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Why It Does Not Take Money to Make Money Anymore
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Recently, while teaching an investment class, I was asked, “What Internet company would you recommend I invest in?”

I replied, “Why invest in someone else's Internet company? Why don't you start your own Internet company and ask people to invest in it?” As stated earlier in the book, there are many investment books written on how to buy assets. This book has been dedicated to learning how to create assets that buy assets. So why not take the time to consider creating an asset, rather than simply buying an asset? I say this because it has never been easier to create your own asset.

The World Is 10 Years Old

On October 11, 1998, Merrill Lynch ran a full-page ad in several of the larger American newspapers, announcing that the world was just 10 years old. Why just 10 years old? Because it had been approximately ten years since the Berlin Wall had come down. Tearing down the Berlin Wall is the event some economic historians use to mark the end of the Industrial Age and the beginning of the Information Age.

Until the Information Age, most people had to be investors from the outside. Now that the world is just over ten years old, more and more people can invest from the inside, rather than from the outside. When I answered, “Why invest in someone else's Internet company? Why not start your own Internet company?” I meant, “It is now the Information Age, so why not become an insider instead of an outsider?”

Three Ages

In the Agrarian Age, the rich were those who owned a castle that overlooked large tracks of fertile agricultural land. These people were known as the monarchs and the nobles . If you were not born into this group, you were an outsider with very little chance of becoming an insider. The 90/10 rule controlled life.

Therefore, the 10% who were in power were there because of marriage, birth, or conquest; the other 90% were serfs or peasants who worked the land but owned nothing.

During the Agrarian Age, if you were a good, hardworking person, you were respected; the idea of being diligent was handed down from parent to child. It was also when the idle rich began to be loathed—90% of the people worked to support the other 10%, who appeared not to be working; that idea was also handed down from parent to child. These ideas continue to be popular and are still handed down from generation to generation.

Then came the Industrial Age and wealth shifted from agricultural land to real estate. Improvements such as buildings, factories, warehouses, mines, and residential homes for the workers were placed on top of the land improvements. Suddenly, rich fertile agricultural land dropped in value because the wealth shifted to the owners of the buildings upon the land. In fact, an interesting thing happened. Suddenly, rich fertile land became less valuable than rocky land, where farming was difficult. Rocky land suddenly became more valuable because it was cheaper than fertile land. It could also hold taller building such as skyscrapers , or factories , and it often contained resources such as oil, iron, and copper that fueled the Industrial Age. When the shift in ages occurred, many farmers' net worth went down; to maintain their standard of living, they had to work harder and farm more land than before.

It was during the Industrial Age that the “Go to school so you can find a job” idea became popular. In the Agrarian Age, a formal education was not necessary since professions were handed down from parent to child; bakers taught their children to be bakers, and so on. Near the end of this era, the idea of “a” job, or the idea of one job for life, became popularized. You went to school, got that one job for life, worked your way up the corporate ladder or up the union ladder, and when you retired, the company and the government took care of your needs.

In the Industrial Age, those not of noble birth could become rich and powerful. Rags-to-riches stories spurred on the ambitious. Entrepreneurs started with nothing and became billionaires. When Henry Ford decided to mass-produce the automobile, he found some cheap rocky land that farmers did not want near a small town known as Detroit, and an industry was born. The Ford family became, in essence, the new nobility, and anyone around them who did business with them also became the new, rich nobility. New names became as prestigious as those of kings and queens—names such as Rockefeller, Stanford, and Carnegie. People often respected as well as despised them for their great wealth and power.

In the Industrial Age, as during the Agrarian Age, however , only a few controlled most of the wealth. The 90/10 rule still held true, although this time, the 10% was not determined by birth but by determination itself. The 90/10 rule held true simply because it took great effort and coordination as well as a lot of money, people, land, and power to build and control the wealth. For example, to start an automobile company or an oil or mining company is still capital intensive; it takes massive amounts of money, lots of land, and many smart formally educated people to build that type of company. On top of that, you often must get through years of bureaucratic red tape—such as environmental studies , trade agreements, labor laws, and so on—to get such a business off the ground. In the Industrial Age, the standard of living went up for most people, but the control of real wealth continued to remain in the hands of a few . The rules have changed.

The 90/10 Rule Has Changed

When the Berlin Wall came down and the World Wide Web went up, many of the rules changed. One of the most important rules that changed was the 90/10 rule. Although it's likely that only 10% of the population will always control 90% of the money, the access or the opportunity to join that 10% has changed. The World Wide Web has changed what it costs to join the 10%. Today, it does not take being born into a royal family as it did in the Agrarian Age. It does not require massive sums of money, land, and people to join the 10%. The price of admission today is an idea, and ideas are free.

In the Information Age, all it takes is information or ideas to become very, very, wealthy. It is therefore possible for individuals who are financially obscure one year to be on the list of the richest people in the world the next. Such people often fly past individuals who made their money in the ages gone by. College students who have never had a job become billionaires. High school students will surpass their college student counterparts.

In the early 1990's, I remember reading a newspaper article that said, “Many Russian citizens complained that under the Communist rule their creativity was stifled. Now that Communist rule is over , many Russians citizens are finding out that they had no creativity. ” Personally, I think all of us have a brilliant creative idea that is unique to us, an idea that could be turned into an asset. The problem for the Russians , as it is with many citizens all over the world, is they did not have the advantage of my rich dad's guidance in teaching them to understand the power of the B-I Triangle. I think it is very important that we teach more individuals to be entrepreneurs and how to take their unique ideas and turn them into businesses that create wealth. If we do so, our prosperity will only increase as the Information Age expands around the world.

For the very first time in world history, the 90/10 rule to wealth may no longer apply. No longer does it take money to make money. No longer does it take vast tracts of land or resources to become rich. No longer does it take friends in high places to become rich. No longer does it matter if your relatives came over on the Mayflower; it does not matter what university you went to, or what sex, race, or religion you are a part of. Nowadays, all it takes is an idea, and as rich dad has always said, “Money is an idea.” For some people, however , the hardest thing to change is an old idea. There is an old truth to the saying “You can't teach an old dog new tricks. ” I think a more accurate saying is: “You can't teach someone who clings to old ideas new tricks, regardless of if they are young or old. ”

So when I am asked, “What Internet company would you invest in?” I still reply, “Why not invest in your own Internet company?” I am not necessarily suggesting the askers start an Internet company; all I am doing is asking them to consider the idea, the possibility of starting their own company. In fact, many franchise and network marketing opportunities are now available on the internet. When people simply consider the idea of starting their own B quadrant business, their minds shift from hard work and physical limits to the possibility of unlimited wealth. All it takes is the idea—and we are in the Age of Ideas. I am not suggesting that such people quit their job and leap into starting a company. But I do suggest that they keep their full-time job and consider starting a business part-time.

The Challenge of Old Ideas

In the stock market today you often hear announcers say, “Old economy versus new economy. ” In many ways, the people being left behind are often people who continue to think in old economy ideas versus new economy ideas.

Rich dad constantly reminded his son and me that money was just an idea. He also warned us to be ever vigilant, to watch our ideas and challenge them when they needed to be challenged. Being young and lacking experience at the time, I never fully realized what he meant. Today, older and wiser , I have tremendous respect for his warning to challenge our old ideas. As rich dad said, “What is right for you today could be wrong for you tomorrow. ”

I have watched Amazon.com, a company without any profits or any real estate, grow faster and become more valuable in the stock market than established retailers such as Wal-Mart, Sears, J.C. Penny, and K -Mart. A new not-profitable Web retailer is perceived more valuable than Industrial Age retailers with solid profits, years of experience, massive real estate holdings, and more assets than any monarch of old. But the new web retailer is more valuable just because it does not require massive amounts of real estate, money, and people in order to do business. The very things that made Industrial Age retailers valuable in the Industrial Age are making them less valuable in the Information Age. You often hear people say, “The rules have changed.” I often wonder what the future holds for these older retailers and their investors as more and more Internet companies slice into profit margins, selling the same products for a lower price. In other words, although Amazon.com is not profitable today, it is cutting into the profit margins of companies that are profitable today. What will that mean to job security, pay raises, and benefits for employees and investor loyalty in the future? And what will happen to the value of real estate? Only time will tell.

I believe that many of the new Internet companies will fold and investors will lose literally billions. They will fold because ultimately, profits and positive cash flow are how a business survives. But many Industrial Age companies will also fold because of price competition from these on-line retailers with no real estate. I recently heard an old-school retailer saying, “We will make shopping an

entertaining experience. ” The problem with such thinking is that making shopping an entertaining experience is expensive, and many shoppers will come to enjoy the experience but will still buy on line for a better price.

I have a dear friend who has been my travel agent for years. However, she has to charge me a service fee to write my tickets these days because the airlines have stopped paying her a commission on ticket sales. She has had to release several of her loyal staff and now worries that I will shift to buying my tickets for a lower price on line. During this same period, a person who is not a travel agent and not regulated by the rules of the travel industry started an online company called Priceline.com. Suddenly, with the idea of auctioning off a perishable product known as an empty airline seat, Priceline.com's founder Jay Walker joins the Forbes 400 list of the richest people in the world. He does this in just a few years. So he becomes wealthy, and my dear friend lays off staff and counts on her loyal customers to stay with her because she will work harder and provide better service. I am sure she will do OK, but the business she started years ago as her retirement safety net has now become a full-time job with no assurance that it will be of any value whatever when she's ready to retire.

Things Have Changed

Since it does not take money to make money, then why not go out and make a lot of money? Why not find investors to invest in your idea so you can all become rich? The answer is because often, old ideas are in the way.

As Merrill Lynch announced, “The World Is 10 Years Old.” The good news is that it is not too late to change your thinking and begin to catch up if you already have not started. The bad news is that sometimes, the hardest things to change are old ideas. Some of the old ideas that may need to be challenged are the following ideas that have been handed down for generations:

1. “Good, hard-working person.” The reality today is that the people who physically work the hardest are paid the least and taxed the most. I am not saying not to work hard. All I am saying is that we need to constantly challenge our older thoughts and maybe rethink new ones. Consider working hard in a part-time business for yourself .

Today, instead of being in just one quadrant, we need to be very familiar with all four quadrants of the CASHFLOW Quadrant. After all, we're in the Information Age, and working hard at one job for life is an old idea.

2. “The idle rich are lazy. ” The reality is that the less you are involved physically in your work, the more your chances are of becoming very rich. Again, I am not saying to not work hard. I am suggesting that today, we all need to learn to make money mentally, not just physically. Those who make the most money work the least physically. They work the least because they work for passive income and portfolio income rather than earned income. And as you know by now, all a true investor does is turn earned income into passive and portfolio income.

In my mind, today's idle rich are therefore not lazy. It is just that their money is working harder than they are. If you want to join the 90/10 crowd, you must learn to make money mentally more than physically.

3. “Go to school and get a job. ” In the Industrial Age, people retired at

age 65 because they were often too worn out to lift tires and put engines into a car on the assembly line. Today, you are technically obsolete and ready for retirement every eighteen months , which is how fast information and technology are doubling. Many people say a student today is technically obsolete immediately upon graduation from school. Now more than ever, my rich dad's advice of “School smarts are important but so are street smarts ” is even more relevant.

Industrial Age) . Kids are teaching their parents how to use computers, and companies are looking for high-tech kids more than college-degreed middle-aged executives.

To stay ahead of the obsolescence curve, continual learning from school as well as the street is vitally important. When I speak to young people, I advise them to think like professional athletes as well as college professors. Professional athletes know their careers will be over as soon as younger athletes can beat them. College professors know that they will become more valuable the older they get if they continue to study. Both points of view are important today.

Rich Dad's Advice Is Even More True Today

For those of you who have read our first two books, you know the difficulty I went through listening to two different dads and their ideas about money, business, and investing. In 1955, my poor dad kept saying, “Go to school, get good grades, and find a safe and secure job.” On the other hand, my rich dad kept saying, “Mind your own business. ” My poor dad did not think investing was important because he believed “The business and the government are responsible for your retirement and medical needs. A retirement plan is part of your benefit package, and you are entitled to it.” My rich would say, “Mind your own business. ” My poor dad believed in being a good, hard-working man. He would say, “Find a job and work your way up the ladder. Remember that companies do not like people who move around a lot. Companies reward people for seniority and loyalty.” My rich dad said, “Mind your own business .”

My rich dad believed that you must constantly challenge your ideas. My poor dad believed strongly that his education was valuable and most important. He believed in the idea of right answers and wrong answers. My rich dad believed that the world was changing and we needed to continually keep learning. Rich dad did not believe in right answers or wrong answers. He believed instead in old answers and new answers. He would say, “You cannot help but get older physically, but that does not mean you have to get older mentally. If you want to stay younger longer, just adopt younger ideas. People get old or obsolete because they cling to right answers that are old answers.”

Here are some examples of right answers that are old answers:

Today, it is obvious that humans are flying everywhere, even in

space.

2. Is the earth flat? The correct answer in 1492 was “Yes.” After Columbus sailed to the New World, the old right answer was obsolete.

3. Is land the basis of all wealth? The answer before the Industrial Age was “Yes.” Today, the answer is a resounding “No. ” It takes an idea and knowledge from the B and I side of the Quadrant to make that idea real. Once you prove you know what to do, the world is full of rich investors looking to give their money to you.

4. Doesn't it take money to make money?” I am most frequently asked this question. The answer is “No.” In my opinion, it has always been “No.” My answer has always been “It does not take money to make money. It takes information to make as well as to keep money. ” The difference is that it has become much more obvious that it does not take money or hard labor to make a lot of money.

I don't know what tomorrow will bring; no one does. That is why rich dad's idea of constantly challenging and updating ideas was one of the most important ideas he passed on to me.

Today, I see so many of my friends falling behind professionally as well as financially simply because they fail to challenge their own ideas. Their ideas are often right answers that are very very old answers handed down for generations, from one economic era to another . Some high school kids plan on never having jobs. Their plan is to bypass the whole Industrial Age idea of job security and become financially free billionaires instead. This is why I ask people to think about building their own Internet business—either on their own or through a franchise or network marketing company—instead of just looking for one to invest in. Today's thinking process is very different, and it may challenge some very, very, old right ideas. Those old ideas often make the process of change so difficult.

Ideas Do Not Need to Be New, They Just Need to Be Better

Always remember that once you have mastered the guidelines found in the B-I Triangle, you can virtually take nothing and turn it into an asset. When I am asked what my first successful investment was I simply reply, “My comic book

business. ” In other words, I took comic books that were going to be thrown away and created an asset around them, using the principles found in the B-I Triangle. Starbucks did the same thing with a cup of coffee. So ideas do not have to be new and unique, they just have to be better. This has been going on for centuries. In other words, things do not have to be high-tech to be better. In fact, many things that we take for granted today, were very high-tech yesterday.

There are many individuals who spend their lives copying other people's ideas rather than creating their own. I have two acquaintances that make it a practice of taking other people's ideas. Although they may make a lot of money there is a price for taking other people's ideas without their permission or giving credit where credit is due for those ideas . The price these people pay, although they may make a lot of money, is the respect of the people that know they take other people's ideas without permission. There are two people I used to be associated with that I do not associate with today because they make it a practice to take other people's ideas without permission and claim them as their own.

As my rich dad often said, “There is a fine line between copying and stealing. If you are creative, you have to be careful of thieves who steal ideas. They are just as bad as people who burglarize your home. ” Because there are more people stealing than creating, it becomes ever more important to have an intellectual property attorney on your team protecting your creations.

One of the most important technological changes in the history of the Western World took place during the Crusades, when Christian soldiers came across the Hindu-Arab system of numbers. The Hindu-Arabic system of numbers, so named because the Arabs found this numbering system during their invasion of India, replaced what we call Roman numerals. Few people appreciate the difference this new system of numbers has made upon our lives. The Hindu-Arabic system of numbers allowed people to sail further out to sea with greater accuracy; architecture could be more ambitious; time keeping could more accurate; and the human mind sharpened, and people thought more accurately, abstractly, and critically. It was a major technological change that had a tremendous effect on all of our lives.

The Hindu-Arabic numbering system was not a new idea; it was simply a better idea—and on top of that, it was someone else's idea. Many of the most financially successful people are not necessarily people who have creative ideas; many of them often just copy other people's ideas and turn the idea into millions or even billions of dollars. Fashion designers watch young kids to see what new fashions they are wearing, and then they simply mass-produce those fashions. Bill Gates did not invent the operating system that made him the richest man in the world. He simply bought the system from the computer programmers who did invent it and then licensed their product to IBM. The rest is history. Amazon.com simply took Sam Walton's idea for Wal-Mart and put it on the Internet; Jeff Bezos became rich much more quickly than Sam Walton. In other words, who says you need to have creative ideas to be rich? You just need to be better at the B-I Triangle and at taking ideas and turning them into riches.

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