Globally known for his ‘Rich Dad Poor Dad’ series of motivational books, Robert Kiyosaki wears many hats. He is an entrepreneur, a financial commentator, and an investor. His books — most of them have topped the top 10 best-seller lists in the US — advocate, among other things, financial freedom and getting rich by investing smartly. Kiyosaki was recently in Delhi and spoke to Business Line . Excerpts from the interview:

Why do you think financial literacy is so important?

My objective is to make financial education simple enough that even a child could understand it. My concern is that I can see the gap between the rich and everybody else increasing.

In America, the middle class is coming down; we have more poor people than middle class people today. This could lead to social unrest, a financial anger.

What is the most important lesson one must learn about financial accounting?

To know what is an asset and what is a liability. Assets put money into your pocket whether you ‘work or not’. A job is not an asset, a house or car is not an asset.

But in traditional accounting, a house and a car are considered assets. So, I decided to make the definition so simple that nobody would question it.

Then what is an asset?

The most important word in traditional accounting is ‘cash flow’. If the cash is flowing into your pocket, it’s an asset. For instance, I own a house but everyday the cash is flowing out of my pocket to pay to maintain it, it is a liability not an asset.

But if I rent out the house, everyday I’ll be making money. That same house now becomes an asset.

When I write a book, it’s an asset because I sell the book to 50 publishers throughout the world and every quarter the money comes in. But when I write in the newspaper, every day I have to write, so it’s a job. Cash flow is the most important word in business.

You have been so many things — a miner, real estate tycoon, an entrepreneur, and an author. How did that happen?

It’s just because I was interested. When I was nine years old, I asked my teacher, “When am I going to learn about money?” The teacher said, we don’t teach money at school. Then I asked why? The teacher said, because we go to school to get a job and work for money... and that’s when I met my rich dad - my best friend’s father. My poor dad was my school teacher. He knew nothing about money, he was smart but poor.

Another thing I noticed is a lot of people who teach the subjects they know nothing about. Later in life, I again asked my teacher, “Why am I learning the calculus?” and the teacher couldn’t answer.

So, when I write about money, I want to make sure what I am talking about. I don’t talk about the stock market, I don’t like stock market.

But, I talk about mining because I have mines, I talk about oil because I have oil wells, I talk about real-estate because I have done real-estate. So, part of my motivation is when I write about something, I better practice what I preach.

Reading your articles and books one gets the impression that you tend to devalue school/college education? Do you?

If they had financial education in schools, I would shut up. What is killing the world today is highly-educated, smart people, who know nothing about money. And then we wonder why we have financial problems.

I don’t write for politicians. I write for the average man on the street. I like to make everything simple enough, so they could protect themselves from politicians. Because you and I know... the rich don’t pay taxes. An average person doesn’t know how to do it. They complain about taxes but they don’t know how to not pay taxes.

Talking about taxes, your critics have gone to the extent of accusing you of discouraging people from paying taxes?

( Laughs ) Legally, yes. Most people don’t understand taxes. Tax laws are basically incentives. If you do certain things, the Government will give you tax breaks.

So, I am not breaking the law, I am just thinking what is that the government wants me to do. The government wants me to drill for oil because we need energy.

I get tax breaks for drilling for oil. If I consume oil, I get taxed. The tax is passed on to the consumer. I am the producer, the average person is the consumer.

Same is the case with housing in America. I get tax breaks for providing low cost housing. I have 4,500 apartments, and I get huge tax breaks because I provide housing.

But if I own a house, I am taxed. So, the Government incentivises us for what it wants from us. The reason I don’t invest in stocks is I don’t get tax breaks.

So, how much money you make by just not paying the taxes?

Lots... lots. Financial education must include tax because it’s a single largest expense. I’ll say it again, by not paying taxes, I am only doing what the government wants me to do.

Critics also say your advice could be really dangerous, as you tend to ignore the risks involved?

If you are financially uneducated, yes. Let me give you an example. I didn’t know how to fly and I was going to Vietnam. If I didn’t know how to fly and I was flying in Vietnam, it would be very risky. So, the Marine Corps sent me to flying school for three years, and then I went to Vietnam. The risk now was very low but if I had no education, I would be dead.

That’s what Rich Dad, the financial education company does. We let people practice financial education in the form of games. And that’s why school teachers are poor, they punish people for committing mistakes. They don’t do anything because they are afraid of making mistakes. And to be successful, you have to make many mistakes.

When I write about something, I have done it. I don’t write about things I have not done.

You only invest in tangibles? Why do you then own gold and silver mines, and now copper mines too? Is it to hedge against the dollar?

Well, it’s more than that. Silver is industrial metal and gold is disaster metal. With rising terrorism, more 9/11s could be coming. If that happens, the dollar is gone. So, I do not want to hold dollars. I want food, gold and supplies. I want the basics now.

What is the most important advice you would like to give to young investors?

Stay out of stock market ( laughs )? It’s the most exciting time to be alive right now. If you are young and smart, you will do extremely well.

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