An excerpt from Rich Dad's...

The Business School

For People Who Like Helping People*

by Robert T. Kiyosaki

What Is The CASHFLOW Quadrant?

          My second book in the Rich Dad series is Rich Dad's CASHFLOW Quadrant.  Many people say that it is my most important book, especially for people ready to make changes in their life. . .a change far greater than simply going from job to job.

The 4 Sources of Income according to Robert T. Kiyosaki

          The E stands for "employee."

          The S stands for "self-employed" or "small business owner."

          The B stands for "business owner."

          The I stands for "investor."

How Do You Know Which Quadrant You Are In?

          The way you know which quadrant you are in is simply from which quadrant your cash flows.  For example, if you receive your income from a job and you receive a regular paycheck from a company or buisness you do not own, then your cash flows out of the E quadrant.  If you you receive the bulk of your money from your investments, then you are an investor, a person from the I quadrant.  If you are a small buisness owner, a spcialist such as a doctor or lawyer, a commission-only person such as a real estate agent, then you are probably in the S quadrant.  In addition, if you own a big business, a company or business that employs over 500 people, then you are in the B quadrant.

Different Quadrants, Different Values

          Years ago rich dad explained to me that different quadrants had different values.  For example, even though a person in the E quadrant can be a janitor or the president of the company, they are united by the same set of core values.  A person in the E quadrant, regardless if they are the janitor or the president, often thinks or says words such as, "I am lookiing for a safe, secure job with benefits."  Or, "How much do we get for overtime?" Or, "How many paid holidays do we have?" In other words security is a very important core value for someone in the E quadrant.

          S Quadrant Values

          For people in the S quadrant the core value is independence.  They want their freedom and do what they want.  When people says, "I'm going to quit my job and go out on my own."  They are often heading from the E quadrant to the S quadrant.

          People found in the S quadrant are small business owners, mom and pop businesses, specialists and consultants.  For example, I have a friend who installs big screen televisions, phone systems and security systems for irch people's homes.  He has a staff of three and is happy to be the boss of just three people.  He is a hardcore, hard-working S.  Commissioned sales people such as real estate and insurance brokers are in the S quadrant.  The S quadrant is also filled with professional people such as doctors, lawyers and accountants who do not belong to a large medical, legal, or accountancy firm.

          The way you know a person in the S quadrant, is again by their words.  An S quadrant person will often say, "If you want something done right, do it yourself."  Or, "I have the best products."  If they had a theme song, it would be, "Nobody does it better."  At the core of the S, behind the facade of independence, is often a lack of trust of other people. . .trust that someone can do it better than they can.

          The way an S gets paid is often by commission or by the amount of time they spend on a job.  For example, an S may be heard saying words such as, "My commission is 6% of the total purchase price."  Or, "I charge $100 an hour."  Or, "My fee is cost plus 10%."

          The S quadrant person is the John Wayne of business.  You can hear them saying, "I'm going to do it on my own."

         
          B Quadrant Values

          People who start from nothing and build great B quadrant businesses are often people with powerful life missions, value a great team and efficient team work, and want to serve and work with as many people as possible.  Earlier in this book, I mentioned Thomas Edison, founder of General Electric, Henry Ford, founder of Ford Motor Company, and Bill Gates, founder of Microsoft.

          While a person in the S quadrant wants to be the best in their field, a B quadrant person often is looking for other people who are the best in their field to join his or her team.  In the previous example of Henry Ford, Ford surrounded himself with people smarter than he was.  An S quadrant businessperson is often the smartest person on a small team, for example a doctor or a consultant.

          When it comes to being paid, a true B quadrant person can leave his or her business and still get paid.  In most cases, if someone in the S quadrant stops working, their income stops also.  Therefore, a question you may want to ask yourself is, "If I stop working today how much income continues to come in?" If your income stops in six months or less, then chances are you are in the E or S quadrants.  A person in the B or I quadrant can stop working for years and the money will continue to come in.

          I Quadrant Values

          The I quadrant values financial freedom.  The investor loves the idea of their money working instead of them working.

          Investors invest in many things.  They may invest in gold coins, real estate, businesses, or paper assets such as stocks, bonds and mutal funds.

          If your income comes from company or government retirement plans, rather than your own personal investing knowledge, then that is income from the E quadrant.  In other words, your boss or the business is still paying its bill for your years of service.

          Words an investor might be heard saying are, "I'm receiving a 20% return on my assets."  Or, "Show me the company's financials."  Or, "How much deferred maintenance is on the property."

Different Quadrants, Different Investors

          In today's world, we all need to be investors.  However, our school systems do not teach us much about investing.  Oh, I know that some schools teach stock picking, but to me that is not investing.  To me picking stocks is gambling, not investing.
          Years ago, rich dad pointed out to me that most employees invest in mutual funds or savings.  He also said, "Doctors are often the worst investors."  He also said, "Just because your're successful in one quadrant, such as the E, S, or B quadrant does not mean you will be successful in the I quadrant."
          Rich dad also pointed out to me that different quadrants invest in different ways.  For example, a person in the S quadrant might be heard saying, "I don't invest in real estate because I don't want to fix toilets."  A person in the B quadrant addressing the same investment challenge might say, "I want to hire a property management company to fix my toilets at night."  In other words, an S quadrant investor will think they have to do the property maintenance on their own and a B quadrant investor will hire another company to do their property maintenance for them.  Different people, different mindsets, different quadrants, different values.
          If you would like to find out more about the different people who are attracted to the different quadrants, you may want to read book number two in the Rich Dad series, Rich Dad's CASHFLOW Quadrant, for greater insights.  As stated earlier, many people say CASHFLOW Quadrant is the most important book for people ready to make changes in their lives.

The 4 Sources of Income

A Network Marketing Business Is A B Quadrant Business

          A network marketing business is for people who want to enter the world of the B quadrant.  Why is it a B quadrant business? The answer is becasue the network marketing business system is designed to expand to well over 500 people.  Also, the income potential in a network marketing business is, in theory, unlimited, while the income potential for the E and S quadrants are often limited, limited to how much you as an individual can produce.  In a network marketing business, you can earn as much as your network can earn.  If you build a big network, you can earn a massive amount of money.

          After you have built a large network business the next step is to move from the B quadrant to the I quadrant.  At least that is what my rich dad recommended I do, and that is what I did.  My fellow salespersons who scoffed at me leaving Xerox and starting my own business are still salespersons today.  They never changed their mindset, their core values, and hence they never changed their quadrant.  Today I know some of them are worried about losing their jobs and a few of them do not have enough money for retirement.  In other words, they spend too much time in the E and S quadrants.

____________________
          *Robert T. Kiyosaki with Sharon L. Lechter, Rich Dad's The Business School For People Who Like Helping People (India:  Manjul Publising House Pvt. Ltd., 2001). 44-47.