Rich Dad Poor Dad: What the Rich Teach Their Kids About MoneyThat the Poor and Middle Class Do Not!

3. Choose friends carefully: the power of association
First of all, I do not choose my friends by their financial statements. I
have friends who have actually taken a vow of poverty as well as friends
who earn millions every year. The point is that I learn from all of them.
Now, I will admit that there are people I have actually sought out
because they had money. But I was not after their money; I was seeking
their knowledge. In some cases, these people who had money have become
dear friends. I’ve noticed that my friends with money talk about money.
They don’t do it to brag. They’re interested in the subject. So I learn from

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them, and they learn from me. My friends who are in dire financial straits
do not like talking about money, business, or investing. They often think it
rude or unintellectual. So I also learn from my friends who struggle
financially. I find out what not to do.
I have several friends who have generated over a billion dollars in their
short lifetimes. The three of them report the same phenomenon: Their
friends who have no money have never come to them to ask them how they
did it. But they do come asking for one of two things, or both: a loan, or a
job.
WARNING: Don’t listen to poor or frightened people. I have such friends,
and while I love them dearly, they are the Chicken Littles of life. To them,
when it comes to money, especially investments, it’s always, “The sky is
falling! The sky is falling!” They can always tell you why something won’t
work. The problem is that people listen to them. But people who blindly
accept doom-and-gloom information are also Chicken Littles. As that old
saying goes, “Birds of a feather flock together.”
If you watch business channels on TV, they often have a panel of so-
called experts. One expert will say the market is going to crash, and the
other will say it’s going to boom. If you’re smart, you listen to both. Keep
your mind open, because both have valid points. Unfortunately, most poor
people listen to Chicken Little.
I have had many close friends try to talk me out of a deal or an
investment. Not long ago, a friend told me he was excited because he found
a 6 percent certificate of deposit. I told him I earn 16 percent from the state
government. The next day he sent me an article about why my investment
was dangerous. I have received 16 percent for years now, and he still
receives 6 percent.
I would say that one of the hardest things about wealth-building is to be
true to yourself and to be willing to not go along with the crowd. This is
because, in the market, it is usually the crowd that shows up late that is
slaughtered. If a great deal is on the front page, it’s too late in most
instances. Look for a new deal. As we used to say as surfers: “There is

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always another wave.” People who hurry and catch a wave late usually are
the ones who wipe out.
Smart investors don’t time the markets. If they miss a wave, they search
for the next one and get themselves in position. This is hard for most
investors because buying what is not popular is frightening. Timid investors
are like sheep going along with the crowd. Or their greed gets them in when
wise investors have already taken their profits and moved on. Wise
investors buy an investment when it’s not popular. They know their profits
are made when they buy, not when they sell. They wait patiently. As I said,
they do not time the market. Just like a surfer, they get in position for the
next big swell.
It’s all “insider trading.” There are forms of insider trading that are
illegal, and there are forms of insider trading that are legal. But either way,
it’s insider trading. The only distinction is: How far away from the inside
are you? The reason you want to have rich friends is because that is where
the money is made. It’s made on information. You want to hear about the
next boom, get in, and get out before the next bust. I’m not saying do it
illegally, but the sooner you know, the better your chances are for profits
with minimal risk. That is what friends are for. And that is financial
intelligence.