Why the Rich Get Richer?

By Robert t. kiyosaki,

I am often asked, "What advice do you have for the average investor?" My reply is, "Don't be average."

Most of us know of the 80/20 rule. That rule is a good rule for averages. And in the world of money, the rule is 90/10. This means 90 percent of the people make 10 percent of the money and 10 percent of the people make 90 percent of the money.

This 90/10 rule holds true in almost anything financial. Take the game of golf, for example. Ten percent of the professional golfers make 90 percent of the money.

Taking the ratio to the next level, the top 10 percent of professional golfers make 90 percent of the money. Just look at Tiger Woods. When you compare his winnings plus endorsements, he is in a league unto himself.

Last year, my wife Kim was invited to play in a pro-am as part of a professional Tour event in New York. (No, they did not invite me...) Kim is pretty good and was the only woman in a field of around 300 golfers. I was a proud husband as she confidently walked alone to the women's tee. Without hesitation, she placed her ball on the tee, took a clean back swing, and swung her club.

She out-drove two of the men in her five-some. Bruce Vaughn, the professional golfer in the group, rushed up to congratulate her. The men amateurs were also complimentary. I could tell they were relived to have a much better than average "woman golfer" in their group. Kim hits her drives longer than most men, myself included.

Tough Way to Earn a Living

The tournament was the first time I got to see the real life of a professional golfer. It is a tough life. It is not the glamour I thought it was. If a professional did not make the cut, they simply moved on to the next tournament in some faraway city...and teed up again. They do not stay for the tournament. They pay for their own transportation, lodging, food, and fees. They are on the road, away from their families for months at a time. Even those who make the cut and play on the weekend have no guarantee of enough earnings to offset expenses. It's a tough way to earn a living.

Like professional golfers, who live and die by the ‘money list,' money is how I keep score. It's my score card, my report card as an investor. It's how I tell how well -- or how poorly -- I'm doing. My rich dad said, ‘Making money is my game.' It's my game, too. And that's why I have so much respect for professional golfers... their livelihood depends upon how well they play the game -- as professionals.

In the world of golf there are average and professional golfers. The same is true with investors. The problem with being an average golfer or investor is that average people rarely make any money. Many average investors are in financial trouble today because they are simply that: average. They never turned pro.

When the financial crisis began in 2007, the professional investors were already out (or getting out) of the market. The average investors did as they were told, which is to invest for the long-term, hanging on tight as the Dow plunged from 14,000 to below 7,000, a 50 percent loss in value. Many real estate flippers and homeowners enjoyed the same wild ride.

Tragedy of the Average Investor

The tragedy is that many amateur investors are still clinging to their losses. They hope the market will bounce back. Amateurs are still following the advice of "invest for the long term in a well-diversified portfolio of stocks, bonds, and mutual funds." Or they continue to believe "your home is your biggest investment." That is subprime advice for subprime investors.

It seems to me that more people keep track of their golf scores than keep track of their money... their ‘financial' scores. That's why they're amateurs... in the money game.

Even after the crash, the same subprime financial advice continues to be dished out in magazines, newspapers, and on television. Subprime advice continues to flow from real estate and stock market professionals who are not professional investors. They are professional sales people. They live on commissions -- not ROI, the returns on their investments. If they do not sell, they do not eat.

If you're going to turn pro, you will need to upgrade your financial advice. Why continue to invest for the long term while the market is crashing? Why continue to diversify when diversification did not protect investors from the crash?

In 1974, as I was leaving the Marine Corps, I decided I wanted to become an entrepreneur and investor. In other words, I did not want a job with a 401(k). That meant I had to become street smart, rather than school smart. It meant I needed a different set of life skills and better financial mentors if I were to survive on the street.
Just like the life of the pro golfers, there were long stretches of losses, no wins, no money or security.

In early 1985, things got so bad that Kim and I were temporarily homeless. I still remember leaving her in San Diego with only $2 for the week, while I traveled to Australia to put a deal together. Somehow we survived the year. In December of 1985 we finally made $1,500 after a year's worth of losses. That year was a great qualifying school. Today, even in this tough economy, our investments continue to grow. This crisis is a good time for professionals and a bad time for amateurs.

Not Good Enough

Years ago, I asked my rich dad, "What is the difference between a professional and an amateur?" His reply was, "Professionals know their best is not good enough. They always want to do better." He paused before continuing and said, "When someone says, ‘I'll do my best' or ‘I'll give it my best shot' or ‘I'll try,' they've already lost. Those are not words of a winner."

In the world of ‘the best,' your best is never good enough. If you're going to be a winner in life, you have to constantly go beyond your best. Most people are happy being average. Most are happy being faceless in a sea of faces. That's why 10 percent always win 90 percent of the rewards. I get up every day, grateful for what I have accomplished, yet looking forward to doing better. I want do better than my (previous) best everyday. It's not about the money anymore. I have enough money. I just love the game of making money.

Today I give most of my money away...but I will not give up the game of money. I play the game because the game is always better than me...and my best will never be good enough. I continue to work hard to become better at a game I love.

I once read a book on golf that said, "People say amateurs play for the love of the game and professionals play for money. That is not true. Amateurs are amateurs because they do not love the game enough. When it is cold and rainy, a professional golfer will play. The amateur will not. When they are sick, the professional will play. The amateur stays in bed. When they are losing, the professional will practice harder and enter more tournaments. The amateur will quit and take up tennis."

It matters little if the game is golf, tennis, or money. Ten percent of the people will always make 90 percent of the money. When the markets began crashing in 2007, the money did not disappear. Ninety percent of the money went to 10 percent of the investors.

A financial crisis is a great time for professional investors and a horrible time for average ones. If you're going to invest, don't be average. It's time to turn pro... or take up tennis.

Many claim to be kin of millionaire trader

SEREMBAN: Numerous people have called in claiming to be family members of the 62-year-old Singaporean millionaire who is now looking for his long-lost wife and son in Malaysia.

The calls came early yesterday morning from all over the country as Yak Eng Wai’s story about his wish to be reunited with his wife Ooi Suan Im and son Ah Teck appeared in The Star yesterday.

State MCA public services and complaints bureau head Tung Kong Ming said he had his hands full entertaining calls from people claiming to have known Yak’s family or were related to him.

“One caller said he was Yak’s son but when I asked him to fax to me documents or provide me with personal particulars, he did not get back to me.

“Another sent me a text message also claiming to be Yak’s son but declined to be reunited with him. The person asked me to get Yak to contact him. Yak later told me that nothing came of it,” Tung said, adding that one of callers had even asked for payment to help find the family.

“We have to be careful that only his real wife and son are found and not some people who want to cash in on this. They must provide their identification papers including a copy of Ooi’s identification card and if possible, a photograph of the family.

“They should be able to furnish us with some personal particulars like where the family had lived in Singa- pore and Penang and names of their siblings. Only then will I agree to a meeting,” he said.

Tung expressed hope that Yak’s family could be located as soon as possible.

Yak is believed to be the owner of one of the biggest auto service and parts centres in Brunei.

He had not heard from his wife and son after she left Singapore for her family home in Air Itam, Penang when she was pregnant with their second child in 1972.

Yak, who remarried in 1981, has a 25-year-old daughter from that marriage.

Tung can be reached at 019-660 5949.

AK denies interest in Magpies

KUALA LUMPUR, July 8 — Reclusive media and telecoms tycoon T. Ananda Krishnan today denied any interest in buying Newcastle United, the English club that was relegated from the Premier League and is on sale for £100 million (RM576 million).

His privately-held Usaha Tegas Sdn Bhd said in a statement that the tycoon has denied stories that he is interested in the football club.

“There is in fact no truth or foundation to this story. Mr Ananda Krishnan has not expressed an interest in purchasing Newcastle United Football Club, has not sent any delegation to Newcastle to engage in such talks or authorised any representatives to negotiate on his behalf and is not considering any such purchase,” the statement said.

A few reports attributed to sources, including one carried by The Malaysian Insider, said Ananda Krishnan was one of many parties interested in the club and was keen to keep Alan Shearer as the manager.

The tycoon is one of Malaysia’s wealthiest men with interest in satellite television operator Astro, mobile phone operator Maxis, gaming firm Tanjung plc and other concerns across the world.

A lesser-known fact is that he was one of the people behind the staging of the Live Aid concerts in 1995, when he was based in the United States.

Ananda Krishnan started out in crude oil concessions and was previously an adviser to the Malaysian government as well as a board member in Bank Negara.

Government scraps teaching of maths and science in English

PUTRAJAYA, July 8 — The government today decided to end the policy of teaching mathematics and science in English or PPSMI in both primary and secondary schools effective from 2012.

Deputy Prime Minister Tan Sri Muhyiddin Yassin, in an announcement today, said the two subjects will be taught in Bahasa Melayu in national schools and Tamil and Chinese for vernacular schools.

The Education Minister added that the changes would not affect Form Six and matriculation programmes.

"The government made the decision after studying closely research on PPSMI that shows that PPSMI could not be implemented as expected," Muhyiddin told a special press conference here.

He said the decision was fair and made carefully after witnessing the implementation in the first six years after its introduction.

He also denied that the decision to scrap the policy was politically motivated.

"This decision is not political, we made the decision not for political mileage. What is Manek Urai compared to the future of our children," said Muhyiddin.

He however denied that the PPSMI policy had failed.

"I wouldn't say it was a complete failure, but it did not achieve what it was supposed to achieve," he said.

Introduced in 2003, the policy has been heavily criticised by Chinese educationists and Malay-language activists, but a recent survey by the independent Merdeka Center showed that 58 per cent of 1,060 voters interviewed supported the policy.

Muhyiddin had admitted in Parliament last month that students had not shown significant improvement in the two subjects over the past six years.

But he said today the intention of the policy, which is to improve English language proficiency among Malaysian students, will continue to be upheld.

The measures to be introduced include recruiting some 14,000 new English language teachers. Currently there are more than 30,000 English teachers nationwide.

Muhyiddin also said the lesson duration for English language would also be doubled for lower primary students to 120 minutes a week, while for upper primary it would be increased from 90 minutes to 120 minutes a week.

For secondary students, the duration will be increased from 200 minutes to 280 minutes a week.

Facebook in investor spotlight

SAN FRANCISCO, July 2 — For Facebook's employees and early investors, the big payday is coming. But it will not follow the standard Silicon Valley script.

Instead of cashing out via the hoopla of an initial public offering — which CEO Mark Zuckerberg has said was a few years out — equity holders in the social networking website get to sell their shares to a Russian investment firm.

The move marks a new trend among start-ups to raise funds by selling shares in private placements instead of going public at time when demand for IPOs is very weak.

The impending deal — due to be unveiled in the next month or so — will provide an important benchmark for investors sizing up the value of one of the world's fastest-growing and most closely watched Internet companies.

"It's an interesting indicator," said Adam Oliveri, a managing director at SecondMarket, which provides a marketplace for trading in private shares and other illiquid assets.

If the world's largest online social network, with more than 200 million active users, eventually decides to float shares to the public, the price that its common stock has previously traded will be a benchmark, Oliveri added.

Facebook, which increasingly competes with online giants like Google Inc and Yahoo Inc for the attention of web surfers and advertisers, has attracted interest from investors keen to get a piece of the action.

In 2007, Microsoft Corp invested US$240 million (RM840 million) in Facebook preferred shares, snagging a 1.6 per cent stake.

Russia's Digital Sky Technologies said in May it would buy "at least US$100 million" of Facebook common stock to let current and former employees unlock money tied up in company equity.

The deal comes on top of US$200 million in funding that Digital Sky pumped into Facebook in May, putting a US$10 billion valuation on Facebook's preferred shares.

The value of Facebook's common shares, as well other key aspects of the stock-purchase plan such as timing and eligibility, remain unknown.

In an April filing with the California Department of Corporations, Facebook listed the fair market value of its nearly 7.9 million common stock at US$5.27 a share, or about US$4.2 billion. But that value was established prior to the DST deal.

The Wall Street Journal has cited a US$6.5 billion valuation for Facebook common shares in the DST deal. That translates to US$14.50 a share, according to Oliveri's calculations.

Oliveri said his own conversations with contacts suggest the price for Facebook stock in the DST deal has not been fixed. But quotes from interested buyers and sellers of Facebook common stock on the secondary market lie between US$10 and US$10.50 a share, valuing it at up to US$4.7 billion.

"Five years ago it would be frowned upon to have the whole company trying to sell shares," said Industry Ventures founder Hans Swildens, whose firm helps arrange private stock sales for budding tech companies.

He said Facebook's programme underscores a trend that may grow among start-ups as venture capital dries up and the recession saps liquidity and demand for big-time IPOs.

Firms like SecondMarket, Saints and Industry Ventures involved in the purchasing of private company shares say they are increasingly working directly with companies to craft programmes that function like a company-sponsored benefit plan for employees hoping to sell their shares.

The terms of the deals vary, with pricing for shares sometimes based on anything from an exchange-like bid-and-offer system to scrutiny of appraisals under tax codes.

"It's opaque. They're not saying anything," said one Facebook shareholder who hopes to sell shares.

Facebook and Digital Sky promised in May to provide details of the plan to eligible participants during the summer. Spokesman Larry Yu said the terms of that deal call for share sales to occur within a time window, but he added that Facebook has no plans to provide a public update about the programme. A representative for the DST did not return calls for comment.

Facebook attempted to create a programme for employees to sell shares to an unidentified investor in 2008, but the plan was put on hold as markets tanked. The initial plan limited the amount of shares an employee could sell to 20 per cent of his or her holdings, or US$700,000, whichever was less, according to a former Facebook employee.

"I've been approached hundreds of times from all kinds of investors wanting to buy my shares, said a former Facebook employee, noting that he believes there is greater long-term value in holding his shares. — Reuters

Wife blows spy chief’s cover on Facebook

LONDON, July 5 — The wife of the new head of Britain’s spy agency has posted pictures of her husband, family and friends on Internet networking site Facebook, details which could compromise security, a newspaper said today.

Sir John Sawers is due to take over as head of the Secret Intelligence Service in November. The SIS, popularly known as MI6, is Britain’s global intelligence-gathering organisation.

In what the Mail on Sunday called an “extraordinary lapse,” the new spy chief’s wife, Lady Shelley Sawers, posted family pictures and exposed details of where the couple live and take their holidays and who their friends and relatives are.

The details could be viewed by any of the many millions of Facebook users around the world, but were swiftly removed once authorities were alerted by the newspaper’s enquiries.

“There were fears that the hugely embarrassing blunder could have compromised the safety of Sir John’s family and friends,” the newspaper said.

Publishing the story on its front page and the pictures on a double-page spread, the Mail on Sunday said the information “could potentially be useful to hostile foreign powers or terrorists.”

It was the latest in a string of security blunders, lapses and leaks by British officials that have embarrassed the government of embattled Prime Minister Gordon Brown. — Reuters

'We're in the Middle of a Crash': Black Swan

The financial system is crashing and action must be taken by the US government to convert debt into equity to produce a more stable environment, Nassim Taleb, author of "The Black Swan," told CNBC Thursday.

"You may have green shoots, whatever you want to call them, you may have temporary relief, but you are still in a world that's breaking," Taleb said on "Squawk Box."

Anything that's fragile like the financial system will eventually crash, he said.

"We're in the middle of a crash," Taleb said. "So if I'm going to forecast something, it is that it's going to get worse, not better."

The government needs to deleverage debt and not try stimulus packages that will inflate assets, he said.

"What makes me very pessimistic in not seeing any leadership or awareness on parts of government on what has to be done, which is deleverage $40-to-$70 trillion," Taleb said.

"The monkey on our back is debt," he added.

As an example, Taleb said banks should not be sending demands for larger and larger sums from homeowner in arrears on their mortgage. Instead the bank should offer to lower the monthly payments in return for part-ownership of the property.

"People would be able to start from scratch on a healthy basis. You don't want to wait for foreclosure," he said.