Posted 9:42 AM by Blah blah

Beware Multi-level Marketing & Rich Dad, Poor Dad

In this down economy, many people are thinking of how to make money more quickly. Recently some of my friends have told me about two schemes from which I think you should stay away.

1. Multi-level marketing (Amway, WMA, WFG, Quixtar, Pre-paid Legal Services, etc.) and pyramid schemes

Another time, I will write tons about this. Basically, STAY AWAY from ALL companies having anything to do with multi-level marketing (MLM) or pyramid schemes!!! Read this description on The Skeptic's Dictionary for details on how all MLM schemes are scams that will ultimately LOSE you money.

What are some major MLM companies around that have recruited me as aggressively as a church group? Amway, Quixtar (the renamed, Internet version of Amway), World Financial Group (WFG)/World Marketing Alliance (WMA), Pre-paid Legal Services, and more!

Please read this May 2000 Money magazine article about WMA and Hubert Humphrey. A scam revealed.

DO NOT BE FOOLED! These are all money-losing scams! Here's a site that tells about the lies of WMA/WFG. A site by ex-WMA/WFG members. Here's a list of sites about Amway/Quixtar, including sites by ex-Amway distributors.

Here's what I wrote about Prepaid Legal Services (PPL), another MLM scam.

I've been approached by these people several times, I've been to some introductory meetings in the past, and I warn you again: do not give any of these people the time of day. They operate like harmful religious cults: intelligent but financially ignorant people are being brainwashed into believing in these scams. I've seen them try to recruit a lot of Asians.

2. Robert Kiyosaki and his Rich Dad, Poor Dad books

Be very careful! He has been all over TV and in the bookstores the last couple of years. But read this January 2003 article in Money magazine about him first. Basically it criticizes him for:

1) Being too simplistic with vague financial advice. He mainly encourages you to start you own business and invest in real estate. And he teaches some basic accounting. But few details or real financial education.
2) Being overly optimistic and ignoring risk. He preaches a feel-good philosophy that encourages you to take huge risks, without telling you what may go wrong.
3) Not being too open about how HE makes his money. About gaining more income than you might think from the sale of his books, videos, and tapes.

From the article, "Poor Man's Prophet":
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Kiyosaki holds himself up as an example, so it's natural to wonder if he really succeeded as described in his books--or whether the books are his one real success. He is secretive about his real estate dealings and his business in general. When I flew to Phoenix to meet Kiyosaki, he and his wife drove me around, showing me a handful of properties he claimed to own, but insisted that their addresses not be printed. (His reason: fear of nuisance lawsuits by tenants.) Public records in Arizona show that he has profitably bought and sold other properties in the area, on a relatively modest scale. He can afford a handsome home in a swank section of Phoenix--bought in 1999 for $1.2 million--and he's got a couple of cars in his garage, one of which is a Ferrari. He lives well, although he's not in the same league with, for example, a local real estate heavyweight like Jerry Colangelo, owner of the Phoenix Suns.

"I'm a real estate guy," is how Kiyosaki responds when asked what his profession is. But he's also been in another business--motivational speaking--for more than 20 years, though this fact gets only a passing mention in Rich Dad. He began lecturing and leading seminars in the early 1980s, when he was first a student and then an instructor with a San Diego outfit now called Excellerated Business Schools. It offered (and still does) a 3 1/2-day program called Money and You, the creation of an attorney named Marshall Thurber who is a protege of Werner Erhard, founder of EST.

During the 1970s EST was a prominent and controversial part of the American cultural landscape. Enthusiastic graduates say it improved their lives by forcing them to break with old habits and ways of thinking; others say it was an authoritarian cult that charged them money for the privilege of being publicly browbeaten for failing to "get it."...

Everything was going fine until October 1993, when an Australian TV news magazine called Four Corners aired a report on Money and You. The main focus was on an Australian attorney who said that after taking the course his life had become a shambles, his business ruined, his marriage wrecked. Other graduates of the program were taped saying they'd been disturbed by learning techniques like the Blocks Game, an exercise in which participants competed to model abstractions like "trust" using only children's building blocks. The game could go on for hours and frustrations could run high. "We got to a stage where virtually everybody in the hall at one stage was crying," one participant told Four Corners. "Some of them were on the verge of a nervous breakdown.... You start losing sight of your own values and your own convictions."...

All of which probably proves nothing and is secondary to the real question, which is: Can the people who buy into Kiyosaki's philosophy reasonably expect to make money following the advice of Rich Dad--whether or not he ever really existed? Kiyosaki's numerous fans say emphatically yes. Planners and other financial pros are much more skeptical.

The question is actually hard to answer, because the advice in Rich Dad, Poor Dad tends to be so general that it's often hard to figure out just what it is, let alone whether it's sound. Kiyosaki is given to saying things like "Pay yourself first"--a line that appears in virtually every financial self-help book. Or: "The poor and middle class work for money. The rich have money work for them." True as that may be, you won't find it of much practical help in getting out of debt, say, or trying to invest prudently for your kids' education. But criticizing Rich Dad, Poor Dad for lack of detail may miss the point. Its purpose is to inspire--and to plug Rich Dad's Guide to Investing, Real Estate Riches and the rest of the Rich Dad line.

As for Kiyosaki's recommendation that investing in real estate is the way to go, there's no question that shrewd real estate investors can and do make money all the time. It is not, however, as easy as Kiyosaki makes it sound. Rich Dad, Poor Dad does contain boilerplate acknowledgments of the risks involved, and Kiyosaki does advise readers to start slow and make their inevitable mistakes on small deals. But the tone of the book is also unfailingly boosterish, with reassuring statements like "Anyone with a high school education can do it."

More revealing may be Kiyosaki's attitude toward risk. In Rich Dad, Poor Dad Kiyosaki writes that whenever Rich Dad was nervous about a pending business deal he took inspiration from people he had met in Texas. Quoth Rich Dad: "Texans don't bury their failures. They get inspired by them. They take their failures and turn them into rallying cries." The Alamo was the scene of a massacre, for example, a massive military failure that nonetheless became a symbol of Texan pride and resolve. Kiyosaki himself adds, "Failure inspires winners. And failure defeats losers."

Kiyosaki denies that he soft-pedals risk, arguing that the stock market is far more dangerous than the Rich Dad way. Nonetheless, his philosophy is one that requires adherents to bet big and roll the dice. Which is fine if you are emotionally wired for it and, say, willing (like Kiyosaki) to live in your car while attending the school of hard knocks. But it offers little guidance for more timid souls--or those of us who, unlike Kiyosaki, have kids to think about--who are apt to take on less risk and thus forgo a shot at the house with a pool and the Ferrari.

In his latest book, Rich Dad's Prophecy, Kiyosaki ups the ante considerably. Given his prediction of a coming stock market meltdown, he argues that you no longer really have a choice about whether to take Rich Dad's advice or not. If you don't want to spend your golden years on the streets, he all but says, you're going to have to get out of the stock market and put your money into things like real estate.