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Chapter 1 << Continued from Part 2 of this excerpt Legal Thieves One of the more interesting discussions Mike and I had with rich dad involved the subject of entrepreneurs stealing from other entrepreneurs. Rich dad used an accountant working for an accounting firm as an example. One day the accountant, who was an employee of the firm, resigned and started his own business with clients he met while an employee of the firm. In other words, the accountant walked out the firm's door, but took the business with him. Rich dad said, "While this may not be illegal, it still is stealing." While this is one type of business design, it is definitely not the kind of entrepreneur he wanted his son and me to be. Creative Entrepreneurs The type of entrepreneur he wanted us to be was a creative entrepreneur like Thomas Edison, Walt Disney, or Steven Jobs. Rich dad said, "It is easy to be a small entrepreneur, like a Mom and Pop sandwich shop. It is also relatively easy to be an entrepreneur in a trade or a profession, such as a plumber or dentist. Also it is easy to be a competitive entrepreneur, someone who sees a good idea, copies the idea, and then competes against the entrepreneur who created the idea." (In the Rich Dad's Advisors book Protecting Your #1 Asset [Warner Books], Michael Lechter refers to this type of competitor as "spoilers" and "pirates.") This is what happened to me when I pioneered the nylon and Velcro wallet business. Once we created the market and the awareness of this new product line, competitors came out of the woodwork and my little business was squashed. Of course I cannot blame them. I can only blame myself because once again, I designed the business poorly before there was a business. Even though I took a pounding, rich dad was happy that I was learning to be a creative entrepreneur, rather than a competitive one. He said, "Some entrepreneurs win by creating. Other entrepreneurs win by copying and competing." He also said, "The riskiest of all types of entrepreneur is the creative entrepreneur, also known as an innovator." "Why is the creative entrepreneur the riskiest type to be?" I asked. "Because being creative means you are often a pioneer. It is easy to copy a successful and proven product. It is also less risky. If you learn to innovate, create, or invent your way to success, you are an entrepreneur creating new value rather than an entrepreneur who wins by copying." Public and Private The vast majority of businesses large and small are private companies. A large private company is often referred to as a closely held company. That generally means a company owned by just a few owners, and ownership interests are not available to the public at large. A public company is a company that sells shares of the business to the public at large, most often through stockbrokers and other licensed securities dealers. A public company sells its shares on a stock exchange like the New York Stock Exchange and operates under much more stringent rules than private companies. Rich dad never formed a public company, yet he recommended that Mike and I create one, as part of our development as entrepreneurs. In 1996, at the same time we were forming The Rich Dad Company, I was also an investor and involved in forming three public companies. One company was created to explore for oil, one for gold, and one for silver. The oil company failed even though it struck oil, which is a story in itself. The gold and silver companies did find substantial amounts of the gold and silver they were looking for. Although the oil company failed, the gold and silver companies made the investors a lot of money. Working on developing the public companies was a great experience. As rich dad suggested, I learned a lot and became a better entrepreneur in the process. I found out that the rules are a lot tougher for a public company, that a public company is actually two different companies serving two different customers-the real customers and the investors-as well as serving two bosses, the board of directors and the government securities agency, such as the SEC, the Securities Exchange Commission. I also found out about tougher accounting standards and tougher reporting standards. When I was first starting out as an entrepreneur, rich dad said, "The dream of many entrepreneurs is to see the company they formed listed on the stock exchange." Yet, after the Enron, Arthur Anderson, Worldcom, and Martha Stewart scandals the rules became tighter and the compliance requirements much more complicated and expensive. The government was breathing down public companies' backs. Building a public company business wasn't as much fun as I had expected. Even though I learned a lot, made myself and our investors a lot of money, became a better entrepreneur, learned how to design a public company, and was glad I went through the learning process, I doubt if I will ever form a public company again. That type of business is for a different type of entrepreneur. I can make more money and have more fun in small closely held private businesses. (If you are interested in more information on the pros and cons of private businesses and public companies we recommend the Rich Dad's Advisors book OPM Other People's Money, by Michael Lechter (Warner Business Books, 2005). Can Anyone Be an Entrepreneur?
Rich dad wanted his son and me to understand that anyone could be an entrepreneur. Being an entrepreneur was not that special. He did not want the idea of being an entrepreneur to go to our heads. He did not want us looking down on anyone or thinking we were better than other people if we became successful entrepreneurs. To this he said, "Anyone can be an entrepreneur. Your neighborhood babysitter is an entrepreneur. So was Henry Ford, founder of the Ford Motor Company. Anyone with a little initiative can be an entrepreneur. So don't think entrepreneurs are special or better than other people. Your job is to decide which entrepreneur you most want to be like-the babysitter or Henry Ford? They both provide a valuable product or service. Both are important to their customers. Yet they operate in very different spectrums, different bandwidths of entrepreneurship. It's like the difference between sandlot football, high school football, college football, and professional football." With that example, I understood the point rich dad was making. When I was in college in New York, playing college football, our team had the opportunity to practice with a few players from a professional football team, the New York Jets. It was a very humbling experience. It was soon obvious to all of us on the college football team that while we played the same game as the pro players, we were playing it at a completely different level of play. As a linebacker, my first rude awakening was trying to tackle a New York Jets running back coming through the line. I doubt if he even knew I hit him. He ran right over me. It felt like I was trying to tackle a charging rhino. I did not hurt him but he definitely hurt me. That running back and I were about the same size. But after trying to tackle him, I realized the difference was not physical. It was spiritual. He had the heart, the desire, and gift of natural talent to be a great player. The lesson I learned that day is that we both played the same game, but we were not playing at the same level of play. The same is true in the business world and the game of entrepreneurship. We can all be entrepreneurs. Being an entrepreneur is not that big a deal. A better question to be asked in designing a business is, "At what level of play do you want to play the game?" Today, older and wiser, I do not have illusions that I would ever be as great an entrepreneur as Thomas Edison, Henry Ford, Steven Jobs, or Walt Disney. Yet I can still learn from them and use them as mentors and role models. And that is rich dad's entrepreneurial lesson #1: "A successful business is created before there is a business." The most important job of an entrepreneur is to design the business before there is a business. Laying the Foundation for Success-Design the Business Most new entrepreneurs get excited about a new product or an opportunity they think will make them rich. Unfortunately, many of them focus on the product or opportunity rather than invest the time designing the business around the product or opportunity. Before quitting your job, it might be a good idea to study the lives of entrepreneurs and the different types of businesses they created. Also you might want to find a mentor who has been an entrepreneur. All too often, people ask business advice from people who have business experience as an employee but not as an entrepreneur. Later in this book, we will introduce the B-I Triangle, which outlines what components are required to create any business, regardless if it is big or small, franchise or individually owned, Mom and Pop or publicly owned. Once a person understands the different components that make up a business it becomes much easier to design businesses as well as evaluate good ones and bad ones. Also, we always recommend keeping your daytime job while starting a part-time business-not for the money but for the experience. That means, even if your part-time business does not make any money, you are gaining something far more important than money-real life experience. Not only will you learn about business, you will learn a lot about yourself. A Bonus One of the reasons for the success of The Rich Dad Company was that the business was started by three already successful entrepreneurs, Sharon, Kim, and me. Each of us brought our own experiences and perspectives to the team. Sharon came from the background of the proverbial A student, a certified public accountant who had migrated into the realm of entrepreneurship. She had started and grown several companies of her own prior to starting The Rich Dad Company with Kim and me. As a bonus for you, Sharon will provide her unique perspective and will share her own insights and experiences related to each lesson. Copyright © 2000 by Robert T. Kiyosaki and Sharon L. Lechter Excerpt Courtesy of Time Warner Book Group Read More: Part 4 of this excerpt >>
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