How To Invest With LESS RISK -Robert Kiyosaki


– [Male Announcer] Fake money,
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the Rich Dad Radio Show. The good news and bad news about money. Here’s Robert Kiyosaki! – [Robert] Hello hello
hello, it’s Robert Kiyosaki, the Rich Dad Radio Show, the good news and bad news about money. Today we have a very very important show, and it is on a very important subject. And it’s a subject that’s
near and dear to my heart. It’s about brothels, no I mean risk. Risk. Now that word is a four letter word. Yet I know the word risk holds so many people back in their lives. And as a person who spends most of my time talking to people about
money and things like this, I notice that most people are so terrified of losing money, or making a mistake or what if my business fails? And it goes to this subject called risk. And it is not just a superficial
surface four letter word. It goes deep down into the
core of the individual. So risk means different
things to different people. So today our guest is Allison Schrager. And she’s the author
of a book that sounds, I haven’t read it, but
I’d like to read it, it’s called “An Economist
Walks Into A Brothel” which came out 2019 this year. And I really like the title already and she’s gonna be talking about people who walk into
brothels and also surfers. So as some of you may know, I
grew up in Hawaii as a surfer and I must admit I’ve walked
into a number of brothels in my lifetime just to take some risk. My wife is here, Kim, so she can tell you that I actually called
her from a brothel once. Any comments Kim?` – [Kim] Well you did actually
call me from a brothel. Yeah, I think you were in Costa Rica and you kinda said “Kim, I’m in a brothel” and I’m like well tell me what it’s like, I’ve never been in one. – [Robert] It was really a nice, interesting people.
– [Kim] Interesting, huh? But I’m very excited to talk to Allison because she’s all about risk management. And it’s something we
haven’t really talked a lot about here but if you think about it, in your business there’s risk management. In finance and money
there’s risk management. In every day of your life
there’s risk management. – [Robert] Crossing the street, looking the wrong way is risky, you know. – [Kim] Yeah, health, sports,
everything is risk management. So, Allison is the expert
and she’s studied it, as Robert said, she’s studied
it from brothels to surfers and all sorts throughout the globes. So I’m anxious to hear her
take on risk management and how to manage it but more importantly, how to use it to your advantage. – [Robert] And one more
thing I’d like to say about Allison, she’s a fantastic marketer because I looked at her
video and she has these good looking young guys
riding these giant waves. So it’s an interesting podcast. I mean, I don’t know what you
call those things anymore. – [Kim] Video, it was a video. – [Robert] But you can go to her website allisonschrager.com even if
you’re not interested in risk. Her video is at minimum, entertaining. So, anyway. – [Kim] Allison, welcome to the show! – [Allison] Thanks so much for having me. – [Robert] You’re a very
good marketer I must admit. Very good, very good. – [Allison] I take no credit for that. I think that was the reason video and they had all the great footage. – [Kim] It worked, so. – [Robert] Your title is a great title because you know, economists and brothels don’t necessarily go hand in hand. So anyways. – [Allison] Yeah that’s
why we went with it because I studied economics of retirement. I don’t exactly do these
sexy things in my work and it was just, it just kept putting me in these sort of places
you would never expect which is how we chose that title. – [Kim] So what is. Yeah, so what is “An Economist
Walks Into A Brothel”? What’s it about? – [Allison] It’s about risk taking. So as I said, my background’s
in retirement finance, and the central question, this is like, one of the pure risk
problems you’ll ever find. Is how do you move money into the future? And the more risk you take,
the more money you can move into the future even though you risk loss. So it’s all one big risk problem and I spent my career as an economist very focused on risk and how to measure it and how to manage it. And it seems to me, I notice that people can be so great about managing risk in one aspect of their
lives but not the other. And I just reject the idea that people can’t understand risk, it’s
really popular to say that. So I was thinking, especially
with the retirement issue, we’ve put this huge
risk problem on everyone that they have to invest themselves for their retirement
and it seems important. People understand all these
things I’ve been studying for so many years and I fully
am committed to this idea that people can understand it. They’re not something you have to get a PhD in to understand, these are basic concepts that people need to know. They’re fundamental to financial literacy, yet we don’t really do anything
to teach them formally. So people kind of use them
in one area but not the other and so I’ve also got a
background as a journalist and I figured a good way
to communicate these ideas was to do storytelling, was
to find interesting examples of people using these
concepts in unusual ways that were memorable and
engaging and interesting and it would also be a fun
experience for me to meet them. – [Robert] Well that’s
great because today, Kim and I are hosting a kind of a luncheon for a US Congressman and he’s going to be talking about the retirement risk. There’s a new video out by PBS
called The Retirement Gamble. And one of the reasons we
started the The Rich Dad company was because, I’m sure you
know in 1974 was ERISA, the Employee Retirement
Income Security Act, which led to the 401k, and all
of these criminal activities caused stocks, bonds,
mutual funds and ETFs. And it’s just ripping people off, so I sit there and go oh my God. And now it’s coming home to ruse because the World War Two generation, our parents’ generation, they had what was called defined
benefit pension plans, and today Baby Boomers
have these things called no pension plans, or
defined contribution IRAs, 401ks and things like this. The average person has no
idea what the difference between a mutual fund and an
ETF or a stock or a bond is, and so that’s why 22 years ago, we kind of coined these,
put two words together called financial literacy
and now I’m glad to hear that people actually using the
word ’cause it was made up. It didn’t exist, because our
academic system is made up by people who are not risk takers. They’re called school teachers. So anyway, I wanna hear what
you have to say about this because I’m very concerned
about the growing gap between the rich and everybody else, but also for my fellow
Baby Boomers right now, a lot of them are going to
go, as you say in surfers, surfer talk over the falls. They’re just gonna get hammered when the next crash comes on. So what did you find out
about surfers versus hookers? I mean, that’s a very
important way to start. – [Allison] I went searching for wisdom. – [Robert] I did too. – [Allison] So most of
the stories I read about are people who take risks in
really smart interesting ways and both surfers and
sex workers are really, are very smart, well they can
be very smart risk takers. – [Robert] Well you have to be to survive in both industries. – [Allison] Totally, I
mean we have this image of both of them being fairly reckless, but when you get to know
them and talk to them, particularly the people who
are successful in their field, anyone who’s successful in any field, no matter what it is, no
matter how exotic it is, there’s a really good risk taker. – [Robert] You also said
something that’s interesting. People take risk in certain areas but don’t take risk in others, right. – [Allison] Totally,
we have this perception that people are risk averse or risk loving and some people are more
tolerant of risk than others but I’ve never met someone
who never takes risks, especially people like to
say women never take risks which I just find offensive. – [Kim] Yeah, that’s a great
point and I was talking to Sallie Krawcheck,
she was on Wall Street and she says that women
are not risk averse. She likes to use the word risk aware. They’re more aware of what the risks are, and so when they make decisions they’re more practical
decisions and they understand that the risks and the non risks. – [Robert] Especially when a guy comes up and says hi can I buy you a drink. Their risk is on at that moment. Risk on, risk off. It’s risk on at that time. – [Kim] So how does a surfer manage risk? What did you find out there? – [Allison] I went to
the North shore of Oahu because they have an
annual risk conference. – [Kim] Oh. – [Allison] So all the big,
these are big wave surfers, so the regular wave surfers
because big wave surfing is exceptionally dangerous. The waves are like 80 feet. – [Robert] Yeah my best friend
died outside that sunset. – [Allison] Oh, I’m sorry. – [Robert] It kind of ended
my big wave surfing career. He was gone. – [Allison] It’s very dangerous, I mean you’re in incredibly dangerous conditions, and because people were dying
more, they really decided, there was this guy, I
don’t know if you ever read an author named Bryan
Kaylana, and he decided. – [Robert] Buffalo. – [Allison] Yeah, his son. – [Robert] Yeah, right, right. – [Allison] Yeah well he
comes from this long big wave surfing dynasty and
he was telling me how one day, he was, I think
he was participating in the Eddie which is a
big wave surfing contest, and he was a lifeguard. And so was Buffalo, it
was a long history of — – [Robert] And that was Eddie Aikau. He died also. – [Allison] Yeah. Exactly. So he was in the water and wiped out, and he was reflecting, I think
it was a couple days before, there’s was a surfer
who he couldn’t rescue, and who died, and this was haunting him, and he was now in similar waters. He was a very good swimmer,
so he was racing the water, so he wasn’t worried about himself, but he was in the water,
sort of bobbing along, waiting for, he had to swim to shore, when a friend of his came
by on a stand up jet ski. They were fairly new, and
he said a light went on. Wow, we could use this
tool to reduce risk. So he went and got home, he
bought a Yamaha WaveRunner, and he brought jet skis to wave surfing. Now, the thing is the surfing world is haunted by this issue, which is, you bring a technology
to make surfing safer. So with jet skis, it’s that you can get rescued when you’re wiped out. – [Robert] And what happened is, they went after bigger waves. – [Allison] Exactly. It’s like a stock option. – [Robert and Kim] Yeah. – [Allison] It’s like it
could be used as insurance, or it can be used as leverage. Bryan’s like, concerned
about this, he’s like, I’m empowering people
to take bigger risks. Not only do they feel safer,
because they have something that can rescue them, but
they also have something that can embolden them
to take bigger risks. And can push them on bigger waves. So they have an annual conference discussing with management. The same way we would
in a pension conference, talk about techniques
of how to reduce risk, and how to take more risks
while at the same time insuring against your downside. – [Robert] Well I’m glad to hear that. What do you find out
about retirement risk? In my opinion, nobody’s really
talking about it right now, but it’s gonna be one
of the biggest disasters and that disaster went back to ’74, when Congress passed ERISA. Which led to the 401k, and now
you have a whole generation of Americans, about 60% my generation who will not ever be able to retire. What does the system say about that, because that’s more than
the Rich Dad strike zone, that’s why Rich Dad was formed, really. – [Allison] 401k is like,
defined contribution pension, isn’t in and of itself a bad thing, I mean there’s problems
with fine benefit plans too. The problem with the
fine contribution plans is we sort of duck everyone with this tool without any training, without
good investment options, without any financial education. Saving for retirement, I’ve
set my whole career on it, I did a PhD and I did a Laureate on it, it’s a really hard problem. – [Robert] Yeah, Allison
but the biggest problem was they stuck people who
are risk averse with it. – [Kim] And ignorant. And financially ignorant. – [Allison] Exactly. There are some people with
an incredibly hard problem, as I said, I even struggle with, and they have no tools or education on how to manage it.
– [Robert] That’s right. I love you Allison, I’m
glad you’re saying that, because that’s the reason the
Rich Dad company was formed. I mean, we have a disaster coming and I’m of that generation, that 401k. And these IRAs, and Roth IRAs,
and mutual funds and ETFs, I look at them and I’m
going holy mackerel, they’re going into the
riskiest of all waters today. – [Kim] So how do you manage that risk, how do you manage the retirement risk? How do you manage the financial risk? – [Allison] Well we have
to reframe the problem. There’s so many levels of
where things have gone wrong, and to start with we
pushed everyone into a 401k without really, like defined benefit plans we’ve had a very clear objective, right. You work for someone and
they gave you securing. – [Robert] Yeah, but the
difference is Allison, for those who do not
know, defined benefit plan was technically, wasn’t always true, was professionally managed. Whereas you had somebody who knew — – [Allison] Yeah, although they often didn’t do a very good job. – [Robert] Yeah, I know
most of them were horrible but anyway, there was some
degree in the corporation, and if you worked for Ford Motor Company in a defined benefit,
you had to pay a check for the rest of your life so it was Ford who was managing that fund manager. But now they … – [Allison] They took on all the risk. – [Robert] Yeah.
– [Allison] For you. – [Robert] And so that’s why
’74 was such a big year for me, I went holy mackerel, we’ve
screwed a whole generation. And the bill is coming due today. – [Allison] Yeah, although a lot of people didn’t have defined benefit
plan, so a lot more people can, I mean, defined contribution
plans are a lot cheaper for companies to offer
because they also take on – [Robert] That’s why they did it. – [Allison] A lot of risk,
because they’re cheaper. – [Robert] Because they don’t have to pay for the employee for
the rest of their lives. – [Allison] Well, what ERISA did is, not only did it create the 401k, it made companies properly account for how expensive defined
benefit plans were. ‘Cause they were being managed a lot more recklessly before, so ERISA
forced companies to realize how expensive these promises were, once they saw that they were
like, we want out of this. – [Robert] Not only that,
when the corporate radars found the defined benefit
plan that was full of money, they went in and raided the company just for that pension plan. And the same thing is going
on in Wall Street today. So that’s why the Rich
Dad company was formed. We have a bunch of very ignorant people leading ignorant people,
that’s why I’m glad to hear what you have to say about
this whole thing on risk because it is sole to
people who are risk averse. And they don’t know what risk is, they may take risk in
other parts of their lives, but they don’t know anything about money or investing, or risk. So when we come back we’ll be talking more to Allison Schrager, she’s
the author of the book “An Economist Walks Into A Brothel”, it’s about risk and risk management. And two very dangerous
professions, surfing and hookers. But when we come back we’ll talk about the next subject called hookers. – [Kim] Can I add something to that? So, when we come back,
I wanna talk to Allison about how you take risk and
manage risk in business, how you manage risk in
money, and what are some of the key points that Allison
has discovered in her research. – [Male Announcer] You’re listening to the Rich Dad Radio Show,
with Robert Kiyosaki. – [Female Narrator] Don’t be like Charlie. Charlie is that do-it-yourselfer
who does himself in. Do-it-yourself is good for tile and grout. It is not good for asset protection. Charlie thought he’d save a few dollars forming his LLC online. With no guidance, he did it wrong. When he sold the property, he lost thousands and thousands of dollars. He did himself in by
trying to do it himself. Don’t burn yourself. Use Corporate Direct to set up and maintain your LLCs and corporations. Corporate Direct is owned and operated by attorney and Rich Dad
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attorney for asset protection. He and his team will do it right. Visit them at corporatedirect.com, or called 800-600-1760. Mention Rich Dad and receive
$100 off your formation fee. That’s corporatedirect.com,
corporatedirect.com. – [Robert] What is your
number one expense in life? Your number one expense. It’s taxes. And I’m gonna ask the question is how come there’s no financial
education in school, but why isn’t there
education on taxes either? You know, they tell you to
save money, which is stupid. They tell you to invest in the stock market, which is stupid. But why don’t they teach you about taxes? So here we have Rich Dad
advisor Tom Wheelright, we’re talking about his
revision-forced book “Tax-Free Wealth.” Welcome Tom. – [Tom] Thanks Robert. – [Robert] So what’s the
tax-free wealth about, what’s different this time? So we’ve got revised edition. – [Tom] So what we did was, this is the first major tax
reform we’ve had in 30 years. 2017.
– [Robert] Right. ’86 was the last one. – [Tom] ’86 was last one, back
when I was in Washington DC. – [Robert] So many guys got wiped out because of that tax change. – [Tom] They did. They did. It wiped out an entire
industry, savings and loans. This new tax law is just
as big, but in a very different way, it affects
different industries. You know, the tax law’s
always a series of incentives. And the question is
always, which incentives, and which ones apply to me. And so, the key to revising
“Tax-Free Wealth” was, what changed so much in this new tax law that we can absolutely take advantage, I mean seriously, it’s amazing
the incentives, for example, I mean the bonused
appreciation, for example, for real estate, is unbelievable. You buy a million dollar apartment, get a $300 000 reduction or
more the very first year. – [Robert] So if you wanna make more money and pay less taxes like
Donald Trump or myself, get Tom’s book “Tax-Free Wealth.” (low music) – [Male Announcer] Financial freedom begins with financial education. Now back to Robert Kiyosaki,
and the Rich Dad Radio Show. – [Robert] Welcome back, Robert Kiyosaki, the Rich Dad Radio Show,
the good news and bad news about money, and today we’re talking about a very important subject especially when it comes to the subject of money. It has to do with risk, and most people are so risk averse, they stay poor. Absolutely poor. Because our school system, as you know teachers teach us zero about money. And on top of that, we’re led by a lot of financial planners, stock brokers, real estate brokers, we’re
more broke than you are. So once again you can listen
to the Rich Dad Radio Program any time, anywhere on iTunes or Android. And all of our programs are archived at richdadradio.com, we archive them because one of the essentials
of education is repetition. If you listen to this
program one more time or two more times, you’ll get smarter because you know when you play golf, the more you swing that club, hopefully the smarter you get. The biggest part about
listening to this program again is get together with friends, family, and especially business partners, listen to this program and discuss it because our guess today
is Allison Schrager. She is an economist, and she is a founder of LifeCycle Finance Partners, LL-assist, LLC, Air Risk Advisor
Reform, the author of, great book, “An Economist
Walks Into A Brothel,” please get it, if nothing else, watch the video, it’s fantastic. And it’s about surfers and hookers. And her website is allisonschrager.com. So if you listen to this
program one more time, you might learn something about a very important subject called risk. And we all take risk,
but in different ways. And so one of the things
that Allison and I were discussing at the break is everybody says investing is risky. That’s absolutely not true. There are ways you can
mitigate risk down to zero, but you have to have the right advisor and a professional supporter. – [Kim] Education and the
great experience, yep. – [Robert] Kim, are we hundreds of thousands and millions in debt? – [Kim] We are. We are, but that comes from education, that comes from experience,
that comes from knowledge. – [Robert] And Dave
Ramsey is a good friend, he’s got great advice. He says live debt-free,
and for most people, – [Kim] For most people,
that’s very good advice. – [Robert] Because they really should not be taking risk with debt. So Allison again is an economist,
an economist and her book is “An Economist Walks Into A Brothel,” and she discussed surfers and hookers. And she was talking about how they take risk and how they manage risk. – [Kim] So many of our listeners, they’re small business owners. They’re small investors. So what would you say to them, some of the keys on how to manage risk as a small business
owner, or as an investor? – [Allison] Well, in
finance, the techniques people use is they diversify. So that gets rid of unnecessary risk. And the other things you can do — – [Robert] That’s what financial
planners tell you, right. Diversify. – [Allison] Yeah. That will help you get rid of the risk that a single stock will rise or fall, or, you know, if you’re a business owner and you have a store
and you only are selling one product, you know, you’re completely banking on that product as well. – [Robert] So diversification is one way a person can minimize,
or mitigate their risk. – [Allison] Well certain kinds of risk. But there’s still these huge risks, like the risk that there’s
gonna be a recession. Or that every single stock is gonna fall like it did in 2008. Or almost every single stock. So you still have those risks remaining you also have to think about managing. Or you’re a small
business owner, you know, you’re very sensitive to what
happens in the whole economy. And that’s where you get
into a little bit more risk management which could
be hedging, which is just, hedging your best, taking
a little less risk. – [Robert] Hedge is
another word for insurance, for the people … – [Allison] I just find
it a little different. Where hedging is balancing risk and reward and insurance is a
different concept which is, when you pay someone to take
on downside risks for you. Or you have a plan — – [Robert] Allison, I understand the term. I understand the term. I agree with you 100%, but
this is what I do for a living. – [Kim] So are you saying,
a lot of the risk management is that you’re kind of looking
at all the what-if scenarios, and what if the downside scenarios. So like recession, we have
to prepare for if there is a recession, how are we
prepared to handle that. If interest rates, if inflation, if you lose your job is an individual, how do you hedge for that,
how do you mitigate that risk. Is that what you’re saying? – [Allison] Yeah. And it’s very dangerous,
too, because, you know, if a recession you’re likely to lose money in the stock market and
your job at the same time. – [Robert] And your house. And then you’re stuck with the debt. – [Allison] Exactly. – [Robert] And how
about student loan debt, which is the worst of all type of debt. – [Allison] Well this
is why systematic risk is so dangerous, is because
everything seems to go wrong at once, and it’s really
hard to find any way to diversify your way out of that. – [Robert] You’re speaking
my language here, Allison. Big question here is today
there’s a rise of socialism. You know, with ALC and
all those characters. The presidential campaign
is now a jury springer show as far as I concerned, led
by my friend Donald Trump. I mean, it’s a rise of socialism because people are afraid of risk. – [Allison] Well yeah, I
think that’s part of it. I think people sense more
acute risk, certainly with all the changes that are
happening that there’s this more existential
threat to their livelihood. And one thing, I think with socialism, or populism in general, is it’s saying someone will take care
of the risk for you, the government will take
care of risk for you. And you know, that’s attractive. – [Robert] And Allison though, the way I always said, capitalism is you teach people to make their money and then in socialism
you give people money. And that’s why people want the government to take care of them. That’s why they want free education, free healthcare, free education. ‘Cause they really are
so risk averse right now. – [Allison] There’s a lot of risk, especially when the
economy is going through a big transition, you
feel that systematic risk so much more and it’s particularly scary. – [Robert] Right. So how does a person mitigate their risk or reduce their risk? – [Allison] It could be
defining different ways to insure, could be finding
different ways to hedge. Figuring out how much
risk is right for you. Like I was saying, you guys
feel comfortable taking on debt. Because you know how to manage that, that’s not right for everyone, for other people, would
be getting rid of debt because if the economy
tanks then you still have to make a mortgage payment, that’s a risky situation to be in. – [Robert] Right, so in your book, “An Economist Walks Into A Brothel,” how do brothel sex workers manage risk? – [Allison] Like anything, you pay, you know, different cost-reducing risk. So I went to the brothels
in Nevada to understand, sex working is a very
risky job, traditionally. You’re walking the streets,
or you’re meeting men online, they can be violent, they can be police. So the women in Nevada,
what they do is they work out of the brothel, and they
give up 50% of their earnings. They give it to the
brothel, and in exchange the brothel promises them complete safety. And the customers as well
are paying for safety because they don’t have to worry about a Robert Kraft Eliot
Spitzer type situation. They know that everything is secure, they know the women are
tested for diseases, and there really won’t
be any repercussions, but they also pay a lot
more than they would pay a legal sex worker for that reassurance. – [Robert] That’s good to hear. So how does that translate
to the average person’s, either a small business
or they’re an old guy preparing for retirement, how
does that translate to them? – [Kim] It sounds like
from the sex workers, these are the things that could go wrong. So I think a lot of business owners, they get very optimistic, and they get very starry-eyed, and they don’t look at what are the downside risks
that need to be managed. – [Allison] I mean, I
met women in the brothel who had worked in the illegal market and had a lot of really scary experiences which is why they ended up
there, because they were very aware of all the downsides
from not being out there. So this is a way of risk
reduction is thinking, I will pay and in exchange
I will get less money, but I will have less risk. – [Robert] You know the thing here is, how does a person today, let’s say they’re an old guy like me, 65 years old, and we’re cruising for one of the biggest market crashes in history because of the quantitative-es, and
they printed so much money the stock market is at
over-inflated rates, and all the financial experts are saying stay in the stock market,
stay for the long term. And we all know it’s gonna crash because markets crash about ten years
so we’re overdue right now. How does a person with a 401k or an IRA protect themselves from a
catastrophic market crash? – [Allison] It depends on
where you are as an investor. Certain assets are less volatile, so you could invest more bonds. I mean, the lower return,
but you do face less risk. Or if you are investing
more for the long term and you’ve got a stable
job and stable earnings, you just have to ride it out and be like alright, the market’s gonna crash but I know or I hope it will come back. So you have to balance those two things, one your investment horizon, and two, how much risk you feel comfortable taking, and get into lower volatility of the lower earning assets to compensate. – [Robert] So you have the
standard financial planner pitch on how to mitigate risk. – [Allison] I guess so. – [Robert] Yeah. So let me just add, as a surfer, when you’re paddling out,
and you see waves coming in sets of five, draw
in that three to five. And you see this huge wave about to crash on you and you’re halfway out. Which is where’d I’d say
most people are today. What would you do today? – [Allison] I think you have to decide what’s right for you
and your risk tolerance. A lot of the surfers I met
would let that wave go, and go for a later wave in the set, even if it would be smaller. Because if you take that first big wave and it crashes on you, you might be dead. So you balance, do I want
that career-defining huge wave or do I wanna take a wave that’s maybe two thirds of its size,
but I know I’ll be safer, and a lot of them make that decision, I think we like to think of these guys as daredevils but a lot of them made the decision to
wait for the later wave. – [Robert] I like what you
said about it in your book, “An Economist Walks Into A Brothel,” that these big waves surfers
are very smart people. They understand risk. And the reason I’m encouraging people to get your book, “An Economist
Walks Into A Brothel,” is in today’s world of high risk, you have to look in the mirror. Who are you? And if you’re
not a big wave surfer, you shouldn’t be out there. And if you’re not a hooker,
you shouldn’t be there either. But most people don’t look in the mirror and then they take advice from
people like school teachers, or financial planners
who are also risk averse. And they don’t get educated. – [Kim] It’s actually why
I love the game of golf. I’m a golfer. And everyday, every round of golf, every shot almost you’re managing risk. And so you hit a bad shot, and
then you’ve got to figure out okay, what’s the best way
to get the best score, the lowest score possible,
here I am under the trees, in the bushes, how am
I gonna get out of this and you’ve got to manage every shot. And I relate that to life, so in business, all of a sudden something goes awry, and you’ve got to figure
out, how am I gonna get back on track, how
do I make the most money, how do I get my most revenues. So it’s like every single day, people are managing risk, I think really not even realizing they’re doing it. – [Robert] Yeah, and
if you saw the Masters with Tiger Woods on the whole 12, Tiger took the less risk and he won because he took the less risk. And his two guys were tied
with him took the greater risk. But that’s kind of human
nature, isn’t it Allison, it’s up to the golfer, the person. – [Allison] Yeah. This is the tricky thing about risk, is knowing what risk’s
the right one to take and when is it better to
hedge, or how much to hedge. This is what makes it hard. – [Robert] And what happened
when my best friend, his name was Carl Roner, when he died, surfing, a lot of us stopped surfing. It was so tragic. You see your friend get wiped out and, they never found his body. I love your book. I love what you’re
talking about here is that the risk is up to you to
manage, but I think you have to look in the mirror personally,
don’t you as an individual. – [Allison] Totally. This is one of the big
issues at the surf conference is how many people are
there surfing big waves who don’t belong out
there, but to be honest, a lot of the sort of tragic accidents in surfing has been skilled people. Even if you do know what you’re doing, sometimes things happen
that you can’t control. – [Kim] Then we often say
that investing isn’t risky, but it’s the investor that’s risky. And that’s the uneducated, ignorant person that’s taking these
risks with no background, no education, and don’t really know what they’re doing, that’s very risky. – [Allison] Totally. – [Robert] And then what you said about technology was very
very insightful Allison. When they came out with those
WaveRunners and all this, they started a new type
of surfing called tow-in. And what they could go out,
they could go further out into the sea, and they could
find these ocean waves. And then they would
hook the surfer up to it and they would tow them into position so the surfer could pick up enough speed to catch an ocean wave, not a shore wave. And so what happened with
technology and surfing was these surfers kept going
for bigger and bigger waves, and that’s why I’m concerned
about the economy today with technology, called algorithms
they have for investing. They’ve taken technology and
taken bigger and bigger risks, which is why I’m
concerned about the future of all these Baby Boomers paddling around with little defined
contribution, 401ks and IRAs. Because these guys who are running the biggest hedge funds in the world, they’re actually tow-in surfers. They can take faster risk,
and they’re trading now, when you say invest in the long term, – [Kim] Like nanoseconds. – [Robert] These guys are
trading within half a second. And taken bigger risk with bigger bets. And the average guy is sitting
there with a little 401k, knowing these guys who are tow-in surfers are about to bring down the world economy. What do you think about that? – [Allison] I think that
that’s mostly right. ‘Cause that is what most
hedge funds are doing, is they make bigger
returns on everyone else by taking leverage, which is … – [Robert] Leverage is more
money for smaller return. – [Allison] So you borrow
again, your returns and that is more risky, but it
also can amplify your return. And that’s a lot like a similar function that jet skis play in surfing which is, a lot of them, or what they’re doing is they’re using options,
which are technically insurance and flipping them
around to take leverage. – [Robert] And I agree with doing that, but you gotta practice doing that, I mean that is really high
risk stuff you’re playing with. – [Allison] Or, more importantly, like with the surfers are discussing, is what about when those
risks put cost to others. – [Robert] Yep. – [Allison] If you wanna run a hedge fund and blow up your hedge fund, good for you, but if you are posing a
systemic risk to other people then where does the responsibility lie? – [Robert] And that’s
what happened in 2008, was the government bailed out, those guys were brought down the economy. – [Allison] Yeah. – [Robert] That’s what’s happening today. – [Allison] Yeah, and
with the surfers as well, they discuss when you get rescued, – [Robert] Who risked a life? So Allison, thank you very much, I’m really glad we’ve interviewed you. I love the title of your book, “An Economist Walks Into A Brothel.” I love the two metaphors you use, surfing, big wave surfing especially, – [Kim] And we didn’t even get into all the military examples
that you used as well, there’s a lot of different
examples you use, either them, brothels or
surfers but that was great. – [Robert] I flew for the Marine Corps, and we practiced practiced practiced before we went to Vietnam. So we knew there was risk, but we had more skill to handle risk. And that’s my concern for
the average person right now, we’re cruising into one of the
biggest crashes in history. And they don’t know what’s gonna hit them. So anyway, thank you
for your work Allison. – [Kim] Thank you Allison, her website is allisonschrager, S-C-H-R-A-G-E-R, allisonschrager.com, go visit her website, and I’m sure there’s a lot
of great information on that. – [Robert] So thank you again Allison. – [Kim] Thank you Allison. – [Allison] Thank you. – [Robert] And when we come back, we’re gonna have the most
popular part of our program, which is called Ask Robert. – [Male Announcer] You’re listening to the Rich Dad Radio Show,
with Robert Kiyosaki. – [Female Narrator] Don’t be like Charlie. Charlie is that do-it-yourselfer
who does himself in. Do-it-yourself is good for tile and grout. It is not good for asset protection. Charlie thought he’d save a few dollars forming his LLC online. With no guidance, he did it wrong. When he sold the property, he lost thousands and thousands of dollars. He did himself by trying to do it himself. Don’t burn yourself. Use Corporate Direct to set up and maintain your LLCs and corporations. Corporate Direct is owned and operated by attorney and Rich Dad
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attorney for asset protection. He and his team will do it right. Visit them at corporatedirect.com, or call 800-600-1760. Mention Rich Dad and receive
$100 off your formation fee. That’s corporatedirect.com,
corporatedirect.com. (guitar music) – [Male Announcer] Log
on to richdadradio.com while you listen. Now back to Robert Kiyosaki. – [Robert] Welcome back, Robert Kiyosaki, the Rich Dad Radio Show, the good news and bad news about money. Gonna wanna thank Allison Schrager, because she’s talking about her new book, “An Economist Walks Into A Brothel,” 2019. She is a co-founder of
LifeCycle Finance Partners, LLC, a risk advisory firm. That’s interesting. Any comments Kim, on Allison? – [Kim] No, I think it’s interesting because there’s certainly
in the interview, in our discussion with
her, there were points that we disagreed on, or not necessarily were so aligned on for example she said you have to take risks to make money. – [Robert] That’s the
biggest lie there is. – [Kim] We have a different point of view here at Rich Dad about that. – [Robert] Anyways, so
it’s completely opposite, why is Rich Dad what the
rich teach their kids about money that Wall Street doesn’t. Wall Street does the education today. My new book is out, it’s called Fake, “Fake Money, Fake Teachers, Fake Assets.” Wall Street sells fake
assets, they’re called stock bonds, mutual
funds, ETFs, and savings. That’s who sells you those assets classes. They’re fake assets. Like your house is not an asset, I said that on Rich Dad Poor Dad. So we’re a financial education company, I’m not a stock broker, I’m
not a real estate broker, but we are educators wanna
point out the differences. – [Kim] So our philosophy
at Rich Dad is that you don’t necessarily have
to take risk to make money. Where the risk gets reduced
is through education, through experience, through
doing the real thing. – [Robert] Amen. Amen. Amen. – [Kim] And you do
that, there’s less risk. – [Robert] And be careful, fake money, fake teachers, and fake assets. Most people listen to fake teachers, they’re called financial planners, stock brokers, real estate
brokers, insurance planners. All these guys, they’re just
trying to sell you something. Look. There doesn’t have to be risk,
and I like Allison’s book, “An Economist Walks Into A Brothel,” because I was a big wave surfer until one of my best friends, Carl Roner, he was killed out there,
they never found his body. That is a very dangerous business. As far the whore houses go, I
decided to call Kim from one. Everything my mother said not
to do became my to-do list. Before I got married, so anyway, I’ve done a lot of the things there. Which is absolutely true,
is the higher the risk of the industry, the
smarter you’ve gotta be. – [Kim] I mean, she
made a very good point, you’ve gotta look at what are the risks and in her example of the sex workers, they mitigated the risk by
paying a higher percentage of what they collected
in return for safety. – [Robert] For protection. – [Kim] That’s protection,
that makes perfect sense, and if you look at her book, there’s a lot of different examples
on how to mitigate risk, how to manage risk, and
for a business owner and an investor, I
think it’s a great book. – [Robert] Yeah. It really is because we
had General McChrystal on, a general, he got fired by Obama, which I think was interesting. But McChrystal said,
because his west point and King’s point were military guys. He says the biggest risk is the person looking at you in the mirror. He says when you look at what is risk, you gotta look at yourself. And I think that’s what
people don’t tell people. Is that, who is risky, the stock, the bond, the real estate, the asset, the gold, the silver, or
are you the risky person? It’s not the asset, it’s you. It’s the guy looking or the
woman looking in the mirror, or did you marry some idiot who you think is gonna protect you, or do you have a job you think is gonna protect you. You’re the person at risk
because you’re the risky person. And that’s the Rich Dad philosophy. So our philosophy is get
financially educated. My new book is Fake. We have cash full of cans,
we got Rich Dad Poor Dad, we have a cash full quadrant. It’s all about who do you have to be when you look in that mirror. And most people are idiots. They have no financial education, and they take advice from people with no financial education either. They take from fake teachers. Like I talk about in Fake,
when I went to Vietnam, my teachers were real pilots. When I was in school, most
teachers were fake teachers. They had no idea what
they were talking about. The guy teaching me calculus. Third year of calculus. He never used this stuff. The guy that taught me
accounting wasn’t an accountant. And that’s what’s happening
today, so sports fans, the reason why we had the
Rich Dad company here, is so you can listen to real people or we’ll debate with them. But be careful who gives
you financial advice. If you wanna take financial advice from a financial planner just know, most of them are not rich people. Most of them are risk averse. So you can submit to Ask
Robert at richdadradio.com, and so Tony, what’s the first
question for Ask Robert. – [Tony] The first question comes from Chelsea, in Tempe, Arizona. “Robert and Kim, how has your
tolerance for risk taking” “changed as you’ve
become more successful?” – [Robert and Kim]
That’s a great question. – [Robert] Look. What every financial planner
will tell you is that, you have to take risk to make money. That is an out and out lie. See the more financial education you have, the less risk you take, and
the more money you make. Let’s take a crash. Kim, when the markets
crashed 2005, ’06 and ’07, did we make money or did we lose money? – [Kim] We made a lot of money. – [Robert] We made fortunes. Most people make fortunes
when markets crash. The metaphor the big wave
surfer, that’s God to us. I’m waiting for this next crash is coming, it’s pretty close. And unfortunately, the reason we started this Rich Dad company, is millions, probably billions of my generation, Baby Boomers and Millennials
will get wiped out. Because they have no
financial education in school. So the risk is listening to idiots who have no financial education wanna sell you something,
it’s called Wall Street. Think about it this way. When Wall Street crashed, the
government bailed them out. Did they bail you out? No. That’s the game plan, sports fans. That’s my new book, Fake, Fake Money, Fake Teachers, Fake Assets, be careful who you take financial advice from. Any comments Kim? – [Kim] When you hear about risk, so most people think
borrowing money is risky, or investing your money is risky. And to Chelsea’s point, we
do bigger and bigger deals, we borrow more and more money, because we have our experience, we’ve made a lot of mistakes,
we’ve had successes, we’re out there, we increase our knowledge with every single investment we do. So we can do the bigger
deals, and borrow more money, and invest more money,
because of our education. – [Robert] Yeah. So let me give one more
piece of information. Diversification. Every financial plan will
give you that same rut. Diversify, reduce risk. That is a bunch of bs, blue sky. It’s not diversify, it’s de-worse-ify. You’re not reducing your risk at all. Let me give you an example. From Rich Dad, Poor Dad
and all the other books, there’s four basic asset classes. There’s business, the
highest risk of all things. You’ve got people saying,
(gasp) I’m gonna start my business, and they have no
experience, they can’t sell, they don’t know taxes,
they don’t have a team. The second highest risk is real estate. We had a friend who said, yeah
I’m a real estate investor, I bought six houses, that they lived in. That’s not investing. That’s consumption. But they think they’re
a real estate investor, they think they’re Donald Trump. The third asset class is paper assets, stock bonds, mutual
funds, ETFs, and savings. That’s what Wall Streets
and the bank pump out. And the fourth asset
class are commodities. Gold, silver, real estate, food. Real commodities. Now when Wall Street says to you, or people like Allison
say to you, diversify, they’re talking to you about de-worse-ify. Which means you go into the third category called paper assets. Stocks, bonds, mutual funds, ETFs. Oh they say, put 60% of
your money in equities when you’re young, and 40% in bonds, and when you get older put 60% in bonds and 40% in equities, stocks. You haven’t diversified,
you’re still in paper assets. The riskiest of all assets. And the only people that make
money on it is Wall Street. Smell the roses man, these guys are the ones selling this garbage to you. Now, to do what Kim and
I do, you have to have financial education, right Kim? – [Kim] That’s correct. – [Robert] That’s why we
have the cash flow game, that’s why we’ve had advisors. We have Ken Mackeroy on real estate, not these phony flippers. – [Kim] On paper assets
you got Andy Tanner but he’s teaching how
to trade with options, which reduces and mitigates your risk. – [Robert] And you make more
money when the market crashes. So when these financial planners tell you diversify, it’s de-worse-ify. But you’re playing straight
into the hands of Wall Street. It’s Goldman Sachs, Lehman
Brothers, all this, Wells Fargo. You guys are ripping us off. That’s why we’re all at the buck fake. And they hire these financial planners that go out there and tell you, oh, it’s just de-worse-ify. You’re not diversified, you’re still in one asset class called paper. And when this market crashes down, which it will soon, because after 2008 they pumped trillions
of dollars to blow up the stock market and real
estate market into a bubble. When that baby comes crashing down, my generation, the Baby
Boomers, are gonna be toast. Most of the Millennials out there, leaving school with student loan debt. And they don’t even know,
they think the banks provide student loan debt. The banks don’t provide student loan debt. In 2009, a guy named President Obama canceled the student loan program, and the banks got out of
the student loan business, and the US Treasury got into it. But they don’t tell you that. It was President Obama who set up the current student loan program. And today, it is the biggest
asset class of the US Treasury. Today, 1.6 trillion dollars. But they don’t tell
you that on television. So there’s the reason we
have the Rich Dad company, and look ladies and gentlemen, you’ve got be a little bit
smarter than that today. Be careful who you take
your financial advice from. So with that said, you
can submit your questions into Ask Robert at richdadradio.com, I thank Allison again. Her advice is good for the average person. Dave Ramsey’s advice is good. Live debt-free, if you don’t
have any financial education, but living debt-free won’t help you if you lose your job
or the market crashes. So with that, that’s why we believe in real financial education. Thank you for listening to
the Rich Dad Radio Show.

Paul Whisler

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