Kiyosaki: The Importance of Learning from Mistakes

I’ve learned more about financial independence from Robert Kiyosaki than any other author I’ve studied. Love him, or hate him, his approach to acquiring “assets” and focusing on “cashflow” will lead to financial freedom.

I’m such a Kiyosaki fan that I’ve actually given away over 1,000 copies of his “Rich Dad, Poor Dad” book. When I owned my real estate brokerage, I actually created a profitable marketing campaign built around offering his book for free. If I remember correctly, the headline for the advertisement was…

Here’s How You Can Have The Best Selling Book Titled, “Rich Dad, Poor Dad” by Robert Kiyosaki Mailed to Your Door for FREE.

I bought this book by the truck load and had my mail crew stuff the packages and deliver the books to anyone who asked for it. There was no catch in the offer and it was very expensive to buy the books and mail them to each person requesting one.

The marketing campaign generated thousands of leads. Obviously, very few actually read the book even though they got it for free. For those who did read the book, I had a strong likelihood of helping them acquire investment properties. (There is a BIG lesson in this for you. I hope you can see it.)

Well, Kiyosaki recently gave this TED Talk:

 

In this short presentation, he talks about how important it is for us to make mistakes. Mistakes make us better, IF we continue trying because we adjust from what we learn. These adjustments improve our future results.

His comments on making mistakes reminded me about an investment a friend made several years ago. A friend who lived out of state bought a rental property. Like all of us, he made a few mistakes with this first investment. He ended up getting so frustrated over these mistakes that he decided to sell the property. Once the rental property was sold, he wiped his hands of real estate and vowed never to consider rental property again.

I certainly understand how challenging real estate can be. I’ve made many of costly mistakes including…

1. Buying commercial property in a depressed area. (It is virtually impossible to rent commercial space in a depressed area. I ended up selling this property for a significantly loss.)
2. Buying a vacation home twelve hours away at the top of the market! (Don’t buy a vacation home. Rent nice homes instead. If you do buy a vacation home, buy one closer to home.)
3. Accepting unqualified applicants as tenants. (Evictions, damages, ugly situations)
4. Allowing tenants to pay late. (Tenants will treat you how you allow them to treat you. If you give an inch, they’ll take a mile.)
5. Renting to and hiring friends. (If you rent to a friend, they won’t be friends for long. If you hire a friend, they won’t be friends for long.)
6. Partnerships. (If you’ve been in a partnership, you understand why this is a mistake.)
7. Signing personally on mortgages for investment property. (This mistake almost forced a personal bankruptcy)
8. Investing for appreciation instead of cashflow. (“The real estate market never goes down….” until it does)
9. Taking on way too much debt. (Debt is a a noose and it tightens with every dollar borrowed)
10. Not filing evictions on non-paying tenants quickly. (If someone isn’t paying on time, they have to move. Get them out now. Don’t wait.)

I learned a great deal from these mistakes and my investments today benefit from everything I learned.

Had my friend stuck with it, he would have made adjustments based upon his previous mistakes. These adjustments would have provided better future results.

Unfortunately, when my friend wiped his hands clean of real estate, he lost the possibility of improved future results. He cannot profit from the lessons learned and his loss is final.

Our losses (mistakes) are not final IF we keep trying. Every loss brings a valuable lesson that can AND should be leveraged going forward. If you keep learning from your mistakes, you become a better investor with each passing year. On the other hand, if you quit… well… you don’t become a better investor and your mistakes remain costly.

You’ve heard the old line about getting burned touching a hot burner on the stove, right? You never touch a hot burner twice!

Well, my friend got burned by the stove and then promptly carried his stove out to the curb for the garbage truck to haul it away.  Now he has to cook everything in the microwave. 🙁

This idea of learning from our mistakes applies to everything.

Business.
Relationships.
Parenting.
Investing.

How many times have we made mistakes as parents? Um, for me, at least once a day. When we make a mistake with our children, we don’t kick them out of the house, do we? We figure out how to handle the situation differently. We learn and adjust how we handle things. This process helps us become better parents. I’m a far better parent today then I was 10 years ago. I still make mistakes and I’m far from perfect, but I’m gonna keep on learning.

I’m also a far better investor today at the age of 46 then I was at 30. So are you!

Mistakes are very valuable and part of the process!.

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