The World Is Flat - Thomas Friedman

Thomas Friedman’s examination of the influences shaping business and competition in a technology-fueled global environment is a call to action for governments, businesses and individuals who must stay ahead of these trends in order to remain competitive.

In a narrative punctuated by case studies, interviews and sometimes surprising statistics, Friedman’s message is clear: be prepared, because this phenomenon waits for no one. Without rhetoric or scare tactics, he paints a picture of a world moving faster than most can keep up. As we explore America’s place in the fast-evolving world economic platform, Friedman presents not only the problems we face, but preventative measures and possible solutions.

The World is Flat is an historical and geographical journey, with stories and anecdotes from the days of Columbus to a modern day Indian call center; from the Great Depression to the home office of a Midwestern-USA housewife demonstrating the pervasiveness of the world-flattening trend. Spanning a broad range of industries, cultures and schools of thought, the real-world examples presented as evidence of his theory are undeniable.

From teleconferencing to podcasts and manufacturing to restaurant order taking, The World is Flat leaves no stone unturned in a quest for answers to a problem that most cannot even define. Friedman’s dissection of globalization is a valiant attempt at explaining and understanding the forces driving the flattening of the world, though he admits that the very nature of beast prevents one from having all of the answers. This candor is in keeping with the theme of the entire book, in that we must learn how to learn, teaching ourselves to stay curious and innovative, if we are to excel in a global economy.

As he moves towards the end of this presentation of his theory, Friedman warns of the forces that could seriously harm or slow the flattening of the world, particularly the threat posed by terrorist networks such as Al-Qaeda. His perspective is refreshing in a media driven largely by scare tactics and fear mongering as he encourages a realistic and objective approach to this threat.

As people become more able to collaborate, compete and share with others of different cultures, religions, educational backgrounds and languages, The World is Flat is a necessary reality check to bring these factors into perspective and offer, if not answers to every problem, the drive to uncover working solutions.

Chapter One – While I Was Sleeping

As we are introduced to Friedman’s theory that the world is flat, we accompany him on a journey to the various locations around the globe that led him to this conclusion. We start off in Bangalore, India, where he finds himself surrounded by advertisements of traditionally American companies such as Pizza Hut, Epson, HP and Texas Instruments during a round of golf. Traveling with a crew from the Discovery Times channel, he encounters Indian workers and businesspeople working for American companies, speaking in American accents and even adopting American names in their own country. A visit to Infosys Technologies Ltd leaves Friedman in wonder at the massive conferencing system they have created that allows people from around the globe to congregate and collaborate in one giant room via satellite and teleconferencing technology.

Friedman guides us through the different eras of globalization as he has defined them in an historical narrative from the days of Columbus to our present day state. We see the ever increasing pace of globalization through his encounters with people such as Jaithirth “Jerry” Rao, an outsourced businessman in India, and others. Through Jerry, we learn about the process of information exchange online and the effect it has on businesses to perform various duties from remote locations with everything from tax preparation to hair appointment scheduling to hospital bookings cited as examples of outsourcing.

As Friedman travels through Japan, China and back to America, we study various examples of the business outsourcing phenomenon and its impact, positive and negative, on the players involved. Homesourcing and military outsourcing are explored as Friedman explains the sheer prevalence of outsourcing in our society.

Chapter Two – The Ten Forces That Flattened the World

We are introduced to Friedman’s interpretation of the ten influencing factors that led to globalization and world flattening, the first being the falling of the Berlin Wall in 1989, which tipped the balance of power across the world towards democratic free market and away from authoritarian rule. A second flattener is identified as our ability to not only author our own content, but to send it worldwide with the 1995 launch of the Internet. Subsequently, free workflow software was developed, allowing people from around the world to collaborate and work together on projects using a shared medium. As Apache and Wikipedia came into play, we became able to develop and upload web content and community collaboration became another flattening force. Preparations for Y2K required resources beyond those available in the United States and as a result, we see that India became responsible for a huge portion of these preparations. Offshoring, using the Chinese manufacturing sector as a prime example, has forced other developing countries to try to keep up with their low cost solutions, resulting in better quality and cheaper products being produced worldwide.

The seventh flattening factor is our introduction to supply chaining, which is discussed in much greater detail later in Chapter Fourteen. Rounding out his list with insourcing, in-forming and “the steroids”, Friedman examines his flattening factors, their origins and the effect they will have on the way we do business in the future.
List of Ten Forces

1. Collapse of Berlin Wall--11/89: The event not only symbolized the end of the Cold war, it allowed people from other side of the wall to join the economic mainstream. (11/09/1989)
2. Netscape: Netscape and the Web broadened the audience for the Internet from its roots as a communications medium used primarily by 'early adopters and geeks' to something that made the Internet accessible to everyone from five-year-olds to eighty-five-year olds. (8/9/1995)
3. Work Flow Software: The ability of machines to talk to other machines with no humans involved. Friedman believes these first three forces have become a “crude foundation of a whole new global platform for collaboration.”
4. Uploading: Communities uploading and collaborating on online projects. Examples include open source software, blogs, and Wikipedia. Friedman considers the phenomenon "the most disruptive force of all."
5. Outsourcing: Friedman argues that outsourcing has allowed companies to split service and manufacturing activities into components, with each component performed in most efficient, cost-effective way.
6. Offshoring: Manufacturing's version of outsourcing.
7. Supply-Chaining: Friedman compares the modern retail supply chain to a river, and points to Wal-Mart as the best example of a company using technology to streamline item sales, distribution, and shipping.
8. Insourcing: Friedman uses UPS as a prime example for insourcing, in which the company's employees perform services--beyond shipping--for another company. For example, UPS itself repairs Toshiba computers on behalf of Toshiba. The work is done at the UPS hub, by UPS employees.
9. In-forming: Google and other search engines are the prime example. "Never before in the history of the planet have so many people-on their own-had the ability to find so much information about so many things and about so many other people", writes Friedman.
10. "The Steroids": Personal digital devices like mobile phones, iPods, personal digital assistants, instant messaging, and voice over Internet Protocol (VoIP).
Chapter Three: The Triple Convergence

Acknowledging that the ten factors he discussed in Chapter Two could not have flattened the world all on their own, Friedman explains that as each of the factors came together, they had to spread and take root to create the environment rich for flattening. He credits this spread, the creation of complementary software and the internet, and political factors that caused several developing countries, including China, Russia, India and Latin America, to open their borders at this time with the creation of the perfect storm that led to the rapid-fire pace of globalization.

Through interviews with U.S. Embassy officials in Beijing, we explore the desperation of Chinese students to study and work in America. For the first time in history, we see that talent has become more important than geography in determining a person’s opportunity in life. We follow the path of a Boeing jet as components of its manufacture are outsourced to Russia and then India, allowing for faster and cheaper development of more planes as Friedman demonstrates the need for individuals and businesses to be able to compete in a global marketplace.

Friedman works to dispel common myths about globalization as we explore the dot.com boom and bust, the American government’s misinformation of the public as the triple convergence took place and the IT revolution we have heard so much about in the last 20 years.

Chapter Four – The Great Sorting Out

Friedman calls for a reality check as we explore the manner in which countries and societies will cope with and adapt to the dramatic changes that globalization brings to the way we do business, as individuals and entities. His comparison of the Industrial Revolution to the current IT Revolution leads us to believe that the world flattening we see today could have been predicted by Karl Marx.

An interview with Harvard’s noted political theorist Michael J. Sandel discusses whether or not exploitation is globalization; are the outsourced people from India being exploited or given opportunity they would not otherwise have had? In search of an answer to this question, Friedman examines the India-Indiana story from 2003, where an Indian company was outsourced to upgrade Indiana’s unemployment computer system, effectively taking work from people in Indiana in order to provide more work for people in India. We examine the blurring boundaries between companies and different groups of workers, as well as the relationships between communities and the businesses that operate within them. Friedman demonstrates that as little people begin to act big, so too are big people able to connect on the smallest level. Identities become harder to define, which will also need to be sorted out. The traditional roles of consumer, employee, citizen, taxpayer and shareholder have all become blurred and intertwined.

Friedman summarizes the chapter with an examination of intellectual property law and means that must be put in place to protect it, as well as the death of the human bond in the online world.
Chapter Five – America and Free Trade

Does free trade still exist in a flat world? As he sets out to explore this dilemma, Friedman considers the banning of outsourcing, an action called for by many, to protect our country’s workers and the effect such an action would have on globalization. He concludes that erecting borders and walls would be detrimental to our goals and that Americans must instead be prepared to compete on a global playing field.

Friedman encourages better education and training, as Americans now compete not only with other Americans, but with the most brilliant minds around the globe for positions. We explore the “lump of labor” theory and new job creation in a global economy. He identifies the workers that will suffer most, should they be unable to keep ahead of the globalization trend, and offers large-scale suggestions to remedy this problem. Using the history of the American agricultural industry as an indicator of future trends in various industries today, he stresses the importance of an ability to adapt and specialize where there is a need. We learn that fear stimulates change and that this is a good thing.

Chapter Six – The Untouchables

Friedman addresses a concern shared by many Americans: what do we tell our kids? As the competition for jobs stiffens, how do we prepare them for the increased competition? His suggestion that we must make ourselves “untouchables” is explored in detail as he identifies three broad categories of workers who will have job security in the flat world. Synthesizers, explainers, leveragers, versatilists and more are identified and explained as viable career options, as well as strategies for preparing for these positions.

Chapter Seven – The Right Stuff

In a frank discussion of the fear amongst Americans regarding competition and education, Friedman explores the “right stuff”; the educational requirements needed to survive in the flattened world and more importantly, the availability of said education in our current system. Stressing the importance of self-learning and learning to learn, Friedman offers valuable advice to parents unsure of their children’s educational and professional futures. He recommends building right-brain skills, or those that cannot be duplicated by a computer, and explores different vehicles to higher learning, including music. Friedman examines the factors necessary to create the right environment for this learning and contemplates methods of achieving this in modern day America.

Chapter Eight – The Quiet Crisis

We begin by examining the U.S Olympic Basketball Team’s unexpected loss at the 2004 Games as an example of our complacency as the rest of the world is learning and catching up in areas we are used to dominating. An interview with Shirley Ann Jackson, 2004 President of the American Association for the Advancement of Science, demonstrates that a quiet crisis is happening slowly but surely as multiple and complex forces at work creating the perfect storm; demographic, political, social, cultural, economic, etc that could lead to America falling behind in innovation, science and technology. We explore the dirty little secrets that no one is talking about – a lack of highly skilled scientists and engineers, disinterest in math and science by our younger population, lack of ambition as television and video games take over, an outdated basic education system, lack of funding for research, lack of infrastructure as we focus on war and other countries focus on developing sustainable and innovative business. Friedman explores the differences between different country’s educational systems with Bill Gates and ultimately poses the question, why are we so focused on idolizing Britney Spears when competing countries are idolizing Bill Gates?

Friedman contemplates The “Innovate America” Report, a well-meaning document ignored by the President as he chased his own agenda – and wonders whether China will beat us to the implementation of our own innovation. He sums up the chapter with a call to action to kick-start the long process of preparing ourselves for the future into motion before we are literally left behind.

Chapter Nine – This Is Not a Test

In a call to action, Friedman stresses that we simply cannot do things the same old way anymore and people must be willing to change and adapt. He compares our current crisis to that we faced in competing with the Soviet Union and the launch of Sputnik; the main challenge then came from those who wanted to put up walls while we now have to face those who want to tear them down. Now, as then, we must change our strategy to overcome these issues. He discusses the difficulty in getting America to stand up and take notice of the importance of this issue in a supercharged society where hype and terror are needed to get the public’s attention and support.

Friedman stresses the importance of shoving political barriers aside in what he calls “compassionate flatism” to prepare our country for what lies ahead. He questions leadership and education; who will lead us into the forefront of this new globalized economy? The necessity for lifelong learning and benefits to allow workers to remain mobile and adaptable is very real, though it seems to be at the bottom of our to-do list.

Finally, Friedman examines how companies such as Capital One are working on the lifelong learning objective by providing training and upgrading to employees, increasing their own productivity and bottom line in the process, as he calls for social programs that encourage workers to be creative and hardworking.

Chapter Ten – The Virgin of Guadalupe

We see the Chinese manufacture of statuettes of The Virgin of Guadalupe and their subsequent importation into Mexico as an example of the problem created when one developing country competes with another, as China replaced Mexico as the U.S.’s number two importer in 2003. Friedman discusses the need for developing countries to put policies in place to create the right environment for their companies and entrepreneurs to succeed in the flat world. He states that countries must be brutally honest with themselves in determining their place in the world market if they are to adapt and survive. A comparison of countries who have opened their borders and adopted free trade policies versus those who have not and been left behind illustrates his point.

The concept of reform retail and wholesale is introduced as we explore changes in education, infrastructure and governance. Ireland becomes a case study for financial success as their per capita GDP has risen to second highest in the European Union. Friedman contemplates a society’s ability and willingness to sacrifice for the purpose of economic development and leaders with vision as vehicles of change and conversely, the reason some countries will not.

Chapter Eleven – How Companies Cope

Friedman opines that companies willing to change and accept change are more likely to do things than have things done to them. In profiling Jill and Ken Greer, creators of Greer & Associates multimedia company, we learn of their experience with the rise of freelancers as their competition, as well as the fact that technology that should have simplified their operations made it more difficult by requiring more of them.

We look into commoditization in a wide range of industries, where everything is the same and supply is plentiful. Clients are flooded with options and everyone becomes the same. Each company is driven to be more creative and innovative, or risk falling between the cracks. At this point we meet Fadi Ghandour, cofounder and CEO of Aramex, a home-grown package delivery service. His web-based global network cut costs and allowed him to compete with the biggest in the business and come out ahead. We see through other business models that globalization forces the big to act small: case in point, Starbucks learning from their customers to use soy milk in their coffees. We learn that companies must be willing to collaborate and focus on niche markets, doing themselves what they need to do to stay in front of their customers and outsourcing the rest. The best companies use outsourcing as a method of growth, not to shrink their workforce. Outsourcing allows them to provide more and better services more efficiently.

We also explore socially responsible outsourcing; giving the outsourced workers a good wage and opportunity within their own country that they would not have otherwise.

Chapter Twelve: The Unflat World

Friedman shares stories of the world flattening but humbly announces that he does indeed realize the world is not yet flat. He wants to draw attention to the flattening and the ever-increasing pace at which it is occurring. Part of this understanding must come from a recognization of factors that are preventing globalization from occurring in some people.

Friedman examines different groups of people he believes are disadvantaged for one reason or another and the way that this keeps them from moving forward into a flattened world. The AIDS epidemic affects people who are too sick to hope they will ever make it to middle class. Disempowered people are those who live in areas touched by the flattening of the world but lack the means, knowledge and infrastructure to benefit from it. For example, in India only 2% of the entire population are involved in the high-tech and manufacturing for export sectors.

Different societies and cultures are coming into contact with each other more frequently and more quickly than ever before, leading to great frustration. Using the Arab-Muslim world and his journalistic encounters with their youth as an example, Friedman explores the impact of freedom of thought and expression that world flattening has created and its impact on a traditionally closed society. He warns of a potential threat lurking in the not too distant future: a depletion of our natural resources as people compete to have more and better.

Chapter Thirteen: Globalization of the Local

In this examination of the impact of globalization on world cultures, we learn that globalization came to be seen by many as Americanization, creating a backlash by those who felt that they would be steamrolled and homogenized into being mini-Americans.

But as new forms of communication and innovation create a global platform for the sharing of work, entertainment and opinion, Friedman believes that globalization serves more to enrich and preserve culture than to destroy it, as each person is given their own voice and vehicle of expression through podcasts, websites, etc. The nature of the beast is such that the bad will always be there with the good. As humanitarians and businesses connect online to share ideas, so too do terrorists and predators.
Chapter Fourteen: The Dell Theory of Conflict Prevention

We begin with an in-depth study of the supply chain, using the purchase of Friedman’s own computer as a case study. This leads to an examination of how geopolitical conflicts could derail or slow globalization.

Friedman’s theory is that two countries invested in a business together by being part of the same global supply-chain are less likely to go to war, as they are now heavily invested in the success of the business venture. Any interruption to that supply chain would be critical. As we reflect on the evolution of supply chains and the effect they have had on politics and the stability of countries they affect, we remember that Asia, as opposed to much of the Middle East, has become more stable because they are part of many supply chains and therefore more interested in doing good business. Overall, the price of war is higher than it used to be and countries will have to consider the effect of a war on their place in the business world. Friedman explores both the China-Taiwan relations and India-Pakistan as examples of how the flattening of the world and supply chain have a calming effect and cause countries to think rationally about the true cost of war, making diplomatic solution more likely.

As we explore the darker side of the supply chain phenomenon, we understand how Al-Qaeda and other terrorist networks form mutant supply chains for the purpose of destruction, not profit. In a flat world, the transmission of terror is much easier. We must examine our abilities to derail the nuclear threat by using our capabilities to disrupt the terrorists supply chain.
Chapter Fifteen: 11/9 Versus 9/11

We begin by examining two significant dates in world flattening: 11/9 as an example of creative imagination and 9/11 as destructive imagination. 11/9, with the destruction of the Berlin Wall, was the door opening to a freer, flatter, and more democratic world, where 9/11 saw our world try to snap shut against outside threat. This is Friedman’s call for positive creativity and giving people the tools to do positive things with what is available through the opening of so many doors.

We see the innovation and creativity that Bin Laden put into his 9/11 plan, as horrible as it was. Friedman concludes that the forces that flatten the world can be used to bring everyone up to the same level, or to bring them all down to the same level. Those of us who live in free and progressive societies must lead others to use their imaginations without allowing their imaginations to get the best of them – or us. Technology cannot protect us; we must harness that technology and decide how it will be used. This requires us to define the line between precaution and paranoia to keep things in perspective in a flat world. We are called to remember who we are to avoid losing our identity in a flat world. In exploring eBay as a virtual community, India as the second largest Muslim country where the context and imagination are different than in other parts of the Arab world, and the curse of oil and how it keeps countries from moving forward in other ventures, we learn about different types of creativity.

Friedman reflects on his story of Aramex from Chapter Eleven as an inspirational closing thought; one of a small Arab company that made it big in the world platform.
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Source: http://www.wikisummaries.org/The_World_Is_Flat

Book Summary: Freakanomics (A rogue economist explores..)

Economics is often regarded as the study of dry, uninteresting financial trends and market developments, but Steven Levitt’s groundbreaking work in the field reveals that the tools of economic research can be put to use in the study of the relationships that underlie the events and problems that we encounter and hear about every day. In Freakonomics, Levitt and his co-author, journalist Stephen Dubner, offer a survey of some of the most interesting research topics Levitt has tackled during his career.

Chapter 1 defines economics as nothing more than the study of incentives and how they are pursued. Sometimes a particular set of incentives is so irresistible that people are driven to attain them through unscrupulous behavior. The authors undertake a study of several prominent instances of cheating. In each instance, Levitt devised a way of analyzing data to detect not only the presence of cheating, but also some of the patterns and incentives that may have served to compel the cheaters to act unethically. The cases that are afforded the most attention include the Chicago public school teachers who changed answers on their students’ high-stakes standardized tests and Japanese sumo wrestlers who conspired to throw certain high-stakes matches.

Chapter 2 centers on the theme of information and the way that individuals, organizations, and businesses often exploit their access to crucial information at the expense of others. First, the authors describe the way that journalist Stetson Kennedy exploited information to help bring about the downfall of the Ku Klux Klan. Then, Levitt’s research on the actions of real estate agents offers another perspective to the discussion. His analysis of real estate data found that agents behave quite differently when the homes they are selling are their own. A few other examples of applications of information asymmetry are also described. Throughout the novel the author consistently employs patisian views accented with a nostalgic attitude; consistenly refering to previous periods.

In Chapter 3, Levitt offers an in-depth discussion of the economic workings of a Chicago drug gang, shattering the common misconception that all drug dealers are wealthy. His analysis of the financial records of a Chicago gang proved that most street-level dealers earned far less than minimum wage. He turns to the socioeconomic context of most gangs for an explanation of the incentives that compel young men to become drug dealers. The influence of gangs is a critical part to the function of the economy because it consistently creates jobs and programs to the fight the prevalent issues.

Chapter 4 sets forth what is arguably Levitt’s most controversial finding: his research revealed a strong link between the legalization of abortion in the United States in 1973 and the sharp decline in violent crime that the nation experienced in the mid-1990s. He bolsters the credibility of this claim by demonstrating that most other explanations for the crime rate drop are untenable.

Chapters 5 and 6 both address various aspects of parenting and the way that parents’ status, choices, and actions can impact the outcomes of their children's lives'. First, Levitt details the outcome of his study of the safety of backyard swimming pools, which found that children are 100 times more likely to drown in a backyard pool than they are likely to die while playing with a gun. Then, he summarizes the findings of a series of studies about parenting practices, all of which suggest that parental socioeconomic status is a more reliable predictor of high academic outcomes in children than most other parenting practices that are commonly recommended by experts, such as reading books to your children. He then turns to the study of children’s names; specifically, the different economic impacts of “white” versus “black” names. Levitt concludes with a discussion of the patterns that govern the popularity of children’s names in the United States.

Contents

Chapter Summaries Introduction: The Hidden Side of Everything

In this introductory chapter, co-author Stephen Dubner offers an overview of the diverse and seemingly unrelated topics that renowned economist and co-author Steven Levitt has addressed in his body of research. The authors state that there is no unifying theme of the book, although the aim throughout is to explore the hidden side of things and the subtle relationships that link everyday phenomena.

The book is based on four fundamental ideas:

* 1) Incentives are the cornerstone of modern life.
* 2) Conventional wisdom is often wrong.
* 3) Dramatic effects often have distant, even subtle, causes.
* 4) "Experts" use their informational advantage to serve their own interests.

Chapter 1: What Do Schoolteachers and Sumo Wrestlers Have in Common?

The authors define the study of economics as the study of incentives. How do we profit by the things that we do? And what incentives are so attractive that they compel us to act unethically in order to attain them? Levitt describes the series of research processes that he used to identify a number of Chicago public school teachers who cheated or helped their students cheat on standardized tests. He analyzed standardized test answer patterns and identified suspicious blocks of correct answers, also comparing test scores to students’ past academic performance. Eventually, a controlled retest was administered to identify cheating teachers with greater precision. The findings resulted in the termination of the boldest offenders, as well as reforms in the school system’s standardized testing procedures.

Another of Levitt’s research projects involved the analysis of the scores and bout records of Japan’s elite-level sumo wrestlers. Although allegations of cheating are rampant in the sport, no definitive proof had ever been garnered, as the techniques that are suspected to be used are very subtle. By analyzing and comparing the performances of the wrestlers in matches with vastly different stakes and potential consequences, Levitt determined that cheating does often occur in the sport.

The story of an entrepreneur who sold bagels using the honor system to office workers in Washington, D.C. concludes the chapter. The owner/operator kept detailed financial records, and by analyzing them, Levitt was able to discern a number of remarkably consistent patterns in the behavior of those who took bagels without paying for them. In this story, Levitt demonstrates that cheating, like almost everything else that involves incentives, can be predicted.

Chapter 2: How is the Ku Klux Klan like a Group of Real-Estate Agents?

The authors assert that information asymmetry is one of the most powerful economic tools. Entire industries have flourished and many significant historical events have transpired as the result of an imbalance in the flow of information. In keeping with this theory, the authors offer the story of a man who helped cripple the racist Ku Klux Klan simply by widely disseminating their secrets.

Stetson Kennedy infiltrated the group in the World War II-era and systematically documented the secret rituals and codes of the organization. Kennedy then supplied the records to Hollywood writers, who used the information to create a long-running story arc on the wildly popular Superman radio serial. Children across the United States imitated the shows in their schoolyard games, and gradually, the mystery, grandeur, and influence of the group were profoundly diminished.

The authors relate a number of other instances of information asymmetry being used as an economic tool, including, most prominently, the practices of real estate agencies. By analyzing data about real estate agents common practices when they are selling their own houses, Levitt discovered that they may not always have their clients’ best interests at heart. The Internet, the authors note, has prompted a massive shift in many industries simply by providing consumers with more information than they have ever readily had access to. Other examples of information asymmetry and resulting misjudgments are explored in the behaviors of game show contestants and users of Internet dating services. Throughout the novel the author consistenly employs partisian diction along with a nostalgic attitude; consistentle referring to previous periods of time.

Chapter 3: Why Do Drug Dealers Still Live with Their Moms?

This chapter offers a detailed glimpse into the economics of a drug-dealing street gang. The authors follow the research efforts of sociologist Sudhir Venkatesh, whose years conducting field studies in the housing projects of Chicago granted him unprecedented access to the inner workings of the gang. Venkatesh befriended many of his research subjects, one of whom gave him several years of financial records kept by the gang, which Venkatesh later provided to Levitt.

With extensive analysis of the data, Levitt was able to debunk the common perception that crack dealers are all very wealthy individuals. He found that although a few participants profit mightily from their involvement, these are usually the higher-ups who lead the organization, rather than the large numbers of street dealers who form the lower ranks of the group. Levitt compares the organizational structure of the gang to McDonalds, in which a comparatively few executives and managers prosper from the labor of thousands of low-wage workers. This comparison proved to be particularly apt when he found that most street dealers made less than minimum wage, while also bearing a 1-in-4 risk of death.

The authors relate the rise of crack in inner-city America to the historical crime pattern in the country and the social progress of the African American community. The chapter ends with an overview of the wave of violent crime that gripped the country in the early 1990s, and then began a mysterious and rapid decline.

Chapter 4: Where Have All the Criminals Gone?

In this chapter, the authors set forth the controversial claim that has generated more attention than any other aspect of the book: Levitt’s research has suggested that the 1973 legalization of abortion was the cause of the dramatic decline in violent crime that had become apparent by the mid-1990s. Recognizing the volatility of this argument, the authors approach it from numerous perspectives, methodically challenging and undermining all of the most common theories that have been advanced to explain the sudden crime drop. In a detailed analysis, they demonstrate that factors such as improved policing strategies, new prisons, diminished drug demand, an aging population, stricter gun control, a strong economy, and a number of other possible explanations simply do not correlate with the available crime data.

The authors note a number of variables that are strongly correlated with criminality, such as poverty or an unstable family environment, are also likely to be the same reasons that compel pregnant young women to seek abortions. Levitt’s research suggests that the drop in violent crime in the United States occurred at the same time that the first wave of babies conceived after the legalization of abortion were entering late adolescence. Presumably, many of the additional 1.6 million children who would have been born annually if abortion had remained illegal would have been at high risk for engaging in violent crime. Although the authors refrain from taking an ideological stance on the issue, they do conclude that women with the right to choose abortion tend to make good decisions, based on the crime data.


Chapter 5: What Makes a Perfect Parent?

Several years before Freakonomics was published, author Steven Levitt lost his infant son Andrew to a sudden, fatal bout of pneumococcal meningitis. In the aftermath of this tragedy, Levitt and his wife became active in several support groups for bereaved parents. Even as he sought help and guidance for the terrible loss, Levitt noticed the disproportionate number of parents in the groups whose children had drowned in backyard swimming pools. This prompted him to research the issue, as well as a number of other aspects of parenting, from an economic point of view. His research uncovered the high risk of allowing children to play in swimming pools: Levitt estimates that a child is more than 100 times more likely to die in a swimming pool than playing with a gun.

In a series of subsequent articles, Levitt explored other facets of parenthood and their outcomes. He determined that in spite of the cottage industry of parenting and the millions of how-to books on the subject sold every year, who you are matters much more than what you do. In other words, positive parenting outcomes are linked more strongly to factors such as socioeconomic status and parental education than any specific parenting practices. Factors that are important in determining high standardized test scores in children include: highly educated parents, high socioeconomic status, maternal age of greater than thirty when the child was born, low birth weight, English as the primary language spoken in the home, parental involvement in the PTA, and many books in the home environment. Also, adopted children tended to have lower standardized test scores than their non-adopted peers.

Chapter 6: Perfect Parenting, Part II, or: Would a Roshanda by Any Other Name Smell as Sweet?

In this chapter, the authors extend the discussion of parenting with an overview of more economic aspects of parental choices. Specifically, they focus upon the economic implications of children’s names, especially the overtly ethnic African-American names that have become common over the last several decades. The authors tied this issue to a larger question about contemporary black culture in the United States: is distinctive black culture merely a reflection of the economic gap between whites and blacks, or has it actively caused the gap to widen?

Using several decades of name data drawn from California birth certificate records, Levitt’s analysis revealed a number of interesting trends. The authors cite previous research that has shown that similar résumés with white and distinctively black names result in job offers being extended to the white-sounding applicant far more frequently than the black-sounding applicant. Among other things, it was determined that having a distinctively black name was linked to lower attainment and negative life outcomes in terms of employment, income, and education.

Levitt then turned to the question of how names become popular among white Americans. In addition to the general trend of increasingly unique names for white children, Levitt describes a pattern by which highly educated parents popularize obscure names, gradually compelling the names to achieve broader popularity. Finally, after a period of several years, white parents from lower socioeconomic classes adopt the names, prompting a selection of new names among highly-educated white parents, and the repetition of another cycle.

Epilogue: Two Paths to Harvard

The life paths of two Harvard graduates who may have seemed to be locked into divergent patterns of achievement based on their backgrounds are outlined. Ted Kaczynski, also known as the Unabomber, came from a privileged background and had access to all of the resources that are typically correlated with success, whereas Roland G. Fryer, an African-American man who was raised in an impoverished, unstable family environment, is now a promising Harvard economist. The book ends with this brief reminder that there are limits to the ability of economic analysis to predict every possible outcome.
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Source: wikisummaries.org

The Tipping Point - Summary

The Tipping Point
From WikiSummaries: Free Book Summaries
The Tipping Point: How Little Things Can Make a Big Difference
Author Malcolm Gladwell

ISBN ISBN 0316346624, ISBN 0-316-31696-2 (first edition)

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By offering readers a groundbreaking analysis of how trends are sparked and take hold, Malcolm Gladwell’s book The Tipping Point became an exemplification of the very processes he was describing. Upon its 2000 release, the book became a national bestseller whose influence would help to initiate paradigm shifts in fields ranging from marketing to public health.

The processes and mechanisms by which some trends achieve exponential popularity while others sputter and fade into oblivion have long been thought to be mysterious and resistant to analysis. However, Gladwell’s central argument is that there are actually a number of patterns and factors that are at play in virtually every influential trend, ranging from the spread of communicable diseases to the unprecedented popularity of a particular children’s television show. If you analyze the evolution of any major phenomenon, the author suggests, you will find that the processes involved are strikingly similar.

The nature of modern culture is such that many new ideas are constantly being introduced from a wide variety of sources, ranging from trend-setting teens and twenty-somethings in the nation’s metropolitan centers to new product offerings from established corporations. Some of these achieve a measure of steady, consistent success, some fail, and some take off on an upward trajectory of exponential popularity and influence.

Based on his in-depth research spanning a number of different fields, industries, and scholarly disciplines, Gladwell identifies three key factors that each play in role in determining whether a particular trend will “tip” into wide-scale popularity. Gladwell’s discussion and illustration of the concepts of the Law of the Few, the Stickiness Factor, and the Power of Context comprise the majority of the book.

The Law of the Few contends that before widespread popularity can be attained, a few key types of people must champion an idea, concept, or product before it can reach the tipping point. Gladwell describes these key types as Connectors, Mavens, and Salesmen. If individuals representing all three of these groups endorse and advocate a new idea, it is much more likely that it will tip into exponential success.

Gladwell defines the Stickiness Factor as the quality that compels people to pay close, sustained attention to a product, concept, or idea. Stickiness is hard to define, and its presence or absence often depends heavily on context. Often, the way that the Stickiness Factor is generated is unconventional, unexpected, and contrary to received wisdom.

The concept that Gladwell terms the Power of Context is enormously important in determining whether a particular phenomenon will tip into widespread popularity. Even minute changes in the environment can play a major factor in the propensity of a given concept attaining the tipping point. Also, Gladwell defines the term context very broadly, discussing the implications of small variations in social groups and minor changes in a neighborhood or community environment as shifts that can cause a new idea to tip.

After identifying and describing these key concepts, Gladwell dedicates the remainder of the book to illustrating them and their interdependency in a series of compelling case studies and examples. An afterword included in the newest edition of the book updates some of Gladwell’s arguments for more pertinent application in an era of widespread Internet connectivity.


Chapter Summaries Introduction

Gladwell begins by discussing the inexplicable resurgence of then-terminally-uncool Hush Puppies shoes among a handful of hipsters in Manhattan’s cutting-edge enclaves in the 1990s, a trend which soon spread across the United States and resulted in exponential increases in the company’s sales. Using this phenomenon as an introduction to the book’s analytical theme, the author states that he will identify, dissect and explain the mechanisms by which certain trends take hold, while others fail.

Chapter 1: The Three Rules of Epidemics

Gladwell asserts that most trends, styles, and phenomena are born and spread according to routes of transmission and conveyance that are strikingly similar. In most of these scenarios, whether the event in question is the spread of syphilis in Baltimore’s mean streets or the sudden spike in the popularity of Hush Puppies sales, there is a crucial juncture, which Gladwell terms the “tipping point,” that signals a key moment of crystallization that unifies isolated events into a significant trend. What factors decide whether a particular trend or pattern will take hold? Gladwell introduces three variables that determine whether and when the tipping point will be achieved.

The three “rules of epidemics” that Gladwell identifies are: the Law of the Few, the Stickiness Factor, and the Power of Context. He concludes the chapter with a preliminary discussion of the Law of the Few, noting that the origins of most major epidemics of sexually transmitted diseases can be traced back to the disproportionate influence of a few “super infectors” who are personally responsible for dozens, or in some cases, hundreds of transmissions. This role is analogous to the category of people that Gladwell identifies as “Connectors,” who play an inordinate role in helping new trends begin to “tip,” or spread rapidly.


Chapter 2: The Law of the Few: Connectors, Mavens, and Salesmen

The attainment of the tipping point that transforms a phenomenon into an influential trend usually requires the intervention of a number of influential types of people. In the disease epidemic model Gladwell introduced in Chapter 1, he demonstrated that many outbreaks could be traced back to a small group of infectors. Likewise, on the path toward the tipping point, many trends are ushered into popularity by small groups of individuals that can be classified as Connectors, Mavens, and Salesmen.

Connectors are individuals who have ties in many different realms and act as conduits between them, helping to engender connections, relationships, and “cross-fertilization” that otherwise might not have ever occurred. Mavens are people who have a strong compulsion to help other consumers by helping them make informed decisions. Salesmen are people whose unusual charisma allows them to be extremely persuasive in inducing others’ buying decisions and behaviors. Gladwell identifies a number of examples of past trends and events that hinged on the influence and involvement of Connectors, Mavens, and Salesmen at key moments in their development.

Chapter 3: The Stickiness Factor: Sesame Street, Blue’s Clues, and the Educational Virus

Another crucial factor that plays a key role in determining whether a trend will attain exponential popularity is what Gladwell terms “the stickiness factor.” This refers to a unique quality that compels the phenomenon to “stick” in the minds of the public and influence their future behavior.

An interesting element of stickiness, as defined by Gladwell, is the fact that it is often counterintuitive, or contradictory to the prevailing conventional wisdom. To illustrate this point, Gladwell undertakes an in-depth discussion of the evolution of children’s television between the 1960s and the 2000s.

The PBS show Sesame Street represented a vast improvement in the “stickiness” of children’s television, in large part because it turned many of the long-established assumptions about children’s cognitive abilities and television-watching behaviors on their heads. These changes, based in large part on extensive research, resulted in a show that actually helped toddlers and preschoolers develop literacy.

Years later, the television show Blue’s Clues applied many of these same techniques to Sesame Street itself, resulting in the development of a program that research has shown can generate significant improvements in children’s logic and reasoning abilities. The attribute of stickiness, Gladwell argues, often represents a dramatic divergence from the conventional wisdom of the era.

Chapter 4: The Power of Context (Part One): Bernie Goetz and the Rise and Fall of New York

City Crime

Another crucial aspect of the complex processes and mechanisms that cause trends to “tip” into mass popularity is what Gladwell terms the Power of Context. If the environment or historical moment in which a trend is introduced is not right, it is not as likely that the tipping point will be attained. To illustrate the power of context, Gladwell takes on the strangely rapid decline in violent crime rates that occurred in the 1990s in New York City.

Although Gladwell acknowledges that a wide variety of complex factors and variables likely played a role in sparking the decline, he argues convincingly that it was a few small but influential changes in the environment of the city that allowed these factors to tip into a major reduction in crime. He cites the fact that a number of New York City agencies began to make decisions based on the Broken Windows theory, which held that minor, unchecked signs of deterioration in a neighborhood or community could, over time, result in major declines in the quality of living.

To reverse these trends, city authorities started focusing on seemingly small goals like painting over graffiti, cracking down on subway toll skippers, and dissuading public acts of degeneracy. Gladwell contends that these changes in the environment allowed the other factors, like the decline in crack cocaine use and the aging of the population, to gradually tip into a major decline in the crime rate in the city.

Chapter 5: The Power of Context (Part Two): The Magic Number One Hundred and Fifty

Clearly, in order for a trend to tip into massive popularity, large numbers of people need to embrace it. However, Gladwell points out that groups of certain sizes and certain types can often be uniquely conducive to achieving the tipping point. He traces the path of the novel The Divine Secrets of the Ya-Ya Sisterhood from regional cult favorite to national best-seller. Gladwell notes that the unique content of the novel appealed strongly to reading groups of middle-aged women in Northern California, and that these women were uniquely well-positioned to catapult the book to national success as a result of an informal campaign of recommendations and advocacy.

Gladwell also remarks upon the unusual properties tied to the size of social groups. Groups of less than 150 members usually display a level of intimacy, interdependency, and efficiency that begins to dissipate markedly as soon as the group’s size increases over 150. This concept has been exploited by a number of corporations that use it as the foundation of their organizational structures and marketing campaigns.

Chapter 6: Case Study: Rumors, Sneakers, and the Power of Translation

In this case study-oriented chapter, Gladwell discusses the rise and decline of Airwalk shoes. The brand was originally geared towards the skateboarding subculture of Southern California, but sought to transcend this niche market and attain national name recognition. They succeeded in this endeavor with the help of an advertising agency with a unique understanding of the factors and variables that influence the public’s perception of "coolness." The marketing campaign ruthlessly honed in on and exploited several timely avatars of coolness, such as Tibetan Buddhism, pachuco gang culture, and hipsters’ ironic embrace of preppy culture, rendering Airwalk shoes cool by association in the process.

The company’s unique strategy of offering unique products to boutique stores and a more mainstream shoe selection to department stores had long kept both cutting-edge hipsters and their more mainstream, impressionable counterparts content. However, as a cost-cutting measure, Airwalk eventually began providing all of its distributors with a single line of shoes. The delicate balance that had long rendered the company’s products cool in the minds of the public was disturbed, and sales declined significantly.

Chapter 7: Case Study: Suicide, Smoking, and the Search for the Unsticky Cigarette

In another case study, Gladwell discusses the relationship between a sudden, alarming rise in suicide among adolescent males in Micronesia and the persistent problem of teen cigarette use in the United States. In both instances, teens were induced to become involved in potentially lethal experimentation. Gladwell asserts that both trends were predicated upon two main factors. First, teenagers are inherently, perhaps even genetically predisposed to imitate others and try on new behaviors and attitudes during adolescence. Second, the types of the people who are more likely to engage in dramatic, easily romanticized behavior such as early cigarette smoking or suicide are also more likely to be those that others tend to gravitate toward and seek to emulate.

Gladwell also considers the origins and implications of the curiously large middle ground that exists between those who abstain altogether from potentially dangerous activities, and those who engage in them in a consistently low-level manner. In terms of cigarette use, these “chippers” typically never smoke enough to tip into full-blown addiction, and thus escape most of the ill effects of long-term tobacco use. Gladwell suggests that infrequent teenage experimentation with drugs or smoking should not be regarded with hysteria, but rather, should be accepted as inevitable and is, in all likelihood, benign.

Chapter 8: Conclusion: Focus, Test, Believe

In this chapter, Gladwell concludes with an account of the type of solution that reflects an understanding of the concept of the tipping point: A nurse seeking an effective, low-cost way to raise breast cancer awareness among African-American women shunned traditional routes and enlisted the help of hairstylists. In this environment, she reasoned, most people are relaxed and receptive to new information in a way that most education efforts can’t duplicate. Gladwell acknowledges that this type of thinking is often derided as being a “band-aid” solution that treats symptoms, rather than underlying problems. However, he asserts that these solutions are often the very type of cumulative, low-key approach that can, over time, build to a tipping point of massive popularity and influence.

Afterword

In the newly-penned afterword to The Tipping Point, Gladwell updates a number of the case studies and anecdotes offered in the original text with new data. He also reconsiders the role of the Internet and Internet-related technologies, such as e-mail, and their impact upon the spread of trends and influence. However, he cautions that the overuse and sheer ubiquity of these formats can make the recipients "immune" to their effects.

Rich Dad, Poor Dad (Robert Kiyosaki)

Rich Dad, Poor Dad
From WikiSummaries: Free Book Summaries
Author Robert Kiyosaki
ISBN ISBN 0446677450


The book is the story of a person (the narrator and author) who has two fathers: the first was his biological father – the poor dad - and the other was the father of his childhood best friend, Mike – the rich dad. Both fathers taught the author how to achieve success but with very disparate approaches. It became evident to the author which father's approach made more financial sense. Throughout the book, the author compares both fathers – their principles, ideas, financial practices, and degree of dynamism and how his real father, the poor and struggling but highly educated man, paled against his rich dad in terms of asset building and business acumen.

The author compares his poor dad to those people who are perpetually scampering in the Rat Race, helplessly trapped in a vicious cycle of needing more but never able to satisfy their dreams for wealth because of one glaring lack: financial literacy. They spend so much time in school learning about the problems of the world, but have not acquired any valuable lessons about money, simply because it is never taught in school. His rich dad, by contrast, represents the independently wealthy core of society who deliberately takes advantage of the power of corporations and their personal knowledge of tax and accounting (or that of their financial advisers) which they manipulate to their advantage.

The book’s theme reduces to two fundamental concepts: a can-do attitude and fearless entrepreneurship. The author highlights these two concepts by providing multiple examples for each and focusing on the need for financial literacy, how the power of corporations contribute to making the wealthy even wealthier, minding your own business, overcoming obstacles by not fostering laziness, fear, cynicism and other negative attitudes, and recognizing the characteristics of humans and how their preconceived notions and upbringing hamper their financial freedom goals.

The author presents six major lessons which he discusses throughout the book:

* The rich don’t work for money
* The importance of financial literacy
* Minding Your own business
* Taxes and corporations
* The rich invent money
* The need to work to learn and not to work for money

Character Summaries

Rich Dad, Poor Dad revolves around three main characters: poor dad, rich dad (Kiyosaki’s second father) and the son (the author himself as narrator of the book). The essence of each character is:

* Poor dad – educated but lacking the street smarts
* Rich dad – very little education (eighth grade), tons of street smarts
* Kiyosaki – the spectator who learns lessons from both but internalizes only rich dad’s traits


Poor Dad

The author compares his poor dad to the millions of fathers who encourage their sons to do well in school so they could get a good job with a good company. Poor dad believed in the traditional principles of working hard, saving money, and not buying material things that one cannot afford. He believed that having a good job with a solid company is what one should aspire for; hence he expresses disappointment when his son leaves the employ of a large, reputable corporation.

Poor dad looks to education as the passport to success. He held a doctorate degree, went to Ivy League universities, but was always struggling financially. He believed he would never be a rich man and the author points out that this became a self-fulfilling prophecy. Poor dad was more interested in a good education than the subject of money. The author wrote that his poor dad would always say things like, “I’m not interested in money” or “money doesn’t matter.”

The author points out that poor dad was preoccupied with things like job tenure and security, Social Security, vacation and sick leaves, company insurance and salary raises and promotions. The author felt that his poor dad was more interested in these factors rather than on the job itself. This is what the author calls being trapped in the Rat Race. His poor dad worked hard incessantly but somehow never made it ahead financially. Poor dad’s approach to the subject of money was based on working hard to have enough money to pay the bills (in contrast to rich dad’s approach to make one’s money work for him).

Rich Dad

The author wrote that it was when he was nine years old that he started realizing that his rich dad made much more sense than his poor dad. It was from rich dad that the author learned not to say, “I can’t afford it”, but instead to ask, “how can I afford it?” He explains this principle by relating an incident when he and his best friend Mike went to work for Mike’s father. Rich dad paid them very low wages deliberately so that would stir anger and a sense of injustice in them and eventually for them to realize that in order to get ahead, one must work for himself and not for others. For example, in that part of the book when the author complains to rich dad that he can hardly afford to buy anything with the wages he is paid, rich dad tells him that he shouldn’t dwell on the fact that his wages are low, but instead ask “how can I make more money” because this stimulates the brain to take action. His rich dad says that when someone says, “I can’t afford it”, his brain stops working. It therefore kills initiative and promotes passivity.

The author adds that while his poor dad invested time and effort in education, he did not have any knowledge on investing. His rich dad, by contrast, was very skilled in the investment game because that’s all he did. The attitude of his rich dad about money was manifested in the saying “the lack of money is the root of all evil” (his poor dad, on the other hand, believed that the love of money is the root of all evil).

According to the author, rich dad also nurtured the idea that taxes punished producers and rewarded the non-producers. He was the type who encouraged money talk at the dinner table and was portrayed by the author as someone who learned to manage risk, instead of not taking risks.


The Son (Robert T. Kiyosaki)

The author begins his book, Rich Dad, Poor Dad, by saying that he is fortunate in having had two fathers. He learned valuable lessons from both of them, but in Chapter One it becomes evident which father had the more sensible approach towards money. He compares and contrasts both fathers’ views about working hard, getting an education, saving and investing and realizing how habits of the rich and poor significantly differ. He attributes his financial acumen through the many conversations he carried out with his rich dad.

The author takes a common sense approach to the subject of money and emphasizes the need for accounting knowledge so that the reader clearly understands what assets and liabilities are. He makes simple diagrams that show the inflow and outflow of money and how the rich build up the asset column and the poor build up the liability column (expenses). It is obvious that the author places much importance on accounting knowledge – no matter how boring it is - because he says it is “the most important subject in your life.”

By using numerous examples and anecdotes, the author drives home his messages effectively, revealing his pro-capitalist stance.

The author also shows his understanding of the mechanisms employed by the government and the tax man and concludes that it is the middle class that actually pay for the poor. The rich are the ones who are hardly taxed because they have the knowledge to use tax legislation to their advantage.

Chapter Summaries

Chapter 1: Rich Dad, Poor Dad

The story of Robert Kiyosaki and Mike starts in 1956 Hawaii, when both boys were a nine years old. Their first get-rich scheme was a counterfeit nickel making company. They made plaster molds of the nickels and melted lead toothpaste tubes and filled the molds to produce the nickels. Their plan was foiled by Mike's father, who informed the boys of their illegal activity. After that day, the boys dedicated their free time to leaning about finance and economics from Mike’s father, the rich dad. The first lesson Mike’s dad made the boys experience was hatred of the “Rat Race”. He was able to achieve this by making the boys work in one of his grocery stores for three hours for ten cents an hour pay. Within a few weeks, Kiyosaki, tired of being exploited for labor, demanded that he receive a raise, but instead, Mike’s father cut his pay and told him to work for free. Eventually, both boys tired of being under appreciated (and unpaid) and they met individually with Mike's father. In their meetings with rich dad, he apologized for lack of pay and he offered them either the moral of the lesson or a pay raise. Both boys chose to learn the moral of the lesson, while rich dad offered them pay raises. He started at twenty-five cents, a dollar, two dollars, and even five dollars, which would have been considered a large amount of money for an hourly wage, but the boys still remained strong with their decision to learn the moral of the lesson. The lesson to get out of the “Rat Race” and instead of spending your whole life working to put a little money in your pocket and a bunch of money in someone else’s pocket, have people work hard to put money in your pocket. Out of all the lessons that were taught to the boys, this one was the most important. (Kiyosaki and Lechter 28-35)

Chapter 2: The Rich Don’t Work for Money

The author tells his readers to forget the notion that life teaches. He says “the only thing that life does is push you around.”

This chapter talks about people who are more comfortable in playing it safe because they were not taught early to take risks. The author develops the ideas that the poor and the middle class work for money, fear and greed cause ignorance and poverty, and the importance of using one’s emotions versus thinking with emotions. The author also stresses that opportunities in life come and go; the rich recognize them instantly and turn them into gold bullions. Others do not see these opportunities because they’re too busy seeking money and security. As the author says, well “that’s all they’re going to get.”

Chapter 3: Why Teach Financial Literacy

The story of Kiyosaki and Mike continues later in life, 1990, and both of the now adults have made incredible leaps and bounds with regards to their finances and their socioeconomic status. Mike was able to take the lesson from his father and apply them to his life. He took control of his father’s large business and increased every aspect of the empire and he is currently raising his son to take control of the company once he retires. As for Kiyosaki, he was able to retire at the age of 47 with his wife Kim. At a business meeting at the Edgewater Beach Hotel in Chicago, Charles Schwab, Samuel Insull, Howard Hopson, Ivar Kreuger, Leon Frazier, Richard Whitney, Arthur Cotton, Jesse Livermore and Albert Fall met to talk about different investments and money schemes. Twenty-five years later, a report stated that a large majority of those extremely wealthy people that met in Chicago either ended up in jail, dead or penniless. The major idea to take from the results of these unfortunate entrepreneurs is that you need financial literacy to be and stay safe. The idea that was represented with the big 1920’s entrepreneurs is still prevalent today with some of the professional athletes making poor financial decisions and ending up with next to nothing. This specific lesson is meant to teach people not to be wise with your money once you have it, but rather be smart with your money before you have it. In a way, don’t try to build a skyscraper or even a house without building a strong foundation first. According to Kiyosaki, there is one rule, and only rule that can help a person to build a strong foundation; know the difference between an asset and a liability, and make sure that you only control assets. (Kiyosaki and Lechter 56)

When it comes to beliefs about money buying freedom and the ability to enjoy retirement without fear of outliving one’s money, this chapter catches the essence of the author’s advocacy for financial independence. He says, “Intelligence solves problems and produces money. Money without financial intelligence is money soon gone.”

The author believes that financial literacy begins with a working knowledge of accounting. It is essential to know the difference between assets and liabilities. To make these two terms understandable to readers, the author makes a rudimentary diagram of these two concepts to motivate them to purchase assets in order to solidify the asset column, while keeping the liabilities (expenses) to a bare minimum. The author states that poor people remain poor because they do the opposite. They pile up on their liabilities and have zero assets so that their balance sheets and income statements look out of kilter. People have to understand that it’s not how much they make, but how much they keep according to the author, and this is an essential principle that this chapter focuses on.

Chapter 4: Mind Your Own Business

In this chapter, the author slowly introduces the concept of real estate investing and uses McDonald’s as an example. He points out that McDonald’s may not make the best hamburgers in the world, but owns the “most valuable intersections and streets in America.” The author remarks that individuals need to mind their own business if they wish to become financially self-sufficient. They shouldn’t mind their employer’s business, they should strive for ways to become their own boss and nurture their own businesses.

The author continues his discussion on building assets. To him, real assets are anything with value – stocks, bonds, mutual funds, income-producing real estate, notes, royalties from intellectual property, etc.

This chapter also reveals the author’s investment preferences: real estate and stocks. For real estate, he says he starts small, and trades his properties for bigger ones and then delays paying taxes on capital gains through one IRS mechanism.


Chapter 5: The History of Taxes and the Power of Corporations

The author states that the poor let the big machinery (corporations) manipulate them whereas the rich know how to use big machinery. This means that the rich possess the knowledge and savoir faire to use the power of the corporation to protect and enhance their assets. The advantage of a corporation versus that of the individual lies in how corporations pay taxes, according to the author. He makes this point clearly: individuals earn money, pay taxes on that money, and live with what’s left. The corporation, on the other hand, earns money, spends everything it can, and is taxed on anything that’s left. The author adds that individuals may not be aware of how much they’re being manipulated; they work from January to mid-May to enrich the government by paying taxes on their income. In the meantime, the rich are hardly taxed.

The author recommends developing one’s financial IQ as one way of leaving the humdrum of daily existence. This is accomplished by gaining knowledge of accounting, investing, understanding the markets, and the law. He says being ignorant gets you bullied whereas being informed translates into “you have a fighting chance.”


Chapter 6: The Rich Invent Money

The author develops the concept of self-doubt. He says that each person is born with talent but that talent is suppressed because of self-doubt and fear. He remarks that it’s not necessarily the educated smart people who get ahead but the bold and adventurous. People never get ahead financially even if they have plenty of money because they have opportunities that they fail to tap, he stresses. Most of them just sit around waiting for opportunity to happen. The author’s idea is that people create luck; they should not wait around for it. He says it’s the same with money. It has to be created.

In this chapter, the author discusses the importance of an education (although some critics say that he appears to downplay its importance). The author is clear by saying, “a trained mind is a rich mind.” In his analysis, there are two types of investors, each with a different mind set: those who go for the packaged investment, and those who customize investments to suit their objectives.

The author encourages people to hire people more intelligent than they because by capitalizing on the knowledge of others, an intelligent individual builds his own knowledge base and therefore has more power over those who don’t know.

Chapter 7: Work to Learn, Don’t Work for Money

This is the chapter where the author talks about the skills individuals need to develop for financial success.

The reader is given an example of a young woman who had a Master’s Degree in English Literature and who was offended when it was suggested that she learn to sell and do direct marketing. After all the hard work for her degree, she didn’t think she would have to stoop so low to learn how to be a salesperson, a profession she didn’t think very highly of. The author uses this example to emphasize that there are other skills people need to cultivate to help them on the road towards financial freedom.

The author mentions management skills. He says individuals need to know how to manage cash flow, systems, and people. To that he throws in selling and marketing skills. He puts equal emphasis on communication skills. He says there are many people who have the scientific bent and hence have a powerhouse of knowledge, but they fail miserably in communications. These are the people who are “one skill away from great wealth.”

The author calls attention to one outstanding trait of great wealthy families: they give money away – plenty of it – unlike the poor who feel that charity begins at home.


Chapter 8: Overcoming Obstacles

The opinion of the author is that five personality traits hamper human beings: fear, cynicism, laziness, bad habits, arrogance. He explains that while it’s normal to have fear, what matters is how one handles it. The author shares his sentiment about his particular fondness for Texas and Texans: “When they win, they win big and when they lose, it’s spectacular.”

The author maintains that it’s not merely a question of balance but also FOCUS. He recommends that the Chicken Littles of the world be ignored. They’re only concerned about the sky falling, spending the rest of their lives in pessimism. He says he constantly hears people saying they want to be rich, but when it’s suggested that money can be made from real estate, their initial reaction is “but I don’t want to fix toilets.” The author believes it’s ironic that they’re more concerned about trivia like fixing toilets rather than what lies ahead in real estate. As a final point, the author states that it is healthy to be greedy, so when faced with a decision, a person must always ask, “What’s in it for me?”


Chapter 9: Getting Started

This chapter serves as a section on tips to create and build personal wealth. His first tip is, find a reason greater than reality to motivate you. What he means by this is to wake up the financial genius in oneself by empowering the mind. He says that people must have a strong /purpose for living.

The next tip is to feed the mind. By feeding the mind, the author contends that people acquire power of choice.

The author also advises people to choose friends carefully. He says to avoid people who proclaim incessantly that the sky is falling and instead encourages readers to spend time with people who enjoy talking about money because they may have valuable lessons to share. The author also believes that people should study one field, and then go out and learn a new one, although it is important to choose what one studies.

Here is another tip that the author observes most people don’t practice: pay yourself first. Even if short of cash, people must pay themselves first. This goes in tandem with managing three things efficiently: cash flow, people and personal time.

Another tip the author gives is being generous. He thinks it makes a lot of sense to pay one’s broker well as he’s an ally, and “your eyes and ears to the market.”

The author suggests having heroes. They are indispensable in life because they not only inspire, they also make it seem so easy. They stimulate the human mind into thinking, “If they can do it, why can’t I?”

“Teach and you shall receive” is another tip that the author shares. His words are eloquent concerning this idea: “There are powers in this world that are much smarter than we are. You can get there on your own, but it’s easier with the help of the powers that be. All you need to be is generous with what you have, and the powers will be generous with you.”


Chapter 10: Still Want More? Here are Some To Do’s

This chapter is sort of a supplement to the previous chapter. It gives readers additional tips to help them reach for financial rewards. One tip is to stop doing what you’re doing – that is, if it’s no longer working or viable. The author encourages readers to look for new ideas, to pick the brains of individuals who have the experience and who have already done what one aspires to do. He advises on keeping the learning curve alive, taking courses, buying tapes, attending seminars.

In looking for real estate investment opportunities, the author recommends looking in the right places. One way of doing this is to jog around the neighborhood one is interested in. People can acquire real estate even if they don’t have sufficient funds for the down payment. In fact, with a bit of cleverness, the author says people can even make money with no capital.


Themes in Rich Dad, Poor Dad

One theme that’s apparent in this book is that for an individual to be wealthy, he must aim to own the system or means of production, rather than work for another individual. The author stresses that there is obviously something confining about being an employee; it shuts the mind to other possibilities and it stunts initiative.

Financial intelligence is THE most powerful asset. By studying the precepts of accounting and investing, the author believes that individuals will be able to see the difference between an asset and a liability; in fact it is the more concrete application of learning what’s right and what’s wrong. Generating a string of expenses is wrong, building assets is right.

Unlike individuals who earn and then pay taxes on what they earn, corporations earn, spend what they want to spend, and pay taxes on what’s left. Corporations, therefore, hold a certain degree of power. The rich know how to use this power, the poor don’t.

The author also believes that true luxuries are experienced when they are the outward manifestations of intelligent investing and asset building. He cites the example of his wife purchasing a Mercedes Benz because it was the car she liked and worked hard to be able to purchase it. The author cautions however about keeping up with the Joneses and getting into debt because of this human frailty.

Fear, laziness, cynicism and arrogance are to be blamed for most of human inaction.