This post Here’s Why ‘A’ Students Work for ‘C’ Students appeared first on Daily Reckoning.
John Bogle, an entrepreneur, true capitalist and the founder of one of the world’s largest mutual fund companies, wrote in his book The Battle for the Soul of Capitalism concerns about the retirement system as a whole.
We’re in a crisis. But luckily, there’s a solution for those smart enough to listen.
He takes aim at CEOs of investment firms and believes retirement is going to be the next big financial crisis in this country. That’s a big deal, especially with so many people relying on distant retirement accounts to provide for their future security.
Bogle, an insider in the mutual fund industry, is disturbed by the greed he sees in his industry.
He says, “When I came into this business there were relatively small, privately held companies, and these companies were run
by investment professionals. Today, that has changed in every single respect. These are giant companies. They are not privately held anymore. They are owned by giant financial conglomerates, whether it’s Deutsche Bank, Marsh & McLennan, or Sun Life of Canada. Basically, the largest portion of mutual fund assets are run by financial conglomerates, and they are in the business to earn a return on their capital in the business—and not a return on your capital.”
Bogle points out that in mutual funds, you, as the investor, put up 100% of the money and take 100% of the risk. The mutual fund company puts up no money, takes no risk, and yet keeps 80% of the returns.
The investor gets back 20% of the gains (if there are even gains).
Warren Buffett Agrees
Warren Buffett is regarded as one of the greatest investors of our time. He is a capitalist. He is an entrepreneur. He is not a managerial capitalist. (Managerial capitalists are not entrepreneurs. They did not start the business. They do not own the business. As managerial capitalists, they have responsibilities, but take no personal financial risks).
This is what Warren Buffett has to say about these corporate money managers, managerial capitalists, most of whom are “A” students from great schools. He says, “Full-time professionals in other fields, let’s say dentists, bring a lot to the layman. But in the aggregate, people get nothing for their money from professional money managers.”
If this is true, it might be stated another way: Those who choose not to become financially educated or play an active role in their investments and, instead, turn their money over to professional money managers, are abdicating responsibility for their financial future—and, if Buffett is on target, getting little value for it. How great is the risk of turning your money over to a “professional” who brings little value to the undertaking of making your money work for you?
The Future of Education
Since the beginning of time, all a child had to do was focus on two types of education. They were:
- Academic Education: This education supports the general skills of learning how to read, write, and solve math problems. This is an extremely important education.
- Professional Education: This education provides more specialized skills to earn a living. The top students, the “A” students, become doctors, accountants, engineers, lawyers, or business executives. Other schools at this level are trade schools for students who want to become mechanics, construction workers, cooks, nurses, secretaries, and computer programmers.
What was missing?
Financial Education.
This is the level of education not found in our school system. This is the education of the future. Again, we advise kids to go to school to get a job and work for money, yet we teach them little or nothing about money.
The statistics tell a sad and sobering story: While 90 percent of students want to learn more about money, 80 percent of teachers do not feel comfortable teaching the subject. Someday, financial education will be part of the curriculum of all schools, but not in the near future.
Bureaucrats: “B” Students
The vast majority of students who graduate from our schools are “B” students. They’re taught, by and large, by “A” students, some of the brightest students who continue their education to become teachers. What becomes of those “B” students as they choose their path in life? It’s my opinion that they become bureaucrats.
My poor dad did well in school as an “A” student. He did well as a bureaucrat in the government.
Unfortunately, when it came to money, business, and investing, he missed out on the opportunity to gain real world knowledge. He could not survive in the cutthroat world of the big business and investment, while the “C” students and dropouts Steve Jobs, Bill Gates, Mark Zuckerberg, and hundreds of others find and develop their genius as true capitalists.
My rich dad was a dropout. He had to leave school to help run his family business. While he didn’t get a degree, he did get an education—running a business in the real world.
Using his education in the real world, my rich dad built a huge real estate empire and hired many “A” students to run his company. He did not need to be a valedictorian to be successful in the real world.
Rich Dad said, “The problem with the world is that it’s now run by bureaucrats.” He defined a bureaucrat as those in a position of authority—such as a CEO, president, sales manager, or government official—but who take no personal financial risks. Explaining further, he said, “A bureaucrat can lose a lot of money, but they do not lose any of their own money. They get paid, whether they do a good job or not.”
Rich dad said, “A true capitalist, an entrepreneur, knows how to take a dollar and turn it into a hundred dollars. Give a bureaucrat a dollar, and they’ll spend a hundred.”
And we wonder why we have a global financial crisis.
Become a “C” Student
Today, millions of people are relying on “B” students, bureaucrats taught by “A” students, from their financial well-being. The problem is that they don’t have your well-being in mind. They have theirs.
The message is simple: Success in the classroom does not ensure success in the real world. The world of the future belongs to those who can embrace change, see the future and anticipate its needs, and respond to new opportunities and challenges with creativity and agility and passion.
If you want to be rich and successful, traditional education, while helpful, is not enough. You need a strong financial education too; it’s an investment that pays dividends year after year.
How do you combat this? By becoming a “C” student—a capitalist.
Whether by investing or starting a business, you have to take control of your money and your retirement, not trust it in the hands of those who don’t have your best interests in mind.
Today, I encourage you to start learning how to make your own money work for you—not others.
Regards,
Robert Kiyosaki
Editor, Rich Dad Poor Dad Daily
The post Here’s Why ‘A’ Students Work for ‘C’ Students appeared first on Daily Reckoning.