Book Summary

The Cashflow Quadrant – Robert Kiyosaki


The Cashflow Quadrant will explain why some people can work less, yet earn more. This ability is the difference between employees and business owners. It reveals why certain investors are successful, and while others are not. Plus, it focuses on how some of the brightest graduates end up working for college dropouts. The Cashflow Quadrant reveals why some people can make lots of money, and others are not.


Robert Kiyosaki is an American Businessman who founded Rich Global LLC and the Rich Dad Company. The latter focuses on private financial education through the mediums of books, videos, and speeches. He is also the author of over 26 books, including the best-seller Rich Dad Poor Dad (which sold over 41 million copies worldwide).

“You will never know true freedom until you achieve financial freedom”
– Robert Kiyosaki


The Cashflow Quadrant is a simple model designed by Robert Kiyosaki. It shows that there are four different paths to becoming wealthy. Importantly, some of these four paths are more efficient.

The quadrant that you belong to depends on where most of your income comes from. Either you are an employee (E), a small business owner or self-employed (S), a big business owner (B), or an investor (I). An E works for the system. An S is the system. A B creates, owns, and controls the system. An I invests money into the system.


The employee wants financial security. They seek the safety of long-term contractual agreements. Robert describes the word ‘secure’ as being a response to fear. Employees look for financial success through climbing the corporate ladder. They work in someone else’s system to earn money. A typical employee will say something like, “I am looking for a secure job with nice colleagues and great benefits.”

Most people are in the employee quadrant because they are programmed to be so from childhood. Most people are also told from a young age to work hard and be careful with their money. It is essential to use your money wisely, but children are taught not to take financial risks. Children are also not taught about starting their own business or investing. You can become rich in this quadrant, but it is extremely difficult.

Pros and Cons of Being an Employee
Despite the purpose of this book, there are still some pros of being an employee. Firstly, there is reduced financial uncertainty. On top of this, paid vacation and health insurance are often included.

However, if you are successful, you often have less free time. Your performance is usually higher than the salary you gain. With the other quadrants, you are generally paid according to your performance. This is not the case for employees.


The small business owner or self-employed strives for control. Robert calls this group the ‘do-it-yourselfers’. These people want to be their own boss. Unlike the employee, a self-employed person responds to fear by taking control, not by seeking security. They gain financial success by becoming highly specialized in a demanding field. A typical small business owner will say something like, “I am looking for a job where I can be compensated well for my skills and time. I want to be in charge.” They are hardcore perfectionists. It isn’t about the money for this group. Money is a bonus, but what they really want is independence.
Self-employed people have to devote more time to their work if they want to earn more. Their income is directly dependent on how much work they can do. Because of this, you can say that self-employed people’s time is money.

Pros and Cons of Being a Small Business Owner
Being a small business owner has benefits when compared to an employee. For example, you have control of the direction of your business. However, it is less secure, and you might even lose money. There are no benefits of being a small business owner over being a big business owner or investor. Self-employed is the riskiest quadrant. Nine out of ten small businesses fail within the first five years. The main reasons for small business failure is a lack of experience and capital.


The big business owner strives for freedom. They gain financial success through creating a profitable business system. A typical big business owner will say something like, “I am looking for people that are smarter than me to run my business for me.”

Pros and Cons of Being a Big Business Owner
As a big business owner, you can have time-based and financial freedom quite quickly. Also, a more significant proportion of your profits go to you, compared to small businesses. However, as with any business, there is always the possibility you lose money. Plus, it takes a different, and a more broad set of skills than being an investor does. For example, having to lead effectively.

The big business owner quadrant is one of the best quadrants for becoming rich. This group of people owns the system or process, where people work for them.

How a Small Business Owner (S) Can Become a Big Business Owner (B)

One of the most significant differences between an S and a B is the reliance on the owner. True Bs can leave their business for a year and return to a more profitable business. True Ss would return to a non-existent business. An S owns a job; a B owns a system.
Robert describes two characteristics that Bs require:

  • The ownership or control a system
  • The ability to lead people

For Ss to transition to a B, they have to change themselves and their knowledge into a system. The issue is that most people struggle to do that.


The investor also strives for freedom. However, unlike the big business owner, the investor gains financial success from allocating money where the money has the highest expected return. They make money with money. A typical investor will say something like, “I am looking for a place where my money can work for me in the most profitable way.” An investor does not have to work as their money works for them. To become genuinely wealthy, you one day have to reach the I quadrant. Getting an education or saving money in a retirement plan are not investments that belong in the I quadrant. Instead, the I quadrant is about investments that generate income on an ongoing basis.
You cannot jump into the investor quadrant without being successful in one of the three other quadrants.

Pros and Cons of Being an Investor
You can achieve financial freedom very quickly as an investor. You have all the strengths of being a big business without the limitations. Plus, you can build a passive income stream. The only limitation of being an investor is financial uncertainty.


OPT stands for other people’s time, and OPM stands for other people’s money. As well as being broken down into four quadrants, the quadrant can be broken down into two sides. The left side very rarely gets the opportunities to use OPT or OPM. The right side does get this opportunity. This suggests one of the drawbacks of not moving towards becoming a B from an S. The more successful you are as an S, the more hard work you will have to put in.

OPT and OPM of Big Business Owners (B)
A person from the B quadrant uses both OPT and OPM. When designing a business system, the B needs to hire people in the E and S quadrants. They typically hire these people using the money of people from the I quadrant. However, a B also spends a lot of time starting the business. They move away from using their time as the business grows.

OPT and OPM of Investors (I)
A person from the I quadrant will use OPT to generate income from his money alone. More experienced investors will also use other people’s money (OPM) and their own. This means they can scale up their investment profits.

What Happens to Those Who Do Not Become Investors

“We learn the most about ourselves when we fail, so don’t be afraid of failing. Failing is part of the process of success. You can’t have success without failure”
Robert Kiyosaki

Robert describes investing as the key to financial freedom. Five things happen to people who do not invest or invest poorly:

  • They work hard all their lives
  • They worry about money all their lives
  • They depend on others to take care of them, e.g., the government or family members
  • The boundaries of their lives are defined by money
  • They will not know what true freedom is

Real investors don’t just park their money. Instead, they move their money. This approach is called the velocity of money. A top investor is always moving their money, acquiring new assets, and moving onto the next up-and-coming asset.

The Five Different Levels of Investment

Zero-financial-intelligence – These people have no financial intelligence and will not invest their money at all

Savers are Losers – Placing your hard-earned money under a mattress or in a low-interest bank will put you in the top 50% of people financially. However, it will not make you wealthy

I’m too busy – A lot of people are too busy with their careers, family and friends to dedicate their time to invest. Therefore, they hand their money over to other people who invest their money

I’m a professional – This person uses his own money and makes his own decisions. They are educating themselves constantly to improve as an investor

Capitalist – This type of investor has come from the B quadrant and has learned how to use these concepts for investing. They have advisors to help them gather information about markets and are not investing alone. This is the person who will reach financial freedom


“No matter what anyone is saying to you from outside, the most important conversation is the one you are having with yourself on the inside”
Robert Kiyosaki

Doing what everybody else does will not make you rich. Common sense is uncommon when it comes to money.
Working hard is not what will make you rich. The hardest workers are not the wealthiest people in the world. To become rich, you need to think independently. People focus too much on what they have to do, rather than who they have to be. It is essential to set goals continually.

Robert states that the cashflow quadrant is all about being, not doing. You should be aiming to strengthen your thoughts (being) so that you can take the appropriate actions (doing). Once you are being and doing, you can then become financially free (having).

“Remember that anything important can’t really be learned in the classroom. It must be learned by taking action, making mistakes, and then correcting them. That’s when wisdom sets in.”
Robert Kiyosaki

Additionally, Robert explains that the greatest cause of human financial struggle is the fear of losing money. We learn at school how to pass exams, but we are not emotionally prepared to take financial risks. This is why so many teachers are not rich. They are working in an environment that encourages people to be safe and secure. Instead of focusing on financial knowledge and education,

Robert describes financial IQ as being 90% emotional IQ and only 10% technical information. Despite this, Robert does not recommend spending lots of money. You don’t become rich by working hard to then spend money. Robert explains that he lived modestly for years and worked hard to invest rather than spend.

One way to encourage this approach is to write down where you want to be financially one year from now and then five years from now. Plus, draw up personal income and balance sheet statements that include your income, expenses, assets, and liabilities. Finally, make sure you eliminate your debt. Put aside $150-$200 per month to pay off credit cards and mortgages. Then, once your debt is paid off you should use this money to invest and generate income.

Robert explains that he played Monopoly as a child. The game taught him that the way to win is to buy four green houses and then trade up for a large red hotel. The book suggests that this can apply to real life. Start off with lots of small investments, then as you start earning more money you can purchase larger investments.

“If you want to be a leader of people, then you need to be a master of words”
Robert Kiyosaki 

How we speak to ourselves impacts our future. Words are powerful tools. We are human be-ings. We have to learn to be rather than think.