Thursday, June 7, 2007

Rich Dad, Poor Dad

In the book "Rich Dad, Poor Dad," Kiyosaki advises embracing risk as a way to higher returns. I think this is an example of the selection effect. Suppose one hundred people started out in the same way as Kiyosaki, taking risks in the real estate market. 99 of them went broke, 1 struck it rich. Which one, do you think, went on to sell a book on how to make money?
There's other problems with the book. For one, the story is fictionalized-- there apparently never was a "Rich Dad." There was some good advice in the book, but it's so mixed up with the bad I wouldn't recommend it.

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