What You Don't Know Really Can Hurt You

An old proverb says, “Arrogance diminishes wisdom.” Rich dad believed that arrogance also diminished your riches. Applying this to money, rich dad said, “What I know makes me money. What I don’t know loses me money.”

At some point in our life, we’re all arrogant.

I’ve found that people most often are arrogant when they don’t know something, especially when it comes to financial education. They may have a little bit of knowledge but not enough to be an expert. Instead of being humble and admitting they are not an expert, they are arrogant and try to make you think they are an expert.

As a young man, when my Velcro wallet business was failing, I met with my rich dad to talk about the business. My hope was to get some advice to turn the business around. So, when he told me the business had terminal financial cancer and that I needed to close it down, I was angry.

In my arrogance, I tried to convince him that it wasn’t as bad as it was, but the truth was I couldn’t read my own financial statements as well as he could. One look at my financial statements told him that my ignorance and arrogance had clouded my judgement. I eventually liquidated the business and paid off over a million in debt. If I hadn’t done that, things would have been much worse.

“Every time I’ve been arrogant,” said rich dad, “I have lost money. Because when I’m arrogant, I truly believe that what I don’t know is not important.”

I find this very common in people when they talk about money. This is especially true with people who have made a little bit of money and begin to think of themselves as rich. For instance, I knew many people during the housing bubble who were making money from flipping houses. When they asked me if a deal was a good one or not, I would say I never liked deals that relied on appreciation instead of cash flow and wouldn’t invest in them. These people would scoff at me, telling me how much money they’d already made doing these types of deals.

When the housing market crashed, these people weren’t scoffing any longer. Many of them lost all their money and their “assets.” It is sad because if they had stopped for a minute and really listened and learned, rather than arrogantly trying to come off as an expert when they really didn’t know what they were doing, they might have become rich and stayed rich, even during the financial crisis. Their ignorance and arrogance made them poor.

Arrogance Is an Obstacle to Wealth

Arrogance is ego plus ignorance.

Add to that equation the fact that money has a way of making you a legend in your own mind, and you can see why arrogance can easily become an obstacle.

Fortunately for me, my wife has been there to remind me when I’m on my high horse. This is good because people on a high horse often run into a low branch. That’s why, especially in this rapidly changing world, arrogance has no place. I think what one needs to succeed today is confidence, humility, and the willingness to work. There’s a big difference between self-confidence and arrogance.

Another downfall of arrogance is that your mind becomes closed. People who are arrogant are not willing to learn something new. Once when I wanted to invest in IBM, rich dad suggested that I get a job with IBM as a janitor. His thought was that I could hang out as a janitor around IBM and at least that way I would be an insider instead of an outside investor. He said, “If you’re really humble and open to learning, you will pick up more from everything going around you as to whether or not you should buy or short IBM at that moment.”

Another aspect about confidence versus arrogance is that people will say, “Well, he’s an arrogant you-know-what.” I get that a lot. However, all I’m doing is stating what I have done. In other words, if you’ve done it, it isn’t bragging. Just because you’ve done something, it doesn’t mean it was easy to do it. You had to be humble enough to learn how to do it.

The final point I want to make is that many people say, “You can’t do that.” For instance, when I talk about how I do certain deals or certain investments, people will tell me, “You can’t do that here.” What they fail to realize is that when you point your finger forward and you say, “You can’t do that,” they forget that there are three fingers pointing back at them. When you think somebody can’t do something, it is more of an indictment on you. Just because you can’t do something, doesn’t mean that somebody else can’t. If you’re saying that a person can’t do something because it is beyond your know-how and abilities, then you are being very arrogant.

Got A Financial Education?

I have found that most people use arrogance to hide their ignorance. This is also especially true when it comes to so-called financial experts and financial advisors. They try to bluster their way through discussions. It is clear to me that they don’t know what they are talking about. They’re not lying, but that are not telling the truth.

There are many people in the world of money, finances, and investments who have absolutely no idea what they’re talking about. Most people in the money industry are just spouting off sales pitches like used car salesmen.

That’s why it is extremely important for you to be financially educated. Just like going to a car lot without any knowledge will get you a bad deal on a used car, talking to financial advisors without any knowledge of money will get you bad investments.

If you want to be rich, you need to be humble enough to admit that you don’t know enough about money and smart enough to begin increasing your financial IQ through financial education. In fact, the best investors I know are the ones who, even though they are extremely rich, still talk about how much they have to learn. They are hungry for knowledge because they understand that knowledge is truly what makes them rich.

What are you going to do today to increase your financial education?

Regards,

Robert Kiyosaki

Robert Kiyosaki
Editor, Rich Dad Poor Dad Daily

The Daily Reckoning