ESBI Quadrant by Robert Kiyosaki, Author of Rich Dad Poor Dad
I have been a longtime fan of Robert Kiyosaki and his book Rich Dad, Poor Dad, but one of the key concepts that Robert puts forth in his more recent works is the ESBI Quadrant shown here. This is meant to illustrate the 4 basic states that a person can aspire to.
E = Employee
In the upper left, the Employee is the heart of a business and good employees are critical to the success of any good business. There is nothing wrong with being an employee, in fact those of us in the other categories could not survive and thrive without them. In too many cases, the employee is not fully appreciated. Almost everyone will start out in this category. You work for someone else and you get paid by a business owner for the work that you do. In most cases, you have to show up in order to get paid. Your job is only as secure as the company that you work for and as too many people have learned in the last few years you can be terminated at any time for any reason, even for reasons beyond your control. I got my first job at age 10. I worked in my father’s business on weekends to save money. By 13 I was opening and closing the business on Sunday from 10AM-6PM. By 18, I was running operations for his international corporation in 38 states and 14 countries. I quit that job to go back to graduate school in 1987.
S = Self-Employed
Many people believe that being self-employed is the personification of the American Dream. I think those of us who have been there and done that might agree, but also would be quick to correct everyone on the misconceptions surrounding it. As an employee, you typically will work 40 hour a week and between 1880 and 2000 hours per year. When you are self-employed you can expect to work as much as 60-80 hours a week and if profits suffer you are always the one who suffers right along with it. If you go on vacation for 2 weeks then no money gets made for 2 weeks. The business at this level is dependent on YOU and on YOU showing up every day and getting it done. In most cases, you have gone from being dependent on a company to being dependent on YOU, but most self-employed people would say that they feel they are a slave to their business. They don’t own their business, their business owns them. If you have ever been self employed you will find that there are special rates for insurance and financing (read as HIGHER) for the self-employed. It may sound like a great idea, but the faster you move from the world of the self-employed to being a business owner the better off you will be. I started my first company in 1993. We didn’t show a profit the first year we were in business until I realized that if we didn’t show a profit then we wouldn’t be around long to support our clients that needed us. So, we have always had the mission to support our clients by making a profit so we can serve their needs best.
B = Business Owner
The next step in the evolution is to move from being an E or an S to being a B. The Business Owner is one that owns a business that runs without his/her direct 24/7/365 input. This business is one based on processes that drive the success of the business forward. I started my first business in 1993, but we didn’t start to adapt the processes necessary to get it to a B until nearly 10 years after we started. I am grateful that I learned my lesson early enough to transform our business into something with enduring value.
I = Investor
I have seen this final quadrant commented on in a variety of ways, but for me and in my personal experience, it is more about investing in businesses than in stocks. I have made good money in the stock market over the last 20 year, even in this down economy, but I have made 3x that much in real estate over just the last 10 years. That said, the money that I have made in stocks and real estate is nothing compared to the value that has been built in the companies that I have started, launched, helped or owned. I started my first company in 1993, but my second came along in 1999. My third in 2004 and my fourth in 2007 and my fifth and sixth in 2010. Aside from these companies, I have an evolving interest as a minority investor in 4 others. By taking the money that I make and using it to build value in other companies, I have been able to take $2 Million over the last 10 years and turn that into $100 Million in value for these 10 companies. If you assume a return of even just 10% then the $10 million that is returned is 5x what I put into them. It is also much more than I have ever made on the stock market or on real estate. My advice to everyone is to work hard, and to save your money to invest in building value in as many businesses as you can so that you too can live the real american dream.
So, in you are working in a job right now or you have recently been laid off. Don’t immediately think of starting your own business as a way out of this problem, you are likely trading one set of problems for another. That said, work hard and save your money and even if you don’t start your own business or buy another business, you can potentially invest money that you do have in the success of other businesses. I encourage everyone to seek out your local Angle Investor Networks, but not for the purpose of asking them for money, but for the purpose of investing in other businesses. The rules for a qualified investor have changed, but the rewards are still as good as ever. So, do your research and educate yourself and understand how to move from E to S to B and eventually to I in the quadrant chart.