THE CASH FLOW QUADRANT | SUMMARY VIDEO

Summary

This script explores the global issue of income inequality, highlighting the disparity between the wealthiest 1% and the rest. It introduces Robert T. Kiyosaki's 'Cashflow Quadrant' theory, which categorizes income earners into Employees (E), Self-Employed (S), Big Business Owners (B), and Investors (I). The video emphasizes the importance of understanding these quadrants to achieve financial and time freedom, suggesting that traditional education often fails to teach financial literacy, thus trapping many in the E and S quadrants. It encourages viewers to shift from active to passive income by moving to the B and I quadrants, where true wealth and freedom lie.

Takeaways

• 🌍 Unequal income distribution is a global issue, with the top 1% of the richest individuals holding more than half of the world's wealth.
• 📊 Society is often divided into 'haves' and 'have-nots', with many people living below their means and only a few achieving financial freedom and pursuing their dreams.
• 💼 The 'Cashflow Quadrant' by Robert T. Kiyosaki categorizes income-earning methods into four quadrants (E, S, B, I), representing different types of income and financial mindsets.
• 🏢 E Quadrant (Employees) rely on a regular paycheck and their income is directly tied to their experience and time worked.
• 🔧 S Quadrant (Self-employed) includes small business owners and professionals who must be physically present to earn, limiting their income and free time.
• 🏬 B Quadrant (Big Business Owners) create systems that generate income without their constant presence, utilizing other people's money (OPM) and time (OPT).
• 💼 I Quadrant (Investors) use their capital to generate more wealth passively, investing in well-developed systems or assets.
• 💡 The traditional education system often fails to teach financial literacy, which can lead to a life of limited income and financial struggle.
• 🏛️ Capitalists (B and I Quadrants) have the ability to earn 'passive income' and enjoy both financial and time freedom.
• 🌐 The majority of the world's wealth is concentrated in the hands of a small percentage of people in the B and I Quadrants.
• 🚀 To achieve financial freedom, one must shift from the E and S Quadrants to the B and I Quadrants, developing skills such as financial literacy, risk management, and leadership.

Q & A

What is the main issue discussed in the transcript regarding the global economy?

The main issue discussed is the uneven income distribution, where the top richest one percent own more than half of the world's wealth, leading to a societal divide between 'haves' and 'have nots'.

What are the two primary things people look for in their lives according to the transcript?

The two primary things people look for in their lives are money and time.

How does the transcript describe the life cycle of income and time for most people?

The transcript describes a life cycle where as students people have free time but no money, as young professionals they have money but no free time, and in retirement they have money but no time to enjoy life.

What is the 'Cash Flow Quadrant' theory introduced by Robert T. Kiyosaki?

The 'Cash Flow Quadrant' theory categorizes all earning methods of people into four quadrants represented by E (Employees), S (Self-employed or Small Business Owners), B (Big Business Owners), and I (Investors).

What does the 'E' quadrant in the Cash Flow Quadrant theory represent?

The 'E' quadrant represents Employees who work for a company or government and earn a salary based on their experience and time.

What are the characteristics of a typical employee as described in the transcript?

Typical employees value job security, seek promotions, try to shop their skills and knowledge for higher earnings, avoid financial risks, and are heavily influenced by their bosses in various aspects of their work and life.

What is the main difference between active income and passive income as mentioned in the transcript?

Active income is earned only when working and is limited by time and experience, as seen in the E and S quadrants. Passive income, on the other hand, is earned even without the person's physical presence, as seen in the B and I quadrants.

How does the transcript describe the 'B' quadrant in the Cash Flow Quadrant theory?

The 'B' quadrant represents Big Business Owners who create or own businesses with more than 500 employees, utilizing systems that generate continuous cash flow without their constant presence.

What are the two main strategies big business owners use to create and run their systems according to the transcript?

Big business owners use Other People's Money (OPM) and Other People's Time (OPT) to create and run their systems, leveraging loans and the work of employees to build their businesses.

What does the 'I' quadrant in the Cash Flow Quadrant theory represent?

The 'I' quadrant represents Investors who use money to create more money, investing in well-developed systems to multiply their wealth.

What is the significance of financial literacy and other skills for moving from the E/S quadrants to the B/I quadrants?

Financial literacy, risk management, emotional intelligence, leadership, and communication skills are crucial for shifting from the E/S quadrants to the B/I quadrants, as they enable individuals to understand and manage investments, take calculated risks, and effectively lead and communicate in business.

How does the transcript suggest people can achieve financial and time freedom?

The transcript suggests that to achieve financial and time freedom, individuals should aim to move to the right side of the Cash Flow Quadrant (B/I quadrants), develop the necessary skills, and create passive income sources.

What is the role of globalization and technology in creating wealth according to the transcript?

Globalization and technology provide opportunities to build systems online, which can generate extreme wealth and allow individuals to create their own empires and freedom.

Outlines

00:00

💰 Inequality and the Cash Flow Quadrant

The script addresses the global issue of income inequality, where the wealthiest 1% control more than half of the world's wealth. It introduces the concept of 'haves' and 'have-nots' and describes the struggle of most people to achieve financial and time freedom. The theory of cash flow quadrants by Robert T. Kiyosaki is presented, categorizing earning methods into four quadrants (E, S, B, and I), which represent different lifestyles and income approaches. The script encourages viewers to stay engaged to understand how this theory can change their lives.

05:01

👥 Employee Quadrant: The Reality of Active Income

This paragraph delves into the characteristics of employees, who are part of the E quadrant and rely on active income. Employees are depicted as hardworking individuals who trade their time and experience for a paycheck. The script outlines typical employee behaviors, such as seeking job security and promotions, and their limited financial growth due to the nature of their income being directly tied to their work hours and experience. The summary highlights the employee's lack of risk-taking and the control exerted by their employers over their financial and personal lives.

10:03

👨‍💼 Self-Employed and Professionals: The S Quadrant

The script moves on to discuss the S quadrant, which includes self-employed individuals, small business owners, and professionals who must be physically present to earn. These individuals are characterized by their belief in doing tasks themselves and are often referred to as 'too busy people.' Despite earning more than employees, their income is still limited by their time and expertise. The summary explains that their income formula is similar to that of employees, emphasizing the limitations and lack of free time inherent in this quadrant.

15:05

🏢 Big Business Owners: Creating Passive Income Systems

The B quadrant is introduced as the realm of big business owners who have created systems that generate continuous cash flow, independent of their physical presence. These individuals have harnessed the power of other people's money (OPM) and other people's time (OPT) to build their wealth. The script uses examples like McDonald's to illustrate the concept of duplicable systems and the importance of creating a business model that operates efficiently without the constant oversight of the owner. The summary underlines the key to their success: building a system that operates autonomously and generates passive income.

20:07

💼 Investors: Capitalists and the Power of Money

The final paragraph of the script focuses on the I quadrant, home to investors who use money to create more money. These individuals are described as ultimate insiders in the world of finance, obtaining assets and wealth through savvy investments. The script differentiates between inside investors, who grow their wealth, and outside investors, who often lack financial intelligence and may lose money. The summary highlights the importance of financial literacy and the ability to generate passive income through investments, as well as the stark contrast in wealth distribution between the B and I quadrants and the E and S quadrants.

🌐 The Path to Financial and Time Freedom

In the concluding paragraph, the script emphasizes the importance of financial education and the need to shift from the E and S quadrants to the B and I quadrants to achieve financial and time freedom. It points out that traditional education often fails to teach about money management, leading to a cycle of limited income and lifestyle. The summary calls for a change in mindset and skills, such as financial literacy, risk-taking, and leadership, to transition from active to passive income sources and ultimately build one's own empire.

Keywords

💡Income Distribution

Income distribution refers to the way in which income is divided among the members of society or among the factors of production. In the video, it is highlighted as a significant global issue, with the top 1% of the richest people owning more than half of the world's wealth, illustrating the disparity and the categorization of society into 'haves' and 'have-nots'.

💡Cash Flow Quadrant

The Cash Flow Quadrant, introduced by Robert T. Kiyosaki, is a concept that categorizes the different ways people earn their income into four distinct groups: Employees (E), Self-employed or Small Business Owners (S), Big Business Owners (B), and Investors (I). The video uses this theory to explain the different mindsets and financial outcomes associated with each quadrant.

💡Active Income

Active income is the money earned through active work, where the income is directly tied to the time and effort put in by the individual. In the script, it is mentioned that employees and self-employed individuals earn active income, which is limited by the hours they work and their personal efforts.

💡Passive Income

Passive income is income that is earned with little to no effort by the recipient, often resulting from investments or systems that generate revenue without the need for active work. The video emphasizes that big business owners and investors earn passive income, which allows them financial and time freedom.

💡Financial Freedom

Financial freedom is the state of having enough financial resources to cover all spending, without having to work actively for a living. The video discusses how individuals in the B and I quadrants achieve financial freedom by creating systems or investing wisely, which allows them to live life on their own terms.

💡Time Freedom

Time freedom is the ability to allocate one's time as desired, without being constrained by the need to work for income. The video script contrasts the lack of time freedom experienced by employees and self-employed individuals with the time freedom enjoyed by big business owners and investors.

💡Rat Race

The rat race is a metaphor for the constant pursuit of financial success, often at the expense of personal fulfillment. In the video, it is used to describe the cycle of working hard for limited income and the feeling of being trapped in a job that one may not enjoy.

💡OPM (Other People's Money)

OPM, or Other People's Money, is a strategy used by big business owners to leverage funds that do not belong to them, often through loans or investments, to build and expand their businesses. The video explains how big business owners use OPM to create systems that generate wealth.

💡OPT (Other People's Time)

OPT, or Other People's Time, is the concept of utilizing the time and labor of others to achieve business goals. The video script illustrates this with examples of big business owners who hire employees to work within their systems, thereby multiplying their own efforts.

💡Investor

An investor is someone who commits money, capital, or resources into financial instruments or projects with the expectation of obtaining a profit. The video differentiates between 'inside investors' who have high financial intelligence and 'outside investors' who may lack this and often lose money.

💡Financial Literacy

Financial literacy is the knowledge and understanding of financial concepts, including how to effectively manage personal wealth. The video emphasizes the importance of financial literacy for those wishing to move from the E and S quadrants to the B and I quadrants, as it is a key skill in achieving financial freedom.

Highlights

Uneven income distribution is a global issue, with the top 1% richest owning more than half of the world's wealth.

Society is often divided into 'haves' and 'have-nots', with most people struggling financially while a few enjoy freedom.

People seek money and time in life, but often find themselves trapped between earning and enjoying.

There are numerous ways to generate income, but they can be categorized into four main types according to Robert T. Kiyosaki's Cashflow Quadrant theory.

The E quadrant represents employees who earn a salary and are paid based on their experience and time.

Employees often value job security, promotions, and believe in hard work for earning more.

S quadrant includes self-employed individuals and small business owners who earn based on their personal efforts and expertise.

Big business owners (B quadrant) create systems that generate continuous cash flow, independent of their physical presence.

Big business owners use Other People's Money (OPM) and Other People's Time (OPT) to build and run their systems.

Investors (I quadrant) use money to create more money, working towards financial and time freedom.

95% of the world's population lives in the E and S quadrants, while 97% of the world's wealth is owned by B and I quadrants.

Traditional education often fails to teach financial literacy, leading to a cycle of limited income and time.

To achieve financial and time freedom, one must shift from the E and S quadrants to the B and I quadrants.

Each quadrant requires different skills and mindsets, and understanding these can help individuals make informed decisions about their financial future.

The globalization and technological evolution provide opportunities to create online systems for generating wealth and achieving freedom.

Developing financial literacy, risk management, and leadership skills are crucial for moving from ES to BI quadrants.

The mindset of each quadrant differs significantly, impacting how individuals approach work, money, and life goals.

Transcripts

the uneven income distribution creates a

huge problem all around the world

the top richest one percent have more

than half of the world's money

why this happens

people in the general society categorize

themselves as halves and have nots

more people live below their means while

few live about their means

and follow their dreams and build up

their own empires

most people struggling their entire life

while few enjoy their life of freedom

almost people look for two things in

their lives

one

money

and two

time

when we are small and students we all

have free time but we don't have money

to buy what we want and go where we want

when we become young we do a job

then we can have money but we don't have

free time to enjoy our life

we all stuck in busy lives

when we are getting old in our retire

age we have money we don't have time to

enjoy our lives

this is the sad reality of almost all

the people live in this planet earth

how many ways that generate income in

this world

what do you think

five or maybe 10

or maybe hundreds or maybe thousands

that is okay to think like that

because there are teachers doctors

lawyers employees

singers

managers

business owners

accountants directors and even laborers

like that we can take plenty of ways to

an income

but believe me my friends these all

methods or ways of earning belongs to

only four categories

we call it as the theory of cash flow

quadrant given to this world by the top

most financial advisor robert t kyosaki

according to this theory all the earning

methods of people are categorized into

foe which is represented by the letters

e s b and i

the e stands for employees

the s stands for the self-employed or

small business owners

the b stands for big business owners

and i stands for investors

this esbi can be represented in four

quadrants just like this

the each and every penny of this world

moving among these four quadrants that

is why this is called as cash flow

quadrant

please focus your mind on every word

and watch till the end

the video might take a bit longer but

stay patient because you can learn and

change lot of things in your life by

applying this theory

it shows the pathway to your dream

so shall we move to the quadrant one of

cash flow quadrant

employee quadrant

who are employees

they are simply workers the people who

works for money

they work for a company or for the

government

as examples staffs managers and

executives in companies

directors

labels government workers government

doctors

like that

and the specialty of these people is

that at the end of the month they obtain

a paycheck or what we call a salary from

the government or respected company

the work paycheck to paycheck

the income can be shown by an equation

like this

income equals experience into time

a company director is paid more than a

junior staff because the director has

more knowledge more experience and more

contribution to the company or the

government

[Music]

general employee allocates 8 hours per

every working days for their job so they

get at the end of the month of their

knowledge and time contribution to the

workplace

if they allocate extra hours of working

they can earn more money from hourly

rate

that is why people in this category are

hard working they work hard from morning

to night to earn

because they leave more books more money

concept

there are few characteristics of a

typical employee

number one

they believe in job security

they always look for a job with more

security and other benefits

number two

they are interested about promotion

climbing the corporate ladder

doing higher education for promotion

number three

they try to shop their skills and

knowledge believing that they can earn

more and build up their life dreams

by doing hard work they can contribute

more to their job and they can earn more

number four

they don't take risks when it comes to

money

number five

all of the employees you guys are stupid

i'm the boss and you all must do what i

say

the boss has a direct influence of their

lives

boss has a direct influence in salary

increments

performance appraisal

leave taking another activities of the

life

the boss purely controls his employee's

life entirely

almost all the decisions made by a

typical employee has a direct influence

by his or her boss

an employee knows this better than

everyone else think a bit about this

number six

employees has a hard earned little money

just enough to survive

after deep struggle he tries to save a

little in a bank for the future

he's not interested in investing

he interested only in saving money

the sparrow later tells you in this

video about the fate of the money

deposit by the employees

because of these conditions an

employee's income is called as an active

or limited income

because he earns only if he works if he

was not he wouldn't get paid

when we again look at the formula when

the time and experience become a limited

factor the income become limited

[Music]

so

every day he has to work hard to earn

he always try to forget his dreams and

try to live below their means

because his salary will never enough to

achieve his big dreams in life

he has to work from 20s to 60s as an

employee for a limited amount of money

[Music]

most people feel enough doing a job

after times

because every day they have to go to job

and come back home

this cycle continues every day what we

call as rat race

they trap in a profession which most of

them actually don't like they missed

their life path and just addicted to

climb the corporate ladder

they do this because they have nothing

to do

in someone's point of view a job is a

kind of slavery a slavery to money

some people of the escotran feel enough

of doing a job and they made a decision

to get out of this rat race

they say

i feel enough of doing this job

and i would start my own business

they come to the next quadrant which is

called as s quadrant means small

business owners

small-scale shop owners street sellers

coming under this category

and also expertise in fields such as

consultants lawyers

private practicing doctors dentists come

in under this category

movie stars singles also come in under

this category

the specialty of this category is the

person should be physically present to

earn because they are more specialized

in that particular field

i can tell you an example

every one of us cannot do the tasks of a

dentist or a lawyer

he should be there to do that task

then he can get a charge for his service

the professionals get a high charging

rate for a unit time period

the smart shop owner is also the same

if they want to get an income they have

to open the shop

otherwise they cannot get an income

when the owner left the business there's

no more business

the category of these people are called

as two busy people

they have less and less in free time

they are always busy with that time

and also they are called as do it

yourselfers

they always think no one can do things

as best as them

they must be there to do that task

this is their mindset

they say

nobody does it better

i do it myself

the endless formula of s quadrant people

can be told as same as e quadrant

income equals

experience into time

[Music]

even though they earn a little more than

a typical employee

there's always limitations

the more they expertise the more they

spend their earn

by the time and expertise both have a

certain level of limitation

so their income also get limited

and the other thing is they have less

and less free time

so these two left quadrants e and s

quadrants people earn a limited income

so their income is called as active

income

they are always struggling with free

time and enough money

then we move to the next side of the

cash flow quadrant

the right side we meet b quadrant

they are the big business owners

these are the people who creates or owns

a business more than 500 employees

by utilizing human and material

resources

they build up a system that generates a

continuous cash flow into their pockets

think about a private hospital in your

area

think about giant shopping malls

think about giant franchises like kfc

and mcdonald's

what the owners did was creating a

system

it takes continuous years of head work

to create a system

[Music]

they hire smart people to build their

systems

[Music]

they always think

if there's someone can do better than i

do why should i do it

i would rather pay him and get the work

done

they create a system that generates a

cash flow even without their presence

this is the success secret of the big

business owner please try to understand

this well

if you need any clarification do not

hesitate to ask from the sparrow

these big business owners use two things

to create and run this system

that is called as opm and opt

what are those

opm means other people's money

and opt means

other people's time

how they use other people's money

they get loans from the banks

ones are the deposits of e-quadrant

as i mentioned in e-quadrant employees

are the people who put their hard

earning money in banks

then what does a bank do

banks give those deposits as loans to

big business owners to create business

systems

the big businessman creates a system and

creates goods and services from that

system and they sell it to people in e

and s quadrants

from that income they settle the loan

and expand their businesses

and how they use other people's time

all the equivalent people are working in

the system produced by the big business

owners

think about a private hospital

from receptionists to consultant doctors

from minor staffs executives managers

all are employees

then who is the big business owner

he's the chairman

how often a chairman or a company owner

visit this company

if you are an employee did you ever see

the chairman of the company you are

working for

mostly not or maybe once or twice a year

so these big business owners create a

system that puts money into their

pockets even though they are not

physically present

even when they sleep they are making

money

so their income is called as passive

income

and these people are called as

capitalists

because they create capital and they

raise their capital

what is the specialty of the system

the system is duplicable

let's discuss with an example

[Music]

think about mcdonald

all mcdonald's in anywhere in the world

look and process at the same way

same color theme same arrangement of

tables

same foot items

if they want to start a new mcdonald

they just only have to find a new

suitable location and placed their

already developed business system just

think a bit

when you eat a hamburger in a mcdonald's

you put money into the pocket of the

owner somewhere in this world

initially mcdonald brothers built a

system that make a product the hamburger

delivered the hands of the customer in

30 seconds

they called it as a speed system

let's watch how the mcdonald's built

their high speed system

then after that what did the owner of

mcdonald's do

he duplicate the system and make a

network all around the world what we

call as franchising

this business model made mcdonald's to

the number one real estate owner in the

world

and one time an interview was from ray

kroc the owner of mcdonald

tell us how you built your hamburger

business

ray kroc instantly said

hamburger is not my business

real estates is my business

this shows how the true capitalists the

business owner thinks

they don't concerned about the product

initially they concerned only about the

system

the earning formula of this big business

owners

income equals

number of employees into number of hours

working into profit generated from an

employee from one hour

[Music]

let's talk with an example when a

company runs with 500 employees

each employee works 8 hours a day and

each employee brings 10 revenue to the

company from their works from hr

[Music]

the income of the company owner equals

500

into eight

into eight dollars

equals

thirty two thousand dollars

equals the net revenue

so if you are an employee of a company

now you know the exact reason why you

ride a budget car or maybe a motorbike

while the chairman of the company rides

a brand new ferrari or porsche

[Music]

in e quadrant i said the employees don't

have time and maximum they have 24 hours

per day

but in here the big business owner

ultimately earns time freedom with

financial freedom

as with the above example the owners

earn 400 working hours per day

the recent classic example of big

business owners are mark zuckerberg who

creates the largest network facebook

steve jobs

jeff bezos

all our top capitalists

and any company owner coming under this

category who creates the extremely

unlimited wealth

after raising the capital what does

these capitalists do

some of them are looking for

well-developed system and invest on them

and multiplying their already skyrocket

wealth

and they are coming to the quadrant eye

which is the quadrant of investors

in b quadrant capitalists used people's

money and time to create wealth

but in here investors use money to

create more money

their money is working hard for them

they are the true investors who we

called as ultimate inside investors

they obtain more and more assets and

money from shares

but you can ask a question

there are a lot of employees who invest

their money in stock market

actually they are outside investors

with zero financial intelligence most of

them lose their money

and the more money they lose the richer

the inside investor become

so with this b and i quadrant they

create passive income they put money

into their accounts even at their sleep

so this is the story of money happens in

the world

but there's a sad story

[Music]

95 of people in the world lives in e and

s

5

in b and i quadrants

when it comes to money distribution 97

of money in the world owns by b and i

quadrants 3 percent left to e and s

quadrant

that means a little money divided among

huge number of people and huge amount of

money is dividing in a small group of

people

so the e and s quadrants are considered

as poor people and b and i quadrants are

considered as rich people

our traditional school system or

traditional education system creates

people in e and s quadrant

school never teach you about the money

so give your child a proper financial

education

otherwise he left as a typical ens

squadron people who live below their

means

so this is the story of all the humans

coming under any of these categories

all the quadrants should be there to

balance the overall society

it's up to you to decide which quadrant

are you in and which quadrant you need

to go

to earn financial freedom and time

freedom you have to go to the right side

to become rich you have to change the

quadrant not the job

changing job can do nothing to become

rich

the same person can earn from different

quadrants

now you can tell which quadrant are you

in whether it is e

s

b or i

and you can now have the ability to tell

which quadrant a person is by looking at

his mod of income

when you go and ask from a person of bni

quadrant what is actual wealthiest they

instantly say the true wealth is freedom

but without having a financial freedom

you cannot get the time freedom of this

earth

where can you find the b and i quadrant

people

go and check the golf grounds they are

playing golf or they are having a fun

time with their loud ones while smoothly

sailing in the luxury yachts

these four quadrants have different

skill set and mindset

they are like four different languages

by knowing one squadron will help to

cooperate with them

these four quadrants need different

skills to success in each

to shift from one quadrant to another

quadrant you have developed those skills

to move from es to bi

you should have skills like financial

literacy taking risks money management

emotional intelligence

leadership and communication-like skills

[Music]

words are the key things to identify

each person's corporate

you definitely heard these type of

things people are talking in the society

equivalent people

they always say

i have out of my mind with this job

i'm hard working

i should do overtime then i can earn a

lot more money

next year i can get a promotion

then i will have pay raise and other

benefits

[Music]

i may change my job so i can get more

benefits

i earn just enough money for living

[Music]

when it comes to

rant they say

i am too busy with my workload

no one do it better than i do i may do

it myself

i have to work entire day

no free time to stay with my family

parents and friends

when it comes to be current they say

i'm looking for a good president to run

business

if someone is doing that job well what

should i do

go hire him and get the work done i

would rather play golf

and the investor says

i am looking for a good business to

invest my money

then i can earn more

this is the difference of the mindsets

of all four quadrants

so try to generate a passive income

source

invest your extra time built in it

if not someone else uses you to build up

his own empire

follow your dreams and build up your

empire

there's good news with the globalization

and the evolution of technology it gives

a chance to build up systems online to

generate extreme wealth to create your

own build and freedom

do not