THE CASH FLOW QUADRANT | SUMMARY VIDEO
Summary
TLDRThis 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
- π Unequal income distribution is a global issue, with the top 1% of the richest individuals holding more than half of the world's wealth.
- π 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.
- πΌ 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.
- π’ E Quadrant (Employees) rely on a regular paycheck and their income is directly tied to their experience and time worked.
- π§ S Quadrant (Self-employed) includes small business owners and professionals who must be physically present to earn, limiting their income and free time.
- π¬ B Quadrant (Big Business Owners) create systems that generate income without their constant presence, utilizing other people's money (OPM) and time (OPT).
- πΌ I Quadrant (Investors) use their capital to generate more wealth passively, investing in well-developed systems or assets.
- π‘ The traditional education system often fails to teach financial literacy, which can lead to a life of limited income and financial struggle.
- ποΈ Capitalists (B and I Quadrants) have the ability to earn 'passive income' and enjoy both financial and time freedom.
- π The majority of the world's wealth is concentrated in the hands of a small percentage of people in the B and I Quadrants.
- π 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
π° 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.
π₯ 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.
π¨βπΌ 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.
π’ 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.
πΌ 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.
π 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.
Mindmap
Keywords
π‘Income Distribution
π‘Cash Flow Quadrant
π‘Active Income
π‘Passive Income
π‘Financial Freedom
π‘Time Freedom
π‘Rat Race
π‘OPM (Other People's Money)
π‘OPT (Other People's Time)
π‘Investor
π‘Financial Literacy
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
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