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Network Marketing and the Cash Flow Quadrant

Robert Kiyosaki , author of Rich Dad / Poor Dad, believes network marketing is a means to achieving wealth.

In the Rich Dad’s CASHFLOW Quadrant: Rich Dad’s Guide to Financial Freedom
, he explains the four income styles used by people today:

The quadrant looks like this:

E | B
__|___
S | I

The E stands for Employee, the persona that our educational system creates (“Get a good education so you can get a good job”).  The employee does not own his or her job.  It is not an asset that can be sold or transferred.  The employee agrees to do what the employer says in exchange for the employer’s money.  The employer may terminate the arrangement at any time.

The S stands for Self-Employed, or small business owner. In this quadrant, the boss and the employee are the same individual. The small business owner might have one or two other employees. In any event, the income depends primarily on the owning individual.

The B stands for large Business owner. Kiyosaki defines a large business as having 500 or more employees. The income here no longer depends upon the owner, but upon the employees. J Paul Getty once said “I would rather have 1% of 100 individuals efforts than 100% of my own.”

The I stands for Investor. The investor has money working for him while any of the three previous ones can in fact invest money, what Kiyosaki means here is large amounts of money invested

Notice that the left side of the quadrant is active income or sometimes called linear income. That is, the individual puts forth effort and receives income. When the effort stops, the income stops. The right side of the quadrant represents passive income. The individuals efforts do not determine the passive income. Rich people have people working for them or money working for them or both.

In network marketing, a person can move from the E quadrant to the B quadrant with very little capital investment. The individual grows an organization of well over 500 people by starting with one person and teaching that person to do the same thing. If each individual finds one new person each month, at the end of the year our hero will have personally enrolled 12 others. The first person enrolled will have enrolled 11 others. Two people will have enrolled ten others.  Four people will have enrolled nine others and so on, resulting in over 4,000 people in the organization. The magic is in the duplication.

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