Economics in the Individual section refers to how the individual behaves towards their acquisition of wealth and the creation of value. Robert Kiyosaki discusses 4 stages of personal economic evolution, or personal finance, generating a more and more responsible individual as they evolve in his book “Rich Dad, Poor Dad”. Each stage is required to ensure the successful evolution of the individual to enable success at the following stage. Skipping a stage leaves out a whole body of experience preventing future successes. For instance, if an individual spends their entire life as a dependent, and suddenly finds himself or herself in the position of behaving as an investor, they will have no context for understanding the entire process that creates a successful business.
Behaviors in stages of financial evolution are not about how an individual identifies them self and how they generate wealth, but how they behave. For instance, an employee in an organization can behave like an investor, and still have a job. Investors can behave like employees while maintaining the responsibility role of Investor.
Figure a. (Kiyosaki 1997) Personal Financial Evolution
Dependence
Kiyosaki did not specifically identify the dependence stage, but it logically exists. There is a time in ones life when they are specifically dependent on others for the acquisition of their wealth. Children are born as dependents and spend the vast majority of their youth dependent on parents or some other caretaker. Many people never leave the dependence state of mind. This is a Stage 1 trap and helps to monetize the measurement of a persons dependence on others for their survival.
Employee
Stage 2 is the Employee stage. The individual learns how to exchange time and effort for money. They learn how to show up on time, do as good a job as possible, and leave. Their motivation comes from the business they work for using positive reinforcement of a paycheck and negative reinforcement of termination of employment to guide their behavior. Basic socialization and economic knowledge is learned. Their primary focus is on doing the minimal necessary to receive the paycheck at the end of the pay period. They watch the clock to see if they are trading more time than they are getting paid for. If the individual is motivated, they will learn from their employer how to become self-employed.
Self-Employed
Stage 3 is the self-employed individual. They learn how to take responsibility for their individual actions. They become self-motivated using their former Employed status as the negative reinforcement for their behavior, and liberation to act on their own to be the driving force behind their actions. Their desire is to be independent from an employer and drive their own future.
Business Owner
After some time as a successful self-employed individual, the person begins to grow their business showing more value to society. This in turn requires the individual to reach out to others and hire them as employees. They learn how to interact with and motivate individuals in their employ to accomplish their vision. They become co-dependent on the individuals in their organizations. They learn how to run, own, and operate a business. They take responsibility for everything in the organization.
Investor
When the individual has evolved to the next stage, Investor, they are a seasoned business owner who has generated enough value in society that they can understand how to mange the most precious of commodities, wealth. They take a higher order of responsibility to invest their own and other peoples money.