Are 401k's a Sham?

Recently a friend of mine asked if 401k's are a sham.  My response was that they are only one type of investment vehicle and like any other they come with risks. The main reason to have a 401k is it's free money from your employer. The other reason is to reduce your taxes because the money is taken out before taxes. The best way to use a 401k is to let the money pile up to around 20k-50k and then roll it over into a good investment property (one in a great location) through a self-directed IRA.

Here's the video that prompted his question: