Book Review 004: The Richest Man in Babylon
/The Richest Man in Babylon is a story about a wealthy man and his common sense approach to creating wealth. Written by author George S. Clason, a businessman and writer who drafted pamphlets about generating wealth in the 1920s. His book has sold over 2 million copies, and his work has been the foundation of countless other personal finance advice that coined the term “pay yourself first”.
Summary:
1. Pay yourself first
“Every gold piece you save is a slave to work for you. Every copper it earns is its child that also can earn for you.”
Algamish advises the young Arkad to always keep part of his earnings. At first, Arkad thought that he kept everything he earned, but in fact, he earned money, spent it on expenses such as food and clothing, but did not have any savings. Algamish told him that by keeping a part of his earnings off the top and using those funds to invest, those monies will bear “children” and those “children monies” will create even more children, Arkad would eventually be rich.
2. Never invest in something you don't understand
(“A small return and a safe one is far more desirable than risk.”)
Arkad took the Algamish’s advice and began to save, but he used his savings to invest in jewels with Azmur, a brick maker, who promised him big returns. However, it turned out to be a scam and Arkad was given worthless glass trinkets instead of jewels. Algamish then warned Arkad to invest only with experts. If he wanted to buy jewels, he should go to a jewel merchant, not a man who made bricks. When it comes to money, he said, always seek knowledgeable advice.
3. Save early and often , seek out opportunities
“A man’s wealth is not in the purse he carries. A fat purse quickly empties if there is no golden stream to refill it.”
Arkad had become a wealthy man following the principles of Algamish, and he began to teach others how to create wealth. Arkad explained that the most important investment rule is to protect your principal. He warned the men against get-rich and fly-by-night schemes, and told them to be as careful choosing their investments as they were when choosing their wives. To invest, he said, they should seek wise counselors who knew about both gold and life. Arkad told them never to invest their gold in ventures they did not understand or with men who were not skilled in the enterprises they promoted. He told them to buy homes instead of renting them, thus taking advantage of one of life’s best investments. He cautioned them to plan carefully for their later years when low energy, illness, decrepitude and age would make it more difficult to work. Finally, Arkad advised every man present to increase his knowledge, expertise and skills, to become wiser so he could earn more.
4. If you have a strong desire, you will find a way, if not, you will find an excuse
“Good luck waits to come to that man who accepts opportunity.”
A trader who had once been a slave, and still would be one if not for the kindness of his mistress, who took pity on him and helped him gain his freedom, shared his story. His mistress gave him two camels, some bread and a jug of water, and told him to ride across the desert to flee for his freedom. He was greatly afraid because the desert is vast and cruel. Then his mistress asked him if he had the heart of a free man. If so, she said, you will take your chance. If not, you will stay here and remain a slave. Dabasir took her dare and rode into the desert. He journeyed for weeks, his food and water long gone. He thought often of death, but the words of his mistress spurred him forward. He vowed to trek on until he was safe and free.
Thus, one day he finally came out of the desert and made his way to Babylon. From that day on, he always used determination to forge ahead, no matter what difficulties lay in his way. Dabasir looked hard at the young man by his side and told him that he, too, had either the heart of a free man or that of a slave, and that a free man would find a way to repay his debts. Tarkad rose and thanked him for the story, assuring him that as a free man he would repay the money. The next day he did. Where there is a will, there’s a way.
Key Take-Aways
Always save at least one-tenth of your income. Invest your savings. Put your money to work for you.
Be thrifty. Budget carefully. Do not spend on needless things.
Seek the counsel of knowledgeable experts before you invest.
Never put the principal that you invested at unseemly risk.
Increase your knowledge, expertise and skills, so you can earn more money.
Good luck comes to those who know how to seize opportunities and act on them quickly.
Be cautious with your money. Lend it only to those who are sure to repay it.
Take comfort in hard work. It is your best friend.
If you are determined to get ahead, you will.
Good Luck!
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