The Richest Man in Babylon
THE RICHEST MAN IN BABYLON
There is a quote in the Richest Man in Babylon that says:
“But too often does youth thinks that age knows only the wisdom of days that have gone, and therefore profits not. But remember this; the sun shines today as the sun shone when your father was born, and will still be shining when your last grandchild shall pass into the darkness".
The Richest Man in Babylon (George S. Clason) written in 1926 has stood the test of time and is still one of the best and oldest self-help finance books. The book is written in parables and the language is old and annoying. It pretends to have been written 4000 years ago. But it wasn’t. The central character is a fictional man called Arkad who went from a lowly scribe to the richest man in Babylon.
In the book, some of his school friends ask him why, with the same start in life and after a lifetime of working hard every day, they were poor whilst he was rich beyond measure. He told them the seven principles of acquiring wealth. Here they are. Pass them on to your kids.
The Seven Principles of acquiring wealth
- Save 10% of everything you earn. You will quickly learn to survive on the 90%.
- Control your spending. Distinguish necessities (needs) from desires. Do not increase your spending just because your income increases. Only spend on your needs. Learn to live modestly. Ignore those that spend. It is not impressive to appear wealthy.
- Put your money to work. Find an income source for the 10% and compound the returns. Money needs to ‘birth’ more money. This will create an income stream that will serve you at all times whether you work or not.
- Protect your principal from loss. Not sure this applies today with bond yields at next to nothing (not for long) but the advice is to only invest where your principal capital is safe.
- Only ask for advice from experts. Do not take advice from unqualified people, even though they may be well-meaning and convincing. Avoid get rich quick schemes and risky investments that promise huge payoffs. Do not lend it to family and friends who do not repay you. Do not put it in investments you haven’t researched. Do not rely solely on your own judgement when you lack experience.
- Own your own home. Make your home a profitable investment by investing in it as an asset.
- Plan for retirement. One day you will no longer be able to work and will need income. You can only create an income by building assets.
- Increase your earning ability. Invest in yourself. Improve your skills and learn and train. The more you learn the more valuable you are.
Some of the wisdom of The Richest Man in Babylon is similar to Rich Dad Poor Dad, a book that changed my life. They both make the point that you need to build assets. I agree. But that does not mean that you don’t have to work, you do, and to execute the formula in the richest man in Babylon, you have to. You have to earn an income. You have to grind to build.
I heard someone say once that you will make more money in a meeting in one hour than you ever will in a lifetime of daily labour. But they’re wrong. In my humble experience, the daily labour is what separates you from the weak and lazy, and these days, the deluded and impatient. Ask any seven day a week business founder.
Constant labour by passionate business owners, a labour that would buckle any mortal employee, is what it takes to build an asset. Constant labour, over a long period. It is the ‘proof of passion’ and that is what buys you a ticket to that one-hour meeting that makes the difference between your life’s financial success and failure. Constant effort is what puts you in the room. You cannot enter without it. Ideas alone are not enough.
Call me a fool, but there is only one way I know to succeed. It was summed up admirably by Ron Barassi, a man amongst men. He said (sprayed) “I don’t admire good looks, I don’t admire talent, I don’t admire the things that you are born with. The only people I admire are the people who get up in the morning and move their arms and legs. I admire Effort!”. To get the full impact he would have to shout it at you at three-quarter time an inch from your face.
I agree. Constant effort. It’s all I know.
Unfortunately, thanks to social media more than anything else, many of our young have become watchers not doers. They are not making an effort as they idolise the effortless. They are wasting valuable time and they assume that one day they too will, nay, deserve to, achieve glory without effort. They won’t. Prolonged impatience and delusion during the crucial years of education is killing futures. I just hope they snap out of it. I’m glad we didn’t have social media in our day. We, luckily, escaped with an education, some discipline, and a sense of place. I wish them well.