Book Summary
The Richest Man in Babylon is a 1926 book by George S. Clason that dispenses financial advice through a collection of parables set 4,000 years ago in ancient Babylon. The book remains in print almost a century after the parables were originally published, and is regarded as a classic of personal financial advice.
Chapter 1: The Man Who Desired Gold
Bansir, the chariot builder of Babylon, lived in the richest city of the world. He dreamed of living a prosperous life with all the means. He worked hard to build the finest chariot anyone could make, hoping someday God would recognize his worthy deeds and bestow upon him great prosperity. But, his purse was always empty and was barely able to make ends meet for his family. He was sad, discouraged and hopeless.
His curious friend, Kobbi, suggested that rather than lamenting their lives, “might we not find out how others acquire gold and do as they do.” They decided to go and see Arkad, their childhood friend and the richest man in Babylon, and ask him about how he has an income that constantly keeps his purse full. It costs nothing to ask for wise advice from a friend.
Chapter 2: The Richest Man in Babylon
In old Babylon there once lived a very rich man named Arkad. Far and wide he was famed for his great wealth.
Arkad’s friend of younger days came to him and said:
“You are more fortunate than we. You have become the richest man in all Babylon while we struggle for existence. We studied under the same master. We played in the same games. And in neither the studies nor the games did you outshine us. Nor have you worked harder or more faithfully, insofar as we can judge. Why, then, should a fickle fate single you out to enjoy all the good things of life and ignore us who are equally deserving?”
Arkad remonstrated with them, saying,
“If you have not acquired more than a bare existence in the years since we were youths, it is because you either have failed to learn the laws that govern the building of wealth, or else you do not observe them.”
Chapter 3: Seven Cures for a Lean Purse
When the king, Sargon, returned to Babylon after defeating his enemies, he was confronted with a serious situation. Many years of prosperity in Babylon had vanished and people were unable to support themselves.
King orders to bring Arkad, the richest man in Babylon, before him. Following day, Arkad appears.
The King asks Arkad, “How did you become so wealthy?”
“By taking advantage of opportunities available to all citizens of our good city,” Arkad responds.
King wanted Babylon to be the wealthiest city in the world and asked Arkad if it is possible to teach people how to accumulate wealth. “It is practical, your majesty. That which one many know can be taught to others.” Arkad responds.
Arkad agrees to teach a class of one hundred men the seven cures for a lean purse.
“First must each of you start wisely to build a fortune of his own. Then you will be competent, and only then, to teach these truths to others.” Arkad addresses the class.
THE FIRST CURE
Start thy purse to flattening
If you desire to build a fortune for yourself, the first step is to start utilizing the source of income which you already have. You can spend ninety percent of your income, but you must keep 10th percent for yourself. This is the beginning to build fortune.
“Surely it is a law of the Gods that unto him who keep and spend not a certain part of all his earnings, shall gold come more easily. Likewise, him whose purse is empty does gold avoid.”
“This, my students, was the first cure I did discover for my lean purse: ‘For each ten coins I put in, to spend but nine.’
A PART OF ALL YOU EARN IS YOURS TO KEEP
THE SECOND CURE
Control your expenditure
Remember, your necessary expenses will always grow as your income grows. You must be mindful of that; don’t confuse necessary expenses with your desires. We all have more desires that our earnings can gratify.
That doesn’t mean you should not spend for your desires. There must be a limit to what desire you can and should gratify. Select the desire you wish to spend, identify all the necessary expenses and cross everything else. Make sure you don’t spend more than 90% of your income.
“This, then, is the second cure for a lean purse. “Budget your expenses that you may have coins to pay for your necessities, to pay for your enjoyments and to gratify your worthwhile desires without spending more than nine-tenths of your earnings.”
THE THIRD CURE
Make your gold multiply
The saving you retain from your earning is only the start. The earnings it will make shall build your fortunes. You need to put your savings to work.
Your wealth is not in the savings you have; it is the income you are building through your savings. Whether you are traveling or working, your income should continually flow into your purse.
It is important that you understand the power of compounding which is to let our savings earn income, and then let your savings and income more income and henceforth. It is the process of multiplying your savings and incomes for a longer period of time that will build a fortune for you.
“This, then, is the third cure for a lean purse: to put each coin to laboring that it may reproduce its kind even as the flocks of the field and help bring to you income, a stream of wealth that shall flow constantly into your purse.”
Related Post: The Power of Compounding
THE FOURTH CURE
Guard your treasures from loss
It is important that savings generate income for you, but it is more important to make sure you don’t lose your savings. When you start investing, start small and learn from it. Don’t be tempted to follow your friends and relatives who will constantly tell you about investment opportunities.
The first principal of investment is security of the principal. It is not wise to be intrigued by larger earnings where your principal may be lost. Large earnings for the cost of principal loss must be avoided. Don't be misled by your desires to become wealthy rapidly.
Before you loan it to anyone gauge their ability to repay and this reputation for doing so. Don’t lend your hard-earned treasure when in doubt.
Don’t be too confident of your own wisdom in entrusting your treasures to the possible pitfalls of investments. Consult the wisdom of those experienced in handling money for profit.
“This, then, is the fourth cure for a lean purse, and of great importance if it prevents your purse from being emptied once it has become well filled. Guard your treasure from loss by investing only where thy principal is safe, where it may be reclaimed if desirable, and where you will not fail to collect a fair rental. Consult with wise men, Secure the advice of those experienced in the profitable handling of gold. Let their wisdom protect your treasure from unsafe investments.”
THE FIFTH CURE
Make of your dwelling a profitable investment
If you are able to use any portion of your 90% of your earnings that you have set aside to live and enjoy life without detriment to your well-being, consider buying a home. Rather than paying an exorbitant rent, it is way better to own a house where you and your family can enjoy life. Living in your own house brings a sense of permanence, and taking care of your own house will bring peace to your mind.
Make payments to the moneylender with the same consistency you would pay to the lender. Once you repay the entire amount to moneylender, it will greatly reduce your cost of living, make available more of your earnings for pleasures and the gratification of your desire and you will have a valuable property.
This, then, is the fifth cure for a lean purse: Own your own home.
THE SIXTH CURE
Make of thy dwelling a profitable investment
“It behooves a man to make preparation for a suitable income in the days to come, when he is no longer young, and to make preparations for his family should he be no longer with them to comfort and support them.”
There are diverse ways by which you may provide safety for your future. One way is to keep saving and saving. Another way is to look for valuable investment opportunities where your savings can grow long-term.
“A man may buy houses or lands for this purpose. If wisely chosen as to their usefulness and value in the future, they are permanent in their value and their earnings or their sale will provide well for his purpose.”
You can loan a small sum to the money lender and increase it at regular periods. The common method of lending money is buying bonds which pays you interest in the form of coupon payments.
“No man can afford not to insure a treasure for his old age and the protection of his family, no matter how prosperous his business and his investments may be.”
It is also important, at the same time, to think and devise a plan how the income will be passed on to family members.
“This, then, is the sixth cure for a lean purse. Provide in advance for the needs of your growing age and the protection of thy family.”
THE SEVENTH CURE
Increase thy ability to earn
A man’s desire to earn more is one of the vital requirements to increase earnings. The desire must be simple, tangible, strong and definite. One should start with a small desire, that will make him capable of a larger one.
“Desire must be simple and definite. They defeat their own purpose should they be too many, too confusing or beyond a man’s training to accomplish.”
The second step is to keep learning and improving your skills. This will require more interest, more concentration upon task and more persistence in effort. Never be complacent with what you learn and improve; one must become a lifelong learner.
There are many other things that make a man’s life rich. Such things as the following, a man must do if he respects himself:
He must pay his debts with all the promptness within his power, not purchasing that for which he is unable to pay.
He must take care of his family that they may think and speak well of him.
He must make a will of record that, in case the Gods call him, proper and honorable division of his property be accomplished.
He must have compassion upon those who are injured and smitten by misfortune and aid them within reasonable limits. He must do deeds of thoughtfulness to those dear to him.
“Thus the seventh and last remedy for a lean purse is to cultivate your own powers, to study and become wiser, to become more skillful, to so act as respect thyself.”
Chapter 4: Meet the Goddess of Luck
In the ancient Babylon, there were no schools or colleges, but had a center of learning and a very practical one. Every evening, a large group of people will gather and discuss subjects of popular interest with Arkad. One evening, they discussed how to attract good luck. Following is a gist of their discussion.
Thinking of good luck, one can turn his thoughts to: gaming tables where people winning are considered lucky or blessed with favour of goddess, horse races, found lost wallets or gold etc. But none of us can think of a person who has been consistently lucky and built his fortune through good luck. Arkad tells the audience:
“What reason have we to feel the good goddess would take that much interest in any man’s bet upon a horse race? To me she is a goddess of love and dignity whose pleasure it is to aid those who are in need and to reward those who are deserving. I look to find her, not at the gaming tables or the races where men lose more gold than they win but in other places where the doings of men are more worthwhile and more worthy of reward.”
No man can win consistently at gaming tables or horse racing because the game is arranged in such a way that will always favour a game keeper. Rather than focusing on good luck, it is way better to focus on actions that are rewarded. In order to get wealth, one must deserve first to get wealth.
"To the building of an estate there must always be the beginning. That start may be a few pieces of gold or silver which a man diverts from his earnings to his first investment.”
"To take his first start to building an estate is as good luck as can come to any man. With all men, that first step, which changes them from men who earn from their own labor to men who draw dividends from the earnings of their gold, is important. Some, fortunately, take it when young and thereby outstrip in financial success those who do take it later or those unfortunate men, like the father of this merchant, who never take it.”
From time to time, you will come across opportunities to take advantage of and when an opportunity comes when you least expect, you are likely to procrastinate and let it escape. It is in human nature to change his mind when right than wrong. Wrong, we are stubborn indeed. Right, we are prone to vacillate and let opportunity escape. No man can arrive at a full measure of success until he has completely crushed the spirit of procrastination within him.
Good luck can be enticed by accepting opportunity. Those eager to grasp opportunities for their betterment, do attract the interest of the good goddess. She is ever anxious to aid those who please her. Men of action please her best.
MEN OF ACTION IS FAVOURED BY THE GODDESS OF GOOD LUCK
Chapter 5: The Five Laws of Gold
“Gold is reserved for those who know its laws and abide by them.”
One can be born rich or inherit wealth, if they are capable of handling it wisely, it will soon vanish. Whether you’re rich or not, the first step is to use whatever wealth or earning you have as the basis for future success. Without wisdom, gold is quickly lost by those who have it, but with wisdom, gold can be secured by those who don’t have it.
The five laws of gold is the eternal wisdom to build fortune and have been time tested for many years. Anyone wishing to build wealth will greatly benefit from these five laws of gold:
THE FIRST LAW OF GOLD
Gold comes gladly and in increasing quantity to any man who will put by not less than one-tenth of his earnings to create an estate for his future and that of his family.
“Any man who will put by one-tenth of his earnings consistently and invest it wisely will surely create a valuable estate that will provide an income for him in the future and further guarantee safety for his family in case the Gods call him to the world of darkness.”
THE SECOND LAW OF GOLD
Gold labors diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field.
“Gold, indeed, is a willing worker. It is ever eager to multiply when opportunity presents itself. To every man who has a store of gold set by, opportunity comes for its most profitable use. As the years pass, it multiplies itself in surprising fashion.”
THE THIRD LAW OF GOLD
Gold clings to the protection of the cautious owner who invests it under the advice of men wise in its handling.
“Gold, indeed, clings to the cautious owner, even as it flees the careless owner. The man who seeks the advice of man wise in handling gold soon learns not to jeopardize his treasure, but to preserve in safety and to enjoy in contentment its increase.”
THE FOURTH LAW OF GOLD
Gold slips away from the man who invests it in businesses or purposes with which he is not familiar or which are not approved by those skilled in its keep.
Key is knowledgeable investing; know what you own. Alternatively, seek advice from those who are skilled.
“To the man who has gold, yet is not skilled in its handling, many uses for it appears most profitable. Too often these are fraught with danger of loss, and if properly analyzed by wise men, show small possibility of profit. Therefore, the inexperienced owner of gold who trusts to his own judgment and invests it in business or purposes with which he is not familiar, too often finds his judgment imperfect, and pays with his treasure for his inexperience. Wise indeed is he who invests his treasures under the advice of men skilled In the ways of gold.”
THE FIFTH LAW OF GOLD
Gold flees the man who would force it to impossible earnings or who follows the alluring advice of tricksters and schemers or who trusts it to his own inexperience and romantic desires in investment.
“Fanciful propositions that thrill like adventure tales always come to the new owner of gold. These appear to endow his treasure with magic powers that will enable it to make impossible earnings. Yet heed you the wise men for verily they know the risks that lurk behind every plan to make great wealth suddenly.”
“There are two rules to successful investing: number one—don't lose money, and number two—don't forget rule number one.”
--Warren Buffett
Chapter 6: The Gold Lender of Babylon
A spear-maker named Rodan was perplexed and beseeched about the fifty pieces of gold he had. It was the king’s gift. The king was much pleased with the design he submitted to him for a new point on the spears of the royal guard, he presented Rodan with fifty pieces of gold.
Rodan’s sister wanted him to loan his gold to her husband so that he may become a prosperous merchant and repay him from his profits. Rodan wasn’t sure if it was a wise thing to do. He goes to a gold lender named Mathon to seek his advice on how he should think about lending gold. Mathon shares the valuable advice:
The safest loans are to those whose possessions are of more than than the one they desire. Possessions could be lands, or jewels, or camels, or other things which could be sold to repay the loan.
In another class are those who have the capacity to earn. They are such as you, who labor or serve and are paid. They have income and if they are honest and suffer no misfortune, they can repay the gold. Such loans are based on human effort.
Others are those who have neither property nor assure earning capacity. Life is hard and there will always be some who cannot adjust themselves to it.
After hearing the valuable advice, Rodan asks: should I lend my fifty pieces of gold to my sister’s husband?
Mathon replies:
Ambition to become a merchant is not enough, it should be practical as well. You need to assess what knowledge he has of the ways of trade. Does he know where he can buy at lowest cost? Does he know where he can sell at a fair price?
“It is easy to lend. If it is lent unwisely, then it is difficult to get back. The wise lender wishes not the risk of the undertaking but the guarantee of safe repayment. ...no man can put an obligation upon you to part with it unless it is your wish.”
The first desire for any investor or lender should be safety. It should be truly safe from possible loss. Don’t be swayed by foolish sentiments of obligation to trust your treasure to any person. If you want to help your family or your friends, find other ways than risking the loss of your treasure. Gold slips away from those unskilled in guarding it.
The second desire is to let your gold earn and grow larger.
“...be not swayed by the fantastic plans of impractical men who think they see ways to force your gold to make earnings unusually large. Such plans are the creations of dreamers unskilled in the safe and dependable laws of trade. Be conservative in what you expect it to earn that you may keep and enjoy your treasure. To hire it out with a promise of usurious returns is to invite loss.”
“Seek to associate yourself with men and enterprises whose success is established that your treasure may earn liberally under their skillful use and be guarded safely by their wisdom and experience.”
BETTER A LITTLE CAUTION THAN A GREAT REGRET
Chapter 7: The Walls of Babylon
An attack was launched on Babylon by enemies when the main armies of Babylon were with their King, far away in the east on the great expedition against the Elamites (ancient civilization centered in the far west and southwest of modern-day Iran). No attack upon the city having been anticipated during their absence, the defending forces were small. Unexpectedly, from the north, bore down the mighty armies of the Assyrians. And now the walls of Babylon must hold or Babylon was doomed.
People in Babylon were scared. But they were assured by defenders of Babylon, even though small in quantity, that the walls of Babylon are strong enough to protect them. For three weeks and five days the attack wagged with scarcely ceasing violence. Upon the fifth night of the fourth week, the mighty shout went up from the defenders. The walls of Babylon had once again repulsed a mighty and vicious enemy determined to loot it’s rich treasure and to ravish and enslave her citizens.
The lesson learned from the story is powerful. In your life, not everything will go as you plan. You need to protect yourself and your family against the unknown. On this day, behind the impregnable walls of insurance, savings, accounts and dependable investments we can guard ourselves against the unexpected tragedies that may enter any door and seat themselves before any fireside.
WE CANNOT AFFORD TO BE WITHOUT ADEQUATE PROTECTION
Chapter 8: The Camel Trader of Babylon
Debasir shares his story of his early and how he came to be a camel trader. When he was a young man, he learned the trade of his father, the making of saddles (Saddle is a seat fastened on the back of a horse or other animal for riding, typically made of leather). Being young and not greatly skilled, he could earn just enough to support his wife in a modest way. He craved things which he could not afford. Soon he found that the shopkeepers would trust him to buy today but pay later.
He didn’t know that he who spends more than he earns is sowing the winds of needless self-indulgence from which he is sure to reap the whirlwinds of trouble and humiliation. He indulged his whims and bought luxuries for his wife and home, beyond his means. But in time he discovered he could not use his earnings both to live upon and to pay his debts. Creditors began to pursue him to pay for his extravagant purchases and his life became miserable. He borrowed from his friends, but couldn’t repay them either. Things went from bad to worse. His wife returned to her father and he decided to leave Babylon and seek another city.
For two years he had a restless and unsuccessful life working for caravan traders. He then joined the robbers who scoured the desert for unarmed caravans. He met with success on his first trip, capturing a rich haul of gold and silks and valuable merchandise. The second time, just after they had made either capture, they were attacked by the spears-men of a native chief to whom the caravans paid for protection. Debasir was taken to Damascus where he was stripped of his clothing and sold as a slave for two pieces of silver by Syrian desert chief.
He was asked to lead camels for Sira, chief’s wife, whenever she wanted to visit her sick mother. One day, during the long journey to Sira’s mother, he told her that he was not a slave by birth, but the son of a free man, an honorable saddle-maker of Bablong. Her comments were disconcerting to him and he pondered much afterward on what she said:
“How can you call yourself a free man when your weakness has brought you to this? If a man has in himself the soul of a slave will he not become one no matter what his birth, even as water seeks its level? If a man has within him the soul of a free man, will he not become respected and honored in his own city in spite of his misfortune?”
“Does not the great king fight his enemies in every way he can and with every force he has? Your debts are your enemies. They ran you out of Babylon. You left them alone and they grew too strong for you. Hadn’t you fought them as a man, you could've conquered them and been one honoured among the townspeople. But you had not the soul to fight them.”
A few days after, Sira’s mother was sick again and she asked Debasir to saddle the two best camels in her husband’s herd. When they reached her mother’s house, Sira tells him to prove if he has the soul of a free man or slave, “take the camels and escape and I will tell the chief that you stole the camels and ran away while I visited my sick mother.” He thanked her warmly and was away into the night. After some hardships along the way, he managed to reach Babylon with a new vision and determination to set out to find a way.
First he visited every man to whom he was indebted and begged his indulgence until he could earn that with which to repay. Most of them met him gladly. Several reviled him but others offered to help him; one indeed did give him the very help he needed. Learning that Debasir knows a lot about camels, he was sent to purchase many herds of sound camels. Gradually he was able to repay every copper and every piece of silver. At last, he could hold up his head and feel that he was an honorable man among men.
“... “the soul of a free man looks at life as a series of problems to be solved and solves them, while the soul of a slave whines, What can I do who am but a slave?”
WHERE THE DETERMINATION IS, THE WAY CAN BE FOUND
Chapter 9: The Luckiest Man in Babylon
Sharru Nada, considered a luckiest man, shares with his young companion, Hadan Gula, the grandson of his business partner, the story of how he and Hadan’s grandfather had become such successful merchants.
In a nutshell, the grandfather and Sharru Nada were both slaves and had each found themselves in dismal financial straits. They both learned that the only way to find freedom is to work hard, improve skills and earn more. They both learned from each other and listened to successful people around them. Each applied the lessons discussed through the book. They helped one another out, and eventually became business partners, successful in every venture they undertook.
With time, effort, patience and discipline, anyone can improve their situation.
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