Introduction
About the book
The prosperity of a nation depends upon the financial prosperity of its citizens.
The Richest Man in Babylon by George S Clason (author) is termed as a guide-book to one’s financial success. It takes us back to an ancient city called Babylon, which was known as the wealthiest city of our ancient world because its citizens were the richest people of their time.
The book focuses on three reasons why the people of Babylon were rich:
1. They appreciated the value of money
2. They followed sound financial principles when dealing with money
3. They created a future source of income for themselves
According to the author, your success is measured by the amount of money you have, and money will only come to you once you have understood the principles of it.
About the author
George Samuel Clason was an American author. He was a soldier, businessman and writer. He served in the United States Army during the Spanish-American War. He is best known for writing a series of informational pamphlets on how to be smart with your money and achieve financial success. He wrote the pamphlets using the parables that were found in ancient Babylon and the most famous ones were compiled into the book "The Richest Man in Babylon."
Buy the book
The book will teach you all the principles of money that will lead you to become financially successful in life. We highly recommend you to read the entire book. (affiliate link)
Historical Sketch Of Babylon
Babylon was located in a place which didn't have any forests, mines, or trade routes. The author said that Babylon was an outstanding example of man’s ability to achieve outstanding results by using the means which were available to him. Rulers and the progeny of Babylon were full of wisdom, entrepreneurship, and education.
The most astonishing feature of Babylon was its huge walls, which were used as a moat, protecting the city from invaders. In the world of finance, a moat refers to a business’s ability to maintain competitive advantages over its competitors. Many successful businesses have a moat around them. For example, Coca-Cola, as a company, the recipe of their drink is not known to anyone. It has a competitive advantage over other soft drinks companies because of their secret ingredient used in their recipe. It is very hard for a competitor to invade these kinds of companies, which was the case with the city of Babylon.
The Man Who Desired Gold
This chapter talks about the story of Bansir, the chariot maker in Babylon, and his friend Kobbi.
Bansir always complained that he would always work very hard but still had no money left at his disposal.
Bansir’s friend Kobbi, was a musician. He asked him for some money, which he didn't have to shell out.
Bansir and Kobbi, in a serious conversation, realize that they had been working for decades but their financial condition seems to be the same as always. They talk about how much gold they had earned over the years, but they had nothing left with them today as wealth. They had spent all the gold and money in their day-to-day living. Kobbi and Bansir discussed how they had both hoped that they would one day become rich, but it never happened. Kobbi and Bansir decide to seek advice from their childhood friend Arkad, who is known to be the richest man in Babylon.
According to Kobbi, a man’s wealth is not in the purse that he carries. A fat purse gets empty quickly if there are no income streams to refill it.
Arkad had a steady income stream which would constantly keep his purse full no matter the amount of money he spent.
The Richest Man In Babylon
In this chapter, Kobbi and Bansir met with Arkad.
Arkad, the richest man in Babylon, was known for his liberality, generosity, and wealth. Every year his wealth would increase rapidly.
Arkad’s friends were complaining that he is luckier than them. Even though Arkad and his friends received education from the same master from the same school, Arkad was the only person who became an honorable citizen between them. The question was Why? and How?
Arkad said that fate/luck is a dangerous thing that can bring no good to anyone.
According to him, people who gain wealth suddenly by luck , are not able to sustain that wealth for a prolonged period. For example, a person who wins a lottery, will not be able to sustain that wealth for a long time. He doesn't know how to save that and make that money work for him. This is why it is immoral to associate a man’s wealth to fate or luck.
Arkad said that wealth cannot bring happiness in a person’s life, but it can increase a man’s ability to purchase the goods he desires. Fulfilled desires can add an aura of happiness in one’s life.
Initially, Akrad failed to acquire wealth, but as time passed, he realized that to acquire wealth, one should use their time and knowledge intelligently.
During his time as a laborer, Arkad met a rich man whose name was Algamish. Arkad asked him the secret of his wealth, and Algamish suggested some tricks of acquiring wealth:
1.“A part of all I earned was mine to keep” - A minimum of 10% should be saved by us every month no matter what the circumstances are. This is the only way by which a person’s wealth can grow. If we spend more than what we earn,our wealth will not grow.
Wealth is like a tiny seed that needs time to grow. The more water you pour into a seed, the more it will grow.
2.“Advice is one thing that is freely given away, but take only what is worth having” -
Arkad kept saving every month for the next year but made a mistake. He took all of his savings and went to a brickmaker to invest his money in jewelry. The brickmaker took all his money and ran away.
The lesson here is that one shouldn’t seek advice in matters of money from a person who has expertise in another field. There is a probability that their guidance will not work properly for us, not because of their intentions, but because of their lack of knowledge.
Genuine advice comes from people who are experts in their respective fields.
As the chapter goes on, Arkad gives some more pieces of advice:
- Have the desire to prosper.
- Opportunity is a goddess and wastes no time for those who are unprepared.
- When you set a task for yourself, complete it.
- Do not set impractical tasks for yourself which you cannot complete.
- Insure an income stream for your future
- High rates are attractive, but a small rate of return is far more desirable than risk.
- Enjoy your life while you are here and do not over save. This will bring unnecessary burden.
Seven Cures For A Lean Purse
In this chapter, The king of Babylon summons Arkad, and requests him to educate the people of Babylon so that they can be as rich as him.
Arkad suggests 7 ways to become wealthy:
1.‘Start thy purse to fatten’ - Save a minimum of 10% of your savings every month. Compounding takes time. More savings signify a greater degree of compounding. The more time you will save for, the better will be the growth of your savings.
First save, then spend.
For example, Warren Buffet, arguably the greatest investor of all time, had a net worth of $1 million when he was 30, but today he is worth $84.6 billion at the age of 90. This is because the value of his investments have been compounding over the years.
2.‘Control thy expenditures’ -
One can only save a part of their income if they limit their expenses. We should not spend unnecessarily, i.e., do not get confused between your necessities and your desires.
Learn to control your desires. The only way to achieve this is by having proper and disciplined habits of living.
Make a list of your necessary expenses, the things which are not on that list are your desires.
3.‘Make thy gold multiply’ -
Money that sits idle is of no use. It will not grow. To make it grow we need to invest in it. Giving a loan is one of the ways through which you can grow your money. A loan should only be given to someone who has the ability to pay it back over time.
Each time you will give a loan, a credible person will not only repay the capital, but also pay interest.
Over a span of 50 years, Arkad managed to multiply his investments up to 17 times.
4.‘Guard thy treasures from loss’ -
Opportunities of making huge profits over a short period of time come our way frequently. We get to know about these opportunities from our friends and family members. Don't get lured by these. We must 1st understand the scheme properly before jumping into any investment decision making.
‘The 1st sound principle of investment is security for the principal’.
Wealth cannot be generated rapidly, and one must have patience.
5.‘Make thy dwelling a profitable investment’ -
According to the author, a person who owns the house he lives in is far more likely to be at peace when compared to a person who lives in a rented house. Owning a house is a better option because a house’s value can increase over a period of time.
Rent needs to be paid forever, but a loan’s interest payment will end after the tenure of the loan is over.
A person who can rent a house is easily capable of owning the same house .
6.“Insure a future income” -
We should focus on developing a source of income so that in the future, when we retire, we can enjoy our life and our family is financially secure. Make preparations for a suitable income for years to come. Know in advance for the needs of your growing age and protection of your family, and make necessary arrangements of the same.
Diversification is an important factor which one should consider while allocating their savings.
7.‘Increase thy ability to earn’ -
You should have a desire to earn if you want to become rich. A strong desire to earn more is important and tangible. Press this until fulfillment, and you’ll train yourself to accumulate wealth. Desires must be simple and definite. Perfecting yourself will increase your earning potential. You will earn more with persistent effort and increasing your skills. Learn more of your craft and you’ll be rewarded financially.
“The more you learn, the more you earn”
Meet The Goddess Of Good Luck
The people of Babylon wanted to know the secrets of attracting luck, i.e., the secrets of attracting money. The author gives an example and states that when we execute a trade after researching all the facts and figures, the chances that we will lose our money become low.
But when we pull a slot machine, the chances of generating profits become extremely low. This is because a slot machine’s mechanism is made in such a way that most of us will suffer losses on most of the occasions. A slot machine’s business model is made in such a way that the game always favors the gamekeeper and not the player.
The only way to be lucky here is to not spend any money.
If you want luck, then earn money, invest it. When that investment matures, you will have a large sum of money, just like magic.
When you see an opportunity to invest in an offer that looks like a bargain, invest in it. You need to overcome procrastination if you’re going to acquire riches. Opportunity comes to those who wait, but it doesn’t wait for anyone. So, take advantage of the opportunities which are being presented to you.
The habit of needless delaying when an action is required should be avoided. If you achieve all of the above points, then good luck surely will come to you.
The 5 Laws Of Gold
Old Kalabab, gives a group of men 2 options:
1.A large bag of gold, or,
2.A tablet inscribed with wisdom.
All the men chose gold. Old Kalabab said that this is what most people would choose, i.e., they enjoy their present without worrying about their future.
To explain this better, Kalabab tells the story of Arkad’s son, Nomasir. Once upon a time, Arkad gave Nomasir both gold and wisdom, and challenged to prove that he can be trusted in matters of money. Nomasir left and returned after 10 years. He explained that he lost the gold that was given to him by his father, but used wisdom to regain the wealth he had initially lost.
Nomasir then goes on to tell the 5 laws of gold that his father taught him. Everyone of us should apply these laws in our lives:
1.Gold comes gladly to any man who puts at least 10% of his earnings to create an estate for him and his family’s future. One should create a valuable business that will generate income for him in the future.
2.Gold works for a person who uses it wisely and multiplies itself as time passes. He explains the power of compounding. Let's try and understand this point with the help of an example:
The rate of interest is assumed to be 10% p.a.
As we can see, in the first 10 years, the value of your savings increased by only ₹159, but in the next 10 years it increased by ₹413, and, in the last 10 years it has increased by more than ₹1000.
Higher the number of years you will save your money for, higher will be the growth of your savings, so start early.
3.Gold will only hold on to you if you take advice from men who are experts in this field. Be cautious with your money. Don’t take a huge amount of risk for a small rate of return.
4.Gold slips away from a person who invests his money in a business he is not familiar with. Don’t invest in a business that you are not familiar with. Your 1st goal should be to protect your earnings from losses. Your 2nd goal should be to earn a small return on your savings.High returns should never be your priority.
5.People who generally offer schemes with super high returns are frauds and that is why we should stay away from them. It is sad to see that in this day and age, scams like the Saradha scam still happen, where people in the low-income group lose their money. Be smart with your savings. Never look for high returns.
“Our wise acts accompany us through life to please us and to help us. Just as surely, our unwise acts follow us to plague and torment us”.
The Gold Lender Of Babylon
Rodan, the spear maker of Babylon, suddenly had 50 pieces of gold. He never had so much gold in his life before at his disposal. Suddenly, he had the chance to fulfill all his desires, but there was a problem. Rodan was not sure about how to use this gold. This is why Rodan decided to visit Mathon, the gold lender of Babylon, and sought his advice.
Mathon then advised Rodan that he can lend his gold and ask for interest in return. Interest is the monetary charge that a lender receives when he lends his money. Rodan will generate profits as people will repay him the principal as well as the interest.
Mathon provides some rules on how to lend money:
- Do not lend your money to someone who cannot repay it to you.
- Each time you lend, take a token, i.e., a down payment and a collateral. The person who took the loan may not pay you back, in that case, sell the collateral and regain your principal.
- Safest are those loans where the collateral’s value is more than the value of the loan. This concept is known as overcollateralization today.
- People who have a regular source of income are good candidates for giving a loan.
- We should not lend to people who don't have a source of income unless a credible 3rd party guarantees to repay the loan in the event of default.
- We should not lend our money to people who are very emotional and make bad choices in matters of money.
Money shouldn’t be sitting idle in your house, but it shouldn’t be invested in a high-risk venture also.
“Better a little caution than a great regret”
The Walls Of Babylon
The walls of Babylon protected its city from sudden attacks by its enemies for many centuries. Year upon year, several enemies tried to enter the city of Babylon by destroying its walls, but no one was able to do it successfully.
The lesson we can learn from the walls of Babylon is that forms of deposits like insurance, savings accounts, and other dependable investments act as the walls of Babylon in our lives, because they protect us against any unexpected tragedy that may occur in our lives.
“We cannot afford to be without adequate protection.”
The Camel Trader Of Babylon
“The hungrier one becomes, the clearer one’s mind works - also, the more sensitive one becomes to the odors of food.”
Tarkad, the son of Azure, was hungry for the past 2 days. He was looking for someone he could borrow a coin from, to have a meal.
Suddenly, he saw Dabasir, a camel merchant, to whom he owed money.
Tarkad and Dabasir then have a conversation where Dabasir asks for his money and Tarkad says he cannot repay him back because he doesn’t have the money.
Dabasir then sits and begins telling a story while Tarkad sits and watches:
Once upon a time, Dabasir spent all his money without thinking about the future. He continuously kept borrowing money without repaying it back. After a while, the total amount he owed to various creditors was huge and he couldn't pay it back. Things went from bad to worse, and soon he left Babylon. He then associated himself with a group of thieves and started stealing from merchants. After getting attacked by the protectors of the merchants he stole from, Dabasir was stripped of everything and was sold as a slave.
His master was a Syrian chief, who brought Dabasir before his 4 wives. The oldest wife spoke to Dabasir and made him understand that she needed a guard for her camels. Sira asked Dabasir whether he had the soul of a free man or the soul of a slave. Dabasir answered the soul of a free man. Sira then allowed Dabasir to escape with 2 of her camels and prove that he can repay his debts. Dabasir, on the way, almost died, but his determination that he had to repay his debts anyhow helped him find the road back to Babylon.
Dabasir came back, worked hard, and repaid all his debts. Dabasir said that the reason he was able to repay all his debts was because of his determination. Dabasir made a plan and followed it till the end.
The lesson that the author wants us to understand from this chapter is that: 'Where there is determination, there is a way'.
The Clay Tablets From Babylon
While excavating the remains of Babylon, Alfred Shrewsbury, from the Department of Archaeology at the University of Nottingham, wrote a letter on October 21, 1934, to Professor Franklin Caldwell, of the British scientific expedition in Mesopotamia. In this letter, the Professor stated that he, with his team, found 5 tablets in Babylon and that they need to be translated.
The content of the letter surprised him because the letter revealed about Dabasir who faced difficulties in paying off his debt. Furthermore, Dabasir explained certain ways by which one can pay their debts off.
Mr. Shrewsbury ended the letter by stating that he and his wife will apply the methods described by Debasir, to manage their personal finances better.
Let's read what each tablet tells us:
Tablet 1:
Dabasir who just returned from Syria, was determined to repay all his debts and become a man who is worthy of respect in his hometime of Babylon.
He made a plan which had the following goals:
- 10% of what he will earn will be saved by him.
- 70% of what he will earn should be enough to meet the needs of his home, food, and clothing. He took an oath that he will never spend more than 70% of his income on his needs.
-
Tablet 2:
His debts will be repaid from whatever he was left with, i.e., 20% if he follows the first 2 steps properly.
All the names who Dabasir owed to, were inscribed in this tablet.
Tablet 3:
Dabasir owed a total sum of 119 pieces of silver and 141 pieces of copper coins. Some of the lenders accepted his plan, others made fun of him.
Table 4:
After working as a camel trader, Dabasir earned a total of 19 pieces of silver. He kept following the plan, and by the end of the 1st day, he reduced his debt by 4 pieces of silver. He also managed to save 2 pieces of silver.
Tablet 5:
Soon after this, the creditors of Dabasir stopped making fun of him. This plan brought him success, as Dabasir was able to pay off all his debts.
The Luckiest Man In Babylon
Here we meet Sharru Nada, who is travelling with the grandson of his partner, HadanGalu. Sharru tells Hadan that he was once a slave and that he considered himself lucky as he was sold to a baker. He was so happy to be able to learn the trade of a baker. He told Hadan that his grandfather had also been a slave, but who was close to buying his freedom. When Sharru and Arad, Hadan’s grandfather, met next, Arad had been freed and Sharru had been sold to another master. Arad bought Sharru’s freedom, and this story touches Hadan’s heart. Hadan from that moment on decides that work truly is the only key needed to his future successes.
The lesson we should learn from this chapter is that hard work can make us achieve a lot of things in our lives. Never stop working and learning.
Also, never deny any work. Do anything that is being presented to you because doing something is far more beneficial than sitting idle.
Conclusion
The book, “The richest man in Babylon” provides us with some timeless learnings on Wealth. We can conclude the entire book by some important learning. They are as follows.
Save at least 10 percent of everything you earn. Savings is Important. Identify the key difference between your necessities and desires. Work hard to improve your skills and ensure a future income because wealth is the result of a reliable income stream. You cannot arrive at the fullest measure of success until you crush the spirit of procrastination within you. The desire to earn money should always be alive within you.
