1. Esseen nimi: The Richest Man in Babylon
2. Kirjoituspäivämäärä: 18.5.20
3. Esseen kirjoittaja: Andrei Potekhin
4. Kirjapistemäärä: 1
5. Kirja: The Richest Man in Babylon
6. Kirjan kirjoittaja(t): George S. Clason
7. Kategoria (YPK) ja opintojakso: Yritystoiminnan käynnistäminen

 

The Richest Man in Babylon

According to Wikipedia George S. Clason (1874-1957) was an American author which is most often associated with his book The Richest Man in Babylon which was first published in 1926. Clason started two companies, but he is best known but writing a series of informational pamphlets, that were using parables, about being thrifty and how to achieve financial success. Banks and insurance companies began to distribute the parables, and the most famous ones were compiled into the book The Richest Man in Babylon. Clason is also credited with coining the phrase “Pay yourself first”. 

I think the main idea of the book sounds like that: “Always spend less money than you earn to have savings and wisely invest savings to multiply them”.

That idea was described in the book from different perspectives; how poor people should start to save money if they have debts and how rich people make their savings grow by investing money in different business projects. Despite the circumstances people start in may greatly differ, there are several rules that everyone should follow to achieve financial success or at least have calm financial life with saving and without debts. As soon as some rules are repeated in different forms and some things, that I think should be marked as rules, were not marked so, I will use the word “point” instead.  

Point number one. Start making money. It is simple and addressed to the people that have no income. If you have a job, just keep earning money doing it. I think it is worth saying that at that point in financial growth it is better to concentrate on doing a job and avoid business. Of course, as soon as the book is written about Babylon, pretty old town, “street trader” is not probably considered as an entrepreneur, because there were not big fancy malls in Babylon and most of the people that did handcrafted things like carpets, dishes and tools had to sell them themselves on the streets. In the modern world, we don’t have to start our own business if we need a job. So, get a job, don’t run a business yet.

Point number two. Save 10% from each earning. That is the key idea and the key number of the whole book. No matter how much money you earn, save 10%. There was a great moment in a story when a wise man said to a poor people, that came to listen to him, that they have different families and incomes, but their wallets are equally empty. Again, at that point we are still not talking about investing that money, because to invest money you simply have to have them. So, every time you got your salary paid, remember that according to the plan job is the first step, save 10% of it. Next question, what does “save” mean? Does it mean hide money in a Nike shoebox under a bed? Maybe just make another bank account for savings? Maybe we should buy a small number of stocks every time? I didn’t find an answer to that question in the book. We should remember that the book was written a long time ago. I think that one of the best solutions today would be just separating money in bank applications. When I say bank I don’t mean just traditional banks with their branches, I also mean neobanks like Revolut and N26. According to my experience neobanks’ applications are very convenient when it comes to separating money. Revolut even has an opportunity to invest money straight from the application. That means that 10% of salary can be invested in stocks in a few minutes after receiving money in the same app.

Point number three. Luck favors the doers. I think success technically means a positive result of a try. The logic here is simple if you want to succeed you have to try. Try what? We face great opportunities every day. Often we simply do not notice them, but sometimes opportunities come to us with banners saying “Take us!” and we still ignore them. Mostly because of our fears. Facing good opportunities we should act very quickly because someone else can use them before us. Without romanticism “luck favors the doers” means that the more you try the more chances to succeed you have. Rock-solid logic.

Point number four. Help people, but do not do their hard job for them. There is a parable in the book about an ass and an ox. The ox old to the ass that his job is very hard, nobody cares about him. The ass told him that next time the farmer will come, the ox should pretend that he is sick. The bull did so and the farmer used the ass. In that story the ass acted like a real friend, but he has to do all the hard jobs for the bull. In practice we can see the same situation when someone wants to borrow money from friends. Sometimes it is very uncomfortable to say “No” to a friend. But according to the book, we should avoid borrowing money to a person that can not use them wisely. For example, if your friend wants to open a coffee place without any experience and research, do not borrow him money and remember to explain why. But if your friend comes to you and says that he did a lot of research, met dozens of coffee place CEOs and after that, he is sure that it is a great idea, you can help him and borrow him money because you can be sure that he will return them. Another way to have a guarantee is to take a pawn. It may work well when you deal with people that are not so close to you, but I do not know how it can work with friends. I think it is better not to borrow at all and explain why than take a pawn. 

Point number five. Pay yourself first. This point seems to be pretty obvious, but it is not. I have a debt to my mom and every time I earn some money I want to give all the money to her. According to the book, this is not right. It is much better to save 10% first, buy groceries, and after that return some money to my mom. This process will probably take a longer time, but I will be happier because despite that I have a debt I still have my own money.

In conclusion I want to say that this book is very simple for reading and I can recommend it to the people that are not going to be entrepreneurs but want to know the basics of everyday finances. I also think that this book might be useful for beginner entrepreneurs, but there is no much new information for experienced ones. As soon as I am a beginner, here are the things I will try to implement into my life.

  1. I will try to start making money doing a regular job. It is extremely boring and unpleasant for me, but I am in a situation when I need money.
  2. I will try to save 10% from each earning.
  3. I will try to use the opportunities quickly
  4. I will try to help people not doing their job for them. I also will try to borrow money to my friends only if I will be sure they will return them.
  5. I will try to pay myself first despite the debt to my mom.