The Richest Man in Babylon: Pt. 1 of 9

Photo credit: jb

I’m re-re-reading a classic, George S. Clason’s The Richest Man in Babylon. As a result, I’ve decided to re-do and refresh my review of the lessons in the book (last updated in 2009) – not a book review, mind you, but going through each of the lessons in the book in its entirety. There are nine parts to my review, and I’ll be releasing a new part every week over the coming 8 weeks.

What’s very interesting about this book is that the lessons aren’t anything new. Perhaps it’s fanciful to assume that these very conversations were being had in ancient Babylon, but the basic lessons have been around for ages and they still apply! Yes, there may be new tax legislation all the time, and from time to time a groundbreaking product may take the stage, but all in all the way to gather and maintain wealth is unchanged throughout the centuries…

The first installment of these lessons takes place in the the first two chapters: The Man Who Desired Gold, and The Richest Man in Babylon.

The Man Who Desired Gold

This first chapter sets the stage for the rest of the book; we are introduced to a chariotmaker, Bansir, and his friend Kobbi, a lyre-player. These two fellows are talking together as modern-day friends might, commiserating about their shared plight. Each man has spent his entire life working, working, working, but they have nothing whatsoever to show for it. Kobbi finds Bansir sitting on a wall daydreaming, rather than finishing the chariot that is half-made in his workshop. He asks Bansir for a loan, since it appears that he must have plenty of money due to his lack of industry.

Bansir tells his friend of his dream, where he had all the money he desired, enough to spend on everything his heart wanted. But he awoke, and found himself still in his dire condition, living hand-to-mouth, with no savings, and no investments to provide him with an income.

Sharing the dream, both men wonder aloud how it is that some people eventually move beyond the situation that they find themselves in. They’ve hoped all their lives that hard work alone would be enough to magically transform their lives to ones of leisure. (to borrow a phrase “So how’s that working for you?”)

As they talk they come to the realization that most men are born into similar circumstances – they even observe a line of slaves being driven to work carrying water to the king’s gardens, noting that they could just as easily have traded fortunes with any one of them. Likewise, they discuss the great fortune of their old friend Arkad, who is known as the richest man in Babylon. How is it that Arkad has such a great fortune, yet they have nothing at all?

Together, they finally decide that the way to learn how to provide themselves with a fortune is to talk with their friend, Arkad, the rich merchant.

Lesson: To start yourself on the way to riches, it is important to learn from others who have experience in acquiring riches.

The Richest Man in Babylon

So Bansir and Kobbi, among other friends in similar situations, go to ask their friend Arkad, the richest man in Babylon, to share the secret of his great fortune. They point out that they all started in the same place – they played together as children, and attended the same schools. How was it that Arkad became the richest man in Babylon?

In answer, Arkad shares his story…

As a young man Arkad was, in fact, in the same boat as Bansir, Kobbi and the others – working, working, working, and never getting anywhere financially. Through his job he happened to become acquainted with a money lender, Algamash, who Arkad decides to ask the same question being asked of him now – how did he become a rich man?

Algamash provides Arkad with the first lesson:  part of all you earn is yours to keep. This is that age-old saying that we’ve all heard often – Pay yourself first. It’s simple enough, but if you don’t take it to heart, make it a part of your every action, and put it into practice you won’t know the vast benefit of such a habit. As Arkad learned, paying oneself a tenth of everything he earns teaches a man to live just as well with the remaining 90% of his earnings. He didn’t even notice the difference.

Later on, as Arkad has gotten into the habit of putting away that tenth… we learn the second lesson. Arkad built up a bit of money and decided to take the advice of his friend the brickmaker, to invest in some gemstones. Algamash points out the folly of taking advice from a brickmaker about gemstones, as Arkad painfully learns by losing all of his savings. Why should he take advice about gemstones from a brickmaker? Lesson two from Algamash: take advice only from those that are experienced in the matter of your questions. 

After a time, Algamash returned again to check on Arkad. He had learned from his mistake and invested on the advice of a shieldmaker who dealt in bronze, and by lending him funds Arkad had earned nice dividends. When asked what he had done with the earnings from his savings, Arkad proudly told Algamash about the feast he had given, the clothing he had purchased for his wife, and his plans to buy a donkey for himself to ride upon. At this news Algamash admonished Arkad – “If you take the children of your gold and make the children produce children, you’ll enjoy many a rich banquet without regret.” The third lesson: take advantage of compounding of returns.

Once Arkad had learned and applied the lesson of compounding returns (making the children of your money to produce children of the children), he had mastered the secret of increasing his wealth. Upon learning this, and knowing that his heirs had not learned these lessons, Algamash offers Arkad a job, managing some of his properties. In return, Algamash makes Arkad a partner in the profits, and the heir of a portion of his fortune. And the rest is history.

Some of the young men in Arkad’s audience believe that he was very lucky to happen onto Algamash, and for Algamash to fortunately agree to share his wealth. But others in the group realized that it wasn’t luck – it was a deep understanding of these lessons that produced Arkad’s “luck”. If he hadn’t become Algamash’s partner, some other opportunity would have presented itself, or at the very least the application of the lessons would have continued the gradual advance of Arkad’s fortune.

In our next installment, we’ll review the lessons of the next chapter –  Seven Cures for a Lean Purse.