Book Summary: The Richest Man In Babylon by George S. Clason

Are you looking for a book summary of The Richest Man In Babylon by George S. Clason? You have come to the right place.

I jotted down a few key insights from George S. Clason’s book after reading it.

You do not have to read the entire book if you don’t have time. This book summary provides an overview of everything you can learn from it.

You may also read some popular quotes from The Richest Man In Babylon here.

Let’s get started without further ado.

In this The Richest Man In Babylon book summary, I’m going to cover the following topics:

What is The Richest Man In Babylon About?

A series of parables set in ancient Babylon, The Richest Man in Babylon discusses financial wisdom. You’ll find the distilled wisdom of these parables in the book summary, which can assist you in accumulating wealth.

Who is The Author of The Richest Man In Babylon?

Businessman and author George S. Clason has been a prominent American for decades. The Richest Man In Babylon is a collection of pamphlets he wrote about financial success in ancient Babylonia, and the best of those pamphlets were later published together.

The Richest Man In Babylon Chapters

  • Chapter 1. The Man Who Desired Gold
  • Chapter 2. The Richest Man in Babylon
  • Chapter 3. Seven Cures for a Lean Purse
  • Chapter 4. Meet the Goddess of Good Luck
  • Chapter 5. The Five Laws of Gold
  • Chapter 6. The Gold Lender of Babylon
  • Chapter 7. The Walls of Babylon
  • Chapter 8. The Camel Trader of Babylon
  • Chapter 9. The Clay Tablets from Babylon
  • Chapter 10. The Luckiest Man in Babylon
  • Chapter 11. A Historical Sketch of Babylon

The Richest Man In Babylon Book Summary

Introduction

There once was a very rich man named Arkad in ancient Babylon. He was the wealthiest man in the land.

Two of his childhood friends came up to him and asked how he had become so wealthy while they had worked extremely hard and could barely feed their families.

Arkad smiled and said he had once been told the secret to wealth by a rich man in exchange for his services as a scribe.

The secret was: “You keep a portion of what you earn.”

In other words, you should not spend all your earnings, but invest them, and invest them wisely.

Arkad got started by investing money into a shield maker, who, in turn, paid him interest, growing Arkad’s wealth.

These parables are found in the book The Richest Man In Babylon, and the advice from them is translated into a modern setting in these blinks.

Additionally, you will learn why you should never lend money to a lumberjack, unless they are in the business of felling trees.

Last but not least, you’ll discover that working hard is the key to good fortune.

Lesson 1: Saving and Investing wisely is the key to building wealth

Have you ever wondered why some people acquire wealth more easily than others? Does this have anything to do with the fact that they are thrifty and stuff every penny they save into their mattress, while others spend all their money on trinkets?

As a matter of fact, the secret to becoming wealthy is somewhere in between these two extremes: to become wealthy, you need to know how to use your money wisely, rather than just hoard it.

Saving up money is the first step.

You cannot spend everything you earn if you want to live within your means. Consider cutting back on those little extras in life, such as the city weekend in Paris you had planned or the quilted luxury toilet paper – the regular stuff will work just as well!

It is not enough to save up money this way to become wealthy, however. Investment opportunities are also necessary.

Your mattress will not increase in value since the money in it won’t grow. It will only generate a meagre interest rate if it is deposited in a bank.

Your savings should instead be invested in something that will generate more wealth, such as stocks, government bonds, or funding start-ups. If you do this right, your savings will grow without you having to do anything extra.

Whenever you do invest, however, be sure to do so wisely: trust your money only to people who will be able to use it.

Don’t trust a lumberjack who says he’ll start a business that buys and sells diamonds, for example. It can also make sense to let a hedge fund invest your money; they probably know the market better than you do.

Lesson 2: The key to financial success is admitting that you don’t know everything

How knowledgeable do you consider yourself to be? Do you consider yourself wise?

I have a surprise for you if that’s the case.

You can only gain true wisdom when you realize how little you actually know and admit it. For the ancient philosopher Socrates, knowing that he knew nothing was a sign of wisdom.

You should also apply this philosophy when learning new things: don’t fool yourself into thinking you now know a lot, instead take a moment to look around.

Acquiring new knowledge reveals, if we observe them, further areas of ignorance.

When you learn about the fundamental basics of the theory of relativity, you are inevitably introduced to its more complicated and sophisticated areas, which make you realize you still have a lot to learn. If anything, you are more ignorant now than before!

Unfortunately, most people are unaware of how little they know, especially when it comes to finance. Research has shown that most adults have difficulty using even basic financial formulas like compound interest. They also tend to ignore all the areas in which they are ignorant and proceed with their little knowledge base.

Many people learned the basics of investing in risky subprime mortgages and thought they knew enough about them to acquire wealth, but they failed spectacularly in 2008 because they hadn’t stopped to learn more about their investments. There was no question about the instrument’s sustainability or riskiness.

You can benefit from the ignorance of others who haven’t studied finance if you take that extra step. By doing this, you might spot investment opportunities or make lucrative trades with others before others do.

Lesson 3: Learning through trial and error is the only way to accumulate wealth

It is a dream of many people to become rich overnight.

Except for winning the lottery, this is very unlikely to happen.

Creating wealth involves taking countless tiny steps forward and sometimes suffering setbacks along the way.

What is the reason for this? Is it because acquiring wealth takes so long?

We live in a constantly changing world, especially in the financial sphere.

You cannot just pick one wealth-building strategy, like investing in a certain stock, and expect the money to roll in. In a world where everything is uncertain, sooner or later something major will happen, like the stock market collapsing. To achieve wealth, you have to be able to adapt to new situations, experiment with new strategies, and possibly fail. Just when you think you have found your next winning strategy, something huge happens again.

You will acquire more knowledge through this process of experience and adaptation so that as you accumulate more knowledge you will be able to invest more wisely. It is similar to how scientific progress is made through trial and error: failed experiments are just as valuable as successful ones. You might learn a great deal from a failed investment in, for example, subprime mortgages, and be able to then make successful investments in that same field.

Be careful not to forget that trial and error entails making mistakes by their very nature. If you don’t know something, don’t invest money you can’t afford to lose in a field in which you’re not confident.

Lesson 4: Don’t just work for money to get the things you want today; invest your money for a long-term return

How does making money differ from attaining wealth?

Most people aren’t even aware that there is one!

There is, however, an important difference:

Achieving wealth means you are in circumstances where money works for you instead of you working for it.

Imagine being the manager of a profitable factory and earning a high salary every month.

It’s clear that you’re earning money, but are you becoming wealthy? Maybe not.

In order to do that, you need to save some money and invest some of it. Saving a portion of your income and investing it in real estate, for example, would enable you to attain wealth since your money would work for you instead of the other way around.

Most people make money to achieve short-term financial success: they care more about the things they can buy with their next paychecks than they do about their futures. Yet, this kind of thinking is fraught with danger: what if the next paycheck never comes?

In contrast, achieving wealth requires longer-term goals.

You need to pay off your real estate investment or wait for its value to increase before the investment will bring you wealth. It may take a while for the investment to pay off, but once it does, it is likely to continue doing so for as long as you own it.

Plan for the unexpected, like losing your job, with this type of long-term planning.

Lesson 5: Earning interest in investments is one of the most lucrative things you can do

It’s likely you’ll have to pay interest if you borrow money – for example if you take out a student loan.

When you lend someone money, they can expect to pay interest for it, and this is one way in which those with money can become more wealthy.

Money, like employees and raw materials, is a resource, which is why paying interest is a necessity.

Consider starting a factory. What would you need?

For your products to be made, you need raw materials and labour. You will need to pay for these resources.

In addition to capital, the factory also needs money to be built.

In this sense, capital is a resource like any other, and as such, it must be bought. You need a salary to entice employees, and you need the interest to entice investors.

Interest is a powerful tool to build wealth as an investor because of its compound nature: since you’re earning interest on top of interest, your interest earnings will increase over time.

Let’s say you invest $100,000 in a new business and on the due date the owner pays you back the original amount plus ten percent interest, resulting in $110,000.

The entire amount is then re-invested into another business with identical terms. You will receive $121,000 when you receive the sum plus ten percent interest – your interest earnings are higher.

This process can be repeated indefinitely, earning an ever greater interest.

As you can see, your money not only works tirelessly for you, but it also becomes more and more efficient over time.

Lesson 6: Opportunities create good luck that – unlike chance – may be pushed to happen more frequently

What does luck mean to you?

The majority of people believe that luck is a random, serendipitous event. Are these beliefs always true?

Take the example of a tennis tournament. You have practised hard and prepared thoroughly for months. Ultimately, your opponent can’t touch the ball because you clip the top of the net.

Did this happen by chance?

That wasn’t your luck, you earned it through hard work.

Random luck is really what people are talking about when they talk about chance. An event that happens randomly and uncontrollably, such as winning the lottery or being struck by lightning, is considered a chance.

The difference between luck and chance must be distinguished since luck is not truly random. People earn it by working hard.

What can you do to make yourself “luckier”?

You can increase your wealth by always looking for opportunities to improve.

Imagine, for instance, an entrepreneur who is passionate about consumer technology and who spends time every day reading trend reports, examining the global financial situation and contacting innovators in her network.

Her network informs her that a method is available to produce 3D televisions for half the cost of conventional televisions the same day she reads that 3D televisions are expected to be the latest trend.

In no time at all, she starts producing televisions and becomes very successful.

This “stroke of luck” was the result of her vigilance and willingness to take advantage of the opportunity.

Lesson 7: Don’t procrastinate on spotting opportunities and taking advantage of them

Boys Scouts have a motto: “Be prepared.”

By adhering to it, you will find new opportunities to increase your wealth.

You saw in the previous blink that looking for and taking advantage of opportunities can make you lucky, but on the other hand, letting opportunities slip through your fingers results in bad luck, missed opportunities, and “If only I had…” stories.

What causes people to pass up opportunities?

Most of the time, it is because they procrastinate.

The inventor would have likely found another investor if, as in the previous section, the entrepreneur had decided not to invest in the new 3D television technology, but instead waited for it to prove itself properly and become more established. If you don’t seize opportunities when they come to you on a silver platter, you will miss out.

In order to see more opportunities, you simply need to work hard. You’ll be better equipped to identify and appreciate opportunities when they come your way if you investigate and build a network in the areas you’re interested in.

Remember though that golden opportunities really are rare, no matter how hard you work. As a result, you might have to wait a while, which can be discouraging since your hard work doesn’t seem to be working.

When an opportunity does present itself, your endurance will pay off eventually.

Take, for example, the case of an inventor who invented the radio that does not require any electricity. In order to pitch her product to investors, she works hard to perfect it. Each and every potential investor rejects it for a year, saying, “Who listens to the radio anymore?”

However, she keeps at it until one day an investor realizes that the product is perfect for developing countries with weak power grids. She eventually succeeds in making the product a great success: her patience paid off.

Lesson 8: Don’t take on debt and make rational choices about your expenses

What causes some people to wind up in financial ruin?

In most cases, it’s simply because they make irrational financial decisions.

What can you do to avoid this?

Before making any decisions about expenses or costs, you should assess your personal needs and your financial situation realistically.

Imagine you are desperate for a new flashy car. Buying it would require taking out a big loan on very unfavourable terms, which you do not really need.

Let’s say you get it regardless of the fact that you shouldn’t.

You’re now spending most of your income paying off interest, and eventually, you’ll be able to repay the actual debt. As a result, you take out another loan just to pay off this one.

In no time at all, you are in a debt spiral, and you better hope that the flash car is also a comfortable place to sleep.

In fact, taking on debt generally isn’t a good idea, because you won’t be able to save up money to invest and build wealth. Rather, you’ll spend your income to pay back the debt.

Surprisingly, this can also harm the creditors, as it prevents debtors from increasing their wealth. As a result, they are financially unstable and could default on the debt entirely – every creditor’s worst nightmare.

The European Central Bank, for example, was deeply indebted to Greece during the recent Eurozone crisis. Since the country had to pay off that debt, it was unable to invest in areas like schools, infrastructure, transport, etc., which would have been beneficial to the economy in the long run. In the absence of these investments, the country wouldn’t be able to pay back its debts in full. Both parties would be worse off as a result of default.

Creditors may wish to suspend payments in some cases to allow their debtors to get back on their feet.

Final Summary

Living below your means will allow you to save up money, and invest some of it in a way that generates interest for you. Also, you should realize that hard work and bravery can earn you luck.

You should never go into debt to purchase a luxury item because once you find yourself in such unnecessary debt, it can be very hard to get out. You can save up to buy the item in question if you desperately want it, but cannot afford it.

The Richest Man In Babylon Review

The Richest Man In Babylon is recommended for anyone interested in achieving financial literacy and being responsible with their money. 

Since it’s relatively short (almost 100 pages), it’s a “light read” though the language is a bit old-fashioned, so if you’re not a native English speaker, keep that in mind.

Like other reviewers have said, each chapter is structured like a short story, like the bible. 

It is important to observe that this book does not contain any “secret formula” to achieve financial freedom and wealth. Instead, it merely outlines the necessary steps to become responsible with money, so if you consider yourself to be very “money-savvy” then this book is not for you. 

This book is best suited for young adults and for those who are just starting out on their journey to financial independence; read it with a critical mindset and try to understand the knowledge and principles behind each of the stories, in order to get the most from it.

Further Reading

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