The Richest Man In Babylon by George S. Clason – Book Review 2

Best for:

The Richest Man In Babylon is for those interested in building wealth and/or getting out of debt. Generally, this is geared toward those close to the beginner level, without a lot of previous finance knowledge.

Difficulty to digest:

The style of the book is relatively difficult to digest, using a very dated vocabulary and style of speaking like “If you desire to help thy friend, do so in a way that will not bring thy friend’s burdens upon thyself”. The content of the book is easy to digest, because it’s delivered in nice, concise stories. 

Key Insights:

The Richest Man In Babylon is a highly regarded book on personal finance. While the style can be difficult to digest for most, there are several key financial principles delivered throughout the book. The focus on stories makes the points especially salient and easy to digest. There is quite a bit of repetition and side sections out for making the primary points especially clear. They’re nearly impossible to miss. 

George Clason repeats many themes throughout the book, showing their importance in different situations. The overarching message, however, is that responsible handling of money allows us to accumulate wealth. With the right mindset and a bit of effort, anyone can improve their financial standing, though it may take time. Here are a few of the core principles discussed:  

The Richest In Babylon Value Hard Work

The value of hard work is repeatedly brought up throughout The Richest Man In Babylon. Work creates value, so by working harder we increase the amount of value in the world. By enacting effort we can multiply the value of something. This means there’s always more work to be done, more value to be created, and more money to be earned. 

By improving our skills in a particular craft, we increase the amount of value we can add. This inherently increases how much money we’re able to make. Clason also argues developing skills generally makes life better. 

Improvement in skill, however, comes at the price of hard work. Developing discipline helps us execute, but finding a purpose makes the work bearable to our spirit. If you’re struggling with work, try to reframe it in a way you can recognize what important benefits it’s providing. At the very least, hard work is the only way to get ahead financially. When we have a goal and a motivating reason, the path to completing the task can be found. 

Gathering Wealth Is Not Luck

Another major section of the book discusses the process for gathering wealth, as opposed to hoping for luck. Gambling is discussed as a way the odds are stacked against you, and absolutely not worth betting on. Yet, other sources of luck are deemed equally unlikely.

The first takeaway is the key to capitalizing on opportunity is taking action. Procrastinating is certain to leave you in the same position you started. Not everyone wins from hard work all the time, but it’s essential to be prepared to prosper when opportunities show up. 

The second key to building wealth is knowledge. Knowing what to do is more important than having money. If you know what to do, you can always make money. If you don’t, you can always spend away all you’ve been given. Luck is not the primary factor. 

Setting a Budget

Richest Man In Babylon outlines a process for building wealth which starts with setting a budget. Budgets help ensure you spend on what you actually want, instead of money leaking when you’re not paying attention. This means some instant pleasures are avoided, but overall the more important purchases happen and you get what’s necessary. 

Clason recommends first saving at least 10% no matter what. Even if you’re short on money, you’ll find a way to make it work on the remaining amount. Then, if you have debt, set aside another percentage. In the book 20% is the amount allocated by those in the story. Finally, use the rest for your living expenses. The primary argument here isn’t to limit yourself to nothing, but having a plan makes it far more likely money ends up in the correct buckets. 

Invest With Wisdom

Once you have some money, you can invest it in ventures that generate even more money. Clason refers to this as having your gold work for you. The best investments are done either in projects you know well, or with people who have a great track record and knowledge. One story includes an individual who loses all his savings by investing with a brick maker to buy jewels. Competent advisors have experience making money. 

In addition, you must continue to reinvest the profits instead of spending them. This cycle ensures the children and grandchildren of your original investments continue to make money. At some point, the income becomes so large, you use it to buy anything you want. Until then, however, you must continually reinvest.

This process takes time. This is made clear in the book, with many of the stories taking place over many years. Building wealth through interest compounds more and more as time goes on. It’s not about doing the right thing once, but consistently over time. This is what builds long term wealth. 

Helping Others

The Richest Man In Babylon also addresses what to do when you finally have money, and others start wanting a piece of it for their own investments. As mentioned before, knowledge is more useful than money itself. Otherwise, those you help will simply lose that money as well.

Clason shares a parable about an ox and donkey trying to avoid work. In this story, the donkey helps the ox get out of work by pretending to be sick. Accordingly, the farmer makes the donkey take on the ox’s work. The moral here is that trying to help others can result in you taking on their burdens if you’re not careful. 

If, however, money is genuinely the best way to help someone else Clason recommends only investing what you could stand to lose. Even if they promise to pay you back, assuming the money is already gone. This mindset sets you up to be okay, regardless of the actual outcomes. It’s alright to invest in others, but probably unwise to risk everything.

Final Opinion:

The Richest Man In Babylon is worth reading if you’re new to personal finance and don’t mind the writing style. The stories are engaging and highlight important core concepts. While a bit repetitive, you’ll certainly have conceptual clarity in one read through. 

Other considerations:

Throughout The Richest Man In Babylon there is talk about enslaved Babylonians. One section in particular speaks at length of the difference between having the ‘soul of a slave’ or the soul ‘of a free man’. Souls implies they were inherently destined to be slaves, even though that may not be the intent. While it was likely meant to highlight differences in mindset, the language could be seen as extremely insensitive. 

There is also a section about how unfair redistribution of wealth is. This position is strongly rooted in assuming capitalism as the default. While there are plenty of reasonable arguments for and against capitalism, they are not explored here in any meaningful way. It’s best to know this beforehand so you can prepare accordingly. 

Applicable Content:

1. What is your current relationship with work? How much effort are you putting in?
2. Do you have a budget? How are you allocating money on a monthly basis?
3. If you had extra money, how might you invest it? Would that investment be risky or would it protect the principle?

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