The Richest Man in Babylon is a personal finance book written by George Samuel Clason in 1926. It is a small book with less than 150 pages, but has sold over 2 million copies and is considered to be a classic. Clason uses interesting stories set in ancient Babylon to teach us about fundamental ideas in personal finance.

When I heard about the book, the first thought that came to my mind is how can a century old book on personal finance be relevant in 2022? Well, it turns out that almost every idea in it is very much relevant even today. In fact, considering that this is a general principles book rather than of the concrete action items or of specific investment options, it will be relevant in the coming years as well.

There is a lot of interest in the concepts of personal finance, financial independence and early retirement in recent years. It is fascinating that this 100 year old book explores similar themes. The first chapter(The man who desired gold) itself is about financial independence and early retirement told from the perspective of Bansir, the chariot builder.

The book starts by telling us that the aim of the book is financial success for its readers. In short, the book is about earning money, keeping money and making the money earn more money. Clason then sets the background of the ancient Babylon of 6000 BC where folks are generally rich (historical accuracy obviously takes a backseat). He tells us that the prosperous city was protected by walls which were as high as 150 feet. He reminds us that,

Money is governed today by the same laws which controlled it when prosperous men thronged the streets of Babylon, six thousand years ago.

One important thing to keep in mind when you read the book is that originally the chapters were pamphlets created for banks and insurance companies. Which explains why there are chapters on getting some protection for your money and it is complimented by the chapter on the need to avoid greed. Since it is based on pamphlets, there is some overlap on the ideas as well. For example, there is a chapter on 7 cures for a lean purse and there is a chapter on 5 laws of gold with some shared themes.

It is interesting to note that even 100 years ago, the importance for early retirement and the ability to generate passive income was recognized by Clason. To quote from the book,

I tell you, my students, a man’s wealth is not in the coins he carries in his purse; it is the income he buildeth, the golden stream that continually floweth into his purse and keepeth it always bulging. That is what every man desireth. That is what thou, each one of thee desireth; an income that continueth to come whether thou work or travel.

Clason also coined the term, pay yourself first. In fact, one of the basic principles which is explained multiple times across chapters is to save 10% of income before even planning any expenses. In the modern world, there will be very few who cannot afford saving 10%. Many of us would be able to save 30% or more if we just control some of our biggest desires.

The core of the book is the chapter titled “Seven Cures for a Lean Purse”. The basic strategy he advocates is to pay yourself first, control unnecessary expenditures, invest wisely to multiply the money, protect it from loss, have an own house, prepare a future income and finally increase the ability to make money. One piece of advice that stands out is the home ownership which is usually expensive, but many folks on the FIRE movement (Money Moustache for example) recognizes buying a good house in a nice neighbourhood as a wise decision. Clason is persuasive on this idea,

No man’s family can fully enjoy life unless they do have a plot of ground wherein children can play in the clean earth and where the wife may raise not only blossoms but good rich herbs to feed her family.

When you closely analyse the stories and the ideas in the book, you will realise that most of the popular books on the subject do contain same material with a more modern context. The ideas remain the same. The main difference here is that Clason focuses on general principles rather than specific techniques or investment types. For example, the book has sound advice when it comes to procrastination and the need to grab opportunities that come our way. In the chapter, Meet the goddess of good luck, we learn the story of the merchant who waits on a great deal for a flock of sheep and later regrets when someone else grabs the offer. Clason reminds us,

Good luck can be enticed by accepting opportunity.

The final chapters talk about financial discipline needed for getting out of debt. The long term progress of clearing the debt is presented as a set of fictitious tablets written by Dabasir, a camel trader from ancient Babylon.

Some may find it irritating that the characters in the story use old English in the conversations. I liked it since it reminded me that these conversations and ideas are relevant even in ancient times.

One of my favourite sentences is the closing paragraph of the book,

So saying Hadan Gula pulled the jewelled baubles from his ears and the rings from his fingers. Then reining his horse, He dropped back and rode with deep respect behind the Leader of the caravan.

Just like Hadan Gula, some readers may change their perspective on personal finance after reading the book!

Interesting Quotes from The Richest Man in Babylon

• Babylon became the wealthiest city of the ancient world because its citizens were the richest people of their time. They appreciated the value of money. They practiced sound financial principles in acquiring money, keeping money and making their money earn more money.
• If you have not acquired more than a bare existence in the years since we were youths, it is because you either have failed to learn the laws that govern the building of wealth, or else you do not observe them.
• I found the road to wealth when I decided that a part of all I earned was mine to keep. And so will you.
• Every gold piece you save is a slave to work for you. Every copper it earns is its child that also can earn for you. If you would become wealthy, then what you save must earn, and its children must earn, that all may help to give to you the abundance you crave.
• Advice is one thing that is freely given away, but watch that you take only what is worth having. He who takes advice about his savings from one who is inexperienced in such matters, shall pay with his savings for proving the falsity of their opinions.
• Opportunity is a haughty goddess who wastes no time with those who are unprepared.
• That what each of us calls our ‘necessary expenses’ will always grow to equal our incomes unless we protest to the contrary.
• Provide in advance for the needs of thy growing age and the protection of thy family.
• Preceding accomplishment must be desire. Thy desires must be strong and definite. General desires are but weak longings.
• Thus the seventh and last remedy for a lean purse is to cultivate thy own powers, to study and become wiser, to become more skillful, to so act as to respect thyself. Thereby shalt thou acquire confidence in thy self to achieve thy carefully considered desires.
• But I was stubborn and refused to make payment that night. Next morning, before I awoke, the city gates opened and four buyers rushed out in search of flocks. They were most eager and willing to pay high prices because the city was threatened with siege, and food was not plentiful. Nearly three times the price at which he had offered the flock to me did the old farmer receive for it. Thus was rare good luck allowed to escape.
• So must every man master his own spirit of procrastination before he can expect to share in the rich treasures of Babylon.
• Good luck can be enticed by accepting opportunity.
• I thought not that you would. But it is there and simple too. Just this: If you desire to help thy friend, do so in a way that will not bring thy friend’s burdens upon thyself.
• Better a little caution than a great regret.
• The hungrier one becomes, the clearer one’s mind works — also the more sensitive one becomes to the odors of food.
• Where the determination is, the way can be found.
• Thy grandfather said something to me one day that I shall always remember. ‘I like thy cakes, boy, but better still I like the fine enterprise with which thou offerest them. Such spirit can carry thee far on the road to success.’

The Richest Man in Babylon – Summary

Following is a chapter wise summary of the book. I use it as a quick reference to the book and also to periodically remind me of the content. Obviously I would recommend you to read the book first before going through this section. However if you are impatient and are looking for a quick summary of the book, read on,

Chapter 1 – The Man Who Desired Gold

Bansir, the chariot builder, looks at his meagre assets after years of work and shares his concern with Kobbi, the musician. Kobbi suggests meeting Arkad (the richest man in Babylon) and points out that Arkad’s son Nomasir also seems to have the same skill of making money.

Chapter 2 – The Richest Man in Babylon

Arkad tells his friends that the secret of getting rich is paying yourself first. He learnt it from Algamish, the money lender. His advice was – “You first learned to live upon less than you could earn. Next you learned to seek advice from those who were competent through their own experiences to give it. And, lastly, you have learned to make gold work for you.”

Chapter 3 – Seven Cures for a Lean Purse

King Sargon asks for Arkad’s advice on what people should do for wealth. Arkad gives them 7 cures,

• The First Cure — Start Thy Purse to Fattening
• The Second Cure — Control Thy Expenditures
• The Third Cure — Make Thy Gold Multiply
• The Fourth Cure — Guard Thy Treasures from Loss
• The Fifth Cure — Make of Thy Dwelling a Profitable Investment
• The Sixth Cure — Insure A Future Income
• The Seventh Cure — Increase Thy Ability to Earn

Chapter 4 – Meet the Goddess of Good Luck

This is a talk by Arkad in the temple of learning discussing the importance of luck. The key themes are embracing opportunity immediately and avoiding procrastination.

Chapter 5 – The Five Laws of Gold

Kalabab (trader) tells the story of Nomasir and how Arkad asked his son Nomasir to find his own way with a tablet of wisdom and gold. How Nomasir squandered the gold and later became prosperous by using the tablet of wisdom containing 5 laws of gold.

• Gold cometh gladly and in increasing quantity to any man who will put by not less than one-tenth of his earnings to create an estate for his future and that of his family.
• Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field.
• Gold clingeth to the protection of the cautious owner who invests it under the advice of men wise in its handling.
• Gold slippeth away from the man who invests it in businesses or purposes with which he is not familiar or which are not approved by those skilled in its keep.
• Gold flees the man who would force it to impossible earnings or who followeth the alluring advice of tricksters and schemers or who trusts it to his own inexperience and romantic desires in investment.

Chapter 6 – The Gold Lender of Babylon

Rodan the spearmaker gets a gift of 50 pieces of gold from the King and asks Mathon, the money lender what to do about the fortune. His sister is asking for it for her husband’s venture. Mathon shows him the details of how he lends people money. He has this advice for Rodan,

I thought not that you would. But it is there and simple too. Just this: If you desire to help thy friend, do so in a way that will not bring thy friend’s burdens upon thyself.

Chapter 7 – The Walls of Babylon

Through the parable of the strong and tall walls of Babylon, we learn the importance of financial protection in our lives.

Chapter 8 – The Camel Trader of Babylon

Tarkad has lot of debts and is without food for 2 days. He meets one of his lenders (Dabasir, the camel trader). Dabasir takes him to the hotel and tells him the story of how he became a camel trader from a slave in Syria. This story is about the role of determination in success.

Chapter 9 – The Clay Tablets from Babylon

This section contains the 5 clay tablets supposedly Dabasir has written while clearing his debts. He saves 1/10, spends 7/10 and then uses 2/10 to systematically pay his debtors. He gets his advice from Mathon, the gold lender. The chapter also contains letters from the archaeology department who after reading the tablets apply it in their own lives!

Chapter 10 – The Luckiest Man in Babylon

The story of Sharru Nada, the merchant prince of Babylon. He tells his story to Hadan Gula, grandson of Arad Gula while travelling from Damascus to Babylon. Nada was taken slave, but then worked hard to get his freedom. He was finally bought by Arad who freed him and made him his partner. This parable is about the importance of work in our lives.