Book Summary: The Richest Man in Babylon, by George S. Clason
Learn the key points in minutes.
This is a preview of the Shortform book summary of The Richest Man in Babylon by George S. Clason. Read the full comprehensive summary at Shortform.
- 1-Page Summary
- Chapter 1: The Setting for the Stories and Principles—Ancient Babylon
- Chapter 2: Seven Principles for Acquiring Wealth
- Chapter 3: The Five Laws of Gold
- Chapter 4: Three Parables
- Chapter 5: Timeless Advice from Clay Tablets
- Chapter 6: A Final Story: Work Hard and Save
1-Page Book Summary of The Richest Man in Babylon
The Richest Man in Babylon by George S. Clason is a financial advice classic written in the 1920s. It presents timeless principles for managing your money in the form of “Seven Cures for a Lean Purse” (how to acquire wealth) and “Five Laws of Gold” (how to preserve and grow wealth). The principles are illustrated by parables set thousands of years ago in the wealthy city of Babylon, where the basic ideas of finance were born.
Clason’s message is that if you work hard, save, live within your means, and invest wisely, you can become wealthy. He’s credited by some with being the first person to articulate the principle, “Pay yourself first.”
The financial principles in the book are delivered by the fictional character of Arkad, the richest man in Babylon, who imparts the secrets of wealth to a group of local citizens who want to learn how to stop struggling financially and become rich.
The Richest Man in Babylon
Arkad, who started his working life as a lowly scribe in Babylon’s hall of records, noticed that the scribes who produced more work received more pay. He worked to increase his speed and received more money himself.
Upon the advice of a money lender, Arkad began saving 10% of everything he earned. To his surprise, he didn’t miss having it available for spending. He created a budget and lived within his means. At first, he spent the interest earned on his savings—however, he later learned to put his money to work by earning more interest on his interest. He also looked for ways to invest. Except for the mistake of investing in the jewels that turned out to be fake, he increased his wealth gradually through wise investments.
Arkad became wealthy because he learned to:
- Pay himself
- Live below his means
- Put his money to work
- Get competent financial advice
The money lender put Arkad in charge of managing his land and other wealth. Arkad increased their value and eventually inherited a share of the estate. Thus, he became “the richest man in Babylon.”
Seven Principles for Acquiring Wealth
Arkad explains to the group of Babylon citizens who questioned him that he became wealthy by implementing “Seven Cures for a Lean Purse.” The cures or principles for acquiring wealth are:
1) Pay yourself first. Save 10 percent of everything you earn, even if you’re in debt, to start building wealth. You’ll find that you get along just fine on 90% of what you earn and in 10 years, you’ll have saved a year’s earnings. Arkad teaches that you may think all of your earnings belong to you, but most of them actually end up going to your grocer, your landlord, and your shoemaker. Only your savings are truly yours. Although you’ll be tempted to spend your savings at times, remember that spending brings only temporary gratification, while saving builds long-term wealth and security. And the person who saves part of his earnings will find it easier to acquire more money.
2) Control your spending. After you save a tenth of your earnings, determine your necessities and create a budget to cover them, plus a few worthwhile things you enjoy, not exceeding the remaining 90% of your income. When distinguishing necessities from desires, remember that if a pack animal got to choose his burden for a long trip, he’d choose to carry grain, hay and water—necessities—rather than gold and jewels. Additionally, lLive within your means or, better yet, live below your means. Should your earnings increase, beware of lifestyle inflation, which is the tendency to increase your spending as your income increases. What you define as necessary will always expand to keep pace with your income unless you resist.
3) Put your money to work. The money you accumulate from your earnings is just a starting point. You need to put it to work by investing it or multiplying it by taking advantage of compounding interest over time. For example, Arkad loaned money to Aggar, a shield maker, whom he knew to be good at his business. When Aggar successfully sold all the shields, Arkad got back the loaned money plus interest. By investing your money, you create a continuing income stream—your money keeps working for you whether you are working, traveling, or retired.
4) Protect your principal from loss. The first thing to do with money you’ve saved is to protect it. Invest it only where your principal is safe and you can get it back if you want to and where you’ll get a fair interest rate. For example, Arkad made a poor investment by loaning money to a brickmaker who intended to sell jewels for a profit. The jewels turned out to be fakes. The lesson is to invest only with experts. Beware of these other ways of losing money you’ve saved:
- Spending it on wants rather than needs.
- Loaning it to family and friends who don’t repay you.
- Making an investment that you haven’t researched and that fails to pay off.
- Succumbing to a bogus get-rich-quick scheme.
5) Own your home. Make your home a profitable investment. By investing your money in buying a home and paying it off over time, you’re turning an expense into an asset. Once you own it, you’ll reduce your cost of living and you can sell it at a profit if you choose. (Shortform note: This principle is debatable today. Depending on factors such as home prices, interest rates, appreciation, and your income/job stability, owning your home may not make sense for you.)
6) Plan for retirement. Invest for the future for two reasons: 1) if you die prematurely, your family will be provided for and 2) when you’re no longer able to work, you’ll have an income.
Ways to do this include buying real estate and land that will increase in value and can be sold later, or making other investments. (Shortform note: Further options today include investment in stocks and bonds, pension/social security, and various forms of insurance.)
7) Increase your earning ability. Increasing your income doesn’t mean asking for a raise. That makes you dependent on a boss. Instead, take control by investing in yourself. Improve your skills or learn new skills through classes and training. The more you learn, the more valuable you are and the more you might earn. Also, set goals and work to improve your performance. Arkad learned this by noticing that scribes who produced more work received more pay.—pPeople who do more and better quality work get paid more.
Five Laws of Gold
Arkad presented “Five Laws of Gold” to his son Nomasir, along with a bag of gold and instructions to return in ten years to report on his accomplishments. (Shortform note: The Laws of Gold, which focus on building wealth, overlap or repeat the seven principles for acquiring wealth.)
The Laws of Gold or of growing your wealth are:
1) You acquire gold by saving regularly (at least a tenth of your earnings) to build wealth for a secure future.
2) Gold grows when you invest it wisely,...
Want to learn the rest of The Richest Man in Babylon in 21 minutes?
Unlock the full book summary of The Richest Man in Babylon by signing up for Shortform.
Shortform summaries help you learn 10x faster by:
- Being 100% comprehensive: you learn the most important points in the book
- Cutting out the fluff: you don't spend your time wondering what the author's point is.
- Interactive exercises: apply the book's ideas to your own life with our educators' guidance.
Here's a preview of the rest of Shortform's The Richest Man in Babylon summary:
The Richest Man in Babylon Summary Introduction
The Richest Man in Babylon by George S. Clason is based on a series of financial advice pamphlets Clason wrote in the 1920s, which were distributed by banks and insurance companies. He compiled them into a book in 1926, which is considered a classic. It presents timeless principles for managing your money in the form of “Seven Cures for a Lean Purse” (how to generate wealth) and “Five Laws of Gold” (how to preserve and grow wealth). The simple principles are illustrated with a series of parables set thousands of years ago in the wealthy city of Babylon, where the basic ideas of finance got their start.
Clason’s message is that if you work hard, save, live within your means, and invest wisely, you can become wealthy. He’s credited by some with being the first person to articulate the principle, “Pay yourself first.” With a few modern-day caveats, the principles remain valuable today.
The financial principles are delivered by Arkad, the richest man in Babylon, who teaches the secrets of wealth to local citizens who want to learn how to stop struggling financially and become rich. (Shortform note: The parables are told in language patterned after that of the King James version of the Bible, with lots of “thys,” “thous,” “saiths,” and “thinkeths.”)
According to Clason, the reason you should manage your money wisely is two-fold: Prospering financially helps not only you, but also society. The prosperity of the nation depends on the wealth of...
The Richest Man in Babylon Summary Chapter 1: The Setting for the Stories and Principles—Ancient Babylon
Babylon was one of ancient history’s greatest and wealthiest cities. It was built not on natural assets but by work and ingenuity.
It was founded in 2300 BC in Mesopotamia, beside the Euphrates River in a dry valley about 60 miles south of Baghdad in present-day Iraq. The area had little rainfall and lacked building materials such as stone and forests for wood.
The city exemplified humans’ ability to make the most of what was at hand—the only available resources were good soil and water from the river, and Babylonians took advantage of them. Engineers channeled water from the river to grow crops by creating irrigation canals and huge dams. Besides creating the irrigation system, they drained swampland at the mouths of the Euphrates and Tigris rivers for additional cultivation.
The city was built of brick made locally and was surrounded by walls and a moat, with a royal palace and a magnificent gate. It may have contained the fabled hanging gardens of Hammurabi and an immense tower to the gods. Besides having some of the earliest engineers, Babylon had mathematicians, astronomers, artists, and financiers—the latter reportedly invented money by using gold as a means of exchange. The city is described in admiring terms by Greek historian Herodotus and others.
Babylon was captured multiple times and ruled by a succession of kings, including the biblical king Nebuchadnezzar. The city fell to Persian ruler Cyrus the Great in 539 BCE.
(Shortform note: Babylon was captured multiple times and ruled by a succession of kings, including the biblical king Nebuchadnezzar. The city fell to Persian ruler Cyrus the Great...
The Richest Man in Babylon Summary Chapter 2: Seven Principles for Acquiring Wealth
Arkad, a fictional character in the Babylonian parables, is described as “the richest man in Babylon.” Two friends, Bansir and Kobbi, a chariot builder and a musician, get tired of working hard to get by without ever improving their status. So, they gather some additional friends and approach Arkad for advice on how to become wealthy. Arkad, who began his working life as a poor scribe, obliges by recommending “Seven Cures for a Lean Purse.”
1) Pay Yourself First
Save 10 percent of everything you earn, even if you’re in debt, to start building wealth. You’ll find that you get along just fine on 90% of what you earn and in ten years, you’ll have saved a year’s earnings. To visualize this, think of collecting ten eggs every day. Each evening, take nine from the basket to sell and keep one for yourself. Eventually, your basket will overflow because you’re putting in more eggs than you’re taking out.
Only the money you consciously set aside is truly yours. You may think all of your earnings belong to you, but when you don’t save a portion, you give them to everyone but yourself. For instance, they go to your grocer, your landlord, your shoemaker, and so onetc.
Although you’ll be tempted to spend your savings at times, remember that spending brings only temporary gratification, while saving builds long-term wealth and security. And the person who saves part of his earnings will find it easier to acquire more money.
2) Control Your Spending
After you save a tenth of your earnings, determine your necessities and create a budget to cover them, plus a few worthwhile things you enjoy, not exceeding the remaining nine-tenths of your income. Don’t confuse wants with needs. If a pack animal got to choose his burden for a long trip, he’d choose to carry grain, hay and water—necessities—rather than gold and jewels.
Live within your means or, better yet, live below your means. Should your earnings increase, beware of lifestyle inflation, which is the tendency to increase your spending as your income increases. What you define as necessary will...
Shortform Exercise: Paying Yourself
The fictional character Arkad in The Richest Man in Babylon recommends saving a tenth of everything you earn. This is a time-honored principle, yet one U.S. survey has shown year after year that a majority of Americans (about 58%) have less than $1,000 in savings.
Do you save or “pay yourself” part of everything you earn? Why or why not?
The Richest Man in Babylon Summary Chapter 3: The Five Laws of Gold
The “Five Laws of Gold” are revealed in a campfire tale by a wealthy camel trader, Kalabab. He starts by asking his audience which they would choose: a bag of gold or a clay tablet inscribed with wisdom. Everyone opts for the gold. However, he points out that without wisdom, they’d just waste the gold and end up back where they started.
Gold (or money), he says, accrues only to those who understand the laws governing it. Kalabab then explains five laws, which he says originated with Arkad, the richest man in Babylon. Arkad passed them on to his son, Nomasir, for whom Kalabab once worked.
(Shortform note: The laws of gold, which focus on building wealth, overlap with the seven principles for acquiring money.)
1) You acquire gold by saving regularly (at least a tenth of your earnings) to build wealth for a secure future.
2) Gold grows when you invest it, along with the interest you receive on it, wisely.
3) Your gold will stick around and grow if you follow competent advice from financial experts.
4) You’ll lose your gold if you follow bad advice or rely solely on your own judgment when you lack experience.
5) You’ll also lose your gold if you succumb to the allure of get-rich-quick schemes or risky investment strategies that promise huge payoffs.
How Nomasir Learned the Laws of Gold
When Nomasir became an adult, his father Arkad considered naming him as his successor and putting Nomasir in charge of his estate. However, to first make sure Nomasir wouldn’t squander his wealth, Arkad gave him a test: a bag of gold, a tablet containing the five laws of gold, and instructions to return in ten years to report on what he accomplished. This was Nomasir’s eventual report:
Nomasir first traveled with a caravan to Nineveh, where he bet and lost some of his money on a horse race that turned out to have been rigged. Then he invested more of his gold in a partnership with a fellow traveler to purchase a store, but the partner was foolish...
Shortform Exercise: Learning From Mistakes
The character Nomasir initially failed to follow the “laws of gold” and ended up losing money his father had given him. But he learned from his mistakes, started over, and eventually succeeded.
Have you ever made a financial mistake and lost money? What was your mistake? Did it violate one of the principles or laws of this book? How?
The Richest Man in Babylon Summary Chapter 4: Three Parables
This chapter recounts three Babylon parables about managing your finances.
Think Twice Before You Help
When a friend or family member asks for money, most people will help if they can—even if they have reservations about the wisdom of doing so. But this altruism can often cause new problems, dragging the helper into the friend’s predicament.
Rodan, a spear maker, found himself with this dilemma. The king had given him fifty gold pieces because he liked Rodan’s design for a new spear point for his guards. The payment was far more than Rodan expected to receive. Now his sister wanted him to loan money to her husband so he could open a store. Rodan had doubts about the husband’s business acumen.
Unsure of how to respond, he asked Mathon, a money lender, for advice. Mathon replied with a parable about an ox and a donkey. The ox complained to the donkey about having to work hard all day plowing the fields, while the donkey had little to do unless the farmer needed a ride somewhere. The ox was tired and wanted to rest, so the donkey advised him to pretend to be sick the next day, so he wouldn’t have to work. The ox did this, so the farmer gave him a day off. But meanwhile, the farmer hitched the donkey to the plow and the donkey ended up doing the ox’s work.
The lesson is, if you decide to help someone, make sure you don’t end up taking their problem upon yourself. If you loan money to someone who can’t handle it, you might have to step in and do their work to save your investment.
Based on his experience as a money lender, Mathon offered Rodan this additional advice about lending money:
- Determine whether the would-be borrower has collateral or the earning capacity to pay back the loan.
- Someone acting under strong emotion is a bad risk for a lender.
- Someone with a track record of good decisions and prompt repayment is a good risk.
- A person already in debt is a bad risk.
Mathon’s final piece of advice on lending was that it’s better to be cautious than to suffer regret later. Not willing to risk losing his money, Rodan ended up...
The Richest Man in Babylon Summary Chapter 5: Timeless Advice from Clay Tablets
Fast-forward to 1934. (Shortform note: 1934 is the date on the letter referred to below and quoted in the book. Since the copyright on the book is 1926, this story may be a fictional projection meant to show that the principles of the Babylonians are timeless.)
Professor Alfred H. Shrewsbury of the Department of Archeology at Nottingham University in England received five clay tablets from the ruins of Babylon, excavated by his colleague, Professor Franklin Caldwell. Shrewsbury translated their inscriptions and was surprised to find that they spoke to his own financial circumstances.
The tablets contained the story of Dabasir’s efforts to pay off his debts. The professor and his wife were deeply in debt, and Shrewsbury seized on the story as a lifeline. It was as follows:
Having escaped slavery, Dabasir returned to Babylon determined to pay his debts and become a person of means. He recorded this plan, which was based on the advice of the money lender Mathon:
- To provide for his future prosperity, he would save for himself 10% of everything he earned.
- To provide well for his wife and himself, he would budget 70% of his earnings for food, shelter, clothing, and enjoyment. He resolved to live on this amount and no more.
- To pay his debts, he would budget 20% of his earnings.
Dabasir listed his creditors and how much he owed to each. He visited each one and explained that once a month he would split 20% of his earnings among his creditors, until his debts were paid in full. Although some berated him, all of his creditors accepted the payment plan. When the camel business was good, he was able to repay more; when it lagged, he repaid less, but he kept up the schedule. Meanwhile, he saved for himself and stuck to his expense budget.
Why are Shortform Summaries the Best?
We're the most efficient way to learn the most useful ideas from a book.
Cuts Out the Fluff
Ever feel a book rambles on, giving anecdotes that aren't useful? Often get frustrated by an author who doesn't get to the point?
We cut out the fluff, keeping only the most useful examples and ideas. We also re-organize books for clarity, putting the most important principles first, so you can learn faster.
Other summaries give you just a highlight of some of the ideas in a book. We find these too vague to be satisfying.
At Shortform, we want to cover every point worth knowing in the book. Learn nuances, key examples, and critical details on how to apply the ideas.
3 Different Levels of Detail
You want different levels of detail at different times. That's why every book is summarized in three lengths:
1) Paragraph to get the gist
2) 1-page summary, to get the main takeaways
3) Full comprehensive summary and analysis, containing every useful point and example
Shortform Exercise: Getting Out of Debt
It’s easy to pile up debt. We live in a consumption-oriented culture urging us to buy things in order to be happy and have status. Also, necessities such as housing, transportation, and education are increasingly expensive. Average personal debt was $38,000 in 2018, excluding mortgages.
How much money do you owe, including a mortgage, car loan, college, and consumer debt? What is your current repayment plan? What percentage of your income does this reflect?
The Richest Man in Babylon Summary Chapter 6: A Final Story: Work Hard and Save
Sharru Nada, a wealthy and respected merchant of Babylon, was returning from a trip to Damascus to bring back his late partner’s grandson, whom he’d agreed to mentor.
The youth, Hadan Gula, was greedy, lazy, and arrogant and Nada worried that with his spendthrift ways, the youth was destined for a troubled future. So he decided to tell him the story of his partnership with the young man’s grandfather, Arad Gula, as a lesson in humility and how to succeed.
The youth was shocked when Nada revealed that he’d started his working life as a slave—his brother had killed a friend and his father bonded Nada to the friend’s widow, who decided to sell him.
On the way to being sold at a slave market, Nada’s fellow slave, Meggido, advised him to work hard because slaves who did good work were valued by their masters. If you convince potential buyers that you’re a good worker, you have a better chance of getting a good master, Megiddo said. Also, good work will bring good things and make you a better person.
So, at the slave market, Nada stressed to buyers his willingness to work and this convinced a baker to buy him. Nada felt he was the luckiest man in Babylon, having escaped the worse fate of working in a wall-building slave gang.
Nada became a skilled baker and came up with a way of selling more honey cakes by hawking them in the city’s streets in the afternoon. His master let him keep some of the profits, which he saved to one day buy his freedom. One of his regular afternoon customers was Arad Gula, who was also a slave and sold rugs for his owner in the streets. Gula was impressed with Nada’s enterprise because he, too, believed in hard work and was laboring to earn his freedom.
The baking business was going well until the...