Episode-2273- John Pugliano and Jack Spirko on The Richest Man in Babylon

I reached out to expert council member John Pugliano about doing this episode with me.  I feel the biggest weakness in what our young people are not taught today, above all other things how to handle, earn, manage and invest money.   While not the end all be all, I find The Richest Man in Babylon to be one of the best foundations on how to think about money ever written.  John and I break this classic down today using the following outline of some of the main concepts presented in the book.

There are also some surprises in today’s show, a phone call from Patrick Roehrman, the arrival of Nick Ferguson and more.  John and I did this recording at my kitchen table while he was visiting for the 10 Year Anniversary Party.  Lots of other TSP folks were on the way in, so rather than edit out the disruptions we rolled with them.  It makes for a fun show.

SUMMARY: Richest Man in Babylon

5 Laws of Gold (my version: money flows to where it’s treated best)

  • 1. 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.
    • a. A portion is yours to keep.
    • b. 10%….my recommendation is 20% (in modern times, taxes eat up too much real income)
    • c. SAVE before you start to think about investing.
      • i. You can’t take advantage of Opportunity unless you have resources
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  • 2. Gold laboreth diligently and contentedly for the wise owner who finds for it profitable employment, multiplying even as the flocks of the field.
    • a. Money likes to “work” and doesn’t complain about being a “slave”….it works without compensation.
    • b. Money has no mind…YOU must find it profitable employment.
    • c. Magic of compounding interest…money multiplies.
      • i. Law of 72
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  • 3. Gold clingeth to the protection of the cautious owner who invests it under the advice of men wise in its handling.
    • a. Emphasize “protection” & “cautious”.
    • b. Be patient and disciplined….it takes TIME.
    • c. Invest vs Speculate (4th part of my book)
    • d. Seek out wise men…mentors. (take an old guy to lunch)
      • i. Knowledge in a specific field.
      • ii. Ignore ideology or imperfections…avoid Hero Worship
        • e. If times get tough or even if they don’t.
          • i. Plan for prosperity and failure…within your sphere of influence & control.
          • ii. If you have dependents buy term life insurance.
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  • 4. 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.
    • a. You have to fix Stupid before you can fix Broke.
    • b. Don’t take advice from Stupid or Broke people.
      • i. Advanced advice: avoid these people all together.
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  • 5. 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.
    • a. Reality: lots of people are trying to screw you.
    • b. You’re NOT that smart.
    • c. Diversify because you’re going to have LOTS of failures.

Work – The Generator of Weath

  • 1. Wealth comes from work.
  • 2. First learn to work, then learn to have others work for you.
    • a. Start with what you know, where you are.
    • b. Story of Baker looking to buy a slave.
      • i. You can buy your own freedom.
      • ii. Work to acquire experience.
  • 3. Money is your ultimate slave.
    • a. The Boss/Owner has money, the Employee is broke.

Debt – The Enslaver of the Fool

1. Magic of Compounding Interest working against you.
2. Debt is SLAVERY…period.

Resources for today’s show…

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7 Responses to Episode-2273- John Pugliano and Jack Spirko on The Richest Man in Babylon

  1. I am understanding correctly that the money set aside is solely for investment and not savings in any way? This would be past your emergency fund of whatever size you choose.

    • Modern Survival

      Yes and no and kinda.

      Say you have a 90 day emergency fund. Okay say you make 60K annually so 5k a month, so you have 15K in savings.

      While true that money should be held as cash or at most in say laddered CDs so it remains liquid, it isn’t not part of your total wealth, just in a different bucket. In other words to me it is part of your total “cash position”, relative to your total investments. So if you had say to make it simple, 85K in your “investments” all in equities, and 15K in your emergency fund. I would still consider that a 15% cash position.

      Does that make sense?

      To me there is savings and there is emergency fund. I hold them in separate accounts. Savings is well put aside my investments for the month, paid my bills and damn, look at that there is more money that I want to keep in checking, let me move that to savings.

      The difference is I can take money from the savings when I want, the emergency and retirement are don’t break glass unless it is a legit emergency type of thing. Make sense?

      • I think so… I guess I’m trying to figure out how to relate it to my life and my next steps. We have a 90 day fund, and my 401k, nothing set up beyond that for a car fund etc. My inclination would be to put up maybe another 12k before I go beyond that to do investing, or am I missing something?

        • Modern Survival

          No in the end save, save, save, save.  You can’t go wrong with that.  The more you save the more careful you will be in investing it.

  2. Ok, great, thanks!

  3. Who wrote the version of “Richest man in Babylon” you are talking about? Clicking the link brings up two books by that title by different authers.

    • Modern Survival

      George Clason wrote the original version with the ancient language theme, thee and thou and what not.

      Various others have written modernized versions, I prefer the original.

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