Golden Rules for Making Money (1880)

"I have discovered there is enough money in the world for all of us, if it was equally divided; this must be done, and we shall all be happy together."

"But," was the response, "if everybody was like you, it would be spent in two months, and what would you do then?"

"Oh! divide again; keep dividing, of course!"

wildmusings2• 10 years ago

Reminds me of one of my favorite Maggie Thatcher quotes: "The problem with socialism is that you eventually run out of other people's money."

cname• 10 years ago

I don't know why so many people think Socialism is about welfare. Socialism is about who owns and controls the means of production.

Read about it here: https://en.wikipedia.org/wiki/Socialism

zouhair2• 10 years ago

At least the witch is dead, we won't have to suffer her stupidity.

She managed alone to prove that women can be as hateful and live destroyers as any men.

arethuza2• 10 years ago

A bit ironic then that the overall tax burden was rather higher than the previous Labour government for most of her time as PM:

"The tax burden (measured by the Institute for Fiscal Studies in the form of total government receipts as a share of national income) started at just above 40 per cent in 1979, peaked at 45.4 per cent in 1982, then fell below 40 per cent in 1990."

http://www.independent.co.uk/news/uk/politics/10-things-you-...

What she did do was reduce the silly taxes on higher level of income - but those taxes were just imposed on poorer people.

carlosnunez4• 10 years ago

Don't show that to the Universal Basic Income diehards...

dangero• 10 years ago

I'm very interested in the concept of basic income, but I don't see any issue with this commentary from PT Barnum. It seems to be more of a statement of fact that some people spend their money more wisely than others. Basic income could be viewed as inline with this statement because you would get an income stipend at some small interval, like once a month, so even if you spent it all last month, this month arrives and you get that basic income again.

angersock2• 10 years ago

Even a cursory reading of the story should suggest to a reader a difference between the proposed action (divide equally riches amongst all), and UBI (fund a fixed-amount per citizen per annum).

Least of all, if one believes in the ability of capital to be reinvested to create more capital, it is obvious that the second case need hardly injure an economy while still helping the people who are broke.

The former case, of continual wealth division, of course may fail--luckily, that's not how UBI works.

mc808• 10 years ago

UBI just lifts the wealth distribution curve up a bit so the long tail approaches something above zero. You could also call it a "tax prebate" as in the FairTax proposal if that's more palatable. The poorest poor are going to get their basic necessities somehow, whether it's by participating in the economy or by digging through your garbage or your garage.

SwellJoe• 10 years ago

Surely the straw in that man has dried up and blown away during the past 156 years?

PaulRobinson• 10 years ago

Which is the correct answer.

When you spend money, it doesn't disappear. It's just moved.

lr4444lr3• 10 years ago

Yes, but the goods it can buy on the next round of division still don't come from the spendthrift vagabond, and if his way of life is incentivized while the producers' is disincentivized by this redistribution, then that circulation won't continue so innocuously.

trophycase• 10 years ago

Value and efficiency can disappear though. I could spend 100 dollars on something that falls apart in a month, or spend 1000 for a functionally equivalently something that will last 3 generations. One of these choices is wasteful and hurts economic efficiency, one isn't.

lottin• 10 years ago

What disappear is the goods the money was spent on, and money is only worth something as long as there are goods that can be bought with it.

johnloeber• 10 years ago

This is nonsense. Spending money isn't bad at the macro/societal level. Spending is a cornerstone of economic growth.

alwaysdownvoted• 10 years ago

In 1880 there was no Federal Reserve system.

"Money" was backed by commodities of finite quantity.

kamaal2• 10 years ago

The fact that socialists feel entitled to free cash is hardly a surprise. In India which went though decades of socialist rule, its quite common among people to expect others to provide for them all their life.

I know a lot of people from my circles, especially older people in the late 50's and 60's who have spent their lives in the socialist era endlessly expect elder brothers/relatives to provide for them. Any refusal to do so is taken to amount to some extremely bad kind of selfishness and greed. Keep alone the fact that they've barely done any work all their lives, or are any way serious even now with their spending habits. The basic idea is that they are entitled to be provided no questions asked and someone is supposed to make up for them. Refusing to comply is evil.

zouhair2• 10 years ago

Socialists feel entitled to free money? Do you have some sources on this?

rorykoehler4• 10 years ago

From where I am standing it seems capitalists feel entitled to free cash. They take their capital, dump it in the stock market and hey presto free cash! This free cash mostly arises due to some accounting trick and is not productivity backed at all.

vlunkr• 10 years ago

Our credit card driven culture could certainly use his advice on avoiding debt.

iagooar• 10 years ago

I took a credit once, for buying a car, and will never do it again.

Although I never had problems with paying the money back, I was paying a lot more money back to the bank, so when I finished paying the credit off, the car was worth half of the price I bought it, almost having paid double the price because of the credit interests.

But the worst part was that it didn't feel right.

So now my policy is to never buy anything with money that I don't have (yet). It makes you feel so much better, you feel a truly free person. I don't own my apartment, true, and the money I spend each month on rent could bring me closer to owning one, but I just don't see the point of it. But buying stuff for money you actually have makes your decisions so much better and closer to what you can really afford.

Also, there is another component to buying stuff with money you actually have. Recently, I decided to buy a scooter. Not a big "deal", but I didn't want to just spend any savings on it that I have so far, so I put aside money from some freelancing outside my daily job, sold some unused furniture and electronics, and only had to pay around 25% of the price of the scooter from my account. It felt so good, it felt like I deserved it, because I planned for it in advance and didn't have to "compromise" my savings. On the other hand, when I took the loan for the car, I felt bad, I almost felt miserable, as if I was doing something wrong. I can't imagine buying a house for someone else's money. You must feel like a slave.

ams6110• 10 years ago

You can make some argument for paying for something over time if you are going to use it over time. A house, or a car, could fall into that category. However a big difference is that a house is an asset which normally appreciates in value, while a car is an expense which depreciates. Buying something on credit that will depreciate (or worse, is a consumable) is something to be very cautious about.

carlosnunez4• 10 years ago

Here's the biggest reason why I don't mind taking out a loan on a car, one of the most aggressive and most expensive depreciating assets out there:

Comfort. Immense comfort.

I spend a lot of time in my car. I enjoy the car that I have now (a 2012 Honda Accord EX-L), but the only reason why I didn't take out a lease on something more expensive (like a 535i or an E-class) is because we're planning to move very soon and driving a luxury car in NYC makes no damn sense unless you are flush with money and can afford the inevitable body work.

When I went to Austin a few months ago, I decided to rent a BMW Z4. It was amazing. An absolute pleasure to drive. It wasn't the speed that did it in for me, though. It was the sheer comfort of everything.

Volume knobs? They're RIGHT THERE. You don't even need to move your forearm.

The seats? Plushy and comfortable (unlike my Accord; everything is great, but those seats are terrible).

Cruise control that actually works on downhills and actually slows down? Not a problem.

Me paying a few hundred dollars per month to not drive something much cheaper (and, likely, not as nice/comfortable) doesn't bother me at all. It's a debt, and debt sucks, but driving a low-grade econobox for a few years while I save up for something that will be worth 30% less than what I bought it for the minute I drive it out is much worse (for me).

(Same goes for my future house or apartment.)

That being said, building up my emergency spend and clearing up some debt that I've amassed is next on my priority list after moving.

icebraining2• 10 years ago

Have you considered that your personal feelings are preventing you from taking what can actually be a good economical decision?

For example, imagine you had taken a loan to buy the scooter, then used the money put aside to pay the installments instead. You might have paid somewhat more for the scooter, but on the other hand, you could actually own the scooter earlier, which might even save you money in the end (for example, if you drove a car instead and therefore spent more in gas and such).

Buying a house is similar; the "point" is that you end up saving money, since you stop paying for it, but never stop paying rent. Also, there are incentives (such as tax breaks) that make it cheaper still.

Does it mean that you have an extra obligation "tying" you? Sure. But that doesn't mean it's always a bad choice.

tomohawk• 10 years ago

Borrowing money for a depreciating asset doesn't make much sense in any case. It's not just the extra cost, but additional exposure to risk. Life sometimes throws curve balls, and being leveraged can make the consequences much steeper.

OneOneOneOne• 10 years ago

Debt breeds debt it seems.

99_00• 10 years ago

Debt comes in all shapes and forms. Credit cards being one of the worst deals for consumers. Some of the other forms of debt can be very helpful.

If you don't understand it, then yes, you should avoid it. But if you do understand it, you can use it to help yourself.

oliv__• 10 years ago

Thank you for posting this. It is profoundly helpful.

ape4• 10 years ago

You can tell its from 1880 because of the basic html.

kristopolous• 10 years ago

The ASCII version is even in a zip for the benefit of our 19th century brethren with their slow telegraph dialup connections.

cubano2• 10 years ago

I'm waiting for Morse code API myself.

agumonkey• 10 years ago

Wait until HTML3 is the new trend.

clishem• 10 years ago

The author of 'So Good They Can't Ignore you' (http://www.goodreads.com/book/show/13525945-so-good-they-can...) basically argues that the first rule he mentions ("Don't mistake your vocation") is a false myth:

"In this eye-opening account, Cal Newport debunks the long-held belief that "follow your passion" is good advice. Not only is the cliché flawed-preexisting passions are rare and have little to do with how most people end up loving their work-but it can also be dangerous, leading to anxiety and chronic job hopping."

ChrisDutrow• 10 years ago

I feel like this a matter of balance. Taken to either extreme, you could end up poor doing something you love. Or paid decent to do something you never got super good at cause you hate it.

Probably the best strategy is to select something within the venn diagram of things you like and things that are lucrative.

sanoli3• 10 years ago

And depending on the society you live in, you feel more confortable moving further to one side or the other.

kjksf• 10 years ago

"Don't mistake your vocation" doesn't mean "follow your passion".

Paraphrasing, it means "do what you you're naturally good at"

"Unless a man enters upon the vocation intended for him by nature, and best suited to his peculiar genius, he cannot succeed".

Retra3• 10 years ago

You'll still end up moving around until you find out what you're great at. Unless by some freak accident you know from the start. For instance, there's _something_ that I'm probably a world-class genius at - I have enough experience being me to suspect that - but I have a very hard time putting it into words what I do, and an even harder time trying to monetize it.

solidsnack9000• 10 years ago

Being good at something and being enthusiastic about it are not at all the same thing.

ScottBurson• 10 years ago

Telling people not to follow their passion ... seems to be Cal Newport's passion.

atmosx2• 10 years ago

Quoting a very wise Math professor I had: "The right answer to 99% of the questions you'll receive in my oral exam is: 'it depends' ".

ezequiel-garzon2• 10 years ago

SNL made a wonderful infomercial in 2006 about point 3: avoid debt. Depending on your location you should be able to watch it in [1] or [2]. During my years in the US it always puzzled me that, upon reaching my credit limit, it would not just increase without any interaction, but sometimes double! American "plastic", as hailed in "The Graduate", was a significant lesson for me.

[1] http://www.nbc.com/saturday-night-live/video/dont-buy-stuff/...

[2] http://www.youtube.com/watch?v=R3ZJKN_5M44

chedar• 10 years ago

For the unlucky that couldn't see it on [1] & [2], here is [3].

[3] https://vimeo.com/145194633

tuttifrutti• 10 years ago

I was always puzzled how people in the US are quick to spend on credit, and not worry too much...

fit2rule3• 10 years ago

One of the great western habits I inherited after living in the US for 15 years, is the use of the credit card for everything, and then just paying a single bill (the credit card) every month. If you do it properly, it can really increase the quality of your life - rewards, points, etc. - and it can also be very, very dangerous for the undisciplined and income-averse ..

madaxe_again• 10 years ago

They are acclimatised to debt - most westerners can't imagine not having a credit card - when I tell folks I cut up my first and last card at 17 they assume I'm a delinquent, broke, punishing myself - for in this society we have managed to redefine debt as wealth.

IkmoIkmo• 10 years ago

'avoid debt' is too simplistic. Debt is simply an opportunity increasing instrument. You have no money to make certain investments that create a net benefit, debt gives you access to that opportunity, and it comes at a cost. If that opportunity is worth the cost, debt is great. Of course it makes sense to say 'avoid needless debt', or 'be careful taking on debt', but just to just say avoid debt is to also say avoid taking opportunities that you should be taking and throw out the baby with the bathwater. One could very well say 'avoid debt for needless consumer spending', buying a new TV with debt, usually at some ridiculous APR, just makes no sense.

For companies, debt is even more interesting, because in corporate finance you'll find that debt is subsidised through tax rates. It sounds a bit weird but it's true, and so there is an incentive to take on debt. In some countries due to the tax systems, this applies to individuals too, e.g. for mortgages, the cost of debt reduces effective income and thereby reduces tax liabilities further than if you saved up first and then bought the house without debt, such that in some countries people did not pay off their mortgages because deductible interest payments were attractive.

Debt sucks, I know, I hate the debt culture as much as anyone and as a European the American creditcard industry is something I pity, but the discussion on debt today is extremely one-sided.

ezequiel-garzon2• 10 years ago

'Avoid debt' is an apt title. The points the author makes agree very much with yours, including the clear warning the infomercial gives against compulsive, superfluous spending:

"I do not speak of merchants buying and selling on credit, or of those who buy on credit in order to turn the purchase to a profit. The old Quaker said to his farmer son, "John, never get trusted; but if thee gets trusted for anything, let it be for `manure,' because that will help thee pay it back again.""

11thEarlOfMar• 10 years ago

Some things never change. Like common sense.

This is all true, but it was not all obvious until I'd experienced four or five decades of life lessons. If you think this advice is at all dubious, ask and we'll see if we can explain...

rokhayakebe2• 10 years ago

Some things never change. Like common sense.

Epic.

WavingThe442• 10 years ago

From Frenzied Finance (1905):

First, there is a fundamental law, from which no one—neither the great nor the small—is exempt. In substance it is: "Every 'Standard Oil' man must wear the 'Standard Oil' collar."

This collar is riveted on to each one as he is taken into "the band," and can only be removed with the head of the wearer.

Here is the code. The penalty for infringing the following rules is instant "removal."

1. Keep your mouth closed, as silence is gold, and gold is what we exist for.

2. Collect our debts to-day. Pay the other fellow's debts to-morrow. To-day is always here, to-morrow may never come.

3. Conduct all our business so that the buyer and the seller must come to us. Keep the seller waiting; the longer he waits the less he'll take. Hurry the buyer, as his money brings us interest.

4. Make all profitable bargains in the name of "Standard Oil," chancy ones in the names of dummies. "Standard Oil" never goes back on a bargain.[9]

5. Never put "Standard Oil" trades in writing, as your memory and the other fellow's forgetfulness will always be re-enforced with our organization. Never forget our Legal Department is paid by the year, and our land is full of courts and judges.

6. As competition is the life of trade—our trade, and monopoly the death of trade—our competitor's trade, employ both judiciously.

7. Never enter into a "butting" contest with the Government. Our Government is by the people and for the people, and we are the people, and those people who are not us can be hired by us.

8. Always do "right." Right makes might, might makes dollars, dollars make right, and we have the dollars.

angersock2• 10 years ago

Pretty good advice, honestly.

I'd like to think that the old robber-barons could still teach the current generation a thing or two about how to run a ruthless business.

cubano2• 10 years ago

I personally think robber barons exist all around us.

They just have smarter PR and image protection from their big media brethren.

77pt772• 10 years ago

5. Never put "Standard Oil" trades in writing

This is good advice?

arethuza2• 10 years ago

If you are Standard Oil and are vastly larger than whoever it you are trading with, have a huge legal team and no doubt some friendly judges handy.

Mind you - I have worked with very senior people who would avoid putting things in writing and then a few months later always have a notably different account of conversations than I did. At first I thought I was actually forgetting things until I realised it's a trick used by overly political types.

WavingThe442• 10 years ago

The list (and book) was written by a guy who suffered from his financial dealings with Standard Oil and he is essentially explaining how they were able to get him over the barrel. It is a very cynical list.

egypturnash• 10 years ago

Twenty chapters of true wisdom, from that great American showman P. T. Barnum. Especially the penultimate chapter, "Don't Blab":

Some men have a foolish habit of telling their business secrets. If they make money they like to tell their neighbors how it was done. Nothing is gained by this, and ofttimes much is lost.

Nicely done, Mr. Barnum. I am honored to share a birthday with you.

Mahn• 10 years ago

It's interesting how flat human nature stays over time, how advice given 136 years ago is still perfectly applicable today. Over the course of centuries life has changed dramatically, but we still think, worry, feel and act like our ancestors did from a millennium ago. I'd bet you could easily find advice given in the roman empire times that would still be relevant today.

drjesusphd• 10 years ago

http://classics.mit.edu/Antoninus/meditations.html

jameslk• 10 years ago

I've thought about this a lot on a philosophical level. A person goes through life repeating the same mistakes their parents made and their grandparents made before them, and so on. We spend so much time re-learning things that have already been learned. And doing things that have already been done. Imagine how life could be different if we didn't have to start over each time.

skosuri• 10 years ago

Basically no one would dream foolhardy dreams anymore, which would make society horrible.

BWStearns2• 10 years ago

I listened to a talk on counterinsurgency given by David Kilcullen (I am about 90% sure, it could have been Nagl), but he asked the audience about whether it was better to learn from experience or from academics. The audience was about evenly split but with a lot of abstainers, and he said academia was the better choice of course, because no on ever died from reading a book.

While "teachable moments" in most contexts aren't fatal, the overall point that it's better to learn from other people's mistakes remains the same.

_yosefk• 10 years ago

I think in such a case, say with humans with a 1000-year lifespan, we would have learned a lot of things that aren't so and stayed that way. "Progress in science happens through the old guard dying" and all that, and it's not limited to science. I've felt since forever that my views are ossifying every day, so that I must be increasingly hopelessly wrong in those areas where I'm wrong. I try to fight it but I'm not sure there's any cure to it remotely as reliable as death...

edanm2• 10 years ago

There are things from 1000's of years ago that are still relevant.

But I think it's mostly survivorship bias. The very few things from long ago that we still read, are still relevant today. That's why we know about them! Take a random book from from most periods of history, and it will be uninteresting, if not outright unintelligible, to a modern audience.

im3w1l• 10 years ago

Take a random book from from most periods of history

I'd be very interested in doing in doing just that. How would I go about it? Weighted by popularity in that era would be fine, but not weighted according to current popularity.

cJ0th• 10 years ago

But I think it's mostly survivorship bias

I don't think so. Have you seen who wrote this piece? I'd say it is a classic case of the Barnum effect.

https://en.wikipedia.org/wiki/Barnum_effect

sanoli3• 10 years ago

Like the other poster said, a lot of it is survivorship bias. There are tons of stuff that people did 1000 years ago that have just been discarded through time by being clearly ridiculous/wrong. We mostly never even hear about them anymore. Think of all the stuff people did and acted upon in the past based on superstition or baseless beliefs that was just passed on, but today has about a zero chance of being taken seriously if it were to be brought up.

matt_wulfeck• 10 years ago

And continue that thought and think for a minute about all of the hopeless stupid stuff our generation believes in that the next generations toss.

Toine• 10 years ago

I'd argue that most of life has been figured out by many, many people thousands of years ago. Greek philosophers had the exact same problems we do today, and over their lifetime they've been pretty successful at figuring out solutions. I'd even argue that most "self-help" books of today are just the same old solutions written in a different way.

zoom6628• 10 years ago

Brilliant, witty and on-the-nail correct. Wish i had read this 30+ years ago.

Required reading for those considering a startup or a career.

znpy• 10 years ago

Very interesting.

iamgopal• 10 years ago

Wow plentY of time that writers and readers had. I wish those days to come again.

gnarbarian• 10 years ago

Here's my favorite bit:

I was recently reading in a London paper an account of a like philosophic pauper who was kicked out of a cheap boarding-house because he could not pay his bill, but he had a roll of papers sticking out of his coat pocket, which, upon examination, proved to be his plan for paying off the national debt of England without the aid of a penny.

bbcbasic• 10 years ago

You are given the TL;DR then the fleshed out story after, which is of a manageable size. The English style is very readable for something so old. There was presumably no word-count pressure.

I loathe books like How to Win Friends and Influence People that have some meandering and boring story before it gets to the point.

This is the 'how to start a startup' for business of the regular type, i.e. no ambition to get loads of capital and become the next Google. Read this once the tech bubble has burst!

huuu• 10 years ago

I always like the book The Incredible Secret Money Machine very much.

The first rule for making money: never do it for the money.

A free download is available: http://www.tinaja.com/ebooks/ismm.pdf

atmosx2• 10 years ago

I've read only the first chapter yet, but will read the rest because it got me.

However there's a hidden idea which equals wealth to happiness which I dislike heavily. That said we can rest assured that while wealth is not connected to happiness (too many things into play to achieve that state), debt sure as hell leads to miserable.

andrewchambers• 10 years ago

Can someone recommend other books like this please?

cybertronic• 10 years ago

"How To Get Rich" by Felix Dennis

vldx2• 10 years ago

I can second this - straight to the point book written by someone who had already amassed his wealth.

Also worth mentioning is "The Millionaire Fastlane" - the title is sleazy, but it had big impact on my mindset when I've read it.

dschiptsov• 10 years ago

Some of these advices are in harmony with thousands old maxim "fortune favours the prepared", which not only hints that so-called success is much more a result of chance, like almost everything else in the universe, but also correlate with the notions of avoiding a debt, concentration and persistence. But the chance is still the major factor.

BTW, the parts of the Patanjali Yoga Sutra, which gives practical advice about the practice - about necessity of an appropriate isolated place, diet, habits with emphasis on sleep cycle, proper state of mind, concentration and persistence - is the best universal advice to achieve anything in life that I am aware of. The word Yoga could be translated as "discipline", and has little to do with asanas, mats, and yoga pants.

tmd• 10 years ago

A lot of old-school financial advice seems to focus on the importance of saving and avoidance of debt. It seems reasonable but I always wonder how applicable that is in the modern times with our record-low interest rates. Short look at the tables in [1] suggests that, for example, you could gen 5% after-tax real returns on government bonds in the 19 century. Today, that would be unthinkable.

[1] http://efinance.org.cn/cn/fm/The%20Equity%20Premium%20Stock%...

gdubs2• 10 years ago

Low interest rates make saving and debt avoidance even more important, since you can't rely as heavily on the market to grow your savings.

sk5t• 10 years ago

On the contrary, near-zero interest rates recommend more debt and more risky investments, because (a) debt is cheap, and (b) inflation (stagflation perhaps) will nibble away your savings if you try to ignore the equity markets.

joslin01• 10 years ago

Wonderful writing.

The inordinate love of money, no doubt, may be and is "the root of all evil," but money itself, when properly used, is not only a "handy thing to have in the house," but affords the gratification of blessing our race by enabling its possessor to enlarge the scope of human happiness and human influence. The desire for wealth is nearly universal, and none can say it is not laudable, provided the possessor of it accepts its responsibilities, and uses it as a friend to humanity.
So in regard to wealth. Go on in confidence, study the rules, and above all things, study human nature; for "the proper study of mankind is man," and you will find that while expanding the intellect and the muscles, your enlarged experience will enable you every day to accumulate more and more principal, which will increase itself by interest and otherwise, until you arrive at a state of independence.
When a man's undivided attention is centered on one object, his mind will constantly be suggesting improvements of value, which would escape him if his brain was occupied by a dozen different subjects at once. Many a fortune has slipped through a man's fingers because he was engaged in too many occupations at a time.

amelius• 10 years ago

Not sure if these are necessary or sufficient conditions.

Probably neither.

Golden Rules for Making Money (1880)

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