The Richest Man in Babylon October 31, 2006
Posted by The Probabilist in : [Books], Financial Literacy, Personal Growth, Vision, Wealth, Work, Investing, History , 5 comments
George S. Clason wrote this timeless classic in 1926 and it’s based on stories, parables and clay tables dating 4,000 to 6,000 years ago from the ancient civilization of the Babylonians. It goes on explaining the simple and effective laws of how to handle money, which show the path leading to improved personal wealth. The people of Babylon discovered this path to be attainable by anyone and the same laws are just as true and just as easy to grasp to this day. This is the book everyone ought to read no matter what your previous knowledge and experiences in financial literacy are. So if you’re troubled by the stringency of a lean purse, start by listening to the words of Arkad, the richest man in Babylon.
The chapters in the book are separate stories by people with a certain money problem and how they were able to solve it. Bansir, the chariot builder is troubled by always working hard and having nothing to show for. He goes with his friends to Arkad to seek his wisdom and advice. Arkad tells them the story of his youth and how it came to a turning point when he learned and adapted the first law of gold as taught by Algamish. Later, the king of Babylon sends for Arkad and wishes him to share the knowledge so that all the people in Babylon may become rich. Arkad then presents the seven cures for a lean purse to 100 men who may pass the knowledge onwards. At the Temple of Learning many men discuss the power of luck and reach a conclusion on why some people are more favored by its goddess. Arkad’s last appearance in the stories is when he gives his son Nomasir a bag of gold and a tablet with the five laws of gold and sends him away from Babylon not to return until ten years have passed and he gives an account of himself.
Following, Mathon, the gold lender guides whom to lend money to should one be smart or fortunate to acquire a great sum. Dabasir, the camel trader tells an inspiring story of how to face your debts and see the world with its true color once again and gain respect among others. Dabasir engraved his efforts on clay tablets and a professor in the 1930s tells how after translating them he too adapted this plan in order to eliminate his debt spiral and move to the path of riches. The last story is told by Sharru Nada on how he was able to become a rich man after being put into slavery. He did it all by learning a valuable lesson, which made him the luckiest man in Babylon.
This is a small and cheap book, readable in a few hours. However, don’t fall under the false impression that the lessons are too simple. The laws and parables are simple, but executing a plan takes effort and the right mindset. Throughout our lives we can all perfectly relate to some of the stories told so I can’t find a single reason not to recommend this book to each and everyone. And the reason I wrote my first review on this particular book is because I find it to be the best starting book to discover the first steps of personal wealth creation. Reading it you will understand fully why money can’t solve money problems.
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Defining Entrepreneurial Failure October 30, 2006
Posted by The Probabilist in : [Articles], Business, Entrepreneurship, Personal Growth, Responsibility, Studies , 38 comments
Today I will present a case report I recently wrote. It was a mandatory task in an enpreneurship course and we were given two articles to read through and use as references. Although it’s somewhat of an academic report I decided not to alter it in any way since I tend to write these in a somewhat personal perspective regardless of who the reader is.
Introduction
Using two articles and a book as key information this individual case report will tackle questions concerning the failure of running a small business and the following treatment given to the entrepreneur in charge. I will also analyze the comparison between treatment of such an individual and those failing at their work within an organization.
When has an entrepreneur failed?
In the Watson & Everett (Defining Small Business Failure) article small business failure can be classified into seven primary reasons. The first one, being bankruptcy is defined as discontinued operations with resulting losses to its creditors. Another reason for discontinuance is prevention from further losses, which means the owner recognizes the need to end the business due to continuing personal financial losses while the creditors might still be receiving their agreed-upon payments. The third reason, ‘making a go of it’ is the most subjective reason as it is based upon personal goals not being reached. While the business may not be running negative, the entrepreneur gives up because it might be too time consuming, stressful, disapproving and whatnot compared to the profit. The remaining reasons consist of retirement due to bad health, sale of business to realize a profit, unknown and other reasons.
The reason I summarized 14 pages of text into one single paragraph is not out of haste or to get off lightly, but because I considered it not to be essential in answering the topic question. Since the first objective of this case is to give my opinion when an entrepreneur has failed I will present a definition for it as well as four reasons that can lead towards or away from it.
“An entrepreneur has failed when he/she stops being an entrepreneur.”
The best way to encourage entrepreneurship is to focus on the entrepreneur and not the factual, statistical or financial results he/she or the nation in average performs. This is why I focus on the individual entrepreneur when defining when he/she has failed and the reasons behind it.
These reasons can be found in the first chapters of Kiyosaki (Retire Young Retire Rich):
The power of your mind and listening to yourself is the most important factor. Failing your first business is the key critical event that will test if you have failed as an entrepreneur. Listening to the loser, wimp, coward and cynic inside you will cause you to stop being an entrepreneur and seek the security of working for another business. However, choosing to listen to the winner, hero, giant and opportunist inside you will give the strength and the whys to start another business venture.
Another factor, also created by your mind is reality. By continuously expanding your reality about what you can do will help overcome obstacles that you previously thought you can’t do. The process on how to do this is by being a lifelong learner.
The third reason an entrepreneur can fail is by listening to others. By listening to cynics and poor people with limited reality you risk believing that starting a business is risky while it does not have to be. The conflict of interest is caused due to differences in reality while finding people with similar interests and reality will improve the business.
The last way an entrepreneur can fail is through giving in on their values. Everyone likes to see themselves as honest, caring, loyal and fair. But when the going gets rough it’s the thief, crook, liar and tyrant in you that can get your attention. By being able to block them out and face your creditors, investors, co-workers and clients with the right values when things go bad you won’t risk not getting the opportunity to start another business in the future.
While these factors are explained in an overly simplified way it is a way of explaining my shared views with this particular author while the direct answer to this question is my personal thought written as a quotation.
How are failed entrepreneurs treated?
Again focusing on the entrepreneur we will find the relevant factors explaining how entrepreneurs are treated and the reasons why some are treated differently than others.
Ask your creditors: The bankers’ and investors’ opinions about the entrepreneur will be dependent on how they were treated when the business failed. If the exit strategy was bankruptcy there is a great chance that the entrepreneur will have to find new creditors for a new business venture. Then again, if the small business was terminated to prevent further losses, and debts are ultimately paid these people will love you and want to hear your next business plan and idea.
Ask your subordinates/co-workers: While founding a small business with the goal of selling it with a profit might be an acceptable solution for the entrepreneur, the employees of the company might not see eye to eye. Since selling or restructuring a business might cost some employee’s their jobs it doesn’t matter how fancy the farewell party is. And those who do get to keep their jobs might have good or bad opinions about getting a new boss/business owner.
Ask your clients: The clients’ perspective on the entrepreneur goes through the product it provides. The greater the need and benefits the product fills, the more supportive the clients who used it are towards the entrepreneur wanting to start fresh. On the contrary the product can be unhealthy, addictive or in another way unapproved by the society sharing no respect towards the person enabling its distribution.
Ask your friends and family: When it comes to those who are nearest and dearest the opinion will be based on their reality. If the majority thinks entrepreneurship is risky and hard work he/she risks following their advice. If the majority thinks working all your life to make others rich is risky then this can be the entrepreneur’s reality.
In conclusion of this topic I’d like to emphasize that it doesn’t matter in what western country the entrepreneur fails his/her business. These are in my opinion the core truths that define how a failed entrepreneur will be treated and it is important to know towards whom you point the question. I don’t have first hand experience of failing a business. Neither do I know anyone in person who has, so giving an opinion of what kind of perspectives people in Finland share I acknowledge that I do not know. Yet once the entrepreneur knows, it will be based on the choices he/she as a person has made to treat the creditors, co-workers, clients and associates.
Failing entrepreneur versus failing employee
Reading through Farson & Keyes (The Failure-Tolerant Leader) about managers’ and executives‘ failure-tolerant leadership style opens many doors in the minds of idealist readers. It goes along saying that success and failure can be viewed equally. Both success and failure can be the result of human effort as well as an accident. The angle to reason with this statement should be that when resulting in a failure or a success one must analyze what the cause was and therefore what kind of response of action to give. Given these two variables there are four different outcomes and responses to give.
The task is a failure due to the lack of unified engagement to reach the goal: This being the least wanted outcome expresses that neither the leader nor the subordinate cares about the goal or how to reach it. There’s a lack of motivation or the atmosphere doesn’t encourage those with it to express themselves which means that personal interest prevails.
The task is a success despite the lack of unified engagement to reach the goal: Although sounding like an unlikely outcome this pattern can take place in organizations where the employees consist of strongly individual people with ‘do it yourself’ mentality and a highly and specifically delegated leadership model. The people take pride in doing what they do best while everyone has mixed expertise to ultimately match all components of the common goal.
The task is a failure despite the unified engagement to reach the goal: This outcome is expressed in the article as the most usual in organizations. By applying failure-tolerant leadership, employees who fail can understand that failure is part of success and failing does not mean you’re a failure. This way reaching the last outcome which is the most sought-after can be achieved with a higher probability.
The task is a success due to the unified engagement to reach the goal: When reaching this outcome leaders and managers understand not to evaluate the employees, but to engage in understanding what was good and what was bad. The subordinates are approached by genuine interest in what must be done to reach the goal while there is a sharing and brainstorming of ideas through both different and equal levels of hierarchy.
Now to analyze the comparison between failure among entrepreneurs and employees we have to acknowledge a couple of differences when applying these two people to the outcomes above. When discussing an employee’s treatment towards failure it is mainly coming from ‘higher ground’ while an entrepreneur faces treatment from subordinates and associates outside the small business. Because of this an employee has highly limited options on how to react to the treatment, whereas an entrepreneur has more freedom of choice on how to respond to the treatment. To put it simple, an employee gets paid if he/she does what is demanded and an entrepreneur gets do to what he/she wants (within legal frames) if the money that is demanded gets paid (to creditors and employees).
So what then is the difference in treatment of failure? I think none. It doesn’t matter what you do, (work or run a business) in what environment (different leadership) or with whom (different realities) you do it, the same kind of failure results in the same kind of treatment. The essential difference is in the magnitude of treatment. As an employee you are usually responsible of one person’s expectations, (the boss) while as an entrepreneur you hold the fate and faith of many in your hands. The key reason to different treatment is found in responsibility: With greater power comes greater responsibility.
Reference
Watson J. & Everett J: [1993] Defining Small Business Failure
Farson R. & Keyes R: [2002] The Failure-Tolerant Leader
Kiyosaki R. [2002] Rich Dad’s Retire Young Retire Rich
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