Hacker News Reader

Comment by hkmurakami | Hacker News Reader

"The Richest Man in Babylon", which was recommended by a HNer (amongst other more advanced books) several years ago.

God please no. This book must be the most overrated piece of junk in the financial advice genre. There are literally only two things in the book that get repeated 50 times over 100 pages:

- invest 10% of your income

- invest only in things you understand or when you happen to know someone who understands them

There is zero more insightful content in this book. And even these two insights are totally lacking, because they won’t tell you what investment makes sense these days.

There was one other interesting bit of advice I recall from that book, which is to invest in things that have fallback value (forgot the exact term) in case the investment doesn't pan out. He gave the example that when the king of Babylon decreed that a new wall of iron (iirc) be built around the city, the "richest man" in Babylon recommended buying up lots of iron. If the wall got built, it would need iron, driving up the price. And if the king changed his mind and it didn't get built, other things would still need iron, so you wouldn't lose all the value in your investment. Basic hedging strategy.

I haven't read the book, but from your description it doesn't look like especially useful advice to me.

If it's obvious that a given investment has good fallback value, then the market has probably factored that in already by the time you are investing. If it's not obvious, then the tip could be superseded by the more general one: "if you have information that most people don't and it makes you think that an investment will work, then go for it". But that is rather obvious, and the problem is to acquire that kind of information.

Although the key lessons can be written in a few bullet points, the story helps the reader internalize the teachings.

I think we misunderstimate the impact a few fundamental lessons on finance can do to a person’s life. Especially when the person is oblivious to it.

I’ve seen it first hand multiple times now. I give away this book all the time and and have seen nothing but good come from it.

It’s rare to see the word misunderestimate in the wild. Mind if I ask was this a mistake, or intentional irony, or is this word has just made its way into the general vocabulary now?

And to be less irrelevant, I do agree with you that a simple rubric that can be internalized by compelling stories can be very powerful in a person’s life.

I find value in the narrative since your average retail investor can't remember principles without anchoring.

If someone wants more concrete advice I usually point them to David Swensen.

Reply on news.ycombinator.com