Who can you trust with your money?
This is the question we are considering as we work through P.T. Barnum’s book The Art of Money Getting.
This book was originally published in 1880 and is therefore no longer subject to nor protected by U.S. copyright law because the copyrights have expired.
Therefore, this book is found freely available online and the reuse of it here is permitted and may trigger content detection on the excerpts that are included for discussion.
The plan is to include excerpts and discussion through a series of posts, so there will be new content provided by me that include my thoughts on the reading to promote discussion in the comments.
Index of related Barnum Book Review posts:
We will pick up this session with BEWARE OF "OUTSIDE OPERATIONS:
THE ART OF MONEY GETTING or GOLDEN RULES FOR MAKING MONEY
By P.T. Barnum
BEWARE OF "OUTSIDE OPERATIONS:
We sometimes see men who have obtained fortunes, suddenly become poor. In many cases, this arises from intemperance, and often from gaming, and other bad habits. Frequently it occurs because a man has been engaged in "outside operations," of some sort. When he gets rich in his legitimate business, he is told of a grand speculation where he can make a score of thousands. He is constantly flattered by his friends, who tell him that he is born lucky, that everything he touches turns into gold. Now if he forgets that his economical habits, his rectitude of conduct and a personal attention to a business which he understood, caused his success in life, he will listen to the siren voices. He says:
"I will put in twenty thousand dollars. I have been lucky, and my good luck will soon bring me back sixty thousand dollars."
A few days elapse and it is discovered he must put in ten thousand dollars more: soon after he is told "it is all right," but certain matters not foreseen, require an advance of twenty thousand dollars more, which will bring him a rich harvest; but before the time comes around to realize, the bubble bursts, he loses all he is possessed of, and then he learns what he ought to have known at the first, that however successful a man may be in his own business, if he turns from that and engages ill a business which he don't understand, he is like Samson when shorn of his locks his strength has departed, and he becomes like other men.
If a man has plenty of money, he ought to invest something in everything that appears to promise success, and that will probably benefit mankind; but let the sums thus invested be moderate in amount, and never let a man foolishly jeopardize a fortune that he has earned in a legitimate way, by investing it in things in which he has had no experience.
DON'T INDORSE WITHOUT SECURITY
I hold that no man ought ever to indorse a note or become security, for any man, be it his father or brother, to a greater extent than he can afford to lose and care nothing about, without taking good security. Here is a man that is worth twenty thousand dollars; he is doing a thriving manufacturing or mercantile trade; you are retired and living on your money; he comes to you and says:
"You are aware that I am worth twenty thousand dollars, and don't owe a dollar; if I had five thousand dollars in cash, I could purchase a particular lot of goods and double my money in a couple of months; will you indorse my note for that amount?"
You reflect that he is worth twenty thousand dollars, and you incur no risk by endorsing his note; you like to accommodate him, and you lend your name without taking the precaution of getting security. Shortly after, he shows you the note with your endorsement canceled, and tells you, probably truly, "that he made the profit that he expected by the operation," you reflect that you have done a good action, and the thought makes you feel happy. By and by, the same thing occurs again and you do it again; you have already fixed the impression in your mind that it is perfectly safe to indorse his notes without security.
But the trouble is, this man is getting money too easily. He has only to take your note to the bank, get it discounted and take the cash. He gets money for the time being without effort; without inconvenience to himself. Now mark the result. He sees a chance for speculation outside of his business. A temporary investment of only $10,000 is required. It is sure to come back before a note at the bank would be due. He places a note for that amount before you. You sign it almost mechanically. Being firmly convinced that your friend is responsible and trustworthy; you indorse his notes as a "matter of course."
Unfortunately the speculation does not come to a head quite so soon as was expected, and another $10,000 note must be discounted to take up the last one when due. Before this note matures the speculation has proved an utter failure and all the money is lost. Does the loser tell his friend, the endorser, that he has lost half of his fortune? Not at all. He don't even mention that he has speculated at all. But he has got excited; the spirit of speculation has seized him; he sees others making large sums in this way (we seldom hear of the losers), and, like other speculators, he "looks for his money where he loses it." He tries again. endorsing notes has become chronic with you, and at every loss he gets your signature for whatever amount he wants. Finally you discover your friend has lost all of his property and all of yours. You are overwhelmed with astonishment and grief, and you say "it is a hard thing; my friend here has ruined me," but, you should add, "I have also ruined him." If you had said in the first place, "I will accommodate you, but I never indorse without taking ample security," he could not have gone beyond the length of his tether, and he would never have been tempted away from his legitimate business. It is a very dangerous thing, therefore, at any time, to let people get possession of money too easily; it tempts them to hazardous speculations, if nothing more. Solomon truly said "he that hateth suretiship is sure."
So with the young man starting in business; let him understand the value of money by earning it. When he does understand its value, then grease the wheels a little in helping him to start business, but remember, men who get money with too great facility cannot usually succeed. You must get the first dollars by hard knocks, and at some sacrifice, in order to appreciate the value of those dollars.
We pick up with Barnum’s well put warning:
“We sometimes see men who have obtained fortunes, suddenly become poor. In many cases, this arises from intemperance, and often from gaming, and other bad habits. Frequently it occurs because a man has been engaged in "outside operations," of some sort. When he gets rich in his legitimate business, he is told of a grand speculation where he can make a score of thousands. He is constantly flattered by his friends, who tell him that he is born lucky, that everything he touches turns into gold. Now if he forgets that his economical habits, his rectitude of conduct and a personal attention to a business which he understood, caused his success in life, he will listen to the siren voices.”
Again, we see this idea from our previous discussion in Part 4 when we were shown the lesson from the book The Richest Man in Babylon that advocated the same principle.
“Every owner of gold is tempted by opportunities whereby it would seem that he could make large sums by its investment in most plausible projects. Often friends and relatives are eagerly entering such investment and urge him to follow.
“The first sound principle of investment is security for thy principal. Is it wise to be intrigued by larger earnings when thy principal may be lost? I say not. The penalty of risk is probable loss. Study carefully, before parting with thy treasure, each assurance that it may be safely reclaimed. Be not misled by thine own romantic desires to make wealth rapidly.
This is especially true in the world of cryptocurrency where you can make a fortune overnight and now you have something you can put towards another project or some new hot ICO.
Just because it is a potentially profitable project doesn’t mean you should just throw crypto around.
Do your own research!
Find answers or risk losing it all.
Also, you should probably never take financial advice from anyone on the internet, including me.
“I hold that no man ought ever to indorse a note or become security, for any man, be it his father or brother, to a greater extent than he can afford to lose and care nothing about, without taking good security.”
This too is wisdom of the ages, but this time we meet with it from a different source.
“Be not one of those who give pledges, who put up security for debts.”
Proverbs 22:26 (ESV)
The financial backing of someone else ties you to them in a way that you will have little or no control over.
Worse over, you may be on the hook for the entirety of their debt and the interest that goes along with it.
If you yourself have no debt, it is wise to keep from acquiring responsibility for others debt as well.
Additionally, Barnum warns that relationships may be strained or taken advantage of by those asking you to pledge for them. They may make good at first, yet seek you out as an easy source of financing in the future.
Then one day, they may act out of greed or some other motive to take a deal that goes bad or may never have been good to start, and when the note comes due, it falls on you.
“Finally you discover your friend has lost all of his property and all of yours.”
What good is working for a secure sound financial future if you end up losing it all at the hand of someone else?
Furthermore, “It is a very dangerous thing, therefore, at any time, to let people get possession of money too easily; it tempts them to hazardous speculations, if nothing more.”
Why do you think they ask so many questions on Shark Tank?
Ultimately “You must get the first dollars by hard knocks, and at some sacrifice, in order to appreciate the value of those dollars.”
What do you think? Let me know in the comments below!
Next time we will pick up with and continue on with ADVERTISE YOUR BUSINESS.
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