Ralph Waldo Emerson's guide to getting rich
If you thought he was just a tree hugger, you're dead wrong.
I never expected to receive business advice from someone so close to Thoreau. You know, the guy who lived in a cabin next to Walden pond and farmed beans for two years. When I decided to read Emerson’s essay titled “Wealth”, I was expecting to find an argument denouncing money and material possessions, but instead I found a 19th century translation of Rich Dad Poor Dad.
Emerson believes in the sort of capitalism that would make Adam Smith blush. If Thoreau believes you should spend less money so can read more books and stare at trees, Emerson believes you should spend less money so you can reinvest more. He believes that the frugality proposed by people like Thoreau is a pointless ask for most men:
it is of no use to argue the wants down: the philosophers have laid the greatness of man in making his wants few, but will a man content himself with a hut and a handful of dried pease? He is born to be rich.
Wow, no wonder their friendship was rocky.
According to Emerson, wealth is meant to better society. He believes that the ingenuity of merchants and business people are what brought about all the advances of modern civilization. Phones, cars, computers, etc. are all immeasurably useful to us today and each the result of a speculative madman.
The truly wealthy are those who have the power to execute their ideas. Power to give legs and feet to their designs. In a way, its own kind of freedom. These people are able to turn capital into a product/service people need and jobs for others. In other words, a capitalist’s purpose is in providing value to many:
For he is the rich man in whom the people are rich, and he is the poor man in whom the people are poor; and how to give all access to the masterpieces of art and nature, is the problem of civilization
In order to create value, you must utilize money properly. If the end is to create value, then money is the means to that end.
The weak are those who become corrupted by the means and never reach an end. They become obsessed with making money rather than creating value. Wealth is not determined by your income. Rather, it is a system of how money is earned and spent. Those who seek to spend money on pleasures are not wealthy, both because they spend their money foolishly and they are not looking to create value.
In order to create real wealth, you must be ruthless with how you treat your money. You must command the means, rather than be compromised by them. Here are Emerson’s tips on how manage your capital with an iron fist:
1. “Each man’s expense must proceed from his character. As long as your genius buys, the investment is safe, though you spend like a monarch”.
Spend your money in a way that leverages your strengths.
Each man has some disposition that allows them to do something easily that others find very difficult. Once you identify this, you must focus all of your money and attention on leveraging it. If your skill is cooking, focus your spending on opening a restaurant, buying supplies, hiring employees, etc.
This point seems obvious, but there’s another side to it. By investing in your own talents, you must also forgo spending on all other, unnecessary expenses. Particularly, outward shows of success. When people have a moderate amount of success, they are tempted to spend on traditional status symbols, because now they can afford it.
But not you. You must not mind appearances.
This requires a certain degree of self confidence. Confidence to commit to your goals without making it obvious to others. Confidence to say that you don’t need fancy clothes, expensive meals, and a magnificent house because that money would be better spent on your own talents.
Once you have strong self awareness, impressing others is no longer necessary. Vanity is expensive, so unless you want to be a well dressed poor person, I suggest you set your sights somewhere other than the Hollywood Hills.
2. “Spend after your genius, and by system”
In order to build wealth, you must be systematic with how you spend your money. You must always make sure that you spend less than you make, and you are always looking for ways to reinvest unspent cash.
Fix your expenses at a sufficiently low number. Then, take the excess money not spent and invest it in things that can generate more wealth. Importantly, this applies no matter how much money you make. If you suddenly find yourself with a lot of money, you must continue to fix your expenses at a low number. Give yourself room for moderate comforts, but keep it low.
It’s very simple, but people always seem to forget that capital is not the end. Capital is the means to the end.
As I’ve said, if you spend as much as you make, you’re just a poor person with fancy clothes. Don’t fall into the trap.
Hoarding all your money is also foolish. Saving towards retirement is one thing, but letting money rot in a bank account is a waste. Take that money and do something with it. If you really don’t know what to do with the extra money, donate it to a good charity. They will use it a lot better than you.
3. “The rule is not to dictate nor to insist on carrying out each of your schemes by ignorant willfulness, but to learn practically the secret spoken from all nature, that things themselves refuse to be mismanaged, and will show to the watchful their own law.”
Translated into English: work smart not hard.
There is always a best way of doing things. Even if you’re doing something that has never been done before, nature has set out a right way and a wrong way of doing it. If all you care about is the “grind”, you will be met with more challenges than is necessary.
Instead, stay aware and look for ways to improve. Don’t be afraid to change strategies. Yadda yadda yadda basic stuff you’ve already heard before.
4. “Look for seed of the same kind as you sow, and [do not] hope to buy one kind with another kind”.
This one is so important, because people refuse to believe it. So many people suffer because they do not follow this small piece of advice.
Many people have an idea of what they would like to do in life, but feel that they need to do something else first in order to justify that lifestyle. Usually it’s making money.
If you want to be a poet, don’t go to law school so you can build a nest egg first. That’s a one way ticket to hating your life. Instead, you should shut the door and start writing right now.
Similarly, if you want to amass large amounts of wealth, you should start investing in things that will generate wealth. But if you want to have a happy family life, close friendships, a dog, and other cute shit like that, don’t try to be the monopoly man.
God has shown you the price, stop haggling over it.
5. “All things ascend, and the royal rule of economy is that it should ascend also, or, whatever we do must always have a higher aim”.
The work you do in the world is an extension of your body. No matter how noble your work may seem, if it is merely meant to make you money, the work will reflect that.
Making money is one thing, but it is pointless if you spend it all on pleasures. If your goal is to create value, then reinvesting that money should be simple and natural. If however you merely seek to make money, then the temptation to spend it on frills will be too much, even if spending for pleasure was not your explicit intention.
Never forget that money is merely a means to the end, not the end itself.
The true thrift is always to spend on the higher plane; to invest and invest, with keener avarice, that he may spend in spiritual creation and not in augmenting animal existence.