The wisdom of the Wise on Making, Saving, Investing, and Enjoying your money.

Ignorance, Confidence, and Filthy Rich Friends: The Business Adventures of Mark Twain, Chronic Speculator and Entrepreneur, by Peter Krass (New Jersey: John Wiley & Sons, 2007), 278 pp., documented, includes index.

Many of us imagine, "If I just made $10,000 more per year, I'd be financially set." But Mark Twain's life demonstrates that even millions in income can't save us from the devastating impact of get-rich-quick schemes and uncontrolled spending. Studying his successes and failures in personal finance and business can instruct and warn us today.

This book is well-written and reads quickly due to its smaller dimensions, frequent subtitles and many text boxes. The subtitles are especially helpful in that they often crystallize the point that's about to be made in the text, such as "A Willingness to Listen to Others--As Painful As It Is--Yields Benefits." Thus, the subtitles help me to focus on what I can learn from Twain's remarkable life, rather than passively lose myself in the story.

Here are some of my takeaways:

Beware of Materialism

We know Twain for his books: Huckleberry Finn, Tom Sawyer, etc. But Peter Krass reveals Twain, not as a passionate writer who just happened to make it big, but as a passionate materialist who saw writing as a way to get filthy rich. According to Krass, Twain's letters show him "motivated by a relentless desire to accumulate great wealth." (p. 3)

By way of contrast, Stanley and Danko (The Millionaire Next Door) found that "prodigious accumulators of wealth" tend to be very conservative in their spending, not being concerned about an outward show of wealth. Twain was the opposite, and his materialism wreaked havoc with his personal finances.

Here are the broad strokes of the story.

As a young man, Twain landed a dream job as a Mississippi Riverboat pilot, a highly respected and lucrative profession, (p. 20) making more in a month than unskilled factory workers made in a year. (24) But Twain longed to get rich more quickly. Thus, he left piloting to mine for silver and purchase stock in silver mines. This long-shot stripped him of all his own money and his friend's invested money before moving on to his next big idea: writing.

For Twain, writing stories didn't spring from the driving passion to write that defines so many authors. Rather, it was simply a way to make big money. In a letter to "Folks," he admitted,

"But I'd made up my mind to one thing--I wasn't going to touch a book unless there was money in it, and a good deal of it." (65)

He quickly established himself as an extremely successful author, commanding huge sums for his book manuscripts, articles and speaking engagements. Now he had abundant resources and fame. But that wasn't enough. Not content to entertain high society, he longed to be high society.

He bought a mansion and hired servants. But to truly walk as equals in the circles he longed to inhabit, he needed mega-bucks. To get them, rather than concentrate on his writing, he looked for the big score--the investment or business venture that would quickly catapult him into enough riches to sustain his extravagant lifestyle and secure his social status in high society.

One after another, his schemes devoured his money:

Financing a newfangled typesetting machine that broke down too easily.

Financing a new type of steam engine which never came together.

Financing and running a new publishing company that started strong but failed in the end.

Reflecting upon his years of experience in business, he advised people,

"My axiom is, to succeed in business: avoid my example." (219)

When he reached his mid-fifty's, he found himself not only broke, but in debt to over 101 creditors for over $144,000. (How much would this be in today's money?!?) Here's a man who could have easily declared financial independence in his 40's, had he simply lived beneath his means and invested more safely for the long haul. Instead, he found himself depressed, panicky and desperate. (173, 182, 184). In 1893 he wrote,

"I have never felt so desperate in all my life--and for good reason, for I haven't a penny to my name. (188)

His dear wife, Livy, confided in a friend that she felt her life was a failure and sometimes wanted to die. (205) He lost his home, destroyed many relationships, endured public humiliation, and put his wife through emotional distress during her time of physical decline. Why? As far as I can tell, the root was his insatiable desire for great wealth.

It reminds me of the Apostle Paul's largely ignored admonition:

"Those who want to get rich fall into temptation and a snare and many foolish and harmful desires, which plunge men into ruin and destruction."

Work Hard

For a time, he worked hard at his writing. But for years he'd neglect his writing to travel or work on new money-making schemes. The latter were often ventures that he wanted to finance from a distance rather than manage up close. This often led to ruptured relationships, despising and blaming the managers and inventors for their failures. Most successful business owners I know (and that Stanley and Danko surveyed) threw themselves completely into their businesses. I don't see this in Twain.

Get Wise Counsel and Submit to Wise Mentors

Fortunately, Twain's financial story ends on a happier note. He put himself under the authority of some wise businessmen and his wise wife. She advised him to not resort to paying creditors back fifty cents on the dollar, but to retain his reputation by paying back his debts in full over time. His counselors worked out terms of payment and arranged for him to retain the rights to his books, so that after the economic downturn, his books began to once again pull in a significant income. Once back on his feet, he continued to get the advice of trusted advisors before making important business decisions.

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Ignorance, Confidence and Filthy Rich Friends, by Peter Krass, Book Summary