Want to get rich? Read fiction; 5 financial lessons from Dickens, Tolstoy, Eliot, and other novelists

Nov. 23, 2013, 7:55 a.m. EST

Want to get rich? Read fiction

5 financial lessons from Dickens, Tolstoy, Eliot, and other novelists

By Jeremy Olshan

In times of money trouble, smart people turn to a financial adviser — or, if the creditors, repo men and SEC are already pounding at the door, a spiritual one, perhaps. I read books.

By this I don’t mean anything like “The Science of Getting Rich,” “The Automatic Millionaire,” or the countless similar titles adorning many an Ikea bookshelf. No, I’m talking about fiction. Novels. Nineteenth century novels, mainly. Dickens is my financial adviser. I’d rather spend an hour with Edith Wharton than with any graduate of Wharton.Granted, if the keys to building wealth and a sound financial plan were really to be found in literature, then universities would mint far more English Ph.Ds. than MBAs. They don’t. A degree in English was never exactly a blue-chip investment, but these days people seem to think it’s a penny stock. Junk. And it’s hard to argue, in terms of career moves at least, that one isn’t better off (and likely to be more well off) as a bookkeeper than a book reader.

Yet there is money in books. Literature has always been a vessel for nuggets of practical wisdom — Homer’s epics contained a Wikipedia’s worth of ancient schooling, oral poetry being the original textbook. Fiction provides us “equipment for living,” in the words of the theorist Kenneth Burke, an assertion supported by a recent study linking literary reading to greater empathy.

Don’t expect, however, to find explicit tips on spending, saving, and investing baked into the texts like messages in fortune cookies. Novelists and dramatists seem suspicious if not disdainful of those who dole out advice about money — which is perhaps why, when they do offer worthwhile personal-finance counsel, the words tend to be put into the mouths of imbeciles.

“Neither a borrower nor a lender be,” Shakespeare writes in “Hamlet.” But this monetary Monroe Doctrine is espoused by the blowhard Polonius in an absurd speech (riddled with cereal-box platitudes) to his son Laertes.

In “David Copperfield,” Dickens shares the seemingly sensible sentiment one should live within his means: “Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.” This line is delivered, in between stints in debtors’ prison, by the comical Mr. Micawber.

“The person who possesses wealth is not made happy by having it but by spending it, and not spending it haphazardly but in knowing how to spend it well.” This isn’t advice from Jean Chatzky or Suze Orman, but Don Quixote.

So if literature offers no pecuniary prescriptions and might send overzealous readers off tilting at windmills, why should seekers of financial advice invest any time in it? Based on my own quixotic reading, and after putting the question to both financial pros and professors of literature, there are at least two reasons, I think:

First: Novels demonstrate the power the almighty dollar wields over our emotions, thoughts and behavior — and reveal the ripple effect our dealings with money can have on those around us. Second: Fiction is great fun. As much as I enjoy reading psychologists or behavioral economists like Daniel Kahneman and Nassim Taleb, or even the latest Malcolm Gladwell bestseller, no account of psychological experimentation or discourse on the human mind and its failings has ever wedged itself in my memory like the foibles of Micawber and Quixote.

So here, with the help of people who know a lot more about money and books than I do, are five financial lesson plans for readers.

1. Read Defoe to understand money.

In the 1980s, Don Phillips was working toward a Ph.D. in English at the University of Chicago when he, like so many graduate students before him, suffered a crisis of confidence. “I think it was around the time we stopped reading literature and started reading literary criticism,” he says. “I thought to myself, how can they sap all the fun out of something this fun.” So he quit academia. “I put the great novels aside and tried to get a job writing about investments,” he says.

Today he’s Morningstar’s head of global research, and uniquely qualified to comment on this story. His passion for literature continues to inform his approach to investing, he says, and more important, his approach to clients, who being human, allow emotional whims to sabotage their financial interests.

Perhaps there’s no better illustration of man’s irrational relationship with money, he says, than the scene in “Robinson Crusoe” not long after the hero’s ship is smashed to pieces on the shores of a strange and apparently deserted island. Crusoe scavenges the wreckage for anything of use, collecting knives, tools, food and even booze, when he happens on a drawer full of gold coins:

I smiled to myself at the sight of this money: “O drug!” said I, aloud, “what art thou good for? Thou art not worth to me, no, not the taking off the ground; one of those knives is worth all this heap; I have no manner of use for thee; e’en remain where thou art, and go to the bottom as a creature whose life is not worth saving.” However, upon second thoughts, I took it away.

“He knows that the money is meaningless, worthless to him in his situation, but he cannot help himself,” Phillips says. “This is precisely what the financial world gets wrong. Intellectually, we understand that there are more important pursuits, that money is nothing but a means to an end — to support the lifestyle we want — and not a goal in itself. But Wall Street turns it into a game in which we have to amass bigger and bigger piles than the ones we already have.”

It should be noted that Crusoe never would have ended up in his particular mess, never would have gone to sea in fact, had he been content with what he had, had he taken his father’s advice and lived a middle-class existence. (Though he might have been a poorer man in countless other ways.) It also should be noted that in the end, Crusoe was right to take the gold. Though it was useless to him during his years on the island, it came in quite handy, decades later, when he did return to civilization.

2. Read Trollope and Dickens to spot the next Bernie Madoff.

There are as many financial role models in fiction as there are sensible lovers. What could be more boring? “You’re not going to find balanced, thrifty characters for whom money is just a means to an end,” says Phillips. “But there are plenty of cautionary tales.”

Money wreaks havoc in the lives of characters, arriving (or departing) almost magically at the opening of many 19th century novels. In “Great Expectations,” poor Pip receives a windfall from a mysterious benefactor, who turns out to be the criminal Magwitch. In “Nicholas Nickleby,” meanwhile, the title character’s woes begin after his father loses his life savings in a bad investment.

The run of luck went against Mr Nickleby. A mania prevailed, a bubble burst, four stock-brokers took villa residences at Florence, four hundred nobodies were ruined, and among them Mr Nickleby.

Rereading these Victorian novels, I’ve been struck, in a way that never occurred to me in high school or college, by how often the plots turn on bad financial decisions. Like Sidney Kugelmass in the Woody Allen short story “The Kugelmass Episode,” I imagine getting transported into the books — if not to seduce the heroines, at least to set their finances in order. I’d save Pip from squandering his money by taking him to the Sudden Money Institute, which advises lottery winners and rookie athletes about newfound wealth. And I’d spare the Nickleby family hundreds of pages of suffering just by diversifying their portfolio.

I began to wonder if reading novels like a CPA rather than an MFA was just a side effect of editing too many personal finance articles, or if I was losing my mind — and just a few Dickens books away from galloping off to La Mancha. Though he couldn’t speak to my sanity, Harvard historian Niall Ferguson assures me the money missteps had been crucial to the novels all along. “There had never been such an accumulation of financial wealth as happened in the 19th century on the back of the industrial revolution,” he says. “That is why there are so many explicit discussions of money in 19th century European literature.”

Many Victorian novels were serialized in the same publications that covered the various financial crises, bubbles and railway booms of the day, and often ran side by side with articles on say, monetary policy, says Nicholas Dames, professor of comparative literature at Columbia University. “The national economy seemed to fluctuate more violently than it had before, and it became one of the offices of the novel to explain how these things could happen,” he says. “The narratives teach us how no one is exempt from financial peril, even if personally blameless.”

These torrents of new money, along with the mania for speculation in railroads and other investments, also birthed a new breed of villain: the swindling financier. Bernie Madoff has so many antecedents in literature that one cannot help but conclude his $50 billion Ponzi scheme never would have come off had more people simply done their homework, which is to say, had they read Trollope’s “The Way We Live Now” and Dickens’s “Little Dorrit.”

Both of these books feature swindlers in the Madoff mold. Trollope’s Augustus Melmotte — note the name even starts with the letter M and features a double consonant — worms his way into London Society much the way his real-life counterpart would more than a century later in Palm Beach. Dickens’s Mr. Merdle — another M name (and a punny one at that) — murdered his victims’ money the same way Madoff made off with his.

“The Way We Live Now” begins with an enormous ball thrown by the financier, which he persuades the elites — royalty — to attend in spite of the air of mystery surrounding his fortunes, and rumors that he “was regarded in Paris as the most gigantic swindler that had ever lived.”

He is one whom we would not admit into our kitchens, much less to our tables, on the score of his own merits. But because he has learned the art of making money, we not only put up with him, but settle upon his carcase as so many birds of prey.

Melmotte’s money dissolves concerns about his background. He may not be a gentleman, but he’s a “great man.” With this golden aura and the endorsement of a few key figures (Madoff played on affinities within the Jewish community in much the same way), his victims essentially come to him. He has little trouble selling shares in “the Great South Central Pacific and Mexican Railway,” the greatness of which few even bother to question.

Will investors ever learn from these swindles and Ponzi schemes? After Mr. Merdle’s fraud unravels in “Little Dorrit,” Dickens suggests they will not. Arthur Clennam, languishing in the Marshalsea debtors’ prison having lost everything in the swindle, says he hopes others can avoid his fate. Ferdinand Barnacle, a government bureaucrat, smiles.

‘My dear Mr Clennam,’ returned Ferdinand, laughing, ‘have you really such a verdant hope? The next man who has as large a capacity and as genuine a taste for swindling, will succeed as well. Pardon me, but I think you really have no idea how the human bees will swarm to the beating of any old tin kettle; in that fact lies the complete manual of governing them. When they can be got to believe that the kettle is made of the precious metals, in that fact lies the whole power of men like our late lamented.

3. Read Eliot and Flaubert before swiping that credit card.

A pack of cigarettes comes wrapped in warnings from the surgeon general. But when a new credit card arrives in the mail, attached to a congratulatory letter with that gummy glue, there’s no warning from Ben Bernanke that swiping may be bad for your wealth.

Illustration of Madame Bovary by Gustave Flaubert (1821-1880)

Consumer advocates bemoan the fact that few bother reading the reams of fine print detailing the fines, fees and destructive potential of such ready credit. Frankly, they’d be better off reading two of the greatest novels ever written: “Madame Bovary” and “Middlemarch.”

Claiming that Madame Bovary is about the perils of credit cards sound like saying “King Lear” is about bad estate planning. However, Emma Bovary isn’t brought down by cheating on her doctor husband, but by racking up ruinous amounts of debt.

The sly and slimy merchant Monsieur Lheureux, plays Amazon.com (NASDAQ:AMZN)   and MasterCard(NYSE:MA)   to Madame Bovary, offering her an array of high-end wares at even higher interest rates. “I don’t need anything,” she tells him at first, but as he continues to lay out lovely scarves and other trinkets she cannot stop herself.

“How much are they?”

“A trifle,” he answered, “a mere trifle; but there’s no hurry; whenever you like.”

She ends up sinking further and further into debt, using one loan to pay off another, until she becomes so overwhelmed by what she owes she cannot bear to even add it all up. “Sometimes, it is true, she would attempt some calculations,” Flaubert writes. “But she would discover things so exorbitant that she could not believe them.” I, for one, can certainly relate, even if my own mishandling of credit card and student loan debt in my younger days never drove me to swallow arsenic.

The dangers of easy credit are also a thread in George Eliot’s “Middlemarch.” As in “Madame Bovary,” one of the plots concerns the materialistic wife of a country doctor, a tale Henry James described as “a tragedy based on unpaid butcher’s bills, and the urgent need for small economies.” That quote was brought to my attention by Rebecca Mead, a staff writer with the New Yorker, whose forthcoming book, “My Life in Middlemarch,” merges the tribulations of her own life with her reading and rereading of the novel. (Kugelmass would be proud.)

Lydgate marries the gorgeous, if shallow Rosamond, who demands a home and lifestyle well beyond what he can afford. “She’s the embodiment of early 19th century consumer culture, with her desire for the right carpets and tableware,” Mead says. “You can just imagine the damage she’d have done in an era of online shopping and proliferating credit-card offers.”

Lydgate is no innocent here. His desire for a wife like Rosamond is no less materialistic than her desire for nice furniture. Eliot draws a comparison here between our romantic and financial mistakes. Toward the end of the novel, the good doctor eventually realizes he might have chosen a very different mate.

He was beginning now to imagine how two creatures who loved each other, and had a stock of thoughts in common, might laugh over their shabby furniture and their calculations how far they could afford butter and eggs.

4. Read Dickens to learn the difference between saving and hoarding.

When his nephew wishes him “Merry Christmas,” Ebenezer Scrooge, the most famous of all money grubbers (real or imagined), sees red — ink.

‘Merry Christmas! What right have you to be merry? What reason have you to be merry? You’re poor enough.’

‘Come, then,’ returned the nephew gaily. ‘What right have you to be dismal? What reason have you to be morose? You’re rich enough.’

The exchange, and the “Bah. Humbug!” Scrooge exclaims in response, may seem too famous, too ingrained in popular culture to have the power to convince any modern-day misers that they should change their ways.

But Ted and Brad Klontz, a father and son team of financial psychologists disagree. Working with financial planner Rick Kahler, they even wrote a book about it, “The Financial Wisdom of Ebenezer Scrooge.” The three ghosts that visit Scrooge are in essence “three therapists,” who help him see the error of his ways, says Brad Klontz, who adds he uses a similar, albeit less supernatural approach, with his own clients. “We see people who are very successful, they have millions of dollars in the bank, but refuse to even go to the dentist, and won’t take a vacation,” he says. “That’s how anxious they are that they don’t have enough.”

Marley’s ghost, from Charles Dickens: A Christmas Carol. With Illustrations by John Leech. London: Chapman & Hall, 1843. First edition.

The generation that grew up during the Depression, for instance, internalized the notion that they should hoard and save everything they could. Klontz calls this a “money script.”

These beliefs are not wrong, but once they’re ingrained, we have trouble letting go. “When the reality changes — when it’s no longer the Great Depression — people cannot shake the old beliefs. That’s when it becomes dysfunctional,” Klontz says.” Scrooge is terrified of change, and needs to be pushed to see how the beliefs forged during his childhood are ruining his present and likely his future.

5. Read Tolstoy before heading to the car dealership.

The old poker player’s adage that if after a few minutes at the table you can’t tell who the sucker is, it’s you, is more or less true in every financial transaction. Whether it’s the purchase of a horse, a car, a stock or a house, there’s a fair chance either the buyer or seller is getting the shorter end of the deal.

This is why it’s essential that before buying — or selling — anything, one read “Anna Karenina.” Though the Tolstoy novel is better remembered as, yes, another novel of adultery, it’s also a highly useful manual for negotiating with car salesmen.

Stepan Oblonsky, a Moscow nobleman, visits his friend Konstantin Levin’s country estate, and tells how he sold a parcel of land — a wood — and wants to know whether he got a good deal.

Levin replies with a simple question: “Did you count the trees?”

“How can I count the trees?” Stepan Arkadyich said with a laugh, still wishing to get his friend out of his bad mood. “To count the sands, the planets’ rays, a lofty mind well may…”

“Well, yes, and Ryabinin’s lofty mind can. And no merchant will buy without counting, unless it’s given away to him, as you’re doing. I know your wood. I go hunting there every year, and your wood is worth two hundred roubles an acre outright, and he’s giving you seventy-five in installments. That means you’ve made him a gift of thirty thousand.”

In other words, only a fool buys or sells something without knowing what it’s really worth. It sounds simple, but I’ve been that fool many times. How often do we fail to count the trees? How often do we sit with the car salesman and not know the real value of the car?

So always count the trees. Count them with calculators, with Excel spreadsheets, or with iPhone apps, if you must. Or count them in their ideal form, after they’re churned into pulp and bound together as the pages of a good book.


About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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