Adam Smith – How to Make Money

Adam Smith: virtue + self-interest = success

Adam Smith wrote about economics, but also self-actualization.  If you are going to study about making money, why not meditate on the wisdom of the ‘father of economics’, he spends his whole life thinking about the subject. He was not exactly a self-help guru,  and he wrote in verbose 18th century English. Smith’s writings were about individual action guided by moral philosophy and its effect on the whole of society in aggregate. However, if you read works he has insights about how to achieve success, in a way that is contrary to modern wisdom on the subject. I prefer him over most  21st century writers on how to make money.

If you want to know how to make money, consider the works of Adam Smith.

scenes from the life of Adam Smith
This place of Adam Smith’s birth – Kirkcaldy, The place of his education – Glasgow, the place of his teaching – Edinburgh from left to right.

When speaking about the economy as a whole Smith was concerned with how our individual decision come together and create the world we see around us. Therefore, your individual decisions are important in shaping the world. This hippie talk of the 1960s and its echoes of it today really is true.

If you want to change the world start with your actions, change it on a small scale, on a local scale and it will reverberate through the collective unconsciousness of society. Your choices are the lifeblood of the world. His advice was to make your choices based on self-interest guided by something higher, an enlightened understanding of virtue and understand why you make choices and what motivates you and others.

My premise is if you increase this awareness, about how people interact and exchange in society, it can help you make money. You will be thinking not just about the generation of income, but more about satiating a demand that people will love you for, and this often equates to rewards in the market. It is basically a shift in focus away from monetary reward towards self-actualization that has the unintended consequence of wealth.

I know it is hard to do. You have to pay the bills and you need money fast. However, if gain a greater awareness of what motivates people, you can develop ideas that align with your talents to offer something profitable.

Therefore, Adam Smith’s books The Theory of Moral Sentiments (1759), and An Inquiry into The Nature and Causes of the Wealth of Nations (1776), were books not only about economics but also guide to how to live a good happy life.  In summary, The Theory of Moral Sentiments was about virtue and The Nature and Causes of the Wealth of Nations was about money. Virtue plus money is a winning combination in life.

The Theory of Moral Sentiments was about reminding the reader why we act as we do

Many people who have not read The Theory of Moral Sentiments believe Smith was about capitalism, self-interest, and pursuit of happiness through economics means. Words like greed and selfishness have negatively been attributed to his works. This is a misinterpretation that puzzles me.

Adam Smith loved and lovely
If you want your money making life to go well, take Adam Smith’s advice, to strive to be loved and lovely.

Adam Smith was a moral philosopher. He addressed questions about life, and how the Great Architect designed the universe, using terms of the enlightenment. He observed and deducted.

Man naturally desires, not only to be loved but to be lovely; or to be that thing which is the natural and proper object of love. – TMS Chapter II

This is in contrast to what we think about utility maximization, utility function, preference curves, demand curves. It was this innate desire to be loved and respected in a human way, rather than a monetary way, which the Great Architect encoded in our DNA. This desire to be love is a driving force in human action. It is not the same as being famous in a Hollywood way, rather, to be admired in a virtuous, altruistic way, even if the expression of your labor is through the market place.

Therefore to achieve success, in  The Wealth of Nations Smith believes each person should pursue their self-interest, but this was enlightened self-interest.

It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.

What this means was something else than what is attributed to Adam Smith. It is not about pure greed, but if you read the totality of his writings, you realize it is about self-actualization.  The butcher, the brewer, and the baker are doing this works because they enjoy it, it makes them happy, they have a talent for it, and it contributes to society. They enrich their lives and the world around them.

Adam Smith's virtue leads to wealth
Recreate the world around you, through enlightened self-interest and virtue and the world will be a better place.

Adam Smith did not recommend the relentless pursuit of wealth, but rather the relentless pursuit of virtue and service to others in ways that you are free and fit to do and the economic rewards of the market will enrich you.  It is not just a do what you love and the money will follow, it is doing what you love, yet in a benevolent way and use your clever mind to find ways to profit. Become intimate with the market, prices and the way it operates and you will have an edge. Think about economic ideas like opportunity cost and margins and you will have an advantage over your competitor.

The unintended consequence of freedom is the Wealth of Nations and your personal wealth.

  • Take away is: pick a way to make money which you are passionate about but also helps others so you will be loved. Do not think about just selling something on eBay or getting a job in government because of the benefits, or a job in banking because it pays, rather be creative and compassionate. Think of something that really helps people.  For example, better would be creating homes with new building material that is inexpensive and non-toxic so struggling families can have inexpensive quality housing.

An unintended consequence of virtue might also be personal wealth if you are honest with yourself and do not deceive yourself.

This self-deceit, this fatal weakness of mankind, is the source of half the disorders of human life. – Theory of Moral Sentiments III.4.6 158

You need to be honest about your passions and ways in which you can market this to others.

His writings are a combination of Dale Carnegie’s How to Win Friends and Influence People and someone modern Zen businessman guru that says ‘do what you love and the money will follow’.

Virtues of Wealth

The man who acts according to the rules of perfect prudence, of strict justice, and of proper benevolence, may be said to be perfectly virtuous. – TMS III

If you act according to so some basic virtues, you will be loved by others, you will lubricate the wheels of business, maybe negotiate better terms of trade, have repeat customers, get better reviews on the web and feel good about yourself. It can not be a false virtue of smiling to the customer, but rather, and true transformation of self.

  • Take away: If you are virtuous in an authentic way, the business would open the door for you, you could never get from a self-help book.

These are the virtues Adam Smith recommends:

  • Propriety – Meeting the expectations of the people you interact with. Not shocking them or surprising them in a negative way. This seems like an outdated virtue. This virtue includes modesty in financial success. You would share this with a close family member but not someone that it would create jealousy with. People today do not understand propriety as it is more the 18th-century expression. It is proper behavior. I think Adam Smith’s virtue of Propriety is to be equated with authentic humility.
  • Prudence – Spending your time wisely and taking care of yourself well. Do not be on snap chat and Tinder, gadgets, rather think about how you spend your time.  Smith said to be on guard against “frivolous trinkets of utility”. Adam Smith used the watch for example. He noted that people had more expensive watches were not more punctual. Be prudent in your expenditures and in your use of time and things. A specific example in my life is I have a large organic garden. Instead of spending money on soil and mulch, I ask tree companies for free wood chips, that I subsequently use for much and compost. If you are prudent you can find ways to do things for less.
  • Justice – There is social justice and personal. Basically, this does not harm others when you look at this on a personal level. Do not steal or hurt others physically.
  • Benevolence – This means I am going to help others.  Smith calls this virtue ‘lose, vague and indeterminate’, it is harder to do, but generally be helpful to those around you. I think Google initially said ‘do no harm’ and now has said they want to ‘do good’. This is a specific example in the business of Justice and Benevolence in operation in the business. It is debatable if they do that, but generally yes.
prudence as a financial virtue
Be prudent in your use of things and time – Adam Smith’s recommendation. With foresight, he used the newest watch as an example.

Adam Smith the Deist

Adam Smith believed the Creator put worry about what other people think of us, to guide and shape civilization in a positive way. If this was not in there we would simply pursue selfish activities. Remember Smith was a Deist (debatable), rather than a Christian. So he was writing about enlightenment God of the philosophers, rather than a religious call for transformation. He did not set out to create another Bible, but rather on his observations of what worked in the realm of business. Since he grew up in the Church of Scotland, Smith’s writings basically align with Christian virtues in his Theory of Moral Sentiments, just the ones with an economic effect.

Therefore, want to actualize ourselves not just in purely self-driven ways, but ways that are within the parameters of society’s recognition, will make others feel good and you feel good as that is the way the Great Architect designed it.

The Paradox of virtue – If you step back for a moment this will more often than not align with monetary reward, however, this can not be your goal or your virtuous goal of self-actualization would be a false pretense. Rather your mantra in once sense should be: ‘virtue is its own reward’.

It is a hard message to swallow in a time when self help gurus in their homilies are tell you to go for the gold. Further, many people claim you have to cheat or be ruthless to get ahead. I would say I know a lot more software engineers who have a nice life, than bank robbers, or corrupt bankers.

To make money with inspiration from Adam Smith – look at how nations generate wealth

Plato wrote about a city-state, a country that was ruled by a philosopher-king.  This was a metaphor for a man, a man ruled by his sense rather than his appetite drives.  Adam Smith wrote about nations and countries and an optimal way for countries to get wealthy.  From this, you can also extrapolate to your own personal situation based on the system in which countries get rich.

Adam Smith’s countries make money by creating something of value.  Actually creating something, not just services.  The Austrian economists did not agree with Smith on this point.  Austrian economists believed services were an integral part of the whole production process.

However, lets start with Adam Smith.  Smith’s basic idea was a county should create something and sell it internally or externally, something of value.  So what does that mean for you? It means that you should not focus on ‘how to get rich quick’, how to make money on the Internet’ by selling someone else’s product, you yourself need to produce, to create to make something of value.

So how do Adam Smith’s writings translate into personal wealth?

Choose a passion that you think will benefit yourself and others.  For example, you might want to skip traditional career methods.  Entrepreneurs statically make the most money. Then choose something you are passionate about.

Jean-Martin Fortier –  With his wife he has developed a bio-intensive form of organic agriculture that is profitable on just over an acre. He has enriched those around himself and his family.

Linus Torvalds  – who championed Linux, with his passion for the kernel he developed an operating system that is used as the basis of much of computing today. He also personally has enriched his life.

Cressida Cowell – transformed her childhood fantasies and imagination when living on an island in the North Atlantic into captivating stories about Vikings and Dragons.

Lauren Daigle  – who has a deep sultry voice, yet she sings music about the message of God.

Mark Biernat – That is me, your humble author, I am writing a language program for the Amish language. It is a fusion of my passion for languages, technology, the Amish and American culture. I am not counting the money, rather, focused on creating something of quality for others to enjoy.

God gives each of us a gift. With the freedom that exists in the world today, and a basic educational structure, anyone can transform their lives into the service of others by pursuing their enlightened self-interest, which is self-interest that is aware and conscious of the world around you.

If you want rags to riches story, I believe you can build off Adam Smith’s insights and economic theory, to make your own personal life wealthy in an honest way.

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