I’ve been reading “The Adventures of Huckleberry Finn” recently. Aside from being a great book in general, I stumbled across a great little bit of How Not to Invest, shall we say, in a conversation between Huck and Jim.
They are talking about being rich, and Jim says he was rich once. He had 14 dollars, but lost it all speculating.
“What did you speculate in, Jim?” Huck asks.
“Well, first I tackled stock.”
“What kind of stock?”
“Why, live stock – cattle.”
Jim says he paid 10 dollars for a cow, but that it soon died. He didn’t lose everything, mind you, as he sold the carcass for $1.10.
He still had about 5 dollars left, so he invested it with a “bank”. The bank was actually just a one-legged farm hand who promised 4 dollars interest at the end of the year for every dollar invested. Jim invests 5 dollars and is promised 35 dollars in one year’s time.
Jim figures the 35 dollars is a sure thing, so in order to “keep things moving” he decides to buy a boat for 35 dollars from his friend, Bob, on credit and promises to pay in a year.
It’s unclear if Jim planned to re-sell the boat and invest the proceeds in something else or what, but it is essentially moot, as the boat was stolen that night. The next day the one-legged farm hand announced that his “bank” had gone bust, leaving the investors with nothing.
If you’re keeping track, as Huck was, you will note that Jim still had 10 cents in cash. What did he do with it? He had a dream to give the 10 cents to his friend, Ballum, to invest for him, because Ballum is said to be lucky.
Ballum takes the money and gives it to the poor because he heard a preacher say that whoever gives to the poor is bound to get his money back a hundred times over.
Of course, no money ever came back to Jim, and he was left with zero. In fact, he is 35 dollars in the hole to Bob, but nothing is mentioned about that.
It isn’t surprising that Twain would insert some commentary on investing in his books. He is well-known to be a social commenter, and was a fantastically terrible investor (he apparently lost about the equivalent of 4 million in today’s dollars by investing in a typewriter that never came to market… he had to go on a 9 year speaking tour to regain his fortune).
What is somewhat surprising is how relevant his words still are today. There are, unfortunately, countless Jims in the world making investments in sickly stock and bad banks, countless Jims misusing credit, and countless Jims giving their money to managers based on past performance.
So don’t be like Jim. You never know where you’ll end up.