The Wise Investor
Large bellows were expensive, and the blacksmith did
not have enough money to buy one. After much thought, he
went to the goldsmith and borrowed some gold.
With this gold, he purchased a larger bellows, and
expanded the range of work that he did. He had to pay a fee
to the goldsmith, of course, but he found that he earned even
more from the new work.
Although it cost him money to borrow the gold for the
bellows, the income he earned from it was even greater, so
overall his financial position was improved.
In a few years, he had completely repaid the loan, and
the business was now larger and generated a greater income
for his family. While this was happening, the blacksmith's
friend, a baker, also had a problem. Even though he worked
from dawn to dusk, he could not bake enough bread to
satisfy his customer's needs.
Every day, he sold all his bread, and still they wanted
more. The baker could have continued like this forever, but
like the blacksmith, he saw an opportunity to expand his
He hired a young man as an apprentice.
Although he had to pay the apprentice a wage, he found
that he earned a greater amount from the extra bread that
was baked, and overall he had a higher profit. As time went
by, the baker hired several employees to bake bread.
Although each employee required wages, the amount of
income they generated for the bakery was higher that their
wages and the extra amount was more profit for the baker.
After a while, the bakery was far larger than it had originally
been, and the baker became a wealthy man."
John stopped speaking and rested. The sun was below
the horizon, now, and there was little daylight left. Soon they
would have to go home.
"The two stories, the blacksmith and the baker, illustrate
two important principles of business. First, it is often
necessary in business and investment to borrow money.
I know I have told you that borrowing is a bad idea, but