Given the perennial popularity of 'How to get rich' books, one could assume that those books contain arcane, hermetic, or even miraculous formulas for people to get rich; that all one has to do is find that elusive message.

But, hard as you might try to dig up that nugget of knowledge, you won't find it. Why not? The answer is simple: there's no such a thing as a magic formula--only insights that already know but hardly practice.

Over my long journey in business and academia, I've found that the closest resemblance to that magic formula for riches is the awareness and good practice of four concepts: (1) Solvency, and (2) Profitability (3) A little knowledge of what Adam Smith taught, and (4) Hard work.

Solvency

Many people think that solvency is a business concept, and that only applies to business situations, such as maintaining a good credit rating, or paying debts on time. In my view, solvency is a virtue --not only in business affairs but also in private affairs-- which people must develop and maintain throughout their entire lives if they wish to become wealthy. Solvency leads to capital formation, and capital formation to the growth of wealth.

When I was young, one of my favorite books was Charles Dickens' David Copperfield. Without major mental effort I can recall and delight in the woes, decencies, and indecencies, of the many characters that populate the novel. Yet, nothing stands out as Mr. Micawber, the garrulous, well-intended, yet unfortunate man who led his family into abject poverty.

Good intentions and awareness are insufficient to handle one's affairs in a productive way. Good practice is indispensable. Mr. Micawber's advice was wise but he never practiced it himself: "My other piece of advice, Copperfield," said Mr. Micawber, "you know. Annual income twenty pounds, annual expenditure nineteen, nineteen six, result happiness."

When your income, your 'take home pay,' or your revenues are greater than your expenses, then the welcome result is happiness. Why happiness? Because not only are you living within your means, but you are also saving something--saving for capital formation.

Now, let's look at the reverse, as seen by Mr. Micawber:"Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery. The blossom is blighted, the leaf is withered, the God of day goes down upon the dreary scene, and-and in short you are for ever floored. As I am!"

Ah! How true that is. When expenses are greater than income, then the unwelcome result is disaster, and human disaster is but undisguised misery and wretchedness. Living beyond one's means causes one to be "for ever floored." And since England had no bankruptcy protection laws in those years, Mr. Micawber was remanded to King's Bench Prison.

One way to get trapped in a ditch --from which is difficult to get out-- is by living beyond one's means: the result is that you are forever trapped in that trench. In our contemporary economic times, that ditch is called "Credit Card Buying." When people realize that they owe more than they have in new worth, then they realize that they are insolvent, which is one step away from filing for bankruptcy protection.

What is Profitability?

What makes people wealthy is the awareness of profitability. In Accounting terms, when the revenues are greater than the expenses, the "bottom line" or net income is positive. The opposite will be deficit or loss.

To absorb this simple concept one doesn't have to be an accountant, which is but what Mr. Micawber lectured David Copperfield about.

How does one solve the "bottom line" problem? Only two things can take place: either you increase your income, or you decrease your expenses--simple as that.

Many people live a life of "quiet desperation" --as Thoreau, said-- living from paycheck to paycheck, or from hand to mouth, or even worse: living with the ever present angst of where their next meal will come from.

If a touchy reader says to me, "You're telling me what I already know!" I will reply: "So, what is your choice? Increase your income or cut back on your expenses?" The choice is ours, it doesn't lie with outsiders--you must choose.

In my experience I've always found it easier to look for additional income rather than to cut back on expenses. Others may think differently, but I believe that opting to reduce one's standard of living is not only backwards, but it diminishes expectations, causing people to feel pessimistic about the future.

In his landmark book The Wealth of Nations, but in particular in the section "Division of Labor," Adam Smith discusses three points:

(1) Humans show a propensity "to truck, barter, and exchange one thing for another." Though smith isn't explicit, he hints that this propensity may well be inherent in humans.

(2) Humans don't differ greatly in natural talents; the difference is caused by habit, custom, and education.

(3) By the division of labor (specialization), humans produce a surplus of product that they can sell to others.

None of the above discussion would have any practical value if one doesn't reduce the discussion to a very simple conclusion:

Adam Smith's Magic Nugget:

To satisfy not only your needs, but also to have something leftover, you either sell your labor or you sell a product, or both.

So, if you sell your labor, then your labor must be worthy, it must be sought, it must be valuable to employers. Training and education give workers the skills necessary for the labor market; the higher the skills the higher the compensation. While a bookkeeper will earn $20 an hour, the same bookkeeper with training and a course work as a C.P.A., (certified public accountant) will command $200 and hour-or more. The handyman in my building who used to earn a pittance is now earning high fees as a certified electrician.

However, neither spiritual success nor material riches will accrue unless we work hard. A terrific nugget that I've alway carried with me comes from Proverbs X:

"He becometh poor that dealeth with a slack hand:

"But the hand of the diligent maketh rich.

Not to brag but to share my experiences, I can say that I owe my good fortune to Adam Smith's insights: I learned valuable marketable skills, and I also learned to sell products in the internet. Yet nothing will be accomplished if one isn't judicious, for as Adam Smith said in his Wealth, "Capitals are increased by parsimony, and diminished by prodigality" (CH III., PT II).

Of course, 90 per cent of the workers live by their skills, collecting paychecks for salaries or wages. About five per cent will develop entrepreneurial spirit and learn to create and sell products; the rest, four to five percent fill the ranks of the unemployed.

Nothing prevents an individual from selling their skills and also selling products. One must choose. By having skills and selling products, I generate net income from which I pay all my monthly bills, with the surplus or leftover augmenting my net worth every month.

The Wealth of Nations was published in 1776, so the language is --by today's standards-- a little stilted; however, the section on "Division of Labor" is fresh and contains a trove of wise insights. Reading these two or three pages will help you get your share of the American dream--and so move from roaches to riches, from the outhouse to the penthouse.