BUSINESS PHILOSOPHIES
This is a preliminary chapter intended to show that management
is the most essential factor in every business proposition.
Several illustrations are given, and some advice offered.
Before discussing government construction, ownership and operation of
railroads, and other so-called public utilities, I want to call
attention to some well-known but seldom recognized principles.
All business stands on three legs. No business can stand on two legs.
Notwithstanding the persistent nonsense that has emanated from press
and platform, from pulpit and professor’s chair, by thoughtless
politician and thoughtful demagogue, capital and labor, unaided, have
never accomplished anything and never will. But management, plus
capital, plus labor, have done wonders and still greater achievements
await the cooperation of this irresistible trinity.
Some have tried to make it appear that the public constitutes a fourth
leg. While the public has rights, and affords markets, business
succeeds only when the public does not interfere.
Take the case of the farmer. His lands, his tools, his teams and other
livestock, constitute his capital. He performs the labor, furnishes the
management, and all goes well. Occasionally a farmer prospers when he
furnishes only capital and management, notwithstanding Benjamin
Franklin’s proverb: “He who on a farm would thrive, must either hold
the plow or drive.” The one absolutely indispensable element of success
in farming is management. No man ever prospered on a farm simply
because he worked. He must wisely manage if he lifts the mortgage. When
the farmer’s management fails, the sheriff becomes his land agent, and
it matters not how productive his land, or how willing his team, or how
fruitful his flock or how hard he works.
You never knew a merchant to fail except when his management buckled.
You may have thought some failures were due to want of capital; but
even in these instances management was solely at fault, for it
attempted too much with its available capital. Barring accidental and
incidental fortune, good or ill, management or the want of it is the
prime factor in every success and in every failure.
The president of a certain Chicago federation of labor, after listening
to this thought, brought a party of friends to my platform and in the
course of a brief visit said: “They have talked to us about capital and
labor, capital and labor, nothing but capital and labor. We knew there
was another guy in there but we couldn’t find him.” Then he added: “And
you have got to pay that guy, too.”
ILLUSTRATIVE INSTANCES
Some years ago and during the period of evolution in harvest machinery,
Marsh Brothers put upon the market what was known as the Marsh
Harvester. It was the first radical improvement upon the old self-rake.
Two men rode upon the machine and bound the grain as it was cut. For
some reason, perhaps disagreement among the interested parties, the
concern was reorganized into three independent companies and certain
territory was allotted to each. A local preacher by the name of Gammon
took one allotment, associated with him William Deering, and the
largest manufacturing plant then in the world was built where nothing
had stood before. The other two concerns took equally favorable
territory, operated under the same patents, obtained their capital in
the same market, hired labor at the same wage, and utterly failed. Five
years thereafter nothing remained except court records to show they had
ever existed.
Did capital build the Deering plant? It did not. Did labor do it? By no
manner of means. The germ of management in the brain cells of William
Deering, which no crucible would disclose and no scalpel reveal, was
wholly and alone responsible. Do you suggest that able subordinates and
efficient labor were in part responsible? My answer is that William
Deering was wholly responsible for having able subordinates and
efficient labor. Andrew Carnegie said to me: “I have never been able to
discover wherein I have been more clever than others except in
selecting men cleverer than I.” That is the acme of clever management,
and affords the only certainty of success.
During a congressional investigation of the meat industry the president
of one of the “big five” packing houses appeared, and in the course of
his examination testified that while holding a position of considerable
responsibility to which he had been gradually advanced, he was asked to
organize a company to take over a certain concern, the stock of which
was selling at about ten dollars per share. The necessary capital was
tendered and he was offered a salary of one hundred and fifty thousand
dollars per year, quite a large block of stock gratis and an option on
thirty-five thousand shares at ten dollars per share, which he
subsequently exercised. When asked if he thought his salary was
unreasonably large, he called attention to the fact that within ten
years his company had become one of the five largest in the world and
that its stock had advanced from ten dollars per share to par.
Thereupon the chairman of the committee remarked that while he was
opposed to large salaries, he thought that one hundred and fifty
thousand dollars per annum was not excessive for this particular
witness. Did capital accomplish that? Did labor? No, management did it.
SUPPOSE A CASE
In a certain city a thousand men are out of employment. In a bank in
that city a million dollars are out of employment. In the foothills
near the city fifty million tons of coal are out of employment. The
unemployed men see the opportunity and offer their joint note for the
money with which to develop a coal mine. But the officers of the bank
will not lend money that does not belong to them upon the signature of
a thousand men, each out of employment. Then management walks in and
says to the president of the bank: “I am a practical coal operator. I
have had experience, and have associated with me a board of directors,
each a successful coal producer. In proof that we understand what we
are undertaking, here is the report of the best-known coal engineer in
the world, who at our expense has bored every square rod of that tract
of coal, showing the exact number of tons available. Here also is an
assay showing the quality of the coal. It is worth so much per ton on
the track. It will cost so and so to put it on the track. After we have
invested a million dollars of our own money, we want to borrow a
million to complete the development and for working capital.” By giving
a majority of the stock, and all the bonds of the company as
collateral, and by each director signing the note, the money is
obtained. The hitherto idle men are now employed and a great industry
results. Query: Locate the cause. Is it capital? Capital languished and
earned nothing. Is it labor? Labor was in rags and labor’s children
were crying for bread. That coal field is developed, the wealth of the
nation increased, homes are warmed, furnaces made to glow, wheels to
turn, by management, plus capital, plus labor. It is so everywhere, in
each and every instance, in this and all other lands.
Capital can usually be had upon approved security, and labor is most
always available at a satisfactory wage, but management, the one
essential of every achievement, is the most difficult thing in the
world to find and, when discovered, imposes its own conditions and
names its reward.
A WORD OF ADVICE
If teachers of economics and of sociology would somewhat oftener and
more generally teach the Benjamin Franklin brand of common sense and
make their classes understand that there are in the United States
vastly more twenty-five thousand dollar jobs than there are twenty-five
thousand dollar men to fill them, bolshevism would diminish as rapidly
as it has increased under the opposite tuition. Where do our editors
and newspaper writers come from? Whence the principals of our high
schools, teachers in our colleges, preachers and lawyers? Ninety
percent of them are from our colleges and universities, and those who
graduate with socialistic and bolshevistic tendencies have usually
imbibed them either from imported professors or from American
professors who have received their Ph.D’s in Germany.
In this connection I also want to say a word to parents: Would it not
be well early in the life of your boy to impress upon him that he will
probably get out of life something fairly commensurate with what he
puts into life? You might also suggest that if he will observe he will
probably discover that those who complain most because the world has
been stingy with them, are seldom able to show a receipt for much that
they have contributed to the world. If instead of giving wholesome
guidance you permit to go unchallenged the teachings which your boy is
certain to get in the school room, in the pew, at the theater and the
movie, on the street, and especially from the demagogue, that those who
make money are invariably dishonest, those who accumulate wealth are
scoundrels and that those who amass fortunes should be in the
penitentiary, I will go security for your son that he will never
disgrace his parents by getting the family name on the letterhead of
any big institution, or in the Directory of Directors.