SPECULATION BY MACHINERY.
[Sidenote: MACHINERY IN EXISTENCE FOR DIRECTING HUMAN VOLITION.]
[Sidenote: THE PATRICIAN INVESTOR.]
Everything, in these times, is done by machinery, and there is
consequently no need for astonishment at finding that machinery is in
existence for directing human volition. Such mechanism has for a long
time been in working order, although it is scarcely realized by the
community as a body. The most accomplished professional speculators make
it their business to study the peculiar tendencies of people who have
any money over and above what they immediately require for necessities.
Firms, with numbers of clerks, exist in our day, who have forty, fifty,
and as many sixty thousand names of people duly registered in their
books, with their place of abode, duration of residences, means, style of
living, trade, or profession, and other particulars, enabling a judgment
to be formed of the kind of investment which is likely to suit them.
These names are all duly marshalled under different heads, and when a
certain kind of undertaking is to be brought before the notice of the
public, in the form of a prospectus, that class of people for whom it is
thought a suitable investment, have one sent to them by post. Experience
has shown that it is unwise to scatter prospectuses broadcast over
the country, trusting to some portion of them bringing applications. A
wholesale scattering of prospectuses among a class of people who are
not at all likely to read them even, will injure the credit of the
scheme for which it is desired to raise the capital in proportion to the
number of prospectuses that are thus wasted. As in everything else, in
business great care must be taken to offer the right sort of investment
to the persons addressed. A man, for instance who lives in a fine house
in a country parish, owns land, and moves among the patricians of the
district, would not think of looking at a new undertaking, if he knew a
prospectus had come by the same post to a man who touches his hat to him,
and lives in a small way outside the gates of the great man’s estate. A
man who is higher up in life than his neighbour’s endeavours, as a rule,
to mark the distinction by having everything that belongs to him of a
superior type. The man of high degree would consider himself insulted if
he were classed indiscriminately with the man of low degree, in sending
out twenty thousand prospectuses of a new mine. People are very touchy
in such matters, and therefore, in catering for the public, as regards
investments, great discrimination is necessary. The different classes
of investors must be passed through the speculator’s machine like the
threshed corn, and when the husks and dust have been winnowed from the
solid grain, he proceeds to classify them, and, as far as possible, learn
their taste in the matter of investments.
[Sidenote: ADMINISTERING SHARES TO THE PUBLIC.]
When joint-stock banking came into vogue, promoters of the new
undertakings that were destined gradually to supersede private banks,
and have superseded all but those that have exceptionally deep roots,
and partners left who are very tenacious of ancient customs, were very
tentative in their mode of proceeding. As with all new things for which
the public require to be educated, companies established on the share
system had in the beginning to be brought forward gently and quietly,
so as not to startle people. Persons are easily scared when asked to
become partners in a bank, in the sense of taking much responsibility and
sharing but to a small extent in what are understood to be the honors of
such a position. The finessing which was at first necessary to accustom
the public to joint-stock undertakings was gradually followed by a thirst
for shares, because all such concerns for a considerable time were
associated with a premium. Individual promoters worked at the business of
building up joint-stock schemes, then it grew to syndicates, and now we
have wealthy firms, with large machinery, whose whole time and staff are
devoted to hunting about the world for powers to bring out foreign loans,
for concessions for making railways, docks, harbours, gasworks, and the
like. When they have procured one or the other, they fix the amount of
capital, cut it up into shares, and administer them to the public, by
much the same process as the Strasburgers enlarge the livers of their
geese. Instead of people being asked politely by an advertisement to
become shareholders in a new concern, the axiom of the supply creating a
demand is acted upon in these times, and a man finds in his letter-box
an investment especially suited to his taste and means, at the precise
moment when his half-yearly dividends are falling due. The economy
of capital is thus being pushed to its extremest limits, through the
development of a system by which one man makes it his anxious business
to see that his neighbour’s interest on his capital shall scarcely have
been passed to his credit at the bank before it is snatched away to
fructify in some scheme for benefiting mankind in one or other of the
four quarters of the globe.
Investments provided by machinery can be done on a very large scale, and
when successful are as a consequence very profitable. But unfortunately
it is a kind of avocation that is pretty nearly sure to be followed
by many unscrupulous persons, who will resort to all kinds of deceit
and trickery, in giving a false and dazzling hue to projects that
should never have seen the light. Moreover, the great difficulty that
individuals find in ascertaining the truth of statements, and the
authenticity of facts, causes them too frequently to take for granted
what should be always viewed with more or less suspicion, unless the
people who vouch for such facts are of the most undoubted standing and
respectability; and, as we have remarked, it is seldom that such persons
will lend their names to anything of the kind. During a season of great
prosperity the promotion of new companies is sure to be largely overdone,
and great will be the losses suffered; but there is sure to be more good
done in the world by the dissemination of capital in new parts of the
earth that would otherwise lie for the most part unproductive, than there
is harm done through the misapplication or loss of a part of it. Many
people bewail and lament over the failure of a bank, a discount house,
or joint-stock concern now and again, and when a commercial crisis
takes place one would think the world was coming to an end, as indeed
the Viennese thought when they had a sharp lesson for their money-greed,
early in 1873; but a little sensible reflection will show that calms
and storms alternate in every variety of form on the earth, and are not
confined to seas whose strands occasionally strewed with the produce of
a foreign clime is only an indication of the miscarriage of a minute
portion of the benefits which, in fair weather, are conveyed by the
inhabitants of one land to those of another.
The fact remains, however, that speculation by machinery, or in other
words, the modern system of cramming the public with securities
wholesale, may be attended with a good deal of mischief, and although it
is too much to say that people who launch new undertakings upon such a
system are necessarily unscrupulous, there are strong reasons for looking
very closely at securities known to proceed from the offices of firms
whose business it professedly is to make money by manufacturing stocks
and shares wholesale, and forcing them upon the public. In the first
place, such a business requires a great deal of money to carry it on, and
a good deal of risk must be run, and money paid out of pocket, before
there is a chance of seeing anything back again. Under such circumstances
private enterprises are sought to be purchased at a small price, and sold
to the public at a very large one, so as to secure a considerable margin,
the only object of the speculators by machinery being to fill their own
pockets.
It is astonishing what faith people put in printed certificates, got
up in a style which resembles documents of real value. A sheet of thin
paper resembling that of a bank note, with a large impressed stamp of
a corporation upon it, and filled in with the magic word sterling, is,
as a rule, sufficient dust thrown in the eyes of the general public to
send them home satisfied to make no further inquiries until collapse
reveals the sham that has been prepared for them. Ordinary people go to
market and make an elaborate fuss over a joint of meat before paying
their money, seeing that it is to a Shylockian nicety of weight, but when
they invest a hundred pounds in a mine, there have been cases in which
they hardly knew where the property was,—or even if it existed at all.
It is very wonderful that such an incomprehensible degree of confidence
is placed in concoctors of companies, and it is the knowledge that the
general public is so ludicrously gullible that encourages the formation
of joint-stock concerns upon often the most flimsy bases.