A FOUNDATION PRINCIPLE
_"It is well to profit by the folly of others"_
One morning in my mail I found a letter from which I quote:
"I have read your book with much interest. If it is to have a large
sale and you wish it to do good, as I presume you do, you should
write another chapter explaining that you failed because you lost
sight of the one thing necessary to permanent success, and state
clearly what it is."
Though I had no personal acquaintance with the writer, I knew him
as one of New York's most successful business men, a man whose name
carries great weight.
A personal interview followed, and I learned from him a lesson,
too late, _perhaps_, for me to reap the benefit, but I am passing
it on in the hope that it will not fall on altogether barren soil,
though I know how difficult it is to persuade young men of the
wisdom to be gained through another's experience.
Economy in personal and family expenditures was the text from which
the lesson was drawn.
In my prosperous days when I made large annual profits, I did not
realize how foolishly extravagant was my scale of living, for every
year I was adding a handsome amount to my accumulations which were
steadily increasing, and yet, looked at from the standpoint of this
clear-headed, successful business man, I was expending far more
than what should have been regarded as my income.
It will be remembered that in the early years of my career, shortly
after my marriage, I was handicapped by the loss through a stock
speculation of all my savings. This was followed by dull times
and increasing burdens, and it was not until the year 1878 that my
profits materially exceeded my absolutely necessary expenditures.
During that year I lived comfortably and happily on an expenditure
of three thousand dollars. My profits were twelve thousand, and I
started the year 1879 with nine thousand dollars to the good.
Taking my expenditure of three thousand dollars as a necessary
basis, no matter what my profits in 1879 were, I was warranted in
spending only the three thousand dollars plus the interest on the
nine thousand, which was my capital. This was the principle imparted
to me by the man who had put it in practice and who believes it to
be a foundation principle in business, and that neglecting to make
it the corner-stone is the cause of nine out of ten of the failures
in the business world.
Then he asked me to figure out how it would have worked in my case.
I did so and was astounded at the results. I may add it gave me
many hours of hard thinking over "what might have been."
In order to make the working of the principle entirely clear to my
readers, I have tabulated the figures for fifteen years, calculating
interest at six per cent, and showing for each year the profits of
my business, the permissible expenditure, and the amount of capital
as it would have been on December 3lst.
Year Profits Expenditure Capital, Dec. 3lst
1878..........$ 12,000 $3,000 $ 9,000
1879.......... 16,000 3,540 22,000
1880.......... 21,000 4,320 40,000
1881.......... 28,000 5,400 65,000
1882.......... 21,000 6,900 83,000
1883.......... 24,000 7,980 104,000
1884.......... 30,000 9,240 131,000
1885.......... 15,000 10,860 143,000
1886.......... 36,000 11,580 176,000
1887.......... 61,000 13,560 234,000
1888.......... 120,000 17,040 351,000
1889.......... 72,000 24,060 420,000
1890.......... 68,000 28,200 485,000
1891.......... 80,000 32,100 562,000
1892.......... 70,000 36,720 629,000
This brings me up to January, 1893, the period when I considered
the question of retiring from business and decided against doing
so for the reason that the income from my capital if invested would
have been far below my annual expenditures.
How would it have been had I lived the fifteen years on the scale
as figured out?
My capital invested at six per cent, would have realized an income
greater than my expenditure in any previous year! But look a little
further.
If during all those years I had been in possession of such amounts
of capital as the evolution of this principle would have brought me,
I am perfectly confident that the profits of my business, handsome
as they were, would have been much larger. The money would have
produced earnings far in excess of six per cent., and in January,
1893, the capital would surely have been set down in seven figures.
Surely those longed-for years of travel would have been mine--or,
suppose I had remained in business? I could not have failed for my
capital would have safely carried me over.
And now to conclude the brief addition to my narrative.
The late Robert Ingersoll once said:
"Hope is the only universal liar who maintains his reputation for
veracity."
Hope promised me, in the prospective reorganization of the Washington
concern, the certainty of a complete fulfillment of my "Dream."
Hope lied! The reorganization is indefinitely postponed. Now,
hope promises me success in a prospective business connection in
Baltimore, and I still have faith in him.
Once more in active business life with all the old energy and
ambition and in perfect health, I may yet have another fifteen
years to put in practice a principle that I know to be sound.