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Title: Creating Capital - Money-making as an aim in business
Author: Lipman, Frederick L. (Frederic Lockwood), 1866-
Language: English
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Copyright Status: Not copyrighted in the United States. If you live elsewhere check the laws of your country before downloading this ebook. See comments about copyright issues at end of book.

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_Barbara Weinstock Lectures on The Morals of Trade_












_The Riverside Press Cambridge_



_Published March 1918_

_The Riverside Press_
U · S · A


This series will contain essays by representative scholars and men of
affairs dealing with the various phases of the moral law in its
bearing on business life under the new economic order, first delivered
at the University of California on the Weinstock foundation.



The object of this paper is to discuss money-making; to examine its
prevalence as an aim among people generally and the moral standards
which obtain among those who consciously seek to make money.

The desire to make money is common to most men. Stronger or weaker, in
some degree it is present in the mind of nearly every one. Now, how
far does this desire grow to be an aim or object in our lives, and to
what extent is such an aim a worthy one?

The typical money-maker as commonly pictured in our imagination is a
narrow, grasping, selfish individual who has chosen to follow lower
rather than higher ideals and who often is tempted, and always may be
tempted, to employ illegitimate means for the attainment of his ends.
The aims he has adopted are made to stand in opposition to the
practice of certain virtues. Thus we contrast profits and patriotism;
enriching one's self and philanthropy; getting all the law allows and
justice; taking advantage of the other fellow and honesty; becoming
engrossed in acquisition and love of family. Now, such contrasts
obviously prove nothing more than that money-making is and would be a
vicious aim if pursued regardless of these virtues, and it could well
be replied that consideration of patriotism, philanthropy, love of
family, etc., must in themselves impel one to earn and to save. "The
love of money is the root of all evil" implies an exclusive devotion
to acquisition that may well be criticized. But aside from this there
is no doubt that amid the confused ideas held on the subject, aiming
to make money is commonly regarded as in some sort of antagonism to
the social virtues.

That there are other sides to the picture is recognized, however, even
by the loose thought of the day. The man who earns his living, for
instance, it views as one who in so far is performing a fundamental
duty. Indeed, the world scorns him who cannot or will not support
himself and his family. But this is only to say that one must work
to-day to meet the expenditures of to-day. Is this the limit? Is it a
virtue for him to work in order to spend, but a vice for him to work
in order to save? What are the considerations to be observed by a man
in deciding whether or not he should adopt money-making--that is, the
acquisition of a surplus beyond his current needs--as one of his
definite aims in life?

One consideration relates to our country. The United States is now
understood to be spending about $25,000,000 per day in carrying on the
war. In the last analysis this amount must be paid out of the past
savings and the savings from current earnings of the people of the
United States. The wealth of the nation consists mainly of the sum of
the wealth of its citizens. We are therefore told to seek increased
earnings and to economize in our expenditures in order to enhance the
national wealth. The duty here is perfectly clear, but even if we did
not have war conditions to teach us as a patriotic responsibility the
necessity of earning and saving a surplus, the obligation would still
be there. We owe a similar debt to our state and to our city or
district. And nearer still comes the duty to one's family and to one's
own future, the duty of providing for the rainy day, for old age. And
it will be observed that money-making in this sense is directed to the
acquisition of _net_ income, it relates to that portion of one's
earnings which is saved from current expenditure and becomes capital.
Then we must also consider the duty to society. As we look out upon the
surrounding evidences of civilization--buildings and railroads and
highly cultivated fields, the machinery of production and distribution,
the shops full of useful commodities--and then cast our thought
backward to a time not very many years ago when all this country was a
natural wilderness, we may begin to realize the magnitude of the
wealth, the capital, that has come into being since then, every
particle of which is due to the earnings and savings of somebody, to
the surplus not consumed by the workers of the past, their unexpended
and unwasted net balances year by year. Universities, churches,
libraries, parks, are included in the wealth thus handed down to us.
Our lives to-day may be richer and broader through this inheritance
created by the industry and abstinence of our forefathers. Their
business careers, now closed, we regard as the more successful in that
they earned and saved a surplus, that they had a _net_ income to show
as the result of their work.

But these savings of the past were accumulated, after all, by
comparatively few of the workers; not by the many, who lived from hand
to mouth, happy-go-lucky, spending and enjoying in time of abundance,
suffering in time of poverty and stress, making no provision even for
their own future, still less recognizing any duty to their country or
to posterity to produce economically and regulate their expenditure
wisely so as to carry forward a surplus. As far as this majority is
concerned we might yet be living among rocks and trees, without
shelter, lacking sure supplies of food, with fig leaves to cover our
nakedness. And to-day the same conditions obtain. How many persons are
to be found among one's acquaintance who feel and act upon any
responsibility for doing their "bit" in the creation of capital? Very
few. Rather than exert himself to work with this in view, on the one
hand, and to abstain from unnecessary consumption, on the other hand,
the ordinary man will make to himself every excuse. He will contemn
money-making as a sordid aim, readily exaggerating itself into a vice;
he will dwell upon the obligations and other considerations of a
higher life, this being defined as something generous and noble, a
something compared with which money-making cannot be regarded as a
worthy object but must be included in the class of unpleasant
necessities, not to say indecencies, which ought to be relegated to
the background of life; he will summon up pictures of extreme poverty,
where any money received must be expended forthwith to meet urgent
needs, as justifying that which in his case is the gratification of
shiftless indulgence. Above all, this typical individual will not
accept and act upon the idea that his affairs, his small income and
expenditure, have any bearing upon the prosperity and progress of his
country. The most he will keep before him is that he should pay his
bills, and perhaps in some few cases, will extend the notion to the
future to include provision for the bills and possible emergencies
then to be met by himself and his family. Nor is this improvident
attitude confined to the young, to the professional and the other
non-business classes. In the business world we see it all around us;
among those who "work for a living," among clerks and employees and
among the so-called laboring classes it appears to be the normal
attitude. People who work for salaries or wages seem characteristically
to use up all their earnings in their current expenditure, to live up
to their incomes without any serious attempt to save. If they pride
themselves upon trying to keep out of debt, it is as much as they
expect of themselves, and among them the man who attempts to go beyond
this in his money affairs is certainly the exception.

One of the effects of a world-wide war is an enormously increased
demand for labor at high and advancing wages, a condition that we
might suppose would be greatly to the advantage of the laborer. But
that will depend upon his own attitude and policy. From England, and
from American towns here and there, we hear stories of the wage-earner
on whom increasing income has had the effect of lessening the effort
to work; who stops during the week when the higher wage scale has paid
him the amount he is accustomed to regard as a week's earnings. Now,
would it not seem natural to expect that any man encountering improved
market conditions for his output, whether of commodity or service,
would seek to turn the situation to advantage by increasing that
output as largely as lay in his power? If, for instance, I can
manufacture shoes to sell for $4.00 a pair and a change in market
conditions is such that I can obtain $5.00 a pair, I would endeavor to
produce more shoes in order to profit by the favorable market; and if
thereafter the price should rise to $6.00 and $7.00 and $8.00 a pair,
at each increment my efforts would be still further intensified. That,
indeed, is the normal economic attitude. Fluctuations in the price
level due to changes in the demand for a commodity are expected to
affect, and do affect, the market supply. At a higher price,
production is stimulated and more units of the commodity are brought
to the market, both from new sources and from old sources. Under
falling prices, on the other hand, the supply offered in the market
would become automatically diminished.

This is an elementary commonplace in economics, yet the laborer to
whom we have just referred does not seem to recognize it. He may find
that he can earn in, say four days, an amount equal to his former
earnings in six days and, therefore, at the end of the fourth day he
quits work for the week. Now, obviously under such increasing wage
scale, he might do one of three things:

He could quit at the end of the fourth day, having received a week's

He could continue working for the six days and use his surplus
earnings for comforts, pleasures, and luxuries which previously he had
been unable to afford.

He might work for the six days and save as much as possible of his
excess earnings.

Now, what is the wise choice for the laborer? Leaving out of account
special cases where he has a large family, or sickness at home, or is
under some other disability which in his individual case would reduce
his earning power or increase his minimum expenses, ought he not to
work for the six days, putting aside all he could of the excess as
savings for the future? It will be generally conceded that this is
self-evident. If, viewing the narrow conditions under which the
workman ordinarily lives, it should be claimed that during a period of
unusual earnings self-gratification would be not only natural but
measurably justifiable, the reply could be made that this is merely
specious, involving assumption not in accord with the facts. Excuses
of this kind we often make for ourselves in the endeavor to justify
our indulgence in present pleasure rather than perform the irksome
duty of self-restraint. The laborer whose ideals are such that he
quits at the end of the fourth day is not the type of man who is going
to spend the two holidays in pursuing higher aims in life; he is going
to pass them in inaction, quite likely at the grog-shop. The man who
fails to take advantage of the security for the future offered him and
his family through the opportunity of saving from extraordinary
earnings is one who is adding to the abnormal demand for such things
as phonographs, jewelry, spirits, and tobacco. And this helps to
explain the tremendous market for luxuries during wartime. Doubtless
there are many workmen who follow a more rational course, who are
reaping and storing the harvest for the comfort and security of
themselves and their families during the winter of life. Could any one
think that this policy involved an aim that was sordid, tending to
draw them down, and away from higher considerations of life? Certainly
a course of careful planning in one's affairs would be in so far a
better course and on a higher plane than indulgence in idleness or
shiftless expenditure of surplus for present luxuries, regardless of
future need.

This case of the workmen under conditions of abnormal wages seems
exceptional; yet the choice so presented to him is not very different
fundamentally from the choice normally presented to all the rest of

The young man starting out in life may be as negligent of his
opportunities as the workman who quits at the end of the fourth day.
Or if he devotes himself properly to his vocation he may consume his
earnings in current self-gratification. If, however, he will both
concentrate on his work and practice self-restraint with the purpose
of creating a saved surplus, all will agree in considering him as so
far headed on the road towards success. In the case of the beginner
this seems clear enough, but, after all, the same considerations apply
to everybody else, whether in business or profession, beginners or
experienced, young or old; to all of us is the same choice presented
daily, and at our peril we must make it wisely. The physician, for
instance, although he cannot afford to pay more attention to
money-making than to the welfare of his patients, to his studies, to
his professional ideals, must not, on the other hand, leave out of
account these business duties and considerations which belong to him
as an economic member of society. He must produce and must consume
with his family, reasonably, decently and thriftily. He must aim at a
surplus to store away for the future. These aims are, as a matter of
course, secondary to his professional ideals, but there need be no
conflict of duty. The point is that there exists a department of his
activity devoted, and to be devoted, by him to his business affairs.
In any event, as a man, a husband, a father, a citizen, he cannot
escape from the responsibility of these business affairs. They must be
conducted in some way. Shall it be well or ill? If he fails herein it
may involve failure in any or all these relations--as a man, husband,
father, citizen. And obviously these same considerations apply to all
other men and women, whatever may be their professions, occupations,
or major interests in life. Why do so many allow themselves to be
dragged along, living from hand-to-mouth, in fear of the knock of the
bill collector at the door? Why do we associate money questions with
that which is unhappy, unfortunate, down-at-the-heel, with fear and
misery? Barring mere accidents, it is because we are careless,
shiftless; because we do not face the problem manfully, practice
reasonable self-restraint, consider the subject in its complexity and
decide upon, and carry out, a constructive programme. Even if one
happens to possess wealth, he is not exempt. Indeed, large wealth
involves still greater necessity for care in the conduct of one's
pecuniary affairs. The rich man is said to have perplexities and
responsibilities which are unknown to those in moderate circumstances.
In fine, everyone must face these money questions or be driven by

Those who live on fixed incomes, whether from salary or investment,
may find it impossible to make any direct attempt to make money; for
them the problem is to be confronted and mastered on its other side,
the side of spending and saving, that the income may be apportioned as
wisely as possible for the purposes of living. But during the last few
years a new factor has entered into the money problems of the
individual, often adding to his trials, often adding to his self-made
excuses, and especially burdensome to the man on fixed income. We
refer to the high cost of living. Here it is, however, that the wage
earner can do something in self-protection, for the level of prices
may be in some measure affected by his policy in handling his

A period of high wages is accompanied by and is in some sense an
incident of a high level of prices. Now we recognize high wages,
considered in itself, as beneficial to the community, for it gives
opportunity, at least, for comforts in life and a provision for the
future that otherwise would be lacking. But if prices have advanced as
much as wages, the apparent improvement to the laborer is merely in
nominal wages, while that which alone can benefit him is higher real
wages. Now let us see what the workman could do to advance real wages
as contrasted with nominal wages.

What will be the effect on prices of the use of surplus earnings
during a period of high wages?

If the surplus earnings are expended, they will be used either in
meeting the higher prices of customary commodities, or in meeting
these advanced prices and also in purchasing additional commodities.
The first case will occur only if, and when, the advance in price
equals the advance in wages, for only in that event will the new wages
just cover the new cost of customary commodities. Then this
expenditure of the entire income in customary commodities tends to
keep up the price level and any benefit from higher wages disappears.

In the second case, so far as the worker spends his surplus earnings
in meeting advanced prices for customary commodities, he tends to
maintain prices at the higher level, and so far as he buys additional
commodities, he increases the demand for them and tends further to
advance the price level.

If, on the other hand, the worker will save from his surplus earnings,
he will increase the community's capital, and this will tend, directly
or indirectly, to cause the production of further commodities, so
increasing the supply of commodities and therefore tending to reduce

In any case, the worker should save as much as possible, as this tends
to reduce the price level and so to better his condition. Or, putting
it more simply, in time of high wages the worker ought to produce as
much as possible and consume as little as possible, both influences
tending to increase the stock of commodities for his ultimate gain and
for that of the community.

In fact, a high level of prices may be due measurably to some wasting
of the world's capital--as in war, for instance--and then the only
antidote is to restore the capital, a movement that would doubtless
occur anyway in time but which could be greatly accelerated through a
general adoption of habits of thrift and saving throughout a

This then, though small, is something definite that we can contribute
to the material advancement of mankind and, like the duty in this
connection to our nation, to our families and ourselves, it consists
in creating capital; that is, earning as much as we can and, in any
event, even if our earnings are fixed, managing the income thriftily,
and carrying forward as large a net result as possible.

We turn now from the mass of mankind, on the whole so singularly
neglectful of these responsibilities, to the few in number who
constitute the creators of capital, to whom are due so much of the
comforts, the conveniences, and the material advantages that go to
make civilized life possible. Now these few are found in every rank in
life. They may be rich or poor, professional or business men, employer
or employee, old or young, male or female. The characteristic is their
habit of thrift, of definitely adopting money-making as an aim, of
spending less than they earn. It is astonishing what a small
percentage of mankind they are. The Income Tax returns in the United
States for 1916 showed that out of a population of 104,000,000 people
those with taxable incomes aggregated only 336,652, about one in three
hundred. But whatever be the rank of the individual practicing this
thrift he is headed in the right direction and he tends to reach the
point of relative competence, of independence in his pecuniary

Preëminent in the class of the thrifty we think of the man of affairs;
the business enterprise indeed is supposed to be the money-maker, _par
excellence_. Money-making is in fact considered as its _raison d'être_;
it is as a money-maker that the business man is contemned by some and
envied by many.

Now money-making and money values occupy a special place in business
enterprise, due to the fact that on economic principles such money
value becomes the best test--perhaps the only true test--of the
workableness and success of business efforts. In the complicated
activities of the world's work, where each man, each undertaking, each
business unit, respectively, is striving primarily for its own
advantage, how is it, among all this pulling and pushing, this
competition, that the social income is distributed so nearly in
accordance with the individual contribution? Even if we admit that
many persons fail to get a fair share, that there is gross inequality
here and there, still after all, a student of mankind's activities in
production, distribution, and consumption must marvel at the extent to
which the rewards approximate the value of contribution. Now this is
made possible by money considered as a measure of relative values, by
the standard or test of fitness embodied in the thought, Will it pay,
and to what extent will it pay? If I have in mind some new invention
that will perhaps confer benefits on mankind, the best test of its
practicability and utility will be, Will it pay, will people buy it,
pay money for it? If an improvement in process is proposed, the
question is, Will it pay? If the young man starts out in life with
high ideals and a reasonably good opinion of his own abilities, an
opinion fostered perhaps by fond parents and admiring friends, the
question is, Will these abilities fit in with the world's needs? Will
they supply a real demand, will they be serviceable? The best means of
ascertaining this, although it may be only a rough estimate and
although errors occasionally creep in is, will they pay? Can he sell
these services for real money? This criterion is practically
omnipresent in the world of affairs. It is based on economic
necessity, and although here and there it may be charged with
cruelties, with serious blunders, it is, on the whole, a remarkably
accurate standard. We see this more clearly where we attempt to
substitute some other criterion for ranking the soldiers in the battle
of life. We can note, for instance, the inferior type and character,
generally speaking, of men elected to office by the suffrages of their
fellow citizens, compared with men who reach positions of authority in
business and other enterprises through the pressure of these economic
principles. Again, consider the nation that has attempted to improve
on economic distribution of power by evolving a government which
places the power in the hands of those best fitted to govern, a ruling
class which aims directly at efficiency, a select class but
necessarily self-selected, thus supplanting an economic régime by a
military régime--successful truly in certain forms of economic
efficiency through a more rigid and compact organization, but
destructive of the initiative, the evolutionary growth, the
fundamental development, the liberties of the people. Contrast this
with the freedom, happiness, and progress of a nation of shop-keepers.
Now this economic régime, with its individual instances of cruelty,
like the cruelties of nature, does on the whole tend to develop men,
to require their best efforts, to make them come forward and upward.
Thus, in this interplay of economic forces, wealth, or money, or
profits stands out as a primary object of attainment, and becomes the
incentive to the complex efforts which tend to benefit the individual,
the community, and the nation.

The business enterprise then directs its attention to profits,
because, from mere economic necessity, profits are the criterion of
the true success of the enterprise, that is, its serviceability to
mankind. Here we distinguish between the shortsighted man, who aims at
immediate returns, and the farsighted man, whose eye is fixed on the
future, who verily desires the profits, but desires them in the long
run. But this is only a manifestation of human nature as we find it in
every field. We always note a deficiency in the man whose life is
lived for the present, for immediate enjoyment: in him we see the
typical pleasure-seeker, peculiarly prone to temptation, to break the
rules of life, to indulge himself at the expense of others or of his
own future. He is characteristically the weakling, the wrongdoer. And
we contrast him with the man of character, who stands superior to an
immediate environment, who will not disregard the distant future, the
absent neighbor, the invisible God. And so in the economic world it is
the whole life period which is to be regarded when aims are chosen.
Profits as a goal for the long run do not antagonize moral principles.
"Honesty is the best policy" and "Do unto others as you would have
others do unto you" are maxims of good business; and that economic
principles do not conflict with them is shown by the fact that they
tend towards profits in the long run. This is not to assert that
mankind in business is perfect. In every period of economic advance
into a new environment, men try new experiments, as during the
development of the great modern corporation in the period following
the Civil War in this country and, earlier than that, in the era of
railroad building. They have tried new experiments in ethics as they
have in physics, in chemistry, in economics. They have attempted to
replace honesty by camouflage, the golden rule by self-aggrandizement.
But these attempts are not successful and so they become discredited;
they do not work because inherently they cannot last, and inability to
endure is fatal to the purposes of any economic undertaking. We are
emphasizing the fact that business is necessarily conducted for the
long run, the very nature of success implying permanence. A man may
take some criminal advantage of an opportunity: he may abscond with
money entrusted to him; he may abuse the confidence reposed in him by
an employer, by a customer; he may obtain an immediate profit by
misrepresentation. But no one could expect such things to last; he
could not possibly be building an enduring structure; such a course
could not in the end promise him profits, or any other kind of
success. A properly conducted business enterprise then is concerned
with making profits in the long run; that is to say, in accordance
with accepted notions of business conduct; in short, according to
rules of the game, and this involves conformity with a standard, a
standard of giving good value for what one gets.

We must next distinguish between gross profits and net profits. The
merchant or manufacturer naturally desires to do a large business, he
points with pride to the increase in his sales this year over last
year. The larger his turnover the smaller the proportionate amount of
his overhead expenses that must be borne per unit of product, and
other economies follow large-scale production or distribution. He may
occasionally be desirous of increasing his output even when it entails
a disproportionate increase in his expenditures, with the idea that he
can later occupy himself with reducing these expenses and in the
meanwhile the goodwill of his enterprise will have gained from the
larger circle of customers. Such is the case with a new enterprise
that often starts out with the expectation of little or no profits
during its early years, when it is gathering a clientèle and learning
to distribute its product with economy. All these, however, are
special cases. The normal situation is that the business enterprise is
aiming at net profits, having an interest in large sales, heavy
transactions and gross profits only so far as these are expected to
lead finally to net profits, the real goal. Now these net profits are,
of course, the remainder of earnings left on hand after providing for
all costs and expenses, for depreciation and every other factor
causing loss, destruction, and deterioration during the business
period under consideration. In short, the business capital as it was
at the beginning of the period is first fully restored and made intact
at the end of the period before a net profit emerges. This net profit
therefore becomes in a true sense a creation of new capital and may
indeed be retained in the business as an addition to capital funds.
Even when it is paid out in dividends, partly or wholly, it becomes
new capital in the hands of the individual stockholders who then in
their private capacity may of course spend it, but by proper
investment may keep it permanently stored as capital. It is the
creation of capital then, that is in reality the ultimate money-making
aim of the business enterprise.

We can now summarize the attitude and policy of the typical business
man in his money-making aim as follows:

In seeking profits he is actuated by economic necessity.

His goal is profits in the long run, which involves conformity with
economic and ethical standards, and net profits, which implies the
creation of capital.

The creation of capital we cannot fail to recognize as a worthy aim. It
has given mankind much of all that mankind possesses and constitutes
the foundation upon which civilization largely rests. The advancement
in the arts and sciences has been in no small degree stimulated by the
demands of business enterprise for new methods of creating capital and
we may believe that should the time arrive when this motive should
fail, when men should grow to be indifferent in their attitude towards
profits, the ensuing stagnation would affect every department of human
endeavor. Of this we may be assured even when we remember that
money-making, and what goes with it, is not the only aim in life.

After cataloguing so much that is virtuous in the pursuit of
money-making the suggestion is inevitable that there must be some other
side to it, that the common views of the rapacity of the money-maker
cannot be wholly unfounded. What then are the vices of the money-making
aim? In examining this question we shall first brush aside some things
to which we have already referred. The pathological cases of mere
crime, of sharp practice, of taking advantage of others, while mounting
up into distressingly high figures considered absolutely, are much less
important relatively; that is, they are infrequent and scarce enough to
avoid obscuring the rule which they violate, the rule that honesty is
indispensable in economics as well as in ethics. What we must now
investigate is any vicious tendencies that may be found in the
money-making aim when followed normally and according to its own
accepted principles. Of such degenerative tendencies we seem to find
two: first, the tendency to that excess which becomes a vice; and
second, the tendency to a disregard of other considerations in life
through too exclusive a devotion to acquisitiveness. But upon further
thought we must see that these two tendencies flow together and become
one, for too much devotion to money-getting and too little attention to
the other purposes of life are, after all, expressions of the same
thing. Perhaps a man may err in excessive devotion to any object of
life but we must admit that in the pursuit of gain the evil tendency to
exaggerated absorption in the one aim is promoted through a coöperation
with his natural selfishness. Of all the fields of human endeavor, here
is one that peculiarly fits in with self-seeking, with disregard for
others, which may drag a man downward, making him small and mean,
unhappy and uncharitable, while apparently attaining the goal at which
he has aimed. Not every man, while concentrating upon money-making, is
consciously seeking his country's welfare, the amelioration of life for
the many, the uplift of posterity, even if he rigidly adheres to the
accepted rules of the game, to the code of business honor. This brings
us back to the popular picture of the money-maker, grasping, sordid,
narrow-minded. There are such people. I believe them to be rare, but
whether there are many of them to-day or not, it is a type tending to
disappear in the environment of modern business which offers its
inducements and rewards to him who does, who becomes, who renders
service, not to the sordid seeker for gain. Barring an occasional
exception, such an exclusive aim is not that of the man of large
affairs, the business leader, the conspicuously successful man. It is
not Harriman, nor Edison, nor Weinstock, nor Marshall Field, nor
Peabody, nor is it the heads of our big corporations of to-day. Such
men are money-makers, creators of capital, builders of large
enterprise, but their aim at profits while genuine is only incidental
to their main purpose of doing, of becoming better able to achieve, of
rendering service. When the beginner in business approaches an
experienced friend for advice, he is told to work as hard and as
faithfully as possible, to study his business, to seek to improve
himself--in other words, to concentrate his whole strength on the
giving of service, for his wages or salary will take care of itself.
The experienced man knows well that this holds just as truly for all
ranks in the business world and that the higher one ascends in
responsibilities, the more he must give and do; indeed the leading
positions in the business world are occupied by men who produce
tremendously, whose value to themselves and others lies in what they
accomplish, and this--not what they get--is the criterion of success
among men of experience, among those in charge of enterprises, who are
on the lookout for leaders of this type.

Here we have the remedy for the tendency backed by natural selfishness
towards undue devotion to gain: such narrowness simply does not work,
it is crowded out by competition with the superior efficiency of
broader motives. And while, here and there, the type continues to
exist, its development in new cases is discouraged by every instance
illustrating the relative success--in all senses--attained by those who
make it their chief aim to produce, to render service. Just as the
physician bestows his first thought upon his patient, these superior
business men give first consideration to their profession, for so they
regard it, and this tends to assure their success, just as it does that
of the physician, and to become the standardized ideal for lesser men.

It is indeed clearly self-evident that on many accounts the man in
business must give attention primarily to the service he is trying to
render. The clerk in the store must devote himself mainly to his
customers, to his merchandise, to his other duties, not to his salary.
And so with the department manager, and so with the general manager,
whether of a store, a railroad company, or other activity; the
immediate daily problem for all lies in the rendering of a service, the
producing of a commodity, or the doing of the thing for which the
business enterprise exists. This concentration upon output is
furthermore required by competition which whips the producer into line
and often makes it a matter of business life and death that one should
make progress in method and quality. That his shoes wear is a matter of
pride to the shoe manufacturer. "Blank tires are good tires" is not to
be regarded as merely a boastful advertisement. If it was it would not
pay the advertising cost.

Money-making as an aim thus becomes subsidiary to the characteristic
activities of the enterprise, it is in a sense a by-product. But the
money-making aim is there, although perhaps in the background. It is
furnishing the power under which the enterprise operates. More than
that, it is the gauge indicating the prosperity or lack of prosperity
of the enterprise, its progress, its fitting in with the needs of life.
In short, the money-making aim spurs on the business enterprise, just
as the weekly or monthly pay spurs on the humble worker; but in each
case the main attention is given, and necessarily given, to the work to
be performed.

Let us now consider some of the implications of this concentration on
rendering service. The directed effort of each man to the production of
the utility characteristic of his business, tends to result in his
learning to conduct that specific activity with a high degree of skill,
and with an increasingly valuable fund of experience. So highly
specialized does he become that it will be quite impossible for any one
hitherto a stranger in that sphere to conduct it as well. Therefore in
an age of coördinated effort the more a man has of accumulated
knowledge and facility in handling a certain kind of affair and the
better fitted, therefore, he is to continue and to progress along that
line, the less relatively he is able to undertake the affairs of some
other kind with which he is not familiar. We commonly feel free to
criticize a railroad, a newspaper, a large business house, perhaps a
university, with which we may have casual contact, but the fact is
there are few competent critics outside of the ranks of the enterprise
itself or of those carrying on activities that are directly similar. In
a word, through this focusing of attention, a man will come to be
exhaustively familiar with his own occupation, while possessing a
merely superficial acquaintance with the theories, customs, and
responsibilities of those of others. The wise man therefore argues the
necessity of confining himself to the field in which he has become
expert and will avoid taking chances in some outside direction wherein
he is not familiar. One of the most common and disheartening
experiences in the money-making and money-saving of the thrifty is that
after having both worked hard and practiced self-restraint, the
resultant savings are often put into some enterprise that turns out
badly, and the whole effort is thus thrown away. Generally this happens
because he has violated the rule we have just stated; he has ventured
his savings in unfamiliar fields, ignorantly he has rushed in where the
better informed would have feared to tread. Such so-called investments
are in reality highly speculative. They involve risks which are unknown
and altogether to be avoided. Now no one speculates in his own
legitimate business, for there he is acquainted with the hazards which,
he has learned, require the best of knowledge and the greatest of
prudence. It is the allurement of the unknown that tempts him to seek
unearned profits through speculation in outside regions where, in the
nature of the case, the chances must be against him. Now speculation
has its proper place in business: there are certain inherent hazards
that must be undertaken, mainly to be found in the risk of the seasons
in the production of crops, and the risk of the future in undeveloped
enterprise. These risks must be carried by somebody, but clearly they
constitute an activity for specialists who study conditions, becoming
relatively expert in determining how and when to act. These specialists
are drawn principally from two classes: First, the professional
speculator, who knows his markets and makes a business of buying and
selling future risks; such men perform a great service in handling our
seasonal crops and in other directions, and are entitled to a
reasonable profit. Second, the man of wealth who may use part of his
surplus in the risks of undeveloped enterprise; although it is probable
that in the end his losses and expenses will outweigh his gains, he can
afford to take chances of such experiments in the hope that success
will follow in some of them; furthermore, he can regard the outlay as a
contribution to the advancement of mankind. For the rest of us,
however, outside of these two classes, it is our business to keep away
from speculation whether in oil wells, flying machines, in new
factories, or in real estate: in the long run, we cannot get something
for nothing and money-making efforts that are ethically valid thus
coincide with those that are selfishly desirable, namely, the efforts
to obtain the payment, the profit, that arises from a valuable service
performed or commodity produced. Too often men who follow this rule in
their regular occupation depart from it in the use of their saved
surplus funds. They feel that their savings ought to make them money,
as they say.

Now savings can be employed in one of three ways: They may be used as
capital by the owner; or they may be put out in investments--that is,
used or utilized as capital in the business of another; or, third, they
may be wasted in gambling or speculation. As a matter of course, the
employment as additional capital in one's own enterprise is generally
the most desirable wherever applicable, but this is a use of limited
scope, relating to but few of the people engaged in productive activity
who earn and save a surplus. The main resource for such accumulations
is in safe investments, in the bonds and securities of our own country
and those of well established enterprises. Not many among our embryo
capitalists possess the experience or skill requisite for the safe and
proper investment of their funds, they must rely upon the advice of
others. But whom can they trust? The demand for investment advice has
not failed to call forth a supply of advisers, and elaborate are the
schemes designed to lure the unwary. But, generally speaking, the man
who falls into the clutches of these birds of prey has himself to
blame, for the reason that the temptations they offer are appeals to
the illegitimate desire to get something for nothing or to the foolish
notion that one can get-rich-quick in some way whispered about by a
stranger, and out of sheer benevolence. The fact is that the wise man
will dismiss all thought of making money out of his investments; he
will seek only the moderate return which alone is consistent with
safety; and with this policy, will turn a deaf ear to any so-called
opportunity which promises big profits. We can summarize the matter by
saying that concentration upon one's business and service implies that
one should not attempt to make money elsewhere.

This concentration on one's affairs therefore grows into a sort of
practical system in which each member of the business community is
looking after some function or activity to the exclusion of other
things. And so the world's work is carried on to the best advantage,
each function being filled by those particular men who have become
relatively expert therein. From this system arises a business habit or
method not always understood by the young and inexperienced, by the
non-business person. We refer to the practice in trade of leaving to
each individual, to each enterprise, to each organization, the
responsibility for looking out for its own interests when having
dealings with others. _Caveat emptor_--let the buyer beware--expresses
an extreme development of this, and in its common signification, that
each side is to be permitted and expected to take any advantage of the
other side that it may be able to secure, it describes a state of
warfare rather than of business. In buying and selling, in aiming to
obtain the most favorable terms for each line of his activity, in
meeting conditions of competition, in all these relations, the business
man is endeavoring to better himself and may doubtless be tempted here
and there to forget the interests of the other party to the
transaction. But to yield to such temptation would merely be to abuse a
principle which on the whole is sanctioned by the requirements of
economic efficiency. This principle is that the nearest approximation
to effective justice in business transactions is reached when on each
side the parties devote themselves to their respective interests and
points of view. If _A_ has a house for sale and _B_ is a prospective
buyer, the essence of the possible transaction between the two is that
_A_'s idea of the value of the property is different from _B_'s idea of
that value; or at any rate that _A_ sees less value in it to him than
does _B_ to _B_. This is of course typical of all business
transactions--the seller desires the money above the commodity, the
buyer prefers the commodity to the money. The seller and the buyer each
dwells naturally upon his own idea of value. This is altogether
desirable, not to say indispensable, and is characteristic of every
relation of business, wherever two men buy and sell, employ one
another, or have other dealings together. The situation is somewhat the
same as in a law suit where the duty of the attorney for the plaintiff
is to make every point that fairly can be made for the plaintiff, while
the attorney on the other side must correspondingly make every point
that can properly be made for the defendant. Each side is supposed to
look after the interest of that side. Similarly, in a business
organization, say a railroad, when some new project is under
consideration it will be submitted to the engineer, to the chemist, to
the attorney, to the practical transportation man, and in each of these
departments it is expected that the wisdom born of experience in the
particular function will be brought to bear. The engineer speaks with
authority on engineering questions, the lawyer on legal questions, the
transportation man on the practical working out of the project; and,
normally, the criticisms and contribution of each are confined to his
own function. In short, the régime of economic self-interest results in
leaving to each the responsibility which he is most competent to
assume, that in which he is most expert, which thereby receives the
best attention that generally speaking it could have. Nor are
correctives lacking for the abuses which may enter in through an
overdevelopment of self-interest. _Caveat emptor_ becomes discredited
as an unmodified basis of human action. The golden rule is increasingly
seen to constitute a foundation demanded by economics as well as by
ethics. The trend to-day is away from indifference to the interests of
those with whom we deal. The successful merchant will not attempt to
make a profit through sales which he knows would not benefit the
purchaser, for that would not measure up to the test, Will it pay? The
value of a business depends largely on its goodwill and too much money
and effort are spent in advertising and other means of building up a
clientèle to make men conceive it to be to their interest to deal
sharply with their customers.

In the efforts of scientists to seek out and establish new methods,
new principles, the success of an experiment is to be determined, I
suppose, by the test, Will it work? Does it yield effective results?
Similarly, in economics, the science of mankind in its production,
distribution and consumption of material things, the test of utility
and efficiency is, Will it pay? that being the standard of
workableness in the application of that science.

We have attempted, therefore, in this analysis of money-making to
apply this test, because the practice or habit or influence that pays
is that which is in accord so far with the principles underlying this
branch of social science. We have seen, according to this standard,
that it is the duty of all to adopt money-making as a conscious aim;
that the money is to be economically used, the final object being net
profit, that balance or remainder which is carried forward as created
capital. Inability to increase a fixed income does not absolve one
from the duty of doing one's part in the creation of capital through
thrift and saving. The business enterprise, moreover, is required by
economic necessity to aim at money-making--meaning, however, profits
in the long run rather than immediate or temporary gains. Such
permanent returns can only be sought through adherence to ethical
principles and although this aim at profits becomes the power plant
which drives the business machine, the latter gives its energies and
attention more directly to the rendering of service.

Concentration upon service tends to make a man relatively efficient
therein, but argues a relative unfamiliarity with the field of others,
from which we infer the advisability of confining one's activity to
the thing he has learned to do best. As an example of this, he should
avoid placing his surplus capital or savings in outside enterprises
where they will partake of risks that are unknown to him, nor should
he attempt to employ his savings at all with the purpose of making
money, unless, indeed, he can use them as capital in his own business.
The focusing of attention on one's own function also implies and
explains the custom of placing upon participants in a business
transaction the responsibility each for his own side, a custom which
is economically justified but which must be kept within proper limits,
as is fully recognized by the business men who are successful and who
therefore become models or examples for the guidance of other men,
influencing the latter towards high ideals.

We have found, on the other hand, that apart from men in charge of
business enterprise, the burden of providing thus for man's welfare
and development is assumed by very few, the vast majority, whether in
professional or business employment, treating it with neglect and
contempt. They think, perhaps, that they are aiming at higher things,
or that their efforts would not sufficiently count, or they do not
give the matter any sturdy thought; while the underlying motive, often
unconscious, is simply an unwillingness to practice self-restraint. It
is self-indulgence, we must conclude, that is to be overcome if we are
to meet this responsibility in a manly way, visualizing it with
sufficient clearness to see that thrift, the creation of capital for
one's self and for the race, comes into no necessary conflict with any
other proper aim in life, but on the contrary constitutes a
fundamental duty to society, to the state, to one's family, to his own
future, to his self-respect.

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