VIII Company Promoting and Other Business Secrets

V I I I COMPANY PROMOTING AND OTHER BUSINESS SECRETS THE life of a business man does not lend itself to graphic description. Buying an-d selling does not make good" copy." A man who stands behind the counter and serves out cabbages need not look for notoriety. If his cabbages are good, if his manners give no offence, if he refrains from excessive drink and conducts him self with ordinary propriety, he will in time be known as a "respected resident"; but in the main his life will pass without comment, and his only obituary notice will be the inscription on his gravestone. The man who wants to be somebody, on the other hand, and to produce good biographical material, must eat other people's cabbages and devote himself to agitation. He must make speeches, and write to the papers. He must rail in public about the tenure of the land which pro duces the cabbages, expatiate on the mode of life of the man who sells the cabbages, or the man who brings them to market: he can, if he will, stir to its depths the public indignation over the price at which the cabbages are sold. In each, or any, of these ways he can become an infi~itely more important person than the humdrum individual who merely sees that his fellows are pro- .

vided with appropriate cabbages. The result of his work as an agitator may be to halve the supply of cabbages, to drive_ the cabbage merchant out of busi ness; to produce conditions in which only the pro fessional profiteer can venture to touch cabbages; to 142 'THE CONFESsIoNSOF A CAPI'fALlsrt create artificial restrictions and regulations-in short, to ruin the industry. All this will make for greatness. The more public inconvenience caused by descanting on these questions, the higher will be the public esti mate of the professional agitator. It would seem to be essential to make trouble, or at least to be associated with trouble, if you would become a great public char acter and leave behind a great biography. There is no good copy in the day by day or year by year.monotony of an ordinary business career. I have several times lately kept a note of the details of one day's work, and I have been driven to the con clusion at the end of each day that I have done nothing but say "Yes" and "No" to a large number of people, and, in their view, been accordingly a help or a nuisance. As will have been noticed from earlier pages, I have at various times done. some of theprac tical work of every department of the publishing busi ness. But it is undoubtedly true of my present position that I do little that would be recognised in most of the political schemes of industrial and social reconstruction.

I merely say" Yes" and" No." An eight-year-old child of mine paid a visit to my office some little time ago, and went home and explained to the family what a farce business really is. "Daddy rang a bell," he told them, " a man came in with a piece of paper on which Daddy scribbled his name, ever so badly, and then he put his hat on and said he might not be back to-day." My function is to take the risk, a function discussed in some detail in the previous chapter. "In the course of fulfilling this function I lose and make a certain amount of money every week of my life. In the end the profits are, or have so far proved, greater than the losses, and for this reason I am considered successful. But my chief work to-day consists in saying " Y es " and " No," and thereby taking the risk of loss COMPANY PROMOTING; BUSINEss SECRETs 14-3 or profit arising from the actions of the various people whom I control.

The whole burden of my story is that these essential actiyities are, and always would be, totally impossible without the existence of some such person as myself, exercising an office which, from its very nature, cannot be separated from the private or individual gain to which my opponents in economic thought take such grave exception. An essential to success in a business career would seem to be the ability to say" No," and the knowledge of when to say it. Although in the minds of those who know my business I am associated with considerable activity, it is all merely a result of the very occasional "Yes" compared with the much more usual, " No." If the business' man were to say " Y es " to more than a very small percentage of the proposals made to him, he would not remain in business long. " No " is the most important word in the language and is the most difficult word of all to say. The educa tion of the child consists very largely in " No," but it is not easy to say it in most cases. The business man must always be saying" No " to the worker, "No"

to the supplier, and" No " to the customer-the last operation being perhaps the most difficult and the least understood of the three. It is very difficult to decline a request for a 5 per cent. discount on a prospective customer's account, especi ally when one is told that all one's competitors give it and that without it the account will not be opened. Given the chance of an order of the value of £100 at one's advertised price, subjected only to 5 per cent. discount, it needs a strong and good business man to throwaway £95 for the sake of the principle involved in a five-pound note. Yet if business is to be sound and honest that must be done. It is essential to be 144 THE CONFESSIONS OF A CAPITALIST fair and just to one's customers. If your price for a given article is £100 and you sell to one ~ustomer at that price and then, because the next is gifted with superior bargaining power, you allow him to have the same article for £95, you are surely wronging the first man.

I have 20,000 customers on my advertising ledgers. When I first entered the trade paper business, a fixed price was the exception rather than the rule. The price of each advertisement was the subject of negotiation. That is, even to-d~y, very largely the case with many small papers, and it is one of the reasons why they remain small. Apart, however, from the justice of the matter, it would be a physical impossibility to arrange individual terms with 20,000 customers. So it becomes evident that, even in a matter like this, honesty is still the best policy; and, by developing the courage to say " No," and declining to do business except upon very definite and rigid terms, one is not only able to deal honestly and fairly with all one's customers, but to expand one's business. A good deal might be said about the science of saying "No." In the business of buying and selling, even in its simplest forms, the buyer must say" No " on the first offer of the seller, if only as a means of testing the quality of the article or proposition, and hearing more about it. But the most difficult " No" of all is that which must be said to some enthusiastic assistant who, out of his desire to help and his personal ambition, has evolved some new idea which will not work. It is very necessary in these cases to say the" No " in such a .

way as not to discourage more ideas of the right kind, and the difficulty is not made any less by the suspicion that will always lurk, certainly in the mind of your assis tant and possibly in your own, that after all your deci sion may be wrong.

COMPANY PROMOTING; BUSINESS SECRETS 145 For the head of a business,as for the head of a family, it is very necessary to be sure when saying "Yes" or " No " that he is not being used as a court of appeal from some lesser authority. When your child comes to you with a request to be allowed to sit up to supper, if you are a wise and practised father, you do not answer the question until you have ascertained whether an answer has already been secured from Mother. Similarly, in the running of a business, a minor official may come to you with a question or suggestion, having no other purpose in view than to take your decision back in triumph to his superior, who has already passed judgment in the opposite sense. I suppose there is no more dreadful secret associated with the conduct of business than what is c~lled the " Capital Account." It is generally to be found written in the private ledger, which is provided with an ela borate lock and key and guarded behind the heavy doors of the private office safe. It is in capital arrange ment and manipulation that the making of fortunes largely consists, and I have done my share in this con nection. So that, in discussing business secrets, it is right and proper that I should have something to say about that process of secret scheming in shares and stocks and goodwills which to most people is a closed book, and to many suggests practices which, to put it mildly, are regarded as doubtful. The capital account of a newspaper is the flimsiest thing there is. As a general rule a newspaper requires a backing of good, solid capital, but when this is invested and the pro perty is established, all this capital assumes the nebu lous form of goodwill and consists of nothing at all except profit-earning capacity. There are newspapers (and some of mine are among them) which never had much solid capital at their. back, which have grown by slow stages over long periods "and, having acquired K 146 THE CONFESSIONS OF A CAPITALIST large earning capacities, have thereby also acquired large capital values. But whether values have their origin in actual money put in and sunk, or whether no money was there in. the beginning, does not matter .

at all in considering the capital value of a newspaper enterprise at any particular time; for value rests entirely upon the profit-making capacity of the publication. I am speaking, of course, of publications and newspapers as commercia.! propositions. The value of any of my properties is at any time .merely the index of its capa city for earning an annual income. A newspaper, there fore, demonstrates clearly the illusory nature of capital. The best illustration that I can give of the many oper ations on capital account which have passed through my hands is the way in which I handled the purchase and sale of the Electrician Printing and Publishing Co. This was a business established in I 864 by Sir John Pender, Sir Jame$ Anderson, and others interested in the new science of electrical telegraphy, with the object of publishing a newspaper known as The Electrician for the development and expansion of that science. The business seems to have flourished and to have accom plished the work designed for it. As electricity became more and more generally applied, the paper became a leading authority on electrical matters. The Pender interests gradually disappeared, and in 1898 the journal became the sole property of a Mr. George Tucker, who, I am informed,had joined it years previously as an apprentice and .had gradually risen to the top. Mr.

Tucker was a Victorian type of business man and he added very largely to the original idea of an electrical newspaper. He developed by degrees a large printing establishment, added other journals and piled up de;.. partment upon department, doing ·the business of an advertising agent and a wholesale stationer as well as any work coming his way as a general jobbing printer.

COMPANY PROMOTING; BUSINESS SECRETS 14-7 When I came into touch with the company, it was employing about 250 people. At the lower prices of those days, it had a turnover of about £25,000 a year and was making almost no profit. I had for years coveted The Electrician. It fitted in with the guiding principle of my career, the massing together of trade papers, and so I kept in touch with Mr. Tucker and· ·discussed with him from time to time the possibility of his selling me the copyright. . Nothing happened, however. Mr. Tucker was much older than I, and his ideas differed widely from mine. It may be accepted as a general rule that the older the man the longer he takes to come to a decision. On the whole it may be that the older man is wiser than the very young one who takes perhaps a premature deci sion, but in this case/it meant that by the time I did secure the business it had sunk to its lowest ebb.

I had no desire for the printing works and the sundry other activities of Mr. Tucker, and my negotiations with him were confined to the question of purchasing The Electrician. In 1914 Mr. Tucker died and left his affairs in the hands of the Public Trustee, and it was then that I was thrown into one of those company promoting capital-manipulation operations which are so little understood and so much suspected by critics of the economic organisation of things. The Public Trustee would consider nothing short of the sale in one lot of the whole of the Tucker interest. I had, therefore, to purchase a tangled miscellany of enterprises and unravel from it the particular one which I desired. The Public Trustee's price was £12,000. The price which had been discussed between Mr. Tucker and" myself for the newspaper alone was £s,000. I could manage the latter figure but not the former. After much negotiation I bought the busi ness for £12,000, £s,000 of which I found on my 148 THE CONFEssIoNS OF A CAPITALIST own account by borrowing from the bank, and £7,000 was put up by my friends.

Then began a long. process of reorganisation and reconstruction, and my financial reward was consider able, and, in accordance with the dictates of Pareto's Law, everyone associated with the enterprise, from the top to the bottom, also benefited consider~bly. Mr. Tucker's management of the business had for the pre vious six years ptoduced dividends on a very small capital of 3t, It, 3, 2t, 3t, and 2 per cent. The annual profits of the two enterprises, into which I split this concern, are now equivalent to the whole of the capital of the Tucker company. His small profits accompanied the lowest wages and the worst conditions that I have met with in my experience. My larger profits are associated with wages and conditions which, I take pride i~ thinking, are a little in advance of the comparatively high standard of these days. My first act was to apply to the Electrician Printing and Publishing Co., Ltd.) my principle that printing and publishing are two separate trades and should not be run together. I took over at once that part of the enterprise which could be classified as copyrights, with all the editorial and advertising members of the staff, and ran the weekly publications and the technical books as part of my own business. The effect was immediate and astonishing. The Electrician, surrdundedwith the machinery of a printing works, enjoyed a revenue from sales and advertisements of under £I 0,000 a year. In three or four years that figure reached over £25,000.

o I then turned my attention to the printing establish ment, sundry merchanting and agency business, a cumbersome affair in which I was not in 0 the least interested. I had the good fortune to find associated with the concern a couple ormen in managerial posi tions, one of whom had grown up with the business, COMPANY PROMOTING; BUSINESS SECRETS 149 and both of whom were working for small salaries under bad conditions out of personal regard for the old" governor," to whom, through long years of asso ciation, they had naturally become closely attached. These considerations did not enter into the relation ship between them and me, ana the death of Mr. Tucker, and my arrival on the scene as chief proprie tor, gave opportunity for the development of ambitions and abilities which both men possessed and for which there had hitherto been no scope. I came to terms with them for the sale of that part of the business which I did not want. It was formed into a separate company; I capitalised it at a figur~ 'which left me a reasonable profit and, taking advantage of my experi ence of 1900, when, it will be remembered, I acquired a property on easy terms by means of long-dated bills, I sold this company to its two managers 'on a similar scheme. I am very happy to know that since those days this business has flourished apace. It has acquired other works and is now of a size and importance far exceeding anything that could have been foreseen in the days when I handled it. This only confirms my views as to the wisdom of specialisation.

The net result of all this manipulation is that in a short period of seven or eight years an old-fashioned business on the verge of bankruptcy, with a turnover of £25,000, employing 250 people on low wages, has been transformed into two flourishing separate con cerns that turn over between them many times the figure of eight years ago and make, I believe, at both ends, handsome profits, to say nothing of an addition to the wages fund which cannot be less than £100,000 a year. So far as I am concerned-and this is a piece of iniquity on which, the" new world" mongers would focus their attention to the exclusion of anything else 150 THE CONFESSIONS OF A CAPITALIST -1 came out of the deal with an addition to my capital of £3,000 or £4,000, which, however, is not really capital at all, but a figure which fixes my share of the profits of the enterprise as a whole, or my commission for having been the agent of this beneficial transaction.

But 1 am searching for business se.crets. It is com monly supposed that business is one maze of secrets; a supposition that is now largely false. There is no more absurd hoax than the business" secret;" and the idea should be knocked out of the public mind. 1t consists to a large extent in the gifts or innate qualities of individuals. Thus, a very important secret of suc cess in business rests in understanding the art of employing, in the power to attract to oneself others who are willing to carry out· their duties as directed with efficiency and goodwill, the one being almost .. as important as the other. The objection to the employer, voiced so loudly by the Socialist and felt to some extent by everybody, has its roots in the fact that he has it in his power to bring employment to an end, to discharge, to "sack." The secret of employing successfully lies in a proper appre ciation of this right. All too few employers take their privilege seriously enough. Many of them indeed fail .woefully to grasp the fact that they are employers at all.

A man will set up as a manufacturer of furniture and hi~ mind, absorbed in the technicalities of his trade, becomes oblivious of the fact that he is not only a manufacturer but also an employer. His function is not only to manufacture furniture but to employ people. If he is so presumptuous as to think that he is able to -find employment for others, he should continually bear that fact in mind and not allow it to be entir~ly sub servient to his more obvious purpose, the manufac ture of furniture. He should regard his duty as an employer so seriously as to feel compelled to secure COMPANY PROMOTING; BUSINESS SECRET5 151 the amount of work for which his employees very naturally look to him. Some day we shall produce a class of employer ,which will rid the rest of the com munity of the menace of uncertainty now supposed to be inseparably associated with what is known as good trade and bad trade .

. The employer, who is an employer, will see in time that his function is not only to make furniture but to make trade-a no less possible process. However that may be, there is no secret which should be more earnestly regarded. by' every employer than the proper exercise of this right of discharging the em ployed. It will enable him to develop in the minds of the employed just that sense of security, the absence of which is the gravamen of the charge against the present system. Controlling, as 1 do, a fairly large staff, it is impos sible for me to have a personal knowledge of the qualities and capabilities of each member of it. But I reserve, and hope always to reserve, to myself alone the right of appointment and the right of discharge to and from the service of my business. It frequently happens that the manager of a depart ment will report that some subordinate is unsuited to his position and that he should be discharged. I never act upon such a report. I am thankful to know that each human being is a blend of peculiarities, and that we are not constituted in such a way that any two of us in all circu1p.stancescan always live happily together.

The characteristic which nlayjar upon the susceptibili ties of one manager may turn out to be a valuable asset in the eyes of another. Hence it is my invariable prac tice, upon receiving an unfavourable report upon an employee, to seek a second and a third report. A typist' or a clerk or a traveller will be moved from the-first department to· a second and then to a third, and not 152 THE CONFESSIONS OF A CAPITALIST until three departments have reported unfavourably do I exercise the right, which I possess as employer, of discharging a subordinate and creating unemployment. In pursuance of the vague idea that I mention above, I have it to my c~edit that I have never discharged any employee of mine solely on account of bad trade. If things are slow in one department, they are .probably active in another, and, in any case, my duty as a busi ness man is to prevent business from being slack. I am not prepared to admit failure or shirk my respon sibilities at the expense of others. There are, of course, some who must be sacked.' There is the man whose ideas are bigger than his capabilities. He can learn his limitations only by moving from one job to another.

In. the course of time he will collect from various em ployers a sufficient number of opinions as to what are his real qualifications and will be a better judge of his own value. I have discharged people, and I hope I shall continue to do so, for bad time-keeping·. One thing of which I am rather proud is my endeavour to establish a record in the matter of short office hours. My business const!tutes a practical illustration of the folly of restriction and ca' canny. We work, omitting meal times (and I am referring now of course only to the clerical or manual class of labour), a week of 37t hours, and we try to cram into those hours every pos sible ounce of effort. We do not work on Saturdays and we are thus able to get. into our lives a balance which is a very happy one. It is therefore my painful duty to exercise my prerogative of discharging those who fail to appreciate the advantages of this arrange ment.

In my business, however, as I think in most busi nesses, there is to be found that se~urity from unem ployment which is so much, talked about and so much sought after. It is, as it must always be, the result COMPANY PROMOTING; BUSINESS SECRETS 153 , or reward of serious service. Equally, therefore, in theory, there can never be any unemployment for those who are willing to render such service. The great. trouble, which we are not as a people really willing to recognise, is the insecurity of inefficiency. It is that trouble which drives so many workers to think well of schemes like nationalisation, which appear on the face of them to provide security without any apparent regard for efficiency. This particular secret, the right. understanding of one's obligations as an employer, leads me to look with grave doubt upon the modern fashion of organ ising indu~try into big units. The very large concern, controlling the output of some standard article and employing many thousands of workpeople, must, from its very nature, be liable to fluctuations from which the smaller organisation is immune. The huge combine, with a weekly wages bill as big as the whole of its annual profit, may be forced by adverse conditions to indulge in wholesale sacking to maintain its existence, and the menace of insecurity-always a feature of the industrial problem-is proportionately intensified. Of course there are great advantages in arranging matters upon such a scale as to secure the maximum output and the greatest economy, but it is possible that we may sometimes forget these, the only possible excuses for size, and carry' the craze for bigness beyond the safety-point.