My Life and Work
incomes. Ordinarily, business is conceived as starting with a
manufacturing process and ending with a consumer. If that consumer does
not want to buy what the manufacturer has to sell him and has not the
money to buy it, then the manufacturer blames the consumer and says that
business is bad, and thus, hitching the cart before the horse, he goes
on his way lamenting. Isn't that nonsense?
Does the manufacturer exist for the consumer or does the consumer exist
for the manufacturer? If the consumer will not--says he cannot--buy what
the manufacturer has to offer, is that the fault of the manufacturer or
the consumer? Or is nobody at fault? If nobody is at fault then the
manufacturer must go out of business.
But what business ever started with the manufacturer and ended with the
consumer? Where does the money to make the wheels go round come from?
From the consumer, of course. And success in manufacture is based solely
upon an ability to serve that consumer to his liking. He may be served
by quality or he may be served by price. He is best served by the
highest quality at the lowest price, and any man who can give to the
consumer the highest quality at the lowest price is bound to be a leader
in business, whatever the kind of an article he makes. There is no
getting away from this.
Then why flounder around waiting for good business? Get the costs down
by better management. Get the prices down to the buying power.
Cutting wages is the easiest and most slovenly way to handle the
situation, not to speak of its being an inhuman way. It is, in effect,
throwing upon labour the incompetency of the managers of the business.
If we only knew it, every depression is a challenge to every
manufacturer to put more brains into his business--to overcome by
management what other people try to overcome by wage reduction. To
tamper with wages before all else is changed, is to evade the real
issue. And if the real issue is tackled first, no reduction of wages may
be necessary. That has been my experience. The immediate practical point
is that, in the process of adjustment, someone will have to take a loss.
And who can take a loss except those who have something which they can
afford to lose? But the expression, "take a loss," is rather misleading.
Really no loss is taken at all. It is only a giving up of a certain part
of the past profits in order to gain more in the future. I was talking
not long since with a hardware merchant in a small town. He said:
"I expect to take a loss of $10,000 on my stock. But of course, you
know, it isn't really like losing that much. We hardware men have had
pretty good times. Most of my stock was bought at high prices, but I
have already sold several stocks and had the benefit of them. Besides,
the ten thousand dollars which I say I will lose are not the same kind
of dollars that I used to have. They are, in a way, speculative dollars.
They are not the good dollars that bought 100 cents' worth. So, though
my loss may sound big, it is not big. And at the same time I am making
it possible for the people in my town to go on building their houses
without being discouraged by the size of the hardware item."
He is a wise merchant. He would rather take less profit and keep
business moving than keep his stock at high prices and bar the progress
of his community. A man like that is an asset to a town. He has a clear
head. He is better able to swing the adjustment through his inventory
than through cutting down the wages of his delivery men--through cutting
down their ability to buy.
He did not sit around holding on to his prices and waiting for something
to turn up. He realized what seems to have been quite generally
forgotten--that it is part of proprietorship every now and again to lose
money. We had to take our loss.
Our sales eventually fell off as all other sales fell off. We had a
large inventory and, taking the materials and parts in that inventory at
their cost price, we could not turn out a car at a price lower than we
were asking, but that was a price which on the turn of business was
higher than people could or wanted to pay. We closed down to get our
bearings. We were faced with making a cut of $17,000,000 in the
inventory or taking a much larger loss than that by not doing business.
So there was no choice at all.
That is always the choice that a man in business has. He can take the
direct loss on his books and go ahead and do business or he can stop
doing business and take the loss of idleness. The loss of not doing
business is commonly a loss greater than the actual money involved, for
during the period of idleness fear will consume initiative and, if the
shutdown is long enough, there will be no energy left over to start up
with again.
There is no use waiting around for business to improve. If a
manufacturer wants to perform his function, he must get his price down
to what people will pay. There is always, no matter what the condition,
a price that people can and will pay for a necessity, and always, if the
will is there, that price can be met.
It cannot be met by lowering quality or by shortsighted economy, which
results only in a dissatisfied working force. It cannot be met by
fussing or buzzing around. It can be met only by increasing the
efficiency of production and, viewed in this fashion, each business
depression, so-called, ought to be regarded as a challenge to the brains
of the business community. Concentrating on prices instead of on service
is a sure indication of the kind of business man who can give no
justification for his existence as a proprietor.
This is only another way of saying that sales should be made on the
natural basis of real value, which is the cost of transmuting human
energy into articles of trade and commerce. But that simple formula is
not considered business-like. It is not complex enough. We have
"business" which takes the most honest of all human activities and makes
them subject to the speculative shrewdness of men who can produce false
shortages of food and other commodities, and thus excite in society
anxiety of demand. We have false stimulation and then false numbness.
Economic justice is being constantly and quite often innocently
violated. You may say that it is the economic condition which makes
mankind what it is; or you may say that it is mankind that makes the
economic condition what it is. You will find many claiming that it is
the economic system which makes men what they are. They blame our
industrial system for all the faults which we behold in mankind
generally. And you will find other men who say that man creates his own
conditions; that if the economic, industrial, or social system is bad,
it is but a reflection of what man himself is. What is wrong in our
industrial system is a reflection of what is wrong in man himself.
Manufacturers hesitate to admit that the mistakes of the present
industrial methods are, in part at least, their own mistakes,
systematized and extended. But take the question outside of a man's
immediate concerns, and he sees the point readily enough.
No doubt, with a less faulty human nature a less faulty social system
would have grown up. Or, if human nature were worse than it is, a worse
system would have grown up--though probably a worse system would not
have lasted as long as the present one has. But few will claim that
mankind deliberately set out to create a faulty social system. Granting
without reserve that all faults of the social system are in man himself,
it does not follow that he deliberately organized his imperfections and
established them. We shall have to charge a great deal up to ignorance.
We shall have to charge a great deal up to innocence.
Take the beginnings of our present industrial system. There was no
indication of how it would grow. Every new advance was hailed with joy.
No one ever thought of "capital" and "labour" as hostile interests. No
one ever dreamed that the very fact of success would bring insidious
dangers with it. And yet with growth every imperfection latent in the
system came out. A man's business grew to such proportions that he had
to have more helpers than he knew by their first names; but that fact
was not regretted; it was rather hailed with joy. And yet it has since
led to an impersonal system wherein the workman has become something
less than a person--a mere part of the system. No one believes, of
course, that this dehumanizing process was deliberately invented. It
just grew. It was latent in the whole early system, but no one saw it
and no one could foresee it. Only prodigious and unheard-of development
could bring it to light.
Take the industrial idea; what is it? The true industrial idea is not to
make money. The industrial idea is to express a serviceable idea, to
duplicate a useful idea, by as many thousands as there are people who
need it.
To produce, produce; to get a system that will reduce production to a
fine art; to put production on such a basis as will provide means for
expansion and the building of still more shops, the production of still
more thousands of useful things--that is the real industrial idea. The
negation of the industrial idea is the effort to make a profit out of
speculation instead of out of work. There are short-sighted men who
cannot see that business is bigger than any one man's interests.
Business is a process of give and take, live and let live. It is
cooperation among many forces and interests. Whenever you find a man who
believes that business is a river whose beneficial flow ought to stop as
soon as it reaches him you find a man who thinks he can keep business
alive by stopping its circulation. He would produce wealth by this
stopping of the production of wealth.
The principles of service cannot fail to cure bad business. Which leads
us into the practical application of the principles of service and
finance.
CHAPTER X
HOW CHEAPLY CAN THINGS BE MADE?
No one will deny that if prices are sufficiently low, buyers will always
be found, no matter what are supposed to be the business conditions.
That is one of the elemental facts of business. Sometimes raw materials
will not move, no matter how low the price. We have seen something of
that during the last year, but that is because the manufacturers and the
distributors were trying to dispose of high-cost stocks before making
new engagements. The markets were stagnant, but not "saturated" with
goods. What is called a "saturated" market is only one in which the
prices are above the purchasing power.
Unduly high prices are always a sign of unsound business, because they
are always due to some abnormal condition. A healthy patient has a
normal temperature; a healthy market has normal prices. High prices come
about commonly by reason of speculation following the report of a
shortage. Although there is never a shortage in everything, a shortage
in just a few important commodities, or even in one, serves to start
speculation. Or again, goods may not be short at all. An inflation of
currency or credit will cause a quick bulge in apparent buying power and
the consequent opportunity to speculate. There may be a combination of
actual shortages and a currency inflation--as frequently happens during
war. But in any condition of unduly high prices, no matter what the real
cause, the people pay the high prices because they think there is going
to be a shortage. They may buy bread ahead of their own needs, so as not
to be left later in the lurch, or they may buy in the hope of reselling
at a profit. When there was talk of a sugar shortage, housewives who had
never in their lives bought more than ten pounds of sugar at once tried
to get stocks of one hundred or two hundred pounds, and while they were