My Life and Work
the waste that had both made the prices high and absorbed the profit. We
sold off the useless stuff. Before we had employed fifteen men per car
per day. Afterward we employed nine per car per day. This did not mean
that six out of fifteen men lost their jobs. They only ceased being
unproductive. We made that cut by applying the rule that everything and
everybody must produce or get out.
We cut our office forces in halves and offered the office workers better
jobs in the shops. Most of them took the jobs. We abolished every order
blank and every form of statistics that did not directly aid in the
production of a car. We had been collecting tons of statistics because
they were interesting. But statistics will not construct automobiles--so
out they went.
We took out 60 per cent. of our telephone extensions. Only a
comparatively few men in any organization need telephones. We formerly
had a foreman for every five men; now we have a foreman for every twenty
men. The other foremen are working on machines.
We cut the overhead charge from $146 a car to $93 a car, and when you
realize what this means on more than four thousand cars a day you will
have an idea how, not by economy, not by wage-cutting, but by the
elimination of waste, it is possible to make an "impossible" price. Most
important of all, we found out how to use less money in our business by
speeding up the turnover. And in increasing the turnover rate, one of
the most important factors was the Detroit, Toledo, & Ironton
Railroad--which we purchased. The railroad took a large place in the
scheme of economy. To the road itself I have given another chapter.
We discovered, after a little experimenting, that freight service could
be improved sufficiently to reduce the cycle of manufacture from
twenty-two to fourteen days. That is, raw material could be bought,
manufactured, and the finished product put into the hands of the
distributor in (roughly) 33 per cent. less time than before. We had been
carrying an inventory of around $60,000,000 to insure uninterrupted
production. Cutting down the time one third released $20,000,000, or
$1,200,000 a year in interest. Counting the finished inventory, we saved
approximately $8,000,000 more--that is, we were able to release
$28,000,000 in capital and save the interest on that sum.
On January 1st we had $20,000,000. On April 1st we had $87,300,000, or
$27,300,000 more than we needed to wipe out all our indebtedness. That
is what boring into the business did for us! This amount came to us in
these items:
Cash on hand, January $20,000,000
Stock on hand turned into cash, January 1 to April 1 24,700,000
Speeding up transit of goods released 28,000,000
Collected from agents in foreign countries 3,000,000
Sale of by-products 3,700,000
Sale of Liberty Bonds 7,900,000
TOTAL $87,300,000
Now I have told about all this not in the way of an exploit, but to
point out how a business may find resources within itself instead of
borrowing, and also to start a little thinking as to whether the form of
our money may not put a premium on borrowing and thus give far too great
a place in life to the bankers.
We could have borrowed $40,000,000--more had we wanted to. Suppose we
had borrowed, what would have happened? Should we have been better
fitted to go on with our business? Or worse fitted? If we had borrowed
we should not have been under the necessity of finding methods to
cheapen production. Had we been able to obtain the money at 6 per cent.
flat--and we should in commissions and the like have had to pay more
than that--the interest charge alone on a yearly production of 500,000
cars would have amounted to about four dollars a car. Therefore we
should now be without the benefit of better production and loaded with a
heavy debt. Our cars would probably cost about one hundred dollars more
than they do; hence we should have a smaller production, for we could
not have so many buyers; we should employ fewer men, and in short,
should not be able to serve to the utmost. You will note that the
financiers proposed to cure by lending money and not by bettering
methods. They did not suggest putting in an engineer; they wanted to put
in a treasurer.
And that is the danger of having bankers in business. They think solely
in terms of money. They think of a factory as making money, not goods.
They want to watch the money, not the efficiency of production. They
cannot comprehend that a business never stands still, it must go forward
or go back. They regard a reduction in prices as a throwing away of
profit instead of as a building of business.
Bankers play far too great a part in the conduct of industry. Most
business men will privately admit that fact. They will seldom publicly
admit it because they are afraid of their bankers. It required less
skill to make a fortune dealing in money than dealing in production. The
average successful banker is by no means so intelligent and resourceful
a man as is the average successful business man. Yet the banker through
his control of credit practically controls the average business man.
There has been a great reaching out by bankers in the last fifteen or
twenty years--and especially since the war--and the Federal Reserve
System for a time put into their hands an almost limitless supply of
credit. The banker is, as I have noted, by training and because of his
position, totally unsuited to the conduct of industry. If, therefore,
the controllers of credit have lately acquired this very large power, is
it not to be taken as a sign that there is something wrong with the
financial system that gives to finance instead of to service the
predominant power in industry? It was not the industrial acumen of the
bankers that brought them into the management of industry. Everyone will
admit that. They were pushed there, willy-nilly, by the system itself.
Therefore, I personally want to discover whether we are operating under
the best financial system.
Now, let me say at once that my objection to bankers has nothing to do
with personalities. I am not against bankers as such. We stand very much
in need of thoughtful men, skilled in finance. The world cannot go on
without banking facilities. We have to have money. We have to have
credit. Otherwise the fruits of production could not be exchanged. We
have to have capital. Without it there could be no production. But
whether we have based our banking and our credit on the right foundation
is quite another matter.
It is no part of my thought to attack our financial system. I am not in
the position of one who has been beaten by the system and wants revenge.
It does not make the least difference to me personally what bankers do
because we have been able to manage our affairs without outside
financial aid. My inquiry is prompted by no personal motive whatsoever.
I only want to know whether the greatest good is being rendered to the
greatest number.
No financial system is good which favors one class of producers over
another. We want to discover whether it is not possible to take away
power which is not based on wealth creation. Any sort of class
legislation is pernicious. I think that the country's production has
become so changed in its methods that gold is not the best medium with
which it may be measured, and that the gold standard as a control of
credit gives, as it is now (and I believe inevitably) administered,
class advantage. The ultimate check on credit is the amount of gold in
the country, regardless of the amount of wealth in the country.
I am not prepared to dogmatize on the subject of money or credit. As far
as money and credit are concerned, no one as yet knows enough about them
to dogmatize. The whole question will have to be settled as all other
questions of real importance have to be settled, and that is by
cautious, well-founded experiment. And I am not inclined to go beyond
cautious experiments. We have to proceed step by step and very
carefully. The question is not political, it is economic, and I am
perfectly certain that helping the people to think on the question is
wholly advantageous. They will not act without adequate knowledge, and
thus cause disaster, if a sincere effort is made to provide them with
knowledge. The money question has first place in multitudes of minds of
all degrees or power. But a glance at most of the cure-all systems shows
how contradictory they are. The majority of them make the assumption of
honesty among mankind, to begin with, and that, of course, is a prime
defect. Even our present system would work splendidly if all men were
honest. As a matter of fact, the whole money question is 95 per cent.
human nature; and your successful system must check human nature, not
depend upon it.
The people are thinking about the money question; and if the money
masters have any information which they think the people ought to have
to prevent them going astray, now is the time to give it. The days are
fast slipping away when the fear of credit curtailment will avail, or
when wordy slogans will affright. The people are naturally conservative.
They are more conservative than the financiers. Those who believe that
the people are so easily led that they would permit printing presses to
run off money like milk tickets do not understand them. It is the innate
conservation of the people that has kept our money good in spite of the
fantastic tricks which the financiers play--and which they cover up with
high technical terms.
The people are on the side of sound money. They are so unalterably on
the side of sound money that it is a serious question how they would
regard the system under which they live, if they once knew what the
initiated can do with it.
The present money system is not going to be changed by speech-making or
political sensationalism or economic experiment. It is going to change
under the pressure of conditions--conditions that we cannot control and
pressure that we cannot control. These conditions are now with us; that
pressure is now upon us.
The people must be helped to think naturally about money. They must be
told what it is, and what makes it money, and what are the possible
tricks of the present system which put nations and peoples under control
of the few.
Money, after all, is extremely simple. It is a part of our
transportation system. It is a simple and direct method of conveying
goods from one person to another. Money is in itself most admirable. It
is essential. It is not intrinsically evil. It is one of the most useful
devices in social life. And when it does what it was intended to do, it
is all help and no hindrance.
But money should always be money. A foot is always twelve inches, but
when is a dollar a dollar? If ton weights changed in the coal yard, and
peck measures changed in the grocery, and yard sticks were to-day 42
inches and to-morrow 33 inches (by some occult process called
"exchange") the people would mighty soon remedy that. When a dollar is
not always a dollar, when the 100-cent dollar becomes the 65-cent
dollar, and then the 50-cent dollar, and then the 47-cent dollar, as the
good old American gold and silver dollars did, what is the use of
yelling about "cheap money," "depreciated money"? A dollar that stays
100 cents is as necessary as a pound that stays 16 ounces and a yard
that stays 36 inches.
The bankers who do straight banking should regard themselves as
naturally the first men to probe and understand our monetary
system--instead of being content with the mastery of local banking-house
methods; and if they would deprive the gamblers in bank balances of the