The Business Problems of the Day

George W. Perkins April 1 1911

The Business Problems of the Day

George W. Perkins April 1 1911

The Business Problems of the Day

George W. Perkins

Mr. Perkins is generally regarded as one of the ablest business men of the age. lie was for many years senior partner with J. P. Morgan d* Co., Neiv York, from which he retired a few years ago. He is chairman of the finance committee of the great U. S. Steel Corporation ; president of the International Harvester Co., and a director of many other industrial corporations. He is now devoting much of his time to the larger commercial problems of the day.

THE business men of the United States and Canada have been deeply concerned for a number of years—and this concern has been growing rather than lessening—over two problems: first: The relations between capital and labor; second: The relations between business and government.

Many of us believe that we have reached a point where the agitation that has been going on in connection with both of these problems must abate and some practical solution be found, or serious results will follow. It is comparatively easy to point out trouble, to locate defects, to prophesy disaster. It is quite another thing to point ont a safe and sane way out of trouble, correct the defects, and avoid the disaster. It is so easy to tear down; it is so difficult to build up.

I. for one,, believe that our statesmen ami politicians have not sufficiently studied the causes underlying our present troubles; and you would not take, with much hope of satisfactory or permanent relief, the prescription of a physician who had not first carefully and thoroughly diagnosed the cause of your illness.

Our lawmakers, in both the nation and the state, have vied with one another for a number of years in enacting legislation the tendency of which has been to restrict.

contract and limit the business men’s activities. During these very same years our inventors have vied with one another (and with unprecedented success) in placing in the hands of business men various instruments which broaden and expand the business man’s activities. The clashing of these two great forces is largely responsible for present conditions. While laws have been enacted, having as their purpose the prevention of business getting together, we have had the uses of steam and electricity so perfected that the business world has been irresistibly drawn together; and the attempts of man to make laws that will nullify conditions that have come about through the conquest of the mysteries of nature, will never succeed.

Electricity in the hands of man has been the creator of our modern corporations. It is the mind, not the body, that does business, and electricity has emancipated the mind from the bodv and given it wings. If a lot of good people will think a little more, if they will be logical, they will have to conclude that even a literal enforcement of the anti-trust laws would not accomplish their desires. What they really want, in order to actually attain their ends, is a new law making it a penal offence to use steam or electricity.

Just ä simple little law like that would be one certain way of solving our present problems.

One would think, from the political teachings of the last ten years and the laws enacted during that time, that we were confronted with a new order of man, full of evil purpose, and that, having been endowed by the Almighty with almost superhuman mental powers, he was in a fair way to accomplish his evil purpose. What are the facts? Simply these: That what has happened, has happened through evolution. The great business combinations of the day have come about naturally and solely because of the inventions of our time that are applicable to business uses. There is not a man in this assembly who will not realize, if he will stop to think a moment, that his father, had he been five times as able as he was, could not have begun to accomplish in business what his son can accomplish today, for the simple and sole reason that he had not the machinery with which to supplement his mental ability. Our forefathers had no stenographers, no typewriting machines; they had not the telegraph, the telephone, the 20th Century Limited, nor the ocean greyhound.

The first crying requisite for doing business is inter-communication. It is by this means that you get a customer, and the more readily you can get at your customer and the larger the number of customers you can readily get at, the more business you can do. In the day of the stage coach and all the lack of inter-communication that went with that period, it was utterly impossible for any one man or group of men to do a large business. There can be no possible question about that. To-day a man in any line of business, resident at any given point, has only to have the desire to quote a price on his wares to almost any point in the civilized world and he can do it in the morning and have his answer by night. Thus, inter-communication has developed by leaps and bounds from a radius of a few miles to a distance only bounded by the circumference of the earth; and it is a striking fact that our business concerns have just about kept pace in their growth and development with the growth and development of inter-communication.

Only a few days ago the news was heralded that a man had perfected an invention by which a number of people could talk over one telephone wire at the same time without interrupting one another, and that this invention was to be patented, not for the benefit of any one man or corporation, but for the free use of the people of the United States.

If what I have said thus far is sound, is correct, it proves that we are living in an essentially “get together” age. The more closely people are thrown together and the larger the number of people who are thrown closely together, the more imperative it becomes that they learn how to get on together; for if they do not get on together and there is trouble, that trouble will be more serious and will affect more people than if a small community had failed to get on together and trouble had broken out.

With our social and business world drawn so closely together by bands of steel and streams of electricity, we must look for the solution of our problems to ways and means that will enable us to get on together; for we are not going backwards, we are not going to abandon the wireless and the 20th Century Limited; we are going on even to the practical navigation of the air, if that be possible.

Some of us who believe that these conditions are practical and not theoretical ones—conditions that will change only in that they will become more pronounced in their tendencies, have been taking a look ahead for the welfare of our country and the coming generations and have been forced to the conclusion that the day of ruthless competition has served its purpose and that we must, with all possible expedition, get away from it to a more humane method of doing business. Ruthless competition by ox-team could never be very serious, but ruthless competition by electricity means bankruptcy. Competition at best means the success of one, the failure of another; it means cruelly low wages ot one time; with the public paying the bills at another time; it means uncertainty always.

It is said for competition that it prevents monopoly and that monopoly would mean fleecing the public all the time. This is the crux of the question. Compe-

tition that competes, that is real, that is earnest, under present conditions of life would he ton destructive to be tolerated. Monopoly, complete and unrestrained, under private ownership or management, would alike bo intolerable under present conditions of life. Some other method must be found, and it would seem to lie through the medium of co-operation. By co-operation I mean a system of doing business by which all parties interested will enjoy the benefits of the business; and I believe we have reached a stage of development in this country where we can safely undertake the organization of our business fabric along these lines.

The millennium has not yet arrived, but no thoughtful man will deny that there lias been a great awakening of the business conscience in recent years. The old motto, “Honesty is the best policy,” in place of being more or less a beautiful sentiment, is coming to be more of a practical reality. The day has come when to be honest means not technically, legally honest, but broadly, humanely honest —honest in thought, in purpose, in act. Man is still selfish, and this must be seriously reckoned with in calculating what he will do in his relationship with his fellows. There is, however, such a thing ns benighted selfishness and such a thing ns enlightened selfishness. I believe that with the awakening of the business conscience is coming what might be called an enlightened selfishness—by which I mean a realization that for one’s own best pecuniary interests the methods of the past cannot be tbe methods of the future: that ns we are tiring in a “get together” age we must do business on a “live and let live” basis, and that one’s own selfish interest makes the doing of business on a co-operative basis more profitable in the long run than on the basis of ruthless competition.

But just as surelv ns you cannot h: oonmetition unie« it competes. so just Mirel\ you can only have co-operati that co-operates T mean bv this, co-op atmn in anv^ given line of business v fail unless it is co-operation between lal and capital, between capital and c «inner, between company and gove’ ment Co-operation between labor a Spital cannot be effected bv the mi

paying of wages and by the giving of gratuities or voluntary rewards at the end of the year. The great educational systems fostered by the state and wealthy individuals, have made tremendous strides in the last quarter of a century in developing the independent thinker among the masses, with the result that the question between capital and labor to-day is not so much the amount of wage a man should be paid as it is whether that wage is a fair proportion of the earnings of the business. The closer the world is drawn together and the better people know each other, the better they understand each other, and the more impossible it is to adopt and pursue secretive methods—to obtain for any one branch of a business unfair and improper profits; and one of the things that inter-communication has done has been to sound the death knell of secretive methods. More and more is public opinion demanding full, open and honest accounting from business concerns, and the more far-sighted business concerns that adopted such methods a few years ago are having less trouble with their labor and the public than other concerns, because both their labor and tbe public know what the profits of the business are and what percentage of it labor is receiving in wages.

Practical experience in recent years in certain large industrial companies has shown that a fair wage, supplemented by a profit-sharing plan, will go a very long way toward promoting harmony between capital and labor. By profit-sharing I do not mean bonuses or gratuities, but rather a definite statement made to an organization at the beginning of a year as to what is expected of it, and that, if such expectations are realized, certain extra compensation will be paid, and paid, not in r>ash that can be immediately spent, but put in some security that represents an investment in the business in which the man is working. Most profit-sharing plans have failed because they did not in point of fact make a partner out of the worker.

Broadly speaking, I believe that an industrial company should be organized in the following manner, viz.: The orgnnizafI°n of brain workers and band workers hould be paid their regular compensation for earning the interest on the bond-

ed debt and dividends on preferred stock. If, by successful management, they earn more than this it would, under modern arrangements, go to what are known as common stockholders; and at this point the organization of brain workers and hand workers should share with the common stockholders in the profits made for the common stockholders, and share on a definitely stated basis, varying according to conditions in different lines of business Where this has been tried it has been eminently successful, and as the question is simply one of handling human nature, what can be done in one line of business in this way can be done in another.

As regards the relations of business to the government, I again believe that publicity, full and frank, will go a very very long way toward correcting any evils that exist and preventing any that may threaten. Each day it becomes more and more apparent that all questions in this country must be settled at the bar of public opinion. If our laws regulating large business concerns provide for proper and complete publicity, so that the labor of a concern would know what was being done, so that governmental authorities would know what was being done, so that stockholders would know what was being done, and the public, which was being served, would know what was being done, many of our present difficulties would disappear; and in place of this being an element of weakness to any given business concern, it would be an element of strength, for, under such conditions, a set of managers operating a given business, if they were able enough mentally to be successful managers, would soon come to realize that they could only succeed by being fair to one and all.

I believe, further, that there is more safety to the public and to labor in having very large business enterprises than in having small or medium-sized ones; for the larger the undertaking is the more generally it is observed and the more thoroughly its affairs are scrutinized. Then, too, the large concern provides more steady employment for labor and minimizes to almost nothing the chance of financial collapse and failure. Of course, proper precautions must be taken to prevent the very results that might come from unre-

stricted monopoly, and this can accomplished by frank and full publicity, with proper supervision and regulation by federal authority.

Business men have pretty generally fought for years the idea that business should in any way be interfered with by the state. In my judgment this has 'been a mistake. If we are to have huge business concerns we can only have them because the capital is provided by the public—thus making them semi-public institutions; and the manager of any such concern should fully realize this fact and appreciate that he is a trustee in the broadest sense of the term. Our large business concerns are popularly called “trusts,” and in one sense of the word it is more aptly applied to them than many of us in the past have taken thought to realize ; for the managers are entrusted with the public’s funds for investment, are entrusted with the public’s labor to manage, are entrusted with a substantial percentage of a given commodity which is to be supplied to the public; and if they discharge their trusteeship in a broad, statemanlike manner, with fairness and equity to all interests. the good rather than the harm they can do is almost incalculable.

It is high time that we abandoned the false notion that corporations do things. A corporation is an inanimate object; it can do nothing; it can neither commit a crime nor render a benefit. It is the manager of the corporation, the human being, who thinks, who acts; he commits the crime or renders the benefit. Let us get straight on this question as regards corporations. For years we have thought straight on this question in the matter of National banks. If a law is violated or a crime committel in a National bank, federal authority immediately seizes the man who did it and punishes him. The bank is not harmed; on the contrary, everything is done to protect the bank and its depositors and stockholders. This is the only practical, sane view to take of corporations and their managers. The day has come when we need statesmanship in business.

It will be impossible to work out any system by which the great business concerns can be supervised or regulated by states or provinces, because we have too

many stato«, and the methods being different in various states, would make a situation too complicated to be workable. But federal regulation is feasible, and if we unite and work for it now we may be able to secure it : whereas, if we continue in our tight against it much longer, the incoming tide may sweep the question along to either government ownership or socialism.

One important reason why business men have feared regulation of business by the government has been that such regulation would be performed by inexperienced men—those without business training, and who would have no practical knowledge of the great problems involved. I have for a long time believed that what Americans should have at Washington is a Business Court, to which our great business problems could go for final adjustment when they could not be settled otherwise. We now have at Washington a Supreme Court, to which is referred the huai settlement of our legal questions. This Court is composed, of course, of lawyers only, and it is the dream of every young man who enters the law that he may some day be called to the Supreme Court bench. If such a call comes, it matters not how lucrative his practice, he always drops it for the honor conferred. M hv not have a similar goal for our business men? Why not have a court for business questions on which no man could sit who had not had a business training, with an honorable record? This would surely come to be regarded by business men in the same wav that the Supreme Court is regarded by lawvers. The supervision of business by such a body of men, who had reached such a court in such a wav would unquestionably be fair and equitable to business, fair and equitable o the public. Furthermore, it would not take out of business that invaluable as*et. individual initiative. It would leave

the every-day management of business untrammeled and allow men free swing to devise ways and means to improve, enlarge and develop our domestic and foreign commerce. We could then move on to the organization of business into large units, confident that many of the trials and tribulations of competition were behind us, and that monopoly would not oppress us. And in the organizing of large bodies of men in each line of trade we would have the great advantage of the emulation which comes from the vieing with one another of a great body of men working together in one calling. Emulation of this sort is just as stimulating as competition and much more uplifting— doing good rather than harm. Then, too, the business that employs 50,000 men is never at a loss for a good man to put into a place made vacant; it has so many men to pick and choose from.

I have presented in this paper a side of the case that I do not believe has been very generally considered—a view of it which I firmly believe should be considered—considered by the business men of this country in each and every community. The discussion of recent years, growing out of changing business methods, has been carried on almost wholly by politicians, newspapers and magazine writers; and while it has been the business man’s problem he has taken practically no part in the discussion ; his side has been presented sparingly, timidly, if at all. This is no way to settle a great and burning question in a great, and free country such as ours. The time has come for business men to take a hand in these questions, to think them out, to decide as to the best course for our country to take, and then champion that course to the full measure of their ability. If this is done in each community, and done honestly and fearlessly, we can trust to the good sense of our people to render a sane verdict.