This is a preliminary chapter intended to show that management is the most essential factor in every business proposition. Several illustrations are given, and some advice offered.

Before discussing government construction, ownership and operation of railroads, and other so-called public utilities, I want to call attention to some well-known but seldom recognized principles.

All business stands on three legs. No business can stand on two legs. Notwithstanding the persistent nonsense that has emanated from press and platform, from pulpit and professor’s chair, by thoughtless politician and thoughtful demagogue, capital and labor, unaided, have never accomplished anything and never will. But management, plus capital, plus labor, have done wonders and still greater achievements await the cooperation of this irresistible trinity.

Some have tried to make it appear that the public constitutes a fourth leg. While the public has rights, and affords markets, business succeeds only when the public does not interfere.

Take the case of the farmer. His lands, his tools, his teams and other livestock, constitute his capital. He performs the labor, furnishes the management, and all goes well. Occasionally a farmer prospers when he furnishes only capital and management, notwithstanding Benjamin Franklin’s proverb: “He who on a farm would thrive, must either hold the plow or drive.” The one absolutely indispensable element of success in farming is management. No man ever prospered on a farm simply because he worked. He must wisely manage if he lifts the mortgage. When the farmer’s management fails, the sheriff becomes his land agent, and it matters not how productive his land, or how willing his team, or how fruitful his flock or how hard he works.

You never knew a merchant to fail except when his management buckled. You may have thought some failures were due to want of capital; but even in these instances management was solely at fault, for it attempted too much with its available capital. Barring accidental and incidental fortune, good or ill, management or the want of it is the prime factor in every success and in every failure.

The president of a certain Chicago federation of labor, after listening to this thought, brought a party of friends to my platform and in the course of a brief visit said: “They have talked to us about capital and labor, capital and labor, nothing but capital and labor. We knew there was another guy in there but we couldn’t find him.” Then he added: “And you have got to pay that guy, too.”

Some years ago and during the period of evolution in harvest machinery, Marsh Brothers put upon the market what was known as the Marsh Harvester. It was the first radical improvement upon the old self-rake. Two men rode upon the machine and bound the grain as it was cut. For some reason, perhaps disagreement among the interested parties, the concern was reorganized into three independent companies and certain territory was allotted to each. A local preacher by the name of Gammon took one allotment, associated with him William Deering, and the largest manufacturing plant then in the world was built where nothing had stood before. The other two concerns took equally favorable territory, operated under the same patents, obtained their capital in the same market, hired labor at the same wage, and utterly failed. Five years thereafter nothing remained except court records to show they had ever existed.

Did capital build the Deering plant? It did not. Did labor do it? By no manner of means. The germ of management in the brain cells of William Deering, which no crucible would disclose and no scalpel reveal, was wholly and alone responsible. Do you suggest that able subordinates and efficient labor were in part responsible? My answer is that William Deering was wholly responsible for having able subordinates and efficient labor. Andrew Carnegie said to me: “I have never been able to discover wherein I have been more clever than others except in selecting men cleverer than I.” That is the acme of clever management, and affords the only certainty of success.

During a congressional investigation of the meat industry the president of one of the “big five” packing houses appeared, and in the course of his examination testified that while holding a position of considerable responsibility to which he had been gradually advanced, he was asked to organize a company to take over a certain concern, the stock of which was selling at about ten dollars per share. The necessary capital was tendered and he was offered a salary of one hundred and fifty thousand dollars per year, quite a large block of stock gratis and an option on thirty-five thousand shares at ten dollars per share, which he subsequently exercised. When asked if he thought his salary was unreasonably large, he called attention to the fact that within ten years his company had become one of the five largest in the world and that its stock had advanced from ten dollars per share to par. Thereupon the chairman of the committee remarked that while he was opposed to large salaries, he thought that one hundred and fifty thousand dollars per annum was not excessive for this particular witness. Did capital accomplish that? Did labor? No, management did it.

In a certain city a thousand men are out of employment. In a bank in that city a million dollars are out of employment. In the foothills near the city fifty million tons of coal are out of employment. The unemployed men see the opportunity and offer their joint note for the money with which to develop a coal mine. But the officers of the bank will not lend money that does not belong to them upon the signature of a thousand men, each out of employment. Then management walks in and says to the president of the bank: “I am a practical coal operator. I have had experience, and have associated with me a board of directors, each a successful coal producer. In proof that we understand what we are undertaking, here is the report of the best-known coal engineer in the world, who at our expense has bored every square rod of that tract of coal, showing the exact number of tons available. Here also is an assay showing the quality of the coal. It is worth so much per ton on the track. It will cost so and so to put it on the track. After we have invested a million dollars of our own money, we want to borrow a million to complete the development and for working capital.” By giving a majority of the stock, and all the bonds of the company as collateral, and by each director signing the note, the money is obtained. The hitherto idle men are now employed and a great industry results. Query: Locate the cause. Is it capital? Capital languished and earned nothing. Is it labor? Labor was in rags and labor’s children were crying for bread. That coal field is developed, the wealth of the nation increased, homes are warmed, furnaces made to glow, wheels to turn, by management, plus capital, plus labor. It is so everywhere, in each and every instance, in this and all other lands.

Capital can usually be had upon approved security, and labor is most always available at a satisfactory wage, but management, the one essential of every achievement, is the most difficult thing in the world to find and, when discovered, imposes its own conditions and names its reward.

If teachers of economics and of sociology would somewhat oftener and more generally teach the Benjamin Franklin brand of common sense and make their classes understand that there are in the United States vastly more twenty-five thousand dollar jobs than there are twenty-five thousand dollar men to fill them, bolshevism would diminish as rapidly as it has increased under the opposite tuition. Where do our editors and newspaper writers come from? Whence the principals of our high schools, teachers in our colleges, preachers and lawyers? Ninety percent of them are from our colleges and universities, and those who graduate with socialistic and bolshevistic tendencies have usually imbibed them either from imported professors or from American professors who have received their Ph.D’s in Germany.

In this connection I also want to say a word to parents: Would it not be well early in the life of your boy to impress upon him that he will probably get out of life something fairly commensurate with what he puts into life? You might also suggest that if he will observe he will probably discover that those who complain most because the world has been stingy with them, are seldom able to show a receipt for much that they have contributed to the world. If instead of giving wholesome guidance you permit to go unchallenged the teachings which your boy is certain to get in the school room, in the pew, at the theater and the movie, on the street, and especially from the demagogue, that those who make money are invariably dishonest, those who accumulate wealth are scoundrels and that those who amass fortunes should be in the penitentiary, I will go security for your son that he will never disgrace his parents by getting the family name on the letterhead of any big institution, or in the Directory of Directors.