c#- ' It-'. -I •J k >4 The Purpose of Commercial Organizations AN ADDRESS BEFORE THE AMERICAN ASSOCIATION OF WOOLEN AND WORSTED MANUFACTURERS PhiivAdelphia, Penn., December 6, 1907 BY G. J. H. WOODBURY BOSTON, MASS, J • x' The Purpose of Commercial Organizations By C. J. H. WOODBURY, Sc. D., Boston, Mass. Secretary of The National Association of Cotton Manufacturers. An Address before the American Association of Woolen and Worsted Manufacturers, Philadelphia, Penn., December 6, 1907. The character of its earlier settlers and the advantages of climate and soil, soon developed adventitious conditions at Philadelphia for the establishment of the professions, particularly those of medicines and law. The sharpness of the Philadelphia lawyer and the skill of the Philadelphia doctor are adages “in good and regular standing” throughout New England to-day. But the great profes- sional work for the whole country was performed by those who applied their philosophic minds to the practical con- ditions of manufacture and trade, and established the logical status of that application of the tariff, by which the revenue which supports the Federal government would also develop industries, sustain profitable commerce, and elevate labor, giving to all who will the opportunity of earning according to their skill. In the course of a disagreement between an organist and the young man who pumped the bellows, to establish his importance, the latter declared: “I can blow without your playing, but you cannot play the organ without my blowing,” and I confess to much the same feeling upon the relation of The National Association of Cotton Manufac- turers to your organization, for a cotton mill does not re- quire wool for its operation, and it is possibly true that the converse may not always be the case ; and it may be that we have other relations in common. 2 All that we have in just measures, the security of con- tract between buyer and seller, the safe transport of goods and the establishment of business honor is due to a com- mercial organization upon which there does not appear to have been a word written in English beyond the few lines buried in cyclopedias. In the middle ages when thrones were weak, courts venial, the church corrupt, armies mere hordes of pillaging mercenaries, and travel by land or sea fraught with peril, some merchants in northern Germany formed the Hanseatic League for the purpose of establishing conditions of honest dealing. Others joined them and the League grew apace, its trad- ing stations dotted Europe, occupied British seaport towns, reached to central Russia, and skirted the Mediterranean, from whose towns its caravans journeyed to the Indies. Their men-at-arms outnumbered the soldiery of any ruler in Europe, and their fleets were greater than any navy. They swept pirates from the seas, and destroyed robbers on land. They caused war and they made peace, they overturned rulers and set up thrones, all in the establishment of com- mercial probity to the conquests of peace. For six centuries they throve, and their principles be- came so thoroughly imbued throughout the commercial world that their work was done, and the indefinable term of business honor still remains as a controlling influence mightier than the letter of the law or authority of rulers. The test of the solidity of business honor is indicated by the slender lines of opinion upon which credits are given, insurance written, commercial paper discounted or goods ordered. The whole business fabric in this respect rests upon matters of belief which would not be accepted by a court to establish a trivial detail, and it is proverbial that “business cannot be run by law.” 3 This faith of man in man is so secure and instances to the contrary so relatively rare, that it furnishes solid founda- tion to build upon. The accuracy of credit estimates is shown by the small ratio of losses to the volume of business. The largest of the Boston banks reported that it had discounted $175,000,000 during the year 1906 without any losses. One of the Factory Mutual Insurance Companies has written nearly four billion dollars of insurance on mill prop- erties since its incorporation fifty-seven years ago, and it has been traditional with its officers that it has never suffered a loss due to moral hazard, and it is regrettable that other experiences in general underwriting do not warrant similar opinions by those engaged in the general insurance business. The scarcity of lapses from commercial rectitude im- parts especial prominence to untoward occurrences, while honest dealing, proceeds as a matter of course without notice. It is their fewness which makes the black sheep in a flock the more noticeable. It may be trite to offer illustrations of moral probity, but two such instances are cited in the belief that each of you could give many others of like nature from your own experiences. ' One Saturday afternoon, thirty- six years ago, a bank cashier in Boston examined the loan account and made on a pocket memorandum notes of the footings for further con- sideration. The next day Boston was ravaged by a con- flagration, and the falling building destroyed the bank vault and annihilated every vestige of legal obligation. The bank issued notice asking the makers of notes to report to a certain place, and every maker of these notes did make re- port. It is proverbial that unpleasant sides of human nature are disclosed in the settlement of insurance losses, but my experiences in connection with those matters many years 4 ago has not justified any such assumption as a rule; under- standing, however, that a man would be recreant to him- self if he did not want all that was coming to him under the terms of the contract of insurance. The settlement of a loss for the destruction of one of two large storehouses of a mill in Fall River furnishes a case in point. The contents of the building were found by taking the account in the yardmaster’s book of the cotton brought into the yard and placed in the storehouse since it was emptied a few months before, while the account of cotton removed from the storehouse was furnished from the books of the overseer of carding, showing the deliveries into the picker room and the difference gave the quantity from which the sound value of the cotton in the storehouse at the time of fire was ascertained. The damaged cotton had been sold, the whole work completed and the adjustment papers drawn up and sworn to, when I received a telegram from the mill Treasurer telling me to hold the proofs of loss or to recall them at once if sent out. It appeared that in walking through the other store- house the Treasurer noticed the tags on a large lot of cotton which it was supposed had been delivered into the burned storehouse, and it was afterwards found that this had been done by a French teamster who did not understand the English instructions given him. No one but this Treasurer knew or could have ascertained these facts which resulted in the diminution of the claim by $10,000. It is very easy for critics to declare that honesty is the best policy because most people have tried both, but many similar experiences in life revealing honest actions under conditions where detection would have been abso- lutely impossible, have implanted within me a profound confidence in the integrity of that portion of humanity which has sufficient brains to acquire other possessions. I am not unmindful of deviations to the contrary, where responsibility has failed to sober people into con- servative rectitude, but such instances pertain to specula- tive rather than industrial affairs. Who will make a just record of the labors and sacrifices of those leaders who poured of their affluence into the money centres during the last month, sacrificing five or six years of plenty in almost that number of days in the strugglethat the industrial progress of this great country may continue. A month ago I was present at the Conference on Trusts and Combinations, at Chicago, at which some leading law- yers based their advocacy of large interests on the wise decisions of Chief Justice Marshal, and on eloquent argu- ments of Attorney-General Wirt. The business men felt that these lines of thought failed to reach present issues, as generations have come and gone since these worthies went to their last rest, and practically everything which now exists in manufacture, transporta- tion and communication was unknown then. The buyer and seller do not now have the same needs nor the same supplies, and the methods must correspondingly change. Monopolies may be of the past, but if so, it will be a result of economics and not of vituperation. The lower prices of their products, established as the results of their skill in organization, still remains, as a power which trans- formed the luxuries of yesterday into the necessities of to-day. The day has long gone by when anyone can have a sole privilege of early information upon events affecting the markets, such as the London merchant who had in the armies of the allies a camp follower with relays of couriers and a boat in waiting to bring to London the news from Waterloo, and reaped a fortune from his advance information. The elder Bennett, the progenitor of modern journalism, maintained organized relays of ponies from centres to carry news of current events to his paper, and naturally opposed the introduction of the telegraph. The labor forces of that day made such virulent opposi- 6 tion to the telegraph that they compassed the defeat of several members of Congress on the issue of their record in voting for the appropriation to build the first Morse tele- graph line from Washington to Baltimore. When the telegraph service became established, it had no more liberal patron than Mr. Bennett and his successors ; while the telegraph system has provided labor for hundreds of thousands. The result of modern communication in shrinking the commercial world was recently illustrated by a map of France having radial lines from Paris to the principal cities of that country upon which were noted the number of hours’ travel required to reach them before the introduction of railways. Using the same scale, the horns required to reach these cities after the introduction of steam transportation was marked on these lines, and a smaller France was drawn on this scale like a Province on the map. A third map on the basis of the time required to reach these towns with the swifter trains of to-day reduced France to an environment around Paris. If the map had been made to illustrate time of com- munication, instead of transportation, France would have been shown as a dot on the map, as Daniel Webster charac- terized another European country. This simultaneous dissemination of intelligence making information coincident with the occurrence has placed busi- ness upon a higher scale, and in the exercise of the right, — as stated by Samuel Budgett, the great Bristol merchant, — to buy in the cheapest and to sell in the dearest market, has elevated the mentality of business operations to the higher intellectual plane in which the victory is to him who has the greatest logical power of deducing the trend of future results from a common knowledge of existing events. No Lord Timothy Dexter can reap a fortune from send- ing warming pans to the West Indies, because he “ dreamed 7 of it three nights running,” as stated in his “Pickle for the Knowing Ones.” The increase of the commercial unit as the logical se- quence of the application of sub-divided labor in manufac- turing, which gives to the artisan the advantage of special- ized skill with its greater earning power and improvement in production, whether measured in terms of quality or of volume of finished goods, has established a means of co- operation among manufacturers to avoid the waste of unin- telligent competition. Long ago, Edward Harris, the great Rhode Island woolen manufacturer, said in words peppered and salted with extreme emphasis, that a man could lock more out of his mill than he could lock in. The naturally intense competition in the professions forced them at an early date to form organizations in which membership is essential to good standing. In many commercial organizations the advantages may be as great even if not yet as widely recognized. The value of uniform methods governing those engaged in any industry, in the sale of the product, and the relations with customers in more exact methods in sale and delivery, information on subjects pertaining to credits, the moral hazard of those who are making excessive purchases for ulterior purposes and for that general information which will properly be a help to all, without divulging the purely private operations of every business. That great Pennsylvania jurist. Judge Jerry Black, once said that no good case was ever injured by being tried be- fore a judge who knew something of the subject. The adjustment of business differences between mem- bers, without publicity or the expense and vexatious delays of trial at law before a judge without technical information on the subject in hand and a jury without any information at all, may be advantageously performed by committees of such an organization. 8 The private trial of causes before referees was greatly stimulated a number of years ago during the Tweed regime in New York, when the courts were so incompetent and corrupt that business men did not dare to risk the chances before such a judiciary, and the experiences from arbitration by referees was so successful that the custom has become general. In the policy of every commercial organization there are traditional methods not revealed in constitution and by-laws. While a church is properly judged by its mem- bership, secular organizations are known by their vacancies. A commercial organization should have a policy which must make it worth the while of all available persons by serving their interests in such a manner that they cannot afford to refrain from membership. Every occupation has relations to the community which can be more forcefully expressed in an efficient manner through the concentrated result of the concensus of intelli- gent opinion as given through the agency of an organization. As confidence between buyer and seller is a condition of advantageous commerce, when the patrons are large in number this confidence must be secured on a broad basis which reaches to the general public by providing the press with the facts bearing on the question. I believe that more efficient service in formulating measures for the consideration of an organization can be done by special committees selected both for their knowledge and for their differing views on the subject, rather than by standing committees which may become bores, or may become infused with dry rot, unless at least a portion of its membership is changed at frequent intervals. The short terms of special committees gives opportuni- ties for the enlistment of many different men in the affairs of an organization, the benefit of many new ideas, which may be blended together into strong results, and also reveals who are particularly fitted for such work. It is important to have as many members as possible actively engaged in the affairs of an organization. Every organization is indebted to its kickers, and the re- sponsibility of committee work or other functions makes them conservative and turns their energies into useful channels. The infusion of new blood is as important to the organ- ization as it is to the individual establishment. The term of membership in commercial organizations is shorter than would be assumed by those who have not examined the records, as many who have reached the posi- tions qualifying for membership are approaching the middle life which leads to retirement from business, or better still dying in the harness, and others must take their places. Within a dozen years, in an organization with whose details I am familiar, the withdrawals from membership due to these various causes have reduced the net increase to three-fourths of the number added by elections. Affiliations with other organizations may lead to en- tanglements which may prove as undesirable as compacts in diplomacy. If an organization is not local, the wise selection of places for meetings is a question requiring careful consid- eration by the board or by a committee and should not be shouted through as an enthusiastic motion. Victor Hugo remarked that to know a man one must eat with him, and on such occasions, as Dr. Johnson said, “A dinner lubricates business,” and the meeting together in social relations furnishes a mutual benefit which cannot be obtained otherwise, but the acceptance of entertainment by public subscription from uninterested persons is an act of mendicancy which may be as out of place collectively as it would be individually. Even if the printed records of a meeting contain a faithful transcription of the proceedings, the cold type fails to reveal that good fellowship which is such a stimulus to every mind. 10 The knowledge of each other derived from such associa- tion tends to obviate those differences which are due to lack of information, as when the typewriter was first intro- duced many a business man received tart letters from rural correspondents informing him that they could read writing, and that it was unnecessary to have the correspondence printed. The chance remark of a friend may supply the miss- ing link to an unsolved problem, such as the use of the jet of steam which made the centrifugal extractor suc- cessfully operative in separating the syrup from granulated sugar. An insurance inspector on seeing for the first time the early type of automatic sprinklers while in an unsuccessful experimental stage, made the suggestion which rendered them operative. The acquaintances furnish those relations between men which are among those things which make life worth the living. A knowledge of the capabilities of another may open opportunities of advancement to a life which in isolation would wait in vain for “ the angel to stir the waters.” Commercialism is not a matter to be suppressed in an organization, but is to be encouraged as one of the advan- tages of membership, and like all other functions in the decorum of the meeting must be kept in suitable control. All dissemination of modern information within the usual lines of such an organization is advertising, as indeed is the ringing of the church bells on Sunday. The private exhibition of a device or process in the corridor of a hall or in a room of a hotel may be objection- able as a surreptitious digression from the purpose of a meeting, while the presentation of the same before the whole assembly, where its advantages may be submitted for the benefit of all and also medt the criticisms of practical men and competitors, is undoubtedly an advantage to the 11 Association in the measure that it may be an advantage to its members. The utmost care should be exercised in permitting the presentation of such subjects which are primarily matters of self-interest, but the careful espionage of a committee will prevent the allurements of the promoter, or immature devices of an inventor from being imposed upon a meeting. My ignorance of your Association has made me bold in presenting some conclusions derived from experiences in other organizations where these questions have been settled after thorough consideration and whose members are en- gaged in sharp competition, as everything worth having must be striven for, but they realize that besides these points of rivalry there are greater issues of common interest in which each may be of benefit to the other and neither the worse. They know, as do you, that while a business competitor may be a rival worthy of his steel, yet he is a man deserving his respect and a friend in mutual regard. As the veteran Tranio says to the competing suitors in “The Taming of the Shrew:” “ Do as adversaries do in law. Strive mightily, but eat and drink as friends.”