14 HARDWOODRECORD 



others — the one the business man is perforce still obliged to esti- prime cause of disastrous failures. It is these conditions which point 



mate — is crookedness. These records of failures for one year are significantly to the fact that merely lack of capital furnished nearly 



something to set students of men and affairs to thinking. The pos- one-third of the failures of the year. The disposition of so many 



sible assets represented in last year's failures, which involved $137,- men in business to resort to crooked schemes naturally makes hard- 



000,000, were $68,000,000. In the light of these figures it is not ships for any concern which, liowever honestly struggling, often 



to be wondered at that "honesty is the best policy" has come to finds itself pushed for capital. It is plain that inexperience and 



be regarded as a platitude rather than a worthy axiom. even sharp competition as threatening factors in business are in the 



Noting the eleven ascribed causes for failures in America and con- minority, both as to numbers and aggregate possibility of loss. Only 



sidering only those which have brought loss to innocent investors a little more than five per cent of the year 's failures are due to 



and creditors, students of business methods may make their own de- these causes. Against the average loss from these two causes of 



ductions as to the possible degree of criminality involved. The $2,762 we have the average from all failures standing at $6,510. 



compilation is as follows: A. further analysis will show that of all firms failing ninety-one and 



a half per cent had an alleged capital of $5,000 and under; six 



I-MTED STATES. p^^. ^^^^ ^^^^ ^ capital of between $5,000 and $20,000, and only 



Causes op Failures. failures. Assets. Liabilities. one and seven-tenths per cent employed capital of between $20,000 



Incompetence 2,091 $9,743,680 .$19,057,908 and $50,000. 



Inexperience 457 1,520,516 2,760,234 n jg perhaps something of which to be proud that of the 1,401,085 



Lack of capital 3,370 19,577,813 39,342,384 . ,. ■ i i I j ^- • • i • i u • 



Unwise credits 244 1,381.690 2.652,590 individuals, firms and corporations m recognized commercial busi- 



Failures of others 190 7,068,226 11,196,193 ness in the United States only 9,385 "proved their inability or in- 



Ne^ecT^*""^" "06 955947 l,'855;4sl disposition to pay their debts ' ' in 1906, in the language of Brad- 

 Competition 101 253.662 537,470 street's. At the same time it cannot be disputed that among the 



Speciflc conditions 1,623 11,674.844 22,923.002 hundreds of thousands of surviving business enterprises there are 



Speculation 70 1,166,633 4,5(6,(34 ° 



pj,au(j 938 9,389,192 20,574,560 possibly uncounted thousands which are "making good through 



keener manipulations of crooked methods. 

 CANADA. 



In view of the foregoing analysis of commercial failures can one 



iTe^erieTcV ............... ■ '*1 2oo!233 '527^620 be at all positive that " honesty is the best (and accepted) policy " 



Lack of capital 626 2,266,775 5.080.214 in the modern business world? 



FriTu^esTf" itle'rs •:::;::::;:: II lllitt lllill Happily it may be stated that this record does not apply specif- 



Extravagance 9 52,175 29,285 ically to the lumber industry. The small record of business failures 



Neglect 41 Jo'U?^ """ii'?!!,'. during 1906 makes an enviable showing for this great commercial 



Competition 9 12,213 27,420 ? ,^ . , . „ , ,.,,,. „, . 



Specific conditions 168 392,766 934,261 pursuit. However, this analysis of general results m all lines of busi- 



Speculation 7 26.600 77,254 ^ess is well worth study by every lumberman that it may prove a 



Fraud 108 182.760 620,334 .^ ^ , • ■ 1 ^i. 4.u 4. i i j 



guide-stone and a warning against the causes that have produced so 



Granting that in almost any of these specific causes for failures many failures in other lines. 



this element of crookedness may have entered, it will be seen that 



the fraud and speculation have been- especially costly, while failures ^^^ QuestiOD of Continued Prosperity. 

 attributable to competition and inexperience are particularly light; 



, . , . . . , , „ 1 ■ .»! i li • 1 ! 1 i.1 1 rinancial experts are discussing the question, ' ' Is prosperity 



and the inference is thereiore plain that "irregular ' methods are ^ " ^ _, . ,. 



, , .■,...■.■ ■ . waning?" and they are unable to agree. Jacob H. Schift predicts 

 much more dangerous to creditors than is even mcompentence. ^ ■' ° t, , ■■ , , 

 . 1 . J! ii ii -1, i J I,- t, 1. , . „ an era of great suffering among the poor. August Belmont told the 

 An analysis of. the attributed causes which are most suggestive ot " ..... 

 ,. , , ,,,.,. „ ., , , ., . ... capitalists and workmgmen at Mr. Carnegie s industrial peace con- 

 dishonest methods m business failures makes a striking showing in ^ , , , , . . , , . , ^ 



TT .1 1 c^ 1 • i- 1 T i.1 ■ 1 1,1 ference that we are about to have a halt in industry, which, he 



averages for the United States m particular. In this double „ , , , ,, ,, , . ,, ^ t Vr.,, 



, . ,, ^ Li .L T ^ ii 1- 1 -i-i- ii • • alleged, may not be altogether undesirable. James J. Hill, often 



analysis the assets are subtracted from the liabilities, thus arriving , „ , . . r , , . , , , , -,. , , „ 



accused of being a pessimist, denies that he has predicted a collapse 



at the net average loss: „ . -, , , ^ ,, . , x, •„ ^ , , . m. 1 



Net losses Aveiage n(?t "^ industry, but thinks there will be a slackening. The general 



Xo. of ivom all loss from yjg^ jjjat trade has been going ahead too fast prevails, and that it 



Causes of Failures. tailures. tailures. each cause. . . , ^, . 



„ „„, .„ .^, . „„„ „. ^., w'lU have to slow down to give capital a chance to catch up: Chair- 

 Incompetence 2,091 $9,914,228 $4,741 j. .., tt •. j cf ^ 0! , r, t- 1 f • 



Inexperience 457 1,240,718 2,715 man Gary of the United States Steel Corporation and many foreign 



Lacit of capital 3,370 19,764,571 5.865 observers have the same view. 



Unwise credits 244 1,270,900 5,209 t, :, ^^. ^, ^ • t 1 .c • i ■ .ir i- i t 



Failures of others 190 4,127,967 21,668 Based on the theory of periodical financial crises the time has not 



Extravagance 95 387,605 4,080 yet arrived for a great industrial depression. Such disasters over- 

 Competition ■ ■. ■. ■. ■. '.'.'.'.'.'.'.'.'.'.'.'.'.'.'.'.'.'. 101 283;S08 2;810 ^°°^ ^^^ country in 1819, in 1837, in 1857, in 1873 and in 1893. 



Speciflc conditions 1,623 11,250,158 6,932 The average interval between them was twenty years. Hitherto the 



Speculation 70 3,410,101 47,716 shortest has been sixteen years— that between 1857 and 1873, and the 



1' land 938 ll,18o,192 11,925 



effects of the Civil War furnished ample explanation of the ex- 



lu proportionate net loss it will be seen that speculation, failures ception. On the basis of financial history a long, severe crisis cannot 

 of others, and fraud are the three greatest agencies. In "failures naturally be expected until some time between 1909 and 1913. A 

 of others" professional men, farmers, stock brokers, real estate mild reaction from prevailing prosperity midway between two great 

 dealers, bucket shops, old bankruptcies in process of court settle- panics has usually prevailed. One occurred in 1884, and a correspond- 

 ment, etc., have not been considered by Bradstreet's in any way. ing break in the present period of prosperity came in 1903. There- 

 in like manner mere failures to succeed, which have not involved fore, according to precedent, "good times" ought to last for some 

 loss to others, have no place in these statistics. Here, then, is the years longer. 



clue to the enormous average of $47,716 for the seventy concerns Prosperity in the United States is largely dependent upon the 



which went down through speculation, and of $21,668 for each of the yield of the crops. The Baring panic of 1890 would have brought 



190 failures through failures of others. In each of these cases the the calamitous times of 1893 two years earlier if the disaster had not 



stock broker, the race track, the real estate dealer and the bucket been stayed by the magnificent harvests of 1891. Of vast impor- 



shop pointed the way to that form of crookedness which leaves dis- tance, therefore, in estimating the commercial prospects of the near 



tinctly ' ' fraudulent ' ' failures in inconsiderable quantity. future are the crop prospects. At the present time this outlook is 



Beyond question these figures point to one form of crookedness or decidedly encouraging. The winter wheat acreage is greater than 



another, on the part of those directly or indirectly concerned, as the ever and fine crops are anticipated. 



