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Some Rules of the Game
Long before my election to the Senate I had learned two things pretty thoroughly.
One was, if you want to get rich—that is, very rich—in this world, make Society work for you.
Not a handful of men, not even such an army as the Steel Trust employs, but Society itself.
The other thing was, that this can only be done by making a business of politics.
The two things run together and cannot be separated.
You cannot get very rich in any other way.
I had an instinct for this fact even as a boy, when, through my father, I got a privilege from the railway, giving me the exclusive right to sell papers in the small town where I lived.
And the same instinct had inspired me when at college, where I got a similar exclusive contract with the publishers to handle college books, as well as a monoply privilege from the railroad to stand my hacks and carriages upon the approaches to the railway station.
I constantly followed this principle in all my business enterprises.
I never got mixed up in retail businesses, nor in any manufacturing enterprises except one, and that was backed up by well protected patent rights.
I have recently noticed that Mr. John D. Rockefeller says that the only way for a man to get on in this world is to save, to be economical, to “watch his gas bills.”
That’s all very well if one expects to spend his life as a bank clerk.
It’s good advice for a trust company to post in its windows and urge upon its depositors.
It was probably all right, too, when Benjamin Franklin got out his almanac; but this sort of Silesian philosophy won’t make a man rich.
I suppose if a man saved long enough and hard enough, he might possibly in time own his own cottage in some little suburban village forty miles from New York.
But if he failed to learn anything more than that about business it would never make him anything more than a second rate bank clerk.
No!
Men don’t grow rich by saving their gas bills any more than they do by working over time for somebody else.
The great captains of industry and the financial leaders of today didn’t follow this road.
Along with the rest of them, Mr. Rockefeller made Society work for him.
If a man has any push and enterprise, he has more chance of success if he indulges in fast horses or a private yacht than if he puts his money in the bank at four per cent.
It’s much the same way with competitive business.
Just about the time you get a good thing started, some one else comes along with something better, or hard times intervene and cut off the profits, if they do not land you in bankruptcy.
The fact is, the average business mortality in the United States is about three per cent. a year.
That is, one hundred per cent. every thirty-three years.
In other words, a man has just a fighting chance of being in business at the end of his life if he follows such advice or enters the strictly competitive field of business.
And you cannot make a great deal of money, and by that I mean millions, by just having a lot of other men work for you.
Not but that there are great opportunities in manufacturing enterprises, and considerable money is made that way; but it involves the hardest sort of work, years of experience, an awful brain fag, with the odds pretty heavy against success.
The secret of great wealth, and I have studied this problem like one in mathematics for a quarter of a century, is to make Society work for you.
If you are big enough, make the whole world work for you.
If you cannot do that, be content to have America work for you.
If that is impossible, get some city.
Even the latter is a big enough proposition to put millions in your purse.
This may seem like a Chinese puzzle, but it’s true, and it is the most valuable business principle worth knowing.
Mr. Rockefeller may think he made his hundreds of millions by economy, by saving on his gas bills, but he didn’t.
He managed to get the people of the globe to work for him.
He did it by securing a monopoly of a commodity that all the world used.
And Carnegie, Morgan, Vanderbilt, Gould, Astor, Hill and Harriman, the big leaders of finance, did the same thing.
Only they were less ambitious.
They were content with one nation.
They confined their operations to America.
Unconsciously at first, I did the same thing, followed the same idea; but it has finally become a conscious business principle, and one that I never depart from.
Only I was content with a growing city with occasional excursions into the State.
Now you won't find anything about this in books on political economy.
From reading them you would think that all wealth was the result of human labor.
At least that was true when I was in college.
It may be that the economists have grown wiser since that time.
But the fact that you don’t find it in the books makes it none the less true.
If you have millions of consumers of oil under your control, it is only necessary to add a penny to the gallon to build a palace or establish a university from the increase in earnings.
If you own a big railway system you need increase freight rates but a fraction of a cent, and a small fraction at that, to put on a new issue of stock and have it pay dividends from the start.
And if you own a franchise and can add a portion of a cent to your fares, or a few cents a thousand to your gas, the returns will come in at the end of the quarter in a way that will surprise you.
This is the way to make millions— make Society work for you.
For if you can pick the pennies from the pockets of the public in large enough quantities, it is better than a big reduction in wages, better than a diamond mine, for by a simple process of addition the pennies of the millions make up the millions of the few.
An examination of the Blue Book of American millionaires shows a surprisingly insignificant number of Wanamakers, Marshall Fields, or merchant princes.
There may be one or two in a score of big cities, but no more.
A somewhat larger number of manufacturers keep their place in this roster from year to year.
They did not know this rule of the game—and really achieved success by their own labors and that of their employees.
But the big men, the names you read about, the Napoleons of finance, who have girded this country with railways, express, telegraph and telephone lines, the men who operate on a gigantic scale, have all made Society work for them.
Pick up Moody’s Manual or any stock exchange handbook and you will see this fact obtruding on every page.
Take the Southern Pacific Railway: its gross earnings increased from 1893 to 1903 from $40,000,000 to $90,000 in 1900.
Take, again, the New York Central: its gross earnings increased in the same period from $44,000,000 to $66,000,000.
Take the Rock Island: its gross earnings increased during that decade from $21,000,000 to $42,000,000.
The same showing appears of almost any big railway system in the United States.
The earnings grow from 75% to 100% every ten years.
All they have to do is to offer the service, and the growth of population and business makes money for them.
They cannot get away from it.
While they sleep Society is at work for them.
The same thing is true of street railways and gas companies.
Their earnings double, ‘ofttimes more than double, every ten years.
The growth of our cities does this, and if you can get hold of a good franchise, Society will make you rich.
It’s like the kodak sign.
You press the button, Society does the rest.
Take the Calumet & Hecla copper mine.
That is the greatest mining proposition in the United States, possibly in the world, with the probable exception of the Rio Tinto.
It was organized in 1871.
The par value of its stock is $25 a share; but $12 per share was paid in.
Today its stock is selling for $700 a share, and it pays upwards of 200 per cent. a year on the par value of the stock.
It’s this same fact that lies at the root of the United States Steel Corporation.
It is not its rolling mills, blast furnaces and the like that give it value.
It is the tremendous area of iron mines and coal fields that it owns.
The former were sold as prairie land twenty years ago.
They now appear in the company’s balance sheet as worth from $500,000,000 to $700,000,000, and Mr. Schwab says they are worth from $1,000,000,000 to $2,000,000,000.
Society has been working all this time, and a universal necessity, a world demand, has arisen for iron and copper products.
This is the way that one gets rich by letting Society work for him, and it’s the only way I know to get rich without labor.
The trouble with the Shipbuilding Trust and the Shipping Trust was that they had no corner on this principle.
It was the absence of an ability to make Society work for them through the control of a universal necessity which could not be duplicated, that cleaned out dozens of the inflated industrial trusts that were put on the market during the boom times and were not bottomed on this principle.
The full beauty of this idea did not appear to me until I got into the gas and street railway business.
Then the possibilities of this principle began to dawn upon me.
I had a monopoly that everybody had to use.
Every immigrant who landed in the city, every child that was born, made money for us.
The census returns were a sort of trial balance indicative of our dividends.
Earnings grew from ten to fifteen per cent. a year.
The same thing happened to my real estate.
Some property that I bought for $3,000 when I first came to the city, now yields five times that sum in ground rents every year.
It lies down by the Central Bank, and every ten years it goes up from thirty to one hundred per cent.
If the city ever has a million inhabitants, as its present rate of growth promises, that property alone will yield more than the salary of the President of the United States.
Few men have brains enough to make more than a living with their hands; there is a considerably larger number who can beat the daily demands of life by working with their brains.
But it’s like educating every boy with the idea that he may be President of the United States, to say that he can get rich by economy, thrift and frugality.
The fact is the Presidency doesn’t go round fast enough to take care of more than one boy in a dozen million.
And a man must be far more than ordinary to get rich in a profession or in some big industry, even where he has thousands of men to work for him.
But the man who owns a piece of ground in a rapidly growing city, a franchise, a coal, iron or copper mine, can go abroad in his private yacht, and come back five years hence to find his land, franchise or mines more valuable than when he went away.
Society will have been busy all the time.
If he owns a railroad system, all America will have been working for him.
It is this fact that makes railway franchises and sound mining stocks good things to buy where they are not overloaded with securities.
The mines and railways cannot get away.
Nor can they be replaced.
They have a market already made.
And the same is true of city real estate.
Take New York City.
The land underlying the city is appraised by the tax department at over three and one-half billions of dollars—about the amount of the United States debt after the Civil War.
Think of it!
Much of this land wouldn’t grow turnips, it is so barren.
Yet it yields today at five per cent. on this valuation, about $185,000,000 to those who own it.
Some of it is worth more than the silver dollars necessary to cover it.
And its value keeps on growing.
It is one of the safest investments in the world.
For so long as New York remains the clearing house of the nation, so long will these values continue to grow.
For Society works all the time.
But it is this very fact that makes politics a necessary part of big business.
In any one of the big Eastern States it is worth millions to be able to control the party in power.
All sorts of emergencies arise which require attention.
In the city there are constant attempts to regulate corporations, to reduce rates of fares or charges, to improve service or to invite competition.
In a lot of Western cities there is much talk of municipal ownership.
The same thing is true in the State and in the nation.
Constant demands are being made on Congress or the legislatures to interfere with private business.
We see this in the President’s Railway Rate Commission, and in Governor La Follette’s ideas.
And these demands can only be headed off by making a business of politics.
As was said by the Commercial and Financial Chronicle of New York about the Ford Franchise Tax Bill in that State:
This piece of legislation was born of the prejudices cultivated by politicians against corporations or every other combination of capital.
The unthinking class get such distorted ideas of wealth that they are easily led to look upon any organization or combination of capital as a fair subject for oppressive tax burdens.
It never occurs to them to think what a debt this vast country owes to just such combinations for all its developments, and what a paralysis would settle upon the activities of today if the spirit of these laws could be carried out and all combinations suppressed.
This law added millions in taxes to the franchise corporations of New York City.
These taxes came out of dividends.
It is dangerous to let these movements go unwatched.
And the only way to control them is through controlling the party in power, be it Republican or Democratic.
Through these means you can put the right sort of men in office; you can see that the proper men go on the bench.
The party’s platform can be shaped, and in city and State all these things can be prevented.
It did not take me long to discover this fact in my business.
If I wanted to protect my enterprises, whether in the city or the State, I had to enter politics.
And this necessity will continue to grow.
For there is no telling to what extent the people will want to legislate in their interference with legitimate business.
And it has become almost as necessary to control the courts as the city councils and legislatures.
For there are all kinds of questions arising today that did not exist a generation ago.
In the city there are labor disputes and injunction proceedings.
In their settlement the aid of the courts is constantly being called in.
A strike can bebeaten by an injunction easier than in any other way.
For the strike has become a sort of warfare and the means employed are those of war.
Of course, the same methods are employed by big business.
They make use of the boycott.
Some of the trusts refuse to sell to jobbers or retailers who handle other goods than theirs.
Or else they charge a discriminating rate.
Railroads do the same thing and always have.
They discriminate between shippers and localities, which is a boycott.
But their offenses are not so easily discovered.
They work like sappers, under the ground.
But a labor union acts in the open, and you can get at its offenses and punish them.
But to do this it is necessary to look after the nominations to the bench.
Then there are all sorts of legislation that have to be watched, and this can be done as a last resort in the courts.
Tax laws, anti-truck store legislation, railway commission and rate regulation, eight-hour day laws, and all these things come before the courts, and if you can’t control the legislature, you can hold a thing up in the courts for a long time and often have it declared unconstitutional.
Of course, the bench is seldom corrupt as is a city council or State legislature.
Judges cannot be bought.
But every lawyer knows the temper of a judge, and he constantly seeks to get his case before the court that by temperament, disposition or prejudice favors his contention or point of view.
And party managers know the same thing.
Good, public-spirited judges are constantly being retired by the party, or passed over when the opportunity comes for preferment.
And there is one thing to beware of, that’s Wall Street speculation.
I had some experience there myself, and know what I am talking about.
If a man must gamble, and apparently many men must, better stick to fast horses, or an occasional hand at poker.
One can find out something about the horses, and at cards one occasionally has a chance to deal the deck.
In a game of poker, too, you can always stay out when you draw a bobtailed flush.
But you haven’t these alternatives in Wall Street.
The cards are always dealt by the other fellow, and he knows every card in the pack and every trick of the game.
He can turn up trumps as the occasion demands, and, moreover, he never lets go of the deal.
And today there is a small bunch of New York financiers who make the terms of the playing.
For they control the banks and the banks dominate the situation.
They indirectly determine the market value of all securities by fixing their loanable value.
They also make the news and the rumors of news, and one is as good as another in its effect upon the market.
It used to be different; but now the big coups are planned beforehand with as much precision as Kuroki laid off a battle, and reported after each engagement that it went off “as planned.”
As I said before, Poor Richard’s Almanac is about as influential today in the making of a millionaire, as is Thomas a Kempis’ “Imitation of Christ.”
It’s not thrift, prudence or the saving of gas bills that makes the millionaire; it’s the getting possession of a monopoly, and then making Society work for you.
With that in one hand, and with the other hand on politics, one can do more in a few weeks’ time than can a whole army by watching its pennies, dimes and dollars.
And these are the rules of the game.
They are understood in Wall Street and in every bank and trust company in the land.
Anyone can find this out readily enough when he has to borrow.
He may have a splendid business, his moral character may be exceptional, but his collateral is scrutinized, his earnings are examined and his books audited before he will get much accommodation.
And the chances are that some bright day his loan will be reduced or called, and the work, savings and achievement of a generation pass into the hands of a receiver.
Or it may be that some one of the trusts, working like a sapper out from Wall Street, and envious of a too persistent competition, will inspire the local bank to call his loan, and thus place him in jeopardy or cause his plant to fall into the maw of the combination.
But the man who has a monopoly, a franchise, a railway, a coal, iron or copper mine, a piece of real estate, suffers none of these discomforts.
His franchise may have cost him nothing, but it is the best kind of collateral.
And bonds can be issued and sold even before a spade has entered the ground.
For the money lender appreciates that such property cannot get away.
Nor can it be duplicated.
And every man, woman and child that is born adds something to its value.
Under ordinary circumstances the increase amounts to at least ten per cent. a year.
In this sense Society works all the time, and he who has cornered some of the natural opportunities of the earth need not concern himself about good times or bad.
The market is already created, and it never grows less.
And all of these properties depend upon the government, either the city, the State or the nation.
To secure and maintain them makes politics a necessary part of business.
If it is the steel, sugar, iron, or tobacco business, it is necessary to control Congress; if a railway, express, telegraph, or similar corporation, it is still necessary to control Congress; if a mining, liquor or landed privilege, it is necessary to stand in close to the State government; and if a franchise for street railway, gas, electric lighting or telephone, it is necessary to be on familiar terms with the Council, the Tax Assessor and the Mayor.
These are the symbols, more magic than those of some prince of the Arabian Nights, by which to rule the game.
First, let Society work for you; and, second, make a business of politics.
Upon an understanding of these rules the great fortunes of America have almost all been reared, from those of the early Argonauts who built the Pacific railways from the sale of government bonds and generous land grants, to the modern princes of finance who have capitalized iron ore underlying the barren lumber lands of Minnesota at thousands of millions; the franchises of New York at hundreds of millions, and the sugar, tobacco and many other trusts at many times their value.
These are the rules of big business.
They have superseded the teachings of our parents and are reducible to a simple maxim: Get a monopoly; let Society work for you; and remember that the best of all business is politics, for a legislative grant, franchise, subsidy or tax exemption is worth more than a Kimberly or Comstock lode, since it does not require any labor, either mental or physical, for its exploitation.
This series of posts will insure that these free thinkers' works live on in living memory.
If only a few.
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