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WHOM TO TRUST: 
 
 A PRACTICAL TREATISE 
 
 ON 
 
 MERCANTILE CREDITS. 
 
 BY P. R. EARLING, 
 
 It 
 
 OF L. GOULD & Co., 
 
 CHICAGO. 
 
 CHICAGO AND NEW YORK: 
 
 RAND, MCNALLY & COMPANY, PUBLISHERS. 
 
 1890. 
 
SPRECKt 
 
 V 
 
 COPYRIGHT, 1889, BY RAND, MCNALLY & Co. 
 
 Trust. 
 
THIS TREATISE IS DEDICATED 
 
 BY THE AUTHOR, 
 TO HIS FRIENDS AND ASSOCIATES IN BUSINESS, 
 
 L. GOULD AND FRANK GOULD, 
 
 AS EMBODYING THE PRINCIPLES AND METHODS ADOPTED 
 AND UNIFORMLY ADHERED TO BY THEM, THROUGH- 
 OUT A LONG AND SUCCESSFUL BUSINESS CAREER. 
 
 111710 
 

CONTENTS. 
 
 INTRODUCTORY. 
 
 PAGE. 
 
 INTRODUCTION _ . . 11 
 
 WHOM IT CONCERNS . 15 
 THE IMPORTANCE OP A KNOWLEDGE OF CREDITS . _ 18 
 
 LOSSES BY FAILURES _ 23 
 
 MERCANTILE REPORTS ... - 29 
 
 ANALYTICAL. 
 
 ANALYSIS OF STATEMENTS OR REPORTS . - 84 
 
 NATURE OF THE BUSINESS . _ 41 
 
 LOCALITY _ . .45 
 
 CHARACTER AND HABITS _ . 52 
 
 ABILITY _ _ _ .55 
 
 EXPERIENCE _ 60 
 
 APPLICATION AND INDUSTRY . . .64 
 
 BUSINESS EDUCATION - 68 
 
 HONESTY _ . - 72 
 
 ECONOMY . 77 
 
 MARRIED OR SINGLE _ - 83 
 
 AGE . - 86 
 
 CAPITAL . . .89 
 
 ASSETS: STOCK AND PERSONAL PROPERTY . 94 
 
 ASSETS: ACCOUNTS AND BILLS RECEIVABLE . _ 98 
 
 REAL ESTATE EXEMPTIONS _ 103 
 
 LIABILITIES _ - 106 
 VOLUME OF BUSINESS IN PROPORTION TO CAPITAL . 110 
 
 ANTECEDENTS . - .115' 
 
 COMPETITION . _ 118 
 
 O) 
 
10 CONTENTS. 
 
 PAGE. 
 
 PUNCTUALITY . . 122 
 
 PRODUCTIVE OR NON-PRODUCTIVE _ _ 127 
 
 DOING BUSINESS AS AGENTS _ . . 130 
 
 PARTNERSHIPS . .134 
 
 DOUBTFUL CREDITS _ _ _ 139 
 JOINT-STOCK AND COOPERATIVE ASSOCIATIONS . 142 
 
 WOMEN IN TRADE . _ 148 
 
 CHATTEL MORTGAGES AND OTHER LIENS . _ 153 
 
 INSURANCE _ _ 157 
 
 MISCELLANEOUS INFORMATION - - . _ 161 
 
 OLD CUSTOMERS _ . 167 
 
 LIMIT OF CREDIT _ . . 171 
 
 MERCANTILE REPORTS ANALYZED, _ _ 174 
 
 CREDIT: A RISK . n_ 200 
 
 FACTS IN GENERAL. 
 
 INVENTORY VALUATIONS _ _ 202 
 
 PAST-DUE ACCOUNTS _ _ . 209 
 
 COLLECTIONS . . _ 215 
 
 COLLECTIONS: METHODS EMPLOYED _ _ 220 
 
 SHARP COLLECTORS . _ 224 
 
 REFERENCES . 228 
 
 COMMERCIAL TRAVELERS . . - 236 
 
 PERSONAL INTERVIEWS vs. REPORTS _ _ 241 
 
 CHRONIC BORROWERS . . 244 
 
 DEBT vs INDEPENDENCE _ _ 248 
 
 COMPROMISES AND EXTENSIONS _ 254 
 
 CREDIT: HISTORY OF - 260 
 
 CREDIT SYSTEM _ . _ 268 
 CREDIT: ITS RELATION TO CAPITAL AND LABOR . 281 
 
 HISTORY OF THE MERCANTILE AGENCY , 295 
 
INTRODUCTION. 
 
 This treatise on "Mercantile Credits" is the 
 outgrowth of frequent requests on the part of 
 business friends of the writer to give them the 
 benefit of his experience "in making credits," 
 so far, at least, as that might be possible in a 
 very condensed form, and by laying down and 
 illustrating a few fundamental principles. An 
 analysis, however, of the subject showed that a 
 few off-hand rules and directions on "when 
 and when not to make credits" would be inad- 
 equate, if not quite useless, since in no two 
 applications for credit are the conditions the 
 same. In the attempt, then, to be of service 
 even to a few personal friends, it was found 
 necessary to treat the subject in a comprehen- 
 sive manner, and although this involved the 
 systematic and consecutive arrangement and 
 assimilation of avast quantity of material, and 
 a close scrutiny of its relationship, the task was, 
 nevertheless, deemed worthy the effort. 
 
 No apology for presenting this volume to the 
 public is offered. But several valid reasons can 
 be pointed out for its publication. The first 
 reason is, that a better knowledge than is gener- 
 ally possessed of this subject is of the utmost im- 
 (ii) 
 
12 WHOM TO TRUST. 
 
 portance to the business interests of the country 
 at large and to individual welfare in particular. 
 Secondly, the total absence of literature and 
 lack of information on a topic of such vital im- 
 portance to every man engaged in business, 
 would seem to justify an effort to supply so 
 palpable a deficiency. Thirdly, that the ex- 
 perience and knowledge of one who has devoted 
 a life-time to the management of "credits " in 
 both mercantile and manufacturing business, 
 can hardly fail of being beneficial, when made 
 available to those less practiced in this special 
 vocation. 
 
 The principles and rules laid down in the fol- 
 lowing pages for determining credit are such as 
 have governed the writer in his own practice. 
 Close observation of causes, and their natural 
 and probable effects, has made it possible to 
 establish certain standards, more or less fixed, 
 for our guidance in all departments of business. 
 
 No new system or better methods than those 
 used by many other credit managers is claimed. 
 In the absence, as we have said, of any pub- 
 lished work, the aim has been simply to give the 
 conclusions of a long and active experience, in 
 the best and most intelligible manner possible 
 to the writer. As the "proof of the pudding is 
 in the eating," the merit of the rules here given 
 may be fairly judged by the results obtained in 
 their daily application; and these, were it per- 
 missible to give them, would be a sufficient in- 
 
INTRODUCTION. 13 
 
 dorsement. This much may be said, that the 
 percentage of losses sustained by houses in gen- 
 eral is by far too large, and that a better un- 
 derstanding of the ' ' Science of Credits ' ' would 
 inure largely to the benefit of the business 
 community and save it millions of dollars an- 
 nually. 
 
 The subject-matter has been strictly confined 
 to the text, viz.: Credits. Every chapter has 
 been prepared with special reference to that 
 topic only; but, incidentally, the treatise will 
 be found to cover the fundamental principles 
 underlying business in general, by pointing out 
 the causes that lead to success or failure. We 
 may accept it as an axiom, that when an appli- 
 cant for credit satisfies the standard of our 
 requirements, we may rightfully infer that all 
 the essential qualifications of a safe and good 
 business-man are also possessed by him. 
 
 No eifort has been made to treat this subject 
 from the standpoint of theory or political 
 economy. Intended, as this treatise is, for busi- 
 ness-men and for practical use, it has been pre- 
 pared as concisely as possible, and to the point- 
 that point being, "How to make Credits." * 
 
 * Among business-men the term Credits is understood to 
 refer to the practical functions of credit as between buyer and 
 seller, and in this restrictive sense the word has been adopted, 
 in contradistinction to the broader term of Credit. 
 
 In speaking of the credit-man throughout this book, it will 
 be understood that all persons are meant who make sales on 
 time, or depend on the future fulfillment of contracts. 
 
WHOM IT C01STCEENS. 
 
 This work concerns and is of paramount im- 
 portance to every man engaged in trade, of 
 whatever kind it may be, but is of special in- 
 terest to the merchant and manufacturer doing 
 necessarily a large credit business. 
 
 It concerns bookkeepers, cashiers, and ac- 
 countants, upon whom devolves the duty of 
 making credits in the absence of the regular 
 " Credit Department," found only in the larger 
 houses. 
 
 It concerns every young man or boy who con- 
 templates entering mercantile life, and the 
 information it contains will be found of great 
 value in whatever position he may occupy. In 
 this country every boy is a possible merchant 
 or manufacturer, and he can not afford to neg- 
 lect this branch of his business education. 
 
 It concerns every banker, for a knowledge of 
 the elements and conditions requisite to success 
 in his customer and debtor is of great import- 
 ance. A large proportion of the loans and dis- 
 counts of banks are made, not on securities 
 actually deposited, but on the confidence felt 
 in the borrower's methods of doing business, his 
 standing in the community, and faith in the 
 
 (13) 
 
16 WHOM TO TRUST. 
 
 successful management of his undertakings. 
 And that the Banker's confidence may not be 
 misplaced, it is essential that he make himself a 
 competent judge of what constitutes favorable 
 or unfavorable conditions in the merchant or 
 manufacturer to whom he lends his funds. 
 
 It concerns, also, lawyers, especially when 
 acting in the capacity of attorneys for creditors. 
 The wisdom and safety of their recommenda- 
 tions to their clients for further time and indul- 
 gence, in behalf of the debtor, will depend upon 
 the attorney's knowledge of business affairs and 
 of what constitutes safetj^; i. e., he should be 
 governed in his estimate of property and assets 
 by the same rules that govern and enable the 
 business-man to determine questions of like 
 character. 
 
 It concerns every man in and out of trade. 
 Professional men, and men in all walks of life 
 can profit by its careful perusal. It is not ex- 
 pected that this volume will be all-sufficient in 
 itself, but it will at least furnish the funda- 
 mental principles, and the processes of reason- 
 ing employed in determining questions of 
 credit. 
 
 It concerns the man out of business to-day, 
 for to-morrow he may engage or re-engage in it; 
 in short, as we are a nation of traders, and more 
 credit business is done in this country than in 
 any other, it behooves every man to know all 
 that can be learned on this subject. 
 
WHOM IT CONCERNS. 17 
 
 It concerns, lastly, but not least, every com- 
 mercial traveler, and should be carefully read 
 and studied by Mm, that he may make himself a 
 competent judge of ' ' Credits. ' ' A large percent- 
 age of the credits given are made on his judgment 
 and recommendation. Some agents' opinions 
 are entirely relied on by their respective houses, 
 but the majority of them are not good " Credit 
 men." Their eagerness to make a record as 
 salesmen transcends all other considerations. 
 Having been a traveling man myself at one 
 period of my commercial life, I know from per- 
 sonal experience why so many fail in gaining 
 the confidence of their firms in this capacity. 
 An agent's recommendation for credit should 
 be sufficient, and his firm should feel warranted 
 in accepting his judgment. Where this is the 
 case, the firm has gained a valuable co-worker, 
 and the agent a strong foothold. To sell is one 
 thing; to "get our pay" is of infinitely greater 
 importance. 
 
18 WHOM TO TRUST, 
 
 IMPORTANCE OF A KNOWLEDGE OF 
 "CREDITS." 
 
 When we speak of commerce and trade, we 
 are met by the question of their existence in a 
 general way. There is suggested, their volume, 
 influence of their relations on the world, and 
 our collective welfare. Considering the subject 
 from this standpoint, we are apt to be led to its 
 theoretical considerations; that is, its civilizing, 
 educational, and social influences, and to the 
 student of political economy these offer a vast 
 and most important field for thought and in- 
 vestigation. But these problems do not concern 
 us here. We have to do with the practical 
 affairs of life, and the question of trade being 
 one of ' i bread and butter, ' ' no more serious 
 issue could present itself. 
 
 Buying and selling constitute trade. If the 
 transactions were all for cash, our success as 
 merchants would simply be a question of who 
 could buy and sell the most, and to the best ad- 
 vantage, and there would be no occasion for 
 the exercise of our faculties except in buying 
 and selling. 
 
 But what confronts us right here? It is the 
 question of credit. As a matter of fact we do 
 not do business for cash. We do it on credit 
 almost wholly, and this radically changes the 
 problem. Long and common usage, expediency, 
 
19 
 
 our spirit of enterprise, and our extraordinary 
 confidence in each other, have established the 
 custom of parting with our property on prom- 
 ises of future payment, and after once parting 
 with it, we hold as a substitute, written or ver- 
 bal, the buyer's promise to pay, and that is all. 
 The discharge of this promise rests on the buy- 
 er' s honesty, ability, experience, and a multi- 
 tude of other factors. If the buyer is honest, 
 our safety depends, mainly, on his success, and 
 this, again, is dependent on his qualifications 
 and circumstances over which he may or may 
 not be able to exercise control. 
 
 The practical and all -important questions 
 then are, to make sure of our payment when 
 due, and that the men we sell to are both will- 
 ing and able to do '"as they agree. The ability 
 to sell the most goods and do the largest busi- 
 ness, does not in itself determine a man' s suc- 
 cess; in fact, observation proves that this is 
 often done unwisely and against his best in- 
 terests. 
 
 Commerce and credit are inseparable. They 
 are not only inseparable, but a judicious exer- 
 cise of credit-giving is the more important of 
 the two. Before delivering our goods to an- 
 other's custody, our first concern must be the 
 reliability of the custodian or buyer, and the 
 probability of getting our money, and with it 
 our profit, which is the sole object of doing 
 business. This being decided, pro or con, we 
 
20 WHOM TO TEUST. 
 
 then make or do not make the sale. This proves 
 our position that our ability as judges, when 
 to sell and when not, comes first in importance, 
 and that of salesmen comes second. 
 
 Practically, credit is incidental to trade, 
 and in our daily transactions the major part 
 of trade is done on credit; i. e., it is dependent 
 on our confidence in the buyer; but blind con- 
 fidence is not meant, nor will it answer. Our 
 faith in men must result from the exercise of 
 good judgment, large experience, a knowledge 
 of men and things, and their fitness to each 
 other. Is our confidence justifiable in any 
 given case? That is the question. That it 
 very often is not, we have learned to our sor- 
 row. 
 
 As above stated, in no country is credit so 
 generally and so lavishly given as in this. Our 
 whole commercial fabric rests on it. Every in- 
 dividual welfare, to a greater or less extent, 
 depends on credit, and the wise use of it. As a 
 problem of such consequence and as a prime 
 factor in our individual success, can the import- 
 ance of its study, and our thorough mastery of 
 it, be over-estimated? No; but that it has not 
 received the attention it deserves is a fact pain- 
 fully regretted by thousands. 
 
 Hon. Edward Everett, in an address delivered 
 before the Mercantile Library Association in 
 Boston in 1838, stated his conviction as follows: 
 "I should deem the formation of sound and 
 
KNOWLEDGE OF " CREDITS." 21 
 
 sober views on the study of credit one of the 
 most desirable portions of a young merchant's 
 education." The practical merchant is even 
 more impressed with tli e importance of the sub- 
 ject, as a result of his daily experience. 
 
 Much as it is desired by the author that this 
 treatise might lead his readers to infallibility in 
 making credits, that is a thing beyond his ex- 
 pectations. But this much is certain, in calling 
 your attention to the subject, and a comprehen- 
 sive study of it, not alone by these pages, but 
 drawing on your own resources of experience 
 and observation, it is impossible that you will 
 be other than largely benefited; and if nothing 
 more be accomplished than to interest you in 
 the study, I shall be amply repaid. The benefit 
 to you, in that case, will be analogous to that 
 of a man face to face with a great danger, of 
 which he ha s been forewarned and for which he 
 is thoroughly prepared. 
 
 That the most rigid adherence to the rules 
 here laid down will avoid loss in every instance, 
 is not expected. The best of business-men, the 
 most conservative and experienced, i ' miss it ' ' 
 quite often enough. But there is a wide mar- 
 gin between the maximum of losses usually 
 sustained and the minimum to which they may 
 be reduced, a difference sufficient in itself to 
 make one man happy and prosperous, and an- 
 other wretched and bankrupt. 
 
 In addition to the chief object before us, which 
 
22 WHOM TO TRUST. 
 
 is to become competent judges of whom it is safe 
 to trust, the suggestions offered will also be val- 
 uable in regulating our own conduct, so that we 
 may share the confidence of others, and be en- 
 titled to credit ourselves. 
 
LOSSES BY FAILUKE. 
 
 LOSSES BY FAILURE. 
 
 BUSINESS FAILURES, 1877 TO 1886, INCLUSIVE. 
 
 YEAR. 
 
 NUMBER IK 
 BUSINESS. 
 
 NUMBER 
 FAILURES. 
 
 LIABILITIES. 
 
 AVERAGE 
 LIABILITIES. 
 
 PROPORTION 
 FAILURES. 
 
 1877 
 
 652,006 
 
 8,872 
 
 $190,669,936 
 
 21,491 
 
 1 in 73 
 
 1878 
 
 674,741 
 
 10,478 
 
 234,383,132 
 
 22,369 
 
 1 64 
 
 1879 
 
 702,157 
 
 6,658 
 
 98,149,053 
 
 14,741 
 
 1 105 
 
 1880 
 
 746,823 
 
 4,735 
 
 65,752,000 
 
 13,886 
 
 1 158 
 
 1881 
 
 781,689 
 
 5,582 
 
 81,155,932 
 
 14,538 
 
 1 140 
 
 1882 
 
 822,256 
 
 6,738 
 
 101,547,564 
 
 15,062 
 
 1 122 
 
 1883 
 
 863,993 
 
 9,184 
 
 172,874,172 
 
 18,823 
 
 1 94 
 
 1884 
 
 904,759 
 
 10,968 
 
 226,343,427 
 
 20,636 
 
 1 82 
 
 1885 
 
 919,990 
 
 10,637 
 
 124,220,321 
 
 11,679 
 
 1 86 
 
 1886 
 
 969,841 
 
 9,834 
 
 114,644,119 
 
 11,703 
 
 1 98 
 
 
 8,038,255 
 
 83,686 
 
 1,409,739,656 
 
 164,928 
 
 10.22 
 
 These figures, like many other statistics, con- 
 vey very little meaning taken by themselves. 
 They have no particular significance, except, 
 perhaps, that they look large to the casual 
 reader. Whether in fact, and in face of the 
 transactions they represent, they are large or 
 small, no adequate idea is furnished. Only by a 
 comparison with the business of previous years 
 are we enabled to judge of tbe present status 
 and determine whether it is more prosperous, or 
 otherwise, to those engaged in it. But for the 
 close student, and for the man who undertakes 
 to deduce exact facts and figures, it is necessary 
 that he have some basis to work upon; yet sta- 
 tistics furnishing such data are almost entirely 
 wanting and are not supplied by our statistical 
 bureau. Nor would tbe labor required to ascer- 
 
24 WHOM TO TKUST. 
 
 tain such figures as are needed be warranted by 
 any private individual, or even trade journals. 
 Nothing short of a "Bureau of Commercial 
 Statistics," under the direct patronage of the 
 commercial industries themselves, will accom- 
 plish anything in this direction with the neces- 
 sary degree of exactitude. Such a bureau, in 
 charge of a competent business -man of large ex- 
 perience, one who knows what kind of infor- 
 mation to collect and select, would be of incal- 
 culable benefit in various ways. The informa- 
 tion and figures attainable at present of the 
 manufacturing and mercantile interests, par- 
 ticularly the latter, are very vague and meager, 
 and neither assimilation nor approximation is 
 easy or possible. 
 
 For instance, to ascertain the percentage of 
 losses sustained by our merchants, it would be 
 necessary to know the total mercantile transac- 
 tions of the country, the capital invested in 
 mercantile pursuits, and the losses by failures 
 of this class. These data would enable us to 
 arrive at the per cent, of loss, both on the capi- 
 tal and the volume of business. 
 
 The table given above comprises a period of 
 ten years, and the condition of the country dur- 
 ing that time from 1877 to 1886 fluctuated 
 from extraordinary depression to great activity 
 and prosperity, and back again, thus giving us 
 a fair general average. The number of firms 
 that failed each year during the ten years is one 
 
LOSSES BY FAILURE. 25 
 
 in ninety; the failures aggregate the grand total 
 of $1,409,739,656, equal to nearly one-half of 
 the total (approximated) capital invested in 
 both mercantile and manufacturing business, 
 as shown further on. The yearly average of 
 losses amount to $140,000,000, in round num- 
 bers. Of course, the entire liabilities of the failed 
 concerns which these figures represent were 
 not lost. We may assume that 30 per cent, 
 was recovered; but this was temporarily tied 
 up, and practically the whole sum was unavail- 
 able, so far as the effect and injury to the cred- 
 itor class was concerned. Deducting from the 
 ten years' average of $140,000,000, 30 per cent, 
 as having been realized, the net annual loss 
 sustained by merchants and manufacturers is 
 nearly $100,000,000. 
 
 From the best estimates obtainable, the capi- 
 tal invested in mercantile and manufacturing 
 enterprises in the United States, in 1880, 
 amounted to about four thousand million dol- 
 lars. One quarter of this may be supposed to 
 have been removed from the danger line of the 
 credit system. As nearly as possible, we want 
 to arrive at the capital that is affected by and 
 dependent on this system, and we have, approxi- 
 mately, three thousand millions of capital thus 
 employed. " One hundred millions annual loss 
 on this sum is equal to 3^ per cent, on the total 
 capital. 
 
 To form an estimate of the percentage of loss 
 
26 WHOM TO TRUST. 
 
 on the sales or transactions of the country, we 
 may multiply the capital by four, as we turn it 
 over probably tliat number of times, at least. 
 That gives us a volume of business equal to 
 twelve thousand millions (twelve billions), sub- 
 ject to the vicissitudes of the credit system. One 
 hundred millions losses makes eighty- three-one- 
 hundreths of one per cent. (.83-100) loss on this 
 volume of business. 
 
 The approximate correctness of these percent- 
 ages is verified by taking a certain number of 
 business houses and computing the average of 
 their losses on a basis of capital invested. Most 
 of them do not calculate their losses on the 
 basis of capital employed, but on that of the 
 volume of business transacted; but here, also, 
 we find the estimate verified by actual figures, 
 taken and averaged from a large number of in- 
 dividual cases. Proportionately, the larger 
 houses lose less than the smaller ones; the 
 percentage decreases with the increase in 
 the volume of business, and the reasons are 
 obvious. 
 
 I desire now to call attention to the question: 
 Do mercantile pursuits render the losses usually 
 sustained imperative and unavoidable? In a 
 measure, yes ; but in a larger measure, no. They 
 are chiefly the result of carelessness, inexperi- 
 ence, and a deficiency of proper discipline on 
 the part of our business-men. It is a lack of 
 knowledge and judgment in the matter of giv- 
 
LOSSES BY FAILURE. 27 
 
 ing credit; or, if not these, it is carelessness or 
 recklessness. 
 
 The importance of this factor in individual 
 success can not be overestimated, and to illus- 
 trate it we have only to take the average busi- 
 ness house for the last twenty years, and figure 
 up the losses sustained by it, and compare the 
 sum total, with compound interest, with its 
 present financial status, and we shall find that 
 it has lost more than the capital accumulated 
 during the period. 
 
 This may seem a very broad assertion, but 
 figures have been obtained from a mifficient 
 number of houses to warrant the conclusion. 
 Nor were these houses selected especially for 
 their extra good or bad management; they 
 represent what is wanted ^or our purpose, 
 namely, a fair average. 
 
 From the foregoing facts and figures, it is 
 apparent that we are doing a large amount of 
 business, not alone for nothing, but at a loss 
 of capital, for the goods we sell are part of our 
 capital, and, if lost, that much capital is lost. 
 It may be asserted that the merchant adds the 
 probable percentage of his losses to the selling 
 price of his goods, or, in other words, figures 
 his profit by that much more. In that case 
 the merchant would not be the loser, for the 
 solvent buyers would make good the loss. But 
 this view can not be accepted at the present 
 day. To meet competition and hold and extend 
 
28 WHOM TO TRUST. 
 
 his trade, the merchant is forced to fix his 
 profit without any allowance for losses. What- 
 ever loss is sustained by reason of bad debts, 
 is to that extent a drain upon his earnings and 
 resources. It follows, then, since competition 
 enforces nearly uniform profits upon all in the 
 same line of trade, that the concern losing the 
 least, conies nearest realizing its calculations. 
 
MERCANTILE REPORTS. 29 
 
 MERCANTILE REPORTS. 
 
 The mercantile report is one of the many 
 innovations of modern business life, and is as 
 much a necessity to-day as any one of the other 
 helpful needs and agents enjoyed by this, over 
 past generations. Though far from perfect in 
 fact, quite imperfect it is, nevertheless, an 
 indispensable adjunct to our present methods. 
 It affords facilities to the business community 
 without which our extensive relations would 
 be materially curtailed, and credits, and there- 
 fore business generally, suffer serious restric- 
 tions. That the mercantile report fills an 
 absolute want is furthermore evidenced by the 
 very general patronage of the mercantile agen- 
 cies by business-men. In addition to quarterly 
 and semi-annually revised reference books, 
 they also undertake to furnish their subscribers 
 detailed reports of facts and figures concerning 
 the financial status of every dealer in the 
 country. How far they succeed in giving reli- 
 able data is left for the patrons of these insti- 
 tutions to determine. They certainly succeed 
 sufficiently to create an ever-increasing demand 
 for their labors. The steady improvement 
 year after year of the agency service is a note- 
 worthy and encouraging feature. 
 
 In the nature of things, infallibility is some- 
 thing the mercantile agency can never hope 
 
30 WHOM TO TRUST. 
 
 to attain, since stability of capital actually 
 employed at any given time and in any given 
 business, can not be depended upon. Men do 
 not always confine themselves to their regular 
 vocations, and capital is thus often diverted 
 from its legitimate operations and devoted 
 to speculative purposes, which may or may 
 not be profitable. The American business 
 community is especially prone to speculation, 
 and, as speculation goes, it is largely at the 
 expense of the regular business. Nor have we 
 any remedy against this, not even when the 
 creditor's capital is directly used and jeopard- 
 ized for the purpose. No restrictions are possi- 
 ble to regulate the exercise of individual judg- 
 ment in regard to the employment of money 
 once in possession, either in fee simple or in 
 trust. Whether success or failure attends a 
 particular venture, are matters of which the 
 outside world is left in ignorance, especially if 
 failure should result. If successful, no one 
 finds fault; if otherwise, it is too late to 
 avail. 
 
 From this alone it will be seen that the finan- 
 cial status of business concerns would vary 
 considerably, even from one month to another. 
 Ratings would require more frequent revision 
 than is possible with the present facilities of 
 the agencies in order to cover these changes of 
 conditions. It is usually only subsequent 
 developments that bring these matters to light. 
 
MERCANTILE REPORTS. 31 
 
 and that at a time when the knowledge of the 
 facts ceases to be of any benefit to us. 
 
 But diversion of capital from its legitimate 
 uses, and to purposes not at all speculative, is 
 also a matter of importance. Many business- 
 men, from miscalculation and poor judgment, 
 invest too large a portion of their working 
 capital in permanent improvements and outside 
 ventures, not necessarily of a speculative 
 nature, and thereby tie up capital which should 
 have remained a working force. Although 
 real estate and permanent improvements should 
 constitute the best representatives of capital 
 invested, and indicate the highest order 
 of assets, yet we know from experience that 
 this class of property is not convertible at 
 will in the event of failure, nor is it, as a 
 rule, available to the creditors. The mercantile 
 agency, however, has no right to ignore capital 
 thus invested; it is obliged to give it a place 
 among the assets and make its ratings accord- 
 ingly. For this reason "the keys" used by 
 the various agencies to denote capital are less 
 to be relied upon than the report itself, for the 
 latter gives details and shows what the capital 
 consists of and is used in, and from these we 
 can make our own deductions. The nature of 
 the assets has much to do with the value of the 
 ratings for the purpose of basing credits. 
 
 This much is certain, if we could always 
 make sure of getting reliable reports, whatever 
 
32 WHOM TO TRUST. 
 
 their source might be, the credit man's task 
 would be made easier, and losses by bad debts 
 would be reduced to a minimum. The weak 
 feature of the mercantile agency system is its 
 dependence on correspondents, who are ex- 
 pected to give their time and services gratui- 
 tously, or nearly so, and we necessarily have to 
 contend with frequent negligence, inaccuracy, 
 and incompetency, and sometimes even personal 
 favoritism or - prejudice, as the case may be. 
 That this has been and is being remedied to a 
 considerable extent by the better class of agen- 
 cies, we have evidence from the improving 
 quality of service rendered. Good services 
 command good pay, and it is due the business 
 world that the agencies secure competent cor- 
 respondents and pay and charge accordingly. 
 We can afford to pay well for reliable reports; 
 unreliable ones are dear at any price. 
 
 Quite a prominent feature of many of the 
 collection agencies is their list of attorneys 
 throughout the country, who are under con- 
 tract (without pay however) to report the stand- 
 ing of business-men in their respective locali- 
 ties. As auxiliaries, and used to corroborate 
 other statements, they possess merit, and are 
 made use of to a considerable extent. But the 
 attorneys perform their labors entirely gratis, 
 and the reports from this source seldom furnish 
 details, but simply offer opinions that parties 
 are supposed to be good or otherwise gener- 
 
MERCANTILE REPORTS. 33 
 
 ally good. The attorneys expect to establish a 
 large clientage through the acquaintance made 
 in this way, and their compensation, as report- 
 ers, is expected to come from professional serv- 
 ices in the future. 
 
 On the whole, excepting, of course, many 
 inaccuracies and misconceptions of facts, the 
 mercantile agency report can be said to lean 
 toward unbiased and truthful statements of 
 ascertainable facts. Human nature inclines to 
 well-meaning statements concerning our fellow- 
 men, and this being so, we may be tolerably 
 certain that a derogatory report has something 
 in it for a foundation, and the credit-man 
 should be slow to ignore its unfavorable com- 
 ments. 
 
34 WHOM TO TRUST. 
 
 ANALYSIS OP STATEMENTS OR 
 REPORTS. 
 
 In the preceding chapter, mercantile agency 
 reports only were discussed, but it was not in- 
 tended to be inferred that business houses were 
 dependent on these for information exclusively. 
 Information regarding the standing of people 
 in trade is obtained from various sources, and 
 not infrequently directly from the applicants 
 for credit. The object of getting a report is, 
 of course, to gain such information as will 
 enable us to determine whether a certain dealer 
 is entitled to credit or not, and if so, to what 
 extent. But what class of information do we 
 require to determine this question, and that 
 will enable us to arrive at an intelligent con- 
 clusion? 
 
 The farmer who contemplates buying lands 
 and settling in a new territory, will want to 
 know many things before he invests his money 
 and locates. His experience and knowledge of 
 his vocation have taught him that simply buy- 
 ing so many acres of land, regardless of internal 
 or external conditions, would be very unwise; 
 therefore, before he invests, he learns about the 
 soil, its condition and adaptation, the climate, 
 the markets, the facilities for transporting his 
 produce, and a great many other things. A 
 farmer should know just what is necessary for 
 
ANALYSIS OF STATEMENTS OR REPORTS. 35 
 
 him to investigate in order to make a wise se- 
 lection; and a practical farmer does know. 
 With a business-man, in making credits, it is 
 j)recisely the same. There are certain things 
 concerning a would-be debtor, of which he 
 must inform himself in order to judge under- 
 standingly. 
 
 As in the farmer' s case, our experience and 
 business education have taught us that our 
 safety as creditors is dependent on many con- 
 tingencies; on qualities of mind and heart of 
 the debtor; on his mental, moral, and financial 
 status, and also on his surrounding relation- 
 ships, etc. 
 
 Now we find, by applying the rules of analy- 
 sis to business, that it is resolvable into cer- 
 tain constituent elements, and that its success, 
 and our safety as creditors, is dependent upon 
 the existence and proper combination of these 
 elements. One of the elements or requisites 
 is honesty; another, ability; another, capital, 
 and so on; and when we have completed our 
 analysis, we find that we have thirty different 
 and distinct elements to which we should have 
 answers, and on which it is important to get 
 information. Each one of these elements con- 
 stitutes an important factor, although some are 
 of more consequence than others. To take one 
 spoke out of a wheel would weaken it, though 
 not perceptibly, perhaps. Industry and capital 
 in business may be likened to the hub; ability, 
 
36 WHOM TO TRUST. 
 
 experience, and honesty to the fellies and tire. 
 The spokes come in to combine the two into a 
 symmetrical and effective whole. In like man- 
 ner the thirty elements or requisites go to make 
 up a whole, by showing us the constituent 
 parts necessary to insure our safety as credit- 
 ors, and success as business-men. 
 
 Each one of the following elements is suscepti- 
 ble of individual analysis, to which the first 
 part of this book is devoted. We take them 
 without reference to their relative importance. 
 The first thing we are usually made cognizant 
 of is the nature of the business in which the 
 applicant is engaged, the next thing is invaria- 
 bly the place where he is located. We there- 
 fore commence with: 
 
 No. 1. Nature of the Business. 
 
 No. 2. Locality. 
 
 No. 3. Character and Habits. 
 
 No. 4. Ability. 
 
 No. 5. Experience. 
 
 No. 6. Application and Industry. 
 
 No. 7. Business Education. 
 
 No. 8. Honesty. 
 
 No. 9. Economy. 
 
 No. 10. Married or Single. 
 
 No. 11. Age. - 
 
 No. 12. Capital. 
 
 No. 13. Assets Stock and Personal Prop- 
 erty. 
 
ANALYSIS OF STATEMENTS OK EEPORTS. 37 
 
 No. 14. Assets Accounts and Bills Receiv- 
 able. 
 
 No. 15. Assets Real Estate Exemptions. 
 
 No. 16. Liabilities. 
 
 No. 17. Volume of Business. 
 
 No. 18. Antecedents. 
 
 No. 19. Competition. 
 
 No. 20. Punctuality. 
 
 No. 21. Productive or Non-productive. 
 
 No. 22. Doing Business as Agents. 
 
 No. 23. Partnerships. 
 
 No. 24. Doubtful Credits. 
 
 No. 25. Joint Stock Companies and Coop- 
 erative Associations. 
 
 No. 26. Women in Trade. 
 . No. 27. Chattel Mortgages and Other 
 Liens. 
 
 No. 28. Insurance. 
 
 No. 29. Miscellaneous Information. 
 
 No. 30. Old Customers. 
 
 It might seem that to embody all these ques- 
 tions in a statement, or rather to exact informa- 
 tion on them all, would make a very lengthy 
 report, and be asking too much labor from the 
 agency or correspondent. But this is not so. 
 An ordinary report, such as we all receive in 
 our daily business transactions, is here submit- 
 ted, which will be found to give satisfactory 
 answers to every one of the series of questions. 
 The numbers in the report have reference to 
 the corresponding numbers in the foregoing 
 
38 WHOM TO TRUST. 
 
 series of questions like numbers representing 
 questions and answers. 
 
 J. M. S. (1) Hardware and stoves. (2) Chi* 
 cago, 111. (19) In business here since 1876. 
 
 (11) Age fifty. (10) Man of family. (21) Tinner 
 by trade. (9) Saved up $300, which was his 
 capital when starting. (18) Came from Ohio. 
 (3) Character and habits good. (8) Reputed 
 honest and upright in his dealings. (4 and 7) 
 Fair education and business ability. (6) At- 
 tentive and industrious. (9) Economical. (13) 
 Last inventory, stock $10,000. (14) Accounts 
 due him, $5,000. (15) Homestead, $3,000. (13) 
 Other personal property, $1,500. Total assets, 
 $19,500. (16) Liabilities: Owing for stock on 
 open accounts, $4,500. ~No other indebtedness. 
 
 (12) Net surplus, $15,000. (12) Net capital in 
 business, $12,000.. (28) Insurance on stock, 
 $8,000. (20) Prompt in meeting his engage- 
 ments. (17) Sales last year. $35,000. 
 
 ANYALSIS AND REMARKS. 
 
 This report answers every one of our ques- 
 tions, though some of them only inferentially. 
 It says nothing directly of his experience, but 
 we infer that he has had that for the last 
 thirteen years. As to partnership, he is perhaps 
 wise in not having any, and the question does 
 not pertain to him; he is alone, the report says. 
 His antecedents, back of thirteen years ago, do 
 not interest us; his record while here is suffi- 
 
ANALYSIS OF STATEMENTS OK KEPOETS. 39 
 
 cient. The report says: "No indebtedness 
 except on. open account," so there are no chat- 
 tel mortgages or liens. In regard to doing 
 business as agent, women in trade, stock com- 
 panies, the report answers all these questions 
 inferentially. 
 
 We may say in regard to this man that he is 
 good for his business requirements and entitled 
 to credit up to the full limit, which, being a 
 prudent man, as we see, he will never ask. 
 
 He has succeeded in building up a lucrative 
 business, and in accumulating a moderate capi- 
 tal, which is all of an available character. To 
 do this he must have combined application with 
 intelligent management and economy. His 
 available assets are $16,500. He owes $4,500, 
 but would be safe for an indebtedness of 
 $10, 000, or even $12, 000. His accounts due him 
 are in good proportion to the business done, 
 and show that he has only about sixty days' 
 sales outstanding, from which we infer that he 
 looks after his collections closely. The accounts 
 are, therefore, not of long standing, and pre- 
 sumably are collectible. His methods of doing 
 business do not indicate that he would include 
 in his showing, old, worthless bills. His annual 
 sales indicate prudence and conservatism. 
 Many firms with less capital would undertake 
 to do more business. 
 
 This case is not difficult to decide; in fact, it 
 is an exceptionally easy one. The above indi- 
 
40 WHOM TO TKUST. 
 
 cates the usual modus operandi of examining 
 a report, and the line of reasoning employed 
 to arrive at a decision. 
 
 For the purpose of furnishing material for 
 analysis, and to enable those of my readers to 
 whom the facilities are not offered, and who 
 seek, possibly, preparatory knowledge in the 
 " science of credits," I have selected a number 
 of mercantile agency reports which will be 
 found on pages 174 to 199. These are all actual 
 reports received in the course of business; only 
 such changes being made as are necessary to 
 avoid identification. 
 
 The following thirty chapters will take up 
 the analytical series in the order enumerated. 
 
NATURE OF THE BUSINESS. 41 
 
 NATURE OF THE BUSINESS. 
 
 When we contemplate investing in business, 
 the first point of consideration with us is to 
 determine the degree of risk that pertains to it. 
 In a large sense the interests of the creditor and 
 the investor are identical. One risks his capital 
 and time; the other his merchandise, and the 
 question is, therefore, of equal importance to 
 both. Now, we know that some lines of busi- 
 ness are more hazardous than others, and this 
 question of necessity constitutes an important 
 factor for us to consider. In the analysis of 
 our report we were called upon to investigate 
 a retail hardware business in its relation to reli- 
 ability and-risk. Of this we know, from past 
 and present observation, that it is both safe and 
 legitimate, and that, with fair attention and 
 ability, it will always do well by its proprietor. 
 It has comparatively few drawbacks, and is 
 exempt from many of the ills to which other 
 lines of business are subject. Losses by reason 
 of old stock or styles, by damage to goods, by 
 age, temperature, or otherwise, are only the 
 result of gross negligence and inattention in this 
 business, and herein it has quite an advantage 
 over others in which, from various causes, more 
 or less shrinkage is unavoidable. So far, then, as 
 the nature of the business under consideration 
 is concerned, we call it exceptionally safe in 
 
42 WHOM TO TRUST. 
 
 fairly capable hands, and can dismiss the ques- 
 tion, so far as it relates to this report. But this 
 is only one of many. 
 
 Different lines of business are subject to dif- 
 ferent ills, and more of them, which affect both 
 the debtor and creditor. It is, therefore, in- 
 cumbent on us to know the detrimental or 
 hazardous features in each case. A stock of 
 seasonable goods always has more risk attached 
 than one of staple goods, that moves every 
 day, and we find correspondingly more fail- 
 ures. The most hazardous goods for the retail 
 hardware dealer, for instance, are stoves and 
 heating apparatus, and many a good business- 
 man has been bankrupted by an overstock of 
 these, brought about by an untoward season 
 or some other cause that prevented sale in 
 the short time such goods are usually in 
 demand. 
 
 Of staple lines of business, a grocer's stock 
 is probably the easiest to convert; but the 
 grocer makes more bad accounts than the hard- 
 ware man, where the ordinary credit system is 
 rulable. In addition to losses from this source, 
 the city retail grocer has another serious draw- 
 back to success, and that is the great expense 
 attending his business, which seems unavoida- 
 ble if he desires to retain and advance his posi- 
 tion in the trade. It results in this, that the 
 closest management becomes necessary to suc- 
 cess, and the money-making city retail grocers 
 
NATURE OF THE BUSINESS. 43 
 
 are few compared with the number engaged in 
 that business. 
 
 But it is not necessary to enter into details of 
 every line of business, and to discuss the advan- 
 tages and disadvantages of each. 
 
 Every line of business has established for 
 itself its own terms, either long or short time, 
 or cash, and these have come to be recognized 
 by the trade at large, and are enforced as if 
 they were law. Now, we find that the most 
 necessary articles to the community, such as 
 flour, meats, sugar, etc., are sold nearest to a 
 cash basis in fact, they are sold for cash only 
 from first hands. We here establish a starting 
 point, and as articles of commerce become less 
 necessary to existence and comfort, we find the 
 terms lengthened out in proportion. This law 
 will be found to hold good throughout. From 
 time to time, as profits on certain lines of goods 
 are cut down, the time is shortened also, and 
 this, too, is in conformity with the laws of com- 
 merce. The greater the profit, the greater the 
 risk that can be taken, and the longer the time 
 that can be, and is, given. 
 
 Seasonable goods are sold on long time to 
 
 facilitate their distribution, but they are made 
 
 payable when the season for their use comes, 
 
 , and they are then sold for cash or on time, 
 
 according to their nature. 
 
 The trade in certain lines adopt certain terms, 
 and their uniform adoption exacts their accept- 
 
44 WHOM TO TKUST. 
 
 ance by the community at large. It is not 
 necessary to state here the maxim, that the 
 shorter the credit the less the risk, and vice 
 versa. That is self-evident. A business in 
 which the transactions are for cash, attracts to 
 itself moneyed men only, who are prepared to 
 meet its demands on them, and there is little or 
 no risk in the ordinary sense. On the other 
 hand, when time is given, it opens the gates to 
 speculation on the future, and taking chances 
 on what should, and under favorable circum- 
 stances would, transpire. Therefore, the longer 
 the time, the greater will be the opportunity for 
 speculative indulgence, and the greater the risk 
 to the creditor. 
 
LOCALITY. 45 
 
 LOCALITY. 
 
 In the case of the mercantile report cited on 
 page 38 we have to do with a large city, the 
 metropolis of a large section of country, with 
 its vast and diversified interests. All the dif- 
 ferent industries of the surrounding country, 
 in a measure of the whole country, are tributary 
 to it as a commercial center. Its own immense 
 population, and the varied enterprises and indus- 
 tries within its own limits, create demand and 
 supply for an inconceivable variety and quantity 
 of wares and work. The business of a large city, 
 therefore, is not dependent upon any one partic- 
 ular industry, whether within itself or tributary 
 to it. The prosperity of all the industries in and 
 out of it, would mean exceptionally good times 
 for the city dealers, and a depression in one or 
 more would only measurably affect it. 
 
 With city dealers and business houses we 
 have always to consider that the competition 
 for trade is very great, and the expense of 
 doing business equally so. It is always an 
 open question, therefore, whether a new concern' 
 can get on a paying basis or not. If it can se- 
 cure a share of the business from the start, it is 
 well. If not, a long struggle for existence en- 
 sues, which time alone determines, and mean- 
 while the status of the debtor is a doubtful one. 
 A city merchant, with an established business, 
 
46 WHOM TO TEUST. 
 
 has fewer risks and interruptions to contend 
 with, than where one industry is depended on 
 for the support of the community where he is 
 located. 
 
 We are called upon now to speak of some of 
 the leading industries that control the welfare 
 of different localities. We have farming, 
 mining, lumbering, manufacturing, and other 
 centers. Locality is an important factor in 
 determining credits, since it gives us somewhat 
 of an idea of the risk incurred. 
 
 In old farming communities, credit can be 
 given with a liberal hand, and it depends mostly 
 on the honesty and ability of the debtor as to 
 meeting his obligations. Crops may be poor 
 some years, and prices low, and some indul- 
 gences may be needed, but otherwise there are 
 no contingencies likely to arise of an unfavora- 
 ble character. This class of trade is not, per- 
 haps, the most profitable to the retailer, but it 
 is the safest. 
 
 In lumber regions, the people as a class have 
 plenty of money in certain seasons and none 
 in others, and the result is that the merchants 
 there, as a rule, have to carry and be carried. 
 Their customers are Jargely composed of em- 
 ployes who are paid at the close of the season's 
 work, and meantime they have to be trusted 
 for the necessaries and comforts of life. As 
 long as lumbering can be done profitably the 
 merchants are safe, but "hard times" in that 
 
LOCALITY. 47 
 
 industry means dire calamity to everybody 
 interested, whether directly or indirectly. 
 
 Mining regions offer rich rewards to dealers 
 while "the boom is on," and while they are in 
 active operation. High wages are paid usually, 
 and people spend liberally, for both necessaries 
 and luxuries. But we have seen enough of 
 mining towns and localities to know what vicis- 
 situdes they are subject to. What was a thriv- 
 ing town three years ago is a deserted camp 
 to-day. New mining towns can never be de- 
 pended on to " stay put," and even the older 
 mines are frequently closed for one cause or 
 another and the income of the population is 
 stopped for a time. All these interruptions 
 affect those who supply goods, both wholesale 
 and retail. The shrewd merchant does not 
 necessarily avoid these districts. The trade is 
 large and profitable while it lasts. He secures 
 a share of it, but retires before the collapse, 
 for there are usually sufficient warnings given 
 to those who are on the alert for signs. 
 
 In exclusively manufacturing centers and lo- 
 calities, where the dealers depend almost wholly 
 on the employes of the factories for patronage, 
 the conditions are not such as to strengthen the 
 stability or reliability of the dealers. They 
 depend, not alone on the employes for their 
 trade, but generally carry them from one pay- 
 day to another. In case of a shut-down, the 
 dealer is not only liable to be left without cus- 
 
48 WHOM TO TEUST. 
 
 tomers, but he has also a number of bills of 
 very doubtful character for the time being, 
 at least until other work can be obtained or 
 the mills start up again. Those who have 
 been in business during the last ten years in 
 such localities, especially when strikes and 
 lock-outs have occurred, can appreciate the 
 situation. 
 
 There will always be traders wherever there 
 is a demand for goods, no matter what the con- 
 ditions or risks may be. That locality consti- 
 tutes an important factor, and that our security 
 and the promptness of our customers is better 
 or worse accordingly, needs no further discus- 
 sion. The credit-man should not fail to consider 
 that the status which would be satisfactory of 
 a dealer in one place would not necessarily be 
 so in another. 
 
 Another point that deserves mention here is 
 the accessibility of your customers. You want 
 them, preferably, where they can be reached by 
 the ordinary methods used for collecting. A 
 large percentage of our collections are made by 
 drafts sent to banks. Towns that have no 
 banks, and are too small even to support a law- 
 yer, place the creditor at great disadvantage 
 when he undertakes to collect. 
 
 To insure collections in these remote places, 
 it is necessary to send claims to attorneys often 
 residing at a distance, and this makes the ex- 
 pense quite onerous. Many people will pay a 
 
LOCALITY. 49 
 
 draft drawn through a bank when they would 
 be very dilatory in remitting. 
 
 Another point also presents itself, viz.: the 
 relation of locality to distance from the mar- 
 kets. A retailer in Chicago, for instance, can 
 do a large business on a comparatively small 
 capital. He is not required to carry stock be- 
 yond his daily or weekly wants. He can buy 
 and sell, from " hand to mouth," and draw his 
 supplies from the jobber, who practically an- 
 swers the purpose of a warehouse. 
 
 On the other hand, the dealer who is remotely 
 situated from the markets is obliged to carry 
 stock enough to last from one to six months, 
 according to distance and location. The city 
 dealer can carry a full assortment in small quan- 
 tities with one thousand dollars, we will say, 
 while in the other case the same assortment, with 
 the increased quantities necessary, will involve 
 a very much larger capital. It is apparent, 
 therefore, that to do a certain volume of busi- 
 ness, more capital is required in one locality 
 than in another. 
 
50 WHOM TO TKUST. 
 
 LOCALITY CONTINUED. 
 
 COLLECTION LAWS. 
 
 In some States the debtor has more prptec- 
 tion than in others, and this is a vital point to 
 be considered in making credits. The differ- 
 ence in the protection granted to debtors in 
 different localities, does not go so far as to 
 make a debtor pay when he has nothing to pay 
 with. Devoutly as such a law might be desired 
 in the interest of commerce, its fruition will 
 continue a thing to be hoped for, but never to 
 be realized. But the point I wish to make is 
 this: In some States, notably in the older and 
 more populous ones, an action can be com- 
 menced, judgment obtained, and execution 
 levied in ten days, in amounts under $200, and 
 in twenty to forty days a judgment is usually 
 obtainable for any amount, and if property can 
 be found it can be satisfied forthwith. But in 
 the Western and Southern States the law's 
 delays, from one cause and another, operate 
 most disastrously to the creditor class. The 
 sessions of the courts are farther apart, and it 
 takes longer to try cases and bring them to a 
 focus. After a decision is finally reached, the 
 debtor' s protection comes in under the head of 
 exemptions, stays, etc. 
 
 The laws in the newer States seem to operate 
 with especial reference to the protection of the 
 
LOCALITY CONTINUED. 51 
 
 inhabitants, both purposely and incidentally; 
 nor may we question their justness or expedi- 
 ency. New countries must offer protection in 
 proportion to the hardships that await new 
 comers and the risks they have to take. It is 
 simply the credit-man's duty to know what the 
 laws are, and a synopsis of these is easily 
 obtained. 
 
 In the Territories, for instance, we find that a 
 man of moderate circumstances may claim as 
 exempt, nearly all he possesses. He is entitled to 
 personal and miscellaneous property to the ex- 
 tent of $1,500, to be selected by the debtor, 
 which may mean twice the amount in fact. He is 
 entitled to a homestead not exceeding 160 acres 
 of land, or one acre in town, without limita- 
 tion of value of buildings and improvements 
 thereon. 
 
 It will be seen, then, that with the generality 
 of dealers, in those localities, the creditor has 
 no legal foothold, and it is important to be 
 cognizant of this fact when we extend credit to 
 them. 
 
 In general, and when the buyer is possessed 
 of the average capital, of from $1,000 to $5, 000, 
 we are not justified in basing credit on his 
 capital. Our safety lies in his honor, and it is 
 not prudent to rely on anything else. The 
 applicant for credit should, therefore, have a 
 well-established reputation for upright and 
 honorable dealings in those localities. 
 
52 WHOM TO TRUST. 
 
 CHARACTER AND HABITS. 
 
 The most important items on which we need 
 information are the character and habits of the 
 applicant for credit, and if these are not good 
 we have not much use for him in any capacity, 
 especially that of debtor. Ability, experi- 
 ence, and even capital would hardly compen- 
 sate for the lack of these two concomitant 
 elements in the make-up of a debtor, any 
 more than in the case of an agent or trusted 
 employe. 
 
 Character and habits are here treated together, 
 for the reason that they are practically insepara- 
 blefor our purpose at least. A man may 
 have exceptionally good habits and lack good 
 character withal in fact, be a thorough-bred 
 scoundrel. On the other hand, he may have 
 proven himself a first class, upright business- 
 man, of the highest integrity, worthy of confi- 
 dence, and yet have some very bad habits. 
 From a business point of view, and where a 
 reputation for honesty and honorable dealings 
 has been established, we may be justified in 
 looking lightly on some personal short-comings 
 in the matter of habits. But this view of the 
 case could only find justification where a 
 would-be debtor had been established in trade 
 for a long period. On general principles, how- 
 ever, one could not aiford to ignore a man's 
 
CHAEACTEE AND HABITS. 53 
 
 habits where a credit or a trust was involved. 
 
 Old established houses have their record. 
 The great difficulty is in determining the char- 
 acter of men just starting in business. Such 
 may, and probably have, served an apprentice- 
 ship as clerks, but nothing can really be known 
 of their character as principals and business 
 managers until time and opportunity are given 
 to develop them. A man's habits, on the other 
 hand, we can know, as they would be much 
 the same either as employe or as principal. 
 
 In extending credit, the character and habits 
 of the party asking it should be searchingly 
 inquired into and all the facts ascertained. 
 Our security as creditors depends on these 
 factors more largely than on any other two. No 
 applicant for credit is entitled to it unless his 
 record for both honesty and sobriety is above 
 reproach. The men of moderate ability, and 
 of good character and habits, are the "stand- 
 bys" in trade, but reversing this order, we are 
 liable to reverse our fortunes if we make them 
 our debtors. 
 
 Because the exceptions prove the rule, we 
 can lay it down as a rule, that business-men 
 who are addicted to habitual and excessive 
 drinking, etc., are undesirable debtors; not 
 altogether for the reason that they drink, but 
 because of the inevitable consequences entailed 
 through it; namely, neglect of business, loss 
 of time, and unwarranted expense. 
 
54 WHOM TO TRUST. 
 
 It is supposable that no sales are ever made 
 without expectations of payment, and yet we 
 find that men of all shades of character, and 
 even " shady characters," constantly figure in 
 the reported failures of the country. That 
 somebody has taken stock in them is self-evi- 
 dent. If they did not owe anybody they would 
 have no need or inducement to fail. The fact 
 that they do owe is prima facie evidence that 
 their credit was good in some quarter, at least. 
 The assumption can hardly hold good that the 
 creditors of dubious characters in trade were 
 cognizant of the fact of such dubiousness when 
 selling to them. We must, therefore, charge 
 this indiscriminate and lavish dispensation of 
 credit, not to a knowledge of the facts, but to 
 negligence in obtaining them. And this is 
 where the weakness of most creditors lies. The 
 time to inquire into character and habits, and 
 other things necessary to be known, is when 
 you make the credit, and if there is any doubt, 
 take the benefit of the doubt yourself. 
 
ABILITY. 55 
 
 ABILITY. 
 
 Ability in the abstract is one thing; ability 
 in the line of our special vocation is quite 
 another. No matter how great a man' s ability, 
 he can not hope to master every calling. To 
 select the vocation suited to our special ability, 
 is the most important step in a man' s career. It 
 surpasses all others in its influence on our 
 future destiny. If phrenology could be re- 
 duced to the scientific accuracy which is claimed 
 for it, it would be a most valuable aid in deter- 
 mining our special aptitude for this or that 
 occupation, and failures would be the exception 
 instead of the rule. 
 
 Taking cognizance of the fact, as our statisti- 
 cians show, that only five per cent, of our busi- 
 ness-men succeed, we are forced to the conclu- 
 sion that something is radically wrong. It cer- 
 tainly is not lack of business that is or can be 
 done, but lack of ability as merchants that is the 
 cause of so many failures, and here is the root 
 of half the evils incident to mercantile life. 
 Though a man be possessed of good ability, if 
 his efforts are misdirected and not in the line of 
 his particular talents, his endeavors will neces- 
 sarily come short of his real capacity. 
 
 Mercantile life can be and is entered by peo- 
 ple without any preparatory schooling, and 
 without reference to fitness. Any man with a 
 
56 WHOM TO TEUST. 
 
 few dollars and a desire for something to do 
 can become a merchant, and he naturally turns 
 his attention to it as offering the greatest in- 
 ducements with the least requirements. How, 
 then, can we expect that mercantile pursuits 
 should succeed, as a rule, when they are largely 
 in the hands of incompetent men? The law of 
 the survival of the fittest dooms them to failure. 
 
 The most eminent lawyers and world- re- 
 nowned doctors would not necessarily make good 
 merchants or manufacturers, and vice versa. 
 It may be presumed that the fact of their great- 
 ness in their respective professions lies in hav- 
 ing chosen vocations suited to their particular 
 ability. The same may be said, and with equal 
 truth, of successful merchants. 
 
 To undertake to analyze and define ability, 
 and the particular ability required to be a good 
 merchant, is too large a subject to be handled 
 here, and belongs more to the " Science of Busi- 
 ness " than to the " Science of Credits." But 
 we will state some of the qualities and experi- 
 ence that observation has taught us go to make 
 up the successful merchant. 
 
 The sum total of the qualities that make a 
 successful career possible may be defined as 
 constituting business ability. Trifling as some 
 of these qualities may seem in themselves, they 
 are of the utmost importance in forming the 
 combination. 
 
 First, the merchant must be a good judge of 
 
ABILITY. 57 
 
 human nature and of character. At every turn 
 this quality will be required, and is especially 
 important in the selection of co-workers and 
 assistants. Great achievements and the build- 
 ing up of large enterprises are not possible 
 without good assistants, and the quality of 
 these depends on him who selects them. Men 
 have been known to succeed in an eminent de- 
 gree with hardly any other qualification, that 
 was discernable at least, than that of being able 
 to surround themselves with good men, either 
 partners or otherwise. This, of course, is not a 
 trait that can be cultivated very much. It is 
 natural to some, the same as other special gifts, 
 but it is of the utmost importance to all busi- 
 ness-men. 
 
 The merchant must be a good judge of values. 
 This is essential, as profitable sales depend on 
 judicious purchases. The trader is born with 
 an intuitive knowledge of values and goods, of 
 the needs and desires of the people, and that 
 knowledge is his stock in trade to commence 
 with. He has also a quick insight into the re- 
 lations between actual needs and "man's pro- 
 gressive wants," and measure of pecuniary 
 ability to gratify the same. 
 
 The merchant must have large executive 
 ability, and be an organizer. New combina- 
 tions are constantly forming as his business 
 expands and conditions change, and he must be 
 equal to the emergency of meeting them and 
 
58 WHOM TO TEUST. 
 
 adapting himself to them. Quick discrimina- 
 tion and ready decision are indispensable fac- 
 tors in his make-up. 
 
 He must have the quality within him to de- 
 sire to keep and to accumulate. All men have 
 this desire to keep, in theory, but not in prac- 
 tice. To practice it, requires self-denial, and 
 that is by no means a universal trait of char- 
 acter. 
 
 The merchant's business is one of endless de- 
 tail, and the closest attention is requisite. It 
 is not the large affairs only that require super- 
 vision; unless the small matters are looked 
 after, large ones will never present themselves. 
 
 Singleness of purpose in the merchant is es- 
 sential to success, coupled, as it must be, with 
 indefatigable energy. A man's energies must 
 be bent in one direction and to one pur- 
 pose "for the achievement of success in his 
 particular line. No man has more temptations 
 offered him for outside ventures and money- 
 making schemes than the merchant, and it 
 requires a strong make-up to be proof against 
 them. The cause of innumerable financial 
 wrecks can be found here. 
 
 To be a good financier is an important requi- 
 site in the merchant; but not in the sense in 
 which that term is generally used. The term 
 financier is presented to us in the light of a man 
 who goes head-over-heels in debt and complica- 
 tions, and then extricates himself as best he 
 
ABILITY. 59 
 
 may. The good merchant avoids complications 
 that might imperil control and thorough mas- 
 tery over his own affairs; his obligations are 
 based on certainties to fulfill, so far, at least, 
 as human sagacity can determine. 
 
 These are some of the elemental traits that go 
 to make up a good merchant. Others could be 
 added, but for the purpose of this chapter fur- 
 ther analysis is unnecessary. 
 
60 WHOM TO TKUST. 
 
 EXPERIENCE. 
 
 Of ability, experience, education, character, 
 and habits, it would be difficult to say which is 
 the least important or most indispensable. 
 Each would seem to be a sine qua non, though 
 incomplete in itself. To engage in any busi- 
 ness without experience nowadays, a man 
 might be likened to a ship without a rudder, 
 and the chances for the inexperienced are grow- 
 ing less and less each year, in the ratio that 
 our standard of knowledge and experience is 
 raised. In the country we often find good 
 farmers allured to store -keeping. They can 
 illy be spared as farmers, as they are trained 
 and experienced in that calling, but as mer- 
 chants they could well be spared, and usually 
 are, after a short probation, when they find 
 themselves wiser, but poorer, men. The credit- 
 man calculates on about how long the u farm 
 money" will hold out, and extends his accom- 
 modations accordingly. 
 
 The aggregate knowledge that has been 
 acquired by personal observation and actual 
 trials is called experience. The kind of experi- 
 ence we are looking for is of a specific char- 
 acter and confined to some one branch of 
 business, and there is no department in trade 
 to-day that does not offer sufficient scope to 
 monopolize all a man's time and attention. 
 
EXPERIENCE. 61 
 
 The more difficult any business or profession is 
 to learn, the fewer will be the competitors to 
 invade it, and herein lies our compensation for 
 its mastery. 
 
 Every business has its ups and downs, its 
 good and bad sides. Experience in a particular 
 business enables us to foresee and provide 
 against emergencies, which the inexperienced 
 mind is incapable of doing; and, further, it 
 enables us, in a large degree, to control circum- 
 stances, instead of being controlled by them. 
 We select our doctors and lawyers from the 
 ranks of those who can give us the benefits of 
 a long practice and consequent experience. 
 
 The experienced man is always equal to the 
 emergencies as they arise in his special depart- 
 ment. He has been through all phases of 
 u dilemmas," and they neither dishearten nor 
 demoralize him. His experience has furnished 
 him with the resources to combat or ward off 
 the impending danger. He knows how to avoid 
 the shallows and the rocks, because he has 
 learned exactly where they are. What would 
 appear to others insurmountable barriers, cause 
 him no uneasiness. He has learned to distin- 
 guish the path that leads by easy stages. 
 
 Men going into new lines of business are con- 
 stantly at sea, and the elements seem always 
 contending against their struggling craft. The 
 man brought up to a particular business, how- 
 ever, feels as safe and secure in it as if it were 
 
62 WHOM TO TRUST. 
 
 a fortress, and is able to withstand any ordi- 
 nary assaults from without with comparative 
 compos are. This much for experience. 
 
 On the other hand, take a man without 
 experience, and every mole-hill appears like a 
 mountain, and as one is surmounted another 
 looms up before him. " Hills peep o'er hills, 
 and Alps on Alps arise." We are largely crea- 
 tures of habit. The experience acquired by 
 the father is, in a large part, the inheritance of 
 the son. Members of successive generations 
 follow in each other's footsteps in their selec- 
 tion of occupations, and the experience and 
 accumulated stock of knowledge of one genera- 
 tion is readily appropriated by the next. The 
 average boy, brought up in his father's store, 
 is conversant with nearly every detail of the 
 business, and seems to come by it without any 
 particular eifort. 
 
 Capital and experience yoked together make 
 a strong combination and lend to our business 
 ventures the greatest probability of success. 
 Experience alone is capable of acquiring capi- 
 tal, and of commanding it. Confidence in the 
 individual to manage wisely, and with experi- 
 ence, is the key to credit, and in procuring 
 credit we procure capital to use in the further- 
 ance of our special enterprises. But the pos- 
 sessor of capital alone, without experience, is 
 dependent on others who have experience to 
 make his monetary possessions productive, and 
 
EXPERIENCE. 63 
 
 this accounts for the large amount of money 
 that is always at the command of experienced 
 men. Experience, therefore, in being able to 
 command capital, is a most important factor. 
 Millions of dollars are intrusted to the man- 
 agers of large corporations, men whose experi- 
 ence is considered a sufficient guarantee to the 
 investors that their funds will be safely and 
 profitably invested, and we see in this the force 
 of our argument. To experience, therefore, 
 quite as much as to capital, do we owe the 
 advancement of our commercial and industrial 
 interests. The surplus accumulations of capi- 
 tal, not less than the capital owned and con- 
 trolled by inexperienced individuals, is thus 
 brought into productive use. 
 
 To acquire experience requires time and 
 patient toil. Money can combine with it ad- 
 vantageously, but it can not buy it, though the 
 instances are not rare where one is exchanged 
 for the other. Money is very often exchanged 
 for experience, though under protest on the 
 part of the money -owner. 
 
 In making a credit we need hardly call 
 attention to the importance of considering the 
 applicant's experience. 
 
64 WHOM TO TRUST. 
 
 APPLICATION AND INDUSTRY. 
 
 John Jay said of a contemporary: "Had 
 his application been equal to his talents, his 
 progress might have been greater." 
 
 A man may be possessed of good ability and 
 otherwise excellent qualities, but if he lacks 
 application and industry, his chances of success 
 will be very precarious, and this holds good, 
 especially in mercantile life. In no occupation 
 are indefatigable energy and close attention so 
 indispensable to success as in that of the mer- 
 chant, and if he is not willing, in this age of 
 competition and push, to devote himself assid- 
 uously and energetically to his calling, he can 
 hardly hope to accomplish great results. The 
 merchant's life is not a path of roses. It means 
 hard work day in and day out, and even 
 though the more laborious part of the work can 
 be delegated to others, his active presence 
 during business hours is nevertheless requisite. 
 Irregularity and negligence in the proprietor 
 are contagious, and, unlike good qualities, 
 spread readily to every employe, and to every 
 department of his business. Constant personal 
 superintendence and vigilance are required to 
 keep the business up to its full tension, and to 
 infuse into everyone connected with it that 
 spirit of endeavor and individual effort which 
 
APPLICATION AND INDUSTRY. 65 
 
 is essential to the attainment of the greatest 
 success. 
 
 The man who would and who does succeed 
 as a merchant is not the man who neglects his 
 business to attend to the various sports that 
 attract people generally. " Business before 
 pleasure " is an inexorable law to him, and he 
 who undertakes to reverse this order will surely 
 reverse his business and his future. 
 
 It is the steady pull in one direction and con- 
 stant watchfulness of your own particular busi- 
 ness that is needed to succeed in mercantile 
 life, and to keep fully posted on all the details 
 of your business and its ever- varying status, re- 
 quires more labor and attention than the average 
 man comprehends, or if comprehending, is will- 
 ing to bestow, even were ultimate success assured 
 him. Men work hard without necessarily com- 
 bining the quality of prolonged and steadfast 
 application. They labor to get bread and but- 
 ter, because they can not procure it without. 
 But a capacity and willingness to work, coupled 
 with application, signifies vastly more. It 
 indicates both physical effort and will-power 
 to accomplish a purpose, and this not only for 
 direct and immediate gain, but for future bene- 
 fits. Likewise, application means stick-to-it- 
 iveness, and trusting to the law of compensation 
 for your reward, which is always sure to fol- 
 low, provided the " bumps" of application and 
 industry are not overshadowed by those of an 
 
 5 
 
66 WHOM TO TRUST. 
 
 antagonistic or neutralizing character. Very 
 industrious people are sometimes known to 
 make little or no headway financially, but to 
 this we have simply to say, that man was 
 given five distinct physical senses, and if we 
 should find a man with only the sense of touch, 
 though it be abnormally developed and culti- 
 vated, we should still pronounce him an imper- 
 fect creation, and so with the mental faculties. 
 In temperaments, we cite the happy medium as 
 our ideal. The individual to whom fortune 
 has decreed a harmonious combination and co- 
 ordination of all his faculties, to him has been 
 given to enjoy the highest estate of man. 
 
 " Sammy, take care of your shop, and your 
 shop will take care of you," was the advice of 
 a Hebrew father to his son, and the admonition 
 came from a competent source. Our Jewish 
 brethren succeed in business, or anything else 
 they undertake, to a much greater degree than 
 any other class; but notice their methods. 
 Causes have their effects, and industry its 
 reward. Who works harder and devotes him- 
 self more closely and unwearingly to his call- 
 ing? He not only keeps watch of every detail 
 of his business, but he is always on hand to 
 give it personal attention. He does not run his 
 business by proxy. 
 
 Reports usually say "attentive to business," 
 or " not attentive," with more or less details on 
 the subject, as the case may be. Inattention to 
 
APPLICATION AND INDUSTRY. 67 
 
 one's business is inexcusable, and is sufficient 
 cause for lack of confidence in fact, no man is 
 entitled to credit who neglects his own business. 
 The business-man, in his function of creditor, 
 can not afford to ignore so important a factor 
 of strength or deficiency in his debtor, as 
 application and industry. 
 
68 WHOM TO TEUST. 
 
 BUSINESS EDUCATION. 
 
 In France, England, and other countries, 
 commerce is classed among the sciences. Al- 
 though it must of necessity be as much a sci- 
 ence in this country as elsewhere, we have been 
 content to let the science part take care of 
 itself, while going in " on our muscle," and mak- 
 ing all the money we can. But when we con- 
 sider how little attention is paid in this country 
 to business training, and how much time is 
 devoted to other callings to fit our youth for 
 active, intelligent work, the conviction is forced 
 on us that we are lax in our appreciation of 
 proper discipline. 
 
 Commerce rules the world to-day, and more 
 people are engaged in it for their living than 
 in all other callings combined. This being the 
 case, and our individual and collective welfare 
 being dependent on our efforts as business- 
 men, why should we or how can we afford to 
 remain indifferent to the really practical part 
 of our education? 
 
 To be sure, our boys start out in life by tak- 
 ing clerkships. These should be, properly, 
 apprenticeships, and in some cases they serve 
 that purpose; but with the large majority of 
 cases they do not. The eagerness to get a 
 dollar a week more is the all-absorbing ambi- 
 tion, and to stick to some one thing, and learn 
 
BUSINESS EDUCATION. 69 
 
 it thoroughly, is of secondary importance. As 
 a rule, our boys start out to get ' something to 
 do," without thought on their part, or that of 
 the parents, as to the selection of a permanent 
 business to be followed throughout life. 
 
 The American boy is always on the alert for 
 more money. As a quality in itself, it is com- 
 mendable and essential if he selects commer- 
 cial life for his vocation; but how much more 
 effective would his efforts be, if his native 
 genius were combined with correct discipline 
 and methodical training? 
 
 The wise and well-meaning parent is anxious 
 to secure a clerkship for his son in some old, 
 reputable house, without especial reference to 
 pay. He wants him not only to learn some 
 particular branch of trade, but he is desirous 
 that correct principles, along with the general 
 routine of business, should be instilled into his 
 mind. 
 
 In youth we are impressionable, and our 
 faculties are equally susceptible to good or bad 
 influences. Now and then we find even boys, 
 who are a ' l law unto themselves ' ' in their quick 
 discrimination between right and wrong, good 
 or bad, methods; but, as a rule, imitation is the 
 most active faculty. 
 
 The youths of the Athenian age were sub- 
 jected to the most rigorous training and disci- 
 pline to make of them soldiers and warriors, 
 and to fit them the better, they were educated 
 
70 WHOM TO TRUST. 
 
 as well in all the known branches of science. 
 Thorough discipline of mind and body were 
 carried to the extremes of hardship and priva- 
 tion. But in our day, commerce has super- 
 seded the art of war, and holds sway over all 
 the world. The sword and the spear are con- 
 verted into plowshares and other implements 
 to be used by an army of wealth -producing arti- 
 sans, instead of an army of bread-consuming 
 idlers. The soldiers and warriors of the Athen- 
 ian age have given place to the merchants and 
 manufacturers of to-day, and why should not 
 our fighting forces be as well equipped now as 
 then? 
 
 The great question before the nations of the 
 world in this generation, is that of commercial 
 supremacy. Legislative enactments and politi- 
 cal measures are devised for the development 
 of our resources, and to facilitate the exchange 
 of products, all with the view to our national 
 growth and advancement, and for securing that 
 supremacy for our own country. Considering, 
 then, how momentous the question, not less, 
 however, than the capacity and prestige of our 
 competitors, if we would meet them success- 
 fully, we must bring to bear, not only our nat- 
 ural advantages, conditions, and aptitude, but 
 we must raise these to their highest capabili- 
 ties by training and cultivating our minds in 
 that direction. 
 
 This article is confined to the merits of a 
 
BUSINESS EDUCATION. 71 
 
 practical business education, and is not intended 
 to enter the domain of education in general. 
 Most of our business-men are self-educated. 
 Wha.t degree of primary education should be 
 necessary for a business-man to have, is outside 
 the jurisdiction of this work. We have to do 
 with business education and training only, in 
 so far as it has any bearing on the subject of 
 making credits. 
 
 The applicant for credit has either served an 
 apprenticeship or has not. If he has not, he 
 is still to serve, and in trusting him, we are 
 trusting to the chance of his serving it to a 
 purpose. If he has served his time, and 
 acquired a knowledge of business, it is desir- 
 able to know how, where, and what were the 
 surroundings and influences. 
 
72 WHOM TO TRUST. 
 
 HONESTY. 
 
 We have here to do with honesty as we find 
 it in our every-day business transactions with 
 one another, and in thus confining the subject 
 within these limits, we shall find that honesty 
 is somewhat elastic. The moment we apply 
 the moral law to it, the subject becomes more 
 rigid and inflexible; but to measure our mer- 
 cantile transactions in general by the moral 
 standard, could not help being disastrous to 
 many a fair business reputation. Our business 
 affairs are governed by our civil laws, and each 
 man can draw upon the moral law and be gov- 
 erned by it, additionally, as much as he pleases. 
 The former exacts only conformity to the let- 
 ter; the latter to the spirit; hence the man who 
 pays his debts dollar for dollar, and discharges 
 his obligations according to the letter, must be 
 called honest. Our business code asks for 
 nothing more, and how far he may fall short of 
 the moral code, we leave for him to settle. 
 
 Shakespeare says: "To be an honest man is 
 to be one in ten thousand." His measure must 
 have been the moral law, for we can not think 
 that commercial honesty, even in his day, was 
 at such a fearful discount. That honesty is 
 developed in man along with his other traits, 
 and in the same ratio, must stand an admitted 
 fact, otherwise our "philosophy of evolution," 
 
HONESTY. 73 
 
 our ideas of human progress, would be wanting 
 in their very essence. 
 
 Speaking from a commercial standpoint, and 
 confining ourselves to those engaged in mercan- 
 tile pursuits, we find them honest; i. e., with a 
 liberal allowance for exceptions, as in other 
 rules. The surprise is rather that people in 
 trade or out of it are as honest as we find them, 
 when we consider the fact that a man who is 
 half-way sharp, can not alone be dishonest and 
 succeed in defrauding his creditors and his 
 friends, but he can evade the clutches of the 
 law with equal success. What, then, tends to 
 make men honest? In the first place, the 
 quality is innate in man. The germ of honesty 
 is in every civilized breast, though variously 
 developed. Secondly, the quality of honesty 
 finds compensation in its own exercise. Hon- 
 esty has its reward, present and future, 
 although it may not always come in the man- 
 ner expected or most desired. 
 
 The world's experience, if not his own, has 
 proven to the merchant that he can afford to be 
 honest. He has no need to stifle that generous 
 and manly impulse, for doing so, is more likely 
 to strew his path with thorns than with roses. 
 After a man has succeeded in gaining a compe- 
 tency, there is no longer any incentive to dis- 
 honesty, and he values the good opinion of his 
 fellow-man quite as much as his possessions, 
 and no reason exists for sacrificing either. On 
 
74 WHOM TO TRUST. 
 
 the other hand, the merchant who still has his 
 mark to make, can by no force of reasoning 
 afford to be dishonest, even though he were 
 dead to all sense of honor. If men could engage 
 in enterprises to-day, and to-morrow retire with 
 sufficient spoils to make them reasonably inde- 
 j>endent for life, no doubt the temptation would 
 prove too great for many a man who now 
 struggles along, and will continue the struggle, 
 as an honest man. But even this case is not 
 derogatory to our faith in the innate and prac- 
 tical honesty of man. The temptation would 
 assail those only whose character is too weak or 
 whose desire for luxurious living is too great to 
 resist it, and in either case it will simply prove 
 that there was a lack of coordination of the 
 mental faculties. Children are born deficient 
 in their moral and mental, as well as physical, 
 organizations sometimes, and that we find occa- 
 sionally a conscienceless, unscrupulous member 
 of society, must be accepted in the light of 
 other phenomena, and as forming the exception, 
 and not the rule. 
 
 "Honesty is the best policy," is a truism, 
 the force of which we all appreciate as a gospel 
 truth, whether we have been honest or not. 
 The dishonest man believes it, though he can 
 not speak from his own experience. He prob- 
 ably does so, however, from observation and by 
 comparison. Perhaps the most convincing 
 proof of the correctness of the maxim was 
 
HONESTY. 75 
 
 given by an old merchant on retiring from busi- 
 ness. He was giving his farewell advice to a 
 young man who had served him faithfully, and 
 in whom he had taken a deep interest. He 
 concluded by saying: u My son, let me repeat 
 to you that honesty is the best policy. I have 
 tried both ways, and I know." Here was a 
 man who was willing to acknowledge that he 
 had tried both ways, and by actual experiment 
 had found that the adage was true. 
 
 I find in the Bankers 1 Monthly for October, 
 in an address delivered by Mr. L. J. Gage, of 
 the First National Bank, of Chicago, the fol- 
 lowing axiom laid down: " All good men love 
 the approval of the good, and all bad men are 
 held in check in fear of the good man's re- 
 proach." The fundamental principles enunci- 
 ated here bear out the argument that man nat- 
 urally leans toward truth and honesty and 
 against their opposites. 
 
 Integrity is the rock on which the vast com- 
 mercial interests of the world are resting for 
 their foundation. Annihilate that, and we 
 destroy trade and commerce, and in the train 
 of its destruction will follow civilization and all 
 the benefits arising out of it. Without faith 
 and confidence in each other's honesty there 
 can be no credit, and without credit very little 
 business. 
 
 To be honest, to do your duty toward your- 
 self and your neighbor, is not a specially meri- 
 
76 WHOM TO TPJJST. 
 
 torious act. An obligation or a duty is dis- 
 charged with its conscientious performance, and 
 that simply ends it as it ought to end. But the 
 failure to perform the duty, the act of being 
 dishonest, for this there can be no excuse on 
 either moral or business grounds. 
 
 If your applicant for credit can not show a 
 clean record as regards honesty, let him apply 
 somewhere else. You can not afford to take 
 any chances on him. Even where we act most 
 advisedly, the percentage of loss is large enough 
 without taking extra hazardous risks. 
 
ECONOMY. 77 
 
 * ECONOMY. 
 
 With every advantage of capital, ability, 
 and prestige, a merchant's ultimate and perma- 
 nent success would still be a matter of doubt 
 if he did not combine economy with his other 
 good qualities and advantages. Extravagance 
 is the cause of innumerable commercial wrecks; 
 it is the reef on which many a good craft 
 founders. Extravagance, in the sense used 
 here, has a wide range. A man may spend 
 $50,000 a year and yet not be prodigal; whereas, 
 another would not be warranted in spending 
 $2,000, or even $1,000. This depends entirely 
 on a man's income, and what portion of it is 
 assured beyond all reasonable doubt. 
 
 All fortunes, the largest not excepted, accu- 
 mulated in mercantile pursuits, or, we might 
 say, in any pursuit, are the result of strict 
 economy, and this applies to personal, as well as 
 business, expenses. You can not have the golden 
 eggs and eat the goose that lays them. The ex- 
 periment has been, and always will be tried, but 
 it will never be attended with success. In sum- 
 ming up the lives of our eminent merchants 
 we shall always find, underlying and combined 
 with other sterling qualities, that -cardinal 
 quality of economy, and how far this consti- 
 tutes a factor in their success, I will endeavor to 
 show. 
 
78 WHOM TO TRUST. 
 
 The poor man, and even the moderately suc- 
 cessful, envies the prosperous and wealthy mer- 
 chant, and fails to see any present indications 
 of economy in the latter' s method or manner of 
 living. He fails to see where economy cuts any 
 figure, and, looked at from a present stand- 
 point, the merchant certainly does not appear 
 to deny himself any pleasure or comfort that 
 money can buy or heart can wish; but economy, 
 nevertheless, is the main factor in bringing 
 about the difference in circumstances between 
 him and his less-favored brother. Causes have 
 their effects. We look at the wealthy mer- 
 chant of to-day and see riches and independ- 
 ence, but these are only legitimate results of a 
 first cause, and though the cause is remote 
 from our point of observation, and is lost sight 
 of, it nevertheless has existence, and we want to 
 make sure of this fact. It is safe to say that 
 the merchant, whom so many envy, would 
 never have become an object of envy unless he 
 had possessed the quality of practical economy 
 in his make-up at a time when it was requisite, 
 and when, to build a solid foundation, it was 
 necessary to practice self-denial and make^ 
 every cent available as working capital. 
 
 The men who do the envying would rarely 
 have been willing, under similar or any circum- 
 stances, to have suffered the voluntary priva- 
 tions and hardships which all self-made and 
 successful men have endured. The early strug- 
 
ECONOMY. 79 
 
 gles of all merchants, who have amassed fort- 
 unes and built up colossal enterprises, read 
 much the same, and in many cases their early 
 habits of personal economy and simplicity are 
 retained long after the need exists for counting 
 the pennies. 
 
 Man as a free agent has full control over the 
 exercise of this faculty, and to practice fru- 
 gality and self-denial is a voluntary act. To 
 practice economy when compulsory, can not 
 be designated a virtue. It is a virtue only 
 when man's will-power is exercised in the 
 direction of voluntarily renouncing present 
 comforts for the accomplishment of a future 
 object; that is, eventual success and independ- 
 ence. 
 
 Some writer has said that economy is the 
 parent of liberty and ease. The purpose of 
 going into business, primarily, is to make a liv- 
 ing and to provide for our daily wants, and the 
 majority of people in trade make no more. It 
 is even questionable if they make that, when 
 we consider how much money is annually con- 
 tributed through failures, and this certainly 
 goes toward the maintenance of those who 
 have not succeeded in making a living in their 
 respective callings. Simultaneously with the 
 merchant's desire to make a living comes the 
 ambition to make something more, to store up 
 the fruits of his labors for his declining years 
 and for the dependent ones. Eventual liberty 
 
80 WHOM TO TRUST. 
 
 and ease are the motives; but this desire, innate 
 though it be in* our civilized communities, can 
 only become an accomplished fact under favor- 
 able conditions, and when the fundamental 
 requirements of trade are complied with. That 
 they are not, is proven by our trade statistics. 
 
 We know, for a fact, that consumers will buy 
 more when they can do so on credit than when 
 they have to pay cash, or have made it a rule 
 with themselves to buy only for cash. With 
 the dealer the temptation has a double potency. 
 For his personal wants and indulgence, he has 
 both money and merchandise under his imme- 
 diate control, though he may be indebted for 
 both, and not even a formal request for credit 
 is necessary. He simply takes what he wants 
 and uses it as he sees fit. When his own and 
 his creditor's property is consumed, we have 
 the announcement of a failure. When we con- 
 sider, then, the ease with which wants can be 
 gratified, and compare it with man' s capacity, 
 or rather incapacity, to resist temptation, the 
 smallness of the number of successful business- 
 men is no surprise. If the practice of economy 
 were a universal trait, there would be less pau- 
 perism and poverty. It is the opposite trait in 
 man, however, that prevails. Profligacy and 
 extravagance are the causes that disturb indi- 
 viduals and society. 
 
 For practical illustrations of what economy, 
 or the want of it, will accomplish, it is only nee- 
 
ECONOMY. 81 
 
 essary for the reader to look back, say twenty- 
 live years, and recall the houses in business, 
 and see how many, or rather how few, have 
 survived till the present time. There must be 
 reasons for this, and a careful examination 
 will reveal them. It will be found invariably 
 that the survivors have been of the careful, 
 conservative, and rigidly economical class. 
 They haven't made haste, neither have they 
 made waste. Of a certain twenty-five large 
 houses doing business twenty-five years ago, I 
 find to-day but two in existence. Personal 
 acquaintance with the business methods of all 
 these houses leads to but one verdict. It was 
 simply a question of economy versus extrava- 
 gance and careless management. The man who 
 is economical is always careful. 
 
 Money put out at interest accumulates fast. 
 Invested in business, money is calculated to, 
 and should, bring a larger return than ordinary 
 interest. Judging from the past ten years, a 
 dollar kept in business and allowed to accumu- 
 late, should double in about six years. Now, 
 as an illustration, we will take two houses: 
 "A" draws $4,000 for his expenses; "B" 
 $8,000. In ten years behold the difference in 
 their relative financial conditions, all other 
 things being conducted equally favorably. 
 "A's" savings of $4,000 per year over "B" 
 will give the former, at the end of ten years, 
 about $80,000 excess capital. This $80,000 and 
 
82 WHOM TO TRUST. 
 
 its compound accumulations of profit, if retained 
 in the business another ten years, will consti- 
 tute in itself an independent fortune. I make 
 this calculation simply to give a cursory glance 
 at what saving and economy will do, when put 
 to a practical and mathematical test; and these 
 figures don't lie; they apply in all cases. 
 
 The great difficulty with man is, that his 
 wants are more progressive than his income. 
 To make our business and our profits increase 
 is a difficulty out of all proportion to the 
 facility with which we increase our wants and 
 expenses. It takes more determination and 
 will-power to preserve the equilibrium between 
 these two factors than the average man pos- 
 sesses, and herein lies, largely, the cause of 
 failure among business-men. 
 
 To the merchant, then, about to extend credit, 
 the question of economy is of paramount 
 importance, since the applicant's success and 
 our safety depend largely on this one factor. 
 
MAKRIED OR SINGLE. 83 
 
 MARRIED OR SINGLE. 
 
 It might seem that whether a man was mar- 
 ried or single, could have no pertinency to the 
 question at issue, and that it could hardly con- 
 stitute a factor in our consideration of his claim 
 to credit. But a man' s social status does have 
 a bearing on the subject, both present and 
 remote; and while we may be neglectful of its 
 importance in many cases, it does not signify 
 that we can really afford to be so. 
 
 The words credit and trust are, in a sense, 
 synonymous terms. We necessarily place trust 
 in a man who gets credit from us. We trust to 
 his honesty or responsibility, or to legal redress, 
 to enforce the fulfillment of his contract; other- 
 wise, we should never extend credit to any man. 
 We have confidence in a man to trust him with 
 our goods or money, and we are his creditors; 
 or he may have our confidence as employers for 
 a place of trust as agent or employe. Either 
 case is one of trust, pure and simple. 
 
 Now, it will be found that in applying to a 
 house for a position of trust, one of the lead- 
 ing questions asked will be if you are mar- 
 ried or single; and the question is not an im- 
 pertinent one, or asked out of mere curiosity. 
 All things being equal, the man with family will 
 have the preference; and the reason for it is 
 founded on the presumption that the latter, 
 
84 WHOM TO TUUST. 
 
 owing to his family ties and domestic respon- 
 sibility, is considered more in the light of a 
 permanent fixture, more settled, and is credited 
 with a greater degree of stability. The single 
 man, on the other hand, without family ties 
 and considerations, and who has no one' s wel- 
 fare to consider, and no reputation and charac- 
 ter to injure but his own, is undoubtedly more 
 prone to questionable habits and is an easier 
 prey to temptations. If some irregularity, either 
 premeditated or otherwise, imperil his safety, 
 there is nothing to hinder him from getting 
 out of the law' s reach on short notice. 
 
 This is the way, at any rate, in which the 
 case is summed up, though oftentimes quite 
 unconsciously. 
 
 The cases of a trusted employe or agent and 
 that of a debtor, are identical, and the argument 
 will apply with equal force to both. 
 
 No claim is made here of greater honesty of 
 the one over the other. The innate honesty of 
 both is precisely the same, but difference in 
 conditions and surroundings is liable to cause 
 different actions and ambitions. The married 
 state with a man favors personal economy, con- 
 centration of effort to a purpose, the mainspring 
 of that purpose being the comfort and welfare 
 of his family. We furthermore recognize as a 
 fact, that if a man in business be a married 
 man, he has a greater incentive to apply him- 
 self more closely to business and to devote all 
 
MARRIED OR SINGLE. 85 
 
 Ms energy and ability to his success. Our whole 
 social and commercial fabric is based on the 
 individual effort and desire of each man to raise 
 his family to the highest degree of respect- 
 ability and independence. 
 
6 WHOM TO TRUST. 
 
 AGE. 
 
 The age of a man, if he is about to be your 
 debtor, is not an unimportant factor in deter- 
 mining his claim to credit. Our dependence is 
 not alone on ability, honesty, and other ele- 
 ments, but we rely, from the nature of things, 
 on energy, ambition, and large combativeness. 
 These qualities in the aged or infirm are on the 
 wane, and in the very youthful business-man 
 are often, we might say generally, misdirected 
 for want of experience. After a man has 
 passed the prime of life our confidence decreases 
 in the ratio of his advancing years, and conse- 
 quent decline of vitality and active usefulness. 
 This, of course, only applies to cases where men 
 past their prime engage in new undertakings, or 
 who have struggled unsuccessfully up to late 
 in life without gaining a firm footing. The lat- 
 ter form quite a numerous class. 
 
 For an aged man to engage actively in busi- 
 ness for a livelihood is to us an admission, un- 
 consciously, perhaps, that thus far his mercan- 
 tile career has been a failure; and taking the 
 past and best part of his life as a criterion, 
 what can be the reasonable expectation for 
 future success when pitted against younger 
 men, keen competitors, and newer methods? 
 And, on this question of different methods, it is 
 a fact that, though the ways of doing things 
 
AGE. 87 
 
 change, men do not change with the changing 
 methods. Men accustomed to the ways and 
 methods of doing business fifty years ago 
 could not become reconciled to our way. There 
 is a limit to man's tenure of progressiveness, 
 and that once passed, he either becomes passive 
 or obstructive. But, fortunately for the world, 
 the wane of energy and combativeness resulting 
 from age induces passiveness, and permits 
 younger men and the genius of succeeding gen- 
 erations to build on the foundations laid by our 
 seniors. All things in this world are wisely 
 arranged to the end that man's progressiveness 
 and development may not be retarded. 
 
 The argument that the credit-man would nat- 
 urally use with reference to a would-be debtor, 
 past the prime of life, would be based on the 
 possibility of failure and the chances of secur- 
 ing his account after that. This case would 
 present little encouragement. The chances of 
 recovery, and subsequent ability to pay, can 
 hardly be considered. With a young or mid die- 
 aged man, however, we feel that his tenure of 
 life is long enough, so that a judgment may 
 eventually be good ; or at any rate, we may choose 
 to compromise and let him continue, and thus 
 recover our loss indirectly through, his future 
 patronage. In the latter case we feel justified 
 in speculating on the possibilities of the future, 
 which we are denied in the former. 
 
 Extreme youth also needs consideration, and 
 
88 WHOM TO TRUST. 
 
 makes our chances equally precarious, though 
 for different reasons. A very young man, if he 
 fails, seldom sticks to the ship. He either feels 
 that he has had quite enough experience in the 
 line he was engaged in, or knows just enough 
 to know that he has mistaken his calling, and 
 in either case he generally seeks employment 
 for which he thinks he is better adapted. Gen- 
 erally, he is lost sight of by his old creditors and 
 those interested in his 'first business venture, 
 and by the time he gets ready to embark in 
 business again, old claims against him are for- 
 gotten or outlawed. 
 
 The experience of all business-men is corrob- 
 orative of these statements concerning the ex- 
 tremes of youth and age, and the credit-man 
 should take full cognizance of them. 
 
CAPITAL. 89 
 
 CAPITAL. 
 
 We have thus far dwelt on the importance of 
 things which in themselves would not pay 
 bills. We can not take five dollars' worth of 
 experience or of ability and use it as collateral, 
 or as an equivalent to money value. We can, 
 however, use our experience and ability in such 
 manner as will produce the five dollars, and 
 with the proceeds pay the debt. 
 
 The man who loans you his property that is 
 to say, trusts you with his goods does so with 
 the belief that their value will be augmented 
 by the aid of your experience, ability, and 
 labor. Absolute confidence in your integrity 
 are the conditions of such a credit, but, in the 
 generality of cases, the creditor would also re- 
 quire, for his safety, a proportion of capital, to 
 be furnished by you, and the larger that pro- 
 portion of capital is to the credit asked, the 
 better it is for both debtor and creditor. 
 
 If all men paid spot-cash for all they bought, 
 there would be no need of questioning their 
 ability, honesty, or anything else. Trade dis- 
 tinguishes between neither race, color, nor 
 religion. 
 
 The amount of capital required in any given 
 case to insure safety and success, is an uncer- 
 tain quantity, ranging from to 100. Some 
 men have the faculty of making money, or rather 
 
90 WHOM TO TRUST. 
 
 of accumulating it, under the most unfavorable 
 circumstances, while others, even more favora- 
 bly, situated, can never make both ends meet. 
 
 In the customer, therefore, asking credit, we 
 have to consider all the elements that go to 
 make up a good business-man, and let the cap- 
 ital be the last consideration instead of the first; 
 though it would seem that so important a factor 
 as capital, should be the primary consideration. 
 As we find business conducted, it must stand as 
 an admitted fact, that few houses wholesale, 
 retail, or manufacturing restrict their business 
 to a basis of their cash capital. We may safely 
 calculate that nine out of ten could not do suf- 
 ficient business to make it profitable were they 
 limited to this in their transactions. What 
 they use in lieu of capital, is confidence, and 
 as long as they succeed in holding this, they 
 can continue and prosper. The point desired 
 to be made, is, that the capital ordinarily con- 
 trolled by a dealer is not sufficient without he 
 also has the confidence of the community. 
 Therefore, when he suffers this to be lost by any 
 unfortunate or questionable maneuver, his re- 
 sources are crippled, and his chances must there- 
 after be ranked doubtful. Capital and confi- 
 dence are deserving of the motto: " United we 
 stand, divided we fail." 
 
 Of capital itself, one of the most important 
 things to know, is how its owner came into pos- 
 session of it. 
 
CAPITAL. 91 
 
 (1) If, as a clerk, he lias been gaining 
 experience and education, and by dint of econ- 
 omy and frugal habits lias accumulated a capi- 
 tal with which he proposes to do business on 
 his own account, every dollar of that man's 
 capital has an enhanced value. In the first 
 place, he has shown ability to earn, and frugal- 
 ity to save, and having both earned and saved, 
 he knows the value of money as no man can 
 who has done neither. This man may be 
 regarded as good for any reasonable business 
 wants, and is entitled to our confidence. 
 
 (2) If the money was inherited by a young 
 man, or he in any way came into possession of it 
 without effort on his own part, and he uses it to 
 engage in business, it will then depend entirely 
 on how much natural ability and experience he 
 combines with his capital. Without an estab- 
 lished reputation as to his business qualifica- 
 tions, his capital would be all there is to base 
 credit on; hence, we could only trust him with 
 safety to the extent of his bank account. 
 Acquiring the needful experience and education 
 should always precede the employment of cap- 
 ital, but where the education and experience 
 are undertaken to be gained concurrently with 
 the use of capital, there is always danger that 
 the latter will be lost before the former is 
 gained. 
 
 (3) Cases that frequently come up are, 
 where a young man without experience, and 
 
92 WHOM TO TRUST. 
 
 with, next to no ability, usually, is started by 
 some well-to-do relative, father, mother, uncle, 
 or aunt. There is said to be no end of money 
 behind the young man, but, as experience 
 proves, the end of the money is seldom very long 
 in being reached. This class is not very difficult 
 to handle for the credit -man. It is generally 
 only a question of time when the aforesaid rela- 
 tives become solicitous about the business and 
 its success, and they must be secured, and it is 
 usually understood in the beginning that they 
 shall not lose by the venture, no matter who 
 else loses. Of course, the general creditor 
 u gets left." Experience teaches that credit 
 must here be confined within very narrow 
 limits. 
 
 (4) To engage in mercantile pursuits, men do 
 not have to go through a preparatory routine of 
 study or of apprenticeship, like the professional 
 man or the man with a trade. A man can not 
 be a doctor to-day and a lawyer to-morrow, or 
 a shoemaker one day and a tailor the next; but 
 either of them can turn merchant at any time. 
 Men leave professions, trades, farms, etc. , every 
 day and enter into business regardless of pre- 
 vious training, or go from one kind of business 
 to another, as if to be a merchant was an in- 
 born attribute of every man. 
 
 To formulate a rule by which to pass judg- 
 ment on this heterogeneous tribe, or rather this 
 " job lot," would be impossible. Applications 
 
CAPITAL. 93 
 
 for credit in these cases should be governed by 
 the record of previous business connections and 
 conduct, and that these are obtained is most 
 essential. This will furnish valuable data for 
 the credit-man, and may or may not, in his 
 opinion, entitle the applicant to credit. But in 
 the absence of any such data, the applicant's 
 claim to credit can only be considered on the 
 basis of his cash capital, and the future must 
 establish his claim to increased confidence. 
 
 The further consideration of capital will be 
 taken up again under the head of "Limit of 
 Credit." 
 
94 WHOM TO TRUST. 
 
 ASSETS: STOCK AND PERSONAL 
 PROPERTY. 
 
 We have reference here, of course, to that 
 portion of the assets of an insolvent concern, 
 which consists of merchantable wares or goods. 
 The term merchandise is understood to mean 
 articles of commerce in general demand, or 
 wares that have ready sale. When we have to 
 do, therefore, with merchandise assets, to be 
 closed out and converted into cash, we may 
 generally and reasonably expect to realize some- 
 where near the original cost price, provided 
 that the goods were bought judiciously, and 
 provided a market exists where disposition of 
 them must be made. Ordinarily this class of 
 assets is the most available to the creditor, and 
 brings more nearly face value than any other, 
 though even here the shrinkage is always con- 
 siderable, not, however, from lack of represent- 
 ative market value, but for reasons outside. 
 
 An assignee's sale, according to the manner 
 in which such sales are usually made and 
 allowed to drag, always involves large expense 
 for clerk hire, rent, and incidental items, 
 besides legal services, etc. If closed out by 
 piece-meal the expenses will be out of all pro- 
 portion to the receipts, and the net proceeds 
 will be equally impaired. If sold in a lump for 
 
ASSETS: STOCK AND PERSONAL PROPERTY. 95 
 
 cash, the buyer usually names his own terms, 
 and in both instances the creditor fares about 
 alike, only that the latter method is the best, 
 because it is the quickest, by avoiding contin- 
 gencies in allowing returns to be made to those 
 interested. 
 
 From this it will be seen that in case of 
 liquidation by assignee's sale, even the most 
 available portion of a bankrupt's assets will 
 undergo considerable shrinkage before it is 
 converted into cash and ready to divide, and 
 that 35 per cent, loss on the appraised market 
 value (leaving the creditors 65 per cent. ) is only 
 a fair average discount. 
 
 In calculating, then, the value of a dealer's 
 stock in trade as part representative of his capi- 
 tal, we are not warranted in estimating it at over 
 65 per cent, on the purported inventory value, 
 when a credit is in contemplation. In few 
 cases will this figure be exceeded, and in many 
 cases it will not be reached. In making cred- 
 its, the possibility of a failure should always be 
 borne in mind, and our estimates of property, 
 to be safe, must be based on that contingency. 
 
 In respect to manufacturing business, we 
 must allow ourselves even greater latitude for 
 shrinkage of assets. A large portion of the 
 assets will necessarily be represented by stock 
 in various stages of completion at all times, and 
 which, consequently have no market value. In 
 the event of failure, this class of assets could 
 
96 WHOM TO TRUST. 
 
 only be converted at great sacrifice of material 
 and labor expended thereon, and they possess 
 really less commercial value than the raw 
 material out of which they are made. We can 
 give them only a nominal value. 
 
 Next comes the stock of manufactured goods. 
 The ready conversion of these into cash will 
 depend on the nature of the goods. What they 
 may bring in the open market and at forced 
 sale, is governed by circumstances. If the prod- 
 uct happens to be of a seasonable kind, then 
 it must be sold in its season to realize the most, 
 and if sale is forced out of season, the sacrifice 
 will be proportionately large. The raw ma- 
 terial, on the other hand, represents and com- 
 mands more nearly market value, and can in 
 nearly all cases be readily disposed of, even 
 more so than the manufactured product itself. 
 
 But the assets of a manufacturing concern 
 that represent the least value at forced sale are 
 those consisting of the plant, so-called; i. e., the 
 machinery, tools, fixtures, patterns, etc. This 
 class of property, if sold at any time, will bring 
 only second-hand prices, and if closed out by 
 an assignee, only a small percentage of the 
 original cost is realized. The creditors have 
 little to hope for from this source in the way of 
 addition to their dividend. What represents 
 thousands of dollars, will scarcely realize as 
 many hundreds. For this reason manufactur- 
 ing concerns generally effect a settlement on 
 
ASSETS: STOCK AND PERSONAL PROPERTY. 97 
 
 their own terms. The creditors do not want to 
 carry on the business; it can not be sold at 
 anything near its actual value, and so the 
 owners are the most desirable parties to keep 
 and continue to operate it on whatever reason- 
 able terms they choose to name. They can, in 
 fact, afford to pay more for it than outside 
 parties. 
 
 The assets of a merchant's stock in trade 
 being worth about 65 per cent., that of a manu- 
 facturer can not be estimated at more than 35 
 per cent., if closed out for the benefit of the 
 creditors; and in making credits we must dis- 
 criminate, therefore, between the different 
 branches of business, and duly consider the 
 nature of the assets. 
 
98 WHOM TO TRUST. 
 
 ASSETS: ACCOUNTS AND 'BILLS 
 RECEIVABLE. 
 
 It is anything but amusing to a creditor to 
 read an assignee's report of the condition of a 
 defunct concern, when that official states with 
 cold-blooded disinterestedness, that of the 
 $5,000 due the insolvent in accounts and notes, 
 only about $1,000 is collectible. What a picnic 
 the dead-beats in the bankrupt' s locality must 
 have had, and what a generous, accommodat- 
 ing merchant he must have been! Generous 
 man, surely to all but himself and those who 
 undertook to help him. And such instances 
 are. not rare, by any means. Far worse come 
 under our notice repeatedly, and we resign our- 
 selves with stolid indifference as to the out- 
 come. 
 
 Ordinarily, however, this class of assets will 
 bring as much as merchandise, viz., about 65 
 per cent. net. Accounts and notes do not cost 
 as much to collect, as goods do to convert into 
 cash. There is neither rent, clerk-hire, nor any 
 of the other expenses incident to carrying and 
 disposing of a stock of goods and personal 
 property, and if the insolvent has used moder- 
 ately good judgment, the shrinkage on their 
 face value may be calculated not to exceed 35 
 per cent. In the hands of the owner they 
 would be worth considerably more, for the 
 
ASSETS: ACCOUNTS AND BILLS RECEIVABLE. 99 
 
 reason that debtors of a bankrupt concern are 
 never eager to pay, and in fact, will use every 
 means to evade even just debts. The assignee's 
 or receiver's task is, therefore, made difficult 
 and expensive, and a large portion of the 
 accounts is usually absorbed in legal fees and 
 costs. 
 
 It is safe to assume that men always engage 
 in business where their capital can find employ- 
 ment to its full extent. A man with $1,000 
 capital generally undertakes to do a business 
 where twice that sum would be needed, for 
 comfort and ease. He calculates on the time 
 he has to give; that is, bases his calculations 
 on the terms nominally established in his trade. 
 If the calculation is made to hold good, and he 
 is firmly resolved to do his credit business 
 without swerving from his purpose, he is all 
 right. But very few have the nerve to do this, 
 and fewer still appreciate the importance of 
 limiting their credit-giving. 
 
 The ignorance on this question is often seen in 
 merchants, who seem to think that if they pay 
 interest on past-due accounts, that they are 
 fulfilling all the obligations as between debtor 
 and creditor. No merchant can afford to loan 
 any portion of his working capital for simple 
 interest. In order to make it pay, he must turn 
 his capital many times in a year. To loan 
 it out at 6 per cent, means simply getting 
 6 per cent, per annum. Let any merchant 
 
100 WHOM TO TRUST. 
 
 undertake to pay all the expenses of doing 
 business for a return of only 6 per cent, on 
 his capital once a year, and he will very soon 
 have no capital. And what holds good when 
 taken on a large scale, holds equally good on a 
 smaller. 
 
 As to the importance of strict adherence to 
 your terms, and insisting that they shall be 
 lived up to on the part of your customers, the 
 following simple illustration will suffice: If a 
 merchant has a capital which enables him to 
 give sixty days' time and still discount his 
 bills, does it cut any figure or interfere with 
 his discounting his bills, should he be com- 
 pelled to give ninety days? Most certainly 
 it would. He would have tied up additional 
 capital, equal to thirty days' sales, which 
 would not be available to him in time to dis- 
 count his own bills any longer. The longer the 
 time that is given or allowed to be taken, the 
 greater will be the proportion of our capital 
 made unavailable. Large and first-class houses 
 understand this, and we have always found 
 them demanding punctuality in the observance 
 of terms. A firm doing a business of $1,000,000 
 per month, for instance, if it gives sixty days' 
 time, means that $2,000,000 are owing it, and 
 ninety days' would mean $3,000,000 outstand- 
 ing. Of course, more or less of our sales are 
 discounted, but this we anticipate in our cal- 
 culations here as well as in practice. 
 
ASSETS: ACCOUNTS AND BILLS RECEIVABLE. 101 
 
 Whether we undertake to discount our bills 
 for cash or buy on time, it will be seen that our 
 safety, comfort, and reputation for promptness, 
 depend very much on the relative proportions 
 of accounts and bills receivable to our capital. 
 A man with $10 doing a C. 0. D. business, can 
 turn his capital every day in the year if buyers 
 can be found. Making 10 per cent, profit on 
 each turn, that $10 would earn over $300 per 
 year, supposing that the daily profit was put 
 aside. That same man, if he sold his $10 
 worth of goods on six months' time, could only 
 turn his capital twice a year, and he would 
 make only twice 10 per cent, on $10. 
 
 This treatise will not permit of additional 
 argument on this subject, but we can not allow 
 the opportunity to pass without calling special 
 attention to its importance as a prominent 
 factor in the science of credits. 
 
 Giving indefinite time and carrying your cus- 
 tomers as long as they desire, at interest, is 
 being done successfully and profitably by 
 merchants sometimes, and they are shrewd 
 merchants. But they are men who have suffi- 
 cient capital to carry on both mercantile and 
 banking business, and can conduct the one con- 
 jointly with, but independently of, the other. 
 The merchant turns banker every three or six 
 months, and gets his accounts secured and* 
 drawing good interest. He could use his bank- 
 ing or surplus capital in no more profitable or 
 
102 WHOM TO TRUST. 
 
 safer way. He furthermore ties these men to 
 Mm, and as long as they owe him and he 
 wants their patronage, he need not fear com- 
 petition. 
 
 But this class of merchants are the exception. 
 The great mass we have do with lack the capital, 
 and some also the brains, to do one business 
 comfortably and as it should be done. 
 
REAL ESTATE EXEMPTIONS. 103 
 
 REAL ESTATE EXEMPTIONS. 
 
 Real estate and permanent improvements 
 should offer the very best basis for credit, and 
 they do, when clear and unincumbered. But 
 very few merchants, comparatively, hold prop- 
 erty in fee simple. There is nearly always an 
 incumbrance on it, large or small, but always 
 large enough to make the property unavailable 
 for the general creditor in case of insolvency. 
 Even when the property is scheduled as clear 
 at a given time, the owner usually raises money 
 on it before an assignment is made, sometimes 
 with the expectation of tiding over, and some- 
 times to save it from the wreck; but as cred- 
 itors are not inclined to advance more money 
 in order to control the debtor's equity, the 
 result is that whatever sum that equity may 
 represent, it is seldom convertible or available 
 as an asset for the benefit of the creditors. 
 
 There is this good feature with real estate, 
 however, as part of the representative capital: 
 It can not be transferred without giving imme- 
 diate notice to the public. The records, as are 
 those of the chattel mortgage, are closely 
 watched by the mercantile agency reporters for 
 the benefit of creditors, and whether conveyed 
 for legitimate or fraudulent purposes, the 
 community is, in either case, advised of the 
 fact. 
 
104 WHOM TO TEUST. 
 
 A homestead is exempt. The Homestead law 
 in various States places different limits on the 
 value that may be claimed as exempt, but there 
 is a wide latitude allowed usually in the 
 appraisal, and practically the creditor' s equity 
 in it is never tangible. The value, whatever it 
 may be, can not, therefore, be considered as 
 part of the working and available capital of the 
 business. It adds to a man's credit in this, 
 that it makes him more of a fixture, and enables 
 him to live more economically to the extent 
 that he saves paying rent. 
 
 In new States and Territories the laws are 
 particularly favorable to the people in them, 
 and the exemptions warrantable under the 
 statutes give the debtor class all the advantage. 
 For the creditor there exists no legal jurisdic- 
 tion, and practically he is more dependent on 
 the honor and honesty of his customers than 
 he is on the exercise of any legal rights that he 
 ought justly be allowed to claim; but notwith- 
 standing this fact, and in spite of the insecurity, 
 so far as a property basis is concerned, credit 
 to those localities does not seem to suffer 
 material restriction. 
 
 The credit-man is sometimes misled by the 
 scheduling, on the part of his customer, of 
 store-building as part of his capital, when in 
 fact it is used conjointly for business and 
 dwelling purposes, which brings it under the 
 head of exemptions and the Homestead law. 
 
KEAL ESTATE EXEMPTIONS. 105 
 
 These points are important, and a thorough 
 knowledge of the nature of the property, either 
 real or personal, is indispensable in order to 
 reasonably insure our safety as creditors. 
 
 The business code of fifty years ago required 
 of a debtor, who made any pretense to honesty 
 and honorable conduct, that he turn over every 
 dollar's worth of property, without reference 
 to legal exemptions whatever, in liquidation 
 of his debts. A man was considered dishonest 
 who kept back anything whatsoever; but this 
 code has given place to a more modern and 
 extenuating one. The unfortunate' s family is 
 considered to be entitled to a home, if one is 
 owned, and the commercial ethics of the pres- 
 ent day sanction its exemption as a debt-paying 
 factor. The family, in particular, is a gainer 
 by the operation of these ethics, and society at 
 large is relieved of a possible burden. From 
 the standpoint of commercial ethics of the 
 present time, the bankrupt is accorded not only 
 a legal, but a moral, right to provide a home 
 for his wife and children and keep them in the 
 enjoyment of it, and the sentiment, while it 
 may be abused frequently, is both charitable 
 and humane, and in harmony and accord with 
 our sense of national and individual independ- 
 ence. 
 
106 WHOM TO TKUST. 
 
 LIABILITIES. 
 
 ACCOUNTS AND BILLS PAYABLE IN PKOPOK- 
 TION TO CAPITAL. 
 
 Things must always bear relative propor- 
 tions to each other to insure safety of the 
 whole. This holds as good in carrying on and 
 building up a business, as in the construction 
 of a house. In the chapter on the " Limit of 
 Credit," on page 171, we have discussed the 
 question of how much a business can safely 
 owe in proportion to its assets, from the stand- 
 point of the creditor. To suppose a case of a 
 merchant whose liabilities are equal to his 
 assets, is practically admitting a clear case of 
 insolvency into our argument, and a case with- 
 out capital. This is a hopeless case, but such 
 cases are not nearly as rare as they might be, 
 and sometimes they even enjoy good credit and 
 unbounded confidence. But there is always an 
 end. The staving-off process works for a 
 while, and accommodating creditors remain 
 patient beyond the limits of prudence. At 
 last, when endurance has ceased to be a virtue, 
 and the debt must be paid, and neither exten- 
 sion of time nor further credit for goods can be 
 obtained, the culminating point is reached, and 
 we are glad to take, in a case of this kind, 50 
 cents on the dollar, and call ourselves lucky at 
 that. In fact, 50 cents is quite a princely offer. 
 
LIABILITIES. 107 
 
 Liabilities have the faculty of growing day 
 and night without our aid, while the assets of 
 a debtor who is hard up and behind, acquire 
 just the reverse attribute. Instead of growing 
 in value, they diminish from day to day. The 
 reason of this is obvious. 
 
 The man who keeps his liabilities within 
 proper limits; i. e., within the limits of abso- 
 lute safety to his own business, enjoys advan- 
 tages, by reason of his good standing, which he 
 can always turn to profit. To the man, on the 
 other hand, who is too much in debt already, 
 no one has any bargains to offer. He pays 
 outside prices for everything, and his com- 
 petitors get the bargains. The distance 
 between him and his more fortunate neighbors 
 is constantly widened, and their relative condi- 
 tions may be seen in the prosperity of the one, 
 and the growing distress of the other. 
 
 The man whose liabilities are out of propor- 
 tion to his capital and business, and who is 
 therefore constantly harassed to meet them, 
 also suffers injury from more remote causes 
 than from loss of confidence and credit. The 
 constant worry attendant upon this condition, 
 the efforts made to turn a corner here and 
 there, the figuring and conniving required to 
 pull through, all these things engage his mind 
 and time, and withdraw his labor from its 
 legitimate functions. A certain portion of 
 services that a business-man has to perform 
 
108 WHOM TO TEUST. 
 
 are an expense or a loss; i. e., they are not pro- 
 ductive. The salesman renders productive 
 service, while that of the man employed to 
 collect the bills is not productive. This 
 belongs to the item of expense. If the bill 
 had been paid in cash when the sale was 
 made, no collector would have been neces- 
 sary. Every time you send a man out to 
 collect, it costs something, and whatever time 
 is devoted, in a business way, to yesterday's 
 transactions, is lost. If you made $1,000 last 
 week on the sale of goods, it will never be 
 more, and you can never make it more by any 
 method of figuring; the more time you spend, 
 and the more assistance you require to get pos- 
 session of it, the less you will eventually 
 realize. Now, the man who is in financial dis- 
 tress, per force, wastes a large portion of his 
 time in unproductive efforts, although they 
 may enable him to turn one more corner. But 
 in no sense can it be contended that he has made 
 or earned anything or added to his capital. 
 
 It is surprising with what rare persistence 
 men hold on long after their condition is past 
 hope. Micawber like, they are always waiting 
 for something to turn up to help them out of 
 their difficulties. When the collapse finally 
 comes, as come it must, all are agreed that it 
 would have been much better if it had come 
 sooner. The creditor has lost money by the 
 delay, and the debtor has lost time. 
 
LIABILITIES. 109 
 
 No definite rule can be laid down to govern 
 the proper proportion of liabilities to assets 
 and capital. We might approximate to this in 
 some one line of business, but we are here con- 
 cerned with business in general, including all 
 branches. All we can say is this: Keep the 
 mastership of your business in your own hands, 
 and this you can do by keeping your indebted- 
 ness and your engagements within the limits 
 of your positive ability to meet. The man who 
 does this, merits and is entitled to our confi- 
 dence; the man who does not, justly lays him- 
 self open to suspicion of jeopardizing, not alone 
 his own capital, but ours as well. 
 
110 WHOM TO TRUST. 
 
 VOLUME OF BUSINESS IN PROPOR- 
 TION TO CAPITAL. 
 
 This question we can discuss only in a gen- 
 eral way, and the considerations will be such as 
 past experience and observation lead us to take 
 cognizance of. No fault can be found with us, 
 as a mercantile community, on the score of not 
 doing business enough on the amount of our 
 capital. The fault is rather that we attempt 
 too much. 
 
 The function of money is to facilitate 
 exchanges of our produce, and that a dollar in 
 the hands of our business people is made to 
 perform that function to its utmost capacity, 
 we have no reason to question. Rust or moth 
 does not get into our dollars or our capital, for 
 it does not remain long enough in one place to 
 become settled, and this is all very well as long 
 as the dollar is kept moving and no unusual 
 conditions arise. In that case, the person pay- 
 ing it out, and the party receiving it, each, in 
 turn, is benefited. If nothing ever occurred 
 to check the circulation of money at some 
 given point, then we might rightfully claim 
 that that method subserved the highest pur- 
 pose which gives it the largest use in effecting 
 exchanges, either for past or present trans- 
 actions. Exchanges are made, i. e., goods are 
 bought and sold on the basis that there is to be 
 
BUSINESS IN PROPORTION TO CAPITAL. Ill 
 
 profit in the operations; therefore, the more 
 transactions or trades that a dollar enables ns to 
 make, the more productive it becomes, and the 
 greater the number of people that are bene- 
 fited. But we find by experience, that when 
 money reaches the point where the maximum 
 number of operations are effected with it, and 
 when exchanges are made with the greatest 
 facility, and apparently with the least friction, 
 which condition is indicative of universal and 
 unlimited confidence in each other's ability to 
 perform them, invariably a halt may be looked 
 for which will shake our commercial structure 
 and all our calculations to its very center. 
 This is the panic. Every man who has passed 
 through one or more commercial crises in this 
 or other countries, if he has been at all observ- 
 ant, has noticed that financial distress to a 
 community is always foreshadowed by excess- 
 ive confidence, and an abnormal tendency to 
 speculation. The limit of the purchasing 
 power of a dollar is exceeded and ignored, and 
 ''promises to pay" take its place largely; and 
 along the whole line each depends on the other 
 for the fulfillment of promises, without any 
 really tangible basis. They are notes without 
 security, and the maker pays them if lie can. 
 
 In the nature of things, in the buoyancy of 
 our spirits and the sanguineness of our make-up 
 as a business people, even the more conserva- 
 tive element loses its equilibrium during 
 
WHOM TO TRUST. 
 
 periods of apparently universal prosperity and 
 confidence, to wake up at last and see the bub- 
 ble burst, as burst it must, from its own over- 
 inflation. The greed for gain is too strong 
 to be resisted, and even our personal experi- 
 ences do not seem to profit us. Inflexible laws 
 govern our commercial transactions, as all else, 
 and we should not be unmindful of indications 
 or ignore the timely warnings that are always 
 given and followed by the wary. 
 
 Whether a policy of safety and conservatism 
 is the most profitable in the long run or not, is 
 demonstrable by facts, and we can find our 
 proofs by pointing to houses which have pur- 
 sued this policy, and to the wrecks that are 
 strewn all along the shore by following the 
 opposite course. This is a practical test, and 
 we need no better. 
 
 Panics do not come and go with the regu- 
 larity of the moon's phases; but they come, 
 nevertheless, in cycles, and there is a perio- 
 dicity about them which the world is prone to 
 overlook. The same, or similar, causes that led 
 to the panic of 1857 and subsequent panics, 
 will cause others, and the great majority of us 
 will be caught in them, as if the records of pre- 
 ceding disasters had been completely destroyed. 
 
 The deductions we would make are based on 
 the experience behind us and the probabilities 
 before us. The former enables us, as wise busi- 
 ness-men, to establish a scientific basis by 
 
BUSINESS IN PROPORTION TO CAPITAL. 113 
 
 which to govern our actions with reference to 
 the probabilities in the future. Conditions, 
 relations, and confidences must be looked at in 
 the light of cause and effect, and the good busi- 
 ness-man anticipates the effect long before it is 
 produced. There is science in business, not- 
 withstanding that this fact has not dawned 
 upon the multitude. A hap-hazard method is 
 always conditioned upon the whims of chance, 
 and success is not its legitimate offspring. 
 
 What amount of business a man can safely 
 do with a given capital would be as difficult to 
 determine, in an abstract way, as to determine 
 the chances of success of a new enterprise with- 
 out a knowledge of the necessary facts and 
 surrounding conditions. We know, as experi- 
 enced credit-men, that when a concern does so 
 much business that it can not pay its bills 
 promptly, it is not safe to extend credit to it. 
 Over-buying, over-trading, and not the least, 
 over-trusting, are the greatest evils we have to 
 contend with. The only rule that can be laid 
 down to guide us safely, is to do all the busi- 
 ness we can, but stop short of the point where 
 the fulfillment of our promises is dependent 
 upon the strict observance of the promises of 
 others to us. 
 
 In other words, we must keep ourselves in 
 condition to meet our obligations, whether 
 others meet theirs or not. A merchant is not 
 compelled, by this rule, to have the cash in 
 
 8 
 
114 WHOM TO TRUST. 
 
 bank at all times for all Ms debts. That is 
 not necessary. A certain percentage of ac- 
 counts and assets can always be relied on and 
 realized from. The liabilities should be kept 
 within the limit of this percentage, leaving the 
 balance as a surplus, or as the representative 
 of capital invested. 
 
 
ANTECEDENTS. 115 
 
 ANTECEDENTS. 
 
 A man's antecedents are found in his written 
 and unwritten biography. Like a barometer, 
 they unerringly indicate and give us an idea of 
 his character, ability, honesty; his good and 
 bad traits, and summing up, we are in posses- 
 sion of valuable data for judging his future, and 
 our chances, if thrown with him. 
 
 Because a man has once failed in business is 
 nothing in itself, in this country, at least. A 
 man may come out of a wreck an honest, capa- 
 ble, and very often a better, man, by reason of 
 his experience. Force of circumstances, joined 
 to a little inexperience and imprudence, may 
 have resulted in his bankruptcy; but in a case 
 of this kind, where the integrity of the party 
 has been kept inviolate, the business commun- 
 ity is ever ready to overlook past mistakes, 
 and bestow upon him its confidence in the 
 future. But the case must be a clear one, and 
 his integrity must stand out uncompromisingly; 
 it must be "net, and no discount." Where 
 such are the facts, reasonable hope of eventual 
 recovery may be rightfully entertained, and 
 our support be extended. 
 
 On the other hand, where the failure is the 
 result of gross violation of business principles 
 and honesty, as is often the case, the bankrupt 
 should forever forfeit all claims on the confi- 
 
116 WHOM TO TRUST. 
 
 dence of the community, and were this more 
 universally adhered to, a wholesome influence 
 would be exerted on all classes. 
 
 Inexperience being largely the cause of many 
 men's downfall in early life, there being no 
 other blemish on their characters, the business 
 world is always ready to forgive and help them 
 again. Our charitableness toward the honest 
 unfortunate is a grand feature in our modern 
 mercantile life, and although it is actuated by 
 policy and self-interest, that need not detract 
 from its merits. A broad Christian sentiment 
 underlies it withal. 
 
 There is a tendency to make light of failures 
 by both the creditor and the bankrupt. The 
 bankrupt thinks he will do better in the future, 
 and, profiting by experience, will soon be 
 enabled to get on his feet again better than 
 ever. But he counts without his host. Except- 
 ing the out-and-out thief, men are not benefited 
 by their own failures. Although the debtor 
 finds, usually, no difficulty in compromising 
 with his creditors on a reasonable basis, such as 
 the assets warrant, thus enabling him to con- 
 tinue his business; yet, of the majority it may 
 be said, that their entire future is blighted, and 
 that they never recover. 
 
 To a few, failure gives additional zest, and it 
 would seem that it was the key to subsequent 
 brilliant success, but we think the failure 
 might have been omitted without peril to their 
 
ANTECEDENTS. 117 
 
 final outcome. Failure always means a set- 
 back and loss of time, also loss of confidence, 
 and the latter can only be regained in the 
 course of time. Going along safely and 
 cautiously, though somewhat slower, arid 
 avoiding failure, is assuredly the shortest road, 
 after all, to success, and the attainment of our 
 desires. 
 
 The time allotted to a man in business for 
 permanently establishing himself, and gaining 
 an undisputed foothold, is limited to but few 
 years thirty, at most, and this does not admit 
 of many or any serious drawbacks. The time 
 is too short, and most men find it so. 
 
 We like to see men ambitious and energetic. 
 These are characteristics of our people. We 
 make haste to get rich; but whether our undue 
 haste does not lay waste a large portion of our 
 efforts, and result in irretrievable loss of time, 
 is a matter for serious consideration. Less 
 haste to accomplish our purposes as business - 
 men, more conservatism and caution, would 
 certainly advance the interest of trade and 
 traders at large. 
 
 The applicant for credit favors, if he has ever 
 failed, or whatever his past life may have been, 
 has left a biography of himself that must be 
 carefully read. All the facts will be enumer- 
 ated therein, and will indicate to the credit-man 
 the course he should pursue. 
 
118 WHOM TO TRUST. 
 
 COMPETITION. 
 
 With, the growth of population in every di- 
 rection, east, west, north, and south, opportuni- 
 ties are opened up for business ventures, and as 
 fast as a town or village is located, two stores 
 are ready to start where only one is really 
 needed. We are accumulating capital very 
 fast, and there is no nook or corner anywhere, 
 in the remotest part of this continent, that does 
 not exert a magnetic influence on capital the 
 moment a chance for its employment is offered. 
 There is no enterprise so large that it can not 
 be capitalized, or so small that it does not 
 attract men to it with the hope of making a 
 living. 
 
 The man with energy, experience, and a little 
 capital, who drives his stakes first in any new 
 town the so-called pioneer has considerable 
 advantage, and his prestige makes it more diffi- 
 cult for others to get a foothold. 
 
 Every new town is always going to be the 
 town, and in the expectation that it will out- 
 strip every other, more stores are generally 
 started than can find profitable remuneration. 
 Of course, the law of supply and demand regu- 
 lates this in due course of time, and only the 
 fittest survive. 
 
 Competition is necessary, not for the seller, 
 but for the buyers, and as the buyers constitute 
 
COMPETITION. 119 
 
 by far the larger class, we must look for the 
 greatest good to the greatest number. It pre- 
 vents robbery, and . every merchant would be a 
 licensed robber of the people if he could, and if 
 competition did not prevent him. 
 
 In regard to selling goods and what profit a 
 dealer should be allowed to make, or be entitled 
 to, there is no established rule or uniformity of 
 practice. Every man is a law unto himself, 
 and is governed solely by circumstances. His 
 aim is to make all he can, and as quickly as he 
 can, legitimately, of course. But this only 
 means that he will sell at a 1 per cent, profit if he 
 is forced to. Left to his own sense of right and 
 justice, 100 or 300 percent, would only be a fair 
 remuneration for his time, employment of his 
 capital, and sacrifice he is making for the ac- 
 commodation of the public. What gas and 
 sugar trusts and other monopolies aim to ac- 
 complish by their manipulations, is to remove 
 competition. This done, and they have it in 
 their power to exact any price and profit within 
 the ability of the people to pay. Every dealer, 
 retail or wholelsale, would constitute himself 
 into a perpetual trust, if he could, and he does 
 so when and wherever he has the field to himself. 
 
 Much can be said on the good and bad side 
 of competition; the preponderance of the argu- 
 ment, however, rests on the side of its good 
 offices in behalf of the many. But what con- 
 cerns us here, chiefly, is its effect on our cus- 
 
120 WHOM TO TEUST. 
 
 tomer, and how far his chance for success is 
 thereby lessened. As for improving his chances, 
 that could hardly ever be possible, though in 
 common parlance we say, competition is the life 
 of trade. While this is so, it does not mean 
 that competition enables you to charge more 
 profit. Quite the reverse. It makes you give 
 more goods and better service, and the public 
 at large is the gainer by the stimulus that com- 
 petition gives to trade, and the greater the com- 
 petition is the nearer to cost will you be obliged 
 to sell. The question, therefore, has much to 
 do with the man or firm we have trusted, or are 
 about to trust, with our goods. Without oppo- 
 sition, our debtor's chance of success could 
 hardly be questioned, and the creditor, other 
 things not being unfavorable, would be justified 
 in considering the risk a good one. On the 
 other hand, if in his locality the business is 
 overdone, and the custom is hardly sufficient to 
 warrant so many dealers, it then becomes a 
 question, with the creditor, of comparative 
 ability, financial and otherwise, of the appli- 
 cant for credit. 
 
 It will appear, then, that a man's surround- 
 ings, and their bearing on his prospects, must 
 be taken into consideration. For a new firm 
 to start into business in opposition to old, estab- 
 lished houses, is always, more or less, a hazard- 
 ous undertaking; but the risk is not confined 
 to the firm alone, since the creditors are 
 
COMPETITION. 121 
 
 always made participants in it, and this fact 
 must be borne in mind. It is not an easy mat- 
 ter to establish a paying business in the face of 
 old and well-known concerns; nor will the lat- 
 ter sit calmly by and let the new-comer get a 
 foothold. His success will depend on his finan- 
 cial and general ability, as compared with that 
 of his competitors. 
 
 We are made to feel reasonably secure, how- 
 ever, in a new firm that has bought out and 
 succeeds an old-established stand. We know, 
 in this case, that the trade is already built up, 
 and that under a fairly good administration it 
 will continue to run in the same groove. A new 
 firm has to create confidence first before a line of 
 customers can be depended on, but the success- 
 ors to an old house start in with a lucrative 
 patronage to begin with. They get the benefit 
 of years of advertising and of acquaintance; in 
 short, they start with a prestige that would 
 otherwise take years to acquire. 
 
 All these points are of vital importance to 
 him who is about to extend credit. The pro- 
 fessional manager of credits gives them careful 
 consideration. Every item of advantage and 
 disadvantage that the applicant for credit pre- 
 sents must be carefully weighed, and if the 
 balances do not show in his favor, it is not 
 alone your privilege but your duty, as a good 
 business-man, to decline the proffered favor. 
 
WHOM TO TRUST. 
 
 PUNCTUALITY. 
 
 Punctuality is the essence of good business 
 methods. It is the foundation wall on which 
 great structures are built. It is the highway 
 to success in life, whatever may be the occupa- 
 tion. Head over the lives of successful mer- 
 chants, and of men in every department, and 
 we shall find this trait invarfably possessed by 
 them and forcefully demonstrated. The man 
 of business owes it not alone to others that he 
 be punctual in his engagements and in the per- 
 formance of his duties, but also to himself; he 
 not alone puts others to inconvenience and loss 
 by his lack of promptness, but he impairs his 
 own chances of success. No great merchant, 
 and we might say, no truly great man, was ever 
 known to be without this quality of punctual- 
 ity in a marked degree, and who did not prac- 
 tice and value it as a cardinal virtue. 
 
 In the matter with which we have to do, viz. , 
 credits, it is an all-important factor, and proba- 
 bly there is no other that exerts so great an 
 influence on the affairs of commerce, in which 
 we are all, directly or indirectly, interested. 
 If every man doing business had in him the 
 elements of promptness, of punctual observ- 
 ance of his promises, whether it be to pay a 
 bill or fulfill a contract, much of our tribulation 
 and distress, and most of our failures, would be 
 
PUNCTUALITY. 
 
 avoided. The man who has an inherent sense 
 and desire to be prompt, or who has made 
 punctuality a maxim for himself in the conduct 
 of his affairs, will make a halt when he finds 
 that adherence to his principles is no longer 
 possible. He rightly and prudentially con- 
 cludes that the business had better be aban- 
 doned or reconstructed on a different basis. 
 A. T. Stewart adopted the C. O. D. plan in his 
 early career as a retail dry-goods merchant, as 
 a result of lack of punctuality on the part of 
 his customers. Having a note to pay one day, 
 he depended, as we all do, and as a legitimate 
 resource, on promises of those indebted to him. 
 But these promises were not kept, and Mr. 
 Stewart was obliged to sacrifice part of his stock 
 to realize money in time to meet his note. He 
 wisely concluded that where so much uncer- 
 tainty and unreliability existed, it was necessary 
 to adopt some other method of conducting his 
 business, to avoid periodical distress and he 
 did. Every good business-man looks upon 
 lack of punctuality in himself as synonymous 
 with loss of personal integrity, and this governs 
 equally in large and small matters. The man 
 who is remiss in the minor transactions is not 
 to be relied on in large ones, although policy 
 and self-interest may prompt him to the punc- 
 tual fulfillment of the latter. 
 
 The man who is not prompt can not be said 
 to be strictly honest. If you sell a man goods 
 
124 WHOM TO TRUST. 
 
 on sixty days' time, you calculate on receiving 
 payment at maturity of the account, and you 
 have a right to expect and demand it. His 
 failure to keep his promise is liable to cause 
 your failure to keep yonrs. Being " behind 
 time," is often as ruinous to the creditor as 
 being made the victim of bare-faced fraud. 
 
 We respect the man, and we have a high 
 appreciation of his business tact, who is always 
 prompt in his dealings and his payments with 
 us, and it is an appreciation which more 
 should strive to merit. But a large number 
 of people in business seem not to have any 
 conception of this great requisite. They were 
 born "behind time," presumably, and will 
 always be "behind time," even in making their 
 exit. 
 
 We all have on our books customers who 
 have always been ' ' slow pay, ' ' and who are not 
 likely to ever mend their ways. It is a chronic 
 disease with them, a congenital deformity, as 
 doctors would say, but in ordinary parlance, 
 " pure cussedness " is more to the point. The 
 community seems to know their failing, and 
 indulges them, very much to its own detriment 
 and that of good business rules. It is fully as 
 reprehensible to be lax in exacting promptitude 
 as it is to be lax in its practice yourself. The 
 large, representative houses have it in their 
 power to do much educational work and to 
 exert a potent influence on the business-men 
 
PUNCTUALITY. 125 
 
 of the country in the direction of instilling 
 good principles into their methods, by simply 
 demanding and insisting on punctual compli- 
 ance with terms and engagements. Some few 
 of our larger firms have done more in this way, 
 in educating the business public than have all 
 other influences combined, and they rightfully 
 pride themselves, and are entitled to credit, as 
 educators and public benefactors. Discipline 
 of this kind naturally results in mutual benefit, 
 and in the private as well as the public good. 
 
 In making credits, the applicant's reputation 
 for promptness should be carefully inquired 
 into. Considerable latitude is permissible and 
 is warrantable even by the most conservative 
 houses. All other conditions being favora- 
 ble, and we find the applicant is simply slow 
 because u he is built that way," we need not 
 refuse him. We can make him prompt with 
 us if we set out to do it, and do it we should, 
 by all means. 
 
 On the other hand, the applicant whose record 
 shows unsatisfactory payments, and who has 
 no established reputation either for ' ' chronic 
 slowness" or financial standing, must be closely 
 scrutinized, and we must take the benefit of 
 existing doubts ourselves. 
 
 In the case of customers already on our books, 
 this ma}^ be said: We take for granted that the 
 course of business is onward and upward not 
 backward. No man ever failed from the ordi- 
 
126 WHOM TO TRUST. 
 
 nary causes who did not give timely warning 
 by hoisting the signal of distress long before 
 the event. When a customer, therefore, who 
 has always been punctual in his engagements, 
 goes back on his good record, there is generally 
 cause for alarm, and a prompt investigation is in 
 order. 
 
PRODUCTIVE OR NON-PRODUCTIVE. 127 
 
 PRODUCTIVE OR NON-PRODUCTIVE. 
 
 By this is meant whether the principals of a 
 business are themselves workers, and are earn- 
 ing their daily wages. If the proprietor be a 
 hard-working man himself, and an equivalent 
 is rendered to the business in services for money 
 drawn for living expenses, the conditions may 
 be regarded as favorable in this case. But if 
 the reverse is true, and the proprietor figures 
 that the business owes him a living without any 
 equivalent being rendered by him, thus neces- 
 sitating the employment of help and the paying 
 of wages, then the conditions must be regarded 
 as unfavorable. Few concerns can thrive under 
 this latter method for reasons even outside of 
 the wages paid, which the proprietor ought to 
 earn himself. Take a small store, for instance, 
 carried on by man and wife assisting each 
 other, as we often find the case, and they uni- 
 formly succeed in their way. They both earn 
 wages, and their combined earnings are more 
 than their personal expenses. What would 
 otherwise be paid out in salaries, and be a drain 
 on the business, is made a source of accumula- 
 tion to their capital. Husband and wife who 
 thus work together, can safely be trusted, since 
 we may rely on economical management and 
 frugal habits. The ambition that prompts 
 them in uniting their industry, also gives 
 
128 WHOM TO TRUST. 
 
 assurance of their eagerness to save and accum- 
 ulate. 
 
 If a man has a trade at which he can work in 
 conjunction with a merchandising business, his 
 chances may be considered at a premium. As 
 a matter of fact, a good tinner, starting a tin- 
 shop and hardware store combined, is a good 
 risk if he only has a set of tools to commence 
 with, and as a matter of course, has good char- 
 acter and habits. He can always earn good 
 wages at the bench, and does not have to 
 depend on the mercantile part of the business 
 for his living expenses. The same holds good 
 in any line where the proprietor works at his 
 trade in such connection. 
 
 On the other hand, a man in business who 
 neither earns wages as workman or as salesman, 
 is out of pocket the wages he pays an employe 
 for taking his place, and this single item, in the 
 course of a few years, amounts to a considera- 
 ble sum in itself. Nor is this all. The man 
 who is industrious and keeps himself constantly 
 employed in his business, necessarily keeps it 
 in better running order. He also requires less 
 for his personal wants than the man who takes 
 his leisure; and again, by giving close attention 
 to his business, fewer opportunities are afforded 
 for squandering money in the various ways 
 that beset the idle man. The difference in the 
 personal expenditures between the two types 
 of men will naturally be considerable, and the 
 
PRODUCTIVE OK NON-PEODUCTIVE. 129 
 
 annual savings of the one over the other, added 
 to his capital, will bring about a vast change in 
 their relative financial conditions in the course 
 of a few years. 
 
 The importance of these points is not always 
 considered, but should be. The careful credit- 
 man does not ignore them. 
 
130 WHOM TO TRUST. 
 
 DOING BUSINESS AS AGENTS. 
 
 The class of persons we refer to are those 
 who act as agents only in name, and not in fact. 
 In it are included mainly such persons as have 
 failed in business, and who have not been able 
 to get a discharge or release from their indebt- 
 edness, which still hangs over them. To enable 
 them to do business without the interference of 
 old creditors, they resort to a legal technicality, 
 and pretend to do it for someone else, and 
 either use some other name, or their own as 
 agent. This class is quite large. In many 
 cases the business is done in the wife 1 s name, 
 the husband being nominally hired to manage 
 it for her. 
 
 There are cases where this course is probably 
 justifiable, all things considered, and where cir- 
 cumstances make it necessary, as a measure of 
 self -protection; but these cases are rare, and the 
 motives or reasons are easily ascertained. Gen- 
 erally the measure is resorted to to keep from 
 creditors their honest belongings, and to keep 
 property and earnings out of the law' s reach. 
 With these facts before us, which furnish us a 
 record of the man's character, we start in fore- 
 warned, and our confidence is not likely to suf- 
 fer abuse for the reason that we give it very 
 charily. In many cases some friend or well-to- 
 do relative is willing to help the man by allow- 
 
DOING BUSINESS AS AGENTS. 131 
 
 ing him to do business in his name, and repre- 
 senting him as his agent. The friend or rela- 
 tive in this instance assumes the sponsorship of 
 the concern, and with his name also lends his 
 property; that is to say, he makes himself 
 responsible for the acts and debts of the 
 agent. The agent's individual responsibil- 
 ity, character, etc., whatever these may be, 
 concern us only indirectly. We are con- 
 cerned entirely with the responsibility and 
 integrity of the principal, who is usually a 
 man of means and of trustworthy character. 
 We may state it as a fact that losses are seldom 
 sustained from this source, and the reasons are 
 quite obvious. The help being extended out of 
 friendship or kinship, and very often without 
 expectation of sharing in the profits, the 
 arrangement is one of friendly aid simply, and 
 few men would so abuse the confidence of such 
 friends as to involve them in losses on their 
 account. It may be further assumed that 
 the agent is placed under certain restrictions in 
 the control of his business, so that the princi- 
 pal feels protected, and also that the agent con- 
 fines his transactions within the limits of abso- 
 lute safety. 
 
 In determining this class of credits, we act 
 cautiously at the outset, because, so far as the 
 agent is concerned, we should not extend credit 
 at all, and in looking up the principal, we are 
 naturally painstaking in our inquiries regarding 
 
132 WHOM TO TRUST. 
 
 his standing, and this precaution is apt to lead 
 us to safe conclusions in regard to the extent of 
 the applicant' s claim to our confidence. 
 
 But there is another phase of this agency 
 business, and one requiring much greater care 
 on the part of the credit-man. It is where the 
 man does business in his wife' s name. In most 
 cases, the man has failed, and fraudulently con- 
 veyed his property and assets to his wife. 
 Practically, he has control of the property, and 
 manages the business as before, using his wife's 
 name as a figure-head only. The logical con- 
 clusion in regard to this stamp of individuals is 
 that the acquisition of property by any means, 
 and the comfort of their families, at all hazards, 
 is the chief aim before them, and they do not 
 scruple to attain these results, even at the loss 
 of character and name. But what he has 
 secured is only a nest-egg, and you will find 
 him very cautious how he ventures any of his 
 capital or property. He must do business to 
 support the family, and in order to keep intact 
 what he has; but he does a safe business, per 
 force, as sellers are not eager to give accomoda- 
 tions. 
 
 Where the wife is the figure-head of a con- 
 cern, for the reasons stated above, and where 
 our safety as creditors depends on her, the 
 nature of the risk must be considered apart 
 from the ordinary way. She has property in 
 her possession subject to execution, and we are 
 
BUSINESS AS AGENTS. 133 
 
 safe so far as this goes, and our claims are cov- 
 ered by it. But in case of her failure, our 
 chances would be worth nothing beyond what 
 could be realized from property in sight. A 
 judgment would be a dead letter against her, as 
 she would never again enter the arena of busi- 
 ness life. She would drop out and be lost to 
 creditors for all time. With a man, on the 
 other hand, under ordinarily favorable circum- 
 stances, the creditor is offered a future, and 
 may reasonably calculate that a certain per- 
 centage of his bankrupt debtors will eventually 
 be good for something. Experience proves that^ 
 worthless claims of to-day against young and 
 middle-aged men of average business capacity, 
 have a prospective value, which can not be said 
 of women under above circumstances. 
 
 Ordinary prudence will suggest our being 
 cautious in extending them credit. We must 
 keep considerably inside of the prescribed 
 limit. 
 
134 WHOM TO TRUST. 
 
 PARTNERSHIPS. 
 
 Many a good man has found out to Ms sor- 
 row that partnerships are many-sided, and not 
 all they might be. In union there is strength; 
 but the union must exist in fact, as well as in 
 name. A simple yoking together of two or 
 more forces does not always have the desired 
 effect, and in partnerships, the forces can never 
 be measured beforehand in their relation to 
 each other. It is always a matter of experi- 
 ment first, and only experience and time can 
 determine the wisdom or in judiciousness of a 
 copartnership. 
 
 Union, or partnership, in this case, to fulfill 
 its highest mission, must mean harmony, 
 mutual confidence, and unity of interests and 
 joint effort for a given purpose. Its very 
 essence and vitality rest in concert of action, 
 and, wanting in this, the combination must, of 
 necessity, be a failure. 
 
 In a large enterprise, partnerships of two or 
 more, when made for the purpose of combining 
 capital and joining forces, each partner being 
 qualified for a special task or department, are 
 for the good of all concerned, and the great 
 success of many of our large houses is due to 
 fortunate partnership associations. I say fort- 
 unate, because whether partners are going to 
 be congenial, and in every respect well-mated 
 
PARTNERSHIPS. 135 
 
 and of benefit to each other and the business, 
 is always a matter that defies pre-judgment. 
 Time alone can solve that problem. In smaller 
 copartnerships the experiment is even more 
 hazardous. There is greater reason for part- 
 ners to clash. The work can not be divided so 
 as to give to each a particular department to 
 attend to, and one or both are liable to be dissat- 
 isfied, though notwithstanding their disagree- 
 ments, they may continue together indefinitely. 
 That this kind of an alliance can not accom- 
 plish what with perfert concert of action it 
 would be capable of, is self-evident, and that , 
 there are a great many such, needs no aifirma- 
 tion. 
 
 There are always risks in forming partner- 
 ships. In selecting any two men, we could 
 hardly hope to find both equally honest, 
 equally competent, or equally energetic. 
 Though truth will prevail and honesty is the 
 best policy, nothing prevails as against an un- 
 scrupulous partner. The honest man stands 
 no show in such an unequal union, as many 
 good men have discovered. 
 
 Partnerships concern us here, however, in 
 a more specific manner. In extending credit 
 to partnership concerns, our attention should be 
 directed to whether the association is a good 
 one, all things considered, and whether the 
 purpose for which partnerships should be 
 formed has been fulfilled; also, whether all the 
 
136 WHOM TO TRUST. 
 
 parties are producers; i. e., workers, and earn- 
 ing wages, or whether they are simply con- 
 sumers. 
 
 The next question of importance is to ascer- 
 tain whether the business is sufficiently large 
 to warrant the family and personal expenses of 
 two or more partners. A great many of the 
 smaller partnership-firms suffer too large 
 and constant a drain on their earnings for 
 family support, thus leaving no chance for ac- 
 cumulation of capital or enlargement of the 
 business. Under these adverse circumstances, 
 concerns can not get ahead, and more than that, 
 it is evident that the ordinary vicissitudes in 
 trade and temporary depressions are liable to 
 cause both the firm's small capital and also the 
 creditor's money to be eaten up while waiting 
 for a turn. The earnings being consumed as fast 
 as made during favorable periods, there is never 
 a surplus fund to draw against. The establish- 
 ment of a successful business demands constant 
 .accumulation of capital and facility for growth. 
 The nature of business is to be progressive and 
 aggressive. When firms stand still, it is 
 because they cari!t do otherwise, for one reason 
 or another, and this condition can not be con- 
 sidered a healthy one. 
 
 Every man, employer and employe alike, 
 must earn what he draws, and give an equiva- 
 lent for what the business pays him. A clerk 
 is paid a salary which he is supposed to earn; 
 
PARTNERSHIPS. 137 
 
 the employer must likewise earn what he 
 draws, though he is not expected to draw all 
 the business earns; in fact, his success in busi- 
 ness demands that he draw as little as he can, 
 so as to admit of the largest possible addition 
 to his capital from year to year. 
 
 Forming a copartnership is one of the most 
 important steps in a man' s life. I am talking 
 now of the honest, right-minded man. The 
 scoundrel, who is ever ready to inveigle anybody 
 and everybody into his spider' s web, is never the 
 one to suffer, even if he has anything at stake. 
 The honest partner, to avoid compromising his 
 honor and his name, is always the loser. 
 Years of toil and accumulation of capital are 
 sacrificed, and the sooner this is done and the 
 association ended, the better, unless he is will- 
 ing to be dragged to the level of the other. 
 Make your selection advisedly, and not until 
 you know thoroughly the man about to be 
 your associate; do not enter hastily into a 
 union. " Marry in haste, repent at leisure," is 
 a trite old saying, and apropos in copartnerships. 
 The antecedents of your associate-to-be must 
 be without blemish. Not only that, but, if he 
 is well-advanced in years, take note of whether 
 he has been, thus far, successful or otherwise 
 in his former undertakings. It may be said 
 that because a man has been unfortunate or 
 unsuccessful, this should not necessarily operate 
 against him. The answer to this can best be 
 
138 WHOM TO TRUST. 
 
 given by quoting the advice of one of the 
 shrewdest and most successful merchants of 
 the last generation: "Avoid unfortunate men 
 in your business affairs," or words to that 
 effect. We may not believe in the doctrine of 
 fatality in its application to business, but 
 experience and observation have taught us that 
 the advice is sound, and it follows that we 
 should struggle to avoid the black mark, "An 
 unfortunate man." 
 
DOUBTFUL CREDITS. 139 
 
 DOUBTFUL CREDITS. 
 
 Many cases, after the most careful scrutiny 
 and consideration, will be of a nature to make 
 a decision, pro or con, difficult to arrive at. If 
 it were a question of making a cash loan in 
 these cases, we should not be long in deciding, 
 but the trouble is that we are prone to look at 
 our merchandise as something that must be 
 kept moving, and not as cash.- In doubtful 
 cases, consider your goods as cash, and decide 
 accordingly. This will facilitate the process 
 of arriving at a conclusion very quickly in 
 most cases; for in no case would you willingly, 
 probably, loan the parties the amount involved, 
 even though the interest on the money should 
 be equal to the profit on the goods. Another, 
 more off-hand but business-like method by which 
 to determine doubtful cases, is to take the benefit 
 of the doubt ourselves, and keep our goods for 
 better and safer customers. Whether this is 
 the safest policy is susceptible of arithmetical 
 demonstration: Take four doubtful orders, for 
 instance, of $1,000 each. It is safe to estimate 
 that one at least will prove a loss, and in these 
 instances there will be very little salvage. Does 
 it pay to sell $4,000 worth of goods with the 
 certainty of losing $1,000, and the strong proba- 
 bility that you will lose even $2,000? It will 
 
140 WHOM TO TRUST. 
 
 surely be money in your pocket not to chance 
 any of the four. 
 
 There is another dangerous feature in know- 
 ingly placing doubtful customers on our books. 
 They may pay once or twice, and our fears of 
 them are quieted; their orders are no longer 
 so closely scanned; we look upon them as old 
 customers, and our vigilance is set at rest. We 
 often say to ourselves of this or that party: 
 Well, he is good for this bill, and we will risk 
 him for once and then drop out, but we do not 
 always adhere to our good resolutions. The 
 prudent business-man also takes into his cal- 
 culations, in these cases, the condition of the 
 country, and of trade. In prosperous times, 
 he is disposed to take greater chances, and 
 draw the line less sharply; but as depression 
 sets in, either generally or at local points, he 
 is the first to take alarm, and to reduce his 
 outstandings to a basis of safety, and when 
 the financial storm bursts, as it does periodi- 
 cally, he has little to fear from its effects. 
 
 Experience proves that in cases where the 
 conditions and surroundings of the debtor 
 appear in every way favorable and satisfac- 
 tory, the losses are quite large enough without 
 taking chances knowingly. How much or how 
 little risk we are warranted in taking will nat- 
 urally be governed by the per cent, of profit 
 we expect to realize in a given transaction. 
 On a basis of profit that would net us as mer- 
 
DOUBTFUL CREDITS. 141 
 
 chants only 6 per cent, per annum on the capi- 
 tal invested, the credit system of the country 
 would be restricted to less than one -quarter of 
 its present volume. Mercantile credits would 
 be placed more nearly on a footing with bank 
 credits. To make 10, or 12, or 20 per cent, on 
 our capital, however, offers temptation and 
 inducement to take proportionate risks. " The 
 larger the interest the poorer the security," 
 is an old maxim well understood by money- 
 lenders. 
 
 In conclusion, we may say of all doubtful 
 applicants for credit, that our so-called Num- 
 ber One risks prove doubtful enough, and 
 when we think we are perfectly safe, we not 
 infrequently "get left." This being the expe- 
 rience of every business-man, let us confine our 
 credit transactions to those whom we think 
 are safe and reliable, and let the doubtful cases 
 be served elsewhere. As a successful merchant 
 and friend of the writer says: " There is plenty 
 of good trade to be had, and I will have that, 
 or none." 
 
142 WHOM TO TRUST. 
 
 JOINT-STOCK AND COOPERATIVE 
 ASSOCIATIONS. 
 
 In the last fifteen years the legislative enact- 
 ments of the different States have been such as 
 to favor joint-stock companies for mercantile, 
 manufacturing and industrial pursuits, and the 
 benefits arising from such legislation can hardly 
 be over-estimated. The law in most States 
 favors and makes easy the organization of stock 
 companies. It enables inventors, discoverers, 
 and men experienced in certain branches, to 
 promote their enterprises by enlisting many to 
 contribute each a little of their surplus, and 
 the investors or stockholders have, on the other 
 hand, the assurance, by legal enactment, that 
 their responsibility, legal and moral, is limited 
 to the amount of their paid-up stock. To the 
 investor this is all-important. His own legiti- 
 mate business is not in the least impaired or 
 jeopardized by the possible entanglement or 
 liability that might arise from a partnership. 
 
 It is this feature, the non-liability of the 
 individuals comprising a company, that we 
 have to do with. Whatever capital is paid 
 into a company, or agreed to be paid in, is all 
 that the creditor has to look to, and when this 
 is lost, there is neither moral or legal responsi- 
 bility attaching to any one of the members of 
 the company. There is, so to speak, no moral 
 
JOINT-STOCK ASSOCIATIONS, ETC. 143 
 
 status, no individual integrity, back of it. In 
 this respect, therefore, partnerships differ from 
 corporations, each and all the members of the 
 former being personally liable for all the debts 
 until they are paid or liquidated in some 
 manner. 
 
 We have become accustomed to corporations 
 where the enterprise has been of a public char- 
 acter, like railroads, banking, and financial 
 institutions, and very extensive manufacturing 
 establishments, and the existence of this class 
 of enterprises would have been impossible if 
 the enormous capital required had to be con- 
 tributed by a few persons. The whole country 
 in fact every money center in the world is 
 interested in public improvements, and the bene- 
 fits arising from this aggregation of capital, 
 all applied to one purpose, are unquestionable. 
 
 But when, as in late years, the stock-com- 
 pany plan has found adoption by all kinds of 
 enterprises, with capital ranging from $1,000 
 upward, we are constrained to inquire into the 
 purpose and motives of such organizations. 
 To organize a stock company for carrying on 
 a small mercantile business with $2,000 capital, 
 more or less, can hardly find justification on 
 the ground of any advantage to business in 
 any sense. But that the promoters or mana- 
 gers have reasons, personal reasons, generally, 
 which make such a course desirable or neces- 
 sary, we need never question. These small 
 
144 WHOM TO TRUST. 
 
 " corporate bodies'' are usually " close corpo- 
 rations," and the stock, and consequently the 
 business, is all under the control of one man. 
 This is about the only redeeming feature in 
 them, in so far as it gives the business a man- 
 aging head without any interference. It will 
 be found that the manager, or proprietor in 
 fact, is under a cloud; that prior business 
 embarrassments, judgments, and claims against 
 him, prevent his doing business in his own 
 name, and the stock company furnishes a way 
 for him to carry on his business without let or 
 hindrance. In these cases the credit-man has 
 only to consider the character of the manager, 
 and he will have no difficulty in determining 
 his or his company's claim to credit. 
 
 There is sometimes a bona-fide company, com- 
 prising a large number of small stockholders, 
 organized for carrying on a small manufactur- 
 ing or mercantile business, rarely mercantile, 
 however. The promoter of these is generally 
 the manager, but, as in larger organizations, he 
 is subject to the dictum of the board of direct- 
 ors. Of these it may be said, that " too many 
 cooks spoil the broth." There is no definite 
 policy, and there is not enough individual 
 interest, and both are necessary to insure 
 success in any business. Usually, after the 
 stockholders have wrangled over the affairs 
 of the company for about a year, and the shoe- 
 maker and the candlestick-maker have had 
 
JOINT- STOCK ASSOCIATIONS, ETC. 145 
 
 their say on the management of a fancy grocery 
 store, for instance, the concern passes into other 
 hands. 
 
 These are entitled to credit to the extent of 
 their bank balances, and no more. No great 
 harm is done to the business community by 
 them. Stock companies have their advantages 
 and their disadvantages, and the latter are rather 
 greater than the former, in several important 
 respects. For old, well-known firms to incor- 
 porate, has many advantages, and the credit of 
 the house being established, only matters of 
 convenience or of expediency need be consid- 
 ered by them. But in the case of enterprises 
 that have still to gain the confidence of the 
 community, the stock company labors under 
 decided disadvantages over the copartnership 
 in obtaining credit. Smith & Brown (copart- 
 nership) can get a credit at their bank for 
 $10,000. The Smith & Brown Co., with the 
 same capital, and doing the same amount of 
 business, finds it difficult to obtain one-half as 
 much accommodation in their capacity of stock 
 company. Go to any bank and ask why the 
 discrimination is made, and they will tell you 
 that they prefer to deal with individuals, for 
 obvious reasons, and the merchant or manu- 
 facturer, applied to for credit by them, will 
 render the same verdict. 
 
 Credit is given to individuals, up to the limit 
 
 of their probability to pay, character, experi- 
 10 
 
146 WHOM TO TRUST. 
 
 ence, and reputation for 'honesty considered. 
 Credit to stock companies is given to the extent 
 of their paid-up capital. The former is bound 
 to us during his life-time to pay his obligations; 
 the latter, in case of failure, is " wiped out of 
 existence," and with it all the creditors. 
 
 The granger movement, inaugurated in 1870, 
 or thereabouts, affords a good illustration of 
 cooperative associations and their outcome. 
 Thousands of these were started. The grangers 
 undertook to do the business of the country 
 and monopolize trade by associating themselves 
 into mercantile companies and appointing or 
 electing men as managers. Too many men, 
 too many minds, and the lack of experience 
 withal, brought them to a halt. The old motto: 
 "Shoemaker, stick to your last," conveyed a 
 practical meaning to them which they had 
 never before realized. 
 
 These associations were cooperative in name 
 but not in fact. Like cooperative societies for 
 mercantile or manufacturing purposes, other 
 than so-called Grangers, they lacked unity of 
 interest, and lack of eif ort in a given direction 
 and for a specific purpose. Every business, 
 small or large, must have a ruling spirit at the 
 head of it to give its affairs intelligent direction, 
 and this master-spirit must be in a position to 
 be supreme ruler. Everyone holding an inter- 
 est can not be "boss," and this is apt to be 
 considered the special prerogative of every 
 
JOINT-STOCK ASSOCIATIONS, ETC. 147 
 
 member of a cooperative company by reason 
 of his supposed superior talent. 
 
 The lack of economy in stock companies is 
 also a noticeable and a bad feature, and one 
 that operates especially against newly-started 
 enterprises. Our own money is one thing; the 
 money of a corporation in which we have but 
 a part interest, is quite another, with the ordi- 
 nary man. That close calculation, attention 
 to details, and saving of pennies, so necessary 
 for new-beginners in any business venture, are, 
 we may say, rarely found in stock companies. 
 The average man, not doubting honesty or 
 ability at all, would not make a safe bank pres- 
 ident or railroad manager. There are really 
 few men who have the faculty of administering 
 other people 1 s money as if it was their own. 
 Of the trusted and tried manager of a bank, 
 or other institution, in charge of the public' s 
 funds, it may be said, that he feels more con- 
 cern for these than he does for his own. He 
 attaches an additional responsibility to his 
 guardianship over them which his own belong- 
 ings do not, or would not, call for. 
 
 Bad failures of the stock, and especially of 
 the cooperative, companies are rare. As they 
 get but little accommodation, they do not 
 become deeply involved, as a rule. 
 
 With reference to their claims to credit, 
 without an established record they should be 
 held closely to cash transactions. 
 
148 WHOM TO TRUST. 
 
 WOMEN IN TRADE. 
 
 With the constantly-increasing number of 
 women in mercantile occupations, engaging in 
 nearly every branch of trade and filling all man- 
 ner of offices and clerkships, excepting those 
 where bodily toil is essential, we might reasona- 
 bly infer, as a result of the experience and the 
 knowledge of business methods acquired by 
 them, that the number of women in trade, on 
 their own account, would be increasing steadily 
 and proportionately. In looking over the Trade 
 Registers, however, we find this verified only 
 in a small ratio. Why this is so, is susceptible 
 of explanation; but we are concerned here with 
 another question, namely, that of credit, and 
 the claims of business- women to it and to our 
 confidence. 
 
 Through force of circumstances we find 
 women carrying on nearly all lines of trade, 
 but those which to her are most congenial, and 
 which she takes to from choice for a livelihood, 
 are Millinery, Dry Goods, Bakery and Confec- 
 tionery, Notions, Stationery, and business of 
 the kind in which her own sex are largely her 
 patrons, and for these branches she is not only 
 well-fitted, but they belong to her by right of 
 adaptation. 
 
 The business, then, in which we generally 
 find her engaged, being thoroughly legitimate, 
 
WOMEN IN TRADE. 149 
 
 safe, and free from any extra-hazardous features, 
 it is next in order, in considering her claim as 
 an applicant for credit, to take an inventory of 
 her qualities of mind and heart in their relation 
 to business her characteristics, in short and 
 see how far they are in harmony with the prin- 
 ciples laid down in the foregoing chapters. 
 
 An analysis of woman is, fortunately for the 
 writer, outside the province of this treatise, 
 which requires the enumeration of her many 
 qualities only so far as they have any bearing 
 on her case as a woman in trade. 
 
 First, we may say, she is cautious. This is an 
 excellent quality for all business-people to 
 possess. She is saving when she earns her own 
 money. Good quality number two : In all her 
 transactions she looks to absolute safety, and 
 can seldom be induced to take any chances that 
 might imperil her business or her future. She 
 is eager for the dollar, but she is not over-am- 
 bitious, like man, and her conservatism keeps 
 her inside of the danger line. She is not over 
 sanguine, and to her a bird in the hand is worth 
 a flock in the bush. She is afraid of entangle- 
 ments and business complications, and is deter- 
 mined to avoid them. Men might follow her 
 example with advantage in this respect. She 
 is in mortal terror of lawyers, as she is of rats, 
 and she steers clear of the meshes of the law by 
 giving it no occasion for interference. In her 
 perceptive faculties and intuitive knowledge of 
 
150 WHOM TO TEUST. 
 
 tilings, especially where her pecuniary interests 
 .are concerned, she stands admittedly as man's 
 superior. 
 
 When we find her in business at all, she is 
 there for the sole purpose of making her living, 
 and she engages in no hap-hazard operations 
 whereby she might lose her foothold. Loss of 
 her little capital would be an irretrievable ca- 
 lamity, and she fully appreciates t]ie hopeless- 
 ness of her situation in case of failure. She is 
 not devoid of ambition, but she does not permit 
 it to lead her into trying to out-do her neighbors 
 or to eclipse the world. She is simply content 
 to make her living, and is not half as easily 
 " gulled" by glittering schemes, as are men. 
 
 She is also a good credit manager, and if you 
 can get her to trust you at all with any of her 
 goods or chattels, you may deem yourself highly 
 honored. She does not readily part with her 
 property on a .promise to pay, as is the case 
 with many of our business-men. If she trusts 
 at all, she wants good assurance of payment, as 
 agreed, and nothing short of an almost absolute 
 certainty will assure her. It need not be feared, 
 therefore, that any considerable portion of her 
 capital will be tied up or lost in bad debts. 
 
 There is another feature in favor of women in 
 trade. They have no money- squandering hab- 
 its. They neither smoke, drink, play billiards, 
 or do any of the other countless things for 
 which men spend, and feel they are called upon 
 
WOMEN IN TRADE. 151 
 
 to spend, money, and the savings from this 
 source, alone, will go far toward supporting a 
 woman and keeping her business intact. In 
 fact, in a small business, such as we usually 
 find her engaged in, her chances, owing to her 
 economy, would seem to be better than man's. 
 
 In the different branches of trade carried on, 
 some stand higher in the credit-man' s estima- 
 tion than others. This is owing both to the na- 
 ture of the business and the men, as a class, 
 engaged in them. Of the houses, the nature of 
 whose business brings them in contact with 
 women, and who depend largely on her for 
 patronage, it may be said that their losses from 
 bad debts through their female customers, come 
 within the average range. But this is saying 
 a good deal in her favor when we consider that 
 she does business on very meager capital, and 
 her creditors trust almost entirely on her own 
 recognizance in meeting her obligations. We 
 might further add, that the financial status on 
 which women receive credit, would not warrant 
 us in giving credit to men, whatever their busi- 
 ness might be. That she should be the recipi- 
 ent of such extra confidence and favors, can 
 only be accounted for on the grounds of an es- 
 tablished record she has made for herself in the 
 mercantile world. We are governed by obser- 
 vation, experience, and precedents, in the mat- 
 ter of making credits, as in all else. 
 
 In summing up, then, and considering all her 
 
152 WHOM TO TEUST. 
 
 good points and leading traits as an applicant 
 for credit, the verdict would be in her favor, 
 and our fullest confidence, within the limits of 
 ordinary prudence, would seem to be justifi- 
 able. 
 
 
CHATTEL MORTGAGES AND OTHER LIENS. 153 
 
 CHATTEL MORTGAGES AND OTHER 
 LIENS. 
 
 Not infrequently we find, in looking up the 
 standing of a firm, that its stock of merchan- 
 dise and personal property is covered by chattel 
 mortgages, or that some dealer, who is already 
 on our books, gives a chattel mortgage. Ordi- 
 narily that is equivalent to insolvency, and 
 eventual failure, and credit is not warrantable 
 under such circumstances, as a rule. Every 
 dollar's worth of your goods simply goes to 
 " the other fellow's " security, and surely your 
 interest does not lie in that direction. 
 
 The law in regard to chattel mortgages dif- 
 fers materially in different States. In some it 
 has been decided that the instrument is not 
 good on a stock of merchandise that is con- 
 stantly changing its identity; but even here, 
 possession is "nine points of the law," and 
 when the mortgagee once gets possession by 
 virtue of his mortgage, it means time and 
 expense on the part of the unsecured creditors 
 to dislodge him. 
 
 Of late years the mercantile agencies have 
 been very diligent in watching and notifying 
 their patrons of all matters of record, so far 
 as they concern people in trade, and who are, 
 presumably, buying on credit. It is, there- 
 fore, almost equivalent to a confession of bank- 
 
154 WHOM TO TRUST. 
 
 ruptcy for a dealer to have a chattel mortgage 
 recorded against him, inasmuch as the whole 
 business community, far and near, will at once 
 be advised of the fact, and cause every creditor 
 to become clamorous for an immediate settle- 
 ment of his claim, and the man who has 
 found it necessary to chattel-mortgage his 
 stock is never in condition to stand a 
 "run." 
 
 Where fraud is contemplated, the chattel 
 mortgage offers the readiest means for carrying 
 out the purpose without let or hindrance. 
 
 It is not asserted that the unsecured creditor 
 always loses his claim where a chattel mortgage 
 is on record. There are extenuating circum- 
 stances, sometimes, but these, as well as the 
 parties themselves, must be thoroughly known. 
 It must be borne in mind that in these cases 
 you are trusting, not alone to the man's honor, 
 but also to the good- will and friendly feeling 
 of the mortgagee toward his and your debtor. 
 All chattel mortgages are so drawn that the 
 mortgagee can foreclose at any time, notwith- 
 standing the instrument may be drawn payable 
 at a given period. 
 
 Not over wide-awake dealers chattel-mort- 
 gage their property, sometimes to relieve them 
 of temporary embarrassment, without appre- 
 hending the effect it will have on their credit 
 and the minds of their creditors. Many of 
 them are probably not aware that every item of 
 
CHATTEL MORTGAGES AND OTHER LIENS. 155 
 
 record is at once reported to their creditors, 
 but such is the fact. 
 
 In the case where judgments are on record 
 against parties, no one would deem it safe to 
 extend credit, and yet a chattel mortgage is 
 not only equal to a confession of judgment, 
 but it makes a voluntary transfer of the prop- 
 erty tinder it, to have and to be held by the 
 mortgagee until certain conditions are complied 
 with. On the other hand, the judgment can 
 only be satislied by execution and levy on 
 property found. The chattel mortgage is 
 already satisfied, and execution and levy are 
 unnecessary. Attention is called to this for 
 the reason that in the minds of many, a judg- 
 ment is a more serious affair than a chattel 
 mortgage, and that their interests are more 
 endangered by the former, which is entirely 
 erroneous. This may be said, however: While 
 the judgment creditor is constantly on the 
 watch for property to satisfy his claims, and 
 the debtor's business is in constant jeopardy, 
 with the holder of a mortgage amicable 
 arrangements and terms have usually been 
 made by which the debtor can prosecute his 
 business without fear of molestation, so long 
 as the conditions of the instrument are carried 
 out. 
 
 To extend credit under circumstances so mani- 
 festly hazardous would be akin to inviting a 
 loss and throwing away your property of your 
 
156 WHOM TO TRUST. 
 
 own free-will and accord, and this is assuredly 
 not your intent, as a business-man. Astonish- 
 ing as it seems, however, no concern is ever so 
 unworthy as not to be able to get credit some- 
 where. The least that can be said of houses 
 that cater to this class of risks, is, that they 
 themselves are lacking in the elements neces- 
 sary to permanent success. 
 
 The good, sound, conservative merchant has 
 no use for the chattel-mortgaged dealer, unless 
 the mortgage runs to himself. 
 
INSURANCE. 157 
 
 INSURANCE. 
 
 No merchant should be entitled to credit 
 who does not keep his stock and other personal 
 property fully covered by insurance. In some 
 localities insurance is very high, but where it 
 is so the risk is proportionately great, and if 
 the risk is extra hazardous to the insurance 
 companies, why should it not be considered 
 equally so by the owner of the property? Even 
 if the owner be out of debt, and the loss, in 
 case of fire, falls entirely upon him, it is still a 
 transgression of good business principles not to 
 be insured. 
 
 The good business-man has for his motto that 
 what is worth possessing is worth insuring, and 
 the expense should be regarded in the same 
 light as any other current expense, such as 
 heat, light, etc. 
 
 The case before us is that of a merchant who 
 owes for a large portion or for all of his stock, 
 and in justice to his creditors he should be fully 
 insured; in fact, be insured for their benefit 
 directly. It is a safeguard, and one which 
 every creditor has a moral right to exact of his 
 debtors. 
 
 Railway corporations do not, as a rule, 
 insure. Neither do some of our wealthy real- 
 estate owners. Their course, however, is justi- 
 fiable from a different stand-point from that 
 
158 WHOM TO TRUST. 
 
 which pertains to the merchant or manufact- 
 urer. Their property is scattered over a vast 
 area, and no single fire would cause them any 
 considerable loss. But with the merchant it is 
 different. All his stock in trade, representing 
 his capital, and often that of others, is located 
 at one point, and a fire means financial ruin, to 
 avert which the prudent man is careful to be 
 insured, the protection thus offered being more 
 than an equivalent for the expense incurred. 
 
 Insurance statistics to the general reader have 
 no particular significance. They deal with a 
 large array of figures of losses paid and risks 
 written, which convey no special meaning to 
 the uninitiated. 
 
 To arrive at plain facts, we take the statistics 
 of 1887, in which year we find the fire-risks 
 written to have been $10,500,000,000 in round 
 numbers. The premiums received for these risks 
 was $95, 000, 000. The losses paid were $52, 000, - 
 000. This gives an average of nine-tenths of 
 1 per cent, of premiums paid; that is, 90 
 cents on every $100 worth of insurance. But 
 in arriving at this average, we include farm 
 buildings, improvements, and also Al building 
 risks in cities, which will raise the percentage 
 on mercantile and manufacturing risks very 
 considerably, and it is these that we are con- 
 cerned with; so that it is safe to say that one 
 merchant or manufacturer out of every three, 
 in the course of his business life-time, suffers 
 
INSURANCE. 159 
 
 loss by fire. And when the chances of such a 
 catastrophe are narrowed down to one in three, 
 not much margin is allowed. From personal 
 observation, and in the absence of any statistics, 
 I will say, that in the course of thirty years, 
 one of every two dealers has suffered loss by 
 fire; and this view finds corroboration in the 
 minds of many experienced men. Of course, 
 the risk is greater in some branches of business 
 than in others. Of the printing establishments, 
 for instance, it is safe to say that their exemp- 
 tion from fire does not exceed twenty years, so 
 that of one hundred concerns in existence to- 
 day, in twenty years not one will have escaped. 
 Many lines of manufacture are equally and 
 even more hazardous. 
 
 On a basis of premiums received by insurance 
 companies for risks written, and judging also 
 from long observation by parties in a position 
 to know, we may assume, in regard to the ordi- 
 nary manufacturing and mercantile business, 
 that every man engaged in these pursuits for a 
 life-time suffers damage by fire to a greater or 
 less extent at some period; and even in the 
 more fortunate cases, the total cost of keeping 
 always insured bears no relative proportion to 
 the loss. 
 
 Instances are not wanting where men have 
 constituted themselves into insurance compa- 
 nies, and become their own insurers, on the 
 hypothesis that what they save in premiums 
 
160 WHOM TO TRUST. 
 
 will cover an eventual, though never-expected, 
 loss. The wisdom of this policy can not be 
 reconciled with the facts before us. and it must 
 be put down as penny wise and pound foolish, 
 and in the long run, disastrous. 
 
 From the stand-point of the creditor, it is 
 every man's duty to insure. The moral obli- 
 gation exists, but there should also be a legal 
 obligation. We can not coerce our debtors to 
 insure, but we can refuse to trust them, and 
 this will bring about a voluntary compliance. 
 No man is entitled to credit whose concern and 
 feeling of responsibility is lacking to such a 
 degree as to willfully jeopardize his creditors' 
 safety. 
 
INFORMATION PERTAINING TO CREDITS. 161 
 
 MISCELLANEOUS INFORMATION PER- 
 TAINING TO CREDITS. 
 
 The merchant or salesman of large experi- 
 ence will be governed in making credits by 
 some things quite insignificant in themselves. 
 
 (1) In this day of traveling agents, no mer- 
 chant need go out of his store from one year's 
 end to the other to buy goods; he can buy 
 all and more than he wants, and generally 
 do it better and cheaper from agents than by 
 going into the market himself. This does not 
 apply equally to all lines of business, for in 
 some, the matter of selection of goods and 
 styles makes a personal visit imperative. The 
 force of this argument is intended to show that 
 people do not have to go out of their way to 
 buy, and it is not natural for them to do so. 
 When, therefore, an order is received from a 
 stranger for a staple line of goods that can be 
 bought in any jobbing town, and when that 
 order comes from a locality not at all tributary 
 to your city, but by reason of transportation 
 facilities, belongs to another town, the natural 
 and rightful inference is, that the man has 
 exhausted his credit nearer home, and there- 
 fore seeks new connections. But even did 
 geographical barriers and reasons not exist, it 
 would still be wise to look with caution on 
 
 unsolicited orders from strangers. Of course, 
 11 
 
162 WHOM TO TRUST. 
 
 we all get more or less mail-order trade, and 
 this can not be too highly valued. It is an 
 indication of the buyer' s confidence in us, which 
 thus finds expression in his preference for us. 
 
 (2) There are houses who do not employ 
 agents, and who do a large business, notwith- 
 standing. They are generally old, well-known 
 houses, however. They advertise largely by 
 means of prices-current and circulars, and 
 undoubtedly have inducements to offer, but, 
 all things being equal, it can not be denied 
 that personal solicitation is the most effective, 
 and that, on an even footing, personal suasion 
 will have the advantage. 
 
 Preference in trade is traceable to satis- 
 factory past relations, and the result is confi- 
 dence. On this hypothesis, houses become 
 firmly established, as we say, and command 
 trade, both through their representatives and 
 otherwise. People do not "switch off" from 
 one house to another without reason, and the 
 reasons are many; nor is the loss of a customer 
 always to be regretted. But, accepting the 
 facts as we find them, they prove that instead 
 of having business thrust on us, we find that a 
 continual scramble is necessary to get even our 
 share. Logically, then, when orders are ten- 
 dered us without special solicitation on our 
 part, and without any claims on the sender, 
 by reason of acquaintance and previous busi- 
 ness relations, close scrutiny is always advisa- 
 
INFORMATION PERTAINING TO CREDITS. 163 
 
 ble. We must, of course, use judgment in the 
 matter. If you are handling a. specialty, which 
 you control, and no one else sells, people have 
 to patronize you with or without solicitation. 
 
 (3) A buyer who is not particular about 
 prices, though sure to want the longest time, 
 is likewise a subject for distrust. In these 
 times of active competition, no dealer can afford 
 to. be overstocked or pay too much for his 
 goods. Recklessness in buying, both as to 
 quantity and prices, does not portend success, 
 and, as creditors, we are interested in every 
 customer's success. 
 
 (4) We like to deal with the liberal ' ' live- 
 and-let-live " buyer. It is a pleasure to do 
 business with him. This includes, also, the 
 man who knows his business thoroughly. He 
 knows what goods he needs and can sell, and 
 he is posted on their values, and is willing to 
 give value for them. He does not haggle; he 
 either takes or leaves them. This represents 
 the better class of merchants. Not quite so 
 agreeable is the over-particular, cranky indi- 
 vidual. 
 
 We find engaged in trade, as in other occupa- 
 tions, a liberal sprinkling of so-called "cranks," 
 or kickers, but the mercantile representative 
 of this class has the best chance for unretarded 
 growth. The business community being, as a 
 rule, accommodating and eager to please, our 
 crank finds it easy to ply his vocation, and 
 
164 WHOM TO TKUST. 
 
 impose on our good-nature. He is forever 
 being smoothed over only to find him breaking 
 out in new spots. In his way, he is a perfect 
 autocrat. Things must be to suit his notion, 
 and reason or logic he has no use for. 
 
 Business-houses, and their salesmen in par- 
 ticular, are not long in finding him out, and 
 after he is once "stamped and labeled," we 
 know about how to handle him, and save our- 
 selves much annoyance. He is labeled all the 
 way through, from the office to the shipping- 
 room. Opposite his name on the ledger is 
 marked "crank." Except by special request 
 no "monthly statement" must be mailed to 
 him. The chances are that he has a special 
 grudge against statements, and we are gener- 
 ally made aware of this peculiarity of his after 
 the first round. His orders we mark "crank," 
 when we send them to the shippers. This is 
 done to insure extraordinary care in filling 
 them to the letter. Change of quantities or 
 the ordinary substitutions are not permissible 
 in his case. To ship him quarter of a dozen 
 rather than break a package for a sixth of a 
 dozen only, as ordered, or to substitute even a 
 better article than the one mentioned, are lib- 
 erties which will cost you return freight 
 charges, and entitle you to a liberal round of 
 abuse besides. Even should the label on a 
 bottle be pasted on carelessly, and be a little 
 lop-sided and out of true, his watchful eye is 
 
INFORMATION PERTAINING TO CREDITS. 165 
 
 sure to detect the blemish. He seems to live 
 for and to have a special aptitude in the direc- 
 tion of finding fault with things. Nor is he 
 ever satisfied to accept your prices and terms 
 without considerable haggling. 
 
 But, though he is a disagreeable customer to 
 deal with, the crank is not without some 
 redeeming characteristics. He seldom asks 
 favors; he can be depended on to meet his 
 engagements, and usually we find him taking 
 advantage of all the cash discounts. He rarely 
 fails from any of the ordinary causes, and if he 
 can be handled, and his trade be made profita- 
 ble to us, we may feel secure in his paying 100 
 cents on the dollar. * 
 
 (5) A valuable hint, worth knowing, is in 
 regard to the course pursued by different peo- 
 ple to obtain credit. We are frequently called 
 upon to write to parties, telling them that the 
 information concerning their standing does not 
 warrant opening an account. This we write 
 only when we are satisfied that we do not wish 
 to extend them credit. As long as we are in 
 doubt we do not write in that forbidding strain; 
 but where this is done, our letter will receive 
 treatment of various kinds. The man who is 
 able and willing to pay for what he buys, will 
 not waste any words or stationery on you. He 
 will simply buy his goods elsewhere; nor need 
 you ever look for any more business from him. 
 The man who is responsible need not beg for 
 
166 WHOM TO TRUST. 
 
 goods; in fact, it is a hardship for him to keep 
 from over-buying of the many houses eager to 
 supply him. On the other hand, the man who 
 answers your letter by making explanations 
 and asseverations of his intention and ability 
 to pay, without, however, giving facts or fig- 
 ures, this man, four times out of five, makes 
 us regret a subsequent change of mind con- 
 cerning him. No responsible man will take 
 your refusal to trust him, with equanimity; it is 
 a thrust against his integrity. If he says any- 
 thing at all, and is a polite man, he will simply 
 tell you to keep your goods. 
 
 Experience has taught this lesson, that when 
 we find* men begging to patronize us, in spite 
 of ourselves, their credit is at a low ebb in 
 other directions. No man will allow himself 
 to be snubbed if he is independent of us, and 
 the fact that he does so, is a priori evidence of 
 weakness, morally and financially, particularly 
 the latter. 
 
OLD CUSTOMERS. 167 
 
 OLD CUSTOMERS. 
 
 To avoid losses from this source seems next 
 to impossible. We feel that a customer who 
 has traded with us for years, and who has 
 always kept a satisfactory account, is entitled 
 to accommodation of extra time, should he 
 desire it, and we are glad, usually, not that he 
 wants a little indulgence, but that we can be of 
 service to him. No doubt enters our minds as 
 to his financial soundness; we .accept as bona 
 fide the reason he gives us for asking the favor, 
 and probably he is thoroughly honest in believ- 
 ing that all he needs is a temporary extension. 
 Most men never fully realize their condition 
 until they are hopelessly bankrupt, and until 
 they reach this point, and can go no farther, 
 they live in hopes of extricating themselves, 
 and feel certain that they could do so if their 
 creditors would only extend their accommoda- 
 tion a little longer. In many cases it will be 
 found that " dry-rot," like some insidious dis- 
 ease, has done its slow, but very effective, work. 
 
 In the case of our old, and heretofore prompt 
 customer, quite unbeknown to us he has gradu- 
 ally been running behind, and, instead of a tem- 
 porary inability to pay, he is practically insolv- 
 ent when he asks for an extension. Some day we 
 learn of his assignment, to our very great sur- 
 prise, for nothing is more remote from our 
 
168 WHOM TO TRUST. 
 
 thoughts than that he should ever fail. We 
 console ourselves, if we are only moderately 
 interested, with the reflection that he might 
 have been our debtor to a much larger sum, if 
 he had chosen. 
 
 Gradual growth and accumulation of capi- 
 tal are indispensably necessary to, and show 
 indications of, a healthy business. Some years 
 may show less gain than others, but a " stand- 
 still ' ' is not a sign of prosperity. Every busi- 
 ness man should be a little better off financially 
 at the end of each year, and when we find a 
 customer who has to sacrifice a . well-earned 
 reputation for punctuality and good business 
 methods, which it has taken him years to estab- 
 lish, and of which he has just reason to be 
 proud, we may infer that his course is directed 
 by necessity, and that his future is not propi- 
 tious. Of this fact he always gives us due 
 notice. 
 
 The only method to pursue is to look up the 
 standing of our customers at least once a year. 
 The man who was in good circumstances a year 
 ago may have lost money in one way or another, 
 and have become, possibly, insolvent during 
 even this short space of time. It is not safe to 
 trust any man, year in and year out, without 
 ' ' looking him up ' ' at stated intervals. This is 
 not meant to involve the expense of a mercan- 
 tile report, but simply the labor of referring to 
 the rating in the agency books. Where these 
 
OLD CUSTOMERS. 169 
 
 have remained unchanged, or have not been 
 changed for the worse, from one period to 
 another, we need go to no further expense; 
 but in those cases where we find ratings im- 
 paired or suspended, it will be necessary to get 
 all the new and latest imformation we can. 
 We are often surprised, after a concern has 
 failed, to find that it had no rating for some 
 time previous. Had we been governed by a 
 system of periodical investigation, we should 
 have discovered this change in time, possibly, 
 and taken warning. 
 
 Another group of customers needs mention 
 here, concerning which it is difficult to govern 
 our conduct by any fixed rules. These are the 
 customers on our books who have never been 
 particularly prompt. They are afflicted with a 
 chronic u slowness," which never changes, 
 except for the worse, and even improvement in 
 their financial condition does not incline them 
 to change their practices. Whatever their cir- 
 cumstances may be, they meet their obligations 
 only on the most earnest solicitation; but for 
 all that, they are clever men to do business 
 with, and are responsible, on an average. Mani- 
 festly, the fault lies as much with the too- 
 indulgent creditor as with the debtor; for, if 
 need be, they can usually be brought to time by 
 a positive demand. Although there are enough 
 of these "slow coaches" to make a large class, 
 we can not treat them as a body, but must 
 
170 WHOM TO TRUST. 
 
 do so individually and from a stand-point of 
 the known peculiarities and condition of each 
 individual, and our past experience with him. 
 
 It might seem that the losses incurred would 
 be greater from opening new accounts than 
 from those already on our books, but this is 
 not so, with conservative houses, at least. We 
 rarely u get left" on a first bill. The new 
 applicant for credit is "sifted" thoroughly, 
 and before an account is opened with him, his 
 standing and responsibility must be above sus- 
 picion. Not infrequently we feel justified in 
 selling a first bill with the secret determination 
 to stop there; but, the danger herein lies in the 
 fact that we do not always adhere to our good 
 resolutions. Prompt payment of the first bill 
 leads to the second and a third credit, and so on, 
 until our first impressions and fears are quite 
 forgotten, or, at any rate, are overshadowed by 
 a few satisfactory transactions. We are war- 
 ranted, sometimes, in the absence of definitely 
 satisfactory knowledge, in speculating on prob- 
 abilities and taking our chances for sixty or 
 ninety days on one bill, when we would not be 
 willing or justified in giving a " line of credit." 
 
 One or two swallows do not make summer; 
 neither do a few prompt payments entitle a 
 man to credit out of proportion to his responsi- 
 bility, or against unfavorable surroundings and 
 antecedents, or yet undemonstrated ability and 
 character. 
 
LIMIT OF CREDIT. 171 
 
 LIMIT OF CEEDIT. 
 
 The limit of credit in any given case must 
 inevitably be governed by things outside the 
 actual capital invested, as much, or nearly so, 
 as by the capital itself. No two cases could be 
 judged alike in this respect, though the capital 
 might be the same in both. We should have 
 to take into account all the surroundings and 
 facts, as required by our analysis of men and 
 things, and this procedure would necessarily 
 give us more latitude in the one case than in 
 the other, irrespective of pecuniary resources. 
 It would seem, therefore, that to draw a line by 
 which to govern our conduct in the ever-vary- 
 ing conditions which are presented to the credit- 
 man, that the task would be not only an intri- 
 cate one, but one next to impossible of solution. 
 
 But all things have a starting-point, and we 
 will commence by stating two propositions: 
 
 First, we know that the man whose capital is 
 sufficient to enable him to buy for cash, and 
 who owns all his stock, accounts, etc., free of 
 incumbrance, is safe. We incur no risk in sel- 
 ling to him. The man who owes nothing, can't 
 fan. 
 
 Second, we know that the man whose liabili- 
 ties are equal to his assets is not safe, and the 
 point is reached here where the creditor's 
 money is in jeopardy, although nominally rep- 
 
172 WHOM TO TKUST. 
 
 resented by property of various kinds. A con- 
 dition worse than tins need not be entertained, 
 even for argument' s sake. 
 
 We establish, then, a middle-ground between 
 the two propositions; namely, between absolute 
 safety and the point where safety no longer 
 exists. The first proposition needs no explan- 
 ation or argument, and the credit-man's task is 
 made easy. But how far may we with safety 
 diverge from the cash basis? That we must 
 keep inside the limit of the second proposition 
 is also unquestioned. We have, to be sure, 
 assets, consisting of stock, accounts, etc. , aggre- 
 gating in all $10,000, and we will say that these 
 assets consist half of merchandise and half of 
 accounts and bills receivable. The liabilities 
 we will suppose to be of equal amount, $10,000. 
 We are here supposing by no means an excep-. 
 tional or aggravated case. There is quite a 
 percentage of business carried on with no better 
 status than that, and, as in this case, where 
 absolutely no capital is visible. To the experi- 
 enced credit-man the case is a hopeless one for 
 both the debtor and the creditor, because that 
 the business, sooner or later and the sooner 
 the better must be closed up, is inevitable. 
 Then, what would be our reasonable expecta- 
 tion? ISTo sane man would expect the estate to 
 pay dollar for dollar, surely. Even under fa- 
 vorable circumstances, and with a good business- 
 man for assignee or receiver, the assets would 
 
LIMIT OF CREDIT. 173 
 
 not net the creditors over $6,500, or 65 per 
 cent, of their claims, and this may be consid- 
 ered a liberal estimate under an assignment. 
 
 What, then, would have to be our limit of 
 credit to keep within the bounds of safety? On 
 the supposition, justified by experience, that 
 the assets of a mercantile firm, in the event of 
 foreclosure or assignee' s sale, do not bring over 
 65 per cent., the limit of credit, to insure* us 
 dollar for dollar, must be fixed at 65 per cent, 
 of the inventory value of the assets. In the 
 case we have assumed, $10,000 assets would pay 
 liabilities of $6,500, and this amount must be 
 established as the limit, and in all cases this 
 relative proportion should be maintained. The 
 shrinkage of 35 per cent, represents the capital 
 invested, but creditors are paid in full, and this 
 is as it should be. The man who embarks in 
 business is supposed to risk his capital, and not 
 ours, in the enterprise, and in case of loss or 
 failure, we, as prudent business-men, should 
 look to it that there is sufficient margin repre- 
 sented by capital to provide for emergencies. 
 The nature of the assets needs to be considered, 
 of course, and the probable shrinkage estimated 
 according to their value and convertibility 
 when credits are made, as will be seen by refer- 
 ence to chapters on Assets. 
 
 A case such as we have cited above, where 
 the liabilities are equal to the assets, is practi- 
 cally one of hopeless insolvency, and perhaps 
 
174 WHOM TO TRUST. 
 
 not once in a life-time do conditions of trade 
 change in favor of the debtor so as to save him. 
 The rapid increase in the value of goods during 
 the war placed many insolvents on their feet 
 again, but wars can not conveniently be invoked 
 for the preservation of sinking concerns. 
 
 MERCANTILE REPORTS ANALYZED. 
 [NO. 1.] 
 
 F. B. CEESSON, Stoves, Tin-Shop, and Cornices, 
 Dakota. 
 
 (February 12, 1888.) 
 
 He was formerly clerk in this city, and was 
 discharged. He afterward associated himself 
 with one Sardell, and in May, 1887, they began 
 business under the style of Sardell & Cresson, in 
 the manufacture of iron cornices. The business 
 was continued for a short while, when Sardell 
 withdrew, and Cresson continued, under the 
 style of City Galvanized Iron Works. In May, 
 1887, he was said to have no means, whatever, 
 of his own, and his record as an employe was 
 said to be poor. It was said, his salary of $20 a 
 week was insufficient to maintain his tastes;, 
 that his extravagance ran to women, and that 
 he was in debt here for such articles as jewelry, 
 board, etc. He had a small plant in his busi- 
 ness, with little or no stock, and what capital 
 he had invested was said to have been borrowed 
 from some lady friend. At home he was virtu- 
 ally unknown to the trade at large; his pros- 
 
MERCANTILE REPORTS ANALYZED. 175 
 
 pects were reported as poor, and he had no 
 credit. At present he is said to be still single, 
 about forty years of age, keeps a small store, 
 does not credit much, has but a small capital 
 and nothing above his exemptions; is regarded 
 as honest in his dealings; might pay a small bill. 
 To some of the trade who have asked him to 
 make a statement of his worth, he will only say 
 that he has all the backing needed to carry him 
 through; that a party with $5,000 stands be- 
 hind him, but he refuses to divulge his friend's 
 name. 
 
 ANALYSIS AND REMARKS. 
 
 Under Character, Habits, Ability, Economy, 
 this case can readily be disposed of. He has 
 no capital or responsibility, and lacks all the 
 elements necessary to insure success. His char- 
 acter, habits, and associations are bad. He has 
 shown that he has not ability or application 
 enough to fill a clerkship. He has no notion of 
 economy. ISTot known by the trade at home. 
 Buys goods elsewhere, and evidently is trusted 
 by some. If goods have any value at all, they 
 are worth more on our shelves than on the 
 books, in this case. 
 
 [No. 2.] 
 
 G-. A. FRANK & Co., Northern Wisconsin. 
 Wholesale Grocers. 
 
 (June 10, 1887.) 
 
 This firm commenced business here three 
 years ago, and is composed of Gr. A. Frank 
 
176 WHOM TO TKUST. 
 
 and L. A. J . The former is a married man, 
 
 about thirty-five years of age, who, we believe, 
 failed once some time ago, but is spoken of in 
 favorable terms. Just prior to entering in this 
 business, was engaged in shipping fruits to towns 
 in this region, and not understood to have any 
 
 means of his own. His partner, J , was an 
 
 explorer, and understood to have a few thousand 
 dollars. They started out with a stock of 
 about $3,000, which they claimed was all paid 
 for. They have been doing a large business 
 from the start, and making some money, but 
 their capital is rather inadequate for the trade 
 they do, although there is no complaint regard- 
 ing, payments, and we understand they confine 
 the bulk of their purchases to one house. 
 About one year ago, a representative of a house 
 called on them and received the following 
 statement of their condition: 
 
 Stock, $10,000; outstandings, $6,000; cash, 
 and in bank, $200; liabilities, about $9,000; on 
 open accounts, about $500 past due, but not 
 pressing, and $1,500 due the bank. J - had 
 homestead worth about $800. Merchandise 
 sales for first six months of the year, $27,000, of 
 which a little over one-fourth was cash. 
 
 This statement was considered a candid one, 
 but showed that they credit quite freely for a 
 house with so light active capital; but claimed 
 to scrutinize closely. They are regarded strictly 
 honest, and we understand they are given what 
 
MERCANTILE REPORTS ANALYZED. 177 
 
 little bank accommodations they need. They 
 appear to have credit for the demands of their 
 business, but it is probably reasonable to sup- 
 pose that their account is allowed to run along. 
 They do an immense business for their capital, 
 which would be, nominally, $4,000 or $5,000, 
 but thus far seem to be able to turn themselves 
 without any apparent inconvenience. Are very 
 fair business-men, steady and attentive, but it 
 is advisable to use some caution in handling 
 the account, as their business is crowding so 
 rapidly that they are apt to overreach them- 
 selves. 
 Supplemental to this agency report, is that 
 
 made by a traveling agent: F is a good 
 
 salesman, and a pusher. His partner is a non- 
 entity, except as to capital originally furnished. 
 Doing too much credit business for means; how- 
 ever, in fair credit, and seem to get all the goods 
 needed. Think them honest and well-inten- 
 tioned toward everybody. 
 
 ANALYSIS AND REMARKS. 
 
 That this concern is being "carried " by some 
 one, or several large creditors, is evident. If in 
 case of any set-back or dull season these should 
 become alarmed, security would be demanded 
 and probably be given, in which event outside 
 creditors will find little left to satisfy their 
 claims. They are undoubtedly honest and pos- 
 sibly solvent to-day, should they wind up. 
 12 
 
178 WHOM TO TRUST. 
 
 The limit of credit allowable on their reported 
 condition simply, must be very small. It is 
 not likely that they can continue the business 
 on the present "broad gauge" very long. 
 Volume of Business in Proportion to Capital 
 will aid us in our decision. Trying to bore a 
 two-inch hole with a gimlet is not a successful 
 undertaking, usually, and theirs will be an 
 exceptional case if they succeed. We are bet- 
 ter off, most likely, to let those continue to 
 supply them who have done it thus far. 
 
 [No. 3.] 
 B. C. ALLEN & Co. Jobbing Town, Ind. 
 
 Dry Goods. 
 (Full Report, dated October, 1881.) 
 
 A has been in business since 1845. Is now 
 seventy-two years old. After the war, reputed 
 worth $150,000 and in Al credit. At this 
 juncture A bought out the managing partner 
 and took his son, who had just finished school, 
 into partnership. From this on, the concern 
 has been going down, mainly from poor man- 
 agement. The senior is not, and never was, a 
 good business-man. At the beginning of the 
 war A was heavily in debt, through former 
 failures, and obliged to do business under 
 "cover." Though penurious in business ex- 
 penditures, family and personal expenses have 
 averaged for years not less than $10,000 annu- 
 ally, and continue at about that rate. From 
 
MERCANTILE REPORTS ANALYZED. 179 
 
 1871 to date, only one or two years have shown 
 any profits, largely owing to general depres- 
 sion and decline, but more largely to poor 
 management. They still do a large business, 
 and show $110,000 surplus, but are slow pay, 
 and collections occasionally put into lawyer's 
 hands. They are not in Al credit, but seem to 
 get all the goods they need. Homestead mort- 
 gaged for $9,000, in 1880, to satisfy claim for 
 borrowed money. Wife said to own some val- 
 uable real estate. Assets represented to consist 
 of: Stock, $135,000; accounts and bills receiv- 
 able, $95,000; equity in improvements on leased 
 ground, $8,000; lands in various parts, repre- 
 sented at $9,000; interest in business carried on 
 by another son, $18,000; total assets, $270,000. 
 Liabilities: On open account, $93,000; due 
 bank, $22,000; due for notes and acceptances 
 (bills payable), $45,000. No instruments on 
 record against them as a firm. A is said never 
 to have applied himself closely to business, 
 paying more attention to outside affairs. The 
 son devotes much of his time to society mat- 
 ters. Business managed by employes. 
 
 ANALYSIS AND REMARKS. 
 
 This report was the result of a special inves- 
 tigation made by a representative of an Eastern 
 house. A large line of credit being involved 
 in negotiations then pending, a thorough exam- 
 ination of the affairs of A. & Co. seemed 
 
180 WHOM TO TRUST. 
 
 necessary, particularly since the prevailing 
 impression among the trade did not favor them. 
 On receipt of the report, negotiations were 
 dropped, and in the light of subsequent events, 
 the Eastern house certainly showed both wis- 
 dom and conservatism in its decision. In 1883, 
 the assignee of A. & Co. made the following sum- 
 marized statement: 
 
 ASSETS. 
 
 Nominal value of stock $ 95,000 
 
 Nominal value of accounts and bills receivable 80,000 
 
 Nominal value of outside interests 20,000 
 
 $195,000 
 
 Appraised market value of stock $ 55,000 
 
 Collectible accounts and bills receivable 45,000 
 
 Available outside interests, about 5,000 
 
 $105,000 
 
 LIABILITIES. 
 
 Secured to bank and others $ 30,000 
 
 Unsecured claims 95,000 
 
 There was realized $78,000. The dividend to 
 unsecured creditors was 37 per cent. 
 
 Two years before the failure a surplus of 
 $110,000 wa,s claimed. How is this shrinkage 
 accounted for? Lack of ability, economy, and 
 personal application to business, were the 
 causes of this concern's downfall. The item of 
 personal expenses alone, in the face of a series 
 of unprofitable years, would cause a serious 
 drain on the capital. The difference between 
 the nominal and actual value of the assets 
 shows great incompetency. It was found that 
 goods, regardless of present value, were always 
 
MERCANTILE HEPORTS ANALYZED. 181 
 
 inventoried at cost, and that there was a large 
 accumulation of old stock (see Inventory Valu- 
 ations}. Bad accounts and bills receivable were 
 likewise kept on the books, instead of being 
 charged up to profit and loss at the close of each 
 year. The actual condition of affairs was more 
 of a surprise to A. & Co. than it was to outsiders. 
 
 [No. 4.] 
 
 SMITH MERCANTILE Co., Lumber and Mining 
 Region, Wisconsin. 
 
 (October 12, 1887.) 
 
 Mr. P. Q. Smith, treasurer and manager, says 
 the company was incorporated June last, with 
 an authorized capital of $10,000, all paid in. 
 Represented by merchandise. He says the 
 business per month would aggregate $18,000; 
 have $5,000 insurance on stock, and succeeds 
 P. Q. Smith. Expects to carry about $20,000 
 stock through the winter. Confine purchases 
 to about five large houses. Keeps bank account 
 with the First National Bank of Chicago and 
 local bank. On July 26, 1887, they gave state- 
 ment as follows: 
 
 ASSETS. 
 
 Cash value of stock in store $ 9,000 
 
 Stock in transit 500 
 
 Book accounts good 800 
 
 Cash on hand and in bank 600 
 
 Real estate 2,000 
 
 Total assets $12,900 
 
 LIABILITIES. 
 
 Merchandise, open account, not due $ 500 
 
 Surplus in business $12,400 
 
182 WHOM TO TRUST. 
 
 Smith says, further, that he considers his in- 
 terest, outside of the company, worth $50,000, 
 over all liabilities. 
 
 The company's books show he paid out, in 
 about one month in August and September, 
 $5,000 in checks on two banks, leaving but a 
 very small balance at present time. He claims 
 to have about $10,000 now, gives liabilities of 
 about $2,000, and says outstandings are about 
 the same. Many claims have been received 
 against Smith individually, and some are in 
 attorneys 1 hands, unpaid, with which nothing 
 can apparently be done but to await his pleas- 
 ure, and it is said that when he has the money 
 he dislikes to pay a debt with it. The idea 
 seems to be entertained that the fact of incor- 
 poration was for the purpose of limiting his 
 liabilities, and to block the collection of exist- 
 ing debts. 
 
 ANALYSIS AND REMARKS. 
 
 Under Stock Companies and Cooperative 
 Associations we will find all that governs this 
 case. Smith formed this company as a means 
 to do business, and to defraud his creditors. 
 Statement of assets and liabilities and surplus 
 would make a very good showing in an honest 
 man's hands. The sum of the liabilities is out 
 of proportion to the monthly sales claimed. In 
 that locality the proportion of cash sales is very 
 small. Eight hundred dollars accounts and 
 
MERCANTILE REPORTS ANALYZED. 183 
 
 bills receivable is also a misstatement, because 
 they are known not to do a cash business. The 
 goods probably go largely into his own mines, 
 and these, it would appear, are not within reach 
 of Smith's old creditors, nor would they be to 
 those of his company. 
 
 Altogether, the concern is not worthy of 
 credit; still it is known that they buy largely 
 from two firms, but these probably have an 
 " inside track." Those who can not get on the 
 "inside" had better stay out altogether. 
 
 [No. 5.] 
 METER & THOMPSON, Michigan. 
 
 General Store and Manufacturers Furniture. 
 
 (December 1, 1887.) 
 
 Firm is composed of N. 0. Meyer and U. Y. 
 Thompson. Ages thirty- two and forty, and both 
 married; and they have been in business for a 
 number of years, and our report of July, 1886, 
 which was the time of their last statement, is as 
 follows : 
 
 " Mr. Meyer makes the following statement 
 of assets and liabilities : Stock in store, $13,000; 
 factory stock, $8,000 ; machinery and dry-kiln, 
 $7,000; warehouse and store-building, $5,500; 
 factory building, $4,000; ground, $8,000; store 
 and lots, $800 ; outstandings, $6,000. Total, 
 $52, 300. Liabilities, for merchandise, $9, 000 on 
 current bills. For purpose of discounting bills 
 
184 WHOM TO TKUST. 
 
 the firm executed a mortgage on the ground, on 
 which all the mill property and store -buildings 
 stand, and including stock in store, for advances 
 to the amount of $10,000, which the First 
 National Bank, the mortgagee, agrees to carry 
 for five years. Advances at this time, about 
 $8,000. The realty was already subject to a 
 mortgage of $7,000, making total liabilities of 
 $21, 500. Surplus, $31,517. 46. Mr. " H. " says 
 he regards the firm worth $25,000 to $28,000. 
 Discount part of their bills. Mr. Meyer thinks 
 by reducing stock and collection of outstand- 
 ings he hopes to reduce indebtedness to bank 
 to $4,000 or $5,000, soon, and then try to get 
 stock in store released, and, if necessary, give 
 new one on property not now subject to mort- 
 gages. He states amount of advances from 
 memory. Learn at bank that it exceeds $8, 000, 
 but not stated how much; is still less than 
 $10,000. Their property is valuable, owned 
 chiefly by Meyer, and they have a good clear 
 margin over incumbrances, exemptions, and 
 liabilities, of several thousand dollars, and it is 
 believed will work out. Meyer is regarded as 
 honest. His wife owns a homestead. ' ' 
 
 According to a report of June, 1887, they de- 
 cline at this time to make a statement. They 
 produced an inventory, however, which showed 
 a net balance of $34,000. They owe $6,000 
 on building, on long time, and current 
 liabilities were $15,000 in January. They 
 
MERCANTILE REPORTS ANALYZED. 185 
 
 say now their liabilities are considerably 
 less, but their stock is correspondingly lighter. 
 Under our latest date it is stated that (under- 
 stand the mortgage now stands as $7,000, but 
 the actual indebtedness which it is intended to 
 secure, doubtless varies, from time to time) the 
 real estate is mortgaged, as heretofore reported, 
 but they have a large margin over incumbrances 
 and other debts. Their stock would probably 
 reach $20,000, or may go to $25,000. They pay 
 all their debts promptly, do a large business, and 
 make money, and do not seem troubled in get- 
 ting all the accommodations wanted. 
 
 ANALYSIS AND REMARKS. 
 
 Personal Property r , Gliattel Mortgages, Heal 
 Estate. Under these heads we find the key to 
 the solution of this case. While we are obliged 
 for the opinion hazarded by the agency reporter, 
 it is the facts he gives that are of the most im- 
 portance to us. The concern stands well, but 
 they have been very slow in meeting small bills, 
 and large ones can hardly fare better. There is 
 no danger of their failing as long as the bank is 
 friendly toward them. Unsecured creditors to 
 any considerable amount could not enforce col- 
 lection, as the mortgagees would come in with 
 their prior securities, and this operates as a 
 protection to mortgagee and mortgagor as well. 
 The personal property, consisting largely of 
 
186 WHOM TO TKUST. 
 
 machinery and manufacturing plant, represents 
 only nominal value to us. The chattel mort- 
 gage of $10,000 would fully cover stock, ma- 
 chinery, etc., currently valued at $25,000. Real 
 estate is not available, whatever the equities in 
 it might represent on paper. 
 
 They are good for small lines of credit, and the 
 amount would have to be determined by the 
 profit, and whether a house was willing and able 
 to carry them. On staple goods to the amount 
 of $1,000 we should have better assurance of 
 prompt payment than this report vouchsafes. 
 
 They are too well established and doing too 
 good a business to fear any trouble except from 
 extraordinary causes, and a claim less than 
 $1,000 could be collected, or secured, probably, 
 before they would allow enforcement of collec- 
 tion bylaw; but in the face of this favorable 
 feature, even, they are not a desirable risk. 
 
 [No. 6.] 
 
 Gr. H. IVES, AGT., Iowa. 
 
 Groceries, etc. 
 
 (June 9, 1886.) 
 
 He has been in business here since March, 
 1882, as agent for his wife. Came here from 
 Indiana, where he was of the firm of Ives & Co. 
 Was not very well regarded there, and was not 
 worth, when he left, much over $1,000, which 
 belonged mostly to his wife. He wrote us in 
 
MERCANTILE REPORTS ANALYZED. 187 
 
 February last as follows: " I have been here 
 for four years; have done a good, prosperous 
 business, and am making money. I had some 
 trouble last winter regarding the payment of 
 my bills, but it all wore off in a short time, and 
 now somebody is trying to make me trouble 
 again. A few years ago I failed in business 
 through a bad partner, and lost all that I had. 
 Since that time, however, I have paid over 
 $3,0l>0 of those debts, but they are not all paid 
 yet. The money that I have in business is 
 money that my wife got from home, and it 
 rightfully belongs to her, and that is why I 
 have agent attached to my name. I have about 
 $3,000 in my business over my liabilities, and 
 about $500 of my bills due; no chattel mort- 
 gage on my stock. Doing a good business, 
 though always slow in winter, and money hard 
 to collect." 
 
 As he states, all his property is in his wife's 
 name, and he does all his business as agent. 
 He carries a nice stock of groceries, does a 
 good, careful business, and attends to it closely. 
 It is difficult to estimate his total clear worth, 
 but he is generally thought to be worth in the 
 neighborhood of $3,000, clear. He is worth lit- 
 tle or nothing in his own name, always hard up 
 and slow, and not considered reliable for credit. 
 From Indiana we learn that his transactions 
 there were questionable, and is not regarded as 
 strictly honest. 
 
188 WHOM TO TRUST. 
 
 ANALYSIS AND REMARKS. 
 
 We shall be able to dispose of this case under 
 the head of Doing Business as Agents, also 
 Antecedents and Honesty. 
 
 We could not safely sell him in his own 
 name if we had to trust to his honesty, and in 
 his capacity as agent we are at his mercy just 
 the same, except so far as his wife's actual 
 responsibility ma^ afford protection. It will 
 be found, probably, that should it be under- 
 taken to collect a claim of any magnitude, the 
 wife's property would not be get-at-able. He 
 has shown by his statement that he does not 
 mean to have his wife' s property used to make 
 good business losses, or for the benefit of 
 creditors. 
 
 Accepting that the statement made in regard 
 to the capital be true, and also considering that 
 he is doing a fair business, we might place the 
 total limit, of his credit at $1,000. He would 
 have to resort to open fraud, almost, to evade 
 payment of that sum. Nearly every concern 
 would risk this man for a small bill, say $50 to 
 $100, and no doubt if the sum-total of his lia- 
 bilities could be kept within the proper limits, 
 there would be no danger. But in the same 
 manner that one concern is willing to risk a 
 small amount, others are willing, and an indebt- 
 edness of several thousand can be run up. This 
 view of the case would not warrant any credit 
 at all from a conservative stand-point. 
 
MERCANTILE REPORTS ANALYZED. 189 
 
 [No. 7.] 
 N. 0. PLATT, Town of 3,000 inhabitants in Iowa. 
 
 Hardware and Tin- Shop. 
 Just starting in. Is a young man, twenty-six 
 years of age; married. Clerked for the last six 
 years for J. & J., in this town. Good character 
 and steady habits. Well liked; regarded honest 
 and reliable. Intends to carry stock of about 
 $2,000. Claims to have saved $900 out of his 
 salary, and this is corroborated by former 
 employer. A stove house and a hardware 
 house, he says, have offered to carry him for 
 from $1,200 to $1,500. Prospects deemed fair. 
 Not* a practical tinner, but understands that 
 branch well enough to run it. Wife is daugh- 
 ter of well-to-do farmer in the country. 
 
 ANALYSIS AND REMARKS. 
 
 All the requisites to a successful career are 
 furnished here. The fact that two large houses 
 are willing to give him a line of credit, as 
 stated, is an indication that they think well of 
 him from a personal stand-point. For any ordi- 
 nary credit in keeping with his business, he is 
 a good risk. Although his capital is small, he 
 stakes all he has and enough to make him care- 
 ful in his management. See Capital. 
 
 Having never managed business for himself, 
 the creditor takes some risk in the direction of 
 what his development may be. A man may 
 possess excellent qualities of mind and heart 
 
190 WHOM TO TRUST. 
 
 as clerk, or under someone else, and yet not be 
 able to make a success of his own business. In 
 fact, cases of this kind are not rare. For men 
 to be their own ' ' bosses " is sometimes a dearly- 
 bought privilege. Other conditions being fa- 
 vorable, however, we are justified in taking 
 chances on this one element of doubt. 
 
 [No. 8.] 
 
 B. C. DAVIS. Town of 10,000, Ohio. 
 
 Furniture,- Notions, Cigars, etc. 
 
 (May, 1888.) 
 
 Just starting in business, and a stranger here. 
 He makes the following statement: c l Have been 
 in the sewing-machine business for the past ten 
 years and made some money, which I invested 
 in real estate in the town I came from. Prop- 
 erty consists of store-building and lot, worth 
 $10,000. Mortgaged for $2,500. I am going 
 to sell this property as soon as I can and use 
 the money in the business. Have no other 
 property except household goods. I intend 
 carrying a stock of $1,500." 
 
 Was formerly located at M , and under 
 
 date of June 8, 1888, it was learned that he 
 owns a store-building, but not worth nearly 
 what he claims. His business was selling 
 machines, and these were sold to him on com- 
 mission. Not known to have any responsibility 
 beyond his equity in real estate. Nothing 
 known of his character in particular. 
 
MERCANTILE REPORTS ANALYZED. 191 
 ANALYSIS AND REMARKS. 
 
 The only thing we have here to base credit on 
 is a possible equity in Real Estate. We may 
 dismiss this case off-hand. Let him first sell 
 his property and be able to show a basis 
 for credit. As the matter stands now, he 
 has neither capital nor experience, and of his 
 ability and character, no estimate can be 
 formed. 
 
 [No. 9.] 
 
 V. W. YOUNG. General Store. 
 
 Town of 2,000 inhabitants, Illinois. 
 
 Commenced business recently. Age twenty- 
 two; single. For several years brakeman on rail- 
 road. Previous to that he was in a store for a 
 short time. He has no means of his own to speak 
 of. Mrs. Y. is quite well-off, and the capital 
 comes from this source. Calculates to carry 
 small stock, from $1,500 to $1,800. He states 
 that his mother will put in $2,000 for him as 
 fast as the business warrants it. Is a sober, 
 industrious boy, attentive to business, and 
 family well regarded. His purchases so far 
 amount to $1,200. Paid cash $800, balance 
 bought on credit. 
 
 ANALYSIS AND REMARKS. 
 
 This is one of those cases which we find 
 under Capital; also, Experience, Business Edu- 
 cation, Character, and Habits, Age, Ability, 
 Competition, etc. In fact, the risk is equally 
 
192 WHOM TO TRUST. 
 
 great in every direction. There is absolutely 
 nothing to recommend him for credit. His 
 character and ability are undeveloped; experi- 
 ence, he has none. His application and devo- 
 tion to business, for one of his age, is no guar- 
 antee of success, as a rule. So far as capital is 
 concerned, the mother will advance it probably 
 as long as she sees the business is prosperous. 
 If not a success and there is danger of failure, 
 she will step in as a preferred creditor in some 
 way for the money advanced. The only way 
 to sell him, if he wants credit, is on his mother' s 
 personal guarantee of payment, until such time 
 as he shall be able to show his capacity as a 
 manager and business-man, and also show 
 evidence of establishing himself on a good 
 footing. 
 
 [No. 10.] 
 
 A. VAN SLOW. Iowa. 
 
 Grocer. 
 
 (September, 1888.) 
 
 Mr. Van Slow states in November, 1887, that 
 he is also of the firm of A. Yan Slow & Son, at 
 W , where he has $4,000 invested, and says 
 that his stock here is worth $5,000, and that he 
 has $6,000 in good book accounts; also says his 
 dwelling is in his wife's name, and that he 
 owns a house and lot here worth $900, and has 
 lands in Michigan worth $5,000, and says that 
 $1,500 will cover all he owes. Some good local 
 
MERCANTILE REPORTS ANALYZED. 193 
 
 authorities think the foregoing statement is 
 substantially correct; speak well of Mr. Van 
 Slow personally, and look upon him as a good 
 business-man. Others say, however, that he 
 has failed once or twice, and intimate that he 
 has been assisted by bank here, and were also 
 under the vague impression that he is responsi- 
 ble to the bank for a portion of what he has; 
 for this, however, we are unable to find any 
 reliable authorities, and from the best informa- 
 tion obtainable, find that aside from being a 
 little loose in business matters and somewhat 
 inclined to spread out, that Mr. Van Slow is a 
 fair manager. Good local authorities think 
 him worth from $7,000 to $8,000, clear, and tell 
 us that he has credit about home for his busi- 
 ness wants, and that no complaints are made 
 in relation to the manner of his payments. In 
 a report of March, 1888, it is stated that he is 
 doing about as usual. Think trade is pretty 
 dull, and that he is indebted $4,000 or $5,000, 
 but regarded perfectly good still. According 
 to our latest reports, he has been running along 
 about the same for the past year, and rather 
 hard up; however, he is doing a good business 
 and can learn of no collections against him this 
 summer. He has been refused credit in some 
 quarters, we learn, on account of slow pay- 
 ments, but others are willing to put up with his 
 methods, so that he has no difficulty in getting 
 all the goods he needs. 
 
 13 
 
194 WHOM TO TRUST. 
 
 ANALYSIS AND KEMAKKS. 
 
 Every wholesale house in his line of busi- 
 ness knows Mr. Van Slow and his methods. 
 His reputation is fully established as being a 
 slow customer. He is undoubtedly good for 
 what he owes, or may owe in the future. Those 
 who sell him will keep him within proper lim- 
 its, so that his indebtedness will be kept inside 
 the "danger line." Though considered good, 
 his credit is not unlimited by even those with 
 whom he deals. 
 
 Punctuality and Old Customers will cover 
 his case. If we are blessed with a good stock 
 of patience and can afford to give six months, 
 on thirty or sixty-day goods, this man will do 
 to sell to, and his patronage can be relied 
 on as long, and to the extent that it may be 
 desirable. He is not hard to please, is not a 
 close buyer, and if the goods he buys afford 
 profit enough to pay for time and collection 
 charges, possibly we may sell him; but we 
 must not get too many of his kind on our 
 books. 
 
 So far as eventual payment is concerned, that 
 can be enforced; but, even the law can not 
 secure our money for us promptly. He will 
 generally take advantage of the law's delay, 
 which is from thirty to sixty days, and he can 
 also take the benefit of the "stay -law," which 
 gives him four months, additional time, and in 
 some States twelve months. This compels him 
 
MERCANTILE REPORTS ANALYZED. 195 
 
 to secure the debt, but does not give us the use 
 of the capital tied up. 
 
 In giving this man credit, it must be borne in 
 mind that his account can not be "banked" 
 on. If many such would be ruinous to the 
 creditor, as will be conceded, it follows that 
 even one of the class can not be of benefit, and, 
 consequently we are better off without the 
 
 " Van Slows." 
 
 [No. 11.] 
 
 ADAMS, BROWN & Co., Colorado. 
 
 Hardware and Implements. 
 
 (May 12, 1888.) 
 
 The firm is composed of C. B. Adams, C. B. 
 Brown, and D. E. Clark. The business has 
 been established some four or five years, form- 
 erly as A. & B. , later on, in 1885, changing to 
 A., B. & Co., with A. E. Davis comprising the 
 company. In February, 1888, we have A. and B. 
 alone, who, in April, admitted Clark, and the 
 style again changing as formerly. They are 
 all married men, aged thirty, forty, and forty- 
 five. They have maintained a very good credit 
 formerly, but in the middle of 1887, they were 
 financially embarrassed. In October, 1887, 
 they write as follows, to our request for a state- 
 ment : " We have been hard up on account of 
 slow collections, and in one or two places have 
 allowed drafts to be returned, and have written 
 to the parties to explain matters. There is no 
 cause for alarm, and parties that we have asked 
 
196 WHOM TO TRUST. 
 
 for extensions have readily granted the favor," 
 and they expected to have better collections, 
 and plenty to pay their debts. In February, 
 A. was reported to have homestead property 
 worth $7,000, and B. had homestead and lot, 
 valued at $1,500, and also other property, con- 
 sisting of one farm of 160 acres of land, also 
 having invested in the business $25,000. Also, 
 were carrying an average stock of $22,000. 
 At this time they appeared in better financial 
 state, and no complaints were heard regarding 
 payments; also, keeping a bank account with 
 three different banks. Under date of April 8, 
 1888, A. & B. write: " That they have recently 
 admitted Clark to copartnership, which expires 
 five years from date, and at this time claim a 
 net capital in the business of $25,000." We 
 learn that Clark is a man of good character 
 and. habits, and is reported to have put in the 
 concern, in cash, $7,000, and is possessed of 
 some outside means. Locally, the concern, at 
 the present time, are considered as being in 
 fair shape, and are deemed worthy of their 
 moderate business requirements. Additional, 
 June 15, 1888: Do quite a wholesale business 
 with the smaller places. Brown traveling most 
 of the time. Claim to be doing at the rate of 
 $250,000 per annum. Liabilities not ascertain- 
 able. Handle some goods on commission. 
 Hear of no complaints. Learn they are 
 indebted to one bank $5,000. 
 
MERCANTILE REPORTS ANALYZED. 197 
 
 ANALYSIS AND REMARKS. 
 
 There is no particular flaw to pick in this 
 statement, except that it fails to give the most 
 essential facts necessary to be known, viz. : the 
 amount of liabilities and resources. It is known 
 that those who have had dealings with them 
 in the past, have had trouble and delay in col- 
 lecting. Their reputation for punctuality is not 
 good, and how far the new partner's money 
 may help them is difficult to say. Eight thou- 
 sand dollars to a wholesale house would not go 
 far, especially when it is already embarrassed. 
 
 Their credit seems to be good with certain 
 houses to the extent of from $6,000 to $8,000, 
 but they are presumably in possession of facts 
 which the report fails to give. On the report 
 itself, $1,000 on sixty days would be a liberal 
 credit for any house to make. The conservative 
 house would keep considerably inside of that 
 amount, or refuse altogether, without further 
 facts and figures, which they decline to furnish. 
 (The mere refusal, however, of parties to give 
 statements, does not mean absolutely that they 
 are " shaky," or can not make a satisfactory 
 exhibit. Some refuse because they feel inde- 
 pendent, and ask no favors, others because they 
 are pig-headed). It is reasonable to suppose, 
 obliged as they are to ask credit, that this 
 concern would cheerfully make an exhibit. 
 Their refusal leaves us to draw our own con- 
 clusions. 
 
198 WHOM TO TKTTST. 
 
 [No. 12.] 
 
 JOHN SMITH, Town of 3,000 inhabitants, near 
 St. Louis, Mo. 
 
 Retail Grocer. 
 
 Commenced this business five years ago; firm 
 was then Smith & Co., the "Co." being his 
 father-in-law, a well-to-do farmer, who retired 
 two years ago from the business. Under Smith 
 & Co. the firm was regarded good, and enjoyed 
 a first-class credit, although the habits of Smith 
 were not good, and this, it is presumed, caused 
 the father-in-law to drop out. He declines to 
 give a statement. His stock is estimated at from 
 $4,000 to $5,000. Does a large credit business 
 with the farmers, and not considered a sharp 
 collector. No estimate can be made of liabili- 
 ties, which he says are for current bills only. 
 Considered responsible for a moderate amount. 
 Hear no complaints. 
 
 ANALYSIS AND EEMAEKS. 
 
 The above report was obtained by a Chicago 
 firm to determine credit on mail order received. 
 The responsibility of the party would seem to 
 be sufficient for a moderate credit, but the 
 question comes up: Why does he go out of his 
 way to buy goods? He can buy the same goods 
 as cheap in St. Louis, at a saving of time and 
 freight, and that would, naturally, be the place 
 for him to buy. Men do not go out of their 
 
MERCANTILE REPORTS ANALYZED. 199 
 
 way to pay more for goods, or place orders to 
 their evident disadvantage, unsolicited in par- 
 ticular. This case clearly comes under the 
 head of Miscellaneous Information. If the 
 facts were known, as they probably are to those 
 who have heretofore sold him, it would un- 
 doubtedly appear that Smith's credit is no 
 longer good where he is best known. Our 
 thorough system of working the trade by per- 
 sonal solicitation gives a " good dealer " hardly 
 any chance or excuse for seeking new alliances 
 by correspondence, especially on staple lines of 
 goods. We may safely put it down that if this 
 man's trade was worth having, it would be se- 
 cured by those houses to whom it legitimately 
 belongs. 
 
200 WHOM TO TKUST. 
 
 CEEDIT IMPLIES RISK. 
 
 After reading the foregoing reports, which we 
 may regard as applications for credit, for such 
 they are in fact, or after examining any number 
 of others as they come before us in the regular 
 course of business, the question of ' ' whether to 
 sell or not to sell, ' ' is indeed a puzzling one, very 
 often. The doubts and misgivings of the man 
 of no particular experience in determining such 
 questions are so clearly portrayed in the follow- 
 ing lines, On Credit, that I consider them enti- 
 tled to a place right here : 
 
 To sell or not to sell? 
 
 That is the question. 
 
 Whether it is better to send the goods 
 
 And take the risk of doubtful payment, 
 
 Or to make sure of what is in possession, 
 
 And, by declining, hold them. 
 
 To sell; to ship; perchance to lose 
 
 Aye, there's the rub ! 
 
 For when the goods are gone, 
 
 What charm can win them back 
 
 From slippery debtors ? 
 
 Will bills be paid when due ? 
 
 Or, will the time stretch out till crack of doom? 
 
 What of assignments, what of relatives, 
 
 What of uncles, aunts, and mothers-in-law, 
 
 With claims for borrowed money? 
 
 What of exemptions, bills of sale, and the compromise 
 
 That coolly offers a shilling a pound; 
 
 And of lawyers' fees 
 
 That eat up even this poor pittance? 
 
CREDIT IMPLIES RISK. 201 
 
 Yet sell we must, 
 And some we'll trust. 
 We seek the just, 
 For wealth we lust; 
 By some we're cust; 
 And stocks will rust ; 
 But we skip the wust, 
 Or we'd surely bust. 
 British and Colonial Printer and Stationer. 
 
 The term credit implies that we have parted 
 with something of value, and for which value is 
 to be given at a future time. It is not convenient 
 or even possible for the buyer of the property 
 to give other value in exchange, on the spot, and 
 so we resolve to take the chances on what time 
 may do. What it will do, of that we can not 
 be absolutely certain. There is, then, a degree 
 of uncertainty which attaches to all credit trans- 
 actions, some more and some less, and to deter- 
 mine these varying degrees of risk, ranging 
 from apparently u no risk to all risk," is where 
 the critical task comes in. 
 
 But we need not be without our bearings. 
 The sailor, with his chart and compass, though 
 in the middle of a tempestuous ocean, is not 
 altogether ' c at sea. ' ' By making use of the aids 
 at his command, and the experience of others 
 before him, in locating the danger-spots, his 
 risk is reduced to a minimum quantity. 
 
202 WHOM TO TRUST. 
 
 INVENTORY VALUATIONS. 
 
 There are safe and unsafe methods of doing 
 business, as there are right ways and wrong- 
 ways of doing things in general. We refer now 
 to taking stock, or inventory. The difference of 
 opinion as to the proper course to be adopted 
 in this matter seems to be very trifling; but the 
 diversity of practice is very great. Strange as 
 it may seem that people should willfully 
 deceive themselves, it is nevertheless a fact that 
 self-deception is of every-day occurrence among 
 business-men. There is a weakness in our 
 human nature which shows itself in a desire to 
 appear for more than we are, and this holds 
 especially good in a financial sense. Nor is the 
 desire restricted in its effect on others, simply, 
 but it operates with equal force on our own 
 minds. Yery few men are willing to gauge 
 their possessions by a cash standard. Even 
 when this is ascertainable, they hope to realize 
 more, and accordingly place a fictitous value on 
 them, which the future may or may not bear 
 out. No deception is so harmful as self-decep- 
 tion to the man of business in the matter of 
 dollars and cents. 
 
 We come now to the question, what do we 
 take an inventory for at stated intervals, as is 
 the custom? First, because we desire to Jcnow 
 how much we are worth. For a business-man, 
 
INVENTORY VALUATIONS. 203 
 
 a knowledge of his condition is necessary in 
 order that he may conduct his affairs intelli- 
 gently and with safety. Secondly, it is desira- 
 ble to know whether the business, for a given 
 period, has been profitable or otherwise. The 
 last inventory, compared with the previous one, 
 will indicate this. To know whether a business 
 has been successful or not for the previous 
 twelve months is of the utmost importance. To 
 continue a business that is unprofitable is not 
 to our interest, therefore a knowledge of such 
 fact would determine us either to retire from it 
 or devise ways and means of remedying the 
 evil. 
 
 But, what is our property worth? In a strict 
 sense, it is worth what we can realize from it in 
 money, whenever it may be desired to convert 
 it. Money is the medium of exchange, and is 
 our standard for measuring property of what- 
 soever description. This might mean a "forced 
 sale" valuation, but that is not demanded by 
 even the strictest rules of business practice. 
 What can be realized from the property in the 
 ordinary course of trade, or what it can be 
 duplicated for, furnishes a fair and safe basis 
 of its worth. A stock is worth what it would 
 cost to replace. It may be worth more or less 
 a month hence, but all subsequent variations in 
 value enter into the following year's profit or 
 loss account, or inventory. 
 
 The plan followed by conservative houses is 
 
204 WHOM TO TRUST. 
 
 to appraise their stock, personal and all other 
 property, at the lowest cash market value. 
 Some are still more conservative, and give goods 
 credit for cost only when that is below the mar- 
 ket, and at market value only when that is 
 below cost. The first plan is safe, but the sec- 
 ond is safer, and as no injury is done to the 
 owners or anyone else, it might commend it- 
 self. The aim should be to appraise our prop- 
 erty in such a manner, that, if we should sub- 
 sequently decide to retire from business, that 
 we should realize the full limit of our calcula- 
 tions. How many do this? 
 
 So far as ascertaining the annual profits is 
 concerned, it is immaterial how the inventory 
 is figured, so long as a uniform system prevails 
 from one year to another. 
 
 Where the greatest mistake is made, how- 
 ever, and where the greatest self-deception is 
 practiced, is on old stock, goods out of date, 
 broken assortments, and" odds and ends ' ' gener- 
 ally, and unless great care is exercised, a large 
 quantity of these will be on hand year after 
 year. To take these at cost, as is not infre- 
 quently done, is unsafe and unbusiness-like. 
 They have an auction-house or "job-lot " value, 
 and the proper thing to do is to ascertain that 
 before each inventory, by converting them into 
 cash by auction or job-lot sale. Many old and 
 reputable houses, after doing business for a 
 life-time, and thinking themselves well-off, 
 
INVENTORY VALUATIONS. 205 
 
 have found, on winding up, that they were 
 comparatively poor, or altogether bankrupt, 
 from no other cause than giving a lot of rubbish 
 a fictitous value which a money standard would 
 not warrant. 
 
 When property consists of a manufacturing 
 plant, and is partly composed of machinery, 
 tools, patterns, fixtures, etc., the following 
 plan is largely adopted in regard to values: All 
 the machinery, tools, etc., are charged to ma- 
 chinery account, at cost. Labor expended in 
 putting them up, fitting and repairing, is 
 charged into expense account directly. At the 
 end of each year the machinery account is 
 credited with a percentage say 10 per cent. 
 for wear and tear and depreciation. If the 
 business was closed out the first year or so, this 
 method would not cover the depreciation, but 
 in carrying it on permanently, we can see that 
 in ten years the first year's investment would 
 stand canceled on the books. Of course, even 
 second-hand machines and tools have a value, 
 and when this is reached, the discounting pro- 
 cess is stopped. It is simply aimed to arrive at 
 a fair valuation, and at which the property 
 would be convertible. 
 
 But the property of a merchant or manufact- 
 urer most difficult to appraise at its actual 
 value, consists of Accounts and Bills Receiva- 
 ble. There are few accounts that we can be 
 absolutely sure of. Those which we look upon 
 
206 WHOM TO TEUST. 
 
 as the best, sometimes turn out a loss, and the 
 more doubtful ones come in all right. In order 
 not to be misled in our calculations of what is 
 due us, and what will be paid, we may classify 
 our accounts, etc., and treat each class separ- 
 ately, by a general average, such as our past ex- 
 perience indicates. We divide them into three 
 classes, viz.: 
 
 (1) Accounts and notes which Jiave been 
 found to be uncollectible after exhausting all 
 
 the means at our command. These should be 
 charged up to profit and loss account and ex- 
 punged from the ledger. 
 
 (2) Accounts against estates in the hands 
 of assignees and receivers. These should be 
 charged, in part, to profit and loss account. 
 We may, with tolerable safety, depend on real- 
 izing one-third of these ; the other two-thirds 
 charge up. This is by no means an under- val- 
 uation. 
 
 (3) Accounts past due, in the hands of at- 
 torneys for collection. This refers to such, 
 where the responsibility of the debtors has not 
 yet been ascertained. They are past due, and 
 the ordinary methods of securing payment have 
 failed. They may or may not be collectible by 
 law. Some of these can be collected in full, 
 others in part, and others not at all, and it is 
 impossible to tell which is which. Charge 50 
 per cent, of these to profit and loss and you will 
 not be far out of the way. It is assumed here 
 
INVENTORY VALUATIONS. 207 
 
 that all accounts are placed promptly in the 
 lawyer' s hands when not settled within a reason- 
 able time after due. In class 3 only ' ' live ' ' ac- 
 counts are contemplated. 
 
 For convenience, accounts under class 3 may 
 be transferred to "Suspense Account," and 
 50 per cent, of the total be charged to profit 
 and loss. This leaves us 50 per cent, of their 
 face value to inventory. The same may be 
 done with class 2, Profit and Loss Dr. to Sus- 
 pense Account 66| per cent., leaving 33^ per 
 cent, to inventory as available assets. 
 
 Because accounts are charged up to profit 
 and loss and balanced on our ledger, does not 
 signify that we are to lose sight of them. A 
 profit and loss ledger, independent of the reg- 
 ular books, is usually kept, and old claims are 
 thus looked after. Some of these are resur- 
 rected occasionally by watching them and 
 keeping track of the movements of our defunct 
 debtors. An entry now and then on the 
 credit side of profit and loss does not mar the 
 looks of that account. 
 
 The bearing that this chapter has on 
 4 ' credits ' ' will be apparent when it is con- 
 sidered that, as a rule, we rely almost entirely 
 on the applicants for credit themselves for the 
 estimates placed on their capital and resources. 
 Whether the estimates and figures are made on 
 a basis of actual value, or whether unsalable 
 goods and worthless accounts make up the sum 
 
208 WHOM TO TRUST. 
 
 total, largely or in part, is beyond our means 
 of ascertaining. But appreciating the fact that 
 over-estimates are the rule, and fictitious valua- 
 tions are not infrequent, more from lack of 
 good business methods than from bad inten- 
 tions, perhaps, the necessity becomes manifest 
 of making allowance for a liberal, average 
 shrinkage. 
 
PAST-DUE ACCOUNTS. 209 
 
 PAST-DUE ACCOUNTS. 
 
 Out of every ten accounts that are lost, it is 
 safe to estimate that only one is lost before 
 maturity. The other nine were still good at 
 maturity, and if the proper effort had been 
 made at the time to collect, they could have 
 been saved in the majority of cases. The fact 
 follows, then, that we make nine-tenths of our 
 losses, approximately, by allowing accounts to 
 run, either by voluntarily extending the time, 
 or by suffering them to drag for one reason or 
 another. 
 
 Usually, it is for reasons of so-called policy 
 policy in other respects; but in no direc- 
 tion will it be found to serve our interest or 
 accomplish a desired purpose. 
 
 We are confronted with the fact, of course, 
 that mercantile bills or open accounts are not 
 looked upon like an obligation to a bank that 
 must be paid on a certain day and by a certain 
 hour; at any rate, comparatively few merchants, 
 taking them all in all, have educated themselves 
 up to this standard. Where we find one that 
 has, we find five who have no idea of meeting 
 even a note on the day it is due. 
 
 But accepting things as we find them in refer- 
 ence to accounts, until they have become due, 
 they cause us no anxiety, nor, in fact, have we 
 any claim, in law, against our customer until 
 
 14 
 
210 WHOM TO TRUST. 
 
 then. It is only when the account has matured 
 that the critical time comes for the creditor, 
 and, even then, not till some days have elapsed 
 for the debtor to make his payment. On a 
 note there is three days' grace, and it is either 
 honored or dishonored; but on an open account 
 no fixed time governs the case. The debtor 
 may take ten or twenty days' grace without our 
 consent and without our feeling justified even 
 in making a peremptory demand. This much 
 extra time we give and have to give, almost 
 unavoidably, before any anxiety or doubt is 
 awakened in our minds as to the goodness of 
 the claim. After that, a series of letters are 
 written demanding settlement, and more time 
 is consumed, resulting in this, that about 
 thirty days are lost, after maturity of a bill, 
 before the fact is ascertained whether non- 
 payment is due to carelessness, lack of good 
 business methods, unwillingness, or inability to 
 pay; and which of these four reasons applies, 
 is not always determinable even then. 
 
 By the bank-draft system adopted by most 
 houses, this loss of time can be materially 
 shortened. Accounts not paid within a couple 
 of days after due are drawn for at sight. If 
 not accepted on presentation or paid when due 
 after acceptance, it is the bank's duty to return 
 the draft at once. If the bank attends to its 
 collection department promptly and on bank- 
 ing principles, we either have our money or the 
 
PAST-DUE ACCOUNTS. 211 
 
 draft returned to us inside of ten days or less, 
 and the loss of time is, therefore, small.* 
 
 Now, then, default of payment having been 
 made and the usual methods having failed to 
 bring payment, we are forced to these conclu- 
 sions: Either our judgment was poor in making 
 the credit in the first place, or the premises on 
 which judgment was based were wrong, or 
 we acted carelessly and without sufficient cir- 
 cumspection. We frequently trust men whose 
 actual capital and financial status would not 
 entitle them to credit. We do this very often 
 on the strength of reported good business qual- 
 ities, a past record for promptness, and other 
 favorable conditions. But when the test comes 
 and we find ourselves disappointed, the party 
 then has forfeited every, claim to credit and 
 confidence. In cases of this kind, no time 
 must be lost in securing claim . Although col- 
 lection might not be enf orcible by law for lack 
 of tangible property, yet the debtor has a fair 
 business, and he can not afford to allow Ms 
 standing and his prospects to be injured, and 
 so by pushing our claim energetically, the 
 chances are in favor of getting our money. 
 
 In the majority of cases, we can not know why 
 bills are not met. To ascertain this at once, is 
 
 * NOTE. Where banks are called upon only occasionally to 
 make collections for us, inclose postage for return of unpaid 
 drafts. It is only right to do this, and the service will be 
 more prompt. 
 
212 WHOM TO TRUST. 
 
 of the utmost importance, and to this end the 
 best and latest information should be obtained 
 in order that we may decide quickly whether 
 our claim would be jeopardized by the necessary 
 delay in trying "moral suasion." Lawyers' 
 services absorb our profits and cause expense, 
 and we are eager, of course, to save the one and 
 avoid the other; therefore, when we can satisfy 
 ourselves, beyond doubt, that an account is col- 
 lectible by law, we may, in these exceptional 
 cases, defer legal action for a little time while 
 making our best efforts to collect without legal 
 process. 
 
 But these cases will be found rare. After 
 diligent inquiry we are generally in doubt as to 
 the real cause for non-payment; but whatever 
 the reason may be, it is tantamount to the 
 debtor's untrustworthiness thenceforth. Delay 
 would be dangerous, and as the customer is no 
 longer a desirable one, our only policy is that 
 which our safety demands, viz. , to enforce col- 
 lection by law at once. 
 
 I have divided our delinquent debtors into 
 three classes, viz.: Those of Insufficient 
 Responsibility, Doubtful Responsibility, and 
 Undoubted Responsibility. The first and sec- 
 ond brook no delay, for it is better to lose our 
 profits in fees to the lawyer and save the prin- 
 cipal, than by delay to lose both. In the third 
 class, delay not being attended with any 
 apparent risk, we may try to save expense, and 
 
PAST-DUE ACCOUNTS. 
 
 endeavor, by the ordinary tactics, to make our 
 claim. Our course, with reference to this class, 
 will naturally be dictated by policy, or by our 
 own necessities; but this we must do: Have a 
 time and a day set when payment will be made. 
 Insist upon this, as you have a right to; and, 
 secondly, insist upon punctual discharge of the 
 promise. If this promise is again violated, 
 disregard further excuses, however plausible, 
 and get your money. 
 
 It may seem impracticable or impolitic to 
 some to follow the rules laid down here. They 
 are correct, however, not only in theory, but in 
 practice, as many houses can testify from their 
 own experience. The more and the nearer we 
 can bring ourselves to work on certain rules 
 and principles, and stick to them, keeping aloof 
 from all personal influences and appeals to our 
 sympathies which in business shows only 
 weakness, after all the smaller will be our 
 loss, and this is applicable, not alone to credits, 
 but to business in general. 
 
 It is an established law that " we act in the 
 line of least resistance." To make our own 
 collections promptly, so as to be able to pay 
 promptly, requires constant and timely ex- 
 penditure of energy, and is, therefore, in the 
 line of greatest resistance just the opposite of 
 our natural inclinations. It can not be denied 
 that nearly all our customers would be " slower 
 pay" than they are if we consented to the 
 
214 WHOM TO TRUST. 
 
 arrangement. In a great measure, therefore, we 
 are responsible, as creditors, for the habits they 
 fall into, and the responsibility involves more 
 than a bad habit in them it involves our capi- 
 tal and our welfare. As between two houses 
 that could be named, having bills maturing on 
 the same day with the same customers, it would 
 not be difficult to say, if only one house could 
 be paid on time, which would get the prefer- 
 ence. It is a question very largely of the kind 
 of impressions we make on those who are our 
 debtors, as to- the respect they entertain for our 
 methods and the degree of effort they feel 
 themselves called upon to make for us. 
 
COLLECTIONS. 215 
 
 COLLECTIONS. 
 
 A synopsis of the laws of the different States 
 pertaining to collections and insolvency, is 
 easily obtained and digested. The statutory 
 laws on assignments, receiverships, exemp- 
 tions, mortgages, limitations, attachments, 
 chattel mortgages, etc., with which the busi- 
 ness-man is mainly concerned in the collection 
 of his accounts, are much the same in all the 
 States, and are largely copied from the old 
 English Common Law. Arrest and impris- 
 onment for ordinary debt is done away with, 
 and while this may operate, in some instances, 
 with too much leniency, and more than was 
 contemplated, yet, in the main, it shows evi- 
 dence of advancement, and is in keeping with 
 our more modern conceptions of humanity and 
 sympathy for the unfortunate. 
 
 In Germany, France, and other countries, 
 rigorous methods are still enforced against 
 bankrupts, and imprisonment for debt is not a 
 rare occurrence. In England, though the laws 
 as they stand are quite as severe, they are not 
 as rigorously enforced. Imprisonment for debt 
 must be admitted to be a relic of despotism, 
 but it is gradually being expunged. Where 
 commerce is least developed, the clause is most 
 enforced, and where we find the highest devel- 
 opment, it is least enforced. 
 
216 WHOM TO TRUST. 
 
 To imprison the man who is in our debt, and 
 who is unable to pay; to shut him up and deny 
 him the opportunities of doing anything to 
 help himself or us, does seem to be the most 
 idiotic proceeding imaginable. Besides the 
 inhumanity of the practice, it is so thoroughly 
 opposed to our own interests, so thoroughly 
 "uncommercial" for people engaged in com- 
 merce, that we wonder it survived as long as it 
 has. An Indian, who was incarcerated in jail 
 in Albany, in default of payment of a certain 
 number of beaver-skins (then taken as cur- 
 rency), made the common-sense remark, which 
 strikes home, ' ' That the prison was a mighty 
 bad place to catch beaver." 
 
 One or two centuries ago, the laws and 
 statutes were looked upon as fixed stars, and 
 therefore unchangeable. Every interest and 
 act of man had to conform to the law as it 
 existed. The view would seem to have been 
 held that laws were made first, and that man 
 came afterward and accepted them, just as he 
 does Nature's laws. 
 
 But happily we have changed this. At the 
 present time we make and repeal our laws, and 
 adapt them to the progressive wants of man, 
 and of society, with a view to promoting the 
 welfare of the community, and by thus revers- 
 ing the spirit of our laws, we have made a 
 decided move onward and upward. 
 
 Our legislative and judicial departments per- 
 
COLLECTIONS. 217 
 
 form their functions no longer arbitrarily, but 
 with due reference to the manifold industries 
 in which man is engaged. It is no longer a 
 question of what does the law allow us to do, 
 but what laws do we need, and that will best 
 subserve our interests, either in protecting or 
 developing. 
 
 In proof of what has been stated here, we 
 may cite the Bankrupt law, which at three 
 different periods in the country's history was 
 put into force, and each time, after having 
 given the relief sought, it was repealed, and 
 both the enforcement and the repeal were 
 equally wise and expedient. At each of these 
 periods, the provisions of the Bankrupt law 
 were invoked for the benefit of the debtor class, 
 who, by severe panic and depression, had 
 become hopelessly involved. The interests of 
 commerce, its life and vitality, demanded 
 relief for a large number of helpless, though 
 otherwise active and useful, members of the 
 business community. That this law did not 
 operate, and never will, for the benefit of the 
 creditor class, directly, has been fully demon- 
 strated, nor has that ever been its purpose. 
 
 Efforts have been made, at various times 
 since its repeal in 1878, to have a permanent 
 Bankrupt law passed, but with no success. 
 The defeat of the movement may be taken as 
 indicative of an adverse sentiment among 
 business-men. In ordinary times it can sub- 
 
218 WHOM TO TRUST. 
 
 serve no good end. Its administration, as 
 experience proves, is not economical, but 
 wasteful of the debtor's assets. Its operation is 
 subversive of the creditor' s interests, instead of 
 being beneficial, and they are better protected, 
 or rather, can protect themselves better, under 
 the State Statutory law. 
 
 Practically, the debtor enjoys all the advan- 
 tages under the State laws, that the Bankrupt 
 law can confer. If the insolvent of to-day can 
 show good cause why he should be discharged 
 from his debts, after paying all that he can, he 
 usually finds no difficulty in getting an honor- 
 able discharge. The man who is entitled to it 
 (and this includes all except the downright 
 thief), can safely depend on the acquiescence 
 of his creditors in any reasonable proposition 
 for settlement. 
 
 Under our State laws it is "first come, first 
 served." The creditor who gets ahead with his 
 claim takes the persimmons. The wide-awake 
 merchant finds no fault with this arrangement. 
 (The law of Minnesota undertakes to prevent 
 preferences being given or obtained, but in 
 other States no such provision is made.) Since 
 the creditor's safety rests, then, on his vigil- 
 ance, it behooves him to be on the alert. Good 
 management of the collection department has 
 its reward under our present system, which is 
 not the 'case under a bankrupt law. Under 
 this, from and after the time that insolvency 
 
COLLECTIONS. 219 
 
 can be established by any act, all the creditors 
 are supposed to have equal rights, and prefer- 
 ences or securities obtained subsequently are 
 held to be unlawful. 
 
 Whether we are extending credit under our 
 State laws, or the Bankrupt law, concerns the 
 larger houses more particularly, and the latter 
 operates especially against these. Many of the 
 wholesale firms carry their customers for large 
 amounts, in consideration of the latter 1 s trade, 
 and this arrangement is for mutual benefit. It 
 ties the customer to some one house, and the 
 relations between buyer and seller are of a very 
 close and confidential nature. Whenever the 
 creditor has reason to become uneasy, his claim 
 is sufficiently large to demand security, and he 
 usually gets it. The smaller creditors are 
 left out " in the cold," in case of a foreclosure 
 by the secured creditor. This happens every 
 day. But under the Bankrupt law, the larger 
 creditor could not secure himself, to the detri- 
 ment of other creditors, and, knowing this, he 
 would feel the need of greater conservatism in 
 extending credit. 
 
 So, all in all, our State laws may be consid- 
 ered f ally adequate to our business needs and 
 protection, and the law of " the survival of the 
 fittest" comes into play. 
 
220 WHOM TO TRUST. 
 
 COLLECTIONS METHODS EMPLOYED. 
 
 The large and constantly increasing number 
 of collection agencies and lawyers, who make 
 a specialty of collecting past-due accounts, 
 would indicate that there is an immense field 
 for work in this line. The best way is not to 
 have to employ them ; but since their employ- 
 ment by us is unavoidable, we must seek the 
 best the market affords. 
 
 The plan of the collection agencies is to se- 
 cure the addresses of attorneys in every town, 
 county, and city, and your claim is sent to 
 these attorneys by the agency to whose care it 
 has been intrusted. The collection charges are 
 usually guaranteed to be no more than if the 
 claim was sent direct by you, and it is further 
 guaranteed that claims coming through these 
 will receive better attention. How far these 
 promises are made good, depends largely on 
 the agency, and much care is necessary in your 
 selection. In the first place, their financial 
 responsibility should be unquestioned ; and, 
 secondly, you should convince yourself that 
 their selection of attorneys is made from the 
 best ranks in the profession. 
 
 Lists of attorneys throughout the country 
 are accessible to everybody, and it is no trick to 
 start a collection agency ; but it does seem 
 to be quite a trick to get satisfactory service 
 
COLLECTIONS METHODS EMPLOYED. 221 
 
 from most of them. But find one, good and 
 reliable, and it will save you much time and 
 annoyance in looking after your claims your- 
 self, besides probably securing better results. 
 
 Where a good deal of collection business has 
 to be done by houses, direct communication 
 with attorneys has been found preferable. 
 While this method involves more work and at- 
 tention at your hands, it has the advantage of 
 making all instructions direct instead of 
 through an intermediary, and the attorneys 
 will work for you just as cheaply and just as 
 efficiently as for the agencies, if not better. 
 
 By becoming a subscriber to a good agency, 
 it furnishes you a list of attorneys, both for col- 
 lecting and reporting. The experience of every 
 house proves that quite a large percentage of 
 claims is lost by dilatoriness on the part of at- 
 torneys. This, however, is quite as much the 
 fault of the client as of the attorney. If the 
 attorney takes your claim and commences suit 
 instanter, he is liable to be blamed and charged 
 with an inordinate desire to make costs and fees, 
 especially if he accomplishes nothing by it. In 
 the absence of special instructions, therefore, 
 he will always try to clear himself from any 
 imputation of that kind. 
 
 When an account gets into such shape as to 
 require the services of an attorney, the inference 
 is that you have waited as long as you care to, 
 and safety warrants. In either case you want 
 
222 WHOM TO TRUST. 
 
 payment of your claim. You have given all 
 the time and indulgence that is deemed pru- 
 dent or your own interest justifies. That 
 being the case, let positive instructions accom- 
 pany your claim, and these should be right to 
 the point. "Collect, or if more time is* asked, 
 get security. If not paid or secured at once, 
 commence suit and enforce collection by law 
 with the least possible delay." Go on the plan 
 that when you employ an attorney it is not to 
 grant further indulgence or to accept further 
 excuses, but to practice the law, and the more 
 summarily this is done, the better for your 
 claim, always. 
 
 We are prone to send our collections and de- 
 pend on our attorneys for advice, and let them 
 do as they think best. But the merchant needs 
 no advice in the matter of an ordinary collec- 
 tion. He is his own best counselor on the 
 merits of a past-due account. It is not a ques- 
 tion of law, but of bringing the law to our aid 
 and getting what belongs to us. 
 
 Positive instructions are of advantage, for 
 other reasons. Attorneys are human, like 
 other people ; their feelings and sympathies 
 are fully as susceptible. Acquaintance, and 
 often friendship, between attorney and defend- 
 ant, place him in an awkward position in mat- 
 ters left discretionary with him. He intends to 
 do his duty by his client, but aims also to fa- 
 vor the defendant as much as possible, and the 
 
COLLECTIONS METHODS EMPLOYED. 223 
 
 result is that valuable time is lost and your 
 claim is often the worse for the delay. But 
 whatever may be the relationship between at- 
 torney and defendant, if the attorney has posi- 
 tive instructions, of which fact he can convince 
 the defendant, the latter can find no fault, for 
 there is no room left for the use of discretion- 
 ary power. Again, the attorney of your selec- 
 tion may also be retained by the other side. 
 This not infrequently happens. Let the in- 
 structions include the request that if he can 
 not, for any reason, attend to your claim as 
 desired, to return it at once. 
 
 It is sometimes a question whether a claim 
 is worth incurring further expense on. In a 
 case of this kind your attorney may be able to 
 advise you, and this will be necessary before 
 you can give definite instructions as to the 
 course you wish to pursue. We come too late 
 with our claims sometimes, and where there is 
 no prospect of making them, it would be use- 
 less to waste money. Such claims, by watch- 
 ing them, can frequently be made in whole or 
 part, but if not, they can be put in judgment 
 before they become outlawed, if the prospects 
 later on warrant the expense. 
 
224 WHOM TO TRUST. 
 
 SHARP COLLECTORS. 
 
 We are in business to make money, and not 
 simply for the accommodation of the public. 
 Upon this we all are agreed, as an abstract prop- 
 osition, but how is it in practice? If anybody 
 should intimate that you did business for 
 accommodation, the accusation would be re- 
 sented, no matter how charitably-inclined you 
 might be, or how philanthropic it may sound. 
 You would naturally say: "If I want to do 
 charity work I can do ifc in an easier way. I 
 can dole out my money and property without 
 the work and worry of business." And yet 
 how many merchants, and especially retailers, 
 there are who conduct their business on that 
 principle. To be sure, accommodation cus- 
 tomers can be found in abundance, and goods 
 need not become rusty or musty waiting for 
 that class. 
 
 But that is not the way of the successful 
 business-man. He looks sharp after his col- 
 lections, and does not want customers who do 
 not pay promptly. His goods will keep until 
 he can exchange them for something beside 
 uncertain accounts. He calculates that while 
 he is in business he will have something to say 
 about the terms of payment, etc. These he 
 will make as long as the nature of the goods 
 will warrant, but whoever buys them on his 
 
SHARP COLLECTOES. 225 
 
 terms, is required to meet the payments 
 promptly at maturity. Houses are prone to 
 carry customers because they think them 
 good. On the other hand, those that are not so 
 good, or not good at all, have to be carried 
 because immediate collection can not be 
 enforced. 
 
 With the former class it is carrying volun- 
 tarily, and with the latter, it is compulsory, 
 and, to sum up, they are carrying all their 
 trade and furnishing them capital. This is 
 doing business on the accommodation plan. 
 
 But it does not pay. There is neither profit, 
 safety, nor common sense in this method of doing 
 business. Even in cases where we have every 
 reason to believe a customer responsible and 
 undoubtedly good for his account to us, we are 
 not justified in carrying him indefinitely, for 
 the reason that any number of mishaps, beyond 
 the control of any man, may happen, which will 
 endanger our safety as creditors. Fire, floods, 
 sickness, death, and innumerable other unex- 
 pected and unforeseen things may occur, and 
 are daily occurring, which, though they may 
 not always result in total loss of our account, 
 are yet sufficient to tie up a portion of our 
 working capital, and every time we extend an 
 account, it must be borne in mind that we incur 
 all these risks. 
 
 The largest and most successful houses are 
 prompt in making their collections, and it may 
 
 15 
 
226 WHOM TO TEUST. 
 
 be claimed that this very feature in the con- 
 duct of their affairs has made them so emi- 
 nently successful. The answer might be made 
 that they can afford to be independent. Yes, 
 and they always were, from a very small begin- 
 ning. If business-men, as a rule, both whole- 
 sale and retail, would insist more on punctual 
 compliance with terms and time engagements, 
 it would be a blessing and a saving to creditor 
 and debtor alike. 
 
 The timid creditor gains nothing by his tim- 
 idity. Let your customer understand that 
 when his account is due it must be paid, and 
 he will pay it unless your judgment of him 
 was wrong to start with; and when he wants 
 goods and you have anything to offer him, he 
 will buy of you more readily than of a house 
 with whom he is already in arrears. 
 
 By letting accounts and customers run 
 behind, the experience of old-established 
 houses is, that you sell them fewer goods, in 
 the long run, than by adopting the other course; 
 but this is only one of the bad features of in- 
 dulgence. 
 
 It is a positive fact that the prompt col- 
 lectors are the most respected by the trade, and 
 stand highest in the community, and another 
 incontrovertible fact is, that they lose no trade by 
 it that is worth having. A third very valuable 
 point gained is, that you can handle your busi- 
 ness and your capital to the utmost advantage, 
 
SHAKP COLLECTOES. 227 
 
 and give your customers better and more satis- 
 factory service. This feature alone draws to 
 you the better class of trade. 
 
 As between the easy, pay-when-you-like 
 method and that of the house which insists on 
 prompt payments, and fulfillment of engage- 
 ments, it is .not difficult to see and enumerate 
 many advantages that the latter has over the 
 former. To look sharp after our collections is 
 one of the most essential things in business, 
 and our success depends on it more than on 
 any other single factor. 
 
228 WHOM TO TRUST. 
 
 REFERENCES. 
 
 References, when given by strangers to obtain 
 credit from us, should be taken with a good grain 
 of allowance and be viewed with great caution. 
 Much credit is given on the strength of these. 
 Whenever any one refers you to another, that 
 other's opinion will be a good one invariably. 
 Do you suppose any one would give you a ref- 
 erence that would turn against him and be 
 detrimental to him? It hardly looks reason- 
 able. 
 
 The party referred to usually occupies one of 
 several positions, and, we may say, his opinion 
 is dominated by either friendliness, indiif erence, 
 or self-interest. When not pecuniarily inter- 
 ested himself, he rarely knows the true position 
 of the party seeking recommendation. Being 
 under no pressure to investigate, he very likely 
 looks upon the lenient and charitable side of 
 the case and says all the good he can, for that is 
 expected of him. He is called upon to tell the 
 truth, and this he does; but he is not obliged to 
 tell all he knows. We dislike to say anything 
 derogatory of any man in trade, and especially 
 if he refers to us and expects our good offices. 
 Though ofttimes perversive of good, we may 
 look upon this charitable phase of human 
 nature in business as very exalted and highly 
 commendable of itself. 
 
REFEKENCES. 229 
 
 If, on the other hand, the referee, or party 
 referred to, is interested pecuniarily in the 
 referring party, who is a customer, we will say, 
 though not perhaps, the most desirable in 
 every way, the law of self-interest is apt to 
 come to the surface. If good can be said, we 
 say it with great pleasure and satisfaction. If 
 not so good, we say less. Our own business 
 relations and safety depend upon his success, 
 and the latter, again, depends upon his ability 
 to get accommodations from others, and our 
 cognizance of this fact prompts us to aid him 
 all we can. In all this, it may be said, the 
 mind operates quite unconsciously of any 
 wrong-doing. 
 
 Another feature is this: There is hardly a 
 man who has not one or more friends, especi- 
 ally if he is a business-man. Some one of the 
 many he trades with can always be relied on to 
 give a good account of him, though so far as the 
 many are concerned, this would probably have to 
 pass for a " minority report." A man always 
 puts his best foot forward, and in giving refer- 
 ences, he will be sure to give such as will bene- 
 fit him. An opinion from all those he deals 
 with would probably differ, and furnish a more 
 correct basis to work from. 
 
 Bank references are usually considered of a 
 very high order, and place the giver very high 
 in our estimation. The man who can lay claim 
 to the right of referring to his banker, we look 
 
30 WHOM TO TETJST. 
 
 upon as gilt-edged. But we find by experience 
 that a banker' s opinion, as he gives it to us, at 
 any rate, is very liable to be misleading. Indif- 
 ference, or self-interest, also govern his state- 
 ments. It is always with reluctance that 
 bankers allow themselves to be used as in- 
 formers or mercantile agencies. They studiously 
 avoid saying anything of a disparaging nature 
 of their townspeople, whether customers or 
 not. That they usually know more than they 
 tell, is unquestionable. 
 
 If the banker, whose opinion you ask of a 
 certain merchant, happens to be a creditor him- 
 self, he will tell you that he has confidence 
 enough in him to loan him money, and this he 
 emphasizes in a manner so as to carry the con- 
 viction that this ought to be sufficient evidence 
 of his worthiness and claim to credit. Our 
 minds are set at rest by this practical demon- 
 stration of confidence, but in case the party 
 fails soon after, what do we find? It is found 
 that the banker was a creditor, possibly is a 
 creditor still, but if so, he is, nine cases out of 
 ten, a secured creditor, while you are not. The 
 banker's confidence, after all, seems not to 
 have been in the party so much as in his col- 
 laterals. 
 
 We find no fault with the banks for protect- 
 ing themselves, and this is not brought against 
 them as an arraignment. Every creditor would 
 do the same. This is brought up merely to 
 
show that because a man is a borrower at a 
 bank, is not necessarily a sure sign that he is a 
 safe man for us to trust. The banker, in the first 
 place, is a privileged character. The borrower 
 is required to make a minute statement of his af- 
 fairs, and he is prepared to give it if he desires 
 a loan. In regard to such statements, the banker 
 also enjoys superior facilities for having them 
 corroborated and their correctness substanti- 
 ated. On the other hand, the merchant who 
 seeks to place his goods and secure a customer 
 in a mercantile way, finds it more difficult to 
 get statements; they are not so eagerly furn- 
 ished; in fact, we are liable to offend by the 
 mere asking for them. 
 
 Inquire of a banker regarding the standing of 
 any business firm in his locality, and his answer 
 will invariably be favorable; rarely unfavorable 
 or damaging. Even if the house in question has 
 been known to be slow in meeting its obligations 
 "well, that does not signify; everybody is a 
 little slow, now." But ask the banker to 
 discount the paper of this same concern, with- 
 out recourse, though with a liberal commission, 
 and it will be a rare exception when he is not 
 out of funds just about that time. 
 
 This simply proves the position taken, that 
 men in business like to say good things of 
 each other, rather than the reverse. It seems 
 to do us good, to give us exceeding pleasure, to 
 be able to speak well of another, particularly 
 
232 WHOM TO TKUST. 
 
 when we can do so conscientiously and by 
 reason of long acquaintance and from personal 
 knowledge. 
 
 What has been stated above pertains to the 
 references ordinarily given by one man to 
 another, or by one house to another, and where 
 simply opinions are dealt in without serious 
 consideration, as is too often the case. Their 
 value, however, can be greatly enhanced and 
 made to perform the very best of offices, as, for 
 instance, when a customer gives us as reference 
 a reputable firm, and that firm, in turn, is willing 
 to allow us access to the man's ledger account 
 or give us. a transcript of the transactions with 
 him. This procedure furnishes us with valua- 
 ble data, and with these we can form our own 
 and intelligent conclusions. If the transactions 
 cover a long period of years they will furnish 
 particularly good evidence of the party's man- 
 ner of doing business, and we can readily deter- 
 mine whether his account would be a desirable 
 acquisition, or not; for what is satisfactory to 
 one house is not always so to another. And if 
 we are given several references, and are accorded 
 similar privileges in each case, we then com- 
 mand information of a very superior and relia- 
 ble nature. Instead of mere opinions, we are 
 placed in possession of facts and figures and an 
 established record, and references which enable 
 us to obtain these details are invaluable to the 
 credit-man. 
 
REFERENCES. 233 
 
 The importance of this class of reference has 
 received recognition at the hands of several lead- 
 ing lines of trade. In the Wholesale Clothing 
 trade nearly all the large houses, East and West, 
 have formed themselves into an association, the 
 object of which is ( ' mutual protection and assist- 
 ance in the matter of credits. ' ' A committee is 
 appointed, " clothed " with authority to ask of 
 any of the members transcripts of accounts of 
 any of their customers. Not only the past 
 transactions of a dealer are thus made service- 
 able for our purpose, but his present liabilities 
 to that particular branch of trade are ascertain- 
 able. A retail clothing merchant's sum-total 
 of indebtedness to the trade is arrived at with 
 exactness by this system, and if his liabilities 
 exceed the justifiable "limit of credit," or, if 
 he falls behind in his payments at any time, 
 the fact can be at once known to every member 
 of the association. 
 
 The same system prevails with the Jewelers 
 and the Furniture trade; and their separate 
 organizations, for mutual protection, have at- 
 tained a high degree of usefulness. A bureau 
 is created, and the information required by 
 members is obtained by an actuary appointed 
 by the bureau. To some extent other lines of 
 trade make use of this method, also, but it is 
 by no means adopted universally. 
 
 It will be seen that information received un- 
 der these conditions is valuable; but to create 
 
234 WHOM TO TRTTST. 
 
 the conditions first requires cooperation of 
 business-houses. As a matter of fact, where 
 this mutual understanding and cooperation 
 exist, references cease to be of any great im- 
 portance, since, with or without them, the 
 standing of a new applicant for credit could, 
 readily, and naturally would be looked up ; nor 
 would the inquiries be confined to the house 
 specially referred to. 
 
 Agencies have been established and exist 
 which work on this plan, but their usefulness is 
 necessarily limited. Were the universal adop- 
 tion of the plan by all houses feasible, however 
 (which it is not, for obvious reasons), we might 
 look for great benefits and greater safety to our 
 interests as creditors. The present mercantile 
 reports, giving us the character, ability, capital, 
 etc., of buyers, in conjunction with reports from 
 the sellers, giving us the total amount of lia- 
 bilities of said buyers and their manner of meet- 
 ing them, would place us in position to act very 
 advisedly, and we might say, unerringly. What 
 our debtors own is important for us to know, 
 but what they owe is equally important, for a 
 knowledge of the assets only, in itself, is not of 
 any particular value. It is an exact knowledge 
 of the proportion of assets to liabilities, in the 
 case of our debtor, that must be arrived at. 
 
 There exists among the trade at large a com- 
 mendable degree of courtesy. Not only in 
 respect to honoring references, which, of course, 
 
235 
 
 it is a duty we owe our customer when he refers 
 to us, but among houses, generally, we find a 
 disposition to be of service to each other in giv- 
 ing information, even without the special privi- 
 lege that a reference confers; and this fraternal 
 feeling can not be developed too much. 
 
 That the practice of giving and taking refer- 
 ences saves much time and perplexity in the 
 ordinary course of business, is undeniable; but 
 in our acceptance and use of them caution is 
 enjoined the same as in accepting gold coins 
 we must carefully weigh and examine them. 
 
236 WHOM TO TKUST. 
 
 COMMERCIAL TRAVELERS. 
 
 To sell, and very often to create a market for, 
 the line of goods lie represents, is the forte of 
 the traveling agent; but this, though done 
 successfully, may after all be fraught with 
 disastrous consequences to the party furnishing 
 the goods and capital. With energy and ability 
 as salesman, it is of the utmost importance that 
 he should combine with these another qualifi- 
 cation, viz. : judgment in making credits. The 
 old and experienced agent becomes, by constant 
 practice and contact with business-people, a 
 keen judge of human nature, of men's motives 
 and honesty: but all have not reached that 
 point, and some, having mistaken their calling, 
 never will. Anybody can give away goods ; that 
 is, make sales without regard to cost or profit, 
 or by selling to irresponsible parties, and plenty 
 of these can always be found. 
 
 A very large proportion of the credits 
 throughout the country are made directly by 
 agents, or based on their opinions, and in a 
 large measure the prosperity of most houses is 
 in their hands. All shades of competency(?) 
 are met with among traveling men on this head ; 
 the difference between them in the matter of 
 giving credit being as great as it is in their 
 various other capacities. Some agents start out 
 with the idea that their sole business is to make 
 
COMMERCIAL TRAVELERS. 237 
 
 sales, and that it is the firm's affair to deter- 
 mine the rest. Of course, the firm has the 
 privilege of accepting or rejecting, bnt we 
 can not afford to have men, under pay and ex- 
 pense, waste their time on parties whose orders 
 have to be declined. That does not pay, and it 
 further indicates a great lack of a vital some- 
 thing, when a representative shows such indif- 
 ference to our interests. Coming in daily con- 
 tact with the trade in his capacity, he is not 
 only the representative of his firm, but he is at 
 the moment the firm "de facto," and not until 
 he realizes this, and that on his acts and judg- 
 ment depends the welfare of his house, will he 
 make himself a valuable man and indispensable 
 co-worker. It is the commercial traveler in our 
 day who transacts most of the business of selling 
 and distributing, and the authority necessarily 
 given allows him all the discretionary power 
 and latitude, that his principals could wisely 
 exercise themselves. And this is necessary, for 
 to enable our representative to do the best for 
 us, he must have our fullest confidence, and be 
 allowed the utmost freedom in the use of his 
 faculties; and to the great body of agents all 
 this is given, with mutually advantageous 
 results. Of course, only those are entitled to 
 such confidential consideration whose past 
 services have been marked by uniformly good 
 judgment and business capabilities. 
 A eulogy of the traveling man is not contem- 
 
238 WHOM TO TRUST. 
 
 plated, but that he forms the backbone and 
 sinews of our commercial growth, and that to 
 him is due, in a large measure, its rapid develop- 
 ment, must be unhesitatingly admitted. This 
 much is necessary to say of him, in a general 
 way, and in order to arrive at a proper appre- 
 ciation of his vocation, that on him devolves 
 the executive part of nearly all our commercial 
 transactions, and the implicit trust reposed in 
 him is either for good or for harm to his firm, 
 according as he is a co-worker, or not, in the 
 fullest sense of that term. With respect to 
 determining a buyer's claim to credit and our 
 safety as creditors, the traveling agent has cer- 
 tainly every opportunity afforded him for exer- 
 cising judgment. Coming in personal contact 
 with the buyer, as he necessarily does, an esti- 
 mate of his ability, character, habits, and 
 " make-up" generally, is made possible to a 
 practiced mind. Being where the business is 
 carried on, he*is also enabled to make observa- 
 tions of its management, the attention given to 
 it, and whether, on the whole, the requirements 
 necessary to success are fulfilled, or in some 
 vital points overlooked or neglected. Every 
 business carries to our minds impressions, 
 and even convictions, of its condition, whether 
 prosperous or otherwise, and our intuitive 
 senses become wonderfully alert through con- 
 stant use. The same holds good of men, and 
 our first impressions of them. Being, further- 
 
COMMERCIAL TRAVELERS. 239 
 
 more, in the buyer's place of residence, the 
 agent can obtain information of a general and 
 often of a specific character from the neighbors 
 and townspeople, all of which will aid him 
 materially in forming his opinion. 
 
 All these facilities are at the command of the 
 agent, and should be utilized by him, to the 
 end that his recommendations may be judicious, 
 or that the information given by him may be 
 used to corroborate agency or other reports in 
 possession of his principals. 
 
 To the man of long service on the road, advice 
 is not proffered, but to the less experienced, or 
 those naturally a little remiss in the matter of 
 credits, as many of them are, a careful notice 
 of the suggestions made in the preceding chap- 
 ters will redound largely to their advantage, 
 and be of immeasurable assistance to their 
 respective firms. 
 
 One of the shortcomings of the average agent 
 is, that he seldom gets actual figures as to a 
 customer's standing, even when a special re- 
 quest is made to that effect. In lieu of a state- 
 ment he will give it as his opinion that the party 
 is all right, without, however, being able to give 
 any specific grounds for his reasoning. His 
 modesty and timidity in getting at facts are 
 only equaled by the customer's incompetency 
 or carelessness in keeping his books and affairs. 
 In many instances we know the agent is unable 
 to get a statement, for the reason that the pro- 
 
240 WHOM TO TRUST. 
 
 prietor himself can only make a rough guess 
 at liis condition, and as for details, classifica- 
 tion of property, etc., he is quite at sea. With 
 this class of merchants, if an inventory is ever 
 taken, the books never show evidences of it; 
 they never know their true condition from a 
 monetary standard, and would be disheart- 
 ened, very often, if they did know. But even 
 in these cases the agent can gather something, 
 if he perseveres in the right direction, and if he 
 knows what points of information are of great- 
 est importance to obtain. 
 
 It is a great satisfaction and relief to be able 
 to feel that an agent' s opinion can be relied on, 
 and that his uniform good judgment warrants 
 us in accepting his dictum in all cases, conflict- 
 ing opinions to the contrary notwithstanding; 
 nor can it be otherwise than gratifying to him 
 to have won respect for his judgment to such 
 an extent. 
 
 In conclusion, we would say, that every trav- 
 eling man should aim to make his recommend- 
 ations on credits unquestioned, and his opinions 
 law, in the estimation of his principals. 
 
INTERVIEWS VERSUS REPORTS. 241 
 
 PERSONAL INTERVIEWS VERSUS 
 REPORTS. 
 
 We will undertake to show the comparative 
 advantages and disadvantages of the two meth- 
 ods in determining credit. The time was when 
 every merchant found it necessary to repair to 
 the markets once a year, at least, to buy his 
 spring or fall stock of goods. If he was a 
 time customer, as nearly all were, say fifty 
 years ago, he brought his cash with him to 
 liquidate previous purchases, thus making his 
 account good for another credit. There was 
 personal contact and acquaintance between 
 buyer and seller, but this no longer exists to 
 any appreciable extent. The business of to-day 
 is done mainly through traveling agents and 
 by correspondence, so that no opportunity is 
 afforded the merchant or credit-man of exer- 
 cising his judgment of character and of men. 
 Half a century ago the New York merchant 
 prided himself on his keen, perceptive facul- 
 ties in judging human nature. Constant prac- 
 tice undoubtedly made them adepts in this 
 special vocation, and questions of credit were 
 probably no more vexatious to them than they 
 are to us. At any rate, they were always ready 
 to back their opinions, if favorable, by risking 
 their goods. 
 
 Did they ever lose? The losses sustained by 
 la 
 
242 WHOM TO TRUST. 
 
 New York merchants, say from 1800 to 1850, 
 were enormous, but they also reaped large 
 profits, and neither the losses nor the long time, 
 six to twelve months usually, prevented them 
 from making fortunes. 
 
 Is a personal interview between a would-be 
 debtor and creditor an advantage, or detriment, 
 in determining credit? It may be either, accord- 
 ing to circumstances. Both methods, personal 
 interviews and reports, have their compensating 
 features. The accomplished rogue impresses 
 you favorably very often. He has made it his 
 study to give good impressions, and he is as 
 well up in his profession as the merchant he 
 is often the more expert of the two. Even 
 though you have unfavorable reports of him, 
 in his case forewarned is not forearmed always. 
 He manages, not infrequently, to brush away 
 any ill-favored comments that his neighbors or 
 reporters may have made, or that in any way 
 preceded him. A personal interview gives him 
 that opportunity, and he, more than likely, is 
 not only able to make a satisfactory explana- 
 tion, but able to ingratiate himself into your 
 confidence and get your sympathy as well. Per 
 contra, when we have only reports to govern us, 
 we have cold-blooded facts to deal with; at 
 least we accept them as facts, and our cool 
 reasoning faculties and judgment alone are 
 exercised, and our sympathies are in no wise 
 appealed to or endangered. 
 
INTERVIEWS VEKSUS REPORTS. 243 
 
 It is not to be denied that now and then men 
 have been badly used and their reputation 
 injured without just cause; but, after all, these 
 cases are rare, and we may with safety conclude 
 that when injurious reports are circulated, that 
 there is some foundation for them, as a rule. 
 Where there is smoke there is always some 
 fire. 
 
244 WHOM TO TIJUST. 
 
 CHRONIC BORROWERS. 
 
 There is a class of individuals in all mercan- 
 tile communities who may be likened to para- 
 sitic or fungus growths. Like the latter, they 
 subsist on their neighbors. These parasites in 
 business, or out of business, are always asking 
 us for a loan till to-morrow or next day, and no 
 sooner get one loan paid up than they are 
 around for another. 
 
 There is a class of men in business who are 
 always borrowing from Peter to pay Paul, and 
 they get as many Peters on the string as the 
 neighborhood and their circle of acquaintances 
 will afford. They are thoroughly imbued with 
 the idea that business is done for their especial 
 accommodation, and accordingly press all their 
 neighbors and acquaintances, however slight, 
 into service, keeping at the same time close 
 watch on each one's turn. The pressing obli- 
 gation is always pressing, and seems never to 
 be discharged; and probably it never is, being 
 only shifted from one day to another, and from 
 one shoulder to another. There is hardly a 
 house that does not carry in its cash drawer 
 several I. O. U.'s returnable to-morrow, and 
 which represent to the cashier so much cash in 
 balancing his accounts. At the end of the year 
 more or less of these are always unredeemed 
 and uncollectible. The most consoling thing 
 
CHRONIC BORROWERS. 245 
 
 about a loss of this kind is that when your cus- 
 tomer suspends payments with you, he suspends 
 his visits to you also, and in this there is some 
 compensation at least. 
 
 But there is a more business-like way of get- 
 ting at this. The man of business tact, be- 
 longing to this same class, however, has a 
 more genteel way. He wouldn't do as the 
 other fellow does; i. e , ask for a loan. That 
 looks too much like borrowing. He runs in 
 and asks you to exchange checks or notes with 
 him. He knows whose checks are always good 
 at the banks. You do not catch him exchang- 
 ing his check for one that there is any question* 
 about; it must be gilt-edged to be fit for an 
 exchange with his. His check, you know (but 
 you do not always), will be all right to-morrow 
 by the time it gets 'round to the clearing-house. 
 Generally it is, but there is a time coming 
 when it will not be. 
 
 Now, for a good business-man and merchant 
 who is supposed to have good judgment, backed 
 by generous experience, what justification is 
 there for you to engage in transactions of this 
 kind? None. There is neither profit, interest, 
 nor the usual banker's fee for exchange for 
 you, but on the other hand, you take all the 
 chances of a loss, and are your own guarantor. 
 Transactions without profit, or show of profit, 
 can not be predicated on sound business prin- 
 ciples. A good rule to go by in these and all 
 
246 WHOM TO TRUST. 
 
 cases is this: never make a business transaction 
 by which, you can not possibly, and do not 
 expect to be, the gainer by the sum of a fair 
 profit or interest on your money, either directly 
 or indirectly. Good business sense does not 
 indorse transactions of all risk and no profit, or 
 even safe trades without profit. 
 
 Accommodation paper and accommodation 
 indorsers are not as abundant as they were in 
 the last generation. Many an old man plods 
 along to-day, poor, but wiser for his experience 
 in this direction. But neither his experience 
 nor wisdom have availed him in later years. 
 That one fatal step, indorsing, caused his ruin, 
 and his fate is the more deplorable when we 
 consider the occasion. The present generation 
 of business-men do not indulge in this danger- 
 ous pastime to any extent, owing, probably, to 
 the experience and good advice of our fathers, 
 and safer methods of doing business withal. 
 
 There are legitimate borrowers, and borrow- 
 ing and lending make up a large part of our 
 daily commerce. It is not only legitimate, but 
 it is both necessary and profitable. The busi- 
 ness-man with legitimate business wants is 
 always helped. The help seeks him quite as 
 much as he seeks it, and transactions of this 
 class are for mutual benefit, and subserve the 
 highest commercial purposes. But the individ- 
 ual who is made the subject of this chapter, 
 the leech who fastens his suckers on his good- 
 
CHRONIC BORROWERS. 247 
 
 natured and accommodating friends, is not in- 
 cluded in the list of legitimate borrowers. We 
 have got him on another list, and if he should 
 never "show up again," he will never, no, 
 never, be missed. 
 
248 WHOM TO TRUST. 
 
 DEBT VERSUS INDEPENDENCE. 
 
 Debt makes slaves of men. It robs them 
 of their independence, of their manhood, and 
 enslaves alike body and mind. 
 
 Within certain limits, debt, like credit one 
 always implying the other is legitimate. For 
 every dollar of credit there is a co- existent 
 debt, and both are legitimate, proper, and con- 
 ducive to the highest development of trade and 
 commerce, as well as individual benefit. It is 
 not, however, the legitimate function of debt 
 and credit that we assail here; it is not their 
 use, but their abuse, to which attention is 
 directed. 
 
 Though debt is the result of a voluntary 
 action to commence with, it is nevertheless 
 grinding and full of servitude, and that of a 
 most menial kind. Millions are kept and keep 
 themselves in perpetual bondage, and, consider- 
 ing the ease with which persons can get into 
 debt, it is not to be wondered at. Even the 
 poor, copper-skinned laborer of Mexico knows 
 what it is to hoe and dig all his life to make 
 good his arrears to his priest or his employer, 
 so that his credit will be good for the next feast 
 day. It may be a good thing for the priest 
 and employer to keep these poor idiots always 
 in debt, as it keeps them in a state of bondage 
 and subjugation, but their mission on earth 
 
DEBT VERSUS INDEPENDENCE. 249 
 
 would seem to be an aimless and unsatisfactory 
 one. To get into debt is easy; to get out is far 
 from easy. Man is born free; free from debt, 
 at least. There is no mechanic' s lien or mort- 
 gage on him at his birth. If he gets into debt 
 later on, it must be of his own volition. The 
 bondage is, therefore, always of his own mak- 
 ing. The chains that bind him are of his own 
 welding. 
 
 Slavery, as an institution, no longer exists, 
 on this continent at least, but Abraham Lin- 
 coln' s "Emancipation Proclamation" did not 
 wipe out a species of slavery which keeps mill- 
 ions in servitude still. No law can reach con- 
 ditions which people eagerly impose on them- 
 selves. 
 
 The ancient Jewish law contained a clause, 
 providing, that on the day of the Jubilee, the 
 slates should be washed clean and all debts 
 forgiven. This provision would work well now, 
 and in the interest of a large deb tor class; not 
 so much because its debts would be forgiven, 
 but because creditors would be scarce and debts 
 could not be so easily contracted. 
 
 Debts are always a burden on present eiforts, 
 since the fruits of toil go for benefits and com- 
 forts already enjoyed, instead of to be enjoyed. 
 Mentally, t men are kept on the ragged edge, 
 scheming, conniving, aye, conspiring how to 
 pay or not to pay their honest debts. How to 
 pay them involves worry and discouragement, 
 
250 WHOM TO TRUST. 
 
 and this condition hampers the best efforts and 
 intentions. How not to pay them incites the 
 baser tendencies of the mind and heart. The 
 man who is burdened with debt, who is 
 under moral and legal obligations to his 
 fellow-man and unable to discharge them, has 
 ceased to be independent. His self-respect, his 
 pride, and his sense of honor (all men have 
 these, with rare exceptions) are made to feel a 
 conscious degradation. What crimes, what 
 humiliation, and what hypocrisy in all the 
 world' s history, from its beginning to the pres- 
 ent time, may not be traced to man' s indebted- 
 ness to man! Debt and bondage, in this con- 
 nection, signify about the same. Watch the 
 man who is always in debt beyond his ability 
 to pay (it requires no philosopher' s lantern to 
 find him) and note the difference between him 
 and his neighbor, who is master of himself. 
 Have you ever had a debtor who would walk 
 blocks out of his way to avoid you, or would 
 "scoot out" by the back door when he saw 
 you coming in by the front? Possibly you 
 have been there yourself; though, perhaps, your 
 case may not have been so well developed, only 
 the symptoms, backed by a strong inclination, 
 being present. What a power we here behold, 
 making men slink into by-ways and alleys; 
 making them cringe and beg as for their very 
 existence! Think of the subtle force there 
 capable of making us such cowards! The man 
 
DEBT VERSUS INDEPENDENCE. 251 
 
 who would not flinch on the battle-field, whose 
 courage would be equal to any danger, and who 
 would brave superior physical forces, is yet, 
 in his creditor's presence, cowed and subdued. 
 But it is not the creditor's presence that cows 
 him, nor is it any force that he himself exerts. 
 It is the debtor's consciousness of his own 
 weakness, loss of confidence in his own recti- 
 tude; in short, it is the moral part of his nature 
 that accuses him. Self -accusation is a for- 
 midable adversary, than whom all others are 
 insignificant. 
 
 We have here portrayed the man in debt; 
 let us now look at the man who is out of debt, 
 and who purposely keeps out. Whether he 
 possesses much or little of this world's goods, 
 you will find in him a conscious independence, 
 a manly self-respect before all men, and a 
 strong personality which he has no occasion 
 to hide or stunt; and well for every man who 
 has learned to appreciate this state, either from 
 experience, observation, or principle. 
 
 Within certain limits, debts are legitimate 
 for everybody, in or out of trade. As long as 
 they are confined to a point, and within the 
 limits of our ability to pay at the time specified, 
 they may be safely and advantageously in- 
 curred. But measure carefully your depth and 
 do not go beyond it if you cherish and would 
 maintain freedom and independence of char-, 
 acter. 
 
252 WHOM TO TKTJST. 
 
 It is a favorite remark with a certain class 
 that, "The rich are growing richer and the 
 poor poorer." I do not think the poor are 
 growing any poorer; they simply stay poor. 
 There seems to be an idea prevalent among a 
 certain class, that as one man makes himself 
 rich, others are impoverished. There is neither 
 logic nor reason in this. Instead of charging 
 this disparity to any peculiar or unfair condi- 
 tions of society, it is due only to natural causes. 
 Riches and accumulations of any kind have 
 a beginning, and the so-called poor man never 
 makes a beginning. The methods and ways of 
 the man who has accumulated a fortune, are not 
 those employed by the masses. There is method 
 in accumulating, and the great majority of the 
 self-styled poor have none. Causes have their 
 effects, and these are either good or bad, the 
 alternative resting largely on our own will. 
 
 Who is it that makes the rich richer? It is 
 the multitude of eager souls who are always 
 getting trusted, and getting in debt, and pay- 
 ing three prices for the privilege. A rich man 
 would feel that he was being robbed and ruined 
 to pay the prices that the poor are paying. 
 Take the "installment" plans and the innu- 
 merable "easy-payment" concerns, and who 
 supports them? A personal friend of the 
 writer, engaged in the business, has computed 
 that not less than $4,000,000 annually are paid 
 by the so-called poor people of this city and 
 
DEBT VERSUS INDEPENDENCE. 253 
 
 county, in excess of cash prices, for the privi- 
 lege of getting things before they are able to 
 pay for them. No man has, or can ever ac- 
 quire, a competency who follows this plan. 
 Earn first and spend afterward, is a maxim of 
 the first importance, and one which every man 
 must adopt if he hopes to improve his finan- 
 cial condition. 
 
 It is the abuse, and not the use of debt and 
 credit that makes them a curse to the poor, 
 especially. * 
 
 * The pauper poor are not referred to here, but those people 
 who work but never get ahead, and who style themselves " the 
 poor " in contradistinction to those who are better off. 
 
254 WHOM TO TKUST. 
 
 COMPROMISES AND EXTENSIONS. 
 
 It was the custom in the last generation for 
 merchants to ask general extensions when they 
 became unable to meet their obligations; but 
 this method of getting out of financial difficul- 
 ties has fallen into disuse. In our day, we 
 ascertain what a man can aiford to pay, and 
 settle with him on a cash percentage of our 
 claims, if we can. 
 
 Conditions are constantly changing, and 
 what was advisable and practicable fifty years 
 ago, does not meet the case to-day. In the 
 first place, long time was given, and to tie up 
 capital and accounts, by carrying customers 
 voluntarily a year or two, was but the regular 
 order of things. To give, then, one, two, or 
 three years' additional time, in an emergency, 
 with prospects of ultimate payment, seemed 
 nothing out of the way. It was in keeping 
 with the general tenor of things. Profits in 
 those days were much larger than now, and 
 this fact explains the longer terms that mer- 
 chants gave and were able to give, and also 
 furnishes reasons why extensions were prac- 
 ticable and judicious then, and not advisa- 
 ble now. In late years, an extension has inva- 
 riably meant a prolongation and aggravation 
 of the difficulties, both to debtor and cred- 
 itor. Time has ceased to be the essence of 
 
COMPROMISES AND EXTENSIONS. 255 
 
 the thing needed in financial embarrassments 
 or insolvency. With larger profits and ca- 
 pable management, extensions might still be 
 advisable; but the larger profits are want, 
 ing, and the fact is, that most concerns have 
 all they can do, under fairly good condi- 
 tions, to keep along, to say nothing of making 
 up losses of the past. To ask an extension 
 now, causes a concern's credit to be impaired 
 and practically lost, and it is thenceforth not 
 in position to command the lowest prices or the 
 best service in any way, and a successful out- 
 come can not be predicted. It is, furthermore, 
 loaded down with interest and a large debt, 
 which is always growing larger; it is harassed 
 and worried, and, in short, working at tremen- 
 dous disadvantage in every way. A large 
 amount of valuable time is lost to the concern 
 in attending to affairs of the past, instead of 
 utilizing it to gain immediate and future 
 results. Yesterday's profits on transactions 
 have been determined, and no amount of time 
 that can be bestowed on past affairs will ever 
 make the profits of by-gone days any larger. 
 Your time may be devoted advantageously to 
 securing what you have made, but you can not 
 add one iota to the amount, consequently, the 
 more time you give to present and future 
 operations, and the less you are obliged to give 
 to things past, the better will be the chances of 
 success. 
 
256 WHOM TO TRUST. 
 
 The last few general extensions that come to 
 mind, proved lamentable failures. Time only 
 made things worse, and when the extended, 
 payments matured, affairs were more compli- 
 cated and inextricable. Although, at the outset, 
 the assets seemed to warrant paying dollar for 
 dollar if time could be gained to convert them, 
 many of the shrewder creditors signed the ex- 
 tension reluctantly. They were more willing to 
 accept a cash offer of fifty cents on the dollar, 
 and the subsequent outcome proved that this 
 would have been the best thing for all inter- 
 ested. But the concerns would not listen to 
 making such, an offer. The property was suffi- 
 cient to pay in full, and their pride and sense 
 of honor would not permit them to compro- 
 mise their indebtedness. At the final wind-up, 
 under an assignee, the creditors did not realize 
 even fifty cents, after losing from one to two 
 years' time in the bargain. 
 
 The code of commercial honor which found 
 adoption by merchants of former generations, 
 did not countenance paying less than dollar 
 for dollar, and compromises were looked upon 
 as odious and dishonest. But to ask an exten- 
 sion of creditors, a.nd agree to pay as fast as 
 possible, was considered the honorable pro- 
 cedure for embarrassed and insolvent debtors. 
 As a rule, the parties worked out their indebted- 
 ness in time, and this " working out" maybe 
 taken in a literal sense. But of late years, 
 
COMPEOMISES AND EXTENSIONS. 257 
 
 when debtors find it no longer possible to 
 meet their obligations, they make the necessary 
 move to compromise for cash, and this kind 
 of settlement is generally acceptable to and 
 preferred by creditors, provided the offer is 
 reasonably fair, and in keeping with the insol- 
 vent's condition. 
 
 When we find merchants, as a rule, adopting 
 certain uniform methods, we may be reasonably 
 sure that those methods have the largest advan- 
 tage on their side. We do that which pays us 
 best, whether it be to compromise with our 
 debtors, or anything else. That is the true 
 principle of trade, and on this principle, com- 
 promises for cash have been found preferable to 
 obdurateness on the part of creditors. It pays 
 better to take fifty cents cash to-day than to 
 take the chances of getting one dollar five or ten 
 years hence, and perhaps not then. The fifty 
 cents will make us fifty in five years if employed 
 in business; on the other hand, if you should 
 succeed in getting face value for your claim in 
 five years, you would not be so well off then, 
 after deducting the lawyer's fees, loss of time in 
 looking after it, etc.; and the proportion of 
 claims against bankrupts that are ever realized 
 in full, is quite small. The man who has a 
 mass of debts hanging over him, can still con- 
 tinue in business, and conduct it so as to evade 
 his old creditors. 
 
 This being the experience, we say to the in- 
 
 17 
 
258 WHOM TO TEUST. 
 
 solvent debtor to-day: u How much cash can 
 you offer us on the dollar for our claim?" Of 
 course the creditor informs himself fully as to 
 the condition of the bankrupt's estate, and also 
 as to the causes leading to the failure, and he 
 is usually not slow in determining what he will 
 take; nor does he insist on the last cent that 
 the estate can be made to pay in the bankrupt's 
 own hands. Creditors want a fair settlement, 
 but are willing to leave the bankrupt in con- 
 dition to continue his business, provided his 
 course has been characterized by honesty and 
 fair dealing. 
 
 This plan, while being fully as, if not more, 
 advantageous than any other to the creditor, 
 combines a humane and Christian sentiment 
 withal. 
 
 There are a few houses that never compro- 
 mise. They take either all or nothing. Some of 
 the old Quaker houses used to refuse to sell 
 goods to dealers who had been known at any 
 time to settle for less than dollar for dollar. 
 Both these cases are now rare exceptions. 
 
 Granting the wisdom, and good, practical 
 sense of our present methods in dealing with 
 the unfortunate debtor, we have next to con- 
 sider the proper course to be pursued with 
 regard to the dishonest and fraudulent debtor. 
 To save ourselves annoyance, litigation, and 
 expense, we are too much inclined to settle 
 with him also; but in his case we should most 
 
COMPROMISES AND EXTENSIONS. 259 
 
 emphatically draw the line. We should do 
 this as a measure of self-defense and protection, 
 and also as a warning to those whom we trust, 
 that questionable transactions will not be lightly 
 passed over by compromising. If creditors 
 would adopt a uniform practice of refusing to 
 settle with dishonest debtors, to the end that 
 they will be kept out of trade at least, a salu- 
 tary effect would be produced on the commu- 
 nity. And more than that, whenever fraud is 
 attempted on the creditors, there should be 
 unanimity of sentiment and action to bring the 
 guilty party to justice. Rather than accept 
 the small pittance usually offered by this class, 
 we should be willing to sacrifice it, and, instead, 
 prosecute and punish them to the full extent of 
 the law. 
 
260 WHOM TO TEUST. 
 
 HISTORY OF CREDIT. 
 
 The oldest record we have of credit is furn- 
 ished by China. Banks of deposit and dis- 
 count existed there 2800 B. c., and as the exis- 
 tence of banks denotes a high state of devel- 
 opment of commerce and of confidence, we 
 may reason that credit, in that deliberate and 
 slowly progressive country, was ages in matur- 
 ing before it culminated in the establishment 
 of banks. Eight hundred B. c. we find inter- 
 est laws enacted for the protection of borrowers, 
 and 500 B. c. the Chinese Government issued 
 paper money. We find in the earliest history 
 of Egypt and India credit transactions recorded. 
 We read of the Hebrew women 1500 B. c. going 
 out into the wilderness glittering with jewelry 
 and trinkets borrowed from their Egyptian 
 neighbors; nor is this mentioned as a novel 
 occurrence. 
 
 History gives us no clue as to when and 
 where the first actual credit transaction took 
 place. That this occurred at an early period 
 when man was still in a semi-civilized state, and 
 incapable of reducing traditions and events to 
 writing, we may readily take for granted. The 
 most ancient writers to whose works we have 
 access, lead us to conclude, by inference at 
 least, that credit was not only contemporaneous 
 with them, but even more ancient than they. 
 
HISTORY OF CREDIT. 261 
 
 Clauses pertaining to contracts, debt, mort- 
 gage, etc., were contained in the Jewish law, as 
 well as that of India and China, and a national 
 bankruptcy court seems to have been as much 
 a necessity then as now, only they called it by 
 different names. One of the grand provisions 
 of the Jubilee demanded that "the slate" be 
 washed clean, and all debts be forgiven at 
 stated intervals. 
 
 In Athens and other commercial centers of 
 Greece, the credit system was not unknown. 
 The rights of capitalists were strictly guarded, 
 though they were heavily taxed. Money was 
 obtainable, and money-lenders were numerous, 
 but interest was high. Indorsing for one 
 another seems to have been customary then as 
 in modern times, for we find laws pertaining 
 to the liability of the indorser. They had 
 marine insurance and probably fire insurance 
 companies. Cargoes were insured, and vessels 
 were burned or shipwrecked for the sake of the 
 insurance money then, as ever since. 
 
 In Rome, also, the credit system flourished. 
 There were many rich people, composed mainly 
 of the nobles, who never turned a deaf ear to 
 the poor applicant if he had good security. 
 But even without this, the noble lord was tol- 
 erably safe, since he had not only a hand in 
 making the laws, but the right of enforcing 
 them to suit his lordship's own ideas of justice. 
 We are told that i ' torture, slavery, and impris- 
 
WHOM TO TRUST. 
 
 onment with hard labor, in a private jail some 
 two stories beneath the banquet hall of the 
 illustrious usurer, were the lot of all delin- 
 quents, and well for them if they ever got out 
 of his clutches again." With prospects like 
 these staring one in the face, it must have 
 required considerable nerve to become a bor- 
 rower. 
 
 In feudal Europe, neither credit nor com- 
 merce attained to any growth. For many cen- 
 turies there was complete stagnation in the 
 sciences, arts, and commerce. That period in 
 the history of the Caucasian race was unset- 
 tled and full of turbulence. The only law that 
 prevailed was that of "might." We read of 
 credit being given, but it lacked the essence of 
 a free-will transaction. Often the lender was 
 not a willing party to the transaction, but the 
 alternative was not to be thought of. It was 
 simply a choice as between two evils. Practi- 
 cally, borrowing was disguised robbery. Rich 
 Jews, wealthy provinces and cities, were alike 
 called upon for loans by the feudal lords, and 
 it was either to grant the request voluntarily 
 or be compelled to do so at the point of the 
 sword, or something worse. Sometimes the 
 loans were repaid in a left-handed manner by 
 granting the creditor special privileges, but 
 they were rarely paid . back in money. A de- 
 mand for the return of a loan would have been 
 more likely to meet with dry blows from the 
 
HISTORY OF CREDIT. 263 
 
 princely borrower and his minions, than with 
 payment in hard cash. 
 
 In the Europe of the Middle Ages, we find 
 the first banks established by the rich trading 
 centers of Genoa, Venice, Hamburg, and Bre- 
 men. From the time of the establishment of 
 these, we may date the growth of commerce 
 and credit. As banks can not flourish in com- 
 munities where confidence does not exist, we 
 must assume that the conditions in Europe had 
 undergone a change for the better. But we 
 must not infer that the functions of banks were 
 the same then as now. They accommodated 
 the public mainly in one way, namely, as reposi- 
 tories of gold and silver, plate, jewels, valuable 
 documents belonging to the wealthy few, 
 and to the State or smaller municipalities. 
 That these deposits represented enormous value 
 must be allowed from the fact that, at various 
 times, the cupidity of revolutionary armies in 
 adjacent States was aroused and frequent 
 assaults were made on Bern, Genoa, Venice, 
 and Amsterdam for the purpose of laying hands 
 on the vast treasures held by the banks of 
 those cities. 
 
 Holland in the seventeenth century had 
 better credit than France or England, and, up 
 to the reign of Queen Anne, she continued to 
 be the first commercial nation. After that, 
 England was in the ascendency, and has main- 
 tained it ever since, and its credit, at home and 
 
264 WHOM TO T.KTJST. 
 
 abroad, from that time to this, has always been 
 the wonder and amazement of other nations. 
 We are told that "the Persian embassadors 
 of hardly more than a century ago, could never 
 comprehend the national debt of Great Britain; 
 they talked much of it, they questioned their 
 English friends, and sent home voluminous 
 dispatches on the subject of the fabulous lia- 
 bility of the Britons. But when they were 
 shown the park of artillery at Woolwich, and 
 heard the roar of ordnance on a field day, they 
 refused to hear further explanation of the debt, 
 declaring that the 'British Government had 
 cannon and gunpowder enough to blow debt and 
 creditors into infinite space,' and that, under 
 these favorable circumstances, no demand for 
 payment was possible." 
 
 They solved the problem in precisely the 
 same manner that the despots of old would 
 have done. Not even the legal form of repu- 
 diation of interest or principal would have been 
 deemed necessary by them. 
 
 We are shown that a high state of credit 
 marks a corresponding degree of civilization. 
 Savages and the ruder tribes of uncivilized 
 countries hardly know what credit means, and 
 have no word even expressive of its meaning. 
 Only where probity and ownership of property 
 exists, and where rightful possession is defined 
 by a higher law than that of the individual 
 standard, can credit flourish. In the matter of 
 
HISTOBY OP CREDIT 265 
 
 property and ownership, the savage is like a 
 child ; everything within his reach he appropri- 
 ates, and neither scruples nor asks questions. Of 
 what we term honor, the savage has none, and 
 truth he is a stranger to with strangers par- 
 ticularly. 
 
 In all civilized communities we find credit, 
 but its use is found to vary according to the 
 intelligence and education of the people. 
 Credit is given liberally by the Chinese, we are 
 told. They are thrifty in their way, and under- 
 stand the accumulating properties of little 
 grains of sand better than any other people. 
 They are also the greatest swindlers, in a small 
 way, in the world ; though in their commercial 
 transactions with one another, they are said to 
 be very honest. No bankrupt laws exist, but 
 debtors are liable to corporal punishment. Not 
 paying one' s debts is a disgrace in China, and 
 the debtor is practically "drummed out" of 
 business. The whole nation "settles up" at 
 New Year's Day, which comes usually in Feb- 
 ruary. It is said that China never had a panic, 
 and that in times of famine or failure of crops, 
 the Government furnishes liberal aid to the 
 sufferers, although recent events do not corrob- 
 orate this statement. 
 
 In all European countries we find credit, but 
 its use is more or less restricted in different 
 localities. In Italy nearly everything is done 
 for cash ; the same in Spain ; on the other hand, 
 
266 WHOM TO TRUST. 
 
 in Russia and Turkey twelve months is usually 
 given, even on articles of prime necessity. 
 The difference in the customs of these nations 
 is probably owing to climatic conditions and 
 occupations. In Western Europe, we find from 
 three to six months' credit rulable. 
 
 Credit-giving is manifestly one of man's 
 inventions, for we can not find that Nature ever 
 established the custom. Nature gives us no 
 credit. We must work first and eat afterward, 
 and she is inexorable in her strict adherence to 
 these terms. Man, however, is more pliant and 
 accommodating in his methods, and is subject 
 to a corresponding degree of disappointment 
 and failure in his affairs. In dealing with 
 Nature, we must first till the soil and sow the 
 seed before we can eat of the abundance of the 
 golden grain. Without this, the fields can not 
 be persuaded to yield the harvest. The hunter 
 must trudge to secure the game ; even the wild 
 fruit and the shell fish make toil necessary for 
 their obtainment. Thus we see that Nature is 
 firm and holds us steadily to fixed conditions, 
 and it is no doubt well that she does so. 
 
 "Credit has an aptitude for good and evil; it 
 can be benign or malignant in turn, but its ex- 
 istence is a sure mark of progress in the social 
 scale. How it slowly ripened, bearing fruit in 
 the shape of stocks, bonds, bank and govern- 
 ment notes, loans, and mercantile credits would 
 be difficult to trace. We exchange our earn- 
 
HISTORY OF CREDIT. 67 
 
 ings for the flimsy bits of paper with a trust 
 that is most wonderful, and the wonder is that 
 credulity does not of tener outstrip performance. 
 But this modern credit is the creation of our 
 own confidence, withal, and in the course of its 
 development has struck deep roots in the very 
 heart of the State." 
 
 " Credit is two-faced and may be employed to 
 our benefit or injury according as its potent aid 
 is invoked. With a good foundation for our 
 business to stand on, backed by brains and 
 energy, it may be used advantageously within 
 proper limits. The danger lies in too great 
 reliance on its good offices. It is often looked 
 upon as an inexhaustible quarry, ever ready to 
 yield to our wants, but apt to fail us when 
 most needed." 
 
 Credit, like fire, when carefully handled is 
 of incalculable service. 
 
268 WHOM TO TEUST. 
 
 OUR CREDIT SYSTEM. 
 
 Some one has aptly said : " Commerce is the 
 offspring and at the same time the support of 
 civilization." Wherever we find the one, we 
 always find the other. Commerce came with 
 the growth of civilization, the latter being the 
 cause, and the former the natural result. This 
 we must accept as a fact, although to day we 
 might almost be inclined to believe that com- 
 merce was the cause, and civilization the 
 effect. 
 
 But commerce does not stand as the agent or 
 representative of civilization in doing this grand 
 work of civilizing and educating. While she 
 performs this work, and does it well, it is for- 
 eign to her real purpose and apart from her 
 mission. The purpose of commerce is not of a 
 philanthropic nature; it has no such motive. 
 Self-interest and the hope of personal aggran- 
 dizement are its incentives, and these furnish 
 the motive-power for its penetrating and aggres- 
 sive tendencies. 
 
 Thus we see that civilization and commerce 
 are so closely allied that it is difficult to deter- 
 mine which one of the two leads or follows. 
 When we consider the relationship of com- 
 merce and credit, we find the line of demark- 
 ation even more indistinct. They are of simul- 
 taneous growth, and the existence of one 
 
OUK CREDIT SYSTEM. 269 
 
 always implies, and is indispensable to the 
 other. 
 
 It might be argued that commerce could 
 exist without credit. Possibly, on a very 
 limited scale. Every commercial or mercan- 
 tile transaction is based on credit at some 
 point. Your confidence causes you to rely on 
 statements made, and you credit these state- 
 ments. You may buy a barrel of St. Louis flour, 
 and pay the cash for it, but there is a credit 
 implied, nevertheless. What makes you pay 
 the cash for the flour before you have actually 
 examined the contents of the barrel, weighed 
 it on your own scales, and satisfied yourself 
 from other sources that the flour was made in 
 St. Louis, and not in Minneapolis, as claimed? 
 You see, even in our cash transactions, credit 
 is given. In the above case the buyer gives all 
 the credit and takes all the chances, whereas, 
 in the ordinary credit transactions, the flour 
 being sold on time, both buyer and seller give 
 credit. They have mutual confidence in one 
 another that each will do as he agrees. In the 
 earliest stages of civilization, commerce had no 
 existence, and credit or its synonym, mutual 
 confidence, was unknown. Exchanges were 
 made of one commodity for another, but traffic 
 of this kind is called barter, and does not reach 
 the dignity of being called commerce or trade. 
 The North American trapper takes beads, 
 showy trinkets, and gewgaws with him when 
 
270 WHOM TO TRUST. 
 
 he visits the wild tribes of the West and North, 
 and these he exchanges with the Indians for 
 their furs. Both get what they bargained for 
 on the spot, and neither credit nor confidence 
 enters into the transaction. 
 
 But to follow the course and growth of com- 
 merce and credit from its incipiency and from 
 a stage of barter, when honor and mutual con- 
 fidence were still undeveloped qualities in man, 
 to that of our present state of commerce and 
 credit and universal confidence, would lead us 
 outside the domain of a practical business treat- 
 ise, and open up a field more in keeping with 
 the labors of the historian. Man's means of 
 support must necessarily at all times have been 
 an all-important element in his condition. His 
 education, progress, and development are so 
 dependent on and so closely interwoven with 
 the means afforded him for support, that com- 
 merce, which for ages has furnished that means 
 to a greater or lesser degree in the different 
 epochs of the world's history, must have 
 exerted an all-pervading influence and power- 
 ful stimulus on the welfare and possibilities of 
 nations and of men. 
 
 In no country is credit so cheap or so high 
 as in the United States. It is said to be cheap 
 because it is so easily obtained, or high, because 
 capital goes out freely and is willing to take 
 its chances on all manner of enterprises, so long 
 as they offer prospective returns for the invest- 
 
OUR CREDIT SYSTEM. 271 
 
 irient. It is the exception here when a man is 
 denied credit for any ordinary or even extraor- 
 dinary business wants. 
 
 The marvelous progress and development of 
 this country is the wonder of the world, and 
 our own amazement finds no limit; but as a 
 single factor in helping to bring about this con- 
 dition," our credit system, extending as it does 
 into every nook and corner of this great con- 
 tinent and beyond it, is no less worthy of 
 remark, and commands the admiration of those 
 capable of a just conception of its importance. 
 Why this willingness and eagerness of every- 
 body to trust everybody should exhibit itself 
 more in this country than in others, is not to be 
 reasoned out on the assertion made sometimes 
 that credit is highest where population is 
 densest, and vice versa. On that theory all 
 European countries would enjoy much higher 
 credit than we, which is not, however, sub- 
 stantiated by the facts. If density of popula- 
 tion caused credit to be more easily obtained, 
 it would follow that credit ought to be dis- 
 pensed with a more liberal hand to-day than it 
 was fifty years ago, which, also, is not the 
 case. In fact, the long-time credits of that 
 period, when six and twelve months were reg- 
 ularly given to traders in the far West and 
 South, with hardly any communication except 
 when buyers visited the markets, required 
 rather greater confidence than is exhibited, or 
 
272 WHOM TO TRUST. 
 
 would be considered warrantable, to-day. The 
 curtailment of the time in late years, we will 
 admit not to be due to a lesser degree of con- 
 fidence, but to smaller margins, which has neces- 
 sitated turning capital over oftener than once 
 or twice a year, and also to the fact that the 
 trading community has more capital at com- 
 mand. But could confidence possibly reach a 
 higher limit than when the New York mer- 
 chants, previous to the era of railroads and 
 the telegraph, trusted their goods out to the 
 far distant Territories, with only stage-coach 
 facilities for reaching them and where the debtor 
 was known to have all the advantages on his 
 side? It is evident that we must look for the 
 cause of our wonderful credit system in other 
 directions, and not attribute it to density of 
 population. 
 
 Credit flourishes in proportion as people 
 have confidence in each other; but confidence 
 does not come of itself. What creates it with 
 us, is, that greater opportunity is afforded 
 for making money, and this, joined to our nat- 
 ural ability as traders and aptitude in improv- 
 ing opportunites, is what gives us faith in each 
 other. Every man with moderate ability can 
 make money here; he can hold his own, at 
 least, and support his family out of his busi- 
 ness, and there is reasonable expectation of 
 success in every legitimate undertaking. Our 
 inherent individual honesty we will rate no 
 
OUR CREDIT SYSTEM. 273 
 
 higher than that of other nations, and placing 
 all nations on a par on this score, we have this 
 additional advantage over all, that money is, 
 and can De, more easily made here, and this is 
 an all important consideration in the minds of 
 those who have money or goods to let out. 
 If a man were known to be ever so honest, 
 credit would not be extended to him if his 
 chances of success seemed doubtful. We 
 are only .willing to risk our capital when we 
 find a reasonable assurance that the borrower 
 or debtor will be able to repay it at the 
 appointed time, with interest or profit. This 
 assurance is felt here to a much greater degree 
 than in other countries, and has been built up 
 by the prestige of past experience. 
 
 We are recognized the world over as a nation 
 of traders. To deserve this encomium and to 
 build up this reputation for ourselves, has set- 
 tled us in the conviction that we possess supe- 
 rior advantages, as well as talents, in our meth- 
 ods of money making. These are the elements 
 that contribute to the development of our credit 
 system, and capital, consisting either of money 
 or goods, feels not only safe in the return of 
 the principal, but has every assurance also of 
 interest or profit. This furnishes the funda- 
 mental principles on which credit is estab- 
 lished, nor will it flourish under adverse con- 
 ditions. 
 
 In countries where we find a high rate of inter- 
 is 
 
274 WHOM TO TRUST. 
 
 est rulable, and where 5 per cent, per month is 
 demanded for the use of capital on the most 
 available securities, we shall always find inse- 
 curity of property and a doubtful feeling as to 
 the ability of the borrower to return the loan at 
 the appointed time. Capital, on the other hand, 
 with us is more productive at from 5 to ? per 
 cent, per annum, it being constantly kept earn- 
 ing, and at this rate is always loanable with the 
 utmost security and without great risk or anx- 
 iety to the lender. The larger the risk that men 
 take, the larger will be the charges exacted. 
 The hope of large gain is always attended 
 with proportionately great risk. "High inter- 
 est means bad security," is an old maxim. 
 
 The credit system may be said to have been 
 a growth of necessity, like other systems and 
 conditions. The growth of civilization and 
 industry made it indispensable, and it kept on 
 growing with the progress of commercial punc- 
 tuality and integrity, and wherever it finds the 
 aliment of its growth, it flourishes and can not 
 be destroyed. Long before it attained its pres- 
 ent magnitude and extension, it had sent out 
 many vigorous shoots in various countries. In 
 a work by Stephen Colwell we find mention 
 made of the fairs, so prevalent in Europe in the 
 Middle Ages, some of which continue even 
 down to our time, and that payments at these 
 fairs were made, to a large extent, by setting 
 off debts against debts. " Men learned to pay 
 
OUR CREDIT SYSTEM. 275 
 
 their debts with their credits, and this mode of 
 payment only disappeared as the progress of 
 the credit system and the growth of cities 
 absorbed both the business and the payment 
 of the fairs." Every debt implying a credit, 
 the fact was revealed that no one could better 
 employ his credit than in paying his debts. 
 This required no money, and was, therefore, 
 not only economical, but free from innumerable 
 risks and trouble inseparably connected with 
 payments in money. 
 
 Our clearing houses and exchanges, our bank- 
 ing business, and our commercial and financial 
 transactions, are all conducted on precisely the 
 same principle. Jones borrows money at the 
 bank and the amount is placed to his credit. He 
 owes Smith, and gives him a check on his bank. 
 Smith deposits it (in the same bank perhaps), 
 and the check is credited to Smith and charged 
 to Jones. No money, or actual cash, is handled 
 in the transaction. Credits are thus used to 
 pay debts; but before this function of credit 
 can be utilized to the uttermost, as we see it 
 to-day, , a fully-developed credit system and 
 mutual confidence are absolutely necessary. 
 
 All our large enterprises, our large corpora- 
 tions, and undertakings of both a private and 
 public character, are due to, and have been 
 possible only through, the medium of our credit 
 system. The capital to further and operate 
 these enterprises is contributed, in a large 
 
276 WHOM TO TllUST. 
 
 measure, by the many, although a few large 
 capitalists generally take the lead. But both 
 small and large investors have confidence and 
 are willing and eager to intrust their accu- 
 mulations to the management of others, in 
 the expectation of fair returns. To this confi- 
 dence, to this facility for obtaining credit, it is 
 due that companies can be founded for pur-, 
 poses the most useful and beneficial. It is not 
 the individual ownership of money, but credit, 
 that ''bridges the morass, spans the land with 
 iron rails and the sea with copper wires, and is 
 building, spinning, making, and gathering all 
 that can be built, spun, made, or gathered." 
 
 The banking business of a country furnishes 
 the best index to its credit, both national and 
 individual, and to the confidence existing 
 among its people in one another. To foreign- 
 ers our methods of banking seem loose and 
 insecure, and to an English or Continental 
 banker, accustomed to the precautions used in 
 his country, we appear, at first glance, most reck- 
 less. American bankers trust out their funds 
 with the same freedom as does the merchant 
 his goods, and not unfrequently loans for busi- 
 ness uses are made solely on the borrower's 
 individual responsibility and reputation, with- 
 out other security or guarantee of second or 
 third parties as indorsers. 
 
 Every bank customer, of any standing what- 
 ever, being thus readily and cheerfully accom- 
 
OUR CREDIT SYSTEM. 277 
 
 modated with loans to an amount within keep- 
 ing with his capital and business, the cus- 
 tomer, if he be a merchant or manufacturer, 
 can increase his business to the extent of his 
 ability to become a borrower, and in this wise 
 trade is greatly facilitated and the country 
 benefited. What he trusts out on the one 
 hand, beyond the limit of his own capital, he 
 borrows on the other hand from the banks, and 
 though he pays 6 per cent, per annum for the 
 money, he is the gainer by the difference be- 
 tween the interest paid and the profits secured. 
 And the large accumulation of our loanable 
 funds always finds a ready demand from this 
 source. Bankers are as eager to find borrowers 
 as borrowers are to find bankers. In times of 
 panic and depression the banker is forced, 
 much against his will and inclination, to call 
 in and reduce his loans as a matter of safety. 
 When money commands the highest rate of 
 interest, which is evidence of loss or want of 
 confidence, bankers find it necessary to be most 
 conservative, and dare not avail themselves of 
 the opportunity of making the larger gains. 
 Although the rate of interest is higher, they 
 earn less money, as only a small proportion of 
 the capital and deposits can be loaned out with 
 safety. In ordinary times, on the contrary, the 
 minimum reserve only need be kept on hand, 
 thus allowing a much larger proportion of the 
 bank' s funds and deposits to be used. Whether 
 
278 WHOM TO TRUST. 
 
 banks feel called upon to keep the maxi- 
 mum or minimum reserve, whereby a stringent 
 or an easy money market is largely caused, is 
 simply an evidence of favorable or unfavorable 
 conditions. In times of panic, banks get the 
 credit of making ' ' confusion worse confounded ' ' 
 by calling in their loans and refusing new 
 ones; but banks are really responsible for this 
 in but a small measure. It is the depositors, 
 composed of people who are not actively 'en- 
 gaged in business, and who easily take fright, 
 who cause the stringency by loss of confidence 
 in the safety of the banks and who consequently 
 withdraw their money for safe-keeping in an 
 old stocking. The withdrawal from circulation, 
 and from the loanable funds, of the aggregate 
 of all these small deposits, is a matter beyond 
 the control of the banks, and loans and depos- 
 its, in the hands of others, not bankers, are 
 likewise subject to be called in from the same 
 general cause. 
 
 High credit is indicative of universal confi- 
 dence, and increases the productiveness of a 
 country. This confidence is what keeps the 
 savings and earnings of the people in circula- 
 tion, and whoever accumulates a savings fund, 
 be it ever so small, deposits or invests it 
 where it will be used in producing and earning, 
 either directly or indirectly. Outside of the 
 pocket money of the people, money is not kept 
 locked up or hidden away as it used to be, ex- 
 
OUE CREDIT SYSTEM. 279 
 
 cept during times of financial distress. In this 
 generation, and in all commercial countries, 
 money is esteemed more for its earning capacity 
 than for the thing itself ; in other words, a 
 larger proportion of the people' s money assumes 
 the character of capital, and the difference be- 
 tween the two terms is, that capital is money 
 (or wealth) employed in producing and earn- 
 ing, while money, not productively employed, 
 is not capital. 
 
 The miser is a relic of a period when hoard- 
 ing and hiding money and valuables was neces- 
 sary for their safe-keeping, and when a con- 
 dition of universal confidence of man in man 
 had no existence. The miser has no confidence 
 in anybody or anything, except the glittering 
 gold and silver coins themselves, though lat- 
 terly we have read of finding greenbacks actu- 
 ally stowed away among the effects of defunct 
 misers ; but such a stretch of confidence as this, 
 in even "Uncle Sam's scrip," is evidence, 
 surely, of miserly degeneracy, and of a weak- 
 ened mind. 
 
 The money hoarded and hidden by the miser 
 is taken out of circulation and ceases to be pro- 
 ductive. In this light, a community of misers 
 and a community of barbarians or Hottentots, 
 by neither of whom mutual confidence is un- 
 derstood, would produce about the same rela- 
 tive results and conditions, inasmuch as 
 neither community would contribute to pro- 
 
280 WHOM TO TRUST. 
 
 ductiveness or development of natural re- 
 sources. 
 
 The difference between this condition, with- 
 out credit, and our actual condition, with the 
 function of credit fully developed, is simply 
 the difference between a condition of ignorance 
 and barbarism and that of the highest type of 
 civilization and development of the human 
 race. 
 
CEEDIT CAPITAL AND LABOR. 281 
 
 CREDIT: ITS RELATION TO CAPITAL 
 AND LABOR. 
 
 The natural and logical order in which these 
 great factors in our industrial system range 
 themselves, is labor, capital, and credit. 
 
 Labor is the source whence all wealth is 
 derived. It is the prime factor, and of neces- 
 sity precedes capital and credit; for without its 
 performance, neither the one nor the other 
 could have existence. Wealth represents the 
 surplus of labor performed in excess of the 
 requirements to maintain life; but our aggre- 
 gate wealth is not an exact or even approximate 
 measure of the product of labor. Natural 
 agents and causes frequently aid in augmenting 
 capital where it already exists; but such aug- 
 mentation is due, nevertheless, to the impulse 
 given by labor, both past and present. What- 
 ever property of value we may possess, is cer- 
 tain to have required a certain amount of labor 
 to be expended in its production. This labor 
 may, or may not, have been performed by us, 
 but that an equivalent has been rendered for 
 our possessions, at some time and by someone, 
 is an indisputable fact, and whether we are the 
 fortunate heirs to an estate, or have found the 
 money, does not alter the case. 
 
 To produce food for our maintenance requires 
 labor, though only a small portion of our time 
 
282 WHOM TO TRUST. 
 
 need be sacrificed in toiling, where mere exist- 
 ence is the sole object of life, as with the ruder 
 tribes of men of to-day, or with our own race 
 in its pre-civilized state. The performance of 
 labor, like its employment, both having for 
 their object present and future benefits, is the 
 outgrowth of civilization and education. Sav- 
 ages do not labor in the sense that we do; i. e., 
 work to-day for benefits to be derived here- 
 after. The law of self-sacrifice self-sacrificing 
 the present for the future is, like the moral 
 law, an evidence of a higher development, 
 whose threshold the savage has not yet crossed. 
 And in this respect a wide divergence is notice- 
 able among members of the same society or 
 class, and to which is attributable the differ- 
 ence in their respective social conditions. 
 "Take no heed of the morrow," is accepted 
 in its literal sense, and the injunction is as 
 religiously obeyed by a large portion of the 
 civilized community as by barbarians, who 
 never heard of it. 
 
 Though rich in everything which bountiful 
 Nature could supply, this continent was left 
 undisturbed and undeveloped in its primitive 
 grandeur, waiting for the hand of labor to make 
 the transformation from a great wilderness 
 to a garden of plenty for eager and hungry 
 millions. Less than three centuries ago, what 
 now constitutes the United States had not the 
 commercial value that many a New England or 
 
CREDIT CAPITAL AND LABOR. 283 
 
 Western, village boasts of to-day; but the won- 
 derful change was not wrought by a miracle; it 
 came through labor, and labor only. 
 
 The Indian, though lord of all he surveyed, 
 and his domain was large, had no care except 
 for immediate wants. Game and water were 
 within easy reach, and to satisfy hunger 
 and thirst for the time being was his sole con- 
 cern. Generation after generation found him 
 in precisely the same condition. There was no 
 thought for the morrow, and thrift was as 
 unknown to him as were civilization and edu- 
 cation. Not willing to make a present sacrifice 
 of his comfort for a future gain, he never pro- 
 duced or acquired anything, and the resources 
 of fertile plain and the earth' s hidden treasures 
 were left unmolested, waiting for him who 
 would sow in the spring and wait till harvest- 
 time for his wages. 
 
 To say that the Indian did not labor would 
 be untrue; but his labor consisted in simply 
 providing for his actual wants, and no more. 
 The Indian would rather work for fifty cents a 
 day and receive his wages at night, than to 
 work for thirty dollars a month with deferred 
 payment for his toil. 
 
 Labor performed in excess of physical wants 
 from day to day, represents capital, but it may 
 not assume the function of capital in our own 
 hands. If, for instance, the excess earnings 
 are applied to surround ourselves with extra 
 
284 WHOM TO TRUST. 
 
 comforts, to the betterment of our moral, men- 
 tal, and physical conditions, we have lost pos- 
 session of the tangible capital to be used again 
 by us; but, the aggregate wealth of the world 
 has been enhanced. Thus, we see, that the 
 man who labors one or two more hours beyond 
 actual necessity, is a creator of capital or 
 wealth, which is subsequently used, by him or 
 others, in further production and accumula- 
 tion. 
 
 The modern conditions of our social and 
 industrial structure have brought about the 
 necessity of a division into bodily and mental 
 labor. Brain-work, which furnishes the direct- 
 ive power must be classed as labor, as much as 
 the work performed by the hands and muscles 
 of the body. Both are necessary for the suc- 
 cessful operations of business, and when made 
 cooperative, the largest results are obtained, in 
 fact, no great results can be achieved without 
 yoking the two forces together. The superior 
 workman is known by the force and quality 
 of mind that direct his hands, and, under 
 all circumstances, a combination of the two 
 enhances the value of each. The value and 
 potentiality of mental labor exclusively de- 
 pend on circumstances. Where a man's sub- 
 sistence must be toiled for by himself, brain- 
 work, or directive power alone, would accom- 
 plish nothing. A certain amount of manual 
 labor must be performed to result in the pro- 
 
CREDIT CAPITAL AND LABOR. 285 
 
 duction of food or anything else; but in the 
 modern methods of doing business the division is 
 not only practicable, but economical, and sub- 
 serves the best interests of all concerned. The 
 capitalist, by reason of his natural and acquired 
 ability, gives sufficient directive force in a few 
 hours daily to keep 100 or 1,000 hands em- 
 ployed.* He plans the work while others exe- 
 cute it, and each one is equal to his task 
 without undue hardship. 
 
 " Capital is the representative of the product 
 of labor already performed." This definition is 
 given by John Stuart Mill in his ' ' Principles 
 of Political Economy," and applies equally to 
 our individual and to the aggregate wealth of 
 nations. 
 
 There is a distinction made between wealth, 
 capital, and money. The last two are always 
 part of the first, but wealth is not always capi- 
 tal, nor can all our wealth be converted into 
 money at one time, since we have only about 
 one dollar in money to every thirty possessed 
 by us in property; yet this proportion is found 
 amply sufficient to facilitate our exchanges, 
 and that is the only purpose which money 
 serves. 
 
 Wealth is defined as consisting of anything 
 useful or agreeable, which nature does not 
 afford gratuitously, and for which some other 
 form of property would be given in exchange. 
 
 Capital is that portion of wealth devoted to 
 
286 WHOM TO TRUST. 
 
 productive uses, and employed in any form of 
 industry for the purpose of making profit or 
 interest, or otherwise adding to the principal. 
 
 Money constitutes a considerable part of our 
 capital, but only a small portion of our wealth, 
 and of all property it is the most available, since 
 it affords instantaneous command over objects 
 of our desire. It represents the net result of a 
 series of transactions which are considered 
 completed only when we have succeeded in 
 converting them into money. But money is 
 not necessarily capital, although in this age a 
 larger proportion than formerly has assumed 
 that function; in fact, all our money or circu- 
 lating medium may be considered to be produc- 
 tively employed and be termed capital, that 
 portion used for pocket or spending money 
 excepted , of course. To illustrate when money 
 is not capital, suppose a case where a man 
 deposits $1,000 in a vault for safe-keeping. 
 Being withdrawn from circulation and earning 
 or producing nothing, it ceases to be capital; 
 but it still remains wealth. It has been robbed, 
 temporarily, of its legitimate function of pro- 
 duction, but continues to possess the quality of 
 being exchangeable with the utmost facility for 
 things desired, and is therefore in the best 
 form to be used with the least inconvenience. 
 This same $1,000, the moment it is released 
 from its hiding-place and used in manufacturing 
 or any business whatsoever, whereby produc- 
 
CREDIT CAPITAL AND LABOR. 287 
 
 tion is effected or assisted, immediately assumes 
 the function of capital again; nor need it be 
 directly employed by the owner himself. 
 Lending it to another on interest results in its 
 productive employment, since no one could 
 afford or be willing to borrow and pay for the 
 use of money, unless he expected to use it and 
 make money by the operation himself. Having 
 thus briefly explained, intelligibly, I hope, the 
 difference between wealth, capital, and money, 
 we will take up the subject of capital, with 
 which we are more especially concerned. 
 
 Capital is the result of accumulation, and an 
 accumulation once made becomes a permanent 
 fund for productive operations, present and 
 future. We may take as an illustration, the 
 case of a small farmer under different and dis- 
 tinct phases. One is given a piece of land 
 which he works, and raises all that he needs 
 for bare subsistence, but no more. He has 
 nothing to sell or to exchange, and one year 
 finds him no better off than its predecessor. 
 The labor performed is in exact proportion to 
 the bodily requirements of the man. No 
 accumulation is here effected, and capital is 
 not produced. This is practically the case of 
 the savage. On the other hand, the farmer 
 who labors more hours, and who has a surplus 
 of product beyond his own wants to exchange 
 for stock, machinery, or for clearing or obtain- 
 ing additional land, is a producer of capital. 
 
288 WHOM TO TKUST. 
 
 Having, by his labor and industry, reaped a 
 harvest which not only yields the means of 
 subsistence for himself for a year, but enables 
 him also to provide for another man's subsis- 
 tence, he has made himself a capitalist to that 
 extent. We will suppose, now, that the farmer 
 discovers on his land a coal or iron mine. The 
 surplus product of his previous year's labor 
 makes it possible for him to employ another 
 man to develop this natural resource, while he 
 devotes himself to acquiring another year's sus- 
 tenance to enable him to prosecute his work of 
 development beyond the present year. 
 
 We here have the capitalist, and we see that 
 he has made himself such, simply by the per- 
 formance of labor in excess of his personal 
 needs. He has accumulated a fund, consisting 
 of food in this case, which represents to him 
 and others an exchange value either for acquir- 
 ing other objects or other men's labor. The in- 
 ference would be that the producer of food is 
 the originator and principal source of all capi- 
 tal and wealth, and that labor in other depart- 
 ments, not directly productive of food, owes 
 the possibility of its existence to the tiller of 
 the soil, and this is logically true. 
 
 In the animal and insect world we find 
 " capitalists " at certain seasons of the year, 
 and in some instances at all times. The squir- 
 rel collects what he deems a sufficient supply of 
 acorns to carry him through the winter; the 
 
CEEDIT CAPITAL AND LABOR. 289 
 
 bee and the ant show prodigious energy in pro- 
 viding for future wants. We call this instinct; 
 but it were well for a portion of mankind were 
 they to exchange man's higher estate of reason 
 for simple instinct. 
 
 Most of us can earn enough in four hours per 
 day to sustain life and procure the absolute 
 necessaries. Some are content with this; others 
 are willing to labor a little more for what 
 special indulgences it may provide; but those, 
 only, who labor with a desire and for the pur- 
 pose of having a surplus left out of their earn- 
 ings, become capitalists. We often hear it said 
 that our millionaires have not performed labor 
 or rendered an equivalent in labor for their 
 possessions; in fact, that no labor at all has 
 been performed for it. If this were true, and 
 capital or wealth was the creation of a mental 
 process, simply and purely, the more of such 
 creative geniuses this country could boast of, 
 the better it would be, most assuredly. But the 
 fact is, that not one dollar of capital exists that 
 does not represent an equivalent in work per- 
 formed by someone, whether it be in the hands 
 of the laborer, the farmer, the merchant, or the 
 millionaire. The men who live by their ' ' wits ' ' 
 or who make speculation their business, live on 
 the produce and the labor of their fellow-men. 
 While it does not appear to be right that one 
 man should be allowed to live on the fruits of 
 another's efforts, it is yet a fact of human life, 
 
 19 
 
290 WHOM TO TRUST. 
 
 as much as that the sun shines on the just and 
 unjust alike. Notwithstanding the wailings of 
 a certain discontented class, the laws governing 
 commerce and society, and man's intercourse 
 with man, are nevertheless fixed and immutable, 
 so far as the individual is concerned, adjusting 
 themselves, however, to the varying conditions 
 and improvement of the race, and in this respect 
 only, differing from the laws of Nature. 
 
 Reverting to the subject of speculators and 
 men living by their " wits," as we say, they are 
 not producers, and in no sense can they be said 
 to be a helpful addition to our industrial forces. 
 They live on what others have already pro- 
 duced, and aim to appropriate as much of this 
 product of others as their ingenuity or superior 
 sagacity enables them to. They can live and 
 thrive only where the earnings and savings of 
 others are in process of accumulation. Stanley 
 has not reported finding them in his African 
 tour, and not until others have gone there and 
 reared the industrial structure, will the specu- 
 lator be induced to bring his special talent 
 to that market. Capital must first have exist- 
 ence, before men can live on each other or be of 
 any use to each other, and only as man advances 
 in the social scale so that he will work and 
 save, will he become a potent factor in his 
 own welfare and contribute to that of the com- 
 munity. 
 
 To quote from the Political Economy of Mr ? 
 
CREDIT CAPITAL AND LABOR. 291 
 
 Mill: "All capital originally is the result of 
 saving, and a saving once made, becomes a 
 permanent fund to be used in endless produc- 
 tive operations, each operation being self-sus- 
 tained and paying a profit besides." To enjoy 
 the comforts and luxuries of life; to be inde- 
 pendent in short, to be in the possession of 
 wealth- is the goal of our ambition; but how- 
 ever ardently we may desire these things, the 
 goal is not reached by simply wishing. We 
 must work and save. 
 
 " Credit is not equivalent to the creation of 
 capital, but it helps to make capital more pro- 
 ductive by being transferred to hands more 
 competent to employ it efficiently." Credit is 
 not an independent factor, although it appears 
 that in the minds of many, credit is the equal 
 of capital and capable of performing all its 
 functions independently. But not one dollar 
 of credit can be given unless a saving and 
 accumulation to that extent have been effected 
 and have tangible existence in what is termed 
 capital. 
 
 The function of credit is not production, but 
 to aid production and distribution. This it 
 does, and to this is owing the greater remuner- 
 ation enjoyed by capital where the conditions 
 in a community warrant a liberal dispensation 
 of credit. Not all men nor even all owners of 
 capital are qualified by education or inclination 
 to engage in productive operations, but they 
 
292 WHOM TO TRUST. 
 
 seek to employ their capital, nevertheless, and 
 by becoming partners or lenders and joining 
 forces with men of experience and energy, they 
 are enabled thus to reap part of the profits 
 arising from such combinations. But it must be 
 borne in mind that the same dollar can be used 
 in but one operation at a time. For one man to 
 give another part of his capital is an uncondi- 
 tional surrender; to lend is a conditional sur- 
 render or transfer; but in each case the original 
 owner has diminished his power of production 
 in the exact ratio that the borrower' s has been 
 increased. From a superficial view it might 
 appear that although A has parted with his 
 capital to B, he can use the securities received 
 from B and not be hindered in engaging in 
 business himself. But this only changes the 
 personality of lender and borrower, for B would 
 then be using C's capital instead o? A's. Now, 
 in our actual business transactions the person- 
 ality of lender and borrower, creditor and 
 debtor, is constantly changing ; but a first 
 principle governs each and all at some point 
 every credit transaction must be represented 
 by capital and be based upon it. 
 
 We can readily see that industry is limited by 
 capital, and this limitation holds equally true of 
 credit, although it might seem that our credit- 
 giving capacity was greater than our capital. 
 For instance, when A buys $10 worth of sugar 
 and sells it at $11 on credit, his credit-giving 
 
CREDIT CAPITAL AND LABOR. 293 
 
 capacity would seem to exceed the capital in- 
 vested. But right here we must not lose sight 
 of a very important factor in the creation of 
 capital, namely, labor. The dollar added to 
 the original investment represents A's labor as 
 distributor or agent. 
 
 There is and has been at all times and among 
 all classes of men, not excepting legislators and 
 even prominent business-men, an erroneous con- 
 ception of the nature of credit, it being looked 
 upon as a creation possessing inherent powers 
 and attributes, and capable of performing func- 
 tions which it can only acquire by a transfer of 
 the thing it represents, viz., capital. The 
 inflationists, previous to 1879, comprised a very 
 respectable faction, both in numbers and gen- 
 eral intelligence. They insisted that the nation' s 
 promise to pay was all-sufficient without refer- 
 ence to its ability, based on property (national 
 wealth) to secure or ultimately redeem. In 
 holding to this theory they manifestly ignored 
 the fundamental law governing the simplest 
 business transactions. A nation's claim to 
 credit, like that of an individual's, must 
 always be based on property; otherwise this 
 claim will not be recognized, whatever may be 
 decreed by legislative enactments. O ur gold and 
 silver certificates pass current because we have 
 confidence in the assurance that the govern- 
 ment has gold and silver coin or bullion in its 
 treasury vaults. While the notes are in circula- 
 
294 WHOM TO TRUST. 
 
 tion we know that the property they represent 
 is held intact for the security of the holder, 
 and this furnishes the basis of our confidence 
 in and ready acceptance of them. 
 
 
MERCANTILE AGENCIES. 295 
 
 MERCANTILE AGENCIES. 
 
 Since the mercantile agency is the direct out- 
 growth and is so inseparably connected with and 
 dependent for its support on our credit system, 
 and since, also, it has come to be recognized as 
 an indispensable adjunct to present conditions 
 and methods of doing business, it may not be 
 amiss to give a brief outline of its origin, growth, 
 and present status. 
 
 The Mercantile Agency System was first con- 
 ceived and put into operation in New York 
 City about the year 1837. The great commer- 
 cial crisis of that year led certain parties con- 
 versant with mercantile affairs and the credit 
 system, as it then existed, to attempt the intro- 
 duction of a method whereby the mercantile 
 interests might find better protection and be 
 surrounded with greater safeguards. With 
 this end in view, and backed by leading houses 
 for whose special benefit the scheme was more 
 directly devised, a bureau for collecting infor- 
 mation was opened by a Mr. Church. This was 
 the beginning of our present Mercantile Agency 
 System, and up to that time nothing had been 
 attempted in this direction. 
 
 The larger houses in those days employed 
 commercial travelers, who managed to get 
 around to their customers once or twice a 
 year; but the object of these annual or semi- 
 
296 WHOM TO TRUST. 
 
 annual visits was more to cultivate acquaint- 
 ance and strengthen the relationship between 
 buyer and seller. An estimate of customers, 
 both as to character and responsibility, was 
 thus formed, and their limit of credit, which 
 we take to have been almost unlimited, was 
 established. Though good, so far as it went, this 
 plan was not alone expensive, but thoroughly 
 inadequate to the needs of the times. Commerce 
 was growing and extending in every direction, 
 and new applicants for credit were constantly 
 pouring in from every quarter, and of these 
 nothing was or could be known, of course. To 
 trust, or not to trust, however, must be decided 
 at once. There was no agency to consult or 
 telegraph to make use of while the customer 
 was being entertained and shown through the 
 stock. Under such circumstances these were 
 both momentous and difficult questions to 
 decide; but as every condition creates and 
 develops its own defense and safeguard, so 
 the merchants of those days were equal to 
 the emergency by means of another school of 
 training, differing entirely from our present 
 methods. 
 
 Most of us can remember when it was the 
 custom of merchants, from all parts of the 
 country, to repair to the metropolis once a year, 
 at least, for the two-fold purpose of settling up 
 and buying new stocks. This custom brought 
 the New York merchant in personal contact 
 
MEKCANTILE AGENCIES. 297 
 
 with his customers, both old and new, and 
 developed in him a faculty for determining 
 character and judging men and human nature, 
 that has been largely lost to modern business 
 science, and which constituted the essence of a 
 thorough business-training fifty years ago. 
 
 Looking back to this and still remoter 
 periods in our commercial history, the law of 
 compensation is brought to our minds with full 
 force. We enjoy great advantages to-day, and 
 would not willingly give up the least of our 
 conveniences; but we have surely made a sacri- 
 fice for them, to which the old-time merchant 
 could never become reconciled. A customer in 
 those days stood in the light of a friend even 
 a warm personal friend. Buyer and seller, 
 after their relationship was once established, 
 did not meet simply for what they could make 
 out of each other. The Southern or Western 
 trader combined pleasure with business when 
 making his annual visit to the metropolis, and 
 meeting his business friends periodically was 
 his vacation and recreation. The merchant in 
 turn received him with the most cordial hand- 
 shake and generous hospitality, for which New 
 York merchants were renowned. A customer 
 then, once secured, could be relied on for 
 continued patronage. There was real, gen- 
 uine friendship, and this was the foundation 
 on which the integrity and honor of buyer 
 and seller mutually rested. Nor was this 
 
298 WHOM TO TRUST. 
 
 mutual confidence often willfully abused. 
 Laws for the collection of debts were on the 
 statute books, and in some States were quite 
 severe, but as regards any benefit to the creditor, 
 they were practically a dead letter. We 
 find in the literature of that period, as late as 
 1847, a suggestion, emanating from some of the 
 larger houses in New York, that the laws for 
 the collection of debts be abolished altogether, 
 and that dependence be placed entirely on the 
 honor and honesty of the buyers. To collect 
 by process of law from a trader in the Territo- 
 rial governments of the then wild West, was, of 
 course, impracticable from a business stand- 
 point, if not impossible. The Dry Goods Rec- 
 ord of that time also favored the repeal of the 
 collection laws, and its arguments were, that in 
 the absence of any legal redress for the cred- 
 itor, a higher moral responsibility would be 
 developed in the buyer by trusting entirely to 
 his moral sense, and having it so understood. 
 Although the laws remained in force, the argu- 
 ment was not altogether illogical for those 
 days, though now it would be impracticable. 
 Yet we do find, even to-day, in the liquor busi- 
 ness, for instance, credit given on a large scale 
 to dealers residing in States where the collec- 
 tion of liquor bills can not be enforced by law. 
 Such is the confidence of man in man, that 
 credit will flourish even without any protec- 
 tion from the law. 
 
MERCANTILE AGENCIES. 299 
 
 Taking up again the origin of the agencies, 
 we find the purpose of its promoters to have 
 been to collect and obtain information of the 
 financial standing and responsibility of traders 
 doing business with New York merchants, and 
 it was mainly in the interest of a few of the 
 larger houses that the agency undertook the 
 work. The idea having much in it to recom- 
 mend it, the list of patrons soon increased, and 
 with it, the scope and value of the institution 
 were increased also. 
 
 The first reference-book was issued about the 
 year 1840. While the list of names furnished 
 was not large, the information was reliable. It 
 was not so much an effort for quantity of 
 material as of quality, and in this respect the 
 value of the agency was not enhanced by time 
 and experience. Competition presently entered 
 the field, and this may be held responsible for 
 the subsequent degeneracy and drifting away 
 from the original plan and high resolve of its 
 promoters. The success of the first agency 
 soon attracted others to the field, some short- 
 lived and others to stay, and ere long there was 
 keen competition for patronage, and efforts, 
 not to out-do, but to out-show each other were 
 the result. Instead of giving the public honest 
 and conscientious work, it resulted in lists with- 
 out regard to reliability of statements. As long 
 as only one was in the field, the most reliable 
 service was sought to be given, and competition 
 
300 WHOM TO TKtTST. 
 
 can not be said to have worked beneficially in 
 this instance. 
 
 The promoters originally sought to supply 
 only authoritative information, when informa- 
 tion was given at all, and this policy should 
 have been rigidly adhered to, for it is not 
 quantity that business-men want, if it is at the 
 expense of reliability. No report at all is bet- 
 ter than an incorrect one, and if the agencies 
 would follow this suggestion more uniformly, 
 they would give vastly better service to the busi- 
 ness community. Like a general storekeeper, 
 who tries to keep everything because the nature 
 of his business implies supplying every want of 
 his customers, so the agencies undertake to 
 answer all inquiries to satisfy subscribers, thus 
 appearing to give them service for their money. 
 
 Yet, considering how much they undertake 
 and how much is asked of them, it is surprising, 
 that they render as acceptable service as they 
 do, especially when we consider the difficulties 
 under which they labor. First, it is incompe- 
 tency and want of business knowledge and tact 
 of the correspondents. Second, carelessness 
 and indifference of correspondents to their 
 work, in which they have no especial interest, 
 and which they perform, in a large measure, 
 gratuitously. Thirdly, personal favoritism or 
 prejudice is apt to sway the correspondent's 
 mind, consciously, sometimes, and unconsciously 
 at others, and so a long list of difficulties might 
 
MERCANTILE AGENCIES. 301 
 
 be enumerated which operate against the 
 agency. Local reporters for agencies rarely 
 get paid for their services, except in an indirect 
 way. Even when under direct pay, it is not 
 remunerative enough to command great talent 
 or much time. 
 
 But notwithstanding all the shortcomings of 
 the system, and with all its glaring defects, it 
 is, nevertheless, a permanent institution with 
 the American business-public, and has come to 
 stay. Notably among the agencies of to-day, 
 R. G. Dun & Co. and Bradstreet may be cited, 
 and as money-making institutions they have 
 been very successful, and this necessarily proves 
 their popularity and usefulness. But we cheer- 
 fully give them credit, also, for constantly 
 improving their service and of appropriating 
 a fair share of their immense earnings toward 
 the perfecting of their systems. Infallibility 
 is not one of the things chargeable to them to 
 any alarming extent, but that the reports of 
 to-day are a great improvement over those of 
 twenty years ago, or even ten, is cause for much 
 encouragement. Within the last few years the 
 agency has been accorded a place in the busi- 
 ness community of this country at least, and 
 by reason of this recognition, they have been 
 able to assume a more independent attitude. 
 The more we recognize their right to existence, 
 the greater will be their usefulness. 
 
 A tolerably recent innovation of the agencies 
 
302 WHOM TO TKUST. 
 
 is the right claimed by them to ask for " Signed 
 Statements," and the requests are complied 
 with much oftener than might be supposed. A 
 statement made over the signature of a dealer 
 is not necessarily correct, and while the esti- 
 mates of figures need be taken with some allow- 
 ance, they are, yet, much better than the purely 
 guess-work (in many instances unavoidable) 
 of the reporters. Where a signed statement 
 of the assets and liabilities is given, the only 
 task, and a comparatively easy one, is to have 
 it corroborated. 
 
 The idea of ' ' Signed Statements " is a good 
 one, and the creditor class, for whose benefit 
 they are obtained, have a right to expect them. 
 A mercantile report of this kind, furthermore, 
 has a legal status. The party giving it does so 
 for the purpose of obtaining credit on the repre- 
 sentations made by him, and in case of a false 
 statement, the law attaches a criminal account- 
 ability to such misrepresentations; that is, 
 obtaining goods under false pretenses. No 
 debtor can afford to make himself liable under 
 this head. 
 
 The history of the Mercantile Agency shows 
 a determined opposition to it on the part of the 
 public, and only in the last twenty years 
 or so has popular prejudice been removed. 
 A little of it lurks even now in remote locali- 
 ties. The very nature of the institution and 
 its inquisitorial functions naturally arouse 
 
MERCANTILE AGENCIES. 303 
 
 antagonism, and, strange to say, for it is para- 
 doxical, the free citizen of the United States is 
 the only one on the face of the globe who tol- 
 erates it. It is a purely American institution 
 and nourishes only on American soil. Aside 
 from a few branch offices established in the 
 principal European cities by Bradstreet and 
 Dun & Co., they are not recognized, and these 
 branches exist only for the information they 
 can give of American houses. 
 
 Europeans do not take kindly to anything of 
 an inquisitorial nature. The Church and State 
 have always monopolized and claimed the right 
 to pry into their affairs, and they graciously 
 submit, but they are averse to any additional 
 encroachments on their privacy. 
 
 In England, banks furnish their customers 
 with information concerning the standing of 
 parties in trade. A customer of a bank is 
 privileged to make inquiry through it, and 
 banks obtain from each other such information 
 as may be wanted. In Europe, banking insti- 
 tutions are excrutiatingly exacting, and in the 
 matter of obtaining and giving information 
 they would naturally be very cautious and 
 painstaking, so that reports received from this 
 source would be quite reliable. We do not 
 apprehend, of course, that banks are eager to 
 lend themselves to this kind of business, and 
 only in special cases, and as special favors to 
 very good customers, do they perform this office. 
 
304 WHOM TO TRUST. 
 
 The growth and efficiency of the Mercantile 
 Agency in the United States, as compared with 
 its status in other countries, is due to natural 
 causes and more favorable conditions. Credit 
 here is dispensed with a liberal hand, and to 
 people very distantly removed from the sellers, 
 but this does not signify that credits are made 
 hap -hazard and without some knowledge of 
 the buyer's commercial standing. And here 
 the agency comes in as a medium between 
 buyer and seller. In round numbers there are 
 over 1,000,000 business firms in the United 
 States, and the agencies furnish information of 
 them all, and, even if incorrect in many in- 
 stances, they still give us an idea of their com- 
 mercial standing, where otherwise we could not 
 even make a guess. The assistance which they 
 render in facilitating business intercourse is, 
 therefore, of great and unquestionable benefit. 
 
 We stated at the beginning that the mercan- 
 tile agencies were the outgrowth of our credit 
 system. It may also be added that our present 
 widely extended credit system is largely due to 
 the labors of the agencies, and it is no longer a 
 disputed question that they supply a want, 
 and are indispensable to the business public, 
 
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