Furthermore, the prices of commodities in general depend on the value of gold, the money metal. If the world's stock of gold does not increase in proper amount, the value of gold tends to become greater. That means that the prices of commodities in general will tend downwards. Such a decline of prices often puzzles business men, for most of them do not under stand the money question and cannot grasp the cause of price-changes.
.-:.\To matter hoW much thought and study a man in business gives to the subject of prices, nor how keen Ile is in watching for circumstances that affect them, he is certain every now and then to be caught napping. NO business man can hope always to sell his goods at a profit. Sometimes it is a wise policy to let them go at a: loss.
9. Perils of advertising.—It is a familiar saying that it pays to advertise. Men tell glibly of fortunes made by advertising wisely, but omit to tell of its enormous wastes. Advertising is such an important aid to profit-making that it is the subject of two of the Modern Business Texts. For the purpose of this chapter it is sufficient to call attention to the fact that advertising when done by men ignorant of the prin ciples is one of the easiest known ways of throwing away money. It is. estimated that over a billion dol lars is spent every year in the United States in the payment of advertising bills, and experts have said that only about ten per cent of this sum is wisely ex pended. Money spent on advertising is wasted if it does not add to the prestige and good-will of the ad vertiser or if it fails to iricrease the demand for the goods advertiSed. Much advertising fails to produce either of these results, and sometimes an advertise ment, because of its objectionable form or content, does positive harm to the business.
But in these days almost no business can achieve ()Teat success without the aid of advertising. Hence the business man who is seeking a profit must take all the risks involved in advertising. He should, there fore, be himself fainiliar witb the fundamental prin ciples of advertising and should know enough to em ploy good advertising counsel.
10. Bad debts.—Business today is dependent on credit. Seldom does the manufacturer get cash when he delivers goods to the jobber or wholesaler. He re ceives a promise to pay at a later date, or he keeps the account upon his books with the understanding that payment is to be made on or before a certain date. The wholesaler gives credit to the retailer, and the re tailer in his turn gives credit to his customers, sending out monthly bills. This credit system, complicated
and hazardous as it seems on the surface, is found so efficient that very few businesses are now run upon a strictly cash basis. The methods of giving credit differ in different countries, but the essential principle is the same everywhere.
The sale of merchandise on credit contains possibili ties of great loss. This the business man must assume and guard against, for his losses vvill be deducted from his profit. He must be wise in his extension of credit to customers, and exceedingly diligent and tactful in the collection of debts past due. These two functions are so important that most business houses maintain a credit and collection department under the manage ment of well trained specialists. This subject is fully treated in the Modern Business Text on "Credit and the Credit Man." The salesman is often looked upon as the most im portant servant of a business concern; he finds the cus tomer and sells the goods. But his work will be in vain if he has not the guidance Of a wise credit man. If despite all precautions a mistake is made, the col lection department must prove its worth. Con scientious salesmen, guided by an alert credit man, reduce the worries of the collection department to a minimum.
11. Unwise the United States, and per haps to a lesser extent in other civilized countries, laws have been passed which needlessly hamper the business man's activities. From a business point of view it is a misfortune that most of the members of our legisla tures and of Congress have been trained for the law and have bad no experience in business. This condition is undoubtedly responsible for the fact that business and the law are frequently out of adjustment.
For example, the Federal Anti-Trust Act of 1890 was the outcome of popular antipathy to monopoly. When this law was passed it aroused little or no crit icism, and many prominent lawyers declared it to be an excellent statute. Yet in the next twenty years it received various interpretations in the courts, and so uncertain were lawyers and business men of its real meaning that many important and desirable business enterprises were halted. It undoubtedly greatly lessened the profits of American enterprise. The law has been supplemented by additional legislation in tbe hope that the growth of monopoly may be checked without any check to the development of legitimate business and industry.