Profits the Reward of Management 1

price, business, sale, futures, selling, ability, labor and hope

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While the labor situation is more difficult, many a business concern is, nevertheless, able to buy labor below the prevailing rate; and the same remark may be made in regard to materials. A careful observa tion of markets reveals considerable variations in prices, tho in remote corners the price does not change promptly in response to shifting conditions. The en terpriser who is wide awake finds that he is able to buy below his competitor. Such are the profits from bargaining.

There is another type of profits that is more nearly related to gambling. It is possible that gambling is not the word to use in describing these profits, since they more closely resemble highway robbery than they do making money- thru good luck. We refer to the returns that come from the adulteration of goods ; from the substitution of low-grade materials for the best, which are promised in the statements about the product; and from spurious advertising, which lures the buyer to a sense of security in the goods he buys, tho they are really unworthy of his confidence. The sale of insurance that does not insure, and the hawk ing of safety devices that do' not act in an emergency, are instances of profit-making both short-sighted and disastrous.

To this list many other "get-rich-quick" enterprises might be added. There are the sale of shares in ficti tious companies, the disposal of lots that are under water at high tide, and the luring of men by stories of gold Mines. The fact that so many persons con tinue to do business by such methods is evidence that there are financial returns of no mean proportions from procedures of this kind. The gain from ex ploitation like this is not, however, to be designated profits. In the best sense, true profits are the re wards of a real service of foresight and. judgment, which often requires courage, good sense and g,,,reat executive ability.

7. Speculative character of whole function of the entrepreneur is speculative. He buys in advance at a low rate, with the hope of selling for a higher price later on. The purchase of capital and labor and the use of land are undertaken in the hope of selling the product for more than it cost to get the productive elements. The illustrations furnished by the activities of men ,everywhere are numerous. The farmer who,- studying the crop returns, decides to plant flax instead of wheat; business men, conning the problem of dry goods versus groceries; and the manufacturer, seeking knowledge of materials—all hope to win a profit.

Profit, however, is uncertain. Various steps have to be taken—a service must be rendered, and risks have to be incurred before profit becomes a posses sion; and even then, real ability must be exercised to prevent loss and insure gain. In many instances, the enterpriser is content with a return of interest and wages of management. To make this certain, lie transfers the uncertainties of price and supply to brokers and other skilled risk-takers who have come into existence with the increasing complications of modern business.

Since price fluctuations are one of the great causes of gains and losses, efforts have been made to control prices and to anticipate price changes by means of advanced knowledge of the changes. The utilization of agreements among manufacturers and of monopoly control• for the accomplishment of the first object have proved unsatisfactory; the law has forbidden this method and, as a matter of fact, the possibility of satisfactory agreements has been infrequent. Hence resort has been had to the utilization of the sale of futures, thru which the enterpriser is able to eliminate from his business some of the elements of risk.

The reader is familiar with the market methods in the sale of grain. Cotton, too, belongs to the spe cial-market class. By means of special mental qual ities, careful study and long experience, men come to fit themselves for the difficult task of forecasting the market. Because of this ability they are ready to supply given quantities of product at a given price.

In arriving at their conclusions, the men engaged in future sales must take into consideration a wide vari ety of influences—from changes in weather to strikes, and from fire to war.

At different times, legislative bodies have been asked to pass laws against dealings in futures. There is no doubt that much gambling, mere looting, dis turbs more or less the actual sale of genuine futures, but the fact nevertheless remains that the business of buying and selling futures acts as a great steadying force in the market. The more accurate the calcu lations on both sides the more satisfactory will be the ad justment of the price to the price of the futures. In the larger centers numerous bodies of men devote their time to the estimating of future prices.

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