The Individual and Society
or Psychology and Sociology
CHAPTER VI
The Philosophy of Business[1]
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IN this chapter I wish to show certain of our principles at work in practise. It will also present to business men some of the reasons that justify their calling. It should serve as well to show that business has an essential place in the functions of society.
I shall divide what I have to say into certain subordinate parts, discussing the Nature of Business, the Method or Logic of Business, and the Morality or Ethics of Business.
I. THE NATURE OF BUSINESS
What, then, is "business," understood so generally that all sorts of business may be included in the term?
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The most general answer to this question defines business as the practical side of political economy; that is, it is the economy of society in actual operation, while the science of political or social economy is the theory. But business is much older than the theory of it. Men entered into business relations with one another long before they discovered the laws of trade, supply and demand, distribution, etc. So the practical business man is an older figure in the history of society than the theorist who explains how it is done.
Still the theory is based upon the actual operations of social life, and we have in the great headings of political economy the points of view from which business may be profitably looked at. These headings are three, as the subject is usually treated: Production, Distribution, and Consumption of wealth or value. And it is under one or more of these headings that all the activities of the business
(173) man —apart from the mere machinery of his calling — may be considered.
But these aspects of the economy of social life, or of wealth, are not of equal importance in the calling of the business man. It is evident from the most superficial inspection that he is principally concerned with the production and distribution, hardly at all with the consumption, of wealth. His interest ceases when the champagne passes into the steam yacht, or when the locomotive is delivered to the railroad: the business is then completed. And the reason for this is not difficult to point out; it is because the methods and processes of consumption are relatively simple and constant, much more so than those of production and distribution. How to produce a locomotive, and how to sell it in the face of competition — these are very complicated problems. What to do with it when it is once had in hand — that is very simple and plain. So with things of utility
(174) generally: their utility is evident, the processes of giving them this utility and of placing them in the hands which have need of them, that is difficult and indirect.
I think it is safe to say, then, that business has to do with the production and distribution of valuable things: money, utensils, anything for which there is a demand in society, or on which society or some individuals of it set value. To produce such things in response to the demand, and to distribute them to those from whom the demand comes, is the undertaking of business. This defines business from the side of society; business is a social function.
There is, however, another side to the question, a side of equal importance, if business is actually to be done: the side of the individual's motive and interest in transacting business. It is very well to point out the role of the business men in the general functions of social life, and
(175) to show the utilities they serve in social economy; but it remains to ask why men care to do business, what they get out of it. This brings up the question of personal economy, or motive for action, on the part of the individual.
Of course, we cannot say that a man does business for the general welfare, and to serve the interest of the distribution of wealth. On the contrary, his interest is much more direct and less collectivistic. He does business to get a living, to make money, to produce wealth in a different sense from that of political economy. Whose wealth? —becomes to him the important question. Not the wealth certainly of his competitors, at a loss to himself; not that of society in general, when he himself spends without reward! This would be philanthropy, not business. In fact he gives up the business when he finds it is being conducted at a loss.
This is true: and it is just here that the principal philosophical problem of busi-
(176) -ness arises, carrying with it ethical and practical problems also. It is the problem of relation between the public utility and the private utility involved in business. It may be put plainly in this way: is business justified which is pursued for personal gain, when it is known, let us say, to be of public damage and loss? Is the calling of the business man, that is, so separate and remote from the social welfare that it can be purely selfish and egoistic, purely individualistic, and not at all collectivistic in its motive and end?
This, as I have said, is a very important question, and one on which philosophers and moralists may well disagree. Current theory, however, based on the results of social psychology points the way to a fairly clear view in the matter. It is to the effect that there is usually, in most of the recognized forms of business activity, no fundamental contradiction between the two sorts of utility: because in the long run, the pursuit of a living
(177) by the individual through making profits, or getting wealth in business, is also a means of advancing the general welfare. The social accumulation of wealth reflected in advancing standards of living, in general devices and instruments of culture, in the support of the institutions of civilization, etc., depends upon the success of individuals in making a living. Not so much upon the exceptional success of some in accumulating large fortunes, but upon the relative success of the average, of the mass of the business men, including the producers, the laboring men, the artisans, in their respective activities. This conclusion is so interesting, that I may be allowed to state certain of the principles on which it rests.
In the first place, it is necessary that the great activities of production and distribution should be economically as well as efficiently performed. This need appeared early in the history of societies and resulted in the actual division of labor.
(178) It was better that a special part be assigned to each in which he can become proficient and serviceable for all, than that everybody should attempt to do everything.
In this division of labor there appeared the class whose part it is to stand between the producer and the consumer, and also between the raw material and the finished article, and administer the product: to distribute, advertise, distinguish between modes and sorts of value, and bring the utility to its proper point of application. All this is the role of the business class. They arose to economize, not to waste the resources of society. And their living and accumulation is a part of the price society pays for this economical arrangement. They are not, of course, to live for nothing — otherwise society would have to support them. They are to be actuated by the motive that actuates men generally in the world of economics; they are to take tip business
(179) because it attracts by its offer of profits. Their self-interest makes them efficient and successful; but their efficiency and success are to the same degree necessary to society. In other words, to put it in technical terms, there is "concurrence" between the individual and the social motive and utility.
A second principle involved is this there is always in progressive society a balance between what are known as the individualistic and collectivistic tendencies. This I have already pointed out in an earlier chapter.
In political life we see this in the growth of socialism on the one hand, and the reaction to individualism in the extreme forms of anarchism and nihilism, on the other hand. The collectivist wishes to make society the one agent and the social welfare the exclusive motive. The individual must submit to the regulations of his union, his order, his class. He must yield his right to judge for him-
(180) self and to strive for individual advantage, and accept the average and uniform result aimed at by the group.
On the other hand, this is criticized by those who take the individualistic point of view. The individual loses his initiative, his talents are unemployed, he is reduced to the average, and society itself loses its best results.
A balance between these two factors must be secured and retained. Society has interests over and above those of the individual: but to sacrifice the ambition, competition, and rivalry of individuals is to sacrifice the progressive factor in society. There must be left a certain freedom of initiation, a range of invention and spontaneous struggle for profits, to stimulate the individual to his best effort. This will then result in the progress and welfare of society as a whole.
I cannot take further space to discuss these two great principles: the need of having the business man, on the ground
(181) of economy and efficiency of social life, and the need of personal competition and rivalry in the interests of social progress and welfare.[2] But it will be evident that in establishing them we have laid down the foundations of a philosophy of business. For the business man, as a class, becomes the agent of society, and the competition of individual men is the means and method of business. In showing that society requires and demands both the man and his methods, we justify business.
We come, then, to certain conclusions. Business is the necessary avenue of social economy, in the production and distribution of wealth, carried on by a specially fitted and recognized class of men, who devote themselves to it from motives of personal gain. What these personal motives are more particularly, and what limits should be placed upon them, are the topics of our further brief discussion.
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II. THE METHOD OR LOGIC OF BUSINESS
It should at once suggest itself to one at all familiar with business that competition plays a great part in its method. Indeed so evident is this that many have attempted to make business competition merely an instance of what in the biological theory of evolution is known as struggle for existence. This conception is, however, no more than a fruitful analogy, since competition differs from biological struggle in important ways, as we have already seen.
The most important difference is seen in the fact that some degree of cooperation or organization characterizes business competition. There is no business, except the most simple and elementary, such as the "swapping" of marbles, that does not involve a certain amount of union and co-operation on the part of individuals.
Competition and co-operation, then, are
(183) the salient. features of business method.
The important role played by competition appears on the surface. If there is a chance of making money, and there are many men able to take advantage of the opportunity, then these men compete for the chance. It results in a certain rivalry, which not only affects the men themselves, but also changes the social conditions in very interesting respects.
In the first place, the competitors are put on their mettle to succeed, and this introduces a great variety of means and methods of securing success. The best and most economical processes of production, the most effective means of display and advertisement, the most persuasive and convincing appeal to the persons having the need and making the demand, and the stimulating of new demand by creating belief in the desirableness of the product—all these are important chapters in the theory of business competition. They involve the prin-
(184) -ciples of the psychology of doing business; the use of the mind and the appeal to desire. There are, however, certain less evident points which I wish to emphasize.
It is part of the theory of competition in economics that it. should be "free," that is, that many men should be able to enter the lists on about the same terms, and with about equal opportunities.[3] In such competition as this, there are evidently enormous advantages to the consumer as well as to the producer. The need to meet the competitor on equal terms spurs on the producer to make the best article at the lowest price; otherwise his rival is favored by the consumer. This results in real social and economic gain; for the articles produced are of greater aggregate value — more durable, more effective, more reliable — and the distribution and use of these rather than others is a corresponding gain to the consumer.
(185) From this point of view, then, competition is a factor of great economic and social advantage.
Again, competition has an important relation to the law of supply and demand. We think of the competitors as trying to supply what is in demand; and this is correct. But there is much more than this. Competition constantly creates new demand. In the effort to supply what is in demand, new articles are designed, new processes developed, new inventions tried out, and the range of demand is widened with the increased variety and richness of living.
The candle is succeeded by the oil lamp, this by gas and the special burner, and this in turn by the electric light; each has brought in a new sort of demand, which has added to rather than detracting from the original demand. So it is generally. The competition becomes not merely a means of securing the direct supply of the article desired, but a means of enlarging
(186) and widening the demand itself, and so of indirectly turning social life into new channels. There is no career that offers greater rewards to the inventor and the independent thinker than this of business competition. In the domain of advertising alone its results are often remarkable. It shows at work the psychological principles of suggestion, imitation, self-display, and struggle for social place.
But my reader will have already remarked that this is true only of what we have called free competition — competition open to all or to many. It supposes the opportunity to be one that men of ability and some capital are free to engage in. It does not suppose conditions in which most men — all save the very few most capable or most rich —are excluded.
This is true, and in modern industrial life such conditions of free or individual competition are in great measure not realized. In place of it we have the
(187) "restricted" competition in which great organizations of capital, having well-developed methods, and holding rights protected by patent, tend to absorb the opportunities of production and distribution. This is the side of competition mentioned above in our discussion of the method of industrial organization. It begins as co-operation, the union of resources on the part of two or more for a given result; it ends in the colossal trusts and monopolies of modern business.
These forms of industrial organization do, no doubt, interfere with the operation of the principles of production and demand of which I have just spoken. They tend to eliminate the direct competitor, to compel the production of certain types of articles (as in the case of the purchase and suppression of a new patent by a company that owns an old one), the artificial control of prices, the regulation of production, and the discouragement of initiative and variety. But we should
(188) not for this reason condemn the organization, as such, off-hand. For it results from the operation of genuine business methods and has corresponding economic advantages.
What is more natural than that the two village blacksmiths should pool their business; each lending to the other the hand that. is free, and so preventing idleness in one shop and congestion in the other? What more natural than that the two city drug stores should agree to cooperate, keeping one night clerk only or having a common delivery wagon. Such arrangements are not only reasonable; they are economical and effective, and for the good of business. But such arrangements are the root and reason of the trust and the monopoly; and when economic movements are thus rooted in economy and efficiency, society cannot talk of their evils alone or plan for their destruction. On the contrary, the most that can be done is to regulate them with
(189) a view to minimizing the evil they work. I think the trust and combination have not only come to stay — being the outcome of forces that it is quite impossible to suppress — but they have come to recast the methods of actual business. It is a question of adjusting industrial and commercial life to a new order of activity.
Granting, therefore, the economy and efficiency of such combinations, what new aspects do they present when considered as methods of doing business?
At the outset, we may remark that they depend essentially upon co-operation; they tend, indeed, to rule out individual effort, except that of an exceptional kind. Under the methods of the combination the best men are given the greatest chance and others are set to tasks which organize their efforts to the ends of production. This may seem merciless as now conducted; it does not stimulate the average man enough, nor protect his individuality and humanity; but there is no reason
(190) that the method of organization, under the direction of the greatest leaders and thinkers and inventors, should not be preserved without these disadvantages. The proper procedure would look to the introduction of subsidiary arrangements to humanize the average man and keep alive his personal energies and interests.
Again, it is evident that this growth in combination and organization carries further the movement which resulted in the rise of the business class and caused the original division of labor. We have seen that when society took on forms of divided enterprise, each man doing some one thing well rather than many things poorly, the business man came in to attend to the business side of life as such. That is his part. So now in the rise of combinations and trusts, new avenues of business are opened up. The delivery wagon of the store is succeeded by the express company, of which all the competitors make use. Transportation facili-
(191) -ties are used in common; they are "common carriers." The resources of nature, on which all alike depend, are made into independent sources of profit and of new business. So there arises a natural corrective to the growth of monopoly. The means upon which the competing companies or firms depend are subtracted from their monopolies, and made equally open to other agencies for competitive purposes.
This natural movement has been forwarded in the United States by projects of legislation looking to the complete neutralization of the railroads as common carriers. They are forbidden to grant special privileges or facilities (as in the practice of rebating.) The similar freeing of the coal supply from semi-private or corporate control as by railroads, and the prevention of ownership of competing lines, are measures looking to the freeing of the resources which are essential for business from the grasp of monopoly.
(192) They suggest the return of competition on the higher plane of rivalry of combinations, instead of that of individuals. No doubt there will be developed in the commercial life of the future a code of business morality in the relations of combinations with one another — or at least a code of legality — corresponding to that now recognized between individual men. This is an interesting topic in the ethics of business.
In this matter of business method, however, having the two sides, competition and co-operation, a further fact is disclosed which is not so generally seen. I venture to state it at the risk of a little repetition.
I have mentioned above, it will be remembered, that two great movements go forward constantly in social life and show themselves in business; the collectivistic and the individualistic. The one tends to co-operation and united effort, the other to single-handed striving and
(193) personal isolation. In all social institutions there are aspects which show both these tendencies at work. In the school we attempt to make the children social and co-operative, but without destroying their individuality and initiative. In the church we recognize authority and doctrine, but we stand up also for individual judgment and sturdy personal conviction. In morality we require common consent and solidarity, but we cherish the ethical freedom and choice of the single person.
Now in business we find the two tendencies illustrated, as I have said above; and it shows itself strikingly in the industrial combination. In all union of agencies and men in business projects, we have, of course, the collectivistic aspect of business; and in the motive of profit and wealth, we find the other, the individualistic. But in the corporation, we have the two put together. The end is individualistic: it is purely a business proposition, a means of profits to the
(194) individual; but its means, its methods of accomplishing these ends, is collectivistic: it requires the united effort and teamwork of the whole body of those interested, employers and employees alike. The road agent who sells Standard Oil must make his personal commissions by praising the oil; he works as one of a team and by this means alone realizes his own personal advantage, which is wrapped up with the success of the company.
I cannot dwell upon the question of the attitude of the agent of a company to the affairs of his company, that is also a problem of the ethics of business; I wish only to point out that the object of the combination or trust is to make money for the proprietors or stockholders, and that the organization of the vast number of employees and agents of all kinds is entirely for that end. The end is secured by the work of all the members of the concern, each doing his part, for the production and distribution of the product.
(195) The team-work is a collectivistic means to the success of the company in competition; the end is the profit of individuals.
An interesting contrast is presented when we compare this with the working of the socialistic idea, which is just the reverse. The socialist tells us that competition is not good; that it is not right to allow some concerns or individuals to destroy others; that such individualistic struggles should be prevented; and that to accomplish this all production should be taken over by agents of the state, to be carried on for the good of all. There should be a distribution to the individuals of the products of the soil and the air, the resources of nature. The established agent of all, the government, should run the business of society.
Of course, the difficulty with this proposal is that it takes away the incentive of individuals to do their best, to exert their powers of thought and action to the utmost. As we have seen above, such an
(196) incentive is necessary to the best results; and if we remove the element of competition, with the advantage it gives to the successful competitor, there remains no adequate incentive.
The conclusion, therefore, which is forced upon us is that. business can only be done on an individualistic or competitive basis. This is true, whether we take as instances the simple ventures of the small capitalist who competes with his neighbor, or those of the large concern which represents many combined interests. The motive remains the making of profits, and this is a legitimate motive. It shows itself also in the newest combinations, the trusts, which, despite the vast organization they represent, still exist only to make money.
III. THE ETHICS OF BUSINESS
I find that I have little space in which to speak of the principles of morality
(197) which should dominate business life — the ethics of business. I can only point out briefly the motives which do animate the business man, and among them the one which should be the strongest and most cherished by him.
In recognizing the presence of competition in all trade, we have to recognize also that it is not money only and for itself that the business man desires and works for; it is money as representing a complicated set of relationships in which he and his family are placed. In the rivalry of business we see at work the three great sets of considerations which constitute modes of social struggle. One is the need of a living, of course, for oneself and one's family, and the best living possible. This is, of course, perfectly legitimate. It is one of the highest duties any man can set before him — to meet the responsibilities of his existence, and live the social life in respectability and comfort. Only through this can he
(198) attain a position which will enable him to be a useful member of society and a factor in its improvement.
But besides this, certain more questionable motives come forward. One of these is what I have called the desire for social place and station. This is the motive of every man in some degree, arising from his having to live in a society in which there are inevitable distinctions of class. But besides its legitimate influence in keeping a man up to his proper status and place in life and society, it becomes a veritable craze for place.
Then there is the love of gain, pure and simple. Men get. into the habit of striving for money, of driving a bargain, of making a deal, of outwitting a competitor; this becomes the passion of life. It is the price the business man pays for his unrelenting pursuit of profits and balances. He finds himself bound by the chains of business habit, and he is unhappy when he is forced to take a vacation. His
(199) larger interests are starved and not only are the pleasures of society, of literature, and of a wider culture lost, but the loss is not even realized.
In the midst of these moral tendencies of the business life, the one corrective, to put it in a word, is found in that other motive which actually does move many business men and should not be too remote from the interests of all; it is what I have called the desire and struggle for excellence.
By this I do not mean simply a general feeling of the need of high standards of conduct and dealing, but a desire to produce and to enjoy the highest in detail. The best possible goods for the market, the best relations of employer and employed, the best concessions to customers, the best reputation for fairness and generosity, the best attitude toward the poor or unworthy workman or fellow tradesman — all this is what I mean by the term excellence. It is not merely a generous or altruistic outlet
(200) for one's moral sentiment; it is a practical motive to success. It may not be true in the single case that more money will be made; but, in the long run, when the satisfactions of a life of business are counted up, there can be no doubt that any balance of financial loss due to standards of excellence will be more than compensated for by the enhanced reputation and standing of the man who has cherished this ideal. The great credits set down to the houses of high banking, commercial, and legal fame are not built up upon the record of sharp dealing, small advantage, underhand action, and misrepresentation; but upon a reputation for high standards of business promise fulfilled in equally high results of business attainment.
This applies in all the relations of business life. If there be one maxim of business morality which I think the considerations of a more philosophical sort justify, it is "love excellence" — excellent
(201) goods, excellent men, excellent business and social relationships. One may love excellence because it will pay, but even then I say, love excellence for that reason rather than not at all.
