Drift and Mastery > Chapter 1 > New Incentives
We say in conversation: 'Oh, no, he's not a business man, - he has a profession.’ That sounds like an invidious distinction, and no doubt there is a good deal of caste and snobbery in the sentiment. But that isn't all there is.
We imagine that men enter the professions by undergoing a special discipline to develop a personal talent. So their lives seem more interesting, and their incentives more genuine. The business man may feel that the scientist content with a modest salary is an improvident ass. But he also feels some sense of inferiority in the scientist's presence. For at the bottom there is a difference of quality in their lives, ? in the scientist's a dignity which the scramble for profit can never assume. The professions may be shot through with rigidity, intrigue, and hypocrisy: they have, nevertheless, a community of interest, a sense of craftsmanship, and a more permanent place in the larger reaches of the imagination. It is a very pervasive and subtle difference, but sensitive business men are aware of it. They are not entirely proud of their profit-motive: bankers cover it with a sense of importance, others mitigate it with charity and public work, a few dream of railroad empires and wildernesses tamed, and some reveal their sense of unworthiness by shouting with extra emphasis that they are not in business for their health.
It is a sharp commentary on the psychological insight of the orthodox economist who maintains that the only dependable motive is profit. Most people repeat that parrot-fashion, but in the rub they don't act upon it. When we began to hear recently that radium might subdue cancer, there was a fairly unanimous demand that the small supply available should be taken over by the government and removed from the sphere of private exploitation. The fact is that men don't trust the profiteer in a crisis, or wherever the interest at stake is of essential importance. So the public regards a professor on the make as a charlatan, a doctor on the make as a quack, a woman on the make as an adventuress, a politician on the make as a grafter, a writer on the make as a hack, a preacher on the make as a hypocrite. For in science, art, politics, religion, the home, love, education, ? the pure economic motive, profiteering, the incentive of business enterprise is treated as a public peril. Wherever civilization is seen to be in question, the Economic Man of commercial theorists is in disrepute.
I am not speaking in chorus with those sentimentalists who regard industry as sordid. They merely inherit an ancient and parasitic contempt for labor. I do not say for one instant that money is the root of evil, that rich men are less honest than poor, or any equivalent nonsense. I am simply trying to point out that there is in everyday life a widespread rebellion against the profit motive. That rebellion is not an attack on the creation of wealth. It is, on the contrary, a discovery that private commercialism is an antiquated, feeble, mean, and unimaginative way of dealing with the possibilities of modern industry.
The change is, I believe, working itself out under our very eyes. Each day brings innumerable plans for removing activities from the sphere of profit. Endowment, subsidy, state aid, endless varieties of consumers' and producers' cooperatives; public enterprise ? they have been devised to save the theater, to save science and invention, education and journalism, the market basket and public utilities from the life-sapping direction of the commercialist. What is the meaning of these protean efforts to supersede the profiteer if not that his motive produces results hostile to use, and that he is a usurper where the craftsman, the inventor and the industrial statesman should govern? There is no sudden substitution of sacrifice for selfishness. These experiments are being tried because commercialism failed to serve civilization: the cooperator intrenched behind his wiser organization would smile if you regarded him as a patient lamb on the altar of altruism. He knows that the old economists were bad psychologists and superficial observers when they described man as a slot machine set in motion by inserting a coin.
It is often asserted that modern industry could never have been created had it not been given over to untrammeled exploitation by commercial adventurers. That may be true. There is no great point in discussing the question as to what might have happened if something else had happened in the past. Modern industry was created by the profiteer, and here it is, the great fact in our lives, blackening our cities, fed with the lives of children, a tyrant over men and women, turning out enormous stocks of produce, good, bad, and horrible. We need waste no time arguing whether any other motive could have done the work. What we are finding is that however effective profit may have been for inaugurating modern industry, it is failing as a method of realizing its promise. That is why men turned to cooperatives and labor unions; that is why the state is interfering more and more. These blundering efforts are the assertion of all the men and all those elements of their natures which commercialism has thwarted. No amount of argument can wipe out the fact that the profit-system has never commanded the wholehearted assent of the people who lived under it. There has been a continuous effort to overthrow it. From Robert Owen to John Stuart Mill, from Ruskin through Morris to the varied radicalism of our day, from the millionaire with his peace palaces to Henry Ford with his generous profit-sharing, through the consumer organizing a cooperative market, to the workingmen defying their masters and the economists by pooling their labor, you find a deep stream of uneasiness, of human restlessness against those impositions which are supposed to rest on the eternal principles of man's being.
There is scarcely any need to press the point, for no one questions the statement that endowment, cooperation, or public enterprise are attempts to employ motives different from those of the profiteer. The only dispute is whether these new motives can be extended and made effective. It is, I think, a crucial question. It lies at the root of most theoretical objection to socialism in the famous 'human nature’ argument. Far from being a trivial question, as socialist debaters like to pretend, ? it is the hardest nut they have to crack. They are proposing a reconstruction of human society, and in all honesty, they cannot dodge the question as to whether man as we know him is capable of what they ask. Persian, Mexican, Turkish and Chinese experience with constitutional democracies ought to show how easy it is, as Macaulay said, for a tailor to measure the clothes of all his customers by the Apollo Belvedere. In a matter like this there is little to choose between the socialist who is sure his plan will work and the 'anti’ who is sure it will not. The profit-motive is attacked, that is certain; that more or less successful attempts are made to supplant it is obvious, but how far we can go, that remains an open question. We cannot answer it by analogy: it does not follow from the success of a cooperative grocery that the Steel Trust can be governed on the same plan. If our expectations are to have any solidity we must find evidence for them in those great private industries which seem to be completely in the hands of profit. That is where the issues join. The theater has always been a stamping ground for 'queer’ people; scholars are notoriously incompetent in 'business’; scientific research pays so well, is so undeniably valuable, that few dare grudge it a subsidy; public utilities, like the highways, are by tradition not business propositions; and cooperatives have had a stormy history. There are, of course, the army and navy, which no man wishes to see organized by private individuals on the make. The most conservative have doubted recently whether armaments should be manufactured for profit. Yet such analogies, impressive as they are, offer nothing conclusive. But if we find that in the staple industries like steel and oil a silent revolution is in progress, then we have a basis for action. If there the profit-motive is decadent and new incentives ready, then perhaps what look like irresponsible outcries and wanton agitation will assume the dignity of a new morality.
In the last thirty years or so American business has been passing through a reorganization so radical that we are just beginning to grasp its meaning. At any rate for those of us who are young today the business world of our grandfathers is a piece of history that we can reconstruct only with the greatest difficulty. We know that the huge corporation, the integrated industry, production for a world market, the network of combinations, pools and agreements have played havoc with the older political economy. The scope of human endeavor is enormously larger, and with it has come, as Graham Wallas says, a general change of social scale. Human thought has had to enlarge its scale in order to meet the situation. That is why it is not very illuminating to say, for example, that the principles of righteousness are eternal and that the solution of every problem is in the Golden Rule. The Golden Rule in a village, and the Golden Rule for a nation of a hundred million people are two very different things. I might possibly treat my neighbor as myself, but in this vast modern world the greatest problem that confronts me is to find my neighbor and treat him at all. The size and intricacy which we have to deal with have done more than anything else, I imagine, to wreck the simple generalizations of our ancestors. After all, they were not prophets, and the conservative today makes an inhuman demand when he expects them to have laid out a business policy for a world they never even imagined. If anyone thinks that the Fathers might have done this let him sit down and write a political economy for the year 1950.
'Since the Sherman Act was passed (1890),’ says President Van Hise of Wisconsin University, 'a child born has attained its majority.'' Indeed he has, much to the surprise of the unwilling parents. Now a new business world has produced a new kind of business man. For it requires a different order of ability to conduct the Steel Trust, than it did to manage a primitive blast-furnace by means of a partnership. The giant corporation calls for an equipment unlike any that business has ever known: the minds of the managers are occupied with problems beyond the circle of ideas that interested the old-fashioned chop-whiskered merchants. They have to preserve intimate contact with physicists and chemists, there is probably a research laboratory attached to the plant. They have to deal with huge masses of workingmen becoming every day more articulate. They have to think about the kind of training our public schools give. They have to consider very concretely the psychology of races, they come into contact with the structure of credit, and a money squeeze due to the Balkan war makes a difference in their rate of output. They have to keep thousands of ignorant stockholders somewhere in the back of their mind, people who don't know the difference between puddling and pudding. They may find themselves an issue in a political campaign, and if they are to be successful they must estimate correctly the social temper of the community. Diplomacy is closely related to the selling department, and perhaps at times they may have to dabble in Latin-American revolutions.
Mr. Louis D. Brandeis commented on this change of scale in his testimony before the Committee on Interstate Commerce.
'Anyone who critically analyzes a business learns this: that success or failure of an enterprise depends usually upon one man.... Now while organization has made it possible for the individual man to accomplish infinitely more than he could before, aided as he is by new methods of communication, by the stenographer, the telephone, and system, still there is a limit for what one man can do well... When, therefore, you increase your business to a very great extent, and the multitude of problems increases with its growth, you will find, in the first place, that the man at the head has a diminishing knowledge of the facts, and, in the second place, a diminishing opportunity of exercising careful judgment upon them.’
In this statement, you will find, I believe, one of the essential reasons why a man of Mr. Brandeis's imaginative power has turned against the modern trust. He does not believe that men can deal efficiently with the scale upon which the modern business world is organized. He has said quite frankly, that economic size is in itself a danger to democracy. This means, I take it, that American voters are not intelligent enough or powerful enough to dominate great industrial organizations. So Mr. Brandeis, in company with many important thinkers the world over, has turned de-centralizer. The experience of history justifies his position in many respects: there is no doubt that an organization like the Holy Roman Empire was too large for the political capacity of human beings. It is probably true that the Morgan empire had become unwieldy. It may be that the Steel Trust is too large for efficiency. The splendid civilizations of the past have appeared in small cities. Today if you go about the world you find that the small countries like Belgium, Holland, Denmark, are the ones that have come nearest to a high level of social prosperity. I once heard George Russell (Æ ), the Irish poet and reformer, say that an ideal state would be about the size of County Cork.
Yet it is not very helpful to insist that size is a danger, unless you can specify what size.
The senators asked Mr. Brandeis that question. They pressed him to state approximately what percentage of an industry he considered an effective unit. He hesitated between ten per cent and forty per cent, and could not commit himself. Obviously, ? or how could Mr. Brandeis be expected to know? Adam Smith thought the corporations of his day doomed to failure on the very same grounds that Mr. Brandeis urges against the modern corporation. Now the million dollar organization is not too large for efficiency and the billion dollar one may be. The ideal unit may fall somewhere between? Where? That is a problem which experiments alone can decide, experiments conducted by experts in the new science of administration.
The development of that science is the only answer to the point Mr. Brandeis raises. Remarkable results have already been produced. Every one of us, for example, must wonder at times how the President of the United States ever does all the things the papers say he does. When, for example, does the man sleep? And is he omniscient? The fact is that administration is becoming an applied science, capable of devising executive methods for dealing with tremendous units. No doubt the President with his increasing responsibilities is an overworked man. No doubt there are trusts badly administered. No doubt there are inflated monopolies created for purely financial reasons. But just what the limits of administrative science are, a legislature is no more capable of determining than was Mr. Brandeis. Only experience, only trial and ingenuity, can demonstrate, and in a research so young and so swift in its progress, any effort to assign by law an arbitrary limit is surely the most obvious meddling. Say to-day that one unit of business is impossible, to-morrow you may be confronted with an undreamt success. Here if anywhere is a place where negative prophecy is futile. It is well to remember the classic case of that great scientist Simon Newcomb, who said that man would never fly. Two years before that statement was made, the Wright brothers had made secret flights.
It may well be that the best unit is smaller than some of the modern trusts. It does not follow that we must break up industry into units of administration whose ideal efficiency is spent in competing with one another. I can understand, for example, the desire of many people to see Europe composed of a larger number of small nations. But I take it that everyone wishes these small nations to cooperate in the creation of a common European civilization. So it is with business. The unit of administration may be whatever efficiency demands. It may be that the steel industry would gain if it were conducted by forty corporations. But at the same time there are advantages in common action which we cannot afford to abandon. Technical improvement must be for the whole industry, the labor market must be organized and made stable, output must be adjusted to a common plan. The appearance of federal organization seems to suggest a possible compromise in which the administrative need for decentralization is combined with the social demand for a unified industrial policy.
No one, surely, proposes to revive the little business monarch who brooded watchfully over every operation in factory and office, called his workingmen by their pet names, and was impelled at almost every turn by Adam Smith's 'natural propensity to truck and barter.’ For just as in political government 'the President’ does a hundred things every day he may never even hear of, just as the English Crown acts constantly through some unknown civil servant at $1,500 a year, ? so in big business,? the real government is passing into a hierarchy of managers and deputies, who, by what would look like a miracle to Adam Smith, are able to cooperate pretty well toward a common end. They are doing that, remember, in the first generation of administrative science. They come to it unprepared, from a nation that is suspicious and grudging. They have no tradition to work with, the old commercial morality of the exploiter and profiteer still surrounds these new rulers of industry. Perhaps they are unaware that they are revolutionizing the discipline, the incentives, and the vision of the business world. They do brutal and stupid things, and their essential work is obscured. But they are conducting business on a scale without precedent in history.
The real news about business, it seems to me, is that it is being administered by men who are not profiteers. The managers are on salary, divorced from ownership and from bargaining. They represent the revolution in business-incentives at its very heart. For they conduct gigantic enterprises and they stand outside the higgling of the market, outside the shrewdness and strategy of competition. The motive of profit is not their personal motive. That is an astounding change. The administration of the great industries is passing into the hands of men who cannot halt before each transaction and ask themselves: what is my duty as the Economic Man looking for immediate gain? They have to live on their salaries, and hope for promotion, but their day's work is not measured in profit. There are thousands of these men, each with responsibilities vaster than the patriarchs of industry they have supplanted. It is for the commercial theorists to prove that the 'ability’ is inferior, and talent less available.
It is no accident that the universities have begun to create graduate schools of business-administration. Fifty years ago industry was an adventure or perhaps a family tradition. But to-day it is becoming a profession with university standing equal to that of law, medicine, or engineering. The universities are supplying a demand. It is big business, I believe, which has created that demand. For it is no longer possible to deal with the present scale of industry if your only equipment is what men used to call 'experience,’ that is, a haphazard absorption of knowledge through the pores. Just as it is no longer possible to become a physician by living with doctors, just as law cannot be grasped by starting as a clerk in some attorney's office, so business requires a greater preparation than a man can get by being a bright, observant, studious, ambitious office boy, who saves his money and is good to his mother.
What it will mean to have business administered by men with a professional training is a rather difficult speculation. That it is a very far-reaching psychological change, I have no doubt. The professions bring with them a fellowship in interest, a standard of ethics, an esprit de corps, and a decided discipline. They break up that sense of sullen privacy which made the old-fashioned business man so impervious to new facts and so shockingly ignorant of the larger demands of civilized life. I know that the professions develop their pedantry, but who was ever more finicky, more rigid in his thinking than the self-satisfied merchant? It would be idle to suppose that we are going suddenly to develop a nation of reasonable men. But at least we are going to have an increasing number of 'practical’ men who have come in contact with the scientific method. That is an enormous gain over the older manufacturers and merchants. They were shrewd, hard-working, no doubt, but they were fundamentally uneducated. They had no discipline for making wisdom out of their experience. They had almost no imaginative training to soften their primitive ambitions. But doctors and engineers and professional men, generally, have something more than a desire to accumulate and outshine their neighbors. They have found an interest in the actual work they are doing. The work itself is in a measure its own reward. The instincts of workmanship, of control over brute things, the desire for order, the satisfaction of services rendered and uses created, the civilizing passions are given a chance to temper the primal desire to have and to hold and to conquer.