This section is from the book "Business Finance", by William Henry Lough. Also available from Amazon: Business Finance, A Practical Study of Financial Management in Private Business Concerns.
Most promoters, however, have to do, not with entirely new enterprises, but with readjustments or combinations of old enterprises; consequently, some of the processes of investigation may be eliminated. The common tendency is to slur over all of it, and the common result is that calculations of prospective earnings, of the amount of capital required and the like, are frequently far removed from the truth. This is just the point at which slipshod methods do most harm.
Frequently the most casual incidents, supplemented perhaps by a little additional thought and some feeble investigation, furnish the sole basis of knowledge for an enormous investment of capital. The formation of the American Malting Company, in 1897, was the outgrowth of an accidental suggestion to one of the large malters "during a conversation held while crossing Boston Common".
At the time of the formation of the United States Ship-xiilding Company, in 1902, President LeRoy Dresser, of the Trust Company of the Republic, was, one day, lunching with Lewis Nixon when Charles M. Schwab happened to stop at he table and remarked: "Why don't you buy the Bethlehem plant?" Less than three weeks later Mr. Schwab had agreed to turn over the stock of the Bethlehem plant to the Shipbuilding Company for $10,000,000' collateral trust bonds, $10,000,000 preferred and $10,000,000 common stock.
The formation of the American Bicycle Company in 1898 resulted from a chance remark made by Colonel J. J. McCook, a prominent lawyer, to A. G. Spalding, a manufacturer of bicycles.
"Have you observed the movement toward combinations apparent everywhere?" asked Colonel McCook.
"Yes," replied Mr. Spalding.
"Have you ever thought of the possible application of the combination idea to the bicycle industry?"
"I wish you would think it over; it seems to be working in many cases."*