1. The men actually in control of industry have been selected in manifold ways. Skill develops a small industry into a large one. A small factory owner gradually adds machine to machine, building to building, till he finds himself at the head of a great industry. Or an employee develops ability and becomes an employer. Who does not know of some one who, as a small boy, went into a store to do chores, worked up to a clerkship and, enlisting the confidence of men of wealth, was enabled to establish a business of his own and become an employer? Others have won promotion from the ranks to the head of a large industry in which they secured at last a controlling interest. Employees that have proved their ability may be selected by the directors of a stock company. Men that have worked their way up from the ranks may bequeath their business positions to their sons and grandsons, as in the case of the Vanderbilts and the Goulds. And finally, but rarely, there may be selection by fellow-workmen in the case of cooperative business.

2. There is a constant selective process: dropping out the weak and advancing the efficient organizer. There is, to be sure, an element of chance in this selection. The process in general is a rude one. Accidents and unforeseen changes, industrial crises, failure of health at a critical moment, fraud and crime, may defeat men of ability and they may never regain their foothold. Lack of experience may lead to disaster a naturally able but youthful heir, too suddenly burdened with the responsibilities of a fortune. On the other hand, men of limited ability may inherit fortunes and preserve them by caution, without enterprise. It is not always true, even in America, that "It is but three generations from shirt-sleeves to shirt-sleeves," although many fortunes slip away from the sous of rich fathers. In general, success in retaining the control of a business is an evidence of considerable ability. By loss of fortune unwisely risked, through unforeseen changes in methods, and after manifold blunders, the less capable drop out. Thus, by the ceaseless working of competition, the higher places are taken by those most capable of filling them, and the efficiency both of the employers and of the workmen is increased.

Success as the evidence of ability.

3. In the various kinds of business organization the merits of men and of methods are tested. The independent producer working entirely alone, directing his own industry, is analogous to the animal organism of a single cell. More complex is the family partnership found often in early stages of industry but more rarely now, where the father directs the work of his children and all share in common. The simplest form of the wage system is the single employer with a few assistants. When the employer is in danger of losing valuable assistants, he sometimes gives them a share in the business. In the ordinary partnership, two or more men divide the ownership and duties, agreeing as to the division of control. Cooperation among workmen, though rare, gives an unusual opportunity for the discovery of special talent. The dominant form of organization today is that of the stock company, or corporation, the ownership of which is divided among the holders of shares of stock, or of certificates of membership.

Various modes of business organization.

Many chances to try ability.

This variety of organization affords opportunity for a two-fold test: that of the ability of men and of the merits, in varying circumstances, of the different forms of organization. Methods of organization are constantly tested by their results. Men having money to invest are asking whether they would be better off to go into business by themselves, or to join with a partner, or to buy stock in some large corporation. Each of these forms of organization has its peculiar advantages. A stock company can better enlist large amounts of capital, while the individual employer is generally more free from dictation and can adapt his business more quickly to changing conditions. At the same time this variety of organization offers better opportunities for managing ability to show its metal. On the watch towers of industry are many observers sweeping the horizon for the appearance of men of business talent. Some characters develop better under direction; others prove that nowhere does native ability count for more, and mere book-schooling for less, than in business administration. There is some ground for the belief that a college education does not increase executive capacity in business. Such ability often seems to be a freak of nature and a product of practical experience, rather than the result of college training.

Questions On Chapter 29. Business Organization And The Enterpriser's Function

1. What is the relative importance of organization in sawing wood, building houses, running a small store, or a large factory?

2. Which wins the battle: the general, the soldiers, or the armament?

3. What determines whether a crop is poor or good: the ground, the weather, or the farmer?

4. Why do some businesses give increasing returns as they grow?

5. One has said: "The natural differences in powers and aptitudes are certainly not greater than are natural differences in stature." Is this sound in an economic sense?

6. Who runs the business in a large store owned by a large family? Who has the risk?

7. Who is the enterpriser in a stock company where there is a superintendent elected by a board of directors, themselves elected by shareholders with one vote per share?

8. Who is the employer in a cooperative cooper-shop whose superintendent is elected by the workmen?

9. Has "a good chance in life" much to do with success?

10. What are the chief elements of business success?

11. Is modern business competition a competition of men only?