1. The enterpriser guarantees to the capitalist-lender a fixed return. Agents will yield the highest economic rent of which they are capable only in the hands of those who can use them with exceptional skill. Owners of capital who for. any reason, such as youth, inexperience, ill health, incapacity, or conflicting duties, are not able to make agents yield the average rent, seek out, or are sought out by, those who in general can make the agents yield more than the average. The interest contract between them is one of mutual advantage, in that the enterpriser pays a definite sum to the investor unable himself to apply his productive agents. Immense sums of capital are now put into the hands of small enterprisers, such as Western farmers improving their lands, builders of city homes and business blocks, and small manufacturers. But stocks and bonds of corporations give a wide variety of investments which shade off from the safer or capitalistic type, to the more uncertain, or enterpriser's type. First-mortgage bonds, being a first claim on the income and property, have the highest security and yield generally the lowest interest. Even national bonds are not absolutely safe, and for that reason as well as because of their fluctuation in price, even their purchase has something of the nature of an enterprise. Stocks are the enterpriser's type of investment, the dividends being more uncertain, but giving the chance of a higher return than the average. It is because some stand ready to assume the risk of making goods yield average returns or more, that others can sit and enjoy a fixed income with little effort and in comparative security.

The enterpriser's skilful use of capital.

The enterpriser's insurance of the lender's capital.

2. The enterpriser gives up the certain income to he got by lending his own capital, and, becoming a borrower, offers his capital as insurance to the lender. Every business has an element of uncertainty in it, and some one must meet the risk. A man with marked ability as an organizer of industry is rarely found long without capital of his own. But even a penniless man who can gain the confidence of investors is able to get backing and to secure the necessary funds to engage in business. The lenders in such a case, however, run a greater risk than when the enterpriser is a man of some means, and they therefore ask a higher rate of interest than if they were loaning to a wealthy man or to a wealthy company. They are in part the enterprisers. When, as usually, the enterpriser invests some of his own capital, it is a guarantee of his good faith, a sort of insurance reserve to protect the lender from loss. The first loss falls on the enterpriser, and the chance of loss to the lender is in large part, though not entirely, eliminated. It is charac-teristic of modern loans that the borrower may be rich, not poor, - often richer than the lender. The mortgage on real estate and the creditor's claim on a merchant's property usually give security of far greater value than the loan.

The enterpriser's insurance of the laborer's production.

3. The enterpriser gives to other workers a definite amount for services applied to distant ends. In discussing the wage system it was pointed out that most labor at the present time is put upon future goods. It is not known what they will be worth a month or a year later when they mature as consumption goods; their present worth can merely be estimated. If they prove to be worth little, the profits may be nothing or less than nothing. The enterpriser, however, buys the services for ready money, embodies them in goods, and assumes the risk; the goods may sell for more or less than the wages. It is sometimes said with a certain irony that if the enterpriser assumes the risk he is very careful to pay so little for labor that he does not lose. In this naive view the enterpriser is so independent of the market that he can pay much or little as he pleases. In fact in many cases he gains little, and in many he loses and loses largely.

4. The enterpriser risks his own services and accepts an indefinite chance instead of a definite amount for them. Assuming the risk for the right conduct of industry, he backs himself, expresses his faith in himself as a manager who can make labor earn more than the prevailing wages and make capital yield more than the prevailing rate of interest. If it were otherwise, he would loan what capital he has instead of borrowing more; instead of employing others, he would himself seek employment in some other industry. Men are constantly shifting from the class of hired workers to that of enterprisers. It is a rude and often tragic process of adjustment and selection that enables men having ability as enterprisers to continue in that work, and forces others into the class of employees.

The risk of the enterpriser's services.

5. The enterpriser is the economic buffer; economic forces are transmitted through him. In a more primitive industry each man is wage-earner, capitalist, and enterpriser combined in one. As industry develops, some of the factors of cost become distinguishable, and relatively stable and calculable. A low rate of interest, ranging from three to four per cent., can be secured with practical certainty by putting one's money into good corporation securities, into the savings-bank, or into national bonds. Contract wages in each class of labor also are fixed by competition at a point where they are a medium or average of gains and losses. The enterpriser is the most movable element. As the specialized risk-taker, he is the spring or buffer, which takes up and distributes the strain of industry. He feels first the influence of changing conditions. If the prices of his products fall, the first loss comes upon him, and he avoids further loss as best he can by paying less for materials and labor. At such times the wage-earners look upon him as their evil genius, and usually blame him for lowering their wages, not the public for refusing to buy the product at the former high prices. Again, if prices rise, he gains from the increased value of the stock in his hand that has been produced at low cost. If the employer often appears to be a hard man, his disposition is the result of "natural selection." He is placed between the powerful, selfish forces of competition, and his economic survival is conditioned on vigilance, strength, and self-assertion. Weak generosity cannot endure.

The enterpriser the intermediary in industry.

Fluctuation of profits.

6. Profits therefore fluctuate more from industry to industry and from man to man than do other incomes. As a somewhat exceptional case, small employers in industries such as baking and tailoring, may for long periods get less for their work than their employees get in wages. The pride in being an employer and occasional chances of greater gains perhaps explain the fact. The fluctuations of the market may sweep away from the enterpriser not only all his "profits," but all his accumulated wealth. As a consequence, profits may be at other times very high, for men will not take the risk of great losses unless there is a chance of large gains. While the income of the salaried man is occasionally advanced, and then for long periods remains unchanged, the profits of enterprise come in waves. In seasons of prosperity the income of the employer swells with a dramatic swiftness while rents and wages move tardily upward. But for years again the employer earns a return hardly exceeding a low interest on the capital invested in the enterprise, or runs the business for a time at a loss. Profits of this kind should not be spoken of as a percentage. Greater or less, they are the net result attributable to the enterpriser's skill, and bear no fixed or calculable relation to any capital investment.