Work, Thrift, and Investment

Work, Thrift, and Investment

THERE are two major ways of acquiring wealth from the commercial point of view,—man making money, and money making money. There is an infinite variety of ways in which this may be accomplished. From the standpoint of work there is the man who makes his living by the sweat of the brow. He is like the Irishman who is “digging the ditch to earn the money to buy the grub to get the strength to dig the ditch.” This may be said, however, of any type of worker who spends, either from necessity or choice, all he earns. Second, there is the physical-mental worker who combines labor and mental skill, such as a foreman or a bookkeeper. Third, is the purely mental worker like the teacher. Then the mental-spiritual which is typified by the priest or clergyman. Finally, the spiritual service which is rendered to the race by the inspirer of emotions and ideals. And in this must be included those who—by the development and use of certain creative faculties, possessed by all but utilized by few—are able to bring wealth out of the Universal storehouse both for themselves and others. This quality, though little known, is not mystical and is fully explained in volume two of this series.

One of the great secrets of success is willingness to work, as we have already shown, and no system of moneymaking can be or ever was devised for the honest acquisition of wealth without work on some plane. Genius itself cannot create without lighting the candle; and art has a canvas back, a marble foundation, a brush and a chisel associated with it. We live in a universe of energy and some sort of energy accompanies every physical or mental act. “Genius,” said Matthew Arnold, “is mainly an affair of energy.”

Every theory has its field of practice and we commend this to those who are seeking to get something for nothing. They will get what they give, and if they give nothing they will get nothing. “Mental Science,” says Judge Troward, “pays no premium on laziness.”

But in the world of finance no great amount of income can be expected merely upon the day-by-day toil.

There will be days when we do not toil, days in later life when we should not toil, and these must be provided for by the system which civilization has evolved of putting the surplus reward of toil to work in the form of capital. By the use of money, combinations of effort can be made through the bringing together of machinery, equipment, materials, and men. Capitalism is a necessary factor in industry, and he who provides any part of it should and does receive his share in its rewards.

But this means saving or thrift. There will be no surplus of the returns upon toil over the expense of daily living unless it is saved. If a man earns eight dollars a day and it cost him six of it for actual living, it can be seen that the two which he can daily save will in three days be sufficient to give him his living for the fourth. But he can put the two dollars to work and it will begin to create additional capital which in turn will go to work for him. Every dollar will soon give birth to a dime, and every dime is a baby dollar.

America has learned the lesson of putting money to work but it has not sufficiently learned the lesson of thrift. We are, as a people, careless spenders because we have on the average so large a surplus above the necessities of life. However, it is not our thought to recommend mere self-denial but rather a system of living which will give us an equally high standard of living and still allow the accumulation of money to be used as capital.

Every child in the schools should be taught domestic accounting and the family budget system. He should not be preached at but taught how. We have already introduced thrift in the schools and through the post office; and we should stress the methods of thrift through careful accounting. This does not mean specialization as in the business college but merely simple bookkeeping showing the major expenses of

home-making, and how they should be budgeted with relation to the income.

However those who are ambitious to increase their wealth can begin now to establish a budget and keep daily accounts with a view to making a definite daily saving and the accumulation of capital.


The mere accumulation of capital is not enough, however.

To make money it must be invested or put to work. Money can be put to work in two ways. 1. Loaning it and receiving a rental value for it. 2. Investing it and receiving profits in proportion to the income.

When money is loaned the return upon it is fixed; if secured as in bonds or mortgages, it is reasonably safe; the returns are proportionally small.

Money that is invested rather than loaned does not carry the same security, but on the other hand it has an earning capacity. That is, your money goes to work with other money to produce a profit in which you yourself share. If all goes well with the business, you get paid not only for the use of the money but also for the risk and the business responsibility.

Invested money may go into your own business, in which case the two of you (yourself and money) are in a situation to realize large returns if your business is well-selected and you know how to run it. As only about ninety-five percent of business enterprises succeed in the long run, however, it is evident that only a small percent of people are properly situated for business adventure or have the business ability that is necessary. For this reason one should study himself honestly and scientifically and know that he has the twenty qualities of success herein described before he lends his capital to himself. It is frequently the poorest investment a man can make to invest in his own business and gamble on himself.

In such cases, and in all cases where the capital involved must be large, it is the part of wisdom to add your capital to that of partners or corporations in which the judgment and experience of others as well as yourself may be utilized. The most popular form of investment today is of course in companies incorporated for this purpose and run on the plan of giving each owner of the stock an authority in the management in proportion to his holdings. He can participate in the election of officers and executives.

The greatest earning capacity of money and the method which has produced most of the great fortunes of America has been that of investment in new

companies, particularly for the development of natural resources. Money put to work in such companies has what is termed “creative power.” H. L. Barber in his “Law of Financial Success,” says:

“The creative power of money in new companies is really what makes men rich. This power is represented by the assets and good-will that the company acquires as it progresses in its business.

A million dollars may be put into a company as capital at the beginning. In a few years, after distributing a part of the profits as dividends, the remaining profits left in the business as further working capital may have increased the assets to $5,000,000, and the nature of the business may be such as to make the good-will worth another $5,000,000.

In this case, in addition to having the earning power represented by the cash dividends paid during these years, the original capital has multiplied itself in value ten times through its creative power.

If at this time the earning power is such that $1,000,000 a year may be distributed as cash dividends, the dividend rate will be 100 percent a year.

The company can now increase its capital from

$1,000,000 to $10,000,000 and distribute $9,000,000 of

stock as a 900 percent stock dividend, so that all the stock will draw a yearly cash dividend of 10 percent. Instead of getting 100 percent a year on one share, the shareholders will now get 10 percent a year on ten shares, the amount of money received being the same in either case.

If the company has prospects of continued growth in its business, these shares can now easily be sold at twice their par value. If the par value of the shares is

$100 the person who bought one original share for that sum has ten shares of which he can sell nine for $1,800, and retain his original share. A few years later he may get another batch of dividend shares that he can sell in the same way.

The foregoing illustration of the idea is modestly drawn. It will be better to illustrate it with an actual case.

The Singer Manufacturing Company was organized in 1864 with a capital of $500,000, a large capital for those days. Stock dividends increased the capitalization, so that at the close of 1922 it reached $120,000,000. An original investment of $100 has, therefore, grown to

$24,000 in stock. For many years these shares have sold in the market for very much above par.

Lately the dividend rate has been 7 percent, which would be an income of $1,680 a year on the stock now represented by the original $100 investment.

Up to 1914 the dividend rate was variable. In 1913 the

$100 original investment drew $1,920; in 1912, $1,560; in 1911, $1,440; in 1910, $2,280; in 1909, $3,600; in 1908,

$1,800; in 1907, $1,320; in 1906, $960; in 1905, $1,560; in

1904, $3,720, and so on back through the years, until in the earlier years it drew only from $50 to $100 a year.

The company has not included a financial statement in its yearly reports to the Manual of Corporations since the one for 1915. At the close of that year its assets were

$125,471,000, and its surplus was $41,121,000.

It appears safe to estimate that its assets have grown, and increased in value at present prices, so that they now are fully $240,000,000.

In that case the $100 originally invested, now grown to

$24,000 in stock, has a value back of it equal to $48,000, of which $47,900 represents what the creative power of this $100 has produced in these years, and we have seen that its yearly earning power now is about $1,680.

Money, then, has an earning power when it is put at work so that all it earns will go to its owner.

It has its greatest earning power when it is put at work where it will have a creative power.”26

Most of the great enterprises of America have been founded on this method of capitalization, including railroads, steamship lines, telephone and telegraph, the great industrial plants, coal and metal mining. But while such investments are legitimate, since in no other way could most of the natural resources of the country be developed, still owing to the speculative element it is generally safer for those who cannot stand loss in case it should come to take the smaller income derived from the rental of money or purchase of “seasoned” securities. Many new concerns are constantly being formed headed by men whose ability and integrity have made successes of other businesses. The major requirements upon which to base a decision include knowledge of the efficiency and honesty of the management; the source of supply for the material or, as in the development of natural resources, the certainty of the undeveloped values; the cost of production or manufacture; the demand of the public for the product; and the probable margin of profit.


26 Quoted by permission of author. “The Law of Financial Success,” by H. L. Barber, note, p. 31.

Finally the question must be settled as to the certainty of sufficient capital to carry the business on until it reaches a paying basis.

Those questions must be satisfactorily settled before the investor can go ahead with an easy mind. If he cannot have an easy mind, he should not go ahead, but remain content with seasoned investments. Nor must the reader take the foregoing as approval of any particular investment that may be presented to him. It must not be forgotten that the large percent of new enterprises fail, but at the same time the fact should be clear that these failures are usually due to something that ought to have been foreseen, and also that this type of investment is the basis of practically all the large fortunes of America. It is for this reason that we have dealt with it at length as one of the factors in the attainment of financial success.

Fenwicke Lindsay Holmes

Fenwicke Lindsay Holmes

Fenwicke Lindsay Holmes was an American author, former Congregational minister, and Religious Science leader.

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