St. Paul daily globe. [volume] (Saint Paul, Minn.) 1884-1896, 1891-01-25
THE TENDENCY TO EXPAND
One Man Points to a Condition of
Affairs That Is Harmful.

Affairs That Is Harmful.
A gentleman who, from the nature of
his business associations, has necessa-
rily given large share OF his attention
to the economics of commerce, con-
Cured that discussion of the great in
vestment question would be peculiarly
pertinent at this time.
1--WE are in an era," he said, 'sof gil
gantic enterprises. Expansion of bust
ness has become the rage. Concerns
that are fairly prosperous, as soon as
they find a surplus accommodating, begin
to extend their business whether the
circumstances warrant it or not. OF
course, in every successful business
house there is a healthy growth and a
fictitious growth. The one is spon-
taneous and gradual, and the other is
forced and sudden. In the one case the
capital takes care OF itself in natural
cOred with adventurous assistance.
ut seems to me that we cannot too
emphatically decry this increasing ten
dency to spread by imitation. 1t leads
too often to dire results, and by influ-
ence creates panicky feeling in the
commercial world that is, sooner or
later, likely to become chronic. Take a
firm of young men as an instance. After
brief experience, they find that they
are getting together little more money
than is needed for the present require
ments of their business. Yielding to
the f1attery of their success, their first
thought is to increase their capacity,
without regard TO whether there is a
healthy demand for the increase, and
sufficientlcapital to warrant it, arguing
that if, with certain capacity they can
earn a certain amount of money, with a
double capacity they can earn twice as
mnch money. The surplus is frequently
all used in the expansion itself, and
then the firm is confronted with the fact
it will he Obliged to borrow money to
carry on the added business and that it
must pay handsomely for its use. In
that way good-SiZed slice is cut out of
the prospective increased profits, and
there is no reserve with which to meet
and tide over season of reyerSeS.
"Others, and there are many of this
class, use their surplus in speculation.
They have been able to make IL per
cent, or more on their capital in their
own business, and, in their anxiety to
become rich rapidly, they strive to make
the same proportion of profit in outside
ventures. They do not stop to think
that portion OF the profit has accrued
through their personal exertions in be-
half of their business; that if they have
100000 invested. and their profit is
$4,000 year, probably half of that rep
resents what is actually due them
in lieu of salary. They want
their surplus to bring them as
great, or greater, per centage Of profit as
their legitimate business. and, as none
of the ordinary sale securities will do
this, they have to take chances and
| speculate. This necessarily takes their
attention away from their own business.
They watch the stock market, become
excited by the fluctuations, and, unless
they are peculiarly fortunate, and have
exceptionally strong characters, they
become involved; and, if they do not
| fail, their credit becomes greatly inn
paired. and they have to carry on their
| legitimate business under cloud.
$50 to my mind the best form in
which to have surplus money is in reli-
able bonds and good real estate mort
cages. 10 BIZ sure, they pay only a
| small return on the investment, from 4
| to per cent, but they are safe, and may
! be quickly turned into cash in case Of