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Show THE AMERICAN WAYl THE PROFIT AND LOSS SYSTEM f By Geort Peck-JzMii Someone has asked mc to try briefly to define the "Profits System." It can't be done because be-cause there never has been any such system, is not now, nor never will be. There is, however, a PROFIT AND LOSS SYSTEM, with which we are all familiar one that entails both an opportunity op-portunity for profit and a chance of loss. It is true that men engage en-gage in business hoping to make a profit, but, unfortunately, then-hopes then-hopes are not always realized, and all too often there is loss instead. PROFIT in industry is what is left after materials, labor, taxes tax-es and all other expenses have been paid. It represents a reward 'for human imagination, planning, skill and hard work. LOSS is the deficit which arises because the planning has been faulty, or insufficient skill has been exercised, exer-cised, or there has not been enough hard work, or a combination combina-tion of all three. I Even when there is a profit, not all of it can be paid in dividends divi-dends to the owners. A portion must be set aside to replace worn out tools; another portion to buy ' additional machinery so that .more workers can be employed; another portion as rainy day insurance in-surance in order that the busi-Iness busi-Iness can be carried on and workers work-ers kept employed during unprofitable un-profitable periods of operation. After these necessary and wise measures are taken, the balance of the profit can be paid to owners own-ers or stockholders in cash dividends. divi-dends. These, in effect, are rent or interest on the capital of those who by special ability, hard work and self-denial have accumulated savings and invested then to launch and operate the industry or business. When such savings are invested, invest-ed, there is no guarantee they will earn a profit in fact no assurance that the investor will not lose part or all of his savings. sav-ings. That is our quarrel with the "planned economists" according ac-cording to them, everybody is supposed to win all of the time. This just can't be done. The history his-tory of American business shows that the number of failures has greatly exceeded the successes, that there is more than an even chance the investor will lose part or all when he invests his savings. sav-ings. Even when the investor does make a profit on his invested savings, at best, it will amount to only a small annual return, while at the same time he takes the risk of losing 100 per cent of his investment. At the race track, a gambler betting on a horse at even money, rcallv takes no more risk of losing his entire bet, but stands to make a quick profit of 100 per cent, plus a quick return of his entire investment. in-vestment. Please do not infer that I am holding any brief for betting on horses, or that I consider con-sider business as gambling. Nevertheless, investing one's savings sav-ings in a business venture does entail risk, and men and women must- have reasonable assurance of a chance of profit commensurate commensur-ate with the risk involved, in or-;der or-;der to induce them to invest their savings. The advocates of the various socialistic systems decry the huge profits made under what they erroneously term the "Profit "Pro-fit System." They pick out the few instances where big profits have been made; say nothing of the much more numerous small profits. They are very mum about the losses; completely tongue-tied regarding the big losses. Zealous crusaders for impractical im-practical reforms ever are prone to paint only one side of the picture pic-ture they cite only one part of the facts. This brings me back to what was said at the outset there is no such thing as a "Profit System." Sys-tem." That is a misnomer, just as inaccurate as referring to the dual personality of Dr. Jeckyll j and Mr. Hyde by only one of the names. The right name of this splendid system is PROFIT AND LOSS SYSTEM. In misnaming mis-naming it, we only lend encouragement encour-agement to its defamers those critics who cither are sublimely ignorant about losses or are not fair enough to mention them,' |