partment to the factory; the inventing and building of the From the manager's idea to the completion of the first The Systematic Elimination of Risk The problem-solving type of mind faced with a newly created problem in general concerns itself with: 1. Analysis; what are the factors at issue? 2. Evidence; what are the facts involved? 3. Experience; what results are shown in practice? These three processes-analysis, the use of evidence, and the test of practice-as evolvers of the practical idea proceed together, inextricably interwoven. Their combined effect is the systematic elimination of risk. How far shall the elimination of risk be pursued in the case of those stirring new projects proffered us more or less continually by the creative impulse? Since even to the most conservative, who in consequence must be satisfied with the smallest of returns, the proposition 100 per cent certain continues to exist as an ideal unrealized, the business man does not hesitate to accept a certain degree of risk. His aim is simply the reduction of risk until, in proportion to the chances for profit, it becomes reasonable; and the use of his problemsolving machinery beyond that point represents unprofitable expenditure. "The trained mind," as Professor Dewey points out, "is the one that best grasps the degree of observation, forming of ideas, reasoning, and experimental testing required in any special case, and that profits the most, in future thinking, by mistakes made in the past." Superior Reasoning Ability in Practice Let us assume that the financing of three industrial enterprises, the propositions similar in all essential respects, is laid before bankers A, B, and C respectively. Under ideal conditions the investigation required would cost $20,000; A, whose problem-solving machinery works at an efficiency of 90 per cent, spends $22,222, whereas B, whose similar efficiency is 80 per cent, requires $25,000, and C, whose rating is but 50 per cent, needs $40,000. In comparison with A, B is handicapped $2,222 and C $17,778. Or on the other hand, supposing that the three expend the same amounts, B and C will still be handicapped in that they will be assuming more serious risks than A. The problem-solving type of mind, because of the superior effectiveness with which it operates in this respect as compared with the average intelligence, secures its possessor equal risk at less cost in time and effort or less risk at equal cost. First Ideas EXERCISES Ideas for the making of profits are continually occurring to you. Our exercise concerns these. Make a list of the first ten such ideas as they come to your mind entering them upon Test Chart 13. Do not examine them critically; in fact, do not examine them at all, but simply make a note of each in order as they appear until ten have been collected. Next put each through the tests outlined in this chapter. In their original form, do your ideas possess high or low chances of winning you the profits desired? The Sifting of Ideas Men will differ in the percentages shown, the imaginative mind which tumbles out projects ceaselessly showing naturally a higher mortality rate in its ideas than the slower, more methodical thinker. What does this exercise reveal to you regarding the relative importance for profit making of original ideas and the means for Practical ideas, we may conclude, are those fitted to survive the struggle for existence which takes place among the ideas evolved within the mind. They represent at all times the result of a more or less persistent, oftentimes laborious and painful, process of selection. This is necessarily so. "Roasted pigeons don't fly into one's mouth," is the way Daniel Guggenheim, President of the American Smelting and Refining Company, puts it. "You have to find a pigeon, you have to be able to shoot him, then you must clean him and roast him before you can eat him. So it is with business." The severe death rate which prevails among the products of our creative impulse is by no means peculiar to executives but holds true of all men producing ideas at once original and practical. The business man loath to train his problem-solving apparatus upon some idea with which he for the time being is captivated, may ponder with profit, therefore, the words of the famous scientist Michael Faraday: "The world little knows how many of the thoughts and theories which have passed through the mind of a scientific investigator, have been crushed in silence and secrecy by his own severe criticism and adverse examination; that in the most successful instances not a tenth of the suggestions, the hopes, the wishes, the preliminary conclusions have been realized." CHAPTER XIII TESTS OF REASONING We must not then add wings but rather lead and ballast to the understanding, to prevent its jumping and flying.-SIR FRANCIS BACON. Exact Knowledge Needed "Modern scientific management," says Vice-President Peck of the Link Belt Company, "is exactly what the name implies -management based on knowledge-on ascertained facts rather than on opinions, however brilliant, of workman, foreman, superintendent, or manager." The last word has the significance. The wise executive, while relying ultimately on his own judgment, checks up his own opinion by the opinions of others who approach the problem from different angles. But more than opinion he seeks information, definite and clear statements of observed facts bearing on the case in hand. Sources of Information Where is such information to be derived? Where not? Reports of every description come to hand, from within the organization and from outside. Information comes through visits of inspection and investigation; through conferences both official and informal; through correspondence, official and personal; through reading of trade papers, government publications, and books. The range of persons concerned in providing information for the executive is equally great. It includes his fellow officers. It includes his subordinates of all ranks, who are perhaps nearest to actual conditions. Then there are the official investigators and examiners-the auditor, the field |