interpreting the probable market for the article from the first signs of the public's attitude toward it. But even with the most consummate skill at his command, such promotions are mere gambles.1

Speculative Features of the Telephone

The early history of the telephone is a striking illustration of this uncertainty as to the public reception of a new invention. Who could foretell its future? The nearest existing device, the telegraph, was a working success but there was no real basis here for estimating the field or the future of the telephone. The design and the purposes of the new device were entirely beyond all experience and the estimates of its value were absolutely divergent. The majority opinion, very freely expressed, was that the telephone would never come into general commercial use. It is doubtful if any, even of its friends, foresaw in it one of the common necessities of business and social life. The objections urged against it-that it was only a toy, that it would be a nuisance in the office, that messenger and office boys were entirely adequate as a means of communication, and that generally the idea was visionary—are all familiar to the older generation. So valid did these objections appear at the time that great difficulty was experienced by Bell and his associates in financing the invention. Not even the experts were anxious to invest in the new enterprise -an enterprise in which, as numerous prospectuses have since informed us, "every dollar originally invested has increased a thousand fold."

In the case of the telephone there was no question as to the ability of the mechanism to transmit speech. The doubtful point was whether the people wanted it to transmit speechwhether the facilities already in use, the mail, the telegraph, the messenger boy, and the personal visit were not all-sufficient. Obviously, the majority of those best qualified to judge thought that the telephone had no place in modern business life. The

'Dewing, "Financial Policy of Corporations."

hundreds of millions of dollars now invested in the telephone show that they were badly mistaken. Only a practical test could have demonstrated the fact.

Speculative Features of the Phonograph

Take another instance along the same general lines, but with a very different termination-that very interesting invention, the phonograph. Here from the first a strong impression prevailedwhich it may be said should have been realized-that the invention had a brilliant and immediately profitable future. The history of the telephone was apparently to be repeated and there was a rush of investors, both experts and ordinary people, to participate in the rich returns. History was repeated, but it was not the history of the telephone. The first attempts to introduce the phonograph were failures, and the majority of the original participants lost every dollar invested.

In this case the inventor and those interested believed, and not without reason, that the phonograph and the kindred devices that soon after made their appearance would find their wide and profitable field of usefulness in the business world. They were to be employed in the office as an assistant to, or substitute for, the stenographer. So thoroughly were the promoters of the invention convinced of the correctness of this position that they actually discouraged the employment of the machine for amusement purposes on the ground that such use would cause it to be looked upon as a toy and retard its introduction in its best and most profitable field-the business office.

In the financing and first exploitation of the phonograph, comparisons were constantly made between it and the telephone, with the idea that the phonograph was a somewhat parallel invention that would come into general business use in much the same way. Likewise, pursuing the same policy as the telephone company, the phonograph was to be leased, not sold. But for some reason the phonograph did not take with business men-probably be

cause it was not so well adapted to their use as it could and should have been. Be this as it may, from the standpoint of business use the invention was a dismal failure. A few lingered in offices here and there to show that there was some virtue in their commercial application. Later, perfected machines, better adapted to the requirements of the business man, were introduced with considerable success and are now widely used.

As its history has shown, the easiest, the largest, and the most profitable field for the phonograph and the related machines was and is in the world of entertainment. Also it has shown that the leasing idea was wrong. At the present time numerous companies with many millions of dollars of invested capital are engaged in the manufacture and sale of sound-reproducing machines, and of records to be used with these machines, and their profits have been eminently satisfactory. It is in this direction that the few of the original investors who really profited by their connection with sound-reproducing machines have made their money.

It is somewhat difficult to explain the mistake. Even Edison with his prophetic vision seems to have concurred in the fatal blunder. Apparently those interested were so sure that the phonograph, in some unexplained way, paralleled the telephone, that they followed its methods of exploitation blindly and without the intelligent consideration that would have at least suggested that entertainment was the easier, the wider, and the more profitable field. Their experience should emphasize the fact that in the realm of invention investigation should be more rigid than in almost any other field. There is risk enough at the best. Every feature of uncertainty should be removed as far as possible so that the risk that still remains shall be reduced to its lowest and clearest terms.

Inventor's Estimates

In considering a new invention, the estimates of the inventor himself are but rarely reliable and are to be accepted not at all,

or with much caution-not necessarily because of any intention to deceive on his part, but from the nature of the case. An inventor is naturally an optimist; a pessimist does not have the courage of invention. The inventor then, an optimist to begin with, ignores adverse conditions, is ever on the look-out for favorable indications, is watchful for facts that coincide with his theories, is oblivious of those that do not, and stakes his time, his money, and his efforts on the successful outcome of his design and of its value when perfected. Under such circumstances, the inventor is, to say the least, not an unbiased judge of either the merits or the value of his invention. His opinion may be useful, but it should never take the place of the most searching investigation that can be made.

It is, of course, always possible, though not probable, that a proposed mechanism will do all that its inventor claims for it. It is also possible that it may prove so entirely new in operation and unique in construction that patent protection is merely a matter of application. All this may be true, but it must be remembered that the wisest of men, Solomon, who was himself quite willing to take chances on occasion, expressed doubts as to the absolute novelty of anything, and his father, David, in a somewhat heated generalization, intimated that false representation is common to all men. As a matter of fact, to venture money on the unsupported anticipations of inventors is even more reckless than "bucking the tiger," cornering wheat, or staking one's all on a wild-cat oil proposition.

Financing an Inventor's Estimates

An illustration of the results likely to follow any such unwise investment is afforded by the history of a company organized some years since. This company based its very liberal expectations of profit on the merits of a newly invented and somewhat extraordinary apparatus for the manufacture of building brick. As conservatively estimated by the inventor, this mechanism—

or, to be more accurate, this train of mechanisms-was to mold, dry, bake, and deliver ordinary building brick of fair average quality at the astonishing rate of not less than 525,000 each day. The net profits of the company on this operation-as figured by the inventor-were to be at least $5 on each thousand of brick, giving a total daily net profit on each and every machine of not less than $2,625.

If the mechanism had been properly proved these figures would indeed have been impressive, and the enterprise itself would not have been in the speculative stage. As a matter of fact, nothing in the way of investigation or demonstration had been undertaken by either the inventor or his associates. The mechanism itself then existed only in the form of neat designs on tracing paper; also with a fine disregard of ordinary business procedure, patents had been practically ignored. Apparently the inventor reasoned that the mechanism, having been invented by him, could not fail to operate in accordance with his intent, and that for equally good reasons it would undoubtedly receive the fullest measure of patent protection whenever he found time to make application.

At any rate, acting upon some such belief and armed only with his designs and a large brick which he used for purposes of demonstration, the inventor attacked a credulous public, and so successfully that, with no further investigation than an inspection of the inventor's brick and a consideration of his statements, over $10,ooo in cash was placed in his hands for immediate expenditure. This was followed by further subscriptions until between $30,000 and $40,000 was staked on the success of the somewhat mythical machine.

Result of Financing an Inventor's Estimates

At this point it occurred to a prospective investor that it might be wise to find out what basis the inventor had for his claims, and the possibility of the proper patent protection of the