inadequate or superficial. Fraudulent enterprises naturally avoid any investigations that would disclose their true character, but where there is no thought of fraud there is frequently an avoidance of investigation that might well arouse suspicion. Too often those promoting an enterprise are quite willing to take chances themselves and apparently think that what is good enough for them is good enough for their friends, or such portion of the investing public as they may be able to interest in the project. At other times investigation is omitted because of absolute indifference; more often, however, through ignorance of its necessity or of what should be done, or in deference to a mistaken economy, or perhaps because of an actual lack of the funds required. Where the investment is comparatively small, as when an investor buys a few shares of stock, investigation is usually superficial or is omitted entirely because the amount involved is too small to justify the cost of an extended research.

Results of Inadequate Investigation

Examples of indifference, on the part of both promoters and investors, to the necessity of investigation are easily found. Frauds pure and simple are freely financed. Worthless mines are developed at great expense; inventions unprotected by patents are furnished with funds; factories are established to manufacture products for which there is scant demand, or are erected in places where raw material is not available or markets too distant for profitable operation; companies are organized to operate under licenses which convey little or nothing. Colonel Carter of Cartersville is not the only one who has financed a railroad which, as characterized by an unfriendly critic, "began nowhere and ended nowhere. "I

A case in the writer's immediate knowledge-not to say experience is much in point. Some years ago an inventor of considerable reputation and achievement stumbled upon a principle,

'Instances are given in Chapter IV, "A Sound Enterprise."'

new to him, in sound reproduction-something that was to relegate such crudities as the phonograph and kindred mechanisms to the scrap heap. The idea seemed reasonable and promising— so much so that when the inventor approached a few friends for money with which to construct experimental apparatus his proposals were promptly accepted. As soon as terms were arranged a machinist was employed and construction work began. All went well for a few weeks until one of the parties concernedhimself an attorney-found it necessary to look up patent matters in connection with another enterprise and thought it well while he was at it to see what had been patented in the line of their own undertaking. His investigation was brief, for he quickly ascertained that many years before Bell of telephone fame had discovered and fully patented the basic idea underlying everything the little syndicate was striving to accomplish. The enterprise then and there came to an abrupt conclusion.

A Loss that Should Have Been Avoided

In the case just cited no investigation had been made because the investors relied on the inventor, and at the worst the amount involved was small. In other words, they took chances and lost, and their only justification-if justification it was lay in the fact that they could afford the loss.

2

A case similar to that just cited, but having disastrous results, is given in a recent work on patents. An inventor, poorly informed as to the "state of the art," i.e., the scope and nature of the work done in his particular field, had undertaken the solution of an intricate mechanical problem. After much thought and study he became convinced that he had it solved. Afraid to communicate his discovery to others, or even to consult anyone else, he fitted up a workshop in his own room and began the construction of his apparatus. It took four years of time and his entire savings to complete the task, but the machine was gradu

2 Avram, "Patenting and Promoting Inventions."

ally approaching perfection, so what did it matter? When his invention had reached, as he supposed, the patentable stage, he brought it to a patent attorney, only to discover that every essential feature had been invented and patented years before.

Investigation Prevented by Conditions

Sometimes neglect of investigation is the result of conditions. An opportunity is offered to invest. Others are also aware of the opportunity. It must be seized at once or not at all. The wisest course in such cases is for the investor to put his money in his pocket and forget the enterprise. Too often the attractive possibilities are too much for him and his money goes-usually into a permanent and unproductive investment.

The writer recalls a recent instance-what its ending will be is not yet known. In a certain section of a southern state, indications of oil abound. Ponds are covered with oily scum; paraffin is occasionally found adhering to the reeds along their banks; here and there the water in the wells is so impregnated with petroleum as to be undrinkable. A test well sunk a thousand feet until stopped by a broken drill tapped both oil and gas, though not in paying quantities.

An interest in a large lease in this territory was offered to northern parties for a comparatively small sum. Before they had time to investigate the matter an offer for the same lease, entirely satisfactory to the owners, was made by other parties. The northern parties were notified that they must "put up" at once or the offer would be withdrawn. The latter decided that the chances were sufficiently good to justify the gamble and "put up." At the same time they recognized that it was a gamble, and justified it on the grounds of the very large returns if they drew the winning cards.

When Investigation Is Refused

Occasionally it happens that the parties most interestedthe owner, promoter, or even those putting money into an enter

prise-will themselves object to a proper investigation. In some cases there is no direct refusal to investigate—it is simply thought to be unnecessary, or to be too much trouble, or too great an expense.

In other cases, however, a proposal to investigate the merits of an enterprise is met with a deliberate and, on occasion, very emphatic refusal. Such a refusal may be due to one of several reasons. Fraud is the first and most obvious inference, but the inference is frequently at variance with the facts. Sometimes the refusal is due to a half-superstitious belief that luck will pull the thing through anyway; sometimes to a feeling hardly acknowledged by the parties themselves that they would rather have a good run for their money-or the money of their backers-and test the enterprise by actual development, than have it nipped in the bud by the unfavorable opinion of some hard-headed expert who might, of course, be mistaken in his opinion of that particular enterprise. More frequently the refusal arises from the fear that an investigation of the enterprise, which may be an unpatented invention, an unprotected process, or an unsecured property, may lead to its loss. Occasionally a refusal results from an honest belief that such investigation will not be a fair one, or will be conducted by improper or incompetent parties.

In both these latter cases the refusal may be entirely justifiable. Speaking generally, however, when proper investigation is refused or evaded, the enterprise should be viewed with deep distrust, and unless a satisfactory method for its investigation can be agreed upon, should be left severely alone. There are people of the kind who are soon parted from their moneywho enjoy the excitement of backing an uninvestigated proposition, and their amusement should not be interfered with by other classes of investors.

Investment as a Gamble

Occasionally investments are made in an enterprise without investigation and as a gamble justified by the circumstantial

plausibility of the presentation and because of the very great possibilities of profit in case of success-as illustrated by the oil gamble referred to on a preceding page. Some years ago a chemist of considerable repute spent a term in jail as the result of just such an investment. He either had or professed to have a formula for the synthetical manufacture of camphor. In other words he claimed to be able to produce camphor in his laboratory by the combination of its chemical elements at a price far below the cost of the natural gum. He positively refused to divulge the secret of his process or to submit it to any test save that of actual manufacture. If his prospective backers would put up a plant he would produce the camphor according to specifications.

A synthetical camphor produced in quantity and at a low price would be of great marketable value at any time, but particularly then when gum camphor was scarce and high in price. The chemist's claims were therefore received with respectful consideration and, though backed by nothing stronger than his own statements and the samples submitted, were deemed of sufficient probability to justify the construction of an experimental plant. A well-known firm of manufacturing chemists advanced $15,000 for the construction and equipment of a laboratory in which the process was first to be demonstrated and the manufacture of the camphor to be carried on thereafter. The demonstration, however, never took place, as the chemist, instead of expending the money on the laboratory and in the production of the gum, diverted it to his own personal use. Whether he really was able to manufacture camphor synthetically has never been divulged. His backers took chances and the chances went wrong.

"Grub-Staking " Investments-The Keely Motor

Investors not infrequently take up the inchoate project of an inventor, discoverer, or prospector on a sort of "blind pool" basis, after very inadequate investigation, possibly amounting to nothing more than a general discussion of the matter with the