The Ethics of Speculation

THE preachers and moralists call this a materialistic age. They deplore the mad rush of multitudes “to get rich” quickly. They call attention to the colossal fortunes which have been piled up by the kings of finance and industry, at the expense of the poor, within a single generation.

Every one agrees that this eager pursuit of wealth is somehow related to speculative methods in business. A considerable class of men are known as speculators. The great stock and produce exchanges in every big city are centres of feverish speculation. The quotations and fluctuations of stock are published in all the newspapers. Farmers in distant country towns, ministers, often women, watch these quotations, telegraph orders to their brokers, and lie awake nights in alternate hope or fear. Periods of panic sweep like storms over the market, new deals are made, and fortunes are won or lost in a day. Tragedies, suicides, nervous prostration, and insanity follow these speculative fluctuations of value in the staples and the wealth of the world. Every one is interested perforce in this aspect of modern business. The successes and the ruin involved in both great and small speculation appeal to the popular imagination, sometimes with a wholesome alarm, and again more dangerously with a zest to enter into the arena and take its gilded ventures. It is difficult to see how the fineness of moral standards, delicacy of spiritual insight, the ideals of public service, or the purity of domestic life can help suffering blight in the prevalence of an atmosphere of speculation.

We are generally agreed that what is known as gambling is pernicious and demoralizing both to winners and losers, that is, it is “wicked.” We manage occasionally to catch in the meshes of our system of law the frequenters of gambling houses or Chinese dives, and we have largely driven the lottery out of existence, and made it disreputable. We are waging a legal battle against poolselling, and public opinion is already attacking the nuisance of the “bucketshop,” which fatally lures multitudes of the poor to loss and many a young clerk to dishonor and ruin. Where now is the dividing line between undisguised gambling and the enormous transactions upon the stock exchange? In other words, is speculation always gambling? And if not, if speculation is sometimes right, when does it cease to be right and become wrong? Moreover, what precisely is the harm in gambling itself — a new crime in the world, unknown as such to our fathers — provided one can afford to lose the amount of the stakes ? These questions, important as they are, are not so simple as they may at first appear.

Let us be sure that we approach our question with candor and without any cant. We must admit, to begin with, that we are all materialists, though we hope that we are not mere materialists. All civilization proceeds upon material foundations. Wealth is evidently the sum of the outward values by which man on his physical side holds the earth. It is a kind of power, whether held individually or by society. We learn all higher and spiritual values, justice, integrity, faithfulness, — the conduct of “the simple life” itself, through the accurate and honest use of material values. If it is not unworthy to love to exercise power, it cannot be unworthy to be pleased to handle wealth.

Again, there can be no harm in liking to “get rich ” quickly. Let us call things by their right names. Avarice, greed, injustice are wrong; they hurt society and dwarf a man’s own soul. But we are made to enjoy success in whatever we do. Does not a farmer like to have a grand crop — a hundred-fold over what he put into the ground ? Does not every fisherman like to strike a school of mackerel or bluefish ? All inventions and the laborsaving application of natural powers are simply means to bring about the most rapid production of wealth. The complaint never ought to be that riches are produced too rapidly, but that they are not fairly distributed.

Moreover, there is doubtless a speculative element, a factor of venture or “chance,” in all human enterprises. This element, called wrongly sometimes “a gamble,” was quite as prevalent in the primitive industries as it is anywhere to-day. Hunting and fishing were largely matters of “luck.” The early unscientific agriculture seemed to depend on a series of lucky chances. There are some kinds of business to-day that are from their nature especially speculative; for example, mining, and the establishment of a thousand and one new undertakings in food and clothing and domestic furniture. The telephone was thus at first a great speculative venture. But this element of hazard did not make it wrong to buy its stock at a few dollars a share. In fact, if some people had not believed in it and risked their money, the world would have had to wait indefinitely for the use of this wonderful new instrument of civilization. We suspect that even Mr. Emerson would have been pleased with the results, if he had trusted the proceeds of one of Ids lectures in the infant enterprise.

Alongside of, and involved with this unknown element of venture, “chance,” or speculation in all human enterprise is the constant factor of intelligence, skill, forethought, purpose, experience, — all of them names for some form of effort, activity, and cost. We draw on the more or less unknown forces of nature, which continually challenge us to watchfulness, to patience, to accurate investigation, to the use of all our faculties and our energy. The best, or most successful, man is he who invests and ventures the utmost skill and force of will in his enterprise.

A profound law governs the processes of civilization. The law is that the civilized man always tends to minimize the variable element, or the risks of his business, and to depend more and more largely upon the use of clearly defined and intelligible means, the result of his own observation and of the widening experience of the race. Everything industrial becomes a science. The expert endeavors to predict how much gold or copper will be produced to every ton of the ore. Science teaches the farmer or the fisherman the conditions upon which he may quite confidently expect the largest possible yield. We shall have occasion presently to refer again to this significant law of progress in industrial civilization, whereby all legitimate business tends to become less a mere speculation and more completely a science.

Let us now try to see just what the mischief is in gambling. Here is a familiar sport of all barbarous peoples. The savage wants excitement, and finds it in venturing everything that he owns, even his wife or his own person. The idle class in a modern city gamble likewise for excitement, to titillate their jaded nerves. Thus bridge-whist with its genteel stakes represents the survival of a very ancient form of barbarism.

Gambling needs to be distinguished from good sport as also from good business. In true sport the element of intellect, patience, attention, activity, rises in value, and the factor of chance declines. The better the sport, the greater the activity of body or mind, the less the need of extra or factitious excitement. The players in the football game or at chess need least of all to bet on their own success. They have “fun ” enough in the effort itself. It is the idle minds with lazy and unintellectual games, or the hangers-on, watching the games of others, who buy a cheap excitement by betting on the sport. Theirs is not true sport. In fact, the more the brains or the skill is used in a sport, the less use have any civilized players for going over into the field of gambling. Pure gambling is based on ignorance; it deals in what we call “chance.” Thus, the dice is a pure gambling game, for the reason that intelligence has no possible exercise in its use. On the other hand, the more skill or intelligence enters into a sport, the greater becomes the folly of those who, with little or no skill, put up their stakes on the mere chances of the game.

What harm, how’ever, is there if the players like to enhance their fun by the excitement of putting up stakes? One easy answer is that the friendly or neighborly instinct in us is more or less offended in pocketing even a small gain at another’s loss. This is a rational instinct, which grows stronger and more sensitive as one becomes more humane and kindly, and especially as we set before ourselves the ideal of living on terms of good-will with all men.

But the supreme objection to gambling in all its forms, whether in sport or in speculative business, is that it works harm and loss to society. As soon as any practice or conduct is found to be socially hurtful, it thereby becomes wrong, whatever men may have thought of it before. Does not all morality rise to consciousness through the fact of social advantage or injury ? Now, the long and costly experience of mankind bears uniform testimony against gambling, till at last the verdict of civilization has become as nearly unanimous as human judgment can be that it is an intolerable nuisance. It is a dangerous or unsocial form of excitement; it hurts character, demoralizes industry, breeds quarrels, tempts men to self-destruction; and it works special injustice to women and children. We may not know precisely why morphine preys upon the nervous system and has to be labeled “poisonous.” The fact is the main consideration. So with the stimulus or excitation of gambling. Grant that I profess myself willing to pay for my fun. The fun is degrading, like the prize fight or bear-baiting.

But suppose, says the casuist, that the players have plenty of good-humor, and self-control enough not to take unreasonable risks. Suppose that mildest form of gambling, the raffle at a church fair, where a hundred people take tickets to pay for a piano, and then cast lots — surely a scriptural method — to determine who shall have the quite indivisible prize. The answer is, that at the best, you, the enlightened leaders of public opinion, who set up your tiny stakes and raffle in church lotteries, are playing about the edge of the very precipice which your own laws have marked “ dangerous ” for the public. Who are you who ask the special privilege of doing what you deem it foolish or wicked for common people to do ? Moreover, the more “reasonable ” you make the stakes of respectable gaming, or of gambling speculation, the tamer the game is. If you want extra excitement beyond what grows out of the normal use of skill and intelligence, you must bid high enough to hurt you a little when you come to lose. In other words, the psychological principle that underlies all craving for factitious excitements makes “reasonable ” gambling either worthless for the purpose of excitement, or else a practical impossibility. The truth is that the normal interests of society grow continually more cooperative or mutual. Gambling on the other hand is by its nature divisive and therefore unsocial. It sets meum over against tuum, my gain against another’s loss. Even in its more refined forms this tendency in gambling threatens petty jealousies, suspicion, and alienation.

It is a dry task and comparatively unprofitable merely to say, “Thou shaft not.” Let us pass over now to the more fruitful and constructive side of our subject. Let us trace the grand and positive law that determines and inspires all legitimate business. Let us define what is good business, and we shall at once set all kinds of bad business aside. The simple law, governing all social activity, is that each individual ought in some way to render at least an equivalent service for all that he draws or uses out of the common wealth. If you live in society, you must perform some useful function whereby to justify your existence. If the individual cell in the body only uses up and exhausts energy, without contributing any corresponding service, here is the beginning of death, menacing the whole body. If the tiny cell functions abnormally, putting its force or its substance to hurtful uses, here is a sort of fever or disease. Give account of yourself, says the body of society to every member or part; show what you are about; of what use you are; why you should eat and drink and be clothed out of the life-blood of society.

The Day of Judgment is coming sooner than many people are aware. The multitudes of the working people of the world are pressing with a new significance these searching and inevitable questions of social justice. There is no such thing to-day as individual independence or national independence. All men in all nations are dependent upon one another, involved in a vast network of mutual services and obligations. There is nothing to which a man, whether a capitalist or a workman, can point and say, “This is all mine. I created it.” All the men in the world who are of any use, besides a host of the inventors and toilers of past ages, stand behind every act of creation or discovery or manufacture and claim their share in it. It is idle merely to “say grace ” over our food. It is necessary to give thanks in the only way, under God’s laws, by which we can render efficient thanks, namely, by trying at least with all our might to do our part to keep up the mighty tide of the circulation of the life of the world. This is to give thanks to God through our mutual service to one another. So far from high position or wealth exempting any one from this law, the obligation is only made greater. This ought to be obvious enough to every one who has ever begun to ask the question, “Where does my living come from ? ”

It is easy at once to illustrate how this law actually applies to one after another of the trades and professions by which men “earn a living.” Every trade and occupation as it comes up to-day for judgment is either approved or repudiated according to the answer of the men who carry it on to the question, “How are you serving society ? ” The farmers, for example, and a whole line of honest tradesmen, easily answer this question. But what if the farmer only raises rye or corn to turn into whiskey ? Men’s consciences already are righteously vexed over such issues as this. The teachers and educators easily pass the judgment seat. But suppose the teacher works for his hire and not for the sake of his pupils ? The good doctors and nurses evidently justify their calling. The lawyers must pass examination at a more tremendous bar than any of their courts. Are they serving justice and helping to make justice prevail in the world ? No glory of splendid fees will protect the man who has to say, No, to this master question. The ministers and churches may well tremble at the new judgment. Either their religion must make life in every way richer, or else the world has no further use for them.

We are ready now to distinguish between that which is socially useful and that which is injurious in business. Any honest man ought to have the satisfaction of knowing that his business carries some wholesome use or service for his fellows. For example, our grocer or our baker may be sure, if honest, that he serves society by the distribution of its products, as truly as ever soldier or policeman is supposed to serve it. His purpose to this effect gives him the same dignity as any honorable profession gives its members. On the other hand, it is difficult to see how, for example, the larger part of the saloon-keepers can avoid the charge of being simply social parasites.

Suppose now a man gets his living by gambling. Possibly he keeps a gambling house, or he may be a “professional” gambler, or he may have made lucky guesses or bets in the stock market. His living certainly comes out of the toil of the people who work in fields and factories, or, anyhow, out of the people who by the use of their directing intelligence or by their wisdom or their active virtue add in some way to the value and worth of life. This man has done neither. Every successful gambling transaction of his has simply put moneys into his pocket which other people somewhere have earned. Why is not this the essence of stealing ? Every one would see that this is so, if the more subtle gambling transactions were not veiled behind the vastly impersonal character of modern business. The man who lives by gambling speculations sees his winnings, while unfortunately he is rarely able to look into the faces of the people who are made poorer by the fact of his parasitism.

The imagination which revolts at the idea of hurting a man is not yet sufficiently trained to revolt at the idea of preying upon a corporation, upon a city, upon the national government, upon the corporate body of human society. The fact remains that the men whose business consists only in some form of betting upon the daily fluctuations of the values of the world evidently take from society, that is, from all of us, that for which they give no honorable return.

Pure gambling, however, as a means of livelihood, is practically almost impossible. The unwritten laws of the world are against it. As has often been said, it is not so much wickedness as folly. The gamblers, whether at the faro table or in the bucket shops, obviously have to support the group of parasites who in turn wait upon them; and the sum of all their winnings must always be less than the amount of their losses. In the long run they can make success only by fraud, or, as occasionally on the stock exchange, by “tips,” or bits of secret information, imparted by sagacious friends who possess previous or exceptional knowledge about the conditions of the market. Most of the gambling of the world is therefore synonymous with ignorance, and will give way only before the increase of enlightenment. No stringent laws against it are enough by themselves to prevent silly lambs from offering themselves to be shorn.

We have admitted that there is a necessary element of speculation or venture in all enterprises. Is there such a thing as honorable or useful speculation? It is at this point that the chief difficulty of our subject lies. There are three lines of justification of legitimate speculation. The original meaning of the word speculate suggests one use to which society puts a certain class of its members. They are scouts or outrunners, who, by their far sight or mobility, explore new routes by which the marching caravan behind them may proceed, or discover treasures and supplies for the benefit of the rest. The inventors and promoters are thus surely useful to the slower and cautious multitude. No one grudges them generous return for their forethought, patience, courage, and faith. The trouble with this class of speculators is that they have frequently failed entirely to see their relation to society. Their honorable business is to serve all of us. They have heretofore been suffered to imagine that they could appropriate for their selfish use whatever they might lay their eyes upon. Sent forward as scouts from the main body, upon whose approach they always reckon, and by whose continued support they are enabled to exist, they have confidently -written their own names as proprietors upon the lands, the springs of water, the forests, the minerals, and all those natural resources which rightly belong to the body of society, — never to a few of its members.

There is then a kind of speculation which is itself righteous, namely, the discovery and promotion of new means of wealth. The injustice begins when men set an excessive price of their own on their work, as if they had performed an act of original creation. We can applaud Mr. Carnegie’s and Mr. Itoekefeller’s enterprise, but we denounce their system of tariff, their manipulation of railways, and their appropriation of mineral lands, through which their speculation has passed over from useful social service into the form of colossal extortion. We cannot even see the social use of any sort which has attended the building of the Astor and other similar for times. The scout in this case lias merely seized and fortified a height above the city and become a robber-baron. We must say, however, by way of excuse, that these men have turned to their own selfish use legal enactments for which we are all responsible.

A second use of the speculator is as an appraiser of values. Here is the social use of the stock and produce exchanges. For the economists tell us that the maddening din of the vast exchange is not for nothing. The men penned there together like gladiators are helping to fix and even to maintain the values of the great staples of the world — the wheat and the cotton, or again, the values of innumerable stocks and bonds. Grant this fact if you will. Ask next who are these people who are crying prices up or down ? There are really two sets of speculators, present in person or by proxy. One set are actual experts in valuation, whose business it is, as dealers or as manufacturers, to study crops and harvests and movements of traffic and labor. These men are playing the game by the use of experience and intelligence. They have a certain normal relation to the values in which they are dealing. It is evidently these men alone,—only a limited number, — who at the best can claim to confer a social service by their speculations. These men also tacitly obey the law of which we have spoken earlier. They tend always to minimize the element of venture and to make their business as largely as they can a matter of intelligence and science. In other words, the good speculators endeavor not to gamble but to know. So far as they break this law, they injure society and put back the course of civilized business. Their valid use is to establish values, and not to manipulate them; to maintain the health of business and not to provoke fever and excitement. Let any professional speculator then be ready to answer this question: What effect, beneficent or otherwise, have such transactions as mine upon the economical health of the world ? It is a shame to a man if he can give no honorable answer to this question. Moreover, society is going to press this question till men who cannot answer it will feel the shame.

Another group — a very large one by all accounts — represented in the transactions of the speculative exchanges, are people who are onlyr ignorant guessers or bettors. No doubt they often act under advice of their brokers, but they contribute no particle of intelligent study in the appraisement of values. This class surely are of no sound economic use in crowding upon the market. So far from helping to fix or maintain values, they probably add an element of exaggeration, excitement, and peril to the conduct of business. Their presence and the stakes which they wager tempt the bona fide or expert class of speculators to play upon their hopes and their fears, and to create artificial “booms ” or panics, and actually to unsettle values. In short the people who “take flyers ” are mostly gamblers pure and simple. They pay their money to support a considerable and expensive group of bankers and brokers. To the honest question: What actual social service do you render through your speculative transactions, such as might justify you in pocketing your expected winnings, abstracted doubtless from the common wealth ? they can give no rational answer. They are not merely trying to get something for noticing, — a harmless amusement, — but they are try-ing to get what does not belong to them.

There is one other ground on which a class of somewhat irregular speculators stand. They have a possibly legitimate function as traders. Some new stock, an invention, a Japanese loan, comes into view. Our speculator believes in the enterprise; he takes his risk with it and puts up his money upon a more or less hazardous margin, and buys. He does this upon the trader’s confidence that his more cautious neighbors will in due time be glad to take the load off his hands and to reward him for holding it through the period of their uncertainty. He thus helps to market and distribute investments among those who can afford later to hold them permanently. All this is plausible. His gains (if he makes them) do not appear to come out of the losses of others, but to accrue from the normal rise in the values in which he had trusted. In short, the speculator in this case is a kind of promoter, a non-commissioned agent of his banker and broker.

The ground of this form of speculation, however, is rather slippery’. Except as the man really becomes a regular banker, his field of quite honorable operation is both perilous and limited. Suppose now that, from helping to market promising ventures, he goes over to the other side, as he will surely be tempted to do, and takes an amateur hand in knocking values downward. Does he then help or harm his fellows ? Moreover, his only chance of success is by virtue, not of the element of chance, but of prevision, skill, intelligence, — all very rare qualities, for the lack of which ninety-nine per cent of the people who try to follow his example will inevitably fail.

The pathos of speculation lies in this direction. It is not wrong that the village schoolmaster, or the country minister, or the dressmaker with her scanty earnings, wishes to have a share in the fabulous wealth which modern society is accumulating. They rightly think “it would be fine ” if their bit of investment in the wonderful mine described in their denominational journal turns out as successfully as they hope. What they do not see is that they have no business to hope for this success; they do not know enough. No one has taught them that every useful or promising kind of speculation depends upon effort, skill, experience, the play of intelligence upon the conditions of each new problem. Honorable speculation is a form of science. It is never mere cheap guess-work. But these innocent people — a great host of them — are daily matching their ignorance against the loaded dice of those whom their credulity tempts to make a business of floating all kinds of plausible and worthless enterprises.

When will the world learn the supreme law of life ? We have no right to expect to receive when we give no equivalent return. We have no right to expect ordinary gains, unless we give at least ordinary service. Much less have we right to extra gains from our investments, where we put in no extra skill, foresight, or other form of service. We only make fools of ourselves in expecting great dividends, where we have not the least knowledge of the conditions of business. Indeed, we have no right to live, even upon our own incomes, unless we are trying continually to make good to society for all that we cost. We are always servants and trustees for society or else we are robbing our fellows. No success, no secure or permanent happiness, lies away from the line of this law.