Happy 1940 Decade?

By Kenneth Srnith

Secretary-Manager, Lrurnber and Allied Products Institute, Lros Angeles Address Delivered Before

Membership

"I just live from year to year and hope to keep even. If I could get out of the lumber business, I would !"

If you haven't said that, you have heard many others say it. It sums up, unfortunately, the state of mind of a majority of the men who have fought a dismal decade of depression complicated by the astounding ascendency of demagogues and crack-pots.

Reared from childhood and having built a successful business on the old-fashioned virtues of work, thrift and honesty, you have had to take derision and obloquy from hate mongering but high placed theorists who condemn the virtues that builded America and extol the vices of living beyond one's means, working as little as possible or not at all and compromising debts justly due.

BUT, understandable as this attitude of defeatism is, there is no escaping the fact that no business can stand still. If it does not go forward, it will go backward.

The other day Bruce Barton said: "You can be sure of only one thing about tomorrow-IT WILL BE DIFFERENT FROM TODAY." Citing the "safe" investments that have been destroyed by change from what wire rope bridges and tunnels did to ferries, down to the fight of the present moment between cotton, rayon and wool and the fight of all three against "women's stubborn determination" to wear less clothes, he gave as a formula for success: "Look around and see what is being done according to blind routine and ritual: THERE is an opportunity for fortune by introducing CHANGE."

It set me to wondering seriously about how many retail lumbermen, defeated and almost hopeless after years of' little or no profit from volume that in by-gone days brought handsome returns are not in that "according to blind routi.ne and ritual" class that is destined to be engulfed by change-that eternal, unceasing change which is more noticeable today only because the pace has been accelerated in recent years.

A ready-made and frequently encountered explanation is: "We are through. There are no more frontiers. No more free land. No more natural resources to be had for the taking." Superficially true, it is all too readily accepied by the man who is unable or unwilling to think his problem through to face and meet the challenge of CHANGE.

What it means in our business is that we are through making money out of the natural population growth that forced the pace for us while we were housing American farmers, American industry and its workers and now we have to find out how to make money out of the new economy as America shakes itself out of its lethargic drifting toward the totalitariah state and restores the initiative of, entrepreneurs by again dangling lures before their eyes, and resumes the working out of its destiny with the same

Meeting tlanuary 23, 1940

energy, zeal and inventiveness as was expended in the mad rush of building through to the Pacific Ocean and outstripping the entire world in the development of machine production.

And what is going to bring that about? Quitting, drifting, refusing to stick your neck out-waiting for "George" to do it or for a Messiah to come along and save both of you the trouble?

Just two things can do it. First: Every man of ability up in the collar again in his own business finding out what the impact of change is doing to it and its future and thinking out the way to meet it. Second: Every man exercising again the responsibility of citizenship in America, as well as accepting its privileges, and leading in his own, orbit to the limit of his ability-devoting as a duty a portion of his time (and of his money according to his means) to reestablish thrift, toil and honor as the lodestars of American life and government.

Which gets me down to the question that prompts this talk-

..OR, A HAPPY 1940 DECADE?''

The decade just closing (1940 is of course, actually the last year of the fourth decade) certainly must have convinced the last one of' us that we are not again going to make any real money running lumber yards the way we always have. Selling o.n price to contractors, piling expensive service upon expensive service, over-expansion of plant and equipment has caught up with us. The effort to cushion the impact of excessive capacity to serve upon inadequate demand (great as it has been in comparison with other markets) by working together has been remarkably successful in preserving equities (as witness the experience in San Francisco, where no such effort was made) but it has not changed the pattern of what is to be.

The retail lumber business is now in various stages of evolution from the original lumber "yard," ofiering only lumber and rendering no service except place utility. Outside of Metropolitan areas it has already become a retail building material business with a further refinement (achieved long since by many born financiers and merchants) into the "building headquarters" of the community, contacting the consumer direct selling the "package" either a home or remodel job and controlling the transaction (without, except rarely, actually becoming the contractor). That trend has been tremendously accelerated since installment selling was made readily available by F. H. A. and is definitely the pattern of things to come for dealers removed from metropolitan centers. The so-called country dealer has always been closer to his trade and a better merchant than his city contemporary, anyway, and has long pioneered direct selling to consumers.

In Metropolitan centers (which is the problem we must analyze) four types of selling and three general types of dealers are emerging as the pattern of the future. There will be, and there is plenty of room for. the ..merchant', just described, operating in a section of the Metropolis (or even on a city-wide scale) but to do so successfully against the speculative builder will require exceptional resourcefulness, selling ability and courage. Those who can do it will be rewarded by a much greater profit per dollar of sales and per dollar of investment than the dealer who elects to become the "wholesaler" type next described.

A group of dealers in every Metropolis will go back (are already doing it, of course) to the original ,,yard" type, ren. dering little service beyond place utility, catering to quan- tity buyers on price with an absolute minimum of sales expense and varding expense. Big plants wlrich have become white elephants, are too unwieldy, or which lack the excep_ tional merchandising minded perso.nnel required to shift over successfully to direct consumer selling, have little choice other than to cut out unprofitable free services, and unprofitable lines of merchandise, reduce overhead to a minimum, eschew detail milling and small complicated ord;, ers, concentrate on lumber sold as bought and as nearly as possible in round lots requiring a very minimum of handling. In other words, running a "wholesale" or ,,warehouse" type of business on the very narrow margin that always accompanies that type of operation in any staple business.

The third type of dealer (old in large eastern cities) is the building material store in the solidly built up neighborhood, handling everything in a small way, and catering to the maintenance and repair trade.

The fourth seller is already with us (and probably to stay as long as there are unethical producers to supply him) in the shape of the broker selling for direct shipment from the mill to both contractors and industrial users.

There will be a few dealers, of course, who are specialists but they are not a part of the problem we are trying to analyze.

These changes will not come about over night. What I am pointing out is the trend, as f see it. It will be ac_ celerated, or held back, in this market to the degree that men with substantial investments either deliberately re_ vamp their organizations and move as rapidly as they can toward becoming either "merchant" or ,,wholesaler:', or deliberately buck the trend. For instance, the present sitj uation could be very nearly frozen for an indefinite period of time if practically all the substantial investments were minded to submit to the rigid regimentation entailed and use the Unfair Practices Act, because it would then be possible, not to make large profit but to recover the pres_ ent cost of operation. Likewise any individual can freeze his own present method of operation as long as he is willing to work for nothing or take losses.

I know that many of you who have spent a lifetime sell_ ing contractors, and made ntoney at it, will disagree and go right on losing money trying to recover the Z3/o to 25% of gross sales, to which your costs have now mounted by reason of a multiplicity of free services, increased labor and taxes, excessive investment in plant and equipment and wholly unwarranted sales costs. lfowever, when lS/o of the contractors (being those who build 5 or more houses per year) are building 63/o of all the houses, I do not be_ lieve you will be able to compete successfully with the "wholesaler" who can operate at a cost to himself of lSVo or less on gross sales. Nor rvill the small contractor be able to compete successf,ully with the ..merchant,' type of dealer.

Any or all of you can buck the trend. Maybe you can buck it and keep even. That depends upon your resource_ fulness, upon volume available, upon the degree of coopera_ tion between dealers, upon efiort of manufacturers to pro_ mote new business, and upon a lot of other things you can think of as well as I. But no man ever made much profit bucking the tide.

This 1940 decade will witness this market go over to dry framing (largely pre-cut), will see "use name" grades displace the present grading nomenclature and descriptions for construction lumber (if not also for industrial trade), will bring salt seasoned timbers into common use and thereby tremendously increase the market for structural lumber. Laminated construction, not only of heavy members of trusses for which it is already being used, but even laminated house framing will be with you. Airplane manufacturers will be using it again, believe it or not. All of which is added reason why men with substantial investments in our business, who wish to make money, or even in many cases, to survive, must adapt themselves to the pattern of things to come.

It means too that salesmen who are successful will have to really sell, that is, produce business that would not exist except for their effort. I firmly believe that every lumber salesman, however experienced, could profitably invest $28 and a lot of intensive study in "Tested Selling Methods," preparing himself to meet the new competition.

All these changes are going to intensify the need for and usefulness oI your assocation, not only to cushion their impact but to meet the problems from the outside that can only be dealt with adequately by joint action.

You will have not only the continuing problem of securing equal opportunity to sell, establishing and maintaining uniform terms and conditions of sale, which includes continuing the effort to make grade-marking 100/o effective, defense against adverse legislation, City a.nd County builcling ordinances, tax and cartage problems wth the Board of Equalization and Railroad Commission, maintenance of Standard Estimating Practices, which includes issuance of moulding catalogs, price lists, etc., but the need for intensive cost stirdies, for close cooperation in the handling of industrial relations and for trade promotion on a broad scale will be greater than ever before.

With one branch of the Government making a wholly unwarranted attack upon you as monopolists and saying to your customers, in efiect, to withhold building until they force you to get construction costs down, and another branch of your Government for the first time in 150 years urging your prospects to rent instead of striving for home ownership; with apartment house owners aggressively advertising the care free life of the apartment dweller, you will need intelligent and aggressive trade promotion to keep alive the home owning instinct as you have never needed it before. Not only you, but the lumber manufacturer. As a matter of fact, a campaign by yourselves, the Red- wood, Ponderosa and Fir producers, through a joint agency along the li.nes of the Western Home Foundation, operating so efficiently in the Northwest under the joint sponsorship of the Western Retail Lumbermen's Association and the West Coast Lumbermen's Association, would be a smart investment profitable to every dealer dependent upon the new construction market.

Naturally these changes will come faster if u'e continue to operate under our traditional system of free enterprise. They will come more slowly if we go into another tail spin; or if we should be sucked into war. Gullible as the American masses are, surely we will stay out of this one. I fervently hope we may because war would be practically certain to end our republican form of Government, destroy our cherished liberty, and leave us saddled with a totalitarian Government.

As a matter oI fact .no man among us is wise enough to know now whether we may not already have gone so far along the road toward the totalitarian state that we cannot win our way back. Certainly state sovereignty has largely gone overboard and a rational and realistic facing of the unsolved unemployment and relief problem, the attempts of this Administration to finance production for use and cooperative buying schemes, the accomplished direct competition of government with business in scores of instances, punitive taxation, deficit financing which will certainly, by the increase in the tax burden, deter building in years to come, one-sided labor regulations, regulatio,n of competition and the current drive on profits, which has not only deterred capital investment but practically destroyed pri vate initiative, gives 'pause to the most stout hearted patriot.

Which brings me to to that second thing I said we must do. Devote a definite share of time as a duty to our responsibility as a citizen for leading each in his own orbit and to the extent of his ability. During the past seven years our whole economic system has been shaken by experiments and initiative killed by limitations on the profit motive, which is what makes our system of free enterprise tick. Yet it is only recently that business seems to have wakened to the realization that it must aggressively com. bat it, and that it is just as essential-and possibly even more important-to devote executive talent to public relations as to the problems of the individual busiqess.

You probably saw The National Association of Manufacturers "set of principles" which it put out in December saying that business can only earn back the leadership which the New Deal took away from it by shifting' more responsibility back to business and away from government. This conservative organization not only pointed out that private industry is at the crossroads, that government dic- tatorship and planned economy mean surrender of freedom-which we all know-but that only business itself can save the private profit system, and check the trend to totalitarianism. That to do it industry and all business men must be realistic, self-examining, unselfish, social minded, community minded. That they must shift the emphasis from attacks upon government, diabolical as its fiscal policies and its attacks upon busi.ness may be, toward seeking self improvement and public cooperation by enlightenment, by producing better products at lower prices, improving worker relationships, giving steadier employment. That it must achieve a better balance of price structures, build up the local community, emphasize the importance of THRIFT and the SOCIAL VALUE of the profits system.

Dr. James W. Fifield, Jr., Minister of First Congregational Church said in his Christmas ad:

"AMERICAN FREEDOM is worth saving. It is not automatically vouchsafed. While attention is being focused upon war a,nd other issues, the church should consistently champion the .cause of freedom which is jeopardized by unsound fiscal policies, confused thinking, dangerous ideologies and world unrest. The social values of recent trends-but only the yalus5-q2n 2nd must be preserved as part of the American tradition.

"FROM THE BEGINNING, AMERICA has built on the ideal of government which provides that the state is servant of its citizens, that all just powers of government arise from consent of the governed, and that government's function is to provide maximum responsibility and maximum freedom to individual citizens. The opposite philosophy has been u,nwelcome in America until recently. It makes citizens the servants of the State. ft advances subtly. Many, with great social zeal, have unknowingly furthered its objectives.

"FREEDOM IN AMERICA needs champions and should find them in churches whose leader taught the sacredness of individuality. Freedom in America needs coordination of its friendly forces, among which business and the church should properly be included.

"BUSINESS, LIKE THE CHURCH, is naturally interested in preservation of basic freedom in this nation. Goodness and Christian ideals run proportionately high among business men. They need no defense, for with all their faults, they have given America within the last decade a new world-high in general economic well-being."

It may fairly be said that Dr. Fifield's last paragraph is peculiarly applicable to retail lumbermen who have for Zffi years been the business men most closely associated with the building of homes in this nation. I spoke a few moments ago of the advisability of setting out to definitely combat the anti-home owning propaganda and stimulate individual home ownership to promote your trade, but you should :never for a moment overlook the fact in connection with these other things we have just been talking about that it is the home owner who has thus created with his own labor a certain basic social security wich he is unwilling to trade for the untried "Ham & Eggs" schemes who is the real bulwark of liberty, and who with a real stake in the community is your security and the security of every man who is trying to carry on a private business.

You have, indeed, by the very nature of your business not only an unparalleled opportunity but an equivalent responsibility for assuming leadership in the building of, and preserving the security of, the homes of the people of this nation. He who causes a new home to be built makes a greater contribution to the maintenance of liberty in this Nation than a hundred politicians making a hundred speeches on Americanism.

I should like to emphasize what I have been trying to say about the necessity of you gentlemen who own these lumber businesses in Los Angeles TAKING A LONG LOOK AHEAD, planning to make the 194O decade worth while instead of just living through it as so many have the 1930's by quoting Jack Dion,ne talking to another group of lumbermen about each making his community grow by selling his fellow man the IDEA OF BUILDING.

"And you-you modern merchants of building materialyou professional construction authorities-you men here today-YOU ARE THE LEADING CITIZENS OF YOUR TOWNS-potentially now, and actually the moment you GET THE RIGHT IDEA OF YOUR POSITION, YOUR POWERS AND YOUR RESPONSIBILITIES."

Call On Retail Trade

R. U. (Bob) Bronson of the Trio Lumber Co., Eugene, recently spent 10 days in Northern California calling on the yards with salesmen of Gorman Lumber Co., Oakland, which represents his concern in this territory.

On Eastern Trip

Gerald Wetzel, resident sales manager of Shevlin pine Sales Co. at McCloud, Calif., was in San Francisco recently on his way to Chicago and Minneapolis.