From a 1922 issue of The American Magazine:
Can You Size Folks Up As This Man Does?
Experiences and ideas of one of the shrewdest credit men in the United States
by Allen Sinsheimer
I was talking with Edward M. Skinner, of Chicago, who is recognized as one of the best credit men in the country — a man with a positive genius for sizing up the human beings with whom he comes in contact. And I had asked him how he could determine, in the course of a short conversation with a person, a stranger, whether or not that person was honest.
“Well,” he said, “I ask him a few questions. And the answers to these questions show me what I call ‘characteristics’ — the things that indicate character. Recently, a young man, a clerk in a retail store, came to me for credit. He had a small capital and wanted to start in business for himself.
‘”How much did you earn as a clerk?’ I inquired.
‘”Thirty dollars a week.’
“‘What do you plan to draw from your own business?’
‘”Oh, about fifty dollars a week.’
“There I had my ‘characteristics.’ He was ignorant of business methods and was extravagant. Again, several months ago, a man came to me from Detroit, with ten thousand dollars in cash, and asked for credit.
‘”Did you borrow this money?’ I asked.
“‘Yes,’ he answered; ‘but I don’t have to pay it back.’
“And then I learned that he had borrowed the money from a young lady whom he planned to marry at some hazy, future time. We did not give him credit.”
All who know Edward M. Skinner will agree that he is a shrewd judge of what he calls “characteristics.” He has worked his way up from office boy to general manager of Wilson Brothers, the largest wholesalers of general furnishings for men.
Many years ago. two oddly assorted men appeared at the Wilson offices. One was short, stout, and chattered incessantly. The other, in corduroy coat, flannel shirt and broad hat, towered silently above his companion.
As much out of harmony with their surroundings as two freight cars in the center of the Congressional Limited, they strode through the aisles toward the credit department.
“Mr. Skinner,” said the little man, “we come from Alaska, my partner, Mr. O’Brien, and me. We want to buy goods, and need some credit.”
“But we’ll not be able to pay you for a year,” interrupted the big fellow.
“No,” agreed the other, “we’ll have to have a year; but we’ll surely pay you!”
“Just a moment, gentlemen,” said Skinner. “Let’s get acquainted. You,” turning to the little man,” are Mr.—?”
“Cohen; Isadore Cohen from Dawson, Alaska.”
“And you,” continued Skinner, addressing the big fellow, “are Mr. O’Brien. All right. Now then, you want to buy some merchandise and need some credit. What do you know about men’s furnishings? And what’s this about taking a year to pay us back? How much money have you?”
“We got three thousand dollars,” explained Cohen; “but we want to go to the new mining camps at Fairbanks, a thousand miles from Dawson, where we got a store, and it costs all our money to get the goods there.”
“How about insurance?” inquired Skinner.
“No insurance, and no chance to get any,” replied O’Brien; “but we will surely pay you back.”
“Yes, I know you’ll pay me if you can,” said Skinner; “but why will it take a year?”
“Because we have to ship the gold dust back to Dawson and have bank drafts sent to you,” explained Cohen, “and it takes so many months to go, and so many months to sell the goods, and so many months to get back, and maybe we’ll get frozen or a boat sinks or we’ll get held up or something — but we’ll surely pay you back.”
“Well,” said Skinner, reflectively, as he told me the tale, “I always take a sporting chance, and this looked like the real thing. The men had some cash and were willing to risk it. They had a knowledge of the business and of the country. They had good credentials, and were unquestionably honest in their genuine eagerness to warn me of the risks I would take and the time I would have to wait.
“So I gave them the goods. They reached Alaska safely and peddled the merchandise at mining camps. Later they opened their store. Next, they developed a jobbing business and spread our merchandise across Alaska and firmly intrenched our name in that country. It paid me to grant them credit. I knew those men were honest. I considered that I was gambling with them against the elements of nature. It was a sort of pioneer’s risk — and I took it.”
There you have a one-word picture of Skinner — pioneer. He was, and is, a pioneer builder of successful retail businesses. Or you might call him a Luther Burbank of business, who grafts credit to character and capital, and produces better business.
Thirty years ago merchants and wholesale salesmen called credit departments “sweat boxes.” Credit men plied prospective customers with inquiries that plainly carried the implied presumption that the answer would be untrue.
Skinner saw the same opportunity that the great life insurance companies have recently discovered. To-day, men who take out insurance are requested to call frequently for examination and advice. The insurance companies find that they can reduce insurance losses materially by taking care of their policy holders.
In the same way, Skinner saw the chance to insure himself against credit losses by making certain that his customers did not die a business death. He analyzed the causes of business failure, and found that thirty-five per cent of all failures were the result of incompetence as against thirty-one per cent caused by lack of capital.
So he places competence, which includes character, above capital. The very last query he put to the two Alaskans was “How much money have you?”
He adopted this plan in his earlier credit days, which followed shortly his move from Wilmington, Illinois. When a boy of fourteen he started work with Field, Leiter & Company, known to-day as Marshall Field’s Wholesale.
He came with a note of introduction to Harlow N. Higinbotham, who was then the credit man. Mr. Higinbotham, who had known Skinner’s grandfather, secured a place for the boy in the office. Here he worked earnestly, striving always to get into the credit department with Higinbotham.
“One day,” he said, recalling the first job, “Mr. Higinbotham came to me and inquired: ‘Skinner, how are you getting along?’
“I knew intuitively that, although he was one of the best-hearted of men, I would lose his respect if I complained and told him, for example, that at that moment I was wearing cardboard in the soles of my shoes because they had worn through.
“So I merely replied, ‘Fine!’
“My first raise came through Mr. Higinbotham. He said one day, ‘Skinner, why don’t you go out to lunch?’ I told him I never ate lunch.
‘”Why not?’ he demanded.
“‘Well, to tell you the truth, I haven’t got the price.’
“If I get you a raise will you eat every day?’
“And, of course,” says Skinner, “I have eaten lunch ever since.”
“Naturally,” continued Skinner, “Mr. Higinbotham was my ideal. Had he been a salesman instead of a credit man, I suppose I would have tried to be a salesman. As it was, I wanted to be in the credit department because it was his. One day I noticed that he always worked nights on the great stacks of papers that accumulated on his desk each day. I asked him if I could stay and help. He was so amazed that he said, ‘Who told you to do this?’
“I explained that no one had; and from that time on, for several years, I assisted him at night and, in that way, acquired my first knowledge of credit work. I remember how his superior used to say, ‘Higinbotham wastes too much time,’ when he was talking with the trade about personal matters. But he was learning much about the private affairs of customers that gave him keen insight into their business methods.”
When Skinner first went to Wilson’s he found a general attitude of “let the other fellow do it.” If he had a letter dealing with gloves or shirts or underwear and sent it to the proper department, it often came back with “What did you send this to me for? It’s not mine. I don’t want it.” And he handled these matters himself until he acquired a comprehensive knowledge of the entire institution.
“I did not do this with any idea of immediate promotion,” he explained, “for there were many old employees, and the three Wilson brothers were all active.”
However, Skinner came down one day to find two of the brothers removed from active work by illness. Opportunity was before him, because no one else knew the many varied details thoroughly. He stepped in and assumed the work of general manager — and though no oral or written confirmation was ever issued he has been holding that position ever since.
Skinner believes his early life in the country developed his sense of the value of money, and of the importance of not wasting.
“Most men,” he said, “cannot comprehend that there is a difference in money; that not all money is alike. There are many kinds of money: saved money, grafted money, borrowed money, stolen money, easy money, speculative money, and so forth. It depends much on what kind of money a man brings in here as to what credit he will secure. For example, you recall that man from Detroit who had borrowed money from his fiancée? That was grafted money.
“There are several things to be considered in granting credit. The most important of all is honesty; and then, in order, you must consider economy, health, industry, ability, knowledge of the business, and finally capital. A man may make a success without all of the above qualifications, except perhaps honesty, but his chances of success grow with each added qualification.
“Most men are honest. Several years ago a group of Chicago business men combined to defeat the loan sharks. They contributed the necessary funds and loaned it without security at the legal rate of one per cent a month to working people who had nothing but their wages, and could not guarantee even them. At the end of two years we found that we had loaned three hundred and fifty thousand dollars and had suffered book losses of but two per cent, much of which was not actually loss but merely deferred payment, due to the unemployment of many of our debtors.
“Of course we always find some exceptions to the rule. But unless the average man knows his business he makes a failure of it.
“Years ago a man named Anderson held a small interest in a Kansas store. I called him my Exhibit A, because he was the first man who took my advice. Anderson’s employer was out West, interested in real estate. The store in Kansas was not paying, and the man out West, its owner, asked Anderson to call on me for advice.
“‘I hope,’ I said to him, ‘that you have not done what most men do — bought too much goods?’
“‘Yes, I have,’ answered Anderson frankly.
“‘That’s too bad,’ I said, and explained to him at length the fundamentals of modern merchandising.
“I showed him how to keep books, and that real profits came from frequent turn-over of his small stock. I drilled him thoroughly and sent him home, advising him to write to his employer periodically about the new plan.
“‘Too much red tape,’ was the decision of the man out West; and after several months he told Anderson he preferred to sell out the store. Anderson had no money, but he now felt well informed about his business, and he called on his local banker, a hard-headed, cautious Scotchman. The banker asked all the usual questions, and was amazed to receive comprehensive replies.
“I never met a man,’ said the financier, ‘who knew so much about his business as you do,’ and he loaned him the money.
“Three years later Anderson owned the store outright, and in time became a wealthy man.
“Business is the only world activity in which men engage without previous study or experience. You find them going into business just because they happen to be successful clerks, are heirs to a little money, or because they have had wholesale experience. They buy merchandise without knowing if they can pay for it when due, or what quantity they can sell.
“A merchant whose business methods I know very well came in some time ago and told me, ‘I have increased my sales to one hundred and eighty-eight thousand dollars this last year.
“‘How much did you lose?’ I asked; and he walked out, angry.
“Three weeks later I was called into consultation with others of his creditors, and found that he had lost eighteen thousand dollars. I told him he was lucky. Had he lost less he would have passed it by unnoticed.
“He was an example of a man who thought selling was all there was to business, and of a greatly increased business, but not an increased turn-over of stock. It is not buying much and selling much, but buying little and selling the same dollar’s worth often, that makes the real profit.
“Credit is often the cause of bankruptcy. It is the cause of extravagance and speculation. Its abuse causes more business depression than results from the lack of prosperity.”
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