Chapter 12

Chapter XII

Not long after I closed my July cotton deal more successfully than I

had expected I received by mail a request for an interview. The letter

was signed by Percy Thomas. Of course I immediately answered that I’d

be glad to see him at my office at any time he cared to call. The next

day he came.

I had long admired him. His name was a household word wherever men took

an interest in growing or buying or selling cotton. In Europe as well

as all over this country people quoted _Percy Thomas’_ opinions to me.

I remember once at a Swiss resort talking to a Cairo banker who was

interested in cotton growing in Egypt in association with the late Sir

Ernest Cassel. When he heard I was from New York he immediately asked

me about Percy Thomas, whose market reports he received and read with

unfailing regularity.

Thomas, I always thought, went about his business scientifically. He

was a true speculator, a thinker with the vision of a dreamer and the

courage of a fighting man--an unusually well-informed man, who knew

both the theory and the practice of trading in cotton. He loved to hear

and to express ideas and theories and abstractions, and at the same

time there was mighty little about the practical side of the cotton

market or the psychology of cotton traders that he did not know, for he

had been trading for years and had made and lost vast sums.

After the failure of his old Stock Exchange firm of Sheldon &

Thomas he went it alone. Inside of two years he came back, almost

spectacularly. I remember reading in the _Sun_ that the first thing he

did when he got back on his feet financially was to pay off his old

creditors in full, and the next was to hire an expert to study and

determine for him how he had best invest a million dollars. This expert

examined the properties and analysed the reports of several companies

and then recommended the purchase of Delaware & Hudson stock.

Well, after having failed for millions and having come back with more

millions, Thomas was cleaned out as the result of his deal in March

Cotton. There wasn’t much time wasted after he came to see me. He

proposed that we form a working alliance. Whatever information he

got he would immediately turn over to me before passing it on to the

public. My part would be to do the actual trading, for which he said I

had a special genius and he hadn’t.

That did not appeal to me for a number of reasons. I told him frankly

that I did not think I could run in double harness and wasn’t keen

about trying to learn. But he insisted that it would be an ideal

combination until I said flatly that I did not want to have anything to

do with influencing other people to trade.

“If I fool myself,” I told him, “I alone suffer and I pay the bill at

once. There are no drawn-out payments or unexpected annoyances. I play

a lone hand by choice and also because it is the wisest and cheapest

way to trade. I get my pleasure out of matching my brains against the

brains of other traders--men whom I have never seen and never talked

to and never advised to buy or sell and never expect to meet or know.

When I make money I make it backing my own opinions. I don’t sell them

or capitalise them. If I made money in any other way I would imagine I

had not earned it. Your proposition does not interest me because I am

interested in the game only as I play it for myself and in my own way.”

He said he was sorry I felt the way I did, and tried to convince me

that I was wrong in rejecting his plan. But I stuck to my views. The

rest was a pleasant talk. I told him I knew he would “come back” and

that I would consider it a privilege if he would allow me to be of

financial assistance to him. But he said he could not accept any loans

from me. Then he asked me about my July deal and I told him all about

it; how I had gone into it and how much cotton I bought and the price

and other details. We chatted a little more and then he went away.

When I said to you some time ago that a speculator has a host of

enemies, many of whom successfully bore from within, I had in mind my

many mistakes. I have learned that a man may possess an original mind

and a lifelong habit of independent thinking and withal be vulnerable

to attacks by a persuasive personality. I am fairly immune from the

commoner speculative ailments, such as greed and fear and hope. But

being an ordinary man I find I can err with great ease.

I ought to have been on my guard at this particular time because not

long before that I had had an experience that proved how easily a

man may be talked into doing something against his judgment and even

against his wishes. It happened in Harding’s office. I had a sort of

private office--a room that they let me occupy by myself--and nobody

was supposed to get to me during market hours without my consent. I

didn’t wish to be bothered and, as I was trading on a very large scale

and my account was fairly profitable, I was pretty well guarded.

One day just after the market closed I heard somebody say, “Good

afternoon, Mr. Livingston.”

I turned and saw an utter stranger--a chap of about thirty-five. I

could not understand how he’d got in, but there he was. I concluded

his business with me had passed him. But I didn’t say anything. I just

looked at him and pretty soon he said, “I came to see you about that

Walter Scott,” and he was off.

He was a book agent. Now, he was not particularly pleasing of manner or

skillful of speech. Neither was he especially attractive to look at.

But he certainly had personality. He talked and I thought I listened.

But I do not know what he said. I don’t think I ever knew, not even

at the time. When he finished his monologue he handed me first his

fountain pen and then a blank form, which I signed. It was a contract

to take a set of Scott’s works for five hundred dollars.

The moment I signed I came to. But he had the contract safe in his

pocket. I did not want the books. I had no place for them. They weren’t

of any use whatever to me. I had nobody to give them to. Yet I had

agreed to buy them for five hundred dollars.

I am so accustomed to losing money that I never think first of that

phase of my mistakes. It is always the play itself, the reason why.

In the first place I wish to know my own limitations and habits of

thought. Another reason is that I do not wish to make the same mistake

a second time. _A man can excuse his mistakes only by capitalising them

to his subsequent profit._

Well, having made a five-hundred dollar mistake but not yet having

localised the trouble, I just looked at the fellow to size him up as

a first step. I’ll be hanged if he didn’t actually smile at me--an

understanding little smile! He seemed to read my thoughts. I somehow

knew that I did not have to explain anything to him; he knew it without

my telling him. So I skipped the explanations and the preliminaries

and asked him, “How much commission will you get on that five hundred

dollar order?”

He promptly shook his head and said, “I can’t do it! Sorry!”

“How much do you get?” I persisted.

“A third. But I can’t do it!” he said.

“A third of five hundred dollars is one hundred and sixty-six dollars

and sixty-six cents. I’ll give you two hundred dollars cash if you

give me back that signed contract.” And to prove it I took the money

out of my pocket.

“I told you I couldn’t do it,” he said.

“Do all of your customers make the same offer to you?” I asked.

“No,” he answered.

“Then why were you so sure that I was going to make it?”

“It is what your type of sport would do. You are a first-class loser

and that makes you a first-class business man. I am much obliged to

you, but I can’t do it.”

“Now tell me why you do not wish to make more than your commission?”

“It isn’t that exactly,” he said. “I am not working just for the

commission.”

“What are you working for then?”

“For the commission and the record,” he answered.

“What record?”

“Mine.”

“What are you driving at?”

“Do you work for money alone?” he asked me.

“Yes,” I said.

“No.” And he shook his head. “No, you don’t. You wouldn’t get enough

fun out of it. You certainly do not work merely to add a few more

dollars to your bank account and you are not in Wall Street because you

like easy money. You get your fun some other way. Well, same here.”

I did not argue but asked him, “And how do you get your fun?”

“Well,” he confessed, “we’ve all got a weak spot.”

“And what’s yours?”

“Vanity,” he said.

“Well,” I told him, “you’ve succeeded in getting me to sign on. Now

I want to sign off, and I am paying you two hundred dollars for ten

minutes’ work. Isn’t that enough for your pride?”

“No,” he answered. “You see, all the rest of the bunch have been

working Wall Street for months and failed to make expenses. They said

it was the fault of the goods and the territory. So the office sent for

me to prove that the fault was with their salesmanship and not with

the books or the place. They were working on a 25 per cent commission.

I was in Cleveland, where I sold eighty-two sets in two weeks. I am

here to sell a certain number of sets not only to people who did not

buy from the other agents but to people they couldn’t even get to see.

That’s why they give me 33⅓ per cent.”

“I can’t quite figure out how you sold me that set.”

“Why,” he said consolingly, “I sold J. P. Morgan a set.”

“No, you didn’t,” I said.

He wasn’t angry. He simply said, “Honest, I did.”

“A set of Walter Scott to J. P. Morgan, who not only has some fine

editions but probably the original manuscripts of some of the novels as

well?”

“Well, here’s his John Hancock.” And he promptly flashed on me a

contract signed by J. P. Morgan himself. It might not have been Mr.

Morgan’s signature, but it did not occur to me to doubt it at the time.

Didn’t he have mine in his pocket? All I felt was curiosity. So I asked

him, “How did you get past the librarian?”

“I didn’t see any librarian. I saw the Old Man himself. In the office.”

“That’s too much!” I said. Everybody knew that it was much harder to

get into Mr. Morgan’s private office empty handed than into the White

House with a parcel that ticked like an alarm clock.

But he declared, “I did.”

“But how did you get into his office?”

“How did I get into yours?” he retorted.

“I don’t know. You tell me,” I said.

“Well, the way I got into Morgan’s office and the way I got into yours

are the same. I just talked to the fellow at the door whose business it

was not to let me in. And the way I got Morgan to sign was the same

way I got you to sign. You weren’t signing a contract for a set of

books. You just took the fountain pen I gave you and did what I asked

you to do with it. No difference. Same as you.”

“And is that really Morgan’s signature?” I asked him, about three

minutes late with my skepticism.

“Sure! He learned how to write his name when he was a boy.”

“And that’s all there is to it?”

“That’s all,” he answered. “I know exactly what I am doing. That’s

all the secret there is. I am much obliged to you. Good day, Mr.

Livingston.” And he started to go out.

“Hold on,” I said. “I’m bound to have you make an even two hundred

dollars out of me.” And I handed him thirty-five dollars.

He shook his head. Then: “No,” he said. “I can’t do that. But I can do

this!” And he took the contract from his pocket, tore it in two and

gave me the pieces.

I counted two hundred dollars and held the money before him, but he

again shook his head.

“Isn’t that what you meant?” I said.

“No.”

“Then, why did you tear up the contract?”

“Because you did not whine, but took it as I would have taken it myself

had I been in your place.”

“But I offered you the two hundred dollars of my own accord,” I said.

“I know; but money isn’t everything.”

Something in his voice made me say, “You’re right; it isn’t. And now

what do you really want me to do for you?”

“You’re quick, aren’t you?” he said. “Do you really want to do

something for me?”

“Yes,” I told him, “I do. But whether I will or not depends what it is

you have in mind.”

“Take me with you into Mr. Ed Harding’s office and tell him to let me

talk to him three minutes by the clock. Then leave me alone with him.”

I shook my head and said, “He is a good friend of mine.”

“He’s fifty years old and a stock broker,” said the book agent.

That was perfectly true, so I took him into Ed’s office. I did not hear

anything more from or about that book agent. But one evening some weeks

later when I was going uptown I ran across him in a Sixth Avenue L

train. He raised his hat very politely and I nodded back. He came over

and asked me, “How do you do, Mr. Livingston? And how is Mr. Harding?”

“He’s well. Why do you ask?” I felt he was holding back a story.

“I sold him two thousand dollars’ worth of books that day you took me

in to see him.”

“He never said a word to me about it,” I said.

“No; that kind doesn’t talk about it.”

“What kind doesn’t talk?”

“The kind that never makes mistakes on account of its being bad

business to make them. That kind always knows what he wants and

nobody can tell him different. That is the kind that’s educating my

children and keeps my wife in good humor. You did me a good turn, Mr.

Livingston. I expected it when I gave up the two hundred dollars you

were so anxious to present to me.”

“And if Mr. Harding hadn’t given you an order?”

“Oh, but I knew he would. I had found out what kind of man he was. He

was a cinch.”

“Yes. But if he hadn’t bought any books?” I persisted.

“I’d have come back to you and sold you something. Good day, Mr.

Livingston. I am going to see the mayor.” And he got up as we pulled up

at Park Place.

“I hope you sell him ten sets,” I said. His Honor was a Tammany man.

“I’m a Republican, too,” he said, and went out, not hastily, but

leisurely, confident that the train would wait. And it did.

I have told you this story in such detail because it concerned a

remarkable man who made me buy what I did not wish to buy. He was the

first man who did that to me. There never should have been a second,

but there was. You can never bank on there being but one remarkable

salesman in the world or on complete immunization from the influence of

personality.

When Percy Thomas left my office, after I had pleasantly but definitely

declined to enter into a working alliance with him, I would have sworn

that our business paths would never cross. I was not sure I’d ever see

him again. But on the very next day he wrote me a letter thanking me

for my offers of help and inviting me to come and see him. I answered

that I would. He wrote again. I called.

I got to see a great deal of him. It was always a pleasure for me

to listen to him, he knew so much and he expressed his knowledge so

interestingly. I think he is the most magnetic man I ever met.

We talked of many things, for he is a widely read man with an

amazing grasp of many subjects and a remarkable gift for interesting

generalization. The wisdom of his speech is impressive; and as for

plausibility, he hasn’t an equal. I have heard many people accuse Percy

Thomas of many things, including insincerity, but I sometimes wonder

if his remarkable plausibility does not come from the fact that he

first convinces himself so thoroughly as to acquire thereby a greatly

increased power to convince others.

Of course we talked about market matters at great length. I was not

bullish on cotton, but he was. I could not see the bull side at all,

but he did. He brought up so many facts and figures that I ought to

have been overwhelmed, but I wasn’t. I couldn’t disprove them because

I could not deny their authenticity, but they did not shake my belief

in what I read for myself. But he kept at it until I no longer felt

sure of my own information as gathered from the trade papers and the

dailies. That meant I couldn’t set the market with my own eyes. A man

cannot be convinced against his own convictions, but he can be talked

into a state of uncertainty and indecision, which is even worse, for

that means that he cannot trade with confidence and comfort.

I cannot say that I got all mixed up, exactly, but I lost my poise; or

rather, I ceased to do my own thinking. I cannot give you in detail

the various steps by which I reached the state of mind that was to

prove so costly to me. I think it was his assurances of the accuracy

of his figures, which were exclusively his, and the undependability of

mine, which were not exclusively mine, but public property. He harped

on the utter reliability, as proved time and again, of all his ten

thousand correspondents throughout the South. In the end I came to read

conditions as he himself read them--because we were both reading from

the same page of the same book, held by him before my eyes. He has a

logical mind. Once I accepted his facts it was a cinch that my own

conclusions, derived from his facts, would agree with his own.

When he began his talks with me about the cotton situation I not only

was bearish but I was short of the market. Gradually, as I began

to accept his facts and figures, I began to fear I had been basing

my previous position on misinformation. Of course I could not feel

that way and not cover. And once I had covered because Thomas made

me think I was wrong, I simply had to go long. It is the way my mind

works. You know, I have done nothing in my life but trade in stocks

and commodities. I naturally think that if it is wrong to be bearish

it must be right to be a bull. And if it is right to be a bull it is

imperative to buy. As my old Palm Beach friend said Pat Hearne used to

say, “You can’t tell till you bet!” I must prove whether I am right on

the market or not; and the proofs are to be read only in my brokers’

statements at the end of the month.

I started in to buy cotton and in a jiffy I had my usual line, about

sixty thousand bales. It was the most asinine play of my career.

Instead of standing or falling by my own observation and deductions I

was merely playing another man’s game. It was eminently fitting that my

silly plays should not end with that. I not only bought when I had no

business to be bullish but I didn’t accumulate my line in accordance

with the promptings of experience. I wasn’t trading right. Having

listened, I was lost.

The market was not going my way. I am never afraid or impatient when

I am sure of my position. But the market didn’t act the way it should

have acted had Thomas been right. Having taken the first wrong step I

took the second and the third, and of course it muddled me all up. I

allowed myself to be persuaded not only into not taking my loss but

into holding up the market. That is a style of play foreign to my

nature and contrary to my trading principles and theories. Even as a

boy in the bucket shops I had known better. But I was not myself. I was

another man--a Thomasized person.

I not only was long of cotton but I was carrying a heavy line of

wheat. That was doing famously and showed me a handsome profit. My

fool efforts to bolster up cotton had increased my line to about one

hundred and fifty thousand bales. I may tell you that about this time

I was not feeling very well. I don’t say this to furnish an excuse for

my blunders, but merely to state a pertinent fact. I remember I went to

Bayshore for a rest.

While there I did some thinking. It seemed to me that my speculative

commitments were overlarge. I am not timid as a rule, but I got to

feeling nervous and that made me decide to lighten my load. To do this

I must clean up either the cotton or the wheat.

It seems incredible that knowing the game as well as I did and with

an experience of twelve or fourteen years of speculating in stocks

and commodities _I did precisely the wrong thing_. _The cotton showed

me a loss and I kept it. The wheat showed me a profit and I sold it

out._ It was an utterly foolish play, but all I can say in extenuation

is that it wasn’t really my deal, but Thomas’. _Of all speculative

blunders there are few greater than trying to average a losing game._

My cotton deal proved it to the hilt a little later. _Always sell

what shows you a loss and keep what shows you a profit._ That was so

obviously the wise thing to do and was so well known to me that even

now I marvel at myself for doing the reverse.

And so I sold my wheat, deliberately cut short my profit in it. After I

got out of it the price went up twenty cents a bushel without stopping.

If I had kept it I might have taken a profit of about eight million

dollars. And having decided to keep on with the losing proposition I

bought more cotton!

I remember very clearly how every day I would buy cotton, more cotton.

And why do you think I bought it? To keep the price from going down!

If that isn’t a supersucker play, what is? I simply kept putting up

more and more money--more money to lose eventually. My brokers and my

intimate friends couldn’t understand it; and they don’t to this day.

Of course if the deal had turned out differently I would have been a

wonder. More than once I was warned against placing too much reliance

on Percy Thomas’ brilliant analyses. To this I paid no heed, but kept

on buying cotton to keep it from going down. I was even buying it in

Liverpool. I accumulated four hundred and forty thousand bales before I

realized what I was doing. And then it was too late. So I sold out my

line.

I lost nearly all that I had made out of all my other deals in stocks

and commodities. I was not completely cleaned out, but I had left fewer

hundreds of thousands than I had millions before I met my brilliant

friend Percy Thomas. For me of all men to violate all the laws that

experience had taught me to observe in order to prosper was more than

asinine.

_To learn that a man can make foolish plays for no reason whatever was

a valuable lesson._ It cost me millions to learn that another dangerous

enemy to a trader is his susceptibility to the urgings of a magnetic

personality when plausibly expressed by a brilliant mind. It has always

seemed to me, however, that I might have learned my lesson quite as

well if the cost had been only one million. But Fate does not always

let you fix the tuition fee. She delivers the educational wallop and

presents her own bill, knowing you have to pay it, no matter what the

amount may be. Having learned what folly I was capable of I closed that

particular incident. Percy Thomas went out of my life.

There I was, with more than nine-tenths of my stake, as Jim Fisk used

to say, gone where the woodbine twineth--up the spout. I had been a

millionaire rather less than a year. My millions I had made by using

brains, helped by luck. I had lost them by reversing the process. I

sold my two yachts and was decidedly less extravagant in my manner of

living.

But that one blow wasn’t enough. Luck was against me. I ran up first

against illness and then against the urgent need of two hundred

thousand dollars in cash. A few months before that sum would have

been nothing at all; but now it meant almost the entire remnant of my

fleet-winged fortune. I had to supply the money and the question was:

Where would I get it? I didn’t want to take it out of the balance I

kept at my brokers’ because if I did I wouldn’t have much of a margin

left for my own trading; and I needed trading facilities more than

ever if I was to win back my millions quickly. There was only one

alternative that I could see, and that was to take it out of the stock

market!

Just think of it! If you know much about the average customer of the

average commission house you will agree with me that the hope of making

the stock market pay your bill is one of the most prolific sources of

loss in Wall Street. You will chip out all you have if you adhere to

your determination.

Why, in Harding’s office one winter a little bunch of high flyers

spent thirty or forty thousand dollars for an overcoat--and not one

of them lived to wear it. It so happened that a prominent floor

trader--who since has become world-famous as one of the dollar-a-year

men--came down to the Exchange wearing a fur overcoat lined with

sea otter. In those days, before furs went up sky high, that coat

was valued at only ten thousand dollars. Well, one of the chaps in

Harding’s office, Bob Keown, decided to get a coat lined with Russian

sable. He priced one uptown. The cost was about the same, ten thousand

dollars.

“That’s the devil of a lot of money,” objected one of the fellows.

“Oh, fair! Fair!” admitted Bob Keown amiably. “About a week’s

wages--unless you guys promise to present it to me as a slight but

sincere token of the esteem in which you hold the nicest man in the

office. Do I hear the presentation speech? No? Very well. I shall let

the stock market buy it for me!”

“Why do you want a sable coat?” asked Ed Harding.

“It would look particularly well on a man of my inches,” replied Bob,

drawing himself up.

“And how did you say you were going to pay for it?” asked Jim Murphy,

who was the star tip-chaser of the office.

“By a judicious investment of a temporary character, James. That’s

how,” answered Bob, who knew that Murphy merely wanted a tip.

Sure enough, Jimmy asked, “What stock are you going to buy?”

“Wrong as usual, friend. This is no time to buy anything. I propose to

sell five thousand Steel. It ought to go down ten points at the least.

I’ll just take two and a half points net. That is conservative, isn’t

it?”

“What do you hear about it?” asked Murphy eagerly. He was a tall thin

man with black hair and a hungry look, due to his never going out to

lunch for fear of missing something on the tape.

“I hear that coat’s the most becoming I ever planned to get.” He turned

to Harding and said, “Ed, sell five thousand U.S. Steel common at the

market. To-day, darling!”

He was a plunger, Bob was, and liked to indulge in humorous talk. It

was his way of letting the world know that he had an iron nerve. He

sold five thousand Steel, and the stock promptly went up. Not being

half as big an ass as he seemed when he talked, Bob stopped his loss

at one and a half points and confided to the office that the New

York climate was too benign for fur coats. They were unhealthy and

ostentatious. The rest of the fellows jeered. But it was not long

before one of them bought some Union Pacific to pay for the coat. He

lost eighteen hundred dollars and said sables were all right for the

outside of a woman’s wrap, but not for the inside of a garment intended

to be worn by a modest and intelligent man.

After that, one after another of the fellows tried to coax the market

to pay for that coat. One day I said I would buy it to keep the office

from going broke. But they all said that it wasn’t a sporting thing to

do; that if I wanted the coat for myself I ought to let the market give

it to me. But Ed Harding strongly approved of my intention and that

same afternoon I went to the furrier’s to buy it. I found out that a

man from Chicago had bought it the week before.

That was only one case. There isn’t a man in Wall Street who has

not lost money trying to make the market pay for an automobile or a

bracelet or a motor boat or a painting. I could build a huge hospital

with the birthday presents that the tight-fisted stock market has

refused to pay for. In fact, of all hoodoos in Wall Street I think the

resolve to induce the stock market to act as a fairy godmother is the

busiest and most persistent.

Like all well-authenticated hoodoos this has its reason for being.

What does a man do when he sets out to make the stock market pay for

a sudden need? Why, he merely hopes. He gambles. He therefore runs

much greater risks than he would if he were speculating intelligently,

in accordance with opinions or beliefs logically arrived at after a

dispassionate study of underlying conditions. To begin with, he is

after an immediate profit. He cannot afford to wait. The market must

be nice to him at once if at all. He flatters himself that he is not

asking more than to place an even-money bet. Because he is prepared

to run quick--say, stop his loss at two points when all he hopes to

make is two points--he hugs the fallacy that he is merely taking a

fifty-fifty chance. Why, I’ve known men to lose thousands of dollars

on such trades, particularly on purchases made at the height of a bull

market just before a moderate reaction. It certainly is no way to trade.

Well, that crowning folly of my career as a stock operator was the

last straw. It beat me. I lost what little my cotton deal had left me.

It did even more harm, for I kept on trading--and losing. I persisted

in thinking that the stock market must perforce make money for me in

the end. But the only end in sight was the end of my resources. I went

into debt, not only to my principal brokers but to other houses that

accepted business from me without my putting up an adequate margin. I

not only got in debt but I stayed in debt from then on.