Reprinted from The Saturday Evening Post magazine, © 1923 SaturdayEvening Post Society.

Mad From Oil
Saturday Evening Post, July 14, 1923By Albert W. AtwoodAs stated in a previous article, the oil boom in Southern California in the last two years has been distinctive in that all the major discoveries were made at the gates of a great city. Never in the entire history of the oil industry has it been so easy to look upon and invest in oil wells, drilling, flowing and pumping. All that any resident of the city needed, to feast the eyes upon this magic source of wealth, has been two or three hours' time, together with a seat in an automobile or the price of a short interurban ride.Naturally, the fields have been visited by untold thousands of tourists and newcomers with leisure time and surplus money. But in the throngs who have ridden out every day are many who can hardly be classed in either category. Wealth from oil appeals to no one age, sex, class, or group. It has a universal appeal, this possibility of sudden wealth; it strikes a responsive chord in every breast. Hypnotic SalesmanshipIn any case, the presence of so much oil close to the city of Los Angeles, with the resulting myriads of opportunities to invest, speculate and gamble, as the case may be, has caused a complete and radical change in what might be called the sales policy, or program, of selling oil-promotional securities. For it goes without saying that when credulous people see millions made in legitimate oil production at their very feet, the slick promoter does not fail to seize such an opportunity.Nor is this change in the sales policy of oil-promotional securities to be considered of merely local or casual interest. It is closely related, as suggested in a previous article, to important developments in the oil industry; and, besides, it is one of the most peculiar, bizarre and picturesque pieces of sheer business practice that has developed in many a year.Speaking briefly, this method of salesmanship and financing may be summed up as consisting of free bus rides, free lunches and free lectures. With even greater brevity, it may be described as the chicken-dinner school of finance. In any case, it makes the oil well as an object of curiosity and investment even closer to the city than has been suggested. One does not need the price of a short interurban ride or of a noontime sandwich. These, too, are supplied. There is no obstacle, no inhibition whatever to making an investment in oil.Strictly speaking, the free bus ride to the oil field, and, of course, to the pariicu1ar well in which stock or units are being sold, together with a free lunch and a free lecture did not originate with the oil operators or promoters. It had previously been adopted by rea1-estate sub-dividers, and is still used by many of them.But in the hands of the oil promoter it is of more than local interest, and as a means of developing an oil field, of furnishing the promoter with the wherewithal to drill, it is the most complete method of extracting money from the public that has yet been devised.I do not hesitate to say that it is the last word in salesmanship, the ultimate perfection of sheer mesmerism or hypnotism.There is no way of conveying by mere words any idea of the extent to which the free bus and free chicken-dinner school of financing is, or has been, employed in the oil fields of Southern California. Or if there is any possibility of painting such a picture, it does not lie within the abilities of the present writer.One may take free rides and eat free lunches for weeks, months and, perhaps, even years. There are promoters who on Sunday, at any rate, have run as many as fourteen or fifteen huge sight-seeing busses, each holding scores of people, to tents or tabernacles close beside the oil wells, where lunch is served and the lecturers hold forth.One salesman estimated that as many as 5000 or 6000 people go out to the oil fields on free rides on a single day. I have seen 300 or 400, and in one case 500 people in a single tabernacle, all brought out free, fed free and lectured to free. Women go from house to house day after day, offering the occupants free rides either to the oil fields, to new real-estate subdivisions or to other enterprises selling stock or lots or units. There are houses whose doorbells are rung every day by canvassers offering free rides. One can ride as far and as often as one chooses, and in practically any direction.The Free Ride BarkersBut, in the main, passengers for the free bus rides are secured by passing out tickets from doorways. This is done on an extensive scale for many blocks along several of the streets radiate which from Pershing Square, in many ways the center of Los Angeles; also for several blocks along the ocean front in Long Beach and in other neighboring cities. It is done with great insistence, but with wholesome respect for police regulation. Unfortunately for the complete free play of salesmanship, the police have had a habit in many-parts of the country for a long time past of placing certain restrictions upon street solicitation. The pedestrian is thus saved from being torn limb from limb by rival barkers, pullers-in, and the like but that is about all.Late in April the free-bus people utilized the front yards of two or three blocks along Ocean Avenue in Long Beach. These blocks, instead of containing fifteen-story hotels and apartment houses, like most of their neighbors, are still occupied by the old-fashioned two-story frame dwelling of twenty-five or thirty years ago, which invariably had front yards. In each front yard, close to the sidewalk, yet back of the property line, sat a woman under a parasol and at a small table, her ammunition being piles of free bus tickets.Even if one walked straight ahead, without turning an eye, each woman held out a bunch of free tickets with an air of almost pitiful supplication. Each one leaned as far out as she could and fairly shook the tickets under the nose of the passer-by, with an enthusiastic, eager invitation to accept. Regulations concerning the use of sidewalks prevented this solicitation from being an actual physical assault, but certainly it was a metal assault of a not wholly pleasant nature.Several hours later I was walking in one of the most respectable, residential district of the city, far from the madding crowd, and had occasion to ask directions of' a staid, white-haired lady who was watering her lawn. Hardly had the sound of her matter-of-fact reply died away before, I heard a shrill voice from another lawn, and there sat a siren under a parasol, with a handful of tickets thrust out.Like, all the others, she promised a wonderful sightseeing trip and a good reserved seat in the bus.Thus, though most of the tickets are handed out, from the more central parts of the city, the invitation to a free bus ride may greet you anywhere and in the most unexpected places. It is thorough going salesmanship.In the business sections of Los Angeles itself the ticket women are not only very careful not to step out on the sidewalk but in many cases would not even talk to a prospective passenger unless he stepped inside the doorway at least, and in some eases inside the building itself."You know, the police are getting very fussy," the women would say to me when, in the best imitation I had of the manner of a rubberneck tourist, I hesitated in front of them and timidly looked in their direction. "If you will come inside we will be glad to talk to you."But we must hasten on to the busses themselves. Every morning, rain or shine, week days and Sundays, they were parked in long, solid rows on all sides of Pershing Square and for many blocks up the side streets, in one case as far as the eye could reach, not to mention those which start from Long Beach, Pasadena and other places. Each enormous bus seemed to me the largest I had ever seen, a perfect monster of the highway, all with banners flying.The Promoter's Smooth ShowmenEven an oil promoter is not above parking regulations, and thus the would-be passenger had to be on hand by 10:45 in the morning. The beginner at any sport is inclined to be nervous and timid. To accept an entire day's hospitality, including a ride which ordinarily would cost several dollars, a lunch that would cost something at least and a free lecture from the mouth of an expert who is paid $100 a day - to accept all this with no intention of buying seems like quite a nerve."Oh, you're just timid the way I was when I first came out," said a salesman who lounged beside his bus and looked at me with amusement when I said I was not in the habit of accepting free rides and lunches from concerns that had something to sell which I had no intention of buying."You're under no obligations to buy. This is merely our method of showing off our goods. The more that go along the better it looks. Of Course, we will try to sell you when we get there, but we don't expect to sell more than a certain per cent, anyway. I'll guarantee that you have a good time. We'll take you to Pasadena and to the Mission.""But why do you go, there?" I asked. "That isn't on the direct road to Santa Fe Springs, is it?""No," replied the salesman; "but this isn't all business; it is partly pleasure. We want to give you a good time."The next conversation was with a somewhat stout and elderly female who insisted loudly, as soon as we stopped in front of her bus, that we promise to go with her."I'm an old woman and I've got to earn a living," she wheezed. "There's no one left but me and the bird.""But we might not want to buy," I repeated almost mechanically."Oh, that's all right," was her cheerful reply. "I'm paid for those I get to go, not for those who buy."But we wandered on to, a younger woman who in reply to our mild advances said that she could give us a choice either of oil or of a real estate subdivision; that she handled both with equal willingness, and it we didn't like to ride in a sight-seeing bus, she would call for us at our hotel in a private car."We have a trip that is different," said a young man before whose bus we stopped next. "It is neither oil nor real estate, but a new kind of rubber." Then with an air of finality, with an assurance that such a statement would surely crush and demolish any lingering doubt as to his being the best possible investment on the markets of the world, he added, "Besides, this is the only concern that gives you music with your lunch."But despite these allurements, we wandered on to a bus which was half filled with people, because we were anxious to go with a large crowd. At once the salesman took our names, pinned tags upon us and gave us choice seats."But," said I timidly, "I might want to buy some oil Units and I have only a few dollars with me. What shall I do?""That's all right," he replied with great heartiness, "We take as low as two dollars. We sell to a great many nurses and school teachers, you know."Alas, we had fallen victims to the very sucker psychology we were trying to study, for the rear seats, which had appeared filled as we walked up to the bus, were occupied by stage properties. A moment before the bus left these people quietly stepped out and disappeared. They had served their purpose and had attracted the real suckers, like my friend and my-self.But the bus was full enough, not only with passengers whom the salesmen hoped to convert into investors, but with a large and cheerful contingent of sales people, male and female. All the way they cracked stale jokes and radiated the best of good cheer, both through the megaphone and in personal conversation."This is the richest street in the world," said the barker as we rumbled along Orange Grove Avenue in Pasadena; "the grass has green backs, the flowers a cent the clouds have a silver lining, and when they open the windows in the morning, a draft blows in."There is the eucalyptus tree which sheds bark instead of leaves. The Y.M.C.A. wants it cut down because it exposes its limbs."We are now passing the only house in Southern California which has seven kitchens, Mr. and Mrs. Kitchen and five kitchenettes."The Siren With A MegaphoneWe had certainly chosen the Four-B route to wealth from oil -- busses, barkers, ballyhoo and boobs. At any rate, the trip was planned to thrill people with the idea of wealth, to hammer in the desire for money, to make us as avaricious as possible. First we passed the old wells in the city itself, brought in by E.L. Doheny -"the multimillionaire," as the barker bawled it out, with emphasis on the "multi." Then we were landed plump on the Pasadena street of wealth, with loud references to the homes of chewing-gum magnates and movie stars. From there we were driven through one of the old oil fields, from which the Baldwin estate has derived such great wealth.But here we were at last in Santa Fe Springs itself, having gone only twice as far as necessary to reach the place. Now we were passing the famous Bell property, and here we could see the ruins of a rig which had been blown to pieces a few days before from the terrific pressure of gas. Frantically the barker shouted a few salient facts about the great oil field. Meanwhile we were fast moving on beyond proved territory. We turned into a field through a grand entrance and stopped in front of a tent. Flags were flying and other huge busses were arriving and discharging their loads. We disentrained and were herded into the tent, or tabernacle, with great promptness.Inside, at one end was a platform, a table and a blackboard, with maps of the oil fields. In front of the platform were rows upon rows of long, rough dining tables and benches, capable of holding perhaps 500 people. Over each table was a sign bearing the name of a section or suburb of Los Angeles, and we seated ourselves according to the place we were supposed to come from.Shortly the salesmen bore down upon us, bearing huge cups of coffee, coarse sandwiches and cookies. We were urged again and again to eat hearty, that "there is more where this came from." The atmosphere was certainly one of the most hearty and excessive hospitality; and it was, indeed, beautiful to see a well-dressed salesman, who would be disgusted at less than fifty dollars a day in commissions while the picking was good, wait upon toil-begrimed workmen and sad-looking women with smelly babies.Lest the writer be accused of looking a gift horse in the mouth, it should be said in all seriousness that there are literally thousands of persons who spend most of their time in taking free bus rides, eating free lunches and going where the best hot lunches are to be found. I however, am unlucky. Despite careful inquiry of newspaper men, the State Corporation Department and other authorities I never succeeded, on several trips of this kind, in picking out an oil investment which provided a hot lunch. Always I had a cold and clammy lunch. But there is consolation in the statement made by one investigator, that the chicken dinners never consisted of chicken, anyway, but of sea gulls.As one sat at luncheon, there was plenty to look at. Through the open flap of the tent, the buildings of the state insane asylum could be seen at a little distance, and a squad of inmates marched from one building to another in what seemed to be a lock step. But the people in the tent were more worth studying. Many bore upon their faces and persons unmistakable signs of both ignorance and poverty, although they were of no one class or group. For the most part, however, they were a sad aggregation of humanity, a lot of culls, as it were, brought together by the powerful forces of curiosity and greed.Observers of this promotional aspect of the oil boom maintain that the investors are mostly women, and elderly. Altogether, the writer visited seven tents, containing from fifty to 500 people each, and spent from fifteen minutes to several hours in each. The people were of all descriptions, but it is probable that the predominant type was the elderly or middle-aged female, bearing every sign of a monotonous and mediocre life.Unpromising ProspectsIn one place we saw a bent and aged crone, looking like one of Dickens or Carlyle's hag women of the French Revolution. It is reliably estimated that at least half the domestic servants in and around Los Angeles have real estate or oil units, and I saw larger numbers of the more elderly domestics in the tents, fairly drinking in the tales of wealth. But younger women, especially married ones with babies, were never lacking. I asked one young mother if her baby liked oil."Not this kind," she replied."Castor oil?"  I ventured, and she shook her head in an emphatic negative.But men were not lacking, either on weekdays or Sundays, although the proportion of men was naturally much greater on the first day of the week. In one of the busses the seat in front of us was filled entirely with old men in apparently the last stages of doddering decrepitude. One was suffering from palsy, another looked exactly like a much Superannuated French dancing teacher. It is certainty fair to say that a very considerable number of all the people we saw in busses or tents were too childish mentally to possess any such thing as business judgment. Many were too old to know their own minds, or to make any decision except as it was forced upon them by high-powered closers.But there were many married couples in all the tents and these were the worst of all; for if one hung back, the other was willing to buy. And, of course, in every case the aimed his talk at the bolder of the two.Certain of the promoters have directed their campaigns at special classes of people such as church congregations, cripples, old soldiers, women's clubs, negro porters and religious sects. Two promoters actually went to one of the state officials and said they were going to quit because they didn't have the heart to sell to old women and old soldiers.But to hasten on with the narrative. By this time we had all eaten plentifully. Several salesmen lifted up the flaps of the tent and we could see scores of derricks in the neighborhood. It was announced from the platform that we might all guess on the daily production of the well which was to be brought in on the property. Little slips were passed around and we were requested to sign our names and put down our idea of the future production."There's always a way to get your names," said one of the salesmen with cheerful candor as he passed us the little slips.Indeed, one of the most startling things about the oil-promotion game is the open, artless way in which promoters and salesmen talk before the prospects.Some Typical Ballyhoo"I don't know anything about oil," said one of the salesmen later; "all I want is the money.""I want eight hundred suckers," was the heading of one advertisement; and another read, "If you are interested in making money, all I can say is, shut your eyes and shoot your money to me."But back again to the story. A sort of master of ceremonies mounted the platform and introduced the promoter, who also was to give the lecture. He was introduced as never having been in a losing venture."I am not a minister, a doctor, a professor or a judge," he began. "But 1 will tell my story as best I can. I am a plain American citizen." [Loud applause from the salesmen mobilized on the rear seats, and a little from the elderly lady prospects.]This reference to the various professions was a knock at other promotion outfits that employ ex-clergymen, judges, and the like, to lecture to the tent loads. In one or two cases, men of former prominence are engaged in this occupation, and it is said that one of them was paid $1000 a week for a time."I am an idealist," went on the 'lecturer. "I can accomplish anything if I try hard enough, and so can you. Strong men decide for themselves and so must you. Five per cent of the men in this country have nearly all the money. Why is that? Because they have the courage to act right now, because they are positive and decisive."People say to me, 'This proposition is probably all right, but I want to wait until tomorrow to think it over.' But there is no tomorrow. What we call tomorrow will be another day. We sleep between today and tomorrow, and recently I looked up the meaning of sleep in Webster's dictionary. What do you think it said? Temporary death."As we were passing an oil well the other day an old lady on the bus whispered to her husband, but I heard her, "Why, I guess that's oil, after all!' Then she explained that she wanted to write to her son back in Bangor, Maine, before investing."'But, madam,' I said, 'what does he know about oil? There is none in Maine!"'He runs a drug, store,' she replied, 'and sells castor oil.'" [Mild laughter.]The lecturer then went on at great length about the evils of fear, and how fear keeps people from making investments. He told us that the first well in Pennsylvania is still producing, and predicted higher prices for oil; which, of course, was perfectly safe, because he put no time limit on his prediction.But in the main, his long ta1k consisted of purely hypnotic exhortation, in an almost semi-religious, Billy Sunday, camp-meeting vein."Be masters of your own destinies. Don't you know that people are poor because they are in bondage to fear and doubt, because they do not think for themselves, because they let the bank make 100 per cent with their money and they only make 4 percent?"Finally he had finished, and before his words had died away an employee in the back of the tabernacle was shouting out the names and prices of various oil unit on the Los Angeles market and another was writing them on the blackboard, all in imitation of the excitement of a broker's office.But almost before the lecturer had spoken his last word the salesmen were down upon us, at our very elbows, peering into our faces, and the real slaughter had begun. The salesmen, previously massed on the rear seats and obviously bored with a lecture they had heard so many times before, scattered about the tent in an incredibly short space of time. As the salesman gets at a minimum somewhere between ten dollars and twenty dollars for each one hundred-dollar unit sold, it can be seen with what rapidity and avidity he gets to work.One was seated beside us, another was insinuating his way alongside a cheery little woman with two small children, still another had tackled a clean but wrinkled and gnarled Swedish maidservant of elderly years; and a vamp type of saleslady was pouring blandishments upon an embarrassed young workman."But what can I do if I have no money?" I overheard the workman say.The woman gave him one sharp look, realized be was telling the truth, and within thirty seconds had left him flat to fasten herself upon another victim.I later discovered that if a tent was fairly well filled, a good many people would drift away after the lecture before the salesmen could nail them. But this was an off day, with only fifty people in all, and no one escaped without a thorough solicitation."Well, what are you fellows going to do?" asked the salesman who sat down beside us, as he looked first at my friend and then at me. "This is such a good clean proposition that I have bought two or three units myself. It's as clean as a hound's tooth." Exactly the same phraseology used by all other oil salesmen.	.I had been warned by state investigators not to fall too easily, to insist upon being shown. But we were both disgusted with the noise and din of the place, with the heat and flies, with the cheap, hectic atmosphere of it all, with the pity of such ignorance and sordid greed. I looked across at another table where a pathetic-looking, poorly dressed young woman, with a face half gone, evidently burned off in a cookstove explosion, was handing a Liberty Bond over to a salesman.The husband, dressed in the roughest workman clothes, sat by with an expression as intelligent as that of a faithful ox. In the woman's eyes was a pitiful look of minded hope and fear, much as a deer or a white baby might have shown as an Apache warrior raised his ax, uncertain perhaps whether to strike.I wanted to get out; the air was choking me. But the game must be played through."What cash bonus did the company pay for this acreage?" I asked, the lecturer having failed to mention this item.	The Chance of a LifetimeThe salesman looked bewildered. He had only been in California three weeks; he knew as much about oil and oil investments as a cat. But the head salesman on the platform heard my question and furnished the information. I had had enough."What is the smallest cash payment you will take?" was the next question I put to the salesman."Five dollars is the smallest amount," he answered, as I handed out the five and received a receipt, as required by the State Corporation Department."How about you?" was his next remark as he turned to friend, and when the latter shook his head in the negative the salesman's parting shot was, "You're missing a chance to live in luxury all the rest of your life."But we passed down the aisle past eager faced old women signing cheeks and receipts, and out into freedom and the open air.The production chief of one of the largest oil companies in the field offered to bet me a hat the following day when I told him of my investment that I would never get any oil, much less any dividends. Indeed, he mentioned the trifling fact that my well was outside of proved territory. It a1so appears that in the month or two since this investment was made, holes in that particular portion of the field have given many indications of dryness and brokers are unkind enough to advertise that they are willing to sell units such as I bought for a fraction of the price paid by original sucker subscribers like the writer.But neither I nor any other purchaser has any redress. The form of receipt required by the State Corporation Department contains the following sentence, printed in very small type, indeed, but signed by Edwin M. Daugherty, commissioner, and Mark H. Slosson, deputy:"Prospective purchasers of these securities are hereby advised that the development of-oil and gas in commercial quantities on the property hereinabove described is purely speculative." So that is that.Why was I so easy as to take the salesman's word that five dollars was the minimum first payment? From many other sources it was subsequently learned that oil salesmen would frequently accept an initial payment of two dollars, or even one dollar, if that was all they could get. Talk about your prize boobs!No sum is too small to be acceptable, none is beneath the notice of your true promoter. There are oil tents in which the salesmen have actually made their first approach to the prospect by asking this crude question: "Have you any money now?" One old woman is said to have given up her fur coat in payment, riding back to town in the cold, while another turned over to the salesman a gold watch given her by her son, who was gassed in the war, the watch being her only memory of him.All for Six-Eighty-FiveOnly a few hours after leaving the tent we were walking along a country road when a salesman accosted us and said, "Why don't you play safe, boys and buy one of these nice lots, eighty by twenty feet, instead of oil stock or units? You get all the oil there is under the lot and own the land besides, all for $685.""How much down?" I asked."One-half cash," he replied."Nothing doing," I said as we walked away, and an effort to be real fresh, called back to him, "You wouldn't take five dollars down, would you?""Just try me and see" shot back the salesman with an eager light in his eyes.But we were investment suckers in more ways than one. We had failed to connect with a hot luncheon or with one where music was furnished. Even worse, we had failed to pick a tent which offered the attractions of a parachute jump, as others in the field did, or the appearance of movie actors and actresses whom we might meet in person. We did not even pick a tent with a big crowd. Talk about bad luck!This latter defect was remedied however, on several subsequent occasions;and though we still failed to pick oil investments with movie-star and parachute-jump attachments, we certainly found in the larger crowds infinitely more entertainment and instruction than in the smaller ones. Indeed, there is a bewildering choice of what might be called tent or tabernacle investments in these oil fields. The whole countryside looks like a giant circus, for one finds tents all over the landscape.Sunday is the best day to visit the oil fields, if crowds are what one want to see; and the and the first tent visited on a Sunday was presided over by a lecturer who, like the one already described, declared himself to be just a plain American citizen and not an orator. He did his best however, to throw his voice against the noise of drilling, trucking and hammering all about. In the next tent, the lecturer evidently was a thorough going professional, for he was unmindful of the terrific din outside.In this tent, which boasted red-white and-blue banner, 5OO people -- men, women and children -- were packed as tight as sardines. They evidently had enjoyed a hot lunch, judging from the unremoved remains which were being attacked by squadrons of flies.First came the promoter himself. He thanked the people for being there, spoke of the honor of having so many guests. The promoter then shook hands with the lecturer.As he started to speak, I watched the eager faces of the crowd and realized that practically of them wanted to believe, that they yearned for courage to act. They fairly hung on his words and evidently found his high-pressure methods to their liking. They were people who could not be driven too hard mentally. What they wanted was insistence, repetition, brutal hammering emphasis. It made them feel as if it must all be real and that they themselves were persons of importance.The lecturer started with a panegyric of praise for California, followed by the statement that this was the most wonderful spot in California, "and our organization is one of the most wonderful in the field. We don't have to prove it; we admit it."Everyone is interested in making money, and whenever people get together, 99 per cent of the talk is about money. I don't mind telling you that before I get through you will be interested and will take your check book out. If you haven't a check, I will furnish you with all you want. "Some people say they don't need to buy oil units because they have money in the savings bank. But what is the idea of putting money in the bank at 4 per cent and allowing the bankers to use it for their own advantage, and making as high as 2200 per cent out of oil investments with your money? You can't accumulate wealth by working on a salary or by putting $2000 or $3000 in a bank."You all say, 'If I only had the money to do this or that.' We all envy those who have money. You envy the man with a larger car, or if you are a woman and see another girl all dressed up in the latest, you say, 'See that hussy,' and then you envy her clothes."All you need is a little money and the nerve to invest it. The oil industry is the safest in California, for the laws are so stringent that fly-by-night promoters can't take your money. But you say you have read in the paper where oil men have gone to jail. Those were not oil men, but slickers. No bona fide oil man goes to jail. Thank God, we live up to the Corporation Department permit. All the companies in field are good and reliable, but we will make you more money. This is the best part of the field. In other places they may not get any oil. We are not making a five cent piece by promotion."The oil is here, there is a big market and the price has nothing to do with supply and demand. I'll guarantee you the price will go up any time the Standard Oil wants to sell."They say that oil is a gamble; but life is too. Death is the only thing in which there is no gamble. You are crazy if you don't gamble. If you haven't sense enough to take a chance, the booby house over there is for you. Talk about chances, why, there was a time when you could have bought lots on Pershing Square for fifty dollars. If you are willing to come in without doubts and fears, come ahead; if not, stay out, we will it to others. I don't believe you are taking any more chances on this well than if you bought government bonds."The Lightning CalculatorThe lecturer then told us that the Standard on Company of California had offered the state $15,000,000 for the insane asylum grounds, in addition to a 25 per cent royalty, the removal of the old buildings, the purchase of suitable new grounds and the erection of suitable new buildings. As several other lecturers made similar statements, Mr. K. R. Kingsbury, president of the Standard Oil Company 0f California, was asked later concerning them, and replied, "I need hardly add that there is no truth in the statement of promoters that we have offered the state of California a huge sum for property at Norwalk."The lecturer next did some lightning calculation on the blackboard -- the arithmetic in oil lectures It hurried over with extreme rapidity -- and showed how the unit holders would get several thousand dollars a year on a $100 investment if the well came in with 8000 or 10,008 barrels a day -- had not drilled yet. But he announced his desire to be conservative and cut the amount in half several times, thus proving triumphantly that the dividend would still amount to 561 per cent.At one point the lecturer said that the permit of the corporation department would back up everything he said, an obvious lie if he meant to imply that it backed up his entire lecture, but perfectly true if he intended it to refer to certain of his statements only. One could not tell.Gradually he worked into a long and really humorous story about two imaginary families who lived side by side, and the wives of which had both been approached the same day by a salesman to buy oil units. One had bought and other had not. He then depicted the green envy of the family which had not bought when the other acquired a large automobile and moved into a fashionable residential section from the riches produced by the oil unit."Your neighbor leans over the back fence and remarks sweetly, 'We are leaving this dirty old neighborhood; we are going to Beverly Hills.' You would really like to bean her with a flatiron or choke her to death, but instead you slobber allover her and tell her how glad you are at her good fortune. When your husband comes home that night you bawl him out. 'Get out of here! You haven't the brains of a gnat. All you can earn is fifty dollars a week and that man next door is worth millions.' "'But, my dear,' mildly interposes your husband, 'I didn't keep you from buying oil stock. In fact, I wanted you to buy it.' "'I know it,' you say; 'but you are supposed to be the stronger sex; you should have overruled me.'"We all know someone who started on the same level with us, but having had a little more nerve, accumulated wealth and left us behind in a rut because we didn't invest when we had a good chance. Within a few minutes you will have another chance to get into the wealthy class. There is only one argument I can't combat, and that is that you have no money."Folks, there it is. I don't mind telling you that I'm going to make $250,000 myself. Twenty years hence, instead of reading where John D. Rockefeller gave away $10, _000,000, you will read where I, little Jonathan Edwards, -- which was not his name -- am giving away money by the million."Opportunity has knocked ten or fifteen times before with all of you, but you were upstairs in the bathtub with the door locked. You couldn't get down. But there is no locked door in your way today." And he might have added with even more point that there was no bathtub, either. "I'm going to make $250,000, and you, too, can make it here and now.""All that that speech boils down to is this," said a friend who accompanied me: "He assumes he is going to get oil and figures from that. He intimated that anything less than $2.50 a barrel for oil was robbery, and then figured on $2.50. He said at one point not to put all you had in oil, and then he intimated that if all you had in the bank was $3000, you were a fool not to put that much in. But, of course, he protected himself by the first part of the statement."In all promotion games the hurry-hurry method is always successful. Such expressions as "too late" and "last chance" seem to drive a certain type of mind into making a decision. Certainly it worked in this case. Within a few minutes a line of investors had formed in front of the lecturer, the regular salesmen, despite the presence of dozens of them, being unable to take all the subscriptions that were offered.The Golden HarvestI did not see any old woman pay a man ten dollars for his place in the line, as one investigator says has been done; but within a few minutes' time I saw between $3000 and $5000 paid over to the salesmen in the form of cash, checks or Liberty Bonds. It is credibly reported that in some of these tents as much as $30,000 has been taken in on a single Sunday afternoon.One couple who sat at our table had a daughter about twelve years of age. They were at once pounced upon by a vamp type of saleslady, and the father signed up for one unit, explaining that he would contribute fifty dollars, the other fifty dollars to be taken from the child's savings-bank account. This sum, he said, the child had saved up to buy a piano, and by making several hundred or thousand per cent in oil it would be possible to purchase the piano much sooner."But," said the child with a wisdom not only beyond her years, but far beyond that of her elders, "suppose I should lose it.""Nothing ventured, nothing gained, dearie," replied the vamp; and the child, who could hardly be expected to concentrate long on a difficult financial problem, ran off to ride donkey-back, while her father signed up.One striking fact about all the crowds seen in oil tabernacles was the number of repeaters, so to speak. In other words, the crowds were made up to a considerable extent of people who had already invested and came down day after day merely to feast their eyes upon the derrick and drink in the rhapsodic words of the lecturer. They seemed fairly intoxicated by the whole performance.In one place, at a certain point in the lecture an automobile door slammed several times, a man slowly got out and walked into the tent, with all eyes turned upon him, as the lecturer pointed to him and said: "I was just about to tell these people about you, Mr. Smith. Is it true that you have received $1400 in dividends from a $250 investment?""Yes," replied Mr. Smith, the coincidence of whose timely arrival every day was certainly fortunate. "I wouldn't sell it for $75,000."In another tent which I visited three separate times, a long individual always arose at a certain point in the lecture and offered to pay a fancy price, which he named, for a large number of units. The lecturer then told the audience all about the interrupter's important financial affiliations. As two of my visits were more than a month apart, and as the cadaverous person always made his entrance in exactly the same way and at the same time, it was evident that these particular unit holders, or prospective holders, prefer their oil investments with a little play-acting on the side rather than straight.The Follow-Up TalkIt is said that once a sucker, always a sucker. Certainly those who had already purchased showed an eager desire, an intense enthusiasm for the sale of more units. Somehow the people did not act like investors, but more like an audience at some sort of sˇance. Intense emotion rather than cold calculation was the predominant note.It goes without saying that earlier purchasers are treated very politely when they visit the tents, no matter how often. The salesmen urge food upon them, and show them more attention, one can be sure, than these poor people ever had before. They feel they are part of the organization, that at last they are getting the sort of treatment and consideration to which they are entitled. In fact, the promoter never tires of telling them that their little one or two or three hundred dollars mean as much to him as if they had put in many thousands.Of course, all the purchasers do not remain satisfied. Naturally, the hypnosis wears off with many, and in the cold gray dawn of the morning after they wonder why they parted with their money on the strength of mere promises. A nurse from the East reached the city at 8:30 in the morning, took a room at an eminently respectable hotel, and within an hour was walking the streets to see the sights. It was her first visit, and the monster busses excited her curiosityA saleslady asked her if she cared to take a ride. Within a few hours of her arrival she was herded with the other cattle into a tent, and was swept off her feet by the promise of 600 per cent a month on her life savings. Upon reaching town she was seized with remorse, and when the state authorities discovered that all she had really purchased was 1-19200th of the oil which might be produced from one well they asked the promoter to refund, which he did.It is to be said in behalf of most of the promoters that they kick back fairly well when there is a squawk in order to hush it up. Several promoters have struck so much more oil than anyone supposed possible that their policy has wisely been one of rapid refunds, with other less fortunate promoters anxious to gain the same reputation. Of course, great numbers of investors do not have the courage to ask a refund, even though they may be in doubt as to the wisdom of their investment. Said an experienced bank president in Long Beach:"There is hardly a day that strangers do not ask me what I think of this or that unit scheme. They come to me. I suppose, because I have been here a long time. The sad fact is that nearly all who make inquiries have already invested. They rarely come to me before they have invested."In addition to those who have already purchased and those who buy for the first time, there are great numbers of mere dead beats, those who ride and eat free for the mere pleasure of it. If anyone mal1 goes on the same ride, and eats lunch in the same tent too often without buying, he is occasionally in danger of being thrown out. But in the main the promoters like a good proportion of dead beats, because these always show enthusiasm for the units, even though they do not buy. If you eat a man's lunch and ride in his car every day, without the formality of payment, you do not knock his proposition, as a rule.It is obvious that this method of salesmanship has great advantages from the promoter's standpoint, and equally obvious a disadvantages from that of the investor. A proposition offered by mail or advertising gives the prospect time to think it over; not so with such direct personal contact and solicitation as I have been describing. The prospect is cornered, as it were. He has no mental escape.It is quite true that the passenger and lunch eater is under no obligations to buy, and many do not. But the pressure is terrific, in practically all cases too much for weak minds. Indeed, a favorite story, not of an oil lecturer but of a real-estate spieler, is to the effect that a wealthy banker and capitalist went to the scene of a subdivision of property which he had sold to an operator.He listened for a while to the lecturer, and remarked later to a friend, "Why, the fellow talked so well that I nearly bought one of my own lots!"	The Common-Law Trust		The lecturer can say almost anything, can make outrageous promises, which in newspaper advertising or circulars might e cause trouble. There is no printed record. No Federal or state authority could possibly follow every lecture; there are or have been too many for that. Moreover, most n of the misrepresentation which I heard was in regard to future contingencies, and it is not a felony to make prophecies, although the writer's understanding is that misrepresentation of facts in the past is much more serious. In other words, the lecturer can soar to the skies as regards the future, without any chance of being held criminally, although, of course, he might be sued civilly if things went wrong.Perhaps the strangest feature in the oil- promotion game, not only in Southern California but in Texas as well, has been the employment of a form of organization known variously as the common-law trust, business trust or Massachusetts trust. Most of the lecturers whom I heard boasted that their concerns were selling units in a common-law trust rather than shares of stock in a corporation. Novel and inexplicable boast, indeed!It has always been understood that one of the worst features of the promotional aspect of the Texas oil boom was the use of these trusts rather than corporations. The business, or common-law trust, was practically unknown to California until the oil boom started about two years ago. At the very beginning of this boom promoters had been selling stock based on the operations at Huntington Beach, which proved a fizzle at the start. As many of these schemes turned out badly, oil stocks received a black eye, which they had enjoyed likewise as the result of the Texas boom.When the other fields came in and the promoters were able to get a large acreage because of the town-lot situation, they adopted the business trust and unit idea, to get away from previous scandals. Time and again promoters go to the corporation department for a permit and say they want to form an organization to enter the oil game."Why don't you form a corporation?"" say the examiners."Oh, we can't sell stock," reply the promoters.In a good many years of study of promotion schemes, the writer has never run across such an utterly unintelligible and unreasoning bit of psychology on the investor's part as this preference for units in u a business trust. Perhaps the investor feels that a unit in a trust is closer to the land than a share of stock, more personal and individual. He feels more as if he were in a family and away from cold-blooded corporations.The lecturers and salesmen tell him that there is no liability attached. But this is undetermined in the California courts, and at the very moment when the lecturer is holding forth on the subject, the salesmen have a pile of the required blank receipts which on the back state in plain language that, "The liability of the holders of these shares for the payment of indebtedness to be created and incurred by said trustee is a matter for judicial determination." Indeed, the courts may decide that liability is even greater than attaches to stock. As commissioner Daugherty reported to Governor Stephens on December eighth last:"The possible danger attending such of organization" -- business trusts -- is recommended for consideration by the proper state officials. A company operating a trust, in the opinion of, this department, evades its just taxation, thus throwing upon the corporation form of organization a heavier proportion of tax burden. Courts in this state have not determined the liability attached to the organization of trusts. Some states have gone so far as to make the formation of trusts extremely difficult, if not impossible. The powers of trustees are not clearly defined by our states, and are not understood by the average investor."But, nevertheless, nearly all the recent oil promotions have been in the form of trusts. It should be understood that the oil boom started about the time that the present corporation commissioner took office, though his predecessor, Mr. Bellows, had had some experience in that respect. As Bellows remarked in one of his reports, the law could be evaded by "oil-land leases, hog contracts, funeral certificates, pre-reorganization securities, and profit-sharing certificates of all sorts." In any case, whenMr. Daugherty took office, it was not early understood whether he had jurisdiction over trusts. Most fortunately, however, the attorney general ruled that he had.Obviously the business trust has one great advantage over the corporation from the promoter's standpoint, which the tabernacle lecturers fail to mention. The three trustees, who, of course, are the promoters, men nominated by them, have absolute control. As far as the writer could learn, unit holders, unlike stockholders in a corporation, have no voice in management -- that is, no vote. The three trustees can do as they please. The trustees do not need to invest anything in the trust. Unlike corporation directors, they do not have to get a majority of the votes of stockholders in order to remain in control.To form a trust, the three trustees must make a declaration of trust with a bank or list company, and the lecturers lay great stress upon that fact."Every man connected with this organization may be a crook," I heard one lecturer say on three separate occasions, "and yet you can buy $200 in units and take the first train back to Indiana in perfect safety. You have absolute protection, because the money will be deposited with the X Savings and Trust Company. The man or woman doesn't live who can beat you under such a protection."State RegulationWith the more speculative or hazardous concerns, the corporation department requires the impounding in a bank of the money taken from the sale of units, to assure that the well will be drilled. In case sufficient money is not raised for drilling, 80 per cent of the money is returned to subscribers, the other 20 per cent being allowed for sales expenses.The corporation department also seeks, where there is hazard, but not enough irregularity to refuse a permit under the wording the law, to give the unit holders a prior claim over the promoters in such oil as may be produced, up to the amount of the unit holder's investment. A rather common arrangement provides that the unit holders receive half the net proceeds from oil, the other half going to the promoters, or that unit holders receive 65 per cent. This, of course, is after the landowner has been paid his share, and also after all expenses of operation have been met.What the corporation department insists upon in cases of hazard is that the unit holds be paid back their principal sum before e promoter gets his share of the actual oil. Where such a provision is inserted, the lecturers boast of it by the hour; and evidently the audiences regard this as a great protection, as the lecturers insist is the case. Apparently it never occurs to them that such unusual precautions would not be taken by the corporation department unless the investment were of the type in which hazard is distinctly present.In any case, with the exception of, these provisions, any money put into the bank is under the absolute control of the three trustees. The bank, of course, does not control the action of its depositors. The trustees are the depositors, and they control the money like any other depositor. Several months ago a very outspoken newspaper in Los Angeles addressed a communication to the president of the clearing house demanding that all banks refuse to accept these trusts, as several have refused to do.But, of course, it is difficult for a bank to censor its list of depositors, and especially difficult for it to refuse accounts of organizations which have been granted permits by the corporation department. This department, like all agencies for the enforcement of blue-sky laws, must face the unpleasant fact that its legal permit is nearly always construed by promoters in their fallacious arguments as an endorsement. In other words, the promoter advertises and boasts of the fact that he has a permit, although in California, as in other states, there is printed in large type on the back of every receipt, and directly above the commissioner's signature, this statement:"The issuance of this certificate is permissive only and does not constitute a recommendation or endorsement of said securities."Though the law in California gives the corporation commissioner broad discretionary powers, his authority is limited to the determination that the applicant does not intend to do an unfair, unjust or inequitable business, and that the securities proposed to be issued and the methods to be employed in disposing of them are not such as, in the commissioner's opinion, will work a fraud on the public.It is no duty of the commissioner to discourage speculative enterprise, or even to limit the number of promotion concerns. The law merely attempts to give persons who assume risky and hazardous enterprises an honest gamble, or a run for their money. Thus the commissioner tries to force the promoter in an oil venture to make his money out of oil rather than from crooked drilling rake-offs, and the like; but on the other hand it is no function of the commissioner to supervise the internal management of business concerns.An Overworked Office In the Los Angeles office alone something like fifty permits for $2,000,000 securities go out each day, Sundays included. To check up on the operations of all oil concerns after the preliminary permit has been given, even in respect to the few conditions already referred to, which are imposed to protect the investor, would require a force of scores if not hundreds of auditors. To follow all the money subscribed by investors, and all that is earned from oil, through the books of .the concerns and into and out of the banks is a sheer physical impossibility.Moreover, the Los Angeles office has only thirty employees, of whom half are stenographers or women clerks. Besides, the state has entered upon a budget and economy program, and the tendency is to reduce rather than to expand this type of regulation. The deputy commissioners start with salaries as low as $150 a month, although they pass on security issues involving many millions each day.The department can afford to employ only two field investigators, and the time of these is taken up mostly with major prosecutions. Complaints can be followed up and an example made of flagrant violators, but that is all.The department has, however, been of very real service, from all the writer could learn, in holding down the promotional aspects of the oil boom, and in trying to ward off, as Mr. Daugherty expresses it, a very serious scandal. The present commissioner took office about the time the oil boom started. Up to that time only ten persons had been prosecuted for violating the law in ten years, according to a report made by the department. In less than a year's time ninety persons have been prosecuted, and numbers of prosecutions are now pending. In one case a promoter and eleven salesmen were arrested in one raid and the lecture broken up.Though the present commissioner deserves credit for his vigorous course, it must be remembered that his predecessors had no such situation to face, and, of course, the writer does not mean to imply that they would have been less effective under similar circumstances. They had found deputies with legal training sufficient; but Mr. Daugherty was obliged to employ an auditor, one or two engineers, a former newspaper man, and a former high police officer, assistants that have proved of very great value indeed.When Mr. Daugherty came in there were literally hundreds of outlaw or coyote oil units, or trusts, which refused to come within the department's jurisdiction until strong action was taken. One concern had put into drilling less than half a cent out of each dollar subscribed. Another capitalized a piece of ground 100 by 170 feet at more than $1,000,000, subdivided it into units and sold out to the public at a total selling expense of 90 per cent. The average selling expense of 104 outlaw companies investigated was 50 per cent.Every hybrid form of business organization the mind of man can conceive of had been adopted by the outlaws. In May, 1922, the situation was so bad that the Standard Oil Company of California announced that though it aimed to buy oil from producers without discrimination, and did not wish to criticize the purpose of these organizations or their relation to the corporation laws and stock-issue legislation, it could not involve itself in freak methods of doing business, "which entail upon it useless expense and difficulties." The company pointed out that when investors are given a direct individual ownership in the property itself, many complications ensue as soon as a well is brought in, and especially in case of the death of an owner.The Coyote Oil UnitAll but a small percentage of the outlaw concerns either quit business or reorganized and came within jurisdiction. Since that time most new promotions have been afraid to stay out. Publicity, of course, was a greater weapon in the commissioner's hands than any other punishment. One promoter who had the habit of talking loudly about God just before he introduced his lecturer to the audience, was convicted by a jury and fined $2000. He had to pay his lawyers $20,000; but as he had taken in $70,000, he was still heavily in the clear. However, he spent several days in jail.The great evil, of course, of the outlaw or coyote oil unit was its overcapitalization. To put a capitalization of $1,000,000 on part of an acre, when for years the large oil companies had regarded $100,000 as a high recoverable value per acre, was highway robbery. Consequently the commissioner has in the last year or so attempted to prevent the issuance of permits on a capitalization in excess of $200,000 an acre, or the payment of selling commissions in excess of 20 per cent, thus giving the investor at least a gambler's run for his money.Newspapers can be of great assistance in the enforcement of any blue-sky law, and one paper in particular went after the oil sharks hammer and tongs, and by name. It not only refused all oil advertising, but actually sent boys with special editions containing exposures, to sell at the entrance to the tents of the concerns which were mentioned. The boys were thrown out, of course, but continued to sell papers across the street. This paper has a large circulation among the laboring classes and in an open letter to the Central Labor Council the editor remarked:"When the oil-promotion crook dips into the funds of profit grabbers it does not matter much; but when he dips into the savings of the workers, he is in literal truth taking flesh and blood."As already stated in both this and in a previous article, a number of promoters in the Southern California oil fields have struck large quantities of oil, and in several cases have paid large dividends. Not only were the promoters able to acquire good acreage because of the cut-up character of ownership, but the fields themselves proved much richer than the big companies had supposed.In one case the state authorities were ready to lay the case of an oil promotion before the grand jury when the concern suddenly brought in a 4400-barrel well. The story is told of a housemaid at Long Beach who put $2000 in an oil scheme, to the disgust of her mistress, who tried to get her to sue the promoter. Rumor has it that the maid is now worth a very considerable sum.There is no doubt that several schemes which were foisted upon the public in the wildest, most preposterous manner, in language which reached the apex of bull, have turned out successfully, because in a few instances the promoters were able to hire better drillers than the big companies or regular operators, and in still more instances because of lucky strikes or on account of the fields having had what oil men call the legs. Promoters who had unfortunate experiences in Texas suddenly found gushers on their hands in California. Others, accustomed to lies, suddenly discovered they were telling the truth. They told tent audiences that "you are sitting over oil," and it proved to their surprise to be true.But these facts do not alter -- and I make the statement deliberately -- the general tenor of this article or the desirability for every investor to go into an oil scheme with his eyes wide open.When the writer investigated the oil boom in Southern California during the last two weeks in April it was practically impossible to determine how many, if any, of the promotion units had paid back the full principal, together with dividends. One authority said that several had paid several hundred per cent; another asserted that none had paid even 100 per cent, although I feel certain this was an error.It is certain that many promotions have paid many dividends, and numbers of them fairly large ones. This fact, however, has singularly little significance, for it must be remembered that an investment in one or two oil wells, especially on a small area among other small areas where intensive town lot drilling is under way, differs radically and fundamentally from any other investment.Ordinarily if a man invests in a railroad, a power plant, a factory, a farm, a dwelling house, a hotel, a bank, or even in a wholesale or retail business, he does not expect the immediate return of his principal. It stays there to work for him and pay dividends. It is represented by certain fixed property. Not so with one or two oil wells. The principal is represented by flowing or pumped oil, which must be taken out and repaid to an amount equal to the entire sum invested before any dividends begin.Nothing is at once so pathetic and so absurd as the way in which ignorant and inexperienced investors describe as dividends the first 100 per cent paid to them by an oil proposition. In other words, the investor must get back 100 per cent in dividends, so called, before he even begins to get any real dividends.Riches Come and Riches GoA woman who bought an oil unit received a monthly dividend of 5 per cent shortly thereafter. She was so delighted that she promptly mortgaged her house and bought an expensive automobile. Five per cent a month seemed like riches unbelievable. A poor carpenter bought a small oil unit and was soon paid a monthly dividend of 10 per cent, which kept up for four months before the concern exploded. But in the meantime the carpenter was so impressed that he mortgaged his house to buy more units, falling, as so many do, for the reloading scheme which promoters always engage in as soon as they begin to pay dividends out of stock subscriptions.The point is, of course, that the principal sum must be returned with extreme rapidity before the field or the particular well begins to dribble down to small proportions. More than 20 per cent of all oil wells drilled in this country in 1922 were dry, representing a 100 per cent or total loss to the investor. But even if the well is not dry, even if a fairly considerable flow is obtained, it does not follow that the investor will ever receive any real dividends.The inexperienced person sees an oil well flowing and immediately jumps to the conclusion that his or someone else's fortune is made. The arithmetic of oil seems very simple to him. But to get oil is not the point. Will the oil continue to flow at a given rate, and is the proposition capitalized low enough? These, of course, are the vital questions, and it is almost impossible for the average investor to answer them.All the authorities whom I consulted said that anywhere from 35 per cent to 100 per cent was the decline curve for the first year. In other words, taking 50 per cent as the average, half the oil comes, out of a well in the first year and the rest of it dribbles out for anywhere from fifteen to twenty years.As recently as the middle of May, R. E. Cullom, state oil and gas supervisor, said that the initial production of twelve wells in the relatively new and very wonderful Santa Fe Springs field was 3950 barrels a well, as compared with the average daily production of 1600 barrels a well for all producing wells in the same field.These figures illustrate in a striking fashion the rapidity with which oil must be recovered and the decline in production. It should be further noted that promoters in describing flowing wells usually refer to the very peak of flush production, and use figures which may have been good for not more than a few days or even hours.The new California fields are unusually rich, but this fact is offset by the rapid, intensive, close-up drilling. Moreover, geologists maintain that when the rise in production for a field is excessively rapid, as in the case of these fields, the peak is more quickly reached and the rapid decline begun. In other words, the curve is not a slow roll over, but an almost perpendicular rise and fall.It should be further remembered that in an oil flood the flush production is likely to get the low prices, and the dribble which always comes later will get the high prices.An investor is delighted when a well in which he owns a unit comes in at 3000 or 4000 barrels. But this is during the flood when prices are naturally low. In the course of a year or so, when production has fallen to a few hundred or scores of barrels a day, prices go up; but that particular concern does not get any big benefit from high prices.More Losers Than WinnersAs explained in detail in a previous article, the operators who drill first in an intensive town-lot excitement are the ones to get big production. The early birds with good luck payout, but the late comers lose. How is the average investor really to know whether the promoter he is riding with is an early bird or not? Investing in oil under such circumstances is precisely like rushing back into a town, down upon which a flood is pouring, in the hope of recovering one's valuables. A few persons may get away with such dare-devil tricks, but most of those who try it will get drowned.Several authorities estimated for the writer that probably two-thirds to three quarters of the money invested in promotional oil units, even in these rich fields, will eventually be lost. There is no certain way of telling, of course; but it is known that taking the country over the average oil promotion does not payout.Promoters usually, forget to mention that after a well stops flowing and goes on the pump new machinery must be purchased, and a very real expense, amounting to several cents a barrel, is added to the cost of operation. They always talk as if every barrel of oil brought in nets the prevailing market price, which, of course, is not so, leaving out as they do not only pumping cost but even overhead expenses of the organization. Naturally, too, when gas pressure is quickly exhausted by too close spacing of wells, the wells go on the pump sooner than usual.Besides, the great depth to which wells are being drilled raises many technical difficulties. A promotion may be financed to drill to a certain depth and then find it necessary to go much lower, without adequate funds for the purpose. In the technical side of oil drilling there is always grief as well as gravy. Still another difficulty is the necessity when the market is overloaded to pinch back production, which is often injurious to the wells and expensive to the operators.After all, the important thing in an oil_-drilling proposition, aside from the chance of not getting oil, is to be sure that the capitalization is low, and this is just where the non-technical investor falls down. He really has no way of telling. The promoter will capitalize as high as the corporation department allows, and still issue a permit, it being recalled that a permit must be issued unless the plan is unfair, unjust or inequitable.There is always danger that the promoter, through hidden or dummy transfers, overriding royalties, drilling rake-offs and similar graft, may be making large sums of front money without turning a wheel, while at the same time preventing the venture from being a success because it is financially overloaded. It is certainly true that many oil propositions are offered the public by promoters regarding whose integrity and ability the public can have no knowledge.Another distinctive feature about oil promotion units is that the promoter does not put up anything, and usually gets a third or a half of the oil if he strikes it.  If oil is not found in paying quantities, he at least has made his regular selling commission on the units sold. The promoter drills on the public's money. He risks nothing. As a business proposition, it is difficult to see how this can appeal to such common sense as the investing public has.The big successful companies did not, of course, start in any such irresponsible fashion. The veteran chairman of one of the three largest companies in California was personally in debt $135,000 after drilling his first seven wells, all of which were dry. He had no assets or resources, and borrowed enough money to drill another well only with the greatest difficulty. Fortunately, it was not dry.It has been assumed throughout most of this discussion that promoters find oil. But many dry holes are usually drilled in the unproved portions of even the richest fields by big companies as well as small. The inexperienced investor has been fooled time and again by the fact that promoters have secured acreage close to or almost adjoining proved territory. From the tents of the unit concerns, flowing wells can be seen only a short distance away.The Savings Bank YardstickBut nearness is not necessarily of value geologically. The earth fold may dip down so rapidly that oil cannot be found unless one drills to China or thereabouts, although flowing wells are in sight. It would be a far better gamble often to drill five or ten miles away rather than next to production. But the real simon-pure sucker always has fallen and probably always will fall hard for an oil scheme close enough to production for him to see it from the property in which he is interested.If the statements made in this article are even partially accurate, it is obvious that an investor in the average oil-unit scheme cannot receive dividends too fast, if he is to get his money back and a reasonable return upon it. One financial authority in Los Angeles said he understood several units had paid out four or five to one, but that they should have paid fifty or seventy five to one because of the risk involved.Dividends of a few dollars a month mean nothing under such conditions, and those of a few cents are merely ludicrous. It cannot be repeated too often that the investor must get 100 per cent in dividends before he has even started to do as well with his money as in a savings-bank account. If he is to get his principal back, he must get it quick, for it is a mad race and the devil takes all but those in the very first row.What the big company and the professional operator never forget is that money has a present value or worth. If it is put into the savings bank at 4 per cent or 5 per cent compound interest, not so very many years are required to double the principal. But when the money is put into drilling an oil well, actual cash is paid out for what? Merely for uncertain futures. The oil dribbles back over a period of years, and to beat the certainty of the savings bank one must be mighty sure of getting back a great deal more than one has put into the proposition. In a previous article great emphasis was laid on the fact that big oil companies will not pay the outrageously high cash bonuses and royalties which promoters are willing to pay. The reason is plain, is it not?The large oil companies work on the principle that they must pay back to stockholders at least as much as a savings bank over a period of years. They realize that when they invest their stockholders' money in drilling for oil they must get back at least 200 per cent in order to beat the savings bank. But everyone knows that in the promotional side of the oil game the investors who get back as much as 200 per cent are, over a period of years, pretty rare birds, to put it mildly.As stated earlier in this article, many investors become frightened after the first hypnotic trance has worn off. In a dim way they realize they have taken a long chance, and quite properly become nervous if dividends are not quickly forthcoming. But it is doubtful if they deserve any sympathy, because they went in on promises of returns beyond all reason from a business standpoint. They were really looking for something in return for nothing, much after the fashion of a horse race or gambling table."In the same way, we are constantly being asked by our acquaintances in the higher walks of life to let them into a good thing when we get it," said an official of one of the larger oil companies. "I have a little company of my own now from which I am certain of making 100 per cent a year for several years. But it is the fruit of long years of barren effort. It is the result of many losses. My friends and I have sunk many a dry hole at a cost of over $100,000 each."It is unfortunate that the public does not hear more about the losses from oil ventures on the part of the more experienced and wealthy classes of business men. But these people don't like to talk about losses from oil. They are afraid it will hurt their credit with the banks."When they strike it right they like to say they are good business men or at least are lucky. Then they shout their affiliations from the housetops. But when they lose, they keep quiet."Though the purpose of this article has been to point out the dangers of the more irresponsible promotional end of any oil boom, there is no intention, of course, to deny the large profits which are made at times by legitimate operators, whether big companies or so-called independents, meaning the smaller but regular professional operators, corporate or individual. There is no doubt that many thousands of investors in California and elsewhere have profited extensively by getting into small but good companies at the start.The great trouble is that so many persons, either through ignorance or unreasoning greed, have invested in merely the gambling end of the industry. Numbers of these have had beginners' luck, like that at the first game of golf or even cards. At such games the lucky man wins in the first half hour, perhaps; but it is the good player who wins in the long run. It is the same in the oil game; the responsible, reputable, experienced, competent operator wins over a period of years.The trouble with taking a shot at one or two wells with which some fly-by-night promoter is experimenting is that the investor so often cannot afford to lose. It is all a question of whether he can afford to lose. Those who cannot must forgo both the possibility of great sudden profits as well as total losses. But though the profits in some cases are sudden, they are no greater, perhaps, in the long run than one would get from the real honest-to-goodness oil companies over a period of ten or fifteen years.It is estimated that an investor who had stock in one of the larger oil companies in California something over ten years ago, when it took its present form, would today have fourteen times his original capital without further investment.Misapplied EnergyLarge companies had to start small, and there are people who believe that a number of the relatively small but experienced and legitimate concerns in Southern California today may develop into big companies as the result of the present boom, or that numbers of the more strictly promotional concerns may be merged or developed into regular oil companies. Most authorities, however, seem to think that the existing large companies, such as the Standard Oil, Union Oil, Shell Company, Doheny interests, Southern Pacific interests and General Petroleum, are likely to absorb such of the promotional schemes as are worth taking over when the boom has slowed down.One of the Los Angeles newspapers, The Record, which has fought the oil sharks rigorously, made a statement in one of its campaigns which should arrest attention. Conditions have changed in many respects since the article was published, and there night not be general agreement as to all portions of it. But, nevertheless, the essential point should be noted by every investor.After referring in vigorous language to he evils involved in the presence of irresponsible promoters in any community, the Record said:"The curse of all this crooked exploitation is that it is so senseless, so useless. This is the one spot in the world where money is being made in real estate and oil. There are abundant honest opportunities for every investor without lying and gypping. The amount of energy and promotion ability expended to hook and rob the unsuspecting public would be a tremendous community asset if expended along community lines."