The Age of Big Business by Burton Jesse Hendrick (read an ebook week .txt) 📖

discoverer, and his achievement seems really a greater one than that of the men who first made apparent our beds of coal, iron, copper, or even gold. For Drake really uncovered an entirely new substance. And the country responded spontaneously to Drake’s success. For anything approaching the sudden rush to the oil-fields we shall have to go to the discovery of gold in California ten years before. Men flocked into western Pennsylvania by the thousands; fortunes were made and lost almost instantaneously. Oil flowed so plentifully in this region that it frequently ran upon the ground, and the “gusher,” which threw a stream of the precious liquid sometimes a hundred feet and more into the air, became an almost every-day occurrence. The discovery took the whole section by surprise; there were no towns, no railways, and no wagon roads except a few almost impassable lumber trails. Yet, almost in a twinkling, the whole situation changed; towns sprang up overnight, roads were built, over which teamsters could carry the oil to the nearest shipping points, and the great trunk lines began to extend branches into the regions. The one thing, next to Drake’s well, that made the oil available, was the discovery, which was made by Samuel Van Syckel, that a two-inch pipe, starting at the well, could convey the oil for several miles to the nearest railway station. In a few years the whole oil region of Venango County was an inextricable tangle of these primitive pipelines. Thus, before the Civil war had ended, the western Pennsylvania wilderness had been transformed into the busy headquarters of a new industry.

Companies had been formed, many of them the wildest stockjobbing operations, refineries had been started, in a few years the whalers of New England had almost lost their occupation, but millions of American homes, that had hitherto had to spend the long winter evenings almost in darkness, suddenly found themselves flooded with light. In Cleveland, in Pittsburgh, in Philadelphia, in New York, and in the oil regions, the business of refining and selling petroleum had reached extensive proportions. Europe, although it had great undeveloped oil-fields of its own, drew upon this new American enterprise to such an extent that, eleven years after Drake’s “discovery,” petroleum had taken fourth place among our exported articles.

 

The very year that Bissell had organized his petroleum company a boy of sixteen had obtained his first job in a produce commission office on a dock in Cleveland. As the curtain rises on the career of John D. Rockefeller, we see him perched upon a high stool, adding up figures and casting accounts, faithfully doing every odd office job that came his way, earning his employer’s respect for his industry, his sobriety, and his unmistakable talents for business. Nor does this picture inadequately visualize Rockefeller’s whole after-life, and explain the business qualities that made possible his unexampled success. It is, indeed, the scene to which Mr. Rockefeller himself most frequently reverts when, in his famous autobiographical discourses to his Cleveland Sunday School, he calls our attention to the rules that inevitably lead to industrial prosperity.

“Thrift, thrift, Horatio,” is the one idea upon which the great captain of the oil business has always insisted. Many have detected in these habits of mind only the cheese-paring activities of a naturally narrow spirit. Rockefeller’s old Cleveland associates remember him as the greatest bargainer they had ever known, as a man who had an eye for infinite details and an unquenchable patience and resource in making economies. Yet Rockefeller was clearly more than a pertinacious haggler over trifles. Certainly such a diagnosis does not explain a man who has built up one of the world’s greatest organizations and accumulated the largest fortune which has ever been placed at the disposal of one man. Indeed, Rockefeller displayed unusual business ability even before he entered the oil business. A young man who, at the age of nineteen, could start a commission house and do a business of nearly five hundred thousand the first year must have had commercial capacity to an extraordinary degree.

 

Fate had placed Rockefeller in Cleveland in the days when the oil business had got well under way. In the early sixties a score or so of refineries had started in this town, many of which were making large profits. It is not surprising that Rockefeller, gazing at these black and evil-smelling buildings from the vantage point of his commission office, should have felt an impulse to join in the gamble. He plunged into this new activity at the age of twenty-three. He possessed two great advantages over most of his adventurous competitors; one was a heavy bank account, representing his earnings in the commission business, and the other a partner, Samuel Andrews, who was generally regarded as a mechanical genius in the production of illuminating oil. At the beginning, therefore, Rockefeller had the two essentials which largely explain his subsequent career; an adequate liquid capital and high technical resources. In the first few years the Rockefeller houses—he rapidly organized three, one after another—competed with a large number of other units in the oil business on somewhat more than even terms. At this time Rockefeller was merely one of a large number of successful oil refiners, yet during these early days a grandiose scheme was taking shape in that quiet, insinuating, far-reaching brain. He said nothing about it, even to his closest associates, yet it filled his every waking hour. For this young man was taking a comprehensive sweep of the world and he saw millions of people, in the Americas, in Europe, and in Asia, whose need for the article in which he dealt would grow more insistent every day. He saw that he was handling a product which was becoming as much a necessity of life as the air itself. The young man reached out to grasp this business. “All of it,” we can picture Rockefeller saying to himself, “all of it shall be mine.” Any study of Rockefeller’s career must lead to the conclusion that, before he had reached his thirtieth year, he had determined to monopolize this growing necessity. The mere fact that this young man could form such a stupendous plan indicates that in him we are meeting for the first time a new type of industrial leader.

At that time monopolies were unknown in the United States. That certain old English Kings had frequently granted exclusive trading privileges to favored merchants most educated Americans knew; and their knowledge of monopolies extended little further than this. Yet about 1868 John D. Rockefeller started consciously to revive this ancient practice, and to bring under one ownership the magnificent industry to which Drake’s sensational discovery had given rise.

 

Daring as was this conception, the resourcefulness and the skill with which Rockefeller executed it were more startling still.

Merely to catalogue, one by one, the achievements of the ten succeeding fruitful years, almost takes one’s breath away. Indeed the whole operation proceeded with such a Napoleonic rapidity of action that the outside world had hardly grasped Rockefeller’s intention before the monopoly had been made complete. We catch one glimpse of Rockefeller, in 1868, as head of the prosperous house of Rockefeller, Andrews, and Flagler, and eight years afterwards we see him once more, this time the man who controlled practically the entire petroleum business of the world. His career of conquest began in 1870, when the firm of Rockefeller, Andrews, and Flagler, joining hands with several large capitalists in Cleveland and New York, was incorporated under the name of the Standard Oil Company of Ohio. In 1870 about twenty-five independent refineries, many of them prosperous and powerful, were manufacturing oil in the city of Cleveland; two years afterward this new Standard Oil Company had absorbed all of them except five: In these two critical years the oil business of the largest refining center in the United States had thus passed into Rockefeller’s hands. By 1874 the greatest refineries in New York and Philadelphia had likewise merged their identity with his own. When Rockefeller began his acquisition, there were thirty independent refineries operating in Pittsburgh, all of which, in four or five years, passed one by one under his control. The largest refineries of Baltimore surrendered in 1875.

 

These capitulations left only one important refining headquarters in the United States which the Standard had not absorbed. This was that section of western Pennsylvania where the oil business had had its origin. The mere fact that this area was the headquarters of the oil supply gave it great advantages as a place for manufacturing the finished product. The oil regions regarded these advantages as giving them the right to dominate the growing industry, and they had frequently proclaimed the doctrine that the business belonged to them. They hated Rockefeller as much as they feared him, yet at the very moment when the Titusville operators were hanging him in effigy and posting the hoardings with cabalistic signs against his corporation, this mysterious, almost uncanny power was encircling them: Men who one night were addressing public meetings denouncing the Standard influence would suddenly sell out their holdings the next day. In 1875 John D. Archbold, a brilliant young refiner who had grown up in the oil regions and who had gained much local fame as opponent of the Standard, appeared in Titusville as the President of the Acme Oil Company. At that time there were twenty-seven independent refineries in this section.

Archbold began buying and leasing these establishments for his Acme Company, and in about four years practically every one had passed under his control. The Acme Company was merely a subsidiary of the Standard Oil. These rapid purchasing campaigns gave the Standard ninety per cent of all the refineries in the United States, but Rockefeller’s scheme comprehended more than the acquisition of refineries. In the main the Rockefeller group left the production of crude oil in the hands of the private drillers, but practically every other branch of the business passed ultimately into their hands. Both the New York Central and the Erie railroads surrendered to the Standard the large oil terminal stations which they had maintained for years in New York. As a consequence, the Standard obtained complete supervision of all oil sent by railroad into New York, and it also secured the machinery of a complete espionage system over the business of competitors. The Standard acquired companies which had built up a large business in marketing oil. Even more dramatic was its success in gathering up, one after another, these pipe lines which represented the circulatory system of the oil industry. In the early days these pipe lines were small and comparatively simple affairs. They merely carried the crude oil from the wells to railroad centers; from these stations the railroads transported it to the refineries at Cleveland, New York, and other places. At an early day the construction and management of these pipe lines became a separate industry. And now, in 1873, the Standard Oil Company secured possession of a one-third interest in the largest of these privately owned companies, the American Transfer Company. Soon afterward the United Pipe Line Company went under their control. In 1877 the Empire Transportation Company, a large pipe line and refining corporation which the Pennsylvania Railroad had controlled for many years, became a Standard subsidiary.

 

Meanwhile certain hardy spirits in the oil regions had conceived a much more ambitious plan. Why not build great underground mains directly from the oil regions to the seaboard, pump the crude oil directly to the city refineries, and thus free themselves from dependence on the railroads? At first the idea of pumping oil through pipes over the Alleghany Mountains seemed grotesque, but competent engineers gave their indorsement to the plan. A certain “Dr.” Hostetter built for the Columbia Conduit Company a trunk pipe line that extended thirty miles from the oil regions to Pittsburgh. Hardly had Hostetter completed his splendid