600 - THIS CLEVELAND OF OURS clutched. They loved the chase almost as much as they did success; and so many a man in Cleveland tried his luck as an oil refiner, as hundreds on Oil Creek were trying it in an oil lease." It might seem strange that, in a time of primitive and expensive transportation, a dominant volume of crude oil should have been taken so far as 200 miles from its source to be refined. But there was an obvious explanation. Cleveland was admirably served by two trunk line railroads running to New York, both eager to carry oil. It was also served by admirable water facilities, the Erie and Ohio canals and the Great Lakes. From its situation it could ship oil products readily into both eastern and western markets. Thus the city was naturally fitted to become a refining capital for the Pennsylvania field, until its exhaustion and the opening of more distant fields. Another explanation was the business enterprise which characterized Cleveland in that period. The beginnings of an industry now difficult and complex were extremely simple. Refining crude oil was almost as easy as making whisky had been for frontiersmen, and the process was similar. It was much easier to make illuminating oil by distilling petroleum than it had been by distilling coal. The immense richness and variety of this rock or mineral oil were as yet unsuspected except by laboratory scientists. So there was "John D." at the age of twenty-six definitely committed to an oil career, already growing rich, putting his amazing talents unreservedly into a novel and infant industry. He worked harder than ever. He bought his own crude, made his own barrels, did his own hauling and loading, built his own storage tanks, first of wood and then of iron. He bought cheap and sold dear, used by-products that other refiners discarded, permitted no waste and as little profit as possible to anybody. His brother William, two years younger, he sent into Pennsylvania to buy oil, finding him an apt pupil, no less valuable to the firm because, unlike its head, he was genial, buoyant and popular. "I knew where I stood at the close of every business day," THE CITY'S WEALTH AND POWER - 603 said John D. "I charted my course by figures, nothing but figures. I never felt the need of scientific knowledge. A young man who wants to succeed in business does not require chemistry or physics. He can always hire scientists." Hardly was the firm of Rockefeller and Andrews well under way when a second refinery was launched under the name of William Rockefeller and Company, with John D. borrowing to the limit of his credit to expand operations. And what was the curious stuff they were dealing with, suddenly become so important to humanity after being neglected by business men since the beginnings of human industry? For an answer we have to go to the scientists whom Rockefeller, in those days, scorned. The quest leads us into geology and chemistry and takes us back a billion years. For ages men had known petroleum without knowing what it was, except that it would burn and had certain medicinal and even industrial values. At "Baku and those fountains of bright flame that burn into the Caspian," whence Moore's hero "Lalla Rookh" came, the Zoroastrian fire-worshippers had regarded the famous oil springs as sacred. The Hebrew prophet Nehemiah is thought to have used mineral oil for his altar fires, calling it "nephthar," apparently our word "naphtha." The pitch that caulked Noah's ark might have been bitumen, a form of petroleum obtainable in Mesopotamia. Asphaltic mortar was used, archeologists say, in building the recently discovered Tower of Babel, and was common in Babylonian construction. Ancient Syrians are said to have used crude oil mixed with ashes as fuel, possibly even making briquettes with it. The Greeks and Romans knew of petroleum. People used it in one way or another, here and there, in the Middle Ages, chiefly perhaps as an antiseptic to heal wounds or cure skin diseases. Our early colonists in Ohio, Pennsylvania and neighboring states liked to have a bottle of rock oil about the house as a family medicine. George Washington bought oil-bearing lands in western Pennsylvania, and in his will listed particularly a piece of property containing a "bituminous spring of so inflammable a nature as to burn as freely as spirits and nearly as 604 - THIS CLEVELAND OF OURS difficult to extinguish." He obviously believed that such springs would have an industrial use. Francis Bacon in 1637 wrote that bitumen is "a mixture of a fiery and watery substance," possibly foreshadowing the discovery that it is composed mainly of carbon, chief constituent of things that burn, and hydrogen, chief constituent of water. The only thing on which scientists are yet wholly agreed regarding petroleum is that it is the most wonderful and complex union of hydrocarbons known to exist. Whence come its infinite possibilities for industry and the arts, in its various forms from asphalt to gas? Chemistry now can analyze this fluid and turn it to myriad uses. But chemistry and geology together have a hard time explaining how it got into the rocks, acquired its present qualities and came to be exactly where it is, awaiting the call of our industrial age. It was supposed at first that petroleum must have come from coal, perhaps through pressure and heat under special conditions. Some oil may have been formed in that way. Chemists can make a petroleum-like oil from coal or wood. But such an explanation is no longer accepted. There is the inorganic theory, that petroleum was formed from natural carbon compounds in the earth by chemical reactions, in connection with volcanic action. But this theory fails to explain many facts. Petroleum is now regarded as certainly organic in origin —produced from living matter. Was that matter vegetable or animal? The answer is that it was probably both. Petroleum may be regarded as mainly the surviving fat of fishes and other forms of animal life, many of them perhaps microscopic in size, that lived in ancient seas, lakes and swamps, together with other carbon compounds of which living bodies are so largely made. Imagine great quantities of marine animal matter, mixed with varied animal and vegetable matter from the land, washed down with the mud and sand, settling to the bottom over vast periods of time. There would be beds of silt with their carbonaceous contents, these layers buried by other layers, all soft at first, but through eons THE CITY'S WEALTH AND POWER - 605 turning solid under stress of pressure and heat and the magic of chemical action. Just how it happened we cannot tell. Often large masses of this once-living carbon and hydrogen may have drifted together. There was ample time for the slow changes that have cooled, formed, broken, upheaved and re-formed this earth's old crust. Somehow, in periods sometimes as long as a billion years, sometimes as short as a few millions, in many places and many fashions, this strange rock liquor was brewed. Just where it was brewed is as hard to tell as when and how. For oil, chemically so much like coal, has this great difference, that it moves. The present location of any deposit gives little hint of where it came from. Once produced, it has been squeezed and pushed about by the force of gravity and the workings of the earth's crust. Necessarily the oil rocks are sedimentary rocks, deposited by water, rather than the original fire rocks. There are three main types of such rock : shale, which is hardened mud or silt; limestone, which is a sort of concrete made of the skeletons of sea creatures; and sandstone, which is compacted sand. The first two of these are called "source rocks," because in them the petroleum developed. But after forming, nearly all of it was squeezed out of the shale and limestone into the more porous sandstone. In this migration the oil may have moved long distances between strata, or through sand or cavernous limestone, taking advantage of geological faults which enabled it to change levels, and pushed by pressure of water and gas. Being lighter than water, oil floats underground as well as above. So wherever in its travels it has reached an impervious, domelike rock layer overhead, the oil has risen there and remained, unless the level changed or the roof broke. Often in such a dome or anticline there is salt water below, then a layer of oil, and gas above the oil. It is the quest of the driller to find and tap these domes. The drillers were doing it blindly in western Pennsylvania, knowing nothing about anticlines. But their wildcat boring and primitive methods of extraction were successful enough to set the world oil-hunting. When Drake struck 606 - THIS CLEVELAND OF OURS oil, there was already a primitive oil industry of a sort in Roumania, with shallow hand-dug wells three feet square, lined with oaken planks, and workmen carrying the oil up ladders in wooden buckets or leather bags. In the Russian Caucasus, in Galicia, in Burma and in the Dutch East Indies, moderate quantities of oil were obtained by similar processes. But Drake had shown how to do it, with his adaptation of the artesian salt well outfit—his derrick and steam-driven drill and sand pump, his wooden casing through the soft upper levels and the wrought-iron pipe below, and his easy resort to power pumping when a natural flow failed. The first wells were drilled along the rivers, but soon prospectors found that they had just as much luck on the hills. There were two or three sands, ranging down to 1,600 feet, any one of which might contain oil. It took courage to drill at $3,000 to $8,000 a well, with four-fifths of the wells dry or profitless. But the lure was strong and the game was quickly mastered. Farm hands learned how to work the drills, to use torpedoes for opening up the hard rock, to check the inrush of water, to fish for lost tools, to use naphtha for cutting the paraffin which clogged the sand and checked the oil flow. Never was there so great a market ready for a new industrial product. The world craved more light. It was as if a new Moses had smitten a rock, bringing forth light instead of water. Wells multiplied until the whole countryside was one bad smell, and roads and fields and orchards and rural beauty were ruined, but no one cared. What had been a murky, greenish-yellow, evil-odored substance contaminating salt wells had now become liquid gold and flowing opals. There were colors in it which even the romantic, as yet, could not see. It took dull scientists to find them. Wells spouted, wagons toiled on in their dust clouds, flatboats and barges floated down the river. Soon there were 1,000 boats, thirty steam tugs and 4,000 men moving that traffic down the Allegheny. Wagons and boats gave way to pipe lines and rails. The railroads came as rapidly as THE CITY'S WEALTH AND POWER - 607 they could be built through the hills. By 1865 there were enough of them. They carried the oil in wooden barrels, then economically in tank cars—first wooden tanks, then steel. Pipe lines were a slower growth. They were an obvious improvement, but hard to perfect. There had been bamboo pipe lines for petroleum in Burma before this, though the Pennsylvania oil men did not know it. But they carried water in iron pipes; why not oil? Experimental pipes leaked badly. Samuel van Syckel built the first successful line, two inches in diameter, from a well at Pithole to the railroad a few miles away. All of the early piping was merely local, to gather the oil for rail and water shipment. Van Syckel had to keep an armed guard for a while to prevent teamsters from cutting his line. They were afraid of losing their occupation, as well they might be. They even burned his oil tanks, until the governor of the state provided armed protection. Soon nearly all of the oil was gathered in this manner, pumped from the well tanks to the receiving tanks of the railway and river lines. And so by rail and river the odorous flood poured into the stills. Nearly everybody seemed to be making oil. A standard process of distillation, quickly evolved, sufficed for a period when the market asked for little but kerosene, leaving plenty of refuse for fuel to operate the stills. It was at first hardly more than a matter of boiling the crude oil and condensing and cleansing the vapor. A cast-iron still was surrounded by brickwork, provided with a copper worm and two tanks. The still was filled with oil, the fire was lighted under it, the vapor passed through the iron gooseneck into the worm, immersed in cold water, and the resulting light oil passed into a zinc-lined tank. This distillate, treated with certain simple chemicals and washed, was run off into a tin-lined tank and allowed to settle. Then it was illuminating oil ready for the lamp. There were highly volatile gases given off at low temperatures that were troublesome, often causing explosions and fires, and the trickish residue was somewhat of a puzzle. But on the whole, it was an easy business. These stills made money, and from them developed great refineries. 608 - THIS CLEVELAND OF OURS The Oil Region wanted to keep the business for itself. By 1865 there were twenty factories between Titusville and Oil City producing three grades of illuminating oil for the United States market—"prime white," "standard white" and "straw color," with some paraffin and lubricating oils—and exporting the more volatile products, naphtha, gasoline and benzine. But the refining went mainly to the cities because of the difficulty of getting the manufacturing equipment to the wells. Thus the crude oil poured into the nearest manufacturing centers—Pittsburgh, Erie and Cleveland—with much going to the seaboard at New York, Baltimore, Philadelphia and Boston. Oil City and Titusville tried in vain to compete, and were especially helpless against Cleveland. In one year of exclusive devotion to oil, Rockefeller had made his refinery the first in Cleveland in capacity and profit, with the exception of the plant operated by the Clark-Payne Company. The members of this firm were James Clark, brother of Maurice Clark who had been Rockefeller's partner, and Colonel Oliver H. Payne. These two are said to have owned everything in common, like the modern Van Sweringen brothers. For successful competition Rockefeller required reinforcements, human and financial. His eye fell upon a business genius named Henry M. Flagler, older than himself, well known from close association. Flagler had come from Monroeville, Ohio, where he had been a grocery clerk, salt manufacturer and grain dealer supplying a distillery. He brought with him a machine for making horseshoes and was given desk room in the office of Clark and Rockefeller, where the two men worked side by side for years. Flagler was added to the oil firm in 1867, and promptly found plenty to do. His first important task was financial. Needing more money, as always, Rockefeller sent him to Stephen V. Harkness, reputed as the richest man in Cleveland. Flagler got a loan, with the promise of all the additional money needed. He then went to New York and opened a selling office. Rockefeller, with calm assurance, began buying other plants. The oil carrying trade was divided now among three THE CITY'S WEALTH AND POWER - 609 strong railroads, the New York Central, Pennsylvania and Erie. There were five important refining centers, the Oil Region, Pittsburgh, Philadelphia, New York and Cleveland. At this time Cleveland was served particularly by the New York Central through its subsidiary, the Lake Shore. In 1868 there was pressure from the eastern refiners, actuated by jealousy of Cleveland's success. J. H. Devereux, the Lake Shore president, succeeding Amasa Stone, said afterward that "Cleveland as a refining center was to be wiped out as with a sponge." The local refiners were frightened. Rockefeller's company, instead of fighting the railroad, proposed an alliance whereby, in return for large shipments, to be handled economically in solid trains of oil cars, it should have a special, reduced freight rate, accomplished by means of a specified rebate after the regular rate was paid. Some competitors got rebates, too, about this time, but Rockefeller got larger ones. His arrangement, definitely establishing the rebate system, was a big factor in making Rockefeller's company the foremost oil concern in Cleveland and making Cleveland the chief refining center of the country. By 1869 all local competitors were beaten, with Rockefeller making 1,500 barrels a day out of the whole city's 11,000. He had bought several rival plants and scrapped one or two, with Flagler as "yardstick" man, estimating the properties and drawing contracts, Rockefeller shaping policies and handling the books, while Andrews stuck to his manufacturing. The Rockefeller and Flagler team had observed the Western Union Telegraph merger and Commodore Vanderbilt's railroad system, described afterward as the first real trusts. The lesson was not lost on them. In 1870 all the refineries of which John D. Rockefeller was the head were combined in a new company incorporated by him, along with Samuel Andrews, Henry M. Flagler, Stephen V. Harkness and William Rockefeller. It had a capital stock of $1,000,000 in shares of $100, and was to manufacture petroleum and its products. The residences of all these partners were in Cleveland, excepting William Rockefeller, who was now living in New York as export and commisson agent. The new concern 610 - THIS CLEVELAND OF OURS was named the Standard Oil Company, indicating its intention of producing a standard grade of illuminating oil. In that year Cleveland shipped 1,459,500 barrels. Now came a period of storm and stress in the oil industry. Hostility had been developing between the crude oil producers and the refiners, particularly between the producers and the Rockefeller interests which comprised the largest manufacturing group. Crude production outran demand, prices fell, surplus oil ran into expense for storage, discontent and rebellion arose in the Oil Region. Beyond advising the producers to drill fewer wells, Rockefeller for a while seems to have paid little attention to them. He was concerned with refining, which itself was running ahead of demand and pulling prices down. The refining industry as a whole had developed a capacity for three barrels to every one marketable. The price of export kerosene fell from 58 3/4 cents a gallon in 1865 to 26 3/8 cents in 1870. Foreign countries, regarding American oil as too high, were demanding crude oil to refine for themselves, and in lieu of an adequate supply of liquid petroleum were turning to quantity production of their own illuminating oil from coal and shale. It was the aim of the Standard Oil Company to deprive Europe of crude, in order to sustain refined prices and hold the foreign market. Reaching out for more extensive control at home and abroad, it formed the famous and half-mythical South Improvement Company, picking up for the purpose an old and forgotten Pennsylvania charter which granted authority to do almost any sort of business under the sun. The Standard Oil group is said to have held 900 shares out of 2,000, the others being held mostly in Pittsburgh and Philadelphia. Thus it was not exclusively a Standard enterprise. But through it Rockefeller and his associates, it has always been charged, made still more exclusive and favorable contracts with the railroads, whereby they obtained not only rebates on their own shipping bills, but "drawbacks" representing the excess freight charges paid by competing shippers over those paid by South Improvement Company THE CITY'S WEALTH AND POWER - 611 refiners. Thus, if the charges were true, they had a double advantage. The railroads at the same time raised their basic rates. This latter move particularly alarmed the Oil Region. A Petroleum Producers' Union was organized and the South Improvement Company members were boycotted. There were vigorous protests, too, from refiners who found it impossible to compete with such handicaps. The railroads became frightened. The general outcry soon resulted in repeal of the charter and cancellation of the discriminating freight contracts. Meanwhile Standard Oil had gained immensely in strength and resources. In a sudden, remarkable expansion campaign it bought out competitors on all sides. At the beginning of 1872 there had been twenty-six refining firms in Cleveland. At the close there were only six. The Standard had absorbed twenty competitors in six months. Its capitalization was increased to $2,500,000. Five more important capitalists were attracted as stockholders—Truman P. Handy, Stillman Witt, Amasa Stone, Benjamin Brewster and O. B. Jennings. Rivals whose properties the Standard sought were offered either cash or stock. Rockefeller preferred to buy with stock because, as he has often said, "our capital requirements always outran our ability to borrow." Prices for the rival plants seemed ruinously low, but those who accepted Standard Oil stock and kept it lost nothing in the end. From such forced sales grew many great fortunes. Often in those days the Standard paid current bills with stock. John and Hugh Huntington took stock in part payment for putting fireproof gravel roofs on oil tanks. John held his stock and died a multimillionaire. Standard Oil production jumped quickly from 1,500 barrels a day to 10,000, one-fifth of the national refining output. The railroads had pledged themselves to carry oil on a basis of equality to all shippers, producers and refiner alike. The producers were supported by the eastern refiners. The New York refiners were led by H. H. Rogers. A little later he and Rockefeller entered into a business alliance. An- THE CITY'S WEALTH AND POWER - 613 prices as the price of refined rose. But this arrangement did not last long. There was dissatisfaction on both sides. Both the Agency and the Association died, and there followed great overproduction which nearly ruined the Oil Region, just as it has nearly ruined many a producing region since. Talk of rebates continued, affecting Standard Oil particularly, but also some of the other refining interests. Though the practice was illegal and in bad repute, there were still many business men who believed it justifiable that large shippers should have lower rates from common carriers than small shippers. The real problem, it has been said, was "to make the railroads ethical." They were too easily tempted or coerced. In 1874 Rockefeller and Flagler, with Charles Lockhart of Pittsburgh and W. G. Warden of the Atlantic Refining Company of Philadelphia, formed a confidential alliance called the Central Association to provide better control of production and prices. Refineries all over the country were to operate with a common understanding and plan. The Standard entered upon another enlargement campaign, buying up outside refineries in many cities, paying for them in stock when possible. This was done, for the most part, without publicity. Refineries acquired frequently proceeded themselves to acquire other refineries in their districts. Among the new properties was that of Pratt and Company belonging to Charles Pratt and H. H. Rogers in New York, which continued operating under its own name. Standard Oil capital in 1875 rose to $3,500,000. There was nothing exclusive about this campaign. Other refiners were welcomed into the Central Association, provided they leased their plants and subscribed to stock, delegating to the executive committee of the Association authority to buy crude oil, to sell refined, to allot the amount to be manufactured by each refinery and to negotiate with railroads and other carriers. Soon H. H. Rogers reported that nine-tenths of the country's refining units were in the organization. The executive committee, in position to nego- 614 - THIS CLEVELAND OF OURS tiate effectively, reported uniform rebates for all from the three big railroads. Nearly all the refineries in the Oil Region were brought in by Archbold, under the pressure of severe competition from the Standard. Eventually only one plant remained in Titusville and one in Oil City, both under the Standard. The independent refining industry in Pittsburgh was completely wiped out. Shippers and middlemen in general were eliminated. Accessory branches of the industry, making lubricants and minor products, disappeared. Plants in good condition and well situated were kept and given production quotas. The others were scrapped ruthlessly. This seems to have been the first systematic house-cleaning in industrial history. Naturally all this progress, whether in the name of efficiency or of concentrated power and profit, could not be achieved without opposition and bitterness. There were wounds left everywhere, particularly among independent Cleveland refiners, which took long to heal. As Rockefeller's foremost historian and critic wrote, after reviewing this period of expansion and reconstruction : "The thing which a man has begun, cared for, led to a healthy life, from which he has begun to gather fruit, which he knows he can make greater and richer, he loves as he does his life. It is one of the fruits of his life. He is jealous of it—wishes the honor of it, will not divide with another. He can suffer heavily his own mistakes, learn from them, correct them. He can fight opposition, bear all—so long as the work is his. There were refiners in 1875 who loved their business in this way. Why one should love an oil refinery the outsider may not see; but to the man who had begun with one still and seen it grow by his energy and intelligence to ten, who now sold 500 barrels a day where he once sold five, the refinery was the dearest spot on earth save his home. He walked with pride among its evil-smelling places, watched the processes with eagerness, experimented with joy and recounted triumphantly every improvement." There was many a business tragedy and many a human tragedy in the oil industry, just as there was destined to be THE CITY'S WEALTH AND POWER - 615 later in all industries, as the individual withered and there remained no place for individualism except at the top. Oil transportation was turning from rails and rivers to pipes and pumps. The first successful oil-gathering from wells by pipe lines occurred in 1866, the year after Rockefeller started refining. By 1872 all of the oil was gathered in pipes, but still carried from the railroad receiving tanks in tank cars. Trunk pipe lines came more slowly. Their effectiveness for long distances was doubted, and the railroads were naturally opposed to them. Up to 1878 oil had never been pumped for more than seventy miles. Rockefeller, who had set out with the intention of being only an oil refiner, soon found himself also a carrier. After an unpleasant boycott which deprived him temporarily of his crude oil supply, he began acquiring pipe lines in the oil fields. Soon Standard Oil had two flourishing systems, the American Transfer Company and United Pipe Lines. Their only competitor, the Empire Pipe Line, a subsidiary of the Pennsylvania Railroad, was absorbed in 1877 with its pipes, tank cars and refining interests. The Standard now carried all the crude within the Oil Region. Between the Standard pipe system and the railroads, which cooperated, the oil producers felt themselves seriously threatened. Aided by independent refiners, they now combined, forming a company called the Tidewater and starting to build a trunk line to the seaboard. This was by far the most ambitious piping project yet attempted, and an experiment pregnant with importance to the petroleum industry. The first division was to be a six-inch pipe from the Bradford oil field to Williamsport, on the Reading Railroad, 109 miles, whence a subsequent extension was to reach tidewater through Reading. Construction began in 1878. Many obstacles were interposed by the railroads. There were delays. But on May 28 the following year all was ready for the test. It was a momentous day in the Oil Region. The oil had to be pumped up over a mountain 2,600 feet high. Such a thing had never been done. The oil was started on its journey, pushed by a seventy-horsepower pump of new design, 616 - THIS CLEVELAND OF OURS first twenty-eight miles to a station 700 feet higher, to be raised by a second pump for a few more miles to the summit of the Alleghanies, whence it would run by gravity down to Williamsport. All along the route men were watching and waiting. The oil traveled as fast as a man could walk. The observers could follow its progress by the gurgling sound. Up, up, up it climbed, and over the mountain pass, and on the seventh day it flowed into the receiving tank beyond Williamsport. The producers and independents were triumphant. They could now defy the railroads and the Standard Oil Company. They could feed the eastern refineries. They would pump eventually into New York. They would ship to Europe. Crude could be carried now to the refinery for 17 cents a barrel. The actual cost of railroad transportation was said to be 35 to 45 cents, the open rate $1.25 to $1.40. The day of the railroads as oil carriers was over. They were not alone in recognizing this fact. Rockefeller immediately began building a seaboard trunk pipe line of his own from the Bradford field to Bayonne, New Jersey, and obtained a right of way to Philadelphia. And before these two lines were completed, he had pipes laid from the Oil Region to the Standard's principal refining points—Cleveland, Buffalo and Pittsburgh. They were operated by a new corporation, the National Transit Company, with a capital of $5,000,000. The movement had started which was to cover the United States with a network of oil transportation lines. It was no part of the Standard Oil plan to have an independent oil line feeding independent refineries in the East. The Standard system was threatened. It fought. Eventually it bought a one-third interest in the Tidewater. In 1883 the latter signed an agreement to sustain rates and divide the carrying business peaceably, the Standard to have seven-eighths of it. National Transit by this time had 3,000 miles of pipes, connected with thousands of wells, taking 1,500,000 barrels a month. Wherever a field was opened, the Standard went there, gathered, stored and transported the oil. It felt itself able to handle all the crude petroleum THE CITY'S WEALTH AND POWER - 617 in the world. It served its own refining interests and made money as a common carrier. It did 90 per cent of the manufacturing. In 1884 it had a paid-up capital of $31,000,000. Along with this constructive activity there was continual warfare—war with producers and refiners and with hostile public opinion. There were legislative investigations. There were lawsuits to defend. Rockefeller, remaining in the background, was a man of mystery. He appeared nowhere except at church. He knew everything. He said nothing. Opposition usually wore itself out. The Oil Region came to feel that combined opposition was futile. Yet individual opposition still appeared now and then. A notable case appeared in Cleveland late in the 'seventies. Scofield, Shurmer and Teagle were a local refining firm of more than usual independence. In 1876, for reasons of mutual interest, they entered into a "joint adventure" with the Standard Oil Company to limit output and hold up prices. They had made a profit of 34 cents a barrel the year before. They made $2.50 a barrel the year after. Such profits were so tempting that, four years later, Rockefeller complained of their manufacturing more than their agreed quota of oil, and demanded the entire profit on the excess. The firm refused, and the Standard shut off the crude supply. The rebels calmly announced that they could get oil elsewhere. The Standard rashly sued for an injunction against them. They made the defense that the agreement had always been unenforceable, because it was "in restraint of trade and against public policy," and the Standard lost. After this, finding competition difficult, Scofield, Shurmer and Teagle sued the Lake Shore Railroad for discriminating against them through refusal of rebates granted to other shippers, and the railroad lost. That incident nearly ended the rebate system. It was helped by a suit of the Petroleum Producers' Union in Pennsylvania. Another influence working to the same end was the Hepburn Commission which investigated the whole business in 1880. "Standard-baiting" for some years was a popular pastime. With refining and transporting admirably organized, 618 - THIS CLEVELAND OF OURS Rockefeller turned to the organization of marketing. The result was an amazingly effective and economical system. The market was studied as no market had ever been. Information was gathered on a scale never before attempted or imagined. Everything was systematized so that the men at the heart of the business could know at any time what was being done in any department, branch or agency, the nature of the competition and the possibilities for new development. It was during this era that the company incurred much criticism for drastic underselling as a competitive weapon. Rockefeller still ignored his critics. "We do not talk much," he said. "We saw wood." So effective was the sawing that for at least a quarter of a century there was never a time when Standard did not control more than 80 per cent of the country's oil manufacturing. How was this done? It is easy to say "through ruthless power." But whence came the power? Ruthlessness, unfairness, illegality, all are evident over a long period during which modern business ethics and public regulation were slowly evolving. But the dominant factor was probably what has been called "the finest organizing brain since Napoleon" and the brilliant and persevering brains with which it surrounded itself. The methods used brought criticism and hatred. The organization itself was great. And by a curious contrast its creator himself, in his personal life, has always been recognized by his friends as a good man, simple, kindly and thoughtful of others. Rockefeller had become a commuter between Cleveland and New York. He had changed his Cleveland home from the old mansion at Euclid Avenue and East Fortieth Street to a curious old building in East Cleveland, formerly a sanitarium, standing in the midst of 400 acres of lovely woodland. There he could indulge to the full his love for landscaping, his boyish fondness for skating and his appreciation of fine trees. In New York he established another home in a rather gloomy house on West Fifty-fourth Street, to use when he went east for conferences and directors' meetings. THE CITY'S WEALTH AND POWER - 619 Eventually, as his interests assumed world proportions, he came to spend much of the year there. The Standard Oil office opened originally at 44 Broadway was changed to the famous 26. There, with a characteristic lack of splendor, sixteen men came to sit regularly around a luncheon table and discuss their widening interests. They were nearly all self-made men, plain, practical, lacking culture and centered in business. They were John D. Rockefeller, John D. Archbold, H. H. Rogers, William Rockefeller, Henry M. Flagler, Charles Pratt, J. A. Bostwick, E. J. Pouch, John Bushnell, Paul Babcock, Thomas Bushnell, Benjamin Brewster, F. Q. Barstow, J. Crowell, J. H. Alexander and James McGee. These directors of the Standard Oil Company are said to have made 26 Broadway "the business capital of the world." Their lunch talk would have interested the stock market. The brilliant and cynical Rogers was the only wit at the table. John D. Rockefeller, its head, was a complete contrast, quiet, bland, propitiating, equally interested in a new foreign market, a new rival to subdue, or saving a drop of solder on an oil can. "All that John D. Rockefeller asked of the world by the year 1887," wrote the hostile Miss Tarbell later, "was to be let alone. He had completed one of the most perfect business organizations the world has ever seen, an organization which handled practically all of a great natural product. His factories were the most perfect and were managed with the strictest economy. He owned outright the pipe lines which transported the crude oil. His knowledge of the consuming power of the world was accurate, and he kept his output strictly within its limit. At the same time the great marketing machinery he had put in operation carried on an aggressive campaign in new markets. In China, Africa, South America, as well as in remote parts of Europe and the United States, Standard agents carried refined oil. The Standard Oil Company had been organized to do business, and if ever a company did business it was this one. From Mr. Rockefeller himself, sitting all day in his den, hidden from everybody but the remarkable body of directors and heads of 620 - THIS CLEVELAND OF OURS departments which he had acquired as he wiped up one refinery and pipe line after another, to the humblest clerk in the office of the most remote marketing agency, everybody worked. There was not a lazy bone in the organization, nor an incompetent hand, nor a stupid head. It was a machine where everybody was kept on his mettle by an extraordinary system of competition, which met success with instant recognition, where opportunity was as wide as the world's craving for good light to cheer its hours of darkness. The machine was pervaded and stimulated by the consciousness of its own power and prosperity. It was a great thing to belong to an organization which always got what it wanted and was making money as no business in the country had ever made it." "We want only the big ones," said Rockefeller, speaking of competing concerns, "those who have already proved they can do big business. As for the others, unfortunately they will have to die." Even day laborers were picked men. Better wages were paid for better workers, the others were discharged. The efficiency and loyalty of the force were increased not only by recognition in place and pay, but by letting them buy stock and acquire a financial interest in the business. Authority was centralized. Plants were wisely located. The smallest items of expense were carefully looked after. All this paid. It had paid from the first. Kerosene had long been going in quantity from Cleveland and other refining centers to every civilized country. American travelers in 1874 found Damascus, Babylon and Ninevah lighted with American oil. The five-gallon Standard Oil can became a common container in the Orient and the Antipodes. But a new storm was gathering. In 1888 came an epidemic of public inquiry. The Standard was investigated by the New York State senate and by Congress. Rockefeller was haled before the congressional committee and interrogated regarding rumors of a mysterious "trust" agreement by which his company was reputed to be operating extra-legally. The original agreement was revealed. The trustees, it appeared, were John D. Rockefeller, William Rockefeller, THE CITY'S WEALTH AND POWER - 621 John D. Archbold, H. H. Rogers, Charles Pratt, Henry M. Flagler, Benjamin Brewster, W. H. Tilford and O. B. Jennings. These nine men, it was suspected, were really directing the operations of the Standard Oil Company and all its affiliated companies, without legal authority or corporate responsibility. They, however, maintained that each company did business in its own way, while they as individuals merely exercised their rights as stockholders and informally received and disbursed dividends. A little later David K. Watson, attorney general of Ohio, happened to pick up at a second-hand book shop in Columbus, for fifty cents, a little volume on "Trusts," and spent the evening reading it. Little was known then about this form of business organization. The volume contained what purported to be the Standard Oil Trust agreement. Watson saw that, if the copy was genuine, the Standard Oil Company of Ohio had been violating the corporate laws of the state for seven years, and that his official duty was to prosecute. In May, 1890, he filed suit for dissolution of the Trust in the Supreme Court of Ohio, against the advice of many friends and political associates, including Marcus A. Hanna. By the agreement, it appeared that the Standard Oil Company of Ohio had transferred 34,993 of its 35,000 shares to the trustees of the Standard Oil Trust, mostly non-residents of the state, and that the latter chose the board of directors of the Ohio corporation and directed its policy. The defense was that the Standard Oil Company of Ohio had nothing to do with the Trust, because the agreement was signed by individual stockholders of the company and not by the company in its corporate capacity, and that the company did business as its charter required. The suit was opposed by three noted lawyers, Joseph H. Choate, S. C. Todd, and Virgil P. Kline of Cleveland. The decision, rendered in 1892, was against the Trust, holding that it was illegal and that it sought to monopolize the petroleum industry by control of production and prices. The company agreed to end it, and started liquidating. There were twenty companies involved, the stock being divided pro 622 - THIS CLEVELAND OF OURS rata. Rockefeller held 256,854 shares out of 972,500. The company then transferred the principal functions of the Trust to the Standard Oil Company of New Jersey, which state's corporation laws permitted more latitude than Ohio's. Further rebellion broke out among oil producers and independent refiners. Finally there was evolved the Pure Oil Company, an independent consolidation, which had considerable success at home and abroad, and proved that independence was still possible, but failed to restore effective competition. By 1896 the Standard Oil Company had a capital and surplus of $147,000,000, with nearly $49,000,000 undivided profits. At the end of the century it was regularly paying dividends around 50 per cent and steadily adding, to its oil holdings, control of iron ore, steel, copper, banks, railroads and ships. Rockefeller had started in the early nineties going rather far from his original purpose. Influenced, very likely, by the example of old Cleveland associates, he began taking an interest in lake shipping and Superior ore. In the account of "Steel," earlier in this narrative, something has been told of his ore and transportation holdings and their acquisition by the United States Steel Corporation when that giant was organized in 1901. A few years after that combination was accomplished, Rockefeller, then in easeful retirement at Forest Hill, explained to Elbert H. Baker, publisher of the Cleveland Plain Dealer, how he happened to wander thus from his chosen field. With his growing income, said Mr. Rockefeller, he naturally came to make varied investments outside of oil, some of them in steel. Observing the chaotic state of the American steel industry, he realized that before long it would have to be organized and stabilized, to avoid overproduction and suicidal competition, as the oil industry had been. He also realized that in any national organization of steel, ore and ships and railroads were going to be essential. So as opportunity offered, he began picking them up. "And," he added with a quiet smile, "when the time came, Mr. Morgan and his THE CITY'S WEALTH AND POWER - 623 friends were surprised at what I had to offer." The odds and ends that he turned in gave him more than $200,000,000 and a place on the United States Steel board. Rockefeller had built up a great business. He had become richer than the Goulds, Astors and Vanderbilts, making money as no man had ever made money. He felt himself aging. He was in poor health, with ruined digestion, worn out by forty years of incessant struggle and strife. It was easier sailing now, on a sea of prosperity, but there were clouds in sight. He was still assailed by a horde of critics. Some of his gifts to churches were refused. There was much talk of "tainted money," which hurt his feelings. Roosevelt was in the White House. Ida Tarbell came out in 1904 with her "History of the Standard Oil Company" in McClure's Magazine. Rebate charges bobbed up again, and government suits. More than half the states had legislated against trusts. A Texas law made it a prison offense to sell Standard Oil. It was the era of the Muck Rake and the Big Stick. Rockefeller withdrew largely from business to seek health, to play golf and plant trees, to devise new uses for his mounting wealth. There came the celebrated trial of the Standard Oil Company before Judge Kenesaw Mountain Landis in Chicago, which severely jolted Rockefeller. He was haled from his seclusion and questioned on the witness stand, but knew little. Secretary Charles M. Pratt acknowledged that the company had made $81,000,000 in 1903, $62,000,000 in 1904 and $57,000,000 in 1905. Such profits seemed criminal in themselves, in the current public state of mind. In 1907 sentence was passed. The company was fined the unprecedented sum of $29,240,000. That fine, though it did not stand, was held as one cause of the 1907 business panic. A more rational attack was now made by Roosevelt's "trust-buster," Frank B. Kellogg, who brought suit in the Federal court in Missouri to dissolve the Standard Oil Company for unfair practices and restraint of trade. The long trial ended in 1911 after 11,000,000 words of testimony, with an order from the United States Supreme Court for the com- 624 - THIS CLEVELAND OF OURS pany to separate into its original units in order to restore competition. It was held that "seven men and a corporate machine have conspired against their fellow-citizens" and that "this dangerous conspiracy must end by November 15." The seven men were John D. Rockefeller, William Rockefeller, Henry M. Flagler, Oliver H. Payne, Charles Pratt, H. H. Rogers and John D. Archbold. The corporate machine of which they were directors was the Standard Oil Company of New Jersey with its thirty-three subsidiaries. J. Pierpont Morgan, organizer' of the so-called "Steel Trust," trenchantly inquired, "How is any court going to compel a man to compete with himself ?" The petroleum field had been divided so that each unit, generally speaking, dominated its own field and confined its efforts to that field, the Standard Oil Company of New York in that state and New England, the Standard Oil Company of Indiana in the Mid-West, the Standard Oil Company of California on the Pacific Coast, etc. The parent Ohio company by this time was little more than a producer, the Prairie Oil and Gas Company was a producer and transporter, the Galena Signal and Vacuum Oil specialized in lubricants. The trust-busters themselves had not realized the vastness and richness of the kingdom that was to be divided. Even in his semi-retirement, John D. Rockefeller controlled more wealth than Carnegie or Morgan or any other man on earth. He owned in his own right more than one-fourth of it. Eight groups, individuals and estates owned a majority of it. The Harkness family came second, the Pratt family third, Oliver H. Payne fourth, the Flagler family fifth, the Rogers family sixth. William Rockefeller, who had sold out most of his interest and gone into mills, mines, railroads, etc., was seventh. Archbold was eighth. The book value of John D.'s 244,345 shares of stock at the time of dissolution was $159.- 250,000. He had huge interests besides in United States Steel and many other corporations, and large real estate holdings in Cleveland and elsewhere. Soon Standard Oil of Indiana, par value $100, sold at