Random Reminiscences of Men and Events
They are not willing to be idle, or they have a just pride in their
work and want to perfect the plans in which they have faith, or, what
is of still more consequence, they may feel the call to expand and
build up for the benefit of their employees and associates, and these
men are the great builders up in our country. Consider for a moment
how much would have been left undone if our prosperous American
business men had sat down with folded hands when they had acquired a
competency. I have respect for all these reasons, but if a man has
succeeded, he has brought upon himself corresponding responsibilities,
and our institutions devoted to helping men to help themselves need
the brain of the American business man as well as part of his money.
Some of these men, however, are so absorbed in their business affairs
that they hardly have time to think of anything else. If they do
interest themselves in a work outside of their own office and
undertake to raise money, they begin with an apology, as if they are
ashamed of themselves.
"I am no beggar," I have heard many of them say, to which I could only
reply: "I am sorry you feel that way about it."
I have been this sort of beggar all my life and the experiences I have
had were so interesting and important to me that I will venture to
speak of them in a later chapter.
CHAPTER IV
SOME EXPERIENCES IN THE OIL BUSINESS
During the years when I was just coming to man's estate, the produce
business of Clark & Rockefeller went on prosperously, and in the early
sixties we organized a firm to refine and deal in oil. It was composed
of Messrs. James and Richard Clark, Mr. Samuel Andrews, and the firm
of Clark & Rockefeller, who were the company. It was my first direct
connection with the oil trade. As the new concern grew the firm of
Clark & Rockefeller was called upon to supply a large special capital.
Mr. Samuel Andrews was the manufacturing man of the concern, and he
had learned the process of cleansing the crude oil by the use of
sulphuric acid.
In 1865 the partnership was dissolved; it was decided that the cash
assets should be collected and the debts paid, but this left the plant
and the good-will to be disposed of. It was suggested that they should
go to the highest bidder among ourselves. This seemed a just
settlement to me, and the question came up as to when the sale should
be held and who would conduct it. My partners had a lawyer in the room
to represent them, though I had not considered having a legal
representative; I thought I could take care of so simple a
transaction. The lawyer acted as the auctioneer, and it was suggested
that we should go on with the sale then and there. All agreed, and so
the auction began.
I had made up my mind that I wanted to go into the oil trade, not as a
special partner, but actively on a larger scale, and with Mr. Andrews
wished to buy that business. I thought that I saw great opportunities
in refining oil, and did not realize at that time that the whole oil
industry would soon be swamped by so many men rushing into it. But I
was full of hope, and I had already arranged to get financial
accommodation to an amount that I supposed would easily pay for the
plant and good-will. I was willing to give up the other firm of Clark
& Rockefeller, and readily settled that later--my old partner, Mr.
Clark, taking over the business.
The bidding began, I think, at $500 premium. I bid a thousand; they
bid two thousand; and so on, little by little, the price went up.
Neither side was willing to stop bidding, and the amount gradually
rose until it reached $50,000, which was much more than we supposed
the concern to be worth. Finally, it advanced to $60,000, and by slow
stages to $70,000, and I almost feared for my ability to buy the
business and have the money to pay for it. At last the other side bid
$72,000. Without hesitation I said $72,500. Mr. Clark then said:
"I'll go no higher, John; the business is yours."
"Shall I give you a check for it now?" I suggested.
"No," Mr. Clark said, "I'm glad to trust you for it; settle at your
convenience."
The firm of Rockefeller & Andrews was then established, and this was
really my start in the oil trade. It was my most important business
for about forty years until, at the age of about fifty-six, I retired.
The story of the early history of the oil trade is too well known to
bear repeating in detail. The cleansing of crude petroleum was a
simple and easy process, and at first the profits were very large.
Naturally, all sorts of people went into it: the butcher, the baker,
and the candlestick-maker began to refine oil, and it was only a short
time before more of the finished product was put on the market than
could possibly be consumed. The price went down and down until the
trade was threatened with ruin. It seemed absolutely necessary to
extend the market for oil by exporting to foreign countries, which
required a long and most difficult development; and also to greatly
improve the processes of refining so that oil could be made and sold
cheaply, yet with a profit, and to use as by-products all of the
materials which in the less-efficient plants were lost or thrown away.
These were the problems which confronted us almost at the outset, and
this great depression led to consultations with our neighbors and
friends in the business in the effort to bring some order out of what
was rapidly becoming a state of chaos. To accomplish all these tasks
of enlarging the market and improving the methods of manufacture in a
large way was beyond the power or ability of any concern as then
constituted. It could only be done, we reasoned, by increasing our
capital and availing ourselves of the best talent and experience.
It was with this idea that we proceeded to buy the largest and best
refining concerns and centralize the administration of them with a
view to securing greater economy and efficiency. The business grew
faster than we had anticipated.
This enterprise, conducted by men of application and ability working
hard together, soon built up unusual facilities in manufacture, in
transportation, in finance, and in extending markets. We had our
troubles and set-backs; we suffered from some severe fires; and the
supply of crude oil was most uncertain. Our plans were constantly
changed by changed conditions. We developed great facilities in an oil
centre, erected storage tanks, and connected pipe-lines; then the oil
failed and our work was thrown away. At best it was a speculative
trade, and I wonder that we managed to pull through so often; but we
were gradually learning how to conduct a most difficult business.
FOREIGN MARKETS
Several years ago, when asked how our business grew to such large
proportions I explained that our first organization was a partnership
and afterward a corporation in Ohio. That was sufficient for a local
refining business. But, had we been dependent solely upon local
business, we should have failed long since. We were forced to extend
our markets into every part of the world. This made the sea-board
cities a necessary place of business, and we soon discovered that
manufacturing for export could be more economically carried on there;
hence refineries were established at Brooklyn, at Bayonne, at
Philadelphia, at Baltimore, and necessary corporations were organized
in the different states.
We soon discovered, as the business grew, that the primary method of
transporting oil in barrels could not last. The package often cost
more than the contents, and the forests of the country were not
sufficient to supply cheaply the necessary material for an extended
time. Hence we devoted attention to other methods of transportation,
adopted the pipe-line system, and found capital for pipe-line
construction equal to the necessities of the business.
To operate pipe-lines required franchises from the states in which
they were located--and consequently corporations in those states--just
as railroads running through different states are forced to operate
under separate state charters. To perfect the pipe-line system of
transportation required many millions of capital. The entire oil
business is dependent upon the pipe-line. Without it every well would
be less valuable and every market at home and abroad would be more
difficult to serve or retain, because of the additional cost to the
consumer. The expansion of the whole industry would have been retarded
without this method of transportation.
Then the pipe-line system required other improvements, such as
tank-cars upon railroads, and finally the tank-steamer. Capital had to
be furnished for them and corporations created to own and operate
them.
Everyone of the steps taken was necessary if the business was to be
properly developed, and only through such successive steps and by a
great aggregation of capital is America to-day enabled to utilize the
bounty which its land pours forth, and to furnish the world with
light.
THE START OF THE STANDARD OIL COMPANY
In the year 1867 the firms of William Rockefeller & Co., Rockefeller &
Andrews, Rockefeller & Co., and S.V. Harkness and H.M. Flagler united
in forming the firm of Rockefeller, Andrews & Flagler.
The cause leading to the formation of this firm was the desire to
unite our skill and capital in order to carry on a business of greater
magnitude with economy and efficiency in place of the smaller
business that each had heretofore conducted separately. As time went
on and the possibilities became apparent, we found further capital to
be necessary; then we interested others and organized the Standard Oil
Company, with a capital of $1,000,000. Later we saw that more money
could be utilized, found persons who were willing to invest with us,
and increased our capital to $2,500,000, in 1872, and afterward in
1874 to $3,500,000. As the business grew, and markets were obtained at
home and abroad, more persons and capital were added to the business,
and new corporate agencies were obtained or organized, the object
being always the same--to extend our operations by furnishing the best
and cheapest products.
I ascribe the success of the Standard Oil Company to its consistent
policy of making the volume of its business large through the merit
and cheapness of its products. It has spared no expense in utilizing
the best and most efficient method of manufacture. It has sought for
the best superintendents and workmen and paid the best wages. It has
not hesitated to sacrifice old machinery and old plants for new and
better ones. It has placed its manufactories at the points where they
could supply markets at the least expense. It has not only sought
markets for its principal products, but for all possible by-products,
sparing no expense in introducing them to the public in every nook and
corner of the world. It has not hesitated to invest millions of
dollars in methods for cheapening the gathering and distribution of
oils by pipe-lines, special cars, tank-steamers, and tank-wagons. It
has erected tank-stations at railroad centres in every part of the
country to cheapen the storage and delivery of oil. It has had faith
in American oil and has brought together vast sums of money for the
purpose of making it what it is, and for holding its market against
the competition of Russia and all the countries which are producers of
oil and competitors against American products.
THE INSURANCE PLANS
Here is an example of one of the ways in which we achieved certain
economies and gained real advantage. Fires are always to be reckoned
with in oil refining and storage, as we learned by dear experience,
but in having our plants distributed all over the country the unit of
risk and possible loss was minimized. No one fire could ruin us, and