Titan
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Perhaps no industry so beguiled the Civil War veterans with promises of overnight wealth than the oil industry. In astonishing numbers, a ragtag group of demobilized soldiers, many still in uniform and carrying knapsacks and rifles, migrated to northwest Pennsylvania. The potential money to be made was irresistible, whether in drilling or in auxiliary services; people could charge two or three times as much as they dared to ask in the city. Ida Tarbell speculated that “this little corner of Pennsylvania absorbed a larger portion of men probably than any other spot in the United States. There were lieutenants and captains and majors—even generals—scattered all over the field.”5 They brought with them a military sense of organization and a bellicose competitive spirit, but they were eager for quick killings and betrayed little sense of how to fashion a stable, lasting business, providing an opening for the organization-minded Rockefeller.
The war had stimulated growth in the use of kerosene by cutting off the supply of southern turpentine, which had yielded a rival illuminant called camphene. The war had also disrupted the whaling industry and led to a doubling of whale-oil prices. Moving into the vacuum, kerosene emerged as an economic staple and was primed for a furious postwar boom. This burning fluid extended the day in cities and removed much of the lonely darkness from rural life. The petroleum industry also furnished lubricants to grease the wheels of heavy industry. Though the world oil industry was squeezed into western Pennsylvania, the repercussions were felt everywhere. In 1865, Congressman James Garfield alluded to the oil craze in a letter to a former staff officer: “I have conversed on the general question of oil with a number of members who are in the business, for you know the fever has assailed Congress in no mild form. . . . Oil, not cotton, is King now, in the world of commerce.”6 Soon, John D. Rockefeller would reign as the undisputed king of that world.
In many ways, Rockefeller seemed a finely tuned instrument of the zeitgeist, the purest embodiment of the dynamic, acquisitive spirit of the postwar era. Like other Gilded Age moguls, he was shaped by his faith in economic progress, the beneficial application of science to industry, and America’s destiny as an economic leader. He steeled himself to persevere, subordinating his every impulse to the profit motive, working to master unruly emotions and striving for an almost Buddhist detachment from his own appetites and passions. “I had a bad temper,” Rockefeller said. “I think it might be called an ugly temper when too far provoked.” 7 So he trained himself to control this temper and tried never to be guided by ego or pique.
By the end of the Civil War, the pale, trim twenty-six-year-old with the reddish gold hair and side-whiskers carried himself like a man of importance. No sooner had he formed a new firm with Sam Andrews than he was bent on expanding it. In December 1865, he and Andrews inaugurated a second refinery, the Standard Works, with brother William appointed its nominal head. The combined Excelsior and Standard Works confirmed Rockefeller as the leading Cleveland refiner at a time when the city ranked among the top refining centers. Photos of his first refineries show an unprepossessing cluster of buildings, scarcely bigger than sheds, spaced irregularly across a hillside. With hands clasped behind his back, Rockefeller paced these works, poking his head in everywhere, a perfectionist alert to the tiniest details. When he saw somebody attending to a neglected, unswept corner, he smiled and said, “That’s right, eternal vigilance!”8 For foreman, he recruited a man named Ambrose McGregor who was, in Rockefeller’s description, “a precise, exacting man, honest as the day but perhaps not given to cultivating people.”9 An imposing, bewhiskered figure, McGregor won Rockefeller’s absolute trust on all technical matters. Since the refineries stood some distance from downtown, Rockefeller and McGregor often lunched at the boardinghouse of a Mrs. Jones; the two men in their oil-soaked boots regularly offended the nostrils of other diners and were exiled to the porch.
As a self-made man in a new industry, Rockefeller wasn’t stultified by precedent or tradition, which made it easier for him to innovate. He continued to value autonomy from outside suppliers. At first, he had paid small coopers up to $2.50 for white oak barrels before he showed, in an early demonstration of economies of scale, that he could manufacture dry, tight casks more cheaply himself; soon his firm made thousands of blue-painted barrels daily for less than a dollar per barrel. Other Cleveland coopers bought and shipped green timber to their shops, whereas Rockefeller had the oak sawed in the woods then dried in kilns, reducing its weight and slicing transportation costs in half. And he continually extended the market for petroleum by-products, selling benzine, paraffin, and petroleum jelly in addition to kerosene.
In this early period, Rockefeller was a chronic worrier who labored under a great deal of self-imposed stress. Though not versed in the scientific side of refining, he often exercised a direct managerial role in the plant. With fluctuating market conditions, he sometimes needed to send shipments to New York with great dispatch and personally rushed down to the railroad tracks to motivate his freight handlers. “I shall never forget how hungry I was in those days. I stayed out of doors day and night; I ran up and down the tops of freight cars when necessary; I hurried up the boys.” 10
At the time, refiners were tormented by fears that the vapors might catch fire, sparking an uncontrollable conflagration. Fire had already taken many lives in the industry—Edwin Drake’s well, for example, was destroyed by fire in the autumn of 1859. During the Civil War, there were so many spectacularly destructive blazes along Oil Creek that producers posted signs warning, “Smokers Will Be Shot.”11 Mark Hanna, who later managed President McKinley’s campaign, recalled how one morning in 1867 he woke up and discovered that his Cleveland refinery had burned to the ground, wiping out his investment, and such fears kept refiners on tenterhooks around the clock. “I was always ready, night and day, for a fire alarm from the direction of our works,” said Rockefeller. “Then proceeded a dark cloud of smoke from the area, and then we dashed madly to the scene of the action. So we kept ourselves like the firemen, with their horses and hose carts always ready for immediate action.”12
Such was the perpetual fire menace posed by the new industry that refineries were soon banned within the Cleveland city limits, hastening the growth of Kingsbury Run. In those years, oil tanks weren’t hemmed in earthen banks as they later were, so if a fire started it quickly engulfed all neighboring tanks in a flaming inferno. Before the automobile, nobody knew what to do with the light fraction of crude oil known as gasoline, and many refiners, under cover of dark, let this waste product run into the river. “We used to burn it for fuel in distilling the oil,” said Rockefeller, “and thousands and hundreds of thousands of barrels of it floated down the creeks and rivers, and the ground was saturated with it, in the constant effort to get rid of it.”13 The noxious runoff made the Cuyahoga River so flammable that if steamboat captains shoveled glowing coals overboard, the water erupted in flames. Each time a black cloud billowed up in the sky, people assumed another refinery had exploded, and kerosene prices soared. At least in retrospect, Rockefeller sounded philosophic about this omnipresent danger. “In those days, when the fire bell rang, we would all go to the refinery and help put it out. When the fire was burning I would have my pencil out, making plans for the rebuilding of our works.” 14
Even the dread of fire paled beside recurrent worries that the Pennsylvania oil wells would dry up, with no substitute in sight. As Rockefeller noted, “It was here today and there tomorrow, and none of us knew with any certainty about the continuance of the supply, without which these investments were valueless. ”15 Already by the late 1860s, stern prophecies were issued about the industry’s impending demise. There were two types of oilmen: those who thought the sudden boom an insubstantial mirage and who cashed in their profits as soon as possible; and those, like Rockefeller, who saw petroleum as the basis of an enduring economic revolution. During the salutary nightly sermons he gave himself in bed, Rockefeller often meditated on the transience of earthly wealth, especially oil, and admonished him
self, “You’ve got a fair fortune. You have a good property—now. But suppose the oil fields gave out!”16 Yet the future of the oil business became an article of religious faith for him, as did the feeling that the Lord had blessed him and his enterprise. In late 1867, several days before Christmas, he just missed a train that ended up in a terrible wreck, killing many passengers, and Rockefeller at once wrote to Cettie, “I do (and did when I learned that the first train left) regard the thing as the Providence of God.”17
Not yet the bête noire of oil producers, Rockefeller frequently donned his shabby oil suit and traveled to Franklin, Pennsylvania, where he kept an office that purchased oil, saving on the cost of middlemen. The oil fever was so infectious in the Oil Regions that these trips always silenced any fugitive doubts he might have entertained about the industry’s survival. As one traveler reported after visiting Oil Creek in 1866, “Men think of oil, talk of oil, dream of oil, the smell and taste of oil predominate in all they eat and drink.”18 These trips energized Rockefeller, who returned to Cleveland with renewed faith. As a friend recalled, “When he came back he would always have great tales to tell, and his eyes would snap as he would speak of his desires to succeed.”19
In the 1860s, nobody knew if significant oil deposits existed outside the rugged terrain of northwest Pennsylvania, so the industry had immediately taken on global proportions. Within a year of Drake’s discovery, his backers were marketing oil in London and Paris, and Europe emerged rapidly as the foremost market for American kerosene, importing hundreds of thousands of barrels yearly during the Civil War. Perhaps no other American industry had such an export outlook from its inception. By 1866, fully two-thirds of Cleveland kerosene was flowing overseas, most of it routed through New York, which became the export entrepôt for oil. At once, Rockefeller saw that he had to look beyond American shores to soak up excess production: “It seemed absolutely necessary to extend the market for oil by exporting to foreign countries, which required a large and most difficult development.” 20 To accomplish this, he dispatched brother William to New York City in 1866 to launch the firm of Rockefeller and Company, which would oversee the exports of their Cleveland refineries.
If William wasn’t much younger than John—“My brother is one year, one month and eight days younger than I am,” John specified with comic exactitude—he certainly had a younger brother’s deference and mentality.21 Already settled by this time, William had gotten married in May 1864 to Almira (“Mira”) Geraldine Goodsell, who came from a well-heeled Cleveland family with Yankee antecedents. The photos of William in his early twenties reveal a young man with thick muttonchop whiskers, clear eyes, and a broad, smooth forehead who looks more placid and less driven than his elder brother. Throughout their lives, despite their antithetical temperaments—William was bluff and friendly and freer than John in morals and manners—the brothers remained warm companions and close colleagues. William was a natural salesman who easily charmed people. Even in Pennsylvania, he was a popular figure who swapped tales with oil producers while John held himself aloof. “William always judges everything by intuition and instinct,” said John, tacitly contrasting his brother with himself. “He doesn’t act on analysis.”22 But those instincts were sound, and, while William took things seriously, he didn’t puff them up into grand moral crusades the way his brother did.
As a novice businessman, William had been precocious like his brother. After joining John as a bookkeeper at Hewitt and Tuttle, he was spirited away by a local miller and ended up at a produce-commission house, making partner after just one year. By age twenty, he was already earning $1,000 a year— “much more than I got,” noted John wryly—and winning his older brother’s confidence.23 “My brother was a young, active and efficient, and successful, businessman.”24 The quality that most endeared William to John was sheer dependability. In later years, John repeated the anecdote of how his brother, as a young bookkeeper, awoke in the night and realized that he had made an error in a bill of lading. He was so disturbed that he couldn’t wait till morning to correct it and marched down to the lakefront warehouse during the night so that the ship could sail on time with proper paperwork. In September 1865, William left the produce house of Hughes, Davis and Rockefeller to join his brother’s oil-refining business, and, when the Standard Works was organized that December, it bore the name of William Rockefeller and Company.
Before long, John D. Rockefeller was cast by critics as the omnipotent wizard of the oil market, setting prices as the whim seized him, but by sending William to New York he acknowledged that the export market decisively influenced oil prices. Whenever news of a Pennsylvania gusher reached New York, the French and German buyers, anticipating lower prices, simply stopped buying, and this made them the ultimate arbiters of price. “They sat there like a lot of vultures,” said Rockefeller. “They wouldn’t buy until the price of refined had fallen very low on account of the flood of crude oil in the market.”25 One of William’s tasks in New York was to apprise the firm’s buyers in the Oil Regions of sudden drops in export prices so that they could temporarily curtail crude-oil purchases.
When William arrived in New York, he set up unadorned offices at 181 Pearl Street, and the proximity to Wall Street was critical. To implement their audacious schemes, the Rockefellers needed massive capital but encountered two problems that seemed insuperable. The elite Wall Street bankers preferred to finance railroads and government and regarded oil refining as a risky, untested business, nothing short of outright gambling. Mindful of the extreme fire hazards and the specter of the oil running dry, only a few intrepid souls dared to wager on it. At the same time, John D.’s insatiable need for money outstripped the meager resources of Cleveland banks, forcing him to widen his search to New York, where he could secure credit at more advantageous rates. “And my dear brother, William, being located in the metropolis, where the opportunities were better for securing money, had upon him this financial burden, and he showed marked ability in keeping a steady nerve and presenting our case very well to the bankers.” 26 As a result of John’s foresight in assigning him to New York, William’s career became closely intertwined with that of Wall Street—to an uncomfortable extent, from John’s later perspective.
As a gray eminence of the business world in his retirement, John D. betrayed a deep suspicion of financiers, boasted that he never borrowed, and was celebrated for his financial conservatism. Yet at this stage of his career, he turned inescapably to bankers. “One can hardly recognize how difficult it was to get capital for active business enterprises at that time,” he admitted.27 If Rockefeller ever came close to groveling, it was in his eternal appeals to bankers. “In the beginning we had to go to the banks—almost on our knees—to get money and credit.” 28 When dealing with the banks, he vacillated between caution and daring: He often went to bed worrying how he would repay his large volume of loans, then awoke in the morning, refreshed by a night’s sleep and determined to borrow even more.29
The Civil War introduced a new greenback currency and national banking system that generously stoked the postwar economy with credit. Many people grew rich with borrowed funds, creating a false flush of prosperity. Rockefeller was very much a product of this new credit-based society and owed a great deal to Truman Handy and other Cleveland bankers who identified him as a young businessman of exceptional promise. He cleverly projected the image of a rising star whom bankers spurned at their peril. One day, he ran into a banker, William Otis, who had allowed Rockefeller to borrow up to his credit limit; some directors were now expressing misgivings. Could Rockefeller stop by to discuss the loans? “I shall be very glad to demonstrate the strength of my credit at any time,” replied Rockefeller. “Next week I shall need more money. I would like to give my business to your bank. Soon I shall have a great deal of money to invest.”30
Obliging but never fawning, he knew how to soothe jittery creditors, and one of his cardinal rules was never to seem too eager to borrow. With amusement, he recalled how one d
ay he was walking down the street, trying to figure out how to find an urgently needed $15,000 loan, when a local banker pulled up in a buggy and serendipitously asked, “Do you think you could use $50,000, Mr. Rockefeller?” Rockefeller, gifted with more than a touch of his father’s showmanship, studied the man’s face for a long time then drawled, “Well-l-l, can you give me twenty-four hours to think it over?” By stalling, Rockefeller believed, he pinned down the deal on the most favorable terms.31
Aside from his reputation for exemplary character, especially among Baptist business executives, Rockefeller had several other traits that inspired passionate allegiance from bankers. He was a stickler for the truth in presenting facts, never fudged or equivocated in discussing problems, and promptly repaid loans. At numerous points in his early career, he was rescued by bankers from crises that might have capsized his business. At one bank, the directors balked at extending him further credit after he suffered a refinery fire and hadn’t yet been compensated by insurers. Stepping into the breach, director Stillman Witt asked a clerk to fetch his own strongbox and announced with a flourish, “Here, gentlemen, these young men are all O.K., and if they want to borrow more money I want to see this bank advance it without hesitation, and if you want more security, here it is; take what you want.” 32