CHAPTER II. THE FIRST GREAT AMERICAN TRUST

When Cornelius Vanderbilt died in 1877, America's first great
industrial combination had become an established fact. In that
year the Standard Oil Company of Ohio controlled at least ninety
per cent of the business of refining and marketing petroleum. A
new portent had appeared in our economic life, a phenomenon that
was destined to affect not only the social and business existence
of the every-day American but even his political and legal
institutions.

It seems natural enough at the present time to refer to petroleum
as an indispensable commodity. At the beginning of the Civil War,
however, any such description would have been absurd. Though
petroleum was not unknown, millions of American households were
still burning candles, whale oil, and other illuminants. Not
until 1859 did our ancestors realize that, concealed in the rocky
of western Pennsylvania, lay apparently inexhaustible quantities
of a liquid which, when refined, would give a light exceeding in
brilliancy anything they had hitherto known. The mere existence
of petroleum, it is true, had been a familiar fact for centuries.
Herodotus mentions the oil pits of Babylon, and Pliny informs us
that this oil was actually used for lighting in certain parts of
Sicily. It had never become an object of universal use, simply
because no one had discovered how to obtain it in sufficient
quantities. No one had suspected, indeed, that petroleum existed
practically in the form of great subterranean rivers, lakes, or
even seas. For ages this great natural treasure had been seeking
to advertise its presence by occasionally seeping through the
rocks and appearing on the surface of watercourses. It had been
doing this all over the world--in China, in Russia, in Germany,
in England, in our own country. Yet our obtuse ancestors had for
centuries refused to take the hint. We can find much cause for
self-congratulation in that it was apparently the American mind
that first acted upon this obvious suggestion.

In Venango County, Pennsylvania, petroleum floated in such
quantities on the surface of a branch of the Allegheny River that
this small watercourse had for generations been known as Oil
Creek. The neighboring farmers used to collect the oil and use it
to grease their wagon axles; others, more enterprising, made a
business of gathering the floating substance, packing it in
bottles, and selling it broadcast as a medicine. The most famous
of these concoctions, "Seneca Oil," was widely advertised as a
sure cure for rheumatism, and had an extensive sale in this
country. "Kier's Rock Oil" afterwards had an even more extended
use. Samuel M. Kier, who exploited this comprehensive cure-all,
made no lasting contributions to medical science, but his method
of obtaining his medicament led indirectly to the establishment
of a great industry. In this western Pennsylvania region salt
manufacture had been a thriving business for many years; the salt
was obtained from salt water by means of artesian wells. This
salt water usually came to the surface contaminated with that
same evil-smelling oil which floated so constantly on top of the
rivers and brooks. The salt makers spent much time and money
"purifying" their water from this substance, never apparently
suspecting that the really valuable product of their wells was
not the salt water they so carefully preserved, but the petroleum
which they threw away. Samuel M. Kier was originally a salt
manufacturer; more canny than his competitors, he sold the oil
which came up with his water as a patent medicine. In order to
give a mysterious virtue to this remedy, Kier printed on his
labels the information that it had been "pumped up with salt
water about four hundred feet below the earth's surface." His
labels also contained the convincing picture of an artesian
well--a rough woodcut which really laid the foundation of the
Standard Oil Company.

In the late fifties Mr. George H. Bissell had become interested
in rock oil, not as an embrocation and as a cure for most human
ills, but as a light-giving material. A professor at Dartmouth
had performed certain experiments with this substance which had
sunk deeply into Bissell's imagination. So convinced was this
young man that he could introduce petroleum commercially that he
leased certain fields in western Pennsylvania and sent a specimen
of the oil to Benjamin Silliman, Jr., Professor of Chemistry at
Yale. Professor Silliman gave the product a more complete
analysis than it had ever previously received and submitted a
report which is still the great classic in the scientific
literature of petroleum. This report informed Bissell that the
substance, could be refined cheaply and easily, and that, when
refined, it made a splendid illuminant, besides yielding certain
byproducts, such as paraffin and naphtha, which had a great
commercial value. So far, Bissell's enterprise seemed to promise
success, yet the great problem still remained: how could he
obtain this rock oil in amounts large enough to make his
enterprise a practical one? A chance glimpse of Kier's label,
with its picture of an artesian well, supplied Bissell with his
answer. He at once sent E. L. Drake into the oil-fields with a
complete drilling equipment, to look, not for saltwater, but for
oil. Nothing seems quite so obvious today as drilling a well into
the rock to discover oil, yet so strange was the idea in Drake's
time that the people of Titusville, where he started work,
regarded him as a lunatic and manifested a hostility to his
enterprise that delayed operations for several months. Yet one
day in August, 1859, the coveted liquid began flowing from
"Drake's folly" at the rate of twenty-five barrels a day.

Because of this performance Drake has gone down to fame as the
man who "discovered oil." In the sense that his operation made
petroleum available to the uses of mankind, Drake was its
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 stock-jobbing
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 project
when the Standard Oil capitalists quietly appeared and purchased
it! For four years another group struggled with an even more
ambitious scheme, the construction of a conduit, five hundred
miles long, from the oil regions to Baltimore. The American
people looked on admiringly at the splendid enterprise whose
projectors, led by General Haupt, the builder of the Hoosac
Tunnel, struggled against bankruptcy, strikes, railroad
opposition, and hostile legislatures, in their attempts to push
their pipe line to the sea. In 1879 the Tidewater Company first
began to pump their oil, and the American press hailed their
achievement as something that ranked with the laying of the
Atlantic Cable and the construction of the Brooklyn Bridge. But
in less than two years the Rockefeller interest had entered into
agreements with the Tidewater Company that practically placed
this great seaboard pipe line in its hands.

Thus in less than ten years Rockefeller had realized his
ambitious dream; he now controlled practically everything
concerned in the manufacture and sale of petroleum. The change
had come about so stealthily, so secretly, and even so
remorselessly that it impressed the public almost as the work of
some uncanny genius. What were the forces, personal and economic,
that had produced this new phenomenon in our business life? In
certain particulars the Standard Oil monopoly was the product of
well-understood principles. From his earliest days John D.
Rockefeller had struggled to eliminate the middleman. He
established factories to build his own barrels, to make his own
acids; he created his own selling firms, and, instead of paying
large storage charges, he constructed his own warehouses in New
York. From his earliest days as a refiner, he had adopted the
principle of paying no man a profit, and of performing all the
intermediate acts that had formerly resulted in large tribute to
middlemen. Moreover, the Standard Oil Company was apparently the
first great American industrial enterprise that realized the
necessity of operating with an abundant capital. Not the least of
Mr. Rockefeller's achievements was his success in associating
with the new company men having great financial standing--Amasa
Stone, Benjamin Brewster, Oliver Jennings, and the like,
capitalists whose banking resources, placed at the disposition of
the Standard, gave it an immense advantage over its rivals. While
his competitors were "kiting" checks and waiting, hat in hand, on
the good nature of the money lenders, Rockefeller always had a
large bank balance, upon which he could instantly draw for his
operations.

Nor must we overlook the fact that the Standard group contained a
large number of exceedingly able men. "They are mighty smart
men," said the despairing W. H. Vanderbilt, in 1879, when pressed
to give his reasons for granting rebates to the Rockefeller
group. "I guess if you ever had to deal with them you would find
that out." In Rockefeller the corporation possessed a man of
tireless industry and unshakable determination. Nothing could
turn him aside from the work to which he had put his hand. Public
criticism and even denunciation, while he resented it as unjust
and regarded it as the product of a general misunderstanding,
never caused the leader of Standard Oil even momentarily to
flinch. He was a man of one idea, and he worked at it day and
night, taking no rest or recreation, skillfully turning to his
purpose every little advantage that came his way. His
associates--men like Flagler, Archbold, and Rogers--also had
unusual talents, and together they built up the splendid
organization that still exists. They exacted from their
subordinates the last ounce of attention and energy and they
rewarded generously everybody who served them well. They showed
great judgment in establishing refineries at the most strategic
points and in giving up localities, such as Boston and Portland,
which were too far removed from their supplies. They established
a marketing system which enabled them to bring their oil directly
from their own refineries to the retailer, all in their own tank
cars and tank wagons. They extended their markets in foreign
countries, so that now the Standard sells the larger part of its
products outside the United States. They established chemical
research laboratories which devised new and inexpensive methods
for refining the product and developed invaluable byproducts,
such as paraffin, naphtha, vaseline, and lubricating oils. It is
impossible to study the career of the Standard Oil Company
without concluding that we have here an example of a supreme
business intelligence working in a field which gave the widest
possible scope of action.

A high quality of organization, however, does not completely
explain the growth of this monopoly. The Standard Oil Company was
the beneficiary of methods that have deservedly received great
public opprobrium. Of these the one that stands forth most
conspicuously is the railroad rebate. Those who have attempted to
trace the very origin of the Rockefeller preeminence to railroad
discrimination have not entirely succeeded. Only the most hazy
evidence exists that the firm of Rockefeller, Andrews, and
Flagler greatly profited from rebates. In fact, refined oil was
not transported from Cleveland to the seaboard by railroad until
1870, the year that this firm dissolved; practically all of the
product then went by way of the Great Lakes and the Erie Canal.
Possibly the Rockefeller firm did get occasional rebates on crude
oil from the oil regions to the refineries, but so did their
competitors. It is therefore not likely that such favors had
great influence in making this single firm the most successful in
the largest refining center. With the organization of the
Standard Oil Company, however, rebates became a more important
consideration.

The turning-point in the history of the oil industry came when
the Rockefeller interests acquired the Cleveland refineries. The
details concerning this act of generalship are fairly well known.
The South Improvement Company is a corporation that necessarily
bulks large in the history of the Standard Oil. Mr. Rockefeller
and his associates have always disclaimed the parentage of this
organization. They assert--and their assertion is doubtless
true--that the only responsible begetters were Thomas A. Scott,
President of the Pennsylvania Railroad, and certain refineries in
Pittsburgh and Philadelphia which, though they were afterwards
absorbed by the Standard, were at that time their competitors.
These refiners and the Pennsylvania, over which the Standard Oil
then was making no shipments, thus represented a group, composed
of railroads and refiners, which was antagonistic to the
Rockefeller interests. The South Improvement Company was an
association of refiners with which the railroads, chiefly the
Pennsylvania, the New York Central, and the Erie, made exclusive
contracts for shipping oil. Under these contracts rates to the
seaboard were to be generally raised, though the members of the
South Improvement Company were to receive liberal rebates. The
refiners of Cleveland and Pittsburgh were to get lower rates than
the refiners located in the oil regions. But the clause in these
contracts that caused the greatest amazement and indignation was
one which gave the inside group rebates on every barrel of oil
shipped by its competitors.

It would be difficult to imagine any transaction more wicked than
these contracts. Carried into execution they inevitably meant the
extinction of every refiner who had not been admitted into the
inside ring. Of the two thousand shares of the South Improvement
Company, the gentlemen who were at that time most conspicuously
identified with the Standard Oil Company subscribed to five
hundred and forty. Mr. Rockefeller has always protested that he
did not favor the scheme and that he became a party to it simply
because he could not afford to antagonize the powerful
Pennsylvania Railroad, which had originated it. When the details
became public property, a wave of indignation swept from the
Atlantic to the Pacific; the oil regions, which would have been
the heaviest sufferers, shut down their wells and so cut off the
supply of crude oil; the New York newspapers started a "crusade"
against the South Improvement group and Congress ordered an
investigation. So fiercely was the public wrath aroused that the
railroads ran to cover, abrogated the contracts, signed an
agreement promising never more to grant rebates to any one, while
the Pennsylvania Legislature repealed the charter of the South
Improvement Company. This particular scheme, therefore, never
came to maturity. Before the South Improvement Company ended its
corporate existence, however, a great change had taken place in
the oil situation. Practically all the refineries in Cleveland
had passed into the control of the Standard Oil Company. The
Standard has always denied that there was any connection between
the purchase of these great refineries and the organization of
the South Improvement Company. But there is much evidence
sustaining a contrary view, for many of these refiners afterward
went on the witness stand and told circumstantial stories, all of
which made precisely the same point. This was that the Standard
men had come to them, shown the contracts which had been made by
the South Improvement Company, and argued that, under these new
conditions, the refineries left outside the combination could not
long survive. The Standard's rivals were therefore urged to "come
in," to take Standard stock in return for their refineries, or,
if they preferred, to sell outright. Practically all saw the
force in this argument and sold--in most cases taking cash.

The acquisition of these Cleveland refineries made inevitable the
Rockefeller conquest of the oil industry. Up to that time the
Standard had refined about fifteen hundred barrels a day, and now
suddenly its capacity jumped to more than twelve thousand
barrels. This one strategic move had made Rockefeller master of
about one-third of all the oil business in the United States, and
this fact explains the rapidity with which the other citadels
fell. There is no evidence that the Standard exercised any
pressure upon the great refineries in New York, Pittsburgh, and
Philadelphia. Indeed these concerns manifested an eagerness to
join. The fact that, unlike the Cleveland refiners, many of the
firms in these other cities took Standard stock, and so became
parts of the new organization, is in itself significant. They
evidently realized that they were casting their fortunes with the
winning side. The huge shipments which the Standard now
controlled explain this change in front. Every day Mr.
Rockefeller could send from Cleveland to the seaboard a train,
sixty cars long, loaded with the blue barrels containing his
celebrated liquid. That was a consideration for which any
railroad would at that time sell its soul. And the New York
Central road promptly made this sacrifice. Hardly had the ink
dried on its written promise not to grant any rebates when it
began granting them to the Standard Oil Company.

In those days the railroad rate was not the sacred, immutable
thing which it subsequently became, although the argument for
equal treatment of shippers existed theoretically just as
strongly forty years ago as it does today. The rebate was just as
illegal then as it is at present; there was no precise statute,
it is true, which made it unlawful until the Interstate Commerce
Act was passed in 1887; but the common law had always prohibited
such discriminations. In the seventies and eighties, however,
railroad men like Cornelius Vanderbilt and Thomas A. Scott were
less interested in legal formalities than in getting freight.
They regarded transportation as a commodity to be bought and
sold, like so much sugar or wheat or coal, and they believed that
the ordinary principles which regulated private bargaining should
also regulate the sale of the article in which they dealt.
According to this reasoning, which was utterly false and
iniquitous, but generally prevalent at the time, the man who
shipped the largest quantities of oil should get the lowest rate.

The purchase of the Cleveland refineries made the Standard Oil
group the largest shippers and therefore they obtained the most
advantageous terms for transporting their product. Under these
conditions they naturally obtained the monopoly, the extent of
which has been already described. Their competitors could rage,
hold public meetings, start riots, threaten to lynch Mr.
Rockefeller and all his associates, but they could not long
survive in face of these advantages. The only way in which the
smaller shippers could overcome this handicap was by acquiring
new methods of transportation. It was this necessity that
inspired the construction of pipe lines; but the Standard, as
already described, succeeded in absorbing these just about as
rapidly as they were constructed.

Not only did the Standard obtain railroad rebates but it
developed the most death-dealing methods in its system of
marketing its oil. In these campaigns it certainly overstepped
the boundaries of legitimate business, even according to the
prevailing morals of its own or of any other time. While it
probably did not set fire to rival refineries, as it has
sometimes been accused of doing, it undoubtedly did resort to
somewhat Prussian methods of destroying the foe. This great
corporation divided the United States into several sections, over
each of which it appointed an agent, who in turn subdivided his
territory into smaller divisions, each one of which likewise had
its captain. The order imperatively issued to each agent was,
"Sell all the oil that is sold in your district." To these
instructions he was rigidly held; success in accomplishing his
task meant advancement and an increased salary, with a liberal
pension in his old age, whereas failure meant a pitiless
dismissal. He was expected to supervise not only his own
business, but that of his rivals as well, to obtain access to
their accounts, their shipments, and their customers. It has been
asserted, and the assertion has been supported by considerable
evidence, that these agents did not hesitate to bribe railroad
employees and in this way get access to their competitors' bills
of lading and records of their shipments, and that they would
even bribe dealers to cancel such orders and take the oil from
them at a lower price. This information laid the foundation for
those price-cutting campaigns that have brought the name of the
Standard Oil into such disfavor. And when the Standard cut, it
cut to kill; the only purpose was to drive the competitor from
the field, and, when this had been accomplished, the price of oil
would promptly go up again. The organization of "bogus
companies," started purely for the purpose of eliminating
competitors, seems to have been a not infrequent practice. This
latter method emphasizes another quality that accompanied the
Standard's operations and so largely explains its
unpopularity--the secrecy with which it so commonly worked.
Though the independent oil refiners were combating the most
powerful financial power of the time, they were frequently
fighting in the dark, never knowing where to deliver their blows.

This same characteristic was manifested in the form of corporate
existence which the Standard adopted. The first great "trust" was
a trust not only in name but in fact. The Standard introduced not
only a new economic development into our national organization;
it introduced a new word into our language and an issue into
American politics that provided sustenance for the presidential
campaigns of twenty-five years. From the beginning the Standard
Oil had always been a close corporation. Originally it had had
only ten stockholders, and this number had gradually grown until,
in 1881, there were forty-one. These men had adopted a new and
secretive method of combining their increasing possessions into a
single ownership. In 1873 the Standard Company had increased its
capital stock (originally $1,000,000) to $3,500,000, the new
certificates being exchanged for interests in the great New York
and Philadelphia refineries The Standard Oil Company of Ohio
never had a larger capital stock than that. As additional
properties were acquired, the interests were placed in the hands
of trustees, who held them for the joint benefit of the
stockholders in the original company. In 1882 this idea was
carried further, for then the Standard Oil Trust was organized.
The fact that the properties lay in so many different States,
many of which had laws intended to curb corporations, was
evidently what led to this form of consolidation. A trust was
formed, consisting of nine trustees, who held, for the benefit of
the Standard Oil stockholders, all the stock in the Standard and
in the subsidiary companies. Instead of certificates of stock the
trustees issued certificates of trust amounting to $70,000,000.
Each Standard stockholder received twenty of these certificates
for each share which he held of Standard stock. These
certificates could be bought and sold and passed on by
inheritance precisely the same as stocks.

Ingenious as was this legal device, it did not stand the test of
the courts. In 1892 the Ohio Supreme Court declared the Standard
Oil Trust a violation of the law and demanded its dissolution.
The persistent attempts of the Standard to disregard this order
increased its reputation for lawlessness. Finally, in 1899, after
Ohio had brought another action, the trust was dissolved. The
Standard interests now reorganized all their holdings under the
name of the Standard Oil Company of New Jersey. Again, in 1911,
the United States Supreme Court declared this combination a
violation of the Sherman Anti-Trust Act, and ordered its
dissolution. By this time the Standard capitalists had learned
the value of public opinion as a corporate asset, and made no
attempt to evade the order of the court. The Standard Oil Company
of New Jersey proceeded to apportion among its stockholders the
stock which it held in thirty-seven other companies--refineries,
pipe lines, producing companies, marketing companies, and the
like. Chief Justice White, in rendering his decision,
specifically ordered that, in dissolving their combination, the
Standard should make no agreement, contractual or implied, which
was intended still to retain their properties in one ownership.
As less than a dozen men owned a majority interest in the
Standard Oil Company of New Jersey, these same men naturally
continued to own a majority interest in the subsidiary companies.
Though the immediate effect of this famous decision therefore was
not to cause a separation in fact, this does not signify that, as
time goes on, such a real dissolution will not take place. It is
not unlikely that, in a few years, the transfers of the stock by
inheritance or sale will weaken the consolidated interest to a
point where the companies that made up the Standard Company will
be distinct and competitive.

This is more likely to be the case since, long before the
decision of 1911, the Standard Oil Company had ceased to be a
monopoly. In the early nineties there came to the front in the
oil regions a man whose organizing ability and indomitable will
suggested the Standard Oil leaders themselves. This man's soul
burned with an intense hatred of the Rockefeller group, and this
sentiment, as much as his love of success, inspired all his
efforts. There is nothing finer in American business history than
the fifteen years' battle which Lewis Emery, Jr., fought against
the greatest financial power of the day. In 1901 this long
struggle met with complete success. Its monuments were the two
great trunk pipe lines which Emery had built from the
Pennsylvania regions to Marcus Hook, near Philadelphia, one for
pumping refined and one for pumping crude. The Pure Oil Company,
Emery's creation, has survived all its trials and has done an
excellent business. And meanwhile other independents sprang up
with the discovery of oil in other parts of the country. This
discovery first astonished the Standard Oil men themselves; when
someone suggested to Archbold, thirty-five years ago, that the
midcontinent field probably contained large oil supplies, he
laughed, and said that he would drink all the oil ever discovered
outside of Pennsylvania. In these days a haunting fear pursued
the oil men that the Pennsylvania field would be exhausted and
that their business would be ended. This fear, as developments
showed, had a substantial basis; the Pennsylvania yield began to
fail in the eighties and nineties, until now it is an
inconsiderable element in this gigantic industry. Ohio, Indiana,
Illinois, Kansas, Oklahoma, Texas, California, and other states
in turn became the scene of the same exciting and adventurous
events that had followed the discovery of oil in Pennsylvania.
The Standard promptly extended its pipe lines into these new
areas, but other great companies also took part in the
development. These companies, such as the Gulf Refining Company
and the Texas Refining Company, have their gathering pipe lines,
their great trunk lines, their marketing stations, and their
export trade, like the Standard; the Pure Oil Company has its
tank cars, its tank ships, and its barges on the great rivers of
Europe. The ending of the rebate system has stimulated the growth
of independents, and the production of crude oil and the market
demand in a thousand directions has increased the business to an
extent which is now far beyond the ability of any one corporation
to monopolize. The Standard interests refine perhaps something
more than fifty per cent of the crude oil produced in this
country. But in recent years, Standard Oil has meant more than a
corporation dealing in this natural product. It has become the
synonym of a vast financial power reaching in all directions. The
enormous profits made by the Rockefeller group have found
investments in other fields. The Rockefellers became the owners
of the great Mesaba iron ore range in Minnesota and of the
Colorado Fuel and Iron Company, the chief competitor of United
States Steel. It is the largest factor in several of the greatest
American banks. Above all, it is the single largest railroad
power in America today.