August 19, 2025 • 46 mins
Dive into the insightful reflections of a prominent figure from the oil revolution of the 20th century. This compelling book embodies the essence of experience, as it chronicles the life of the second highest taxpayer in the U.S. during the 1920s. Though not included in the text, enjoy a glimpse of his wisdom through a poignant poem I was early taught to work as well as play, My life has been one long, happy holiday; Full of work and full of play- I dropped the worry on the way- And God was good to me every day. (Summary by sidhu177)
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Speaker 1 (00:00):
Chapter four of Random Reminiscences of Men and Events by
John D. Rockefeller. This is a LibriVox recording. All LibriVox
recordings are in the public domain. For more information or
to volunteer, please visit LibriVox dot org. Recording by William
(00:21):
tom Coe Random Reminiscences of Men and Events by John D. Rockefeller,
Chapter four, Some experiences in the oil business. During the
years when I was just coming to Man's Estate, the
produce business of Clark and Rockefeller went on prosperously, and
in the early sixties we organized a firm to refine
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and deal in oil. It was composed of Messrs James
and Richard Clark, mister Samuel Andrews, and the firm of
Clark and Rockefeller, who were the company. It was my
first direct connection with the oil trade. As a new
concern grew, the firm of Clark and Rockefeller was called
upon to supply a large special capital. Mister Samuel Andrews
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was the manufacturing man of the concern, and he had
learned the process of cleansing the crude oil by the
use of sulfuric acid. In eighteen sixty five 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
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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
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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 mister Andrews's wished to buy that business. I
thought that I saw great opportunities in refining oil, and
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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 and Rockefeller, and readily settled that. Later,
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my old partner, mister Clark, taking over the business. The
bidding began, I think, at five hundred dollar 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 fifty thousand dollars, which was much more than
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we supposed the concern to be worth. Finally it advanced
to sixty thousand dollars, and by slow stages, to seventy
thousand dollars, 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 seventy two thousand dollars
without hesitation. I said, seventy two thousand, five hundred dollars.
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Mister 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. Mister Clark said, I'm glad
to trust you for it. Settle at your convenience The
firm of Rockefeller and Andrews was then established, and this
was really my start in the oil trade. It was
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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
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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
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for oil by exporting to foreign countries, which required a
long and most difficult development, and also to greatly improve
the process 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
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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 accomp all these tasks of enlarging the market and
improving the methods of manufacture in a large way was
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beyond the power or ability of any concern. As they 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 centralized the administration
of them, with a view to securing greater economy and efficiency.
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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 setbacks.
We suffered from some severe fires, and the supply of
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crude oil was most uncertain. Our plans were constantly changed
by changed conditions. We developed great facilities in an oil center,
erected storage tanks and connected pipelines. Then the oil failed
and our work was thrown away. At best, it was
a speculative trade, and I wonder that we managed to
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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
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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 out there. Hence, refineries were established at Brooklyn,
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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,
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we devoted attention to other methods of transportation adopted the
pipeline system and found capital for pipeline construction equal to
the necessities of the business. To operate, pipelines required franchises
from the states in which they were located, and consequently
corporations in those states, just as railroads running through different
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states are forced to operate under separate state charters. To
perfect the pipeline system of transportation required many millions of capital.
The entire oil business is dependent upon the pipeline. 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 of the consumer. The
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expansion of the whole industry would have been retarded without
this method of transportation. Then the pipeline 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. Every one of the steps
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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 today enabled to utilize the
bounty which its land pours forth and to furnish the
world with light. The start of the Standard Oil Company
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in the year eighteen sixty seven, the firms of William
Rockefeller and Company, Rockefeller and Andrews, Rockefeller and Company, and S. V.
Harkness and H. M. Flagler united in forming the Firm
of Rockefeller, Andrews and Flagler. The cause leading to the
formation of this firm was a desire to unite our
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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
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organized the Standard Oil Company with a capital of one
million dollars. Later, we saw that more money could be utilized,
found persons who were willing to invest with us, and
increased our capital to two million, five hundred thousand dollars
in eighteen seventy two, and afterward in eighteen seventy four
to three million, five hundred thousand dollars. As the business
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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 ascribed the success of the Standard
Oil Company to its consistent policy of making the volume
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of its business large enough 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
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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 pipelines, special cars, tank steamers,
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and tank wagons. It has erected tank stations at railroad
centers 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
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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 learn
by dear experience, but in having our plants distributed all
over the country, the unit of risk and possible loss
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was minimized. No one fire could ruin us, and we
were able thus to establish a system of insuring ourselves.
Our reserve fund, which provided for this insurance could not
be wiped out all at once, as might be the
case with the concern having its plans together or near
each other. Then we studied and perfected our organization to
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prevent fires, improving our appliances and plans year after year,
until the profit of this insurance feature became a very
considerable item in the standard earnings. It can easily be
seen that This saving in insurance and minimizing the loss
by fire affected the profits not only in refining, but
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touched many other associated enterprises, the manufacture of by products,
the tanks and steamers, the pumping stations, et cetera. We
devoted ourselves exclusively to the oil business and its products.
The company never went into outside ventures, but kept to
the enormous task of perfecting its own organization. We educated
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our own men. We trained many of them from boyhood.
We strove to keep them loyal by providing them full
scope for their ability. They were given opportunities to buy stock,
and the company itself helped them to finance their purchases,
not only here in America, but all over the world.
Our young men were given chances to advance themselves, and
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the sons of the old partners were welcomed to the
consuls and responsibilities of the administration. I may say that
the company has been in all its history, and I
am sure it is at present a most happy association
of busy people. I have been asked if my advice
is not often sought by the present managers. I can
say that if it were sought, it would be gladly given.
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But the fact is that since I retired, it has
been very little required. I am still a large stockholder. Indeed,
I have increased my holdings in the company stock since
I relinquished any part in its management. Why the standard
pays large dividends, Let me explain what many people perhaps
fully appreciate, but some I am sure do not. The
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Standard pays four dividends a year, the first in March,
which is the result of the busy season of the
whole twelvemonth because more oil is consumed in winter than
at other seasons, and three other dividends later at about
evenly divided periods. Now, these dividends run up to forty
percent on the capital stock of one hundred million dollars.
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But that does not mean that the profit is forty
percent on the capital invested. As a matter of fact,
it represents the results of the savings and surplus gained
through all the thirty five or forty years of the
workings of the companies. The capital stock could be raised
several hundred percent without a penny of over capitalization or water.
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The actual value is there. If this increase had been made,
the rate would represent a moderate dividend paying power of
about six to eight percent a normal growth study for
a moment, the result of what has been a natural
and absolutely normal increase in the value of the company's possessions.
Many of the pipelines were constructed during a period when
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costs were about fifty percent of what they are now.
Great fields of oil lands were purchased as virgin soil,
which later yielded an immense output. Quantities of low grade
crude oil, which had been bought by the company when
it was believed to be of little value, but which
the company hoped eventually to utilize, were greatly increased in
value by inventions for refining it and for using the
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residues formerly considered almost worthless. Dock property was secured at
low prices and made valuable by buildings and development. Large
unimproved tracts of land near the important business centers were acquired.
We brought our industries to these places, made the land useful,
and increased the value not only of our own property,
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but of the land adjacent to it to many times
the original worth. Wherever we have established businesses in this
and other countries, we have bought largely of property. I
remember a case where we paid only one thousand dollars
or so an acre for some rough land to be
used for such purposes, and through the improvements we created,
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the value has gone up forty or fifty times as
much in thirty five or forty years. Others have had
similar increases in the value of their properties, but have
enlarged their capitalization Correspondingly, they have escaped the criticism which
has been directed against us, who, with our old fashioned
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and conservative notions, have continued without such expansion of capitalization.
There is nothing strange or miraculous in all this. It
was all done through this natural law of trade development.
It is what the Asters and many other large landholders did.
If a man starts in business with one thousand dollars
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capital and gradually increases his property and investment by retaining
in his concern much of his earnings instead of spending them,
and thus accumulates values until his investment is, say, ten
thousand dollars, it would be folly to base the percentage
of his actual profits only on the original one thousand
dollars with which he started. Here again, I think the
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managers of the Standard should be praised and not blamed.
They have set an example for upbuilding on the most
conservative lines, and in a business which has always been,
to say the least hazardous and to a large degree
unavoidably speculative. Yet no one who has relied upon the
ownership of this stock to pay a yearly income has
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been disappointed, and the stock is held by an increasing
number of small holders the country. Over the management of capital,
we never attempted, as I have already said, to sell
the standard oil stock on the market through the stock exchange.
In the early days. The risks of the business were great,
and if the stock had been dealt in on the exchange,
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its fluctuations would no doubt have been violent. We prefer
to have the attention of the owners and administrators of
the business directed wholly to the legitimate development of the
inter prize, rather than to speculation in its shares. The
interests of the company have been carefully conserved. We have
been criticized for paying large dividends on a capitalization which
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represents but a small part of the actual property owned
by the company. If we had increased the capitalization to
bring it up to the real value and listed the
shares on the exchange, we might have been criticized then
for promoting a project to induce the public to invest.
As I have indicated, the foundations of the company were
so thoroughly established and its affairs so conservatively managed, that,
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after the earlier period of struggle to secure adequate capital,
and in view of the trying experiences through which we
then passed, we decided to pursue the policy of relying
upon our own resources. Since then, we have never been
obliged to lean very heavily upon the financial public, but
have sought rather to hold ourselves in position not only
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to protect our own large and importance interests, but to
be prepared, in times of stress, to lend a helping
hand to others. The company has suffered from the statements
of people who I am convinced are not familiar with
all the facts. As I long ago ceased to have
any active part in the management of its affairs, Perhaps
I may venture the opinion that men who devote themselves
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to building up the sale of American products all over
the world in competition with foreign manufacturers should be appreciated
and encouraged. There have been so many tales told about
the so called speculations of the Standard Oil Company, that
I may say a word about that subject. This company
is interested only in oil products and such manufacturing affairs
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as are legitimately connected therewith. It has plants for the
making of barrels and tanks, and building pumps for pumping oil.
It owns vessels for carrying oil, tank cars, pipes for
transporting oil, et cetera, et cetera, but it is not
concerned in spec interests. The oil business itself is speculative enough,
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and its successful administration requires a firm hand and a
cool head. The company pays dividends to its stockholders, which
it earns in carrying on this oil trade. This money
the stockholders can and do use as they think fit,
but the company is in no way responsible for the
disposition that the stockholders make of their dividends. The Standard
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Oil Company does not own or control a chain of banks,
nor has it any interest directly or indirectly in any bank.
Its relations are confined to the functions of ordinary banking,
such as other depositors have. It buys and sells its
own exchange, and these dealings, extending over many years, have
made its bills of exchange acceptable all over the world.
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Character the essential thing in speaking of the real beginning
of the Standard Oil Company it should be remembered that
it was not so much the consolidation of the firms
in which we had a personal interest, but the coming
together of the men who had the combined brain power
to do the work, which was the actual starting point.
Perhaps it is worth while to emphasize again the fact
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that it is not merely capital and plants and the
strictly material things which make up a business, but the
character of the men behind these things, their personalities and
their abilities. These are the essentials to be reckoned with.
Late in eighteen seventy one we began the purchase of
some of the more important of the refinery interests of Cleveland.
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The conditions were so chaotic and uncertain that most of
the refiners were very desirous to get out of the business.
We invariably offered those who wanted to sell the option
of taking cash or stock in the company. We very
much preferred to have them take the stock, because a
dollar in those days looked as large as a cart wheel.
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But as a matter of business policy, we found it
desirable to offer them the option, and in most case
they were even precipitate in their choice of the cash.
They knew what a dollar would buy, but they were
very skeptical in regard to the possibilities of resurrecting the
oil business and giving any permanent value to these shares.
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These purchases continued over a period of years, during which
many of the more important refineries at Cleveland were bought
by the Standard Oil Company. Some of the smaller concerns, however,
continued in the business for many years, although they had
the same opportunity as others to sell. There were always
at other refining points which were regarded as more favorably
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located than Cleveland, many refineries in successful operation the Bacchus burches.
All these purchases of refineries were conducted with the utmost
fairness and good faith on our part. Yet in many
quarters the stories of certain of these transactions have been
told in such form as to give the impression that
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the sales were made most unwillingly and only because the
sellers were forced to make them by the most ruthless
exertion of superior power. There was one transaction, viz. The
purchase of the property of the Bacchus Oil Company, which
has been variously exploited, and I am made to appear
as having personally robbed a defenseless widow of an extremely
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valuable property, paying her therefore only a mere fraction of
its worth. The story as told is one which makes
the strongest appeal to the sympathy, and if it were true,
would represent a shocking instance of cruelty in crushing a
defenseless woman. It is probable that its wide circulation and
its acceptance as true by those who know nothing of
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the facts, has awakened more hostility against the Standard Oil
Company and against me personally, than any charge has been made.
This is my reason for entering so much into detail
in this particular case, which I am exceedingly reluctant to do,
and for many years have refrained from doing. Mister F. M. Backus,
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a highly respected citizen of Cleveland and an old and
personal friend of mine, had, for several years prior to
his death in eighteen seventy four, been engaged in the
lubricating oil business, which was carried on after his death
as a corporation known as a Backus Oil Company. In
the latter part of eighteen seventy eight, our company purchased
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certain portions of the property of this company. The negotiations
which led to this purchase extended over several weeks, being
conducted on behalf of Missus Backus as a principal stockholder
by mister Charles H. Marr and on behalf of our
company by mister Peter S. Jennings. I personally had nothing
to do with the negotiations, except that when the matter
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first came up, Missus Backus requested me to call at
her house, which I did, when she spoke of selling
the property to our company and requested me to personally
conduct the negotiations with her with reference to it. This
I was obliged to decline to do, because, as I
then explained to her, I was not familiar with the
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details of the business. In that conversation, I advised her
not to take any hasty action, and when she expressed
fears about the future of the business, stating, for example,
that she could not get cars to transport sufficient oil,
I said to her that though we were using our
cars and require them in our business, yet we would
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loan her any number she needed and do anything else
in reason to assist her, and I did not see
why she could not successfully prosecute her business in the
future as in the past. I told her, however, that
if After reflection, she desired to pursue negotiations for the
sale of her property. Some of our people, familiar with
the lubricating oil business, would take up the question with her,
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as she still expressed a desire to have our company
by her property. Negotiations were taken up by mister Jennings,
and the only other thing that I had to do
with the matter was that when our experts reported that,
in their judgment, the value of the works, good will
and successorship which we had decided to buy were worth
a certain sum, I asked them to add ten thousand
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dollars in order to make doubly sure that she received
full value. The sale was consummated as we supposed, to
the entire satisfaction of Missus Bacchus, and the purchase price
which had been agreed upon, was paid, to my profound astonishment.
A day or two after the transaction had been closed,
I received from her a very unkind letter complaining that
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she had been unjustly treated. After investigating the matter, I
wrote her the following letter November thirteenth, eighteen seventy eight.
Dear Madam, I have held your note of the eleventh
instant received yesterday until to day, as I wished to
thoroughly review every point connected with the negotiations for the
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purchase of the stock of the Baccus Oil Company, to
satisfy myself as to whether I had unwittingly done anything
whereby you could have any right to feel injured. It
is true that in the interview I had with you,
I suggested that if you desire to do so, you
could retain an interest in the business of the Bacus
Oil Company by keeping some number of its shares. And
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then I understood you to say that if you sold out,
you wished to go entirely out of the business. That
being my understanding, our arrangements were made in case you
concluded to make the sale that precluded any other interests
being represented. And therefore, when you did make the inquiry
as to your taking some of the stock, our answer
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was given in accordance with the facts noted above, but
not at all in the spirit in which you referred
to the refusal in your note. In regard to the
reference that you make as to my permitting the business
of the Bacus Oil Company to be taken from you,
I say that in this, as in all else you
have written in your letter of the eleven inst you
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do me most grievous wrong. It was but of little
moment to the interests represented by me whether the business
of the Backus Oil Company was purchased or not. I
believed that it was for your interest to make the sale,
and have entirely candid in the statement, and beg to
call your attention to the time some two years ago
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when you consulted mister Flagler and myself as to selling
out your interest to mister Rose, at which time you
were desirous of selling at considerably less price and upon
time than you have now received in cash, and which
sale you would have been glad to have closed if
you could have obtained satisfactory security for the deferred payments.
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As to the price paid for the property, it is
certainly three times greater than the cost at which we
could now construct equal or better facilities. But wishing to
take a liberal view of it, I urged the proposal
of paying sixty thousand dollars, which was thought much too
high by some of ours. I believe that if you
would reconsider what you have written in your letter, to
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which this is a reply, you must admit having done
me great injustice and I am satisfied to wait upon
your innate sense of right for such admission. However, in
view of what seems to be your present feeling, I
now offer to restore to you the purchase made by us,
you simply returning the amount of money which we have invested,
and leaving us as though no purchase has been made.
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Should you not desire to accept this proposal, I offer
to you one hundred, two hundred, or three hundred shares
of the stock at the same price that we paid
for the same with this addition that, if we keep
the property we are under engagement to pay into the
treasury of the back of Oil Company, any amount which
added to the amount already paid would make a total
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of one hundred thousand dollars, and thereby make the shares
one hundred dollars each. That you may not be compelled
too hastily come to a conclusion, I will leave open
for three days these propositions for your acceptance or declination,
and in the meantime, believe me yours very truly, John D. Rockefeller.
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Neither of these offers was accepted. In order that this
may not rest on my unsupported assertion, I submit the
following documents. The first is a letter from mister H. M. Backus,
a brother of Missus Backus's deceased husband, who had been
associated with the business and had remained with the company
after his death. The letter was written without any solicitation
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whatever on my part, but I have since received permission
from mister Backus to print it. It is followed by
extracts from affidavits made by the gentleman who conducted the
negotiations on behalf of Missus Backus. I have no wish
to reprint the complimentary allusion to myself and mister Backus's letter,
but have feared to omit a word of it lest
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some misunderstanding ensue. Bowling, Green, Ohio, September eighteenth o three,
Mister John D. Rockefeller, Cleveland, Ohio. I do not know
whether you will ever receive this letter or not, whether
your secretary will throw it into the waste basket or not,
but I will do my part and get it off
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my mind, and it will not be my fault if
you do not receive or read it. Ever since the
day that my deceased brother's wife, Missus F. N. Bacchus,
wrote you, the unjust and unreasonable letter in reference to
the sale of the property of the old Backus's oil company,
in which I had a small interest. I have wanted
to write you and record my disapproval of that letter.
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I lived with my brother's family, was at the house
the day you called to talk the matter of the
then proposed purchase of the property with Missus Backus by
her request, as she told mister Jennings that she wanted
to deal through you. I was in favor of the
sale from the first. I was with Missus Backus all
through the trouble with mister Rose and with mister Maloney.
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Did what I could to encourage her and to prevent
mister Rose from getting the best of her. Missus Backus,
in my opinion, is an exceptionally good financier. But she
does not know, and no one can convince her that
the best thing that ever happened to her financially was
the sale of her interest in the Baccus Oil Company
to your people. She does not know that five more
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years of the then increasing desperate competition would have bankrupted
the company, and that with a big debt that she
was carrying on the lot on Euclid Avenue near Sheriff Street,
she would have been swamped, and that the only thing
that ever saved her and the oil business generally was
the plan of John D. Rockefeller. She thinks that you
literally robbed her of millions, and feeds her children on
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that diet three times a day, more or less, principally
more until it has become a mania with her, and
no argument that any one else can suggest will have
any effect upon her. She is wise and good in
many ways, but on that one subject she has one sided.
I think, of course, if we could have been assured
of continued dividends, I would have been opposed to selling
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the business, but that was out of the question. I
know of the ten thousand dollars that was added to
the purchase price of the property at your request, and
I know that you paid three times a value of
the property. And I know that all that ever saved
our company from ruin was the sale of its property
to you, And I simply want to ease my mind
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by doing justice to you by saying so. After the
sale to your company, I was simple enough to go
to Buffalo and try it again, but soon met with
defeat and retired with my flag in the dust. I
then went to Duluth and was on the top wave
till the real estate bubble broke and I broke with it.
I have had my ups and downs, but I have
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tried to take my medicine and look pleasant instead of
sitting down under a juniper tree and blaming my losses
to John D. Rockefeller. I suppose I would have put
off writing this letter for another year or more, as
I have done so long, had it not been for
a little chat that I had with mister Hannafin, superintendent
of the Buckeye Pipeline Company, a day or two since,
(34:06):
when I was relating the sale, et cetera of the
old b O Company's business, and in that way revived
the intention that had lain dormant since the last good
resolution in regard to writing it was made. But it's
done now and off my mind. With much respect and
admiration to John D. Rockefeller, I remain yours truly, H. M. Bachus.
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It appears from the FI Davits that the negotiations were
conducted on behalf of Missus Bacchus and her company by
Charles H. Marr, who had been in the employe of
the Bacchus company. For some time, and by mister Maloney,
who was the superintendent of the company from the time
of its organization and was also a stockholder and on
behalf of the Standard Oil Company, by mister Peter S. Jennings.
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There has been an impression that the Standard Oil Company
purchased for seventy nine thousand dollars property which was reasonably
worth much more more, and that the sacrifice was occasioned
by threats and compulsion. Mister Jennings requested mister Marr to
submit a written proposition giving the price put by the
backust Company upon the several items of property and assets
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which it desired to sell. This statement was furnished and
was annexed to mister Jennings affidavit. The Standard Oil Company
finally decided not to purchase all of the assets of
the company, but only the oil on hand, for which
it paid the full market price amounting to about nineteen
thousand dollars, and the item works, good will and successorship,
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which were offered by mister Marr at seventy one thousand dollars,
and for which the Standard offered sixty thousand dollars, which
was promptly accepted. Mister Marr made affidavit as follows. Charles H. Marr,
being duly sworn, says that in behalf of the Bacchus
Oil Company, he conducted the negotiations which led to the
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sale of its works, good will and stock of oils.
And during same, when said company had offered to sell
its entire stock for a gross sum to wit the
sum of one hundred and fifty thousand dollars, which was
to include cash on hand, accrude dividends, accounts, et cetera,
said Jennings requested said company to submit an itemized proposition
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fixing values upon different articles proposed to be sold, And
that he, after full consideration with Missus Bacchus, and with
her knowledge and consent, submitted the written proposition attached to
said Jennings. Affaitavit that the same is in his handwriting
and was copied at the office of the American Lubricating
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Oil Company from the original by himself at the request
of said Jennings, and said original was submitted by affiant
to Missus Bacchus, that she was fully cognizant of all
the details of said negotiations and the items and values
attached there too. In said proposition consulted with at every
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step thereof, none of which were taken without her advice,
as she was by far the largest stockholder in said
Backus Oil Company, owning about seven tenths of said company stock,
and she fully approved of said proposition and accepted the
offer of said Jennings to pay sixty thousand dollars for
the item works, good will and successorship without any opposition
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so far as a Fiant knows, and Afian says that
the amount realized from the assets of the Bacchus Oil Company,
including purchase price, has been about one hundred and thirty
three thousand dollars, and a part of its assets have
not yet been converted into money. As Affiant is informed,
Mister Marr, who was it will be remembered the widow's representative,
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refers to the negotiations leading up to the purchase and says,
but Affiance says that nothing that was said by mister
Jennings or anybody else during their progress could be construed
into a threat, nor did anything that was said or
done by said Jennings hasten or push forward said trade.
He also says. Affiant says that the negotiations extended over
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a period of from two to three weeks, and during
their pendency, that Missus Backus frequently urged a fiant to
bring the same to a conclusion, as she was anxious
to dispose of said business and relieve herself from further
care and responsibility therewith. And when the said offer of
purchase by said Jennings, upon the terms afort said, was
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conveyed to her by a Fiant, she expressed herself as
entirely satisfied therewith. Mister Maloney made an affidavit that he
was superintendent of the Backus Oil Company from the time
of its organization and also a stockholder in the company,
and had been associated in business with mister Backus for
many years previous to his death, that he took part
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in the negotiations for the sale, representing Missus Backus in
the matter. After speaking of the new negotiations, he says, finally,
after consultation, their proposition was made by her to dispose
of the works, good will and successorship for seventy one
thousand dollars. A few days after the proposal was made
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to her to pay the sum of sixty thousand dollars
for works and good will and to take the oil
on hand at its market price, which propositions she accepted,
and the sale was concluded. During these negotiations, Missus Backus
was anxious to sell and was entirely satisfied with the
sale after it was concluded. I know of the fact
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that about a year and a half previous she had
offered to sell out the stock of the Backus Oil
Company at from thirty to thirty three percent less than
she received in the sale referred to, and the value
of the works and properties sold had not increased. In
the meantime. I was well acquainted with the works of
the Backus Oil Company and their value. I could, at
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the time of the sale have built the works new
for twenty five dous thousand dollars. There were no threats,
nor intimidations, nor anything of the kind used to force
the sale. The negotiations were pleasant and fair, and the
price paid in excess of the value and satisfactory to
Missus Backus and all concerned for her. So far as
(40:17):
I can see, after more than thirty years have elapsed,
there was nothing but the most kindly and considerate treatment
of Missus Backus on the part of the Standard Oil Company.
I regret that Missus Backus did not take at least
part of her pay in standard certificates, as we suggested
she should do. The question of rebates. Of all the
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subjects which seem to have attracted the attention of the
public to the affairs of the Standard Oil Company, the
matter of rebates from railroads has perhaps been uppermost. The
Standard Oil Company of Ohio, of which I was president,
did receive rebates from the railroads prior to eighteen eighty,
but received no advantages for which it did not give
full compensation. The reason for rebates was that such was
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the railroad's method of business. A public rate was made
and collected by the railroad companies, but so far as
my knowledge extends, was seldom retained in full. A portion
of it was repaid to the shippers as a rebate.
By this method, the real rate of freight which any
shipper paid was not known by his competitors, nor by
other railroad companies, the amount being a matter of bargain
(41:25):
with the carrying company. Each shipper made the best bargain
that he could, but whether he was doing better than
his competitor was only a matter of conjecture, much dependent
upon whether the shipper had the advantage of competition of carriers.
The Standard Oil Company of Ohio, being situated at Cleveland,
had the advantage of different carrying lines as well as
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of water transportation in the summer, taking advantage of those
facilities and made the best bargains possible for its freights.
Other companies sought to do the same. The Standard gave
advantages to the railroads for the purpose of reducing the
costs of transportation of freight. It offered freights in large quantity,
car loads and train loads. It furnished loading facilities and
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discharging facilities at great cost. It provided regular traffic so
that a railroad could conduct its transportation to the best
advantage and use its equipment to the full extent of
its hauling capacity without waiting for the refiner's convenience. It
exempted railroads from liability for fire and carried its own insurance.
It provided at its own expense terminal facilities, which permitted
(42:32):
economies in handling. For these services. It obtained contracts for
special allowances on freights. But notwithstanding these special allowances, this
traffic from the Standard Oil Company was far more profitable
to the railroad companies than the smaller and irregular traffic
which might have paid a higher rate. To understand the
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situation which affected the giving and taking of rebates, it
must be remembered that the railroads were all eager to
enlarge their freight traffic. They were competing with the facilities
and rates offered by the boats on lake and canal,
and by the pipelines. All these means of transporting oil
cut into the business of the railroads, and they were
desperately anxious to successfully meet this competition. As I have stated,
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we provided means for loading and unloading cars expeditiously, agreed
to furnish a regular fixed number of car loads to
transport each day, and arranged with them for all the
other things that I have mentioned, the final result being
to reduce the cost of transportation for both the railroads
and ourselves. All this was following in the natural laws
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of trade pipelines versus railroads. The building of the pipelines
introduced another formidable competitor to the railroads. But as oil
could be transported by pumping through pipes at a much
less cost than by hauling in tank cars and a
railroad train, the development of the pipeline was inevitable. The
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question simply whether the oil traffic was sufficient in volume
to make the investment profitable. When pipelines had been built
to oil fields where the wells had ceased to yield,
as often happened, they were about most useless property imaginable.
An interesting feature developed through the relations which grew up
between the railroads and the pipelines. In many cases it
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was necessary to combine the facilities of both because the
pipes reached only part of the way, and from the
place where they ended, the railroad carried the oil to
its final destination. In some instances, a railroad had formerly
carried the oil the entire distance upon an agreed rate,
but now that this oil was partly pumped by pipelines
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and partly carried by rail the freight payment was divided
between the two. But as a through rate had been provided,
the owners of the pipeline agreed to remit a part
of its charges to the railroad. So we had cases
where the Standard paid a rebate to the railroad instead
of the reverse. But I do not remember having heard
any complaint of this coming from the students of these
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complicated subjects. The profits of the Standard Oil Company did
not come from advantages given by railroads. The railroads rather
were the ones who profited by the traffic of the
standard oil company, and whatever advantage it received in its
constant efforts to reduce rates of freight was only one
of the many elements of lessening cost to the consumer
(45:25):
which enabled us to increase our volume of business the
world over because we could reduce the selling price. How
general was the complicated bargaining for rates can hardly be imagined.
Everyone got the best rate that he could. After the
passage of the Interstate Commerce Act, it was learned that
many small companies which shipped limited quantities had received lower
(45:46):
rates than we had been able to secure, notwithstanding the
fact that we had made large investments to provide for
terminal facilities, regular shipments, and other economies. I well remember
a bright man from Boston who had much to say
about rebates and drawbacks. He was an old and experienced
merchant and looked after his affairs with a cautious and
(46:07):
watchful eye. He feared that some of his competitors were
doing better than he in bargaining for rates, and he
delivered himself of this conviction. I am opposed on principle
to the whole system of rebates and drawbacks unless I
am in it. End of Chapter four, Recording by William
(46:29):
tom Coe
Chapter four of Random Reminiscences of Men and Events by
John D. Rockefeller. This is a LibriVox recording. All LibriVox
recordings are in the public domain. For more information or
to volunteer, please visit LibriVox dot org. Recording by William
(00:21):
tom Coe Random Reminiscences of Men and Events by John D. Rockefeller,
Chapter four, Some experiences in the oil business. During the
years when I was just coming to Man's Estate, the
produce business of Clark and Rockefeller went on prosperously, and
in the early sixties we organized a firm to refine
(00:44):
and deal in oil. It was composed of Messrs James
and Richard Clark, mister Samuel Andrews, and the firm of
Clark and Rockefeller, who were the company. It was my
first direct connection with the oil trade. As a new
concern grew, the firm of Clark and Rockefeller was called
upon to supply a large special capital. Mister Samuel Andrews
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was the manufacturing man of the concern, and he had
learned the process of cleansing the crude oil by the
use of sulfuric acid. In eighteen sixty five 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
(01:28):
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
(01:50):
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 mister Andrews's wished to buy that business. I
thought that I saw great opportunities in refining oil, and
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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 and Rockefeller, and readily settled that. Later,
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my old partner, mister Clark, taking over the business. The
bidding began, I think, at five hundred dollar 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 fifty thousand dollars, which was much more than
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we supposed the concern to be worth. Finally it advanced
to sixty thousand dollars, and by slow stages, to seventy
thousand dollars, 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 seventy two thousand dollars
without hesitation. I said, seventy two thousand, five hundred dollars.
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Mister 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. Mister Clark said, I'm glad
to trust you for it. Settle at your convenience The
firm of Rockefeller and Andrews was then established, and this
was really my start in the oil trade. It was
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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
(04:02):
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
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for oil by exporting to foreign countries, which required a
long and most difficult development, and also to greatly improve
the process 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
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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 accomp all these tasks of enlarging the market and
improving the methods of manufacture in a large way was
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beyond the power or ability of any concern. As they 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 centralized the administration
of them, with a view to securing greater economy and efficiency.
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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 setbacks.
We suffered from some severe fires, and the supply of
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crude oil was most uncertain. Our plans were constantly changed
by changed conditions. We developed great facilities in an oil center,
erected storage tanks and connected pipelines. Then the oil failed
and our work was thrown away. At best, it was
a speculative trade, and I wonder that we managed to
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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
(06:32):
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 out there. Hence, refineries were established at Brooklyn,
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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,
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we devoted attention to other methods of transportation adopted the
pipeline system and found capital for pipeline construction equal to
the necessities of the business. To operate, pipelines required franchises
from the states in which they were located, and consequently
corporations in those states, just as railroads running through different
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states are forced to operate under separate state charters. To
perfect the pipeline system of transportation required many millions of capital.
The entire oil business is dependent upon the pipeline. 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 of the consumer. The
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expansion of the whole industry would have been retarded without
this method of transportation. Then the pipeline 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. Every one of the steps
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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 today enabled to utilize the
bounty which its land pours forth and to furnish the
world with light. The start of the Standard Oil Company
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in the year eighteen sixty seven, the firms of William
Rockefeller and Company, Rockefeller and Andrews, Rockefeller and Company, and S. V.
Harkness and H. M. Flagler united in forming the Firm
of Rockefeller, Andrews and Flagler. The cause leading to the
formation of this firm was a desire to unite our
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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
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organized the Standard Oil Company with a capital of one
million dollars. Later, we saw that more money could be utilized,
found persons who were willing to invest with us, and
increased our capital to two million, five hundred thousand dollars
in eighteen seventy two, and afterward in eighteen seventy four
to three million, five hundred thousand dollars. As the business
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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 ascribed the success of the Standard
Oil Company to its consistent policy of making the volume
(10:13):
of its business large enough 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
(10:35):
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 pipelines, special cars, tank steamers,
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and tank wagons. It has erected tank stations at railroad
centers 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
(11:24):
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 learn
by dear experience, but in having our plants distributed all
over the country, the unit of risk and possible loss
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was minimized. No one fire could ruin us, and we
were able thus to establish a system of insuring ourselves.
Our reserve fund, which provided for this insurance could not
be wiped out all at once, as might be the
case with the concern having its plans together or near
each other. Then we studied and perfected our organization to
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prevent fires, improving our appliances and plans year after year,
until the profit of this insurance feature became a very
considerable item in the standard earnings. It can easily be
seen that This saving in insurance and minimizing the loss
by fire affected the profits not only in refining, but
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touched many other associated enterprises, the manufacture of by products,
the tanks and steamers, the pumping stations, et cetera. We
devoted ourselves exclusively to the oil business and its products.
The company never went into outside ventures, but kept to
the enormous task of perfecting its own organization. We educated
(12:49):
our own men. We trained many of them from boyhood.
We strove to keep them loyal by providing them full
scope for their ability. They were given opportunities to buy stock,
and the company itself helped them to finance their purchases,
not only here in America, but all over the world.
Our young men were given chances to advance themselves, and
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the sons of the old partners were welcomed to the
consuls and responsibilities of the administration. I may say that
the company has been in all its history, and I
am sure it is at present a most happy association
of busy people. I have been asked if my advice
is not often sought by the present managers. I can
say that if it were sought, it would be gladly given.
(13:32):
But the fact is that since I retired, it has
been very little required. I am still a large stockholder. Indeed,
I have increased my holdings in the company stock since
I relinquished any part in its management. Why the standard
pays large dividends, Let me explain what many people perhaps
fully appreciate, but some I am sure do not. The
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Standard pays four dividends a year, the first in March,
which is the result of the busy season of the
whole twelvemonth because more oil is consumed in winter than
at other seasons, and three other dividends later at about
evenly divided periods. Now, these dividends run up to forty
percent on the capital stock of one hundred million dollars.
(14:16):
But that does not mean that the profit is forty
percent on the capital invested. As a matter of fact,
it represents the results of the savings and surplus gained
through all the thirty five or forty years of the
workings of the companies. The capital stock could be raised
several hundred percent without a penny of over capitalization or water.
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The actual value is there. If this increase had been made,
the rate would represent a moderate dividend paying power of
about six to eight percent a normal growth study for
a moment, the result of what has been a natural
and absolutely normal increase in the value of the company's possessions.
Many of the pipelines were constructed during a period when
(15:00):
costs were about fifty percent of what they are now.
Great fields of oil lands were purchased as virgin soil,
which later yielded an immense output. Quantities of low grade
crude oil, which had been bought by the company when
it was believed to be of little value, but which
the company hoped eventually to utilize, were greatly increased in
value by inventions for refining it and for using the
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residues formerly considered almost worthless. Dock property was secured at
low prices and made valuable by buildings and development. Large
unimproved tracts of land near the important business centers were acquired.
We brought our industries to these places, made the land useful,
and increased the value not only of our own property,
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but of the land adjacent to it to many times
the original worth. Wherever we have established businesses in this
and other countries, we have bought largely of property. I
remember a case where we paid only one thousand dollars
or so an acre for some rough land to be
used for such purposes, and through the improvements we created,
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the value has gone up forty or fifty times as
much in thirty five or forty years. Others have had
similar increases in the value of their properties, but have
enlarged their capitalization Correspondingly, they have escaped the criticism which
has been directed against us, who, with our old fashioned
(16:24):
and conservative notions, have continued without such expansion of capitalization.
There is nothing strange or miraculous in all this. It
was all done through this natural law of trade development.
It is what the Asters and many other large landholders did.
If a man starts in business with one thousand dollars
(16:45):
capital and gradually increases his property and investment by retaining
in his concern much of his earnings instead of spending them,
and thus accumulates values until his investment is, say, ten
thousand dollars, it would be folly to base the percentage
of his actual profits only on the original one thousand
dollars with which he started. Here again, I think the
(17:08):
managers of the Standard should be praised and not blamed.
They have set an example for upbuilding on the most
conservative lines, and in a business which has always been,
to say the least hazardous and to a large degree
unavoidably speculative. Yet no one who has relied upon the
ownership of this stock to pay a yearly income has
(17:28):
been disappointed, and the stock is held by an increasing
number of small holders the country. Over the management of capital,
we never attempted, as I have already said, to sell
the standard oil stock on the market through the stock exchange.
In the early days. The risks of the business were great,
and if the stock had been dealt in on the exchange,
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its fluctuations would no doubt have been violent. We prefer
to have the attention of the owners and administrators of
the business directed wholly to the legitimate development of the
inter prize, rather than to speculation in its shares. The
interests of the company have been carefully conserved. We have
been criticized for paying large dividends on a capitalization which
(18:11):
represents but a small part of the actual property owned
by the company. If we had increased the capitalization to
bring it up to the real value and listed the
shares on the exchange, we might have been criticized then
for promoting a project to induce the public to invest.
As I have indicated, the foundations of the company were
so thoroughly established and its affairs so conservatively managed, that,
(18:36):
after the earlier period of struggle to secure adequate capital,
and in view of the trying experiences through which we
then passed, we decided to pursue the policy of relying
upon our own resources. Since then, we have never been
obliged to lean very heavily upon the financial public, but
have sought rather to hold ourselves in position not only
(18:57):
to protect our own large and importance interests, but to
be prepared, in times of stress, to lend a helping
hand to others. The company has suffered from the statements
of people who I am convinced are not familiar with
all the facts. As I long ago ceased to have
any active part in the management of its affairs, Perhaps
I may venture the opinion that men who devote themselves
(19:20):
to building up the sale of American products all over
the world in competition with foreign manufacturers should be appreciated
and encouraged. There have been so many tales told about
the so called speculations of the Standard Oil Company, that
I may say a word about that subject. This company
is interested only in oil products and such manufacturing affairs
(19:42):
as are legitimately connected therewith. It has plants for the
making of barrels and tanks, and building pumps for pumping oil.
It owns vessels for carrying oil, tank cars, pipes for
transporting oil, et cetera, et cetera, but it is not
concerned in spec interests. The oil business itself is speculative enough,
(20:04):
and its successful administration requires a firm hand and a
cool head. The company pays dividends to its stockholders, which
it earns in carrying on this oil trade. This money
the stockholders can and do use as they think fit,
but the company is in no way responsible for the
disposition that the stockholders make of their dividends. The Standard
(20:26):
Oil Company does not own or control a chain of banks,
nor has it any interest directly or indirectly in any bank.
Its relations are confined to the functions of ordinary banking,
such as other depositors have. It buys and sells its
own exchange, and these dealings, extending over many years, have
made its bills of exchange acceptable all over the world.
(20:50):
Character the essential thing in speaking of the real beginning
of the Standard Oil Company it should be remembered that
it was not so much the consolidation of the firms
in which we had a personal interest, but the coming
together of the men who had the combined brain power
to do the work, which was the actual starting point.
Perhaps it is worth while to emphasize again the fact
(21:12):
that it is not merely capital and plants and the
strictly material things which make up a business, but the
character of the men behind these things, their personalities and
their abilities. These are the essentials to be reckoned with.
Late in eighteen seventy one we began the purchase of
some of the more important of the refinery interests of Cleveland.
(21:33):
The conditions were so chaotic and uncertain that most of
the refiners were very desirous to get out of the business.
We invariably offered those who wanted to sell the option
of taking cash or stock in the company. We very
much preferred to have them take the stock, because a
dollar in those days looked as large as a cart wheel.
(21:54):
But as a matter of business policy, we found it
desirable to offer them the option, and in most case
they were even precipitate in their choice of the cash.
They knew what a dollar would buy, but they were
very skeptical in regard to the possibilities of resurrecting the
oil business and giving any permanent value to these shares.
(22:14):
These purchases continued over a period of years, during which
many of the more important refineries at Cleveland were bought
by the Standard Oil Company. Some of the smaller concerns, however,
continued in the business for many years, although they had
the same opportunity as others to sell. There were always
at other refining points which were regarded as more favorably
(22:36):
located than Cleveland, many refineries in successful operation the Bacchus burches.
All these purchases of refineries were conducted with the utmost
fairness and good faith on our part. Yet in many
quarters the stories of certain of these transactions have been
told in such form as to give the impression that
(22:57):
the sales were made most unwillingly and only because the
sellers were forced to make them by the most ruthless
exertion of superior power. There was one transaction, viz. The
purchase of the property of the Bacchus Oil Company, which
has been variously exploited, and I am made to appear
as having personally robbed a defenseless widow of an extremely
(23:19):
valuable property, paying her therefore only a mere fraction of
its worth. The story as told is one which makes
the strongest appeal to the sympathy, and if it were true,
would represent a shocking instance of cruelty in crushing a
defenseless woman. It is probable that its wide circulation and
its acceptance as true by those who know nothing of
(23:41):
the facts, has awakened more hostility against the Standard Oil
Company and against me personally, than any charge has been made.
This is my reason for entering so much into detail
in this particular case, which I am exceedingly reluctant to do,
and for many years have refrained from doing. Mister F. M. Backus,
(24:03):
a highly respected citizen of Cleveland and an old and
personal friend of mine, had, for several years prior to
his death in eighteen seventy four, been engaged in the
lubricating oil business, which was carried on after his death
as a corporation known as a Backus Oil Company. In
the latter part of eighteen seventy eight, our company purchased
(24:23):
certain portions of the property of this company. The negotiations
which led to this purchase extended over several weeks, being
conducted on behalf of Missus Backus as a principal stockholder
by mister Charles H. Marr and on behalf of our
company by mister Peter S. Jennings. I personally had nothing
to do with the negotiations, except that when the matter
(24:46):
first came up, Missus Backus requested me to call at
her house, which I did, when she spoke of selling
the property to our company and requested me to personally
conduct the negotiations with her with reference to it. This
I was obliged to decline to do, because, as I
then explained to her, I was not familiar with the
(25:06):
details of the business. In that conversation, I advised her
not to take any hasty action, and when she expressed
fears about the future of the business, stating, for example,
that she could not get cars to transport sufficient oil,
I said to her that though we were using our
cars and require them in our business, yet we would
(25:27):
loan her any number she needed and do anything else
in reason to assist her, and I did not see
why she could not successfully prosecute her business in the
future as in the past. I told her, however, that
if After reflection, she desired to pursue negotiations for the
sale of her property. Some of our people, familiar with
the lubricating oil business, would take up the question with her,
(25:50):
as she still expressed a desire to have our company
by her property. Negotiations were taken up by mister Jennings,
and the only other thing that I had to do
with the matter was that when our experts reported that,
in their judgment, the value of the works, good will
and successorship which we had decided to buy were worth
a certain sum, I asked them to add ten thousand
(26:12):
dollars in order to make doubly sure that she received
full value. The sale was consummated as we supposed, to
the entire satisfaction of Missus Bacchus, and the purchase price
which had been agreed upon, was paid, to my profound astonishment.
A day or two after the transaction had been closed,
I received from her a very unkind letter complaining that
(26:35):
she had been unjustly treated. After investigating the matter, I
wrote her the following letter November thirteenth, eighteen seventy eight.
Dear Madam, I have held your note of the eleventh
instant received yesterday until to day, as I wished to
thoroughly review every point connected with the negotiations for the
(26:56):
purchase of the stock of the Baccus Oil Company, to
satisfy myself as to whether I had unwittingly done anything
whereby you could have any right to feel injured. It
is true that in the interview I had with you,
I suggested that if you desire to do so, you
could retain an interest in the business of the Bacus
Oil Company by keeping some number of its shares. And
(27:19):
then I understood you to say that if you sold out,
you wished to go entirely out of the business. That
being my understanding, our arrangements were made in case you
concluded to make the sale that precluded any other interests
being represented. And therefore, when you did make the inquiry
as to your taking some of the stock, our answer
(27:40):
was given in accordance with the facts noted above, but
not at all in the spirit in which you referred
to the refusal in your note. In regard to the
reference that you make as to my permitting the business
of the Bacus Oil Company to be taken from you,
I say that in this, as in all else you
have written in your letter of the eleven inst you
(28:01):
do me most grievous wrong. It was but of little
moment to the interests represented by me whether the business
of the Backus Oil Company was purchased or not. I
believed that it was for your interest to make the sale,
and have entirely candid in the statement, and beg to
call your attention to the time some two years ago
(28:22):
when you consulted mister Flagler and myself as to selling
out your interest to mister Rose, at which time you
were desirous of selling at considerably less price and upon
time than you have now received in cash, and which
sale you would have been glad to have closed if
you could have obtained satisfactory security for the deferred payments.
(28:42):
As to the price paid for the property, it is
certainly three times greater than the cost at which we
could now construct equal or better facilities. But wishing to
take a liberal view of it, I urged the proposal
of paying sixty thousand dollars, which was thought much too
high by some of ours. I believe that if you
would reconsider what you have written in your letter, to
(29:05):
which this is a reply, you must admit having done
me great injustice and I am satisfied to wait upon
your innate sense of right for such admission. However, in
view of what seems to be your present feeling, I
now offer to restore to you the purchase made by us,
you simply returning the amount of money which we have invested,
and leaving us as though no purchase has been made.
(29:28):
Should you not desire to accept this proposal, I offer
to you one hundred, two hundred, or three hundred shares
of the stock at the same price that we paid
for the same with this addition that, if we keep
the property we are under engagement to pay into the
treasury of the back of Oil Company, any amount which
added to the amount already paid would make a total
(29:48):
of one hundred thousand dollars, and thereby make the shares
one hundred dollars each. That you may not be compelled
too hastily come to a conclusion, I will leave open
for three days these propositions for your acceptance or declination,
and in the meantime, believe me yours very truly, John D. Rockefeller.
(30:11):
Neither of these offers was accepted. In order that this
may not rest on my unsupported assertion, I submit the
following documents. The first is a letter from mister H. M. Backus,
a brother of Missus Backus's deceased husband, who had been
associated with the business and had remained with the company
after his death. The letter was written without any solicitation
(30:32):
whatever on my part, but I have since received permission
from mister Backus to print it. It is followed by
extracts from affidavits made by the gentleman who conducted the
negotiations on behalf of Missus Backus. I have no wish
to reprint the complimentary allusion to myself and mister Backus's letter,
but have feared to omit a word of it lest
(30:52):
some misunderstanding ensue. Bowling, Green, Ohio, September eighteenth o three,
Mister John D. Rockefeller, Cleveland, Ohio. I do not know
whether you will ever receive this letter or not, whether
your secretary will throw it into the waste basket or not,
but I will do my part and get it off
(31:12):
my mind, and it will not be my fault if
you do not receive or read it. Ever since the
day that my deceased brother's wife, Missus F. N. Bacchus,
wrote you, the unjust and unreasonable letter in reference to
the sale of the property of the old Backus's oil company,
in which I had a small interest. I have wanted
to write you and record my disapproval of that letter.
(31:33):
I lived with my brother's family, was at the house
the day you called to talk the matter of the
then proposed purchase of the property with Missus Backus by
her request, as she told mister Jennings that she wanted
to deal through you. I was in favor of the
sale from the first. I was with Missus Backus all
through the trouble with mister Rose and with mister Maloney.
(31:55):
Did what I could to encourage her and to prevent
mister Rose from getting the best of her. Missus Backus,
in my opinion, is an exceptionally good financier. But she
does not know, and no one can convince her that
the best thing that ever happened to her financially was
the sale of her interest in the Baccus Oil Company
to your people. She does not know that five more
(32:16):
years of the then increasing desperate competition would have bankrupted
the company, and that with a big debt that she
was carrying on the lot on Euclid Avenue near Sheriff Street,
she would have been swamped, and that the only thing
that ever saved her and the oil business generally was
the plan of John D. Rockefeller. She thinks that you
literally robbed her of millions, and feeds her children on
(32:39):
that diet three times a day, more or less, principally
more until it has become a mania with her, and
no argument that any one else can suggest will have
any effect upon her. She is wise and good in
many ways, but on that one subject she has one sided.
I think, of course, if we could have been assured
of continued dividends, I would have been opposed to selling
(33:02):
the business, but that was out of the question. I
know of the ten thousand dollars that was added to
the purchase price of the property at your request, and
I know that you paid three times a value of
the property. And I know that all that ever saved
our company from ruin was the sale of its property
to you, And I simply want to ease my mind
(33:22):
by doing justice to you by saying so. After the
sale to your company, I was simple enough to go
to Buffalo and try it again, but soon met with
defeat and retired with my flag in the dust. I
then went to Duluth and was on the top wave
till the real estate bubble broke and I broke with it.
I have had my ups and downs, but I have
(33:44):
tried to take my medicine and look pleasant instead of
sitting down under a juniper tree and blaming my losses
to John D. Rockefeller. I suppose I would have put
off writing this letter for another year or more, as
I have done so long, had it not been for
a little chat that I had with mister Hannafin, superintendent
of the Buckeye Pipeline Company, a day or two since,
(34:06):
when I was relating the sale, et cetera of the
old b O Company's business, and in that way revived
the intention that had lain dormant since the last good
resolution in regard to writing it was made. But it's
done now and off my mind. With much respect and
admiration to John D. Rockefeller, I remain yours truly, H. M. Bachus.
(34:29):
It appears from the FI Davits that the negotiations were
conducted on behalf of Missus Bacchus and her company by
Charles H. Marr, who had been in the employe of
the Bacchus company. For some time, and by mister Maloney,
who was the superintendent of the company from the time
of its organization and was also a stockholder and on
behalf of the Standard Oil Company, by mister Peter S. Jennings.
(34:52):
There has been an impression that the Standard Oil Company
purchased for seventy nine thousand dollars property which was reasonably
worth much more more, and that the sacrifice was occasioned
by threats and compulsion. Mister Jennings requested mister Marr to
submit a written proposition giving the price put by the
backust Company upon the several items of property and assets
(35:14):
which it desired to sell. This statement was furnished and
was annexed to mister Jennings affidavit. The Standard Oil Company
finally decided not to purchase all of the assets of
the company, but only the oil on hand, for which
it paid the full market price amounting to about nineteen
thousand dollars, and the item works, good will and successorship,
(35:36):
which were offered by mister Marr at seventy one thousand dollars,
and for which the Standard offered sixty thousand dollars, which
was promptly accepted. Mister Marr made affidavit as follows. Charles H. Marr,
being duly sworn, says that in behalf of the Bacchus
Oil Company, he conducted the negotiations which led to the
(35:56):
sale of its works, good will and stock of oils.
And during same, when said company had offered to sell
its entire stock for a gross sum to wit the
sum of one hundred and fifty thousand dollars, which was
to include cash on hand, accrude dividends, accounts, et cetera,
said Jennings requested said company to submit an itemized proposition
(36:18):
fixing values upon different articles proposed to be sold, And
that he, after full consideration with Missus Bacchus, and with
her knowledge and consent, submitted the written proposition attached to
said Jennings. Affaitavit that the same is in his handwriting
and was copied at the office of the American Lubricating
(36:39):
Oil Company from the original by himself at the request
of said Jennings, and said original was submitted by affiant
to Missus Bacchus, that she was fully cognizant of all
the details of said negotiations and the items and values
attached there too. In said proposition consulted with at every
(37:00):
step thereof, none of which were taken without her advice,
as she was by far the largest stockholder in said
Backus Oil Company, owning about seven tenths of said company stock,
and she fully approved of said proposition and accepted the
offer of said Jennings to pay sixty thousand dollars for
the item works, good will and successorship without any opposition
(37:23):
so far as a Fiant knows, and Afian says that
the amount realized from the assets of the Bacchus Oil Company,
including purchase price, has been about one hundred and thirty
three thousand dollars, and a part of its assets have
not yet been converted into money. As Affiant is informed,
Mister Marr, who was it will be remembered the widow's representative,
(37:46):
refers to the negotiations leading up to the purchase and says,
but Affiance says that nothing that was said by mister
Jennings or anybody else during their progress could be construed
into a threat, nor did anything that was said or
done by said Jennings hasten or push forward said trade.
He also says. Affiant says that the negotiations extended over
(38:08):
a period of from two to three weeks, and during
their pendency, that Missus Backus frequently urged a fiant to
bring the same to a conclusion, as she was anxious
to dispose of said business and relieve herself from further
care and responsibility therewith. And when the said offer of
purchase by said Jennings, upon the terms afort said, was
(38:30):
conveyed to her by a Fiant, she expressed herself as
entirely satisfied therewith. Mister Maloney made an affidavit that he
was superintendent of the Backus Oil Company from the time
of its organization and also a stockholder in the company,
and had been associated in business with mister Backus for
many years previous to his death, that he took part
(38:53):
in the negotiations for the sale, representing Missus Backus in
the matter. After speaking of the new negotiations, he says, finally,
after consultation, their proposition was made by her to dispose
of the works, good will and successorship for seventy one
thousand dollars. A few days after the proposal was made
(39:14):
to her to pay the sum of sixty thousand dollars
for works and good will and to take the oil
on hand at its market price, which propositions she accepted,
and the sale was concluded. During these negotiations, Missus Backus
was anxious to sell and was entirely satisfied with the
sale after it was concluded. I know of the fact
(39:34):
that about a year and a half previous she had
offered to sell out the stock of the Backus Oil
Company at from thirty to thirty three percent less than
she received in the sale referred to, and the value
of the works and properties sold had not increased. In
the meantime. I was well acquainted with the works of
the Backus Oil Company and their value. I could, at
(39:56):
the time of the sale have built the works new
for twenty five dous thousand dollars. There were no threats,
nor intimidations, nor anything of the kind used to force
the sale. The negotiations were pleasant and fair, and the
price paid in excess of the value and satisfactory to
Missus Backus and all concerned for her. So far as
(40:17):
I can see, after more than thirty years have elapsed,
there was nothing but the most kindly and considerate treatment
of Missus Backus on the part of the Standard Oil Company.
I regret that Missus Backus did not take at least
part of her pay in standard certificates, as we suggested
she should do. The question of rebates. Of all the
(40:39):
subjects which seem to have attracted the attention of the
public to the affairs of the Standard Oil Company, the
matter of rebates from railroads has perhaps been uppermost. The
Standard Oil Company of Ohio, of which I was president,
did receive rebates from the railroads prior to eighteen eighty,
but received no advantages for which it did not give
full compensation. The reason for rebates was that such was
(41:02):
the railroad's method of business. A public rate was made
and collected by the railroad companies, but so far as
my knowledge extends, was seldom retained in full. A portion
of it was repaid to the shippers as a rebate.
By this method, the real rate of freight which any
shipper paid was not known by his competitors, nor by
other railroad companies, the amount being a matter of bargain
(41:25):
with the carrying company. Each shipper made the best bargain
that he could, but whether he was doing better than
his competitor was only a matter of conjecture, much dependent
upon whether the shipper had the advantage of competition of carriers.
The Standard Oil Company of Ohio, being situated at Cleveland,
had the advantage of different carrying lines as well as
(41:46):
of water transportation in the summer, taking advantage of those
facilities and made the best bargains possible for its freights.
Other companies sought to do the same. The Standard gave
advantages to the railroads for the purpose of reducing the
costs of transportation of freight. It offered freights in large quantity,
car loads and train loads. It furnished loading facilities and
(42:08):
discharging facilities at great cost. It provided regular traffic so
that a railroad could conduct its transportation to the best
advantage and use its equipment to the full extent of
its hauling capacity without waiting for the refiner's convenience. It
exempted railroads from liability for fire and carried its own insurance.
It provided at its own expense terminal facilities, which permitted
(42:32):
economies in handling. For these services. It obtained contracts for
special allowances on freights. But notwithstanding these special allowances, this
traffic from the Standard Oil Company was far more profitable
to the railroad companies than the smaller and irregular traffic
which might have paid a higher rate. To understand the
(42:53):
situation which affected the giving and taking of rebates, it
must be remembered that the railroads were all eager to
enlarge their freight traffic. They were competing with the facilities
and rates offered by the boats on lake and canal,
and by the pipelines. All these means of transporting oil
cut into the business of the railroads, and they were
desperately anxious to successfully meet this competition. As I have stated,
(43:18):
we provided means for loading and unloading cars expeditiously, agreed
to furnish a regular fixed number of car loads to
transport each day, and arranged with them for all the
other things that I have mentioned, the final result being
to reduce the cost of transportation for both the railroads
and ourselves. All this was following in the natural laws
(43:39):
of trade pipelines versus railroads. The building of the pipelines
introduced another formidable competitor to the railroads. But as oil
could be transported by pumping through pipes at a much
less cost than by hauling in tank cars and a
railroad train, the development of the pipeline was inevitable. The
(43:59):
question simply whether the oil traffic was sufficient in volume
to make the investment profitable. When pipelines had been built
to oil fields where the wells had ceased to yield,
as often happened, they were about most useless property imaginable.
An interesting feature developed through the relations which grew up
between the railroads and the pipelines. In many cases it
(44:22):
was necessary to combine the facilities of both because the
pipes reached only part of the way, and from the
place where they ended, the railroad carried the oil to
its final destination. In some instances, a railroad had formerly
carried the oil the entire distance upon an agreed rate,
but now that this oil was partly pumped by pipelines
(44:43):
and partly carried by rail the freight payment was divided
between the two. But as a through rate had been provided,
the owners of the pipeline agreed to remit a part
of its charges to the railroad. So we had cases
where the Standard paid a rebate to the railroad instead
of the reverse. But I do not remember having heard
any complaint of this coming from the students of these
(45:04):
complicated subjects. The profits of the Standard Oil Company did
not come from advantages given by railroads. The railroads rather
were the ones who profited by the traffic of the
standard oil company, and whatever advantage it received in its
constant efforts to reduce rates of freight was only one
of the many elements of lessening cost to the consumer
(45:25):
which enabled us to increase our volume of business the
world over because we could reduce the selling price. How
general was the complicated bargaining for rates can hardly be imagined.
Everyone got the best rate that he could. After the
passage of the Interstate Commerce Act, it was learned that
many small companies which shipped limited quantities had received lower
(45:46):
rates than we had been able to secure, notwithstanding the
fact that we had made large investments to provide for
terminal facilities, regular shipments, and other economies. I well remember
a bright man from Boston who had much to say
about rebates and drawbacks. He was an old and experienced
merchant and looked after his affairs with a cautious and
(46:07):
watchful eye. He feared that some of his competitors were
doing better than he in bargaining for rates, and he
delivered himself of this conviction. I am opposed on principle
to the whole system of rebates and drawbacks unless I
am in it. End of Chapter four, Recording by William
(46:29):
tom Coe
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