Titan: The Life of John D. Rockefeller, Sr.

by Ron Chernow

Horses were routinely lashed to death with heavy black whips as they pulled enormous loads through the black muck. Left to die by the roadside, their hides and hair were eaten away by petroleum chemicals, leaving ghastly, corroded carcasses strewn across the landscape.

By 1863, the Allegheny, befouled with oil, actually caught fire and burned a bridge in Franklin.

From its first days, the industry tended to oscillate between extremes: gluts so dire that prices plummeted below production costs, or shortages that sent prices skyward but raised the even more troubling specter of the oil running dry.

“It is very important to remember what other people tell you, not so much what you yourself already know.”

As an ardent temperance advocate, he was extremely uncomfortable around drinkers—perhaps one reason why he seldom visited the oil fields.

“A question he asked several times in our discussion of business matters was, ‘What in the world would you have done without me?’ I bore it in silence. It does no good to dispute with such a man.”

Daring in design, cautious in execution—it was a formula he made his own throughout his career.

He slowly and secretly laid the groundwork, then moved with electrifying speed to throw his adversaries off balance.

Even as a young man, Rockefeller was extremely composed in a crisis. In this respect, he was a natural leader: The more agitated others became, the calmer he grew.

Having discarded several older partners, the young man had no real business mentors, heroes, or role models and was beholden to no one. John D. Rockefeller was not only self-made but self-invented and already had unyielding faith in his own judgment.

She played the piano for three hours daily and often accompanied John in duets, but she also had a taste for literature and poetry and could be an entertaining conversationalist.

Despite her constant reluctance, Rockefeller pursued her with quiet persistence; in love as in business, he had a longer time frame, a more settled will, than other people.

Shortly afterward, the ascetic Rockefeller did something wholly out of character, spending a shocking $118 for a diamond engagement ring.

Having established his financial wherewithal, Rockefeller now reverted to type and spent just $15.75 on the wedding ring, which was duly recorded in Ledger B under the rubric “Sundry Expenses.”

With the Swiss precision that governed his life, Rockefeller allotted exactly one month—September 8 to October 8, 1864—for a honeymoon that traced a conventional itinerary. The newlyweds started off at Niagara Falls, followed by a stay at the Saint Lawrence Hall Hotel in Montreal and the Summit House in Mount Washington, New Hampshire.

For the first six months of their marriage, John and Laura lived with Eliza at 33 Cheshire Street; then they moved into a dignified, two-story brick house at 29 Cheshire Street. Surrounded by a white picket fence, the house had tall, graceful windows but was disfigured by an ugly portico. Even though Rockefeller now operated and partially owned the largest refinery in Cleveland, he and Laura lived frugally without house servants. Rockefeller always cherished the chaste simplicity of this early period and preserved their first set of dishes, which stirred him to wistful reflections in later years.

he period after the Civil War was the most fertile in American history for schemers and dreamers, sharp-elbowed men and fast-talking hucksters, charlatans and swindlers. A perfect mania for patents and inventions swept America, as everybody tinkered with some new contrivance. It was a time of bombastic rhetoric and outsize dreams. As always during a protracted war, millions of people postponed their lives until the ghastly bloodshed was over, then they turned to private life with newfound zeal. The sudden wealth of young businessmen such as Rockefeller fed envy among returning soldiers, who wished to emulate their good fortune. The money fever was, in part, the reaction to a war that had appealed to both the worst and the best in the national character, for Lincoln’s high-minded crusade had often been debased by profiteering contractors operating behind patriotic façades. For many in the North, the high drama of preserving the union and emancipating the slaves had exhausted their capacity for altruism, leaving a residual contagion of greed.

The age was presided over by an inept president, General Ulysses S. Grant, a small-town businessman before the war, who was enamored of the rich, no matter how frequently they tried to fleece him.

Before the war, the federal government had only twenty thousand employees and shied away from attempts to regulate business. Unlike Europe, America had no tradition of political absolutism or ecclesiastic privilege to quench entrepreneurial spirits, and the weak, fragmented political system gave businessmen room to flourish.

In time, the government redefined the rules of the capitalist game to tame trusts and preserve competition, but as John D. Rockefeller set about building his fortune, the absence of clear-cut rules probably aided, at first, the creative vigor of the new industrial economy.

Perhaps no industry so beguiled the Civil War veterans with promises of overnight wealth than the oil industry.

Moving into the vacuum, kerosene emerged as an economic staple and was primed for a furious postwar boom. This burning fluid extended the day in cities and removed much of the lonely darkness from rural life.

As a self-made man in a new industry, Rockefeller wasn’t stultified by precedent or tradition, which made it easier for him to innovate. He continued to value autonomy from outside suppliers. At first, he had paid small coopers up to $2.50 for white oak barrels before he showed, in an early demonstration of economies of scale, that he could manufacture dry, tight casks more cheaply himself; soon his firm made thousands of blue-painted barrels daily for less than a dollar per barrel. Other Cleveland coopers bought and shipped green timber to their shops, whereas Rockefeller had the oak sawed in the woods then dried in kilns, reducing its weight and slicing transportation costs in half. And he continually extended the market for petroleum by-products, selling benzine, paraffin, and petroleum jelly in addition to kerosene.

Rockefeller was a chronic worrier who labored under a great deal of self-imposed stress.

Before the automobile, nobody knew what to do with the light fraction of crude oil known as gasoline, and many refiners, under cover of dark, let this waste product run into the river. “We used to burn it for fuel in distilling the oil,” said Rockefeller, “and thousands and hundreds of thousands of barrels of it floated down the creeks and rivers, and the ground was saturated with it, in the constant effort to get rid of it.”13 The noxious runoff made the Cuyahoga River so flammable that if steamboat captains shoveled glowing coals overboard, the water erupted in flames.

In the 1860s, nobody knew if significant oil deposits existed outside the rugged terrain of northwest Pennsylvania, so the industry had immediately taken on global proportions.

The Civil War introduced a new greenback currency and national banking system that generously stoked the postwar economy with credit.

Obliging but never fawning, he knew how to soothe jittery creditors, and one of his cardinal rules was never to seem too eager to borrow. With amusement, he recalled how one day he was walking down the street, trying to figure out how to find an urgently needed $15,000 loan, when a local banker pulled up in a buggy and serendipitously asked, “Do you think you could use $50,000, Mr. Rockefeller?” Rockefeller, gifted with more than a touch of his father’s showmanship, studied the man’s face for a long time then drawled, “Well-l-l, can you give me twenty-four hours to think it over?” By stalling, Rockefeller believed, he pinned down the deal on the most favorable terms.

Rockefeller solicited money from Stephen V. Harkness, by now one of Cleveland’s richest men. A bearish man with thick, slightly unkempt hair, fluffy sideburns, and a walrus mustache, Harkness had capitalized on inside political information to make a fortune during the war. As an ally of U.S. senator John Sherman of Ohio, he had received timely word in 1862 of an upcoming government move to levy a two-dollar tax on every gallon of malt and distilled liquor. Before the tax took effect, he busily stockpiled wine and whiskey and even raided the deposits of a local bank he owned to pour more money into this operation.39 When the tax was enacted in July 1862, he sold his enormous cache of spirits for a fast $300,000 profit. It is deeply ironic that Rockefeller, a staunch temperance advocate, got one of his most significant cash infusions from questionable gains in liquor.

Transportation assumed a pivotal place in the petroleum business for an elementary reason: Drake had discovered oil in a distant, inaccessible spot that was, at first, poorly served by the railroads. For several years, teamsters—the wagoners who hauled out the barrels—exercised a brutal tyranny and charged exorbitant sums. Since oil was a relatively cheap, standardized commodity, transportation costs inevitably figured as a critical factor in the competitive struggle. The logical and elegant solution—to construct a comprehensive pipeline network—encountered harsh resistance from the threatened teamsters.

Between the benighted rule of the teamsters and the future domination by efficient pipelines, there arose an interregnum in which the railroads exercised pervasive influence over everything that happened in the industry. At first, they tried to ship barrels on open flatcars, but the swaying, jolting ride splintered the containers and spilled their contents. After the Civil War, this hazardous method was superseded by primitive tank cars—twin pine tubs mounted on flatcars—that were soon replaced, in turn, by single iron tanks that became the industry norm. Such technical advances allowed the railroads to speed oil across the continent and vastly expanded the market for petroleum products.

Even late in life, Rockefeller was loath to confess, for political reasons, the overriding reason for his attachment to Cleveland: It was the hub of so many transportation networks that he had tremendous room to maneuver in freight negotiations.

Other Cleveland refiners evidently made the same calculation, and by late 1866 the city supported fifty refineries, ranking second only to Pittsburgh. Cleveland’s refineries were so numerous that their foul, acrid atmosphere enveloped the outskirts, tainting the beer from local breweries and souring the milk.

Following a myopic and ultimately destructive policy toward Pittsburgh, the Pennsylvania Railroad decided it was more profitable to carry crude oil from Oil Creek all the way to Philadelphia or New York refineries rather than to have it refined in Pittsburgh. By penalizing Pittsburgh refiners with crushing rates, the railroad fattened its short-term profits but sacrificed the city’s future as a refining center and paved the way for the hegemony of the city the Pennsylvania wanted most to eradicate: Cleveland.

By the late 1860s, the press was rife with reports that the Pennsylvania Railroad had decreed that Cleveland would be “wiped out as a refining center as with a sponge”—a statement forever engraved on Rockefeller’s unforgiving memory.

He was a man who always acted on Flagler’s business motto of favoring “sharp, vigorous and decisive measures.”

For any railroad, the prospect of steady shipments was irresistible, for they could dispatch trains composed solely of oil-tank cars instead of a motley assortment of freight cars picking up different products at different places. By consolidating many small shippers into one big shipper making regular, uniform shipments in massive quantities, the railroads could reduce the average round-trip time of their trains to New York from thirty days to ten and operate a fleet of 600 cars instead of 1,800.

From that moment, the railroads acquired a vested interest in the creation of a gigantic oil monopoly that would lower their costs, boost their profits, and generally simplify their lives. As in other industries, the railroads developed a stake in the growth of big businesses whose economies of scale permitted them to operate more efficiently—an ominous fact for small, struggling refiners who were gradually weeded out in the savage competitive strife.

Because many railroad deals ended with a handshake, not a signature, Rockefeller could breezily deny their existence without fear of embarrassing refutations later on.

As the chief transportation deal maker, Flagler had overseen the landmark pact, and Rockefeller always credited him for it. Some of this derived from Rockefeller’s humility, but it also betrayed a lifelong habit of covering his tracks and pretending to be elsewhere when critical decisions were made.

This refusal to truckle, bend, or bow to others, this insistence on dealing with other people on his own terms, time, and turf, distinguished Rockefeller throughout his career.

Rebates had inevitably accompanied railroad expansion. As the total railroad trackage doubled to 70,000 miles within eight years after the Civil War, the roads were saddled with high fixed costs and heavy bonded debt. This forced them to maintain a high, steady freight volume to stay alive and waylaid them into vicious rate wars. Rebates weren’t just solicited by shippers but were sedulously pushed by railway freight agents eager to win over new business. Rebates enabled them to maintain the fiction of listed rates while secretly giving discounts to favored shippers. Over time, relations grew ever closer and more incestuous between the railroads and large shippers. For decades, Rockefeller and his colleagues enjoyed free passes on all major railroads, which they regarded not as payoffs but as natural perquisites of their business.

But in spite of numerous scattered cases of rival refiners getting comparable rebates, no other firm received so many rebates so consistently over so many years or on such a colossal scale as Rockefeller’s. It was therefore disingenuous of him to suggest that rebates played only an incidental role in his success.

Small, irregular shippers were the bane of railroads for the simple, mechanical reason that they forced the trains to stop repeatedly to pick up single carloads of oil.

To meet the terms of his deal with the Lake Shore, Rockefeller had to run his refineries at full capacity even when kerosene demand slackened. He therefore paid a price for his rebates and felt that equal rates for all shippers would have unfairly penalized his firm.

Indeed, one can argue that the obsession among reformers with the rebate issue might have blinded them to a multitude of other sins.

Not until the Interstate Commerce Act in 1887 did it become an illegal, punishable offense for railroads to give rebates, and the practice didn’t cease entirely until the 1903 Elkins Act. Nevertheless, by the end of the Civil War, a widespread belief had begun to take hold that railroads were common carriers and should shun favoritism.

As to Tarbell’s charge that the secrecy of rebates proved their immorality, Rockefeller countered that railroads didn’t wish to advertise discounts that might then be demanded by other shippers. “For these arrangements were not except by the academic expected to be published, any more than the general of an army’s plans are published to enable the enemy to defeat him.”

The most compelling argument against rebates was that railroads received state charters and therefore had the right of eminent domain—that is, the right to claim private property in order to lay down tracks—investing their activities with a public character. In 1867, a committee of the Ohio senate declared that railroads, as common carriers, should charge equal rates, but a bill incorporating these ideas was defeated. The following year, just as Rockefeller implemented his Lake Shore deal, a Pennsylvania senate committee reported that railroads were common carriers and had “no right to show partiality among their customers”; but, again, no regulatory changes ensued.66 Almost twenty years passed before reformers succeeded in introducing public regulation that forced an end to the railroad favoritism that so incensed farmers and other small shippers across America.

Rockefeller could have afforded something showier than this $40,000 house, and pedestrians might have thought its owner a lesser light in business, yet this was exactly the misimpression that he wanted to convey. Far from trying to parade his wealth, he wanted to blend into the scenery. Even at home, Rockefeller was discreet and behaved as if he was concealing some secret from prying eyes.