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

by Ron Chernow

“I hate frills,” he once said. “Useful things, beautiful things, are admirable; but frills, affectations, mere pretences of being something very fine, bore me very much.”

To expand his gardens, he bought an adjoining lot but was disturbed by the house that came with it and obstructed his view. Since he detested waste, he donated the house to a new girls’ school being built a block away. In what was hailed as an engineering wonder at the time, the brick house was jacked up by a windlass and rolled down the block on greased logs—a spectacle that was covered by local papers and drew spectators. “Mr. Rockefeller … set [the house] on new foundations where it was as good as ever,” Lucy Spelman said of her brother-in-law’s feat. “This was a marvelous undertaking, but then he was always undertaking marvelous things.”

Unable to do anything in a casual manner, Rockefeller became obsessive about his hobbies, which he could sometimes indulge in extravagant fashion.

His style of racing was also revealing: He never applied cruel, coercive measures to recalcitrant horses but studied them closely and tried to coax them along gently and with great patience. “I remember when my brother William and I used to go riding,” he said. “I would invariably come in first. He would be covered with perspiration, as was his horse. My horse would be too—but I would be as cool as I am now. I always would talk to my horses—quietly, steadily—never get excited.”5 This unflappable style and conservation of energy also characterized his approach to the management of his vast oil empire.

to be fiercely revolutionary in business, he needed to be utterly conventional at home.

“I was meeting all the people I needed to meet in my day’s work.… My family would rather have me at home—even if I were snoring in an easy chair—than going out for the evening, and certainly I preferred to stay at home.”

Since he and Cettie were deeply involved in temperance work—they did everything from sponsoring lecture tours to lobbying to have temperance principles inserted in school textbooks—they avoided the very presence of liquor, and this severely cramped their social activities.

In time, he became something of an evangelist on health-related issues. “It is remarkable how much we all could do if we avoid hustling, and go along at an even pace and keep from attempting too much.”

He didn’t seem to require time to indulge normal human idleness, much less illicit passion. In his rigidly compartmentalized life, each hour was tightly budgeted, whether for business, religion, family, or exercise.

Rockefeller was always patient with his children and seldom lost his temper or uttered a harsh word. As the son of a self-absorbed absentee father, he made a point of being an affectionate parent and something of a homebody.

Rockefeller kept his children hermetically cut off from the world and hired governesses to educate them at home. Aside from church, they never engaged in outside social or civic functions and betrayed a very Baptist fear of worldly entertainments.

John Jr. hinted that the children brought to visit weren’t real companions and were mostly window dressing to gratify his parents. “We had no childhood friends, no school friends.”

In later life, John Jr. confessed sheepishly that until the age of eight he wore only dresses, because he was the youngest child and the three older siblings were girls.

Even more of a pinchpenny than John, she wore patches on her clothes and shocked one acquaintance by stating that a young woman needed just two dresses in her wardrobe. Even as her husband grew rich, she continued to perform much of the housework herself, employing two maids and a coachman when they could have afforded many more.

he great industrial revolution that transformed America after the Civil War triggered an inflationary boom that swamped the country with goods. When this expanded supply led to lower prices and a deflationary bust, it set the pattern for the rest of the nineteenth century, which experienced huge economic advances, punctuated by treacherous slumps. Lured by easy profits, legions of investors rushed into a promising new field and, when big gluts developed from overproduction, they found it impossible to recoup their investment. This was especially true in new industries where people lacked the caution bred by experience and thus expanded with reckless abandon. As a result, many businessmen began to distrust unfettered competition and flirted with newfangled notions of cooperation—pools, monopolies, and other marketing arrangements that might curb production and artificially buoy prices.

Rampant speculation had so overbuilt the industry that total refining capacity in 1870 was triple the amount of crude oil being pumped. By then, Rockefeller estimated, 90 percent of all refineries were operating in the red.

Already a mini-empire, Standard Oil controlled 10 percent of American petroleum refining, as well as a barrel-making plant, warehouses, shipping facilities, and a fleet of tank cars.

Under the terms of the proposed pact, the railroads would sharply raise freight rates for all refiners, but refiners in the SIC would receive such substantial rebates—up to 50 percent off crude- and refined-oil shipments—that their competitive edge over rivals would widen dramatically. In the most deadly innovation, the SIC members would also receive “drawbacks” on shipments made by rival refiners—that is, the railroads would give the SIC members rebates for every barrel shipped by other refiners. On shipments from western Pennsylvania to Cleveland, for instance, Standard Oil would receive a forty-cent rebate on every barrel it shipped, plus another forty cents for every barrel shipped to Cleveland by competitors! One Rockefeller biographer has called the drawback “an instrument of competitive cruelty unparalleled in industry.”

One other factor tempted the railroads to come to terms with Rockefeller: In a farsighted tactical maneuver, he had begun to accumulate hundreds of tank cars, which would be in perpetually short supply.

One of Rockefeller’s strengths in bargaining situations was that he figured out what he wanted and what the other party wanted and then crafted mutually advantageous terms. Instead of ruining the railroads, Rockefeller tried to help them prosper, albeit in a way that fortified his own position.

“The world is full of Sham, Flattery, and Deceptions,” he wrote, “and home is a haven of rest and freedom.”

As if his foes already intuited his special power, he was singled out for abuse, one newspaper crowning him “the Mephistopheles of Cleveland.”

By remaining silent in the face of criticism, he thought he would seem confident and secure in his integrity—in fact, he seemed guilty and arrogantly evasive. Throughout his career, Rockefeller endured abuse with so much equanimity that Flagler once shook his head and said, “John, you have a hide like a rhinoceros!”44 He had an early Christian’s fierce defiance of critics, his boyhood with Big Bill having also taught him to disregard the malicious gossip of neighbors. He had a great general’s ability to focus on his goals and brush aside obstacles as petty distractions. “You can abuse me, you can strike me,” Rockefeller said, “so long as you let me have my own way.”45 As always, the greater the tumult, the cooler Rockefeller became, and a strange calm settled over him when his colleagues were most disconcerted. When pushed, he always stood his ground. The SIC episode showed that Rockefeller was now developing exalted faith in his own judgment. Like all revolutionaries, he saw himself as an instrument of higher purpose, endowed with a visionary faith. He knew that his actions would at first be resisted and misunderstood by the myopic crowd, but he believed that the force and truth of his ideas would triumph in the end.

In this era before railroad regulation and antitrust legislation, the SIC contract didn’t violate any obvious laws, only a universal sense of fair play. In early April, the Pennsylvania legislature canceled the SIC charter, while a congressional committee, a month later, branded the scheme the “most gigantic and daring conspiracy” ever to confront a free nation.

Though only a latent threat, the scheme acquired lasting infamy for two reasons. First, Rockefeller’s fiercest critics regarded it as a dress rehearsal for the grand pageant, the place where he first revealed his master plan, to be implemented in a thousand secret, disguised, and indirect ways. The second reason for all the later attention was that during the brief interval while the SIC was alive, Rockefeller engineered his most important coup: the swift, relentless consolidation of Cleveland’s refineries, which gave him irresistible momentum. The threat of the SIC, critics alleged, was the invisible club that he had waved over Cleveland refiners, forcing them to submit to his domination. Between February 17 and March 28, 1872—between the first rumors of the SIC and the time it was scuttled—Rockefeller swallowed up twenty-two of his twenty-six Cleveland competitors. During one forty-eight-hour period alone in early March, he bought six refineries.

Another businessman might have started with small, vulnerable firms, building on easy victories, but Rockefeller started at the top, believing that if he could crack his strongest competitor first, it would have a tremendous psychological impact.

(Commodore Matthew Perry, who opened Japan to commerce in 1854,

Sure of his mission, Rockefeller castigated those who resisted Standard Oil as foolish and shortsighted. “Take Standard Oil stock,” he urged them, “and your family will never know want.”71

Since so many refiners were losing money, Rockefeller paid them a pittance, typically a quarter of their original construction costs, or what the plants might have fetched if auctioned off for scrap; he paid little or nothing for goodwill—that is, the intangible value in a thriving business, such as its reputation or client list.

Since he aimed to convert competitors into members of his cartel and often retained the original owners, he preferred not to resort to naked intimidation.

“I have ways of making money you know nothing about.”

Nowadays, most people imagine that American businessmen have always favored free competition, at least in the abstract. But in the industrial boom after the Civil War, the most significant revolt against free-market capitalism came not from reformers or zealous ideologues but from businessmen who couldn’t control the maddening fluctuations in the marketplace.

Economic historians often cite the exuberance of Gilded Age businessmen, their red-blooded faith in America’s future, without noting the constant uncertainty that lurked underneath.

If the most creative and dynamic of economic systems, capitalism can also seem wasteful and inefficient to those who endure its rocky transitions and violent dislocations.

If, as he asserted, Standard Oil was the efficient, low-cost producer in Cleveland, why didn’t he just sit back and wait for competitors to go bankrupt? Why did he resort to the tremendous expense of taking over rivals and dismembering their refineries to slash capacity? According to the standard textbook models of competition, as oil prices fell below production costs, refiners should have retrenched and padlocked plants. But the oil market didn’t correct itself in this manner because refiners carried heavy bank debt and other fixed costs, and they discovered that, by operating at a loss, they could still service some debt. Obviously, they couldn’t lose money indefinitely, but as they soldiered on to postpone bankruptcy, their output dragged oil prices down to unprofitable levels for everybody. Hence, a perverse effect of the invisible hand: Each refiner, pursuing his own self-interest, generated collective misery.

In a day of primitive accounting systems, many refiners had only the haziest notion of their profitability or lack thereof.

“oftentimes the most difficult competition comes, not from the strong, the intelligent, the conservative competitor, but from the man who is holding on by the eyelids and is ignorant of his costs, and anyway he’s got to keep running or bust!”

monopolies might prove beneficial during depressions or in new, rapidly shifting industries.

his business conduct could withstand the most rigorous scrutiny.

Before long, Rockefeller was so detested in the Oil Regions that he ceased to visit and retreated to the status of a dim, shadowy legend; no authenticated photo shows him in the rural backwater to which he owed his fortune.

After Standard Oil bought decrepit old refineries in Cleveland to cut back on capacity, many sellers violated their covenants and started up new plants with improved equipment. They were drawn back, Rockefeller argued, only because he had markedly improved conditions and boosted prices. To complicate matters, new refiners now entered the business expressly to blackmail him into buying them out.

In 1873, the mad dash for riches that followed the Civil War ended in a prolonged slump that ground on for six interminable years. On Black Thursday—September 18, 1873—the august banking house of Jay Cooke and Company failed because of problems in financing the Northern Pacific Railway. This event ignited a panic, leading to a stock-exchange shutdown, a string of bank failures, and widespread railroad bankruptcies. During the next few years, deflated by massive unemployment, daily wages plunged 25 percent, exposing many Americans to the horror of downward mobility.

As his operations grew, Rockefeller made a fetish of secrecy, flavored with paranoia, a legacy of his self-conscious boyhood.

One day, he was riding on a train in Cleveland with Pittsburgh refiner O. T. Waring when Waring asked him who owned a handsome, dark green hillside house in the distance. “You wish to know who owns that house?” asked Rockefeller, suddenly very upset. “It’s our Mr. Hopper, who makes barrels for us. Whew! It’s an expensive house, isn’t it? I wonder if Hopper isn’t making altogether too much money? Let’s look into it.”11 Back in the office, he pored over the accounts, decided that Hopper’s profits were excessive, and terminated the contracts with him.

13During the Saratoga meeting, he impressed the Standard men because he listened attentively but hardly breathed a syllable, which elicited Rockefeller’s highest praise: “That’s the kind of man I’d like to have go fishing with me.”

Around Titusville, Standard Oil was reviled as the “octopus,” and Rockefeller was regarded as a monster. Mothers scolded their children by saying, “Run, children, or Rockefeller’ll get you!”

The completion of the Baltimore campaign left John D. Rockefeller, still in his thirties, the sole master of American oil refining. Since no major crude-oil deposits had been unearthed beyond western Pennsylvania—Russia, perhaps, being the lone exception—it also meant that he monopolized the world kerosene market. He was now living a fantasy of extravagant wealth that would have dwarfed the most febrile daydreams of William Avery Rockefeller. And few people beyond the oil business had ever even heard of him.

Indeed, American high society in the twentieth century would be loaded with descendants of those refiners who opted for stock.

As the owner of almost all the Erie and New York Central tank cars, Standard Oil’s position grew unassailable: At a moment’s notice, it could crush either railroad by threatening to withdraw its tank cars. It also prodded the railroads into granting favors for tank cars not enjoyed by the small refiners who shipped by barrel. For instance, railroads levied a charge for the return of empty barrels, while tank cars traveled free on the return route from the East Coast to the Midwest refineries. Tank-car clients also received the exact same leakage allowance received by barrel shippers, even though the tank cars didn’t leak—which effectively allowed Standard Oil to carry sixty-two gallons gratis in every tank car.

Had oil been found in scattered places after the Civil War, it’s unlikely that even Standard Oil could have mustered the resources to control it so thoroughly. It was the confinement of oil to a desolate corner of northwest Pennsylvania that made it susceptible to monopoly control, especially with the emergence of pipelines. Pipelines unified the Pennsylvania wells into a single network and ultimately permitted Standard Oil to start or stop the flow of oil with the turn of a spigot. In time, they relegated collaboration with the railroads into something of a sideshow for Rockefeller.