Rockefeller’s Rose

PETER: We’re back with BackStory, the show that looks to the past to understand the America of today. I’m Peter Onuf.

BRIAN: I’m Brian Balogh.

ED: And I’m Ed Ayers. We’re talking today about what’s been called black gold by some and the devil’s excrement by others. And that would be oil. And we’re reflecting on the ways that Americans have attempted to keep a steady supply of it flowing into our lives. We’re going to turn now to one of the most iconic images of the oil industry’s dark side, the Standard Oil octopus. Now you’ve probably seen this image. It features a giant octopus with tentacles controlling Congress, state houses, railroads, the shipping industry, and businessmen, and politicians. But there’s another image that’s been invoked to describe the behavior of this 19th century behemoth, an image that’s much more becoming too Standard Oil founder John D. Rockefeller. That image, a rose.

University of Texas historian H.W. Brands says this metaphor was first articulated by Rockefeller’s son, John Rockefeller Jr., and basically says this.

H.W. BRANDS: Running a business is like cultivating an American beauty rose. And so you plant the bush, and you go out there in the spring, and you look at the buds that come out, but you don’t allow all of the buds that come out to go to maturity, because they would bleed off the energy of the plant. No, you go through, and you quite ruthlessly cut away the less sturdy ones, until there’s just one blossom. And all the energy of the plant goes into that one blossom. And that one prize specimen, that one American beauty rose, that’s like Standard Oil.

We wanted to focus on this image instead of the octopus because we thought it was such an odd analogy to represent an oil company. It basically suggests that competition isn’t advantageous in a capitalist society, at least in the case of oil.

H.W. BRANDS: In another business, in the steel business for example, you can sort of discover new supplies of iron ore, but it can’t all come to market all at once the way it does in the oil business. So oil was more prone to these booms and busts than other businesses at the time.

ED: Booms and bust. That seems to be the very story of oil. And it was true even in the pre automobile era, when people used oil’s derivatives to light their homes and to lubricate the machinery of their ever bigger industrial economy. Even big cities like Cleveland felt the turbulence of the market, and that’s because the city’s economic backbone was refining the oil that had recently been discovered nearby.

In the 1860s a 20 something John D. Rockefeller was one of the many refinery owners in Cleveland who jostled for a place in the suddenly crowded field.

H.W. BRANDS: The cost of entry was still quite low. And there were the equivalent of mom and pop refineries. The chemistry wasn’t difficult. The engineering wasn’t hard. The recipes for making this stuff were pretty straightforward. And so somebody could come along and say, OK, this is what they’re buying the oil for, this is what they’re selling it for. I can refine it, and I can make some money.

And so for several years from the mid 1860s until the early 1870s, it was pretty much a harem scarem kind of operation.

ED: By the late 1860s, there were so many refineries in Cleveland that their capacity was estimated at triple the crude oil output from Pennsylvania. Most refineries were losing money while not actually producing a very good product. And that drove Rockefeller nuts, so he decided to tame the boom bust cycle. He would take control. To use the metaphor his son would later employ, Rockefeller would prune the thorny rose bush of oil production in Cleveland and soon of all the United States.

After years of saving his money and during a very controversial and ultimately failed deal as something like a cartel with the railroads of Pennsylvania, Rockefeller decided to finally make his move in Cleveland. In 1872, he got out his pruners, and this soft spoken 32-year-old approached each of the dozens of refineries in the city with a simple choice.

H.W. BRANDS: He would offer either a share of this new corporation that he was making, the Standard Oil trust, or he’d pay them cash. And the really smart ones, the ones with the greatest insight, the farthest sighted ones, would take Standard Oil stock. The next smartest ones would take the money. The ones with the least foresight would say, no I like my business. I’m going to keep. Because what Rockefeller then would do, would be to proceed to drive those people out of business.

ED: This event of buying out or under selling competition would come to be known as the Cleveland Massacre. It took Rockefeller less than three months. And then he moved on to other cities to use the same tactic.

H.W. BRANDS: By 1880 or so, he controlled 93% or 94% of the refining capacity of America. Now in all of this, Rockefeller thought that he was doing the country a good turn. He also thought that he was doing the competitors that he drove out of business a good turn. And he’s likened himself, saying I was the angel of mercy who swept down and scooped them up, and gave them good money for these piles of junk that they had. I said come on, get on in the ark, and we’ll carry you to safety. And this was something that he really believed.

ED: Standard Oil lived up to its name. It set a standard low price and kept a standard of quality high. Rockefeller prided himself on this achievement and on the way that he executed it. After all, he only made his move on the Cleveland competition after years of planning, and building his capital, and wooing skittish investors in New York to give them the edge. Rockefeller prided himself on playing the long game, but other people were playing an even longer game, like a woman named Ida Tarbell.

H.W. BRANDS: Ida Tarbell was the daughter of one of his competitors and somebody that he had run out of business back in the 1870s.

ED: At that time, Tarbell was only 14 years old, but the experience was seared in her brain for the next 30 years. She had patience and a vision similar Rockefeller’s, particularly when it came to painstaking research and reporting.

H.W. BRANDS: And remembering what her father had gone through, and believing that his demise had been the direct consequence of the actions of John Rockefeller, she wrote this expose that was serialized in the McClure’s Magazine at the beginning of the 20th century, called The History of is Standard Oil Corporation. And it laid bare the various, what she considered to be, nefarious practices of John D. Rockefeller. And it gave great impetus to the progressive movement.

ED: The government had been looking into Standard Oil’s monopolist activities since the late 1880s. And more progressive laws had been passed to prevent it from dominating the industry, particularly the Sherman Antitrust Act of 1890. And Tarbell revealed through her investigation that Standard Oil maintained secret deals with railroad companies that helped them squash their competition.

The revelations fueled growing antitrust sentiment. And in 1911, the Supreme Court found Standard Oil to be illegal. When that happened, Rockefeller was playing golf, and a reporter asked what advice he would give to investors.

H.W. BRANDS: And Rockefeller, at the moment when his life’s handiwork was being broken into pieces– Standard Oil was being broken up– he said if you have any money, invest in Standard Oil.

ED: It was the dawn of the automobile age, and suddenly, the man who had dedicated his life to consolidating oil’s production under a single company’s roof seemed to be saying there were big profits to be made in a much more competitive market.

H.W. BRANDS: This was just after Henry Ford had rolled out the Model T. Ships were starting to convert from coal to oil. And he realized, perhaps, that maybe Standard Oil altogether wasn’t nimble enough to deal with these new challenges. And in fact, he was absolutely right. If somebody had invested in Standard Oil at the moment of the break up when everybody else was selling Standard Oil Stock, they would have become enormously wealthy over the next 20 or 30 years.

ED: That’s historian H.W. Brands. He writes about the robber barons of the 19th century in American colossus. His other books include Greenback Planet, The Money Men, and The Age of Gold.