Titan

by Ron Chernow

  The Archbold scandal convinced Junior that the doubts he had entertained about Standard Oil had not been the product of an overactive imagination. Many years later, he admitted to having been “sickened” by the Hearst exposé. “It was the political contributions that focussed the whole thing” as to whether or not he should resign from Standard Oil.55 For more than a decade, ever since leaving Brown, Junior had been poised uneasily between business and philanthropy. He had never warmed to commerce, and the Archbold scandal pushed him toward his proper career: that of a full-time philanthropist.

  The decision to leave Standard Oil was so sensitive that Junior discussed it only with his wife and father. He had to figure out how to extricate himself without hurting his father or the organization. To live with his own conscience, he told his father, he had to resign from the trust and devote his life to philanthropy. He also advocated Archbold’s ouster, but Senior thought it impossible to fire Archbold in the midst of the antitrust suit. As for his son’s departure, he reacted with surprising equanimity: “I want you to do what you think is right.”56 That his father honored his wish to leave Standard Oil only deepened the bond between them.

  Whether as a concession to his father or to Archbold, Junior waited more than a year to depart from the company. At the January 11, 1910, board meeting, he quietly retired as a director of Standard Oil: thus, the active, daily involvement of the Rockefeller dynasty with the trust had lasted only slightly more than one generation. Two months later, when a bill was introduced in Washington to incorporate the Rockefeller Foundation, Junior’s resignation was first revealed to the public, helping to separate the family’s charitable efforts from Standard Oil. To purify himself of all business ties, Junior also retired at the same time from U.S. Steel. He had ended his relations with every company except for American Linseed and the one company, ironically, that would defile his name: the Colorado Fuel and Iron Company.

  It seems odd that Junior’s disenchantment with Archbold did not diminish his reverence for his father. We know that Archbold had studied corruption at the master’s feet, but Senior made no effort to disabuse his son. Clearly, he did not want to forfeit the love of this young man whose goodness validated his own life. Perhaps he did not think Junior could live with the moral ambiguities of a fortune extracted by dubious methods. Perhaps he felt he was sparing his son disturbing knowledge. Or perhaps he had so thoroughly rationalized his own behavior that he saw himself in the same glowing, virtuous light as his son did. This last theory would seem to be the one most consistent with the rest of his career.

  In the last analysis, it took a stupendous leap of faith for Junior to believe that his father was blameless and that Archbold had inaugurated corruption at Standard Oil. It is almost inconceivable that he did not suspect at moments that Archbold had learned some of his tricks from Senior. And how did Junior know that his father was innocent? By instinct, by blind faith, by knowledge of his father’s private character—by everything but detailed knowledge of his business career, which Senior did not care to discuss. If Junior harbored any unspoken doubts about his father’s ethics—doubts only whispered to Abby in the dead of night—the Archbold scandal gave him a convenient cover to slip away from Standard Oil without blaming his father’s past.

  The scandal coincided with a formative phase in Junior’s life, as he caught the bracing spirit of Progressive reform. Soon after graduating from college, Junior had joined the movement to clean up tenements, making contact with reformers such as Jacob Riis and Lillian Wald and proposing to Gates an attack on tuberculosis in the slums. The Progressive movement favored peaceful, incremental change and was infused with unimpeachable ideals: that people should be healthier and better educated and that government should operate in a businesslike manner. The Progressives conjured up an antiseptic world of public administration in which decisions would be made rationally by scholars, scientists, and experts. For someone like Junior, who shrank from venomous words and violent confrontation, such clean government promised to transcend the bruising partisan politics that had sullied his father’s reputation. Best of all, Progressives were well-bred, educated, upstanding types whom you could invite home to dinner without embarrassment.

  In the early 1900s, the movement latched on to an ideal issue: the New York brothels then flourishing under Tammany Hall protection. During the 1909 mayoral campaign, a debate arose over something called white slavery—the traffic in young women forcibly drafted into a life of sin. After the election, a special grand jury was impaneled to weigh the matter, and in January 1910 Judge Thomas C. O’Sullivan picked Junior as its foreman. Protesting that he had never patronized the ladies and was achingly ignorant of the subject, Junior tried to beg off, only to have the judge snap: “You owe it as a duty to the city to do your part in crushing out the vile practices that are said to exist.”57

  The choice of Junior was a setup. Tammany bosses figured that he would be weak and spineless, too prudish to explore the demimonde, and that his grand jury would sit for a month and issue harmless recommendations. Instead, Junior plunged into his work with fanatic energy. “I never worked harder in my life,” he said. “I was on the job morning, noon, and night.”58 The cause enlisted his deepest sympathies, for he yearned to overcome a crippling sense of amateurism and become an expert in something. The white-slavery jury gave him a chance to graduate from being his father’s factotum and to acquire a separate identity. Emerging from Senior’s shadow, Junior re-created himself as a reformer, placing himself alongside the Ida Tarbells and Henry Demarest Lloyds of the world.

  Junior explored the murky realm of Manhattan bordellos at arm’s length, as if afraid to expose himself to their forbidden allure. He later made an astonishing confession: “When I was investigating vice in New York I never talked to a single prostitute.”59 But behind the protective shield of scientific inquiry, he questioned countless experts and became extremely knowledgeable. Because he refused to settle for superficial answers, his grand jury extended its work from one to six months. When he handed up a presentment with fifty-four indictments, Judge O’Sullivan, aghast, quarreled hotly with him. “When O’Sullivan found out what I intended to do he was thoroughly frightened because it meant that the plans of Tammany Hall had miscarried,” Junior recalled.60 The grand jury’s work was, sadly, nullified when Mayor William Gaynor—himself now at war with Tammany Hall—failed to act on the findings, and most of the indictments ended in acquittal. Despite this denouement, Junior emerged as something brand-new in Rockefeller annals: a civic hero. Not some rich patsy to be pushed around by party bosses, he now stood forth as a formidable personage in his own right.

  The white-slavery jury had a lasting impact on him. When the city did not follow up on the jury recommendations, Junior consulted one hundred experts on how to solve the problem. (Among those who most impressed him was the young Raymond B. Fosdick, who had rooted out municipal corruption under two mayors; Fosdick later became president of the Rockefeller Foundation and Junior’s official biographer.) In May 1913, Junior set up and personally financed the Bureau of Social Hygiene, which for twenty-five years studied urban ills ranging from venereal disease to lack of birth control to drug addiction. Cettie proudly sent him $25,000 to promote instruction in sexual hygiene for female students around the country. Junior also worked with Jacob Schiff and Paul Warburg to protect young Jewish women on the Lower East Side from procurers. The young Rockefeller heir, so long kept in limbo, was now showing a new willingness to tackle controversial social issues and place his money behind it. The more evil that people attributed to his father, the harder he worked to achieve an impossible purity.

  As he awaited the verdict in the antitrust case against Standard Oil, John D. Rockefeller, Sr., gave way to uncharacteristic melancholy. While working on Random Reminiscences, he toted up the names of more than sixty former colleagues who had died. Henry Rogers died in May 1909, following a stroke, leaving an estate appraised at $41 million, and his memorial service was probabl
y the last occasion that lured Rockefeller back to 26 Broadway. The titan was now one of the last veterans of the early days on Oil Creek and had to contemplate the fact that the government was about to undo his decades of work.

  In trying to predict the verdict, Rockefeller, usually a tough-minded realist, fell back on the most feathery hopes. After the 1908 election, he was relieved to be free of Teddy Roosevelt, who handed over the Republican nomination to his corpulent secretary of war, William Howard Taft. On October 29, 1908, in a cameo appearance at 26 Broadway, Rockefeller endorsed Taft for president. “He is not a man, I judge, to venture with rash experiments or to impede the return of prosperity by advocating measures subversive of industrial progress.” Annoyed by this implicit dig at him, Teddy Roosevelt mocked Rockefeller’s endorsement: “It is a perfectly palpable and obvious trick on the part of the Standard Oil people to damage Taft.”61

  After Taft’s election victory over William Jennings Bryan—who had said that Rockefeller should be sent to prison—Rockefeller understandably wired his congratulations to the president-elect. When the press hinted that Taft might be hostile toward Standard Oil, Rockefeller demurred, telling Henry Folger that “I cannot believe this is anything more than an idle rumor.”62 Actually, Taft liked Rockefeller personally but loathed the trust. He later wrote, “It was indeed an octopus that held the trade in its tentacles, and the few actual independent concerns that kept alive were allowed to exist by sufferance to maintain the appearance of competition.” 63 While many industrialists hoped that antitrust prosecutions would slacken under Taft, he in fact initiated sixty-five antitrust actions, even more than the forty-four brought by Roosevelt. Throughout the antitrust case, Rockefeller woefully underestimated public animosity against Standard Oil, and as late as August 1909 he told Harold McCormick that he had stopped granting interviews for a while because “the sentiment has greatly changed in our favor.”64

  Three months later, a federal circuit court in Saint Louis ruled unanimously that Standard Oil of New Jersey and thirty-seven affiliates had violated the Sherman Antitrust Act; the holding company was given thirty days to divest itself of its subsidiaries. Taft praised Frank Kellogg for his “complete victory,” while Teddy Roosevelt, on safari in Africa, where he was butchering a small zoo’s worth of animals, conveyed his elation, terming the verdict “one of the most signal triumphs for decency which has been won in our country.”65

  Although the trust appealed instantly to the Supreme Court, a deep sense of gloom settled over 26 Broadway as the final verdict approached. Meanwhile, one government decision after another went against the stigmatized monopoly. In 1909, Congress largely repealed the duty that had protected the trust from foreign competition; the secretary of war halted purchase of petroleum products from it; and the president set aside petroleum-rich territory for conservation purposes. When Rockefeller crossed paths with Taft in 1910 during his stay at the Hotel Bon Air in Augusta, Georgia, they agreed to golf together, but Mrs. Taft, fearing bad publicity, got the president to cancel his game. On another occasion—doubtless when the first lady was not looking—Rockefeller asked the president to greet his five-year-old granddaughter, Mathilde McCormick. To Rockefeller’s delight, the huge Taft hoisted the lovely little girl with the long curls high into the air.

  By the spring of 1911, the wait for the Supreme Court’s decision began to seem interminable, and even the president grumbled about the court’s glacial pace. Because the court’s composition changed after the death of one justice, the arguments had to be heard twice. On April 25, 1911, Junior passed along to his father Senator Aldrich’s wily prediction: “He was disposed to believe that the decision will be adverse to the company, but thinks the Court will clearly define the law and hopes that it will point out a legal way for the conduct of large corporations.”66 The senator must have had excellent sources.

  When the end came for Standard Oil after forty-one years of existence, it was swift, sudden, and irrevocable. At 4 P.M. on May 15, 1911, Chief Justice Edward White told a sleepy courtroom, “I have also to announce the opinion of the Court in No. 398, the United States against the Standard Oil Company.”67 At once, the room quivered with expectation as senators and congressmen streamed in to hear the verdict. For the next forty-nine minutes, White read aloud the twenty-thousand-word opinion, speaking in such a low, monotonous voice that other justices had to lean over and ask him to speak louder. In his mumbled, momentous words, White upheld the decision to dismantle Standard Oil, which was given six months to spin off its subsidiaries, with its officers forbidden from reestablishing the monopoly. Thus ended the longest running morality play in American business history.

  Rockefeller reacted with studied nonchalance. He was golfing at Pocantico with Father J. P. Lennon from the Tarrytown Catholic church when he learned of the decision, and he did not seem particularly perturbed. “Father Lennon,” he asked, “have you some money?” The priest said no, then asked why. “Buy Standard Oil,” Rockefeller said—which turned out to be sound advice.68 To his former partners, he sent a sad, whimsical obituary that began, “Dearly beloved, we must obey the Supreme Court. Our splendid, happy family must scatter.” 69 Intent as always on ignoring bad news, Rockefeller refused to read the celebrated opinion that broke up his empire—exactly what one would have expected.

  The antitrust suit against Standard tested whether the American legal system could cope with the new agglomerations of wealth and curb their excesses. The paradoxical lesson learned was that government intervention was sometimes necessary to ensure unfettered competition. Regulation did not inevitably harm business but could also aid it. The 1911 decision was not an undiluted triumph for reformers by any means, and many of them considered it a shameful betrayal. Senator Robert La Follette, who stood in the courtroom as Judge White read the verdict, told reporters afterward, “I fear that the court has done what the trusts wanted it to do, and what Congress has steadily refused to do.”70 Echoing this, William Jennings Bryan asserted that Chief Justice White had “waited 15 years to throw his protecting arms around the trusts and tell them how to escape.” 71

  For fifteen years, White had vainly advanced a doctrine called the “rule of reason,” which would not outlaw every combination in restraint of trade but only those that were unreasonable and violated the public interest. This doctrine vastly expanded judicial discretion and opened a loophole large enough to tolerate many trusts. In the lone dissent, Associate Justice John Harlan angrily protested this new principle, banging the bench and accusing his fellow justices of having put “words into the antitrust act which Congress did not put there.”72 He added mockingly, “You may now restrain commerce, provided you are reasonable about it; only take care that the restraint is not undue.”73 The decision tallied in many ways with Teddy Roosevelt’s belief that the government should rein in irresponsible trusts but not meddle with good ones. The more militant reformers were right to consider it, at best, a partial victory.

  As so often happens with politics and markets, by the time of the Supreme Court’s 1911 decision, evolutionary changes in the marketplace had already eroded the trust’s dominance. With the final amalgamation of Royal Dutch and Shell in 1907, Standard Oil at last faced a worthy competitor abroad, while the Anglo-Persian Oil Company was tapping rich new fields in the Middle East. At home, more oil poured forth from Texas, Oklahoma, California, Kansas, and Illinois, providing an opening wedge for assertive newcomers. Where the trust had pumped 32 percent of American crude oil in 1899, its share had slumped to 14 percent by 1911. Even Standard’s historic strength in refining dipped from an 86 percent market share to 70 percent in the five years before the breakup.

  The automobile was also radically recasting the industry: In 1910, for the first time, gasoline sales surpassed those of kerosene and other illuminating oils. In 1908, William C. Durant launched the General Motors Corporation, and that year Henry Ford brought out his first Model T. Auto ownership soon exploded, reaching 2.5 million cars by 1915 and then 9.2
million by 1920. Though Standard Oil of California introduced the first filling station in 1907, the trust was not a pioneer in this area, and the national network of gas stations would be too extensive to be monopolized by any one company.

  Those who had seen the Standard Oil dissolution as condign punishment for Rockefeller were in for a sad surprise: It proved to be the luckiest stroke of his career. Precisely because he lost the antitrust suit, Rockefeller was converted from a mere millionaire, with an estimated net worth of $300 million in 1911, into something just short of history’s first billionaire. In December 1911, he was finally able to jettison the presidency of Standard Oil, but he continued to hold on to his immense shareholdings. As the owner of about one quarter of the shares of the old trust, Rockefeller now got a one-quarter share of the new Standard Oil of New Jersey, plus one quarter of the thirty-three independent subsidiary companies created by the decision. And that did not include the oil shares he had given to the GEB, the University of Chicago, and other recipients of his largesse.

  At first, investors did not know how to value the shares of these Standard Oil components, since Rockefeller had resisted a New York Stock Exchange listing and the old trust never issued reports to shareholders. As one Wall Street publication warned on the eve of trading, the value of the new companies was “the merest guesswork.”74 What quickly grew apparent, however, was that Rockefeller had been extremely conservative in capitalizing Standard Oil and that the split-off companies were chock-full of hidden assets. Two other factors encouraged a veritable feeding frenzy in the stocks. For years, the shares of Standard Oil of New Jersey had been depressed by the antitrust litigation, but with the litigation ended, they bounced back to a more normal level. And the explosion of the automobile industry created euphoria about the endless growth prospects of the petroleum industry, which had been shadowed for fifty years by warnings of doom.