Titan
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When trading started on December 1, 1911, the public exhibited an insatiable appetite for the new companies, especially after they declared dividends averaging 53 percent of the old capital value of Standard Oil stock. As if rejoicing in the chance to tweak trustbusters, investors bid up the shares to insane levels. Between January and October 1912, Standard Oil of New Jersey zoomed from 360 to 595; Standard of New York went from 260 to 580; and Standard of Indiana from 3,500 to 9,500. Thanks to this staggering appreciation, Rockefeller’s net worth reached a lifetime peak of $900 million in 1913—more than $13 billion in 1996 dollars. (To put that $900 million in perspective, the total accumulated national debt of the United States stood at $1.2 billion that year, equivalent to 3 percent of the gross national product; federal spending was a mere $715 million.) As Junior later explained, his father never had a billion dollars at any one moment, although much more than that passed through his hands. During the ten years after Standard Oil’s 1911 dismantling, the assets of its constituent companies quintupled in value. Beyond his talents as a businessman, Rockefeller benefited from a large dollop of luck in his life, making more money in retirement than on the job.
The soaring fortunes of the Standard companies made it seem as if the cagey Rockefeller had outwitted the country again. Newspapers began running daily box scores of his wealth—not exactly the chastening sequel Washington had envisioned. As former J. P. Morgan partner George Perkins told a friend, Wall Street was “laughing in its sleeve at what has been going on.” 75 Nobody felt more frustrated than Teddy Roosevelt, who returned to the presidential fray with his third-party Bull Moose candidacy in 1912. Lashing out at Standard Oil again, he roared, “The price of stock has gone up over one hundred percent, so that Mr. Rockefeller and his associates have actually seen their fortunes doubled. No wonder that Wall Street’s prayer now is: ‘Oh Merciful Providence, give us another dissolution.’ ” 76
In the eternal race for the title of the world’s richest man, Rockefeller now left Andrew Carnegie far behind and probably had at least twice as much money as Carnegie did. (Exact comparisons are difficult since both men had given away so much.) Nonetheless, Rockefeller and Carnegie still enjoyed cordial if rather distant relations. In 1912, en route to Washington to give testimony, Carnegie dropped by Kykuit and found Rockefeller “tall and spare and smiling, beaming.” Carnegie still savored his belief that he had outfoxed Rockefeller on their old Mesabi ore deal, for he afterward wrote a friend, “Positively it is a delight to meet the old gentleman. But I did not refer to the ore purchase I made from him.”77
It was hard to convince a skeptical public that the thirty-four new companies, with their seventy thousand employees, would not reconstitute a new conspiracy. J. P. Morgan, upon hearing of the 1911 decision, asked, “How the hell is any court going to compel a man to compete with himself?” 78 Many of the newly independent companies were powerful enough to inspire fear as freestanding entities. Standard Oil of New Jersey remained the world’s largest oil company, second only to U.S. Steel in size among American enterprises and retaining 43 percent of the value of the old trust. Five of the newly divested companies stood among the country’s two hundred largest industrial firms. Since all the companies had identical owners, it was hard to foresee vigorous competition. As Roosevelt complained, “All the companies are still under the same control, or at least working in such close alliance that the effect is precisely the same.”79
Rockefeller made all the right noises about obeying the 1911 decision. As he told Archbold on September 8, 1911, “We will do the best we can to comply with every requirement of the government, and if as much is required of others it does seem as though it must bring about a reform.” 80 Yet he quietly worked to undermine the dissolution, suggesting that officials of the Standard Oil companies meet at 26 Broadway at ten-thirty each morning to maintain amicable relations and swap information. (For legal reasons, everyone was cautioned not to exchange thoughts on paper.) That both Standard Oil of New Jersey, headed by Archbold, and Standard Oil of New York, headed by Folger, kept their headquarters in the same old building said much about their relationship.
For the next decade, the divestiture often seemed a sham. The Standard companies continued to divide the country into eleven marketing territories, selling the same brand names and not competing on prices. It took a long time for former colleagues to view each other as competitors and raid each other’s territories. Many critics thought that, to avert this complicity, the government should have done one of three things: keep the trust intact and regulate it; force shareholders to take stock in only one of the thirty-four companies; or create fully integrated companies that did not need to rely on other Standard companies. Standard of New Jersey, for instance, inherited a vast refining system without the crude oil to service it, forcing it into close collaboration to remedy the imbalance.
While the old guard at 26 Broadway mourned the trust’s passage, some Young Turks at the operating companies were overjoyed. Many Standard Oil directors had been over sixty. This had given the organization a geriatric tone, stifling young, imaginative men at a time that demanded rapid adaptation to the auto age. One of these extraordinary mavericks, Dr. William M. Burton of Standard Oil of Indiana, thought that Roosevelt and Taft had performed an inestimable service. After the 1911 dismemberment, he said, “It was felt all along the line—younger men were given a chance.” 81 Free of top-heavy bureacracy, Burton patented an exceptionally valuable process in 1913 for “cracking” crude oil—that is, for refining it so as to yield a far higher percentage of gasoline. This discovery permitted Standard of Indiana to reap windfall royalties from other oil companies. Maintaining full control of this technology until 1921, Standard of Indiana required its cousin companies to restrict sales of “cracked” gasoline to their pre-1911 marketing territories, helping to extend the trust structure for another decade.
It is an enduring tribute to Rockefeller that so many Standard Oil companies prospered during the remainder of the century, controlling a significant fraction of both the American and world oil industry. Rockefeller’s stepchildren would be everywhere: Standard Oil of New Jersey (Exxon), Standard Oil of New York (Mobil), Standard Oil of Indiana (Amoco), Standard Oil of California (Chevron), Atlantic Refining (ARCO and eventually Sun), Continental Oil (Conoco), today a unit of DuPont, and Chesebrough-Ponds, which had begun by processing petroleum jelly. Three offspring—Exxon, Mobil, and Chevron— would belong to the Seven Sisters group that would dominate the world oil industry in the twentieth century; a fourth sister, British Petroleum, later took over Standard Oil of Ohio, then known as Sohio. It was certainly not their intention, but the trustbusters helped to preserve Rockefeller’s legacy for posterity and unquestionably made him the world’s richest man.
Henry H. Rogers and Mark Twain sailing together in Bermuda in 1908. (Courtesy of the Mark Twain Project, the Bancroft Library)
CHAPTER 28
Benevolent Trust
As the national thirst for gasoline caused his stock in the Standard Oil companies to appreciate wildly, it was only proper that the oil king should develop a passion for automobiles. He kept a Peerless auto at Pocantico as early as 1904. In the 1910s, cars began to fill his stone coach barn alongside the old-fashioned buckboards and coaches. Even as a young man, Rockefeller had been exhilarated by speed and motion, racing his trotting horses down Euclid Avenue, and he now took daily auto drives of fifty miles or more. It was the powerful, gleaming Crane-Simplex touring car of 1918 that truly captured his fancy. Big as a cruise ship, smoothly navigating bumpy back roads, this elaborate maroon vehicle with semi-open sides had wide running boards and a glamorous interior of black leather upholstery.
Since the Crane-Simplex comfortably seated seven, Rockefeller turned the afternoon drives into carefully orchestrated social affairs, telling each person where to sit and specifying the exact itinerary to the chauffeur. Like a king enthroned in his movable court, Rockefeller always sat in the middle of the backseat. As wi
th his golf games, the afternoon drives permitted no intimate or serious conversation, only obligatory jollity. As the huge car swept down country roads, trailing whorls of dust and ventilating the passengers with fresh air, Rockefeller hummed, sang spirituals, whistled, or joked. Social director of these excursions, he was relaxed and jovial, often sitting back and daydreaming— but without ever abandoning his competitive instincts. If a young hotshot sped by, Rockefeller would absorb the affront in silence, then bend forward and calmly instruct the chauffeur, “Phillips!” “Yes, sir.” “How fast are we going?” “Thirty-three, sir.” “Could we go a little faster?” Slowly but inexorably the speedometer would climb until the young motorist was overtaken—at which point Rockefeller would stare resolutely ahead, his face impassive, betraying no sign of his joyful triumph.1 Rockefeller clocked these drives and liked to set new speed records. “Phillips,” he would say, “we got to town Monday in one hour and seventeen minutes. Let’s see what we can do today.”2 Phillips would smile, touch his cap, and go for the record.
On many drives, the touring car stopped by a meadow so that Rockefeller and his guests could recline on the grass. Rockefeller chatted happily with farmers who happened by, quizzing them about their seed or fertilizer and passing along tips to the superintendents of his estates. It was one of many signs in Rockefeller’s later years that he yearned for the innocent pleasures of his bucolic boyhood. “I am very sorry to see this tendency of crowding into the cities, very sorry,” he once told a Bible class. “It is not like fifty years ago, when I was a boy. It seems to me that as the cities grow larger the country in general becomes weaker.”3 Carrying a cane, chatting casually with neighbors, he loved to wander around the Pocantico village in his golf knickers. Each year for his birthday, he invited the local children to Kykuit and offered them huge mounds of ice cream while a brass band boomed and flags fluttered overhead. Shedding his straitlaced image, he even stooped on all fours and played with the town children. His comfort with children was one of the conspicuous features of his later years.
For all the holiday ease of his retired life, Rockefeller could never escape a sense of danger off in the shadows. In 1912, he received threats from the Black Hand, a Sicilian and Italian American secret society engaged in blackmail and terrorism. As a precaution, Junior, Abby, and the children were packed off to Lakewood for the autumn while security was tightened at Pocantico. Senior was sufficiently spooked that he installed a special alarm system at Kykuit, with a button under his pillow. If he heard prowlers or unexplained noises, he pressed the button, which made small, inconspicuous lights twinkle in the trees at three or four spots; the night watchman would then ring Rockefeller to verify his safety.
Rockefeller devoted a great deal of his spare time to religion. Before breakfast, he reverently recited a blessing then read aloud a page from My Daily Meditation for the Circling Year by the Reverend John Henry Jowett, who championed a severe, uncompromising Christianity and counseled readers against pride, lust, and avarice. Jowett preached stoic calm in the face of hatred and warned against bearing grudges against enemies—advice that Rockefeller must have taken to heart. At breakfast, guests were invited to read poems or selections from the New Testament. Rockefeller turned for bedtime solace to another volume of sermons called The Optimist’s Good Night, so that his days were bracketed with the consolations of religion.
While Rockefeller felt that his retirement years were steeped in righteousness, the American public never quite believed it. For all the good work performed by the Rockefeller Institute for Medical Research and the General Education Board, the founder was still accused of hoarding his wealth. The newspapers applied their own grinding pressure, showing that his gifts had neither matched Andrew Carnegie’s nor kept pace with his own growing fortune. One statistician projected in 1906 that if he let his wealth collect compound interest for the next thirty years, he would end up sitting on a pile of ninety billion dollars.
As early as 1901, Rockefeller had realized that he needed to create a foundation on a scale that dwarfed anything he had done so far, and he toyed with the idea of establishing a benevolent trust: “Let us erect a foundation, a trust, and engage directors who will make it a life work to manage, with our personal cooperation, this business of benevolence properly and effectively.” 4 Frederick Gates revived the idea in June 1906 when he wrote to Rockefeller, “I have lived with this great fortune of yours daily for fifteen years. To it, its increase and its uses, I have given every thought, until it has become a part of myself, almost as if it were my own.”5 Mustering all his rhetorical resources, Gates thundered, “Your fortune is rolling up, rolling up like an avalanche! You must keep up with it! You must distribute it faster than it grows! If you do not, it will crush you and your children and your children’s children.”6 If Rockefeller did not act soon, Gates predicted, his heirs would dissipate their inheritances or become intoxicated with power. The solution he advanced was to set up “permanent corporate philanthropies for the good of mankind” that would give money to education, science, the arts, agriculture, religion, and even civic virtue. 7 These trusts would constitute something novel in American society: private money administered by competent trustees for the public weal. “These funds should be so large that to become a trustee of one of them would make a man at once a public character,” Gates explained. “They should be so large that their administration would be a matter of public concern, public inquiry, and public criticism.”8
The concept of charitable trusts was not invented by Rockefeller; Benjamin Franklin, Stephen Girard, and Peter Cooper had set up such trusts. What he brought to the concept was unprecedented scale and scope. As he contemplated the formation of a giant foundation in 1906, Margaret Olivia Sage, widow of financier Russell Sage, was about to establish a foundation to investigate the plight of working women and the social ills bred by modern life. Junior touted such philanthropies as the best way to advance the family’s favorite causes. To his father, he suggested that he create one trust to promote Christian civilization abroad, a second to do the like at home, and a third to supply money to the University of Chicago, the GEB, and the RIMR. These boards would be small by design and staffed by about five family members and Rockefeller insiders. However limited the vision behind this blueprint, it began to sketch the outlines of a new approach to philanthropy. Not surprisingly, the architect of Standard Oil favored the creation of a single mammoth foundation in which he would retain veto power. Once again, the scale of the Rockefeller fortune demanded that new forms be devised to administer it.
Afraid that a state charter for a Rockefeller Foundation could be repealed at the whim of an unfriendly state legislature, Junior and Gates aimed for a more prestigious federal charter for the new foundation, such as that received by the GEB in 1903. The Rockefellers waited until early 1908 to make their pitch in Washington, possibly hoping to capitalize upon the goodwill generated by Senior’s assistance in quelling the 1907 panic. By chance, on a train trip to golf in Augusta, Georgia, Rockefeller had encountered Senator “Pitchfork Ben” Tillman of South Carolina and unexpectedly charmed this critic. Junior was cheered by this serendipitous encounter: “Senator Tillman would formerly have been one of the leaders in antagonizing the bill. If he is favorable to it he could do more with the radicals than anyone else.” 9
On June 29, 1909, Rockefeller signed over 73,000 shares of Standard Oil of New Jersey, valued at $50 million, to three trustees: Junior, Gates, and Harold McCormick. This was supposed to be the first installment of an initial $100 million endowment for the projected Rockefeller Foundation. Getting the U.S. Senate to grant a charter for a tax-exempt foundation amid the tumult of the federal antitrust suit against Standard Oil proved a tricky proposition. Exactly how did legislators explain to their perplexed constituents that the ill-gotten gains now being exposed in court should be honored by a federal charter? Introduced in the Senate in March 1910, the charter bill threatened to stir up more public animosity against the Rockefellers th
an it assuaged. Only a week later, Standard Oil attorneys filed briefs with the Supreme Court in the antitrust appeal, mingling the two events in the public mind and putting the patently bad Rockefeller and the patently good Rockefeller on display side by side.
The charter traveled a rocky road in Congress. Following the pattern of Johns Hopkins, Rockefeller advocated a broad, unrestricted charter that would allow great flexibility. “Perpetuity is a long time,” he was fond of saying, and he did not wish to saddle future foundation executives with outmoded mandates.10 Gates thus enunciated a purposely vague mission for the Rockefeller Foundation: “to promote the well being of mankind throughout the world.”11 Critics were quick to allege that this nebulous charter gave the Rockefellers carte blanche to manipulate the foundation for their own ends. In fact, this open-ended quality was meant to free the proposed foundation from the influence of its founder. That it would be huge, global, and general—that its money could go anywhere and do anything—was the essence of its novelty. Many newspapers saw the vagueness, however, as a gauzy curtain behind which the evil wizard of Standard Oil could work his mischief. Others deplored the foundation as an elaborate publicity stunt to deodorize the Rockefeller name. In denouncing the charter, one paper called the projected organization a “gigantic philanthropy by which old Rockefeller expects to squeeze himself, his son, his stall-fed collegians and their camels, laden with tainted money, through the eye of the needle.”12