sold out his share of the commission business and put his money into the oil firm of Rockefeller and Andrews.
In the new firm Andrews attended to the manufacturing. The pushing of the business, the buying and the selling, fell to Rockefeller. From the start his effect was tremendous. He had the frugal man's hatred of waste and disorder, of middlemen and unnecessary manipulation, and he began a vigorous elimination of these from his business. The residuum that other refineries let run into the ground, he sold. Old iron found its way to the junk shop. He bought his oil directly from the wells. He made his own barrels. He watched and saved and contrived. The ability with which he made the smallest bargain furnishes topics to Cleveland story-tellers to-day. Low-voiced, soft-footed, humble, knowing every point in every man's business, he never tired until he got his wares at the lowest possible figure. "John always got the best of the bargain," old men tell you in Cleveland to-day, and they wince though they laugh in telling it. "Smooth," "a savy fellow," is their description of him. To drive a good bargain was the joy of his life. "The only time I ever saw John Rockefeller enthusiastic," a man told the writer once, "was when a report came in from the creek that his buyer had secured a cargo of oil at a figure much below the market price. He bounded from his chair with a shout of joy, danced up and down, hugged me, threw up his hat, acted so like a madman that I have never forgotten it."
He could borrow as well as bargain. The firm's capital was limited; growing as they were, they often needed money, and had none. Borrow they must. Rarely if ever did Mr. Rockefeller fail. There is a story handed down in Cleveland fromthe days of Clark and Rockefeller, produce merchants, which is illustrative of his methods. One day a well-known and rich business man stepped into the office and asked for Mr. Rockefeller. He was out, and Clark met the visitor. "Mr. Clark," he said, "you may tell Mr. Rockefeller, when he comes in, that I think I can use the $10,000 he wants to invest with me for your firm. I have thought it all over."
"Good God!" cried Clark, "we don't want to invest $10,000. John is out right now trying to borrow $5,000 for us."
It turned out that to prepare him for a proposition to borrow $5,000 Mr. Rockefeller had told the gentleman that he and Clark wanted to invest $10,000!
"And the joke of it is," said Clark, who used to tell the story, "John got the $5,000 even after I had let the cat out of the bag. Oh, he was the greatest borrower you ever saw!"
These qualities told. The firm grew as rapidly as the oil business of the town, and started a second refinery — William A. Rockefeller and Company. They took in a partner, H. M. Flagler, and opened a house in New York for selling oil. Of all these concerns John D. Rockefeller was the head. Finally, in June, 1870, five years after he became an active partner in the refining business, Mr. Rockefeller combined all his companies into one — the Standard Oil Company. The capital of the new concern was $1,000,000. The parties interested in it were John D. Rockefeller, Henry M. Flagler, Samuel Andrews, Stephen V. Harkness, and William Rockefeller. 5
The strides the firm of Rockefeller and Andrews made after the former went into it were attributed for three or four years mainly to his extraordinary capacity for bargaining and borrowing. Then its chief competitors began to suspect something. John Rockefeller might get his oil cheaper now and then, they said, but he could not do it often. He might make close contracts for which they had neither the patience nor the stomach. He might have an unusual mechanical and practical genius in his partner. But these things could not explain all. They believed they bought, on the whole, almost as cheaply as he, and they knew they made as good oil and with as great, or nearly as great, economy. He could sell at no better price than they. Where was his advantage? There was but one place where it could be, and that was in transportation. He must be getting better rates from the railroads than they were. In 1868 or 1869 a member of a rival firm long in the business, which had been prosperous from the start, and which prided itself on its methods, its economy and its energy, Alexander, Scofield and Company, went to the Atlantic and Great Western road, then under the Erie management, and complained. "You are giving others better rates than you are us," said Mr. Alexander, the representative of the firm. "We cannot compete if you do that." The railroad agent did not attempt to deny it — he simply agreed to give Mr. Alexander a rebate also. The arrangement was interesting. Mr. Alexander was to pay the open, or regular, rate on oil from the Oil Regions to Cleveland, which was then forty cents a barrel. At the end of each month he was to send to the railroad vouchers for the amount of oil shipped and paid for at forty cents, and was to get back from the railroad, in money, fifteen cents on each barrel. This concession applied only to oil brought from the wells. He was never able to get a rebate on oil shipped eastward. 6 According to Mr. Alexander, the Atlantic and Great Western gave the rebates on oil from the Oil Regions to Cleveland up to 1871 and the system was then discontinued. Late in 1871, however, the firm for the first time got a rebate on the Lake Shore road on oil brought from the field.
Map of Northwestern Pennsylvania, showing the relation of the Oil Regions to the railroads in 1859, when oil was "discovered."
Another Cleveland man, W. H. Doane, engaged in shipping crude oil, began to suspect about the same time as Mr. Alexander that the Standard was receiving rebates. Now Mr. Doane had always been opposed to the "drawback business," but it was impossible for him to supply his customers with crude oil at as low a rate as the Standard paid if it received a rebate and he did not, and when it was first generally rumoured in Cleveland that the railroads were favouring Mr. Rockefeller he went to see the agent of the road. "I told him I did not want any drawback, unless others were getting it; I wanted it if they were getting it, and he gave me at that time ten cents drawback." This arrangement Mr. Doane said had lasted but a short time. At the date he was speaking — the spring of 1872 — he had had no drawback for two years.
A still more important bit of testimony as to the time when rebates first began to be given to the Cleveland refiners and as to who first got them and why, is contained in an affidavit made in 1880 by the very man who made the discrimination. 7 This man was General J. H. Devereux, who in 1868 succeeded Amasa Stone as vice-president of the Lake Shore Railroad. General Devereux said that his experience with the oil traffic had begun with his connection with the Lake Shore; that the only written memoranda concerning oil which he found in his office on entering his new position was a book in which it was stated that the representatives of the twenty-five oil-refining firms in Cleveland had agreed to pay a cent a gallon on crude oil removed from the Oil Regions. General Devereux says that he soon found there was a deal of trouble in store for him over oil freight. The competition between the twenty-five firms was close, the Pennsylvania was "claiming a patent right" on the transportation of oil and was putting forth every effort to make Pittsburg and Philadelphia the chief refining centres. Oil Creek was boasting that it was going to be the future refining point for the world. All of this looked bad for what General Devereux speaks of as the "then very limited refining capacity of Cleveland." This remark shows how new he was to the business, for, as we have already seen, Cleveland in 1868 had anything but a limited refining capacity. Between three and four million dollars were invested in oil refineries, and the town was receiving within 35,000 barrels of as much oil as New York City, and within 300,000 as much as Pittsburg, and it was boasting that the next year it would outstrip these competitors, which, as a matter of fact, it did.
The natural point for General Devereux to consider, of course, was whether he could meet the rates the Pennsylvania were giving and increase the oil freight for the Lake Shore. The road had a branch running to Franklin, Pennsylania, within a few miles of Oil City. This he completed, and then, as he says in his affidavit, "a sharper contest than ever was produced growing out of the opposition of the Pennsylvania Railroad in competition. Such rates and arrangements were made by the Pennsylvania Railroad that it was publicly proclaimed in the public print in Oil City, Titusville and other places that Cleveland was to be wiped out as a refining centre as with a sponge." General Devereux goes on to say that all the refiners of the town, without exception, came to him in alarm, and expressed their fears that they would have either to abandon their business there or move to
