THE STANDARD OIL COMPANY
It would be surprising if in an organization which included a great
number of men there should not be an occasional employee here and
there who acted, in connection with the business or perhaps in
conducting his own affairs, in a way which might be criticized. Even
in a comparatively small organization it is wellnigh impossible to
restrain this occasional man who is over-zealous for his own or his
company's advancement. To judge the character of all the members of a
great organization or the organization itself by the actions of a few
individuals would be manifestly unfair.
It has been said that I forced the men who became my partners in the
oil business to join with me. I would not have been so short-sighted.
If it were true that I followed such tactics, I ask, would it have
been possible to make of such men life-long companions? Would they
accept, and remain for many years in positions of the greatest trust,
and finally, could any one have formed of such men, if they had been
so browbeaten, a group which has for all these years worked in loyal
harmony, with fair dealing among themselves as well as with others,
building up efficiency and acting in entire unity? This powerful
organization has not only lasted but its efficiency has increased. For
fourteen years I have been out of business, and in eight or ten years
went only once to the company's office.
In the summer of 1907 I visited again the room at the top of the
Standard Oil Company's building, where the officers of the company and
the heads of departments have had their luncheon served for many
years. I was surprised to find so many men who had come to the front
since my last visit years ago. Afterward I had an opportunity to talk
with old associates and many new ones, and it was a source of great
gratification to me to find that the same spirit of coöperation and
harmony existed unchanged. This practice of lunching together, a
hundred or more at long tables in most intimate and friendly
association, is another indication of what I contend, slight as it may
seem to be at first thought. Would these people seek each other's
companionship day after day if they had been forced into this
relation? People in such a position do not go on for long in a
pleasant and congenial intimacy.
For years the Standard Oil Company has developed step by step, and I
am convinced that it has done well its work of supplying to the people
the products from petroleum at prices which have decreased as the
efficiency of the business has been built up. It gradually extended
its services first to the large centres, and then to towns, and now to
the smallest places, going to the homes of its customers, delivering
the oil to suit the convenience of the actual users. This same system
is being followed out in various parts of the world. The company has,
for example, three thousand tank wagons supplying American oil to
towns and even small hamlets in Europe. Its own depots and employees
deliver it in a somewhat similar way in Japan, China, India, and the
chief countries of the world. Do you think this trade has been
developed by anything but hard work?
This plan of selling our products direct to the consumer and the
exceptionally rapid growth of the business bred a certain antagonism
which I suppose could not have been avoided, but this same idea of
dealing with the consumer directly has been followed by others and in
many lines of trade, without creating, so far as I recall, any serious
opposition.
This is a very interesting and important point, and I have often
wondered if the criticism which centred upon us did not come from the
fact that we were among the first, if not the first, to work out the
problems of direct selling to the user on a broad scale. This was done
in a fair spirit and with due consideration for everyone's rights. We
did not ruthlessly go after the trade of our competitors and attempt
to ruin it by cutting prices or instituting a spy system. We had set
ourselves the task of building up as rapidly and as broadly as
possible the volume of consumption. Let me try to explain just what
happened.
To get the advantage of the facilities we had in manufacture, we
sought the utmost market in all lands--we needed volume. To do this we
had to create selling methods far in advance of what then existed; we
had to dispose of two, or three, or four gallons of oil where one had
been sold before, and we could not rely upon the usual trade channels
then existing to accomplish this. It was never our purpose to
interfere with a dealer who adequately cultivated his field of
operations, but when we saw a new opportunity or a new place for
extending the sale by further and effective facilities, we made it
our business to provide them. In this way we opened many new lines in
which others have shared. In this development we had to employ many
comparatively new men. The ideal way to supply material for higher
positions is, of course, to recruit the men from among the youngest in
the company's service, but our expansion was too rapid to permit this
in all cases. That some of these employees were over-zealous in going
after sales it would not be surprising to learn, but they were acting
in violation of the expressed and known wishes of the company. But
even these instances, I am convinced, occurred so seldom, by
comparison with the number of transactions we carried on, that they
were really the exceptions that proved the rule.
Every week in the year for many, many years, this concern has brought
into this country more than a million dollars gold, all from the
products produced by American labour. I am proud of the record, and
believe most Americans will be when they understand some things
better. These achievements, the development of this great foreign
trade, the owning of ships to carry the oil in bulk by the most
economical methods, the sending out of men to fight for the world's
markets, have cost huge sums of money, and the vast capital employed
could not be raised nor controlled except by such an organization as
the Standard is to-day.
To give a true picture of the early conditions, one must realize that
the oil industry was considered a most hazardous undertaking, not
altogether unlike the speculative mining undertakings we hear so much
of to-day. I well remember my old and distinguished friend, Rev.
Thomas W. Armitage, for some forty years pastor of a great New York
church, warning me that it was worse than folly to extend our plants
and our operations. He was sure we were running unwarranted risks,
that our oil supply would probably fail, the demand would decline, and
he, with many others, sometimes I thought almost everybody, prophesied
ruin.
None of us ever dreamed of the magnitude of what proved to be the
later expansion. We did our day's work as we met it, looking forward
to what we could see in the distance and keeping well up to our
opportunities, but laying our foundations firmly. As I have said,
capital was most difficult to secure, and it was not easy to interest
conservative men in this adventurous business. Men of property were
afraid of it, though in rare cases capitalists were induced to unite
with us to a limited extent. If they bought our stock at all, they
took a little of it now and then as an experiment, and we were
painfully conscious that they often declined to buy new stock with
many beautiful expressions of appreciation.
The enterprise being so new and novel, on account of the fearfulness
of certain holders in reference to its success, we frequently had to
take stock to keep it from going begging, but we had such confidence
in the fundamental value of the concern that we were willing to assume
this risk. There are always a few men in an undertaking of this kind
who would risk all on their judgment of the final result, and if the
enterprise had failed, these would have been classed as visionary
adventurers, and perhaps with good reason.
The 60,000 men who are at work constantly in the service of the
company are kept busy year in and year out. The past year has been a
time of great contraction, but the Standard has gone on with its plans
unchecked, and the new works and buildings have not been delayed on
account of lack of capital or fear of bad times. It pays its workmen
well, it cares for them when sick, and pensions them when old. It has
never had any important strikes, and if there is any better function
of business management than giving profitable work to employees year
after year, in good times and bad, I don't know what it is.
Another thing to be remembered about this so-called "octopus" is that
there has been no "water" introduced into its capital (perhaps we felt
that oil and water would not have mixed); nor in all these years has
any one had to wait for money which the Standard owed. It has suffered
from great fires and losses, but it has taken care of its affairs in
such a way that it has not found it necessary to appeal to the general
public to place blocks of bonds or stock; it has used no underwriting
syndicates or stock-selling schemes in any form, and it has always
managed to finance new oil field operations when called upon.
It is a common thing to hear people say that this company has crushed
out its competitors. Only the uninformed could make such an assertion.
It has and always has had, and always will have, hundreds of active
competitors; it has lived only because it has managed its affairs well
and economically and with great vigour. To speak of competition for a
minute: Consider not only the able people who compete in refining
oil, but all the competition in the various trades which make and sell
by-products--a great variety of different businesses. And perhaps of
even more importance is the competition in foreign lands. The Standard
is always fighting to sell the American product against the oil
produced from the great fields of Russia, which struggles for the
trade of Europe, and the Burma oil, which largely affects the market
in India. In all these various countries we are met with tariffs which
are raised against us, local prejudices, and strange customs. In many
countries we had to teach the people--the Chinese, for example--to
burn oil by making lamps for them; we packed the oil to be carried by
camels or on the backs of runners in the most remote portions of the
world; we adapted the trade to the needs of strange folk. Every time
we succeeded in a foreign land, it meant dollars brought to this
country, and every time we failed, it was a loss to our nation and its
workmen.
One of our greatest helpers has been the State Department in
Washington. Our ambassadors and ministers and consuls have aided to
push our way into new markets to the utmost corners of the world.
I think I can speak thus frankly and enthusiastically because the
working out of many of these great plans has developed largely since I
retired from the business fourteen years ago.
The Standard has not now, and never did have a royal road to
supremacy, nor is its success due to any one man, but to the multitude
of able men who are working together. If the present managers of the
company were to relax efforts, allow the quality of their product to
degenerate, or treat their customers badly, how long would their
business last? About as long as any other neglected business. To read
some of the accounts of the affairs of the company, one would think
that it had such a hold on the oil trade that the directors did little
but come together and declare dividends. It is a pleasure for me to
take this opportunity to pay tribute to the work these men are doing,
not only for the company they serve, but for the foreign trade of our
country; for more than half of all the product that the company makes
is sold outside of the United States. If, in place of these directors,
the business were taken over and run by anyone but experts, I would
sell my interest for any price I could get. To succeed in a business
requires the best and most earnest men to manage it, and the best men
rise to the top. Of its origin and early plans I will speak later.
THE MODERN CORPORATION
Beyond question there is a suspicion of corporations. There may be
reason for such suspicion very often; for a corporation may be moral
or immoral, just as a man may be moral or the reverse; but it is folly
to condemn all corporations because some are bad, or even to be unduly
suspicious of all, because some are bad. But the corporation in form
and character has come to stay--that is a thing that may be depended
upon. Even small firms are becoming corporations, because it is a
convenient form of partnership.
It is equally true that combinations of capital are bound to continue
and to grow, and this need not alarm even the most timid if the
corporation, or the series of corporations, is properly conducted with
due regard for the rights of others. The day of individual competition
in large affairs is past and gone--you might just as well argue that
we should go back to hand labour and throw away our efficient
machines--and the sober good sense of the people will accept this fact
when they have studied and tried it out. Just see how the list of
stockholders in the great corporations is increasing by leaps and
bounds. This means that all these people are becoming partners in
great businesses. It is a good thing--it will bring a feeling of
increased responsibility to the managers of the corporations and will
make the people who have their interests involved study the facts
impartially before condemning or attacking them.
On this subject of industrial combinations I have often expressed my
opinions; and, as I have not changed my mind, I am not averse to
repeating them now, especially as the subject seems again to be so
much in the public eye.
The chief advantages from industrial combinations are those which can
be derived from a coöperation of persons and aggregation of capital.
Much that one man cannot do alone two can do together, and once admit
the fact that coöperation, or, what is the same thing, combination, is
necessary on a small scale, the limit depends solely upon the
necessities of business. Two persons in partnership may be a
sufficiently large combination for a small business, but if the
business grows or can be made to grow, more persons and more capital
must be taken in. The business may grow so large that a partnership
ceases to be a proper instrumentality for its purposes, and then a
corporation becomes a necessity. In most countries, as in England,
this form of industrial combination is sufficient for a business
co-extensive with the parent country, but it is not so in America. Our
Federal form of government making every corporation created by a state
foreign to every other state, renders it necessary for persons doing
business through corporate agency to organize corporations in some or
many of the different states in which their business is located.
Instead of doing business through the agency of one corporation they
must do business through the agencies of several corporations. If the
business is extended to foreign countries, and Americans are not
to-day satisfied with home markets alone, it will be found helpful and
possibly necessary to organize corporations in such countries, for
Europeans are prejudiced against foreign corporations, as are the
people of many of our states. These different corporations thus become
coöperating agencies in the same business and are held together by
common ownership of their stocks.
It is too late to argue about advantages of industrial combinations.
They are a necessity. And if Americans are to have the privilege of
extending their business in all the states of the Union, and into
foreign countries as well, they are a necessity on a large scale, and
require the agency of more than one corporation.
The dangers are that the power conferred by combination may be abused,
that combinations may be formed for speculation in stocks rather than
for conducting business, and that for this purpose prices may be
temporarily raised instead of being lowered. These abuses are possible
to a greater or less extent in all combinations, large or small, but
this fact is no more of an argument against combinations than the fact
that steam may explode is an argument against steam. Steam is
necessary and can be made comparatively safe. Combination is necessary
and its abuses can be minimized; otherwise our legislators must
acknowledge their incapacity to deal with the most important
instrument of industry.
In the hearing of the Industrial Commission in 1899, I then said that
if I were to suggest any legislation regarding industrial combinations
it would be: First, Federal legislation under which corporations may
be created and regulated, if that be possible. Second, in lieu
thereof, state legislation as nearly uniform as possible, encouraging
combinations of persons and capital for the purpose of carrying on
industries, but permitting state supervision, not of a character to
hamper industries, but sufficient to prevent frauds upon the public. I
still feel as I did in 1899.
THE NEW OPPORTUNITIES
I am far from believing that this will adversely affect the
individual. The great economic era we are entering will give splendid
opportunity to the young man of the future. One often hears the men of
this new generation say that they do not have the chances that their
fathers and grandfathers had. How little they know of the
disadvantages from which we suffered! In my young manhood we had
everything to do and nothing to do it with; we had to hew our own
paths along new lines; we had little experience to go on. Capital was
most difficult to get, credits were mysterious things. Whereas now we
have a system of commercial ratings, everything was then haphazard and
we suffered from a stupendous war and all the disasters which
followed.
Compare this day with that. Our comforts and opportunities are
multiplied a thousand fold. The resources of our great land are now
actually opening up and are scarcely touched; our home markets are
vast, and we have just begun to think of the foreign peoples we can
serve--the people who are years behind us in civilization. In the East
a quarter of the human race is just awakening. The men of this
generation are entering into a heritage which makes their fathers'
lives look poverty-stricken by comparison. I am naturally an optimist,
and when it comes to a statement of what our people will accomplish in
the future, I am unable to express myself with sufficient enthusiasm.
There are many things we must do to attain the highest benefit from
all these great blessings; and not the least of these is to build up
our reputation throughout the whole world.
The great business interests will, I hope, so comport themselves that
foreign capital will consider it a desirable thing to hold shares in
American companies. It is for Americans to see that foreign investors
are well and honestly treated, so that they will never regret
purchases of our securities.
I may speak thus frankly, because I am an investor in many American
enterprises, but a controller of none (with one exception, and that a
company which has not been much of a dividend payer), and I, like all
the rest, am dependent upon the honest and capable administration of
the industries. I firmly and sincerely believe that they will be so
managed.
THE AMERICAN BUSINESS MAN
You hear a good many people of pessimistic disposition say much about
greed in American life. One would think to hear them talk that we were
a race of misers in this country. To lay too much stress upon the
reports of greed in the newspapers would be folly, since their
function is to report the unusual and even the abnormal. When a man
goes properly about his daily affairs, the public prints say nothing;
it is only when something extraordinary happens to him that he is
discussed. But because he is thus brought into prominence
occasionally, you surely would not say that these occasions
represented his normal life. It is by no means for money alone that
these active-minded men labour--they are engaged in a fascinating
occupation. The zest of the work is maintained by something better
than the mere accumulation of money, and, as I think I have said
elsewhere, the standards of business are high and are getting better
all the time.
I confess I have no sympathy with the idea so often advanced that our
basis of all judgments in this country is founded on money. If this
were true, we should be a nation of money hoarders instead of
spenders. Nor do I admit that we are so small-minded a people as to be
jealous of the success of others. It is the other way about: we are
the most extraordinarily ambitious, and the success of one man in any
walk of life spurs the others on. It does not sour them, and it is a
libel even to suggest so great a meanness of spirit.
In reading the newspapers, where so much is taken for granted in
considering things on a money standard, I think we need some of the
sense of humour possessed by an Irish neighbour of mine, who built
what we regarded as an extremely ugly house, which stood out in bright
colours as we looked from our windows. My taste in architecture
differed so widely from that affected by my Irish friend, that we
planted out the view of his house by moving some large trees to the
end of our property. Another neighbour who watched this work going on
asked Mr. Foley why Mr. Rockefeller moved all these big trees and cut
off the view between the houses. Foley, with the quick wit of his
country, responded instantly: "It's invy, they can't stand looking at
the ividence of me prosperity."
In my early days men acted just as they do now, no doubt. When there
was anything to be done for general trade betterment, almost every man
had some good reason for believing that his case was a special one
different from all the rest. For every foolish thing he did, or wanted
to do, for every unbusiness-like plan he had, he always pleaded that
it was necessary in his case. He was the one man who had to sell at
less than cost, to disrupt all the business plans of others in his
trade, because his individual position was so absolutely different
from all the rest. It was often a heart-breaking undertaking to
convince those men that the perfect occasion which would lead to the
perfect opportunity would never come, even if they waited until the
crack o' doom.
Then, again, we had the type of man who really never knew all the
facts about his own affairs. Many of the brightest kept their books in
such a way that they did not actually know when they were making money
on a certain operation and when they were losing. This unintelligent
competition was a hard matter to contend with. Good old-fashioned
common sense has always been a mighty rare commodity. When a man's
affairs are not going well, he hates to study the books and face the
truth. From the first, the men who managed the Standard Oil Company
kept their books intelligently as well as correctly. We knew how much
we made and where we gained or lost. At least, we tried not to deceive
ourselves.
My ideas of business are no doubt old-fashioned, but the fundamental
principles do not change from generation to generation, and sometimes
I think that our quick-witted American business men, whose spirit and
energy are so splendid, do not always sufficiently study the real
underlying foundations of business management. I have spoken of the
necessity of being frank and honest with oneself about one's own
affairs: many people assume that they can get away from the truth by
avoiding thinking about it, but the natural law is inevitable, and the
sooner it is recognized, the better.
One hears a great deal about wages and why they must be maintained at
a high level, by the railroads, for example. A labourer is worthy of
his hire, no less, but no more, and in the long run he must contribute
an equivalent for what he is paid. If he does not do this, he is
probably pauperized, and you at once throw out the balance of things.
You can't hold up conditions artificially, and you can't change the
underlying laws of trade. If you try, you must inevitably fail. All
this may be trite and obvious, but it is remarkable how many men
overlook what should be the obvious. These are facts we can't get away
from--a business man must adapt himself to the natural conditions as
they exist from month to month and year to year. Sometimes I feel that
we Americans think we can find a short road to success, and it may
appear that often this feat is accomplished; but real efficiency in
work comes from knowing your facts and building upon that sure
foundation.
Many men of wealth do not retire from business even when they can.
They are not willing to be idle, or they have a just pride in their
work and want to perfect the plans in which they have faith, or, what
is of still more consequence, they may feel the call to expand and
build up for the benefit of their employees and associates, and these
men are the great builders up in our country. Consider for a moment
how much would have been left undone if our prosperous American
business men had sat down with folded hands when they had acquired a
competency. I have respect for all these reasons, but if a man has
succeeded, he has brought upon himself corresponding responsibilities,
and our institutions devoted to helping men to help themselves need
the brain of the American business man as well as part of his money.
Some of these men, however, are so absorbed in their business affairs
that they hardly have time to think of anything else. If they do
interest themselves in a work outside of their own office and
undertake to raise money, they begin with an apology, as if they are
ashamed of themselves.
"I am no beggar," I have heard many of them say, to which I could only
reply: "I am sorry you feel that way about it."
I have been this sort of beggar all my life and the experiences I have
had were so interesting and important to me that I will venture to
speak of them in a later chapter.