Part 5 (2/2)

CHARACTER THE ESSENTIAL THING

In speaking of the real beginning of the Standard Oil Company, it should be remembered that it was not so much the consolidation of the firms in which we had a personal interest, but the coming together of the men who had the combined brain power to do the work, which was the actual starting-point. Perhaps it is worth while to emphasize again the fact that it is not merely capital and ”plants” and the strictly material things which make up a business, but the character of the men behind these things, their personalities, and their abilities; these are the essentials to be reckoned with.

Late in 1871, we began the purchase of some of the more important of the refinery interests of Cleveland. The conditions were so chaotic and uncertain that most of the refiners were very desirous to get out of the business. We invariably offered those who wanted to sell the option of taking cash or stock in the company. We very much preferred to have them take the stock, because a dollar in those days looked as large as a cart-wheel, but as a matter of business policy we found it desirable to offer them the option, and in most cases they were even precipitate in their choice of the cash. They knew what a dollar would buy, but they were very sceptical in regard to the possibilities of resurrecting the oil business and giving any permanent value to these shares.

These purchases continued over a period of years, during which many of the more important refineries at Cleveland were bought by the Standard Oil Company. Some of the smaller concerns, however, continued in the business for many years, although they had the same opportunity as others to sell. There were always, at other refining points which were regarded as more favourably located than Cleveland, many refineries in successful operation.

THE BACKUS PURCHASE

All these purchases of refineries were conducted with the utmost fairness and good faith on our part, yet in many quarters the stories of certain of these transactions have been told in such form as to give the impression that the sales were made most unwillingly and only because the sellers were forced to make them by the most ruthless exertion of superior power. There was one transaction, viz., the purchase of the property of the Backus Oil Company, which has been variously exploited, and I am made to appear as having personally robbed a defenceless widow of an extremely valuable property, paying her therefor only a mere fraction of its worth. The story as told is one which makes the strongest appeal to the sympathy and, if it were true, would represent a shocking instance of cruelty in crus.h.i.+ng a defenceless woman. It is probable that its wide circulation and its acceptance as true by those who know nothing of the facts has awakened more hostility against the Standard Oil Company and against me personally than any charge which has been made.

This is my reason for entering so much into detail in this particular case, which I am exceedingly reluctant to do, and for many years have refrained from doing.

Mr. F.M. Backus, a highly respected citizen of Cleveland and an old and personal friend of mine, had for several years prior to his death in 1874 been engaged in the lubricating oil business which was carried on after his death as a corporation known as the Backus Oil Company.

In the latter part of 1878, our company purchased certain portions of the property of this company. The negotiations which led to this purchase extended over several weeks, being conducted on behalf of Mrs. Backus, as the princ.i.p.al stockholder, by Mr. Charles H. Marr, and on behalf of our company by Mr. Peter S. Jennings. I personally had nothing to do with the negotiations except that, when the matter first came up, Mrs. Backus requested me to call at her house, which I did, when she spoke of selling the property to our company and requested me to personally conduct the negotiations with her with reference to it.

This I was obliged to decline to do, because, as I then explained to her, I was not familiar with the details of the business. In that conversation I advised her not to take any hasty action, and when she expressed fears about the future of the business, stating, for example, that she could not get cars to transport sufficient oil, I said to her that, though we were using our cars and required them in our business, yet we would loan her any number she needed, and do anything else in reason to a.s.sist her, and I did not see why she could not successfully prosecute her business in the future as in the past.

I told her, however, that if after reflection she desired to pursue negotiations for the sale of her property some of our people, familiar with the lubricating oil business, would take up the question with her. As she still expressed a desire to have our company buy her property, negotiations were taken up by Mr. Jennings, and the only other thing that I had to do with the matter was that when our experts reported that in their judgment the value of the works, good will, and successors.h.i.+p which we had decided to buy were worth a certain sum, I asked them to add $10,000, in order to make doubly sure that she received full value. The sale was consummated, as we supposed, to the entire satisfaction of Mrs. Backus, and the purchase price which had been agreed upon was paid.

To my profound astonishment, a day or two after the transaction had been closed, I received from her a very unkind letter complaining that she had been unjustly treated. After investigating the matter I wrote her the following letter:

November 13, 1878.

DEAR MADAM:

I have held your note of the 11th inst., received yesterday, until to-day, as I wished to thoroughly review every point connected with the negotiations for the purchase of the stock of the Backus Oil Company, to satisfy myself as to whether I had unwittingly done anything whereby you could have any right to feel injured. It is true that in the interview I had with you I suggested that if you desired to do so, you could retain an interest in the business of the Backus Oil Company, by keeping some number of its shares, and then I understood you to say that if you sold out you wished to go entirely out of the business. That being my understanding, our arrangements were made in case you concluded to make the sale that precluded any other interests being represented, and therefore, when you did make the inquiry as to your taking some of the stock, our answer was given in accordance with the facts noted above, but not at all in the spirit in which you refer to the refusal in your note. In regard to the reference that you make as to my permitting the business of the Backus Oil Company to _be taken_ from you, I say that in this as in all else you have written in your letter of the 11th inst., you do me most grievous wrong. It was but of little moment to the interests represented by me whether the business of the Backus Oil Company was purchased or not. I believe that it was for your interest to make the sale, and am entirely candid in this statement, and beg to call your attention to the time, some two years ago, when you consulted Mr. Flagler and myself as to selling out your interests to Mr. Rose, at which time you were desirous of selling at _considerably less price_, and upon time, than you have now received in cash, and which sale you would have been glad to have closed if you could have obtained satisfactory security for the deferred payments. As to the price paid for the property, it is certainly three times greater than the cost at which we could now construct equal or better facilities; but wis.h.i.+ng to take a liberal view of it, I urged the proposal of paying $60,000, which was thought much too high by some of our parties. I believe that if you would reconsider what you have written in your letter, to which this is a reply, you must admit having done me great injustice, and I am satisfied to await upon your innate sense of right for such admission. However, in view of what seems to be your present feeling, I now offer to restore to you the purchase made by us, you simply returning the amount of money which we have invested, and leaving us as though no purchase has been made.

Should you not desire to accept this proposal, I offer to you 100, 200 or 300 shares of the stock at the same price that we paid for the same, with this addition, that if we keep the property we are under engagement to pay into the treasury of the Backus Oil Company any amount which added to the amount already paid would make a total of $100,000 and thereby make the shares $100 each.

That you may not be compelled to hastily come to a conclusion, I will leave open for three days these propositions for your acceptance or declination, and in the meantime believe me,

Yours very truly,

JOHN D. ROCKEFELLER.

Neither of these offers was accepted. In order that this may not rest on my unsupported a.s.sertion, I submit the following doc.u.ments: The first is a letter from Mr. H.M. Backus, a brother of Mrs. Backus's deceased husband, who had been a.s.sociated with the business and had remained with the company after his death. The letter was written without any solicitation whatever on my part, but I have since received permission from Mr. Backus to print it. It is followed by extracts from affidavits made by the gentleman who conducted the negotiations on behalf of Mrs. Backus. I have no wish to reprint the complimentary allusion to myself in Mr. Backus's letter, but have feared to omit a word of it lest some misunderstanding ensue:

BOWLING GREEN, OHIO, September 18, '03.

MR. JOHN D. ROCKEFELLER, Cleveland, Ohio.

I do not know whether you will ever receive this letter or not, whether your secretary will throw it into the waste-basket or not, but I will do my part and get it off my mind, and it will not be my fault if you do not receive or read it. Ever since the day that my deceased brother's wife, Mrs. F.N. Backus, wrote you the unjust and unreasonable letter in reference to the sale of the property of the old Backus Oil Company, in which I had a small interest, I have wanted to write you and record my disapproval of that letter. I lived with my brother's family, was at the house the day you called to talk the matter of the then proposed purchase of the property with Mrs. Backus by her request, as she told Mr. Jennings that she wanted to deal through you. I was in favour of the sale from the first.

I was with Mrs. Backus all through the trouble with Mr. Rose and with Mr. Maloney, did what I could to encourage her, and to prevent Mr. Rose from getting the best of her. Mrs. Backus, in my opinion, is an exceptionally good financier, but she does not know and no one can convince her that the best thing that ever happened to her financially was the sale of her interest in the Backus Oil Company to your people. She does not know that five more years of the then increasing desperate compet.i.tion would have bankrupted the company, and that with the big debt that she was carrying on the lot on Euclid Avenue, near Sheriff Street, she would have been swamped, and that the only thing that ever saved her and the oil business generally was the plan of John D. Rockefeller. She thinks that you literally robbed her of millions, and feeds her children on that diet three times a day more or less, princ.i.p.ally more, until it has become a mania with her, and no argument that any one else can suggest will have any effect upon her. She is wise and good in many ways, but on that one subject she is one-sided, I think. Of course, if we could have been a.s.sured of continued dividends, I would have been opposed to selling the business, but that was out of the question. I know of the ten thousand dollars that was added to the purchase price of the property at your request, and I know that you paid three times the value of the property, and I know that all that ever saved our company from ruin was the sale of its property to you, and I simply want to ease my mind by doing justice to you by saying so. After the sale to your company I was simple enough to go to Buffalo and try it again, but soon met with defeat and retired with my flag in the dust. I then went to Duluth, and was on the top wave, till the real-estate bubble broke, and I broke with it. I have had my ups and downs, but I have tried to take my medicine and look pleasant instead of sitting down under a juniper tree and blaming my losses to John D. Rockefeller.

I suppose I would have put off writing this letter for another year or more as I have done so long, had it not been for a little chat that I had with Mr. Hanafin, Superintendent of the Buckeye Pipe Line Company, a day or two since when I was relating the sale, etc., of the old B.O. Co.'s business, and in that way revived the intention that had lain dormant since the last good resolution in regard to writing it was made. But it's done now, and off my mind.

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