Part 6 (2/2)

The question was simply whether the oil traffic was sufficient in volume to make the investment profitable. When pipe-lines had been built to oil fields where the wells had ceased to yield, as often happened, they were about the most useless property imaginable.

An interesting feature developed through the relations which grew up between the railroads and the pipe-lines. In many cases it was necessary to combine the facilities of both, because the pipes reached only part of the way, and from the place where they ended the railroad carried the oil to its final destination. In some instances a railroad had formerly carried the oil the entire distance upon an agreed rate, but now that this oil was partly pumped by pipe-lines and partly carried by rail, the freight payment was divided between the two. But, as a through rate had been provided, the owners of the pipe-line agreed to remit a part of its charges to the railroad, so we had cases where the Standard paid a rebate to the railroad instead of the reverse--but I do not remember having heard any complaint of this coming from the students of these complicated subjects.

The profits of the Standard Oil Company did not come from advantages given by railroads. The railroads, rather, were the ones who profited by the traffic of the Standard Oil Company, and whatever advantage it received in its constant efforts to reduce rates of freight was only one of the many elements of lessening cost to the consumer which enabled us to increase our volume of business the world over because we could reduce the selling price.

How general was the complicated bargaining for rates can hardly be imagined; everyone got the best rate that he could. After the pa.s.sage of the Interstate Commerce Act, it was learned that many small companies which s.h.i.+pped limited quant.i.ties had received lower rates than we had been able to secure, notwithstanding the fact that we had made large investments to provide for terminal facilities, regular s.h.i.+pments, and other economies. I well remember a bright man from Boston who had much to say about rebates and drawbacks. He was an old and experienced merchant, and looked after his affairs with a cautious and watchful eye. He feared that some of his compet.i.tors were doing better than he in bargaining for rates, and he delivered himself of this conviction:

”I am opposed on principle to the whole system of rebates and drawbacks--unless I am in it.”

CHAPTER V

OTHER BUSINESS EXPERIENCES AND BUSINESS PRINCIPLES

Going into the iron-ore fields was one of those experiences in which one finds oneself rather against the will, for it was not a deliberate plan of mine to extend my cares and responsibilities. My connection with iron ores came about through some unfortunate investments in the Northwest country.

These interests had included a good many different industries, mines, steel mills, paper mills, a nail factory, railroads, lumber fields, smelting properties, and other investments about which I have now forgotten. I was a minority stockholder in all these enterprises, and had no part in their management. Not all of them were profitable. As a matter of fact, for a period of years just preceding the panic of 1893, values were more or less inflated, and many people who thought they were wealthy found that the actual facts were quite different from what they had imagined when the hard experiences of that panic forced upon them the unpalatable truth.

Most of these properties I had not even seen, having relied upon the investigation of others respecting their worth; indeed, it has never been my custom to rely alone upon my own knowledge of the value of such plants. I have found other people who knew much better than I how to investigate such enterprises.

Even at this time I had been planning to relieve myself of business cares, and the panic only caused me to postpone taking the long holiday to which I had been looking forward. I was fortunate in making the acquaintance of Mr. Frederick T. Gates, who was then engaged in some work in connection with the American Baptist Education Society, which required him to travel extensively over the country, north, south, east, and west.

It occurred to me that Mr. Gates, who had a great store of common sense, though no especial technical information about factories and mills, might aid me in securing some first-hand information as to how these concerns were actually prospering. Once, as he was going South, I suggested that he look over an iron mill in which I had some interest which happened to be on his route.

His report was a model of what such a report should be. It stated the facts, and in this case they were almost all unfavourable. A little later he happened to be going West, and I gave him the name and address of property in that region in which I held a minority interest. I felt quite sure that this particular property was doing well, and it was somewhat of a shock to me to learn through his clear and definite account that it was only a question of time before this enterprise, too, which had been represented as rolling in money, would get into trouble if things kept on as they were going.

NURSING THE COMMERCIALLY ILL

I then arranged with Mr. Gates to accept a position whereby he could help me unravel these tangled affairs, and become, like myself, a man of business, but it was agreed between us that he should not abandon his larger and more important plans for working out some philanthropic aspirations that he had.

Right here I may stop to give credit to Mr. Gates for possessing a combination of rare business ability, very highly developed and very honourably exercised, overshadowed by a pa.s.sion to accomplish some great and far-reaching benefits to mankind, the influence of which will last. He is the chairman of the General Education Board and active in many other boards, and for years he has helped in the various plans that we have been interested in where money was given in the hope that it would do something more than temporary service.

Mr. Gates has for many years been closely a.s.sociated with my personal affairs. He has been through strenuous times with me, and has taken cares of many kinds off my shoulders, leaving me more time to play golf, plan roads, move trees, and follow other congenial occupations.

His efforts in the investigations in connection with our educational contributions, our medical research, and other kindred works have been very successful. During the last ten or twelve years my son has shared with Mr. Gates the responsibility of this work, and more recently Mr.

Starr J. Murphy has also joined with us to help Mr. Gates, who has borne the heat and burden of the day, and has well earned some leisure which we have wanted him to enjoy.

But to return to the story of our troubled investments: Mr. Gates went into the study of each of these business concerns, and did the best he could with them. It has been our policy never to allow a company in which we had an interest to be thrown into the bankruptcy court if we could prevent it; for receivers.h.i.+ps are very costly in many ways and often involve heavy sacrifices of genuine values. Our plan has been to stay with the inst.i.tution, nurse it, lend it money when necessary, improve facilities, cheapen production, and avail ourselves of the opportunities which time and patience are likely to bring to make it self-sustaining and successful. So we went carefully through the affairs of these crippled enterprises in the hard times of 1893 and 1894, carrying many of them for years after; sometimes buying the interests of others and sometimes selling our own interest, but all or nearly all escaped the expenses and humiliation of bankruptcy, receivers.h.i.+p, and foreclosure.

Before these matters were entirely closed up we had a vast amount of experience in the doctoring of the commercially ill. My only excuse for dwelling upon the subject at this late day is to point out the fact to some business men who get discouraged that much can be done by careful and patient attention, even when the business is apparently in very deep water. It requires two things: some added capital, put in by one's self or secured from others, and a strict adherence to the sound natural laws of business.

THE ORE MINES

Among these investments were some shares in a number of ore mines and an interest in the stocks and bonds of a railroad being built to carry the ore from the mines to lake ports. We had great faith in these mines, but to work them the railroad was necessary. It had been begun, but in the panic of 1893 it and all other developments were nearly ruined. Although we were minority holders of the stock, it seemed to be ”up to us” to keep the enterprise alive through the harrowing panic days. I had to loan my personal securities to raise money, and finally we were compelled to supply a great deal of actual cash, and to get it we were obliged to go into the then greatly upset money market and buy currency at a high premium to s.h.i.+p west by express to pay the labourers on the railroad and to keep them alive. When the fright of the panic period subsided, and matters became a little more settled, we began to realize our situation. We had invested many millions, and no one wanted to go in with us to buy stock. On the contrary, everybody else seemed to want to sell. The stock was offered to us in alarming quant.i.ties--substantially all of the capital stock of the companies came without any solicitation on our part--quite the contrary--and we paid for it in cash.

We now found ourselves in control of a great amount of ore lands, from some of which the ore could be removed by a steam shovel for a few cents a ton, but we still faced a most imperfect and inadequate method of transporting the ore to market.

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