Standard Oil – The Intelligent Collector Magazine

Milan High School’s state basketball victory over larger Muncie inspired the 1986 film *Hoosiers*.

By Jim O’Neal

The last time I was in Buffalo, N.Y., was in October 1974. We were on a tour of supermarkets to improve our code dating discipline. Anytime we spotted a bag with an illegible date or past the stale point, we simply crumpled the bag and asked the store manager to have the Frito-Lay salesman replace it with no charge to the store. I was aware that Grover Cleveland had been sheriff of Erie County and personally hanged two murderers, but didn’t know that the Ball Brothers glass manufacturing company had moved their company to Muncie, Ind., in 1889 due to the abundance of natural gas. And, of course, President William McKinley got himself assassinated in Buffalo in 1901.

Muncie has become newsworthy ever since a landmark sociological study was undertaken there in the 1920s. It had been identified as the representative American community worthy of the title “Middletown.”

It started after Robert Lynd, a young seminary student, accepted an assignment to analyze the effectiveness of ministries by studying a Wyoming oil-drilling camp owned by Standard Oil of Indiana. The camp was a dismal collection of tents inhabited by 500 discouraged workers and their families. Lynd was successful in forging them into a viable community. He then wrote an article for an obscure journal, detailing the appalling conditions and attacking John D. Rockefeller Jr. (personally) as the one responsible.

In a twist of fate, Rockefeller – a devout Baptist with liberal ideas – had just formed a committee to study America’s religious practices. He wanted to reconcile capitalism of the early 20th century with his personal Protestant beliefs. So Rockefeller picked Lynd to head the “Small City Study” to prove it was truly independent. Their charter was to look at social problems arising from industrialization – “ascertain[ing] the religious, ethical and capability of people” in a single industrial city.

Lynd chose Muncie since it fit certain criteria: small (38,000), Midwestern and economically diverse. Although 92 percent were “native white of native parentage,” Lynd claimed a homogeneous population permitted him to study cultural changes, unimpeded by racial or religious differences. It also reflected his deep belief that native-born Protestants represented the bedrock of American society and best hope for the country’s future success.

Robert and wife Helen Lynd arrived in Muncie in 1924 and quickly decided religion was too narrow and expanded the study to factory conditions, the Kiwanis and Rotary Clubs, and even the people’s reading habits. What they discovered was a city rushing into the 20th century, with rapid industrialization, farming to factories, kerosene to electricity, central heating, hot water in a tap and the telephone, automobile and railroads.

In 1929, they published Middletown: A Study in Modern American Culture, 500 pages detailing a rigid class system and gradual erosion of values, with excessive materialism and consumerism in full bloom. Returning after the 1932 Great Depression, Lynd was totally disillusioned by American capitalism and looked with naive envy on the Marxist experiments in the Soviet Union.

Waves of subsequent sociologists have made their own journeys to Muncie, which today calls itself “America’s Hometown,” with a litter of empty storefronts, outlying Wal-Marts, factories shuttered, the Ball Brothers HQ now in Colorado, and a vibrant service economy. Locals have grown accustomed to being sampled and polled by outsiders. “Here, it’s something of a way of life,” said Muncie Star-Press editor Larry Lough.

I’d like to visit Muncie some day since I love Indiana basketball and in 1954, tiny Milan High School (enrollment 161) knocked off Muncie to win the state basketball championship. This was the inspiration for the 1986 film Hoosiers with Gene Hackman in one of my all-time favorites.

Intelligent Collector blogger JIM O’NEAL is an avid collector and history buff. He is president and CEO of Frito-Lay International [retired] and earlier served as chair and CEO of PepsiCo Restaurants International [KFC Pizza Hut and Taco Bell].

This Andrew Carnegie photograph – inscribed, signed and dated Dec. 11, 1917 – realized $1,015 at a September 2011 Heritage auction.

By Jim O’Neal

Jeff Bezos of Amazon is the world’s richest man, with an estimated net worth of more than $100 billion. A hundred years ago (1916), John D. Rockefeller became America’s first billionaire, which in today’s economy would be two to three times greater than Bezos’ fortune. In the late 19th century, Andrew Carnegie coveted this crown and saw steel as his road to stardom.

In the post-Civil War era, America grew rapidly as railroads crisscrossed the country and extended their reach to all four corners. Electricity arrived to light up buildings and homes, oil supplemented kerosene and coal, iron and steel production grew as demand soared to keep up with rapid economic expansion. Occasional booms/busts occurred since the markets were unregulated and coordination was difficult.

Carnegie had led the growth in the American steel industry and his ambition to snatch Rockefeller’s crown became more acute. One of the key industry developments involved the construction of a steel bridge to connect St. Louis and East St. Louis on opposite banks of the mighty Mississippi River. The Eads Bridge, named for its designer, engineer James B. Eads, relied heavily on steel for its revolutionary design. It was set to become the first significant bridge using steel girders and a cantilever form.

A young Carnegie supplied the financing and the steel, despite skepticism over the sturdiness of the structure after it was completed. A man named John Robinson came up with a clever way to dispel any doubts. Elephants were believed to have good instincts about where they stepped, so Robinson borrowed a fully grown one from a traveling circus. On June 14, 1874, he led the beast across the length of the bridge, with crowds on both ends going wild. Later, a convoy of locomotives were driven back and forth as a further (and final) test of soundness.

On July 4, 1874, the bridge officially opened with General William Tecumseh Sherman driving the last spike as 150,000 people looked on. Demand for steel exploded, forcing Carnegie to develop creative ways to boost production. One was a modified vertical production technique that maximized factory output. But that was still not enough. It became obvious that a 12-hour, six-day workweek was needed. The only problem was that workers’ health couldn’t keep up. Carnegie hired tough managers to impose the onerous schedule and he left for Scotland to escape the critics. Later, his guilty conscience led him to an unprecedented binge of philanthropy after he sold the Carnegie Steel Company to J.P. Morgan for $480 million. It became U.S. Steel, the first billion-dollar corporation in the world.

John D. Rockefeller took an even more devious strategy to his domination of the oil-refining industry. In 1872, he formed a shell corporation: the South Improvement Company (SIC). He then struck an agreement with large railroad companies whereby they sharply raised freight rates for all oil refineries, except those in the SIC (notably Standard Oil), which received substantial rebates – up to 50 percent off crude and refined oil shipments. Then came the most deadly innovation – SIC members also received “drawbacks” on shipments made by rival refineries. So when Standard Oil made shipments from Pennsylvania to Cleveland, they received a 40-cent rebate on every barrel, plus another 40 cents for every barrel of oil shipped by every competitor!

It has been called “an instrument of competitive cruelty unparalleled in industry.” In fact, it was collusion on a scale never equaled in American history. And it was only one of several techniques employed. But it did help Mr. Rockefeller and his investors achieve a 90 percent share of the entire U.S. oil business.

All Bezos has is the internet.

Tag: Standard Oil

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