Mr. quiet as he had been since the breakifig up of the Refiners' Association in the summer of 1873, had by no means given up the idea of doing for the refining interest of the whole country what he had done for that of Cleveland through the South Improvement Company.
Mr. Rockefeller has shown repeatedly in conquering business career remarkable ability to learn from experience. The breaking up of the Refiners' Association may have seemed a disaster to him. He did not allow it to be a profitless disaster. He extracted useful lessons from the experience, and, armed with this new wisdom, bent his whole mind to working out a third plan of campaign. He now knew that he could not hope to make again so rich a haul as he had made through the lefunct South Improvement scheme. The experience of the past year with the refiners convinced him that it would take time to educate them to his idea of combination; but he had Learned who of them were capable of this education. As for :he producers, the alliance attempted with them was enough :o demonstrate that they would never endure long the re traints of any association. Besides, the bulk of them still held the, to unpractical belief that rebates were wrong. Mr. Rockefeller had also re-learned in these eighteen months what he knew pretty well before, that the promise to give or take away a heavy freight traffic was enough to persuade any railroad king of the day to break the most solemn compact.
With all these reflections fresh in mind, Mr. Rockefeller again bent over a map of the refining interests of the United States. Here was the world he sighed to conquer. If we may suppose him to have begun his campaign as a great general with whom he has many traits in common—the First Napo leon—used to begin his, by studding a map with red-headed pegs marking the points he must capture, Mr. Rockefeller's chart would have shown in and around Boston perhaps three pegs, representing a crude capacity of 3,500 barrels; in and around New York fifteen pegs, a capacity of 9,790 barrels; in and around Philadelphia twelve pegs, a capacity of 2,061 barrels; in Pittsburg twenty-two pegs, a capacity of 6,090 barrels; on the creek twenty-seven pegs, a capacity of 9,231 barrels.* His work was to get control of this multitude of red pegs and to fly above them the flag of what the irreverent call the "holy blue barrel." Some time in the summer of 1874, after it had become cer tain that Colonel Potts's plan for an equalisation of oil freights would be carried out, Mr. Rockefeller wrote to his former colleague in the South Improvement Company, W. G. War den, of Philadelphia, telling him he wanted to talk over the condition of the oil business with him, and inviting him to bring Charles Lockhart, of Pittsburg, to that Mecca of American schemers, Saratoga, for a conference with him and Mr. Flagler. Mr. Warden hesitated. He had been much abused for his relation with the South Improvement Com pany. He had seen the National Refiners' Association fail. He had begun to feel a distaste for combination. Besides, he was doing very well in Philadelphia. However, after some hesitation, he and Mr. Lockhart went to Saratoga. The four gentlemen breakfasted together and later strolled out to a pavilion. Here they discussed again, as they had nearly three years before, when they prepared the South Improvement assault, the condition of the oil business.
Mr. Rockefeller now had something besides a theory to present to the gentlemen he wished to go into his third scheme. He had the most persuasive of all arguments—an actual achievement. "Three years ago," he could tell them, "I took over the Cleveland refineries. I have managed them so that
to-day I pay a profit to nobody. I do my own buying, I make my own acid and barrels, I control the New York terminals of both the Erie and Central roads, and ship such quantities that the railroads give me better rates than they do any othet> shipper. In 1873 I shipped over 700,00o barrels by the Cen tral, and my profit on my capitalisation, $2,5oo,000, was over $1,000,000. This is the result of combination in one city. The railroads now have arranged a new tariff, by which they mean to put us all on an equal footing. They say they will give no rebates to anyone, but if we can join with Cleveland the strongest forces in other great shipping points, and apply to them the same tactics I have employed, we shall become the largest shipper, and can demand a rebate in return for an equal division of our freight. We proved in 1872-1873 that we could not do anything by an open association. Let us who see what a combination strictly carried out will effect unite secretly to accomplish it. Let us become the nucleus of a private company which gradually shall acquire control of all refineries everywhere, become the only shippers, and conse quently the master of the railroads in the matter of freight rates." It was six hours before the gentlemen in confer ence left the pavilion, and when they came out Mr. den and Mr. Lockhart had agreed to transfer their refineries in Philadelphia and Pittsburg to the Standard Oil Company, of Cleveland, taking stock in exchange. They had also agreed to absorb, as rapidly as persuasion or other means could bring it about, the refineries in their neighbourhood. Their union with the Standard was to remain an absolute secret—the con cerns operating under their respective names.* On October 15, 1874, Mr. Rockefeller consummated an other purchase of as great importance. He bought the works of Charles Pratt and Company, of New York city. As before, the purchase was secret. The strategic importance of these purchases for one holding Mr. Rockefeller's vast ambition was enormous. It gave him as allies men who were among the most successful refiners, without doubt, in each of the three greatest refining centres of the country outside of Cleve- , land, where he ruled, and of the creek, where he had learned that neither he nor any member of the South Improvement Company could do business with facility. To meet these pur chases the stock of the Standard Oil Company was increased, on March io, 1875, to $3,5oo,000.t The value of the concern as a money-earner at this early date, 1874, is shown by the fact that Pratt and Company paid not less than 265 for the Standard stock they received in exchange for their works.f The first intimation that the Oil Region had that Mr. Rockefeller was pushing another combination was in March of 1875, when it was announced that an organisation of refin ers, called the Central Association, of which he was president, had been formed. Its main points were that if a refiner would lease to the association his plant for a term of months he would be allowed to subscribe for stock of the new company. The lease allowed the owner to do his own manufacturing, but gave Mr. Rockefeller's company "irrevocable authority" to make all purchases of crude oil and sales of refined, to decide how much each refinery should manufacture, and to negotiate for all freight and pipe-line expenses. The Central Associ ation was a most clever device. It furnished the secret partners of Mr. Rockefeller a _plausible proposition with which to approach the firms_of Avhich they wished to obtain control.