|Author(s):||Doran, Peter B. |
Published by EH.Net (July 2016)
Peter B. Doran, Breaking Rockefeller: The Incredible Story of the Ambitious Rivals Who Toppled an Oil Empire. New York: Viking, 2016. xii + 337 pp. $28 (hardcover), ISBN: 978-0-525-42739-1.
Reviewed for EH.Net by Robert Whaples, Department of Economics, Wake Forest University.
To understand an economy it is important to examine the figures found in volumes like Historical Statistics of the United States. As cliometricians know, it also important to use sound economic theory to help explain such numbers. But it is also important to consider the lives of the people who were the economy — especially the entrepreneurs whose decisions developed and redirected the economy’s resources. For example, one cannot ignore the lives of business leaders such as Cornelius Vanderbilt, Andrew Carnegie, John Rockefeller, Henry Ford, and Steve Jobs, if the goal is to have a clear view of what made the U.S. economy tick. And these lives are often utterly fascinating, as one soon discovers by reading biographies such as T.J. Stiles’ The First Tycoon (on Vanderbilt), Ron Chernow’s Titan (on Rockefeller), David Nasaw’s Andrew Carnegie, Steven Watts’ The People’s Tycoon (on Ford), or Walter Isaacson’s Steve Jobs.
Alongside these masterpieces is a great body of entrepreneurial biographies that inform and engage the reader. Peter Doran’s Breaking Rockefeller is such a book. Its focus is on the men who built what became Standard Oil’s chief overseas rival in the late 1800s and early 1900s, the Royal Dutch Shell Company.
The volume begins with a chapter outlining the career of John Rockefeller — casting him and Standard Oil (SO) as the villain of the piece. Gamely battling against SO and against the odds are Marcus Samuel who built Shell Oil (and later became a Viscount) and the men who built Royal Dutch — Aeilko Jans Zijlker, Jean Baptiste August Kessler, and especially Henri Deterding. The chapter detailing how Samuel launched Shell on an entrepreneurial bet that he could construct a fleet of oil tankers safe enough to be granted passage through the Suez Canal is one of the best in the book — because it carefully shows the obstacles to his bold plan, how he worked with others to overcome them, and how he thwarted SO’s attempts to scuttle them. But, like other chapters, it is prone to hyperbole, including the statement that these actions “flipped the oil world on its head” (p. 95). Rather, these actions seem to have barely put a dent in Standard’s growing profits.
Also well done is the chapter on Royal Dutch’s early operations in Indonesia — the persistence and innovation with which obstacles, including the intense climate and geography, were overcome. This was an oil market where luck played a much bigger role than today. Doran reports that drilling success rates were incredibly low — at one point Royal Dutch bored more than one hundred wells in its Indonesian fields without a single success — until geologists began to learn how to better find oil. Today close to half of exploratory wells and about 90 percent of development wells are successful.
The downside of Doran’s book is that, in an effort to build up the drama of the battle between SO and its rivals, exaggerations are made. Doran portrays Rockefeller as ruthless, unscrupulous and greedy, somehow bullying and conniving his way to a position of dominance — but leaving out keys to his success, such as relentless cost cutting and efficiency improvements, boldness in betting on the long-term prospects of the industry while others were willing to take quick profits, and impressive abilities to spot and reward talent, delegate tasks, and manage a growing empire. Rockefeller’s scruples, along with the endearing facets of his personality — seen so clearly in Chernow’s biography — are ignored or mocked. Standard is repeatedly referred to as a monopoly — even when it’s clear to the reader that it faced competition in many markets — and the roots of its domestic monopoly power, the barriers to entry that it struggled to build and maintain, are never considered. Questionable economic logic seeps into the analysis, such as when Doran asserts that if Standard’s profits fell due to increased competition in the international market, it would respond by increasing its price in its domestic market. Is this something a profit-maximizing monopolist would do? If it had a domestic monopoly and already charged the profit-maximizing price there, why would it then increase the price above the profit-maximizing price? Events overseas wouldn’t increase its marginal costs or demand domestically, so increasing the price at home wouldn’t make sense.
The volume is especially frustrating when it misrepresents important facts. Doran repeatedly makes the claim that until the Spindletop gusher in early 1901, “the U.S. oil industry had been spiraling into a phase of terminal decline. … Each year they were pumping less crude” (p. 150, see also p. 108 and 143). Such statements add drama to the story, but official statistics belie them. Historical Statistics (4:335) shows that crude petroleum production in the U.S. rose from 266 trillion BTUs in 1890 to 307 trillion in 1895 to 369 trillion in 1900, while exports of petroleum (4:298) rose most years during the decade — with an increase of 43 percent from 1890 to 1900.
Almost any successful market response against SO is made to sound heroic and improbable. The brute fact is that petroleum was being discovered all over the world and Standard didn’t have the wherewithal to buy up and refine all of this oil. So much oil was being discovered, especially in Russia, that it was bound to reach the market in competition with Standard. And Standard’s competitors were backed by some pretty deep-pocketed groups — such as the Rothschilds — which Standard wasn’t going to be able to put out of business or buy up.
I’m also disappointed that — by focusing almost exclusively on Shell and Royal Dutch — Doran did not include more on SO’s American rivals. As Alfred Chandler points out in The Visible Hand (1977, p. 350), before the 1911 court-ordered breakup of Standard, “a number of oil companies besides Standard Oil were among the largest business enterprises in the nation,” such as the Texas Company (Texaco), Gulf Oil, Associated Oil (Tidewater), Union Oil, and Sun Oil. Standard’s share of American refining fell from 86 percent to 70 percent in the five years before the breakup (Chernow, p. 555). It simply couldn’t erect the barriers to keep competitors out. Instead of exploring these rivals of Standard in greater detail, Doran takes the reader on numerous tangential asides. Some of this makes for enjoyable, informative reading, but he certainly goes overboard in places.
The biggest irony, which Doran points out in the text but not in his title, is that despite this swarming competition and the Supreme Court ruling that broke up Standard into dozens of smaller companies, Rockefeller wasn’t ever really “broken.” After the dissolution of Standard, Rockefeller’s wealth soared (buoyed by increasing demand for gasoline), he became the wealthiest man in the word, and then he gave almost all of it away — continuing the philanthropy he had practiced before his retirement from the oil business.
Robert Whaples is the co-editor of four recent books: The Future: Economic Peril or Prosperity? (with Chris Coyne and Michael Munger, 2016), The Routledge Handbook of Modern Economic History (with Randall Parker, 2013), The Routledge Handbook of Major Events in Economic History (with Randall Parker, 2013), and The Economic Crisis in Retrospect: Explanations by Great Economists (with G. Page West, 2013).
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|Subject(s):||Agriculture, Natural Resources, and Extractive Industries|
|Geographic Area(s):||General, International, or Comparative|
|Time Period(s):||19th Century|
20th Century: Pre WWII