Sunday, February 4, 2024

Information Asymmetry: Ida M. Tarbell Presents An Investment Opportunity

Ms Tarbell was one of the original muckrakers. More on them after the jump.

Via Lapham's Quarterly, Volume XV, Number 2 | winter 2024

Contributor

From “Kansas and the Standard Oil Company,” published in McClure’s Magazine. In 1871 John D. Rockefeller arranged a covert partnership with three major railroad companies to secure favorable shipping rates for Standard Oil. Tarbell’s father, a small-time oil producer, joined other independent producers in anti-monopoly protests. “Uncomprehending as I was in that fine fight,” Tarbell later wrote, “there was born in me a hatred of privilege.” This report was an installment in a nineteen-part exposé of Standard Oil’s business practices later collected as A History of the Standard Oil Company.

Good Grease
c. 1885

Sometime in the eighties there was discovered around Lima, Ohio, a new oil field. There was evidently a great deposit there, but the oil was of an inferior quality and when refined had an odor so unbearable that it could not be sold. When the Lima field was opened, the Standard Oil Company was practically the only refiner and transporter of crude oil. It immediately extended its pipelines into the Lima field, put up tanks, and began to buy the new oil. It bought thousands upon thousands of barrels, storing it because there was no market for it. 

The sulfur in the oil was so strong that it rotted the tanks. The quantity increased so that there was a continual outlay to take care of it. Many of the Standard directors are said to have expostulated. Why pile up the useless stuff? But John D. Rockefeller, with his fine smile, said only: “It’s all good grease, gentlemen, it’s all good grease.” And the “grease” continued to accumulate.

But work was going on at the same time. If the oil could not be refined, it could be used as fuel. In and around Chicago were many factories willing to buy oil as fuel. Contracts were made to supply some of them and a pipeline was laid from Lima to Chicago to carry the oil. But while this was being done, there was work going on in the Standard laboratories. A chemist had been working on the Lima oil and believed he could find a process of deodorizing it. 

The Standard spent thousands of dollars on this experimenting, and just about the time the pipeline to Chicago was completed, it was successful. Lima oil could be refined sufficiently to make a cheap illuminant; mixed with Pennsylvania, Lima could be sufficiently disguised to pass for a high-grade illuminant. Of course, what had been done in the laboratory was known only to the Standard Oil Company, and it used the information skillfully. 

The Lima oil field had been developed by scores of different oil operators. The belief that the oil could not be refined profitably had, of course, reduced its price far below cost of production, but the operators had gone on in hopes that eventually some use would be made of it. But they were, naturally, discouraged. The Standard knew this, and as soon as it had conclusive proof that Lima oil could be refined, planned a splendid stroke....

....MUCH MORE

The latest issue of Lapham's Quarterly is devoted to energy and being Lapham's, they come at the subject from around 100 different angles. 

Here's Lapham's Energy issue.

Some of our posts on the Muckrakers:

Media: Where Are The Muckrakers? The Rise and Fall of McClure's Magazine

 As noted back in 2016

Over the years, simply because the blog is composed of things that caught my eye rather than some grand plan, we've from time to time mentioned some of the early 20th century journalists who got appended the term muck-rakers but when I did a quick search of the blog I was surprised how many we'd named, although usually just in passing.

Some links below.
And from Allegheny College, a swell repository of all things Ida Tarbell:
“The Explosions of Our Fine Idealistic Undertakings”....
One of the original Muckrakers in McClure's Magazine's January 1901 issue.
This piece is a bit later, McClure's July 1905 via the Tarbell Collection at Allegheny College....
....As to Mr. Rockefeller's origin it is typically American. He sprang from one of those migrating families which, coming to this country in the seventeenth century, has moved westward with each generation seeking a betterment of condition. He and his brothers were the first great product of a restless family searching a firm footing on new soil. The first word heard of the Rockefeller family in Richford, Tioga County, New York, where John D. Rockefeller was born, was in the early 1830's when his grandfather, Godfrey Rockefeller, moved to that community from Mud Creek, Massachusetts. There are still alive in Tioga County many men and women who remember Godfrey Rockefeller. It is not a pleasant description they give of him — a shiftless tippler, stunted in stature and mean in spirit, but held to a certain decency by a wife of such strong intellect and determined character that she impressed herself unforgettably on the community.....

In 2011 we visited Ida Tarbell in "Ida M. Tarbell: 'John D. Rockefeller: A Character Study'" in part because I wanted a searchable link to the Tarbell collection at Allegheny college and partly because she described John D.'s grandfather, Godfrey as "a shiftless tippler, stunted in stature and mean in spirit".

In February 2016's "Oil Tankers and Interest Rates and Scallywags and Time" one of the Rockefeller minions, Thomas Lawson, got a mention, not for his exposé of his copper dealings with Standard Oil honcho Henry Huttleston Rogers, Frenzied Finance, but because of the ship for which Lawson was namesake.

Staying in 2016, it was Ida's buddy Lincoln Steffens in "Goldman Sachs: Death Of Capitalism Averted, Time For Working Schlubs to Partaay!", again not for the work he was most famous for, in Steffens' case his Shame of the Cities (St. Louis, Minneapolis, Pittsburgh et al) but because of his famously wrong statement about Soviet Russia in a letter dated April 3, 1919: “I have seen the future and it works.”.
It didn't.

In 2015 there was Jacob Riis because I was reminded of one of the photographs from "How the Other Half Lives: Studies among the Tenements of New York":
Jacob Riis Lives! "San Francisco Housing Bubble Goes Subterranean: $500/Month To Live In A Crawlspace"
 
And along the way Theodore Dreiser got a major link (possibly one of the best business novels ever) in "Switzerland Begins Two-Year Trial of Driverless Buses (plus money, art, glory and sex)"

So yes, more than wary reader might have anticipated and I've probably forgotten a couple.
Circling back to Ida, here's an online version of History of the Standard Oil Company.

Although there are quite a few critiques you can raise about her book it was pretty important and was one of the factors that led to the breakup of Standard Oil in the Supreme Court decision "Standard Oil Co. of New Jersey v. United States" seven years later. So Mr Rockefeller probably considered the book important.

It ranks #5 on NYU's Journalism school's list of the 100 best works of 20th-century American journalism. (via the NYT