In the winter of 1846, forty-seven people were stranded in the Sierra Nevada’s just outside of Lake Tahoe. The party had left Kansas late and winter had come real early. Too make matters worse, there were no traps to capture food in the winter. The snow storm that hit the Sierra’s was the worst in a century. Soon after becoming stranded in twelve foot snow banks the party began running out of food. A rescue party was sent to Sacramento. But they would take weeks to return. Eventually the group turned to cannibalism. People were on the move. Migrating west and what every party needed was non perishable food. Needs create inventions.
Gail Borden was a trained surveyor in the state of Texas. An avid inventor who was constantly tinkering with different materials and processes. The Donner party was a calling to people like Borden to make food that could keep. Borden created a process to extract the important minerals from meat which he then mixed and canned. He packaged and attempted to sell it to the military, cattle drivers and any mobile group in America. Unfortunately, it tasted worse than dried leather. The idea was sound, the finished result was less than expected. However, the idea of condensing would take him toward his most important invention. While traveling back from England aboard a liner he was taken aback by the cries of immigrant children demanding milk. Cows would be held in the bottom storage of the boat, but would become seasick and unable to produce milk. Borden wondered if his condensing idea could be applied to milk. Fortunately, he knew nothing of the process of condensing milk. Unlike the process of heating and condensing meat, the milk would stick to the sides of the pan. Scientist urged him to give up, but Borden merely greased the pan and Eureka condensed milk. Just as his discovery of condensed milk hit the scene a scandal hit the New York milk producers. Contaminated and unhealthy milk was being reported in the daily newspapers. As the population became Urban, science had not caught up to the problems of providing healthy fresh food. Since refrigeration had not yet been discovered, condensed milk would provide city dwellers with safe, healthy milk.
Oil was first used by Indians in the Pennsylvania hills to caulk the bottoms of their canoes. The oil literally seeped out of the ground. In 1854 George Bidwell, a Dartmouth graduate, was visiting an old schoolmate when he came across a bottle of rock oil. The oil was advertised as some sort of medicine that had amazing curing powers. Bidwell, without knowing what it actually did or was worth, decided he wanted to pursue the acquisition of oil. With monetary help from some investors he hired two men to go up to Western Pennsylvania and begin extracting oil. Bidwell hired Edwin Drake to organize the operation. Drake’s previous work consisted of clerking for a steamboat, a hotel and a dry goods store. He had no technical experience or any knowledge of mining. Upon arriving in Tittusville, Western Pennsylvania, Drake decided to drill for oil. Most people who were in the business of oil believed the it came from the coal hills that surrounded the area. The oil was seeping into the rivers and workers were paid to scoop it up. The prevailing opinion was to bore for it, or to build a large trench and let the oil seep into it. It might have been his inexperience and lack of knowledge that allowed him to attempt the unthinkable, but Drake decided to drill for it. He visited some nearby salt mines and hired a local by the name of “Uncle Billy” Smith to set up his drilling operation. On August 27th, 1859, at about 69 1/2 feet down, they struck something. Leaving it for the night, they were awakened the next morning by a thick syrupy material. Drake looked at it and said, “What is it?” Uncle Billy replied, “That’s your fortune.”
An example of the boom and bust of the late 19th century can be found in the oil business. In the spring of 1864, a lucky ‘oil finder’, using a divining rod declared that a farm located on both sides of Pithole creek Pennsylvania held a fortune in oil. On January 7, 1865 the first complete well was pouring out 250 barrels a day.
Thousands of people flocked to the area in the hopes of making their fortune. When a second oil well struck, an oil fever ensued. People from all over American began moving toward Pithole. By the end of June four wells were producing 2,000 barrels a day, which was a third of all production in Pennsylvania. Oil wells began cropping up everywhere. As far as the eye could see, oil wells scarred the landscape. The area, which six months before was pasture and farmland, was booming with economic activity. Three thousand teamsters were hauling the oil to rail lines. Barrel makers hired hundreds to manufacture the containers to hold the oil. Hotels, homes, makeshift living establishments sprung up overnight. The price on land skyrocketed. Economic activity had exploded in a short time. The boom attracted all kinds of individuals. Swindlers deceived people by pouring a few gallons of oil into holes on the land they were selling and declared them oil wells. The area kept attracting more and more people, who drilled for more and more oil until there was no more. When the oil eventually dried up, fortunes were lost overnight. Office buildings, hotel owners who built in Pithole anticipating continued growth were left with empty buildings. When the Oil dried up people left town looking for the next boom. In addition to the lost fortunes, the land became an environmental wasteland, with oil derricks and discarded equipment pocketing the landscape. This type of scene would be replicated in places all over America.
John D. Rockefeller
When Drake discovered Oil in 1859 John D. Rockefeller was a commodities trader in Cleveland Ohio. An accountant by trade, he had developed an reputation for frugal, cost cutting business practices.
By the age of 20 he had made a 1/2 a million dollars. In ‘59’, oil was selling for 50cents a barrel, and on average, areas like Titusville were producing about 300 gallons a day. However, the discovery of oil usually brought an oil rush to the area and soon overproduction would lower the price, destabilizing the market thereby making it an unpredictable and unwise business investment. The destruction of men and the environment was immanent unless some sort of control could be established in the oil business. Rockefeller saw his opportunity. He decided to get into the refinery business and in 1863 bought his first refinery. At the time cities were competing for commerce and business. The railroads were competing for passengers and goods to haul. The city of Cleveland was right on the Atlantic and Great Western Railway line. A perfect place in which to launch a business empire. In 1867, Rockefeller bought out his partner for $75,000 and by the end of the year was grossing $1.2 million dollars. However, overproduction and the depression of 67-68 wiped out the oil refinery business. Fortunately, Rockefeller was one of the few to survive. In order to create stability in the oil business he needed to control production. With every new oil discovery creating greater amounts of production and unstable prices, change was needed. In Rockefellers eyes, change meant controlling distribution. Standard Oil, the company Rockefeller created set about controlling the oil refinery side of the business. He signed secret contracts, called rebates with the railroads. The rebates resulted in charging the competition higher rates for hauling oil. This difference in price allowed Rockefeller to charge less and slowly force out the competition.
Rockefeller also invented predatory practices in business. He developed a network of corporate spies and would approach the competition much like an army approaches the enemy. Initially, a competitor would be offered a buyout price for his business. Often the offer was well below the actual worth of the business. However, a targeted business would soon be without options. If a business resisted, corporate spies would identify the weakness of a particular business and then the squeeze would be administered. Eventually a business would either go bankrupt or sell to Standard Oil. This predatory activity on the part of Standard Oil became common place. Journalists would come to call Standard Oil the Octopus. In the end, Standard Oil would end up controlling 70% of all the oil refinery business world wide.
One common theme of all these entrepreneurial geniuses was their ability to see an opportunity and then fill it. In the 20’s prohibition was passed wich outlawed the sale and consumption of alcohol. It was a measure that was unpopular in the cities. Al Capone was an Italian immigrant around this period who had been denied legitimate opportunities in other businesses. During this period, Italian immigrants to the U.S. came in at the bottom of the immigrant ladder. Most of the Italian immigrants were peasants with few skills that could help them rise in an urban, industrial world. Even the Catholic Church, where they comprised a considerable proportion of the followers, gave them little opportunity. As late as 1960, when Italian-Americans numbered one sixth of All-American Catholics, there was not one Italian-American bishop. Capone once quipped “Why, I tried to get into legitimate business two or three times, but they won’t stand for it.”
The Capone business formed an entity designed to protect and distribute vice in the city of Chicago. Capone, never risking his own money in illegal establishments, provided protection from police raids, arson, bombings from rival gangs. To accomplish this, he recruited and trained extremely loyal personnel with specific qualifications. Capone had connections in politics and could guarantee the election of politicians in his district, and even the mayor’s seat. He was able to obtain the choicest liquors for his wealthy clients from Canada and Cuba. As Capone once said
“I make my money supplying a public demand. If I break the law, my customers who number hundreds of the best people in Chicago, are as guilty as I am. The only difference between us is that I sell and they buy. Everybody calls me a racketeer. I call myself a businessman. When I sell liquor, it’s bootlegging. When my patrons serve it on a silver tray on Lake Shore Drive, it’s hospitality.”
The remarkable rise of organized crime in the twentieth century is only another episode in the saga of restless new Americans reaching for opportunities to enlarge their fortunes and to rise in the world.