- Historic Sites
Frederick T. Gates And John D. Rockefeller
April 1955 | Volume 6, Issue 3
Although few general histories of the United States contain the name of Frederick T. Gates (1853-1929), he had a larger influence on American life than many a general or political leader who receives detailed notice. It is an ironic fact that whenever the name of this wise, careful, idealistic planner is mentioned, someone is sure to say, “Oh, you mean ‘Beta-Million’ Gates?"—a man antipodal in all his traits. In due course the impact of Frederick T. Gates (in association with John D. Rockefeller) upon the fast-changing nation of 1890-1925 will be properly recognized. He offered the highly unusual combination of a man creatively interested in religion and philanthropy, and at the same time extraordinarily shrewd and farsighted in business. Rockefeller in his Random Reminiscences speaks of this combination: “rare business ability, very highly developed and very honorably exercised,” and “a passion to accomplish some great and far-reaching benefits to mankind.” But more remarkable than his business ability or idealistic passion was his gift of imagination, his sense of large unexplored horizons.
Gates’s career falls into three main parts: his early association with the Baptist Church as minister, money-raiser, and chief reorganizer of its educational activities; his adventurous services as guardian and planner of Rockefeller’s investments; and his work as architect of foundations and other philanthropies which, taken as a group, perhaps show more statesman-like prevision than any others in our history.
Rockefeller’s account of his discovery of this extraordinary lieutenant is bare and colorless. “I had been planning to relieve myself of business cares,” he writes. “I was fortunate in making the acquaintance of Mr. Frederick T. Gates, who was then engaged in some work . . . which required him to travel extensively over the country, north, south, east, and west.” Behind these sentences lies a dramatic story. Actually Rockefeller had come to know Gates in the later 1880’s, when the question whether a great Baptist university should be established in New York or in Chicago divided the denomination. Gates, with William Rainey Harper of Yale, Dr. Thomas W. Goodspeed of Morgan Park Theological Seminary, and others, stood for Chicago; Dr. Augustus H. Strong, of the Rochester Theological Seminary, whose son had married Rockefeller’s daughter, stood for New York. Gates had been in the foreground when Rockefeller, in 1889, finally decided to found the new university in Chicago. Meanwhile, Rockefeller and he had been carefully studying each other.
Indeed, Rockefeller never chose an associate without meticulous scrutiny and investigation. Much of his success as an industrial organizer was attributable to the partners he had selected: Henry M. Flagler, John D. Archbold, Oliver H. Payne, and others. Gates tells an interesting story of how, when as a champion of the Western Baptists he was pressing the case for Chicago, Rockefeller had subjected him to something of an ordeal. They had lunched in New York to discuss the proposed university. Rockefeller suggested that as he was about to go to Cleveland, while Gates was returning to Chicago, they take the same train. They did so. Gates, then in his middle thirties, was rather awed by the magnate. He was struck by the neatness and quietness of Rockefeller’s dress, his avoidance of jewelry, his simple solution of the problem of tipping by holding out a handful of change to let porters take what they thought right. He was struck still more by the penetration of Rockefeller’s mind, the ease and simplicity of his speech. “The greatest man I have met,” he reported to his parents. “He is the broadest, clearest-headed, most universal in his sympathies, most calmly self-poised, most devoted to what he regards as duty, least influenced by considerations of position, or the authority of advocates of special causes.” Enthusiasm was always one of Gates’s traits.
But Rockefeller had proposed the trip not to discuss the university, but to look Gates over. The younger man waited vainly all evening for his companion to speak of higher education. Instead, Rockefeller talked probingly of general subjects. It became evident to Gates that he was being sized up; that his capacity, insight, and dependability were being weighed. And soon afterward, Rockefeller imposed some special tests. Hearing that Gates was going south, he asked the young man to look over an iron mill there. Gates turned in a model report, stating all the facts—though they reflected strongly on Rockefeller’s judgment or that of his advisers in this investment. A little later Gates made a western journey. “I gave him the name and address of property in that region in which I held a minority interest,” writes Rockefeller. “I felt quite sure that this particular property was doing well, and it was somewhat of a shock to me to learn through his clear and definite account that it was only a question of time before this enterprise, too, which had been represented as rolling in money, would get into trouble.” As soon as Rockefeller founded the University of Chicago, Gates joined Goodspeed in collecting funds and making initial plans for the institution. His address, earnestness, and vision in this work impressed Rockefeller.
It could hardly have been a total surprise to Gates, then, when Rockefeller made a proposal epochal in the lives of both. The time was a March day in 1891; the place was Rockefeller’s office in the Standard Oil building at 26 Broadway. They had been conferring on university affairs. Gates rose to leave. “Sit down,” said Rockefeller. “I want to talk with you on another matter.” He was obviously harassed and worried. His gifts that year were destined to exceed half a million; for the next year, they would reach nearly a million and a half. His health, after twenty years of overwork, was badly impaired. Gates has reported his exact words:
“I am in trouble, Mr. Gates. The pressure of these appeals for gifts has become too great for endurance. I haven’t the time or strength, with all my heavy business responsibilities, to deal with these demands properly. I am so constituted as to be unable to give away money with any satisfaction until I have made the most careful inquiry as to the worthiness of the cause. These investigations are now taking more of my time and energy than the Standard Oil itself.”
At this time John D. Rockefeller, Jr., was a stripling; it would be two and a half years before he entered Brown University. Nor could the elder Rockefeller foresee that he would make philanthropy his lifework; on leaving college he might take up law or business. Rockefeller therefore went on to say that he must have a helper immediately.
“I think you are the man. I want you to come to New York and open an office here. You can aid me in my benefactions by taking interviews and inquiries, and reporting the results for action. What do you say?”
This speech had the ring of a heartfelt appeal. Gates had by now overcome his awe of Rockefeller. He always took the same attitude as William Rainey Harper: “No feudal relationship.” But he was touched by Rockefeller’s words; he had a vision of the great opportunities for bettering mankind which he might help Rockefeller to seize; and he was superbly confident of his capacity to do the work. He was aware, of course, that he would have to say a hundred “Noes” to every “Yes”; that he would soon make a host of enemies. But he accepted without hesitation. He quickly found that Rockefeller was being hounded by thousands of petitioners; that his desperation was well-founded. He was not safe from intrusion in his office, in his home, in his dining room, in his walks, in the elevated trains he took to and from work, or even in the aisles of his church. He was “hunted like a wild animal”—but now Gates was his shield.
“And so,” Gates has recalled, “nearly all comers, near or remote, friend or guest, high or low, were blandly sent to my office at Temple Court. I did my best to soothe ruffled feelings, to listen fully to every plea, and to weigh fairly the merits of every cause.” He found some rascals trying to impose on Rockefeller. But, he adds, “I gradually developed and introduced into all his charities the principle of scientific giving, and he found himself in no long time laying aside retail giving almost wholly, and entering safely and pleasurably into the field of wholesale philanthropy.” He and Rockefeller adopted these terms. To the end of his career Gates, as Dr. Abraham Flexner relates, would sweep aside petty applications with the scornful words: “That is retail business.” Before long, wholesale philanthropy meant some single gifts not of millions, but of scores of millions.
Before Gates’s activities reached this phase, however, he was compelled to turn to Rockefeller’s disordered investments. The date of his first appointment, 1891, is significant. Rockefeller’s health broke badly in 1891-92. In 1893 came panic and depression. While building the Standard Oil edifice, Rockefeller had of necessity entrusted his outside investments (his main accumulations were always in the Standard itself) to the hands of advisers. These advisers, with perfectly good intentions, were neither wise nor prudent. In particular, two fellow members of the Fifth Avenue Baptist Church, a broker named Colgate Hoyt and an entrepreneur named Charles L. Colby (son of the founder of Colby College), had led Rockefeller into dubious ventures in the South, the Great Lakes area, and the Pacific Northwest. As early as 1881 Rockefeller had been a large holder of Northern Pacific stock. That was well enough; but Colby and Hoyt, undertaking to develop what is now the city of Everett, Washington (named for Colby’s son), had poured Rockefeller money into a land company, mining company, shipbuilding yard, paper mill, and other enterprises in the Puget Sound area. As the Great Northern laid plans to make Everett its terminal, and a wild boom brought a host of speculators into Washington, Hoyt displayed a Colonel Mulberry Sellers enthusiasm: “There’s millions in it!” Then the panic crushed the boom. Everett became almost a ghost town.
Gates’s reorganization of these investments is a fascinating story. With the help of an able mining engineer, the brother of Nicholas Murray Butler, he proved that the mining company was almost worthless. A two-million dollar railroad had been built to its mountain shafts before the veins had been properly tested! A costly lead smelter had to be scrapped; there was no lead. Other properties were jettisoned. But Gates’s shrewd eye saw that proper development of the Everett Timber Company might recoup all losses. He bought more forest land, and in due time sold it to the Weyerhaeusers and others at prices even five or six times the cost. “I was able to report to Mr. Rockefeller before I left him,” he later recalled, “that I had already made enough out of the Timber & Investment Company to repay him all his Puget Sound losses, and there remained an unsold surplus of one billion feet, at least, on which there had already accrued two or three millions more of profit.” To Gates a shrewd stroke of business gave great pleasure—veterans of Wall Street soon came to speak admiringly of his talents; but it gave him still greater pleasure to augment a fortune which he saw destined to public uses. He was creating resources for future boards, foundations, and institutes.
Sometimes a touch of drama enlivened Gates’s efforts to salvage the bad investments. A Cleveland promoter, acquiring a number of mining claims at Telluride, Colorado, had gotten Rockefeller and other friends to invest large sums in what he represented as rich mineral deposits. He talked of another Comstock Lode. Gates investigated. His suspicions grew. Finally he was directed in Denver to a mining engineer who knew the Telluride district intimately. Gates went to his office, and presented a card of introduction.
” ‘What?’ he shouted. ‘Do you mean to say that John D. Rockefeller has invested money in that damned swindle?’ And when I humbly confessed the truth, his eyes flashed, his face flushed, and he strode to and fro, making the air blue with oaths and imprecations.”
In this instance Gates failed to obtain any redress. The promoter, who paid himself a $15,000 a year salary, had long hoodwinked other investigators. When Gates called him and the officers of the company to his Telluride hotel, and bade them redeem Rockefeller’s stock at cost or meet the consequences, they gave him a note for the investment. But the note was never paid. In other instances, however, he achieved better results—sometimes spectacularly good. He made his office, which was transferred to 26 Broadway, a center for collecting information on investments, interpreting it, and systematizing Rockefeller’s holdings. Money went into public utilities, into real estate, into railroads, and into other channels. While this was being done, the flow of gifts was being organized and accelerated. In 1897 John D. Rockefeller, Jr., took his place at Gates’s side, for he instinctively felt that there was his place of greatest usefulness; and his tributes to Gates for the tuition he supplied in managing the fortune and using it for the best philanthropic objects have always been generous.
One accidental investment of Rockefeller’s involved Gates in the almost melodramatic story of the Mesabi ore lands, a story he has told with color and feeling in his thirty-page pamphlet, The Truth About Mr. Rockefeller and the Merritts . The five Merritt brothers and their three nephews, timber-cruisers and ore-prospectors in the Mesabi country, have long laid a spell on the American imagination. So has the Mesabi itself, a huge pine-covered basin filled with soft iron ore of almost unexampled richness. Rockefeller originally held no part of this particular area. His iron properties, when Gates began to assist in his financial affairs, were in Cuba, Wisconsin, Michigan, Colorado, and at one or two points in Minnesota outside the Mesabi. In fact, Rockefeller for a time refused to buy lands in this rich area. The Merritt brothers had obtained large claims, had formed companies in which they had about a forty per cent stock holding, and had piled debt on debt in trying to extent rails to their holdings. They had tremendous faith in their ores, not realizing that most steel companies distrusted the soft, powdery stuff, and that special new furnaces would have to be designed before it became usable. They and their chief partner, one Charles W. Wetmore, were already financially embarrassed when the Panic of 1893 came on. Everything fell to half value.
“By July, 1893,” writes Gates, “the Merritts could not have sold their stock in the open market at Duluth, which has a small Wall Street of its own, for more than one-half of their debts. The stocks were quoted or sold nowhere else. The Merritts weathered the storm of 1893, but in January, 1894, their Minnesota creditors . . . forced the Merritts to sell their holdings to whomsoever would pay the most money for them.”
Gates’s brochure is an effective defense of Rockefeller’s treatment of the Merritt brothers. Just how did they weather the first storm? In the aftermath of the panic Rockefeller strained his own financial position to assist hard-pressed friends, making advances of about six millions to 58 men and companies which could not get credit at the bank. He was ready to assist the Merritts. A new company was formed, the Consolidated, into which both the Merritts and Rockefeller put important mining properties. But the Merritts had concealed the true extent of their debts, and just as Rockefeller and Gates supposed that the brothers were safely past their troubles, and that the development of the joint property could now proceed, the Merritts were compelled, as Gates says, to sell their stock. Rockefeller took 90,000 shares at $10 a share, $2 above market price. He agreed to sell 55,000 shares back to the brothers after one year at the same valuation. Indeed, he kept carrying two of the Merritts on freely renewed options for seven years, when they sold their shares to United States Steel at prices which made them millionaires. But the other brothers fell into the hands of attorney Anak A. Harris, who persuaded them to turn against Rockefeller with a suit.
If Gates’s pamphlet vindicates Rockefeller and convicts Harris of indefensible conduct in behalf of certain of the Merritts (who finally signed a statement exonerating Rockefeller) it does not, unfortunately, contain the fascinating story of Gates’s part in developing the Mesabi.
That story is unquestionably the greatest in Gates’s business career. When Rockefeller, against his own will, came into control of the Consolidated properties on the Mesabi, Gates perceived that bold and imaginative measures must be taken to make it pay. With Rockefeller’s active support, he bought more lands in the Mesabi basin. As they were acquired, Rockefeller became chief holder of perhaps the richest iron deposits in the world, and thus potentially a leader of the steel industry. Gates helped put the Mesabi Railroad into good running order; he helped supervise the construction of ore docks at Duluth and Superior. He saw that ships would be needed to carry the ore down the Lakes to the iron mills. Indeed, he became a master of ore transportation, a complex subject entirely new to this former minister. “He did all the work,” states Rockefeller.
It was Gates who, when he and Rockefeller decided that a fleet of ore carriers must be built, brought Samuel Mather of Cleveland, experienced in the trade, to Rockefeller’s house. Rockefeller knew Mather. “I told him I thought we could finish up our affairs in ten minutes, and we did,” Rockefeller later recalled. When a dozen all-steel vessels, of the largest capacity then deemed practicable on the Lakes, had been finished, it was Gates who urged that they should run the craft themselves instead of contracting for operation by others. “You don’t know anything about ships, do you?” demanded Rockefeller. “No,” Gates confessed, “but I know a man who I believe could do it.” Doubtless with a twinkle, he added: “He lives upstate and never was on a ship in his life. But he has sense.” It was Gates who did more than anyone else to direct the multifarious investments by which Rockefeller’s Mesabi properties were made a handsome source of revenue, and an important part of the fortune. And it was Gates who, in the final negotiations with J. P. Morgan for the incorporation of these holdings in the United States Steel Corporation, bargained more tenaciously than anyone else.
When these negotiations came to their crisis, it appeared that Morgan and Frick believed $75,000,000 the “outside price.” But neither Rockefeller nor Gates, it would appear, thought that enough. The price finally paid for the Mesabi properties and the ore-carrying fleet has been usually put at $88,500,000, though as part of it was in stock, valuations might differ. That much more for the benefactions so near to Frederick T. Gates’s heart! Nor was he the man to see his achievement in helping build the Mesabi empire go unrecognized.
On the signing of the final papers, he called on Rockefeller to make his final report. What followed he several times reported to intimate friends. Listening attentively, Rockefeller at the end showed genuine gratitude.
“Thank you, Mr. Gates—thank you!” he said with his usual quiet emphasis, and more than his usual cordiality.
Gates stood facing his employer, an unusual glint in his eye.
” ‘Thank you’ is not enough, Mr. Rockefeller,” he replied.
Obviously it was not; and Rockefeller saw that he received a reward commensurate with the resourcefulness, energy and skill he had shown in developing the ore fields and marketing their product.
But while Gates’s achievements as Rockefeller’s business adviser were impressive, his enduring contributions to American welfare were made in his thirty years of philanthropic planning. Into this work went his unquenchable enthusiasm, his creative flashes, his most “pregnant ideas"—to use his own term. In this field he proved himself one of the bold leaders of his time. Had a plodder, a man of lukewarm scientific temperament, a person of incurious mind, stepped into the place made for Gates, how much the country would have lost! The opportunity was truly extraordinary. The money, the circumstances, were ready; could the men be provided? The dividends of the Standard Oil combination in 1896 went above $30,000,000; in 1900 they almost touched $47,000,000. The United States, its frontier closed, its pioneer age gone, was emerging into the urban and industrial era, with multitudinous new social problems; emerging to world responsibilities, its own fortunes linked as never before with those of other nations. Men of adventurous minds were needed to break open new paths. Even a fortune like Rockefeller’s could easily have been frittered away on temporary enterprises. Next to Rockefeller himself, to Gates must go the credit for the contribution made by the successive creations—the University of Chicago, the Rockefeller Institute for Medical Research, the General Education Board, and the Rockefeller Foundation.
Gates was a pioneer in his field. Perhaps it is in part because he was a pioneer that his accomplishment looms up so large as compared with that of most subsequent administrators of foundation activities. But we may be sure that it was partly because in eagerness of mind, fiery earnestness of spirit, and capacity for grasping large designs, he was unique. Wealth to him was a means of reaching out into the infinite.