When spring arrived, the cherry blossoms at the Moon Temple atop Japan’s Mount Maya were worth the journey. In truth, there was no such thing as a Moon Temple on Mount Maya. Only the foreigners living at the base of the mountain in Kobe called it that. Its true name was the Maya-san (Tenjō-ji) Temple. Dedicated to the mother of the Buddha, the site had no connection to the moon at all. The reason anyone called it the Moon Temple likely originated from a nighttime procession of pilgrims who trekked the mountain during Japan’s summer O-bon festival. During the O-bon, the faithful visited the temple to honor their ancestors. When foreigners ventured to the temple grounds at all other times of the year, they typically came in sunlight and as tourists.1 If the temple held no interest for them, the mountain’s visitors could gaze upon the nearby Nunobiki waterfall, or marvel at the spectacular views of the distant harbor. Spread out below Mount Maya was the awakening port town of Kobe. It was new, bustling, and filled with foreigners.
For more than two and a half centuries, the harbor of Kobe had slept under the willful isolation of the old Tokugawa shoguns. Seeing no need for the outside world, the shoguns had shunned it, ruling Japan as a closed, militaristic state based on rice and feudal allegiances. After reformers forced the reopening of Japan in 1868, Kobe roared back to life. This process, known as the Meiji restoration, was cracking Japan’s old barriers to the world. As part of the transformation, Japanese officials designated Kobe’s harbor to be one of the country’s official entry points for all foreign trade. The walls against commerce fell. Foreigners came in fleets. Kobe grew at an exponential rate.
The most visible signs of Kobe’s awakening could be seen in the Foreign Concession along the waterfront. Here the paved streets, gaslight lamps, and mixed assortment of European architecture clashed with the surrounding shrine and temple structures of old, sleepy Kobe. In the eyes of one visiting American, Kobe’s newly built Concession had a “very English look.” But that was only if a visitor looked beyond the obvious rickshaw traffic, the adolescents in dark uwagis, and the clumps of local laborers who milled around the gates of Kobe’s foreign consulates.2 The Concession was decidedly not London, nor even Liverpool. It was a special bubble world created for one purpose: trade.
The merchants who populated Kobe’s Foreign Concession enjoyed all the amenities of gracious living. There was a daily English-language newspaper, a post and telegraph office to connect Kobe with the outside world, and even the illumination of an electric lighting company. Most important of all, the foreigners of Kobe had the Hyogo Hotel, the epicenter of the town’s expatriate social life, its billiard games, and its local pricing scheme for rickshaw runners. In fact, the Hyogo was so central to the foreigners of Kobe that when one of them wished to go anywhere around town, the cost of a rickshaw ride would be quoted in terms of the distance to or from the hotel.3 It was little wonder then that Sam Samuel chose a location only a few blocks from the Hyogo in which to open the new offices of S. Samuel & Co. of Yokohama and, now, Kobe, Japan.
Because the youngest Samuel son spent a good deal of his adulthood in Japan, the rules and rhythms of the Orient had come to define his professional life. Sam first arrived in Japan after the initial shock wave of the Meiji restoration in the early 1880s. It had been his task to expand the family’s commercial foothold on this new frontier of the Far East. Operating under the trade name of S. Samuel & Co., the buildout of S. Samuel’s first foreign office, in Yokohama, had proved to be one of Sam’s major successes in Japan. The opening of the second office, in Kobe, gave him a nice bookend to that accomplishment. In between Yokohama and Kobe, Sam had established a thriving business importing British spinning machines and exporting Japan’s camphor oil, rice, sugar, and coal to ports around the globe.
As the head of the family’s operations in Japan, Sam enjoyed a wide degree of freedom from Marcus back in England. One way this autonomy manifested was in Sam’s total disregard for regular business hours. Unlike Marcus, who arrived at work in Houndsditch promptly by eight o’clock, Sam’s appearance in the office was more lackadaisical and harder to predict. On Saturdays, the final day of the business week, Sam typically breached the office doors at the leisurely stroke of eleven o’clock, whereupon he promptly ordered lunch and a double whiskey soda, and then proceeded to dig through the firm’s weekly finances. Officially, Sam’s employees were supposed to work only a half day on Saturday, but this was rarely the case. Instead, his ritual inspection of the books became a harrowing daylong affair. No one could leave as Sam methodically inspected, disputed, and calculated every expenditure and invoice that had steadily accumulated on his desk during the previous week. Being on time for work could be dispensed with, but neglecting the family’s ledger was unacceptable. Rockefeller would have approved—at least about the ledger.
During his time in Japan, Sam had collected a colorful cast of characters who floated through the offices of S. Samuel & Co. There was “Smiling” Zensuke Tanaka, Sam’s expert on the silk trade; Tatsuji Ando, the virtuoso of all imports; and Walter Finch Page, the seasoned British expatriate, full-time railroad expert, and part-time transportation adviser to the Japanese government.4 Finally, in 1886, a highly capable Scottish trader named William “Foot” Mitchell joined the merry band of Sam’s office staff. The arrival of Foot Mitchell was a turning point for Sam: older brother Marcus felt it was time for Sam to come home, and Foot Mitchell would take over in Japan. After Sam had spent his early adulthood in the Orient, his world of misnamed temples, shaved foreheads, rickshaw rides, and carefully calculated wagers in the local rice market was about to disappear. For Sam, returning home meant losing his relative independence from Marcus. The readjustment for both brothers would not be a tranquil one.
Reunited in London before Marcus’s trip to Batumi, the contrast between the Samuel brothers was stark. In physical appearance, the tall, lean Marcus loomed above the shorter Sam, who was beginning to bulge at the waist. In personality, Marcus played the introvert to Sam’s extrovert. In love, Marcus had eyes only for his wife, Fanny, while Sam was a committed bachelor. However, the brothers’ most decisive difference lay in the realm of business. By now, the older Marcus had emerged as the risk taker, while young Sam approached business decisions with much more caution. Naturally, their management styles and temperaments in the office also differed, especially as the last will and testament of Marcus Samuel, Sr., still hung over both of them. The Samuel brothers had not forgotten their father’s final request.
Nearly two decades had passed since Marcus Sr. instructed his sons to “keep the good name of Marcus Samuel from reproach.” While these words remained sacrosanct, friction persisted between the brothers over day-to-day decisions. Once they began to work side by side in Houndsditch, Marcus and Sam locked pincers like scorpions in a bottle. Arguments between them were frequent, loud, and hostile. It was usually Marcus who tried to steamroll his younger brother’s objections. Sam invariably refused to yield ground. Epithets sailed. Savage curses followed. Cutting words escalated into outbursts. Just when the flare-ups seemed to reach a climax, there would be an abrupt silence. “The two brothers would always go to the window,” remembered one eyewitness, “their backs to the room, huddled together close, their arms round each other’s shoulders, heads bent, talking in low voices, until suddenly they would burst apart in yet another dispute.” In this way, business was conducted at M. Samuel & Co. “Mr. Sam with loud furious cries, Mr. Marcus speaking softly, but both calling each other fool, idiot, imbecile, until suddenly, for no apparent reason, they were in agreement again.”
It was into this high-tension environment that Marcus returned from the Black Sea in 1890 with his plan to flood the Far East with kerosene. Seen through Sam’s naturally cautious outlook, the intrigue that Marcus had cooked up in Russia represented nothing less than commercial suicide. There could be no doubt that Standard would try to eliminate any competition from the Samuels. Wherever they tried to offload illuminating oil in Asia, 26 Broadway was sure to slash the market price for kerosene. Worse, Marcus’s bright idea about cutting through the Suez was a nonstarter. The canal was closed to oil tankers because “safe” tankers did not exist. The risk that one of them might blow up inside the Suez was too great to endanger the flow of global commerce. Even if the Samuels could somehow build a fleet of these vessels, the up-front costs of the gamble were astronomically expensive. The brothers did not have enough liquid assets to cover the capital costs. How would they ever finance the idea?
Much like the strategy itself, Marcus’s solutions to these practical impediments were equally bold. Taking a page from his original Bangkok rice run in the 1870s, he intended to draw credit from the Far East merchant houses with whom the brothers did business and with whom they enjoyed a trust cultivated over the course of decades. This would eliminate the need for bank loans, which the brothers steadfastly avoided in business. If they agreed to pursue the venture, Marcus could lower their overhead even further by piggybacking on the merchant houses’ ready-made distribution channels into the hinterlands of the Far East. That would translate into greater sales volume and higher revenue. But lowering costs would help only if the plan could be executed—which was far from guaranteed.
The most important elements of Marcus’s plan would be scale and speed. By opening the spigots of Russia and moving product in bulk, he could surprise Rockefeller with a preemptive price war across every major kerosene market east of the Suez. That would turn the tables on 26 Broadway. Instead of getting a “good sweating” from the American oil giant, he would force Standard to lose money instead. He needed to turn all of Asia into his battlefield in order to short-circuit the threat of “cut to kill.” Economies of scale had always been on Rockefeller’s side. Marcus would turn that advantage against Standard by making the scale of his commercial attack larger than anything Rockefeller had yet experienced.
In the past, when Standard used the devious strategy of “cut to kill” against competitors, the contested market or country had always been a limited one. If 26 Broadway wished to deploy its old weapon against Marcus, it would have to do so in every major port, market stall, and distribution channel in the Orient. The financial pain from such a price war would be immense and would require Standard to compensate by imposing across-the-board price hikes in America. When that occurred, savvy Russian oilmen would pounce on Rockefeller. Why fight for scraps in Europe, when premium prices in America would invite every oil baron with a tanker to offload their product in New York or Philadelphia?
In the rough-and-tumble world of oil, Marcus was preparing to open his attack on Standard with shock and awe. Nothing of this magnitude had been attempted in the petroleum business before. The catch was that it required an all-or-nothing bet from Marcus. If his gambit failed, then he endangered his own personal fortune. More alarming, he would very likely bring all of M. Samuel & Co. down with him. The “good name” of Marcus Samuel, Sr., would end in disaster, bankruptcy, and liquidation. On the other hand, if Marcus succeeded, the financial upside was potentially boundless. The wealth that would flow from his venture could propel Marcus, as well as the entire Samuel family, into an entirely new echelon of class and social status. That was, of course, only if Sam agreed. Marcus could take no action without Sam’s support. The Samuel brothers might fight all they liked, but in the end, forming a consensus was the unbreakable family rule of their business.
The precise manner in which the Samuel brothers finally came to an agreement on the oil gamble remained between them. What mattered was that both brothers were of one mind. Marcus had prevailed. Sam consented. The youngest sons of Marcus Samuel, Sr., would wager his good name on an all-or-nothing bet in the kerosene business. It was a point from which there could be no return. Marcus and Sam were going to be oilmen. If they failed, they would be bankrupt oilmen. From this point forward, they raced to assemble the pieces of their strategy before Standard got wind of it.
From BREAKING ROCKEFELLER: The Incredible Story of the Ambitious Rivals Who Toppled an Oil Empire by Peter B. Doran, published by Viking, an imprint of Penguin Publishing Group, a division of Penguin Random House LLC. Copyright © 2016 by Peter B. Doran.
