The Russian Rockefellers

Introduction

Before the beginning of World War I, Russia was producing more than half the world’s oil and the Nobel family one-third of Russia’s crude and 40 percent of its refined petroleum.

Insane!

…the Nobel story has been largely shrouded in darkness because Lenin and Stalin in seizing power have kept it dark, as they have kept the mass of Russians in darkness. They have renamed the factories, harbors, dwellings and rest homes after Bolshevik leaders and done their best to make the Nobels into unpersons and their works into apparent achievements of the Soviet regime. But in the long run, history will not be so cheated.

The communist scenes later on in the book are very hard to read. The Nobel family is possibly the best refutation against the notion that all capitalists are immoral, greedy pigs. If anything, capitalists are the most ethical. The Nobel family did more to lift Russians out of poverty than any government.

Ludwig Nobel, after a highly successful career as a St. Petersburg manufacturer, literally created the Russian oil industry which in turn fueled the tremendous economic expansion of prerevolutionary Russia. He designed the world’s first oil tanker and had a dozen in regular service before other nations followed his lead; he installed Europe’s first pipelines and put the first tankcars on its rails; he built the world’s first full-scale continuous distillation refinery and developed oil burners to utilize more efficiently the black gold pouring from the world’s first gushers; he forged a gigantic infrastructure on water and land, overcoming native inertia and a stubborn opposition, building a network of storage depots and tank farms, harbors, freightyards, and marketing outlets from one end of the vast Russian empire to the other and then across the European continent and into the British Isles. Ludwig’s father before him pioneered development of underwater mines, designed some of the first steam engines to power Russian ships, and installed the first central heating systems to warm Russian homes. Ludwig’s son after him launched the world’s first diesel-driven tugs and tankers while bargaining with the Rothschilds, struggling against Royal Dutch-Shell, and bartering with Standard Oil in Europe’s second Thirty Years War, a petroleum war for control of world markets.

This is why people taking credit for capitalism’s advances is so grating. Capitalism is nothing more than exceptional individuals making their mark on the world. At every step, people told Ludwig he was crazy. Time after time, he proved them wrong and willed an entire industry into existence. And after all that, the Russian government has the gall to suggest that he stole from the people. Fuck. Communism.

Nobels pioneered decent housing, medical care, technical training for the workers, and elementary education for their children. They abolished child labor and shortened work hours, while establishing workers’ savings banks and a system of regular wage payments without resort to the standard and iniquitous system of fines for real or imagined transgressions. Their fifty thousand workers felt a special loyalty and pride in being identified as “Nobelites.”

They were literally the best people. They treated their workers better than anyone else in all of Russia, and for the all the good they did, they were labeled traitors and wiped from history.

At the turn of the century Russia was supplying more than half the world’s oil, but the troubles of 1903–1906 marked the end of that leadership and spelled defeat for Nobel, Rothschild, and the other Russian producers in the Thirty Years War.

A very sad story.

By 1916 Nobel owned, controlled, or had substantial interest in companies producing a third of all Russian crude oil, 40 percent of all the refined, and supplying almost two-thirds of domestic consumption. There were more than four hundred tank farms and depots flying the Nobel banner and the company commanded the largest private fleet in the world.

An incredible accomplishment.

Immanuel, the Patriarch

Immanuel, still faced with the debts from his abandoned building projects, saw no alternative to the humiliation of declaring himself bankrupt. But he refused to be discouraged or defeated. He was determined to find practical applications for some of those ideas that never seemed to stop swirling in his head.

[sic]

Immanuel Nobel was never one to let frustration block his path or force him to a resigned acceptance of fate.

If there’s one quality that every book has mentioned, it’s persistence. The Nobel family has this in spades.

Three months later Immanuel received 25,000 rubles for his invention. That handsome payment was as much a reflection of Immanuel’s achievement as it was of the degree of interest the tsar and his ministers had in underwater mine warfare. Russia was the only country in the world with an organized and systematic research and development program in the new weapon of war. Its origins went back to the time of Fulton’s experiments.

His own kingdom of Sweden was not as interested in his underwater mines, but Russia proves to be a more profitable venture, so he ends up leaving his wife and children and semi-permanently setting up in Russia.

As soon as they were old enough their mother made certain they received some schooling; they were enrolled in Jacobs Preparatory, the only formal education they ever received. Robert as the eldest attended five years, Ludwig three, and Alfred only a single year before departing for Russia. Once in Petersburg they were instructed solely by tutors—Robert and Ludwig primarily in engineering, Alfred in chemistry, and all three in Swedish, Russian, German, French, and English. They were also put to work in the factory, moving from one position to another, learning the business of running a business, acquiring from direct on-the-job exposure practical lessons in the problems and challenges of management, execution, and administration in nineteenth-century Russia.

The thing I love most is that he immediately puts his kids to work in the factory. This type of real-world education is far more valuable than the academic education.

The army maintained that the underwater mine was a logical development from the land mine, that Nobel had initially been commissioned to work on land mines. In a fit of bureaucratic jealousy the army apparently refused to cooperate with the navy to foster further development.

Nice to know that governments have never been logical, no matter how far back you go.

When war threatened a decade later no one could find the papers or a prototype, and Immanuel had to assemble another on a crash basis, to test and to stage another demonstration, before being given the order to manufacture hundreds of them for defense of Russian harbors. After years of work and expense by the committee, no weapon was ready for use when needed. Not even Jacobi’s plans for galvanic mines could be found. The tsar, Immanuel was later informed, never was told of this incredible bureaucratic bumbling. The Nobel mines reviewed by the ministry and approved in 1853 were the same type developed ten years earlier: chemical-contact mines, conical-shaped two-foot containers made of strong zinc, fifteen inches wide at the top and charged with eight pounds of powder which was detonated by an ingenious slide-bar, lead-and-glass tube mechanism protruding from the mine.

Pretty much every interaction with the Russian government in this book is a case of good tsar, bad boyars.

For the Nobels the war in the Baltic had been a great personal triumph, a family victory in a struggle that otherwise was marked by inept leadership, senseless and suicidal tactics, and crippling corruption. For Immanuel it was a supreme satisfaction. He knew he could improve his mines…

And thus, the seed of market demand for his mines were planted.

But Immanuel had no time then for experimentation with explosives. His other projects took all his energies. 1852–1857 were the golden years for Immanuel. The presentation at court, the Imperial Gold Medal, the success of his mines, the manufacture of marine engines, the steady expansion of the factory until it had a labor force of a thousand, his reputation as inventor and as one of Russia’s leading engineers and industrialists were all striking indications of Immanuel’s success: the ultimate rewards for his diligence, his persistence, and his genius.

[sic]

Despite the achievements and the recognition, Immanuel was not in a secure financial position.

[sic]

…never had such effort been so poorly rewarded. It was a lesson that none of the sons would ever forget.

Unfortunately, the family is still poor despite everything because the father is so over-leveraged. Decades of loans, poor financial decisions, and a bit of overspending are still leaving them in the red. This impacts all the children, but Alfred Nobel (the future inventor of dynamite, and the progenitor of the Nobel Prize) is famously frugal for the rest of his life after this.

For Immanuel the decline was a disaster. Without government contracts he could not keep the factory running. His creditors and suppliers were demanding payment while the government refused financial compensation for cancelled orders. Immanuel dispatched Alfred, recognized as the son most adept at dealing with figures and financiers, to Paris and London to raise money to tide the company over the period of readjustment.

And as the war declined, interests in mines waned, dooming the family to even greater poverty.

Finally there was the problem of Immanuel himself, a man of massive energies and broad interests, a seminal thinker whose restless and inventive genius frequently led him to impulsive overindulgence in wildly-optimistic schemes. Less of a businessman and factory director than inventor, occasionally ill-tempered and brusque with those of lesser talent, understanding, and dedication, he was simply not the man to manage an enterprise that had grown to a size encouraged by his tremendous talents in fields other than management.

In short, he simply was not an operator. He was an inventor at heart.

The sons saw the end coming, but Immanuel probably remained hopeful to the last. Robert, Ludwig, and Alfred would never forget the bitter lessons of their father’s failure, the causes within the man and within the country. For Immanuel, then fifty-eight, there would never be another chance. In 1859 it was all over.

And thus the end of Immanuel’s career. He returns to Sweden.

But he was not pessimistic about that next generation. He had no fears for the future of the Nobels. “If my sons work harmoniously, and carry on the work that I have begun, I believe that, with God’s help, they will never want for their daily bread, for there is still much to be done here in Russia.”…

The next generation did a fantastic job.

Ludwig, the Son

Ludwig was eager to make the attempt. More than a third of the state budget went to the military and he knew the potential profit from military contracts—but he was careful to avoid total dependence on such contracts, to rely on the spoken or even written word of government ministries. He had no intention of repeating his father’s costly mistakes.

[sic]

The Ludwig Nobel Factory became the country’s largest manufacturer of gun carriages.

Ludwig goes back to Russia and starts with the same business, but with (wisely) less reliance on government contracts.

The Russian economy was still medieval, the workers unskilled, and the education and technical training levels far below European standards.

[sic]

…finding that level of talent was just as difficult for Ludwig as it had been for his father, and the solution for both men was to recruit as many Swedes and Finns as were willing to work in Petersburg. There simply were not enough qualified Russians available.

Reading this book is a very stark reminder of just how poor Russia was. There was such a skill deficit that recruiting intelligent native Russian workers - which was far easier - was harder than just convincing Swedes and Germans to move to Russia!

Ludwig designed a new rifling machine and utilized phosphor bronze for greater strength and durability in the breech parts, machining all the bolt actions in his Petersburg plant. It was the first time bronze had been machined in Russia.

The Nobel family does so many firsts for Russia.

The Russian general was often called upon for such loans, and until his death in 1885 he was always willing to oblige his friend. Such support and encouragement was a most valuable asset for Ludwig’s plans for the Petersburg factory, the Izhevsk armory, and for other more vast industrial enterprises. His influence also made it easier for Ludwig to avoid many of the pitfalls that plagued the businessman in Russia, those problems the English director of the huge Chepelevsky Iron Works condemned as “the corruption inseparable from Russian official life.” The Englishman complained that “Even when a manager is capable and anxious to do his duty, he is baffled by the process of red-tapeism.”…

More than any European country of that era, the Russians truly had the least competent government. It’s so frustrating to read about.

…it was eight hundred miles from the nearest railroad and without telegraph. An isolated, primitive land with an abundance of freed serfs, it was an ideal challenge for someone with Ludwig Nobel’s vision, for an entrepreneur, for what the times were beginning to recognize as a “captain of industry.” In the course of the eight years from 1872 to 1880 Ludwig created in this wilderness a modern production facility filled with machine tools and assembly lines. He enlarged and modernized the local steel mill, increased productivity, introduced quality control, and made Russian rifle production independent of Austria which previously had supplied the raw materials.

A reminder that Ludwig set up in the middle of nowhere and just created a well-executing factory out of nothing. He single handedly reduced the cost of rifles from 27 to 21 rubles with how efficient he was. This was most certainly not “inevitable” technological progress. It was the will of one man.

Ludwig had abolished the standard system of fines along with the practice of paying wages in kind rather than in cash. In addition to eliminating those iniquitous methods of worker suppression he put all supervisory personnel on a salary system to remove the temptation to pocket bonus payments intended for the workers, and he made certain that everyone in the plant was paid promptly and on a regular schedule—not too common a practice in nineteenth-century Russia.

From the beginning, the Nobels are treating their workers significantly better than the standards of that era.

Ludwig always made certain that his workers’ accommodations were adequate and well maintained. This was especially important in Izhevsk where new housing had to be constructed for the hundreds of freed serfs who streamed into the area. He encouraged them to save a portion of their wages and established a savings bank, regularly adding substantial sums from his own profits. He refused to employ child labor and was an important and enthusiastic supporter of the movement to eliminate the hiring of workers who were less than twelve years old, giving his full endorsement to the 1881 government measure banning such labor. He reduced the workday from the usual twelve or fourteen hours to one of ten and a half hours, and instituted the first profit-sharing plan in Russia if not in the world.

The first profit-sharing plan in Russia! Clean accommodations at a time when those were unheard of. This man is practically a socialist, and of course, it’s never good enough for the commies. This is why you simply never argue or debate with these people. Nothing you do will ever be good enough for the rabid left. They will swallow you whole.

Ludwig continued to work on the underwater mines, improving on the idea that had first brought his father to the east. He also continued to keep before him those reasons which made his father leave the east; he closely monitored government developments as well as those in his own factory, making absolutely certain he did not overcommit himself in either labor force or plant capacity until military orders were signed, sealed, and delivered to his office.

Learning from the lessons of his father, he never overextends himself.

…outside the city the roads were so bad the coach drivers sat sideways with their legs hanging out so they could slip off easily when jarred by a hole larger than usual.15 Bogs, quagmires, spring thaws, rocks, potholes—these were the testing grounds of the Nobel wheel. The result was a monopoly of the market. The Nobel wheel was the Michelin of the time, famed throughout Russia as well as abroad.

Every step along the way, Ludwig identifies a problem that’s making his operation inefficient, and solves it. And by doing so, he actually creates a whole new market! What better place to test your tires than in the worst roads in all of Russia?

He was as interested in these administrative details as he was in the engineering, design, and processes of manufacturing. A fanatic for work, he was constantly in the plant to check on the operation of some machine he had designed, to supervise installation of a new lathe, to oversee repair of a press. There was no facet of production or distribution or direction that escaped his attention.

Unlike his father, Ludwig is a fantastic innovator as well as operator.

[T]he Nobel wheel earned Ludwig his second Order of the Imperial Eagle in 1882 at the Great Russian Exhibition.

The dude perfected his dad’s mines, made the best wheel of his era, and the best gun of his era and has not even started producing oil yet.

Alfred

Alfred had a dozen dynamite factories strategically scattered around the globe and was in the process of purchasing a magnificent Paris town house on the Avenue Malakoff. His success, his newfound affluence, like that of Ludwig, was a striking and painfully obvious contrast to Robert’s own career.

Robert is absolutely the black sheep of his family. But what surprised me is, we all know of Alfred Nobel thanks to the prize named in his honor, but reading this book it’s clear that Ludwig is the more impressive one. The book goes into a lot of detail into the numerous ways in which Robert is constantly depressed and whining, but I frankly find it to be too boring, so I’m not going to include tehse passages.

The interesting part is that Alfred, though highly accomplished, absolutely shares his brother Robert’s personality. He is constantly whining to his lover(s?) about how they’re going to leave him, periodically suffering from bouts of depression, and just overall a bummer.

…it was in Sweden where the first real breakthrough occurred. Alfred had moved there in 1863 and had taken out patents on the new explosive. He was not the first to experiment with nitroglycerine but he was the first to combine successful experimentation with a genius for business organization and financial management. He himself dated the era of dynamite as opening in 1864 when he set off a charge of pure nitroglycerine with a minute amount of gunpowder.

[sic]

Alfred’s brother Emil Oscar and four companions were killed in an explosion that totally destroyed the laboratory, terrified local authorities who promptly banned any future Nobel experiments near their new home, shattered the nerves of the father, and brought the Robert Nobels to Stockholm. Immanuel suffered a paralyzing stroke a month later, but neither he nor Alfred took Robert’s advice to “quit as soon as possible the damned career of inventor, which merely brings disaster in its wake.”.

And thus the invention of dynamite. Alfred would never forget that it killed Emil.

Ownership was based on a contract system with the government granting monopoly rights for exploitation in specific plots for periods of four years. The contract could be revoked at any time and there were no option rights for renewal. Contract holders therefore were never certain how long they would be able to hold their rights and they obviously were not too concerned about anything other than getting as much oil out of their pits as possible. Their contracts were expensive and the tsarist administration—never noted for its consistent economic policies and never immune to pressures, bribery, and favor-granting—was too uncertain a master. Those who leased pits understandably were not interested in measures of good management or improvement or conservation or anything else that might delay or interfere with the greatest maximum production and profit in the shortest possible time.

Alfred has a mind for numbers though and immediately creates an extremely profitable mechanism for distributing the dynamite.

Robert

…the temple of the Parsees had fallen into a state of disrepair; there were only a few Magi remaining to tend the fires and in 1880, when the last priest died, the government issued a decree forbidding future entry of fire-worshiping pilgrims. Once the dominant religious power in Persia until persecuted and banned by Mohammed and his followers, the Zoroastrians thus were forced from still another land.

Now the capital of Azerbaijan, but at the time it was part of the Russian tsar’s kingdom. It’s a fascinating read into the culture - today they’re mostly Muslim, but at the time Zoroastrianism was the main religion. All of this to say that the people of Baku were very different than urban Russians (or even most rural Russians).

Robert was fascinated. In all his travels he had never seen anything like Baku and in all his dreams for personal enrichment and involvement he had never seen greater potential.

[sic]

His offer was the “walnut money,” all 25,000 rubles of it. A sudden decision taken without consultation with either Ludwig—it was his money—or Alfred, the family expert in matters of finance and investment. When he returned to Petersburg he would have to convince his brother that he had found a much better investment for the money than riflestocks. Robert was right, but it took several years before anyone agreed with him. Ludwig, with little choice in the affair, treated the news as an obvious fait accompli and was resigned to the inevitability of extending further credits. Alfred took no part in the decisions or in the initial stages of setting up Robert’s new business. It was all Robert’s doing and his two brothers looked upon the scheme with as much enthusiasm as they had viewed his other projects.

Robert does Robert things, but even a broken clock is right twice a day. This particular “investment” would prove to be extremely fruitful later on.

He was a good chemist—his brother Alfred, a rather respectable judge of the subject, said that he was a very good chemist—and in a short time he was able to suggest improved methods of refining the crude oil to produce a higher-grade kerosene than was the norm for Baku refineries.

Nonetheless, Robert starts a small oil refinery in Baku.

Robert’s modernized refinery produced the highest-quality kerosene that had ever come out of Russia where the usual product was known as “Baku Sludge.” And after he demonstrated the superiority of his new techniques he made plans to build a new refinery. Again Ludwig advanced the money and in 1875 the Robert Nobel Refinery commenced operation. It unquestionably was the best of the hundred forty crammed into Black Town. And it was an all-Swedish operation.

An entirely Swedish town - they had to, because it was impossible to find skilled labor in Russia at the time.

This crew was responsible for making the first breakthroughs, for achieving what in later years would be expected of anyone associated with the Nobel company: being the first, producing the most reliable product, establishing new standards, setting a pace which others had to follow, providing goals and guidelines in all phases of a new industry.

Another first for the Nobels.

In just two years Robert Nobel proved he was the most competent refiner in Baku. His product could compete in quality with the American which then dominated the market of Russia and all other areas of the world where kerosene was sold.

Rockefeller and the Nobels would fight later in other parts of Europe.

Visitors from America who were familiar with conditions in the Pennsylvania fields were stunned by the incredible waste. Watching ton after ton of oil being burned off or allowed to run into lake or sea or into the calcareous soil was a painful experience for those who only had seen wells slowly pumping a few hundred barrels a day.

Has any country in the world wasted its natural resources more than Russia? It’s insane.

There was a proverb among Russian businessmen that “whoever lives a year among the oil owners of Baku can never again be civilized.” It was also said that anyone leaving Petersburg for Baku had his will prepared and estate set in order before departing.

Everyone thought Baku was a pointless endeavor. There was no infrastructure (financial or physical). The people were said to be little more than brutish thieves. And the oil wasn’t even of high quality - at least, that’s what all the experts said. And it’s in this environment that Robert and (mostly) Ludwig create the best oil operation in all of Europe (and quite possibly the world).

The time, the place, the setting were ideal for Ludwig’s particular genius. Baku was begging for a man of sweeping, comprehensive vision able to consider the full panorama of Russian realities and economic possibilities, to temper discouragement with optimism, and to regard no barrier as insurmountable.

Enter one of our two main heros.

Realization of promise and potential could never be effected, Ludwig knew, so long as all aspects of the industry beyond refining remained bound to the traditional ways of the past and the crippling restrictions of the present. Every phase of the business would have to be examined, every area rationalized, improved, modernized, to take advantage of new techniques already in use elsewhere or those devised expressly for Russian conditions.

Ludwig changes virtually every single aspect of how oil is extracted, refined, and delivered.

Ludwig

…there were no pipelines in Russia and to many individuals in government and industry the very idea of sending oil through pipes over a distance of eight, five, or two miles—or just a few feet—was as mysterious as it was impractical, maybe even dangerous. The arbas had carried the oil for years; the arbas should continue to carry the oil.

This is very similar to Rockefeller in the US; nobody besides him wanted to invest in long term infrastructure because everyone thought the oil would run out eventually, and this was just a get rich quick scheme. In both cases, only Rockefeller and Nobel made actual physical infrastructure investments, and only they would be the dominant players.

The Baku authorities had refused adamantly to permit pipe to be laid across their land; with most of the area between field and refinery a no-man’s-land belonging to the government, for a time that proved to be an effective barrier. But Ludwig’s pressures and determination triumphed over these opponents of change.

Remember this everytime people think the Nobels don’t get credit for the Russian oil industry. At every step of the way, they had to scratch and claw their way into the solution that’s still used to this day.

The work was frequently interrupted by protesting arba drivers and by the coopers who made their barrels; eight watchtowers had to be erected along the length of the line. The first pipeline in America at Pithole, Pennsylvania, had provoked a similar reaction from the teamsters and armed guards had been needed to fend off attacks and vandalism.

In every country in every age, people hate automation threatening to take away their jobs.

Nobel’s pipeline, constructed at a cost of $50,000, was then a fact of Baku life, an innovation for the Russian oil industry and—as he had predicted—a boon to the company. The freight cost from field to refinery was reduced from 10 kopecks a pood to a half-kopeck, and for the next few years other refiners were glad to pay the Nobel Company 5 kopecks a pood—later reduced to 1.5 kopecks a pood—for the privilege of utilizing the cost-saving Nobel pipeline. It took only a year for Ludwig’s investment to be paid in full, including the expenses of the Cossacks and their watchtowers.

Imagine that - reducing the cost by 20x! All of a sudden, it becomes economical to produce even ‘Baku sludge’. A payback period of less than 12 months is insane. It just goes to show how much oil was being wasted.

Despite the peculiarly Baku reaction to innovation and improvement the system obviously was there to stay. The next year the Baku Oil Company, Mirzoiev, Lianozov, and the Caspian Company put down nearly ninety miles of pipe. But Nobel remained the leader and by the turn of the century had three hundred twenty-six separate pipelines covering close to seventy miles.

And once the Nobels succeed, everyone wants to copy.

[W]hen “the great idea of the transport of petroleum and its products in bulk was first conceived.” It was, he declared, “the most important fact in the entire history of the petroleum industry.” Goulishambarov, his country’s chief oil expert and a student of the industry familiar with the world’s oil economy, participated in those discussions and thirty years later wrote that “the successful solution of this difficult problem was entirely due to Ludwig Nobel.”

Someone tell Lenin, who firmly thinks it was “the people” in the abstract who were responsible for this.

He found little support even though the shippers were constantly complaining about the leaky barrels. Other producers were even less receptive to this concept than they had been to the idea of pipelines. They argued that if the idea was really practical the clever Americans with all their business sense would have thought of it and would have used such tankers for transport across the Atlantic. They did not know that the Americans had in fact tried one tankship but it proved unequal to the challenges of the ocean. In America wood was plentiful and inexpensive but in Russia barrels accounted for half the price of the petroleum; they had to be constructed of wood brought in from remote areas of the empire or imported all the way from the United States.

Time for the next innovation. All our barrels are leaking, you all constantly fucking complain about it. Why don’t we invent a tanker? Nope, if it was a good idea the Americans would have already done it. That is not an argument!

As more and more oil gushed from the soil of Baku the price of the raw product fell but the price of the barrels remained the same; in time the barrel would be worth more than the oil. The system had to be changed. Dependence on barrel transport was as impractical as reliance on arbas. Ludwig’s arguments, as logical and persuasive as they seemed to him, failed to sway the opposition. There was absolutely no support for the scheme. It was too great a risk; it had never been done before.

That’s insane. The cost of the wood to produce the barrel was worth more than the oil it was carrying! A very similar phenomenon happened in America - Rockefeller single-handedly dropped the price of oil from $0.30 a gallon to $0.06! Same thing happening here. With more efficient infrastructure, less oil is wasted, and the supply of oil surges, dropping the price.

When no Russian showed interest he went to Lindholmen-Motala in Sweden and there, with Director Sven Almqvist, he designed the world’s first oil tanker.

Another first, thanks to the Nobel family - and this time, even Rockefeller hadn’t yet done that.

The first of the line, the first oil tanker in the world, was named most appropriately Zoroaster. It was the first of three Nobel ships honoring the ancient fire worshipers.

A wise move, given that they were headquartered in Baku.

The Caspian with its sudden storms and squalls was as dangerous as any ocean; vessels built to withstand Caspian conditions could sail the Atlantic or Pacific.

This is the unique problem that allowed them to conquer global trade even faster than the Americans. America was mostly transporting oil in relatively placid waters or by rail.

Ludwig made no effort to keep secret any part of the design and he rejected the pleas of his associates that he take out patents. He did not wish to profit in that manner, to restrict dissemination of ideas that could benefit the entire industry. Zoroaster was open to inspection and imitation by anyone who made the trip to the Caspian or who discussed the ship with Ludwig and his engineers in Petersburg or with Almqvist and his crew in Motala.

An incredibly generous and wise person. Widening the pie and making the oil industry successful would be more profitable than patenting tankers.

The new system of transport was not without its hazards and when accidents occurred the voices of alarm joined the chorus of opponents who feared Ludwig’s innovations.

Just like the pipelines.

Russian bulk kerosene on the Thames in the heart of London! It took little imagination to comprehend the significance of that precedent for the industry.

All thanks to Nobel. You’re welcome, Russia.

Ten years after Ludwig had conceived the idea and eight years after he had given the world a practical working model of that idea the discovery was accepted and copied outside of Russia. The worldwide revolution in transportation was under way.

[sic]

“The fruitful seed sown by the genius of Nobel in Russian soil,” as a British historian wrote nearly seventy years ago, had indeed “brought forth a brilliant harvest in both hemispheres.”.

Ludwig is incredibly impressive. While Alfred basically rides the coattails of a single invention, Ludwig keeps innovating and changes an entire industry.

…this was Ludwig Nobel’s empire within the empire. He created it in ten years. From well to wick it was all Nobel. It was the achievement of an individual who thoroughly dominated all aspects of an industry which he was literally creating as he went along, inventing this piece of equipment, supervising the layout of that particular freightyard, drawing plans for tankers and barges, for railroad cars, pumps, engines, storage tanks, warehouses; organizing sales areas, arranging bank loans, overseeing company finances. He was president, chief engineer, sales manager, an entire research and development department, chairman of the board, and market analyst.

Absolutely remarkable.

What he achieved for the industry on sea he achieved again on land, building his own fleet of railroad tankcars. The pattern was the same: contact the other major producers in Baku and receive a negative response; contact the shippers—in this case the Griazi-Tsaritsyn Railway Company—and receive a negative response. Then take out pen and paper and do it yourself.

Next innovation - railroads.

Ludwig demonstrated that land transportation, while more expensive than water, was essential. There was no other way to distribute petroleum products during the long winter when the Volga was frozen and river transportation halted, the very time when demand for illumination—and later, fuel—mounted to peaks directly proportionate to cold and darkness.

And remember how bad the roads were in Baku? There was no choice but rail, not for the large quantities they wanted transported every season.

By then there were thousands of tankcars in use on Russian railroads. The voices of opposition that had so vigorously opposed Ludwig’s ideas as impractical and dangerous—until they saw the practicality and profit and monopolistic threat and demanded that all tankcars be taken over and run by the state—were stilled. They had their own tankcars or used those of the state railways. A few years after the first Nobel trains were circling the empire the railroad administration saw the light and ordered their own tankcars.

Every time it’s the same story. Almost everyone unanimously opposes it, and somehow Ludwig persists and gets the thing done, only for everyone to turn around and agree.

Opposition never really bothered Ludwig, never really impeded his progress or diminished his determination. He was one of those individuals strengthened by it, one who seemed to thrive on it. “An industrial undertaking, properly managed and well organized,” he once wrote, “involves a constant struggle.… Its success is dependent upon foresight, perseverance, industry and economy.”

An incredible man.

Ludwig was not deterred by the report of the European expert who had recently visited Baku and declared that no oil of commercial value would ever be found below two hundred feet. A noted geology professor had said much the same thing in 1863: there was no oil beyond sixty or seventy feet and the new steam-powered drills would prove to be useless. The professor favored the ancient method of hand-dug pits. By the time Ludwig’s six American drillers arrived on the scene in 1878 there were no pits to be found but there were almost three hundred steam drills, an increase of three hundred percent in just two years.

I love these so called “experts”.

Ludwig also wanted to introduce a new system, one based on continuous distillation. The other Russian refiners did not copy the system and it was not used in the United States for another twenty-five years, yet it was unquestionably the most efficient method of refining and it enabled Nobel to refine a higher grade of kerosene and other products at less cost than the standard single-still system then in use throughout the world. It also made Nobel the largest refiner in Russia.

This guy was two decades ahead of America when it came to refining practices. Unreal.

Ludwig and his engineers, not content to rest on past achievements or to remain satisfied with present profits or progress, decided to cut costs of refining still further by building their own factories for production of sulphuric acid and caustic soda.

Once you start down the path of destruction (as opposed to differentiation), the only thing left to do is verticalize completely and drive costs to zero, thereby destroying the competition. It’s the Rockefeller playbook set in another country.

Ludwig also explored the feasibility of refining gasoline, then useful in the manufacture of rubber. With Baku crude yielding only 0.5 percent gasoline and the internal combustion engine still a few years off there was little need for great quantities, but Ludwig went ahead with his plans.

Incredibly forward thinking. He’s seeing where the world is going and starting now.

Ludwig was trying to improve and rationalize where others, blinded by the supplies of available oil, were content to use the old methods regardless of waste. And those methods were still less expensive than coal or wood.

Just like Rockefeller, Ludwig is far more long-term oriented than his competitors.

…the Nobel organization had an infinitely stronger control of both labor and its routine of work and it was able to command a higher discipline and loyalty because of its concern for the workers’ welfare. Ludwig’s adamant insistence on improving the lot of the worker, on providing decent housing, a living wage, safe and secure conditions, recreational facilities, and opportunities for self-improvement had previously been demonstrated in the wilderness of Izhevsk and in the factory complex on the Sampsonievsky.

[sic]

In addition to his profit-sharing plan—after a distribution of 8 percent of the profits to shareholders, 40 percent of the remainder was given to salaried personnel and the remaining 60 percent to shareholders—Ludwig provided improved housing for the wage-earners far superior to anything previously seen in Baku. He offered free education, established technical schools in Black Town as well as in Balakhany, and ordered construction of what became famous throughout the Caucasus and the international oil community: Villa Petrolea, a compound near White Town, a walled-in oasis of homes and apartments for the executives of the company resident in Baku.

[sic]

At a time when most laborers in the oversized Russian enterprises were crowded together in miserable barracks without regard to sex or married status the Nobel workers had separate accommodations far better than anything they could find in the town. Ludwig refused to agree with his fellow capitalists that squalor was the workers’ natural state, and in providing for his employees’ welfare he was as unusual in Russia as he was in most other countries of the world.

Remember these details for when the Nobels are accused of being class-traitors and “oppressing” people.

Ludwig’s reforms and concern were most unpopular. But Ludwig was accustomed to making his own decisions, travelling his own road; and he was certainly used to opposition, direct and indirect, silent and vocal. But no matter how violent or bitter or stubborn that opposition, Ludwig obstinately and optimistically charged ahead. He led the way and showed those around him how to overcome. “That they should have never been discouraged by the opposition they met at every step they took,” wrote British historian Charles Marvin in 1884, “is a remarkable testimony to the unflinching courage and irrepressible perseverance of Ludwig Nobel.”

Remember that even treating people well was unpopular. He did it anyway. This is the man you’re going to later accuse of being an oppressor. You truly cannot win with these people, so don’t bother ever engaging.

Self-sufficient, independent, with a devotion to work and a reliance on its routine, the Swedes demand a high level of order in that work, a sense of purpose and perspective in their own rational slide-rule civilization. For the Nobels, their boyhood of poverty strengthened the motivation. “He who does not work need not eat,” declared Ludwig. Immanuel believed that it was Alfred who demonstrated the greatest industry in youth and Ludwig the greatest genius, but when comparing achievements it is indeed difficult to assign any priority.

Perhaps that was true in their childhoods, but Ludwig definitely takes it once they’re adults.

For Alfred, execution did not mean direct and total personal involvement and responsibility. His rule was “never to do myself what another could do better, or at any rate, as well.” In contrast to both his brothers, he was certain that “if you try to do everything yourself in a very large concern, the result will be that nothing will be done properly,” and whoever tries to do it all himself will be “worn out in body and soul and probably ruined as well.”

Alfred is definitely a genius. He’s the best with numbers of anyone in the family, equally talented in chemistry and quite a remarkable business mind. but I’m not sure I agree with his fear of being ‘worn out in body and soul’.

…ruin, the threat of financial ruin, was never far from the nightmares of Alfred who was almost too Swedish, too northern, in his acute awareness of impending tragedy, his sense of doom, his fears that someday he would be forced to the wall and bankrupted. His father had been there twice; the sons needed no reminders of the agonies and frustrations that follow a fall from the heights.

The fear of his father’s financial ruin still haunted him into adulthood. It’s why he would never take the types of risks that Ludwig did, and it’s probably why he was never as great.

Ludwig was not a person easily forgotten, even after the briefest encounter. He was, in the words of one of his closest collaborators, “a personality in the fullest sense of the word.” Short in stature but broad-shouldered, with bushy eyebrows shading blue-gray eyes that had an almost hypnotic quality, he dominated any audience, revealing at once an inner clarity of purpose and deep concentrations of power.5 Unlike Alfred who lived and worked aloof from his employees, Ludwig’s home was in front of his factory, his office a room of his house, and he spent many hours with his engineers and draftsmen, his factory foremen and section chiefs. It showed: not only in his own frequently brusque, direct manner, but also in the explicit loyalty of his workers. Ludwig’s philosophy of business reflected a basic difference between the brothers; unlike Alfred, he believed in no secrets, no monopolies, no special privileges. The distinction was apparent in their personalities, with both Alfred and Robert often revealing that other side of the sometimes merry Swedish exterior, that “silent touch of the somber and hidden sadness of the pine forests,”

It’s hard to read this book and come away hating Ludwig.

Despite his practical talents, his administrative and technical skills, he was not a typical Swede with that lack of interest in people, that characteristic cited for decades as the reason why every second Swede is an engineer, why they have such interest in machinery, why they are fascinated with what can be touched and felt. Ludwig added a genuine social consciousness, a sincere interest in the well-being of those on his payroll. At heart an irrepressible optimist, he probably was as hopeful about mankind as he was about his own capabilities and career. This again put him at odds with both brothers who shared a more pessimistic, cynical view of their fellow man. In Robert that cynicism could turn into jealousy and suspicion; in Alfred it helped mold his radical political and religious sentiments.

The comparison among the brothers is quite interesting.

Incorporation

Six hundred shares at 5,000 rubles each were issued. Ludwig, who had purposely set the share price high to discourage market speculation, was the majority shareholder.

And thus the Nobel Brothers Petroleum Company (Branobel) is formed.

Alfred was greatly troubled. He had none of his brother’s robust optimism. “The main point,” he wrote Ludwig, “is that you build first and then look around for the wherewithall.” Alfred was far more conservative; he wanted all the financial support lined up and signed up before any contracts were let. For a time he was the one who provided the support. In 1881 he advanced 656,000 rubles…

This same argument happens over and over between the brothers.

Alfred tried to convince Ludwig to speculate with company shares on the market as a means of raising money but Ludwig regarded speculation as a refuge for those who were too lazy to work. He told Alfred to “give up market speculation as a bad occupation and leave it to those who are not suited for really useful work.”

Always too conservative Alfred.

Alfred could view the problem only through the mind of a financier or a bookkeeper: he argued that Ludwig had moved too far too fast, that he had not established proper lines of credit. He reminded his brother of his own experience in building a dynamite business in a variety of countries with a variety of currencies, market, and credit arrangements. He went further. When Ludwig did not heed all his advice Alfred, in a pique of anger, attacked his brother and his management of the company.

Alfred doesn’t realize that while he has differentiation (a product nobody else has on the market), Ludwig does not. Ludwig needs to go for domination, so it’s essential that he corner the entire market.

…he did not really understand the industry. The viciousness of the competition, the wild fluctuations in the price of a product dictated by totally unpredictable forces, the tremendous infrastructure needed to move that product from well to wick, the impossibility of using the main transportation artery for half the year—these were alien considerations to the man whose own industrial empire was based on a product he alone controlled. He alone determined the quantity of dynamite to release on the market; he alone decided which plants in which country should charge what price. Competition was of little or no concern to him and he could run his business from a hotel room in any country he chose. With Nobel Brothers forever dependent on Russian materials and transportation and markets Alfred feared there could never be a stable situation; and with the world market at the mercy of the power of Standard Oil and the Americans there could not even be a guaranteed profit. To his dying day Alfred was pessimistic about the future of Nobel Brothers and could only view with often overwhelming negativism the entire industry.

Exactly. He’s trying to apply the dynamite formula onto the Russian oil industry, and it would never work. But, even a broken clock is right twice a day - he was right to be pessimistic. But it had nothing to do with the oil industry and everythign to do with Russia.

Ludwig was not a bookkeeper but an engineer, not an accountant but an entrepreneur who was never content to delegate, to merely invest, but who always insisted on becoming personally and totally committed. When his brother delivered a particularly scurrilous broadside just before the end of the crisis year 1883, Ludwig reminded him that “far out in front of businessmen and bookkeepers stand men with heart, a sense of honor and a strong sense of duty.”

Ludwig is my favorite type of founder.

Nobel also was suffering from the drop in market price—in later years the company benefited during such declines by purchasing at depressed prices and holding the oil in its extensive storage facilities. It was totally committed, in fact overcommitted as Alfred never failed to point out.

Optionality is overrated.

Competition

It was Ludwig, after all, who was the leader of the industry. He owned the mantle of the “Oil King of Baku.” In Russia his name was certainly as well known as that of Rothschild, and in Europe the name was gaining fame through tales of Ludwig’s achievements and the successes of Alfred. Ludwig had nothing to fear from a Rothschild and he was confident that the rumors he had heard were true, that they really had no intention of investing heavily in the industry.

[sic]

Three weeks later Ludwig learned just how wrong he could be.

Enter the Rothschilds.

Rothschilds had studied Ludwig’s offer and had rejected it out of hand.

It’s interesting that he even makes the offer though.

Rothschild would never consider participating in any company without having majority control. As the Nobel representatives reeled from that declaration, Linger warned that the Rothschilds were too important and powerful in the financial world for anyone to consider competing with them.

Of course, in the same way that the Nobel family would never give up their company.

…a senior Standard executive, making the rounds in Europe, wrote Rockefeller that some agreement definitely should be made with Nobel—not to purchase the company because the Russian government would never allow it, but to acquire a substantial number of shares and retain Ludwig whose “shrewd ability, his knowledge of the Russian business, his high connections and his experience in dealing with the Czarist bureaucracy, make him invaluable.”…

So now it’s a 3-way battle between Nobel, Rockefeller, and Rothschilds.

With at least two Rothschilds looking over his shoulder he had to make absolutely certain his company could withstand a series of sorties or an all-out offensive. He revamped his sales organization, negotiated new contracts with all domestic and foreign agents, gave them a monopoly in their territories, allowed them to buy at the lowest possible price and then set their own selling price.

Walking a tightrope here Ludwig.

In late November Standard cut prices. Rockefeller’s goliath already controlled more than 90 percent of all American oil exports and was the domineering force in all world markets except the Russian; but the price of monopoly is eternal aggression and when the Americans saw Nobel’s sudden and successful invasion of their markets they quickly counterattacked.

What a line. The price of monopoly is eternal aggression.

Not only did Standard cut prices. They resorted to sabotage and bribery.

This is a very common playbook for Standard Oil.

…when the truth was learned the engineer was fired and Nobel became the sole supplier. Standard no doubt fed its own version of the story into its own rumor mill. It was already circulating reports that the Nobel product was vastly inferior to Standard’s kerosene, that it did not burn well and in many cases not at all. To consumers who had previously been exposed only to the Baku Sludge but not to the Nobel product the rumors had an impact and Nobel was forced to counterattack.

And sometimes, it backfired like crazy. The Nobels had a reputation for being extremely ethical, so if like in this case when Standard’s underhanded tactics were discovered, they permanently lost a customer.

Standard Oil had done everything possible in order to eliminate, ruin, neutralize, or absorb competing Russian companies: price-cutting, circulation of rumors, anything that would remove the Russian threat and leave Standard in absolute control, in a monopolistic position to raise prices…

Rockefeller and his ilk were absolutely merciless.

The first bulk shipments of Nobel kerosene were arriving in London and Standard officials were faced for the first time with a serious threat in a market they had long monopolized. They tightened their procedures for maintenance of barrels—the American kerosene was still being shipped in barrels—and reduced imports from the Lima fields. That malodorous Ohio oil would never keep customers from switching to Nobel’s brand. Standard was not about to let the British market slip away, but Nobel and then Rothschild were making important advances, were seizing some of the high ground. Their share of the British market increased from 2 percent in 1884 to almost 30 percent four years later.

Nobel is beating Standard Oil at their own game!

Nobel’s forty-two-mile line was completed in 1889—four hundred tons of Alfred’s dynamite were used in the process—but it was another seventeen years before the government finished that eight-inch $12-million line traversing the entire distance. The five-hundred-sixty-mile pipeline with its nineteen pumping stations was then the longest in the world, but it was a long time in construction. The government, never noted for its ability to expedite, stammered and stuttered across the Caucasus, reluctant to lose the control and revenue implicit in reliance on rail transport. It insisted that all the pipe and hydraulic equipment be of Russian make and threw up other obstacles. The inordinate delay prompted two Russian engineers with British backing to apply for a concession to construct a canal connecting the Caspian with the Black Sea.

Having your brother be the inventor of dynamite is a heck of a competitive advantage when it comes to building pipelines. Is it any wonder nobody else can compete?

An American engineer visiting Baku at the time was completely stunned by the sight; he said that in the United States Droozhba would have earned its owner a fortune, at least $25,000 a day. But for the little Armenian company which had just scraped together enough money to buy a tiny plot of land and erect a derrick the spouter spelled ruin. It could never pay for all the damages and was forced to bankruptcy.

I have to state it again - the Russians were blessed with more oil than they could handle. You accidentally find a geyser that requires a level of infrastructure most people simply did not have. So it was all wasted! Absolute insanity. Worse than wasted, it would drive whoever discovered it into bankruptcy because they could not pay for the damages. By the way, that $25,000 a day would be roughly $880,000 today. Each day.

The area of production was only twelve square miles but the gushing oil from that small bit of earth made millionaires at an unprecedented rate.

Russia has been blessed with natural resources unlike any country in the world. Those twelve square miles supplied 45% of the entire world’s crude oil.

To quote one of the Mohammedans, Nobel was “the only one who despised Oriental methods of competition,” always maintaining that “the European method was more successful anyway.” Ludwig was proud of his own particular guarantee and that of his company: “If you can find in Baku any man who can prove we are dishonest, cheat, adulterate or refuse to redress substantial grievances, we will face inquiry in your presence and if guilty, make amends.” Russian expert Charles Marvin was enthusiastic in his admiration of the honesty and the achievement, informing his readers that “the brothers Nobel have acquired their wealth by honourable means and by enterprise and vision such as is uncommon even in the England of our time.” Or in the America of that time where Standard Oil was clawing its way to dominance by less than “honourable means”—private and illegal freight rebates, discriminatory price policies, bribery, and other secretive means by which the competition was suppressed.

Here you have quite possibly the only ethical oil company in the entire world. And simultaneously, the only people accused of being oppressors. It’s just sad.

Such excesses eluded Ludwig and the Nobel officials residing in Baku. Their Villa Petrolea provided as much luxury as a Swede in southern Russia could hope to find. There were too many more important things on which to spend money: new lands, pipelines, derricks, refinery capacity, tankers, meeting rooms. The list was endless and the money continued to flow from the Nobel treasury.

Spend money where it counts - on infrastructure. While the other barons in Baku are living lavishly, the Nobels are reinvesting every dollar earned back into the business. Gee, I wonder who will win?

Standard Oil was as shocked as Nobel and the other Russian competitors of Bnito. Samuel, Lane, and the Rothschilds had kept their tanker plans secret and by the time the other companies recovered from the voyage of the Murex a sister ship, the Conch, was sliding down the ways. There soon followed a succession of others, all named for shells—Samuel never forgot those old shell boxes and the humble East End origin of the family. Lane and Samuel planned well. Despite the opposition of those who continued to protest that it was unsafe to use the canal, despite Standard’s vicious price-cutting efforts all across the Orient in one market after another and the cutthroat tactics of sales agents and near guerrilla warfare in their desperate efforts to retain their sales areas and the countless difficulties in organizing a Nobel-type storage and distribution system in sometimes primitive economic and commercial conditions—despite all this, Samuel prevailed.

And just like that, the competition is now here, with their own tanker.

Samuel was not dumped and his Tank Syndicate organization prospered, eventually becoming the Shell Transport and Trading Company.

[sic]

Samuel and Deterding represented a new generation of the oil industrialist, a new breed far removed from the pioneering do-it-yourself spirit of Ludwig Nobel.

I did not realize this is the origin of Shell!

Ludwig’s Death

His state of exhaustion was total, his health was shattered. His heart failed. He was in his fifty-seventh year.

Ludwig Nobel worked himself to the bone.

Ludwig Nobel was a man of “total integrity,” an “engineering genius” who combined his “inventive talent” with a great “capacity for organization” and the “power of patiently pressing down obstacles, and by sheer force of character commanding success.”

I really, really admire this man.

[T]he European press, confusing the news from Russia, reported that Alfred Nobel had died. From his laboratory at Sevran-Livry a few miles outside of Paris the inventor of dynamite had the distinct displeasure of reading obituaries condemning the munitions maker, the warlord who had made so much money finding new ways to maim and kill. Ironically the mistake was harbinger of history’s treatment of the two Nobels: Ludwig was soon forgotten; Alfred, brooding about his own obituaries, eventually rewrote his will leaving all his fortune to purposes which no obituary would ever condemn and which would guarantee forever his fame.

Alfred sees everyone in the world celebrating his death and it causes him to change his life’s work. It’s what gives birth to the Nobel Prize.

Ludwig, never a believer in classroom education at the expense of actual experience, had put Emanuel to work when he was sixteen, apprenticing him to a local factory where he worked a shift from six o’clock in the morning until midnight. Even Ludwig, with all his capacity for work, was impressed by those hours and by his son who managed to stick it out for a year. He had learned early the satisfaction derived from sustained periods of hard labor. “The main thing is the work,” he declared. “The victory of enterprise and initiative is worth more than money.”

Perhaps the only person I admire more than Ludwig is his son Emanuel. It is so refreshing to find a capable successor, especially after reading about the rather depressing stories of Dunkin’ Donuts. Emanuel is shaped wonderfully by his father and does an excellence job of continuing the family legacy.

It was after the tour, during the exchange of champagne toasts, that the tsar said he hoped to have the satisfaction of seeing Emanuel become a subject of the emperor. The young man immediately replied that he had waited for just such a moment to ask for that great honor. Emanuel, the perfect host and already a polished diplomat, thus became the first and only Nobel to take that step. From the court’s point of view it was a logical move. Why shouldn’t the leader of one of the country’s most important enterprises be a Russian citizen? For the Nobels it was also logical. Emanuel’s education and experience were Russian; becoming a citizen might help dissipate some of the jingoistic prejudices swelling in the land and stimulated from the highest circles. Besides, one does not easily say no to a tsar.

Emanuel is the only one of the Nobels who converts and becomes a Russian citizen.

A producer in Baku could thus choose which of the three to sell to—Nobel, Rothschild, or Mantashev—at a price regulated by a fourteen-member commission in Baku made up of both the major and minor refiners. It was a giant step forward for the industry, a serious, rational effort to move from the morass of jealousy and rivalry that had for so long prevented any form of cooperation. Not surprisingly, Standard studied the association with great interest.

This is the first oligopoly in the oil business.

With Russian oil flowing from the ground in ever-increasing quantities and the rate of Russian production climbing faster than the American, Standard was again haunted by the specter of Baku oil flooding world markets and costing only a fourth to a third as much to produce as the American.

Russians had a three of four fold advantage over Americans!

Alfred did his bit to bring the two parties together. The brain which had organized the dynamite trusts had an abhorrent fear of an all-out struggle with stronger competitors and he single-mindedly decided to propose to Standard that they buy into Nobel Brothers, taking 49 percent of the common stock or 15 million rubles of a new issue.

Genius maneuver. Between the oligopoly and this agreement, all of a sudden everyone is in business together and no longer fighting amongst each other.

Standard’s monopoly had been broken.

Standard Oil lost. It’s almost unthinkable.

Bradstreet’s reported that Standard was negotiating with Nobel and the Rothschilds, working out “a scheme for parcelling out between them the whole of the refined oil markets of the world”—the Russians would have the monopoly in Asia and Standard in England and Germany. The report was premature. Standard still had to make one more effort to control (usually defined in their manual as “eliminate” or “absorb”) their American competitors.

[sic]

The New York Herald headlined the meeting as a secret division of world markets. Again the press was premature; again Standard, despite all its price-cutting campaigns, was unable to drive its American competitors out of Europe. Plans to divide the world were indeed made and the agreements actually drawn up. But Standard had to admit defeat. It could neither conquer nor control.

I can’t wait to dive into Titan after reading these parts.

Nobel, Aron, and Libby—three men dividing the world. It was a scheme worthy of the age.

The global oil market is being portioned out. I wish I could have been a fly on the wall of that meeting.

The following year Russia produced more crude than the United States and by the end of the century Russian wells were pouring out more than half of the total world production.

And the bulk of that is from Nobel.

Alfred’s Death

The crisis was caused by the death of Alfred in December 1896. There was immedicate speculation that the financial bulwark of Nobel Brothers had been removed, that plans for expansion, for improvements, had to be curtailed, that the company was in serious danger of going under. When the terms of that remarkable will were made public, establishing a foundation and Swedish-Norwegian committees to award prizes for extraordinary human achievement, the impact was even greater. Alfred’s holdings in the company had to be liquidated in order to finance implementation of the will and to establish the foundation.

[sic]

Emanuel’s friends and advisors, fearing imminent collapse from a market panic, urged him to contest the will. But as spokesman for the Russian branch of the family he adamantly refused. He had been one of the executors of an earlier 1893 testament, was the eldest of all the nieces and nephews, and certainly the one closest to Alfred.

Alfred’s entire family wants the will to be revoked. People are trying to convince him that his uncle was delusional, that in his end days he didn’t mean it, he coudln’t possible give it all away. Emanuel, lovely Emanuel, says fuck off to everyone and with single-mindedness honors his uncle’s will. And that’s the only reason anyone today really even respects the name Nobel.

…he advised the executor Ragnar Sohlman to be guided by the Russian words “dushe prikashchik”—to allow the will and his own actions to be “spokesmen for the soul.” Emanuel personally followed his own advice, becoming the strongest supporter of Sohlman in his arduous task of execution. Sohlman in later years never was able to “recall without emotion the high-mindedness and courtesy he displayed towards me, though I had been appointed to represent interests which might be regarded as running counter to those he represented himself.”

Emanuel alone is extremely polite and curteous to Sohlman, the man chosen by his uncle to execute his will.

It was Emanuel who finally prevailed over the other members of the family, in particular the Swedish branch, and convinced them to accept the will as written. Robert had died four months before Alfred and his heirs—his sons Hjalmar, Ludwig, and son-in-law Count Ridderstolpe—did everything in their power to void it, to keep Alfred’s money within the family. They filed court suits; they tried to freeze assets in France, Germany, and Great Britain; they enlisted the support of highly placed Swedish officials and played on the fears of those who maintained that Swedish academies were ill-suited to select world leaders in science and art; they found receptive audiences for the concern and resentment felt when Alfred named the Norwegian parliament, still under the Swedish crown, to award a peace prize. To some extent they also managed to enlist the support of a few members of the Russian branch of the family. This disaffected trio mirrored in part the bitterness and resentment that had troubled Robert ever since his retirement and departure from Baku. He never stopped complaining…

And Emanuel alone, closeset of all to his uncle (who never had kids), kept the spirit and the letter of the will. He is the only reason we have the Nobel Prize today. Ludwig and Emanuel are the heroes of this story to me.

They made every effort to convert Emanuel to their position but he would not budge. In March 1897 when they learned he was in Berlin—he was negotiating a 21-million-mark loan from the Discount Bank in order to have funds available to purchase Alfred’s stock and cover any emergencies that might arise as the result of a forced sale—they rushed to meet with him but he refused to see them. He had made his position clear: he would not fight the will. He was interested in preservation of the family name and honor, in strict adherence to the wishes of Alfred, avoidance of open court squabbles, and retention of the family business.

What a man. I hope someone in my family will be this stalwart should I ever be fortunate enough to leave such a large amount to charity.

It was a lonely role to play. Family, friends, the press, even the king opposed him. Summoned to the palace, he was told by Oscar II that “it is your duty to your sisters and brothers, who are your wards, to see to it that their interests are not neglected in favour of some fantastic ideas of your uncle.” Emanuel was not convinced. He replied, “I would not care to expose my sisters and brothers to the risk of being reproached, in the future, by distinguished scientists for having appropriated funds which properly belong to them.” When the king persisted in his argument Emanuel could only repeat what he so firmly believed: “I cannot take it upon my conscience to try to lay hands on the money my uncle intended for persons worthier than myself.”5 The agreement was made, the will validated; the Nobel Foundation with its $8.6 million was established. Emanuel not only had preserved the honor of the family name. By his actions he had guaranteed for posterity the memory and annual remembrance of the achievements of at least one member of the family. But in 1898 it took courage to oppose popular sentiment, to fight his own family, to brook arguments with the king. His Russian valet feared for his life; when he returned to the Grand Hotel from his audience at the palace and explained to his valet that he had strongly disagreed with the sovereign, the valet started packing their trunks in a panic that the police would soon be at the door. But Sweden was not Russia and there was room for disagreement with royal authority. Emanuel could take his time about leaving the Swedish capital, content with his role as “dushe prikashchik.”

He even had to fight the monarchy of Sweden!

Revolution

There were no contracts, no papers, no lawyers, just a verbal agreement and a handshake. When Hagelin asked the Persian to send over some workmen to check the amount of oil coming into the Nobel pits he replied that it would not be necessary, that he trusted the Swede. Each day Karl Vasilievich went to check the tanks, to note the day’s flow, and then to send the payment to Assadouleff. This in a city condemned for its dishonesty, for what one journalist dismissed as “fierce financial competition, mad speculation, colossal frauds, thirst for monetary gain.”11 The board in Petersburg had the same trust. How could they argue with Hagelin’s performance? Providing the equivalent of the company’s dividend on one transaction would have been proof enough. They had learned to respect his judgment, to listen to his suggestions. When he proposed establishing a sales network in Central Asia they posed no objections.

Someday I’ll tire of quoting Charlie Munger, but that day is not today. Trust is the greatest economic force.

“We had in our service,” Hagelin wrote, “Swedes, Danes, Norwegians, Finns, Germans, Baits, Russians, Armenians, Persians, Georgians and even a Frenchman, but all these different nationals were first and foremost Nobelites.” The Nobel Company was their company, the successes and failures their own successes and failures. There was a pride in belonging to the pioneers, to the best, a loyalty and special spirit in being identified as a Nobelite.

This was truly a global operation - and a remarkable one.

[T]he tsarist secret police encouraged the socialist agitators, promoted their strikes and demands for better conditions, basing their strategy on the hope of diverting attention from what they—in all their wisdom and frequent overindulgence in the subtleties of countersubversive tactics—believed to be the greater threat.

What an own-goal by the tsarist regime. They never thought in a million years just how out of hand it would get.

[A]nother attempt to divert the attention of the workers from their economic misery, to divert the masses from thoughts of their immediate problems by providing scapegoats, to encourage Tatars to turn against Armenians and loyal Russians everywhere against the Jews as the evil exploiters responsible for the troubles of the nation.

It’s insane to me how willing the tsarist regime is to ferment racism in what would otherwise be a quite diverse country. Rather than just improve the working conditions, they’re willing to do anything else.

…the ravaging hordes destroyed over a thousand wells. Bibi Eibat was in a less vulnerable location and did not suffer the almost total destruction of Balakhany, but this “most famous oil field in the world” lost more than three hundred derricks and a hundred producing wells were set ablaze.

[sic]

Damage reached the millions. The industry was completely crippled. Never again would Russia lead the world in oil production. Its annual rate of nearly eleven million tons during the first years of the century would not be reached again until the late 1920s.

Oil production subsided for over two decades, and it permanently lost its top spot.

…the Jews were marked and Rothschild properties in Baku and Batum—the Bnito and Mazut installations—were attacked. When the government learned of the Rothschild loan to the Japanese those attacks were intensified.

Sigh…

A British observer on the scene reported rather imperiously that “labor has been meddled with, unsettled and made offensively dictatorial, and a splendid industry has been placed in jeopardy,” but by 1910 that meddling had brought the oil worker benefits previously reserved for the Nobelites: an eight-hour day in the fields, nine in refineries and factories; housing for nearly three-fourths of the work force with over 20 percent of those not housed receiving compensatory allowances.

Again - they’re fighting for benefits that the Nobelites already have. So how are you going to make the Nobels into bad guys?

Emanuel was an enlightened entrepreneur but he was not willing to relinquish much power of decision over production and personnel policies in his factory. He was confident that the Nobelites in Petersburg, like the Nobelites in Baku and along the Volga or anywhere else in the empire, were far better treated than their colleagues in other companies. For Nobel the welfare of the workers was still as primary a principle as it had been during the days of Ludwig. In the 1896 Nizhni-Novgorod exhibit the factory had received its third Imperial Eagle, this one awarded in recognition of the company’s “concern and solicitude” for its workers. Even in the midst of revolution and social unrest the Nobel organization was still far ahead of its capitalist colleagues. Emanuel built additional units at the workers’ housing complex on Sampsonievsky and constructed apartments for salaried personnel. He provided free medical care for all workers—the doctor in charge was the Nobel family physician, his daughter married to Emanuel’s brother Carl. A savings bank was established along with a special workers’ emergency support fund. Ludwig’s free educational opportunities now were broadened to include a school for the workers’ children.

The problem, Emanuel, is that these are not rational people. They do not care about the reality of how good they have it. “The cause” is everything to these clowns.

The Nobel factory was producing more diesel engines than any other concern in the world.

Diesel is taking off, so Emanuel pivots his factories to start making deisel engines. Even in the midst of a revolution, the Nobels are still innovating and outcompeting the rest of the world.

Hagelin was certain that a properly designed vessel could navigate the twists and turns of the waterway, risking the frequently stormy Vita, Onega, and Ladoga lakes. In 1902 Karl Vasilievich dramatically proved his point. He unexpectedly appeared in Petersburg one summer day with Volga tug Votyak docked on the river just across from the factory.

[sic]

The idea later became standard design on all ocean-going tankers. Construction of the ship was done in Russia. The three 120-horsepower engines were built by Swedish Diesel and ASEA provided the electrical equipment, assembling it under the watchful eyes of two young Russian machinists whose on-the-job exposure in Stockholm made them the best diesel mechanics in the fleet. Once again Hagelin proved the truth of one of his favorite Russian proverbs: “Risk is a noble action.”

Hagelin is a remarkable employee. He’s there in quite a few other scenes, but he really is ultra-dependable. And I agree with him. Taking risk is the only way to contribute something new back to the pool of human experience. It is the only way to move the species forward.

[T]his time drawing up plans for a forty-five-hundred-ton diesel tanker with two 500-horse-power engines, four times as large as anything then on the Caspian. Emanuel and the board rejected the idea. Hagelin would not be denied and went to another firm, Markulyev Brothers, which had recently signed a five-year contract to sell and distribute Nobel products. With that contract in hand, their good reputation, and Hagelin’s presence and persistence, the Kolomna shipyards agreed to advance credit for construction, believing with Hagelin and the Markulyevs that the new ship would soon pay for itself just as Ludwig’s Zoroaster had done so many years earlier.

[sic]

There was no doubt about the value or success of Hagelin’s stubborn scheme. He was right and the board was wrong. Emanuel immediately put Karl Vasilievich in charge of a sweeping program to modernize the fleet.

Remember that Emanuel is not as risk-seeking as his father Ludwig, but also not so risk averse as his uncle Alfred. But it helps to have someone like Hagelin who can take risk and prove it.

By 1915 Nobel captains were in command of three hundred fifteen vessels displacing a total of three hundred sixty-eight thousand tons. Only the Russian navy had greater tonnage in the empire and they too were modernizing their fleet.

An incredible achievement.

Exhausted physically and overwhelmingly pessimistic about the future of Russia, Olsen resigned his post as director and also as Norwegian consul general—a position he had held since 1905 when his country gained its independence from Sweden. He had informed Emanuel of his intention to retire nearly a year earlier but had probably made up his mind before that. After the events of 1903–1906 he had little faith in the future stability of the country and convinced his wife to sell most of her Nobel stock.

Olsen had the right idea. It’s impossible to do business in a country that is ill-governed. You can be the greatest entrepreneur ever (and it’s possible Ludwig was just that, that’s how much I respect him). Without a well-functioning state, it is simply building a castle on quicksand.

Several thousand workers were suddenly on the streets but—much to Rothschilds’s credit—every one of them received some kind of pension or a half-year’s wages.

Amazing how the capitalist Jews you villify so greatly are the ones who treated the peasants best of all. No other major oil employer did this.

After twenty-seven years of profits in the golden age of the Russian oil industry the Rothschilds knew when to withdraw. In a few more years they would have lost everything.

Smart. The Nobels kept waiting.

Nobel shipped more than a third of the kerosene, more than a fourth of all the fuel oil, and more than half the lubricants.

This is on a global scale!

Bolsheviks out-shouted, outorganized, and outmaneuvered their divided opponents, rallying the people with cries of “Peace! Land! Bread!”—forcing the center of political gravity far to the left and eventually seizing all initiative from the Provisional Government. Lenin repeatedly demonstrated that he was the most adaptable, decisive, imaginative, and single-minded leader on the scene but the ruthlessness that would follow absolute control was not yet apparent, least of all to the many foreign observers and visiting socialists like Hjalmar Branting, Sweden’s first Social Democratic member of parliament and later the organizer of its first Social Democratic government. Along with numerous other European liberals he enthusiastically applauded the downfall of the Russian government and the rise of Lenin.

There’s a lot of quite brutal scenes in this part. Quite frankly, though I have them highlighted, they are simply too difficult to re-read and cover in detail. I get extremely emotional. I’m going to skip most of them for the sake of this blog post.

Estates were pillaged, peasants seized the land, troops deserted by the thousands in order to return to their villages and share in the spoils. As the workers’ demands became more radical, the shortages of supplies and raw materials critical, and the continuing pressures of the war overwhelming, production in the factories drastically declined. The transport system, crushed by the thousands trying to flee or to join the chaos, approached total breakdown as engines and cars were neither repaired nor replaced. To prevent mass migration to other lands the government decreed that no more than 500 rubles a month could be taken or sent out of the country, but at this stage most of those fleeing were non-Russians.

Sigh.

The wives and children of Nobel’s Swedish employees moved back to the safe shores of their neutral country but almost all the Swedish salaried and wage-earning personnel stayed on. Their future well-being depended on the future stability of the country, on the survival of the factory, the recovery of the oil industry. Not until their lives were threatened did they leave.

Crazy that even during this the wage-earning employees are still staying on. Just goes to show nobody really expected it to get so crazy.

Written just prior to the revolution this practical manual by a Swedish veteran of twenty-seven-years’ experience selling machinery all over the empire confidently predicted that “whatever changes do take place, they will be mostly for the best.” Russia, the manual declared, “after many centuries of oppression and repression, will be opened out to the capital, enterprise and energy of the nations of the West,” and “the numbing and deadening power of the ‘Tchenovniks’ [bureaucrats] and of the old corrupt police, who levied blackmail on the merchants and manufacturers, will now be curtailed.”3 Any residue of such misplaced optimism was quickly dispelled by the events of November.

This is how optimistic people were about Russia. This is the potential that was squandered.

Lenin advised his followers not to whine over the useless vermin blocking their path.

This line is seared into my brain. Anytime anyone talks class consciousness, just remember how real communists refer to their own “class”.

It was in fact a trial with the Nobel director accused of being a capitalist incapable of comprehending the position of the workers or recognizing their interests. The main orator, the prosecutor, was a recently hired employee whom Hagelin did not know but suspected of being a professional agitator skilled in rousing a crowd and in suppressing any who stood in opposition. At one point a group of the older workers gathered around their Karl Vasilievich to protect him from possible seizure by those whipped into an angry frenzy by the shoutings of the prosecutor.

Absolute insanity.

…those who had protected him at the meeting came to his room to warn of an attempt on his life. Hagelin sailed for Saratov the next day. He was not a moment too soon. The news of Nobel Brothers’ record 40-percent dividend was just being announced in Petersburg. It was the last good news the company had to report. Hagelin’s experience in Astrakhan was repeated over and over again as the revolutionary councils braced their once-powerful employers with demands.

And thus the legalized looting begins.

“They’re asking us to arrange our own fourth-class funeral, one in which the corpse himself drives the hearse.” The petroleum industry was nationalized.

And it would never recover its production.

An overture was made to Hagelin to take over technical leadership of the industry—he had impeccable credentials: proletariat-peasant background, a worker who had risen through the ranks, understood and respected by the workers. But Hagelin declined. He had absolutely no political sympathies with Russia’s new masters and he had no desire to be subject to the whims, inexperience, and stupidities of committees of workers who would watch his every move.

Of course - they had no technical skills! Ranting and raving about class consciousness does not an engineer make. And of course he declines. I cannot imagine a worse fate than an engineer having a non-technical lunatic for a boss.

A former insane-asylum inmate was named Minister of War and promptly proposed the election of a donkey to the council to represent oppressed animals; an illiterate sailor was placed in charge of the schools, and a well-known pimp was given control of public welfare.

You cannot make this shit up.

British representatives were judged by the Nobelites to be less capable than their Turkish predecessors and, much to Lessner’s annoyance, consistently sided with the government against the owners and industrialists. Was it to gain the loyalty of the workers, he wondered, or perhaps to force a wedge that could later be used to strengthen the British presence in the area, perhaps to replace Nobel? Work in the fields slowed to a lazy and largely unproductive pace as material shortages were added to the other problems. Storage tanks and reservoirs were filled to overflowing.

Managing an oil refinery is an extremely sophisticated and complex operation. It’s hilarious to me that these fucking retards think they can just put someone with a poetry major and they’ll “figure it out”. Good luck.

Ministers of the Azerbaidzhan government, despite Soviet guarantees of safety spelled out in the documents of surrender, were put to the sword. Thousands more were arrested and taken to the Cheka prison on the nearby island of Nargen, there to disappear without trace. There was no security for the bourgeoisie, no missed opportunity to make existence in home or office precarious and perilous.

I just can’t.

A “week of plundering” was decreed: the revolutionary proletariat “oppressed and deprived by brutal capitalists of the very necessities of life” were allowed one week to search the homes of the “capitalist bloodsuckers and their parasites” for clothes, money, furniture, utensils.

So basically “the purge”.

“there was always the danger of being stood up against the wall and shot,” but none of the Nobel chiefs really believed that the danger was more than a passing phenomenon, that the Bolsheviks could continue very long in power. In September 1920 Wannebo got out to Sweden, Malm and Lessner to Europe. Nobel’s last chief in Baku, traveling via Tiflis, Batum, and Constantinople, was met at his arrival in Germany by Emanuel and Hagelin who had been out for two years.

Again, the whole time, they were all so optimistic.

Could the Bolsheviks continue in power? Neither the Russian nor international oil industrialists believed it possible Certainly the Nobels did not imagine they had seen the last of Russia. Somehow and sometime soon they would regain control of what had been taken from them. The total and irrevocable loss of all their property was inconceivable although they knew that certain possessions would never again be seen.

This is really, really sad.

Emanuel and Gustav had managed to transfer titles and papers from Petersburg before the Bolsheviks could lay claim to the international assets of the company. Nobel thus managed to retain its Société Franco-Egyptienne with holdings in France, Egypt, and Syria, and they still had their SAIC marketing outlet. The skeletal remains of EPU was of little use to them but they did make every effort to recapture the two markets that were once Nobel provinces: the newly independent nations of Finland and Poland.

They still lost the vast majority of their wealth.

Nobel did not consider other offers once serious discussions commenced with Standard. The family preferred to work with the Americans, to have the power of Standard and the backing of its country with the businesslike approach of its cooperative consular corps helping to hold the Nobel banner. How else could they even hope to withstand the power of the Bolsheviks who were then sweeping down from the north to threaten the Moslem Republic of Azerbaidzhan?

[sic]

Standard showed its faith in the future of freedom in Russia by advancing a half-million dollars to Nobel to purchase additional oil-producing lands in Baku for the joint account of the two companies. Twenty-six Broadway was obviously convinced that the Bolshevik regime would not last, that one day Standard’s engineers would be working in the area described by Sadler as “a production engineer’s dream” and “a wildcatter’s paradise.”

Suddenly, Rockefeller seems like the preferrable option compared to the Bolsheviks.

Teagle and his board were quite willing to gamble on losing their entire investment against the unique opportunity of gaining wide and easy access to half the Russian industry by buying half the Nobel family’s interests in their company. It was easily worth the relatively few millions the Nobels were asking.

They’re forced to sell their assets for pennies on the dollar.

Conclusion

In 1923 he again became a Swedish citizen.

Welcome back home.

The Zoroaster, in a final twist of fate, was sold to the Soviets who put duplicates of the Nobel two-stroke engine in their new transport ships.

Fuck the Soviets.

…he found great pleasure in life—even in exile. He refused to be consumed by anger and bitterness; he rejected reliance on recriminations unlike a Deterding who never seemed to tire of describing Bolshevik duplicity, attacking their claim to achievements that were really the heritage and contribution of the dispossessed. “Nationalism,” Emanuel used to say, “is a pretty word for the meanest of actions.” But he refused to succumb to stronger language, not even when the Soviets implicated him in the Russian banknote trial of 1930.

This is where his strength of character shines brightest. Unlike Alfred, he never succumbed to depression.

Emanuel ignored the charges. His few remaining years were not going to be wasted worrying about such absurdities or falling victim to a paralyzing pestilence of hate and frustration. There were more important things to do. He was, after all, a Nobel, the ranking Nobel, heir and guardian of a great family and tradition. And at no time was that more important than during the annual Nobel Prize ceremonies. As the individual who had done so much to make those prizes possible, the one who had stood up to family, friends, and the crown to guarantee survival of the spirit of his uncle’s will, who could more appropriately take the hand of the winner and with a sincere and royally hospitable manner extend congratulations and good wishes? He enjoyed the occasion tremendously, the pomp and circumstance, the honor it did his uncle, the family, the nation, the memories it brought flooding into his own being. But then he enjoyed many things during his years of retirement, the many trips—especially to places he had never seen like India and Ceylon. There was the annual taking of the waters at Professor Dapper’s Sanitorium in Bad Kissingen, long a mecca for the wealthy of Petersburg. His last trip was to Copenhagen in January 1932 to visit the tsar’s sister, Grand Princess Olga Alexandrovna. Five weeks later he suffered a stroke and on 31 May he died.

Rest in peace Emanuel.

…in 1959 Nobel Brothers Petroleum Company, in its eightieth year, was formally dissolved. Nobelevski, the Nobel period of the world’s oil history, was officially over.

The only company that could have, and did, take on Standard Oil. And won.

The Ludwig Nobel Factory, largest engine plant in the Soviet Union, became simply Russkiy Diesel and Emanuel’s great clubhouse for the workers was converted into the Vyborg Palace of Culture. The office building of Nobel Brothers in town was taken over by the Coal Commissariat and a few blocks away the Kazan Cathedral where both Immanuel and Robert once had toiled was transformed into the Museum of Religious History and Atheism.

The erasure is despicable.

In Baku, as all visual proof of the Nobel name was removed, Tagiev’s textile factories overnight became the Lenin Mills and out where the benevolent Tatar’s ships used to dock near the Nobel fleet there suddenly appeared the Paris Commune Shipyards.

I shouldn’t be surprised. Communists taking credit for things they didn’t do is nothing new, but it still angers me immensely.

Wrenched from a place in history, reduced to the category of nonperson, Immanuel, Ludwig, Robert, Emanuel, Hagelin, Olsen, and all those Nobelites who struggled and strained to build and create disappeared into the mist, their glory, power, and honor obliterated by those who seized what they had created, their acts long forgotten by those secure from such a miserable fate.

No words.

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It’s very, very hard for me to write anything super cogent. Reading about the Russian revolution or Mao always makes me emotional. I hope the world recognizes the amazing contribution Ludwig and Emanuel made. Climate change is unfortunate, but without oil we literally could not have modernity. It sped civilization forward, and the numerous innovations the Nobel family gave to oil is the most direct contribution to that.

Emanuel is perhaps the most impressive character in the book. I can only hope to raise my kids half as well as Ludwig did. He instilled a remarkable work ethic into Emanuel, an incredible sense of morality, and the courage to not compromise his values.

And the fruit of this character is the Nobel Prize.

And fuck any communist.