The Humbugs of the World

CHAPTER XXIV

Every sham, as has often been said, proves some reality. Petroleum exists, no doubt, and is an important addition to our national wealth. But the Petroleum humbug or mania or superstition, or whatever you choose to call it, is a humbug, just as truly, and a big one, whether we use the word in its milder or its bitterer sense.

There are more than six hundred petroleum companies. The capital they call for, is certainly not less than five hundred million dollars. The money invested in the notorious South Sea Bubble was less than two-fifths as much – only about $190,000,000.

Now, this petroleum business – very much of it – is just as thorough a gambling business as any faro bank ever set up in Broadway, or any other stock speculation ever conjured up in Wall Street – as much so, for instance, as the well known Parker Vein coal company.

I shall here tell exactly how those well known and enterprising financiers, Messrs. Peter Rolleum and Diddle Digwell proceeded in organizing the New-York and Rangoon Petroleum Company, of which all my readers have seen the advertisements everywhere, and of which the former is the Vice President and managing officer, and the latter Secretary. In June 1864, neither of these worthy gentleman was worth a cent. Rolleum shinned up and down in some commission agency or other, and Digwell had a small salary as clerk in some insurance or money concern. They barely earned a living. Now, Rolleum says he is worth $200,000; and Mr. Secretary Digwell, besides about $10,000 worth of stock in the New York and Rangoon, has his comfortable salary and his highly respectable “posish” – to use a little bit of business slang.

Mr. Rolleum was the originator of the scheme, and let Digwell into it; and together they went to work. They had a few hundred dollars in cash, no particular credit, an entirely unlimited fund of lies, a good deal of industry, plausibility, talk, and cheek, considerable acquaintance with business, and an instinctive appreciation of some of the more selfish motives commonly influential among men.

First of all, Rolleum made a trip into the oil country. Here, while picking up some of his ordinary agency business, he looked around among the wells and oil lands, talking, and examining and inquiring of everybody about everything, with a busy, solemn face, and the air of one who does not wish it to be supposed that he has important interests in his care. Then he talked with some men at (we will say) Titusville and thereabouts; told all about his valuable business connections in New York City: and after getting a little acquainted, he laid before each of half-a-dozen or so of them, this proposition:

“You can have a good many shares of a first class new oil company about to be formed just for permitting your name to be used in its interest, and for being a trustee.” A thousand shares apiece, he said; to be valued at five dollars each, the par value however, being ten dollars. Five thousand dollars each man, and to be made ten thousand, as soon as the proposed puffing should enable them to sell out. After a little hesitation, a sufficient number consented. There was nothing to pay, something handsome to get, and all they were asked for it was, to let a man talk about them. What if he did lie? That was his business.

This fixed four out of the nine intended trustees.

Rolleum also obtained memoranda or printed circulars showing the amounts for which a number of oil land owners would sell their holes in the ground or the room for making others, and describing the premises. He now flew back to New York, and went to sundry persons of some means and some position but of no great nobility, and thus he said:

“Here are these wealthy and distinguished oil men right there on the ground who are going to be trustees of my new company.

“You serve too, won’t you? One thousand shares for your trouble – five thousand dollars. No money to pay – I will see to all that. Here are the lands we can buy,” – and he showed his lists. The bribe, and the names of those already bribed, influenced them, and this secured three more trustees. Two more were needed, namely the President and Vice President. Rolleum himself was to be the latter; his next move was to secure the former.

This, the most critical part of the scheme, was cunningly delayed until this time. Rolleum went to the Honorable A. Bee, a gentleman of a good deal of ability, pretty widely known, not very rich, believed (perhaps for that reason) to be honest, no longer young, and of a reverend yet agreeable presence. Him the plausible Rolleum told all about the new Company; what a respectable board of trustees there was going to be – and he showed the names; all either experienced and substantial men of the oil country, or reputable business men of New York City. And they have agreed to serve, in part because they know what a very honest company this is, and still more because they hope that the Honorable A. Bee will become President.

“My dear Sir,” urged Rolleum, sweetly, “this legitimate business enterprise must succeed, and must secure wealth, reputation, and influence to all connected with it. We know that you are above pecuniary considerations, and that you do not need our influence, or anybody’s. We need yours. And you need not do any work. I will do that. We only need your name. And merely as a matter of form, because the officers are expected to be interested in their own company, I have set apart two thousand shares, being at half par or $5 a share, $10,000 of stock, to stand in your name. See how respectable all these Trustees are!” And he showed the list and preached upon the items of it.

“This man is worth so many millions, that man is such an influential editor. Could I have obtained such names if this were not a perfectly square thing?”

Ten thousand dollars will go some ways towards squaring almost anything, with many people, even if it is a mere matter of form; and so the old gentleman consented. This fixed the whole official “slate.”

Now to set up the machine.

In a few days of sharp running and talking, Rolleum and Digwell accomplished this, as follows:

First, they hired and furnished handsomely, paying cash whenever they couldn’t help it, a couple of pleasant first floor rooms close to Wall Street. No dingy desk-room up in some dark corner or attic, for them. Respectability is the thing for Rolleum.

Second, they hired a lawyer to draft the proper papers, and had the New York and Rangoon Petroleum Company “Duly incorporated under the mining and statute laws of the State of New York,” with charter, by-laws, seal, officers’ names, and everything fine, new, grand, magnificent, impressive, formal, respectable and business-like.

Third, they now had every requisite of a powerful, enterprising and highly successful corporation, except the small trifles of money, land and oil. But what are these, to such geniuses as Rolleum and Digwell? Singular if having invented and set the trap, they could not catch the birds!

They bought about three pints of oil, for one dollar; and that settled one part of the question. They bought it ready sorted and vialled and labelled; some crude and green, some yellowish, some limpid as water, half a dozen or so of different specimens. These, in their tall vials of most respectable appearance, they placed casually on the mantel-piece of the outer office. They were specimens of the oils which the company’s wells are confidently expected to yield – when they get ’em!

Last of all – land and money. Subscriptions to capital stock are to furnish money, money will buy land. And saying we’ve got land will procure subscriptions.

“It’s not much of a lie, after all,” said Rolleum, confidentially, to brother Digwell. “When we’ve said we’ve got it for awhile, we shall get it. It’s not a lie at all. It’s only discounting the truth at sixty days!”

So he and Digwell went to work and made a splendid prospectus and advertisement, the latter an abridged edition of the former. This prospectus was a great triumph of business lying mixed with plums and spices of truth, and all set forth with taking “display lines.”

It began with a stately row of names: New York and Rangoon Petroleum Company; Honorable Abraham Bee, President; Peter Rolleum, Esq., Vice President; Diddle Digwell, Esq., Secretary; and so on. With cool impudence it then gave a list headed “Lands and Property” – not saying “of the Company” for fear of a prosecution for swindling. But the list below began with the words “the oil lands to be conveyed to the Company are as follows:” “that’s exactly it” quoth Rolleum – “no lie there, at any rate. They are to ‘to be conveyed’ to us – if we choose – just as soon as we can pay for them.” And then the list went on from “No. 1” to “No. 43,” giving in a row all those memoranda which Rolleum had obtained in Venango County and the region round about, of the descriptions of the real estate which the landsharks up there would be glad to sell for what they asked for it.

The Prospectus said the capital of the company was one million dollars, in one hundred thousand shares at ten dollars each. But in order to obtain a WORKING CAPITAL, twenty thousand shares are offered for a limited period at five dollars each, not subject to further assessment.

And it added, though with more phrases, something to the following effect: Hurry! Pay quick! Or you will lose your chance! In conclusion the whole was wound up with many wise and moral observations about legitimate business, interests of stockholders, heavy capitalists, economical management, and other such things; and it bestowed some rather fat compliments upon the honorable Abraham Bee and the Trustees.

Having concocted this choice morsel of bait, they set it in the great stream of newspapers, there to catch fish. In plain terms, with some cash and some credit – for their means would not even reach to pay in advance the whole of their first advertising bill – they managed to have their advertisement published during several weeks in a carefully chosen group of about thirty of the principal newspapers of the United States.

The whole web was now woven; and Rolleum and Digwell, like two hungry spiders, squatted in their den, every nerve thrilling to feel the first buzz of the first fly. It was natural that the scamps should feel a good deal excited: it was life or death with them. If a confiding public, in answer to their impassioned appeal, should generously remit, they were made men for life. If not, instead of being rich and respected gentlemen, they were ridiculous, detected swindlers.

Well – they succeeded. So truthful is our Great American Nation – so confiding, so sure of the truth of what is said in print, even if only in the advertising columns of a newspaper – so certain of the good faith of people who have their names printed in large capitals and with a handle at one end – that actually these fellows had a hundred thousand dollars in bank within ten weeks – before they owned one foot of land, or one inch of well, or one drop of oil, except those three pints in the vials on the office shelf!

And remember this is no imaginary case. I am giving point by point the exact transactions of a real Petroleum Company.

Everything I have told was done, only if possible with a more false and baseless impudence than I have described. And scores and scores of other Petroleum Companies have been organized in ways exactly as unprincipled. Some of them may perhaps have proceeded as real business concerns. Some have stopped and disappeared as soon as the managers could get a handsome sum of money into their pockets for stock.

What the result will be, in the present case, I don’t know. The New York and Rangoon Petroleum Company, when I last knew about it, “still lived.” They had – or said they had – bought some land. I have not heard of their receiving any oil raised from their own wells. They have sent off a monstrous quantity of circulars, prospectuses and advertisements. They caused a portrait and biography of the Honorable A. Bee to be printed in a very respectable periodical, and paid five hundred dollars for it. They had themselves systematically puffed up to the seventh heaven in a long series of articles in another periodical, and paid the owner of it $2,000 or so in stock. They talk very big about a dividend. But although they have received a great deal of money, and paid out a great deal, I do not know of their paying their stockholders any yet. If they should, it would not prove much. For it is sometimes considered “a good dodge” to declare and pay a large dividend before any real profits have been earned; as this is calculated to enhance the price of shares, and to make them “go off like hot cakes.”

I shall not make any “moral” about this story. It teaches its own. It is a very mild statement of what was done to establish an actual specimen, – and far from being of the worst description – of a great part of the Petroleum Company enterprises of the day.

It is whispered that somehow or other the trustees and officers of the New York and Rangoon do not own so much stock of their company as they did, having managed to have their stock sold to subscribers as if it were company stock. If this is so, those gentlemen have made their reward sure; and Mr. Peter Rolleum, having the cash in hand for that very liberal allotment of stock which he gave himself for his trouble in getting up the New York and Rangoon Petroleum Company, is very likely half or a quarter as rich as he says.

CHAPTER XXV

Alboni, the singer, had an exquisitely sweet voice, but was a very big fat woman. Somebody accordingly remarked that she was an elephant that had swallowed a nightingale. About as incongruous is the idea of a nation of damp, foggy, fat, full-figured, broad-sterned, gin-drinking, tobacco-smoking Dutchmen in Holland, going crazy over a flower. But they did so, for three or four years together. Their craze is known in history as the Tulipomania, because it was a mania about tulips.

Just a word about the Dutchmen first.

These stout old fellows were not only hardy navigators, keen discoverers, ingenious engineers, laborious workmen, able financiers, shrewd and rich merchants, enthusiastic patriots and tremendous fighters, but they were eminently distinguished (as they still are to a considerable extent) by a love of elegant literature, poetry, painting, music and other fine arts, including horticulture. It was a Fleming that invented painting in oils. Before him, white of egg was used, or gum-water, or some such imperfect material, for spreading the color. Erasmus, one of the most learned, ready-minded, acute, graceful and witty scholars that ever lived, was a Dutchman. All Holland and Flanders, in days when they were richer, and stronger compared with the rest of the world than they are now, were full of singing societies and musical societies and poetry making societies. The universities of Leyden and Utrecht and Louvain are of highly an ancient European fame. And as for flowers, and bulbs in particular, Holland is a principal home and market of them now, more than two hundred years after the time I am going to tell of.

Tulips grow wild in Southern Russia, the Crimea and Asia Minor, as potatoes do in Peru. The first tulip in Christian Europe was raised in Augsburg, in the garden of a flower-loving lawyer, one Counsellor Herwart, in the year 1559, thirteen years after Luther died. This tulip bulb was sent to Herwart from Constantinople. For about eighty years after this the flower continually increased in repute and became more and more known and cultivated, until the fantastic eagerness of the demand for fine ones and the great prices that they brought, resulted in a real mania like that about the morus multicaulis, or the petroleum mania of to-day, but much more intense. It began in the year 1635, and went out with an explosion in the year 1837.

This tulip business is, I believe, the only speculative excitement in history whose subject-matter did not even claim to have any real value. Petroleum is worth some shillings a gallon for actual use for many purposes. Stocks always claim to represent some real trade or business. The morus multicaulis was to be as permanent a source of wealth as corn, and was expected to produce the well known mercantile substance of silk. But nobody ever pretended that tulips could be eaten, or manufactured, or consumed in any way of practical usefulness. They have not one single quality of the kind termed useful. They have nothing desirable except the beauty of a peculiarly short-lived blossom. You can do absolutely nothing with them except to look at them. A speculation in them is exactly as reasonable as one in butterflies would be.

In the course of about one year, 1634-5, the tulip frenzy, after having increased for fifteen or twenty years with considerable speed, came to a climax, and poisoned the whole Dutch nation. Prices had at the end of this short period risen from high to extravagant, and from extravagant to insane. High and low, counts, burgomasters, merchants, shop-keepers, servants, shoe-blacks, all were buying and selling tulips like mad. In order to make the commodity of the day accessible to all, a new weight was invented, called a perit, so small that there were about eight thousand of them in one pound avoirdupois, and a single tulip root weighing from half an ounce to an ounce, would contain from 200 to 400 of these perits. Thus, anybody unable to buy a whole tulip, could buy a perit or two, and have what the lawyers call an “undivided interest” in a root. This way of owning shows how utterly unreal was the pretended value. For imagine a small owner attempting to take his own perits and put them in his pocket. He would make a little hole in the tulip-root, would probably kill it, and would certainly obtain a little bit of utterly worthless pulp for himself, and no value at all. There was a whole code of business regulations made to meet the peculiar needs of the tulip business, besides, and in every town were to be found “tulip-notaries,” to conduct the legal part of the business, take acknowledgments of deeds, note protests, &c.

To say that the tulips were worth their weight in gold would be a very small story. It would not be a very great exaggeration to say that they were worth their size in diamonds. The most valuable species of all was named “Semper Augustus,” and a bulb of it which weighed 200 perits, or less than half an ounce avoirdupois, was thought cheap at 5,500 florins. A florin may be called about 40 cents; so that the little brown root was worth $2,200, or 220 gold eagles, which would weigh, by a rough estimate, eight pounds four ounces, or 132 ounces avoirdupois. Thus this half ounce Semper Augustus was worth – I mean he would bring – two hundred and sixty-four times his weight in gold!

There were many cases where people invested whole fortunes equal to $40,000 or $50,000 in collections of forty or fifty tulip roots. Once there happened to be only two Semper Augustuses in all Holland, one in Haarlem and one in Amsterdam. The Haarlem one was sold for twelve acres of building lots, and the Amsterdam one for a sum equal to $1,840,00, together with a new carriage, span of grey horses and double harness, complete.

Here is the list of merchandise and estimated prices given for one root of the Viceroy tulip. It is interesting as showing what real merchandise was worth in those days by a cash standard, aside from its exhibition of tremendous speculative bedlamism:

In 1636, regular tulip exchanges were established in the nine Dutch towns where the largest tulip business was done, and while the gambling was at its intensest, the matter was managed exactly as stock gambling is managed in Wall street to-day. You went out into “the street” without owning a tulip or a perit of a tulip in the world, and met another fellow with just as many tulips as yourself. You talk and “banter” with him, and finally (we will suppose) you “sell short” ten Semper Augustuses, “seller three,” for $2,000 each, in all $20,000. This means in ordinary English, that without having any tulips (i. e., short,) you promise to deliver the ten roots as above in three days from date. Now when the three days are up, if Semper Augustuses are worth in the market only $1,500, you could, if this were a real transaction, buy ten of them for $15,000, and deliver them to the other gambler for $20,000, thus winning from him the difference of $5,000. But if the roots have risen and are worth $2,500 each, then if the transactions were real you would have to pay $25,000 for the ten roots and could only get $20,000 from the other gambler, and he, turning round and selling them at the market price, would win from you this difference of $5,000. But in fact the transaction was not real, it was a stock gambling one; neither party owned tulips or meant to, or expected the other to; and the whole was a pure game of chance or skill, to see which should win and which should lose that $5,000 at the end of three days. When the time came, the affair was settled, still without any tulips, by the loser paying the difference to the winner, exactly as one loses what the other wins at a game of poker or faro. Of course if you can set afloat a smart lie after making your bargain, such as will send prices up or down as your profit requires, you make money by it, just as stock gamblers do every day in New York, London, Paris, and other Christian commercial cities.