You probably associate it with money when you hear the name John D. Rockefeller, given that he was the wealthiest American in history and one of the most wealthy men of all time. His fortune was valued at US$409 billion at the time of his death in 1937 (adjusted for inflation, of course). And, that was roughly 2% of the entire economy of the United States. The large contributions he gave and the founding of the Rockefeller Foundation do not take this amount into account.
Rockefeller inherited the pious convictions of his mother and throughout his life, considered himself a devout man. He took everything he learned to establish Standard Oil, a large corporation that supplied 90 percent of America’s oil at one point. Do you ever wonder how this average man managed to monopolize industry as a whole?
Here is John D. Rockefeller’s tale and how he rose to the top to become one of the wealthiest personalities of his time.
SON OF A CON MAN
John Rockefeller was born on July 8th, 1839, in Richford, New York. His father was known in the neighborhood as a con artist and was referred to as “Devil Bill.” When it came to his family life, Bill wasn’t around much. He spent a great deal of time on the lane, saying he wanted to sell lumber for his job and later market patent medicines. The second of the six children Bill had with his wife, Eliza, was John. Bill had two more children out of wedlock as well. He wasn’t the best dad, and his sons were known to be cheated out of money, but he believed that it was to educate the businesses and the importance of money.
JOHN’S DEVOTIONAL MOTHER
Bill thought he would have more career opportunities in different places, so when John was a young child, he relocated the family several times. Eventually, they settled in Strongsville, Ohio. In Cleveland, John attended high school and then took a business class where he learned the fundamentals of bookkeeping, giving him a lucrative career opportunity. John had a passion for music, even though his education was based on business; at one point, he even contemplated a singing career. He also had a way to share his views and opinions and gained a strong debating reputation. He inherited the religious convictions (Baptist) of his mother, which remained with him for the rest of his life.
THE FIRST JOB
John worked some unusual jobs as a child, such as selling vegetables and turkeys to city folks. However, his first real full-time job was as a bookkeeper for a food brokering firm. He soon acquired a skill that would be beneficial in his life and career: how to increase earnings by reducing the cost of shipping goods to markets. He developed negotiation abilities that helped to compensate for shipping costs. Originally, he believed that the price had been set by ship owners and freight managers. He built positive long-term business relationships by reusing the same shippers, which were relatively separate from the evolving market conditions. For several years he worked as an apprentice, earning $58 a month.
FIRST ENTREPRENEUR ENDEAVOR
Rockefeller and his business partner, Maurice Clark, after serving as an apprentice for three years, agreed to start their own business on a commission basis, purchasing and selling produce from farmers. For his half of the company, Rockefeller needed $2,000 but had only managed to save $800. Thankfully, with an interest rate of 10 percent, his father gave him the remainder as a loan. They started the business at the perfect time. Right as the Civil War broke out in 1861, Rockefeller and Clark allied all the contractors that were exporting their goods to the Union Army. Rockefeller was drafted into the army and hired replacements to serve in his stead. As the war was starting to decline, he considered investing his remarkable gains into the profession of purifying crude oil or kerosene. At the time, this was the main means of providing light.
THE RIGHT TIME
In the 1860s, when the war first began to more than $13 a barrel, government officials raised the price of oil. The rising oil prices led to the very first wave of oil wells exploration by wildcatters. By the war’s end, the market was inundated with oil. Most kerosene came from coal (coal oil) before the Civil War, and it soon became evident that crude oil would also be a cheaper option than kerosene. It wasn’t too costly to build a refinery during that period, and neither were the costs of running one. Rockefeller found that delivering it to the refinery first and then shipping the finished kerosene to the markets was the most costly method of processing crude oil. Fortunately, John Rockefeller was already an expert at handling shipping prices.
BUSINESS AND PARTNERSHIPS
The benefit from the shipment of food to armies was at its peak at the height of the Civil War. In a Cleveland area known as “The Flats,” Rockefeller and Clark agreed to leave the producing company to create an oil refinery. They were joined by more partners, including a chemist named Samuel Andrews and two of Clark’s brothers. The partners discovered, thanks to the chemist on board, how to conserve fuel, which is a by-product of the refining process, and how to use it as operating power for the factory. At the time, most refiners only burned fuel, but Rockefeller and his business partners used what remained in other products, such as paraffin and lubricating oils.
THE THRIFTY NATURE
John’s dad would sometimes leave hungry children behind during his childhood for their mother to worry about and feed. At a very young age, this taught Rockefeller the importance of thrift. All was recycled in the house he grew up in, and nothing was lost. These ingrained principles were introduced to the refining sector by Rockefeller: any future crude oil product will be sold. For instance, the roofing and paving suppliers purchased tar that came from sludge. As soon as he saw that the price of wooden barrels had risen, Rockefeller cut off his suppliers, bought raw lumber, and employed cooperatives to build his own barrels. This method reduced the expense to less than one, from over two dollars a barrel. Rockefeller used them in his workforce instead of recruiting third-party plumbers and pipefitters, paying them hourly instead of a fixed fee for each job.
THE SOLE OWNER
Rockefeller was not sure if the oil industry for lighting would ever recover after the war ended, so he agreed in February 1865 to purchase his partners (but kept chemist Andrews around). The Transcontinental Railroad was championed by Abraham Lincoln, and Rockefeller was confident that the cross-country line and the railroads of the South would be constructed after the war. Oil-based goods were booming, and Rockefeller placed himself with stock manipulation, borrowing money with low interest, and maximizing his income to become the king of the forthcoming oil-based economy. Since coal was the primary source of steam-generating fuel that drove the economy, it was expected by Rockefeller that coal would be replaced with oil, and he wanted to be ready.
Rockefeller joined up with his brother William after the Civil War and founded a second refinery in Cleveland. In 1867, Henry Flagler joined their partnership, and the Rockefeller, Andrews, and Flagler Company owned the refineries. By 1868, the New York subsidiary and the two refineries in Cleveland were the world’s leading oil refinery companies. The company was known for its per barrel earnings, which still surpassed its rivals. However, kerosene (for lighting) was its main consumer product and it was marketed at less than the average market rate. Rockefeller ensured that, with very little or no waste product, all the refineries made a significant profit.
STANDARD OIL CORPORATION
Cleveland, Ohio, became one of the most important refining cities in the United States, along with oil reserves in Pittsburgh, New York City, and western Pennsylvania, thanks to the Rockefeller refineries. The progress of the refineries resulted in an unnecessary quantity of kerosene on the market that was required to satisfy demand, resulting in lower prices. More than three times the amount of kerosene required for sale was on the market, and the surplus didn’t seem to be dwindling any time soon. Rockefeller terminated the relationship in response to the business conditions and formed a new company called Standard Oil. His partners remained with the company, but it was obvious that John D. Rockefeller had business decisions in his hands.
SELF MADE TRANSPORTATION SERVICE
More than three times the quantity of kerosene required for sale was on the market, and the surplus didn’t seem to be dwindling any time soon. Rockefeller terminated the relationship in reaction to the business conditions and formed a new company called Standard Oil. His partners remained with the company, but it was obvious that John D. Rockefeller had business decisions in his hands.
The South Improvement Company was founded by Rockefeller in 1871. It was a cartel of railroads and oil refineries that gave better shipping prices to its members, allowing them to charge consumers less too. The effort included three major railroads: Pennsylvania, The Erie, and the New York Central. For smaller firms that were left out of the cartel, this decreased refining efficiency.
In the United States, oil refineries generate about 40,000 barrels a day. The demand for oil products was approximately 16,000 barrels per day during that period. All 16,000 of those barrels were required by Rockefeller to come from Standard Oil. He knew that the smaller refiners would be forced to close, or at least only sell locally, by regulating shipping. Shipping overseas was not very realistic because oil had to be transported in barrels, and tankers were not yet based on ships. Rockefeller acquired 18 oil refineries within a month later referred to as the Cleveland Massacre). In 1872, Pennsylvania revoked the South Improvement Company’s charter. But Rockefeller was seen by the public as the first robber baron after nearly a year of taking over the railroads and oil refineries.
A LAW ABIDING CITIZEN
In many different ways, Rockefeller used the big influential railroads to control rates. He provided rebates, influenced shipping schedules, prices per mile, and other activities that helped his business and damaged smaller refineries for returning customers. When the smaller businesses were suffering and needed to pay to move their products, they were taken over by Standard Oil. This was ruthless, not illegal, however. Rockefeller did not violate any rules, and the railroads did not either; this was a time when only the prevailing market conditions influenced companies. When Rockefeller’s railroad monopoly was suspended by Pennsylvania, it was one of the first times the government took steps to regulate how a corporation worked in the United States.
RETALIATION FROM THE PRESS
As the press exposed the exploitation of shipping prices for oil by Standard Oil, they vilified Rockefeller. In both cartoons and text, he was criticized, even though his actions were what made kerosene more accessible than ever before. Oil lamps illuminated homes, factories, offices, streets, and shops at a much lower cost than when most houses used candles for illumination before the Civil War. So while Rockefeller was vilified by the media, most of the public did not. Even after he was ripped apart by the national newspapers, he managed to produce Standard Oil and had eyes on him from government bodies that were already suspicious of his wealth and influence.
THE INCREASED RUTHLESSNESS
By 1872, Cleveland, Ohio, had factories owned by 26 oil companies. Standard Oil managed to take over 22 of them within just under four months. By his disdain for wastefulness, Rockefeller was motivated as much as he was by greed. He also made hidden deals with rival refineries, pitting them against each other and taking over both of them and his methods were less than honorable. He also exploited the railroads against each other to achieve better shipping prices for his business as he reduced his competition, and the number of people who would complain about how he operated his companies. He will then buy out smaller refineries that we’re unable to afford to compete. Since he pushed down kerosene rates for personal use, customers were still pleased. This made Standard Oil one of the country’s most recognized consumer firms.
COMPETING OR BUYING?
The negotiation style of Rockefeller grew as his power and wealth increased. He would clearly present the books of a competing Standard Oil to show them the power their smaller business was up against. He threatened, after that to bankrupt them if they did not sell. Rockefeller finally found a way, by buying them at the subsequent bankruptcy auction, to purchase the businesses anyway. He was intimidating, and during these “negotiations,” his cynical image within the industry served in his favor. He derived deep gratification by using sneaky tactics to gain leverage over businesses that defied his attempt to form a railroad cartel (which benefited his business over the competition).
THE BUSINESS MIND
In all the companies he introduced to Standard Oil, John D. Rockefeller used his appetite for productivity and waste reduction, and his strategy forced rivals to use similar tactics in hopes of survival. Rockefeller extended his business in the 1870s in the style he developed by hiring his own pipefitters and coopers, purchasing his own railcars instead of paying rent to the railroads. He also invested in pipelines and distribution trucks to directly carry his goods to the home of the customer, instead of ordering it from a third party. To reduce competition, Standard Oil had traditionally kept the quality of its goods below retail rates.
EXPANSION OF THE STANDARD OIL CORPORATION
Standard Oil produced over 300 petroleum-based goods for customers during the 1870s, thanks to the deep-seated disdain of Rockefeller for wasting everything. Chewing gum also became a product line. Oil-based paints were produced and marketed directly to customers, as well as producers of paint. Standard Oil was also producing and selling Petroleum Jelly and had several uses. Paraffin wax was put on the market (less costly than beeswax). The first paraffin candles, with a distinct scent, were renowned for being smoky. They soon began dominating the market, however, because they were less costly. 90% of the crude oil refined in the United States by the end of the 1870s was provided by Standard Oil, with petroleum products about to erupt on the scene.
ROCKEFELLERS VS PENNSYLVANIA RAILROAD
By 1877, Rockefeller claimed that his company’s vast pipelines were a realistic alternative to transporting his goods by rail, and he began to look for the means to build them. Since they had the easements needed to locate them around the nation, the Pennsylvania Railroad assumed the pipelines were part of the rail companies. Backed by their established rail network, the PRR (Pennsylvania Railroad) began buying and constructing pipelines. They also began purchasing oil refineries so that these pipelines could be fed, something that Rockefeller saw as a battle against Standard Oil. Not surprisingly, as he had been attempting to monopolize the oil industry, this was not something he would consider.
THE ROCKEFELLER VICTORY
Through not using the railroad to transport Standard Oil products, Rockefeller went against the PRR and instead used the PRR market. A catastrophic loss of revenue suffered from the PRR; the falling revenues meant they had to slash salaries, contributing to a railroad labor crisis. It was no issue for Rockefeller to turn to the other railroads and effectively kill the PRR. He set in motion a price war that sliced deeper into the reserves of Pennsylvania. Ultimately, the railroad yielded, compelled to sell its oil and Standard Oil pipeline; it seemed to be the price of peace. Rockefeller got what he wanted, but in the Pennsylvania legislature, the PRR influence led Rockefeller and his company to face a charge in 1879 for running a monopoly. In a long, costly war that lasted over three decades, the millionaire found himself.
OTHER STATES VS ROCKEFELLER
Other states entered the case after Pennsylvania brought an indictment against John D. Rockefeller and Standard Oil for establishing a monopoly that literally dominated the U.S. oil industry. Any state that launched inquiries or brought charges only did so within its own boundaries, not before a federal court. Rockefeller required to personally face each territory, depending on the laws and practices unique to each one. Needless to say, a lot of his attention was taken up by this and to him, all this was just a waste of time. As the inquiries grew in size, so did Rockefeller’s coverage; he was everywhere in newspapers and magazines. Ironically, under oil lamps illuminated by kerosene produced by Standard Oil, these articles were commonly read.
In the United States, the heyday of yellow journalism was at the end of the 19th century. A big target for reporters, politicians, and columnists was Rockefeller and his Standard Oil Company. It was never a true monopoly, legally, so it’s not like there was no competition. Across the country, there were hundreds of small oil companies. Still, the media denounced and blamed Rockefeller for monopolistic activities. In 1880, the New York World reported that “cruel, impudent, and pitiless” was Standard Oil (and Rockefeller). It went on to claim that the corporation was the most “grasping monopoly” that any country was ever compelled to suffer. Rockefeller refuted all charges and argued that certain unfortunate oversights that were resolved as soon as they were identified contributed to the size of the company.
ROCKEFELLER’S STANDARD OIL TRUST
Many state laws made it illegal for a corporation to partner with another state to operate under its territory back in the late 19th century. This meant that Standard Oil managed hundreds of businesses, a managerial nightmare, to say the least, in different states. In 1882, Rockefeller generated what was effectively a company, produced by many companies, to address this management shortage. He called it the Standard Confidence for Oil. 41 individual companies formed the Trust, with a board of nine members overseeing it one being John D. Rockefeller. The result: the biggest and richest individual in the world became Standard Oil. This only prompted enemies to double their attempts to depict the ultimate robber baron as Rockefeller.
THE GIGANTIC BUSINESS EMPIRE
The newly founded Standard Oil Trust was also huge. In the United States, it had ownership of 20,000 oil wells, transporting goods via the company’s operated pipelines, which surpassed 4,000 miles in length. By owning 5,000 tanker cars, along with fleet boxcars, hoppers, and private passenger cars, it also evaded leases on railroad equipment (for its executives). The company was responsible for 90% of the refined petroleum products across the globe at its peak. During the 1880s and 1890s, the number started to decline slowly. It fell to around 80% at the turn of the 20th century. The openness was due to the increasing perception of Rockefeller of the animosity and anger generated by his domination of the oil industry and how he intended to change his company’s public portrayal.
LOVE FOR CHARITY
When he started his first real job as a bookkeeper, John developed a habit of giving a portion of his earnings to charity. He continued this practice for the remainder of his life, despite his greed. His charitable donations were often substantial, but he also carried around nickels and dimes so that he could give money to strangers and friends personally. For this reason, he was renowned for keeping a pocket full of dimes, and he was also known for giving them to his fellow rich business magnates. He would also send the coins to famous men, all insanely rich in their own right, including Henry Ford and Harvey Firestone.
LESSONS FOR GRANDKIDS
The ingrained thriftiness of Rockefeller was legendary. He kept insisting on taking a look at the books with his own eyes, even though he had many accountants, bookkeepers, and business managers. He maintained a pocket ledger, where every day he carefully recorded his daily expenses. When they were young, he would not allow his children and grandkids to visit his offices so that they would be unaware of how wealthy the family was. With the scale of the company, though, their wealth was revealed to them anyway. Even though he constructed spacious homes, he taught them his principles of wastefulness and extravagance. But he didn’t go as far as the rich guys of the day who designed huge homes in Newport, Rhode Island, the Berkshire Hills of Massachusetts, and New York’s Hudson Valley.
LOVE FOR RELIGION
Rockefeller’s mom was a devout Baptist, as we mentioned earlier, and her religious and moral values rubbed off on her son. He applied them to his (in his mind) business dealings and his kids. “The reason he liked charity was because of the Christian belief recorded in Luke’s Gospel that the more one gave, the more one will give to him. Many of Rockefeller’s donations were of a religious sort, and yet, he saw no moral dispute, even at the detriment of other citizens, between the cruel way he conducted his business and the act of sharing the wealth he received. For instance, when he removed the middle man providing consumers with kerosene, it cost hundreds of people’s livelihoods but increased his company’s income, which increased the money he could give to charity.
FLUCTUATION IN PRICES AND THE OIL FUTURES
Through raising or decreasing storage costs for oil in its pipelines and reservoirs, Standard Oil began regulating the price of oil in the 1880s. Value certificates against oil stored in Standard pipelines were issued under the command of Rockefeller and exchanged by brokers and investors. The first oil futures to be exchanged in these certificates were (kind of like stocks). Ever since innovation was created, it has been the source of oil market prices. Late in 1882, oil futures were traded on the National Petroleum Exchange in New York. The Exchange was known at that point as the United States business hub. Standard Oil was willing, through its domination of the industry, to set oil prices well into the future based on shifting markets. This guaranteed their continuous profitability.
STANDARD OIL’S COMPETITION
Up until the mid-1880s, the state of Pennsylvania recovered more than 80 percent of the world’s crude oil. By the end of the decade, rivalry from oil fields in Asia, Russia, and the South Pacific Islands had risen across the world. Then an entirely new ship was built, the oil tanker, which made it economically feasible to recover crude from far away sources. Competition from another source, electrical lighting, was also available. It was more enjoyable at first, but it became a much more realistic source of light, reducing the need for kerosene. The firm of Rockefeller has increased its marketing of natural gas as a heat and light resource. Marketing for petrol, which was also influenced by new technology, the vehicle, was also expanded (and the internal combustion engine).
MOVING STANDARD OIL TO NEW YORK
Rockefeller wanted to transfer Standard Oil to New York as his business became more and more reliant on the activities of other firms. Thereby constructing a mansion in midtown and establishing his company headquarters downtown, he joined several of his fellow businessmen. Many of the industry’s giants commuted to their offices in carriages or cars powered by chauffeurs. Every day, Rockefeller had to take the railroad to operate, where he would hand out loose change. He was well aware of the obstacles that would be raised against his reign by the Sherman Antitrust Act, which began as a mechanism for regulating trade unions in 1890 when he read the daily newspaper. It also, however, allowed for steps to break the Standard Oil Trust apart.
STANDARD OIL TRUST: BREAKING UP
In Ohio, Standard Oil began, and that’s when the government first became wary of the influence of Rockefeller and took action to demolish it. Standard Oil of Ohio was forced to break from the oil giant’s empire in 1892 by implementing the antitrust laws of the state. Standard Oil Ohio has survived for almost another century and is familiar to Ohio residents, where the term is still used by gas stations. In the iron ore industry, Rockefeller also led Standard Oil to move unrefined ore using the railroad assets he acquired over the years. Venturing into the iron ore market led to further clashes, including Andrew Carnegie, with steel industry tycoons.
ROCKEFELLER READY TO RETIRE ?!
In the west, in West Virginia, Ohio, Indiana, and Illinois, he started to acquire what he assumed would be prolific oil fields, with production declining in Pennsylvania, the region where Rockefeller extended wells for a large volume of his oil possessions. He was also getting sick and tired of having to defend the press and statesmen from his popularity, trade, and money on an ongoing basis. As the nineteenth century was proceeding to a terminal, Rockefeller tended to fill his time doing more relaxing activities, such as becoming an amateur golfer. It was not the only sport he took on at the turn of the century, he started to ride a bicycle, a popular sport. He left the hectic pace of New York City for the Hudson Valley, where he purchased a new home.
ROCKEFELLER’S NEXT GENERATION
In 1902, a group headed by the famed J.P. purchased Carnegie Steel. Morgans. Morgan. With this, the new firm, US Steel, acquired Rockefeller’s interest in the transport of iron and iron ore. Rockefeller exchanged his iron investments for US Steel’s share of the stock. The deal was negotiated between Rockefeller and his uncle, John D. Rockefeller Jr. by Henry Clay Fricke. The agreement left them on the governing board with memberships. This allowed John Rockefeller Jr. to retire completely from Standard Oil’s operations at the age of 63. Rockefeller continued to attract negativity from the press, despite his removal from activities, and his charitable donations. He was condemned for his ownership of the oil industry, as well as for his personal wealth and strength.
SPLITTING OF THE STANDARD OIL TRUST
Following years of lawsuits and being vilified in the media, which led to several re-organizations of the Standard Oil Companies, the United States Supreme Court ruled that New Jersey’s Standard Oil was contrary to the Sherman Antitrust Act in 1911. About thirty separate corporations have been divided into the Standard Oil Company, many of which are still recognized today. Continental Oil became Conoco and California’s Standard Oil is now known as Chevron. New York’s Standard Oil was renamed Socony (later Mobil), and Esso became the old New Jersey Standard Oil (later Exxon and eventually, ExxonMobil). Rockefeller owned stock in each of these new businesses, and his fortune increased even further in addition to his shares in the Standard Oil Trust (before its breakup).
ROCKEFELLER’S DECLINING HEALTH
Rockefeller developed his fortune and wealth and founded the large Standard Oil Company. He was vulnerable to physical and mental disease as well. Rockefeller lived with depression for periods of time in his middle age and was known back then as melancholic. Nowadays the signs he displayed will possibly be described as clinical depression. In the 1890s, he only ate regularly and lost a lot of weight while Rockefeller was struggling with all the legal battles. That contributed to problems with his digestion, which made him feel too tired to exercise. He also acquired alopecia during that decade. He lost all of the hair on his body, including the hair on his eyebrows, lashes, and head, because of the disease. Rockefeller began wearing wigs to conceal his appearance in his late forties, but his lack of facial hair was also commented on.
THE MAN OF CONTRADICTIONS
John Rockefeller was extremely religious(and a moral man in his head). He did, however, smash enemies to get what he desired before he produced Standard Oil with such ruthlessness. In American history, he had more money than any other person, but he chose to take a train to work.
Despite being one of America’s most famous individuals, he was pious. Every single day, he read the Bible and also quoted it. He also had no issue with the prediction of Christ that it would be hard for a rich man to reach heaven. The life he lived showed that he learned a great deal from both his parents: his father, his con-man, and his religious mother. For all his long career, he took those lessons with him (bad or good).