When we talk about the most impactful business leaders in history, the conversation remains incomplete without mentioning John D Rockefeller.
John D. Rockefeller was an American industrialist and philanthropist who played a significant role in shaping the American economy during the late 19th and early 20th centuries. He is often considered one of the most influential figures in the history of the United States and the world, as he founded the Standard Oil Company and became the world’s richest man of his time.
The Origin Of A Reformist
While Rockefeller’s father, William Avery Rockefeller, lived a transient lifestyle as a salesman of fraudulent medical remedies, posing as a doctor, his mother raised their six children. Eventually, his family settled in Strongsville, Ohio, a suburb of Cleveland. As a teenager, Rockefeller took a job as an assistant bookkeeper, where he gained valuable business skills. At the age of 16, Rockefeller quit high school and began working as a clerk in a commission house. He left this job to team up with oil driller Maurice Clark, and together they established their first oil refinery in Cleveland in 1863. Later, Rockefeller and Clark joined forces with Flagler and Andrews to form Rockefeller, Andrews, and Flagler in 1870, focusing solely on oil refineries instead of drilling.
An Innovative Head And A Calculative Thinker
In 1870, Rockefeller, Andrews, and Flagler established Standard Oil, which successfully gained control of all oil refineries in Cleveland within two years. Rockefeller’s aptitude for risk management allowed him to recognize the potential for both significant gains and losses in the oil industry. To mitigate risk, he strategically shifted the company’s focus towards refining, which offered more stable profits but with lower margins.
Within a decade, Rockefeller took charge of Standard Oil under a unique trust structure consisting of a board of nine trustees, including himself. He and his partners created this innovative system by trading their individual holdings for shares in the trust, giving Rockefeller the power to veto decisions and control all subsidiary companies within the conglomerate. This setup brought several benefits such as cost reduction, lower prices for kerosene, and uniformity across the industry. Moreover, Standard Oil had the financial resources and expertise to build or acquire pipelines and other infrastructure on an unprecedented scale.
A Heavy Investor In Research and Development
Standard Oil employed a team of chemists whose mission was to enhance the quality and variety of combustible fuels and to repurpose waste into valuable substances. As a result of their efforts, petroleum was refined into an array of products, including diesel fuel, varnish, toothpaste, and Vaseline.
Thanks to the reduced cost of production, these new products contributed to the expansion of Standard Oil’s global market share. Moreover, by investing in extensive research and development, Rockefeller was able to find innovative ways to make use of oil byproducts that had previously been discarded. This led to the creation of lubricating oils, petroleum jellies, paraffin wax, and other beneficial products.
A Methodical Construction Of An Invincible Monopoly
Rockefeller countered the cutthroat competition in the oil industry by acquiring 22 of 26 rival refineries at low prices in the “Cleveland Massacre” of 1872. He also formed a secret deal with three major railroads to divide oil shipments into negotiated amounts, with the railroads charging high rates to competitors. Standard Oil would receive rebates on transportation costs and a share of the revenue from competitors. The agreement caused panic among rivals, leading to their selling to Rockefeller to avoid bankruptcy. However, due to public outcry, the deal was never executed.
Rockefeller’s strategy to dominate the oil industry involved not only purchasing his competitors but also using various tactics to persuade holdouts to sell their businesses. These methods included causing a shortage of oil barrels, buying land to prevent pipeline construction, orchestrating price wars between subsidiaries, secretly bribing legislators, limiting the number of trains available for shipment, and purchasing equipment and suppliers to restrict replacement parts. These measures ensured that Rockefeller maintained control over the industry, leaving smaller companies with little choice but to sell their assets to Standard Oil.
The End Of The Monopoly
The government was concerned about Standard Oil’s dominance in the oil industry and passed the Sherman Antitrust Act in 1890 to limit the power of monopolies. Standard Oil responded by restructuring itself into a holding company, which was similar to a trust but not legally defined as such. The holding company structure allowed Standard Oil to maintain its monopoly, but the government continued to pursue legal action against the company. In 1911, the Supreme Court ruled that the holding company violated the Sherman Antitrust Act, resulting in the breakup of Standard Oil into 34 separate companies. This breakup included well-known names like Exxon, Chevron, and Mobil. Despite the dissolution of the company, its influence on the oil industry persisted, and some argue that its practices paved the way for modern corporate monopolies.
Faith, Philosophy, and Philanthropy
Rockefeller’s devout Baptist faith informed his belief that his ability to make money was a blessing from God. He saw no contradiction between his ruthless business methods and his faith, believing that the world’s division into rich and poor was part of God’s plan. Rockefeller felt that he was favored and blessed with an increase because he would give it back to those in need. After retiring in 1896, Rockefeller turned his attention to philanthropic causes, donating hundreds of millions of dollars to various charities. He was also known for carrying nickels and dimes and giving them to children. In 1913, he established the Rockefeller Foundation with his son to continue his charitable work. At the time of his death in 1937, his assets were equivalent to 1.5% of the total U.S. economic output for that year, surpassing the wealth of today’s billionaires like Bill Gates.
Even today, Rockefeller remains an influential figure on Wall Street. Rockefeller’s legacy has been the subject of much debate. Some view him as a ruthless monopolist who exploited workers and stifled competition, while others see him as a visionary entrepreneur who drove innovation and created jobs. Regardless of one’s opinion, there is no denying his impact on the American economy and the world at large.