John D. Rockefeller

• 1. Introduction

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  John Davison Rockefeller Sr. once said, "Competition is a sin." By 1900 the company he built, Standard Oil, controlled about 90 percent of the nation's oil production. He was born on the 8th of July 1839 into a large family in Upstate New York, and he died on the 23rd of May 1937, less than two months shy of his 98th birthday. Between those dates he became the first billionaire in the United States, with a fortune worth nearly 2 percent of the national economy. How did the son of a traveling con artist build the most feared business in the world? What did he do with a fortune so large that no other American fortune, including those of later titans, would ever come close as a share of GDP? And why did a man who crushed competitors spend the last forty years of his life giving the money away?

• 2. Devil Bill And Eliza

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  William A. Rockefeller Sr. was known to locals as "Big Bill" and "Devil Bill." He claimed to be a "botanic physician" who sold elixirs, lived a vagabond existence, and returned to his family infrequently. He led a double life that included bigamy, fathering children with his mistress and housekeeper Nancy Brown, and he permanently abandoned his family around 1855 to live with a second wife, Margaret L. Allen. Bill bragged, "I cheat my boys every chance I get. I want to make 'em sharp," and he advised his son to "trade dishes for platters" and always get the better part of any deal.

  Eliza Davison, John's mother, was a devout Baptist and a homemaker who struggled to maintain stability while Bill was gone for long stretches. Thrifty by nature and necessity, she taught her son that "willful waste makes woeful want," and she taught him how to save and track money. John was the second of six children, with an elder sister Lucy and four younger siblings, including fraternal twins Franklin and Frances. He did household chores and earned extra money raising turkeys, selling potatoes and candy, and lending small sums to neighbors. He distanced himself from his father as life went on, later stating, "From the beginning, I was trained to work, to save, and to give."

• 3. The Bookkeeper's Education

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  In September 1855, at sixteen, Rockefeller got his first job as an assistant bookkeeper at a small produce commission firm in Cleveland called Hewitt & Tuttle. He worked long hours and delighted, as he later recalled, in "all the methods and systems of the office." Much of his work involved negotiating with barge canal owners, ship captains, and freight agents. There he learned a lesson that shaped his career: posted transportation rates believed to be fixed could be altered depending on conditions, timing, and the use of rebates to preferred shippers.

  His pay began at $16 a month for a three-month apprenticeship, rising to $31, then $50, and finally $58 a month. As a youth he reportedly said his two great ambitions were to make $100,000 and to live 100 years. In 1859 he went into the produce commission business with Maurice B. Clark and George W. Gardner, raising $4,000 in capital. Rockefeller had only $800 saved, so he borrowed $1,000 from Big Bill at 10 percent interest. The firm netted $4,400 its first year and $17,000 its second, and profits soared with the American Civil War as the Union Army demanded food and supplies. Rockefeller voted for Abraham Lincoln in 1860 and supported the new Republican Party. When asked about military service he said, "I wanted to go in the army and do my part. But it was simply out of the question."

• 4. The Day That Determined My Career

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  During the Civil War, military consumption of oil drove the price up from 35 cents a barrel in 1862 to as high as $13.75. The boom drew thousands of speculators who blew holes in the ground, often leaving creeks and rivers flowing with wasted oil in place of water. In 1863 Clark and Rockefeller built an oil refinery in "The Flats," then Cleveland's burgeoning industrial area, alongside chemist Samuel Andrews and Clark's brothers. A barrel of refined oil sold for around $13 that year, with a profit margin of roughly $5 to $8.

  Where other refineries kept the 60 percent of product that became kerosene and dumped the other 40 percent into rivers and sludge piles, Rockefeller used the gasoline to fuel the refinery and sold the rest as lubricating oil, petroleum jelly, paraffin wax, and other by-products. Tar paved roads and naphtha went to gas plants. His refineries hired their own plumbers, cutting pipe-laying costs in half, and barrels that cost $2.50 each fell to 96 cents when he bought the wood and built them himself. In February 1865 he bought out the Clark brothers for $72,500 at auction, an action oil historian Daniel Yergin later called "critical," and founded Rockefeller & Andrews. "It was the day that determined my career," Rockefeller said. By 1867 Henry Morrison Flagler had joined the partnership.

• 5. The Cleveland Conquest

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  On the 10th of January 1870, Rockefeller abolished the partnership of Rockefeller, Andrews & Flagler and co-founded Standard Oil of Ohio. The railroads, competing fiercely for traffic, formed the South Improvement Company, offering Standard rebates of up to 50 percent on its own product and even rebates on the shipment of competing products. The scheme touched off a firestorm of protest, including boycotts and vandalism, and a major New York refiner, Charles Pratt and Company, led by Charles Pratt and Henry H. Rogers, led the opposition until the railroads backed off and Pennsylvania revoked the cartel's charter.

  Undeterred, Rockefeller ran a self-reinforcing cycle: buying the least efficient competitors, improving his operations, pressing for shipping discounts, undercutting rivals, and making secret deals. In less than four months in 1872, in what became known as "The Cleveland Conquest" or "The Cleveland Massacre," Standard Oil absorbed 22 of its 26 Cleveland competitors. In 1874 even Pratt and Rogers made a secret agreement to be acquired, and Rogers became one of Rockefeller's key men in forming the Standard Oil Trust. For many competitors, Rockefeller had merely to show them his books, then make a decent offer; if they refused, he warned he would run them into bankruptcy and buy their assets cheaply at auction. He cast himself not as a destroyer but as "an angel of mercy" absorbing the weak. By the end of the 1870s, Standard was refining over 90 percent of the oil in the United States, and Rockefeller had already become a millionaire.

• 6. Building The Trust

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  In 1877, Standard clashed with Thomas A. Scott, president of the Pennsylvania Railroad, its chief hauler, over Rockefeller's vision of pipelines as an alternative transport system. Standard held back shipments and, with help from other railroads, started a price war that caused labor unrest until the railroad sold its oil interests to Standard. In 1879 the Commonwealth of Pennsylvania indicted Rockefeller on charges of monopolizing the oil trade, beginning an avalanche of similar proceedings. Of that period he later said, "All the fortune that I have made has not served to compensate me for the anxiety of that period."

  In 1882, Rockefeller's lawyers created an innovative form of corporation to centralize dozens of separate state companies, giving birth to the Standard Oil Trust. Nine trustees, including Rockefeller, ran the 41 companies in the trust, and rival businesses quickly copied the idea. The empire included 20,000 domestic wells, 4,000 miles of pipeline, 5,000 tank cars, and over 100,000 employees, and the price of kerosene dropped by nearly 80 percent over the life of the company. Standard's most potent weapons were underselling, differential pricing, and secret transportation rebates. By 1880, according to the New York World, it was "the most cruel, impudent, pitiless, and grasping monopoly that ever fastened upon a country." In the early 1880s Rockefeller ordered certificates issued against oil stored in its pipelines, and the National Petroleum Exchange opened in Manhattan in late 1882 to trade them, creating the first oil-futures market.

• 7. Miss Tarbarrel And The Breakup

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  In 1904, Ida Tarbell published The History of the Standard Oil Company, documenting the firm's espionage, price wars, heavy-handed marketing, and courtroom evasions. Tarbell's father had been driven out of the oil business during the South Improvement Company affair. She said, "I never had an animus against their size and wealth... But they had never played fair, and that ruined their greatness for me." Rockefeller called her "Miss Tarbarrel" in private but in public said only, "not a word about that misguided woman."

  Theodore Roosevelt, upon ascending to the presidency, initiated dozens of suits under the Sherman Antitrust Act of 1890. In 1911 the Supreme Court of the United States found Standard Oil Company of New Jersey in violation of that act and ordered the trust broken into 34 new companies. By then the trust still held a 70 percent share of the refined oil market but only 14 percent of the U.S. crude oil supply. The fragments included Standard of New Jersey, which became Esso and later Exxon, now part of ExxonMobil; Standard of California, which became Chevron; Standard of Indiana, which became Amoco, now part of BP; and Standard of New York, which became Mobil. Rockefeller held over 25 percent of the stock and received proportionate shares in all 34 companies. Over the next ten years the breakup proved immensely profitable: the combined net worth rose fivefold and his personal wealth jumped to $900 million.

• 8. Give And It Will Be Given

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  Rockefeller's charitable giving began with his first job as a clerk at sixteen, when he gave 6 percent of his earnings to charity, as recorded in his personal ledger. By twenty his charity exceeded 10 percent of his income. A Baptist preacher once encouraged him to "make as much money as he could, and then give away as much as he could," and Rockefeller recalled, "It was at this moment, that the financial plan of my life was formed." A devout Northern Baptist, he read the Bible daily and believed in the principle of Luke 6:38, "Give, and it will be given to you." He adhered to total abstinence from alcohol and tobacco throughout his life. He relied closely on his wife, Laura Spelman Rockefeller, whom he married in 1864, saying, "Without her keen advice, I would be a poor man."

  He gave $80 million to the University of Chicago, which he called "the best investment I ever made," and funded the establishment of Central Philippine University in 1905. In 1884 he provided major funding for the Atlanta Baptist Female Seminary for African-American women, and Spelman College, named for Laura's family, was heavily supported by him; its oldest existing building is Rockefeller Hall. He founded the Rockefeller Institute for Medical Research in 1901, which became Rockefeller University in 1965 and claims a connection to 23 Nobel laureates. His Rockefeller Sanitary Commission, founded in 1909, eventually eradicated hookworm in the American South, and the Rockefeller Foundation, created in 1913, received $182 million from him and built the Peking Union Medical College in China. In total he donated about $530 million. In his later life he became known for giving dimes to adults and nickels to children, once handing a dime to tire mogul Harvey Firestone after a good golf shot. He first stayed at the Ormond Hotel in Ormond Beach, Florida, in 1914, bought an estate there called The Casements in 1918, and died there of arteriosclerosis, buried in Lake View Cemetery in Cleveland.