John D. Rockefeller – A Brief Biography (1839-1937)
John D. Rockefeller. Pach Brothers Studio, CC0, via Wikimedia Commons
John D. Rockefeller was an American business magnate and philanthropist, who is widely regarded as the richest person in modern history.
Rockefeller founded and ran the Standard Oil Company, which made him the wealthiest American of all time. Through his company, he revolutionized the petroleum industry and was instrumental in drastically reducing the production cost of oil.
Early Life
John D. Rockefeller was born on 8th July 1839 in Richford, New York, to William Avery Rockefeller and Eliza Davison. He was the second child, with an elder sister, Lucy, and four younger siblings, William Jr., Mary, Franklin, and Frances.
Rockefeller’s father, William, was a lumberman and a traveling salesman who called himself a botanic physician, selling elixirs. He soon came to be regarded as a con artist due to his shady schemes and gained the nicknames, Devil Bill and Big Bill.
His father led a vagabond and free lifestyle, returning to his family only occasionally. His mother, Eliza, was a housewife and homemaker, who tried her best to lead a normal family life with her children while dealing with her husband’s philandering and absences.
From an early age, Eliza was a major influence on Rockefeller’s life. She taught him the importance of hard work, saving, and giving, and also warned him that wilful waste makes woeful want.
The young Rockefeller regularly did his household chores and earned some money on the side by raising turkeys, selling candy and potatoes, and lending out small sums of money to his neighbors.
As he grew up, Rockefeller distanced himself more and more from his father.
Education
In 1851, when John D. Rockefeller was 12 years old, his family moved to Owego, New York, where he began attending the Owego Academy.
The following year, after the family moved to Strongsville, Ohio, Rockefeller enrolled at Cleveland’s Central High School. It was the first free public high school west of the Alleghenies and the first one in Cleveland.
Rockefeller also began attending a business course at Folsom’s Commercial College, where he studied bookkeeping. He was described by his peers as reserved, serious, well-behaved, studious, religious, and very methodical. He was also said to have a love for music and was a good debater.
Working as a Bookkeeper
In 1855, John D. Rockefeller, aged 16, began working as an assistant bookkeeper for a small produce commission firm in Cleveland known as Hewitt and Tuttle.
At the firm, he learned how to calculate transportation costs, which later helped him in his business career. He also frequently negotiated with ship captains, freight agents, and barge canal owners, in order to alter the transportation rates that were supposed to be fixed. On certain occasions, he was charged with collecting debts for the firm.
Rockefeller worked long hours at the office and took an interest in all the methods and systems of the office. He would go on to work at the firm for four years.
Partnership with Clark
In 1859, John D. Rockefeller, aged 20, partnered with Maurice B. Clark and entered the produce commission business.
Clark put up $2,000 for the venture. Since Rockefeller only had $800 with him, he borrowed $1,000 from his father at 10% interest and put it up for the new business.
Their business was a success. In the first two years of business, Rockefeller and Clark earned $4,400 and $17,000 in profit respectively.
With the outbreak of the Civil War, their profits increased when the Union Army called for large amounts of food and supplies. Rockefeller avoided combat and tended to his new business, instead preferring to give money to the Union cause. He did so because there was no one to take his place and run the business, and he feared that if he did not stay back, the business would stop and collapse.
Rockefeller was an abolitionist and had voted for President Abraham Lincoln. He was also a supporter of the Republican Party.
As the Civil War came to an end, Rockefeller and Clark turned their focus to the refining of crude oil.
Entering the Crude Oil Business
During the Civil War, the federal government was subsidizing oil prices, which drove up the price from $0.35 per barrel in 1862 to as high as $13.75. A market sprung up for refined oil in the form of kerosene and the profit on the refined product was quite large, around $5 to $8 per barrel in spite of the government tax levied on it.
Taking advantage of this boom, John D. Rockefeller and Maurice B. Clark shifted their focus to oil and built an oil refinery in 1863 in Cleveland. The refinery was owned by the Andrews, Clark & Company, which included Clark, his two brothers, a chemist named Samuel Andrews, and Rockefeller himself.
The company began using gasoline to fuel the refinery and sold the rest as lubricating oil, paraffin wax, petroleum jelly, and other by-products, instead of dumping it into rivers and sludge piles like the other refineries.
They also bought the wood and built their own barrels, and hired their own plumbers to cut the cost of pipe-laying. This resulted in heavy cost-cutting and a substantial increase in profits.
In 1864, Rockefeller married Laura Celestia Spelman, with whom he would go on to have four daughters and one son. Rockefeller often credited Laura for having better judgment than him, saying that without her sound advice, he would have been a poor man.
In 1865, Rockefeller, aged 26, bought out the Clark brothers for $72,500 at auction and established the Rockefeller & Andrews firm. Rockefeller himself described this event as something that determined the rest of his career.
He was now in a position to take advantage of the great expansion westward, which was facilitated by the growth of railroads and an oil-fueled economy.
Rockefeller, Andrews & Flagler
In 1867, American industrialist Henry Morrison Flagler became a partner in Rockefeller’s company, thereby forming the firm Rockefeller, Andrews & Flagler.
John D. Rockefeller continued to borrow heavily, reinvest profits, control costs, use the refineries’ waste, and adapt to the changing market. The company now owned two refineries in Cleveland and a marketing subsidiary in New York.
Establishing the Standard Oil Company
In January of 1870, John D. Rockefeller ended the Rockefeller, Andrews & Flagler partnership to establish the Standard Oil Company in Ohio.
Soon enough, by employing the same practices as in the previous firm, Rockefeller expanded the company, making it the most profitable one in Ohio. The company became one of the largest shippers of kerosene and oil in the country, becoming a major oil-producing, refining, transporting, and marketing company.
In the following years, Rockefeller continued to buy the least efficient competing refiners, improve the efficiency of his operations, press for discounts on shipments, undercut his competition, raise investment pools, buy out his rivals, and make secret deals.
By 1872, Standard Oil had absorbed 22 of its 26 competitors in Cleveland. This takeover by Standard Oil came to be known as The Cleveland Massacre or The Cleveland Conquest.
Growth of Rockefeller’s Oil Empire
John D. Rockefeller often used his shrewd and ruthless business tactics to eliminate his competitors.
He would first show his competitors his books to make them realize what they were up against. Then he would attempt to make a decent enough offer. If they refused, he would threaten to run them into bankruptcy and then buy up their assets at the auction for a cheap price.
Such a tactic almost always worked in his favor and Standard Oil continued to expand exponentially.
Rockefeller saw himself as the savior of the oil industry, one who made the industry stronger and more efficient as a whole. Standard Oil made oil and its by-products available to the average household by keeping the prices low and affordable. They also sometimes sold below the market cost to increase their market penetration.
Toward the end of 1870, Standard Oil was refining over 90% of the oil in America and selling more than 300 oil-based products.
At its height, Standard Oil became the largest oil refiner in the world.
Accused of Monopolizing the Oil Trade
In 1877, John D. Rockefeller decided to use pipelines as an alternative transport system for oil and soon began building and acquiring them.
However, the Pennsylvania Railroad Company, run by Thomas Alexander Scott, saw this move of Rockefeller’s as an incursion into the pipeline and transportation field. The Railroad formed a subsidiary to buy and build oil refineries and pipelines. In retaliation to this, Standard Oil held back its shipments and, along with the help of other railroads, began a price war that reduced freight payments, thereby leading to serious labor unrest.
The Pennsylvania Railroad backed down and Standard Oil prevailed as usual. The Railroad also ended up selling its oil interests to Standard Oil.
After this encounter between the two companies, the Commonwealth of Pennsylvania indicted Rockefeller on charges of monopolizing the oil trade. Following this indictment, several other court proceedings were initiated against Rockefeller in other states.
Standard Oil’s business practices came under the radar and became a national issue, attracting serious backlash and criticism from the press and public.
During this period, Rockefeller suffered from tremendous stress and anxiety. He would later remark that all the fortune he had made had not served to compensate him for the anxiety of that period.
Dominating the Oil Industry
By the end of the 1870s, Standard Oil was the largest oil refining and selling corporation in America. Thanks to Rockefeller’s practice of horizontal integration, Standard Oil had captured around 80% of the American market.
Their cost-cutting mechanisms, such as having their own delivery and distribution system in place, greatly helped to reduce the cost of kerosene products, while at the same time improving their availability and quality.
But in spite of all this, the company’s business practices attracted a lot of controversies and negative publicity. Their methods of differential pricing, underselling, and secret transportation rebates came under much criticism. Due to such negative publicity, the company soon gained a reputation for being cruel, pitiless, and impudent.
Establishing the Standard Oil Trust
In 1882, John D. Rockefeller and his associates established the Standard Oil Trust in order to manage the dozens of separate corporations opened by them in various states. Therefore, the Trust would act as a corporation of corporations that would help to centralize their holdings. The trust included 41 companies, run by 9 trustees, including Rockefeller himself.
The sheer size and wealth of the Trust attracted public attention and criticism. It established Standard Oil as the largest and most powerful company in the world that always defeated its critics, political enemies, and competitors.
The company now seemed immune to the fluctuation of the business cycle and continued to make increasing profits year after year. It had 5,000 trucks, 4,000 miles of pipeline, 20,000 domestic wells, and over 100,000 employees.
The Decline in World Dominance
By the 1880s, despite forming the Standard Oil Trust, Standard Oil had gradually begun to lose its dominance in the world oil market.
Over the years, foreign competition increased as oil fields were discovered in Russia and several Asian countries. Considering these new developments, John D. Rockefeller finally gave up on his dream of controlling all of the world’s oil refining, realizing that public sentiment would be against them if they managed to achieve that feat.
The invention of the light bulb also played an important role in the decline of the company’s dominance, as kerosene was not as much in demand for illumination anymore.
The company slowly began expanding into natural gas production in America and then gasoline for automobiles. In the 1890s, Rockefeller also began expanding into iron ore and ore transportation, thereby coming into conflict with steel magnate Andrew Carnegie. The competition between the two industrialists attracted the attention of newspapers and cartoonists, who made it their primary subject.
Contemplating Retirement
By the late 1890s, while John D. Rockefeller was on a massive purchasing spree, acquiring leases for crude oil production in Ohio, West Virginia, and Indiana, he began to contemplate his retirement.
The management of the Standard Oil Trust was handed over to John Dustin Archbold, whose small oil company had been bought out by Standard Oil. After this, Rockefeller turned his attention to other activities such as playing golf and cycling.
By the age of 63, Rockefeller was properly retired and had earned over $58 million in investments in 1902 after selling Standard Oil’s iron interests to U.S. Steel, which was established by John Pierpont Morgan in 1901.
Supreme Court Verdict
In the year 1909, New Jersey changed its incorporation laws to allow the recreation of the Standard Oil Trust in the form of a single holding company.
In 1911, the Supreme Court of the United States found the Standard Oil Company of New Jersey to be in violation of the Sherman Antitrust Act, which prescribed the rule of free competition among those engaged in commerce.
The court declared that the Standard Oil Trust originated in illegal monopoly practices, and, therefore, ordered it to be broken up into 34 new companies.
John D. Rockefeller and the other stockholders received proportionate shares in each of the 34 companies. However, even though Rockefeller’s control over the oil industry was reduced, the breakup of the Trust proved to be highly profitable for him as the combined net worth of all the 34 companies increased fivefold over the next 10 years, resulting in his personal net worth soaring to $900 million.
Death
On 23rd May 1937, barely two months shy of his 98th birthday, John D. Rockefeller died of arteriosclerosis in Ormond Beach, Florida.
He was interred at Lake View Cemetery in Cleveland.
Philanthropy
John D. Rockefeller began his philanthropic activities at a very early age. While working at his first job, aged 16, he gave 6% of his earnings to charity, which he dutifully noted in his personal ledger.
By the time he had turned 20, he gave 10% of his income to charity. He also frequently made large donations to churches and congregations during his business travels. And as his personal wealth grew, so did the amount he donated. He mostly donated to public health and educational causes, including art and science.
As Rockefeller spent the latter part of his life deeply involved in philanthropy, he defined the structure of modern philanthropy, along with other prominent industrialists such as Andrew Carnegie. They chose to adopt a systematic approach of targeted philanthropy by establishing foundations to support various causes like education, scientific research, medicine, etc.
He also established the University of Chicago and Rockefeller University and even funded Central Phillippine University.
Rockefeller is said to have donated a total of $550 million of his wealth to charity.
Legacy
John D. Rockefeller is widely regarded as the richest person in modern history and the wealthiest American of all time.
By 1902, he was worth around $200 million, compared to the total national GDP of $24 billion at the time.
At the time of his death, it was estimated that Rockefeller had accumulated close to $1,500,000,000 out of the earnings of the Standard Oil Trust and his other investments, which was most probably the largest amount of wealth that any private citizen had ever been able to accumulate by his own efforts.
Even though many of the tactics employed by Rockefeller were controversial and even downright wrong, one can hardly deny the fact that he was a self-made man, who rose up from humble beginnings and accomplished great wealth and success through his own industry and efforts.
In today’s world, Rockefeller continues to remain a polarizing figure, one that invokes mixed reactions from people. Some think of him as a ruthless, greedy, unscrupulous, and power-hungry man, a bully who could go to any lengths to gain dominance and wealth. While others think of him as a self-made man and great philanthropist, who was more humane toward his competitors and whose wealth was the least tainted of all the great fortunes of his time.
