Who Was rockefeller?
John Davison Rockefeller, best known for his work on the refinement of oil into gasoline and his monopoly of the oil business in the 19th century, was born on July 8th, 1839 in Richford New York to Elisa Davison and William Avery Rockefeller. His father, a doctor of sorts, was gone for long periods of time but would return with large sums of money which he earned by charging his patients $25 (almost $610 today*) for his self-proclaimed cancer treatment. Even at a young age, John showed signs of being a skillful businessman, and by age 12 he had saved over $50 ($1,470 today). John then loaned this $50 to a local farmer with a 7% interest. When the farmer paid him his $50 back plus the $3.50 interest, John had $53.50, about $1,570 today.
He eventually enrolled in Owego Academy in Owego, New York, where he showed his inept skill at mathematics and problem solving. He then attended high school where he learned more useful skills such as public speaking and debating. In August 1855, after only 10 weeks at Folsom's Commercial College, John Rockefeller began looking for work in Cleveland. At the time, Cleveland's business was in a rut, and it was difficult for John to find a job. Finally, on September 26th, 1855, he was hired by Hewitt & Tuttle, commission merchants and produce shippers, to be an assistant bookkeeper. John's attitude quickly impressed his employers: he was hardworking and took his work with utmost seriousness. He fought hard to collect overdue accounts from customers, and he worked to get the company's money from delinquents. Though he was not paid much at all, what he was paid he gave to local charities. Earlier in life John had learned to "let the money be my servant and not make myself a slave to the money…". Thanks to his impressive attitude, Rockefeller quickly moved up the ranks at Hewitt & Tuttle, as well as making himself known to the broader business community in Cleveland.
He eventually enrolled in Owego Academy in Owego, New York, where he showed his inept skill at mathematics and problem solving. He then attended high school where he learned more useful skills such as public speaking and debating. In August 1855, after only 10 weeks at Folsom's Commercial College, John Rockefeller began looking for work in Cleveland. At the time, Cleveland's business was in a rut, and it was difficult for John to find a job. Finally, on September 26th, 1855, he was hired by Hewitt & Tuttle, commission merchants and produce shippers, to be an assistant bookkeeper. John's attitude quickly impressed his employers: he was hardworking and took his work with utmost seriousness. He fought hard to collect overdue accounts from customers, and he worked to get the company's money from delinquents. Though he was not paid much at all, what he was paid he gave to local charities. Earlier in life John had learned to "let the money be my servant and not make myself a slave to the money…". Thanks to his impressive attitude, Rockefeller quickly moved up the ranks at Hewitt & Tuttle, as well as making himself known to the broader business community in Cleveland.
Rockefeller Begins his business career
Maurice Clark
Only 19 years f age, John Rockefeller started his own commission merchant business on March 1st 1859, alongside his neighbor Maurice Clark (shown right). The business, named Clark & Rockefeller began with only $4,000, but after the first year had grossed $450,000. The reason for the company's success can be attributed to John's inept business ability, but his business also boomed as a result of the Civil War. Rockefeller took no risks in his business, and calculated the effects of his decisions long before acting. Because of his attitude and his aggressive hard work, his business continued to grow. Rockefeller and Clark knew, however, that their success would be short lived because the future in commission merchants business in Cleveland had a bleak future. According to Rockefeller, the railroad would become an invaluable tool in his field of business, and Cleveland's had no use for railroads because its primary source of goods transportation was via it's Lake Erie port. As a result, Rockefeller, ever the businessman, took the geographical disadvantage he'd been faced with and turned it into a money-making and empire-building tool. He knew Cleveland's future lay in the hands of raw industrial materials, so in 1863, Rockefeller made up his mind on what he would use to shoot his business forward - oil.
rockefeller enters The Oil business
It was 1962 and Rockefeller began exploring the newly booming world of the oil business. Just three years earlier, on August 27th, 1859, Edwin Drake struck oil near Titusville, Pennsylvania. It wasn't the fact that he struck oil that was revolutionary, but rather the way in which he drilled for the oil. Drake was the first person to pump oil out of the ground in the same fashion in which one would pump water. This revolutionized method combined with the rich oil that could be found in Pennsylvania and the newly developed method of refining oil in the early 1850s started an oil frenzy, an Rockefeller was bent to come out on top. In 1862 Andrews, Clark & Company was formed and the long-planned Atlantic & Great Western Railroad was built. The A&GW line went east into Meadville, PA, then northeast to Correy, PA, and then into New York, where it met with the Erie Railroad. The A&GW also had its hearts in key oil industry regions including Titusville and Franklin. This gave Cleveland, and more importantly Rockefeller, access to the East coast and key oil regions. Rockefeller got straight to work ironing out the "kinks" in his business. Rockefeller believed the key to a successful business was to wring every drop of efficiency out of every aspect of his business, so he let nothing go to waste. In February of 1865, Rockefeller bought out the Clark brothers (Maurice Clark's brothers had entered the oil business) for $75,000. Now in total control of the company, Rockefeller turned all of his profits back into his company and took important steps to further build up his "empire". Rockefeller brought his brother William into the business in 1866 and put him in charge of a New York City office that handled exports, which eventually became larger than the domestic business.
The BUSINESS expands
Henry M. Flagler, a grain merchant, was trying to re-start his life in 1865 by working as a manufacturer of oil barrels. By coincidence, Flagler had his office in the same building as Rockefeller, and because of their similar mindsets and characters, they became friends and eventually business partners. Flager's uncle-in-law, Stephen V. Harkness, became a silent partner that gave substantial investments in the partnerships, and by 1868, Rockefeller, Flagler & Harkness was the biggest oil refinement business in the world. Rockefeller knew that in order to be successful, their company would have to be strong in two aspects: size and waste utilization. They knew, however,that because of the oil refinement's few risks and multiple rewards, they would have a lot of competition. Whith this in mind, they began their preparations:
In short, Rockefeller covered all his bases, and left nothing up to chance.
- They built high-quality, larger, better-planned refineries. They built permanent facilities using the best materials available.
- They owned their own cooperage (barrel making) plant, their own white-oak timber and drying facilities, and bought their own hoop iron. Consequently, they cut the cost of a barrel from about $3.00 to less than $1.50.
- They manufactured their own sulfuric acid (which was used in the purification process) and devised technology to recover it for re-use.
- They owned their own drayage service, consisting of at least 20 wagons in 1868.
- They owned their own warehouses in New York City and their own boats on the Hudson and East Rivers to transport their oil.
- They were the first to ship oil via tank cars (albeit big wooden tubs mounted in pairs on flat cars -- later to evolve into the modern form of a tank car). And they owned their own fleet of tank cars.
- They built huge holding tanks near their refineries for storing crude and refined oil, with the equipment for drawing off the oil from the tank cars into the holding tanks.
- Their huge size made it economical to build the necessary physical plant to handle all the "waste" products from the refining of kerosene. They began manufacturing high quality lubricating oil that quickly replaced lard oil as a lubricant for machinery. Gasoline, which many refiners surreptitiously dumped into the Cuyahoga River at night (the river often caught fire), Rockefeller and Flagler used as fuel. They manufactured benzene (used as a cleaning fluid; a solvent for fat, gums, and resin; and to make varnish), paraffin (insoluble in water, used for making candles, waterproofing paper, preservative coatings, etc.), and petrolatum (used as a basis for ointments and as a protective dressing; as a local application in inflammation of mucous membrane; as an intestinal lubricant, etc. -- white petrolatum later marketed under the brand name Vaseline). They shipped naphtha (volatile inflammable liquid used as a solvent in dry cleaning and in wax preparations, varnish and paint making, burning fluid for illumination, and as a fuel for motors) to gas plants and other users.
In short, Rockefeller covered all his bases, and left nothing up to chance.
Standard oil company: 1870-1882
The Standard Oil Company was created on January 10th, 1870. Its creator, John Rockefeller, had hold of 30% of the company, while William Rockefeller held 13.34%, Henry Flagler held 16.67%, Samuel Andrews held 16.67%, Stephen Harkness held 13.34%, and O.B. Jennings held 10%. In Rockefeller's eyes, the oil business was unstable. With its low entry fee and its high potential rewards, the business was flooded with many weak firms a midst a few strong ones. To Rockefeller these small firms only lowered prices below production costs, and ruined the stronger firms. Rockefeller's solution was in effect an oligopolistic market, with simply a few (or one) strong firms cornering the business. Rockefeller and Flagler devised a plan to take over all other small businesses and make their business the chief firm, and in 1871, they put their plan into motion when they began buying out their competitor oil firms in Cleveland. Rockefeller dealt with his competitors personally, and his tactic for convincing competitors to sell him their company was simple yet effective: The rival refinery would be appraised and the refinery's owner would be given stock in Standard Oil based on the value of their company. By April 1872, Rockefeller had almost complete control of the oil business in Cleveland. In 1874, Standard Oil began building its own pipeline system using Bostwick & Co., an oil refinery business Rockefeller bought in 1872. Standard continued to build and buy new pipelines as well as partial control of railroads and Eastern shore refineries, and by 1879, Standard Oil did about 90% of the U.S.'s oil refining, and 70% of that was shipped overseas. Rockefeller never reached his goal of controlling 100% of the US's oil refinement business because in 1879, Tidewater Pipe-Line Company (later the Tidewater Oil Company) emerged as the 10% of the oil business Rockefeller didn't control. In 1882, Rockefeller turned to an economic mindset when the Standard Oil Trust was formed. A Board of Trustees was set up who elected directors and officers of all the subset companies. The Trust was publicly capitalized at $75,000,000, but the true value may well have been over $200,000,000. By 1890, Standard had set up a complex system that delivered their oil to almost every American town. It was during the height of his companies business that Rockefeller began to change.
a nERVOUS BREAKDOWN
In the early 1890s, It was very apparent that Rockefeller was suffering from a nervous breakdown. He lost all his hair, including his eyebrows, and his overall health began to fail. Despite his poor physical and mental condition, his business continued to make money. If fact, Rockefeller had to hire Frederick T. Gates to manage his growing fortune. Rockefeller finally retired in 1897 at age 58, and John Archbold took over for Rockefeller as the head of Standard Oil. Rockefeller, however, never publicly announced his retirement, which proved to be a big mistake. Because of Standard Oil's monopoly of the oil business, Rockefeller could have simply increased the prices of his oil to outrageous prices, and his prices would have to be met, because of his almost complete control of the oil business. Rockefeller, however, resisted the temptation to extort his power in this way. When John Archbold took over, however, he raised the prices aggressively and let the money roll in. Since Rockefeller had not publicly announced his retirement everyone thought he was still in charge of Standard Oil, and blamed him for the outrageous oil prices.
In 1912, Rockefeller's fortune peeked at almost $900 million, most of which he gave away to charities. In 1897, John D. Rockefeller Jr. joined forces with Gates and took control of the Rockefeller Fortune. A list of a few projects he funded, and the amount he gave:
On May 23rd, 1937, John Davison Rockefeller died, leaving his son an estate totaling only $26,410, 837 as a result of his enormous donations to charities and foundations.
In 1912, Rockefeller's fortune peeked at almost $900 million, most of which he gave away to charities. In 1897, John D. Rockefeller Jr. joined forces with Gates and took control of the Rockefeller Fortune. A list of a few projects he funded, and the amount he gave:
- University of Chicago - $75,000,000
- Rockefeller Institute for Medical Research (now Rockefeller University) - $50,000,000
- General Education Board - $50,000,000
- Rockefeller Foundation - $235,000,000
On May 23rd, 1937, John Davison Rockefeller died, leaving his son an estate totaling only $26,410, 837 as a result of his enormous donations to charities and foundations.
His legacy
According to Keith Poole, a Professor of Political Science at the University of Georgia, John D. Rockefeller was a Schumpereran entrepreneur. He clearly changed "the stream of the allocation of resources over time by introducing new departures into the flow of economic life' by creating the modern oil industry. His emphasis on size and efficiency and the use of modern chemistry resulted in the development of a wide variety of new products that made the lives of ordinary people better as a consequence. He made light cheap for untold millions and his great creation was ready, willing, and able to provide the cheap gasoline when it was needed, thus ushering in the age of the automobile in America. Last, but not least, he set the standard for philanthropy. Just the eradication of hookworm in the South alone would merit his place as one of the great humanitarians of the 20th Century. But his reputation was so sullied that he never received the credit that he was due for this great act on behalf of humankind."