John D. Rockeffeler

Early Life
John D. Rockefeller was born on 8th July 1839 to parents William and Eliza Rockefeller in Richford, New York State.[2] He came from a humble background and grew up extremely religious as a devout Baptist[3]. His mother ingrained values of charity in him from a very young age, also teaching him the importance of working hard and saving money. The family relocated to Ohio in 1853 where John attended high school until 1855.[4] He continued his education at Folsom’s Commercial College where he gained practical business knowledge in areas such as bookkeeping, penmanship, and mercantile customs.[5] After graduating, Rockefeller landed his first professional role as a bookkeeper for a mercantile and shipping company in Cleveland, Hewitt & Tuttle in 1955.[6] His diligence and honesty stood out to his employers; he fulfilled his duties in a timely manner and maintained a pleasant and persistent demeanor. Although he was earning minimum wages he regularly donated to local churches and charities, something he practiced until he died in 1937.[7] After gaining experience in more complicated shipment deals that involved planning  (coordination between railroad, canal, lake boats for shipping), Rockefeller felt confident in his business skills.

On March 1st 1859, Rockefeller went into business with his partner Maurice Clark.[8] They each put in $2,000 and formed the company Clark & Rockefeller.[9] “The partners specialized in selling produce and during the American Civil War, (they) profited tremendously as they sold supplies to the federal government”.[10] They had been successful at the end of their first year in business grossing in over $450,000; their profit in 1860 which was $4,400 more than doubled to $17,000 in 1861.[11] By mid 1860s, Rockefeller became convinced that railroads were becoming the primary mode of transportation for commodities including agricultural products.[12] This would severely disadvantage Cleveland which was a port city and thereby affect Rockefeller and Clark’s business.

It is important to mention that this was a commission mercantile business which would now have limited growth opportunities. This realization pushed Rockefeller to shift focus from agricultural commodities to raw materials, which he believed to be the future of Cleveland. Simultaneously, an oil boom had been in effect in the nearby region of Northwest Pennsylvania. Once tested this oil was determined to be of extremely high quality and could yield a range of useful by-products upon refining. As new technologies around the drilling and refining of oil developed, Rockefeller and his partner seriously measured the viability of entering the oil business. Finally, Andrews, Clark & Company was formed in 1863 and was an oil-refining company.[13]

Early Business
In 1865 Rockefeller decided to buy out Clark’s share of the company and create the Rockefeller & Andrews Oil company; this new company earned approximately $200,000 that year alone.[14] He brought on another partner, Henry Flagler forming Rockefeller, Andrews, and Flagler in 1867.[15] The oil found in Pennsylvania was of high quality with one barrel yielding, “60-65% illuminating oil, 10% gasoline, 5-10% naphtha, and tar”.[16] Yet, it was dominantly used for a singular purpose- lighting. This led to unpredictable supplies of oil and prices that were constantly fluctuating. Rockefeller and his partners recognized this and made some decisions regarding their business to reduce waste, increase efficiency, and remain competitive in a market that lacked stability.

They sold different by-products to different companies for the first time selling every product created in the process of refining oil. Paraffin was sold to candle-makers, petroleum jelly to companies that specialised in medical supplies, and tar as paving material for roads.[17] Additionally, they made their own barrels and invested in their own hoop iron which reduced the cost of each barrel by half. Warehouses owned by the company in New York combined with boats they had bought to control their supply chain allowed them to easily transport oil via the Hudson and East Rivers. Additionally, they invested in innovative ways to efficiently transport their products. They were the first company to use tank cars as a shipping method.

As their business grew, railroad companies that connected Cleveland and New York scrambled to partner with them. Thereby, Flagler was able to negotiate rebates from the railroads giving their company a huge advantage over their competition.[18] The year 1870 was a monumental one for Rockefeller and new partners.[19] They owned two major oil refineries in Cleveland and decided to incorporate them as one under a charter that was issued in Ohio. This was the birth of Standard Oil, and the company that truly created Rockefeller’s massive fortune.

Standard Oil
The oil refineries located in Cleveland used railroads to carry Crude oil and Kerosene in large amounts to big city markets including New York City. As mentioned above, Rockefeller and his partners had secretly negotiated a discounted rate with freight carrier companies which allowed them to sell their products at a cheaper price. These kinds of secret alliances became characteristic of Rockefeller’s business practices. In 1971 Rockefeller helped create another secret alliance between railroads and refiners; together they planned to manipulate freight rates by cooperating instead of competing.[20] Additionally, the so called “Cleveland Massacre” which started right before this deal was extremely problematic.  In the early 1970s, “Rockefeller used the threat of this deal to intimidate more than 20 Cleveland refiners to sell out to Standard Oil at bargain prices”.[21] As a result, Standard Oil controlled more than 25% of the US oil industry.[22]

Rockefeller had envisioned exactly this- large interconnected companies replacing smaller individual competition. We see that he believed that monopolies were not only inevitable, but also preferred. By 1874, Rockefeller and partners started acquiring pipeline networks, enabling them to control and manipulate the flow of crude oil.[23] Often, they would use this to divert or block supply to other refineries by buying land alongside theirs, running them out of business, and purchasing the company at a bargain price. Using these tactics, Standard Oil became the first industrial monopoly of the world by owing 90% of the US refining business.[24] This is important as by doing business nation-wide, Rockefeller’s company had violated its Ohio charter; they were prohibited from doing business outside state-lines under this charter. As a result, Rockefeller moved his company to New York City and built a new type of organization called a ‘Trust’.

To put simply, “A trust is a combination of firms formed by legal agreement”.[25] Rockefeller and nine others held “in trust” stock in Standard Oil and forty other companies under it. The most significant part of this arrangement was its secretive nature, once again highlighting the use of alliances as a strategy within the Rockefeller business empire. By the 1880s Standard Oil produced majority of the Kerosene for lamps, owned over 4,000 miles of pipelines and employed a workforce of over 100,000.[26] Further, US was divided into districts to sell Standard Oil products; the company indulged in shady practices including giving away stoves and lamps to create demand for their oil products, creating sham competitors, and lowering prices dramatically to run their competition out of business. Through all this, “Rockefeller often declared that the whole purpose of Standard Oil was to supply “the poor man’s light”, and ensured good quality products at generally low prices.[27] Rockefellers increasing investments came at a time when anti-monopoly sentiments were rapidly rising in the US. As Standard Oil made its way to the West coast of America in 1900, over thirty US states passed antitrust laws to curb market manipulation from economies. These states filed cases against Standard Oil, most of which the company lost while evading rulings to maintain their monopoly.

Standard Oil was sued by the Attorney General under Roosevelt in 1906 under the Sherman Antitrust Act of 1890.[28] A public trial in 1908 in a Missouri Federal Court showed that, “the trial judge and a unanimous federal appeals court agreed that Standard Oil was a monopoly violating the Sherman Antitrust Act”.[29] This decision was appealed in the Supreme Court by Standard Oil. On 11th May, 1911 Standard Oil was ordered to dissolution by the Supreme Court due to being in violation with the Sherman Antitrust Act.[30] While the Trust was ordered to be broken up, stakeholders could still hold shares in the newly formed companies. “Rockefeller, owning a 25 percent share in each of the new companies, was worth $900 million in 1913 ($13 billion in today’s dollars). This made him the richest man in the world”.[31] Rockefeller believed that competition was a sin, and his business principles truly reflected that.[32]

Although involved in the legal battles surrounding Standard Oil, Rockefeller officially retired from the company by the late 1890s.[33] By the time of his death in 1937 he is said to have donated almost his entire fortune to public causes such as health, education, and cultural arts. By 1932, Rockefeller had donated $75,000,000 to the University of Chicago.[34] An institute for medical research, now named the Rockefeller University received over $50,000,000 from him. The general education board was founded by him in 1903 and helped in building and managing high-schools across Southern USA. He was an important agent in the preservation of historical communities across America such as Williamsburg in Virginia.[35] Additionally, he directly contributed to the eradication of hookworm in the South by establishing Rockefeller Sanitary Commission in 1903.[36]

John D. Rockefeller remains a complicated figure in American history. On the one hand, he can be viewed as a ‘Captain of the Industry’ due to his massive wealth and success. On the other hand, his success in the Gilded Age can earn him the title of a Robber Baron, or someone who made their fortune by exploiting others.[37] It is clear that the business practices Rockefeller indulged in including forming secret alliances, price fixing for oil, and ultimately building a monopoly are highly questionable. However, this paper has shown that Rockefeller was an important figure in the history of America as he transformed the refining business and created the foundations for the modern oil and refining industry.[38] He provided products that were of the best quality for the lowest price possible ultimately benefiting his consumers. His philanthropic contributions further benefit the public and set new standards for philanthropists for generations to come. It is safe to say that John D. Rockefeller Is one of the most important business figures to exist and continues to have an impact on business even today.