UK: Business Legends - The world's first oil billionaire.

UK: Business Legends - The world's first oil billionaire. - Philanthropist and founder of the infamous Standard Oil Company, JD Rockefeller rose to the heights of wealth and power believing he was doing the nation a favour.

by Rhymer Rigby.
Last Updated: 31 Aug 2010

Philanthropist and founder of the infamous Standard Oil Company, JD Rockefeller rose to the heights of wealth and power believing he was doing the nation a favour.

The world's greatest oil man (forget the Sultan of Brunei) was born in 1839 on a farm in upstate New York. Mum was the kind of hard-core Calvinist who believed suffering was good for you and Dad was a spiv who had made a fortune swizzling the local Indians and hawking cures for cancer. Pa Rockefeller was a well-rounded failure as a role model. In 1849, he was indicted on a rape charge (the home help) and the family left the county, eventually settling in Cleveland, Ohio. Soon after John D reached adulthood, Dad disappeared altogether - it was later discovered he had lived out the remainder of his 96 years as a bigamist in South Dakota.

Prior to this disappearance, however, John D Rockefeller finished school in 1855 and landed a job as a book-keeper at a commodities merchant, earning $3.50 a week. Although he dutifully tithed 10% of his earnings to the Baptists, by 1858 he had saved $800. Borrowing a further £1,000 from his father, at a punitive 10%, he decided to set up a commodities business with Maurice Clark, a British immigrant. He was 19. Dealing in raw materials, the company prospered during the American civil war.

More significantly, the world's first oil well was sunk in 1859 in Pennsylvania's Allegheny mountains. In 1863, a contact of Clark's was looking for investors in a refinery. Rockefeller invested $4,000 and became a shareholder. Two years later, he had bought out his partners and Rockefeller found he was in the right place at the right time. With only a little luck and judgment, he could scale almost unlimited heights of wealth and power. The key to the oil industry lay not in getting the stuff out of the ground - the infant market made for volatile crude prices - but in refining and distribution. So, he 'leveraged' himself to the hilt and set about buying up Cleveland's refining capacity.

He then jumped into bed with the railroads, using his clout to negotiate considerable discounts (secret but legally sound) from the operators, thereby tilting the playing field firmly in his favour. In 1870, Rockefeller really entered the premier league when he founded the infamous Standard Oil company. He then visited Cleveland's remaining refiners with the ultimatum: 'Throw your lot in with me or go out of business.' One of the refuseniks was a business in which his brother Frank was involved.

JD bankrupted it.

Standard soon became the nation's biggest refiner and, by 1880, held near monopolies in refining and the increasingly important pipeline network.

Amusingly enough, throughout this viciously acquisitive period, Rockefeller genuinely believed that he was doing the smaller companies and the nation a favour.

Back then, the US was a looser federation than it is today and most states didn't allow indigenous companies to hold shares in businesses beyond their borders. For the determinedly expansionist Rockefeller, this would never do. So he devised a trust to circumvent this technicality, which became active in 1882. Again, there was nothing illegal about this and, while he undoubtedly paid bribes by the lorryload, palm greasing was accepted practice.

Meanwhile, the company maintained its commanding position with continuous horizontal expansion and vertical integration. Before long, its involvement with 'the product' extended from the drilling right through to the gas pump. In 1888, Rockefeller moved his megaprise to New Jersey to take advantage of that state's relaxed corporate ownership laws. Here, he reconstituted the trust as a holding company. Interestingly, Rockefeller was pretty 'hands off'. He wielded supreme authority but his managers were by no means 'unempowered'.

Thus, in the 1890s, when he stepped away from the day-to-day running of the company on doctor's orders and passed control to salaried executives, all went well.

The same could not be said of public opinion. Popular concern over the tycoon's antics prompted the federal and state governments to pass a series of anti-trust laws. In 1906, Roosevelt's justice department brought a suit against Standard and, five years on, the group was dismembered into its 34 constituent companies, among them the forerunners of Mobil and Exxon. Ironically, this had the effect of whacking up the value of JD's personal holdings to nearly a billion dollars.

Though Rockefeller effectively bankrupted his brother, he wasn't all bad. He endowed not only a college but the whole University of Chicago.

He channelled his fortune into a vast philanthropic foundation and devoted his last years to charity, golf and gardening. Finally, in 1937, the 96-year-old philanderer's son died a 97-year-old philanthropist.

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