John D. Rockefeller

John D. Rockefeller: The Bookkeeper Who Bought an Industry

In September 1855 a sixteen-year-old took a job as assistant bookkeeper at a Cleveland produce firm and began tithing six per cent of a very small salary to his church. Sixty years later he was the first billionaire in American history, his personal fortune equal to 2.3 per cent of the entire national economy, and he had given away more money than anyone who had ever lived. The instrument in both cases was the same: an obsessive, almost inhuman attention to what things actually cost.

Devil Bill's Son

He was born on 8 July 1839 at Richford, New York, the second of six children. His father William was a travelling salesman and confidence man known as Devil Bill, unprincipled by every account including his family's; his mother Eliza Davison was a devout Baptist whose values took permanent hold on the boy. The family moved repeatedly before settling in Cleveland. Rockefeller attended Central High School and then a ten-week course at Folsom's Commercial College, where he learned bookkeeping. That was the whole of his formal training, and it was enough.

At Hewitt & Tuttle he kept the books with a fastidiousness that unnerved people, and taught himself the economics of freight — what it cost to move a thing from one place to another, and why. He raised his tithe to ten per cent by the time he was twenty. In 1859 he went into partnership with Maurice Clark and George Gardner in produce commission.

Into Oil

As wartime commission profits thinned, the partners built a refinery in Cleveland's industrial flats in 1863. In February 1865 Rockefeller bought the Clark brothers out for $72,500 and formed Rockefeller & Andrews. He called it the day that determined his career, and he was right: by 1868 the firm ran the largest oil refinery in the world.

On 10 January 1870 he incorporated Standard Oil of Ohio, with Henry Flagler among his associates, and began consolidating. What followed between 1870 and 1872 is remembered as the Cleveland Massacre: Standard Oil absorbed twenty-two of the city's twenty-six competing refineries in four months. By 1880 it held roughly ninety per cent of American refining.

How He Did It

Two things, running together. The first was genuine operating efficiency, and it is often forgotten in the telling. Rockefeller drove costs down by manufacturing his own barrels, laying his own pipelines, and refusing to throw anything away — the residues other refiners dumped became gasoline, lubricating oil, paraffin wax and petroleum jelly, all sold at a profit. Kerosene got cheaper, year after year, and ordinary Americans got light.

The second was leverage of a less admirable kind. Because Standard shipped in volumes no rival could approach, Rockefeller extracted preferential rebates from the railroads, then used the resulting cost gap to present competitors with a choice between selling to him and going under. In 1882 his lawyers assembled the Standard Oil Trust, a legal structure new to the world, placing the stock of forty-one companies in the hands of nine trustees. It solved his coordination problem and gave the English language a word for corporate menace.

The Reckoning

The trust made him the most hated man in America. Ida Tarbell's *The History of the Standard Oil Company*, published in 1904, documented the tactics case by case and remains one of the most consequential works of journalism ever written. In 1907 Judge Kenesaw Mountain Landis fined Standard Oil $29,240,000, the maximum available, though the fine was reversed on appeal. On 15 May 1911 the Supreme Court found that Standard Oil had violated the Sherman Antitrust Act and ordered it broken into thirty-four separate companies — the ancestors of Exxon, Mobil and Chevron among them.

The dissolution was supposed to punish him. Instead the pieces were worth far more separately than together, Rockefeller held shares in all of them, and he became substantially richer. He was America's first billionaire by 1916.

Giving It Away

From the 1890s he turned the same method on philanthropy, and the results were not sentimental. He gave $80 million to found the University of Chicago. He established the Rockefeller Institute for Medical Research in 1901, now Rockefeller University; the General Education Board in 1903; the Rockefeller Sanitary Commission in 1909, which set out to eliminate hookworm in the American South and largely did; and the Rockefeller Foundation in 1913, endowed with $182 million. His giving passed $530 million in his lifetime. His money funded the campaign against yellow fever and, through the Flexner Report, rebuilt American medical education from the ground up.

Why John Is Called a Genius

The talent was analytical and specific: Rockefeller could see the true cost structure of an entire industry when everyone else was looking at the price of a barrel. Where his competitors thought of themselves as oil men, he thought in terms of a system with many inputs — freight, cooperage, transport, waste streams, capital — and worked each one down. Making his own barrels, laying his own pipe, and converting refinery residue into saleable products were not clever tricks but applications of one habit of mind. The Standard Oil Trust was the same habit applied to law: a novel instrument invented because the existing corporate forms could not hold what he had built. Very few people in commercial history have been able to hold a whole industry in their head at that level of detail and still act decisively.

Two further points support the word. He applied the same analysis to giving, inventing the modern research foundation — an institution that funds the systematic pursuit of a solution rather than relieving distress case by case — and public health has not been the same since. And his judgment of people was exceptional; economists studying Standard Oil consistently point to talent selection alongside cost control as the engine of the whole thing.

The counter-case is unavoidable and Tarbell made it definitively. A large part of Standard's advantage came not from being better but from secret railroad rebates that competitors could not obtain — an unearned edge used to force sales at prices sellers could not refuse. The Supreme Court agreed in 1911. Ron Chernow's summary is the fairest available: his good side was every bit as good as his bad side was bad. Allan Nevins judged his fortune the least tainted of the great fortunes of the era, which says as much about the era as about him. Call it commercial and organisational genius married to a genuine ruthlessness that the man himself, tithing all the while, appears never to have recognised as such.

Legacy

He married Laura Celestia Spelman in 1864 — she influenced his business judgment considerably — and they had four daughters and one son, John Jr. He never drank or smoked, went to church twice a week and taught Bible study. In his fifties he suffered depression and lost all his hair to alopecia, thereafter wearing a toupee, and took to handing dimes to strangers and nickels to children.

He spent his last decades at Kykuit in Westchester County and at The Casements in Ormond Beach, Florida, and died of arteriosclerosis on 23 May 1937, weeks short of ninety-eight. He is buried in Lake View Cemetery in Cleveland, the city where he learned to keep books.

The companies he was forced to relinquish still dominate global energy. The foundation model he invented is how billionaires give money away in the twenty-first century. And American antitrust law, the thing built specifically to stop him, is still the framework by which every dominant firm since has been judged.

Achievements

• Notable work: Riverside Church
• Notable work: Kykuit
• Educated at Chancellor University and Bryant & Stratton College
• Worked as entrepreneur, accountant and banker