John Davison Rockefeller (July 8, 1839 – May 23, 1937) was an American
oil magnate. Rockefeller revolutionized the
petroleum industry and defined the structure of modern
philanthropy. In 1870, he founded the
Standard Oil Company and aggressively ran it until he officially retired in 1897. Standard Oil began as an
Ohio partnership formed by John D. Rockefeller, his brother
William Rockefeller,
Henry Flagler,
Jabez Bostwick, chemist
Samuel Andrews, and a
silent partner,
Stephen V. Harkness. As kerosene and gasoline grew in importance, Rockefeller's wealth soared, and he became the world's richest man and first American worth more than a
billion dollars.
Fortune Magazine lists the richest Americans, not by the changing value of the dollar but by percentage of
GDP: Rockefeller is credited with a Wealth/GDP of 1/65. (accessed 20 August 2009). Adjusting for
inflation, he is often regarded as
the richest person in history.
Rockefeller spent the last 40 years of his life in retirement. His fortune was mainly used to create the modern systematic approach of targeted philanthropy with foundations that had a major effect on medicine, education, and scientific research.
His foundations pioneered the development of medical research, and were instrumental in the eradication of
hookworm and
yellow fever. He is also the founder of both
the University of Chicago and
Rockefeller University. He was a devoted
Northern Baptist and supported many church-based institutions throughout his life. Rockefeller adhered to total abstinence from alcohol and tobacco throughout his life.
John D. Rockefeller, by Albro Martin,
Encyclopedia Americana 1999 Vol. 23
He had four daughters and one son;
John D. Rockefeller, Jr. "Junior" was largely entrusted with the supervision of the foundations.
Early life and business career
Rockefeller was the second of six children born in
Richford, New York, to
William Avery Rockefeller (November 13, 1810 – May 11, 1906) and Eliza Davison (September 12, 1813 – March 28, 1889). Genealogists trace his roots back to French
Huguenots who later fled to
Germany in the 17th century.Chernow, (1998) p. 10Scheiffarth, Engelbert:
Der New Yorker Gouverneur Nelson A. Rockefeller und die Rockefeller im Neuwieder Raum. Genealogisches Jahrbuch,
9 (1969), pp. 16–41 His father, first a lumberman, then a
traveling salesman, billed himself as a “botanic physician” and sold dubious elixirs. The locals referred to the mysterious but fun-loving man as "Big Bill," and "Devil Bill".Chernow, (1998) p. 11 He was a sworn foe of conventional morality who had opted for a vagabond existence and who returned to his family infrequently. Throughout his life, William Avery Rockefeller expended considerable energy on tricks and schemes and avoided plain hard work.
Eliza, a homemaker and devout Baptist, struggled to maintain a semblance of stability at home as William was frequently gone for extended periods. She also put up with his philandering and his double life, which included bigamy.Chernow, (1998) p. 43 Thrifty by nature and by necessity, she taught her son that "willful waste makes woeful want". Young Rockefeller did his share of the regular household chores, and earned extra money raising turkeys, selling potatoes and candy, and eventually loaning small sums of money to neighbors. He followed his father’s advice to "trade dishes for platters" and thereby always get the better part of any deal. Big Bill once bragged, "I cheat my boys every chance I get. I want to make ‘em sharp."Segall, (2001) pp. 15–16
In spite of his father’s absences and frequent moving, Young Rockefeller was a well-behaved, serious and studious boy. His contemporaries described him as reserved, earnest, religious, methodical, and discreet. He was an excellent debater, and expressed himself precisely. He also had a deep love of music, and even dreamed of it as a possible career.Chernow, (1998) p. 40 Early on, he displayed an excellent mind for numbers and detailed accounting.
When he was a boy, his family moved to
Moravia, New York and, in 1851, to
Owego, New York, where he attended Owego Academy. In 1853, his family bought a house in
Strongsville, a suburb of
Cleveland. In September 1855, when Rockefeller was sixteen he got his first job as an assistant
bookkeeper, working for a small produce commission firm called "Hewitt & Tuttle". Though he worked long and hard hours, he delighted, as he later recalled, in “all the methods and systems of the office”.Chernow, (1998) p. 46 He was particularly adept at calculating transportation costs, which served him well later in his career. The full salary for his first three months' work was $50 (50 cents a day).Chernow, (1998) p. 47 Almost from his first pay, he displayed a philanthropic verve, donating about 6% of his earnings to charity, which increased to 10% by the age of twenty.Chernow, (1998) p. 50
In 1859, Rockefeller went into the produce commission business with a partner,
Maurice B. Clark, and they raised $4,000 in capital. Thrilled to be his own employer, Rockefeller went steadily ahead in business from there, never having a losing year during the rest of his career.Segall, (2001) p.25 They began their trade in wholesale foodstuffs but then built an
oil refinery in 1863 in "The Flats", then Cleveland's burgeoning industrial area. The refinery was directly owned by Andrews, Clark & Company, which was composed of Clark & Rockefeller, chemist Samuel Andrews, and M. B. Clark's two brothers. The commercial oil business was in its infancy. Whale oil had become too expensive for the masses, and a cheaper, general-purpose illuminant was desperately needed.Chernow, (1998) pp. 73–74
While his brother Frank fought in the Civil War, Rockefeller tended to his thriving business and hired substitute soldiers to fight in his place. He also gave money to the Union cause, as did many rich Northerners who avoided combat.Segall, (2001) p.28 In February 1865, in what was later described by oil industry historian
Daniel Yergin as a "critical" action, Rockefeller bought out the Clark brothers for $72,500 at auction, and established the firm of Rockefeller & Andrews. Rockefeller himself said, "it was the day that determined my career."Segall, (2001) p.32 Rockefeller was now well-positioned to take advantage of post-war prosperity and the great expansion westward fostered by the growth of railroads and an oil-fueled economy. He borrowed astutely and heavily, reinvested profits, adapted rapidly to changing markets, and fielded observers to keep a watchful eye over the quickly expanding industry.Segall, (2001) p.32, 35
In 1864, Rockefeller married
Laura Celestia "Cettie" Spelman. They would have four daughters and one son. He admitted later, "Her judgment was always better than mine. Without her keen advice, I would be a poor man." He became a lifelong member of the then new Republican Party, and a strong supporter of Lincoln and the party’s abolitionist wing. He also became a faithful church go-er, taught Sunday school, and was a trustee, clerk, and occasional janitor for the modest Erie Street Baptist mission church.Chernow, (1998) p. 52 Religion would continue to be a guiding force throughout his life and Rockefeller believed it to be the source of his success. As he bluntly stated later, "God gave me money", and he felt no apology was necessary for how he acquired it. He felt entirely at ease and righteous following
John Wesley’s dictum, "gain all you can, save all you can, and give all you can."Chernow, (1998) pp. 54–55
In 1866, John D. Rockefeller's brother, William, built another refinery in Cleveland and John was brought into the partnership. In 1867,
Henry M. Flagler became a partner, and the firm of
Rockefeller, Andrews & Flagler was established. By 1868, with Rockefeller continuing to borrow heavily and reinvest most of the profits while controlling cost and utilizing his refineries' waste, the company owned two Cleveland refineries and a marketing subsidiary in
New York, and it was the largest oil refinery in the world. Rockefeller, Andrews & Flagler was the predecessor of the Standard Oil Company.
Standard Oil
By the end of the
American Civil War,
Cleveland was one of the five main refining centers in the U.S. (besides
Pittsburgh,
Philadelphia,
New York, and the region in northwestern
Pennsylvania where most of the oil originated). In June 1870, Rockefeller formed Standard Oil of Ohio, which rapidly became the most profitable refiner in Ohio. Standard Oil grew to become one of the largest shippers of oil and kerosene in the country. The railroads were fighting fiercely for traffic and, in an attempt to create a
cartel to control freight rates, formed the
South Improvement Company, in collusion with Standard and other oil men outside the main oil centers.Segall, (2001) p.42 The cartel received preferential treatment as a high-volume shipper, which included not just steep rebates of up to 50% for their product, but also rebates for the shipment of competing products. Part of this scheme was the announcement of sharply increased freight charges. This touched off a firestorm of protest from independent oil well owners, including boycotts and vandalism, which eventually led to the discovery of Standard Oil's part in the deal. A major New York refiner,
Charles Pratt and Company, headed by
Charles Pratt and
Henry H. Rogers, led the opposition to this plan, and railroads soon backed off. Pennsylvania revoked the cartel’s charter and equal rates were restored for the time being.Segall, (2001) p.43
Undeterred, though vilified for the first time by the press, Rockefeller continued with his self-reinforcing cycle of buying competing refiners, improving the efficiency of his operations, pressing for discounts on oil shipments, undercutting his competition, making secret deals, raising investment pools, and buying rivals out. In less than four months in 1872, in what was later known as the "Cleveland Conquest" or "Cleveland Massacre", Standard Oil had absorbed 22 of its 26 Cleveland competitors.Segall, (2001) p.44 Eventually, even his former antagonists, Pratt and Rogers, saw the futility of continuing to compete against Standard Oil: in 1874, they made a secret agreement with their old nemesis to be acquired. Pratt and Rogers became Rockefeller's partners. Rogers, in particular, became one of Rockefeller's key men in the formation of the Standard Oil Trust. Pratt's son, Charles Millard Pratt became Secretary of Standard Oil.
For many of his competitors, Rockefeller had merely to show them his books so they could see what they were up against, then make them a decent offer. If they refused his offer, he told them he would run them into bankruptcy, then cheaply buy up their assets at auction. He saw himself as the industry’s savior, "an angel of mercy", absorbing the weak and making the industry as a whole stronger, more efficient, and more competitive.Segall, (2001) p.46 Standard was growing horizontally and vertically. It added its own pipelines, tank cars, and home delivery network. It kept oil prices low to stave off competitors, made its products affordable to the average household, and to increase market penetration, sometimes sold below cost if necessary. It developed over 300 oil-based products from tar to paint to Vaseline to chewing gum. By the end of the 1870s, Standard was refining over 90% of the oil in the U.S.Segall, (2001) pp.48–49 Rockefeller had already become a millionaire.Segall, (2001) p.52
In 1877, Standard clashed with the Pennsylvania Railroad, its chief hauler. Rockefeller had envisioned the use of pipelines as an alternative transport system for oil and began a campaign to build and acquire them.Chernow, (1998) p. 171 The railroad, seeing Standard’s incursion into the transportation and pipeline fields, struck back and formed a subsidiary to buy and build oil refineries and pipelines.Segall, (2001) p.57 Standard countered and held back its shipments, and with the help of other railroads, started a price war that dramatically reduced freight payments and caused labor unrest as well. Rockefeller eventually prevailed and the railroad sold all its oil interests to Standard. But in the aftermath of that battle, in 1879 the Commonwealth of Pennsylvania indicted Rockefeller on charges of monopolizing the oil trade, starting an avalanche of similar court proceedings in other states and making a national issue of Standard Oil’s business practices.Segall, (2001) p.58
Monopoly
Standard Oil gradually gained almost complete control of oil refining and marketing in the United States through
horizontal integration. In the kerosene industry, Standard Oil ruthlessly replaced the old distribution system with its own vertical system. It supplied kerosene by tank cars that brought the fuel to local markets and tank wagons then delivered to retail customers, thus bypassing the existing network of wholesale jobbers.Chernow, (1998) p. 253 Despite improving the quality and availability of kerosene products while greatly reducing their cost to the public (the price of kerosene dropped by nearly 80% over the life of the company), Standard Oil's business practices created intense controversy. Standard’s most potent weapons against competition were underselling, differential pricing, and secret transportation rebates.Chernow, (1998) p. 258 The firm was attacked by journalists and politicians throughout its existence, in part for these
monopolistic methods, giving momentum to the
anti-trust movement. By 1880, according to the New York World, Standard Oil was "the most cruel, impudent, pitiless, and grasping monopoly that ever fastened upon a country."Segall, (2001) p.60 To the critics Rockefeller blandly replied, "In a business so large as ours…some things are likely to be done which we cannot approve. We correct them as soon as they come to our knowledge.”
At that time, many legislatures had made it difficult to incorporate in one state and operate in another. As a result, Rockefeller and his associates owned separate corporations across dozens of states, making their management of the whole enterprise rather unwieldy. In 1882, Rockefeller's lawyers created an innovative form of corporation to centralize their holdings, giving birth to the
Standard Oil Trust.Segall, (2001) p.61 The "
trust" was a corporation of corporations, and the entity's size and wealth drew much attention. Nine trustees, including Rockefeller, ran the 41 companies in the trust. The public and the press were immediately suspicious of this new legal entity, but other businesses seized upon the idea and emulated it, further inflaming public sentiment. Standard Oil had gained an aura of invincibility, always prevailing against competitors, critics, and political enemies. It had become the richest, biggest, most feared business in the world, seemingly immune to the boom and bust of the business cycle, consistently racking up profits year after year.Chernow, (1998) p. 249
Its vast American empire included 20,000 domestic wells, 4,000 miles of pipeline, 5,000 tank cars, and over 100,000 employees. Its share of world oil refining topped out above 90% but slowly dropped to about 80% for the rest of the century.Segall, (2001) p.67 Ironically, in spite of the formation of the trust and its perceived immunity from all competition, by the 1880s Standard Oil had passed its peak of power over the world oil market. Rockefeller finally gave up his dream of controlling all the world’s oil refining, he admitted later, “We realized that public sentiment would be against us if we actually refined all the oil.” In reality, foreign competition and new finds abroad eroded his dominance. In the early 1880s, Rockefeller created one of his most important innovations. Rather than try to influence the price of crude oil directly, Standard Oil had been exercising indirect control by altering oil storage charges to suit market conditions. Rockefeller then decided to order the issuance of certificates against oil stored in its pipelines. These certificates became traded by speculators, thus creating the first oil-futures market which effectively set spot market prices from then on. The National Petroleum Exchange opened in Manhattan in late 1882 to facilitate the oil futures trading.Chernow, (1998) p. 259
Even though 85% of world crude production was still coming from Pennsylvania wells in the 1880s, overseas drilling in Russia and Asia began to reach the world market.Chernow, (1998) p. 242 Robert Nobel had established his own refining enterprise in the abundant and cheaper Russian oil fields, including the region’s first pipeline and the world’s first oil tanker. The Paris Rothschilds jumped into the fray providing financing.Chernow, (1998) p.246 Additional fields were discovered in Burma and Java. Even more critical, the invention of the light bulb gradually began to erode the dominance of kerosene for illumination. But Standard Oil adapted, developing its own European presence, expanding into natural gas production in the U.S. then into gasoline for automobiles, which until then had been considered a waste product.Segall, (2001) p.68
Standard Oil moved its headquarters to New York City at 26 Broadway and Rockefeller became a central figure in the city’s business community. He bought a personal residence in 1884 on 54th street near the mansions of other magnates such as
William Vanderbilt. Despite personal threats and constant pleas for charity, Rockefeller took the new elevated train to his downtown office daily.Segall, (2001) pp.62–63 In 1877, Congress created the
Interstate Commerce Commission which was tasked with enforcing equal rates for all railroad freight, but by then Standard was depending more on pipeline transport. More threatening to Standard’s power was the
Sherman Antitrust Act of 1890, originally used to control unions, but later central to the breakup of the Standard Oil trust.Segall, (2001) p.69 Ohio was especially vigorous in applying its state anti-trust laws, and finally forced a separation of Standard Oil of Ohio from the rest of the company in 1892, the first step in the dissolution of the trust.
In the 1890s, Rockefeller expanded into iron ore and ore transportation, forcing a collision with steel magnate
Andrew Carnegie, and their competition became a major subject of the newspapers and the cartoonists.Segall, (2001) p.77 Rockefeller also went on a massive buying spree acquiring land for crude oil production in Ohio, Indiana, and West Virginia, as the original Pennsylvania oil fields began to play out.Chernow, (1998) p.287 Amidst the frenetic expansion, Rockefeller began to think of retirement. The daily management of the trust was turned over to John D. Archbold and Rockefeller bought a new estate,
Pocantico Hills, north of New York City, turning more time to leisure activities including the new sports of bicycling and golf.Segall, (2001) pp.79–80
Upon his ascent to the presidency, Theodore Roosevelt initiated dozens of suits under the Sherman Antitrust Act and coaxed reforms out of Congress. In 1901, U.S. Steel, now controlled by
J. Pierpont Morgan, having bought Andrew Carnegie’s steel assets, offered to buy Standard’s iron interests as well. A deal brokered by
Henry Clay Frick exchanged Standard’s iron interests for U.S. Steel stock and gave Rockefeller and his son membership on the company’s board of directors. In full retirement at age 63, Rockefeller earned over $58 million in investments in 1902.Segall, (2001) p.84
One of the most effective attacks on Rockefeller and his firm was the 1904 publication of
The History of the Standard Oil Company, by
Ida Tarbell, a leading
muckraker. She documented the company’s espionage, price wars, heavy-handed marketing tactics, and courtroom evasions.Segall, (2001) p.89 Although her work prompted a huge backlash against the company, Tarbell claims to have been surprised at its magnitude. “I never had an animus against their size and wealth, never objected to their corporate form. I was willing that they should combine and grow as big and wealthy as they could, but only by legitimate means. But they had never played fair, and that ruined their greatness for me.” (Tarbell's father had been driven out of the oil business during the
South Improvement Company affair.)
Rockefeller responded by calling her “Miss Tarbarrel” in private but held back in public saying only, “not a word about that misguided woman.” Instead Rockefeller began a publicity campaign to put his company and himself in a better light. Though he had long maintained a policy of active silence with the press, he decided to make himself more accessible and responded with conciliatory comments such as, “capital and labor are both wild forces which require intelligent legislation to hold them in restriction.”Segall, (2001) p.91 He wrote and published his memoirs beginning in 1908.
Rockefeller and his son continued to consolidate their oil interests as best as they could until New Jersey, in 1909, changed its incorporation laws to effectively allow a re-creation of the trust in the form of a single
holding company. Rockefeller retained his nominal title as president until 1911 and he kept his stock. At last in 1911, the
Supreme Court of the United States found
Standard Oil Company of New Jersey in violation of the
Sherman Antitrust Act. By then the trust still had a 70% market share of the refined oil market but only 14% of the U.S. crude oil supply.Segall, (2001) p.93 The court ruled that the trust originated in illegal
monopoly practices and ordered it to be broken up into 34 new companies. These included, among many others, Continental Oil, which became
Conoco, now part of
ConocoPhillips; Standard of Indiana, which became
Amoco, now part of
BP; Standard of California, which became
Chevron; Standard of New Jersey, which became
Esso (and later,
Exxon), now part of
ExxonMobil; Standard of New York, which became
Mobil, now part of ExxonMobil; and Standard of Ohio, which became
Sohio, now part of BP. Pennzoil and Chevron have remained independent.Segall, (2001) p.112
Rockefeller, who had rarely sold shares, held over 25% of Standard’s stock at the time of the breakup.Chernow, (1998) p.333 He, as well as all stockholders, received proportionate shares in each of the 34 companies. In the aftermath, Rockefeller’s control over the oil industry was somewhat reduced but over the next ten years, the breakup also proved immensely profitable for him. The companies’ combined net worth rose fivefold and Rockefeller’s personal wealth jumped to $900,000,000.
Philanthropy
From his very first paycheck, Rockefeller
tithed ten percent of his earnings to his church. As his wealth grew, so did his giving, primarily to educational and public health causes, but also for basic science and the arts. He was advised primarily by
Frederick Taylor Gates after 1891, and, after 1897, also by his son.
Rockefeller believed in the
Efficiency Movement, arguing that
"To help an inefficient, ill-located, unnecessary school is a waste...it is highly probable that enough money has been squandered on unwise educational projects to have built up a national system of higher education adequate to our needs, if the money had been properly directed to that end."
He and his advisers invented the conditional grant that required the recipient to "root the institution in the affections of as many people as possible who, as contributors, become personally concerned, and thereafter may be counted on to give to the institution their watchful interest and cooperation."
p 183
In 1884, he provided major funding for a college in Atlanta for African-American women that became
Spelman College (named for Rockefeller's in-laws who were ardent
abolitionists before the Civil War). The oldest existing building on Spelman's campus, Rockefeller Hall, is named after him. Rockefeller also gave considerable donations to
Denison University and other Baptist colleges.
Rockefeller gave $80 million to the
University of Chicago under
William Rainey Harper, turning a small Baptist college into a world-class institution by 1900. His
General Education Board, founded in 1902, was established to promote education at all levels everywhere in the country. It was especially active in supporting black schools in the South. Its most dramatic impact came by funding the recommendations of the
Flexner Report of 1910, which had been funded by the
Carnegie Foundation for the Advancement of Teaching; it revolutionized the study of medicine in the United States. Rockefeller also provided financial support to Yale, Harvard, Columbia, Brown, Bryn Mawr, Wellesley and Vassar.
Despite his personal preference for
homeopathy, Rockefeller, on Gates's advice, became one of the first great benefactors of
medical science. In 1901, he founded the
Rockefeller Institute for Medical Research in New York. It changed its name to Rockefeller University in 1965, after expanding its mission to include graduate education. It claims a connection to 23 Nobel laureates. He founded the Rockefeller Sanitary Commission in 1909, an organization that eventually eradicated the
hookworm disease that had long plagued the American South. The
Rockefeller Foundation was created in 1913 to continue and expand the scope of the work of the Sanitary Commission, which was closed in 1915. He gave nearly $250 million to the foundation, which focused on public health, medical training, and the arts. It endowed
Johns Hopkins School of Hygiene and Public Health, the first of its kind. It built the
Peking Union Medical College into a great institution, helped in
World War I war relief, and it employed
William Lyon Mackenzie King of Canada to study industrial relations. Rockefeller's fourth main philanthropy, the Laura Spelman Rockefeller Memorial Foundation, created in 1918, supported work in the social studies; it was later absorbed into the Rockefeller Foundation. However, all told, Rockefeller gave away about $550 million.
Oddly enough, Rockefeller became well known in his later life for the practice of giving dimes to adults and nickels to children wherever he went. He even gave dimes as a playful gesture to men like tire mogul
Harvey Firestone.Chernow, 613–14
As a youth, Rockefeller allegedly said that his two great ambitions were to make $100,000 and to live 100 years. Rockefeller died of
arteriosclerosis on May 23, 1937, two months shy of his 98th birthday,
The Richest Man In History: Rockefeller is Bornhttp://dead.atyourage.com/age/97/318http://www.google.co.in/search?q=John+D.+Rockefeller+Death+was+due+to+heart+disease.&hl=en&rlz=1T4GGLJ_enIN337IN337&sa=2 at
the Casements, his home in
Ormond Beach, Florida. He was buried in
Lake View Cemetery in Cleveland.
Legacy
Rockefeller had a long and controversial career in the industry followed by a long career in philanthropy. His image is an
amalgam of all of these experiences and the many ways he was viewed by his contemporaries. These contemporaries include his former competitors, many of whom were driven to ruin, but many others of whom sold out at a profit (or a profitable stake in Standard Oil, as Rockefeller often offered his shares as payment for a business), and quite a few of whom became very wealthy as managers as well as owners in Standard Oil. They also include politicians and writers, some of whom served Rockefeller's interests, and some of whom built their careers by fighting Rockefeller and the "
robber barons".
Biographer
Allan Nevins, answering Rockefeller's enemies, concluded: