Category: Rockefeller

I read Titan: The life of John D. Rockefeller Sr, a biography by Ron Chernow, and today I will share an important lesson I have realized through my reading of this work. Rockefeller was born on July 8, 1839, in Richford, New York, and moved to Cleveland, Ohio when he was fourteen. He was a pious baptist, the oldest of three boys, and would later become the largest shareholder of Standard Oil, America’s first monopoly. Rockefeller possessed unyielding self-control and patience. He possessed cunning. He possessed single-minded determination. Most importantly, however, he possessed an eye for detail. It was his attention to detail, the small things that don’t seem to matter, which enabled him to monopolize the oil industry. Rockefeller insisted that his goal was to sell cheap kerosene to people so that they could have light when it would otherwise be dark. I’m not going to question this, but he also made a whole lot of money in the process. When Rockefeller first entered the oil industry, it was extremely volatile, and full of inefficiencies. Refineries, which refined crude oil into kerosene,often erupted in flames due to the oil combusting. In addition, some people distrusted using kerosene as it sometimes exploded, burning down homes.

Rockefeller used this to his advantage, viewing the formidable obstacle instead as an opportunity. He viewed his oil refineries like how an english teacher might view an essay or speech written by a student, infinitely bad and infinitely capable of improvement. He vastly improved the efficiency of his oil refineries, and took full control of the supply chain. However, Rockefeller thought that the end justified the means, and took many less than admirable shortcuts to get there. An anecdote that demonstrates how his attention to detail helped him gain every small advantage on other refineries was how he cut costs associated with the production of kerosene. While visiting one of his oil plants in the 1870s, Rockefeller asked how many drops of solder it took to seal a can of kerosene. When he found out that it took forty drops, he asked the workers to try using thirty-eight drops. When thirty-eight drops were used, some cans leaked, but thirty-nine drops worked perfectly. He applied this with various other portions of manufacturing, such as reducing the size of the iron hoops that hold barrels together. Standard Oil also started selling the byproducts of petroleum that were made while producing kerosene, including waxes used to make chewing gum, lubricants for railroads, and asphalt for roads. This meant that Standard Oil was able to sell what was before just wasted, allowing them to sell more than just kerosene to the consumer. Standard Oil was able to branch out and sell commodities for little to no cost. By meticulously improving the efficiency of these plants, Rockefeller was able to considerably decrease the price of kerosene. Although these changes were minuscule, the savings were amplified by the vast scale of Standard Oil, as well as by time. His parents likely were the driving force behind his eye for detail. Due to his father being continuously absent, the Rockefeller household had to be extremely frugal when buying things, as they didn’t know when their father would come back with money, or how much money he’d come back with. Because of this, his mother made them keep track of every single expense they had.

This eventually ended up landing Rockefeller his first job in 1855, where he worked as a bookkeeper, keeping track of the expenses of a commodities company. This moment was crucial for Rockefeller, as it introduced him to the world of business. His experience as a bookkeeper for both his family and the business taught him this astuteness, simply due to the nature of the job, which required accuracy and avoiding making mistakes in record keeping, and this skill followed him for the rest of his career, with Rockefeller often choosing to audit Standard Oil’s books himself. He also had a ledger in which he kept track of his own daily expenses, which he came to respect almost as much as the bible. Rockefeller’s legacy may be stained with the predatory and anti-competitive practices he used to get an advantage on his competitors and maintain his monopoly, but he also made vast improvements to the way business works. What used to be Standard Oil now makes up Marathon Petroleum, BP, ExxonMobil, and Chevron, which are among the world’s largest oil and gas companies. After Rockefeller’s retirement, Rockefeller, with his mountains of wealth, founded a philanthropic foundation, donating around five hundred forty million dollars in his lifetime. Although he possessed many qualities that helped him become successful, it was ultimately his immaculately meticulous attention to detail that allowed him to do so well in the oil industry. Although some of us won’t choose to go into the oil industry and even less have dreamt of monopolizing it, many of us can still learn from John D. Rockefeller and by paying attention to the even the most minute of things, we can improve the work that we do every day.

Daniel Yergin starts the section by saying: ‘There was the matter of the missing $526.08.’ This missing cash was in regards to a for-pay examine risk attempted by Benjamin Silliman, Jr. in the mission for additional salary. Silliman Jr. was hard up for money when money was difficult to get, and his educator’s compensation was not meeting his needs. To fill the hole, he agreed to investigate a venture from a gather headed by George Bissell, the man who Yergin portrays as the dad of the oil business.

Bissell’s speculation was struggling to make sense of on the off chance that they could make a not too bad lighting fuel out of ‘shake oil,’ the name for a dark substance known to be found in Pennsylvania. They got Benjamin to give an examination clarifying if the substance gave a credible lighting liquid. The issue was, he wasn’t paid, and he would not release his investigation until he had been paid at any rate $100 ahead of time. Silliman’s charge, however $5000 in 1990 dollars, was worth more than gold. Silliman announced that, by bubbling rock oil, it very well may be separated into parts, and one of these is valuable as great lighting up oil. What Silliman found was the process of fragmentary refining; it is this procedure that is utilized today (in a refining tower) to isolate horde oil based goods including tar, different kinds of gas, mineral oils, and different items.

The inquiry was whether shake oil could be assembled in a sufficient amount to shape a satisfactory supply. This started a development towards the cutting edge oil industry of today, with organizations searching for approaches to discover the asset and tap it from the beginning. Yergin makes reference to that salt exhausting systems had been created in China in excess of a thousand years previously and it was to these thoughts that Bissell and his partners turned so as to assert some authority in the oil business.

‘The offering started at $500, but climbed rapidly. Maurice Clark was soon at $72,000. Rockefeller calmly went to $72,500. Clark threw up his hands. ‘I’ll go no higher, John,’ he said. ‘The business is yours.’ Rockefeller offered to work out a beware of the spot; Clark let him know, no, he could settle whenever it might suit him. On a handshake they separated. ‘I ever point to that day,’ Rockefeller said 50 years after the fact, ‘as the beginning of the success I have made in my life.”

Soon after this, Rockefeller started growing his refinery with rather swiftly. Henry Flagler joined him in 1867, and Yergin takes note of that the two had most likely accumulated the biggest refinery business on the planet before the finish of the 1860s. A great number of people were just interested in getting rich, and this presented an issue to the business in general. Keep in mind those flawless little free market activity bends you learned in financial matters in secondary school? Rather than a bend, think about the supply patterns for oil around then as the spiky, flimsy image of a heartbeat on an EKG.

To spare the oil business, Rockefeller developed the oil business into the structure it would need to take so as to be valuable to the world. Basically, he was in charge of persuasion to the public to think of oil as the substance into ‘dark gold.’ By combining showcasing, conveyance, and deals oil organizations into a private level imposing business model, Rockefeller balanced out the business and made it equipped for giving oil without the huge value instability that came about because of overproduction.

While Rockefeller was attempting to grow his global oil empire, two other organizations started up in Russia: the Rothschilds and the Nobel siblings. The Rothschilds were familiar with Marcus Samuel through Fred Lane. Marcus Samuel made a transportation chain for the Rothschilds that would in the long run topple Standard Oil’s expectations.

Marcus Samuel designed new tankers to showcase lamp fuel east of the Suez Canal to Asia. These tankers could transport large measures of the lighting liquid at a very ragged value. He arranged entry through the Suez Canal in spite of resistance from Standard Oil. Standard, with this approach, failed to carry out this plan.

In this way, Samuel upset Standard Oil’s desire with such a impressive skillful deception that the position couldn’t be surpassed. The passage outlines the occasion: ‘And so the day was saved. Samuel’s overthrow had worked, and in record time. By the end of 1893, Samuel had launched ten more ships, all of them named for seashells—the Conch, the Clam, the Elax, the Cowrie, etc. By the end of 1895, sixty-nine tanker entries had been made through the Suez Canal, all but four ships owned or chartered by Samuel. By 1902, of all the oil to go through the Suez Canal, 90 percent belonged to Samuel and his gathering.’ It should be noted that Samuel named every one of his tankers after seashells since he began his transportation life by exchanging shells.

Yergin mentions the popularity of Thomas Edison’s light bulb invention: He developed the first successful electric illumination devices by 1879. “By 1885, 250,000 light bulbs were in use; by 1902, 18 million.” All of Standard Oil’s investment in the oil production and distribution was in immediate danger because of the light bulb invention. However, as one market was on the brink of disappearance, another was opening, the car. A percentage of those vehicles were fueled by the inner burning motor, which outfit a diverted blast of gas for stimulus. It was a loud, restless, and not too dependable methods for transportation, however vehicles controlled by interior ignition picked up in Europe after a Paris-Bordeaux-Paris race in 1895, in which the cars were able to go fifteen miles per hour, which may not seem very fast to us now but in 1985 this was significant. The following year, the main auto track race was held in Narrangansett, Rhode Island.

In this way, while one market was detracted from significant American oil makers, another was included in a timely manner. The association was direct to the point that it incites considerations of participation: Henry Ford quit a job as a central specialist with Edison Company so as to manufacture and showcase cars. It was when the new century rolled over that Standard Oil’s hang on the American market started to become considerably more dangerous than the world one, since oil started being discovered everywhere throughout the country: Colorado, Kansas, California, lastly a major find in oil history, Spindletop, Texas. This finding in Spindletop, Texas was significant because the area provided an abundant supply of oil that would impact the oil industry. With this mass amount of oil found in Texas, it would provide more oil that would enhance the expansion of the shipping and railroad industries as well as cars and planes.

Standard Oil was quickly losing ground toward the start of the twentieth century. In the soul of ‘unhindered commerce,’ the American open rebelled against Rockefeller’s monopolistic practices. In the wake of numerous bits of against trust enactment, Standard Oil’s partition was just a short time. Where Rockefeller saw reliability, the United States saw rivalry.

In spite of various events to part the Standard Oil trust separated, the organization figured out how to hold together, and even reinvigorated themselves by building a holding organization named ‘Standard Oil of New Jersey’.

Ida ‘Tar Barrel’ Tarbell, a hopeful writer and excited ‘mud slinger’, set going to uncover the money related offenses of Rockefeller’s organization. However, with the great area extending over a significant part of the world, Standard were to stay away from consideration for long. In May of 1911, Chief Justice Edward White arranged the trust broke up.

‘“In the aftermath of the decision, the directors of Standard faced an immediate and momentous question. It was one thing for a court to order a dissolution. But how exactly was this vast, interconnected empire to be broken up? The scale was simply enormous. The company transported more than four-fifths of all oil produced in Pennsylvania, Ohio, and Indiana. It refined more than three-fourths of all United States crude oil; it owned more than half of all tank cars; it marketed more than four-fifths of domestic kerosene.”

At last, next to no of the organization’s structure changed; distinctive divisions just turned into their very own organizations. Standard Oil of New Jersey was renamed Exxon, an organization commonplace in the present business world. Others changed their names to a few titles found in a normal day’s outing through town: Mobil, Chevron, BP, Amoco, ARCO, and Sunoco.

Marcus Samuel’s oil transportation operation, later named the Shell Transport and Trading Company, was Samuel’s path after the break up. Marcus Samuel was known for having the ability to effectively improvise in any situation. The book compares the contrast between his personality and the calm, collected, organized, and intelligence in behavior of John D. Rockefeller. Marcus Samuel had a contract with the Rothschilds that one ended in 1900 and Samuel began searching for oil the world over to assure his business a secure supply. His search soon involved the island of Borneo.

Henri Wilhelm August Deterding, CEO of Royal Dutch Oil Corporation, came up with a massive deal with Marcus Samuel’s Shell Corporation in which he was successful in gaining overall control. Deterding also pulled off a deal liquidating the Rothschilds’ Russian oil operation and making it part of the Royal Dutch/Shell umbrella. Russia was not a stable place to be at this time, with Lenin’s revolutionaries staking their headquarters in the very center of oil production at the Baku fields. Nonetheless, this powerful business deal would place Royal Dutch/Shell at the top and enable them to compete with Standard Oil. The productive capacity of Russia would serve as a counterweight against Standard Oil, because this was a market that the American giant had failed to enter.

““Though the revolutionary upheaval that began in 1905 set in motion developments that would turn Baku into a commercial backwater in the world oil market for two decades, it would remain the most important source of oil on Europe’s immediate periphery. For that reason, revolution notwithstanding, Baku would become one of the great and decisive prizes in the global conflicts that were still ahead.” (Yergin, 117)

In 1855, Benjamin Silliman, Jr., a professor of chemistry, fumed when he did not receive payment for the report on ‘rock oil’ he had prepared for a group of investors led by George Bissel. The test ran by the chemist proved that they could distill a superior, economical fuel for lamps, while a different process could make it useful for lubricating machinery. They formed a company for exploration. In England, entrepreneurs looked to exploit asphalt and its derivative, kerosene.

By the mid-19th century, with the idea of drilling for salt form the Chinese. Around 1830 Edwin “Colonel” Drake had began to apply their methods in Titusville, PA. Colonel was a determined individual who refused to give up. After getting oil right before being ordered to shut down his operations. Soon there were 75 producing wells in Titusville, and Bissell grew wealthy. Near the ‘Oil Regions,’ refineries sprung up to process crude oil into kerosene. Soon production outpaced consumption during the Civil War, prices fell, and many newly rich producers were ruined. After the war, however, veterans returned in search of opportunities, and new companies mushroomed. Greedy entrepreneurs knew little about geology, and, following English common law’s ‘rule of capture,’ over harvested and depleted oil reserves too quickly. Muddy, oil slick communities vanished into ghost towns. Transporting barrels from the Oil Region created a physical bottleneck, placing the oil companies at the mercy of teamsters. They settled on pipelines as an alternative method of delivery. Informal oil exchanges developed to coordinate buying and selling between producers and refiners. They provided for regular sales, spot sales, and futures. By 1871, petroleum was well on its way to becoming the biggest and immensely profitable business.

In 1865 Maurice Clack owner of a Cleveland refinery sold out to his partner John Rockefeller for $72,000. After hearing about the breakthrough of Colonel. The partner began to focus more on their oil refinery. Rockefeller worked to improve the quality of his products and began taking the steps towards integrating supply and distribution, to insulate his business from market volatility and to improve its competitive position. Rockefeller focus on understanding every part of the new industry. In 1867, Henry Flagler joined Rockefeller, together the worked on creating a cooperation. Among producer, Flagler believed that cooperation was the way to fewer risk. In 1870, the Standard Oil Company was the product of Flagler and Rockefeller joining up together. Flagler formed an argument with railroads to get discount on freight rates, in order to get a pricing advantage and raise profits. Rebates evolved into ‘drawbacks,’ an arrangement whereby railroads paid Standard a percentage of the non-discounted price that rival companies paid. They cloaked these arrangements through a mysterious corporation, causing enraged competitors to boycott the refinery/railroad cartel. Thus began the first ‘Oil War.’ Rockefeller was not swayed by press hostility, however, and as cutthroat production could not be controlled, concentrated on making refining safe and profitable. Whenever friendly acquisitions failed, Standard gave targets ‘a good sweating’ by cutting prices to the point they could not survive. Takeovers were cloaked through ostensibly independent companies within the Standard Group. By 1879, Standard controlled 90% of U.S. refining capacity, as well as the pipelines, gathering systems, and transportation.

In 1879, Oil Region producers used deception and speed to construct the 110-mile Tidewater Pipeline to a railway connection, and Standard responded by building pipelines to Cleveland, New York, Philadelphia, and Buffalo, and by buying up sufficient Tidewater stock to arrange a pooling of shipments. The independents turned to the political and legal systems, filing suits in Pennsylvania against discriminatory rates.

Needing a shield of legality without sacrificing administrative flexibility, Standard initiated a trust agreement in 1882 that created for a board of trustees who would control 700,000 shares and supervised 14 wholly- and partly-owned companies. Standard organizations were incorporated in the various states in which they operated. A central office coordinated and rationalized their activities. Eight specialized committees were established to manage various products. An executive committee set policy. Achieving the goal of being the low-cost oil producer required efficiency of operations, mastery of costs, massive scale and volume, technological initiative, and ceaseless striving for ever-larger markets. Arbitrage, corporate intelligence, and espionage proved effective tools. Rockefeller, his brother William, Flagler, and two other associates controlled 57% of the stock. Another dozen intelligent, enterprising, willful, and assertive individuals – most bought-out competitors – rounded out senior management. Unanimous consensus ruled, following extensive formal debate and luncheons in the private dining room of the headquarters at 26 Broadway in Lower Manhattan.

Due to the high efficiency of Standard Oil (high quality and low prices), the company’s share of the oil products market grew from 4% in 1870 to 25% in 1874 and to about 85 per cent in 1880. All these features characterized Standard Oil as a monopoly. Was John Rockefeller’s plans to become a monopolist initially? Not really. His actions were a way to survive among aggressive competition. Not only Rockefeller turned his attention to the promising petroleum product market in the early 1860’s. The oil boom has begun, which has led to the growth of the refining industry. Competition escalated and led to overproduction. The oil industry, into which hundreds of millions of dollars poured, fell into a tough crisis.

The history of the creation of the monopoly “Standard Oil” began in 1871. With a conspiracy of interests and advantages called the South Improvement Company. The South Improvement Company is a cartel consisting of several oil refining companies that make up no more than 10% of the total market and several of the largest railway carrier companies.

The railway facilities could not cope with the increased demand for oil transportation, and therefore the South Improvement company agreed to mutually beneficial terms with Standard Oil, agreeing to provide the company with a 50% discount on transportation and raise prices by more than 2 times for other companies not involved in the transaction. This allowed Standard Oil to become the largest oil company in the United States, which caused great discontent among those companies that were not involved in the cartel.

By the spring of 1872, the South Improvement Company began to lose ground, but by then Standard Oil had already regulated about 90% of the US oil market.

One of the most serious challenges the company received in 1879. By May 1879, the first long-distance pipeline was built, stretching 110 miles from Oil City to the Reading Railway. This project was called the “Coastal Pipeline” and it was implemented in the strictest confidence of “Standard Oil”. The successful construction of this pipeline made a technological breakthrough. The Onshore Pipeline became the main rival to the railways and shook the influence of Standard Oil.

Thanks to the timely response, Standard Oil was able to build 4 pipelines in the direction from Oil City to Buffalo, Cleveland, New York and Philadelphia respectively. Rockefeller also acquired a small portion of the shares of the ‘Coastal Pipeline.’ Thus, by the end of 1870’s, Standard Oil managed to overcome the crisis by becoming the largest oil producing and refining company in the United States, which controlled most of the pipelines leaving Oil City.

At the turn of the 20th century, John Rockefeller’s “Standard Oil” reached the peak of its power. In 1904, the company controlled 91% of oil production and 85% of sales in the United States.

As a result, in 1906, legal proceedings began against the company. “Standard Oil” was accused of violating antitrust laws. In 1911, the Supreme Court demanded the abolition of the company. Thus, the great oil company was divided into smaller 34 companies, geographically divided.

But John Rockefeller benefited from the separation of his own company. He retained a controlling stake in all companies. The corporation’s market share fell to 64%, but its share price more than doubled, making Rockefeller the richest man in the world.

Thus, John Rockefeller is one of the most controversial personalities in the history of mankind, but no matter how we relate to him, it should be remembered that “Standard Oil” was the largest American oil corporation engaged in the extraction, transportation, refining and marketing of petroleum products. His business vision system was one of the most effective systems of his time, which allowed John Rockefeller to become the first dollar billionaire in human history and changed the lives of ordinary Americans.