John D. Rockefeller, in full John Davison Rockefeller (1839-1937), was an American industrialist and philanthropist. He was the founder of the Standard Oil Company. He became one of the world’s wealthiest men and a major philanthropist.
Born into modest circumstance, in Richford, New York, about midway between Binghamton and Ithaca, he entered the then-fledgling oil business in 1863 by investing in a Cleveland, Ohio refinery. In 1870, he established Standard Oil, which by the early 1880s controlled some 90 percent of U.S. refineries and pipelines.
His father, William Avery Rockefeller, a "doctor" was gone for months at a time, traveling around the West from town to town and would return to wherever the family was living with substantial sums of cash. His mother, Eliza Davison Rockefeller, was very religious and very disciplined. She taught John to work, to save, and to give to charities.
Early Life And Education
John D. Rockefeller was the eldest son and second of the six children of William A. and Eliza Davison Rockefeller. Rockefeller’s father, William Avery Rockefeller, led a nomadic life as a snake-oil salesman who called himself a physician, while his mother raised their six children.
Industrious even as a boy, the future oil magnate earned money by raising turkeys, selling candy and doing jobs for neighbors. By the age of 12, he had saved over $50. Thus, from working for neighbors and raising some turkeys for his mother. At the urging of his mother, he loaned a local farmer $50 at 7% interest payable in one year. When the farmer paid him back with interest the next year Rockefeller was impressed and said of it in 1904:
His father, William Avery Rockefeller, a "doctor" was gone for months at a time, traveling around the West from town to town and would return to wherever the family was living with substantial sums of cash. His mother, Eliza Davison Rockefeller, was very religious and very disciplined. She taught John to work, to save, and to give to charities.
Early Life And Education
John D. Rockefeller was the eldest son and second of the six children of William A. and Eliza Davison Rockefeller. Rockefeller’s father, William Avery Rockefeller, led a nomadic life as a snake-oil salesman who called himself a physician, while his mother raised their six children.
Industrious even as a boy, the future oil magnate earned money by raising turkeys, selling candy and doing jobs for neighbors. By the age of 12, he had saved over $50. Thus, from working for neighbors and raising some turkeys for his mother. At the urging of his mother, he loaned a local farmer $50 at 7% interest payable in one year. When the farmer paid him back with interest the next year Rockefeller was impressed and said of it in 1904:
"The impression was gaining ground with me that it was a good thing to let the money be my servant and not make myself a slave to the money…"
From 1852, Rockefeller attended Owego Academy in Owego, New York, where the family had moved in 1851. Rockefeller excelled at mental arithmetic and was able to solve difficult arithmetic problems in his head — a talent that would be very useful to him throughout his business career. In other subjects, Rockefeller was an average student but the quality of education was very high.
In 1853, the Rockefellers moved to Cleveland, Ohio, and John attended high school from 1853 to 1855. He was not only good at math but was also on the debating team. The school encouraged public speaking and even though Rockefeller was only average, it was a skill that would prove to useful to him.
After his family eventually took root in Strongsville, Ohio, a suburb of Cleveland, he joined the Erie Street Baptist Church, which later became the Euclid Avenue Baptist Church. Active in its affairs, he became a trustee of the church at the age of 21.
Pre-Standard Oil Career
Rockefeller left high school in 1855, at age 16, and took a business course at Folsom Mercantile College. He completed the six-month course in three months and became the assistant bookkeeper with Hewitt & Tuttle, a small firm of commission merchants and produce shippers.
He worked long hours, as he later recalled: "all the methods and systems of the office." He was particularly adept at calculating transportation costs, which served him well later in his career. Much of Rockefeller's duties involved negotiating with barge canal owners, ship captains, and freight agents.
In these negotiations, he learned that posted transportation rates that were believed to be fixed could be altered depending on conditions and timing of freight and through the use of rebates to preferred shippers. A few months later he was promoted to cashier and bookkeeper. Rockefeller received $16 a month for his three-month apprenticeship.
During his first year, he received $31 a month, which was increased to $50 a month. His final year provided him $58 a month. He later left that position in order to form a business partnership.
Business Partnership
In 1859, with $1,000 he had saved and another $1,000 borrowed from his father, Rockefeller formed a partnership in the commission business with oil driller, Maurice B. Clark. Thus, Rockefeller established his first enterprise, a commission business dealing in hay, grain, meats, and other goods. Rockefeller went steadily ahead in business from there, making money each year of his career.
In their first and second years of business, Clark & Rockefeller netted $4,400 and $17,000 worth of profit, respectively. And their profits soared with the outbreak of the American Civil War when the Union Army called for massive amounts of food and supplies. When the Civil War was nearing a close and with the prospect of those war-time profits ending, Rockefeller and his business partner looked toward the new business opportunity in western Pennsylvania.
After obtaining a sample of the Pennsylvania oil and had a Yale University chemist analyze it, the chemist determined that the Pennsylvania oil was of very high quality and could be refined into a variety of useful products. The technology used by Drake was not new. What was new was the idea of drilling for oil -- the idea that you could pump oil out of the ground like you could pump water.
In 1863, Rockefeller, Maurice Clark together with Samuel Andrews, built their first oil refinery, Andrews, Clark & Co. in Cleveland.
The firm also continued in the commission business, but in 1865 the partners disagreed about the management of their business affairs and decided to sell the refinery to the partner who bid the highest. Rockefeller bought it for $72,500, sold out his other interests and with Andrews, formed Rockefeller & Andrews.
Rockefeller and Clark would in 1870 become Rockefeller, Andrews, and Flagler, a company that focused on oil refineries rather than drilling. He was the guiding force behind the creation and development of the Standard Oil Company.
The firm also continued in the commission business, but in 1865 the partners disagreed about the management of their business affairs and decided to sell the refinery to the partner who bid the highest. Rockefeller bought it for $72,500, sold out his other interests and with Andrews, formed Rockefeller & Andrews.
Rockefeller and Clark would in 1870 become Rockefeller, Andrews, and Flagler, a company that focused on oil refineries rather than drilling. He was the guiding force behind the creation and development of the Standard Oil Company.
In 1864, Rockefeller married Laura Celestia “Cettie” Spelman (1839-1915), an Ohio native whose father was a prosperous merchant, politician and abolitionist active in the Underground Railroad.
In February 1865, in what was later described by oil industry historian Daniel Yergin, as a "critical" action. After, Rockefeller bought out the Clark brothers for $72,500 at auction and established the firm of Rockefeller & Andrews, Rockefeller said, "It was the day that determined my career."
He was well-positioned to take advantage of postwar prosperity and the great expansion westward fostered by the growth of railroads and an oil-fueled economy. He reinvested profits, adapted rapidly to changing markets, and fielded observers to track the quickly expanding industry.
Prior to the acquisition, the commercial oil business was then in its infancy. Whale oil had become too expensive for the masses, and a cheaper, general-purpose lighting fuel was needed.
While other refineries would keep the 60% of oil product that became kerosene, but dump the other 40% in rivers and massive sludge piles, Rockefeller used the gasoline to fuel the refinery, and sold the rest as lubricating oil, petroleum jelly and paraffin wax, and other by-products.
Prior to the acquisition, the commercial oil business was then in its infancy. Whale oil had become too expensive for the masses, and a cheaper, general-purpose lighting fuel was needed.
While other refineries would keep the 60% of oil product that became kerosene, but dump the other 40% in rivers and massive sludge piles, Rockefeller used the gasoline to fuel the refinery, and sold the rest as lubricating oil, petroleum jelly and paraffin wax, and other by-products.
Tar was used for paving, naphtha shipped to gas plants. Likewise, Rockefeller's refineries hired their own plumbers, cutting the cost of pipe-laying in half. Barrels that cost $2.50 each ended up only $0.96 when Rockefeller bought the wood and had them built for himself. Rockefeller abhorred waste and devoted considerable energy to increasing the efficiency of his refining business.
He believed that the secret of success was attention to detail — to wringing little efficiencies out of every aspect of his business.He built his own cooperage shop and made his own barrels for the oil. He bought tracts of white-oak timber for making the barrels.
Instead of transporting the freshly cut green timber directly to the cooperage shop, he had kilns built on the timber tracts to dry the wood on site, to reduce the shipping weight of the lumber. He bought his own wagons and horses to transport the wood to the cooperage shop in Cleveland.
Oil Refinery
In February 1865, at the age of 24, he gained complete control of the business. In 1866, after John D. brought his brother William Rockefeller into the partnership, they built another refinery in Cleveland which they named, Standard Works. They also opened a New York City office with William Rockefeller in charge, to handle the export business, which eventually became larger than the domestic business.
In 1867, Henry Morrison Flagler became a partner, and the firm of Rockefeller, Andrews & Flagler was established.
Oil Refinery
In February 1865, at the age of 24, he gained complete control of the business. In 1866, after John D. brought his brother William Rockefeller into the partnership, they built another refinery in Cleveland which they named, Standard Works. They also opened a New York City office with William Rockefeller in charge, to handle the export business, which eventually became larger than the domestic business.
In 1867, Henry Morrison Flagler became a partner, and the firm of Rockefeller, Andrews & Flagler was established.
The Standard Oil Company
Rockefeller and Flagler had met years earlier in Bellevue, Ohio, when Rockefeller was buying grain for his commission house and Flagler was a grain merchant. Flagler had gone into the salt well business but went broke in 1865. He began to recoup his fortune in 1865 in Cleveland as a manufacturer of oil barrels and had an office in the same building as Rockefeller. Flagler and Rockefeller were very much alike -- ambitious, with a taste for expansion.
(Henry M. Flagler had left school at age 14. Not wanting to burden his family any further, he walked to the Erie Canal in 1844 and took it to Lake Erie, and then went to Ohio via a lake steamer. )
By 1868, Rockefeller, Andrews & Flagler was the largest refiner in the world. Rockefeller and Flagler understood that the only way to make profits consistently in oil refining was to make the business as large as possible and to utilize all their "waste" products.
On January 10, 1870, the Standard Oil Company of Ohio was created by John D. Rockefeller (30%), William Rockefeller (13.34%), Henry Flagler (16.67%), Samuel Andrews (16.67%), Stephen Harkness (13.34%), and O. B. Jennings (brother-in-law of William Rockefeller, 10%).
Standard prospered and began to buy out its competitors, because of Rockefeller’s emphasis on economical operations. By 1872, it controlled nearly all the refineries in Cleveland. That fact enabled the company to negotiate with railroads for favoured rates on its shipments of oil.
It acquired pipelines and terminal facilities, purchased competing refineries in other cities, and vigorously sought to expand its markets in the United States and abroad.
In 1881, Rockefeller and his associates placed the stock of Standard oil of Ohio and its affiliates in other states under the control of a board of nine trustees, with Rockefeller at the head. Thus, they established the first major U.S. “trust”. Standard Oil gained control in the oil industry by buying rival refineries and developing companies for distributing and marketing its products around the globe.
In 1882, these various companies were combined into the Standard Oil Trust, which would control some 90 percent of the nation’s refineries and pipelines. In order to exploit economies of scale, Standard Oil did everything from building its own oil barrels to employing scientists to figuring out new uses for petroleum by-products. It was the logic of this competitive structure that determined Rockefeller and Flagler's course of action.
They built high-quality, larger, better-planned refineries;
They built permanent facilities using the best materials available;
They owned their own cooperage (barrel making) plant, their own white-oak timber and drying facilities, and bought their own hoop iron. Consequently, they cut the cost of a barrel from about $3.00 to less than $1.50;
They manufactured their own sulfuric acid (which was used in the purification process) and devised technology to recover it for re-use;
They owned their own drayage service, consisting of at least 20 wagons in 1868;
They owned their own warehouses in New York City and their own boats on the Hudson and East Rivers to transport their oil;
They were the first to ship oil via tank cars (albeit big wooden tubs mounted in pairs on flat cars -- later to evolve into the modern form of a tank car). And they owned their own fleet of tank cars;
They built huge holding tanks near their refineries for storing crude and refined oil, with the equipment for drawing off the oil from the tank cars into the holding tanks.
They owned their own cooperage (barrel making) plant, their own white-oak timber and drying facilities, and bought their own hoop iron. Consequently, they cut the cost of a barrel from about $3.00 to less than $1.50;
They manufactured their own sulfuric acid (which was used in the purification process) and devised technology to recover it for re-use;
They owned their own drayage service, consisting of at least 20 wagons in 1868;
They owned their own warehouses in New York City and their own boats on the Hudson and East Rivers to transport their oil;
They were the first to ship oil via tank cars (albeit big wooden tubs mounted in pairs on flat cars -- later to evolve into the modern form of a tank car). And they owned their own fleet of tank cars;
They built huge holding tanks near their refineries for storing crude and refined oil, with the equipment for drawing off the oil from the tank cars into the holding tanks.
Their huge size made it economical to build the necessary physical plant to handle all the "waste" products from the refining of kerosene. They began manufacturing high quality lubricating oil that quickly replaced lard oil as a lubricant for machinery. Gasoline, which many refiners surreptitiously dumped into the Cuyahoga River at night (the river often caught fire),
They manufactured benzene (used as a cleaning fluid; a solvent for fat, gums, and resin; and to make varnish), paraffin (insoluble in water, used for making candles, waterproofing paper, preservative coatings, etc.), and petrolatum (used as a basis for ointments and as a protective dressing; as a local application in inflammation of mucous membrane; as an intestinal lubricant, etc. -- white petrolatum later marketed under the brand name Vaseline).
In short, nothing was left to chance, nothing was guessed at, nothing left uncounted and measured. Efficiencies down to the smallest detail of the business were the order of the day. Economy, precision, and foresight were the cornerstones of their success.
In short, nothing was left to chance, nothing was guessed at, nothing left uncounted and measured. Efficiencies down to the smallest detail of the business were the order of the day. Economy, precision, and foresight were the cornerstones of their success.
The South Improvement Scheme
What interrupted Rockefeller and Flagler's careful planning was the emergence of the South Improvement scheme of 1871. Tom Scott of the Pennsylvania Railroad came up with the idea. The scheme was inspired by the Anthracite Railroad combination of 1868-71 in which five railroads and two coal companies bought up all the coal pits along the five railroads in order to control output and prices.
The South Improvement Company had been created by the Pennsylvania Legislature in 1870 and its charter allowed the Company to hold the stocks of other companies outside the state. This was an unusual power at the time and made it ideal for Scott's scheme. Scott arranged for the purchase of the charter by a group of Philadelphia and Pittsburgh refiners with Scott in the background.
In December 1871, during the dust-up over the South Improvement Scheme, Rockefeller and Flagler set in motion their plan to consolidate the industry. They began by buying up all their competitors in Cleveland. The strategy and tactics were Rockefeller’s and he handled the negotiations with the rival refiners personally.
He began with the strongest refineries first. He believed that if he had bought up the weak refineries first then he would be faced with higher prices later and stiffer resistance. Consequently, he approached the strongest first and bought them out.
His technique was always the same. The merger would be effected by an increase in the capitalization of The Standard Oil. The rival refinery would be appraised and the owners would be given Standard Oil stock in proportion to the value of their property and good will and they would be made partners in Standard Oil. The more talented owners would also be brought into the Standard Oil management. If they insisted upon cash they received it.
By March or April 1872, Rockefeller had bought up and/or merged with almost all the refineries in Cleveland. The inefficient and poorly constructed refineries were dismantled, while the better-quality ones were upgraded to Rockefeller and Flagler’s standards.
His technique was always the same. The merger would be effected by an increase in the capitalization of The Standard Oil. The rival refinery would be appraised and the owners would be given Standard Oil stock in proportion to the value of their property and good will and they would be made partners in Standard Oil. The more talented owners would also be brought into the Standard Oil management. If they insisted upon cash they received it.
By March or April 1872, Rockefeller had bought up and/or merged with almost all the refineries in Cleveland. The inefficient and poorly constructed refineries were dismantled, while the better-quality ones were upgraded to Rockefeller and Flagler’s standards.
The Standard Oil Trust
On January 2, 1882 the Standard Oil Trust was formed. Attorney Samuel Dodd came up with the idea of a trust. A Board of Trustees was set up and all the Standard properties were placed in its hands. Every stockholder received 20 Trust certificates for each share of Standard Oil stock, and all the profits of the component companies were sent to the nine trustees who determined the dividends. The nine trustees elected the directors and officers of all the component companies.
The Trust was capitalized quite conservatively at $70,000,000 — the true value was about $200,000,000 (no stock watering at the Standard). The nine Trustees controlled 23,314 of the 35,000 shares with J.D. Rockefeller holding 9,585 shares. At age 43, Rockefeller was the leader of the Trust.
Rockefeller Exits
Rockefeller was a Schumpeteran entrepreneur. He clearly changed "the stream of the allocation of resources over time by introducing new departures into the flow of economic life" by creating the modern oil industry.
Rockefeller's wealth was managed by Frederick T. Gates in September of 1891. He became the full-time manager of his fortune. By this time, Rockefeller was literally inundated with appeals from individuals and charities for funds. Gates not only removed this burden; he also oversaw all of Rockefeller’s investments, which were becoming huge in their own right.
For example, by 1897, Rockefeller owned large holdings of the Missabe iron range in Minnesota, a railroad to carry the ore to Lake Superior, and a fleet of huge ore-carrying lake steamers. In 1901 Rockefeller sold his iron ore-related business to J.P. Morgan for $80,000,000 with an estimated profit of at least $50,000,000 -- a huge fortune in its own right, but it was just one of his investments.
Morgan added the Rockefeller properties to the U.S. Steel Corporation. By 1896, Rockefeller stopped going to his office daily and in 1897 he retired, at the age of 58.
Retirement And Philanthropy
John D. Rockefeller retired in 1896, leaving his only son to run his company. He pursued a second career as a philanthropist. Giving away the bulk of his fortune in ways designed to do the most good as determined by careful study, experience, and the help of expert advisers.
From the time he began earning money as a child, he had given a share of his income to his church and charities. His philanthropy grew out of his early family training. He founded the General Education Board in 1903 (later the Rockefeller Foundation). The General Education Board helped to establish high schools throughout the South by providing free professional advice on improving instruction and education.
Rockefeller's fortune peaked in 1912 at almost $900,000,000, but by that time he had already given away hundreds of millions of dollars.
The effort was a cooperative one, and local money was used to build the high schools. In 1919, Rockefeller donated $50,000,000 to the Board to raise academic salaries, which were very low in the wake of WWI.
He was inspired in part by fellow Gilded Age tycoon, Andrew Carnegie (1835-1919), who made a vast fortune in the steel industry. As a philanthropist, he gave away the bulk of his fortune. His son, John D. Rockefeller, Jr. in 1897 joined Gates in the full time management of the fortune.
The Rockefeller Foundation
In 1913, Rockefeller established the Rockefeller Foundation to “promote the well-being of mankind throughout the world.” In keeping with this broad commitment, the foundation has given important global assistance to public health, medical education, improved food production, scientific advancement, social research, and the arts.
At the urging of his son, he also set up, the Rockefeller Institute for Medical Research (now Rockefeller University) and his gifts to it totaled $50,000,000 by the 1930s. The foundation’s International Health Division expanded the work of the Sanitary Commission worldwide, working against various diseases in 52 countries, bringing international recognition about public health and environmental sanitation.
He was inspired in part by fellow Gilded Age tycoon, Andrew Carnegie (1835-1919), who made a vast fortune in the steel industry. As a philanthropist, he gave away the bulk of his fortune. His son, John D. Rockefeller, Jr. in 1897 joined Gates in the full time management of the fortune.
The Rockefeller Foundation
In 1913, Rockefeller established the Rockefeller Foundation to “promote the well-being of mankind throughout the world.” In keeping with this broad commitment, the foundation has given important global assistance to public health, medical education, improved food production, scientific advancement, social research, and the arts.
At the urging of his son, he also set up, the Rockefeller Institute for Medical Research (now Rockefeller University) and his gifts to it totaled $50,000,000 by the 1930s. The foundation’s International Health Division expanded the work of the Sanitary Commission worldwide, working against various diseases in 52 countries, bringing international recognition about public health and environmental sanitation.
The foundation built and endowed the world’s first school of hygiene and public health, at The Johns Hopkins University, and spent $25 million to develop public health schools globally.
A few of the noted achievements of its scientists are the serum treatment of spinal meningitis and of pneumonia; knowledge of the cause and manner of infection in infantile paralysis; the nature of the virus causing epidemic influenza; blood vessel surgery; the first demonstration of the preservation of whole blood for subsequent transfusion; the first demonstration of how nerve cells flow from the brain to other areas of the body; the discovery that a virus can cause cancer in fowl; peptide synthesis; and the identification of DNA as the crucial genetic material.
Family Life
John D. Rockefeller married Laura C. Spelman, a teacher, on September 8, 1864, in Cleveland. They had five children: Bessie, Alice, Alta, Edith, and John Jr., who inherited much of the family fortune and continued his father’s philanthropic work.
In the 1870s, Rockefeller began to make business trips to New York, and soon he started bringing his family for lengthy stays. In 1884, he bought a large brownstone house at 4 West 54th Street, the land of which is now part of the garden of the Museum of Modern Art.
Beginning in the 1890s, the family spent part of their time at their home Pocantico Hills, about 25 miles north of Manhattan, but during the summer they returned to their Forest Hill home in East Cleveland. After Laura died, he spent several months each year at his homes in Lakewood, New Jersey, and Ormond Beach, Florida.
Legacy
Certainly, one of Rockefeller’s main legacies is federal antitrust legislation, as well as laws strengthening unions. His business practices and charities have benefited millions of people. The Rockefeller Foundation continues today to follow its stated mission to “promote the well-being of humanity throughout the world.”
In addition, he established the University of Chicago and the Rockefeller University. His business practices and charities have benefited millions of people and the Rockefeller Foundation continues today to follow its stated mission.
His legacy also lived on through his offspring. John D. Rockefeller Jr. built the famous art deco Rockefeller Center in Manhattan, which continues to house business offices to this day, as well as popular enterprises such as Radio City Music Hall and the Rockettes, the Rainbow Room, an open-air skating rink, a famous annual towering Christmas tree, and the television studios.
Rockefeller’s grandson Nelson Aldrich Rockefeller served as a four-term Republican governor of New York State and as the 41st vice president of the United States under President Gerald Ford, in addition to running for the Republican presidential nomination three times.
Death
Rockefeller died, on May 23, 1937, at The Casements, his home in Ormond Beach. He was 97 years old. He is buried in Lakeview Cemetery in Cleveland. He had given most of his property to his philanthropies, his son and other heirs.
Legacy
Certainly, one of Rockefeller’s main legacies is federal antitrust legislation, as well as laws strengthening unions. His business practices and charities have benefited millions of people. The Rockefeller Foundation continues today to follow its stated mission to “promote the well-being of humanity throughout the world.”
In addition, he established the University of Chicago and the Rockefeller University. His business practices and charities have benefited millions of people and the Rockefeller Foundation continues today to follow its stated mission.
His legacy also lived on through his offspring. John D. Rockefeller Jr. built the famous art deco Rockefeller Center in Manhattan, which continues to house business offices to this day, as well as popular enterprises such as Radio City Music Hall and the Rockettes, the Rainbow Room, an open-air skating rink, a famous annual towering Christmas tree, and the television studios.
Rockefeller’s grandson Nelson Aldrich Rockefeller served as a four-term Republican governor of New York State and as the 41st vice president of the United States under President Gerald Ford, in addition to running for the Republican presidential nomination three times.
Death
Rockefeller died, on May 23, 1937, at The Casements, his home in Ormond Beach. He was 97 years old. He is buried in Lakeview Cemetery in Cleveland. He had given most of his property to his philanthropies, his son and other heirs.
As a youth, Rockefeller reportedly said that his two great ambitions were to make $100,000 and to live 100 years.
