John Davison Rockefeller
John Davison Rockefeller
John D. Rockefeller was born on July 8, 1839, in Richford, N.Y. His father owned farm property and traded in many goods, including lumber and patent medicines. His mother, a straitlaced puritanical woman, brought up her large family very strictly. The family moved west by degrees, reaching Cleveland, Ohio, in 1853, when it was beginning to grow into a city. John graduated from high school there and after three months of commercial college found his first job at the age of sixteen clerking in a produce commission house. In 1859, when he was nineteen, he started his first company with a young Englishman: Clark and Rockefeller. They grossed $450,000 in the first year of trading. Clark did the fieldwork; Rockefeller controlled office management, bookkeeping, and relationships with bankers.
From the start Rockefeller revealed a genius for organization and method. The firm prospered during the Civil War. With the Pennsylvania oil strike (1859) and the building of a railroad to Cleveland, they branched out into oil refining with Samuel Andrews, who had technical knowledge of the field. Within two years Rockefeller became senior partner; Clark was bought out, and the firm Rockefeller and Andrews became Cleveland's largest refinery. A second refinery, the Standard Works, was opened in 1865 by another firm established by Rockefeller in his brother William's name; and a sales office was opened in New York City in 1866.
With financial help from S. V. Harkness and from a new partner, H. M. Flagler, who also secured favorable railroad freight rebates, Rockefeller survived the bitter competition in the oil industry. The Standard Oil Company, chartered in Ohio in 1870 by Rockefeller, his brother, Flagler, Harkness, and Andrews, had a capital of $1 million and paid a dividend of 40 percent a year later. Standard Oil controlled one-tenth of American refining, but competitive chaos remained. The chief bottleneck was the transporting of the oil. Out of this situation came the controversial South Improvement Company scheme of 1872—a defensive alliance of Cleveland refiners to meet the bitter opposition of the oil producers of Pennsylvania. The sweeping freight rebate agreements in this scheme brought public opposition, and the plan was outlawed by the Pennsylvania Legislature. Meanwhile, a looser organization, a refiners' pool, also failed (1873).
Rockefeller still hoped to impose order on the oil industry. He bought out most of the Cleveland refineries, then acquired others in New York, Pittsburgh, and Philadelphia. He turned to new transportation methods, including the railroad tank car and the pipeline. By 1879 he was refining 90 percent of American oil, and Standard used its own tank car fleet, ships, docking facilities, barrel-making plants, draying services, depots, and warehouses. Strict economy and planning were enforced throughout. Rockefeller came through the Panic of 1873 still urging organization on the part of the refiners. As his control approached near-monopoly, he fought a war with the Pennsylvania Railroad in 1877, which created a refining company to try to break Rockefeller's control, but the bloody railroad strikes that year forced them to surrender to Standard Oil. Rockefeller's dream of order was near completion.
America's First Trust
By 1883, after winning control of the pipeline industry, Standard's monopoly was at a peak. Rockefeller created America's first great "trust" in 1882; since laws forbade one company's ownership of another's stock, ever since 1872 Standard had placed its acquisitions outside Ohio in the hands of Flagler as "trustee." All profits went to the Ohio company while the outside businesses remained nominally independent. In 1882 this was regularized. Nine trustees of the Standard Oil Trust received the stock of 40 businesses and gave the various shareholders trust certificates in return. The trust had a capital of about $70 million; it was the world's largest and richest industrial organization.
In the 1880s the nature of Rockefeller's business began to change; he moved beyond refining oil into producing crude oil itself and moved his wells westward with the new fields opening up. He pioneered in this by acquiring oil land in Ohio before it was certain that this sulfuric oil could be refined successfully; then he employed the scientist Herman Frasch, whose process (1886-1889) made these fields yield an enormous profit. Standard also expanded its marketing facilities and entered foreign markets in Europe, Asia, and Latin America. From 1885 a committee system of management was developed to control Standard Oil's enormous empire.
Attacking the Trust
Public opposition to Standard Oil grew with the emergence of the muckraking journalists; in particular, Henry Demarest Lloyd and Ida Tarbell published harsh exposés of the oil empire. Rockefeller was condemned for various alleged practices: railroad rebates (a system he did not invent and which many refiners used); price discrimination; industrial espionage and bribery; crushing smaller firms by unfair competition, such as cutting off their crude oil supplies or restricting their transport outlets. Standard Oil was investigated by the New York State Senate and by the U.S. House of Representatives in 1888. The rising tide of reform sentiment brought in the Sherman Antitrust Act (1890). Two years later the Ohio Supreme Court invalidated Standard's original trust agreement. Rockefeller formally disbanded the organization; though the trustees handed in their trust certificates, in practice the organization remained unified, and the four presidents of the state firms (John D. Rockefeller for Standard of Ohio, William Rockefeller for New York, Flagler for New Jersey, and J.A. Moffett for Indiana) still met regularly to fix overall policy. In 1899 Standard was recreated legally under a new form as a "holding company;" this merger was dissolved by the U.S. Supreme Court in 1911, long after Rockefeller himself had retired from active control in 1897.
Perhaps Rockefeller's most famous excursion outside the oil industry began in 1893, when he helped develop the Mesabi iron ore range of Minnesota. By 1896 his Consolidated Iron Mines owned a great fleet of ore boats and virtually controlled Great Lakes shipping. Rockefeller was now an iron ore magnate in his own right and had the power to dictate to the steel industry. He made an alliance with the steel king, Andrew Carnegie, in 1896: Rockefeller agreed not to enter steelmaking and Carnegie agreed not to touch transportation. In 1901 Rockefeller sold his ore holdings to the vast new merger created by Carnegie and J. P. Morgan, U.S. Steel. In that year his fortune passed the $200 million mark for the first time.
From his first employment as a clerk, Rockefeller sought to give away one-tenth of his earnings to charity. His benefactions grew with his income, and he also gave time and energy to philanthropic causes. At first he depended on the Baptist Church for advice; the Church wanted its own great university, and in 1892 the University of Chicago opened under the brilliant presidency of a man Rockefeller much admired, William Rainey Harper. The university was Rockefeller's first major philanthropic creation. He gave it over $80 million during his lifetime and left the university entirely independent under Harper. Rockefeller chose New York City for his Rockefeller Institute of Medical Research (now Rockefeller University), chartered in 1901. Among the institute's many achievements were yellow fever research, discovery of serums to combat pneumonia, advances in experimental physiology and surgery, and work on infantile paralysis. In 1902 he established the General Education Board.
The total of Rockefeller's lifetime philanthropies has been estimated at about $550 million. Eventually the amounts involved became so huge (his fortune reached $900 million by 1913) that he developed a staff of specialists to help him; out of this came the Rockefeller Foundation, chartered in 1913, "to promote the wellbeing of mankind throughout the world."
Rockefeller's personal life was fairly simple and frugal. He was a man of few passions who lived for his work, and his great talent was his organizing genius and drive for order, pursued with great single-mindedness and concentration. His life was absorbed by business and later by organized giving. In both areas he imposed order, efficiency, and planning with extraordinary success and sweeping vision. He died on May 23, 1937, in Ormond, Fla.
Rockefeller's Random Reminiscences of Men and Events (1909) remains interesting and important. The definitive life of Rockefeller is Allan Nevins, Study in Power: John D. Rockefeller (2 vols., 1940; rev. ed. 1953). A sympathetic account is Jules Abels, The Rockefeller Billions (1965).
For general economic history see the readings in Peter d'A. Jones, The Robber Barons Revisited (1968). The history of Standard Oil of New Jersey is treated in R. W. and M. E. Hidy, History of Standard Oil Company: Pioneering in Big Business, 1882-1911, vol. 1 (1955), and Standard is considered comparatively in Alfred D. Chandler, Jr., Strategy and Structure: Chapters in the History of Industrial Enterprise (1962). Standard's history in California to 1919 is described in Gerald T. White, Formative Years in the Far West (1962). For a broader history see Harold F. Williamson and Arnold R. Daum, The American Petroleum Industry (2 vols., 1959-1963). □
Rockefeller, John Davison
ROCKEFELLER, JOHN DAVISON
The name Rockefeller has become synonymous with the idea of enormous personal wealth. In ordinary language one many hear the phrase "rich as Rockefeller," an enduring popular legacy for the man who built the largest fortune ever up to that time seen in the United States. John D. Rockefeller (1839–1932) created an oil empire that helped fuel the Industrial Revolution.
John Davison Rockefeller was born in 1839 in Richford, New York. His Baptist upbringing taught the young Rockefeller to be frugal, hard-working, and self-reliant. He despised waste and had a quiet disposition. Rockefeller's subdued character masked an aggressive ambition that would take him to the heights of success. In 1855, at age 16, he graduated from high school and began work as a bookkeeping clerk in Cleveland, Ohio. After four years Rockefeller left bookkeeping behind to start his own business in the new and rapidly growing oil industry.
As an entrepreneur, Rockefeller drew on the qualities instilled in him at childhood to run a successful and profitable business. He tried to save costs where possible and constantly reinvested his savings into his business. Rockefeller's business philosophy was akin to Charles Darwin's evolutionary theory of the "survival of the fittest." He could be a ruthless businessman, using harsh and even unethical methods to succeed, often driving his competition out of business.
By the 1870s Rockefeller's oil business grew to include refineries, lubrication plants, pipelines, cooperage plants, and other enterprises. The wide reach of his investments created an unwieldy and complicated business that Rockefeller controlled with an iron fist.
Rockefeller delegated management of his oil properties to 40 allied firms that, in 1882, centralized his operations under the Standard Oil Trust. The Standard Oil Trust monopolized 90 percent of all oil business in the United States and extended its influence into other parts of the world as well. It stifled competition in the oil industry.
While Rockefeller's business grew, the oil industry expanded. Rockefeller's increasing control over this important industry caused the United States government to examine more closely the fairness of trade and competition in the industry. The Ohio Supreme Court first asserted the illegality of Rockefeller's Trust in 1892. In 1870 Congress passed the Sherman Anti-Trust Act in part as a response against vast and powerful empires such as Rockefeller's. However it wasn't until 1911, under President Theodore Roosevelt (1901–1909), that the United States Supreme Court prosecuted the Standard Oil Trust for violation of anti-trust laws and dissolved its practices as "a monopoly in restraint of trade." By the time the Supreme Court completed its case against the Standard Oil Trust, John Rockefeller had pulled away from active involvement in his company's practices. He turned his attention to business ventures in minerals and ore in northwestern United States, and he developed ore operations in Colorado, Washington, and Minnesota.
John Rockefeller was one of the most successful U.S. entrepreneurs. He amassed a fortune of close to $1 billion, an outrageous sum for his day. Despite his enormous wealth Rockefeller did not forget his early upbringing. He regularly contributed to charity and created the Rockefeller Institute for Medical Research, the General Education Board, the Rockefeller Foundation, and the University of Chicago. John D. Rockefeller died at age 97 in Ormund Beach, Florida, on May 23, 1937.
See also: Petroleum Industry, Robber Barons, Standard Oil Company
Aiken, Edward N. Flager: Rockefeller Partner and Florida Baron. Gainesville, FL: University Press of Florida, 1991.
Carr, Albert H. John D. Rockefeller's Secret Weapon. New York: McGraw-Hill, 1962.
Chernow, Ron. Titan: The Life of John D. Rockefeller, Sr.. New York: Random House, 1998.
Gitelman, Howard M. Legacy of the Ludlow Massacre: A Chapter in American Industrial Relations. Philadelphia: University of Pennsylvania Press, 1988.
Hawkes, David F. John D.: The Founding Father of the Rockefellers. New York: Harper and Row, 1980.