John D. Rockefeller: The World’s First Billionaire

Often hailed as the ‘wealthiest man in history,’ John D. Rockefeller is an American icon.

Today, his name marks some of New York City’s most famous landmarks, but over a century ago, he was just a poor boy born into a large family.

So, how did a young assistant bookkeeper go on to control 90% of U.S. oil? Rockefeller says, “From the beginning, I was trained to work, save, and give.”

Rockefeller got his first job at a small commission firm in Cleveland at age 16. He quickly developed his negotiation skills, constantly speaking with barge owners and captains. He said, “The ability to deal with people is as valuable a commodity as sugar or coffee. And I will pay more for that ability.”

In 1859, twenty-year-old Rockefeller went into the produce business. He and his partners raised $4,000 (around $130,000 today) in seed money.

The American Civil War proved profitable for Rockefeller. The Union Army needed food and supplies, causing profits to soar.

As the war ended and the prospect of lagging profits loomed, Rockefeller knew he needed another plan. He and his partner, Maurice Clark, began researching oil refining.

The war had drastically multiplied oil prices, driving many into the business. However, current collection practices left 40% wasted. Most failed, and Rockefeller wasn’t interested in failing.

Rockefeller understood the value of efficiency, one of his most successful traits. To avoid waste, Rockefeller kept runoff oil to fuel his refinery and to produce other by-products he could sell.

In 1870, Rockefeller founded Standard Oil. He bought out Clark for $72,500, or $1 million today. Rockefeller called this “the day that determined my career.” He was positioned to leverage post-war growth, railroads, and the era’s oil-fueled society into a strong business.

During the firm’s early years, Rockefeller developed a practice of reinvesting profits and controlling costs. These measures dropped the price of kerosene by 80% in the 1870s.

Before Rockefeller, only the rich could afford candles and lighting. But because of his relentless ingenuity, lower and middle-class people could afford oil, allowing them to work and read after the sun fell.

Ever the believer in efficiency, Rockefeller developed an orderly flow of products and processes, from oil extraction to its final home on a customer’s shelf.

Throughout the 1870s, Rockefeller bought up his competitors, improved efficiency, and undercut his competition. In “The Cleveland Massacre,” over four months, Rockefeller absorbed twenty-two of his twenty-six competitors in Ohio.

In 1877, Rockefeller’s first hurdle came from Cornelius Vanderbilt, the Commadeer of Railroads. Vanderbilt noticed Rockefeller’s reliance on his trains for shipping and cut off Rockefeller’s preferential pricing deals.

Rockefeller was committed to his belief: “We are refining oil for the poor man, and he must have it cheap and good.” At the time, oil pipelines could only travel five miles. Rockefeller saw potential and began building a pipeline network across the Eastern U.S.

Rockefeller said this of the ordeal, “All the fortune that I have made has not served to compensate me for the anxiety of that period.”

By the late 1870s, Rockefeller produced 90% of the oil in the United States. The reason it wasn’t more? Rockefeller said, “We realized that public sentiment would be against us if we actually refined all the oil.”

Rockefeller’s practices garnered him little support and plenty of criticism. According to  writer Ida Tarbell, “[Standard Oil] had never played fair.”

His next hurdle came from the Sherman Antitrust Act of 1890. Ohio applied this law, forcing Standard Oil to separate from the rest of the firm in 1892.

Theodore Roosevelt’s presidency in the early 1900s was Rockefeller’s deathknoll. Roosevelt initiated dozens of lawsuits against Standard Oil. In 1911, the Supreme Court broke Standard Oil into 34 new companies, including Continental Oil (now Conoco), Amco, Chevron, and ExxonMobil. Rockefeller retained his assets and shares in these firms.

While exact figures are unknown, it’s estimated that Rockefeller was worth $336 billion over the course of his life. By his death in 1937, Rockefeller’s wealth comprised 1.5% of the U.S. economy.

Here’s what we can learn from Rockefeller about leadership, crisis management, and demand.

Lessons

Sell a product that everyone needs. “The secret to success is to do the common things uncommonly well.” Rockefeller didn’t sell a product that didn’t exist; oil refineries were a relatively competitive market, even in the 1860s. The Civil War drove up the price of oil drastically—purchasing it was far from the reach of many. Rockefeller recognized the public’s need for a more affordable version of the product already available. To that end, he designed a production and refinement process that slashed costs, widening his customer base. His goal? “The best illuminator in the world at the lowest price.” He said, “We must ever remember we are refining oil for the poor man and he must have it cheap and good.” Coopers, one of his competitors, charged $2.50 per barrel; Rockefeller’s ‘use it all’ and DIY processes allowed him to cut the price to $0.96. The price paid for oil dropped 80% over the course of the 1870s, allowing the public to continue life after the sun went down. Rockefeller says, “If you want to succeed, you should strike out on new paths rather than travel the worn paths of accepted success.”

Listen more than you speak. As a boy, Rockefeller’s mother told him, “Control of self wins the battle, for it means control of others.” A characteristically reserved man, Rockefeller’s demeanor starkly contrasted with his peers. At the time, business leaders relied on loud displays of anger to coerce employees. Rockefeller was a quiet authority, even with his lower-level employees. His biographer said his reserved behavior garnered him “excellent reviews from employees who regarded him as fair and benevolent, free of petty temper and dictatorial airs.” Rockefeller believed that “Success comes from keeping the ears open and the mouth closed.” Always probing for opportunity, his quiet demeanor allowed him to listen for potential ventures without provoking his competitors. One of his employees said, “[Rockefeller] always had a nod and a kind word for everybody. He never forgot anyone. We had some trying times in the business in those early years, but I’ve never seen Mr. Rockefeller when he was not friendly, kind, and unruffled. Nothing excited him.”

Use philanthropy as a crisis management tool. “I always tried to turn every disaster into an opportunity.” During his battle against the Sherman Antitrust Act, Rockefeller famously donated money to Baptist universities as a crisis cover tactic. He gave $80 million to the University of Chicago (over $2 billion today), turning it into a world-class university. Keen on crisis management tactics, Rockefeller knew, “Next to doing the right thing, the most important thing is to let people know you are doing the right thing.” He was quick to publicize his donations in papers across the United States. More importantly, Rockefeller uniquely understood the value of carefully selected causes. Rather than give away money to every charity under the sun, he believed that “Charity is injurious unless it helps the recipient to become independent of it.” His ‘do no harm’ approach felt empathetic and honest. He invested in causes that were important to him, namely his faith.

Never let yourself become stuck in a corner—don’t be afraid to exploit new opportunities. “In the same way the failures which a man makes in his life are due almost always to some defect in his personality, some weakness of body, or mind, or character, will, or temperament. The only way to overcome these failings is to build up his personality from within, so that he, by virtue of what is within him, may overcome the weakness which was the cause of the failure.” Rockefeller, more so than his competitors, was a ruthless businessman. When railroads cut his preferential deal, he brainstormed a way out, exploiting new opportunities in oil pipelines. When foreign oil became cheaper than oil in the U.S., Rockefeller overhauled his production, using less iron in his sealing cans and saving all byproducts. Rockefeller studied foreign markets extensively, trying to find chinks in their armor. When a competitor zigged, Rockefeller zagged, constantly observant of changes in the market. He never let himself become comfortable. He said, “Don't waste effort on a thing that ends in a petty triumph unless you are happy with a life of petty success.”

Use tailwinds advantageously. “I believe that every right implies a responsibility; every opportunity, an obligation; every possession, a duty.” Always scanning for opportunity, Rockefeller believed that opportunity was transient. Success comes from moving quickly. Rockefeller began a produce commission firm in 1859 with the Civil War brewing on the horizon. The war proved advantageous, and the Union army called for supplies, resulting in enormous profits. “The way to make money is to buy when blood is running in the streets,” he said. Recognizing the potential opportunities posed by the war’s end, Rockefeller quickly began studying the oil industry, recognizing the public’s growing need for cheap light. He said, “Everyone is a product of his thoughts; thinking about small goals will lead to small results. Thinking of great goals will win great success. And great ideas and big plans usually come easier than small ones, at least it will not be more difficult.”

John D. Rockefeller Quotes

On philanthropy: “Giving should be entered into in just the same way as investing. Giving is investing.”

On hiring: “I would rather hire a man with enthusiasm, than a man who knows everything.”

On character: “I believe in the sacredness of a promise, that a man's word should be as good as his bond, that character—not wealth or power or position—is of supreme worth.”

On partnerships: “A friendship founded on business is better than a business founded on friendship.”

On reputation: “The most important thing for a young man is to establish a credit . . . a reputation, character.”

On leadership: “Good management consists of showing average people how to do the work of superior people.”

On listening: “It is very important to remember what other people tell you, not so much what you yourself already know.”

Speeches

• John D. Rockefeller Sure Prosperity Is Coming Back (1932)---A rare video of Rockefeller speaking on economic uncertainty.

Videos

• The Men Who Built America—The History Channel examines key industrial-era figures.
• 97: The Gilded Age’s Robber Barons: John D. Rockefeller & Andrew Carnegie—Discusses Rockefeller and other era magnates.
• Rockefeller: The World’s First Billionaire—Discusses Rockefeller’s career and firm.
• Why John D. Rockefeller Was a Money-Making Genius—Rockefeller’s wealth strategy.
• How Rockefeller Built His Trillion Dollar Oil Empire—Rockefeller’s career and impact on Standard Oil.
• How John D. Rockefeller Salvaged His Image—A look at Rockefeller’s approach to image maintenance.
• Why The Rockefeller Fortune Will Last Forever—Rockefeller’s wealth-accumulation strategy.
• John D. Rockefeller: The American Oil Magnate—Rockefeller’s life and career.
• A day in life of John D. Rockefeller (1924)---A silent video examining Rockefeller’s daily life.
• The Breakup of Big Oil | Rise of Rockefeller | American Scandal | Full Episode | Episode 1—Podcast looks into the breakup of Standard Oil.
• How Rich Would Rockefeller Be Today?--A look into Rockefeller’s life and fortune.
• John D. Rockefeller and the Standard Oil Company–Podcast briefly looks into Rockefeller’s career.

Further Readings

• Business profile: From turkeys to oil... the rise of John D Rockefeller–Rockefeller’s career and a Standard Oil company profile.
• The founding grandfather–An extensive NYT profile.
• John D. Rockefeller–Overview of Rockefeller’s major moments.
• John D. Rockefeller: Infinitely Ruthless, Profoundly Charitable–Rockefeller’s philanthropic endeavors.
• Financier's Fortune in Oil Amassed in Industrial Era of 'Rugged Individualism'---Rockefeller’s legacy.
• John D. Rockefeller Was the Richest Person To Ever Live. Period—Rockefeller’s financial success.
• TIL John D. Rockefeller was worth a modern equivalent of $336 billion.---Redditors discuss Rockefeller’s wealth strategy.
• Be Your Own Tyrant: John D. Rockefeller’s Keys to Success–Lessons from Rockefeller.
• John D. Rockefeller, 1839-1937–Rockefeller Foundation’s biography.
• John D. Rockefeller—Chronicles Rockefeller’s relationship with the University of Chicago.
• John D. Rockefeller’s Obituary—Rockefeller’s NYT obituary.
• John D. Rockefeller and the Oil Industry—Rockefeller’s enduring impact.
• John D. Rockefeller, one of the richest men in the world at the time, talking during the Great Depression, 1932.---Redditors discuss Rockefeller’s legacy.

Book Recommendations

• Titan: The Life of John D. Rockefeller–An extensive biography.
• John D. Rockefeller: Anointed with Oil–A look into Rockefeller’s career.
• The Rockefellers: an American dynasty–Take on Rockefeller’s family legacy.
• The history of the Standard Oil Company–Discussed the history of Rockefeller’s firm.
• Random Reminiscences of Men and Events—Rockefeller’s own accounts and wisdom.
• John D. Rockefeller on Making Money: Advice and Words of Wisdom on Building and Sharing Wealth—Rockefeller’s advice on building wealth.