John D Rockefeller Success Story
There are several reasons why the human race is considered the most supreme. If history is any indication, then it is clear that we are resilient to a fault, and have so far, always managed to triumph over whatever adversity fate has sent our way. In fact, so deeply entrenched is the influence of some people that their very names have become synonymous with success.
From Akbar in the east to Alexander in the west, from Mahatma Gandhi to Winston Churchill to Abraham Lincoln, these are just some of the examples of the best and the brightest stars that have walked among us. In India, names like the Tatas and the Ambanis are associated with success. Such an example, in the United States, would be the name of John Davison Rockefeller.
John Davison Rockefeller’s life is a true rag to riches story. He was born into a large family which did not have any stable source of income. In spite of that, Rockefeller became the world’s first billionaire. We have all heard his name in bits and pieces. From the Rockefeller Centre to the University of Chicago to the refinery giant Standard Oil, we are familiar with the name John Davison Rockefeller. However, not many of us know the impressive trajectory that his own life took.
That, my dear friends, is why we are gathered here today. We are going to look at the entire story, from the beginning till the end and find out how the impressive John Rockefeller net worth came to be.
John Davison Rockefeller was born in New York in 1839. The son of charlatan William Rockefeller and the second of six children, John was forced to move around with his family. His father sold remedies for incurable diseases like cancer, and as a result, they could never live in one place for too long. Further, John was forced to assume a position of responsibility and provide for his family from a very early age.
From the age of 13-14, John took up odd jobs such as working in the school canteen to earn whatever little amount he could. After he finished his schooling and a short course on book-keeping, he was forced to start looking for a job immediately. Finally, he got a job as an assistant bookkeeper at Hewitt and Tuttle in September 1855.
Do you want to know a fun fact?
The richest man in modern history entered into the professional world as a full-time employee with a starting salary of only $14 per month.
Of course, true talent reveals itself no matter what the circumstances. As it was, John was always a meticulous person. From his religious and disciplined mother, he had learnt the importance of maintaining accounts and keeping track of his income and expenditure. These good habits ensured that he was always able to donate 10% of his income to charity, even as a young man. From here begins the saga of the famous John D Rockefeller philanthropy.
Always an enterprising man, John was on the lookout for opportunities which would help him to climb the strata of society and wealth. Over the two years that he spent at Hewitt and Tuttle, his responsibilities increased exponentially as his true talent became apparent to all around him. From a lowly book-keeper, he soon took charge of elaborate and difficult deals and started venturing into commodity trading.
In 1859, at the tender age of 20, John formed his own company with his partner Maurice Clark. The business was centred around the vegetable trade; they would buy, sell and transport vegetables in exchange for a commission. Soon, they had expanded into grains, meat and other items as well.
In 1857, the US economy went into recession. During this time, as liquidity in the economy dried out, many companies went out of business and several others made huge losses. The mark of a truly good businessman is how he handles his company, not during times of triumph, but during times of crisis.
John’s genius was apparent in the fact that even though the entire economy was struggling, his company still maintained an exponential growth rate and increased flow of profits. He not only survived, but he also flourished.
One of the famous John D Rockefeller quotes says, “The way to make money is to buy when blood is running in the streets”.
John was a prudent businessman; he did not rely on speculation or leave anything to the mercies of the market forces. All his transactions were extremely calculated, and in the merchandise business, he always worked on commission to ensure a steady and uninterrupted stream of income.
John functioned as his own R&D team. He was always on the lookout for stagnation in his sector and for newer opportunities for expansion. Soon, he realised that there was not a lot of option for growth left as a commission merchant. The real opportunity presented itself in 1863.
During that time, a man named Edwin Drake had discovered oil in the northwestern part of Pennsylvania. Before that, the idea that oil could be extracted out from the earth by drilling was unknown. As is with any new innovation or discovery, it spread like wildfire, and soon many companies had jumped on the oil wagon.
John, too, heard about the new breakthroughs in the oil business and was eager to discover how he could benefit from it. After extensive research, he realised that the oil extraction business involved a lot of expenditure and luck in equal amounts. Often times, it so happened that the readings were incorrect, and after drilling, no oil deposit was found. It was a high-risk business and did not suit John’s innate style.
Instead, he focused on the refining of oil, after it had already been extracted. Oil, when it is extracted, is always in a crude form. From that, kerosene and other usable fuels are obtained after distillation and other purification processes. This business involved a fraction of the cost of oil drilling and also reduced the risk several-fold.
In 1863, he opened his first oil refinery in Cleveland, with Maurice Clark and Samuel Adams. This refinery was located very close to the Atlantic and Great Western Railroad, which connected Cleveland with New York, Pennsylvania and several other oil regions. This strategic decision to place the refinery close to the railroad gave John an instant competitive advantage over others. Not only did he save on transportation, but he could also serve a larger demand simply because of the convenient location.
However, as we all know, the long-run success of any company in any sector depends on its comparative advantage over its peers.
Another John D Rockefeller quote says, “If you want to succeed, you should strike out on new paths, rather than travel the worn paths of accepted success”.
John knew the importance of increasing efficiency, and he brought in a team to figure out how to reduce the waste that was generated in the process of distilling kerosene from crude oil. In other words, he wanted to find out if there was any way in which he could convert the tar and the remaining waste into new products that people would use.
In this course of discovery, John realised that the wastage from kerosene refinement could be made into paraffin, benzene, naphtha and wax, which were separate products. He monetised even his waste to increase efficiency. John also devised methods for improved storage and transportation of the crude oil and the finished products. From making his own sulphuric acid to building an entire fleet of tank cars for transportation, John went all out.
Impressive, isn’t it?
In 1865, John bought out his other partners and gained complete control over the refinery. After this, he embarked on a quest for rapid expansion and growth. He brought on his brother William Rockefeller and the like-minded Henry Flagler. Together, they took the oil refining business to new heights.
In 1870, Standard Oil was born. At this time, the oil refining business was full of a large number of small companies, and there was no real organisation or hierarchical structure to it. The low investment required to enter the business meant that there were many firms who were weak and inefficient.
This, of course, provided an opportunity for a businessman of John’s calibre. He had already grown his business tremendously, on the basis of the comparative advantages he had cultivated and the deals and agreements he negotiated with the railroad systems. To add cherries on top of the cake, John and his partners had even created specific pipelines which were meant for the exclusive transport of crude oil and the finished products. All of this combined to bring transport costs to an all-time low and also minimised waste.
In simple words, Standard Oil was already a giant in the oil refinery business and had captured about 10% of the market. Thus, John was in a unique position to cement his monopoly even further. He started buying out all the smaller firms that had ventured into the oil refinery business in an exploratory manner. Using a strategy of aggressive acquisitions, Standard Oil gobbled up as many as 3-4 oil refineries on a monthly basis.
Following this steep trajectory, Standard Oil became the largest oil company in the United States by 1882. In fact, data shows that 90% of the refineries in the country belonged to Standard Oil, and 98% of the kerosene in the US markets came from Standard Oil. In other words, Standard Oil had all but reached monopoly status, and controlled the market.
At this time, John was in his early forties and had already reached the pinnacle of his career. By 1890, the John D Rockefeller personal net worth had reached such a level, that even the business virtuoso was not able to manage all of it. He had to bring on a full-time manager to look after his fortune.
With the attention and focus that Standard Oil gathered from the rest of the world, it comes as no surprise that problems started cropping up, as external forces tried to restrict John’s power and influence. In 1891-92, John is said to have suffered a nervous breakdown from the pressure of managing his never-ending empire. He retired from Standard Oil soon after and focused only on philanthropy.
After that, John turned his attention to the fortune that he had amassed and started contributing more actively to charities and trusts. He founded the University of Chicago, created the Rockefeller Sanitary Commission and Rockefeller Foundation, among other initiatives.
Rockefeller’s successor at Standard Oil, John Archbold, made full utilisation of his position at the head of the biggest oil monopoly in the United States. In order to milk the profits, he increased prices steeply and this brought a lot of heat onto Standard Oil. In 1911, following a Supreme Court regulation, the company was dismantled and broken up into 34 separate companies. Out of these, the largest were Exxon and Chevron. As these individual companies grew larger by market capitalisation, the John D Rockefeller net worth grew even larger.
In 1916, John became the first billionaire in the world. It is estimated that his personal wealth amounted to 2% of the entire US economy.
John D Rockefeller died in 1937 at the age of 97 years. Even though he may have died, his name and his legacy live on in the lives of his family and his charities.