The man who saved the Whales!
Well, technically he didn’t actually save the whales, but he certainly helped. In the first half of the 19th century whale oil was a main source of oil for lanterns and the United States owned 70% of the market. And the whale population was being decimated. By 1860 the market for whale oil had peaked and would never recover. One of the main reasons it never recovered was because of the emergence of kerosene as a viable inexpensive lighting source. And John D. Rockefeller played a major role in that.
Born in Richford, New York in 1839 to a family that moved often, Rockefeller was a natural businessman. At the age of 15 he took his first job, as a bookkeeper at the Cleveland, OH produce commission / shipping agent firm of Hewitt & Tuttle. It was there that he gained his first exposure to the transportation industry and quickly gained an understanding of how transportation costs impacted commodity prices.
In 1859 Rockefeller struck out with two partners to start their own competing firm. With the beginning of the Civil War their firm, Clark, Gardner & Company found great success providing food and supplies to the Union troops.
Halfway through the war Rockefeller and a different set of partners turned their attention to the refining of crude oil into kerosene and built their first refinery in 1863. At the time, the industry, while still in its infancy, was chaotic and extraordinarily inefficient. Rockefeller would bring his prescience and outstanding business skills to help rationalize and grow the market. He would build a fortune along the way and make a legion of enemies while doing so.
One of Rockefeller’s early innovations was the efficient use of the oil that was turned into kerosine. Other refiners would dump the excess after the kerosine was distilled. It could be up to 40% of the crude and Rockefeller intended to use it. He developed a wide range of products (over 100 in all) that would be manufactured from the leftover. Among them were lubricating oil, petroleum jelly, coke and much more. These alone provided Rockefeller with a revenue stream that few other refiners had.
But Rockefeller had many other tricks up his sleeve. One was plowing all of his profits back into the business and another was borrowing heavily to acquire competitors. In 1870, when he established Standard Oil, there was a glut of refiners in the market and prices tumbled. Rockefeller used the opportunity to buy up most of his competitors – including the large number of “competitors” who were not really competitors at all, but who feigned entering the refining business with the specific intent of being bought out by Rockefeller. In 1872 alone he bought up 22 of his 26 competitors in Cleveland.
Another of Rockefeller’s innovations was the vertical integration of the business, which meant that he owned everything from drillers to pipe manufacturers to pipelines for shipping, to railroads and delivery trucks bringing his product to customers. This gave him far more cost control than most of his competitors who had to pay suppliers for most of their inputs.
Easily however the single best known (and vilified) element of Rockefeller’s business was the pacts he made with railroads. Because he shipped such an enormous volume of product – at its peak during the decade of the 1870’s, Standard Oil would control 90% of the domestic oil market and for a short period of time an equal amount of the world market – Standard Oil was able to strongarm railroad companies to give it shipping kickbacks that were not available to other companies. Indeed, Standard Oil even garnered kickbacks when competitors shipped product!
Despite the fact that Rockefeller almost single handedly rationalized the drilling and refining industry and pushed down the price of kerosine by over 80%, which made it affordable to the average family, eventually the army of enemies Rockefeller had engendered caught up with him. In the 1880’s and 1890’s states from New York to Pennsylvania to Ohio were after Standard Oil for a variety of reasons. But it wasn’t until the Supreme Court ruled against the company in 1911 that Standard Oil was seriously hit. Sherman Antitrust Act was used to split the company into 42 different companies.
The long term impact was nominal however as the companies emerging from Standard Oil went on to dominate the American oil and gasoline (for automobiles) markets for most of the next century, making the Rockefeller family one of the richest in the world.
Beyond business, Rockefeller was also one of the greatest philanthropists in American history. He started at 16, giving 6% of his earnings to charity and the share only ever went in one direction, up. Although he would give away 10% of his income throughout his life, he would do much more than write random checks. He funded abolitionist organizations before the Civil War and following it he was active in programs to help educate former slaves, including funding Spellman College (an Historically Black Institution for women) in Atlanta and providing land for the nearby brother school Moorehouse College. He also founded the University of Chicago and gave millions to other institutions from Yale to Harvard to the Central Philippine University. Much of his philanthropy would make its way through various religious institutions as well. One of his primary efforts was focused on medicine and healthcare, where he funded the rapid advancement of the scientific method in the field and which would power the United States to rapidly become the most important source of medical research and medicine development in the world.
John D. Rockefeller would die in 1937 at the age of 97 and holding the title as the richest man in the world. His life would very much be characterized by having been led according to an encouragement he received from a Baptist preacher “Make as much money as you can, and then give away as much as you can.” Rockefeller was a tenacious and tough businessman at a time when America needed tenacious and tough businessmen to bring order and structure to the nascent petroleum marketplace, one which, in its infancy was utterly chaotic and inefficient, but one which would go on to fuel the industrial might and economic prosperity that would come to characterize the 20th century. Reviled, feared, loved and admired, Rockefeller would go down as one of the most important businessmen in all of human history, one whose impact was felt long after he had stepped off this mortal plain.