Discover how John D. Rockefeller's hardscrabble childhood—caught between a devout Baptist mother and a con artist father—forged the relentless drive and strategic cunning that built Standard Oil into the largest monopoly in American history.
In this episode, we dive deep into the life of John D. Rockefeller, Sr., drawing from Ron Chernow's Pulitzer Prize-winning biography Titan: The Life of John D. Rockefeller, Sr. This nearly 700-page masterwork reveals the man behind America's first great monopoly—a figure who remains as enigmatic as he was influential.
Rockefeller's character was forged between two opposing forces: his mother Eliza's stern Baptist morality, frugality, and work ethic, and his father "Big Bill's" con-artist cunning and fearless deal-making. This tension—prudence versus daring—would define his approach to business for the rest of his life.
His mother drilled maxims into young John that he never forgot: "Willful waste makes woeful want" and "Save when you can, not when you have to." Meanwhile, his father's mysterious absences and flamboyant returns taught him secrecy, self-reliance, and a deep wariness of others.
At just seven years old, Rockefeller was already selling candy for profit. By sixteen, he treated his job search like a full-time occupation—six days a week, six weeks straight—until landing his first bookkeeping position. This relentless drive would become his trademark.
His first ledger book, "Ledger A," became one of his most treasured possessions, representing his financial independence and the foundation of everything he would build.
Founded on January 10, 1870, Standard Oil grew from controlling 10% of U.S. refining to a staggering 91% of global capacity. Rockefeller's strategy was revolutionary: consolidate a chaotic industry, achieve economies of scale, and leverage transportation costs through secret railroad rebates.
The "Cleveland Massacre" of 1872 saw him acquire 22 of 26 local refiners in just 40 days—a masterclass in strategic pressure and calculated acquisition.
"I was trained from the beginning to work and to save. I have always regarded it as a religious duty to get all I could honorably and to give all I could." — John D. Rockefeller
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The life of John Davidson, Rockefeller Senior was marked to an exceptional degree by silence, mystery, and evasion. Even though he presided over the largest business and philanthropic enterprises of his day, he has remained an elusive figure, a master of disguises. He spent his life camouflaged behind the multiple persona and shrouded beneath layers of mythology.
Hence, he lingers in our national psyche as a series of disconnected images ranging from the auspicious creator of Standard Oil. Brilliant, but bloodless to the wise and old cadre dispensing dimes and canned speeches for the newsreel cameras,
It’s often hard to piece together the varied images into a coherent picture, to delve into the voluminous Rockefeller papers. Is to excavate a lost continent. Yet even with such massive documentation, [00:01:00] I had the frustrating sense early in my research that I was confronting a Spinx Rockefeller trained himself to reveal as little as possible, even in his private letters, which he wrote as if they might someday fall into the hands of a prosecuting attorney.
With his instinctive secrecy, he excelled at employing strange euphemisms and elliptical phrasing.
For this reason, the 20,000 pages of letters that Rockefeller received from his more outspoken business associates proved a windfall of historic proportions, written as early as 1877. Seven years after Standard Oil's formation, they provide a vivid portrait of the company's Byzantine dealings with oil producers, refiners, transporters, and marketers, as well as railroad chieftains, bank directors, and political bosses.
This panorama of greed and guile should [00:02:00] startle even the most jaundiced students of the Gilded Age. The story of John D. Rockefeller transports us back to a time when industrial capitalism was raw and new in America, and the rules of the game were unwritten more than anyone else.
Rockefeller incarnated the capitalist revolution that followed the Civil War and transformed American life. He embodies all of its virtues of thrift, self-reliance, hard work, and unflagging enterprise. Yet, as someone who flouted government and rode roughshod over his competitors, he also personified many of its more agrarian vices.
As a result, his career became a focal point for debate about the proper role of government and the economy that has lasted until this very present day.
These openings, my friend, they come from the book Titan, the Life of John D. Rockefeller. That was written by [00:03:00] Pulitzer Prize winning author Ron Chernow. This is almost a 700 page book that looks at the life of Rockefeller through many different lenses. It starts with his ancestry and then it focuses on the intergenerational transformation of trauma, beliefs, habits, and faith that he would inherit from his mother and his father.
and these would mold a young John quickly into that of a man-child. As described in the book,
It looks really closely at his deeply driven nature in business from his roots to the complete monopoly over the oil industry through Standard Oil, and then it turns its focus to his 40 years of retirement. His philanthropic efforts and then much attention is focused on his son John D. Rockefeller, Jr. Who works tirelessly to try to shift the view of the Rockefeller name from that of poison to one of admiration for great advances in [00:04:00] medicine and science.
This is really a fascinating book along with reading the book, I also listen to the audio book is like 35 hours of listening. when I read a book in my mind, I can really see the scenes being sketched out and colored in. then, when I follow on by listening, it's like adding the fine details to the picture and giving it vivid colors.
So all in, just to get started to even make an outline for the show today is at least 70 hours of reading and listening. Now for the show today, I really wanted to focus on those intergenerational elements that Rockefeller inherits from his mother and his father. These are the ones that shaped and molded him, and they really act as the silent yet main characters in the play of John D. Rockefeller's life.
Then from there we'll take a look at what made him so deeply driven, [00:05:00] the fuel that really gave him his purpose in life, that sets him on a path towards founding and growing the largest monopoly ever seen at that time in history.
Along the way, we will focus on extracting the most valuable lessons that you and I can take away, and we'll spend some time talking about them as well. We'll also take a brief look at his retirement years and the work that he undertook towards his tremendous philanthropic efforts.
but primarily, we'll focus on those early years, how we got started in business, and then how we grew Standard Oil.
If you can, I would highly recommend picking up a copy of the book for all of the details. I believe that there could be at least a dozen or maybe more episodes in this one book alone, or, you know, maybe this could be a 30 hour podcast. I guess at that point you might as well just read the book or listen to the audio book.
So what I'm really trying to do here, uh, for both of our benefits is just to distill down those [00:06:00] most valuable lessons that we can use in business to help service our customers better, or even things possibly that we could use in our life
As I've been thinking about the show more and more, I really wanna focus on those lessons that are simple, but very, very deep. The ones that drive the ultimate impacts for our business. and one of my heroes for a long time has been Fred Rogers, there's a quote that he has, it's one that I really love.
I just wanted to read it for you here real quickly. I feel so strongly that deep and simple is far more essential than shallow and complex, and I really agree with that.
The goal here is to focus on the simple lessons that we can learn and use practical lessons.
As you and I learn lessons along the way. It's important that we also apply them to our businesses and our lives. And this is something that Fred has taught me, and I'm trying to apply this to the show, to really [00:07:00] focus on those lessons that are simple for us to grasp, but require deep, long-lasting attention to accomplish.
And as a result, they'll have major benefits for us over the long run. I also believe this was a major theme for John D. Rockefeller. As he took a long view on most things in business and life, and he followed that view religiously from the book. Here, he favored patience and stability over quick wins, often choosing cooperation and consolidation to tame chaotic markets and keep his rivals inside the tent, even if that meant carrying expensive deadwood on the payroll to prevent defections later on.
So John D's primary focus was consolidating the oil market and he developed a series of repeatable strategies, which he used to exert maximum pressure and leverage to win this game,
of which was to aggressively buy [00:08:00] out his competitors and have complete control. Oftentimes, he would keep the original founders in the managers of the companies that he buys out on the Standard Oil payroll. And this normally worked to his benefit because he would greatly empower them to do his quote-unquote dirty work, or he would neutralize them from going out and starting new operations by just carrying expensive deadwood on the payroll.
As we just heard, he wanted complete control over everything,
In just 10 years, between 1870, when he started and founded Standard Oil, until the end of that decade, Rockefeller would come to control 90 to 95% of the oil market. Before we get into the full story here of how John D built Standard Oil,
it's important to understand his early history and how he was shaped by his parents, and the social and religious atmosphere of the [00:09:00] United States in the 1840s and the 1850s. If we just jump back in time here, we can get a feel of John D's early beginnings in the book.
By the time John D. Rockefeller was born in 1839, Richford New York was acquiring the amenities of a small town. It had some nascent industries, sawmills, grist mills. Uh, those are just grain mills and a whiskey distillery, plus a schoolhouse and a church. Most inhabitants scratched out a living from hard-scrabble farming.
Yet these newcomers were hopeful and enterprising.
Notwithstanding their frontier trappings. They had carried with them the frugal culture of a Puritan New England, which John D. Rockefeller would come to exemplify. The Rockefellers had to struggle with the Spartan life they occupied a small plain house, 22 feet deep and 16 feet across fashioned with hand beams and timbers.
This [00:10:00] area where the family home had been constructed, it was said to have been built on non-feral and rocky soil. That really took them a lot of hard work to farm,
which John D's grandmother Lucy and his mother Eliza, Would exhibit this hard work to John, and he witnesses this. It's going into what he's seeing in his way of life, and he's understanding what it really takes to survive at even a most basic level here as just a young boy
now, his father, on the other hand, had greatly different ideas, and the first chapter in the book is called Flimflam Man. And this is exactly what his father was. He was a flimflam man or con artist, a swindler or a trickster term. and we see very quickly in the book how he's described in the following way.
By the time he was in his mid twenties, William Avery Rockefeller was already a sworn foe of conventional morality
who had [00:11:00] adopted for a existence Ever an adolescent. He disappeared on long trips in mid-winter, providing no clues as to his whereabouts. throughout his life, he expended considerable energy on tricks and schemes to avoid playing hard work. But he possessed such brass charm and rugged good looks.
He was nearly six feet tall with a broad chest, high forehead, and a thick auburn beard covering a ignatious jaw. The people were instantly beguiled by him, posing as a deaf-mute paddler, selling cheap novelties. He kept a small slate with the words I am deaf and dumb chalked across it, tied by a string to his buttonhole.
On this slate, he conversed with the locals and later boasted how he exploited this ruse to flush out all the town's secrets during his long career. As a confidence man, Big Bill always risked reprisals from people who might suddenly unmask his [00:12:00] deceptions. Since he usually presented false claims about himself and his products, bill worked a large territory to evade the law.
He was roving more than 30 miles northwest of Richford in the vicinity of Niles and Moria. When he first met his future wife, Eliza Davidson at her father's farmhouse with a flare of showmanship and self-promotion, he always wore brightly colored duds that must have dazzled a sheltered farm girl like Eliza.
Like many itinerant vendors in rural places, He was a smooth-talking purveyor of dreams along with tawdry trinkets. and Eliza responded to this romantic wonder. She was sufficiently taken by his deaf dumb humbug, and she involuntarily exclaimed in his presence.
I'd marry that man if he were not deaf and dumb,
whatever tactic doubts she might have harbored when she discovered his deceit. she soon succumbed, as did other women [00:13:00] to his mesmerizing charm.
For Big Bill, he is gonna chase Eliza. And it says in the book that it wouldn't take him very long because a few months later, in February of 1837, they would be married. It was also said that her father was known to be a rich man. He had a farm that was already paid for perhaps he had like four or $5,000 to his name.
This really attracted bill along with Eliza's good looks. Now, needless to say, her father was not happy with this arrangement as Big Bill. He had a less than stellar reputation as the Rockefellers in the area. They were known to be a hard drinking hillbilly clan. They were fond of music, liquor, and good times.
And this was quite opposite
of Eliza's strait laced Baptist upbringing.
In a world where things such as drinking, dancing, and playing cards, those things were strictly forbidden. These are deep beliefs that [00:14:00] Eliza would soon begin to pass on to her younger son, John D, who absorbs them and takes them into his life. Right from the start. Here we see even more despicable behavior from Bill as they're newly married and they're living in their first home. He hires a young lady who was also a former girlfriend by the name of Nancy Brown. As their live-in housekeeper and almost right away under this situation, Eliza becomes pregnant with their first child, Lucy, and then a few months later, Nancy would become pregnant.
And this pattern repeated itself. John D was the couple's second child that was born, and then a few months after that, Nancy would have another child giving big Bill four children in just two years. And that is just a crazy story. Then to top it off, bill, he continues with his flimflam [00:15:00] lifestyle.
Which sees him mysteriously disappearing in the middle of the night. No explanation of where he is going or when he would be back. Oftentimes he would come back weeks or months later, but during that time, Eliza, too bad. You're on your own. He just left her. And we start to see this first hard Scrabble life being drilled into a young John D. Rockefeller.
In the book it says the following, never knowing when their credit might be canceled. Also before Big Bill would leave, he would instruct the local shop owner to give Eliza what she needed, and then he would pay the bill upon his return.
Um, let's keep going In the book here, Eliza became extremely frugal and drilled her children in thrifty Maximums such as willful waste makes willful want. Save when you can, not when you have to. We never waste, we never [00:16:00] throw away. Poverty of spirit is worse than poverty of purse. these maxims, they feed deeply into John D. developing his sense of frugality.
Savings and using everything to its maximum value. Imagine with me for a second that you were a child of this era and you see your father disappearing for months at a time. Being the oldest male, you're watching your mother struggle to make ends meet. She's working hard to live a straight and honest life.
while you're starting to build a sense that your father is up to some unsavory, means that starkly contradict with what your mother is teaching you.
All of these elements, they're brewing inside of John D., crafting his conscious world that's feeding into his subconscious.
Then outta nowhere, his father would show up in the following way.
Imagine how this would make you feel as I read this. [00:17:00] After one prolonged absence of several months, when Eliza's bill at Chauncey Richards tops a thousand dollars, he came trotting into town in a magnificent carriage, seated behind a team of splendid horses’ diamonds, glittering in his front shirt at the general store.
He made a point of settling the tab with large bills. After such trips, Bill gathered his friends and family around the dinner table while wolfing down heaps of food. He would regale them with picturesque tales of his adventures among the Western settlers and the Indians. Devil Bill had a knack for weaving his experiences into spell binding narratives, making Eliza and the children vicarious partners in his travels.
I know if it was me as a youth, I would probably be quite upset seeing my father coming home in this manner, flaunting his money while the [00:18:00] family is struggling. Then you give it a bit of time and you're mesmerized by his stories and you really overcome. He has this very pleasing personality. So you let down your guard and you start enjoying your time with him, and then poof, he's off again.
Gone. No explanation. these visits with the family. They were said to be very brief and big Bill. He would be back out in the wild working on new schemes. While the family, they're at home, they're struggling to survive with a lack of money. John D. develops this deep respect for the value of money that would serve as the foundation for the duration of John D's life.
At the same time, here, he begins his own business. He starts buying candy by the pound. He would divide it into little small pieces and then go around selling it at a nice little profit. And this connects him for the first time to the survival of the family as [00:19:00] described.
By age seven, encouraged by his mother, he was dropping gold, silver, and copper coins that he earned into the blue China bowl on the mantle. Imagine with me,
at the age of seven, he's already working to help support the family. On the last episode, we spoke about Jim Casey and how at the age of 11, he had to go out and get a job due to how sick his father was, and thus he was really forced to be the breadwinner for the family. And this leads Jim to his purpose in life, which was to deliver the highest quality of service that he could to those messages and packages that he was delivering.
And this would ultimately go on to become UPS, both Jim and John D., they're forced to basically become adults at a very early age to help support their families. one advantage here for John D. was that he was able to [00:20:00] stay in school a little bit longer than that of Jim Casey.
But in school, he was said to be on the slow side, but he was a very patient and the author compares his mathematical acumen in the same vein as JP Morgan and Jay Gould. While we haven't spoke a lot about JP Morgan here on the show, , we have covered Jay Gould on episode four, who was very similar to Rockefeller in that he had a very private life and he was well connected to his family, and he valued spending time reading and working in his garden.
yet in the business world, he was an absolute killer. Taking over railroads and telegraph companies all while manipulating Wall Street like a puppet master. And if you're interested in the life of Jay Goldand episode four, we go deep into his life and we learn a lot of valuable lessons on that episode
Now I find it interesting that Jay Gould and Rockefeller, They would cross paths many times [00:21:00] in business with Gould calling Rockefeller the highest genius for constructive organization in American economic history.
I find it interesting, it's these early curiosities in the ferocity towards learning that we see in so many of these great founders and entrepreneurs that we study on the show. These are what I consider the first sparks of greatness.
And you know what? That curiosity is always there. It's the fire inside that really keeps them moving. Rockefeller, he never stopped learning. Just like Jay Gold and all the others that we've studied on the show.
John D. he was said to devote a lot of time to books, music
games and through his mother, he developed a deep love of the church. This would also, be his spiritual fire one that set him apart from so many of the Gilded Age robber barons. Who flaunt their wealth. [00:22:00] Rockefeller was very reserved and connected to the church, and we can see at a young age as described in the book, John D. really embraces the church in the following way.
John D. Rockefeller was driven to the church not as some nagging duty or obligation, but as something deeply refreshing to his soul. The Baptist Church of his boyhood provides many clues to the secrets of his character. Rockefeller, later cited, his mother's altruism As the genesis of his philanthropy early in life, he learned that God wanted his flock to earn money and then donate money in a never ending process.
I was trained from the beginning to work and to save. Rockefeller explained, I have always regarded it as a religious duty to get all I could honorably and give all I could. I was taught that way by the minister when I was a boy. [00:23:00] These are the lessons that he would never. Forget as he accumulated his wealth, he did not abandon him.
In fact, he dug in deeper. He was really well known for his philanthropy, especially later on in life. He would give away hundreds and hundreds of millions of dollars with the bulk of it going to help fund colleges and aid scientific research.
And as we're reading the book, we can really see how these early elements in Rockefeller's life are really shaping his character and who he would become later on in life. It reminds me a lot in fact, of Sam Walton, how when he was growing up, he was the product of the Depression era, and he was really forced to learn the value of a dollar through hard work.
And he saw this firsthand how hard his parents worked and how well they treated and respected others.
Thus he would incorporate these [00:24:00] values into the way that he approaches business as well. Sam Walton, like John D., he had this deeply innate drive inside of him to simply outwork others. And at the same time, both young men, they developed a sense of even calmness in dealing with intense situations.
For Sam, he never let fear or anxiety overtake him in making irrational decisions. in fact, it reminds me of that time that he lost his first five and dime store in New Newport, Arkansas. Due to a poorly worded lease agreement, he remained calm, and in Sam's words, he said the best solution was to get busy fixing the problem.
He didn't dwell on the problem. He got busy and he fixed it. And that leads him to Bentonville, Arkansas, which is now the home of Walmart. These are the virtues that he learned from his mother. Early on in this [00:25:00] very same light, John D. learns the following from his mother.
He also had his mother's slow metabolism and ability to bear a large burden for long periods in an unruffled way. Many neighbors testified that the unflappable Eliza never lost her temper, never raised her voice, never scolded anyone.
a style of understated authority that John inherited from his mother. He learned economy order thrift and other, virtues that figured so largely in his success at Standard Oil.
Forced to pay a heavy penalty for her impetuous decision to marry Devil Bill. Eliza changed her children to reflect coolly before making decisions.
her frequent admonition, we will let it simmer, was a saying, John D. employed throughout his business career.
Rockefeller is like a statue, in my [00:26:00] opinion. Almost nothing could phase him. In fact, when situations got more intense, he often became more calm inside, especially when it came to newspapers or legal trials where his name was being downcast or it was being dragged through the mud.
John D. had the means to block this out, and it really comes from his upbringing through the acts of his father. You see, when he was growing up, many of those towns, folks and the neighbors, they knew that his father was a car artist and a snake oil salesman. He was out there pretending to be a doctor, selling all kinds of fake potions and pills.
From the book, we learned the following about his father and how John D. learns to tune this out.
Bill wasn't engaging but notorious character who prompted intermediate speculation about his travels and sources of income. A boy with such a father needed to screen out malicious gossip and cultivate a brazen indifference [00:27:00] to community opinion. This read in him a reflexive habit of secrecy, a fear of the crowd, a deep contempt for idle chatter and loose tongues that lasted a lifetime.
He learned to cultivate a secretive style and a defiant attitude towards strangers, perhaps out of a self-protective instinct. Bill taught his children to be wary of strangers and even himself When John was a child, bill would urge him to leap from his high chair into his waiting arms.
One day he dropped his arms, letting his astonished son crash to the floor. Remember, bill lectured him, never trust anyone completely, not even me.
Not only was his father cruel to his mother, he was very strict with John and all of the siblings teaching them to keep track of money and ledgers, forcing them to do chores around the house and then [00:28:00] abandoning them for months at a time as Devil Bill would eventually take
on a secret identity by the name of Doc Levingston. And this was mostly done so that he could marry a woman by the name of Margaret Allen. This makes him a bigamist in doing so,
This would see him spend even more time away from his first family. This place is an even bigger pressure on John D. 'cause he now had to run the household and manage the family budget all while not having any idea about his father's secret, second wife, at least not as a young child. Later on in life.
He certainly became aware of this, but this really forces him to grow up and grow up fast he would take a drastic action here, just two months away from graduating from high school. He would drop out and he would state the following. there were younger brothers and sisters to educate, and it seemed wise for [00:29:00] me to go into business. It really was a mixture of his mother and his father that molded the way Rockefeller was, and this is what drove him.
And I found this following selection in the book. It really explains the mixture so well,
In his business career. John D. Rockefeller was accused of many sins, but he took pride in paying his debts promptly and abiding strictly by contracts. he was also accused of mixing the lawless and the honorable of ignoring ethical niceties in a manner reminiscent of his father. Whether John D. Rockefeller ultimately followed his father's unscrupulous craft or his mother's stern respectability in steering standard oil is the question that weighs most heavily on his historical reputation. Bernard Russell once said a Rockefeller, what he said, what he thought, and what he felt came from his mother, but what he [00:30:00] did came from his father with the addition of a great caution generated by early Unpleasantries.
The issue is much more complicated than that, but there's no doubt that Rockefeller's achievements arose from tense interplay between the two. deeply ingrained tendencies of his nature. His father's daring and his mother's prudence yoked together under great pressure with the added pressure that John D. has to help support the family,
He's gonna pay $40 and enroll in this three-month business college that would teach him the following. It taught double entry, bookkeeping, clear penmanship, and the essentials of banking, exchange and commercial law. The sort of purposeful courses that appealed to John By the time his studies ended in the summer of 1855, he had turned 16 and was ready to flee the traumas of his family life by focusing his energies on a [00:31:00] promising business situation,
What would his first job be? I think that is an interesting question. It's gonna be to find a job, Rockefeller, he took this job search extremely intensely. He would wake up each morning and leave home at eight o'clock dressed in a black suit. He would make his rounds to all the businesses in Cleveland, and this went on six days a week.
For six weeks. And often he would visit the same business several times, asking to speak to the owner or the person in charge, and John D., he would say, the following about this effort, I was working every day at my business, the business of looking for work. I put in my full time at this every day. Such wise knowledge at just the age of 16, looking for a job is hard work. I've been there a few times. It's really stressful. It takes a lot of toll on you, but when you can frame [00:32:00] it like a full-time job, eventually something will come through.
Guaranteed. He was met with a lot of rejection.
But the more he faced these difficulties, it made him even more determined. And I think this is a guiding force for you and I. The more rejection we face the more difficult something presents itself, the deeper we need to dig in. It reminds me a lot of Kent Taylor, who was rejected more than 130 times by investors for his Texas Roadhouse dream.
But he held firm and he eventually landed a group of doctors who believed in his dream and believed in Kent, and funded him with the capital that he needed to get things off the ground.
he never let rejection slow him down, and it can be so easy just to give up and walk away, but when things are their absolute hardest, we have to dig in the most, we have to keep going. [00:33:00] That's when things often start to shift and become better for us. we saw this in episode seven with Elon Musk after their third Falcon rocket had failed.
SpaceX in 2008 was basically out of money, but he had enough parts in the factory to build one more rocket musk. would rally the team and tell them the following, build it he said, and then fly it. And he gave them six weeks basically to fly or die. Everything was on the line. And with this intense focus, it changed the DNA of SpaceX forever.
From the book liftoff, Eric Berger says the following, the period that followed would be the most memorable and arguably most important of the company's history, hardening its DNA, and setting the stage for SpaceX to become the most transformative aerospace company in the world.
when your back is against the wall in life or business,my friend, it can be [00:34:00] really helpful to look at examples like this
and let them serve as words of inspiration that we can use to forge ahead and be successful. No matter how difficult your situation may look, someone else has had it worse, and we can learn from their experiences and draw upon this and let it motivate us and drive us forward into the future so that we can continue to grow and do great things.
It's just great inspiration for us to have these founders and entrepreneurs who have gone through hell, and we can learn from them and we can grow and we can be successful as well.
Now for John D., he knew that his family's survival really depended upon him going out and finding a job. At the same time, just as importantly, he also knew that his independence would be forthcoming. And this was a deep drive for John to find a job. And eventually he would find one, [00:35:00] he would land a job as a bookkeeper at a firm named Hewlett and Tuttle.
They were produce merchants and shippers. And this is where I believe John is really presented with his purpose in life.
the lessons he learns, here are the dots to his path in life. Forward , Rockefeller's gonna work his first three months before he got his first paycheck in the amount of $50 On September 26th, he's gonna affectionately call this job day. So for the rest of his life, he's gonna celebrate job day with much more enthusiasm than he would even his own birthday.
For this day, he really saw this as the birth of his independence. For so many years, he was forced to be the father figure in a household. While his father was away pretending to be Doc Rockefeller, this was the day that he finally was liberated from Big Bill. His father as a bookkeeper, John, he was [00:36:00] relentless down to keeping track of every single penny.
At the same time, it gave him a really intimate working knowledge of the business. He could see how the ledgers, they told a story, what the performance was like, if there was any fraud or misdealing’s going on in the company. and it also told of hidden inefficiencies. He scrutinized every bill down to the last detail, often calling out errors of just a few cents.
and this really appalled him. When the company founders, they weren't doing the same thing. They were very lazy and lackadaisical, and he would often chastise him for their lack of accountability. Rockefeller here he is very deeply driven.
He's a task master with these ledger books. At the same time, he learns how to do collections. And this would be his following style. Let me just read for you here. Besides writing letters, keeping books and paying bills, [00:37:00] young Rockefeller also served as a one-man collection agency for Hewlett's rental properties.
Though patient and polite, he displayed a bulldog tenacity that took people by surprise sitting outside in his buggy, pale and patient as an undertaker, he would wait until the debtor capitulated. He donned people as if his life depended on it. That gives us a very early picture of Rockefeller's tendency in business.
His hard driving manner that's developing here, this approach, it works for him and things. They really start to open up more and more and he's starting to get a sense of what it's like to have control over his domain. And for Rockefeller, the business is really his true north. This is his ultimate driving force.
Described in the book the business world entranced
him as a form of inexhaustible wonders. And then in a [00:38:00] direct quote from John D. himself, he said the following, it is by no means for money alone.
That these active minded men labor, they are engaged in a fascinating occupation. He wrote in his memoirs, published in 1908 and 1909,
he goes on to say the following, the zest of work is maintained by something better than the mere accumulation of money
as this intense love of business and control, its building Rockefeller. He also applied the same strict practice to his Journal of Ledgers. And he did this in his own life in what is called Ledger A. This was a small red book that he had bought to use to keep track of all of his expenses down to the very last penny.
This guided his life and it gave him an intense feeling of independence from his father, like Job Day. The ledger gave him immense power over his world. In fact, he would [00:39:00] display this ledger to a Bible class more than 50 years later, becoming almost tearful. It had become one of his most cherished relics, and he kept it under lock and key.
50 years later, he still has these really strong emotions around this 10 cent book, but it was obviously a hell of a lot more than that. It represented something bigger, something that's about to come for him, past this first taste of independence. It's really the foundation of everything. The house upon which Rockefeller was built that of a strict financial means with little debt, strict collections, a python like grip on everything under his control, and if it wasn't in his control, a super intense burning desire to dominate his competitors and suffocate the life out of them all while maintaining this place of secrecy that could only be revealed through those ledger books that [00:40:00] he held so sacred.
now there is one line item in those ledgers that might be a little bit surprising, but he got this from his mother, and we had already talked about this, so maybe not as surprising, as Rockefeller is dominating in business, he also gives very, very generously over the course of his life, starting out with that very first job, he gave a modest 6% away of his salary and this quickly geared to 10%.
And then it went above and beyond that. As we spoke about earlier, Rockefeller, he really loved going to church. as he grew into adulthood, this just intensified. If we jump into the book here, we can get a really good feel of this major aspect of his life. From the very beginning, his Baptist faith served as a powerful instrument to control forbidden feelings and check his father's unruly nature within him.
after the constant flux of his childhood. He yearned to be rooted in [00:41:00] a church that would act as his substitute family,
But without the shameful aspects of his real one,
John D. would regularly attend a church called Erie Street Baptist Church, and he would make many lifelong friends at the church, and as he eventually grew rich, he would donate generously to this church, and he stayed loyal to his roots. He didn't go to a big, fancy upscale church. Later on when he got rich, he really stayed right here in his roots, in his home with the people that he grew up with.
For Rockefeller, he felt like he had always been called by God and was the chosen one to be the shepherd over God's kingdom while he was here on earth, which is described so well in the book. Let's just hop in and take a quick read. Rockefeller always averted to his own adherence to the doctrine of stewardship.
The notion of the wealthy man is a mere instrument of God,
a temporary trustee of his money, who devoted it to good [00:42:00] causes. so Rockefeller, even in his late seventies would say the following about his giving. It had seemed as if I was favored and got an increase because the Lord knew I was going to turn around and give it back. And then to further add to this line of thinking, the author adds the following high impact insight for us here.
Rockefeller, was convinced that he had a God-given talent for making money, was obligated to develop it, and was literally rewarded by God, all compatible with the Baptist doctrine. For this reason, he found religion far more of a spur than a hindrance to his ambitions.
This my friend, is really powerful and he really possesses this deep sense of business and religion and is described by the author short and sweet. Here he says, Christianity and capitalism form the twin pillars of his life. I believe that is dead on [00:43:00] 100% accurate capitalism and Christianity. That is Rockefeller.
So as we move along here, we're gonna start to focus on his first business dealings and then the start of Standard Oil. This is a really important aspect to keep in mind just how driven Rockefeller was by the church and his strong beliefs at winning at all costs. because the more he can earn, the more he can give away.
And where would it all start in terms of him starting out on his own in business? That is a great question. You see, he would become quite concerned with his position as a bookkeeper at his current employer when he could see very clearly through the ledgers that they were basically bankrupt and plus the owners, they didn't really pay much attention to the business anyways, so he knows that he needs to look for something different, but a lot of things happen here.
He acquired a lot of
knowledge [00:44:00] about how the produce trade worked and the various commodities, such as flour, ham, pork. What they were selling for, what the costs were. He knew what they were paying for freight, such as ships and railroads, which was really a major portion of their overall costs.
He observed this like a hawk. So we can really see that he has the basics down here. Not long after this, he's gonna be approached by an acquaintance by the name of Maurice b Clark, who's gonna suggest that they go into business together. They would each put up $2,000, but at this point, John D., he doesn't have that much.
He only has $800. So he goes to his father to borrow some money. Now it's reported that his father had told him that on his 21st birthday he was gonna give him a thousand dollars, but he was willing to advance it to him early for a 10% interest rate on that money. John, he was really happy to pay this rate that [00:45:00] gave him the money he needed to go into business.
On April 1st, 1858, at just the age of 18, he enters into business under the name of Clark and Rockefeller.
they would start selling produce and John d would say The following about this experience, it was a great thing to be my own employer, said Rockefeller. Mentally I was swelled with pride, a partner in a firm worth $4,000 capital. The moment was fraught with meaning for him, and after his first day at work, he fell to his knees and implored the Lord to bless his new enterprise.
Now, if you recall, just two years earlier, he was dropping outta high school, struggling to find that first job, and now here he is, he's partner in his first firm. As he gets started here in business things, they run quite well For the new Operation [00:46:00] Rockefeller, he was always the first to arrive in the office and the last to leave each day. But this newfound pride and this sense of success that he has inside, it's really starting to take a toll on a young Rockefeller at this point, and I find this next action quite admirable.
This is a way to really keep himself in check, and I don't think there's a lot of 18, 19, or 20 year olds that would have this really keen foresight to keep their egos and their success at bay. So many men of the time, and I guess maybe even today, they just flaunt their success. They buy into nice clothing and big houses and yachts, and at the time fast horses.
But for Rockefeller, he devised a really cautionary means each night as he was going to bed to keep himself grounded and he would say the following to himself.
When he rested his head on the pillow at night, he warned himself, because you have got a start. You think you are quite a [00:47:00] merchant, look out, or you will lose your head. Go steady. are you going to let money puff you up? Keep your eyes open. Don't lose your balance.
That really reminds me of what we learned from Herb Kelleher on episode 14, as he was building Southwest Airlines, he cautioned that the biggest threat to their success was us, as in the employees and managers of Southwest Airlines. And in a direct quote, he said the following,
we must not let success breed, complacent, cockiness, greediness, laziness, indifference, preoccupation with not essentials, bureaucracy, hierarchy, quarrelsome ness, or obliviousness to the threats by the outside world. What Rockefeller is doing right here is the same thing that Herb was doing with himself and with his team.
And this is valuable [00:48:00] for you and I to keep this in mind. Oftentimes we have to grind it out really hard to get our businesses off the ground. And once we start seeing some success, we shouldn't dwell on it and let it go to our head. We must keep our focus
And we can let these great leaders such as John D. or Herb Kelleher teach us so many lessons about staying grounded, keeping our egos in check, and always looking forward. It's just so important to keep yourself grounded. Focus on the next thing in your path and let that be your guide. Keep your team grounded and focused at the same time.
for John D., he was feeding this into his mind. his business continues to grow, and this even temperament, it puts him into a position where he would become a really strong salesman in the following way.
Rockefeller was a smooth, pervasive salesman. Instead of Braley trying to poach clients [00:49:00] from arrivals, he modestly outlined the firm's services.
I would go into an office and present my card and say to the man that I suppose his business connections were satisfactory and that I did not wish to intrude upon him, but that I had a proposition that I myself believed in and believed it would be to his advantage. that I did not expect him to decide offhand, but asked him to think it over and I would come to see him again about it.
I found that old men had confidence in me right away, and the consignments came in and our business was increased and it opened up a new world for me.
This skill would prove invaluable for him, especially later on in life. As he moves into acquiring companies. I like to think about this as Rockefeller building his toolbox, if you will. another weapon that he would use to arm himself would be around learning how to borrow money from the bank [00:50:00] as described in the following way in the book, , if he wanted to borrow 5,000, he let it be brooded around town that he wished to invest 10,000. This rumor would certify his firm's rock solid credit, while also giving bankers an added incentive to extend him a loan. Rockefeller's need for money only grew during the Civil War, which was a bonanza for the commodity business.
So right here, Rockefeller, he is really smart. he's going out into the market signaling that he wanted to invest. The bankers, they would hear about this and they believed that his business was thriving, which it actually was, and that it was highly reputable, thus, it made it really easy to lend $5,000, which looks kind of small compared to that larger amount that he was projecting to the community, and that really helped make him a master in banking and borrowing money.
[00:51:00] Then there was the Civil War, which for Rockefeller kept him very busy as he was supplying a lot of food stuff and farm implements to help support that war effort. Now, another major thing that was also happening was the development of the railroads.
And we start to see John D. using them as leverage. he's playing the pricing game.
He would get pricing from one railroad and then use it against the other railroad to force them to lower their rates. Then at the same time, he's also mixing in the rates from the shipping vessels.
So he is just leveraging the hell out of all these freight companies, lowering his cost down more and more, which works to his advantage. Rockefeller, he's really crafting his business skills right here. He is very keen at sales. He's a savvy borrower of capital. He's a shrewd negotiator. We know he is excellent with the ledger books, and he's learning all of these various [00:52:00] transportation modalities and how to work them against one another.
This is gonna see his firm reach a very nice profit of $17,000 in 1862, which was a considerable amount as described in the book. John D. at this point is already a very wealthy man in his early twenties.
While he was still in his twenties, the Civil War had converted Rockefeller into a wealthy man, giving him the funds to capitalize on a new industry, then flowering in the northwest corner of Pennsylvania For the substantial prophets booked by Rockefeller during the war, they would prove mere pocket change compared to the prophets flowing from the rivers of black gold.
Now gushing from the wells around Titusville and that black gold, my friend is of course. Oil. Oil had been discovered in Pennsylvania in 1859 one of their business associates by the name of Samuel [00:53:00] Andrews. He was well known as a chemist in the area, and he had perfected a means to refine that oil into a clean, burning kerosene that would be eventually used to help illuminate people's homes and businesses all over the world.
It's important to keep in mind here that prior to kerosene, it was really expensive to light your home, and there weren't a lot of choices for this. You had lard oil, talo oil, cotton seed, and coal oil. All of these were toxic and they would leave behind these dirty residues. Now along comes this new cutting edge technology, clean kerosene.
So in 1860, this was really. Very popular for those who needed to illuminate their homes, and it would be the primary source to do so until Edison invents the light bulb. And he's able to proliferate that technology and it would eventually overtake [00:54:00] the kerosene and the oils that were being used for illumination in the home.
So Rockefeller had this gap of time, say 30 to 40 years that he could use to really grow his business. And needless to say, Rockefeller, he had the foresight here to invest $4,000 into this new technology with his partner Andrews. And he really believed that this is just gonna be a fun little side business.
He didn't think it was gonna turn into a whole lot, but he also had intimate knowledge of the shipping industry. So he goes out and he selects a three acre parcel of land that's about a mile and a half from downtown Cleveland. And he spent a lot of time looking for this land. He was looking for some very distinct advantages.
One was that of waterway. This waterway. It flowed into the Cuyahoga River and gave him access to Lake Erie. And then [00:55:00] in Rockefeller fashion, he had knowledge of where the railroads were going. Because remember, he's in the produce business and he's intimately involved with the railroads and how they're developing at the time.
He knew that they were gonna be building tracks very close to where he was purchasing this land. And that allows him leverage against these freight shipping companies.
We can just hop into the book here real quick. We'll get a feel for how Rockefeller thinks about this, able to ship by water or over land. Rockefeller gained critical leverage. He needed to secure preferential rates on transportation, which is why he agonized over plant locations throughout his career.
This is key. Very, very key in how John D. operated. He was a leverage master, I believe, probably the best that we've ever seen on the podcast so far. He would always [00:56:00] put himself into a position where he could use maximum leverage playing one company against another company for maximum discounts.
It really was all about the cheapest numbers that he could write down in that ledger book. and we'll see soon that cost control would be his lethal weapon for domination in business. Let's keep going here. This is so fun, my friend.
so in the early 1860s, it really was very cheap to get started. In refining it didn't take a lot of capital. And by 1863 it said that there were more than 20 refiners in the Cleveland area already in oil. It was kind of in limited supply, and the profits that Rockefeller and others could make were very handsome.
The supply is limited. They had a high price on what they were selling, and there was really a boom in this area.
what Rockefeller sees right here, is that all of his competitors, they're out [00:57:00] there making this money and they're spending it on lavish lifestyles.
Rockefeller didn't take this approach. He remained very reserved and collected in what he was doing. He could see that drilling for oil. Itwas really a risky business.
Now, each time that a new gusher was discovered, it sent the price of oil down and then as supplies started to decrease prices, obviously went back up a lot of drillers, lost their shirts trying to prospect, they just came up short or they found a lot of empty wells, Rockefeller.
felt that it was really safe to remain in this refining space. That's why didn't go into prospecting for oil early on. He really liked the safety of refining.
This allowed him to always work out deals to buy oil on the cheap. in addition, he's gonna develop his own warehouses in these large refineries so that he could [00:58:00] store excess oil and kerosene. this really helped him smooth his cost out over time. This was really a major advantage for Rockefeller.
Remember, it's all about that ledger book and controlling costs. He was the absolute master at this.
Just to give you a sense of oil in 1864, from a cost perspective, it says that the price of a barrel would fluctuate between four and $12 a barrel.
but by this time Rockefeller, he's really all in along with his lead chemist Andrews.
John D. takes those earlier learned borrowing skills, and he really puts them into overdrive here. Let's just hop into the book here and see what it says. Undeterred by these extreme gyrations, both Rockefeller and Andrews wanted to borrow heavily and expand while Clark favored the more circumspect approach.
This sentence is really key for a couple of reasons. [00:59:00] First, his other partner, Clark, along with his two brothers that had joined the firm, they had a lot of vices, and Rockefeller really looked down on these vices. They were smokers, drinkers. They had a lot of women just to name a few. This didn't go well with Rockefeller Second Clark, he wasn't full tilt on oil and he couldn't see the future here.
And then third Rockefeller, he really wants to dominate the control over the business. He doesn't like these guys in the business. And what would its next step be here then? I think that is a great, great question. Rockefeller, he was a really keen observer of everything that's going on around him. Like so many founders that we studied here on the show, you see he had borrowed a hundred thousand dollars in his partner, Maurice Clark.
He became very upset with this, and he had threatened to [01:00:00] dissolve the business, but eventually they came to terms with this borrowing. But John D. knew that if he pushed his borrowing, again, this is the trap that he would need to get out of the business. But before doing this, he's gonna go to Andrews and he is gonna say the following,
Sam, we are prospering. We have a future before us, a big future. But I don't like Jim Clark and his habits. He is an immoral man in more ways than one. He gambles in oil. I don't want this business to be associated with a gambler. Suppose I take them up the next time they threaten a disillusion. Suppose I succeed in buying them out.
Will you come in with me? When Andrews agreed, they shook hands on the deal. Now past this, it's gonna take a couple of weeks and these two businessmen, they're gonna have a serious disagreement to which Clark would say the following. If that's the way you wanna do business, we better dissolve and let you run your [01:01:00] own affairs to suit yourself.
Clark warned
and that right there my friend, was the perfect trap for Rockefellers prey
and for you and I as spectators, we get an absolute front row seat to the action that's going on right here. This is why I love reading. You can really feel the guillotine. It's getting set up and these guys are marching to the top and it's about to be dropped. Let's keep going here. Moving swiftly to implement his scenario.
Rockefeller invited the partners to his home on February 1st, 1865, and vigorously expounded a policy of rapid refinery expansion.
a policy knew, which wouldn't appeal to the Clarks. Playing right into Rockefeller's hand. James Clark tried to browbeat him. We better split up. He declared in conformity with the partnership agreement. Rockefeller got everyone to state publicly that he favored [01:02:00] disillusionand the Clarks left imagining they had cowed Rockefeller.
In fact, he raced off to the office of the Cleveland Ledger and placed a notice in the morning paper dissolving the partnership. The next morning the clerk saw it and they were stunned. My friend, the guillotine dropped. That is just crazy and I can only imagine their reactions. Rockefeller, he wasn't messing around.
He wanted control. The company was gonna be sold to the highest bidder at auction. The Clarks right here, they really believed that they had the upper hand. Against Rockefeller when it came up for auction, but that's not gonna be the case. John D's gonna have the funds and he's gonna outbid them, taking control of the company for $72,500 at that time.
and he would be thrilled because he could now rid himself of these vice laden men. And this would [01:03:00] forever put him in a position where he was his own boss. Rockefeller wanted complete control from the top, and it's gonna say the following in the book about this monumental day, it was the day that determined my career.
I felt the bigness of it, but I was as calm as I am talking to you now. And this statement is in a reflection much later in life when he's talking to his biographer. This transaction would make his new company of Rockefeller and Andrews the largest refinery in Cleveland, they were spitting out 500 barrels a day of kerosene.
At this time, more than double of any other competitor around them. All the while John D., he's only. 25 years old. And he's the largest refiner in Cleveland, possibly the United States. That is quite an accomplishment, I must say. It would be during this time in 1865 [01:04:00] that John D., he's gonna meet his wife Cetti
She was also a perfect match for his values.
She didn't care at all about social life aspects, and she put religion at the center of her universe as well. and this is a theme that the couple would carry out for the duration of their marriage. If we just take a look at the book here, we can see how driven he is, even on his wedding day.
This is just wild
refusing to deviate from his routine. John worked the morning of his wedding day, visiting both his downtown s and the Cooperage at the refinery. He had arranged a special luncheon for the 26 employees without disclosing at first the reason for the celebration. When the jovial bridegroom left for the wedding, he told the foreman, fastidiously, treat them well, but see that they work for Rockefeller.
Routine was everything. Throughout his entire working career, he was in the office every morning, nine 15 [01:05:00] sharp immaculately dressed, always extremely punctual for appointments. And he held a very firm belief that no man has the right to occupy another man's time unnecessarily. We can see that even on his wedding day, he refuses to deviate at least in the morning anyways.
Alright, uh, let's keep going here because, let's see, we're up to December of 1865 in Rockefeller. He's going to open his second refinery that's called Standard Works. And for the first time, this is where we see the word standard starting to be used. And John D., he's gonna bring in his brother William to run this facility.
In the long term, his brother would also become one of his most trusted lieutenants. And he wields a great deal of operational power and authority to his brother William. This is a strategy that we're gonna talk about here a little bit later on, [01:06:00] but his Rockefeller was growing and expanding.
He became an absolute master of putting that top talent in charge once he knew he could trust them.
Now, another aspect that we get to see about Rockefeller in the book is when he starts taking control of every aspect of the business. As just an example of this, they were buying oak barrels at $2 and 50 cents a piece.
However, that didn't last very long, and let's just hop into the book here. We can get a feel of Rockefeller's intense focus in how he outmaneuvered others in business, and he really focused on cost control. Let me just read for you here,
In an early demonstration of economies of scale, that he could manufacture dry tight casts more cheaply himself. Soon his firm made thousands of blue painted barrels daily for less than a dollar a barrel. Other Cleveland Coopers bought and shipped green timbers to their shops, [01:07:00] whereas Rockefeller had the oak salt in the woods then dried in kilns, reducing its weight and slicing transportation costs in half.
This is an absolute theme for Rockefeller. he knows his shipping costs down to the penny. And you know what? That dry wood, it's cut right there in the forest
At the same time. You know what? It's one of those really super and powerful deep concepts that we learn. It falls into the line of knowing your business from A to Z.
Rockefeller knows what he's paying for barrels and his transportation costs for all of these raw goods. And it just falls down to a math problem. How much to pay the men that are doing the work out there in the field, what was the cost of the materials, the transportation and the assembly back to the main plant.
And as a result, he would save 60% on his cost.
And I guess if you look at this from a different angle, he's paying 60% [01:08:00] less. For this element of his overall product versus that of his competitors. And when your costs are cheaper, that just gives you a ton of flexibility in the marketplace. And for Rockefeller, he just hammers this home very deeply across his organization with all of his top leaders.
That cost control was absolutely paramount. Now, speaking of top leaders for Rockefeller, we should probably turn our attention to one of his most trusted men.
and was by his side as a founder in Standard Oil in long-term associate. His name was Henry Flagler. We can just hop into the book here real quick and learn a little bit about Flagler.
Rockefeller needed one associate who would share his daydreams, endorse his plans, and stiffen his resolve, and that indispensable alter ego was Henry Morrison Flagler, nine years older than Rock Rockefeller. His ruggish good looks. Flagler was a [01:09:00] distinguishing figure with luminous blue eyes, smooth black hair, and a handlebar mustache.
Then if we keep going here, we can tie Flagler directly into Rockefeller's way of conducting business. They were almost one in the same. Let me read for you here. Both Rockefeller and Flagler had nimble minds for numbers and infinite dexterity with balance sheets. Neither was interested in a modest success and they were both prepared to go as far and as fast as the marketplace allowed as Flagler boasted.
I have always been contented, but I have never been satisfied. Rockefeller found his partner's enthusiasm. Atomic noting that Flagler was always on the active side of the equation and to his wonderful energy is due much of the rapid progress of the company in the early days. Given their exalted goals,
It probably helped that Flagler had been chasten [01:10:00] by failure and was acquainted with the perils of complacency. Rockefeller loved Flagler's dictum that the friendship focused on business was superior to a business founded on friendship, and for several decades they worked together in an almost seamless fashion.
In the early years, the two men were bound by a common dream, lived near each other and seemed virtually inseparable, as Rockefeller said in his memoirs. We met and walked to the office together, walked home to luncheon and back again after luncheon, and then home again at night.
On these walks, when we were away from the office interruptions, we did our thinking, talking and planning together. For a man as reserved as Rockefeller. This picture suggests an unbuttoned exchange of ideas of a sort. He permitted with few people
In the office. Their intimacy was patent to visitors for they had back to back desk [01:11:00] and shared many duties.
Then outside the office, Flagler was also said to have very similar views as Rockefeller on that of vices and religion. And let's just get a quick insight on that from the book here. Not only did he labor six days a week, but he shunned bars and theaters and the Devil's Playgrounds and became superintendent of the First Presbyterian Church like Rockefeller.
He advocated self-discipline and deferred gratification.
we can see right here that Flagler, he was a trusted lieutenant. He was Rockefeller's right-hand man and confident for a long, long time.
and as such, they're soon gonna have a new partnership under the name of Rockefeller Andrews and Flagler. This company, Flagler, he's gonna take the position of a treasurer, but this role, it's gonna be so much more than that of just the treasurer. He is often credited with being the [01:12:00] mastermind of negotiations with those railroads,
which in the long term would end up being one of the most controversial aspects of Standard Oil in their later years, and would actually help take them down as they got considered a monopoly in 1911. But for the meantime, let's just keep going here. Rockefeller, he oftentimes uses his most trusted men to carry out his dirty work, the less desirable work, if you will. And he takes more of a ringleader approach, and he makes sure that his men were motivated seek out the things that he was after
Once he knows that he can trust them, he would relinquish a lot of control over to them and let them run their businesses as they see fit against his rigid standards in what he wanted done.
We're gonna see this time and time again, especially as he starts buying up other refiners. He's gonna retain the former founders and the big bosses, and he's [01:13:00] gonna really mold them to his way of business and unleash them over their territories to rule with an iron fist of domination. Now, if we look at Cleveland around this time, this is, uh, 1866 is the period that we're in until about the end of the decade.
It had three major railroad hubs that were in place, plus it had access to the Erie for shipping as one of the largest refiners in the United States. He oftentimes plays the railroads against themselves. And with the help of Flagler, they're gonna strike a deal with Jay Gould,
and at this time, Gould, he had gained control over the Erie Railroad, and if you're interested in learning about how he gained control over that railroad, we go in depth on episode four and how that took place. It's quite interesting, but at this point in the story, he has control of the railroad
And they're gonna work out a deal with gold to get [01:14:00] some rock bottom rates here. What would happen is Gould would give them shares in one of his smaller companies called the Allegheny Oil Creek Company. And this had a couple of major benefits for them. First is they're gonna receive a 75% rebate. And when I say rebate, I would think about a discount on all the oil that they would ship with the railroad.
This really goes back to that concept of pushing your costs lower and lower, as low as you can possibly get it. and if you're paying 75% less than your competitor is paying, you have an insane advantage. Because remember at this point in time, oil, it's extremely volatile. So when the price was severely depressed, many refiners, they simply would go under 'cause they couldn't cover their cost.
Rockefeller could produce a finished product and sell it below its competitor's cost. They simply could not compete with him.
and as we'll see in a little bit, this is actually gonna be an acquisition strategy [01:15:00] for him in the future. Then the second major point around the Allegheny Oil Creek company that was to their benefit was that it gave them access to the pipelines that were out there in the oil fields.
This is gonna be another insanely popular leverage point for them to save cost. At the same time, You see, previously they were paying these really high rates for min in the form of physical labor to haul oil from the pumps to the train stations.
Now they can just use pipelines, and this saved them a ton of money that they could use to leverage against manual labor. And then once they see all the benefits from the pipelines here, they're gonna start extending them for the long haul perspective, and then they're gonna play them against the railroads to help drive prices even lower.
All of these elements that we're talking about here are the nuts and bolts that are securing the foundation for what is gonna be [01:16:00] standard oil here on the near future. They were really learning to play the game and building out a playbook here one step at a time for you and I, I think what we're observing here is really critical for us in business and that we should be keenly aware of our acquisition costs, but at the same time, we should also be looking at our entire process from A to Z to see where we might be able to streamline and optimize.
It can be super, super easy for us just to fall into a pattern where we're comfortable with our costs and possibly it doesn't even make you competitive or maybe it just holds your company back from expansion. We should really be spending a lot of time looking at every aspect of how we can dig in deeper.
Can we learn from Rockefeller here? He was deep in the innovations of his time and he uses this as leverage to to his advantage
and it's really through books like this that we can really learn a lot from these [01:17:00] great founders and entrepreneurs. They've spent a lifetime learning these lessons and in just a few hours this knowledge can be transferred into us.
And it's really our job to absorb this material and think about how we can apply it to help it shape our business. It just takes one idea or even just a partial idea to make a really dramatic change in our business for the better. It really makes me excited to be talking with you about these lessons and I'm really inspired to be constantly learning and growing my business.
For me, this is the best learning that I can possibly be doing. These real-life examples that give me motivation to work harder and look for ways to service my clients better at the end of the day. Alright, my friend with that, let's keep moving forward here.
So one thing to keep in mind is that these large [01:18:00] railroad discounts, they were often done in secrecy.
A handshake in this case was sufficient to seal the deal. They never wrote these things down. That was severely frowned upon.
these really steep discounts obviously gave them an upper hand against their competition.
The buzz around this time around being anti-competitive, it's kind of starting to grow. This is becoming a new thing. There's not really any anti-competitive laws at the time, but there is this concept of fair dealing and being fair in business. and this is something that Rockefeller really operated in the gray zone on, but from Rockefeller's point of view, he is gonna state the following about this.
Who can buy beef? The cheapest,the housewife, her family, the steward for a club or hotel, or the commissary for an army who's entitled to better rebates from the railroad? Those who give it 5,000 barrels a day, or those who give it 500 barrels a day or [01:19:00] 50 barrels a day.
With Rockefeller and Flagler's level of volume, they can almost dictate costs to the railroad. They're one of the largest refiners, and they're shipping an ungodly amount of oil.
this puts Rockefeller into a position where he is commanding a lot of power across the entire industry at just the age of 29.
He has so much power here that he would refuse to go see Commodore Vanderbilt, Cornelius, Vanderbilt, he was the king of the railroads. And at the age of 74, Rockefeller would insist that he come to see him. We could see clearly right here, Rockefeller. He refuses to bend or bow to others and deal with people on his own terms, his own time, and his own turf.
And this is gonna distinguish [01:20:00] Rockefeller for the remainder of his career. As stated in the book, he didn't bend to anyone, even the dominant Cornelius Vanderbilt.
This is really a springboard in the book because his power is just gonna start expanding even more rapidly. You see there was a large gluttony of refiners in the business
and then out in the oil fields, new pumps, they're constantly popping up everywhere and Rockefeller really feared that his wealth could potentially be snatched away from him. Remember, he grew up dirt poor and he's been grinding super hard at this point for the last 15 years to build up his business and keep a respectable distance away from his snake oil selling father.
He really needs a dramatic action here to shore up and make himself stable. This is gonna lead to a pivotal flash, a vision for Rockefeller with the help of Flagler as he looks across the [01:21:00] landscape. Let me just read for you here so you can get a feel of his strategic thinking.
And keep in mind that Rockefeller, he's in this for the long term. He really wants to grasp control of his slice of the world here.
As someone who tended towards optimism, seeing opportunity in every disaster, he studied this situation exhaustively. Instead of bemoaning his bad luck, He saw that his individual success as a refiner was now meed by an industry-wide failure, and that it therefore demanded a systemic solution.
This was a monuments insight, pregnant with consequences. Instead of just tending to his own business, he began to conceive of an industry as a gigantic interrelated mechanism and thought in terms of strategic alliances and long-term planning. The culprit he decided was the overdevelopment of the refining [01:22:00] industry, which had created ruinous competition.
If this factious industry was to be made profitable and enduring, he would have to team and discipline it, a trailblazer who improvised solutions without any guidance. From economic text, he began to envision a giant cartel that would reduce over capacity, stabilize prices, and rationalize the industry.
Rockefeller, he has the vision now. He needs a methodology to execute upon this. And Flagler, he's gonna come up with the solution. We'll keep reading here. To devise a comprehensive solution for the industry. Rockefeller again needed money. Money to create economies of scale, money to build cash reserves, to endure downturns money, to heighten efficiency,
and to buy. In the many refineries that were the source of overproduction and confusion, we [01:23:00] needed a great deal of money. The tricky part for Rockefeller and Flagler was how to supplement their capital Without relinquishing control. The solution was to incorporate, which would enable them to sell shares to select outside investors.
I wish I had the brains to think of it said Rockefeller. It was Henry m Flagler. Luckily, many states now passed laws permitting companies to incorporate.
So with this, they're gonna incorporate standard oil on January 10th, 1870 with $1 million in capital. And just a couple observations here that I think are worth calling out.
The first Rockefeller is in this for the long term. He didn't give a damn about those short term gains or trying to make a quick buck. He was strategically thinking long term and how he could obtain control and stabilize the industry. [01:24:00] And this is really a valuable insight ,
as we should also be spending time looking towards the future, five or 10 years out, what does your industry look like and where do you see yourself spend some time visualizing where it's at and where it's going, and sketching out plans. It really reminds me of what we learned about Herb Kelleher over at Southwest Airlines.
And as they were growing, they would spend time with their leaders running through scenarios that they could possibly envision coming up in the future. In one such situation that they had strategized was the rapid takeover of valuable gate space at an airport in the event that another airline should pull out of that market or that they should shut down.
And guess what? This happened in Chicago when Midway Airlines filed for bankruptcy and within 24 hours Southwest, they had already negotiated a lease for the gates [01:25:00] and they were putting up signs with their name and their logo, where other airlines would've taken several months probably to even get started.
Herb Kelleher kept bureaucracy to an absolute minimum in his organization. he insisted that his team think about the future, and these results paid off massively for them several times over. This was the exact same approach for Rockefeller. He was always thinking long term, and he insisted that his top leaders do the same.
Then the second observation here is we see the absolute value of having a plus players on your team. As he says, Flagler, he came up with the idea to do the incorporation. John D., he had the vision, he knew where he wanted to go, but Flagler had those technical skills and together these two, they're gonna be unstoppable.
And I really love it when we see firsthand the [01:26:00] outcomes of all of the lessons that we talk about so often on the show. This is just a firsthand example
of how an a plus thoroughbred rockstar on your team can make a huge, huge difference. Alright, my friend, let's keep going here. So at this time, Standard Oil. They're getting started in the industry and as they do start, they're already controlling about 10% of the US refining production. They had a barrel making plan already that we talked about earlier.
They had warehouses set up, they had their own shipping facilities. And then at this point in time, they also had their own fleet of tanker cars for shipping. Massive amounts of oil.
and then from a management perspective, Rockefeller would be the president and the largest shareholder, Flagler Andrews and his brother William. They're all gonna have significant stakes in the company as well.
And they're all trusted [01:27:00] top lieutenants that Rockefeller would lean very heavily on.
one thing to keep in mind is that they would incorporate in the state of Ohio, but with this incorporation, like with most states, they weren't allowed to conduct business outside of the state at those times. Incorporation meant that you're just operating inside of your state.
And this would be a major challenge for them right from the start. And as we move along here, I'll try to call out some of the ways that they tried to navigate around the situation. However, their first major action is going to shore up their home field first. And what takes place over the next year is what many people refer to as the Cleveland Massacre.
This is gonna see standard oil take over 22 of the 26 Cleveland refiners in just a few short months between February and March of 1872.
And
the chain of events that takes place, was cleverly masterminded by Rockefeller and [01:28:00] used to his absolute advantage. And I'll do my best to walk you through the strategy and the execution that took place here. Now, the initial plan was to stomp out those weaker competitors in the industry and to do this Rockefeller, along with several of the railroad tycoons, they had set up a Pennsylvania entity called
The Southern Improvement Company or SIC. The intention of the SIC was to form this cooperative of oil producers, refiners, and railroad companies, and then under this plan, the freight rates, they're gonna be doubled from 52 cents to over a dollar a barrel. That is a significant cost increase, but not to worry because, well, if you're a member of the plan, you get a 50% discount.
and then to spice the deal up even further. If you're in the plan, you get a drawback from the railroad for each barrel that non-members shipped. [01:29:00] Basically, you're just making profit from your competitors' business. Now, you think there would be a lot of refiners in the organization, but standard Oil, they own 50% of the shares in the SIC.
And then the other shareholders, well, they were mostly just the railroads, So basically all of the refiners are going to suffer as a result. However, the plan, it was intended to be executed in secret, as we spoke about earlier. At this time, secrecy was everything.
The goal here was really to drive all of the other refiners outta business through these massively increased freight rates. Rockefeller, he had estimated that about 90% of the refiners were operating in the red and they were borrowing really heavy to stay in business.
Plus, we already know that Rockefeller's cost to produce kerosene is dramatically lower than that of [01:30:00] his competitors. His view here is that they were really a major pain in the ass for him and he wanted to eliminate them as soon as possible so that he could secure his future and build his own control in the industry.
Now, what happens next in the chain of events is gonna spark a massive shit storm. You see, a simple human airwould spark a major oil war.
So what would happen is there would be a local freight agent for the Lake Shore Railroad. He was working late one evening when he got a call that he needed to go visit his dying son. So he would leave an apprentice in charge of the office this apprentice, he didn't have any idea about the SIC and that the new rates that he was seeing in front of him shouldn't be implemented just yet.
So it was part of his job. He publishes the new freight rates that are effective immediately except for those who were in the SIC and this
sets off fire in [01:31:00] brimstone. The headlines in the newspaper proclaim massive increases, and they project that many are simply gonna go under, especially those smaller refiners who consider this a death warrant at the hands of the mysterious SIC.
It doesn't take them long to figure out who is involved in the SIC. And this sparks a lot of riots and protests and boycotts all across the oil region, especially against Standard Oil and Rockefeller. He was crowned the musts of Cleveland standard oil, they're gonna have to temporarily lay off 90% of their workforce due to the boycotts that were taking place.
But Rockefeller, he was undeterred by this. He would turn the situation around and use it as maximum leverage in domination
as he really saw himself as an instrument for a higher purpose. Who was an [01:32:00] empowered visionary, backed by his strong faith, selected to conquer all who were evil and not in his control.
In his next plan acquisition aggressively. now in the book it says that another businessman, they might have started with smaller, more vulnerable firms, building on these easy victories, but not Rockefeller. He went straight to the top, believing that if he could crack the strongest competitor first, it would have a tremendous psychological impact.
And you know what? He was right. His first target was gonna be a firm named Clark Payne and Company. They were the second largest refiner in Cleveland. And he's gonna meet with a gentleman by the name of Harry Payne, and he's gonna propose that they come into the comfort of Standard Oil with their really low shipping rates and their efficiencies in their operation.
Now, Henry Payne, he was really intrigued. they went out and [01:33:00] they evaluated all of his plants and they came up with a really fair price for him. and then they close the deal. Rockefeller's gonna allow him to view his books and the author's gonna say the following about this, that afternoon when he surveyed standard oils ledgers, he was thunderstruck by the profits paying consented to a $400,000 price for his refinery.
Rockefeller knew he was overpaying, but couldn't resist a deal that would certify his position as the world's largest oil refiner at age 31.
Then from the deal, Rockefeller is also gonna retain pain who would go on to become one of his top men for many years to come. it says in the book, like he did with Flagler, that Payne also had an office very near Rockefeller. And they often consulted each other back and forth on many key strategies.
After buying Payne. Rockefeller continues forward with his strategy of gobbling up all of the other [01:34:00] refiners in the Cleveland area,
and to get an understanding of what those refiners felt by the invisible hand of the SIC and these massive freight rate increases. The author does a really good job and includes a quote from John Alexander who would say the following, upon selling his refining plant to Rockefeller.
. This is really insightful right here. What he says. There was a pressure brought to bear upon my mind and upon almost all citizens of Cleveland engaged in the oil business, to the effect that unless we went into the Southern Improvement Company, we were virtually killed as refiners, that if we did not sell out, we should be crushed out.
it was said that they had a contract with the railroads by which they could run us into the ground if they pleased.
Imagine if this was your thinking as a business owner. And then just out of the Blue Rockefeller shows up and he outlines his standard pitch in the following way. You [01:35:00] see, this scheme is bound to work. It means an absolute control of us of the oil business. There is no chance for anyone outside, but we are going to give everyone a chance to come in, you are to turn over your refinery to my appraisers and I will give you standard oil company stock or cash as you prefer for the value we put upon it.
I advise you to take the stock. It will be for your own good.
With this deep knowledge of the industry and his business, Rockefeller is gonna gobble up. 22 of the 26 refiners in the Cleveland area in just 40 days. In doing so, he paid most refiners a fraction of what their plants were actually worth. And as we just heard, he would urge them to take standard oil stock, often seeingthe following, take standard oil stock and your family will never know [01:36:00] want.
And for those that really did take the stock, they were often retained. And in the long run, they're gonna reap very handsome rewards as a result.
Then for those that took the cash, they were often forced to sign non-compete disclosures. And in a few cases, when some of those owners sold out and turned around and opened new businesses, they were simply crushed by standard oil lawyers. Now from Rockefeller's point of view, he's simply just helping to consolidate a chaotic industry that was really misguided and bound for self-destruction.
through his saving graces, he brought in strong founders. He gave them good jobs, and he paid them well. All the meanwhile, he was able to enrich himself quite handsomely in doing so, becoming the largest refiner on the planet.
Now if we step back here and we look at the SIC, it was nothing more than a [01:37:00] secretive plan that turned into an oil refiner coup to wield falsities in the marketplace. And it allowed Rockefeller to leverage massive power against his rivals to acquire their businesses. , what would happen to the SIC, it would be abandoned in late March of 1872. the railroads are gonna claim fair and uniform rates for everyone, which would be generally false as standard oil would continue to work.
Secret deals with the railroads for the next 30 years, mostly through manipulation of the railroad companies against themselves. Now that Standard Oil had control over Cleveland, it's gonna begin a nationwide assault, taking over refiner city by city
and to fly under the radar. Rockefeller. resorts to deep levels of secrecy in the following way, as described in the book,
in absorbing [01:38:00] competitors. Rockefeller was equally secretive and asked them to continue operating under their original names
They were instructed to retain their original stationary, keep secret accounts, and not allude on paper to their Cleveland connection. Internal correspondence with Standard Oil was often conducted in code or with fictitious names. Rockefeller also did this as a necessary legal expedient for under existing law.
Standard Oil of Ohio couldn't own property outside of the state. A situation that invited deception by companies that operated nationally.
Rockefeller. Warren Refiners joining Standard Oil not to parade their sudden wealth least people wonder where they got their cash.
By keeping these dealings, secret Rockefeller, he's gonna empower the former founders of these companies to act under his secretive instructions. he knew in many [01:39:00] cases, especially refiners, located within proximity to those oil fields. that his name was poison. From the book, the author describes the following around Titusville Standard Oil was reviled as the octopus and Rockefeller was regarded as a monster.
Mothers scolded their children by saying, run children, or Rockefeller will get you.
Thus in the Titusville area, he's gonna instruct his newly acquired former founder in that of John Archibald to go about and absorb as many Oil Creek refiners as he possibly could. And let me just read for you so you can get a sense of how this went down. In no other place did Rockefeller, so sorely need an attractive substitute.
Archibald was a smiling face who mollified enemies and restored peace.
and with his Advent, Rockefeller no longer needed to go to Oil Creek, [01:40:00] in September, 1875, standard Oil formed the Acme Oil Company, a front organization to take over local refiners under Archibald's guidance. Within months he had bought or leased 27 refiners moving at such a hectic pace that he nearly drove himself into collapse
over the next three or four years, Archibald hearted the remaining independence into standard oil.
And this is just one example that Rockefeller was using in his approach to taking over all of the refiners under his control. He would use the same approach in Philadelphia, Pittsburgh, New York, and Baltimore. With this approach, he's gonna give standard oil a staggering 91% control of the world's oil refining capacity.
This is really an amazing slice of history, my friend, how one man [01:41:00] was able to absorb a hard work ethic from his mother, learn shrewd business tactics from his father, and leverage his way to the top of the oil industry. Now, past this point, Rockefeller, he's gonna basically step away from daily operations and he's gonna spend the next 40 years or so of his life in retirement.
Then with the rise of the automobile, standard oil, they're gonna shift into gasoline, and he would make far more money in retirement than he ever did working. However, those early years, when he is grinding it out super hard, that set him up very nicely. Later on in life, it says in the book, he would have a peak wealth of approximately $900 million.
Oftentimes we see that maybe he had up to a billion dollars. And if I translate this over, I'm just curious like how much would that relate to today? At the time that he had his [01:42:00] maximum amount of money in 1913, this represented about 2.3% of the US GDP. So if we convert that over, today's GDP is somewhere around $28 trillion, this would be something worth around $650 billion.
So I guess that still puts him in the position of the richest person, at least in the history of the United States, possibly Elon Musk call reach him. And I guess maybe only time will tell on this,
now Rockefeller, he really did believe in giving away his money, and he's gonna shift most of his focus over to philanthropy during his retirement years. It says that he would give away over half of his fortune or $540 million. Mostly the funds went to colleges, and then to also help fund scientific study.
At its time, at the age of 97, [01:43:00] John d Rockefeller is gonna pass away in his winter home in Orman Beach, Florida.
the lessons in this book, my friend, are endless. I really believe that this could be a 20 hour podcast if we just went deep into the entire book, and I would highly, highly suggest picking up a copy if you can. It's time just really well spent. I really believe it's a balanced and fair read of Rockefeller, and I enjoyed it very much.
If you use the link in the show notes to buy the book, you'll be helping to support children's literacy As I'm donating 100% of all of those affiliate revenues so that children have more resources for reading. That's something I believe in very, very deeply. If you enjoyed the show today, possibly you could just leave me a quick review on your favorite listening platform with reading, listening, outlining, and recording the podcast.
I'm guesstimating 90 to maybe a hundred hours worth of work into this one [01:44:00] episode alone for me. It's been a tremendous learning exercise and I've enjoyed it a lot, and I've really enjoyed sharing it with you, my friend and I would tremendously appreciate all of your support.
With that, thanks for listening. It's really been a true pleasure and I hope to see you back here soon. Until next time, make it a beautiful day in the neighborhood, my friend.