Those he couldn't beat, he broke. Born poor, Rockefeller believed his riches demonstrated God’s endorsement. He became so powerful he could tip a country into collapse.
"The business of creating monopolies, crushing opposition...he made a bloody fortune out of it."
Senator JAY ROCKEFELLER John D. Rockefeller’s Great Grandson
RAGS TO REFINERIES
In 1839, John Davison Rockefeller is born into a poor Cleveland family. As a young boy he sells sweets to local children to help his family as his father, a conman known as ‘Devil Bill’, doesn’t. He quits school early, becomes a bookmaker, works in dry goods, and bored, determines to risk all. He enters the oil business. He finds prospecting unpredictable and wasteful. He believes refining the crude oil into kerosene, the clear liquid that will light America, is where the money is.
In 1863, at just 24, he invests everything into his first refinery. By 27, he’s on the verge of bankruptcy. To not only survive, but thrive, he agrees to meet with the rail road magnate Vanderbilt, hoping to secure competitive transport rates. But Rockefeller narrowly misses his 6:25am train to New York.
The train crashes. Rockefeller would probably have been among the many dead. Already a religious man, he now sees his mission as ordained. When he does meet with Vanderbilt, he promises him 60 barrels a day in exchange for cheap shipping rates.
It’s a risky business; literally. Kerosene explosions are common. In 1870, to alleviate concerns, he creates Standard Oil, guaranteeing uniform quality. Rockefeller becomes the largest producer of refined kerosene in the country.
Rockefeller wants bigger and better shipping rates. He meets with Vanderbilt’s rival, Tom Scott, president of one of the largest rail lines, and his protégée, Andrew Carnegie. An oil and rail cartel is agreed. No paperwork is exchanged. Rockefeller relies on a man’s word.
THE FIRST US MONOPOLY
With his increased profits, Rockefeller, aged just 33, buys up his competitors, and creates the country’s first monopoly. He now controls 90% of the North American oil supply. And his lawyers come up with the infamous ‘trust’ solution.
“Holders of stock in the various oil companies handed over their shares to Rockefeller and his associates acting as a board of trustees; in return they got ‘trust’ certificates which paid dividends but gave no power”
Hugh Brogan, Historian
His 1872 takeover of competitors is so intimidating it’s recorded as ‘The Cleveland Massacre.’ Rockefeller’s rapid rise makes unlikely allies out of Scott and Vanderbilt who try to force better rail rates on him. In response, he blasts through the countryside building a 4,000 mile pipeline that delivers his oil from Ohio to Pennsylvania, ending his dependence on the railroads.
His oil had accounted for 40% of rail cargo and his withdrawal helps precipitate a crash that bankrupts one third of the country’s 360 railroad companies.
“Whether it’s 2008 or 1873...a necessary condition for a crisis is nobody expects it.”
Alan Greenspan, Former Chairman of the US Federal Reserve
THE FIRST COLLAPSE
The 1873 crash panics the New York Stock Exchange so much that for the first time, it shuts down. It’s the start of the Great Depression. For the first time in the country’s short explosive history, large numbers of workers are jobless. The rich remain largely untouched.
In fact, Rockefeller sees the slump as an opportunity to buy out his remaining competitors at knock-down rates. By the time the Great Depression finishes, Rockefeller has formed the largest corporate empire in America.
Tom Scott and Andrew Carnegie build their own pipeline. But two thirds of the oil they’ll transport comes from Rockefeller and rather than endure competition, he shuts down his Pittsburgh refineries.
Scott loses half of his business, forcing him to lay off tens of thousands of Pittsburgh workers. They turn, not against Rockefeller, but Scott. In just one night of rioting 39 of his buildings and 1,200 of his train cars go up in smoke.
ROOSEVELT V ROCKEFELLER
Rockefeller now controls 98% of all Kerosene and in today’s money is worth $225 billion. His Standard Oil comes to symbolise big, bad business. Roosevelt is re-elected and files dozens of law-suits against dozens of trusts. Rockefeller is subpoenaed and runs all over the country to avoid being served. But then his first grandson is born. So, to see him, he turns himself in and agrees to go to court.
ROCKEFELLER V CARNEGIE
Rockefeller buys the Mesabi mines threatening Carnegie’s dominance in the steel industry. At first, Carnegie isn’t worried as the iron ore from the Mesabi mines is like dust and clogs up the blast furnaces. But steel manufacturers quickly figure out how to use the iron ore and Rockefeller immediately begins supplying it to Carnegie’s competitors at rock bottom prices. And then Rockefeller starts planning to build a new steel plant to rival Carnegies. To end the competition, Carnegie buys up Rockefellers steel in return for his rival’s exit from the industry.
HIGHLY TOXIC, HIGHLY FLAMMABLE: THE FUTURE
As Morgan’s electricity lights America, it reduces the need for the Rockefeller supplied kerosene in traditional oil lamps. Rockefeller needs an alternative use for petroleum. The highly flammable, highly toxic substance by-product of refining, gasoline, has previously been a problem, a pollutant. Now, it will power the new internal combustion engine that will drive the vehicle of the 20th century, the car.
THE PEOPLE VS STANDARD OIL
The Roosevelt court case concludes. It has heard of kickbacks, political bribes, predatory pricing and when all else fails, straightforward intimidation. After 444 witnesses and 12,000 pages of testimony, the court rules that Standard Oil’s unreasonable business practices violate the Sherman Anti Trust Act. Standard Oil has six months to break up.
In its place, 34 smaller companies are formed. These will later become Exxon, Mobil and Chevron but for now, the age of monopoly is over. The defeated Rockefeller is still left with a net worth, in today’s money, of $660 billion.
Before he dies, aged 97, he gives $100 billion of that away.