John D. Rockefeller

Industrialist

• Born: July 8, 1839
• Birthplace: Richford, New York
• Died: May 23, 1937
• Place of death: Ormond Beach, Florida

American industrialist and philanthropist

One of the major industrialists and philanthropists in American history, Rockefeller pioneered in raising the scale of business organization through his phenomenally successful Standard Oil Company; he also raised the scale of philanthropic giving.

Areas of achievement Business, patronage of the arts

Early Life

John Davison Rockefeller was the son of Eliza Davison and William Avery Rockefeller. His father owned a farm and traded such commodities as salt and lumber. The family, which included John’s older sister, two younger sisters, and two younger brothers, moved frequently: first to Moravia, New York; then to Owego, New York; and finally, to Cleveland, Ohio. John’s education was irregular, but he studied hard and did have two years at Cleveland High School. His father, who by that time had become a wandering vendor of patent medicine, encouraged him to go into business. John especially liked mathematics, and he took a three-month course in bookkeeping at Folsom’s Commercial College.

In selecting a job, Rockefeller was not as much interested in the salary as he was in the possibilities a position offered for learning about the business world. He selected a large and diversified merchant firm and started as a bookkeeper at a salary of $3.50 per week. After three and a half years, he left to form his own wholesale grain and grocery business with Maurice B. Clark. Together, the two had only four thousand dollars; during their first year, however, they grossed $450,000 and netted a fourteen-hundred-dollar profit. The following year, the Civil War began. The war gave Rockefeller, along with a number of other leading postwar industrialists, the opportunity to make his initial pile of money. Business at Cleveland-based Clark and Rockefeller boomed with major orders coming in from the army, other cities, and Europe. Rather than miss these business opportunities fighting in the Civil War, Rockefeller avoided the draft by paying for a substitute to fight in his place.

During these early business years, Rockefeller displayed the character traits and personal lifestyle that would be with him throughout his life. A devout Baptist, Rockefeller remained active in that church, even after becoming fabulously successful in business. For years, he taught Sunday school and served on church boards with streetcar conductors and other working-class people. He also took seriously the biblical injunction to give away one-tenth of what he earned, even when starting out at a low salary. He lived simply, had few pleasures, and was devoted to his family.

In 1864, Rockefeller married Laura Celestia Spelman, whose father was a prosperous businessperson. Eventually, they had four children who lived to adulthood: three daughters, Bessie, Alta, and Edith, and a son, John D. Rockefeller II, of whom his father was quite proud. The family lived in a large, comfortable, but not ostentatious house in Cleveland until moving to New York during the 1880’s. Rockefeller instilled a sense of industry and public responsibility in his offspring that extended down to the third and fourth generations, producing one vice president (Nelson) and three state governors (Nelson of New York, Winthrop of Arkansas, and John D. IV of West Virginia). Of all the leading American industrial families, the Rockefeller dynasty became the most remarkable.

Life’s Work

It was possible for John D. Rockefeller to gain a monopolistic fortune in the oil business because of certain conditions that existed at that time. Oil was first used for medicinal purposes. Oil strikes in Pennsylvania during the 1850’s greatly increased the supply. To find other uses for the product, the Pennsylvania Rock Oil Company hired Yale chemist Benjamin Silliman, Jr. Silliman discovered that oil could be distilled into kerosene for burning in lamps, and he also noted its lubricating qualities. At the time, oil was obtained by skimming off what floated on the surface of water-filled ditches and springs.

With other uses, however, drilling quickly became economically productive. Independent oil wells and small-scale refineries sprang up in great profusion in northwestern Pennsylvania, and refineries also proliferated in Cleveland. The oil business was chaotic, with numerous small operators, overproduction, cutthroat competition, and alternating periods of boom and bust. Rockefeller perceived that whoever could bring order to this industry could make a fabulous fortune.

In 1863, Rockefeller began his involvement with the oil business. He and his wholesale grocery partners, along with refining expert Samuel Andrews, built a refinery in Cleveland. His wholesale grocery partners proved too cautious for Rockefeller’s taste. In 1865, he decided to buy out the three Clark brothers, get entirely out of the wholesale grocery business, and devote himself to oil. By the end of the year, the firm of Rockefeller and Andrews had an oil refinery that was producing at least twice as much as any other single refinery of Cleveland’s nearly thirty refineries.

Rockefeller prospered more than his competitors because of his foresight, attention to detail, emphasis on efficiency, lack of toleration for waste, and growing reputation as a successful businessperson. These qualities allowed him to borrow heavily from bankers and to attract partners who brought additional capital to his firm. Henry M. Flagler joined Rockefeller in 1867, bringing with him a substantial amount of money and the ability to negotiate ever lower railroad shipping rates. Railroad rates were unregulated then, with railroads commonly giving favored shippers rebates on their publicly stated rates. The larger the shipper, the more favorable the rate. Rockefeller was able to play two railroads off against each other and water transportation off against the railroads. In turn, his lower shipping rates allowed him to undersell his competitors, steadily driving them out of business.

Meanwhile, Rockefeller implemented a policy of vertical integration. To cut his firm’s dependence on related businesses, he began making his own barrels and then bought his own timber tracts to supply his cooperage plant. He owned his warehouses, bought his own tank cars, and, to the extent possible, owned or produced the raw materials and transportation he needed to operate. Finally, he fought waste by using kerosene by-products to become the oil industry’s leading producer of paraffin and machine lubricants.

In 1870, to accommodate additional growth, Rockefeller converted his partnership into a joint-stock corporation, the Standard Oil Company of Ohio. Meanwhile, Thomas A. Scott of the Pennsylvania Railroad began organizing certain railroads, oil refiners, and well owners into the infamous South Improvement Company. The purpose was to form a monopoly and get rebates on their competitors’ shipments. The public reaction was hostile, and the South Improvement Company quickly lost its charter. Rockefeller had been part of this scheme, which badly tarnished his reputation. However, through the South Improvement Company, he acquired another wealthy partner, Cleveland refiner Oliver H. Payne.

Furthermore, Standard Oil decided to proceed on its own to create a monopoly in the oil business. Early in 1872, Rockefeller offered to buy out nearly all remaining Cleveland oil refineries. Owners could either accept a cash offer, take the offer in Standard Oil stock, or be driven out of business. With the South Improvement Company still a live entity and given the size of Standard Oil itself, most refiners sold out. Some claimed that they had been pressured into taking less than their businesses were worth, but those who acquired Standard stock did make small fortunes. Rockefeller accomplished this takeover of his Cleveland competitors in three months. From Cleveland, Standard then proceeded to acquire refineries in Pittsburgh, in Philadelphia, and on Long Island. By 1875, the firm was refining half of the oil products in the United States. Rockefeller’s next step was to gain control of pipelines, oil terminals, kerosene distributors, and additional plants. He also attracted rival oilman John D. Archbold to his firm. By 1878, Rockefeller had secured his monopolistic position.

During the 1880’s, Standard Oil continued to grow. The firm acquired new oil fields, built new refineries, and developed new refining methods. Under the direction of John’s brother, William Rockefeller, the firm also expanded into the international market. Standard Oil products were a familiar sight in Asia, Africa, South America, and even Central Europe, where Standard encountered stiff competition from cheap Russian oil. Also, Standard Oil pioneered in corporate organization. Rockefeller employed the best legal talent to devise the concept of the trust. That meant that the stock of Standard’s subsidiaries and related companies was combined with Standard’s stock, new certificates were issued, and an executive committee with Rockefeller at the head assumed control. During 1883-1884, he transferred the corporate headquarters to New York City. However, Standard Oil never took total control of the oil industry. While accounting for 80-90 percent of oil produced in the United States and making substantial profits, Standard did lower the price of its products. Rockefeller had stabilized a chaotic industry.

In the process, Rockefeller became powerful and was feared and vilified. The lack of railroad rate regulation did much to make his monopoly possible. Unfair railroad rates upset many more people than Rockefeller’s business competitors. The public began agitating for railroad rate regulation, first at the state level and then for the Interstate Commerce Act, passed in 1887. Because that law was largely ineffective, agitation continued until railroad rates were finally effectively regulated in the twentieth century. Throughout this agitation, the outstanding example of how unregulated railroad rates could lead to powerful monopolies was Standard Oil.

The New York legislature investigated Standard Oil in 1879 and again in 1888. Henry Demarest Lloyd published an exposé in the Atlantic Monthly in March, 1881. Congress sought to dampen the public’s concern with the Sherman Antitrust Act of 1890. When that law went initially unenforced, muckrakers again attacked. The best-known exposé was Ida M. Tarbell’s History of the Standard Oil Company (1904). Rockefeller always refused to respond directly to these attacks. His attitude was that his products spoke for themselves. Not until 1905 did Standard Oil hire its first public relations expert. Nevertheless, the federal government proceeded to prosecute Standard Oil for violating the Sherman Antitrust Act. Under court order, the company broke into smaller, separate companies in 1911.

Rockefeller’s wealth at one point approached $900 million. What to do with all this money posed a dilemma. He invested in the stock market and, during the 1890’s, gained control of the Mesabi Range, the richest iron ore field in the United States. Within a few years, however, he sold his Range holdings to Andrew Carnegie. Increasingly, his interests were turning to philanthropy, where his impact was tremendous.

At first, Rockefeller’s gifts to hospitals, colleges, and other institutions were haphazard, and his gifts were sometimes misused. Soon, however, he began to apply some of his principles for making money—of attention to detail and organization—to giving money away. He virtually made the University of Chicago with a founding gift in 1889 of $600,000 and later gifts (some from his son) totaling $80 million. He created the Rockefeller Institute for Medical Research in 1901 and the General Education Board in 1902. The latter helped to revolutionize medical education, fought the spread of hookworm, and worked to improve southern agriculture. His philanthropy was further systematized with the creation of the Rockefeller Foundation in 1913. He gave away more than a half billion dollars, and the influence of his philanthropic institutions has continued to grow after his death. Rockefeller had turned over active leadership of the Standard Oil Company in 1897 but lived until 1937, dying at the age of ninety-seven.

Significance

John D. Rockefeller succeeded as a businessperson and a philanthropist in part because of his personal qualities and in part because of his times. He had an uncanny ability to identify and secure leading executive talent. The extreme care with which he made decisions was accompanied by a boldness of action and accuracy of vision unmatched in his field. Furthermore, he had the steadiness to compete in a rough, competitive, “survival of the fittest” environment where there were few laws and regulations. Indeed, he turned this freewheeling environment to his advantage.

Rockefeller was able to build Standard Oil because of such conditions as the general absence of effective railroad rate regulation and lack of an income tax. He went into the oil business at a time when it was taking off, and good luck was with him when the gasoline-powered automobile came along to increase demand. He regarded himself as a trustee of his wealth and became, perhaps, the outstanding philanthropist in the United States. Finally, he instilled an obligation for public service in his descendants. Of all the “robber barons” of his generation, his long-range impact may have been the greatest.

Further Reading

Abels, Jules. The Rockefeller Billions: The Story of the World’s Most Stupendous Fortune. New York: Macmillan, 1965. Scholarly, readable, with a good selection of photographs of Rockefeller, his family, business associates, and houses. Generally, Abels is favorably disposed toward Rockefeller.

Carr, Albert A. John D. Rockefeller’s Secret Weapon. New York: McGraw-Hill, 1962. Focuses on the role that the Union Tank Car Company, established by Rockefeller and the key to his transportation system, played in the success of Standard Oil. In 1891, the company became a separate corporation from Standard Oil in response to the Sherman Antitrust Act. Carr covers the history of Union Tank Car up to 1961.

Chernow, Ron D. Titan: The Life of John D. Rockefeller, Sr. New York: Random House, 1998. Well-written, meticulously researched biography based on newly acquired archival materials. Chernow recounts the details of Rockefeller’s life and career, describing his human side as well as his misdeeds.

Collier, Peter, and David Horowitz. The Rockefellers: An American Dynasty. New York: Holt, Rinehart and Winston, 1976. The bulk of this book is on John D. Rockefeller’s descendants, down through his great-grandchildren, the impact his fortune has had on them, and their sense of public responsibility.

Hawke, David F. John D.: The Founding Father of the Rockefellers. New York: Harper and Row, 1980. A chatty, popular account, this slim volume is not too extensively footnoted but is based on archival sources along with more detailed secondary sources, especially Nevins’s 1940 biography.

Josephson, Matthew. The Robber Barons: The Great American Capitalists, 1861-1901. New York: Harcourt, Brace, 1934. Reprint. Harcourt, Brace, and World, 1962. In this critical account, Rockefeller is only one among many late nineteenth century industrialists, but the book is excellent for setting him in the context of his time. Josephson is critical of the business practices and extensive power of Rockefeller and his associates.

Nevins, Allan. John D. Rockefeller: The Heroic Age of American Enterprise. New York: Charles Scribner’s Sons, 1940. Nevins is the scholarly authority on Rockefeller. This two-volume work was the most comprehensive, carefully researched, and balanced source on Rockefeller until Nevins’s 1953 book appeared.

‗‗‗‗‗‗‗. Study in Power: John D. Rockefeller, Industrialist and Philanthropist. New York: Charles Scribner’s Sons, 1953. More of a second biography of his subject than a revision, this book incorporates material based on a large amount of documents not available to Nevins in his earlier biography; it also reflects a maturing of Nevins’s analysis. Both Nevins biographies can be profitably consulted.