There was blood in the streets.

All the oil refiners in Cleveland were shaking in their boots.

Oil refining was a harrowing business to be in to begin with.  There were rapid,  there were wild price fluctuations.

There were tough negotiations with oil drillers who supplied the raw materials, as well as with  the railroads who  Shipped  the finished goods on to  their end markets.  There was always the possibility of accident or fires.  There was always the possibility of accidents, especially fires, taking down an entire  refinery in a flash.

But this was a different kind of threat.

Rockefeller and his standard refining.

And his standard refinery had negotiated a backroom deal with the railroads. It was all still a bit hazy and there were more rumors than there were facts, but this much was known  for standard for Rockefeller and standard refining  shipping.  Shipping oil was about to get very cheap and for everyone else. And everyone else was going to be on the outside looking in.  paying exorbitant prices to move their materials if they could get it shipped at all.

This much was clear.

The deal,  known as the South Improvement Company,  was was an existential threat for all of the other refiners.

In the midst of this panic, Rockefeller went to refiner after refiner  and offered them  a way out.  Calmly, he would explain that they were doomed, but that they had one option  to gain something for their effort, and that was to sell their refinery to him and that option was to sell their refinery to him  at only pennies on the dollar.

Almost everyone accepted. Rockefeller seemed inevitable.  However, one man tried to stick up for himself. His name was John Heisel of Bishop and Heisel. He remembered telling Rockefeller that he wasn't, he tried to stick up for himself. He told Rockefeller that he wasn't.  He tried to stick up for himself.

When Rockefeller walked into his office, he got upset.

He got upset. Some might even say histrionic. He started shouting,  telling Rockefeller how horrible he and standard, and he and the standard refinery were.  Drawing himself up to full measure, he wagged his finger in Rockefeller's face and told him, I'm not afraid of you.  Rockefeller took all of this in calmly.

He moved very little, and the tone of his voice never changed.  He responded quietly.  You may not be afraid to have your hand cut off,  but your body will still suffer.  And then he left.  The next day, Heisel called him back.  He wanted to sell after all.

By the end of the week,  By the end of the week,  Rockefeller was the owner of more than 90 percent of the refining capacity in Cleveland.  This time period became  known as,

As the Cleveland Massacre.

Hello and welcome to how to take over the world. This is Ben Wilson. Today, we are going to be talking about John D Rockefeller.  And Rockefeller is interesting. Many people have heard his name and they know that he's a rich guy, an industrialist.  This podcast is not how to make a gazillion dollars.

It's called how to take over the world. And I try to focus on people who've had impact.

And Rockefeller, yes, was potentially the richest man ever, and we'll get into that in the second episode of how you define wealth and and how you compare, his fortune to that of the Rothschilds or someone like Elon Musk or Jeff Bezos today. But anyway, you slice it, this guy was unbelievably wealthy.

His fortune was valued again. It's tough to compare directly, but he was worth 3 percent of GDP in the United States. So if that was today I think 3 percent of GDP would be something like 700 billion or something. So it's basically, Elon Musk plus Jeff Bezos plus Bernard Arnault plus Mark Zuckerberg is is what you have to be thinking about when you think about John D Rockefeller.

It's not  just that is the imprint that he left on the world. He basically invented modern business as it's conducted. He invented the modern corporation, how it functions, how it works.  He in his philanthropic efforts which are not as widely known as some others.  Those have had maybe a bigger impact than any.

He He.  One of the things that he was, one of his big legacies that people don't know about is he invented the American medical system. Again, we'll get into more of that, but this is someone who leveraged, he founded the University of Chicago, which is, one of America's great universities now.

Again, this is not something that many people know. It's an episode not only about how he made just unbelievable amounts of money, it's also an episode about how he used that money to have,  influence and impact on the world. And it's also about a really interesting character. And one of the most effective and unique  executives I've ever heard of.

One biographer called him. One biographer said, called him quote,  the greatest business administrator America has ever produced.  An oil historian echoes this verdict quote, Rockefeller was the single most important figure in shaping the oil industry. The same might arguably be said for his place in the history of America's industrial development and the rise of the modern corporation.

So if you

want to learn to lead, if you want to learn to be a great executive. So if you want to learn to be a great executive or a great leader in any capacity, I think his story is worth studying because he leads in a really interesting way. It's different from a lot of people I've heard. So, let's get into it.

I will share my sources, which are, I read the I read the excellent and extremely long biography Titan by Ron Chernow, and then I also read John D. Rockefeller's autobiography  called Random Reminiscences of Men and Events. It's not really an autobiography, it is what it says. It's some autobiographical musings. But yeah. I think it's a really interesting episode.

I learned a ton and there's a ton of great takeaways. This one's going to be a little bit different. I'm going to go through most of his life in this one. And then I'll just have the rump in with the end notes episode coming soon. Hope you enjoy it. Thanks for listening. With that, please enjoy

the life  of John D. Rockefeller.

The father of John Rockefeller was named William Rockefeller Sr., and he was a wild figure. He would be known in his life as Devil Bill. He was extremely handsome and charismatic and talented. He could  tame animals. He was a crack shot who could who was never bested in a shooting competition. He loved telling jokes.

He loved telling stories. He was also a fraud  who went around selling snake oil. He was a quack doctor who claimed that he could he was at times either a true charlatan claiming to be deaf and dumb or a quack doctor who sold essentially snake oil. There's actually. His sign read, quote, Dr.

William a Rockefeller, the celebrated cancer specialist here for one day only all cases of cancer cured unless too far gone and then can be greatly benefited.  Okay, that gives you. An idea of what kind of doctor this, what kind of businessman this guy was. He claimed to be a doctor, but had no formal medical training.

He also would go around and beg for money and take odd jobs. And he would do this act where he pretended to be deaf and dumb.  And one day,  he is in a city. Pretending to be deaf and dumb. And this girl from a wealthy family, her name's Eliza Davison, takes notice of him  again. He's tall, built, very handsome.

And she says, if that guy weren't deaf and dumb, I'd consider marrying him  and devil Bill Rockefeller says.  Wouldn't you know it, I am cured!  And And apparently it was so charming the fact that she came to know him as a deaf and dumb beggar and and then and then he realizes that he is not in fact deaf and dumb does not scare her off.

They do get married. Again, she was from a wealthy family,  very Puritan, very religious. Very well to do, very educated. The opposite of him.

They get married, and Devil Bill says, uh, I would like to bring in this housekeeper  as well, our name is Nancy Brown  and she's going to live with us. And then Nancy Brown, who's unmarried, starts ending up pregnant. And so Devil Bill  has two families living under one house. Eventually Nancy, gets kicked to the curb, but Bill was a free spirit who loved the open road.

And so he would go on these big, business trips for months at a time. He would just disappear from the family. And he would often be selling his his herbal concoctions, his snake oil.  And then he would come back flush with cash  and would flaunt all this money that he had made.

In the meantime  His wife and children would have to survive on credit from the local store

from the local general goods store. And and so John D. Rockefeller grew up learning to account for every penny,

and that would be important in his life, that he was someone who always took a very close account of things. Devil Bill would come back Big Bill Rockefeller would come back and would spoil his children and would, Spend his money and pay off all the debts. I should say that some of his business ventures were legitimate, especially in the lumber business.

He would go off and  he was doing low lumber and those were quite lucrative. Or he was off, selling snake oil,  but he had, the big bill had this mania for money. He loved money. He took it out lovingly. He liked to show it off. He liked to hold it.

One of his companions said, quote, the old man had a passion for money that amounted almost to a craze. I never met a man who had such a love of money.

And, he was this interesting he was this interesting presence he would come into their lives intermittently and. Bring really bring a lot of energy and and celebration and happiness and to

the family.  But then he also, he was never abusive or anything like that, but he was definitely a quirky father. Like there's one story where when John was a child, Bill  would tell him to leap from his chair. Into his arms and then he would spin him around and then one time John Jumps and Bill doesn't catch him and he crashes to the floor and Bill says to him quote remember Never trust anyone completely not even me  So he tries to teach him all these hard lessons when he is around the family starts off living in

The family starts off living in upstate, New York in a city called Richford  in a town called Richford

And apparently to get away from some trouble that Big Bill had caused, the family moved to Moravia, New York, and then to Owego, both in upstate New York. And these are pretty small towns. They're moving to Slightly bigger towns.  And It gives you an idea of what a provincial upbringing he had that John tells a story that when he moved to a, we go, he says, quote, down at the railroad station one day, I saw a Frenchman think of that a real live Frenchman, and he wore a mustache. The first I ever saw.  So that gives you an idea of this small town upbringing, that to see a foreigner, a Frenchman, a real live Frenchman, was a big deal for him.

His mother was the opposite of Big Bill in many ways. She was a very religious, very devout Baptist, very committed. And John grew up going to church and that was extremely important to him.

Yeah, it was the kind of religious family. Where, here's a quote from Chernow's book, he said, quote, Inspired by a Sunday school class on forgiveness, the children initiated a custom that suggests how religion permeated their lives. Each night, when they got into bed, they turned to their siblings and said, Do you forgive me all that I have done to you today?

By the time they fell asleep, the air had been cleared of all recriminations or festering anger.  They're very religious. And he gets this religiosity from his mother and this love of money. From his father. And he actually did not see them as contradictory.  He saw them as going hand in hand, that money could be a sign of God's divine favor in that with that money,  he could improve the world.

He could contribute it to Baptist churches. He could give it away as charity. He could do good things. And so those are the twin pillars of his whole life. He wants to make money and he wants to give it away. And he learns early on  all about money. First a local farmer  first, and the, one of the early lessons he has on money is he's working for a local farmer  and he's helping him dig potatoes for 37 and a half cents per day.  This sent up an instructive contrast for him when soon afterwards, he loaned one farmer 50 at 7 percent interest and collected 3 and 50 cents at the year's end.

Without without a stitch of work

end quote. Says, quote, the impression was gaining ground with me that it was a good thing to let the money be my slave and not make myself a slave to money. That's what he said, had to say about that experience.  And again, John is different from his father in that he's more reserved. He's a much more of a rural follower and and he's much more religious, he's not this crazy philanderer, but.

He does have this obsession with money, just like his father. One day he's walking in with a friend and he blurts out someday, sometime when I'm a man, I want to be worth a hundred thousand dollars. I'm going to be too someday.  And he blurts his house to this one friend, but according to sure.

Now, there are many such accounts.  That, almost identical from other people. So this is something he's really fixated on. Is, making all this money, becoming worth 100, 000.  Nevertheless,  he's not an exceptional student. One quote about his early childhood. Quote, I have no recollection of John excelling at anything.

I do remember he worked hard at everything. Not talking much and studying with great industry. There was nothing about him to make anybody pay a special attention to him or speculate about his future.  He's not brilliant. He's good at math. He's good at arithmetic. That's the one place where he kind of excels  and he has this incredible self discipline.

So Chernow is talking about  one contemporary who is in the village named Susan Lamont. He says, quote, Susan Lamont saw that the boy's eerie self discipline concealed a deep fund of emotion, and she remembered the ceremony of grief he went through.  On the day she died, John came to our house and stretched out on the ground and would not go away.

He was so sorry that he would not,  he was so sorry that he would not go away, but lay there all day.  Such stories reveal a sensitivity in Rockefeller that would always be there, but that would later be studiously concealed behind the polished facade of the hard driving businessman. And I think this is true of many great leaders, great achievers.

They have this really deep well of emotion. They're very emotional people, but they're able to control and channel that emotion. And that was true of  Rockefeller. He really mastered his emotions. And was very serious. His future sister in law, Lucy Spellman, said, quote, He was a studious boy, grave, reserved, never noisy or given to boisterous play.

One high school teacher described him  with patent distaste as, quote, The coldest blooded, the quietest and most deliberate chap.

As I said,  his father moves the family around a little bit in order to facilitate his His vagabond, his  vagabonding, and eventually he moves the family he, he finds he falls in love completely in love with a new woman.  And and because of that has to move the family again. And so he moves the family to Strongsville, Ohio, just outside of Cleveland.

And in fact, on June 12th, 1855,  big bill married Margaret Allen in Nichols, New York, just south of Owego. So he tried to. It wasn't good to have his two families right nearby, right? Which is why he moves the John Rockefeller and the rest of his family to Ohio to keep them separate.

But for the rest of his life Bill Rockefeller would be married to two women and keep a secret family.  John was smart enough that they  the plan was to send him to college and go study and get a degree, start going places in the world. But it's, he's 15 years old  when his father, starts the second family.

So all of a sudden  Bill Rockefeller has to support two families. So he's a little short on money. So he says, John. Without saying the reason why, hey, I can't afford to send you to college anymore. So why don't you go,  just study business. And so John paid 40 for a three month course at Folsom's Commercial College, which is a chain of colleges that offer these, these little business courses.

It's like the University of Phoenix at its time. Like it's reputable for what it is which is like a vocational school but has no prestige. He enters when he's 15, by the time he finishes in the summer of 1855, he had just turned 16 years old and,  is ready to leave this insane family situation.

And is ready to be done with dependence on his father.  And so he wants Respectability, they're a backcountry family  and his father is very not respectable. He's always carrying out these wild schemes in lumber and you know in hucksterism and so he says quote I went to the railroads, to the banks and to the wholesale merchants.

I did not go to any small establishments. I did not guess what it would be, but I was after something big.  Okay.

And so he goes in Cleveland and he's talking with all these big firms, you know, wholesale banks, railroads, and he's going through and he's pitching himself and he says you know, he made,  and he made it his job. to find a job. He wrote, quote, I was working every day at my business, the business of looking for work.

I put in my full time at this every day.  And so  he goes around to all these businesses  and pitches himself as an accountant and as a minor businessman. And they all say, it was not a good time economically. And they all say,  no. And  so he makes it all the way through his list.  So what does he do after that?

You want a job, You literally go ask every major establishment in the city for a list and they all say no,  okay, you're supposed to try a lot, supposed to put a lot out there and they all say no,  what does he do? He simply starts over from the top of the list and visit some of them two or three times.

He just keeps going. And this is one thing Steve Jobs talks about putting your dent in the universe, right? When he's talking to.

When he's talking to John Scully, he says, Do you want to keep selling sugar water, or do you want to put a dent in the universe? And this is the thing I talk about, is remember, The universe does not want to be dented.  That's what it means to dent the universe. It's a sort of intrusive act.

And if you want to dent the universe, You have to have a greater will  than the universe. The universe has a lot of inertia, but it doesn't care that much. And, And so sometimes I think people take failure as a sign to change their strategy. And sometimes that's definitely necessary, but sometimes it's hard to know which, when do you need to change your strategy?  But sometimes you need to consider maybe I just need to do a Rockefeller.  Okay. I failed.

Have I first tried just like  doing saying, no, I will not fail and going through two or three times, just like really making sure that this isn't happening for me. I think it's interesting. So he's going through the lists again.  And then on September 26th, 1855, he walks into the offices of Hewitt and Tuttle.

And these are merchants and shippers. These are people who are handling a lot of  dry goods, a lot of food,  and they're buying and selling. salt, pork, beans,

and they listened to him.  And here's what Rockefeller said, quote, all my future seemed to hinge on that day. And I often tremble when I ask myself the question, what if I had not got the job  in a but  after interviewing with.  Tuttle in the morning, he interviews with Hewitt in the morning, or in the afternoon, and he is, in fact, offered a job. And for the rest of his life, he would honor September 26th as Job Day.  And he actually celebrated it  more than his birthday. He was obsessed with Job Day, which I think tells you Which I think tells you a lot about who he was, once again.  And I think this is one of the things that defined  Rockefeller was the clarity of his vision.  Again, I've said this before, but knowing what you want is a superpower. Knowing what you want is a superpower.  So few people can just have a clear vision around what they want and work for it and block out everything else.

Not Rockefeller. He was greatness. He knew exactly what he wanted. One of the things I always bring up is that every great leader is following another great leader. It's just following in the path of someone else.  And this is true of Rockefeller as well.  He finds this book.  called Extracts from the Diary and Correspondence of the Late Amos Lawrence.

And so Amos Lawrence is a great American businessman,  manufactures textiles up in New England, and he gave away more than 100, 000 in his life.  And he does it in a very sort of  planned and thoughtful way.  And so Rockefeller says, quote, I remember how fascinated I was with his letters.

I made up my mind that if I could manage it someday, I would give away  money too.  So that's what his whole life has been around,  making money.  and giving it away.  And he sees his job as  the first step.  And so this job is hopefully just the first step on that ladder.

And it would be, because he soon proved himself to be  perhaps the greatest junior account  perhaps the greatest junior accountant of all time.

He said, quote, As I began my life as a bookkeeper, I learned to have great respect for figures and facts, no matter how small they were. I had a passion. And  he was, indeed, extremely passionate about detail.  Listen to this story. He says, quote,

I examined all the invoices, bills of landing and other documents and found this captain had presented entirely unwarranted claims. He never did it again.  And so this is what he's doing. He is  writing letters, keeping books and paying bills.  And as he's keeping these books and paying these bills, he's really scrutinizing the books.

And he's finding any savings that he can. And he's famous for, if he's being overcharged by cents by even just, a couple of cents, he's going to bring it up and make sure that the price gets adjusted.

He was also extremely effective as a collections agent  for for the company. They had a number of rental properties and so he would go collect. And, Rockefeller is a church boy, so he's very, so he's very polite. He's scrupulously polite, but he has this unbelievable persistence  and it would take people by surprise. And if at first they wouldn't give up the money, he would just sit outside in his buggy and just patient as could be and wait until the debtor capitulated and,

and gave up the money. This is one of the things that you'll see about.  Rockefeller is, he's like the Terminator,  right? You just, he's like the tide.  He's not  excitable. He's not emotional.  In fact, he makes it,  he makes certain to never show emotion, but he's just going to keep coming until He's just the Terminator. He's just going to keep coming.  He's just. Emotionless clear eyed, logical, and he is just going to persist until he gets exactly what he wants. That is how John D. Rockefeller was. Again, like the tide, you know, you can shout, you can scream, you can try to build walls, but guess what?

The tide is coming in.

The one time that he breaks This, Terminator like  character is when when he lands,  is whenever he lands a deal. If he lands a deal or makes a great trade, And make some money, then he'll do a little dance. He'll do a little skip and he'll get excited. In fact, one older businessman remembers catching him one day saying quote, I am bound to be rich, bound to be rich, bound to be rich.

So that's like the one thing that get him excited in life  was making money. But again, he had these, this twin passion making money, but not just making it, but giving it away. And this was not someone who waited until he was rich to give away money in his first year. He's making hardly any money and he really needed it.

He's poor and the records show that he donated about 6 percent of his wages to charity, which is pretty good. For how poor he was. He said, quote, I have my earliest ledger. And when I was only making a dollar a day, I was giving five, 10 or 25 cents to all of these objects.  And not only is he donating his money, but he's donating his time.

He is very involved with his local Baptist church.

Not just attending services, but,  performing unpaid labor as well. He became a Sunday school teacher, a trustee, an unpaid clerk who kept the board minutes in his own hand. And even sometimes was a volunteer janitor who could be seen sweeping up the the chapel.

And he would always believe that these two things were connected. His love of, he always believed that these things were connected. His ability to acquire money and his religiosity and his commitment to God and to giving it away. He said, quote, God gave me my money.

Hi.

Okay.

Yes. Five minutes.  Okay.  Bye.

He also said, quote, I remember clearly when the financial plan, if I may call it so of my life was formed. It was out in Ohio under the administration of a dear old minister who preached quote, get money, get it honestly, and then give it wisely. I wrote that down in a little book.  That's one thing that Rockefeller was famous for.

He had this little red book where he wrote down every single little expense. And and would also write down, stuff like this. He kept it as a little journal too.

When Tuttle quit the practice. So remember there's there's two partners, Hewitt and Tuttle. Tuttle quits in January of 1857. And so he's given Tuttle's job.  So at age 17, he. It's essentially a partner in his firm, but where, but he's not actually made partner. So whereas Tuttle had made 2, 000 a year, Rockefeller was given only 500 a year.

The next year it's raised only to 600 by 1858. He thinks he's being way underpaid. He is being way underpaid. Nevertheless, this guy's 17 years old. And so he continues to chug along with Tuttle or with Hewitt  and look,  Everyone who achieves great things  has to have  A  time in their life when they create way more value than they capture.

And that is true. Immediately springs to mind as Walt Disney who especially did not capture a lot of the upside on Oswald, the lucky rabbit and on a lot of his early cartoons,  but you have to do this if you wait to cap until you can capture  all the value to do your best work then you're never gonna break through.

So you have to go through that time period where you create way more value than you capture. And here Rockefeller is certainly doing that,

There is a danger in letting this go on too long. So he only does it for about a year. And then in April of 1858 he goes out and, he's making the rounds, he's becoming well known. And he borrows some money  and  is able to start a new partnership with,  he's able to leave Isaac Hewitt and start a new partnership, Clark and Rockefeller.

And so at 18 years old, he is a partner. In in a trading firm in Cleveland.  And this again, like you have to imagine this is not like  finance and the way of thinking that we think of it. It's not trading, just like numbers on a page.  They're literally warehousing this stuff, he's literally counting beans.

There's a story where they get a big batch of beans that are like semi spoiled. They have some bad ones and they've got dirt and garbage in them. And he says that quote, when we were not needed in the office, we used to go out to the warehouse, my partner and I, and sort out those beans. Um, this is someone who, again, is very attentive.

To details as a, not above counting beans and sorting beans in order to get the maximum profit from them.

Rockefeller succeeds in this new business. He's really good at raising capital. Part of that is he's a good salesman. He's not like larger than life and this big personality like his father, but what he is extremely reliable, extremely honest.  And gives off this kind of aw shucks persona. He's a church going boy.

And so he gets a lot of business frankly from religious people who who want to give their business, their money to a good Christian boy.

Here's what Rockefeller had to say about it. Quote, I found the old men had confidence in me right away. And after I stayed a few weeks in the country, I returned home and the consignments came in and our business was increased and it opened up a new world for me.

And.

It's during this time that the civil war breaks out and he doesn't go he doesn't fight in the civil war. He hires a substitute, which is something that you could do. He said about it, quote, I wanted to go in the army and do my part. But it was simply out of the question. We were in a new business, and if I had not stayed, it must have stopped, and was so many dependent on it.

And what he's referencing there is he still lives at home, so his mother and his siblings are still dependent on him to bring in the bacon, to bring in the money. And so he has a lot of people dependent on him, so he does not go into the Civil War, but he does make a lot of money in the Civil War. A lot of people did.

The Civil War was a real boon for there's so much action. It drives up commodity prices. And so a lot of people got rich on trading commodities.  And one thing that I think is interesting. Is that Rockefeller's office becomes a center. Here's what it says, quote, Since Rockefeller's commodity business depended upon market intelligence and a rapid flow of telegrams from various sections of the country, his office became a clubhouse for the latest battlefield bulletins.

He and Maurice Clark tacked up two large detailed maps and tracked the war's progress with rapid attention.  Yeah, coming.

If you find the, if, as long as I get my way quote, it goes here. Okay. So civil war is an enormously profitable time. They didn't get any government contracts necessarily, but the enormous inflation in commodity prices and the general business surge  did benefit them greatly.

Okay. So it is during the civil war  in 1862.

That this guy,  Samuel Andrews,  walks into their office and says, Hey,  I have an idea  for a for an oil refinery.  He had developed something called fractional distillation, which is supposed to be much more effective in extracting kerosene.  So he comes in to their office and he's actually friends  with he's actually friends with Clark. So he goes and he asks Clark and Clark says, quote, I told him there was no chance that John and I together did not have more than 250 we could spare out of our business. We simply had enough working capital together with our credit at the banks

to enable us to make advances to consigners. paying insurance and rent.  So Andrews is shoot. But he goes into Rockefeller's office and gives the sales pitch to Rockefeller.

But Rockefeller is a penny pincher. He's been saving like crazy. So he's got some money. And so  he's encouraged by Rockefeller. He goes back to Clark.  Who says, quote, I started to shut him off, but when he said, Mr. Rockefeller thinks well of it, I impulsively replied if John will go in, I will. So

they pledged 4, 000 for half the working capital of the new refining venture.

And this is a huge investment for them. 4, 000.

Okay. This is far from the only refinery. There were 20 refineries in Cleveland at the time.

And at the time, it's doing really well. The Civil War had disrupted whaling which was used to make candles

And so other energy sources were getting really expensive and kerosene was much cheaper

by contrast.  And when we talk about the oil rush now, it has nothing to do with gasoline. No one has much of a use for gasoline at this point. It's all kerosene, which is burned in little lamps as a light source.  But kerosene starts doing great.  And in the early days,  everyone is making  Money hands over fist in the oil business.

And so Rockefeller goes hard and he's involved in the details once again.

Yo,  he goes in early.

He's rolling barrels, he's stacking hoops, he's sweeping out shavings And one of the things Rockefeller is really good at is finding savings. And one of the ways he does this is he finds that, um, let's do that later.

Quote, such was Rockefeller's ingenuity, his ceaseless search for even minor improvements that within a year of finding had overtaken produce as the most profitable side of the business. Despite the unceasing  vicissitudes of the oil industry, prone to cataclysmic boons and busts, he would never experience a single year of loss.

Keep in mind at this

time,  oil has only been discovered.  In Northwestern Pennsylvania. So that's not far from Cleveland at all. And  as far as anyone knows, it's the only source of oil in the world.  And the industry is so new that one big new well, one discovery, one oil field  could lead to the supply of oil doubling.

So you have these huge oscillations in price. Okay. So like  a barrel of oil going for cents, and then going for 12 it literally does in 1861, the price goes between 10 cents and 10. And in 1864, it fluctuates between 4 and 12. So you needed to have a strong stomach. If you're going to be in the oil business,

drilling for oil was. Like a lottery,  and it attracted a lot of rough neck types who wanted to try their hand and see if they might strike it rich refining on the other hand was a little more buttoned up

quote before too long. He realized that refining was the critical point where he could exert maximum leverage over the industry.

And so they quickly run into a problem, which is. Rockefeller really loves oil. He's wow, this is a great business. It is  really profitable. This is, he quickly realizes he's found his calling in life. Maurice Clark said John had a biting faith in two things, the Baptist creed and oil.

That's correct.  On the other hand, Maurice Clark is just cautious. So here's what Rockefeller had to say about him. This is a great quote, quote, Clark was very angry when I borrowed money to extend our business for refining oil  of refining oil. Why you have borrowed 100, 000. He exclaimed as if that was some sort of offense  and they were borrowing a ton,  but the quote was on Clark was an old grandmother and was scared to death because we owed money at the banks.

It's a great quote. Clark was an old grandmother and was scared because we owed money at the banks.

And on, by contrast,  Rockefeller quickly realizes that scale is the key to this business.  So he says, quote, we should borrow whenever we can safely extend the business by doing so.

And so he wants to keep borrowing and he wants to keep expanding.  Clark does not.  And then finally it comes to an embass  and they say, all right, this is not going to work.  So let's so let's go to an auction and we can bid for the other half of the company, the other 50 percent and one of us will get out.

And so they're bidding against each other.  It quickly advances to 60, 000 and slowly to 70, 000. But Rockefeller has lined up a bunch of banks, a lot of outside financing before bidding war and  he's going to do whatever it takes, like he really believes in oil. He's not going to give up on the business that he that he started in the oil business.

He ends up buying it for 72, 000.

So at age 25, he owns Cleveland's largest refinery, which could treat 500 barrels of crude oil a day, twice the capacity of its nearest local rival.  And it was one of the largest facilities in the world. I don't know if

I mentioned that Rockefeller also is very good at

using up all of the oil. So most of them would take the kerosene and then dump the rest. But he would turn the rest of the oil into gasoline to fuel the refinery,  and then sell the rest as lubricating oil, petroleum jelly, paraffin wax,  whatever they could make from it. Coatings and paints, things like that.

In 1864, he marries Laura Celestia Spellman, who would go by Setti,  and she was a good companion for him, for his entire life. Especially early on,  she was a more business minded woman than most, and she would actually review the books with him, to help him look it over.  Just like Napoleon, he worked the morning of his wedding.

He makes his own barrels,

John Rock, John D. Rockefeller makes his own barrels. He realizes this is one of our,  one of our main expenses and, are these people really giving us a great price? So they

were buying them for 2 and 50 cents. And he figures out a process for making their own oil barrels. And soon they're making them for less than a dollar per barrel. So that's a huge saving  benzene. That's another thing they're selling.

So he's always trying to expand. He needs more and more credit. Like you said, I want to borrow all the time to expand credit. And so he's quickly outstripping Cleveland's ability to finance his operation. So he starts migrating towards New York where there are bigger banks and he can raise more money.

He's a really good borrower. He can get on really good terms by never seeming too eager to borrow, never seeming too excited. There was one time when he's walking down the street, he really needs 15, 000. He needs it like yesterday, right? And a banker pulls up and says,  Hey Rockefeller, I got 50, 000. I'm trying to deploy.

Do you have any use for it?  And.  Rockefeller says can you give me 24 hours to think it over? And so by doing that, he makes it seem like he's not  urgent. He's not desperate to raise the money  and therefore

he gets the money on better terms than he might have. He seemed like he really needed it, which he did.

I should mention he is redlining it the entire time. So he is,  there are times when the business almost goes under because he's so leveraged. Um, one time a,  refinery burns down, which they very often did. They were huge fire hazards. So one of his refineries burns down and he yet hadn't yet been compensated by insurance.

And so he's just. He needs the capital or they're going to go out of business and no one's lending to him. But he had a really good reputation  with many of the biggest banks because he was so consistent and so honest  that when there was an exceptional circumstance, like a refinery burning down, they believed him.

Goes to a bank.  And they say they won't extend him more credit. And then the bank's director Stillman Witt in the middle of this sees this and he goes and he says, Hey, give me my personal safe. And he brings in the safe and he starts taking out money and says, quote here, gentlemen, these young men are all okay.

And if they want to borrow more money, I want to see this bank advance it without hesitation. And if you want more security here, it is take what you want.

There's one rich Cleveland guy. Stephen Harkness,  who he was taking a large loan from  and Harkness decides to, he's got a son in law.

Okay.

Got it.  So they're actually like.  Anyways, they're relatives.  Anyways the point is Harkness has quite a bit of money, and says Young man, you can have all the money you want. You are on the right track, and I am with you.  I'll make Henry my watchdog. Harkness is like a really successful rich guy.  And he was a director of quote, banks, railroads, mining, real estate and manufacturing companies. So, Rockefeller gives up quite a bit of equity and for Harkness who invests a hundred thousand dollars, but this turns out to be more than worth the money because he has all these great connections and he brings in he brings in, um, Flagler and Flagler turns out to be.  An exceptional business partner for John D. Rockefeller. He is the Charlie monger to Rockefeller's Warren Buffett.

They just immediately liked each other, understood each other push each other. Both were excited about oil. Both just wanted to push and push, and both riled each other up and got each other even more excited. Flagler is an interesting character.  He boasted, quote, I have always been contented, but I have never been satisfied.

And, Rockefeller was always the one pushing forward, wanting to do more, everyone else was always saying, no, slow down. And so he loved Flagler who quote was always on the active side of every question.  And Flagler is basically with him on every question of should we expand faster?

Should we go harder? Should we produce more? He's yes. As is Rockefeller.  Flagler is this interesting character. He keeps a quote on his desk that says, quote, do unto others as they would do unto you and do it first.

And one of the things Flagler is great at is helping him to negotiate  transportation deals.  For their oil. So they have to transport crude oil from Pennsylvania. It goes West to Cleveland and then is refined there in their refineries. And then they have to ship the final products.  This kerosene mostly other products do mostly kerosene.

They have to ship that  on to other cities.  Some of it is going west  to, whatever, Kansas City, Minnesota,  Illinois, Indiana. But most of it is going east, back to  New York, Massachusetts, Virginia. The more settled east coast of the United States.  This is the 1860s, the  west coast is The West is still lightly settled.

And Cleveland is a really good position for them because  there are multiple railroads  that go through Cleveland. Going kind of North directly East and South  and of course West. And then, but not only that they've got.  The Great Lakes, they're on the Great Lakes. And so they can also ship it. They can put it on barges and,

Send it up through,

up through Lake Erie to the Erie Canal  and and get that way.  It's not so important in its own right, but it's important because it allows them to negotiate. They're not beholden. To any one railroad, they can play the railroads. Here's the quote with virtuosic from Chernow with virtuosic brilliance,  Rockefeller and Flagler played these three railroads against each other in seemingly endless permutations.

At one point one of these railroads, the Pennsylvania railroad

declares that they would be quote, wiped out as a refining center. as with a sorry, the Pennsylvania railroad declares that Cleveland would be quote, wiped out as a refining center as with a sponge.

Okay, how can they do that? If you'll remember  the actual, the only oil wells in the world are in Pennsylvania. So they're basically saying, look,  raw oil isn't going anywhere else to get refined. We're going to refine it right here in Pennsylvania. And And then we're going to send it out.

Okay. So they can't get the oil.  And they can't  ship it on the Pennsylvania railroad. So, this is terrible, right? Like you're dead. You can't get oil.  You can't get raw oil. You can't get crude oil and you can't export your products. You're dead.  And  one of the things that Rockefeller was best at is he was always very calm  during a.

Crisis.

So they completely flip it on the railroad and they built a pipeline from these oil fields to Cleveland bypassing the railroad. And then they actually use this as a, as leverage  on the other railroads saying, Hey, you're going to lose all your oil hauling from us. Unless you give us so like you got to help us out here because we're being attacked by the Pennsylvania railroad.

So they get extreme concessions, your traffic is going to be decreasing from all of these Cleveland railroads, but we can make it up. We have this pipeline. If you give us good prices, if you give us some concessions,

so they turn their geographic disadvantage into about powerful bargaining tool and secured  covert rates that allowed them to, this is a quote. Quote, in other words, the young Cleveland refiners cannily converted their geographic disadvantage in to a powerful bargaining tool and secured covert rates that allow them to ship crude oil to Cleveland and then refined oil to New York for only 1.

65 per barrel compared to an officially listed rate of 2 and 40 cents.

But the main thing that they offer is just volume. So they make a lot of concessions. They don't want this to just be them squeezing the railroads. They want everyone to win. They, offer to stop sending stuff by ship through the Erie Canal. They offer to assume legal liability for fire and other accidents.

But most of all, they offer them 60 carloads of refined oil daily.  Okay, and that is single destination to single destination. So they don't have to pick up anything else. They can just go, Cleveland to New York.  It's great. It's really great for them.  Of course, they actually didn't have 60 carloads daily, so they would have to beef up their production quite a bit.

So they're going to have to coordinate with other refiners, but that's fine by them. They basically then will have these refiners in their pocket, right? Because it's only by the grace of Rockefeller that they're able to ship their oil with these great rates.

This is just incredible operational efficiency for everyone.

Okay. But  this is very controversial. This is something that'd be extremely controversial is they're receiving of rebates  from,  the railroads. So the railroads, technically are like a public utility. And so everyone is supposed to have equal access to them as a public carrier. In other words, anyone.

It is supposed to be able to ship something on the railroad for X dollars, per carload.  In practice, that was not true. There were a lot of carve outs. It was like Swiss cheese, but

but this is them getting a deal to get rebates. They're going to get preferential treatment from the railroad. Now, of course, like  It's pretty understandable. This is great for the railroads because, more volume is more consistent.  It's more regular. They can count on it again. They have to make, they don't have to make as many stops for each train.

It makes a lot of sense for them, but with the public is like this practice, which would only grow and grow of getting.  More and more rebates. And the reason it's a rebate is because,

They're charging the officially listed price, so they're just saying give me, giving them a rebate. Whatever they're not, it's technical jargon instead of just saying we're charging them less. Anyway,  these rebates would be very controversial,  but from this moment The train companies  have an incentive.

For this monop, for this big conglomerate to just grow and grow so that they can do more volume on more predictable terms.

Because this is so controversial, this deal is actually never committed to paper. This is just a handshake agreement.

And Rockefeller, who is now doing more and more kind of shady business practices, but still views himself as like God's ultimate servant, the ultimate Baptist, he always puts a nice veneer on it. He says, quote, our people did not think it would be best for the Lake shore road or us to have a contract.

You just cut that out. Our people do not think it would be best for us to have a contract.  But with the good faith between us and desire to promote each other's interest, we can serve each other better by being able to say we have no contracts.

One of the things that made Rockefeller such a great negotiator, and he was a very good negotiator, is that he didn't bowl people over. He generally tried to make it a win and had them and gave people incentives to buy in.

Okay,  now, so this is a total coup  for Rockefeller, however,  just a year later, people continue to jump into the refining business. And so just a year later refining capacity is triple  what the market needs.  So there's just like way too much refining capacity that's creating a glut of product, which is creating really low prices, which is killing everyone.

So the entire industry is facing ruin. Rockefeller estimated that 90 percent of all refiners were headed towards bankruptcy. We're losing money.

And how do you solve this? What a terrible situation. And there's no way to solve it without taking control of the entire industry.  Let me repeat that. There's no way to solve it without  taking control of the entire industry.  Now, most people, when they hear that think,  man, there's no way to solve it without, taking control of the entire industry.

Rockefeller,  he just hears,  okay, there is a solution. It's taking over the entire industry. And that's the moment that he decides that's exactly what he's going to do. Um, these years, 1869, 1870 is when he starts to conceive of his new idea of cooperation rather than competition. The idea being, look,  when we're competing with each other,  we're driving each other out of business.

There's too much. Refining capacity.  And the problem is once you have  built  the refinery yes, you're operating in the red, but you still want to refine anything that you can in order to lessen your debt obligations, therefore it's a.  A prisoner's dilemma situation. What's best for me is what's worst for everyone.

Right?

So he makes preparation for this by first establishing a joint stock firm.  So  he abolishes Rockefeller Andrews and Flagler and establishes the standard oil company. And, standard oil is supposed to be, this is the standard. It's a very good name, I think. It gives the impression of quality and competence and ubiquity

and the uniform quality of their products.

And so they raise a million dollars. At this phase of his career, Rockefeller's answered to every. Every problem is raise more money and go bigger.

So it's already a mini empire.  It controls 10 percent of American petroleum refining, as well as barrel making plant, warehouses, shipping facilities, and a fleet of tank cars.

And even despite these really difficult circumstances, because they're so operationally efficient,  they continue to turn a modest profit.  They managed to turn a healthy profit

in 1871. So the next year

standard oil meets with the three most powerful railroads, the Pennsylvania, the New York central, and the Erie,  and a handful of other refiners.  And they have this idea  that we are, going to establish something called the Southern the South improvement company.

And the idea is basically similar to what they did before, which is

look, we're going to give, we as railroads are going to give preferential treatment to these specific refiners. We're going to give you rebates. And not only are we going to give you rebates,  but we're going to give you something called drawbacks, which is not only are we going to give you, are we going to pay you?

A little discount, a little,  a little rebate every time we ship your oil. But every time a competitor  ships their oil on our rail lines, we're going to give you a drawback.  So like our incentives are totally aligned. So what this means is that for non SIC, South Improvement Company

refiners, like  this is the end, it's going to increase their costs for shipping oil dramatically,  and it's going to reduce costs dramatically for SIC  companies.

One Rockefeller biography called it quote, an instrument of competitive cruelty, unparalleled in the industry.  Unparalleled in industry.

And they get competitive information about their competitors  in intelligence, essentially,  which allows them to underpriced them.

Okay.  This is actually good. How's this good for the railroads then? Because the railroads are also interested in cooperation.  So rather than, they too were driving themselves broke competing with each other. So you say, look,  um. We'll reduce your rates a lot, but you act as a leveler for us.

You act as an evener, standard oil would act as an evener is what it's called.  To make sure that each received a predetermined share of the oil traffic. Okay, so  we're gonna reduce the rates, but we're gonna stop this downward spiral of you can't play us off each other anymore in order to  get us to lower our rates.

And then there's another factor, which is Rockefeller had been accumulating all of these tank cars,  which were a primitive version of what you now see as an oil tanker. So it's just like a train car  with just one big giant container for oil.  Previously it had all been in barrels, which is a problem because they crack and they break and then the barrels themselves take up a lot of room.

And so you don't ship as much oil. This is great.

Quote, both refiners and railroads were struggling with excess capacity and suicidal price wars. Rockefeller's supreme insight was that he could solve the oil industry's problems by solving the railroads problems at the same time, creating a double cartel in oil and rails. Okay. It is a double cartel.

And so this creates riots, especially in the oil producing region of Pennsylvania.

Oh, this is the quote I wanted to go earlier.  You can abuse me. You can strike me. So long as you let me have my way  That's a great quote from Rockefeller. You can abuse me. You can strike me so long as you let me have my way

So they get boycotted  Which has a terrible toll on them and then eventually Pennsylvania revokes the  charter to

Eventually, Pennsylvania is threatening to revoke their charter and  The  train companies say, okay, this is way too much blow back. We're going to tear up the SIC. Okay.  Good idea but we can't follow through on this.

And so the SIC falls apart. So  failure, right?  Wrong. Because before it is torn up

Rockefeller conducts.  His infamous Cleveland massacre, which is between February 17th and March 28th, 1872. Between the first rumors of the SIC and the time it was scuttled,  he  manages to acquire 22 of his 26 Cleveland competitors.

I think it's interesting. What do you do?  How do you go about these companies?  Do you start with the small ones or you start with the big ones? You might start think start small, get some wins and work your way up.  But no. He did the opposite. He goes to the biggest refiners first and buys them  sometimes overpaying a little bit,  but this just feeds the fear and hysteria, right?

These other refiners have heard about this SIC.  They're like, Oh man we're scared. We were not going to be able to ship our oil. Standard is going to crush us. And then they hear that he has acquired his next best competitor. And now they're just shaking in their boots. They're beaten already.

And so when he comes through and says Hey, I'll acquire you for 10 cents on the dollar. They're like, and if you don't, you're going out of business.  And this is what he says, quote. You talk earnestly to his rivals, tapping them on the knee or gesturing with his hands, reasoning with them in richly cadenced evangelical tones.

As one refiner said of Rockefeller, quote, He knew that he and his associates had a better knowledge of the business and a better command of the business than anyone else. You never saw anyone so confident as he was.

So he tries to  portray himself as a a savior  saying quote,  we will take your burdens.  We will utilize your ability. We will give you representation. We will unite together and build a substantial structure on the basis of cooperation.

Similarly,  we here at Cleveland are at a disadvantage. Something should be done for a mutual protection. We think this plan of ours is a good scheme. Think it over. We would be glad to consider it with you. If you are so inclined,  of course, as we saw at the beginning of this episode with the famous incident from this time period,

Even if you're not scared to have your hand cut off, the body will still feel pain. He can also be a little bit more  aggressive than that when necessary.

And he's paying them pennies on the dollar, typically a quarter of their construction costs. On the one hand, it's oh, they're being taken advantage of. On the other hand, it's, they were gonna go out of business.  Again, three times the refining capacity. As was actually necessary.  And so what he's saying is look, man, I'm saving these people.

They're getting something. I'm giving them some money and guess what? I'm offering them stock in the standard oil company. I'm making that an option.  Most people don't take it. Most people take cash and, but that's their fault. He offers them all stock. He really is is evangelical about standard oil.

He's look, we're going to cooperate. We're gonna get together.  Yeah, I'm gonna buy you out. You're gonna get something for your refinery instead of nothing because you're headed towards bankruptcy anyway.  So this is a good deal.

This is what Schirnau has to say. I quote, Rockefeller probably paid a fair price for many antiquated plate plants, but it was a bitter pill for the ruined owners to swallow. And he operated in a climate of fear that gave rival his rivals little choice in the matter. And we should know it's a climate of fear that he obviously helped to create.

So with many of these refiners, again, this is why he's saying I'm actually the nice guy here.  If they have good up to date refineries, he keeps them around. But many of them, he's just shutting down. He's just trying to reduce the capacity in order to make oil production or oil refining profitable.

In fact when he starts doing this in other cities, he next goes to Pittsburgh  and Philadelphia, and eventually goes to Baltimore and people start catching on and they start. creating refineries when Rockefeller comes to town just so that they can get bought out.

Okay, in 1873,

so Standard Oil is really growing and is quickly becoming the top oil concern in the country.

So there's a huge

So after 1873, there's a huge panic, essentially a big recession, a depression and oil starts trading for incredibly cheap. There's this huge glut of oil still.

Rockefeller slashes standard oils, dividend increases cash reserves and it starts buying up.

Other

this is where he's buying up other refineries. Actually, this is when he really takes over Pittsburgh and Philadelphia.

And by the way, he's not just taking over the refineries. Often he's taking on the executive team and he leaves them in place to run their refinery and converts them into standard oil stockholders.  Which creates some really good incentives for him. This was not a common, this seems so obvious to you yet.

Oh, okay. He's giving some options to to his employees. Yeah. It seems simple. No one else is doing this, right? Using.

Using stock in order to align people's incentives and bring them onto the team, really get them invested in the company is a new idea.

It's these people are like real converts. They love standard oil. And in fact one guy. Camden  is one of his top lieutenants who had owned other refineries. And it's exactly what I told you, right? They're buying out some of these people  and some people, and some executives don't want to buy out these refineries.

They're like, they're going to fail. Let's just starve them out. But Rockefeller wants to expand faster, drive them out sooner consolidate faster, and just.  Own oil and don't leave room for anyone else to come in, keep the momentum going forward. And Camden says, quote, it almost makes me weepy to pay out good money for this kind of junk.

Was that it?  But as it is a part of our duty to mankind, I suppose it is necessary to carry it through without flinching oh man.

It makes me weepy to be paying money to become a monopoly. I think we should just take it. Yeah, it makes him weepy to become a monopoly in the most valuable business in the world.

So anyway, by the mid 1870s, John D Rockefeller, still just in his thirties is the sole master of American oil refining.  It's not a true monopoly. And in fact, they would always. Keep around some refiners. They would let, 10 percent of the market exists  so that they could claim that it wasn't a monopoly.

They ended up acquiring over 90 percent of the refining capacity in the United States.

And as they  acquire more and more refineries, they make it harder on the remaining refineries by once again,  pinching the railroads, extracting

rebates and drawbacks. And, um, just doing everything and make it more expensive for others to refine and ship oil.

To show you how far they could go, there is one challenge to them.  And  that is a seaboard pipeline. So this is a pipeline that is supposed to go from oil country in Pennsylvania out to Delaware, I think, to be refined on the coast. Maybe it's New York.

Now I told you there were pipelines.  And there were, but there were no long distance pipelines like this, to go from Western Pennsylvania all the way to the coast. This was a monumental undertaking and standard oil opposes this pipeline like crazy. So some of the executives.  Recommend let's just smash it up.

Let's just get some goons in the middle of the night and smash up this pipeline. And Rockefeller says no.  I'm willing to do almost anything to crush my enemies, but not quite that. I'm, I am a church boy.  And so

one of the subordinates writes to Rockefeller quote, I would have no mercy on them that don't deserve nor appreciate it. So first they go to manufacturers. It's called the tidewater.

So they, anyone who works with them, they're like, Hey, you're getting blacklisted if you work with them at all. And any refiners who might work with Tidewater, they tell them, Hey, we'll give you a super low rates on standard oil pipelines and transportation.  And he bought other refineries that might be Tidewater customers.

So it was increasing his market share beyond 90%.  And then  when that's not fully working, Tidewater somehow is still managing to cobble together the resources to build this pipeline. They start buying what are called deadlines.  So that is, they buy a strip of land from the North of Pennsylvania to the South of Pennsylvania.

So they just start going to all these farmers and they're like, Hey, can we have just a little parcel of your land? We'll overpay you for it. They're like, Oh, okay. So now they've got a North South strip  that Tidewater can't get through. Right. But Tidewater, still manages to

To get around this

and then they declare legislative war. They're getting they go to all these state legislature, legislatures and tell them, Hey, you got to block the formation of this pipeline.  And so they do, and they actually have to adjust the pipeline. And they, they can't get all the way to the coast in the end.

However, despite all this. The Tidewater company really needs to be commended because they've  managed to get through all this and they managed to construct their pipeline.

Okay. But it's amazing because they go to all this work. And then in 1880, shortly after it's constructed,  they go to the standard oil and they're like, Hey, we'd really love to meet. Their executive says to the standard oil executive quote he felt that the time had come. When the company should work together with a view of preventing other companies from engaging in the business. So essentially, Tidewater comes in and says, Hey, we can, we're this long distance pipeline.

We can ship cheaper than the railroads.  And,  but then they have to do it for cheaper. And they're like, this kind of sucks. So they come to standard oil and they're like, Hey, what if we work together? And we just both raise our prices.  So, within a year  they are drawn into the standard oil orbit and this threat to their business goes away.

One thing is you think about all this extra capacity, one thing Rockefeller is working at this entire time is.  We need to export a lot of a lot of this kerosene, a lot of this oil, and get it out to the world.  Because they can soak up the extra capacity. And so they're exporting more and more of it.

So more and more, they're sending their crude oil to the seaboard, to the East Coast, to be refined there. And then they're exporting it, and they're shipping it mainly from New York.  And so more and more,  His business is taking him to New York  and

in 1883, he moves to New York

around the same time, actually just a year earlier in 1882,  as time goes on, they're dealing with more and more

legal challenges. And one of the reasons they're susceptible to so many legal challenges is that the United States at this time, really the States were sovereign.  It was just a patchwork of States and there were, hardly any rules set up for interstate companies. Like generally you needed a different company for each state that you were operating in  and,

And companies couldn't own  proper, especially property in other States. This is a real problem, right? Especially for a growing. now international company  like Standard Oil. And so they come up with this trust agreement which is essentially, they say, okay, this isn't, this isn't a company out of Ohio that has property everywhere.

Actually, this is just a series of companies that all happen to have the same. Shareholders and  they pay dividends to, to those shareholders and they're dictated by the board by this trust that happens to have the same members as the board of the Standard Oil Company. So it's a pretty clever workaround  and it creates a system where people can own  securities, can own stock  in the entire  company, essentially.

Now, just when they're masters of the oil world in the 1870s oil is discovered in Russia  and it's extremely plentiful, which makes it very cheap  and so  immediately there is a battle for Europe and Rockefeller who. Has never heard the phrase anti competitive practices in his life and certainly doesn't believe in them.

Um, raises prices cuts prices dramatically in Europe to undercut his Russian competitors and try and  smother  their industry before it can really grow.  And in order to compensate raises prices in the U S where he has a monopoly and can just raise prices at will to make up for it.

One of the things that they need to do in order to compete is they need predictable sales. And so they modernize, they start creating an international company and they integrate vertically. What they do is they had before these kind of wholesalers, these wagons that would go in and sell. And so they start driving these guys out of business and selling directly to to these general stores.

And, um, they really bully them. They tell them, Hey, you are going to sell standard oil and you're only going to sell standard oil. And if we catch you selling other oil, then we are not above creating a competitor and we're going to sell groceries at cost just to drive you out of business.

If you sell anyone except for standard oil, and they do this a couple of times, they build these general stores to drive people out of business, these grocery stores. So they have now sales agents to control the process all the way from refining to the end point sale.

And in fact Territory  leaders they were called station agents  or station managers, sorry, territory leaders. They're called station managers were expected to command at least 85 percent and if possible, much more of the oil trade in their district. So they get, they take really aggressive tactics to drive others out of their business.

It's like textbook monopolistic, anti competitive behavior.

Okay. In the 1880s, they started their natural gas business.

So in, as part of this vertical integration,  there are some new fields discovered in Ohio.

And  it has a problem.

People refer to it as skunk oil.  And so this Ohio oil, people think, eh,  we don't know if it's worth anything  compared to Pennsylvania oil,  but  Rockefeller had these almost oracular powers. Like he's one of the best decision makers I've ever seen.  He's just like on major decisions in his career.

He's 19 for 20. He was like one slip up. Otherwise incredible decision making. And this is one where he says no, we're, I believe in Ohio oil. We are going to buy these oil fields.  And at first they're just storing it.  Just this oil comes out of the ground. It's called Lima, it's near the city called Lima, and so it's called Lima oil or skunk oil, and they just started storing and they have over 40 million barrels worth of Lima oil in storage tanks.

And this stuff can only sell for 15 cents per barrel. It's just completely valueless. People think Rockefeller has lost his mind. But he hires this chemist and has him work and work. And eventually. He finds a way to process the oil to completely remove the smell. It's called skunk oil because it has a high level of sulfur in it.

So when you burn it,  it smells. It smells really bad. And he figures out how to refine it.

He figures out how to clean it of the stench. And it becomes really valuable. And they never got a monopoly on  crude oil production, the way they've done the rest of the process, and they didn't want it. At their height, they controlled 30%.  American production, but it was enough to ensure that they always had a 33 percent in nine in 1898 is is when they controlled the most crude production, but 33 percent controls is still a lot of control, right?

And it was enough to ensure that they had a steady supply of crude and and to make that a part of their vertical integration.

As I said, lots of legal challenges.  And in 1890 their bad reputation catches up to them.  And president Harrison signs the Sherman antitrust act, which outlawed trusts and combinations in restraint of trade and subjected violators of fines up to 5, 000. Now, key line there in restraint of trade.

So this main, the main reason  that this has passed is to restrain the standard oil company. They just.

Kind of move along as if it were never passed

They just ignore  It and say well that doesn't apply to us. We're not in restraint of trade and For 17 years the law is not applied to them And so they just they sidestep it and they move past the Sherman Antitrust Act.

So in 1890

At this point, Rockefeller is definitely one of the richest men in America. He's probably top five. The thing that would actually push him over the edge is he makes to number two was some smart investments in mining, which was Andrew Carnegie's wheelhouse. But Rockefeller actually Find some really good minds that Carnegie had passed on and again, with his like foresight, somehow he always knows what's going to happen.

He buys up these minds and when they start producing really great ore, he ends up selling them. That vaults him up into second place.  Now with all this money,  he's been charitable the entire time. He's giving it away. But now he's making a name for himself. Everyone knows Mr. Rockefeller. And so he is  continually just  besieged with requests for his money.

And he really wants to help everyone. And so the stress of the Sherman antitrust act, more and more legal attacks on standard oil combined with. More and more requests for charitable contributions leads to something like a nervous breakdown.

His hair starts falling out in, and not just in a normal way on the top of his head, like his eyebrows, his mustache, like the hair all over his body starts falling out. His look really changes.

And and so he begins on an early retirement

now, so he starts to pull back in 1889.  There actually, within a few years is a major recession in 1893. So he gets pulled back in to steady the ship. And not just steady the ship. So he regains  some of his  health between 1889 and 1893.  And only does he pull standard oil through the crisis, the country as a whole, and he's making loans everywhere.

Cause he's has this enormous fortune by this point. He's got millions and millions of dollars. So he's bailing people out. He's trying to steady wall street.  And once he does that, then finally after a couple of years, he starts to fade out again in 1897, he really retires

and, I think there's something more to it than the health angle. He was always a health nut. But one of his one of his contemporaries said that the business quote had ceased to amuse him. It lacked freshness and variety and had become merely irksome and he withdrew.  And I think that  you can understand that.

Like he had consolidated oil, all that was left to do. There was no growth necessarily left at the time. That was obvious, although he would get. Much wealthier in the future. Yeah, like the interesting work was done  to him. After all this, and after the U S steel deal that he does with his minds his net worth, his personal net worth moves to more than 200 million,

and  this would mark the, he's still behind Andrew Carnegie is the richest man in America, but Carnegie. Was,  at the peak of his powers and Rockefeller was just getting started. I'll just, spoil the ending. I'll talk more about this in the second episode in the end notes episode, but the thing that pushes him to, okay. 3. 5 billion. That's a great fortune. That's a ton of money. But what pushes it pushes him to.

Just  the richest man in the world has ever seen is of course, the invention of the automobile and Henry Ford and the automobile becoming, widespread all over the world that of course increases demand. We've been talking about oil this entire time  and, gasoline is used a little bit.

But when we think oil, we think gasoline  and no kerosene is by far the biggest use. And so as gasoline becomes.  What it is today that is what vaults Rockefeller to this unbelievable

stratosphere of wealth.  Okay, so there you've seen it.  Rockefeller becomes, the king of American oil  by, through extreme strong arm tactics, through incredible attention to detail, Through incredible focus,  through long term planning, through great decision making. So let's talk about how he managed and how he led.

And let me start off by saying  Rockefeller didn't think that he was anything special as a leader. He thought it was a completely learner completely learnable skill. He said, quote, the ability to deal with people is as purchasable a commodity as sugar or coffee. And I pay more for that ability than for any other under the sun.

Okay. So  how did you do it? So if you can just learn to lead like Rockefeller, if it's as purchasable as  sugar or coffee,

then how do you do it?

So one thing  is that just like Napoleon and his cannons, just like Steve jobs. And

one thing is that he was detail oriented. Okay. All these great leaders are extremely detail oriented. There's the great story of Walt Disney. Anytime they brought a.  A cartoon to him. He'd say can I see it a few more ways? He always he always wanted different looks at it.

Same Steve jobs. There's this famous story of him getting into the weeds and into the details of the color on a certain presentation. And he keeps asking them to change the green, the color of the green. And he doesn't like it until finally.  They change it and he likes it. He says, great green.

And so everyone walks around mocking him. Great green. They thought that was funny. And Napoleon, of course, was famously into the details of,  even by hand, positioning his cannons. That's why he was known as Le Petit Corporal. I could go on, but great leaders are always detail oriented.

Here's a great quote from Chernow quote. As a former bookkeeper, Rockefeller devoted special attention to ledgers. One accountant recalled him stopping by his desk and saying courteously, permit me, then flipping quickly through the books. Very well kept. He said, very indeed. Then his eyes leapt to a tiny error, a little error here.

Will you correct it? The accountant was flabbergasted by the speed with which Rockefeller had scanned so many dense columns of figures. And I will take my oath, he reported, that it was the only error in the book.

The, one of the other big things about Rockefeller is his consistency. Listen to this passage, this is another great passage. Quote, he walked with a measured gait, steady as a metronome, always covering the same distance in the exact same time. He had the soundless movements and modulated voice of an undertaker.

Gliding about with silent footfalls, he startled people by materializing at their desks and politely asking in a mellow voice to inspect their work.  So he's incredibly  Consistent.

He has incredible powers of concentration. I love this quote from Rockefeller himself. Do not many of us who fail to achieve big things fail because we lack concentration, the art of concentrating the mind on the thing to be done at the proper time and to the exclusion of everything else.  I actually think more than anything, this explains the success of Rockefeller.

Again, he was not a super genius as can be  deduced from his academic record as a young man.  Like he just wasn't, he wasn't. He was very smart, but he wasn't that brilliant. He's not like a Thomas Edison type where you're like, Oh man, this guy's just so smart. No. But what he was incredibly focused.

And then I would add to that determination, just determined. But it's just like you said, the art of concentrating the mind on the thing to be done at the proper time and to the exclusion of everything else. I think that explains a lot about why he was so successful. He used silence to his benefit.

He would be very quiet and he would listen  and then,  he would respond a little bit, but if he disapproved of something, he would get very quiet and he just wouldn't respond.

So everyone noted his calm. He was even tempered by nature.  You could say the most outrageous things, you could yell, you could scream, and he just didn't react.

Okay, I've been describing him as the Terminator, but he was he was legitimately good with people. He remembered everyone, he remembered their names,  he always had a kind word for them. It was never too excited, right? It was never like over enthused. Oh, I love you. You're the best. It's just, hello, good day, fine work and that, that kind of vibe.

And then the other thing is,  someone was asking me the other day,  does every great achiever have a posse?  And I responded immediately yes. Every single one of them has a tribe.  And that is true for Rockefeller as well. He had this small group of great executives that he surrounded himself. I mentioned Flagler.

There's this guy Archibald there's Camden there a handful of others, but these his brother, William and these people were.  Just really talented. He paid them really well. A lot of them became, not as rich as him because he, but kajillionaires. And so his ability to build up and acquire people around him who are really talented was crucial and he put a ton of value on it. So here's another quote, quote, so highly did Rockefeller value personnel that during the first years of standard oil, he personally attended to routine hiring matters.

After parentheses, after conquering the other refining centers, the payroll ballooned to 3000 people and this became impossible.  And then it says, taking for granted the growth of his empire. He hired talented people as found, not as needed. In other words, if he found a really talented person that he believed in,  if he didn't have a position for them, he wasn't like, Oh, sorry.

Can you check back later? He was like, Nope, I am snatching you up right now. And we'll find a spot for you. We'll find something for you to do.

Another thing is. Because he believed it was so important to hire well and to have these people motivated employees were invited to send complaints or suggestions directly to him.  And,

and he would look them over. He was also reasonably generous, is what it says. Reasonably generous in wages, salaries, and pensions. He paid somewhat above the industry average. So he's a frugal guy. He's never going to pay extravagant salaries.  He paid somewhat above industry average in order to attract bright people.

And that went for all levels. At the top levels, he incentivized these people with not with extravagant salaries, but with standard stock.

And then this is something I found really interesting. If you just listen to the last episode, to the Mr. Beast episode, I thought one of the most interesting things that he said was,  that he doesn't have any training procedures that his procedure is.  You hire really talented people and then you stick them with the person that they're, whose job they're taking over, who they're supposed to learn from.

And then they just stay attached to them. They just sit with them and then they're tutored by them until they're ready to go. And that is exactly what Rockefeller does. Here's the quote from the Chernow book. Quote,  To orchestrate such a gigantic operation, he had to delegate authority. And part of the standard oil gospel was to train your subordinate to do your job.

As Rockefeller instructed a recruit. Quote, Has anyone given you the law of these offices? No. It is this, nobody does anything if he can get anybody else to do it.

Okay. Then the other thing is, this Steve Jobs idea of be a benchmark of quality. So here's another great quote, most of all Rockefeller inspired subordinates with his fantastic, with his fanatic perfectionism. He never did anything haphazardly and wrote hundreds of thousands of business letters that were models of concision and balanced phrasing the product of painstaking.

Revision this is this quote. I actually can't remember who said it, but I'll tell you that I stole it from David Senra from his podcast founders. But he says that  the founder is the soul of the company. And I think that comes down  to this, to being a yardstick of quality. What is the standard, standard oil?

What is the standard? What is perfection? And then demanding that.  Most of all, Rockefeller inspired subordinates with fanatic perfectionism.

And then one other thing that I think is interesting,  I haven't seen anyone else do this, so I won't say that it's a pattern, but it's so different that I think it's worth highlighting, which is that he insisted on  unanimity.  Had this board of really talented people,  and he said,  um, he wouldn't make major decisions without unanimous  consent from the board.

And, sometimes they would feud and they would bicker but, eventually they would come around. There's one great story where one of the old timers is it was actually with the Lima oil, with the skunk oil, and he just would not go along with it. He was scared like a grandmother, as he said at the beginning  and  Rockefeller takes out his checkbook and says, okay.

Then I will, he's the last holdout and so they can't get unanimous consent. So they're not going to buy the fields and Rockefeller says, okay  I am going to personally lend the money for my personal accounts to buy these And he whips out his checkbook ready to write a check on his own account at which point the guy Gives in and says okay John if you feel so strongly about it that you  are Willing to put your own personal fortune on the line, then I guess I could go for it.

Okay  Tune in next week to hear the end notes episode, the part two slash end notes episode, where I will talk a little bit more about his charitable contributions and how those change the world. His establishing of multiple medical schools, Rockefeller university, his establishment of the university of Chicago.

Some of the environmental work that has come from the Rockefeller foundation, the establishment of the Rockefeller foundation, as well as how Standard oil is eventually broken up and then how those companies have come to us today, like of the top 100 highest revenue companies in the world like  a half dozen of them or a dozen of them are Descendants of standard oil so I'll go a little bit more into that

and then I'll talk more about fun takeaways interesting facts from his life and stuff like that. So if if you want to get that part two end notes episode, go to supercast,  go to takeoverpod. supercast. com. As always, thank you for listening to how to take over the world.

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