John D. Rockefeller: The Oil Man
Well, after discussing about Microsoft, Apple and Intel, the obvious choice for today’s Gyan should have been IBM. But the simple reason that I am not going to write about IBM today is: I couldn’t get snaps of Thomas Watsons!! (Yes, both Father and Son shared the same name!)
Today, I’m just going to leap back into past to talk about another great personality. Well before Bill Gates, Paul Allen or Larry Ellison could make it to the list of richest men, there was an undisputed “World’s Richest Man”.
With the Oil prices sky rocketing and reaching higher and higher everyday, it’s obvious that the oil producing companies would surely be making hell lot of money. Today’s Gyan is about John D. Rockefeller, the man, in a way pioneered Oil industry and Monopoly and also, was the richest man in the history of mankind, by any standard!
Born in a Baptist family, John D. Rockefeller – better known as John D – had a serious business mind. So much so that, in his childhood, he used to SELL candies to his siblings at a higher price. I think, he had inherited this kind of business tendency. His father used to lend money to his sons and would charge a hefty interest rate. He, even, used to beat them if they couldn’t return the sum in due time. His father defended this attitude stating that it would make his sons more practical and they would be ready to handle any hardship in life. I don’t know if that really was the intention, but it surely built the foundation for John D and his future. At the age of 16, John D. started working as an accountant in a grocery store.
In 1850’s, Edwin Drake invented the method of retrieving oil from the earth and refining it. Just like Gold Rush, it started a Black Gold Rush in USA. Lots of refineries started shooting up near the oil field areas. John D. was smart enough to see that “Oil is Money” and opened his own refinery along with other partners in 1863 in Cleveland. Of course, John D. wasn’t the only one to join the rush. The number of refineries increased so high that the oil production went up and prices went down. It directly affected the refineries in a big way. As oil prices/barrel started plummeting drastically (15 Cents a barrel!), it became harder for most of the refineries to stay in the business.
John D. foresaw the future. There was a consolidation of refineries that took place. John D. – A nonbeliever in Competition knew that he has to acquire as many refineries as possible to prosper ahead in the business. A story goes that in an auction to buy one of the refineries, John D. was bidding against another competitor. The bid went up higher and higher. John D would bid higher than anything his competitor would quote. Finally, the competitor backed off and Rockefeller bought that refinery. Now, the funny part is Rockefeller really didn’t have enough money to buy it but he just dared to bid high enough so that no one else could make a deal. (Gee, sounds like Amitabh Bachchan saying “Aaj mere paas 5 footi kaudi nahi hai aur Main 5 Crore ka Sauda karne aaya hoon!!”) Finally, only after winning the bid, he managed to raise the necessary funds! Eventually, there were a good number of companies – small refineries under John D.’s presidency. The whole company was named as “Standard Oil Company”
Now, the refinery companies were not the only ones who were making money. The oil produced needs to be carried to other places. This is where the Railroad companies came in picture. These Railroad companies had tie-ups with the refineries. Although, the Standard Oil Company was big it wasn’t big enough to make an impact on oil and transportation rates. Again, John D. showed his business mind. Along with some railroad companies, he founded what is called as “South Improvement Scheme” and he showed as if, apparently, 90% of the refinery companies are into the scheme when in fact; only 10% of them were actually part of it.
The Standard Oil Company thus grew bigger and bigger. John D. totally monopolized the market. I think, he was the first person who could truly establish a monopoly at such a high level. Finally, there were only a couple of competitors left who had still managed to stay in the dog – fight with Standard Oil Company. To persuade them to join Standard Oil Company, John D. personally went and met with the presidents of these companies but they declined. John D. soon came to know that these companies are laying up pipe lines to carry the oil they produced. These companies had to resort to this option just because almost all the rail road companies were working for Standard Oil Company by then. Can you imagine how John D outdid this? He simply BOUGHT the whole land through which the pipe lines were proposed to run!! The competitors were left with no choice but to join John D. Well, and soon after they joined him, the frequent fire breakouts at their (competitors’) plants stopped, too!
This is how the one Standard Oil Company – John D. Rockefeller’s empire was built.
John D.’s monopoly was surely not a good sign for the market. Hence, the US government had to intervene. So, in 1911, the Standard Oil Company was broken into 18 different companies, making way for Exxon, Shell and Chevron etc. to come into existence.
John D. was very particular about small details. A story goes that while passing by the packaging plant, he saw that the worker, welding the lids of Oil barrels, was using 40 drops of metal to pack it. John D. asked him to do it in 38 drops. After much of a “bargaining”, they settled to 39 drops. But just one drop per barrel saved thousands of dollars for the company. No wonder, the graph for net profit of Standard Oil Company looks like:
When you look at those zeroes, remember that they belong to 1890’s to 1910’s!!!
John D. died in 1937, at the age of 98. He used to be seen only in his office, home and his Baptist church, not much even in the oil regions. People used to get awed by how the man never seen much often can control almost everything. Although, I haven’t got into details of the other business tricks John D. used, I won’t be surprised if I get to see even more out – of – the – world tricks in a book named “Titan: Life of John D. Rockefeller”
Today, the companies made out of Standard Oil Company – Chevron, Shell, Exxon are themselves so huge that their yearly turnover is more than almost 40 countries’ annual GDP!! I bet, if John D. would have still lived to own these companies today, he would have surely given Bill Gates a run for his money…
Today, I’m just going to leap back into past to talk about another great personality. Well before Bill Gates, Paul Allen or Larry Ellison could make it to the list of richest men, there was an undisputed “World’s Richest Man”.
With the Oil prices sky rocketing and reaching higher and higher everyday, it’s obvious that the oil producing companies would surely be making hell lot of money. Today’s Gyan is about John D. Rockefeller, the man, in a way pioneered Oil industry and Monopoly and also, was the richest man in the history of mankind, by any standard!
Born in a Baptist family, John D. Rockefeller – better known as John D – had a serious business mind. So much so that, in his childhood, he used to SELL candies to his siblings at a higher price. I think, he had inherited this kind of business tendency. His father used to lend money to his sons and would charge a hefty interest rate. He, even, used to beat them if they couldn’t return the sum in due time. His father defended this attitude stating that it would make his sons more practical and they would be ready to handle any hardship in life. I don’t know if that really was the intention, but it surely built the foundation for John D and his future. At the age of 16, John D. started working as an accountant in a grocery store.
In 1850’s, Edwin Drake invented the method of retrieving oil from the earth and refining it. Just like Gold Rush, it started a Black Gold Rush in USA. Lots of refineries started shooting up near the oil field areas. John D. was smart enough to see that “Oil is Money” and opened his own refinery along with other partners in 1863 in Cleveland. Of course, John D. wasn’t the only one to join the rush. The number of refineries increased so high that the oil production went up and prices went down. It directly affected the refineries in a big way. As oil prices/barrel started plummeting drastically (15 Cents a barrel!), it became harder for most of the refineries to stay in the business.
John D. foresaw the future. There was a consolidation of refineries that took place. John D. – A nonbeliever in Competition knew that he has to acquire as many refineries as possible to prosper ahead in the business. A story goes that in an auction to buy one of the refineries, John D. was bidding against another competitor. The bid went up higher and higher. John D would bid higher than anything his competitor would quote. Finally, the competitor backed off and Rockefeller bought that refinery. Now, the funny part is Rockefeller really didn’t have enough money to buy it but he just dared to bid high enough so that no one else could make a deal. (Gee, sounds like Amitabh Bachchan saying “Aaj mere paas 5 footi kaudi nahi hai aur Main 5 Crore ka Sauda karne aaya hoon!!”) Finally, only after winning the bid, he managed to raise the necessary funds! Eventually, there were a good number of companies – small refineries under John D.’s presidency. The whole company was named as “Standard Oil Company”
Now, the refinery companies were not the only ones who were making money. The oil produced needs to be carried to other places. This is where the Railroad companies came in picture. These Railroad companies had tie-ups with the refineries. Although, the Standard Oil Company was big it wasn’t big enough to make an impact on oil and transportation rates. Again, John D. showed his business mind. Along with some railroad companies, he founded what is called as “South Improvement Scheme” and he showed as if, apparently, 90% of the refinery companies are into the scheme when in fact; only 10% of them were actually part of it.
The Standard Oil Company thus grew bigger and bigger. John D. totally monopolized the market. I think, he was the first person who could truly establish a monopoly at such a high level. Finally, there were only a couple of competitors left who had still managed to stay in the dog – fight with Standard Oil Company. To persuade them to join Standard Oil Company, John D. personally went and met with the presidents of these companies but they declined. John D. soon came to know that these companies are laying up pipe lines to carry the oil they produced. These companies had to resort to this option just because almost all the rail road companies were working for Standard Oil Company by then. Can you imagine how John D outdid this? He simply BOUGHT the whole land through which the pipe lines were proposed to run!! The competitors were left with no choice but to join John D. Well, and soon after they joined him, the frequent fire breakouts at their (competitors’) plants stopped, too!
This is how the one Standard Oil Company – John D. Rockefeller’s empire was built.
John D.’s monopoly was surely not a good sign for the market. Hence, the US government had to intervene. So, in 1911, the Standard Oil Company was broken into 18 different companies, making way for Exxon, Shell and Chevron etc. to come into existence.
John D. was very particular about small details. A story goes that while passing by the packaging plant, he saw that the worker, welding the lids of Oil barrels, was using 40 drops of metal to pack it. John D. asked him to do it in 38 drops. After much of a “bargaining”, they settled to 39 drops. But just one drop per barrel saved thousands of dollars for the company. No wonder, the graph for net profit of Standard Oil Company looks like:
When you look at those zeroes, remember that they belong to 1890’s to 1910’s!!!
John D. died in 1937, at the age of 98. He used to be seen only in his office, home and his Baptist church, not much even in the oil regions. People used to get awed by how the man never seen much often can control almost everything. Although, I haven’t got into details of the other business tricks John D. used, I won’t be surprised if I get to see even more out – of – the – world tricks in a book named “Titan: Life of John D. Rockefeller”
Today, the companies made out of Standard Oil Company – Chevron, Shell, Exxon are themselves so huge that their yearly turnover is more than almost 40 countries’ annual GDP!! I bet, if John D. would have still lived to own these companies today, he would have surely given Bill Gates a run for his money…
posted by Gyan for the Day! | 7:21 pm
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