John D. Rockefeller: Story of America’s First Billionaire

By Toyeke Oswide 

“I believe the power to make money is a gift from God—just as are the instincts for art, music, literature, the doctor’s talent, the nurse’s, yours—to be developed and used to the best of our ability for the good of mankind. Having been endowed with the gift I possess, I believe it is my duty to make money and still more money, and to use the money I make for the good of my fellow man according to the dictates of my conscience.”

     John D. Rockefeller (Courtesy: The Rockefeller Archive Center)

America is indeed a superpower. The United States achieved her current position clearly by rising up as the most powerful economy in the entire world with a GDP of about $16.77 trillion. America used the money it made to build its military might and advance technology and research to a point where no other country could compete with her. But how did she get there?

A lot of individuals contributed to her enviably great economy but none did like a person whom many consider to be the next richest replace after King Solomon of the Bible. This legendary American is history’s first recorded billionaire. He owned virtually all the major oil companies of today including Exxon, Mobil, Chevron and Amoco. His name is John D. Rockefeller.

Germany and France have laid claims to the ancestral roots of John Davison Rockefeller but the most authentic claim traces the Rockefeller family’s German origin to the Rhine Valley dating back to the 1600s. John D. Rockefeller was born on July 8th 1839 in Richford, New York, to William Avery Rockefeller nicknamed “Devil Bill” – a wandering scoundrel, duping the locals of their money, making elixirs and even claiming to be a cancer specialist. He went to a town, pretending to be deaf and dumb and peddling valueless trinkets. There he spotted Eliza Davison, daughter of John Davison, a strict Baptist of Scotch-Irish descent. He charmed her by his looks and elegant clothes. She discovered his act but succumbed to the charisma of the smooth-talker and married him.

John D. Rockefeller’s father had a girlfriend before marrying his mother. He brought her into his home under the guise of being his maid and began having children alternatively by his wife and mistress in the same house. Eliza had three sons including John and two daughters. His father continued his wayward wandering lifestyle but kept his girlfriend and her kids away after pressure from Eliza’s people.John’s family was constantly on the move because of his father’s reckless livingwith him leaving them, continuing his escapades and showing up some times three times a year. His father later married another Margaret while being married to his mother, none being aware of the other’s existence and left his family.

John’s mother trained him well and instilled her Christian virtues in him. He grew up with a sense of responsibility for his family. When not attending school, he cut wood, milked the cow, drew well water, tended the garden they had and supervised his younger siblings. He devoted a lot of time to books, music and church. Rockefeller was attracted to the church from an early age and grew with a strong diet of Protestant messages guiding his conduct. A strict Baptist till his death, he saw money as something God wanted His children to have and dispense to the common man’s good. He once said, “I have always regarded it as a religious duty to get all I could honorably and to give all I could. I was taught that way by the minister when I was a boy.”John was strolling with a friend one day when he blurted out, “Someday, sometime, when I am a man, I want to be worth a-hundred-thousand-dollars. And I’m going to be, too—some day.”

Rockefeller changed schools as his family moved from New York to Ohio. He was finally enrolled at high school at age fifteen and earned the name “John D.” from his schoolmates as he always signed his essays this way. John had a head for arithmetic at school for he was taught to keep records of gains and losses of the little family business at home.  His father even borrowed money from him at such a young age. At school, he advocated for the stopping of the slave trade calling it a “violation of the laws of our country and the laws of our God that man should hold his fellow man in bondage.”John would later contribute to several charities that aided blacks and cast his first presidential vote for Abraham Lincoln, the abolitionist. Heeding to his father’s suggestion, he got rid of any thought of having a college degree and enrolled at a business college where he learned double-entry bookkeeping, clear penmanship and the essentials of banking, exchange and commercial law. This gave him an introduction into the world of business which he loved so he could financially uplift his family.

On the morning of September 26, 1855, John D. Rockefeller at 16, got a job as assistant bookkeeper at Hewitt and Tuttle, commission merchants and produce shippers. For the rest of his life, he recognized that day as “Job Day” and hallowed it more than his own birthday. At Hewitt and Tuttle, he wrote letters, kept books, paid bills and acted as a one-man collection agency for the company. He paid tremendous attention to detail, closely reviewing bills and making correction to errors of a few cents. The job served as a training ground for Rockefeller and he was paid $25 a month, enough to be financially free. He got a small red book and called it “Ledger A” where he recorded how he spent his money, exercising prudence. Rockefeller gave to philanthropic causes which makes us no surprised at how much he gave later in his life. By 1859, when he was twenty, his charitable giving increased and despite a pronounced tilt toward Baptist causes, he contributed to other aids such as helping a black man in Cincinnati in 1859 so he could buy his wife out of slavery. The next year, he gave to a black church, a Methodist church and a Catholic orphanage.

John excelled at his job and earned a reputation in the local business community for being reliable, with people calling him ‘Mr. Rockefeller’. He got elevated to the level of chief bookkeeper after one of the partners, Tuttle quit. John expected something bigger as he filled the shoes of his previous boss but could only get a mere $700 dollars a year. After series of arguments with Hewitt, Rockefeller at age 18, decided it was time to go. On April 1, 1958, he got into a partnership with Maurice Clark, a 28 year old Englishman and a friend from business school. Both invested $2000 to form the Clark and Rockefeller commission house. They dealt with grain, fish, water, lime, plaster, coarse fine solar and dairy salt. Clark was in charge of sales and purchases while Rockefeller kept the books.

This early photo of John D. Rockefeller shows the seriousness with which he saw life (Courtesy: Rockefeller Archive Center)

He was a tall young man with deep, penetrating eyes and tightlipped, giving him a strong presence. He always said to himself, “Your future hangs on every day that passes” and recalled later in life, “Life was a very serious business to me when I was young.” He was the first to arrive and last to leave work each day. Rockefeller’s hard work paid off with the business thriving as the commodity trading industry experienced a boom during the American Civil War.

The world had been obsessed with the idea of a cheap source of light that could extend the day and brighten the night. Prior to the use of kerosene, a distillate of petroleum as a means of lighting lamps, people used candles and only the wealthy could afford whale oil for their lamps. Petroleum was used by the Seneca Indians (group of Native Americans) for medicine and war-paint. It was called Rock oil or Seneca oil by that time.

Derricks were built for drilling salt from the ground but Col. Edwin Drake (only a retired railway conductor and not a real colonel) ingeniously used that idea and convinced an Uncle Billy into building a derrick for drilling for oil. On Sunday 28th August 1859, in Titusville, Pennsylvania, oil seeped from the world’s first oil derrick. The world’s first oil in a barrel was to sell for $40. This discovery showed that oil existed in abundance underground and could be produced cheaply. Overnight, a new industry emerged. Drake’s discovery caused a frenzy in the town, soon to spread across Pennsylvania. With this ‘gold rush’, derricks were constructed everywhere and everyone wanted to partake in this new fortune. Cleveland businessmen became interested in the oil rush among which Rockefeller would soon partake. Rockefeller expressed in his later life, “these vast stores of wealth were the gifts of the great Creator, the bountiful gifts of the great Creator.”

At first, Rockefeller was skeptical about venturing into oil but was lured after the combined effort of Samuel Andrews (a self-taught chemist that would soon invent how to refine crude oil cheaply), Maurice Clark (his partner) and Clark’s brothers. They pledged $4000 into a new refining business and called it the Excelsior Oil Works. Refining oil at this time was a highly profitable investment. With a startup capital of about $1000 or less, one could open up a new refinery and hire people to run it. This was way cheaper than the cost of starting a commodity trading business at that time. This made it possible for anyone to enter into refining and by mid-1863, there were already about twenty refineries in Cleveland. Everyone made a profit and people were still rushing into the production and refining of petroleum resulting in rapid boom and bust cycles. This caused a barrel of oil to sell between 10 cents and $10 in 1861 also, $4 and $12 in 1864. Rumours also circulated about the impending doom of crude oil’s exhaustion. Rockefeller’s overwhelming impact on the oil industry stemmed from the need to set order into a turbulent and unruly industry.

For Rockefeller, the future of the oil business demanded solid faith and he was ready to take the bull by the horns. Rockefeller’s relationship with the Clarks started to sever after he began borrowing heavily to expand their refining business. In 1865, they decided to split up and Rockefeller paid $72,500 ($1 million in 2015 dollars), buying them out of the business. Samuel Andrews remained and the firm was renamed ‘Rockefeller and Andrews’. At 25, he now had control of Cleveland’s largest refinery with a capacity of 500 barrels per day.

Having now established himself in Cleveland, Rockefeller felt it was time to settle down and married on September 8, 1864, Laura Celestia Spelman – a friend from high school and daughter of an Ohio legislator. Laura, the valedictorian of her high school class, had deep Christian beliefs. “Her judgment was always better than mine,” Rockefeller said of her. “She was a woman of great sagacity. Without her keen advice, I would be a poor man.” Rockefeller brought home his record books and reviewed them with her.

Like the other Gilded Age moguls of his time, John D. Rockefeller was driven by his faith in economic progress, the usefulness of science to industry and the future of America as an economic power. In 1865, he expanded his business further and created another refinery, calling it ‘Standard Works’. John appointed his brother William to head that refinery.

Rockefeller was innovative and demonstrated economies of scale when he made his own barrels. His refinery sold byproducts of petroleum such as benzene, paraffin and petroleum jelly in addition to kerosene. Seeing the excess production of crude oil in America, Rockefeller thought to export oil to counter the overproduction. He set up Rockefeller and Company in New York in 1866 to export the products of their Cleveland refineries to Europe. Rockefeller dreamt big about his business and borrowed heavily from the banks to finance his plans and expansions. Henry Morrison Flagler, a young Ohio businessman who shared the same business beliefs as Rockefeller, became a partner of the refining business in 1867. Flagler had previously patronized Rockefeller when he was still in the commodity business by sending him carloads of wheat. Through Flagler, Rockefeller got access to Stephen V. Harkness(Flagler’s relative and one of Cleveland’s richest men then) who invested $100,000 in the company. Harkness also gave Rockefeller numerous connections.

Freight costs were a determinant for a successful or downtrodden refining business. It wasn’t long before oil refiners rushed to railroad companies for cheaper rates. The railroad companies had such tremendous power over the American economy as they decided who could use their lines and how much manufacturers paid to transport goods. Cleveland, Ohio gave Rockefeller room to maneuver freight negotiations as it had so many transportation networks. He could bypass the railroad companies and send his refined oil via the waterways during the summer which was cheaper. Cleveland was serviced by three railroad lines: The Erie Railroad, the New York Central and the Pennsylvania Railroad. Rockefeller’s chance came when the Pennsylvania railroad had threatened to block out Cleveland refiners from using their rail-lines because they wanted to serve refiners only in the Oil Regions (Franklin, Titusville and Oil City, all in Pennsylvania) and make more profits.This enabled him forge deals with the other two railroads and turn the situation to his advantage. In 1968, they made a deal where they received a 75% rebate on oil shipped via the Erie line. They also had an arrangement for a $1.65 per barrel shipment opposed to an official rate of $2.40 per barrel on the Lake Shore railroad (subsidiary of the New York Central). Rockefeller could broker these deals because he was the largest refiner and these deals were made with the promise of constant oil traffic on the trains of the railroad owners. It is important to note that the rebate system was not illegal at that time.

The strangling competition in the refining business could not break Rockefeller’s resolve to become the king of the oil industry. He had to incorporate his company. With a $1 million capital (more than $11 million today), the Standard Oil company was born. Standard Oil was a wonder as Rockefeller said, “there was no other concern in the country organized with such a capital.” Rockefeller maintained his position as highest shareholder throughout its existence. His purchase of rival refiners was his trademark and Rockefeller brought in several investors including Commodore Vanderbilt (considered the greatest man in the railroad industry) to boost the firm’s capital.

One of the most daring feats during Rockefeller’s career was the South Improvement Company in 1872, devised by Tom Scott (mentor of Andrew Carnegie), head of the Pennsylvania railroad that had previously waged war against Rockefeller and the Cleveland refiners. Scott had proposed an alliance between the three most powerful railroads (Pennsylvania, New York Central and Erie) and major refiners including Standard Oil. The deal’s terms were to raise freight rates greatly for all refiners but give a 50% rebate from crude and refined oil shipments. This deal would create an unparalleled margin between Standard Oil with all refiners in the scheme, and refiners outside the scheme. Not only that, they were also to receive rebates on shipments made by ‘outside’ refiners. They also had access to intelligence on the oil shipped by competitors, giving them an opportunity to under price them. The scheme was exposed without any of its plans being implemented andRockefeller became a public enemy.

The South Improvement Company had given Rockefeller headway as he used the scheme to acquire twenty-two of twenty-six Cleveland rival refiners. He warned the competitors of the impending doom they had to face if they didn’t sell out to him. Rockefeller often advised them to take Standard Oil stock instead of cash. Rockefeller continued his buying spree and eventually bought out most of the major refineries in the US. He exhibited a team-spirit at meetings and rarely used the word “I” when talking to colleagues:“Don’t say that I ought to do this or that,” he told them. “We ought to do it. Never forget that we are partners; whatever is done is for the general good of us all.” He often embraced contrary opinions when plans were discussed.

Rockefeller often connected his business practices with his Christian beliefs. He saw himself and his Standard oil army as missionaries of light who had come to save an industry on the brink of collapse. He once told a reporter, “I believe the power to make money is a gift from God—just as are the instincts for art, music, literature, the doctor’s talent, the nurse’s, yours—to be developed and used to the best of our ability for the good of mankind. Having been endowed with the gift I possess, I believe it is my duty to make money and still more money, and to use the money I make for the good of my fellow man according to the dictates of my conscience.” Even when stupendously rich, Rockefeller was still active in his church duties, serving as a sanctuary cleaner and Sunday School teacher.

Rockefeller avoided publicity and wasn’t one to impress people. He lived a simple life and raised his children with such. He and Laura (his wife) brought up their children in such austerity that they had to earn money by killing flies, pulling weeds, cleaning and exhibiting good behaviour. He expressed disdain for alcohol all through his life and supported the Temperance Movement with his wife.

Rockefeller became one of America’s richest men at forty and Standard Oil now owned about 90 percent of the refineries and pipelines in America. There was however, an antitrust law enacted that prevented Standard Oil of Ohio from owning companies in other states. To solve this problem, the company in 1879, had to assign trustees to hold stock in about twenty other subsidiaries outside the state. When they received dividends, they had to distribute them to thirty-seven individual investors of Standard Oil of Ohio including Rockefeller. This was ingenuous. Rockefeller and his crew had to find ways of maneuvering laws that restricted their business operations. Rockefeller needed to change his game plan again in 1881 when Pennsylvania tried to tax Standard Oil of Ohio’s properties in Pennsylvania. He had to bring in Samuel C.T. Dodd, who drafted up an interstate operation plan in which a separate Standard Oil would be set up in every state where it had major interests. The Standard Oil of New York was formed with William Rockefeller as president and John D. Rockefeller as president of Standard Oil of New Jersey. The Trust was eventually dissolved in 1892 with the same men who controlled the majority shareholders of the component companies.

Rockefeller retired in 1897, at age 58 and passed his duties to John Archbold. After Standard Oil, he was mainly involved in philanthropic activities. He was stalked and literally hunted by people asking him for money. People even stopped by his church on Sundays to catch a glimpse of the world’s richest man. He appointed Frederick T. Gates, a Baptist Minister to manage his philanthropic work and his son later joined. Rockefeller acted as almost sole-benefactor for the University of Chicago. He founded the General Education Board (now Rockefeller Foundation) in 1903 and Rockefeller Institute for Medical Research (now Rockefeller University) which helped eradicate hookworm and yellow-fever. His giving totaled more than $500 million. His son continued the distribution of his wealth for the good of mankind.

After Theodore Roosevelt became president of the United States in 1901, he hunted down gigantic Trusts including Standard Oil. On November 18, 1906, the US Federal Government filed a suit against Standard Oil under the Sherman Anti-Trust Act. The verdict for the case against the great Standard Oil was announced on May 15th, 1911 while Rockefeller was playing golf (a habit he cultivated in old age). The government won but Rockefeller became richer as the value of his stocks appreciated. The Supreme Court’s decision was to dismantle Standard Oil into what we have today as: Exxon (Standard Oil of New Jersey), Mobil (Standard Oil of New York), Chevron (Standard Oil of California), Amoco (Standard Oil of Indiana), Conoco (Continental Oil) and many others. The breaking up of Standard Oil made him history’s first recorded billionaire.

In his later years, Rockefeller settled in his private estate and began played golf at exactly twelve minutes past twelve. This puzzled Henry Ford, the automobile genius who became a usual visitor and good friend of Rockefeller’s. John D. Rockefeller became a media sensation in his eighties. The legend was portrayed in videos as a genial old man who always dispensed dimes to adults and nickels to kids. Rockefeller’s son, John D. Rockefeller Jr. had five sons who soon became symbols of power in America.

Rockefeller died from natural causes on May 23, 1937, two years and two months short of his dream of clocking a hundred years. He made this statement in poetic fashion:

“I was early taught to work as well as play

My life has been one long, happy holiday

Full of work and full of play

I dropped the worry on the way

And God was good to me everyday.”

Rockefeller’s only surviving grandson, David, clocked 100 years on June 12, 2015 and is worth about $3.2 billion (the world’s oldest richest man). He was still alive when this article was written.