He was, at one point, not just the richest man in America, but the richest man in the world.
In this episode, we'll be looking at the life of American business magnate John D. Rockefeller and how he built and grew the Standard Oil empire.
[00:00:00] Hello, hello hello, and welcome to English Learning for Curious Minds, by Leonardo English.
[00:00:11] The show where you can listen to fascinating stories, and learn weird and wonderful things about the world at the same time as improving your English.
[00:00:21] I'm Alastair Budge, and today we are going to be talking about a man who was, at one point, not just the richest man in America, but the richest man in the world.
[00:00:32] His name was John D. Rockefeller. Now, I’m sure you have heard this name already, perhaps you already know a little bit about him, but in today’s episode we’ll go a little deeper.
[00:00:45] We’ll look at how his childhood, and in particular the behaviour of his father, influenced his later life.
[00:00:53] We’ll look at how he spotted opportunities and capitalised on them, ultimately becoming the richest and most powerful person in the country, and we’ll look at how, despite all the efforts to rein him in and reduce his power, there was seemingly nothing that could stop his bank balance from going up.
[00:01:13] OK then, let’s get right into it and talk about J.D Rockefeller, America’s Richest Man.
[00:01:22] The word “monopoly” comes from Ancient Greek, monos, meaning single or alone, and pōlein, meaning to sell.
[00:01:32] If you look it up in a dictionary you’ll find it defined as something like “a structure in which a single supplier produces and sells a given product or service”.
[00:01:44] And the first known use of the word “monopoly”, can be traced all the way back to the 4th century BC, in Aristotle’s philosophical work, Politics.
[00:01:57] In this work, Aristotle talks about how another Greek philosopher, Thales of Miletus, cornered the market of olive presses, the machines used to squeeze the liquid out of olives to make olive oil.
[00:02:12] Thales, according to Aristotle, had correctly predicted that there would be a period of good weather, he had agreed in advance to rent all of the olive presses in the local area, and when demand to use the olive presses increased, Thales was able to rent them out at a profit.
[00:02:32] Now, Thales of Miletus appeared to have little interest in business or making money, and he engaged in this monopolistic action as a way to prove a point.
[00:02:44] And, you might point out, having a monopoly over the olive presses in an area of Greece, well, sure the Ancient Greeks did like their olive oil, but this is not the sort of huge, money-printing business that you might think of when you hear the term “monopoly”.
[00:03:02] However, fast-forward to the late 19th century, to 1880 to be precise, and we will find another oil monopoly, but this one will be in a completely different league.
[00:03:17] One company, called Standard Oil, controlled 90% of the oil refining business in the then oil capital of the world, the United States. The business owned six and a half thousand kilometres of pipeline, and employed 100,000 people, so that’s 0.2% of the entire US population at the time.
[00:03:42] And at the top of it all stood one man, John Davison Rockefeller.
[00:03:49] By this time, his net worth was an estimated $400 billion in today’s money. And for reference, the richest person in the world as of the time of making this episode, Elon Musk, is only worth $200 billion.
[00:04:08] But to find out how Rockefeller got there, we need to go right back to the start. As you might expect, there were several experiences in young John’s life that instilled in him the qualities that would translate into such success.
[00:04:26] He was born on July 8th, 1839, in Richford, New York.
[00:04:32] His father, Bill, was a so-called “botanics salesman”.
[00:04:38] Now, this might sound exotic, legitimate, and something like a herbal doctor, but what it really meant was that he was a conman and a trickster; he was a fraud.
[00:04:53] He would travel from town to town selling supposed “miracle remedies”, but they would really do nothing at all, and by the time his patients realised this, Bill would have skipped town and moved on to look for the next gullible crowd.
[00:05:12] As you might imagine, the nature of Bill’s job meant that he was on the move a lot. He would only occasionally return home to his wife and kids, sometimes with lots of money, sometimes with none.
[00:05:28] When he did come back, he would even trick and cheat his own children, including John, which Bill felt was an important lesson a father should teach his children: never trust anyone.
[00:05:42] It seems that there were plenty of other reasons for young John not to trust his father.
[00:05:47] He was, of course, a con man, but he was also having an affair. Not just this, but he had somehow persuaded his wife to allow his lover to move in with them as their supposed “housekeeper”.
[00:06:03] Bill was clearly a nasty piece of work: disloyal to his wife, absent from his family, and mean to his children.
[00:06:13] But John was not like his father. And indeed, he looked at his father’s behaviour, from the cheating in business to the betrayal of his mother, with disgust, and swore to never be like him.
[00:06:27] And, for the most part, he wasn’t.
[00:06:31] He started his business career young, doing things like raising turkeys for his mother and loaning the money he made to a local farmer. It would appear that he got out of the house at the first opportunity, as at the age of 16 he got his first “real” job, working as an office clerk at a company in Cleveland, Ohio, a company that bought, sold, and shipped grain, coal, and other commodities.
[00:07:02] This was clearly an important step for young John.
[00:07:07] So important, in fact, that he would mark September 26th, the day he started this job, with an annual celebration, calling it “Job Day”.
[00:07:18] Now, it wouldn’t be this job that would turn him into the richest person in the world.
[00:07:23] He was paid a measly 50 cents a day, or $17 a day in today’s money.
[00:07:31] But this job would do two things.
[00:07:35] First, he saw how the world of business, in particular transportation, worked. He saw behind the scenes, he saw how much stuff cost and how much money companies made from it, which would open his eyes to how to make money.
[00:07:52] And secondly, this experience would allow him to make a name for himself as an honest and trustworthy person. He worked long hours, he was always polite and diligent, and in contrast to his professional con artist of a father, he never tricked or overcharged his customers.
[00:08:13] This would give him the confidence that he could run a business himself, and so in 1859, at the age of 20, he started his own trading business with a partner.
[00:08:25] It was, as you might suspect, a near-immediate success.
[00:08:30] His company bought, sold and transported commodities. With the outbreak of the American Civil War in 1861, business boomed, as the Union Army enlisted Rockefeller’s logistics services.
[00:08:44] Rockefeller, by the way, was a staunch abolitionist, he was anti-slavery, and it’s said that he would have enlisted himself and fought in the war had there been someone who could have taken over his responsibilities in the business.
[00:08:59] Wartime business was good, but as the war drew to a close, and with it the war-time profits drying up, Rockefeller was on the lookout for a new opportunity.
[00:09:13] This opportunity, it turned out, was right in front of his eyes, or under his feet, depending on how you look at it.
[00:09:22] Oil.
[00:09:24] We might now think of the oil capitals of the world to be located in the Middle East: Saudi Arabia, Kuwait, Iran, and so on.
[00:09:34] In the mid to late 19th century, however, there was only really one oil capital. The United States of America.
[00:09:43] In 1859, crude oil had been discovered in Pennsylvania, and there was a subsequent oil rush, with speculators buying up land, laying drills, and hoping that they would be greeted by a fountain of black liquid rising up into the air.
[00:10:02] Many of these oil speculators grew spectacularly wealthy.
[00:10:07] Others, on the other hand, lost everything, as they took on large loans or invested all of their savings only to find that the land they had thought would contain this miracle black gold, contained nothing more than dry earth.
[00:10:25] What’s more, they were completely at the mercy of the price of oil, which went up and down like a seesaw.
[00:10:34] Rockefeller saw this and thought, well, I could try my hand at drilling for the oil myself, but that seems kind of risky.
[00:10:42] Instead, why don’t I deal with the processing and refining of the oil after it has been discovered, therefore I don’t take on any of the risk, and I still have most of the upside, all the money-making potential.
[00:10:58] So, in 1863, shortly after the end of the war, Rockefeller and his partners switched from transporting commodities to refining crude oil. Remember, the oil that comes directly from the ground needs to be processed and standardised so that it can be used. An oil “refinery” is an integral part of the oil supply chain.
[00:11:23] And these oil refineries, at least before Rockefeller got into the business, were pretty wasteful places. They took the crude oil, turned it into kerosene, but they would throw away all of the byproducts that were produced during the refining process. This was about 40% of the total, and it was simply thrown away, discarded.
[00:11:51] Rockefeller, ever the numbers man, looked at this and thought “can we use this waste product for something? Is there a way to make money from it rather than throw it away?”
[00:12:02] It turned out that there certainly was. This waste product could be used for everything from creating tar for roads through to gas to power the refinery itself.
[00:12:14] Instead of being thrown away, it was used or sold, which made Rockefeller’s operation much more profitable.
[00:12:22] What’s more, he looked at everything that the business did, and did everything he could to cut costs: he brought in his own plumbers to lay piping and ordered for his own wooden barrels to be built.
[00:12:35] Long story short, Rockefeller was able to reduce his costs significantly and increase his revenues. And you don’t have to have been to Harvard Business School to know that this is good news for a business.
[00:12:49] But, rather than Rockefeller himself taking huge amounts of money out of the company and sleeping on a bed of hundred dollar bills, he ploughed all of his profits back into growing the company.
[00:13:03] He started by buying out his partners, and then went on a buying spree, buying up smaller refineries around him, and getting closer and closer to what Thales of Miletus had achieved in the 4th century BC: an oil monopoly.
[00:13:20] In 1870, he founded the company he would grow to be famous for, Standard Oil.
[00:13:26] As Standard Oil grew, Rockefeller was able to continually offer the lowest prices in the market, meaning his rivals simply couldn’t compete. According to one story, Rockefeller would invite a competitor to his office, open up his books, his accounts, and let the competitor realise for themself that Standard Oil could continue to sell oil at rock bottom prices for longer than the competitor could stay in business.
[00:13:57] Essentially, there was no way that other companies could compete. They could either sell to Rockefeller, and join him, or they would go out of business. It really wasn’t much of a choice.
[00:14:10] Like a python slithering along the floor, swallowing up animals that got in its way, and in the process growing bigger and bigger, Standard Oil continued to grow.
[00:14:23] In one four month period alone, in 1872, it bought 22 of the 26 other oil refineries in Cleveland, Ohio.
[00:14:34] Rockefeller also expanded into buying oil pipeline networks. This enabled the company to cut off the flow of crude oil to refineries that Rockefeller wanted to buy.
[00:14:45] And, when one rival company attempted to build a competing pipeline across Pennsylvania, Standard Oil bought up the land along the way to block it.
[00:14:57] In business he was completely cut-throat, he would do whatever it took to enlarge his empire.
[00:15:04] Now, although consumers overall liked the lower prices that came from this, there was an increasing feeling that Standard Oil the company, and Rockefeller the man, were growing too strong and too powerful.
[00:15:20] And, by 1880, it controlled 90% of the oil refining business in the United States. It had huge power to negotiate prices, knock down suppliers, and–if it wanted–increase prices for consumers.
[00:15:37] Ultimately, Rockefeller was forced to restructure Standard Oil, ending up dividing it into a “trust”, owned by its shareholder. What this meant was that, in practice, Rockefeller and his business partners still owned it, but less directly.
[00:15:56] To make the oil market seem less monopolised by Standard Oil, the Standard Oil Trust also created other smaller companies to look like there was competition, but these companies were also ultimately owned by Standard Oil.
[00:16:13] Thales of Miletus might have had a temporary monopoly on olive presses in a small region of the Mediterranean, but John D Rockefeller had what looked like an unbreakable monopoly in the United States on the most sought after commodity in the world.
[00:16:30] By this time the company was hugely profitable, paying out vast dividends to Rockefeller and its other shareholders every month.
[00:16:40] But, its success and size would ultimately lead to legislation against it, and it was disbanded in 1911.
[00:16:50] It was split into 40 different companies, many of which you’ll have heard of and are still around today: Exxon Mobil, Chevron, and Marathon, for example.
[00:17:01] Now, apart from the nature of his business and his dealmaking, we haven’t heard much yet about John D. Rockefeller the man. This is really because he was a very private man, and not a huge amount is known about him.
[00:17:18] By all accounts he was, if you’ll excuse such a generalisation, a “good man”. He married a schoolteacher, with whom he had five children. He was a faithful husband and a loyal father to his children.
[00:17:34] Throughout his life, he donated heavily to good causes, giving away an estimated $540 million dollars, which if we adjust it to today’s money would be something like $20 billion.
[00:17:49] And this is the “problem” of J.D. Rockefeller, or at least the main reason he was and still is a controversial figure.
[00:17:59] He was by some calculations the richest man in the history of the world, and controlled vast wealth and power. He was an easy man to point fingers at and say “it is disgraceful for one person to amass such wealth while there is such poverty in the world”.
[00:18:17] Yet he gave away a huge amount of money to good causes, he did more good in terms of his philanthropy than anyone else in recent history.
[00:18:28] So he has gone down in history as both a robber baron and a philanthropist, a legendary businessman and a double-crossing capitalist, someone who built and standardised a vital industry but put his competitors out of business in the process.
[00:18:46] As his biographer wrote, “What makes him problematic is that his good side was every bit as good as his bad side was bad. Seldom has history produced such a contradictory figure.”
[00:19:00] He died in 1937, less than two months away from his 98th birthday. As a young man he had reportedly said that he had two wishes in life: to make a hundred thousand dollars, and to live to the age of 100.
[00:19:19] As to the first one, Rockefeller could have put a few zeroes on the end and he would still have got there. In 1913, he was worth around 3% of US GDP, which would be almost a trillion dollars in today’s money.
[00:19:35] And as to the second, living to 100, well he almost did it, but there are some things in life that money can’t buy.
[00:19:46] OK then, that is it for today's episode on J.D Rockefeller | America’s Richest Man.
[00:19:53] I hope it's been an interesting one, and that you've learnt something new.
[00:19:57] As always, I would love to know your thoughts about this episode.
[00:20:01] What is “too big”? Can a monopoly ever be a good thing?
[00:20:05] And are there any Rockefeller-like people in your country?
[00:20:09] I would love to know, so let’s get this discussion started, the place for that is, as always, community.leonardoenglish.com
[00:20:17] Oh, and we are actually going to be following up this episode with another one about an American tycoon, but a very different one this time, Cornelius Vanderbilt, so keep a lookout for that one.
[00:20:29] You've been listening to English Learning for Curious Minds, by Leonardo English.
[00:20:34] I'm Alastair Budge, you stay safe, and I'll catch you in the next episode.
[END OF EPISODE]
[00:00:00] Hello, hello hello, and welcome to English Learning for Curious Minds, by Leonardo English.
[00:00:11] The show where you can listen to fascinating stories, and learn weird and wonderful things about the world at the same time as improving your English.
[00:00:21] I'm Alastair Budge, and today we are going to be talking about a man who was, at one point, not just the richest man in America, but the richest man in the world.
[00:00:32] His name was John D. Rockefeller. Now, I’m sure you have heard this name already, perhaps you already know a little bit about him, but in today’s episode we’ll go a little deeper.
[00:00:45] We’ll look at how his childhood, and in particular the behaviour of his father, influenced his later life.
[00:00:53] We’ll look at how he spotted opportunities and capitalised on them, ultimately becoming the richest and most powerful person in the country, and we’ll look at how, despite all the efforts to rein him in and reduce his power, there was seemingly nothing that could stop his bank balance from going up.
[00:01:13] OK then, let’s get right into it and talk about J.D Rockefeller, America’s Richest Man.
[00:01:22] The word “monopoly” comes from Ancient Greek, monos, meaning single or alone, and pōlein, meaning to sell.
[00:01:32] If you look it up in a dictionary you’ll find it defined as something like “a structure in which a single supplier produces and sells a given product or service”.
[00:01:44] And the first known use of the word “monopoly”, can be traced all the way back to the 4th century BC, in Aristotle’s philosophical work, Politics.
[00:01:57] In this work, Aristotle talks about how another Greek philosopher, Thales of Miletus, cornered the market of olive presses, the machines used to squeeze the liquid out of olives to make olive oil.
[00:02:12] Thales, according to Aristotle, had correctly predicted that there would be a period of good weather, he had agreed in advance to rent all of the olive presses in the local area, and when demand to use the olive presses increased, Thales was able to rent them out at a profit.
[00:02:32] Now, Thales of Miletus appeared to have little interest in business or making money, and he engaged in this monopolistic action as a way to prove a point.
[00:02:44] And, you might point out, having a monopoly over the olive presses in an area of Greece, well, sure the Ancient Greeks did like their olive oil, but this is not the sort of huge, money-printing business that you might think of when you hear the term “monopoly”.
[00:03:02] However, fast-forward to the late 19th century, to 1880 to be precise, and we will find another oil monopoly, but this one will be in a completely different league.
[00:03:17] One company, called Standard Oil, controlled 90% of the oil refining business in the then oil capital of the world, the United States. The business owned six and a half thousand kilometres of pipeline, and employed 100,000 people, so that’s 0.2% of the entire US population at the time.
[00:03:42] And at the top of it all stood one man, John Davison Rockefeller.
[00:03:49] By this time, his net worth was an estimated $400 billion in today’s money. And for reference, the richest person in the world as of the time of making this episode, Elon Musk, is only worth $200 billion.
[00:04:08] But to find out how Rockefeller got there, we need to go right back to the start. As you might expect, there were several experiences in young John’s life that instilled in him the qualities that would translate into such success.
[00:04:26] He was born on July 8th, 1839, in Richford, New York.
[00:04:32] His father, Bill, was a so-called “botanics salesman”.
[00:04:38] Now, this might sound exotic, legitimate, and something like a herbal doctor, but what it really meant was that he was a conman and a trickster; he was a fraud.
[00:04:53] He would travel from town to town selling supposed “miracle remedies”, but they would really do nothing at all, and by the time his patients realised this, Bill would have skipped town and moved on to look for the next gullible crowd.
[00:05:12] As you might imagine, the nature of Bill’s job meant that he was on the move a lot. He would only occasionally return home to his wife and kids, sometimes with lots of money, sometimes with none.
[00:05:28] When he did come back, he would even trick and cheat his own children, including John, which Bill felt was an important lesson a father should teach his children: never trust anyone.
[00:05:42] It seems that there were plenty of other reasons for young John not to trust his father.
[00:05:47] He was, of course, a con man, but he was also having an affair. Not just this, but he had somehow persuaded his wife to allow his lover to move in with them as their supposed “housekeeper”.
[00:06:03] Bill was clearly a nasty piece of work: disloyal to his wife, absent from his family, and mean to his children.
[00:06:13] But John was not like his father. And indeed, he looked at his father’s behaviour, from the cheating in business to the betrayal of his mother, with disgust, and swore to never be like him.
[00:06:27] And, for the most part, he wasn’t.
[00:06:31] He started his business career young, doing things like raising turkeys for his mother and loaning the money he made to a local farmer. It would appear that he got out of the house at the first opportunity, as at the age of 16 he got his first “real” job, working as an office clerk at a company in Cleveland, Ohio, a company that bought, sold, and shipped grain, coal, and other commodities.
[00:07:02] This was clearly an important step for young John.
[00:07:07] So important, in fact, that he would mark September 26th, the day he started this job, with an annual celebration, calling it “Job Day”.
[00:07:18] Now, it wouldn’t be this job that would turn him into the richest person in the world.
[00:07:23] He was paid a measly 50 cents a day, or $17 a day in today’s money.
[00:07:31] But this job would do two things.
[00:07:35] First, he saw how the world of business, in particular transportation, worked. He saw behind the scenes, he saw how much stuff cost and how much money companies made from it, which would open his eyes to how to make money.
[00:07:52] And secondly, this experience would allow him to make a name for himself as an honest and trustworthy person. He worked long hours, he was always polite and diligent, and in contrast to his professional con artist of a father, he never tricked or overcharged his customers.
[00:08:13] This would give him the confidence that he could run a business himself, and so in 1859, at the age of 20, he started his own trading business with a partner.
[00:08:25] It was, as you might suspect, a near-immediate success.
[00:08:30] His company bought, sold and transported commodities. With the outbreak of the American Civil War in 1861, business boomed, as the Union Army enlisted Rockefeller’s logistics services.
[00:08:44] Rockefeller, by the way, was a staunch abolitionist, he was anti-slavery, and it’s said that he would have enlisted himself and fought in the war had there been someone who could have taken over his responsibilities in the business.
[00:08:59] Wartime business was good, but as the war drew to a close, and with it the war-time profits drying up, Rockefeller was on the lookout for a new opportunity.
[00:09:13] This opportunity, it turned out, was right in front of his eyes, or under his feet, depending on how you look at it.
[00:09:22] Oil.
[00:09:24] We might now think of the oil capitals of the world to be located in the Middle East: Saudi Arabia, Kuwait, Iran, and so on.
[00:09:34] In the mid to late 19th century, however, there was only really one oil capital. The United States of America.
[00:09:43] In 1859, crude oil had been discovered in Pennsylvania, and there was a subsequent oil rush, with speculators buying up land, laying drills, and hoping that they would be greeted by a fountain of black liquid rising up into the air.
[00:10:02] Many of these oil speculators grew spectacularly wealthy.
[00:10:07] Others, on the other hand, lost everything, as they took on large loans or invested all of their savings only to find that the land they had thought would contain this miracle black gold, contained nothing more than dry earth.
[00:10:25] What’s more, they were completely at the mercy of the price of oil, which went up and down like a seesaw.
[00:10:34] Rockefeller saw this and thought, well, I could try my hand at drilling for the oil myself, but that seems kind of risky.
[00:10:42] Instead, why don’t I deal with the processing and refining of the oil after it has been discovered, therefore I don’t take on any of the risk, and I still have most of the upside, all the money-making potential.
[00:10:58] So, in 1863, shortly after the end of the war, Rockefeller and his partners switched from transporting commodities to refining crude oil. Remember, the oil that comes directly from the ground needs to be processed and standardised so that it can be used. An oil “refinery” is an integral part of the oil supply chain.
[00:11:23] And these oil refineries, at least before Rockefeller got into the business, were pretty wasteful places. They took the crude oil, turned it into kerosene, but they would throw away all of the byproducts that were produced during the refining process. This was about 40% of the total, and it was simply thrown away, discarded.
[00:11:51] Rockefeller, ever the numbers man, looked at this and thought “can we use this waste product for something? Is there a way to make money from it rather than throw it away?”
[00:12:02] It turned out that there certainly was. This waste product could be used for everything from creating tar for roads through to gas to power the refinery itself.
[00:12:14] Instead of being thrown away, it was used or sold, which made Rockefeller’s operation much more profitable.
[00:12:22] What’s more, he looked at everything that the business did, and did everything he could to cut costs: he brought in his own plumbers to lay piping and ordered for his own wooden barrels to be built.
[00:12:35] Long story short, Rockefeller was able to reduce his costs significantly and increase his revenues. And you don’t have to have been to Harvard Business School to know that this is good news for a business.
[00:12:49] But, rather than Rockefeller himself taking huge amounts of money out of the company and sleeping on a bed of hundred dollar bills, he ploughed all of his profits back into growing the company.
[00:13:03] He started by buying out his partners, and then went on a buying spree, buying up smaller refineries around him, and getting closer and closer to what Thales of Miletus had achieved in the 4th century BC: an oil monopoly.
[00:13:20] In 1870, he founded the company he would grow to be famous for, Standard Oil.
[00:13:26] As Standard Oil grew, Rockefeller was able to continually offer the lowest prices in the market, meaning his rivals simply couldn’t compete. According to one story, Rockefeller would invite a competitor to his office, open up his books, his accounts, and let the competitor realise for themself that Standard Oil could continue to sell oil at rock bottom prices for longer than the competitor could stay in business.
[00:13:57] Essentially, there was no way that other companies could compete. They could either sell to Rockefeller, and join him, or they would go out of business. It really wasn’t much of a choice.
[00:14:10] Like a python slithering along the floor, swallowing up animals that got in its way, and in the process growing bigger and bigger, Standard Oil continued to grow.
[00:14:23] In one four month period alone, in 1872, it bought 22 of the 26 other oil refineries in Cleveland, Ohio.
[00:14:34] Rockefeller also expanded into buying oil pipeline networks. This enabled the company to cut off the flow of crude oil to refineries that Rockefeller wanted to buy.
[00:14:45] And, when one rival company attempted to build a competing pipeline across Pennsylvania, Standard Oil bought up the land along the way to block it.
[00:14:57] In business he was completely cut-throat, he would do whatever it took to enlarge his empire.
[00:15:04] Now, although consumers overall liked the lower prices that came from this, there was an increasing feeling that Standard Oil the company, and Rockefeller the man, were growing too strong and too powerful.
[00:15:20] And, by 1880, it controlled 90% of the oil refining business in the United States. It had huge power to negotiate prices, knock down suppliers, and–if it wanted–increase prices for consumers.
[00:15:37] Ultimately, Rockefeller was forced to restructure Standard Oil, ending up dividing it into a “trust”, owned by its shareholder. What this meant was that, in practice, Rockefeller and his business partners still owned it, but less directly.
[00:15:56] To make the oil market seem less monopolised by Standard Oil, the Standard Oil Trust also created other smaller companies to look like there was competition, but these companies were also ultimately owned by Standard Oil.
[00:16:13] Thales of Miletus might have had a temporary monopoly on olive presses in a small region of the Mediterranean, but John D Rockefeller had what looked like an unbreakable monopoly in the United States on the most sought after commodity in the world.
[00:16:30] By this time the company was hugely profitable, paying out vast dividends to Rockefeller and its other shareholders every month.
[00:16:40] But, its success and size would ultimately lead to legislation against it, and it was disbanded in 1911.
[00:16:50] It was split into 40 different companies, many of which you’ll have heard of and are still around today: Exxon Mobil, Chevron, and Marathon, for example.
[00:17:01] Now, apart from the nature of his business and his dealmaking, we haven’t heard much yet about John D. Rockefeller the man. This is really because he was a very private man, and not a huge amount is known about him.
[00:17:18] By all accounts he was, if you’ll excuse such a generalisation, a “good man”. He married a schoolteacher, with whom he had five children. He was a faithful husband and a loyal father to his children.
[00:17:34] Throughout his life, he donated heavily to good causes, giving away an estimated $540 million dollars, which if we adjust it to today’s money would be something like $20 billion.
[00:17:49] And this is the “problem” of J.D. Rockefeller, or at least the main reason he was and still is a controversial figure.
[00:17:59] He was by some calculations the richest man in the history of the world, and controlled vast wealth and power. He was an easy man to point fingers at and say “it is disgraceful for one person to amass such wealth while there is such poverty in the world”.
[00:18:17] Yet he gave away a huge amount of money to good causes, he did more good in terms of his philanthropy than anyone else in recent history.
[00:18:28] So he has gone down in history as both a robber baron and a philanthropist, a legendary businessman and a double-crossing capitalist, someone who built and standardised a vital industry but put his competitors out of business in the process.
[00:18:46] As his biographer wrote, “What makes him problematic is that his good side was every bit as good as his bad side was bad. Seldom has history produced such a contradictory figure.”
[00:19:00] He died in 1937, less than two months away from his 98th birthday. As a young man he had reportedly said that he had two wishes in life: to make a hundred thousand dollars, and to live to the age of 100.
[00:19:19] As to the first one, Rockefeller could have put a few zeroes on the end and he would still have got there. In 1913, he was worth around 3% of US GDP, which would be almost a trillion dollars in today’s money.
[00:19:35] And as to the second, living to 100, well he almost did it, but there are some things in life that money can’t buy.
[00:19:46] OK then, that is it for today's episode on J.D Rockefeller | America’s Richest Man.
[00:19:53] I hope it's been an interesting one, and that you've learnt something new.
[00:19:57] As always, I would love to know your thoughts about this episode.
[00:20:01] What is “too big”? Can a monopoly ever be a good thing?
[00:20:05] And are there any Rockefeller-like people in your country?
[00:20:09] I would love to know, so let’s get this discussion started, the place for that is, as always, community.leonardoenglish.com
[00:20:17] Oh, and we are actually going to be following up this episode with another one about an American tycoon, but a very different one this time, Cornelius Vanderbilt, so keep a lookout for that one.
[00:20:29] You've been listening to English Learning for Curious Minds, by Leonardo English.
[00:20:34] I'm Alastair Budge, you stay safe, and I'll catch you in the next episode.
[END OF EPISODE]
[00:00:00] Hello, hello hello, and welcome to English Learning for Curious Minds, by Leonardo English.
[00:00:11] The show where you can listen to fascinating stories, and learn weird and wonderful things about the world at the same time as improving your English.
[00:00:21] I'm Alastair Budge, and today we are going to be talking about a man who was, at one point, not just the richest man in America, but the richest man in the world.
[00:00:32] His name was John D. Rockefeller. Now, I’m sure you have heard this name already, perhaps you already know a little bit about him, but in today’s episode we’ll go a little deeper.
[00:00:45] We’ll look at how his childhood, and in particular the behaviour of his father, influenced his later life.
[00:00:53] We’ll look at how he spotted opportunities and capitalised on them, ultimately becoming the richest and most powerful person in the country, and we’ll look at how, despite all the efforts to rein him in and reduce his power, there was seemingly nothing that could stop his bank balance from going up.
[00:01:13] OK then, let’s get right into it and talk about J.D Rockefeller, America’s Richest Man.
[00:01:22] The word “monopoly” comes from Ancient Greek, monos, meaning single or alone, and pōlein, meaning to sell.
[00:01:32] If you look it up in a dictionary you’ll find it defined as something like “a structure in which a single supplier produces and sells a given product or service”.
[00:01:44] And the first known use of the word “monopoly”, can be traced all the way back to the 4th century BC, in Aristotle’s philosophical work, Politics.
[00:01:57] In this work, Aristotle talks about how another Greek philosopher, Thales of Miletus, cornered the market of olive presses, the machines used to squeeze the liquid out of olives to make olive oil.
[00:02:12] Thales, according to Aristotle, had correctly predicted that there would be a period of good weather, he had agreed in advance to rent all of the olive presses in the local area, and when demand to use the olive presses increased, Thales was able to rent them out at a profit.
[00:02:32] Now, Thales of Miletus appeared to have little interest in business or making money, and he engaged in this monopolistic action as a way to prove a point.
[00:02:44] And, you might point out, having a monopoly over the olive presses in an area of Greece, well, sure the Ancient Greeks did like their olive oil, but this is not the sort of huge, money-printing business that you might think of when you hear the term “monopoly”.
[00:03:02] However, fast-forward to the late 19th century, to 1880 to be precise, and we will find another oil monopoly, but this one will be in a completely different league.
[00:03:17] One company, called Standard Oil, controlled 90% of the oil refining business in the then oil capital of the world, the United States. The business owned six and a half thousand kilometres of pipeline, and employed 100,000 people, so that’s 0.2% of the entire US population at the time.
[00:03:42] And at the top of it all stood one man, John Davison Rockefeller.
[00:03:49] By this time, his net worth was an estimated $400 billion in today’s money. And for reference, the richest person in the world as of the time of making this episode, Elon Musk, is only worth $200 billion.
[00:04:08] But to find out how Rockefeller got there, we need to go right back to the start. As you might expect, there were several experiences in young John’s life that instilled in him the qualities that would translate into such success.
[00:04:26] He was born on July 8th, 1839, in Richford, New York.
[00:04:32] His father, Bill, was a so-called “botanics salesman”.
[00:04:38] Now, this might sound exotic, legitimate, and something like a herbal doctor, but what it really meant was that he was a conman and a trickster; he was a fraud.
[00:04:53] He would travel from town to town selling supposed “miracle remedies”, but they would really do nothing at all, and by the time his patients realised this, Bill would have skipped town and moved on to look for the next gullible crowd.
[00:05:12] As you might imagine, the nature of Bill’s job meant that he was on the move a lot. He would only occasionally return home to his wife and kids, sometimes with lots of money, sometimes with none.
[00:05:28] When he did come back, he would even trick and cheat his own children, including John, which Bill felt was an important lesson a father should teach his children: never trust anyone.
[00:05:42] It seems that there were plenty of other reasons for young John not to trust his father.
[00:05:47] He was, of course, a con man, but he was also having an affair. Not just this, but he had somehow persuaded his wife to allow his lover to move in with them as their supposed “housekeeper”.
[00:06:03] Bill was clearly a nasty piece of work: disloyal to his wife, absent from his family, and mean to his children.
[00:06:13] But John was not like his father. And indeed, he looked at his father’s behaviour, from the cheating in business to the betrayal of his mother, with disgust, and swore to never be like him.
[00:06:27] And, for the most part, he wasn’t.
[00:06:31] He started his business career young, doing things like raising turkeys for his mother and loaning the money he made to a local farmer. It would appear that he got out of the house at the first opportunity, as at the age of 16 he got his first “real” job, working as an office clerk at a company in Cleveland, Ohio, a company that bought, sold, and shipped grain, coal, and other commodities.
[00:07:02] This was clearly an important step for young John.
[00:07:07] So important, in fact, that he would mark September 26th, the day he started this job, with an annual celebration, calling it “Job Day”.
[00:07:18] Now, it wouldn’t be this job that would turn him into the richest person in the world.
[00:07:23] He was paid a measly 50 cents a day, or $17 a day in today’s money.
[00:07:31] But this job would do two things.
[00:07:35] First, he saw how the world of business, in particular transportation, worked. He saw behind the scenes, he saw how much stuff cost and how much money companies made from it, which would open his eyes to how to make money.
[00:07:52] And secondly, this experience would allow him to make a name for himself as an honest and trustworthy person. He worked long hours, he was always polite and diligent, and in contrast to his professional con artist of a father, he never tricked or overcharged his customers.
[00:08:13] This would give him the confidence that he could run a business himself, and so in 1859, at the age of 20, he started his own trading business with a partner.
[00:08:25] It was, as you might suspect, a near-immediate success.
[00:08:30] His company bought, sold and transported commodities. With the outbreak of the American Civil War in 1861, business boomed, as the Union Army enlisted Rockefeller’s logistics services.
[00:08:44] Rockefeller, by the way, was a staunch abolitionist, he was anti-slavery, and it’s said that he would have enlisted himself and fought in the war had there been someone who could have taken over his responsibilities in the business.
[00:08:59] Wartime business was good, but as the war drew to a close, and with it the war-time profits drying up, Rockefeller was on the lookout for a new opportunity.
[00:09:13] This opportunity, it turned out, was right in front of his eyes, or under his feet, depending on how you look at it.
[00:09:22] Oil.
[00:09:24] We might now think of the oil capitals of the world to be located in the Middle East: Saudi Arabia, Kuwait, Iran, and so on.
[00:09:34] In the mid to late 19th century, however, there was only really one oil capital. The United States of America.
[00:09:43] In 1859, crude oil had been discovered in Pennsylvania, and there was a subsequent oil rush, with speculators buying up land, laying drills, and hoping that they would be greeted by a fountain of black liquid rising up into the air.
[00:10:02] Many of these oil speculators grew spectacularly wealthy.
[00:10:07] Others, on the other hand, lost everything, as they took on large loans or invested all of their savings only to find that the land they had thought would contain this miracle black gold, contained nothing more than dry earth.
[00:10:25] What’s more, they were completely at the mercy of the price of oil, which went up and down like a seesaw.
[00:10:34] Rockefeller saw this and thought, well, I could try my hand at drilling for the oil myself, but that seems kind of risky.
[00:10:42] Instead, why don’t I deal with the processing and refining of the oil after it has been discovered, therefore I don’t take on any of the risk, and I still have most of the upside, all the money-making potential.
[00:10:58] So, in 1863, shortly after the end of the war, Rockefeller and his partners switched from transporting commodities to refining crude oil. Remember, the oil that comes directly from the ground needs to be processed and standardised so that it can be used. An oil “refinery” is an integral part of the oil supply chain.
[00:11:23] And these oil refineries, at least before Rockefeller got into the business, were pretty wasteful places. They took the crude oil, turned it into kerosene, but they would throw away all of the byproducts that were produced during the refining process. This was about 40% of the total, and it was simply thrown away, discarded.
[00:11:51] Rockefeller, ever the numbers man, looked at this and thought “can we use this waste product for something? Is there a way to make money from it rather than throw it away?”
[00:12:02] It turned out that there certainly was. This waste product could be used for everything from creating tar for roads through to gas to power the refinery itself.
[00:12:14] Instead of being thrown away, it was used or sold, which made Rockefeller’s operation much more profitable.
[00:12:22] What’s more, he looked at everything that the business did, and did everything he could to cut costs: he brought in his own plumbers to lay piping and ordered for his own wooden barrels to be built.
[00:12:35] Long story short, Rockefeller was able to reduce his costs significantly and increase his revenues. And you don’t have to have been to Harvard Business School to know that this is good news for a business.
[00:12:49] But, rather than Rockefeller himself taking huge amounts of money out of the company and sleeping on a bed of hundred dollar bills, he ploughed all of his profits back into growing the company.
[00:13:03] He started by buying out his partners, and then went on a buying spree, buying up smaller refineries around him, and getting closer and closer to what Thales of Miletus had achieved in the 4th century BC: an oil monopoly.
[00:13:20] In 1870, he founded the company he would grow to be famous for, Standard Oil.
[00:13:26] As Standard Oil grew, Rockefeller was able to continually offer the lowest prices in the market, meaning his rivals simply couldn’t compete. According to one story, Rockefeller would invite a competitor to his office, open up his books, his accounts, and let the competitor realise for themself that Standard Oil could continue to sell oil at rock bottom prices for longer than the competitor could stay in business.
[00:13:57] Essentially, there was no way that other companies could compete. They could either sell to Rockefeller, and join him, or they would go out of business. It really wasn’t much of a choice.
[00:14:10] Like a python slithering along the floor, swallowing up animals that got in its way, and in the process growing bigger and bigger, Standard Oil continued to grow.
[00:14:23] In one four month period alone, in 1872, it bought 22 of the 26 other oil refineries in Cleveland, Ohio.
[00:14:34] Rockefeller also expanded into buying oil pipeline networks. This enabled the company to cut off the flow of crude oil to refineries that Rockefeller wanted to buy.
[00:14:45] And, when one rival company attempted to build a competing pipeline across Pennsylvania, Standard Oil bought up the land along the way to block it.
[00:14:57] In business he was completely cut-throat, he would do whatever it took to enlarge his empire.
[00:15:04] Now, although consumers overall liked the lower prices that came from this, there was an increasing feeling that Standard Oil the company, and Rockefeller the man, were growing too strong and too powerful.
[00:15:20] And, by 1880, it controlled 90% of the oil refining business in the United States. It had huge power to negotiate prices, knock down suppliers, and–if it wanted–increase prices for consumers.
[00:15:37] Ultimately, Rockefeller was forced to restructure Standard Oil, ending up dividing it into a “trust”, owned by its shareholder. What this meant was that, in practice, Rockefeller and his business partners still owned it, but less directly.
[00:15:56] To make the oil market seem less monopolised by Standard Oil, the Standard Oil Trust also created other smaller companies to look like there was competition, but these companies were also ultimately owned by Standard Oil.
[00:16:13] Thales of Miletus might have had a temporary monopoly on olive presses in a small region of the Mediterranean, but John D Rockefeller had what looked like an unbreakable monopoly in the United States on the most sought after commodity in the world.
[00:16:30] By this time the company was hugely profitable, paying out vast dividends to Rockefeller and its other shareholders every month.
[00:16:40] But, its success and size would ultimately lead to legislation against it, and it was disbanded in 1911.
[00:16:50] It was split into 40 different companies, many of which you’ll have heard of and are still around today: Exxon Mobil, Chevron, and Marathon, for example.
[00:17:01] Now, apart from the nature of his business and his dealmaking, we haven’t heard much yet about John D. Rockefeller the man. This is really because he was a very private man, and not a huge amount is known about him.
[00:17:18] By all accounts he was, if you’ll excuse such a generalisation, a “good man”. He married a schoolteacher, with whom he had five children. He was a faithful husband and a loyal father to his children.
[00:17:34] Throughout his life, he donated heavily to good causes, giving away an estimated $540 million dollars, which if we adjust it to today’s money would be something like $20 billion.
[00:17:49] And this is the “problem” of J.D. Rockefeller, or at least the main reason he was and still is a controversial figure.
[00:17:59] He was by some calculations the richest man in the history of the world, and controlled vast wealth and power. He was an easy man to point fingers at and say “it is disgraceful for one person to amass such wealth while there is such poverty in the world”.
[00:18:17] Yet he gave away a huge amount of money to good causes, he did more good in terms of his philanthropy than anyone else in recent history.
[00:18:28] So he has gone down in history as both a robber baron and a philanthropist, a legendary businessman and a double-crossing capitalist, someone who built and standardised a vital industry but put his competitors out of business in the process.
[00:18:46] As his biographer wrote, “What makes him problematic is that his good side was every bit as good as his bad side was bad. Seldom has history produced such a contradictory figure.”
[00:19:00] He died in 1937, less than two months away from his 98th birthday. As a young man he had reportedly said that he had two wishes in life: to make a hundred thousand dollars, and to live to the age of 100.
[00:19:19] As to the first one, Rockefeller could have put a few zeroes on the end and he would still have got there. In 1913, he was worth around 3% of US GDP, which would be almost a trillion dollars in today’s money.
[00:19:35] And as to the second, living to 100, well he almost did it, but there are some things in life that money can’t buy.
[00:19:46] OK then, that is it for today's episode on J.D Rockefeller | America’s Richest Man.
[00:19:53] I hope it's been an interesting one, and that you've learnt something new.
[00:19:57] As always, I would love to know your thoughts about this episode.
[00:20:01] What is “too big”? Can a monopoly ever be a good thing?
[00:20:05] And are there any Rockefeller-like people in your country?
[00:20:09] I would love to know, so let’s get this discussion started, the place for that is, as always, community.leonardoenglish.com
[00:20:17] Oh, and we are actually going to be following up this episode with another one about an American tycoon, but a very different one this time, Cornelius Vanderbilt, so keep a lookout for that one.
[00:20:29] You've been listening to English Learning for Curious Minds, by Leonardo English.
[00:20:34] I'm Alastair Budge, you stay safe, and I'll catch you in the next episode.
[END OF EPISODE]
