29 / 09 / 2010
John D. Rockefeller. “I never would have been able to tithe the first million dollars I ever made if I had not tithed my first salary, which was $1.50 per week.”
John Davison Rockefeller Rockefeller was the second of six children born in Richford, in a small farm in the west of New York. His father, William Avery Rockefeller was first a lumberman, then a traveling salesman. Eliza, a homemaker and devout Baptist, struggled to maintain a semblance of stability at home. Since he was young, John D. Rockefeller evidenced his talent for the finance. He sold colored and rare formed stones to his schoolmates; he saved his small income in a blue vase, his first safe-deposit box. It didn´t pass a long time meet with the beautiful sum of $50, would determine the future orientation of boy. As an example, a farmer in the surrounding area needed precisely that amount to an urgent debt. John provided him... But with an interest rate of 7%! After a year, discovered struck that its capital given on loan returning to their pocket with 31/2 dollars of interest. From that date, wrote later "decided to make work to the money in my place". In 1853 the Rockefellers moved to Cleveland, Ohio, and John attended high school from 1853 to 1855. He was very good at math and was on the debating team. The school encouraged public speaking and even though Rockefeller was only average, it was a skill that would prove too useful to him. In the spring of 1855 Rockefeller spent 10 weeks at Folsom’s Commercial College (a "chain College" ) where he learned single and double-entry bookkeeping, penmanship, commercial history, mercantile customs, banking and exchange. From his father he had learned how to draw up notes and other business papers. His father was very meticulous in matters of business and believed in the sacredness of contracts. In August of 1855 at the age of 16 Rockefeller began looking for work in Cleveland as a bookkeeper or clerk. Business was bad in Cleveland at the time and Rockefeller had problems finding a job. He was always neatly dressed in a dark suit and black tie. Cleveland was not a large city in 1855 and Rockefeller could easily visit every business in under a week’s time. He returned to many businesses three times. Finally, on September 26, 1855, he got a job as an assistant bookkeeper with Hewitt & Tuttle, commission merchants and produce shippers.
By 1858 Rockefeller had more responsibilities at Hewitt & Tuttle. He arranged complicated transportation deals that typically involved moving a single shipment of freight by railroad, canal, and lake boats. He began to engage in trading ventures on his own account. He was naturally cautious and only undertook a business venture when he calculated that it would be successful. He had iron nerves and would carry through very complicated deals without
hesitation. This combination of caution, precision, and resolve soon brought him attention and respect in the broader business community in Cleveland From the beginning, he donated about 6% of his earnings to charity, which increased to 10% by the age of twenty, when he tithed to his Baptist church. Discipline, order and a record faithful in bookkeeping was since then the code of his life. The third year already earned $600 per year but when denied an increase of 200-dollars, decided to move to his own business. He had saved $800, but still lacked other 1000 to embark on its own brokerage. His father was ahead with an annual interest rate of 10 per cent, until it reached the majority age. Rockefeller formed a partnership in the commission business with another young man, Maurice B. Clark, they founded Clark & Rockefeller. Te commission business was about shipping food in big scale. Here we can see a robber baron´s common characteristic which is they always make businesses with essential goods for the human being. In this case we are talking about food, which ´s needed for everybody in the world. Rockefeller was extremely hard working. He traveled extensively, drumming up business throughout Ohio, and then would go to the banks and borrow large sums of money to handle the shipments. This aggressive style built the business up every year. However, Rockefeller realized that the future of the commission merchant business in Cleveland was going to be limited. He had become convinced that the railroads were going to become the primary means of transportation for agricultural commodities. In that same period of time the first oil well was drilled at Titusville in western Pennsylvania, giving rise to the petroleum industry. Cleveland soon became a major refining center of the booming new industry. Samuel Andrews (1836–1904) was a chemist and inventor. Born in England, he immigrated to the United States before the American Civil War, and settled in Cleveland, Ohio. He had already had some experience in shale-oil production in the newly-discovered oilfields of western Pennsylvania when in 1862 he approached two Cleveland produce merchants to become stockholders in a new enterprise. One was John D. Rockefeller, who saw the potential in Andrews' plan and invested in the venture. With this capital, Andrews designed and began a small refinery in Cleveland. In 1863 Rockefeller and Clark entered the oil business as refiners. Together with the new partner, Samuel Andrews, who had some refining experience, they built and operated an oil refinery under the company name of Andrews, Clark & Co. The firm also continued in the commission business but in 1865 the partners, now five in number, disagreed about the management of their business affairs and decided to sell the refinery to whoever amongst them bid the highest. Rockefeller bought it for $72,500, sold out his other interests and, with Andrews, formed Rockefeller & Andrews. Rockefeller’s stake in the oil industry increased as the industry itself expanded, spurred by the rapidly spreading use of kerosene for lighting. Kerosene market did grow extremely fast due to the great cities need´, lighting. This need couldn´t be satisfied by a whale candle so kerosene revolves the lighting industry. Rockefeller knew that and profited that situation to
grow his business and company. Was the largest refinery in Cleveland, with a capacity of 500 barrels per day and earnings of $1 million per year, which would double the following year. Was able to negotiate with the rail preferential tariffs, and that discount was an essential weapon against the competitors. In 1870 he organized The Standard Oil Company along with his brother William, Andrews, Henry M. Flagler, S.V. Harkness, and others. It had a capital of $1 million. That ´s the story of the first million of John D. Rockefeller. Rockefeller was 57 years old in 1896 when he decided that others should take over the day-to-day leadership of Standard Oil. He now focused his efforts on philanthropy, giving away the bulk of his fortune in ways designed to do the most good as determined by careful study, experience and the help of expert advisers. (-The End-) Standard Oil became large and they create a cartel. In that way they can control prices. Rockefeller competing style was very aggressive and it´s one of the keys of his success. He continued with his self-reinforcing cycle. What means: Buy competing refineries Improving the efficiency of his operations, don´t forget that he was very good in cost management and reducing them. Press for discounts on oil shipments (relative efficiency) Undercutting his competitors Make secret deals, raising investments pools Standard Oil gradually almost completes the control of the oil refining and marketing in the EEUU. So, he controlled kerosene´s prices. Standard Oil was powerfull and controlled the market, so their prices. Standard Oil different practices: Underselling Differencial pricing Secret transportation Companies’ spionage Price wars Heavy-handed marketing tactics Cover room evasion, he tried to sheap the laws with his lawyers, money, power and influence. Those conditions were unfear, Standard oil did let oxygen to the competitors in the market. His empire included: 20,000 wells 4,000 miles of pipeline 5,000 tank cars Over 100,000 employees
Rokefeller didn´t use his own money for the business, he usually used investors money, for that he used futures. Actually he create the first future speculation fuel market. It opened the Nacional Petrolum Exchange market in New York City. The Standard Oil Built the first Oil tank. A Critical moment for the company was when Thomas Edisson invents the light bulb, with this new creation the kerosene´s demand will go down more and more the light bulb became popular. But Standard Oil focused in the gasoline market linked to the car market which was emerging in this period. No one believed in the gasoline market but as we know now a day it was a big success. Sherman made the antitrust act of 1890. In this act it was never allowed to make those strategic alliances you can control market´s prices with. Standard oil became illegal, so the government made Standard Oil to split in 34 different companies which will have to compite with each other. Examples: EXXON, Chevron, BP… When John D. Rockefeller left the business y started to make philanthropy all over the world. He wanted to change his image which was very deteriorated. He did things like: Churchs Education Science Hospitals Library CHICAGO UNIVERSITY Cité universitaire He believed in the efficient movement Conserved the Versailles palace with a foundation for the historical patrimonium