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Good Bad Billionaire
John D Rockefeller: The first billionaire
00:47:12
John D Rockefeller believed God wanted him to get rich – so he obliged
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- [00:00]
Narrator
This BBC podcast is supported by ads outside the UK. Over the past 25 years, technology has transformed our world in amazing ways. We've gone from dial up modems to 5G connectivity and bulky PC towers to AI powered microchips. Every day, innovators are redefining what's possible. Through it all, Invesco QQQ ETF has connected investors to the forefront of innovation. Access the Future today with Invesco QQQ, let's rethink possibility. There are risks when investing in ETFs, including possible loss of money. ETFs risks are similar to those of stocks. Investments in the tech sector are subject to greater risk and more volatility than more diversified investments. Before investing, consider the fund's investment objectives, risks, charges and expenses. Visit Invesco.com for a prospectus containing this information. Read it carefully before investing. Invesco Distributors, Inc. Did it occur to.
- [00:46]
Simon Jack
You that he charmed you in any way?
- [00:48]
Xing Singh
Yes, it did.
- [00:51]
Simon Jack
But he was a charming man.
- [00:53]
Xing Singh
It looks like the ingredients of a really grand spy story. Because this ties together the Cold War with the new one.
- [01:00]
Simon Jack
I often ask myself now, did I know the true Yan at all? Listen to Hot Money, Agent of Chaos, wherever you get your podcasts. New York City, 1871. The Civil War is over, but its scars are fresh. The nation is rebuilding, and behind the white marble facade of a grand hotel, powerful men are quietly plotting a bold new scheme. You see, America is in the grip of an oil rush. Fortunes are being made and lost. Refineries are popping up fast, but with every new player, prices swing wildly. It's chaos. And for one man, owner of the largest refinery in Cleveland, that simply won't do. He craves order, control, and above all, profit. He believes that God wants him to accumulate money. Lots of it. In that hotel room, a plan is laid out. A secret pact with the railroads, a shell company to crush the competition. He listens, he calculates, and he sees it. The chance not just to survive, but to dominate. He won't just be part of the plan, he'll be the force that drives it. That man, it's a name that comes up time and again in our show is John D. Rockefeller, the first ever billionaire.
- [02:25]
Xing Singh
Welcome to season four of Good Bad Billionaire from the BBC World Service. Each episode we pick a billionaire and we find out how they made their money. Then this season, it's over to you to judge whether they're good, bad or just another billionaire.
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Simon Jack
I'm Simon Jack. I'm the BBC's business editor, and I'M Xing Singh.
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Xing Singh
I'm a journalist, author and podcaster.
- [02:43]
Simon Jack
And a slight change this time.
- [02:45]
Xing Singh
You might be thinking, wait a second, we are going back a lot further than we normally do. And you'd be absolutely right. So this new mini season, Good, Bad, Dead Billionaire, we are bringing you five episodes about some of the titans of 20th century America. Pioneers who may be long gone, but whose fingerprints are all over modern business. Their wild careers helped build some of the industries that made the US the global powerhouse it is today. And it paved the way for our billionaires get well, filthy rich.
- [03:16]
Simon Jack
But let's rewind. Let's go back to the first one to hit the billion dollar mark. John D. Rockefeller. Before Rockefeller, a billion was just a number, a big number. He made it a lifestyle. At his peak, his net worth hit $1.4 billion. Now you might think that's pretty modest next to the likes of some of the centi billionaires, the hundred billionaire pluses we've covered, Bernard Arnault, Jeff Bezos, for example. But this was in the 19th century. Adjusted for the size of the economy back then, he controlled one and a half percent of US GDP of the entire US economy. You translate that to today, that's the equivalent of 631 billion. No one's even come close. So yes, you could say Rockefeller's a good candidate, maybe to be the richest person of all time.
- [04:02]
Xing Singh
So I only really heard of Roc A Fella in actually rap lyrics. You know, Jay Z constantly raps about being the next Roc A Fella. Yeah, Jay Z being one of our other billionaires. Of course.
- [04:12]
Simon Jack
Yeah. I mean, Roc A Fella is reverberates in America to this day. There's the Rockefeller Plaza. Rockefeller Center. If you go up to that tall building, it's called Going to the Top of the Rock. You can see Central Park. And you know, he was a byword for being rich for a long time. And I've personal recollection of this. I had a friend who lived in New York and I used to visit him regularly. He started dating someone called Rockefeller.
- [04:37]
Xing Singh
Wow.
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Simon Jack
We started picking out our holiday homes in the Caribbean.
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Xing Singh
You're like, we're never going to work again.
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Simon Jack
Just stick with this one, my friend. Anyway, sadly, well, I think happily for both it didn't work out, but there was a moment of great excitement.
- [04:49]
Xing Singh
Yeah, well, I mean, I'm sure the yacht that you picked out is gathering dust in a marina somewhere.
- [04:53]
Simon Jack
But let's go back to how he became this byword for vast wealth. The richest man, possibly who's ever lived in relative terms.
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Xing Singh
So he built his fortune refining oil and founding a company called Standard Oil, the first US Business trust. We'll talk a lot about that later. So its structure is basically the blueprint for modern corporations. And you can see his fingerprints everywhere in companies like Chevron, ExxonMobil, Conoco, Phillips. But in his lifetime, he was deeply polarizing. So some people saw him as this ruthless robber baron, which is what they called people who became rich through ruthless, unscrupulous business practices. Others described him as a visionary, as a real captain of American industry. Interestingly, Mr. Burns from the Simpsons is meant to be partly based on him.
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Simon Jack
Really? Gosh, how interesting.
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Xing Singh
Yeah, you can see him steepling his fingers now and going, simpsons, you're an imbecile. Exactly.
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Simon Jack
But why was he called the Jekyll and Hyde of American capitalism? Because alongside his record breaking wealth, he was a record breaking philanthropist. He was a devout Baptist. Rockefeller gave away $540 million in his lifetime. Remember what that is in today's money saying, I believe it is every man's religious duty to get all he can. Honestly, we'll question that and give all he can and really, you know, set a blueprint for philanthropists, which we saw from other US Titans and we still see today, people like Carnegie Mellon, et cetera.
- [06:21]
Xing Singh
It's also not a million miles away from one of our other billionaires to disgrace Sam Bankman Fried, who was an adherent to effective altruism, if you remember that. Yeah, that philosophy where you should go into high powered, high earning businesses, make as much money and then give back as much as you can.
- [06:36]
Simon Jack
Yeah. Well, anyway, he died at 98 and his fortune was split between his family and his foundation.
- [06:42]
Xing Singh
Yeah. In fact, over 200 Rockefellers, one of whom your friend dated, share that legacy. They have a combined net worth of around $10.3 billion. Can't believe your mate walked away from that one.
- [06:52]
Simon Jack
Well, I'm not sure he had much choice. But anyway, that name still rings out. You've probably seen it. As I say, in the Rockefeller center, there's a Rockefeller University, there's a Rockefeller Foundation. All part of the legacy. But let's rewind. Let's go back to where it all began, when accumulating billions was just a fantasy. No one thought it was even possible. Yeah, we're heading back to rural New York State, 1839, the birthplace of John D. Rockefeller. And we should say we're very grateful for Ron Chernow's brilliant biography, the life of John D. Rockefeller, Senior as a source, among others, for this episode. So picture, if you will, a sprawling, prosperous farmland community close knit, where a fervent religious revival known as the Second Great Awakening was taking root. Rockefeller's mother, Eliza, was part of this. She was a devout Baptist. His father, not so devout. William Big Bill Rockefeller, also known as Devil Bill, was a smooth talking con man who sold fake cancer cures and disappeared for months like original snake oil salesman, sometimes returning with cash, sometimes with his mistress who moved in as the housekeeper.
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Xing Singh
So while Devil Bell was out there scamming people out of their money, young John, as the eldest son in the family, became the man of the house. He had this knack for making money, which is something we see a lot of with our billionaires. And he sold sweets to his siblings at a markup, dug potatoes for pennies. He even hatched and raised wild turkeys to sell.
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Simon Jack
Yeah, that kind of Tom Sawyer type ingenuity is something we've seen a lot in this series. But when Devil Bill was home, he believed in tough love. He once told toddler John to fall into his arms, but then didn't catch him saying, never trust anyone completely, not even me. And when he lent his sons money, he charged them 10% interest.
- [08:38]
Xing Singh
God, I'm not sure that's how a trust four is meant to work. Thankfully, however, Eliza instilled a very different attitude into her children. Faith, discipline, and this is important, charity. So Sundays meant Baptist church and dropping pennies into the collection plate that would go around, you know, asking people to donate towards the congregation. So for John, money wasn't just for holding onto and keeping. It was part of this moral cycle. You earn it to give it away.
- [09:03]
Simon Jack
Eventually, they moved to OHIO and at 14, John enrolled at Central High in Cleveland. He was decent at school, but brilliant with numbers and was very passionate about music. He practiced the piano, it said, for six hours a day.
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Xing Singh
Pretty good, pretty obsessive. And even then, you know, he had another obsession brewing, which was money. So schoolmate Mark Hannah, who was later a US Senator, said John was sane in every way but one. He was money mad. And Rockefeller, he once said he wanted to make $100,000 and live to be 100. So let's see how that one plays out.
- [09:38]
Simon Jack
Now, back then, there wasn't that many colleges to drop out of. But at 15, Rockefeller did indeed drop out of high school. Instead. He signed up for a three month bookkeeping course in 1855, and by 16.
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Xing Singh
He was chasing a job with a big stable company. So he used a business directory to Find firms of strong credit ratings, railroads, banks, merchants. And for six weeks straight, six days a week, he hit the hot streets of Cleveland in a suit, asking to speak to the boss. And once he'd been to every single office, he would start all over again.
- [10:08]
Simon Jack
And it worked. September 26, 1855. The magnificently named Henry B Tuttle of Hewitt Tuttle gave him a shot with a bookkeeping job. No pay at first, just a promise. Three months later, they back paid him 50 cents a day, which back then wasn't that much. But Rockefeller was thrilled. He later said, all my futures seemed to hinge on that day. And for the rest of his Life, he celebrated September 26 as Job Day.
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Xing Singh
So he got to work. He paid bills, he collected rent, and spotted even the tiniest of errors. And he tracked every single penny, even his own personal spending, in detailed ledgers.
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Simon Jack
In fact, he'd later criticised competitors who didn't do the same kind of thing, saying some of the brightest didn't even know when they were making money or losing it.
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Xing Singh
And just after three years on the job, Rockefeller was ready to move on and be his own boss. So he teamed up with Maurice Clark, a fellow bookkeeping student, to start up a business business.
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Simon Jack
And that's so interesting, isn't it? Even then saying, if I'm going to make money, I need to be on my own, to own the company, to have control. We've seen lots of our billionaires who basically catapulted their wealth when they actually took control of their own destiny. Their own name, their own publishing, their own songwriting, their own fragrance, their own whiskey brand.
- [11:19]
Xing Singh
Exactly.
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Simon Jack
So they each put in $2,000. Rockefeller had saved about 800. His dad loaned in the rest. But remember that steep 10% interest? More than the banks were charging at the time. Still, Rockefeller was all in.
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Xing Singh
So this business that they set up was mostly buying and selling food shipped through the Great Lakes. And it wasn't all smooth sailing. So some crops were ruined by frost. There was a shipment of beans that showed up half full of dirt and rubbish. Rockefeller and Clark ended up sifting it all out themselves. So, you know, not a man afraid to get his hands dirty.
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Simon Jack
Yeah, and that mess forced Rockefeller to ask his dad for another loan. By the end of their first year, they made a profit of $4,400. That's a lot of money in the late 19th century.
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Xing Singh
But don't forget, within the late 19th century also comes the Civil War in 1861. So Rockefeller was anti slavery. He'd even written about it in school. He'd donated to related causes. But when he was drafted for the war in 1863, he didn't want to fight. So he paid $300 to send a professional soldier in his place. Now this might sound crazy, but this was not actually uncommon for people with his means.
- [12:24]
Simon Jack
Yeah. The war turned out to be good for business though. With the Mississippi blocked in the South, Cleveland's canals became vital trade routes. Rockefeller's firm took full advantage and by the end of 1862 they'd made 17,000 in profit.
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Xing Singh
But if you're wondering to yourself, wait a second, Rockefeller isn't known for food. You're absolutely right, he isn't. In 1863, age 24, he got into the business that would make his fortune. Oil.
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Simon Jack
And remember, it's hard to imagine a pre oil era, but in the early 19th century, most people lit their homes with candles. Whale oil was used for lamps or lubrication in machinery. In 1859, the first commercial oil well was struck in Pennsylvania and it sparked an oil rush. Kerosene, which is refined from crude oil, became the new go to for lighting. One newspaper quipped, good news for Wales.
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Xing Singh
That'S a very good line. Now Cleveland, which was just 100 miles away from the action and very well connected by rail, quickly became a hub for refining oil. So oil at the time was a low barrier business. So drilling rigs cost under $1,000. And by 1863 Cleveland had around 20 refineries.
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Simon Jack
And Rockefeller saw his chance. Here he teamed up again with Morris Clark plus Samuel Andrews, a self taught chemist with some experience in oil refining. Together they launched Clark, Andrews and Company.
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Xing Singh
And at first Rockefeller viewed this as, you know, just a side issue business to their food trading, a kind of side hustle. But demand exploded because kerosene was even used on Civil War battlefields. So Rockefeller would excitedly wake up his brother at night with new ideas. He'd whoop for joy when he got a good deal on barrels. He was officially hooked on the oil business.
- [14:01]
Simon Jack
Yeah. And by 1865, after a few years, now in the all game, Rockefeller was ready to bet big. He took on serious debt to expand the business.
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Xing Singh
And he really did see the future, which is something that you'll find that many of our billionaires do. He realized that railroads were replacing rivers for transport. Now Cleveland wasn't great for shipping food anymore, but it was perfectly placed for moving raw industrial goods between the east coast and Chicago.
- [14:27]
Simon Jack
But Rockefeller's partners weren't sure they wanted to play it safe. So Rockefeller made a bold move. He Bought them out for $72,500. That was more than he planned to spend, but it gave him majority ownership. Going back to what I said before, control, all important later, he said, that was the day that determined my career.
- [14:44]
Xing Singh
So he's just 25. He's running Cleveland's biggest refinery. It processes 500 barrels of crude oil a day, double the output of his nearest competitor.
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Simon Jack
And big things were happening on the home front, too. He'd just married Laura Spellman, a schoolteacher. And despite their growing wealth, they lived modestly, even without servants. That was pretty rare at that time for a couple of their status.
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Xing Singh
Now, Rockefeller, the man is often remembered as stern, serious guy. His biographer called him the Protestant work ethic in its purest form.
- [15:15]
Simon Jack
But others who knew him say he had a sharp wit. He loved a good joke and was a great listener.
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Xing Singh
But we're not here to talk about his jokes. Let's go back to business. Over the next few years, Rockefeller went full throttle. He expanded his empire, chasing one goal, to be the most efficient oil refiner out there.
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Simon Jack
He brought in his brother William to run the New York office, and he teamed up with Henry Flagler, who was an oil man with Rockefeller's same eye for detail.
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Xing Singh
And they built everything themselves. So barrows, wagons, even their own kilns, barrows dropped from $2.50 to just 96 cents as a result. They even had their own plumber to save money. So, you know, it reminds me of something we've talked about before. Vertical integration.
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Simon Jack
Yeah. And it's interesting this, because there are two schools of thought on this. Vertical integration is where you do all the different bits of the process. So if you're making cars, you also get the leather for the seats, all the bits of the chain, you own it all and you vertically integrate. That was very popular around this era. And for decades afterwards, they sold everything, not just kerosene, but all the byproducts of oil solvents, wax, asphalt, petroleum jelly. But gasoline, petrol, get this, they had no use for it yet, because petrol fuel, cars had only very recently been invented. So sometimes they had gasoline left over. This was the last bit, and they dumped it in the river.
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Xing Singh
Wow. Can you imagine? That's literally now like pouring liquid gold down the river. Then came a shady but strategic move. So in 1868, Rockefeller made a secret deal with Jay Gould of the Erie railroad and a 75% shipping rebate in exchange for locking in huge oil shipments. So this gave Rockefeller the edge over his competitors without them even realizing it because of the Rebates, he could lower costs, he could undercut them, he could increase his dominance in the industry.
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Simon Jack
And this is fundamental to where we're going to end up with some of the legal ramifications for this, which you can feel in the world today. Anyway, that deal with the railroad set the stage. By 1870, Rockefeller, a few others launched what became known as Standard Oil. With a jaw dropping, at that time, $1 million, the empire was officially in motion.
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Xing Singh
It's such an interesting move because, you know, we talk about America having the Wild west, but this is really the Wild west of business. Right. It sounds like you could just do anything and they hadn't even invented the laws to stop you yet.
- [17:38]
Simon Jack
Exactly. I mean, what they did was they formed something called a trust. And if you look at the newspapers this week, next week last year, you'll see one or another massive corporation being sued under antitrust regulation. And antitrust means going after a company because they are too dominant and they're snuffing out competition. And that is to the detriment, not only of the competition, but of innovation in society as a whole. Weird thing. You can become successful, but not so successful that you're squashing the other guy. And that drama is playing out right now with cases against Google, against Meta, against others. The foundation is being laid here.
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Xing Singh
It's almost like financial Tall Poppy syndrome.
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Simon Jack
Yeah.
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Xing Singh
So when you nail vertical integration controlling every step of that production process, what is next? For someone who wants total industry domination.
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Simon Jack
Horizontal integration wiping out the competition? Brings us back to those secret meetings with the railroad owners. Select oil refineries, including Standard Oil naturally. Tom Scott of the Pennsylvania Railroad created a shell company called the South Improvement Company, or sic. But it was just a front. The railroads would raise freight rates, but big refiners who are members of the sic, like Rockefeller would get special sweetheart deals, major rebates and access to competitors, shipping data, which meant they could undercut them. They'd even earn a profit from competitor shipments. And the goal of all this? Crush the smaller players. It's considered one of the most ruthless business schemes in American history, and Rockefeller was right at the heart of it.
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Xing Singh
So with his unfair advantage locked in, Rockefeller launched what became known as the Cleveland massacre, buying out 22 of 26 local competitors in just six weeks. At one point, he bought six refineries in just 48 hours. Quite the shopping spree. So he kind of pitched it to people like a rescue mission, like his kind of Noah's Ark. So climb aboard, we'll take the risk we'll protect you from the flood. But, you know, let's be real, his competitors had no choice. He offered stock and Standard Oil as compensation, which helped, you know, smooth things over. But fear of being sent under did the rest.
- [19:48]
Simon Jack
Yeah, and any illusion of kindness that he was doing everyone a favor cracked when the secret deal that he'd been hatched leaked. Outraged independent oil men took to the streets in protest.
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Xing Singh
Journalist Ida Tarbell, whose own father was ruined by the deal, described banners reading, down with the conspirators and don't give up the ship. So the Mysterious South Improvement Company was known as the Monster, the 40 Thieves and the Great Anaconda. So the backlash was really fierce.
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Simon Jack
Yeah, and one refiner recalled, if we didn't sell out, we would be crushed out. It shook Cleveland's business world. Some went bankrupt, others sold for pennies.
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Xing Singh
Rockefeller brushed it off. He said we had to do it in self defence. The oil business was in confusion and daily growing worse.
- [20:30]
Simon Jack
And by the late 1870s, Standard Oil had jumped from controlling 10% of U.S. refining to nearly one third. There was also a long depression in the 1870s that wiped out even more rivals.
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Xing Singh
And as the company grew, Rockefeller kept dividends low and borrowed heavily, reinvesting everything. In 1874, he commissioned a new oil pipeline to reduce dependence on the railroads.
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Simon Jack
And that's another interesting trait, and one I would make a direct comparison with. Amazon, because Amazon didn't make a profit for the first 15 years of its life because any money it made it reinvested in servers, in marketing, in whatever. It takes a lot of confidence and a lot of long term vision to basically have money rolling in and not take it, but to put it back and keep it for another day. But not everyone agreed with increasing their debt and taking on more financial obligations to expand. Sam Andrews, one of the original partners, wanted out. He wanted a million dollars. That was a massive ask. But Rockefeller didn't hesitate for a moment. He wrote a check immediately. He knew letting those shares hit the open market could tank confidence and their ability to raise credit. Because if you've got splitters and saying, this guy's showing lack of confidence in the future, maybe your lenders will start having those kind of doubts as well.
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Xing Singh
It's like the lemming effect, isn't it?
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Simon Jack
Yeah, exactly. And also if you flood the market with new shares, like anything, it can drive down the price, the value, the perceived value anyway, of the company.
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Xing Singh
So clearly Rockefeller is a savvy guy. And by the late 1870s, he has an estimated net worth of over $5 million. So it's safe to say John D. Rockefeller is officially a millionaire. But public anger is brewing and eventually Rockefeller would have to face his day in court.
- [22:28]
Simon Jack
Did it occur to you that he.
- [22:30]
Xing Singh
Charmed you in any way? Yes, it did.
- [22:34]
Simon Jack
But he was a charming man.
- [22:36]
Xing Singh
It looks like the ingredients of a really grand spy story, because this ties together the Cold War with the new one.
- [22:44]
Simon Jack
I often ask myself now, did I know the true yan at all? Listen to Hot Money, agent of chaos, wherever you get your podcasts. So let's go from a million to a billion. You might think all that money would turn Rockefeller into a big spender, but no. True to his devout Baptist roots, he avoided flashy displays of wealth. Reminds me of one of our other billionaires. Warren Buffett still lives in the same house he bought in the 1950s and.
- [23:20]
Xing Singh
Enjoys a good old McDonald's he does. So he lived on Cleveland's millionaires Row, but he lived quietly with his wife and five kids. He had a pretty modest four bedroom house compared to others. He didn't drink. He thought the opera was too racy. He had to be reminded to change his suit when it got shiny from overuse. And Rockefeller was lean and athletic at when other rich men really piled on the pounds to prove that they were living that decadent a star lifestyle.
- [23:47]
Simon Jack
He did have one indulgence though. Trotters. Now these are little horses, not galloping, but sort of trotting really fast, pulling racing carts. He loved these things. And in fact, the stables he built, his horses were fancier in many ways than his own house.
- [24:01]
Xing Singh
So quite an idiosyncratic guy. And he also made some pretty idiosyncratic game changing moves, including one that set the blueprint for the structure of modern multinational corporations.
- [24:13]
Simon Jack
So on January 2, 1882, age 43, Rockefeller and his partners created the first business trust. Until then, trusts were mostly used to manage money for widows and orphans. What Rockefeller did was revolutionary. Here's why. Standard Oil owned businesses across several states, each with its own rules and taxes. Back then, corporations couldn't own stock in other corporations couldn't have cross holdings. And states would tax outsiders doing business on their turf. Got to remember that the state by state nature of the United States is something that still baffles people to this day. If you want to open a business, you have to go to the commissioner in each state to do it. However, the trust centralized everything. It pulled together 40 companies with a board of trustees. They issued certificates of trust which enabled Rockefeller and his fellow trustees to make production and investment Decisions on behalf of each partner in exchange for a guaranteed share of the profits. And that meant that they could operate on a much more federal way rather than state by state basis. They could centralize decision making, and it's.
- [25:16]
Xing Singh
The first time it's ever been done.
- [25:18]
Simon Jack
I suppose you would describe the East India Company of centuries before as the first. Well, it was the first joint stock holding company, the first one that was made like this. But in the US we had such fractious relationships because of the Civil War, for example. It had never been possible to do this on a more than a state by state basis.
- [25:38]
Xing Singh
So they measured every single inch of pipeline, every brick, every asset. It was meticulous. And you know, while this all sounds very egalitarian, remember that out of 700,000 total shares, Rockefeller had a whopping 191,700 of them. Flagler was next with just 60,000.
- [25:56]
Simon Jack
And with that, Standard Oil was officially a monopoly. It controlled 14,000 miles of pipeline and about 90% of US refining and 90% of any market share. Well, again, let's Compare it to Google. 85% of the search market. Imagine having a stranglehold on a commodity that was becoming into its own, like oil. Same way that Google had a monopoly on search. The emergence of Internet search and Internet commerce. It's an amazingly powerful position.
- [26:26]
Xing Singh
Yeah, and, you know, despite all that control, the public didn't seem to mind that much yet because prices of oil kept dropping. So if the public's happy, you know, there's no kind of public pressure on legislators to intervene.
- [26:39]
Simon Jack
Exactly. The argument that modern companies use. We give our services away for free. What's the problem? So Rockefeller, though, wasn't a dictator. He did let his board weigh in, but he seemed to make bold calls when it counted.
- [26:52]
Xing Singh
Like when there was a triple threat of Russia ramping up oil production, US fields drying up and electric lighting starting to replace kerosene. Everyone was panicking. But Rockefeller saw opportunity.
- [27:03]
Simon Jack
Yeah, his trustees didn't want to touch oil from Ohio' Lemur field. It was full of sulphur, smelled like rotten eggs. It burned dirty. But Rockefeller ignored the doubters and bought it anyway. Millions of dollars worth, stockpiling it and funding research to figure out how to clean that oil.
- [27:18]
Xing Singh
And that gamble paid off. So Rockefeller's chemists cracked the code. And suddenly Standard had a new, steady oil supply just when they needed it most. And now, Standard Oil may have pioneered the trust, but soon everyone wanted it. And so by the late 1880s, trust controlled everything from whiskey to sugar, the. To salt. So Rockefeller really had just opened the floodgates.
- [27:39]
Simon Jack
Yeah, and banking as well as. We'll see. His longtime lieutenant, John Archbold put it best. Rockefeller always sees a little farther than the rest of us and then he sees round the corner.
- [27:49]
Xing Singh
But the tide was turning, so critics were saying. Trusts crushed competition. They kept wages low, they could hike prices. And in the 1888 election campaign, both the Democrats and the Republicans went after the monopolies hard.
- [28:02]
Simon Jack
Yeah. That same year, the New York Senate launched an investigation into Standard Oil. Oil. Rockefeller was called to testify. Facing accusations of monopolistic practices, he listed 111 of his competitors and pointed to Russian oil as another. Reminds me a bit of Zuckerberg saying, well, there's TikTok, there's Snapchat. Snapchat. There's, you know, there's plenty others out there.
- [28:23]
Xing Singh
Yeah. It didn't, however, convince the public. So two years later, President Harrison signed the Sherman Antitrust act, outlawing trusts and threatening fines and jail time. Now this sounds tough, but in practice, nobody actually enforced it. Rockefeller and many others just carried on business as usual. But that was all about to change.
- [28:43]
Simon Jack
Yeah, it was going to bite. And in 1892, it really did. Ohio won a case against Standard Oil. The company was officially declared a monopoly.
- [28:52]
Xing Singh
Other states were ready to pile on, but Rockefeller and his board moved fast. They dissolved the trust, they transferred its assets to companies in other states. So on paper, it looked like all change. But the same nine guys still pulled the strings.
- [29:05]
Simon Jack
Yeah. So the structure may have changed. The power and the decision making stays the same. Outwardly, it seemed business as usual. But behind the scenes, the pressure took a toll on him. Stress hit hard. There were reports of a partial nervous breakdown. He developed digestive issues, alopecia. He lost all his hair, including his eyebrows. He aged fast and looked far older than his years.
- [29:26]
Xing Singh
Okay, but his wealth was still in rude health. By 1892, Standard Oil still controlled two thirds of the world's oil. All the oil in the ent world. The press crowned him the richest man in America, worth $150 million and pulling in $25,000 a day.
- [29:44]
Simon Jack
And he wasn't just sitting on that cash. In the 1890s, Rockefeller started spreading those bets. He diversified his portfolio. He invested millions in railroads, steel, real estate, banks, ships, even orange groves. I mean, these are the, the primary industries of a growing capitalist democracy.
- [30:02]
Xing Singh
And John D. Rockefeller was about to make a dramatic pivot from building his fortune to giving it all away. So in 1895, at the age of 56, he began quietly stepping back from.
- [30:14]
Simon Jack
Standard Oil by 1897, without telling the press, he handed day to day control to his protege, John D. Archbold. Rockefeller still offered the odd bit of advice, but his sights were elsewhere. This is interesting. Not everyone, when they get to their late 50s. I'm thinking of Rupert Murdoch here. Wants to relinquish control quite so quickly.
- [30:33]
Xing Singh
No, but, you know, clearly something was weighing on him because he was setting his sights on philanthropy, so this wasn't a new instinct. He tithed a tenth of his wages from his first job to the Baptist church, aged 16. Now, tithing is where you give a proportion of your income to the church. But he didn't just want to hand out money.
- [30:50]
Simon Jack
Yeah, no. He worried about creating dependency. He believed in giving people the tools, the jobs, the education, the opportunity, not handouts. He also wanted institutions he supported to grow stronger and not be reliant on him. Reminds me a bit of Bill Gates, who didn't want to just write checks. He wanted to try and develop, you know, programs. Programs, educational things, medical breakthroughs, all that kind of stuff, rather than just, you know, buy a big building and stick your name on it.
- [31:18]
Xing Singh
Yeah. So in many ways, Rockefeller's providing the blueprint for billionaires to come. And with guidance from Frederick T. Gates, a former Baptist minister, Rockefeller helped found a university in the Midwest. You may know it today as the University of Chicago.
- [31:32]
Simon Jack
Very famous University of Chicago. Absolutely pivotal and central to the development of modern shareholder value philosophy. The school of the University of Chicago is one that basically preaches a mantra of maximizing shareholder value. So it's still got its fingerprints on, you know, if you talk about the School of Chicago, that's what you mean. Basically, you look after the shareholders. Everything else will take care of itself.
- [31:56]
Xing Singh
Rockefeller would be proud.
- [31:58]
Simon Jack
Frederick Gates also helped him launch the General Education Board, which supported education without distinction of race, sex or CREED and funded 800 public high schools in the south and transformed medical education. Big stuff.
- [32:10]
Xing Singh
He even bankrolled efforts to wipe up hookworm, which is a parasite that plagued the Southern US which caused anemia and breathing problems.
- [32:18]
Simon Jack
Rockefeller wasn't the only tycoon with a philanthropic streak. Steel magnate Andrew Carnegie famously said, the man who dies rich dies disgraced. The press love that rivalry. They would keep a score of who gave more. Carnegie often edged ahead. He even beat Rockefeller to launch a charitable foundation in 1911. Rockefeller followed two years later. You also get massive tax breaks for charitable donations in the us so that can help a little bit.
- [32:42]
Xing Singh
Yeah. And you also get to put your name on Lots of shiny buildings and foundations.
- [32:46]
Simon Jack
That's true, that's true. But what's going on in the business?
- [32:49]
Xing Singh
Although behind the scenes, Rockefeller had left Standard Oil, he still kind of was taking the heat of the press criticism in the 1900s. So he really was taking the fallout for his successor's decisions.
- [32:59]
Simon Jack
Because Archbold played things differently from his mentor. Rockefeller had largely avoided using the company's monopoly to hike prices. But Archbold did raise prices sharply. Profits soared, so did public anger. Even President Theodore Teddy Roosevelt called the Rockefeller family a malefactor of great wealth.
- [33:17]
Xing Singh
Yeah, there's also a great kind of newspaper comic from the time in 1904 which shows standard Oil as this octopus spreading its tentacles all across America. And remember Ida Tarbell, that journalist whose father was one of the Cleveland refiners burned by Rockefeller's tactics and how she reported on the protests back then? Well, she wasn't done. So she spent years investigating the company. In 1902, she started publishing this blistering 19 part expose in a magazine called McClure's. She accused Rockefeller of ruthless, unethical tactics. And she wrote National Life is poorer, uglier, meaner for the kind of influence he exercises. I think you could apply that to quite a few billionaires today. And that reporting made waves. So published two years later as the history of the Standard Oil company is considered a landmark of investigative journalism.
- [34:06]
Simon Jack
And like great journalism, it did have an impact. It had real consequences. In 1906, the US Department of Justice sued Standard Oil under the Sherman Antitrust act, accusing it of conspiring to monopolize the oil trade.
- [34:19]
Xing Singh
And by 1911, it was all over. The Supreme Court ruled that Standard Oil had to be broken up within six months.
- [34:27]
Simon Jack
Yeah, we could be talking about stuff we've been hearing about in the last week or two, you know, the possibility of breaking up massive powerful companies. In particular, for example, Meta is going through this process right now.
- [34:38]
Xing Singh
I mean, it's funny because you never think, you know, these companies are so huge and they're so powerful. You don't think, oh yeah, they could just get broken up just like that. But that's exactly what happened to Stan Doyle.
- [34:47]
Simon Jack
Yeah, it's like you said, it's sort of the corporate equivalent of the Tall Poppy syndrome. You like people to be successful, but when their success starts impinging on other people's ability to compete, to innovate, that's when American sensibilities for enterprise and innovation begins to start feeling a little bit sweaty and they just don't like the.
- [35:07]
Xing Singh
Look of that it's so interesting because I think we think of, you know, companies like Meta or Google and the stuff that they're doing and going through right now as being uniquely 21st century because it's all tech. But actually in 1911 this stuff was happening and it was talked about in the press in much the same way.
- [35:24]
Simon Jack
People were angrier about the trust's dominance of certain industries like steel, railroad, banking, etc, than people are right now about the dominance of tech companies. It was a big thing, it was a political movement, it dominated talk at that time about, you know, how do you stop the robber barons, these titans basically controlling entire industries, their own enrichment. That dominance attacks the fundamentals of the American dream.
- [35:51]
Xing Singh
Right.
- [35:51]
Simon Jack
That any person who's got a better gumption has got a chance of making it, you know, and everyone buys into that. And literally, you know, that's why people tolerate rich people, because they think that that might be me tomorrow, I've got a ticket in the same lottery of life. And that if you are damaging my chances of succeeding, that gets right to the fundamental aspiration at the heart of American society. Really?
- [36:14]
Xing Singh
Yeah, it offends something. That's a really particularly American kind of sentiment about everyone has the same chance to succeed and if you succeed, you've done it fair and square.
- [36:23]
Simon Jack
Well, because also, you know, pioneering, if you like, is at the heart of the American, you know, much of the chagrin of First Nation Americans who basically saw everyone come in and carve up the country for. But that idea of going out and driving a stake into the ground and saying, I'm going to drill for oil, pan for gold, till the last, till the land that antitrust movement taps into, that sense that you are basically shutting off the chances for the next pioneer on this land.
- [36:49]
Xing Singh
Well, Standard Oil certainly fell foul of that. Standard Oil was broken up into 34 separate companies and the goal was to cut Rockefeller down to size. But it didn't exactly work.
- [37:01]
Simon Jack
No, because Rockefeller owned about a quarter of Standard Oil. That meant he now owned a quarter of each of the new companies, including the biggest, Standard Oil of New Jersey.
- [37:10]
Xing Singh
Yeah. So while the share price took a hit during the legal battle, by the time trading resumed In December of 1913, prices were climbing and timing couldn't have.
- [37:19]
Simon Jack
Been better because the age of the automobile had arrived. The Model T Ford was rolling off assembly lines and it was powered by petrol. Standard Oil was ready to fill the tanks of Mr. Ford's cars. And we will be discussing him in a later episode.
- [37:36]
Xing Singh
By the end of 1913, Rockefeller's net worth had surged to $900 million.
- [37:41]
Simon Jack
And did the breaking up of Standard Oil really increase competition? Not quite. These new companies still work together. They divided territories, they used the same branding and didn't compete on price. Banker John Pierrepoint Morgan, you'll name better. As JP Morgan famously said, how the hell is any court going to compel a man to compete with himself?
- [38:00]
Xing Singh
By 1916, Rockefeller's fortune hit $1 billion and the new York Times officially dubbed him the world's first ever billionaire. Now there's some debate over whether anyone else got there first, but most agree that Rockefeller was very much the first billionaire in history.
- [38:17]
Simon Jack
Yes. So thank you, John D. Rockefeller. This series would not exist without you. But let's go beyond a billion. By the mid-1900s, John D. Rockefeller was openly retired. He was focusing on his philanthropy. He'd moved between his estates in Westchester County, New York, Lakewood, New Jersey and spent the winters puttering around golf courses in Ormond Beach, Florida, where he'd bought a simply furnished three story house.
- [38:51]
Xing Singh
But even in retirement, he kept a strict daily routine because, you know, he's a man of discipline. He start his day at 6am reading the papers for an hour. At 7 he'd walk through his home and garden handing out coins to each new employee and a nickel to every veteran. By 8 it was time for breakfast. 8:45. He played Numerica, a numbers game which is a bit like solitaire to help him digest. And he also loved reminding dinner guests to chew each mouthful 10 times. Even liquids which he would swirl around his mouth.
- [39:21]
Simon Jack
Weird.
- [39:21]
Xing Singh
Yeah, weird, but also not completely unlike. Kind of some advice you hear on TikTok nowadays.
- [39:26]
Simon Jack
I know, but it's so funny, isn't it? I'll never be a billionaire is that I'd be out having a. You know, you wouldn't be awake at.
- [39:33]
Xing Singh
7Am unless you were awake from the night before.
- [39:35]
Simon Jack
Yeah, I'd have pushed on through from a big party night before probably. Anyway, on May 27, 1937, Rockefeller passed away at his home in Florida. He was 97, just shy of his childhood goal to reach 100. If you remember, the New York Times reported he'd given away most of his fortune to family and through philanthropy. By the time he died, he, his estate was estimated at $25 million.
- [40:02]
Xing Singh
So that is where Rockefeller's story ends. But on this show we also rate our billionaire on a number of categories. We've got wealth, controversy, giving back and power and legacy.
- [40:11]
Simon Jack
On absolute wealth, given he was the richest man, controlled 90% of the U.S. oil industry. I think that's a solid 10.
- [40:17]
Xing Singh
I think that is a 10. You know, he didn't splash the cash. You know, he's far too religious for that. But you know, I think the fact that he kind of set the blueprint for the modern day billionaire counts in his favor.
- [40:28]
Simon Jack
No, he's a 10 all day long. So we have a new category, controversy. Basically, how controversial were their business practices and what their businesses built? So Rockefeller believed in creating a monopoly and no matter the route he took to get there, it was the right thing for all, guided by God even. He once said competition is a sin. And that Standard Oil had, in his words, rendered a missionary service to the whole world. Strong as this statement is, he said it is the gospel truth.
- [40:57]
Xing Singh
Wow. It's convenient how business completely aligns with what God wants to do.
- [41:02]
Simon Jack
Exactly. What do they say? Easier for a camel to pass through the eye of a needle than a rich man to enter the kingdom of heaven? Something along those lines.
- [41:09]
Xing Singh
I wonder what Rockefeller made of that particular verse.
- [41:11]
Simon Jack
Yeah, so he thought he was on a mission from God to be rich and stamp out competition. And as a result, he clearly had detractors in his lifetime, the most famous being journalist Ida Tarbell, as we've discussed, and indeed President Teddy Roosevelt.
- [41:25]
Xing Singh
Yeah. In fact, there was a governor of Wisconsin, a guy called Robert LaFollette, who famously commented that Rockefeller was the greatest criminal of his age.
- [41:34]
Simon Jack
Even his biographer, Ron Chernow, who had access to Rockefeller's private archive and an unpublished interview with him from 1911, and it said Rockefeller was the great corporate criminal of his age. Rockefeller always claimed that much of what happened with Standard Oil had either never happened or had been done by underlings. I was able to show that he masterminded it. To that extent, he comes off worse.
- [41:56]
Xing Singh
This is an interesting one because I have to admit that when you look at Rockefeller's story with the eyes of today, you think to yourself, oh, this just always happens now, doesn't it?
- [42:05]
Simon Jack
Yeah, yeah.
- [42:06]
Xing Singh
People get away with this stuff all the time.
- [42:08]
Simon Jack
The Cleveland massacre, I think, is an important moment because that's when he realized that if he was going to have a stranglehold on this, he needed to buy what he bought. 22 out of the 26 companies, something like that. That was a very naked grab for Monopoly. And he. Listen, he's unapologetic about it, right?
- [42:23]
Xing Singh
Yeah.
- [42:23]
Simon Jack
You know, competition is a sin after all. So there we go. So, yeah, I mean, that is controversial. And by the way, you know, his behavior and those of his trust, colleagues. That is why we have the legislation we have today. So he basically, you know, his movement actually inspired the legislative response to it. So it is by definition controversial because it spawned law.
- [42:47]
Xing Singh
Yeah, that is true. I think I'm gonna give him an 8 out of 10.
- [42:50]
Simon Jack
Yeah, no, solid 8 from me as well on controversy. Giving back. Well.
- [42:55]
Xing Singh
Well, he did a lot to give back. And you know, it's kind of funny when you hear the way that people like him and Carnegie talk about the importance of giving back to society. You don't really hear many people talk about wealth in that way anymore.
- [43:08]
Simon Jack
No. I wonder whether. Cause Carnegie was quite a religious man as well. I wonder whether it's a kind of an absolution of sorts for amassing that kind of wealth. It's your way of going into the confessional and saying, really sorry I got so rich.
- [43:24]
Xing Singh
Yeah. Well, it reminds me of one of our other billionaires from the first series, Chuck Feeney, who came from an Irish Catholic background, so also religious, and ended up giving away all of it.
- [43:34]
Simon Jack
Yeah, God is watching. Yeah.
- [43:36]
Xing Singh
Well, interestingly, Rockefeller was famous for handing out dimes to children. And people think he gave out $35,000 in dimes to kids on the street.
- [43:44]
Simon Jack
And Rockefeller, along with Carnegie, Andrew Carnegie, they revolutionized the model for philanthropy and billionaires have followed ever since. Rockefeller's approach, slightly different to Carnegie's. Carnegie donated directly to institutions or buildings, libraries, sports halls, music venues. Rockefeller funded education and medical research that would lead to generalized benefits. So much more of Bill Gates kind of approach. He scorned any charity that smacked of social welfare. Instead of giving alms to beggars. If anything can be done to remove the causes which lead to the existence of beggars, then something deeper and broader and more worthwhile will have been accomplished, he said.
- [44:18]
Xing Singh
But you know, let's also acknowledge the fact that Rockefeller believed that the rich were rich because they had superior intelligence and enterprise. Interestingly, he said, the failures that a man makes in his life, almost always to some defect in his personality.
- [44:32]
Simon Jack
That is fascinating.
- [44:33]
Xing Singh
So the more Rockefellers we can create, the richer society will be.
- [44:38]
Simon Jack
Not only that, but being poor is your fault.
- [44:42]
Xing Singh
It's a personal failing.
- [44:43]
Simon Jack
It is actually a sign of failing either morally, intellectually, spiritually, and to this day, in a way, being poor is a sin in America. So giving back. I'm going to have to give him at least a nine.
- [44:59]
Xing Singh
Yeah. I think Chuck Feeney was maybe the first and only 10 we've ever given.
- [45:03]
Simon Jack
Okay. Because he gave it all away. Yes, nine for me, on giving back.
- [45:07]
Xing Singh
Yeah, I mean, nine for me, he really sort of redeems himself. Yeah.
- [45:10]
Simon Jack
I think power and legacy is another of our categories, obviously. He wielded almost ultimate power over corporate America in his lifetime. By controlling 90% of the oil industry at the time when it was emerging all its power. He led to the creation of antitrust laws. So I would say his legacy is absolutely massive.
- [45:32]
Xing Singh
Yeah, it's huge. I mean, he wasn't actually that involved in politics, but you have to think, would there be the shape of American business as it is now without John D. Rockefeller? And I don't think there would.
- [45:43]
Simon Jack
I think he was definitely a trailblazer for how America thought about corporate power, how they responded to overweening corporate power. And I mean, if he didn't get involved in politics, I mean, that was his own choice. What did one of his classmates say? He was sane in most regards, but he was money mad. Money was more important to him than power.
- [46:03]
Xing Singh
Yeah. And also, you know, arguably, he didn't need politics. Like, he was plenty capable of dominating just on his own.
- [46:10]
Simon Jack
Yeah. So power and legacy, it's another high mark, isn't it? Rockefeller Plaza. He's still with us in many ways. So I'm gonna give him an 8 for power and legacy.
- [46:20]
Xing Singh
Oh, really? I would actually give him. I think I would give him a 10, you know.
- [46:23]
Simon Jack
Okay. I'm just trying to think. Yeah. Of all of those people, you know, think of Vanderbilt, Carnegie Mellon. Rockefeller's the king of them all, so. All right, I'm gonna give him a nine for legacy.
- [46:36]
Xing Singh
Yeah, you don't get Jay Z shouting out Carnegie in his songs, I'm afraid. Okay, Rockefeller. It's got swag, it's got a beat, it's got rhythm.
- [46:44]
Simon Jack
Okay, so good, bad, or just another billionaire?
- [46:47]
Xing Singh
Well, now for the first time ever, it's over to you, dear listener. We want to know how you would judge John D. Rockefeller or any of the other billionaires we've covered on Good Bad Billionaire, and any of the other American pioneers we'll be covering on this mini season. We've got motorman Henry Ford, original eccentric billionaire Howard Hughes, and Walmart founder Sam Walton.
- [47:08]
Simon Jack
So please share your thoughts, your judgments with us by emailing. Good, bad, billionaire. All one word B C dot com. Or drop us a text or WhatsApp or voice. Note to 001-917-686-1176. Let me give you that again. 001-917-6861176.
- [47:32]
Xing Singh
So let us know what you think about John D. Rockefeller and the rest of our billionaires in this special mini season. Good Bad Dead Billionaire.
- [47:40]
Simon Jack
We might feature your voice note or comment. So don't forget to share your name with us.
- [47:44]
Xing Singh
We've already been getting some emails in. We've had some great ones. Dear Good Bad Bluene, I'm Karen and I'm 14. I'm from India. I've been listening since I was 13. I adore your podcast and Mr. Simon Jack's cluelessness on pop culture. Sing Sing is wonderful. Thanks Kerryn.
- [47:59]
Simon Jack
Ouch.
- [48:00]
Xing Singh
I love this podcast. More emails like that please.
- [48:07]
Simon Jack
Who've we got next episode.
- [48:09]
Xing Singh
So we've got a man who was really on the cutting edge of of a brand new piece of technology. Something that we all take for granted today. The humble four wheeled car. That's Henry Ford, the motorman. The man who 99 years into the 20th century was named the businessman of the century by Fortune magazine.
- [48:28]
Simon Jack
And not only did he put America on four wheels, he changed manufacturing processes forever. He invented or perfected the assembly of line with huge results for manufacturing not just in the US but around the world.
- [48:42]
Xing Singh
That's Henry Ford on Good Bad Billionaire.