1. CONTROLLING THE GAME
Good leadership consists of showing average people how to do the work of superior people. (John D. Rockefeller)
BACKGROUND
W
hen the Rockefeller family is involved in something, one can be certain that is very carefully planned. Their extraordinary global influence has been achieved by the ability to work towards specific goals over a very long timescale.
Standard Oil
The Rockefeller fortune was created by developing and controlling the oil industry in the United States. It all started with Standard Oil of Ohio, founded in 1870 in Cleveland, Ohio, by brothers John D. and William Avery Rockefeller Jr.
Initially, the oil was only used to produce kerosene – a revolutionary product at that time that helped light up homes across the world. John D. Rockefeller had a special gift for anticipating public demand.
Due to his aversion towards wasting resources, he made use of a kerosine waste product that the rest of the petroleum industry simply dumped: gasoline. By being so proactive, a fuel was developed ready to power the nascent auto industry. The investment in gasoline also helped Standard Oil survive the electrification of private homes which dramatically decreased kerosene demand. By 1910, gasoline was outselling kerosene.
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In the early 1900s scientists also discovered that petroleum (
petr-oleum
, rock oil) could be used or modified into other chemical products such as pesticides, ink, paint, paraffin wax, beauty- and hygiene products, synthetic fibres, pharmaceuticals, and various forms of plastic. Bakelite was the first plastic material to be developed, as early as 1907.
The Rockefellers brothers’ business plan was to control the whole production chain, from refining to the finished product, while constantly looking for ways to make production more efficient. With renowned ruthlessness, they created a monopoly on the refining and transportation of oil, the Standard Oil Trust.
John D., the most ambitious of the brothers, saw “competition as a sin" and would use any means to outsmart their competitors. State after state fell into their hands as competing petroleum companies were either acquired or eliminated. In the end, Standard Oil dominated the U.S. market.
In 1882 their power was consolidated into a nine man strong board of directors, with John as chairman. The board appointed the
directors and officers
of all
subordinate companies
. Thus, all the interdependent parts acted as one disciplined unit. This cartel was the first of its kind. At its peak, the Standard Oil Trust controlled 90% of the petroleum market.
In 1885, Standard Oil’s assets were gathered in the impressive new head quarters at 26 Broadway, New York, which, with its proximity to Wall Street, soon became a global hub. William became the representative of Standard Oil Company in New York until 1911. The Rockefeller family institutions also began redrawing the map and character of New York City.
Standard Oil also expanded worldwide and became one of the first and largest multinational corporations. After only a few decades, oil became the life blood of a world economy in which Standard Oil played a central part. Oil revolutionised travel and transportation, while at the same time causing huge pollution problems and fuelling the destructive wars of the 20th century. It caused geopolitical conflicts right from the start and those who controlled it could easily be intoxicated
by the power it
gave.
John took the “survival of the fittest” business logic of capitalism to mean that in the end only the strongest company would emerge as lone victor at the top. To reach this goal, Standard’s products had to be the best on the market and were developed and refined to perfection. The name
Standard
reflected not only a monopolist mindset but also the ambition to provide a product with a reliable standardised quality all over the world.
The other essential component was being able to outmanoeuvre all competition and becoming a master at manipulation. When competitors could not be beaten, they would be joined.
An early example was the 1880s oil price war between the Rockefellers, the Rothschild family, the Nobel brothers, and newly formed oil companies such as Royal Dutch and Shell (later merged to form Royal Dutch Shell). The powerful Rothschild family had entered the oil business and given loans to the Nobel brothers for oil drilling in Russia. John D. naturally saw this as a serious threat to the world dominance of Standard. The price war forced him to invite the head of the Rothschild family, Baron Alphonse de Rothschild, to a meeting in New York in 1892. The negotiations resulted in a truce where the competing families instead formed an alliance.
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These close ties would remain and influence the
social, economic, and political
development of the twentieth century.
In the late 1800s, the Rockefeller brothers started expanding their business ventures. William founded the Amalgamated Copper with Henry H. Rogers. John D. invested in the mining industry and the Colorado Fuel and Iron, partnering with the unscrupulous industrialist Jay Gould. The brothers both sensed
that power and wealth was based on controlling natural resources.
Devil Bill
The art of winning by any means, fair or foul, had been passed down from their father, William Rockefeller, a notorious fraudster and bigamist who went by the nickname “Devil Bill”. Bill was tall, broad-chested and handsome and had a special charm for both attracting women and parting gullible people from their hard-earned cash.
Bill made a living both from legitimate business ventures such as lumber, and as a travelling salesman and charlatan. In his 20s he started posing as a deaf and dumb peddler of trinkets.
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Later he travelled under the name Dr. William Levingstone, offering “herbal remedies" to unsuspecting country folk.
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Despite his dubious business methods, he was still meticulous about bookkeeping, paying bills, respecting contracts, and avoiding alcohol (likely deterred by his alcoholic father).
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When marrying Eliza Davison, who came with a $500 dowry, Bill brought his former sweetheart, the beautiful but poor Nancy Brown, as housekeeper and had children alternately with his wife and with his mistress (until Nancy grew quarrelsome and was sent back to her family, later marrying another man).
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Bill was constantly travelling, now and then returning home, extravagantly dressed with his pockets full of money which he spent generously as compensation for his absence, and entertaining his children with captivating tales. Between these short showers of abundance, John D. and his mother struggled to make ends meet.
On one of Bill's business trips he later met and married a younger woman, Margaret Allen, under his alias Dr Levingston, while continuing to be married to Eliza.
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Bill’s double life and shady background remained an embarrassing family secret.
John D. Rockefeller
Even in his youth, John D. was introverted and solemn, with piercing eyes and high moral standards. Like his parents he was a teetotaller, and minded his health. Early in life he got involved with the Baptist church and was much influenced by its teachings. He did not, however, take lightly to those who led a sinful life with gambling or drunkenness
and was viewed as a bit of a killjoy.
When he started earning his own money, at age 16, all his personal economic activity, both incomes and expenses, were meticulously entered into his red
Ledger A
. It was his most precious possession and would for the rest of his life be treated almost as a sacred relic.
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This bookkeeping habit was later transferred to his own children who were taught the art of financial management from an early age.
Starting his career, first as a diligent bookkeeping assistant and later as partner in a commissions firm before going into the oil business, John’s industriousness and serious manners earned him the trust and respect of the older businessmen in the community. People started calling him “Mr. Rockefeller” while still in his teens. He was punctual, orderly and loved to work from early morning to late at night.
From his father Bill, John D. had learned the art of bookkeeping, writing contracts, evaluating the quality of goods, and unconventional negotiation techniques – skills which turned out very useful in his professional life.
However, he also came to harbor a well-concealed resentment against his father who had boasted to a neighbour,
“I trade with my boys and I skin 'em and I just beat 'em every time I can. I want to make 'em sharp."
When Bill knew that John was in dire straights, he would demand immediate repayment of a loan he had given earlier, keep the money for a while and then hand it back to his son.
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Even when John was a young boy, Bill had played cruel games with him, with the explicit purpose of teaching his son not to trust
anyone
completely, not even his own father. Such tough love taught John to be a ruthless and efficient businessman who would not accept defeat. His father had given him the clear message that the business world was fierce and ruthless and that in order to succeed, any means were acceptable.
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From his conscientious, stern, and deeply religious mother, John got both his strategical and mathematical thinking and his Christian faith. He internalised her constant admonitions to not let success go to his head. These disparate influences made John D. very successful, but also gave him somewhat of a dual personality, a Dr. Jekyll and Mr. Hyde.
Like his father, John D. loved his money more than anything but was not inclined to spend it willy-nilly. His rapidly increasing fortune was to grow and not be scattered on excesses, parties, fine clothing or luxuries. Every purchase and investment was to be carefully calculated
and nothing go to waste. Always attending to the most minute detail in optimising and streamlining every part of his growing business empire, by 1880, he had reached the top of the list of the richest men in the United States.
PHILANTHROPY
From a young age,
John D. was a strong believer in giving a certain percentage of his earnings to charity (carefully entered into
Ledger A
, of course). As soon as he earned an income he would make donations to various charities, both Baptist, Methodist, Catholic and abolitionist.
Inspired by Baptist ethics, and by the prosperity theology not uncommon among businessmen of his time, he saw his wealth as a gift from God, given to the most worthy and hardworking for stewardship.
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With his immense resources he wanted to make the world a better place.
Those who refused to participate in his plans and become part of his growing empire were, however, seen as sinners and not deserving of any sympathy. Charity also became a way of redeeming his often
ruthless and predatory business methods.
In 1896, the same year that Svante Arrhenius (1859–1927) became the first scientist to calculate the levels of carbon dioxide in the atmosphere and its possible influence on the greenhouse effect, John D. Rockefeller Sr. retired from the management of Standard Oil and handed the leadership of the company over to his closest man, John Dustin Archbold (1848–1916).
His son, John D. Jr., was also placed in more responsible positions within the company. Senior had new plans. Just like steel magnate
Andrew Carnegie (1835–1919), he started investing in philanthropy and social reform.
There was now enough capital to start reshaping the world and provide it with a more efficient management.
Only a few decades later, Rockefeller philanthropy would start financing the research field emerging from the theories of Svante Arrhenius.
EDUCATION AND RESEARCH
Early on in his career, John D. Rockefeller realised the benefits of gaining control over education and the production of knowledge. With the aid of his financial advisor, baptist pastor Frederick Gates (1853–1929), who was hired to run the philanthropic endeavours, the founding or financing of a long list of significant institutions began.
Through the generations, the Rockefeller family came to actively support seventy-five top colleges and universities, including Harvard, Yale, Brown, Columbia, Cornell, Massachusetts Institute of Technology (MIT), Princeton, Tufts, University of California Berkley, and University of Chicago. This gave a significant degree of influence over the field of education and research, mainly in the United States but also overseas (e.g. through Central Philippines University and the London School of Economics).
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University of Chicago
In 1890, John, D.
Rockefeller and the
American Baptist Education Society co-founded the University of Chicago (on land donated by department store owner Marshall Field). It was Rockefeller’s million dollar donation that turned the college into a university, and he continued to finance its operation. As the university required more and more funding, Rockefeller asked for representatives on the board of directors in order to get more oversight and control of how donations were used.