Profile of John D. Rockefeller Few family names are arguably better known in the United States than the Rockefellers. As convenient and visible public icons of wealth, big business, and politics, the Rockefellers have been revered and reviled in American music, literature, and news media. For instance, during the Great Depression, Louis Armstrong sung about being as “Rich as Rockefeller”. Decades later, for many Americans, “Rockefeller” is still synonymous with money and power. The Rockefellers have made substantial contributions to American politics, health care, and arts as well as to the controversial “competitive capitalism” or business monopoly that gripped the nation at the turn of the 20th century. Few Americans are aware, however, of the equally profound influence the family patriarch, John D. Rockefeller, had on American philanthropy and traditions of civic responsibility and leadership. John D. Rockefeller was born in 1839 on a farm in Richford, NY, the son of William A. and Eliza Rockefeller. One of six Rockefeller children, John and his family moved to Ohio in his teenage years. John attended public schools in Cleveland and after a short stint at a business college, began work as a bookkeeper. Deeply religious, Rockefeller worshiped at a Baptist Church each Sunday and by age 21 was selected as a Church trustee. He regularly gave a portion of all his total earnings to his church, as well as to other religious and charitable endeavors. At his first job, Rockefeller earned all of $3.57 for a week’s work. In wasn’t long, however, before the ambitious young man joined with a partner in 1859 to start a produce business, using for capital $1,000 in savings and a $1,000 loan from his father. © www.learningtogive.org 1 At the time, a thick black “rock oil” had been discovered literally “floating on ponds” in western Pennsylvania and soon the oil was recognized as an excellent source of kerosene for lights and lubrication. In 1863, Rockefeller entered this new oil business as a refiner. Cleveland became a major center for the oil industry. As Rockefeller earned more money, he also continued to tithe a large part of his earnings to his church and other religious and social causes. Rockefeller was dismayed, however, at what he found in the oil business. An “oil mania” was literally sweeping the country as entrepreneurs attempted to get in on the new found source of wealth by starting their own businesses in transportation, refining, drilling and manufacturing. Rockefeller saw an “anarchy of production,” characterized by self-defeating price wars in the oil industry, lost jobs, lost production and “suicidal competition.” Researcher and author F.X. Micheloud has noted that before Rockefeller later took the industry in his “iron hand, the price of oil fluctuated wildly. It soared or fell quickly, depending on the market being flooded with an abundant supply or starved by a strong demand. In 1859 for example, the crude oil barrel was selling for $20 and two years later only for 52 cents. Speculators bought huge quantities of crude after an especially generous well (a wildcat) had made the prices go down (or knocked the bottom out of the market, in the colorful English of the oilmen) and stored it in tanks, waiting for the prices to rise again. To invest in such a business needed the temperment of a gambler, which was not lacking to these men.” In contrast, Rockefeller was a proponent of “cooperation” (others would later call it monopoly) between oil industry sectors in drilling, refining, transportation and sales. He called for vertical integration of business enterprise. By the late 1860s, Rockefeller bought out many oil refineries in Ohio and Pennsylvania and also purchased plants, warehouses, tanker cars and wagon fleets to make his company as self-sufficient as possible. In what would perhaps be the most controversial and fateful business decision of a lifetime, Rockefeller in 1868 made a pact with Jay Gould, owner of Erie Railroad, guaranteeing Gould a specific volume of shipments in exchange for rebates to Rockefeller on shipping rates as well as rebates on oil shipped by Rockefeller’s competitors over the railroad. Within two years, Rockefeller established the Standard Oil Company of Ohio with $1 million, gained control of area oil refining facilities and worked with other oil companies and railroads to establish the South Improvement Company (SIC). The SIC was an alliance between Rockefeller, other oil barons and the railroads to eliminate competition. © www.learningtogive.org 2 Here is the contract that the refiners who wanted to collaborate with Standard (or the SIC) had to sign: I, -- -, do solemnly promise upon my honor and faith as a gentleman that I will keep secret all transactions which I may have with the corporation known as the South lmprovement Company; that should I fail to complete any bargains with the said company, all the preliminary conversations shall be kept strictly private; and finally that I will not disclose the price for which I dispose of any products or any other facts which may in any way bring to light the internal workings or organization of the company. All this I do freely promise. Rockefeller bought out 21 of 26 small Cleveland refineries and by 1879, Standard Oil Company controlled 95 percent of oil refining in the United States. Rockefeller saw his action as a way to control “the anarchy of production” and dismissed growing public criticism of his dealings with the railroads through Standard Oil. The Standard Oil Company might control most of U.S. oil production, but Rockefeller thought the company’s action was warranted due to a global demand for oil. And, by that time, inexpensive kerosene lamps were lighting homes from Beijing to Berlin. Much of the lamp oil was from the United States, and the Standard Oil Company. As Rockefeller purchased and consolidated many related oil companies, he faced a problem with state corporate law in Ohio. The law limited one corporation from owning stock in other businesses. To avoid such restrictions, Rockefeller set up the Standard Oil Trust as an umbrella for all his businesses. Anti-monopoly sentiment against Rockefeller and the oil industry grew across the United States. Yet, Rockefeller continued to expand his control over the oil industry - and few could outlast a price war with Standard Oil. At one point, Rockefeller wrote to refiners he was interested in “cooperating” with and said: “Three years ago I took over the Cleveland refineries. I have managed them so that to-day I pay a profit to nobody. I do my own buying I make my own acid and barrels, I control the New York terminals of both the Erie and Central roads, and ship such quantities that the railroads give me better rates than they do any other shipper. In 1873 I shipped over 700'000 barrels by the Central, and my profit on my capitalization, $2,500,000, was over $ 1,000,000. This was the result of combination in one city. ... Let us become the nucleus of © www.learningtogive.org 3 private company which gradually shall acquire control of all refineries everywhere, become the only shippers, and consequently the master of the railroads in the matter of freight rates. “ John D. Rockefeller and the Standard Oil Company. F.X. Micheloud’s Website. [cited February 9, 2004]. Available from http://www.micheloud.com/FXM/index3.htm. In the face of business challenges and public criticism, Rockefeller remained steady in his commitment to his family, religion and to a growing concern for less fortunate people in America and around the world. Rockefeller is said to have concurred with Andrew Carnegie’s The Gospel of Wealth, in which Carnegie asserted the wealthy have an obligation to use personal wealth to improve common good. Carnegie: “…who dies rich dies disgraced.” In 1897, Rockefeller and his son John, Jr. developed a new approach to philanthropy that is still key to most individual, corporate and foundation philanthropy today - one stressing “cooperation and (a) conditional system of giving.” The Reverend Frederick Y. Gates also contributed greatly to this philosophy, acting as a visionary behind the institutions that the Rockefellers endowed. John, Jr. played a role of refining Gates’ ideas and presenting them to his father, who had the funds to invest. What they essentially said was: “We’ll provide support for good causes, but only when we’re sure others see the merit in the causes and are willing to help out as well.” The Rockefellers began ongoing, major charitable efforts to establish American institutions in philanthropy, medicine, public health, and the arts. Rockefeller’s first major philanthropic undertaking was to establish the University of Chicago, which ultimately received $35 million from him. Rockefeller also hired Frederick Gates to oversee his philanthropic endeavors and implement his philosophy of cooperating and conditional system of giving. In 1890 Congress passed the Sherman Antitrust Act, outlawing trusts and “combinations in restraint of trade.” Within two years, the Ohio Supreme Court dissolved the Standard Oil Trust and separated it into 38 different companies. Rockefeller responded by creating the Standard Oil Company of New Jersey. He transferred business control to the new Company, since New Jersey corporate law permitted a business in that state to own stock in other companies. This move would prove to be short-lived, however. Newspaper and magazine articles, such as Ida Tarbell’s “McClure’s Magazine” series on the history of Standard Oil, kept the © www.learningtogive.org 4 controversy over business monopoly and Rockefeller’s role in the oil industry before the public eye during the decades at the turn of the 20th century.