Billionaires are everywhere today. Ok maybe not
EVERYWHERE, but there are more billionaires alive today
than ever before in history. There are approximately 1700
billionaires on the planet (that we know of), with more
popping up every week. But it wasn't all that long ago that
no human being had ever had a billion dollar bank account.
Gates, Bezos, Ballmer, Buffett, Zuckerberg, Brin, Page.
These are some of the most famous names we associate
with modern billion dollar fortunes. Most of today's
billionaires make their money from things like technology,
hedge funds, pharmaceuticals, energy drinks. A century
ago, people like Andrew Carnegie and William A. Clark
earned their fortunes off things like steel and railroads. And
while many of these early tycoons were incredibly wealthy,
with fortunes that are over $1 billion after adjusting for
inflation, their actual fortunes at the time did not quite pass
the 10 figure mark.
So who was the very first person to possess a billion
dollars? And how'd he get so rich??? That man was none
other than John D. Rockefeller. Johnny D. made his fortune
in oil. Standard Oil to be exact. But, as you're about to see,
there was nothing standard about Rockefeller's bank
account.
John Davison Rockefeller was born July 8, 1839 in
Richford, New York. His father William was a traveling
salesman who sold his questionable goods across the
country and thus was not home all that often, leaving
John's mother to raise the family on her own. In 1853, the
Rockefellers moved to Cleveland, Ohio, where he attended
Central High School. However, in 1855 he dropped out of
high school to enroll at Folsom Mercantile College where he
completed a three month business course. At the age of
16, Rockefeller became a bookkeeper with a commission
merchant and produce shipper. His astute business sense
soon became evident. Rockefeller saved $1,000 in four
years, and at the age of 20 with a $1,000 loan from his
father, he entered into his own commission merchant
partnership with Maurice Clark. By the age of 24,
Rockefeller and Clark expanded into the regionally booming
oil refinery industry, bringing on a new partner, chemist
Samuel Andrews.
In 1865, the partners, which included Rockefeller, Clark,
Andrews and Clark's two brothers, were in serious
disagreement about the direction of their business, so they
decided to sell it to the highest bidder among them.
Rockefeller, then 25-years old, won the business with a
$72,000 bit and with Andrews as a partner, established
Rockefeller and Andrews.
Rockefeller studied the new oil business and soon became
savvy in his business dealings. Rockefeller's company soon
merged with a large Cleveland refinery called O.H. Payne,
and then with others. Rockefeller brought his brother
William and Andrews' brother John into the growing
company. In 1866, Rockefeller saw that 70% of refined oil
was being shipped overseas, so Rockefeller established an
office in New York City to cut out the middleman – a
practice that he would use throughout his career to cut
expenses and increase profits.
In 1870, John D. Rockefeller incorporated the business as
the Standard Oil Company, naming himself the President.
Rockefeller and his partners in the Standard Oil Company
were very rich men but they wanted more. In 1871,
Standard Oil, a few other large refineries, and major
railroads secretly joined together in a holding company
called the South Improvement Company (SIC). The SIC gave
transportation discounts ("rebates") to the large refineries
that were part of their group but then charged the smaller,
independent oil refineries more money to transport their
goods on the railroad. This was a blatant attempt to
financially destroy those smaller refineries and it worked.
When businesses went under because of this practice,
Rockefeller bought them. Standard Oil was able to acquire
20 Cleveland companies in one month in 1872. This
became known as "The Cleveland Massacre" and it ended
the competitive oil business in the city. Standard Oil now
had 25% of the U.S. oil in its control. This created a
backlash of public contempt.
In the Spring of 1872, the Pennsylvania legislature
disbanded the SIC, but Standard Oil was already well on its
way to becoming a monopoly. In 1873, Rockefeller
expanded his business into New York and Pennsylvania,
taking control of half of the Pittsburgh oil business.
Standard Oil continued to grow, folding independent
refineries into its business until the company controlled 90%
of the United States' oil production by 1879.
In January 1882, the Standard Oil Trust was formed with 40
corporations under its control. Rockefeller wanted to wring
every penny out of the business, so he eliminated
middlemen like wholesalers and purchasing agents. He
even began manufacturing the barrels and cans needed to
store the company's oil so that he didn't have to buy them
from someone else. Rockefeller also developed products
that produced petroleum by-products like petroleum jelly,
machine lubricants, chemical cleaners, and paraffin wax.
Standard Oil eventually eliminated the need for outsourcing
completely, destroying several existing industries in the
process.
In November 1902, McClure's Magazine ran a 19-part serial
expose called History of Standard Oil. In the article
Rockefeller's public reputation was proclaimed to be one of
greed and corruption. The writer, Ida Tarbell, told of the oil
giant's practice of snuffing out the competition. A book was
published out of these articles and it became a bestseller.
The spotlight was now on Standard Oil's business practices
and they were not just attacked in the media, but also by
state and federal courts. The Sherman Antitrust Act was
passed in 1890 as the first antitrust legislation designed to
limit monopolies. Then, 16 years later, the U.S. Attorney
General under President Teddy Roosevelt's administration
filed two dozen antitrust actions against large corporations,
with Standard Oil as the largest target.
Five years later, in 1911, the U.S. Supreme Court upheld the
lower court's decision and the Standard Oil Trust was
ordered to break up into 33 independently functioning
companies. But don't cry for John D. Rockefeller, as he was
a major stock holder in the Standard Oil Trust, he became
much much richer from the dissolution of the Standard Oil
Trust and establishment of new companies.
Rockefeller may have been a ruthless businessman and the
first person to make a billion dollars, but he was also a
devoted philanthropist. He gave away millions of dollars,
established the University of Chicago in 1890 with his
donations of $35 million over 20 years and established
Rockefeller University in 1901. Within that institution's
laboratories, causes, cures, and various manners of
prevention of diseases were discovered, including the cure
for meningitis and the identification of DNA as the central
genetic marker. Rockefeller also established the General
Education Board in 1902. The Board distributed $325 million
to American schools and colleges over its 63 years of
operation.
Personal Wealth:
In 1902, an internal audit pegged 62 year old Rockefeller's
personal net worth at $200 million . That's roughly $6 billion
in today's dollars. Over the next 12 years, his wealth grew
very rapidly. By the beginning of World War One, roughly
1914, a new audit pegged Rockefeller's personal wealth at
$900 million. His net worth was made up of ownership
interests in banking, mining, railroads and of course oil. The
war caused demand for oil to skyrocket. By the time WWI
was over, roughly 1918, Rockefeller's personal net worth
crossed over $1 billion. His wealth would eventually soar to
several billion dollars. At the time of his death in 1937, John
D. Rockefeller left personal trusts valued at roughly $1.5
billion. That figure does not include the hundreds of millions
of dollars that had already been given away to various
charities.
Side Trivia: After adjusting for inflation, at the peak of his
empire's power Rockefeller had a net worth equal to $340
billion modern dollars.
In 1913, Rockefeller created the Rockefeller Foundation and
donated over $500 million to the foundation which provided
assistance to medical research and education, public health
initiatives, scientific advancements, social research, the
arts, and other fields all over the world.
John D. Rockefeller hoped to live to be 100 years old, but
died at the age of 98 in 1937.
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