The Way of the Accountant: From Chaos to Order in Oil
In 1863 a well-to-do young merchant had caught a fever that was sweeping America: Oil Fever.
The first oil well had been drilled in 1859 and in just four years the country went from darkness to light. The merchant thought the industry had potential, but he harped upon its inefficiencies.
For instance, the black goop was slopped into leaky wooden barrels that were then loaded onto railroads. The railroads would make a long journey from the oil wells to the dozens of disparate oil refineries. Worse many oil companies would use horse and buggies to transport their product. This caused dozens of spills, as they slogged these barrels of flammable kerosene roughshod through the country. Even the way the product was actually refined left most of it to waste. Worst of all, a lack of standards in the refining process was causing in-home explosions. Thousands were dying.
To the ambitious merchant this would not suffice. To him, an accountant by training, the ledger was a sacred book. He set out to solve each of the inefficiencies in turn. And he would do so by cutting costs.
First, he did not set up a series of cheap refineries as many of his competitors did. Instead, he invested in building the largest refinery in Cleveland. He did not rely on barrel makers, who more often than not provided shoddy products. Rather, he decided to have his company manufacture their own barrels. He even made significant improvements to the barrels. Later he would invest in the newly developed tank car, which was simply a railroad car with a giant tank attached. He had an in-house chemist create an improved formula for the distillation process — creating the first R&D department in corporate history. Their improvements increased safety and simultaneously cut cost. The young merchant used identical and identifiable blue barrels to distribute his product; this not only saved money, but also imprinted into the public mind his company’s standard of excellence. The blue barrels came to be recognized as the cheapest and safest product on the market. This all reflected his desire to differentiate himself from the chaos of other refiners, and so he called his product: Standard Oil.
The Merchant’s name:
