How Rockefeller Became America’s First Billionaire
There are some people out there who are happy with a steady paycheck, a house, a car, a partner, and a happy family.
Then there are some hardcore entrepreneurs — the ones who won’t take “no” for an answer — who will strangle their competitors — who will make headlines every day — who will not stop dominating the world until the government itself has to intervene.
John D. Rockefeller was one such individual. Let’s take a look at this entrepreneur’s story and understand how he dominated the American oil industry in the 20th century.
His humble beginnings
Yes, this is one of those “rags to riches” type of story, but it’s far from ordinary. I mean, the man went on to become the first billionaire America had ever seen. Never, in the history of the country, had one man acquired such a colossal amount of wealth.
John D. Rockefeller was born on 8 July 1839 in New York. His father had children with several women and the old man decided to bring them all under one roof. But sharing a house with so many siblings isn’t a walk in the park.
As you can probably imagine, the household might have been chaos for the young John Rockefeller and that’s when he realized the value of standing out of the crowd and making a name for himself.
Why he became an entrepreneur
John was a hustler since childhood. He got his hands on a lot of menial tasks, including raising turkeys and doing chores for neighbors, to make any money he could.
When he was just 16, he got his first “big boy” job as an assistant bookkeeper at a company called Hewitt & Tuttle, but young John had to drop out of school for this.
He only made 50 cents a day — which was very less, even in the 19th century. That’s why John also did other jobs on the side to support himself. After two stressful years, an ambitious John, frustrated with his low income, requested a raise.
But his seniors at Hewitt & Tuttle refused to give him any raise! Well, he was John Rockefeller after all, and he wasn’t going to work for someone else for 50 cents a day for the rest of his life!
That’s when he decided to take matters into his own hands. He managed to secure a loan and started selling food products, such as grain and meat.
The business boomed and John made some serious money. He was far from a millionaire though, but he didn’t do too bad for an inexperienced teenager. He was only 18, but the banks, impressed with his commercial acumen, were ready to loan him more money.
Starting and monopolizing the American oil industry
In 1859, the first-ever oil well in the United States was discovered in Pennsylvania. And so began the “oil rush”. A lot of ambitious entrepreneurs, Rockefeller included, rolled up their sleeves and prepared to grab their slice of the pie.
When a bunch of determined, ruthless, pioneering entrepreneurs see an opportunity, they don’t show any mercy to their competitors. These people are relentless and won’t settle for anything but the first spot.
John Rockefeller not only sold refined crude oil but he also squeezed profits from byproducts like paraffin wax, tar, and naphtha. He didn’t buy wooden barrels from other businesses — he bought a forest and used his own wood to produce barrels to store oil.
The revenue kept coming and Rockefeller made all the small competitors surrender to his authority. In 1870, Rockefeller incorporated his company as the Standard Oil Company.
But there was one thing that was still bothering him. There were four more competitors left and Rockefeller, who was raised in a crowded household and earned 50 cents a day, wasn’t a big fan of sharing.
The state intervened and tried to stop him (but it couldn’t)
Rockefeller invited all the remaining competitors and gave them a bit of a mathematics lesson.
He showed his competitors, statistically, that even if his company decreased its prices substantially, his business would still survive long after every competitor went bankrupt.
Terrified by the idea of being penniless, some of them chose to surrender to Standard Oil. And for the ones who didn’t, Rockefeller was about the crank it up a notch. He actually decreased the prices of his company’s products by 80%.
And it worked. Soon, Rockefeller became the king of the American oil industry — refining almost 90% of America’s oil at that time. But as the saying goes, “What goes up must come down.”
In 1911, Standard Oil was found guilty of violating the Sherman Antitrust Act and the Supreme Court ordered that Standard Oil must be broken into 34 separate companies.
But Rockefeller still had his shares in these smaller companies and the profit kept coming. These smaller companies united with each other in the future and are still part of the big players in the oil industry, namely, Chevron, ExxonMobil and BP.
In 1916, John D. Rockefeller, who was once a kid that dropped out of school and did menial jobs to survive, became America’s first billionaire.
Conclusion
I know some people love Rockefeller and others think he was a megalomaniac.
Well, I’m neutral about this whole situation and my only aim was to analyze how a human being, who came from such a humble background, acquired so much power.
What lessons did you learn from this story? Please let me know in the responses. I’m really keen to get third-party opinions on this.
Thanks.
About this Publication
If you want to read more case studies on how the financially successful people made it, you can find them here at How They Made Money.
This publication might contain just what you need to know about financial freedom.
