John Davison Rockefeller was an American oil magnate, investor, and philanthropist. Rockefeller started the Standard Oil Company, a business enterprise that subjugated the oil industry for many years. He changed the oil sector of economy and laid down the foundation for modern day philanthropy (Parker 6). When the name of John D. Rockefeller is mentioned, numerous thoughts flow in people’s minds. Some of them consider that Rockefeller was a bright and smart businessman, while others consider him a back-dealing monopolist. Still, to others, the name evokes memories of a great philanthropist. Indeed, though loved and hated in equal measure, it is not a secret that Rockefeller was, at his time and even today, a man surrounded by mystery. Indeed, he saw his talent in generating wealth as an opportunity to help those in need. As a result, this led him to think that he was entitled to monopoly in the oil sector. According to his thinking, having monopoly rights in the oil industry was not an immoral thing at all. In spite of this, Rockefeller’s motivation was to provide oil for the poor at prices that they could afford (Laughlin 20).
As one of the pioneering entrepreneurs in the United States, John D. Rockefeller defined the oil industry and later became the richest American, whose wealth is still legendary. Rockefeller was born on July 8, 1839 (Chernow 31). His early beginning was humble and had no trappings of the wealth he was later to amass. With a father barely able to fend for his family of six children, hawking medicine of dubious value and a religious mother, Rockefeller’s family was always moving. He must have inherited the entrepreneur spirit from his father and piety, philanthropy and hard work ethics from his mother. His schooling was sporadic due to the continuous movement of the family, but he did manage to graduate from high school (Steiner and Steiner 76).
Rockefeller has learnt the basics of book keeping, commercial and banking practice at a local village school instead of going to college, and later started to work as a clerk at a local business. From the early days of working, Rockefeller believed in the mantra of honest work, saving and philanthropy. His reputation grew due to his honesty and diligence; this combined with his saving principles allowed Rockefeller to form a partnership and open his first business dealing in grain. The business did exceptionally well during the Civil War providing the army with supplies.
Rockefeller was deeply religious and philanthropic, attending the church and donating regularly. Through this church association, he met a church member dabbling in oil refinery, formed with him a partnership and thus got involved in the oil sector. The discovery of oil in the United States transformed the lives of millions. These changes have resulted from the discovery of Benjamin Silliman, the chemist, who, after detailed analysis, concluded that distilling and purifying the crude oil produces kerosene, which was a better light producer than the whale oil they had been using. Previously, the crude oil had been neglected, as nobody knew what to do with it. From Cleveland where Rockefeller was based to Pennsylvania, the place of the oil discovery, Rockefeller was soon immersed in the activities of the oil industry. His refinery was one of the largest in Cleveland. The partnership was replaced with the incorporation of Standard Oil in Ohio in 1870 with Rockefeller, his partner, Sam Andrews, his brother William and Henry Flagler as shareholders, marking the beginning of a company that came to dominate the oil industry in the United States (Hamen 49).
The oil industry, in its early stages, was a tumultuous business with fortunes made and lost in short periods of time. This was mainly due to the overproduction of the 'black gold’ as everyone tried to get rich quickly. As the laws of supply and demand dictate, the price plunged due to oversupply, which led to bankruptcy of some investors. However, the discovery of new markets drove the prices up, creating wealthy investors. The sector was a seesaw of fortunes (Winkler 80).
From the early stages of his business activities, it has always been Rockefeller’s top priority to provide the ‘best at the cheapest’ (Parker 94). The only way to serve this goal was to find the solution to two endemic problems in the oil industry, namely, the fluctuation of prices and waste. His aversion for wastage and saving ethos forced Rockefeller and his partner, Sam Andrews to find use for the byproducts that could otherwise be wasted. Therefore, as other refiners threw away the byproducts and handled the oil carelessly, wasting much of it in the process, Rockefeller and his partner found uses for their byproducts such as lubrication oil, paraffin, and Vaseline among others. Paraffin, for example, was used to make candles. This constant search for saving methods, strategies, and mechanisms helped Rockefeller and partners, to expand their operations and company. By cutting costs in labor, owning input materials such as timber, kilns and horses for transportation, forever trying to minimize his business costs so that he was able to reduce the prices he offered to customers, Rockefeller has gained a competitive advantage in the market (Steiner and Steiner 77). As profits soared, it was reinvested in the development of the company, in particular – in development of superior and effective equipment and hiring experts to find the ways in which oil could be used, while always striving to offer the cheapest prices possible. Rockefeller driving ambition was to exploit the potential of oil in every possible way.
A significant break came through rebates offered by the railway companies. The competition among the main railway industry players, Pennsylvania and New York Central with the Erie, forced them to proffer rebates to the major dealers in the oil industry to attract them to use their railroads. Thus, Rockefeller used his dominant position in the oil sector of economy to his advantage. He negotiated with the railways to give him the largest rebate and in return, he will provide apart from the greatest amount of oil being transported, loading, and unloading labor. As no other company could match Standard Oil’s volume, it gained the advantage of being the only one given that level of rebate. Its shipping deliveries were also the most efficient, as it used its own loading and unloading staff, thus, did not waste time waiting for the railway companies’ loaders.
Due to his efficiency, cost cutting and savings Rockefeller’s Standard Oil was able to make a comparably better deal than his competitors in terms of rebates. This combination of efficiency, cost cutting, and savings when combined with rebates enabled the company to make profits, while offering lower prices and driving its competitors out of the market. His customers were more than happy, as before, only the richest could afford the high price of lamination as found in candles and other oils. Thanks to the rock bottom prices charged by Standard Oil, most people could afford to pay one cent per hour lighting. It was the democratization of nighttime activities (Morris 148).
Having made a huge mistake in joining a cartel with the aim to fix prices after the acrimony caused by the small producers forced a legislation that annulled the cartel’s charter, Rockefeller embarked on integration. He bought out the owners of other refineries using outright purchases or Standard Oil’s stock. He believed that only large and efficient oil companies could effectively compete in the market. Thus, in exchange for their facilities, he would give them a say and combining their talents they would build a better company in Standard Oil.