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Who was the first billionaire?

John D Rockefeller John D Rockefeller was the top oil tycoon of the 19th century, and his savvy business decisions made him tremendously wealthy. John D Rockefeller became one of the wealthiest Americans in history by taking control of the newly born oil industry.

thecollector.com - Here's How John D Rockefeller Became the First Billionaire

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Portrait of John D. Rockefeller, 1913, via Library of Congress, Washington DC

John D Rockefeller became one of the wealthiest Americans in history by taking control of the newly born oil industry. He studied safe and smart business practices that ultimately helped him gain control over most of the industry by the time he turned 40 years old. Rockefeller’s Standard Oil Company became the most dominant oil refinery in the country, eventually enabling him to bring in thousands of dollars a day. His navigation of the industry and adoption of monopolistic business practices led him to be the first on the list of billionaires.

Early Life & Business Ventures of John D Rockefeller

Portrait of John D. Rockefeller at the age of 16, via Public Broadcasting Services (PBS) John D Rockefeller was born in Richford, New York in July 1839. His father was a traveling salesman and con artist, and his mother was a religious woman who taught John about working and finances. Rockefeller had a knack for arithmetic, which would later benefit him as a businessman. At around 14 years of age, Rockefeller and his family moved to Cleveland, Ohio. He began working for farmers nearby but disliked the amount of physical labor required. Rockefeller decided to attend Folsom’s Mercantile College, where he studied penmanship and bookkeeping practices and transactions. He graduated in 1855 and started looking for bookkeeping positions around the city of Cleveland. After several failed attempts to secure a job, he was hired as an assistant bookkeeper by a merchant company named Hewitt and Tuttle. He learned common bookkeeping practices and started participating in trading ventures at the company. In 1859, Rockefeller left Hewitt and Tuttle to explore his own business interests. He went in on a business venture with Maurice B. Clark. They invested $4,000 total to start the Clark and Rockefeller company. Clark and Rockefeller were commission merchants who mainly specialized in selling produce. They made significant profits selling meats, grain, and hay to the federal government during the American Civil War. Remains of the Titusville, Pennsylvania oil well drilled by Edwin Drake by Keystone View Company, 1926, via Library of Congress, Washington DC Rockefeller was a savvy businessman who was always looking for new business opportunities and wishing to expand upon his profits. The first oil well was drilled in Titusville, Pennsylvania by Edwin Drake, who struck oil in August 1859. Rockefeller took notice of this event and decided to jump on the opportunity of the blooming oil industry. Clark and Rockefeller partnered with Samuel Andrews to establish an oil-refining business. The company was named Rockefeller and Andrews after Rockefeller bought out Clark’s interest in 1865. Andrews and Rockefeller created a plan to stabilize the prices of the oil industry. Since the oil industry was still new, prices were inconsistent due to the limited market. They met with their largest competitor in the Cleveland oil industry, Oliver H. Payne, to come to a partnership agreement. The Standard Oil Company was established in January 1870, which began John D. Rockefeller’s long-leading success and exponential wealth.

The Oil Industry in the Late 19th Century

Group of men standing next to an oil rig in Titusville, Pennsylvania by Mather, 1900, via Library of Congress, Washington DC Finding oil in Titusville in 1859 is marked as the beginning of the oil boom in the US. The Industrial Revolution allowed new technological innovations to make extracting natural resources easier. The Pennsylvania Oil Rock Company was responsible for hiring Edwin Drake to drill the first oil well. Millions of oil barrels were being produced in Pennsylvania by the 1860s. This caused the oil market to become unstable as prices dropped due to increased production with little demand. The oil industry was at a low point when people no longer needed oil to light their homes upon Thomas Edison’s invention of the incandescent light bulb in 1879. However, John D. Rockefeller’s involvement in oil refining kept the industry afloat. He had entered the oil industry just in time to create his own oil-refining setup for little cost. The goal was to be as efficient as possible and use as many resources as possible with little waste. This allowed the Standard Oil Company to eventually buy out its competitors or run them out of business.

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The Standard Oil Company Dominates the Industry

John D. Rockefeller and his partners devised a plan in 1871 to consolidate oil refining companies to stop inconsistent collapses in pricing and gain more control of the industry. Over the next decade, Rockefeller approached his competitors to strike a deal and buy them out. In an effort to appease all parties, Rockefeller gave his competitors a portion of Standard Oil Company stock that was comparable to the value of their firms. Some oil refinery owners were brought into the Standard Oil Company and given management positions. In just one year, Rockefeller had successfully integrated or bought most of the oil refineries in Cleveland. Rockefeller’s next business move was to expand the Standard Oil company outside of Ohio and make agreements with railroads to cut transportation costs. He began merging with oil refinery firms in Pennsylvania. He also bought oil pipelines. In the latter half of the 1870s, Rockefeller acquired most of Empire Transportation Company’s (ETC) property. The ETC was a subsidiary of the Pennsylvania Railroad, and it owned pipelines, tank cars, and New York harbor terminals. At this time, Rockefeller already had a deal with the Pennsylvania Railroad. It carried a little over half of Standard Oil’s shipments of oil. He also negotiated agreements with other major railroads, such as the Erie Railroad, Baltimore and Ohio, and New York Central. Agreements were negotiated to add other railroads into the mix later on. Oil train leaving an Illinois Central Railroad yard going east to the Pennsylvania Railroad by Jack Delano, 1942, via Library of Congress, Washington DC During the railroad negotiations, Rockefeller promised to transport so many carloads of oil on a consistent basis. This attracted railroad companies because it meant they would get steady business. These railroad rebates allowed Rockefeller to cut costs down for Standard Oil Company shipments. As a result, any competitors the company had left were unable to compete with his prices because they couldn’t afford it. By 1878, the Standard Oil Company had gained control of 90% of the oil refineries throughout the entire nation. Rockefeller had become an oil tycoon by the age of 40 and within just one decade of establishing the Standard Oil Company. He made it a point to weed out any unnecessary middle-man activity in order to gain as much profit out of his business as possible. In 1882, the Standard Oil Trust was established after the idea was introduced by American lawyer Samuel Dodd. A board of trustees was created, which consisted of nine members. This allowed Standard Oil to be spread across the nation in seemingly independent entities. However, all of the refineries still worked together, and Rockefeller still managed and had the most control over all of them. Over the next decade, Standard Oil became more aggressive in its business tactics, which would ultimately lead to the downfall of the company’s monopoly.

Antitrust Policies Attack the Standard Oil Company

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Ohio Senator John Sherman proposed an antitrust act in 1890 to put an end to monopolies that were taking over various industries. The Sherman Antitrust Act was signed into law in July 1890. The law allowed the federal government to get involved in business relations by breaking up trusts that were taking over industries and putting competitors out of business. The Sherman Act wasn’t foolproof at first. It failed to work with the American Sugar Refining Company in the United States v. E. C. Knight Company court case in 1895. However, it became more successful in later years. President Theodore Roosevelt was often nicknamed the “trust buster” for his determination to dissolve monopolies. The Standard Oil Trust came under fire when the attorney general of Ohio, David K. Watson, filed a lawsuit against the company for violating the Sherman Antitrust laws. Standard Oil lost the case, but the decision was repealed. This would cause the dissolution of the Standard Oil Company to be prolonged until the US Supreme Court ruled that it was a trust in 1911. Standard Oil was ordered to be dissolved, and it broke up into several independent companies. However, the firms still worked together, and many still went by the Standard Oil name, followed by the state they were located in. The original Standard Oil Company was kept in Ohio, where it had started. Many of the entities that were created from the dissolution of the trust were later integrated into larger firms. For example, the Standard Oil Company of New Jersey eventually became ExxonMobil. British Petroleum (BP) bought the original Standard Oil Company of Ohio for almost $8 billion in 1987.

John D Rockefeller Named the First Billionaire After Retirement

Portrait engraving of John D. Rockefeller by W.T. Bather, 1913, via Library of Congress, Washington DC Although the Standard Oil Company was dissolved, John D Rockefeller still managed to make huge profits. The demand for oil saw a resurgence when automobiles began hitting the roads. The oil industry was booming, especially after Henry Ford made the Model T affordable to the middle class. By this time, Rockefeller was in retirement. He became less active in the Standard Oil office and ultimately retired in the late 1890s and began focusing more on philanthropy. Despite running many competitors out of business during the days of the Standard Oil Trust, Rockefeller used a good chunk of his fortune to donate to charities and partook in other philanthropic work. He helped establish the University of Chicago and contributed almost $35 million in total within just two decades from the time it was founded. He also founded the Rockefeller Institute for Medical Research to support research in medicine, later named Rockefeller University. In 1913, the Rockefeller Foundation was created in an effort to support public health issues. John D Rockefeller was announced as the world’s first billionaire through newspaper headlines in 1916. Towards the end of his life, Rockefeller gave much of his money and assets to his heirs and philanthropies. He died in his home in Ormond Beach, Florida on May 23, 1937, and was buried at the Lakeview Cemetery in Cleveland.

thecollector.com - Here's How John D Rockefeller Became the First Billionaire

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