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.
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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.
