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How did John D. Rockefeller expand his business?
How John D. Rockefeller made $340 billion!
In 1855, when Rockefeller was 16, he got his first job as an assistant bookkeeper working for a small produce commission firm called Hewitt & Tuttle.
In 1859, Rockefeller went into the produce commission business with a partner, Maurice B. Clark
At that time, the Federal government was subsidizing oil prices, driving the price up from $.35 a barrel in 1862 to as high as $13.75. This created an oil-drilling glut, with thousands of speculators attempting to make their fortunes. Most failed, but those who struck oil did not even need to be efficient.
In this environment of wasteful boom, the partners switched from foodstuffs to oil, building an oil refinery in 1863 in Cleveland’s burgeoning industrial area
In February 1865, Rockefeller bought out the Clark brothers for $72,500 (equivalent to $1 million in 2016 dollars) at an auction.
In 1866, William Rockefeller Jr., John’s brother, built another refinery in Cleveland and brought John into the partnership.
By 1868, with Rockefeller continuing practices of borrowing and reinvesting profits, controlling costs, and using refineries’ waste, the company owned two Cleveland refineries and a marketing subsidiary in New York
In 1870, Rockefeller abolished the partnership of Rockefeller, Andrews & Flagler, forming Standard Oil of Ohio.
Standard was growing horizontally and vertically. It added its own pipelines, tank cars, and home delivery network. It kept oil prices low to stave off competitors, made its products affordable to the average household, and, to increase market penetration, sometimes sold below cost.
It developed over 300 oil-based products from tar to paint to petroleum jelly to chewing gum. By the end of the 1870s, Standard was refining over 90% of the oil in the U.S.
The company’s vast American empire included 20,000 domestic wells, 4,000 miles of pipeline, 5,000 tank cars, and over 100,000 employees.
In 1882, Rockefeller’s lawyers created an innovative form of corporation to centralize their holdings, giving birth to the Standard Oil Trust. The “trust” was a corporation of corporations, and the entity’s size and wealth drew much attention. Nine trustees, including Rockefeller, ran the 41 companies in the trust.
In the 1890s, Rockefeller expanded into iron ore and ore transportation and also went on a massive buying spree acquiring leases in Ohio, Indiana, and West Virginia
According to some methods of wealth calculation, Rockefeller’s net worth over the last decades of his life would easily place him as the wealthiest known person in recent history, approximately $340 billion (4 times that of Bill gates)