Learning From Rockefeller
By Brandon Peters
Entrepreneurs and would-be entrepreneurs trying to get a business education are faced with an avalanche of books and articles on business and personal development, by experts from all sorts of different fields, all advocating an equally wide range of approaches to business. Things can get particularly confusing when you see books like “The 48 Laws of Power” and “The 7 Habits of Highly Effective People” jostling each other for space on the bookshelf, both decorated with an impressive array of endorsements and at the same time containing advice that goes in opposite directions. Yet for all their variety, few if any have taken a look at one of the most successful businesspeople in world history: John Rockefeller.
Part of this is because while Rockefeller is famous for his wealth and philanthropy, he’s also notorious for several things: He earned his fortune in oil drilling and refining, not exactly the most popular industry in the world today. His business practices have been criticized as monopolistic. He was the richest man in the world in his time, some say in history, and a lot of people don’t think well of such a huge disparity of wealth.
So why try to learn from a tycoon from a bygone era, and one known for business practices that are illegal today? Well, setting aside the propaganda, a look at Rockefeller’s life reveals some interesting lessons that are very current despite the fact that he earned his wealth over a century ago. The fact that technology was so different then also helps us focus on the principles underlying the success rather than the particulars, something which is harder to do with the current crop of billionaires: when we examine the likes of Bill Gates and Steve Jobs, we’re tempted to focus on their specific industry and products, forgetting that truly pioneering thinkers go out of the box, and the next big thing rarely comes as a simple iteration of what’s gone before. So with that said, let’s look at what this pioneer of the oil industry has to teach us:
Rockefeller’s most controversial lesson, yet something that might be key in a business environment that prizes sustainability. After all, while we’ve all been taught that competition is vital for inspiring innovation and preventing price inflation, it’s also unquestionably a wasteful process: how many different manufacturers of kitschy umbrellas and keychains do we really need, each with their own product line and inventory? And what of the enormous amounts of trash generated by non-salable products and dead companies? As to innovation, when a truly game-changing idea comes along, like the steam locomotive or the internal combustion engine, no amount of resistance is going to stop it. And then of course there’s how Rockefeller consolidated, which is our next lesson…
While Rockefeller attained monolithic status as a titan of industry, he did so by working with other business owners rather than against them. Contrary to the propaganda that painted him as a ruthless competitor, records show that Rockefeller offered fair prices to those people he wanted to buy out, and those who chose to join forces with him became rich alongside him. This is because, like Stephen Covey points out, in a worldview of abundance, there’s enough for everybody. Life is not some zero-sum game – the sum can be greater than its parts. Cooperation not only allowed Rockefeller to expand rapidly, the larger size of the combined enterprise allowed for greater efficiency, which underscores Rockefeller’s next lesson for us…
Small Efficiencies Add Up.
During the life of Standard Oil, the industry giant Rockefeller founded, the price of kerosene dropped by 80%. This underscores the fact that savings from economies of scale and streamlined operations get passed to consumers. Such marginal increases add up even more with Rockefeller’s other favorite tactic…
Vertical integration allowed further cost reductions by taking charge of different manufacturing inputs and distribution. This goes somewhat against the grain of modern conventional wisdom, which is to focus solely on what the company does well and outsource the rest. This same wisdom was what led to the outsourcing of production facilities overseas and is the cause of America’s loss of competitiveness since for a lot of industries, the loss of manufacturing knowledge means we no longer have the expertise we need in order to innovate.
Another lesson that somewhat belies the criticism that big companies limit consumer choices. Standard Oil was not content to simply refine crude oil and market bulk products: it developed over 300 oil-based products, including tar, paint, and petroleum jelly. While other companies might focus just on the main profit-makers and ignore the rest, John Rockefeller’s hatred of waste meant that he tried to make use of all the byproducts of refining, making his approach a more appropriate model for green practices than that of many modern firms.
Above all, Dream Big.
Rockefeller’s goal was to control all the world’s oil refining. Although he later gave up on this dream, he certainly went a long way to achieving it, at one point controlling over 90% of production. Looking beyond what some might call a megalomaniac obsession, the fact remains that it was this ambitious goal that brought him the sheer amount of wealth that allowed him to give away as much wealth as he did to charitable institutions and colleges. In the end, few men, if any, shape the world accidentally, and the only real reason for acquiring great wealth is to shape the world into our personal definition of a better place.
Brandon Peters is an entrepreneur, a writer, and an avid observer of both the oil industry and alternative energy. As an entrepreneur, he’s tried his hand at everything from construction to car repair, from food carts to a hobby shop. After exploring the myriad possibilities of the Internet, he’s now working on the Next Big Thing.
This is an article contributed to Young Upstarts and published or republished here with permission. All rights of this work belong to the authors named in the article above.