The 3 Most Important Lessons for Building Wealth from History’s First Billionaire
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The 3 Most Important Lessons for Building Wealth from History’s First Billionaire

The 3 Most Important Lessons for Building Wealth from History’s First Billionaire

John D. Rockefeller (1839 to 1937) was an American businessman who became the world’s first billionaire in 1916. At the peak of his business, he would have had a net worth of $340 Billion in today’s dollars.

Rockefeller accomplished all of this by starting his own company, the ever-feared Standard Oil. By 1890, Standard Oil was refining and marketing nearly 90% of all of the United States’ oil. Standard Oil became such a powerful company, that they were sued by the US Department of Justice for “monopolistic practices”. By 1911, the US Supreme Court ordered that the company be disbanded for more fair business.

For one man, especially one who came from a fairly modest family, this was a monumental accomplishment. That accomplishment took considerable courage, time, and effort. Luckily, we can study exactly how he did it. We can study the Titan himself.

Titan: The Life of John D. Rockefeller is a biography of the life of our businessman John D. Rockefeller. It is the first full-length biography written with access to Rockefeller’s private papers and as such carries tremendous insights into the mind of one of the greatest businessmen in American history.

Let’s learn from him. Let’s try to understand some of the key qualities that Rockefeller had that made him so successful. Here, I’ve outlined the 3 most important ones. But I always encourage one to read in full detail through his biography.

(1) Put your money to work

Rockefeller knew how to make his money work for him. He was both an investor and a businessman through and through. In fact, Rockefeller’s business career can be thought to have started at a very young age.

While still in school, Rockefeller was earning money from a part-time job raising turkeys for his neighbors. He had his own business too, selling chocolate to some of his classmates at school for a markup. By the time Rockefeller was 12 years old, he had made about $50 all on his own — about $1400 in today’s money.

His endeavors with investing, and more-so how he could leverage money also started at a young age. At age 13, he began to loan out the money he earned from his part-time work to a local farmer. The loans were set to 7% interest, payable in one year.

The impression was gaining ground with me that it was a good thing to let the money be my servant and not make myself a slave to the money
— John D. Rockefeller

This knack for investing continued with Rockefeller into his business with Standard Oil. The oil business at the time became so intense that Rockefeller and his partners had an argument about the future of the business. In the end, they decided to part ways. Following a bidding war, Rockefeller purchased the refinery business for $72,500, with the confidence that eventually, his investment would be worth many times that as the business scaled. And as history shows us, he was right.

The key lesson here is to make your money do the work for you. You’ve worked so hard to earn it, why not let it do some of the heavy lifting?

Investing your money is one direct way to do this. Things like GICs and Bonds in today’s world are a safe and guaranteed way to get a fixed amount of interest as Rockefeller did with his loans. The stock market is riskier but has the potential for much higher returns.

The other side of things is running a business. You want to be able to leverage your money, to scale it. If you only ever work at a job to earn your money, then you’ll only ever earn a fixed amount of money for your time. Business, on the other hand, is scalable. The more you work and the more you grow it, the higher your return, all the while putting in the same amount of time.

(2) Keep knocking on the big doors

Rockefeller got his first “real” job when he was 16 years old at a merchant’s business called Hewitt and Tuttle. But even to get that first job, he was relentless. He was an ambitious young man with his eyes set on the highest highs.

He started right from the top with his job search, first by making a list of the top railroads, banks, and wholesale merchants. He’d then go down the list in order, walking straight through the company’s front door, and asking for the person in charge to say he was ready for work.

The economy at the time wasn’t the best, but Rockefeller would not be shaken. 6 days a week, for 6 weeks straight, Rockefeller would dress up in his suit and make his round visiting the top companies he was interested in to ask for work.

Never taking no for an answer. Never giving up. And always going for the biggest opportunities available.

I was working every day at my business — the business of looking for work. I put in my full time at this every day
— John D. Rockefeller

Once again, Rockefeller’s eye for the big prizes stayed with him during his time running Standard Oil. The oil refinery business was doing well, but as the demand rose, the market became hot with many competitors.

Rather than trying to compete with them directly, Rockefeller opted to get loans from banks and buy out his competitors. This had a cascading effect as the more competitors Standard Oil bought out, the more powerful it became, and therefore the more capital at its disposal to buy out more competitors. It has been documented in his biography that Standard Oil bought as many as 24 competing refineries in 60 days. His goal was to establish a monopoly.

To further expand, Rockefeller looked to the next biggest driver in profits: the high cost of railroad transportation. To get around this, Rockefeller made a secret deal with all the large railroad companies, promising massive bulk shipments in exchange for vastly reduced prices that would undercut his competitors. This was a huge bet that ultimately destroyed Standard Oil’s remaining competitors who originally refused to be bought out.

Ignore the small stuff like competition, they only waste your valuable time. Always aim for the biggest targets, the ones that’ll get you the most bang for your buck. And the ones that will ultimately make you a winner.

(3) Strategy is king

Rockefeller was a master of strategy. That mastery came with an intense focus, an almost supernatural ability to target long term growth over smaller, cheap gains. Throughout the history of his company, Standard Oil, there are a few key elements of his strategy that made the business a huge success.

Investing for growth

Rockefeller never hesitated to invest for business growth, even if it meant borrowing money. He’d gladly take short term losses if it meant a long term gain. Standard Oil was known to frequently borrow from banks to acquire competing refineries or aggressively build more of its own. The company also reinvested nearly all of its dividends to compound its growth.

Aggressive expansion

Speed and aggression are killers in business. Rockefeller constantly worked to expand Standard Oil’s control over the full end-to-end market. It began by building more refineries but later spread to engaging in all aspects of the oil distribution including adding pipelines, tank cars, and a home delivery network. With the entire chain under his control, he could deliver his product at a much larger scale, to a much larger population. In addition, he could reduce the cost of his product to levels which competing refineries could not. All of this draws from the goal of capturing as much of the market as possible, as fast as possible.

Market dominance

“Competition is a sin”
— John D. Rockefeller

Rockefeller hated competition. Not because it was inherently bad. He just didn’t believe in competing. It didn’t make sense to him. His goal was to simply create and deliver the best product so that the market would have no need for the competition!

At the base level, Rockefeller constantly worked on improving the efficiency of the operations, pressing for discounts on supplier and shipping costs whenever he could, reducing shipping time, speeding up refinement, and the like. To further block out competition, he would occasionally set prices so low as to sell at a loss, at least initially. This low pricing would move customers from competitors over to Standard Oil. He could then strike bigger deals to win back the profits once he had captured the customer business.

Above all else, Rockefeller was a hard worker. He was an expert strategist, investor, and businessman not through natural talent but rather through constant study and practice. He constantly worked to improve himself and his business, with only the most important and biggest goals always in sight.

“I do not think that there is any other quality so essential to success of any kind as the quality of perseverance. It overcomes almost everything, even nature”
— John D. Rockefeller