This week we have completed the audiobook version of the Ron Chernow tour de force biography of John D. Rockefeller Snr. This book is often held up as being the very definition of a perfect business biography. Reflecting upon completing almost 30 hours of listening, we were torn on the business lessons that we felt comfortable putting forward as examples of exemplary business excellence due to the somewhat questionable activity that was interwoven into his career, especially in his early days of starting Standard Oil.
The name Standard Oil doesn’t generate the reverence that it did for previous generations, especially since it was forcefully broken up by the US Government in 1911. However, it was a monopoly unparalleled in modern business. It would have had a market capitalisation of over $1 trillion. It is now known by its successor entities, names such as ExxonMobil, Chevron, BP, Unilever and Transunion.
The book is extremely thorough in all areas of Rockefeller’s life and looks to get inside his psyche and motivation. It is fair and is a must-read (or listen to) for anyone who is a fan of business biographies. There is no doubt that a key part of what built Standard Oil is what would now (and most likely then) be considered illegal practices. Price fixing, intimidation, price gouging and bribery were just some of the tools in the Standard Oil toolkit. Tools at odds with the religious beliefs at the heart of all Rockefeller did.
However, whilst not glossing over the negatives (or covering the philanthropic dedication which brought true advances in mankind), I have focused on some elements of his undoubted success that are lessons that are timeless to being successful today. After all, in today’s money, the Rockefeller fortune would have touched $400 billion. For context, at his height in 2022, Elon Musk was worth $200 billion.
Here are the 5 most powerful lessons from John D. Rockefeller Snr:
- Numbers Talk
Underpinning Rockefeller’s success was his calculated choice of profession right at the very start of his career. He understood that training as a bookkeeper was the best grounding for achieving his specific aim of being a financially successful businessman. He actually began in the wholesale of grain and other food items and then moved to oil but not as a prospector, as a trader and later owner of the refining plants. He even insisted his children produced annual P&L statements to justify their allowances! His success came from his ability to understand numbers. If you aren’t at least proficient in the basics, then it will hold you back. Balance Sheets, Profit and Loss Statements and Cashflow Statements are the absolute basics. There is no excuse, there are plenty of Youtube tutorials.
- The power of cooperation
Standard Oil is rightly labelled as a bona fide example of a monopoly. However, a common misconception is that this was achieved by just building a standalone operation. At its heart, Standard Oil was a series of Trusts. His success was convincing (sometimes with positive means and sometimes negative) other operators to join his Trust in return for Standard Oil stock. The only way he was able to build Standard Oil into the behemoth that it became was by continually adding businesses into the trust. Cooperation and working together was maybe the key part of Standard’s success, and if those owners kept their Standard Oil stock, they became richer than their wildest dreams.
- Cash is Reality
The bull market that ran from 2010-2022 has lulled a whole generation into a false sense of economics. Businesses being valued on growth fueled with cheap money. As Warren Buffett famously said, “It’s only when the tide goes out, you see who is wearing swimming trunks.” Rockefeller realised early that managing his cashflow was perhaps the most essential metric to manage in his business because of the options it gave him. In market downturns, it gave him the cash on hand to execute great value acquisitions, in times when suppliers tried to squeeze his margins, such as the shipping companies, he used cash to start his own shipping business.
- Working on the business, not in the business
The obvious assumption with such a success as John D. Rockefeller had is to imagine him as an Elon Musk-esque workaholic with his finger on every detail. The opposite was true. In the first few years, he was working hard on establishing the business but very early on he fixated on handing over the everyday running of the business to trusted members of the team. His focus was on the strategic elements of the business. He had very little to do with day-to-day operations for most of Standard Oil’s existence. He realised that by stepping back, he could deliver much more towards the success of the business.
- Manage Costs as well as Profit
Rockefeller was a pedant for cost control. This almost certainly came down to a mix of his fixation with financial statements but also his own fervent religious conviction. His protestant faith was grounded in simplicity and an aversion to opulent living, both in terms of ostentatious demonstrations of wealth but also alcohol and smoking. Despite the fabulous profits that Standard Oil generated, Rockefeller installed a core value of giving every dollar spent a purpose and being accountable. Too often businesses get carried away with revenue and growth and forget to be disciplined with costs. This doesn’t mean not investing. Rockefeller was not afraid of large capital investments, but he also made sure proper value was delivered – both on large and small-scale purchases.
You can’t help but be impressed by the quality of Chernow’s research, thoroughness and dedication to presenting Rockefeller’s many contradictions as fairly as possible. The depth of the skulduggery of elements of Standard’s Oil rise was a huge black mark on Rockefeller’s character. Still, his later philanthropy held him out as one of the most positive forces for good in the history of mankind. Whilst he is unparalleled and inimitable as a business role model, there are some key lessons that entrepreneurs of today can take from his approach and his key values.