Standard Oil Part II

In this episode of Acquired, Ben Gilbert and David Rosenthal delve into the complex history and impact of Standard Oil and its founder, John D. Rockefeller. They explore the company's aggressive expansion strategies, including the Cleveland Massacre and the use of trusts to control the oil industry. Despite Rockefeller's philanthropic endeavors and the eventual breakup of Standard Oil in 1911 by the Supreme Court, the dissolution ironically increased Rockefeller's wealth, as the resulting companies' share prices soared. The hosts reflect on the legacy of Standard Oil, considering its parallels with modern tech giants and the role of regulation in curbing monopolistic practices. They also discuss the Rockefeller family's continued influence through their philanthropic work and the recent decision by the Rockefeller Foundation to divest from fossil fuels.

• David Rosenthal expresses dismay at the changes in his travel habits due to new responsibilities.
• Ben Gilbert teases David about the inconveniences he will now face while traveling.

"Oh, it's so going to kill me."

This quote reflects David's personal attachment to his travel lifestyle and his realization that his habits will have to change.

• Ben Gilbert and David Rosenthal introduce themselves and their roles.
• They set the stage for the episode's focus on Standard Oil's history from 1890 to its breakup in 1911.
• The episode will explore Rockefeller's legacy, philanthropy, and the debate over Standard Oil's business practices.

"Welcome to season nine, episode five of Acquired, the podcast about great technology companies and the stories and playbooks behind them."

This quote serves as the formal introduction to the episode, indicating the podcast's theme and what listeners can expect.

• David and Ben discuss the podcast's recent growth, particularly following the TSMC episode.
• They express gratitude to long-time listeners for their support and welcome new listeners.

"We have had a pretty crazy month here at Acquired, starting with the TSMC episode we have just been on."

David highlights the podcast's significant growth, attributing it to recent episodes that resonated with the audience.

• David shares the personal news about expecting a baby girl with his partner, Jenny.
• Despite the excitement, there is a sense of nervousness due to the timing of the baby's arrival and recording obligations.

"By the time y'all hear this, Jenny and I will have had a little baby girl that we are expecting any day now."

David's quote shares his personal life update with the listeners, revealing the anticipation and challenges of balancing work with impending fatherhood.

• Pilot is introduced as a sponsor, providing accounting services for startups and growth companies.
• The service is recommended for its efficiency and ability to help companies focus on their core products.

"Pilot both sets up and operates your company's entire financial stack."

This quote explains Pilot's comprehensive service offerings, positioning it as a valuable asset for businesses.

• The hosts clarify that the podcast is for entertainment and educational purposes only.
• They mention that they may hold positions in the companies discussed but emphasize that the focus is on historical companies.

"This is not investment advice. This is for entertainment and educational purposes."

The quote is a standard disclaimer to inform listeners that the podcast's content should not be taken as professional investment guidance.

• The Sherman Antitrust Act is seen as ineffective against Standard Oil initially.
• Rockefeller's retirement is discussed, with a focus on his desire to leave the business despite remaining nominally involved.

"Everybody's having a good laugh about it. The political money is still flowing around like Hotcakes or fine wine, which, of course, Rockefeller didn't drink."

This quote illustrates the perceived lack of threat from the Sherman Antitrust Act and hints at Rockefeller's personal habits.

• Rockefeller faces a dilemma on how to effectively allocate his wealth for philanthropic efforts.
• He brings in Frederick Gates to assist in organizing his philanthropy, leading to the establishment of systematic giving.

"I am so constituted as to be unable to give away money with any satisfaction until I have made the most careful inquiry as to the worthiness of the cause."

Rockefeller's quote reveals his meticulous approach to philanthropy, emphasizing his need for careful evaluation before donating.

• Rockefeller's involvement in the founding of the University of Chicago is highlighted.
• The discussion includes his philanthropic strategy and the establishment of the Rockefeller Institute for Medical Research.

"We have money, but it will have value for mankind only if we..."

Rockefeller's unfinished quote signifies his intention to use his wealth for the betterment of humanity through structured philanthropic efforts.

• The Rockefeller University was established following the philanthropic efforts of John D. Rockefeller.
• It is renowned for significant medical research breakthroughs.
• Not initially intended to be named after Rockefeller, it was later recognized as a milestone in human progress by Winston Churchill.

"When history passes its final verdict on John D. Rockefeller, it may well be that his endowment of research will be recognized as a milestone in the progress of the race."

This quote by Winston Churchill encapsulates the significant impact of Rockefeller's contributions to scientific research, suggesting that his legacy may be most remembered for advancing human knowledge and welfare.

• Rockefeller University was established with a different approach compared to the University of Chicago.
• It focused on low overhead, minimal pomp, and direct support for top researchers to pursue their work.

"It was diametrically opposed to the University of Chicago project, where that was super high overhead, big deal, out of the gate, a lot of pomp and circumstance, and with the Rockefeller University or what would become that. It was almost like the lean startup."

Ben Gilbert draws a parallel between the lean, focused approach of Rockefeller University and modern lean startup methodologies, contrasting it with the more traditional, grandiose approach of the University of Chicago.

• Rockefeller played a pivotal role in shaping modern medical education by spreading the Johns Hopkins model of medical school across the U.S.
• The initiative led to the standardization of medical education and the requirement of a college degree for medical training.

"So they go first to the University of Chicago, then to Yale, then to Vanderbilt, then to all these other institutions, and they just give tens of millions of dollars."

David Rosenthal outlines the systematic approach taken by Rockefeller and his associates to reform medical education nationwide, emphasizing the large-scale financial investment made to ensure the adoption of the Johns Hopkins model.

• The Rockefeller Foundation was established to institutionalize and perpetuate the philanthropic efforts of the Rockefeller family.
• It continues to contribute to various causes, including medicine, education, and the arts.

"They set up in 1913, they get a charter from the state of New York. I don't know exactly how this works. I think it was a federal charter granted in the state of New York to create the Rockefeller foundation, which still exists to this day."

David Rosenthal describes the establishment of the Rockefeller Foundation, highlighting its ongoing influence and the legal framework under which it was created.

• Standard Oil's practices and the resulting antitrust cases ultimately led to the company's breakup.
• The company paid out substantial dividends and saw significant stock price increases prior to the breakup.

"The breakup of Standard Oil."

Ben Gilbert introduces the topic of the breakup, signaling a shift in the narrative to focus on the legal and financial consequences faced by Standard Oil due to its monopolistic practices.

• Theodore Roosevelt, as the governor of New York and later as President, played a crucial role in challenging Standard Oil's business practices.
• Roosevelt's presidency marked a turning point in the enforcement of antitrust laws against Standard Oil.

"So standard and the business community and Mark Hanna. They come up with a brilliant, genius solution to their new problems from Roosevelt in the state of New York."

David Rosenthal discusses the strategic, albeit ultimately unsuccessful, efforts by Standard Oil and its allies to neutralize Roosevelt's influence by nominating him for vice president, which inadvertently positioned him to intensify antitrust actions against the company.

• Ida Tarbell's investigative journalism exposed the unethical practices of Standard Oil, influencing public opinion and aiding legal actions against the company.
• Her work is considered highly influential and a pioneering example of investigative journalism.

"Tarbell uncovers and documents exactly how the Cleveland massacre went down."

David Rosenthal acknowledges Tarbell's critical role in uncovering the true history of Standard Oil's rise and its aggressive tactics, which had long been shrouded in secrecy.

• John D. Rockefeller went into hiding to avoid testifying in antitrust investigations, demonstrating the intense legal pressure faced by Standard Oil.
• Rockefeller's attempts to resign from Standard Oil were repeatedly rejected by the company's executives.

"JD, he obviously doesn't want to do this, so he goes into hiding."

David Rosenthal describes Rockefeller's evasion of legal processes, painting a picture of the lengths to which he went to avoid personal legal repercussions for Standard Oil's actions.

• The Supreme Court's decision in 1911 mandated the breakup of Standard Oil, marking the culmination of antitrust legal proceedings.
• The decision was a landmark moment in U.S. business and legal history.

"US Supreme Court Chief Justice Edward White reads the decision."

David Rosenthal marks the decisive moment when the Supreme Court ruled against Standard Oil, emphasizing the gravity and historical significance of the court's verdict.

• The case discussed is Standard Oil v. United States, a landmark antitrust lawsuit.
• Standard Oil lost in lower courts and the final appeal was to the Supreme Court.
• The Supreme Court upheld the decision that Standard Oil was in restraint of trade.
• Standard Oil was ordered to be broken up into 34 separate companies within six months.

"The Supreme Court upholds the decision of finding against Standard Oil. They are indeed in restraint of trade and orders them... to be irrevocably cannot undo this, broken up into 34 separate companies and it has to happen within the next six months."

This quote summarizes the Supreme Court's final decision on the antitrust case against Standard Oil, highlighting the significant impact on the company by mandating its division into 34 separate entities.

• John D. Rockefeller, upon hearing the news of Standard Oil's breakup, advised buying Standard Oil stock.
• Rockefeller's wealth increased after the breakup, making more money in retirement than while working.
• The breakup actually benefited the shareholders and Standard Oil's share price increased significantly after the split.

"John Rockefeller says, because if you did, you should buy some Standard Oil stock right now."

Rockefeller's immediate reaction to the breakup news was to see the investment opportunity, illustrating his business acumen and foresight into the financial implications of the breakup.

• The breakup led to increased competition and innovation within the oil industry.
• The newly independent companies from Standard Oil's breakup became highly successful.
• Shareholders, including Rockefeller, benefitted immensely from the breakup as share prices soared.

"Rockefeller was converted from a mere millionaire with an estimated net worth of 300 million in 1911 into something just short of history's first billionaire."

This quote highlights how the breakup of Standard Oil paradoxically resulted in a massive increase in Rockefeller's personal wealth, making him one of the richest individuals in history.

• The government significantly expanded the Justice Department to take on Standard Oil.
• The case set a precedent for defining "restraint of trade" and government intervention in private enterprise.
• The outcome of the case was a balance between punishing Standard Oil and promoting competition.

"Standard Oil is dead. Long live Standard Oil."

This quote reflects the irony of Standard Oil's breakup, where despite the government's attempt to dismantle the company, the resulting entities thrived, and the influence of Standard Oil persisted in the industry.

• The Rockefeller family has been involved in numerous philanthropic efforts, shaping various aspects of American life.
• The family's wealth has been managed through trusts and foundations, continuing their influence through generations.
• The Rockefellers have contributed to education, medical research, national parks, and cultural institutions.

"The Rockefeller family is now seven generations in. There's about 170 heirs."

This quote emphasizes the long-lasting impact of Rockefeller's wealth and philanthropy, which has extended through multiple generations and continues to play a significant role in various societal domains.

• Standard Oil's aggressive tactics ultimately benefited shareholders, particularly those who received shares instead of being run out of business.
• However, these tactics became consumer harmful when the company started raising prices after eliminating competition.
• The narrative shifted when new competitive forces emerged due to advancements in oil discovery and drilling technology, which would have likely eroded Standard Oil's market share even without the government's intervention.

"They were insatiable. Even some of the more nefarious tactics. You're right, probably led to good things for everyone, especially for the people who did end up taking Standard oil shares rather than being run out of business."

This quote emphasizes that while Standard Oil's tactics were aggressive, they ultimately resulted in benefits for shareholders who received company shares.

"At a certain point, I think it did become at least not as good for consumers."

The quote highlights the turning point when Standard Oil's practices started to harm consumers by raising prices due to their monopolistic position.

• The podcast hosts draw parallels between Standard Oil's history and current events with big tech companies, noting similar patterns of market dominance and antitrust sentiment.
• They discuss the role of acquisitions in consolidating power, as seen with Facebook's purchases of Instagram and WhatsApp, and compare it to Standard Oil's tactics.
• The conversation also explores the potential for technology and market shifts to naturally disrupt monopolies without the need for heavy-handed regulation.

"This is happening again now with tech, or let's at least say it's happening in social networking where they're being rolled up together."

This quote identifies the current trend of consolidation in the tech industry, particularly in social networking, which mirrors Standard Oil's historical consolidation of the oil industry.

"Anytime somebody declares the end of something, this game is over, this market is over, blah, blah, blah, they're wrong."

The quote suggests that declarations about the end of market opportunities are often premature, as new developments and technologies can unexpectedly change the competitive landscape.

• The hosts debate the necessity of regulation in curbing monopolistic practices, suggesting that technological advancements and paradigm shifts may naturally counteract monopolies over time.
• They express concern that regulation can stifle innovation by being too prescriptive, but acknowledge its importance in preventing destructive practices.
• The discussion also touches on the role of the press and public perception in shaping the narrative around antitrust issues.

"Regulation, by definition, will always limit innovation because it says you can do less stuff in the world."

This quote captures the tension between the need for regulation to prevent harmful practices and the potential for it to inhibit innovation.

"Paradigm shifts happen, new technologies happen, and they will always unseat incumbents."

The quote expresses the belief that market dynamics and technological progress will eventually challenge and disrupt existing monopolies, potentially reducing the need for aggressive antitrust actions.

• The hosts reflect on the historical significance of oil in advancing global technology and quality of life, while also considering the environmental impact of fossil fuels.
• They discuss the Rockefeller Foundation's decision to divest from fossil fuels, highlighting the changing attitudes toward energy sources and the importance of sustainable practices.

"Even the largest holder of the remnant shares of the Standard oil company is now saying it is time for us to get rid of these."

This quote points to the symbolic and practical significance of the Rockefeller Foundation's decision to divest from fossil fuels, marking a shift away from the legacy of Standard Oil.

"Quality of life, no doubt, would not be what we have today if not for all the fossil fuels we burned."

The quote acknowledges the complex role of fossil fuels in improving living standards, despite their negative environmental consequences.