Disclaimer - this is a direct compilation of a tweet storm. No edits whatsoerver made here.
Cornelius Vanderbilt started his rail empire by borrowing $100 to buy a small ferry boat, he quickly earned the reputation of a shrewd businessman. He always got ahead by any means necessary by hook or crook, it was pretty much win or lose. No middle ground. His single ship quickly became a fleet of ships and he was christened “The Commodore.”
He quickly understood the power of transportation – own the infrastructure and call the shot. At this peak, he does the unthinkable; he sold all his ships and invested in railroads. In today’s speak; he disrupted/reinvented himself/business. He saw the future and was willing to bet everything on it. His decision paid off greatly and he became the richest man in America with a net worth of $68M, which will roughly translate to about $75B today. He would be the 3rd richest man in the world today, just after Buffet.
Then around 1806, tragedy struck! Vanderbilt lost his favourite son, George, in a war. He was devastated. The loss of his child had far-reaching consequences, almost threatening his empire. Vanderbilt’s rivals sensing this, swooped in. They wanted to take the old man out. Vanderbilt sent his other son, William, to carry out a trade negotiation; his rivals laughed him away and sent him back to his father. Vanderbilt, upon hearing this, was very upset. He called his son into a room, pulled out a map and declared ‘‘they want war, I will give them war.’’
Vanderbilt owned the only rail bridge in NYC then; it was the gateway to the country’s largest port and market. He understood this leverage and he wasn’t going to spare anything that will bring his competition to their knees. You don’t mess with Vanderbilt and expect to walk away unscarred. This was an opportunity to teach William what it meant to be a Vanderbilt. Vanderbilt commanded his son to close the bridge, essentially blocking other rail operators access into the country’s biggest port and market.
New York City was a gateway into the continent, with this move, he was asserting his power as the rail king. He said to his son “we are going to watch them bleed.” And bled, they did. The presidents of the rival companies had no option than to sell, their stock holdings were on a free fall. William, sensing another opportunity, came to his dad and informed him about the free fall, Vanderbilt commanded him to buy everything he could. He dealt his rivals a knockout punch. In just days, he bought out all his rivals, creating the largest, single rail company in America.
Vanderbilt wasn’t contented with being the rail king; he wanted the world to know about it. He built the Central depot. It will harmonize Harlem, Hudson and Central, he wanted it in the heart of New York. This rail magnet also pioneered the concept of a hostile takeover. As time passed, he came to the realization that at the end of the day, transportation will be a bigger business than owning railroads.
John D. Rockefeller
Kerosene was fast becoming an essential commodity and Vanderbilt wanted to become the sole transporter. He then learns about a refinery built just close to the railroads. He quickly reaches out to the owner. That owner was John D. Rockefeller. Rockefeller, at 27/28 years of age, was just starting out in the oil business. Vanderbilt understood that if he controls oil transport, he will come back on top. He invited Rockefeller to a meeting and this was going to become a pivotal moment for both men. Vanderbilt invites Rockefeller for a meeting in NYC. As Mr Rockefeller sets out to meet Vanderbilt, he misses his train that morning and the train had a fatal accident, that incident had a profound impact on his life. He became convinced that God has a higher purpose for him. At the meeting, Rockefeller promised to fill up Vanderbilt’s rail line in exchange for an exclusive transportation contract, but there was a problem, Rockefeller had over promised and had no means to fulfil this order. Undaunted, he set out to explore more oil, not too long, he struck gold.
He didn’t want to continue drilling oil, so he turned to refining, he believed gamblers drill for oil while businessmen refine this oil into finish products. He wanted to play in the refining value chain of oil. He named his company “Standard Oil,” signifying a company that will offer standard quality kerosene for all American household. He wanted to do to oil what Vanderbilt did to rail.
After raising money from investors, he became the largest refiner in the country. Soon, Rockefeller had more oil than Vanderbilt could carry. Tom Scott, another of Vanderbilt’s fierce rival, saw this as an opportunity and moved in quickly to seal a deal with Rockefeller. Rockefeller played the rail kings against themselves. With new cash inflow, he bought other refineries and at 33, he owned over 90% of the market, creating the first monopoly ever, making him the most powerful man in America. Vanderbilt and Scott formed an alliance, cutting Rockefeller away from their rail lines. This was a declaration of yet another war, with this move, Rockefeller sorts an alternative. One day, while touring his refinery, he noticed how pipes conveyed oil from one point to another, he had an epiphany and this led him to construct the first ever petroleum pipeline.
Rockefeller’s workers worked round the clock to lay pipelines. They laid more than a mile every day. The pipeline stretched between Ohio & Pennsylvania cutting through 10s of refineries. Vanderbilt and Scott’s railroads didn’t matter again. He had laid more than 4,000 miles of pipe. This move hit the stocks of the rail companies. The effect was so bad; it wiped out 1/3 of the country’s 360 rail road company. The crash was the worst America had ever seen in its history. The market shut down for 10 days, triggering the first national depression. The pipeline became Rockefeller’s advantage. At the height of the depression, Vanderbilt passed, at a ripe old age 82 leaving an empire worth $100m to his son, William.
Scott, seeing the pipeline as the future, invested in his own pipelines. Scott, with his protégé, Andrew Carnegie, was ready. Rockefeller asked his COO not to send any more oil through Scott’s line, forcing Scott to fire 10s of thousands of people and cutting wages, this was devastating.
Rockefeller became the richest man in America, amassing a net worth of $150M or $225B today. In 1882, Scott died. His protégé, Andrew Carnegie was livid. Rockefeller was partly responsible for his mentor’s death. Scott and Carnegie had a long history, Scott took Carnegie in at the age of 12; he was more than a mentor, he was a father figure. At 24, Scott promoted Carnegie to the manager of his rail business. Andrew wanted to avenge the death of the most influential man in his life, Tom Scott and in other to do that, he must go against his boss’ fiercest rival, John D. Rockefeller. Before Scott’s death, Scott took Andrew to the banks of the Mississippi River and charged him with building a rail bridge over the river, the bridge will be a mile long. Andrew stepped up to the plate and threw everything behind the project, Andrew was told it will be impossible to undertake a project of this nature, he reminded the project managers that nothing was impossible. The Project Manager said the only way it will work is if they built the project with steel, this was to help the bridge withstand the Mississippi current.
Steel was very expensive at that time, and for a project of this nature, calling it audacious was an understatement. Andrew was not deterred, he charged ahead, he was going to make his own steel. Steel is made out of iron and carbon. He teamed with an English inventor, Henry Bessemer. Bessemer had invented a procedure that cut down steel manufacturing from 2 weeks to 15 minutes, Andrew was ready.
At 33, Carnegie dared the impossible, this project was going to unite America, but the project was proving expensive and difficult, his lenders closed in on him, pressure mounted. Andrew needed to raise $1m to complete this project, he pitched his ideas to a new set of investors and got fresh funding. After 4 years, the bridge was completed, the result was epic. In other to test the strength of the bridge, they made an elephant walk through it. After this public display of strength, orders for steel came pouring. Unfortunately, Carnegie just couldn’t meet demand, the rail Industry wanted steel too. He raised the equivalent of $21m in today’s money and he built a new steel plant that produced thousands of tons daily. Rail business was fast dying and Andrew turned his sight to a new industry, Real estate.
As migration into NYC happened, more homes will be required, Andrew’s steel literally built the American society, vertically. The world’s first skyscraper was built in Chicago with Andrew’s steel wad powering this. In the next few years, over 100,000 skyscrapers were built in Chicago. With this boom, Carnegie became one of the wealthiest men in America. Despite all he has achieved, something was missing, Rockefeller’s wealth was 7 times that of Carnegie and he wasn’t happy. To fix this, he hired Henry Frick, a self-made millionaire. Frick brought the ruthless part that Andrew lacked and this turned out to be one of the worst decisions of Carnegie’ career.
Frick’s ruthlessness set Carnegie’s empire a thousand miles behind. Frick was also power hungry, his drive for profit made him reduce wage, increase working hours to 12 hrs daily, 6 days a week. In 2 years, profit at the steel mill doubled, workers revolted and this led to the first case of a union. These workers closed the mill and held Frick hostage, production stopped and revenue was lost. Frick wasn’t one known to relish nonsense; he hired mercenaries to take on the workers, 9 people died and scores wounded. The community where the mill operated wasn’t going to take this lightly, a few days later; there was a failed assassination on Frick’s life. Andrew called off his vacation and went home, by this time, Frick was already the chairman of the company. Carnegie informed Frick that the board was relieving of his position, he got angry, claiming that while Carnegie was on holiday, he was the one that survived a bullet and a stab, he chased Carnegie into a corner and planned a hostile takeover.
Andrew had a big problem in his hand, as Frick became increasingly more powerful, this power led him into establishing a “members only club,” sort of a playground for the rich and mighty, he even created an artificial lake for fishing. As construction of this playground went ahead, the walls holding the dam close to James Town weakened. On a particularly rainy day, the walls gave in and James Town was submerged. This one incident dented Carnegie’s already frail image even further, he needed to fix this. In an effort to launder his image, Carnegie started giving away his money, he donated millions to help rebuild James Town, he also donated towards the building of Carnegie Hall, a home for performing arts, but a challenge brewing ahead.
JP Morgan, an astute banker was rising pretty fast. His expertise was in buying failing companies and turning them around, he will become Carnegie’s newest threat, no thanks to Frick’s carelessness. From when he was a boy, his dad had a towering influence in his life. By the age 40, he wanted to create his own identity and step away from his father’s shadow. His father always taught him not to venture into big risks, but he was tired of doing things his father’s bidding. Morgan didn’t just want to buy businesses again, he wanted to create one from the ground up, he met an amazing inventor named Thomas Edison and the duo went on to form an incredible alliance.
One day, Morgan was visiting Edison and an invention caught his eyes, it was the light bulb. Morgan with an eye for opportunities quickly spotted the value of electricity and how it will fundamentally change the way we live. Morgan invested in Edison’s company and he hired Edison to install electricity in his house in NYC. His home quickly became a laboratory for Edison’s electricity experiment. After months of perfecting the technology, Morgan was ready to show his friends the marvel of electricity for the first time. Morgan’s home became the first private residence in the world to be lit by electricity. His dad wasn’t impressed, he said Morgan was fooling around and would be better off doing something else.
As Morgan’s influence grew due to electricity, one man, Rockefeller wasn’t happy. He saw electricity as a threat to his kerosene empire, against his father’s investing philosophy, Morgan doubled down on Edison. He wanted to own the future, Morgan funded Edison with the equivalent of $83M, together they formed The Edison Power Company. They dug ditches around NYC, laying over 100,000 copper cables and provided electricity for a lot of homes in New York. Rockefeller wasn’t happy with Morgan’s success, he launched a targeted PR campaign, with the hope of scaring the public about the dangers of electricity; electrocution, fire, etc. His hope was to maintain market share, any home that got lit by Morgan’s electricity meant a lost customer for him. Tesla, a worker in Edison’s lab was developing his own type of electricity; alternating current. Tesla tried to get Edison to look at his designs, but Edison wouldn’t even give it a second thought, he saw himself as the father of electricity. Frustrated, Tesla quits and sets out to start his own company. George Westinghouse became his investor. He positioned AC as the safest form of electricity. Overnight, the Thomas Edison Power Company had a new rival to contend with, and with pressure mounting on Edison, he took the dark route, he began using Tesla’s AC in some terrible demonstration.
A New York City prison, looking to replace hanging for its capital punishment, reached out to Edison, this led him to develop the electrocuting chair. His singular plan was to take out Tesla by painting his AC in a bad light, the electric chair was his opportunity to prove this. If people see the dark side of AC, they will refrain from it and the Westinghouse Company would potentially go out of business. This act backfired, the public couldn’t tell what type of current was used during the execution, all they remembered was that electricity was used in killing a man and Edison was the man behind it. Edison played himself right into Rockefeller’s trap, demonstrating that electricity is dangerous and deadly. Morgan’s dad was so upset, he asked him to pull away from this madness.
Meanwhile, in the midst of this, work was going on at the Niagara Falls. A company was working to create the largest electricity generator that will power the entire country, JP Morgan quickly realized that this will be his opportunity for domination. The Niagara Company was undecided about whose electricity technology to use; Tesla’s AC or Edison’s DC, Morgan wanted it all, but he knew that an undertaking of this magnitude will require massive investments, one his dad will never approve. As he ponders about his next move, tragedy struck! His dad got involved in a carriage accident, not too long after the accident, he passed away as a result of the injuries sustained. With Morgan now in charge, nothing could stop him from taking the Niagara contract, call it a blessing in disguise. With his father’s death, Morgan’s net worth instantly quadruples, he was suddenly sitting on hundreds of millions of Dollars. He called Edison into his office and said to him, “the best time to buy is when there is blood on the street.” He said Rothschild gave his dad this advice, he increased his stake in the Edison company by an extra $4M, he asked Edison to prepare a bid for the Niagara project and as he told Edison, “you better win.” He was going to war with Westinghouse.
With Westinghouse’s rapid expansion, he found himself drowning in debt, Morgan smelled blood and was going to take advantage of the situation. Timing, they say is everything, Morgan launched a smear campaign against Westinghouse, when asked by reporters if another company will go burst on Wall Street, he said the companies that will go burst are those that are expanding too fast, capital intensive and low on cash. Though subtle, his remarks had damaging consequences, it triggered a sellout of Westinghouse stocks and within days, Westinghouse was crawling, but something happened. Tesla informed Westinghouse that he will forgo his royalty contract with Westinghouse, he tore his contract. His invention meant more to him than money. Soon, investments poured into Westinghouse, once again, they were back in business. Westinghouse went on the offensive.
In 1893, Chicago held a fair, the largest at that time and the organizers wanted to power it with electricity. Westinghouse bided 1/4 of Morgan’s bid and they won the contract to light the fair, with the world’s eyes on the fair, this was a monumental project for the Westinghouse Company. On the opening night, 200,000 light bulbs came to light, 27M people came to the fair and they witnessed this magic. This move further demonstrated that AC was safe, the folks at the Niagara station kept tabs with this happening. One day, two letters were sent out to Morgan and Westinghouse, but one man will win the contract. Who will it be? Both men opened their letters and Westinghouse got the contract for the Niagara Falls project, luck was back on his side. Morgan, as expected was pissed, his fiercest rival had defeated him. Morgan wasn’t going to back down, he was going to take out his competition through intimidation. He sued Westinghouse for patent infringement of the AC design. Westinghouse realizing he didn’t have the resources to cover a legal tussle of this nature gave in, Morgan was back on top. Westinghouse was forced to sign over the patent of AC to Morgan, this move broke the company he started with Tesla.
Morgan, once again applied the principles of the Morgan way towards competition, with this new success, he wanted to take out Edison, he purchased additional shares in the company until he gathered enough controlling stake. His first move was to change the company name to General Electric. GE became the most powerful company with a valuation of $50m or $1B, he converted the company to use AC, the standard that is still used up to this day. GE, to this day, is one of America’s largest corporation, he pulled a master stroke, he single-handedly consolidated the electric industry, he proved his father wrong and with more power, he became hungrier for even more. After 2 years period of depression, the US Treasury came close to bankruptcy, the government called Morgan to help, he put together a loan worth about $100m or $3b for the government, saving it from a complete collapse. His rivals now saw him as their biggest enemy, they wanted to eliminate him. Rockefeller, his fiercest competitor needed to find another product to replace kerosene, he hired a team of scientists to find the use of gasoline, a substance he had been discarding for years. The quest to create a more powerful motor led to the development of The Combustion Engine, and when this motor was placed on the horseless carriage, he realized how big gasoline will become. He was unto something huge.
JP Morgan, on the other hand, was looking for the next big thing, he cuts cost across his companies; cut labour, increased working hours and reduced wages and profits soared. Then a politician emerged, William Jennings Bryan, he channelled the seeding frustration of the people towards his own political gains, he vowed to break down the monopolies of JP Morgan, John D. Rockefeller and Andrew Carnegie. These 3 men weren’t going to sit around and watch a charismatic politician jeopardize what they had spent their lives building. They devised a bold plan, but in other to succeed, they will need to sheath their sword and work together. All 3 men decided to buy the president. I mean, why wouldn’t they? The trio had a combined net worth of the equivalent of $1tr - One Trillion Dollars. Rockefeller’s worth was almost 1% of the American economy.
Bryan’s campaign was equality for all, he became the spokesman for the common man, his emergence became a source of a headache to the businessmen. JP Morgan suggested that the trio buy their own president, they threw their support behind William McKinley, an Ohio native, who will go on to become the 25th president of the United States of America. All three men donated an equivalent of $20m to the McKinley campaign. This happened to be one of the most expensive campaigns in America’s history, Bryan fought back; he went on a tour of the country and gave over 500 speeches to a large crowd, he set up the model for how presidential campaign tours were carried out, even to this day. As Bryan willed more influence, once again, the men turned to fear tactics, they told their workers not to show up the next day if Bryan won, they were in a dilemma.
After long hours of tallying the results, Rockefeller, Carnegie and Morgan had dodged a bullet, their candidate of choice emerged as the new president, these men bought their way into the White House, but their relationship didn’t last long, they all broke ties and reignited their rivalry. Rockefeller learnt about an iron deposit in Minnesota, this was his chance to beat Carnegie at his own game. He quickly took hold of the mines and began to supply iron to Carnegie’s competition at rock bottom prices, Carnegie’s profit began to shift. Rockefeller devised a scheme to build his own steel company, something that will be a rival to whatever Carnegie had ever built. Carnegie looking to end this bloodbath offered to buy the entire output of Rockefeller’s mines, in return, Rockefeller will stay away from the steel business, both men closed the deal.
Morgan set up a meeting with Carnegie’s right-hand man, Charles Schwab, Morgan was going to buy Carnegie’s steel and make Charles the new president. With Charles acting as Carnegie’s caddy one afternoon, he chimed the question, “suppose Morgan wanted to buy your company, what will be your price?” Carnegie scribbled $480m on a piece of paper, which is the equivalent of $400b today. This was the price he was going to sell his company for, for context, this is almost like trying to buy Facebook or Alibaba or Amazon today. Carnegie thought Morgan wouldn’t be able to raise the money. Charles returned to Morgan with the price and Morgan immediately called for a meeting, both men shook hands, the deal was sealed. Carnegie instantly became the richest man in the world. He had finally achieved his lifelong mission of beating Rockefeller as the richest man. JP Morgan called his new company US Steel, it became the largest corporation in the world worth more than $1B.
Almost out of nowhere, a new politician emerged. His name, Theodore Roosevelt. He was a man of character and wouldn’t be bought, he quickly targeted the two remaining men, Rockefeller and Morgan. Roosevelt became McKinley’s running mate and was later sworn in as the US Vice President, with their man still in the White House, they relaxed and didn’t think too much about a re-election, but their clever plot backfired. On 14th September 1901, William McKinley was assassinated, this spelt trouble for Rockefeller and Morgan as Roosevelt gets sworn in as the president of the United States. Roosevelt goes after Morgan; he was bent on breaking the monopoly of these men, he sues his company in a Federal Court marking the first antitrust case brought against a major corporation. Roosevelt wins and Morgan’s railroad monopoly is broken up, this was a sign of things to come. Shortly, the government turned its eyes on Rockefeller and Standard Oil, this marked the biggest antitrust case in America at that time.
During the trial, Rockefeller claimed not to remember any of the charges that were made against him, while he grappled with his suit, a young entrepreneur, Henry Ford, was emerging. Ford wanted to build an affordable, mass-market motor vehicle, he priced his car at $900, but in other to sell his cars, he needed to get permission from the Association of Licensed Automobile Manufacturers, ALAM. ALAM owned the patent on the automobile, giving them control over who can manufacture and sell automobiles. Henry presented his case before ALAM, after months of deliberation, his application was rejected, this was a crushing blow for the young entrepreneur, but he wasn’t going to give up. With grit and determination, he challenged the owner of the biggest car company to a race, beating the biggest manufacturer will give him the much-needed boost for his own car company. This was a break or make moment, reminiscent of the story of David and Goliath.
Ford won the race and became an instant sensation, he raised the equivalent of $700,000, built a factory and soon he was making 15 cars daily. ALAM took notice and they came after him. While Ford was battling ALAM, Rockefeller was fighting the US govt. As these men were struggling, Carnegie set out to build the Panama Canal. 75,000 workers worked on this project, Carnegie raised the equivalent of $7B for the project.
Built on steel, powered by electricity and driven by oil, these are the commodities that made America the most powerful country on earth.
Over the course of 40yrs, Rockefeller used innovation, ingenuity and intimidation to build one of the largest corporations on earth. Just before the court gave its judgment, Rockefeller said what the government called monopoly was merely an enterprise. Back in Detroit, Ford awaits judgment, ALAM sued Ford for a royalty on every car he sold. If he gives in, the price of his cars will become unaffordable for the average American, he defied ALAM and continued building his cars. He increased the wages of his workers to $5 daily, more than double the rates of most factories, he innovated a new system for making cars and he introduced the assembly line, which is still used in manufacturing to this day. With the assembly line, they can build more cars than their competition, a car that took 12hrs to assemble came down to less than 2hrs.
He standardized the 8hrs work day, 5 days a week. Back in New York, Rockefeller awaits judgment, this will decide the fate of Standard Oil. Finally, judgment is passed, Standard Oil is broken into 34 companies; the age of monopoly is broken. Judgment is passed on the suit between Ford and ALAM, the court ruled in favour of Ford, ALAM has been defeated. Ford’s aim was to bring the car to everyone, his factory went on to create the Model T, it became the car for the common man. The success of Ford became a boost for Standard Oil’s gasoline stations across the nation, cars that were built using Carnegie’s steel, in factories powered by Morgan’s electricity.
PS: It is amazing to watch the interdependence of these different industries.
The industrial revolution resulted in the boom of the American middle class; Exxon, Mobil and Chevron, 3 out of the 34 companies that were broken out of Standard Oil and are giants in their own right today. John Rockefeller being a shareholder in each of these companies, saw his wealth swell, even more, giving him a net worth of more than $600B (in today’s money), making him essentially the richest man in history.
In April 1913, JP Morgan died in his sleep. As a sign of honour, the NYSE shuts down, JP Morgan has helped modern finance, his influence was larger than life. After the death of Morgan, Rockefeller and Carnegie realized time was running out, their new competition wasn’t about who was going to make the most money, but instead who was going to give the most money. Carnegie gave away the equivalent of $67B; most went to education and libraries. John Rockefeller outlived his rival by 13 years; he donated millions to churches and universities, he created the Rockefeller Foundation with a personal endowment of the equivalent of $38B. He lived to the age of 97 years, he gave out more than $500m.
The 20th century will go on to be known as the American century with well-paying jobs, wealth and prosperity reached the common man. These visionary men sparked a revolution that changed America forever. They didn’t discover modern America, they built it.
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