Life lessons from John D. Rockefeller

John Davison Rockefeller was an American industrialist, born in Richford (New York), on July 8, 1839. He attended several public schools in Cleveland (Ohio). At 16 he became a librarian in Cleveland. He is the patriarch of the Rockefeller family, which to this day is still powerful and one of the wealthiest ones in the world.

In 1862 he partnered with Samuel Andrews, inventor of a revolutionary process for refining crude oil. After a rapid expansion, the company was taken over in 1870 by the Standard Oil Company, founded by Rockefeller, his brother William and several others.

In early 1872, Rockefeller helped create the South Improvement Company, a partnership that included the major oil refiners of Cleveland, reaching agreements with railway companies to obtain large discounts for members of the association. This agreement was annulled legally three months later, over the protests of the people, but by then almost all of the competitors of Rockefeller had been forced to sell or to associate with him. In 1878, Rockefeller controlled 90% of the oil refineries in the US and soon after had a monopoly of distribution channels.

In 1882, Rockefeller created the Standard Oil Trust, which was the first trust in the world, deemed as an illegal monopoly and forced to disband by the Supreme Court of Ohio in 1892 but, in fact, it was not dissolved until 1899. That year, Rockefeller established the Standard Oil Company in New Jersey and became its president until his retirement in 1911. That same year, the company was divided into several corporations by order of the Superior Court of the United States.

It is estimated that Rockefeller’s personal fortune came to reach $1 billion. His philanthropic contributions totaled $550 million. Of these, 80% went to four charitable organizations created by Rockefeller: the Rockefeller Foundation, the General Education Board, the Rockefeller Institute for Medical Research (now Rockefeller University) and the Laura Spelman Rockefeller Memorial, created in 1918 and absorbed by the Rockefeller Foundation in 1929.

Rockefeller was a descendant of German-Jews who immigrated to the United States in 1733. During his modest beginnings as an accountant of the firm Hewitt and Tuttle, young John Davison began writing a sort of economic journal which he entitled “Ledger A”. That curious record, which is currently still preserved, and annotations contained in his autobiographical book “Random Reminiscences of Men and Events”, offer a masterly sketch of his personality.

Other curiosities

From a young age, John D. Rockefeller displayed a talent for financial transactions. With his family in Cleveland, around 1853, he sold stones of different colors and shapes to his schoolmates and the income accrued from these sales was kept in a bowl of blue faience, his first “safe”. It was not long before he earned $50, which would determine the future direction of the boy.

A nearby farmer needed precisely that amount to pay an urgent debt. John lent him the money with an interest rate of 7% After a year, he discovered that the loaned capital returned to his pocket with about $31 of interests. From that day on, he decided to make the money “work for him”.

From then on all of his earnings would be religiously recorded in the “Ledger A”.

His father, William Avery, was not an example of marital fidelity nor a role model for his six children. He’d be away from the family for long periods, and when he returned his pockets were usually full of money and he’d unfailingly return laden with gifts for his wife and their children. Much later, John discovered that his father was nothing but an impostor, visiting Indian reservations and selling its inhabitants all kinds of useless objects. His next business was much more profitable: pharmaceuticals, which he sold as a cure for cancer. From his mother, Eliza, John inherited not only the looks but also her strict Calvinist morality. At age 16 he got his first job at a brokerage and grain merchants firm, where he worked without looking at the clock, lost in that sea of figures that had him so fascinated. At night, in bed, he would mentally review the financial operations of the day, trying to discover the ways in which he could have earned higher profits.

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Image courtesy of AK Rockefeller at Flickr.com

The code of his life

Discipline, order and a faithful record of debit and credit was since the code of his life. The outbreak of the Civil War in 1861 was key to his fortune. Two years earlier, with the drilling of the first oil well, he realized that he could make a greater fortune with transportation and refining than exploitation. When in 1863 the railway company extended its line to Cleveland, putting the city in direct contact with New York through the oil region, he knew it was time. He was 23 years old and invested $4000 as a limited partner in the new firm Clark, Andrews & Co. Refineries emerged in Cleveland and enthusiasm for the black gold made him leave the grain trade. His partner Clark rejected the expansion of the firm, so they decided to auction the company. In February 1865 Rockefeller kept the company. The business, which would henceforth be called Rockefeller and Andrews, was Cleveland’s largest refinery, with a capacity of 500 barrels per day and earnings of one million dollars per year, which would double the following year. Thus he was able to negotiate preferential rates with the railroad, and that discount was essential to found, in 1870, a new company, with $1 million in capital: The Standard Oil.

An empire is born

In 1870, it was one of the largest refineries in the central United States. In 1872, along with two of the largest refiners of Pittsburgh and Philadelphia, they could handle at their will the rates with the railways. In three months, Rockefeller had bought 22 of the 25 refineries in Cleveland. Standard Oil refined a quarter of all oil production in the country. Step by step they’d eliminate their competitors, and Standard Oil became a powerful trust, which refined 95% of the country’s total capacity. His management team was formed by a group of the most experienced financiers of the country. All of them were millionaires. For Rockefeller, the staff had always been an important ingredient; so he elected the most capable and enthusiastic ones.

Rockefeller died on May 23, 1937, in Ormond Beach, Florida.

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The Most Aggressive Corporate Raider in Finance

Among the most important money masters based in New York, like Ray Dalio or Stephen Schwarzman, we can find Carl Icahn, one of the 50 richest men in the world, with a fortune worth more than $20 billion in assets. He is well- known for his hasty style as a corporate raider and as a shareholder activist. With numerous takeover and takeover attempts of some of the biggest corporations in America, Icahn is recognized by financial experts like Patrick Dwyer as a financial celebrity and an expert in arbitrage opportunities.

A flamboyant figure and an aggressive investor, Icahn is recognized as one of the inspirations for the Gordon Gekko character in Oliver Stone’s 1987 film Wall Street.

Early life and education

Carl Icahn was born on February 16, 1936. He was raised in the Far Rockaway neighborhood of Queens Borough, in New York City, a difficult place known for being a poor and rainbow-colored neighborhood with black, Irish, Jewish and Latin American immigrants.

Icahn’s mother was a schoolteacher from Brooklyn. According to him, she was always afraid to try new things. His father wants to be an opera singer but settled on being the cantor at the local synagogue, while being a lawyer.

Icahn was recognized as a gifted student. Once he began applying to colleges, his parents told him they’d only pay for college if he was accepted by the Ivy League: Yale, Harvard, or Princeton. They did all this under the assumption that Icahn wouldn’t be accepted since they believed those schools didn’t take kids from that side of town.

But Icahn applied despite the opinion of his parents and was accepted by all of them. He chose to attend Princeton, and then his father had to pay a $750 dollar bill in the 1950s. Besides tuition, other expenses like room, board, and books needed to be covered by Icahn and to do so, he took a summer job at the cabana club in the Rockaways. It was there where his talents and skills beyond intelligence and hard work were really visible when he joined a regular poker game with some of the cabana owners. Al first he would lose every hand, but after reading three books on how to play poker, he would become a better player than any of the older guys. Icahn would win about $2,000 each summer in the 50’s, equivalent to $50,000 today.

At Princeton, the young Icahn played a lot of chess and studied philosophy. His thesis, on empiricism let him earn a school prize. Icahn later explained that his understanding of life from a philosophic perspective allowed him to become a magnate. He once stated that Empiricism is based on observation and experience, not feelings, it trains your mind for takeovers and teaches you that there is a strategy behind everything.

When Icahn graduated from Princeton, he applied and was accepted to NYU Medical School. There he studied for two years. He dropped medical school because he disliked working with corpses. Then he joined the army in 1961 for a brief period and started working on Wall Street as a stockbroker for Dreyfus & Co.

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Image courtesy of Insider Monkey at Flickr.com

How Icahn became successful

Carl Icahn joined Dreyfus & Co. as a broker during a strong bull market. He worked in Wall Street and gained experience working with different companies as an options manager. Once he was making enough money, he decided it was time for him to open his own shop. He talked to his uncle, a businessman who was grateful to him and asked him for the money to buy a seat on the New York Stock Exchange (NYSE), about $400,000 back in the 60’s.

Once the newly formed Icahn & Co started operating, it focused on options strategies and arbitrage, especially takeover arbitrage, which meant the company would simultaneously purchase and sale an asset to profit from a difference in the price. That is how Icahn started to make big money at the time ($1.5 to $2 million per year). A rough estimate made in the 80’s indicated that Icahn & Co net worth was at least $100 million.

In 1978, Icahn started to do more than just invest in takeover opportunities, he decided to start buying larger portions of medium size companies and demand a place on their boards and administrative changes in exchange for not selling their portion off its less-profitable parts. Icahn started to be known for his bully approach to C executives and corporate boards. It was the key to his success.

In 1985, Icahn was ready to go after some of the biggest corporations in America, making an $8 billion leveraged buyout offer for Phillips Petroleum. Phillips fought back and as a contingent measure, its board approved a stipulation declaring that in case of a hostile takeover, the company would pay shareholders in preferred shares whose terms would make the acquisition unsustainable to whoever was dumb enough to try it. Finally, Icahn agreed to sell his portion back to the company, making a reported $50 million by walking away.

Living a business life full of challenges, so far Icahn has won several battles in the business field, dealing with takeovers, mergers, acquisitions, tough contenders and 2008 national economic crisis. Currently, Icahn acts without investors and has turned to public shareholder activism through his website. He also has taken important positions in companies such as Netflix, Apple, eBay and Family Dollar.

Important events in the life of J.P. Morgan

John Pierpont Morgan was born in Connecticut in 1837. His father was an American banker, the one who started planting in J.P. a great passion for finance accompanied education of the highest quality internationally. When he was 20 years old, John worked at a company headquarters located his father in London, UK. After working there for a year he moved to New York City, where he began a career in the financial sector, becoming one of the highlights in the history of the United States bankers. It is worth mentioning that unlike most success stories, in the case of J. P. Morgan earned his fortune even though his father was already a multimillionaire. It is a case in which two generations of entrepreneurs who achieve untold fortune come together.

His way as a financial began in 1856 the following year he began work on the New York stock market. At the beginning of his career one of the first good decisions by Morgan was to buy obsolete elements of the US military for a low cost, this purchase was made a few months before the outbreak of the civil war. Then when the American Civil War broke out, the demand for equipment was very high, until he sold it everything he had acquired seven times more expensive than he had paid recently.

In this age Morgan had made a lot of money in the banking system of the United States, however did not stop and in the following decades used his skills to be part of the rail industry, buying in poor condition and then restore them and rent, which led him to have a much larger fortune.

In the eighties JP noted that the business was buying bankrupt companies and implement them, he devoted the rest of his life to it for that reason put at stake its solvency to realign the US rail sector, cleaning up companies with financial difficulties, based on capital investment, reposition its debt at lower interest rates and rationalize costs.

At the time of economic crisis on Wall Street in 1893, Morgan bought US treasury debt. In other words, the wealth of Morgan was such that it became the only creditor of the United States at that time, achieved this by relying on its relations with the London house of his father and financially established in Paris. In fact, she never leaves the business of state funding, participating in large loans turn of the century. Another important aspect of the life of Morgan was the one who financed Tesla to bring electricity to the home, ushering in the modern era. While his was fortune growing up Morgan continued making investments and acquisitions, always geared towards businesses new generation, so much so that during the 70s and 80s, allowed the very same Thomas Edison, supporting him financially at all times, enabling the company of Thomas, Thomson corporation merged with Houston Electrical, being born with this new alliance today known as General Electric.

One of the aspects that led him to glory was in the fall of 1907, when the economy of the United States was facing a major crisis, which led among other consequences a sudden shortage of money and credit, generating difficulties in obtaining the funds needed for different transactions. Then JP Morgan had a great loss in the rail industry for control of the Northern Pacific Railroad, for that reason his vision on investment issues led him to set his interests were the manufacturing industry, intervening in companies like US Steel and other leading companies. This thanks to his reputation as a banker and financier was already so high that helped him to attract the interest of investors in buying business.

By 1912 the Morgan bank owned more than two thirds of the funding sources US. Their companies had increased so much in value that to date were valued at more than $ 25 billion. That’s when the US Senate decided to submit to an investigation process for monopolistic practices. Nothing cost the richest banker in the world at that time to move his son and get away from the charge. Morgan had another vision of capitalism which had their contemporary companions, who were struggling from their competitive position to gain market share, something he hated, making it possible to absorb and create monopolies to control prices and developing real lattices business to your taste and whim.

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Image courtesy of Ozzy Delaney at Flickr.com

J.P. fortune Morgan came to be equivalent to about 15,600 million current dollars, part of which would allocate to charitable and cultural works, such as the founding of the Morgan Library or donation of his art collection to the Metropolitan Museum in New York, as one of its great passions in his life was the collection of paintings, books, yachts and houses. It was taken by one of the most powerful people in the world, personifying the great capitalism of the late nineteenth and early twentieth centuries. He died in Rome, Italy, in 1913 leaving his legacy and fortune to his son, John Pierpont Morgan Jr.

To read more about family of J.P Morgan, you can visit his website by clicking here.