Notes - Random Reminiscences of Men and Events

November 19, 2024

Chapter 1: Some Old Friends

Importance of Associates

This chapter emphasizes the importance of capable business associates. Rockefeller stresses the importance of open communication and respectful debate among partners to reach the best decisions for the company.

Arguments Versus Capital

He recounts an anecdote about a partner who resisted a major investment, demonstrating that sometimes appealing to a partner's sense of risk and shared responsibility can be more persuasive than logical arguments.

H.M Flagler

Rockefeller praises his early partner, H.M. Flagler, for his energy, forward-thinking approach, and commitment to building lasting infrastructure in the oil business. He illustrates Flagler's fairness and attention to detail with an anecdote about a contract drawn on a mullen stalk. He also shares an example of Flagler's compassion, where he insisted on offering a former baker, who had become an oil refiner, a chance to join their company out of concern for the man's financial well-being.

Value of Friendships

Rockefeller stresses the value of true friendships, drawing a distinction between those who offer empty support and those who are genuinely dependable. He provides an example of true friendship with S.V. Harkness, who offered him his entire fortune when Rockefeller's oil refinery burned down. He also highlights the support of Stillman Witt, a bank director who vouched for Rockefeller's company and offered his personal assets as collateral.

Focus on Business, But Not for Money's Sake

Rockefeller acknowledges the excitement of business and the satisfaction of working with bright minds, but cautions against the pursuit of wealth for its own sake.

Vacations

Rockefeller states that despite his dedication to work, he managed to take vacations because of his capable associates who could manage the business in his absence.

Importance of Details

He reflects on his early experience as a bookkeeper, which instilled in him a deep respect for accuracy and detail. However, he also acknowledges the need to balance this focus on details with a broader vision.

Balancing Business with Other Interests

Rockefeller discusses his passion for landscaping and designing paths, contrasting it with his partner's intense focus on the iron ore business. He highlights his unique approach to managing his business affairs, often working remotely from Cleveland and relying on telegraph communication to stay connected. He explains his interest in cultivating nurseries and his systematic approach to managing and valuing the trees he planted on his various properties.

Chapter 2: The Difficult Art of Getting

Early Business Experiences

John D. Rockefeller's father instilled in him practical business principles. His first business venture was raising turkeys with the help of his mother when he was seven or eight years old. Rockefeller was taught that money must be earned and that even small expenditures and donations should be meticulously tracked. Even after he received a whipping at school, his mother instilled in him the importance of following through with commitments, saying, "Never mind ... we have started in on this whipping, and it will do for the next time."

Apprenticeship and Early Jobs

At age 16, Rockefeller began a business apprenticeship with Hewitt & Tuttle, a commission merchant and produce-shipping firm. He learned about a variety of businesses because the firm owned dwelling-houses, warehouses, and land, as well as participated in forwarding, storage, and shipping. He also learned a lot from observing the partners interact and plan as he was always present in the office. After four months, he was offered a raise but decided to seek employment elsewhere.

Partnership with Clark

Rockefeller partnered with Maurice B. Clark, forming a commission merchant partnership with $4,000 in capital. They conducted business in carload lots and cargoes of produce and their sales reached half a million dollars in their first year. In order to expand the business, they required a loan. Rockefeller secured their first loan for $2,000 from T.P. Handy, a bank president who knew Rockefeller from his childhood. The bank president continued to be a great friend for many years, loaning them money whenever they needed it.

Rapid Growth

Rockefeller notes that one of the main characteristics of their business and one that contributed to their success was the rapid pace at which it grew. He had to constantly secure financing from banks in order to cover their purchases and he became quite familiar with travelling to different banks to secure funds.

Early Philanthropic Work: Raising Church Funds

Rockefeller became involved in philanthropy early in his career. As a young trustee of a mission church, he led a campaign to raise $2,000 in order to pay off the church’s debt. This early experience solidified his desire to earn more money so that he could continue this type of work. It took many months to raise the money, mostly in small amounts. Rockefeller was proud of their success in raising the funds. He continued to be involved in raising money for charities until his other responsibilities forced him to resign.

Chapter 3: The Standard Oil Company

Overview of the Standard Oil Company

• The Standard Oil Company has been accused of engaging in unfair business practices such as underselling competitors, spying on them, and ruining their trade.
• However, the company's main goal was to increase consumption by expanding its markets globally.
• The Standard Oil Company did not interfere with dealers who cultivated their markets adequately, but it would provide facilities for extending sales in areas where it saw new opportunities.
• The company had to hire many new employees because its expansion was so rapid. Some of these employees may have been overly zealous in going after sales, but they were acting against the company's expressed wishes.

The Standard Oil Company: Not a Monopoly

• The Standard Oil Company, despite being referred to as an "octopus", has never had any "water" introduced into its capital. This means that the company has not issued any stock or bonds that are not backed by actual assets.
• It has never had to make the public wait for money it owed and has always found ways to finance new oil field operations.
• The Standard Oil Company has always had hundreds of competitors. These competitors include those in oil refining, by-products, and foreign markets. The Standard Oil Company often faces tariffs, local prejudices, and unusual customs in foreign markets.
• The company's success is due to its efficient and economical management, not a lack of competition.
• If the company's managers were to relax their efforts, the quality of their product would decline, they would lose customers, and the business would fail. The author, John D. Rockefeller, states that he would sell his interest in the company for any price he could get if it were run by anyone other than experts. More than half of the company's products are sold outside of the United States.

Advantages and Dangers of Industrial Combinations

• Combinations of capital will continue to grow. As long as they are conducted properly and with respect for the rights of others, they should not be a cause for alarm. The number of stockholders in large corporations is rising quickly, meaning more people are becoming partners in these businesses. This will hopefully lead to more responsible management and encourage people to carefully consider the facts before criticizing or attacking them.
• Individual competition is no longer feasible in large-scale business and arguing for it makes no more sense than arguing for a return to manual labor.
• The primary benefits of industrial combinations stem from collaboration among individuals and the pooling of capital.
• A partnership may be sufficient for small businesses, but corporations are necessary as businesses expand.
• In America, due to the federal system where corporations are only recognized in the state where they are formed, companies operating in multiple states need to establish corporations in each of those states.
• If a business extends to foreign countries, which Americans are increasingly interested in, forming corporations in those countries can be beneficial and even necessary.
• Different corporations become cooperating entities within the same business, linked through common stock ownership.
• Industrial combinations are essential and arguing against them is pointless. Large-scale combinations involving multiple corporations are necessary for Americans to conduct business across state lines and internationally.
• There are risks associated with industrial combinations:
  • The power resulting from combination might be misused.
  • Combinations may form for stock speculation instead of running a business, leading to temporary price increases rather than reductions.
• These risks exist in combinations of all sizes. Just as the possibility of accidents doesn't negate the benefits of steam power, the potential for abuse shouldn't rule out industrial combinations. Reasonable safeguards should be established to mitigate these risks.

The Future of American Business and Foreign Investment

• The potential of the United States is immense, with vast untapped resources and a massive domestic market.
• Americans are beginning to realize the potential of serving foreign markets.
• Building a strong global reputation is crucial for reaping the full benefits of these opportunities.
• American businesses need to conduct themselves in a way that encourages foreign investment in American companies. It is essential for Americans to treat foreign investors fairly to ensure that they don't regret purchasing American securities.

Chapter 4: Some Experiences in the Oil Business

Formation of the Company

John D. Rockefeller explains that in the early 1860s, he and his partners organized a firm to refine and trade oil, marking his entry into the oil industry. Rockefeller emphasizes that the business landscape at the time was characterized by intense competition, with numerous small, inefficient refineries struggling to survive. He highlights the prevalent challenges such as:

• Price volatility: The price of crude oil was highly unpredictable, making it difficult to plan and invest.
• Inefficient production: Many refineries were using outdated and inefficient methods, leading to waste and high production costs.
• Limited market reach: The market for oil was still relatively small and localized.

Recognizing the need for greater efficiency and stability, Rockefeller and his partners began acquiring the largest and best refining companies to create a more integrated and streamlined operation.

Growth and Expansion

Rockefeller describes the rapid growth of the new company. However, this growth also brought a new set of problems:

• Uncertain crude oil supply: New oil fields were being discovered, while existing ones were being depleted, leading to constant adjustments and investments.
• Speculative nature of the trade: The inherent risks of the oil business made it challenging to predict future outcomes and make sound decisions.

Despite these difficulties, the company persevered and began developing expertise in managing this complex and volatile industry.

Foreign Markets

Rockefeller recognizes that expanding the company's market reach was crucial to its success. He outlines how the company:

• Targeted global markets: They actively sought to sell their products in every part of the world.
• Established strategic refineries: Refineries were set up in key seaboard cities to facilitate export operations.

Pipe-Lines vs. Railroads

Rockefeller discusses the limitations of traditional oil transportation methods, which relied heavily on barrels. He points out that:

• High packaging costs: Barrels were often more expensive than the oil they contained.
• Environmental concerns: Extensive deforestation was required to produce the barrels.

To overcome these challenges, the company embraced the pipeline system. However, this transition involved significant investments and legal complexities, as pipelines required franchises from various states and the establishment of separate corporations in each state.

Start of the Standard Oil Company

Rockefeller explains that the formation of the Standard Oil Company in 1867 was driven by a desire to pool resources and expertise. The company evolved through several partnerships, ultimately becoming a corporation with a capital of $1,000,000. This capitalization was later increased to $2,500,000 in 1872 and then to $3,500,000 in 1874 as the business continued to grow.

Reasons for Success

Rockefeller attributes the Standard Oil Company's success to its commitment to providing high-quality products at affordable prices, made possible through:

• Efficient manufacturing: The company invested in the best and most efficient production methods.
• Skilled workforce: They recruited and trained skilled workers and paid them competitive wages.
• Strategic investments: The company readily replaced outdated facilities with new and improved ones.
• Market expansion: They sought out new markets for both primary products and by-products.
• Technological advancements: The company invested heavily in developing new technologies, such as pipelines, to reduce costs and improve efficiency.
• Focus on core business: The company maintained a strict focus on the oil industry and its related products, avoiding risky ventures outside its core expertise.
• Employee development: They prioritized employee training and development, creating a loyal and skilled workforce.

Insurance Plans

Rockefeller describes the company's innovative approach to insurance, which played a significant role in its profitability. He outlines how the company:

• Implemented comprehensive fire prevention measures: They invested heavily in fireproof construction and other safety precautions to minimize the risk of fires.
• Self-insured: Instead of relying on external insurance companies, the company created its own insurance fund, significantly reducing insurance costs.

These measures not only saved money but also provided a competitive advantage, as they allowed the company to offer lower prices to customers.

Why the Standard Pays Large Dividends

Rockefeller acknowledges that the Standard Oil Company paid large dividends, sometimes reaching 40%. However, he clarifies that this seemingly high percentage is misleading as it is based on the company's relatively small capitalization of $100,000,000. Rockefeller emphasizes:

• True value of the company: The actual value of the company's assets is far greater than its stated capitalization, accumulated through years of successful operation.
• Conservative financing: The company chose not to inflate its capitalization, unlike many others, which explains the high dividend rate.
• Consistent returns: The company's conservative approach ensured reliable and consistent dividend payments to its stockholders.

The Management of Capital

Rockefeller explains that the Standard Oil Company avoided listing its stock on the Stock Exchange in the early years due to the inherent volatility of the oil business. Listing on the exchange would have exposed the stock to speculative trading, potentially creating instability and diverting attention from the company's core operations. Instead, the company:

• Relied on internal financing: The company prioritized using its own resources for growth and expansion, minimizing reliance on external capital markets.
• Maintained financial stability: This conservative approach allowed the company to weather economic downturns and maintain a strong financial position.
• Aided others in times of need: The company's financial strength enabled it to support other businesses and institutions during periods of financial distress.

Character the Essential Thing

Rockefeller emphasizes that the true foundation of the Standard Oil Company was not just its capital or physical assets, but the character and abilities of the men behind it. He states that "these are the essentials to be reckoned with."

Acquisition of Refineries

Rockefeller explains that the company's acquisition of other refineries was conducted fairly and ethically. He highlights that these acquisitions were driven by:

• Efficiency and economies of scale: Consolidation allowed the company to streamline operations, reduce costs, and improve overall efficiency.
• Voluntary participation: Not all refineries chose to sell, and some continued operating independently for many years.
• Competitive landscape: Refineries located in areas considered more advantageous than Cleveland remained in operation.

The Backus Purchase

Rockefeller addresses a specific accusation regarding the purchase of the Backus Oil Company. He recounts how he was personally accused of taking advantage of a widow, Mrs. Backus, by acquiring her company for a fraction of its true worth. To refute these claims, Rockefeller provides a detailed account of the transaction:

• Initial meeting: Mrs. Backus approached Rockefeller, requesting that he personally handle the sale of her company. However, Rockefeller declined, citing his lack of expertise in the lubricating oil business, the specific area of the Backus Oil Company. Instead, he offered Mrs. Backus assistance with her business operations.
• Negotiations: When Mrs. Backus insisted on selling, Rockefeller assigned other company representatives familiar with the lubricating oil business to handle the negotiations.
• Fair valuation: Rockefeller instructed the company's experts to add an extra $10,000 to their valuation of the Backus Oil Company to ensure that Mrs. Backus received a fair price.
• Misunderstanding: After the sale was finalized, Mrs. Backus expressed dissatisfaction with the terms, leading Rockefeller to write her a letter clarifying the details of the transaction.
• Supporting evidence: Rockefeller provides affidavits from those involved in the negotiation, including Mrs. Backus's own representative, confirming that she was fully informed and agreed to the terms of the sale.

Rockefeller concludes by expressing his regret that Mrs. Backus did not accept part of her payment in Standard Oil certificates, as he had suggested, which would have allowed her to benefit from the company's continued success.

The Question of Rebates

Rockefeller acknowledges that the Standard Oil Company did receive rebates from railroads before 1880. However, he argues that:

• Reciprocal benefits: These rebates were not unearned favors but were provided in exchange for valuable services rendered to the railroads.
• Volume discounts: The company's large and consistent shipments, along with its investments in infrastructure, allowed railroads to operate more efficiently and cost-effectively.
• Competitive practices: Other companies also sought and received rebates from railroads based on their individual arrangements and bargaining power.

Rockefeller concludes by noting that after the implementation of the Interstate Commerce Act, it was discovered that some smaller companies with limited shipping volumes had actually received lower rates than Standard Oil, despite the company's significant investments in logistics and infrastructure.

Chapter 5: Other Business Experiences and Business Principles

Unfortunate Investments in the Northwest

John D. Rockefeller's involvement in the iron ore industry was not part of an intentional plan. It stemmed from a series of investments made in the Northwest, which included various industries like mines, steel and paper mills, a nail factory, railroads, and smelting properties. Rockefeller was a minority stakeholder in these businesses and was not involved in their administration.

The panic of 1893 took a toll on these investments, revealing inflated values and precarious financial realities for many.

Enlisting Frederick T. Gates

To gain a better understanding of these businesses, Rockefeller sought assistance from Frederick T. Gates, who, despite lacking specialized knowledge of factories and mills, possessed exceptional common sense. Gates was initially tasked with evaluating an iron mill during a work trip for the American Baptist Education Society, providing a comprehensive report that highlighted several unfavorable aspects of the mill.

Impressed by his thoroughness, Rockefeller requested Gates to assess another property, this time in the West, anticipating a positive report. However, Gates’ assessment revealed this enterprise was also on the verge of trouble.

A Partnership for Business and Philanthropy

Recognizing Gates’ abilities, Rockefeller proposed a partnership, offering him a position to help navigate these complex affairs. However, their agreement stipulated that Gates would continue pursuing his philanthropic ambitions.

Rockefeller acknowledges Gates’ rare combination of business acumen and philanthropic passion, highlighting his commitment to ethical practices and dedication to benefiting mankind.

Averting Bankruptcy

Rockefeller and Gates adopted a policy to prevent companies they had interests in from entering bankruptcy. Instead of resorting to receiverships, which are often costly and detrimental to value, they chose to support struggling businesses.

They employed a strategy of providing financial assistance, improving facilities, reducing production costs, and exercising patience to guide these companies toward self-sustainability. This approach was especially crucial during the challenging economic times of 1893 and 1894.

Their experience with these struggling companies taught them valuable lessons about the importance of careful management and perseverance. They believed that with added capital and adherence to sound business principles, even businesses in dire straits could be revived.

Acquiring Iron Ore Mines

Among the investments in the Northwest were several ore mines and a railroad under construction to connect the mines to lake ports. While confident in the mines' potential, the railroad was essential for their operation. The project had commenced but suffered significant setbacks during the panic of 1893. Despite being minority stockholders, Rockefeller and Gates felt obligated to keep the enterprise afloat during the crisis.

Rockefeller had to utilize his personal securities to raise funds and transport cash via express to support workers and maintain their livelihood.

As the panic subsided, they realized the extent of their commitment. They had invested substantial sums, and instead of finding partners to invest, they were faced with numerous offers to sell stock. They ultimately bought out these stakeholders, acquiring a significant majority of the companies’ capital stock.

The lack of interest from major iron and steel manufacturers in these mines, which were available at low prices before their involvement, surprised Rockefeller.

Gates Takes the Lead

Having committed to the venture, they aimed to provide ore through efficient mining and transportation. Their profits were reinvested in acquiring more ore lands.

Frederick T. Gates assumed the presidency of the mining and railroad companies, embarking on a journey to learn and develop the intricacies of the ore business. He displayed a remarkable aptitude for the field and proved instrumental in navigating its complexities.

The Need for Ore Transport Ships

With the railroad operational, the need for ships to transport ore across the Great Lakes became apparent. Lacking experience in shipbuilding, they sought the expertise of someone already established in the ore transportation business.

Gates identified an industry leader, whose involvement would inadvertently make them competitors. During a brief evening meeting at Rockefeller's residence in New York, Gates, accompanied by the expert, secured an agreement for the construction of ore-carrying ships.

Securing the Shipbuilder

The expert initially hesitated to partner, recognizing the potential conflict of interest. However, Rockefeller and Gates emphasized their determination to enter the trade and offered a fair commission for overseeing the shipbuilding process.

This pragmatic approach convinced the expert, Samuel Mather of Cleveland, and a deal was struck, marking the start of a mutually beneficial collaboration.

A Strategic Shipbuilding Order

Mather was tasked with building the largest and most efficient ore-carrying ships possible. They decided to maximize their order to provide employment opportunities for idle workers on the Great Lakes who were struggling due to the economic downturn.

Mather was instructed to inquire about the shipbuilding capacity of various companies on the Great Lakes without revealing the full extent of their needs. This discreet approach aimed to secure competitive pricing and prevent price gouging.

Mather gathered bids from nine or ten shipbuilding companies, leading each to believe they were competing for a limited contract of one or two ships. In reality, he planned to award contracts to each company based on their maximum production capacity.

On the eve of the contract awards, Mather met with each potential shipbuilder in Cleveland, fostering a sense of optimism in each regarding their chances. However, to their surprise, each company received a contract for their full capacity, discovering they had been competing against themselves. This clever strategy resulted in a win-win situation, with Mather securing favorable pricing and the shipbuilders receiving substantial work orders.

Exiting the Ore Business

Seven years later, Rockefeller chose to divest from the ore business, selling their interests to the U.S. Steel Corporation. The sale, primarily paid for in Steel Corporation securities, positioned them to benefit from the company's anticipated future prosperity.

Adhering to Business Principles

Rockefeller reflects on his experiences in the ore industry, emphasizing the importance of adhering to ethical business practices, conducting thorough due diligence, and anticipating setbacks.

He stresses the importance of sound financial planning, accurate assessments of market conditions, and avoiding the pursuit of short-term gains or deceptive tactics.

In his view, lasting success is built on integrity, leading to trust and confidence, which he considers the most valuable assets. He encourages aspiring business individuals to approach their work with a long-term perspective, meticulousness, and unwavering ethical principles.

Navigating the Panic of 1907

The chapter concludes with Rockefeller's observations on the panic of 1907. He recounts how the Standard Oil Company's conservative financial practices allowed them to weather the crisis and offer assistance to others.

He commends J.P. Morgan for his leadership in restoring confidence and acknowledges the collective efforts of leading financiers in navigating the challenging economic environment.

Rockefeller expresses optimism about the nation's resilience and highlights the valuable lessons learned from the panic, emphasizing the importance of conservative management practices and adapting to evolving economic realities.

Chapter 6: The Difficult Art of Giving

Limitations of the Rich

John D. Rockefeller believes that the possession of money in great abundance does not necessarily bring happiness. The very rich, like everyone else, derive pleasure from money when they use it to do things for others.

• People assume that the rich can buy anything they want, but what people most seek cannot be bought with money.
• The novelty of being able to buy anything quickly passes.
• The rich cannot get personal returns beyond a certain limit for their expenditure:
  • They cannot buy a good digestion and therefore can only moderately gratify their taste for food.
  • They cannot spend much money on fine clothes without suffering from public ridicule.
  • They cannot spend much on comfortable homes without experiencing more pain than pleasure.
• The only way the rich can get a real equivalent for the money they spend is to cultivate a taste for giving because that can produce lasting gratification.

The Best Philanthropy

A man of business does his share for society by building up a property that gives steady work to people. He contributes by giving his employees good working conditions, opportunities for growth, and a strong stimulus to good work. Good works do not consist chiefly in the outright giving of money.

• The best philanthropy helps people to help themselves. It is the investment of effort or time or money, carefully considered, to employ people at a remunerative wage, to expand and develop the resources at hand, and to give opportunity for progress and healthful labour where it did not exist before.
• No mere money-giving is comparable to this in its lasting and beneficial results.
• Philanthropy should not be confined to Sunday. The man who plans to do all his giving on Sunday is a poor prop for the institutions of the country.
• The busy man of affairs should be the one most involved in philanthropy. Some men have followed the philanthropic principle of developing work and have taken up doubtful enterprises and carried them through to success, not just for profit, but for the general uplift of society.

Disinterested Service The Road to Success

A young man starting out in life who wants a large success should not approach his career with the idea of getting from the world by hook or crook all he can. His first thought should be how he can be most effective in the work of the world and how he can lend a hand in a way most effectively to help people.

• Making money should be a byproduct of a useful life. If you set out to be helpful, you will find that the development of your character and personality will reward you better than the pursuit of money for its own sake.

The Generosity of Service

The very poor are probably the most generous people in the world because they share each other’s burdens in times of need.

• The spirit of giving counts for more than the proportion of one’s possessions given.
• The poor give without any self-consciousness. The rich, on the other hand, must add service in the form of study to their gifts of money. They should use their resources to attack and improve underlying conditions.
• The poor meet promptly the misfortunes that confront their neighbors, while the rich can attack problems from a more scientific standpoint.

Scientific Research

Hospitals do wonderful work. However, research into the causes of disease and their remedies, which can relieve or stamp out disease, is no less important.

• Helping investigators who are striving to attack the causes of sickness and distress does not attract the giver of money as strongly as helping the sick and distressed, even though it may do more good. Helping the sick appeals to the heart, while helping the investigator appeals to the head. However, we are making wonderful advances in the field of scientific giving.
• The need for dealing with philanthropy scientifically is evident all over the world, and help is being given to the men and women devoted to these scientific tasks.
• A good example is the heroism of the men who risked and sacrificed their lives to discover the facts about yellow fever.

How far should the spirit of sacrifice extend? Many scientists give up everything to contribute to human knowledge, and people who criticize their actions don't realize what they are talking about. It is easy to sit back and put forth words of cynical wisdom; it is another to plunge into the work and through strenuous experience earn the right to express strong conclusions.

• People who are against using live animals for medical research don't understand the good it can do.
• Rockefeller recounts the story of a baby who was dying from internal bleeding. The baby's father, a surgeon, had spent time with Dr. Alexis Carrel at the Institute for Medical Research. Dr. Carrel's skill was the result of experiments on animals. The baby's father knew that a blood transfusion was the only chance, but it had never been done on such a young infant.
  • A vein in the baby's leg and an artery in the father's wrist were exposed.
  • The surgeon thought the baby was dead and questioned whether they should proceed, but the father insisted.
  • The baby’s vein was very delicate, but Dr. Carrel successfully connected the father’s artery to it and let the father’s blood flow into the baby.
  • Color returned to the baby, it began to cry, and eight minutes later, the connection was separated.
  • ** The baby was fed and lived.**

The Fundamental Thing in All Help

The fundamental thing is to educate people to help themselves because that strikes at the root of many of the world’s evils.

• The only thing of lasting benefit to a man is that which he does for himself.
• Money that comes to him without effort is seldom a benefit and often a curse.
• That is the principal objection to speculation: not that more people lose than gain, but that those who gain are more apt to be injured by success than they would have been by failure.
• The same is true of money or other things that are given from one person to another: only in exceptional cases is the receiver benefited.
• The only way to overcome failings is to build up personality from within.
• The principal cause for economic differences between people is their difference in personality, and the only way to achieve a wider distribution of wealth is to assist in the wider distribution of those qualities that make up a strong personality.
• A man who is strong in body, mind, character, and will need never suffer want. These qualities can only be developed by his own efforts.

Some Underlying Principles

There is not enough money for the work of human uplift, so it is vitally important that expenditures go as far as possible and be used intelligently. The same principles of combination and cooperation that are effective in saving waste in commerce will eventually prevail in philanthropy.

• Around 1890, Rockefeller was still giving in a haphazard fashion, and he almost had a nervous breakdown. He realized he needed to organize his giving.
• Rockefeller discusses some of the fundamental principles that underlie his giving:
  1. Progress in the means of subsistence
  2. Progress in government and law
  3. Progress in literature and language
  4. Progress in science and philosophy
  5. Progress in art and refinement
  6. Progress in morality and religion

Rockefeller believes that progress in science and philosophy is fundamental.

• Individual ownership is still the best way to handle capital.
• Progress in government and law, in language and literature, in science and philosophy, and in art and refinement are best promoted by higher education. Rockefeller is especially interested in promoting original investigation because new facts benefit the entire human race.
• Rockefeller’s committee has not been satisfied with giving to causes that have appealed to them. They have studied the field of human progress and tried to contribute to the elements that promote progress. Where organizations that could promote progress have been lacking, they have created them.

Rockefeller believes it is important for fathers to stay close to their children and to take their daughters as well as their sons into their confidence. Children learn by seeing and doing and should have a part in family responsibilities.

• Rockefeller raised his own children this way. For years, his family read aloud at the dinner table letters they received about various charitable causes and studied requests, histories, and reports of institutions they were interested in.

Chapter 7: The Benevolent Trust—the Value of the Coöperative Principle in Giving

Combining Forces for Charitable Work

John D. Rockefeller believed that combining forces in charitable work, just like in business, was crucial for effectiveness and efficiency. He saw the potential for greater impact and reduced waste through organized philanthropy. He praised Andrew Carnegie's involvement in the General Education Board as an endorsement of this principle of cooperative giving for education.

Rockefeller admired Carnegie's philanthropic spirit and his dedication to the well-being of the United States. He believed that Carnegie's example would inspire others to follow suit. Rockefeller saw the General Education Board, with its mission to systematically improve education across the nation, as a powerful illustration of this cooperative approach. He expressed confidence in the board's potential, especially under its current leadership. The board's structure, with its diverse and experienced directors, exemplified this idea of combining expertise for greater impact. For example, Robert C. Ogden, a successful businessman, dedicated himself to improving the Southern education system, particularly common schools. His focused efforts on foundational aspects of education were expected to have long-lasting, positive effects.

Rockefeller emphasized that his children shared his belief in the importance of organized philanthropy, and they actively participated in carefully and intelligently managing the family's charitable work. They recognized the need for the same level of effort in the effective use of acquired wealth as was invested in earning it.

The Role of the General Education Board

The General Education Board played a vital role in researching and assessing the needs of higher education institutions across the United States. The board thoroughly analyzed the location, goals, performance, resources, administration, and educational value of these institutions. Their findings formed the basis for their contributions, averaging around two million dollars annually, which were allocated based on a meticulous evaluation of needs and opportunities nationwide.

Rockefeller highlighted the board's commitment to transparency by making its records accessible to the public. Numerous philanthropists supporting education took advantage of the board's impartial investigations, and he hoped more would follow suit.

Rockefeller recognized the significance of individual contributions to education in the U.S., but he also pointed out the wastefulness of supporting inefficient or unnecessary schools. Experts suggested that misdirected funds could have established a robust national higher education system if allocated wisely. He urged individuals involved in educational philanthropy to carefully investigate the organizations they supported. Factors like the quality of leadership, location, and existing resources in the surrounding area should be considered. While such comprehensive assessments are often challenging for individuals, the General Education Board's thorough, expert-led inquiries provided a valuable service.

Rockefeller observed a positive trend towards greater collaboration in philanthropy, with diminishing sectarian barriers and a growing willingness among well-intentioned individuals to work together for the common good.

Efficiency and Effectiveness in Giving

Rockefeller observed the Roman Catholic Church's effectiveness in managing charitable work. He was impressed by the efficient use of funds by priests and nuns, often achieving better outcomes with limited resources compared to other organizations. This, he believed, highlighted the importance of organizational structure and experience in achieving impactful results, qualities he saw exemplified by the Roman Catholic Church's long history of organizational development.

Rockefeller acknowledged the need for a systematic approach to managing the overwhelming influx of appeals he received. His office had established a dedicated department to handle this task, which involved reviewing and categorizing a large volume of letters daily. While the majority were personal requests, the remaining worthy requests were broadly classified into local, national, and international categories.

He stressed the importance of local charities relying on support from within their communities. Conversely, national and international charities, with their broader reach, were better suited for individuals with substantial wealth who sought to make a more extensive impact beyond their immediate surroundings.

Rockefeller strongly advocated for supporting established, reputable organizations, rather than responding to individual pleas. These large-scale organizations possessed the knowledge, resources, and infrastructure to allocate funds effectively and maximize their impact. He used the example of funding a hypothetical hospital through a well-established religious organization to illustrate this point. Direct contributions might seem like the obvious choice, but channeling funds through an organization with a broader understanding of the region's needs could result in a more strategic and beneficial use of resources.

Addressing Common Excuses for Not Giving

Rockefeller addressed common justifications for avoiding charitable giving, emphasizing that refraining from giving to street beggars doesn't absolve one from contributing to solutions for poverty and homelessness. Instead, he encouraged supporting organizations dedicated to tackling these issues systematically and ethically. He also countered the argument of administrative costs hindering donations by highlighting that it doesn't excuse inaction; instead, it should motivate efforts to improve the organization's effectiveness.

He recognized the importance of avoiding redundancy in charitable work. Before establishing new initiatives, it was essential to ensure the need wasn't already being met by existing organizations. He emphasized evaluating institutions within their broader context, considering their relationship to similar organizations in the area. To illustrate this, he shared an anecdote about an individual who thoroughly researched the need for a proposed orphanage. The research revealed an abundance of available resources and a lack of demand, indicating that the new institution wasn't necessary. However, the project proceeded despite these findings, demonstrating the difficulty of abandoning well-intentioned initiatives, even when evidence suggests otherwise.

Rockefeller believed that systematic organization didn't hinder individual efforts; rather, it enhanced and encouraged them. He observed a simultaneous growth in both structured philanthropic initiatives and the overall spirit of generous giving.

The Importance of Higher Education

Rockefeller firmly believed in the vital role of higher education in societal progress, seeing ignorance as a root cause of poverty and crime. He argued that supporting high-quality education in all fields had a ripple effect, as new discoveries and knowledge benefitted everyone. He saw the University of Chicago, with its strong emphasis on research, as a prime example of this principle.

Reflections on Dr. William R. Harper

Rockefeller's association with the University of Chicago led to a close relationship with Dr. William R. Harper, the university's president, whose passion for the institution deeply impressed him. Their first encounter was at Vassar College, where Rockefeller's daughter was a student, and he was captivated by Harper's enthusiasm.

During the university's founding, Rockefeller and Harper shared a vision of assembling the best faculty and establishing a modern institution free from traditional constraints. Harper's ability to raise funds and garner support from influential figures in Chicago and the Midwest was instrumental in the university's success.

Rockefeller admired Harper's ability to cultivate genuine interest and engagement from donors, which extended beyond mere financial contributions. He believed that Harper's vision for the University of Chicago had a positive influence on higher education throughout the Midwest, inspiring individuals, religious groups, and lawmakers to take action.

Rockefeller appreciated Harper's personal qualities as much as his professional achievements. He valued their friendship and the opportunity to host Dr. and Mrs. Harper for relaxing breaks from the demanding university environment.

Addressing Misconceptions About Donations

Rockefeller clarified that his contributions to the University of Chicago weren't the result of personal pressure from Dr. Harper, despite media portrayals suggesting otherwise. He found humor in cartoons depicting him being coerced or chased by Harper for donations.

He emphasized that his giving process was consistently systematic. Needs were presented formally in writing by university officials, followed by discussions between a committee of trustees, the president, and Rockefeller's Department of Benevolence. Recommendations were generally unanimous, and Rockefeller seldom deviated from them.

Rockefeller stressed that the university's inherent merit, not personal pleas, justified his support. Its strategic location, strong community ties, and demonstrably impactful work made it a worthy recipient of his contributions. He extended this principle to all philanthropic endeavors, emphasizing the need for a compelling case based on merit, not persuasive tactics.

To address the numerous requests for personal meetings, Rockefeller clarified that written proposals were a more effective way to ensure thorough consideration of each cause. This approach allowed for careful evaluation, consultation, and comparison by his team, leading to a more informed final presentation.

Conditional Giving: Promoting Sustainability and Engagement

Rockefeller believed that simply providing funds to organizations that should be self-sustaining was counterproductive to fostering a culture of philanthropy. He argued that sustained support from a wide range of individuals was crucial for the long-term health of charitable institutions. This approach ensured ongoing accountability, encouraged effective work, and met real community needs. Furthermore, widespread involvement fostered responsible financial management and genuine dedication to the cause.

Rockefeller often made his donations conditional on contributions from others. This strategy was not intended to pressure people into giving; rather, it aimed to cultivate a sense of ownership and responsibility among a larger group of stakeholders. He viewed this shared commitment as essential for promoting ongoing support and attentive oversight. He recognized that conditional giving sometimes attracted criticism but maintained that such criticism, when genuine and constructive, held value and should be embraced as a catalyst for improvement. He acknowledged facing his fair share of negativity but maintained that it hadn't led to resentment or bitterness. He respected differing opinions, even those critical of his methods.

Envisioning Benevolent Trusts

Rockefeller reiterated his vision for "Benevolent Trusts," specialized corporations designed to manage the operational aspects of charitable giving. He believed this concept required the expertise of individuals with practical business acumen and envisioned attracting top business leaders to these organizations. He saw immense potential in this structured approach to philanthropy, anticipating that it would revolutionize charitable work by ensuring sound financial management and maximizing the effectiveness of every dollar donated. He criticized the current state of philanthropy as being largely unsystematic, leading to wasted effort and inefficient resource allocation.

He suggested that integrating business principles into philanthropy could benefit both sectors. His experience highlighted the occasional lack of practical business knowledge among religious leaders and those in positions of trust within churches. He emphasized that honor and integrity formed the foundation of any successful system, whether in business, religion, or science. Just as ethical business leaders prioritize honesty and trustworthiness, he believed religious figures, who often critiqued the business world for its perceived selfishness, could learn valuable lessons from collaborating with their business counterparts.

Rockefeller believed that Benevolent Trusts would elevate ethical standards by prioritizing transparency and accountability. These organizations would critically assess the effectiveness of charities and institutions, supporting those that demonstrated genuine impact. Ultimately, he envisioned them raising the bar for effective philanthropy by promoting self-sufficiency and empowering individuals to improve their own lives. He predicted the emergence and rapid growth of these trusts, with leadership positions filled by individuals renowned not only for their wealth but also for their commitment to responsible and impactful giving.

A Call to Action

Rockefeller shared an anecdote from the University of Chicago's decennial anniversary dinner, where he abandoned his prepared remarks and made an impassioned plea for his Benevolent Trust concept. Recognizing the busy lives and demanding schedules of the affluent individuals present, he proposed the idea of entrusting their philanthropic endeavors to expertly managed trusts.

He drew a parallel with financial planning, highlighting the importance of selecting competent individuals to manage inheritances. He implored the audience to apply the same level of care and consideration to charitable giving as they would to their own family's financial well-being. He urged them to act decisively and establish a robust and efficient system for managing their benevolent activities rather than postponing it. He concluded by reiterating his unwavering belief in the importance and urgency of establishing such a structure.