Standard Oil Part II (Extended Cut)

1. 0:00 – 0:37

   Cold open banter: travel habits and the show begins

   1. BGBen Gilbert0:00

      Dude, this is gonna especially kill you as someone that travels even for, like, two and three-day trips just with a backpack.

   2. DRDavid Rosenthal0:07

      Oh, it's so gonna kill me.

   3. BGBen Gilbert0:09

      Like, you're never traveling that way again.

   4. DRDavid Rosenthal0:11

      I know.

   5. BGBen Gilbert0:11

      You're checking, like-

   6. DRDavid Rosenthal0:13

      Checking

   7. BGBen Gilbert0:13

      ... car seats and-

   8. DRDavid Rosenthal0:14

      Yes

   9. BGBen Gilbert0:14

      ... backpacks and-

   10. DRDavid Rosenthal0:15

       Yep.

   11. BGBen Gilbert0:17

       I'll see you at baggage claim, my friend.

   12. DRDavid Rosenthal0:18

       Oh, my God. [laughing]

   13. SPSpeaker0:20

       Who got the truth? Is it you? Is it you? Is it you? Who got the truth now? Hm. Is it you? Is it you? Is it you? Sit me down. Say it straight. Another story on the way. Who got the truth?

2. 0:37 – 2:26

   Episode roadmap: 1890–1911, Rockefeller’s legacy, and the antitrust line

   1. BGBen Gilbert0:37

      Welcome to season nine, episode five of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert, and I'm the co-founder and managing director of Seattle-based Pioneer Square Labs, and our venture fund, PSL Ventures.

   2. DRDavid Rosenthal0:51

      And I'm David Rosenthal, and I am an angel investor based in San Francisco.

   3. BGBen Gilbert0:57

      And we are your hosts. When we last left our hero... villain? Uh, unclear. We saw John D. Rockefeller- [laughing]

   4. DRDavid Rosenthal1:07

      Anti-hero?

   5. BGBen Gilbert1:08

      ... supporting the Sherman Antitrust Act as a piece of dead-on-the-vine legislation with really nothing to fear from it. Today, we will cover Standard Oil from 1890 through their, spoiler alert, breakup in 1911.

   6. DRDavid Rosenthal1:23

      Oh, Ben, you're ruining the plot. [laughing]

   7. BGBen Gilbert1:25

      [laughing] Uh, we're gonna cover Rockefeller's legacy and philanthropy, and how today's world is a Rockefeller-shaped one in more ways than one. We will also debate the finer points of where Standard Oil crossed the line between using legitimate business practices, like operational efficiency and economies of scale, into straight-up abuses of power to grow their massive, massive profits.

   8. DRDavid Rosenthal1:51

      You mean, like, bribing elected officials? [chuckles]

   9. BGBen Gilbert1:53

      David, I... Look, I don't wanna spoil anything here- [laughing] ... I guess other, other than the breakup. [laughing]

   10. DRDavid Rosenthal1:58

       [exhales]

   11. BGBen Gilbert1:59

       Well, uh, there's also- we should say there is a ludicrous amount of post-1911 oil industry history that we will, uh, find some way to dive into in the future, uh, on a dedicated sort of energy industry history special. Uh, 'cause there's, you know, especially once you leave the US and get into the, the, uh, the powers that be internationally, I think it's a, a, a- we could do six more episodes.

   12. DRDavid Rosenthal2:24

       Oh, totally. Well, we'll have to in the future.

3. 2:26 – 4:36

   Show updates: audience growth, David’s baby announcement, and sponsor setup

   1. BGBen Gilbert2:26

      We will. Well, uh, listeners, we wanna say thank you. David, what for?

   2. DRDavid Rosenthal2:33

      Yeah. We have had a, uh, pretty crazy month here [chuckles] at Acquired. Uh, the, uh... Starting with the TSMC episode, we have just been on... I don't know what it is. Y'all like semiconductors, but, uh-

   3. BGBen Gilbert2:45

      [laughing]

   4. DRDavid Rosenthal2:45

      ... uh, the show has been growing hugely. Uh, so much good stuff is going on. Um, and, uh, we, we, we were talking beforehand, like, we really do wanna keep our- try and keep our intros shorter and just start getting right into the stories. But, uh, two things today: one is this, we gotta say thank you to all of you. Like, this journey is incredible.

   5. BGBen Gilbert3:03

      And in particular, thank you to our old listeners for, like, spreading the gospel. Like, we've really enjoyed this, like, slow, methodical, linear growth because it's- I think it's helped us hone the product of, of Acquired. Um, but of course, like, an explosive br- growth spurt is always a fun thing. So, so thank you to those of you for spreading the word over the years, and welcome to all the new folks.

   6. DRDavid Rosenthal3:25

      Yeah, indeed. And then, uh, two, unrelated to the episode, but, uh, special little fun thing to talk about, um, we are about to have a new addition to the Acquired family. Maybe, uh, a spinoff. Is that what it is, a spinoff? Uh-

   7. BGBen Gilbert3:41

      Yeah, not an on-air addition, though.

   8. DRDavid Rosenthal3:43

      No. Not, not an acquisition, a s- a spinoff. No, not on-air. Um, this is so crazy. By the time y'all hear this, Jenny and I will have had a, uh, uh, presumably will have had a, uh, a little baby girl. We are expecting any day now. Honestly, it was, like, coming down to the wire of recording this [chuckles] is very nerve-wracking, but, um-

   9. BGBen Gilbert4:02

      This was almost a serious cliffhanger, where we just did part one, and then David disappeared. [chuckles]

   10. DRDavid Rosenthal4:07

       Literally, friend... A bunch of my friends were asking me, like: "Hey, like, so excited for you, and, uh, you know, the baby and all that, but, um, you're gonna get recording for part two in [laughing] before the baby comes?"

   11. BGBen Gilbert4:16

       [laughing] Well, David, uh, uh, congratulations. So excited for you and Jenny. I think, uh, will, it will be really fun to, you know, h- h- hear dad stories on future shows and on Twitter.

   12. DRDavid Rosenthal4:28

       Maybe, maybe hear some crying baby in, in future episode backgrounds. Um, yeah, we, uh, we can't wait.

   13. BGBen Gilbert4:35

       I'm sure.

4. 4:36 – 8:22

   Sponsor interlude: Pilot and the ‘Stop doing your books’ doctrine + disclaimer

   1. DRDavid Rosenthal4:36

      Well, last thing before we dive into part two here of the Standard Oil story is, as always, Pilot, our presenting sponsor for all of season nine. Pilot is the backbone of the modern financial stack for startups. As you know, they are backed by all-star investors themselves, like Sequoia, Index, Bezos Expeditions, and Stripe. They are truly, truly, truly the gold standard for startup bookkeeping. If John D. Rockefeller were starting Standard Oil today, he would not do the books himself. He would have Pilot do it. Uh-

   2. BGBen Gilbert5:09

      Stop doing your books.

   3. DRDavid Rosenthal5:10

      [chuckles]

   4. BGBen Gilbert5:11

      It's obvious. Outsource it. You're not a books company. [chuckles]

   5. DRDavid Rosenthal5:16

      [inhales] Uh, yeah, you're not a... [chuckles] You're not a books company. That's great.

   6. BGBen Gilbert5:21

      You're not. You're not an accounting company.

   7. DRDavid Rosenthal5:23

      [exhales]

   8. BGBen Gilbert5:23

      Like, any of you listening out there, like, point one percent of you run an accounting company, so get Pilot to do it instead.

   9. DRDavid Rosenthal5:28

      [chuckles] Oh, that's so good. All right, now over to our conversation with co-founders Waseem Daher and Jessica McKellar. So we talked last time about what changed that enabled you all to build Pilot as an actual technology company versus just a professional services provider, as pretty much every startup bookkeeping service was before y'all. What services does Pilot integrate with, and what does that look like from your customer's point of view?

   10. SPSpeaker5:56

       Yeah, I mean, one of the great things about Pilot is, first, it doesn't matter what institutions you're using, we know how to ingest and take good care of-... your financial stack. Now, on top of that, one of the great things about Pilot is that we do have the expertise for these deep integrations with tools as they evolve quickly. You know, Stripe releases a new invoicing API, we can get on that immediately. So if you are taking advantage of these fintech solutions as they continue to evolve, you're really gonna want a partner that's able to keep up with that on the finance side. That being said, really, it's sort of our problem, how do we correctly reflect your business needs in your books? And the good thing about Pilot is, you know, you're talking to a person who understands you and your business and your needs, and is taking care of translating that into what happens on the back end. You don't have to worry about how to integrate with these institutions, because that's our job, and you can just sit back and let us handle that for you.

   11. DRDavid Rosenthal6:59

       What a good example of what we've been talking about all season here, which is, as a startup founder, bookkeeping is not something you wanna deal with. [chuckles] That's Pilot's job. And you can be sure with you guys that you're not only gonna be on top of all the latest API changes from Stripe or Plaid or whomever, but you're just gonna take care of the job.

   12. SPSpeaker7:18

       Yep.

   13. DRDavid Rosenthal7:19

       You can learn more about Pilot and whether they can help your company eliminate the pain of tax prep and bookkeeping by going to pilot.com/acquired. And thanks to Waseem and Jessica, all Acquired listeners, if you use that link, you'll get twenty percent off your first six months of service. Super excited, as always, to have them with us. Thank you, and seriously, [chuckles] as Ben says-

   14. BGBen Gilbert7:41

       It's a killer deal, and stop doing your books!

   15. DRDavid Rosenthal7:43

       The Gilbert Doctrine. Gilbert Doctrine:

   16. BGBen Gilbert7:45

       [chuckles]

   17. DRDavid Rosenthal7:45

       Stop doing your books. Have Pilot do them for you.

   18. BGBen Gilbert7:49

       Well, David, uh, this one, we're gonna cover some companies that are, are newer, so we actually need to say, this is not investment advice. This is for entertainment and educational purposes. We may hold some of the companies that we're talking about, but, uh, you know, they're, they're pretty old companies, and they're super merged together at this point. So the, the incarnation that we'll be talking about of the Esso company today on this show is extremely different than the company that, uh, many of you may hold or, and very intentionally not hold today.

5. 8:22 – 12:25

   Sherman Act ambiguity meets Ohio’s lawsuit: the trust structure attacked

   1. DRDavid Rosenthal8:22

      All right, so last we left our plucky, uh, anti-heroes. [chuckles] I like anti-heroes. I think that's what we're gonna go with. Uh, Ben, as you said, the Sherman Antitrust Act had just passed. Everybody's having a good laugh about it. [chuckles] The political money is still, uh, flowing around, uh, like hotcakes, uh, or, uh, uh, fine wine, uh, which, of course, Rockefeller didn't drink 'cause he, he never had a drop of alcohol in his life.

   2. BGBen Gilbert8:49

      And what was the language that everyone, uh, that, that ma- that made everyone feel like the, the legislation was DOA?

   3. DRDavid Rosenthal8:57

      Yes, the key modifier, modifying clause in the Sherman Antitrust Act was in restraint of trade. So everything, all combinations were outlawed if they were, quote, "in restraint of trade".

   4. BGBen Gilbert9:11

      Which was not defined.

   5. DRDavid Rosenthal9:12

      Nobody knows what that means. [chuckles] Uh, it's like Will Ferrell, like... [chuckles]

   6. BGBen Gilbert9:17

      It's provocative, gets the people going. [chuckles]

   7. DRDavid Rosenthal9:20

      [chuckles] Uh, okay, so [chuckles] okay, speaking of going, Standard Oil is, uh, going. Um, you know, we said this at the end of part one, like, they've won. They've, like, won capitalism. They've won, like, America.

   8. BGBen Gilbert9:34

      Ninety percent market share, like, the whole kerosene market, ninety percent belongs to them.

   9. DRDavid Rosenthal9:38

      It's game over. Um, but we did kinda hand wave over a bunch of stuff at the end of last time. Um, one, there was the, uh, you know, some trouble brewing back, uh, in the home front, back in the state of Ohio, so we're gonna cover that. Uh, and then the big thing that we really just spent, like, fifteen seconds on last time was, uh, the whole, you know, like, oh yeah, JD retires. [chuckles] Uh, well, what was going on with that? Why, why does he just walk away and ride off into the sunset?

   10. BGBen Gilbert10:06

       It's interesting, he-- like, 'cause, 'cause he stayed titularly. Like, his name was still on the door.

   11. DRDavid Rosenthal10:12

       Oh, yeah.

   12. BGBen Gilbert10:13

       And he intended that... Like, I think he actually did wanna walk away, right?

   13. DRDavid Rosenthal10:18

       Oh, he did. Oh, we will get into all of this.

   14. BGBen Gilbert10:21

       But they thought it would be, like, bad for the shareholders?

   15. DRDavid Rosenthal10:25

       Mm-hmm. Maybe, maybe. We'll see. All right, so first, let's cover the trouble on the home front, uh, back in Ohio. So right around, literally, like, right as the Sherman Act was passing, um, state legislature members in Ohio, [chuckles] remember, they're like... They're pretty pissed at, at Rockefeller and, and at, uh, Standard Oil. And, like, this goes all the way back to the Cleveland Massacre, and, like, you know, he, he has a lot of enemies back home, shall we say. So the state attorney general, a guy named David Watson, he decides that he's gonna bring a case, uh, against Esso. Um, I don't think it was actually an, an antitrust, uh, case, uh, but he argues that the, um, uh, it's not. The, the case is that Standard Oil is in violation of the state corporation laws and that they are a Ohio corporation, but they are conducting illegal, uh, interstate commerce, is, is what they allege. Uh, and what they allege, you know, Esso had created this, this trust structure that was so brilliant, but this suit is like: Hey, this is just a sham and a front. You're not ac- you didn't, like, really transfer any assets here, and you're actually breaking our laws. So i- it takes a couple of years, but by 1892, the case reaches the Ohio Supreme Court, the state Supreme Court, which rules against Standard Oil, which means that the trust has to be dissolved, like, they lo... Like, this is, uh, uh, the, the letter of what this means, this Ohio ruling, is, like, game over, [chuckles] uh, you know, but obviously that's not what happened. So, so how do they get around this? This seems like a pretty big problem.... Well, [chuckles] turns out that our, uh, our Standard Oil friends have an escape plan that they've already hatched, that they have in their back pocket, it just for this very occasion. So

6. 12:25 – 15:26

   New Jersey loophole and ‘shadow play’: Standard reorganizes without losing control

   1. DRDavid Rosenthal12:25

      they had figured out, Standard Oil lawyers had figured out that in the state of New Jersey... Now, they have operations, Standard Oil has operations in New Jersey, but there's no, you know, Rockefeller and crew. They're at 26 Broadway in New York. You know, it started in Ohio. There's no real reason why headquarters, you know, they don't have any special attachment to New Jersey. But [chuckles] in New Jersey, there actually is a loophole in state corporate law at the time, that did allow New Jersey corporations to straight-up hold stock in other out-of-state corporations. No, no even need for a trust structure. Like, what Ohio is suing them for, New Jersey just allows. [chuckles]

   2. BGBen Gilbert13:11

      That was the reason why they needed the trust structure in the first place, is because Standard Oil of Ohio couldn't own any other Standard Oil companies that are operating in any other states, and they couldn't have operations in other states. So it was like, it's just this crazy remnant of the fact that we are the United States, and-

   3. DRDavid Rosenthal13:30

      Yep

   4. BGBen Gilbert13:30

      ... every single state to date had s- uh, basically said, "If you have a charter to operate a corporation in our state, that's all the business you can do. Your total addressable market is our state."

   5. DRDavid Rosenthal13:42

      So [chuckles] they've got this loophole in New Jersey. What do, what do they do? Boom! They just reorganize the whole thing, [chuckles] and they transfer all the trust, maybe trust, you know, the Ohio assets, all the assets, um, into, uh, the new Standard Oil of New Jersey. Or again, at least they make a public show of this. They tell the courts, they tell everybody like, "Oh, yeah, yeah, yeah. This is what we're doing." You know, whether they actually do this or not, eh, we'll maybe see a little later in the episode. Uh, doesn't matter, though. Problem solved. So as, uh, Chernow writes in Titan about this, quote, "The 1892 overhaul was mostly shadow play, a charade to appease the courts. The executive committee at 26 Broadway," of course, the, you know, Rockefeller and, and all the Flagler, and all the cronies, "uh, was formally dissolved, but the members lost only their titles and were soon converted, by the nicest legal cunning, into the presidents of 20 affiliated companies. In Standard parlance, these men were now 'the gentlemen upstairs,' or alternatively, 'the gentlemen in room 1400.' Nobody had to switch seats at the lunch table, and Rockefeller and his coterie ruled as absolutely as before." [chuckles]

   6. BGBen Gilbert15:00

      Fascinating. And so you've got this Standard Oil of New Jersey that, by the letter of the law, owns wholly or near wholly, all these other, you know, at this point, 20-some companies that are operating in all these other states. And so the way that, that sort of structurally looked is, all the people who were the trustees of the Standard Oil Trust are now the presidents of all those companies, and they're working remotely from Manhattan.

   7. DRDavid Rosenthal15:26

      [chuckles]

7. 15:26 – 21:08

   Rockefeller drifts from business: boredom, reputation pressure, and staying ‘titular’

   1. DRDavid Rosenthal15:26

      Yeah, right. They were, they were ahead of the curve. They were, uh, [chuckles] they were, uh, you know, doing Zoom meetings before, [chuckles] before it was fashionable. Uh, so this is great. Um, but... Well, great, this is great for Standard Oil. Uh, and this goes on for a while, but, uh, slowly, but, but then noticeably over the years, um, everybody starts to notice that, like, something's a little different about Rockefeller. Um, you know, he's alwa- he's always been, like, aloof. You know, famously, he would do meetings, you know, during meetings, he would, like, lie down on a chaise lounge and have his eyes closed, and people would think he's asleep, but then he would jump in-

   2. BGBen Gilbert16:09

      Oh, these are, like, Standard Oil board meetings.

   3. DRDavid Rosenthal16:12

      Yeah, yeah, exactly. But he's actually listening, like, intently to everything. Like, he's always been a little weird, [chuckles] you know, in how he operates. Um, but super, like, laser-focused and engaged in the business. Um, and, and he kind of starts, like, drifting away slowly, and he seems weird. He starts not coming into the office every day. Uh, I think first, he stops coming in on Saturdays, [chuckles] and, uh, then he, like, takes longer time off. Um, he, uh, he starts missing the, you know, the sacred, like, executive committee or gentlemen upstairs lunch meetings. Um, so people are like, "What's, what's going on?" Um, and there really are two things happening to Rockefeller at this time. Um, you know, one is sort of like short-term good, but long-term bad. Uh, and the other one is short-term bad, but long-term good. So, so first, the, the long-term bad, but short-term good one, um, I think, and, you know, Chernow writes about this, like, he kind of doesn't have anything left to prove at this point. Like, he's outwitted everybody. [chuckles] He's built the greatest thing of all time. You know, he's like... I was thinking about, um, uh-- Of course, we talked about, you know, the Jay-Z Rockefeller connection last time, but it's like the Black Album with Jay-Z, where he's like, "I'm retiring, I'm done" You know, like, what more... W- literally, what more can I say here? Uh, Chernow writes, quote, "In explaining his retirement," which this would lead to, "the Rockefeller literature has always stressed his health and the heavy burden of his charities, though another factor contributed as well. He had perfected the gleaming machinery of Standard Oil and his appointed task done," remember, he felt like this was his divine, you know, uh, duty from God, "he felt he should pass the reins on to younger men. As Gates," who we'll talk about in a minute, "put it, the business, 'quote, 'had ceased to amuse him. It lacked the freshness and variety and had become merely irksome, and he withdrew.'"

   4. BGBen Gilbert18:12

      ... So what you're saying is Rockefeller is really only like a zero to one guy-

   5. DRDavid Rosenthal18:16

      [laughs]

   6. BGBen Gilbert18:16

      - and maybe like a one to 10 guy, and kinda like a 10 to 100 guy, but maybe not 100 to 1,000 guy.

   7. DRDavid Rosenthal18:21

      Uh, may- maybe more like, not like, a, you know, 1,000 to million guy [chuckles] .

   8. BGBen Gilbert18:26

      Or perhaps, I mean, he's already at scale, so it's almost like [chuckles] he's not really a 1,000 to 1,100 guy.

   9. DRDavid Rosenthal18:31

      Yeah. I wonder if it's kinda like... You know, we'll talk about this much later in the episode, but this, like, this might be part of what you're seeing with all these big tech CEOs now. It's like Bezos, "What, what more can I do here, guys?" Like [chuckles]

   10. BGBen Gilbert18:44

       Yeah, and you know the public sentiment has to be weighing on Rockefeller, too, where he's like: "Look, I believe in my heart of hearts that what I've done here is virtuous. Like, I truly believe this is my calling and what God wants me to do. I do believe that I've brought light to the world in a reliable, cheap way. I believe that I've provided 100,000 jobs, good jobs for people, and everyone hates me." And like, I, I don't think he was necessarily overly concerned with other people's view of him, like, he was not a externally motivated man, but that has to grate on you over time, where you're, you know, working your ass off and you believe you're in the right, at, at least the vast majority of the time, and yet the world is either, uh, espousing incredible hatred toward you or begging you for your money constantly.

   11. DRDavid Rosenthal19:37

       So yeah, I mean, yeah, he's just like... It's just kinda not fun anymore. Um, so he w- he wants, we've alluded to this, he wants, and he tries to fully actually resign from the company. Uh, he, he talks to John Archbold, who he wants to take over, um, a- and says, like: "You know, look, I, my heart's not in it anymore. I'm ready to go have another chapter in my life." Um, [chuckles] but Archbold, and, and some of the other executives, they're like: "Well, you know, [sighs] your name on the d- like, it really matters. Like, I think it would be bad for the troops, you know? And we've just had these, you know, brushes with the government. Um, I think it really would help things if, just, just in title only, you stay involved. You remain, you know, the president, titularly, of Standard Oil. [chuckles] Ooh."

   12. BGBen Gilbert20:29

       A- and of course, that means you remain, like, the... an officer of the company and all the liability that comes with that, "and j- just keep the title, man."

   13. DRDavid Rosenthal20:37

       Yeah, "uh, just the title. It's, [chuckles] it's really to honor you." [chuckles] Oh, God. Oh, man, these, the... I was gonna save this, uh, little quip for later, but I'll use it now, of, um, you swim with the sharks, you sleep with the fishes. [laughs] Uh, Archbold and, and Flagler, and all these guys, they were, they were something. So this was a very, very bad move for Rockefeller and a freaking great move for all of the other execs, especially Archbold at, uh, [chuckles] at Standard Oil.

8. 21:08 – 33:24

   The wealth problem: inventing modern philanthropy with Frederick Gates

   1. DRDavid Rosenthal21:08

      Uh, okay, so you said charity, and like, everybody asking, you know, John D. for his money. Um, so this is the other pieth- piece of it, is that, that long term becomes just o- one of the greatest things to ever happen to America and, and the world, I think. Um, but he's like, [chuckles] he's really, really struggling with what to do with his wealth, and in particular, all these causes... You know, remember, he wants to do great works. He feels called to God. He wants to-- by God, he wants to make the money to then do great works with the money.

   2. BGBen Gilbert21:41

      And he's been donating all along the way, kind of in these smaller chunks, but, like, to everyone at church on Sundays, to the church, to, to maintain it. I mean, he's been, he's been charitable thus far.

   3. DRDavid Rosenthal21:52

      Yep, and it's kinda trained, um, people around him who he gives to, organizations who he gives to, and now the general public, who knows about this, that, "Oh, hey, you can just ask John D. for money, and he might give you money." Um, and he's super stressed out about this. Like, I would find that very stressful if just constantly, all... And he's getting thousands of letters a week, uh, uh, just asking for money.

   4. BGBen Gilbert22:19

      He's not into the, like, cool billionaire stuff ideas. Like, he doesn't really wanna... He wants to donate, and so he's finding it, like, incredibly challenging that what he wants to do is find, uh, like, high return-on-society ways to give this money away that align with his beliefs. So he's, you know, looking for, um, either good sort of Christian values ways to give it away or at least not anything that's antithetical to his beliefs. Uh, but, like, uh, the last thing that he wants to do is say, "Ah, there's, there's too much inbound. I'm just gonna ignore it." Like, no, he... This is his mission in life, is to answer these pleas.

   5. DRDavid Rosenthal22:59

      Yep. Yeah, Chernow found this, this great quote from him in, uh... I don't know if it was something he said to somebody or in his, you know, papers or whatnot, but, uh, I think this really sa- you know, says a lot about what he was, how he was feeling. He... So this is directly from Rockefeller about this time: "I investigated and worked myself almost to a nervous breakdown in groping my way without sufficient guide or chart through the ever-widening field of philanthropic endeavor. It was forced upon me to organize and plan this department upon as distinct lines of progress as our other business affairs."

   6. BGBen Gilbert23:33

      Well, important to note here is, like, the notion of a philanthropic organization does not yet exist in America. Like, there's not a professional... You know, there's no Gates Foundation. There's no playbook for, like, "I'm going to start a 501 [c] [3] and employ people that work at this nonprofit, that will figure out how to give the money away." It's, it's kind of random and scattershot, the way that everyone donates, and so there, there is like... There's not a playbook of like, "Cool, I'll spin up this organization to give away my wealth."

   7. DRDavid Rosenthal24:04

      Yep, and he's doing it all hims- uh, himself. It's all on his shoulders. Uh, so literally, you know, his, um... Uh, folks might, might know who either were familiar before or have, you know, gone and looked up and, uh, John D. on the internet since our, our part one-... his appearance, like, radically changes during this time. So, you know, he was, um, you know, kind of like a, like Devil Bill. He had a lot of Devil Bill in him. Uh, like a big guy, you know, very, uh... You know, he's, he's very, like, his personality is understated, but, like, he was, you know, a presence. Uh, he starts shriveling up. He's losing weight. He, he gets, um, I think is it pronounced alopecia? Like, he literally loses-

   8. BGBen Gilbert24:43

      Alopecia. He loses his hair.

   9. DRDavid Rosenthal24:44

      All of his hair on his entire body, not just, like, his head, his eyebrows, his mustache. He always had a big, bushy mu- bushy mustache, the rest of his body. For the whole rest of his life, his hair is gone, and it's all just 'cause of this stress that's weighing on him.

   10. BGBen Gilbert24:58

       And frankly, the incredible amount of work that he had done. You know, the, the, the Standard Oil had some trying times for him, that, that, uh, th- he's not new to stress.

   11. DRDavid Rosenthal25:08

       Yep, but I, I think, uh, this is really my interpretation here. You know, some I think comes from Chernow, but, um, you know, like, he loved Standard-- he loved every minute of Standard Oil. I think if it were just Standard Oil, I don't think any of this would've happened. I really think the weight of this wealth and this philanthropy, like, was like this albatross just, like, hanging around his neck.

   12. BGBen Gilbert25:32

       And let me give a quick, uh, s- scope for a moment. When you say the weight of his wealth, let's talk about his wealth s- so far at this point in time, and then we can check in later and update the numbers. So, uh, in, uh, in 1890, he was generating $10 million in annual income, just y- from Standard Oil dividends, from a variety of sources, and there was no-

   13. DRDavid Rosenthal25:56

       That's just like, almost no... You know, the percentage of the population that is in that level today is, like, infinitesimal. [chuckles]

   14. BGBen Gilbert26:03

       And, and, and, you know, it's like 30x today, like, the, the, these numbers.

   15. DRDavid Rosenthal26:07

       Yeah, it's just insane.

   16. BGBen Gilbert26:08

       The other thing to think about is this is before the federal government enacted the income tax, so this is 10 million post-tax dollars. Uh, [chuckles] he, uh, even-

   17. DRDavid Rosenthal26:19

       Not even post-ta- there's the, the concept of income tax-

   18. BGBen Gilbert26:21

       Right. Well, but it's like the, the notion of a post-tax dollar today.

   19. DRDavid Rosenthal26:24

       Yeah, just straight money.

   20. BGBen Gilbert26:25

       He really just has this, like, self-perpetuating wealth because he owns 257,000 of the 973,000 shares of Standard Oil. So he owns a quarter of Standard Oil, and he's generating these dividends. Uh, at this point in time, I think Rockefeller was trying to keep it pretty modest, these, like, 11% annual dividends, but he himself was receiving 3 million in these annual dividends. He had $24 million invested outside of Standard Oil in things like railroads and real estate and steamships and, like, a dozen of each of these types of companies. He was in- invested in banks, like Chase Manhattan. He had a very close relationship [chuckles] there and, and, and, and put a lot of money in there. But, like, he, he... I think by the time he actually retires, he's worth about $200 million.

   21. DRDavid Rosenthal27:18

       Yeah, and right around this time, I think... Oh, gosh, I think this happened after he retired. I, I don't have it in... I didn't write it down in my notes, uh, so I may get the timeline wrong, but I think it was after he retired. [chuckles] A, a roundabout way, he ends up owning a significant iron mining and ore deposit operation, uh, that ends up getting rolled up into U.S. Steel when J.P. Morgan rolls up U.S. Steel. [chuckles] J.P. Morgan, not the bank, the person, rolls up, uh, [chuckles] U.S. Steel.

   22. BGBen Gilbert27:47

       Which is, of course, Carnegie Steel that he's rolling up into.

   23. DRDavid Rosenthal27:51

       Yep, exactly. And he makes 80 million on [chuckles] that transaction.

   24. BGBen Gilbert27:58

       Like, 80 of his $200 million of wealth come from this U.S. Steel roll-up that he was fortunate enough to have made an investment in this iron, uh, company. Uh, it's just wild. So he's got, at this point, of course, owning a quarter of Standard Oil, generating 10 million a year in annual income, got all these investments across all these industries, and then boom, U.S. Steel happens to him, too.

   25. DRDavid Rosenthal28:21

       Man, strength leads to strength.

   26. BGBen Gilbert28:22

       For sure.

   27. DRDavid Rosenthal28:23

       I guess it applies to people, too, not just [chuckles] institutions.

   28. BGBen Gilbert28:26

       And one last comment on this Rockefeller wealth. You know, I mentioned... We're still in sort of this 1890 to 1892 timeframe, but, uh, I mentioned that, that point when he's worth 200 million in, in 1902. The GDP of the United States at that point was $24 billion. So e- even at that point, this is, like... You know, there's still a lot of- there's still a decade before Standard Oil gets broken up, and he owns [chuckles] a quarter of it. Uh, he already has 1% of the US's GDP as his personal net worth.

   29. DRDavid Rosenthal29:05

       [laughing] Oh, wow!

   30. BGBen Gilbert29:07

       Already the richest man that will ever ex- the richest person that will ever exist in America, including Bezos, uh, all these people.
9. 33:24 – 42:15

   Early philanthropic pillars: Spelman and the University of Chicago build-out

   1. DRDavid Rosenthal33:24

      Yeah. All right, so let's get into it. So the first big project... W- well, you know, a- as Ben, as you said, he had been giving all, all his life, even going back to his bookkeeping days, he was giving an amount. And, um, the first significant project that, uh, he and the family, uh, do is actually Spelman, uh, College, was Spelman Seminary, what becomes Spelman College, the, um, HBCU, uh, women's, uh, college in Atlanta. Uh, in the early 1880s, they, um, they, they, they financed the building of that, uh, and, um, Spelman, uh, I didn't know this till I researched-

   2. BGBen Gilbert33:57

      Ceddie Spelman.

   3. DRDavid Rosenthal33:58

      Spelman is the maiden name of his wife, Ceddie Spelman. Yeah, uh, pretty amazing that that was the first, like, major project that they do.

   4. BGBen Gilbert34:05

      And I think they already... Just to not over-credit, I think they already had, like, a few hundred people enrolled, and they were raising money locally, and they just had some debts. And so Rockefeller came in and just wiped out all the debt, funded it-

   5. DRDavid Rosenthal34:17

      And then building the campus there, too. [chuckles]

   6. BGBen Gilbert34:19

      Pretty wild. I mean, it's the- it is the first liberal, liberal arts college for Black women in America.

   7. DRDavid Rosenthal34:24

      Yeah, totally amazing.

   8. BGBen Gilbert34:26

      And also worth, worth pointing out about Rockefeller's character, which I find fascinating, 'cause a lot of the times you study people from this era, and they just have such... They're, you know, they're a product of their time, and so they have a very low opinion of people that aren't white men. And Rockefeller does have some less savory parts, uh, in, in reference to comments that he's made about sort of other ethnic groups here and there. But he went from, like, pre-Civil War, being an abolitionist to a bir- a big supporter of Lincoln, to really, like, carrying that through and then putting his money where, where his mouth is and really advocating for the rights of Black people after the Civil War.

   9. DRDavid Rosenthal35:05

      Yeah.

   10. BGBen Gilbert35:06

       It's almost silly to say this, but, like, for a rich white guy of the time, he's remarkably not racist.

   11. DRDavid Rosenthal35:12

       Yeah. Uh, he is... Like, so much about him is remarkably modern, [chuckles] given the time. And, um, it-- And you know, he doesn't, uh, like you said, he doesn't have a perfect track record on anything, and he doesn't have a perfect track record on, uh, you know, women and, and women's rights. [chuckles] Most glaringly, I think they-- he and Ceddie had five children. Uh, one died very young, four children that survived to adulthood. The three eldest were daughters, and then J... I think Junior was the youngest, uh, one son. [chuckles] The daughters are like: "Yeah, you know, like, uh, fine, you can do stuff, whatever, but, Junior, you're getting all the money, and you're gonna be my successor."

   12. BGBen Gilbert35:50

       Very similar to The New York Times story in that respect, where the money flowed through the male lineage.

   13. DRDavid Rosenthal35:54

       Yep, totally. But as you say, remarkably striking how close to modern, um, he was in his sensibilities. Um, so that was, that was Spelman. That was the first big project. [chuckles] And then there's the University of Chicago, uh, which obviously is this amazing institution and achievement. [chuckles] I think this project is really what put him over the edge psychologically, though. This was hard. Um, so it started... I didn't know anything about this history. So, um, it started in the early 1880s. There was this movement to build a true Baptist university in America, and remember, Rockefeller's Baptist. You know, all the Ivy League schools-... uh, you know, started as, you know, religious or quasi-religious institutions, but they weren't Baptist. Uh, with the exception of Brown, Brown had a lot of Baptist, um, influence, and that's where Junior Rockefeller's son went. Um, but it wasn't strictly Baptist, I don't think. There was a-- They wanted to build, like, a real Baptist university.

   14. BGBen Gilbert36:57

       And the Ivy Leagues at this point in time are becoming more and more secular. Like, it's, uh... They're, they're sort of the, the Baptist educational community is sort of worried about, uh, "Uh-oh, what's about to take off is this sort of secular education movement, and all the best and brightest are gonna flock to those types of institutions."

   15. DRDavid Rosenthal37:14

       And remember, you know, what did we say the first time about the Baptists? They're evangelical, [chuckles] they wanna, like... You know, it's not about the wealth per se, but it's, uh... You know, they wanna recruit, and so this movement is like, "We wanna put this university in New York City." [chuckles] Like, the part-- You know, attract everybody, the big city, America, post-war, et cetera. JD, of course, is the perfect benefactor for this, so he gets involved. Uh, [chuckles] it becomes a mess. [chuckles] The guy who's running it, um, a guy, uh, running the, the initiative, a guy named Augustus Strong, who's a Baptist minister, [chuckles] he ends up sort of scheming, um, [chuckles] Rockefeller's oldest daughter, uh, Bessie, ends up marrying his son. Uh, so they get, like, very involved, but then the project falls apart, and Rockefeller withdraws his support. Awkward. Um, it eventually does morph into trying to build this project in Chicago instead, and the idea is that, you know, [chuckles] so we think Chicago's the Midwest, like, it was the West then, like, you know, the frontier. Uh, but it was the biggest city in the frontier. I think it was already the second-biggest city in America at that point. That here was sort of new ground. We can build this Baptist university, and then it'll be a model, uh, template, and we'll build a bunch more Baptist universities all over the country.

   16. BGBen Gilbert38:39

       And two more benefits, too, one of which is it's really expensive to build stuff in Manhattan, and so it's a lot cheaper to get building materials out there and hire construction crews. And then, of course, you have Rockefeller, who really wants to do these good works because he thinks they're the right things to do, not because he thinks he's repenting for some business sins that he's done, and he's, like, really, really afraid of anything that looks like I'm doing a charitable thing in order to curry public favor, so they don't hate me for the business. Like, anytime anybody would insinuate, like, "Well, this is a good way for you to make up for all the Standard Oil stuff," he would just, like, excommunicate them, and so it was convenient that it was in Chicago because he sort of felt like if it's in New York, then people will sort of view it as me trying to influence the public to like me, and I don't wanna be seen as attempting to do that.

   17. DRDavid Rosenthal39:39

       So you're saying, like, the opposite of what Rockefeller wants might be something like, um, oh, I don't know, like Leland Stanford University or [chuckles] Vanderbilt University or Duke University, [chuckles] all wonderful institutions. I, I went to one of them. Uh, but, uh, yeah, these are, uh, [chuckles] these are people who want their names on the building, so to speak.

   18. BGBen Gilbert40:02

       And, like, for most listeners, I bet you're like, "Wait, Rockefeller started, founded the University of Chicago?" And that is exactly what he was going for.

   19. DRDavid Rosenthal40:11

       And it wasn't just universities, right? So, like, obviously, probably some of you are thinking, like, "Well, you're talking about how Rockefeller pioneered philanthropy and all that, but, like, there-- you guys are missing something." There was another [chuckles] wealthy white dude at the time who was pretty dang philanthropic, Andrew Carnegie, of course, and, and they were big-time rivals. Uh, you know, Carnegie did something pretty amazing. He created the American public library system.

   20. BGBen Gilbert40:41

       Oh, I didn't know that.

   21. DRDavid Rosenthal40:42

       Yeah. Uh, you know, you know how there's, like, a library in every town in America? Like-

   22. BGBen Gilbert40:46

       Huh!

   23. DRDavid Rosenthal40:46

       ... that's Carnegie. [chuckles] He created those libraries and funded them.

   24. BGBen Gilbert40:50

       I assume that was, like, taxes.

   25. DRDavid Rosenthal40:52

       [chuckles] No.

   26. BGBen Gilbert40:53

       I guess it probably is funded by taxes, like public libraries?

   27. DRDavid Rosenthal40:56

       Well, I think they're, you know, government institutions, uh, today, but, um, but they were created and sort of given to America, and he also did, uh, internationally, too, um, created a, a bunch of library systems, um, by Carnegie. [chuckles] But, uh, you know, one of the reasons t- for sure that he did that is, like, how do you make sure your name goes down in history? [chuckles] Get a plaque or a statue in front of a big building in every town in America with your name on it. [chuckles]

   28. BGBen Gilbert41:27

       [chuckles]

   29. DRDavid Rosenthal41:27

       That was not Rockefeller's style.

   30. BGBen Gilbert41:29

       Yeah.
10. 42:15 – 53:46

    Rockefeller medical revolution: the institute, modern medical schools, and public health

    1. DRDavid Rosenthal42:15

       Yep, and the Standard brand, and what was, what was Standard itself? It was about setting the standard. It was about creating, uh, you know, doing this sort of, quote, unquote, "research" to create the best processes that were again, dis- get disseminated out to the decentralized organization. That's what he wants for philanthropy. Uh, and so once he brings Gates in, they start thinking about this, and they turn their attention to the state of medicine, uh, and health in America and in the world.... And they do something pretty amazing. So in 1901, they decide to set up the Rockefeller Institute for Medical Research in New York City. This is amazing. They buy a farm. [chuckles] They buy a farm on the East Side of Manhattan, uh, uh, overlooking, uh, overlooking the East River, uh, in the, in the sixth- like, the upper 60s. [chuckles] You know, like, literally in the middle of Manhattan, there's this farm. And they set up this research inst- this medical research institution there. Uh, and the idea is, it's not gonna be-- it's gonna be pure, basic research. Uh, and Chernow has this great, great quote of Rockefeller talking to his, to his son, to Junior. He says, "John, we have money, but it will have value for mankind only if we can find able men with ideas, imagination, and courage to put it into productive use." Rockefeller placed the scientists at this institution, not the trustees, in charge of expenditures, and this was revolutionary. This was the institute's secret formula: gather great minds, liberate them from petty cares, and let them chase intellectual chimeras without pressure or meddling. If the founders created an atmosphere conducive to creativity, things would presumably happen. [chuckles] So this little research institution goes on to become Rockefeller University. [chuckles] Ben, had you heard of Rockefeller University before we did the research for this?

    2. BGBen Gilbert44:26

       I hadn't, and I've been blown away by the amount of medical research that's come out of it.

    3. DRDavid Rosenthal44:31

       So a small sample, this... I'm just gonna, like, read from Wikipedia here. If you go to the Wikipedia entry for Rockefeller University, these are the things that have come out of this, [chuckles] in no particular order. First to culture the infectious agent associated with syphilis, showed that viruses can be oncogenic, which enabled the field of tumor biology, identified the genetic defect associated with atherosclerosis, the leading cause of heart attacks in the US, development of the practice of travel vaccination, identified the phenomenon of autoimmune disease, developed virology as an independent field, [chuckles]

    4. BGBen Gilbert45:11

       [chuckles]

    5. DRDavid Rosenthal45:11

       developed the first peptide antibiotic. [chuckles]

    6. BGBen Gilbert45:14

       It's crazy.

    7. DRDavid Rosenthal45:14

       Uh, showed that genes are structurally composed of DNA, discovered blood groups. [chuckles] Uh-

    8. BGBen Gilbert45:20

       Just casual, all the blood groups-

    9. DRDavid Rosenthal45:22

       Just-

    10. BGBen Gilbert45:22

        ... That they exist.

    11. DRDavid Rosenthal45:23

        All the blood groups. Yeah. Uh, developed methadone as treatment of heroin addiction, and devised the AIDS drug cocktail. [chuckles] Uh-

    12. BGBen Gilbert45:32

        Whoa! Really?

    13. DRDavid Rosenthal45:33

        Yes, really. [chuckles] Uh, so this, this institute, it wasn't until the '50s that it would become Rockefeller University, so during Rockefeller's life, he never created a or intended to create a university with his name on it. Uh, but, um, you know, here's much later... This is a quote from Winston Churchill talking about John Rockefeller: "When history passes its final verdict on John D. Rockefeller, it may well be that his endowment of research will be recognized as a milestone in the progress of the race. For the first time, science was given its head. Longer-term experiment on a large scale has been made practicable, and those who undertake it are freed from the shadow of financial disaster. Science today owes as much to the rich men of generosity and discernment as the art of the Renaissance owes to the patronage of popes and princes. Of these rich men, John D. Rockefeller is the supreme type."

    14. BGBen Gilbert46:32

        Boom! That is a pretty ringing endorsement. Winston Churchill.

    15. DRDavid Rosenthal46:37

        Yeah, Winston Churchill. So, like, this, you know, this is very far from, uh, you know, what all these other philanthropic folks had in mind. [chuckles]

    16. BGBen Gilbert46:49

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

    17. DRDavid Rosenthal47:08

        Yeah, like, you've never heard of it.

    18. BGBen Gilbert47:10

        And they didn't make a big deal at the beginning, and they didn't build a special campus, and they didn't... It was very much like, "Let's get a bunch of really smart people, the brightest in their field, together. We'll pay them good money, and, like, we'll kinda see."

    19. DRDavid Rosenthal47:22

        Let them come here and work on what they wanna work on. We're not telling them what to work on. Uh, so, uh, in its, you know, 110, 120-year history, um, there have been 38 Nobel laureates that have either come through or been produced by the institute, uh, and then the university. Uh, so there's all this basic research that they're doing. They go even further. So the first head of the institute who they recruited was this guy named Simon Flexner, and Flexner was a physician. Uh, he had been-- he was teaching at Penn, and he'd been educated at Johns Hopkins, which was really the only, like, f- real [chuckles] medical teaching institution in America at the time. Remember, like, [chuckles] this is... You know, we're talking about how modern Rockefeller is and how modern Standard Oil is and how modern this philanthropy is. [chuckles] Remember his father, you know, Bill, uh, was a doctor, quote-unquote? Like, he was a, like, a witch doctor. Like, that's what medicine in the practical sense looked like in America. You know, it was really closer to that at this time still.

    20. BGBen Gilbert48:31

        I mean, at, at best, it was homeopathy.

    21. DRDavid Rosenthal48:33

        At best, at best, which Rockefeller was actually sympathetic to himself, uh, for a long time. But, um... So, you know, they, Gates and, and Rockefeller and the family, they work with Flexner, and they say, "How can we... You know, we've done all this research and this science. How can we change how medicine is practiced?"... So they go to Hopkins. They take the Johns Hopkins model, which is four year, you know, what we know as medical school today. Four years post-undergrad, and they spread it out. They don't go create another [chuckles] university to teach another medical school. They go create medical schools at all the other universities in America, [chuckles] uh, with this model. Um, uh, you know, before this, other medical schools, you didn't need a college degree. There was no standardization. There was like, there was no, no faculty standards. Um, so they go first to the University of Chicago, then to Yale, then to Vanderbilt, then to all these other institutions, and they just give tens of millions of dollars.

    22. BGBen Gilbert49:35

        So they just start medical schools?

    23. DRDavid Rosenthal49:37

        To start medical schools in the model of Johns Hopkins. Uh, and, and this creates, you know, modern practical medicine as, as we know it today. Then they go even further in the teens and '20s. Um, you know, after World War I, uh, they're concerned about, like, you know, there's, there's the practice of medicine, but there's also a broad... There's like public health [chuckles] is a thing. So [chuckles] they go back to Hopkins, and they say, "We will fund creating a new school here, uh, attached to the medical school, a public health school." [chuckles] So they create the first, like, you know, school of public health at Hopkins, and then they go to Harvard, and they do the same thing there, so the Harvard, you know, School of Public Health. Uh, and then they go again out to all the rest of the universities in the country and around the world. Uh, and it's all behind the scenes. Like, this-- so like, this is so Rockefeller and so Standard Oil, like, you know?

    24. BGBen Gilbert50:36

        And is this being sort of managed by Frederick Gates?

    25. DRDavid Rosenthal50:40

        Yeah. Yeah, Gates and, and now the Rockefellers, like, Junior gets very involved in this and ultimately takes it over. Um, but Senior and Junior and Gates, the three of them together, along with the staff that they're building, uh, they're driving all of this.

    26. BGBen Gilbert50:56

        It's awesome. So listeners, as you can tell by now, Standard Oil Part 2 is really like Rockefeller Part 2. I mean, we're dancing in and out of Standard Oil here, but there's the scope of what the early, you know, or Standard Oil money allowed the Rockefeller family to do is just unbelievable.

    27. DRDavid Rosenthal51:15

        Yep. Uh, and then, and then to, you know, sort of put a, a bow on all of this here, in 1913... So they're thinking the whole time, they're like, "How do we really institutionalize this?" You know, Senior's getting older. Uh, they've built up this office. This is unique. "How do we, how do we m- make this something that's gonna perpetuate indefinitely?" They set up in 1913, they get a charter from the state of New York. I, I don't know exactly how this works. I think it was a federal charter granted in the state of New York to create The Rockefeller Foundation, which still exists to this day. They give away hundreds of millions of dollars a year to causes from medicine to education, to the arts, to all sorts of things. So if there's some public, you know, good cause in America or around the world, like, there's a good chance that it was funded, at least at some point in time, by The Rockefeller Foundation.

    28. BGBen Gilbert52:12

        It's also because it's been privately held this whole time, we also don't have an exact figure of, like, what the sum of all these different pockets of Rockefeller family wealth are worth. It's really... I mean, it's, it's kind of astonishing that we don't, but we don't. Like, there, there have been scholars who have tried to pore into this, and, and there are estimates, but it's, uh, it's tough.

    29. DRDavid Rosenthal52:36

        Yeah, and, and this model, you know, [chuckles] endowments today, from university endowments to all sorts of other charitable foundations, uh, this is, this is the model they follow. So, [exhales] um, I think, I think that's probably where we should leave it, right, Ben? Um, you know, Rockefeller, Standard Oil, he won business. He's won philanthropy. He's won, like, America.

    30. BGBen Gilbert53:00

        [chuckles]
11. 53:46 – 1:06:43

    The trust-busting fuse: dividends, automobiles, Ohio redux, and Roosevelt ascends

    1. DRDavid Rosenthal53:46

       All right. Here we go. [chuckles] The breakup of Standard Oil.

    2. BGBen Gilbert53:51

       So let's review a few numbers before diving into the breakup story. So Rockefeller had sort of handed over to, to Archibald, you know, the, the day-to-day of, of running the company. That modest 11% dividend, uh, Archibald's a pretty big shareholder. All his friends are pretty big shareholders. That ratcheted up to 31% in 1897, and then 33% in 1899. So we are cutting big dividend checks to all these, uh, these shareholders.

    3. DRDavid Rosenthal54:22

       Which Rockefeller actually was not happy about, [chuckles] paradoxically.

    4. BGBen Gilbert54:26

       No, he liked keeping it super modest, keeping the cash in the business, reinvesting it. The share price... So this is interesting. It's not a publicly traded company, and so we don't get to see the books, especially-

    5. DRDavid Rosenthal54:38

       But shares do change hands.

    6. BGBen Gilbert54:39

       But shares do change hands, and so every day in the newspaper, uh, a, a share price is published, at which it's kind of the reference price that, that people are, are deciding to trade. The share price went from 100-

    7. DRDavid Rosenthal54:50

       It's like a direct offering.

    8. BGBen Gilbert54:51

       Yes, $176 in 1896 to then, three years later, $458.... So the stock is running, as they say.

    9. DRDavid Rosenthal55:02

       Hmm.

    10. BGBen Gilbert55:03

        So y- you've got this-

    11. DRDavid Rosenthal55:04

        That's a nice, uh, Tesla-like move there.

    12. BGBen Gilbert55:06

        Yes. [chuckles] Uh, y- which not really. Like, the number- the, the, the stock movement that we're seeing today i- in meme stocks is, is just a totally different multiple than we're talking about here, but unbelievable three-year run from 176 to 458. You then sort of look at that dividend policy, uh, and you're like: Well, how much of that i, i, you know, is there in total? From 1893 to 1901, they paid out $250 million to shareholders. Keep in mind, Rockefeller is making 25% of that.

    13. DRDavid Rosenthal55:40

        [chuckles]

    14. BGBen Gilbert55:40

        Like, he's upset, but he's also making just a crap ton of money. And so the, the thing to sort of land on here is this is all before the automobile. Like, this is all still the kerosene business, and there's this, this, like, seminal point right around 1898, where cars start happening, like, it starts working. We go from 800 cars in 1898 to then two years later, 8,000 cars, and so it's starting to happen. Standard Oil is realizing, "Wait a minute, we finally can use this useless gasoline product," and so even in his retirement, Rockefeller's real wealth ends up getting piled on top of his sort of paltry wealth that we talked about earlier from the, uh, mass market adoption of the internal combustion engine.

    15. DRDavid Rosenthal56:36

        Yep, yep, yep. So right around that time when the automobile was taking off... This is also the crazy thing, you know, like, there's two, um, [chuckles] there's two parts to the breakup story that we're gonna talk about here. You know, [chuckles] and they're both good for everybody. Uh, one is the breakup, uh, which is good, [chuckles] very good, and two is the automobile, which is very good. And they happened, like, right at the same- like, on the same parallel paths. So in 1897, right as this run-up in the auto industry is starting, uh, and right as JD had fully, you know, tried to walk away, uh, from the business, uh, [chuckles] good old state of Ohio, they bring charges again, back to the, you know, the top of the show here. They're like: "Okay, you guys moved to New Jersey, but, like, still, you're still, like, breaking our laws. [chuckles] We still don't like you." Uh, and so what they do is, um, somebody, uh, uh, like a government official, tries to go... They get a hold of some old trust shares, and they try and go redeem the shares of the trust to get- they're like, "Oh, well, uh, you know, if you did what you said you were gonna do, I should be able to go get shares in Standard Oil in New Jersey, and then there's the holding company of underlying, you know, all of these other companies." And they can't actually do it, so they're like, "Aha, you guys, you defrauded everybody!" So they bring a case. Rockefeller actually gets called to testify in this case, [chuckles] and he puts on this great show. He pretends to be this, like, doddering old man who's senile and, like, can't remember anything. [chuckles] It's amazing.

    16. BGBen Gilbert58:27

        Oh, when he's on the stand, it's like, it's like he's, like, wandering through the mist. "Oh, I can't remember. Oh, it's been, uh..." It, it goes from, like, one of the sharpest, brightest people to ever live in American history to seemingly having no recollection of really how anything kind of came together.

    17. DRDavid Rosenthal58:45

        Yep. "Oh, God, how did that, how did that happen? I... You know, where are those trust shares? Gosh, I, I don't know, Mr. Prosecutor." [laughing] Uh, the um, uh, the state doesn't actually win the case, uh, but it's, it's again, it's, like, kind of a distraction, and it starts to move public opinion, which is what really counts, the court of public opinion, against Standard Oil. Uh, but they win, and everybody's like, "Oh, okay, fine," like, you know, [chuckles] "We're gonna make it." Uh, [chuckles] also, oh, this is just so good. At the same time as this case is going on, there's a presidential election happening. Uh, it was actually when it started in, in 1896 was the election, and, uh, there's a really terrifying figure from Standard's, uh, Standard Oil's point of view, running for president here. William Jennings Bryan, the celebrated, the OG populist. His, his thing was, um, America was gonna get crucified on a cross of gold, right? That was his, uh-

    18. BGBen Gilbert59:51

        Yep, populism and silver, that's like his, uh-

    19. DRDavid Rosenthal59:53

        [chuckles] Yeah

    20. BGBen Gilbert59:54

        ... It's like the two things I remember from American history about him.

    21. DRDavid Rosenthal59:56

        Oh, motherhood and apple pie. [chuckles]

    22. BGBen Gilbert59:58

        That, and he was, like, around forever. Like, somehow he-

    23. DRDavid Rosenthal1:00:01

        Yes

    24. BGBen Gilbert1:00:01

        ... showed up in, like... I, I was like: How is this guy still alive? Like, he was in the American national political scene for decades, and decades, and decades.

    25. DRDavid Rosenthal1:00:10

        Hmm, still alive. Hmm, just a striking choice of words there. So Bryan loses, uh, of course, he doesn't become president. And who does become president? The best person that, like, Standard and all these other trusts, like JP Morgan and Carnegie, and everybody could imagine, William McKinley, the celebrated conservative whose Standard Oil contributed-

    26. BGBen Gilbert1:00:30

        Republican from Ohio.

    27. DRDavid Rosenthal1:00:32

        Yep, yep, good old boy. Standard contributed a cool quarter million dollars to his campaign. Everybody is just pumped. Uh, [chuckles] his campaign manager, McKinley's campaign manager, a guy named Mark Hanna, actually went to high school with John D. back when he was going to high school before, uh, [chuckles] Wild Bill pulled him out. Uh, and he's, like, deep, deep in the, in the family with these guys. He sends a telegram when McKinley wins that [chuckles] literally reads, "God is in His heaven. All is right with the world." [laughing]

    28. BGBen Gilbert1:01:07

        [laughing] That's a gloating telegram if I've ever seen one.

    29. DRDavid Rosenthal1:01:09

        Oh, my God, there is fist bumping going on all over the place.... McKinley is just, like, [chuckles] literally sent from God here, from Standard's perspective. Fast-forward a couple years, though, [clears throat] all's good on the federal level, but we start getting some trouble with the states again, and this time it's not Ohio. This time it is right close to the new, [chuckles] new home, the actual home in New York. It is in New York when the feisty new governor of New York starts making some noises about coming after the trusts, in particular, the oil trust with Standard Oil. None other than Theodore Roosevelt, the new governor of New York.

    30. BGBen Gilbert1:01:56

        Which I didn't realize, like, uh, what he did before becoming president, and I didn't realize he was the, involved in bringing this suit against Standard Oil.
12. 1:06:43 – 1:25:15

    Ida Tarbell and the muckrakers: investigative journalism turns public opinion

    1. DRDavid Rosenthal1:06:43

       as president, September 1901, a amazing pioneering woman journalist, named Ida Minerva Tarbell, who's a writer for McClure's Magazine, national magazine, it's gonna be important, national magazine, uh, starts working on a new project that she pitches to the editor, McClure, uh, The History of Standard Oil, as a book to come out in serial form in the magazine.

    2. BGBen Gilbert1:07:14

       Now, one might say Ida has an ax to grind from-

    3. DRDavid Rosenthal1:07:17

       Ooh

    4. BGBen Gilbert1:07:18

       ... uh, her own past.

    5. DRDavid Rosenthal1:07:19

       Hmm, yeah, what was her past? Well, we'll get into that in one sec, but this, I mean, this is amazing. Like, uh-... th- this is the birth of, of investigative journalism, uh, as we know it today. Um, uh, Daniel Yergin, the great historian who wrote The Prize, which so many people have recommended after part one that we, that we read, uh, we-- Ben, you, you read a little bit of it.

    6. BGBen Gilbert1:07:40

       Yeah, [chuckles] I quickly realized, like, oh, this is, like, mostly about US-Saudi Arabia relations, and we are so not gonna get to that in part two.

    7. DRDavid Rosenthal1:07:48

       Yeah. So we'll, we'll have to do-- cover The Prize and, and all, you know, the rest of the international oil history another time. Uh, but he, the celebrated historian, he calls this book, The History of Standard Oil, quote, "Maybe the single most influential book on business ever published in the United States." Uh, amazing. Um, she becomes, uh, I-- uh, Tarbell, uh, and her colleagues at McClure, at McClure's, become known as the Muckrakers. You know, if you've heard the term muckraking journalists-

    8. BGBen Gilbert1:08:19

       Oh, yes

    9. DRDavid Rosenthal1:08:19

       ... uh, this is-- she's them. Um, do you know who coins the term Muckrakers?

    10. BGBen Gilbert1:08:26

        Ooh, no, I don't.

    11. DRDavid Rosenthal1:08:28

        Teddy Roosevelt himself. [chuckles]

    12. BGBen Gilbert1:08:29

        No way!

    13. DRDavid Rosenthal1:08:30

        Yes. So great, he gives a speech, and he, he talks about, about how great they are. Uh, yeah, so she was this amazing character. [chuckles] Now, you said she might have some agenda, [chuckles] uh, shall we say, some bias.

    14. BGBen Gilbert1:08:42

        Yes, a little bit of personal history to color, you know, her, her point of view here.

    15. DRDavid Rosenthal1:08:46

        Yeah, so where, where is, uh, where is Ida from? Uh, you know, she's, like, this, this international woman. She lives in Paris for a while, but she's, you know, based in New York. She's writing for this Areo Dig magazine. Uh, but her, her roots are actually somewhere sort of close to home in this story.

    16. BGBen Gilbert1:09:02

        Kinda Western Pennsylvania area?

    17. DRDavid Rosenthal1:09:04

        Yeah, yeah. You know, like, the, the wild, you know, East back in the day. Yeah, she grew up in Titusville. [laughing]

    18. BGBen Gilbert1:09:11

        And her dad was an oil refiner, right?

    19. DRDavid Rosenthal1:09:16

        Not only did she grow up in Titusville while the beginnings of the oil, oil industry were, were happening, her dad was a, a producer, like a, a driller, uh, who, like, got totally flattened by Standard Oil and was one of the leaders of the, like, riots, uh, uh, uh, like, the rebellion against the South Improvement Company stuff and everything that was going on at that point in time. And I don't know if you knew this, not only her dad, her brother goes into the oil business, and her brother becomes a senior executive at Pure Oil.

    20. BGBen Gilbert1:09:52

        Which is, like, the most legitimate competitor to Standard, right?

    21. DRDavid Rosenthal1:09:55

        I don't think we talked about this in part one. Uh, part of the strategy was they got to, like, 90-ish percent market share, uh, in refined oil, uh, products, uh, uh, you know, coming out of the US. Uh, they didn't wanna get to 100% 'cause they wanted to keep up some charade of competition.

    22. BGBen Gilbert1:10:12

        Totally. It's like having Bing out there in the search engines.

    23. DRDavid Rosenthal1:10:15

        Exactly. [chuckles] Sorry, Bing. Uh, so the Bing of Standard Oil was Pure Oil-

    24. BGBen Gilbert1:10:21

        [laughing]

    25. DRDavid Rosenthal1:10:21

        ... that they allowed to survive, and guess who's a senior executive there? William Walter Tarbell.

    26. BGBen Gilbert1:10:27

        Ida's brother.

    27. DRDavid Rosenthal1:10:28

        Ida's brother. [chuckles]

    28. BGBen Gilbert1:10:29

        By the way, I do have the, like, actual stat that we pulled from, um, PitchBook sent us this great tear sheet that Standard Oil controlled 91% of oil refinement in 1904 and 85% of even the final sales.

    29. DRDavid Rosenthal1:10:42

        Wow, wow.

    30. BGBen Gilbert1:10:43

        Monopoly!
13. 1:25:15 – 1:44:42

    Federal case to Supreme Court: Standard Oil v. United States and the 34-company breakup

    1. DRDavid Rosenthal1:25:15

       Ah, interesting, interesting. Um, so June of 1906, Roosevelt directly directs the US attorney. Like, he calls... Like, in a secret nighttime meeting, he calls the, the US attorney general into his office, and he's like, "I'm directing you to open a federal antitrust investigation into Standard Oil."... And then on November 18th, 1906, that suit is filed in Missouri. [inhales] Suit against, federal suit, federal antitrust suit against Standard Oil on the grounds... You know what the grounds are? They have violated the Sherman Antitrust Act. [laughing]

    2. BGBen Gilbert1:26:01

       Ooh.

    3. DRDavid Rosenthal1:26:01

       [laughing] They are in restraint of trade.

    4. BGBen Gilbert1:26:02

       Which is really interesting, because it was definitely true in 1890, it was true through the 1890s, but their dominance was fading at this point. In, like, the late 19-aughts, you were already getting into a situation where there was major foreign influence. I mean, there was lots of oil found in, in Russia and in the Middle East. You're starting to get discoveries in Texas.

    5. DRDavid Rosenthal1:26:27

       Yep, California.

    6. BGBen Gilbert1:26:29

       [chuckles] And who, who was it that said that, uh, if there was oil found west of the Mississippi, they would drink all of it?

    7. DRDavid Rosenthal1:26:36

       [chuckles] Oh, I, uh, I, I haven't heard that one.

    8. BGBen Gilbert1:26:38

       There was some Standard Oil crony at one point that was so confident that there was no oil west of the Mississippi, that they would drink it-

    9. DRDavid Rosenthal1:26:44

       Ah [chuckles]

    10. BGBen Gilbert1:26:45

        ... if anybody found any. And, like, so Standard Oil's strong suit was not Texas, and of course, the Permian Basin would become where tons of oil ended up being found.

    11. DRDavid Rosenthal1:26:55

        Yep. Tex- uh, Texaco, uh, or what became Texaco, and Gulf, I think also-

    12. BGBen Gilbert1:27:01

        Yep

    13. DRDavid Rosenthal1:27:01

        ... came out of Texas?

    14. BGBen Gilbert1:27:02

        Yep.

    15. DRDavid Rosenthal1:27:03

        Yep.

    16. BGBen Gilbert1:27:03

        Yep.

    17. DRDavid Rosenthal1:27:03

        Uh, so there, there were... Yeah, the monopoly was fading anyway, which probably was the other factor that made... Like, there are three things: one, Roosevelt bought the son of a bitch, but he didn't stay bought [laughing] ; uh, two, uh, Tarbell, uh, and the muckrakers, and public opinion; and three, like, legitimately, they weren't that... You know, they're still the most powerful company in the world, but they weren't as powerful.

    18. BGBen Gilbert1:27:29

        Well, yeah, m- uh, like, so, so I don't want to flash forward too far here, but I do know that in 1911, when the federal antitrust law-

    19. DRDavid Rosenthal1:27:39

        When things go down [chuckles]

    20. BGBen Gilbert1:27:40

        ... When things go down, which I'll, I'll just leave there for a second, their market share had eroded to 64%. There were at least 147 other refining companies competing with it in the United States. At that point, John D. had left the company, and so you, you do have this really interesting sort of scenario where, like... I don't know, did it need to be broken up at that point? Uh, uh, are we, are we chasing demons of 20 years earlier? I think we'll hold on that for now, but I think that's the, that's the thing to sort of noodle on at this point.

    21. DRDavid Rosenthal1:28:12

        Yeah. Well, we'll hold on it just for a minute. Let's, let's go there. Let's, you know, I'm not... [chuckles] A bunch of, like, crazy drama happens between 1906 and 1911, but it's all, it's all a sideshow. Uh, it just takes that long for all this to get to the Supreme Court. Um, and then judgment day, May 15th, 1911, US Supreme Court Chief Justice Edward White reads the decision.

    22. BGBen Gilbert1:28:40

        And this is, like, Standard Oil v. United States, right?

    23. DRDavid Rosenthal1:28:43

        Yes.

    24. BGBen Gilbert1:28:43

        Like, it's like-

    25. DRDavid Rosenthal1:28:44

        This is the big one.

    26. BGBen Gilbert1:28:45

        Yeah.

    27. DRDavid Rosenthal1:28:46

        And, and Standard in the... Oh, gosh, what's the circuit below the Supreme Court? Federal Court of Appeals, maybe, some appellate court?

    28. BGBen Gilbert1:28:54

        I'm not sure.

    29. DRDavid Rosenthal1:28:55

        Uh, I should know this, as child of two lawyers, and [chuckles] my two- Jenny's two parents are also lawyers. They'll be yelling at me listening to this.

    30. BGBen Gilbert1:29:03

        [chuckles]
14. 1:44:42 – 1:50:38

    Aftermath and recomposition: Standard’s children (Exxon, Mobil, Chevron, etc.) and innovation unlock

    1. DRDavid Rosenthal1:44:42

       So there is another reason, too, why the breakup, um, ended up being great for Standard Oil and for its shareholders. And, and probably, too, you know, I don't think the government was thinking about this probably at all as a, um, as a, a consequence of the breakup, but I, I think does speak to... There's, like, a really important lesson here about the danger of too much, um, centralization and, like, uh, consolidation of power in a single entity, and that is that-- So, you know, we've, we've alluded all along to the fact that, um, it was automobile sales and the going from kerosene to gasoline that was really gonna take Standard Oil and the whole energy industry, [chuckles] you know, to, to the moon, to the next level here. Um, uh, that's not what Rockefeller and the cronies and all the people that were having lunch at 26 Broadway or coffee, that's not what they were built for. They were... That was like m- mm- you know, they weren't against it, but that wasn't their, that wasn't their game. And as long as they were in charge, and as long as Standard Oil was this singular, monolithic, you know, in practice, uh, thing, um, a lot of the sort of Young Turks, uh, within the organization that were focused on this new market felt stifled. So the breakup allowed these people, the, the new blood, to rise to the top. So Chernow writes: "While the old guard at 26 Broadway mourned the trust's passage, some Young Turks at the operating companies were overjoyed. One of these extraordinary mavericks, Dr. William M. Burton of Standard Oil of Indiana, thought that Roosevelt had performed an inestimable service. After the 1911 dismemberment, he said, 'It was felt all along the line, younger men were given a chance.' Burton patented an exceptionally valuable process in 1913," two years later, "for, quote, unquote, 'cracking' crude oil. That is, for refining it so as to yield a far higher percentage of gasoline. This discovery permitted Standard of Indiana to reap incredible windfall royalties." And, you know, if you remember from we were looking up on the last episode, what did Standard of Indiana become?

    2. BGBen Gilbert1:47:02

       Amoco.

    3. DRDavid Rosenthal1:47:03

       Amoco. [laughing] Uh, and it was all this, like, all these... You know, innovation was, was alive and well again within the oil industry here and within all the Standard sort of children. Um, so, you know, that's what Standard Oil of Indiana becomes Amoco.

    4. BGBen Gilbert1:47:20

       Yeah, d- Can, can I talk about the spin-outs?

    5. DRDavid Rosenthal1:47:22

       Should we go through- Yeah, let's talk about them.

    6. BGBen Gilbert1:47:24

       Yeah. All right, so the, the spin-outs, uh, uh, of the 34, many of them, you know, y- you'll, you'll know, [chuckles] to, to say the least. So the first one-

    7. DRDavid Rosenthal1:47:32

       Especially if you grew up in America, but even if you didn't, like, you'll know. [chuckles]

    8. BGBen Gilbert1:47:35

       Yeah, yeah. The first one wa- was Standard Oil of New Jersey, but its name i- in the spin-out was not Standard Oil of New Jersey. It was the Eastern Seaboard Standard Oil-

    9. DRDavid Rosenthal1:47:47

       [laughing]

    10. BGBen Gilbert1:47:48

        ... or the acronym Esso.

    11. DRDavid Rosenthal1:47:50

        Esso!

    12. BGBen Gilbert1:47:50

        E-S-S-O.

    13. DRDavid Rosenthal1:47:51

        This is so great.

    14. BGBen Gilbert1:47:51

        Which is a little cute wink, wink, nudge, nudge by Rockefeller and crew to say, "And we're still Esso."

    15. DRDavid Rosenthal1:47:59

        I just love these, our anti-heroes here. [laughing]

    16. BGBen Gilbert1:48:01

        [laughing]

    17. DRDavid Rosenthal1:48:01

        Like, they're just such characters. Like, uh-

    18. BGBen Gilbert1:48:04

        Totally

    19. DRDavid Rosenthal1:48:04

        ... the, uh, whole thing reminded me, uh, I think this was when I was growing up, maybe to, um, the Esso, ESSO, which I had no idea [chuckles] what that referred to until recently. Um, the marketing slogan was, uh, "Put a tiger in your tank." Do you remember that?

    20. BGBen Gilbert1:48:21

        Oh, no.

    21. DRDavid Rosenthal1:48:22

        Yeah, it was so good. Uh, [laughing] and literally, I mean, like, [chuckles] this, this breakup and allowing these companies to flourish puts a tiger in everybody's tank here.

    22. BGBen Gilbert1:48:33

        Yeah, so Esso becomes Exxon.

    23. DRDavid Rosenthal1:48:37

        Yep.

    24. BGBen Gilbert1:48:37

        Standard Oil of New York becomes Mobil.

    25. DRDavid Rosenthal1:48:40

        Yep.

    26. BGBen Gilbert1:48:40

        Standard Oil of Indiana, as we mentioned, becomes Amoco. Standard Oil of California becomes Chevron.

    27. DRDavid Rosenthal1:48:47

        Boom.

    28. BGBen Gilbert1:48:48

        Standard Oil of Ohio, which became Sohio, then got bought by BP to become BP America.

    29. DRDavid Rosenthal1:48:56

        I've heard of them.

    30. BGBen Gilbert1:48:57

        The Ohio Oil Company, which became Marathon, and then also the Speedway brand.
15. 1:50:38 – 2:09:09

    Rockefeller-scale wealth and a Rockefeller-shaped world: family, institutions, parks, and cultural landmarks

    1. BGBen Gilbert1:50:38

       I wanna end with just, like, illustrating Standard's wealth here because, uh, uh, or, or, or in more, more in particular, Rockefeller's wealth. 'Cause we've talked about a few figures over time. One of them was the 1902 audit that showed he was worth about 200 million, then around 1911, uh, around 300 million. Well, uh, he actually, with all the stock pops in the split-up and the, uh, move into the gasoline market for internal combustion engines, his personal wealth by 1913, just two years after the breakup, was $900 million. So in 2021 inflation-adjusted dollars, if you literally just do the inflation math, that's about 25 billion. But the more accurate way to look at it would be to say, actually, that's like 3% of GDP, which was still only $40 billion relative, of course, to 21 trillion today. So [chuckles] if you, if you base it on GDP, that figure is about $470 billion.

    2. DRDavid Rosenthal1:51:44

       Ah, yeah, that's... 'Cause I- the figures I had in my mind, and that I think are on Wikipedia, are in that sort of 300 to 500 billion adjusted net worth range.

    3. BGBen Gilbert1:51:53

       Yeah. So, like, I, I do think we should think about him like he was a 470 billionaire, not in terms of purchasing capacity, but in, in terms of societal impact. Like, the, the, the, the analogy doesn't scale all the way back. Like, if you think about when the GDP of America was $1,000, if someone had 500 of that, like, sure, they controlled half the wealth, half the wealth in the nation, but they didn't have the purchasing power that someone who would have, uh, you know, $10 trillion today would have. So it's an imperfect way of scaling it, but, you know, there is no one who controls 2 to 3% of the nation's GDP in their pockets the way that, that Rockefeller did in 1913. So let's think of him like a 470 billionaire.

    4. DRDavid Rosenthal1:52:41

       Well, and here's the thing, he had already given away about half of his wealth at that point.

    5. BGBen Gilbert1:52:45

       Yes! That's the nutty thing, is you already had the RMIR, the, the... You already had the, the, the r- what would become Rockefeller University. You already had the University of Chicago. You already had all these medical endowments. It's wild. And so you, you look today, like, Bezos and Musk are about 190, 200 billion. You've got Gates at 130 billion, again, from all the philanthropy, about tied with Zuckerberg. Uh, Buffett, these days, has about 100 billion, again, from the philanthropy. So, uh, like, if you think that Rockefeller, he sort of had the potential to have, like, 700, 800 billion [chuckles] in terms of the amount of, of sort of influence of the nation's wealth that he controlled.

    6. DRDavid Rosenthal1:53:26

       Which probably would be about all of the other moguls today combined, right?

    7. BGBen Gilbert1:53:31

       That is exactly where I'm going.

    8. DRDavid Rosenthal1:53:32

       Perfect. Well, and that's the perfect analogy. He kinda was that. I mean, yes, there was Carnegie, there was, uh, JP Morgan, there was a generation earlier, there was Vanderbilt, you know, and, and there was Stanford out in the West, and, like, all that. Yep, for sure. Uh, but, uh, but just the scale, like, yeah, nobody could touch Rockefeller.

    9. BGBen Gilbert1:53:51

       So we should transition into, uh, sort of the family generational wealth from here, 'cause there's a few interesting things about it. So by the time of his death in 1937, uh, his remaining fortune, of course, which is largely tied up in various family trusts, was estimated to be about 4 point... uh, 1.4 billion in 1937 dollars. Uh, so that's about one and a half percent of GDP. It's about 315 billion of today's dollars. The Rockefeller family, uh, is now seven generations in. Uh, there's about 170 heirs. According to Forbes, they have a, a fortune of about 11 billion in 2016, so obviously been doing a tremendous amount of philanthropy. I do think that 11 billion, it's kind of an unknown. Uh, we can estimate it all we want, but, like, th- there are multiple Rockefeller family trusts and philanthropies and wealth management groups, and, you know, it's a maze.

    10. DRDavid Rosenthal1:54:48

        There is literally a business and a business ecosystem around the Rockefeller [chuckles] family, uh, which is crazy. I actually went to college with several of them.

    11. BGBen Gilbert1:54:58

        RockCo is a, like, a, a wealth management firm for the Rockefeller family.

    12. DRDavid Rosenthal1:55:03

        Venrock, the venture capital firm? [chuckles]

    13. BGBen Gilbert1:55:05

        Yes. Okay, so this is what I wanted to talk about. So obviously, the Rock is Rockefeller, and for those not familiar who want a crazy tie from this episode to modern day, Venrock was one of the earliest investors in none other than Apple Computer.

    14. DRDavid Rosenthal1:55:21

        That's right. That's right, it was.

    15. BGBen Gilbert1:55:23

        Just amazing how full circle this comes.

    16. DRDavid Rosenthal1:55:26

        Alongside Arthur Rock.

    17. BGBen Gilbert1:55:28

        Yep, yep. So this really bucks the trend of... Have you ever heard the phrase, David, "shirts- shirtsleeves to shirtsleeves in three generations?"

    18. DRDavid Rosenthal1:55:37

        Hmm. Uh, I didn't, I didn't know the three generations part, but I've heard shirtsleeves to shirtsleeves, yeah.

    19. BGBen Gilbert1:55:41

        It's like the general idea that because of taxes and, you know, the fact that this is when you have heirs, and they have heirs, and they have heirs, this is an exponential distribution of wealth, so it just, everything keeps getting cut in smaller and smaller pieces pretty quickly. That has not been the case.

    20. DRDavid Rosenthal1:55:56

        Not to mention also... Yeah, that's not been the case. But, uh, I think the other thing, obviously not in every case, but-... It's pretty hard, hard, quote, unquote, nobody would shed any tears, but, you know, maybe you should. Like, uh, it's a hard psychological, um, set of cards to be dealt where you're like, you are born into a family that has-

    21. BGBen Gilbert1:56:15

        Boo-hoo, trust fund of-

    22. DRDavid Rosenthal1:56:17

        Right, but-

    23. BGBen Gilbert1:56:17

        -multi-billion.

    24. DRDavid Rosenthal1:56:18

        But like it-

    25. BGBen Gilbert1:56:18

        But still, like, how do you-

    26. DRDavid Rosenthal1:56:19

        It wreaks havoc on people's psychology.

    27. BGBen Gilbert1:56:21

        Totally.

    28. DRDavid Rosenthal1:56:21

        Like-

    29. BGBen Gilbert1:56:21

        How do you go live a regular life when you know-

    30. DRDavid Rosenthal1:56:23

        Yeah
16. 2:09:09 – 2:22:09

    Modern parallels: antitrust, platforms, and whether paradigms break monopolies without regulation

    1. DRDavid Rosenthal2:09:09

       So we thought, uh... We were debating, like, "How do we grade this? What, uh, what analysis do we do?" You know, we've, we, we talked a little bit about powers here, but we mostly covered that in the last episode. Um, you know, we're gonna end with a grade here, uh, in, in a minute, but we wanna add a special section for this episode, which is, uh, one of our motivations for doing this series, other than, like, it's a really freaking great [chuckles] story, and we love telling good stories, uh, is like, "Duh, this is happening again now- [chuckles]

    2. BGBen Gilbert2:09:38

       [chuckles]

    3. DRDavid Rosenthal2:09:38

       ... you know, with tech."

    4. BGBen Gilbert2:09:39

       Or let's at least say it's happening in social networking, where they're, uh, being rolled up together. It's happening in... Actually, that's the chief offender.

    5. DRDavid Rosenthal2:09:49

       Well, and Amazon, too, and e-commerce, like, there's-

    6. BGBen Gilbert2:09:51

       Yeah, but not in this, like, rolling up way. Like, a- a- Facebook is the most direct, comparable thing to Standard Oil. Like, Apple has plenty of offenses in potentially abusing their App Store privilege, uh, but I think that's a little bit of a different thing.

    7. DRDavid Rosenthal2:10:05

       Yep. Certainly, on the, um, antitrust sentiment in the public, though, uh, I think that expands to all of big tech, right? And the government and in the public, uh, not just social networking.

    8. BGBen Gilbert2:10:16

       Yep. Somehow not Microsoft this time around, but yeah. [chuckles]

    9. DRDavid Rosenthal2:10:19

       [chuckles] Yeah, right. They already had their, their day in court. Um, but yeah, so anyway, we thought this was a really apt thing to do right now. Uh, and, uh, so we thought for this section, we would, uh, kind of just brainstorm and go through and catalog, like, all right, what are the similarities and differences? Let's enumerate them between the Standard Oil story and the situation with big tech today. Um, and this is the one... I hadn't thought about this before we recorded, but as you were saying, uh, the market had already started to change by the time the breakup happened, and the competitors were emerging in a way that nobody thought they could before, and that was 'cause of market conditions. I think that's happening now, too.

    10. BGBen Gilbert2:11:03

        Are you saying that, that L- that Calibra is not gonna win Web3? [chuckles]

    11. DRDavid Rosenthal2:11:08

        [chuckles] I doubt it. Uh, I seriously doubt it. But yeah, like, if we rewind two to three years ago, um... And I, I even think, like, talk- talking to LPs about, uh, venture capital fundraising two to three years ago is where... This, this was, like, really acute. There were conversations happening where a legitimate concern was like: Why should we invest in startups right now? Because-

    12. BGBen Gilbert2:11:34

        Big Tech is settled.

    13. DRDavid Rosenthal2:11:35

        Big Tech... W- well, and they're gonna eat everything, you know? Between Facebook and Amazon and Google and Apple and-

    14. BGBen Gilbert2:11:42

        All the returns are accruing to scale in a way that's never happened in this industry before, and it's just gonna happen indefinitely.

    15. DRDavid Rosenthal2:11:49

        Any new market or idea of any import that comes along, the best you're gonna be able to hope for is that Facebook buys you for a couple billion dollars. Um, like, uh, it seemed dire out there. [chuckles] Fast-forward to today, and, like, I don't know about you, Ben, but I am wildly excited about investing in startups and not in big tech companies.

    16. BGBen Gilbert2:12:12

        Oh, it feels like we're at the, the same way that it was at the beginning of the mobile era. It feels like this explosion right now, in, in particularly Web3, and a lot of, you know, crazy, wrong stuff out there, but there's so much heat and energy, and it's such a new paradigm.

    17. DRDavid Rosenthal2:12:25

        Yep, and I, I think not on- it's not just crypto and Web3. Look at, like, SaaS company. Like, how many independent multi-billion or tens of billions of dollars public SaaS companies are there out there now? Like, Amplitude just went public.

    18. BGBen Gilbert2:12:40

        Totally. There's a new $5 to $10 billion IPO every other day right now.

    19. DRDavid Rosenthal2:12:44

        Like, a few years ago, that would've been unimaginable.

    20. BGBen Gilbert2:12:47

        So true, and it's funny you said a few years ago. Uh, the Ben Thompson article, "The End of the Beginning," which lays out this hypothesis, uh, and he has some- a really good analysis on it. I think it's probably the best, um, the best analysis done on, uh, uh, are we done creating new big tech companies forever? Uh, that was January of 2020. [chuckles]

    21. DRDavid Rosenthal2:13:10

        Oh, wow! [chuckles]

    22. BGBen Gilbert2:13:11

        [laughing] Hadn't been that long.

    23. DRDavid Rosenthal2:13:14

        Wow. All right, I think it's time... Is it, is it... It might be time for another Acquired postulate. I don't know what we're gonna name this one.

    24. BGBen Gilbert2:13:19

        Ooh, lay it on me, and I'll decide.

    25. DRDavid Rosenthal2:13:21

        All right, all right. New postulate, heard it here first. Prob- I'm, I'm sure we're not the first people to say this. [chuckles] Anytime somebody declares the end of something, [chuckles] uh, like, you know, "This game is over," "This market is over," blah, blah, blah-

    26. BGBen Gilbert2:13:36

        [chuckles] They're wrong

    27. DRDavid Rosenthal2:13:37

        ... that is the, that is the, uh, bottom of the market and is all going up from there 'cause it is never the end. [chuckles]

    28. BGBen Gilbert2:13:43

        What was the year that the, uh, inspector general of the, the USPTO said that everything's already been invented?

    29. DRDavid Rosenthal2:13:51

        [chuckles] Oh, I don't know that one. Uh-

    30. BGBen Gilbert2:13:52

        That's, that's like one of these best apocryphal quotes ever.
17. 2:22:09 – 2:44:56

    Wrap-up: final tidbits, sponsors, grading the breakup, carve-outs, and community plugs

    1. BGBen Gilbert2:22:09

       So the Standard trademark was doled out as a part of the breakup to the 34 child companies, and each owns a different set of states that they can use it in. Many of these states have a use it or lose it clause in their trademark, and so in many of these states, including California, where Chevron owns the Standard trademark, there is one or two gas stations that will carry the logo of the company you're familiar with, but say the word Standard. And there's a great one in downtown San Francisco that you can go-

    2. DRDavid Rosenthal2:22:41

       Yeah

    3. BGBen Gilbert2:22:41

       ... drive by and be like: "Wait, I'm sorry, what? Standard, it lives!"

    4. DRDavid Rosenthal2:22:46

       It lives. It's, uh, it's at, uh, Market and Van Ness, right?

    5. BGBen Gilbert2:22:50

       Yep.

    6. DRDavid Rosenthal2:22:50

       Yep. It's a [chuckles] ... You drive, and you're like: "Whoa! That should be a Chevron station, but it says Standard on it."

    7. BGBen Gilbert2:22:57

       So weird. So, so, like, such a fascinating... Like, it's fun to, like, see a remnant of American history, sort of like on, [chuckles] on your commute.

    8. DRDavid Rosenthal2:23:06

       Yep.

    9. BGBen Gilbert2:23:07

       Uh, the second one is a very interesting harbinger of what's to come. Uh, the foundation, the Rockefeller Foundation's assets, starting all the way back with Standard Oil, and then, of course, in what it was broken up into, an enormous holding, as you can imagine, is the oil companies, in particular, ExxonMobil. In December of 2020, just this last year, the foundation pledged to dump their fossil fuel holdings.

    10. DRDavid Rosenthal2:23:39

        Mm.

    11. BGBen Gilbert2:23:39

        So you have the, the original oil money pledging divestment.

    12. DRDavid Rosenthal2:23:44

        Yeah, interesting.

    13. BGBen Gilbert2:23:46

        So that'll be fascinating to watch how that plays out.

    14. DRDavid Rosenthal2:23:49

        So they haven't... Is it that they've pledged to do it, but they haven't done it yet or-

    15. BGBen Gilbert2:23:53

        I don't know what the timeframe is yet.

    16. DRDavid Rosenthal2:23:54

        I assume they're not gonna just dump all of it on the market-

    17. BGBen Gilbert2:23:57

        Unload a bunch of Exxon on the market

    18. DRDavid Rosenthal2:23:58

        ... all at once.

    19. BGBen Gilbert2:23:58

        Yeah, probably not. But to hear, you know, the, the John D's descendants pledging, you know... It's, it's this, uh, uh, delicious dichotomy of, of John D. believing that we should hold on to the Standard shares because they're gonna be so valuable forever, and hoard them. And now, you know, finally, we're at this moment in history where we're realizing how really terrible it is to burn all these fossil fuels, and even the largest holder of the remnant shares of the, of the Standard Oil Company is now saying, "It is time for us to get rid of these."

    20. DRDavid Rosenthal2:24:32

        Yeah. It'd be super fun to find, um... We, we meant to do this on this episode, but, uh, it's, there's too much other stuff to get in, and we're not experts, but maybe find some guests, do a special episode on, uh... Like, I'd love to unpack this, right? 'Cause, like, the, the oil industry, you know, like-

    21. BGBen Gilbert2:24:51

        Oh, I would love-

    22. DRDavid Rosenthal2:24:52

        Yeah

    23. BGBen Gilbert2:24:52

        ... to understand just current ownership structure.

    24. DRDavid Rosenthal2:24:54

        Yeah.

    25. BGBen Gilbert2:24:54

        Like, you know, w- what's the cap table look like?

    26. DRDavid Rosenthal2:24:56

        Totally. I, I mean, specifically, yes, all that, too, but also from an environmental standpoint. Like, yeah, fossil fuels are bad, but fossil fuels and oil upgraded the world technologically to where we are now.

    27. BGBen Gilbert2:25:14

        Right.

    28. DRDavid Rosenthal2:25:14

        You know, like [chuckles] ...

    29. BGBen Gilbert2:25:15

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

    30. DRDavid Rosenthal2:25:20

        Right. Right. So, like, what is... I don't know, what's the right way to think about this? [chuckles]

Episode duration: 2:44:56