How do you distil an epic biography of over 800 pages into a single takeaway? Especially considering the enigmatic nature of the protagonist. During his lifetime, John D. Rockefeller Sr. was the wealthiest man in the world while also being one of the greatest philanthropists, donating over $540 million (not adjusted for inflation). That legacy of philanthropy continues in the Rockefeller family to this day.
Rockefeller’s wealth was accumulated through the Standard Oil company which completely dominated the oil industry to such an extent it was broken up by the government in 1911. A monopoly in the truest sense, Standard Oil engaged in extremely aggressive business practices.
Rockefeller’s success in business and philanthropy largely comes down to his masterful implementation of Leverage. He had a intuitive understanding of when to go all in, and when to cut back.
In the early days preceding Standard Oil, Rockefeller and his partners would be scrambling for loans to fund their aggressive takeovers. He had no qualms about borrowing heavily, then reinvesting profits in a continual cycle of expansion.
Leverage is a double-edged sword however. Rockefeller never let it get the better of him. In 1907 a stock market panic gripped the country and Rockefeller bailed out several family members while providing millions to shore up banks and brokerage houses at risk of collapse.
The principles of leverage were also applied to great effect in the charities established by Rockefeller. In 1902 the General Education Board was established to support higher education, especially in the poorer South. Instead of focusing solely on building schools, the GEB also paid the salaries of special professors at state universities who found the best sites for schools and were able to drum up political support from local taxpayers. Through affiliations with local institutions and government the GEB was able to leverage Rockefeller’s donations.
Would Rockefeller’s wealth have reached such heights without leverage? Very unlikely. Leverage is a pillar of liberal capitalist economies. Applied wisely, it’s the source of all great wealth.
Don’t forget the importance of leverage beyond the financial domain. I’ve written a post on this here: Leverage Your Life.
You can buy the book here.