Standard Oil Part II

0:00 Dude, this is gonna especially kill you as Someone that travels even for like two and three day trips just with a backpack. Oh, it's so gonna kill me. Like you're never traveling that way again. I know. Like car seats and backpacks and I'll see you at Baggage Clean, my friend. Oh my god.

0:20 Who got the truth? Is it you, is it you, is it you Who got the truth now? Is it you, is it you, is it you? Me down

0:33 Another story on the way Welcome to Season 9, Episode 5 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. And I'm David Rosenthal. And I'm an angel investor based. San Francisco.

0:57 And we are your hosts. When we last left our hero. Villain? Unclear. We saw John D. Rockefeller.

1:07 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 eighteen ninety through their spoiler alert breakup in nineteen eleven. And you're ruining the punchline. 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.

1:44 into straight up abuses of power to grow their massive, massive profits. You mean like bribing elected officials? David, I Look, I don't want to spoil anything here, I guess other other than the breakup. Well, listeners, we want to say thank you.

2:02 Yeah. We have had a uh Pretty crazy month here acquired. Starting with the T S M C episode, we have just been on I don't know what it is. Y'all like semiconductors, but the show has been growing hugely

2:16 So much good stuff is going on. We were talking beforehand. Like we really do want to keep our intro shorter and just start getting right into the stories. And in particular, Thank you to our old listeners for spreading the gospel. We've really enjoyed the slow, methodical, linear growth. I think it's

2:32 helped us hone the product of acquired. But of course, like an explosive growth spurt is always a fun thing. So thank you to those of you for spreading the word over the years and welcome to all the new folks. And then Two. Unrelated to the episode, but special little fun thing to talk about.

2:49 We are about to have a new addition. To the acquired. Family. Yeah, not an on air edition, though. No, not on air. This is so crazy. By the time y'all hear this

2:59 Jenny and I will have had A little baby girl that we are expecting. Any day now. Honestly it was like coming down to the wire of recording this is very nerve wracking. This was almost a serious cliffhanger where we just did part one and then David disappeared. A bunch of my friends were asking me, like, hey, like So excited for you and the you know, the baby and all that, but

3:19 You're gonna get recording for part two in before the baby goes back. Well, David, congratulations. So excited for you and Jenny. Yeah, we can't wait. All right listeners. Now is a great time to talk about a new partner of ours here on Acquired, Lagora.

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5:48 And just tell'em that Ben and David sent you. Well, David This one we're gonna cover some companies that 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 they're pretty old companies and they're super merged together at this point.

6:09 Alright, so last We left our plucky uh Antiheroes. Then as you said. The Sherman Antitrust Act.

6:16 Everybody's Having a good laugh about it. The political money is still Flowing around like hotcakes. Or uh

6:26 Fine wine. Which of course Rockefeller didn't drink. And what was the language that made everyone feel like the legislation was DOA? Yes, the key modifying clause in the Sherman Antitrust Act. Was

6:39 In restraint of trade. So everything all combinations were outlawed if they were quote in restraint of trade. Which was not defined. Nobody knows what that means. It's like Will Farrell, like it's provocative. Gets the people going. Uh okay, so Speaking of going, standard oil is going. You know, we said this at the end of part one, like they've won. They've like one

7:04 Capitalism. They've won like America. Ninety percent market share. The whole kerosene market, ninety percent belongs to them. It's game over. But We did kinda hand wave over a

7:15 Bunch of stuff at the end of last time. One, there was some trouble brewing back in the home front back in the state of Ohio. We're gonna cover that. And then the big thing that we really just spent like fifteen seconds on last time was The whole, you know, like, Oh yeah, J D retires. What was going on with that? Why do why does he just walk away and ride off into the sunset?

7:33 Because he stayed titularly. His name was still on the door. Oh yeah. And I think he actually did want to walk away, right? Oh, he did. But they thought it would be like bad for the shareholders. Maybe maybe.

7:48 We'll see. Alright, so first Let's cover the trouble on the home front. Back in Ohio. So Right.

7:54 as the Sherman Act was passing. State legislature members in Ohio, remember they're like They're pretty pissed at Rockefeller and Standard Oil and like this goes all the way back to the Cleveland Massacre. He has a lot of enemies back home. So the state attorney general, guy named David Watson.

8:13 He decides That he's gonna bring A case. I don't think it was actually an antitrust case. But he argues that it's not.

8:22 Standard oil is in violation of the state. Corporation laws. In that day. R A Ohio corporation.

8:31 But they are conducting illegal Interstate commerce is what they allege. Standard Oil created this trust structure that was so brilliant. But this suit is like, Hey, this is just a sham in a front. You don't really

8:44 Transfer any assets here and you're actually breaking our laws. So It takes a couple of years, but by eighteen ninety two The case reaches the Ohio. Supreme Court. The state Supreme Court.

8:56 Which rules. Against the Standard oil. Which means That the trust has to be dissolved.

9:04 This is The letter of what this means, this Ohio ruling is like Game over. Uh But obviously that's not what happened. So how do they Get around this, this seems like a pretty big problem.

9:15 Well, turns out our standard oil friends. Have An escape plan. That they've already hatched.

9:23 that they have in their back pocket. It just For this very Occasion. So standard oil. Lawyers.

9:30 In the state of New Jersey. Now they have operations. Standard Oil has operations in New Jersey, but there's no Rockefeller and crew, they're at twenty six Broadway in New York, you know, it started in Ohio. There's no real reason why

9:45 headquarters, you know, they don't have any special attachment to New Jersey. But in New Jersey there actually is a loophole. in state corporate law at the time. That did. Allow New Jersey corporations

10:01 to straight up hold stock. In other out of state corporations. No even need for a trust structure. What Ohio is suing them for, New Jersey just allows.

10:12 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 a

10:28 Crazy remnant of The fact that we are the United States and Yep. Every single state to date had 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. So they've got this leap hole in New Jersey. What do they do? Boom.

10:47 They just reorganized the whole thing. And they transfer. All the assets. Into the The new

10:54 Standard oil of New Jersey. Or again, at least they make a public show of this. They tell the courts, they tell everybody like ah yeah yeah yeah. This is what we're doing. Whether they actually do this or not, we'll maybe see a little later in the episode. Doesn't matter though.

11:09 Problem solved, so as turn out. Right and Titan. Quote. The eighteen ninety-two overhaul was mostly shadow play. A charade to appease the courts.

11:19 The executive committee at twenty six Broadway, of course the you know, Rockefeller and and all the Flagler and all the cronies. Was formally dissolved. But The members lost only their titles. and were soon converted by the nicest legal cunning.

11:33 into the presidents of twenty affiliated companies. In standard parlance, These men were now quote. The gentleman upstairs. Or alternatively

11:43 Quote The gentleman in room fourteen hundred Nobody had to switch seats at the lunch table. And Rockefeller and his coterie rules as absolutely As before. Fascinating.

11:54 And so you've got this standard oil of New Jersey that By the letter of the law. Owns. Holy Or near Holy.

12:02 All these other At this point. twenty 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 Royal Trust are now the presidents of all those companies.

12:16 And they're working remotely from Manhattan. They were ahead of the curve. So this is great for standard oil. And this goes on for a while. But Uh slowly, but then noticeably over the years.

12:28 Everybody starts to notice. Something's a little Different about it. Rockefeller. He's always been like aloof, you know, famously

12:36 During meetings he would lie down on a Chase lounge and have his eyes closed and people would think he's asleep, but then he would jump in. Yeah, yeah, exactly. But he's actually listening like intently to everything. Like he's always been a little weird, you know, in how he operates. But super laser focused and engaged in the business. And he kinda starts like drifting away slowly and he seems weird.

13:00 He starts Not coming into the office every day. I think first he stops coming in on Saturdays and uh Then he like takes longer time off. He starts missing the Sacred executive committee or

13:13 Gentlemen upstairs, lunch meetings. And they're really All right. Two things happening to Rockefeller at this time. One is sort of like short term good, but

13:22 Long term bad. And the other one is short term bad, but long term good. So He kinda doesn't have anything left to prove at this point. He's outwitted everybody.

13:32 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. Literally, what more can I say here? Turn out rights. quote in explaining his retirement, which this would lead to.

13:46 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

14:02 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 of and had become merely irksome.

14:16 And he withdrew. So what you're saying is Rockefeller is really only like a zero to one guy and maybe like a one to ten guy and kinda like a ten to a hundred guy, but maybe not a hundred to a thousand guy. Or perhaps I mean, he's already at scale, so it's most like he's not really a thousand to eleven hundred guy. Like this might be part of what you're seeing with all these big tech CEOs now. It's like Bezos. Yeah, what what more can I do here, guys?

14:40 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. 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 a hundred thousand jobs, good jobs for people. And everyone hates me. I don't think he was

15:05 necessarily overly concerned with other people's view of him. Like he was not a externally motivated man, but that has to greet on you over time where you're, you know, working your ass off. And You believe you're in the right, at least the vast majority of the time, and yet The world.

15:22 Is Either. espousing incredible hatred toward you or begging you for your money constantly. I mean, yeah, he's just like it's just kinda not fun anymore. So he wants, we've alluded to this.

15:35 He wants and he tries. To fully actually resign. From The company. He talks to John Archbald, who he wants to take over.

15:45 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. But Archbald and some of the other executives. They're like

15:56 Your name on the d like it really matters, like I think it would be bad for the troops. And we've just had these, you know, brushes with The government. I think it really would help things if it just in title only. You stay involved, you remain

16:10 The president. Titularly. Of standard oil. And of course that means you remain an officer of the company and all the liability that comes with that and just keep the title, man. Yeah. It's really to honor you. Oh God. Oh man. I was gonna save this uh little quip for later, but I'll use it now of um

16:31 You swim with the sharks, you sleep with the fishes. Uh Archbold and Flagler and all these guys. 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 Standard Oil. Okay, so you said charity and like everybody asking John D for his money.

16:54 So this is the other piece of it that long term one of the greatest things to ever happen to America and the world, I think. But he's really, really struggling with what to do with his wealth and in particular

17:08 all these cause, you know, remember he wants to do great works, he feels called by God to he wants to make the money. To then do great works with the money. And he's been donating all along the way, kind of in these smaller chunks, but to everyone at church on Sundays, to the church to to maintain it. I mean, he's been charitable thus far. Yep. And it's kind of trained.

17:29 People around him who he gives to the 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.

17:39 And he might give you money. And he's super stressed out about this. Like I I would find that very stressful if just constantly all he's getting thousands of letters a week. Just asking for money. He's not into the like cool billionaire stuff. ideas. He wants to donate. And so he's finding it incredibly challenging that what he wants to do is find

18:00 high return on society ways. Two give this money away that align with his beliefs. So he's, you know, looking for Either good Christian values ways to give it away, or at least not anything that's antithetical to his beliefs.

18:17 The last thing that he wants to do is say, ah, there's too much inbound. I'm just gonna ignore it. This is his mission in life is to answer these, please. Yeah, Turnell found this great quote from him in uh I don't know if it was something he said to somebody or in his papers or whatnot, but I think this really says a lot about what he was how he was feeling. He so this is Directly from Rockefeller, about this time.

18:36 I investigated and worked myself almost to a nervous breakdown in In groping my way without sufficient guide or chart. through the ever widening field of philanthropic endeavor. It was Forced upon me.

18:49 To organize and plan this department. upon as distinct lines of progress as our other Well important to note here is the first time. The notion of philanthropic organization does not yet exist in America. There's no gates foundation. There's no playbook for like I'm going to start a 501 C3.

19:07 and employ people that work at this nonprofit that will figure out how to give the money away. It's Kinda random and scatter shot the way that everyone donates. And so there's not a playbook of like cool, I'll spin up this organization to give away my wealth. Yep. And he's doing it all himself. It's all on his shoulders. Folks might know who

19:25 either were familiar before or have gone and looked up John Dee on the internet since our part one. His appearance radically changes during this time, so He was um Yeah, kinda like Devil Bill. You got a lot of Devil Bill in him. Like a big guy.

19:40 You know, he's very like his personality is understated, but like he was, you know, a presence. He starts shriveling up, he's losing weight, he gets um Alopecia. He loses his hair. All of his hair on his entire body, not just like his head. His eyebrows, his mustache, he always had a big bushy mustache, the rest of his body, for the whole rest of his life.

20:00 His hair is gone. And it's all just'cause of this Stress that's weighing on him. And frankly, the incredible amount of work that he had done. Standard oil had some trying times. He's not new to stress. Yep.

20:13 This is really my interpretation here. You know, some I think comes from turn out, but um He loved every minute of standard oil. I think if it were just standard oil, I don't think any of this would have happened. I really think the weight of

20:27 This wealth and this philanthropy. What's like this albatross just like hanging around his neck. And let me give a quick scope for a moment. When you say the weight of his wealth, let's talk about his wealth so far at this point in time and then we can check in later and update the numbers. So In eighteen ninety, he was generating ten million dollars in annual income.

20:47 Just from standard oil dividends, from a variety of sources. Inflation adjusted, it's like thirty X today. Yeah. It's just insane. The other thing to think about is this is before the federal government enacted the income tax.

21:02 So this is ten million post tax dollars. Not even post tax. There's the concept of tax. Well, but it's like the notion of a post tax dollar today. Yeah. It's just straight money. He really just has this self perpetuating wealth because he owns Two hundred and fifty seven thousand. Of the nine hundred and seventy Three thousand

21:23 shares of standard oil. So he owns a quarter of standard oil. And he's generating these dividends. At this point in time, I think Rockefeller was trying to keep it pretty modest, these like eleven percent. annual dividends, but he himself was receiving three million in these annual dividends. He had twenty four million dollars invested outside of standard oil in things like railroads and real estate and steam ships, and like a dozen of each of these types of companies. He was invested in banks, Chase Manhattan. He had a very close relationship there and put a lot of money in there. I think by the time he actually retires

21:59 He's worth about Two hundred million dollars. Yeah. Gosh, I think this happened after he retired. In a roundabout way, he ends up Owning.

22:08 A significant Iron. mining and or deposit operation. That ends up getting rolled up into US Steel when JP Morgan rolls up US Steel. Not the bank, the person rolls up uh US steel. Which is of course Carnegie Steel.

22:24 that he's rolling up into. Yep. Exactly. And He makes Eighty million. On that transaction. Eighty of his two hundred million dollars of wealth come from this

22:37 US steel roll up that he was fortunate enough to have made an investment in this iron company. 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, US steel happens to him too. Man, strength leads to strength. For sure. I guess it applies to people too, and not just institutions.

23:00 And one last comment on this Rockefeller wealth. You know, I mentioned that we're still in sort of this eighteen ninety to eighteen ninety two time frame, but I mentioned that point when he's worth two hundred million in in nineteen oh two. The GDP of the United States at that point.

23:16 was twenty four billion dollars. So even at that point. There's still a decade before standard oil gets broken up. And he owns a quarter of it. He already has

23:28 one percent of the US's GDP as his personal net worth. already the richest person that will ever exist in America, including Bezos, Zuck, all these people. Yeah. Well it'll be interesting to see how things play out in the coming years.

23:43 But yeah, crazy. So he's got all this weigh in on him. He's trying to be the best. The greatest of all time. Trying to be the goat. The Tom Brady, if you will. In both business. And philanthropy.

23:55 Finally in eighteen ninety one he Not gives up, but says like I gotta find a a different way to make this work. And he convinces a man named Frederick Gates. Who he had been working with on the University of Chicago project.

24:11 To come. Moved to New York. And help him with the philanthropic endeavors that he's undertaking. And this is so novel. This ends up creating What leads to the Rockefeller Foundation, you know, a family office, all the stuff about how we think, Oh yeah, this is how it's done today.

24:27 This is where it starts. He starts this whole thing, he engages. He writes. A letter to Gates he says, I am in trouble. Mr. Gates. The pressure of these appeals for gifts.

24:36 has become too great for endurance. I haven't the time or strength with all my heavy business responsibilities to deal with these demands properly. I am so constituted that as to be unable to give away money with any satisfaction until I have made the most careful inquiry

24:53 as to the worthiness of the cause. These investigations are now taking more of my time and energy than standard oil itself. Either I must part With the burden. Or stop giving entirely and I cannot.

25:06 Do the latter. That sums it up right there. It's crazy to me that he's still the same old Rockefeller. He's obsessed with digging into every little detail, knowing how the money is going to be used. It's actually very similar to the Buffett comparison that we made earlier. If you think about the episode that we did with I think it's Berkshire Hathaway part two, when he starts donating some of his money.

25:26 Warren. was obsessed with analyzing the return on an investment. And so when he was gonna donate, he was obsessed with understanding How can I maximize the impact of that investment, which of course was this large burden for him. And so that's why he ended up deciding actually I'm just gonna go give it all to the Gates Foundation and they can figure out and then I don't have to think about it.

25:46 Whereas There are no foundations yet. So you have Rockefeller here. With a similar obsession. with making sure that every penny is deployed in the most optimal way he did his whole business career. And

25:59 How frustrating. Yeah. Well, and I think there's one key difference though between Rockefeller and Buffett. I think they both have this outlook. Bye. Buffett I think

26:10 He doesn't have a genuine like want to be involved in it. He has this outlook. This is the way it should be, but I don't have a passion to do it myself. Rockefeller has the passion to do it himself. I wanna run standard oil and I wanna

26:25 Do this myself, but I need help. So he brings in Gates. They basically invent philanthropy. Yes, they do. We're gonna have so much fun on this episode still to come, but

26:34 I think if there's one thing to take away from this part two, it's Part one was Rockefeller and Standard Oil invented modern business. The thing to take away here is They

26:44 Invent philanthropy. And coming out of that is like so many cornerstones of what modern life Is for All of us? Or almost all of us that are listening that we just take for granted.

26:56 Yeah. And we say invent philanthropy. They invent these sort of systematic and organizational giving away of money. They don't invent tithing. That's a biblical concept, but they really do invent

27:07 Modern philanthropy. Yeah. All right. So let's get into it. So the first Big project. Well,

27:14 All his life, even going back to his bookkeeping days. The first significant project that he and the family do is actually Spellman Seminary. What becomes Spellman College, the um H B C U women's College in Atlanta. in the early eighteen eighties, they financed the building of that. Sety Spellman. Spellman is the maiden name of his wife, Seti Spelman.

27:33 Yeah. Pretty amazing that that was the first major project that they do. Just to not overcredit, 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. And then building the campus there, too. It is the first liberal arts college for black women in America. And also worth pointing out about Rockefeller's character, which I find fascinating, because a lot of times you study people from this era. You know, they're a product of their time and so

28:02 they have a very low opinion of people that aren't white men. And Rockefeller does have some less savory parts in reference to comments that he's made about other ethnic groups here and there, but He went from pre-Civil War being an abolitionist, a big supporter of Lincoln, to really like carrying that through.

28:20 And then putting his money where his mouth is and really advocating for the rights of Black people after the Civil War. Yeah. It's almost silly to say this, but like for a rich white guy of the time, he's remarkably not racist.

28:34 Yeah. So much about him is remarkably modern. Like you say, he doesn't have a perfect track record on anything. And he doesn't have a perfect track record on mean of women and women's rights.

28:45 Most glaringly, I think. They he said he had five children. One died very young, or four children that survived to adulthood. The three eldest were daughters and then Junior was the youngest, one son.

28:57 The daughters are like, uh fine, you can do stuff, whatever, but Junior, you're getting all the money and you're gonna be my successor. Very similar to the New York Times story in that respect, where the money flowed through the male lineage. But As you say, remarkably striking how Close to modern. He wasn't his sensibilities.

29:14 So that was Spellman. That was the first big project. And then there's the university of Chicago. Which obviously is this amazing institution and achievement. I think this project is really what put him over the edge psychologically, though. This was hard.

29:31 So it started in the early eighteen eighties. There was this movement. To build a true Baptist University in America. And remember Rockefeller's Baptist. You know, all the Ivy League schools. started as religious or quasi religious institutions, but they weren't Baptist. With the exception of Brown. Brown had a lot of Baptist Influence and that's where Junior, Rockefeller's son, went.

29:53 But it wasn't strictly Baptist, I don't think. They wanted to build like a real Baptist University. And the Ivy Leagues at this point in time are becoming more and more secular. the Baptist educational community is sort of worried about 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.

30:12 And remember, you know, what did we say the first time about the Baptists, their evangelical You know, it's not about the wealth per se, but they want to recruit and So this movement is like we want to put this university in New York City. Attract everybody, the big city. America post war, et cetera.

30:30 J D, of course, is the perfect. benefactor for this, so he gets involved. It becomes A mess. Okay.

30:37 running the initiative a guy named Augustus Strong. Who's a Baptist minister. He ends up. Sort of scheming. Rockefeller's oldest daughter.

30:46 That's it. ends up marrying his son. So they get like very involved, but then the project falls apart and Rockefeller Withdraws his support. Awkward.

30:56 It eventually does morph. Into trying to build this project in Chicago. Instead. And the idea Is that

31:05 So we think Chicago's the Midwest, like it was the West then, but it was the biggest city in the frontier. I think it was already the second biggest city in America at that point. 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.

31:23 Oliver. The country. 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 higher crews. And then of course You have Rockefeller who

31:39 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 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. Any time anybody would insinuate well

32:02 This is a good way for you to make up for all the Standard Oil stuff. He would just 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 want to be seen as attempting to do that. So you're saying the opposite of what Rockefeller wants might be something like

32:28 Leland Stanford University or Vanderbilt University or Duke University. All wonderful institutions. I went to one of them. But uh Yeah, these are people who want their names on the building, so to speak. 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. And it wasn't just Universities.

32:53 Obviously. probably some of you are thinking like, Well, you're talking about how Rockefeller pioneered philanthropy and all that, but you guys are missing something. There was another wealthy white dude. at the time who was pretty dang Philanthropic.

33:07 Andrew Carnegie. And they were Big time rivals. You know, Carnegie did something pretty amazing. He created The

33:16 American public library system. Oh, I didn't know that. Yeah. You know how there's like a library in every That's Carnegie. He created those libraries and funded them. I assume that was taxes.

33:29 No. I guess it probably is funded by taxes, like public libraries. Well, I think they're, you know, government institutions today. But they were created and sort of given to America. And he also did uh internationally too, created a bunch of library systems. You know, one of the reasons For sure that he did that is How do you make sure your name goes down in history?

33:51 Get a plaque or a statue in front of a big building in every town in America with your name on it. That was not Rockefeller's style. Yeah. This is At the time sort of a nebulous concept, but he

34:05 Wanted what he was doing to really Be like Standard oil. In that You know, what did standard oil?

34:13 Dude, they had all of these different operations, you know, in different states, but also different companies. Remember they bought up all these other companies. And it wasn't that they absorbed them whole cloth. They kept operating these individual companies on their own with support from the mothership, but they were expected to be Profitable.

34:31 Have good tight operations. In a decentralized manner. They would just have to pass a quality bar for making sure that they had good reliable product and then they would slap the standard brand on it. Yep. And

34:43 The standard brain. What was standard itself? It was about setting the standard. It was about creating Doing this sort of thing. quote unquote research to create the best processes that would get disseminated out to the Decentralized organization.

34:58 That's what he wants for philanthropy. So once he brings Gates in, they start thinking about this. And they turn their attention to the state of medicine. And health in America and in the world.

35:11 They do something pretty amazing. So In nineteen oh one They decide to set up The Rockefeller Institute for Medical Research.

35:21 Yeah. New York City. This is amazing. They buy a farm on the east side of Manhattan. Overlooking the East River. In the upper sixties.

35:29 Literally in the middle of Manhattan there's this farm. And they set up this medical research institution there. And the idea is It's gonna be pure.

35:40 Basic Research. And Therno has this great quote of Rockefeller talking to his son to Junior. He says John. We have money.

35:49 But it will have value for mankind. Only if we can find able men with ideas, imagination, and courage can To put it into productive use. Rockefeller placed the scientists at this institution, not the trustees.

36:04 in charge of expenditures. And this was revolutionary. This was the institute's secret formula. Gather great minds, liberate them from petty cares, and And let them chase intellectual chimeras.

36:16 Without pressure or meddling. If the founders created an atmosphere conducive to creativity, Things would, presumably. Happen. So at this little

36:27 Research institution. Goes on. To become. Rockefeller University. Ben, had you heard of Rockefeller University before we did the research for this? I hadn't, and I've been blown away by the amount of medical research that's come out of it.

36:41 So a small sample. I'm just gonna like a read from Wikipedia here, if you go to the Wikipedia entry for Rockefeller University. These are the things that have come out of this. First to culture the infectious agent associated with syphilis. Showed that viruses can be Oncogenic.

36:58 Which enabled the field of tumor biology. Identified the genetic defect associated with arteriosclerosis. The leading cause of heart attacks in the US. Development of the practice of travel vaccination. Identify the phenomenon of autoimmune disease.

37:14 Developed virology as an independent field. Develop the first peptide antibiotic. Crazy. Showed that genes are structurally composed of DNA. Discovered blood groups. Just casual all the blood groups that they exist. Yeah.

37:28 Developed methadone as treatment of heroin addiction. And Devise the AIDS drug cocktail. Whoa, really? Yes.

37:37 So this institute it wasn't until the fifties that it would become Rockefeller University. So during Rockefeller's life he never Intended to create a university with his name on it. Yeah, here's a much later This is a quote from the Winston.

37:51 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. Boom. That is a pretty ringing endorsement.

38:09 Winston Churchill. Yeah. This is very far from What? All these other

38:16 Philanthropic folks. had in mind. It was diametrically opposed to the University of Chicago project, where that was super high overhead. Big deal, out of the gate, lot of pomp and circumstance.

38:30 And with the Rockefeller University or what would become that It was almost like the lean startup. Yeah. You've never heard of it. And they didn't make a big deal at the beginning and they didn't build a special campus. 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.

38:47 And we'll kinda see. Let them come here and work on what they want to work on. They go even further. So The first head of the institute who they recruited was this guy named Simon Flexner.

38:58 And Flexner was a Physician. Remember, we're talking about how modern Rockefeller is and how modern Standard Oil is and how modern this philanthropy is. Remember his father?

39:09 Bill. was a doctor, quote unquote. He was a witch doctor. That's what Medicine.

39:15 And practical sense looked like in America. You know, it was really closer to that at this time still. I mean, at best it was homeopathy. at best. Which Rockefeller was actually sympathetic to himself for a long time. But Gates and Rockefell and the family, they work with Flexner and they say

39:32 You know, we've done all this research in this science. How can we change how medicine is? Practiced. So they go to Hopkins. They take the Johns Hopkins model, which is What we know is medical school today. Four years.

39:45 Post undergrad. And they spread it out. They don't go create another university to teach another medical school. They go create medical schools. At all the other universities in America.

39:57 Before this other medical schools you didn't need a college degree. There was no standardization. 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. So they just

40:11 Start medical schools. Medical schools in the model of Johns Hopkins. And This creates you know modern practical medicine as we know it today.

40:22 Then they go even further. So They go. Back to Hopkins. And they say

40:29 We will fund creating a new school here. Attached to the medical school. A public Health school. So they create the first school of public health. at Hopkins and then they go to Harvard and they do the same thing there.

40:42 And it's all behind the scenes. This is so Rockefeller and so standard oil. And is this being sort of Managed by Frederick Gates. Yeah. Gates and

40:52 Now the Rocka fellers, like Junior gets very involved in this. And ultimately takes it over. But senior and junior engage, the three of them together. Along with the staff that they're building. They're driving all of this.

41:04 So listeners, as you can tell by now, standard oil part two is really like Rockefeller part two. I mean we're dancing in and out of standard oil here, but there's the scope Of what The Early

41:16 standard oil money allowed the Rockefeller family to do is just unbelievable. Yeah. sort of put a bow on all of this here. So they're thinking the whole time they're like how do we really

41:27 Institutionalize this. Seniors getting older. They've built up this office, this is unique. How do we make this something that's gonna perpetuate Indefinitely. they set up in nineteen thirteen, they get a charter

41:40 From the state of New York. 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.

41:49 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.

42:01 It's also because it's been privately held this whole time. We also don't have an exact figure of what the sum of all these different pockets of Rockefeller family wealth are worth. I mean it's kind of astonishing that we don't, but

42:16 We don't. There have been scholars who have tried to pour into this. And there are estimates, but It's tough. Yeah. I think that's probably where we should leave it, right, Ben? You know, Rockefeller

42:26 Standard oil, one business. He's won philanthropy, he's won like America. It's kinda nothing more to see here, right? You know, everybody lives happily ever after. Not quite. Uh not quite.

42:38 You know, Ben, you've been on the mafia movie uh and content kick, you know, the Godfather and all that in your car abouts. I think it's time to bring in the one um Good part of Godfather Part three. Just when I thought I was out. They pull me back in.

42:58 Yeah, I think there's a little more to the story. Yeah, you shouldn't have stayed president. Should not have left your name on the door. Here we go. The breakup. Of standard oil.

43:08 So let's review a few numbers before diving into the breakup story. So Rockefeller had sort of handed over to Archbold, you know. the day to day of running the company. That modest eleven percent dividend.

43:22 Archibald's a pretty big shareholder, all his friends are pretty big shareholders. That ratcheted up to thirty one percent in eighteen ninety seven and then thirty three percent. in eighteen ninety nine. So we are cutting Big.

43:35 dividend checks to all these shareholders. Which Rockefeller actually was not happy about, paradoxically. 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. But shares do change hands. But shares do change hands, and so every day in the newspaper a share price is published.

43:59 At which it's kind of the reference price people are deciding to trade. It's like a direct offering. Yes. The share price went from one hundred seventy six dollars in eighteen ninety six. To then three years later four hundred fifty eight dollars. So the stock is running.

44:15 As they say. It's a nice uh Tesla like move there. Yes. Which Not really. The stock movement that we're seeing today in meme stocks is just a totally different multiple than we're talking about here, but unbelievable three year run from one seventy six to four fifty eight.

44:31 You then sort of look at that. Dividend policy. How much of that, you know, is there in total? From eighteen ninety three to nineteen oh one they paid out two hundred and fifty million dollars to shareholders.

44:43 Keep in mind Rockefeller is making twenty five percent of that. He's upset. But he's also making Just a crap ton of money. And so The thing to sort of land on here is

44:55 This is all before the automobile. This is all still the kerosene business. And there's this seminal point right around eighteen ninety eight. Where Cars start happening.

45:09 It starts working. We go from eight hundred cars in eighteen ninety eight. to then two years later eight thousand 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

45:27 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

45:38 the internal combustion engine. Yep, yep. So Right around that time. When

45:46 There's two parts to the breakup story that we're gonna talk about here. They're both good. First. Everybody. One is the breakup.

45:56 Which is good. Very good. And two is the automobile, which is Very good. And they happen on the same parallel paths.

46:06 So In eighteen ninety seven. right as this run up in the auto industry is starting. And right as J D had fully tried to walk away. From the business.

46:18 Good old state of Ohio. They bring Charges. Again. Back to the uh the top of the show here.

46:26 They like Okay, you guys moved to New Jersey, but like still you're still Breaking our laws. We still don't like you. And so what they do is Government official gets a hold of some.

46:38 old trust shares and they try and go redeem The shares of the trust. They're like oh well, if you did what you said you were gonna do, I should be able to Go get shares in Standard Oil New Jersey, and then the the holding company of underlying, you know, all these other

46:51 Companies. And they can't actually do it. So they're like, Aha, you guys, you defrauded everybody. So The bring a case. Rockefeller actually gets called to testify in this case.

47:03 And he puts on this great show. He pretends to be this doddering old man who's senile and like can't remember anything. It's amazing. Oh when he's on the stand, it's like he's wandering through the mist. Oh I can't remember. Oh it's been uh he goes from the like one of the sharpest, brightest people to ever live in American history. to seemingly having no recollection of really how anything kinda came together. Yep.

47:30 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. The state doesn't actually win the case. But it's kind of a Distraction it starts to move public opinion. Which is what

47:46 really counts, the court of public opinion. Against standard oil. But they win and everybody's like, Oh, okay, fine, like You know, we're gonna make it. Also

47:56 At the same time as this case is going on, there's a presidential election happening. Uh it was actually when it started in eighteen ninety six was the election. And uh It's a really terrifying figure. From Standard oil's point of view.

48:09 running for president here. William Jennings Bryan. B. celebrated the OG populist. His thing was um America was gonna get crucified on a cross of gold, right? That was his uh Yep, populism and silver.

48:23 The two things I remember from American history about him. Motherhood and apple pie. That and he was like, around forever. I was like, How is this guy still alive? He was in the American national political scene for decades and decades and decades.

48:37 Hm still alive. Hm. J a striking choice of words there. So Brian loses, of course. Doesn't become president. And who does become president the best person that standard and all these other trusts of JP Morgan and Carnegie and everybody could imagine William McKinley.

48:53 The celebrated Republican from Ohio. Yep. Good old boy. Standard contributed a cool quarter million dollars.

49:03 Everybody is just Pumped. 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 Wild Bill.

49:15 Pulled him out. And he's like deep. in the family with these guys. He sends a telegram when McKinley wins that literally reads God is in his heaven, all is right with the world. That's a gloating telegram if I've ever seen one. Oh my God, there is fist bumping. Going on all over the place.

49:36 McKinley is just like literally sent from God here from standards perspective. Fast forward a couple years though. 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

49:52 Home. The actual home. In New York. Is in New York when the feisty new governor of New York starts making some noises. About coming after the truss in particular.

50:04 The oil trust with standard oil. None other. And Theodore. Roosevelt. The new

50:12 Governor. Oh. New York. Which I didn't realize what he did before becoming president, and I didn't realize he was involved in bringing this suit against Standard Oil. Ooh was he was he was very involved. If uh Rockefeller was bad, there's a chance Theodore Roosevelt was badder.

50:31 Oh, he was the ultimate badass. Once again, Andy Sparks on Twitter, the best. Reminded me. The Theodore Roosevelt a little like all the glee that we had in part one for Rockefeller and Standard Oil and Flagler and Mafia Dons and everything that they're doing. Gonna have just a equal glee on the other side. When he was unsuccessfully running for president.

50:52 Later in life. He gets shot before a speech. Literally gets shot in the chest. Oh, that's right. And he gives the speech anyway, right? And he's on the way to deliver the speech. He's being driven. He gets shot by a botched assassination attempt.

51:08 He's got a bullet. In his chest the driver starts to divert and take him to the hospital and he's like Oh no no, young man. I'm gonna give that speech. He goes to the the venue. And he sort of starts the speech and he's like I I'd like everybody to be as quiet as possible.

51:27 I don't know if y'all realize that I was just shot. And he gives the speech and then he goes to the hospital. Oh, Teddy Roosevelt's the best. There's a great David McCullough biography about him. Is it mornings on horseback? Is that the Oh I think that that might be it. That sounds familiar.

51:44 I've been to his uh estate in uh Sagamore Hill, I think it is called. It's on Long Island. Huh, cool. It's super cool. Teddy also has, you know, by modern standards a problematic figure in his all of his hunting and, you know, all that.

51:58 My favorite is there's a trash can made of an elephant hoof. Oh my God. Crazy. Alright, so this is the guy that is gonna challenge John D. So

52:10 Standard. And the business community in Marcana. Brilliant. Genius solution to their new problems from Roosevelt.

52:20 In the state of New York. Remember, they like control the Republican Party at this point. They're not going to be able to do Get Roosevelt nominated. As the vice president on the ticket.

52:31 For McKinley's reelection campaign in nineteen hundred. This will get rid of him. This will get rid of him, like send him to be VP, you know, it'll be like great for his political career, but you're gonna get him out of New York and Everybody knows VPs do Basically, not'em in the corner.

52:46 Put him in the corner. Now, of course, McKinley wins in a landslide again, problem solved, everybody's high fiving. What year is this? This is, you know, the fall of nineteen hundred when um The election happens, it's all great. McKinley gets reinaugurated. Uh in nineteen oh one.

53:03 And then he gets shot and he dies. Oops. Uh unlike Roosevelt, he does not Survived. Did the secret service exist yet? Are they bad at their jobs or are they just not around yet? That's a good question. I don't know. Such a wild world. And also that this would like continue for

53:21 Ever, you know. Oh not for ever, but W Reagan got shot, right? Like was he the last president to actually be Shot. That's a good question. Yeah, they seem to catch'em early now. Yeah.

53:33 Goodness. Obviously we don't I don't mean to make light of McKinley. being shot and dying, but This is literally the worst nightmare. Possible.

53:42 Suddenly public enemy number one or private enemy number one for Standard Oil is now in the White House. Yes. Now In The White House. So T R I mean. I'm sure everybody's upset about the assassination one episode.

53:56 Once he, you know, gets done with mourning, he's like Oh you M Fers. I've got you. Right where I want you now. And

54:07 He's about to get some serious ammo because right at the same time, literally the same month. The T R is inaugurated as president September. Nineteen oh one. A amazing

54:20 Pioneering. Woman journalists. Named Ida Minerva. Tarbell. Who's a writer for McClare's magazine.

54:29 National magazine. It's gonna be important, national magazine. Starts working on a new project that she pitches to The editor, McClare. The history of standard oil as a book. to come out in serial form in

54:43 The magazine. Ida has an ax to grind from uh her own past. This is The birth of investigative journalism, as we know it today. Daniel Yurgen, the great historian who wrote the prize, which so many people have recommended after part one that we

55:00 That we read. Ben, you you read a little bit of it. Yeah, I I quickly realized like, Oh, this is mostly about US Saudi Arabia relations and we are so not gonna get to that in part two. Yeah. So we'll we'll have to cover the prize and you know the rest of the international oil history another time. But he Yeah, celebrated historian. He calls this book, The History of Standard Oil Quote.

55:21 Maybe the single most influential book on business ever published in the United States. Amazing. Tarbell and her colleagues at McClur's become known as the muckrakers. You know, you've heard the term muckraaking journalists. She's them.

55:36 Do you know who coins the term muckreakers? Ooh, no, I don't. Teddy Roosevelt himself. No way. Yes. So great he gives a speech he talks about about how great they are. Yeah, so she was this amazing character now. You said she might have some Agenda.

55:51 Yes. A little bit of personal history to color. her point of view here. Yeah, so where is Ida from? You know, she's like this international woman. She lives in Paris for a while, but she's, you know, based in New York. She's writing for this Aerodic magazine. But her roots are actually somewhere. Sort of close to home in this story. Kinda western Pennsylvania area. Yeah, yeah. You know, like the wild, you know, east back in the day.

56:15 Yeah, she grew up in Titusville. And her dad was an oil refiner, right? Not only did she grow up in Titusville, while the beginnings of the oil industry were happening. Her dad was a producer, like a a driller.

56:31 Who got totally flattened by Standard Oil and was one of the leaders of 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.

56:45 Hm. Brother. Goes into the oil business. And her brother becomes a senior executive at Pure Oil. Which is the most legitimate competitor to standard, right? I don't think we talked about this in part one. Part of the strategy was

57:00 They got to like ninety ish percent market share in refined oil products coming out of the US. They didn't want to get to a hundred percent'cause they wanted to keep up some charade of competition. It's like having Bing out there in the search engines. Exactly. Sorry, Bing. So the Bing of Standard Oil was pure oil that they allowed to survive. And guess who's a senior executive there? Ida's brother. William Walter Tarbell.

57:25 Ida's brother. By the way, I do have the actual stat that we pulled from um Pitchbook sent us this great tear sheet that standard oil controlled ninety one percent of oil refinement in nineteen oh four and eighty-five percent of even the final sales. Wow. Monopoly. Uh you said it. She's got this uh agenda, one might say.

57:48 But she is a very serious journalist, so she spends a year Just researching. She wants to find the real history. Like nobody's uncovered how this actually went down. Well, and she starts by going to Titusville to rekindle her roots and remember what it was like and stew up some feelings of anti uh Rockefeller before embarking on doing this. So turn out rates. From the perspective of nearly a century later.

58:13 Ida Tarbell series remains The most impressive thing ever written about standard oil. That is high praise. I mean Yeah. Essentially late like so much ink is spitz filled, but for Chernow to say This is the most impressive thing ever written. I almost ordered the book, by the way, but I was like this is gonna be way too hard to read.

58:31 Well, we'll just take Tiernow's word for it here. I trust him. He continues, a tour de force of reportage. that dissects the truss's machinations with withering clarity. She laid down a clear chronology provided a trenchant account of how the combine had evolved. and made the convoluted history of the oil industry comprehensible.

58:52 In the dispassionate manner associated with McClur's She sliced open America's most secretive business. And showed all the hidden gears and wheels. Turning. Inside it.

59:04 It remains one of the great case studies of what a single journalist Armed with the facts. can do against seemingly invincible. Powers. And this is like a

59:15 Freaking nuclear bomb goes off in standard oil and around the country. Like this captivates America. It was like the Elizabeth Holmes trial is going on and like Theranos. That was nothing. compared to this. Right. It's like that trial meets the half decade long pitchforks against Facebook and the privacy plus the anti Amazon sentiment. Like There were no equivalent companies to standard oil. There were other trusts that rose up and sort of were uh following their business practices, but no one as big or as bad or as loathed.

59:49 By America as Standard oil trust. It runs for nineteen monthly installments. So for like almost two years. I don't have the exact numbers here, but the circulation of McClure's

1:00:02 triples or quadruples during this time. Like it grows by hundreds of thousands of people. And remember It's national. This is new, you know, like in the past standarded You know, they they didn't really care about the press, right? Because it was all like, you know, local stuff or whatever. Like we can crush all this. So there's a delicious piece of irony in this being a national publication. We do have this unbelievable, unprecedented period in the early nineteen hundreds where you have

1:00:28 Golden era of media, of magazines, of newspapers. And when you think about it, well, what's the media business model that was the winning one at the time? It was advertising. And so You got

1:00:39 All these corporations and trusts that are making all this profit And what they're doing is they're advertising to potential consumers in these publications. Who now have all these consumer eyeballs and they're like, We gotta get really

1:00:53 epic stories to tell. And so it literally the profitability of the business model that standard pioneered that is funding the organizations that are now coming after them. Oh, the parallels today are are so good. I was on um The wire cutter the other day, which is

1:01:09 Fantastic. Love the wire cutter. Yeah, owned by the New York Times. They have affiliate links on the wire cutter. Great acquisition. Great acquisition. To Amazon.

1:01:18 No, Amazon, Facebook, all the like the press today is coming after these companies in many ways, you know. Rightly so, although not like they Don't have their own agendas too. They're taking advertising from them too. It's crazy.

1:01:31 So crazy. So In the history, Tarbell. uncovers and documents exactly how the Cleveland Massacre went down. If you remember from part one, we read a sort of fictionalized quote. Of how

1:01:44 standard approached the independent refiners in Cleveland with Hey, you got two choices here. We can crush you or we can buy you out at a valuation that we ascribe. That quote came from Oh yeah. This history. We wouldn't know these things. All the stuff we said in part one, we wouldn't know without Ida because the only other real account is

1:02:05 Rockefeller talking to his official biographer, William O. Inglis. Which was never published during the time. Right, toward the end of his life. He only sort of breaks character once or twice. And It's really not that interesting or not that spicy of a story. And still he says, You know what?

1:02:24 Actually, there's too much here. You should just store it in the family archives. And so like it doesn't come out and it end up ends up just being a source for future biographers in the future after they get the family's permission. It really is Ida Tarbell who discovered all the stuff that we've talked about. I mean there's lots of big stuff that she uncovers. The fact that there were secret subsidiaries that were nominally, you know, people thought were competitors of Standard Oil, but were actually owned by Standard Oil.

1:02:48 She finds out that they're still currently at the time engaging in illegal practices with the railroads. There's a whole thing about how um They sneak papers out of I think the Cleveland office of Standard Oil. Showing that uh the railroads are sending

1:03:06 information about competitor shipments to Standard oil offices. That comes out in the piece. So the fact that this was a national magazine. Standard and Rockefeller, when all this comes out, even though the antitrust cases are going on.

1:03:22 They don't do anything. You know, their playbook, they've never been faced with something like this before. And the standard response is Silence. They don't respond, they don't mount a counter campaign, even though there's a lot of stuff in Tarbell's history that's wrong that they very legitimately could have taken issue with. Yeah, that strategy works until some boiling over point. reminds me a lot of Apple. If you think back to

1:03:48 AntennaGate is a great example where like Apple doesn't comment on rumors one way or another because if they say that a rumor's not true, then it means that it substantiates all the ones that they don't comment on. But then you have something like Antenna Gate, where It wasn't as big a deal, but it was a deal. And so Steve Jobs flies back from vacation on Hawaii with his family to hold a next w you know, same week press conference about it. there is some boiling over point where like if you don't say something, it is way worse. Up to a certain point saying something.

1:04:17 Makes you look guilty. But then past a certain point. Not saying something makes you look guilty and standard Past this point. So not saying anything made them look

1:04:28 Super freaking guilty in the eyes of the public. You know, and to be fair, they were guilty of a lot of stuff. So that's how they respond to the Tarbell piece. Yeah. Then on the Roosevelt.

1:04:39 Pressure front. Roosevelt's first term goes by. And miraculously they manage to escape by. Nothing like major happens in terms of Breaking on the antitrust front. Even though Roosevelt wants it to.

1:04:52 So when he's running for election. in the nineteen oh four campaign, which would be the first sort of mandate for him. From the people. Standard tries to run the same playbook they've always run. They cozy up to him.

1:05:05 And they're like Teddy Let's all be friends here. We've got a lot of money. You can do this is big for you. This is your first selection on a national stage. You could really use our support. And Roosevelt's campaign managers, they're like Sure, we could use the money.

1:05:25 We'll take the money. And they do. And standard wasn't the only trust to do this, all the other big trusts Did this too. Oh, this is one of my favorite quotes in Olive Titan.

1:05:34 Which is actually from Henry Frick, who was an executive at US Steel. About what happens here. Frick summed up the situation best. After the election.

1:05:44 With the quote. We bought the son of a bitch. But he wouldn't stay bought. Oh wow. And who's Frick? I can't remember if he was running US Steel at the point or if he was a senior executive at US Steel. So not standard oil. That's right. I think

1:06:01 Yeah, he's the one that like got Rockefeller and Rockefeller Junior on the Board of directors of US Steel. Uh yeah, I think that's right. They were all buddies. Yeah.

1:06:12 So after the election. Which Roosevelt wins in a landslide'cause he's got the support of business behind him. Now he's like, All right, I've got the mandate. I'm gonna make this happen. So right after he's reinaugurated in February nineteen oh five,

1:06:28 Congress. Passes a unanimous resolution. urging individual states. to conduct antitrust investigations into standard oil. And immediately a whole bunch of states.

1:06:40 Spring cases, including Missouri. Which is where everything Eventually ends up going down. Great state of Missouri. They subpoena.

1:06:49 J D. To come. And then testify in front of a grand jury in these investigation. G D he he obviously doesn't want to do this, so he goes into hiding. He literally goes on the lamb. At the same time, the state of Ohio

1:07:04 They go a step further. They issue a warrant for Rockefeller's arrest. It's so crazy. Like it's the world's wealthiest man. It's not like he's leaving the country or anything, but he's just trying to like stay super low key about where he is. He disappears like there are process servers trying to serve him with the subpoena and the warrant for his arrest all over the country trying to track him down. They're jumping over the fence of I think it's Potantico Hills, his residence in New York. There's some servant or something who sees this person leap over the fence and fall and they're like, Can we help you? Uh so he won't even tell his family where he is. The standard oil executives don't know where he is.

1:07:44 It's amazing. He just disappears for like two years. During this time he's sending letters with no return address. Constantly. To twenty six Broadway. To Archbold and to all the other directors of Standard Oil being like

1:07:57 Guys. I actually want to resign. He's sending his letter of resignation perpetually every week. It's crazy because at the same time he's building all these medical universities and medical schools that are attached to all these other colleges. And these thousands of letters are coming in asking for money, and he's dodging the government because they keep trying to get him in court.

1:08:19 He's like a Bond villain. It's amazing. It's crazy. It's so great. So uh Archbold. They refuse to let him resign. They're like, Mm. Nah. I don't know where you are. Sorry, bud.

1:08:31 Well and at this point those guys are a lot of them are sort of defending themselves and throwing Rockefeller into the bus. They're saying, Oh Standard Oil may have acted in this illegal way, but like I certainly didn't. You even have executives at Standard Oil Talking and giving first party accounts to Ida Tarbell. To Tarbell, yes. To try and shield themselves. Exactly. So the primary guy who talked to Tarbell and did this was a executive and I think a board member.

1:08:58 Named Henry Rogers. And Snow finds this quote. I think he said this to Tarbell. This quote from Rogers says, quote We told him, Rockefeller, GDP That he had to keep the title of president. These cases against us were pending in the courts.

1:09:14 And we told him if any of us had to go to jail, he would have to go with us. It's the freaking mafia. It's amazing. So This is it. You know, Rockefeller, he can stay on the run, he can stay on the lamb as long as he wants, but like The jig is up.

1:09:31 This is like the end of the Sopranos where uh I forget whatever the situation was, but like Tony's getting whacked here. Standard oil is getting whacked. We don't know if Tony was whacked. Yeah, right. Okay. We we don't know, but Didn't the show's producers say And then they unset it. Oh, and then they unset it. They said, Oh, that's not exactly what I was referring to.

1:09:50 Interesting. Interesting. So June. Of nineteen oh six. Roosevelt directly directs the US Attorney, like at a secret nighttime meeting he calls the US Attorney General.

1:10:03 Into his office and he's like I'm directing you to open a federal Antitrust. investigation into standard oil. And then on November eighteenth, nineteen oh six, that suit is filed.

1:10:16 In Missouri. Federal antitrust suit against Standard Oil on the grounds You know what the grounds are. They have violated

1:10:28 The Sherman. Antitrust Act They are in restraint of trade. Which is really interesting because It was definitely true in eighteen ninety. It was true through the eighteen nineties.

1:10:42 But their dominance was fading at this point in like the late nineteen 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. Yep.

1:10:59 California. And who was it that said that uh if there was oil found west of the Mississippi, they would drink all of it? Oh, I haven't heard that one. 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 if anybody found any. So standard oil strong suit was not Texas. And of course the Permian Basin would become where

1:11:22 Tons of oil ended up being found. Yeah. Texico or what became Texaco and Gulf, I think also came out of Texas. Yep. Yeah, the monopoly was Fading anyway, which probably was the other factor that made There are three things. One

1:11:38 Roosevelt. Bought the son of a bitch, but he didn't stay bought. To Tarbell and the Micrachers in public opinion. And three, like legitimately they weren't that Yeah, they're still. the most powerful company in the world. But

1:11:51 They weren't as powerful. So I don't want to flash forward too far here, but I do know that in nineteen eleven When the federal antitrust law.

1:12:01 When things go down. When things go down, which I'll just leave there for a second. Their market share had eroded to sixty four percent. There were at least a hundred and forty seven other refining companies competing with it in the United States. At that point, John D had left the company. And so you do have this really interesting sort of scenario where I don't know.

1:12:22 Did it need to be broken up at that point? Are we chasing demons of twenty years earlier? I think we'll hold on that for now, but I think that's the thing to sort of noodle on at this point. A bunch of like crazy drama happens between nineteen oh six and nineteen eleven, but it's all a sideshow. It just takes that long for all this to get to the Supreme Court. And Then

1:12:41 Judgment Day. Maybe Fifteenth. Nineteen eleven. US Supreme Court.

1:12:47 Chief Justice Edward White. Reads the decision. And this is like standard oil V United States, right? Yes. This is the big one. Yeah.

1:12:57 And standard in the oh gosh, what's the circuit below the Supreme Court Federal Court of Appeals, maybe, subapellate court. Sure. I should know this as child of two lawyers and J's two parents are also lawyers.

1:13:11 They'll be yelling at me listening to this. Uh anyway. Standard had lost. Every step of the way. And then the final appeal, of course, is to the Supreme Court. Supreme Court upholds the decision of

1:13:24 finding against standard oil. They are indeed And orders them. I don't know if it was the Supreme Court that ordered this remedy or if this was what had been ordered at the lower courts and they upheld it.

1:13:38 To be irrevocably. Cannot undo this. Broken up. Into thirty four Separate companies.

1:13:46 And it has to happen. Within the next. Six months. It's a fast time frame to be able to disassemble a company. Seriously. Especially because all of the, you know, previous

1:13:56 Changes in corporate structure at standard oil. It may or may not have actually happened. Like they said it happened, but like did it really happen. But this no, like they gotta do this this time. There's some tech debt. There's some legal debt to go and uh undo here. Did you read about Rockefeller's reaction when he gets the news. Is this when he's on the golf course and a messenger just brings it on like a little piece of paper? So for this is the best. All right, listeners, now is a great time to tell you about a longtime friend of the show, Vanta.

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1:16:11 So Rockefeller, he had come out of hiding at this point. One of the crazy things that happened in the interim between nineteen oh six and nineteen eleven was um Roosevelt got really pissed about this. There was a judge in Chicago That almost blew up the whole case. He subpoenaed Rockefeller and was willing to 'Cause he wanted him to come, you know, testify and was willing to grant him criminal immunity.

1:16:33 If he came to testify, so Rockefeller was like, I'll take that deal. Oh, and he couldn't be like tried again for double jeopardy then? So this would have been the one He couldn't be criminally prosecuted, after this. Huh. Sidebar. But this is ridiculous what happens. So he does the whole daughtering old man thing again. I don't know. Lost my way. What? Who are you? What's oil. What's oil? The judge gets nothing out of him. But he's so pissed.

1:16:58 At the end of the process, I forget what the exact case was. He Levies A twenty nine million dollar fine on standard oil. Which is like

1:17:07 By like two orders of magnitude, the highest fine ever given to a company ever, at this point. That's crazy. Yeah. Is that over a billion dollars today? I don't know, it was a lot of freaking money.

1:17:19 I mean now like companies get fined all the time, but this was I think it was one, if not two orders of magnitude, higher of an intervention than the government had ever done in private enterprise before. So what does this do? This sends the stock market Plummeting. Because everybody's like, Oh crap.

1:17:36 The government's gonna start coming after all of these companies. And they already knew the government wanted to, but this is the first time it was like oh crap, this has teeth. And so there's a panic in the stock market. Oh, does Rockefeller buy Rockefeller not you know, he buys the dip, quote unquote. That'd be the the easy joke to make here, but Even more. He offers to bail out the freaking country. 'Cause now he's come out of hiding. Oh, is this the panic of eighteen ninety three?

1:18:00 This was in like nineteen Gosh, I don't know. eight, nineteen oh nine, sometime around then. Sometime between six and eleven. Got it.

1:18:09 But there's a huge panic. Everybody's pressuring him, like, Hey, you're the wealthiest man in America, you know, say something. When w you know, when there's a panic now and Buffett comes out and reassures everybody. Never bet against America. Yeah, it's never been stamic. Rockefeller does Buffett one better. He comes out and he's like I'll backstop everything. Personally.

1:18:30 So he restores confidence in everybody. Just the great irony here. That's the best sideshow of this whole thing. So at this point he can't be tried Criminally. Yeah, he's gonna get off scot free.

1:18:42 For the rest of his life. By nineteen eleven he actually had left Standard Oil. Well, so when the breakup happens in December His resignation is It's accepted at that point in time and then he rides off into the sunset. The great thing, we'll talk about this in a sec.

1:18:55 He just becomes the happiest man on earth after this. He's so happy. He's golfing, he's vacationing, he's becoming more of a socialite. All of his worries about philanthropy, that albatrosses off his shoulders. He's created this institution, he's done these great things for the world. Doesn't have to worry about standard oil person literally he's gotta get out of jail card free for the rest of his life. So Messenger comes. He's on the golf course on the fateful May fifteenth. Nineteen eleven.

1:19:23 Not a care in the world. He's golfing Actually with the local Catholic priest in Terrytown. Uh they were they were buds. He loved this private golf course that he owned because he could take people out and restrict them from ever talking business. And so he got to be like jovial and social exactly on his terms. Yeah, like he doesn't talk business anymore. He just like after he gets the get out of jail free card. Literally he's the happiest man in the world.

1:19:51 So they're on the golf course, he gets the messenger running up. Oh the Supreme Court ruled against standard oil, it's gonna be broken up. This is how the legend goes. He gets to the news. He turns to the priest smiling and he says

1:20:05 Father Lennon, his name was Lennon. Have you some money. And everybody in the golfing party is like uh Geez, John. I mean, I know this is bad that standard's gonna get broken up, but you're not gonna be bankrupt. You don't need the Catholic priest here and Terry T you got some real estate assets at least.

1:20:21 That you can sell off and like, you know, support yourself in your old age here. Father Lennon's like uh W wh why do you ask, John? Rockefeller says Because if you did. You should buy some standard oil stock right now. And he's so right. This is the great irony. This is the best.

1:20:43 Best thing. That ever happened. The standard oils. Share price. Not at that exact moment. Of course, at that exact moment the share price went tumbling. But in the long run.

1:20:53 To Rockefeller the line, and it's true is that he made more money in retirement and after standard oil was broken up than he did while he was working. Turn out rates here. This was literally the luckiest stroke of Rockefeller's career. Precisely because he lost the antitrust suit.

1:21:09 Rockefeller was converted from a mere millionaire. with an estimated net worth of three hundred million in nineteen eleven. Into something just short of history's first Billionaire. So remember he owned a quarter.

1:21:23 Of the Company trust. You know, whatever the thing. And he basically never sold shares. He was always a buyer from other people. Anytime he had a dispute with a partner or another board member, I'll buy you out. And because his Mafia cronies.

1:21:40 Archbold and Flagler. I think Flagler was gone at this point, but they kept raising the dividend against his wishes. He's just getting this Geyser of cash every year. And that was financing all the philanthropy and whatnot. So yeah, he wasn't selling. He still owns a quarter of this dang thing. When the breakup happens.

1:21:57 So it's broken up into thirty four Companies. Standard oil of New Jersey, the main one, but then all the other, you know, operations in the diverse states and refining and whatnot are separated out. And when they get separated out. I'm pretty sure they become publicly traded companies.

1:22:13 And so the financials The books get opened and people can see What ludicrously good businesses these are. So yes, you can see what ludic the financials but also not just the financials, the assets. They own all sorts of crap in these things. It's not just like the oil operat they own.

1:22:32 God knows what. The all these like secret assets and all these, you know competitors and operations and upstream and downstream stuff that People thought were competitors but really weren't. Railroad cars, all this stuff. Ability to make take metals and turn them into pipes and plumbing operations and it's crazy. Yep. So December first

1:22:56 Nineteen eleven. The breakup Takes effect. Thirty four companies, they all get publicly listed. I don't know if it's on the New York Stock Exchange or but on on a stock exchange, you know, for the first time.

1:23:08 I don't think immediately, but over the next year. Standard Oil of New Jersey. goes from a initial share price of three hundred and sixty dollars a share to five hundred and ninety five dollars a share. Over your Year one.

1:23:21 Standard oil of New York goes from two sixty to five eighty. Standard oil of Indiana goes from thirty five hundred to ninety five hundred Sure, and so on and so on. Close to tripling. Yeah, all of these

1:23:34 companies literally newspapers across America. 'Cause I mean this is like this is just selling papers here, all this news. They start running daily box scores. I don't know if it was alongside the sports section or whatnot. Keeping track of Rockefeller's net worth. So yeah, I I hope that that Catholic priest had some money to go buy the dip. I love that that's the stock tip too. He's like all right, everyone's about to know what a great business this is. Oh Jesus says buy the dip. Another one of the just amazing things here.

1:24:02 So of course, you know, we finally have to separate out. these assets, you know, everybody on the executive committee that met for lunch every day, you know, the famous thing. That were titularly the presidents of all the separate companies. Now they actually are So they can't meet for lunch anymore.

1:24:16 Gotta separate out. No more lunch meetings at twenty six Broadway. Instead. At J D's suggestion, you know, sort of like voice from the golf course. He's like, How about y'all meet for coffee at ten thirty instead?

1:24:30 So they continue meeting every day at ten thirty. Just giving the finger to the government. It's like the old line about, you know, when a European, you know, monarch dies and they say, you know, the king is dead, long live the king. The monarch is dead, long live the monarch. Standard oil is dead. Long live standard oil. That is exactly what happens here.

1:24:49 And so it's interesting in thinking about why. At least in theory. why the government wanted to break up standard oil. It wasn't that they wanted to necessarily Again, in theory.

1:25:00 Punish. the owners of standard oil because that they wildly failed at. It was literally like we want to increase competition. And Theoretically. It will benefit consumers.

1:25:11 But again, I really want to underscore that for the vast majority of cases, and let's take out the like weird supermarket stuff they were doing and some of the terrible things they were doing at the railroads. It really all was just a benefit to consumers. Yep. So you ended up with consumers generally pretty happy from all this standardization over the years, competitors super pissed. And now the shareholders of standard are all just wildly rich beyond their wildest dreams. It's actually quite interesting to think about the people that like took the deal in the Cleveland Massacre. If they had held, that would have gone really well for them.

1:25:45 So Chief Justice Edward White. Sure. presided over the verdict and you know read the decision. He was actually like a very conservative figure and very Business friendly.

1:25:56 So he had had this sort of pet theory and this was chance to like write this into law. You know, remember there was the modifying clause on the Sherman Antitrust Act was in restraint of trade. And then it's like, what is that? Oh, so this was an ability to define what restraint of trait is. I think it was called like the reasonableness.

1:26:14 doctrine or the reason something like that. That he wanted to be like Yeah. Trade.

1:26:21 within reason. And this is what you're talking about here. Let's be reasonable about this. It's not actually that bad for customers. Yeah. So interesting. And Roosevelt was pissed about this because he wasn't the president anymore by the time this happened.

1:26:34 Roosevelt and like Tarbell and the Muck Breaking crew and all the progressives. They wanted all the standard oil people to go to jail. They wanted to end this practice forever. And of course that's not what happened. And they wanted to make it so other people were afraid enough that they would never try it again in the future. Yeah. And it ended up being this

1:26:51 Very middle Not even middle ground, like very business friendly. quote unquote conservative final Approach to it. The government had a really big investment.

1:27:01 in this where we talked about how Standard Oil is the really the first modern corporation Roosevelt sort of set the playbook for the modern billionaire. We've talked about how he invented modern philanthropy. This is also massively expanding

1:27:17 The might of the Justice Department in a way that the US had never seen before. 'Cause in the eighteen nineties The entire Justice Department staff in Washington was eighteen lawyers. In order to go after standard oil, they massively, massively staffed up. I assume it just never went down from there.

1:27:39 So there is Another reason, too. Why? The breakup. Ended up being great.

1:27:46 For standard oil and for its shareholders. And I don't think the government was thinking about this probably at all as a consequence of the breakup, but I think does speak to There's like a really important lesson here about the danger of Too much

1:28:02 centralization and consolidation of power in a single entity. And that is that. So we've alluded all along to the fact that It was automobile sales and the going from kerosene to gasoline that was really gonna Take.

1:28:15 Standard oil and the whole energy industry. To the moon, to the next level here. That's not what Rockefeller and the cronies and all the people that were having lunch at twenty six Broadway or coffee. That's not what they were built for. They were that was like Mm. You know, they weren't against it, but

1:28:30 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 Thing. A lot of the sort of young Turks within the organization that were focused on this new market felt stifled. So the breakup allowed these people to The new blood.

1:28:49 To rise to the top. So Chernell writes. While the old guard at twenty six Broadway mourned the trust's passage. Some young Turks at the operating companies were overjoyed. One of these extraordinary mavericks is Doctor William M. Burton.

1:29:04 Of standard oil of Indiana. thought that Roosevelt had performed an inestimable service. After the nineteen eleven dismemberment, he said. It was felt all along the line younger men were given a chance. Burton patented an exceptionally valuable process in nineteen thirteen.

1:29:24 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 that To reap incredible windfall.

1:29:38 Royalties. And you know, if you remember from we were looking up on the last episode what did standard of Indiana Amaco. Amico. And it was all this, you know, innovation was alive and well again within

1:29:54 the oil industry here and within all the standard sort of children. So standard of IL. Becomes Micro. Yeah, can I talk about the spin outs?

1:30:03 Yeah, let's talk about'em. Alright, so the spin outs of the thirty four, many of them you'll know. To say the least. Especially if you grew up in America, but even if you didn't, you'll know. Yeah. The first one

1:30:15 was Standard Oil of New Jersey, but its name in the spin out was not Standard Oil of New Jersey. It was the Eastern Seaboard standard oil. Or the acronym. SO E S O

1:30:28 Which is a little Cute wink wink nudge nudge. by Rockefeller and Crude say, and we're still SO. I just love these our antiheros here. Like they're just such characters. The um Whole thing reminded me, uh I think this was when I was growing up.

1:30:44 Maybe you two. The SO Yeah, so I'm not going to be able to Which I had no idea what that referred to until recently. The marketing slogan was uh put a tiger in your tank. Do you remember that?

1:30:56 Oh no. Yeah, it was so good. And Literally, I mean like This breakup and allowing these Companies to flourish. Puts a tiger in everybody's tank here. Yeah, so SO becomes exon.

1:31:09 Standard oil of New York. becomes mobile. Standard oil of Indiana, as we mentioned, becomes Amoco. Standard oil of California becomes Chevron. Boom.

1:31:20 Standard oil of Ohio, which became so high, then got bought by BP to become B P America. Heard of them. The Ohio Oil Company, which became Marathon, and then also the Speedway brand. The Atlantic refining company, which got shortened to ARCO. Part of that was spun off and bought by Sinoko, and then the rest of it was acquired by BP, and then ironically they sold.

1:31:49 that brand over to Marathon. So a lot of internal dealings here still. Continental oil. became Conico, which of course is now Conico Phillips. And the South Penn Oil Company

1:32:02 became penzoil. Oh, I didn't know that one. I missed that one. Oh, that's cool. Cause there were all these other oil products that they were Developing and marketing. Yep.

1:32:14 Man, I didn't know pen's oil was a standard oil uh child. And here's the craziest thing is if you trace it all the way back. And you look at The standard oil of New Jersey and standard oil of New York. Exxon and mobil together accounted for more than half of the whole standard oil business prior to nineteen eleven.

1:32:32 So Exxon Mobil really is the primary recongglomeration of the majority of the original standard oil. Yeah. So fascinating. There's almost like a evil laugh that I want to have after that line'cause it is, you're right, it's delicious and it's a century in the making.

1:32:49 Yeah. Well, Should it be an evil laugh? We'll debate in a second. Let's put a bow on uh On this whole thing, shall we?

1:32:57 I wanna end with just illustrating standard's wealth here. More in particular Rockefeller's wealth, because we've talked about a few figures over time. One of them was the 1902 audit that showed he was worth about two hundred million. Then around 1911, the Around three hundred million. Well He actually with all the stock pops in the split up.

1:33:17 And The move into the gasoline market for internal combustion engines, his personal wealth by nineteen thirteen, just two years after the breakup, was nine hundred milyen dollars. So in twenty twenty one inflation adjusted dollars, if you literally just do the inflation math.

1:33:34 That's about twenty five billion. But the more accurate way to look at it would be to say, actually that's like three percent of GDP. which was still only forty billion dollars, relative, of course, to twenty one trillion.

1:33:49 Today. So If you base it on GDP. That figure is about four hundred and seventy billion dollars. Yeah. The figures I had in my mind and that I think are on Wikipedia are in that sort of

1:34:03 Three hundred to five hundred billion adjusted net worth range. Yeah. I do think we should think about him like he was a four hundred and seventy billionaire. not in terms of purchasing capacity, but in terms of societal impact. the analogy doesn't scale all the way back. Like if you think about

1:34:20 When the GDP of America was a thousand dollars. If someone had five hundred of that. Sure, they controlled half the wealth in the nation, but they didn't have the purchasing power that someone who would have ten trillion dollars today would have. So it's an imperfect way of scaling it, but There is no one who controls two to three percent

1:34:38 of the nation's GDP in their pockets. the way that Rockefeller did. in nineteen thirteen. So let's think of him Like a four hundred and seventy billionaire. Well, and here's the thing, he had already given away about half of his wealth at that point. Yes.

1:34:53 That's the nutty thing is you already had 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 look today like Bezos and Musk are about a hundred and ninety two hundred billion. You've got gates at a hundred and thirty billion again from all the philanthropy. About Tide with Zuckerberg.

1:35:13 Buffett these days has about a hundred billion again from the philanthropy. So if you think that Rockefeller He sort of had the potential to have like seven, eight hundred billion. in terms of the amount of sort of influence of the nation's wealth that he controlled. Which probably would be about all of the other moguls today combined, right? That is exactly where I'm going.

1:35:33 Perfect. Well and that's the perfect analogy. He kinda was that. I mean, yes. There was Carnegie. There was JB Morgan. There was a generation earlier, there was Vanderbilt, there was Stanford out in the West and like all that. Yep. For sure.

1:35:45 But does the scale like yeah, nobody could touch Rockefeller? So we should transition into sort of the family generational wealth from here, because there's a few interesting things about it. So by the time of his death in nineteen thirty seven, His remaining fortune, of course, which is largely tied up in various family trusts, was estimated to be about one point four billion. In nineteen thirty seven dollars.

1:36:07 So that's about one and a half percent of GDP. It's about three hundred fifteen billion of today's dollars. The Rockefeller family is is now seven generations in. Uh there's about a hundred and seventy errors.

1:36:20 According to Forbes, they have a fortune of about eleven billion in twenty sixteen. So obviously been doing a tremendous amount of philanthropy. I do think that eleven billion, it's kind of an unknown we can estimate it all we want, but like there are multiple Rockefeller family. trusts and philanthropies and wealth management groups and you know, it's a maze. There is literally a business and a business ecosystem.

1:36:47 around the Rockefeller family. Which is crazy. I actually went to college with several of them. Rock Co is a a wealth management firm. for the Rockefeller family. Venrock, the venture capital firm. 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

1:37:11 investors in none other than Apple Computer. That's right. That's right, it was. Just Amazing how full circle this comes.

1:37:19 Alongside Arthur Rock. Yep. So this really bucks the trend of have you ever heard the phrase, David, shirt sleeves to shirt sleeves in three generations? Mm. I didn't know the three generations part, but I've heard shirt sleeves to shirt sleeves, yeah. It's like the general idea that because of taxes and

1:37:36 The fact that this is when you have errors and they have errors and they have errors, 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. Yeah, it has not been the case. But the I think the other thing. Obviously not in every case, but It's pretty hard. Hard quote, nobody would shed any tears, but you know, maybe you should. It's a hard psychological

1:37:59 Set of cards to be dealt. Yes. Boohoo trust fund of multi billion. Right, but It wreaks havoc on people's psychology. How do you go live a regular life when you know you have that in the bank? So I just find it fascinating how like the shirt sleeves to shirt sleeves thing hasn't really been true. There's been no real like major lawsuits that we know of or feuds or public scandals. They're out of the news. It's this family with a hundred and seventy

1:38:23 Ersatz. That's still Wields. Tens of billions of dollars at the very least. is involved in all these projects and you really never hear about'em. Yeah.

1:38:32 You know, again because like when we were talking about the philanthropy, like Rockefeller didn't want his name on stuff. So you know, all these universities, all this stuff, you know, you don't know that it's Rockefeller money. But then there's the one great exception of Rockefeller Center. Yeah, so I got the list. You ready? So this is what I spent my last hour doing before we recorded. So we talked about Spelman College, we talked about the University of Chicago, we talked about Rockefeller University and all the unbelievable medical breakthroughs.

1:38:58 We talked about the grant that he made to Johns Hopkins that ended up funding the discovery of a cure for scarlet fever. Which is pretty cool. And then so here's this continues. From nineteen fifteen to nineteen forty, Junior financed, designed, and directed the construction of a network of carriage roads through Acadia National Park and

1:39:18 and then refinance the whole restoration of the park in nineteen forty seven. So it's this really interesting thing where Junior Whereas senior kind of left his mark in medical research. He decided that that was something that he could do that was Not

1:39:34 necessarily religious, but moral. And so it aligned well with his religious views and the stamp that he wanted to put on the world. In fact, uh Rockefeller was so well known for being the medical donor that When Carnegie got approached with projects like this, he would go, I do believe you're looking for Mr. Rockefeller. Rockefeller put his stamp there. Junior was a naturalist.

1:39:54 he really wanted to endow parks and things like that. So Check this out. Junior was a huge part of the donation to restore and recreate Colonial Williamsburg. Yes. For anybody that's been there. Yep. That was the main funding of the recreation of Colonial Williamsburg. Yep.

1:40:10 Congress in uh nineteen twenty six authorized the creation of the Great Smoky Mountains National Park. But there was no nucleus of federally owned land to actually develop it. So Junior contributed five million dollars in 1926. The US government then kicked in two million, and private citizens from Tennessee and North Carolina pitched in to assemble the land for the park piece by piece. Junior led the round the government participated, basically. Yes. Then you've got Abby Aldrich Rockefeller, who I believe is she Junior's wife. Junior's wife, yeah.

1:40:44 Oh, you gonna talk about what I think you're gonna talk about here? The MOMA. The MOM of Modern Art in New York City was her brainchild. Which The land that the moment's on, the buildings, the space? Yeah. Those were the first Rockefeller Mansions in New York. Oh, no way. I think they tore down the buildings and the the MOMA is a new building there, but that land Was

1:41:04 When The family first moved from Cleveland to New York. They bought two mansions. Next door to each other, one for senior and one for junior.

1:41:14 Right there, and that land, I think, is now the MOMA. Wild. Well, and then nearby there there's obviously Rockefeller Center. Which was a junior project. Rockefeller Center is fascinating, right? Because it was a business project. It was junior's main

1:41:28 business project and everybody thought he was crazy, like who would want to be headquartered. Then he recruited G E to be an anchor tenant. And RKO, like and the Radio City music hall. The reason it's called Radio City Is he recruit all the media organizations to come headquarter there. Now not to mention NBC. Yep, yep. You know, thirty rock, like Rock Valley Center. The ice skating rink. Senior loved ice skating. Oh yeah, that was his winter thing instead of golf. And I think ice skating even started earlier in his life.

1:41:58 They did, yeah, back in Ohio. 'Cause he was like a big fitness buff. But interestingly not for um vanity purposes, for longevity purposes. He wanted to live to be a hundred. He came close at ninety eight. But he was, to put it exactly the way that I think he thought about it, afraid of dying. And so anything that was for health and longevity was sort of virtuous to him. Silicon Valley Raiders team could have a

1:42:21 Field day with Rockefeller if they were to go do like a retro version of Silicon Valley. All right, so the party continues. In nineteen forty five, Junior donated eight and a half million dollars, which I think is something on the order of a hundred million today. to just go buy the land for the UN. This is right after World War Two, that would become where they built the UN building in New York.

1:42:45 That's awesome. I just donated it. He continues, the area that is now Grand Teton National Park was privately owned until the nineteen thirties when Junior started buying up the land that would eventually He would donate. to become much of the park, especially the actual Jackson Hole area. I really could go on too with large areas of the Redwood State Park in California or Embarcadero Center, the buildings in San Francisco. No way. Yeah. Again, more of a business project, less of a philanthropy necessarily, but that was a Rockefeller investment.

1:43:18 This family you know, this man like and the company And company and then companies. B. Foundation.

1:43:27 Uh institutions, you know, and then the family that he begat. Like every aspect of American life was touched. And modernized by The Rockefellers. It's insane.

1:43:39 Yeah. You're playing right into my What I try to say at the top of the show and what I was alluding to when uh our world is a Rockefeller shaped one in in more ways than just standard oil. Alright, well, there's definitely some playbook and other things that I want to talk about here, but first let's talk about power.

1:43:57 So we reviewed I think we probably did the seven powers justice in part one and we don't need to do it again, but I do want to make a Point. Especially'cause we sort of teased it in the intro of where did they have legitimate business practices and where did they kind of run a foul. Where the initial

1:44:15 power that they had in the business. really came from like their operating excellence. creating economies of scale. innovating clever production inventions and in refining But then later on they clearly leverage their scale position to like

1:44:30 Put competitors out of business, screw over partners like the railroad. try and gobble up as much of the value chain in really sort of nefarious ways. And eventually they just straight up used racketeering and bribery. to sort of ensure that they're

1:44:45 very profitable business at ninety percent market share could continue. One fun little sidebar that I missed in the notes on that. Literally was straight up bribery, you know, I think we've only talked about Political campaign donations. Archbold was

1:44:59 He was really somebody When he took over He actually put legislators on the payroll. Not campaign donations, just like you get fifteen thousand dollars a year. You you get twenty thousand dollars a year.

1:45:13 To do what we want in perpetuity. I think the best way to put it is probably they became unsatisfied with what they had accomplished and they just kept pushing. This is probably the right transition point. to what would have happened otherwise. I mean what if the trust hadn't gotten broken up. And I think we should examine it from Standard oil shareholders perspective.

1:45:34 Which I think we're all gonna say like what would have been worse. consumers perspective and then competitors perspective. And in part, maybe even before what would have happened if they hadn't been broken up, maybe we should examine what would have happened If

1:45:48 They hadn't gone into nefarious business practices. What if They just were the leading innovator. and they had the best operational excellence and they were operating at large scale so they could have

1:46:04 legal scale dynamics out at play. Yeah. You know, it's funny, my thoughts on this It's like uh I don't know, we were talking about boiling points earlier in the episode. I think up until a certain point.

1:46:16 As we hopefully laid out in part one. What they were doing was I don't I don't want to bring morals into it. But It was a chaotic

1:46:27 Point. in both American history and in the industry. It was chaos. In the oil industry in the early days. And Kinda, you know, is Rockefeller's argument, right? We would have all beat each other to death.

1:46:41 And Maybe somebody, maybe we would have emerged the winner eventually, but we accelerate it's like um foundation, you know, for people who've read uh Asimov's foundation, right? Like The whole premise is There will be chaos for fifty thousand years.

1:46:55 Or one thousand years if we have the seldom plan to like Get everybody through to the other side and it'll happen much faster and suffering will be alleviated. That's what standard oil did in the early days. I would say that there is a lot of merit to that. But once that happened

1:47:11 Especially after Rockefeller left, you know, Archbold and the other cronies, they kept using those tactics even after they'd already crossed the point. And that was bad. They were insatiable. Even some of the more nefarious tactics, you're right, probably led to good things for everyone, especially for the people who did end up taking standard oil shares rather than being run out of business. But then

1:47:33 At some point. it doesn't accrue benefit to anyone in the ecosystems it took to keep pressing your advantage. And the damning Piece of evidence here.

1:47:43 I don't have the numbers in front of me, but it's in Titan the turn now. Quotes. It's actually just a small part of the book. I wish he'd spent more time on it. At a certain point, you know, just like Uber and Lyft today are all monopoly or duopoly type businesses, at a certain point they did start raising prices on consumers.

1:48:00 And in those early days, you know, it was great for consumers. They kept prices artificially low, et cetera, et cetera. But once they did wipe out all the competition and Rockefeller was against this, but the cronies started doing it. They started raising prices and exploiting monopolistic pricing power. So at a certain point I think it did become At least not as good for consumers. Consumer harmful. Yep.

1:48:22 Okay, so what if the trust wasn't broken up? Yeah, it would have eventually become worse for consumers. Well, the competitors thing is interesting. So we've already talked about shareholders. It was great for shareholders that they got broken up. For competitors, It's interesting to me that there was already a very legitimate competitive set emerging by nineteen oh six, and certainly by nineteen eleven, when they only they had less than two thirds market share at that point. Yep. I don't think competitors were having a hard time

1:48:50 at this point in history because of the maturation of discovery and drilling technology that we realized there was just way more oil out there than we realized. You drill into the earth's crust. Under most countries in the world.

1:49:05 And you're gonna find some oil. And I think That would have eventually driven down their market share even if The

1:49:16 government hadn't broken them up into thirty four constituent parts. So we thought Uh we were debating like How do we grade this? What analysis do we do? You know, we've talked a little bit about powers here, but we mostly covered that in the last episode You know, we're gonna end with a grade here in a minute, but

1:49:32 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 story, and we love telling good stories. It's like Duh, this is happening again now, you know, with tech. Or let's at least say it's happening in social networking.

1:49:49 where they're being rolled up together. It's happening in Actually that's the chief offender. Well and Amazon too and e commerce. Yeah, but not in this like rolling up way. Facebook is the most direct comparable thing to standard oil. Apple has plenty of offenses in potentially abusing their app store privilege.

1:50:08 But I think that's a little bit of a different thing. Yeah. Certainly on the um Antitrust sentiment in the public, though. I think that expands to all of Big tech, right in the government and in the public, not just social networking. Yep.

1:50:21 Somehow not Microsoft this time around, but yeah. Yeah, right. They already had their day in court. But yeah, so anyway, we thought this was a really apt thing to do right now. And we thought for this section we would kinda just brainstorm and go through and catalogue like All right. What are the similarities and differences? Let's enumerate them.

1:50:38 Between The standard oil story. And the situation with big tech today. This is the one I hadn't thought about this before we recorded, but as you were saying The market had already started to change.

1:50:51 by the time the breakup happened. And the competitors were emerging in a way that nobody thought They could before, and that was because of marketing condition. I think that's happening now too. Are you saying that Calibra is not gonna win web free? I doubt it. Uh I seriously doubt it. But yeah, like if we rewind two to three years ago Talking to LPs about Venture capital fundraising.

1:51:15 two to three years where this was like really acute. There were conversations happening where A legitimate concern was why Should we invest in startups right now? Because Big tech is settled. Well, and they're gonna eat everything. Between Facebook and Amazon and Google and Apple and 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.

1:51:39 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 of billion dollars. It seemed dire out there. Fast forward to today. And like I don't know about you, Ben, but I am wildly excited about

1:51:56 investing in startups and not in big tech companies. Oh, it feels like the same way that it was at the beginning of the mobile era. It feels like this explosion right now in particular web three. And a lot of crazy wrong stuff out there, but there's so much heat and energy and it's such a new paradigm. Yeah. And It's not just crypto on web three.

1:52:16 How many independent multi billion or tens of billions of dollars public SaaS companies are there out there now. Like Amplitude just went public. There's a new five to ten billion dollar IPO every other day right now. A few years ago that would have been unimaginable. So true. And it's funny you said a few years ago 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 analysis done on

1:52:42 Are we done creating new big tech companies forever? That was January of twenty twenty? Oh wow. Hadn't been that long. Wow.

1:52:53 It might be time for another acquired postulate. I don't know what we're gonna name this one. Ooh. Lay it on me and I'll decide. Alright. New postulate. Hard it here first.

1:53:02 I'm sure we're not the first people to say this. Any time somebody declares the end of something. This game is over, this market is over, blah blah blah. They're wrong. That is the bottom of the market and it is all going up from there'cause it is never the end. What was the year that the uh inspector general of the US PTO said that everything's already been invented? That's one of these best quotes ever.

1:53:28 So good. Yeah, it's a really good point. Oh, and just real quick, all those LPs in twenty. Oh my God, I'm just thinking about this. I I love LPs, uh as a glass, but like

1:53:39 twenty sixteen, twenty seventeen, twenty eighteen, when they were nervous and like worried about this and not wanting to invest in venture capital. Oh my God, those were the best years to be investing in venture capital. That's a great point. Well, I wanna make a little bit of an argument against regulation. Or at least the nervousness that regulation gives me.

1:54:00 Regulation. by definition will always limit innovation. Because it says you can do less stuff in the world. Yeah. It's prescriptive.

1:54:08 Yes. And A lot of times that's good. A lot of times that stuff shouldn't be done. People's creativity can lead them to do destructive things. But

1:54:17 It does seem to be the case that paradigms break monopolies. And so we may not need legislation. Or the courts to do it. And that these things will play themselves out.

1:54:31 By the fact that Twenty one years after the Sherman Antitrust Act. Standard Oil's monopoly position was already unseeded by the time the ruling came down. If there's so much value destruction going on by a monopoly that we can't afford to wait it out, you know, that's one reasonable argument to either have law or courts.

1:54:52 Change this. But Paradigm shifts happen, new technologies happen and they will Always unseat incumbents. And in particular, in this one, it was the advent of electricity.

1:55:03 That unseated kerosene. And the creation of the internal combustion engine and the massive desire for gasoline. that sort of undid the invention of electricity because suddenly there was this massive market available. But then right around the same time again, oil's discovered freaking everywhere, and we can drill it very easily everywhere. So you sort of have this massive destabilizing force driven by technology.

1:55:25 in our ability to go find this product elsewhere. Yeah. I like that. So I guess where I'm going with that is it may not always be necessary to go trust bust, as long as we're willing to sort of wait it out and if there's coincidental timing of a new technology C change.

1:55:41 Which I think is the argument that is at least so far kind of carried the day in terms of what's actually happened. With big tech, at least in America. Not in China, but in America of um You know, guys, these are like bammers and you gotta be really careful about wielding them. And maybe it's better to let it play out a little longer.

1:56:02 Before you bring the hammer down. Yeah. This is why I was saying that Facebook is the most similar thing to Standard Oil, and just to be extremely blunt about it, Facebook buying Instagram and WhatsApp is a lot like Standard Oil's Cleveland Massacre and you know, the subsequent roll up of all these other refiners elsewhere. Oh, the parallels are exact, right? Literally Zuck went to

1:56:23 There's back in the day and was like Love what you're doing. Here's my competing product that I'm launching next week, you know? Yeah. Here is the ultimatum. And I'm wondering if

1:56:35 The Internet. and software makes it so that acquisition is not the only way. Like growing horizontally via acquisition is not the only way. to play Standard Oil's playbook.

1:56:47 Should we be concerned About Apple. Or about Amazon's

1:56:55 anti trusty stuff that might look like standard oil in a different way that is not rolling up. Mm-hmm. Those are more sort of like platform concerns. Platforms either competing with the vendors on them. or perhaps abusing their position in the value chain to take too much of a rake, or as Bill Gurley would say, a rake too far. You know, obviously the thirty percent thing with Apple.

1:57:17 Those I think our Different. than what we're talking about here with standard oil. Well, if anything, I think standard oil

1:57:24 Actually was a I don't know, what's better or what's worse depends on your perspective, but to my perspective, played these aspects better.'Cause they could have taken a rake too far on so many things. But as we talked about in the first episode. They didn't want to

1:57:38 put all their partners out of business. They could have crushed the railroads under their foot at any time. But they didn't want to, they wanted them to profit and thrive. Ooh, maybe actually that's more like Apple. Where like Apple's keeping the take rate where it is, they're gonna take an insane amount of the profits of the work of these partners. But they want to keep the partners around. Like Apple's not gonna they're like, Well, we don't want to go build every app. So it's good to have a developer ecosystem building apps, whereas Standard Oil is like, Yeah, not sure we wanna actually be the railroads, but it's really nice to extract as much value from them as we can. Yeah.

1:58:09 I don't know if I ever even knew the numbers. Well enough to say in terms of the relationships with the railroads. But I feel like I don't know, Apple. Maybe this is just sentiment, but like God, that thirty percent feels really unjustified. Whereas

1:58:22 I don't Think standard with the railroads and their other partners. wanted the partners to feel like they were taking an unjustified Piece of the pie.

1:58:33 They wanted them to know that they could at a moment's notice. But uh I think they really did value warm relations, so to speak. Hm. Interesting. Alright, before we move on to a couple

1:58:47 Fun little last tidbit to know you have been before we grade. Two more. Similarities I wanna highlight. Resonances between the standard oil and the big tech situation. One is I'm just struck by

1:58:59 That Quote about Standard oil of Indiana at the end and That the sort of young Turks in the ranks Thought it was great when the breakup happened. I think part of what was going on there is

1:59:11 No. Old guard became so ossified in their view of how the world worked and We're seeing reality anymore. And I think about not all the big tech companies, but uh again to pick on Facebook, this really seems on the outside. to be the case with Facebook right now and like the Facebook files and everything going on with the Wall Street Journal.

1:59:30 It really seems like leadership there. Again, w whatever what's right or wrong when the Tarbell articles came out. And Rockefeller and everybody was like, Oh, we don't need to say anything here. They're playing this wrong. I bet there are a lot of people deep within the organization that are actually doing the work who are like

1:59:47 We should have a different strategy here. But Can't have their voices heard, you know? Anyway. That's one.

1:59:54 The other one, similarly that I wanna This sort of dual The angelic and the less angelic side of the press and people and journalists and their motivations. This is playing out.

2:00:08 Obviously real time in so many places in tech. Yes. The press is doing great, super valuable, incredibly important investigative work. And yes, they are also humans. And the New York Times hates Facebook. Yes. They're also humans with agendas. That was true then and it's true now.

2:00:27 At the end of the day, all of this is a bunch of humans doing things that they are incentivized to do for whatever biological, chemical reasons, they're incentivized to do them. Yep. Yep. So The standard trademark was doled out as a part of the breakup to the 34 child companies, and each own different set of states that they can use it in.

2:00:49 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 drive by and be like, wait, I'm sorry, what?

2:01:13 Standard. It lives. It lives. It's at uh Market and Van Ness, right? Yep. Yep. You j have and you're like Boom.

2:01:21 That should be a Chevron station, but it says standard on it. So weird. such a fascinating it's fun to like see a remnant of American history on your commute. Yeah. The second one

2:01:33 is a very interesting Harbinger of what's to come. 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.

2:01:50 Is The oil companies, in particular ExxonMobil. In December of twenty twenty, just this last year, the foundation pledged to dump their fossil fuel holdings. So you have the the original oil money. Pledging divestment. Yeah, interesting.

2:02:08 So that'll be fascinating to watch how that plays out. Is it that they've pledged to do it, but they haven't I don't know what the time frame is yet. I assume they're not gonna just Dump all of it on the market all at once. Unload a bunch of Exxon on the market, yeah. Probably not. But To hear

2:02:23 John D's Descendants pledging. It's this Delicious dichotomy 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, finally we're at this moment in history where we're realizing how

2:02:39 Really terrible it is to burn all these fossil fuels. And even the largest holder of the remnant shares of the standard oil company is now saying it is time for us to get rid of these. Yeah. It'd be super fun to find. We meant to do this on this episode, but

2:02:53 There's too much other stuff to get in and we're not experts, but maybe find some Guest do a special episode on uh I'd love to unpack the oil industry. Oh, I would love to understand just current ownership structure. What's a cap table look like? Yes, all that. Two.

2:03:09 But also from an environmental standpoint. Yeah. Fossil fuels Uh Bad.

2:03:15 But Fossil fuels and oil. upgraded the world technologically to where we are now. Quality of life, no doubt. would not be what we have today if not for all the fossil fuels we burned. Right, right. So like what is

2:03:30 I don't know, what's the right way to think about this? And we're not gonna change overnight. That's the other thing. It's like should we all be using clean, safe nuclear? Yes, we should. And It's gonna be a long time before that is the case. Yeah.

2:03:42 So More fun acquired energy stuff to come in the future. Yep. All right listeners. Now is a great time to thank our longtime friend of the show, ServiceNow.

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2:04:58 ServiceNow already runs more than a hundred billion workflows annually and trillions of transactions for more than eighty five percent of the Fortune five hundred. So when companies need a place to govern AI at enterprise scale, they're building on a platform at the center of how their business already operates. And in a future, that isn't going to be one AI, it's going to be thousands of AI agents working across every function of the company. But the question is. Who's managing them all? So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely at scale, go check out service now.com slash acquired and tell them that Ben and David sent you. Alright, grading. I thought a fun way to do this would be

2:05:39 So the very classic acquired episodes very early on, especially, were grading an acquisition. So if you are the shareholder of a big company, and you use some of the assets of that big company to buy the little company. How good of a investment or a use of those proceeds was it to go buy that little company? I thought for this one it would be fun to say Well

2:05:59 I'm the shareholder or a shareholder of Standard Oil. And let's say the government's not involved, and I as the management team of the company are recommending that we break this up into thirty-four constituent parts. And like we're not being forced to do anything. This is just the way that we are choosing to rearrange our corporate structure. Everyone's gonna get a share in thirty four different companies proportional to your share of ownership in the standard oil company. And that is the transaction that we are electing to make as a corporation. Are you saying it would be like uh I don't know if you're like a shareholder or a board director at Amazon and

2:06:35 Do I want to do it? To hold Amazon shares with everything, or do I want AWS shares and Amazon share. Exactly. Or SpaceX, and you're like, Do I want to hold SpaceX shares and Starlink shares? Or even going back to our our eBay episode with PayPal. How good of an idea was it to do the spin off for shareholder value? So I'm leading the witness here.

2:06:54 But I don't think it's an A plus necessarily, but that's definitely an A. that they did this. It did from a pure shareholder value perspective. in finally being able to open the books, see how good of a business each of these things were.

2:07:10 And There's an open question in my mind of What if you could just open the books of standard oil as a whole, rather than break it into a bunch of little parts. But there is no arguing with it was a great move. Again, I'll say it and it sounds dirty saying it'cause it's just such a corporate

2:07:26 capitalist phrase, but great move for shareholder value to Break it up. Oh man, this was the OG value unlock move. This is what, you know, investment bankers uh would be uh Just Salivating over today. Oh can you imagine the fees on this deal, too? You can make so many slide decks. Funny story. I was talking to a friend earlier today. He'll laugh when he listens to this. No identities or uh anything uh revealed here, but um

2:07:55 Who was uh Investment banker. back a few years ago who uh his group Covered Tesla. And he was telling me about The four twenty day, the day that Elon tweeted funding secured.

2:08:08 And just the mass chaos that that unleashed. On Wall Street. Oh, they were like, Who's doing the deal if it's already secured? Well, once everybody figured out oh the deal was in flux, just the fee potential that like everybody's eyes lit up to like we gotta get in to be, you know, lead advisor on whatever this deal's gonna be and signing up different buyers and partners and like I can only imagine the situation if you were a banker and you heard that Standard oil was considering a A spin out. Like it would have been

2:08:36 That times ten. Yeah, in reality you actually had five years of preparation and lighting up the transaction to do, so it was probably a little bit more organized, but That actually wasn't covered much in Titan, so I'm curious for a more financial history of the breakup to cover. There's gotta be like a um Barbarians at the gate. of the standard oil breakup.

2:08:56 That would be so good. All right, so David, what's your grade for you're a shareholder in standard oil? This is for sure an A. On every dimension. I mean we've already covered it. Like there's no dimension where this is bad. And it's

2:09:09 I don't know, it probably borderline A plus. Like I don't know, like this is a great For this type of transaction, I can't think of anything better. Like this is this is great. The way that you could actually calculate some kind of return on it is you look at the uh appreciation in the ensuing decades and compute some kind of IRR on all the component parts. And try and look at it versus the previous fifteen year IRR on the appreciation of the actual shares of standard.

2:09:34 You get Archbald and Rogers and all that all those guys out of there and turn this These places into legitimate operations like us fantastic. Young Turks, gasoline centers. Yeah. All right. What do you think? I mean that's yeah, it's an A. These companies went on to become the most valuable companies in the world until big tech.

2:09:51 You know? Alright, so what does this portend for? Big tech breakups like Should Amazon spin out AWS? So I'm of the opinion that it's indifferent with Amazon.

2:10:03 First of all, we know the size of both businesses. I don't think that it's them both being under one umbrella is creating drag for either one of the organizations. I think Amazon knows how to move pretty qu fast with both of them, but I also don't buy the like We're our own first and best customer thing in a way that is value creative on the scale of Oh my God, they're so much better together than they would be apart.

2:10:25 I think that's always been a myth. That Amazon is the first and best customer of AWS. Like I don't think that's actually True. Well, it took a while to move over all the Amazon stuff that was written not on AWS, AWS. Yeah, they were still using Article until like last year. Yeah.

2:10:42 So I actually think as a Potential Amazon shareholder I don't know if we should disclose or can disclose on the show, whether I hold it or not. I'm indifferent. Or as a theoretical Amazon shareholder, I'm indifferent to uh Whether it's one company or two.

2:10:56 I think we can. Well at least I have before. I'm a I saw uh Uncle Stuart in our uh Slack community. He tweeted today with uh His current. uh evaluated uh holdings portfolio. So like all bets are off now. All bets are off now. We're in Stonkland. We're in uncharted territory. Yeah. Amazon is uh

2:11:16 I don't know if it's my biggest holding. I think I have more Bitcoin than Amazon, but anyway. Top three for sure. Yeah, I I think I'm with you indifferent. A spin off? I think it would probably unlock some value.

2:11:32 But I'm pr it's probably just recency bias by Just having done this episode here. Yeah. All right, let's move on to carve outs. Yeah. Let's do it. What do you got? All right, two for me.

2:11:43 The first one is uh The upcoming MacBook Pro with an M1X. uh or an M2 or whatever. I so desperately need this. This is your like white whale. Pre-making it my carve out just to will it into existence sooner. I was looking around for like what should be my carve out and I looked at my computer and I was like, Well, not that thing.

2:12:05 You're gonna end up like never upgrading your computer'cause you're just holding out like I think I told you like a year ago that like You should have just gotten a Air. I'm I'm on the M one air. It's Freaking fantastic and then just sell it and get the superbook. Dude, you should just get an air.

2:12:21 use it and then sell it, you'll you'll lose like ten bucks on it. These things keep their value so much. You're right. If I'm willing to get a new iPhone every year. Like a degenerate. But we're so close now. All right. If they don't announce this damn thing, like I right. See, that's I thought it was like three months away forever. Right, right. I think if this is not out by December I'm literally gonna buy you an air and I'm gonna send it to you and then I'm gonna charge it to acquired.

2:12:47 Fair. Count me in. I've set it on air. You have my uh verbal signature. The air is really good. I bet. Okay, I have a second one though. We at PSL Ventures just invested in a great company called Starfish Space, alongside our friends at uh NFX and Mac Venture Capital.

2:13:05 This company is so freaking cool. This is my first space investment from PSL. Oh, you've been wanting to do this forever. And this company is so cool. It's effectively an outer space tugboat. It's a tiny little satellite. That you launch and it attaches to other satellites.

2:13:21 and can tweak them a little bit. It can just move them back into orbit gently. can do things like extend the life of satellites. it can decommission satellites that are in a dangerous place. I think we've all seen gravity, you don't want that to happen, you know, satellites should be where you want them to be. It's autonomous, it uses electric propulsion, it uses this really cool novel technique to dock to other satellites. That's a a super versatile way to do it. And the founders are just

2:13:46 Top notch. So I just wanted to like talk about them for anyone that's also a space nerd. Obviously they're hiring But I think like just go to StarfishSpace dot com, check out what this company's doing. I just love the like

2:13:59 Incredible innovation unlocked by this birth of the private space tech ecosystem these days. So go on. Thank you, SpaceX. You want.

2:14:09 Yep. Yeah, we gotta Listeners keep telling us not to do this'cause we get people's hopes up, but uh

2:14:16 I'll do it anyway. W we gotta do some more Elon stuff. We gotta do like a Tesla part two. Elon, if you're listening, we officially accept You're invited. You will have you for sure on the show. We'll accept your invitation to come on the show. And if you're listening and you've emailed with Elon like in the last couple of weeks. reply to that email with him and be like, by the way

2:14:38 I think you should do this. Yeah, the next podcast you do. It's gotta be it's criminal that you haven't done it with us yet. Terrible. Nobody's gonna tell the story better than us. I truly, genuinely believe that. So What are we doing? On air Rosenthal sales pitch. Uh okay. Give me your carve outs.

2:14:58 Mike Car, this is a funny one. It's like sort of embarrassing, but I'm I'm not embarrassed anymore. So for a long time I saw all my friends dropping like flies on this, not just with having babies that we're now doing too. The last of the party. I'm not talking about that. But I resisted for years and I was like, you did this, Ben, and I was like No way. That is just two on the nose, millennial. I am not gonna do this. It was my best pandemic purchase.

2:15:23 Sometimes the wisdom of the crowds. is right for a reason. I finally became a card carrying millennial. I broke down, I bought a Peloton. And It's great.

2:15:35 It's really great. Do you need one? No, actually I used it for a couple of months. I used just the app and a cheap spin bike. From Amazon it was fantastic. But I found I was using it so much, which like just

2:15:46 Shocked me. I didn't expect that. Like it's so It's so efficient? You're looking in really good shape. Thank you. Well and I was thinking, you know, I got the baby Wild.

2:15:56 You know, I'm not gonna have time to just go for long leisurely runs anymore. I want to be efficient or I'm gonna turn into I'm gonna start looking like my baby all, you know, flabby. So yeah, then I broke down and I I used Ben's referral code. Thank you. Got a Peloton. Pro tip so I think this is different for everybody. Initially I was like, All right, if I'm gonna do it, I'm gonna go all in.

2:16:14 We get the bike plus. So I got the bike plus initially. And it's like really nice for sure. But I had used a regular Peloton before and I was like, this is not especially with the price drop on the regular Peloton, this is not a thousand dollars more nice. I can't believe it's a thousand dollar difference. There's so many things wrong with Peloton's pricing strategy, but you know, I don't say mean this to hurt, but I'm actually helping Peloton now. John Foley, if you're listening to this, come on the show. We'll talk about the pricing strategy. Yes. I actually mean it. We should do a Peloton episode. If you know John, if you're friends with him, tell him he should come join us.

2:16:44 I love it. This is great. We're just episode planning here Uh Anyway, yeah, it's great. It's great. Don't get the bike plus At least right now it's stupid to spend a thousand dollars more, but the main bike It's really freaking great. And now I get amazing workouts in

2:17:00 Twenty to forty minutes. And I'm just so Glad to now have this heading into crazy parent life. Welcome to the party, pal. Uh we'll have to check in. Uh we'll do you know, we'll have to do some like

2:17:13 Acquired group rides or something. Oh, that'd be fun. Be super fun. All right listeners. Now is a great time to talk about one of our favorite companies, Statsig.

2:17:24 Yes, there is a reason why the best product teams rely on StatSig, whether they are iterating on their core product features or shipping AI powered experiences at scale. Yeah. In the crazy speed of today's AI world. Shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly.

2:17:45 The real advantage is how quickly you learn what changes actually created value for customers. And how fast you can use that signal to guide what you ship next. This is where StatsIG comes in. It brings experimentation, feature flags and product analytics into one unified system so teams can ship safely, test rigorously, and directly link what they changed to how users actually behaved. So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com slash acquired to get started. There's an acquired slack. It's uh got a great URL acquire dot fm slash slack, nice and memorable.

2:18:25 We are launching a thing. I think Maybe, depending on the order of these episodes as they come out, we will have told you about this on a previous episode, but if not, then we are announcing today For the first time. For the second time, the existence of the acquired

2:18:41 Job board. So so many of you have been posting in the jobs channel for years now in the Slack. You have hired each other, you have gotten new jobs through the acquired community and it warms our heart to see it because it's really cool to watch so many of you get to go work with each other. Levels, Solana Labs, Vouch. Bunch of different places that

2:19:01 or sort of our friends and you know, close to the show have had Folks join them. But now if you go to acquire.fm slash jobs, that is in a nice organized format. where you can uh browse and there's even a little one liner next to each job of it's kinda making their their Rosenthal sales pitch of why

2:19:18 Uh, this is a cool job and you should come work here. We curate them. So there's no one that's allowed to post there that we don't look at and approve and sort of Decide. personally that we think they're interesting opportunities. So Yeah, go check'em out. Acquire dot fm slash

2:19:32 Jobs. Most of you know about the L P program, but I do wanna highlight friggin' awesome. We haven't shipped it yet as of recording this, but I bet it'll be out by the time we drop it. Uh it is with Ronille Rumberg, the founder and CEO of AudioS.

2:19:48 So fun. I don't think I've had a better web three conversation on or off the show. than with Reneeal. I thought what was so cool about it was like We ranged from talking about like super

2:19:59 Technical like Deep stuff. Like Reneal is a computer science like major at Stanford. Like we were actually there at the same time. I was at TSP, he was an undergrad. Then we were talking about fun, like tech history stuff from that era. And then like towards the end we're like Oh yeah, by the way, you're in the music industry, so

2:20:15 Tell us a little bit about like, you know. Yeah. And he's like, Oh. Yeah. Oh, like hanging out with Dead Mouse and Blau and Yeah, like Dead Mouse. Like, yeah, he's really cool. He's a cool dude. Like w what? Yeah, for people who don't know, Audio is crazy. It has six million users and it's a

2:20:32 cryptication. Like it's I think That, Brave, and MetaMask are probably like the three largest applications by user count in all of crypto right now. Web three, yeah. Yeah. He was like, Oh yeah, like Blau, Tennessee. Yeah, like they're really fun to hang out with. And we got into like the stuff that I was really curious about, which is like how does a decentralized application work also with like a standard web stack, like a web two

2:20:59 stack where you definitely need web servers and you definitely need to serve an application to people using regular browsers. So Really fun. I'm actually gonna go listen to it'cause I feel like I've forgotten some of the conversation and wanna Want to re-listen, but check that out. Acquire.fm slash LP If you want to share this with a friend, you totally Totally should.

2:21:17 One on ones are our favorite. We like to grow with high affinity rather than uh when a broadcast method, so Pick a person that uh you think would really enjoy this and please send it to them. And with that listeners. We will see you next time. We'll see you next time. Um

2:21:34 Well, next time you're gonna hear from me'cause we did build up a little bit of a Backlog will actually be in the past. But then the next time. I talk to you. My life will have changed, so yeah.

2:21:46 It'll be wild. Totally wild. Alright, listeners, later. We'll see you then. Who got the truth? Is it you, is it you, is it you Who got the truth now

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