Standard Oil Part II

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 you're checking like car seats and backpacks and i'll see you at baggage claim my friend oh my god 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 sit me down say it straight another story on the way who got the truth welcome to season nine episode five of acquired the podcast about great technology companies and the stories and playbooks behind them i'm ben gilbert and i'm the co-founder and managing

director of seattle-based pioneer square labs and our venture fund psl ventures and i'm david rosenthal and i'm an angel investor based in san francisco and we are your hosts when we last left our hero villain unclear we saw john d rockefeller supporting the sherman antitrust act as a piece of dead on the vine legislation with really nothing to fear from it today we will cover standard oil from 1890 through their spoiler alert breakup in 1911 and you're ruining the punchline we're going to 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 fighter points of where standard oil crossed the line between using legitimate business practices like operational efficiency and economies of

scale into straight up abuses of power to grow their massive massive profits you mean like bribing elected officials david i look i don't want to spoil anything here i guess other than the breakup well listeners we want to say thank you yeah we have had a uh pretty crazy month here at acquired starting with the tsmc episode we have just been on i don't know what it is y'all like semiconductors but the show has been growing hugely 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 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 we are about to have a new addition to the acquired family yeah not an on-air addition though no not on air this is so crazy by the time y'all hear this 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 uh you know the baby and all that but you're gonna get recording for part two and before the baby 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 the agentic operating system that is redefining how the world's best legal teams work yep it's sort of obvious that ai is going to completely change the legal industry i bet most of you listening have dropped a contract into some sort of ai chatbot out there lagora took that insight and asked the question what if you really

built something with that power from the ground up for the legal industry so the founders did exactly what great founders do operate with obsessive customer focus they embedded inside a massive law firm for months they sat with the lawyers just watching how the work really gets done and that's how you get features that customers love like tabular review where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with lagora's bet here is interesting since it lets each lawyer handle more complexity any given person can increase the quality of their work and do higher value work and this means that the pie can grow even as each individual

task takes less time and they recently launched lagora agent offering greater intelligence and performance the agent lets lawyers set an objective then it can handle the planning and the execution and delivery of the final product legal teams get to maintain full control and transparency since they're still involved where judgment is required and lagora works where you already work you can use it within microsoft word while redlining or drafting the early lagora numbers essentially speak for themselves when they have a head-to-head pilot with their top competitor they win 70 of the time lagora now has over a hundred thousand lawyers on the platform from 1200 legal teams in 50 countries and crazily they went from 1 million to 100 million in arr in about 18 months truly insane numbers and that is the real test plenty

of things demo well but the question is whether a busy associate actually reaches for it during crunch time or whether a partner trusts it before going into a conversation with a major client if your legal team wants to check it out whether you're a law firm or you're in-house at a company you can learn more at lagora.com acquired and just tell them that ben and david sent you well david this one we're going to 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 all right so last

we left our plucky uh antiheroes ben as you said the sherman antitrust act had just passed everybody's having a good laugh about it the political money is still flowing around like hotcakes or uh 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 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 ferrell 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 won capitalism they've won like america 90 market share

the whole kerosene market 90 belongs to them it's game over but we did kind of hand wave over a 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 15 seconds on last time was the whole you know like oh yeah jd retires what was going on with that why do i just walk away and right off into the sunset 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 we'll see all right so first let's cover the trouble on the home front back in ohio so right 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 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 the case is that standard oil is in violation of the state corporation laws in that they are a ohio corporation 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 and a front you didn't really transfer any assets here and you're actually breaking our laws so it takes a couple years but by 1892 the case reaches the ohio supreme court the state supreme court which rules against standard oil which means that the trust has to be dissolved 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 well turns out our standard oil friends have an escape plan that they've already hatched that they

have in their back pocket it just for this very occasion so standard oil lawyers had figured out that in the state of new jersey now they have operations standard oil has operations in new jersey but there's no rockefeller and crew they're at 26 broadway in new york you know it started in ohio there's no real reason why headquarters you know they don't have any special attachment to new jersey but in new jersey there actually is a loophole in state corporate law at the time that did allow new jersey corporations to straight up hold stock in other out-of-state corporations no even need for a trust structure what ohio is suing them for new jersey just allows that was the reason why they needed the trust structure

in the first place is because standard oil of ohio couldn't own any other standard oil companies that are operating in any other states and they couldn't have operations in other states so it was like it's just this crazy remnant of the fact that we are the united states and 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 loophole in new jersey what do they do boom they just reorganize the whole thing and they transfer all the assets into the new standard oil of new jersey or again at least they make a public show of this they tell the courts they

tell everybody like oh yeah yeah this is what we're doing you know whether they actually do this or not well maybe see a little later in the episode doesn't matter though problem solved so as turnout writes in titan quote the 1892 overhaul was mostly shadow play a charade to appease the courts the executive committee at 26 broadway of course that you know rockefeller 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 into the presidents of 20 affiliated companies in standard parlance these men were now quote the gentleman upstairs or alternatively quote the gentleman in room 1400 nobody had to switch seats at the lunch table and rockefeller and his coterie ruled as absolutely as before

fascinating and so you've got this standard oil of new jersey that by the letter of the law owns wholly or near wholly all these other at this point 20 some companies that are operating in all these other states and so the way that that sort of structurally looked is all the people who were the trustees of the standard oil trust are now the presidents of all those companies and they're working remotely from manhattan they were ahead of the curve so this is great for standard oil and this goes on for a while but slowly but then noticeably over the years everybody starts to notice something's a little different about rockefeller he's always been like aloof you know famously during meetings he would lie down on a chaise lounge and have his eyes closed and people

would think he's asleep but then he would jump in these are like standard oil board meetings 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 kind of starts like drifting away slowly and he seems weird he starts not coming into the office every day i think first he stops coming in on saturdays and then he like takes longer time off he starts missing the sacred executive committee or gentlemen upstairs lunch meetings and there really are two things happening to rockefeller at this time one is sort of like short-term good but long-term bad and the other

one is short-term bad but long-term good so he kind of doesn't have anything left to prove at this point he's outwitted everybody 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 writes quote in explaining his retirement which this would lead to the rockefeller literature has always stressed his health and the heavy burden of his charities though another factor contributed as well he had perfected the gleaming machinery of standard oil and his appointed task done remember he felt like this was his divine duty from god he felt he should pass the reins on to

younger men as gates who we'll talk about in a minute put it the business quote had ceased to amuse him it lacked the freshness and variety and had become merely irksome and he withdrew 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 kind of 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 i think this might be part of what you're saying with all these big tech ceos now it's like bezos what what more can i do here guys

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 necessarily overly concerned with other people's view of him like he was not a externally motivated man but that has to grate on you over time where you're you know working your ass off and you believe you're in the right at least the vast majority of the time and yet the world is either

espousing incredible hatred toward you or begging you for your money constantly i mean yeah he's just like it's just kind of not fun anymore so he wants we've alluded to this he wants and he tries to fully actually resign from the company he talks to john archbold who he wants to take over and says like you know look my heart's not in it anymore i'm ready to go have another chapter in my life but archbold and some of the other executives they're like well your name on the 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

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 these are the i was gonna save this a little quip for later but i'll use it now of you swim with the sharks you sleep with the fishes 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 so this is the other piece of

this that long term becomes just 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 all these causes you know remember he wants to do great works he feels called by god 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 maintain it i mean he's been charitable thus far yep and it's kind of trained people around him who he gives to organizations who he gives to and now the general public who knows about this that

oh hey you can just ask john d for money and he might give you money and he's super stressed out about this like i wouldn't find that very stressful if just constantly all the time 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 high return on society ways to 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 the last thing that he wants to do is say ah there's too much inbound i'm

just going to ignore it this is his mission in life is to answer these please yeah turn out found this great quote from him in uh i don't know if it was something he said to somebody or in his papers whatnot but i think this really says a lot about what he was how he was feeling so this is directly from rockefeller about this time i investigated and worked myself almost to a nervous breakdown in groping my way without sufficient guide or chart through the ever widening field of philanthropic endeavor it was forced upon me to organize and plan this department upon as distinct lines of progress as our other business affairs well important to note here is 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 501c3 and employ people that work at this non-profit that will figure out how to give the money away it's kind of random and scattershot 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 either were familiar before or have gone and looked up john d on the internet since our part one his appearance radically changes during this time so he was um you know kind of like devil bill he had a lot of devil bill in him like a big guy 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 his hair is gone and it's all just because 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 this is really my interpretation here you know some i think comes from turnout 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 this wealth and this philanthropy was 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 we can check in later and update the numbers so in 1890 he was generating 10 million dollars in annual income just from standard oil dividends from a variety of sources inflation adjusted it's like 30x today yeah it's just insane the other thing to think about is this is before the federal government enacted the income tax so this is 10 million post-tax dollars 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 257 000 of the 973 000 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 11 percent annual dividends but he himself was receiving three million in these annual dividends he had 24 million dollars invested outside of standard oil and things like railroads and real estate and steamships 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 he's worth about 200 million dollars yeah gosh i think this happened after he retired a roundabout way he ends up owning a significant iron mining and ore deposit operation that ends up getting rolled up into u.s steel when jp morgan rolls up u.s steel jp morgan not the bank the person rolls up a u.s steel which is of course carnegie steel that he's rolling up into yep exactly and he makes 80 million on that transaction 80 of his 200 million dollars of wealth come from this u.s 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 u.s steel happens to him too man strength leads to strength for sure i guess it applies to people too and not just institutions and one last comment on this rockefeller wealth you know i mentioned we're still in sort of this 1890 to 1892 time frame but i mentioned that point when he's worth 200 million in in 1902 the gdp of the united states at that point was 24 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 one percent of the u.s's gdp as his personal net worth already the richest person

that will ever exist in america including bezos so i call these people yeah well it'll be interesting to see how things play out in the coming years but yeah crazy so he's got all this weighing 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 finally in 1891 he not gives up but says like i gotta find 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 which we'll talk about in a sec to come move 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 this is where it starts he starts this whole thing he in gates he writes a letter to gates he says i am in trouble mr gates the pressure of these appeals for gifts 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 as to be unable to give away money with any satisfaction until i have made the most careful inquiry 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 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 you think about the episode that we did with i think is berkshire hathaway part two when he starts donating some of his money warren was obsessed with analyzing the return on an investment and so when he was going to 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 going to go give it all to the gates foundation and they can figure out and then i don't have to think about it 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 how frustrating yeah well i think there's one key difference though between rockefeller and buffett i think they both have this outlook but buffett i think 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 want to run standard oil and i

want to 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 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 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 yeah and we say invent philanthropy they invent the sort of systematic and organizational giving away of money they don't invent tithing that's a biblical concept but they

really do invent modern philanthropy yeah all right so let's get into it so the first big project well ben as you said he had been giving 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 hbcu women's college in atlanta in the early 1880s they financed the building of that seddy spellman spellman is the maiden name of his wife seddy spellman yeah pretty amazing that that was the first major project that they do just to not over credit i think they already had like a few hundred people enrolled and they were raising money locally and they just had some debts and so

rockefeller came in and just wiped out all the debt funded it 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 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 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 yeah so much about him is remarkably modern like he doesn't have a perfect track record on anything and he doesn't have a perfect track record on you know women and women's rights most glaringly i think they he said he had five children one died very young four children that survived to adulthood the three eldest were daughters and then junior was the youngest one son the daughters are like uh fine you can do stuff whatever but junior you're getting all the money and you're going to 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 was in his sensibilities 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 so it started in the early 1880s there was this movement to build a true baptist university in america and remember rockefeller's baptist you know all the ivy league schools 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 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 going to flock to those types of institutions and remember you know what did we say the first time about the baptists they're 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 etc jd of course the perfect benefactor for this so he gets

involved it becomes a mess a guy running the initiative a guy named augustus strong who's a baptist minister he ends up sort of scheming rockefeller's oldest daughter bessie ends up marrying his son so they get like very involved but then the project falls apart and rockefeller withdraws his support awkward it eventually does morph into trying to build this project in chicago instead and the idea is that so we think chicago is the midwest like it was the west then but it was the biggest city in 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 a template and we'll build a

bunch more baptist universities all over 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 hire construction crews and then of course you have rockefeller who really wants to do these good works because he thinks they're the right things to do not because he thinks he's repenting for some business sins that he's done and he's 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 anytime anybody would insinuate well 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 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 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 andrew carnegie of course and they were big time rivals you know carnegie did something pretty amazing he created the american public library system oh i didn't know that yeah you know how there's like a library in every town in america that's carnegie he created those libraries and funded them i assume that was taxes 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 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 wanted what he was doing to really be like standard oil in that you know what did standard oil do 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 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 the standard brain and what was standard itself it was about setting the standard it was about creating doing this sort of quote-unquote research to create the best processes that would get disseminated out to the decentralized organization 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 they do something pretty amazing so in 1901 they decide to set up the rockefeller institute

for medical research in new york city this is amazing they buy a farm on the east side of manhattan overlooking the easter river in the upper 60s 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 going to be pure basic research and sure now there's this great quote of rockefeller talking to his son to junior he says john we have money but it will have value for mankind only if we can find able men with ideas imagination and courage to put it into productive use rockefeller placed the scientists at this institution not the trustees in charge of expenditures and this was revolutionary this was the institute's secret formula gather great

minds liberate them from petty cares and let them chase intellectual chimeras without pressure or meddling if the founders created an atmosphere conducive to creativity things would presumably happen so at this little 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 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 which enabled the field of tumor biology identified the genetic defect associated with

arteriosclerosis the leading cause of heart attacks in the u.s development of the practice of travel vaccination identified the phenomenon of autoimmune disease developed virology as an independent field developed 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 developed methadone as treatment of heroin addiction and devised the aids drug cocktail whoa really yes so this institute it wasn't until the 50s that it would become rockefeller university so during rockefeller's life he never intended to create a university with his name on it you know here's much later this is a quote from winston churchill talking about john rockefeller when history passes its final verdict on john d rockefeller

it may well be that his endowment of research will be recognized as a milestone in the progress of the race boom that is a pretty ringing endorsement winston churchill yeah this is very far from what all these other 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 a lot of pomp and circumstance 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 and we'll kind of 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 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 bill was a doctor quote unquote he was a witch doctor that's what medicine in the 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 rockefeller

and the family they work with flexner and they say 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 as medical school today four years 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 before this other medical schools you didn't need a college degree there was no standardization so they go first 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 start medical schools to start medical schools in the model of johns hopkins

and this creates you know modern practical medicine as we know it today then they go even further so they go back to hopkins and they say 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 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 now the rockefellers like junior gets very involved in this and ultimately takes it over but senior and junior and gates the three of them together along with the staff that

they're building they're driving all of this 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 standard oil money allowed the rockefeller family to do is just unbelievable yep to sort of put a bow on all of this here so they're thinking the whole time they're like how do we really institutionalize this seniors getting older they built up this office this is unique how do we make this something that's going to perpetuate indefinitely they set up in 1913 they get a charter 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 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 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 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 standard early one business he's one philanthropy he's one

like america it's kind of nothing more to see here right you know everybody lives happily ever after not quite not quite you know ben you've been on the mafia movie uh and content kick you know the godfather and all that in your carve outs 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 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 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 11 dividend archbold's pretty big shareholder all his friends are pretty big shareholders that ratcheted up to 31 in 1897 and then 33 in 1899 so we are cutting big dividend checks to all these 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 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 176 dollars in 1896 to then three years later

458 so the stock is running 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 176 to 458 you then sort of look at that dividend policy how much of that you know is there in total from 1893 to 1901 they paid out 250 million dollars to shareholders keep in mind rockefeller is making 25 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 this is all before the automobile this is all still the kerosene business and there's this seminal point right around 1898 where

cars start happening it starts working we go from 800 cars in 1898 to then two years later 8 000 cars and so it's starting to happen standard oil is realizing wait a minute we finally can use this useless gasoline product and so even in his retirement rockefeller's real wealth ends up getting piled on top of his sort of paltry wealth that we talked about earlier from the uh mass market adoption of the internal combustion engine yep yep so right around that time when the automobile was taking off there's two parts to the breakup story that we're going to talk about here and they're both good for everybody one is the breakup which is good very good and two is the automobile which is very good

and they happen on the same parallel paths so in 1897 right as this run-up in the auto industry is starting and right as jd had fully tried to walk away from the business good old state of ohio they bring charges again back to the you know the top of the show here they're like okay you guys moved to new jersey but like still you're still breaking our laws we still don't like you and so what they do is the government official gets a hold of some 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 going to do i should be able to go get shares in standard oil new jersey and then there's a holding company of underlying you know

all these other companies and they can't actually do it so they're like aha you guys you defrauded everybody so they bring a case rockefeller actually gets called to testify in this case 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 like one of the sharpest brightest people to ever live in american history to seemingly having no recollection of really how anything kind of came together yep oh my god how did that how did that happen i you know where are those trust shares gosh 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 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 at the same time as this case is going on there's a presidential election happening uh it was actually when it started in 1896 was the election and uh there's a really terrifying figure from standard oil's point of view running for president here william jennings bryan the celebrated the og populist his thing was um america was going to get crucified on a cross of gold right that was his uh yep populism and silver 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 still alive hmm just 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 jp morgan and carnegie and everybody could imagine william mckinley the celebrated conservative republican from ohio yep yep good old boy standard contributed a cool quarter million dollars to his campaign everybody is just pumped mckinley's campaign manager a guy named mark hannah actually went to high school with john d back when he was going to high school before uh wild bill 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 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 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 trust in

particular the oil trust with standard oil none other than theodore roosevelt the new governor of 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 was he was he was very involved if rockefeller was bad there's a chance theodore roosevelt was badder oh he was the ultimate badass once again andy sparks on twitter the best reminded me that theodore roosevelt literally 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 you're gonna have just an equal glee on the other side when he was unsuccessfully running for president later in life he gets shot before a speech he 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 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'd like everybody to be as quiet as possible 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 i've been to his uh estate in uh sagamore hill i think it's 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 i was gonna say are there pelts everywhere my favorite is there's a trash can made of an elephant hoof oh my god crazy all right so this is the guy that is gonna challenge john d so standard and the business community and mark hannah they come up with a brilliant genius solution to their new problems from roosevelt in the state of new york remember they like control the republican party at this point they get roosevelt nominated as the vice president

on the ticket for mckinley's re-election campaign in 1900 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 right put him in the corner 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 1900 when um the election happens it's all great mckinley gets re-inaugurated uh in 1901 and then he gets shot and he dies oops uh unlike roosevelt he does not survive 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 forever you know oh not forever but reagan got shot right like was he the last president to actually be shot that's a good question yeah they seem to catch him early now yeah 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 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 tr i mean i'm sure everybody's upset about the assassination whatnot but once he you know gets done with mourning he's like oh you mfers i've got you right where i

want you now and he's about to get some serious ammo because right at the same time literally the same month that tr is inaugurated as president september 1901 a amazing pioneering woman journalist named ida minerva tarbell who's a writer for mcclure's magazine national magazine it's gonna be important national magazine starts working on a new project that she pitches to the editor mcclure the history of standard oil as a book to come out in serial form in the magazine now one might say ida has an axe to grind from her own past this is the birth of investigative journalism as we know it today daniel juergen the great historian who wrote the prize which so many people have recommended after part one that we that we read ben you you read a little bit of it yeah i quickly realized like oh this

is mostly about u.s saudi arabia relations and we are so not going to get to that in part two yeah so we'll have to cover the prize and you know the rest of the international oil history another time but he you know celebrated historian he calls this book the history of standard oil quote maybe the single most influential book on business ever published in the united states amazing tarbell and her colleagues at mcclure's become known as the muckrakers you know if you've heard the term muckraking journalist she's them do you know who coins the term muckrakers oh 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 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 area dike magazine but her roots are actually somewhere sort of close to home in this story kind of western pennsylvania area yeah yeah you know like the wild you know east back in the day 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 driller 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 her 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 they got to like 90 ish percent market share in refined oil products coming out of the u.s they didn't want to get to 100 because 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 ida's brother by the way i do have the actual stat that we pulled from pitch book sent us this great tear sheet that standard oil controlled 91 of oil refinement in 1904 and 85 of even the final sales wow monopoly uh you said it she's got this agenda one might say 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-rockefeller before embarking on doing this so turn now writes from the perspective of nearly a century later

ida tarbell's series remains the most impressive thing ever written about standard oil that is high praise i mean yeah essentially like so much ink has been spilled but for turn now to say this is the most impressive thing ever written i almost ordered the book by the way but i was like this is going to be way too hard to read well we'll just take turn now's word for it here i trust him he continues a tour de force of reportage that dissects the trust'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 in the dispassionate manner associated with mcclure's

she sliced open america's most secretive business and showed all the hidden gears and wheels turning inside it 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 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 in 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 by america as the standard oil trust

it runs for 19 monthly installments so for like almost two years i don't have the exact numbers here but the circulation of mcclure's 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 standard it you know 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 1900s where you have 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 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 got to get really 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 so i was on um the wire cutter the other day which is fantastic love the wire cutter you know owned by the new york times they have affiliate links on the wire cutter great acquisition great acquisition

to amazon you know amazon facebook although 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 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 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 rockefeller talking to his official biographer william o ingles 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 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 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 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 they sneak papers out of i think the cleveland office of standard oil showing that the railroads are sending information about competitors 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 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 it reminds me a lot of apple if you think back to antenna gate is a great example where like apple doesn't comment on rumors one way or another because if they say that a rumor is 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 the next 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 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 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 pressure front roosevelt's first term goes by and miraculously they managed to skate by nothing like major happens in terms of breaking on the antitrust front even though roosevelt wants it to so when he's running for election in the 1904 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 and they're like teddy let's all be friends here we've got a lot of money you know this is big for you this is your first selection on a national stage you could really use our support how about we make some campaign donations and roosevelt's campaign managers they're like sure we could use the money 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 uh this is one of my favorite quotes in all of titan which is actually from henry frick who was an executive at u.s steel about what happens here sure now writes that uh frick summed up the

situation best after the election 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 u.s steel at the point or if he was a senior executive at u.s steel so not standard oil that's right i think yeah he's the one that like got rockefeller and rockefeller jr on the board of directors of u.s steel ah yeah i think that's right they were all buddies yep so after the election which roosevelt wins in a landslide because 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 re-inaugurated in february 1905 congress passes a unanimous resolution

urging individual states to conduct antitrust investigations into standard oil and immediately a whole bunch of states bring cases including missouri which is where everything eventually ends up going down great state of missouri they subpoena jd to come in and testify in front of a grand jury in this investigation jd he obviously doesn't want to do this so he goes into hiding he literally goes on the lam at the same time the state of ohio 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 patantico 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 it's amazing he just disappears for like two years during this time he's sending letters with no return address constantly to 26 broadway to archbold and to all the other directors of standard oil being like 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 he's like a bond villain it's amazing it's so great so uh archbold they refuse to let him resign they're like no i don't know where you are sorry bud well and at this point those guys are a lot of them are sort of defending themselves and throwing rockefeller to 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

i to 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 named henry rogers and charnell finds this quote i think he said this to tarbell this quote from rogers says quote we told him rockefeller jd that he had to keep the title of president these cases against us were pending in the courts 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 lam as long as he wants but like the jig is up 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 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 interesting interesting so june of 1906 roosevelt directly directs the u.s attorney like at a secret nighttime meeting he calls the u.s attorney general into his office and he's like i'm directing you to open a federal antitrust investigation into standard oil and then on november 18th 1906 that suit is filed in missouri federal antitrust suit against standard oil on the grounds you know what the grounds are they have violated the sherman antitrust act they are in restraint of trade which is really interesting

because it was definitely true in 1890 it was true through the 1890s but their dominance was fading at this point in like the late 19 aughts you were already getting into a situation where there was major foreign influence i mean there was lots of oil found in in russia and in the middle east you're starting to get discoveries in texas yep 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 tons of oil ended up being found yeah texaco 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 roosevelt bought the son of a bitch but he didn't stay bought to tarbell and the muckrakers in public opinion and three like legitimately they weren't that you know they're still the most powerful company in the world but they weren't as powerful so i don't want to flash forward too far here but i do know that in 1911 when the federal antitrust law when things go down when things go down which i'll just leave there for a second

their market share had eroded to 64 there were at least 147 other refining companies competing with 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 did it need to be broken up at that point are we chasing demons of 20 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 1906 and 1911 but it's all a sideshow it just takes that long for all this to get to the supreme court and then judgment day may 15th 1911 u.s supreme court chief justice edward white reads the decision and this is like standard oil v united

states right yes this is the big one yeah and standard in the oh gosh what's the circuit below the supreme court federal court of appeals maybe some appellate court i'm not sure i should know this as child of two lawyers and jenny's two parents are also lawyers 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 the supreme court upholds the decision of finding against standard oil they are indeed in restraint of trade 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 to be irrevocably

cannot undo this broken up into 34 separate companies 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 changes in corporate structure at standard oil it may or may not have actually happened like they said it happened if i like did it really have but this no like they got to 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 this is the best all right listeners now is a great

time to tell you about a longtime friend of the show vanta ai has scrambled the whole security picture it used to be that you proved that you were secure once a year on audit or a static pdf then everyone would nod and you're done but in an ai first world that doesn't hold up anymore yep your risk surface changes every week now a vendor turns on an ai feature or someone writes in a new model without telling it and your posture is different than it was last week let alone at your last audit vanta's own research found that around 70 percent of companies have this quote-unquote shadow ai running with no security review at all right and that's where vanta comes in they're the leading agentic trust

platform meaning they've built the thing that closes the gap and the way that they close that gap is vanta agent think of it as a grc engineer that's governance risk and compliance except that it's software and it doesn't sleep it finds the issues drafts the fixes and cuts the time that you'd spend on vendor assessments in half in half which is exactly why more than 16 000 companies today run on vanta companies like ramp cursor and snowflake all stay audit ready and catch the risks that crop up between audits across every vendor every ai tool the whole environment and that's the real value trust has to be continuous now which is why vanta automates your security your compliance and the work

to earn and prove trust we're huge fans of vanta over here and literally hundreds of acquired listeners have become vanta customers at their companies over the years so you can get a thousand dollars off vanta at vanta.com slash acquired that's v-a-n-t-a.com slash acquired for a thousand dollars off and just tell them that ben and david sent you okay so take us back to the golf course david so rockefeller he had come out of hiding at this point one of the crazy things that happened in the interim between 1906 and 1911 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 because he wanted him to come you know testify and

was willing to grant him criminal immunity 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 sidebar but this is ridiculous what happened so he does the whole doddering old man thing again i don't know i've lost my way what who are you uh what's oil what's oil the judge gets nothing out of him but he's so pissed at the end of the process i forget what the exact case was he levies a 29 million dollar fine on standard oil which is like 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 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 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 diff that'd be the easy joke to make here but

even more he offers to bail out the freaking country because now he's come out of hiding oh is this the panic of 1893 this was in like 19 gosh i don't know 8 1909 sometime around then sometime between 6 and 11 got it but there's a huge panic everybody's pressuring him like hey you're the wealthiest man in america you know say something when you know when there's a panic now and buffett comes out and reassures everybody never bet against america yeah it's ever better be it's america rockefeller does buffett one better he comes out and he's like i'll backstop everything personally so he restores confidence in everybody just a 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 for the rest of his life by 1911 he actually had left standard oil well so when the breakup happens in december his resignation is is 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 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 albatross is 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 got to get out a jail card free for the rest

of his life so messenger comes he's on the golf course on the fateful may 15th 1911 not a care in the world he's golfing actually with the local catholic priest in tarrytown 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 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 the news

he turns to the priest smiling and he says father lenin whose name was lenin 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 in tarrytown you got some real estate assets at least that you can sell off and like you know support yourself in your old age here father lenin's like uh well what 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 best thing that ever happened to standard oil's share price not at that exact moment of

course at that exact moment the share price went tumbling but in the long run 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 turnout rights here this was literally the luckiest stroke of rockefeller's career precisely because he lost the antitrust suit rockefeller was converted from a mere millionaire with an estimated net worth of 300 million in 1911 into something just short of history's first billionaire so remember he owned a quarter 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 archbold and flagler i

think flagler was gone at this point but they kept raising the dividend against his wishes he was 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 so it's broken up into 34 companies standard oil of new jersey the main one but then all the other you know operations in the various states and refining and whatnot are separated out and when they get separated out i'm pretty sure they become publicly traded companies and so the financials the books get opened and people can see what ludicrously good businesses these are well so yes you can see what ludicrously 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 opera they own god knows what they 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 forests to build barrels and everything we talked about in the first one 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 1st 1911 the breakup takes effect 34 companies they all get publicly listed i don't know if it was on the new york stock exchange or whatever but on on a stock

exchange you know for the first time i don't think immediately but over the next year standard oil of new jersey goes from a initial share price of 360 dollars a share to 595 dollars a share over your year one standard oil of new york goes from 260 to 580 standard oil of indiana goes from 3500 to 9500 a share and so on and so on oh close to tripling yeah all of these companies literally newspapers across america because 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 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 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 gotta separate out no more lunch meetings at 26 broadway instead at jd's suggestion you know sort of like voice from the golf course he's like how about y'all meet for coffee at 10 30 instead so they continue meeting

every day at 10 30 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 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 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 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 so chief justice edward white who presided over the verdict and you know read the decision he was actually like a very conservative figure and very business friendly so he had had this sort of pet

theory and this was a 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 it's like what is that oh so this was an ability to define what restraint of trade is i think it was called like the reasonableness doctrine or the reason something like that that he wanted to be like yeah in restraint of trade 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 roosevelt and like tarbell and the muck raking 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 yep and it ended up being this very middle not even middle ground like very business friendly quote-unquote conservative final approach to it the government had a really big investment in this where we talked about how standard oil is really the first modern corporation roosevelt sort of set the playbook for the modern billionaire talked about how he invented modern philanthropy this is also massively expanding the might of the justice department in a way that the u.s had never seen before because in the 1890s the entire justice department staff in washington was 18 lawyers oh yeah i remember reading about this

in order to go after standard oil they massively massively staffed up i assume it just never went down from there so there is another reason too why the breakup ended up being great 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 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 that going from kerosene to gasoline that was really gonna take 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 26 broadway or coffee that's not what they were built for they were that was like you know they weren't against it but 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 the new blood to rise to the top so churnow writes while the old guard at 26 broadway mourned the trust's passage some young turks at the operating companies were overjoyed one of these extraordinary mavericks dr william m burton of

standard oil of indiana thought that roosevelt had performed an inestimable service after the 1911 dismemberment he said it was felt all along the line younger men were given a chance burton patented an exceptionally valuable process in 1913 two years later for quote-unquote cracking crude oil that is for refining it so as to yield a far higher percentage of gasoline this discovery permitted standard of indiana to reap incredible windfall royalties and you know if you remember from we were looking up on the last episode what did standard of indiana become amaco amaco and it was all this you know innovation was alive and well again within the oil industry here and within all the standard sort of children so standard of oil of indiana becomes amaco yeah can i talk about the spin outs yeah let's talk

about them all right so the spin outs of the 34 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 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 sso which is a little cute wink wink nudge nudge by rockefeller and crew to say and we're still so i just love these are anti-heroes here like they're just such characters the uh whole thing reminded me uh i think this was when i was growing up maybe to the so e sso 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 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 so becomes exxon standard oil of new york becomes mobile standard oil of indiana as we mentioned becomes amaco standard oil of california becomes chevron boom standard oil of ohio which became sohio then got bought by bp to become bp america heard of them the ohio oil company which became marathon and then also the speedway brand oh the atlantic refining company which got shortened to a rco part of that

was spun off and bought by sunoco and then the rest of it was acquired by bp and then ironically they sold that brand over to marathon so a lot of internal dealings here still continental oil became conoco which of course is now conoco phillips and the south pen oil company became penzoil oh i didn't know that one i missed that one oh that's cool because yeah there were all these other oil products that they were developing and marketing yep man i didn't know penzoil 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 mobile together accounted for more than half

of the whole standard oil business prior to 1911 so exxon mobile really is the primary reconglomeration 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 because it is you're right it's delicious and it's a century in the making yeah well should it be an evil laugh we'll debate in a second all right let's put a bow on uh on this whole thing shall we i want to end with just illustrating standards 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 200 million then around 1911 the

around 300 million well he actually with all the stock pops in the split up and the move into the gasoline market for internal combustion engines his personal wealth by 1913 just two years after the breakup was 900 million dollars so in 2021 inflation adjusted dollars if you literally just do the inflation math that's about 25 billion but the more accurate way to look at it would be to say actually that's like three percent of gdp which was still only 40 billion dollars relative of course to 21 trillion today so if you base it on gdp that figure is about 470 billion dollars yeah the figures i had in my mind and that i think are on wikipedia are in that sort of 300 to 500 billion adjusted net

worth range yeah i do think we should think about him like he was a 470 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 when the gdp of america was a thousand dollars if someone had 500 of that sure they controlled half the wealth in the nation but they didn't have the purchasing power that someone who would have 10 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 of the nation's gdp in their pockets the way that rockefeller did in 1913 so let's think of him like a 470 billionaire well and here's the thing he had already given

away about half of his wealth at that point yes 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 190 200 billion you've got gates at 130 billion again from all the philanthropy about tied with zuckerberg buffett these days has about 100 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 perfect well and that's the perfect

analogy he kind of 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 but this 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 1937 his remaining fortune of course which is largely tied up in various family trusts was estimated to be about 1.4 billion in 1937 dollars so that's about one and a half percent of gdp it's about 315 billion of today's dollars the rockefeller family is now seven generations in uh there's about

170 heirs according to forbes they have a fortune of about 11 billion in 2016 so obviously been doing a tremendous amount of philanthropy i do think that 11 billion it's kind of an unknown 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 around the rockefeller family which is crazy i actually went to college with several of them rock co is a wealth management firm for the rockefeller family venrock the venture capital firm okay so this is what i wanted to talk about so obviously the rock is rockefeller and for those not familiar who want a crazy tie from

this episode to modern day venrock was one of the earliest investors in none other than apple computer that's right that's right it was just amazing how full circle this comes 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 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 the fact that this is when you have errors and they have errors and they have errors this is a 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's not been the

case but i think the other thing obviously not in every case but it's pretty hard hard quote unquote nobody would shed any tears but you know maybe you should it's a hard psychological 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 170 heirs that still wields tens of billions of dollars at the very least is involved in all these projects

and you really never hear about them yeah you know again because like when we're 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 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 1915 to 1940 junior financed designed and directed the construction of a network of carriage roads through acadia national park and then refinanced the whole restoration of the park in 1947 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 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 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 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 congress in 1926 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 dollars the u.s 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

oh you're gonna talk about what i think you're gonna talk about here the moma the moma of modern art in new york city was her brainchild which the land that the moma's on the buildings the space yeah those were the first rockefeller mansions in new york oh no way not the i think they tore down the buildings and the moma is a new building there but that land was 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 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 business project and everybody thought he was crazy like who would want to be headquartered then he recruited ge to be an anchor tenant and rko like in the radio city music hall the reason it's called radio city is he recruited all the media organizations to come headquartered there now not to mention nbc yep yep you know 30 rock like rockefeller 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 it did yeah back in ohio because he was like a big fitness buff but interestingly not for um vanity purposes for longevity purposes he wanted to live to be 100

came close at 98 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 hbo and the uh silicon valley writers team could have a field day with rockefeller if they were to go do like a retro version of silicon valley all right so the party continues in 1945 junior donated eight and a half million dollars which i think is something on the order of 100 million today to just go buy the land for the un this is right after world war ii that would become where they built the un building in new york that's awesome and just donated it he continues the area that is now grand teton national park was

privately owned until the 1930s 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 to with large areas of the redwood state park in california or embarcadero center the buildings in san francisco no way yeah yeah again more of a business project less of a philanthropy necessarily but that was a rockefeller investment this family you know this man like and the company and company and then companies the foundation the 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 yeah you're playing right into my what i tried to say at the top of the show and what i was alluding

to when uh our world is a rockefeller shaped one and in more ways than just standard oil all right well there's definitely some playbook and other things that i want to talk about here but first let's talk about power 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 because we sort of teased it in the intro of where did they have legitimate business practices and where did they kind of run afoul where the initial power that they had in the business really came from like their operating excellence creating economies of scale innovating clever production inventions and refining

but then later on they clearly leveraged their scale position to like 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 their very profitable business at 90 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 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 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 which i think we're all going to 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 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 legal scale dynamics out at play yeah you know it's funny my thoughts on this it's like a i don't know we're talking about boiling points earlier in the episode i think up into a certain point as we hopefully laid out in part one what they were doing was i don't want to bring morals into it but it was a chaotic point in both american history and in the industry it was chaos in the oil industry in the early days and kind of you know is rockefeller's argument right we would have all beat each other to death 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 50 000 years or 1000 years if we have the selden 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 especially after rockefeller left you 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 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 i don't have the numbers in front of me but it's in titan a turnout 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 and in those early days you know it was great for consumers they kept prices artificially low etc etc 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 yeah 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 1906 and certainly by 1911 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 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 and you're going to find some oil and i think that would have eventually driven down their market share even if the government hadn't broken them up into 34 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 going to end with a grade here in a minute but we want to 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 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 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 now in the government and in the public not just social networking yep somehow not microsoft this time around but yeah yeah right they already had their day in court but yeah sorry we thought this was a really

apt thing to do right now and so we thought for this section we would kind of just brainstorm and go through and catalog like all right what are the similarities and differences let's enumerate them between the standard oil story and the situation with big tech today and 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 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 conditions i think that's happening now too are you saying that calibra is not gonna win web3 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 two to three years ago is where this was like really cute 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 any new market or idea of any import that comes along the best you're gonna be able to hope for is that facebook buys you for a couple billion dollars it seemed dire out there fast forward to today and like i don't know about you ben but i am wildly excited about investing in startups and not in big

tech companies oh it feels like the same way that it was at the beginning of the mobile era it feels like this explosion right now and particularly web3 and a lot of crazy wrong stuff out there but there's so much heat and energy and it's such a new paradigm yep and it's not just crypto and web3 how many independent multi-billion or tens of billions of dollars public sas 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 and he has a really

good analysis on it i think it's probably the best analysis done on are we done creating new big tech companies forever that was january of 2020 oh wow hadn't been that long wow it might be time for another acquired postulate i don't know what we're gonna name this one oh lay it on me and i'll decide all right new postulate heard it here first i'm sure we're not the first people to say this anytime 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 is all going up from there because it is never the end what was the year that the uh inspector general of the uspto said that everything's already been

invented oh i don't know that one that's one of these best quotes ever so good yeah it's a really good point oh and just real quick all those lps in 20 oh my god i'm just thinking about this i love lps uh as a class but like 2016 2017 2018 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 want to make a little bit of an argument against regulation or at least the nervousness that regulation gives me regulation by definition will always limit innovation because it says you can do less stuff in the world yep it's prescriptive 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 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 by the fact that 21 years after the sherman antitrust act standard oil's monopoly position was already unseated 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 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 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 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

see change 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 gosh these are like big hammers you gotta be really careful about wielding them and maybe it's better to let it play out a little longer 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 yeah literally zuck

went to these founders 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 like yeah here is the ultimatum and i'm wondering if 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 should we be concerned about apple or about amazon's anti-trusty stuff that might look like standard oil in a different way that is not rolling up 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

girly would say a rake too far you know obviously the 30 thing with apple those i think are different than what we're talking about here with standard oil well if anything i think standard oil actually was a i don't know what's better what's worse depends on your perspective but to my perspective played these aspects better because 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 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 oh maybe actually that's more like apple where like apple's keeping the

take rate where it is they're going to 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 was like yeah i'm not sure we want to actually be the railroads but it's really nice to extract as much value from them as we can yep i don't know if i ever even knew the numbers well enough to say in terms of their relationships with the railroads but i feel like i don't know apple maybe this is just sentiment but like god that 30 feels really unjustified whereas 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 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 interesting all right before we move on to a couple fun little last tidbits i know you have been before we grade two more similarities i want to highlight resonances between the standard oil and the big tech situation one is i'm just struck by 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 the old guard became so ossified in their view of how the world worked and weren't seeing reality anymore and i think about not all the big tech companies but 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 it really seems like leadership there again 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 we should

have a different strategy here but can't have their voices heard you know anyway that's one the other one similarly that i want to highlight is the press this sort of duel the angelic and the less angelic side of the press and people and journalists and their motivations this is playing out 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 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 owns a different set of states that they can use it in many of these states have a use it or lose it clause in their trademark and so in many of these states including california where chevron owns the standard trademark there is one or two gas stations that will carry the logo of the company you're familiar with but say the word standard and there's a great one in downtown san francisco that you can go drive by and be like wait i'm sorry what standard it lives it lives it's at a market and van ness right yep yep you jab and you're like whoa 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 yep the second one 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 is the oil companies in particular exxon mobil in december of 2020 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 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 going to 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 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 going to be so valuable forever and hoard them and now finally we're at this moment in history where we're realizing how really terrible it is to burn all these fossil fuels and even the largest holder of the remnant shares of the 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 there's too much other stuff to get in and we're not experts but maybe find some guests do a special episode on uh i'd love to unpack the oil industry oh i would love to understand just current ownership structure what's the cap table look like yes all that too but also from an environmental standpoint yeah fossil fuels are bad 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 i don't know what's the right way to think about this and we're not going to change overnight that's the other thing it's like should we all be using

clean safe nuclear yes we should and it's going to be a long time before that is the case yep 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 service now if you are running a large enterprise ai agents are likely spread across every team and deploying them is uh no longer the hard part yeah the hard part is knowing what permissions they have what employees are using them for or what decisions ai is making ai security for an enterprise at scale is not a small concern like the risks are real exactly and the challenge with ai is governing it securing it measuring it and making sure that it

actually delivers value that is why service now built the ai control tower yep ai control tower gives enterprises a single place to see manage govern and optimize ai across the entire business and it works with any ai not just theirs every device on your network every permission across every system every ai agent visible and secure in one place and service now can do this because they've spent more than 20 years building the operational backbone of the enterprise the workflows governance approvals security controls and institutional knowledge that power how work actually gets done across it hr customer service finance and security service now already runs more than a hundred billion workflows annually and trillions of transactions for more than 85 percent of the fortune 500 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 acquired and tell them that ben and david sent you all right grading i thought a fun way to do this would be so the very classic acquired episodes very early on especially were grading and acquisition so if you were 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 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 34 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 going to get a share in 34 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 do i want to hold amazon shares with everything or do i want aws shares and amazon shares exactly or spacex and you're like do i want to hold spacex shares and starlink shares or even going back to our ebay episode with paypal how good of an idea was it to do the spinoff for shareholder value so i'm leading the witness here but i don't think it's an a plus necessarily but it'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 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 because it's just such a corporate 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 anything uh revealed here but um

who was a investment banker back a few years ago who his group covered tesla and he was telling me about the 420 day the day that elon tweeted funding secured and just the mass chaos that that unleashed on wall street oh they were like who's doing the deal if it's already secure 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 got to get in to be you know lead advisor on whatever this deal is going to 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 that times 10 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 got to be like a um barbarians at the gate of the standard oil breakup oh 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 i don't know it's 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 great the way that you could actually calculate some kind of return on it is you look at the uh appreciation and the ensuing decades and compute some kind of irr on all the component parts and try and look at it versus the previous 15 year irr on the appreciation of the actual shares of standard you get archbold 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 you know all right 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 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 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 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 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 i think we can well at least i have before i'm a i saw uh uncle stew stew stewartner 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 stonk land we're in uncharted territory yeah amazon is uh 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 to maybe slight preference for a spinoff i think it would probably unlock some get a little standard oil value but i'm probably just recency bias by just having done this episode here yep all right let's move on to carve outs yeah let's do it what do you got all right two for me the first one is uh the upcoming macbook pro with an m1x or an m2 or whatever i so desperately need this that 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 you're gonna end up like never upgrading your computer because you're just holding out like i need it so bad i think i told you like a year ago that like you should have just gotten a air i'm on the m1 air it's freaking fantastic and then just sell it and get i want the super book dude you just get an air use it and then sell it you'll you will lose like 10 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 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 acquire fair count me in i've said 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 nfx and mac venture capital this company is so freaking cool this is my first space investment from psl oh you've been wanting to do this forever man 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 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 super versatile way to do it and the founders are just 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 starfish space.com check out what this company's doing i just love the like incredible innovation unlocked by this birth of the private space tech

ecosystem these days so cool thank you spacex elon yep man we gotta listeners keep telling us not to do this because we get people's hopes up but uh i'll do it anyway 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 weeks you reply to that email with him and be like by the way 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 no but literally i'm not even like being facetious here like nobody's

gonna tell the story better than us i truly genuinely believe that so what are we waiting for on air rosenthal sales pitch uh okay give me your carve outs my car this is a funny one it's like sort of embarrassing but 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 to last 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 too on the nose millennial i am not gonna do this it was my best pandemic purchase 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 it's really great do you need one no actually i used it for a couple 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 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 coming like things are gonna get wild you know i'm not gonna have time to just go for a 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 let me 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 her 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 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 20 to 40 minutes and i'm just so glad to now have this heading into crazy parent life welcome to the party pal we'll have to check in uh we'll do you know we'll have to do some like acquired group rides or

something oh that'd be fun it'd be super fun all right listeners now is a great time to talk about one of our favorite companies statsig yes long time acquired partner there is a reason why the best product teams at companies like open ai and notion atlassian figma rippling bricks and more rely on statsig whether they are iterating on their core product features or shipping ai powered experiences at scale yep 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 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 whether it's a feature tweak a pricing change a performance improvement or an ai

update like a model change or prompt adjustment they're not relying on instinct they're measuring what actually moved engagement retention and ultimately revenue and as more teams build with ai that learning loop becomes even more important building with llms introduces non-determinism into your product experience the same input doesn't always produce the same output and behavior can shift in subtle ways in real world use so doing offline evals will give you part of the picture but you can really only understand the impact once your product is live with real users and then you can measure how their behavior actually changes it's very different than the way that you would ship features in a pre-ai world where you knew exactly what the software was going to do in production yeah exactly so 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 the result is a tighter feedback loop and learning that compounds over time so you don't just ship more you ship better 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 acquired to get started there's an acquired slack it's uh got a great url acquired.fm slash slack nice and memorable 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 or the second time the existence of the acquired 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 a bunch of different places that are 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 browse and there's even a little one-liner next to each job of it's kind of making their their rosenthal sales pitch of why 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 them out acquired.fm slash jobs most of you know about the lp program but i do want to highlight a recent episode that was freaking 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 roniel rumberg the founder and ceo of audius so fun i don't think i've had a better web 3 conversation on or off the show than with roniel i thought it was so cool about it was like we ranged from talking about like super technical like

deep stuff like roniel is a computer science like major at stanford like we were actually there at the same time i was at gsp he was an undergrad so 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 tell us a little bit about like you know that and he's like oh yeah oh like hanging out with deadmouse and blau and yeah like deadmouse like yeah he's really cool he's a cool dude like like what yeah for people don't know audius is crazy it has six million users and it's a crypto application 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 3 yeah yeah he was like oh yeah like blau deadmouse 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 2 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 because i feel like i've forgotten some of the conversation and want to 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

one-on-ones are our favorite we like to grow with high affinity rather than uh when the 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 and well next time you're gonna hear from me we did build up a little bit of a backlog we'll actually be in the past but then the next time i talk to you my life will have changed so yeah it'll be wild totally wild all right 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 woo