Lessons from John Rockefeller: How to Become a Billionaire from Scratch

John Rockefeller is the world's first dollar billionaire. Rockefeller contributed $ 2,000 to the start-up capital of his first business. Of these, I borrowed $ 1,200 from my father. And in 1937, when Rockefeller passed away, his capital was estimated at $ 1.4 billion. At today's prices, that's 318 billion. For comparison, the wealth of the world's richest man - Amazon founder Jeff Bezos - is estimated at $ 149.8 billion.

The path in the oil business, in which Rockefeller made fixed capital, he began with a small firm that sold kerosene in bulk. And when Rockefeller retired at 55, his Standard Oil Company controlled up to 95% of the US oil industry, 70% of the world's proven oil fields and the entire production chain - from oil production to delivering kerosene to retail customers - almost all over the world.

Let's figure out what helped Rockefeller make billions.

Lesson 1. Follow the movement of money

At the age of seven, Rockefeller earned his first money on a farm from a neighbor, whom he helped to pick potatoes and raise rabbits. Then, on the advice of his mother, he made the first entry in the ledger, where he reflected, to the last cent, how much and for what he received and what he spent. These analogs of the modern statement of cash flows (DDS), one of the instruments that are used to record business finances, he led until his death, and lived for 97 years.

Rockefeller biographers like to mention that he grew up in a poor family. It was not possible to find information on how much his father earned. It is known for sure: the dad of the future billionaire was a traveling salesman, traveled a lot around the country. And while the head of the family was absent, Rockefeller's mother had to save. Hence the habit of counting every cent, which she instilled in children.

From childhood, John saw how accounting for money helps to multiply them. His parents wanted him to go to university, but Rockefeller preferred a commercial college and accounting courses. And when, after studying, he got a job as an assistant accountant, his love for numbers was quickly noticed and appreciated by his superiors. None of Rockefeller's colleagues liked to tinker with completed periods and projects. And his eyes burned from such tasks.

Rockefeller's starting salary is $ 17 a month. From the second month - already 25 dollars. A year later, he was a manager with a salary of $ 800 a year.

Rockefeller's heirs keep the tradition from early childhood to take into account every cent to this day. Rockefeller taught this to his own children, those to their own, and so on.

I also have a home version of the DDS, but in the form of an electronic sign. He began to lead at 40-odd, in childhood there was no one to tell. But better late than never. It's a routine, but it really helps you manage your money wisely.

Lesson 2. Don't be afraid to borrow

Entrepreneurs treat borrowed money as an evil that is best to stay away from. Rockefeller's example shows - in vain.

If Rockefeller had not taken the sum missing from his father to enter the business, most likely he would have worked his whole life for hire.

Borrowed funds were a constant companion of Rockefeller's business. He preferred to sell shares to the next investor, even when his own funds were enough. I also invested my money, but I also kept it as a reserve. And if the investors were not there, he took over the financing of the next project entirely on himself.

Rockefeller's first business was a small logistics company. Rockefeller received orders for $ 0.5 million in the first year. The money to provide them soon became insufficient. Already owing a lot of money to his father, who gave not just a loan, but at 10% per annum, Rockefeller borrowed the missing amount where he could. It wasn't easy, but he did it.

It is believed that only financially illiterate people are not afraid of loans. And then - until the first call from the collectors. The difference between them and Rockefeller is that he took loans wisely.

Lesson 3. Making commitments

Rockefeller has always been careful in fulfilling obligations, including financial ones. No matter how difficult it was, and in the first years of doing business, these difficulties were constant, I always found the right amount by the right date.

In his memoir How I Made $ 500,000,000, Rockefeller recalls how his father came to his office for another loan payment at the most inopportune time and insisted that money is needed right now. Rockefeller himself finds it difficult to say whether it happened by chance or his father made a special guess for educational reasons. In any case, each creditor, including his own father, received from him what was due and when it was due.

Over time, at one word from Rockefeller, bankers fearlessly shoveled all the contents of the safes for him. His financial reputation was the best guarantee.

Lesson 4. Know the cost of every management decision

Rockefeller was able to fearlessly borrow and regularly fulfill his obligations because he did not act at random. Each decision was scrupulously calculated in advance. If he borrowed money, then taking into account when and how much he will have to give, due to what he will be able to return it and how much he will earn on borrowed funds. If he invested his own money, he calculated when and how much he would increase it.

Rockefeller has invested millions of dollars in his ventures. If the investment showed an increase in production and / or a decrease in costs, which was converted into an increase in profits, Rockefeller did not skimp.

The first in the United States, Rockefeller stopped transporting oil in wooden barrels on horseback and began transporting it in tanks by rail, driving entire trains across the country. He was the first to stop skimping on the safety of refineries when he appreciated the damage caused by constant fires. And the first American oil refineries were literally barns. Oil workers believed: oil is a profitable business, but soon it will be pumped out all. And so they saw no reason to invest in infrastructure.

When Rockefeller began to send oil for export, devices were needed to quickly transfer it from tanks to tankers. Rockefeller, at his own expense, equipped the necessary railway stations with them. At first glance, he gave it to the railway workers. But this, in addition to traffic volumes, became an argument for lowering the tariff and allowed Rockefeller to transport oil on rails three times cheaper than competitors.

Rockefeller also owned several iron mines. When he realized that it was more profitable to transport ore to blast furnaces and ports by ships than by trains, he built his own fleet from scratch.

Rockefeller's partners considered his next innovations too risky and did not want to invest in them. In such cases, he said: “Okay! I will invest the money alone, but all the profits will be mine. After that, the partners immediately became compliant. Everyone knew - since Rockefeller is ready to invest alone, there will definitely be a profit.

Lesson 5. Engage professionals

In life and business, it helped Rockefeller that he loved to tinker with numbers. But you can not love - that's okay. It is enough to attract a person who loves to the team or to outsource.

British millionaire Richard Branson loved what is now called hype, but he hated numbers. But in his youth, he had a business partner who loved to tinker with numbers. By the time Branson's business had grown enough, the owner, realizing the importance of management accounting, remembered his former partner and instructed him to take over the numbers.

The founder of the McDonald’s empire, Ray Kroc, was involved in sales all his life and knew only about them. This allowed him to see a promising franchise product in a small roadside diner and make it a symbol of America. But a person from his team, who rummaged in finances, saw and suggested to him another promising direction: not to sell a bare franchise, but first to rent and subsequently buy out plots of land with premises for a restaurant and lease them out to franchisees. This decision simultaneously increased McDonald’s revenue, profit and capitalization several times. In 1974, Kroc himself, at a meeting with students, said: “My business is not hamburgers. My business is real estate."

Rockefeller himself preferred not to delve into what he did not understand, but to listen to professionals. Sometimes this approach failed. This was the case with the shares of the iron mines, which he bought in the early 1890s: specialists promised a bonanza, and the mines turned out to be unprofitable and were on the verge of bankruptcy.

To find out what was going wrong, Rockefeller found a financial expert. His name was Frederick Gats. Gats provided reporting that helped Rockefeller understand what was going on and how to save the day. He instructed Gats to restore order to the mines, and soon they began to make a profit. Gats later became Rockefeller's right-hand man.

When Rockefeller decided to build his own fleet, he turned to the owner of the shipping company for help. He transported the ore himself and was not interested in helping a competitor. Rockefeller's speech sounded something like this: “I understand you. But I will only carry ore on my own ships. I’ll build them anyway, you’ll earn nothing from transporting my ore. But I suggest you earn a commission for building ships for me under your control. I turned to you because you are a professional and honest person. And I will not skimp on commissions. The ship owner left the Rockefeller house with a $ 3 million contract.

Lesson 6. Do not be afraid of negativity in reports

When Rockefeller was still working as an accountant, he somehow walked into the office of his boss's business partner. And that just got a huge bill from a supplier with many items. The boss's partner looked longingly at the columns of numbers and doomedly tossed the paper to the accountant: "Pay."

"And I would say to the accountant: 'Check and tell me if everything is correct, and only then pay," "- decided Rockefeller.

In his memoirs, Rockefeller is surprised that American businessmen, intelligent and sane people, were afraid to look again at the accounts. Entrepreneurs experienced a particular panic fear of her when the business had problems. Rockefeller believed: it is when something is wrong in business that reporting should be studied even more closely.

Lesson 7. Don't be greedy

Rockefeller did not spare money, not only on investments. His company, Standard Oil, paid out dividends four times a year. Their total amount was $ 40 million - exactly 40% of the authorized capital of the company. Rockefeller got 3 million of this money.

Rockefeller offered the owners of the oil companies that he bought to pay in shares in part or in full. With the consent of the workers, he gave them wages in shares. The company's shares were received by all investors. A stable and high income for its shareholders was guaranteed.

This is the set of rules that Rockefeller followed to succeed. As you can easily see, there is nothing supernatural about them.