Over a 40-year career John Rockefeller used innovation and ingenuity to create a corporate empire unlike any the world has ever seen. But he was also notoriously ruthless and many believe he went too far. By 1896, Rockefeller was the second wealthiest man ever born, after King Solomon, but he had achieved this through exploiting his workers, creating vast monopolies, bribery, corruption, predatory pricing, intimidation and in the end, basically only one man got all the wealth! Rockefeller became the richest entrepreneur in the history of the world with a net worth of almost $660 billion dollars in today’s money.
JP Morgan, John Rockefeller and Andrew Carnegie were worth the modern equivalent of over $1 trillion dollars combined. (More than the entire net worth of the 40 richest people alive today.) Their wealth, then, was like royalty. They literally controlled America.
But while Carnegie, Rockefeller and Morgan continue to get richer in the late 1800’s, others were struggling to get by. The gap between the rich and the poor was as big as it’s ever been. Over 90% of Americans survived on less than $100 dollars per month, while the average worker earned barely a dollar a day – well below the poverty line. Working conditions in factories across the country were almost unbearable. In a single year, one out of every 11 steel workers died while on the job. As the country approached the 1896 Presidential election, America’s poor were desperate and without hope.
Standard Oil, Rockefeller’s company, got the reputation as the most hated company in America. It became literally the symbol for big business evils. It was an example of big businesses getting way too much power and nothing, or no one, available to restrain them.
However in 1908 a new breed of businessmen emerged. Henry Ford had a completely different ethos. He said, “I have set out to build the best motor car for popular use. It is priced at $900 compared to $1 500 for the average licensed car. Which makes it the first car affordable for the common man.” This young entrepreneur had created a new kind of car. But in order to sell it he needed to get permission from the association of licensed automobile manufacturers, also known as ALAM. ALAM owned the patent on the automobile giving them complete control over who can manufacture and sell cars.
When Ford entered the automobile business people didn’t drive their own cars, they had drivers. And so cars were seen as this luxury item. Ford’s insight was that cars could be an every day item. They could be very utilitarian so that it was within the reach of ordinary people. Ford spent years developing his car for the common man.
After months of deliberation the ALAM board reached its decision. Henry Ford’s application was rejected. He was battling a powerful cartel for the right to make a car he believed in. Ford thought that the whole thing was ridiculous. He knew those royalties would drive up the cost of his car, putting it out of the reach for the average consumer. So as his lawsuit wound its way through court he openly defied the order from ALAM and continued building and selling his cars. He believed there was a better way to conduct business in America and he was determined to make it a reality.
Henry Ford was able to position himself as an anti-monopolist, really in a certain way, as a kind of antithesis of the Rockefellers and the Carnegies. He was a kind of heroic individual entrepreneur, who believed in competition, who believed in developing a product and bringing it to the people. Ford began paying his workers a livable wage, $5 per day, more than double the rate of most U.S. factories. But Ford wasn’t just paying his workers better, he was also getting more out of them.
He innovated a new system for producing cars. Rather than hand crafting each car one at a time, his were assembled by a line of workers, piece by piece. It’s was called the assembly line and it completely changed manufacturing forever. Ford didn’t invent mass production, but he perfected mass production. Using the assembly line, Ford workers can build cars up to 8 times faster than any other automobile factory in the world. What once took 12 hours to assemble, now took an hour and a half. The innovation also allowed Ford to standardize the 8-hour workday.
Against all odds, Ford won against ALAM in court. Ford’s dream was made a reality. The car belonged to everyone. Ford’s success put him forward in American life as a new kind of businessman but, in crucial ways, unlike Rockefeller or Carnegie, he wasn’t trying to gain a monopoly. He was trying to bring a product to the people.
Ford seized the momentum and his factories went into overdrive. His assembly lines started producing a revolutionary new car at a record rate. It was called the Model T and it cost only $825. For the first time, a car the common man could afford. Henry Ford created what became the most important industry in the American economy. He had no idea of the enormous impact it would have on almost every sector of American life. He literally changed America, the way they live, the way they do things, and the way they go about their business.
The result was broad prosperity shared throughout the country and perhaps America’s greatest innovation to date, a thriving and prosperous middle class. The Industrial Revolution created the development of the middle class. It created wealth that people never would’ve imagined possible before then.
So what can we learn from history?
Are the banks, financial institutions, REITs, Funds and money managers not the same as Rockefeller? Are they not in it for themselves and prepared to win, no matter what it takes. Have they not also been involved in all the practices, which Rockefeller was found guilty of, around the world? Have they not caused a global crisis (GFC), got governments into ridiculous debt, rigged rates and numerous other scandals, all in the pursuit of personal gain? Have they actually created anything of value?
It is no wonder that according to Tony Robbins in the book, “Money, Master the game,” he states that 77% of Americans have financial worries, and only one out of four trust the financial system – with good reason. He goes on to talk about the ridiculous fees charged by financial institutions and how this erodes any chance of prosperity or wealth, ultimately the reason why less than 1% of people in the Western World retire wealthy. The entire system is rigged against them and yet sophisticated marketing is used to lure in trillions for investment from the bottom 99%. The only people who get wealthy are those running the banks, funds, REITs, etc.
These are very similar characteristics to Rockefeller above.
Then arrives technology and starts to disrupt the old-school financial, banking and investment sector. Just like Uber has disrupted the taxi industry, cutting out the middleman, vastly reducing fees, increasing accessibility and most importantly making the entire experience more pleasant and safe (there is a reason it is worth USD $50 billion), technology will do the same in this space.
However, just like ALAM tried to stop the innovative entrepreneur like Henry Ford from creating real change and enhancing the life of the average American, the SEC, FSB, ASIC, FCA, etc stand in the way of allowing this to happen. They say they are protecting the poor, unsophisticated investors, but why then are they allowed to gamble or buy houses. Why have these regulatory bodies not sent people to jail when there has been blatant fraud by big business? Lobby groups and big business keep saying that the technology is not safe and that people need to be protected, but in truth, technology provides the much needed trust and transparency and the only thing which is going to be needed to be protected is their profit margin. Just like ALAM, they will fight for their monopoly, but just like Henry Ford, there is a new breed of entrepreneurs who are more interested in bringing a product which adds real value to the people.
Real Estate has for centuries been the bedrock of wealth creation and preservation. Where did the saying come from, “He who has the land is King?” 49% of the world’s wealth is held in real estate and yet only 12.9% of the world’s population has access to it. And, as explained above, of this 12.9%, less than 1% actually retire wealthy. At the moment, real estate, especially commercial and international real estate, like cars before Ford, are only for the ultra wealthy. But just like Henry Ford used technology to innovate, a new breed of entrepreneurs, those who understand the intersection of technology and real estate, are providing solutions to the common man to invest in the same quality opportunities, with the same quality partners, as the top 1%.
This will not only vastly improve their lives, but like with Ford, will have a dramatic impact on the planet, solving the greatest challenge on the planet, the widening of the Wealth Gap. As Scott Picken, Wealth Migrate Founder and CEO says, “It is not about protecting the top 1%, but rather about empowering the bottom 99%. Our mission in leading the Wealth Movement is to empower a billion people by 2020.”
Now is the time to learn from history, not allow Rockefeller type actions to continue, join together, learn, discuss, debate, but most importantly ensure that we follow Henry Ford and create a better and more sustainable planet for all. By doing this we will all win.
In the words of Margaret Mead, “Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it’s the only thing that ever has.”
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