Happy Relationships Blog

Tim Kellis, Author of "Equality: The Quest for the Happy Marriage"

One significant objectives to understand for a successful relationship is conflict resolution.  Problems that are not resolved lead to psychic lesions, eventually causing the mind to shut down with respect to the relationship.  If couples could only learn an approach to conflict resolution where every problem within a marriage is resolved then the relationship does not degrade down that nasty road to divorce.

I find it interesting the different approach to conflicts in the corporate world.  The very basis for corporate survival requires the resolution of conflicts, even when those conflicts conflict with our very nature of democracy.  Couples could learn a lot about resolving their conflicts by looking at the way major conflicts have been resolved in corporate America.  Here is example #1, the conflict between Standard Oil and our trust busters early in the 20th Century.

Example #1: Standard Oil and J.D. Rockefeller

The best example of a company that used its clout to monopolize an industry during this period is the story of Standard Oil and John D. Rockefeller. Rockefeller actually began his career as an assistant to a merchant in Cleveland, OH. Rockefeller was raised to be very fastidious and pious. His father was a transient so his mother raised him to be the opposite of his father. Family lore has it that Rockefeller from the time of his childhood maintained a strict maintenance of his finances, both his revenues and expenses, down to the last penny. And he used his discipline as the assistant merchant so that as the business grew Rockefeller became a successful businessman by the time he reached his twenties.

He then used some of his profits to invest in an oil refinery shortly after oil was discovered in Titusville Pennsylvania on August 27, 1859. After the discovery, refineries shot up like weeds in both Western PA, around Titusville, and Cleveland. Unfortunately for Rockefeller at the time, his investment wasn’t doing so well, so he decided to take over the operation himself, catapulting Rockefeller into the business of refining crude oil.

Interestingly, this was before the automobile industry was even born. Crude oil refined into Kerosene would replace candlelight and other crude sources of illumination as the source of light in the late 1800s before the invention of the electric light bulb, and Standard Oil led the way in controlling the distribution part of the business, the refining process.

Rockefeller’s rationale at the time for controlling the refining process was a simple one. The oil industry at this early time was in a state of chaos. Oil prices fluctuated wildly as prices plummeted with each new discovery only to skyrocket soon after, with speculators following every new find and overbuilding the oil wells that were used to get the oil out of the ground, leading to plummeting supplies of oil. In one stark example, prices fell from $10 a barrel at the beginning of 1861 to 10 cents a barrel at the end of 1861.

Stability only occurred after Rockefeller began controlling the main point of distribution, the refinery process. And once he got control he relentlessly pursued the rest of the refinery industry. Rockefeller simply had the most efficient refinery company in Cleveland, which meant that he had the lowest cost. He used this advantage to eventually take control over the entire industry in Cleveland, and then the rest of the country.

His method was a simple one. He would go to the owner of a competing refinery and give the owner two options. Option one was to sell out to Standard Oil in return for Standard Oil stock. The owners who took this option became very rich. The other option wasn’t so friendly. If an owner refused to sell out Rockefeller would simply build a competing facility and use his lower cost advantage to drive the competitor out of business. By the time Rockefeller took over complete control of the oil refinery industry…let’s just say he had a lot of enemies.

The downfall of Standard Oil was a result of the daughter of one of those out-of-business competitors, Ida Tarbell, one of the first successful female journalists in the country. Ida was the daughter of one of Rockefeller’s competitors who saw first-hand the ruthlessness of Rockefeller’s business practices.

The journalistic breakthrough came with Tarbell’s groundbreaking stories that were published in McLure’s Magazine, one of the country’s leading periodicals, in twenty-four successive monthly articles between November 1902 and November 1904 that led to the government hearings on the Standard Oil Trust. The best example of Rockefeller’s use of his power to bring control of the industry under the Standard umbrella was a practice that was discovered in the February 1872, well before the industry became large enough to be of interest to the masses, the source of common sense.

One of the biggest costs in the refinery process is the transportation cost and Rockefeller used his clout at the expense of his competitors. In 1872 word leaked out that Rockefeller and his fellow producers, under the umbrella company called the South Improvement Company, received kickbacks from the railroads on all of the transportation costs associated with the movement of oil by railroad. He not only got kickbacks on his transportation costs but his competitors, as well.

He used this economic advantage to take over control of the industry but abandoned it after the practice was discovered. It was too late, though. He had already won. By 1879 he controlled ninety percent of the refinery market.

Rockefeller would do anything in his power to either bring his competitors into his camp or drive them out of business, and he was wildly successful. Tarbell, whose father had allied himself against the South Improvement Company in 1872, also wrote about the many other Rockefeller abuses she knew about. There were many. Her muckraking stories would change journalism forever.

After her articles it became obvious the many trusts were using their monopoly to stifle competition. Her articles coincided with the presidency of the great trustbuster, Theodore Roosevelt, who became President after the assassination of William McKinley in 1901. Roosevelt brought suit against Standard Oil in November 1906 and in May 1911 the Supreme Court handed down its verdict for the dissolution of the company, breaking it up into seven sub-entities divided along geographical boundaries.

One interesting aspect of the Standard Oil hearings was how Rockefeller responded when he was questioned about the way Standard Oil did business. By this time, though, he was very old and not really that involved in the operations of the company. His response, though, to the hearings is something very hard to believe. He simply responded to every question by saying he didn’t remember what had happened. Rockefeller behaved as if the person who started the company didn’t have any knowledge about what the company did. This is one way people with insecurities respond with questions about their insecurities.

But the government decided to break the company up anyhow. Amazingly, the government’s solution was to simply split up the company on geographical lines. The investors in all of the new companies received the same amount of equity as they held in Standard Oil. Rockefeller may have given up control over this enterprise, but he didn’t give up any equity. He actually made more money in his stock in the new companies than he had with Standard Oil Of course it took the invention of the automobile for the growth of the oil industry to truly take off. The solution was simply to dilute the power of Rockefeller.

The question to be looked at with this example is the common sense notion of what is best for the government and what is best for the company, what is the logic? The goal of the company, of course, is to grow revenues as much as possible while controlling costs as much as possible, resulting in the company generating the greatest possible profits. In the case of monopolies this results in the lack of competition because no one else can afford to compete with the monopolists.

This collides with our democratic ideas because it results in higher prices for the average consumer, the person we know our government is looking out for. This was the great lesson learned by the Robber Barons. Our capitalistic economy breaks down when there is no competition to provide for a free marketplace. Adam Smith wrote in his groundbreaking book on the economy, Wealth of Nations, in the late 1700s that it is the “free hand” of the marketplace that decides the economy. In other words, fair competition cannot allow any individual company to control the direction of an industry.

This disagreement between the government and the monopolists was handled using only logic. The hearings didn’t disintegrate into screaming matches between the two parties involved. The discussions were obviously arduous but the two parties involved eventually came up with a solution. Just like court cases, the solution used the logic of common sense, which infers what is best for the masses where solutions to problems occur.

Just like in our own relationships, logical disagreements can occur. Unfortunately for relationships, though, disagreements do not occur in a public setting, where common sense can be used to determine the solution. What has made the solution to our negative relationships so difficult is because the problems occur behind closed doors, where no one else can help understand the problem.

If the disagreements are not looked at objectively, with an open mind, then they simply disintegrate into arguments, where it is not the logic that is discussed, the thinking side of our psyche, but the feeling side, which is not logical. The solution can only be determined when both parties perspective are taken into consideration. Within the relationship, where both thoughts and feelings are involved, both must take both the thoughts and feelings into consideration, but this must be done on a logical basis.

Another interesting aspect of the story of Rockefeller and Standard Oil is how a man who got into the business under honorable circumstances used those circumstances to abuse his power. As Ida Tarbell is quoted as saying in The Prize, The Epic Quest for Oil, and Money & Power by Daniel Yergin, “unraveling of this espionage charge…turned my stomach against the Standard.” For “there was a littleness about it that seemed utterly contemptible compared with the immense genius and ability that had gone into the organization.”

This is exactly what occurs in relationships where the objective is the quest for power, even those with “immense genius”. Disagreements turn into arguments where the little things turn into major issues, “a littleness about it”. The only way to have a peaceful harmonious relationship is one where there is no power struggle. If one person has total control over the decision making process then the abuse of power becomes extraordinarily easy.

by Tim Kellis
HappyRelationships.com

Tim Kellis, author of \\\"Equality: The Quest for the Happy Marriage\\\"  Renowned Wall Street analyst Tim Kellis takes on what could be considered society’s biggest problem today, divorce. The journey that led to him tackling such a significant issue was both personal and professional. After a successful career that eventually landed him on Wall Street Tim met what he thought was the girl of his dreams, only to see that relationship end with bitterness and anger. The journey included work with a marital therapist, and after he discovered the therapist wasn’t really helping decided to tackle the issue himself. Ambition and a strong aptitude for math helped lead Kellis to discover how to make relationships work. His math skills led directly to an engineering degree, nine years in the telecommunications industry, an MBA in finance, and finally on to Wall Street, where he became the very first semiconductor analyst to focus on the communications market. After publishing a 300-page initiation piece entitled Initiating Coverage of the Semiconductor Industry: Riding the Bandwidth Wave, Kellis became a leading semiconductor analyst at one of the biggest firms on Wall Street. The experience he gained as a Wall Street analyst provided an excellent backdrop for becoming an expert on relationships, and resulted in his relationship book entitled “Equality: The Quest for the Happy Marriage”. Read more from this author