The Age of Big Business Chapter 19 Section 3

Edwin Drake and the Oil Business Workmen drilled all summer, six days a week, with the Sabbath Drake's inviolable day off. When water flooded the hole, Drake innovated a solution; he drove an iron pipe down to bedrock, then placed the drill inside the pipe to keep water out of the excavated shaft. The men drilled, and drilled, and drilled. Drake at last struck black gold, on August 28, 1859, nearly seventy feet down. In the late 1850s, New Haven speculator James Townsend hired Drake to investigate Titusville, Pennsylvania for oil deposits. He had seen a Yale chemistry professor's report that rock oil could be refined and employed for illumination, lubrication, and other uses. He never patented his drilling method. Years later, the oil barons who owed their wealth to Drake offered him financial support. And in 1873, Pennsylvania voted an annuity of $1,500 to the "crazy" man whose determination founded an industry. Drake died in 1880.

John D. Rockefeller One of the business problems that Rockefeller encountered was the high cost of transporting his oil to his Cleveland refineries (40 cents a barrel) and the refined oil to New York ($2 a barrel). Rockefeller negotiated an exclusive deal with the railway company where he guaranteed sixty car-loads a day. In return the transport prices were reduced to 35 cents and $1.30. The cost of his oil was reduced and his sales increased dramatically. Within a year four of his thirty competitors were out of business. Eventually Standard Oil monopolized oil refining in Cleveland. Rockefeller now bought out Samuel Andrews for a million dollars and turned his attentions to controlling the oil industry throughout the United States. His competitors were given the choice of being swallowed up by Standard Oil or being crushed. By 1890 Rockefeller's had swollen into an immense monopoly which could fix its own prices and terms of business because it had no competitors. In 1896 Rockefeller was worth about $200 million. One of the business problems that Rockefeller encountered was the high cost of transporting his oil to his Cleveland refineries (40 cents a barrel) and the refined oil to New York ($2 a barrel). Rockefeller negotiated an exclusive deal with the railway company where he guaranteed sixty car-loads a day. In return the transport prices were reduced to 35 cents and $1.30. The cost of his oil was reduced and his sales increased dramatically. Within a year four of his thirty competitors were out of business. Eventually Standard Oil monopolized oil refining in Cleveland. Rockefeller now bought out Samuel Andrews for a million dollars and turned his attentions to controlling the oil industry throughout the United States. His competitors were given the choice of being swallowed up by Standard Oil or being crushed. By 1890 Rockefeller's had swollen into an immense monopoly which could fix its own prices and terms of business because it had no competitors. In 1896 Rockefeller was worth about $200 million.ClevelandUnited StatesClevelandUnited States Business Method: Horizontal Integration: Combining competing firms into one large firm What is a monopoly? A monopoly is when one corporation has almost total control of an industry. It was bad for consumers because corporations had no reason to keep prices low or improve its goods and services. There was no competition from others.

Andrew Carnegie Founder of Thompson Steel Works Business Method: Vertical Integration: Acquiring companies that provided equipment and services needed by the corporation. Example: Carnegie acquired coal mines, iron mines, railroads and ships. All were part of the steel making and transporting industry.

Factors of Production Land  Land and all natural resources on the land. Labor  People needed to turn raw materials into a finished product. Capital  Equipment needed to perform work and money needed to run operatons.

Sherman Anti-Trust Act What was the purpose of the Sherman Anti- Trust Act? The purpose was to prohibit trusts and monopolies. One corporation could not control an entire industry.

Shareholders Shareholder:  A shareholder is a person who buys stock in a company.  Corporations sell stock to raise capital or money.  If the company makes money the shareholder makes money. If the company loses money so does the shareholder.

Stock Exchange  Markets for the buying and selling of stock or shares in a company.  The New York Stock Exchange is located in New York City.

Popular Stocks GOOGLE SHARES 108 to 135 each (2004) Last Trading Day (9/12/06) Google is $391 a share. AMAZON.COM A single share of Coca-Cola purchased for $40 at the IPO in 1919, for example, crashed to $19 the following year. Yet, today, that one share, with dividends reinvested, is worth over $5 million.dividends reinvested $10,000 invested in Wal-Mart is now worth $10 million plus.