The Truth About Better Decision-Making (Collection), 2/e

Truth 44. Lower the costs of failure

In building Standard Oil, John D. Rockefeller collaborated with the railroads to come up with a system of drawbacks. He paid only 10 cents a barrel to ship his oil, while competitors paid 35 cents. Rockefeller received a drawback on the shipping of competitors' products, so he made money every time rivals shipped. Even when he lost, he won.

This made it nearly impossible for other companies to compete. They were forced to sell out to Rockefeller or be driven out of business. (One of Rockefeller's own brothers resisted and was crushed. Another brother complied and became a multimillionaire.) Standard Oil gained 95 percent of U.S. oil production. While this became a classic example of iron-handed anticompetitive ...