What is Letter 20 About?

Letter 20, written on November 2, 1936, explores the paradoxical relationship between risk-taking and business success. Triggered by a news story about a gambler’s philosophy—”Only by curiosity can you discover opportunities, and by taking risks can you make use of them”—Rockefeller examines how strategic risk-taking differs fundamentally from gambling, yet shares certain psychological elements. The letter recounts one of the most decisive moments in Rockefeller’s career: his all-or-nothing investment in the Lima Oil fields when conventional wisdom declared them worthless. Through this narrative, he articulates principles for distinguishing productive from destructive risk-taking, and demonstrates how calculated risks, grounded in preparation and conviction, create breakthrough opportunities that caution cannot access.

The Gambler’s Paradox

An Unlikely Source of Wisdom

Rockefeller opens with an intriguing confession: despite disagreeing with gambling, he finds wisdom in a successful gambler’s philosophy. David Morris, who “recently had a streak of good luck at the casino,” articulated a principle that resonated deeply: “Only by curiosity can you discover opportunities, and by taking risks can you make use of them.”

This creates immediate tension. Rockefeller “always disagree[s] with people who are addicted to gambling” and “hate[s] those who treat the industry as casinos.” Yet he cannot help but admire Morris’s insight and even speculates that “with his philosophical wisdom and mind, he might become a very successful businessmen—an excellent gambler, if he joins the business world.”

This paradox reveals an important distinction Rockefeller will develop: the difference between gambling and strategic risk-taking lies not in the presence of uncertainty but in how one engages with that uncertainty. The gambler’s wisdom—curiosity discovers, risk exploits—applies equally to business, but the application differs fundamentally.

The Fundamental Principle

Rockefeller explicitly endorses “the adventurous spirit” and affirms “a rule: ‘The higher the risk, the greater the return.'” This establishes risk-taking not as reckless behavior to avoid but as essential element of wealth creation.

He immediately clarifies: “For everyone, sailing in the business sea is the greatest adventure that life can provide him.” This frames business itself as inherently risky rather than safely predictable. The question isn’t whether to take risks but how to take them intelligently.

The Personal Context

Rockefeller personalizes this discussion by reflecting on his own risk-taking history: “The trajectory of my life is a rich adventure.” This isn’t mere retrospective interpretation but acknowledgment that his greatest achievements required accepting substantial risks.

He identifies his entry into the oil industry as “the most decisive and the most relevant to my future” adventure. This wasn’t obvious at the time—agricultural product sales was “doing a good job,” and continuing that path would likely have made him “a big middleman.”

But he chose differently, and that choice “changed all this.” The willingness to abandon comfortable success for uncertain possibility enabled transformation from middleman to industry titan.

The Nature of Productive Risk

Risk as Tool, Not Desperation

Rockefeller distinguishes sharply between productive and desperate risk-taking: “Borrowing money is not a bad thing, it won’t make you bankrupt, as long as you don’t treat it like a life buoy when you only use it in times of crisis, but instead treat it as a powerful tool, you can use it to create opportunities.”

This reveals two fundamentally different relationships to risk:

Defensive risk (the life buoy): Used in desperation when drowning, as last resort to avoid disaster. Characterized by:

• Panic rather than calculation
• Reaction to crisis rather than proactive opportunity-seeking
• Limited options and constrained choices
• High probability of failure due to weak position

Offensive risk (the powerful tool): Deployed strategically to create opportunities otherwise inaccessible. Characterized by:

• Careful analysis and preparation
• Proactive initiative rather than desperate reaction
• Multiple options and considered choices
• Enhanced probability of success through strong position

The gambler who approaches casinos with this distinction might succeed; the gambler who doesn’t will almost certainly fail. Similarly, the businessperson who treats risk as strategic tool may thrive; the one who uses it desperately will likely collapse.

The Opportunity Principle

Rockefeller articulates a crucial insight about competitive advantage: “Opportunity is here, letting it go is not just about money, but it also weakens your power in the arena of getting rich.”

This reframes risk assessment. The conventional calculation weighs potential gain against potential loss. Rockefeller adds a third factor: the opportunity cost of inaction. Failing to seize opportunities doesn’t preserve the status quo—it degrades one’s competitive position as bolder competitors capture advantages.

He elaborates: “The more things I have, the greater the power.” This establishes an accumulating advantage dynamic. Early risk-taking that succeeds creates resources (financial, reputational, structural) that enable subsequent risk-taking from positions of increasing strength. Initial calculated risks, when successful, compound into overwhelming competitive advantages.

The Lima Oil Field Decision: A Case Study

The Background Context

Rockefeller provides crucial context for understanding the magnitude of his Lima gamble: “Prior to this, the oil industry had not stopped fearing that crude oil would be exhausted.”

This existential anxiety pervaded the industry. His own assistants “began to fear that they would not be able to profit from oil in the long run, hence quietly selling the company’s stock.” Even senior people “suggested that the company should exit the oil industry early and switch to other more stable industries.”

This represents maximum psychological pressure toward caution. The entire organization, from junior employees to senior advisors, advocated retreat from the core business. Choosing risk in such circumstances requires extraordinary conviction and willingness to stand alone.

The Opportunity

When oil was discovered in Lima, Ohio, it presented both promise and problem: “Lima’s oil exudes a smell that cannot be removed by conventional methods, which deeply shook the confidence of many people who wanted to make a lot of money there.”

The sulfurous odor made Lima crude seem commercially worthless. Conventional refining couldn’t eliminate the smell, making the kerosene unacceptable to consumers. Most observers dismissed Lima as a failed prospect.

Rockefeller saw differently: “I was strongly confident in Lima Oil field. I could foresee that once we monopolize Lima, we will have a powerful force over the oil market.”

This reveals strategic vision transcending immediate technical problems. While others focused on the smell issue, Rockefeller recognized:

1. Volume potential: Lima could provide massive crude oil supply
2. Strategic value: Controlling Lima would secure supply independence
3. Technical solvability: The smell problem would eventually be solved
4. Competitive positioning: Acquiring Lima while others hesitated would create decisive advantage

His assessment: “The opportunity is here. If you let it slip away quietly, Rockefeller’s name will be associated with pigs.”

The Internal Opposition

Rockefeller’s board opposed the Lima investment, creating a leadership crisis: “It was a pity that my opinion was opposed by the timid.”

He attempted persuasion: “I was hoping that through peaceful discussions, everyone could finally agree with my opinions.” This reveals his preference for consensus when possible. But time pressure mounted: Pennsylvania oil fields were depleting, production cutting, creating vulnerability to Russian competition.

“Cannot wait any longer, it is time for me to act!” This decision point—proceeding despite board opposition—represents one of the most critical moments in his career.

The Personal Guarantee

Facing continued board resistance, Rockefeller made an extraordinary offer: “Gentlemen, if we do not want our huge ship to sink, we must guarantee our crude oil supply… I decided to use my own money to make this investment and take the risk for two years. If it succeeds in two years, the company can return the money to me; if it fails, I will bear all the losses myself.”

This represents risk-taking at the highest level:

Financial risk: Committing personal wealth sufficient to monopolize Lima

Reputational risk: If wrong, permanent association with catastrophic failure

Career risk: If the investment failed, his leadership credibility would collapse

temporal risk: Two years is long enough for competitors to exploit weakness

Yet by assuming all downside personally while offering upside to the company, Rockefeller achieved two objectives:

1. Removed obstacle: Board could no longer claim the risk was inappropriate for company funds
2. Demonstrated conviction: Willingness to bet personal fortune proved this wasn’t casual speculation

The Conversion

Rockefeller’s personal commitment converted his strongest opponent: “My determination and sincerity touched my biggest opponent, Mr. Pratt, as tears welled up in his eyes and excitedly said to me: ‘John, my heart is captured by you. Since you think we should do it, let’s do it together! If you can take the risk, so can I!'”

This illustrates leadership through example. Conviction becomes contagious when backed by personal sacrifice. Pratt couldn’t dismiss Rockefeller’s judgment when Rockefeller was willing to stake everything on it.

The conclusion: “The cooperative spirit of facing victories and losses together is also a spiritual pillar for our growth.”

The Vindication

The Lima gamble succeeded spectacularly: “We made every effort to invest huge sums of money in Lima, and the rewards were even greater. We controlled the largest crude oil production base in the United States in our own hands.”

This success wasn’t merely profitable—it was transformative: “The success in Lima intensified our vitality and allowed us to dominate other unprecedented acquisition in the oil industry. As a result, like we expected, we became the most feared super fleet in the oil field and achieved unshakable dominance.”

A single calculated risk, successfully executed, can fundamentally alter competitive dynamics and establish enduring advantage.

The Principles of Calculated Risk

Understanding Risk’s Value

Rockefeller articulates why risk-taking is necessary: “To win, you must understand the value of risk, and you must have your own vision of creating luck.”

This establishes two requirements:

Understanding value: Recognizing that certain opportunities are only accessible through risk acceptance. No amount of caution could have secured Lima’s advantages—only bold action could capture them.

Creating luck: Rather than waiting for fortune to appear, successful people create favorable conditions through calculated risk-taking. “Luck” becomes the intersection of preparation, timing, and boldness.

The Role of Conviction

The Lima decision demonstrates conviction’s centrality to productive risk-taking. Rockefeller’s confidence didn’t rest on certainty—he couldn’t know the smell problem would be solved or that Lima would prove as vast as hoped. Rather, it rested on:

Informed judgment: “I could foresee that once we monopolize Lima, we will have a powerful force over the oil market”

Faith in capabilities: “I believe that science will clear our doubts”

Strategic vision: Understanding that securing supply created enduring competitive advantage

This combination—informed judgment plus faith in problem-solving capabilities plus strategic vision—enabled risk acceptance that pure calculation might have rejected. Sometimes the math is less important than the conviction that you’ll find a way to make the math work.

The Preparation Foundation

Rockefeller emphasizes that boldness should rest on preparation: “Plan boldly and implement carefully.” This two-part formula prevents both timid under-reaching and reckless over-reaching.

Bold planning means:

• Setting ambitious objectives
• Imagining possibilities beyond current constraints
• Refusing to let caution limit vision
• Considering options others dismiss as impossible

Careful implementation means:

• Systematic execution of bold plans
• Attention to operational details
• Risk mitigation where possible
• Monitoring results and adjusting as needed

The combination produces calculated audacity—boldness grounded in competence rather than resting on wishful thinking.

The Psychology of Risk-Taking

Fear and Courage

Rockefeller acknowledges experiencing fear: “I was worried. We have built a giant oil refinery on a global scale. It was like a hungry baby who was greedy for its mother’s milk. It needed to ‘eat’ a steady stream of crude oil.”

This reveals that courage doesn’t mean fearlessness but rather action despite fear. The risks were real: supply shortage, Russian competition, potential obsolescence, massive capital commitment to possibly worthless resources.

Yet he chose action: “Cannot wait any longer, it is time for me to act!” The decision to act despite fear, grounded in strategic necessity and informed judgment, distinguishes courage from recklessness.

The Competitive Mindset

Rockefeller’s approach to risk reflects his competitive philosophy: “Whether it is to win wealth or to win in life, what good people think about in competition is not what they will lose, but what they should do to become a winner.”

This reveals a fundamental mindset difference:

Risk-averse thinking: Focuses on potential losses, asks “What could go wrong?”, seeks to minimize downside

Risk-intelligent thinking: Focuses on winning requirements, asks “What must I do to win?”, accepts necessary downside to access upside

The Lima decision exemplifies risk-intelligent thinking. Rockefeller didn’t ignore downside—he acknowledged potentially “losing everything”—but his primary focus was on winning requirements: “What must I do to maintain industry dominance?”

The Alternative to Risk

Rockefeller articulates why avoiding risk ultimately fails: “It is almost certain that safety first cannot make us rich. If we want to get paid, we must always accept the necessary risks that follow.”

This challenges the common belief that gradual, safe accumulation produces wealth. While such approaches may build modest fortunes, transformative wealth requires accepting transformative risks.

He continues: “There is no such thing as maintaining the status quo. If you do not advance, you will retreat. It is that simple.” This dynamic competitive reality means that refusing risk doesn’t preserve position but guarantees its erosion as bolder competitors advance.

Risk-Taking Versus Gambling

The Critical Distinctions

Although Rockefeller began by admiring a gambler’s wisdom, he carefully distinguishes productive business risk from destructive gambling:

Purpose: Business risk creates value; gambling merely redistributes existing stakes

Information: Business risk can be informed by analysis; gambling odds are fixed or random

Control: Business risk can be influenced by skill and effort; gambling outcomes are independent of player ability (in pure chance games)

Sustainability: Successful business risk-taking builds competitive advantages; gambling success is typically temporary

Social value: Business risk-taking when successful benefits customers, employees, and society; gambling creates no social value beyond entertainment

The Preparation Difference

The most important distinction lies in preparation. Rockefeller’s Lima decision involved:

• Years of industry experience informing judgment
• Technical consultation about solvability of the smell problem
• Financial capacity to sustain the investment
• Organizational capability to exploit success
• Strategic analysis of competitive dynamics

A gambler making a comparable bet would have none of these advantages. The superficial similarity—both involve risk and uncertain outcomes—masks fundamental differences in probability of success.

Rockefeller’s “gamble” was informed by decades of experience and supported by substantial capabilities; a casino gambler’s bet involves neither.

When Business Becomes Gambling

Rockefeller warns against treating business like a casino, implying certain practices cross the line:

• Taking risks without adequate information or analysis
• Betting on outcomes you cannot influence
• Risking resources you cannot afford to lose
• Seeking excitement rather than value creation
• Ignoring probability in favor of wishful thinking

These behaviors transform legitimate business risk into destructive gambling, likely producing the same long-term result: ruin.

The Broader Philosophy

Risk as Life Principle

Rockefeller universalizes risk beyond business: “Isn’t life like this?” suggesting that all meaningful human endeavor involves uncertainty and potential loss.

He elaborates: “In my aspect, being cautious is not the perfect way to succeed. No matter what we do, or even our lives, we must choose between taking risks and being cautious. And sometimes, the chance of winning by taking risks is much greater than by being cautious.”

This frames existence itself as requiring risk engagement. Marriage, career choices, relocations, major purchases, starting families—all involve accepting uncertainty and potential downside to access potential upside. Those who consistently choose caution over calculated risk may avoid spectacular failures but also miss transformative opportunities.

The Compound Effect

The Lima success illustrates how risks compound: one successful bold move creates resources and positioning that enable subsequent bold moves from stronger positions.

Before Lima: Vulnerable to supply disruption, facing depletion, potentially dependent on Russian oil After Lima: Supply-secure, volume leader, positioned to dominate acquisitions

This improved position resulted directly from risk acceptance. Had Rockefeller chosen caution, Standard Oil might have gradually declined; instead, Lima propelled it to unassailable dominance.

Risk and Character

Underlying Rockefeller’s risk philosophy is a view of character. Willingness to take calculated risks reflects:

• Confidence in one’s judgment and capabilities
• Courage to act despite uncertainty and opposition
• Vision to see possibilities others miss
• Determination to pursue difficult objectives
• Responsibility to accept consequences of decisions

These character traits, developed through risk-taking, become assets as valuable as financial resources. The person shaped by successfully navigating risk becomes capable of achievements impossible for those shaped by avoiding risk.

Practical Guidance

Assessing Risk Opportunities

Rockefeller’s approach to Lima suggests criteria for evaluating risk opportunities:

Strategic value: Does success create enduring competitive advantage?

Problem solvability: Are obstacles likely to be overcome with effort and resources?

Timing urgency: Is there window of opportunity closing?

Competitive dynamics: What happens if we don’t act while others might?

Resource adequacy: Can we sustain the investment through difficulty?

Downside tolerance: Can we survive if this fails?

Opportunities meeting most or all criteria warrant serious consideration; those meeting few should generally be declined.

Building Risk Capacity

Rockefeller’s ability to take the Lima risk rested on foundation built over decades:

• Financial resources to sustain major investment
• Organizational capabilities to exploit success
• Industry knowledge to inform judgment
• Leadership credibility to persuade others
• Proven track record reducing perceived risk

This suggests a developmental path: take smaller calculated risks early, build capacity through success, progressively accept larger risks from stronger positions.

The Conviction Test

Perhaps the most practical guidance comes from Rockefeller’s personal guarantee offer. If you’re unwilling to bet substantial personal resources on an opportunity, that reveals either:

• Insufficient confidence in the analysis (suggesting more study needed)
• Inadequate conviction about the opportunity (suggesting declining it)
• Appropriate recognition of unacceptable risk (suggesting seeking alternatives)

This test forces honesty: conviction sufficient to risk others’ money but insufficient to risk your own suggests the conviction is inadequate.

The Necessity of Intelligent Risk

Letter 20 presents calculated risk-taking not as optional enhancement but as essential requirement for exceptional achievement. Rockefeller’s analysis reveals that:

First, meaningful opportunities almost always involve meaningful risks. The caution that avoids downside simultaneously forecloses upside, while calculated risk acceptance creates access to transformative possibilities.

Second, the fundamental question isn’t whether to take risks but how to take them intelligently. Strategic risk-taking grounded in preparation, informed judgment, and adequate resources differs fundamentally from gambling despite superficial similarities.

Third, risk-averse organizations and individuals gradually lose competitive position to bolder rivals. The dynamic nature of competition means that maintaining current position requires continuous advancement—which requires risk acceptance.

Fourth, personal conviction matters profoundly. The Lima decision succeeded partly because Rockefeller’s willingness to personally guarantee it convinced skeptics and concentrated organizational effort behind the initiative.

Fifth, successful risk-taking builds capacity for subsequent risk-taking. Each calculated risk successfully navigated develops judgment, builds resources, and strengthens competitive position—enabling progressively larger risks from increasingly secure foundations.

Sixth, the greatest risks often involve going against consensus. When the entire organization advocated caution, Rockefeller’s willingness to stand alone and stake personal fortune on contrary judgment proved decisive.

Seventh, risk cannot be eliminated from business or life, only managed. The choice is between conscious, calculated risk-taking and unconscious drift into competitive irrelevance.

The letter’s enduring wisdom lies in its recognition that fortune favors not merely the bold but the intelligently bold—those who combine courage with calculation, conviction with competence, and vision with execution capability.

Rockefeller’s message to his son, and to all readers, is clear: if you want transformative results, you must accept transformative risks. But these risks should be:

• Calculated: Based on thorough analysis and informed judgment
• Strategic: Creating enduring advantages rather than temporary gains
• Prepared: Supported by adequate resources and capabilities
• Timely: Seized when windows of opportunity open
• Survivable: Sized such that failure, while painful, isn’t fatal
• Conviction-backed: Important enough to stake personal resources on

The Lima decision exemplifies these principles. Conventional wisdom declared the opportunity worthless; Rockefeller’s analysis revealed transformative potential. The board advocated caution; Rockefeller offered personal guarantee. Technical obstacles seemed insurmountable; he bet on human ingenuity solving them. The risk was enormous; the reward proved larger still.

This is the paradox at the heart of exceptional achievement: the very magnitude of risk that deters most people creates the opportunity for those willing to accept it. When everyone else retreats in caution, the bold advance to victory—provided their boldness rests on judgment rather than mere recklessness.

The gambler David Morris was right: curiosity discovers opportunities, and risk exploits them. But as Rockefeller demonstrates, the exploitation that creates enduring success differs from casino gambling in every dimension except the presence of uncertainty. Business risk-taking, properly executed, is less like rolling dice and more like chess played for meaningful stakes—skill matters, preparation matters, judgment matters, and while outcomes remain uncertain, probability tilts decisively in favor of the prepared, capable, and courageous.