#266 Henry Ford's Autobiography

0:00 An able man is a man who can do things. And his ability to do things is dependent on what he has in him. What he has in him depends on what he started with. And what is done to increase And discipline it.

0:13 An educated man is not one whose memory is trained to carry a few dates in history. He is one who can accomplish things. A man who cannot think is not an educated man however many college degrees he may have acquired. Thinking.

0:29 І за хардиствор аніманду. Which is probably the reason. Why we have so few thinkers. There are two extremes to be avoided. One is the attitude of contempt towards education.

0:41 The other Is the tragic snobbery of assuming that marching through an education system is a sheer cure. For ignorance. And mediocrity. You can not learn.

0:53 І ані ску What the world is going to do next year. But you can learn some of the things which the world has tried to do in former years and And where it failed. And where it succeeded.

1:06 If education consisted in warning the young student away from some of the false theories on which men have tried to build so that he may be saved the loss of the time in finding out by his own bitter experience. It's good. Would be unquestioned. A man's real education begins

1:26 After He has left school. The true education Is gained Through the discipline.

1:32 Of life. That's an excerpt from the book that I'm gonna talk to you about today, which was published a hundred years ago. And it's my life and work, the autobiography of Henry Ford. So back on episode two sixty three in that biography of Edwin Land, called Land's Polaroid Acompany and the Man Who Invented It. In chapter three.

1:49 It goes through all the different hero and people that Edwin Lan was studying, like the great people that came before him that influenced his approach to uh building p his all of his work, really his scientific work and the building of Polaroid. And so it's like people there's there'll be like one or two paragraphs, maybe like a page or two, on the people that he was studying as like a young person. He's like seventeen or maybe nineteen at the time. And it's like people like Michael Faraday, Thomas Edison, Alexander Grand Bell, Henry Ford is is Uh one of the people which is I'll get to in a minute why I'm rereading his autobiography. Uh and George Eastman.

2:20 And so what I've been trying to do the last few weeks is like set up Okay, if you had to ask like who are the Who's the most influential entrepreneurs of the last hundred years. And I think the top two are blatantly obvious and it's Steve Jobs and Henry Ford.

2:33 And you and I are living in the world that jobs change, so I don't have to tell you what uh the introduction of smartphone changed, you just live through it. But I think a lot of people miss how fundamentally innovative the model T was. Henry Ford's model T was the first mass produced car in history. Before that, humans are getting around on foot. Horse.

2:51 Maybe horse driven carriage. Or maybe a bicycle. Henry Ford was the first person in history to figure out how to produce a car at a price. That everybody could buy one. But I like this idea of studying the two most important entrepreneurs of the last hundred years, Steve Jobs and Henry Ford, back to back.

3:06 So with that, let's jump into the book. Now this is technically called an autobiography. But that's not really the way it's set up. So when he the reason I opened the podcast that way where he says, Hey You know, true education is actually gained through the discipline of life. I think that's how Henry Ford thought about this book as well. We'll learn like a little bit about his early life. But mostly.

3:24 It is like ha reading this book is like having a one sided conversation. speaks directly to you and tells you, Hey, this is my philosophy on company building. And so let's go to the first chapter and it just opens up In a very odd way for an autobiography to open up. He just gets right into the main point. Power and machinery, money and goods are useful only as they set us free to live.

3:45 They are but a means to an end. The fact that the Ford that the commercial success of the Ford Motor Company has been most unusual. Is important. Only because it serves to demonstrate That the theory in other words his theory

4:00 to date is right. So I'm gonna pause right there. He publishes this book In nineteen twenty two. In nineteen nineteen, he has b he has bought out All of his investors. He owns The Ford Motor Company. He owns a hundred percent of the Ford Motor Company.

4:15 And this is at a time in history when he is making like half, I think something like half of all cars in the world. A rough analogy of what that would be like today is if you own like let's say a ten or a twenty billion and something like that. Can or twenty billion dollar company, a hundred percent. And so he opens up, we're like, listen, I have a lot of criticisms about the way other businesses are built. And I think I my criticisms are valid and there be there are more people will be more open to hearing them.

4:38 because I have betted benefited immensely financially from the system as is, and I still want to change it. So that is what he's talking about in these two paragraphs. Considered solely in the light, I can criticize the prevailing system of industry and the organization of money in society from the standpoint of one who has not been beaten by them. There in something's gonna be obvious, uh Apparently.

4:57 Henry Ford had a giant ego. And this is like a key thing to think about because it's why it's so important for founders to learn from other founders. Uh, because a lot of this uh lot of the assets to a successful founder and a lot of the things they do. Or almost in direct opposition of what polite society would tell you to do.

5:12 And so far after reading about a hundred thousand pages of these biographies of entrepreneurs over the last few years. Uh something jumps out like small egos don't build giant companies. The only difference is some of the founders are better at hiding it. Which was the advice Sam Walton had. He's like, Listen, I knew you have an ego. hide it, don't use like use it to drive you, but don't let people see it.

5:31 It's an internal driven thing, not an extern not something to like strut about. Externally. But that is just the first line and there's gonna be several of them today where he's just like, Okay, I can criticize this. Most of the time people criticizing the way businesses are built and how money shapes society They're usually the ones that have been beaten by it. And he's like, Listen, I can criticize because I'm have not been beaten by them. At the time this is being written, he is one of the richest people on the planet.

5:54 So he continues, as things are now organized, I could, were I thinking only selfishly, ask for no change. If I merely want money, the present system is all right. It gives money in plenty to me. But I'm thinking of service. The present system does not permit

6:08 Of the best service because it encourages every kind of waste. It keeps many men from getting the full return from service. And I wanted to bring that up right at the beginning, because I'm gonna give you an opportunity to jump out. Oh I don't know how long you and I are gonna talk right now, maybe an hour, maybe two hours, depends on how long it takes me to get through this. I'm essentially just gonna repeat his main thing. His main idea. Is that business exists for one reason and one reason only, and that is to provide service for other people.

6:35 The note I left myself when I re read that paragraph is everything I do is serving my true end, which is to make a product that makes other people's lives. Better. I have both the paperback version and the Kindle version of this book. He uses the word service. One hundred and twenty nine times.

6:53 And then he's gonna echo an idea from his hero. So I just went through the the fact that at the beginning Edwin Land was setting all these other people. A lot of so Uh Henry Ford, Edwin Land. Steve Jobs, they share a lot of heroes, which is interesting. And so Henry Ford.

7:07 Idolizes. Thomas Edison. Thomas Edison's like a few, maybe like a generation older than Henry Ford. They wanted becoming really good friends. Like he um Henry Ford considered Edison like his maybe even his best friend. But what he's about to say here is Very Edison. Ideas are themselves extraordinarily valuable, but an idea is just an idea. Almost anyone can think

7:27 Up an idea. The thing that counts is developing in it. Into a practical product. So Edison was famous for saying, Hey, I make a lot of inventions. I'm only interested in inventing things that people want to buy. Because a sale is a proof. Of utility.

7:40 And then Ford says, Hey, these are the ideas I use to build one of the most valuable companies in the world. That company just happens to produce our mass manufacturer cars, but these ideas can be used in any business and later on Uh he gets so frustrated with the inefficiency of a railroad that he winds up buying it and showing he's like, Listen, that playbook I just ran on the Ford Motor Company, I'm gonna run on this railroad and I'm gonna demonstrate that the the principles are they actually work. And he says, I am now most interested in fully demonstrating that the ideas we have put into practice are capable of the largest application. That they have nothing particularly to do with motor cars. And so there's a maxim that you and I have talked about over and over and over again.

8:16 The way I would compress that idea so you can always remember and take it with you is that you don't copy the what, you copy the how. In addition to his main theme of service, Henry Ford. The chess. Lazy people. And he's gonna bring this up over and over again. Humans are made to work.

8:30 The way I I you know, I'm gonna read this to you first and then I'll write I'll tell you what I wrote down right after I read it. So he says the natural thing to do is work to recognize that prosperity and happiness can be obtained only through honest effort. Human ills flow largely from attempting to escape. From this natural course. So the way I think about that is humans are made to work. The sense of accomplishment from overcoming difficulty is satisfying in a way. That a life of leisure and ease Will never be. And then he's gonna compare and contrast his philosophy, which which he sees like the prevailing philosophy of his day.

9:02 And then I'll have a way to like summarize this and kinda break it down a little bit more. Uh then'cause he he goes on for quite a bit here. So he says monopoly is bad for business. Profiteering is bad for business. The lack of necessity to hustle The lack of necessity to hustle is bad for business. Business is never as healthy as when like a chicken It must do a certain amount of scratching for what it gets. So keep in mind he grew up on a farm, so that's why he talks the way he does. So it's like business is never as healthy as when, like a chicken, it must do a certain amount of scratching for what it gets. So what it what it eats, right? Things were coming too easily.

9:33 there was a letdown of the principle that an honest relation ought to obtain be attained between value And prices. the public no longer had to be catered to. There was even a public be damned attitude in many places. So he's saying a public be damned attitude. By business owners.

9:49 Henry Ford, like Jeff Bezos, was extremely customer. Obsessed. А те сам тайм а вас редій спок. I listened to an episode of Invest Like the Best podcast with this guy named Ravi Gupta. And he said something that's really interesting and so interesting that I took a note and and saved it my phone.

10:06 And he says, I think Amazon's culture is largely based on one thing. It is not based on fourteen. It is based on customer obsession. That is what Bezos would die on the hill for.

10:17 this almost maniacal obsession and dedication to providing cust customers the best service at the lowest cost is a way to think about Henry Ford because To me is like every single once you once you really put it into into your brain. Like every single decision that he's gonna make in the building of the company's all gonna flow from that one thing. And if he sees a business that doesn't and this is like the big ego part, if he does if he sees a business that doesn't have the thing, like he's gonna talk shit about it. And so that's exactly what he's doing here. The public no longer had to be catered to. He's always gonna try to cater them. There was even a public be damned attitude in many places. It was immensely bad for business. Some men called this abnormal condition prosperity.

10:53 So he's coming right off of like this big financial boom. It was not prosperity, it was just needless money chase. Money chasing is not business. And so this is what he thinks business should be. It is the function of business to produce for consumption and not for money or speculation. Producing for consumption to the consumer, right? Implies that the quality of the article I need to pause there. Anytime you read Books. in like this age from like nineteen hundreds uh nineteen ten, nineteen twenty, nineteen thirty.

11:22 For some bizarre reason. Uh and I've read a ton of them, obviously, for this podcast. They use the word article. When he says the word article, it's not how we think of the word article today, like something like a newspaper or something like that. He th he's saying product.

11:34 So when you hear article, I will try to before I even say it to you. I'll try to change it into product, but in case I don't If you hear Henry Ford say the article produced, he he's not talking about writing something, he's talking about m his product, the model T. So let me start the sentence over again. Producing for consumption implies that the quality of the article, the quality of the product produced will be high and that the price will be low. That the art that the article there I go again that the product be one which serves The people

12:02 And not merely the producer. And so I have the Kindle version up right now. I just realized something. I told you that the word service It appears in this book a hundred and twenty nine times. That word serve or serves is another fifty five. He's just gonna repeat this over and over and over again for two hundred pages.

12:19 So let me wrap up this section, I'll tell you how I how to think about Henry Ford's philosophy and like something that fits into a like a a tweet size, like maybe a paragraph size. Okay. The producer depends for his prosperity upon serving the people. I hope you don't get annoyed at me, I promise. I'm not like the it's very interesting. This book is I think must read for any entrepreneur. And you can read it really fast. But it's just h funny that he just h pounds on this thing over and over again. The producer depends for his prosperity upon serving the people. He may get by for a while serving himself, but if he does, it will be purely accidental. And when the people wake up to the fact that they are not being served, The end of that producer

12:54 Is in sight. So I've probably read that paragraph. Yeah, maybe I don't know, five times in the in the preparation to talk to you today. It didn't just hit me till just now. So

13:03 I'm reading that and I'm like, Oh, wait a minute, there is like some weird thought that just popped into my mind that I had forgot. It's gonna come from Uh Jeff Bezos. That is episode one seventy nine of Founders, if you want to listen to that. But what brought that to mind, that brought that book to mind, and I'm gonna read uh excerpt to you from h from in a minute, is where Henry Ford's like You're gonna focus on serving yourself over your customers, that's fine. You might temporarily have success, but one day you're gonna wake up. One day the customers are gonna wake up and realize there's a better option out there. So Pizza was called

13:30 A uh all hands in the early days of Amazon. And he said, listen, it's because they were worried that Barnes and Nobles at the time in Amazon history, Barnes and Nobles they're only selling books, Barnes and Nobles is opening an online store and this is what Bezos Toad told his team, look, you should wake up worried. Terrified every morning. But don't be worried about our competitors because they're never gonna send us any money anyway. Лес би воріє баркомер стаєм фокус.

13:55 And so that's the main theme with basos. It's like this and you need to be focused on your customers over your competitors. And as long as you're serving them, don't give them a reason to go anywhere else. And if you do that, they won't go anywhere else. So this everything I'm reading to comes across like several different pages and I kinda put it all together. And then this is the note I was really thinking, is like how can I I I need to like take this like five hundred words or whatever this is. I I need this to I need to compress this so I can actually take this with me. And so I wrote like okay, how can I distill what I is my understanding of Henry Ford's philosophy. So it's get rid of waste. Increase efficiency through thinking and technology.

14:27 Drop your prices. And make more money with left less profit per car. Watch your cost religiously. When needed. Bring that business process in house.

14:37 And always stay focused. On service. Fast forward a few pages. He's back at it again. Being greedy for money is the surest way to not get it. But when one serves for the sake of service, for the satisfaction of doing that which one believes to be right

14:52 then money abundantly takes care of itself this next Sentence. I think is my favorite. He's got a lot of good quotes. This is my This is my favorite Henry Ford.

15:03 Money comes naturally. As the result of service. Money comes naturally as a result of service. I That I've probably repeated that in conversation like a hundred times. It's just a fantastic way to think about what we're doing. Money comes naturally as a result of service. So then he gets back into this fact that he just h he detests lazy people. And he says in my mind nothing is more abhorrent than a life of ease.

15:26 На вас газині рей та із. There is no place in civilization for the either. So when I had re read this now. The second time. I read a bunch of now since the since the first time I read this book. And now you know I've probably read I don't know, like two hundred books, whatever it is.

15:40 And I read two of them on Winston Churchill. I remember reading this book, Disbiography of Churchill. And like almost spitting out the water that I was drinking when I got to this part of the book, because he's writing a letter, Churchill's writing a letter to his son. When I got to his part, I was like, Oh, this is reminding me of what Churchill said to his son and Churchill writing to his son, he says, Your idle and lazy life is very offensive to me You appear to be leading a perfectly useless existence.

16:04 And then the author says Churchill loved his son, but over time he liked him less and less. Another main idea from Henry Ford's philosophy, he wants to make simple products. And he wants to make them at scale. My effort is in the direction of simplicity. People in general have so little and it costs so much to buy even the barest necessities. Because nearly everything that we make is much more complex than it needs to be. Real simplicity means that which gives the very best service to

16:31 And is the most convenient in use. Start with a product that suits And then study to find some way of eliminating the entirely useless parts, which is, if you think about it, is exactly what he did. He's giving us advice. He's like, Hey, if you wanna wanna build a business, you wanna build a product, start with a product that already exists, study it, and then just find a way to get rid of the useless parts. Well, that's I mean, he starts out bu building like six thousand dollar luxury cars.

16:56 For other people at a time when like the average worker was making like two or three dollars a day, and he realized like we have all this stuff in the car that's just not needed. And so you can think about Ford's career, it's like okay, that's the state of cars now. And so for the next fifteen to twenty years, I'm gonna find a way how to keep making this simple, m keep making it lighter. And then the more simple I make something, the more Uh, the more of them I can make, the more of them I can make, the lower the price gets. And so there you go. He's just changed the entire literally changed our physical world with his one idea. Hі liter Henry Ford had one idea.

17:25 So back on founders number one twenty, one twenty one, and one twenty two, I did a three part series on Billy Durant and Alfred Song. So Billy Durant is Everybody knows the company General Motors Motors. Nobody knows who Billy Durant is. He's the founder. Outside of Henry Ford. Billy Durant is by far the most important other founder for like the the very the creation of the very foundation of the American automobile industry. It's remarkable how few entrepreneurs actually know who he is. So there's just one paragraph from one of these books. It is from founders number one twenty-one.

17:55 And it just gives you an this idea'cause I think this is more it is really important to know up front when you're studying Henry Ford that he literally had One idea his entire career. And it was completely different from every other automobile manufacturer. And it says he was determined to concentrate on the low end of the market, where he believed that high volume would drive costs down and at the same time feed even more demand for the product. It was a fundamental difference.

18:18 In philosophy. So why'd I bring that up to you now? Because when he's telling you and I at this part of the book, hey Find a product that already exists. Study it. And then eliminate the useless parts.

18:28 He's telling you that And he's telling me that. Because that's what he did. And then he talks about this sounds simple, but it takes a long time because you gotta do it not only to not only the product, but every single part in the construction and manufacturing of the product. I'm he goes into a lot of detail. I'm gonna pull out one.

18:42 Because this is important. So at the point at this time there's like a good amount of wood that is being put into these cars. And so he says, Take wood, for example. For certain purposes, wood is now the best substance we know. But wood is extremely wasteful. The wood in a Ford car

18:57 contains thirty pounds of water. There might and then This very like basic It's it's like simple but not easy. like his approach to building a business is simple but not easy, right? So it's like okay, well this is just one material in one part of a car that has you know hundreds, maybe thousands of different

19:13 Um pieces to it. And so he's like, Okay, well this seems to be very wasteful. The wooden afford car contains thirty pounds of water. And his this thought process is fantastic. So he goes, There must be some way of doing it better than that. There must be some bethod by which we can gain the same strength and elastic elasticity without having to lug around useless weight. And this is the punchline, this is so important and why I'm reading it to you.

19:36 And so through A thousand processes. His point is like I didn't just think about this For wood in the car. I thought about it for every single part of my product, every single part of my business.

19:49 That line of thinking takes time because you have to do it a thousand times to different areas of your business. But if you are willing to invest that time, by the time he starts mass producing By the time the first model T comes off of the assembly line. He has been experimenting and using this kind of thought process for twenty years, right? So they think okay And why is that important?

20:11 Биказ батай да процес старц. The game is already over. Game set match. because now he can make a product in Twelve minutes.

20:21 That takes his competitor two days. And so he talks about in kind of like a weird, un hard to understand way that you know, I basically I only had one idea. I wanted to make the car for the everyman. I was only interested in trying to get that car the price as low as possible. And so what he's about to say here is like really like you start with the product. and the product that he wanted to make was the inexpensive car for the everyday man. And then you try to work backwards on how to do that. Over many, many decades. The place to start manufacturing is with the product. The factory, the organization, and the selling and the financial plans will shoot themselves to

20:51 The product. And that process is extremely long, і се зай спент Челв єр. Before I had a model T. That suited me. We did not attempt to go into real production until we had a real product. So he had made a bunch, I think he made like

21:05 Eight or nine different Versions of Ford cars before the model T. So that's what he's talking about. It's like Start with something big and expensive. even if it was cheaper than what my competitors were giving, but it's still not the one idea I had in my mind, what I saw, what I was going for. It took me twelve years of trying to figure out

21:20 how to get to the point where I can mass produce and actually make that car for the everyday man. And then I want to point out something here, like the great thing about this book It's just she's very straightforward. I don't think the writing is great. It's like sometimes you have to hard understand but it's like he doesn't bury the lead. He's like this is just what I think and then he'll give you example of why he thinks. So he says the essence of my idea then is that waste and greed block the delivery of true service. Both waste and greed are unnecessary. Waste is due largely this is so important.

21:47 Waste is due largely to not understanding what one does or being careless in doing it, and the only way to truly understand what you're doing. Right? is to do it for a long time and focus on it and think about it. At this point he's writing this, he's been trying to build cars for thirty years. There's no shortcut. You have to put in the time. There's a fantastic quote by Mickey Mannell.

22:09 that I think kind of like echoes what like what we're talking what you and I are talking about right now. It's like it's unbelievable. How much you don't know. about the game that you've been playing all your life. And so he's saying, Hey, other entrepreneur. Waste is largely due to not understanding what one does or being careless in d in the doing of it. Greed is merely near sightedness. I have striven towards manufacturing with a minimum of waste, both of materials and of human effort, and then towards distribution at a minimum of profit. That means profit per per car, not

22:39 He's not trying to artificially suppress the amount of money he makes. He just doesn't want to make a lot per So there you go. I kinda ran over his his point there. philosophy of service. I'm gonna save that for the end. 'cause he repeats that in the last chapter as well. So I'm gonna skip to

22:57 He's gonna actually give us oh oh my goodness. So we've all we've been talking about his philosophy in his autobiography. Now we actually hear s a little bit about his life. And he says on May thirty first, nineteen twenty one, the Ford Motor Company turned out Car number five million. And he's about to tell us, Hey, I've been at this a long time. I'm happy I just made my five millionth car and the four in the model T alone.

23:15 He's gonna still fifteen million just of the model T. So he's talking about Number number five million of any Ford car. That's not included, like Model T alone is fifteen million, but that that's gonna happen over the next like decade and a half from where we're in the story. But the reason I'm bringing this your attention is'cause like he said I he built a gasoline buggy, which is like kinda like the first primitive car.

23:33 Thirty years before He produced his five millionth car. And why is he bringing this up? Because listen, car number five million He's like He says it's simpler than my first car.

23:43 But almost every point in it. may also be found in the first car. This is why I keep saying like He had literally had one idea. And in every single book that I've read on Henry Ford, like it just jumps out. He's just like I had one idea, had no idea how I was gonna do it. But I just kept working at it until I got to it. It just happened to take a long time. And then once he figured it out, it's it's like, okay, well the game's over. No one's gonna be able to produce as fast as possible.

24:05 And What's fascinating is the fact that he focused on I don't want to be too complicated because I don't want to direct your attention away from what we're talking about. But there is something interesting in studying that related is of the automobile industry that I think applies t universally to other industries. Like Ford took the lead. was the dominant player had over fifty percent market share. But this the he uh His i that's how good his one idea was, but that one idea led to the a giant gap.

24:30 Because Billy Duran of GM's like, I'm not gonna just make one car. I'm gonna make like a conglomerate. I'm gonna have like a cheap car, a medium car, a luxury car. I'm not gonna do all this. I'm gonna go out and what he did is like I w I'm gonna go out and buy all these other existing he bought like Buick and Cadillac and I think he started Chevrolet. I don't know if he bought it, I can't remember. But the point being is it's like eventually people got tired of just having the one black Model T

24:52 And once they started then cars became like hey, your car says something about you and there's all these other things. The entire time that Henry Ford was having success. Billy Durant and then really Alfred Sloane because Billy Durant lost control of his company and Alfred Sloan was the one that brought GMs Billy essentially Alfred Fr Sloan was the one that brought Billy Durance. ideas to fruition in the marketplace.

25:14 And Because GM had better product offerings. Once the model T tapered out, that's when GM had this huge rise. And I think by like nineteen I say like nineteen fifty, maybe? I I don't know the number, like let's say nineteen fifty, nineteen sixty. It's GM's like one of the largest

25:31 uh companies on the planet. And really the takeaway there is like okay. one industry you have two legendary founders, they both have completely different philosophies and sometimes The philosophies

25:41 work depending on the time. Like think about Microsoft and Apple's like a a kind of a good parallel to that. So anyways, didn't mean to go on that tangent. He's saying, Listen, That first car It's like a lot worse, but it's very similar to this five million car. He says the changes have been brought through experience in the making and not through any change in the basic principle. Essentially, hey, I had one idea, I'm not changing that. I'm just getting better at actually expressing that idea.

26:02 In a physical car. Which I take to be important fact, demonstrating that given a good idea to start with, it is better to concentrate on perfecting it. than to hunt around for a new idea. One idea at a time is about as much as anyone can handle. And now he gets into okay, why the hell are you building a car in eighteen ninety three anyways? It was life on the far farm that drove me into devising ways and means of better transportation. For even when I was very young, I suspected that much might somehow be done in a better way.

26:30 He always says it's like a man should never do something that a machine can do better. Like that we should that should be our main focus. And he starts out thinking about it's like how can I get myself out of the physical labor Through mo through like building motors on a farm. That is what took me into mechanics, although my mother always said that I was born a mechanic.

26:47 I had a kind of workshop with odds and ends of metal for tools before I had anything else. My toys And they still are. That's a fantastic sentence. The biggest event of my early life was meeting with a road engine

27:01 About eight miles out of Detroit one day when we were driving into town. So he's driving into town by horse. There is no cars when he's saying driving, right? I was twelve years old. I remember that engine as though I'd seen it only yesterday, for it was the first vehicle other than horse drawn. It was the first view that wasn't horse drawn that I had ever seen. And so he continues talking about the impact that just this one experience had on, right? From the time I saw that road engine as a boy of twelve right forward to today, my great interest has been in making a machine that would travel the roads. And so that's why he has a love of mechanics.

27:34 And he could considers himself a mechanic. There is an immense amount to be learned simply by tinkering with things. Machines are to a mechanic. Well books are to a writer. He gets ideas from them. And if he has any brains, he will apply those ideas. And then he's gonna give advice, especially for young people, but it applies really to everybody that hey, you can't live the life

27:54 Like the your life the way other people want you to. Even your family. Sometimes you gotta say, Hey, shut up, mom and dad. My father was not entirely Uh, sympathetic with my bent towards mechanics.

28:04 He thought that I should be a farmer. When I left school at seventeen and became apprentice in machine shop, I was all but given up for lost by his father. And so now he's apprenticing in a machine shop. And it's just one sentence and y I think you already know this. I wanted to make something in quantity. He repeats this a lot. I don't wanna make

28:22 five cars a week or five cars a day. I would like to make five cars every two minutes. And then this paragraph is I think I was trying to explain this to you. earlier I don't know how like I'll have to listen to it back if I did a good job or not, but I was trying to make this point. It's like listen, it The reason Henry Ford

28:38 Is so worth study is because his product literally changed the world. Like the geography, like the physical world. Where we live and what it looks like. That's insane to think about. And he says one of the most remarkable features of the automobile on the farm is the way it has broadened the farmer's life.

28:54 We simply took for granted that unless the errand Was urgent. We would not go into town. And I think we rarely made a trip into town more than once a week. And so what's interesting is again, at this point in history, humans are getting around mainly by horse. So even

29:10 One of the early criticisms. of uh the early automobiles you'd hear from people, which is you know, consistent with human nature, history doesn't repeat human nature does. Is that why do we need a car? We have a horse. And for it is like I felt perfectly certain that horses Considering all the bother of attending to them and the expense of feeding

29:28 uh feeding them and cleaning after them did not earn their keep. And the point is is like Picking up horse shit used to be a job. In main cities, like there was people all they did was pick up horse shit off of roads. And so Henry Ford's point is like, what if I just made a product that, you know, never it couldn't travel it traveled just as far and just as fast as a horse. Just the fact That somebody doesn't have to follow it around with a shovel means my product is better.

29:52 So now he's talking about the in the like the entrepreneur environment in uh Michigan at this time, let's say this is like the late 1800s. If you were mechanically inclined, there's a lot of people wanting to build cars, a lot of people were experimenting. And so Uh I I brought this up on several podcasts in the past, but a lot of people are surprised that like the the the main engines that they were trying to build cars before the internal combustion engine. Uh was steam and electri uh electricity. This is like eight.

30:16 People that know there's electric cars in late eighteen hundreds. But his whole point here is that he repeats over and over again, he's very suspicious of experts and he feels that if you could actually fill up your competitors company with experts that you're that like it's a Nefarious way to get an unfair advantage. So it says the idea of gas engines was by no means new. But this was the first time that a real serious effort had been made to put them on the market. They were received with interest rather than enthusiasm. And I do not recall anyone who thought that the internal combustion engine would ever have more than just limited use. This is his idea.

30:46 Because he wants his cars to travel far. and steam first we thought that was super dangerous'cause it explode and they were and and elect electrical cars couldn't go very far. So he's like, Okay, well I'll try to use internal combustion engine and other people were telling him was like No, you can't do that, it's just gonna be like the tiny little thing. All the wise people demonstrated conclusively that the engine could not compete with steam. They never thought that it might carve out a career for itself. That is the way with wise people. They are so wise and practical that they always know to a dot just why something cannot be done. They always know the limitations.

31:17 That is why I never employ an expert in full bloom. If I ever wanted to kill opposition by unfair means, I would endow the opposition with experts. They would have so much good advice that I could be sure. That they would do very little work. Henry Ford is very blunt. Actually makes reading his autobiography Uh rather refreshing. I I like this the simple way he communicates. He's just like this this is what I believe. I don't care if you agree with me or not, kinda thing. What's fascinating is he's doing all these experiments.

31:43 On the internal combustion engine or engine. Here's a just ran over I'm about to run over my own point. He was doing this while he was working for an electric company. He was offered a job. He's like I at this point I was offered a job with the Detroit Electric Company as an engineer and machinist. So he's working at an electric company during the day, and he says every night And all of Sunday.

32:04 I worked on my motor. I cannot say that it was hard work. No work with interest is ever hard. And Really the way you think about okay, so he's got a full time job.

32:14 He's got a wife. Every night and on Saturdays, right, he's working on this dream of his dream of this internal combustion engine, everybody around him telling this is a stupid idea, right? And the way I think about this is like think about the amount of work ethic put in. He's been told he's already told us like what five, four or five times up until this point, that he hates lazy people who think it's idleness. And so when I read this section, I thought of What I wrote down is like if you can't handle the workload

32:37 Someone else will. And the fact that he not only endured the workload, but he enjoyed it. He just said, I can't say it was hard work. No work without interest is ever hard. He was fascinated by what he was doing. So what's the result? In eighteen ninety two. I completed my first motor car. Why is that important? Because the public praises people for what they practice in private. He's already been experimenting for years.

32:58 And we're still dekads. Away from the model T. This is what he call his first car. He said my gasoline buggy. Was the first and for a long time the only automobile in Detroit. This line is hilarious. I had to get a special permit from the mayor, and thus for a time enjoyed the distinction of being the only licensed chauffeur in America.

33:17 I built three call cars in my home shop. And all of them ran for years in Detroit. So check this out though. He's you know, he's selling these cars.

33:27 obviously if the there's only one car, people are like w what is this thing? Who who made it? His boss at the electric company tries to get him to give up his experiments. During all this time I kept my position with the electric company and gradually advanced to chief engineer. I was making a hundred and twenty five dollars a month. But my gas experiments were no more popular with the president of the company than my first mechanical leanings were with my father. It was not that my employer objected to experiments, only to experiments with a gas engine.

33:52 I can still hear him saying electricity, yes. That is the coming thing, but gas, no. And this is for its point. I remember in eighteen ninety two, maybe eighteen ninety three at this point, no one had the remotest notion of the future of the internal combustion engine. While we were just on the edge of the great electrical development. So everything. Like

34:12 all the energy, the attention, the money, the entrepreneurial energy and spirit is going into electricity. And yet Ford was able to ignore that distraction. And with great independence of mind be like, uh no, I'm gonna I'm gonna focus on this thing. 'Cause I'm I like it. I'm interested in it. I think it has a future.

34:29 That is so that's easy to say, Oh yeah, think for yourself. It is almost impossible to actually do, especially when everybody around you is focused on something else. And this is where Henry Ford at every there's always like a fork in the road in an entrepreneur or founder's life, right? It's like at some point, none of this is gonna work if you don't bet on yourself. And usually you're not in the best position when you have to make this decision, which is why so few people do it. The Edison Company offered me the general superintendency of the company, but on a condition that I would give up my gas engine and devote myself to something useful. That's their words. I had to choose between my job

35:05 And my automobil And I chose my automobile. This is a crazy thing. Right. It this is a calculation. Based on arrogance.

35:17 There was really nothing in the way of choice for already I knew that the car was bound to be a success. I quit my job. on august fifteenth, eighteen ninety nine. and went into the automobile business. Why did I say that is a calculation based on arrogance? At this point

35:33 There is no such thing as as a commercially successful car company. And he's saying I already knew it was bound to be a success. It gets even More unbelievable.

35:45 I had no personal money. What money was left over from living was all used in experimenting. But my wife agreed that the automobile could not be given up and that we had to make or break. There was and this is so important, he's talking about the fact that at the beginning there is no demand. Like he's essentially describing the creation of a new industry. And how humans are likely to react to a change. He says there was no demand for automobiles.

36:08 There is never demand for new product а ферст. The horseless carriage, not even calling an automobile, right? The horses carriage was considered merely a freak notion. And many wise people explained why it could never be more than a toy. No man of money even thought of it as a commercial possibility.

36:25 In the beginning. There was hardly anyone who sensed that the automobile could be a large factor. in industry. The most optimiстиc PO а дисстан. Hoped for a development.

36:37 There was a kin. To the bicycle. So his first car company fails. That's really important to know. Because their idea he he still has this idea is like I want it to be available to everybody. At this point, the few people that are making cars, they're extremely expensive. I rev referenced earlier, so I'm just gonna give one paragraph till we jump into where he starts the company that's successful. The Detroit Automobile Company is the one that

36:58 Uh he's organized Uh, I was a chief engineer and held a small amount of the stock. For three years we continued making cars more or less on the model of my first car. We sold very few of them. I could get no support at all toward making better cars to be sold to the public at large. Don't want to make a luxury car like everybody else. I wanna make a car for the everyman.

37:15 The whole thought. And to get the largest price possible for each car. He finds that

37:23 Idea. Repulsive. So he leaves. And he's like, All right, I'm gonna start try to do this on my own. He rents a a shop. It's like a w really like a one story shed.

37:33 And he continues his experiments to find out like what the automobile business like really is. Like what is it at this point? What can I do? And so one of the first things he builds are race cars, and he does that because He viewed racing as a means to an end. It's probably racing is the greatest marketing invention of the automobile industry. It's funny that they're using this in like eighteen ninety nine. Actually no, I think this is in nineteen oh two, actually. So they're using this in nineteen oh two. You and I know because I've done three episodes on Enzo Ferrari. Like for that's w that laid the foundation obviously Enzo Fur was just maniacally obsessed

38:05 Like one of history's greatest obsessives, like he worked seven days a week. twelve to sixteen hours a day for sixty years on Ferrari'cause he's an absolutely insane person. Maybe history's greatest obsessive in terms of like he only thought about that one thing. But my point being is like he used that same idea. The fact that Ferrar is winning all those races in the fifties and sixties, maybe even in the forties.

38:26 is what built like the demand. They're like okay, Ferrari means winning. I want some of that winning, I'll buy that car. So anyways. Ford's doing the same thing, says we met at the racetrack and in Detroit. And I beat him. So it's essentially like

38:38 It's a spectacle that the press can cover. And that's like that's how he's getting his initial traction, is the way you could think about it. uh his initial traction for these cars that he's making. So he says I met him at the Gross Point track and I beat him. That was my very first race and it brought advertising of the only kind that people cared to read. The public thought nothing of a car unless it made speed and unless it beat other racing cars. My ambition to build the fastest car in the world led me to plan a four cylinder motor. And I feel it's been a few minutes since he's w uttered the word service, but don't worry, he's gonna say right here, the most surprising feature of business as it was conducted. And then And really he would argue now outside of the Ford Motor Company was the large attention given to finance and the small attention given to service.

39:18 That seemed to me be reversing the very natural process, which is that money should come as a result of work and not before the work. The second feature was the general indifference to b to better methods of manufacturing, as long as whatever was done got by and took the money. So they're like, Hey, we're making money selling five and six thousand dollar cars, right? In some cases like ten thousand dollar race cars. It's like well what seems to be the problem? Like we don't have to fix anything, this is great. And Henry Ford's like, No, this is just the very beginning. In other words, a product apparently was not built with reference to how greatly it could serve the public. But with reference solely on how much money could be had for it. And that without any particular care

39:55 Whether the customer was satisfied. To sell the customer was enough. And when I re read this part, I said, This is what I wrote down. This is why Henry Ford is one of my favorite entrepreneurs. And I mean his approach to work. As a person, he's a creep.

40:08 Uh I I I've covered that on other um podcasts and when I read like a another biography of him, I'll go into more detail, but that is obviously absent in this book. But the reason that he's one of my favorite entrepreneurs It's because think of it from the other side, right? We're customers. Like w you and I we're all building products, right, for other people to use.

40:26 But we are customers to way many more businesses. Then like we get to make one product, but we have to Yeah. But we Bye.

40:35 You know what? thousands of like an incalculable number of products and services from other businesses All over our life. Right? So like we have one company, yeah, we are customers of an incalculable number of businesses. Of course.

40:48 You'd want the businesses that you give money to to have Ford's philosophy. Service to the customer. Over everything. And yet you know. I mean go t go think about the last dozen businesses that you've given money to.

41:03 How many of them had truly great service? How many were making decisions based on what was best for their customer and now was best for them? And then we get back to this idea of h he detests laziness. Uh there's a great Kobe Bryant quote on this. I can't relate to lazy people. We don't speak the same language. I don't understand you and I don't want to understand you. And so this is Henry Ford's version of that. I noticed the tendency among many men in business to feel that their lot was hard. They worked against a day when they might retire and live off an income. Get out of the strife.

41:29 Life to them was a battle to be ended as soon as possible. That was another point that I could not understand. For as I reason, life is not a battle except with our own tendency to sag with the downpull of getting settled. If to petrify success. All one has to do is humor the lazy side of the mind. But if to grow is to suc is success, then one must wake up anew every morning and keep awake all day. Life as I see it is not a location but a journey. And the way I personally think about this is I love the climb. I don't care where the summit is.

42:03 And so anything that Henry Ford sets his mind to, he's going to be really good at. He starts winning races, builds more race cars, and like just builds faster and better ones. This one was hilarious. So it's like he made one. In some cases he would race them, right? But he's like This one scares the hell out of me. Uh I'm not gonna erase it. We gotta find somebody else that does. And so they find a guy and this is a description of him. The man did not know what fear was. So at the beginning of the race they have to crank these cars, right? There's no electric starters yet.

42:29 Um and so our self starters is I guess what they were called this point in history. And so Henry Ford's the race about the start, Henry Ford is like cranking it. And listen to what this guy says. While I was cranking the car for the start, he remarked cheerily, Well This chariot may kill me.

42:42 But they will say afterward that I was going like hell when she took me over the bank. And then Ford talks about he's pretty sure that the race car driver never even used the brakes ever. He just went like hell, like he said. He was about half a mile ahead of the next man at the end of the race. And so he uses the publicity of the nine nine nine, which is the race car that he's talking about here. And it says this nine nine nine advertised the fact that I could build a fast motor car, and so a week after the race I formed the Ford Motor Company. He makes a mistake at the beginning because he was short on funds.

43:14 And he owned like I don't know, like twenty percent or maybe thirty percent of the company. So he's working on it for like a year or two. But we get an insight into his personality. He says, Listen, I very short shortly found that I have to have control. And therefore in nineteen oh six, with funds that I had earned in the company, I brought enough stock to bring my holdings up to fifty one percent of the company. So really you could think of in the early days of the Ford Motor Company, they're like they're like assemblers. They're not even really manufacturers. They're buying their parts from all the all all of uh other companies. They ship their like

43:39 It's more like a warehouse than a factory. And then they just put it together. But even from that, he's like okay. He was determined, he's like obsessed. with taking weight out and like simplifying the product. He's already mentioned a bunch of times. And he says the most be and this is why the most beautiful things in the world are those from which all excess weight has been eliminated. And I would argue same for companies too.

44:00 This uh the the best express expression of this idea, even though it pops up over and over again, I read the music producer's biography, uh Rick Rubin, right? It's episode two forty five. And one of my favorite things Rick Rubin said Rick Rubin said is like You know, they would describe him as a producer. He's like, I'm not a producer, I'm a reducer. Like I take your music and I take away everything that is not the music. The most beautiful things in the world are those from which all excess weight has been eliminated. That's true for a song, a car.

44:27 And a company. And then this is funny. Whenever anyone suggests to me that I might increase weight or add a part to my car I look into decreasing weight. And eliminating a part. So he just knows human nature. We like to make simple things more complex. So somebody's trying to get you to do something complex, just fight in the uh

44:43 React. Vigorously and go in the other direction. It's like, okay, yeah, we're gonna add a part. You want me to add a part or increase weight? Actually, I'm gonna find out a way to decrease the weight I already have. So not only am I not adding to it, I'm making it. Lighter and more simpler. In other words, sir, I reject.

44:57 Your advice. Little bit about his mindset in the early days of his company, argue I would argue he maintained this mindset his entire life. We did not, meaning our company did not make the pleasure appeal. our ads or when we teach people about our products. Not like oh it's a pleasure mobile It's big, luxurious, right?

45:15 He's just like I build what did Steve Jobs say? Steve Jobs said I build tools. Henry Ford thought the exact same way. We did not make the pleasure appeal. We never have. In its first advertising, we showed that a motor car. was a utility. He just mentioned the need for control. Why is he talk about the need for control? Why eventually

45:33 Does he have no partners? My associates were not convinced that it was possible to restrict our cars to a single model. So at this point, I think they have like three different ones. But his little thing's like I got one idea. And when I figure out how to get that one idea, when they Do the model T. They don't sell anything else.

45:48 And so th when I got to this point, one of my favorite things that I r ever read in any of the books I've covered for the podcasts. And he says intransigence is my only weapon. This is the first of many disagreements with other people that Henry Ford has to overc overcome to remain true to his one dream.

46:05 And so when his associates convince him to build other cars, this is how he describes it. We scattered our energy among three models. He does not like that. And so he goes into detail about like what they're making, how much it costs, how many they're selling, all this other stuff.

46:20 I'm just gonna give you like the the highlights here. So Nineteen five, nineteen oh six, th they're selling models and some of the models are two thousand and one thousand dollars each. And he's like It's cheaper than like a six thousand dollar car or a four thousand dollar car that was common at the time, but he's like it's still too expensive. And so he's like at two thousand dollars and a thousand, we only sold fifteen hundred cars. And so he eventually goes like this continuous improvement.

46:40 This is still way before the model T, p keep in mind. But he gets the price down. Instead of two thousand and one thousand, it's seven hundred and fifty and six hundred. And this is where he's like, Oh, I'm right and everybody else is wrong. Because once he got the price low enough, they goes from selling fifteen hundred cars to almost eighty five hundred.

47:00 So it's fascinating is like even though they're selling thousands and thousands of cars He's getting closer to his original idea, he's not there yet. His the other people like the shareholders and other people in the business are like okay, like this is good enough. But again. Henry Ford's like no, I just have one idea.

47:12 I'm glad of the progress I'm making towards it. I think I'm getting closer, but I'm still not there yet. And so it says we were a prosperous company. We might have easily sat down and said, Now we've arrived, let us hold on to what we got. Indeed, there was some disposition to take this stand. Some of our stockholders were seriously alarmed when our production reached a hundred cars a day. They wanted to do something to stop me from ruining the company. And when I replied to the effect that one hundred cars a day was only a trifle And then I hope long before to make a thousand a day.

47:42 They were shocked. And he says the temptation to stop and hang on to which to what one has is quite natural. I can entirely sympathize with the desire to quit. A life of activity and retire to a life of ease. I have never

47:58 felt the urge myself. So again there's like a little bit of a Ego there's like Yeah. They thought a hundred cars a day was fine. They thought a thousand cars a day was crazy. He's like, Listen, I understand it's very natural. We you don't want to mess up what you have. You know, I sympathize your desire to kinda take it easy. But that's not why I'm here.

48:13 I have never felt the urge myself. And he continues, it was it was however no part of my plan to do anything of that sort. I regarded our progress. Merely as an invitation. To do more.

48:27 And why is that? Because he says I had been planning every day through these years Toward a universal car. And we are not there yet. So therefore we are not stopping. And so now we get to his

48:39 Like Henry Ford's iPhone. So you can think of it, I designed eight models Before the model T. I made the following announcement. I will build this is him quoting himself, I will build a motor card for the great multitude. It will be large enough for a family, but small enough for the individual to run and care for. It will be constructed of the best materials and by the best men to be hired after the simplest designs that modern engineering can devise, but it will be so low in price. That no man making a good salary will be unable to own one. That is Henry Ford's.

49:10 One single idea. It will be So loan price. That no man making a good salary would be unable to own one. He has to the the important part is like it's easy to just say, Oh just make my my

49:22 Product cheaper. But he's like I don't want to make a Low quality. cheap product. I want to make a high quality cheap product. And so for there, he's literally got to invent The ability.

49:32 to mass produce cars which did not exist before Henry Ford. So he makes this statement, they runs this ad and it says the question was already being asked, How soon will Ford blow up? Nobody knows how many thousand times it has been asked since. It is asked only because of the failure to grasp that a principal rather than an individual is at work. А на та принцип і со сим.

49:54 That it seems mysterious. And so then he goes into all I mean, there's a million different decisions he has to make and a million different processes that he has to examine and just continuously improve over and over again. And you do that for decade after decade and you get to be able to build a high quality product at a price nobody can match. But the way he his brain works is very similar to the way Rockefeller's brain works. And so for example, he said he's talking about the layout of the factory and the workflow. And he says, hey, if we can save 10 steps a day for each of the twelve thousand employees that I have, you will save fifty miles

50:26 Of wasted motion and mis spent energy every day. So that's this idea. It's like force Focus on the continuous improvement as this company scaled. Right? It's gonna remind you of when I just reread Titan. It's episode two forty eight.

50:40 And Henry Ford and Rockefeller understood it's like these little things make a big difference because our organizations are gonna be gigantic. And so Rockefeller's watching a machine that would like solder Caps to cans. And he's like, How many drops of solder do you use on each can? And the guy's like, We use forty. And he's like, Have you have you tried thirty eight? Rockefeller asked.

50:58 And the guy's like, No, but I will. And so he tries thirty eight drops. And a small percentage of the cans leaked. So that doesn't work. But then they try thirty nine instead of forty.

51:09 And none of them. Leaked. And so At thirty nine drops of solder became the new standard uh at standard oil. At all the standard oil refineries.

51:18 And why is that important? The Rockefell is gonna tell us right now that one drop of solder And I'm pr I'm most likely pronouncing that word incorrectly, by the way. That one drop uh saved twenty five hundred dollars the first year, but that export business kept on increasing after that and doubled and then quadrupled and then became immensely greater than than what it was, and the savings has steadily gone along, one drop on uh on each can and now has amounted since to many hundreds of thousands dollars. Every year.

51:44 One drop. On one process Enterprise. That is how Rockefeller and Ford

51:54 Thought. Then we go back to this idea'cause he repeats it over and over again. He says like if you actually know what you're doing, you would never consider yourself an expert. None of our men are experts. We have most unfortunately found it necessary to get rid of a man as soon as he thinks that he's an expert. Because no this is such a good line. Check this out. No one ever considers himself an expert if he really knows his job. A man who knows a job sees so much more to be done than he has done.

52:20 That he is always pressing forward and never gives up an instant of thought to how good and how efficient he is. Thinking always ahead. Thinking always of trying to do more. Brings a state of mind in which nothing is impossible. The moment one gets into an expert state of mind and

52:37 A great number of things become Impossible. Summarize that. No one is an expert if he truly knows his job. This is another I just love his like unapologetic level of optimism that he has. And probably for mostly for his own like skill set and thoughts.

52:52 Uh, especially when you hear the way he talks about other people. But this is one of my favorite Henry Ford quotes. I refuse to recognize that there are impossibilities. I cannot discover that anyone knows enough about anything. on this earth definitively to stay what is and what is not Possible. And so of course if you believe that, you're always focused on this continuous improvement in every little aspect of your business, right? Not a single operation is ever considered as being done in the best or cheapest way in our company. What is that? What is he saying? Things can always be done better.

53:24 He just says it with more words than he needs to. Not a single operation is ever considered as being done in the best or cheapest way in our company. Things can always be done better. That is the idea behind that sentence. And so a main theme in history of entrepreneurship is that repetition is persuasive. I've now moved like twenty pages ahead of where we just were. And he's still at it. We are never satisfied with the way that everything is done in any part of the organization. We always think it ought to be done better and that eventually it will be done better.

53:51 And why? One cent saved on each part would amount to millions a year. Therefore in comparing savings the calculations are carried out To the thousandth. That is how far he thinks He takes things.

54:03 My improvements may be so minuscule that I cannot even calculate them. Unless I take out my calculations to the thousandth part of a cent. Imagine trying to compete with this guy. Then he has a bunch of like one liners and maximum spread throughout the entire book. This one I love. 'Cause essentially when you're studying history, that's what you're doing. It's like I don't care what

54:22 We think human nature is or it ought to be. It's like what is it? Well just read it. Like if you're reading these books like you're watching tape. It's like the same thing uh the same way a basketball player watches tape game tape or an a any kind of athlete watches game tape. That's what reading biographies is. We're just watching game tape. of some of the greatest people in history, like how how they did life, right? And he says there are t far too many assumptions about what human nature ought to be and not enough research into what it is. Another one liner. The habit of acting short sightedly

54:49 is a hard habit to break. Another one liner. There will never be a system invented which will do away with the necessity of work. Idle hands and minds were never intended for any one of us. Work is our sanity. our self respect.

55:04 And our salvation. Then he takes the same idea and he applies it to a different domain. He's like, Listen, if you the reason that I'm preaching continuous improvement and I've kinda like Maniacally obsessed with this stuff because his whole point is like, listen, continuous improvement makes your business likely to survive economic downturns. There is no use waiting around for business to improve. In a in a like an economic swamp. If a manufacturer wants to perform his function, he must get his price down to what people will pay. There is always, no matter what the condition, a price that people can and will pay for a necessity. And always if the will is there.

55:36 The price can be met. It cannot make be met by lowering quality. It has to be met by lowering price. And the way he lowers prices is to is because he eliminates waste. And so that All these ideas, like it's kinda like a snake eating its tail.

55:50 Right? Continuous improvement means less weights, less weights means uh lower prices. Lower prices means that you can survive Your more your business is more likely to survive economic downturns. And then once I got to this part for the second time, I wrote to myself this is when I realized that this book is less of an autobiography. And more of a manifesto.

56:07 There are short sighted men who cannot see that business is bigger than any one man's interest. Business is a process of give and take. Live and let live. It is a cooperation among many forces and interests. Whenever you find a man who believes that business is a river. Whose beneficial flow ought to stop as soon as he reaches him. You find a man who thinks he can keep business alive by stopping its circulation. And what is the circulation of business to Henry Ford? Service to others. Let's go back to this idea. We he told us earlier, hey, start with the product and everything

56:39 That the business needs that that product needs, right? That in other words that we call business. Will appear around it. And it also clarifies your thinking. He says you will notice that the reduction of price comes first. We have never considered any cost as fixed. Therefore, we will first reduce the price to a point where we believe more sales will result, then we go ahead and try to make that price. So

56:59 What is he saying at this point in the book? If We had to sell the model T. For only three hundred dollars. And right now it costs four hundred dollars and nine four hundred and ninety dollars.

57:09 How would we be able to do it? Well. One way to force our ways ourselves to figure that out is hey, the price is now three hundred. How do we make that happen? A large part of the book is the fact that he feels

57:20 A lot of people confuse finance and business. He does not feel business. Uh, he does not feel finance is business uh is business. There's a lot of these opinions where he's like, You need so much financing because your business sucks. We have demonstrated that we d do not me need any money. And why is he saying that at this point?'Cause he's like my business is throwing off Oodles of cash. I don't even know what to do with it. And so he's gonna elaborate on his philosophy. says money is only a tool in business. It is just a part of the machinery.

57:47 You might as well borrow one hundred thousand lates. as one hundred thousand dollars if there's trouble inside your business. So lathe is just a machine for like shaping wood or metal or something else you need in the the manufacturing process. So he's like, okay, might as well borrow 100,000 lates as well as$100,000 if the trouble is inside your business. More lace will not cure it. Neither will more money. So his point is like he's analyzing the way that a lot of financing has been done. He's also talks about like this is a big problem in the railroad industry, why he bought a railroad at one point, is because like they have a crappy business that's mismanaged and wasteful and then they throw more money at it.

58:21 And that's not what you do. His opinion's like you solve the problem first And usually the the financing that you need is is in the elimination of the waste. Right. So it says more weight lates will not cure it, neither will more money. Only heavier doses of brains. And thought. And wise courage can cure.

58:37 A business that misuses what it has will continue to misuse what it can get. The point is Cure the misuse. When that is done, the business will begin to make its own money. He continues that hey this environment this easy money environment is not helping any.

58:53 Barring may easily become an excuse for not boring into the trouble within your business. And his point's like okay, your business is going through difficult financial times. Good. Problems are just opportunities and workflows, and many a businessman should thank his stars for the pinch. The economic pinch which showed him that his best capital was in his own brains. And not in bank loans.

59:17 And so there's this idea that all of business is is a problem solving machine. This came from I did this book, who knows? five, four years ago. It's Danny Meyer's fantastic autobiography. It's called Setting the Table. And he's he's at like a dinner with the guy from Stan this guy named Stanley uh Marcus from Neiman Marcus. And he's a much older gentleman, if I remember correctly. And

59:36 Danny's like you know, just like down and out about a problem. And so I'm gonna read from that book right now. And he says, Opening this new restaurant, I said, might be the worst mistake I've ever made. Stanley set his martini down, look me in the eye, and said, So you made a mistake. You need to understand something important and listen to me carefully. The road to success is paved with mistakes well handled. His words remain with me through the night.

59:57 I repeated them over and over to myself and it led to a turning point in the way I approached. uh approach my business. Stanley's lesson reminded me of something my grandfather had told me. The definition of a business is problems. Business is problems. Success lies not in the elimination of problems, but

1:00:18 But in the art of creative problem Uh excuse me, in the art of creative Profitable. Problem solving. The best companies are those that distinguish themselves by solving problems most effectively.

1:00:30 The way I think about this idea is business is problems. And successful companies are just effective problem solving machines. And that is a point that Henry Ford is making. You should thank your stars for the problem that you're having,'cause once you solve it, you will now have better problem solving abilities. And therefore it's likely over time that your company becomes more successful as a result of you being forced into this very difficult position. to actually grow and acquire these new skills. Because business is problems.

1:00:59 And the reason that Ford is so fanatically obsessed with continuous improvement and continuous problem solving Is because his view is completely counter to anybody else in business at this point. And he talks about this. Old time business went on the doctrine that prices should always be kept to the highest point at which people will buy. My business has taken the opposite view, and so what I wrote here is Ford would not agree with Warren Buffett.

1:01:21 Ford would say just because you can raise prices Prices on C's candy. And it doesn't like sales don't go down and more people buy. Doesn't mean that you should. Ford and Buffett are playing different games.

1:01:35 Another main point of forward. He's like, listen, I want low prices and high wages, and this is why. This is fantastic. There's something sacred about wages. They represent homes and families and domestic destinies. People ought to tread very carefully when approaching wages. On the cost sheet, wages are mere numbers, they're mere figures. Out in the world. Wages are bread boxes and coal bins. Babies creators and children's education.

1:01:58 Family comforts. And contentment. What he's really telling you and I here is never forget The people behind the wages you pay. Wages aren't the same as your other expenses.

1:02:10 There is a ruthlessness that Henry Ford uh definitely has, though. And his point is everything and everybody Must produce. Or get out. What is he talking about there? In a company that's dedicated to service.

1:02:23 There's no room for waste. And he has an entire paragraph dedicated to one of the uh my favorite lines. Read George Lucas' fantastic biography. It's called George Lucas Life. Uh, the writers Brian J. Jones, I think it's founders number thirty five. But there's a line in that book I never forgot, and it says George Lucas unapologetically invested in what he believed in most himself. It is possible to even overemphasize the saving habit. It is proper and desirable that everyone have a margin, margin of safety, have some money in the bank, right? It is really wasteful not to have one, if you can have one, but it can be overdone. We teach children to save their money as an attempt to counteract thoughtlessness and selfish expenditure. That makes sense, right? But that has a value, but it's not always positive. It does not lead the child

1:03:02 or self-expenditure. To teach a child to invest and use is better than to teach them to save. Most men who are laboriously saving a few dollars would do better to invest those few dollars First in themselves. And then in some useful work. Eventually they would have more money to save as a result.

1:03:22 Young men ought to invest rather than save. They ought to invest in themselves and then create creative value. Okay, then I'm gonna spend some time in this section. It's chapter called the Railroads. And it talks about hey This is a his pr the perfect illustration of the idea is like where you need to copy

1:03:40 the the how and not the what. And the fact that he needs certain railroads to transport his products all around the country. And they're so efficient it's become such a large problem at this point in his career that he's gotta buy one. And this is where he really compares and contrasts. He's like, This is where I'm writing the book. This is my philosophy on how to build a business. And this is why, because how most businesses are poorly run. I'm entirely without any disposition to pose as a railroad authority.

1:04:03 There may be railroad authorities. But if the service as rendered by the American Railroad today is the result of the accumulated railroad knowledge Then I cannot say that my respect For the usefulness of that knowledge is all prof is all that profound. Let me pause right in there. What is he saying? I see no evidence of this knowledge because it's not manifested in service.

1:04:22 I have not the slightest doubt in the world that the active managers of the railways are The men who actually do the work. are entirely capable of conducting the railway of the country to the satisfaction of everyone. The men who know railroading have not been allowed to manage railroads. So that's his way of saying, Hey, got no problem. with the actual workers doing the job. It's the management and the administrators that are greedy and wasteful.

1:04:44 And one thing he notices as soon as he buys the railroad Is that they don't even actually reinvest. They just take the money as dividends, put it in their pocket, right? A very small fraction of the money by the railways has gone back into the rehabilitation of their properties. And so then he's examining like where's all this money going? And this goes back to the fact that Ford Is Very profounder.

1:05:03 And worker. He just despises anything that is not work directed at service, so he talks a lot of shit. About bankers. And lawyers and administrators and all that stuff. The natural ally of the banker is the lawyer.

1:05:15 Such games as have been played on the railroads have needed expert legal advice. Lawyers like bankers know absolutely nothing about business. In our experience with the Detroit d the name of the road was uh relevant. In our experience with our railroad We bought the railroad because it its right of way interfered with some of our improvements on the River Rouge, which is this giant plant that he's making, okay? We did not buy it as an investment. Or because of its st strategic position. We literally bought it because you're interfering with what would we need to get done.

1:05:45 And if you can't get the job done, then we'll just buy it and we'll do it ourselves. So since we bought the railroad Uh, because it interfered with our plans. We have to do something with it. The only thing to do is to run it as a productive enterprise, applying it to it the exact same principles as applied to every department in our business. And when you think about what he's saying there's like listen, since I own this thing, it needs to be an asset and not a liability. And so I'm just gonna use the same principles that I use for building cars. as building the railway. This is why

1:06:11 Again, I'd pick up the whole book and just read this entire chapter is fascinating. It is true that applying the rule of maximum service at minimum cost, which he's always doing, right? That's a really great way. What is Henry Ford distilled down to five words? Maximum service at a minimum cost. Maximum service at minimum cost. It's five words. Five words summary of Henry Ford for you. Maximum service at minimum cost. Has caused the income on the road to exceed the outgo.

1:06:32 meaning was losing money, now it's turning a profit. Which for that road represents a most unusual condition. See he also is kind of low key funny. 'Cause I kinda like talking shit there. It has been represented that the chain'cause like For this road that that's an unusual condition. How dare they make more How is how do they have more revenue than expenses? What's happening here? It has been uh represented at the changes we have made.

1:06:53 And remember that they've been made simply as part of the day's work are peculiar Oh, it says Oh, I need to back up here. They're saying, Hey, this is like revolutionary. Like this is How is this happening? And forwards like these are not revolutionary.

1:07:06 And they could actually be applied to railroad management in general. And then he just has like a very common sense way of breaking down This is the business I own now, these are the assets, these are the people working there. Like let's just go through and do a thorough like uh is everything being done as good as it could do. And in other words, like what's about to happen is like the railroad is was being run in the exact opposite way that Henry Ford would run a business.

1:07:29 All of the rolling stock was in extremely bad condition and a good part of it would not run at all. All the buildings were dirty, unpainted, and generally run down. The roadbed was something more than a streak of rust and something less than a railway. The repair shops were overmanned and under machined. Practically everything connected with the operation was conducted with a maximum of waste. There was, however, an exceedingly ample executive and administrative department, and of course a legal department. So l listen to what he's saying. Where are they investing the money?

1:07:56 In their trains? No. Are they investing the money in the track? Nope. Are they re investing the money into the latest technology so that they can actually have more machines doing work instead of the men doing. No, they're not doing that. Where are they putting the money?

1:08:08 There was an ample executive and administrative department and of course a legal department. So he's like, Well, we're not gonna do this. There had been an executive office in Detroit and we closed that up and then we put that administration in charge of one man. And so he goes through some of numbers here. It's like oh, there's twenty five administrators. Okay, see ya. There's gonna be we're gonna be one dude. One dude's gonna do all that.

1:08:28 And he just goes to and does this line by line. All these unnecessary Uh counting and red tape were thrown out and the payroll of the road was reduced from twenty seven hundred people down to sixteen hundred and fifty. And he goes on for quite a bit. I'm not gonna read all that. I'm just gonna give you what was my interpretation of what's taking place. Most businesses are overstaffed. The people running them are just not skillful operators.

1:08:48 And so then he's like, Okay, well you can uh there's uh there's also a way to increase money is that you can actually reduce time. We are not pouring in great amount of money. Everything is being done out of the earnings from the railroad. That is our policy. The time of our freight movements have been cut down about two thirds. And so he does that idea, the idea behind what he that sentence right there, he does that a lot.

1:09:10 By increasing speed he actually creates money. And there's very similar where Apple Uh that's one of the best things Tim Cook did at the very beginning when um when Steve Jobs came back to Apple. And Apple actually did this'cause they they increased inventory turnover. Uh when Steve came back and it was like I forgot how much money saved, but it was a good amount. It was like tens of millions. It might even be like two hundred million. It was a good amount of money. Just like

1:09:31 making things go faster. We are routing as much as we can around our own business over the road, but only because we g we Because on this road we get the best service. For years past, we had been trying to send freight over this road that I now own that I previously didn't, is what he's telling us, right? Because it was conveniently located. But we've never been able to use it to any extent because of the delayed deliveries. And another way to think about that is like we like the he made the the risk in buying this railroad was actually really tiny to Henry Ford because he knew as trying to be Um, it's trying to be a customer of the business. It he knew it was a poorly run business.

1:10:04 So it's like There's obvious room for improvement here. They're just not doing it. So just increasing the obvious things makes this risk in buying the the asset. I think he only paid like five million. Maybe five million for the road. And I think he winds up selling it for like thirty million. I could those numbers might be wrong, but it's like A very small investment. Like the risk is very tiny because from the outside it's like oh these guys just don't know what they're doing.

1:10:22 And his point was just like we actually fixed what was wrong with the road. Everybody previously just kept raising more money. So he says, Will a billion dollars solve this sort of trouble? No. A billion dollars only make the difficulty one billion dollars worse. The purpose of the billion is simply to continue the present methods of railroad management. And it is because of the present methods that we had any railroad difficulties to begin with. So what is he saying? You're just throwing more money at incompetent people. Okay.

1:10:48 And then we'll end where we began. This is Henry Ford. Summarizing his philosophy. It has been thought. That business existed for profit.

1:10:57 That is wrong. Business exists. For service. If I did not think so, I would not keep working. For the money that I make is inconsequential.

1:11:06 Business must always give more to the community than it takes away. In the first chapter was set forth My creed. Let me repeat it. For it is at the basis of all of our work.

1:11:18 Number one. An absence of fear. Of the future. Our veneration for the past. One who fears the future.

1:11:25 Who fears failure. Limits his activities. Failure is only the opportunity more intelligently to begin again. There is no disgrace in honest failure. There is discreet.

1:11:36 In fearing to fail. Вот із паст із фу. Only as it suggests. Ways and means For progress.

1:11:44 Number two. A disregard of competition. Whoever does a thing best ought to be the one to do it. Number three.

1:11:53 The putting of service before profit. Without a profit. Business cannot extend. There is nothing inherently wrong about making a profit. Well conducted business enterprises cannot fail to return a profit.

1:12:07 But profit must and inevitably will Come as a result. of good service. І канабіде бесис. It must be the result of service.

1:12:17 Number four. Manufacturing is not buying low and selling high. It is the process of buying materials fairly. And with the smallest possible addition of cost. Transforming those materials

1:12:29 Into a consumable product. And distributing it to the customer. There is always something to be done in this world. And only ourselves to do it. Every advance

1:12:41 begins in a small way. And with the individual. And that is where I'll leave it for the full story. Highly recommend. buying the book. If you buy the book using the link that's in the show notes.

1:12:53 You'll be supporting the podcast at the same time. as you're buying more books and reading more books Make sure you get the ReadWise app. Readwise is where I store all of my notes and all of my highlights for every single book. That I read.

1:13:05 I've done this for years and it's one of the main benefits of listening to this podcast, because not only have I listen have I read over a hundred thousand pages in the history of entrepreneurship, but the way I don't forget these things is because I put them in read wise and I read them over and over and over again. It is by far the best app I pay for and I could not make the podcast without it. So founders tend to read A ton. And if you're gonna read

1:13:25 You might as well remember what you read. And so if you go to I think it's I'll leave the n the I should know the link by now. She's Uh the I'll leave the link in the show notes in case I'm wrong, but I think it's readwise dot io for slash founders. And you can get sixty days free. It's fantastic.

1:13:38 That is two hundred and sixty six books down. One thousand ago. And I'll talk to you again soon.

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