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 he has done to increase and discipline it 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 is the the hardest work anyone can do 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 the other is the tragic snobbery of
assuming that marching through an education system is a sure cure for ignorance and mediocrity you cannot learn in any school 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 where it failed and where it succeeded 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 after he has left school the true education is gained through the discipline of
life that is an excerpt from the book that I'm going to 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 263 in that biography of Edwin land it's called land's po accompanying the man who invented it in chapter 3 it goes through
all the different Heroes and people that Edwin Lan was studying like the great people that came before him that influenced his approach to uh building his all of his work really his scientific work and the building of Polaroid and so it's like people there 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 17 or maybe 19 at the time and it's like people like Michael Faraday Thomas Edison Alexander granbell 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 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 and you and I are living in the world that jobs change so I don't have to tell you what the introduction of
smartphone change 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 were getting around on foot horse 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 100 years Steve Jobs and Henry Ford back toback 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 gain 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 it is like reading this book is like having a one-sided conversation where one of the
greatest entrepreneurs ever live just 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 they are but a means to an end the fact that the for that the commercial success of the Ford motor company has been most unusual is important only because it serves to demonstrate that the theory and in other words his theory to date is right so I'm going to pause right there
he publishes this book in 1922 in 1919 he has he has bought out all of his investors he owns the Ford Motor Company he owns 100% of the Ford Motor Company 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 10
or 20 billion something like that 10 or20 billion company 100% And so he opens up he's like listen I have a lot of criticisms about the way other businesses are built and I think I my criticisms are valid and they there more people be more open to hearing them because I have beted 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 and Society from the standpoint of one who has not been beaten by them there and something's can be apparent
Henry Ford had a giant ego and this is like a key thing to think about because why it's so important for Founders to learn from other Founders uh because a lot of this uh a lot of the assets to a successful founder and a lot of the things they do are almost in direct opposition of what polite society would tell you to do and so far after reading
about 100,000 pages of these biographies of entrepreneurs or 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 know you have an ego hide it don't he's like
use it to drive you but don't let people see it it's an internal driven thing not an exter not something to like strut about externally but that is just the first line and there's going to 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 have not been beaten by them at the time this is being written he is one of the richest people on the planet so he continues as things are now organized I could where I thinking only selfishly
ask for no change if I cly 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 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 going to give you an opportunity to jump out oh I don't know how long you and I are going to talk right now maybe an hour maybe two hours depends on how long it takes me to get through this I'm essentially just going to 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 the note I left myself when I reread 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
129 times and then he's going to Echo an idea from his hero so I just went through that the fact that at the beginning Edwin Lan 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 idolizes Thomas Edison Thomas Edison's like a few maybe like a
generation older than Henry Ford they wanted becoming really good friends like um Henry Ford considered Edison like his maybe even his best friend but what he's about to say here is very edisonian ideas are themselves extraordinary valuable but an idea is just an idea almost anyone can think up an idea the thing that counts is is developing 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 and then for 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 manufactur 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 going to run on this Railroad and I'm
going to 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 Motorcars and so there's a maxim that you and I have talked about over and over and over
again 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 detests lazy people and he's going to bring this up over and over again humans are made work the way I you know I'm going to 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 going to compare and contrast his philosophy which which he sees like the prevailing philosophy of his day and then I'll have a way to like summarize this and kind of break it
down a little bit more uh than because 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 way he does so it's like business is never as healthy as when like a chicken it must do a certain amount of scratch for what it gets or what what it eats right things were coming too easily there was a let down of the principle that an honest relation
ought to be attained between value and prices the public no longer had to be catered to there was even a public bamned attitude in many places so he's saying a public be damned attitude by business owners Henry Ford like Jeff Bezos was extremely customer obsessed at the same time I was reading this book I listened to an episode of invest like
the best podcast with this guy named Ravi Gupta and he said something is really interesting and so interesting that I took a note and and saved in my phone and he says I think Amazon's culture is largely based on one thing it is not based on 14 it is based on customer Obsession that is what Bezos would die on the hill for and I think
this this almost maniacal Obsession and dedication to providing C customers the best service at the lowest cost is a way to think about Henry Ford because to me it's like every single once you once really put that into your brain like every single decision that he's going to make in the building the company is all
going to float for that one thing and if he sees a business that doesn't this is like the big ego part if he if he sees a business that doesn't have that thing like he's going to talk about it and so that's exactly what he's doing here the public no longer had to be catered to he's always going to try to
cater them there was even a public B damned attitude in many places it was immensely bad for business some men called this abnormal condition Prosperity so he was coming right off of like this big Financial boom it was not Prosperity it was just needless money chase money chasing is not business 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 and need dep pause there anytime you read books in like this age from like 1900s to 1910 1920 1930 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's saying product 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's not talking about writing something he's talking about 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 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 appears in this book 129 times that word serve or serves is another 55 he's just going to repeat this over and
over and over again for 200 pages so let me wrap up this section I'll tell you how how to think about Henry fort's philosophy and like something that fits into 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 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 funny that he just 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 is in sight so I probably read that paragraph you know maybe I don't know five times in in appropri to talk to you today it didn't just hit me till just now so I'm reading that I'm like oh wait a minute there is like some weird thought that
just popped into my mind that I forgot it's going to come from uh Jeff Bezos that is episode 179 of Founders if you want to listen to that but what brought that to mind that brought that book to mind and I'm going to read an excerpt to you from from in a minute is where Henry Ford's like you're going to focus on
serving yourself over your customers that's fine you might temporarily have success but one day you're going to wake up one day the customers are going to wake up and realize there's a better option out there so Bas was called a uh all hands in the early days of Amazon and he said listen it's because they were worried that Barnes a Nobles at the
time in Amazon history Barnes & Nobles they're only selling books Barnes & Nobles is opening an online store and this is what Bezos to told his team look you should wake up worried terrified every morning but don't be worried about our competitors because they're never going to send us any money anyway let's
be worried about our customers and stay head down focused and so that's the main them with Bezos he's like listen you need to be focused on your customers over your compet 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 I kind of put put it all together and then this is the note I was really thinking is like how can I I I need to like you know take this like 500 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 for's philosophy so it's get rid of waste increase efficiency through thinking and Technology drop your prices and make more money with Le less profit per car watch your cost religiously when needed bring that business process in house and always
stay focused on service fast forward a few pages he's back at it again Being Greedy for money is the shest 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 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 quote money comes naturally as a 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 hat he detests lazy people and he says in my mind nothing is more abhorent than a life of ease none of us has any right to ease there is no place in Civilization for The Idler so when I had reread 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 probably read I don't know like 200 books whatever it is and I read two of them on Winston Churchill I remember reading this book this biography of Churchill and like almost spitting out the water that I was drinking when I got to this part of the book CU he's writing a letter Churchill is writing a letter to
his son when I got to this 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 idol and lazy life is very offensive to me you appear to be leading a perfectly useless existence 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 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 want to want
to build a business you want to build a product start with a product that already exists study it and just find a way to get rid of the useless Parts well that's I mean he starts out building like $6,000 luxury cars for other people at a time when like the average work worker was making like $2 or $3 a day
and he realized like we have all this stuff in the car that's just not needed and so you think about Ford's career it's like okay that's the state of cars now and so for the next 15 to 20 years I'm going to find a way how to keep making the simple 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 there you go he's just changed the entire literally changed our physical world with his one idea he liter Henry Ford had one idea so back on Founders number 120 121 and 22 I did a three-part series on Billy Durant and Alfred St so Billy
Durant is everybody knows the company general motor 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 in one of these books it is from Founders number 121 and it just gives you this idea because I think this is more this is really important to know up front when 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 cost down and at the same time feed even more demand for the product it was a fundamental difference in philosophy so why did 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 he's 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 got to do it not only 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 going to pull out one 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 contains 30 lbs of water there 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 um pieces to it and so he's like okay well this seems to be very wasteful the wooden AFF Ford car contains 30 PBS of water and this thought process is fantastic so he goes there must be some way of doing it better than that there must be some be method by which we can gain the same strength elas elasticity without having
to Lug around useless weight and this is the punchline this is so important and why I'm reading to you 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 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 20 years right so they think okay and why
is that important because by the time that process starts the game is already over game set match because now he can make a product in 12 minutes that takes his competitor 2 days and so he talks about in kind of like a weird hard to understand way that you know 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 at 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 Sho themselves to the product and that process is extremely long he says I spent 12 years 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 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 took me 12 years of trying to figure out 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 he's very straightforward I don't think the writing is great it's like sometimes you
have to hard to understand but like he doesn't bury the lead it'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 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 that he's writing this he's been trying to build cars for 30 years there's no
shortcut you have to put in the time there's a fantastic quote by Mickey Manel 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 in the doing of it greed is merely nearsightedness 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 he's not trying to
artificially suppress the amount of money he makes he just doesn't want to make a lot per per car depending for the total profit upon the volume of distribution so there you go I kind of ran over his his point there and then he has like this four-part philosophy of service I'm going to save that for the end because he repeats that in the last
chapter as well so I'm going to skip to he's going to actually give us oh oh my goodness so all we've been talking about his philosophy in his autobiography now we actually hear a little bit about his life and he says on May 31st 1921 the Ford Motor Company turned out car number 5 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 in the for in the Model T alone he's going to sell 15 million just of the Model T so he's talking about number five million of any Ford car that's not included like Model T alone is 15 million but that that's going to happen over the next
like decade and a half from where we're in the story but the reason I'm bringing this ch attentions cuz like he said I he built a gasoline buggy which is like kind of like the first primitive car 30 years before he produced his 5 millionth car and why is he bringing this up because listen car number 5 million he's
like he says it's simpler than my first car 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 going to do it but I just kept working at it until I
got to it just having to take a long time and then once he figured it out it's like okay well the game's over no one's going to be able to produce as fast as possible 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 the early days of the automobile industry that I think applies universally to other Industries like Ford took the lead was the dominant player had over 50% market share but this he is that's how good his one idea was but that one aidea led to the giant Gap because Billy
Durant of GM's like I'm not going to just make one car I'm going to make like a conglomerate I'm going to have like a cheap car a medium car a luxury car I'm not going to do all this I'm going to go out what he did is like I I'm going to 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 just like eventually people got tired of just having the one black Model T 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 Sloan because Billy Durant lost control of his company and Alfred Sloan was the one that brought GM's Billy essentially Alfred Sloan was the one that brought Billy Durant's ideas to fruition in the marketplace 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 19 let say like 1950 maybe I I don't know remember like say 1950 1960 GM is like one of the largest 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 work
depending on the time like think about Microsoft and apples like 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 5 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 in a physical car which I take to be important in 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 you building a car in 1893 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 might somehow be done in a better way 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 I had a kind of workshop with odds and ends of metal for tools before I had anything else my toys were all tools and they still are that's a fantastic sentence the biggest event of my early life was meeting with a road engine about 8 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 12 years old I remember that engine as though I'd seen it only yesterday for it was the first vehicle other than Hors drawn it was the first vehicle that wasn't HSE 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 12 right for to to 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 and he considers himself a mechanic there is an immense amount to be learned simply by tinkering with
things machines are to a mechanic what 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 going to give advice especially for young people but it applies really to everybody that hey you can't live the life like the your life the way other people want you
to even your family sometimes you got to say hey shut up mom and dad my father was not entirely uh sympathetic with my bent towards mechanics he thought that I should be a farmer when I left school at 17 and became an 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 there's just one sentence and I think you already know this I wanted to make something in quantity he repeats this a lot I don't want to make five cars a week or five cars a day I would like to make five cars every 2 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 the reason Henry Ford is so worthy of 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 we simply took for granted that unless the erand 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 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 forward is like I felt perfectly certain
that horses considering all the bother of attending to them in the expense of feeding uh feeding them and cleaning up them did not earn their keep and the point is is like picking up horeshit used to be a job in main cities like there was people all they did was pick up horeshit off of roads and so Henry Ford's point is like
what if I just made a product that you know never couldn't travel it traveled just as far and just as fast as a horse just the fact that somebody hasn't to follow it around with a shovel means my product is better so now he's talking about the 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 wanted to build cars a lot of people were experimenting and so I brought this up on several podcasts in the past but a lot of people were surprised that like the the the main engines that they were trying to build cars before the internal combustion
engine uh was steam and elect uh electricity like eight people didn't know there's electric cars in the late 1800s 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 competitor's company with experts that 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 is 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 because he wants his cars to travel far and steam first he thought that was super dangerous because it explode and there and and 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 was like no you can't do that
it's just going to be like a 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 ad dot just why something
cannot be done they always know the limitations 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 kind of thing what's fascinating is he's doing all these experiments on the internal combustion edicine 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 at this point I was offered a job with the Detroit Electric Company as an engineer and machinist so he's working at an electrical company during the day and he says every night and all of Sunday night 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 he's got a wife every night and on Saturdays right he's working on this dream of his this dream of this internal combustion engine everybody around him is 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 thinks of idleness and so when I read this section I thought of what I wrote down is like if you can't handle the workload 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 ever hard he was fascinated by what he was doing so what's the result in 1892 I completed my first motorc car why is that important because the public Praises people for what they practice in
private he has already been experimenting for years Years and we're still decades away from the Model T this is what he called 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 I built three car 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 obviously if there's only one car people are like 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 a chief engineer I was making $125 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 I can still hear him saying electricity yes that is the coming thing but gas no and this is Ford's Point remember we're in 1892 maybe 1893 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 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 h no I'm going to I'm going to focus on this thing cuz I'm I like it I'm interested
in it I think it has a future 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 going to 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 and my automobile and I chose my automobile this is a crazy thing right it this is a calculation based on arrogance 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 15th 1899
and went into the automobile business why did I say that is a calculation based on arrogance at this point there is no such thing 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 I had no personal money what money was left over from living was all used and
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 there is never demand for a new product at first the Horseless Carriage not even call an automobile right the Horseless 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 in the beginning there was hardly anyone who sensed that the automobile could be a large factor in Industry the most optimistic people at this time hoped for a development that was akin to the bicycle so his first car company fails that's really important to know because their idea he he still has this idea he
like I want it to be available to everybody at this point the few people that are making cars they're extremely expensive I referenced this earlier so I'm just going to give one paragraph till we jump into where he starts the company that's successful the Detroit Auto automobile company is the one that 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 want to make a car for
the every man the whole thought was to make it was to make the car to order and to get the largest price possible for each car he finds that idea repulsive so he leaves Le and he's like all right I'm going to start try to do this on my own he rents a shop it's like a really like a one-story shed 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 1899 actually no I think this is in 1902 actually so they're using this in 1902 you and I know because I've done three episodes on Enzo Ferrari like for that's that's laid the foundation obviously Enzo Ferrari is just maniacally obsessed like one of History's Greatest obsessives like he
worked seven days a week 12 to 16 hours a day for 60 years on Ferrari because 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 Ferraris winning all those races in the 50s and 60s maybe even the 40s 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 he says we met at the RAC track in Detroit and I beat him so it's essentially like it's a spectacle that the Press can cover and that's like that's how he's getting his initial traction it's 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 4-cylinder motor and I feel it's been a few minutes since he's Ed the word service but don't worry he's going to say right here the most surprising feature of business as it was conducted in 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 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 difference toit 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 $6,000 cars right other competitors or in some cases like $10,000 race cars it's like what seems to be the problem like we don't have to fix anything this is great and Henry Ford is 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 whether the customer was s satisfied to sell the customer was enough and when I reread 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 uh I I I've covered that on other um podcasts and when I read like 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 is because
think of it from the other side right we're customers like you and I we're all Building Products right for other people to use but we're customers to way many more businesses than like we get to make one product but we have to one product or service but we buy you know what thousands 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 you'd want the businesses that you give money to to have Ford's philosophy service to the customer over over everything and yet you know I mean go go
think about the last dozen businesses that you've given money to 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 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 the day when they might retire and live off an income get
out of The Strife 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 down Pull of getting settled if to petrify is Success all one has to do is humor the lazy side of the
mind but if to grow is to S is Success then one must wake up a new 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 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 cards 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 him right but he's like this one scares the hell out of me uh I'm not going to race it we got to 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 um and so or self starters I guess what they were called at this point in history and so Henry Ford's the race about to 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 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 999 which is the race C that he's talking about here and it says this 999 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 and he owned like I don't know like 20% or maybe 30% 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 1906 with funds that I had earned in the company I
brought enough stock to bring my Holdings up to 51% 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 of other companies they ship them to their like 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 it says the most and this is why the most beautiful things in the world are those from which all excess weight has been
elim minated and I would argue same for companies too this the best expression of this idea even though it pops up over and over again I read the music producers biography uh Rick Rubin right it was episode 245 and one of my favorite things Rick ruber 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 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 like react vigorously and go in the other direction it's like okay
yeah we're going to add a part you want me to add a part to increase weight actually I'm going to 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 your advice a 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 it's not like go it's a pleasure mobile it's big luxurious right he's like I'm not making he's he like I build what did Steve Jobs said 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 motorc car was a utility he just mentioned the need for control why is he talk about the need for control why eventually 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 whole thing is 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 and so when I got to this point one of my favorite
things that I've ever read in any of the books I've covered for the podcasts came from Charles the G and he says in transigence is my only weapon this is the first of many disagreements with other people that Henry Ford has to overcome to remain true to his one dream 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 I'm just going to give you like the the highlights here so 1905 1906 they're selling models and some of the
models are 20 and $1,000 each he's like it's cheaper than like a $6,000 car or a $4,000 car that was common at the time but he's like it's still too expensive and so he's like at $2,000 and a th000 we only sold 1,500 cars and so he eventually goes like this continuous Improvement this is still way before the Model T keep in mind but he gets the
price down instead of 2,000 and 1,000 it's 750 and 600 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 ,5 00 cars to almost 8500 so what'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 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 he 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 were some disposition to take this stand some of our stock holders were seriously alarmed when our production reached 100 cars a day they wanted to do something to stop me from ruining the company and when I
replied to the effect that 100 cars a day was only a trifle and that I hoped long before to make a thousand a day 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 felt the urge myself so again there's like a little bit of a ego there it's like yeah they thought 100 cards a day was fine they thought a thousand cards a day was crazy he's like listen I understand it's very natural you don't want to mess up what you have you know I sympathize your desire to
kind of take it easy but that's not why I'm here 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 and why is that because he says I had been planning every day through these years towards a universal car and
we are not there yet so therefore we are not stopping and so now we get to his 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 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 one single
idea it will be so low in price that no man making a good salary would be unable to own one he has the the important part it's like it's easy to say oh just make my my product cheaper but he's like I don't want to make a lowquality cheap product I want to make a high quality cheap product and so for there he's
literally got to invent the ability 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 principle rather
than individual is at work and that the principle is so simple 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 12,000 employees that I have you
will save 50 miles of wasted motion and misspent energy every day so that's his idea is like Ford's focused on the continuous Improvement as his company scaled right it's going to remind you of when I just reread Titan that's episode 248 and Henry Ford and Rockefeller understood it's like these little things make a big
difference because our organizations are going to be gigantic and so Rockefeller is 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 40 and he's like have you have you tried 38 Rockefeller asked and the guy's like no but I will and so he tries 38 drops and
a small percentage of the cans leaked so that doesn't work but then they try 39 instead of 40 and none of them leaked and so at 39 drops of solder became the new standard uh at standard oil at all the standard oil refineries and why is that important the Rockefeller is going to tell us right now that one drop of
solder and I'm I'm most likely pronouncing that word incorrectly by the way that one drop uh saved $2,500 the first year but that export business kept on increasing after that and doubled andrup and then became immensely greater than than what it was and the savings has steadily gone along one drop on on each can and now has amounted since to
many hundreds of thousand dollars every year one drop on one process on one tiny part of a gigantic Enterprise that is how Rockefeller and Ford thought then we go back to this idea because 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
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 a great number of things become impossible sumarize 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 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 say 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 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 20 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 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 part of a scent that is how far he thinks he takes things my improvements may be so minuscule that I cannot even calculate them unless I take out my calculations
to the thousandth part of a scent imagine trying to compete with this guy then he has a bunch of like one liners and maxims spread throughout this entire book this one I love because essentially when you're studying history that's what you're doing it's like I don't care what 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 it's like you're watching tape it's like the same thing same way a basketball player watches tape a game tape or an any kind of athlete watches gam tape that's what reading biographies 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 far too many assumptions about what human nature ought to be and not enough Research into what it is another oneliner the habit of acting shortsightedly is a hard habit to break another oneliner 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 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'm kind of 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 a business to improve in a in a like an economic slump 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 the price can be met it cannot be met by lowering quality it has to be met by lowering price and the way he lowers prices is because he eliminates waste and so that all these ideas like it's kind of like a snake
eating its tail right continuous Improvement means less waste less weight 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 realize that
this book is less of an autobiography and more of a Manifesto 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 it teaches 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 where he told us earlier hey start with the product and everything 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 point where we believe more sales will result then
we go ahead and try to make that price so really what is he saying at this point in the book if we had to sell the Model T for only $300 and right now it costs $400 and9 $490 how would we be able to do it well one way to force our way ourselves to figure that out is hey the price is now 300 how do we make that happen a large
part of the book is the fact that he feels a lot of people confused finance and business he does not feel business uh he does Finance is BU is business there's a lot of these opinions where he's like you need so much financing because your business sucks it's basically what he says we have demonstrated that we did not need need
any money and why is he saying that at this point because 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 going to elaborate on his philosophy says money is only a tool in business it is just a part of the Machinery you might as well borrow 100,000 laths as
$100,000 if there's trouble inside your business so lath 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 you might as well borrow 100,000 LS as as $100,000 if the trouble's 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 and why he bought a railroad at one point is because like they have a crappy business that's mismanaged and wasteful and they throw more money at it and that's not what you should do his opinion is like you solve
the problem first and usually the financing that you need is is in the elimination of the waste right so it says more wa LS will not cure it neither will more money only heavier doses of brains and thought and wise courage can cure 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 borrowing May easily be become an excuse for not boring into the trouble within your business and his point is like okay your business is
going through difficult Financial Times Good problems are just opportunities and work clows 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 and so there's this idea that all a business is is a problem solving machine this came from I did
this book who knows five four years ago it's D Myers fantastic autobiography it's called setting the table and he's he's at like a dinner with the guy from St this guy named Stanley Marcus from Neiman Marcus and he's much older gentleman if I remember correctly and Danny's like you know just like down and out about a problem and so I'm going to
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 looked 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 I repeated them over and over to myself and it led to a turning point in the way I approached 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 his
philosophy came down to a simple fact of business life success lies not in the elimination of problems 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 the way I think about this idea is business is
problems and successful companies are just effective problemsolving machines and that is the point that Henry Ford is making you should thank your stars for the problem that you're having because 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 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 oldtime 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 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 another main point of Ford 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 creat and children's education 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 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 there's no room for waste
and he has entire paragraph dedicated to one of the my favorite lines read George Lucas's fantastic biography it's called George Lucas life uh the writer Brian J Jones I think it's Founders number 35 but there's a line in that book I never forgotten he 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 out into the safe and useful Adventures of self-expression 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 young men ought to invest invest rather than safe they ought to invest in themselves and then create creative value okay then I'm going to spend some time in this section it's chapter called
the railroads and it talks about hey this is his the perfect illustration of the idea is like where you need to copy 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 has become such a large problem at this point in his career that he's got to buy
one and this is where he really Compares in contrast he's like this is where I'm writing the book this is my philosophy on to build a business and this is why because how most businesses are poorly run I entirely without any disposition to pose as a railroad Authority 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 I have not the
slightest doubt in the world that the active managers of the railways 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 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 earned 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 and worker he just despises anything that is not work directed at service so he talks a lot of about bankers and
lawyers and administrators and all that stuff the natural Ally of the banker is the lawyer 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 the name of the railroad is relevant in our experience with our railroad we bought
the railroad because it's right away interfered with some of our improvements on the River Rouge this this giant plant that he's making okay we did not buy it as an investment or because of it's a strategic position we literally bought it because you're interfering with what we need to get done and if you can't get
the job done then we'll just buy it and we'll do it ourselves so it says since we bought the railroad uh because interfered brother plans we have to do something with it the only thing to do is to to run it as a productive Enterprise applying it to it the exact same principles as applied to every Department in our business and one way
you think about what he's saying there he like listen since I own this thing it needs to be an asset and not a liability and so I'm just going to use the same principles that I use for building cars as building the ra this is why again I'd pick up the whole book and just read this entire chapter it's 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 distill 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 of
the road to exceed the outgo meaning it was losing money now it's turning a profit which for that road represents a most unusual condition see he also kind of low-key funny CU like kind of like talking there it has been represented that the chain because like for this road 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 that the changes we have made and remember that they've been made simply as part of the day's work are peculiar oh he says oh I need to back up here they're saying hey this is like revolutionary like this is how is
this happening and Ford's like these are not revolutionary 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 what needs to be fixed he takes the inventory this is what I 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 is everything being done as good as it could do and in other words like what's about to happen is the railroad is was being run in the exact opposite way that Henry Ford would run a business 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 roaded 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 listen what he's saying where are they investing the money in their trains no are they investing the money in the track nope are they 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 there was an ample executive and administrative department and of course a legal department so he's like well we're not going to 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 the numbers here it's like oh there's 25 administrators okay see you there's going to we're going to be one dude one dude's going to do all that and he just goes through 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 2700 people down to 1650 and he goes on for quite a bit I'm not going to read all that I'm just going to give you what most my interpretation of what's taking place most businesses are overstaffed the people running them are just not skillful operators and so then he's like okay well you can uh there's there's
also a way to increase money is that you can actually reduced 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 2/3 and so he does that idea the idea behind what he that sentence right there
he does that a lot 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 because they they increased inventory turnover 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 been like 200 million it was a good amount of money just like making things go faster we are routing as much as we can around our own business over the road but only because we get 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 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 r risk in buying this railroad was actually really tiny to Henry Ford because he knew as trying to be um as trying to be a customer of the business it he knew it was a poorly run business 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 5 million he paid 5 million for the raot and I think he winds up selling it for like 30 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 and his point was is like wait I 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 $1 billion 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 and then we'll end where we began this is Henry Ford summarizing his philosophy it has been thought that business existed for profit 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 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 number one an absence of
fear of the future or a veneration for the past one who fears the future 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 disgrace in fearing to fail what is passed is useful only as it suggests Ways and Means for Progress number two a
disregard of competition whoever does a thing best ought to be the one to do it number three the 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 but profit must and inevitably will come as
a result of good service it cannot be the basis it must be the result of service 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 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 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 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 I've done this for years and it's one of the main benefits of listening to this podcast because not only I have I
read over 100,000 pages in the history of Entrepreneurship but the way I don't forget these things is because I put them in readwise 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 need a ton and if you're going
to read you might as well remember what you read and so if you go to I think it's I'll leave the the I should know the link by now jez uh I'll leave the link in the show notes in case I'm wrong but I think it's readwise doio Founders and you can get 60 days free it's fantastic that is 266 books down 1,000 to go and I'll talk to you again soon