And so, you think Elon is cool?

Capital Thinking • Issue #99 • View online

Recently, I’ve been re-reading “The Goal” by Eli Goldratt and of course, that leads you to Taiichi Ohno, founder of the Toyota Production System - which is credited as the beginning of the Lean Production methods touted so highly today by Eric Reis and others.

But while all those guys are great, I don’t think they hold a candle to Henry Ford who never seems to get the credit as that he really deserves.

“There’s nothing quite like viewing the past first-hand, through the lens of the people living in it at the time – people who wrote about their present. When reading new stories about the past, it’s so easy to slip into the habit of judging those ridiculously foresighted people from history, and how could they have ever believed that anyway? Like, duh.

Which is kryptonite to learning, because of course, our present will soon be the past, and people will think the same of us. Perspective, and humility, are necessary ingredients to becoming fully human and these days they are in short supply.” - Amy Hoyt

That’s Amy Hoyt writing about one of her favorite business books, Henry Ford’s personal biography, My Life and Works.

While Ford certainly had his quirks and flaws, he was undeniably gifted with unusual insights into business, all things mechanical, and even human nature.

And unlike another, more modern, titan of industry, Elon Musk, Ford actually produced not only products, but systems that are still with us today.

Here are just a couple of Amy’s favorite lines in Ford’s book:

Rushing into manufacturing without being certain of the product is the unrecognized cause of many business failures. People seem to think that the big thing is the factory or the store or the financial backing or the management. The big thing is the product, and any hurry in getting into fabrication before designs are completed is just so much wasted time.

Elon Musk: I can produce an electric car.

Henry Ford: Here, Hold my beer.

Or how about this:

My idea was then and still is that if a man did his work well, the price he would get for that work, the profits and all financial matters, would care for themselves and that a business ought to start small and build itself up and out of its earnings.

If there are no earnings then that is a signal to the owner that he is wasting his time and does not belong in that business.

I have never found it necessary to change those ideas, but I discovered that this simple formula of doing good work and getting paid for it was supposed to be slow for modern business.

The plan at that time most in favor was to start off with the largest possible capitalization and then sell all the stock and all the bonds that could be sold. Whatever money happened to be left over after all the stock and bond-selling expenses and promoters, charges and all that, went grudgingly into the foundation of the business.

A good business was not one that did good work and earned a fair profit. A good business was one that would give the opportunity for the floating of a large amount of stocks and bonds at high prices. It was the stocks and bonds, not the work, that mattered.

Whoa! Ford could be addressing the whole crazy tech merger and tech mania we see today on Wall Street, in the news, and on TV.  

Nothing much changes, does it?

Getting back to Goldratt’s The Goal (and the Theory of Constraints), you also see that Ford was able to grasp the real problems in his business and produced results like these:

Ford reduced the average time to produce a car from over 12.5 hours to just 93 minutes.

and this:

In 1914, Ford’s 13,000 workers built around 300,000 cars — more than his nearly 300 competitors managed to build with 66,350 employees.

Elon can’t match those numbers - even in his dreams!

Ford raised wages, set a reasonable work week, built and shipped more cars than everyone else in the world, managed to lower his costs of production by nearly two-thirds, and build one of the largest and most successful companies on the planet.

Do yourself a favor and read a little bit more about Ford who was a better inventor, businessman, and thinker than Elon will ever be. OK, so maybe he was better at all those things than Elon. But may be too early to tell.

Here’s a couple of posts to get you started:

P.S. - And that's how you build a dynasty

At one point, Ford, not happy about the increase in the cost of lumber used in car bodies and interiors at the time, decided to do what only Ford could: he sat down and calculated his needs down to the last inch.

Then, he contacted his suppliers and informed them that from this point forward, Ford Motor Company would only accept deliveries in specially designed wooden crates. As the new materials arrived in said crates, employees disassembled them and used the pre-cut lumber - already sized perfectly - on the assembly line.

Not only was Ford able to lower his lumber cost, he completely transferred that cost to his suppliers.

We talk about “living your story” and “knowing your customer”, but few did it as well as Carroll Shelby.

Read and learn.