Acquired - Ferrari

Starting point is 00:00:00 Okay, David, so the question, do you have a favorite Ferrari? Ooh, that's a tough one. I would never actually want to get behind the wheel of it, but I think I got to go with the F40. Of course. I remember just being like a kid in elementary school and getting a model of one and thinking like, oh my God, this is the most incredible machine that mankind has ever created. Yeah, it's the defining supercar. Yes, yes. How about you? I actually have two. One is the car from Charles LeCle.

Starting point is 00:00:30 Claire's wedding. Ooh. It's the 1957-250-250 Testerosa. Hmm. And the car from Ford versus Ferrari. That 1966, 330P3 is just beautiful. It's got these curves. It looks like a spaceship.

Starting point is 00:00:44 It's gorgeous. Ah, beauty and power. The story of Ferrari. Yes. All right. Should we do it? Let's do it. Who got the truth?

Starting point is 00:00:53 Is it you? Is it you? Is it you? Is it you? Is it you? Welcome to the spring 2026 season of Acquired, the podcast about great companies and the stories and playbooks behind them. I'm Ben Gilbert. I'm David Dresenthal.

Starting point is 00:01:17 And we are your hosts. Almost everyone needs transportation. It is a giant market serving a huge human need, and it is one of the top three things that households spend money on along with their housing and their food. and the automobile has become the default way that humans move around the world. And that is not what we're talking about today. And this episode has absolutely nothing to do with any of that. Today's episode, listeners, is about selling dreams. Oh, yes.

Starting point is 00:01:48 We are talking about Ferrari, one of the most paradoxical companies that we have ever studied here on Acquired. Ferrari ships very, very few cars. around 14,000 per year. That is approximately the number of Toyotas that are sold every 10 hours. But of course, we know Toyota and Ferrari are a silly comparison. So what about a company that we have covered in the past? Porsche.

Starting point is 00:02:15 Yeah. Even Porsche ships 22 times the number of cars that Ferrari does. And yet, even though almost nobody owns a Ferrari, only about 180,000 people globally, they have among the highest brand recognition. I would argue that over a billion people know what a Ferrari is. Easily. Which means, David, that Ferrari has the highest ratio of people who know about their products

Starting point is 00:02:43 to people who actually own their products of any company in human history. I think we got to scope it to companies that make products that are nominally available for purchase by consumers. Yes. But yes. Yes, like the space shuttle is a product, but you can't go go buy a space shuttle. Yeah. So I would say Ferrari is the only ultra luxury brand that has reached mass cultural awareness. Yeah.

Starting point is 00:03:11 There are some fun numbers just to keep putting this in perspective. There are 10 times more Birken and Kelly bags made each year over at Hermes than there are Ferris. And there are 70 times more Rolexes made each year than there are Ferraris. Yeah, it's wild. The paradoxes continue. People are dying for their SUVs, and yet they limit them to just 20% of total volume. Wait, what is this SUV of which you speak? I'm sorry, Ferrari utility vehicle because they would never...

Starting point is 00:03:38 Yes, the FUV, the Ferrari utility vehicle. Ford, here's another good one, makes 160 times the number of cars that Ferrari does, yet Ferrari has a higher market capitalization. They're worth more than the Ford Motor Company and Volkswagen and Honda. and Honda and Stalantis and Mercedes-Benz. This company is worth so much more than most giant manufacturers. Ferrari makes all of their cars, mostly by hand, inefficiently and one-off in a single town, Marinello, Italy.

Starting point is 00:04:14 And they have the highest margins in the entire auto industry. Of the very few cars that they do make, this is my favorite one, David, about 80% of them are earmarked specifically for people who already own a Ferrari. Right, right, right. So that means there's less than 3,000 new customers buying Ferraris in any given year. It's actually completely insane when you think about it. This funnel narrows pretty tight. So how on earth did Ferrari manage to build this incredibly valuable business while selling their cars to almost nobody?

Starting point is 00:04:47 Well, the answer is bloody. It is half a century of death and speed. and love and feeling alive. And of course, there are some of the most clever business model mechanics that we have ever studied here on Acquired. It really is very Italian, you might say. Yeah. It's beautiful.

Starting point is 00:05:04 It's tragic. It's romantic. There's death, sex, betrayal, and very, very fast cars. Well, listeners, if you are interested in the big takeaways from each episode in writing, you should join our email list at Acquired.fm slash email. You can also get past episode corrections, exclusive behind-the-scenes photos that we found during our research. We'll be sending some of those out for this episode. And you can vote on future episode topics.

Starting point is 00:05:31 Plus, we will give away a little hint about the next episode each time. That's Acquired.fm slash email. Come talk about this episode with us in Slack at acquired.fm slash Slack or by clicking the link in the show notes. And before we dive in, we want to thank our presenting partner, J.P. Morgan Payments. Yes. Just like how we say every company has a story, every company's story is powered by payments. And JPMorgan Payments is a part of so many of their journeys from Cid to IPO and beyond. So with that, this show is not investment advice.

Starting point is 00:06:01 David and I may have investments in the companies we discuss. And this show is for informational and entertainment purposes only. David Rosenthal, take us to Italy. Ooh, all right. Well, we start in 1898 in the medieval Italian town of Modna, with the birth. of our hero, Enzo Anselmo Giuseppe Maria Ferrari. Better known, of course, either by the name of the company he would found that bears his last name, Ferrari, or to his hundreds of millions of fans around the world, simply as Enzo.

Starting point is 00:06:38 So Enzo is born here in 1898 in Modena, the second of two sons. And his mother, Adaljisa, is a beautiful young woman. and his father, Alfredo, is 12 years older than his mother. And his father runs a successful metalworking shop and is kind of like a, you know, fairly well-to-do middle-class entrepreneur about town. And Enzo and his father are often at odds growing up, but part of his dad does rub off on him

Starting point is 00:07:08 in this sort of entrepreneurial influence. His dad says something to him, which sticks with Enzo for the rest of his life. A company is perfect when the number of partners in a company, it is odd and less than three, i.e. don't take on partners, always be self-sufficient. It's a great quote. We should say that much of this history, this whole episode comes from the fantastic, really definitive biography of Enzo called Enzo Ferrari, written by Luca Del Monte, who worked at Ferrari and Maserati for many years, and then after he retired, dedicated about a decade

Starting point is 00:07:41 of his life to researching and reading this definitive biography. It's really excellent. So anyway, his mother and his father are always fighting. They're always yelling, arguing, swearing. And this has a very different effect on each of their two children. For Enzo's older brother, who is named after his father, he's also named Alfredo, nicknamed Dino to tell them apart, he, Dino becomes like the golden child. He's the peacemaker, the pleaser, the striver, the smart and successful one. He's going to make his parents proud and he's going to take over the family business. Enzo, on the other hand, he's. and as the younger brother, he just takes right after all the sort of less savory parts of mom and dad. He's mischievous. He doesn't apply himself in school or paying any attention. And, you know, why should he? His family's got money for the place and time. His older brother, Dino, the golden child, you know, is going to make them proud.

Starting point is 00:08:32 He's going to take over the family business. Enzo can just kind of knock about town. He dreams of someday maybe becoming a journalist or an opera singer, mostly so that he can, you know, hang out with the showgirls. Oh, what could have been? a very different Enzo Ferrari. Ah, well, his life is an opera, as we shall see. So there's one thing, though, that really captivates Enzo's spirit, which is the new, modern sporting and leisure pursuit of automobile racing.

Starting point is 00:09:00 And one blissful night when Enzo is a teenager, he declares to his best friend his true intention in life, I am going to be a racing driver. And that dream does indeed come true, but probably not in any way that Enzo expected that night. Because very shortly thereafter, World War I breaks out, and two tragedies happen to Enzo in quick succession. First, his father, Alfredo, contracts pneumonia and dies.

Starting point is 00:09:32 Unrelated to the war, he just got pneumonia, and suddenly died. Shortly thereafter, his older brother, Dino, the golden child, goes off enlists in the Italian army, where he also contracts pneumonia and dies. So Enzo is left alone with his mother that he needs to support. The family business is gone. And because Enzo has never applied himself, he has no discernible skills or ability to continue it

Starting point is 00:10:00 or really do much else that would provide gainful employment for him here. That was supposed to be Deno's role in the family. Now, before Enzo can stop to really think, he too gets drafted into the army, where he also comes down with pneumonia and nearly dies, but he survives. He's the one who survives. He has a quote later in life where he sort of acknowledged this emotional burden and his life's work that he would go on to create, where he said,

Starting point is 00:10:25 I feel alone after a life crowded by so many events and almost guilty of having survived. Yeah. I mean, the title of his memoirs is My Terrible Joys. Tells you everything you need to know right there about Enzo's life. Yep. So when he comes back home to Monnet, at the end of the war. He has no hope,

Starting point is 00:10:45 but he does still have his dream of motor racing. And remember, he's still like a teenager, basically at this point, a late teenager, early 20-something. He starts making noise to his mom about selling the family house to finance buying a racing car

Starting point is 00:11:00 and that he's going to go out and race this car and win prize money to support them. It's an audacious plan. It's an audacious plan. His mom is like, uh, no. How about instead, how about this?

Starting point is 00:11:14 Why don't you go try to get a job at a car company and see where things go from there? And so it's like, okay, okay, fair compromise. So his mom arranges for him to travel to Turin, big city of the northeast of Italy, where he interviews for a job at Fiat. And Fiat is the biggest Italian car company at the time and will come back up many, many times in this story. It is, as you all probably know, essentially the Ford Motor Company of Italy. And the family behind it, the Annelis, are the wealthiest and most important industrialists, basically in the history of Italy. And today they own and control both Stalantis, which is the merged result of Fiat, Chrysler, and Pujo, and they also own and control Ferrari.

Starting point is 00:11:58 Don't worry. We'll get there. We'll get there. But not for, I mean, the better part of a century here. Yes, yes. So back to Enzo here in 1918. Fiat, of course, rejects his job application because, again, he has no discern. skills, but Enzo is persistent, and in 1919, he lands a job at a new startup automobile company called C-M-N. And there, he pledges his future salary, like the next several months of his

Starting point is 00:12:26 salary, to purchase for himself one of the company's sports cars that he then goes off and takes racing. So he didn't have to sell his house to finance this dream, but he did pledge his future salary. Now, this is an important point to land here. With very few exceptions, one of which we'll talk about in just a minute, motor racing at this point in time was a private individual sport. Drivers generally bought and raced their own cars, either because they were independently wealthy and successful and could afford their own staffs and mechanics to maintain these cars. These were folks known as gentlemen racers. That's right. I've heard that term. Yes, and this is the group of people that ultimately, once Ferrari gets founded, become Enzo's core client base.

Starting point is 00:13:12 Or the other group of drivers at this time are like Enzo. They're these kind of like hustlers and dreamers who manage to glom on somewhere in the car industry and leverage that into entering races. But basically, motorsport was this like passionate sort of privateer pursuit. Not organized professional racers on highly paid teams. Yes. So Enzo enters into this world and he does pretty well. well enough not only to send some prize money back home to mom, but also to attract the attention

Starting point is 00:13:42 of Alpha Romeo, which is Italy's other large car company at the time, although much, much smaller than Fiat. And Alpha has one of Italy and Europe's few, if not only, in-house racing teams. So even though most racing that's happening is privateers, Alpha has their own racing team, which is pretty unique for Europe at the time. So they scoop up this young, hot shot, talented driver, Enzo to come and race for them. This is a huge coup for Enzo. Like, basically, his whole dream as a teenager is coming true. He's racing.

Starting point is 00:14:19 He's making money from prizes. He's part of this Alpha Romeo team that's going to support him, provide him great vehicles to race and also mechanics and everything he needs. So he hatches a plan that he's going to cash in on this. newfound fame and notoriety by starting his own business. He's going to be an entrepreneur, just like his dad. So at age 22 in 1920, Enzo starts his first company, a coach-building business in Modna called Karatzeria Emilia. Now, what is a coach-building business? This is another really important point to understand about the car business at this point in time. For most companies, and especially car companies that were making sports cars,

Starting point is 00:15:04 the actual bodies or the coaches were built and designed by third-party coach builders. The cars were just an engine and a chassis that the car maker would deliver. And then the clients would go to a coachmaker, like this one that Enzo is starting up, and have them build the body to their taste and specifications that would go on top of the mechanics of the car.

Starting point is 00:15:26 Yeah, it reminds me of our Rolex episode where the movement makers were totally different than the case makers, which were totally different than the jewelry stores that sold them, not the sort of integrated way that we know it today of the movement maker is often the same as the casemaker and then you often just sell sort of pseudo directly. Yes, totally. In this case, it's actually a holdover from the horse-drawn carriage days where the coach builders built carriages, but they obviously didn't supply the horses.

Starting point is 00:15:53 So the same thing starts to emerge here in the early automobile industry. So Enzo's, admittedly, pretty half-baked plan here is that thanks to his sure-to-come, you know, new fame and fortune as an Alpha-Romeo race car driver, customers, Alfa Romeo customers and customers of other car companies, are going to come banging down his door to build their car bodies, to build their coaches. What the connection is between being a good race car driver and being a great coach builder, I'm not sure, and neither is the market. because the business does not go well. It's a failure, and within two years, Enzo is bankrupt. Now, perhaps relatedly, Enzo's sort of medal as a professional race car driver also proves to be good, but he's not great. He has all the talent, all the skill, but he comes to realize he doesn't have the one final thing

Starting point is 00:16:51 that separates the true motorsport champions from everyone else. he's too afraid to die. He can't push himself in the car to the point that's really, really, really, really on the edge. The limit, yes. Part of this, of course, is his sort of haunted past. You know, the deaths of his brother and father, death has had this huge presence in his life. But also, it's very much his presence. So once he joins the Alpha Romeo team, there's two sort of senior drivers on the team who really take him under his wing as mentors and they become friends.

Starting point is 00:17:24 and Enzo watches them both die during races at the wheel. The first of which Enzo was the first person to find him, and he actually literally died in Enzo's arms. And so after all these experiences, Enzo just, he can't push himself to do the same thing over and over like they did. And that is the sick reality of racing, at least in this point in history, is it is the people who are absolutely willing

Starting point is 00:17:49 to go right up to that line and maybe cross it. Often cross it. I mean, it kind of depends where you put the line. Those who win are the ones who are absolutely willing to die. I mean, on our Formula One episode, we talked about through the 70s, right? There was an average of more than one death a year in Formula One out of a field of only like 20 drivers. So yeah, that's the reality for a very long time in this business. And paradoxically, that's also part of the appeal. So in 1924, Enzo makes the decision to quit racing, cast off the

Starting point is 00:18:24 coach building business and instead open a Alpha Romeo dealership in Modna. Oh, I didn't know this. Yeah, he's now married. He wants to have a family. His son, naturally named Dino, would be born a few years later. Dino after his father and brother. Basically, he's going down the time-honored path of retired ex-athlet with some degree of notoriety opens local car dealership.

Starting point is 00:18:48 Pioneering. Pioneering. Now, toward the end of his racing career, Enzo had also gotten more involved in the actual management of the team and gotten to know some of the managers of Alpha Romeo, the company itself. So he still has these close connections to the company, which are certainly going to help him in becoming a dealer. And then the very next year, the Alpha Romeo Board of Directors makes the inexplicable decision to drastically cut back on their racing activities. And they're going to keep the company team, but only going to enter a few races and the budget is going to be cut. And so Enzo's like,

Starting point is 00:19:21 Whoa, whoa, whoa, whoa, whoa, whoa, whoa. Hang on a sec here. I need the publicity from the Alpha Romeo racing team. That's my only, like, connection to fame here and why people would come to my dealership and buy my cars. I kind of need to have Alpha's racing on a regular basis. So he goes to Alpha Romeo headquarters in Milan with a proposal. I understand that you want to cut the expense, you know,

Starting point is 00:19:45 sort of day to day of running your own racing team. What if I take it over? And all the races that you don't want to run, you bless me, your dealer, Enzo Ferrari, as the official racing agent of Alpha Romeo. And I'll put together my own private team. I'll hire the drivers. I'll hire the mechanics. I'll cover the costs. Right. It's like a fully outsourced racing team that's just kind of a contract relationship. You don't have to have this on your books. This is sort of loose affiliation. And for Enzo, what better marketing activity could you imagine than to become the quasi-euxi? official racing agent, sort of second team of Alpha Romeo.

Starting point is 00:20:24 Yep. And thus, the first iteration of the Ferrari business is born. The Scooteria Ferrari, which is the name that he gives to his new racing team, Scuderia being stables in Italy. It's a stable of drivers and cars for Alpha Romeo. And the Ferrari racing team to this very day in Formula One and elsewhere is the Scuderia Ferrari. That is the S-F that you see on the Ferrari shield everywhere. Yep.

Starting point is 00:20:52 And for a team that would go on to adopt the prancing horse, I am loving the thick metaphor here with the stable and the... Oh, Enzo, as we shall see, is a natural-born marketer. So, important to note a couple things here. The Scooteria Ferrari is very much intended to be a junior partner to Alpha Romano. Or at least Alpha intends it that way. But Enzo does in the back of his mind have broader ambitions. As we alluded to with the whole coach building thing,

Starting point is 00:21:25 unless you're one of the few new at this point, really mass assembly line consumer car companies like Fiat or like the Ford Motor Company over in America, the line and the barrier to entry between being a garage who develops and maintains racing cars and graduating to making your own. cars that you sell to the privateers who go racing is pretty thin. And Enzo's always got this in the back of his mind.

Starting point is 00:21:56 And he's got some examples out there. So there are other garages, for lack of a better word, out there in Italy at the time, that have made the jump from developing race car versions of other cars made by other manufacturers to selling their own cars. The prime example being Maserati right there in Modna, right across town. the Maserati brothers. In the video game world, this is modding. Yes.

Starting point is 00:22:20 You're sort of taking someone's kind of basic game and souping it up into something really special for you that you're customizing. Yep. So Forenso in the back of his mind, he's like, okay, this is my opportunity to build my own team, hire my own engineers and mechanics, use hopefully my team's success combined with the scooteria Ferrari brand that I'm building.

Starting point is 00:22:39 Maybe someday I too can launch my full-on car company like the Maserati brothers across town. So as he gets going with this grandmaster plan and developing the scooteria, he knows that he needs to build up more than just his own operations. He also does need to build a brand if he's going to sell his own cars someday. And specifically, he needs a logo. And he's got the perfect one. But before we tell the story of the legend of the Ferrari prancing horse, now is a great time to thank our presenting partner, J.P. Morgan Payment. Yes. And one thing that kept coming up, listeners, in our research for Ferrari, is just how global they have been from their early days, of course, headquartered in Italy, but selling cars to the U.S. and around the world, as we will soon get to, from those early days. And behind any company operating at that scale, there is a massive engine orchestrating money movement behind the scenes.

Starting point is 00:23:39 That's right. It's an enormous amount of complexity, paying suppliers in one currency, collecting receivables, and another, managing exchange risk, adding vendors and suppliers, and of course, staying compliant in all these regions. When you're really early stage, moving money across two or three currencies, you can manage it yourself. But going from three to 20 is like a completely different situation. Yes. And the companies that get this right that make those strategic investments in payments infrastructure early, those are the ones that scale. That's what JP Morgan payments cross-currency solutions are built for. They send payments in 120 currencies. They receive payments in 40 across more than 200 countries and territories.

Starting point is 00:24:20 That means that you get seamless integration through their APIs that plug directly into your existing treasury workflow. And that gives you real-time visibility and control over your transactions. The whole goal is to make global money movement invisible. And because there's so much complexity required behind the scenes to make it feel invisible, the stability and scale of J.P. Morgan's global payments network plus local market infrastructure is really what makes it possible. It is one of those things where the scale is the product. If you do the math, there are tens of thousands of combinations of currencies that you may need to switch in between, not something you want to take on yourselves. So, listeners, if your business is moving money across borders and you need cross-currency payment solutions that do the hard work for you, check out jpmorgan.com slash acquired and just tell them that Ben and David sent you.

Starting point is 00:25:07 Okay, David, so where does the famous, infamous prancing horse for Scooteria Ferrari come from? Yeah, how did all those Ferraris come to have a black prancing horse on them? And I got to say, it is the strangest thing looking at some of these old pictures because the first thing that the prancing horse went on was these Alpha Romeo cars. Yes, yes. And so there's these old pictures of an Alpha Romeo badged car and the fender sort of in front of the door, there's a scootoria Ferrari prancing horse. Yes. It's bizarre to look at today.

Starting point is 00:25:42 Yeah, listeners, we'll send that out in the email. So back when Enzo was a promising young racing driver, one of his early fans and supporters was a noble Italian count and countess whose son, Francesco Baraka, had been Italy's number one ace fighter pilot during World War I, like World War I dogfighting, and Baraka had won 34. aerial victories before he was tragically killed in combat right before the end of the war.

Starting point is 00:26:15 And on his airplane, he had painted as his symbol and a good luck charm the black prancing horse. Now, he's like a national hero. And everybody in Italy knows about Count Baraka and his exploits during World War I. And his parents are fans of Enzo. And so one night after the war,

Starting point is 00:26:34 the Countess tells Enzo why don't you paint the black horse on your car? It will bring you luck. And to symbolize this gift, she gives Enzo a photo of her son in front of his plane before he was killed with the horse and with an inscription from her below it that Enzo should use this symbol. That's an official endorsement right there. Absolutely. Oh, absolutely. So here we are now.

Starting point is 00:27:00 Enzo is launching his scooteria, his stables, his horses. and he knows that this is the moment to put the gift to use as the Scooteria's logo. It's perfect, stable horses, but it's more than that. This man had been a national hero. Everybody in Italy knows him and knows the symbol, and Enzo has had it bestowed upon him, not just with his mother's blessing, but with the explicit direction to put it on his race cars. So Enzo takes the prancing horse. He places it within a yellow shield, yellow being the same.

Starting point is 00:27:33 city color of Modena with the three colors of the Italian flag above. This is just a genius marketing move. The prancing horse reflects both the scuderia and links Enzo and the team to this national hero. The shield reflects his intention to do battle on the racetrack, and the Italian colors reflect the ultimate ambition to establish this team, this company, and its future cars as the Italian national team and sports car company. Yep. So in our research, I spoke to Luca de Montezemolo, the legendary Ferrari chairman who would ultimately succeed Enzo

Starting point is 00:28:14 and really in many ways be his heir, as we will tell in this story. Important to note different Luca than the Luca who wrote the book, David, that most of this narrative is based on. And I asked Montezemolo, you knew Enzo probably as deeply and as well as just about anybody who's still alive today. And there's this kind of popular legend that Enzo was just a racer. He only wanted to race.

Starting point is 00:28:40 He didn't really care about business or road cars. And all the road cars only existed to fund his racing activities. Oh, this is the biggest thing about people today when I say, oh, we're doing an episode on Ferrari. They say, oh, my gosh. Yeah, it's such a crazy story because, you know, Enzo really just wanted to race cars and he built this car company. But really, that was just sort of to finance the racing. And he doesn't even care about those road cars. He's not really a business guy.

Starting point is 00:29:03 He just wants to make great cars with great engines and send them racing. Completely false. Montezemolo confirmed when I asked him. Enzo was a natural-born entrepreneur and marketer. He really was Italy's Steve Jobs in every aspect. I mean, think about it. What was Steve Jobs? Steve Jobs was not an engineer.

Starting point is 00:29:28 He was a marketer. The same as Enzo. Enzo is not an engineer. He's not a car mechanic. He can't build the cars himself. But they both had a sort of understanding and deep appreciation for the technical things that enabled their visions to be possible. Yes. Enzo would say about himself when asked that he's not an engineer, he's not a car designer. He's no longer a driver, even though he runs this team. He is, quote, an agitator of men. And that perfectly described Anzo. And I think, you know, perfectly describes Steve Jobs. too. So if you think about it, what is Enzo doing here with the brand that he's building? There's the prancing horse. And then what's the other famous, you know, visual symbol associated with Ferrari, the red, Ferrari Red, Rasa Corsa, that he adopts here. And sure, you know, Ferraris are red because red was the assigned national racing color of Italy. But come on. Enzo is the one who embraced it and imbued this Rasa Corsa with so much more than just the national racing color of Italy. It's not Alpha Romeo's colors. It's Ferrari's colors.

Starting point is 00:30:33 Right. When you draw a picture of a race car today, let's say you're 10 years old, you're coloring it red and you're coloring it red because that is Ferrari red. Yes. And what does red represent? It's passion. It's blood, it's desire. It's all of this that is all deeply wrapped up into a Ferrari. I mean, just look at Italy's other luxury supercar company today, Lamborghini.

Starting point is 00:30:56 You know what their colors are? Not red. In fact, their color is every color but red. Because Ferrari has co-opted it. Yep. So back to the Scooteria here. After a couple of years, in 1933, the golden opportunity arrives for Enzo. Alpha Romeo finally decides that it is going to disband its official racing team entirely

Starting point is 00:31:18 and designate Scuderia Ferrari as its official racing operation in all races all across the globe. So Enzo acquires, quote unquote, the entire Alpha operation, engineers, mechanics, everything. And his dream has come true. He is not only Alpha Romeo's official racing team, but by this point in time, Alpha had been nationalized by the fascist Italian state by Mussolini. So he is Italy's official national racing team. There's this one problem, though, which is. is that Alpha got out of the racing business for a reason

Starting point is 00:32:02 because Hitler is coming to power in Germany. And one of Hitler's most, you know, kind of important national agenda items is making sure that his German auto industry is the best and that he proves it on the racetrack, just like, you know, the Olympics. So throughout the rest of the 1930s, the German state is supporting Mercedes and auto union, which would go on to become Audi today. And their cars are just dominating European Grand Prix racing. So Enzo and Ferrari are like sent out there, you know, by Alpha and the Italians to compete.

Starting point is 00:32:38 But it's a fool's errand. And so in 1938, Alpha and Mussolini kind of fed up with losing. They actually acquire the Scuderia Ferrari and remake it, you know, as part of Alfa Romeo into this official sort of government entity. Huh. So they decide, actually, we do want to put resources behind this. And now you're kind of the only game left in town since we shut down the other operations. Yeah, I mean, at the end of the day, this is just rearranging deck chairs because the war is coming. So the very next year, Hitler invades Poland and World War II begins.

Starting point is 00:33:15 Needless to say, European automobile racing is on hold indefinitely. Yes. During this period, Enzo gets into a fight with Alpha Romeo management and manages to get himself fired. Yeah, this is 1939. He cares about one thing and that's auto racing. It's just not the strategic priority for Alpha Romeo as a company or for the country.

Starting point is 00:33:39 And so I think this friction kind of leads to it. The crazy thing is his separation agreement, I think he got paid to leave. But, you know, it's a firing forbids him for four years from A, building cars

Starting point is 00:33:55 to race them, and B, using the name Ferrari associated with a racing team or a car builder. Like, he lost the rights to his own name for four years. Well, I mean, you know, he gave them up to the Italian government, essentially. Yep. So speaking of which, during the war, Enzo creates a new company to feed the Italian war effort that he names Auto Avio Constructione, Auto and Aviation Construction, which is, he sneaks that auto in there.

Starting point is 00:34:27 Not really supposed to be building cars and racing them, but like, I'm doing other stuff too. Yeah. It's not called Ferrari. That's not called Ferrari. But this same company is better known today as Ferrari Societia per Azioni or Ferrari SPA, the Ferrari joint stock company that is publicly traded on the New York Stock Exchange under the ticker race. Yes. Best stock ticker ever. Best stock ticker ever.

Starting point is 00:34:54 Indeed. So what is this company doing? They're not making cars even though. auto is in the name, they're making machine tools in the workshops and essentially factory that Enzo has created there in Modena. And on each tool throughout the war effort that they make, Enzo has them stamp the prancing horse and the word Scuderia Ferrari Modena, clearly signaling his intentions after the war of what he's going to do.

Starting point is 00:35:20 I bet those are some very valuable collector's items if you can find them. So anyway, Enzo and his factory are pretty good. at making these machine tools and they become part of the war effort. So as the war wears on and the allies, you know, push into Europe, ends up when the government start to worry about them bombing the factory in Modena. So in 1943, he decides that he's going to move all of his operations out to a small little town in the countryside to avoid the bombing. He's going to go about 15 kilometers south of Modna to Maranello. And that's why Ferrari to this very day is in the small little hamlet of Maranello, not in the bigger city of Modena. Yep. So even despite the move to

Starting point is 00:36:06 Maranello, the factory does get bombed twice during the last days of the war. After the war that leaves Enzo kind of at a crossroads. The factory is not quite in ruins, but, But it's in, you know, they've been bombed. Disarray. Dissarray. Significant disarray. Disarray. And he's just spent the last four or five years building machine tools and gotten pretty good at it.

Starting point is 00:36:35 Yep. And then Enzo gets a visit from an old racing pal, an Italian, but one who spent the war not in Europe, but in exile in America. Luigi Kennedy. the man who brings Ferrari to America. So Luigi and Enzo met way back when Enzo joined the Alpha Romeo racing team as a driver. And Luigi was a mechanic on the team who also then became a driver. And he ends up in New York. And when the war is over, Luigi goes back to Italy to visit Enzo, and he tells him about America.

Starting point is 00:37:14 So this is a quote here from Brock Yates' biography of Enzo. Brock Yates was the longtime editor of Car and Driver magazine. Kennedy described the miracle that was America, the aggressiveness of its people, their childlike acquisitiveness, and their bourgeois credulities. Yet, there was a rich upper class whose taste were European.

Starting point is 00:37:37 He had seen them, met them, gained their trust as he kept their aging European automobiles operating through the war years. He knew they would pay a king, ransom for Enzo's elite machines. And he, Luigi Kinetti, meant to exploit that naive colonial lust. What writing?

Starting point is 00:38:00 What writing? Enzo agrees. Now, legends would say later, Luigi, I think, would probably perpetuate this himself, that Luigi is the one who convinced Enzo to abandon the machine tools business and focus only on cars again after. World War II. That's false. Enzo was planning to anyway. There's no way that he really was going to go into machine tools. I mean, by 1943, his non-compete is up. And he's allowed to use the name again. And so, you know, the clock's ticking. The clock's ticking. But it is true. Luigi definitely

Starting point is 00:38:35 convinced Enzo about America. And America was critical for Ferrari. And you know what wealthy Americans are extremely interested in when they're considering if they're going to buy a, extremely expensive, rare automobile. They love that cold shoulder of a artist creating the car mysteriously in some small town in Italy who's just interested in racing. He's not interested in mass market cars. You're just lucky to get one of these racing cars and he couldn't even care less about you. Oh, yeah.

Starting point is 00:39:10 Oh, yeah. That sells cars. And boy does Enzo know it. Yeah, he totally leans into this. This is like part of the perpetrating of the myth. This is why everybody believes, oh, he wasn't really a businessman. He just wanted to race cars. Yeah, I mean, the whole persona of Enzo Ferrari, you know, the dark sunglasses.

Starting point is 00:39:28 Oh, yeah. What's the tidbit you got on the sunglasses? It was an act. You know, we would wear the sunglasses in public and, you know, press interviews and meetings with clients or whomever. And then everybody else would leave the room and he'd just take them off and put him on the table. He didn't wear sunglasses all the time. Only when crafting his image. But, yeah, he leaves.

Starting point is 00:39:47 to do it. Yep. So one way or another, machine tool business is out the window and Enzo is back in cars. 1947 is the first year that they get going with the newly renamed Auto Constructione Ferrari, Ferrari, now that he can use the Ferrari name. In 1947, they build three cars just for team racing, just for the scooturia, in which during the year they enter 14 races and and win seven of them. Pretty good. 50% win rate for, you know,

Starting point is 00:40:22 they newly rebuilt Scooteria Ferrari. They didn't sell any of those cars. Yes. Enzo Ferrari, to this point in history, has not sold a car yet. No. How old is he, David?

Starting point is 00:40:34 He is in 1947. He's 49 years old. I mean, this is like this great classic sort of founder myth of the young hot shot who starts this thing. Ferrari,

Starting point is 00:40:46 yes, it's a racing team, but it is a car company who sells cars to consumers, and by age 49, Enzo had never done that. Yes. Now, he has established the brand and the myth and put all the pieces in place to create Ferrari. But yes, he did not sell a single car to a customer until 1948.

Starting point is 00:41:04 When they introduce the Ferrari 166 Barchetta at the Turin Motor Show. And Luca Del Monte in his biography writes, for Enzo Ferrari, the 166 M.M. Barchetta was a declaration of intent, a sports car with a sensual shape, as fast and powerful as it was beautiful and elegant. It was the foundation on which, from that moment on, he would build every road model. Cars capable of winning races on circuits and roads all over the world, and at the same time being the protagonist of the most prestigious Concord Delagance, in the four corners of the earth. What a great description of what a Ferrari is. Absolutely.

Starting point is 00:41:51 Enzo is really figuring out how to create desire here. Yes, yes. These machines are beautiful and they are deadly. That is the point. You can enter them in a race. You can be competitive. You might even win, as we see in a second. And you can drive them in a brown town and look beautiful and elegant.

Starting point is 00:42:13 when they work. Yeah, the Ferraris in this era and history that we're talking about here, you know, the late 40s, 50s, the 60s, these were not the most reliable machines, especially the road cars. I think you could also lump in the 70s and the 80s, large chunk of the 90s. I mean, this is this fascinating thing about luxury that reliability is not actually a relevant part of the equation of how desirable, how much do I. I lust after this machine. I think it's from the luxury strategy book, anti-law of marketing number, something or other is ensure that your product has enough flaws.

Starting point is 00:42:52 Yes. Boy, do Ferraris have a lot of flaws. Yep. So this first Ferrari, the 166, Barchetta, they produce about a dozen of them that year in 1948, both to race themselves with their own team drivers and also sell them to wealthy private clients. Two of the very first models are sold to American clients through Luigi Kennedy.

Starting point is 00:43:17 One to Tommy Lee, who is a wealthy Cadillac dealer in Los Angeles. And one to Briggs Cunningham, who is one of the Proctor and Gamble heirs. You get a sense of like, who are the customers in America? Right. They're setting the precedent. Others are sold to various European racers and nobility, including Italy's own most celebrated industrialist Gianni Angelli,

Starting point is 00:43:44 the patriarch of the Angelli family, which owns Fiat. Some might say the Henry Ford of Italy. The founding family of Fiat. Yeah. Not only the owners, but the founders. He was one of the first Ferrari customers. He was, indeed.

Starting point is 00:43:59 He bought a 166 Barchetto. That's an amazing full circle. Poetic. We'll come back to that at the end of the story. Oh, yes, we will. So then the next year, Luigi Kennedy, he's a real believer in the potential of these machines that Enzo is building to make a lot of money and generate a lot of desire.

Starting point is 00:44:19 So he takes one of the 166s and he enters it in the first running of the 24 hours of Le Mans to be run after World War II, the first post-war running of Le Mans. And the car that he takes, Enzo doesn't think the 166 is ready for LaMalle. He doesn't want to enter. But Kennedy says, no, no, I'm going to go do it. So he takes a privately owned car owned by the British nobleman and gentleman driver, Lord Selsden. And they win. They win LeMont. Oh, wow.

Starting point is 00:44:55 Like the whole thing. Not endorsed by Ferrari the company, just a sort of gentleman driver. It is the first major international race victory for a Ferrari car. but it's not run by the Ferrari team. So this is a big deal. This is the first time it's being run after the war. And here's this startup, Italian, I mean,

Starting point is 00:45:12 startup. Everybody knows the heritage of Enzo Ferrari and who he is. But here's a Ferrari winning. And it's like the perfect illustration of the business model and Enzo's entrepreneurial genius. You know, he's got the brand.

Starting point is 00:45:26 It's the Ferrari that won, but it doesn't even have to be his own racing team. Right. Oh, that's interesting. It creates just as much consumer desire for those cars, whether it's him entering the competition or not. All anybody knows and all anybody in America definitely knows is a Ferrari just won LaMalle. And man, I got to get my hands on one of those things.

Starting point is 00:45:45 And it really validates the engine. I mean, this is famously Enzo Ferrari's reputation is he was an engine guy. He's got a few sort of great quotes on this. His comment is, I sell engines and the car, I throw in for free. Yes, such a great quote. Another great one. Aerodynamics are for people who can't build engines. That's like that one, the AMD guy, real men build fabs. Yes.

Starting point is 00:46:13 Yes. Eventually, Ferrari would become very much about aerodynamics in addition to engines. Yes, yes. But we know where Enzo's heart always was. Yes. He also famously was a late adopter of new technology. This is very, very different today. But in the early days, I mean, we're going to talk about Formula One here shortly.

Starting point is 00:46:31 But in those early days of F1, other teams figured out, hey, you should probably move the engine to be a mid-engine, sort of above the rear axle, not in the front of the car. And Enzo is very, like, he's biting his time. He's like, well, wait and see. And he's got this idea that in a carriage, the horse pulls the carriage. Yeah, God put the horse in front of the carriage, so the engine's going in front of the car. Surely the engines should be in the front, yes. And it took years to adopt the sort of correct, most balanced, way to do it because he not only wanted to be a late adopter of technology to sort of let other

Starting point is 00:47:06 people prove it out, but also because he was in a position to do so. As a very early sort of luxury pioneer here, he realized that it only helped build the Ferrari myth. Yes, exactly. To talk about the old ways of doing things. This is the point. It's all about the myth building. Enzo knew exactly what he was doing. He even, there's funny entries in the historical record here where in the same month that Enzo is out there talking about how the engine belongs in the front of the car. In Marinello, there are teams who are constructing next year's mid-engine car. So say one thing, do the other. Yes, yes.

Starting point is 00:47:43 Very Enzo. It's worth a moment here to talk about what actually is Ferrari at this point in time after LaMalle and when they're selling the 166 because it's pretty pioneering. it's three separate things all under the same roof. It's its own professional racing team. It is a world-class racing car constructor that builds cars both for its own team and for private clients.

Starting point is 00:48:14 And it's also all of the support infrastructure that you need to do both of those things. So it's not like Canadian Lord Selden could just buy a 166 and drive it up to France and like enter Le Mans. You got to tune these things for the race that you're driving. And Ferrari is providing that for his own team and for his clients. This is pretty revolutionary.

Starting point is 00:48:40 Nobody else had really created something like this before. You know, other car manufacturers, as we talked about with Alpha or Mercedes or even for a point in time, even Fiat, had their own racing teams. But they were separate operations. Like think about the Mercedes racing team today. It is a completely separate operation. Yes. Or most of the F1 operations today that carry the name of a constructor, of a car brand,

Starting point is 00:49:04 they're actually separate companies that happen to be owned by... Yeah, separate locations. Yes. The whole thing. Like, yes, there is some tech transfer, I'm sure, from the Mercedes F1 team to AMG performance cars. But, like, it's a tenuous connection. Whereas in Marinello, they're sitting there on the same plot of land. For many decades, the early history of Ferrari, it's the same thing.

Starting point is 00:49:25 same people. Same people making the same cars under the same roof. Pinnacle of motor sports, road cars that you can buy, built and maintained and serviced by the very same people. That is an incredible proposition as a client. I mean, and if you think about it, it's really not that different from any other luxury company heritage out there, like Tieri Hermes and his sons making saddles for the nobility and the new au bourgeoisie on the boulevards in Paris and also making saddles for the jockeys jumping and racing on the weekends, they're the same people making the same saddles. Enzo and his team are the same people making the same cars. But I think you nailed this point that I think is a little bit lost today, which is even then

Starting point is 00:50:09 in 1950-ish, you're not just going to go buy a Ferrari and then race it. This is a highly maintained, serviced thing that is not just like a product that you own. It is a bundle of product and services that get it ready for any given situation. Yeah, we joked earlier about the, you know, you could drive these things on the street when they worked. That was part of the point. Like, they were built to be racing machines. Right.

Starting point is 00:50:37 And a lot of clients didn't race them or, you know, if they did race them, race them not very well. But the point was you could. This was a weapon. This is not a mode of transportation. That's a tradeoff clients were intentionally willing to make. This is not the most practical. car. It's going to have all sorts of issues if I want to use it as my daily driver, but it's an

Starting point is 00:50:57 amazing race machine. And because I race, or maybe not because I race, I want to own a race machine, and so I'm buying it, tradeoffs and all. Yes, yes. So then in 1950, the pinnacle of motorsport arrives, the new Formula One World Championship series, as we talked about a great length on our Formula One episode. And Ferrari, of course, would become one of the founding teams and the only F1 team continuously operating from the beginning of the sport all the way through to today. But of course they are. Participating in the pinnacle of motorsport, as we've just been talking about, is integral to what Ferrari is. And if you buy a Ferrari as a client, what you are buying is a direct connection to that ongoing

Starting point is 00:51:47 heritage in a way that you are not with any other auto manufacturer. At least not at this point in history in 1950. There have been many others who have tried that strategy since, obviously less successfully than Ferrari, and we'll talk about why. But yes, this is the Ferrari formula that they uniquely execute well on. Yep. So, as we continue the operatic life of Enzo Ferrari here, the re-entry into the racing business and the new pinnacle of motorsport in Formula. Formula One, unfortunately, comes with renewed tragedy. Enzo would hire the young Alberto Ascari, who is the son of one of his two mentors who died when Enzo was racing for Alpha Romeo.

Starting point is 00:52:37 And Enzo would take Alberto under his wing, treat him almost like a surrogate son, until in 195, Alberto is killed, practicing in a Ferrari at Manza at exactly the same age that his father died. And Enzo vows that he will never become emotionally close to a driver again. He's witnessed too many deaths in his life. But unfortunately for Enzo, death during this time was only just beginning to reenter his life and his company. And the next death is really the one that kind of defines the rest of his life going forward. Yes. But before we continue this beautiful tragedy of Enzo Ferrari and his company,

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Starting point is 00:53:56 where they are first-class users of the platform alongside human developers. It's also optimized for human developers who integrate agents into their workflows, and most importantly, it's infrastructure that acts with agency. So, zero-config deploys, automatic scaling, self-optimizing performance. The platform handles itself, self-driving infrastructure, as they like to call it. Yes, which makes sense when you look at what's already running on Vercel. OpenAI, Polymarket, Stripe, Versel built the modern platform for the web,

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Starting point is 00:55:26 and truly, truly tragic opera of Enzo and Ferrari continues. First, let's talk about the beauty. The Ferrari 250 series, which for some of you means a lot. For the rest of you, we're talking about the Ferris Bueller car. Undeniably, one of the most beautiful automobiles ever manufactured.

Starting point is 00:55:55 But, David, did you know, it is the Ferris Bueller car, but the car you see on screen is actually not a Ferrari. Yes, it's a replica. And Ferrari sued the replica maker after the movie, right? That's right. Believe it or not, it is essentially a retrofitting. Ford. Yes. Deeply ironic, given what we are going to talk about it about at a minute here. And then there's a second version of it that I think is even a less real drivable

Starting point is 00:56:21 car that they used when it slid out the glass and fell down and smashed on the ground. So they did not wreck a real Ferrari. In fact, there is not even a real Ferrari in camera in that entire movie, or at least in that shot. Yes. You don't need to worry. No 250s were actually harmed in the making of Ferris Bueller's day off. Yep.

Starting point is 00:56:42 So as we talked about, the first Ferrari that Enzo sold to clients was the 166, but less than a hundred of them were ever made. Which must mean that there was demand for 101 because there's the famous Enzo Ferrari quote that is the business strategy today. Ferrari will always deliver one car less than the market demand. I think that actually might be the strategy today back there. with the 166, there was demand for a lot more than 100 and one. That's true.

Starting point is 00:57:17 But they could only make 100. So in 1952, Ferrari comes out with the 250 series. And this is the first real production Ferrari. And over the next set of years throughout the 50s, Ferrari manufactures a few thousand of them. So, you know, still a very, very boutique, you know, essentially handmade sports car manufacturer. but a lot more scale than the hundred or so. Yeah, real production volumes. Yeah, and as we were alluding to earlier,

Starting point is 00:57:48 this car is just stunning. No matter which variant of it, you're looking at it, the one in Ferris Bueller's Day off is a 250 GT, California. It is truly, truly beautiful. And it was designed not by Enzo Ferrari or even anybody who worked at Ferrari. It was designed by,

Starting point is 00:58:10 Matista Pinnon was his nickname Farina and his Pinnon-Ferina Coach Builders. So remember earlier when we talked about Enzo's first business venture was he was going to be a coach builder? Turns out that was not his calling in life, but that was the calling in life for Pinnon-Furina. He was basically the Michelangelo of Car Body Coach Builders. And Enzo totally realized it, totally glommed onto it, and built this beautiful partnership with Pinn and Farina, first Batista himself and then his son, Sergio, and then multiple generations that lasted 61 years. This was a multi-generational partnership. It lasts all the way up until 2013. The La Ferrari?

Starting point is 00:59:02 The La Ferrari Halo car was the first fully in-house designed Ferrari. and during those 61 years, I believe every single road-going production Ferrari except for one, I think, was designed by Pinn and Farina. Wow, it's quite the run. It really is. So Luca Del Monte in his book writes, Enzo was looking for someone who could complement the mechanics of his cars with their body designs. Body and engine, elegance and power had to go hand in hand and had to be born and grow together. He said that he was not looking for a tailor, but for a coach builder who worked at his side and conveyed in the shape of the body the power and philosophy of his cars. The coach builder, he said, must be involved from the beginning of the project, not merely called upon to dress a finished project.

Starting point is 00:59:53 It really was a partnership between Enzo and Pinnett-Ferina. As much as Enzo would kind of make noise about, oh, I just make engines and then, you know, we slap some aluminum on. I don't really care what the aluminum is. No, these things were thoughtfully designed and built hand at hand. Yeah. Pinn and Farina was like the Johnny Ive to the Enzo Steve Jobs. That's a great analogy. And in fact, Johnny Ive is going to come back into the story later as we shall see.

Starting point is 01:00:19 Yep. It's probably also worth a quick moment here to talk about the sort of Italian nature of beauty and luxury versus the French nature of beauty and luxury that we've covered on Hermes or LVMH. In both cases, French luxury and Italian luxury, what you are buying when you are buying one of these products is a mixture of craftsmanship and a dream that it represents. But the sort of nature of those two ingredients are different between French and Italian luxury.

Starting point is 01:00:54 The primary ingredient in French luxury is the dream, and specifically the dream-like connection to French royalty and this like mostly imagine. past that, you know, if you buy a Birken bag or if you buy a Louis Vuitton trunk, you too can be like the bygone French royalty. Of the nobility. Yeah. Yes.

Starting point is 01:01:14 Exactly. Exactly. You can live that dream. You can live that life. And the beauty that's associated with that is, you know, very regal, very soft, very refined, very elegant. And quiet. It's not yelling at you.

Starting point is 01:01:27 Yes. There's no engines involved. There are no engines involved. That is for sure. There are French car makers, but we're not going to make any elephant. episodes about them, shall we say? Italy, though, doesn't have the same kind of history as France. I mean, it's got like the Roman history and all that ancient history, but it doesn't have

Starting point is 01:01:46 the same royal lineage in history. So with Italian luxury, the primary ingredient is the craftsmanship. And that's embodied in the design and the passion. The myth, the dream that you're buying is about reinforcing that passion that, that motion that went into the product. And the best way I can think of to illustrate this is just the centrality of the designers. Like, who are the designers at Hermes? If you really know the house, if you really know Hermes, you probably know who the designers are. But for most Hermes clients, it's just like, oh, this is Hermes. In Italy, it's totally different. You could have Gucci, but it's like,

Starting point is 01:02:26 well, which Gucci is that? Is that Tom Ford Gucci? Or is that Gucci in the wilderness Gucci? Or name your other designer like Georgio Armani or Donatella Versace or Vercchi or Vero. Valentino or Brunello Cuccinelli today. Like the actual people and the designers and their passion and their personality is much more central than in French luxury. That's interesting. I'm not sure I totally agree with the distinction, but a thing that I will say is you go to Paris to absorb the history and look at the fine museums and you go to Italy to feel

Starting point is 01:02:56 something. To live the good life. To let loose. Yeah. To live your life in the fullest, to let your hair down. I mean, it's a whole different side of life they are asking you to embrace when you are doing something distinctively Italian. Yes. It is a very different kind of thing.

Starting point is 01:03:11 And in this era, right after World War II, the greatest designers and the greatest innovators in Italy were the car designers. And these are death machines. Totally. You're on the edge. You're living every ounce of life that you possibly could to the fullest. These are death machines and they are being designed by the era. and the country's most esteemed designers. Yes, yes.

Starting point is 01:03:36 They are beautiful death machines. Beckoning to risk at all. That is exactly on point. And thus comes the Yang to the Yin of Beauty, which is this tragedy in death that is such a part of Ferrari and motorsport. So we talked about in 1955, Alberto Ascari, the sort of, you know, surrogate son,

Starting point is 01:03:57 if you will, to Enzo, is killed at Monza. The very next year, in 1950s, Enzo's own son, Dino, who he's been grooming to take over the business. He's the heir. Continue the family lineage. His air, his actual heir, dies at age 24 of muscular dystrophy. So not in a race car, but a horrible tragic disease. I mean, and that's even more tragic.

Starting point is 01:04:22 Yeah. It's more romantic if he had died in a race car. And Enzo has spent 24 years since Dino's birth keeping him safe. I mean, doing everything that he can control in his worldly power to not be around race cars. Yes, yes. It's such a great point. I mean, he's not racing them. He's trying not to have Dino race them.

Starting point is 01:04:41 He's not meeting the drivers anymore. He's trying not to get too wrapped up in the lives of the drivers. And yet, his son has still taken from him in this horrible illness that he cannot control and is pure randomness and awfulness. So that's a great point. And it is truly shattering for Enzo. This is the shattering event among many shattering events. events in his life. Because it's, of course, the grief for his lost son, but it's also the grief for his empire. Like, it's gone. He has no air anymore. The line won't continue. So after Dino's death,

Starting point is 01:05:15 Enzo stops going to races. It's sort of like a self-inflicted punishment that, you know, if Dino can't be here with me to go to the races, then I will no longer travel to and go to the races to my great, terrible joys. And it is both the end of his family line, or so he believes at this point in history, but also it's the end of sort of the inherited company. This is an old school era of capitalism where the company would be passed down through the male error in the family. I mean, today, Ferrari is a publicly traded company with multiple families and owners and parent companies and holding companies involved. Enzo's assumption here is that none of that is going to happen in the far future. It is that Dino, my son, will own it and his descendants will own it.

Starting point is 01:06:02 Well, if you know anything about the shareholding structure of Ferrari today or its board of directors, you might say, wait a minute. There sure is a Ferrari who owns it. Yeah. Isn't there a current member of the Ferrari Board of Directors named Piero Ferrari who owns 10% of the company and is also the biological son of Enzo who very much would have been. alive at this time. Yep. So Enzo had an affair. Enzo had many affairs, but one of his affairs with a woman named Lena Lardy produced a son, Piero. And the just devastatingly cruel reality of Italy in that time and place is that illegitimate children by law did not exist. They were invisible. Piero was invisible at this point in time. So Enzo knows he has this other

Starting point is 01:06:51 son, who he loves, but who will never inherit his empire. And when you say invisible, he certainly isn't a Ferrari. No. He's not taking that surname. Divorce was illegal at this point. Yes. Divorce was not legal in Italy until the 1970s. So in the eyes of the law, like not an error. Yeah.

Starting point is 01:07:10 Not capable of being an error. A tragedy is the only word that I can think of to describe it. So that was 1956. And then in 1957 at the Milamiglia race, in Italy. Which this race, this is this amazing, legendary race through Italy that ran a thousand miles. Yes. And it runs from 1927 to 1957. It is beautiful and bloody. Yeah. There is at least one death in every single year except 1927 and a small span, 1931 to 1934, and another two year span of 36 to 37. But basically, this was this race that everyone came out for and watched death. And Enzo has a

Starting point is 01:08:04 quote on this. He loved the milamiglia. He said, it is the race of the people. One may say that the whole of Italy leans forward with her eyes on the tarred strip of roads somewhere along the course on milamilia day. It is a day when I feel that my life is useful. Wow. I didn't realize that this 1957 race is the last one. It is the last one. It ends with this. Wow. So at this race in 1957, again, two years after the F1 crash that killed his driver protege,

Starting point is 01:08:36 one year after the death of Dino, a Ferrari flies off the road and into the crowd, killing the driver and nine spectators, including five children. And after the race, Enzo is charged by the Italian authorities, with manslaughter. Was he even at the race? I don't believe he was at the race, no. But he's the owner of the company that made the car, and there's a high death count.

Starting point is 01:09:00 Right. Well, it's not just that he's the owner. It's that he is the architect of this slaughter, basically, which is exactly what the Catholic Church charges him with. So not only is the Italian state, the police charging him with manslaughter,

Starting point is 01:09:16 the church, the Pope, comes after him. So the Vatican's official newspaper runs a story after the race with the headline of industrial Saturn. Saturn, of course, being the Roman god who devoured his own children. And it calls Enzo, quote, a modern Saturn become industrial tycoon. He continues to devour his sons, as in the myth, so unfortunately in reality. Ultimately, Enzo is acquitted after long process in the legal case. And he reaches a compromise with the Vatican, that he can continue racing and Ferrari can continue to sort of exist as this sort of

Starting point is 01:10:00 national champion within Italy. Oh, is this as long as they're not Italian drivers? Yes, as long as he agrees to never hire Italian drivers. You know, basically like, you can kill young men as long as you don't kill our young men. Oh, brutal. Oh, man. But all of this, this whole era, this just waves incredibly, incredibly heavenly. on Enzo. And you might be wondering, like, why do the drivers, why are they okay with the death? Why is Enzo okay with the death?

Starting point is 01:10:30 Enzo viewed this as a fundamental human expression of striving. His comment is that one drives at high speeds in order to transcend oneself. Yeah. And many of the drivers would sort of echo this same thing. Ken Miles, who is a very famous race car driver, actually on the Ford and Shelby, the U.S. side that we'll talk about here shortly, His quote on this is, I'd rather die in a racing car than get eaten up by cancer. And it's this idea that, look, we're going to die, but I get to feel like I live the most life by putting my life at risk and living right on the limit.

Starting point is 01:11:06 I mean, it's kind of actually like a way of fighting back against death. Yes. These cars are weapons to fight against death. You can come right up and you can like stare death in the face. And you can hopefully say not today or not. So again, paradoxically, all of this tragedy is just great for business. This is part of the attraction. It only makes Enzo and his Ferraris more globally known, more romantic, more coveted.

Starting point is 01:11:39 It's like for Porsche when James Dean died in the Porsche 550 Spider or in the modern era when Paul Walker died in the Carrera GT. That made those cars legendary. That made people want them. And here is Ferrari. it's even more. His cars are being labeled by the Pope as forbidden fruit. If you're a young man or if you're more accurately a middle-aged man having a crisis, like, you know, what more could you desire? And yeah, if the Pope says you just can't do this one thing, what's the one thing you're going to be interested in doing? It's like a toddler. No, as long as you don't have candy, we can do anything you want. Exactly. So throughout the late 50s, sales of Ferrari 250s are just ramping, you know, they are flying out of, show rooms across the world and particularly in America. By 1960, production reaches 300 cars a year. You know, they're making more or less 1, 250 every working day. And by 1962, it's 500 cars a year. And I believe at this point, distribution is sort of roughly divided a third, a third, a third, between local Italian clients, American clients, and then the rest of Europe.

Starting point is 01:12:47 And production just keeps growing by, call it, 50 to 100 cars a year throughout the early 60s, and there is plenty of demand. Yep. By 1963, though, Enzo's now getting older. He turns 65. He's had all this death. He publishes his memoirs, which, you know, as we said before, are aptly titled My Terrible Joy's. His plan by this point is that he'd be getting ready to hand the company to Dino, but Dino is dead. at a press conference that's held one of the journalists asks Enzo, you know, you're older now.

Starting point is 01:13:22 What will happen to Ferrari when you're gone? And he replies with the famous quote from King Louis the 15th in France, "'Apre moi le deluge. Chaos, you know, the French Revolution. It's all coming after me. It's all going to end with me. And of course, Piero at this point is already working in Ferrari. He's an employee at Ferrari, but it's a secret that he's Enzo's son.

Starting point is 01:13:44 and he knows he can ever inherit it. I didn't realize it was still a secret. Yeah. I mean, people within the company know, but it's like you don't talk about, hey, Piero is actually Enzo's son. So the question that the journalist asked remains, though, what's going to become of the company? Right. Well, enter the Ford Motor Company and Ford versus Ferrari. Yes.

Starting point is 01:14:09 So listeners, most of this is from the book Go Like Hell, which is the book that Ford versus Ferrari. is based on. The movie, yeah. So in 1963, Henry Ford the second, which notably this is the grandson of Henry Ford the first. There was Henry Ford, then Edsel, then Henry Ford the second. And he's looking to make his mark. I mean, at this point, it's third generation ownership. Ford is this great American company. There's a lot of people that are sort of throwing barbs saying, well, I mean, it's your grandfather. And then that was your father. But like, how much of this is really you? That's starting to kind of weigh on him. He decides that Ford needs. to be in the racing business, to change their image and stimulate sales for the new generation.

Starting point is 01:14:51 Now, over in the racing land of Ferrari, they're on a hot streak. We've been talking about their production at this point in time, but they had just won Le Ma in 1958 and then all in a row, 1960, 61, 62, 63, 64, 65. So if you are interested in entering racing, either you got to beat Ferrari or you got to own Ferrari. Yeah. So the Deuce, as Henry Ford I second was known. What a great racing moniker, The Deuce. Right, right?

Starting point is 01:15:22 Oh, and Enzo's got some great ones too. Yeah, I mean, ultimately in his older age, he becomes the grand old man. But what was he before that? Il commandatore and the Drake. Yes. He's got some great ones. So the Deuce over in America gets word, weirdly through their German subsidiary that a mysterious letter has arrived from the German consulate in Milan

Starting point is 01:15:47 that an internationally known Italian automobile factory was interested in selling. So already you should kind of... There's something going on here. Be a little suspicious of how this information comes to Ford. But Ford is not. Ford just goes, oh, this is interesting. Let's try and figure out who's thinking about selling.

Starting point is 01:16:07 Well, it doesn't take them long to figure out that is Ferrari. It's Enzo. Yes. They begin sort of a process to try to buy it. it. And Ford at this point has basically no racing capability of its own. This is an entirely new muscle for them. So they make an offer to buy Ferrari. The asking price was originally $18 million, but somehow Ford manages to easily negotiate it down to $10 million. So again, a little mysterious, a little suspicious. Like maybe that was a little bit too easy. The agreement that is drafted and

Starting point is 01:16:43 hits Enzo's desk. I mean, think about what could have been. This is the craziest pitch. There are two companies that are formed. One is called Ford Ferrari. It is 90% owned by Ford, and it would make road cars. There's a second called Ferrari Ford that's 90% owned by Ferrari. That's the racing team. The racing team. Yep. So this document is on Enzo's desk. He digs into it and he's looking through the fine print. And he kind of realizes is if I want to go racing and Ford does not want to go racing, who decides? And of course, Ford says, well, we're buying your company. We have the final say.

Starting point is 01:17:24 Ultimately, I control the budget. Right. So Enzo, of course, hates this. And in dramatic fashion, he blows up the deal right at the finish line. All while the papers had been reporting, you know, the information leaked, that the Americans were about to buy this Italian national treasure, makes big headlines when the deal blows up. You can imagine why this is in Ferrari's public relations interest based on everything that we've been describing about their business strategy, of course. Then Henry Ford, the second, is absolutely incensed. And he has this great quote.

Starting point is 01:17:54 In May of 1963, he goes to his lieutenants and he says, we will go to La Ma and beat his ass. We're going to race him. And Ed says probably like, thinking dumb Americans the whole time. Yes. There's this great quote in the Brockyates book about Enzo and his opinion of the Americans, which is something like he realized the fundamental truth to selling European luxury goods to Americans. Treat an American like a hick and you'll own him for life. Oof. That hurts. That hurts. So the whole Ford versus Ferrari movie is what happens next.

Starting point is 01:18:34 And it's a great movie with Christian Bale and Matt Damon. And while it's, of course, dramatized, bones of the story are actually pretty factually correct, so I highly recommend it. So what happens is Ford, who at this point says, we got on a limited budget. We just got to go beat these guys. Enlists the help of Carol Shelby and the driver Ken Miles and sort of a real crack team of American mechanics and racers. They actually do, after a few years, beat the Ferraris in the 1966 Le Maher race, finishing with Ford's in first, second, and third. It's this incredible story. But also, Ultimately, this is a complete side show. Yeah, what's really going on?

Starting point is 01:19:14 What are Enzo's true intentions here? So this is done, of course, to market the exclusivity of Ferrari and how they're the mark to bead. And it's a great tactic to sell cars. But it's also to signal that Enzo is willing to do a deal. He is willing to sell the company. That's why he wanted all the papers writing about the fact that he was. But it had to be on his terms with the right partner. And he had to be able to go racing.

Starting point is 01:19:38 Yeah. It's kind of like Enzo and Ferrari got a dual benefit out of this whole saga. One, as you said, like, this is only great for the myth and the legend of Ferrari. Of like, oh, we were going to sell to these big, ugly Americans, but they wanted to take our racing from it. And we said, no, you'll have to kill us in order to take him. Exactly. And it is this Italian national treasure. I mean, that's real.

Starting point is 01:20:06 That is the cultural export of Italy. And there was a way to signal to the market like, hey, I might be open to a deal. Yes. So any last little misconceptions you have about Enzo Ferrari not being an excellent business person and negotiator, that should be completely dispelled at this point. So, David, what happens next? So all the Ford versus Ferrari drama was going down between the years of 1963 and call it 1966-67. Yep. Through all this, Enzo's doing great.

Starting point is 01:20:39 He's in his late 60s at this point, but he's loving life. As much as Enzo is capable of loving life, he's healthy, he's reinvigorated by this battle. Everything's going great. And then, after all the Ford drama, in 1968, Enzo contracts kidney disease. And it's pretty bad. Like, he thinks this is probably actually going to be the end. And statistically, he would. was right. Yeah. And it gets so bad, as we'll see in a moment, that shortly after this in 1970,

Starting point is 01:21:13 he goes into organ failure and has to be hospitalized for months. Like, he really should have died at this point in time. But as always for Enzo, fate has other plans. So once he comes down with the disease, he gets serious about actually selling the company. And he sniffs around. He talks to his old buddies at Alpha Romeo and they sort of work on a deal not to Enzo's liking. Really at the end of the day, though, there's only one correct buyer for Ferrari, and it's Gianni Angelli and the Fiat Empire. So in 1969, Enzo strikes a deal with Gianni to sell 50% of Ferrari to Fiat immediately there in 1969 with a secret agreement that triggered upon Enzo's death, which again he thinks is imminent, Fiat will acquire another 40%, taking their stake to 90%, and 10% of the company will transfer to Piero. Once Enzo dies, his plan is to, as much as he can legitimize Piero,

Starting point is 01:22:24 give him the Ferrari name and give him a 10% stake in the company, so that the bloodline, to some extent, as much as it possibly can in that time and place, will continue. And part of the deal with Fiat, just like he wanted with Ford, is that Fiat, you can take control of the roadcar business. But I'm going to retain final authority over racing. You know, I know that my end is near and I want to spend my last days on this earth doing what I love, which is running the racing team. The incredible irony was the end was nowhere near. And actually, the world would change enough between this moment and when. when he would eventually pass, that Pierrot is able to take over as Pierrot Ferrari son of Enzo.

Starting point is 01:23:13 Yes. Yes. Yes. So how many years was it between 1969 is when the 50% sale to Fiat? He doesn't pass away until. He lives another 20 years. Yeah. 19 years.

Starting point is 01:23:24 1988. Like, he lives until I was born. Yes. Where's the sort of the end of his life? Well, he lives to launch the F40, which is the last car that Enzo launches. So there are two really interesting things about this deal. One, Enzo started his career by applying for a job at Fiat and was turned down. So that's a total full circle moment there.

Starting point is 01:23:45 The other full circle moment is that Gianni Anielli was one of the very first Ferrari customers of their road cars. It's amazing. And when you look at the actual deal, this blew my mind, David, if you do the lira to US dollar exchange rate in 1969, they ended up selling half the company for a little under three. and a half million dollars, valuing all of Ferrari at 6.8 million. Wow. Oh, my goodness. Enzo really wanted to do this deal, and I think he determined at this point in history. I've not seen this written anywhere, but I'm reading into this, you know, even Ford thought it was worth somewhere between 10 and 18 million earlier in the decade. Enzo basically had one bidder, and he thought, I have no exit path other than this.

Starting point is 01:24:34 This needs to land with Fiat and whatever the price is, it is. And so I think Fiat basically got a steal on this because it needed to stay in Italy and it needed to go to a strong thriving car company. Car company and family and Yelis. Yes. Well, all of this just underscores the most critical point here. I think this is probably the moment in history where the false legend that Enzo only cared about racing and wasn't a real entrepreneur emerges from.

Starting point is 01:25:04 Because if you look at the fact pattern, it makes sense here. Like, he wanted to spend his last days racing. He did this not great deal with Fiat. The only reason this happened is because he truly thought he was about to die. Yep. And he really did just want to spend his last days on Earth running the racing team. And he wanted to ensure continuity for the company and a role for his son, Piero, going forward. That's what happened here.

Starting point is 01:25:29 The state of Ferrari is kind of grim at this point. The factory needed investment. The racing program was unbelievably expensive. They're starting to face very real competition from Lamborghini. They were founded in 1963 specifically to challenge Ferrari, at least Lamborghini Motors, which we'll come back to. And there was manufacturing headaches happening because of Italian labor unrest. And so asking someone to take on Ferrari's operations was a tall order in addition to needing to sell. Yes, I'm glad you brought up Lamborghini. Lamborghini had just launched the Mira, the Lamborghini Mira at this point in time, which was a truly excellent car. Yep. Like a better Ferrari than a Ferrari at the time. So there was real headwinds in the business. And this is really why Fiat and Gianni Anjali had to be the buyer to stored Ferrari through this period.

Starting point is 01:26:25 Now, as we said earlier, fate had plans other than death for Enzo. Right after the sale in 1970, Enzo does go into organ failure and is hospitalized. He's away from the business for many months, which really makes it incredibly fortuitous that he had already done the deal with Fiat. So there was management to keep the company running while Enzo is away. Miraculously, though, he recovers. And in the spring of 1971, Enzo, the grand old man, is back in Marinello at the head of Ferrari. But it's a Ferrari that he barely recognizes from when he left.

Starting point is 01:27:10 He had come in. And this is where he intersects with another young man who would go on to carry the legacy and the spirit of Ferrari for really the next 40 years and into the next generation. and build Ferrari what it is today. With a break in between. With a little break in between. Luca de Montezemolo.

Starting point is 01:27:38 But before we tell Luca's story, now is a great time to thank our longtime friend of the show, ServiceNow. Yes. A year ago, nobody was talking about AI agents. And now, if you are a large enterprise, you probably have AI everywhere. Co-pilots and models and agents all spread across every team. Which sounds great until you realize.

Starting point is 01:27:59 none of it is really connected. Exactly. This actually reminds me of Ferrari on race day. It's not just about having the fastest car. It's about coordinating thousands of signals across tires and fuel and brakes and more, all in real time to make the right decision. That is where companies are with AI right now. Tons of intelligence, but not a lot of control.

Starting point is 01:28:21 And that's the shift. Intelligence is becoming a commodity. The hard part now is making all of that AI actually work together inside a real organization. securely, reliably, and in sync. That's what ServiceNow has been building for over 20 years. Today, they run the workflows behind more than 85% of the Fortune 500, which amounts to over 80 billion workflows a year. So in a very real way, a big part of the world already works with Service Now. And with their AI control tower, they're giving companies a single place to manage all of it, not just agents, but every AI system across the business. Yes. So listeners,

Starting point is 01:28:55 it's not just about AI that thinks. It's about AI that actually works. It's about AI that actually works. If you're thinking about how AI really operates at scale, go check out service now.com slash acquired and just tell him that Ben and David sent you. Okay, so David, Luca de Montezemalo, at least the first act of Luca anyway.

Starting point is 01:29:16 Of Luca's story, yes. So in 1971, when Enzo gets back to the office in Marinello after his hospitalization, he tunes in to a fateful talk radio show where he discovers a young man who will bring a breath of fresh air into his life.

Starting point is 01:29:40 Luca. So Montezemelho, to many of you listening, is already a living legend. I mean, as much as anyone in Ferrari history besides Enzo, Luca de Montezemolo is Ferrari. And as I mentioned, I was very lucky to get to speak with him for a few hours in research for this episode.

Starting point is 01:29:58 And I also got to watch this great movie about him that has just been made. It's called Seeing Red. It's with Chris Harris, the Top Gear presenter. Yeah, how did you get that? Because that's not out yet. Yeah, it's not distributed outside of Italy yet, but I got a link to watch it. It's directed and produced by Manish Pandi, who wrote and produced Senna, the Sena movie. It's really, really excellent.

Starting point is 01:30:22 When it's available in whatever geography you live in, very, very, very much worth watching. So Luca was born in 1947, the same year that the modern Ferrari commenced operations. Very poetic. In Bologna in Italy, but he moved to Rome as a child where his best friend growing up is Cristiano Ratazi, who is the son of Susanna Angelli's sister. So Luca grows up almost like a member of the Angelli family. His best friend is, you know, one of the Annialli heirs. And Luca comes to develop a close relationship with Gianni. And he would say Gianni was like a combination of an older brother and a father for me.

Starting point is 01:31:08 So in 1970, young Luca moves to New York City to go off to study international law at Columbia Law School. Around the same time, though, he's also pursuing another career as a rally car driver. Really? Like a rally car driver, right, yes, yes. I don't think I've ever seen a Ferrari rally car. I don't think these two things have ever intersected. These universes are about as far apart as you could possibly get. But this is how Luca starts in motorsport.

Starting point is 01:31:43 And so, that one fateful day in 1971, Luca the rally car driver, is a guest on this popular call-in talk radio show. and an audience member calls in to basically accost Luca and chastise and criticize the entire motorsport industry, kind of much like the Pope in 1957, starts just laying into Luca this caller, talking about how motor racing is evil, it's dangerous, it's bad for the environment. Like, this is a sport just for rich people.

Starting point is 01:32:18 It has no value in society. And Luca, impassion, rises to the occasion. And he gives this passionate defense of motor racing. He speaks eloquently, poetically. He shuts down this collar and really gives this incredible response. And who happens to be listening to the program, but Enzo Ferrari? Unbelievable. You just can't make this stuff up.

Starting point is 01:32:42 You really cannot make this up. And he's kind of this perfect person, because if Enzo is going to take a liking to him here, I don't know what you're about to say. But if he's kind of Enzo's guy, but he's also a pseudo family member, of the Anie family. It's kind of this perfect candidate pool of one. Yes. So Enzo calls up the radio station.

Starting point is 01:33:00 And he's like, I got to know who this kid is. I want to get in touch with him. Who is this rally car driver? And literally the quote, Luca told me that this is what Enzo told the radio station. Enzo said, This boy has big balls. I want to talk to him.

Starting point is 01:33:16 Wow. So Luca and Enzo meet. And Enzo says to him, I like you. You know, you've got big balls. I've been away from my business for too long and I need some help. What I really need, I need an assistant, but I need a spy who can go throughout the organization and report back to me what is actually going on in my company. You don't have to ask Luca twice here. He takes the opportunity and goes to work for Enzo as his assistant here in the early 70s. Now, of course, at some point along the way here, Enzo also learns of Lucas' connection to the Angelli family, which only makes him even more attractive. He's like, ooh, now I can have a spy at Fiat in the Angelly family, too. So great. Right.

Starting point is 01:34:06 So the first thing that Enzo assigns him to do is go figure out what's going on with sales of the roadcar business. Like, go spend some time with the distribution network, understand who the clients are, understand who the collectors are, who are the dealers are, who are the deal. or so Luca does. He comes back. He reports, it's not good, as you were alluding to, Ben. This is a pretty tough time for Ferrari here in the 70s. The oil crisis is underway. Any car with an engine size over two liters was taxed at an incremental 40% in Italy and throughout much of Europe. The whole sports car industry is basically in the dumps. So Luca reports all this back to Enzo, and Enzo's like, okay, great, you passed your first test. Things aren't good on the road car side of the business, but like, at the end of the day, that's Fiat's problem now.

Starting point is 01:34:55 Okay, my real assignment for you. I want you to go to the next Formula One race. Just go, just observe. Just tell me what you think is going on with the team. Yep. Now, at this point here in like 1973, 74, things are really bad for the Ferrari F1 team. They haven't won a driver's or constructors championship for 10 years. a historic drought for Ferrari.

Starting point is 01:35:24 So Luca goes, he observes a race, and he calls Enzo up and he says, hey, look, I advise that we just take the cars home and we don't race them. We have no chance of winning. Oof. And Zo's like, okay, okay, well, we're not going to take them home,

Starting point is 01:35:39 but we need to get competitive again. What are we going to do? And Luca's like, the issue is that the sport has changed. This isn't just an engine sport anymore or power. We're now in the era of Colin Chapman and Lotus and aerodynamics. Aerodynamics and the chassis is way more important. And the Ferrari team is stuck focused 100% on the engine. Like we have no chance of winning.

Starting point is 01:36:05 So Enzo says, okay, here's what I'm going to do. I'm going to make you, Luca, the team manager of the Ferrari Formula One team. And your mandate is to fix this. I can't fix. I'm Enzo. I'm like the engine guy. You go in, you can be the new blood, you can fix this. And this is amazing because this is quite the quick promotion for Luca.

Starting point is 01:36:29 I mean, it's like a guy he found that he brought in to be as assistant. I mean, he was much more than an assistant, but that was his title. He's not even 30 years old yet. Then suddenly you're managing the Formula One team, which historically is the driver that creates all the lust that sells the cars. Like, this needs to start working. Yes. Oh, Luca has this great, great. quote, on the nature of the connection between Ferrari's performance on the track and the business selling road cars.

Starting point is 01:36:57 He says, there is not a direct correlation between Ferrari victories on the track and the number of cars that you can sell. But if for many years you do not win, it means that you do not add wood to the fire of the myth. The myth of Ferrari is based on competition, on cars. In the competition, you can win or you can lose. but you cannot only lose. It's so perfect. It is perfect. So Luca comes in his team manager, and he revamps the team.

Starting point is 01:37:28 He brings in great chassis folks. He brings in great aerodynamic folks. And the most important thing, he goes out and recruits Nikki Lauda to come in as their number one driver. And in 1975, with the new team, the new approach, Luca's manager. Nicky Lauda wins the driver's championship for Ferrari, and Ferrari wins the Constructors' Championship, ending the 10-year drought. And there is great rejoicing.

Starting point is 01:38:00 Luca is now revered across Italy. He's not even 30 years old yet, as this young hero who has come in and saved, essentially the national team of Italy from this despairing period. It's amazing. And the funniest thing is imagining, as you describe these conversations,

Starting point is 01:38:17 that Luke is off doing stuff, He comes back and reports to Enzo. Where is Enzo's house in all this when he's sort of like recovering from the illness? And it is around the corner from the Ferrari factory in Marinello. It's this farmhouse. And in this exact period, actually a couple of years before, in 1972. So after the illness, but before the Nikki Lauda F1 victory, they actually build a full racetrack adjacent to Ferrari's headquarters that goes around Enzo. house. So Enzo can walk out of his farmhouse and watch them testing the cars on this, I mean,

Starting point is 01:38:56 truly unbelievable custom racetrack only for Ferrari's research and development. Yes, that's incredible. But he needs Luca, the young guy, to come in and change the culture. Enzo can't do it. He's too bound. He's a prisoner of his own myth and his own legend. Yep. So all of this is great. Truly, truly great. There is rejoicing throughout the country. But there's just one problem, which is Enzo's pretty used to Enzo being the guy. So he starts to get a little jealous of young Luca. Now, they always have a great relationship. There's not like personal animosity here.

Starting point is 01:39:29 But a couple things happen. The next year in F1, there's the truly crazy tragedy of Nikki Lauda, catching on fire. Horrific. Actually catching on fire at the Nürberg ring. He's severely burned. He should have died. He does not die. and he wants to come back and race.

Starting point is 01:39:49 He's in contention for the championship. He ends up not winning the championship that year, even through this great act of bravery to try to come back. But almost does, remarkably. If you're interested in this, go watch the movie Rush. It's awesome. So good. Enzo, though, remember, he's very experienced

Starting point is 01:40:05 with these race car drivers and their brushes with death. Enzo, I think, kind of loses faith in Lauda as a driver. After that, he's like, oh, no, he fears death now. Luca still believes in him, though. So there's some conflict there. Again, it never gets personal. I think they truly do always kind of love and respect each other.

Starting point is 01:40:25 But all of this combines Luca can't stay at Ferrari. So they ultimately decide it's better if Luca leaves the F1 team, leaves day-to-day at Ferrari, and goes to work for Fiat in Turin. He remains on the board of Ferrari, Luca does, but he goes day to day to turret and kind of closer to the Anjeli Empire. And I think Enzo thinks that he's going to still have a spy now in Viet with Luca, which maybe he does, maybe he doesn't. But sadly, this is another tragedy.

Starting point is 01:40:59 This is kind of the end of the glory for Ferrari in racing during Enzo's life. They had this great moment together. And for the rest of Enzo's life, there's some ups and downs, but mostly the Ferrari glory on the racetrack is gone and doesn't return until Luca returns after Enzo's death. Much later. And there's this glorious, amazing return of Luca, and there's this unbelievable run in Formula One,

Starting point is 01:41:28 and the Ferrari roadcar business becomes stronger than ever, but basically none of it in Enzo's lifetime. In fact, the last 10-plus years of his life is a real whimper in the history of Ferrari. the road car business falls on some real ugly times. Yeah, it's funny. I had written in my script here about the last days of Enzo Ferrari. They do mostly end with a whimper, not a bang.

Starting point is 01:41:53 But there is one little bang. There absolutely is. His last car, Ferrari's first official supercar, Halo car. There were unofficial GTO amalgation versions of race cars. And now those things sell at auction for like 40, 50, 50. million or more. One of them sold for 70 million. Yeah.

Starting point is 01:42:15 So those cars existed in Enzo's past, but there was never a model that was made just to be available for purchase by our best clients, but a true, true supercar until the F40, which, fittingly, is the last car that Enzo makes before he dies in 1988. All right. So tell us about the F40. Oh, man. Talk about a death machine. The F40 was just this incredible raw beast.

Starting point is 01:42:50 If you look at pictures or video of the interior of the F40, this is not a luxurious vehicle. There's no leather. The door handle is a piece of string. This is the rawest racing machine in its purest form. It is. Can we throw out everything that is not absolutely required? can have the lightest weight vehicle possible.

Starting point is 01:43:12 And it's crazy. We'll put a photo of the interior of this cabin in the email. It is a lot of carbon fiber, but not like cool looking carbon fiber. No, like raw carbon fiber. This is the absolute minimum that we could ship. And David, to your point, this thing, while it is a supercar, the same way that the F50 and the LaFri and the Enzo and the F80 are supercars, this is not a luxury supercar. When you're sitting in this car, you're not sitting in here thinking, like, I'm a rich person.

Starting point is 01:43:43 You're sitting in here thinking like... This thing is trying to kill me at every angle. I'm in some sort of test harness. Yes. Oh, yeah. I mean, the videos online of people crashing Ferrari F40s are tragic, of course, because they're amazing machines. But if you get in this car and you do not know exactly what you're doing, you're going to crash. It's interesting.

Starting point is 01:44:06 The F40 sort of punctuated the... end of Enzo's life or the end of the Enzo era in this really interesting way because it is a supercar the same way that the modern cars are about supercars. They're these high performance machines, but it had every flaw of the Enzo era of Ferrari. It wasn't practical. It was purely about being a race car and made every compromise possible to get there. Yep, Ferrari will. Never make another one like it again. We should say also what F40 means. It was the 40th anniversary of the commencing of operations of the modern Ferrari, so from 1947 to 1987 when the F40 came out. So then the next year, at age 90, the grand old man does finally

Starting point is 01:44:57 pass away. Enzo Ferrari dies in the summer of 1988. Poetically, just after his death, Ferrari in the next Formula One Grand Prix that is run after Enzo's death finishes 1-2, wins at Monza. Oh, my God. The Italian Grand Prix. And that is the only race that Ferrari won that season. Either the gods were smiling upon Enzo in death. Or Bernie Eccleston's fix was in.

Starting point is 01:45:32 Yes, the fix was in. Either way, it was. poetic. For the next couple of years, though, oh, ma'am, the sort of slow-motion disaster at Ferrari continues unabated on both sides of the business. Real quick, before that, though, it's worth highlighting. So the Anielli family ends up getting the 40%. Piero ends up getting the 10%. But an interesting thing to note, the valuation is extremely different this time around. Yeah, you found detail on this. I couldn't find it. So a good friend of the show, Arvin Navarotnam, from worldly partners.

Starting point is 01:46:05 scoured all of the old annual reports that he could find. And in the 1988 annual report, it reports the amount of lira to acquire the remaining 40% of Ferrari. Oh, I'm so curious. What was it? If you do the exchange rate at that time, it is $77 million, which valued the company at $192 million in 1988, much different than the, what was it? Six, seven million in 1969. Yeah. I mean, two things are simultaneously crazy right here. One, how much the valuation increased from the first time. Second, that Fiat and the Angelli family acquired 40% of Ferrari for a valuation of $192 million. Unbelievable.

Starting point is 01:46:54 Or that they acquired 90% of it for, what, $72 million. Yeah, in aggregate. Yeah. Wow. Wow. Wow. Or that as recently as 1988, it was worth only $192 million. I mean, this is a company today that's worth recently over $90 billion, but today $55 billion. Yes.

Starting point is 01:47:14 In 1988, $192 million. Well, this really just highlights how different a company Ferrari was when Enzo died. Yes. And how much Luca de Montezemelho transformed it when he came back and became the chairman. But for the moment when Enzo was when Enzo died. So the sort of slow-motion disaster just continues unabated. Fiat's attempt their best solution to fixing the problem of the roadcar business is to produce more roadcars, which is the cardinal sin of luxury strategy management. Just as one example, Ferrari during these years before Luca comes back, Ferrari produced 7,000 testerasas.

Starting point is 01:48:05 over the seven years that the Testerosa was in production. Compare that to Lamborghini. Lamborghini only produced 2,000 kuntasches during a period twice as long. They made kuntas for 16 years. By any normal car company, we're talking tiny numbers no matter what, but when you're talking about something rare and exclusive

Starting point is 01:48:27 and so special as what a Ferrari should be, and then you have a company that you don't even really consider your competitor over there, making a more exclusive product and managing it better. That's not a good situation. No, it is not. And another crazy frame on that, if you look at the production of total Ferrari cars, not just one model, but total cars, in 1982, it was 2,200.

Starting point is 01:48:54 If you look in 1991, that grew all the way up to 4,500. They just kept ramping, ramping, ramping, ramping. and making more cars. Yeah. Not the right fix. Not the right fix. So you mentioned 1991. That was the last year of this interregnum period before Luca comes back.

Starting point is 01:49:17 It's so bad. Demand has evaporated so much for Ferraris that for the first time in history, cars are going unsold. They have to furlough the factory workers and shut down the factory. And so when it comes to this, Gianni Anielli finally calls up Luca and says, it's time for you to return. We need you to come back. We are, quote, putting Ferrari in your hands. And Luca de Montezemalo returns to become chairman of Ferrari. We should note it's going to be important here in a minute.

Starting point is 01:49:58 In Italy, chairman of the company is actually the most important in power. powerful title and the CEO reports to the chairman. So at this point, when Gianni calls Luca back, he's been gone from the day to day at Ferrari for almost 15 years. After Ferrari, he did a short stint at Fiat, and then he stayed in the Angelli Empire. He became CEO of the beverage company Chinzano, which is another Anjeli family company. And so he gained CEO experience. And then the reason that Luca couldn't come back to take over Ferrari as soon as Enzo died was he had become the organizer and president of the Italia 90 World Cup. So the World Cup in 1990 was in Italy. And Luca organized the whole thing. And there's great stories associated with that. My favorite is that

Starting point is 01:50:55 he convened for the sort of final evening ceremony of the World Cup for the first time, the three-teners, The three-tenors didn't exist until the World Cup. And the way he convinced Poverati to join, because he was the big star he didn't want to join, was he gave him an F-40. And thus the three-tenors were born. That is awesome. So once the World Cup is over, John,

Starting point is 01:51:19 he's like, okay, enough messing around. You've got to come back. Fix this. So the first thing Montezemolo does when he knows he's going to return to take over Ferrari after Enzo. He goes. he buys a 348, the flagship Ferrari sports car at the time, just to sort of see the state of things.

Starting point is 01:51:41 Like, how bad was it really? I'm going to go buy my own 348 and test it out. And Luca's actual quote on this is, the Ferrari 348 was a shit car. It was the worst car we ever made. Everything was missing. It had no personality. It had no technology. It wasn't state of the art in anything. It had no power. It was all missing. He talks about when he was driving it, he would pull up to stop lights and try and race the other cars off the line and see how it would perform me to kind of drag race and stoplights. He was like, I was getting beaten off the line by Volkswagen golfs in a Ferrari. Brutal.

Starting point is 01:52:23 What do you attribute this to? Like, Ferrari has deteriorated. It's fallen apart in this era. The cars have no personality, but they also have no performance. And they're impractors. And they're overmaking them and no one wants them. What's wrong? Like, why have the wheels come off the bus here? It was Fiat. It was all they knew how to do. They came in of like, oh, the way we can fix this is when increased production will cut costs.

Starting point is 01:52:47 So let's share some parts with Fiat cars. You know, Ferrari road cars went from being the same thing built by the same people as the racing cars, as the F1 cars and the Laman cars in the same factory to in this period with Fiat cars. control, they're really not the same thing. You know, these are, it would be too far of a stretch to say they were repurposed fiats, but they had lost that true connection to race machines. And so Luca comes back and says, we got to fix this. So at the time, the Japanese sports car industry was on the rise.

Starting point is 01:53:26 And all the car enthusiasts were saying Ferrari's dead. The Italian car makers are dead. the Japanese have taken over. Luca has the test drivers at Ferrari go out and buy a Honda NSX and do his own version of the Pepsi Challenge. Like, go out there, drive the NSX as hard as you can

Starting point is 01:53:44 around the test track, drive our cars, drive the 348 as hard as you can around the test track, and they come back and they're like, yeah, I mean, there's no competition. The NSX just blows us away. Wow. How sad is that?

Starting point is 01:54:00 It's a Honda. Honda. That's completely lost to history today. You don't hear anyone talking about. Ferraris is this sort of like untouchable apex brand that it's hard to imagine that happening just, you know, as recently as the early 90s. Right. I mean, it's one thing if Lamborghini is beating them. I mean, that's bad. That's really bad. But if Honda is making a better sports car than Ferrari, there's a real, real problem. Yep. So how's Luca going to turn this around? He comes up with three priorities. The team, the technology, and the myth. So number one, the team, the Formula One team. We have to fix the Formula One team. Going back to his great quote, there's not a direct correlation

Starting point is 01:54:47 between victories on the track and cars that you can sell, but the team feeds the myth. If you don't add wood to the fire of victories on the track, the flame of the myth will die. You can cannot only lose. Yep. So the team hadn't won a championship since 1979. Luca goes out and recruits the dream team. I think the greatest set of F1 team members that had ever existed in history. Jean Todd, team principal, Ross Braun, race engineer, Michael Schumacher, Ferrari number one driver.

Starting point is 01:55:27 and it takes a couple years for Luca and the team to turn this around, but this is just absolute domination that they unleash on the field. By the end of the decade, there would be five straight years, 2000 to 2004, where Michael Schumacher won every single driver's championship five years in a row, and Ferrari won every single constructor's championship five years in a row. As we talked about on the F1 episode, it was a problem for Formula One. The sport became too boring because Ferrari always won. Yep.

Starting point is 01:56:01 In total, under Montezemolo's tenure, Ferrari wins 19 drivers and constructors championships, which is more than Enzo. That's amazing. It's incredible how we turned the team around, just like he did back as Enzo's assistant back in the day. All right. Then the technology. The technology. The cars.

Starting point is 01:56:24 We can't have a Honda NSX. outclassing a Ferrari. Ferraris are about our heritage and our myth, but they are also about looking ahead. We can't be selling 250s repainted for the modern era. Yeah. And this is really where the feelings about technology change, where Ferrari went from a late adopter of technology when it's sort of proven to really pushing the bleeding edge. And today, Ferrari spends a good amount more on R&D as a percentage of their revenue than most other car companies. It's become sort of a signature of the company. Yep. And this absolutely was a hallmark of Montezemelo's turnaround. Enzo didn't really care that much about technology. That's interesting. Yeah. Yeah. So first thing they do,

Starting point is 01:57:10 we got to fix the 348, the flagship sports car. So they revise it. They do some stop gaps. but ultimately as soon as possible they kill it and replace it with the 355, which was just a glorious car. And this just checked every box. Amazingly, it was modestly price. So it was a $127,000. So modest by Ferrari's standards anyway, it was much more sort of user-friendly to drive. It actually made sense if you weren't a track car driver to drive this car. it was really the workhorse of the turnaround, and by 1997, it accounted for 70% of sales.

Starting point is 01:57:51 Wow. Wow. The 355, I would put it in the category of like a Rolex submariner, of this thing that is a signature of the brand, is perfect product market fit, is priced perfectly and just deeply understands why the customer is buying it. The other thing to note, before they launch the 355, is Luca massively cut production. So I mentioned that in 1991, Ferrari had made 4,500 cars, which is just this giant inflation. By 1993, just two years later, Luca brought this down to 2,300. So cut it almost in half in those two years. And production would start climbing again. You know, as I mentioned, the 355 was really well received, and they started really building

Starting point is 01:58:34 up their back order list again. But interestingly, it would not eclipse that 1991 peak of 4,500 cars again until until 2006, a full 15 years later. Yeah. We need to not just fix the myth of Ferrari, but we need to protect it. And this was Luca's third and most important priority, the myth.

Starting point is 01:59:00 Luca came from a very different background and life experience than Enzo. Luca is the one who realized that Ferrari is a luxury company. to Enzo, Ferrari was a racing company that sold a connection to that to its clients. And Enzo was a marketing genius, and he came up with the printing horse and the red and the myth of Enzo. But you couldn't talk to Enzo about how Hermes was managing its business. Enzo had no idea what Jean-Louis Dumas was doing over in Paris.

Starting point is 01:59:34 Luca knew exactly what Jean-Louis Dumas was doing over in Paris. Lucas is the one who institutes weightless. Luca is the one who institutes presentation ceremonies when your car is delivered. Luca is the one who institutes custom luxury leather luggage that comes perfectly fitted to your Ferrari. Luca institutes the luxury strategy at Ferrari. Where did Luca come up with this strategy? Like, did he adopt the luxury strategy from somewhere else? Did he invent it from whole cloth?

Starting point is 02:00:10 I think it's just he comes from such a different background and world experience than Enzo. Enzo didn't know a Birkin from a coach bag. Right. He grew up in Modna. He grew up in Modna. And then after Dino's death, he never gets on an airplane again. He doesn't leave this one region of Italy. Whereas Luca has lived all over the world.

Starting point is 02:00:30 He's run the Italian Cup. He's been CEO of an alcoholic beverages company. He knows all the luxury families. He knows all the luxury companies. and he studies what they do. Yeah, it's interesting. That makes total sense. The other big piece of his strategy is anytime you see a Ferrari, it needs to scream Ferrari at you.

Starting point is 02:00:49 And in a way that was really exemplified by the 355, it looked like all the cool classic Ferraris and the race cars, but it was much easier to drive. So there should be sort of a unification between the stuff we're selling to people and the race cars. Yes, this was another key understanding of Lucas. these cars needed to be driveable. In Enzo's day, you could get away with the excuse of, yeah, these cars aren't really going to function on the road because they truly are intended to be race cars. By the 1990s into the 2000s, that's not going to fly anymore. The people who are the clients who are buying these cars, they want to be able to drive them on the streets. Yep.

Starting point is 02:01:29 He does a handful of other tactics that I would say set the company up for success in the short term, but add risk in the long term. And there's a big need to. Ferrari was operating in the red when he came in. They generated losses, like real income statement losses from 1992 to 1994. And by 96, they were back to break even. And by 97, they were profitable. But I would say all the ways to generate profits were not the best long-term solution.

Starting point is 02:02:02 And it took them time and a lot of effort to dig out of that hole. one of which was licensing the brand for merchandise. Yes. Now, there's a pro and a con here, but yes, I thought that's where you were going to go with this. Yeah. So there were some smart things, licensing the brand to put on luxury goods and some sportswear. They even started licensing it for toys. And when you're licensing the brand, that's basically 100% margin.

Starting point is 02:02:29 I mean, it drops straight to the bottom line. So when your dire straits, it's really good. And so it has obvious allure. But they put the prancing horse on some real garbage over time. My favorite is by 2009. So, you know, this is a full 15 years later. They put the prancing horse on an acer netbook. Yes, yes.

Starting point is 02:02:50 Do you remember netbooks, David? Oh, yeah. I was wondering if you were going to find this. Just so destructive to their brand. It's the apex luxury brand of cars. Like one of the greatest brands in the entire world. And they have licensed it to this like under-clocked plastic little piece of crap computer. Yes.

Starting point is 02:03:08 That is like the microcosm of brand destruction, like the reason to resist the heroin of brand licensing. Yes. The ACER laptop was a real low point. But there's a lot of crap that it's on. There's a lot of crap that there's on. Now, there is some nuance here. If we were talking about Louis Vuitton or Hermes or Pattec-Filippe. or Rolex, this would be all bad.

Starting point is 02:03:36 There would be no good reason besides easy profit dollars to do this. Ferrari is a different thing. Yes. It is an Apex luxury brand unquestionably in the same way as all of those companies. But unlike those companies, it also has a couple hundred million rabid fans that it needs to serve. And also unlike those other. companies, there's not actually attention there. Ferrari clients and Ferrari collectors aren't upset by the fact that Ferrari has a couple hundred million, you know, commoner fans out there.

Starting point is 02:04:18 In fact, they're happy about it. Right. Ferrari is both a luxury brand and a giant international sports team. Yes. Yes. Exactly. They always talk about the Tafosi. You know, the hundreds of millions of people who are just fans of the brand and the spirit and the team. Yeah, Hermes doesn't have a couple hundred million teenage girls around the globe that have posters of Birkins on their walls that they have to please. Right. Ferrari is Hermes and Manchester United smashed together. Yes, yes. Yeah, and that makes it super different.

Starting point is 02:04:47 So I guess to your point, that does validate the licensing their brand for merchandise strategy. Yeah. Much more. I mean, hey, look, it doesn't validate the, you know, Acer Netbook. But there is like some actual justification to the activity. Yeah. So manufacturing. Should we talk about how that changes under Lucas tenure?

Starting point is 02:05:09 Yeah, so I know a lot about manufacturing today. Did Luca really bring Ferrari's current manufacturing to life? I think so, or at least he started it. It was really important to him that the factories be first rate. So he brought in great architects to redesign the factories. And this is when, if you look at video or photos of Ferrari factories today, they have trees in them. He brought in the trees. Yeah, they're absolutely beautiful.

Starting point is 02:05:38 We'll link to some factory tours in the show notes. I think my favorite thing about Ferrari is the manufacturing process. And it's both because of how cool it is from a nerdy perspective, but also the business model that enables for them. So after 1994, Ferrari does. does not have a stock of cars. They're not just sitting there at dealerships. They're not just sitting there at the factory. They don't manufacture them and then find buyers. It's the other way around. So for every single car, they only start manufacturing it after you order and you customize it. And it's important to know that by this point in history, every Ferrari is unique. There's so much

Starting point is 02:06:21 customization that starts happening that everyone that rolls off the lineup is actually its own custom car. I mean, maybe just a little detail here or there is different, but you will not find two that are identical. Yep. So Ferrari factories are vertically integrated to the nth degree. Most car manufacturers these days are systems integrators. Kind of lame. They're just buying from a network of thousands of companies that make common parts that basically go in all of our cars as contracts to the big brands. And yes, the brands do some specification. And then they take whatever it is, some long time frame, five to ten years, to actually build out the full supply chain, source the thousands of parts from all the suppliers, and then integrate them into a car.

Starting point is 02:07:02 Not Ferrari. They have trucks that roll up to the factory with raw ingots of aluminum, and they are casting entire engines themselves right there in Marinello. Everything happens on one plot of land. They build engine molds out of sand. They have 700 degrees Celsius furnaces, and they operate an entire foundry right there on site. They do the same thing for body panel work and stitching the seats and more. Yes, it really reminds me of Rolex in this regard. And there's another dimension that it's

Starting point is 02:07:34 different from just about every other car manufacturer out there. Most other car companies, even the Porsches and the Audi's and the Lamborghinis, a lot of the models that they're making are based on shared platforms. So like, we'll get into this more toward the end of the episode here, but the Lamborghini Uris, the Lamborghini SUV. That is the same platform as the Porsche Cayenne, which is the same platform as the Volkswagen Toreg. When you buy a Lamborghini Uris, you are buying a car that is essentially a Volkswagen Toreg. Or an Audi Q8, is that right?

Starting point is 02:08:12 One of the cues, yeah. No Ferrari shares a platform with any other car. But you're right. When you're a big family of brands like this, you are looking for economies of scale and ways to, share more across your line. And you're right, not Ferrari. It's the complete opposite. And some of this was starting to creep in in the last years of Enzo and the Interregnum period when Fiat was taking control. There were some Fiat parts and switches that were making their way

Starting point is 02:08:39 into Ferraris. And Luca stops all of this. It's like, no, no, no, no. The only things that go into Ferraris are Ferraris. It's what makes us different. Yes. And because everything is so customizable, like we were talking about, every single one that rolls off. the line is unique. They have left their manufacturing process to be very flexible and manual. They can make any car on any line. There's humans doing manual work at every station except for one, and that one is where they affix the windshield, because you, for safety reasons, don't want to have people doing that. But it is crazy and unheard of across the car industry to be able to make any car on any manufacturing line. Now, you might say, well, that's really inefficient, and it is. I mean,

Starting point is 02:09:22 they don't invest in making a automated production line that can easily make lots of cars. Efficiency is not the point for Ferrari. Right. They would make for a terrible scaled car company. Ferrari can operate on a much shorter time scale between design and actually getting a car out to customers since there's less overhead in getting started. And it is, it's a double-edged sword. You would never want to do 100,000 cars a year with the Ferrari model. In fact, you barely want to be doing 14,000.

Starting point is 02:09:54 But the pro is that they can be really iterative and really responsive to new ideas. They could change their engine casting spec without involving a supplier and asking them to do a rebuild of something. And they can also get learnings from their F1 team quickly into cars since it's right across the street. Yep. I think this is like one of the interesting nerdy business model characteristics of the pros that come from a manufacturing process that, sort of doesn't invest in overhead and doesn't allow for the cheapest incremental, marginal car to roll off the line. It's more about how do we maintain sort of the most flexibility at any given point because we're selling expensive cars and we've got the margin to absorb it. Well, really,

Starting point is 02:10:38 this is how bespoke handmade craftsmanship applies to a modern automobile company. It's the same dynamic as the other luxury companies as Hermez. You know, you think Hermes' is investing. in efficiencies in their factories? Like, hell no. Right. And part of what you are buying, if you are interested in buying a Ferrari, especially, let's say you came into this, you didn't want a Ferrari, you leave this episode, you're like, actually, I do kind of want a Ferrari. Part of what you are buying is the lore that I just shared. You kind of like the fact that this is a, yeah, there's robots, but like a pseudo-handmade bespoke inefficient manufacturing process to make it. It's wrapped up in the value proposition. There is a team of artisans and experts aided by

Starting point is 02:11:21 technology that is making my Ferrari. Yes, that's exactly right. Yeah, it's super cool. So that's manufacturing. We've talked about Luca's embracing of the luxury strategy for Ferrari. Let's talk about markets and growth. Yes. And international.

Starting point is 02:11:37 Yes. So when we're talking about caps on the number of cars they create, it's not that you can't produce any more units without diluting your brand. It's that you can't sell any more units into your current market. Correct. Without diluting your brand. New markets are perfectly allowed as long as it doesn't change the perception in the current markets that, oh, no, there's suddenly lots of Ferrari zooming around the streets.

Starting point is 02:12:03 Geographic segmentation can be a great luxury strategy. So he goes to start selling in China meaningfully for the first time and the timing couldn't have been better since in Europe it was becoming less fashionable to display your wealth. China, it was perfectly acceptable. Very fashionable. Extremely fashionable. And this is a strategy that they then continued to run. Anytime a new geography sort of came up in global wealth or disposable income or was okay with becoming flashier, then suddenly there's a whole new area where you can sell your Ferraris without changing perception in existing markets.

Starting point is 02:12:39 Yes. And there's another subtle point here that applies very specifically to Ferrari. they make so few cars and sell so few cars to a given geography that it really is a special experience every time you even see one on the road. Yep. And it's really important not to dilute that. Owning a Ferrari is a truly rare and special experience, but even just seeing one, even just being next to one,

Starting point is 02:13:10 should be a rare experience. The minute that that stops being rare, the myth dies. The funniest thing is, since a large number of Ferraris are owned by people with 10, 20, 30 Ferraris, they actually can soak up a lot of the units into garages that you never see anyway. Yes. Yes. Yeah, so if you're Ferrari and you're trying to manage scarcity, you sort of have an incentive to continue selling to the same person over and over and over because it is a way to generate a sale without having the problem of a Ferrari out on the streets feeling commonplace. Yes. Now,

Starting point is 02:13:45 Now, there is one other related thing that Ferrari takes on during this time, which is a lot of Ferrari clients, particularly American clients, really want a family Ferrari. They've got more use cases in their life for automobiles than Ferraris give them opportunity to use it for. You mean to tell me that a 45-year-old man who really, really wants to be out on the track or sort of envisions himself out on the track actually has most of his time where he can't be on the track, but he wants to feel awesome and fast and risking his life and associate with a brand kind of like Ferrari. But gosh, that's actually just not the reality of his life these days. Right, right. He might need to drive his kids to school or you might need to be driven by your chauffeur. to an important business meeting. Really, you would like a four-door Ferrari for that.

Starting point is 02:14:48 Oh, David. Stop. I know, I know. Disgusting. I know. Well, it is disgusting. And that is why during this era, Ferrari takes on the Maserati brand under its wing. So the Maserati brothers that we referenced earlier in the episode, that company after their ownership had gone through a whole series of ownership changes and the brand had had

Starting point is 02:15:11 its ups and downs over the years. it ends up in the hands of Fiat. And in the late 90s, Fiat says, why don't we give Maserati management over to Ferrari? And then we can, you know, have this connection between the Ferraris and the Maseratis. And we can have models that are Maseratis that are not Ferraris. These are not Ferraris. But there is a connection. And, you know, we're happy to sell you a Quattraporte if you wanted or a grand

Starting point is 02:15:43 Tarismo if you want it. And that's what they do. And so this is when the Quattroporte, the Maserati Quattroporte, launches in America. And to great demand, unfortunately in the beginning, it was not a very good car. It took them a few years to iron the kinks out, at least on the reliability front. But it's a brilliant brand strategy. It's almost like Rolex and Tudor. A tutor is never going to be a Rolex, but you can have a great use case for a tutor. I was going to make that connection. I was thinking about it. But I don't think, I mean, Maseratis are not made in Maranello, right? No, they're not. So Ferrari gets the sort of market intelligence of what happens when we launch a Maserati in a market and kind of learnings from customers. But it's not like there's manufacturing

Starting point is 02:16:32 synergies or on-campus learnings from prototyping new things. I think they're pretty separate and they're sort of R&D. Yes. So they showed great restraint in never launching a Fiat Ferrari car or standardizing on platforms the way that the Volkswagen group does. Yeah, I think remarkably Ferrari has had the sole of a standalone company, even though it was for a very long period of time, 90% owned by Fiat. Yep. And Luca is a huge part of that, as is Piero, too. Yep.

Starting point is 02:17:03 Him having the 10% ownership stake in place on the board keeps that continuity to Enzo and the Ferrari family, even in a 10% minority ownership way in the kind of. company. Yep. Well, speaking of Ferrari also being part of the Fiat and Yeli empire, something pretty big is about to change here as we enter the early 2000s, which is Gianni Angelli passes away. And all of a sudden, the Fiat empire is now in crisis. But before we tell the story of what happens next there and how it, incredibly, ends up with the IPO of Ferrari. Now is it great time to tell you about one of our favorite companies, Statsing. Yes. So listeners, as we've been talking about all episode, Ferrari builds cars designed for

Starting point is 02:18:04 speed and precision. These are incredibly powerful machines, but every component is also engineered so the car performs predictably even when you're pushing it to the limit. And you know what? That is a great metaphor for modern software development. Teams today can ship faster than ever, especially teams building with AI coding tools. But when you're moving so quickly, the challenge becomes knowing which changes actually improved the product. Because when you go faster, you also increase the risk of unintended consequences. And that is especially true when AI is involved.

Starting point is 02:18:38 LLMs, of course, introduce nondeterminism into the product experience. So the same input doesn't always produce the same output. Small changes to prompts or models or user experience can actually have surprisingly large downstream effects. You can learn a bit from offline evals, but the real signal comes from real users. Yep, and that is where Statsig comes in. Statssig gives product teams the control systems for fast product development. Experimentation, feature flags, and product analytics all in.

Starting point is 02:19:08 one place. Teams can ship quickly, roll out changes safely, and measure how those changes actually impact users with a much tighter learning loop. Statsig lets you keep moving Ferrari level fast, well, making sure that what you're doing actually does make the product better. So if you want to ship fast and know what's actually working, go to statzig.com slash acquired to get started. So in 2003, Gianni Aneli dies. Tragically, the logical heirs to the Anielli Empire in the next generation had also already died young. So when Gianni dies in 2003, his brother, Umberto, takes over. But he only lives for another year and then he passes away in 2004.

Starting point is 02:19:55 When this happens, the empire is in chaos. Meanwhile, the Fiat business is really struggling. Sales have been falling off a cliff. The company has a mountain of debt and the share price is like trending towards scraping the bottom here. So the last surviving Anielli of Gianni and Iberto's generation is Susanna, mother of Luca's best friend growing up. She calls Luca after Umberto dies and asks him to take over. as Fiat chairman and replace Gianni and Berto in addition to Ferrari. So Luca will stay a Ferrari, but he will now come and serve the anielli's as sort of a

Starting point is 02:20:39 stored and a bridge to the next generation while they get the house in order and hopefully try to save Fiat along the way. So he's chairman of the parent company. He's now chairman of Fiat and Ferrari. Which they own 90% of. Yes. And at the same time, the chosen next heir in the general. below in the Anjeli family is a man named John Elkan, who you might have heard of. Today is a

Starting point is 02:21:04 celebrated investor and head of Exor, the publicly traded holding company, which is the Anjali family holding company. He's 27 years old at this point in time, though. He's a kid. He's like Luca back in the day when Enzo tapped him to take over Ferrari. Yep. So Luca and John Elkan have to work together to try to save Fiat. So the first thing they do is they turn to Sergio Marcione, who is a turnaround expert and financial engineer extraordinaire, who has been CEO of SGS, which is a Swiss consumer products testing company

Starting point is 02:21:47 that is also part of the Anjeli family investment empire. And he's completely turned around SGS and saved the company there. And they tap him to come in and help them do the same thing with Fiat. So he joins as CEO in 2004 with Luca as chairman and John Elkin as the Angelly family representative. Which it's interesting to note here, the Angelly family empire is larger than just Fiat. Yes. And this is how they really differ from like Ford and the Ford family. The Ford family was always focused on the Ford Motor Company. The Anie family, Fiat was the crown jewel, but they invested in and built many businesses.

Starting point is 02:22:25 over the years throughout the generations. They really diversify it out of just one company. Yeah. So the three of them together miraculously turn around Fiat

Starting point is 02:22:36 and save it from the abyss through the combination of a couple of things. First, they launch the smash hit new Fiat 500, the mass market platform, the city car for Europe.

Starting point is 02:22:51 There was some precedent for this earlier. Volkswagen had relaunched the Beatles in 1997, and so that was some of the inspiration. But the FIA 500 truly was an amazing success. Yep. You've seen this car many, many times. Yes, and especially in Europe. Like, it was popular in the U.S., but if you live in Europe, you saw the Fiat 500 all over cities throughout Europe. It sells a million units in five years. It wins the 2008 European Car of the Year award. It's

Starting point is 02:23:20 truly, truly a special car that saves the company. I got to say, it's so funny that we feel the need here on the Ferrari episode to extol the virtues of the Fiat 500. But it ends up becoming actually very important and path dependent to Ferrari's trajectory from here and why a few things happen to Ferrari. And it was designed by a man named Frank Stevenson who had been Luca's in-house design guy at Ferrari when Luca was just at Ferrari. So there's a Ferrari connection and lineage there that gets pushed up to the Fiat 500. Now, the other thing that happens, and this is all Sergio's doing, he totally restructured the operations at Fiat.

Starting point is 02:24:02 He was like an efficiency and cost-cutting specialist. And at a company like Fiat, that actually is like really, really important. The other thing he did is Fiat had a ill-fated partnership with GM with General Motors. Sergio gets them out of the partnership and engineers GM paying $2 billion to Fiat in order to and the partnership. And I think without that $2 billion, the company almost certainly would have died. Wow. He is a magician. He really is a magician. So Sergio, Luca, and John Elkin come into Fiat in 2004. Within two years, they have returned the company to profitability. They've got a handle on the debt. 2007, the Fiat 500 comes out. It's a massive success. 2008 hits. The financial crisis.

Starting point is 02:24:55 all of the U.S. car companies are in really bad shape. Man, it's crazy that Fiat just barely got their house in order in time. Just barely. Otherwise, they could have been down with the rest of the global economy. Well, Sergio says we can play offense here. So he engineers a partnership with Chrysler, which had been wazzi nationalized, taken over by the U.S. government at this point. time. Right. They were in the worst of the positions of Ford GM and Chrysler. The big three automakers in the US, yes. So they engineer a partnership in 2008, Sergio does with Chrysler, and then fully acquires

Starting point is 02:25:38 the company in 2014. And that creates FCA, Fiat Chrysler automobiles. FCA. And basically for free, Fiat paid either zero or almost zero in sort of equity value for Chrysler. Wow. Yeah. It truly is amazing what they did. And save the company, too. I mean, Chrysler and Dodge and Jeep and all of its brands are a thing today and part of Stalantis today because of what Fiat and Sergio did during the financial crisis. And Stalantis is the name for the merger between Fiat Chrysler automobiles and Pujo. Pujo. Okay. The French company. Okay. Yeah. One of those French car companies that, you know, we're not going to make an episode about. So as everything is stabilizing at Fiat and returning to success.

Starting point is 02:26:27 In 2010, Luca steps down from the Fiat chairmanship and returns solely full-time to Ferrari. John Elkin assumes the Fiat chairmanship then. He's now ready to be the steward and heir the Anjali family and work with Sergio and running the Fiat Empire. But there is one cost to taking over Chrysler, which was that in doing so, Fiat had to assume Chrysler's debt, including about $5.5 billion that it owed the U.S. and Canadian governments for the bailout.

Starting point is 02:27:09 So when this happens, the combined debt load for FCA, Fiat Chrysler automobiles, balloons up to over $11 billion. Fiat announces to Wall Street as part of the merger, though, Sergio does. Hey, we've got a plan, and we are going to reduce that from over $11 billion to $1 billion or less over the next four years by 2018. So they are forecasting a lot of cash flow that, hey, this business is going to be great, super profitable. We're going to eliminate $10 billion of debt. They are forecasting a lot of debt reduction. Some of that will come from cash flow. And some of that might come from other places.

Starting point is 02:27:50 So Sergio needs, you know, a lot of cash to meet. is promised to Wall Street and pay down the debt, where's an easy place to find it, he's going to IPO Ferrari and use the proceeds to help pay down the Fiat Chrysler debt. Now, we should note, through all of this, if you couldn't already foresee it, there was a huge conflict and power struggle brewing between Luca and Sergio. These two guys were both, including, including incredible auto company operators, but like cut from totally different cloths. Yeah. Luka is the ultimate car guy. He's a great businessman and he's a great executor of the luxury strategy for Ferrari. But in his mind and his heart, the cars always have to come first. The great business decisions come out of the great car decisions.

Starting point is 02:28:47 Sergio, on the other hand, is not a car guy. He came from a consumer products testing company. He is a financial engineer and an empire builder. And actually, the great tragedy to this act of Ferrari is it could have been a beautiful partnership between the two of them. And was, truly was. They saved Fiat together. But ultimately, Luca and Sergio are not going to be able to coexist and share power within the same structure. And for a while, Luca going back to just Ferrari. Makes it work?

Starting point is 02:29:21 felt like it was the solution that made sense. His passion was Ferrari. His history was there. He could go back to running it and be very happy.

Starting point is 02:29:30 And Sergio could leave it alone and continue running the Fiat Empire. But once Sergio needs the cash to pay down the Chrysler did and turns to Ferrari,

Starting point is 02:29:40 they're on a collision course. Because IPOing Ferrari is like completely anathema to Luca's way of being. Becoming a public company means you've got to deliver consistent, predictable growth, which means hitting a drumbeat

Starting point is 02:29:58 of shipping more cars, making more models, adding more clients, raising prices. It's not like Luca doesn't want to do these things in a vacuum, but he wants to do these things very thoughtfully and over an extended period of time, not on a Wall Street calendar. And to have flexibility. Yes. It's not opposed to any of those things, just the way that you and I aren't opposed to doing things with Acquired, but we don't want to be locked in and committed. You want some organicness to how you run the business. You want the products to be these living, breathing things. You want to be able to rapidly change your mind in the face of new market conditions.

Starting point is 02:30:35 Yep. I mean, hell, one of Luca's very first actions when he came back to Ferrari after Enzo's death was to cut production by half. Right. Right. Can you imagine doing that as a publicly traded company? Yeah, making it announce to Wall Street, like, oh, hey, we think the right thing to do next year is to cut our production by half. Hope you're with us. Now, interestingly, at first, yes, they're publicly traded, but don't they only float 10% of fiat's 90%?

Starting point is 02:31:03 Yeah. Well, so here's what happens. Thanks to the Chrysler acquisition, it's not an option not to pay down the debt. The company, fiat, the empire has to get the money. So the choice is kind of made for them. they have to side with Sergio. Because they have to go public, and he's kind of the guy to run it as a public company. I mean, taking Ferrari public is part of the plan of how this whole thing is going to work.

Starting point is 02:31:26 Yeah. Do you think Luca was not a public company CEO? I think Luca probably had zero interest in taking Ferrari public, and I think he had even less than zero interest in using proceeds from the Ferrari IPO and the other financial engineering that we're about to talk about to save Chrysler and Fiat. Luca did not care about any of that. Whereas in the other side, Sergio is kind of exactly the guy you would want to manage the street

Starting point is 02:31:56 to look for all the ways that the Ferrari business is quote unquote unoptimized to realize the full value of the asset. He's like the sort of leader that investors salivate over. Yes, yes. So in September 2014, Sergio unceremoniously fires. Luca as chairman of Ferrari. The pretext is that the Ferrari F1 team has performed poorly in recent years, but... Which was true? I mean, was true, but like, for God's sakes, just a few years earlier,

Starting point is 02:32:29 Luca had engineered, you know, the greatest dynasty in Formula One history with Schumacher and Braun and Todd. And, like, you know, everybody knows what's really going on here. Also, part of the reason that the Ferrari Formula One team wasn't performing well at this point in time was that Formula One had switched to hybrid power trains and Fiat never developed hybrid technology. So Ferrari didn't have anywhere to turn to to get a head start like some of the other manufacturers that could turn to hybrid technology.

Starting point is 02:32:57 So it was going to take a while for Ferrari no matter what. At the end of the day, though, it's sad. Like, this is not how Luca's time at Ferrari should have ended. So Bernie Eccleston, you know, the... Bernie F1, impresario, who Luca did very much not always see eye to eye with, gives a quote to the press when Luca is fired that sums it up better than I can. Bernie says, Luca leaving is for me the same as Mr. Enzo dying. He has become Ferrari. You see him, Luca, you see Ferrari.

Starting point is 02:33:36 You don't see anything else. You don't see Luca. The context that you need to know for this quote that makes it even more. impactful is if you listen to our F1 episode, you know that there was the Foda breakaway attempt of the group of teams that just a few years before this had tried to bust Bernie's hold on F1 and break away and start a rival Formula Racing League. That was led by Luca. Oh, wow. Luca was like Bernie's arch adversary just a few years earlier. And so for Bernie to be this cordial. And here's Bernie paying tribute to him like this.

Starting point is 02:34:13 Yeah. Huh. So with Luca gone, the path is cleared to IPO Ferrari. And in 2015, Fiat and Sergio float, as you said, Ben, 10% of their 90% ownership stake in Ferrari on the New York Stock Exchange for an initial total market cap. of Ferrari of 9.8 billion, which raises just under a billion dollars in cash that Fiat uses to pay down the debt. So 2015, Ferrari publicly traded worth $10 billion. That is up from the 192 million figure that we had talked about back in 1988.

Starting point is 02:34:56 Right. But still nowhere near the heights that it would reach in the years to come. But that is Luca's legacy, that Delta. That totally. That is turning Ferrari into a real business there. Yeah. So a billion dollars in cash proceeds from the equity sale in the IPO. That helps. That contributes to the total $10 billion that you need to reduce your debt by. Yeah, to go from 11 down to one.

Starting point is 02:35:21 Yeah. You know, it helps, but it's not a lot. Well, Sergio had another. This one is ridiculous. Financial engineering coup up his sleeve. as part of the spinoff of Ferrari and the whole transaction, they effectively transfer another $3.2 billion in Fiat Chrysler debt to Ferrari. So in total, Fiat Chrysler out of this transaction gets almost $4 billion in debt reduction. That'll make a dent.

Starting point is 02:35:56 That'll make a real dent. The interesting thing is, it was perfectly fine to do this because, for Ferrari turns into a great, great business that is perfectly capable of paying down all that debt that was just transferred to them. Yes, yes, absolutely. You know, we're sort of telling the story from Lucas's side here. From Sergio's side, this all makes total sense. Right. There was very little risk involved in this transaction.

Starting point is 02:36:22 Right. It's actually quite genius. Right. It helped Fiat Chrysler become a real going concern, successful company, one that exists today. And Ferrari is a great little engine to pay down debt. Yeah, and not just a little engine. Like, the value unlock that happens at Ferrari here to use investor speak is unprecedented. The company IPO is at a $9.8 billion market cap in 2015.

Starting point is 02:36:47 Within a few years, it's trading at, you know, what, 90 billion, flirting with 100 billion market cap. Yeah, as of a few years ago, they hit 90 billion. Yeah, way, way, way higher than Stalantis market cap. Yes. If you're the Anielli family, this was a great financial transaction for you. It is interesting. When you often hear investors talk about unlocking value by spinning something off and getting rid of the conglomerate discount and isolating centers of value. That totally happened here. Ferrari was not appreciated by investors when it was nestled inside of Fiat for the real gem that it was. And as a publicly traded company on its own reporting its own financials, people piled in. Sure attracted a lot of investor demand. Yep.

Starting point is 02:37:34 And still does. Yep. So, man, like so much about this story, you can't script what happens next. All is going according to plan. The Fiat Empire has never been better. Fiat is saved. Chrysler is saved. Value is unlocked at Ferrari.

Starting point is 02:37:53 And then in 2018, just three years later. Just three years later, the same year that Sergio had promised to Wall Street that he would pay down all of the debt at Fia Chrysler, he dies suddenly and unexpectedly. This story, oh my God, again and again and again, those closest to Enzo himself, Ferrari the company, tragedy. Tragedy. Sergio unexpectedly dies of cardiac arrest following complications from shoulder surgery. Nobody expected that he was going to die. No.

Starting point is 02:38:27 So once again, the whole empire is thrown into chaos. a much better and more stable place than when Gianni died. But still, within Ferrari, there ends up being kind of a parade of CEOs over the next couple of years. Caretaker CEOs. Yes. Culminating in 2021 when the current CEO of Ferrari, Benedetto Vina, is hired. And he's a new choice for the company. Complete outsider. A tech guy. A former, I believe, physicist, or at least physics undergrad, who ended up going into semiconductors. And if my memory serves, he holds the patent for the accelerometer. Yes. Or at least one of the patents for the accelerometer in the original iPhone.

Starting point is 02:39:17 Yes, in the iPhone and basically all mobile phones today, the accelerometers that are used there. That's Benedetto. A semiconductor guy. Which actually makes a lot of sense for the direction that Ferrari and. technology is heading. Yep. So the question is, what happens at the company after the IPO? Well, on the one hand, a lot of the things that you would expect, Ferrari does increase production. They go even further into the luxury retail goods market. And in particular, on this luxury retail goods market, it's interesting. They sort of bifurcate the strategy. The first thing they do is

Starting point is 02:39:57 they clean up all the old crappy merchandising, and they kind of narrow it to this brand licensing in very specific categories with very specific partners. So luxottica for glasses, Montblanc for pens, Richard Meal for watches, and Puma for shoes. So there's this like sort of cohesive, yeah, we're going to make stuff for the Tofosi, but like there's a luxury associated with our brand that, you know, we have to stay true to. Then they go into a lifestyle category of, their own of first-party products. Yes. David, what is this?

Starting point is 02:40:32 This is essentially Ferrari runway fashion. That's one pillar of it anyway. But yeah, it's this acknowledgement of, hey, there's a lot of people that want to participate in the Ferrari brand who are very affluent and they don't want to go buy any of these things from our partners. They want products from us that aren't cars. And traditionally, most of our customers, I don't know, 90% are men and men in the, men in the, their 50s. I think the average age is 52 of a Ferrari buyer. I believe 35% of people who are buying the lifestyle merchandise they're creating are women. They're really opening up the aperture of Ferrari represents something and can we give people more tokens to sort of adorn themselves

Starting point is 02:41:16 in Ferrari and not just cars. It's an interesting strategy. I'm not sure I would do it. I get why they're doing it. I'm not sure I would do it. Yes. All of that to say, certainly there are initiatives that come about as a result of Ferrari now being a public company and needing to show predictable growth and new avenues of growth to Wall Street. Including theme parks. Including theme parks, yes. They've opened two very different style theme parks, one in Spain and one in Abu Dhabi right next to the F1 racetrack there.

Starting point is 02:41:48 From what I can tell, it's going well. I think they're totally outsourced to third-party partners the same way that you would treat a licensing deal. But I'd like to go to one at some point. Yeah. When I first read that this is what they'd done in the last 10 years, as a little bit of a head scratcher. But I get it.

Starting point is 02:42:04 People want to experience the brand in a more visceral way. These products are so full of emotion and passion that merely seeing one drive by you once every few months on the street is not exactly the way to cultivate fandom. Yep. So that's sort of one side of the ledger. On the other hand, a lot less than you'd expect actually changes. In fact, Ferrari becomes even more independent.

Starting point is 02:42:27 And, you know, if you take as an axiom that the most important part of the soul of Ferrari is a Ferrari being a Ferrari and not being a rebadged Fiat 500 or Volkswagen Tor Egg, Ferrari today is even farther away from Fiat than it was before the IPO. It really kind of reestablished Ferrari as its own separate entity. Yeah. So today, it's still 10% owned by Piero. Ferrari, a little over 20% is owned by the Anjali family with their holding company Exor. But that 20% was 90% before the IPO and what, 81% right after the IPO. So they have really sold down that stake over time. 68% of it is now owned by public shareholders. I mean, that is an independent company. However, the voting shares are a different story. So together, XOR, and Piero have the right to vote about 49% of the voting shares. So it doesn't take much for them to control the vote on any given decision as long as they vote together. They just need to

Starting point is 02:43:39 go sway one or two percent of the public float to vote with them as a block. Yes, that's true. I think the really interesting thing to look at is how the Ferrari model range has evolved in the years since the IPO. Yes. I'm so glad you took it here. So Ferrari effectively makes four types of cars that consumers can buy. 85% of units shipped fall into what they call the range. These cars are a few hundred thousand dollars each, of course, before any personalization or customization.

Starting point is 02:44:16 So this is the collection of sports cars and GT grant touring cars that have always been the core of Ferrari. Yep. You've got your mid-engine V8s and V6s, you've got your front engine V-12s, and you've got your hybrids that have been a relatively new addition. Yep. This is your Amalfi, your Roma, your Tessarosa, your 12-cylindry, these sorts of models. So that's 85%. And actually, sometimes it flexes up even higher if they are not shipping a supercar at the moment, Because the supercar that we had talked about, the F40, the F50, the Enzo, the La Ferrari, and now the F80, these are not being made all the time. They just make them for, I don't know, 24 months, once a decade. Special occasions, shall we say.

Starting point is 02:45:04 So at the end of the Luca era, that was the product lineup. It was the core range and the occasional Halo supercar. That was it. Now, 10% are what they call the special series. These will run you between 500,000 and a million, again, before customization. David, what are these? These are like the special versions of the range cars, the high performance. You know, if you take like BMWs, you know, you've got your regular BMWs and then you've got your M series or Mercedes.

Starting point is 02:45:37 You've got the regular Mercedes and then you've got the AMG. Oh, Ferrari people would scoff at you for making that comparison. Part of me is dying by making this analogy for Ferrari. But it's telling, right, that this was. added. This never existed before. And now there's, you know, essentially the M series or the AMG series of the Ferrari range. And they're a little more racy than the typical models. They're not track only. I mean, this isn't like the XX program or the Ferrari Challenge or any of these like cars that they make for racing in very specific competitions. But these are

Starting point is 02:46:09 racier versions, higher end versions and more limited production of the range cars, more or less. And there's a lot of demand for them. Yes. And the way. I just described that. Someone at Ferrari is very mad. Fans of the brand are going to jump all over me for all the nuance that I missed there. But anyway, that's the special series. Then the remainder are the Icona series. That'll run you about $2.3 million for the current one, this V-12 Daytona SP3. And of course, the supercar, which depending on the year is only one to five percent of the units that they ship. But it's extremely important to their profits. given those supercars run three and a half to five million dollars. And we'll come back to just how important it is to their profits. Yes, yes. So basically what they've done is they've added a second series to each aspect of the core lineup before the IPO. They've kind of doubled the model range. The Icona exists for a very particular reason. And I will explain that in a minute when we get to financials. Oh, okay. I think they kind of backed into it. The stated reason is that they

Starting point is 02:47:15 pay homage to Ferraris from history. You know, the Daytona was this very famous one. Or the Monza, etc. But I'll hold my tongue for now on exactly how they backed into it. Great. I think I know where you're going, but we'll say it. It is also worth noting clients who were invited to the supercar or the Icona class, these people own at least 10 new Ferraris, maybe 20 plus Ferraris in a garage.

Starting point is 02:47:40 These people are tens of millions of dollars deep into buying Ferraris. Yes. These are the Birkins and the Kellys. You don't just walk in off the street and buy one. You need to buy a lot of scarves, et cetera, before you get invited to buy an Icona or a supercar. Yes. I mentioned earlier that every car that they make is unique as a part of their manufacturing process. They do take that to the most extreme. There are models that are literally called one-off. Yes. So they will make you, and not just like you can change the seat color, they will make you a custom car. with a custom body style for very, very, very special VIP customers,

Starting point is 02:48:20 and they never disclose them. Yep. Okay, Ben, one model that you didn't talk about is the FUV. Yes, and you are not speaking with a Lisp there. That is, it is the Ferrari utility vehicle. The Puro Sangway, the pure blooded. Yes. So this is a delicious tidbit of Ferrariism.

Starting point is 02:48:43 The market really wants an SUV. 60% of Porsche's sold at this point are SUVs. They're expensive and beautiful soccer mom and soccer dad cars. And when you go upmarket from Porsche, even to Lamborghini, which looks a lot like Ferrari from a production volume standpoint, they only make 11,000 cars here also. And importantly, is part of the VW Volkswagen group along with Audi. Yes. astonishingly, over 60% of Lamborghinis now sold are their SUV. Yes.

Starting point is 02:49:16 I mean, the classic idea of like die driving a Lambo around the street, 60% of that brand's cars are soccer mom and soccer dadmobiles. It's the exact same thing that happened with Porsche. Porsche was the 9-11 company and now they're the Cayenne and McCann Company. If I ever get a distastefully large amount of crypto winnings, I'm going to go buy a Lambo, but it's going to be an Uris. Just for the irony. I hope in bright green. Yes, yes. Okay, so people really want one from Ferrari.

Starting point is 02:49:49 So what does Ferrari do? They don't call it an SUV. They call it an FUV. They debut a low top, four-door, almost SUV called the Puro Sangway. And as you mentioned, it translates to pure blood or thoroughbred. And it's almost as if they're saying, yes, this is still a Ferrari. In fact, we're almost even overcompensating with the name and saying, We really insist it is as thorough bread of a Ferrari as you could possibly own by naming it that.

Starting point is 02:50:14 And it has a naturally aspirated V12 as its engine. Yeah. I mean, it's a real Ferrari under the hood. Yes. The really disciplined thing that they did, though, they capped total production at 20%. This ensures that when you see a Ferrari on the road, it will stay your classic idea of what a Ferrari is. It really protects the brand and it sacrifices a lot of short-term profits. And I got to say, I have immense reverence for the company for this sort of discipline.

Starting point is 02:50:42 And it keeps this core pillar of Ferrari that just seeing one should be a special event. They are not going to go sell 60,000 Pura Sanquas. They're selling about 2,500 to 3,000 of them per year globally. You are not going to see one on the streets tomorrow or the day after that or the day after that. Yes. I saw one this week, David, at an event that we were at Valet Parade. parked outside. And I thought, oh, I've actually never seen one of those before. Yeah. Which is exactly how it should be every time you see a Ferrari. Yes. So the other thing about their model

Starting point is 02:51:17 range is they have become very diligent about their wait list too. They're essentially sold out these days for the next two years. Most car companies could not tell you what their sales will look like next quarter. But as of today, Ferrari knows exactly what their sales will be and to who through the end of 2027 at least, maybe into early 28. And if you want one sooner, you're going to have to buy a used one. Yep. All right, Ben. So how much do these models cost?

Starting point is 02:51:45 And what were you teasing earlier with the... The Icona? Thoughts on the Icona series. Okay. So the average selling price of a Ferrari is about $500,000 up from $350,000 in 2022. Wow. So they have taken price a lot in the last few years. Now, the models technically start at $280,000, such as the role.

Starting point is 02:52:07 a spider, but A, that's on a two-year wait list, and B, that's before you do any customization. And customization adds anywhere from 20% to 100% of the price of the car. Even more importantly, in explaining that $500,000 number, that is an average. And averages hide the most interesting data. You know, you have to pull it apart and look at the distribution. So as we consider the range, the special series, the Icona, and then finally the supercar, let's look at the distribution. Ferrari is incredibly top-heavy as a business.

Starting point is 02:52:41 And I mean this in two ways. One is the obvious way. The most engaged customers obviously contribute an outsized amount to Ferrari's revenues. If you're a guy buying 20, you're a hugely, hugely important part of Ferrari's business. But two, more interestingly, the most expensive models provide a huge amount of the profits for the entire company. So let's look at just the F80, their current supercar. And by the way, all of these were sold out before the car was even announced to the public. Yes.

Starting point is 02:53:11 That is how sold out it is. There are reasonable estimates that the F80 average selling price is about $4 million. They're making $799. So that is $3.2 billion of Ferraris just in that car. Wow. $3.2 billion of Ferraris in 799 examples. Yes. Now that's retail. So let's assume a 10% retail margin that goes to the dealership. So $2.9 billion of F80 revenue to Ferrari. Let's assume those deliveries happen about over the course of two and a half years,

Starting point is 02:53:47 which means that give or take, one and a quarter billion dollars of revenue in the first 12 months is going to Ferrari from that supercar. That's 15% of revenues for the year, just from that one car model. But that is not the whole story. Ferrari has disclosed that the Icona and the supercar models have higher margins than the rest of the line. Of course they do. And I've seen lots of very credible estimates. They're way higher. Like I've seen 80% gross margins for the supercar. Wow. And this is intuitive. You can imagine when Ferrari throws an extra $10,000 of something nice in the supercar, they market up a lot more since the buyers are wildly price and sensitive. So, I think that it's not crazy to assume that while that car will contribute 15% to revenues in the first 12 months, it's more like 30% of Ferrari's annual profits just from that one supercar in its first year. It could be even higher than 30%. Wow. Yeah. So it's critically important to the business.

Starting point is 02:54:54 The business is in the supercars. Yeah. I mean, this isn't quite true, but it is funny to think about this framing. the Ferraris you see driving around occasionally, those are just peanuts for their business. And it's really all about the ones that are locked away in the garages that you don't see that actually make the money. If you think about the F40 and where Enzo was in his life

Starting point is 02:55:15 and where the company was when they released that, I think they had no idea the business model they unlocked with this limited run supercar. Yeah, that's totally true. And where I imagine you were going with the Icona series, it's like, boy, wouldn't it be nice if we had a whole, another series with maybe not quite as good dynamics as that, but like pretty good dynamics. And gosh, it's a real shame we only have supercars once a decade, which we had something that was

Starting point is 02:55:42 still pretty expensive and still pretty desirable and still close to as good of margins to smooth out that pesky seasonality. Those down years when we don't have the supercars. That's exactly right. So that is what you were looking at with the Icona. Yeah, yeah, that makes sense to me. The other thing that you should know, listeners, when you're sort of thinking about Ferrari, because we've said a lot of model names here. And that is odd, right? Most car companies have over the course of 30 years, very few car models. They run them for a long time.

Starting point is 02:56:13 When we did our Rolex episode, you heard us talk about the Submariner from, I don't know, 1965 and the Submariner from today. It's one sort of continuous evolving line that maybe your grandpa had and your dad had one and you have one. Ferrari is the exact opposite. Over the next five years, they intend to launch four new models per year on average. That's 20 new model names in the next four years. And they discontinue models very quickly after launching them. So every four to five years or so to really enforce each one of these things is very unique, very exclusive. Now, why doesn't everyone do that?

Starting point is 02:56:52 Well, most people have to invest a huge amount up front in tooling. But Ferrari doesn't. They can bespokely spin up a brand new car that never existed because they can do their own really nimble manufacturing process. Right. They have such a different manufacturing process than any other major or boutique auto manufacturer. And this is the thing that the super boutique hypercar companies like the Paghanis or the Koneg Sigs, etc. But those are like way, way, I don't know, Pagani is probably 150th, the man. manufacture a Ferrari or something like that.

Starting point is 02:57:28 Well, right. And those companies don't have all the tooling and manufacturing prowess that Ferrari does. So they can only make their models once a decade or maybe not quite that long, but they can't turn around and make new models and keep the momentum going year after year in the same way that Ferrari can. Four new models every year. And the really impressive thing about Ferrari is the cars are just different. enough where they deserve different names, but a lot of the R&D and the components are carried over. When you look at the internals from some of these cars to the next generation that carry a different name, that have a different body style, they are different, but you can see the manufacturing

Starting point is 02:58:14 learnings. I don't want to say they reuse components, but they're heavily inspired by a lot of the fixed cost work that was done before. Yep, very interesting. Okay, so you mentioned dealerships a minute ago and their margin. How did dealerships work in Ferrari? Yeah. So in the past, dealerships worked a lot more like the traditional model, where dealers would have clients and they would get to allocate cars. Now the allocation is done centrally by Ferrari, and the dealerships really serve more as distribution, operations, and service. And I've been thinking about it less as a dealer network and more as a franchised service and delivery infrastructure with Ferrari owning the actual customer relationship.

Starting point is 02:58:57 It's like you get to own the local franchise in your city that takes care of this stuff, but they're Ferrari customers. They're not really your customers. And Ferrari now centrally controls the wait list. Yes. Dealers do, however, play a huge role in the secondary market. And Ferrari knows it's in their interest

Starting point is 02:59:14 to have a thriving secondary market since given how few new cars there are, the entry level Ferrari is really a used Ferrari. And so it's the way to sort of cultivate the next generation of owners. So they incentivize dealers to buy and sell by giving them 100% of the economics on a secondary market transaction rather than being involved in that in any way. So dealers often exist as a way to source used Ferraris for buyers. And the secondary market for Ferraris is enormous. There's a crazy stat out there.

Starting point is 02:59:49 Over 90% of all Ferraris ever made, going all the way back to 1947 and the 166 Barchetta, are still on the road. That's right. Nobody scraps a Ferrari. Like an ordinary car, it depreciates down to zero because it will eventually be scrapped. Ferraris only go off the road if they're involved in a terrible crash and can't be restored. There have been 330,000 Ferraris ever made, and almost 300,000 of them are driveable today. Yes, still on the road, still owned, still operated. It's truly incredible.

Starting point is 03:00:24 It is incredible. Now, if you're Ferrari, it would be nice to participate in this whole secondary market somehow, in sort of a tertiary way. Yeah, tell us about Ferrari Classy K. So let's say you buy a used Ferrari, or you're getting yours ready for sale. It sure would be nice if there was a certificate from Ferrari saying that they looked it over, and they looked at every part and it's genuine. Well, good news. There's a program for you called Ferrari Classique.

Starting point is 03:00:49 And for just $6 to $10,000, you can get it looked over and get just such a certificate. Now it's interesting here. Ferrari is militant about what meets the bar for Ferrari Classy K certification. Yep. It has to all truly be original with official Ferrari parts. and specifications, which also means, you know, a lot of these cars have been out there for a long time. Things happen, right?

Starting point is 03:01:21 Means if you want to get it certified and you want to have it be officially blessed by Ferrari, you're going to have to pay Ferrari or your local dealer to restore it and return all the parts to official Ferrari parts. And you really only ever get it serviced at a Ferrari authorized service center. I mean, you're not getting your oil changes at your local. oil change place. If you're a Ferrari owner, you definitely intend to sell it at some point. Like, either you're going to trade it for another Ferrari, you're going to sell it so you can buy another one, you can add to your collection. Even if you're going to die with it and pass it on, you still want it to be this appreciating asset or asset that holds its value. So you are going

Starting point is 03:02:01 to get it maintained with meticulous records from Ferrari and from Ferrari Service Center. So it's a nice little closed ecosystem that they have created. Yes, indeed. Okay, so why do they do all of this? And why do they launch four new models every year and rapidly discontinue models and have all these clubs and events and track days and Classique and a robustly tracked secondary market and there's all this infrastructure? Well, a friend of the show, Brian Lum from Bailey Gifford, had a great insight on this. This is a great mental model. If you're going to create a brand that the whole world lusts after, durably, you need to create a lot of infrastructure for bands to engage with, to sort of hang their Ferrari fandom on. And so you need to have ever

Starting point is 03:02:48 more rare models so that every member of the Ferrari owners and future owners has a place to go. In luxury, you never want a customer to feel like they've done it all. You want a place for them to graduate to. Maybe that second Ferrari or going from your first use Ferrari to your first new Ferrari or getting invited to buy an Icona or participate in a race or buy the car that just came out with that brand new name that honors the model from 30 years ago. A lot of brands who want to be like Ferrari don't make the investments to have that amount of infrastructure and models and programs. The illusion is, oh, well, we'll just ship very few units and we'll have simplicity.

Starting point is 03:03:29 But in fact, the opposite is true. You need to have all this uniqueness and mobility for every client to build a brand like this. Yes. And this ultimately creates the Ferrari pyramid. Yes. There always needs to be a place for you to sort of graduate up to in your Ferrari fandom. And there's all this stuff around it, too. There's like a whole forest around the pyramid of different events that you interact with and community elements. And it is just very, very impressive and very high cost to just operate Ferrari day to day. Whereas I think a lot of product companies, they make a product, they ship it. And then, yeah, there's some servicing, but then there's maybe a lightweight customer touchpoint. But operating. the forest and pyramid and ecosystem that is the Ferrari universe is like a high cost everyday thing. Yep. And pyramid is such a great analogy, right? Because if you want to grow the pyramid, grow the business, and you want to do so sustainably or as sustainably as possible as it is to grow a

Starting point is 03:04:32 luxury brand, you need to grow in all dimensions. You need to grow the base. You need to widen out the base, and you need to grow the height, the vertical. So you need to be adding the Icona series and the special series, et cetera, et cetera, if you also want to be expanding out the base. Everybody needs to have their place in the pyramid. That's right. And adding layers beneath. I mean, you could argue the entire Tofosi. All 400 million Ferrari sports fans are sort of of the base that you sort of enter and then graduate up from. I mean, here's an example of the most absolutely insane, top of pyramid experience, the most extreme clients can buy a former F1 car. Yes.

Starting point is 03:05:14 Like an actual F1 car that was raced in prior seasons. I was wondering if you were going to break this up. But of course, you can't just go drive an F1 car. And let's say you even store it in your garage. How are you going to drive it out of your garage? So what they do is they store it for you in Maranello. It's like a library wine. And they staff it with an engineering team and a set of mechanics and a whole events team.

Starting point is 03:05:39 And then they build programs and say, hey, do you want to come race at our private racetrack on this day? Do you want to come race your car? We'll get your team ready to drive it around. And maybe if you want to race it somewhere else, we'll fly the whole team and the car there. So you just roll up and then you can drive your F1 car around that special track. I mean, the cost, the investment that I think most people don't. realize to staff the full infrastructure is crazy. It's astounding.

Starting point is 03:06:08 And that has always been the core of what Ferrari is and why it is unique, going all the way back to 1947 and Enzo. Like we've been talking about all episode, it is the combination of three things under one roof. A world-class racing team, a world-class racing car and racing car here. Heritage Construction Company and the suite of services and people needed to operate that, available for hire to private clients. No other car company has that. Yep, that's exactly right. And most traditional car companies actually can't do stuff like this. Their scale prevents them.

Starting point is 03:06:52 So they can't have only limited edition cars and they can't have a super wide range that gets completely rebooted every couple of years. So they're missing an important piece of the pyramid. It's very easy to own all of the cars from a big company because most big companies make very few cars. The thing that makes you successful at scale prevents you from being able to execute Ferrari's strategy. Okay, so there is one car we have not talked about yet before we catch up to present day. Well, it doesn't exist yet as a recording. It's true. It's true. We are six weeks away from the unveil of the Ferrari luchet.

Starting point is 03:07:28 Yes. What is the luchet, David? Ferrari's first electric vehicle designed in collaboration with Love From Johnny Ive and Mark Newsom in San Francisco. And they unveiled this thing in a very unique way for Ferrari, clearly targeting a different demographic. They unveiled just the internals, like just the buttons and dials and tactile feel of everything and the steering wheel. at the top of the Transamerica pyramid in San Francisco, they have not revealed the outside of the car yet. They wanted the tip of the spear of excitement to be,

Starting point is 03:08:08 look at what Sir Johnny Ive would make with his hands in a workshop. 20 years after he designed the iPhone, what would he do today with all that learning and what would he do if it were a Ferrari? And it's the exact opposite of the previous universe that they lived in, which is let's show the body. Let's show the shape of the car. Let's appeal to the motorheads.

Starting point is 03:08:32 Let's talk about the internal, the, I mean, the engine. What we are talking about here is the buttons and the clickiness of the buttons. I am so fascinated to watch what the rest of this car will look like in six weeks when they unveil it. Yeah. This was incredibly daring because so many of the long time Ferrari, clients, the hardcore collectors, the petrol heads, the people who love the old school small displacement V12s and worship at the altar of Enzo, this is anathema to them. Okay, so let's do a bull bear analysis just on what the luce could be.

Starting point is 03:09:16 And I want to start with, is the job to be done by an electric vehicle compatible in any way with why people buy Ferraris? So there's essentially zero interest in electric supercars. I mean, truly, you look around the industry. When Ferrari and others started preparing for it 10 years ago, everyone sort of thought that new internal combustion cars would be banned soon, at least in Europe. There were EU regulations saying that ICE cars would have to be phased out by 2030, 2035, at some point in time. But Ferrari has put all this work into building this. car. They built a whole new factory, the E-building. That's right. And they're going to go ahead with the

Starting point is 03:10:00 launch. Lamborghini actually canceled theirs and has switched it to a plug-in hybrid electric vehicle instead. And I think the point I keep kicking around is much like the quartz crisis in the world of watches, speed is no longer relevant. Yep. I mean, the F-80 goes zero to 60 in two point two This is the supercar. This is the $3 to $5 million car. The Tesla Model S Plaid does it in 1.99 seconds. So the reason that people buy Ferraris, just like watches, has shifted to be about expressing yourself and having a unique driving experience.

Starting point is 03:10:35 In a sense, electric cars are incongruent with the reason that you buy a Ferrari unless Ferrari can do something really cool and unique. Yep. Yep. And that is clearly what they're trying to do. Yes. So the bull case is we haven't seen this outside yet, but I mean, the internal components have been absolutely awesome. I looked over at my wife and, you know, I thought I just want to touch every one of those tactile buttons and dials and play with it. Ferrari could be expanding their audience here. I don't think it's a layer in the pyramid. I think it's a new pyramid. It's like a whole different, they're going to appeal to a set of people that would have no interest in owning a traditional Ferrari. I mean, like me, I have no interest in owning a traditional Ferrari. But gosh, I was like, oh, could I ever, well, would they ever take me as a client? Depending what this car looks like, I could be very interested.

Starting point is 03:11:23 Yes, and I think that is the daring element of it. They're creating something that kind of by nature has to exist in a parallel universe to their core client base. Yeah, they have always appealed to the gearheads. I mean, the engineering innovations have always appealed to a set of people, but this is a whole different universe of engineering. Here's one that I think is really cool. It's quad motor, one on each wheel. plus additional motors on each wheel that independently do steering and suspension

Starting point is 03:11:52 and the effect that it has, apparently, I haven't driven one, is that it takes a super heavy battery-powered car and it makes it feel really lightweight and balanced. And so there's all these almost like illusions that they can do with technology to make the car just different than every other electric car that you've driven. And for Ferrari being a company that stimulates emotion,

Starting point is 03:12:15 that stimulates passion, that provides a unique experience, they may have figured out how to do that in an electric car. And we may look at all the other electric cars and say, yeah, they're fast, but gosh, they just don't feel the way that this car feels. And we'll have to see. Yep, yep. All right.

Starting point is 03:12:32 Well, while we wait here for the Luce to come out in six weeks or so, give us Ferrari by the numbers today. All right. So last year, they delivered 13,640 cars. As we mentioned, 330,000 cars have ever been produced. Here's another way to frame that stat that is my favorite. This has been true all the way up until this year, this quote. Porsche delivers more cars each year than Ferrari has ever.

Starting point is 03:13:02 So for all the hand-wringing out there about increased production, etc., etc., Ferrari still is in a class of its own. Small batch. Last year, approximately 81% of new Ferraris were sold to existing clients, and 48% percent, were purchased by customers who already owned multiple Ferraris. Adding to the collections. Yes, so you should have the picture by now. Most Ferraris sit in garages because they sit among many other Ferraris, and occasionally some are driven on racetracks.

Starting point is 03:13:31 So largely, this is going to sound hilarious, but for a company that is all about the driving experience, Ferraris mostly are not driven. Yes, yes, there's a deep irony here. I would bet they have the lowest hours of use per car of any manufacturer in the world who produces at least, I don't know, draw a hard cut off, 5,000 cars a year.

Starting point is 03:13:51 Which makes for an interesting luxury good because there is zero way to subtly show off that you have a Ferrari. It's either silent because you have one in your garage and you're sitting there thinking, how can I bring up that I have a Ferrari? Or if you show up in it, it is really loud.

Starting point is 03:14:06 It is, I have a Ferrari. There is no quiet luxury in the universe of Ferrari. I actually think there's more nuance to that, then it would appear on the surface. Okay. And this is a good time to bring up a couple points. The first is car collector and Ferrari collector culture.

Starting point is 03:14:26 By and large, at least with the current slash older generation, car guys are very different than like, you know, Hermes collectors or, you know, LV fans or something. There's a nerdiness. There's a real nerdiness. and there's a real, like, community to it. Cars and coffee meetups are, like, a real thing. And you just go to them and you connect with other people there. And they accept anybody.

Starting point is 03:14:54 It's a way for adult males to make friends. Yes, yes, yes. So there sort of is this other way to show off your Ferraris as part of a community where you can celebrate and appreciate them together with the community. And it's very, like, opening and welcoming this culture. If you're interested, even if you don't own any of these cars or have the means to, like, it's okay.

Starting point is 03:15:19 You're still welcome in this community. It is different. Like the watch world when someone says, like, oh, what watch are you wearing? There's a little bit more ick to it. Yeah. Like, I ask people all the time, because after the Rolex episode, I'm just infinitely fascinated by what's on your wrist. And I like hearing the stories.

Starting point is 03:15:35 But if you're not careful, it can sound like how expensive is your watch. Yes. And car culture doesn't feel like that in the way. that watch culture does or luxury handbags. It's paradoxical in that these are the most expensive luxury objects out there, like way, way, way more expensive than a watch. And way rarer. And way rarer.

Starting point is 03:15:56 And yet it's somehow sort of less exclusive, at least in the community aspect of it. So that's sort of one point. The other point is that yes, Ferraris are allowed and yes, Ferraris are designed to convey passion and an experience of being maximally alive and, you know, battling against death if you so choose. But they're not flashy, or at least traditionally, they weren't flashy in the same way as, say, a Lamborghini. If you want to be a crypto bro, you buy a Lamborghini. Yeah, well, Lamborghinis are the most garish side of Ferrari minus the racing heritage. Yes, yes. That's a good way to put it. Yeah, it's not like certainly plenty of Ferraris.

Starting point is 03:16:40 can be garish. But there is like both a legitimate history and culture that you're buying into. Right. And many of the models are actually quite restraint, at least in styling. Okay, relatively, yes. The last point on this is, furry has taken price up a lot in recent years. And so if you were, you know, let's say you're a 70-year-old dude and you have a couple of old Ferraris that you collect and you like bringing to shows, they weren't that expensive. until recently. I mean, they were always more expensive than other luxury cars. They were definitely ultra luxury cars. But if you just look at how much the price has gone up in recent years,

Starting point is 03:17:23 and it stimulated the second market, too. So I was talking to someone who bought a car in the mid-90s just from the sort of bottom of the range. And he was lamenting the fact that he sold it three years ago, four years ago, and it's doubled in price since then. That sort of phenomena has happened all over the Ferro universe, which adds to the mild ick of seeing one. that I don't think you used to experience as much. Yeah, that's a great point. Okay, so back to the numbers. They did $8.2 billion in revenue in 2025.

Starting point is 03:17:52 In terms of profits, they did $3.2 billion in EBITDA. So they've got a 38.8% EBITDA margin. Pretty good business. Pretty good for a car company. It's not a car company. That is the answer here. Of course. So how are they so profitable?

Starting point is 03:18:09 This is the exact comparison I was going to. Well, let's look at their cost to make each car versus how much they can sell each car for. And we'll start by looking at other car companies to kind of get a sense of what their gross margins are. Ford, 7%. That is 7% gross margin. Not EBITDA, not net income, not cash flow margin. That is their gross margin when they create one unit of a car. A new F-150, you know, et cetera, et cetera.

Starting point is 03:18:42 Yeah. They make 7% before having to pay their overhead and their R&D and their GNA and any of their fixed cost. Yeah. GM, 10%. BMW, 14%. Wow. Volkswagen, 14%. Mercedes-Benz, 16 to 22%.

Starting point is 03:19:01 Porsche. Freaking Porsche, 15 to 25%. Toyota, that same kind of range. 18 to 21%. Toyota is exceptionally well run. Isn't that amazing that Toyota generates on the order of three times as much gross margin per car that rolls off the line compared to Ford? Yeah, that is incredible. Ferrari is 50% gross margins. That is a luxury brand. And as you were pointing out earlier, that's average. Yes. The supercars and the Icona cars are way above 50% gross margins.

Starting point is 03:19:39 get the sense the range is like 30-ish percent, maybe 35 percent, and then the supercars are in the 80 to 90 percent gross margin range. So it is worth pointing out here, this average 50 percent gross margin. You might say, oh, it's a luxury brand, which is the assertion I'm making. They do have to make a bunch of complex, expensive, giant hunks of metal and safety and engineer the absolute crap out of them and truly innovate. So when you look at companies that don't have to do that, LVMH is 66% and Hermes is 71%. So, I mean, there exists a category when you don't have to do all of that hard engineering work where, you know, it's a good business just selling handbags. Yeah. Yep. And this is where the technology element of Ferrari comes in that doesn't apply to many of the other luxury companies. Yep. But still, Ferrari is able to sell their cars for twice what it costs them to make, whereas if BMW spent a hundred hundred thousand, you know,

Starting point is 03:20:39 hundred bucks to make a car, they only get to sell it for $115. So perhaps more interesting, though, than all of this than the gross profit percent is the gross profit absolute dollars. The profit per car, average, exceeded $170,000. That is more than the entire retail price of your average luxury sedan, and even Porsche would need to sell six cars to equal the profit dollars that come from a single average Ferrari. Wow. That is truly astonishing. There's so many different ways to slice this.

Starting point is 03:21:19 It's fun. God, I mean, what other company or products can you think of that has a per unit gross margin contribution of $170,000? Well, this gets into how we opened the episode that in terms of how people spend money, in life. It's housing, food, and transportation. And if you are selling them something in the transportation category, like one of their largest possible spends and you're selling them the most expensive version of it, you've sort of spiked. Like, you kind of have to, it's like real estate is the only other thing you could really meaningfully start to compare this to. Yep. All right,

Starting point is 03:21:52 a little segment breakdown time. They've got three segments that they report. There's cars and spare parts. That's 84% of their revenue. 11.5% though is sponsorship, commercial and brand. The Formula One team. Yeah. I was going to say the commercial and brand, this is sort of where their their lifestyle stuff is, the fashion. But really the interesting bit here is sponsorship. Formula One for them is a profit generating center that is also the single best marketing dollars they could ever spend. Yes. Thank you Liberty Media and their stewardship of Formula One. Like overnight in the last 10 years, Formula One went from just a marketing spend for to the best marketing activity they do and a real meaningful profit center.

Starting point is 03:22:39 Yeah. I mean, the HP deal alone, the title sponsor of the team, is rumored to be $100 million a year. And the latest Forbes valuations of F1 teams, I think Ferrari, they have the value of the team at $6.5 billion. Is that right? Sounds right. Yeah. Sounds right. Yeah, they don't produce the most profit, but they are the most valuable team because they're Ferrari.

Starting point is 03:22:59 And everyone pays a little extra premium for Ferrari and everything. Right. So, you know, of the current market cap, that's what, probably close to 10% of the current market cap is just the value of the team. Oh, that's crazy. You're right. Yep. And again, you can't really extricate one from the other. No, these are one thing. Ferrari is Formula One. Formula one is Ferrari. But it's now a meaningful value and profit driver. Yep. Then lastly, four and a half percent of their revenue is financial services and some other random stuff, including selling engines to other Formula One teams.

Starting point is 03:23:30 Right. So this is the money that the Cadillac team. is paying to Ferrari to put an engine in their car. All right. Multiple for anyone who is not an investor. This is, when you look at the current business, how many years of the current business would you have to pay them to buy the whole company from them? And there's a bunch of different ways to slice it.

Starting point is 03:23:52 We're going to look at the price to earnings ratio or PE. Ferrari trades at about 35 times their earnings. And until the luxury slump where LVMH and Hermes and all these other companies got hit to in the last couple of years, it was trading around 50X for their last few years. Now, for reference, most automakers trade at 8 to 10x and Hermes trades at 35 to 60x. Again, big swing the last few years and LVMH sort of around 25x. So essentially, the market agrees with management that this is a luxury company, not a car company. And one of the very, very best luxury companies, not just a luxury company, but an apex luxury company, like valued on a multiple on par with the two very best luxury brands in the entire world. Yes. The implication here with a very high price to earnings multiple is that investors believe that the profit streams are a lot more durable and certain compared to traditional automakers.

Starting point is 03:24:54 effectively there's a high degree of certainty that all these profits will continue. The only other option when you're looking at why is a P.E. ratio so high is if you expect it's going to grow. Right. But that is super duper not what is happening here. I mean, that's like when you would have a high P.E. multiple for a startup that's growing 300% year over year. Revenue growth is actually experiencing a massive slowdown at Ferrari. If there's a bare case at all for Ferrari investors, which, you know, we've painted quite the bull case this whole episode. It's that Ferrari has reached the edge of their extreme pricing power and their ability to sort of keep ratcheting that up at the number of units that they're selling.

Starting point is 03:25:36 Management said in their October 2025 investor day that the era of double-digit revenue growth is over. And over the next five years, they expect revenue to grow just five percent each year. Yeah. Which actually for the long term is probably helpful. for the company and the brand. Like, they've expanded the pyramid so much in recent years that a period of slower growth probably is the right thing to do in terms of luxury strategy management here. But, yeah, the stock really took a hit after that investor day last fall. It's funny.

Starting point is 03:26:08 It took a hit, and people still think Ferrari's current revenue streams are so durable that they're willing to pay the next 35 years worth of profits to buy the business today. And that is after getting crushed. I mean, the market cap went from 90 billion to 55 billion, and investors probably got a little bit excited about that 11% and 17% growth rates. And now that they're hearing 5%, that's sort of why you're seeing this contraction. But a contraction to 35x price to earnings. Yeah. Yep. Well, one more thing before we get to analysis and powers and quintessence, China. Yes. You mentioned it earlier, but what's going on for Ferrari in China? So what's going on in? the auto industry in China. It's probably the place to start. China's car market is being completely upended by inexpensive, high-quality electric cars. Domestic EVs. Yes, domestically from B.YD, Xiaomi and others. This is having a huge impact on brands that expanded into China in the last

Starting point is 03:27:11 decade, like we talked a lot about on our Porsche episode. But China is only 7% of Ferrari's sales down from 10% at its peak. Now, Porsche, on the other hand, China was 33% of their deliveries a few years ago, which has collapsed all the way to 15% and continues to fall. So the question then is, is Ferrari any less desirable today in China than it was five years ago? And does it fill a different enough job to be done than the domestic supercars for them to sort of weather that storm. Interesting.

Starting point is 03:27:49 I don't know enough to say, but I would suspect it's probably about as healthy as you can be. Yeah. I think my answers on this are there are domestic supercars in China. They're still not Ferrari level in terms of desirability, certainly not brand heritage. Yeah. They don't have the myth. Unless there's a sentiment change where people in China only want to buy domestic supercars, I mean, that's sort of a risk to them.

Starting point is 03:28:16 But I think the thing that you're buying, the signal you're trying to send when you buy a Ferrari is not really at risk. The job to be done by an EV, I kind of keep coming back to this, is completely different than the job to be done by owning a Ferrari. That's it. I'm glad we brought this up again here because I think this also is an important point of perspective to add to the Luce. And why I really think it is kind of bold and daring and important that they're doing it. It's easy for us sitting here in the U.S. to have a perspective of like, why are they continuing this EV thing? Clearly, they should just stay with combustion engines. I'm not. It's the only one I want to buy.

Starting point is 03:28:56 Well, yes, good point. Okay. Easy for U.S.-based collectors to petrol heads to maybe be upset about this and not understand it. If you look, certainly in China, but also in Europe where Chinese EVs are, you know, invading everywhere. In America, EVs are in a bit of a slum. But in much of the rest of the world, Chinese EVs are dominating. And like clearly showing what the future should be. So is Ferrari going to say, yeah, we're just going to abdicate all of that and let the next supercar brands be built around EVs and probably be built in China? Or are they going to step up and take their own swing?

Starting point is 03:29:35 Yeah. It's a swing. All right. Should we move into analysis? Yes. Let's start with our traditional segment. seven powers. Yes.

Starting point is 03:29:44 Borrowed from Hamilton Helmer's great book and framework. Of what power does a company have, what are the things that give it a durable, sustainable, comparative profit advantage over its nearest competitors? And the seven powers are scale economies, network economies,

Starting point is 03:30:02 counter positioning, switching costs, branding, quartered resource and process power. Yes. What you got for Ferrari? All right. Well, should we just start with brand? It's funny. Okay, I'm glad you started there because I think it's actually an interesting discussion.

Starting point is 03:30:18 Go for it. How much would you pay for a Ferrari that was badged as a Ford? Well, there's probably a pretty good data point on this, which is the Ford GT. Yes. And I don't know what they sold it for MSRP, but I suspect it was less than a Ferrari. Yeah. I mean, this is so hard because aroma is not. not that much more expensive as the highest end Corvette that you could buy.

Starting point is 03:30:47 But an F80 is $5 million, and there are not cars from normal car companies that anywhere near approach that. So the question is kind of who is their direct competitor? Their direct competitor is probably Lamborghini. Yeah, that's the closest, yeah. If you really want to go as apples to apples as possible. Yep. So Lamborghini, as we mentioned, makes about 11,000 cars a year compared to Ferrari's 14,000. Lamborghini has meaningfully increased volume.

Starting point is 03:31:21 If you look back at the Ferrari IPO year, back then the average selling price was about even. It was about $300,000, whether you're buying a Lamborghini or a Ferrari. Today, Ferrari's average selling price, as we mentioned, is $500,000, whereas Lamborghini is about $300,000. 140,000. So Ferrari has really flexed their sort of pricing power over Lamborghini, especially as Lamborghini has made more and more and more to kind of catch up to their volume. And 60% of Lamborghinis are Euris. Yes, there's that too. But the point that is useful for our powers exercise here is how much more would you pay for a Ferrari than a Lamborghini? Well, it's right there in the data. Right. It's about a third more. Yep. I was going to take the counterpoint.

Starting point is 03:32:09 On the one hand, yeah, brand is, of course, the strongest power that Ferrari has, as with any luxury company. On the other hand, I think it's not quite as powerful in terms of driving profit margins for Ferrari as it is for, say, a LVMH or an Hermes. Yeah. Because a Ferrari product, a Ferrari car is really differentiated. Still has to be a Ferrari. Yes. Ferrari can't just stamp the prancing horse. on a car and call it a Ferrari.

Starting point is 03:32:42 A Ferrari has to elicit emotion from you. Yes. And it has to be cutting edge. And it has to be incredibly powerful. So it's sort of like there's more cost that has to go into it. Yes. There's a phrase they use called racing thrills. Yeah.

Starting point is 03:32:56 And it's engineered over decades to provide a very specific racing thrill when you drive it, which is not something that you can throw another badge on. So I think if you were asking management, they would insist this is a, fruitless discussion because there is no way to rebadge something and call it a Ferrari that's intellectually impossible. It's tautological. A Ferrari is a Ferrari. Yes, yes. But in reality, when they raise prices, people are willing to pay those higher prices because there is a shared myth that we all have a belief in what the brand represents and means to us and the emotions that it gives us by owning and driving it that are quantifiable and worth something. Yep, yep. How does this compare to

Starting point is 03:33:37 how you felt about watches at the end of the Rolex episode? Watches don't provide racing emotions. So what matters, because all the performance is effectively identical at the high end, what matters is who you are saying that you are to the world when you look down at your wrist. Yes. And when someone else sees your wrist. A watch says something about you, but it doesn't provide an experience for you. That's correct.

Starting point is 03:34:03 And there's this, like, interesting, perfect comparison here. Porsche is Rolex. I mean, they make an absolute crap ton of them. Rolex is a million a year, and Porsche, I don't have the numbers in front of me, but it's $320,000 or so a year. Exactly. And it's an incredible brand. Yes. Just like Rolex is an incredible brand.

Starting point is 03:34:23 And I see them driving around my neighborhood all the time, and I think they are amazing, polished pieces of engineering, and I respect them for the engineering. And the same way that I'm wearing a Rolex explorer on my wrist, I could easily see buying a Porsche. It feels reasonably me. Could I see going out and buying a Patek Philippe? Not really. The same way that I say not really about Ferrari. If you're going to make the analogy, the crude one, that Porsche is Rolex, I think you can make

Starting point is 03:34:53 the analogy that Ferrari is Patek Philippe. It's much smaller production. It's an order of magnitude more expensive. The big difference here being that Ferrari is much sort of flashier than Patech is as a brand and they also have the Tofosi, which adds this whole different element to it. So to directly answer your question, I think branding shows up more in luxury watches than it does in luxury cars for the, almost like the lack of experiential, intrinsic product characteristics that it's just hard to experience the product in a watch, but it's easy to experience the product differences in a car. Yep, totally

Starting point is 03:35:30 agree. So you rely more on brand and in watches. Yeah. Okay, let's step through some of these others because I think Some of them are quite interesting, keeping with the Pot Tech Ferrari comparison, I do think Ferrari has this really interesting sweet spot of scale economies that I don't think we've ever seen before where like they can do things Pagani can't, but they can also do things that Toyota can't. Yes, exactly, exactly. They have power because of their scale economies and because they're like Goldilocks. They're like just right. They're big enough but not too big and they're small enough but not too small. Yes. If they were any bigger, they would be sort of handcuffed by their overhead. And if they were any smaller, then they couldn't do some of the innovations that they do and design all the programs they designed and all that sort of thing. Exactly. There's absolutely a scale economy to the community. I mean, the fact that they have all these racing programs and car meetups and factory tours, you need to be a certain scale to support all of those operations. Yep. I totally agree. That's part of being the minimum. I thought you were going to go to network economy.

Starting point is 03:36:34 Ferrari absolutely has network economy. For sure. 100% with the Tafosi and the community and the nature of the community and being so open. And as you perfectly put it, it's a way for older men to make friends. Yes. Whether you're a member of the Tafosi or a Ferrarista, a big part of what you are doing is making friends. Yes. Network economies by having a robust, rich community around your product are almost this free defensibility.

Starting point is 03:37:01 Because there's just so much more predisposition to want to buy. something with a Ferrari logo on it because of the network economy you were just describing, David. Yeah. I mean, it's astonishing calling back to our F1 episode. Ferrari is the most popular F1 team in the world by a large margin. And hasn't really won much since Michael Schumacher. Yeah. And sells the most expensive cars that the vast, vast, vast majority of their fans will never be able to buy. Absolutely exclusionary. I bet a lot of fans of the Mercedes racing team, one way or another can find a way to buy a Mercedes. Almost none of the fans of Ferrari can find a way to buy a Ferrari.

Starting point is 03:37:39 All right. You just pulled forward my quintessence, so I'm just going to do it now. Great. Ferrari is both inclusive and exclusive. It has the exclusivity of a luxury brand, but the inclusivity of a sports team. Yeah, that's it. I mean, it's this amazing marriage that this is going to sound so self-serving, but I was just sitting there nodding, reading their financials,

Starting point is 03:38:00 because this is exactly acquired story. strategy. We are unbelievably exclusive about the companies that we are willing to do these editorial deep dives on. We're unbelievably exclusive about our sponsors. And yet, we're as inclusive as possible for the community. It should be the best deal on the internet. We want to make tickets cheap whenever we have big live events. You and I have always talked about it as Costco in the front and Hermes in the back. But really, we're just Ferrari. Fri figured this out first. Yes. It's so smart. All right. Well, we're going to have to change how we talk about acquired. If you can marry a luxury brand with a sports team. It is a business cheat code. Yes. Yes. I love it. Oh, that's such a

Starting point is 03:38:38 great quintessence. All right. Back to Powers. It feels anticlimactic to come back to powers. Well, let's run through it quickly. All right, so we did scale economies, network economies, branding. Counter positioning? Did this even ever exist in the first place? Because this almost never exists when you're an incumbent, but trying to think if they didn't, if they used counter positioning in the takeoff phase. Yeah, I don't really think so. I think they were just doing something different as we talked about, by having the team, the constructor, and the services all in one house. Oh, they're counter positioned against the houses of brands today. They can do stuff that Lamborghini can't do because of the platform sharing.

Starting point is 03:39:16 Yeah. Switching costs, there's no switching costs. In fact, I think most people who own Ferrari's own other cars and want to keep adding other cars. Yeah. Corned Resource, absolutely. They have Enzo and the history and the myth and the legend of Ferrari. And that is not going anywhere, obviously. And actually, for a while, their F1 team had an advantage because they have their own racetrack that no one else has.

Starting point is 03:39:41 I mean, they have their own wind tunnel and everything, but they also own a racetrack. Yes. Yes. Yes. Do they have process power? Process power? I don't think they have any obvious or specific process power. Sure, there's institutional knowledge in the factories, and they have their very unique way of building cars that is different than in the other auto manufacturer.

Starting point is 03:40:02 but I don't think that's quite process power. I think their power lies mostly in the other categories. Yeah, I agree. So the question kind of becomes, what is the primary reason why imitators have failed to execute Ferrari's strategy as well as Ferrari? And the most obvious is McLaren.

Starting point is 03:40:20 They're trying to basically do the same thing. There's Lamborghini that we've talked about. There's Aston Martin. It's a much smaller production, but there's Bugatti. I mean, why are there no other Ferrari? I think I would posit that there are no other Ferraris because of the continuity. Even through all the crazy ups and downs and the wild story and the journey that we told on this episode, Ferrari has always been Ferrari. The core myth has always remained intact.

Starting point is 03:40:56 And the products as up and down as they have been over the years, more or less have always delivered on what it is that you are buying when you buy a Ferrari. And that has been unbroken all the way back to 1947. I mean, for God's sakes, they're the only F1 team that has been continuously operating for all of F1. Yeah. That's my answer. I think that is largely correct. It is interesting for all the people who complain, oh, you know, that model was crappy or this strategy was crap.

Starting point is 03:41:24 It's actually a pretty narrow window where more or less they were still being Ferrari, even if you have a particular gripe. Yep. And certainly if you compare it to the ups and downs of any other car company, it's quite continuous. And my answer is different for each one of these. I mean, for example, Lamborghini, how do you build a company like this without racing heritage to tie it to? If you're going to build a luxury brand, you need time and you need heritage where you tie it to an important emotional thing that people lust for connection over. And in cars, it's racing. I'm sorry. It's just it's the obvious thing to tie the emotion of your brand to. Aston Martin has fallen down because they've been terrible at running a business.

Starting point is 03:42:10 McLaren, various changes in ownership and leadership and strategy. So different for different reasons. But no one has over, what is it, 80 years been able to run the Ferrari playbook. Yep. All right. Quintessence, you already gave yours, which I love the marriage of a luxury brand and a sports team. What could be more quintessentially acquired than the marriage of a luxury brand and a sports team? I think for me, as I was thinking about quintessence, I sort of took the question that

Starting point is 03:42:40 you and I posed to each other at the start of our research journey here in Ferrari, which is, what are you buying when you buy a Ferrari? And for me, it's two things that you're buying. You're buying one passion. There's undeniable, purely quivering. essentially Italian and Enzo and Ferrari passion that goes into every one of these cars from the range, the Icona series, certainly to the supercars. And I think probably even the Pira Sengue, even the FUBs. Certainly. Certainly. It's funny. David, you know this, but I talked with the CEO Benedetto Vina yesterday. And he told me, we don't sell a car. We sell a dream. And I think that that's an old lincoln line. But yes. Yes. It's true. It's true. You know, in

Starting point is 03:43:30 compare that to other cars. And it's just, you know, most cars, there's zero passion in them. So one, I think it's passion. And two, I really do think there's something to the ability to feel maximally alive in a Ferrari. And that comes right back to Enzo and his story and all the great tragedy and death that was part of it. Like buying a Ferrari, you're buying a weapon that you can use to you know, fight against death and scream into the void, should you so choose. And the one thing I will add to that, back on our Rolex episode, we threw out the idea of a functional alibi, a reason you could claim that you need such a watch. For Ferrari, they have lots of incredible alibis. Most people do not experience the thing that you just described,

Starting point is 03:44:22 feeling maximally alive and going right up to the edge. But that is one of several plausible alibis for why you can convince yourself that you are buying this thing. For me, it's the incredible engineering. I think for some people, it's the racing heritage. I also think they're cool manufacturing and their craftsmanship. These are all tremendous assets that the brand has that are extremely plausible alibis that you can tell yourself why you are buying this. Yeah, that's a great point. Even if what you're really, really doing is social signal. Or you have too much money and you truly don't know what to do with it and this seems fun. I mean, that's a lot of thing. Or you view it as an investment. That's right. Well, that is a great place to leave our story for today. We have a few

Starting point is 03:45:06 fun things here before we wrap up the episode. I've got a couple bits of trivia for you, David. I don't know if you know them. All right, I've got a couple. Is one of yours the Lamborghini stories? Yes, yes. All right. We got to tell the actual Lamborghini story here. Did you know, so the way that this story is out in the world, there is an issue of thoroughbred and classic cars from January of 1991. And it is a quote from Ferruccio Lamborghini that is in this print-only magazine. So this is the origin of the myth of the founding

Starting point is 03:45:37 of Lamborghini is in this magazine. I did not find that. That's incredible. All right, well, do you want to tell it? You give your side of the story and then I'll give the quote. Okay. So the legend out there about the founding of Lamborghini is that Ferruccio Lamborghini was a wealthy Italian tractor

Starting point is 03:45:53 magnet, manufacturer. Yeah. Who was dissatisfied with the clutch in his Ferrari that he owned, and he went to Enzo to complain about it. And here's the quote. Great. The problem with the clutch was never cured, so I decided to talk to Enzo Ferrari. I had to wait for him for a very long time. Ferrari, your cars are rubbish, I complained. Ill commendatorre was furious. Lamborghini, you may be able to drive a tractor, but you will never be able to handle a Ferrari property. This was the point where I finally decided to make a perfect car.

Starting point is 03:46:27 Now, the reality is that was an intentional attempt at myth building on the part of Furruchio. That never happened. The real story is that one of his tractor mechanics was repairing one of Frutio's Ferraris and found that some of the parts that were used in the Ferraris were quite similar to the parts that they used in the tractors and said to Frutio, like, hey, we could try making cars too. I bet we can be at least as good as this Enzo guy. I don't know. Everyone involved in these stories is long dead. It could be some of column A and some a column B. That's true. That's true. That is the legend of the founding of Lamborghini. Yes. I'll love it. All right. My second bit of trivia is not a confirmed fact, but it's something that I've been kind of thinking through. I had seen numbers floating around out there of the number of clients that Ferrari knows the name of. They say in their public reporting that they have 90,000 active owners and another 90,000 who, currently own Ferraris but haven't bought in the last five years. I don't think these are estimates.

Starting point is 03:47:33 If there's only 180,000 rows that they need in a CRM... Yeah, it's completely reasonable that they know every owner of every Ferrari. I think they have a giant spreadsheet with names mapped to serial numbers and who owns every single car. Yeah, that's crazy to think about, but completely reasonable. Because think about it, what are the ways in which they would not? not have your information. If you bought it new, they've got your information. If you bought it used from a dealer, they've got your information. If you bought it in a private sale at auction, pretty sure they can get your information. But if not, you probably want to get one of those

Starting point is 03:48:09 six to $10,000 certificates here pretty soon. Right. The classic A, yep, exactly. Which is going to involve contacting the factory. Get a new information. You know, track days. There's like all these community programs. I think they know every single owner who owns every single car. I bet they do. I bet you're right. Isn't that awesome? We'll have to ask them next time we chat with them. That's right. All right. My second and last one, I am so sure I'm going to get you with this one. The 1949 Limel that Luigi Kennedy won started a first major victory for Ferrari, example of the business model, you know, private client car, winning Lamont, et cetera, et cetera. There was another privately owned Ferrari 166 that was entered by another Ferrari client

Starting point is 03:49:01 in that very same race, the 1949 LeMalle. Do you know who that other client was? European or American? European, French. Is it a member of the Armes family? Good guess, but no. You're not going to get it. I don't know.

Starting point is 03:49:22 Pierre Louis Dreyfus of the... Oh, Julia Louis Dreyfus. Yes, yes! Of the famous Dreyfus family and Julia Louis Dreyfus's grandfather, Elaine from Seinfeld, her grandfather, was one of the first Ferrari clients and raced in LeMond. Oh, my God. That is awesome. So awesome.

Starting point is 03:49:43 So, side note, I think that is so crazy that she's like of the Louis Dreyfus family and went on to be a incredibly successful, self-made actress coming from a multi-billion dollar European generation. wealth. I mean, it's just a... It's an incredible story. It's just a crazy smash together of two worlds. Totally. All right, carve outs. Let's do it. Go watch the movie Ford versus Ferrari. It's enormously fun. I have a few random shoutouts. Maison wheat sweaters. I'm wearing one right now. I have a whole closet full.

Starting point is 03:50:17 And they have been the most pleasant. I can wear them to bed or to dinner. I'm wearing them to recording. They feel like the most flexible item that I own. And they're unbelievably comfortable, so I can't recommend Mazon Wheat sweaters enough. Oh, nice. I'm in the market for some new sweaters. I'll go check them out. Yeah, they're great. Craig Hill scissors.

Starting point is 03:50:38 Okay, wow. This is a deep cut. Cissors. Sometimes I get tricked by Instagram, as my wife says, where I'm scrolling through, and then I find, like, the perfect ad hitting me at the perfect moment for some product. I didn't even know I needed. This pair of scissors, the ad is great because it says, how come your scissors are, like, some flimsy sheet metal.

Starting point is 03:50:58 And when you cut something that's hard, sometimes the scissors split sideways. And don't you hate that when it doesn't actually cut? And the little screw is actually not positioned in the place to give you maximum leverage. We've just gotten so cheap in how we make scissors. Don't you miss the scissors from your grandma's house when you were growing up from the 50s that were like metal and like really solid? Well, we have brought those back. But with the highest manufacturing quality, the best metals, this amazing grip.

Starting point is 03:51:27 And I'll tell you, oh, and the way it slides when you squeeze them together to cut something is so unbelievably crisp, satisfying, smooth. And I bought them thinking, like, we'll see. And they're expensive scissors. It's like $50 scissors or something. And they show up. And it is everything I could have hoped for. It is the Ferrari. I'm throwing away all my other scissors.

Starting point is 03:51:48 I'm only using Craig Hill scissors forever. It's a fantastic product. And after I bought it, I actually found out the founders are acquired listeners. So thank you so much for making a delightful product. Amazing. Amazing. Wow. Okay.

Starting point is 03:52:05 I don't think I could top that. That's great. That's an all-time carpent out right there. All right. My Amazon grocery service has completely transformed groceries in my family. It launched in San Francisco a couple months ago. Oh, like at the end of your shopping journey, you just randomly start clicking and adding things to your cart. Yes.

Starting point is 03:52:24 People have been trying to crack online grocery forever. including Amazon, you know, a variety of different ways. And I've tried to... Yeah, we get Amazon Fresh every week. Yeah, you know, Amazon Fresh or Instacart or there's good eggs here in San Francisco. And, like, they all have their pros and cons. But, you know, at the end of the day, like, I mostly still went to the grocery store. Amazon has cracked it with Amazon grocery.

Starting point is 03:52:46 You just click and add stuff on whenever you're ordering Amazon. I mean, there's a parent of two small children. I'm ordering from Amazon multiple times a week. and I'm just clicking and adding on stuff for my daughter's lunches, whatever we need. You just add it on. There's no extra fees. There's no nothing. It just comes within a couple hours with your Amazon order.

Starting point is 03:53:07 It's amazing. I go to the grocery so much less now over the last couple months now that I can just click and add stuff. It's life-changing. It's awesome. All right. I have funny story about this. It just provides you like a little grid of pictures, right? It's like a little interstitial inserted before you finally

Starting point is 03:53:25 get to the checkout page, and you start tapping on the things that you want to just show up at your doorstep. I tap the picture of a banana five times because I was like, oh, I need like five bananas. And I got five bushels of bananas. Bunches of bananas. Good thing you have a toddler who, if he's like any other toddlers, you know, I assume it's a lot of bananas. A banana day. Yeah. Yeah. My second carve out is one that you mentioned a couple episodes ago. Travel Pro had reached out and sent you a bunch of. of great travel pro luggage. I bought the luggage first long before they sent it.

Starting point is 03:54:01 And they sent it because I got a lot more luggage because we used it as a carve-out. Right. Well, they also asked if I wanted someone, I said, sure. They said, hey, we want to also send you this backpack. I'm like, okay, I don't know. I love travel backpacks, but I don't know that I need another one.

Starting point is 03:54:15 I love this backpack, the travel pro altitude backpack. I've been using it a ton. I did a solo trip with my two girls. while Jenny was away on a work trip for a weekend at Legoland, and I packed for all of us in my backpack. It was incredible. I love this thing. The Travel Pro Altitude Backpack, I consider myself a connoisseur of travel backpacks. I've been through many in my life. And I've never found one so perfect as this. So thank you, Travel Pro. There you have it. Well, a huge list of thank yous that we want to give to all the great folks who helped with this episode. First to our partners this season, J.P. Morgan Payments, trusted, reliance.

Starting point is 03:54:55 liable payments infrastructure for your business no matter the scale. To Versel, the developer tools and cloud infrastructure to build and scale fast, secure applications on the web, Vurcell.com slash acquired, to ServiceNow, the platform that puts AI to work for people, servicnow.com slash acquired. To Statsig, bringing experimentation, feature flags, and product analytics into one unified system for product teams, statsig.com slash acquired. You can click the link in the show notes to learn more. And as always, the sources, books, and everything that we did for research are linked in the show notes.

Starting point is 03:55:29 Yes. And speaking of, I owe just a huge, huge thank you to Luca Del Monte, who authored the definitive biography of Enzo Ferrari and was super generous, spent many hours on Zoom with me talking through the nuances of all this history. We are incredibly appreciative of his help. Second, most importantly, to the other Luca, Luca de Montezemolo, truly a living legend who embodies Ferrari as much as anybody alive today. Thank you for taking time with us. To the also legendary Domenico de Soleil, the former CEO of Gucci and business partner of Tom Fords, who spent another good chunk of time with me helping me really understand the difference between French and Italian luxury. to Stephen Wilmot, who covers European autos at the Wall Street Journal, and wrote a great piece breaking down how the waitless work at Ferrari that we'll link to in the show notes. To our friend Doug DeMiro and to Chip Conner, who is one of the foremost Ferrari collectors in the world and gave us great perspective on the Ferrari collector community. For me, to Arvin Navarutnam at Worldly Partners for his great, great write-up on Ferrari, linked in the show notes.

Starting point is 03:56:43 Worldly Partners, for those who don't know, is a highly concentrated long-term investment firm focused on multi-decade compounding businesses, very in line with Acquired's ethos. You can learn more at worldly partners.com, and he's got the Ferrari right up there. To my good friend Matt Shobb, Ferrari enthusiast and former Ferrari owner. To Brian Lum at Bailey Gifford, really, really thoughtful investor who helped me think through all of Ferrari and really woke me up to the idea of the pyramid of infrastructure. So thank you, Brian. To Neil Kanzan, one of the OG folks at Microsoft here in Seattle, who then would have a second career actually working for Ferrari, moving to Marinello, experiencing it from the inside, working on the F1 side of the house on their technology, which was really fun to get his perspective on how the company evolved over the decades.

Starting point is 03:57:33 To Mike Miller, good friend of the show, former editor at Wall Street Journal, who really helped us research and construct this episode. and to Benedetto Vinya, the CEO of Ferrari today. Thanks to Benedetto for taking some last-minute time yesterday to run through some final questions I had before recording. To Eddie Q, who is actually a Ferrari board member, and a good friend of the show, thank you for helping us contextualize... In addition to all of his work at, you know...

Starting point is 03:58:02 Apple, fruit company, yes. And lastly, to DeLupa for their models much, much easier than digging through SEC filings. So thanks to DeLupa. If you liked this episode, go check out our episodes on Portia, Rolex, Hermes, and LVMH. You can join the email list at Acquired.fm slash email. That's where we will send our big takeaways from each episode, past episode corrections, exclusive behind-the-scenes photos we found in the research.

Starting point is 03:58:28 And it's where you can vote on future episode topics. Plus, we will give a little hint each time about what the next episode will be. David, I thought your little Ferris Bueller nod last time was quite clever. So nice work with that. A lot of people got it. I thought that, man, this is going to be really obscure. You're going to have to get more obscure in your hints going forward. Acquired.fm slash email.

Starting point is 03:58:49 And after you finish this episode, come talk about it with the other smart members of the acquired community at Acquired.fm slash slack. With that, listeners, we'll see you next time. We'll see you next time. Who got the truth? Is it you? Is it you? Is it you? Who got the truth now?

Acquired - Ferrari

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