Founders - #119 The Dodge Brothers

Episode Date: April 5, 2020

What I learned from reading The Dodge Brothers: The Men, the Motor Cars, and the Legacy by Charles Hyde.----Get access to the World’s Most Valuable Notebook for Founders by investing in a subscription to Founders Notes----This is the story of two small town machinists who became enormously successful automobile manufacturers in the early years of the auto industry [0:01]Early life and first jobs [3:02]Moving to Detroit: Arriving at the right place, at the right time, with the right skill set [6:28]Horace Dodge is a gifted engineer like Henry Royce (Founders #81) was + Inventors and bicycle manufacturers [12:00]How The Dodge Brothers first described their business [16:40]Doing work for Ransom Olds, Founder of Oldsmobile [18:20]Crucial decisions in the early days of the company [23:33]In a gold rush don't dig for gold. Sell pick axes [24:44]The Dodge Brothers almost bankrupted Ford for lack of payment [28:22]The Dodge Brothers got very rich off of Henry Ford [33:28]Why and how the Dodge Brothers built their own car [36:00]Comparing The Dodge Brothers organizational structure with that of Ford and GM [41:00]The Dodge Brothers view on advertising [43:04]How and why they worked so well together [46:13]A bond so tight it could only be separated by death [50:58]Their greatest accomplishment [52:01]----Get access to the World’s Most Valuable Notebook for Founders by investing in a subscription to Founders Notes----“I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested, so my poor wallet suffers.”— GarethBe like Gareth. Buy a book. It's good for you. It's good for Founders. A list of all the books featured on Founders Podcast. ----Founders Notes gives you the ability to tap into the collective knowledge of history's greatest entrepreneurs on demand. Use it to supplement the decisions you make in your work.  Get access to Founders Notes here. ----“I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — GarethBe like Gareth. Buy a book: All the books featured on Founders Podcast

This is the story of two small-town machinists who became enormously successful automobile manufacturers in the early years of the auto industry. At the start of the Ford Motor Company in 1903, the Dodge brothers supplied nearly every car part needed by the up-and-coming auto giant. After 15 years of operating a successful automotive supplier company, much to Ford's advantage, John and Horace Dodge again changed the face of the automotive market in 1914 by introducing their own car. The Dodge Brothers automobile carried on their names even after their untimely deaths in 1920, with the company remaining in the hands of their widows until its sale in 1925 to New York bankers and then the subsequent purchase in 1928 by Walter Chrysler. The Dodge nameplate has endured, but despite their achievements and their critical role in the

early success of Henry Ford, John and Horace Dodge are usually overlooked in histories of the early automotive industry. Some historians continue to understate the importance of John and Horace Dodge to the automobile industry. This book is the first scholarly study of the Dodge brothers and their company, chronicling their lives from their childhood in Michigan to their long years of learning the machinist trade, and then examining their influence on automotive manufacturing and marketing trends in the early part of the 20th century. Hyde, that's the author's name, details the brothers' civic contributions to Detroit, their hiring of minorities and women, and their often anonymous charitable contributions to local organizations.

Hyde puts the Dodge brothers' lives and accomplishments in perspective by indicating their long-term influence, which has continued long after their deaths. The most complete and accurate resource on John and Horace Dodge available, the Dodge Brothers uses sources that have never before been examined. Its scholarly approach and personal tone make this book appealing for automotive historians as well as car enthusiasts and those interested in Detroit's early development. Okay, so that was an excerpt from the book that I'm going to talk to you about today. And I think also describes exactly why we should spend time studying it. And that book is called The Dodge Brothers, The Men, The Motor

Cars and the Legacy by Charlie Hyde. Okay, so I talked about this last week, and over the next few weeks, I'm gonna do a multi part series. So last week, we started with my 40 years with Ford. And I want to focus on all the pioneers of the automobile industry that birthed out of the state of Michigan in the early 1900s. So today, we're going to talk about the Dodge Brothers moving forward. We're going to cover people like the founders of GM, Cadillac, and Chrysler, and any others I discover along the way. So for today, I'm going to start, let's start right with their early life, tell you a little about that. And I'm going to focus mostly on their career, because this is a biography of the Dodge brothers. But I would say the majority of the book is actually a biography of the Dodge

company. And there's just a lot of detail in here, I think that we're going to find interesting. All right, so let's go to the book. Early early on he says the brothers grew up in a family that included a father and two uncles who were machinists by trade they were two fiercely independent but inseparable red-headed brothers even at an early age the brothers showed independence and initiative a willingness to work hard and mechanical abilities they were the product of perfectly respectable lower middle class family that was supported by a skilled machinist. And so that's the way to think about Dodge Brothers. Yes, they were entrepreneurs. Yes, they were investors. They made tens of millions of dollars off their investment in Ford Motor Company. But by trade and how they thought

about themselves was machinists. They thought of themselves even when they were fabulously wealthy, they were more comfortable around regular working class people because that's who their family was that's who they were so let's go into a little bit about their for like their early life and their first jobs what did they do before they started studying the machinist trades so it says john and horace worked hard as youngsters and showed a good deal of ambition and initiative. John, as a young boy, John drove a cow three miles twice a day and earned 50 cents a week for his efforts. So he was cattle herding. As a teenager, John carried heavy sacks of bran from railroad cars to riverboats for 50 cents a day. That's the late 1800s we're talking about. I want to give you an example of what I think is their, probably their strongest trait is that they had exceptionally gifted mechanical abilities.

So here's an example of some of the early mechanical abilities I just mentioned. And also an illustration that the Dodge brothers, like many of the people that we've profiled and analyzed on this podcast, they're relentlessly resourceful. And so we see that it says the Dodge, the Dodge boys exhibited glimmerings of the mechanical genius, even as youngsters. When John was in high school, his schoolmate, Fred Bonney, was the first person in their city to own a high wheel bicycle. So think of like the large wheel on the front and a tiny wheel on the back. Bonney's family was wealthy and the bicycle supposedly cost $200. So at that time in their lives, they could not spend $200 on a bicycle. So they made their own. John and Horace fabricated their own high wheel bicycle from scrap. They fashioned the high wheel by hand and used the wheel from a baby carriage for the small rear

wheel. They proudly rode their homemade creation around town for two years and it worked as well as any store-bought model. Keep that in mind because the first business they actually create before the Dodge Brothers Machinery Company is a bicycle company. They actually are granted in the late 1800s, granted a patent. We've seen this in a few other examples like the Wright Brothers and some other people that we've talked about on the podcast where the bicycle industry in the late 1800s was huge. So a lot of people that wound up moving on and becoming pioneers in other fields got their start in the bicycle industry. The Dodge brothers were an example of that as well. So I'll get there in a minute. I want to tell you a little bit more about their early career. John and Horst honed their skills as machinists. So this is the first

jobs they had as young men taking after their their uncle and their father john and horace grant honer john and horace dodge rather hone their skills as machinists from 1886 to 1900 first they were working for other people and then eventually opening up their own shop when they did work for other people they moved up into the ranks as foremen and superintendents so i'm going to get to the founding of dodge Brothers in a minute, but there's a lot more to cover before them. So something I find fascinating is this idea that there's just certain cities and certain geographical locations, let's put it that way, even before cities,

and certain types of history that are just a hotbed of activity in one particular industry. So the one I always reference over and over again is the fact that Enzo Ferrari thought he was a beneficiary of the fact that he lived in Modena. He says the people in the city that he was from had a special psychosis for racing cars. And so he was able to build some of the best racing cars in the world because the talent pool that was already there,

people were already, they were a collection of misfits. They were extremely passionate, enthusiastic about what they were doing. Well, Detroit in early 1900s was full of people that wanted to build horseless carriages. So they wind up moving from a small city outside of, in Michigan, outside of Detroit to Detroit. And the note I left myself was like, part of understanding the Dodger Brothers stories, understanding that they arrived at the right place at the right time with the right skill set. And we're going to see how they leveraged all being lucky in those situations to build their automotive empire and become fabulously wealthy through multiple different ways, which is really fascinating, too.

So it says when the family arrived in Detroit in the spring of 1887, John was 22 and Horace was 18. In 1887, Detroit was a mid-sized city of about 200,000 people with an industrial base that included scores of foundries and machine shops. That's what you would need, the raw materials you're going to need to make a car, right? Over the next 14 years, the Dodge brothers became accomplished machinists, experienced managers, and successful businessmen. They came of age professionally in detroit um interesting enough one of these so they worked at a series of different shops machinist shops as they continue to hone their trade and one of the places they worked manufactured replacement parts for typography machines right when they the reason i'm telling

you that is because when they eventually open up their own machine shop, they will do the same thing. They'll actually manufacture replacement parts for typography machines, and then they'll also manufacture other special purpose machinery, and they build steam engines for boats. Eventually, they discover, oh, wow, it's way more lucrative to dedicate all of our time to the automotive industry. Now, I want to bring this to your attention because this is just fascinating to me. Their careers are intertwined with several of other automotive industry pioneers. So let me give an example of just one of these, and there's a bunch in the book. And this is another example of this idea that I always talk to you about, that books are the original links. that lead us from one idea to another, just like, you know, the modern links on the internet

do. And in this case, like I discovered a bunch of people that I maybe had a vague understanding of, but then they were made explicit how important these individuals were to the early development of the automobile industry. And so here's an example of one of them. It says, okay, well, let me give some background first. And this is important to understand. So John suffered from severe chronic coughing. He's the older brother, which was soon diagnosed as tuberculosis. He was unable to work for several months.

During John's disability, Horace worked part-time at the machine shop of Leland, Faulkner, and Norton to help cover John's living expenses. So John's rendered sick to his bed. Horace has got to work to support him, right? Now, this is who he was, one of the people he was working for. It becomes really important. Horace no doubt gained valuable experience working for Henry Leland, who had brought to Detroit the high standards for accuracy already attained in the machine shops of Leland, who had brought to Detroit the high standards for accuracy

already attained in the machine shops of Leland's native New England. So you see this transfer of skills and knowledge from one geographical location being routed to where it's going to be served best. It's a lot more valuable. Those skills are a lot more valuable applied to the automotive industry in Detroit than they are in New England. Now, Henry Leland is the eventual founder of Cadillac and Lincoln. What is also really interesting, the more I read about the early automotive industry in Detroit than they are in New England. Now, Henry Leland is the eventual founder of Cadillac and Lincoln. What is also really interesting, the more I read about the early automotive industry is how many of these companies that they founded still survive to this

day. You're talking about over 120 years later. That's very, very rare. Okay, so we're going to talk about Leland and other people more in a little bit. The reason I jumped on the Dodge Brothers first is because I was attracted by their wild and crazy personality. They're just wild people. Dodge Brothers are heavy drinkers. They're not only extremely gifted machinists and entrepreneurs, but they drink, they get into fights, they just, they go crazy. Also, you know, part of what makes them fascinating and interesting to study. And so we're going to see a little bit about their aggressive nature here, even before they had a reason to be aggressive. The Dodge brothers came to the plant to see the superintendent, Mr. Piper, looking for work for both.

Piper said that he only that he wanted only one man to which John Dodge replied. We're brothers and we always work together. If you haven't got room for two of us neither of us will start and that's that piper agreed to hire the pair and as you can imagine from this this short sentence what i'm about to tell you you probably already caught on to john was the more aggressive and hard-working of the two brothers both drank heavily on weekends but they usually drank with each other apart from others. And so that's another way to think about the Dodge brothers. And I'll talk more about that in a little bit. They did not really think of themselves as independent people. They thought of themselves as one cohesive unit. So I want to tell you a little bit more. So John is like the loud, aggressive, like, you know, the one that's pushing, right? Horace, I'm going to compare and contrast later. He reminds me a lot of Henry Royce, the gifted engineer responsible for the high quality products that

you see from Royce Royce, where, you know, he let other people run other areas of the business, just like Royce did. Horace is focused on engineering. And we see this here because Horace is the one that invents and patents an improved bicycle bearing in 1896. And then he has his brother on there to share the patent with him. And so this is how they wind up becoming inventors and bicycle manufacturers before they opened the Dodge Brothers machine shop. Okay, so it was an improved bicycle bearing. His innovative design had the advantage of being dirt-proof and offering a smoother ride with less effort. As a note, I left myself as the one I just already said to you.

Horace reminds me of Henry Royce. He was a gifted engineer. He just wanted to focus on that and let other people run the other parts of the company. He was no nonsense, and he's just focused on craftsmanship. So that's how I want you to think about Horace Dodge in your mind. So they team up with another guy, this guy named Fred Evans, and they manufacture the Evans and Dodge bicycle from 1896 until 1900. Let me tell you a little bit about this guy, Fred Evans. Fred had already been manufacturing bicycles before he became business partners with

the Dodges. He's got some good ideas from their bike company, one of which is to go where your competitors are not. At this time, Canada, believe it or not, was like the main center for bicycle manufacturing. Evans and Dodge Bicycle had great success in the market in part because Fred Evans was a good salesman. His company was the only Canadian bicycle manufacturer to exhibit its wares at the New York Cycle Show in February 1897. So he takes an advantage. He goes and he's the only Canadian company there. He spent 10 days. This is why I bring this up. He spent 10 days at the show and reportedly sold 50 wheels to dealers in Philadelphia and additional ones in New York City. So they're selling the Evans and Dodge bicycle that they made to people to resell all throughout the Northeast United States at the time.

And then this is another really smart move that we've seen other people apply to different domains and different industries. To promote sales of their bicycle, they promoted the use of bicycles generally. They offered bicycle riding instruction. Instruction was free for people that owned Evan and Dodge bicycle owners or people that owned them already had a bike that they purchased from them, but cost others $2 for five lessons. Okay, so moving on. Sometime in 1900, the Dodges sold their interest in bicycle manufacturing and returned to Detroit to open a general machine shop under the name Dodge Brothers. Now, what I found really interesting and kind of humorous when I was reading this book, because it blew my mind, one thing that influenced their decision to sell

was that Evans and other people, they wind up, there was a Canadian bicycle cartel. They rolled up a bunch. We've seen this throughout history. Go back to my podcast I did on Cornelius Vanderbilt, John D. Rockefeller, every other industry at this time, they would consolidate,

they'd roll up a bunch of independent companies into one giant cartel so they could control prices. Well, guess what? This was happening in Canada and there independent companies into one giant cartel so they could control prices. Well, guess what? This was happening in Canada. There was this gigantic Canadian bicycle cartel. So it says the Dodge brothers sold their interest for $70,500 and established their own machine shop. Their stint in Canada gave them much needed experience as machinists and as managers. They saw how you build a rather large company.

Instead of selling machine services or eventually cars, you're selling bicycles or manufacturing bicycles. The Dodge brothers used the proceeds from the sale of their interest in CCM, that's the cartel, to open their own machine shop. I just said that. John was 36 and Horace was 32 years old. So, you know, they moved to Detroit, what were they, 1822, something like that. So you have a good 10 or more years of gaining experience before they finally open their main business, right? And so think of the careers of John and Horace in steps. One, they have a small, relatively modestly successful bicycle manufacturing business, right? Then they have a very successful machine shop. And then later, right before they die, a hugely successful automotive car manufacturing. That's

where they make their own car. Okay, so we're going to go over that. Let me tell you, I'll, you know, why do I spend so much time talking about the early days of companies. I find it fascinating because, you know, their Dodge is now a gigantic company, sells, you know, hundreds of thousands, what, millions of cars right now. But you had to grow into that. And it's very fascinating. You go back and you see how before they were the Dodge brothers, as we know them now, they were just, you know, in their thirties trying to figure things out so this is how they describe themselves the very first ad what i'm going to read to you right now is the very first ad of the dodge brothers company and they said they're builders of simple compound triple and quadruple expansion marine and stationary engines we also build and repair

any kind of machinery we do all kinds of difficult punch, dye, and tool work. We do internal, external, and surface grinding, milling, gear cutting, and punch press work. In short, we are prepared to do any class of work that can be done in a first-class modern shop. So clearly, we see from that little text ad how they thought about themselves. And also interesting, at the very beginning, hey, I need to take any job. I need to keep the lights on here, I got to take any job, you'll see over time, they narrow their focus to eventually they're they only producing for Ford before they jump ship and do their own car. Okay, they're also very successful getting press. If you remember, I think it was on founders number 25. James Dyson would tell you that editorials are more valuable than advertisements. And that's how what he would use to sell a large percentage of his vacuum cleaners instead of spending money ads.

So Dodge Brothers are using the newspapers in Detroit at the time to publicize the fact that they're selling services. And people that own that want to build cars, read this, and then they go to the Dodge Brothers. So it works. The Detroit Free Press ran a lengthy feature article on Dodge Machine Shop in September 1901 and praised the operation enthusiastically. It may be truthfully stated that the plant of this firm is one of the most thoroughly equipped and up-to-date in the city. The newest ideas and everything that can in any way assist them in their work have been adopted. So one of the people that find out about the Dodge brothers is another person that's extremely important in the early automotive industry, and that's Ransom Olds. He's the founder of Oldsmobile. It says by early 1901, the Dodges had their first

automotive contract. They were to manufacture engines for Olds Motorworks. That was the name of the company at the time. Now, I want to tell you more about Ransom Olds because he's an important character in the story of the founding of the automotive industry in Michigan. He may be the single most important person at the very beginning. It says Ransom Olds was in many respects the founder of the Michigan automobile industry and the most important early automotive pioneer in the United States. He because he came first. Right. He became experimenting with steam powered carriages around 1887 and produced several prototypes. He decided to focus on gasoline engines after visiting the Chicago World Fair in 1893.

Remember, 10 years after this guy's building his gasoline engine is when Henry Ford decides to build his. Ransom Olds introduced the first gasoline-powered carriage in June 1896. And he began manufacturing them for sale in June 1896, and he began manufacturing them for sale in his Lansing, Michigan factory. This was the first American automobile to sell in significant numbers. Now, here's why I bring him up to you, because Ransom Olds influenced many future car company founders before they were car company founders. And we've seen this in other domains as we continue to study the history of entrepreneurship. Founders are constantly influenced and borrow ideas from other founders. So you can tie, let me give you an example of some of the most well-known founders

today. You can tie the career of Steve Jobs directly to other founders like Edwin Land of Polaroid, Bob Noyce of Intel, and David Packard and Bill Hewlett of HP. You can also tie the career of Jeff Bezos directly to Sam Walton of Walmart, Jim Sinegal of Costco, and sole price of Price Club. That is why it's so important to study the history of entrepreneurship. All right, back to the book. More important, the Olds Motorworks attracted the future automotive pioneers with substantial contracts for automobile components, and it was the training ground for other automotive leaders. It's not just list off all these people. The Olds motorworks provided the first automotive contracts for

the wilson body company these are all people that eventually build their own cars now remember last week i told you we went from like 2 000 automobile manufacturers down to three in the united states over let's say a 70 year period something like that so a lot of these people you may never heard of but at one time they had their own companies. So the Wilson Body Company, the Hyatt Roller Bearing Company, Dodge Brothers, the Leland and Falker Manufacturing Company, who I just told you eventually became the founder of Cadillac and Lincoln. During their brief time in the old motor works was in Detroit, employed future automobile entrepreneurs, such as Jonathan Maxwell, who started the Maxwell Motor Car Company, and Roy D. Chaplin, who started Chalmers Motor Company and then the

Hudson Motor Company. Okay, let's go back to the Dodge brothers because these guys are really, really fascinating. I want to tell you a little bit about how they worked so we have an idea of what was important to them, what made them successful, and a little bit about what their personalities were like. So again, now we're using as a reference an early article written in the newspaper in Detroit in in the 1800s says the author of the article was particularly impressed with the orderly efficient way in which the shop was laid out and managed perfect order prevails no unpleasant orders oh so let me give you an example they're extremely precise people as you can imagine as a machinist over multiple decades

you have to be right perfect order prevails no unpleasant unpleasant odors or burnt oil are perceptible. No pounding of loose jointed machinery jars up the nerves. And the numerous employees have an orderly and neat appearance that is decidedly refreshing. The result was high quality precision work that came as a result of using machine tools with skill and care. So what can you take from that? The Dodge brothers would tell you that whatever you do, you just do it better than anyone else that should be your goal that was their goal the dodge brothers were the first to establish in detroit a machine shop this is i'm quoting from the article now were the first to establish in detroit a machine shop of the type where really close and accurate work could be done they installed machine tools of a size and character that nobody else in

detroit had the courage to consider. That's another thing. They were huge risk takers. When we get to numbers, they became rich, right, off of Henry Ford. But the amount of investment they had to make before Henry Ford paid them a dollar was considerable. And without taking that huge risk, they wouldn't have been rich. So I'll get there in a minute. More on how they worked and managed. The brothers, of course, would prioritize hard work and then they were hands-on managers. They were always present at the start and end of the workday. When John Dodge was not working as a machinist along with Horace, he was scouring the city for more orders. The two brothers routinely locked up at the end of the day, went out for a sandwich, and then returned to work until midnight before finally going home.

This is the first two years of their machine shop. They're on very shaky ground. As you can imagine, they had to work these hours. They would spend time planning the next day's work, preparing blueprints, making estimates, preparing the accounts, and sending out letters to customers or suppliers. John Dodge estimated that during the first two years of the company, they spent a total of only six weekday evenings at home. Okay, so I want to go over some crucial decisions in the early days of the company. There's going to be two I want to bring to your attention real quick. It says, once the Dodge brothers began making automobile components for ransom olds and Henry Ford, they specialized almost exclusively in automotive work.

But until that happened, they took almost any work that was offered to them. Now, at the beginning of their automotive work, they make two big decisions. The first, they find their plant, and plant's a generous term for it, was inadequate for their needs, and they had to build a larger factory, which means they had to risk a lot of money. But they built, because they had to build a larger factory, which means they had to risk a lot of money. But they built because they had to build a factory before the orders come in. Okay, so that's the first smart thing they did. The second thing is the Dodge brothers made a second major decision,

more risky than the first, but ultimately a brilliant one. They agreed in February 1903 to become the major supplier of components for Henry Ford before the current Ford Motor Company even existed. Remember, Henry Ford had two failed motor companies before he finally was successful in his third one. And the third one, the beginning of the third one was extremely shaky. And the Fords play a huge role in that. As a supplier to and a major stockholder in Ford, and I'll get to how they became a major stockholder in a minute, the Dodge brothers quickly earned profits and dividends much greater than expected. Now, I want to pause here.

This is a lesson, one smart move to do that we see that happens throughout history is everybody in Detroit that in a gold rush, you don't dig for gold. You sell pickaxes. That's the smarter move, right? Everybody in Detroit at this time wanted to build an automobile. So what did the Dodge brothers do? They don't build the automobile yet. They sell pickaxes. This sentence gives you an illustration of that. The Dodges became suppliers for the Detroit automobile industry.

They're selling the raw materials for what the automobile manufacturers need to make their cars. It's just really smart. It gives them a huge advantage. All right. Now, and then another lesson I got from this book is sometimes you're granted an opportunity from random tragic events. They're outside of your control, but you can still benefit from them. One of this is following a disastrous fire that destroyed Moser's factory, Ransom Olds was forced to rely more on outside sources. So he can no longer produce a lot of the materials he needed for his cars longer produce a lot of the materials he needed for his cars, and the result of the fire was that there was more work for the Dodges.

So now, let me tell you, this is hilarious. The size of their larger, put it in quotation marks, factory. And to me, this is just a reminder that it should be super motivating for us all. A reminder that all new ideas start small. So here is the description of the Dodge brothers' larger factory.

The city of Detroit issued a building permit for a two-story brick building. It was 50 feet wide and 138 feet long. Okay, so now let's get into the Dodge Brothers and Ford. I'm going to try not to duplicate a lot of what I covered in past Henry Ford podcasts, okay? But this book has way more detail because there's a series of notebooks and other things that were preserved and it has a lot more detail on like the actual early financials between the two companies between dodge brothers and henry ford both before they became the dodge brothers and before they came henry ford right ford motor company would make payments of five thousand

dollars to them on march 15th on april 15th and then with the first delivery of their first 60 machines so they're they're making i think the estimate somewhere between 60 to 75 percent of every single component of the ford motor car okay so it says if ford failed to make the required payments the dodge brothers would could sell all unsold machines and keep the proceeds this provision would have would have at least left Dodge Brothers with some assets to sell. They needed to do that because they put out like 60... I think I'll find the numbers in my notes. I'll go over them here in a minute. I think it was like $60,000 before they got a dollar from Ford. So a lot of money, right?

All right. So this provision would... Okay, I already just said that. The Ford Motor Company struggled to... I put this in bold. This is so important. The Ford Motor Company struggled to make all of its early payments to the Dodges. It's important for two reasons.

One, because you're talking about $5,000. The Ford Motor Company winds up becoming a billion-dollar corporation. Henry Ford prints money, but not at the beginning. He can't even come up with five grand. Now, the second reason it's important because he had a hard time paying the bills. Dodge takes stock. They own 10% of the Ford Motor Company,

which makes that eventual decision, makes them tens of millions of dollars. The Dodge brothers delivered the first machines to Ford's buildings. Oh, this was hilarious. Check this out. The Dodge brothers delivered the first machines to Ford's buildings,

conveying them on horse drawn hay racks. Then when I left myself was one technology destined to displace another really crucial time in history is fascinating. So this was very surprising. The Dodges almost bankrupted Ford for lack of payment. If this would happen, Ford's companies basically killed in the cradle, right? To begin production for Ford, the Dodge brothers spent more than $60,000 for retooling and raw materials before receiving any revenues. Huge risk, right?

They had trouble getting paid from Ford right from the beginning. The Dodge brothers met with Alexander Malkusen. He was somebody working with Ford. In mid-March, 1903, and demanded immediate payment of the first $5,000 due to them. They made it clear that they expected to receive the of the first $5,000 due to them. They made it clear that they expected to receive the next payment of $5,000 that was due on April 15th. Malcolmson admitted

to the Dodge brothers that he did not have the money to pay them. They, in turn, threatened to take ownership of the machines and sell them, as their contract permitted. Malcolm returned that afternoon to the Dodge plant with Henry Ford and another potential investor. We don't need to worry about his name. They were trying to woo. On the heels of the visit to the Dodge Brothers machine shop, this investor invested $10,500 in return for 105 shares in the company. This last minute infusion of capital kept the Ford Motor Company afloat and kept the Dodges in the fold. If this didn't happen, both of the Dodge, the futures of the Dodge brothers and Henry Ford would have played out vastly different.

That's fascinating. A reminder to us that the early days of companies are tenuous. Okay. Now, here's a smart move by the Dodge brothers that I just referenced earlier. This, because the stock is later going to turn into tens of millions of dollars. With the Ford Motor Company habitually behind its payments, the Dodge agreed in June 1903 to write off overdue payments of $7,000 and extend Ford an additional 3,000 credits. So what are they giving them?

Essentially giving them $10,000 for 10% of the company. And in return, receive 10% of the Ford Motor Company stock. It's a hell of a return on investment. Okay. Later, we know from covering past Ford podcasts, Dodge brothers are forced to sue Henry Ford because Henry Ford's not paying out the dividends and he's using it to expand his plant, okay?

So I want to fast forward in the timeline before I reverse in the timeline, but Dodge is going to recount details of this 1903 contract in testimony that he gives a 1916 lawsuit to try to force Henry Ford to distribute the profits to them, to the stockholders, right? So he says, this is very interesting. He estimated the Dodge brothers invested between 60 and 75,000 in machinery materials to start production for Ford. John Dodge admitted, we had a rather foolish contract or we would have compelled them, meaning the Ford Motor Company, to pay over much more.

We were not as wise then as perhaps we should have been. Or put another way, we all grow into it. We don't know what we don't know. We're forced to grow into that. John Dodge had to grow into who they became or he became. Horace Dodge had to grow into who he was going to become. Henry Ford had to grow into it. Everybody has to grow into who they are. And that's another way John is saying, hey,

we didn't know what we didn't know, but it wound up working out for us. Okay. So I want to give you some examples. Another example, there's a lot of example of the violence of the Dodge brothers. They're just wild people. In another incident, Ford's tester, this guy named Rockleman, went to the dodge plant to complain about the about them shipping engines with loose flywheels when he threatened to stop accepting the machines they were shipping the dodge brothers nearly started a fistfight with rockleman that's you know wild times but we also see other aspects of their personality where they if they realize that they're wrong they'll change course so it says according to rockleman once he provided the hole drilled in the flywheel was too big for the crankshaft that it was supposed to accept,

they were gentleman enough to apologize and said they would correct that. At this point, when they're manufacturing a lot of parts for Ford, I want to give you an update on to what a typical work week at the Dodge Brothers plant would consist of. 10-hour days Monday through Friday and 5-hour day on Saturday. So 55 hours a week. Now, eventually Ford, listen, there's no dullards. There's no idiots here in the early days of the automotive industry. Ford's very shrewd and smart.

So is the Dodge Brothers. So eventually Ford realizes, hey, I want to become less dependent on the Dodge Brothers. That's good for him. But it also eventually becomes good for the Dodge Brothers because this will push them to make their own car. So it says the Dodge brothers made the entire Ford car, except the body wheels and tires. And now we see slowly over a series of years, I'm going to read these years to you and you'll see Ford adjusting this. Smart move for him, smart move for the Dodge brothers. In 1904, Ford assembled the model b with with more parts built by suppliers other than the dodge brothers henry ford was keeping his options open

and applying leverage to the dodge brothers at the same time smart strategic decision should yes he should have done that 1905 ford announced his intention of producing a large share of the needed engines and transmissions in house 1906 the the Ford Motor Company for the first time manufactured a substantial part of its component requirements. So it's still about 10 years before Dodge Brothers start their own car company, but we see little by little, they're going to have to be forced to move in that direction. Now, something to understand about the Dodge Brothers, they got very, very, very, very, very, very rich off Henry Ford. Dodge Brothers earned substantial profits from the Ford contracts and more importantly, so they're making money as a subcontractor for Ford and also receiving substantial dividends from their Ford stock. I want to go over the dividends

because it also shows how fast a company can grow. These05, $200,000. 1906, nothing. 1907, $10,000. 1908, $500,000. Huge jump. 1909, 3.6 million. 1910, 2.3 million. So within six years, they go from 98,000 a year to millions of years. John and Horace together collected one-tenth of the total and were no longer the struggling businessmen they had been in the first years of running their machine shop. Yeah, they will soon be even richer. By 1910, John and Horace Dodge were wealthy men. They had accumulated the trappings of wealth, especially the large homes they both enjoyed. So this is what I was referencing earlier when I said they achieved their success in a stepwise fashion. It says they had merely plateaued in their climb to much greater success and fortune.

An enormous new manufacturing plant was to serve as the jumping off point for the next stage of their illustrious careers. And that's the plant. They're not only going to use the plant first to make more parts for Henry Ford, but also to make their own cars. All right. This gives you an idea of the size of the Dodge Brothers operation. While Dodge Brothers were still manufacturing parts exclusively for Ford, the Hammertrack, I don't know, that's probably not how you pronounce it, plant became a large operation by any definition.

The annual part production was impressive. They could make a quarter million transmissions, 225,000 rear axles, almost 200,000 front axles, 200,000 crankshafts, almost 900,000 connecting rods, and half a million universal joint knuckles. They'd also been able to manufacture two dozen other parts in numbers exceeding 200,000 units. So a giant operation. The Dodge brothers manufactured 60% of the total value of the Ford cars produced between 1903 and 1914, including the legendary Model T. So there is no Henry Ford without the Dodge brothers. there's no dodge brothers without henry ford give you an idea as you can imagine they moved

rapidly so this is horace dodge complaining about how subcontractors work slowly i must say that i'm thoroughly disgusted with them they seem to think it makes no difference with them whether they finish the work this year or next as long as they get it done dodge brothers were a lot of things dumb was not one of them so we see this he says they worried about their near total dependence on ford recognizing that he would eventually manufacture all of his own components just like it was a smart strategy for to take over control smart strategy for the dodge to take their their fate in their own hands now we got to the part where they're going to start building their own car there's a lot of different theories out there why they made that decision or how they made the decision, rather.

This is the one I'm most familiar with. It says, for John Horst Dodge, the decision to break with Ford and manufacture their own car was not simple. Okay, that's a lot to think about in that simple sentence. Think about it. It could not have been easy since how much money they made, so much money from Ford. This decision might be the most impressive thing they ever did. The Dodge brothers' decision to build their own car seemed like a logical step for them to take after making parts for Ford for 11 years.

They believed they could greatly improve Ford's car without driving up its price. But Henry Ford had rigid refusal to consider improvements to the Model T and that further discouraged the Dodge brothers to strike, or encourage the Dodge brothers to strike on their own. Now, Theodore McManus, whose advertising firm had Dodge brothers starting as a client in 1914, provides a more personal version of their decision to break with Ford. McManus recalled a meeting between the Dodge brothers and their lawyer, this guy named Howard Bloomer. Bloomer asked them point blank, why don't you build your own car?

John Dodge explained that they enjoyed lucrative contracts, meaning they're making a ton of money, with Ford and hefty stock dividends, and besides, they didn't want the aggravation of having to sell cars. Bloomer reminded the Dodges that their total dependence on Ford could prove costly to their business. It was a point of failure. The following day, they resumed the discussion and both John and Horace conceded that Bloomer was right. This also shows that they're smart, driven individuals. They have full belief in themselves,

but they're also receptive to good ideas from other people. That's just an intelligent way to live. So they finally break from Ford. Their original investment of $10,000 in the Ford Motor Company in 1903 yielded a total return of $32 million. Wow. After the legal battles ended, Henry Ford and the Dodge brothers had a remarkably cordial relationship, an appropriate finish for a business partnership unlike any other in the American automobile industry. This is another example of how fast

they moved. Over a remarkable 18-month span, John and Horace Dodge designed and produced an entirely new automobile, introducing a proud new nameplate that has survived to this day. While continuing to fulfill their contract to supply parts and components to Ford until June 1914, the Dodges simultaneously reworked and greatly enlarged their existing manufacturing facilities to produce their new car. They also created a national sales organization and a network of franchise dealers to sell their automobile all from scratch. There's some notebooks that survived from this time that decels the excessive amount of work involved. So let me read what we found out from those notebooks. We can see the size and complexity of the work from this surviving set of notebooks, containing materials relating to the purchase of raw materials and components for the Dodge Brothers car, along with information on the containing materials relating to the purchase of raw materials and components for the Dodge Brothers car, along with information on the design of components

and the purchase of machinery to manufacture the parts. It contains detailed costs and quality estimates for components ranging from frames, wheels, tires, bearings, piston rings, and ignition systems, and from more than 100 potential suppliers. In short, this is the main point what the author is telling us, these notebooks are a primer on launching a new automobile. Fascinating.

This is the answer to the question. How did the Dodge brothers build a factory to build their own car so quickly? All the while servicing the needs of a gigantic and growing Ford motor company. It's really, really impressive if you think about it. He had asked the works manager, Frederick Haynes,

how Dodge Brothers were able to get such an enormous plant built and into operation so quickly. The manager of the plant explained, chiefly because the Dodge Brothers themselves own the plant. If we had been obliged to get permission from a board of directors, from banking interests, from outside stockholders, for the expenditures of millions that we've put into these new buildings, the new machinery and new processes, it couldn't have been done things go smoothly when the actual owners are right in the factory and are most enthusiastic of all in having the best that's hugely important

you had the they they not only did they control the company they control the money there is no they don't go get outside approval it's like i where was this i'm trying to think what what what book i was reading i did i covered on the podcast where oh it was i'm pretty sure it was jeff bezos when they were he hired he i don't have in front of me so let's just go off my memory and hope i'm read correct okay he hired a bunch of people from walmart to expand the the initial like amazon warehouses and so this guy realizes guy realizes, hey, we need a lot bigger for the demand that we have to fulfill. We need a lot bigger warehouse network

or whatever the case is. So he's talking to Jeff about this one day. And it's a considerable investment and relatively short conversation. The guy says something like, okay, well, I need approval to get this done. And Jeff goes, jeff's goes you just did go do it and that was it and he went i think it was like 300 000 square feet or something like that it was something gigantic like that again just so when one person's in charge one person has the all the the authority they need

things can go super fast now i want to tell you more about the advantage that dodge brothers enjoyed from this simplified ownership ownership and cost. And I want to compare the Dodge Brothers organizational structure right now with that of Ford and GM, because I think this is really fascinating, can be applied to your own work, and works in other industries, right? It says, placing the lives and careers of the Dodge Brothers in perspective can be accomplished by comparing them with the contemporary auto industry pioneers, meaning people that were also doing the same thing at the same time. Their management style in running Dodge Brothers was quite distinct from that of contemporary auto industry giants such as Henry Ford, Billy Durant, and Alfred P. Sloan.

So primarily they're comparing and contrasting Dodge with Ford and GM, okay? Their management style reflected their equal partnership in this venture and the relatively simple nature of the enterprise. Unlike Ford, Durant, and Sloan, the Dodges enjoyed full ownership of Dodge Brothers from the beginning. Never borrowed from banks and neveran, the Dodges enjoyed full ownership of Dodge Brothers from the beginning. Never borrowed from banks and never had to consider stockholders or a board of directors in making business decisions. Managing the Dodge Brothers operation was in many respects simpler than at the competitive firms. Production involved only one factory after 1910. In contrast, Ford Motor Company operations included two major manufacturing facilities and 14 assembly plants.

The constantly evolving General Motors Corporation included hundreds of manufacturing and assembly plants spread all over North America. Now, when I read this, remember what Steve Jobs taught us. The further you get away from one, the more complexity you're inviting in. The Dodge brothers understood that intuitively. By dividing up the tasks and responsibilities for those tasks, John and Horace Dodge stayed out of each other's way and thus avoided duplication of efforts and conflict. Neither of the Dodge brothers was autocratic in the fashion of Henry Ford. The contrast between the management styles of the Dodge brothers and that of Billy Durant could not be greater. Durant was mainly a financial tycoon, a free-willing manipulator of stock and companies who combined scores of automobile, truck, and component manufacturers in 1908 to form General Motors.

I'm going to read his biography soon. He was a dealmaker who seemed indifferent to the profitability or efficiency of his creations. He had no interest in the day-to-day management of General Motors. His field of dreams was not found on the floor of the assembly plant, like the Dodge Brothers, but on the floor of the New York Stock Exchange. Okay, this is hilarious. This is the Dodge brothers view on advertising. It also tells you a lot about how they manage their business. So they can meet this advertising executive

because they need to do advertising for their new car. When McManus arrived, John Dodge immediately revealed his attitude toward advertising. Horace and I go into the factory and sweat blood to save a tenth of a cent. And you fellows turn right around and throw away 10%. McManus, impressed with John Dodge's honesty, began thinking about promoting the new car as honest and practical,

much like the brothers themselves. Just a reminder that it's never too late to do something new. At the introduction of the first Dodge Brothers car, John Dodge was 50 and Horace was 46. Also important to note that there's many different strategies that can work. An example of this is Dodge Brothers took an entirely different strategy than Henry Ford on pricing. Unlike Henry Ford's practice of almost continuously lowering prices on the Model T Ford, the Dodge Brothers prices rose over time, reflecting the various improvements incorporated into new models

when asked about the difference in price john dodge said just think of all those ford owners who will who will one day want an automobile that's a bit of trash talking dodge brother style oh let me give you more of their style more of like john dodge he's definitely the one that the author talks about the most because horse is just just, you know, kind of, he's the creative genius just trapped in his lab, innovating. And John is out there, you know, kind of pushing the pace with his gigantic personality. So like most other manufacturers at this time, they have to make supplies for the war. The government compels them to, right? This is World War I we're talking about. And from this story that happens, we're going to know a lot about his personality.

In the fall 1917, the U.S. Secretary of War Newton Baker searched for an American manufacturer to produce delicate recoil mechanisms for two French heavy artillery pieces. No one had ever manufactured these delicate recoil mechanisms outside of France. John Dodge met in Washington, D.C. with the secretary of Warbaker and a delegation of French manufacturers who offered to send their skilled machinists. Now think about this. Remember at the beginning, I told you they primarily thought about themselves as skilled machinists. This delegation of French manufacturers who offered to send their skilled machinists to Detroit to teach the Dodges how to make the device. John Dodge replied in angry and earthy language that he and Horace needed only brookrints to begin machine production.

Secretary Baker responded. Look here, Mr. Dodge, I'm not accustomed to being spoken to in that kind of language. John Dodge replied. The war would be a hell of a lot better if you were this guy's wild i love it at the time and then i'm going to skip over this part but let me just summarize this part of this this section for you the french were able you know they're like we're going to send our skilled machinists we're going to teach you how to do this right they never made more than five of these things a day the dodge Dodge brothers were at their peak, were able to make five times that, 24 a day. So skilled machinists, they definitely were.

Dodge brothers were bad. You know what? Okay. Let's talk about how and why they worked well together. Maybe we could take some of their ideas and lessons and apply to our own lives, right? Throughout their careers as independent businessmen, the Dodge brothers made all their important decisions together. They did have a basic division of labor in their work and maintained separate offices at opposite ends of the factory. John negotiated contracts, managed the firm's finances, directed sales, advertising, and public relations, and he served as a general administrator of the company. Horace was the mechanical genius who designed the products Dodge Brothers manufactured and many machines used in their operations. He organized and managed production. The shop floor was Horace's domain.

This is why I tell you he reminds me of Henry Royce. He was responsible for the engineering and designing of the Dodge Brothers automobile and for the design of scores of other machines needed. In describing Horace's mechanical inclinations, one biographer noted, his office was literally a museum of parts, past and present, and perspective for dodge brothers cars he was constantly scheming improved details new processes new methods and always building new machinery i love this guy he never lost touch of the craftsman let's let's go that's fantastic i never

lost touch with craftsmanship and could never let machinery alone the atmosphere of the shop as he entered it would cause a noticeable change in his bearing. Outside, he was quiet, reticent, and could even be termed shy. But within the four walls, he was the master of the domain. Within the four walls of the shop, he was the unquestionable master of the business. A little bit more about their personality long after they became extremely wealthy john and horace dodge felt more comfortable among ordinary shop floor workers in the factory than with detroit's business and social elites john's instruction that the pallbearers at his funeral

would all be ordinary shopmen is but one indication of this okay Okay, now I'll use the word pallbearers. One of the craziest things about their lives, and a reminder to all of us that we don't know when our time is coming. They died early. And the time I'm recording this, it's kind of spooky because we're going through a pandemic. They died of Spanish flu. So, this is shocking.

The story of John and Horace Grant ended tragically in 1920 with their deaths. In January 1920, John and Horace had contracted influenza, which quickly developed into pneumonia. By this time, influenza was beginning to reach epidemic proportions in the United States. So, this is the Spanish flu that killed an estimated 50 to 100 million people from 1918 to 1920. Because of, I'm not going to go into detail because I'm sure you have enough, you're inundated with enough of this.

This is just a history and business podcast. So you obviously don't come here for current events. I just read this book, though, if you're interested in using history as an indication of what we can expect now. It's called The Pale Writer. It is a biography of the Spanish flu. I highly recommend reading that book. I listened to the audiobook a few weeks ago.

So anyways, in that book, you learn that Spanish flu killed an estimated 50 to 100 million people between 1918 and 1920, John Dodge being one of them. Horace gets it too. He dies a few months later, but it's also he had complications in the liver

and some other stuff that probably contributed to his death. So it says, Horace gets it too. He dies a few months later, but it's also he had complications in the liver and some other stuff that probably contributed to his death. So it says, Horace slowly recovered, but John's pneumonia worsened. Having lungs previously ravaged by tuberculosis only made the struggle more difficult. He died on January 14th at the Ritz-Carlton Hotel in New York City with Horace at his side.

He was 55 years old. Oh, I got to the part of this book and it's gutted. The Detroit Free Press observed at the time of his death, the community could only afford to lose John Dodge. He was a citizen who counted. He's one of the big forces in making of modern Detroit. And there's every reason to believe that if he had lived the next 10 to 15 year period, would have been time of his greatest accomplishment undoubtedly that's probably true because there's six years into building their own car horace did not now this is this is man horace did not survive the year chronically ill with influenza and psychologically devastated by john's death he saw no reason to live this this is this is heavy he offered additional

insight into his state of mind. The passing of my dear brother John is to me personally a loss. This is a hard time reading the sentence. Okay. The passing of my dear brother John is to me personally a loss so great that I hesitate to look forward to the years ahead without his companionship. Our lives having been, as you know, practically inseparable since our childhood.

He died on December 10th, 1920 at age 52. Didn't even last, you're talking about 10 months later, 11 months later, he died. When you really think

about this story, the note I left myself, this was a bond so tight it could only be separated by death. The brothers insisted that male directives to business be addressed to Dodge Brothers or they would return it unopened. They would not accept letters sent to either of them as individuals. This practice reflected the fact that they saw themselves as one.

This is a great story that illustrates how wild they were, but also how much they loved each other. According to one legendary story, the two were drinking at the bar and began to argue about where they would take their jointly-owned $300,000 yacht for a cruise on the upcoming weekend. John wanted to go north from Detroit into Georgian Bay. Horace preferred to cruise south into the Thousand Islands. John proposed that they flip a coin for sole ownership of the yacht Horace won the coin toss John conceded that he would now have to go to Thousand Islands but Horace insisted that since John was now his guest he would take his brother to Georgian Bay they loved each other man

they just they loved each other okay this is a good this is where I'm going to close on their greatest accomplishment Okay. This is a good... This is where I'm going to close, on their greatest accomplishment. Over the final seven years of their lives, John and Horace Dodge transformed their company from the largest supplier of automotive parts

in the United States to a large-scale producer of a popular mid-priced car of their own design. Their formula for success was quite simple. They had complementary skills, interests, and personalities, while they genuinely understood and liked each other. They remained honest and fair to their customers and employees alike. Their company survived and prospered after they died, and later became a core component of the Chrysler Corporation. With their passing, the automobile industry and the

greater Detroit community acknowledged their automotive significance and their important civic and charitable contributions as well. It was not the mere physical fact of brotherhood that welded these two together. It was a bond that had in it something of strange depth and purity and fineness. Something that transcended the usual brother bond. For the brothers loved each other as friends. They were friends. I'll leave the story there. That's 119 books down, 1,000 to go. If you buy the book using the link in the show notes, you're going to be supporting the podcast at the same time. Stay safe, and I'll talk to you again soon.