Founders - #80 Henry Ford (Today and Tomorrow)

Episode Date: July 14, 2019

What I learned from reading Today and Tomorrow by Henry Ford.  ----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

We are being born into opportunity. For hundreds of years, men have been talking about the lack of opportunity and the pressing need of dividing up things already in existence. Yet each year has seen some new idea brought forth and developed, and with it, a whole new series of opportunities. Until today, we already have enough tested ideas which, put into practice, would take the world out of its slows and banish poverty by providing livings for all who will work. Only the old outworn notions stand in the way of these new

ideas. The world shackles itself, blinds its eyes, and then wonders why it cannot run. Take just one idea, a little idea in and of itself, an idea that anyone might have had, but which fell to me to develop, that of making a small, strong, simple automobile to make it cheaply and pay high wages in its making. From a mere handful of men employed in a shop, we have grown into a large industry, directly employing more than 200,000 people, not one of whom receives less than $6 a day. Our dealers and service stations employ another 200,000, but by no means do we manufacture all that we use. Roughly, we buy twice as much as we manufacture, and it is safe that another 200,000 are employed

on our work in outside factories. That gives a rough total of 600,000 employees, direct and indirect, which means that about 3 million men, women, and children get their livings out of a single idea put into effect only 18 years ago and this is and this one idea is only in an in its infancy these figures are given not with any thought of boastfulness I'm not talking about a specific person or business I am talking

about ideas and these figures do show something of what a single idea can accomplish. And this has matured in less time than a child matures. What nonsense it is to think or speak of lack of opportunity. We do not know what opportunity is. So that is from the introduction of the book that I read this week and the one that I'm going to be talking to you about today, which is Today and Tomorrow by Henry Ford. And this is a book that was first published in 1926. I found this book because of this idea that you and I talk about quite frequently, which is that books are the original hyperlinks.

And they link us from one idea, much like the modern web, one idea to another and one person to another. I was reading, I can't even remember which book it came from, but another founder was talking about what he learned from this book, and I didn't even know that this book even existed. I was like, wait a minute, what is Today and Tomorrow? And I've read a few books by this time, turned them all into podcasts. So if you just search Henry Ford and Founders Podcast, you could see all of them. So it was a pleasant surprise because this is another,

after reading Henry Ford's autobiography, which is My Life and Work, you see that it's, he gets right to the point. He speaks very plainly. And it's almost like a journal of sorts, where he's just, his ideas on not only the work he does at Ford, but he talks about all kinds of different topics like education and war and economics and the meaning of money and the meaning of work. And so it's like a lot of good practical knowledge for us, but also a lot of like an exposure to like his own philosophy on life, which I particularly appreciate. So let's not waste any time. let's go ahead and get back into the book and i just love this idea um that he talked about he's like listen look at what one single idea can accomplish and it's just a reminder that there's just always new

opportunities um and if you're on my email list i just sent an email to everybody on the list i was watching jeff bezos talk probably about 20 years ago. The video I was watching took place 20 years ago, rather. And he has this bizarre, and I mean that in the most flattering way possible because I never heard anybody else talk like this. He has this metaphor about the web's future. What's the internet future? And he's like, it's not the gold rush.

It's more akin to like, he calls it the electricity metaphor. And in that, he talks about like every single new idea or every new business creates two new opportunities. So therefore like we're not living in this zero-sum game anymore like Henry Ford was just talking about. He's like the opportunities out here are limitless and they're only going to multiply faster. So it's just a good reminder that there's always new opportunities. And here Ford is echoing a very similar sentiment, you know, what, 100 years before Bezos did. So he says, with the maturing of industry, a whole new world of opportunity opened up.

Think about how many doors of creative activity every industrial advance has opened. It has turned out through all the fierce competitive fights that no man could succeed That's why I'm personally skeptical about this idea that we're going to ever get to a point where technology does everything we want it to do, and we're just going to be all sitting around with nothing to do. I see no evidence of that at all in history. In fact, I see the opposite, that the more that we're able to invent new products and services and the more we're able to put different ideas into implementation, that's only going to create other opportunities

for other people to pursue in the future and future generations. Okay, so he says, and this is something that always blows my mind, because I think I talked about this on a podcast a week or two ago. And, you know, we're all trying to build things that other people can use, right? That's what a product does. It's, to quote Richard Branson,

like a business is just something that makes somebody else's life better, you know? Like your entire point of making a product is to be in service of other human beings because if no one uses it, then there's no utility. There's no like benefit that either accrues back to you or that goes first to society. But could you imagine making a product like Henry Ford did

that literally changed the geography of the world? The invention of the automobile and more importantly, the mass production of it, I guess, is what he really invented. And obviously, with the mass production and making it affordable for even like the average person to purchase, it literally changed the nature, like the natural physical world around us. It's such a bizarre idea. So he's talking about this. He says, what the motor car, and that's what he calls automobiles, does, among other things, quite apart from its own usefulness, is to familiarize people generally with the use of developed power, to teach what power is, and to get them about and

out of the shells in which they have been living. Before the motor car, many a man lived and died without ever having been more than 50 miles from home. That is the past of this country. It is still true of much of the world. And on the very same page, another idea that he's gonna um i mean he dedicates an entire chapter to this um he has this thing called a wage motive which i'll get to in a little bit but he's just like listen um wait when you're running a business like almost every single other entrepreneur we've ever talked about on this podcast he has a focus a fanatical focus

on keeping costs low and he's like has a just an innate distaste for waste, right? But he's like, you don't look at wages as a cost. You need to keep your costs low and your wages high. So he says, the workman has also had to be protected and someone invented the living wage notion. All of, and he doesn't agree with this at all. All of which grows out of a complete misconception of the entire industrial process.

So he continues, The plain fact is that the public which buys from you does not come from nowhere. The owner, the employees, and the buying public are all one and the same. And unless an industry can so manage itself as to keep wages high and prices low, it destroys itself. For otherwise, it limits the number of its customers. And I love that because it's just, I don't, you know, claim to speak for all of modern business, but I feel that most companies look at wages, especially if you think of like the ones that are rewarded on like a quarter,

like a short-term focus quarter-to- quarter basis, like one way to squeeze out profits and to artificially inflate temporarily your stock price is to push down wages. But Henry Ford's like, this is stupid. This is very short-term thinking. Like those customers, the wages you're pushing back down are not only your own customers, but customers of other businesses.

And there's no way that you can prosper with low wages. And unfortunately, I don't know if what like we're in a weird like if you think of like the weird the macro economic environment where we're just in a bizarre time in history so i have no idea how this is going to play out but i would just say that like if you're in a position where that's why i always say like the best description of entrepreneurship besides like that peter drucker quote which i really love and always reference that entrepreneurship is not an art or science to practice um the best one i've ever heard is describing entrepreneurship is really it's it's an out of money option and if you're in an environment where you think that you're not

getting compensated commensurate with the amount of skill and talent that you bring and that's what most entrepreneurs believe if not they'd go get a job because they'd be like, oh no, the market has already accurately assessed the value that I bring to society. So therefore I'm willing to take a job. That's what you're doing when you have a job. Entrepreneurs are saying, no, no, no, the market is not, is mispriced. And I'm going to prove that by delivering value and then collecting a part of that value, right? So unfortunately, if you're working for wages um which most people are you're you're at somebody else's whim you know and maybe you're in an environment where you're an industry that's growing and you have skills that you can then make other businesses compete

for that but if not like you really have no leverage and that's just a dangerous place to be um so again if if you're personally in situation, find a way to work for yourself. And if you're already working for yourself and you're hiring people, just hire, and Ford's going to hit on this over and over and over and over and over again in this book that like, if you're paying, if you're artificially, uh, if you're already artificially suppressing the wages you're paying, he's like, you're getting lower quality work. That lower quality work, you think you're saving money today, but you're really going to pay for it

much more in the long term. And again, this is just thinking that is unfortunately extremely rare in society, but extremely common in the people that were covering these books. Let's see. The note I left myself was the opposite of autopilot. Think about what you're doing i don't

know what does it mean okay what that means it says all men are not voluntarily intelligent they must be taught all men do not see the high escape from drudgery and work by putting intelligence into work they must be taught that's interesting the high escape from drudgery and work by putting intelligence in work all men do not see the wisdom of fitting means to ends of conserving material. And he always talks about material. This is such another unique idea. I'm going to say that over and over again because this guy just, I mean, it makes sense why so many of the entrepreneurs that we admire today study and admire him. You know, he's birthed so many founders that are using his ideas, and you can see why.

So he considers – I'm going to reread and start this part over in a second, but this is important. Like when he's using materials for production, right, he doesn't think of it just as like a – you know, just these natural resources that appear out of nowhere. He says you have to treat materials sacred because that's the results of others' labors. Okay, so let's go back to this. And keep in mind, this book is from 1926. He's going to use the word men. This applies to women.

It applies to everybody. It's just not – it's just, in his case, like I don't even know if he had any women working for him. So when you hear that, just in our day and age, it's people. So it said, all men are not voluntarily intelligent. They must be taught. All men do not see the high escape from drudgery and work by putting intelligence into work, and they must be taught. All men do not see the wisdom of fitting means to ends.

And he's going to talk about this. You need to start with what is your objective in business, and I'll cover that in a little bit. Of conserving material, of saving that most precious commodity, something he repeats over and over again, time, they must be taught. So he's saying, listen, really think about what you're doing. Now my own note makes sense to me. The next section, every business or product exists to serve customers. This is priority number one. Again, something something that should be if you've listened to a bunch of these uh it's you see that that um trend over and over again we look at uh we look at how a serving corporation so he talks he makes a distinction in the book different difference

between a business that's set up to serve its customer service to like the general population its customers and those serving money he hates the ones that are serving money so he considers what he's doing a serving corporation. If we look at how a serving corporation comes into being, first of all, it has to be designed to furnish some service. The corporation has to follow the service. The service does not follow the corporation. The design is what counts.

Everything in this world, to be made rightly, has to follow a design. And time spent in getting a thing right is never wasted it is time saved in the end so he has a very it's no wonder remember the podcast i did on by mark spitznagel the book the dow of capital had this huge element about listen do not just think about time as in the present you have to look at it in a spectrum and he called uh i said in if you read that book and i recommend it because it's just mind-blowing um the the classic example of how to look at time from an entrepreneur's perspective because mark is doing it as an investor he he

referenced henry ford i could have easily just taken all the quotes and passages out of that book and made an entire another he's talked about so frequently i could have made an entire another podcast just on the henry ford part um and it makes perfect sense when you study how henry ford thinks and that's another example he's like listen time everything has to do with time and then this whole idea about design i don't know who said it maybe it's abraham lincoln i don't remember but uh the famous quotes like listen if you give me six hours to cut down a tree i'll spend the the first four sharpening the ax. That's exactly what Henry Ford's saying here. He's like, listen, start with what you want to do, then put the time and effort upfront into designing it. You're not wasting time by spending time on the design. Because if you don't do that at the beginning,

you're going to pay for it at the end, and it's going to be much more costly. Okay. A simple but not easy guiding principle. The test of the service of a corporation is in how far its benefits are passed on to the consumer. So, again, focus on serving the customer, number one, and then trying to spread that benefit as much as you can. So the way Henry Ford did that, it was by lowering costs, increasing wages. And with that, he lives in a different age, obviously, than we do. You need to be a much you know, you need to have the economies of scale back then to lower the prices. Now you can do the same with much smaller companies because of the, you know, the transition that we're going in from the analog to digital.

Putting profit above service leads to inevitable death. Okay, let's see what he means here. Business must be run at a profit. I skipped that, sorry. Business must be run at a profit, else it will die. But when anyone attempts to run a business solely for profit and thinks not at all of the service of the community, then also the business must die, for it no longer has a reason for existence. The profit motive, although it is supposed to be a hard-headed and practical, is really not practical at all, because it has its objectives, the increasing of prices to the consumer and the

decreasing of wages and therefore it constantly narrows its markets and eventually strangles itself that accounts for much of the difficulty abroad he's talking about all the the like stagnation uh in other parts of the world at this time. And right there is a good maybe one paragraph description of Ford's guiding principles on how he wanted to conduct business. Ford, like many people that we've studied in history, warns us to be wary of debt. And he says, another rock on which business breaks is debt. Debt is nowadays an industry. Luring people into debt is an industry.

The advantages of debt have become almost a philosophy. And as you could guess, he does not agree with that philosophy. The debt motive is basically a slave motive. When business goes into debt, it owes a divided allegiance. This is so important. The scavengers of finance, when they wish to put a business out of the running or secure it for themselves always begin with the debt method. We talked about this last week. Why do so many people that they're already financially set choose to sell their businesses to Warren Buffett and Charlie Munger? Because they know if they sell to Warren and Charlie, they'll reap the benefit. But Warren

and Charlie want them to keep running their business. they wanted to see exist a lot of people in like let's say private equity will buy that business loaded up with debt sell it off for parts they'll make a lot of money in the process but the business dies and if you've spent your whole life think about the why this advantage accrues to people like warren buffett and charlie munger like if you spent your whole business uh your whole life's building up this business you have a uh an intimate relationship with your employees you your intimate relationship with your customers you don't want to see that happen so of course you're going to go to them and so that that advantage accrues to them all right so once on that road the business has two this is so such a good point once on that road the business has

two masters to serve the public and the speculative financier it will scrimp the one to serve the other and the public will be hurt for debt leaves no choice of allegiance business has freed itself from domineering finance by keeping itself within its earnings just good old practical old school knowledge from henry ford here this is ford on profits long-term thinking, and resourcefulness. Profits may be stupidly fixed and stupidly used. If so, they destroy their source and vanish. A business which charges too high a profit disappears about as quickly as one that operates at a loss. The duty of every manager of industry is to encourage business

by making it easy for people to obtain what they need at a price they can afford. Interesting. To hold up prices is to tax the people more heavily than a government ever could. Good management pays dividends in good wages, lower prices, and more business. It is very bad management that can see in a revival of national ambition only an opportunity to lay heavier burdens on the spirit of enterprise. This ought to be self-evident. No one who gets rich quickly stays rich. Going into business just to get rich is a waste of effort. We do have a type of business whose only objective is the swelling of someone's personal fortune. A business which exists to make one man or family rich

and whose existence is of no moment when this is achieved is not solidly founded. I love the clarity of his thinking. This is something that I definitely, speaking for myself, need to focus on and something that's really important. Let's see. Focus. The importance of focus. And so what is the focus of Henry Ford?

What was the focus of his life? We're in the motor business and in no other business. Everything that we do gets back to the motor. So that's very simple. It's really easy to make decisions. He talks about this in the book quite at length, and he gives explicit detail, like how much material he uses, how much it costs, why is he doing that. And it all comes down to, listen, we're in the motor business.

He says a car is just, we're making cars, but really what we're doing is we're in the motor business. He says, a car is just, we don't, we're not, I mean, we're making cars, but really what we're doing is we're putting wheels on motors. And I was like, wow, that's a really interesting way to look at it. So anything that comes to, like when they're making decisions, like will this decision, right, further our one goal? Our one goal is to manufacture motors. He says, we have built this he talks a little bit more about this he said we have built nothing for the sake of building we have bought nothing for the sake of buying we make nothing for the sake of making our operations all center around the manufacture of motors so sometimes you have to buy materials sometimes you have to make it yourself whatever decision

you're choosing it's all oriented around what the hell is your purpose? Why does your business exist? And it's so surprising when you look at, when you study modern businesses, and I'm sure this is true in the past too, because history doesn't repeat, human nature does. It's like they have one goal and then they get distracted

by all these other shiny things. We talked, Charlie Munger talked about this last week. He's like, don't you remember this point in history where every one oil company goes out and buys a fertilizer company? And then what do all the oil companies do? They start buying fertilizer companies. And then this whole bubble plays out and realizes I didn't need to buy the damn fertilizer company to begin with. Well, they got away from what their main goal is. So I just love that. I love that because it's a simple yet hard idea to adhere to.

This is Henry Ford telling us that we can always improve. It is one of the oddities of business that a man will cite what he has done in the past as proof of what he can do in the future. The past is only something to learn from. So he talks about this a lot of times. He's like, listen, we thought we were all cool. He didn't use that word, obviously. He's like, we thought, oh, my God, we made 3 million cars this year.

This is amazing. And then now we make 10 or whatever the number is. I'm just making these numbers up for illustration purposes because I don't have the note in front of me. And he's like, just listen, learn from the past, but don't think that's the apex of human achievement. You can improve on that constantly. And he's going to keep, a few pages later,

he keeps hitting on this point that things can always be improved the only tradition we need to bother about in industry is the tradition of good work all else is that is called tradition had better be classed as experiment what a good frame like a thing of frame for your mind when you're analyzing the past like these are just experiments these are results of experiments. There's ideas that we can take away that are good, ideas that are bad that we don't want to replicate, but it's not the end of human progress. It seems hard for some minds to grasp this. The easy course is to follow the crowd, to accept conditions as they are, but that is not the way of service. It is not the way of sound business. It is not even

the way to make money. Of course, any man may, following this line, fall into a bit of good luck and make a million or two, just as a gambler sometimes wins heavily. In real business, there is no gambling. A real business creates its own customers. I love that idea. Our own attitude is that we are charged with discovering the best way of doing everything and that we must regard every process employed in manufacturing as purely experimental. We do not make changes for the sake of making them, but we never fail to make a change once it is demonstrated that the new way is better than the old way. We hold it our duty to permit nothing, to stand in the way of progress. It is not easy to get away from tradition.

That is why all our new operations are always directed by men who have had no previous knowledge of the subject and therefore have not had a chance to get on really familiar terms with the impossible. So this is another way of, he has this famous quote that he never employs experts in full bloom and he's talking about that right here.

He's like, listen, they're always directed by men who had no previous knowledge of the subject and therefore had not had a chance to get on really familiar terms with the impossible. A lot of times experts in industry, they're experts on what is not possible based on their own collective knowledge. But when you have somebody that's just brand new, they maybe approach it from a different way that people already in the industry have not been taught, and they wind up finding these weird improvements that no one thought about. No operation is ever directed by a technician, for always he knows far too many things that can't be done. Our invariable reply to it,

to our invariable reply to it can't be done is go do it. Focus on doing one thing well. Another thing that he repeats a lot. We do nothing at all in what is sometimes ambitiously called research, accepting as it relates to our single objective. We believe that anything else would be outside our province and possibly done at the expense of our own particular function,

which to repeat is making motors and putting them on wheels our principal duty as we conceive it is to not wander from our own path but to learn to do one thing well this is a worthy way to spend your time. The true end of industry is to liberate mind and body from the drudgery of existence by filling the world with well-made, low-priced products. And there's another reminder that there's always more opportunity. What is the best way to do a thing? It is the sum of all the good ways we have discovered up to the present.

It therefore becomes the standard. To decree that today's standard shall be tomorrow's is to exceed our power and authority. Such a decree cannot stand. We see all around us yesterday's standards, but no one mistakes them for today's. Today's best, which superseded yesterday's, will be superseded by tomorrow's best. That is a fact which theorists overlook. Ford spends quite a bit of the book talking about what he believes, like, what proper business management is. So this is a good way to think about what, you know, Ford's basic thoughts on what management actually is.

We look upon industry largely as a matter of management. And to us, management and leadership are quite the same. We have no patience with the kind of management that shouts orders and interferes with instead of directing the men at their work. Real leadership is unobtrusive. Our aim is always to arrange the material and machinery and to simplify the operations so that practically no orders are necessary. This is kind of echoing that famous quote by Jeff Bezos. Like, most companies are trying to figure out how we can communicate better. He's like, no, no, the fact that you're communicating is a sign of dysfunction.

It's an actual sign that you have not communicated properly with other areas in the organization how to get what they need from you. So he says, it's much better if there was no communication. Like, what's the best customer service of a company? Never having to contact customer service. So he's kind of echoing that here. He's like, to simplify the operations so that practically no orders are necessary. Unless management begins on the drawing board, it will never get into the shop. Each man and machine should do only one thing.

And then this is Ford, his relentless focus on costs. Once we had large supply rooms and men lined up at the windows to get their tools, that was waste. We found it often costs 25 cents worth a man's time, not counting overhead, to get a 30 cent tool. With that, we abolished the central tool room. So what he does there, he just reverses. Instead of employees waiting in line to get their tools, they have a separate set of employees that bring them to him. And he goes into this whole chapters about all the different ways. They were just, again, focusing on seconds. So you could save a ton of money in the future

because of how big his operation got so it winds up paying dividends same thing with like they made everything waste height so they realized if somebody had to bend down or move or in a position like they'd work slower so again you don't you don't over optimize at the very beginning like first he started on a shop doing it rather crude. Once he got it down, then he had a relentless focus on optimization, especially when it comes to costs and time and the relationship between the two. Okay. So this is an example that founders tend to have extreme personality traits. And he's got an entire chapter he titled The Meaning of

Time. Okay. This kind of goes back to what I was talking about with the Dow Capital. And this is an example of, you know, Henry Ford's an extreme character or was an extreme character. Hiring two men to do the job of one crime, or excuse me, I stepped over the punchline there. Hiring two men to do the job of one is a crime against society. To carry a product 500 miles to the consumer if that product can be found within 250 miles is a crime for a railroad to deliver in 10 days what it might deliver in five is grand larceny this guy's serious about

not being wasteful it is not possible to repeat too often that waste is not something which comes after the fact. Restoring an ill body to health is an achievement, but preventing illness is a much higher achievement. Picking up and reclaiming the scrap left over after production is a public service, but planning so that there will be no scrap is a higher public service. Time waste differs from material waste in that there can be no salvage the easiest of all wastes and the hardest to correct is the waste of time because wasted time does not load to the floor like wasted material in our industries we think of time as human energy and the note I just left myself is one of my favorite quotes that I remind myself constantly. Don't waste time. You don't have much of it.

And this is the result of continuous improvement over a long period of time. Our production cycle is about 81 hours from the mine to the finished machine in the freight car. Our three days and nine hours instead of 14 days, which we used to think was record-breaking. Kind of see why he thinks, why he says, and he believed, you could always improve. Let's see. So this is about saving resources. It is not possible long to continue to get something for nothing, but it is possible to get something from

what was once considered nothing. So you can't get something for nothing, but it is possible to get something from what was once considered nothing. So taking a different approach. And he gives an example of saving on wood. This is at the root of our efforts to save timber. We are trying to use as little lumber as we can and here's the crazy thing so he focused on that he's like i want to decrease the amount of lumber we use but he says so we use less wood each year meaning today at the time he's writing that uh in spite of our ever-growing production so he's doing more with less and another way to think about that is getting something from what what was once considered nothing and saving on costs is the same thing as um is is the same ways

and has the same effect in your bottom line all things equal as increasing sales they're two parts of the same coin okay this is ford on the wage motive which is like his like central thesis on business um so this is going to be the long probably the longest part that I read to you, just because it unfolds over so many pages. Okay, so let's go over what the wage motive is. We are, as a matter of policy, against hard work. We will not put on the back of a man what we can put on the back of a machine. There is a difference in a man working hard and hard work. A man working hard will produce something, whereas hard work is the least productive sort of labor and one that he believes should be outsourced to machines, right? Somehow,

a deal of confusion has crept into wages, hours of work, profits, and prices. Most of this confusion traces back to an unwillingness on the part of someone to work. And so what is that? What is this confusion is caused by people that don't want to work, right? And so he describes the people that don't want to work as trying to do the impossible. That is to live without work. And now take wages. An unemployed, this is, you're going to get the central core of like his thoughts on why he keeps his wages high and costs low. An unemployed man

is an out of work customer. He cannot buy. An underpaid man, meaning you're trying to squeeze that because you think of wages as a cost. An underpaid man is a customer reduced in purchasing power. He cannot buy. Reduce wages and you reduce work because you reduce the demand upon which work depends. So he's going to continue this line of thought here. And he says, high wages with high prices do not help anyone. It just means that everything else has been marked up. But higher wages and low prices means greater buying power, which means more customers. The payment of high wages, however, is not just a matter of wishing to pay them.

So he's like, you don't get to the point where you are just by saying, okay, I'm just going to pay high wages. I could bankrupt you. You can't just wish to do it. You have to do the work necessary first to get to that point. In his opinion, it goes back to the very structure of the business itself and the idea on which it is founded. If you set out to make something which will help people, then you have to plan slowly and surely, trying out as you go along until you have what you believe is right. Then, and not until then, have you anything worthwhile making. The next step is to find out how to make it, and that is a job which is never finished. And he's going to remind you here, your employees are part of your public. If you cut

wages, you just cut the number of your own customers. If an employer does not share prosperity with those who make him prosperous, then pretty soon there will be no prosperity to share. And he continues, Fully to carry out the wage motive, society must be relieved of non-producers, meaning people that just refuse to work and contribute to society.

We need more creators than we ever did, not fewer. And now we have Ford's principles on management, or of management, rather. And he said, the four principles of management, the principles are extremely simple. They may be compressed into three statements. Number one, do the job in the most direct fashion without bothering with red tape

or any of the ordinary divisions of authority. Two, pay every man well, not less than six dollars a day, and see that he's employed all the time through 48 hours a week and no longer. Three, put all machinery in the best possible condition, keep it that way, and insist upon absolute cleanliness everywhere in order that And then in the book, he gives the example of they had to buy a railroad and they didn't want to just because they thought they were getting ripped off and they wound up being right so like well the amount of savings we would get if this is operated efficiently uh would uh would be greater than the cost to buy the railroad so we'll just buy the railroad and then he applied those principles and wind up turning the thing around okay um so this is for giving us advice like he's like listen you could apply these principles to any business and something that is important to him was, because the way I say it's important to him is because he repeats it over and over and over and over again,

is that you have to first, the very first step, you have to think about the kind of business you want. Like really spend a lot of time sharpening the ax, if you will. Think about what you want to do. And not only the product you want to make, but how you want your business to be organized so you said at first we could do little uh then gradually we could do more and more and today we are able to do a great deal although we have more ahead to do than we have behind us done we are going forward all the time

these methods are changing so constantly not not because we like changes for themselves, but because the firm policy of always striving to lower the price and raise the quality just naturally forces improvements. The question to ask oneself is not, what are the best methods for a man with a business like mine to adopt, but what am I in business for? Where am I going? What do I want to do? So he's saying answer those questions first, and then you'll figure out which principles you need to use.

And one of those principles that he believed in was that all of your actions should serve your objective. And he talks about that in the sense of making. He says, we never make for the sake of making. This, I think, answers the question of how our methods might be put to use by the smaller manufacturer. It is not the method, but the objective that controls. So work backwards. Start with what is objective? And then adopt your methods to that. Your methods are formed by what you are trying to do. They do not determine your purpose. To my mind, it is starting wrong to put methods ahead of purpose.

And in the same chapter, you're going to hear from Ford on what he thinks about competition. It is doing anything in less than the best way, not competition, that matters. If we do that which is before us to do in the best way that we know how, that is, if we faithfully try to serve, we do not have to worry much about anything else. The future has a way of taking care of itself. And I would also add, I think he's picking up there that so few people and so few businesses are run this way, that if we just focus, he's saying, listen, if we faithfully try to serve, and that's our main objective, our focus here we're serving the public and his

point the public and the customers are are the same exact thing so when he's saying i'm serving the public he's saying serve your customers and goes in both directions um you're not gonna have to worry about anything else because not only is this like a central tenet of the way he would organize business and manage them but in my opinion and i don't think he states this here although he does talk a little bit about people i don't think he states this here although he does talk a little bit about people that don't really know like he talks about some business owners are just better off um getting jobs but uh it's because this is so rare that it's so valuable and to be able to do so on such a long like a long um like a long time period is even more rare.

At this point, he's saying, what, this is about 18 years since his innovation in the Model T. So the idea that you can continue to keep your eye on that ball, your eye on that objective for 18 years is extremely rare. It goes against the normal way of our species. And I'll just close on this. This is not the longest book. If you want to pick it up, I'll even link in the show notes like I always do.

And every other book that I do is available at Amazon.com, 4-shop, 4-founderspodcast, like always. I would pick it up and read it i think it's i mean like if you if you like the way henry ford thinks and i'm assumed like you've listened to the other podcasts on ford i just don't think you can waste your time by by studying henry ford all right he says um this actually comes from the last chapter and he says let this me let be made clear. There is no way out of poverty except through work. The world has tried everything but work. And this is what I was referencing earlier about like, what is the point of what we're doing? Like, why do you want to build a company? Why do you want to build a product? Why do you want to build a service?

And he gets like he he's very capable of doing that gets right to the heart of the matter and he says industry exists to make things that people use i just love that that sentence and you know the way again what i just mentioned earlier richard branson says a business is just something a product or service that makes somebody's life easier or life better um there is nothing in business itself that necessitates failure, but men who enter business unprepared by training in its special points take failure with them. Business never fails. Only men do that. The way into business is through the door of work I love that quote

Alright and that's where I'll leave the story If you want to pick up the book I got this paperback version It's like this really tall Version It's Today and Tomorrow by Henry Ford Timeless Wisdom for a Modern Digital Age But there's a bunch of

This book's so old There's a bunch of other like independent printers so just choose whichever one that you like it's probably an audiobook version of this which i thought would be would probably be interesting um i'd imagine it's available i haven't confirmed that though um so i'll leave and if you want to buy the book obviously and support the podcast at the same time i'll leave a link in the show notes and i would say if in case you're not on my private or i keep saying private on my personal email list, my personal email list is David's Notes. I take notes on entrepreneurship just like I take notes.

So basically like when an entrepreneur speaks, I listen, I take notes, and I email you the notes. This is really all there is to it. If you aren't on it yet, let me just tell you some of the ideas. Like people that I've recently taken notes on. There's Mark Andreessen and Ben Horowitz talking about the difference of entrepreneurs today and maybe in the past. That went out. I took notes on Jeff Bezos and the electricity metaphor for the web's future, which I referenced earlier.

Bill Gurley on all things business and investing. Bill Gates on advice for founders, his mistakes in philanthropy. An interview with Patrick Collison, the founder of Stripe, who's a really unique and interesting thinker. Another podcast on Bill Gurley on why the abundance of capital

is today's biggest challenge and the right way to think about market size when assessing opportunities Peter Thiel on monopolies, entrepreneurship and society Matt Molenweg the founder of WordPress on the operating system for the open web which I found interesting Charlie Munger's commencement address he did about

15 years ago on USC interview a podcast with Elon Musk talking about Tesla and autopilot. Very fascinating. Another video titled Running Your Startup by Patrick Collison again.

Notes from Naval Ravikant's appearance on the Joe Rogan Experience, which is really fascinating. That's actually a really long note. Marc Andreessen on change, constraints, and curiosity. It just goes on and on and on and on. I have over 5,000 individual notes in the archive if you want to go look at that. But anyways, you can just go to davidnotes.substack.com. I'll leave a link too. You can go through the archive if you want. It's that that url for such archive but if you just want me to email you the notes every time i do notes um then join that email list thank you

very much for your support i have uh something coming just for misfits uh soon and um it's just additional podcasts i'm going to be doing in addition to the every other one that you guys are getting exclusively. I'm doing the history of American technology from 1976 to 1980, 18 or 1860. Maybe I don't have the book in front of me. Do I? No, I don't have the book in front of me. So that that's coming. And then I'm doing, Oh my goodness. I got myself in a pickle here, man. I'm doing all the Berkshire Hathaway shareholder letters, and that's going to be just for you guys as well. So that is a monster. That is, I don't want to, if I had to guess, and I don't know for sure, but I'm pretty sure that's going to be the longest podcast I've ever done by a long shot. And of course, that's only going to you. Thank you very much for your

support. Thank you for listening, and I'll talk to you next week.