We Study Billionaires - The Investor’s Podcast Network - TIP135: Henry Ford & the Secrets of his Success w/ Christopher Whalen (Business Podcast)

Starting point is 00:00:00 You're listening to TIP. Hey, how's everyone doing out there this week? We got a very exciting episode for you. One of the people that we have never covered is the one and only Henry Ford. And if Henry Ford was around today and you took his net worth and you looked at it from an inflationary impact here in 2017, Henry Ford would be worth $199 billion. That's twice as much as Warren Buffett. So to say his impact was huge would be the biggest understatement ever.

Starting point is 00:00:35 But there's a little catch with Henry Ford. And our guest today, his name is Christopher Whalen. And Christopher Whalen has done a ton of research on Henry Ford and what it was that made him so successful. And I think when you hear this interview, you're going to be very surprised because it might be a little bit different than the history that you studied maybe in your high school history class or your college history class. class because some of the facts that Mr. Whalen's going to disclose today are going to really surprise you about Henry Ford. In this episode, you'll learn the true and fascinating story about Henry Ford and the Ford Dynasty. We will learn how this great company was built and has lasted for more than a century, perhaps

Starting point is 00:01:18 not because of the Ford family, but just as much despite the family. Our guest will teach us that contrary to popular believe, Henry Ford didn't invent the assembly the line. It was Charles Sorensen, the lead engineer, and we learned how we could attribute Ford's early success to James Cousin, who ran Ford Motors, and how Alan Mullaley saved and made the company what it is today in the 24th century. In other words, this is the story about the Ford men, the men not known to the public, but the men who made Ford Motor Company what it is today. You are listening to The Investors Podcast, where we study the financial market. and read the books that influence self-made billionaires the most.

Starting point is 00:02:03 We keep you informed and prepared for the unexpected. All right. So like we said in the intro, we have Christopher Whalen here with us, and he's the author of Ford Men. And we are really, really excited to talk to you about this because Henry Ford and all the individuals surrounding him is just a topic that we have never covered. And we're very excited to cover this. So, Chris, thank you so much for taking time. of your busy day to join us today.

Starting point is 00:02:36 That's my pleasure. It is a great story. All right. So let's go ahead and kick off the interview with this question here. So one of the common themes that we see with many modern billionaires is some sort of driving force or interest that propels the individual to form a desire for extreme performance. What would you say was the driving force behind Henry Ford? Henry Ford's vision was of creating a horseless carriage, a wagon that had a gasoline. engine. Everybody in Ford's community in that turn of the century period in Detroit, Michigan, worked at a wagon factory. They worked in it around the business because those immigrants came down

Starting point is 00:03:19 to St. Lawrence Seaway and they disembarked from their ships. The first thing you had to do was get a wagon to take you and your goods and your family to wherever it was you were going. That whole area of the United States had been opened up for the logging industry and natural resource exploitation, and the waves of immigrants who came thereafter really determined why Detroit became a center of transportation. If you think, why did the auto industry end up in Detroit? It was because most of the major players, Henry Ford, the Dodge Brothers, many, many others, all worked in wagon shops initially. So Ford gets this idea of a gasoline-powered car, or wagon, if you will, after he had spent a lot of time talking to his friend Thomas Edison.

Starting point is 00:04:08 And Edison said, no, don't use electricity the way the European automakers had tried to do. It's better to use gasoline. It's more compact as a source of energy. So did Edison have a bigger role than what you just described? Talk to us about how much of a role he played in all of this. Well, Edison and Ford were contemporaries. They were close personal friends. And Ford always gravitated to very intelligent people.

Starting point is 00:04:36 He was the sort of man who took his own counsel. He didn't take advice from anybody. But for somebody like Thomas Edison or Harvey Firestone, another very close friend, you know, these were the sorts of people that Ford looked up to and associated with. He traveled with them extensively. They all had homes down in Florida, for example, and they would travel back and forth, which was quite an undertaking in those days. So, you know, he definitely was influenced greatly by Edison,

Starting point is 00:05:06 although he later said that while Edison was one of the great inventors of all time, he was also one of the poorest businessmen. He sold General Electric and put his money into another endeavor, which did not turn out. Isn't that so common, though, with a lot of the inventors? That's kind of neat to see that, you know, time really doesn't change too much. Yeah, but the fortune of Ford was made. because of the other people around him, because automobiles were in such vast demand

Starting point is 00:05:35 that you could make just about anything and put four wheels on it, and people would buy it. There were dozens of car companies, and slowly they got consolidated and bought out and everything else. And Ford survived, in part because of the people who worked there, but also because of the grace of God. Henry Ford almost destroyed the company several times, and it's one of the themes in the book is just that it was only the Ford men the managers people like Charles Sorensen and many others who kept this thing on track

Starting point is 00:06:08 but it survived through World War II and the Great Depression and the various crazy things that the great creator would do from time to time you know he was an imperfect man he was a lot like Steve Jobs if you compare the two personalities are very similar And one of these men, one of these Ford men you're talking about, Chris, that would be James Cousson. And he perhaps probably not received the recognition that you should have. He was basically the person who was the driving force and handled all the daily operations at the first decade of Ford Motor Company. So could you talk about that rivalry between the two and why he ultimately decided to leave the company? Well, James Cousins was a clerk for a coal dealer named Malcomson. and Malcolmson was essentially the private equity investor who started Ford Motor Company. Ford wasn't an officer of the company when it started because it had two business failures.

Starting point is 00:07:05 The second company he was associated with would later become Cadillac, part of General Motors. And so when they invested in this third enterprise and basically was built around Henry Ford's idea to bake a car, They had to be kind of quiet about it because Malcolmson was afraid his bankers would get upset if they found out he was associated with Henry Ford. Ford was a racer and a tinker who was not known as somebody that, you know, was reliable in a commercial sense. So cousins had to watch Ford because the bankers insisted that Malcolmson stayed with his coal business to secure the loans that supported Ford. and a small group of people put their money together and helped to capitalize a company, including cousins. He borrowed money from his family members.

Starting point is 00:07:57 The Dodge brothers were early investors, Horace Dodge. And it got started, but Cousins was the man who insisted that they were there to make money and to sell cars. If it had been up to Henry Ford, he would have tinkered with his invention endlessly. And Cousins wouldn't have any of that. So one day he just said, I'm putting an ad in the newspaper.

Starting point is 00:08:17 were selling cars. And sure enough, the orders started to come in. So they had to build cars to sell to these people. And initially, very early on, Ford didn't even have a factory. So the Dodge brothers, who were the great parts makers of that era, actually sold hits to Ford with Ford specifications, which were then assembled in this building in Detroit that they used as their first factory.

Starting point is 00:08:44 And that's how the company got started. It was just a bootstrapped kind of entrepreneurial endeavor, but one that didn't have enormous amount of planning or guidance. That's really one of the lessons from this book is luck is very important and chance. And also just being in the right place at the right time. Because you could have sold anything, as I said before. There was such an enormous acclaim and demand for cars in that first decade of the 20th century. You could have literally sold anything.

Starting point is 00:09:15 In fact, the investors in Ford Motor Company got all their money back in the first year. The profits were exponential, and they just went straight up from there. Let's take a quick break and hear from today's sponsors. All right, I want you guys to imagine spending three days in Oslo at the height of the summer. You've got long days of daylight, incredible food, floating saunas on the Oslo Fjord, and every conversation you have is with people who are actually shaping the future. That's what the Oslo Freedom Forum is. From June 1st through the 3rd, 2026, the Oslo Freedom Forum is entering its 18th year, bringing together activists, technologists, journalists, investors, and builders from all over the world, many of them operating on the front lines of history.

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Starting point is 00:13:36 Wow. And so how much do you think was luck and how much do you think was really hearing forward skill in attracting the right people. And the reason why I asked this is, it's not only James Cousson what we're talking about now. It's also, you mentioned before, Charles Sorensen, engineer basically running a company for 40 years or so. Well, I'm not sure that Henry Ford picked the right people. I think they picked him. It was a case that he had a reputation as someone who had an idea about building cars. And other people came together around him and formed this enterprise. And many of these people would be driven off later by Ford as he slowly got rid of all

Starting point is 00:14:18 of the original shareholders, eventually James Cousins leaves in 1915. And by the time you get into 1920s, Henry Ford's basically running the company by himself. He makes his son Edsel president. And Edsel has, you know, limited authority. And Ford basically ran the company as a plantation. with no planning, no board of directors, no governance, no auditors. I mean, a company didn't have audited financials for the first 50 years of its existence. So, you know, it was very much of a dictatorship built around the great man, and he also was quite distracted. He got involved in politics, and, you know, he opposed America's entry into World War I,

Starting point is 00:15:04 made it very clear that he was on the side of Germany. You know, just he was a man that paid. attention to everything but running the company. And it was only because of a series of managers, people like cousins and others, that the thing continued. But again, that demand for cars is what pulled it forward. But the trouble was that Ford's vision was very set in stone. It was not flexible. So as, you know, you get into the 20s and the 30s and you'd have general motors growing and offering all sorts of new products. Henry Ford had one car. He built, the Model T until 1927.

Starting point is 00:15:43 And by then it was hopelessly obsolete, but he believed that it was the only car people needed. And it only came in one color, black. So Christopher, after spending so much time researching the stories for your book, what was the most surprising thing you uncovered? And what was the main learning point from that discovery? The real interesting vignette about Henry Ford did very few people know, and which always struck me as a student of finance, is the role he played in the Great Depression.

Starting point is 00:16:14 Ford and Cousins, when they parted company, still lived in Detroit, and Cousins became the senator from Michigan, very involved in politics. Cousins, I believe, was probably the one who raised wages. It wasn't Henry Ford. Cousins was haunted by his wealth and the fact that it had exploded in such a way

Starting point is 00:16:34 by the time he got into politics and whatnot, he was worth 40, 50 million dollars. Yeah. And that was just the multiplicative effect of the board success. It was just enormous. Everyone involved in that company became enormously wealthy. So Ford was very much antithetical to America's involvement in Europe in World War I, and he was also opposed to American involvement in World War II. and he was very vocal about this and it really became at loggerheads with both President Hoover and FDR.

Starting point is 00:17:11 And in the early 30s, after the great crash, the banks in the U.S. were in a lot of trouble, and the banks in Detroit in particular were in a lot of trouble. Herbert Hoover tried to convince Ford, but Ford said, no, to hell with all of you, I'm going to take my money out of the bank. This was in February of 1933, and Henry Ford was one of the wealthiest men in. the country and certainly probably the biggest deposit in U.S. banks. So the governor of Michigan found out about this and declared bank holiday. And three weeks later, when Franklin Roosevelt took office in March of 1933, every bank in the country was closed. That's because of Henry Ford. And I often wondered, I said, how is it possible that Henry Ford could do such

Starting point is 00:17:56 a thing and we never talk about it? And the reality is, it's kind of buried in Hoover's memoirs. It's also discussed at length in the memoirs of Jesse Jones, the head of the Reconstruction Finance Corporation. And, you know, all of these men and cousins, too, tried to reason with Ford and just, you know, Ford said, oh, well, if, you know, the world goes to hell, I'll rebuild by myself. And that was such a ridiculous statement because his wealth and his success had come about because of the help and the work of many, many other people. And it was a very revealing episode in Ford's life. It showed just how myopic and how selfish he could be. But, you know, on the other hand, he was probably right. Putting money into a bank that was going to fail

Starting point is 00:18:42 anyway, wouldn't have been a very good idea. How do you think that Henry Ford really got the reputation? Because I've got to be honest, before reading your book, like I guess I had the same impression like most people, like he was this great businessman, this great thinker, and who really made all this possible, and it seems to be a lot of stories untold. Do you think he was very aware of his own reputation, or was it more like the Ford Motors would also have an interest in building on his reputation because it's a part of the brand? Well, the Ford Motor Company, the public relations, people, some really great ones who work for Ford over the second half of the 20th century, certainly burnished the history. And while Henry Ford is the creator, I think it's important to realize

Starting point is 00:19:30 that there's an awful lot of people that comprise this story over the years, many managers, people like Robert McNamara, for example, who came in with the Wiz kids right after World War II. And the first thing they had to do was assemble a financial picture of the company. The company had never been audited. It had no financial records. No, it was a completely blank slate. So they had to go in there, figure out what the company owned, where all these assets were, try and assemble a financial picture

Starting point is 00:20:01 so that eventually they did a public offering in the late 50s not because the company needed to raise money but because the Ford family had to engineer a way to get around the confiscatory estate taxes that FDR had put in place during his term in part because he wanted to get people like Henry Ford. Wow. A really interesting story.

Starting point is 00:20:26 And if we should continue this discussion about what happened in the mid and late 80s. Because it's really hard to talk about the Ford Motor Company without discussing Fort ETSL, which is today still regarded as one of the classic examples of how not to launch a product. So could you please tell us the story about this horrible, horrible product launch of the new car

Starting point is 00:20:50 and what we can learn from their mistakes? Well, the ETSO was an effort to create an upmarket product for Ford. because coming out of the war years, they still really only had entry-level products. So if you were an executive and your first car was a Ford, you would not necessarily go and buy a Ford when you were making more money and you were more successful. In fact, quite the opposite. You would probably go buy a Chevrolet or an Oldsmobile or something like that because General Motors had half a dozen different product offerings. Ford had one. Now they had the Lincoln.

Starting point is 00:21:29 The Lincoln they had acquired. It was very expensive, well beyond the means of most Americans. So there was nothing in the middle. And the ETSA was an effort to try and put a slightly more expensive, fancier vehicle in place. But the execution was horrendous. And in particular, the way that they handled the organization of the product and the dealers who were going to handle it and all the rest of the rest. if it was just a mess. And this was a failure that was to a large extent owned by Ernie Breach

Starting point is 00:22:03 and also by Robert McNamara to very significant executives during this period. And, you know, basically they didn't plan it. They didn't execute it right. They should never have named it after Edsel Ford. That was a terrible thing to do. But they were kind of pandering to the family. And this was unfortunately something that you find throughout the story, the tension between the managers on the one hand and the Ford family on the other. And the family should have said, no, don't name it after Edsel. And the sad thing is that the Edsel vehicle itself was not that badly conceived. And there were a couple of variants of it that were sold under the Mercury brand going forward. They didn't get the recognition that they should have gotten. But the trouble was

Starting point is 00:22:51 the immediate execution and the launch of the Edsel car was so bad and the products were not well made. They had doors falling off and all sorts of things. So you had this really, really bad start and Ford immediately pulled back and killed the program. If they had stuck with it and fixed the problems and tried to get it right, I think it might have succeeded. Let's take a quick break and hear from today's sponsors. No, it's not your imagination. Risk and regulation are ramping up, and customers now expect proof of security just to do business. That's why VANTA is a game changer. VANTA automates your compliance process and brings compliance, risk, and customer trust together on one AI-powered platform.

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Starting point is 00:26:48 It was not a simple product for the consumers. And the distributors were perhaps the group that was even more confused, four different models, or was it not four different models? And it was very difficult to basically communicate with the buyer. What is it really that you're getting? And why should you buy this car? Would you agree that it was really a marketing disaster more than anything? It was a marketing disaster.

Starting point is 00:27:10 They hadn't defined the price points and just where this vehicle fit in in the marketplace. They had a couple different variants of the Edsel. And they also cannibalized their dealer network. Henry Ford II at one point was thinking in terms of creating a whole new dealer network for the Edsel. But that really wasn't possible. They just weren't people out there that were looking to open Edsel dealerships. it wasn't enough. So they basically piggybacked on the existing dealers,

Starting point is 00:27:43 and they were not terribly enthusiastic about this. And it was just, there were a number of different errors that were all strung together in a series that came together to make this quite a flop. But as I say, it was a good idea to come out with a mid-priced vehicle to go along with the entry-level vehicles that Ford had. But it really was just so poorly executed. that it's rightly thought of as a disaster.

Starting point is 00:28:11 All right. So the next question that I have is one of the chapters in your book is titled, Never Complain, Never Explain. Without giving away the whole premise of the story, talk to our audience about what the mindset and general culture that Ford would cultivate within his organization. Henry Ford II had to grow up very quickly. He didn't really have much of a childhood.

Starting point is 00:28:33 He was in the Navy, young man comes home. and because he is the Ford, the next generation, he had to immediately take over and run the company and try and gather the managers and the other people of talent around him that could help him accomplish this because such was the legend of Ford and the enormous esteem that the family had in the public mind, that it was really impossible for anybody else to take over.

Starting point is 00:29:05 you know, once his grandfather had died and, you know, the family was looking to him to save their fortune and save the company. And that's what he did. And so he was, you know, at times a little sophomoric and he got in some trouble. He was out with his mistress one day in California drunk driving and, you know, got arrested. And he basically used that term to explain why he wasn't going to make any explanations. but I think it was very appropriate for the auto industry because the auto industry grew up on a regular basis and they never complain and they never apologize.

Starting point is 00:29:43 And you saw that with the Ford Explorer and with other product defects. But it's certainly, that phrase certainly, Henry Ford II very well, Henry the Deuce, as he was called. Yeah. So let's talk about Ford Motors here in the 21st century because it was definitely not an easy time that they have, and it seemed like things were only getting worse after the 2000.

Starting point is 00:30:08 In 2006, they reported a 12.7 billion loss, and the new CEO, Alan Mulali, was under intense pressure to restructure the company. Do you think you can tell us a story that symbolizes the financial side of the restructuring, and perhaps even more importantly, a story about the changes in the corporate culture for a motor's experience during those years? Well, the interesting thing about Malawi, he had been at Boeing, a very talented executive, but the board passed him over for the CEO slot. And John Thornton, the Goldman Sachs partner, who was on the board of Ford Motor Company, found Malayle, along with a couple other directors, because they realized that Bill Ford, you know, smart as he is, really didn't have the credentials to run the company.

Starting point is 00:30:57 And the company was facing a terrible crisis in the early time. 2000. But what they did was they hired Malawi. They went out and they raised 20 billion plus dollars and they effectively restructured the company without filing bankruptcy. They didn't want to file bankruptcy the way GM and Chrysler did because that would have meant that the Ford family would have lost their super voting shares. They have shares that have a 10 vote margin compared to the normal common shares. And they succeeded. They literally had to hawk every asset that the company had and Belaely, you know, who had come from the aircraft business and had no particular emotional attachment to automobiles fixed it. But he not only fixed the company, he at least

Starting point is 00:31:41 temporarily fixed the culture. And that was a big problem at Ford. And it's still a problem today, which is you have the managers on the one hand who run the business, understand the business. And then you have the family on the other hand that has the vote who control the business. but they don't make cars. They don't have the competency to be operators of a business. You would never hire any of them to run a business if their name wasn't for. And that's kind of the dichotomy

Starting point is 00:32:12 that I deal with throughout the book and that I end the book with is that you had Malaley there for a while, fixed the business, restructured the company, wonderful success for him. But then he leaves, in part because if he had stayed, he would have probably been too influential

Starting point is 00:32:30 and he might have threatened the family's control. To me, that's what's interesting about Malay. He could have easily stayed on, but he didn't. I think that says it all. Hmm. That's a really interesting story and perhaps also why Ford Motor Company is facing the problems that are today.

Starting point is 00:32:48 All right, Preston, I see you have the next question here. So, Chris, many of the people that are listening to our show own their own business and are looking for key lessons that they can take away and put into practice into their own lives. What would you say the key learning point would be from Ford men that they could take away? I think it's a couple of things. First, successful businesses need luck.

Starting point is 00:33:09 You need to be in the right part of the business cycle and any new business particularly to take advantage of the kind of demand. As I said, you could have sold anything if it had four tires on it. And all the automakers took advantage of that. Later on in the 80s and the 90s, when the American automakers were confronted by the imports to Japanese, and then later, Korean cars, cars from all over the world, they've really struggled and they've had to remake themselves. And then finally, obviously, I think the tale of Ford men is about being able to gather the talented individuals you need as a team. And it wasn't about one man.

Starting point is 00:33:53 It was really about a whole succession of people, some in the family, some not. But together they made it work. And that, I mean, is the key lesson of the book. Very interesting. Before we conclude, could you please share with the audience one of the most influential book you ever read and explain why it's been profound for you? And it can be related to Fort Menor, it cannot. Oh, boy, that's a hard question.

Starting point is 00:34:20 I'm sitting here in my library. which book shall I tell you about? I think probably one of the books I mentioned earlier, $50 billion, my 13 years at the RFC by Jesse Jones. That's a book that really early on opened my eyes to how America got through the Great Depression and how important it was

Starting point is 00:34:41 that when businesses failed, they had to be fixed. They had to be restructured. They had to be recapitalized. Jesse Jones came from, Texas, went up to Washington looking for help. And Herbert Hoover said, fine, you're staying, and put him on the board of the RFC. Even though at the time, Hoover really didn't know what to do with the RFC, he knew the economy was in trouble. So he didn't have the data and the insight to really know exactly what he should do. Jones stayed on when FDR won the election. In fact,

Starting point is 00:35:15 Jones made himself chairman that the other directors resigned and worked very closely. with FDR to basically restructure the U.S. economy and then help to finance the war. Leo Crowley, who was head of the FDIC, worked very closely with Jones. The banks that you qualify for FDIC insurance, ended up in Leo's bucket, and the banks that couldn't ended up with Jesse Jones. And he would literally remake them. He restructured commercial companies and everything else. And in that book, of course, he talks about Henry Ford,

Starting point is 00:35:48 about what a difficult individual he was and also the role that Ford Motor Company eventually did play a very positive role in World War II. So Chris, if people want to learn more about you, where can they find you on the internet? Well, a book will be available on Amazon, which is easy to find Ford Men from inspiration to enterprise. I'm active on social media under R.C. Whalen, W-H-A-L-E-N.

Starting point is 00:36:14 And then my website is the same, R.C. Whalen.com. and my blog, which I just resurrected, the institutional risk analyst, is also interesting stuff for those who like finance. But I'd be happy to hear from any of your listeners, and I appreciate your time. Well, we appreciate your time, Chris, and the stories and the insights that you provided to our audience were just awesome.

Starting point is 00:36:37 I know it's very different than the story. I remember reading about in high school and some of the other history classes that I've taken with respect to Ford and his legacy. So that was really, really interesting discussion, and we really appreciate your time. All right, guys. That was all the Presta and I had for this week's episode of The Investors Podcast. We'll see each other again next week.

Starting point is 00:36:57 Thanks for listening to TIP. To access the show notes, courses or forums, go to theinvestorspodcast.com. To get your questions played on the show, go to AsktheInvesters.com and win a free subscription to any of our courses on TIP Academy. This show is for entertainment purposes only. Before making investment decisions, consult a professional. This show is copyrighted by the TIP network. Written permission must be granted before syndication or rebroadcasting.

We Study Billionaires - The Investor’s Podcast Network - TIP135: Henry Ford & the Secrets of his Success w/ Christopher Whalen (Business Podcast)

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