WHAT I LEARNED ABOUT BUSINESS
My "gasoline buggy" was the first and for a long time the only
automobile in Detroit. It was considered to be something of a nuisance,
for it made a racket and it scared horses. Also it blocked traffic. For
if I stopped my machine anywhere in town a crowd was around it before I
could start up again. If I left it alone even for a minute some
inquisitive person always tried to run it. Finally, I had to carry a
chain and chain it to a lamp post whenever I left it anywhere. And then
there was trouble with the police. I do not know quite why, for my
impression is that there were no speed-limit laws in those days. Anyway,
I had to get a special permit from the mayor and thus for a time enjoyed
the distinction of being the only licensed chauffeur in America. I ran
that machine about one thousand miles through 1895 and 1896 and then
sold it to Charles Ainsley of Detroit for two hundred dollars. That was
my first sale. I had built the car not to sell but only to experiment
with. I wanted to start another car. Ainsley wanted to buy. I could use
the money and we had no trouble in agreeing upon a price.
It was not at all my idea to make cars in any such petty fashion. I was
looking ahead to production, but before that could come I had to have
something to produce. It does not pay to hurry. I started a second car
in 1896; it was much like the first but a little lighter. It also had
the belt drive which I did not give up until some time later; the belts
were all right excepting in hot weather. That is why I later adopted
gears. I learned a great deal from that car. Others in this country and
abroad were building cars by that time, and in 1895 I heard that a Benz
car from Germany was on exhibition in Macy's store in New York. I
traveled down to look at it but it had no features that seemed worth
while. It also had the belt drive, but it was much heavier than my car.
I was working for lightness; the foreign makers have never seemed to
appreciate what light weight means. I built three cars in all in my home
shop and all of them ran for years in Detroit. I still have the first
car; I bought it back a few years later from a man to whom Mr. Ainsley
had sold it. I paid one hundred dollars for it.
During all this time I kept my position with the electric company and
gradually advanced to chief engineer at a salary of one hundred and
twenty-five dollars a month. But my gas-engine experiments were no more
popular with the president of the company than my first mechanical
leanings were with my father. It was not that my employer objected to
experiments--only to experiments with a gas engine. I can still hear him
say: "Electricity, yes, that's the coming thing. But gas--no."
He had ample grounds for his skepticism--to use the mildest terms.
Practically no one had the remotest notion of the future of the internal
combustion engine, while we were just on the edge of the great
electrical development. As with every comparatively new idea,
electricity was expected to do much more than we even now have any
indication that it can do. I did not see the use of experimenting with
electricity for my purposes. A road car could not run on a trolley even
if trolley wires had been less expensive; no storage battery was in
sight of a weight that was practical. An electrical car had of necessity
to be limited in radius and to contain a large amount of motive
machinery in proportion to the power exerted. That is not to say that I
held or now hold electricity cheaply; we have not yet begun to use
electricity. But it has its place, and the internal combustion engine
has its place. Neither can substitute for the other--which is
exceedingly fortunate.
I have the dynamo that I first had charge of at the Detroit Edison
Company. When I started our Canadian plant I bought it from an office
building to which it had been sold by the electric company, had it
revamped a little, and for several years it gave excellent service in
the Canadian plant. When we had to build a new power plant, owing to the
increase in business, I had the old motor taken out to my museum--a room
out at Dearborn that holds a great number of my mechanical treasures.
The Edison Company offered me the general superintendency of the company
but only on condition that I would give up my gas engine and devote
myself to something really useful. I had to choose between my job and my
automobile. I chose the automobile, or rather I gave up the job--there
was really nothing in the way of a choice. For already I knew that the
car was bound to be a success. I quit my job on August 15, 1899, and
went into the automobile business.
It might be thought something of a step, for I had no personal funds.
What money was left over from living was all used in experimenting. But
my wife agreed that the automobile could not be given up--that we had to
make or break. There was no "demand" for automobiles--there never is for
a new article. They were accepted in much the fashion as was more
recently the airplane. At first the "horseless carriage" was considered
merely a freak notion and many wise people explained with particularity
why it could never be more than a toy. No man of money even thought of
it as a commercial possibility. I cannot imagine why each new means of
transportation meets with such opposition. There are even those to-day
who shake their heads and talk about the luxury of the automobile and
only grudgingly admit that perhaps the motor truck is of some use. But
in the beginning there was hardly any one who sensed that the automobile
could be a large factor in industry. The most optimistic hoped only for
a development akin to that of the bicycle. When it was found that an
automobile really could go and several makers started to put out cars,
the immediate query was as to which would go fastest. It was a curious
but natural development--that racing idea. I never thought anything of
racing, but the public refused to consider the automobile in any light
other than as a fast toy. Therefore later we had to race. The industry
was held back by this initial racing slant, for the attention of the
makers was diverted to making fast rather than good cars. It was a
business for speculators.
A group of men of speculative turn of mind organized, as soon as I left
the electric company, the Detroit Automobile Company to exploit my car.
I was the chief engineer and held a small amount of the stock. For three
years we continued making cars more or less on the model of my first
car. We sold very few of them; I could get no support at all toward
making better cars to be sold to the public at large. The whole thought
was to make to order and to get the largest price possible for each car.
The main idea seemed to be to get the money. And being without authority
other than my engineering position gave me, I found that the new company
was not a vehicle for realizing my ideas but merely a money-making
concern--that did not make much money. In March, 1902, I resigned,
determined never again to put myself under orders. The Detroit
Automobile Company later became the Cadillac Company under the ownership
of the Lelands, who came in subsequently.
I rented a shop--a one-story brick shed--at 81 Park Place to continue my
experiments and to find out what business really was. I thought that it
must be something different from what it had proved to be in my first
adventure.
The year from 1902 until the formation of the Ford Motor Company was
practically one of investigation. In my little one-room brick shop I
worked on the development of a four-cylinder motor and on the outside I
tried to find out what business really was and whether it needed to be
quite so selfish a scramble for money as it seemed to be from my first
short experience. From the period of the first car, which I have
described, until the formation of my present company I built in all
about twenty-five cars, of which nineteen or twenty were built with the
Detroit Automobile Company. The automobile had passed from the initial
stage where the fact that it could run at all was enough, to the stage
where it had to show speed. Alexander Winton of Cleveland, the founder
of the Winton car, was then the track champion of the country and
willing to meet all comers. I designed a two-cylinder enclosed engine of
a more compact type than I had before used, fitted it into a skeleton
chassis, found that I could make speed, and arranged a race with Winton.
We met on the Grosse Point track at Detroit. I beat him. That was my
first race, and it brought advertising of the only kind that people
cared to read. The public thought nothing of a car unless it made
speed--unless it beat other racing cars. My ambition to build the
fastest car in the world led me to plan a four-cylinder motor. But of
that more later.
The most surprising feature of business as it was conducted was the
large attention given to finance and the small attention to service.
That seemed to me to be reversing the natural process which is that the
money should come as the result of work and not before the work. The
second feature was the general indifference to better methods of
manufacture as long as whatever was done got by and took the money. In
other words, an article apparently was not built with reference to how
greatly it could serve the public but with reference solely to how much
money could be had for it--and that without any particular care whether
the customer was satisfied. To sell him was enough. A dissatisfied
customer was regarded not as a man whose trust had been violated, but
either as a nuisance or as a possible source of more money in fixing up
the work which ought to have been done correctly in the first place. For
instance, in automobiles there was not much concern as to what happened
to the car once it had been sold. How much gasoline it used per mile was
of no great moment; how much service it actually gave did not matter;
and if it broke down and had to have parts replaced, then that was just
hard luck for the owner. It was considered good business to sell parts
at the highest possible price on the theory that, since the man had
already bought the car, he simply had to have the part and would be
willing to pay for it.
The automobile business was not on what I would call an honest basis, to
say nothing of being, from a manufacturing standpoint, on a scientific
basis, but it was no worse than business in general. That was the
period, it may be remembered, in which many corporations were being
floated and financed. The bankers, who before then had confined
themselves to the railroads, got into industry. My idea was then and
still is that if a man did his work well, the price he would get for
that work, the profits and all financial matters, would care for
themselves and that a business ought to start small and build itself up
and out of its earnings. If there are no earnings then that is a signal
to the owner that he is wasting his time and does not belong in that
business. I have never found it necessary to change those ideas, but I
discovered that this simple formula of doing good work and getting paid
for it was supposed to be slow for modern business. The plan at that
time most in favor was to start off with the largest possible
capitalization and then sell all the stock and all the bonds that could
be sold. Whatever money happened to be left over after all the stock and
bond-selling expenses and promoters, charges and all that, went
grudgingly into the foundation of the business. A good business was not
one that did good work and earned a fair profit. A good business was one
that would give the opportunity for the floating of a large amount of
stocks and bonds at high prices. It was the stocks and bonds, not the
work, that mattered. I could not see how a new business or an old
business could be expected to be able to charge into its product a great
big bond interest and then sell the product at a fair price. I have
never been able to see that.
I have never been able to understand on what theory the original
investment of money can be charged against a business. Those men in
business who call themselves financiers say that money is "worth" 6 per
cent, or 5 per cent, or some other per cent, and that if a business has
one hundred thousand dollars invested in it, the man who made the
investment is entitled to charge an interest payment on the money,
because, if instead of putting that money into the business he had put
it into a savings bank or into certain securities, he could have a
certain fixed return. Therefore they say that a proper charge against
the operating expenses of a business is the interest on this money. This
idea is at the root of many business failures and most service failures.
Money is not worth a particular amount. As money it is not worth
anything, for it will do nothing of itself. The only use of money is to
buy tools to work with or the product of tools. Therefore money is worth
what it will help you to produce or buy and no more. If a man thinks
that his money will earn 5 per cent, or 6 per cent, he ought to place it
where he can get that return, but money placed in a business is not a
charge on the business--or, rather, should not be. It ceases to be money
and becomes, or should become, an engine of production, and it is
therefore worth what it produces--and not a fixed sum according to some
scale that has no bearing upon the particular business in which the
money has been placed. Any return should come after it has produced, not
before.
Business men believed that you could do anything by "financing" it. If
it did not go through on the first financing then the idea was to
"refinance." The process of "refinancing" was simply the game of sending
good money after bad. In the majority of cases the need of refinancing
arises from bad management, and the effect of refinancing is simply to
pay the poor managers to keep up their bad management a little longer.
It is merely a postponement of the day of judgment. This makeshift of
refinancing is a device of speculative financiers. Their money is no
good to them unless they can connect it up with a place where real work
is being done, and that they cannot do unless, somehow, that place is
poorly managed. Thus, the speculative financiers delude themselves that
they are putting their money out to use. They are not; they are putting
it out to waste.
I determined absolutely that never would I join a company in which
finance came before the work or in which bankers or financiers had a
part. And further that, if there were no way to get started in the kind
of business that I thought could be managed in the interest of the
public, then I simply would not get started at all. For my own short
experience, together with what I saw going on around me, was quite
enough proof that business as a mere money-making game was not worth
giving much thought to and was distinctly no place for a man who wanted
to accomplish anything. Also it did not seem to me to be the way to make
money. I have yet to have it demonstrated that it is the way. For the
only foundation of real business is service.
A manufacturer is not through with his customer when a sale is
completed. He has then only started with his customer. In the case of an
automobile the sale of the machine is only something in the nature of an
introduction. If the machine does not give service, then it is better
for the manufacturer if he never had the introduction, for he will have
the worst of all advertisements--a dissatisfied customer. There was
something more than a tendency in the early days of the automobile to
regard the selling of a machine as the real accomplishment and that
thereafter it did not matter what happened to the buyer. That is the
shortsighted salesman-on-commission attitude. If a salesman is paid only
for what he sells, it is not to be expected that he is going to exert
any great effort on a customer out of whom no more commission is to be
made. And it is right on this point that we later made the largest
selling argument for the Ford. The price and the quality of the car
would undoubtedly have made a market, and a large market. We went beyond
that. A man who bought one of our cars was in my opinion entitled to
continuous use of that car, and therefore if he had a breakdown of any
kind it was our duty to see that his machine was put into shape again at
the earliest possible moment. In the success of the Ford car the early
provision of service was an outstanding element. Most of the expensive
cars of that period were ill provided with service stations. If your car
broke down you had to depend on the local repair man--when you were
entitled to depend upon the manufacturer. If the local repair man were a
forehanded sort of a person, keeping on hand a good stock of parts
(although on many of the cars the parts were not interchangeable), the
owner was lucky. But if the repair man were a shiftless person, with an
adequate knowledge of automobiles and an inordinate desire to make a
good thing out of every car that came into his place for repairs, then
even a slight breakdown meant weeks of laying up and a whopping big
repair bill that had to be paid before the car could be taken away. The
repair men were for a time the largest menace to the automobile
industry. Even as late as 1910 and 1911 the owner of an automobile was
regarded as essentially a rich man whose money ought to be taken away
from him. We met that situation squarely and at the very beginning. We
would not have our distribution blocked by stupid, greedy men.
That is getting some years ahead of the story, but it is control by
finance that breaks up service because it looks to the immediate dollar.
If the first consideration is to earn a certain amount of money, then,
unless by some stroke of luck matters are going especially well and
there is a surplus over for service so that the operating men may have a
chance, future business has to be sacrificed for the dollar of to-day.
And also I noticed a tendency among many men in business to feel that
their lot was hard--they worked against a day when they might retire and
live on an income--get out of the strife. Life to them was a battle to
be ended as soon as possible. That was another point I could not
understand, for as I reasoned, life is not a battle except with our own
tendency to sag with the downpull of "getting settled." If to petrify is
success all one has to do is to humour the lazy side of the mind but if
to grow is success, then one must wake up anew every morning and keep
awake all day. I saw great businesses become but the ghost of a name
because someone thought they could be managed just as they were always
managed, and though the management may have been most excellent in its
day, its excellence consisted in its alertness to its day, and not in
slavish following of its yesterdays. Life, as I see it, is not a
location, but a journey. Even the man who most feels himself "settled"
is not settled--he is probably sagging back. Everything is in flux, and
was meant to be. Life flows. We may live at the same number of the
street, but it is never the same man who lives there.
And out of the delusion that life is a battle that may be lost by a
false move grows, I have noticed, a great love for regularity. Men fall
into the half-alive habit. Seldom does the cobbler take up with the
new-fangled way of soling shoes, and seldom does the artisan willingly
take up with new methods in his trade. Habit conduces to a certain
inertia, and any disturbance of it affects the mind like trouble. It
will be recalled that when a study was made of shop methods, so that the
workmen might be taught to produce with less useless motion and fatigue,
it was most opposed by the workmen themselves. Though they suspected
that it was simply a game to get more out of them, what most irked them
was that it interfered with the well-worn grooves in which they had
become accustomed to move. Business men go down with their businesses
because they like the old way so well they cannot bring themselves to
change. One sees them all about--men who do not know that yesterday is
past, and who woke up this morning with their last year's ideas. It
could almost be written down as a formula that when a man begins to
think that he has at last found his method he had better begin a most
searching examination of himself to see whether some part of his brain
has not gone to sleep. There is a subtle danger in a man thinking that
he is "fixed" for life. It indicates that the next jolt of the wheel of
progress is going to fling him off.
There is also the great fear of being thought a fool. So many men are
afraid of being considered fools. I grant that public opinion is a
powerful police influence for those who need it. Perhaps it is true that
the majority of men need the restraint of public opinion. Public opinion
may keep a man better than he would otherwise be--if not better morally,
at least better as far as his social desirability is concerned. But it
is not a bad thing to be a fool for righteousness' sake. The best of it
is that such fools usually live long enough to prove that they were not
fools--or the work they have begun lives long enough to prove they were
not foolish.
The money influence--the pressing to make a profit on an
"investment"--and its consequent neglect of or skimping of work and
hence of service showed itself to me in many ways. It seemed to be at
the bottom of most troubles. It was the cause of low wages--for without
well-directed work high wages cannot be paid. And if the whole attention
is not given to the work it cannot be well directed. Most men want to be
free to work; under the system in use they could not be free to work.
During my first experience I was not free--I could not give full play to
my ideas. Everything had to be planned to make money; the last
consideration was the work. And the most curious part of it all was the
insistence that it was the money and not the work that counted. It did
not seem to strike any one as illogical that money should be put ahead
of work--even though everyone had to admit that the profit had to come
from the work. The desire seemed to be to find a short cut to money and
to pass over the obvious short cut--which is through the work.
Take competition; I found that competition was supposed to be a menace
and that a good manager circumvented his competitors by getting a
monopoly through artificial means. The idea was that there were only a
certain number of people who could buy and that it was necessary to get
their trade ahead of someone else. Some will remember that later many of
the automobile manufacturers entered into an association under the
Selden Patent just so that it might be legally possible to control the
price and the output of automobiles. They had the same idea that so many
trades unions have--the ridiculous notion that more profit can be had
doing less work than more. The plan, I believe, is a very antiquated
one. I could not see then and am still unable to see that there is not
always enough for the man who does his work; time spent in fighting
competition is wasted; it had better be spent in doing the work. There
are always enough people ready and anxious to buy, provided you supply
what they want and at the proper price--and this applies to personal
services as well as to goods.
During this time of reflection I was far from idle. We were going ahead
with a four-cylinder motor and the building of a pair of big racing
cars. I had plenty of time, for I never left my business. I do not
believe a man can ever leave his business. He ought to think of it by
day and dream of it by night. It is nice to plan to do one's work in
office hours, to take up the work in the morning, to drop it in the
evening--and not have a care until the next morning. It is perfectly
possible to do that if one is so constituted as to be willing through
all of his life to accept direction, to be an employee, possibly a
responsible employee, but not a director or manager of anything. A
manual labourer must have a limit on his hours, otherwise he will wear
himself out. If he intends to remain always a manual labourer, then he
should forget about his work when the whistle blows, but if he intends
to go forward and do anything, the whistle is only a signal to start
thinking over the day's work in order to discover how it might be done
better.
The man who has the largest capacity for work and thought is the man who
is bound to succeed. I cannot pretend to say, because I do not know,
whether the man who works always, who never leaves his business, who is
absolutely intent upon getting ahead, and who therefore does get
ahead--is happier than the man who keeps office hours, both for his
brain and his hands. It is not necessary for any one to decide the
question. A ten-horsepower engine will not pull as much as a twenty. The
man who keeps brain office hours limits his horsepower. If he is
satisfied to pull only the load that he has, well and good, that is his
affair--but he must not complain if another who has increased his
horsepower pulls more than he does. Leisure and work bring different
results. If a man wants leisure and gets it--then he has no cause to
complain. But he cannot have both leisure and the results of work.
Concretely, what I most realized about business in that year--and I have
been learning more each year without finding it necessary to change my
first conclusions--is this:
(1) That finance is given a place ahead of work and therefore tends to
kill the work and destroy the fundamental of service.
(2) That thinking first of money instead of work brings on fear of
failure and this fear blocks every avenue of business--it makes a man
afraid of competition, of changing his methods, or of doing anything
which might change his condition.
(3) That the way is clear for any one who thinks first of service--of
doing the work in the best possible way.