#120 Billy Durant Creator of General Motors

Summary Notes


In the episode featuring the story of William "Billy" Durant, the founder of General Motors, the host explores Durant's paradoxical personality, his exceptional vision, and his role in shaping the American automobile industry. Despite not being a household name like Henry Ford or Walter Chrysler, Durant was instrumental in creating GM and had a hand in the beginnings of three major American automobile manufacturing corporations. Unlike other automotive pioneers, Durant excelled in assembling organizations rather than tinkering with mechanics. His charm, iron will, and salesmanship enabled him to realize grand dreams, but his penchant for risk-taking and stock speculation ultimately led to his financial downfall. The episode delves into Durant's life, from his early success with his carriage company to his dramatic takeover and eventual loss of GM, underscoring the cautionary tale of his life—a man who died without a fortune despite founding some of the most successful companies of his time.

Summary Notes

William Durant's Role in the American Automobile Industry

  • Durant is recognized as the founder of General Motors (GM) and a key figure in the automobile industry.
  • Despite his significant contributions, Durant is less known compared to contemporaries like Henry Ford and Alfred P. Sloan.
  • Durant was instrumental in shaping three of the four major American automobile manufacturing corporations.
  • He was not a mechanic but a visionary organizer, known for his dramatic flair and complex personality.

"It's fitting that Durant's name as GM's founder is cast in bronze on a historical marker in front of the corporation's headquarters, because neither GM nor its most famous American brands would likely exist today had he not either created or saved them."

The quote highlights Durant's foundational role in establishing General Motors and his lasting impact on the American automobile industry despite his diminished fame.

Durant's Paradoxical Personality and Business Style

  • Durant was known for his paradoxical personality, capable of both great successes and failures.
  • His optimism and visionary traits enabled him to create great organizations but also led to his downfall.
  • Durant is described as a super salesman with a soft voice, a paradoxical figure who was adored and criticized simultaneously.
  • His story serves as a cautionary tale, illustrating the balance between strength and destruction in business.

"He was an extremely complex and paradoxical personality, a super salesman who spoke in a soft voice, a builder of fortunes, who cared very little about money and who ultimately died without any."

This quote captures the essence of Durant's complex character, highlighting his salesmanship, indifference to personal wealth, and eventual financial demise.

The Legacy and Downfall of Billy Durant

  • Durant's life story is both inspiring and tragic, ending with him destitute despite founding several successful companies.
  • His continuous gambling and risk-taking with business ventures are emphasized as cautionary examples.
  • Durant's likability contrasts with other automotive pioneers, making him a compelling but ultimately tragic figure.
  • The book "Billy Durant, Creator of General Motors" is a historical account that sheds light on his life and lessons.

"The same thing that made Billy Durant strong, ultimately destroyed him."

This quote summarizes the central theme of Durant's life, where the very traits that led to his success also led to his downfall.

Comparison with Other Automotive Pioneers

  • Durant is compared to Henry Ford and the Dodge brothers, each with their unique traits and contributions to the industry.
  • Ford is recognized as a gifted entrepreneur but also a controversial figure due to his personal beliefs and control over employees' lives.
  • The Dodge brothers are noted for their machinist skills and wild personalities.
  • Durant stands out as a likable person from whom one could learn, despite his flawed decision-making.

"Billy Durant, though, was somebody that you could learn from because he had some good ideas, but he's also somebody that you want to be around."

This quote suggests that Durant's personality and ideas were valuable and that he was more approachable than his peers, despite his eventual poor decisions.

Durant's Early Life and Business Ventures

  • Durant's family background included a successful grandfather but a father criticized for reckless financial behavior.
  • Billy Durant's early life is not well-documented, and he dropped out of high school to enter the business world.
  • Before entering the automobile industry, Durant engaged in various sales ventures, showcasing his entrepreneurial spirit.

"Billy's boyhood is recorded in bits and pieces, since he did not talk of it often."

The quote indicates that Durant's early life is somewhat mysterious, with only fragments of information available about his formative years.

The Impact of Geographic Location on Industry Pioneers

  • Flint, Michigan, played a pivotal role in the rise of the automobile industry, transitioning from lumber to manufacturing.
  • The decline of one industry often leads to the rise of another, as seen with the lumber industry giving way to automobile manufacturing.
  • Durant began as a skeptic of automobiles but later applied his business strategies to the new industry.

"Lumber money financed the transition from harvesting raw materials to engaging in manufacturing."

This quote illustrates the economic shift in Flint, Michigan, where the waning lumber industry funded the emergence of manufacturing, setting the stage for the automobile industry.

Durant's Entry into the Vehicle Business

  • Durant's first significant venture was in the horse-drawn vehicle industry, where he demonstrated his sales acumen.
  • His quick decision-making and persuasive abilities were evident in his early business dealings.
  • Durant's experience with a dishonest business partner taught him the importance of controlling essential aspects of his business.

"Decide quickly, make your pitch, nail down the details, and don't worry about the money."

The quote encapsulates Durant's business philosophy of swift action and focus on the broader vision, which played a role in his initial successes.

Intersections with Other Early Automobile Industry Founders

  • Durant's life intersected with other notable figures in the automobile industry, such as Charles Nash.
  • The early automotive scene in Michigan was a hotbed for entrepreneurial talent and innovation.
  • Durant's approach to business deals, characterized by rapid movement and risk-taking, is highlighted as a defining trait.

"Durant could tell you all about how he had founded General Motors in 1908, but that wasn't the beginning, really."

This quote suggests that Durant's journey to founding General Motors was a culmination of experiences and ventures that began well before the official establishment of the company.

Early Career of Nash and His Work Ethic

  • Nash worked as a laborer in the road car plants during the pre-automobile era.
  • He was paid based on the number of cushions he stuffed for buggy seats, demonstrating his hard work.
  • Nash's work ethic was notable; he worked hard and fast, causing discontent among other laborers.
  • Nash began working full-time at the age of twelve due to his family's financial situation, with little to no education.

"Nash stuffed cushions for buggy seats. Remember, this is Pregm. We're still dealing with horse-drawn transportation. He was paid, meaning Nash was paid according to how many cushions he stuffed. And he worked so hard and so fast that other laborers began to grumble."

The quote emphasizes Nash's dedication and the piece-rate payment system that motivated his work ethic, which was significant enough to cause resentment among his peers.

Durant's Advice on Salesmanship

  • Durant was recognized for his exceptional sales abilities, repeatedly highlighted in the book.
  • He believed in hiring the best salespeople and had a talent for selling various things, from products to career opportunities.
  • Durant's sales advice includes treating the customer as knowledgeable, not over-talking, and allowing the customer to convince themselves if the product is good enough.

"Durant had a theory about salesmanship. So now we hear specifically from the wisdom of Durant. Assume that the person you're talking to knows as much or more than you do. Do not talk too much. Give the customer time to think."

This quote outlines Durant's approach to sales, which is to respect the customer's knowledge, be concise, and let the product's quality aid in the sale.

Durant's Investment Philosophy and Generosity

  • Durant persuaded investors to back various ventures, such as a bicycle company.
  • When investments failed, Durant felt responsible and repaid investors from his own company's funds, earning a reputation for protecting investors.
  • His generosity was admirable but financially unsustainable, leading to his eventual poverty.

"Durant decided that the investors should be repaid out of the Durant dort coffers. After all, he reasoned, the company's officials had urged the men to invest, and therefore Durant Dort was responsible."

The quote demonstrates Durant's sense of responsibility and ethical stance on investment losses, which contributed to his reputation as a protector of investors.

Durant's Realization of the Need for Control in Business

  • Durant and other successful entrepreneurs of the time recognized the importance of controlling essential business components.
  • Durant experienced issues with monopolies controlling parts of the manufacturing process, leading to his decision to manufacture most parts used in his products.
  • He acquired various plants and resources, making Durant Dort the largest carriage company in the U.S. and achieving vertical integration.

"We realized that we were making no progress and would not unless we manufactured practically every important part that we used."

This quote reflects Durant's strategic shift towards self-sufficiency in manufacturing, which was key to the success and growth of his company.

Durant's Personality and Business Acumen

  • Durant had trouble focusing on one venture for an extended period, which led to mixed business outcomes.
  • His lack of focus became problematic as his organizations grew more complex, especially during financial crises.
  • Durant's inability to concentrate on the right businesses and his speculative nature in the stock market led to his financial downfall.

"But his inability to focus was really a downside. And that weakness was compounded and revealed the more complex the organization he built got."

The quote highlights Durant's personality flaw of lacking focus, which was detrimental to the stability and success of his business empire.

Durant's Transition from Carriages to Automobiles

  • Despite initial resistance, Durant was eventually convinced of the automobile's potential by a test drive in a Buick.
  • His realization came when he was 42 years old, marking a late but significant career shift.
  • Durant's sales talent was evident in his ability to sell a large number of Buicks before production could meet demand.

"For the first time, he began to see that the automobile had a future. The stockholders of Buick were so desperate that they were willing to turn over their controlling interest to him."

This quote captures the pivotal moment when Durant recognized the future of automobiles and decided to pivot his business focus, leveraging his sales skills to gain control of Buick.

Handling Financial Panics and Production Strategies

  • Durant's approach during financial panics was to continue production, storing inventory for when demand returned.
  • This strategy proved successful during the panic of 1907 as Buick was ready to meet demand when the market recovered.
  • Durant's foresight and risk-taking mirrored successful strategies in other industries, such as the whiskey business during Prohibition.

"Durant ordered his factories to produce at full tilt, storing new Buicks in barns, warehouses, and fields. Durant's gamble paid off handsomely."

The quote illustrates Durant's counterintuitive strategy during economic downturns, which paid off by positioning Buick ahead of competitors when the market rebounded.

Business Cycles and Entrepreneurial Optimism

  • Speaker A discusses the importance of being mindful of business cycles, citing Durant's oversight as a bad idea.
  • Durant, an extremely talented entrepreneur, transitioned from being the largest carriage maker to the largest automobile manufacturer in just over three years.
  • Durant's overconfidence led him to believe he could weather any recession without concern.

"After that, Durant seemed never to worry about business cycles. Bad idea. Figuring he could ride out any temporary recession..."

The quote highlights Durant's disregard for the potential impact of economic downturns on his business, which is presented as a cautionary example.

The Founding of General Motors (GM)

  • Durant founded GM in 1908, leveraging his existing business assets from his carriage company and Buick.
  • David Buick, the founder of Buick, left the company due to disenchantment with the operational pace, receiving $100,000 from Durant which he later invested poorly, leading to his death in obscurity.
  • Durant was approached by JP Morgan and company for a potential large automobile merger, which led to the consolidation strategy under GM.

"Before 19 eight was out, Durant had founded a new company, General Motors."

This quote marks the establishment of General Motors, which would become a pivotal company in the automotive industry.

Durant's Consolidation Strategy and Encounter with Henry Ford

  • Durant aimed to consolidate the automobile industry under GM, starting with a suggestion to approach Henry Ford.
  • Ford's personality is summarized as craving publicity and leadership, and his business philosophy centered on mass-producing inexpensive cars.
  • A meeting between Durant, Ransom Olds, and Henry Ford is described, where Ford expresses concerns about consolidation leading to higher prices, which contradicts his vision of affordable transportation.

"I suggested he first see Henry Ford, and who was in the limelight liked publicity, and unless he could lead, the procession, would not play."

This quote provides insight into Henry Ford's character and his conditions for business engagement, emphasizing his desire for leadership and recognition.

Financing Challenges in the Early Automobile Industry

  • Durant faced difficulties raising capital from New York financiers for the automobile industry in Michigan, reflecting a broader skepticism about the sector's economic potential.
  • Ransom Olds secured funding from a copper magnate, illustrating a common source of early automobile industry financing from wealthy individuals in traditional industries.
  • Durant's intense work ethic and unconventional schedule are highlighted, including a late-night visit to the Olds plant for acquisition talks.

"If you think it's an easy matter to get money from New York capitalists to finance a motorcar proposition in Michigan, you have another guest coming."

The quote underscores the challenge of securing investment for the nascent automobile industry, reflecting the skepticism of traditional financiers.

Durant's Acquisition Strategy and Early GM Growth

  • Durant's master plan for GM involved acquiring both established and emerging automobile companies, often using GM stock as currency for acquisitions.
  • His strategy was considered speculative and aimed at creating a diverse portfolio of products to secure a dominant position in the industry.
  • Durant's lack of central staff and uniform bookkeeping led to a lack of clear control over GM's rapidly expanding empire.

"I figured if I could acquire a few more companies like Buick, I would have control of the greatest industry in the country, a great opportunity and no time to lose."

This quote reveals Durant's ambitious goal to dominate the automobile industry by rapidly acquiring companies.

The Role of Albert Champion and the Importance of Ancillary Products

  • Durant met Albert Champion, who provided a valuable spark plug product for Buick, leading to significant cost savings and the incorporation of the Champion Ignition Company.
  • Champion's success with GM stock and his colorful career trajectory are noted, contrasting with Durant's financial mismanagement.
  • The story of Champion emphasizes the value of ancillary products and the fortunes made by those who provided essential components to the automobile industry.

"The champion ignition company of Flint was incorporated. Durant gave champion $25,000 in stock."

This quote indicates the strategic partnership and investment in a supplier that would become critical to GM's operations.

Durant's Overextension and Loss of GM Control

  • Durant's aggressive expansion led to financial strain, with GM subsidiaries varying in profitability and management quality.
  • The lack of cash flow and uniform management practices, combined with the Panic of 1910, resulted in Durant losing control of GM.
  • Durant's personal secretary recounts a driving incident that metaphorically captures Durant's relentless and risky approach to business.

"It was almost impossible to put together more than 20 companies of varying profitability and uneven management in two years and be entirely certain of what was going on."

The quote illustrates the chaotic nature of Durant's rapid expansion and the inherent risks of not having a clear understanding of the consolidated businesses.

Durant's Reflections and Legacy

  • Durant reflects on the rapid expansion of GM and the need for additional capital that wasn't available, leading to his ousting from the company.
  • The importance of cash flow and gross margins is underscored by a quote from Don Valentine, emphasizing that businesses fail when they run out of money.
  • Durant's inability to control his speculative tendencies is seen as a key factor in his downfall, despite his knowledge and experience.

"All companies that go out of business do so for the same reason they run out of money."

This quote, attributed to Don Valentine, encapsulates the fundamental reason for business failure, which is directly applicable to Durant's situation with GM.

General Motors and Personal Endorsements

  • General Motors was heavily reliant on personal endorsements and guarantees by a single individual.
  • No other stockholder besides this individual was asked to endorse or guarantee obligations.
  • This approach was seen as unbusinesslike and senseless.

General Motors, for many years, was called a one man institution with respect to these endorsements and guarantees, meaning when he's loaning money, he's doing personal guarantees, it might so be considered.

The quote explains that General Motors' financial strategy heavily depended on one person's personal guarantees, which was not a common business practice.

Early Associates and Limited Capital

  • The individual's early associates were personal friends with limited capital.
  • They were willing to risk everything, believing in the future of the automobile industry.
  • This overconfidence led to significant financial consequences.

My early associates, for the most part, were my personal friends with limited capital. Many were willing to and did risk every dollar they possessed, believing, as I did, in the future of the automobile industry.

The quote reflects the personal relationships and optimistic risk-taking that characterized the early financial decisions of the individual, despite the potential for loss.

Financial Panics and Raising Capital

  • The individual could have worked with a financial group to provide necessary capital, but skepticism from bankers made this difficult.
  • During financial panics, bank loans were called, and working capital was depleted, leading to a halt in business.
  • Efforts to secure funds from financial institutions and wealthy individuals were unsuccessful.

In squaly times, that's his word for financial panics. It is easy to offer suggestions or to speculate as to what might have been.

The quote highlights the challenges faced during financial panics and the hindsight that often accompanies these difficult periods.

Terms of Financial Assistance

  • The terms demanded by bankers for financial assistance were severe and controlling.
  • The individual was forced to accept these terms due to a lack of alternatives.
  • The actual cash received was less than the loan offered, with a high interest cost.

The $15 million loan finally offered had outrageous terms, which I was forced to accept.

The quote illustrates the desperate situation that led to accepting a loan with unfavorable terms, emphasizing the power imbalance between the individual and the bankers.

Success and Challenges of Billy Durant

  • Billy Durant experienced success with his carriage company and GM, but also faced significant challenges.
  • His story is seen as tragic due to financial missteps despite having a potentially great business.
  • Durant's strategy to compete with Ford in the low-priced automobile market was successful with Chevrolet.

Success was right there. Monumental success right there. If you just augmented tiny bit of your strategy or the way you were.

This quote reflects on the missed opportunities and the fine line between success and failure in Durant's career.

Regaining Control of General Motors

  • Durant intended to regain control of General Motors and did so by establishing Chevrolet.
  • He avoided bankers in his new venture, learning from past experiences.
  • Durant's strategy to buy GM stock and the expiration of the bankers' control allowed him to regain control of GM.

If I ever expected to regain control of General Motors, which I certainly intended to do, I should have a company of my own running in my own way.

The quote reveals Durant's determination and strategic planning to regain control over General Motors by creating and running Chevrolet independently.

Durant's Personality and Leadership

  • Durant was a gifted leader but not everyone was suited to work under his leadership style.
  • Notable figures like Walter Chrysler left GM but maintained respect for Durant.
  • Durant's personality was a mix of likability and tragedy due to his financial decisions.

Durant was extremely gifted leader, but there were some people that were not born to be yes men, and inevitably, they had to leave the company.

This quote discusses Durant's leadership qualities and the challenges that arose from his dominant personality, which led to some talented individuals leaving the company.

Financial Panics and Market Support

  • Durant faced financial troubles during market downturns due to holding large stock positions on margin.
  • He opposed short selling and felt betrayed by a partner's decision to sell shares.
  • Durant's inability to prepare for financial downturns led to significant personal losses.

Durant, as a major GM stockholder, was holding large blocks of stock by paying only a 10% margin required in those days.

The quote describes Durant's risky financial strategy of holding large stock positions on margin, which contributed to his financial difficulties during market downturns.

The End of the Durant Era at General Motors

  • Durant's financial strategies and market support efforts ultimately led to his downfall.
  • Partners like Dupont and J.P. Morgan had to intervene to cover Durant's indebtedness.
  • Durant's emotional and financial losses marked the end of his time at General Motors.

The Morgans and the Duponts would raise money to make a cash offer to recover Durant's indebtedness. Durant would resign as president of GM.

This quote signifies the end of Durant's leadership at General Motors, as financial backers had to step in to resolve his debts, leading to his resignation.

Legacy and Reflection

  • Despite his financial missteps, Durant is credited with creating one of the largest industrial corporations in history.
  • His daring and impulsive nature led to both significant wins and losses.
  • The story of Billy Durant serves as a lesson in the importance of prudence and preparation in business.

He won big and he lost big. But on balance, he created what became the largest industrial corporation in history.

The quote sums up the dual nature of Durant's legacy, acknowledging both his remarkable achievements and his dramatic losses.

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