#80 Henry Ford Today and Tomorrow

In this episode of the Founders podcast, the host and guest delve into Henry Ford's book "Today and Tomorrow," first published in 1926. They explore Ford's revolutionary business philosophies, emphasizing the importance of ideas, opportunity, and continual improvement. Ford's critical stance on waste, particularly time waste, his advocacy for high wages coupled with low prices to boost buying power, and his belief in the "wage motive" as a driver for creating more customers are discussed. They also address Ford's management principles, which include direct action, fair compensation, and clean, efficient operations. The conversation highlights Ford's focus on serving customers, his disdain for debt, and his view that businesses should aim to liberate people from drudgery by providing well-made, affordable products. The episode underscores Ford's conviction that industry should not be about quick riches but about contributing to society through work, and that the future of business lies in serving the public and adapting to change.

• The concept of opportunity has evolved over time, with each year bringing new ideas and possibilities.
• Tested ideas exist that could alleviate poverty and economic slowness if implemented.
• Outdated notions are the main impediments to seizing these opportunities.

"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."

This quote emphasizes the historical perspective on opportunity and the progression of new ideas contributing to economic growth and the potential to overcome poverty.

• Henry Ford discusses the impact of his idea to create a small, affordable automobile.
• This idea led to the employment of 600,000 people and supported 3 million individuals.
• The success of this idea demonstrates the vast potential and ripple effect of innovation.

"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."

Henry Ford illustrates the broad economic impact of his automobile idea, highlighting the significance of innovation in creating employment and supporting livelihoods.

• The book "Today and Tomorrow" by Henry Ford was first published in 1926.
• It was discovered through the idea that books are like hyperlinks, connecting ideas and people.
• Ford's book is a straightforward account of his ideas on various topics such as education, war, economics, and the meaning of work.

"So that is from the introduction of the book that I read this week... which is today and tomorrow by Henry Ford."

The quote introduces the book "Today and Tomorrow" and sets the stage for discussing the insights and philosophies of Henry Ford.

• The internet and new technologies create an ever-expanding array of opportunities.
• Jeff Bezos's electricity metaphor suggests that each new idea or business leads to further opportunities.
• The sentiment of limitless opportunities aligns with Ford's views from a century earlier.

"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."

The quote reflects Bezos's view of the internet as a catalyst for continuous opportunity, similar to how electricity revolutionized industries and created new possibilities.

• Industrial progress opens doors for creativity and new ventures.
• Success in one's field inherently creates more opportunities than one can seize.
• The advancement of industry has historically led to a proliferation of opportunities for future generations.

"It has turned out through all the fierce competitive fights that no man could succeed in his own opportunity without creating many times more opportunities than he could begin to grasp."

This quote underlines the idea that industrial success not only benefits the individual but also generates numerous additional opportunities for others.

• The automobile, as popularized by Ford, drastically changed the physical and social landscape.
• The motor car introduced people to the concept of developed power and expanded their worldviews.
• Ford's automotive innovation serves as an example of a product that reshaped society.

"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."

Henry Ford discusses the profound impact the automobile had on people's mobility and the expansion of their horizons, demonstrating the transformative power of technology.

• Ford criticizes the notion of a living wage as a misunderstanding of industrial processes.
• He advocates for high wages and low prices to maintain a healthy industry and consumer base.
• Ford's philosophy suggests that suppressing wages is detrimental to both businesses and society.

"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."

This quote from Ford emphasizes the interconnectedness of employers, employees, and consumers, advocating for fair wages to sustain a thriving industrial ecosystem.

• Ford and other entrepreneurs share a focus on reducing waste and providing value to consumers.
• Entrepreneurs challenge the market's valuation of their skills by creating and capturing value through their ventures.
• Ford repeatedly stresses the importance of fair wages for quality work and long-term success.

"If you're 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."

Henry Ford argues against the practice of suppressing wages, highlighting that it leads to lower quality work and ultimately costs more in the long run, both for businesses and society.

• Not all individuals are inherently intelligent; education is necessary.
• Intelligence should be applied to work to escape drudgery.
• Understanding the efficient use of resources is not common sense but must be taught.

"All men are not voluntarily intelligent. They must be taught."

This quote emphasizes the belief that intelligence is not innate and that education is essential for individuals to develop intelligence.

"Escape from drudgery and work by putting intelligence into work."

This quote suggests that work can be made less tedious by applying intelligence, implying that thought and innovation can improve the work experience.

"All men do not see the wisdom of fitting means to ends, of conserving material."

The quote highlights that not everyone understands the importance of resource efficiency and goal-oriented actions, indicating a need for education on these matters.

• Materials used in production should be treated with respect as they represent the labor of others.
• Henry Ford's perspective on materials is influential among modern entrepreneurs.
• Ford's approach was to consider materials as sacred due to their connection to human labor.

"Sacred because that's the results of others labors."

This quote shows Ford's reverence for materials, recognizing them as the product of human effort and therefore deserving respect.

• The language of the past may not be inclusive, but modern interpretations should extend to all people.
• Ford's use of "men" is understood to apply to everyone in the current context.

"He's going to use the word men. This applies to women, applies to everybody at his case."

This quote clarifies that while Ford's language was specific to his time, the ideas he expressed are applicable to all people today.

• A business's primary objective should be to serve customers.
• Profits should result from good service rather than being the main goal.
• A serving corporation must prioritize service over profit.

"Every business or product exists to serve customers. This is priority number one."

The quote underlines the principle that businesses should be customer-centric, with service as their foremost concern.

"The corporation has to follow the service. The service does not follow the corporation."

This quote advocates for businesses to be designed around the service they provide, not the other way around.

• Time spent in proper design and planning is an investment, not a waste.
• Good business management involves long-term thinking and resourcefulness.
• Henry Ford valued the efficient use of time and emphasized the importance of design in business success.

"Time spent in getting a thing right is never wasted. It is time saved in the end."

Ford's quote suggests that thorough planning and design are crucial for efficiency and will ultimately save time.

• Profits should benefit the consumer through lower prices and better wages.
• A business that focuses solely on profit is unsustainable.
• Good management results in benefits for employees, customers, and the business itself.

"The test of the service of a corporation is in how far its benefits are passed on to the consumer."

This quote implies that a corporation's value is measured by how much it benefits its customers, not just its owners or shareholders.

• Debt can be destructive to businesses and should be approached with caution.
• Ford criticizes the debt industry for encouraging financial dependency.
• A business should avoid debt to maintain its focus on service rather than financial obligations.

"Another rock on which business breaks is debt."

Ford warns that debt is a significant risk factor for businesses, potentially leading to their downfall.

• Profit margins should be reasonable to ensure the longevity of a business.
• Businesses that exploit for high profits or operate at a loss are both unsustainable.
• Solid business foundations are built on providing affordable services, not on personal enrichment.

"Profits may be stupidly fixed and stupidly used. If so, they destroy their source and vanish."

This quote criticizes the misuse of profits, suggesting that unreasonable profit margins can lead to a business's demise.

• A business should have a clear focus and stick to its core purpose.
• Diversifying away from the main goal can lead to inefficiencies and distractions.
• Henry Ford's focus was on the motor business, and all decisions were made to further that goal.

"We're in the motor business and in no other business, everything that we do gets back to the motor."

The quote from Ford highlights the importance of maintaining a clear focus in business, using his own company's dedication to the motor business as an example.

• Henry Ford emphasizes the importance of continuous improvement in business.
• Past achievements should be seen as a starting point for future advancements, not the pinnacle of success.
• Learning from the past is critical, but it should not limit one's vision for improvement.
• Tradition in business should be considered experimental and not impede progress.

"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."

This quote underscores the idea that past successes should not be seen as the limit of what can be achieved in the future. Instead, they should be used as a foundation for further improvement.

"The only tradition we need to bother about in industry is the tradition of good work. All else that is called tradition had better be classed as experiment."

Henry Ford suggests that the only valuable tradition in industry is the commitment to quality work. Other traditions should be viewed as experiments that can be modified or discarded in favor of better methods.

• Complacency in business leads to stagnation and missed opportunities for improvement.
• Henry Ford advocates for a mindset that always seeks to surpass previous achievements.
• Companies should avoid resting on their laurels and instead focus on continuous learning and innovation.

"But don't think that's the apex of human achievement."

This statement encourages the idea that no matter how much a company has accomplished, there is always room to achieve more.

"You can improve on that constantly."

Henry Ford reiterates the concept that improvement is an ongoing process, not a one-time event.

• Experimentation is a key component of progress in business and industry.
• Both good and bad ideas stem from experimentation, and it's important to discern which to replicate and which to avoid.
• Progress is not the result of following the crowd but comes from challenging the status quo and innovating.

"These are just experiments."

Ford views past business practices as experiments, indicating that they are not definitive but rather opportunities to learn and improve.

"That we don't want to replicate. But it's not the end of human progress."

This quote suggests that while some experiments yield practices that should not be continued, they do not represent the limits of what can be achieved.

• Real business involves creating value and serving customers, not relying on luck or gambling.
• Business success is about innovation and meeting the needs of customers, not following the crowd.
• A sustainable business model focuses on creating its own demand through excellence.

"A real business creates its own customers."

Henry Ford asserts that genuine business success comes from the ability to innovate and attract customers through the value provided, rather than relying on chance.

• Henry Ford values fresh perspectives over expertise when it comes to innovation.
• Newcomers to a field can offer insights and improvements that experts may overlook due to preconceived notions of what's possible.
• Challenging the idea of the "impossible" is crucial for 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."

Ford explains his strategy of appointing individuals without prior knowledge of a subject to lead new operations, as they are not constrained by traditional beliefs about what can or cannot be done.

• Specialization and a singular focus are key to efficiency and excellence in business.
• Diversifying too much can dilute a company's core competencies and lead to inefficiencies.
• Businesses should aim to excel in a particular area rather than spreading resources too thinly across multiple endeavors.

"We do nothing at all in what is sometimes ambitiously called research, excepting as it relates to our single objective."

Ford emphasizes the importance of focusing research efforts on the company's primary goal to avoid waste and maintain clarity of purpose.

• Effective management is synonymous with leadership and should not be authoritarian.
• The goal of management is to create a system where minimal direct orders are necessary.
• Management should begin with planning and design to ensure efficiency and self-sufficiency in operations.

"We look upon industry largely as a matter of management, and to us, management and leadership are quite the same."

This quote highlights Ford's belief that management should be indistinguishable from leadership, implying a more holistic and integrated approach to guiding a company.

• Henry Ford had a relentless focus on reducing costs and waste in his operations.
• Simplifying processes and reducing the need for tool retrieval or unnecessary movements can lead to significant savings.
• Optimizing for cost and time can have a profound impact on a company's bottom line.

"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 $0.25 worth a man's time, not counting overhead to get a 30 cent tool."

Ford describes how he identified and eliminated waste in his operations by changing the way tools were distributed to workers, showcasing his meticulous attention to cost-saving measures.

• Time is a critical resource in business and should be managed as carefully as material resources.
• Wasted time is a form of inefficiency that can be difficult to detect and correct.
• Continuous improvement can lead to dramatic reductions in production cycles and increased efficiency.

"The easiest of all wastes, and the hardest to correct, is the waste of time, because wasted time does not litter the floor like wasted material."

Ford points out the challenge of recognizing and addressing wasted time, emphasizing its significance as a resource in business.

• Maximizing resource use and minimizing waste are essential for sustainable business practices.
• Finding value in what was previously considered waste can lead to both cost savings and environmental benefits.
• Efficiency in production and distribution is not just good for business but also a responsibility to society.

"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."

Ford argues that true resourcefulness comes from reevaluating and utilizing materials that were previously disregarded, which can lead to innovation and efficiency.

• Ford's philosophy on wages is rooted in the belief that overworking employees is counterproductive.
• Fair wages and reasonable hours contribute to a healthy economy by ensuring that workers are also customers.
• The wage motive is central to Ford's business strategy, linking employee well-being with customer purchasing power.

"An unemployed man is an out of work customer. He cannot buy. An underpaid man is a customer reduced in purchasing power."

This quote encapsulates Ford's view that the well-being of employees directly affects their ability to contribute to the economy as consumers, thus influencing the success of businesses.

• High wages with high prices do not benefit anyone as it only indicates inflation.
• Higher wages paired with low prices increase buying power and customer base.
• The payment of high wages is not simply a matter of wanting to pay them, but it is a complex process.
• Reducing wages directly impacts the demand for goods and services as it reduces the purchasing power of workers.

"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."

This quote explains the relationship between wages, prices, and purchasing power, emphasizing the importance of balancing wages and prices for economic growth.

• A business must be founded on the idea of creating something useful for people.
• Planning and testing are essential steps before having a product worth making.
• Continuous improvement in production is necessary to lower prices and raise quality.
• Employees are part of the business's public; cutting their wages is akin to reducing the number of customers.

"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."

This quote underscores the importance of thoughtful planning and the iterative process in developing a product that serves people's needs.

• Ford's management principles are simple and include avoiding bureaucracy, paying fair wages, and maintaining a short workweek.
• Ensuring machinery is in top condition and promoting cleanliness are essential for respecting tools and self-respect.
• Applying these principles can turn around even unrelated businesses like railroads.

"The Ford principles of management. The principles are extremely simple. They may be compressed into three statements."

This quote introduces Ford's straightforward management principles that prioritize efficiency, fair compensation, and respect for the work environment.

• Businesses should focus on their objectives and work backwards to determine their methods.
• The purpose of a business should guide its operations, not the other way around.
• Questions about business goals and direction are more important than the methods used.

"It is not the method, but the objective that controls."

The quote emphasizes that a business's goals should dictate its approach and operations, rather than being led by methods without a clear purpose.

• Doing things in the best possible way is more important than competition.
• Serving the public and focusing on the customers' needs ensures business success.
• Few businesses operate with this service-oriented mindset, making it a rare and valuable approach.

"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."

This quote suggests that excellence in service and focusing on what needs to be done will naturally lead to success and longevity in business.

• Industry's purpose is to create useful products for people.
• Business success is not inherent to the industry but depends on the preparedness of the individuals.
• The only way out of poverty is through work, and industry should be entered through the door of work.

"There is no way out of poverty except through work."

This quote is a clear statement on the role of work in overcoming poverty and the importance of industry in providing opportunities for useful labor.

• Entrepreneurs should spend time considering the type of business they want and its organization.
• Continuous learning and adaptation are key to business growth.
• The archive of David's notes offers insights from various entrepreneurs and business thinkers.

"The way into business is through the door of work."

This quote reinforces the concept that hard work is the fundamental entry point to successful entrepreneurship and business development.

• The book "Today and Tomorrow" by Henry Ford is recommended for its timeless wisdom.
• David's personal email list, David's notes, provides insights into entrepreneurship.
• Upcoming podcasts will focus on the history of American technology and Berkshire Hathaway shareholder letters, exclusively for supporters.

"I just don't think you can waste your time by studying Henry Ford."

This quote encourages the study of Henry Ford's principles and practices, affirming the value of learning from successful entrepreneurs' experiences.