#9 I Invented the Modern Age: The Rise of Henry Ford

What I learned from reading I Invented the Modern Age: The Rise of Henry Ford by Richard Snow. ---- Founders Notes gives you the ability to tap into the collective knowledge of history's greatest entrepreneurs on demand. Use it to supplement the decisions you make in your work. Get access to Founders Notes here. ---- “I have listened to every episode released and look forward to every episode that comes out. The only criticism I would have is that after each podcast I usually want to buy the book because I am interested so my poor wallet suffers. ” — Gareth Be like Gareth. Buy a book: All the books featured on Founders Podcast

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• 0:01David Senra?

  Every century or so, our republic has been remade by a new technology. 170 years ago is the railroad. In our time, it's the microprocessor. These technologies do more than change our habits. They change the way we think. Henry David Thoreau, hearing the trains passing, once wrote, "Have not men improved somewhat in punctuality since the railroad was invented? Do they not talk and think faster in the depot than they did in the stage office?" And of course, anyone knows what computers and the internet are doing to us now. In between the steam locomotive and the apple, came Henry Ford's Model T. One day, toward the end of his life, its maker was talking with a local high school boy, and they got onto the subject of education.

• 0:46David Senra?

  Ford spoke of the virtues of the McGuffey's Reader era. Those were textbooks that he used to educate himself. And this sounded pretty futzy to the boy. "But sir," he protested, "these are different times. This is the modern age and..." "Young man," Ford snapped, "I invented the modern age. The claim is as preposterous as it is megalomaniacal. It is also largely true." My name is David Senra, and you're listening to Founders, my podcast about history's greatest entrepreneurs. This episode is about Henry Ford. I've mentioned on past podcasts that I've been reading the fantastic blog by Tim Urban

• 1:31David Senra?

  called Wait But Why? And specifically, I found it after going through his multi-part series on Elon Musk. And I was reading the post titled, "Why Tesla Will Change The World." Well, first of all, I really shouldn't call it a post. They're like, it's like, the series that he's doing is like 30,000 words, so they're almost like small books. But I was reading the one that says, "Why Tesla Will Change The World," and I came across this quote, and this is directly from the blog. "I asked Musk about his opinion on Henry Ford. He said, 'Ford was the kind of guy that when something was in the way, he found a way around it. He just got it done.

• 2:14David Senra?

  He was really focused on what the customer needed, even when the customer didn't know what they needed.'" So obviously, you can't really do a podcast about history's greatest entrepreneurs and not cover Henry Ford. There's a great line in the book. It talks about Ford had the impact in the 20th century that Thomas Edison had in the 19th century. And I definitely would agree with that. So two quick notes before we get into this book. First of all, I apologize it's taking me so long to get this out. That was not my intention. This is actually my third attempt at recording this podcast. The first one, I did a couple days ago and it was just way too long. And when I listened, when I listened to it back, I didn't think

• 2:55David Senra?

  I did a good job. I think I included too much stuff that wasn't that interesting when I was hearing it, hearing myself talk. So I scrapped that and I started over and recorded another one the next day. The second one was good, but I accidentally recorded it with my gain on my microphone turned all the way up and the audio quality was just terrible. And I wouldn't dare subject you to that. So I'm doing this again, hopefully third time's a charm. And I'm telling you all this is because in case you aren't already subscribed, make sure you subscribe. So when the new episodes are released, new podcasts are released, your podcast player alerts you. I don't really have a schedule. I'm doing them as fast as

• 3:35David Senra?

  I can. And because they're all, every single podcast is based on a new, a different book. Sometimes I could read a, read the book and get a podcast done in a few days. And sometimes the book is just longer or the outline takes longer and it takes me more than a week. So I am releasing them as fast as I can get them done. That brings me to my second note before we get into the book. And just reminder, this podcast is independent, ad free due to patron support. So patrons get every podcast first. So if you want them as fast as possible, make sure you become a patron. It's, it's really inexpensive. And patrons also get exclusive access to premium podcasts I do. So every other podcast that I record, I do just for the patrons. And so you won't hear every other podcast unless you become a patron.

• 4:20David Senra?

  So make sure you do that. It's the best way to support the podcast. Keep me ad free. So we, there's no interruptions. We just get right to the good content that you want. And it's also a good way to learn about entrepreneurship. We're covering, and not only learn about entrepreneurship, but I think people that fundamentally changed the

• 4:39David Senra?

  Like the trajectory of history or just it's interesting to me and hopefully it's interesting to you to hear about these people's lives. People like Sam Walton, Jeff Bezos, Elon Musk, Thomas Edison, Joseph Kennedy, Jim Clark. Now we're talking about Henry Ford. And just and I have, you know, I read a new book every week. So I have one, I just got in the mail today, the new Phil Knight book that everybody keeps talking about. It's called Shoe Dog, about the founder of Nike. So I'm going to keep this going and if, like I said, if you want to support it, best thing to do, go to founderspodcast.com. That's you can go to become a patron. There's also a link directly in your podcast player.

• 5:21David Senra?

  So taken long enough, I want to get right into the content. So since I've done this multiple times, I know what the outline is going to be. The first part I want to talk to you about is the idea. So how he, how Henry Ford came up with the idea for the horseless carriage, specifically the gas-powered horseless carriage, which was, didn't exist at the time. And then the precursor to him meeting Thomas Edison. And as you'll see, I definitely left out the parts that everybody knows. So everybody knows about the Model T. I think everybody knows that Henry Ford was credited with coming up with a system for mass production and being able to lower prices. But so I'm just going to include the parts that were surprising to me when I read the

• 6:06David Senra?

  book and just some of them because the book is kind of long. It's like 350 pages. But Richard Snow, the author, did a really good job. So let's get into the idea. At this time in the story, Ford is just an engineer and a mechanic and he, he's been studying engines, usually steam-powered engines for a few years. So he is summoned to Detroit to fix a broken engine and it's called an auto engine, O-T-T-O. So let's get right into the book. "This one, meaning the engine, was smaller and suppller than the first Ford had seen, and he returned home distracted. He sat and brooded over some technical magazines.

• 6:48David Senra?

  He mentioned the engine he spent the day with, and he said he believed it could be used to power a horseless carriage." There was more. Ford knew all about forging and tuning metal. He knew all about steam. But the auto engine was fired by an electric spark, and he didn't know much about electricity. To learn, he would have to move to Detroit and get a job with a power company. He told Clara, Clara's his wife, he had hoped that it might be at the Edison Illuminating Company. He went up to the steps of Edison Illuminating, which, founded five years earlier, was now feeding power to 1,000 homes and 5,000 streetlights. And he ran into an elderly man who was just leaving.

• 7:33David Senra?

  "Who's in charge here?" Ford asked him. "Charles Phelps Gilbert said, 'I am. What can I do for you?'" "I am an engineer. Have you any work I can do?" "Well, how much do you know about the work?" "As much," Ford boldly replied, "as anyone my age." That was the interview. Phelps said, "Well, I do think we have a place for you. A man was killed last week down at the substation, and we need someone in his place right away. The hours: 6:00 PM to 6:00 AM. The salary: $40 a month."

• 8:08David Senra?

  Clara was horrified. Henry may not have told her he was leaping into the shoes of a dead man, but she saw clearly enough what his plan meant. She'd be leaving her family, the countryside she had lived in her whole life, the house that she had helped design, and the garden. It almost broke her heart. She was a believer, though. The Fords left their house on the morning of September 25th, 1891, and Henry started his job at Edison Illuminating the same day. Gone with the couple was William Ford, William Ford is Henry Ford's dad. Gone with the couple was William Ford's last hope of seeing his son settle down and work the family acres.

• 8:49David Senra?

  Henry summed up his final departure in a sentence that, although just six words long, it's spacious enough to show that he had never for a moment intended to make the transition from working on engines to farming. The timber had all been cut. So before I move on, I just want to explain what took place in that last paragraph. William Ford was a very proud farmer. He wanted his son to take over the family farm. And from a very early age, Henry Ford hated farming. In fact, he got into engineering and building engines because he wanted to find a way that machines could do the farm work that he was supposed to do. And so what they mean there by him saying those six words, the timber had all been cut.

• 9:31David Senra?

  His father had given him, I think like 40 acres or something like that, as long as he would remove the timber. So he used machines to clear the land and then use the wood to build a house for himself and his wife at the time. And this is also a metaphor for saying that his time on the farm is over. And now he's going to move to Detroit and pursue his love of engines and engineering. And then eventually, of course, building the car. So I want to skip ahead. So that part was the idea. This is the first, you know, little seed or little inkling of, hey, maybe this electric engine I'm working on can actually power a horseless carriage, right? And this is the late 1800s. So now I want to move to the motivation.

• 10:14David Senra?

  And if you recall, in the Thomas Edison podcast we did, I spent a little bit about that podcast talking about the friendship that developed between Thomas Edison and Henry Ford. Later in his life, Edison was a main benefactor of Ford's wealth. Ford idolized Thomas Edison, similar to, I think, how maybe today's entrepreneurs idolize, in many cases, like Elon Musk. So anytime he would have the opportunity to do business with Edison, Ford would. He wound up like funding a bunch of projects. He wound up loaning millions of dollars to Edison because Ford also hated Wall Street. He hated financiers, he hated lawyers.

• 10:58David Senra?

  He was a brilliant engineer and a brilliant manufacturer, but Ford did have some quirks and some negative sides to him. I'm not going to cover too much of them. There is some in the book. A lot of it has to do with his distrust of Wall Street. He was a well-known anti-Semite. And just, there's a part in the book that's just really strange where he thought he could...

• 11:25David Senra?

  He was so successful, the most famous person in America, as we'll see at the end of the podcast, one of the richest people in America. And he wanted to, he thought he could put an end to World War I before it began by basically chartering a boat and then going and talking to neutral, it's just, there's some, there's some fascinating parts of Henry Ford, but like everybody else, we're, we're, there's, we're all, we all have good and bad to us, and the book definitely didn't skip over the bad. But for now, I want to talk to you about the motivation. And so at this point, this is a few, Henry Ford's been working at the Edison Illuminating Company in Detroit for a few years. He's been doing such a good job that the person that's running that plant invites him to the Edison Conference, where all the people that work for Edison gather, and he winds

• 12:10David Senra?

  up being able to meet Edison. So let's, let's jump right into that. Henry Ford's career is so thoroughly Brian and myth, much of it tended by the carmaker himself, that his meeting with Edison might seem like folklore. But in fact, that August, he spent three days with the man who played much the same role in the 19th century that Ford would in the 20th. Dow, this is Alexander Dow, Edison's boss at the, or excuse me, Ford's boss at the plant. Dow had much faith in Ford, but little in the internal combustion engine. He was an electricity man. So already at this time, Ford figured out, he'd built a small gasoline engine in his kitchen and in his workshop outside of Detroit, in the back of his yard.

• 12:53David Senra?

  And he created like what's called like a quadricycle, which looks like a very small car powered by a very tiny internal combustion engine. So let's go back here. He was an electricity man. Edison had set up his Pearl Street Station, the first central power plant in the country in Manhattan just 13 years earlier, and that was modern enough for Dow. On the second night, August 12th, he and Ford were seated at Edison's table. The group had been discussing batteries that day, and the talk turned to their use in powering automobiles.

• 13:27David Senra?

  Dow pointed across to Ford and said loudly, "Everyone spoke loudly around Edison because he was a half-deaf. There's a young fellow who has made a gas car." Ford believed the perfectly accurate statement contained a barb of mockery. Possibly Dow had hoped that here, next to the man who might as well have invented electricity, Ford could be laughed out of his fixation on gasoline. Dow went on to tell how he looked out his office window one day to see his superintendent, that's Ford, his wife, and little boy, pop, pop, popping, pass beneath. He made fun of the engine noise because electric cars ran silently. And I just want to get into, um, comment right there. I think, I didn't know this until

• 14:12David Senra?

  I watched the documentary, What Happened to Electric Cars? And then I went even deeper and when I read Tim Urban's blog post on Tesla, that the first cars were all electric. And Ford was one of the first people, certainly the first person in Detroit to build a gasoline-powered car.

• 14:32David Senra?

  Now let's go back to the book. Servants of electricity though they all were, everyone at the table turned to Ford with interest, including Edison himself, who was clearly struggling to hear. Noticing this, the man next to him got up and gestured Ford into his chair. "Is it a four-cycle engine?" Edison at once asked. Ford said it was. "What ignited the gas in the cylinder?" I told him that it was a make-and-break contact that was pumped apart by the piston and drew a diagram for him of the whole contact arrangement. "He was going to improve this on the next car," Ford said, and went on to draw what today we would call a spark plug. "It was really an insulating plug with a make-and-break mechanism using washers of Mica. I drew that too."

• 15:18David Senra?

  Edison kept asking questions and Ford kept drawing. "For I've always found that I could convey an idea quicker by sketching it than by just describing it." That was a direct quote from Ford. When he was finished, Edison banged a fist on the table so hard that the dishes around him jumped and said, "Young man, that's the thing. You have at it. You have it. Keep at it." He went on to dismiss the competition. "Electric cars must keep near to power stations. The storage battery is too heavy. Steam cars won't do either, for they have to have a boiler and a fire. Your car is self-contained, carries its own power plant.

• 15:57David Senra?

  No fire, no boiler, no smoke, and no steam. You have the thing. Keep at it." Edison finished by telling Ford that for the purpose, any gas motor was better than any electric motor could be. "It could go long distances," he said, "and there would be stations to supply the cars with hydrocarbon." That was the first time I ever heard this term for liquid fuel. Remembering that evening some thirty-five years later, Ford said, "That bang on the table meant the world to me." He went on with an extremely rare mention about having entertained doubts. "I had hoped that I was headed right. Sometimes I only wondered if I was.

• 16:39David Senra?

  But here, all at once and out of a clear sky, the greatest inventive genius in the world had given me a complete approval." Ford started on his second automobile. So, before moving on, I just want to comment on that. So Ford was extremely confident, like the story I just told you, sometimes overconfident, where he thought maybe he could fix the World War I just by talking to people. But this part, I think, you don't have to be, your business or your goals don't have to be as large and grandiose as maybe Henry Ford's were. But I think he's describing the struggle that every entrepreneur feels at some point. And it's like, he says, "I had hoped that I was headed right. Sometimes I only wondered if I was."

• 17:23David Senra?

  And it goes back to the way that, I think, anytime you're building a new project or doing anything, that you oscillate back and forth between extreme confidence and then doubt. So we talked about the idea for the gasoline-powered horseless carriage, the motivation, having a conversation with Edison. Now we're going to talk about the actual starting of the Ford Motor Company. So let's just jump right into it. On June 4th, John Anderson, which is one of Henry Ford's attorneys, sat down and wrote a long letter that turned out to be well worth the wrist-cramping amount of effort he put into it, for it eventually netted him $17 million.

• 18:05David Senra?

  The letter was to his father, a Civil War surgeon, who was now the mayor of La Crosse, Wisconsin, asking him for $5,000 to invest. It is clear, persuasive, and largely honest. A fine-selling letter. It is also the best firsthand account we have of the birth of the Ford Motor Company. Dear Father, John began, Horace and I have an opportunity to make an investment that is of such a character that I cannot refrain from laying the details before you for your consideration. Mr. Ford of this city is recognized throughout the country as one of the best automobile mechanical experts in the US.

• 18:47David Senra?

  There follows a summary of Ford's racing history and a wonderfully benign account of his dealings with Leland. Several years ago, he designed, Leland was somebody he started a company with, several years ago, he designed, perfected, and placed on the market a machine. A company was organized, but not long after, desiring to devote his attention to a new model entirely, he sold out his patents and interests and retired. The machine is known as the Cadillac. You will see it advertised in all the magazines. So what they're talking about there is something I didn't know. So obviously, everybody knows about the Ford Motor Company, right? But this is his third attempt at starting a car company. The first two followed the same pattern.

• 19:28David Senra?

  So he would, he'd build a car, he'd find, he'd have somebody make an investment, they'd start a company. What happened is similar to, I guess, what would happen now, where the entrepreneur owns, raises so much money that he owns such a small portion of his own company and then has no control. So Henry Ford is, is very much, in my opinion...

• 19:50David Senra?

  What an entrepreneur is and that is like, yeah, you you want to make money, of course, but you want control. And for him, he just wanted to build the best machine possible. He didn't call them cars, he called them machines, by the way. And he wanted control and anytime he was in a situation where somebody else was telling him what to do or not letting him build the machine he he wanted, he would just leave. So he dissolved two companies before the Ford Motor Company. One of those companies wound up being Cadillac, which is kind of crazy considering the Ford Motor Company is still around today and so is Cadillac and they both started with, they were both invented by Henry Ford. So let's go back into the, oh, before I go back into the letter too, this part where they talk about there follows a summary of Ford's racing history.

• 20:32David Senra?

  Do you remember in the podcast about the Wright Brothers, how one of their marketing strategies was they would put on these like shows. So people would would like 20,000 people would show up just to watch them like fly these airplanes and then once you have that amount of people at a show, inevitably like contracts to purchase these machines would would would come in. Henry Ford, one of, one of the first ways he built like such a celebrity was he entered one race. At the time, Americans were not interested in automobiles other than racing. They didn't see like the application for like the everyday use, largely in part because they were really expensive. But so he wound up designing a race car. He raced it himself.

• 21:16David Senra?

  He won the race by a large margin and then he would never race ever again because it was so dangerous. So that's, that's what they're referring to. So let's get into the actual letter that John's writing his father. He then turned his entire attention to the designing and patenting of an entirely new machine. Mr. Malcolmson, the coal man, backed him with money. That's Ford's partner. And the result is that they have, that they have now perfected and are about to place on the market an automobile, and they have the words gasoline in parentheses here, that is far and away the best of anything that has yet to come out. And I should say Malcolmson's Ford's partner at the time. That's not going to last. Ford, again, he's only going to run the company the way he wants to run and anybody that gets in his way, as we'll see in a story in a few minutes, is going to be pushed to the side.

• 22:02David Senra?

  Having perfected the machine in all its parts and demonstrated to their complete satisfaction and to the satisfaction of automobile experts and cycle journal representatives from all over the country who came here to inspect it, that it was superior to anything that had been designed in the way of an automobile, and that it was a sure winner, the next problem was how to best and most economically place it on the market. So that, that is one long, one on sentence, but I didn't want to change the content, so I just read it the way it's written. "After canvassing the matter thoroughly, instead of forming a company with big capital, erecting a factory and installing an extensive plant of machinery to manufacture it themselves, they determined to enter into contracts with various concerns to supply the different parts and simply do the assembling themselves."

• 22:47David Senra?

  That's an interesting part, so what he's referencing is there's, there's, there's other automobile companies at the time. Ford's not credited with inventing the automobile. He's credited with inventing the mass production of the automobile. But what they realized was that you'd have to raise so much capital just to build a factory if you're building everything yourself, that your ownership would be diluted. So, almost like how you have like MVPs, like minimal viable products now, this is, this is the, the minimal viable product version of a, of an automobile in the late 1800s, excuse me, early 1900s. So what they're gonna do is they're gonna design the machine, then they're gonna find all these subcontractors that can make individual parts, and then they'll have the parts shipped to their quote-unquote "factory," and then Ford will, and his workers will put it together.

• 23:34David Senra?

  The letter continues, and you're gonna recognize this, this name too, and this is really fascinating. "So they entered into, they entered with the Dodge Brothers here to manufacture their automobile complete, less wheels and bodies, for $250 apiece." So again, Ford starts Cadillac, leaves that company, Ford then starts a Ford Motor Company that's still there, and now we're, we're gonna, you're gonna recognize that name, Dodge, which still exists to this day. And I actually want to talk about the Dodge Brothers. I want to see if there's books written on them, because they're, they make a, they play a big role in Ford's life, and they're just, they're characters, so let's talk about that real quick. "So the Dodge Brothers came into Henry Ford's life, and he could scarcely have found two colleagues more different from himself."

• 24:17David Senra?

  Alfred Sloan once wrote, "I saw nothing of the mining camps of the West and nothing that happened when oil was struck, but I did see Detroit. The gasoline engine and its myriad promoters, from gifted engineers to manufacturer representatives, living out of their suitcases, were giving the long-established city something of the feverish effinescence of a boomtown. Into this volatile brew of hope and money and opportunism, John and Horace Dodge brought a whiff of the all-but-vanished violence of the frontier." Now, in their late 30s, the Dodges had been born to a blacksmith in southeastern Michigan

• 24:59David Senra?

  and had gone to Detroit in the 1880s to become exhort machinists. Horace worked two years with Henry Leland, and then the brothers went across the river to Canada and set up a bicycle factory. It prospered enough for them to move back to Detroit, open a machine shop, and win the contract to make engines for Olds. Oldsmobile. So, real quick, when they talk about they set up the Dodge Brothers before they got into automobiles, were setting up a bicycle factory? Something I also learned from reading this book on automobile manufacturing and also the book on the Wright Brothers is the precursor to both the automobile and the airplane. So, a lot of people think the precursor to the automobile is like a horse, right?

• 25:44David Senra?

  It's not, it's a bicycle. They took a lot of the designs from bicycles and applied that, just made it a four, basically what they called quadricycles, so like a four-wheel bicycle with an engine. Same way, if you recall, the Wright Brothers, they produced and manufactured and designed their own bicycles, and then they took a lot of the stuff they learned from bicycles and transferred into trying to make a human-powered flight. So, again, that's just something that I didn't know, learning for the first time, and I thought it was interesting, so I'd share it with you. Let's go back to the book. This is the really, like, these guys are just, Dodge Brothers are crazy. As against this admirable, rising professional arc, they were both loud-mouthed saloon brawlers. The brothers were inseparable.

• 26:29David Senra?

  They dressed even more identically than men of business usually did in those days, and they shared the red hair that folklore ties to a quick temper. Horace was the slightly less aggressive of the two, and his wife always blamed John for the scraps they got into. But Horace clearly needed little encouragement. One time, they smashed all the light bulbs in the chandeliers of the Cadillac Hotel. Once, in a scene truly reminiscent of Tombstone days, John pulled a pistol on a saloon keeper and made him dance on top of his bar while using his free hand to fling glasses against a mirror. There must have been a lot of glasses, because this particular spree cost John Dodge thirty-five thousand dollars in damages.

• 27:14David Senra?

  So before I continue, let me just give you some context there. When Henry Ford was bought out of the Cadillac Company, they gave him nine hundred dollars, and he was happy with that, because he could support his family for about six to twelve months on nine hundred dollars. So that's just a few years before. John Dodge is paying thirty-five thousand dollars for one night of saloon brawling and shooting and breaking glasses. So it gives you, uh, it should give you some idea of the kind of damage that this guy. If you could support yourself and your family on nine hundred bucks for half a year, a year, how much damage, like, what did the saloon look like? So it's interesting. Back to the book. But to continue with John Anderson's pitch to his father, what he wrote next is also true.

• 27:58David Senra?

  The Dodge brothers are the largest and best-equipped machine plant in the city. They have a new factory, just completed, and it has not excelled anywhere. Well, when this proposition was made to them by Ford and Malcolmson, they had under consideration others, offers from Oldsmobile and the great Northern Automobile Company to manufacture their machines. But after going over Mr. Ford's machine very carefully, they threw both of those offers away and tied up with Mr. F. and Mr. M., meaning Ford and Malcolmson. So, this, this is, um, this, this kind of speaks to...

• 28:39David Senra?

  How great Ford was at designing and engineering machines and engines.

• 28:47David Senra?

  Okay, so skipping ahead a little bit, this is now the author describing parts of the letter and then we'll get back into that. "It might not sound much, it might not sound like much of a proposition. A dozen boys in a $75 per month wooden factory, patching together parts pulled in from various works around the countryside and offering the result as an automobile. But given the immense amount of capital necessary to create a factory that could accommodate the whole job of building a car under one roof, the independent supplier and his piecework were almost inevitable." So, I included that part for two reasons. One, the description of, this is the very beginning of the Ford Motor Company, which winds up, just the Model T alone, they sell over 15 million of them. And now, of course, the Ford Motor Company still exists 100 years later, it's, you know,

• 29:31David Senra?

  maybe tens of, I don't know the market cap offhand, maybe tens of billions of dollars still. And yet, it started out 100 years ago, in a $75 a month quote-unquote "factory", which was just, it's just a warehouse. And 12 boys putting together

• 29:48David Senra?

  pieces of an automobile produced by other people. And then, the second part, I wanted to include that in there is because, again, it references their version of the multiple, the minimum viable product. It's, "Hey, it costs us way too much money to build our own factory. Let's try to do this on the cheap as much as we can, and then let's get to selling, and then, from there, eventually, of course, Ford builds its own factories and does all that, but he does it after the product is successful, not before." So, the letter continues. "Now, as to the investment feature, you will see there's absolutely no money to speak of tied up in a big factory." Again, they keep hammering this over and over again. He goes on to speak about the product. "The to know," I don't know if I'm pronouncing this correctly, I've never seen this word before, "but the to know," he mentions, "is actually a backseat.

• 30:33David Senra?

  The basic model car was a two-seater with a sloping rear. If the customer wanted the to know, he would pay another $100." Here's where Dr. Anderson will get his returns. "The machines sell for $750 without a backseat, and with a backseat, $850. This is the price of all medium-priced machines and is standard. It is what the Cadillac and the Great Northern sell for here, and what other machines elsewhere sell for."

• 31:03David Senra?

  John then outlines his first father, their expenses, like the machine costs $250, the body $52, the wheels, so on and so forth. I'm not going to read the whole list, but the important part is he arrives that each car will net them $200 in profit. So $550 in expenses out of the $750 sale price. And then he wraps it up here. "On the season's output of 650 machines, it means a profit of $97,500." So skipping ahead just a little bit. "Dr. Anderson reads his son's letter and headed for Detroit, spurred on not by enthusiasm, but by caution.

• 31:45David Senra?

  John had once gotten him involved with a Chicago fire sprinkler company that had eaten a great, a good deal of Dr. Anderson's capital before expiring as though poisoned by it. What he found in Detroit did not reassure him. His first stop was at the large, light, and airy new plant." Those are in parentheses. And now this is Dr. John, or Dr. Anderson talking. "I came to see the factory, which I had heard so much about. It was nothing prepossessing, just a little building on Mac Avenue in which the cars were being assembled from parts made elsewhere. James Cousins," I want you to remember that name, we're going to talk in detail about

• 32:24David Senra?

  him, "he's called Ford's greatest asset, and I find also his life interesting." "So James Cousins was at the plant when we were there, and he offered to drive us to town in his first Ford car. On the way, he attempted to drive through a small park, but the car stalled on a small hill. After frequent attempts to cross the little hill, Mr. Cousins was forced to detour around the block. That was my first auto ride." Dr. Anderson could have saved himself some trouble and anxiety simply by staying put in La Crosse after receiving his son's lengthy plea. "He was evidently a fond father, for after having looked up with dismay upon the Mac

• 33:07David Senra?

  Avenue factory and gotten stuck in the park in its sole product, he gave his son the $5,000 he'd asked for. All the fundraising went like that, slowly, the money arriving and painfully extracted, drips, and drabs." The Ford Motor Company started in business on June 16.

• 33:32David Senra?

  Okay, so I'm gonna skip ahead. This is from the chapter, it's called Ford Finds His Greatest Asset. And that greatest asset is this guy named James Cousins. So, I'm gonna read a little bit about James' personality and his early life, and then we're gonna get right into how he finds himself at Ford Motor Company, and then the impact that he made in the partnership he engages in with Ford. So, this is about James. "Over his father's vigorous objections, he went to work, and did about as well as could be expected from a pre-adolescent with no training whatsoever. He was fired, and found he didn't like failing one bit. He went back to high school for two years, and then, still stinging from his short-lived

• 34:17David Senra?

  career, entered a local business college to study bookkeeping. By 1890, he'd run out of patience with business school, and went to Detroit, where, at just 18 years old, he got a job as a car checker on the Michigan Central Railroad for $40 a month." Cousins had, this is describing the job he had. "Cousins had to note down the numbers on the freight cars that entered the yard, check the seals on their doors, and tack a confirmation card to each side of each car. This was merely tiresome work in August, but in December, when the cars might roll in carrying a couple of inches of ice on their

• 35:01David Senra?

  sides, it was a true ordeal. During bad weather, his fellow workers often glanced at the encrusted seal, and simply wrote down, 'Indistinct.' Cousins never shirked, always chipping away the ice until the seal yielded up its secrets to his kerosene lantern."

• 35:22David Senra?

  Railroad bureaucracy rarely moves swiftly, but the car checker's superiors saw what sort of worker they had in Cousins. And when he turned 21, and he asked for a promotion, they jumped him over several men who'd been with the road, with the company years longer, to make him the head of the freight office. Cousins was not a popular boss. Stern, distant, and always cross, his employees began to say that his sole annual smile signaled the spring breaking on the ice on Lake Erie. He nonetheless was grudgingly regarded as a fair one. "He never tried to shift responsibility upon others

• 36:04David Senra?

  to shield himself," said a man who worked for him in the freight office. "If he made a mistake, he would own up regardless of what the results might be." And if Cousins was intemperate with his underlings, he was every bit as abrupt with his superiors and even with his customers. So this again is a twist of fate in his life and eventually Henry Ford's life. "The way Jim Cousins talked with these patrons on the telephone," another employee remembered, "giving them holy hell was just astounding." Now here's the twist. One of those customers who often got the sharp side of his tongue was Alexander Malcolmson. Malcolmson, you'll recall, is Ford's partner and one of the chief financiers of the Ford Motor Company.

• 36:47David Senra?

  He had plenty of temper himself, but a few bouts with Cousins left him more impressed than annoyed by the man's utter devotion to the interests of the Michigan Central Railroad. Wouldn't so implacable an advocate be of use to the Malcolmson Coal Company? In 1897, Alexander Malcolmson offered Cousins the job of managing the Coal Company office. Cousins accepted. A year later, he was earning $100 a month and scrupulously saving enough to have accumulated his $400 hoard when his boss got together with Henry Ford. What he's talking about there is... He saves $400 and when that letter, the letter that we just covered, the $7 million

• 37:30David Senra?

  letter, so there's a bunch of people that put in money. Some people, the largest single contribution was by this banker named Gray and it was $10,000. Of course, Dr. Anderson put in $5,000. Well Cousins so believed in Henry Ford that he put his entire life savings into the company and it was $400. And then he encouraged his sister to put in a hundred, half of her life savings, which was, she had $200 at the time, so she invested $100 in Ford Motor Company. She winds up selling out her interest, that $100 she turns into $355,000. And then, as we'll see later Cousins $400, including accruing stock, working at

• 38:10David Senra?

  the company, he cashes out for over $30 million. So the amount of wealth that the Ford Motor Company generates is just staggering. And I'm going to cover that in the next section where we talk about how Ford's able to accomplish something that no one else in American history ever has. So we'll get there in one second.

• 38:30David Senra?

  Okay, so back to Cousins though. Cousins knew nothing about motor cars and that was fine with him. There's a funny story where he thought they ran on water. He got more interested in automobiles when his employer told him how consumed he expected to be by the Ford operations. While Malcolmson was away discussing engine compression and flywheels, he had given Cousins greater responsibility in the coal business, a raise and a bonus too. As it turned out Cousins never got near the coal business again. Now this is another twist of fate, which we always talk about on these podcasts, how there's just one or two or three decisions or just acts of randomness that greatly influenced the outcome. And this

• 39:13David Senra?

  greatly influences the outcome of Cousins' life, Malcolmson's life and Ford's life with what happens here. So it says, "He never got near the coal business again." "Malcolmson explained his plan to John Gray, the reluctant president of the new Ford Motor Company." "Gray was president only because he put in the largest amount of money, which was the $10,000." "And it talks about here, but Gray put in the most..." "The weird thing is Gray put in the most money and he was hugely pessimistic." "He thought he would like, he thought no one would buy automobiles, he thought the company would fail." "He was just putting in money because he was making so much money on Malcolmson's coal company." "And Malcolmson asked to put in money." "Gray dies in a couple of years from like heart failure, I think."

• 39:56David Senra?

  "But his estate makes tens of millions of dollars off this investment." "So Malcolmson's telling him, 'Hey, I have this guy Cousins.'" "While we get started with this new venture in the Ford Motor Company, he's gonna run the coal company." "And Malcolmson does not like that, so let's go to the book." "No, no," said Malcolmson. "No need for, no, no," said Malcolmson. "No need for that." "Oh, I'm sorry, let me back up." "During a meeting of the Ford's stockholders to be, Malcolmson explained his plan to Gray, reluctant president of the new company." "Gray was having none of it." "Malcolmson knew coal best," he said. "No, no," said Malcolmson. "No need for that." "Cousins here is a wonderful manager, he can easily run our coal operations."

• 40:39David Senra?

  "That's fine," Gray replied. "If Cousins is so good, then you can send him to the automobile business." "He can watch that for you." "Malcolmson protested again, but Gray shut down the debate." "I am putting up my money on you because you're a good coal man." "You must stay in the coal business." "Thus, Henry Ford was assigned a partner." "He offered to drive Cousins home from the incorporation meeting on that close, muggy June night." "So the, the, the fate of the Ford Motor Company could have changed drastically if Cousins was never involved." "'Cause as you'll see in a few minutes, Cousins is credited with being able to scale." "And, and also keep Ford shipping."

• 41:22David Senra?

  "And Malcolmson winds up losing his seat at the table when he tries to argue with Ford over what kind of car to build." "And as I mentioned earlier, Ford does not like taking..." "He wants complete control over the entire company and he wants to complete control over the direction of the product."

• 41:40David Senra?

  "But we'll get there, let's go into, let's continue on with Cousins and the impact he makes."

• 41:47David Senra?

  So it talks about in the first few months of manufacturing, what worried him, meaning Ford, most were the complaints of the fellows who had purchased his cars. Each one stung him. Perhaps it was a shattered brake drum, perhaps one more about the tea kettle radiator. Whatever the particular complaint, Ford started once again to voice his conviction that the customers were right and that the car wasn't quite ready. And it had to be improved before it was sent out on the market. Another month or so should suffice. Such scruples had already wrecked two promising companies. But those operations hadn't had a James Cousins and his infinite reserve of stubbornness and resource to draw on. Cousins told Ford, "No."

• 42:31David Senra?

  Cousins would, he said, "be willing to dispatch a mechanic to anywhere in the country to fix an ailing Model A. But stop shipping and we go bankrupt." Ford kept shipping. So right there, before I continue about Cousins. He's able to accomplish something no one else had ever been able to accomplish at that point. What they were talking about with the two other companies. The two other car companies that Ford started before the Ford Motor Company, they never shipped, or they shipped so slowly and at a rate which would eventually bankrupt them because Ford was a perfectionist. And he kept wanting, just like you said, "Oh no, I need another month. It'll be better." And that's just not how cars work, especially at this time when you're building everything from the ground up. Things are going to break. I mean, even today, you constantly have to take your car to be serviced and whatnot.

• 43:16David Senra?

  So now, his partner and who the board put with him, James Cousins, doesn't allow that. So I would think this might be analogous to how Steve Jobs was designing and creating the products. And then he hired Tim Cook to make sure that the logistics were taken care of and they could actually build the product. So obviously, Tim Cook's not telling Steve Jobs, "No." At least, I've never heard about that. But, so that the analogy might not be perfect. But basically, you have this inventive genius who can build these great products. And then you have Cousins that makes sure the products hit out the door and the company makes money. Cousins exercised the same fierce vigilance over every aspect of the company's operations.

• 43:57David Senra?

  He got to his office in the Mack Avenue plant at 7:00 in the morning and stayed there until 11:00 most nights. Everything that Ford couldn't do, he did. He took care of the books, of course. He kept a constant intimidating eye on the shop floor and he wrote lively and seductive advertising copy. He made no friends above or below him, and this is Cousins crazy. This is a good part. When Alexander Malcolmson, again, this is Ford's partner. When Alexander Malcolmson sold a close acquaintance, a Model A at a discount, which was a practice forbidden by Cousins, the founder of the company found himself so flangely berated that he made up the difference to the company out of his own pocket. I just thought that was hilarious.

• 44:43David Senra?

  And this is a great summary of the impact Cousins has. Ford by himself could not have managed a small grocery store and Cousins could not have assembled a child's kiddie car. Yet together, they built an organization that astounded the world.

• 45:01David Senra?

  So now we're going to skip ahead. We're still talking about Cousins. This is the role Cousin plays in getting Malcolmson out of the company. So Malcolmson wanted the Ford Motor Company to build expensive cars. Henry Ford believed exactly the opposite. Make the car cheaper, not more expensive. You'll do better selling lots of low-priced cars to farmers and shop clerks than you will a few lavish ones to millionaires.

• 45:30David Senra?

  In later years, Ford suggested that this lightweight, inexpensive everyman's car had been his lifelong goal. So before, let me just interject there. When I was reading this section, it reminds me of that famous Jeff Bezos quote where he says there's two types of companies in the world. Those companies that strive to make their product or service more expensive and those that strive to make their product or service as cheap as possible. And that's just obviously a paraphrase. You can Google Jeff Bezos quote to get the exact quote. Ford is definitely one that wants to make the least expensive product possible.

• 46:06David Senra?

  So we just heard him say a little bit of that, let's go back into this. In later years Ford suggested that this lightweight inexpensive everyman's car had been his lifelong goal. In fact, it is difficult to discover just when the idea took hold with him. But it was fully formed by the time he founded the Ford Motor Company. In the middle of that year, he told John Anderson, our friend that wrote the letter. "When you get to making the cars in quantity, and when you make them cheaper, you can get more people with enough money to buy them. The market will take care of itself. The way to make automobiles is to make one automobile like another automobile. To make them all alike, to make them come through the factory just alike. Just as one pin is like another when it comes from a pin factory,

• 46:49David Senra?

  or one match like another when it comes from a match factory." As his convictions hardened, his friction with the board increased. Cousins, who by now was siding with Ford on virtually everything, just wanted a car he could sell for more than it costs to build. The Dodge brothers were for an expensive car, but they disliked Malcolmson and didn't fight on his behalf when he demanded one. So look what's happening now. Ford's getting mad because he wants, his entire goal is to make the cheapest car possible. His partner's trying to get him to build this big, really expensive car. Cousins is already on Ford's side, they're running the company and the company's making money, so he doesn't want to disrupt that. And then their suppliers and the people who are building the largest part of the car,

• 47:34David Senra?

  the Dodge brothers, don't like Malcolmson. So now he's already being isolated on an island, and that usually doesn't go well in this circumstance. Now this is Ford talking. "I am convinced that the $500 model is designed to revolutionize automobile construction, and I consider my new model the crowning achievement of my life." So at this point, they start with the Model A, they keep releasing, so you have the Model K, you have the Model N, and they all different cars, but Ford wants to focus on what eventually becomes a Model T, and that's what he's referencing here. Back to the book. Even as the Model A was sprinkling prosperity on everyone involved in its creation, friction grew among the shareholders.

• 48:15David Senra?

  Most of the discord came from the different aims of Ford and Malcolmson. There was more than that to the acrimony, though. As he had back in the Detroit Automobile Company's brief day, Ford was beginning to resent not being his own man. That is a constant theme throughout the entire book. This guy is definitely, like, he could not be anything else but an entrepreneur. He does not like people telling him what to do. That Malcolmson's faith and capital had made possible success meant less and less to Ford. He was surely thinking of his chief investor when he said, "Anyone who did not have a part in the manufacturing of the company was actually not contributing and was a parasite."

• 48:59David Senra?

  I think, again, I've mentioned this on past podcasts, why, like, I think history, studying companies in, like, the historical context is more interesting than even what's going on in modern day is because history doesn't repeat, but human nature does. And so, this is what you see. People in general will very rarely remember the good things you did for them. Especially if it gets in the way of their incentives or what they want to do. So in this case, Malcolmson was actually extremely valuable. The Ford Motor Company would not exist without him. And now, they're rolling around, they're making money, and, but Ford's not concerned about the money. He wants more control, and now he's discounting.

• 49:41David Senra?

  Even though Malcolmson was essential to his success, he doesn't care. And unfortunately, that's just something you're going to see a lot in human nature. And something that maybe you could apply to, like, your own dealings. So, again, this is Ford. "Anyone who did not have a part in the manufacturing of the company was actually not contributing was a parasite." He's saying that about the person that funded the company. That's just, that's kind of crazy. For his part, Malcolmson thought, and I shouldn't say it's kind of crazy. It's completely expected, given human nature. I'm just saying it's...

• 50:13David Senra?

  It's not that nice. For his part, Malcolmson brought Ford, uh, thought Ford was being both stubborn and perverse. The trend throughout the industry was toward expensive cars. So this is an interesting part. In 1906, half the automobiles sold in America went for between three and $5,000. Why stake your business on sales a tenth of this magnitude? A decade later, such cars would command less than 2% of the market. But during this hostile board, but during the hostile board meeting, Ford alone foresaw that. So at the time, half the automobile market is cars as three to five, three to $5,000.

• 50:52David Senra?

  And again, going back to the fact that Henry Ford could um, support his family for six to 12 months on $900. That gives you an idea of how expensive, you know, three to $5,000 was in 1906. It is also interesting that within a decade, that, that market share shrinks from 50% to 2%. So Ford winds up being, you know, correct. Um, he just, no one knew that at the time. When the tussling grew from shouted disagreement to an actual corporate fight, it was Malcolmson who started it. And this is where he just, he just screws up, screws himself. Uh, Ford and Cousins just play him. He said truly enough that the original arrangement had stipulated that Cousins would handle the car business while Malcolmson got his coal dealership in order. And then the two men would swap positions.

• 51:38David Senra?

  This had been all Cousins wanted when he joined up with the, with Ford a couple of years earlier. But back then, he believed a car could run on water. His hard-earned success with his partner made him refuse his boss. So did Henry Ford. I told Malcolmson that I did not want him, but that I wanted his man, his man Cousins. And this just again speaks to Cousins. He had a... He was also very difficult to deal with in the sense that, just like they talked about when he was 21, he would be yelling at his bosses and his customers. This is his boss telling him, "Hey, now you're gonna go run my coal business." And he's like, "Nope, that's not gonna happen." Malcolmson then tried to, this is another strategic mistake Malcolmson is doing here, and you're gonna see in a few paragraphs how much money this cost him.

• 52:22David Senra?

  Malcolmson then seems to have tried to get Cousins fired. Ford in turn persuaded the board to double Cousins' salary from $4,000 to $8,000. This was in part a provocation, and like most deliberate provocations, it worked. Malcolmson protested violently at the next shareholders' meetings, despite the fact that Ford Motor Company had enjoyed a net profit that year of nearly 30 times his initial investment. As the claustrophobic meetings bickered on, Ford and Cousins decided on a strategy at once sly and fortright. This is how they bait him and get him out of the company. The Ford Motor Company had advanced to a maturity where it was no longer desirable,

• 53:04David Senra?

  and possibly even dangerous, for the company to rely on a single supplier for the heart and muscle of all of its automobiles. Henry and Ford announced the incorporation of the Ford Manufacturing Company, which would make chassis, but only for the Model N. The Dodges would continue to build them for the big Model K. The Model K is the big Ford that Malcolmson wanted to build, the really expensive one. The brothers had nothing to kick about, because they automatically became shareholders in the new company, and recipients of all the dividends it would generate. Malcolmson, on the other hand, did not. He retained his shares in the Ford Motor Company, of course, but he would get profits

• 53:47David Senra?

  only on the sale of the finished cars. And who knew how much the new, house-built chassis would cut into that profit? "I consider this scheme as unwise, as it is unfair." That's a direct quote from Malcolmson. "This was a position difficult for anyone to argue against, but then the gamblers' audacity that had given birth to the Ford Motor Company intensified by indignation and bruised feelings prodded Malcolmson into taking an unwise step." On December 5, 1905, the Detroit Free Press announced the establishment of a new auto plant in the city. The AeroCar Company, capitalized at $400,000, was building a factory on Mack Avenue that

• 54:29David Senra?

  would turn out 500 air-cooled touring cars in 1906. The company, which would be making, this is their tagline, "The car of today, tomorrow, and for years to come," was owned by Malcolmson. That the treasurer of the Ford Motor Company would now be competing with it shifted the sympathies of the entire board to Ford. The directors demanded Malcolmson's resignation and after a few months of quarrelsome negotiations, Malcolmson sold his one-fourth interest to Ford. He got $175,000. Hardly a bad return on investment of $10,000 three years earlier.

• 55:10David Senra?

  But if he'd stuck it out for a decade longer, he would have gotten $100 million. So this mistake cost him $99,900,000. $99,800,000. And that was the end of Malcolmson. The author talks about when he spent three years researching this book. "I was unable to find anybody in Detroit who knew further about Mr. Malcolmson." So a huge mistake.

• 55:41David Senra?

  Okay, so I want to skip ahead. Again, I said earlier, I'm going to skip the parts that everybody knows. So, at this point, the Model T is a massive success. Ford is the most famous and one of the richest people in America. And just like he has problems with Malcolmson and all his old partners and bosses, he wanted complete control. This section is, I labeled, when I was writing my notes, called "control." And this is where Henry Ford is able to accomplish something that I don't think any other entrepreneur in history has ever been able to accomplish. And so, we're going to get into this. It's also interesting because, well, I'll tell you when I get there.

• 56:23David Senra?

  Ford announced in 1916 that henceforth, he would be paying dividends of 5% monthly on the company's comically low book capitalization of $2 million. He told the brothers in August, these are the Dodge brothers, he told the Dodge brothers in August, that this would allow him to put $58 million into expanding his plant. At the same time, he cut the price of the Model T by $66. Again, he was obsessed with lowering the price. Even with Highland Park, that's one of their Ford Motor Company's production facilities, running at full capacity, the supply of cars could not meet the demand for them. And this meant, the brothers calculated, that Ford had just torn up $40 million of company profits for no reason at all.

• 57:07David Senra?

  They said for no reason at all, but his reason is because no matter what, he wants... The lowest price possible. The Dodges were no longer supplying any parts to the Ford Motor Company. Three years earlier in 1913, they had been shopping in a downtown department store when they ran into Howard Blumer, their friend and lawyer. Again, just like we talk about these twists and turns and these, these elements of randomness that become so important. This is a huge, uh, this is one right here, just shopping in a department store.

• 57:37David Senra?

  Blumer surprised them by asking, "Why don't you brothers build your own car?" John said that they had headaches enough, let Ford and Cousins cope with the myriad difficulties of putting an automobile in the hands of a buyer. Blumer reminded them that their contract with Ford allowed either party to cancel it on a year's notice. What if Ford did that? "Your plant equipment is too heavy to have it all depending on one customer." This is actually really, really smart. "You've got too big an investment not to safeguard it better than you are doing." John, still merely amused by Blumer's suggestion, asked the lawyer if he didn't believe in the business acumen of Andrew Carnegie, and quoted the steelmaker's slogan, "Put all your eggs in one basket and then watch that basket."

• 58:22David Senra?

  Also really good advice. "Yes, I believe that," Blumer said. "If you own the basket, the basket belongs to Ford, the eggs belong to you. What is to prevent Ford from kicking over his basket and breaking your eggs?" Blumer went, Blumer went to the brothers' office the next day to press his argument. And that July, the Dodgers told Ford that their agreement would come to an end on July 1st, 1914. Despite their initial misgivings, they quickly created a popular automobile. Their car was more expensive than the Model T and thus no competition to Ford, but they were relying on his dividends to get it firmly established. Ford had stopped paying all but the most derisory dividends to his shareholders

• 59:07David Senra?

  in order to invest in his other plants. As the Dodge brother's friend had told them, "It's fine to put all your eggs in one basket as long as you have control of the basket." And here's why what their lawyer told him was so smart. Ford, in this case, suddenly decided that the basket was his and he was going to keep all the eggs. The Dodge is told Ford, alright, if that's how you want to do it, just buy us out and you'll have a free hand. Ford said he had already given them a fortune on their initial investment and he wasn't interested in adding to that by buying them out. Then this is a huge, um, part. The brothers took him to court. They got a restraining order against Ford using the company funds for the Rouge, which the Rouge is this huge plant that they're building.

• 59:51David Senra?

  Or any plant expansion and brought suit demanding the company pay out the shareholders. Three quarters of its cash surplus, which would come to nearly forty million dollars. So they go to court, um, I'm gonna skip over that part, we're just gonna talk about the verdict. The court told Ford that he had to drop his plans and within ninety days pay a dividend of nineteen million, two hun- uh, two hundred and seventy-five thousand dollars. Ford appealed the decision and in February nineteen, uh, Ford appealed the decision. Uh, the appeal comes back, the dividend stands. So he's gotta pay that nineteen million dollars as a dividend.

• 1:00:27David Senra?

  And here's where, um, why that, that lawsuit was so important. Uh, because Henry Ford was the main shareholder, most of the payment went right back to him. The trial had evidently made him restless and on December thirtieth nineteen eighteen, he resigned as president of the Ford Motor Company. He was leaving his company because of the Dodge suit. The court's ruling had made it clear to him that he was not free to operate as he saw fit. And his only possible course was to get out and design a new car. Again, the fact that he wants complete control is popping up again, uh, popping up another time.

• 1:01:02David Senra?

  Now here's his plan, this is not, this is like a, a head fake and Cousins sees that it's, um, it's actually a lie. Um, and at this time Cousins, Cousins and Ford, uh, had, kept having disagreements and bumping heads. So Cousins had resigned from the company years earlier. He just, um, he also has an interesting life, like I mentioned earlier. Where he doesn't, even though every single car company in the world wanted him, he never got back into the car business. He made a lifetime's worth of money off Ford, the Ford Motor Company, his share in his stock and then he becomes the mayor of Detroit.

• 1:01:38David Senra?

  So back here's Ford's plan. At the same time, agents began to approach the Ford stockholders, expressing cautious interest in acquiring their Ford Motor Company shares, civilly suggesting that it might be a good time to sell. It is a powerful testament to what Henry Ford had accomplished, that the shareholders didn't at once see that the new company was a ploy and it soon to be produced car a fantasy. But look what Henry Ford had done. They began to agree to sell. So the fact that he resigned, it's like, okay, now it's a good time to sell the shares. Let's get, let's get out of here. Now, this is Cousins though. Again, this is a really smart guy. Cousins did not.

• 1:02:21David Senra?

  He had been right there when his partner figured out the Model T. He knew Henry Ford would no sooner, sooner abandon that car than he would his wife or his son. He had also watched while Ford used an identical strategy to buy out Malcolmson. Cousins stayed out of the negotiation as the bidding started at $7,500 per share and the price rose and finally settled at $12,500 per share. Then he said he was willing to sell, but only at $13,000 a share. John Anderson, again, our friend that wrote the letter, who had grown from the eager timid young lawyer who wrote his father the long letter begging for $5,000 into a gentleman of leisure,

• 1:03:05David Senra?

  found out what was going on through a man named Stuart Webb. Stuart Webb was representing undisclosed parties that wished to buy his shares. I'm sure you can guess by now who those undisclosed parties are. Anderson had already told Webb he would sell only if other shareholders wanted to. And on July 3rd, 1919, Mr. Webb called, this is now John Anderson talking. Mr. Webb called on the telephone and said he had a document which he thought might interest me. Anderson told him to come over. The document proved to be an option running to Edsel Ford, Henry Ford's son, giving him the privilege of buying Mr. Cousins' stock in the Ford Motor Company for $13,000 a share. Now here's a direct quote from John.

• 1:03:49David Senra?

  "Well, I read that option over, and it was certainly a distinct surprise to me, because this was the first time I had any inkling who the purchaser of the stocks was to be. Mr. Ford had denied in the press that he was interested in buying the stock. Well, I said to Mr. Webb, I see Mr. Cousins is getting more for his stocks than is being offered to me. Webb unhappily agreed that this was true, and there was nothing he could do about it. Anderson said, I don't care, Mr. Webb. If there's anybody in that organization who is entitled to a little bit more than anybody else in the case of a general sale, it seems to be it is Mayor Cousins. He was the mayor of Detroit at the time. It was due to his efforts that the company became a success."

• 1:04:32David Senra?

  So you have Anderson, this is an insight into the personality of Anderson. And he just comes off extremely likable in the book.

• 1:04:40David Senra?

  So skipping ahead a little bit. "Anderson studied the figures and came to realize that if he sold, he'd be getting a good deal less than his shares' true value. Because he was the only stockholder who had not committed himself to selling, he was in a position to extract more money. But he did not want to present to Mr. Ford the picture, as it inevitably would have been presented to him, that I was holding him up. All his old colleagues had signed the agreement. If he held back, he'd be upsetting their plans. On the other hand, had he been too generous in his initial response to Cousins getting more for his own shares? And now here's John Anderson's thinking. "All of these thoughts ran through my mind.

• 1:05:22David Senra?

  I figured out, supposing I do refuse unless I get two or two and a half million more dollars, then the tax, then with the taxes, where would that land me? It meant a difference of about six hundred or seven hundred thousand dollars. And I said to myself, by Jove! As I thought over what Mr. Ford had done for me, as I thought of the house I was in and the room, and contrasted it with my humble home in 1903 when the company started, the advantages I had in the meantime, and the ability to give up the daily practice of law, the opportunities afforded to travel, and all of these things I could trace directly to my association with Mr. Ford and the Ford Motor Company, and I said to myself, John Anderson, are you going to be an ingrate, or are you going to be a man?

• 1:06:05David Senra?

  And I decided that I would not try to be an ingrate." On Monday, Anderson told Webb, "Yes." And then the deal moved so quickly that the newspapers reported it completed four days later. Now here's some crazy numbers. Anderson got $12.5 million, having already received dividends of nearly $5 million. Cousins received $30 million. The estate of John Gray, who had gone to his grave, still full doubts about the wisdom of investing in motor cars, took in $26 million. John Gray, you'll recall, is the banker who wouldn't let Malcolmson go and who was the largest shareholder of the initial, not the largest investor at the time, at the beginning, rather. Henry Ford, who so distrusted Wall Street and all the haughty financial bastions of

• 1:06:50David Senra?

  the East, had to swallow his pride to ask for a $75 million credit to cover his buyout. He did so grimly, but when everything was settled, he found he had climbed to a summit nobody had achieved before. This is what I was referencing earlier. John D. Rockefeller never owned much more than a third of Standard Oil. And Rockefeller himself had been surprised to learn how little America's foremost financier had been worth when J. P. Morgan died in 1913. But by the end of 1919, Henry Ford held the largest company ever in the hands of one person. His operation was worth half a billion dollars, and he owned it as completely as he did his

• 1:07:35David Senra?

  piano and his birdhouses. So there you have it. Almost 20 years after the founding of the company, Henry Ford finally gets what he wants. He has complete control and winds up accomplishing something no one's ever done before. Somebody that owns the entire company and has a market valuation of $500 million in 1919. That's just, that was surprising. I had no idea before I read this book that that actually happened. So I think that's a good place to leave it. If you want the full story, make sure you buy the book. I actually left a link in the description. It's an Amazon affiliate link, so if you want to support the podcast, if you like the story you just heard and you want to read the book, if you buy the book through

• 1:08:20David Senra?

  the link, that's afounderspodcast.com and also in the notes of your podcast player. Amazon will give me a small portion of the sale and no additional cost to you. And I think it winds up being like 70 or 80 cents. So a lot, I know a lot of you guys do that and I'm really thankful. It's a great way to support the podcast. And again, the story is worth it. It's, it's really interesting. And I mean, I buy a lot of books, probably buy four to six a month. And it's just something I never, I never think about as an expensive, thinking about it as an investment. Also, if you like what you just heard, you can leave a review wherever you get your podcasts. One of you recently left a review that made me laugh out loud. I want to read it real quick. It said, it's on Apple Podcasts.

• 1:09:03David Senra?

  It said, "The production quality is no Radiolab, but the content is excellent. Great idea for a podcast. I don't miss an episode." So whoever you are, thank you for writing that. Just know that you made me chuckle. The production quality is definitely not Radiolab. I do that on purpose. I really, I've talked about on other podcasts, I'm a podcast, just like I'm addicted to reading all the time. Addicted to listening to podcasts. I just, I hate that they're all starting to sound the same. It's like people are just taking the same format and copying it over and over again. So I'm intentionally trying to do something different because podcasts can be whatever you want them to be. It's a completely malleable medium. So.

• 1:09:41David Senra?

  And finally, if you like what I'm doing here and you want to support, please become a patron. I want this podcast to be ad-free and independent, and I can only do that with patron support. In return, patrons receive exclusive access to members-only episodes. They also like, they get this, the episode you're listening to now is a free episode, but the patrons got it before you're hearing it. And every other episode I do is a premium episode, so it's published just for patrons only. So if you like the free episodes, you like what we're doing, you want to hear more, I say "we," it's just me. If you like what I'm doing. Patrons, I, going back to that Jeff Bezos quote, I definitely want to, I, it's really inexpensive.

• 1:10:20David Senra?

  It's only five bucks a month, and I do that on purpose because I want to make it as accessible and inexpensive to everyone.

• 1:10:30David Senra?

  And if you sign up to be a patron, your support helps me create more podcasts on History's Greatest Entrepreneurs. So founderspodcast.com to do that. So also I'll leave a link in, with everything in your podcast player. And that's it. I'll be back in a few days with another podcast. Thanks for listening.