#423 Soichiro Honda

What I learned from reading Honda: The Man and His Machines by Sol Sanders. Made possible by: Ramp: ⁠https://ramp.com⁠ Applovin: ⁠https://www.applovin.com/⁠ Vanta: ⁠https://vanta.com/founders

• 0:00Speaker 00

  I wanted to read a biography of Soichiro Honda after James Dyson wrote about the impact that Honda had on his career. The key lesson that James Dyson took from studying Honda was this framework that Dyson actually used throughout his career. And it was pretty straightforward. It was, take an existing product, notice what's bad, clumsy, overcomplicated, or even ignored about that existing product. Improve it obsessively and continuously, and you do this by making the product simpler and more pleasurable to use. Then you retain enough control of your company to keep improving the existing product. And then you repeat this loop and never stop. And so, the book that I want to talk to you about today was written in 1975, and it was called Honda: The Man and His Machines. And it was written by Saul Sanders.

• 0:45Speaker 00

  And I think the dedication to this book actually describes the kind of entrepreneur that Honda was. It says, "To the free spirits in all cultures, the Soichiro Honda typifies." And I want to jump into the introduction, and I want to pull out a few key ideas. I think it gives a wonderful overview of who Honda was. And just, really, this is a story of a Japanese maverick. And one of the most remarkable things about his life story, and then the work that came out of his life story, is what he had to endure, the changes that were happening at the country level. So it says, "Across his 60-year career, Japan has come a long way. It has been a torturous trail that led through enormous and seemingly unlimited expansion: the Great Depression, military coupes, the China War of the 1930s, World War II and

• 1:27Speaker 00

  the nuclear bombing that destroyed two cities, foreign occupation, and the remarkable economic miracle and post-war prosperity. Honda has lived and worked through this all." And this next part goes into his personality and his obsession. "There is a man named Honda who very much dominates the history of the company and its products. He has almost constant nervous activity. It takes a while for a stranger to get him into conversation that will reveal the fire in his belly." What can draw that out is talk of machines. He has a passion for motors. Motors and machines grab hold of him from a very young age and they never let him go. In fact, he repeats this phrase over and over again, that fumbling with machines is what he loves to do and it's what he would do for free.

• 2:11Speaker 00

  He would fumble with machines before he got paid to do it. He built his career fumbling with machines. And in retirement, what he does is fumble with machines. And one of the things that made this book so much fun to read, and Honda's a person so fun to study, is that he's just a maverick and a rebel and he's a wild boy. And his personality goes against the grain of the society that he was born and raised in. Honda's thoughts are often controversial in terms of Japanese attitudes, which requires so much conformity from members of society. His straightforwardness sometimes embarrasses the Japanese. Honda was a blunt and direct communicator. His simple and direct approach to many problems is refreshing. It is very appropriate that Honda's efforts have gone to motorcycles, for there is something

• 2:54Speaker 00

  to the motorcycle rider's feeling of freedom and special sort of being fully charged with one's destiny when you're on a bike. Honda is very much that rare thing in the Japanese environment. He is a free spirit. One of the most remarkable things, in addition to being an engineering genius, is he manufactured the best-selling motor vehicle of all time. The Honda Super Cub has been in constant and uninterrupted production for over 60 years. They have sold over 100 million Supercubs. And once he designed, engineered, and manufactured the Super Cub, he never stopped improving it. One of his main ideas on how to improve your product is to make sure that your company stays youthful. He repeats this throughout the entire book.

• 3:37Speaker 00

  He is obsessed with his company maintaining youthfulness. And by that, he means hiring young people and giving them a chance, so much so, again, we're still in the introduction, that says, "Among the factors which dictated his decision to retire from direct leadership of the company was his belief that the technological demands of the new products were beyond him. While he was running the company, he considered himself just an employee of his own company." He would work elbow to elbow with the young engineers. This is one way they described, this is a young engineer at Honda describing what it was like working with Honda. He is a company president who is not like a company president at all. When we say that he works with his employees as one of them, we don't just mean he wears the same uniform as others. We aren't referring to superficial matters. Instead, what we mean is that we find in Honda

• 4:21Speaker 00

  the same kind of person with whom we can have an on-the-same-level dialogue. And for me, one of the most interesting parts of the story is how much it mirrors James Dyson's own story. This description of what Honda did to the motorcycle market is exactly the same as what Dyson did to the vacuum cleaner market when he started. They took hold of an old and narrow market, made it respectable, and expanded it to a size that no one ever thought possible. Another thing that Honda had in common with Dyson is that he believed in the Edisonian principle of design. So Honda wanted to learn by doing. He believed that success first comes with "fail, fail, fail, fail," then succeed. And he's got a lot of great quotes in the book on the difference between failure and success, and how most of it is just persevering through failure. In fact, this is what he says:

• 5:05Speaker 00

  "Success can only be achieved through repeated failure. In fact, success represents 1% of your work, which results only from the 99% that is called failure. I believe your final success can only be achieved if you face challenges with this kind of pioneer spirit." And another idea that Honda repeats is that "technology should only be invented to serve mankind," that humanity should not be slaves to technology. And so this is one way he describes it. "Technology is a tool to serve mankind. Technology is nothing more than the means for achieving a better life for men. Some people mistake the means for the end and have the wrong idea that scientific technology itself is their goal." In today's modern civilization-- now, keep in mind, he's saying these words over a half a century ago--

• 5:50Speaker 00

  "In today's modern civilization, where science and technology are making rapid progress in every field, we often observe a tendency to think that the machine has priority over humanity. I think that such thinking is not only very dangerous, but fundamentally wrong. Don't be used by the machine, use the machine." And then he would repeat this over and over again. "I wish to emphasize that the solution to any problem should be sought at its very root." Okay, so that's an overview of some of the things that he's going to repeat throughout his career. I want to get into his early life, his early career. So he was born in a remote village. His dad is a blacksmith. And one of his earliest memories is other people making people's lives better through engineering and technology.

• 6:33Speaker 00

  And so what he's describing is when lighting was first installed in his very poor and remote village. He says, "I was terribly impressed by the sight of electricians swaggering with their cutting pliers and screwdrivers around their hips, hanging onto electric poles to work on wires. They cut a dashing figure of heroes in my eyes. I was so fascinated that I could never forget them." Before we get back into this, I want to tell you about the presenting sponsor of this podcast, Ramp. I have been reading a lot about SpaceX lately. SpaceX is one of the most valuable businesses in the world, and one of the main themes in the history of SpaceX is constantly attacking and questioning your cost. Ramp helps many of the most innovative businesses in the world do exactly that. And they do this by using first principles thinking.

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• 8:02Speaker 00

  That is ramp.com. And so like last week when we talked about Joseph Pulitzer, Honda also had to endure the fact that most of his siblings perished. He says, "Of the nine Honda children, only four reached maturity. The others died of various childhood diseases." This next part describes how poor his family was. "Honda wore shoes made with soles of rice straw. His mother had to mend his shoes every night so they could be worn in the morning." Honda describes his childhood very simply by saying, "We were very poor." And so even though his father was a poor man, his father was a craftsman. His father cared about doing great work and doing work the right way. Many of Honda's ideas that he'd repeat throughout his life, solve the problem at the root, make things straight, do things your way.

• 8:47Speaker 00

  He actually learned from his father. His father was a man who always wanted things straight and attempted to establish logic in the smallest things. Honda inherited his stubborn resolve to get logically at the root of things and to do it his way from his father. And Honda's another great example of this maxim that true interest is revealed early. Even before I started school, I was fond of fumbling with machinery and was interested in engines. There was a mill around four kilometers from my house, and at that mill was a motor, which was a rare object in those days. I was often taken to the mill on my grandfather's back. I found the sounds of the motor and the blue smoke, with its peculiar smell of oil fascinating. From those days, I have always had a sense of exhilaration

• 9:33Speaker 00

  just to look at and listen to motors and engines. He is not even 10 years old yet. He still has that obsession when he's in his 70s. And listen to how he describes the very first time he ever saw an automobile. I went running after the car. I caught up with it and hung on to its rear. I was deeply stirred. That was my first encounter with any kind of motor vehicle. Remember, he's going to manufacture the most successful selling motor vehicle of all time. That was my first encounter with any kind of motor vehicle. When the car stopped, oil dripped down to the ground under it. I was literally intoxicated by the smell of that oil. I put my nose down to the ground and took deep breaths of the smell. Then I rubbed the oil over my hands and arms.

• 10:16Speaker 00

  It was from that moment that the idea originated that I would one day build a car myself. Every time I heard that there was an automobile on the street, I would run down to see it with the same exhilaration. He is obsessed from the very first moment. And one of the most important elements that would guide his later career is when his father's blacksmith shop had been transformed into a bicycle repair shop. And so Honda would help in the repair shop. And when he wasn't helping, he'd be reading the trade magazine, this magazine called The World of Wheels. And in that magazine, he comes across an ad for help wanted by a Tokyo repair shop. He's in a little village. He wants to get to the big city where he thinks the opportunity is.

• 10:59Speaker 00

  He says, "My dream for months had been to work for an automobile repair shop. My father was not very keen on letting me, the eldest son and a notorious truant, go away to Tokyo at such a young age. But I finally managed to convince him." So he never finished his school. He's 16, moves to Tokyo so he can work in a repair shop. And he says, "When I left my home village, I was full of burning ambition to become an expert car mechanic."

• 11:24Speaker 00

  So he gets to the repair shop and he has to endure the traditional Japanese apprenticeship, which essentially makes him wait over a year to do any of the work that he actually wants to do. And it's very difficult for an impatient person like Honda. And it was so torturous, this is how he describes his time in his life. "Through all the trials and tribulations of a long life, Honda feels that this experience as an apprentice, an apprentice who had to wait endlessly to get at his work, was the most trying." And then, when he's around 17 years old, one of the biggest earthquakes in Japanese history strikes. And the book says, "This turned out to be good luck for Honda. Before the earthquake and the fire, the subsequent fires that come after the earthquake, that is, the shop employed 16 repairmen. After, only two were left. Honda was one of the two.

• 12:07Speaker 00

  When business resumed, a large number of vehicles had to be repaired by hand. The earthquake was far from being a disaster. I could drive cars, ride motorcycles, and learn how to repair automobiles," Honda said. And just like Joseph Pulitzer last week, Honda is harder working and more talented than his peers. And as a result, it says Honda became more and more important to the repair shop. And, again, like Joseph Pulitzer, the best employee gets set up with his own business. And that's exactly what happened to Honda. Honda looks back on those six years, when he was working for his boss before he starts his own company, with great satisfaction. He says, "I acquired skills as a repairman and mastered a knowledge of the automobile. My master had enough confidence in me to help me set up my business on my own." A son of a blacksmith turned bicycle shop owner.

• 12:50Speaker 00

  And because I was by nature fond of fumbling with machinery, there's had... Phrase again, and because I was by nature fond of fumbling with machinery, I was quick in acquiring skills. Whatever I did in those years, no matter how trivial, profited me. For in the long run, there is no waste in life. And so that is another thing that he repeats. In the long run, there is no waste in life. The stuff you're learning today, the skills you're acquiring, you might not use today, but you'll use them five, 10, 15, 20 years from now. And so this is the start of his own business. Things were very humble at the start. It was just Honda and one apprentice. He was considered too young by potential customers to do any repairs. Two other shops in the city were run by older men and gave stiff competition.

• 13:33Speaker 00

  And so Honda made himself a reputation built on making repairs, which other shops said were hopeless or which they had failed at doing. This is actually really important because later on, about probably two decades from where we are on the story, maybe a little longer. When he founds Honda, one of the principles in the founding of Honda was always start with the hardest problem first. And it's exactly what he has forced to do because in Japanese society, older people were favored way more. And so therefore they're not even going to give the young kid a shot to do repairs. He had to start with the hardest repairs. And he doesn't stay a repairman for long. Soon he began tinkering with new ideas was to make the name Honda known throughout the world for technical innovation. He succeeded in making his first product, which was cast metal spokes.

• 14:17Speaker 00

  So the metal spokes, he made metal spokes on wheels for cars and for bikes. And he did that because in that big earthquake we just talked about, most spokes at that time were made of wood and they burned in the fires from that great earthquake. So that's an example of him not wasting anything that happens to him. He's like, why don't I just try to make some that are not made out of wood? Therefore, they won't burn. And this adventure was so successful, he patented. It was to be the first of over 100 patents he would hold personally. Japanese trading companies were soon exporting them to markets as far away as India. By the time Honda was 25, the repair shop was earning a profit of 1,000 yen a month, and he was employing 50 people. And so he's making a ton of money and when he makes money, he likes to spend it by nature.

• 15:00Speaker 00

  It is not in me to spend money sparingly when I'm having a good time. I believe in spending my own money as I like and spending it to have a good time in a grand way. Honda became a playboy. It was a common sight to see him going from geisha house to geisha house and piling a few geisha into the car. One time, he was so drunk, he drove his car off the bridge. I told you he was a wild boy. Luckily, the bridge wasn't high and the car landed in mud and no one was hurt. So it was a very interesting dichotomy to him. Because he's this genius engineer, he's this workaholic, but when he's not working, he has to blow off steam. So genius engineer, workaholic, but he likes to smoke, he likes to drink, he likes to curse, he likes to drive fast, he likes to party and chase women. And that's not the only way he's a wild boy. He also has this really hot temper. Listen to this.

• 15:45Speaker 00

  Honda made local headlines when he got into an argument with the tax office. Honda decided to have it out with tax officials by getting a fire engine hose and dousing officials as they came out of their building. He is constantly getting into all kinds of trouble, but he also believes the fact that he would carouse late at night, he'd drink with normal people, he thought it was beneficial to building products later in his life. Honda says his theory that no experience is ever a waste applies even to his hell-raising days. That's what he called them, hell-raising days, and that they too were profitable for him. I learned about the feelings of people who travel the back ways of life. I was able to acquire a knowledge of human nature through exposure to life in the raw. If, as some people say, I am not exactly a man with characteristics usually associated

• 16:30Speaker 00

  with successful, big businesses, perhaps it's because of this wide experience. And so he parties hard, but he also works very hard, too. He says chasing after geisha was only part of Honda's extracurricular activities. He was still intent on finding out all he could about motors and engines. He developed a great interest in racing cars, their design, how to build them and how to race them, which was to become basic to the success of the Honda organization later on. So he considered racing just R and D. Racing as R and D will be a reoccurring theme throughout Honda's career. Honda did most things in an unorthodox fashion. Honda is called Mr. Thunder because of his instantaneous temper and sometimes erratic behavior.

• 17:16Speaker 00

  His temper is like a summer storm. It suddenly blows up and then as quickly the sun comes out and there are no grudges held. You must be prepared for his impatience and his directness. He's also extremely ambitious and wants to control his own destiny. And so eventually he's like, hey, I don't want to repair other people's machines. I actually want to manufacture my own. And he has a wild strategy that he uses to get his own way. So it says Honda decided that although the repair business was thriving, he wanted to venture into new fields. This is what he said. A garage was a garage after all. No matter how good a repair job is done by a garage, requests for repair work wouldn't come in from Tokyo or America. Honda decided it was time for him to think of something more ambitious, to think of

• 17:59Speaker 00

  manufacturing rather than repairing other men's machines. He decided to go into manufacturing of piston rings. But there was difficulty persuading his board of directors. His board of directors should be said in quotes, by the way. It's like his father and some old friends that helped him set up the company, but are trying to dissuade him from the path that he wants to take. So this is his very unusual strategy. At the same time, he came down with severe facial neuralgia, so painful that he had to stay away from work for two months. Miraculously, when an intermediary working as a go-between helped persuade the rest of the company to permit the change in its activities, Honda's neuralgia was cured overnight. Honda was ready to begin his career as a manufacturer. And again, he doesn't know anything about manufacturing, so this is how he learns.

• 18:44Speaker 00

  Honda began to live and work in the factory, literally all day and night. Honda turned into a hermit, complete with long hair. When he couldn't stay awake any longer, he would lie down on a straw mat on the factory floor and doze off. When I got to this section, I thought of this quote from James Dyson's first autobiography where James Dyson writes, "Anyone can become an expert in anything in six months. After the idea, there's plenty of time to learn the technology. My first cyclonic vacuum cleaner was built out of cereal packets and masking tape long before I understood how it worked." And so a large part of Honda's initial manufacturing efforts were done by hand. The problem with that is you could never maintain quality.

• 19:25Speaker 00

  So he winds up selling like 50 piston rings to Toyota and they send 47 of them back to him. This causes Honda to become a disciple of interchangeability and automation. He did not like the lack of precision of making things by hand, which was excessively common at the time. And so he points his engineering genius towards automation. And it says Honda's mechanical originality came into play when he developed automatic equipment for producing piston rings that permitted the machines to be run by relatively uninitiated women workers as the wartime male manpower pool dried up. This is in the 1930s. Much of this experience, he translated after World War II into the production of Honda's motorcycles. And this guy can't catch a break, but what I love about all the bad things that happened

• 20:10Speaker 00

  to him that are outside of his control, what else is he gonna do? He can't help himself. He has to fumble with machines and make motors. And so if you were Honda and you believe that your life's work, whether it's an earthquake, a fire, a war, losing all your manufacturing plants, the only choice he has is to wake up the next day and just go at it again. And what I love about him is that he's got this unshakable optimism. So he says he lost two factories in the firebombings by the Americans. Yet with the fantastic way Honda always seems to have for pulling luck out of any inferno, even then he profited. The extra gasoline tanks from the US fighter planes dropped on these attacks supplied him with needed precious and scarce metals. Honda called this dividend from the bombings Truman's gift.

• 20:54Speaker 00

  In 1945, so that's after he's getting firebombed, right? In 1945, an earthquake hit the area, destroying Honda's plant and the machines inside. And so eventually he winds up selling his company. I'm pretty sure he sells this company to Toyota. From the sale of this piston ring company, he nets about $125,000 and that gives him time to figure out what to do next. And it is in this constant tinkering and fumbling with machines that he stumbles on the greatest opportunity of his life, which is to start trying to make motorbikes. And he was inventing out of necessity. Honda's first motorbike was a result of the post-war chaos and oil shortages. There was no gasoline. So it says Honda's solution to the problem arose simply, almost matter-of-factly. I happened on the idea of fitting an engine to a bicycle,

• 21:39Speaker 00

  simply because I did not want to ride the incredibly crowded trains and buses myself. And it became impossible for me to drive my car because of the gasoline shortage. Honda, with his great ability to improvise, started to use a gasoline-powered motor that had been utilized by the military to operate generators for radios. He fit that radio onto a bicycle. Transportation of any kind was desperately needed. Remember, this is after World War II. So Honda's makeshift motorbike was an instant success. Soon, the surplus military motors were exhausted, and Honda decided to design and build a motor for the bicycle. And one of the most important parts of the story is, again, in his society, he's expected to conform, he'd just stay in his place. He has this relentless trust in his own judgment,

• 22:24Speaker 00

  focuses on what he wants to do regardless of all the critics and all the people and people trying to dissuade him, the people around him trying to dissuade him from what he wants to do. Just like in When He Wanted His, "I don't want to do a repair shop anymore, I want to be a manufacturer." People tried to not get him to do that. And in this case, they're like, "Why are you trying to make, you know, these bikes with engines?" So it says, "Some of my relatives and friends had opinions and criticism about my going into the motorbike business. Some said I should open a garage since the number of automobiles was bound to increase rapidly in Japan. Some of my critics suggested that a motorbike is only a thing to be used by a black marketer. In fact, that was the principal use of the motorbike. Even my wife was using one to travel the countryside to gather food for our family." Honda suggested his product was necessary and important for just that reason.

• 23:07Speaker 00

  It economized the use of gasoline, which was in short supply. And so this is in 1949. Honda is 43 years old, and this is the beginning of a company that is still thriving 80 years later. And before we get back into this, I want to tell you about AppLovin'. One of my all-time favorite quotes is from the book Zero to One. In that book, Peter Thiel writes, he says, "The single most powerful pattern I have noticed is that successful people find value in unexpected places, and they do this by thinking about business from first principles instead of formulas." And that is exactly what AppLovin' has done with their advertising platform. AppLovin' connects you with over a billion potential new customers in mobile games. AppLovin' allows you to capture undivided attention.

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• 25:18Speaker 00

  Go to vanta.com/footslashfounders and you'll get $1,000 off. That is vanta.com/footslashfounders. Honda decided that he had to switch to a motorcycle rather than a motorbike because something more sturdy and with a longer range was needed. Honda christened his new machine, "The Dream", because, as he says, "I was trusting my aspirations and my dreams to speed." This was the machine that began the fabulous parade of models and the vast production that has spread around the world. Now, this is very, very fascinating. Honda would have never succeeded if he didn't have the right partner, the right co-founder. The way I think about Honda when it got to this section is like, if you study Walt Disney, Walt Disney wanted to spend all his money building the best products possible. That's what he wanted to spend all his money on. What he wanted to spend all his time on.

• 26:03Speaker 00

  I remember there was an argument between him and his brother, who handled like the business side of things. It's like, "How much is this gonna cost?" And Walt Disney yelled at him. He goes, "We're innovating. I'll let you know what it costs when we're done." Honda's got a little bit of that in him. And so Honda needs somebody who will run the business and make sure they don't run out of money. So at this point, he's building motorcycles, and he's just happy because a few people are buying them, but he never thinks to collect money for them. He'd give them on credit, and then when he'd go try to collect the money, months later, the person would disappear, or the shop would be out of business. So he almost goes bankrupt. He says, "Since I found pleasure in the fact that a thing of my own invention was proving useful and was appreciated by people, I was not paying much attention to profits." Honda was facing bankruptcy, since many of the products it sold were just not being paid for. The shops he sold to on credit would never pay, or they'd go out of business.

• 26:48Speaker 00

  This is when Honda's alter ego appeared on the scene, his partner's Takio Fujisawa. There is no Honda without Fujisawa. Fujisawa recalls that when he was first approached with the possibility of joining Honda's small manufacturing operation, his wife warned him that two unconventional Japanese characters would never be able to hit it off. It was hard to imagine two men more different. And so this partnership is gonna last the rest of their career. Honda wanted Fujisawa to join him. He had always realized his deficiencies in finance and marketing. Honda works as a member of a team and recognizes that some of the most important members of any such cooperative group must have quite different talents and personalities than he. This is what he says.

• 27:31Speaker 00

  "I have always felt a person who cannot mix with people of different temperaments is rather a useless person. Talent should be sought far and wide." And he also needs a steady hand in the company. He has this erratic genius. In fact, there's hilarious stories. Like this one sentence about him being a wild boy. "Honda often thundered home on his motorcycle at 2:00 or 3:00 in the morning, full of sake." And so you have this product and engineering genius. And now you match him with somebody that's great at finance and developing distribution channels. And this is really, really smart idea. So Fujisawa is going to build a distribution network from scratch for Honda's products. He also helped solve their cash flow problem by making the shops that they sell wholesale

• 28:14Speaker 00

  to pay upfront for the product. But the way he built this distribution system is very fascinating. Says Fujisawa looked into Honda's distribution system and was shocked to learn that there were less than 200 bicycle shops and other distributors of Honda's product. He sat down and wrote a letter to a list of 18,000 bicycle shop owners in the whole of Japan. This is what he wrote. This is great marketing. Less than 100 years ago, your father saw the first bicycle brought in from Western countries. He knew little about it, nor how to ride it, how to make it, how to deal with the simplest problem. But he learned to do all those things, and he learned to do them well. Because of that spirit of Japanese resourcefulness, he was able to make a comfortable living and left you with a bicycle shop and a way to earn your living.

• 28:59Speaker 00

  Now we are launching a new product. It will be a motor-driven bicycle. You have hardly seen one, and you do not know how to sell it or how to repair it. But we intend to help you do both. This letter worked almost overnight. This set up a distribution network of 5,000 dealers on the basis of the replies that Fujisawa received from this letter. So this is when Honda decides, hey, I went too narrow with the dream. At the time, motorcyclists were thought of like this crazy cult. I should build something simpler that anybody could use, that people that are afraid of motorcycles would buy from me. And so it says, "The demand for the dream was moderate. The machine was heavy and it was expensive. Even more important, the motorcycle was a product designed for a relatively small

• 29:42Speaker 00

  group of enthusiasts, people who belonged to the very exclusive cult of motorcyclists. I racked my brain to come up with a design that would be in great demand. The conclusion I reached was that I must make a motorcycle which would be able to substitute for the bicycle, which was enjoying overwhelming popularity in Japan in those post-war days."

• 30:01Speaker 00

  Honda set out to design a smaller engine of his own. The model he came up with was called the Cub. Again, the Cub is going to be one of the most successful products of all time. It is the best-selling motor vehicle of all time. This is why he believed he could make something as great and as widely appealing as the Cub. He says, "I was conceited enough to think that I understood the minds of people better than others, thanks to my wide-ranging, pleasure-seeking activities, such as drinking with all kinds of people." And so night and day, he's working on his product. And he's asked, like, "It must be extremely taxing to invent something." And I think Honda's reply to that question reveals a lot about himself. He says, "I don't really find it very taxing because I'm doing what I like to do."

• 30:44Speaker 00

  As the proverb goes, "Love shortens distances." A person who is trying to invent something new is enjoying himself, although he may appear to others to be having a hard time. And so he'll continue on this theme, that you should be working on things that you love to do. He did it himself, and he encourages his employees to do the exact same thing. Honda tells the young men joining the company that they should understand that they are working first for themselves and second for the company, and that they must do something that pleases them. To say this in Japan is revolutionary. And one of the things I love about Honda is that he wants to win by building the best product in the world. At this time, there's a lot of other people in Japan trying to petition the government to essentially stop importing foreign goods and essentially protect their goods.

• 31:28Speaker 00

  And Honda is the only one of these manufacturers that doesn't vote for this. And in fact, he explicitly says he doesn't want any government help. This is what he says. This is fascinating. "A group of private businesses held a meeting and decided to ask the government to adopt measures to promote exports and discourage imports to Japan. I did not participate because I felt strongly that we should not choose the easy path of asking for the government's help. In my opinion, the problem had to be solved by our own achievements in the technical field. If Japanese technology were good and Japanese products were high-quality, then the Japanese would not have to import foreign-made products. I resolved to prove that high-quality goods know no national boundaries. I resolved to discourage imports and promote exports

• 32:10Speaker 00

  by enhancing technology and developing engines that were the highest-performing in the world." And he puts his money where his mouth is and even risks bankruptcy to do so. So he spends more on high-quality tools than needed to make these high-quality products that he wants to make. Then the company had an assets in the time. They spent something like 10X on tools than the entire assets of the company. And his thinking here was very fascinating, but Honda found that high-quality products could not be produced without high-quality tools. My feeling was that even if our company went bankrupt after importing production machine tools, this did not mean I was squandering resources because the machines would remain and be working for the people no matter what happened to me.

• 32:50Speaker 00

  I thought that Japan would be swallowed up by the worldwide tide of economic liberalization and competition if it remained behind without doing anything to maintain its competitive position. I believe that there was only one decision for Japan to make, either to bring about its own destruction by turning its back on the progress of the world, or to dare to chant survival by importing up-to-date machinery. And I chose the latter. Now, the crazy thing is, right after he leverages the company and buys all these machines, Japan goes into a deep recession and as a result, Honda cannot pay for his machines. And what I love about what happens next is this example that relationships run the world. So Honda has a supporter inside of his main creditor, inside the bank, and this supporter

• 33:34Speaker 00

  convinced the rest of the bank not to foreclose on Honda. The reason this is so fascinating to me is, he's just trying to help Honda buy time. He understands the assets are still good. And Honda, in turn, repays many decades later, when Honda is a giant, giant company. When they're much more successful than they are now, they're still doing business with this small bank even though they had better options available to them at that time. So it says this guy, Karo Hara, supported Honda against those in the bank who wanted to foreclose on their loans. He reasoned that the machine tool purchases that Honda had made were of excellent equipment and could be sold if worse came to worse. It took six months, but Honda squeaked through. And once they come out of recession, Honda has a fantastic product in the Super Cub. Now, this is very interesting.

• 34:17Speaker 00

  They intentionally targeted non-motorcycle users, in the way that Steve Jobs intentionally targeted non-technical users with the Apple II. So it says the Super Cub was not designed for the young, daring, speed demon in the motorcycle field. It was meant for the man in the street, his wife, and his kids. It opened up the possibility of low-priced, easy-to-ride, cheap transportation. It was a machine almost anyone could ride. The machine touched off an explosive demand for motorcycle transportation. I'm going to read you this from Steve Jobs' biography. Steve Jobs, again, had this very similar idea. With the Apple II that we see that Honda had with the Super Cub, and this is what Steve Jobs said about the Apple II. "My vision was to create the first fully packaged computer.

• 35:01Speaker 00

  We were no longer aiming for the handful of hobbyists who liked to assemble their own computers and who knew how to buy transformers and keyboards. For every one of them, there were 1,000 people who would want the machine to be ready to run." And then now we get to what I think might be the most interesting part of this entire story. So Honda had to change the perception of the entire product category before he could enjoy any success. And so how they thought about this and how they did this, there's huge chunks of the book that I want to read to you because I found this part especially fascinating. "The company laid down a saturated advertising campaign. The problem they found was the very low reputation of motorcycles and the public at large. So the initial thing we had to do was to change the image of the motorbike. What we did was to advertise our motorbike

• 35:45Speaker 00

  through such popular and prestigious magazines as Time and Life. We wanted to develop products that would be purchased by the nicest people. So that became our slogan. You meet the nicest people on a Honda." Motorcycles at the time carried bad connotations. It was the idea that you were rough, dangerous, and perhaps even a criminal if you rode a motorcycle. The company fought a continuing battle against the image of the motorcycle as a plaything for juvenile delinquents. The advertising program was based on the belief that the primary resistance of motorcycle sales was not based on the public's lack of familiarity with the vehicle. The problem was the social acceptance of motorcycles as serious transportation.

• 36:30Speaker 00

  Their largest market is going to be American, so this is where they're waging the war first. There was a general concept that anyone riding a motorcycle was a member of a black leather gang. Honda's ads didn't set out to sell their own products. This part is so important. Honda's ads didn't set out to sell their own products. They sold motorcycling. Their ads featured illustrations of people in various respectable walks of life. Students, housewives, businessmen, etc., with motorcycles. They became the largest advertiser of motorcycles on US network TV. They spread their slogan, "You meet the nicest people on a Honda far and wide."

• 37:14Speaker 00

  Their ads showed ordinary, presentable people in all walks of life on a Honda. This is also very smart. They were targeting not just a potential owner-driver, but his family, seeking parental and family acceptance of the Honda as an acceptable means of transportation for a loved one. And one story, one anecdote, illustrates how successful Honda was at this exact point. So a mom goes in to one of the Honda dealers. A parent with her son went to a Honda dealer and said, "My son was insisting on buying a motorcycle. I told him I wouldn't have him riding one of them, but I would buy him a Honda." That is really clever. Okay, so then I need to get to the fact that, really, I would think of Honda

• 37:57Speaker 00

  as like basically like a giant research and development organization. They prioritize research and development over everything else, and they know if they do so, then inevitably, they will invent new products that come out of that. And so, one thing that he uses for his R&D, and we'll get to the fact that he actually spun his R&D department out and put it into a separate company. I don't, this is a very fascinating idea. So Honda is intent on using racing as R&D, and he has this experience by going to the greatest motorcycle race in the world at the time, which takes place at the Isle of Man. And this experience he has is going to cause him to fundamentally reorganize how his company operates. So he says, "Top motorcycle men from various countries are invited to match the technical standards of their machines." He saw German and Italian motorcycles competing and said, "I felt discouraged and flabbergasted in thinking

• 38:40Speaker 00

  that it would be a long time before my dream of winning this race would be realized. But it did not take me too much time for my inborn, unyielding spirit to reassert itself. There is no reason why something which could be done by foreigners could not be done by the Japanese. And what I had to do was to concentrate on research, to find out why it was that the motorcycles I had seen had the same number of cylinders as our motorcycles, but had three times the horsepower." So then he goes back, and this is when he sets up R&D as a separate company, and why, this is fascinating. Honda reorganized the company. He set up a special research organization. They were given independent status and made a separate company. Honda explains why he did this.

• 39:22Speaker 00

  One thing that must not be forgotten is that research means a succession of failures. That more than 99% of our research is total failure. Had we left research in the parent company, it would have been treated like a stepchild. For that company's purpose is the pursuit of profits. Since good research cannot be treated as simply as an appendage on manufacturing, I decided that it would have to be a separate, distinct operation. The organizational structure of a research institute is different from that of a manufacturing company. A research organization should be structured to enable individuals to make the best of their ability, whereas a manufacturing company should be organized to yield maximum efficiency.

• 40:04Speaker 00

  We decided that Honda Research should get a specific portion of the sales of Honda overall, and in return, it hands over any developments it makes to Honda Manufacturing. And in research is where he wants to spend most of his time. He likes to do the actual work and views himself mainly just as an employee of his own company. Honda's commitment to the research activities of the company was a very personal one. He spent almost all of his time at the research and engineering laboratories, where he was not bored with the problems of marketing and finance. He would be smeared with grease as he worked side by side with the development engineers. I am president of the company only when I'm considering its future, but most of the time, I'm just one of the employees. Now, one of the most fascinating parts of the book is the fact that there is another

• 40:48Speaker 00

  legendary company that you and I have both talked about and studied in the past that was started at the exact same time in Japan as Honda, and that is Sony. And so, the founder, the founding engineer, and the technical brilliance behind Sony, Masuro Ibuka, appears in this book, and for like two pages, he kind of breaks down why Honda, what makes Honda such a special founder. It's one of my favorite parts of the book. Says the unique feature of Mr. Honda's personality has been that once he gets an idea, he pursues it regardless of what's in the way. I think the best comparison is with Edwin Land of Polaroid, who seems to be a similar type of individual. I think the thing that made Honda outstanding is that he concentrated on engines as an engineer. This was the one thing on which he focused all of his attention.

• 41:33Speaker 00

  Honda concentrated on engines. He left the rest of the business to Fujisawa. When Honda would concentrate on a goal, he would pay so much attention to it and the company would concentrate on it so much that sales would fall off. Observers on the outside world would say that Honda was on the road to bankruptcy. When Honda then succeeded in a technical breakthrough that started yielding products, then its sales would go skyrocketing and business would boom. As a result of this, Honda has accumulated a tremendous amount of unique engine technology, which it alone has. Honda resisted suggestions that the company move into other fields. The company's products, he said, must have an engine.

• 42:17Speaker 00

  It reminds me of what Henry Ford wrote in one of his books. This is Henry Ford. This sounds exactly like Honda. We are in the motor business and in no other businesses. Everything that we do gets back to the motor. If you study the career of Henry Ford, you just realize that, oh, he basically saw a car as wheels for a motor. The car was just the delivery mechanism for the motor. The motor was the center of gravity for his entire enterprise, just like it is for Honda. And so then Honda goes back to talking about the importance of racing as R and D. He actually calls entering a race floating research. This was fascinating. We are not just out to win a race, Honda said. We want to apply the knowledge we gain in the race to production.

• 42:58Speaker 00

  By improving the technical qualities of our engines for racing, we are able to improve our standard cars. Honda also feels his company is unique and should go it alone. So most of his competitors at the time are merging or doing joint ventures with larger American car manufacturers. So like Mitsubishi goes and partners with Chrysler, Isuzu partners with General Motors, and Honda did not. And this is why Honda thought that he should go it alone, that there was a special genius in the company that must be preserved. And he thinks the center of that genius is their research. And so he talks more about this peculiar approach to research that they had when he was running the company. The basic principle of our R and D program is that our R and D work is respect for humanity.

• 43:42Speaker 00

  Men desire something, technology is something to achieve that goal. It's not that technology is there and that's why we make this. It's the other way around. There is a need, hence the technology. The technology is simply a means. This is our fundamental philosophy. The quality of our development is not solely dependent on the amount of money that we devote to R and D and the number of people we have. In R and D, we believe that what is important is what is in our people's brains. We manage R and D in such a way that everybody in there enjoys working and that they're enthusiastic. If their brains are on strike, then nothing is going to work, no matter how much money you put into it.

• 44:23Speaker 00

  With our technology, we can create the demand, we can create the market. And I love that he stayed focused, that excellence in our product is our north star. Go back to what he said. He's like, I don't want this protectionism, this government protectionism. If I build the best product, the best product knows no national boundaries. And so he says, we sometimes say that it's nice that there are companies which are interested only in seeking profits because thanks to such companies, a small company like Honda will have a chance to do great work. And so in that pursuit of excellence and achieving a great product, he is also very extreme. And so he says, do not accept any easygoing technological compromise. If there is a possibility, then we should pursue it to the extreme. That is the essence of our research staff.

• 45:09Speaker 00

  And then the book ends describing what makes Honda special, why there is genius in the company and needs to be preserved, and why he had to retire. It says Honda is different. It is a company founded by a man who is fond of the smell of gasoline, founded by a man who is a transportation maniac. Honda is an engineer. He is a man who only knows how to make things. He is talented at cutting through technological jungles. What is important to remember is that Honda was not the only company founded in those days, so post-World War II destruction. There were many, many other companies seeking to make their way. Of all these companies, only a handful have survived. The others were blown away by storms like pebbles on a roof. And there are some traits common to those companies which survived.

• 45:54Speaker 00

  The men who founded them were all innovators. And one way that Honda ensured that his company continued to innovate was by, he was obsessed with staffing his company with young people and then giving them the ability to change the company, which goes against human nature. Youthfulness is mentioned in the company management policy. "Youngsters will think that things must be changed." This is a quote from Honda. "And the older generation will be critical of the young. It is natural that there exist insurmountable differences between these two." Honda accepts this as not only an inevitable conflict, but one which he approves of and feels is essential to progress. Honda has put the emphasis on the recruitment of young people. "Our R&D system is such that each individual is given an opportunity

• 46:38Speaker 00

  to do whatever he would like to do. He is free to make any proposal and take responsibility for any research he wants to do. If you only have older, experienced engineers, you are not going to get anywhere. Young engineers must be given more opportunity." Honda added in his usual mixture of bravado and frankness, keep in mind he's in his 60s when he says this. "I regard myself as still being young mentally and physically, and I don't think you can beat me. Realistically, however, I must admit that nowadays I often envy young people and feel I can no longer keep up with them." I now feel more keenly than ever how wonderful it is to be young. Nobody in the world is perfect.

• 47:21Speaker 00

  An important thing in any organization is for the individual to seek assistance from others for what is missing in him and what he cannot do. And at the same time, spare no effort for maximum utilization of what he has. And this is what Honda said when he retired. "Looking back in my work, I feel that I have made nothing but mistakes. A series of failures, a series of regrets. Although I made one mistake after another, my mistakes or failures were never due to the same reason. I never made the same mistake and I always tried my hardest and succeeded in improving my efforts." When he was asked, "What is he doing in retirement?", he answered, "Fumbling with machines."