Buy the Book: Men and Rubber tells the story of the early automobile industry and how Harvey Firestone built a small tire company into a leader in the industry. His autobiography offers timeless insights into starting and running a business.
The Notes
- “Thomas A. Edison sums it up this way: ‘There is no expedient to which a man will not go to avoid the real labour of thinking.'”
- “For the most difficult thing in business is first getting yourself to thinking and then getting others to thinking. I say this is difficult because, in the natural course of business, an infinite number of details come up every day, and it is very easy indeed to keep so busy with these details that no time is left over for hard, quiet thought – for thinking through from the beginning to the end.”
- “A committee may function very well indeed as a clearing house for thoughts, but more commonly a committee organization is just an elaborate means of fooling one’s self into believing that a spell spent in talking is the same as a spell spent in thinking. “
- “If you ask yourself why you are in business and can find no answer other than ‘I want to make money,’ you will save money by getting out of business and going to work for someone, for you are in business without sufficient reason. A business which exists without a reason is due for an early death.”
- “The single reason for the existence of any business must be that it supplies a human need or want, and, if my experience is worth anything, a business which has this reason for its existence will be bound in the end to prosper if the thought be put into it.”
- “A business is not a business until it has been hardened by fire and water. What we lost in the boom – what everyone lost – was the appraisal of values. It does not require any thought to do business in a period of rising prices, and we had gotten out of the way of thinking. Instead of comparing values, the continued rise in prices covered up our mistakes. And it took a great shock to bring us to our senses and make us again appraise values.”
- “Much of the thinking in business has to be along the lines of comparing values. If we make a change in manufacturing or in selling methods, will the added return pay the cost?”
- “The test of a business man is not whether he can make money in one or two boom years, or can make money through the luck of getting into the field first, but whether in a highly competitive field, with out having any initial advantage over his competitors, he can outdistance them in a perfectly honourable way and keep the respect of himself and of his community.”
- “Having a surplus is the greatest aid to business judgment that I know — and I bitterly know what I am talking about, for I went through years of upbuilding without being able to accumulate a surplus. Then, when I gained one, I saw it completely wiped out and turned into a deficit overnight. A man with a surplus can control circumstances, but a man without a surplus is controlled by them and often he has no opportunity to exercise judgment.”
- Harvey Firestone’s Father:
- Was a farmer.
- “My father had the rare foresight to know that a fine crop one year was more or less a fortunate accident and did not set a figure to be followed during future years.”
- “He often told me: ‘Never rush in on a deal. Let it come to you.’ That is the course he followed, and by the time he was ready to trade, he knew the whole market. If his survey convinced him that the market was not a good one either to buy or to sell in, he simply went home again. He often held his stock a year to get better prices, and he was so good a judge of conditions that I do not recall that he ever made a mistake by holding. If the market were high and seemed to be going higher, he would seldom wait long to sell, and he never held back in the hope that the prices would soar to some impossible figure. Although he probably had never heard of Baron Rothschild’s advice never to buy at the top or sell at the bottom, he literally followed it. He never wanted to get more than his stock was worth or to buy stock for less than it was worth, which is probably the reason why everyone in the market respected him and dealt with him fairly.”
- “This thing of sleeping and eating with your business can easily be overdone; it is all well enough – usually necessary – in times of trouble, but as a steady diet it does not make for good business; a man ought now and then to get far enough away to have a look at himself and his affairs. Otherwise, he gets lost in the details and forgets what he is really doing.”
- “Why is it that a man, just as soon as he gets enough money, builds a house much bigger than he needs?”
- “One changes with prosperity. We all think we should like to lead the simple life, and then we find that we have picked up a thousand little habits which we are quite unconscious of because they are a part of our very being – and these habits are not in the simple life. There is no going back – except as a broken man.”
- Salesmanship
- “The first principle of salesmanship – which is, that you must thoroughly believe in what you have to sell. Then selling becomes merely a matter of showing how your product will help a prospect.”
- “Salesmanship has to establish a continuing relation in which the seller helps the buyer. Going to great lengths to sell a man something he does not want is a clumsy way of trying to get money – it is much simpler and just as honest to knock the fellow on the head and take the money away from him.”
- “It is the duty of management to provide so good a product and then to let people know so thoroughly about it that any man of reasonable intelligence can go out and sell it. If there is no real salesmanship in the home office, there most certainly will be none on the road.”
- “The public is always willing to pay for quality. If we were just fooling ourselves about the quality being better, then the public would not pay us an extra price and we should fail. The real test was of product.”
- “Selling is first a matter of having something to sell, then of finding whom to sell to, and, finally, of finding real reasons why this prospect should buy.”
- “We have never been fond of the purely commission basis, because many men are short-sighted and they will neglect service and the steady customer of the future for the immediate customer on whom they can earn a commission.”
- “It is unusual, and indeed abnormal, for a concern to make money during the first several years of its existence. The initial product and the initial organization are never right. The first product, no matter how thoroughly it has been thought out, has to be seasoned in the market. An experienced company with ample resources can make extensive laboratory tests, and also tests in use, for a long period before bringing out a product, and can reduce many of the elements of luck and risk. But it cannot know in advance either how the public will receive that product or how it will stand up in actual service.”
- “The new company will think that it has taken every precaution. It will think that it has made every sort of an investigation, but really the most searching trials that a new company can make are of small moment, first, because the promoters can never get themselves into the cold, detached frame of mind in which the public approaches anything new, and, second because the knowledge of what really is a test will be lacking.”
- “It is exceedingly unwise to hold out any promises of quick returns – although it is human nature to do so. For if a new business does succeed, it will have to be uncommonly careful in the distribution of profits. If you are going ahead, you will need every cent you can lay your hands on to finance operations, and the more of these operations you can finance with your own money, the better off you are. A business which starts off quickly, makes money at once and seems to be in every respect a gold mine, often does not last long. It is just selling peanuts to the crowd in town for the circus – a once-around affair.”
- “If the organizers of a corporation cannot agree at the beginning, there is small chance that they will afterward.”
- On Electric Vehicles: “We all thought of electricity as the coming motive power for everything. The few domestic gasoline cars which I had seen impressed me as being ingenious rather than useful.”
- “Losing money is not pleasant, but every business must at times lose money. Losing money is really serious if you do not know why you are losing, or if you do know why and cannot help yourself.”
- “An office is essentially a place in which to work. It is not a club and it ought not to be fitted up as a club else it may turn into a club. When a concern is earning large profits, an extra $ 10,000 spent in getting more elaborate office equipment seems a mere trifle, but no company always earns large profits, and there are times when $ 10,000 looks big to almost any company. And there is more satisfaction in having the ten in bank than in having it in a row of ornate chairs!”
- “A soundly financed business ought to have enough free money of its own to be out of the banks during the dull period of the year and reserve its bank borrowing for the busy seasons. I cannot too greatly emphasize or repeat too many times that bank borrowing for any capital purpose is asking for more luck than falls to the ordinary enterprise.”
- “I believe in keeping prices low, for, regardless of service, there is no real profit in high prices because high prices automatically cut down volume. But the only possible way to lower prices and still keep business is to save in the cost of manufacturing by improved processes. Quality must go up, not down, and if a competitor lowers his quality, that is exactly the time for you to raise yours.”
- “Competition rarely puts anyone out of business – a man usually puts himself out of business either by not making a good article or by wrong methods in sales or finance.”
- “No business can succeed unless it is constantly revising its product, not only to meet the actual demands of today but also the potential demands of tomorrow.”
- “There is always a better way of doing everything than the way which is standard at the moment. It is a good thing for a man to be pushed into finding that better way.”
- “The biggest thing in business is to be working and planning ahead – planning ahead for production, for sales, for new developments in the art, for money, for sources of supply. The business of the day is, of course, highly important, for unless today’s business be looked after, there will be no tomorrow’s business to bother about. But unless one can see and plan for a year or two ahead, one’s business will not grow evenly and naturally. It will pass through a series of emergencies, and one of those emergencies will wreck it. Emergencies will come about in any business, but they will be few and not hard to meet if the future has been mapped.”
- “The only danger in mapping the future lies in making the plans inflexible. No one can know exactly what will happen next month, let alone next year, but reasonable plans can always be made, and then they can be changed as circumstances require. A too rigid plan may be worse than no plan at all.”
- “My own common sense taught me that the human being is yet to be born who can make a rigid plan covering twelve months in the future without running into the danger of suddenly operating a plan instead of a business. If it were possible to plan for a year ahead, then there would be no need for judgment or management – any question that came up could be settled by referring to the plan. That is the trouble with a plan, especially a carefully considered plan. We are so likely by tacking the name “plan” on what is only a guess to give more dignity and weight to the plan than it deserves.”
- “One thing at a time is a pretty good rule – a rule that I never break.”
- “The roads of the country were not up to any average… Anyone who got four thousand miles out of a tire was doing well.” (around 1910)
- “The management of one’s self, which gets down to controlling one’s own time and distinguishing the important from the unimportant, comes only from experience. Every man has to work out his own rules and, like all personal rules, they have to be flexible.”
- “I know of only one first-class policy. It runs: ‘Use what common sense you can under the circumstances.'”
- “I know of no better way of fooling one’s self than writing inter-office communications and asking for reports. A man can keep himself busy that way all day long and completely satisfy his conscience that he is doing something worthwhile.”
- “The only firm rule I have is to take up one thing at a time and to take up nothing else until my mind is free. I do not believe in quick decisions unless in an emergency. I would rather take my time about making up my mind, and I nearly always manage to do so. Indeed, anything that can be decided in an instant is something that ought not to come to me.”
- “Nothing is easier than to budget in mechanical fashion. You can start with a 10 percent increase in business, and you can fool yourself right at the outside by calling that 10 percent increase normal. There is no normal increase in business.”
- Efficiency is acquired through experience.
- “The eternal problem of business is men. Through more than twenty-five years, I have been hiring and promoting men, and I know of no formula for either hiring or promoting. And indeed, if there were a formula, it would be of little use in any position requiring the exercise of judgment.”
- “A company that gets business too quickly acts just about as a boy does who gets money too quickly.”
- “We still make mistakes and we expect to go on making mistakes as long as we remain human beings, but we are all so close to affairs that a mistake does not get far. If a mistake be made, it is our mistake and it does not help any one to put in time hiding it.”
- “In bringing down prices, it is absolutely necessary that we prove to dealers and consumers alike that our quality has not only been maintained but improved. The public is very apt to associate lowered prices with cheapness. In the public mind the word “cheap” does not imply quality or value.”
- “Successful business is never conducted on rules; it is conducted on principles put into effect by human energy – by the kind of energy which does not know when it is licked.”
- “The moment that a company starts paying dividends without regard to future needs, it is as good as finished. If the number of stockholders be large, the dividends have to be high – the stock market actually judges the condition of a company by the dividends it pays. High dividends may be a sign of strength, but more often they are a sign of heedless management.”
- “One who founds a business simply has to choose between expanding on the profits or expanding on the profits plus the proceeds of new issues of stock. Undoubtedly, the first course is the better, if it can be followed. The next best course is to have as few stockholders as possible and have them investors, not speculators.”
- “On one point I am certain – the employees ought to have some stock interest, and we have made that compulsory – a condition of employment. And also I believe that the officers should have their savings in the company they work for. Whenever stock is offered for sale, I try to get the officers of the company in on the purchase. The best results are obtained when a majority of the stockholders are directly involved in the management of the company.”
- “I believe that conservative borrowing makes money for us. The ability to clean up all borrowing once a year is a test of the nature of the borrowing – although not a certain test. There are no certain tests.”
- “The commercial instinct has been overrated. The service instinct is more important.”
- “It is a gift to keep silent when one has nothing to say!”
- “Business is not a game. Business is not a science there are too many unknown and unknowable factors ever to permit it to be a science. If business were a science, then one could learn the principles and let the thing run itself. But no business will run itself.”
- “The greatest pleasure is in doing something to help others to help themselves. There is some small satisfaction in just giving away money, but the great satisfaction is in giving others the chance to be independent.”
- “Business is made up of opportunities for great sacrifices and great accomplishments. It is the most absorbing occupation on earth.”
- Firestone-Victor Rubber Company
- Was started with $1,000 in Chicago, Illinois.
- Made solid rubber tires for horse carriage wheels.
- Merged with the Rubber Tire Wheel Company, a larger competitor, and became the largest buggy tire business in the area.
- The Consolidated Company, a trust buying control of rubber companies, offered to buy them out for $1,254,000.
- Harvey Firestone got $45,000 cash. He invested $20,000 in 6% mortgages and $25,000 in the bank.
- Firestone Tire & Rubber Company
- Chartered in August 1900 with $45,000 in capital in Akron, Ohio.
- Made solid automobile tires as cars become more widely used.
- “I did not want to be president, and in fact did not become president until three years later. I have never cared much about titles – it did not bother me who had the title so long as I ran the company. “
- Grew from 10 employees at the start to 19,800 at its peak in 1920, from 40 tires per day to 40,000 per day, and over $100 million in sales.
- “We grew to sixty-two factory branch houses, seventy-five warehouses, and thirty-six thousand dealers in the United States, and in addition we founded more than a hundred foreign branches and distributors.”
- Sold $110,000 in tires the first year; $150,000 in the second year but lost money after expenses because their competitors made their tires rather than making their tires in-house. Led Firestone to buy a cheap factory and used equipment to make their own tires.
- Earned their first profit in 1903 of $8,503.
- 1904: $460,000 sales, $71,043 profit, on $200,000 capital.
- “I bought my own stock at par, and I bought every share I could. For ten years I lived in a rented house at $40 a month, in order to put my money back into stock.”
- Transitioned to pneumatic tires because they offered a more comfortable ride, but patents made the transition difficult.
- The biggest problem with pneumatic tires was holding it on the rim.
- Signed a deal to make 2,000 pneumatic tires for Henry Ford, and The Ford Motor Company, in 1905 for delivery in 1906. Firestone only had 1 man making pneumatic tires at the time.
- “Our profits were book profits, not cash profits. They were all ploughed right back into the business.”
- 1906: Hit $1 million in sales, profit was $10,000 less than the year before.
- 1907: $1.6 million in sales, 44,000 tires sold. The 1907 Panic made it impossible to borrow and the bank asked him to pay back part of a loan.
- 1910: over $5 million in sales, $1,394,385 in profit.
- “I then and always have regarded the stock of our company as something to buy and hold and not something to speculate in. I have never bought a share on speculation — that is, with the intention of selling again. The moment that officers or directors of a company begin to speculate in its stock, the ruin of the company is not far away, for it is impossible to serve both the company and the stock market.”
- Started making their own tire rims, after seeing a car race where the cars carried demountable rims with tires already on them.”
- “I like to keep a ratio of at least three to one between quick assets and current liabilities.”
- Built a new factory in 1910, thought it would cover their growth for 15 years, but started expansion work before the building was done.
- WWI
- Harvey Firestone served on the Ohio Council of Defense and War Industries Board.
- Firestone Tire and Rubber made nearly 7 million tires during 1917 and 1918.
- “With the war we gave nearly all our output to the government for automobiles and trucks, and our new plant was turned over for the making of army balloons.”
- “Before the war, comparatively few automobiles were used for business, and the truck had not established itself as an economical form of transportation. Long hauls by trucks were unknown excepting as stunts. The war changed all that. The war was fought with trucks, and we had the problem of getting out a truck tire that would stand up under any usage.”
- Firestone created the Ship-by-Truck movement in the U.S. because railroads were “clogged with government freight.”
- “The Ship-by-Truck movement gained tremendously. In 1916, only 215,000 trucks were registered; in 1917, the number had jumped to 326,000; in 1918, to 525,000; in 1919, to 794,372; and in 1920, the registration passed the million mark. Most of these trucks were of the ton-and-a-half variety, but others went to five tons or more.”
- The company grew so fast, that they needed to restructure and departmentalize the company which led to problems.
- “I let the business get away from me in the easiest of all fashions – by thinking of an organization as something of itself instead of as a means of getting work done quickly and well. We were passing through a highly prosperous time, and whenever any question arose as to whether or not we were doing exactly the right thing, the increase in sales gave the answer. That is the trouble with prosperity – it hides the defects of a business.”
- 1920
- The company experienced a shock in 1920 — the economy collapsed. Rubber prices dropped from 55 cents to 16 cents a pound, crashed inventories, sales dried up, and the banks called in loans. Firestone had $43 million in debt and 3-year contracts on high-priced raw materials.
- The high growth period led to excesses and bloat in all areas of the company and everything needed to be cut. The company needed a “de-organization.” The office staff was cut by 70%. The sales force was cut by 75%. Manufacturing saw similar-sized cuts.
- To raise cash, they slashed tire prices by 25%.
- “I did not tell them that I had been considering 33.3 percent. But I did tell them that a small reduction would not give the smash we had to have the big dramatic play. For not otherwise could we attract the buying public.”
- “It was a fire sale for the first time in our history. We thrust aside all our dignity and customs. We plastered the country with our slogan.”
- The price cut got the company a month’s head start against the competition. They sold $18 million in tires and used it to pay down debt.
- The debt was paid off fully in October 1924.
- “The first question I always ask myself when looking at any operation – whether in the shops or in the office – is this: Is it necessary? Very often it is not necessary at all, but merely a tradition.”
- “If I do find a process or operation necessary, then I ask: Can it be simplified?”
- Tire-Making Characteristics:
- Cushion or riding quality.
- Mileage or riding quantity.
- Skid or ability to hold the road.
- Tradeoff: “It is easy enough to make a soft riding tire, but not so easy to make one which will endure. It is easy enough to make a tire which will give tremendous mileage, but it would not ride easily, and what the customer would save on tires he might lose on jars to his car.”
- 1920: $115 million in sales.
- “I can say with great earnestness that financing this tremendous growth was not nearly as difficult as solving the human equation, or, to be more accurate, getting something in the nature of a comprehension of the human equation. No one ever solves the labour problem.”
- Basic Labor Policies:
- Provide the best possible working conditions.
- Try to pay a higher wage than anyone else pays.
- Provide rewards and facilities over and above what any other company provides.
- Insist that foremen treat their men as human beings.
- Avoid the strict definition of the duties of any supervisor or foreman, in order that no man may easily pass the buck.
- Created a training and education program for employees — they learn all aspects of tire making from the factory to the office — and fit the employees into the best positions for their skillset. Training salesmen led to a 74% improvement in first-month sales and a 17% reduction in turnover.
- Built a clubhouse (restaurant, bakery, library, auditorium, gymnasium, bowling alley, swimming pool, barber shop, and store), athletic field, and built Firestone Park — a residential area where homes were built for employees on easy payment plans.
- “As far as the officers are concerned, I have always taken the position that their stock holdings ought to be so material that the dividends will mean more to them than their salaries. That takes them out of the class of hired men. And it is right and proper that the officers should stand or fall with the company, for what they do makes or breaks the company.”
- Created a suggestion system, where employees could be rewarded for suggested improvements in the company.
- “When a dispute of any kind arises, we take the position that the workman is right and proceed on that basis. I find it the best basis.”
- Great Britain controlled over 77% of the world’s rubber output and rubber prices. It set up production restrictions in 1920 to “stabilize prices” and enrich companies behind the British monopoly. Led Firestone to set up its own rubber plantations in the 1920s.
- “Winston Churchill made the statement: ‘One of the principal means of paying the debt to America is in the provision of rubber.'”
- Firestone also had a rubber washing/refining plant in Singapore, a shoe and boot department, and rubber plantations on 1 million acres in Liberia.
- Harvey Firestone took annual camping trips with Thomas Edison, Henry Ford, and John Burroughs that began in 1915. Edison planned the trips.
- “Two points which Mr. Edison and Mr. Ford dwelt on, time and again, during our talks about the campfire, were: (1) Own your business. (2) Keep plenty of cash in bank – make the banks work for you.”
- “One precept stands out above all others. It has been the rule of the lives of both Mr. Edison and Mr. Ford. It is the reason why they are great. It is this: Go it alone. Do not fail to try because someone has already tried and failed.”
- Henry Ford
- “He was wholly interested in getting out a car that he could sell at a low price. He spoke a little of his complete conviction that the automobile was not a mere pleasure conveyance but a new form of transportation and that the price had to be brought down to a point where anyone could afford to buy. It was the engine the heart of the automobile —that held his attention.”
- “It is a characteristic of Mr. Ford’s that, no matter how perfect any mechanical device may seem on paper, he will accept it only after the most rigid tests.”
- “He is always interested in substituting machine work for hand work.”
- “Mr. Ford always thinks in terms of the greatest good to the greatest number. He aims to place all his inventions within the reach of the great mass of the people. When he first went into the automobile business he associated himself with others in building a large, expensive car, but very soon saw that the need was for a car sufficiently low in price to place it within the reach of the mass of the population.” — John Burroughs
- “The big point is that all this work was being done to save transportation of useless material, to quicken the turnover, and to earn from waste – which are three of the cardinal points in Mr. Ford’s theory of manufacture. The lesson which I learned was that a manufacturing operation should be carried through without a stop from the raw material to the finished product and that no man can be said to control his business unless also he can control his sources. The larger the business, the greater are the possible economies.”
- Thomas Edison
- “It was Mr. Edison’s thought that, if only we had enough cheap power, we should be able to reduce manufacturing costs to a minimum and bring on widespread prosperity.”
- Edison was particularly interested in hydroelectric power – turning every river into source a source of electric energy.
- “He is an exceedingly interesting talker, for not only is he a good storyteller but he has a marvelous range of information. He reads a great deal and he remembers what he reads so that he can talk deeply on any subject.”
- “‘Organized matter,’ remarked Mr. Edison, ‘sometimes behaves in a very strange manner.'”
- “He has become wealthy in spite of himself, through his great service to the whole civilized world. His first and leading thought has been, What can I do to make life easier and more enjoyable to my fellow men? He is a great chemist, a trenchant and original thinker on all the great questions of life – a practical scientist, plus a meditative philosopher of profound insight.” — John Burroughs
