My Life and Work by Henry Ford

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Henry Ford tells his life story and the founding of the Ford Motor Company. He shares the business philosophy and practices that transformed manufacturing and dominated the emerging auto industry.

The Notes

• Published in 1922, collaberated with Samuel Crowther.
• Early Years
  • Born July 30, 1863, on a farm in Dearborn, Michigan.
  • He thought there was too much work on the farm for what they got out of it.
  • At age 12, he saw a road engine on a trip to Detroit. It was the first non-horse-drawn vehicle he had ever seen. It was a portable steam engine (with a chain drive from the engine to the rear wheel) used to drive threshing machines and sawmills.
  • “It was that engine which took me into automotive transportation. I tried to make models of it, and some years later I did make one that ran very well, but from the time I saw that road engine as a boy of twelve right forward to today, my great interest has been in making a machine that would travel the roads.”
  • Ford learned a lot from tinkering with things (engines, watches, etc.), taking them apart, and putting them back together.
  • He left school at 17 and became a machine shop apprentice at Drydock Engine Works. He worked nights repairing watches in a jewelry store.
  • After his apprenticeship, he worked with a rep at Westinghouse Company to repair road engines for a year.
  •  Early on he wanted to build a tractor but found farmers weren’t interested, so he focused on a car instead.
  • “I found eventually that people were more interested in something that would travel on the road than in something that would do the work on the farms. In fact, I doubt that the light farm tractor could have been introduced on the farm had not the farmer had his eyes opened slowly but surely by the automobile.”
  • The first car he built was steam-powered. A dangerous boiler requires more weight to be safe. He ultimately abandoned the idea of steam-powered cars.
  • “I do not recall any one who thought that the internal combustion engine could ever have more than a limited use. All the wise people demonstrated conclusively that the engine could not compete with steam. They never thought that it might carve out a career for itself.”
  • Ford repaired an Otto gas engine in 1885. That gave him a first look at a combustion engine. Two years later he built a four cycle model based on what he learned.
  • He built a double-cylinder engine in 1890. He thought a double-cylinder engine would power a road car.
  • He worked at Detroit Electric Company as an engineer/machinist at $45/month. He moved with his wife to Detroit. He set up a workshop in a shed where he worked on a new motor.
  • First Car:
    • Completed in 1892. It took another year before it ran to his satisfaction.
    • It looked like a buggy on bicycle wheels that carried two people. Two-cylinder engine, about 4 horsepower. It had two speeds 10 mph and 20 mph, no reverse, held 3 gallons of gas, and weighed 500 lbs.
    • “Many inventors fail because they do not distinguish between planning and experimenting. The largest building difficulties that I had were in obtaining the proper materials. The next were with tools. There had to be some adjustments and changes in details of the design, but what held me up most was that I had neither the time nor the money to search for the best material for each part.”
    • “It was considered to be something of a nuisance, for it made a racket and it scared horses. Also it blocked traffic. For if I stopped my machine anywhere in town a crowd was around it before I could start up again. If I left it alone even for a minute some inquisitive person always tried to run it. Finally, I had to carry a chain and chain it to a lamp post whenever I left it anywhere. And then there was trouble with the police.”
    • He eventually had to get a special permit from the Mayor to drive his new car.
    • He ran it for about 1,000 miles until 1896 when he sold it to Charles Ainsley for $200. He used the money to build a new car.
    • He bought the car back years later for $100.
  • Second Car:
    • Started in 1896.
    • The second car was similar to the first but lighter and had a belt drive.
    • “I built three cars in all in my home shop and all of them ran for years in Detroit.”
  • Electricity
    • “I did not see the use of experimenting with electricity for my purposes. A road car could not run on a trolley even if trolley wires had been less expensive; no storage battery was in sight of a weight that was practical. An electrical car had of necessity to be limited in radius and to contain a large amount of motive machinery in proportion to the power exerted. That is not to say that I held or now hold electricity cheaply; we have not yet begun to use electricity.”
  • He was offered general superintendent at Edison Company, if he gave up his car hobby. He quit the job on August 15, 1899.
• “There was no ‘demand’ for automobiles – there never is for a new article. They were accepted in much the fashion as was more recently the airplane. At first the ‘horseless carriage’ was considered merely a freak notion and many wise people explained with particularity why it could never be more than a toy. No man of money even thought of it as a commercial possibility.”
• Detroit Automobile Company
  • Ford joined a group to build cars similar to his first car.
  • Ford was the chief engineer and held a small amount of stock.
  • Cars were made to order.
  • Ford believed the company was more about making money than making good cars.
  • He quit in March 1902.
  • Detroit Auto became the Cadillac Company.
• From 1902 until he started Ford Motor:
  • He developed a 4-cylinder engine.
  • Racing was the natural offshoot once people realized cars could go fast. Building a fast car brought recognition.
  • Ford’s first race was with a 2-cylinder engine on a skeleton chassis against Alexender Winton. Ford won.
  • “That was my first race, and it brought advertising of the only kind that people cared to read. The public thought nothing of a car unless it made speed – unless it beat other racing cars. My ambition to build the fastest car in the world led me to plan a four-cylinder motor.”
  • “I tried to find out what business really was and whether it needed to be quite so selfish a scramble for money as it seemed to be from my first short experience.”
    • “Most Surprising Feature of Business” as Ford observed at the time:
      • “The most surprising feature of business as it was conducted was the large attention given to finance and the small attention to service. That seemed to me to be reversing the natural process which is that the money should come as the result of work and not before the work.”
      • “The second feature was the general indifference to better methods of manufacture as long as whatever was done got by and took the money. In other words, an article apparently was not built with reference to how greatly it could serve the public but with reference solely to how much money could be had for it — and that without any particular care whether the customer was satisfied.”
    • “My idea was then and still is that if a man did his work well, the price he would get for that work, the profits and all financial matters, would care for themselves and that a business ought to start small and build itself up and out of its earnings. If there are no earnings then that is a signal to the owner that he is wasting his time and does not belong in that business.”
    • Ford noticed that many “businesses” were considered good because they could float the largest amount of stocks and bonds at the highest prices not whether it could produce a good product at a fair profit.
    • “I determined absolutely that never would I join a company in which finance came before the work or in which bankers or financiers had a part. And further that, if there were no way to get started in the kind of business that I thought could be managed in the interest of the public, then I simply would not get started at all.”
    • “Business men go down with their businesses because they like the old way so well they cannot bring themselves to change.”
    • “There is a subtle danger in a man thinking that he is ‘fixed’ for life. It indicates that the next jolt of the wheel of progress is going to fling him off.”
    • “There are always enough people ready and anxious to buy, provided you supply what they want and at the proper price and this applies to personal services as well as to goods.”
    • What he realized about business:
      • “That finance is given a place ahead of work and therefore tends to kill the work and destroy the fundamental of service.”
      • “That thinking first of money instead of work brings on fear of failure and this fear blocks every avenue of business – it makes a man afraid of competition, of changing his methods, or of doing anything which might change his condition.”
      • “That the way is clear for any one who thinks first of service of doing the work in the best possible way.”
  • Ford built 2 race cars in 1903 with Tom Copper — named 999 and Arrow. Both cars had four-cylinder 80 horsepower engines and tillers to steer (steering wheels had not been invented yet). They hired Barney Oldfield to drive. He won.
  • “The “999” did what it was intended to do: It advertised the fact that I could build a fast motor car. A week after the race I formed the Ford Motor Company. I was vice-president, designer, master mechanic, superintendent, and general manager.”
• Ford Motor Company
  • Formed in 1903.
  • Ford owned 25.5% of the company.
  • “The total amount subscribed in cash was about twenty-eight thousand dollars – which is the only money that the company has ever received for the capital fund from other than operations.”
  • In 1906 Ford bought controlling interest at 51%. Later he increased that to 58.5%. He realized he needed control to accomplish his goals because shareholders disagreed with his policies.
  • Ford’s son Edsel bought the remaining 41.5% in 1919 for $27 million.
  • The company’s first “factory” was a rented carpenter shop on Mack Avenue. Parts for the first cars were made by other manufacturers and the finished cars were assembled in the shop. They could not afford machinery to make parts.
  • Ford wanted to make cars for the 95% of people who could not afford high-priced cars. He wanted to make the best quality cars at the lowest price. Custom-ordered cars was the wrong business model for low-priced cars. He needed to make cars in volume and had to improve the manufacturing process to lower costs.
  • “The price has to be reduced (this is very important) because of the manufacturing economies that have come about and not because the falling demand by the public indicates that it is not satisfied with the price. The public should always be wondering how it is possible to give so much for the money.”
  • Ford wanted a lighter, stronger vehicle.
  • He had to educate consumers and dealers that cars could be used year round. It wasn’t just a summer luxury.
  • 1903 (Year 1)
    • Model A
      • First car produced.
      • It was the only model with a rear motor.
      • Two models:
        • Runabout sold for $850
        • Tonneau sold for $950
      • Sold 1,708 cars in the first year.
      • First Advertisement:
        • “Our purpose is to construct and market an automobile specially designed for everyday wear and tear – business, professional, and family use; an automobile which will attain to a sufficient speed to satisfy the average person without acquiring any of those breakneck velocities which are so universally condemned; a machine which will be admired by man, woman, and child alike for its compactness, its simplicity, its safety, its all-around convenience, and last but not least – its exceedingly reasonable price, which places it within the reach of many thousands who could not think of paying the comparatively fabulous prices asked for most machines.”
        • Focused on build quality, simplicity to drive, and easy to start (two sets of six dry cell batteries).
    • Employed an average of 311 people.
    • Factory space was 0.28 acres.
    • Ford’s investors expected him to build a new unique model each year. Some thought Ford would ruin the company by mass-producing cars.
    • “It is extraordinary how firmly rooted is the notion that business – continuous selling – depends not on satisfying the customer once and for all, but on first getting his money for one article and then persuading him he ought to buy a new and different one.”
  • 1904 (Year 2)
    • Model B
      • 4-cylinder touring car.
      • Sold for $2,000.
      • Used another race to advertise the Model B.
      • “That put ‘Model B’ on the map – but not enough on to overcome the price advances. No stunt and no advertising will sell an article for any length of time. Business is not a game.”
    • Model C
      • An improved Model A.
      • Sold for $900.
    • Model F
      • A touring car.
      • Sold for $1,000.
    • Total sales volume: 1,695 cars.
    • “We scattered our energy and increased prices—and therefore we sold fewer cars than in the first year.”
  • 1905-1906:
    • Made two models:
      • Four-cylinder car for $2,000
      • Touring car for $1,000
      • Sold 1,599 cars.
      • Ford thought sales were low because the cars were too expensive.
    • Built a 3-story factory in 1906 at Piquette and Beaubein streets out of working capital.
    • Ford learned about vanadium steel at a car race in 1905. It was lighter and stronger.
      • “I pulled apart our models and tested in detail to determine what kind of steel was best for every part – whether we wanted a hard steel, a tough steel, or an elastic steel. We, for the first time I think, in the history of any large construction, determined scientifically the exact quality of the steel. As a result we then selected twenty different types of steel for the various steel parts. About ten of these were vanadium.”
  • 1906-1907:
    • Made three models of runabouts and roadsters.
    • Different appearances but none were materially different based on parts or manufacturing process.
    • Ford changed his policy on prices.
    • Prices were cut to between $600 and $750.
    • Sold 8,423 cars.
  • 1907-1908
    • “Our banner week was that of May 15, 1908, when we assembled 311 cars in six working days. It almost swamped our facilities.”
    • Added a new model: six-cylinder, 50-horsepower car.
    • Sold 6,398 cars.
    • 1907 Panic cut into sales.
  • 1908-1909:
    • Model T
      • Ford had wanted to make a “universal car.”
      • The “universal car” had the attributes: quality materials, simply operation, sufficient power, absolute reliability, lightness, and control.
      • “The important feature of the new model…was its simplicity. There were but four constructional units in the car – the power plant, the frame, the front axle, and the rear axle. All of these were easily accessible and they were designed so that no special skill would be required for their repair or replacement.”
      • Ford wanted to eliminate expensive repairs and expensive new parts. Parts could be sold cheaply in hardware stores.
      •  “I thought that it was up to me as the designer to make the car so completely simple that no one could fail to understand it.”
      • “The less complex an article, the easier it is to make, the cheaper it may be sold, and therefore the greater number may be sold.”
      • First sold in 1908-1909.
      • Five versions:
        • Touring car: $850
        • Town car: $1,000
        • Roadster: $825
        • Coupe: $950
        • Landaulet: $950
      • Had the first motor made in house.
    • Also sold Model R and Model S.
    • Sold 10,607 cars.
    • Employed 1,908.
    • 2.65 acres of factory space.
    • Selden Patent Suit
      • George B. Seldon, a patent attorney, filed for a patent in 1879 for “The production of a safe, simple, and cheap road locomotive, light in weight, easy to control, possessed of sufficient power to overcome an ordinary inclination.”
      • Patent was granted in 1895.
      • An association of automobile manufacturers, operating under a license (from the patentee), brought suit against Ford Motor in 1903.
      • Judge Hough ruled, on September 15, 1909, against Ford
      • The suit and decision brought more attention to Ford. He believed it created sympathy from consumers.
  • 1909-1910
    • Ford announced they’d produce only the Model T.
    • “Any customer can have a car painted any colour that he wants so long as it is black.”
    • Most viewed it negatively. Sales agents did not like it. Most thought he’d be out of business in six months.
    • “The impression was that a good car could not be built at a low price, and that, anyhow, there was no use in building a low-priced car because only wealthy people were in the market for cars.”
    • Bought 60 acres in Highland Park, Michigan to build a bigger factory.
    • Raised prices by $75 to $200 on all models to cover the cost of land, factory, buildings, etc.
    • Sold 18,664 cars.
  • 1910-1911
    • Cut price of the Touring car: $780
    • Sold 34,528 cars.
    • Branches opened in London and Australia. (Model C was introduced in England in 1905).
    • Sold 14,060 cars in England.
  • 1911-1912
    • Touring car: $690
    • Total car production: 78,440
    • Employed 4,110.
    • 32 acres of factory space.
  • 1912-1913
    • Touring car: $600
    • Total car production: 168,220
  • 1913-1914
    • Touring car: $550
    • Total car production: 248,307
  • 1914-1915
    • Touring car: $490
    • Total car production: 308,213
  • 1915-1916
    • Touring car: $440
    • Total car production: 533,921
  • 1916-1917
    • Touring car: $360
    • Total car production: 785,432
  • 1917-1919
    • WWI
    • Production transitioned to war work.
      • Ford refused war orders from “foreign belligerents” before the U.S. entered the war.
      • From April 1917 to November 1918 the factories worked exclusively for the U.S. government.
      • Made 2.5-ton and 6-ton trucks, Liberty motors, aero cylinders, 1.55 mm and 4.7 mm caissons, listening devices, steel helmets, Eagle Boats, and experimented on armor plates, compensators, and body armor.
      • Price of a Touring car: ranged from $450 (1917-18) to $525 (1918-19)
    • Total car production: 706,584 (1917-18) and 533,706 (1918-19)
    • Fordson (tractor)
      • Produced a year earlier than intended because of food shortage in England.
      • Sent 5,000 tractors in 1917-1918. All 5,000 were made in 3 months.
      • The tractors were originally to be produced in England but the cost was lower if made in the U.S. and shipped over — a 53% savings ($1,500 versus $700 per tractor).
      • “The only kind of tractor that I thought worth working on was one that would be light, strong, and so simple that any one could run it. Also it had to be so cheap that any one could buy it.”
      • The tractor doubled as a power plant that could run a thresher, grist mill, saw mill, etc. on top of normal farm duties of plowing, cultivating, reaping, etc.
      • The tractors were first sold in the U.S. in 1918 at $750 each.
      • “It is important that it shall be cheap. Otherwise power will not go to all the farms. And they must all of them have power. Within a few years a farm depending solely on horse and hand power will be as much of a curiosity as a factory run by a treadmill.”
      • The Fordson cut the cost of plowing (versus horses) from $1.45 per acre to $0.95 per acre not accounting for time. It plowed an acre in one-fourth the time.
  • 1919-1920
    • The U.S. experienced a depression from January 1920 to about July 1921.
    • Touring car: $440
    • The price of the touring car was cut from $575 due to declining sales. It was sold below cost (due to the high price of raw materials because of WWI). He shut the factory down in December 1920 (for 6 weeks) to “take an inventory and clean house.”
    • War production added a lot of waste and was eliminated in the “house cleaning.” Anything not related to car production was cut or sold.
      • Workers no longer needed in one area were offered jobs in other areas.
      • The overhead charge per car was cut from $146 to $93 (at 4,000 cars made per day).
    • Detroit, Toledo, & Ironton Railroad
      • Bought it because its right of way interfered with improvement plans at their River Rouge plant.
      • Its usefulness only became apparent after they bought it.
      • “It is a road which, from a general business standpoint, ought to pay. It has paid. It seems to have paid the bankers.”
      • Most of the road was in bad condition but had an “ample executive and administrative department, and of course a legal department.”
      • Cost cutting and improvement went into effect immediately. They eventually cut costs, reduced rates, increased business, and made the road profitable.
      • Sped up turnover and helped lower costs further.
      • Adding the railroad cut the manufacturing cycle from 22 to 14 days — 33% less time from raw material to finished product. That allowed them to cut inventory by 33%.
      • “We had been carrying an inventory of around $ 60,000,000 to insure uninterrupted production. Cutting down the time one third released $20,000,000, or $ 1,200,000 a year in interest. Counting the finished inventory, we saved approximately $8,000,000 more — that is, we were able to release $28,000,000 in capital and save the interest on that sum.”
      • “I am firmly of the opinion that if at this time or earlier manufacturers and distributors had all made drastic cuts in their prices and had put through thorough house-cleanings we should not have so long a business depression.”
    • Total car production: 996,660
    • Price of the Fordson: $790
  • 1920-1921
    • Sold 1.25 million cars.
    • May 31, 1921 — Made the 5 millionth car.
    • Price of the Touring car: $355
    • Price of the Fordson: $625
  • 1922
    • Price of the Fordson: $395
  • Agents/dealers sold cars paid by salary. Requirements:
    1. A progressive, up-to-date man keenly alive to the possibilities of business.
    2. A suitable place of business clean and dignified in appearance.
    3. A stock of parts sufficient to make prompt replacements and keep in active service every Ford car in his territory.
    4. An adequately equipped repair shop which has in it the right machinery for every necessary repair and adjustment.
    5. Mechanics who are thoroughly familiar with the construction and operation of Ford cars.
    6. A comprehensive bookkeeping system and a follow-up sales system, so that it may be instantly apparent what is the financial status of the various departments of his business, the condition and size of his stock, the present owners of cars, and the future prospects.
    7. Absolute cleanliness throughout every department. There must be no unwashed windows, dusty furniture, dirty floors.
    8. A suitable display sign.
    9. The adoption of policies which will ensure absolutely square dealing and the highest character of business ethics.
  • Mass Production
    • “Save ten steps a day for each of twelve thousand employees and you will have saved fifty miles of wasted motion and misspent energy. Those are the principles on which the production of my plant was built up.”
    • Ford couldn’t hire enough skilled labor or train unskilled labor fast enough to make cars in volume, so he created a process where skilled labor was unnecessary.
    • Principles of Assembly:
      1.  “Place the tools and the men in the sequence of the operation so that each component part shall travel the least possible distance while in the process of finishing.”
      2.  “Use work slides or some other form of carrier so that when a workman completes his operation, he drops the part always in the same place – which place must always be the most convenient place to his hand – and if possible have gravity carry the part to the next workman for his operation.”
      3. “Use sliding assembling lines by which the parts to be assembled are delivered at convenient distances.”
    • Ford’s goal was absolute efficiency. Every step in assembly, from the parts to the car, was reduced to a single repetitive job that relied on muscle memory.
    • The assembly line was introduced around April 1, 1913. — “The idea came in a general way from the overhead trolley that the Chicago packers use in dressing beef.”
      • Ex: Chassis Assembly
        • Averaged about 12 hours, 28 minutes per chassis.
        • An experimental line as built with six assemblers cut the time to 5 hours, 50 minutes per chassis.
        • In 1914, they raised the line, subdivided the work further, and cut the time to 1 hour, 33 minutes per chassis.
    • “Every piece of work in the shops moves; it may move on hooks on overhead chains going to assembly in the exact order in which the parts are required; it may travel on a moving platform, or it may go by gravity, but the point is that there is no lifting or trucking of anything other than materials. Materials are brought in on small trucks or trailers operated by cutdown Ford chassis, which are sufficiently mobile and quick to get in and out of any aisle where they may be required to go.”
    • Production was divided so that each department made a single part or assembled one part.
    • “I did not know that such minute divisions would be possible; but as our production grew and departments multiplied, we actually changed from making automobiles to making parts. Then we found that we had made another new discovery, which was that by no means all of the parts had to be made in one factory.”
    • “We get some of our best results from letting fools rush in where angels fear to tread.”
    • The bulk of Ford Motors experimentation and R&D was in improving manufacturing. Everything was open for improvement if it reduced “waste” — wasted time, materials, movement, costs, etc.
    • “Dividing and sub-dividing operations, keeping the work in motion – those are the keynotes of production. But also it is to be remembered that all the parts are designed so that they can be most easily made. And the saving?… If at our present rate of production we employed the same number of men per car that we did when we began in 1903 – and those men were only for assembly – we should today require a force of more than two hundred thousand. We have less than fifty thousand men on automobile production at our highest point of around four thousand cars a day!”
    • “If there is any fixed theory – any fixed rule – it is that no job is being done well enough. The whole factory management is always open to suggestion, and we have an informal suggestion system by which any workman can communicate any idea that comes to him and get action on it.”
    • “If the new way suggested shows a saving and the cost of making the change will pay for itself within a reasonable time – say within three months – the change is made practically as of course.”
    • Ford believed the average worker wanted a job that they didn’t have to think. He couldn’t see himself doing the same repetitive job of his workers. “Repetitive labour – the doing of one thing over and over again and always in the same way – is a terrifying prospect to a certain kind of mind. It is terrifying to me.”
    • About 80% of the jobs required from one day to one week to learn.
    • Machines were placed to maximize efficiency. They measured each job to find the exact floor space needed to do the job most efficiently and safely.
    • “New machines are tested in every way before they are permitted to be installed. As a result we have practically no serious accidents. Industry needs not exact a human toll.”
    • Parts were made interchangeable across all models to reduce the cost and expense of parts.
    • “The most economical manufacturing of the future will be that in which the whole of an article is not made under one roof – unless, of course, it be a very simple article. The modern – or better, the future – method is to have each part made where it may best be made and then assemble the parts into a complete unit at the points of consumption. That is the method we are now following and expect to extend.”
  • Business Structure
    • “To my mind there is no bent of mind more dangerous than that which is sometimes described as the ‘genius for organization.’ This usually results in the birth of a great big chart showing, after the fashion of a family tree, how authority ramifies.”
    • “The Ford factories and enterprises have no organization, no specific duties attaching to any position, no line of succession or of authority, very few titles, and no conferences. We have only the clerical help that is absolutely required; we have no elaborate records of any kind, and consequently no red tape.”
    • “If we have a tradition it is this: Everything can always be done better than it is being done. That pressing always to do work better and faster solves nearly every factory problem. A department gets its standing on its rate of production.”
    • Set a policy in 1914 to never turn away a potential hire based on physical condition. Ford surveyed every job and found that only 949 out of 7,882 jobs required “strong, able-bodied, and practically physically perfect men.” About half didn’t require any physical exertion. He found jobs that could be done by legless, one-legged, armless, one-armed, and blind workers. Basically, anyone would be hired if they would do the work.
    • They did not hire married women whose husbands had jobs.
  • Living Wage
    • “Why do we hear so much talk about the ‘liquidation of labour’ and the benefits that will flow to the country from cutting wages -which means only the cutting of buying power and the curtailing of the home market?… No question is more important than that of wages – most of the people of the country live on wages. The scale of their living – the rate of their wages – determines the prosperity of the country.”
    • Ford believed that employees were partners and deserved to share in the business’s success.
    • “In a partnership of skilled management and honest labour, it is the workman who makes high wages possible. He invests his energy and skill, and if he makes an honest, whole- hearted investment, high wages ought to be his reward. Not only has he earned them, but he has had a big part in creating them.”
    • “The habit of acting shortsightedly is a hard one to break.”
    • “When we are all in the business working together, we all ought to have some share in the profits – by way of a good wage, or salary, or added compensation.”
    • He also believed that a company’s success was dependent on paying a high living wage. Higher wages found their way back into businesses, leading to higher sales.
    • “Country-wide high wages spell country-wide prosperity, provided, however, the higher wages are paid for higher production.”
    • Prior to 1913, Ford included some profit sharing with employees based on years worked and as a percentage of wages.
    • Ford ran a study in 1913 that led to an increase in pay for every employee.
    • January 1914: Set a minimum $5/day wage and reduced hours to 8 hours per day (48 hours per week) for every employee. Profit share was accounted for in the wage increase (paid in time rather than year-end).
    • Other companies condemned him for the increase: “upsetting standards — violating the custom of paying a man the smallest amount he would take.”
    • “We made the change not merely because we wanted to pay higher wages and thought we could pay them. We wanted to pay these wages so that the business would be on a lasting foundation. We were not distributing anything – we were building for the future. A low wage business is always insecure.”
    • Ford originally had an added condition with the $5/day wage. The workers’ home had to be up to a certain standard. It was later dropped but he created a Social Department that investigated whether the workers were taking proper care of their families.
    • The higher wages improved employee turnover:
      • 1914: Hired 53,000 workers to maintain a force of 14,000 employees.
      • 1915: Hired 6,508 workers to maintain a force of more than 14,000. (Most were hired due to business growth).
    • “If you expect a man to give his time and energy, fix his wages so that he will have no financial worries. It pays. Our profits, after paying good wages and a bonus – which bonus used to run around ten millions a year before we changed the system – show that paying good wages is the most profitable way of doing business.”
    • Ford believed wages should be the last thing cut when trying to “fix” a struggling business. He viewed it as incompetent management blaming labor for its problems instead of fixing the real issues of the business.
    • “The payment of five dollars a day for an eight-hour day was one of the finest cost-cutting moves we ever made, and the six-dollar day wage is cheaper than the five. How far this will go, we do not know.”
    • The wage was $6/day in 1922.
    • “People ought to tread very carefully when approaching wages. On the cost sheet, wages are mere figures; out in the world, wages are bread boxes and coal bins, babies’ cradles and children’s education – family comforts and contentment.”
  • General Business
    • “It is my ambition to have every piece of machinery, or other non-consumable product that I turn out, so strong and so well made that no one ought ever to have to buy a second one. A good machine of any kind ought to last as long as a good watch.”
    • “Since the first year we have practically always had plenty of money. We sold for cash, we did not borrow money, and we sold directly to the purchaser. We had no bad debts and we kept within ourselves on every move. I have always kept well within my resources.”
    • Ford believed that service extended beyond the sale. “A man who bought one of our cars was in my opinion entitled to continuous use of that car, and therefore if he had a breakdown of any kind it was our duty to see that his machine was put into shape again at the earliest possible moment.”
    • “Business is always either feasting or fasting and is always either ‘good’ or ‘bad.’ Although there is never a time when everyone has too much of this world’s goods – when everyone is too comfortable or too happy – there come periods when we have the astounding spectacle of a world hungry for goods and an industrial machine hungry for work and the two – the demand and the means of satisfying it – held apart by a money barrier.”
    • “The function of the manufacturer is to contribute to this comfort. He is an instrument of society and he can serve society only as he manages his enterprises so as to turn over to the public an increasingly better product at an ever-decreasing price, and at the same time to pay to all those who have a hand in his business an ever-increasing wage, based upon the work they do. In this way and in this way alone can a manufacturer or any one in business justify his existence.”
    • “Any man who can give to the consumer the highest quality at the lowest price is bound to be a leader in business, whatever the kind of an article he makes.”
    • “What is wrong in our industrial system is a reflection of what is wrong in man himself. Manufacturers hesitate to admit that the mistakes of the present industrial methods are, in part at least, their own mistakes, systematized and extended.”
    • “Any one who was foolish enough to regard the high profits of the boom period as permanent profits got into financial trouble when the drop came.”
    • “We learned long ago never to buy ahead for speculative purposes. When prices are going up it is considered good business to buy far ahead, and when prices are up to buy as little as possible… But we have found that thus buying ahead does not pay. It is entering into a guessing contest. It is not business.”
    • “Instead of giving attention to competitors or to demand, our prices are based on an estimate of what the largest possible number of people will want to pay, or can pay, for what we have to sell.”
    • Ford bought the competition’s cars to study new features added that might improve his own models.
    • “Our policy is to reduce the price, extend the operations, and improve the article. You will notice that the reduction of price comes first. We have never considered any costs as fixed. Therefore we first reduce the price to a point where we believe more sales will result. Then we go ahead and try to make the price. We do not bother about the costs. The new price forces the costs down.”
    • We will not put into our establishment anything that is useless. We will not put up elaborate buildings as monuments to our success. The interest on the investment and the cost of their upkeep only serve to add uselessly to the cost of what is produced – so these monuments of sucess are apt to end as tombs.”
    • “The notion persists that prices ought to be kept up. On the contrary, good business – large consumption – depends on their going down.”
    • Cost cutting: “A penny here and a penny there runs into large amounts in the course of a year.”
    • Reducing and repurposing waste byproducts in production led to constant experimentation to lower costs. Steam power plants for electricity were fired by coal waste and gas byproduct from the steel blast furnaces. Ammonia sulfate went towards fertilizer. Benzol went toward motor fuel. Excess coal was sold to employees at cost to heat their homes.
    • “One big part of the discovery of what is ‘normal’ in industry depends on managerial genius discovering better ways of doing things.”
    • “It is not good management to take profits out of the workers or the buyers; make management produce the profits. Don’t cheapen the product; don’t cheapen the wage; don’t overcharge the public. Put brains into the method, and more brains, and still more brains – do things better than ever before; and by this means all parties to business are served and benefited.”
    • “My own financial operations have been very simple. I started with the policy of buying and selling for cash, keeping a large fund of cash always on hand, taking full advantage of all discounts, and collecting interest on bank balances.”
    • “I would not say that a man in business needs to know nothing at all about finance, but he is better off knowing too little than too much, for if he becomes too expert he will get into the way of thinking that he can borrow money instead of earning it and then he will borrow more money to pay back what he has borrowed, and instead of being a business man he will be a note juggler, trying to keep in the air a regular flock of bonds and notes.”
    • “Borrowing for expansion is one thing; borrowing to make up for mismanagement and waste is quite another.”
    • “My financial policy is the result of my sales policy. I hold that it is better to sell a large number of articles at a small profit than to sell a few at a large profit. This enables a larger number of people to buy and it gives a larger number of men employment at good wages. It permits the planning of production, the elimination of dull seasons, and the waste of carrying an idle plant.”
    •  “Reducing prices increases the volume and disposes of finance, provided one regards the inevitable profit as a trust fund with which to conduct more and better business.”
    • “I have always insisted on the payment of small dividends and the company has today no stockholders who wanted a different policy. I regard business profits above a small percentage as belonging more to the business than to the stockholders.”
    • “If large profits are made – and working to serve forces them to be large – then they should be in part turned back into the business so that it may be still better fitted to serve, and in part passed on to the purchaser. During one year our profits were so much larger than we expected them to be that we voluntarily returned fifty dollars to each purchaser of a car. We felt that unwittingly we had overcharged the purchaser by that much.”
    • “Profits belong in three places: they belong to the business – to keep it steady, progressive, and sound. They belong to the men who helped produce them. And they belong also, in part, to the public. A successful business is profitable to all three of these interests – planner, producer, and purchaser.”
    • Ford believed excessive profits exploited consumers and hurt the business.
    • “The time for a business man to borrow money, if ever, is when he does not need it.”
    • “I cannot too greatly emphasize that the very worst time to borrow money is when the banking people think that you need money.”
    • “It is inevitable that any one who can borrow freely to cover errors of management will borrow rather than correct the errors.”
• Henry Ford Trade School
  • Created in 1916.
  • Offered a trade education for boys aged 12 to 18.
  • Three Principles:
    • The students were treated as students, not premature workers.
    • Academic training included industrial instruction.
    • The training was on items that were used in the industry.
  • Each student got a $400 cash scholarship upon entrance, increased to $600 if they maintain a good record.
  • Students also got a monthly stipend deposited into a savings account and made available after they finished school or for emergencies.
  • Students were taught trade skills — 1 week in the classroom, 2 weeks in the shop. All work that passed inspection was bought by Ford Motor.
  • Jobs were offered at Ford Motor upon graduation (the school supplied needed toolmakers in the Ford Motor shops).
• Ford Hospital
  • Housed 1,500 patients during WWI.
  • “There are no hospitals for those who can afford to pay only a moderate amount and yet desire to pay without a feeling that they are recipients of charity. It has been taken for granted that a hospital cannot both serve and be self-supporting that it has to be either an institution kept going by private contributions or pass into the class of private sanitariums managed for profit. This hospital is designed to be self-supporting to give a maximum of service at a minimum of cost and without the slightest colouring of charity.”
  • Doctors and nurses were paid a salary and could not have a practice outside the hospital.
  • The goal was to run the hospital like his factory — eliminate waste, improve efficiency, and lower costs through scale.
  • He did not expect the hospital to return a profit.
• Thomas Edison
  • “No man exceeds Thomas A. Edison in broad vision and understanding.”
  • “He regards as ‘impossible’ as a description for that which we have not at the moment the knowledge to achieve.”
  • Ford, Edison, John Burroughs, and Harvey Firestone took several trips together by car around the U.S.
• On War
  • “No man with true patriotism could make money out of war – out of the sacrifice of other men’s lives.”
  • “War is an orgy of money, just as it is an orgy of blood.”
  • “I believe that it is the duty of the man who opposes war to oppose going to war up until the time of its actual declaration.”
• On Education
  • “An educated man is not one whose memory is trained to carry a few dates in history he is one who can accomplish things. A man who cannot think is not an educated man however many college degrees he may have acquired.”
  • “There are two extremes to be avoided: one is the attitude of contempt toward education, the other is the tragic snobbery of assuming that marching through an educational system is a sure cure for ignorance and mediocrity.”
  • Education is a way to learn from others’ past mistakes to the avoid time spent learning by experience.
• Unions
  • “If the blind boss was a disease, the selfish union leader was the antidote. When the union leader became the disease, the blind boss became the antidote. Both are misfits, both are out of place in well-organized society.”
  • Ford was against organized labor that limited production.
  • “The strike for proper conditions and just rewards is justifiable. The pity is that men should be compelled to use the strike to get what is theirs by right.”
  • Three types of strikes according to Ford
    • Justifiable strikes — were the fault of the employer.
    • Strike w/ concealed design — workers are manipulated to strike for to benefit someone else.
    • Strike that is provoked by money interests to give labor a bad name.
• Ford’s Views
  • “We have only started on our development of our country – we have not as yet, with all our talk of wonderful progress, done more than scratch the surface. The progress has been wonderful enough – but when we compare what we have done with what there is to do, then our past accomplishments are as nothing.”
  •  “An idea is not necessarily good because it is old, or necessarily bad because it is new, but if an old idea works, then the weight of the evidence is all in its favour. Ideas are of themselves extraordinarily valuable, but an idea is just an idea. Almost any one can think up an idea. The thing that counts is developing it into a practical product.”
  • “Freedom is the right to work a decent length of time and to get a decent living for doing so; to be able to arrange the little personal details of one’s own life.”
  • “Reactionaries have frequently taken advantage of the recoil from such a period, and they have promised ‘the good old times’ – which usually means the bad old abuses – and because they are perfectly void of vision they are sometimes regarded as ‘practical men.’”
  • “Monopoly is bad for business. Profiteering is bad for business. The lack of necessity to hustle is bad for business. Business is never as healthy as when, like a chicken, it must do a certain amount of scratching for what it gets.”
  • “It is the function of business to produce for consumption and not for money or speculation. Producing for consumption implies that the quality of the article produced will be high and that the price will be low – that the article be one which serves the people and not merely the producer.”
  • “Being greedy for money is the surest way not to get it, but when one serves for the sake of service – for the satisfaction of doing that which one believes to be right – then money abundantly takes care of itself.”
  • Ford was obsessed with efficiency in everything — to simplify the productive process to cut costs to a minimum but without sacrificing quality. That allowed him to produce the best service/quality product, in the highest volume, and at the lowest price so it would benefit the most consumers.
  • “As we cut out useless parts and simplify necessary ones we also cut down the cost of making. This is simple logic, but oddly enough the ordinary process starts with a cheapening of the manufacturing instead of with a simplifying of the article. The start ought to be with the article. First we ought to find whether it is as well made as it should be does it give the best possible service? Then – are the materials the best or merely the most expensive? Then – can its complexity and weight be cut down? And so on.”
  • “The trouble is that the general tendency is to complicate very simple affairs.”
  • “Our big changes have been in methods of manufacturing. They never stand still. I believe that there is hardly a single operation in the making of our car that is the same as when we made our first car of the present model. That is why we make them so cheaply.”
  • “The essence of my idea then is that waste and greed block the delivery of true service. Both waste and greed are unnecessary. Waste is due largely to not understanding what one does, or being careless in the doing of it. Greed is merely a species of nearsightedness. I have striven toward manufacturing with a minimum of waste, both of materials and of human effort, and then toward distribution at a minimum of profit, depending for the total profit upon the volume of distribution. In the process of manufacturing I want to distribute the maximum of wage – that is, the maximum of buying power. Since also this makes for a minimum cost and we sell at a minimum profit, we can distribute a product in consonance with buying power. Thus everyone who is connected with us – either as a manager, worker, or purchaser – is the better for our existence. The institution that we have erected is performing a service. That is the only reason I have for talking about it.”
  • Ford believed poverty could be eliminated if businesses focused on service over money, efficiency over waste, and farsighted over shortsighted.
  • “Most men who are laboriously saving a few dollars would do better to invest those few dollars – first in themselves, and then in some useful work. Eventually they would have more to save.”
  • “The highest use of capital is not to make more money, but to make money do more service for the betterment of life. Unless we in our industries are helping to solve the social problem, we are not doing our principal work. We are not fully serving.”
  • “Cooperative farming will become so developed that we shall see associations of farmers with their own packing houses in which their own hogs will be turned into ham and bacon, and with their own flour mills in which their grain will be turned into commercial foodstuffs.”
  • Work over idleness and leisure solved a lot of problems in Ford’s mind. Ex: charity was unnecessary if everyone was productive. And there’s no need for it if business puts service first.
  • Ford believed decentralization benefited communities and should be adopted almost everywhere. Finished products should be made near raw materials and shipped from there.
  • “A country becomes great when, by the wise development of its resources and the skill of its people, property is widely and fairly distributed.”
  • “When its rich natural resources are exploited for the increase of the private fortunes of foreign capitalists, that is not development, it is ravishment.”
  • Ford was antisemitic. He discussed his statements on the “streams of influence which were causing a marked deterioration” on the country at the end of Chapter 17. He tried to “prove” it (it’s conspiratorial nonsense).
  • He saw bankers, financiers, lawyers, laws/regulations, the money system, and human nature (selfishness, greed, envy, jealousy) as hindrances to his goal of service.
  • “This much we must believe as a starting point: That the earth produces, or is capable of producing, enough to give decent sustenance to everyone – not of food alone, but of everything else we need… That it is possible for labour, production, distribution, and reward to be so organized as to make certain that those who contribute shall receive shares determined by an exact justice. That regardless of the frailties of human nature, our economic system can be so adjusted that selfishness, although perhaps not abolished, can be robbed of power to work serious economic injustice.”
  • “Money is useful only as it serves to forward by practical example the principle that business is justified only as it serves, that it must always give more to the community than it takes away, and that unless everybody benefits by the existence of a business then that business should not exist.”
  • His Principles of Service:
    1. An absence of fear of the future and of veneration for the past. One who fears the future, who fears failure, limits his activities. Failure is only the opportunity more intelligently to begin again. There is no disgrace in honest failure; there is disgrace in fearing to fail. What is past is useful only as it suggests ways and means for progress.
    2. A disregard of competition. Whoever does a thing best ought to be the one to do it. It is criminal to try to get business away from another man – criminal because one is then trying to lower for personal gain the condition of one’s fellow man to rule by force instead of by intelligence.
    3. The putting of service before profit. Without a profit, business cannot extend. There is nothing inherently wrong about making a profit. Well-conducted business enterprise cannot fail to return a profit, but profit must and inevitably will come as a reward for good service. It cannot be the basis – it must be the result of service.
    4. Manufacturing is not buying low and selling high. It is the process of buying materials fairly and, with the smallest possible addition of cost, transforming those materials into a consumable product and giving it to the consumer. Gambling, speculating, and sharp dealing, tend only to clog this progression.

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