My Life and Work
Henry Ford, 1922
Why can a lower price bring in more money than a higher one? In 1922 Henry Ford explained how one model, a moving conveyor and a five-dollar day turned the car from a rich man's toy into something for millions. You will learn his rules: service before profit; the product before the factory; the price before the cost.
Who it is for
For people who manage others, start their own business, or want to understand how a shed in the backyard grew into a plant producing a million cars a year.
Greed for money is the surest way to keep it from you.
In six months he will be broke
Picture Detroit in 1909. The automobile is still a toy for the rich, and the manufacturers work to keep it that way: they sell “pleasure cars” at a high price and invent a new model every season. Then one of them announces that he will build a car for a huge number of people. It will be made of the best materials, have the simplest design, and be so cheap that any man with a good wage can buy it. The experts answered almost in chorus: if Ford does this, within six months he will be bankrupt.
Henry Ford did not go bankrupt. Twelve years later his factories were producing more than a million cars a year, and the price of the simple open model had fallen from 950 to 355 dollars. In 1922 he wrote this book together with the journalist Samuel Crowther. Ford was convinced that he had found not a way to make cars but a general rule for any business, and he wanted to prove it with his own figures.
His main idea sounds almost naive: a business exists to serve people, and profit comes as a consequence of good service. But behind it stand very concrete decisions: one model instead of several, a moving conveyor, a wage that doubled for half the workers, and a price that was cut before anyone knew how to keep it.
Next you will see how these decisions connect and what you can take into your own work, even if you never run a factory. We will start with what Ford learned from his own failure.
Money comes after the work, not before it
In 1899 Ford left a secure job as an engineer at an electric company to work on automobiles. A group of enterprising people immediately decided to make money from his car, and so the Detroit Automobile Company was born. Ford became its chief engineer, but he was not the one who decided things. The cars were made to order, and the company tried to charge as much as possible for each one. They sold very few. In 1902 Ford left and promised himself he would never again work under other people's orders.
The following year he studied how the business around him worked, and saw something strange. Finance got enormous attention, and service to the buyer almost none. Once a car was sold, the manufacturer lost interest in it. If it broke down, that was the owner's bad luck, and spare parts were profitably sold at a high price: the person had already bought the car and had nowhere else to go. A dissatisfied customer was seen not as a person who had been cheated, but as a nuisance or a source of new money.
Ford drew the opposite conclusion. For him a sale was only an introduction to the customer, not the end of the deal. A person who bought a Ford would drive it all the time, so the company arranged repairs and spare parts in advance, while other firms left the customer to a local mechanic with his huge bills. By Ford's own account, this care after the sale became one of the main reasons for his success.
He has an image that explains everything. A chisel is for cutting, and what matters in it is the cutting edge: a tool made of fine steel without an edge is just a piece of metal. The cutting edge of a business is the place where the product meets the buyer. If the person is disappointed at that point, no financial scheme will save the business.
The mistake Ford saw everywhere is putting money ahead of the work. Profit is needed, and without it the business does not grow, but it should be a result, not a foundation. Try to find your own cutting edge: the place where your work meets the person it is done for, and ask yourself what happens there after the money has already been received.
About the author
Henry Ford (1863 to 1947), an American engineer and founder of the Ford Motor Company, made the automobile a mass product. He wrote this book together with the journalist Samuel Crowther. In the 1920s The Dearborn Independent, a newspaper owned by Ford, published antisemitic material.
All books by this author: Henry Ford
Terms from the book
- Wall Street
- cost price
- pounds
- paternalism
- Crowther: Samuel Crowther, an American journalist who wrote about business. Co-author of the book: he helped Ford put his thoughts and experience into words.
- conveyor: A moving line along which a product or part passes from one worker to the next, each doing one short operation.
- Detroit Automobile Company: A company set up in 1899 by a group of entrepreneurs to produce Ford's car. Ford was its chief engineer and left it in 1902; later the Cadillac company grew out of it.
- chisel: A woodworking tool with a flat, sharp blade for cutting and chiselling wood. Ford uses it as an image: what matters in any work is what really cuts.
- Palm Beach: A resort town in Florida where car races were held in the early twentieth century.
- vanadium: A chemical element, a metal. A small addition of vanadium makes steel noticeably stronger and more durable.
- Fahrenheit: The temperature scale used in the United States. 3,000 degrees Fahrenheit is roughly 1,650 degrees Celsius, and 2,700 degrees roughly 1,480.
- Model T: Ford's car, made from 1908 to 1927. Simple, cheap and durable, it became the first truly mass-produced automobile.
- controlling interest: The share of stock that gives its owner the right to make the main decisions in a company. Ford acquired it in 1906.
- chassis: The frame of a car with the wheels, axles and engine, onto which the body is then fitted.
- Highland Park: A town near Detroit where Ford built a large plant and where the first moving assembly lines started in 1913.
- magneto: A small generator that supplies the current for the spark in an engine. In the Model T it was built into the flywheel.
- inches: An American unit of length, 2.54 centimetres.
- Sociological Department: A service at Ford's plants which from 1914 checked whether workers and their homes qualified for a share of profit.
- labour turnover: The constant departure of workers and hiring of new ones to replace them. The higher it is, the more a company spends on training newcomers.
- overhead: Costs that cannot be assigned to one particular item: the office, management, heating, telephones, accounting.
- dealer: An independent seller who buys cars from the factory and resells them to buyers in his area.
- treasurer: A person who manages a company's money: payments, loans, cash.
All terms
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