Monday, September 8, 2008

The Fords: An American Epic by Peter Collier and David Horowitz

The Fords: An American Epic was one of the best business biographies I've read in a long time. The Fords are a fascinating family, with equal measures of Greek tragedy, myth, suffering, arrogance, incompetence and genius.

The first Henry Ford ran at least two companies into the ground before starting his namesake company, Ford Motors. And it was at Ford Motors that he arrived at the brilliant insight of applying assembly line methods to manufacture the Model T.

This enormous insight led to more than 15 years of massive success for the company. Unfortunately, it was followed by another 20 years of almost equally massive failure, as Ford nearly sank his company with capricious management, kooky behavior and horrendous decision-making. It was only by the effective takeover in 1945 of Ford by Henry II (Henry's grandson) that the company was turned around.

I'll briefly share what was possibly Henry I's worst business decision: as American auto buyers became more aspirational in the 1920's, Henry systematically countermanded his managers' (and even his own son Edsel's) attempts to bring out any new car designs to replace the model T, setting the stage for GM to crush Ford's dominant market position. Years later, when the crucial mistake of allowing Ford to depend so heavily on sales of the Model T should have been obvious even to him, he famously said, "The only thing wrong with that car was that people stopped buying it." Clueless is too weak a word. Was this guy really a genius according to his legend? Or was he just really lucky?

With the brief exception of the first 10-20 pages, which are written in a strangely purple style, the book is extremely well-written. Just grind through the introduction and you'll find the remaining 400 or so pages of this book to be a fast and entertaining read. The authors do an excellent job weaving together the colorful history of Ford the company alongside the even more colorful history of the personal lives of the various Ford family members.

And this book contains some fascinating factoids: Henry I had an illegitimate son that apparently his entire family knew about; the radical idea of paying $5 a day wages in 1914 wasn't Henry Ford's idea, though he ultimately took the credit for it; in the 1960s, Henry II was practically the only industrialist openly supporting civil rights, as well as a host of similarly progressive causes; Ralph Nader, who was making his name in the 1960s as an anti-auto industry consumer advocate, didn't even know how to drive; and Lee Iacocca was an arrogant, back-stabbing screamer of a manager whose ego literally was infinite (sounds like I ought to read Iacocca to get the man's own side of the story, doesn't it?).

After reading this book, I came away all the more convinced that success in business is both arbitrary and depends on counterintuitive decision-making. Mass producing cars at low cost and at a low profit on a per car basis was an idea completely out of the norm for the auto industry at the time the Model T was created. And yet it was a fundamental innovation that changed the industry and created massive wealth for the Fords.

However, I'd also argue that Henry Ford mistook that one outsized success (which was in many ways merely a function of luck and good timing) as validation for so many of his horrendous decisions that followed. Too much success can make a man think he walks on water.

This book also raises interesting questions about the nature of long term success in business. Once you've built a great company, how do you protect the franchise, yet still take the right risks to keep the company great? If you avoid taking risk, can that be damaging to your company's long term success? To put it more bluntly: is it actually risky to avoid risk?

This book indirectly suggests that the answer to that question is yes. After Henry's grandson, Henry II, turned Ford around in the 1940s by modeling the company after GM's many-layered management and centralized authority structure, it was this very corporate structure that counterintuitively led to a lethal lethargy and avoidance of risk at Ford in the following decades.

That's why, by the late 1970s and early 1980s, Detroit automakers made unimaginative, boring and mediocre cars. There was always some overly cautious manager somewhere in each of these companies who would kill any truly aggressive, creative or risky decision that may have bubbled up to his desk.

That "we better not risk it" corporate culture led to bland car lineups at Ford, GM and Chrysler that were widely rejected by the American public, even as those same car models probably pleased the cautious, middle-aged bureaucrats running these companies. Of course this set the stage for yet another devastating conquest of the US auto market, this time by Japanese and European automakers.

After reading The Fords, it's not shocking any more to me that Ford as a company is in dire straights right now. What's shocking is that the company actually survived long enough to make it to the current day. I highly recommend this book.



Reading list for The Fords: An American Epic:
Once again this book yielded a massive reading list, too many to include here. I've chosen what seem to me to be the best nine titles. If you're interested in the full reading list (it contains more than twenty books), just send me an email at dan1529[at]yahoo[dot]com. I'll be happy to forward the full list over to you. Finally, note that if you visit Amazon via any of the links on this blog, I will receive a small affiliate fee on any purchase you make (it won't cost you anything extra). Thank you to my readers for all your support!

1) The House of Morgan by Ron Chernow
2) Those Fabulous Greeks: Onassis, Niarchos, and Livanos by Doris Lilly
3) The End of Innocence: Franklin D. Roosevelt and the era of the New Deal by Jonathan Daniels
4) The Decline and Fall of the American Automobile Industry by Brock Yates
5) The Car Culture by James Flink
6) Iacocca by Lee Iacocca (Iacocca's self-promoting autobiography)
7) Iacocca by David Abodhaer
8) The Best and the Brightest by David Halberstam
9) Kennedys: An American Drama by Peter Collier and David Horowitz

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