I have been reading a recent book (“Fordlandia”) dealing with Henry Ford’s attempt to grow rubber trees in the Amazon jungle.
The book makes interesting reading, but I was struck by how carelessly Ford seemed to make business decisions. The story was his tire magnate friend (Harvey Firestone) was complaining about the British monopoly on cultivated rubber (from Malaya. Ford decided to break the monopoly, by growing rubber trees in the Amazon (the original source of wild rubber).
Ford leased half a million acres of land in a remote jungle location (18 hours by boat from the nearest city, Santarem), and set up a town of 5000 people-he built a water tower, sawmill, power plant, and housing for the workers and managers. His ivestment (as of 1935) was >$8 million (a fortune in those days).
The venture was a failure, but Ford hung in till 1945. The author also mentioned that HF short-circuited his son’s (Edsel Ford) attempst to set up a modern accounting system within Ford. Of course, since Ford was 100% owned by Henry, he had no directors or shareholders to answer to.
Critics charge that Ford made several disastrous business decidons, after 1930-was he goind senile?
Of course, that doen’t detract from Ford’s tremendous achivements-he put the USA on wheels, and set up a giant corporation.
No idea about Ford but if, for example, you look at Google you’ll note that they’ve released for more that has completely failed than those which have succeeded:
Google Search - Success
Google Earth - Success
Gmail - Success
AdSense - Success
Wave - Not really
Google Documents - Not really
Chrome - Not really
SketchUp - Not really
GTalk - Not really
Google Videos - Not really
Lively - Not at all
Desktop Search - Not really
Orkut - Not really
An organization can mostly fail and yet be a massive success if they happened to hit the right spot with one or two major products. Trying out new businesses doesn’t (necessarily) mean you don’t know what you’re doing, it may just mean that you have lots of ideas that you’d like to try. So long as you can manage your finances well enough that the strong ones don’t take a hit, that’s perfectly fine.
Ford didn’t like accountants (or unions) but that in itself didn’t make him senile – just an old coot who was set in his ways. His goal was to control a completely vertically integrated automobile manufacturing process – with Ford owning everything from the iron ore and coal needed to make the steel, to the glass for the windows. He built the world’s biggest damned industrial complex, so he probably didn’t consider building a factory town in the middle of the jungle as too outlandish. Besides, Ford Motor was worth $1 billion in the 1920’s, so an $8 million investment was chump change.
Henry had a stroke in 1938 and turned the company’s operation over to Edsel. But when Edsel died a few years later, Henry came out of retirement. In a sense, he had to. Edsel’s son, Henry II, was still in his 20’s, and yielding control of the company to someone outside the family was out of the question (indeed, Ford is still controlled by the Ford family.) By that time, Henry really was, putting it gently, past his prime.
Henry did make some disastrous business decisions in the 20’s and 30’s, but they were mostly the mistakes of an industrialist with a too-big vision, not the irrational acts of someone who was losing it.
Even more – the sand that was used to make the glass.
Here in St. Paul, Minnesota, the Ford plant is built above a series of caves that contain very high quality window-glass type sand. Ford used a lot of it to make glass (after they realized what they had) – they didn’t at first, and were importing sand to make glass, despite sitting on top of tons of it.
Ford thought guys sitting around desks ushing paper (accountants, bookkeepers) was a waste of time. Every so often he’d walk by the office, see a room full of them and say “they aren’t making anything useful, fire them all”.
When his son was experimenting with a 6-cylinder, Henry told him to come look at their new scrap processing equipment. While they were looking, the 6-cylinder prototype came up the conveyer and into the crusher. “Let that be a lesson son,” said Henry. “A car doesn’t need more cyliners than a cow has teats.”
Or he fired his longtime security manager by asking him to check the engine on his car. While the guy was hanging in the engine compartment, Ford drove the car full speed out the gates and jammed on the brakes, dumping the guy on the ground. “You’re fired, don’t come back!” He told him.
Plus he was sued and lost over his virulently anti-semetic publications in his private newspaper.
When the war department basically took over the company and put Junior in charge, the story is that he asked accounts Payable how much they owed, and was told “how much do you want it to be?” They had a formula where they separated bills into 3 stacks based on the amount, then multiplied height of the stack (in feet) by an empirical number to get a pretty good guess. In the days before computers, when everything was paper and tracked by hand, you can imagine how chaotic things could get. For the WWII effort, the government could not afford one of their major producers to be too disorganized to deliver.
So if he was going senile - how would you tell?
Henry Ford also backed Edison’s goldenrod rubber, which counts as a clanger dropped by Edison in his last years. I don’t think he was senile either. A new source for rubber was a hot topic in the 1920s, as the price had gone through the roof.
(You can make rubber from goldenrod, and you can grow the stuff in the US, obviously, since it grows just fine as a weed. But the idea of having goldenrod plantations to produce rubber domestically, using Edison’s enhanced strains which produced higher concentrations of latex, wasn’t the way to go.)
David Sarnoff was the founder of RCA because he was visionary enough to believe there would be a market for the home radio. Soon after he created NBC to create radio programming; he also created ABC but had to sell it due to a monopoly issue. He put Vladimir Zworykin and many others to work on television as soon as radio was successful.
By the 1950s he was driving his executives insane with some of his decisions. He was not senile but he was convinced of his own infallibility; he was after all the visionary who had envisioned then created a market that completely revolutionized the world, he must know what he’s doing, right? And because of his past brilliance and his role as living icon and his ownership of the companies people didn’t much dispute him, plus he was so rich that he could cause NBC and RCA to lose amounts of money inconceivable to most people and yet never miss a meal or a mansion.
I think Ford was much the same: his early and staggering successes convinced him he knew what was right and he didn’t particularly give a damn if others didn’t see it or if it was demonstrably wrong. Remember that he had gone bankrupt several times before he became “Henry Ford”- he knew that failure was a part of great success. And he was still churning out great successes; while he was not known for his enlightened and ahead of their times racial views he was frothing at the mouth trying to get George Washington Carver to Michigan and never did understand the fact Carver was not motivated by money, but his financing of Carver’s soybean research (Carver’s soybean research was far more important than his peanut and sweet potato research) and his use of soybeans in everything from suits to car bodies was a major breakthrough.
Henry II famously hated his grandfather and refused to allow a picture of him to be displayed in his house. He blamed Henry I on Edsel’s unhappiness and death, and I think his toppling of him was at least as much vengeance as financial concern.