Henry

February 04, 2025

History doesn’t repeat itself, but it does rhyme.

Howard Marks, Mastering the Market Cycle

Every few decades, an entrepreneur manages to completely transform the way people do business, revealing both beautiful and jarring realities of human psychology in the process.

In 1902, Henry Ford’s career had been anything but a smooth ride.

After meeting with Thomas Edison a few years back, he had the opportunity to design cars for the renowned scientist. The partnership flamed out, and Ford left to found the Detroit Automobile Company with William Murphy, a wealthy businessman from Detroit. The company dissolved two years later due to low quality cars with high price tags.

It seemed like things were headed in a better direction when Ford designed a 26-horsepower car in 1901. The progress led William Murphy and other investors from Detroit Automobile to incorporate a new company with hopes of a breakout model. The company was dubbed the Henry Ford Company. It lasted for a little over a year, before Ford had a falling out with one of the consultants that William Murphy brought in. Ford stepped away, and Murphy’s consultant, Henry Leland, renamed the company Cadillac Automobile.

cadillac runabout, 1903

From the outside looking in, Ford had failed time and time again. Every time it seemed as if his moment was inevitable, unforeseen misfortune took the reins.

Almost like the feeling of playing Uno; you get down to the last card and then everybody conspires against you until your hands are filled with cards again.

But all it takes is one moment.

Long tails, or the farthest ends of a distribution of outcomes, are the most powerful force in the business world. A very small number of events often account for the majority of outcomes.

Use Apple as a case study: in 2017, Apple drove 7% of the S&P 500’s returns. The iPhone drove 60% of Apple revenues in 2017. So one company is driving a large proportion of public stock returns and one product within that one company is driving a large proportion of revenue.

It sounds extremely intuitive when laid bare, nonetheless, a reminder is often necessary. One home-run can change everything. A swing and miss can be a learning opportunity provided said individual remains in the game.

The 999 was a grand slam. Henry’s first racecar debuted in the fall of 1902, after he parted ways with Leland and Murphy. At the time, no car was nearly as fast - the 999’s 91 mph set a speed record. Barney Oldfield, a racecar driver, took the car on a national tour, providing Ford with unprecedented marketing exposure.

New financial backers arose from the dust and Ford - the company - was alive again.

The second tail event was the Model T.

Model T’s were released by the Ford Company in 1908. The car was simple yet revolutionary. Its engine and transmission were enclosed, with a steering wheel on the left, features that other car companies quickly copied. But most importantly, the Model T was very inexpensive relative to other options - $825, or ~$28,000 in today’s prices. Average Americans bought the Model T in droves.

Wasn’t enough for Henry.

Supply chain shortages were the biggest roadblock facing the newly successful company. Ford tried to stockpile parts but inventory costs were massive. Keep in mind that Henry’s goal was to make the Model T as cheap as possible so that middle income Americans can have an affordable, yet first class driving experience.

The supply chain crisis would be solved by one of the most impressive acts of vertical integration the modern world has witnessed. Over the span of a decade, Ford had acquired an enormous rubber plantation in Brazil for tires, coal mines in Kentucky, acres of timberland and iron ore mines in Minnesota and Michigan, and a railroad to control every stage of production at the Ford factory in Michigan.

Vertical integration allowed Ford to slash prices from $825 to $360. (~$28,000 to ~$12,000 in modern prices)

For further context, the average American was earning ~$1,300 and competitors were selling cars for ~$1,400. They stood no chance against Ford in 1920.

So the 999 racecar got Henry in the game, the Model T put him at the top, and vertical integration killed the competition.

After reading My Life and Work by Ford, it became apparent that the parallels between Ford and Musk are too hard to ignore.

The Tesla Roadster was Elon’s 999, the Model 3 is his Model T, and Tesla’s autonomous driving capability could potentially kill the competition.

real stories never end

By identifying an opportunity within the electric vehicle market, Musk managed to capitalize on the fact that EVs were both (a) expensive and (b) unattractive, which stood in the way of mass adoption. Prior electric car attempts by larger incumbents (Toyota, Chevrolet) were uncool, despite Leonardo DiCaprio trying to convince the world to drive a Prius. The Model 3 completely eliminated both obstacles, vertically integrating production to make an inexpensive, attractive electric car that’s a no-brainer for the average American. I’d argue no other car - at the ~$40,000 price point - makes more sense. What the Model 3 did for EVs is what the Model T did for cars. No conspiracy here, Elon studied Ford closely.

Ford’s dominance of the American automobile market proved lucrative.

Adjusting for inflation, he managed to amass a $200B personal fortune at his peak.

Henry didn’t trust accountants, so naturally, there was no accounting department at Ford. Instead of counting money, the company weighed it on a scale to estimate how much they were making. The company was never audited during Henry’s tenure.

counting all day like the clock on the wall

From a certain angle, Ford’s fortune can be linked to the origins of Silicon Valley.

The Ford Foundation was established in 1936 by Henry Ford and his son Edsel Ford. While the mission statement said something along the lines of advancing humanity’s interests, historians argue that it was created directly in response to President FDR’s 70% tax on large inheritances, instituted in 1935.

FDR’s bill was formally known as The Revenue Act of 1935, and the 70% tax targeted inheritances of $50M or higher. Henry and Edsel owned more than 96% of Ford stock at the time, so family ownership post-Henry would be diluted significantly by the tax. The Ford Foundation would help preserve family control.

By 1947, Henry and Edsel had both passed, and Henry Ford II was in charge of the Ford Foundation. One of Henry Ford II’s first hires was Horace Rowan Gaither, who would go on to become president of the Ford Foundation in the 1950s. Horace Rowan Gaither would later join William H. Draper and Frederick L. Anderson to form the first venture capital firm in California, Draper Gaither Anderson. The firm’s effect on Silicon Valley was butterfly-esque and warrants a separate chapter.

At the time, 12 foundations controlled 80% of America’s endowment capital.

Norman Dodd was a financial advisor and chief investigator for the Special Committee on Tax Exempt Foundations, working with Congressman B. Carroll Reece to investigate the purpose of America’s largest foundations, including the Rockefeller Foundation, the Carnegie Endowment for International Peace, and the Ford Foundation.

What he found was incredible.

Below is a segment of his interview with Ford Foundation president, Horace Rowan Gaither:

HORACE: Mr. Dodd, we invited you to come because we thought that perhaps, off the record, you would be kind enough to tell us why the Congress is interested in the operations of foundations such as ourselves… Mr. Dodd, we operate here under directives...which emanate from the White House. Would you like to know what the substance of their directives is?

NORMAN: Yes, Mr. Gaither, I would like very much to know.

HORACE: The substance of the directives under which we operate is that we shall use our grant-making power to alter life in the United States so that we can be comfortably merged with the Soviet Union.

NORMAN: Mr. Gaither, legally you are entitled to use your grant-making power for this purpose but I do not think you are entitled to withhold this information from the American people to whom you are beholden for your tax exemption. So why do you not tell the American people what you have just told me?

HORACE: Mr. Dodd, we would not think of doing that.

this is not a memo

After other shocking interviews with executives at the Rockefeller and Carnegie endowments, Dodd found that foundations were using their funds to warp American teaching of history, control the education system, involve the United States in wars, and intentionally corrupt the nation.

One such method was through fellowships granted by foundations. For instance, Dodd found that the Carnegie Foundation trustees wanted to use the educational system to discredit the founding fathers and demean the Constitutional structure of government. But the trustees found it hard to convince established historians to compromise morals and play puppet. The clever trustees decided it was better to build than buy, and they began awarding fellowships to college graduates studying history. The new grads would flown out to London and given scholarships and stipends for further schooling. In return, the fellowship recipients were expected to carry out the foundation’s mission: slowly contaminate the historical narrative with disdain for America. Carnegie Foundation partnered with the Guggenheim Foundation on this specific project.

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