60. Why Was Henry Ford So Important?

Once upon a time, cars were a luxury item only the super rich could afford. But thanks to Henry Ford and an economic concept called “economies of scale,” cars were able to mass produced, making them more affordable to everyday people.

Terms: 

  • Economies of Scale: When the cost of producing one unit of a good or service decreases as the volume of production increases.

Links:

 

Here is the transcript of our conversation:

Brittany: Hi Connor.

Connor: Hey, Brittany.

Brittany: So we have both talked several times about how much we love innovators and entrepreneurs. I know we’ve talked about Elon Musk, we’ve talked about Jeff Bezos, we’ve talked about so many today. I wanna talk about another one, somebody who’s really important to me, and that is Henry Ford. And as the name might suggest, you might afford, might sound familiar to some people that’s a car brand and American car brand. I know a lot of times now it doesn’t come from America, which I’m okay with, I think the free market provides But the cool thing about Henry Ford is, you know, look at your, in your parents’ garage or in your driveway. And the reason your family has a car is in large part to Henry Ford. and I don’t know, Connor, do you know anything about Henry Ford?

Connor: You know, I know he was kind of a pioneer of a lot of like, automation and factories and, you know, he had to build a lot of cars. And so I think he put like some systems in place and trying to figure out how to produce a lot of cars very quickly. and I think he was, I’m trying to remember, did he invent things as well? I’m, a little rusted.

Brittany: He Invented an engine, so he was, really big on like building cars from scratch. But then he had this idea, he just slowly started taking that hobby into something he could make some money off of. And started mass producing, like you said, cars utilizing machinery. You know, before it was, you couldn’t mass-produce cars. A car was made and it was one at a time. Now, because we are post-industrial revolution, during Henry Ford’s time, he was able to find a way to get products like in mass, like in bulk. I always think of it as like going to Costco, if your parents ever go to Costco and they can get like, better deals because they’re buying more food. It’s very similar thing with cars. So you buy more parts at one time, and you get a deal and then you start mass producing them. So, the cool thing about that is because of that, cars became more affordable because as you have more things, the cost is gonna go down. We’ve talked about with inflation, it’s a similar principle. so yeah,

Connor:

What I find interesting, Brittany is he was actually awarded 161 patents by the US government. So, many, he did invent a lot of things, but what’s really cool is like, okay, here he is focused on cars, but when you’re focused on cars as an example, you have to figure out how to solve a number of other problems. So for example, he was really interested in plastics trying to figure out how to make a car to be lightweight. He actually teamed up with George Washington Carver and they were trying to figure out how to get plastic parts into the car. And so, you know, throughout the 1930s they’re working on this. In the early 1940s, Henry Ford got a patent for an automobile made almost entirely out of plastic.

Brittany: Wow.

Connor: And it didn’t weigh very much. It was, much lighter. It could withstand, you know, heavy blows and things like that. it even ran on ethanol, which is a type of alcohol, instead of gasoline. and you know, the car never really went anywhere, but you can see he’s trying to solve a number of problems because if you have a very heavy car, then it’s having to use a lot of gasoline to push that heavy car forward on the road. And so he’s focused on making a good car, kind of like Elon Musk. I mean, now they’ve, you know, got electric cars, but now they’re figuring how to make better batteries that last a long time. Yeah. now they’ve got solar panels for your roof and all these kind of things. And so what I like about this, example is that one project kind of leads to another, I found this in my own life. I mean, I’ll, briefly, you know, share this, it won’t be a surprise to anyone here. I was focused on Libertas Institute and I was building an organization in my state fighting for freedom. But because I was a dad of young kids, that led to this other idea of doing Tuttle Twins book. And that led to another book and that led to a curriculum to learn about free markets. And that led to some of the new projects we’ll be doing and a cartoon. And what I really like about entrepreneurship is it’s so, I mean, organic is kind of the word we use. It just kind of means like it’s spontaneous and it kind of evolves on its own. And so here’s Henry Ford focused on one thing, but then that raises these questions where he is like, Hey, in order to do a good job at this, I need to solve some of these related problems. And so then he kind of broadens his view and is probably why he ended up, you know, having so many patents is cuz he’s trying to solve a lot of those problems.

Brittany: He also inspired other people. And that’s what I think is really cool. A car might not be saving anybody’s life directly. You could argue that maybe a car can drive someone to the hospital or, you know, there are life-saving things a car could do. But so this thing that he did that I was saying where he was like making lots of cars at once, there’s a term for that of getting things in bulk and then making things in, multiple numbers it’s called economies of scale, which is kind of a complicated term. So we won’t go into it. But, so if you can get a lot of people or, a lot of, you know, one thing being built at one time, you can serve more people and you can lower costs. Well, this has been adopted by healthcare workers. So there is a doctor in India named Dr. Sheti and I will link to an article about him that I wrote a couple of years ago. And he took the same principle. Henry Ford took, and they call him the Henry Ford of heart surgery. So he, they perform, I think it’s over 3000 heart surgeries a day in their hospital that is more than I think like we do in the United States in a day total. Wow. Yeah. So they were able to do this and, they’ve been able to perfect their skill because they’re getting so much practice, these doctors doing heart surgeries all day long that they’re, getting better and they’re saving lives. So it’s cool that, you know, a car manufacturer can impact a little boy who was in India who heard about him and thought, I can do this with healthcare.

Connor: I think that’s really cool. maybe I do wanna explain briefly before you continue economies of scale. Cause I think it is something that maybe with this explanation, some of the kids can understand. I’ve occasionally had my kids help me pack Tuttle Twins books. We have a whole team.

Brittany: Really? That’s

Connor: Fun. Yeah. And it’s fun. They can make a little money and, help out. And so we have a team of people, but sometimes when it’s really busy or when there’s a sale, you know, I’ll take my kids to the warehouse and they’ll help. And the way that you become very effective at that particular job is not, to do everything yourself. In other words, you know, you gotta build the box, kind of assemble the box, and then you go down the line and grab book number 1, 2, 3 all the way through 11. And then you put some little flyers in there and then fill it with some packing paper and then you gotta tape it and then put it over. So that’s kinda the whole process and you could, you know, go through and do each step, but you’d be very slow because your body and your mind is focused on all these different activities. However, when I have one of my kids focused just on building boxes, and then when another kid focuses just on filling those boxes with, books, and then, you know, when I do the rest at the end we build way more boxes because you start to get like muscle memory, right? Where your, body just starts kind of going through the motions and, without you having to really think about it too much. So then you can work more quickly. and everyone can kind of focus rather than having to walk up and down and back and forth. You can just kind of stand there and, so you’re saving time walking back and forth. You’re saving mental energy cuz you’re not having to think about everything. And so we end up doing way more by focusing on each person on their little step. And so with someone like Henry Ford, when you’re building a whole car, you focus on everyone becoming kind of a specialist in a little task and then they hand it off to the next person and you get this whole process where, because everyone is specializing and everyone is focusing on what they’re good at. And then when you start doing a lot, you can do a lot more. That’s kind of the scale part of economies of scale. So you can do a lot. and because you can work more quickly, you don’t have to pay as much money, right? If I say, Hey, I need a thousand tunnel twins boxes packed, and then all of my workers are just doing every part of the job themselves, I’m gonna have to pay more money because it takes them longer. Whereas I’m saving money. So this is the economy’s part of the economies of scale. It’s more economical or more, cost-effective for me to have people focus each on their task and when we then we can do a lot for a lot less. And so that’s kind of a one way to explain it, where someone like Henry Ford at a bigger scale was able to see how you can start to really specialize, and help people a lot more without as much, cost. I think it’s pretty cool.

Brittany: No, that’s a really good explanation cuz that’s always the economy’s part of that definition. I always have a hard time grasping around, but the way you economically kind of described it that way, I thought was really, really resourceful. but yeah, so it’s kinda like the production line, right? You mentioned the whole like somebody folds a box and stuffing it. That’s exactly what Henry Ford did. Some people were working on one part of the car, some people working on the other part, and it was a production line. He kind of revolutionized the whole idea of the production line. So that’s, pretty impressive on its own.

Connor: I think it is. And you know, people like this, I kind of find it interesting. Everyone has their own political views. What I kinda like, one of the things I like about, um, Henry Ford is that he was anti-war, and he was anti-war in kind of a different way. I mean, there are a lot of reasons to be concerned about war, but, one of his concerns is that it was a terrible waste. Here’s someone who’s involved in trying to come up with new inventions and go across the world, finding places where you can source products, you know, to build better things and make people’s lives better. And so you’re focused on resources, you’re focused on a cost efficiency, right? Making things cheaper for people. you’re focused on, improving things. How, can I make a car better and cheaper, and faster? And so from that kind of perspective, it’s interesting to think about something like war and the waste of, you know, instead of building cars or building homes for people, you know, we’re building tanks and we’re building bullets and we’re building bombs and people are dying and rather than working productively, they’re out there trying to destroy. And it’s kind of interesting to have that perspective on things like there’s, there’s a whole moral realm, to something like war. But there’s also just the logistics of like, in fact, and this is kind of a tangent, but it’s a fun topic. Dwight D. Eisenhower, here’s this, you know, American military leader involved in, war, and then he becomes president of the United States. And he had this amazing address where he similarly said, he is like, look, every you know, every bullet, every bomb, every tank, every plane that we build is one less school. You know, one less lunch to help someone. and, we’re, wasting resources. And so I just kinda like that about Henry Ford. As I look back, it’s kind of fun to see it from that perspective where he’s like, Hey, look, we’re, we’re making the world better for people, but you know, one of these problems when people just spend all this money on war, you end up with all this waste. And so that’s always kind of spoken to me.

Brittany: I like that. That’s because for people who can’t understand the human toll of war, and there is a hit you know, there is a lot of, human deaths of human casualties and that’s terrible. But, you know, it’s interesting to say no, it’s also an economic issue. Why are we wasting money on bullets? Are we doing that? I’ve never thought of it that way. So that was really interesting.

Connor: So as you reflect on the life of Henry Ford, what, relevance is that? Like why should we care? Right? Like he lived a long time ago, so why should we care today about him?

Brittany: So I think the doctor example is my favorite. When I was doing research on this, Dr. Debbie Sheti, I just, I fell in love the whole concept. And when he said he was inspired by Henry Ford that, you know, that it wasn’t just machines for him, it wasn’t just cars. I also like the idea. So that’s another big thing. I think that him he’s actually saving lives by inspiring people. The second thing I’m always fascinated by entrepreneurs who are not only able to create an amazing product but to make it affordable for, the masses. we could argue that Elon Musk has done that with his, which is the card that was initially pretty affordable.

Connor: It was like the I always get confused. There’s, yeah, I don’t

Brittany: Remember. There was like the base model that was like, oh, and anyone can afford this but, I feel like something like that. Yeah. But I kind of feel that’s what Harry Ford did, only at a time when not a lot of people, not everyone wants driving cars. So that’s pretty, revolutionary in my book.

Connor: What’s also interesting is, so there’s an organization called the Ford Foundation.

Brittany: Oh, they’re fun. Yeah.

Connor: And, so this is a group that has a lot of money and they give out grants to organizations that are trying to, you know, do things, change people’s minds, help people serve people. I think they have over 12 billion with a bee. And, they got started. The money is Henry Ford’s money that after his death, was left and he set it up so that his posterity, his children, and grandchildren would control this organization and decide who gets the money. And it’s interesting cuz you know, all this wealth is created. All these people say I want a Ford car. And so he starts amassing all this wealth because he is made people’s lives better. And so what does he do with that wealth? And that’s an maybe an interesting topic for another day is, you know, you get someone like Ford and here he has all this money, and now his posterity is in control, but they don’t necessarily agree with him, right? they can kinda change their mind. And so now here’s people spending, you know, great granddad’s money on things that he didn’t necessarily agree with. And so what do you, what do you do when you’re trying to change the world? and how, you know, if you build wealth and create value for people, what should you do with that money? I mean, there’s something like the Giving pledge which I think Warren Buffet and others have created where they go to all the wealthy people in the world and they’re like, Hey, you should spend, give us money all your, all your money before you die to try it, rather than just kind of passing it on and, and so forth. But it’s, it’s really cool, I think, to see how, some of these entrepreneurs, including Henry Ford, create so much value for people. Someone like Steve Jobs at Apple, right? Or Elon Musk or whatever, where yeah, they make a lot of money, but really that’s a signal for, they’ve served a lot of people who feel that their lives are improved and as a result, they pay money to obtain whatever, you know, the good or the services, from that person. So I think that there’s a lot of lessons to be learned about that where, if we create value for other people, they’ll compensate us. And the more we get compensated, that’s kind of a cool signal that we’re actually making a lot of impact. But then also you end up with this wealth that you can use to do even more good. You know? And how should we be charitable? What should we do? Is it all about making money just for ourselves and going on lavish vacations and buying a bunch of homes? Or maybe there’s something else that we should be doing with those resources. Kinda a fun topic to think about.

Brittany: Yeah, and Ford, actually, another cool thing that they did, I don’t know that they do this every year, but I know they did it the year I worked with a group called Youth Entrepreneurs, which is exactly as it sounds. They go into schools and they help young kids, like our listener’s ages learn how to be entrepreneurs. and you have to actually create your own business plan created a project. but Ford teamed up with them for one year and they got to go to the Ford Museum, the students and present their ideas in the same, you know, in the same building as the first Ford Engine. So that I thought that was really cool them to support that, initiative because it starts young. We’ve talked about this so many times. The best time to be an entrepreneur is when you’re a kid. So,

Connor: And it’s fun to, learn from other people. In fact, I’ll tease here another, product, another book that we’re coming out with, hopefully in a few months. it’s gonna be called The Tuttle Twins Guide to Inspiring Entrepreneurs. because I think there’s such power in young people really digging in and learning the stories of these people who have, you know, made the world a better place and the failures that they went through, right? All the things they had to learn. I think there’s a lot of power in those stories. And so that’s a book that we’re working on. It’s been really fun to really dig into a lot of these people’s lives and kind of see what drove them and what can we learn from them. Yeah, that’s fun. Can we, how can we be an inspiring entrepreneurs for those who really want to kind of forge their own path? It’s a really fun story. Guys. Head to Tuttletwins.com/podcast. If you want to grab the show notes page, we’ll have the definition there of economies of scale. We’ll have a couple links for you to read about Henry Ford. If you wanna spend a homeschool day digging in and kind of reading some biographical stuff and learning a little bit more, it could be some fun. Brittany, great topic as always. And until next time, we’ll talk to you later.

Brittany: Talk to you later.

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