Henry Ford: one of the most influential American industrialists. Through his company Henry transformed American life and in this video we’re gonna learn how he did it starting from the very beginning. This video is brought to you by Audible and a big part of it is based on Henry Ford’s biography, which you can listen to for free on Audible if you register for a free trial with the link in the description.
You should also check out Real Engineering’s video on the manufacturing innovations of the assembly line, which he explains masterfully on his channel. By all accounts, Henry Ford should’ve been a farmer. Born in Michigan barely 20 years after it had become a state, Henry grew up at a time when farming was slow, exhausting and manual, which is why unsurprisingly he came to hate it with a passion.
But whereas most people at the time didn’t have the fortune to escape what they were born into, Henry was lucky enough to get such an opportunity. You see, the village he was born in was just 8 miles west of Detroit, which was rapidly becoming an industrial center thanks to the steam engine. Early on in his childhood Henry encountered technology, which few children his age could play around with.
He’d tinker with the watches of his better-off neighbors and by the time he was twelve he could not just take them apart, but also put them back together and repair them. His interest grew into an obsession when he got to observe a working steam engine firsthand while on a school trip to one of the rail companies in Detroit. By the time Henry had become a teenager the steam engine was already making its way into the farming community: coal-powered threshing machines and sawmills were becoming common sight and Henry was learning how they worked and how to fix them.
At the age of sixteen he made a big leap forward, when against his father’s wishes he left his village to go work in Detroit, where any young mechanic could easily find very lucrative employment. Industry in Detroit was booming and it had been doing so for close to five decades. In 1825 a canal had been dug connecting the Hudson River to the Great Lakes, which at the time were effectively the western frontier.
All the untapped resources that had not way of getting out could suddenly be moved by steamboat to New York and in the span of just 50 years Detroit’s population increased by a factor of ten, with vast mines in the north producing copper and iron and lumber mills opening up virtually everywhere. All this metal and wood sustained close to a thousand companies in Detroit alone, including the ones in which Henry would work at over the course of the 1880s. It is during this time that Henry by chance learned about the gas engine from a British Magazine.
It was being produced in small numbers by a German engineer, Nikolaus Otto, and it was gaining some traction in Europe, but it was practically unheard of in America. Henry would get the chance to work on such an engine himself in 1889 and he instantly recognized the advantages it had. Because it did not use steam, the engine was much lighter: it got rid of the heavy boiler and all the water in it because it did all the combustion internally, a much more efficient process.
This also allowed the gas engine to start quickly, whereas steam engines of the time needed as much as 30 minutes to heat up the water and generate enough steam to start working. The gas engine was an innovation Henry fell in love with, but it was one he didn’t fully understand: after all, he had extensive experience with steam and metal, but almost none with electricity and the gas engine was fired by an electric spark. To obtain this missing knowledge, Henry went to work for the local branch of the Edison Illuminating Company.
It was generating electricity for over a thousand homes in Detroit and it was doing so by using steam engines, so Henry was a natural hire for them. Whenever the engines broke Henry had to fix them, but whenever they were working he was free to do as he wished: it was the perfect job that allowed him to spend his days experimenting with gas engines. In 1893, when Henry had already been promoted to Chief Engineer at Edison, he created his first working gas engine.
The idea of using the gas engine to create a horseless carriage had been around in Henry’s mind since he first laid eyes on one, but actually making that idea a reality would take years of work. Building a car in a world with no car parts wasn’t easy and Henry had to figure out every detail through trial and error. It took him three years of constant effort to produce this: the Quadricycle, a simple frame with an engine powered by ethanol and four bicycle wheels mounted onto it.
It had only two gears and neither one was for going in reverse, but what’s worse is that it had no cooling system to speak of, thus making overheating a constant issue. In its first year Henry made numerous improvements to the Quadricycle, most notably adding a cooling system, and by the time he sold it in 1897 for $200 he had driven a thousand miles in it. Henry built a second Quadricycle and then a third one, always improving the design, before finally feeling confident enough in 1899 to start his own company.
Capitalized at $150,000, the Detroit Automobile Company was a very ambitious venture. Many of the Detroit elite invested in it, including Henry’s friends from the Edison Company, and everyone was eager to see what Henry could create with proper capital. Henry’s plan was very clever: since he personally knew many of the industrialists in Detroit by that point, he’d try to build an automobile they could use in their businesses.
He leased a factory and planned to hire a hundred workers to make his new “delivery wagon”, as he called it. But it turned out that building such complex machines in high numbers was much more difficult than Henry imagined. The vast majority of the parts used in the making of the delivery wagon were produced by other companies and every time a single delivery was late the entire factory would have no choice but to stop working.
The first delivery wagon took six months to produce and no more than twenty were made in the first two years of the company’s existence. By the end of 1902, the other shareholders were sick of Henry’s lack of progress and actually voted to get rid of him. Now, because Henry held only 15% of the company he had no choice but to comply and interestingly enough, the man who took over the Detroit Automobile Company would eventually transform it into Cadillac.
But that’s a story for a different time: what matters is that Henry was pushed out of his own company and had only a thousand dollars to his name. It was back to the drawing board and this time Henry would take a very different approach. Instead of targeting businesses with expensive machines, Henry would design a vehicle to be used by the average man.
You see, at the time virtually all cars were high-ticket items: they were mostly made by skilled craftsmen one at a time and more often than not were designed for racing, which was rapidly becoming a favorite American activity. Henry envisioned turning the car from a status symbol into a commodity, but doing that would not be easy and in fact it took Henry 20 different design iterations before he finally got one that worked. Henry labeled his first design as the model A and worked his way through the alphabet over the next 5 years, sustained by capital from his friends and family.
But what changed the most during this time is not the car itself but the production process. Henry learned the importance of having a reliable supply chain when his first company failed, which is why this time around he tried getting as many parts as possible from the same manufacturer. The one he chose will probably sound familiar: the Dodge Brothers Company, a machine shop in Detroit that would eventually evolve into the eponymous American brand.
The biggest game-changer of all, however, was Henry’s chance visit to a slaughterhouse in Chicago. He saw there something interesting: a disassembly line, so to speak, where multiple workers would process carcasses moving down a line. Henry figured he could use the same process, but in reverse: an assembly line.
Using the money he had saved from some of his earlier models, which were also assembled by the Dodge Brothers, Henry was able to build a factory of his own in 1904, where he could experiment with the assembly line process. By 1905 the Ford factory employed over 300 people that built 25 cars a day, but Henry still hadn’t figured everything out: he was producing multiple different models at the same time which prevented him from properly using an assembly line. Nevertheless, there was a sign of things to come: the affordable Model N, created in 1906 became the best-selling car in the US and Ford became the biggest car producer in America.
It is actually during the production of this model that Henry would first use the assembly line process to at least partially assemble some of his cars. It wasn’t a full moving assembly line, but nevertheless this experiment increased production by a factor of 5 in the same factory. Logistics, of course, was another big part of Henry’s success: in 1905 he created the Ford Manufacturing Company, complete with its own factory that started making the engines and transmissions of Henry’s cars to further eliminate any possibility of delays.
But the biggest factor in Henry’s success came from perhaps the most unexpected place: Peru. Now, this is a story you’re not gonna hear anywhere else, so listen carefully. In 1907, Henry began construction of heat treatment plant to produce vanadium steel.
This alloy was new to America: in fact, few furnaces in the US could even reach the temperature needed to manufacture it. The difficulty in producing it, however, was worth it because vanadium steel was more than twice as strong as regular steel while actually being lighter. Now, at the time vanadium metallurgy was cutting edge research, but Henry had an extremely lucky connection: he was friends with the two brothers who owned the one vanadium mine in Peru producing 92% of the world’s supply.
Joseph and James Flannery had commercialized vanadium steel in Europe and in the US by selling it to rail companies, but their Peruvian mine was producing so much vanadium that they had to do something else with it. They sold vanadium steel to the US government for the construction of the Panama Canal, but even that wasn’t enough so when they met Henry in 1906 they immediately made him an offer: they would help him transition his entire manufacturing process to use vanadium steel. It was their chief engineer that built the heat treatment plant for Henry in 1907 and it was their company that supplied Ford with all the vanadium it needed for its cars.
The first Ford car designed with vanadium steel was the model T in 1908 and it was this alloy that actually made it successful. It wasn’t the cheapest car Henry had made: the model N and its upscale versions were actually cheaper. But it didn’t need to be because it was by far the best car built at the time, much stronger than any competitor.
The sheer difference in quality was the only marketing Henry needed and within weeks of the Model T’s release Ford received 25,000 orders for it, even though it only managed to produce 17,000 units for the entirety of 1909. Henry realized just how big of a deal the Model T was which is why he built a second bigger factory in 1910 and it is there that he would perfect the moving assembly line in 1913. During this period production would double every year: in 1910 he built 20,000 Model Ts and just six year later he was building over half a million.
At the same time Henry adopted another brilliant strategy: he was constantly reducing the price of his car to further increase his market share. In fact, during these six years he cut the Model T’s price by more than half. By 1918 half of all cars in America were Model Ts and this trend would continue well into the 1920s.
Henry had begun a new age in American history: the age of the automobile and it was his company that would totally dominate in its first two decades. It wasn’t until the end of the 1920s that the rest of the auto industry caught up to Henry, but at that point he was already one of the richest men alive. In 1922 he actually took the time to write an autobiography, where parts of this video came from and which you can listen to it for free as part of your 30-day free trial of Audible.
In his book Henry not only recounts his experiences in a very eloquent fashion, he also shares plenty of business advice that is actually still relevant today. You should visit audible. com/businesscasual or you can text “businesscasual” to 500500 to get started with Audible, who have the biggest collection of audiobooks in the world.
And if you’re more into the manufacturing side of things, you should check out the video my friend Brian from Real Engineering made on exactly this topic. He will walk you through the beauty of the assembly line that made the automobile miracle possible, so you should definitely head on over to his channel, which I’m certain you’re gonna enjoy. In case you also enjoyed this video I’d like to thank you for watching it and I’d also like to encourage you to share it around with your friends.
You can expect my next video in two weeks, and until then: stay smart.
