Some Ideas from Henry Ford

A while back I was reading Henry Ford's autobiography, My Life and Work, as well as another one of his books, Today and Tomorrow. I find them good reads that I would recommend to you (still haven't had time to put them under the Interesting Reads page of the blog). The ideas in this book aren't just nice for reading and for aspiring entrepreneurs, but I think that they actually represent qualities of good companies that we should be looking out for and I think that there are points that are similar with Philip Fisher's "Common Stocks and Uncommon Profits", which I've did a post on at Growth Investing vs Value Investing. I'll be covering some of the key ideas which I have found useful and interesting

(Image source: https://commons.wikimedia.org/wiki/File:Henry_ford_1919.jpg)

Cheap prices for consumers

By providing the cheapest prices for consumers and constantly reducing the price through the innovation and technical expertise of his company, he was able to make the Ford Model T available to many Americans and allowed the working man to be able to afford a car. Instead of charging the maximum that the customer will pay, he charged the lowest that the company could afford, which allowed the company to grow quickly in popularity among consumers.

High wages for workers

He did not have many issues with unions in part due to the high wages that his company paid. He believed that higher wages for workers allowed them to spend more, which would allow them to afford the cars that the company was producing and also, as money goes around in cycles, higher wages to workers will benefit other companies which will come back and create more potential customers for his business. This is a very long-term view but not only is it good for the company that you are investing in (provided that it has other credentials that make its products attractive for consumers) but it's also good for the society as a whole.

Constant Innovation

He believed in constantly using new technology in order to reduce the costs of the company and to allow it to sell at cheap prices to consumers while paying high wages for workers. He also adapted ideas from different areas into the automotive industry which allowed his company to succeed. Many ideas that he had were not completely new ideas invented by him but were rather introduced into the automotive industry and adapted to its needs.

Producing value-added goods

Henry Ford believed in the usefulness and value of the products that his company produced. Cars, tractors and trucks all helped to move the load of work from the backs of man onto the machines. The production of value-added goods would help the development of the overall economy and help push the country and the world as a whole forward. These value-added goods, sold at cheap prices, will have evergreen demand as they fulfill a need or help to improve the productivity of people.

Using workers to their best abilities

Instead of discriminating against workers that had disabilities and hiring workers with the most abilities, Ford hired workers with little discrimination other than their ability and willingness to work. This is good as it allows the company to be able to hire workers easily as it expands while doing a social good as it provides jobs to people from different walks of life, which leads back to the same point on paying high wages to increase the potential customer pool.


After-sales service

In his industry, in his time, after-sales service was almost non-existent. This may not apply as much to companies that sell simple items, but more complicated products such as a automobile would require good after-sales service to end the customer's relationship with the manufacturer on a good note. Ford made his parts interchangeable across models and spare parts were cheap to purchase. This in turn creates loyal customers.

Summary

I guess these are just some of the points that I've been able to glean from the book. In a phrase, I think it can be expressed as "Focus on the customer", but we also have to note his good treatment of workers, which I really admire. In my opinion, these are some of the pointers that the book has provided when looking for good companies to invest in. These companies with the long-term vision will not only be able to provide good returns to shareholders but also are doing a public good which we should be supporting

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