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Men and Rubber: The Story of Business by Harvey S. Firestone
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This printing of Men and Rubber: The Story of Businessby Harvey S. Firestone is part of the Farnam Street Timeless Classics Series, where we continue with our goal of ‘mastering the best of what other people have figured out.’ This is one of the books I give away the most.
Harvey S. Firestone was one of the leaders of American industry. In a testament to his thoughtful corporate leadership, Firestone tires are still on cars everywhere. Many of the insights he shares on how to start and run a company are as relevant today as when they were originally written.
Please remember this book was written in 1926, and no updates were made to the original text.
Let’s take a look at the first chapter.
The Labour of Thinking
Thomas A. Edison sums it up this way: “There is no expedient to which a man will not go to avoid the real labour of thinking.” He has had it posted on signs about his laboratories; he has said it to me a dozen times and illustrated it with cases. He and Henry Ford often discuss it, and I have often discussed it with Mr. Edison. For the most difficult thing in business is first getting yourself to thinking and then getting others to thinking. I say this is difficult because, in the natural course of business, an infinite number of details come up every day, and it is very easy indeed to keep so busy with these details that no time is left over for hard, quiet thought—for thinking through from the beginning to the end.
An executive cannot grandly dismiss details. Business is made up of details, and I notice that the chief executive who dismisses them is quite as likely as not to dismiss his business. I believe in one-man control—no business is large enough to survive divided authority. Some one man must be supreme, and that man whose authority is supreme, whether or not he be the titular head of the business, has to find the time, not only to know the necessary day-to-day details and progress, but also for quiet, sustained thought.
A man may keep very busy indeed without doing any thinking at all, and the easy course—the course of least resistance—is to keep so busy that there will be no time left over for thought. Almost every man tries to dodge thought or to find a substitute for it. We try to buy thoughts ready-made and guaranteed to fit, in the shape of systems installed by experts. We try to substitute discussion for thought by organizing committees; a committee may function very well indeed as a clearinghouse for thoughts, but more commonly a committee organization is just an elaborate means of fooling oneself into believing that a spell spent in talking is the same as a spell spent in thinking.
Take Mr. Ford. He knows every necessary detail of the far-flung Ford Industries; he always knows what is going on, but he never attends to the execution of details. He does not waste time in dictating and signing notes and letters, or in seeing people whom it is not necessary for him to see; he delegates all this to others. He has assigned no executive duties whatsoever to himself—in fact, he does not even have a desk. He has only a few friends and no social obligations at all, and so he keeps himself free to think and to plan and to watch.
It is commonly imagined that Mr. Ford arrives at his decisions quickly. Nothing could be farther from the fact.
He reaches his decisions slowly and alone; he does not jump at anything, and so, when the time comes for execution, everything moves with marvelous rapidity because everything has been previously thought through and planned. He has had the time to do this thinking and planning because he has used his time himself instead of permitting others to use it for him. And he is certain that plans will be executed for him, because he knows how to let men go when they grow too rich and lazy to execute.
It is really a misnomer to call the directing head of an enterprise an “executive.” He cannot possibly be an executive and hold enough time back to think. The execution must be done by others, and one of the vital, ever-present problems, as a company grows wealthy, is keeping executives on the job of executing. Men are apt to swell up and get lazy, and then no price is too high to pay to get rid of them. Mr. Ford manages to keep his people ever quick and active, and in the rare case of a man slowing down in order to get leisure to spend money, Mr. Ford always spots him and gradually relieves him of his more important duties, and finally puts him in a quiet backwater with nothing to do.
Mr. Edison is a profound thinker. His mind is very different from that of Mr. Ford in that, while Mr. Ford thinks both creatively and commercially, Mr. Edison thinks almost wholly creatively and does not give the same order of thought to commerce that he gives to creation. Neither man is an inventor in the ordinary sense, for they do not stumble upon things by accident; they start with what they want to achieve and then think out the methods of achievement.
Mr. Edison is the most widely informed man I have ever come in contact with; not only his scientific knowledge, but also his general knowledge is well-nigh universal. Often, on our camping trips, I have seen him pick up a stick of wood or a stone and talk for an hour on it. One of his favourite amusements is “questions and answers.” In this game he is allowed to ask each player a certain number of questions, and each player is allowed to ask him a certain number of questions. When a player fails to answer, he drops out. Mr. Edison always wins, for I have never seen him unable to answer any question put to him, while the questions he puts he usually has to answer himself just to demonstrate that they are answerable!
Mr. Edison’s whole life has been devoted to training his mind to concentrated thinking. He will work for hours and days without food or sleep, and he can do this because he has so trained his mind that it shuts out everything excepting the specific problem before him.
Business is founded on thought. Optimism and enthusiasm are valuable in keeping up the morale of an organization—they are lubricants which help to overcome friction—but they cannot be the driving power, and they cannot substitute for well-thought-out business principles, any more than a machine will run just because it is well oiled. Power has to be transmitted before a wheel will turn. We give various names to the thought which has the power to turn the wheels. Sometimes we call it management. But there is another kind of management which is not based on thought and which is not management at all; for instance, there is the kind of management which operates solely on records. Records will guide thought, but they will not substitute for thought. Good management—that is, management with real thought behind it—does not bother trying to make its way by trickery, for it knows that fundamental honesty is the keystone of the arch of business. It knows that you will fail if you think more of matching competitors than of giving service, that you will fail if you put money or profits ahead of work, and that there is no reason why you should succeed if what you do does not benefit others.
This is not idealistic philosophy; it is the hardest kind of hard common sense. If you ask yourself why you are in business and can find no answer other than “I want to make money,” you will save money by getting out of business and going to work for someone, for you are in business without sufficient reason. A business which exists without a reason is due for an early death. The single reason for the existence of any business must be that it supplies a human need or want, and, if my experience is worth anything, a business which has this reason for its existence will be bound in the end to prosper if thought be put into it. Thought, not money, is the real business capital, and if you know absolutely that what you are doing is right, then you are bound to accomplish it in due season. I say this not because I read it somewhere in a book, but because I have lived it. For if there is any phase of adversity which our business has not met and beaten, I should like to know it. We chartered the present Firestone Tire & Rubber Company in 1900, making solid tires for carriage wheels. I had a capital of $45,000, which I had earned in a previous carriage-tire company. We had scarcely begun business before we were faced with a great patent suit, second, perhaps, only to the famous Selden patent suit. We had only a little factory with ten men, and I was general manager and sales manager and every other kind of manager. Our capital ran quickly out, and as our business grew, it had to be financed by bank loans and sales of stock. I not only had to sell the tires we made, but also the shares of stock to get the money to make more tires. For years I rarely met a man who seemed to have any money without trying to sell him stock. I sold it to officers of banks with which we did business, I sold it to the people from whom we bought our supplies, I sold it to our own employees, and I bought it myself whenever I could find a bank which would take it as collateral. We financed from hand to mouth, but steadily we grew, and we grew in the face of great tire companies who could have bought us out of their current bank balances.
I sold the stock in the absolute confidence that I was doing a favour to whoever bought it, and in that I was right. For instance, I induced an officer of a steel corporation with which we did business to take, in the first few years, stock to the value of $7,500. For some years he got nothing in return for his money; today his holdings have a market value of $900,000.
We grew from the little building we first bought to larger buildings, and for many years we could not increase our manufacturing capacity in pace with the orders that came in. We fought and won other great patent suits, the loss of any one of which would have wiped us out of existence. Our original ten employees grew to 17,000. We passed from the solid carriage tire to the various forms of automobile tires. Our sales went up to around a hundred million dollars a year, and our capacity from around forty tires a day to around forty thousand. We built up on the side a rim-making business which supplies half the manufacturers of passenger cars and trucks in the country. From only a few scattered salesmen, we grew to sixty-two factory branch houses, seventy-five warehouses, and thirty-six thousand dealers in the United States, and in addition we founded more than a hundred foreign branches and distributors. We applied Mr. Ford’s ideas of production and cut out more than half of the hand labour of making tires—which largely increased the average wage of the employees while reducing the price of tires to the consumers. We built a factory in Canada and a rubber mill in Singapore in the Straits Settlements, so that we might save waste in the transport of rubber; we built a thousand homes or more for our employees, and in the year 1919 we earned more than nine million dollars, and our total assets exceeded seventy million dollars, of which nearly one half was surplus. We had four dollars in current assets to every dollar of current liabilities.
We were sailing smoothly with the wind, and we were so strong that we thought nothing could harm us. We had all the bank credit we could possibly use. We dwelt on Easy Street and walked on velvet. Then, in the fall of 1920—not out of a clear sky but out of a sky which looked clear to us, for, in our prosperity, we had stopped thinking through—the tornado swept out, gripped us, and shook us. I was in Europe at the time. Rubber dropped from fifty-five cents to sixteen cents a pound, and with it crashed our tremendous inventories. We owed the banks nearly forty-four million dollars, and some of them wanted their money, and we had no money. I personally owed the banks several million dollars, with Firestone stock as collateral, for whenever I could buy any stock I bought it. I had put everything I earned into this stock, for I believe that a man is not truly in his business unless he has his all in it. The value of this stock had in a few days dropped below the amount of the loans it secured. Both the company’s fortune and my personal fortune were hanging out on the end of a limb which threatened at any moment to break. It was a time for quick thinking, but above all for thorough thinking, and in the excitement, everything made for taking action instead of taking thought. But first I took thought, and I took counsel, and then I took action, with the result that we reduced our bank loans twelve million dollars in a couple of months; we ranged up nearly all our banks so that they did everything to help us and nothing to hinder us; we reorganized the inside workings of our company, both in manufacturing and selling; we started to think again, and we carried on through the dullest years the tire industry has ever experienced, to such good purpose that by October 1924, we had paid off every dollar of bank indebtedness and were in far sounder condition than at any previous period. And now, although I date the foundation of the company historically from 1900, I regard those first twenty years only as a period of preparation for the real test of 1920. A business is not a business until it has been hardened by fire and water.
What we lost in the boom—what everyone lost—was the appraisal of values. It does not require any thought to do business in a period of rising prices, and we had gotten out of the way of thinking. Instead of comparing values, the continued rise in prices covered up our mistakes. And it took a great shock to bring us to our senses and make us again appraise values. Much of the thinking in business has to be along the lines of comparing values. If we make a change in manufacturing or in selling methods, will the added return pay the cost? This appraising operation in business is continuous. For instance, in 1920, when we began to compare expenditures and results in our office, we promptly discovered that instead of 1,500 office employees we actually needed only 300—or, in other words, we had 1,200 men performing operations of no value to us. We found an even worse situation in selling; in a period when no selling was necessary since people rushed in to buy, we had built up, because we had lost our sense of values, a most intricate organization that could not possibly pay its way. It was being paid for by rising prices and not by work.
If you employ a man, you appraise his production, and the value of that production to the company is his salary. As his production increases, so should you increase his salary. Keeping this in mind avoids the danger of underpayment or overpayment. One can apply the same rule to personal affairs; what you get out of your automobile in pleasure or in service is the value of the machine to you. If you can get a return of value for the upkeep and inevitable depreciation and that return is above the cost, then you can make money on the car. Otherwise, it will be a loss for you to own it.
Many of the values are intangible and cannot be put down on paper in terms of dollars and cents, but this is the point: if you can make a picture of a situation in your own mind, then you can make comparisons and relate values, even if you cannot express them. Some people call this vision, and we hear a deal about the necessity for vision. But vision, as I see it, is not a dreaming forward. It is a thinking through with the values ever in mind. For instance, I should not be exercising vision if I looked forward to a day when I should supply all the tires in the world. That would be just idle, profitless dreaming. In quite another class is thinking out ways and means to get a certain percentage of all the tires used and then relating prices and manufacturing schedules and so on to that end. It is perfectly possible to make an exact mental picture of what would be required to do a decided percentage of business—and if that picture be kept in mind, the decisions to carry it out can come quickly. Quick decisions that have not behind them a long train of thought are exceedingly dangerous. Personally, I do not want to have around me the kind of man who can give me an instant decision on anything I may bring up, for, if he has not had the opportunity to give the question serious thought, then he is only guessing. And I can do my own guessing!
In order to do any good-sized work, one has to build an organization of executives and of employees, and as a business grows, the task is to discover how many of the men will think and how many will just execute orders. There is plenty of room for both kinds of men; the man who only executes is extremely valuable, unless he happens to get into a position where thought is required. The army recognizes this; it not only does not expect the private to think, but actually punishes him for any thought that causes him not to obey orders to the letter—be they right or wrong. Thinking is not required all the way down the line in business. The difficulty is to pick out the men who can and will think and get them into the positions where thought is needed. For instance, a salesman can be a one-act man and still be a success. By “one-act” man, I mean a man who shows a great knowledge of his subject and is really impressive until you happen to get him off his exact line of talk. Then you find that his talk is only an act which he has mastered—that his cleverness is only the repeating of lines which someone else has written. When he has finished his act, he is through. The great trouble with this sort of man is that he may spring his whole act at the wrong time and in the wrong place!
Then one is frequently fooled by the glibness of failures. A man who is a first-class failure—who has had plenty of experience in failing—commonly will talk his head off. He will tell considerably more than he knows, while a thoughtful man will often be none too ready with his answers and usually will tell a little less than he knows. It is the affair of the head of a business to think and to plan broadly and then to select other men who can think and plan within their particular spheres, and finally to select men who can execute. And then, when you have made your selections of men, they are at the best only tentative, for only one out of every hundred men can stand the test of prosperity without losing his sense of values, and fewer still can face adversity without digging in.
This is a queer business of ours. It has changed mightily in twenty-five years. Once upon a time, we sold on mere style. Now we have to sell on service on what we can give a man for his money. And, further, we have to use as our principal raw materials two products which we cannot control and whose prices are continually shifting—that is, rubber and cotton. We have every problem of manufacturing which any business can have; also, we have every problem of selling, for competition is intense; we have seasonal peaks and valleys of demand; we have problems of finance and of forecasting markets, for our production could not, without great waste, meet the peak of demand. We have had one of the biggest booms in history, and also one of the biggest smashes. In short, we have had a little of everything which business can face—and a good deal of some things. But we are here and prospering. It has required some thinking through.