Transcription
You know, Henry Ford, China's laws on wages and purchasing, and India's jump from poverty to global economic dominance all have one key thing in common. Their case studies in how productivity, wages, and demand can pull an entire group of people from poverty to middle class. A country doing this is one thing, but one person, well, that's a whole different ballgame. And the reason you can listen to this while driving in your car on your way to work, gym, or your favorite restaurant is because one man made an insane bet that everyone else was sure would fail. And his bet changed the course of human history. Welcome to Alux, the place where future billionaires come to get inspired. You don't have to serve the rich to become rich.
If we had to sum up Henry Ford's entire contribution to the world as we know it, well, that's the sentence we would go with, which seems slightly off track when you're talking about the man who created the first mass-consumed car. But this is the belief that fueled his desperate need to make cars for everyone, even those who couldn't afford it yet. The strategy was simple: If more people could buy your product, you'll make more money. Except Ford had two big problems getting in the way. First of all, at the time, wages were so low only the rich could afford to pay for anything that wasn't basic food, clothing, or shelter. And secondly, production costs were so high that even if wages tripled for everyone, they still wouldn't be able to afford to buy a car.
To him, the solution was simple: Increase the wages and make production costs much cheaper. So, tackling these solutions would be no small feat, right? But they were far from his biggest challenge. We almost didn't have mass-produced cars because the elites and lawmakers didn't believe that poor people would ever want one. Saying that Henry Ford reshaped the structure of industrial capitalism sounds kind of dramatic, especially if your knowledge starts and ends with him building cars. But it is the truth. Okay. Before he came along, companies made goods and products for wealthy people. Workers were never seen as consumers. People basically clutched their pearls thinking about it. It simply wouldn't do because workers were just labor costs and that had to be minimized as much as possible. But Ford, he changed that system.
You see, wealthy elites and lawmakers didn't consider working-class people as normal people with wants and desires. It sounds ridiculous now, right? But this was the late 1800s, so they had two key reasons for thinking this way. On the one hand, cars did not start off as something practical or useful. They were a status symbol and rich men's toys. The rich weren't using cars to get from point A to point B. They weren't reliable or powerful enough for that. So, it was purely a leisure activity. You spend the day taking a fancy ride through the city or countryside, kind of like you would go on a horseback ride as an activity if you were rich, not to actually get somewhere. And on the other hand, working-class families tend to live close to their jobs. They didn't travel very far and had no concept of personal transport as freedom. They got around with public transportation, by horse, street cars, or walking. And their lives and routines were organized around that. So manufacturers believed that even if cars became cheaper, poor people simply wouldn't buy them. But Henry Ford knew that wasn't true.
He'd grown up poor himself. He was born to a family of farmers, and not the rich kind. His family was a small family farm in rural Michigan. His father expected him to take over the farm, but Ford had other plans. From a young age, he was curious about mechanics. He would dismantle and rebuild watches and farm equipment. It's like he spoke the language of inanimate objects or something. He didn't have any formal education, but he was undeniably talented. And once people saw this, they couldn't help but hire him. That's how he became a machinist apprentice in Detroit when he was still in his teens. And how he eventually became chief engineer at the Edison Illuminating Company. That's where he built the first gasoline-powered car, the quadricycle.
Now, this was during a time when everyone was traveling with horse-drawn carriages, trains, and steamboats. Transportation was designed to follow a path that was already decided, and only the wealthy got to veer off that path and go to different places. Ford knew that just because you weren't in the upper-middle class didn't mean you didn't desire freedom and fun. He saw firsthand the desire that follows access. Once you're actually able to get something, you start to imagine your life around it and then you want it more. Without access, your imagination has to make too many leaps to imagine how your life would be like with it. It was never just about a car. He brought movement and freedom to the working class, and that changed everything for them.
But, you know, it was far from smooth sailing to get there because for the first few years, the people who doubted Ford's vision, they were proved right. His first car company, the Detroit Automobile Company, flopped within 2 years. The cars kept breaking down and they cost a fortune to build. His investors lost money and he lost his reputation. Before he could convince people to buy in again, he had to repair his reputation. And so he built a car, entered a 10-mile race, and won, beating the favorite at the time. The win gave him the attention and respect he needed, and most importantly, it got investors interested again. And you know, there's truly so much involved in building a business and a following. But you don't have to go on this track all by yourself, okay? We built the Alux app exactly for people like you. People who want to bring their entrepreneurial dreams to life. We've helped thousands of people on their journeys. We've even helped mint a few fresh millionaires, and we would love for you to join their ranks. So, if you download the app and scan this QR code, you'll get 25% off your membership.
But back to today's topic, shall we? So, his next business, the Henry Ford Company, only lasted a year. He had constant fights with investors because he was focused on racing, not production. So, he walks out. His next venture finally works out, where it's the Ford Motor Company and his first major success is the Model A car. Five years later, he launched the Model T. And that's exactly what he envisioned: Affordable, reliable, and easy to repair. Behind the scenes, though, everything was still a mess. You see, Ford insisted on putting all profits back into the business so it could expand. Today, this is a huge part of building a business. But back then, you put in just enough to keep production going and you paid dividends to your shareholders. But Ford, he refused to do this. He basically ran off and held the money hostage, and shareholders lost their minds.
The Dodge brothers were early investors in Ford and they owned 10% of the company. In 1916 alone, the company made over $60 million, about $1.7 billion today. Ford announced he would stop paying shareholders and use that money to build a massive new manufacturing plant. It's, you know, it's kind of funny to imagine all of these owners already planning what they're going to do with all their riches, only to hear that the man in charge has no intention of giving it to them. The Dodge brothers filed a lawsuit and argued that Ford had a legal duty to act in the financial interest of shareholders and not just his own vision. Three years later, the court ruled in their favor and forced Ford to pay the dividends. But Ford wasn't just going to take that one on the chin. No, he decided to buy out all of the minority shareholders through a secret backdoor deal. He set up a new company and told everyone he would be leaving the old one. People panicked and it forced a mass selloff, and he swooped in and bought up their shares, gaining 100% ownership of his company.
Everything he did with his company went against how the world worked back then. He refused to pay dividends and announced he would reinvest profits into expanding the business. He was sued for this. He offered a $5 a day wage, which was super high for assembly workers. Economists called it suicidal and said it would destroy profit margins. He chopped up the process of building into tiny steps and hired regular unskilled workers. Experts said this would lead to bad quality and mistakes. Oh, and of course, they all believed that poor people wouldn't want, nor could they ever afford cars. It was just for the rich. Better to keep it that way.
Now, can you think of anything you believe might happen in the future that everyone else doesn't think would happen? Like, do you think that AI companions will replace human relationships? Or do you think that some countries will break off into network states ruled by tech giants instead of democratic governments? Or maybe a system where governments pay citizens not to work. That way they can control labor supply, especially in countries where robots or AI dominate production. You know, it's really hard to imagine these scenarios and get a feel for where we're headed. We've been wrong so many times before. We thought we'd have flying cars, that we'd already have colonies on Mars or a cure for cancer. Except we only have more information on how difficult it is to make these things happen. And we have a whole other load of things that we don't even think about. This is the climate that Henry Ford was up against. So before you go thinking that you would obviously have acted differently to everyone else, put your mind into that time frame. It was a risky, crazy bet on every front and nobody believed it would come true.
Our biggest mistake, and one that the world continues to make over and over again right now, is that we trust experts maybe a little bit too much. Experts can be out of touch, but they're loud and confident, so all we can hear is the things that they're saying making sense. Ford flipped that model. They all knew his moving assembly line brought down production costs. He cut the time to build a Model T from 12 hours to just 90 minutes when he introduced the assembly line. That process with small, repetitive tasks that unskilled workers could do quickly meant his employees needed less training. His company needed fewer workers and they were building way more cars. Not to mention the cars were much cheaper than everything else on the market. And by paying his workers double what everybody else paid, he gave them an opportunity to spend instead of just barely getting by. He paid his employees enough to make them customers, too.
It's hard to imagine now, but workers were not always consumers. Only the rich consumed. The lower classes just barely survived. He created a self-reinforcing system which jumpstarted the growth of the American middle class and kicked off mass consumerism. When millions of people spend money like this, it creates a consumer boom. It's what happened in post-World War II America when the GI Bill gave veterans money and savings were high from wartime rationing. And with China's middle-class expansion when the government suppressed consumption and wages for 30 years and then raised it, urbanized 500 million plus people and gave them access to credit. And with India, a country that was too poor and rural for traditional infrastructure to scale. But once cheap phones, mobile data, and digital payments were possible, the cost of access collapsed and the economy exploded. This suppression of access, whether it's done intentionally or not, creates desire and demand that's just waiting to escape once you open the doors. Henry Ford was the first person in modern history to recognize this desire banging on the door. And he was just one man from a small farming family.
Once those floodgates open up, people who thought they would never have a chance for wealth and security in their lifetime, they can suddenly afford to buy homes, radios, and clothes. That in turn creates new markets and jobs in other industries. And that is how you give a warm welcome to mass consumerism. Time and time again, we see this economic system forget about working-class people. There'll be a boom like there was just after Ford's vision changed the economy and everyone will run to target working-class people and that will create a middle class and then we'll see the money starting to siphon toward the top of the chain again and we lose the middle class, which is kind of what's happening right now. Although the access to massive amounts of debt is still allowing people to look good while actually sitting below working-class level. But we've seen this before, and the cycle of a poor person who believes that everyone should have access to the luxuries the elite have will move the needle again. Sam Walton did it with Walmart in the 1960s when his ultra-low prices and tight supply chain control allowed him to focus on rural working-class America, a demographic that was ignored by other retailers at the time. Ray Kroc also did it with McDonald's when he created the fast food assembly line. McDonald's wasn't gourmet, but it was accessible. And really, that's the fundamental need of every consumer.
It's easy to forget that, right? When your business books and entrepreneur podcasts are bombarding you with advice about finding a niche, solving a problem, and fulfilling a need, you can lose your head in figuring out the perfect product. When really, all people need is something they can actually access. The ripple effect of this access is beyond what anyone could ever dream of. Like India's economic boom is because of access. And the first point of access started with Lei Jun, Xiaomi, the low-cost Chinese-made smartphone that gave young consumers in India access to the world. This allowed them to jump years ahead of the rest of the world's digital life. Visit India and China and you'll see how everything is done through one app on your phone: your rental application, paying your rent, paying your other bills, sending your friends money, everything. And this access exists because Lei Jun had access to a workforce that could build phones quickly and cheaply. And that happened because China spent 30 years becoming the world's production factory. Just like the reason you, me, and 90% of the uh wealthy world can drive around the country in cars is because Henry Ford knew that people just need an opportunity.
We've seen time and time again that aligning your product, price, and wages can create an explosive and sustainable business model. One that's got the potential to change the course of humanity's future. But it still is a risky bet because in every case you'll be betting on a loop working perfectly, and that is rare. Selling to the masses gives you thin margins and everything depends on scale and speed. If you can't reach millions cheaply and quickly, you'll go broke before you go big. It happened with Jet.com when they tried to compete with Amazon. They offered ultra-low prices through dynamic pricing and their strategy was based on losing money upfront, scaling quickly, and making money later. But they burnt through cash too fast and couldn't scale fast enough. By 2020, they were shut down. Better Place, they tried it, too. They wanted to create mass electric car adoption through battery swapping stations. They built infrastructure for EV charging before EV cars got big. $900 million later and they hadn't sold a fraction of what their goal was and by 2013 they were gone. There's also the trap of focusing on innovating the process and not really the product. There's a chance your product might suck and consumers won't care how efficient you are if your product doesn't work for them. That's exactly what happened with Segway. They tried to revolutionize personal transport but ignored the fact there was no real purpose for the product. Google Glass that came, went, and took an estimated $1 billion down the drain with it. The product was awkward, looked weird, and made people feel like a lonely alien. For the process to win, it has to be paired with value that people actually want. And that alignment of productivity, wages, and demand that we mentioned earlier, well, it's not like they're naturally sinking up. The balance is fragile and rare. Japan did it with Samsung and Hyundai. Scandinavia did it with public infrastructure and education. Zara did it with their design to store in under three weeks system.
So who will be next? Because the world is due for another middle-class revolution. Okay? And AI hardware, elder care services, and modular housing are industries that are brimming with potential. And our question to you is, will you watch it happen or will you be a part of driving that change? If you voted option two, you're ready for the Alux app. Here's that QR code again, complete with a discount, courses, and collections that will help you achieve your dreams. And if you like this content, then check out our video, Buy, Borrow, Die, the free money loophole, available only for the rich. I'll see you there. Until next time, my friend, take care.