Henry Ford on Bootstrapping, Funding, & Going Public

Every Friday, I share juicy excerpts and commentary from awesome business books. I read ’em, so you don’t have to. (Just kidding. READ THE BOOKS. LEARNINGS!) That’s why I call it Biz Book Friday.


Last week, I squee’d all over how awesome Henry Ford’s autobiography is. And I offered running commentary to the highlights I had chosen.

This week, I thought I’d let a passage stand without commentary. It doesn’t need it.

Henry Ford on Bootstrapping, Funding, & Going Public:

A few pages, excerpted in order, with only one ramble bit skipped, directly from Henry Ford: My Life and Work…

The most surprising feature of business as it was conducted was the large attention given to finance and the small attention to service. That seemed to me to be reversing the natural process which is that the money should come as the result of work and not before the work…

The automobile business was not on what I would call an honest basis, to say nothing of being, from a manufacturing standpoint, on a scientific basis, but it was no worse than business in general. That was the period, it may be remembered, in which many corporations were being floated and financed. The bankers, who before then had confined themselves to the railroads, got into industry. My idea was then and still is that if a man did his work well, the price he would get for that work, the profits and all financial matters, would care for themselves and that a business ought to start small and build itself up and out of its earnings. If there are no earnings then that is a signal to the owner that he is wasting his time and does not belong in that business. I have never found it necessary to change those ideas, but I discovered that this simple formula of doing good work and getting paid for it was supposed to be slow for modern business. The plan at that time most in favor was to start off with the largest possible capitalization and then sell all the stock and all the bonds that could be sold. Whatever money happened to be left over after all the stock and bond-selling expenses and promoters, charges and all that, went grudgingly into the foundation of the business. A good business was not one that did good work and earned a fair profit. A good business was one that would give the opportunity for the floating of a large amount of stocks and bonds at high prices. It was the stocks and bonds, not the work, that mattered. I could not see how a new business or an old business could be expected to be able to charge into its product a great big bond interest and then sell the product at a fair price. I have never been able to see that.

I have never been able to understand on what theory the original investment of money can be charged against a business. Those men in business who call themselves financiers say that money is “worth” 6 per cent, or 5 per cent, or some other per cent, and that if a business has one hundred thousand dollars invested in it, the man who made the investment is entitled to charge an interest payment on the money, because, if instead of putting that money into the business he had put it into a savings bank or into certain securities, he could have a certain fixed return. Therefore they say that a proper charge against the operating expenses of a business is the interest on this money. This idea is at the root of many business failures and most service failures. Money is not worth a particular amount. As money it is not worth anything, for it will do nothing of itself. The only use of money is to buy tools to work with or the product of tools. Therefore money is worth what it will help you to produce or buy and no more.

If a man thinks that his money will earn 5 per cent, or 6 per cent, he ought to place it where he can get that return, but money placed in a business is not a charge on the business—or, rather, should not be. It ceases to be money and becomes, or should become, an engine of production, and it is therefore worth what it produces—and not a fixed sum according to some scale that has no bearing upon the particular business in which the money has been placed. Any return should come after it has produced, not before.

Business men believed that you could do anything by “financing” it. If it did not go through on the first financing then the idea was to “refinance.” The process of “refinancing” was simply the game of sending good money after bad. In the majority of cases the need of refinancing arises from bad management, and the effect of refinancing is simply to pay the poor managers to keep up their bad management a little longer. It is merely a postponement of the day of judgment. This makeshift of refinancing is a device of speculative financiers. Their money is no good to them unless they can connect it up with a place where real work is being done, and that they cannot do unless, somehow, that place is poorly managed. Thus, the speculative financiers delude themselves that they are putting their money out to use. They are not; they are putting it out to waste.

I determined absolutely that never would I join a company in which finance came before the work or in which bankers or financiers had a part. And further that, if there were no way to get started in the kind of business that I thought could be managed in the interest of the public, then I simply would not get started at all. For my own short experience, together with what I saw going on around me, was quite enough proof that business as a mere money-making game was not worth giving much thought to and was distinctly no place for a man who wanted to accomplish anything. Also it did not seem to me to be the way to make money. I have yet to have it demonstrated that it is the way. For the only foundation of real business is service.

Sounds pretty familiar, doesn’t it?

Except for the interest rates being so high… and the fact that VCs expect 10x return and not 5%, Ford puts his finger right on it and he could be writing today, about what we do.

Either Henry Ford is a time-traveling super startup spy… or nothing ever fucking changes, just every generation believes it came up with something new.

You can guess which scenario I’m putting my money on:

There is no “New New New Economy.” Same shit, different century.

Which is why you should download Henry Ford: My Life and Work now — for free! because it’s so old! — and read the crap out of it.

Get my next bootstrappy gettin-shit-done essay delivered straight to your inbox. (And be first in line for tickets & discounts.) Drop your name in the box!


  1. Jim Gay

    Henry Ford’s big mistake here is that he didn’t understand that you can give it away for free and make up for it in volume! That’s why Ford Motor Co. was never a successful business.

  2. Gk Parish-Philp

    Absolutely, completely, 1000% true. The investment bankers who hosed the FB IPO and the railroad barons of 150 years ago are in fact the same people. It is possible, though very, very difficult to find investors who actually understand the healthy purpose and role of capital. Thanks for sharing this!

    • Amy

      Excellent point. Although at least after the railroad barons were through with us all, we had railways across the country. What exactly does FB leave us if it fails?

      • Drew

        … millions of hard drives full of photos in a proprietary format!

      • Brent

        Enough social data to uncover knowledge of anthropology we could never have conceived.

  3. Justin Jackson

    Amy, this is brilliant. I can’t believe this was written in the 1920’s. What Ford describes here is eerily similar to the current madness in Silicon Valley.

  4. Daniel

    The best businesses are based on service not capital.

    Investors miss out on the best businesses because the best businesses don’t need their money.

    If I think my business is limited by money, then I’m probably thinking about the business wrong.

  5. John Broughton

    Hi Amy,

    Thanks for finding this highly relevant excerpt.

    I thought you might find the work of Carlota Perez very informative. It speaks directly to these kinds of behaviours, shows us how and why these cycles occur, and how the hell we get to move on to better things (not that that will be easy).


    That is a short piece introducing her ideas, the links to her own work at the bottom of the post are probably where you should spend your time (if you are sufficiently interested, of course).


  6. sojourner

    Thank you for this. I was floored by how prescient his ideas are. And how much they apply today.

    And then I read that this was available for free. Duly downloaded. Thank you!!

  7. Keith Jacobs

    Great find, Amy! I’ve never thought to look at traditional businesspeople and view their lens through the world of small-business software startups before, but I’ll bet you’d find a bunch of similar ideas from Warren Buffett, Bill Gates, and maybe even Jack Welch. You should start a Nothingeffingchanges.com blog and get Ron Perlman to record your first podcast: “Business. Business never changes.”


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