Ford vs. GM, Detroit, and Me

Ford vs. GM

Many believe that the greatest innovation introduced by Henry Ford and the American automobile industry at the turn of the 20th century was the mass-produced automobile. Some might [justifiably] argue that it was vertical-integration and the assembly line production system. Though laudable, these innovations—and the stories told about them—overshadow what is arguably the most impactful contributions that this industry made to the way we live and collaborate in modern society…

Consumer Credit.

Little known fact: In the early 1900s, the Ford Company introduced their Model T, the first automobile that was accessible to the common and was intended to achieve massive scale. Soon, other American automakers took notice of its resounding success and followed suit. As these companies ramped up sales of their automobiles, they faced a challenge to their growth: the fact that a large segment of would-be-buyers that, though eager and financially qualified, were unable to afford an upfront payment in cash.

The differing attempts by the Ford Motor Company and General Motors to address this challenge reflect both traditional financial services at the time and the advent of a disruption. GM believed the this new product required a new payment approach, and it offered loans to cover the balance between the cost of its automobile of how much they could pay. Ford, vehemently opposed to the idea of using debt to pay for cars, created a layaway program that furnished a car to the customer only after he had made enough deposits on the amount due.

Years and thousands of automobiles later, Ford lost this disagreement handily. GM would go on to institutionalize what we now call consumer credit, setting up a successful financing arm to offer this to its customers. Ford would eventually swallow its pride and adopt the same, after the spectacular failure of its layaway system (though layaway would continue to eek out a living in American department stores all the way into the early 2000s).

The simple act of offering a new way for consumers to access their automobiles was a ripple in the financial services universe that reverberated far beyond Detroit, Michigan. From this spawned the development of payment technology, financial products and industries, embedded lending [2.0, to Detroit’s 1.0] and the global credit and debit systems that define our modern economy. With the gift of hindsight, it is safe to say that Ford, GM, and the innovative approach to the “how” of their work redefined the way that individuals would transact and collaborate in the future.

Detroit

Had the impact of Ford vs. GM or the industry been limited to technology or financial services alone, it would already make a compelling story. However, this impact is far more reaching, and Detroit serves as a clinic of how transformative technological innovation can be on every aspect of a society’s life, for better or worse.

A flood of new, well-paid jobs in the automobile industry created a standard of living previously unattainable for a whole generation of working class people. It gave Detroit and the region a new-found national—even global—economic prominence. This prominence created an indelible mark on space and place in Detroit. It fueled an architectural renaissance, seen in the swift emergence of grand office buildings, public works projects, residences, museums, and more. Labor demands and resulting migration reconfigured the makeup of city neighborhoods, as migrants from across the country, particularly African American migrants from the American South, relocated to Detroit. Housing policy and urban development became an increasingly important mandate of the city government.

This prominence also reshaped politics in Detroit—and the rest of the nation— for years to come. The growth of big industry and its management class lead to the meteoric rise in influence of a key countervailing political force: the labor union. As the rank of autoworkers in Detroit swelled, so also did the negotiation power and political influence of the labor unions that represented them. Quickly, labor politics and the influence of the union, would became and would remain a fixture in US national politics in the decades after.

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As quickly as the auto industry built the city up, so also did it take it down. When the automobile industry moved to other regions of the US and the world, it left a scale of economic and social devastation in its wake unprecedented in the US, and from which the city of Detroit has taken decades [and counting] to rebound. Though it is impossible to attribute this emigration and its effect to the industry alone—national and global policies fundamentally reshaped the manufacturing landscape, labor power, and related industry incentives—it is equally impossible to scrub the industry’s role from the narrative.

Detroit in the 20th century is a “one-of-one” inspiring and cautionary tale, and there are likely no modern-day parallels to it (though San Francisco and the impact of the tech industry there might give it a run for its money!). For me, it represents a compelling example of the three Ps of technology: its unfathomable potential as a catalyst for human development, its power to define the social and economic livelihood of individuals, regions, countries, etc.…and the peril it presents if neither its context nor consequence are taken into account.

Me

Beyond Detroit’s story being an interesting narrative, why does it matter to me?

Detroit and the history of the automobile industry sits at the confluence of a number of key economic and social issues. These are many of the same issues that have defined the grand questions I find most interesting and the work I’ve pursued to date.

In the first stage of my career, I primarily focused on understanding and influencing social policy, with law and policy advocacy as my primary tools. I was eager to learn this across varying scopes, from hyper-localized policy and politics (s/o Pittsburgh, PA) to supranational policy (European Parliament). “Federal” policy protecting migrant rights in Europe and the US was the scale challenge that consumed me then.

Conscious that I lacked a strong understanding of the economic forces that often influenced social policy considerations, especially in complicated context like Greece during the Eurocrisis, I shifted my focus to what would become the second stage of my career: supporting economic development. Project finance, law, and economic development social programming were my primary tools of trade here. Developing energy infrastructure to address the electricity deficit in sub-Saharan Africa (Power Africa) was the scale challenge I tackled.

A serendipitous work experience at a South African VC firm led to the third and ongoing stage of my career: investing in technology companies. A summer well-spent there made me a strong believer that 1. micro-economic development, one business at a time, can be transformative for people and industries, and 2. technology is the most incredible catalyst for making great ideas achieve scale. When this realization hit, I could not look back.

Now, I dual-wield tools in both finance and company-building, seeking and supporting great ideas that have the potential to achieve tech-enabled scale and transform. Money is the ultimate facilitator of collaboration, within members of a society or across societies. This is why I view financial services as the essential “how” in our modern lives, as it helps us create, exchange, protect, and predict our collective and individual value.

I’m fortunate to have witnessed significant variance in the maturity of economies across the places I call home. In every context, its clear to me that good products need exceptional distribution to transform lives at scale. Therefore, I get most excited by creative products and companies, what creates customer delight, how to scale this delight, and how to enable frictionless access to these at the last mile. I’m working backwards in this value chain, spending my most recent years exploring innovation in access and distribution via tech and financial services. Ever curious, I’m eager to move earlier in the value chain and become more intimately involved in production of the “what” - where the creative meets commercial. More to come…

Ps. Many people have written exceptional accounts of the impact of the automobile industry on Detroit and its surrounding regions. If interested, I can provide you with a laundry list of these.