Thursday, October 13, 2011

1910s: Early Auto Industry

Each Labor Day weekend I go to Auburn, Indiana for a classic car festival, including a trip to the Auburn Cord Dusenberg Museum that tells the story of automobile manufacturing in Indiana in the first decades of the Twentieth Century. I am always fascinated by the hundreds of small car companies that were founded by tinkering mechanics that added engines to carriages, or by an enterprising businessman to assemble and market autos made entirely from acquired parts.

These were true start up companies at the infancy stages of an industry, with the same as we are seeing today in technology. Many small companies enter the market with an incremental innovation or with access to a new piece of the market. Many of these companies quickly fail, but a few catch enough lightning for short-term success. Then consolidation begins, and access and control of capital becomes an equally important factor to pure innovation and operations.

Many of these pioneer automakers only produced a handful or even just one car under its own brand before being lost to history. The ones that have survived today, the Buick, Ford, Chevrolets, Chrysler, are the result of both a great vision and effort of their founders as much as pure fortune of being in the right place at the right time. Pelfrey's Billy, Alfred, and General Motors is a fascinating story of how two gentlemen had the right vision while being at the right place and time.

While other pioneers, especially Ford, were successful building scale from initial concepts, this story shows how Billy Durant's path to consolidate different brands being the first to create economies of capital gave GM the infrastructure and competitive advantage to quickly emerge as the early, dominant player in the industry. But GM's legacy was only solidified, the author argues, because Durant was succeeded by Alfred Sloan who tranformed Durant's conglomeration into a single-functioning company with economies of scale that could continue to compete and grow.

While even now we are seeing companies take a competitive advantage to grow to a dominant position and then later lose when it cannot adapt, the story of GM's early generations shows the rare company that is able to radically evolve. In recent years we have seen IBM reinvent itself after Microsoft's rise, and then Microsoft's struggle to change.

This book was great after reading the stories of the industrial revolution titans taking advantage of innovations and government trying to adapt to keep up with a rapidly changing country. The rise of the auto industry expands upon these trends resulting in stories of average born but industrious individuals competing and building national businesses. The true American story of the Twentieth Century was born.

Pelfry's book is a really fun read, 5/5 stars. It was written for a General Motors anniversary and maybe is a little too bias toward the company legacy, especially compared to Ford, but I didn't care here and the stories of the various characters and ventures were well researched and told.

(Read August 2011)

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