WALTER ISAACSON: It’s the late 1980s, and a young man with short, brown hair and smiling eyes had just left his home in South Africa. He was flying across the globe to pursue an undergraduate degree at Queen’s University in Kingston, Ontario, Canada. One night, the young man decides to go to a party.
He’s not what you might call a social animal. He grew up immersing himself in science fiction, reading every sci-fi book he could get his hands on. He was a loner– had few friends. His experience with members of the opposite sex was limited.
But on this night, there’s a girl at the party that the young man is clearly smitten with. He summons the courage and sits down beside her on the couch.
MAN 1: Hi, I’m Elon.
WALTER ISAACSON: –he says. And then he pops the question that is clearly at the top of his mind.
MAN 1: Have you been thinking about electric cars?
WALTER ISAACSON: –he asks.
MAN 1: I’ve been thinking about electric cars.
WALTER ISAACSON: It was probably one of the nerdiest pick-up lines ever uttered. But it gives us a window into the kind of single-minded intensity and willingness to think outside the box that most disruptors share.
The Elon in the story is, of course, Elon Musk, the CEO and chairman of Tesla Motors, and the man currently responsible for perhaps what is the greatest disruption the automotive industry has seen in the last hundred years. We could be on the cusp of the most revolutionary change to the automobile since another young man with big dreams– a farmer’s son from Dearborn, Michigan– changed the world with one big idea– an idea that he, too, would never give up on, no matter how great the obstacles.
I’m Walter Isaacson, and you’re listening to Trailblazers, an original podcast from Dell Technologies.
MAN 2: The automobile has brought with a new way of life.
MAN 3: I am your permit– your permission to drive.
MAN 4: You’ve got to drive like everybody else was crazy.
MAN 5: Hey, you– why don’t you pay attention where you’re going?
MAN 6: Ever hear of tailgating, Joe?
MAN 7: Sure. That’s another name for bumper-riding.
WALTER ISAACSON: Henry Ford is so closely associated with the birth of the automobile industry that it’s easy to forget that there were cars chugging around the United States and parts of Europe for about a decade before Ford built his first car– the model A in 1903. There were a lot of people anxious to get involved in this nascent industry. You could find automobile startups in places like Buffalo, Cleveland, and Indianapolis.
And like the dotcom boom of 20 years ago, you could also find investors, eager to throw money at anyone with an idea for an automobile business that looked like it might pan out. And Henry Ford had one big idea– make a car that just about anyone could afford. His competitors weren’t really interested in doing that.
They were selling cars for between $1,500 and $3,500 at a time when the average annual wage was under $500. They were going to make money on margins, not on volume. They simply did not believe that there was a mass market for cars in the United States at that time. And according to Matt Anderson, the curator of transportation at the Henry Ford Museum in Dearborn, Michigan, there were very good reasons for them to think that way. [MUSIC PLAYING]
MATT ANDERSON: When you think of the US transportation scene in the 1890s, we really had no need, quote unquote, for automobiles. You could certainly get around in the cities via a streetcar—
–or even on foot fairly well, or by bicycle.
Bicycles were really all the rage at that time. And in rural areas, it wasn’t all that difficult to use a horse—
–and wagon to get to the nearest railhead to send things out by railroad. So cars were really not seen as anything more than a novelty. But I think Ford realized fairly early on that, know wait a minute– there are far more people who are in the middle and even lower class than there are in the upper class. So if someone can build a quality car, but at an affordable price, there’s this vast untapped market, just waiting to be catered to. WALTER ISAACSON: So Henry Ford set about trying to make his dream come true. There were many technological challenges to overcome, and progress was slow. The Model A was followed by the Model B, and then C, onward through the alphabet. The model N showed some promise when it was released in 1906. It handled well, and it was relatively inexpensive.
But it had a wooden frame, was not very sturdy, and was too small for a family car. But Ford knew he was heading in the right direction. So he gathered a team of his smartest and most trusted lieutenants, put them in a room in his factory, kept what he was doing secret from everyone else in the company, and spent two years working out every design challenge of the car that was going to become the Model T.
The release of the Model T Ford in the fall of 1908 was one of the seminal events in the history of American industry. The repercussions are still being felt today. It not only disrupted the automobile industry, but it changed our culture, remade our cities, and launched a company that, within a few years, would achieve world domination.
Henry Ford called it, quote, the universal car.
MAN 8: There’s one car that takes you anywhere you want to go– the Model T.
WALTER ISAACSON: A car for the masses, made out of steel alloy, called vanadium, the Model T was sturdy enough to take on the roughest roads, and large enough to transport an entire family. But it weighed just 1,200 pounds– roughly 500 pounds less than other cars on the market. It was cheaper to produce and cheaper to buy.
A Model T in 1908 cost $850, less than half the price of its nearest competition.
MAN 8: No longer a luxury. Almost everyone can afford to own a car.
WALTER ISAACSON: More than 10,000 were sold in the first year– 15 million by the mid-1920s, when more than half the automobiles driven in the world were Model Ts. But turning out cars at that scale couldn’t be done by using old production methods. Henry Ford’s second great disruption came when he replaced the old stationary method of assembling cars, where workers stood around and built the car as a team, with a moving assembly line, where every worker had only one task.
MATT ANDERSON: There’s a basically a waist-high table. And workers will put these pieces together one piece at a time, and slide them on to the next person. So it’s all kind of driven by hand. It doesn’t take much of a leap to realize, well, what if we chain drove this line– put them on a moving platform? Then not only can we efficiently move the parts from one worker to the other, we can also control the rate at which the work is being done. So it speeds up the slow workers, and slows down the fast workers.
WALTER ISAACSON: By 1914, Ford’s assembly line was churning out Model Ts at an extraordinary rate. Under the old production method, it used to take about 12 hours to assemble a single car. Now, it could be done in 90 minutes. Ford was producing 300,000 cars a year with 13,000 employees. The combined workforce of all other American car companies was producing roughly the same number of cars with 66,000 employees.
MAN 9: A car comes off the end of the line every 10 seconds.
WALTER ISAACSON: But Ford workers weren’t happy with the change. They had always considered themselves to be skilled craftsmen. Now, they were being treated as replaceable cogs in a giant, moving machine. Many of them simply stopped coming to work. And it was hard to recruit new workers to replace the old ones.
So Henry Ford came up with a radical new idea– his third, and, perhaps, most far-reaching disruption. In January 1914, he announced that he would more than double his workers’ wages, from roughly $2.30 a day to the previously unheard of sum of $5 a day. The plan worked. People were now lining up to get a job with Ford.
That assembly line suddenly seemed not so unbearable. The $5 a day plan solved Ford’s labor problem, and brought him some favorable publicity. It also had a profound impact on the American economy and the American way of life.
MATT ANDERSON: That was an added benefit, that, probably, Ford realized at the outset. If you start paying people more money, then, all of a sudden, you’ve built a whole new base of customers. Now, your workers can afford to buy the product. And it’s sometimes said that the Highland Park plant and that assembly line was the mainspring of the 20th century.
That’s where it really began, not in terms of the years, but in terms of how we think of the 20th century, with this expanding booming middle class. A lot of it was born out of that $5 wage at the Model T plant. And now, folks who, before, could never have dreamed of owning an automobile are able to do that and so much more. It becomes within their reach.
WALTER ISAACSON: By 1920, Henry Ford had completely reinvented the automobile industry. He was producing an incredibly popular, affordable mass market car, using a movable assembly line and paying his workers a living wage to work on that line. The automobile was no longer a plaything for the wealthy, but an integral part of America’s life in cities and on the farm.
He was hailed as a genius– an American folk hero. The problem was, he started to believe his own press clippings. He forgot one important lesson. Even a disruptor needs to keep on disrupting.
MATT ANDERSON: Ford himself was a victim of the Model T’s success. He had so much tied up in that car, and, of course, it had done so much for him that he was exceptionally reluctant to kind of let it go. They were still building these in the mid-1920s, by which point what was state of the art in 1908 and 1909 was now a technological dinosaur. And Ford’s sales kept falling every year.
All he could do to try and slow those drops was to cut the price on the Model T. And it’s worth pointing out, when the Model T is introduced in 1908, it cost $850. But between all of the efficiencies of the assembly line, and then these cuts to kind of keep it selling into the 1920s, by the early 20s, you could buy a two-seater Model T for $260. It’s a tremendous drop in the price.
But you get to a point where you can’t cut the cost any further. At one point, they were making as little as $2 profit on car. And that’s just not a viable business plan.
WALTER ISAACSON: Never again would one car or one company or one man so completely dominate the automobile industry. But it wouldn’t be for lack of trying. There have been other great disruptors. In 1925, Walter Chrysler had the idea to put the brakes on all four wheels instead of on the transmission, which is where it was on the Model T. This allowed the Chrysler to safely achieve speeds of up to 60 miles an hour.
But when you think about the auto industry over the past 90 years, what stands out is not how much has changed, but how much has stayed the same. Compared to just about any industry you care to name, the automobile industry has been relatively disruption free. There have, of course, been times of considerable turmoil, when the industry itself felt under attack, like in the 1960s, when a young consumer advocate named Ralph Nader called out the big three auto companies for not paying enough attention to safety. That led to some important changes, like mandatory seatbelts, and more attention paid to engineering for safety rather than for style. A few years later, in the mid 1970s, Americans confronted gas shortages and rising prices at the pumps, as Middle Eastern oil producers cut back on their production. For the first time, consumers started to pay attention to gas mileage when choosing which car to buy. American car companies were ill prepared for the switch.
They had continued to produce oversized gas guzzlers. Meanwhile, the Japanese and Germans were marketing smaller, more fuel-efficient cars. And the big three American companies saw their market share begin to erode. American cars would never again dominate the industry as they had before.
And then there was the financial crisis of 2008, when millions of Americans lost their homes and had no money to spend on buying cars. Government bailouts were needed to save General Motors and Chrysler from bankruptcy. But through it all, the vast majority of cars continue to run on gas-fueled internal combustion engines, continue to be produced in giant factories– even though those assembly lines are now more likely to be staffed by robots than by people. And they continue to be sold through dealerships connected to a relatively small number of giant companies with global reach.
In other words, it’s an industry that Henry Ford would probably not have too much trouble recognizing. But not for long. Massive disruption has finally caught up with the automobile industry. 10 years from now, we may not be able to recognize either the car or the industry that produces it. And one of the men at the forefront of this great disruption is Elon Musk. The man who spent his teenage years thinking about electric cars is now reimagining the car in ways not seen since Henry Ford and the Model T.
ASHLEE VANCE: Elon’s not short on ego, and he does usually think he’s the smartest person in the room, if not the smartest person in any room. And he has this incredible self-belief and self-reliance that if he charges after something, he will conquer it.
WALTER ISAACSON: That’s technology writer Ashlee Vance, author of the book Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future. The challenge that Musk set out to conquer with his first electric car in 2008 was the same one that had bedeviled many very smart people over the past 100 years, including Henry Ford, who had experimented with electric cars with his friend Thomas Edison.
But neither Ford nor Edison nor anyone else could figure out a way to build a battery big enough to allow the car to travel long distances without recharging, but still be light enough so the car would be able to match the speed and power of a gas-fueled engine.
ASHLEE VANCE: Different companies had taken stabs at electric cars. They were sort of half-hearted, historically. It was all about mileage. And so you would make these very conventional cars that were not attractive. And it was really just about trying to get the most miles per gallon, or miles per charge, in this case.
Elon turned this idea on its head, in some ways. He decided to try and drum up interest in electric cars by making– Tesla’s very first car was that it was called the Roadster, and it was this very sexy sports car that was based on the Lotus Elise chassis. And so what he wanted to do was generate interest in this type of vehicle by making something that was super fast and was actually this object of desire.
WALTER ISAACSON: The Tesla Roadster was sleek and sexy. It was all electric. And it could go 230 miles on a single charge. No previous electric car had achieved that kind of range. But it cost more than $100,000 to own, and only about 2,500 were ever built before Tesla shut down production in 2012.
The company wanted to concentrate on its next car– a full-sized luxury sedan called the Model S. The Model S was universally hailed as not just the best electric car ever produced, but possibly one of the best cars of any kind. But it was not a car for the masses. It cost about the same as a high-end Mercedes or BMW, and only about 150,000 have been produced over the past five years.
But it was never Elon Musk’s dream to produce electric cars for the pleasure of the global elite. Those cars were a means to much larger end.
Musk believes the fossil fuel era is coming to an end. The electric car will be a critical weapon in the fight against climate change. But for that to happen, he would need to develop a car that would revolutionize the industry in the same way the Model T did 100 years earlier. It would have to be a car that the average buyer could afford, and would be widely available. The company would have to figure out how to manufacture not thousands of them, but hundreds of thousands every year. The car was called the Model 3.
The Model 3 began rolling off Tesla’s California assembly line in August 2017. It is priced at around $35,000 in the US, and more than 400,000 people have already put down deposits of $1,000 to insure they’ll be among the first to own one.
But building cars is hard, and Tesla has never built them at this scale before. Elon Musk says he expects to be churning out 10,000 Model 3’s a week by next year. But other companies with far more experience at mass production are betting he won’t be able to do that. If Tesla can deliver the Model 3 on time, those potential customers might start looking elsewhere.
ASHLEY VANCE: This is a huge test for Tesla. Can they become what I would consider a real automaker, pumping out cars on a volume similar to something like a BMW or a Mercedes? So right now, they’re clearly the mindshare leaders in electric car. They have this aura around them, part of which comes from Elon, and part of which just comes from the company.
And so Tesla has this moment where you could compare it to something like the iPhone, where this product comes out and the competitors are going to respond. And you want to sort of have as much time to yourself as possible where you have this unique product. We see companies like BMW, Audi, Mercedes– pretty much every automaker– now trying to come up with an electric car that’s a response to Tesla.
And so they clearly have manufacturing advantages over Tesla. The question is, can they think in the same way that Tesla does about software and about advancing technology? And so it’s kind of a race to see who can deliver this perfect car first.
WALTER ISAACSON: One way of looking at this race to the future between the upstart Tesla and the legacy car companies is to see it as a potentially historic shift in the center of power of the automobile industry, away from Detroit, where it’s resided since the days of Henry Ford, to Silicon Valley. Ashlee Vance believes that today’s cars are essentially evolving into computers on wheels, with software becoming more important than horsepower. This is not a world that plays well to the automakers’ traditional strengths.
ASHLEE VANCE: You know, I live in Silicon Valley, and I could have the Silicon Valley bias. But historically, I’ve seen this play out in so many different industries. It is really hard to develop good software. And that is the one thing that Silicon Valley is really good at. The more something looks like a computer, the better Silicon Valley tends to do.
WALTER ISAACSON: And that’s precisely why Ashley Vance believes that Detroit may wind up paying a big price for being too slow to respond to the challenge posed by Elon Musk and his Model 3.
ASHLEY VANCE: I believe that Tesla, if it can survive this Model 3 launch and emerge as a profitable company, you know it would be the first successful car startup since 1925, which is when Chrysler appeared on the scene.
WALTER ISAACSON: The challenge posed by Tesla’s Model 3, as critical as it is, is just one of the problems keeping auto executives up at night these days. An even bigger potential disruption is just around the corner. In fact, it’s already arrived on the streets of San Francisco, Pittsburgh, and several other American cities.
They are self-driving or autonomous cars. And they may well be the ultimate disrupter, not just for the auto industry, but for just about every aspect of our lives, and an area where traditional automaker kings like Ford made come back swinging. [MUSIC PLAYING] MAN 10: And now, we see an enlarged section of 1960s Express Motorway. Along the ledge of this beautiful precipice, traffic moves at unreduced rates of speed. Curved sides assist the driver in keeping his car within the proper lane under all circumstances.
WALTER ISAACSON: The idea of cars that could drive themselves has been around for a long time. In this video, produced by General Motors for the 1939 World’s Fair, viewers were asked to look ahead to the year 1960. Drivers would still have their hands on the wheel, but their cars would be kept a safe distance apart by radio signals that would prevent them from getting too close to each other on the highway.
That 1960 deadline proved to be wildly optimistic. But after many false starts, that day has now finally arrived. The only question now about self-driving cars is when, not if. One of the earliest supporters of this project was the American military, which saw the life saving potential that autonomous vehicles brought to the field of battle.
As with so many of our recent technological advances, what began as a military project quickly spread into the civilian economy. In 2004, DARPA– the Defense Advanced Research Projects Agency– funded by the Defense Department, began sponsoring an annual competition with a million dollar prize to encourage researchers to continue their work on self-driving cars. The 2007 challenge was won by a group from Carnegie Mellon University in Pittsburgh. Bryan Salesky was one of the members of that winning team.
BRYAN SALESKY: It was really the first time that the community came together and built a robot with the intention of interacting with other vehicles, and trying to build in a rule set that would obey the rules of the road, and do it in a way that would require zero human involvement over a long mission duration which six hours, then, was actually a very tall order. And it was through that experience where we realized, wow, this really can work. This really can and will happen. And it’ll have a huge impact on our lives. WALTER ISAACSON: After winning that 2007 com petition, Bryan Salesky continued to work on autonomous cars, first at Google, and now as CEO of Argo AI, a company that he co-founded in 2016 that recently signed a billion dollar deal with Ford to develop artificial intelligence software for Ford’s self-driving car.
BRYAN SALESKY: You know, when we look at driving today, humans are not very good at the task. They get distracted very easily. There’s human error that factors into a huge majority of collisions that occur today. And just the ability to remove human error from the equation– that right there has huge safety benefits.
And then there’s other benefits that comes to transforming cities. So imagine that we have a shared fleet of driverless vehicles. You can get a ride anytime you need one. But you never have to park the vehicle. You don’t need to own a vehicle.
And so what that means is that parking now can be pushed to the edges of the city, and we can use that space for other things, whether it be a park or office buildings or retail or whatever it might be. So I think it’s rare in our lifetime when there is such a high impact and transformative technology that can just fundamentally change an aspect of our lifestyles. And that’s why I think many of us, myself included, are drawn to self-driving vehicles.
WALTER ISAACSON: Reducing the carnage on our roads and putting parking lots to more productive use are clearly positive things that would benefit everyone. Some of the other disruptions that will result from the arrival of self-driving cars carry with them more negative consequences, particularly when it comes to millions of jobs that are potentially at risk. Truckers and cab drivers and anyone else who makes their living behind the wheel are the obvious victims. But let’s not forget also the people who work in body shops, drive tow trucks, make and sell auto parts, or work in the insurance industry. As with any disruption, there will be some jobs lost, and, probably, some jobs created.
As attractive as the promise of self-driving cars may be, even people on the front lines of autonomous car research say we need to be careful not to get too swept up in the hype and forget to look at the big picture. Oliver Cameron is the CEO of Voyage, which is currently operating a fleet of self-driving taxis in California.
OLIVER CAMERON: There is no doubt in my mind that self-driving cars are a net positive for the world. There are concerns, of course. Job loss is never a good thing. But the hope is that the opportunities that self-driving car presents, in terms of hopeful economic growth, in terms of being able to move more people around more of the time, and changing how cities are built, I think the benefits definitely outweigh the negatives.
But the truth is, we don’t know. We’re going into the unknown. It’s a very mysterious industry that has a lot to prove. So for us, it’s really important that we think about these things.
WALTER ISAACSON: The self-driving taxis that Oliver Cameron’s company uses are provided by Ford. Ford is also the company that has spent a billion dollars to partner with Bryan Salesky’s company Argo AI, researching artificial intelligence for autonomous vehicles.
And they are not alone. All the big automakers are pouring huge sums of money into self-driving research. They’re competing not just against each other, but against well-funded newcomers like Google and Apple– who have no experience building cars, but are very good on the software side– and also from Tesla, who has already incorporated lots of the self-driving technologies into its electric cars.
The world has become very complicated indeed for the traditional automakers. They need to be looking to the self-driving future without neglecting their historic cash cow– the gas-fueled cars with internal combustion engines. It can be a difficult balance to strike. And the stakes are high. Hans-Werner Kaas is senior partner at the McKinsey Group’s automotive practice, based in Detroit.
HANS-WERNER KAAS: You cannot just throw money where you think there might be opportunities. Obviously, you do need to understand where you know new opportunities, consumer trends, and service opportunities are heading, and then look at the options of how you would like to participate in that.
There are, however, very clear approaches and thoughtful assessments needed to then decide how much capital and how many resources you allocate. Because at the end of the day, you need to think in always what I call in a bipolar world. You need to improve your core business, which is about designing, manufacturing, and selling cars, and extracting as much value as you can in that core business.
And at the same time, you need to invest in the future, and in the opportunities for future revenue and profit streams, both for sustaining your company’s fortunes, but also for your shareholders at the end of the day. And I think that is an important task for executives today– how they find the balance between opportunities they have in the core business today and building the opportunities for tomorrow. And then, very important– how to shift capital and resources between the two, and understanding how they are related.
WALTER ISAACSON: So what will the automotive industry look like in 10 years? The traditional companies will probably still be around. They are, after all, the only people with the proven ability to produce cars at scale. And they’re pushing to get ahead in the race for self-driving cars, investing in startups like Argo AI, that will deliver critical parts of the technological puzzle.
But if the big profits in the car of the future lie in the connectivity and computing software, the competition may be intent, with traditional automakers finding themselves competing against companies like Google and Apple– companies who bring with them an incredible amount of software innovation prowess. The only thing we know for sure is that after a century of relative stability that often lead to complacency, the forces of disruption have now hit the automotive industry like a tsunami.
I’m Walter Isaacson, and you’ve been listening to Trailblazers, an original podcast from Dell Technologies. If you enjoyed the show and want to hear my impressions of Elon Musk, who I had the chance to interview onstage a few years ago at the Vanity Fair Establishment Summit, or my conversations with Henry Ford III at the Detroit Auto Show, visit DellTechnologies.com/trailblazers12. That’s trailblazers, then the number 12.
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