Most individuals know Henry Ford for revolutionizing American manufacturing with the meeting line.
However the lesser-known story is of Ford’s unhinged hubris and eventual downfall…
It got here after and maybe due to his great success and fortune.
Energy and ego obtained the very best of him — and, at present, Ford’s downfall serves as a cautionary story for this century’s American auto magnate and his starry-eyed followers.
However earlier than we are able to inform that story, we have to perceive precisely what Ford obtained so flawed.
It began in 1896, when Henry Ford constructed his first experimental automobile in a small workshop behind his home in Detroit.
By 1908, Ford was cranking out Mannequin Ts — which turned the usual for cars at a time when motorized vehicles had been simply beginning to change horses and buggies.
Photograph of the Ford Mannequin T, courtesy of Ford Motor Firm.
What began in his workshop grew right into a multibillion-dollar enterprise and the staple for American manufacturing on the flip of the century.
Whereas Ford’s improvements and great success within the automotive trade are well-documented, his eventual unraveling was not.
Ford’s lack of ability to maintain all of it collectively practically sunk his $52.7 billion firm.
Cash, Energy and Ego: A Cautionary Story
By 1918, the Ford Motor Firm was grabbing headlines for its built-in meeting line, doubling the pay of its employees and shortening the work day to eight hours.
Development started on what would turn into the biggest built-in manufacturing unit on this planet on the time.
Not lengthy after, Ford launched its first-ever truck — the Mannequin TT.
Henry Ford had reached the head of enterprise success.
The corporate he in-built his workshop had grown to provide practically 50% of all automobiles on the highway within the U.S. — and practically 40% of these in Nice Britain.
Ford was outselling the following seven manufacturers of automobiles mixed.
However, in 1919, Henry Ford determined that operating the world’s largest auto producer wasn’t sufficient.
His cash, energy and ego proved a strong temptress, and he discovered himself lured into buying a media outlet, seemingly so he might use it as his personal private megaphone.
Enter The Dearborn Unbiased.
Since 1901, The Dearborn Unbiased was a weekly newspaper, delivering information to the suburb of Detroit that carried the identical title.
Henry Ford purchased the paper in 1919.
Biographers stated Ford spent day-after-day within the newspaper’s workplaces — which had been situated inside Ford’s River Rouge plant in Detroit.
The paper reached 900,000 houses by 1925, largely as a result of Ford requiring his sellers purchase them, and it turned the second largest newspaper behind the New York Every day Information.
The articles Ford produced had been unsavory at finest, they usually did little to spice up the worth of his or his firm’s model.
In reality, fairly the other … Henry Ford’s articles led to authorized threats and even boycotts of the Ford Motor Firm.
Ford ultimately shuddered The Dearborn Unbiased in 1927, however the harm had already been executed to his once-pristine and completely dominant automobile enterprise.
By the point he refocused on constructing vehicles, Ford Motor’s market share dropped to 10% — and was outpaced by competitor Basic Motors.
It was the top of Ford’s dominance in vehicle manufacturing.
And all of it might need been averted had Henry Ford managed his cash, energy and ego with grace and, merely, stayed centered on doing what made him profitable within the first place … manufacturing progressive cars.
As an alternative, he scratched the itch to be the nation’s most loud-spoken and controversial free-speecher on the time … and in doing so his status and enterprise prowess faltered.
For those who’ve adopted markets the previous few years, this should sound acquainted.
And in case you additionally occur to be a shareholder of the world’s most prolific electrical automobile (EV) firm … you is perhaps sweating a bit.
However in case you don’t, that doesn’t imply you’re protected. Virtually everybody owns shares of this firm whether or not they purchased it straight or not.
And that’s why, like all good investor, we should be taught from historical past and acknowledge the warning indicators now…
How Henry Ford’s Downfall Is a Warning to Elon Musk
Elon Musk parlayed his wealth and affect as a co-founder of PayPal (Nasdaq: PYPL) into Tesla Inc. (Nasdaq: TSLA), the place he was an early investor within the EV producer and ultimately purchased the corporate in 2004.
Underneath Musk’s management, the corporate has turn into a pioneer within the EV house. Whereas Tesla sells a scant fraction of the automobiles international giants like Toyota and Volkswagen do, it beat legacy automakers to the EV punch — about 72% of new EV sales in 2021 were Teslas.
Tesla’s early-mover market share on this house is certainly a hit story.
However simply as success ultimately led Henry Ford astray … there’s an uncanny parallel in Elon Musk’s habits and decision-making during the last yr or two.
On the whole, the erratic nature of his habits and public persona appears to have grown alongside his and Tesla’s fanatical recognition.
He first raised eyebrows in 2018 when he smoked weed on Joe Rogan’s podcast.
A pair weeks later, he tweeted he was “contemplating taking Tesla personal at $420 a share” (a weed joke). That tweet now has Musk defending himself towards securities fraud costs in 2023.
Ever since, Musk has given the media an limitless provide of fabric, by way of statements and habits nobody would count on from a centered and disciplined CEO.
However the firm has run into potholes since October 2022 when its CEO spent $44 billion to purchase the favored social media platform Twitter.
Musk’s acknowledged causes for purchasing Twitter had been, in a means, much like why Ford purchased The Dearborn Unbiased: to advertise free speech and guarantee all sides of a narrative had been represented.
Nevertheless, the eye Musk has put into Twitter has considerably steered his time away from Tesla, making a disaster of confidence amongst Tesla’s board, shareholders and potential EV patrons.
Tesla’s EV market share within the U.S. following Musk’s buy of Twitter tumbled to 58% — down from practically 78% in the identical interval the yr earlier than.
Because the Twitter sale, Tesla shares fell as a lot as 56% into December 2022.
The priority amongst Tesla’s board is that Musk appears to have “taken his eye off the ball.” They suppose his focus is now not on constructing the EV model however salvaging a social media firm he overpaid for.
Two separate polls point out the public’s perception of Tesla has waned. Extra Individuals had a destructive notion of Tesla on the finish of 2022 than they did initially.
And, like with Ford within the Nineteen Twenties, different automakers are chipping away at Tesla’s dominance within the EV house.
I don’t know if Musk is spending day-after-day at Twitter’s workplaces in San Francisco, however I do know he isn’t spending practically as a lot time at Tesla’s Austin, Texas, headquarters as he used to.
One factor is definite: Musk’s Twitter distraction is costing Tesla.
Thousands and thousands in gross sales, double-digit share worth losses and favorability in an ever-growing EV market.
His blue chook distraction, like Ford’s newsprint, will spell doom for a corporation used to dominating.
Most traders will sit idly by as Tesla unwinds, not understanding that it impacts them even when they don’t maintain a single share.
However I’m not.
In reality, I’ve a means so that you can flip this example into what might turn into the largest revenue windfall of your life.
Driving Tesla Into the Floor
If Tesla winds up being the biplane caught in a lethal tailspin I believe it’s, don’t suppose you’re protected merely since you don’t personal the inventory.
As I shared last week, Tesla has made its means into the S&P 500.
Which means each 401(ok) and pension that make up a overwhelming majority of American retirements relies on its success.
I don’t suppose that’s proper, particularly for a corporation that also trades so richly in comparison with its friends … even after sliding over 50%. And that’s on prime of its CEO changing into extra involved with an unprofitable social media web site than his core enterprise.
It’s Henry Ford another time. Too many traders are uncovered to an organization whose market share is sliding, whose chief is distracted … and whose future is in excessive doubt.
That’s why my Next Big Short is on Tesla.
To be clear, this isn’t the primary time I’ve shorted TSLA.
In reality, I’ve already advisable a number of quick trades to my subscribers … going all the best way again to November.
We’ve already locked in a 69% revenue on one of many trades. However I count on what’s to return will likely be far larger.
Earlier this week, I launched a presentation with my full thoughts on the situation in TSLA and the potential profits at stake.
I consider this will likely be THE investing story of the yr. If markets proceed to unravel, TSLA will unravel quicker and probably take your retirement with it.
For those who haven’t already, go here to see all my research.
Regards,Adam O’Dell Chief Funding Strategist, Cash & Markets