Leadership Styles and Their Impact on Early Automotive Innovation

What I learned from reading Billy, Alfred, and General Motors: The Story of Two Unique Men, A Legendary Company, and a Remarkable Time in American History by William Pelfrey.

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[0:01] They were oil and water in all respects. Billy Durant, the high school dropout, was the flamboyant dreamer and gambler, focused on personal relationships and risk. Alfred Sloan, the MIT engineer, was the stern organizer and manager, focused on data, logic, and profit.

[4:40] The paradox of this book in two sentences: Sloan’s most constant criticism of Durant was that he acted on instinct and whim rather than facts. Yet the achievements and decisions of Durant the dreamer were what made Sloan the manager’s spectacular career possible.

[6:50] Alfred Sloan telling us it is a lot harder to stay successful over a long period of time: “The perpetuation of an unusual success or the maintenance of an unusually high standard of leadership in any industry is sometimes more difficult than the attainment of that success or leadership in the first place.”

[10:45] Walter Chrysler left the highest paying job in the entire automobile industry because of Billy Durant’s wasted his time: More than once, Chrysler had been summoned by Durant only to be kept waiting then to discover that the urgent matter that needed to be discussed was nothing that couldn’t have been resolved quickly at the plant level rather than wasting top management’s time and brainpower.

[12:52] Sloan believed Billy Durant had no right to be distracted by the financial markets while Durant was supposed to be running General Motors: Sometimes I used to feel as if he were always holding a telephone in his hand. I think there were twenty telephones in his private office and a switchboard. He had private wires to brokers’ offices across the continent. In the same minute, he would buy in San Francisco, sell in Boston. It did not seem to me that the operating head of a corporation had any right to devote himself to the market, even if the stock of the corporation was involved. 

[17:13] Billy Durant will remind you that everything is possible: What was it in Billy’s genes and character that had led the high school dropout from rural Michigan to even dream of building an empire that would change the world?

[20:30] Billy Durant would tell you to control the things that are important to your business: Billy Durant would never forget the bitter lesson of what he saw as Paterson’s treachery: Always control your own production and, whenever possible, all of the links in the supply chain.

[23:05] Unlike Durant, Alfred Sloan had a singular focus. His singular focus was General Motors: By the early 1930s, Alfred Sloan was widely considered to be one of the richest men in the world, but he had no known hobbies and had never sold a single share of General Motors stock. His only known investment of either time or money in anything beyond the domain of General Motors was the purchase of a yacht at the urging of friends and his wife. 

[26:37] There are ideas worth billions in a $30 history book: In Henry Singleton’s case that is literally true. Reading Sloan’s book had a multiple billion dollar effect on the outcome of Teledyne.

[29:04] Sloan would not tolerate any excuses: Sloan is kinda like Yoda. Do or do not. There is no try.

[29:48] A key ideological difference between Alfred Sloan and Billy Durant was how growth should be financed: What Alfred didn’t mention in his letter was that Hyatt’s growth had come from reinvestment of the company’s own profits, rather than the acquisition and stock market strategy mastered by Billy Durant. A divergence of fundamental strategy that would be at the core of the General Motors crisis and showdown of 1920.

[31:12] An important lesson from history is that new and important industries can start out looking like toys: In 1899 the automobile industry in America was no more than the strange and wild obsession of a few tinkerers and an amusing diversion for the wealthy investors who backed them. Cars were still widely considered impractical toys and dangerous nuisances by most people. 

[34:35] Alfred Sloan admired and copied Henry Leland, founder of Cadillac and Lincoln: Of all the American automobile industry’s unique and colorful characters, the one whom Alfred Sloan most admired and emulated was Henry Leland. Leland was a perfectionist who expected and demanded higher standards than any of his peers. He accepted no excuses and suffered no fools. Sloan devoted more words and detail to what he learned from Leland than he did any other person.

[45:55] Alfred Sloan on why vertical integration was so important in the automobile industry: Every piece of the motor car is essential in the sense that the automobile is not complete unless every part is available. Delay in delivery of any part stops the work. A dependable supply of parts might well make the difference between success and failure.

[48:08] Henry Ford's ONE idea was different from every other automobile manufacturer: He was determined to concentrate on the low end of the market, where he believed that high volume would drive costs down and at the same time feed even more demand for the product. It was a fundamental difference in philosophy.

[49:35] Comparing and contrasting Billy Durant and Alfred Sloan’s approach to growth: For him, the thrill was always in the next deal, not in the nuts and bolts of daily operations. In his mind, empires were built by conquest, not through internal growth. And the road to conquest was through other people’s money and other people’s confidence in his genius, rather than the quiet, conservative road of knowing the fundamentals of manufacturing and marketing, as was followed by the likes of Henry Leland and Alfred P. Sloan.

[56:05] Why Innovation is so important. We must arm the rebels! The automobile sparked not only the great oil boom it also sparked innovations in petroleum refining and metal alloys that led to further innovation in chemicals. It also spawned the motel industry as well as gasoline retailing. Thanks solely to the demand for gasoline to run the internal combustion engine automobile, crude oil production in the United States soared.The first gasoline pump appeared in 1905. By 1915, Standard Oil had developed the first chain of gasoline service stations. In 1916, the federal government began funding the interstate highway system. Ten years later, motels and road side restaurants were common in every state. Thanks to Henry Ford’s Model T, Billy Durant’s vision of a nation transformed by the automobile had become a reality.

[57:47] When most of your revenue comes from one or two major customers you are fragile. Or Why Alfred Sloan sold Hyatt Roller Bearing to Billy Durant: The problem for Alfred and his peers was that, compared with the manufacturers, the suppliers’ pockets were not nearly as deep. Expanding their production capacity meant investment in new plant and equipment, but there was no guarantee that the boom would continue once these commitments were made. Nor was there any guarantee from the manufacturers that they would not shift to a different supplier with lower cost at some point in the future, leaving Supplier A stuck with both excess capacity and the cost of the original expansion.

[1:14:23] How Alred Sloan positioned General Motors product line: Sloan developed a product strategy targeted at buyers’ specific aspirations. Its essence was to divide the market into price segments and offer cars with the most appeal and value in each segment. Sloan called it “a car for every purse and purpose.” No General Motors vehicle division or brand would compete against any other in any of the segments; each was to have a distinct identity and appeal to a distinct buyer.

[1:15:10] David Ogilvy on positioning your product: Now consider how you want to ‘position’ your product. This curious verb is in great favor among marketing experts, but no two of them agree what it means. My own definition is ‘what the product does, and who it is for.’ I could have positioned Dove as a detergent bar for men with dirty hands, but chose instead to position it as a toilet bar for women with dry skin. This is still working 25 years later.

[1:16:48] Alfred Sloan —like Sam Walton—made it a priority to visit dealers: I made it a practice throughout the 1920s and early thirties to make personal visits to dealers. I went into almost every city in the United States, visiting from five to ten dealers a day. I would meet them in their own places of business, talk with them across their own desks in their closing rooms and ask them for suggestions and criticism concerning their relations with the corporation, the character of the product, the corporation’s policies, the trend of consumer demand, their view of the future, and many other things of interest in the business. I made careful notes of all the points that came up, and when I got back home I studied them.

[1:20:46] Billy Durant’s metaphor on the difference between him and Alfred Sloan: But, you see, this infantry captain didn’t have the disadvantage of a West Point education and he didn’t know he couldn’t do it, so he just went ahead and did it anyway.

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