The Expanded and Annotated My Life and Work

USE LOWER PRICES TO DRIVE LOWER COSTS
Ford was sufficiently confident in his Lean manufacturing program to 
lower his prices and expect his costs to follow. Ford and Crowther (1926, 
pp. 43–44) add that Ford demanded that the C.R. Wilson body company 
(as identified by Sorensen, 1956, p. 81) reduce its price by half. Wilson 
then had to increase wages to get first-class workers, but implementation 
of Ford’s methods allowed it to earn more from the low price than it would 
have earned from the high one.
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Our policy is to reduce the price, extend the operations, and improve the 
article. You will notice that the reduction of price comes first. We have never 
considered any costs as fixed. Therefore we first reduce the price to a point 
where we believe more sales will result. Then we go ahead and try to make the 
price. We do not bother about the costs. The new price forces the costs down. 

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How Cheaply Can Things Be Made?  •  131
The more usual way is to take the costs and then determine the price, and 
although that method may be scientific in the narrow sense, it is not scientific 
in the broad sense, because what earthly use is it to know the cost if it tells 
you you cannot manufacture at a price at which the article can be sold? But 
more to the point is the fact that, although one may calculate what a cost is, 
and of course all of our costs are carefully calculated, no one knows what a 
cost ought to be. One of the ways of discovering what a cost ought to be is to 
name a price so low as to force everybody in the place to the highest point 
of efficiency. The low price makes everybody dig for profits. We make more 
discoveries concerning manufacturing and selling under this forced method 
than by any method of leisurely investigation.
The payment of high wages fortunately contributes to the low costs because 
the men become steadily more efficient on account of being relieved of outside 
worries. The payment of five dollars a day for an eight-hour day was one of 
the finest cost-cutting moves we ever made, and the six-dollar day wage is 
cheaper than the five. How far this will go, we do not know.
We have always made a profit at the prices we have fixed and, just as we 
have no idea how high wages will go, we also have no idea how low prices will 
go, but there is no particular use in bothering on that point. The tractor, for 
instance, was first sold for $750, then at $850, then at $625, and the other day 
we cut it 37 per cent, to $395. The tractor is not made in connection with the 
automobiles. No plant is large enough to make two articles. A shop has to be 
devoted to exactly one product in order to get the real economies.
For most purposes a man with a machine is better than a man without 
a machine. By the ordering of design of product and of manufacturing pro-
cess we are able to provide that kind of a machine which most multiplies the 
power of the hand, and therefore we give to that man a larger role of service, 
which means that he is entitled to a larger share of comfort.