The Expanded and Annotated My Life and Work

DYSFUNCTIONAL EFFECTS OF A FOCUS ON DIVIDENDS
Ford had a serious falling-out with his stockholders, which he resolved by 
buying them out in 1919. His position was that profits should be reinvested 
in the company, while they wanted high dividends. Ford now points out 

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148  •  The Expanded and Annotated My Life and Work
that people whose eye is primarily on the dollar and not on the job that 
delivers it should not run any business.
The Introduction already showed that the “Whiz Kids” who took over 
Ford after World War II based their decisions on financial metrics and, 
thus, proved Ford’s warning accurate. It is, in fact, the same kind of people 
whose first thought as to how to cut labor costs is to send jobs offshore.
* * *
Bankers and lawyers can rarely appreciate this fact. They confuse inertia 
with stability. It is perfectly beyond their comprehension that the price should 
ever voluntarily be reduced. That is why putting the usual type of banker 
or lawyer into the management of a business is courting disaster. Reducing 
prices increases the volume and disposes of finance, provided one regards the 
inevitable profit as a trust fund with which to conduct more and better busi-
ness. Our profit, because of the rapidity of the turnover in the business and 
the great volume of sales, has, no matter what the price at which the product 
was sold, always been large. We have had a small profit per article but a large 
aggregate profit. The profit is not constant. After cutting the prices, the profits 
for a time run low, but then the inevitable economies begin to get in their 
work and the profits go high again. But they are not distributed as dividends. 
I have always insisted on the payment of small dividends and the company 
has to-day no stockholders who wanted a different policy. I regard business 
profits above a small percentage as belonging more to the business than to 
the stockholders.
The stockholders, to my way of thinking, ought to be only those who are 
active in the business and who will regard the company as an instrument 
of service rather than as a machine for making money. If large profits are 
made—and working to serve forces them to be large—then they should be 
in part turned back into the business so that it may be still better fitted to 
serve, and in part passed on to the purchaser. During one year our prof-
its were so much larger than we expected them to be that we voluntarily 
returned fifty dollars to each purchaser of a car. We felt that unwittingly we 
had overcharged the purchaser by that much. My price policy and hence my 
financial policy came up in a suit brought against the company several years 
ago to compel the payment of larger dividends. On the witness stand I gave 
the policy then in force and which is still in force. It is this:
In the first place, I hold that it is better to sell a large number of cars at 
a reasonably small margin than to sell fewer cars at a large margin of 
profit.
I hold this because it enables a large number of people to buy and 
enjoy the use of a car and because it gives a larger number of men 

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Money and Goods  •  149
employment at good wages. Those are aims I have in life. But I would 
not be counted a success; I would be, in fact, a flat failure if I could not 
accomplish that and at the same time make a fair amount of profit for 
myself and the men associated with me in business.
This policy I hold is good business policy because it works—because 
with each succeeding year we have been able to put our car within the 
reach of greater and greater numbers, give employment to more and 
more men, and, at the same time, through the volume of business, 
increase our own profits beyond anything we had hoped for or even 
dreamed of when we started.
Bear in mind, every time you reduce the price of the car without reduc-
ing the quality, you increase the possible number of purchasers. 
There are many men who will pay $360 for a car who would not pay 
$440. We had in round numbers 500,000 buyers of cars on the $440 
basis, and I figure that on the $360 basis we can increase the sales to 
possibly 800,000 cars for the year—less profit on each car, but more 
cars, more employment of labour, and in the end we shall get all the 
total profit we ought to make.
And let me say right here, that I do not believe that we should make 
such an awful profit on our cars. A reasonable profit is right, but 
not too much. So it has been my policy to force the price of the car 
down as fast as production would permit, and give the benefits to 
users and labourers—with resulting surprisingly enormous benefits 
to ourselves.
This policy does not agree with the general opinion that a business is to be 
managed to the end that the stockholders can take out the largest possible 
amount of cash. Therefore I do not want stockholders in the ordinary sense 
of the term—they do not help forward the ability to serve. My ambition is to 
employ more and more men and to spread, in so far as I am able, the ben-
efits of the industrial system that we are working to found; we want to help 
build lives and homes. This requires that the largest share of the profits be put 
back into productive enterprise. Hence we have no place for the non-working 
stockholders. The working stockholder is more anxious to increase his oppor-
tunity to serve than to bank dividends.