April 1992 | Volume 43, Issue 2
Have you heard the story of the man who almost made a fortune in the soft-drink industry? He invented 6-Up.
All right, I know it’s a very old joke, but it illustrates a point: there are a lot more near-misses in capitalism than bull’s eyes. Many of these near-misses come about through simple bad timing or bad luck (RCA’s SelectaVision, for instance, blown out of the water by the VCR and laser disc). Others result from technological overreach (Howard Hughes’s Spruce Goose).
But others happen because innovators fail to fully conceptualize the new technology they are dealing with and rely on models from the old technology they seek to replace. The first mechanical pencil sharpener was a Rube Goldbergian contraption that sought to imitate a human hand wielding a penknife. Not surprisingly it didn’t work very well.
Or consider Henry Ford’s Fordson tractor. While Ford no more invented the tractor than he invented the automobile, his Fordson tractor, like his Model T, revolutionized an industry, brought a powerful new technology within the reach of millions, changed an age-old way of life forever, and had vast economic consequences.
But while the Model T made Ford one of the richest men in the world, the Fordson tractor was, finally, a financial failure. The reason it failed, perhaps, was that Henry Ford hated farming and focused too much on simply replacing the horse and not enough on what the horse actually did for the farmer.
American agriculture, from its beginning, had been different from its European antecedents. In Europe land was expensive and labor cheap; in America it was exactly the reverse. Because of this reality, early American farmers often had a startling lack of interest in husbandry but were very receptive to laborsaving machinery.
At the time of the Revolution, farmers still had little in the way of equipment unknown to the Romans two thousand years earlier. It was reckoned that two men and a boy, using two or three horses or twice as many oxen, could plow only an acre or two a day.
But as early as 1788 Thomas Jefferson was working on the right mathematical curve for a plow to turn the earth with maximum efficiency (his equation, elegance itself on paper, was not successful in the field). Most farmers continued to use simple wooden plows, while the wealthier could afford cast-iron ones.
Then in 1819 Jethro Wood introduced cast-iron plows with replaceable parts, bringing them within reach of the average farmer. Two decades later John Deere introduced the steel plow, a great improvement on the cast-iron model and a capitalist bull’s eye of the first order. The John Deere Company used the motto “He gave to the world the steel plow” for well over a century (of course, as more than one farmer noted, “He may have given it to the world, but I had to buy mine!”).
There is much more to farming, to be sure, than plowing, and the Industrial Revolution also gave the farmer mechanical seed drillers, cultivators, reapers, and threshers. All this had a radical effect on productivity. In 1822 it had taken fifty to sixty man-hours to produce twenty bushels of wheat on an acre; by 1890 it took just eight to ten man-hours.
The number of “horse-hours,” however, had greatly increased, and by 1880 the number of horses and mules on American farms exceeded twelve million and was climbing quickly.
At that time the only alternative to the horse was steam. At first portable steam engines were employed on very large farms for threshing. In truth they were portable only in the sense that they were not permanently situated and could be moved, very slowly, by large teams of horses.
Somebody soon had the idea of using a steam engine’s own power to move it from farm to farm. It was exactly such an engine that the young Henry Ford encountered one day when riding in a wagon with his father. It was the first self-propelled device that Ford had ever seen, and he was wild with excitement as only a twelve-yearold boy can be.
“The engine had stopped,” Ford wrote half a century later, “to let us pass with our horses and I was off the wagon and talking to the engineer before my father...knew what I was up to.” The engineer cheerfully explained how everything worked and made a lifelong impression on Ford. Indeed, “from the time I saw that road engine...right forward to today, my great interest has been in making a machine that would travel roads.”
Steam, however, was not well adapted to farm use. Its energy output is low per unit of weight, and thus steam engines capable of doing farm work were very heavy and expensive. Very few farmers could afford to own steam engines, and many could not even afford to rent them.
With all of steam’s disadvantages, when the internal-combustion engine began to approach practicality, it was soon adapted to farm use. The first gasoline-powered traction engine (a phrase shortened by 1900 to “tractor”) was built by John Froelich in 1892, four years before Henry Ford built his first automobile. Froelich’s engine, like most early prototypes, didn’t work very well in the real world, and Froelich soon disappeared from history.
But the major farm-equipment companies such as John Deere and International Harvester, along with a host of smaller companies, were soon experimenting and turning out internal-combustion tractors. The early gasoline tractors were largely modeled on the steam-powered ones they were beginning to replace. Thus they were large, heavy, clumsy, and expensive. Few farmers wanted or could afford them. Then World War I changed everything.
American farm prices soared as European grain production plunged and Russia’s huge grain exports were cut off. The demand for horses and mules, meanwhile, also increased vastly. The belligerents needed the animals to haul wagons and guns on the front lines, where they were slaughtered, like the soldiers, by the hundreds of thousands. With the price of horseflesh rising out of sight and money in their pockets from grain sales, more and more American farmers decided to try tractors. Henry Ford decided the time had come to produce one.
In 1915 he announced his plans for the Fordson tractor, saying he would sell it for $250. His new tractor was smaller than most then on the market, structurally much simpler, and specifically designed to be mass-produced—a tractor version of the Model T, in other words. It took Ford two years to get into production, and the initial price ended up at $750. Still, from the beginning sales were brisk. By March 1918 he was making eighty a day, and production hit three hundred a day by year’s end. In 1920 Ford boasted that he had sold one hundred thousand tractors, twice the total number that had been in use on American farms when the Fordson was introduced.
Although already the largest manufacturer of tractors, Ford then decided to go after market share. In January 1922 he slashed prices, selling the Fordson for only $395, less than the price of a good team of horses. The other tractor manufacturers were stunned and had no choice but to meet his price. Many, Ford included, were losing $300 on every tractor they sold, and a good number vanished from the marketplace. International Harvester, however, did not.
“Ford was backed,” Cyrus H. McCormick, grandson of the founder, explained, “by the most popular commercial name of the time and by the uncounted millions earned for him by his epoch-making car [but] he was trying to capture a business with which he had no previous contact. International Harvester had on its side many years of training gained from contact with farmers, less capital by far, and utter inexperience with defeat.” That contact with farmers and farm equipment was to prove crucial in the contest between Ford and McCormick for dominance in the tractor market.
You see, the old horse-drawn farm equipment had been powered by a bull wheel. That was a large wheel sticking out from the side of the equipment, armed with cleats that dug into the ground. As the horses pulled the equipment, the bull wheel, at least in theory, turned the machinery. When the soil was wet, however, the bull wheel often just slithered along without turning and had to be helped manually, an exhausting and sometimes dangerous job. Farmers hated bull wheels.
But the bull wheel, for all its inadequacy, was the best way there was for powering horsedrawn equipment. As one engineer of the time explained, “horses are obliged to transmit their power through the ground to the machinery they operate because of their inherent and unchangeable construction.”
The construction of tractors is not unchangeable, however, and in the cutthroat tractor market of the early 1920s International Harvester soon offered a vast improvement on the bull wheel, the power takeoff. The PTO is a rotating shaft powered by the tractor’s engine that can be connected to the equipment being pulled by the tractor. It has since been a feature of every successful tractor model.
Being a farm-equipment manufacturer, International Harvester soon had a line of equipment designed to work with the new, much more efficient, and far more reliable power source offered by its tractors. Farmers loved the PTO, and International Harvester quickly pulled ahead of Ford in tractor sales.
When Ford produced his Model T, he produced a practical, affordable horseless carriage, all that the traveler needed to travel and just what the marketplace was looking for. It was one of the great capitalist bull’s eyes of history. His Fordson tractor, however, was no more than a practical, affordable horseless horse. That, in the end, was not quite enough.
Even geniuses don’t hit the bull’s eye every time.