Henry Ford and the Stock Market
March 26th 2007 12:22
Henry Ford had definite ideas about finance and the stock market according to his book “Today and Tomorrow.” It should be noticed that he seems to always consider only the secondary market.
On page 214 Ford says: “The stock market as such has nothing to do with business. It has nothing to do with the quality of the article which is manufactured, nothing to do with the output, nothing to do with the marketing, it does not even increase or decrease the amount of capital used in the business. It is just a little show on the side.”
In the same line, Ford points out: “if not a single share of stock were to change hands, it would make no difference to American business. And if every share of stock changed hands tomorrow, industry would not have a cent more or a cent less capital to work with.”
On the purpose of business, Ford makes it clear (page 215): “When the chief function of any industry is to produce dividends rather than goods for use, the emphasis is fundamentally wrong. The face of the business is bowed toward the stockholder and not toward the consumer, and this means the denial of the primary purpose of industry.”
I understand Ford’s frustration with the stock market and its hype, but the fact is that in the primary market stockholders do provide companies with equity and so with its physical capital to work with.
But I get his point, which is reinforced in these words: “Industry is not money – it is made up of ideas, labour, and management, and the natural expression of these is not dividends, but utility, quality, and availability. Money is not the source of any of these qualities, though these qualities are the most frequent sources of money.”
On page 214 Ford says: “The stock market as such has nothing to do with business. It has nothing to do with the quality of the article which is manufactured, nothing to do with the output, nothing to do with the marketing, it does not even increase or decrease the amount of capital used in the business. It is just a little show on the side.”
In the same line, Ford points out: “if not a single share of stock were to change hands, it would make no difference to American business. And if every share of stock changed hands tomorrow, industry would not have a cent more or a cent less capital to work with.”
On the purpose of business, Ford makes it clear (page 215): “When the chief function of any industry is to produce dividends rather than goods for use, the emphasis is fundamentally wrong. The face of the business is bowed toward the stockholder and not toward the consumer, and this means the denial of the primary purpose of industry.”
I understand Ford’s frustration with the stock market and its hype, but the fact is that in the primary market stockholders do provide companies with equity and so with its physical capital to work with.
But I get his point, which is reinforced in these words: “Industry is not money – it is made up of ideas, labour, and management, and the natural expression of these is not dividends, but utility, quality, and availability. Money is not the source of any of these qualities, though these qualities are the most frequent sources of money.”
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