Daily Archives: October 22, 2014

Age, Ferrari, Brooks Camera, General Motors, and the problem with Capitalism

Ferrari-0089

A couple of weeks ago, maybe a month now, Luca Cordero di Montezemolo, the President of Ferrari, was fired. My first reaction is that it was a good move because the Ferrari Formula One Team is doing miserably and Montezemolo is part of the problem. They need fresh blood. Formula One is a constantly evolving sport and Montezemolo who is 67 doesn’t have any new answers.

Rather than taking a chance with young drivers – and engineers – who are on their way up, like Red Bull, which has won four Championships in a row, Ferrari has hired great drivers and engineers on the way down. When a company is not gambling on the future but trying to safely replicate the past with the people of the past, is can only be mediocre and that is a great description of Ferrari’s Formula One program under Montezemolo. But, according to the F1 gossip, that is not why he was fired.  The FIAT Board fired Montezemolo because they want to increase production to increase profits and Montezemolo wants to keep Ferrari exclusive.

In the 60s, 70s, and into the 80s, there was a camera store on the corner of Maiden lane and Kearny, Brooks Camera. Brooks Camera which was started by Julius Bloch – who escaped Nazi Germany in 1936 – was the best camera store on the West Coast, maybe the nation. It was always packed, always! Like 10:00 Tuesday morning packed. It was the kind of place where one could buy a Kodak Brownie, a brand new Nikon, or an obscure camera part (I once stood in line behind a guy who bought, not one, but two  Pierre Angenieux lenses for his Bolex movie camera, saying I am on my way to Vietnam here is my NBC account number).

In different ways and at different levels, both Enzo Ferrari and Julius Block had a vision to create a company that was the best at what it did. That is what Capitalism or Entrepreneurship does best, create the money and arena to create new products and better services out of a visionary’s dream. Ferrari or Brooks would not have existed in a  Command Economy. However, the new products and better services only continue to be created when there is still a Vision. When Bloch retired, he left Brooks Camera to the employees, but they didn’t care about the vision, all they cared about was making money.

I have no idea what will happen to Ferrari, but Brooks Camera is gone. The employees turned the operation into a series of discount camera stores to increase earnings and the world, apparently, doesn’t need another discount camera store. Still, that is often not the case and that is the problem with Capitalism. Usually, after the founder/visionary leaves the company he or she founded, making money becomes the company’s reason for being. Often, when the company has a large market share, is rich enough, or has a deserved sterling reputation, it can lever that into making lots of money. For years, after Alfred Sloan left General Motors, they made more money with GMAC – General Motors Acceptance Corporation which loaned money for people to buy cars (and, eventually, houses) – than they did in actually building and selling cars.

For General Motors, making money became the goal – the overriding goal –  and, in that environment, weighing the cost of replacing millions of ignition switches against the cost of potential lawsuits from criminal negligence, made good sense. When making money becomes the goal, making good products, innovation, or providing good jobs – among other socially desirable goals – becomes secondary, although the companies often do make lots of money. However, they no longer make the world, our world, richer, they only make the shareholders richer.

As an aside, Ferrari still makes wonderful cars – great cars – but they are no longer the reflection of Enzo Ferrari, il Commendatore. If you want a car that is the reflection of one man’s vision, you would have to buy something like a Pagani Huayra, the creation of Horacio Pagani, with its stunning exterior and spectacular steampunk interior. End aside. Pagani Huayra 1

Pagani Huayra

Pagani