Entrepreneur

Ever Heard Of Henry Ford’s Colossal Failed City in the Jungle?

By January 18, 2019 No Comments

Screen Shot 2013-10-02 at 9.04.17 AM

(This post originally appeared on Entrepreneur)

He was a visionary and one of the most famous capitalists in all of history. He introduced the automobile to the world and created the modern day production line. By the time of his death in 1947 Henry Ford was worth almost $200 billion in today’s dollars. He was an icon and a hugely successful businessman.

Except when he failed. And in 1928 he launched a project that failed big time. It was called Fordlândia and no, it wasn’t located in Oregon and Fred Armisen had nothing to do with it.

It’s a town located in the Amazon rainforests of Brazil. Believe it or not, the town is still there but not at all like it was planned.  Fordlândia (catchy, right?) was established by the automaker so that he could have a reliable source of a very critical raw material: rubber. In 1928, there was (or so it seemed) an endless supply of rubber trees in the Amazon rainforest and hey – who gave a hoot about the environment back then anyway, right?

The deal seemed like a good idea at the time. Resources were plentiful, labor was cheap. The Brazilian government was happy to give a concession for a cut of the profits. The hope was to build a community of 10,000 workers who could enjoy the high standard of living, like the Americans had, while churning out rubber for Ford’s factories back home.

It failed. Big time. Why?

Workers building the city were felled by yellow fever and malaria. Transport was only possible by a nearby river because there were no roads. Managers, who knew little about tropical farming, incorrectly planted crops that were then beset by disease and insects. Even worse, the local workers were forced to eat unfamiliar American food, wear ID badges, endure long hours in the hot sun, live in American-style housing and — can you believe it? — they didn’t like it! In fact, they disliked the arrangements so much that riots broke out after just a few years.

Ironically, the whole adventure ultimately turned out to be a waste of time: by 1945 synthetic rubber would circumvent the need for natural rubber. Ford’s grandson sold back the property to the Brazilian government six years after its founding for a loss of about $200 million in today’s dollars.

Talk about a bad business decision, right?

But here’s the thing: even the greatest capitalists make bad business decisions. Don’t believe me? Think of “New Coke” or Apple’s “Newton” or Sony’s Betamax. Bad business decisions are a part of doing business. But there’s a thing about making bad decisions that separates the successful business people like Henry Ford from all others. The decision doesn’t kill your company.

The Fordlândia loss most definitely hurt Ford’s pride more than his pocketbook because, as mentioned above, he was personally sitting on a fortune worth more than 10 times that amount while the Ford Motor Company was in the midst of a post-war profit boom.

Sure, Ford lost money. But he didn’t lose his shirt. He did what smart business people do. He took a risk — a big risk — but he certainly didn’t bet the farm. That’s a lesson I’ve learned from years running a business. When I decide to invest in a new technology, or a new product line, or an updated website I always make sure I can afford to lose the money. Whenever I hear of people investing their life savings in a new business or all of their capital in a new venture I always think “uh-oh.” That’s not something Henry Ford would have done.

Leave a Reply