The Reckoning

What’s good for General Motors is good for America. The saying summed up the 20th century when the US, and its car industry, ruled the world. The invention of the car in Detroit and the discovery of oil in Texas changed the country forever, both in terms of its culture and economy. Henry Ford created the assembly line, and the assembly line created modern America. Ford, along with GM and Chrysler, was a shared monopoly, divvying up the car industry between them. However, within the span of two generations, the Big Three went from leading the world to barely staying afloat. Detroit became a graveyard, while the American manufacturing base hollowed out. The rapid rise and even faster fall of Ford is a story worthy of Edward Gibbon, the author of The Decline And Fall Of The Roman Empire. David Halberstam tells it in The Reckoning, a book written in 1986 that is still relevant today.

Halberstam parallels Ford’s decline with the rise of Nissan, one of the leaders of the Japanese car invasion of the 1970s. Japan and the US had been closely linked ever since American warships steamed into a Japanese harbor in 1854 and opened the islands to foreign trade. After 220 years of isolation, the Japanese had to quickly re-invent themselves to become a modern industrial power. They eventually became strong enough to challenge the US for control of the Pacific in World War II. It wasn’t a fair fight. They were a middleweight going up against a heavyweight. Once we survived their initial blow, there was only one way it could end. After the war, the Japanese were disarmed, and their islands came under the US military umbrella. We provided security and dictated how their economy would be rebuilt. The irony is the pro-corporate reforms we initiated crushed their labor movement, giving their car companies a huge advantage when competing with their American counterparts. Nissan controlled labor costs in a way Ford never could.

Japan is more hierarchical than the US. Obeying authority is the ultimate good. That’s how life works when so many people are crammed into a small land mass without many natural resources. The only advantage the Japanese have is their ability to work together. Everything is centralized. The International Bank of Japan and the Ministry of International Trade and Industry are more powerful than their equivalents in the US. Katsuji Kawamata, the head of Nissan for more than 30 years, came from the IBJ. The Japanese built their car industry almost from scratch after WWII. They learned everything they could from their conquerors. Hierarchical societies produce good students. Americans ignored in their own country, like quality control expert Edwards Deming, were revered in Japan and given free run to try their ideas.

No one in the US cared about car quality. They were making too much money to bother. The US was the only industrial power untouched by WWII, so no other country could compete economically. The war was a triumph of production and logistics. The Allies controlled 86% of the world’s oil. It was only a matter of time before the sheer number of ships, tanks and planes overwhelmed their enemies. The brains of the war effort weren’t the generals. It was the statisticians and analysts who ensured the continent-wide industrial machine ran at max efficiency. Modern analytics were born in the Pentagon. After the war, Robert McNamara and men like him brought systems analysis to the private sector. McNamara eventually became the head of Ford, before running the Vietnam War as LBJ’s Secretary of Defense.

The disputes between McNamara and the car people at Ford read like a mid-20th century version of the ones between the stat guys and scouts in Moneyball. There was an enormous class divide between the two groups. The car people were blue collar men who came up through the company. The analysts came from the best schools in the country. They didn’t have a technological background, but they didn’t need it. The numbers told them money was being left on the table. They were the first generation of consultants. They streamlined the manufacturing process and squeezed consumers for every dollar. Why build a car to last 20 years, when you could build one that broke in five and forced people to buy a new one? Why put money in research and development when people would buy whatever they put out?

So there were more people than ever from the business schools, and where they once had only slide rules for their calculations, now they had computers, which greatly increased their capacity to quantify any concept and to put those numbers to use. Computers were a powerful new weapon for the finance people. Every year now they had great access to financial detail and greater skill in using that detail within the company. With the coming of computers, the financial people were like prophets armed. 

The analysts told the owners what they wanted to hear. Henry Ford II, the grandson of the company’s founder, had taken Ford public after WWII. It made the family incredibly wealthy, but it also tied their fortunes to the stock market. The business changed. Ford went from selling cars to selling stocks. The goal was maximizing short-term revenue. They had to impress Wall Street with quarterly profit numbers. There was no pressure to innovate. The barriers for entry were too high for new domestic companies to compete. GM set the market. Ford and Chrysler followed. Follow the pecking order and they would all get rich.

The Big Three were slaves to the numbers. When the numbers didn’t correspond with reality, they questioned reality, not the numbers. Their researchers knew the tastes of their consumers were changing, but the bosses weren’t listening. They couldn’t. Their business model was built for a world where the size of your car determined your social status. That changed for the generation who grew up after the war. The first yuppies were more sophisticated than their parents. They were born with money, and they signalled status through food, lifestyle and politics, not consumption. A forward-thinking company would have tried to change, but the Big Three needed the higher profit margins that came from bigger cars. The executives had annual bonuses, and they had negotiated generously with the UAW knowing they could pass on the costs to the consumer. Their cars were getting worse and more expensive at the same time. Something had to give.

The worldwide supply of oil gave in the 1970s. The economic boom of the 20th century was built on cheap oil. Technological advancements came from the labor-saving power of machines, and the machines ran on oil. The Japanese didn’t have as much, so they used it more efficiently than the Americans. In 1973, OPEC, a cartel of the world’s biggest oil producers, created a panic when they restricted supply. With prices rising and lines stretching around the block at every gas station in the country, US consumers began focusing on mileage. Toyota and Nissan were ready to pounce. Domestic competition in Japan was much fiercer than in the States. It was natural selection 101. Companies fighting for their lives make better cars than ones protected from competition. The Japanese pushing their way into the US car market was a stark reversal of what happened in 1854. It was like introducing an invasive species to an environment where they had no natural predators. The Big Three couldn’t react fast enough to how the market was changing.

What makes the book so interesting is that it also tells the story from the perspective of the Japanese. From the American point of view in the 1980s, they appeared to be an unbeatable industrial machine. However, there was just as much infighting and dysfunction at their companies. They just did a better job of hiding it. The power struggle between Takashi Isihara and Ichiro Shioji at Nissan was almost a carbon copy of the one between Henry Ford II and Lee Iacocca at Ford. Yutaka Katayama, the trailblazing executive who popularized Nissan in the US, was resented by his bosses for his success. Not even being right could save him from being marginalized. The same thing happened to Hal Sperlich, the chief architect of the Ford Mustang and Chrysler Minivan. Once an organization gets large enough, advancement and survival within it depends on playing politics. It’s Robert Conquest’s Third Law of Politics in action: The simplest way to explain the behavior of any bureaucratic organization is to assume it is controlled by a cabal of its enemies.

The human heart is flawed. Our greatest strengths are also our greatest weaknesses, and every revolution contains the seeds of its own destruction. That was the story in the US just as much as it was in Japan. The more successful people get, the more arrogant they become. By the end of his life, Henry Ford had nearly destroyed the company he founded. After being pushed out of Ford, Iacocca took over Chrysler and slowly turned into everything he hated about Henry Ford II, who was essentially Bruce Wayne without Batman. The second generation of Japanese factory workers, just like their US counterparts, didn’t want to follow their parents into such demanding jobs. The final few chapters of the book show Korea doing to Japan what Japan did to the US. Nothing stays on top forever. It’s worth remembering in an era where a few companies control the online economy. Apple and Google will get fat and lazy, just like Ford and Nissan. What comes up must come down.

There is a time for everything, and a season for every activity under the heavens: a time to be born and a time to die, a time to plan and a time to uproot, a time to kill and a time to heal, a time to tear down and a time to build, a time to weep and a time to laugh, a time to mourn and a time to dance, a time to scatter stones and a time to gather them, a time to embrace and a time to refrain from embracing, a time to search and a time to give up, a time to keep and a time to throw away, a time to tear and a time to mend, a time to be silent and a time to speak, a time to love and a time to hate, a time for war and a time for peace.  

Ecclesiastes 3:1-8

The Forge Of Christendom

No one talks about the Middle Ages. In the popular imagination, the thousand years between the fall of the Roman Empire and the Italian Renaissance were a dark period in European history, where civilization was in decline, society stagnated and people were blinded by ignorance and superstition. However, history is never as simple as it appears, and the people living through that era certainly didn’t feel like they were in uneventful times. You can draw a direct line between what happened at the turn of the first millennium and the state of the world today. Everything is connected: skip over huge portions in the history of any country and you can’t expect to have all the necessary information to understand what is going on. In The Forge of Christendom, Tom Holland does a brilliant job of making an obscure section of history come alive, making us re-assess what we think we know in the process.

The first thing he points out is that Rome never really fell, at least not in the 400s. By the time Alaric the Great sacked the actual city of Rome in 410, it was a relative backwater that didn’t even rule Italy, much less the Empire. The regional capital was in Ravenna, two hundred miles north, while the imperial capital had long since moved to Constantinople (modern day Istanbul). The Byzantines thought of themselves as Romans, and their capital was the biggest and most important city in the Mediterranean, if not the entire world. Their power fluctuated, but their strategic location, as well as their wealth, meant they were a major player internationally until the city finally fell in 1453. Rome and Persia had been rivals since the days of Julius Caesar, and the Crusades were just one chapter in the struggle between the two great civilizations.

Our system of dating itself comes from this time period. People started thinking about history in terms of AD and BC in the 800s, when Charlemagne popularized the Christian calendar to help unify his newly conquered realm. Charlemagne was the first medieval king worthy of the name, and the modern-day borders of France and Germany stem from how his empire was divided up between his sons after his death. After subduing most of the Western Europe, he needed to legitimize his rule, so he bartered with the Pope to crown him the Holy Roman Emperor. It was a mutually beneficial arrangement: the Pope asserted his authority over the other bishops in the Western Church, and established the precedent that rulers needed his blessing.

The running theme through the book is the conflict between the church and state in the West leading up to its resolution in 1073, when Henry IV kneeled before Pope Gregory VII and asked for forgiveness. There was no such separation in the East, either in the Eastern Orthodox church or the Islamic world, where power was centralized and religious leaders served at the pleasure of the king. The difference in the West was that the Bishops of Rome used their connection to the Apostle Peter, who lead the church in Rome before he was killed in the 60s, to elevate themselves over the rest of the Catholic church and turn the city into a religious capital. However, they never had the political power to go with it. The dominant tribes - the Franks, Germans and Normans - in the West were all Northern, and they had uneasy relationships with the Papacy. A particularly strong king, or pope, might hold sway for awhile, but the two offices were never combined in the way they were out East.

The Normans (aka the Northerners) were the descendants of Vikings who settled throughout Europe. They saw how Christianity could be useful: the church’s network of bishops provided a bureaucratic framework through which they could rule, while the religion gave them a reason to pillage new lands, since they were “bringing Christ” to the natives. Norman kings had to create wealth for their followers, so there was a constant push to expand into new territory, whether it was Iceland, Greenland, England or Russia. The name Russia came from the word “Rus”, which meant “rowing” in the language of the original inhabitants, because the Normans established a foothold in Russia by rowing down the Volga and Danube Rivers. Every king wanted Norman mercenaries: they fought on both sides of most major conflicts. The Byzantine Emperor had an entire regiment of them as a Praetorian Guard.

The European world was very interconnected. The peasants might not have moved around much, but the elites thought globally. One of the most memorable characters from the book is Harald the Varangian, a Norman captain who ventured abroad to win a fortune and marry a Russian princess. He cut a swath through Constantinople, where he was a medieval version of the most interesting man in the world:

Brags about his exploits in the imperial service would end up echoing as far afield as Iceland. In Sicily, it was claimed, he had captured no fewer than eighty towns. In the Holy Land, he had bathed in the River Jordan, and conquered Jerusalem - “an easy task for Harald”. In Constantinople, he had been thrown into prison by a lovelorn empress, helped to blind an emperor and fought with a dragon. The plausible and utterly fantastical, in the rumors of Harald’s deeds, were promiscuously mixed. And to a sensational effect - for in the North he was soon a living legend. Piled up for safe keeping in an island compound outside Novgorod was a great heap of treasure, “a hoard of wealth so immense that no one had ever seen its like before”: Harald’s winnings. 

Harald used his money to become king of Denmark and Norway, and when it ran low, he looked towards England, the richest kingdom in the Western world. The relative isolation of the English allowed them to create a centralized state, as well as a defined ethnic identity, much earlier than their neighbors. And the more unified a kingdom was, the more money the king made. The king of England, Harald Hardrada, was able to beat off the invasion and kill the other Harald, but that left him open to attack from across the English Channel lead by William the Conqueror. William was a real-life King Arthur: a descendant of an English noble family exiled to France, He had been groomed since childhood, along with a tight group of relatives who became his lieutenants, to be a warrior king. The Norman conquest of 1066 was the last successful invasion of the English islands, something which had been happening every few hundreds of years since the beginning of recorded history in Europe.

The Saracens (aka the Muslims) were the Normans of the South, a small warrior elite who ruled over a huge number of conquered peoples. They viewed their military success as proof their righteousness, and they taxed conquered dhimmis (Jews and Christians) at exorbitantly high rates to fund their armies. It was a brutal time. The origin of the word “slave” comes from how often the Slavic peoples in Eastern Europe were enslaved, by Christians and Muslims. Kings won their legitimacy by beating back foreign invaders. An unorganized society without one in charge wasn’t going to last very long. 

Given the level of political turmoil, it’s no wonder people thought the end of the world was near. Humans have worried about the apocalypse since the beginning of time. Our society doesn’t believe in God anymore, but we still fear our sins will destroy the world:

Many tenth century Christians thought the millennial anniversaries of the birth and death of Jesus Christ signaled the beginning of the end times. As it turned out, though, the world kept right on spinning after they were gone. They thought they were living in the most important period of history, but by the turn of the second millennium, their descendants had written them out of the history books. People at the end of the third millennium will do the same to us. Ask the average person today about the year 3000, and they would probably question whether the world will last that long. It’s the same answer you would have gotten if you asked people a thousand years ago about the year 2000.

The most important period of history is always right now. History is the story the present tells about the past to shape the future. People remember what they want, and what actually happened quickly recedes in the sands of time. Fake news didn’t start with the internet. The medieval monk Gerbert, who became Pope Sylvester II, taught students about the Earth circling the Sun five hundreds of years before Copernicus. Things we take for granted now will be forgotten in the future, and people in the 1800s would be shocked at some of the things we don’t know. The more things change, the more they stay the same.

What do people gain from all their labors at which they toil under the sun? Generations come and generations go, but the earth remains forever. 

What has been will be again, what has been done will be done again; there is nothing new under the sun. Is there anything of which one can say, “Look! This is something new”? It was here already, long ago; it was here before our time. No one remembers the former generations, and even those yet to come will not be remembered by those who follow them. 

- Ecclesiastes 1:3-4, 9-11