Do you know what a Model T is?
Of course you do. Who doesn’t?
It’s the car that put America on wheels. It was the product of some of the greatest manufacturing innovations. It changed the world.
Do you know what a DA Master is?
Unless you’re a classic car fan, probably not. It’s one of America’s many forgotten cars.
But the story of the DA Master will point you toward getting exceptional returns — far above large cap stocks and bonds — right now...
Survival of the Fittest
You see, the DA Master was Chevrolet’s top seller in 1934. It was a huge success. Sales of the car pushed General Motors, owner of Chevrolet, into the #1 spot for U.S. automakers.
Here’s the thing: GM didn’t necessarily make better cars during the Depression; GM didn’t charge a significantly lower amount for its vehicles...
Its success was the result of the company's continued aggressive marketing.
General Motors stayed in front of the eyes of its customers throughout the entire downturn. As a result, it jumped ahead of Ford during the Depression.
Not long before the DA Master showed up in car lots, GM was outsold by Ford ten to one. The Depression played a key role in helping GM stay ahead of Ford as America’s leading carmaker for more than 70 years.
GM didn’t just survive; it thrived. It grew market share which it would reap greater rewards for when the market did return.
It wasn’t just marketing, though. GM’s legendary chief, Alfred Sloan, revolutionized the management of the company.
In Industrial Revolution in America, authors Kevin Hillstrom and Laurie Collier Hillstrom note:
'Along with AT&T, Coca-Cola, and a few of the railroads, [GM] was a gleaming example of business progress against the ravages of hard times,’ observed one historian, ‘Whatever Henry Ford had done to turn his factory floor into a model of efficiency, Alfred Sloan superseded by creating the optimum office environment. Sloan honed management charts until they flowed in only one direction, toward the creation of a motivated workforce. As a result, GM’s organization was studied and then copied by thousands of corporations around the world, but no one could copy Ford’s organization — there wasn’t one.'
Under Sloan’s watch, GM made it through the entire Great Depression without a single losing year.
And it wasn’t only a few big carmakers that managed to make the best of a bad situation...
It happened all across America — and to many of today’s leading companies.
When Life Hands You Corn…
One glaring example of a company that laid the foundation for huge success during the Depression was in the cereal industry.
C.W. Post founded the company with his own name (Post Cereals, which would go on to become General Mills) in the 1890s.
Post was a patient/guest at the Battle Creek Sanitarium in Michigan, which was operated by the Kellogg brothers. One day — and completely by accident — they produced a dried, flaky creation to serve during breakfast. Corn Flakes was born.
Post took the idea and sold it around the country while the Kelloggs stayed at the sanitarium.
After a falling out with his brother, W.K. Kellogg went on to sell Kellogg’s Corn Flakes with his signature (this is the reason for the cursive-style Kellogg’s logo) as the “original” Corn Flakes.
Post had a decade head start and led the industry for many years — that is, until the Great Depression hit.
Post cut its ad budgets while Kellogg was ramping up its own ad spending, and by the end of the Depression, Kellogg was number one.
If you think about it, most of the truly iconic American corporations were founded during hard times...
The Panic of 1873 kicked off the original Great Depression (as it was known until the world rose out of the 1930s Depression). The failure of the leading North American investment banking firm, Jay Cooke & Company, sparked one of the worst economic downswings in history (eerily similar, I know). The downturn lasted 23 years.
Five years after Panic, with the country mired in depression, the Edison Electric Light Company was founded. Edison’s company grew into General Electric (NYSE: GE).
The Tabulating Machine Company, the company which would become IBM (NYSE: IBM), was founded during the late-1890s recession, shortly after the (then) mighty Reading Railroad failed.
Microsoft (NASDAQ: MSFT) was founded in 1975, in the middle of a stagflationary era.
In 1940, the first McDonald’s (NYSE: MCD) opened in California.
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These business leaders jumped on opportunity when everyone else was running for cover. They trounced their competition with innovation, and by not holding back when it came to ensuring their customers didn’t forget about them.
Right now, things look bleaker than they have since the credit crunch. Virtually every economist, pundit, and politician is warning it’s going to get worse before it gets better.
And your editor agrees. We’re not at the end of this — not by a long shot.
There will be more businesses disappearing in the next few years. That means competition for many businesses making the right moves now will go away as well.
Strong, well-run businesses will be left behind in more dominant positions than they were before it all began.
There will be more volatility in the markets. Adept traders like my colleague Ian Cooper will make some money by capitalizing on short-term trends within long-term trends like this one.
But there will also be opportunities just as great for investors who make the right choices over the coming year or two. The next Sloans, Edisons, Gates, and Watsons are out there working away right now...
Although it may not feel like it, these are the periods when the seeds of true wealth are planted.
Good investing,
Andrew Mickey
Editor, Wealth Daily
