Ferdinand wanted to make cars for the people, but the Porsche brand we know is an empire of performance.

Dave Young: 

Welcome to the Empire Builders Podcast, teaching business owners the not-so-secret techniques that took famous businesses from mom and pop to major brands. Stephen Semple is a marketing consultant, story collector, and storyteller. I’m Stephen’s sidekick and business partner, Dave Young. Before we get into today’s episode, a word from our sponsor, which is, well, it’s us, but we’re highlighting ads we’ve written and produced for our clients, so here’s one of those. 

[ASAP Commercial Doors Ad]

Dave Young: 

Welcome to The Empire Builders Podcast. It’s the podcast where we talk about empires that were built, businesses, business empires. You know what we… If you’ve listened before, you know… 

Stephen Semple: 

Something like that. I get it. Businesses that have done pretty well over the years. 

Dave Young: 

They started small. 

Stephen Semple: 

They started small. 

Dave Young: 

They started small and then they got big. They got so big to the point that you could call them an empire. 

Stephen Semple: 

That’s it. That’s the idea. 

Dave Young: 

It’s a pretty simple premise. 

Stephen Semple: 

That’s it. 

Dave Young: 

So as we counted down, Steve told me the topic today and it’s Porsche. 

Stephen Semple: 

Yes, sir. 

Dave Young: 

Porsche. I’m assuming this is the car. 

Stephen Semple: 

The car, yes, the car. 

Dave Young: 

Okay. 

Stephen Semple: 

The car. 

Dave Young: 

And I’m trying to… I know some Porsche jokes, but I probably shouldn’t tell those on this show. I’m trying to think if I’ve ever actually been in a Porsche. 

Stephen Semple: 

Oh, well then you’ve got to come up and see me, Dave. 

Dave Young: 

You own one. I know you own one. 

Stephen Semple: 

Well, I have one. Bernier’s got two. I don’t know how many Steve has. 

Dave Young: 

I see how it is. I see how it is. Maybe I will tell my Porsche joke. So you guys that own them, do you call it Porscha? Because some of us just say Porsche. 

Stephen Semple: 

Well, if you actually take a look back, that’s the proper German pronunciation as Porsche. 

Dave Young: 

Porsche, okay. 

Stephen Semple: 

And it’s supposed to not be… It’s not Italian Porsche, right? So it’s Porsche. 

Dave Young: 

Porsche, Porsche. Okay, I’ll accept that. I’ll accept that. I’m guessing we’re- 

Stephen Semple: 

Well, look, you got to always call a dealership to double check. They’ll tell you. 

Dave Young: 

Now, if I had to guess where we’re headed to start this off sometime around the 40s, maybe earlier. 

Stephen Semple: 

A little earlier than that, actually. It was founded by Ferdinand Porsche in 1931 in Stuttgart, Germany. You’re not far off. But the interesting thing is where the growth really happened, even though that’s when it was founded, when things really started to happen, was actually post-World War II. 

Dave Young: 

That makes sense. 

Stephen Semple: 

You’re correct on that. 

Dave Young: 

So, it started in 31 and by the time you hit the late 30s and 40s, you’re part of the war machine. 

Stephen Semple: 

Yes. 

Dave Young: 

Okay. 

Stephen Semple: 

So it was founded in 1931, Stuttgart, Germany by Ferdinand. And when we take a look at the history of the business for a very long time, they were a part of the VW group, although they were recently spun off into their own separate business. And there’s a lot of shared history between VW and Porsche. A lot of people make fun of the fact that it’s basically a VW. There’s so much connection. Now here’s the other thing is, there’s a lot of connection in Nazi Germany here as well. And I mean- 

Dave Young: 

That’s what I was intimating but trying not to say, but yes, there was definitely. 

Stephen Semple: 

And not one of these ones of, “Oh, I’m a business and I got sucked up into the machine.” I mean, very early on. Very early on. Ferdinand was a member of the SS following the war, both he and his son were charged. 

Dave Young: 

No kidding. 

Stephen Semple: 

He served two years in jail. His son six months. So we’re not talking loose connections here. He was a buddy of Adolf. Let’s just put it out there. And if you remember, going back to episode 21, VW was founded by Nazi Germany. So episode 21 about The Beetle, and Ferdinand was the guy who designed the Beetle. 

Dave Young: 

Right, right. I remember you saying that, Ferdinand Porsche. 

Stephen Semple: 

And look, Porsche has not always had the success it has today. It’s become pretty big. They do 40 billion EU in sales. They have 40,000 employees. They make 300,000 cars. There was a time that they’re making cars in the hundreds and thousands. It wasn’t that long ago. But let’s go back to Germany to the early 1900s. And if we think about Germany at that time, pre-World War II, pre-World War I, there was lots of history of engineering and science in Germany. More Nobel Prizes in Science was awarded to Germany than anywhere else in the world at that time. 

Dave Young: 

Right. 

Stephen Semple: 

Germany was a real leader in science and engineering. And the first commercial automobile was made in Germany by Mercedes-Benz. So it’s 1906 and Daimler recruits Ferdinand because Ferdinand had been the winner of the Pottingham [inaudible 00:06:05] Prize, which is the automotive engineer of the year, which is given to new chief engineers and basically allows the person to have this designated doctor engineer honoris causa, Ferdinand Porsche. And he would go around calling himself all of that. 

Dave Young: 

Okay. 

Stephen Semple: 

And this is an honorary doctorate because he never actually finished college, but he had real engineering chops, Ferdinand. So he moves to Stuttgart, which at the time is a center of car making in Germany, including all the suppliers. And he works for Benz for 20 years. Okay. Now, it’s Germany in the 1930s and 2% of the population own a car in Germany as compared to the United States, which is 30%. 

Dave Young: 

In that time? 

Stephen Semple: 

In that time. 

Dave Young: 

Okay. 

Stephen Semple: 

Ferdinand comes up with this idea of we should make an inexpensive car. We shouldn’t be making car for the wealthy. We should make an inexpensive car. The board rejects the idea. Ferdinand leaves in 1929. And in 1931… Kicks around for a few years, and then 1931 starts a consulting firm. Now, this dude knew how to name things. You’re ready for the name of the company? 

Dave Young: 

Of the consulting firm? 

Stephen Semple: 

Of the consulting firm. 

Dave Young: 

Okay. 

Stephen Semple: 

I have to read this to get it right. The Doctor Engineer Honoris Causa Ferdinand Porsche Construction and Consulting and Design Services for Motor Vehicles. 

Dave Young: 

Now, if I know anything about German, that was all one word that you just said, right? 

Stephen Semple: 

Well- 

Dave Young: 

No spaces in between any of those words. 

Stephen Semple: 

Translated, you’ll see it as Dr. in H period, C period, F period, Porsche, capital G, small M, small B, capital H. 

Dave Young: 

It just rolls off the tongue, doesn’t it? 

Stephen Semple: 

Now, here’s the crazy thing. Up until 2009, that remained the official name of the company. You actually can find, if you see Porsche’s older than that, that if you look for that, it’ll be stamped somewhere in the car that that’s the manufacturer. 

Dave Young: 

They changed it finally because it was just too expensive to- 

Stephen Semple: 

It cost too much- 

Dave Young: 

Put that many letters in a dye cast. 

Stephen Semple: 

Exactly, exactly. 

Dave Young: 

Holy cow. 

Stephen Semple: 

So it’s 1934 and they land a contract with Germany to design a small affordable car for the people called the Volkswagen. 

Dave Young: 

Volkswagen. 

Stephen Semple: 

Beetle. Right, there you go. Now, here’s the thing that’s weird. Post World War II, the allies are in trying to rebuild Germany and no one owns VW. VW was owned by the state. So now it’s in the hands of the British and the British and the allies want to create a strong economy in West Germany because it’s now the Cold War. So the big defense to defending against East Germany and the expansion of communism is to really get the economy going in Germany. And so the British government, as we know from episode 21 about the Beetle, approached Porsche who designed it and said, “Help us get this car built.” And this is where it gets just a little bit weird because the son goes in one direction. Ferdinand’s doing his own thing. They both got arrested for war crimes. Son gets out first because he did six months. 

And his son’s name’s Ferry and his dad is in jail for two years. So between this time where dad’s still in jail and son’s out, here’s one of the things they did towards the end of the war. We don’t know exactly how many, but it was probably about 20 of their best engineers and they moved them out into the farmland of Austria and basically had them working in a barn because they didn’t want to get them arrested or killed, quite frankly. So Ferry gets out and he goes to this barn in Austria and he’s looking around and he goes, “What the heck are we going to do to make some money? Let’s start fixing up cars.” Now, not a huge business fixing up cars. It’s post-war and there weren’t a lot of cars in Germany anyway, but they had to do something. 

Then the dad gets out of jail and he ends up doing this work with Volkswagen. Now, here’s what’s interesting. And this is where the really tight ties between Porsche and Volkswagen start. The deal that the German government gives Ferdinand, the deal that the allies give Ferdinand is this. 

Dave Young: 

Stay tuned. We’re going to wrap up this story and tell you how to apply this lesson to your business right after this. 

Speaker 6: 

Hey, watch. Stephen created something new. 

Speaker 7: 

That’s not surprising. Why are you being so quiet? 

Speaker 6: 

Well, not very many people know. 

Speaker 7: 

Really? 

Speaker 6: 

Yes, it’s new and it’s amazing. 

Speaker 7: 

Like tailwagon amazing? Well, tell me. 

Speaker 6: 

Usingstoriestosell.com. 

Speaker 7: 

Okay. 

Speaker 6: 

It’s a new free 90-minute session. 

Speaker 7: 

Why? 

Speaker 6: 

Because people have a hard time figuring out how to tell their business story. 

Speaker 7: 

And? 

Speaker 6: 

This leverages Stephen’s TEDx talk on the four ingredients for telling a compelling story. 

Speaker 7: 

It’s a great talk for sure, but how can- 

Speaker 6: 

Don’t worry. You’ll get help figuring out your story quickly and you’ll have one you can use right away. You’ll even learn where to use it. 

Speaker 7: 

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Speaker 6: 

You could sign up at usingstoriestosell.com. 

Speaker 7: 

Wait, isn’t there a tea time coming up? 

Speaker 6: 

Oh yeah, let’s go. 

Speaker 7: 

You’re away, Dave. 

Dave Young: 

Let’s pick up our story where we left off and trust me you haven’t missed a thing. 

Stephen Semple: 

The deal that the allies give Ferdinand is this. We want your help designing and distributing this car. We will give you a royalty for every VW Beetle sold worldwide. 

Dave Young: 

Wow, that’s pretty generous. 

Stephen Semple: 

Well, no one knew it was going to be such a huge success and basically go for 50 years that car was being built. 

Dave Young: 

Right, right. 

Stephen Semple: 

So for a long time, the biggest source of revenue for Porsche was royalties on VW Beetle sales. 

Dave Young: 

Wow, okay. So it really- 

Stephen Semple: 

Isn’t that crazy? 

Dave Young: 

It really wouldn’t exist if that deal hadn’t been made. 

Stephen Semple: 

May not have, may not have. Now, meanwhile, Ferry, who has design chops of his own and loves cars, started tinkering around with vehicles. And what he started to do was put big engines in small cars. There was all these Beetle parts lying around. He would build a car, this little car, and he’d put a big engine in it. And if you go back in the time, if you go back and take a look in the late 30s, early 40s, and you take a look at Ferraris and things like that, you take a look at the race cars at the time, they were two-thirds engines. They’re these massive engines. So he went the opposite direction. He said, “Well, let’s take a little car and put a big engine in it.” And he’s driving around and he goes, “This is fun.” Because he’s basing it on parts lying around, which is the VW stuff. 

It’s an engine in the back. This becomes the Porsche 356, which is basically Porsche’s first car. So they start making this car and they wanted to make it somewhat affordable. So the price was $3,750, which would be $42,000 today. And they also wanted to have it as being a daily driver because again, everybody else making performance cars were not daily drivers, had a trunk, bunch of things, daily driver. And this is an important part of Porsche’s DNA. We’re going to come back to this a little bit later, this idea of it being a daily driver. So coming out of World War II, sports cars, industry’s happening and everybody’s got one. MG and Jag in the UK, there’s Ferrari in Italy, you get the idea. Now, one thing I forgot to mention that’s interesting and still today, the government state of Lower Saxony, which is basically would be the state, they still own 20% of Volkswagen. 

Dave Young: 

Really? Okay. 

Stephen Semple: 

I forgot to mention that. 

Dave Young: 

Who are they now? 

Stephen Semple: 

Well, Volkswagen’s still around. Volkswagen’s still- 

Dave Young: 

No, who is the Saxony? 

Stephen Semple: 

Well, it’d be like saying the state of Texas. It’s a state. 

Dave Young: 

Okay, it’s just a part of Germany. 

Stephen Semple: 

Part of Germany and that government still owns 20% of the company. 

Dave Young: 

What a world. 

Stephen Semple: 

Now there’s all this stimulus going on in Germany to try to get the economy going. One of the things that they did, there was a really interesting tax rate. There was an interesting tax structure. There was a very high marginal tax rate. Now, ordinary people were taxed at 15%, but the marginal tax rate could go as high as 95%. And the reason why they wanted to do this was create this incentive for reinvestment. So there’s all this… As they’re making money, there’s this heavy reinvestment. And in the early 50s, racing is really exploding. Automobile racing is really exploding, but the lines between professional and amateur is blurry. If you remember, James Dean and Steve McQueen and other actors, Paul Newman, were all racing. 

Dave Young: 

Right. 

Stephen Semple: 

They’re all racing vehicles. And Jaguar and Porsche were trying to do the same thing in terms of creating this daily driver that you could race. Now in the end, Porsche won, and I think part of it is because quite frankly, they just built a better vehicle. There was a time where the joke with Jaguars was you had to own two because one would always be in the shop and one… And going back to the early DNA, Ferry Porsche was quoted as saying, “We have the only car that can go from an East African safari to race in the Le Mans to take out to theater and then drive on the streets in New York.” 

Dave Young: 

Wow, okay. 

Stephen Semple: 

And look, today, Porsche still heavily advertises that. They will advertise a Porsche driving through the snow with ski racks on it. And not their SUVs, the 911. This is very much part of it. And if you think about it, this parallels what Rolex did in the early days. You remember from episode 184 with Rolex. Rolex, the Submariner, the Explorer. 

Dave Young: 

Target by niche. 

Stephen Semple: 

Target by niche and make it tough and something that you could use and wear day to day. So it’s 1954 and Porsche’s selling 588 cars and about 40% of them is in the US. So really what’s making things hum with them is all those Beetle sales. And it’s the ’60s, the Ford Mustang comes out, the Jag E type comes out, the Austin-Healey comes out, and Porsche decides they need a new vehicle. And they were going to do a sedan, a four door sedan. But what they realized was they didn’t really want to compete with Mercedes and BMW. So they looked around at the other German car manufacturers and they said, “You know what? That’s probably not the place to go.” They had designed it up and that project failed. They had also been working on a six cylinder Boxter engine. 

So Boxter engine, the cylinders are opposed, so they’re like boxing. And the whole idea is that lowers the center of gravity of the weight of the engine. And they had a project that they were working on that that didn’t go ahead. So they stepped back and they went, “Maybe what we should do is just reduce the size of the sedan and put that engine in it.” That’s what they did. And that became the Porsche 901. Except there’s a problem. Peugeot had the copyright for zero in the middle of a bunch of numbers in France. They couldn’t call it the 901 because of that copyright. 

Dave Young: 

So they called it- 

Stephen Semple: 

So they called it the 911. And that’s now the iconic Porsche car. 1966, they sell 13,000 of these cars. Now, here’s the thing that I think is very interesting. And Porsche, as far as I could figure out, is the only car manufacturer that does this. First of all, they’ve maintained the 911 forever, but even on top of that, Porsche really understands design language. We can all recognize a Porsche. 

Dave Young: 

Right. 

Stephen Semple: 

We can recognize one from 2020. We can recognize one from 1999. We can recognize one from 1970. Even though they’ve upgraded the technology, they’ve changed the design of the car. They’ve now come out with the Cayman and the Macan and the Cayenne. They’re all recognizable as that vehicle. They’ve done a great job of doing that. I think that was a lost opportunity, frankly, when Tesla came out because they had a clean design slate. Tesla could have done that. But I think that’s really interesting how they’ve managed to maintain, even though they’ll modernize it. In our minds, we still will see one and go, “That’s a Porsche.” 

Dave Young: 

Sure. And the great car brands are able to do that. 

Stephen Semple: 

Yes. 

Dave Young: 

Audi is always going to be an Audi. Volvo is always going to look like a Volvo. And in the Portals class at Wizard Academy, one of the videos that I use to demonstrate that, there’s a language. If you combine specific shapes and specific lines, that all adds up to that brand of car. And so I’ve got an old video that I got when I was in the Motor Press Guild from Audi. It was just a video that was made for journalists with an Audi designer explaining all the lines on the car when they came out with the Q7 and how it still maintained the Audi design language. It was fascinating. 

Stephen Semple: 

It is. 

Dave Young: 

So Porsche could tell you that and the cool thing is those designers can tell you that. It’s hard for you and I to go, “Well, I can look at it and say, “That’s a Porsche.” But to be able to put it into words that describe it to someone else, is a gift. 

Stephen Semple: 

What’s really interesting, my nephew, Jeffrey, he loves Audi’s. That’s what he has. And he’ll even make the comment, he doesn’t like the Porsche’s because you feel like you’re in a bubble. Audis are very square. If you look at the back of an Audi and you look at the rear end of a Porsche, it has hips. But again, he’s even, “They’re great cars, but I like the squareness of the Audi.” So that’s interesting. 

Dave Young: 

Audi Audi has a fairly, not perpendicular, but an upright grill more so than a … And that’s part of their design language. 

Stephen Semple: 

So the whole DNA of Porsche came from this whole idea of a small car. 

Dave Young: 

Big engine. 

Stephen Semple: 

Big engine, daily driver, that was the whole idea is, it’s supposed to be a car that you can drive every day. That’s the core, core, core, core principle. That’s why they always have decent sized trunks. I remember when Gary bought his Boxter, one of the things he loved about it is you can actually put two sets of golf clubs in that car. 

Dave Young: 

Okay. 

Stephen Semple: 

Right? Now, here’s what’s fun. There was a time where when they were really wanting to get things going, they did some great print advertisements. So they had ads like bug killer. Another one was calling it transportation is like calling sex reproduction. 

Dave Young: 

Okay. 

Stephen Semple: 

Now, two of my favorites, one was not perfect. It would list 20 or 30 races that Porsche won. And if you actually read it, there was two that it didn’t. 

Dave Young: 

That they didn’t, “We didn’t win all the races.” 

Stephen Semple: 

So not perfect. 

Dave Young: 

That could have been driver error. 

Stephen Semple: 

That could have been. But Dave, you were going to make some jokes. Porsche’s able to laugh at itself. It actually had an ad that said, “Small penis? Have I got a car for you? If you’re going to overcompensate, then by all means, overcompensate.” 

Dave Young: 

I love it, I love it. Well, and that’s always the thing, the jokes are not about the car. 

Stephen Semple: 

But they actually ran that ad and I believe it ran in Car and Driver Magazine. I cannot imagine getting that ad approved. 

Dave Young: 

That’s amazing. 

Stephen Semple: 

And look, their own drivers are like, “Yeah, whatever.” 

Dave Young: 

Sure, compensating all I want. Absolutely. I love that story. Well, thank you, Stephen. I love the story of Porsche. 

Stephen Semple: 

There you go. 

Dave Young: 

And get out there and enjoy it or just buy me one and send it here. Thank you. 

Stephen Semple: 

All right, thanks, David. 

Dave Young: 

Thanks for listening to the podcast. Please share us. Subscribe on your favorite podcast app and leave us a big fat, juicy five-star rating and review at Apple Podcasts. And if you’d like to schedule your own 90-minute Empire Building session, you can do it at empirebuildingprogram.com.