Porsche (with Doug DeMuro)
03:21:32 Share

It's definitely porch porpora .

definitely don't say, definitely don't say the family like I said, they not like poor, sure, but more like porsha like but it's hard. I think it's a german thing and I think it's difficult to. But so we all say .

porsha port, if you say porch with a german accent, IT comes out like porch yeah .

so I think yeah yes yeah. That's .

probable actly who got.

True, got. Easy you busy you with you see me down, stand welcome two season and twelve episode six of acquired .

the pocket about great technology companies and the stories and play books behind them and then girl bert, David rose all and we are your hosts today. We tell the story of porsha, if you like our L V M H episode, you are going to love this one. And not just because it's a european luxury brand.

There is possibly even more family drama, creeping takeover vers and complex corporate structures at play. But why is porsha the brand and the product so special? The company has struck an incredible baLance of both building some of the world's finest supercars well, also being a great daily driver.

Unlike, say, a hori or a lamborghini, of course, these are expensive daily drivers, with the average porsha costing one hundred and ten thousand dollars. But they have managed to nail being a prestige brand with pricing power and make a ton of cars at three hundred and fifty thousand per year. Today will study how they cultivated such a viBrant community, which conveniently for them, is comprised of extremely wealthy people.

But IT has not always been this way, and I certainly didn't start this way today. Story has not seized tanks, the first electric vehicles. And like most luxury brands, some most adventures in the one thousand and eighties.

Oh yes. And if you like, works and features, you're going to be pumped about our partner in crime to help us tell this story. Dug the miro dog is one of David and my favorite youtube s and content entrepreneurs.

He Operates the largest independent youtube channel focused on car reviews with millions of subscribers. He also used to work at portia corporate and is about as big of an enthusiasts of the brand as you'll find anywhere. In fact, we are filling this episode now, a sitting in his garage age in front of a very special porcher dugs korea gt.

Welcome to acquired dog. Thank you for having me wonderful to have you here. Well, listeners, if you want to know every time an episode drops, sign up for email updates at a quiet data m, join the slack. We will be talking about IT after this episode acquired dot F M, slash, slack and without further a do David take us in and listeners, this is not investment advice. David I and dug may have investments in the companies we discuss and the show is informational and entertainment purposes only.

To set the stage a little bit, I think that even though it's .

a marketing phrase, the german engineering .

thing is worth sharing a little bit story because IT is more than just a marketing phrase, right? So there's a pretty long an incredible history of science and engineering in germany. And austro IT goes all the way back to the scientific revolution.

And you honest kepler, and actually before world war two, germany have produced more nobel laureate in scientific fields than any other nation in the world. Folks like max plank or when trod anger cardell and you know, Albert einstein, these are all german in australian scientists. And uh, this tradition extends also, of course, to the auto industry.

So IT is very likely that the first gas powered transportation vehicle this was look more like a tricycle than a car. But predecessor of a car was created by a german inventor in eighteen sixty four named sig free Marcus. I say probably because nobody really knows, because Marcus was jewish and the nais destroyed all records related to him during the war.

We're going to talk a lot about the not here in a minute. Either way, though, germany definitely did create the first successful production consumer automobile was a vehicle called the bds patent motor wagon. And that was made in eight hundred and eighty five by carl benz.

I recognized that name, bends.

Indeed, you probably do, as the most less news. Now, around the same time, another german inventor named godlee, but dealer, sets up his own motor company. And then in the early nineteen hundreds, they have a model that they're producing, goes on to be quite popular, is named after the daughter of one of their biggest dealers in their dealer in network.

Of course, we are talking about where I have no idea. That's where the crazy so bends and diameter end up merging in one thousand nine twenty four. And mercies bans is born.

But okay, you might be asking, what does this have to do with porsha? Well, turns out quite a lot, because in one thousand nine hundred six diamond cores, a pretty big win in this fledged german auto industry when they recruit the current putting a prize winner. The putting prize was for austria's automotive engineer of the year to come be their new chief engineer.

A diameter when doctor engineer honors cause a verden ied portion. Now the, uh, whole doctor engineer honors caused a thing. A is a bit of a red hearing, although porter, the person and the company would make quite a big deal about IT. The dude never even finished college, let alone got A P, H, D. IT was an honor degree .

that he got later. And if the doctor porsha is like doctor, like the sues doctor.

well, he had an honorary doctor.

He was already doing stuff that he was engineering .

and creating, yes, hence the door. Yes, he definitely was a bad as engineer. And we are going to talk about all of the things, the amazing things that this guy creates.

But we also gotta state this up front. And this is a good place as any first and portion and many other folks in the family and in the early porcher and vogue wagg. And as we will see, days were also huge nates.

And ferdinand himself not just wasn't nai, but was a very close personal associate of adou hitler. He was a member of the sss. And you, we're gonna glorify him.

And many of these other folks here of there, business and engineering contributions. But like that doesn't mean that these are good people. So keep that in mind.

Yeah, this isn't like one of those people that you hear. Oh, well, you know, at that point in time, the notes were so big, powerful, they kind of just got course or they collaborated. It's no this he was yes.

he was definitely alty. So when first and takes this uh new post as the head of engineering at dialer, he moved his family from austral where was the poddy prize winner to stuck out in germany and dug you have more text on this start is basically like the detroit of the german .

auto to become more that way. Portia was as well. Get to cause Mercedes ends is there. And IT really does feel like yeah manufacturing crit, especially for cars.

And I think it's not even much like detroit. It's not even just the car companies, but all the is the sub country.

everybody you need in start art. It's just like when you go to detroit, works for poor summer, said his bends, or a supplier or something like that IT .

like the industry town. yes. So porsha friend is not a short period of time. It's two decades like that. He is running the engineering and the car design for Mercedes spans while he is there towards the end of his time. Can as we're getting into the light up to world war two, he comes up with a concept.

He thinks that he can produce a small, affordable car that can really become the first german and european and mass market automobile. Ile, now back in the us, there is model t and and reform that existed. But first nan's vision is a small car. The model t was a large car. They like a modern, small ornament, ill that german everywhere can can buy.

which was important because in germany in that time, corwen erp was not anywhere nearest as big as IT. Wasn't the united states apparently only two percent of germans on to carvers, thirty percent of americans by the one hundred thirties? And so mobilizing germans was not seeing that had happened in mass at that point.

So this really was a chAllenge to build a car that could be affordable enough for the average seven person to buy. And indeed, IT was a chAllenge because the board of dialer bands, uh reject IT uh that like now we can do this. We make expensive cars for wealthy people, right? They get into a huge fight over this. And third, nand ends up leaving the company pretty acrimoniously in one thousand twenty nine. So much so that like a duck, you work to porter, you have content like I think to this day, the river between Mercedes bands in port like there, there's some bad blood.

IT heats up and IT cools down. And there's more to discuss that in the future, for sure. They ultimately do share that town too. So like there's rivalry, but like they're also, you know you hang you have beers with, can avoid hungry out with mercies bands.

Employees also love IT. So one thing leaves vertu bumps around for a little while. And then in nineteen thirty one, he starts a consulting firm to kind of advise other car companies, not dial bands, but other car companies in germany, in europe and I think in america, two on their designs, and like, do some work for them, and maybe you can design cars for them. And he names IT, the doctor engineer, honest cause, a 4 nian portion construction and burg for motoring and version about I ap。 That to be fair to you.

so it's amount .

I studied french holic and that translates as the doctor engineer on us caused a first in porch consulting and design services for motor vehicles company. And this is the beginning of ports of the company, and up until two thousand nine and two thousand nine, in which we will get too much later in the episode that is the company that makes for cious.

你 yeah .

I mean， you look up like the stock of porsha and you pick the right porsha and there's a couple will talk about that still. The full name of the company is all of his honorary things.

So when he starting this new company, he unless the financial support of two people, one is his son in law, his darter Louis s. Husband, when anton P. H, remember that last name, because IT is also going to be very important as we go along here.

And the other person is adou rosenberger. Now, if you are a portion history now, you probably know about the anon ph, you probably don't know about IT off rosenberger, because shortly after they start the company, uh, rosenberger was jewish, and he gets arrested by the gustavo. He gets imprisoned.

He eventually bribes his way out, escapes to america. But during the war portion, and the nazis totally appropriate his stake in portion. He's written out of history. wow. okay. So this new fernand company in one thousand thirty four, they land one very, very, very large contract that would go down in history, both for the company and the world.

That contract would be to design first dance vision, the small, affordable car for the people, A A vox, a vagon, you might say in german, that car would go on to become the vox wagon beetle and the company that contracted porsha to build in design IT. Was vox wagon, which was established to do so by adored hitler. I had heard rumours over the years like, oh yeah, this there's like a native connection here.

Eight off hitler founded vox. Bigger than a connection. There's not a connection because it's the same person, right?

Is the thing a facebook? I feel like that has some kind of like sucker berg association.

but i've never really put IT together. Yeah, there's some link between markets at work.

And I just got to say this early in the epo de, we may as well like pointed out already, IT is crazy how comfortable we all are driving volkswagons and portions. When I was like, not just a little, not I affiliated, like founded by nazis. And yet the way the world has evolved, like people kind of became OK.

With that, all the german brands, I mean, you know, most of them used jewish labor and their factories at that time. And obviously very different people run the businesses now. And so you just kind of put IT .

out your mind and you know what generations have gone by also, you less so on the portrait side of things, more so on the vox wag inside of things that will see with the history here. There is kind of a pretty incredible refounding of vox well after the war. And I think if IT weren't not for this refounding that will talk about minute, he would not exist today. Yes, but yeah, just wild break in to aid off hitler. So the beat this, this.

you know, people's car dog, you might know this. Did you go on to become the most popular car ever in the entire? yes.

IT is very hard to get actual production and sales data.

especially for old car, especially like the produced in many countries over many years. I mean, they were building them in light amErica through a couple of years ago, maybe two thousand and three years something. And so it's like difficult to figure out, but it's obviously whether or not IT was the most or one of the most IT was obviously the effective of that cars is cleared, you know, today.

And I am I I tried to think I could not think of any other model. I believe the beat the original beetle was is likely the single longest produced and largest of both in terms of the length of time and a number of units. St of a single generation model of a car like the civic, the musing, the f one fifty more than the beetle, but like those aren't the same car. Like the beetle was the same freaking car until the new beedle in.

And interesting, I think the Young people today look at like a cute classic car, but like at the time I was what you drove to drive your family around. And we will talk more as we get to postwar. But like that in germany at the time is like a real important .

practical family car original. One of things you can do when you start a company as a fascist dictator, uh, you can create a new city to house this company in which he did so. Hitler creates a new city in germany, known as the then called the city of the strength through joy car. That was, I wanted to call the the beetle originally.

the strength through .

just the strength they never like .

in that see erman.

And yeah, yes, and this is wolberg like, this is the city that walks on, is still located in, and not vox wagon.

but like the vocs wagon group. One of the largest lam in the world that owns many other brands are familiar with all out of walser g.

all out of wolves burg. So hilo creates smoke wagon. He creates wolfsburg.

They do start production at the beedle before where where two starts, they only make about two hundred units. These are super rare. Today you find a prewar middle, then war.

War two begins in on september first nineteen thirty nine, as you would expect, vox wagon, all the vox wagon in ports Operations, yet repurpose to making military vehicles. There is a bunch of darkness of everything you mentioned earlier, force, labor, r concentration camps. This was the naughty war effort.

IT all happened. We're gona skip over this period for our purposes today. But like note, IT happened after the war, though a whole bunch of really interesting stuff happens that basically fractures and separates out the vote swagger Operations from the porch Operations for the next, the rest of the century and into the twenty first century. So ironic, given that they are now one company again, right?

First of, where are they?

no. Well, where are they? That's the question.

And the funny thing is also, they always the dance around, even in this period and then in the decades after that. And then, of course, now there was always kind of thing with each other. yes.

So first on the vox wag inside I had looted to this a minute ago is a pretty amazing story. What happens because you would think, like there's no way you can imagine that volks would survive post world war two, given what .

the the company.

So what happens is wolfsburg ends up in the hands of the british at the end of the war. There's this whole crazy thing in germany of like all the elite armies are coming in, and literally germany in berlin nds up getting split in the east erin, west germany, east britain and west berlin. Will's berg is in the hands of the british.

And remember, because IT was a political organization, IT wasn't the company before the world. Nobody owns IT. It's this like ord organization is super unclear. There's no like propriety ship of IT. So the initial plan that the british come up with, they were going to dismantle the factory and ship IT over to britain and essentially have britain appropriate the volkswagon technology and Operations like the beetle was almost a british car yeah.

But supposedly the british didn't want IT. The british saw the planes for voice wagon for the the beetle and said, no one's can ever want to buy that car. It's crazy to think about now.

And IT gives you an idea of how the british would Operate their car industries, constant missed opportunities. But they literally looked at like this, the draw, you know, they feel the models that they had feel that they had built. They said, that is, they literally said, IT is not commercially viable.

wow. wow. So, okay, the british government can elect vision for this. But a secular british person did see the vision for this.

And that is the officer who was in charge of the, the, the territory where the factories would be like on the ground, managing IT, a major i've been hurt. A legendary figure in vox wagon history, he finds one of the pre war production, beatles, the two hundred that were made. He starts to driving and around.

He's like, hey, this things actually pretty good. I think we could maybe do up there with this. Here he also season, this becomes increasingly obvious, says the post world war two state of world affairs takes place here in germany of like habit, like the cold boards.

About to start, he realizes that west germany needs a economic revitalization here. We need to restart german industry. Hey, the uncertain is falling just to the east here. So he amazingly proposes and convinces the british command to leave the factory in wolf's may be easier than I thought because the british didn't want IT, apparently.

And also to place an initial order, a seed order, to restart the company for twenty thousand beatles that the british military is going to adopt and use as their main military transport. So not as like a tank, but like not an armored meeting, but like they're going to use IT to drive officers and stuff around. Yet from that seed order like that is now the new volker. And so it's like, yes, hitler started IT, but then i've ve been hurt.

Yes, totally. Now, one of the things that I find interesting about the beetle is that each europe was so war torn after a bar two, the all these places, they were in similar situations to germany. And that, like the people needed to get back to work, they needed to be able to drive and go places.

And each european country had their own beetle, you know, U. K. Had the many, italy had the fiat five hundred, france had the citron two cv.

They're all kind of looked similar. These all based on the beat. No, no, no. But they all came from the postwar era where they needed something small and chip to, like remobilisation the citizens, basically. And so kind of each country developed, had their own, you know, car that did that for each country. But in germany, of course, the beat became a global hit, where, as in those countries, that that was more, you know, in their air.

but you know, a lot of sita.

yeah, no. But the two city was a huge, huge car. And the french, just like the germans, needed to get back to work, needed to start building stuff again and also needed a cheap car to like .

crews around IT yeah super interesting too. That looks like and but put a pin in them will will come back to them in about fifty years because there's a lot more to say on on six and twenty years.

That's about how long they would make that one model of the beetle.

Yes, the new beetle would get introduced, I think in nineteen ninety eight. And the first one's post war were made in nineteen. Crazy.

crazy isn't a while, but it's since.

Okay, so what about porch? Well, they have a bit of a different so after the war.

and we should say during the war, for and portion was designing tanks, yes, and other military design.

the elephant anti tank tank, the most powerful land base tank ever created, a terrible, but be like just the range of design talent that he had, like he designed the beetle and he designed the largest .

antitank tank, and also some of the very first hybrid and electric cars in history. But at that time, battery technology wasn't advances enough. And so you're logged around this huge waited battery packed to get almost no true set of that. And so I didn't really go into production.

He was a genius. This is also runs in the family. Too many of his decedents are both engines and cars.

Genius after the war for nand and the sun in law, anton PH are both arrested by the french as war criminals tried in france. They end up being imprisoned for two years in france and research. The technical .

thing they got him on, which is why they only had two years, was for the force labor that they took, the imprisons jews and force them to work in the factories. But all the other war crimes that were stacked against them ended up not being charged. And so quick trip .

in .

an so first .

nan sun ferry pora, who had been working in the business, I think a little bit before the war and then during the war two um he is also arrested for her crimes do at the end of the war he gets released after six months in the summer of one thousand nine hundred and forty six six. And he and his sister, luis, I like, what are we gonna do you know, we got to rebuild the family. We're going to restart the business.

Let's go figure things out. They return to the family's kind of animal in austral. And that happens to be quite convenient because during the last days of the war, as stuck out and other large scale german military production facilities were getting bombed by the al porsha took about twenty years old of the best, most talented engineers and production people that they had.

And they move them and a sticker, and they move them to the austrian countryside so that they wouldn't be you targeted by this, that the other bombers wouldn't know where they are. And this is prety crazy. They are literally Operating out of a saw mill in a farming village in southern austria named gmt. We're talking about like a couple thousand people may be well, live in this area.

yeah. And David, are you getting all this from? I know you read like five hundred dollars worth .

of textbooks on porsha. So there is this incredible history of portion called excEllence was expected there was written by carl ludvig and we have to O A big thank you to him, uh, for the research for this episode. This work is like, I mean, the photo is the archive work that are in this this volume. It's it's incredible.

I read a coffee table book that was like the complete illustrated history of the nine eleven, because for this episode, in this topic, you want a visual history. And so it's not like there is audio books and kindle books that we could do. Our Normal amount of research on all this stuff is in these like huge, heavy bound pictorial books.

These are amazing objects that like are being produced. This is such a like um like visual tangible quality to them. That is that we don't usually cover on acquired. Okay, so fern Lewis, go back to australia.

They're they are in the moon um and like, well, what if we start a new company and see what we can do around here and there's some vehicles we can start fixed in? This is literally like the SONY story. If your member, when tony first got started in tokyo at literally the same time, they started by fixing radios.

the second deportation.

a company portuguese struction in uh, G M B H, which is an austrian, an company that they start do this, they started up like fixing old dino military vehicles that are around there in austria. Unlike SONY in tokyo though, where there were a lot of radios in tokyo and there weren't a lot of cars in government. So prety quickly they are like, huh, we don't have any more cars to fix up. And bad .

business .

well about not a large market, shall we say at this point. Ferry has an idea, and IT turns out it's a pretty damn good one. He definitely liked and agreed with his father's vision for, you know, small AR car for the masses of walks wagon. But he always had one major problem with the beetle, which was that I was slow and I just was not fun to drive.

So during the war he actually had a custom bio made that he drove during the war, uh, with a super charge, danger and fair said the later in a thousand nine hundred seventy two interview I saw that if you had enough power in a small car, IT is nicer to drive. If you have a big car, which is also overpowered, and IT is more fun. On this basic idea, we started the first portion prototype to make the car later and to have an engine with more horsepower. Can you contextualized .

what a big moment in like world history this is?

Yeah I mean, it's an interesting concept because sports cars in general weren't a thing that much. They were and there's gonna people around. And now there are a lot of sports cards before, but IT was really a thing of, uh, real enthusiasts, altho people that sort of thing would buy cars to go motor racing in the era of, you know, brasher. And the concept of creating like something more affordable little or that was still fun, was like IT was kind of an interesting idea that, you know, this was a brill, was a touchstone of a concept that has really been taken obvious ly by them and refined and others as well.

I went in the research, I when I looked up, you know, some of those sports cards pretty portion, and you look at them, yeah, things are like Franking cars. They are you, right? And the engines are the like.

The engine base in the front of the cars are two thirds of the length of the car. There's this one ferry from that era. And I look unlike, how do you even steer this pig? Good, good. Looks like a boat.

if I thought at the time, really was, you want to go faster, more, more power, which of course creates more weight, which of course creates the need for more power. And they did that, but he was unwilling.

Ty, yes, I am even like to the step of corey t, sitting behind us. That's not a large car.

right, right. And that was a porch, a thing. And that was even more of a portion, a thing at at this time.

totally. And David, you said a word there that if people aren't in the cars, they may not know this super charge duck. What does that mean to supercharge?

Basically, you know, when engine takes an air and that kind of air helps, air r mixes with the fuel and IT creates a combustion that more or less, that's how a combustor works. Supercharger push like, pushes in even more air to create more power, basically. So the term super charge would be referring to lake takes the same engine, but adds this thing, that kind of force more power through .

the light IT literally force more iron. yeah. And then I don't think turbos had been invented, and turbos would obviously become a big thing for portions as much later.

The concept of problem is actually fairly similar to super charging, except that it's spin, something that adds even more air, basically, and thus turbo charges result in power kind of being produced as the car makes more power, IT makes more power, if that make any thing that kind of like spins itself up in a faster way. And there's kind of prose or cons to either either of them and .

for those following long at home, this is like end of the forty one thousand nine hundred forty seven type era.

those couple years after the war, when everything was kind of .

getting figured out. Yeah.

so ferry has this idea is like, I D like driving my super church. Beetle is a really fun to have a small car that also had a lot of power on IT. What if we take this small Operation of our, you know, a lead team here in the moon, and now we try and build a card that does that.

And hey, IT also, you know turns out that um well, we built the beetle so we know how to work with the beedle. There are bunch of beetle parts around the beetle was the main kind of tasty platform for a lot of military vehicles for germany during the world. What do we take a lot of these parts and um the basic architecture of the beetle, which is a rear mounted air cool engine on a small car, and we try to put something together here and this becomes the legendary port three fifty six.

For some context on this, you can buy an old beetle today for ten fifteen thousand dollars at auction, even to be like a classic one from the fifties or sixties. Three fifty six is regularly cell for about three hundred thousand hours at auction, and special ones go for well, well above a million. This is a big idea. The gulf between a different thing is a large doug.

why is the desirability of these cars so different today?

The well I mean production numbers is probably the biggest compound with that one, right? They made literally silan adults um in the three fifty six, especially because IT really kind of was one of the the real touchstone moments of the sports car coming out of the war, how we define the sports car today. IT was a special thing and IT was a special time in a special moment and a lot of them also weren't treated all that well.

Ultimately, the three fifty six IT was not affordable, but they made a decent number of them. They got to be relatively cheap. IT was the old used portion for a while in the sixties and seventies, and so not that many of them were saved. And now it's kind of revered as when we look back as as this major moment in portion history.

Yeah this was another thing. So obviously ck a um their production capability is not nearly as largest smoke wagon. So they need to press these things pretty high.

They Price them at three thousand seven hundred and fifty dollars. The german equite, one of three thousand seven hundred and fifty dollars in the late forties. That's about forty two thousand dollars today.

But we're talking about war torn eype you're trying to sell. That's a lot of money. Here's the crazy thing. There's a market for that, even in war torn europe for a forty thousand dollars sports car, like there are enough people who IT turns out are interested enough in various vision for a small, fun, fast sports car.

Initially I was slow. Then I took a while, the first couple years they only made like a couple hundred over more than like that. IT was initially pretty slow, but then things started to kind of kick around.

People in germany started to get some money and things started to take off. Yeah, IT may be worth pointing out also on the context of the sports car. Like the three fifty six coming out of world war two was kind of the beginning of the sports car really taking off. Like I mentioned before, the the earlier ones were these big, giant things that we're only Operated by, enthusiasm, know how to work them. But like post world war two, there was a lot of optimism.

There was more in britain was happening to the mg, was coming out with their sports cars, Austin healey, jwt, these cars all kind of were born from this postwar period of, like, hey, these cars have been refined to the point where we can use them and enjoy them and enjoy them. And that really became a thing. And in germany, IT was the three fifty six.

So that takes us to delete parties. Here are starting to three fifty six moon. Now, the end in one thousand nine hundred forty seven, five, nine, porsha and anthon PH gave, released from french prison.

They come back to austria, the families all together, and they kind of got to decide what to do here, right around the same time, walks. I can s getting back up and running. Host is running at its its like the vision they are to make the meal for for germany and for the world. They come back to the portions and they say, hey, we still want to do business with you.

And in fact, we actually wanted expand the scope of our business with you guys are even more than IT was before the war because we could still really use you know technical design consulting work and really leadership from new individual portions here evokes what can I mean after you design the beetle too, though? Now, you know, we're not a government organization in the same way anymore. We need distribution.

And you guys have this new austrian porsha company that you've set up. So how about this? They propose two things. One, they say, let's reinstate that old german portion company, the doctor, engineer, honors, cause a blab, a blaw.

Uh, what we create the german portion company, it'll resume doing the technical designing consulting work for us here, box waggon. In return, they give that german porsha company literally the sweet, hard deal of a lifetime, a royalty on every beetle sold worldwide. No way. Yes, yes. This is how entertained these two companies are.

yes. So sorry. The deal is, we want your austrian company to distribute our walks waggons. And in order to course you to doing that work .

in the consulting work.

we also want the consulting work OK.

But but then you're on the right track. This is a hole of a street hard deal for the port of failure. I mean, you are right to be saying, why would the .

german government do that?

Do you know what kind of royalty IT was enough .

that I was. And the time that even clear, just how right? Amazing IT right?

Nobody knew that the beetle was going to become the international. But he also, the german government did know that this was a lot of value. And they also mayor may not have known that on the austrian port suicide for the dealership distribution side, that was also a lot of value.

So we're not not going to talk as much about the austrian Operations of portion for the rest of the episode, but IT becomes a huge business. So by the time in the early two thousands, when IT all gets consolidated back into one company for most of the two separate histories, that was the larger company by revenue. So the austrian portrait company becomes the largest hard dealer network in europe, not just for volks waggon's, but for all types of automotive brains. They're doing billions of annual revenue within a few years here.

I mean, what an opportunity to be given a distribution network just as the car is starting to become like a big thing, exclusive .

distribution right to.

And there in countries not just in austria.

they're all about place yeah they're all over the place in europe. And even more incredibly, so what the family decides is that third nand and ferry, the original first nan and his son ferry, they're going to move back to stucker ard and take over retake over the kind of german Operations of portion luis and anton on the sudden law. They're gonna stay in austria and run this dealership business.

Anton dies in one thousand nine hundred and fifty two. And luis is the one who builds this business like luis and her children, and turn that into this huge, you know, the largest car deal in network in europe. wow.

Dug the way the value chain of all for selling cars. There is a very clear delineation in the U. S. At least until tesla, of separating the dealership from the manufacturer. There is no direct consumer. Was that already like obvious at this point in history when portion could have has these two different companies? To an interesting question.

I suspect the answer is more or less. In some brands, I bet they were selling direct consumer and some I I bet they weren't. Some of the smaller ones maybe. I suspect the reason this worked out is because folks for I didn't I mean, these companies didn't want to be the ones who are distributing all cars across and doing they focused .

on manufacturing. I think there been a technical reason which even though this new vote wagon was reconstituted as a company, is only shareholders at this point in time, were the german government so both the national west german state and the state of lower saxony within west germany, which still to this day twenty percent of vox wagon, which is crazy yeah um yeah they would I P O vox swagger, I believe in one thousand nine hundred and sixty sixty one.

So IT was um even though was a company, IT was a german national company to Operate in other states, other countries in europe. They probably needed the parties. Yeah.

wo yeah.

well.

Dp, okay. Listeners now is a great time to tell you about long time, a friend of the show service now.

yes, as you know, service now is the A I platform for business transformation, and they have some new news to share. Service now is introducing A I agents. So only the service now platform puts A I agents to work across every corner .

of your business. yeah. And as you know from listening to us all year, service now is pretty remarkable about embracing the latest AI developments and building them into products for their customers. AI agents are the next phase of this.

So what are A I agents? A I agents can think, learn, solve problems and make decisions autonomously. They work on behalf of your teams, elevating their productivity and dentil. And while you get incredible productivity enhancements, you also get to stay in full control .

up with service. Now AI agents proactively solve chAllenges from I T H R. Customer service software development. You name IT. These agents collaborate, they learn from each other, and they continuously improve handling the busy work across your business so that your teams can actually focus on what truly matters.

ultimately service. Now, an agenda I is the way to deploy A I across every corner of your enterprise. They boost productivity for employees and rich customer experiences and make work Better for everyone.

Yeah, so learn how you can put A I agents to work for your people by clicking the link in the shower notes or going to service. Now document slash A I dash agents.

Okay, so bad you hit on this a minute ago. What the hell, why is the new western controlled western german post nazi government giving this deal of a lifetime to these former?

Not, and it's not just will pay you for the car as you distribute that we make. We will pay you for all cars that we make every beat, regardless of whether you distribute or not.

Yes, to the german company. And then the austrian company has exclusive rates to distributed is a craze deal. So here's what's going on. Um IT actually as crazy as the time makes sense. So we talked about a minute ago the iron curtain on and the sov.

It's like so hard for us to remember now, but germany, post war, was ground zero for the cold war, like the battle against the soviet union was happening right there, right next door. And so for the west reconstituting, the west german industrial base was of paramo importance. So like the Marshall plan, the people probably know about like this is why the Marshall plan happen.

And this is essentially part of this philosophy. We don't care that these people used to be not, but for portia, for merges bands for lots and lots of german industrial as companies, the reason that they get restarted and reinjected with steroids, so to speak, is like, hey, we got an extension al threat next door. We got a rebuild the instant al place.

Now the deal that they give them does come with an implicit string attached, which is they basically say, to porch and other companies, we're not really going to give you a license to print money. Instead, we will give you a license to essentially create enterprise value. So what west germany does is they create one of the oldest tax incentive systems i've i've ever seen.

So for ordinary people in west germany, post war, the tax rate was very low. The maximum amount of taxes that any Normal person would pay would be like fifteen, twenty percent of your income. But for these new old industrial alist, above a certain income, germany sets the marginal tax rate at an eighty five percent. Basically.

cain, yeah.

like people are complaining that you living california, oh my god, thirteen percent static of tax on top of federal. Like imagine if the marginal tax rate were ninety five person.

you would just have no incentive to earn .

any additional dollars that is equally bad on the corporate. Any profits are attacks. So what are they trying to do here? They're trying to incentivize capital reinvestment in the industrial pace. So they're basically saying to portion and others set all this up.

And we are going to create all the incentive such that you will plot all of the money all these royalties were giving you from the beatles into building up your production capabilities and investing in d and new models and a set a at at a. And I mean, that sounds crazy on paper, but like, my god, IT actually works. Like IT works really frequent. Well.

do you think there was some guarantee that the tax rates .

would lower someday? Maybe and I think they did. But um as we'll see porsha becomes like IT becomes pretty institutionalize ed there of like don't take profits instead really best in new models and R N D racing uh, to the great benefit of the brand.

yes. So I mentioned one of the things that porsha investing over the years is race cars and racing. And this is is super interesting.

None of us are racing historians. That's a whole another brands of the automotive industry. So here are in the late forties.

Early fifties. Racing in this era doesn't look at all like IT looks today. IT hadn't professionalized yet. So the line between consumer enthusiasts car market and professional racing market was very blurry, very, very blurry, right? And IT turns out that even though your manufacturer, including port, would make special versions of cars for racing, for lemon being the most famous race at the time, um you know when others around the world IT wasn't like like you look at enough one car today or you look at alamo's car like there is .

no connection between and so super obvious .

point to illustrate this is um fox are probably you know no names like James dean or Steve mcqueen, these famous hollywood actors that were known as like you know they did all these race car films that they were also professional .

race car drivers. Festival L.

S. Were in, yeah, they competed in like real race.

This add, brad pitt, jump in laa, right?

D cut, well, I was about to joke the'd kill themselves. James dean did kill himself in a porter, five, fifty spider. Which portion would make a kind of dedicated of racing type vehicle? There was also a consumer production vehicle.

That car that never would have happened if portion was incentivize to invest all their profits. Like, I mean, maybe you can say I did like the legendary ss of that harm. And they self for what five million years plus. They only made .

ninety of them in the end. And so like IT was a car that in theory you could go by. but. While the three fifty six was like the sports car that you could gentleman race, the five fifty spider was for people who like, really like, let's go racing and like, do IT. But like you said, you could, a person could walk into the, not a dealership IT necessarily, but like just order yeah, but is a solution you .

can to see this trend, this moment where you see the by vacation between anybody can do IT and what the very best in the world kind of look like. That seems to be true across everything in the world today in the way that like what Taylor swift is doing on the stage on her tour has nothing to do with, like a person who picks up their guitar and is talented in place at the local bar, like SHE is the sr. Seventy one pilot and this know flying on a local bar stage, just flying a sestina. And the machinery to do so is entirely different in the same way that you're talking about cracking splitting at this moment in the early fifties.

Yeah so back to ring. We were talking about the spider a minute to guy. I'd get so excited about James dean. But dunk, to your point, three, fifty six years in one thousand nine hundred and fifty one in one thousand nine hundred and fifty two win their class at lemons. They don't win IT outrage. Other bigger, powerful cars win out but they win their engine classes at lemons and these are, you know yeah they're modified a little bit but like you basically buy them.

right yeah that that was kind of a special thing but that that was the point of those classes. That was that there were cars for people who could kind of go buy a car street and to find IT.

And I think this was pretty unique to porches at the time. Certainly, you could go buy for aries and floris competed in one. But like again, like we are talking about, the series were a different thing. Yes, these different, and I think there are probably also a lot more expensive than the thirty seven hundred dollars plus.

An important distinction between portion for our in this era is that portrait was largely focused on broadcast. And then the road cars went racing, except for the five fifty, which was kind of built, purpose built for racing. And there were racing versions of the three fifty six.

But the goal was mostly road cars where as ends. So very famously, he just wanted to race. And he hated his customer, his his road car customers deeply. IT wasn't his thing. He just wanted to raise. He only sold road cars to kind of finance racing and a lot of the road cars that he ended up selling or either based on race cars or just former race cars that were done with this crap, uh, where's portion was selling three I mean three, fifty six were like being sold, but is in a pretty good volume.

There's this great, great, great, very partial quote about this, what he would say later about the nine eleven. But I I think this also applies in early form of the three fifty six. The quote is, we have the only car that can go from an east african safari to lemons, then to the theater and then to the streets of new york. And like that, such a unique thing.

especially in this era like IT remains true. It's kind of thing yeah to this day like how relatively usable the car isn't just about any setting like you can drive IT to work. You can actually take IT on a race track that like has remained sort of an east of whether or not there there is constantly a north star for them. IT is what they do.

Anybody else I try to think of a what the rate um kind of other luxury brand analogy is. Your important definitely is a luxury brand. It's not like making apples and is here um it's kind of like a role ex to me. Is that really .

yeah do you think? Yeah absolutely. yes. You buy those watches to wear them. You don't buy them to keep them. In a case in augat know steel, they're originally made for people who are swimming english channel or suba diving.

I think it's reasonable to also compare IT to like continuing in the luxury world like a remote to case those aren't that expensive there three times, four times more expensive than relig. That's why it's made out of stainless steel also. I think that's probably the right. I think it's not a broken bag.

Like brands like this are so valuable because .

IT has both the breaths and the depth. Like there are enough people who are like, I love porches because they are my cars I can actually drive, but they are super cars.

Yes, this thing behind this is two about, yes.

this thing behind this is little bit different.

And there have been and will get to. And we in the five thirty spires, one of them there, have been important that kind of go one way or another in the philosophy. But like generally speaking, at sort of the middle road, going back to furies quote about this exact thing can do all these things.

Yeah dug. One question for you, i'm to keep going you for terminology. David mention leon.

What is that lama is like? There are various car races that are considered sort of the big car race, right? Like the eighty five hundred is the case of that racing series. The ma has always kind of been a place to prove technology. It's a twenty for our race.

So you switch drivers and it's always been a place where some of like IT IT proves like the endurance and the capabilities of a car and of a manufacturer over that time here. It's really serious, always raining and it's always a disaster and it's in the middle night and it's difficult. And so like being able to win or win your class. Look more like the monto grandpre, the super bowl, if you will, of like vehicles racing in that sort of racer.

There's also this like um I I I I think probably advanced this argument that relative to the other races is closer to like what you want for a all around car that would also be a driverless car because like fuel efficiency matters.

matters is also a road race. So it's not on a race track literally on the closed dow roads in the french countryside and and race on the road. And so there's like some component of like instead of purpose building a car for a circuit to lake cows, we're using the .

throat of two days before yeah total. So on the back of all this success and like James dean and Steve, my queen and all this, as you would imagine, portions start to become quite popular in america. So in one thousand nine hundred and fifty four portrait, would I I don't think very and very like invisible, like we're going to sell cars in america.

This wasn't part of the business plan. But in one thousand nine hundred and fifty four ports cells, five hundred and eighty eight cars in the U. S, which was forty percent of their entire production for the year and that forty percent basically stays count, goes way up for a while in the seventies and eighties but um kind of never dips below that. Like amErica is a huge market for porches.

Just amazing to think that five hundred eight cars with forty percent of the production I agree with to you, by the way, by your point, det, they didn't really have amErica in the business plan. It's one one thing the project provides some context is important. Even mind the number of like sports cars startups happening in europe at this time was significant, most of which listener's fears will never really hurt of because they were died.

These came up, they showed up. They raised a little. They sold some cars, they felt, and that there were two of these.

There was no concept that portia would be more successful than any of, obviously, the family hoped that would. And IT became that way. But so many families hope there's what two, and they all failed. And somehow portrait, you know, well, part of IT .

was the incredible success of the cars. A big part of the two is the royalty on the big. That's a nice steady source of cash for that. You can invest in your with four.

three inventions. So you're doing stuff like racing, you're doing stuff like looking international. You're like what can we invest in that? Like we're not sure if it's .

up are likely because we we get the money company and be continues to be more and more and more popular and only continues to involve them to.

right? So it's speaking every investing as we get to the one thousand nine hundred sixty is like the three fifty six is great, amazing car. But it's kind of I don't know that where you would put IT in my mind, it's china. It's not quite a modern car. It's like it's like close, you know it's not a model t, but it's it's it's not a right it's not a nine eleven.

Right, right, right. And and what was starting to happen was the three fifty six was one of the leaders of the charge of the sports car that era. And what was clearly starting to happen with other sports cards are showing up that we're refining some of the principles.

yes. So we're now in the sixties, ford announced the must, jack has got the e type. Chevy comes out with the second generation corvet, the stingray.

And all these are starting to shop. All yeah here, everything is like, okay.

is a lot of pressure? Yes, so okay. In one thousand nine hundred and sixty two, very portion makes the decision.

Three, fifty six amazing. In a rebirth of the company, we got to invest profits and replace a with the new model. So for a couple years, port had actually been working on a design for a sedan for a larger model.

Seems radical. now. IT was actually like gonna second model portion.

I mean, I feel that way. Every time I see a pena drive, I like what is what to make this car, but I see them driving by.

So that's why they make the corner. China is why they make. That will get to that later. So the next generation of portions, fery son friend, known as booty, named for the named after his grandson of IT, was working in the company and he admit leading the body design for this larger sudan the porter was going to make fairy decides for buncha reasons that to cancel this and project um probably the most important reason was um I don't know how much this was government motivated and how much I was just sort of like a cabal of like Mercedes and bmw like they were the sudan makers and portion maybe could have chAllenged them but was like, hey you know they've got their turf will keep our turf and sports cars and where everybody i'll be happy here anyway they decide to cancel the project and uh double down on sports cars at the same time.

Ford and porter boots the grandsons, his cousin from the austro inside of the family Lewison anthon son, also named friend. For nam P. H, he is also joined the company.

These two Young turks, the grandsons for nand, are here in the company. And P, H, is working in the engine department. So turns out, but he's a pretty brilliant engine designer he comes up with. And I believe we only a kid do a dug you any more about the like.

I think he really was the one the development of the six cylinder boxer engine or so and then the six car boxer engine, but the engine that ends up in the nine eleven that is like still to this day, the model for the nine eleven engine comes from him. I think he's working on IT for a racing car project that ends up not coming together. Fairy says, okay, let's take these two kind of failed projects that, you know, the next generations working on.

Let's weave them together. Take the styling the boots is done for the sudan, take this amazing engine that ferdinand is built for the racing Operations, and let's see what happens when we put them together. And this is the earth of the person. Nine, o one o one the nine .

o one I dave IT am not .

familiar with that one. Yes, what is that?

Well, so this .

is why I duck. I'm sure you is only called the nine seven because puzo of all companies had a trademark in france for any car with a model name of any number, any roman number with a zero in the middle, and then any other number. So x.

zero x, and in fact, all puja cars, even to this day, are named two or five, two or six, two or seven, two or eight. That's the two, three, three or eight, four, eight, five or eight. And so they trademark him all just knowing that eventually that that would happen.

Unbeliever, so I mean, to make sense, forces like, well, what we did, we can't really not sell in france. I mean, france wasn't like the biggest market, but IT isn't a small market.

For the story that I hear have heard about this is that they said we got these benches that say nine zero on one. Why don't we do nine one one? Because we have the nine in the one, hence the nine .

eleven hand.

Some of this may be more awkward than us. One of the things that I don't understand is why they want to call the car the nine o one in the first place. And I was never really able to get great information about that.

The three six was purportedly named because was the three hundred and fifty six like engineering project? They did yep. But did they really do five hundred engineering projects between six?

And so a couple of details that I got on this from excEllence was expected, I believe could be wrong in this. But I believe nine, no one was the name of the engine project that third np h was working on. And I think I think that's the origin of the two. Yes, in partial law. Is that like the reason these model numbers like these the engineering project, but that's totally awkward, like they jump around, they jup now.

they go forward and backward. Yes, going back to the very.

very beginning in the consulting company, they started with type seven or project number seven because they didn't want to look like they were brain, become like, yeah, we've been done six project. This is project number seven.

I forget who they were working. It's when you're .

starting a new company, you sending .

your first invoice, you call IT yes, the lure is that they know all of our projects have model numbers and like the yes, right uh, so funny.

And to be clear, so I admired designs of portion cars before doing the research for this, but do basically nothing about the company or its line up. I've certainly never owned one. And IT took me a long time in the research to realize that there are a lot of car designs that start with nine, that are all nine elevens. Just like, yes, no, I didn't write more than the nine, four, the nine, five, nine. And IT gets complicated because .

what ends up happening, just like up as every cars, they start to get redesigned as they get, you know, the years go on, they need newer models. They still called the eleven eleven. Distinguish the newer version from the older version is to call by the project number, which is one thousand six, four, nine, nine, three, eight, eight, seven, a. And so if you're really do IT, you've ttl know not just that it's in nine eleven but which version IT .

is and not all nine eleven, say nine eleven on the back. So you can even like use saad as reference what more complex .

maybe that's part of the successive there's the like sort of the language you have to speak in order to like get port to an extent, and there's something to that.

I think it's really, really is tension versus it's evolved this way with the brand. But like to me, it's just so brilliant because there is this tribe language to portions. If you see a nine eleven, you know instantly, yes, that is a nine eleven. IT is iconic, is one the most iconic designs .

in the world. And partly because they've essentially kept the shape .

the same for the since. So pretty immediately, like this car is a big hit, a one nine hundred and sixty two is when they start working on IT, they first started selling IT in one thousand sixty four. They sunset the three six in one thousand sixty five. And so sixty six is the first year that's fully nine eleven for porter production.

They saw almost thirteen thousand thousand cars in sixty six, uh, which that's what what we say ten twelve years ago, they only sold and that number of almost thirteen thousand nine elements they saw was fifteen percent more than their best year with only the three fifty sexes. Like dog, how would you Carry? Like is what what makes the nine O L in so special? It's important to keep in mind.

At the time you didn't know, right, IT was just like this thing, this like sports car they had come up with. And again, there a lot of sports cars was whatever. But of course, what is ended up happening is that this car has become symbol lic of the sports car.

And I think a lot of people, if you were told to mention a sports car, they would say that I IT IT just has become like A V car. And I was like you say here, IT was clear, very early on, that had something special in this great combination of, you know, reliability, comfort, t practicality, just like the three fifty six had been. But just Better. Yes.

it's my thinking. The flat six boxer engine, which was a great engine that first np h designed to go in the first nine eleven. There's something like cool and unique to that like we've been talking about the difference betwen horses and other cars here. This is a performance engine, but it's a six, right? It's not an a, and its real mmt t right?

So the three thirty six at a box or four to explain what a boxer engine is. You know, a lot of cars, most cars had, well, these days most cars have inline engines where the soldiers are in a line. A lot of other cars in the past that have had vee engines, where the cylinder literally make a vee for baLance, the box or engine, the cylinders are literally, like across from each other is flat.

They called a flat engine or a boxer, because the cylinder heads look like their boxing each other as they go back and forth. And the benefit of the box or engine was that um it's got this great baLance to IT because it's like literally flat in the car. Ah yes, IT was unusual.

I don't think IT was necessary, unusual to do a six engine, although as time has gone on, IT has started to become more unusual like that. The police cars still have six cylinder, even as the eighth and the tens became twelve became more popular. But IT was the thing. IT was what they did. And I was part of that ethos of keep IT, relatively light, relatively simple, and like strip things down to the core essentials of the car.

An average person can walk off the street by one Operated. That's right. Drive to work.

Have a great time. He wasn't crazy faster. Anything else? yes.

Now the three fifty six, all three fifty six IT had four cylinder. And so now it's not world class powerful fast car, but it's IT elevates the three fifty six into a much more alike. You can really achieve a lot more with this than you could write three forty sexes.

This becomes super important from a business side for portrait because they praised the nine eleven, about fifty percent hier. When had the three fifty six? Now what they do at first, they realized this is going to create like a major Price gap line up here.

We're going to lose a lot of customers elevating. So they do a stop gap. At the same time that they introduced the nine eleven, they also introduced the nine twelve.

And the nine twelve is a nine eleven with the old three fifty six four cylinder engine in IT. So they essentially nek APP the they downgrade the nine eleven to be the entry level model only as a staff gap. They don't want to do this permanently.

They sell about three quarters of the units are the nine twelve per for some other ones. And one quarter of their sales are the more expensive nine elements. The profit margins there on the nine eleven are so much higher so that I started thinking like, okay, this is part of the plan along, I think let's create a whole new model.

The three fifty six were going to buy forced our performance, real enthusiasts, customers who are willing to spend and that we're going to make great margins on those models. That's going to be the nine eleven. Well, let's create a new car that can replace can be the entry level force will eventually introduce the boxer twenty plus years later, takes for a while to really get to the the, the, the the perfect n state of this strategy.

But for this new car, fy says, hey, we're not really equipped yet to be running multiple lines as just a portion the company we need a partner for this new card. Let's turn to our good old friends at walks egg and jointly engineer and produce this new car with them. So in one thousand nine hundred and sixty seven, porch kicks off a joint project with walks wagon to produce a new mid engine roads.

no. Is a smaller, more compact car and mid engines not real engine called the nine fourteen. And the idea is that there going to make both the four cylinder and a six cylinder version of this.

The four cylinder versions gonna a box won six million diversions, is gonna a portion and a ferry puts his nephew and P, H, in charge of this joint project with walks like an a very fateful decision, as we shall see now what ultimately happens with the nine fourteen. There is a change in CEO at vox wagon. And the new CEO definitely sees the value in deepening the relationship with portia and specifically the relationship with Young first.

And so he wants to continue the project. But he's like, I actually don't think that a sports car makes sense in the vw lineup. Why not? We just have all of these portions.

So the plane was originally to have some of the nine fourteenth's be branded V, W. Some of them be branded .

had made little sports car called the carman gea previous to this in the sixties. And so the thought was they wanted to replace the carman gea. Portia wanted to an entry level car, let's currently developed portion, gets the more powerful one, the nine, four thousand, six to six cylinder, and works going to get the force cylinders. But the decision's made me.

said the new V W C O. He he actually gets a pretty deal of. So he deepens the relationship with the nand.

He gives the car fully to porsha. But in exchange, V W takes over all of portions distribution in america. Huge, huge deal, huge deal for V W. So we started to returning these companies little. That deal is an enormously .

wide ranging partnership because you're trading distribution from one side of your business with the ability to create a product on your other side. I mean, it's it's basically merging the companies because it's so massively and twine now in this partnership where it's not like, oh yeah, we partner with them on this one small little thing. It's like, no, our car that we expect to sell more of than any other car is made by the other company.

Meanwhile, on the V, W side of things, it's like america, the most important and largest growing car market in the world. We we now own the distribution for porch like this. Even if it's not structure this way. This is a merger.

Well, if history were strait line, what you are saying would come to pass. Unfortunately, it's not a street, unfortunately for drama on our show. Uh, so you're absolutely right.

The nine fourteen goes on to be a huge success, sales way more units than the than the nine eleven, which was the whole strategy porches cool with this daily great. We're making our profits on the more expensive of nine eleven. We've segmented at our market.

The nine fourteen is the entry level portion sells one hundred thousand units in the eight years that it's on the market. And I think IT really sure dug, you can come on on this. There is also a market for mid engine roads. Earth, i've been including the one sitting behind us, regardless of Price.

Like these are pretty amazing sport card. Previous this had nine, three. And so this was a military which was starting to really take hold in the car world as the right design, because the engine, the middle, is really the perfect baLance.

You kind of can put the engine right in the center of the car and caves. You could like perfect weight distribution. When I was talk about sports cars, in my mind, that got intended sports cars to be mid engine.

That's how it's more difficult. The engineering is more difficult in front of but that's how IT and really just in saying but portion made IT work. They're always been great at that. But mining's, how should be?

And when you say mid, this basically means that is still obviously behind where the passengers said.

but in front of the rear axle. In this case, now there are technical mid engine cars where the engines in the front, but behind the front axle. But most people, when referring to emit engine car, are talking about a car that has the engine between the passenger compartment and the real EXO. Yeah, I think you .

have a video where you say the came in G, T four R, S, which is the cabin at the boxer talking about, here is the best modern portion. Yeah, I feel that way.

But it's controversial because the nine eleven is .

the portion don't yeah I know I .

feel like you've seen multiple the best on your channel.

You know every car is the best when IT comes out and then it's superceded .

by the there you go.

One of the differences between youtube and podcast world is a titles. And S H is really important in the youtube world.

And I don't need to take the advance of that as much as some my college.

Well, it's on this topic, year of engines. I kind of imagine this is one of just the huge sea changes that is coming with electric vacation of performance cars right like um yeah the whole different set of calculus like IT doesn't matter that there is .

no engine anymore. Although an electronics for a performance electric car, you still want the weight to be as close to the middle. The car is possible for a similar reason, honestly, but the engine component and all the other stuff. Boxer.

yeah, that doesn't. Okay, so a minute ago then you said like all this naturally would lead to emerging of no V, W and portion. so.

So this is in the late sixties when the nine fourteen launches. As we head into the seventies, the oil crisis happens in the seventies, and sports cars become less with thing. People are really worried about this.

This is like a chAllenge to portia. It's particularly a real chAllenge to the nine fourteen. Interestingly, nine eleven sales stay relatively robust throughout the seventies because it's a luxury good, right?

Like just like in any recession and and even like sector targeted ones like the oil crisis and auto industry for true luxury goods like those people like the market for that is very resilient. The nine fourteen though very different story. So as we had in the mid 7 uh even though was a very successful car and project for porch a as a whole， IT starts becoming a real money loser.

So this creates a lot of tension in the company, this kind of a backdrop of stress to another um family dynamic that's emerging, which is you ve got these two third and grandsons that are kind of buying starting to buy for a control of the company. No, they are now got, I don't know, probably in their thorium, maybe entering their forties ferries, getting older here, like who's going to take over the company? We've got succession vives here.

On the one side, you've got booty for an porcher. He's got the name he's very is sun and he's a great designer. He designed the nine eleven, maybe the most iconic car design ever.

And this is german third working, actually producing the cars.

But the other third, and the son of lian anton, hired by the german.

yeah, he so yeah, he's hoped over. He know in the one thing like this darker is kid, right? He's the austro inside of the family.

You've got car. He's proved himself engineer executive. He was in charge of this nine, fourteen project.

He managed IT with vocs waggin. That was an incredibly successful car until the oil crisis at at. So he's like you.

This should be my company. Tensions, of course, start to rise and something pretty incredible happens. You know, we've come across on the show.

There are lots of stories out there of family businesses and succession and how all this happens. I don't think there's another case of anything going down like this that i've ever heard of. So in the fall of nineteen, nineteen seventy, ferry and Lewis together call a joint family summit.

They're like we're gna settle things. I don't know, i'm speculating here, but I I suspect fern Louis were didn't have a lot of our money over, I mean, their brother and his sister and they had luis had her company. He had his company money, had a lot of everybody is happy.

This is between the children here. So they call a family summit at the end of IT. They come to a very, very surprising decision. They don't decide that one first nandor the other is gonna over. Instead, they make the call that the families are going to completely and jointly exit Operating the business.

Everybody out of the pool, not the two third names, got very ferry himself who's running the cut nan's long down at this point that the original first nand, they're going to ue owning the company, but they will no longer manage the company. They will no longer Operate the company, they will no longer design cars, they will no longer make product decisions. Frankly, this is just insane and because it's not like be one thing if they were like ah you know we're really not that good at this like we should hire professional these are LED the generational talents in the car industry and the best solution they can come up with this. You know what? We're all done here.

It's crazy. I would be so fasted to get video footage of what actually went down in that room in the logic that they could walk themselves through to this is actually the best outcome.

There are some direct quotes from a lot of them in excEllence was expected and like as you can imagine, it's a very delicate topic um and they're also germans so like they are prime proper but I think fairy he basically admits he's like, yeah, there probably was a Better solution to this but like IT did mean that we could kind of reunite as a family and like I think he said something like there were still tensions but we could go to each other's birthday again you know, something like that so I mean, I guess and you know if you value family above all else, lazy is a craze decision .

because like you said, were killing in there were been family business until this point. And I had been a very successful one because of the efforts of the family. And especially you got for P. H. Now looking back on this, we know what happens to for amp for get to but you've got him on this up and coming track .

or he's so legit .

and it's like, no, you're crazy.

I think he definitely was so best. So let's talk about what happens here. Boozy, he goes off and he found poor shit design.

So there exists these, where is like porch, a sun glasses out there. You can buy portion design laptops, like all. That's him.

That's a totally new company that he started. IT is now been reabsorbed into the broader portion can glaum. But that was started, right? You like, great, I want to be a designer. That's the path he goes down.

The same thing happened in the gucci family. Anyone who seen the the gucci movie with adam driver, this part of a family member who wanders off and does them like effectively like brand licensing, going to name is money.

I think also was a very talented. I mean, time to seven for talented, but yes, trading on the name here. The other friend, P. H, so this guy, oh my god, he's a, he's A G.

So at first he's like, I imagine, and inspired by his grandfather, he's like, i'm going to go start my own engineering consulting company and the insult further card companies, he does do that for a little bit. But pretty quickly they after remember, vw and the new CEO really wanted to build this relationship with pora with, yes, he gets recruit to come in and take over alty for B W. I don't think you originally, I think he enters working within audio, but then very quickly becomes the head of the auto brain for vox swagga.

And doug, at this point in history, what does the folkswriter group own brand wise?

Yeah that's interesting question. The brain that we know, I think I was just walks on and ali .

had been a separate company.

I would he had been a separate company. And it's also important context ally here to make one really important point about at that time out I was a joke out. I was not what IT is now like now you view out as a legitimate petite mercies in bmw back than IT was more like how sab would have been treated like IT was a absolute second or third tear brand that no one could possibly IT IT was not a brand that was desirable .

would be like today um infinity like I know you, you own a key, right it's a winter key and honey's trying to enter the luxury mark .

and on that level of like i'm A E was the .

alty five thousand the thing that can save them and and that .

on the country, actually, that car was the one that had the the famous scandal in the united states for sixty minutes found that IT unintended acceleration would accelerate, which turned out to kind of be unfounded. But this reputation was like severely, severely damaged by that. Um but that was this era that was this era. The already needed to turn around walks like going to get out there like we know want to help to do this thing. We ve got the w university is they are killing IT.

So PS comes in and like, I mean, this dude is good. Like this was such a mistake to force him to. So he turns around the auto and like, build audi into you, doug, like he said, the audience know today, and he is so successful than in one thousand nine hundred ninety three he gets promoted and becomes C. E. O of vox wagon.

So you had the situation where they kicked him out of running the company. And then he goes that up, running mild.

a wild. I mean, he oversaw and launched the new beetle like literally his grandfather's legacy, the beetle. He turned over the beetle model to the the new beetle.

How long was third and P H running vox wa long and .

one thousand and ninety three. I believe he was chairman until twenty fifteen, twenty sixteen. Maybe he develops .

this reputation of being just said, like I can when you say, I can imagine how I said he was when they made the decision to end the family involvement. He has this rap of being like incredibly angry, and everything must be to his standard. And so I can .

imagine how you different.

He was that typical you know how you think of like a german industrial around this time walks. I can started really gaining a lot of brand. So in the late nineties, they bought liberati. Um they own two europe only brands, one for like spain and once ful like eterna and they re purchase the bug I the rights to the bug I name which had gone to an italian company um and they brought IT back to france where IT was like .

initially existing arted I mean doug, you concept but to put a bow on of what a boler P H was um in one thousand eight ninety nine the global automotive elections foundation. They award him the car executive of the century .

and by the way, that's like uncontested in the car world for napes like that is like exactly what you're saying. The guy, everybody knows his impact.

Everybody knows how effective he was and the families but just like, yeah, no, you got to get out here unbelievable maybe he wouldn't have had the motivation who knows? Who knows this wild.

but looks like a much bigger company than porsha, right? Like you got kicked out of his own company. So he went and ran a much .

bigger that competes with IT. bigger?

Yeah, yeah, yeah, yeah. wow. So back to the process, said this decision was was really not good, really not good.

So the first C E O who comes in the first professional manager, C E O actually is somebody who has been with the company for a long time. Uh, earned ferman uh becomes the first non family member C E O of pora. He was actually part of the original elite engineering crew back in the saw mill in the moon.

So he has a long history with the company. Unfortunate he was probably a Better engineer than a manager, though. His first move is to scrap the nine fourteen and instead introduced the nine twenty four.

The nine twenty four was another joint project between V W N porsha. The problem with the nine twenty four I I I think IT actually was a decent car. Uh, dug you actually reviewed nine is the next generation of. I think IT, you can say I think that was a good car, but it's not a portion is a front engine water cold IT suffered .

from that stigma. H, for sure, the saving Grace was that was actually a pretty good car drive. And so over the years, and even at the time, I was kind of accepted as, hey, we all get that IT came from a vox, but sort of the beloved at nine, fourteen and IT dries pretty yeah.

So like people.

people will take this as the entry portion of the time. But IT wasn't IT was an another .

and IT wasn't a nine fourteen either. Really, IT was a totally different .

thing at the nine thirteen, a small, lightweight, compact roads to a removable top. And twenty four was IT was definitely a different .

kind of situation. Firman had a quote on that when ask what is this ah he says the nine twenty four is aimed at new clients who either can't afford a nine eleven or are not necessarily looking for the performance of a nine eleven. I mean, I guess that's true, right? That's also a true of the nine thirteen. But like, can you come up a position?

Quiet part. T yeah.

Can can you come up with something that is not using the word not to describe who wants IT?

Like what you say, who would want IT? Yeah, this is for .

the poor customers, right? right? And I get but also it's in in whole philosopher, but it's not a portion. Even more concerning is the nine twenty eight.

So fermin makes a decision as the new CEO of the company that is time to replace the nine eleven. And I can you know maybe like to give him some credit. This is the seventies. The oil crisis is going on like there's um safety regulations. This is post rough nature and unsafe at any people like IT may be reasonable to think that a real engine sports car isn't like a great strategy of pursuing here and unsaved any .

speeds that was like a federal report that came out that said, like basically all cars on the market are unbelievable unsafe and people, our citizen should not be driving around to them. And so all cars need .

to change in regulation started to really show up, like in this time period that in the car world, the sixties are of viewers, like the last bathroom of, just like anything goes in some very special cars came out of that era. And the seventies, everything started to get the oil crisis was a big factor because that's disco of emissions. And then you had all these regulations about bombers and safety and see belts that, you know, were very important and beneficial.

But at the time I was, like other people, fun. Shing, how much, say, cars and you look cute, old portions there, so much smaller, right? And you look at the big one day and you can lift off. Cards have gotten so big, but cards have also gotten so much safer .

far and there faster than they were back. So it's kind of the best of all world and in most cases, more efficient total.

So in one thousand hundred and seventy eight, ferman introduced the 48 with the stated intention that this is going to eventually replace the nine eleven。 They keeps selling the nine eleven. He says, what keeps selling the nine eleven? As long as we get demand for I think that was at least like ten thousand units a year or something like that bit. You know, once the nine twenty eight on the market and demand dips for the nine eleven will stop.

Now I wanted defend the thousand and eight little bit here because IT was a, if this is an important moment in portias history, would we look back on IT? Now IT seems insane that the nine eleven would go away. Like, how could that be? But it's important to keep in mind that like the three fifty six went away, and that was the porch.

A like, how now you say, like, I have a jeep and you're referring to the ranger. Or like that was the was the three fifty six and so that went away for the nine eleven. IT only made sense at some point.

The nine eleven would also go away. The crazy thing about the nine twenty eight in the partial world is that he was a front engine v eight car, which portia had never pursued before and was more kind of an american thing. But in the context of the time, it's not that insane that they went after this.

All sports cars were starting to get bigger and more powerful. And because of the oil crisis and because of tightening emissions laws, IT was getting very difficult to make any sort of power from anything other than a big engine and even big engine cars at that time didn't early make a lot of power. I like, i'd like eight leader vates that made like a hundred and fifty horse prime.

I was embarrassing stuff because they had to put so many emissions controls on that by the time you actually got the power out, IT was a disaster. So I didn't see that and saying, and the jg e type had just been replaced. That was the a big competitor was another sports car that had been replaced by the X J.

S, which was now A V comfortable automatic transmission car. Mercedez bends to the same thing with the S L class. IT went from like a little fun sports car, like the nine eleven to a big v eight kind of relax, the leather luxury cruise er or that sort of thing. And so IT made sense that portia would maybe want to head in that direction also and start thinking about moving past the nine eleven, just as they had moved past the three fifty six, you know, twenty years before. There was some sense to IT.

So the nineteen twenty eight comes out in one nine hundred and seventy eight. And as we to the end of the seventies, and in the the eighties, as we also have talked to about a lot on this show, everything that the seventies was in terms of austerity, oil crisis, seventeen percent interest rates and massive inflation, the a not that that rising tide with votes.

lots of disposable income. Wall street is ripping what pin traps yeah, seems like actually a really good .

time for fast cars. Seems like a good time for fast cars. And indeed, IT was including for the eight by and still the nine, eleven people still wanted them, I think largely because of that, although i'm sure there are other reasons too.

So the portion paca families, when they exit Operationally from the business, they still owned the business. So they're still like the supervisory board. They get fed up with fermin.

They asked him and they bring on a new C, E, O, an american as C. O of porsha. When Peter shuts, famously, he comes in and he redraws the nine eleven production line. And I know you have some first experience of the lesion.

Great, great. The great stories in the auto industry, the nine twenty eight, though I just provided an impassion defense for IT um you would never felt like the right car to porch a never felt like the right car to especially the employees who had kind of phone in love with this nine eleven been in production now at this point for probably twenty years, twenty five years maybe.

And um the nine eleven was poor suit to a lot of these people in the fact that IT was going to be get replaced by the nine twenty eight was this sad thing and I had kind of really hurt moral uh in stute guard at the factory all the way up to the to some of the people at the top. And so the great story is that a the the nine eleven, everybody knows the impending cancellation is coming. It's still going, but it's coming this beloved car and so, uh shoots Peter, shoots the american CEO is sitting in the the the office of helmeth bott， who the chief of engineering for portion. And there is a line on the wall that shows where all the products stop and start the timeline.

And this is like like on a Whiteboard .

yeah the White or the great. And so they're soon they're talking about that. They know that is low. They know that the company wants to keep the nine eleven even though you know IT should be replaced because it's old. You know that's .

the thinking and of the people and that's what was said like in .

german culture, when something when I on sale, like IT, has shown up to replace the nine eleven in the spirit of these other cars of the time in the v eight front engine that made sense. That was what they're going to do. But the moran was low, and I knew this.

And so shot stands up. You've got a marker in his hand. He stands up. He walks up to the timeline on the on the wall, and he draws a line on the timeline, draw all the way onto the wall, and extends the nine eleventh time line indefinitely, including on to the literal wall. Now this story, of course, is this is like the stuff of legend in portion likes Peter shoots the american CEO, saving the nine eleven in this moment. And a lot of talk about whether this actually happened, like did he actually just draw .

the line and make .

the complete one, the reputation of the C. E. O among the among the workers? He drew the line.

right? And there's a perfect line that which is shit, just looks over at the chief engineering goes, do we understand each other, right? And then he walks out.

I always wondered if the story was true. I worked at pora ten years ago and um has become friends with portraits general council in north america. When Peter shoots retired, he moved to naples, florida, and the general council. Porsha and Peter shoots were neighbors and their homes in naples.

And I one day he went over to his house and asked him, know, is the story real? Did that happen? And apparently, shoot said, not only did that happen, but helmet bot was grinning like the cheshire when I drew that line, like, I was like this moment, like we're gona do this and I like really, apparently really in in his words, that really .

actually was a true story.

It's awesome to get that validation because there are so many of these stories that we tell on the show. We're like, we're like this is probably apocryphally is really no way to verify IT.

Now of course, if your shoots, you'd want to tell the story because become so famous. But no, at least the story is real.

It's a great story, yes. I mean, literally he extended the line of the production line onto the wall, right?

So keep making both cars.

yeah. So they kept making. I think they made the nine, twenty eight until one thousand and ninety five, he was very king who comes in a minute, who finally killed with the same thing.

The problem with this decision, and you'll get into more economic realities of this situation at as the eighties kind of draw to a close, whatever. But the promote this decision was that the company was planning on ending the nine eleven. And so by drawing that line symbolic, that was we're going to keep doing this. IT also committed a lot of the company's resources to now refreshing something that they hadn't planned on refreshing.

So in the gogogo years of the early through mid eighties, no problem, right? More s do an I C O, many .

team one. In fact, I think shoots was like, let's make airplane engine.

Yes, I think he was. yes. Oh my gosh.

And on the back of you, do these go go years in success? They're in the nine eleven. They're sell in the nine twenty.

They're on a lot. And nine forty four is like this sort of ton of those things. The families take the company public. So just like a lot of these, like we talked about on the L V M H episode, a lot of these european luxury brands, craft man brands, they did an IPO. They thought they were being smart.

They sold, I think, a thirty percent stake in the company, but all non voting shares like I, we're not, no, no, no corporate raters here. Nobody will have any voting control except the families like IT is impossible that somebody could, you know, attacked us because the family is all you know. You would have to be somebody inside the famous attack.

Why would that ever happen? Well, everything goes great. The stock you know doubles within the first year that is on the market.

But then one thousand nine hundred eighty seven long term capital management plays, you know the end of the google years, the eighties, not good, not good for portion and not good in a lot of senses like ages, period, economic climate, not good for anybody be you're making luxury sports cars. Now as we talked about in the seventies, the oil crisis in the seventies was really was bad for portion. IT was really bad for the nine fourteen.

The nine eleven was pretty robust, like there was very resilient. I think the same is again true here at the end of the eighties, but they've still got the nine in the nine forty four on the market. And like those things started second wind.

big time. This is not a good situation because now you have three aged products. And so the economy is slowing and your cars are not really competitive. yes.

So shoots though he continues production of all three lines. And not only as he continues production, he reinvest, especially in the nine twenty four and nine forty four line. They even refresh to the third time to the nine sixty eight in the same basic car.

Yes, like they're investing resources in this car and at the you probably have a Better sense than me. But like another aspect of the kind of recession at the end of the eighties was the exchange rates with european currencies got hit really hard. And so relative to the asian currencies in the us. So IT became, I don't know, call IT ten twenty thousand dollars cheaper to buy an equivalent entry level sports car from a japanese man.

And IT just so happened that at this time, you know, japan was kind of having boom. And as a result of that, they started making the sports because the exact describing the new on three hundred op, toyota pra, you know, all these cars are showing up. And by the way, they don't have forced or engines, and they're not twenty five, twenty year old platforms like the nine sixty eight was and there was very little reason to buy nine sixty eight.

I mean is um I feel like i'm sort of in my history, probably all of us barely do starting to enter consciousness here ah you know this is very fast and the furious but not that pretty in the furious all those know japanese are cars that got tuned up. The supermarket species that .

all are just starting to come in and they offered, just as they do today, this great, great value proposition of like big power for not as much money. yeah.

And again, the nine eleven isn't threatened by this, right? But the nine forty four and nine sixty eight, hell, yes, threatened by right.

Like that was so old that sales were a trickle by ninety. There were three products, which was the the entry level, which was the nine forty four, that became the nine sixty eight. Then there was the nine eleven, which was actually the nine six four and nine eleven. By that point, you only make things even more easy. And then there was the nine twenty eight, which was the front engine.

V I like flagship car.

T nobody say, literally only made three cars, and they were all three.

number nine cars. IT was a complete, I mean, IT portions, never named cars. Well, even now, but like, yeah, at the time you had again, you had to like to speak the language you had to like. And by the way, the nine elevens also correo on the back. So everybody is like, what about, you know, is this like, I like, why does he say career never any sense.

And all careers are nine elevens, but all nine elevens are not carers today.

That has changed over the years. Then there was a trim level of the nine twenty four called the korea that was actually called the careg t, which they later named this car. None of IT IT was all confused. No, you had to be like a german who was into this stuff to like, figure out the precision level with which I had made sense.

So as all this happens forces now a public company, the stock phrase starts to decline variously.

and they flowed three percent .

of the thirty percent. Now, no voting control, but the company, they're really like resting the tree tops here as there you know, beginning their descent at one point, porters market cap was less than four hundred million euro.

crazy to me, like almost zero.

And I believe also at that time, they didn't have any debt. So like truly like the markets believed that portion was worth than nothing. IT wasn't like all there is value here, but there's a big dead burden on the company.

IT was in an unbelievably difficult time and is kind of unna to think about because now people think of porsha is porsha like this crazy companies is one of the hottest est brands, like he said, problems, but one of the most viable brands. And the only thirty years later, only thirty years later, IT was dire straights. I pull up the U.

S. Sales figures reported from this era, so insane to me, they dipped in ninety one, ninety two to forty one hundred units that was worse than one thousand nine hundred and sixty five cells. They had routinely sold between thirteen and thirty thousand cars year throughout the sixty, seventy, eighty, thirteen and thirty thousand. And in the U S, at ninety two they dip to one hundred cars. That was the level that they that we were talking about IT was IT was complete dire straight.

So even though the public doesn't body voting control, um everybody starts to think the only thing that can happen here is this companies can get bought out. One equity research annaly's actually in a research note, said that he thought there was a ninety eight percent chance that the families would have to sell and that they would accept, know some amount of value for their state rather than just have to go to zero.

So shoots get fired, but it's not like that fixes anything. I think that was one nine hundred eighty seven when he gets fired. Over the next six years.

They cycled through, I think, for three or four more CEO, none of which really figured that out. There is one very fact, however, which if there is swear or more acquired epo de, we would just skip. But we've got dug um the nine five nine yes is actually the .

nine five nine and another interesting component off shooting that but the nine five nine comes out at that time, which is like their first super car. So sort of the predecessor to this car and I actually wasn't commercially successful sort of in keeping with portus world at the time, but he did IT was kind of a test bed for some new technology, including four wheel drive in a super car, which has now pretty much become standard fair.

The nine five nine was really the first car that had that after the nine five nine, poor shit was so desperate, so that they started taking on projects for other. And so it's known in the car world, but not as much in the general world. Portia built a Mercedes bans, which was called the five hundred e, was a midsize and Mercedes didn't have the capacity or didn't really want to do IT former. That's in the portion of factory in zoof's housing in stucco.

who designed IT. IT was a Mercedes car.

so was a mercie class, like a regular mercies, sudan, but with a larger engine. And Mercedes felt that having porter involved would give IT some sports car credibility. Porch literally produced the car, and then oui did the exact same thing need more credibility because they were still of a flagged luxury car brain.

And they wanted to get into the sports room because that's a lot of was being made. And so ali came to portion, said, can you help us develop a car? And was called the R S.

two. And I actually had one just saw that last year, IT was a station wagon and that was the conditions under which also agreed to build the car. They said we'll do IT. We only compete with our cars as a coup sports cars.

So we will build if you build a stationwagon and which essentially touched off the like high performance station wagon, which oud is still known for to this day, more than almost any other thing. But portion was so desperate, they even allowed out to to license their name and put in on those cars. So the R.

S. Two had portion breaks their branded portion. The partial go appears in the badge, like the bloom on the side of the car. Portion was just like, yeah, fine, because IT literally kept the lights on .

in stucki you. So when spate.

completely desperate. So when you mention like the portion merges relationship, that five hundred e was an interesting thing. Because around the portrait at the time, there were a lot of ways that I could have gone on totally wrong. And I went there and I did a factory tour a couple years ago, and the guy gave the toward work there for like twenty five, thirty years through this time period. And he said that in his mind and in the mind of a lot of portion employees at the time, Mercedes's bds help save porsha mercede es could have built that car, but their brothers and stood guard down the street, having really half times, here's a project that you can work on .

to keep the factory workers gone.

wow. And IT was literally like you have empty production lines. So even though you are going to make a lot of margin on this.

let's at least like you can be our contract manufacturer yeah .

like when you have union contract and maybe this was part of the second you have any countries get paid, these people, whatever. Here you're not going to make money but like we're doing IT and it's something .

it's a project for you see your s instead losing money on how to be wow.

IT was a tough air. IT was like indescribably tough. And I think this is lost on a lot of Younger people who have only seen portrait in the world of crazy expensive cars and all the money they charge for colors. Now on that, there was a period where IT almost all came to and long ago.

all right listeners, our next sponsor is a new friend of the show, huntress. Huntress is one of the fastest growing and most loved cyber security companies today. Its purpose built for small amid d size businesses and provides enterprise grade security with the technology, services and expertise needed to protect you.

They offer a revolutionary approach to manage cyber security that isn't only about tech, it's about real people providing real defense around the clock.

So how does IT work? Well, you probably already know this, but IT has become pretty trivial for an entry level hacker to buy access and data about compromised businesses. This means cybercriminal activity towards smell and medium businesses is at an all time high.

so hunches created a full managed security platform for their customers to guard from these threats. This includes end point detection and response, identity threat detection, response security awareness training and a revolutionary security information and event management product that actually just got launched. Essentially, IT is the full suite of great software that you need to secure your business, plus twenty four, seven monitoring, buying a elite team of human threat hunters in a security Operation center to stop attacks that really software only solutions could sometimes miss. Countries is democratizing security, particularly cyber security, by taking security techniques that were historically only available to large enterprises and bringing them to businesses with as few as ten, a hundred or a thousand employees at Price points that makes sense for them.

In fact, it's pretty wild. There are over one hundred and twenty five thousand businesses now using, and they rave about IT from the hill tops. They were voted by customers in the g two rankings as the industrial leader in end point detection and response for the eighth consecutive season and the industry leader in manage detection and response again this summer.

Yep, so if you want cutting edge cyber security solutions backed by a twenty four seventeen of experts who motor or investigate and respond to threats with precision, head on over to huntress dot com slash acquired, or click the link in the show notes are huge, thanks to huntress.

So David, this thing that doug just reference to me, the money they they charge for colors, you can do a thing today where you go to buy a porsha and their online configuration or and they have the paint from every single porsha ever produced in history. And so you are like, you know, there was really something about this particular nine eleven in this year. I really loved this paint. You can pay them something like fifteen thousand dollars for your porch a to be in that .

particularly for it's exactly IT.

Imagine the portion .

of the eighties, early nineties, like commanding that kind of IT would never have happened. But now the brain has changed so much that, like fifteen rain for a color, people are like, follow over the to do why.

The other thing that is emblematic of, which I think we haven't really talked about yet, of what makes partial special, is this unbelievable heritage like the design language that they use, what the nine eleven is you mentioned earlier, they don't really change IT that much from, you know, generation generation. There's this sort of obsession with put something out there and then spend years and years and years, tiny little tweak and refinements, making IT the like platonic form of what IT can be. And there's this like obsession with, if you loved porch a in any given year, we want to make sure that we keep you along for the ride and you can continue to love us today, right?

If you was a child, one and nine, eleven, guess what? It's still around IT still looks about the same and it's still the same level of desirability that you want IT back then.

It's so funny. I feel like the sales cycle for nine eleven has got to be forty or fifty years, right? Like kids fall in love and then you can't really buy one until you're in your forties or fifties.

He was always a weird aspect of the brand that like you actually weren't necessarily only marketing to like adults. You also had the market to like people who would cultivate this passion that you knew that would become a thing later when you aren't even in an executive or you aren't working there. But like that part of the brand is like hooking people Young and making them feel like this is a cool thing.

So doug, this thing that we're talking about, this idea that if you loved porsha ever, we want to deliver on that promise today, do you feel like that consistency has been there since the very beginning? Or do you feel like that something they learned, they are like rise from the ashes after the ad?

So, so good. But you have to assume they didn't expect, you know, in eighteen forty eight, they would ever even be in the position to deliver that right in thousand nine hundred fifties.

Also, like he said, I am quite thought about, but I was planning to tell the story of like, oh my god, fermin wanted to kill the nine eleven. What had done idea like natural, they killed. The natural thing would have been killed .

looking back on the same, but IT seemed like now all these icons have emerged in all this law has emerged over the years. But when you really think about you, put yourself in the perspective .

of those errors. Okay, so porches in this tail fin, the two errors that happened next, are both equally amazing. So in one thousand nine hundred and ninety three, I get name vendean of viking, gets appointed as the CEO.

Now he had actually started his career with portion in the eighties. As all this crazy stuff is happening, he was like a loud voice of protest against all the, you know, shoots and fermina decisions. He resigned and left the company.

They recruit him back in the early nineties to take over as head of production. And he implements the toyota 的 system， which are, they must be like the last automatic. sure. No, I don't know, for I uses the toyota 的 system， but like, this wasn't a new technology at this pointing time, right? Remember poor's bleeding cash.

Being more efficient and more profitable in your Operations for whatever cards you can sell is pretty important is like like the tim cook of portrait here, he gets promoted to C. E. O.

And when he does, speaking of apple, he kind of pulled the Steve jobs return like moment. He cuts the product lines down to just the nine eleven. So this is the right thing that needed to be done.

But it's also can crazy. He kills the nine forty four, nine sixty eight. He kills the 8。 He takes everything back down to just the nine eleven.

And like analysts, people like car, you know, magazines asked him, what's your strategy for an entry level porch? And he says a portion strategy for an entry level porsha is a used porsha. Such a good line, such a good line.

Such a good line. So by the ninety five, ninety six production year, the nine eleven is the only porter model left on the market, which hasn't been the case since the three fifty six. This is this is kind of crazy.

Also, what kind of company makes one product? Like how I mean, seriously, what do they believe that this is a transition ary period? Or do they believe like .

this is the long because I am a cost cutter and I will cost everything down like he is much like he has big ambitions, big, big, big ambitions. This is a transitioning moment. He does want to expand the portion as we shall see.

He greatly expands IT. So I think this is pretty brilliant. And certainly for the financial forming of the company was brilliant and its survival. I think nine eleven enthusiasts are less enthusiastic about this.

But he decides that rather than the old strategy for the entry level model of sharing a platform with vox wagon, what if we have the new entry level model instead, share a platform with the nine eleven? And so what he does is he says, let's take the front end of the nine eleven of the next generation, nine eleven in the nine six, and use that exact same front end, same headlights, same hood d same everything. And then made IT with a new entry level, read back and the rest of the chaste of the car. Revive the old nine fourteen concept that was so successful, mid engine roadster model with a how would you describe the it's not a convertible?

Yes, no. IT is IT the was converted yeah yeah. And it's also important point out the enterie almost entirely shared as well.

The interiors were you like steer the whe all the buttons.

In fact, if you get into a boxer which was a two sider car, IT has a coat hold on the back at the sea, because the nine eleven had a cold, hot on the back. You can put a coat in the boxer. The sea is right up against the, but they shared .

everything interesting. So dead way you are leading to this is the porch of boxes, which becomes a huge success. And I think the reason for that is that is genuinely is to anybody looking at, like this is a portrait, not that stupid, that the people is a free design language.

IT shared the design language. And I think video thought was the the entry level portion has always been looked at as a second class citizen, like like fermin literally said, which was true. I know everybody thought IT, but he said, IT, how do we make IT not look like a second class? That the answer is, make a look like an and make IT litter literally share. I mean, he didn't even just look like IT literally had the same enders, the same you know.

headlights and hood and also from a production and profitability Operations in point. This is so great, you're now sharing so many components, not with another auto manufacturer, but with yourself.

right? So doug, what's the difference that at this point in time between the nine eleven and the new boxer.

the thinking was that they would continue to move the nine eleven up market, more expensive, more power. So the boxer comes out in ninety seven for the ninety seven model year, and he was a huge deal. I mean, IT was on the cover of every car magazine in the whole portion of new car is incredible.

IT had two hundred horsepower, and the nine eleven of that air had about three hundred. So was a significant difference plus the nine eleven was just more of a IT was bigger IT was White IT was faster. No IT was a more IT was more .

of a muscle or is is free to say that. Then and and I think maybe even especially now with the boxer and the came in, the came in is the hard top model of the of the boxer is also a different kind of experience for last week.

And IT has over time, IT has evolved even more significantly for ninety seven. Now the nine eleven is kind of playing more of a luxury car like turing car role, almost where, you know what, the special colors in the stitching and all that. And IT seems like the more approaches focus more of its sort of true sports car efforts on those the mid engine cards as they call the boxer in the table. Yes.

it's the engine level port for sure, but it's also it's not like you feel like crappy if you're buying one you like, you know i'm buying the best version on the market of this particular product.

And IT was mid engine again. So you you know arguably, IT was the correct place for IT. IT felt like a true portia sports car for the first time. Portions of entry level car felt like that in decades. yes.

So v king has this awesome quote about the strategy for this. We didn't want to a flee from the competition into higher Prices, meaning like not be in the entry level market adult. He says we don't want to be germans, for we don't want to be a big fish.

And upon that shrinking, but rather a growing fish with more room to move in a larger lake. I feel like vid and down valentine, the quality ital would be lake brothers in arms here like they're targeting big markets, that is the strategy, but they're arming them in a porter way. So really cake like I don't know how much this was his thinking all longer, or that he was just emboldened by the success of the boxer.

He really means that he gets into S, U, V S. And this, I mean, I even is like a teenager at the time, I not being damaged of a kind. I just remember people like porch is making an s of these people lost their freaking minds. Like, who who on earth would buy a porcher S U V?

Also, I got to say, like, maybe all cars were kind of ugly in this period, but I am when I looked at the first time, I was like, so it's like a toyota IT wasn't of the most attractive car.

There's no question about that. Everybody hate that. The design and you know what? It's been twenty years. IT has not grown on you yet.

The mccan looks really good.

The new, the new kinds look great too. Honestly, they ever since they redesigned to ll eleven, but those early kinds, you see him now you're like still logally .

IT also just doesn't look like a poor shit to me like there's not enough that brought through from the heritage of the and he described .

the back on the nine eleven, right? That sort of what happened was the kain was an interesting situation because portion was kind of a first mover. They weren't exactly where sadie came out with A S, U.

V. First in for the nineteen ninety eight model. You're called the m class, which was, that was a revolution.

And they built in america, which was a really big revolution. Bmw cannot be x five in two thousand. And that was also a revolution.

The m class, where cities never had the sporty pretense that bmw did so that car was just for suburban families. The B M W X five actually had to be sporty and was like, go. So not only can luxury brains build these reviews, but they're sporty.

So portion comes out to three. I mean, they yd audio dy and come on. The next two portion was there, like early, early, early. So what the problem was, portion had no clue, because they were early, they had no clue what to do.

And so I remember at portia, and when I worked, they are talking to some of these people about the early kinds porsha literally didn't know what to offer in A S. U. V.

To the point where they actually legitimately asked some of their american employees, do we need to offer gn rax as an option for the american building sports? And they no cept concept of people would want. And what the early kay's had an optional spare tire on the back like like jip anglers do.

like you get that the part was a cultural german thing for sure, but not understanding america. But I don't think anybody understanding I don't think there were any super expensive S V S on the market.

The only ones were landrover, but they were focused so far on off roding. But part of the reason the kan was ugly when IT first came out is because portion decided or we can do IT best. And so they come out with an S V that is both amazing on road and off road.

And the early kye s actually have an unbelievable off road capability. They have the two speed transfer case. They going to high, low gearing off road.

They have air suspension that can lift them up in low um they had all these off road hardware that like you would never put in a lucky y performance C C V now. But because poor should didn't know what customers would want, they decided to give them everything. And so the result was IT was a big, bulky, heavy car to Carry all this hardware. And so I looked that just wasn't IT didn't IT wasn't executed that well from a style perspective, but from every other perspective, IT was a hit .

yeah I think a few things to say about IT. There wasn't anything else that was like A, I can spend one hundred thousand dollars on an S.

U. V. right? This was the days of an escalated.

Even kan came out to three. Escalates, came out in ninety nine. So this was before they were.

Just at that time, they were just taaoa that look nice, like now is becoming real thing. But at that time, IT wasn't. Portion was really pushing into some new terror. Yes, he was a crazy decision.

And S, U, V, S. Were coming so important in america. I think there would just like a lot of wealthy people out there and a lot of status focus people that we're like, yes, there's an S V. I can spend a hundred grand yeah money.

And also there's a practicality of I can not need a mini I van, but I don't anna drive a many van and so i'm driving this new emerging class of S U. V. But if I have money, I kind of want the portion version of .

in portion must have been thinking, hey, we've got all these customers who love our sports cards. And when we have this brand name, that's always been to say, with performance.

how else can we hope this family right?

And so in in, by the way, with those familiar are buying and excite and it's like one a week, right?

And the danger here, if you're at home and you didn't know how this ended and you're a smart business person, you'd be thinking, well, this is gna borrow against their brand decline, like this is gonna drain the bucket, not add new love to the brand bucket. And the magical, incredible, amazing thing about porcher is they have double done on this strategy. IT has become a huge part of business.

They generate a tone of margin on the S. U. S. And IT has not borrowed against their brand. And IT is increased.

The love for the brand think because at the same time, just before they had given a huge shut, the ARM back to the performance with the boxer in the nine nine eleven, and then also done the S U V, which they partner with books vagon with first name P H I to make peace. Een running walks.

the comes with the torrid, which was walks leg and SUV and that served as the basis for the original km really portion starts .

a new whole new production facility and a new part of germany and lipstick a to make IT. And then ultimately shortly there after makes this car .

the production facility. That's right. They were built in the same place. And you know, I think that goes back the point you just made.

That portion, the the S U V, yes, you'd think you come up with the S U V. IT destroys your brand credibility. We've been this mozara come out with stands, and now nobody wants one.

But portion always made sure to be making other cool stuff and to keep coming out with other cool stuff. Reinvestment performance, like you said. And so they used this new factory that kind was built in to also create this super car.

And that was important. IT really showed people here, they might be making an S, U. V.

but they are also making this. So they're legit. The career G, T.

Sitting behind us.

The kerg, okay, we've eluted to this amazing machine behind us. Like.

what is this thing? The current gt, in my mind, is the greatest driving car ever built. And a lot of people actually said it's not objective by any means, but a lot of people who have driven, you know, this and a lot of other cars and feel that way about this car.

IT was a true analogue e super car, which means manual transmission. There's a very few driver AIDS in this car like you've get a modern car. Stability control, traction control, that sort of stuff is either are not exist or heavily dial down full carbon fiber body like no expense was spared, basically.

And the coolest par was that the power train, which is a big v ten, was shared with IT. Initially, I was developed for formula racing, and then IT was evolved to lam racing. And in neither cases that i'd ever actually see the relative day they created a formula one engine.

IT didn't work out. It's a little bit like the original nine eleven engine, the p design for racing, but then only made IT into .

the right IT dates exactly like that. The crazy thing here though, being in that time you could do that because there are no emissions regulations. The concept of taking a race car engine today and putting them into a road car is just not existent. Like to get a lama or formula one engine homologated for road use is just like mind blowing. So that's that's the cool thing.

And this car has um IT originally came out you know in this era and and was thought of his cool and special whatever but it's legend has sort of growing since then as sports cars have moved away from some of the things that made this cars so special. Specifically this analogue feel, you know, all exotic cars now are automatics and hybrids and that sort of thing. And this was kind of the end of the end.

My sense is this car too has a reputation, partly because paul Walker died in A E unlike a lot of portions in the nine eleven. And like, this is something that you need to be really know what you're doing. Operate this thing you if you let you get away from you.

it'll kill you. yeah. IT has a reputation for being. Difficult to drive, which I think is somewhat unfounded, but also especially by modern stairs cars so much powful. This a new aud R S three, which is just an auto hyperon today and that you can buy for sixty five, seventy thousand years faster than this is. It's not that crazy about modern stars, but at the time, IT certainly was something.

But I just like today, cars, like there's so much stuff, technology and cars designed to keep you from like doing stupid stuff.

and that this car was of the end of that era and I think that's why it's so special, was like the last of these cars that really you could get into into trouble in poll worker died in one um and there were some other deaths to that weren't quite as high profile. But there were some serious um accidents and some people died and and and maybe still Willy and know I it's still out there and it's still a dangerous car.

The weird thing about high end cars that have law associated with them is typically when someone hy profile dies and at the value goes up.

right? It's like like artist. It's like painting.

Yeah I think that car people who always known the car heads kind of this reputation they would like .

lawsuits can portion .

about this port gets you yeah, we went to jury trial portiers funless at least partially liable. And that's a big health for your maker because they got three hundred .

of these out there. Very production is the value of the car. Now like production was initially intended to be higher than landed up being they stopped IT early and they they had some.

some weird issues happen. There was a changing regulation that force them to build a lot of them sooner than they thought. So they ended up flooding dealerships with them earlier than they expected to.

And the car didn't sell well. When I first came out, the sticker Price is four hundred and forty thousand dollars, and they dropped fast. You could get A N O A O seven way you could for two fifty all day long.

And now you can. They don't exist under a million dollars is a crazy thing. Should all invested in courage.

Apple stock or t will be a lot .

more fun, but IT would if they all completely took off.

Wow, I was funny. I thought that this E O was going to be a fun little direction about the cog. t. But I realized now, actually, this is a super important point to the business history. While they were drawing on the brand equity to make the S U V, this was a big part of putting cash back in the bank of the brand equity. Yeah um and to do IT on the same production line.

And I also help legitimize that facility because up until that point, except for the ones built in an austral, all of the portions had been built in, stuck out in zoo and house in that factory that's same factory for all these years. And so this car helped legitimize, like we might be making a factory in these germany. We are building S, U, V S, but we're not string too far. We're still doing thing.

So this point is an interesting one because that is something that other luxury brands do as well. I remember reading when levon first started coming out with the more approach able wallets and clutches and ways that you could tip to in to participating in the brand story. They were also releasing hundred thousand dollars or two hundred thousand dollars special handbags that were new products or new collaborations with other designers that sort of told, you know, we're still leive aon. We we just have this other way to be a part of .

our brand and portion was going to do IT again what .

i'm sure talk about shortly. Oh yes. So on the back of this, like incredibly bold plan and turn around and success by verdict, I mean, he becomes a legend and poor shit goes from debt door.

Less than four hundred million year old market cap when he takes over to by two thousand seven porcius market cap. Is thirty two billion eos razing a Better investment than a career? D T, in fact.

So they never had to have any like help once they scrape the bottom of whatever that was four hundred million .

dollar market cap. No is ved IT. IT will be independent forever.

Families will never have to sell that equity. Research analyst can eat his word. No, not quite. Um there's another chapter to the story.

So that's a hundred dex market cap growth. That right did you say three hundred million to thirty two billion?

Yes, that is one hundred dex market cap growth in a decade.

Occasionally there are these hundred beggars available in the public markets. And like you only know about i'm looking backwards. But like it's crazy.

You don't have to be an early stage venture capitalists to find these. They exist. I suspect .

in most these cases though, to take advantage of you would have have been insane, like to have investing for at that point.

Even you told a person in one thousand and ninety three, hey, this guys coming in, he's gonna kill the entry level stuff. Go back to doing entry level stuff and then do an S, U. V. You'd be like, how do I get out of this .

because he was the fourth CEO is buying amazon in .

two thousand and one two when things .

look the absolute bleak like that, how you gotten one hundred background, the public market, maybe even a thousand at this point. But like, come on.

who would have actually wet and the thirty two billion euro market cap? It's not crazy because by this time hortie is doing almost two billion euros a year in Operating profit.

Turns out these S U V S and making only supercars uh, is a very profitable lot of merging there.

And china was starting to take off at this time too. So the final sort of chapter to the video era on the product production side was the panama a the sudan portion makes the sudan now document current. Your thoughts on the pima he's always, always been for made us to them of weird that looks kind of weird. Um I think from doing the research now, I think a large part of the intention of IT was to really target the china market and IT became successful globally too. But I think the panama and the kin to really helped ports IT enter china, no question.

Looking back, that has become especially true as porcius business and all luxury brands and business grown in asia at the time that I think they just they had an S. U. V.

They had done that. So was they go right? Do you know city? And is the next the next place we want to compete? Let's let's replicate the success we had in the S. U. V.

And what do you think changed in the corporate like you going from? We have a very particular way that we do things in a very particular market we serve with a very particular type of product. Let's have a poll of a full products. We just like everyone else.

Prom that hundred, don't you think? I think I think they looked at and and said, holy crap, by medas of tony, money came and came and made a ton of money. Kan showed up in as a ton of money. We get cash, let's let go. After in the mercies s class in the B M W seven series, the big luxury sudan's from their german rivals because they knew there was profit there and they could do IT Better like they had .

done with the kind and honestly IT. We've work and did work. Uh, IT was not what brought down the company.

Not at all like you think like if you are naively following along, you might think like this work and that worked beautifully um just ultimately under different ownership. So let's talk about what we've been allowing to all episodes. The german tax regime still is not very favorable to distributing profits, just the corporate tax rate alone.

Decent sand vises spinning off cash flow and incentivises reinvesting. At this point under view, the king port is doing everything they possibly can to reinvest in new models, new lines like they're building a new production facility. What more could they do in with all the money they are making? They can do anything.

So they start looking around for other places to put in the cash. Now at the time, there were rumors circulating in the auto industry that volks wan had their eye on the the king and they were looking to recruit him to be the successor to further and PH. We're now in .

work the first time to the best guy over a portion over all. Let's do again.

So I think, uh, first np h took over A C E O of the whole V W group. I believe in the same year the vd became C E O of porch in one thousand ninety first tens, obviously much older, coming towards the sort of twilight years of his career. You can see how this would make sense if I were trip, whether it's two or not.

I'm sure to came against rumors of IT vikings. Really, you don't can feel like themselves here. Port, right? Like he's hard to imagine a Better run.

He gets the idea. H, he kind of has like a sort of just in timber, like social network moment of, you know, million dollars in cool. A bill being A C O of vox wag isn't cool.

You know what would be cool if we are also bought vox wagon? I'll become the C O V W group when I buy you. Uh, I remember the first name P H is chairman and C E O of vox waging group. He's also A P H. He's also on the supervisor reboard of porsha because he is also a key member of the family that owns porsha.

Yeah the sitting active C E O of vox wagon as a family member of the porch. P H. Family has voting shares in porch .

yes and is on the board, the supervisory board of port. So they thought they were done with the family drama here. Turns out there, there's another chapter.

So isn't IT obvious than that? That would be hard for porch a to take over walks wagon, well, porsha.

And does the families needed something to do with the cash? And at the time when they start this, V W shares are a pretty good investment like they're not trading super highly like it's pretty clear to them that is undervalued. N V W is a critical partner to portion.

So I believe certain ly, certainly to the public and probably also to the family visiting positions that says like hey, we're deeping in the partnership. They don't announce flake hey, i'm trying to take over real you out of I, C to portion. September two thousand and five portion spends four billion dollars to acquire twenty percent of the vw group on the open market.

Uh, kind of a creeping takeover vives that you alluded to in the trio at this point. Video and porches, CFO joins the foxy on board, and then they keep buying shares. But using another panted, bernard, are no technique. They do IT mostly using various derivatives and options contracts. So they're buying like the rights to buy shares in the future.

And that's usually ways to get around regulatory stuff, right? Like then you're not exceeding caps if you're buying derived is rather .

than the shares themselves, yes. And in vw in particular, there was actually law in on the books in german law called the vox wag and law that was designed to prevent a takeover of V W. Because the state of lower sexy is still owned, the twenty percent share invoke. And to this day, and he was considered sort of a national treasures, and they didn't wanted to be taken over by corporate raters, they didn't envision that that would be another chaman auto company that would try to take IT over. So IT was impossible for a an actual direct take over to happen.

I am literally gna read from the wake pedia here because the wake pedia is extremely well written. Under the folks wagon law, no shareholder and folks wagon ag could exercise more than twenty percent of the firms voting rights regardless of their level of stock holding. This law was supposed to protect the box wagon group from takeover vers in october two thousand and five, porsha acquired in eighteen point five three percent stake in the business. And in july two thousand six, port increased that ownership more than twenty five percent.

yes. And part of the reason this all was able to happen, there was a lot of speculation that this german vox wagon law uh, would be illegal under new E U. Regulations in two thousand and seven, medicine creates a new separately publicly traded holding company for the family's ownership of portion.

So it's there's still the portion Operate in Operating company. There is now a new holding company that owns one hundred percent of the Operating company and the V W. Shares that they've been acquiring.

And this is .

poor A S E porch S E holding. And here's where things start to go, right? Video starts loading up the holding company with debt, with cheap debt in two thousand seven to go buy more V W shares on the market. Ultimately ten billion dollars of debt that he puts on this holding company.

He's got third in P H, signing off on right.

Like why would p go along with this? I think the best as I could figure out is that p was not happy with the then current CEO of vox like an and was looking for a way to get his first successful or out. So he clearly he was trying to recruit IT into so like he was benefiting from this to right yeah, he was how was taken needed to I head.

I went.

tells you lose yeah. So as portions buying all these vw shares on the market with the debt that are loading up in the holding company, the float of V, W shares that are actually available on the market starts shrinking precipitately. Because remember, the german state of lower sax, and he still holds twenty percent poor, should now loans more than fifty percent.

because they had kept buying after that, twenty five percent using all the cheap debt, and they got all the way up to fifty percent.

Only leaves 3 person。 Then you plus maybe some long term holders are funds that aren't onna sell. The amount of V, W shares trading hands on the open market shrinks to pretty good, less to zero. We know that the markets are supply and demand, just like this car sitting behind us. If there's not a lot of supply available, Prices are gonna go up.

didn't go up so much that vote swagging like briefly became the most valuable company by market cap in the world.

Yes, he did. So as all of this is happening, remember, this is collapsed, which this this is the black one event that be the king couldn't have predicted. Like he's not dumb.

He knew he was taking risks here. But like a so living british collapses and it's crazy what happens. So during the week after the collapse in october two thousand eight, that's when vox wagon group becomes the most valuable company in the world. Head funds have been shorting vox wagon and you get a short squeak that happens and the stack just goes through the roof because there's .

all the demand for borrowing the shares .

to do the first selling. So you would think that this is like the best thing that ever happened to portion. They now own more than fifty percent of the most valuable company in the world.

They're invite, I believe, the threshold that they needed to get to with seventy five percent in order to consolidate V W. Financials into porcher. And so they had announced that their intention was to buy up to that thresholds to get there.

So you think this is great, but this is terrible. This is the undoing of portia and video because they've got this dead lemons just happened. So like clearly, they're not going to be able to refinance any of that.

And yes, V W share places in the attis here, but it's not sustainable because if porsha were to start to sell any of their shares, which they're gonna to, to service the debt really soon, the share Prices is gna completely created because like this is this is like going an artificial Prices just because of the short squeeze is that high. So portion now is like completely trained. They can sell to service the dead because then the share Price will cator. They can buy because they can't take out any more debt. Uh, so they're just kind of like stuck in time.

Why can't they sell? Because if they sell, they get a bunch of cash by not liquidating that many shares .

because it's so valuable to sell .

that many shares at this Price .

before the the Price whom and right?

Wow, fascinating.

So at this point, P, H, and and good old d nan.

who hasn't moved a single piece on the chest.

No, he's just fine. He's on the beach board, and he's still chairman of the vw board. He's no longer C, E, O, but he's still chairman of V, W. This is when he turns on video so he invokes wagon announced publicly to the market that they no longer believe that porsha is a financially viable entity as a deep trusted partner .

yeah we believe and um they say .

that they have to say this because portion is a great to than fifty percent owner of V W until you have to disclose this the market um and that is a result of this extraordinary circumstances. Ces V W LED by third nam is willing to bail out the her partner portia and save them by purchasing the portion Operating company for, you know the neighbor d of three to four billion eos to, you know, get them out of this predicament.

And then just to impact the statement a little bit more, what he's basically saying, like make IT more explicit, is a key partner of hours went .

so deeply into .

dead to try buying our shares that .

they .

can't service that debt and are now about to be insolvent and default on loans. So therefore, we will help them out by what is that buying them for.

They they floated up Price of three to four billion eos, which remember, like a couple months ago, this company portion was treating at ten.

Wow, this is literally first nen saying to via king, if you come at the king, he does not.

Exactly what is going on. yeah. Wow, indeed. So there's a whole flurry of negotiations. This is all against the backdrop of a being october.

Within a few months, by january two thousand and nine, video is gone as C. E. O.

Of course, I supposedly, when he exists, the building he exits to a standing ovation from portion employs, which I, he kind deserves, even though, like all of this craziness, he did go a bridge too far like he did save the company. Vw does end up buying pora the Operating company in two traces. Over three years, they buy fifty percent up front.

Three years later, in twenty eleven, they complete the purchase. IT ends up being about eighty half billion euros tonal. So between that opening value of three to four and the thirty two, thirty two IT lands at eight and half was even crazy about this.

The undisputed hands down the home run winner in everything is, of course, the portion P. S. families.

And first nand, they emerge as the largest shareholders, the families personally in V. W. group. So portion S E.

this new hole in company they created that was buying V W shares.

already owned fifty percent of V W and then vw paid eight, ten and a half billion dollars to by porch a so the families own fifty percent of V W, and they just got eating a half billion dollars for porcher. So they already were pretty high up there in the rankings. But after this transaction, they are now in the top called fifteen wealth est families .

in the world oh my god. So posts both tranches uh, after porch ag, the Operating company is fully owned by vw. What does the family own?

Thirty two percent of the vw group, which remember now also on port, but they have over fifty percent of the voting power. So they control vee of you group.

It's so crazy. Vw, the company bought portia the company, but really portion the family owns at .

all owns at all and they just got a eight and half billion dollar cash out wow yeah crazy. So here's the thing now we're now in twenty eleven when the second church of the buyout happens um word deep in the grave financial crisis and the recession. Um should the business, it's fine, the drama is all around porch, the hedged fund you know and the financial snana's um and the families, the actual Operating business, the cars sales are fine.

Porsha has won downtown es year only one during the financial crisis. Um and then everything else is is up. A big part of that is the investment in china and china starts really, really growing through the early twenty tens for porsha.

Also, this is when they come out with the nine eighteen spider. Um there are next super car at this moment in time. There's all this old portions now owned by vw and concentrating they're yeah we can still make the best cars .

in the world yeah in the ninety team help to inro's ce um like lugg hybrid technology, which portion knew that would be going in that direction? And so the ninety teen was like like example we are talking about before of how they like covered the kn with the courage tea. By then we're still doing this. The ninety teen helped them say, hey, we're gonna hybrids, which is viewed as this like cheat, you know, like little car, the press like you think, well, here's a hybrid and we're gonna hybrids were were going to start top down with this crazy, crazy super car.

Talk about super cars for minute because I think it's important to understand like they don't always make a super car, right.

right? It's like a once in every ten or fifteen years cycle, they're making one. But it's a very yes, it's a rare and special thing that they do IT.

And IT seems to be they do IT only to can approve something, approve a technology like the nine, five, nine was all will drive. And this car was kind of this new production facility. And and the nine, eighteen was the plug in hyper technology.

And how many years did they make him for when they say they are going to be a short model run? So this part made twelve hundred and seven years. Consider a lot for a super car, made hundred, eight hundred.

And in fact, that was considered for a super car. It's biggest rivals at the time, uh, which were the nuclear p won in the law. Ori, they didn't combine to make one hundred eight. And but the the .

nine eighteen spider is what a two million dollar car these .

days yeah IT IT new was like nine hundred or so， maybe a million. And after you get a bunch of stuff and it's double done well, all the supercars well.

bet i'm sure you're talking about this in a minute, but porter is the master just of like you their easy base Price, but you're not going to spend the base Price. You're going spend like forty percent more.

But even even if you figured the base Price was like nine hundred grand, they made one hundred eighteen. And you do the math, doing a super car is real money to be made fairly quickly, as opposed to a kind is a long tail, and you make him over a long time to spread out the cost.

And so this super car was a plug in hybrid. I don't think our new all.

all supercars are now. But the ninety spider was portia saying we're going to go into this plugged in world because they knew what was coming up. We're get to the second with the, but they knew what was coming out that hybrid ds and electric cars were gonna a thing.

So instead of introducing that with with A S U, V, for example, which is where they should have, right? Because that's what the market wants that they said not we're going to do with the super car and show people we're going to do that. We can do well and then we'll trickle IT down.

What did the car world think of that?

It's important, keep in mind, that ninety spider, being a plugging in hybrid, had a elector component. But I also still had a massive va and IT that had zilker sepos. And IT was the same with the law for orion, the malarkey one.

They still had massive engines also, so was fine. The the next couple of supercars will probably be full electric. And so that transition, I think, is going to be more controversial. The interesting thing that setting seems to be setting portion apart now though is the third um standing behind IT furious he said that the technology I E S A although the plague and stuff we want to be any part of the afro I and so like no one's .

really sure how that's going to age. Be all exactly multi million dollar car? Yes.

exactly. It's scary situation of your own that car and the battery is gone. You know, to do you go to the supplier, the portion has always been big about standing behind the cars in part to preserve real that and to make sure that owners of the next super car, now that theyll be protected. And so like this cars already almost twenty years old, all the paris still available.

like that's the smart brand thing.

IT is that thing to do. But it's not easy, like if you really think about IT for plus, they don't need to, they don't care. They make the next phone, the next one they keep finding with people.

They only make what, thirteen thousand cars a year, small person .

rule of luxury dominate .

your customer.

Ferry was owned by somebody at some point though.

right? Yeah, there are all these floria story that is a crazy one also. But the field group eventually had stepped in because and so I had just driven the company to but in his pursuit of racing.

had like driving the company to find IT wasn't his pursuit of veto derivatives?

No is quite different. That was actually very italian thing versus the procedure kind of a very german thing, yes. But um yeah that was a real bad situation or no of those companies are independent. And it's not really possible either because the way regulations are structured, especially fuel economy, you have to spread out your fuel economy over your corporation um and you have to hit certain targets. And so actually in some senses may work that well for portion because um IT would have been difficult to get portrait a kind of work on the corporate average fuel economy standards because the other cars are kind of an efficient, but because they're under the walks like an an umbrella, you can kind of get that whole spread and IT works.

We want to think our long time friend of the show, venter, the leading trust management platform, venta, of course, automates your security reviews and compliance efforts. So frameworks like soc two, I saw twenty seven o one gdpr and hip compliance and modeling ing vento takes care of these otherwise incredibly time and resource training efforts for your organization and makes them fast and simple.

Yeah, fanta is the perfect example of the quote that we talk about all the time here and acquired jeff basis, this idea that the company should only focus on what actually makes your beer taste Better. I E spend your time and resources only on what's actually gone to move the needle figure product and your customers and outsource everything else that doesn't. Every company needs compliance and trust with their vendors and customers. IT plays a major role in enabling revenue because customers and partners demand IT, but yet IT add zero flavor to your actual product that IT takes care of volvo for you.

no where spread sheet, no fragment to tools, no media reviews to cobble together your security and compliance requirements. IT is one single software pain of glass that connects to all of your services via is and eliminate countless hours of work for your organization. There are now A I capabilities to make this even more powerful. And they even integrate with over three hundred external tools, plus they let customers build private integrations with their internal systems.

And perhaps most importantly, your security reviews are now real time instead of static, so you can monitor and share with your customers and partners to give them added confidence.

So whether you are start up or a large enterprise and your company is ready to automate complaints and streamline security use like vana seven thousand customers around the globe and go back to making your beer taste Better, head on over to vantage a combs required and just tell them that ban and David sent you. And thanks to friend of the show, Christina anto CEO, all acquired listeners get a thousand dollars of free credit vantage com slash acquired .

yes okay well great. So this is perfect to to wrap up on the the history of portion here. Um as part of the V W group, they come out with the macon, which is a huge success and both .

in amErica and china and acs OK exactly. And a lot of folks bag and stuff shared with all these cars. Engines are shared across tones of model lines. Now yeah.

Interest, which is such a departure for a port.

That's right. It's for an engineering company to doing this kind of secret. The engineer, the kin turbo, which is the best kn, is in the lab.

Gini aris, an italian car. The Betty bent taga, a british but volks wag, owns all of these. It's in the aud R S six. In the r seven, it's like it's everything is now to spread across .

all these brand is a little bit echoes of lucky marney. We the heritage of the great airplanes, the great portions. Is this independent and your engineering small team culture 不 打 today with yeah in the count you have to be part of this。 So the macon to make IT um and then we just saluted to IT with the the time and the the mission e is the concept of that they introduced. And so like pretty early I the tesla model s came out twenty thirty twelve thousand .

two thousand twelve model year. So portion was pretty early with the concept mission. Yeah yes, not everybody was sure that was going catch on. Electric vegas, I know of people were slow as a result yeah um in fact like entire .

nations were like japan is five years behind everyone and electrics it's the weird dest thing. It's like they just like woke up last year and we're like, oh my god.

this going to happen in the car role mean, at least five years by toilet just started to came the first electrode AR like yesterday, eight years ago.

We talk about that another day on a quiet like how did that happen? I mean, they were they were the forefront of hybrids.

totally the press that would. They invented IT all another like still like waiting and seeing rik wild.

So the takes on comes out. It's a very phenomenal car like I think people are little unsure at first, but then it's super well received within like three years.

Yeah no, it's it's it's been well received IT. I drives like a portion, which I think was everybody's fear about an electronic car that you'd lose the engine sound, you d lose the feel of IT, but the time on dozen deed drive like a porsha.

Why do you think they came out with us to end?

This was a mistake for sure. yeah. Yes, I think I think probably because development started about when they started mission e and that was in fifteen incidents were still a big part of the market.

But most brands now that are coming out with electric cars as their first car are coming out with svs. You look at riviere pure S V V and truck hammer E V. All there's a time um I think portion made .

a mistake yeah .

but relative to the other .

traditional lot of I get the sense portion you gotta be in the top tier of like best positioned for an electric feature yeah yeah no absolutely.

And they will continue to innovate. There's electric is coming soon so they say and so it'll be fine um in time can I mean, one could argue that portion needs to come out with an electric spotty car first because they needs if you come out the electric car U V. As your first one and it's like .

they have no plans for an election c nine eleven.

right? I mean, that's what they would tell you if you asked them. That's what they would say. But let's be honest here, like the future is electric, there will be electric versions of all these cars and probably within are not so distant lifetimes, they will be purely electric.

Interesting thing about the time on. So you mention the next super car will be on all electric, one I haven't driven in a time on. I have watched videos of people driving IT. I'm like, what do you what else you need to do to make this a super car?

You know the thing about electric cards as they all can accelerate incredibly well. And that's like say in on to everything is two seconds.

but isn't IT also like tune to drive, like a track car where your fifteenth lap is gona be just as performance as your first?

yeah. And so it's beneficial at the of the day a four car, especially one that made not limited quantities, is never gonna have the effect like a super car. Halo car has unlike really showing people what a brand can like do. And so they will I suspect in the next couple years, they will come out with the next super car, which will be, you know, look like this, and they only make a thousand and you will cost two million dollars. And IT will be fully electric and user to sixty and one and .

a half performance characteristics of the next generation of supercars can look like, like what are you humans can go. And I think second, so I think that .

will continue to help the values of these cars increase. Because at the end of the day, as cars age, they all get slow, right? This car now mind that fast by modern standard.

So you start to look for other things that make them special, which was the feel of the sound at A, I was, I had a press card drop on the other day. A K, A E V six G, T, which is the electric key. A cross over IT is sized and designed to compete with, like the toyota v four.

Okay, but this is the high performance version, deserve to sixty. And like three point two second astride yeah. Like what is a super car even mean anymore? Like ultimately, like what is IT offer that I K Y U V C T for father way fifty one thousand dollars does not offer?

And the answer just has to be like it's lower, it's wider. So IT can IT handles Better. That's one of the big missing things from a lot of these fast accelerating electric cars is that they're not necessarily like sports cars really are fast, but they are not really sports cars.

And so I guess that's gonna going to be the future. But you're right, power is being democratized. Everyone can now access a car that deserted in three seconds, right? And so I don't know it's it'll be interesting to see how the .

sports corresponds. Well so that brings us to today um when or or is more accurately last fall, september twenty, twenty two, when vw group rei po portion, the portia rei po is the largest european IPO of all time, the initial market cap of portrait at trading was about seventy five billion dollars. Today that's up to about one hundred and fifteen billion dollars, call IT nine months later, as the .

investment bankers would say, like there was a lot of value unlocked by making this its own company, which I think is legitimate, I think there's an element to being able to own one of the premier luxury companies in the world without having to coming with a bunch of other stuff. And so like all shareholders of porsha, can purely just be shareholders of porsha. And you when you look at the financials and you understand like, okay, they have incredible margins relative to you look at the rest of V, W portfolio. And fine, it's interesting though.

like the doug, to your point, Operationally though, you can no longer extricate these companies so you can financially extricate .

them reportedly. But even then, how do you how do you if financially extract like development cost to a power train that used in multiple vehicles or a platform? I mean, the tiger version of the title called the e trade t how do you you know it's all internal. So yeah.

if it's not actually Operationally any different, then you do have this question really like OK value was unlocked by just looking the market he was by actually what happened there is you got Better at marketing a security, right? Not you literally created value inside the company.

So it's interesting livings on car, livings on who rope excEllence is expected. He published a new edition of IT last year. And in the forward to IT, he said, the reason I did IT now is that the old independent portion is is done like this is a completely different company now.

And I can fully put, yeah yes, that original portion. So even though there was a rei po of port, it's never gonna be the same. That independent.

And by the way, you can choose to buy porsha ag, the independent spin out of A V W. Or you can also on the stock market go and .

by porch S E the so uh some other .

interesting things about porsha today, the family, as we mentioned as complete control both of V W and porch a so in some ways it's still the same old porsha even though it's all coming old. Um here's the sort of nail in the coffin my opinion argument on is that a separate company or not, Oliver bloom is both the current C E O of V W group and portion.

Yes.

when you share production facilities and you share distribution and you share a CEO and you share components and you like at what point in what way are these separate companies?

I guess me, the king was right. He was right in everything that he was doing. He just, he didn't win the game of rounds.

right? fascinating.

So digg into the business a little bit, uh, they do over forty billion dollars a year in revenue right now. When you look at the breakdown of that, interestingly enough, two thirds of IT has come from suvs, and there's a good amount of IT that comes from the take to. So the nine eleven has sort of grown slowly over time. The seventeen that's the boxer. Kan not a lot of revenue coming from that.

Yeah that force car sales just slow, yes, is not the same, but that helps give them more legitimacy. yes.

And the panamera does have pretty decent sales, but still nothing compared to the monster that is the the S U. V. A. When you look at where their sold, this is quite interesting. China is as poor tie would account for their largest market. But the reason that I put that cava in there, because as that twenty six percent is, is china, they split out germany from europe and call them two different regions.

So they have german eras like a true german wood.

Germany is ten percent, and rest of europe, excluding germany, is twenty three percent. So you know, it's all of you are up together, would be bigger than china. But germans.

one of the interesting things is know the chinese only by four doors. They only want four door cars. There's almost note because there's no herge portion in china is a luxury good.

It's it's a cool brand that sells a cv and there's a lot of suffering vehicles there. And so like they don't it's almost none. Sports car sales in china, we are hard to believe, but we think of porch is such a sports car brands and like part of the ethos.

they're just like a kind right? Wow, yeah, I know we're used to IT now, but I remember the first time I seeing porsches like, well, that's that's a sports car brand. This is wear right? But for them, they never had the sports car brand.

So it's just like noral. It's crazy. North amErica is very close to china, has twenty four percent in terms of sales and then the rest of words, about sixteen percent.

So interesting thing when you start to look at both the amount of cars that they make now because it's huge and the margin structure associated with that. So last quarter, they delivered eighty thousand cars, and that's growing about twenty percent year over year. So last year, they delivered about three hundred and fifty thousand cars.

So this really is a scale organization at this point. This is not for ri. This is not libertini. These are mass manufactured vehicles. And I know they would say over not a mass market thing, which is true in some ways when use your average selling Prices one hundred and ten thousand dollars. But like if you're making three hundred and fifty thousand of something .

is a must market brain. I compared the brand to roll x earlier, I think from a brand perception that's too from the Operations of the company. Really, it's lue vita like they make blue, makes a lot of stuff.

This is the correct analogue. So I had this, and I know it's much later, but I want to bring afford right now. Porsha is levittown, for ri is our MaaS. yeah.

And I think that this whole time I well, researching I I just had this like broken thing in my brain where I was like, how how do they make so much stuff when their airman is? And they are not airman. They were once.

But as soon as they started making the S. U. V S, that's not who they are. They have tiered access to luxuries like different luxury products with a shared brand that unifies them.

which is funny because people see IT as such a high end brand. It's almost like the S. U. V. Have managed like get under the rate are of the people about the sports cars. And the sports cars have this still have this elevated viewpoint, even though you can actually go to a portion deal and least A A con for now, seven, fifty a month.

Whatever did you know? right? right.

On the scale thing though, there is another order of magnitude up. And these these other brands do fill much cheaper. So at around two and half million a year is bmw and Mercedes bends.

And IT does feel like porsha is in a much different class than B, M, W and Mercedes bends in terms of the sort of hoy I is associated with that. When you get to drive and you get to own one. And I I think that, that clearly shows.

And the question is, if they made ten times as many porches, would we all feel the same way that h it's just A B, M W, probably like there. There should be an inverse relationship between scale and brain perception, but they have managed to find this like mismatch, or like to your points, like skating under the radar, where they are able to make a lot of SUV and still maintain, right, what they have. And the question is for how long, right?

Or or at what scale? If if double again, it's interesting about B M W, because if you think about if you saw porters as often you saw B M W would would be special across answer is no.

So what do you think the air selling Price for areas across all there? Two fifty, three thirty .

h that's in the same that .

is in three x 3X43 x .

portion。 How many four years every year.

thirteen thousand.

thirteen thousand verses three hundred and fifty thousand? Yes, it's so funny because the enthusiastic world is often, are you a portia person? Or for every person like they are not really right .

these are two very different bees yeah and .

it's fair to be like, are you a nine eleven plus super car person for person but the rest of porsha shares the name porsha but is a completely different thing right there no where .

near each other.

It's almost like porsha should go get even more aggregate market cap by like spinning .

out just there .

like .

hyper car there yeah .

just the real world yeah in .

germany then that's crazy. Price three thirty four .

is average in Price three and thirty thousand thirty.

It's interesting, right? Like, I mean, you're duck the miro um you won't encourage t you don't own a mccain.

Yeah, well, yeah, I mean, I I uh, but they are cool. I think I would get when I recommend them to a lot of people, but that's a good point. Like, I haven't went, got a porch.

S, U, V truths fully. The reason is ridiculous. I I don't want to drive like things of that name brand like on a, like my wife would never be seen a port do.

It's funny thing is, one of David, my closest friends, drives a portion of, and his wife drives an aly O S toa different thing. That is something very different about who I am. SHE was driving his car the other day, and SHE was like, uh, I hate being seen in portion, or that you don't want to be driving, run to seventy five thousand of our portion. And yet the thing that you have.

it's particular I know it's interesting point. I never really considered that. I just i'd like to be casual for my Normal cars also.

I think that like having the portrait, S U V is kind of like it's almost more in your face than this. Like if you want us, we are kind of you the sports if you S U V, it's like, I love them. By the way, they're awesome cars. I just didn't .

not for me right. It's like getting um like the master's logo imprinted on your golf clubs. It's like, okay, I know you didn't play in the mass is but like, well, okay.

that's cool, right? It's that's exactly how I look at IT like OK, that's fine. I just that i'm a gamest c kind of look key and my Normal.

what do you .

think I drive .

a got .

a mont free?

It's a good guess. It's a David drives and that try what I would nice to. C, X, five.

Oh yeah. okay. You get the portion of of the make every time is the japanese portion of.

And if you asked my colleagues, they would say that. But I think IT just is a Normal but I like them. They're good. I recommend those to people .

to uh okay so more um back to portion uh a couple other interesting observations just for a listeners trying to keep track of home. Like what did the profiles of these businesses look like? I would think gross margin is an interesting place to look to understand the strength of a brand because basically showing like what can you mark up over your cost of good sold and set to people and still have them swallow that Price, right?

B M W, as we mentioned, ten times more units of B M W sold than portions uh are down seventeen percent in terms of gross margin. So they they really aren't marking up much above their cost of goods in order to to um ship those cars. Where is a little bit Better at twenty three percent.

Porches at twenty nine percent, so about fifty percent higher than B M W. Flora is forty eight percent. So people who are buying for arries do not care what IT costs. People just pay and pay and pay.

And by the way, the three thirty average playing like that's i'm just like to still assign age by that's an unbelievable amount of money when you really think about IT for thirteen thousand cars here.

And to put another way, because let's round forty eight percent uh to fifty percent, if you have fifty percent gross margins, that means you go buy a bunch of stuff, you assemble IT and then whatever IT costs you, you double back to sell IT to the customer.

I mean, for all is still charge like two grand to put apple car play as an option in their cars. I am dead serious like heated seats are like eight hundred box extra for you .

get the idea yeah .

I very options this google crazy.

So switching gears but staying on gross margins and cause David, you brought A L V H earlier, L V M H is gross margins sixty eight percent IT. Turns out you can mark up either way more than you can mark up cars. Interesting like at some point there, there is some sensitivity to like you can just make every ferri cost eight million dollars because like there's so much real hard cost in cars, they're just not in other luxury goods. And so you have this opportunity .

to .

be unbelievable Price premiums in all the stuff. L, V, majors. If you can touch IT, if if IT feels good on your hands, or IT looks good your eyes, or IT smells nice, you have the opportunity to market IT up way more than sitting in something that is .

going to thrill you.

How interesting. This is really interesting. Trying to understand which of these businesses sort of rather own and gross margin is in everything. But IT is amazing that L, V, M H is truly in a league of their own on on gross margins. Yeah.

going into doing this episode, I sort of wondered in the back of my mind his banner I know and L V H ever made a run in any of these yeah luxury auto companies. And if they have not, maybe this is the reason why, like they're just in a Better business.

Yeah, it's hard. Businesses is a lot of stuff. It's a lot of sense. It's it's a it's a different business, business a lot any distributions harder.

yes. And IT takes a really special type of person and and and team to run me. It's it's engineering and art, whereas there's not engineering in anything that lbma Jones. I mean, i'm sure there's bill who work there, whose title or our engineer.

but it's no it's crafts. Yes, it's craft's, man. yeah. So if I were to guess.

I would say maybe burnt know has kicked the tires unlike for our lamborghini, but more on like licensing agreements than trying to own those businesses because I just don't think that actually works into the rest to the fly wheel in the same way. Like you ve got to own a factory that makes these cars.

you got to do all the are indeed plus abilities harder .

and the the ships and the distribution hard.

your shipping stuff on giant boats all across the world.

Should we talk power .

move in and talk power yeah so for .

any listeners who are new um and based on the rocky de epsom, a lot of listeners are new there uh is sexy to called power which is a way that we try to figure out uh, what enables a business to achieve persistent differential returns above their news competitors.

So why are they more profitable on a durable basis than other people who compete against them? And this is always a fun thing to try to analyze because you like what what actually is IT for a business that has pricing power that, that they get to mark up their goods. And so we just talked about porsche having Better gross margins than bmw or Mercedes.

But not as good as fry ferry couldn't make the a number of cars. That portrait doesn't maintain those margins. So that's not really a fair like direct comparison in terms of who who their competitor is.

But B M W also makes ten times more car. So that may not also be the right comparison. And this, I think, is an an interesting point, which is porcius kind of in a league of their own in making the number of cars that they do. It's like this magical sweet spot where they get to be a luxury brand without a making so few things that you can barely do, you know, even work with the company.

Yes, they definitely, especially relative to her, have scale economies being part of the V, W. Group that they can be in. SUV is in a way that ferri can.

I think you're right that scale economies enable them to be in the S U. V. Business, which has great margins. And that's a that's a thing that you would need to have all these deep partnerships with other, other car brands in order to do that .

is a differentiating factor against ferry. But obviously lots of other car brands are in the S. U. V, right business.

The herd is obviously an enormous factor.

The brain and is the obvious is .

yeah the big one. I suspect that the german engineering thing also plays a role like I think now not against the universities bds, but certainly against lick the japanese. I'm sure their margins are much, much hier than the accurate and the lexi's of the world. And they even though that we can when you really look at IT on paper, IT doesn't make sense. There's there is some level of like this is a the german engineering thing like you looked to earlier, has this incredible reputation that helps them, okay, this card is simply built Better to european, german.

And does that, I think, for a long time that expressed itself in reliability of porches relative to other luxury car manufacturer today, is that as much as reliability as much an advantage for porches .

IT was in the past? Reliable is excEllent on the J. D, power studies and all that. Now the question of where the protection important for people making the decisions by the cars and that so sure how many those S U V customers are release and don't really care of things is reliable. No um but there is some component of just like quality that you just feel.

I mean that is certainly true to you going to A B M W Mercedes bends, just not as nice. It's not the same like you have this feel. It's it's it's certainly more special. There's a special list to IT.

okay. So moving through them branding, yes, obviously, like especially if if you're trying to enter uh, any space and computer, a luxury brand, uh, you don't have the heritage. There's just no way that you have the the seventy five years of people believing in your brand and thus willing .

to pay extra margin dollars for IT. So that's .

the obvious one.

one more great heritage automotive brands, right?

They are they're just going to take seven, five years, right?

Maybe I mean, like the there is never going to be another situation where the link between racing and production cars is like IT was when portrait was getting arted. There be another .

racing like there's another thing I think that's that's my object to think that twenty five years from now, people won't obsessively care that some new brand was forged in the twenty twenty years that had some others in a qual about IT. That's like the equivalent of racing versus production cars that you could imagine at some point. Tesla, as a heritage brand, feeling we like, there was a crazy accents. C founder.

yeah, no, I agree with that. But I will take yeah as many .

decades, you think. And it'll have to be .

for something else.

Form is a commodity. Now.

the koreans have been around for twenty five years and there's no like emotional attachment. Any of those cars, even the older ones. No, no brand is IT brand scale economies .

enabling the S. U. V line. I think that was a good one. There's not really counter positioning. I don't think there was in the Younger days, especially the racing Younger days, especially with the aggression of portias .

advertising portion ads have been some of the most iconic just brand advertising of all time.

and they were brushed. The reason its counter positioning is because a lot of car, like very higher cars, would never dream of showing their brand in such a greet way and giving their brand voice such a risky.

Of course is the nine nine three turbo, the arena red nine nine three turbo. Um the course would put up one picture of the car. And then there was always a tag line that was like the thing for decades. The famous was killed bog fast.

So the other one that i'm thinking of is nobody y's perfect.

That add was great. I had one for my nine, nine, six turbo that I earned nine, seven years ago. I had a framed, and I said, calling IT transportation is like calling sex reproduction the year, which is a great example of no other luxury brand with no way we touch that.

Yeah.

but yeah, I love David. I had the same favorite, one of nobodies. perfect. Because what they did is the bulk of the ad, when you look vertically down, is the top ten winners at lama and porch has nine of the ten and it's just pora porch, porch.

porch and .

that is import perfect.

So good.

Yeah right. So that's modest counter position, but not really any more um switching costs. I actually don't think there are switching costs in the car industry.

I think this is really interesting thing. We're like, uh, like my car before the moster, C X five was a honor. C R V. And like I, I, I completely reevaluate IT with flat, with fresh eyes. There was nothing about being a part of that old ecosystem that Carried forward to .

the new ecosystem and like apple or die yeah lesson that is that gonna become less to, I suspect, with all detective and cars. But yeah, I agree up until this point that certainly but .

there's no network economies. There's like really no benefit to you own a pora there for I own a porsha and I get value out of you a port particularly I think that can like go to cards and coffee together right um process power. This is probably where I would slow german engineering uh of all the things that we've talked about.

And then the last one, cornered resource, I don't think there's a particularly cornered resource here. It's not like the the square footage and student card they own is like some magical thing. So right, that doesn't a for power playbook. We've talked a lot of playbook along the way, but i'm curious for ones that jumped out of you that we we haven't yet.

I know we just talked about this a bit, but for me, the racing thing is interesting. Even though we didn't spend that much time on the details of IT throughout the history, I don't know that we've covered any other companies where there is this kind of like a Jason activity to the core um business of the company that adds so much to the brand value and is worth investing in. I just trying to think if there's anything else like this, I think has invested millions .

in racing.

but it's not like there's like software competitions out there, right? You could enter your software, right? Build your brain prestige.

Yeah, that's right. That's the same point. Are there any other companies that do things like .

that or industries that have like a showcase, right, like a very expensive showcase where you have to go build a completely different product line.

you know, is like this, the athletic apparel industry. And nike, yeah, like they spend all of their marketing budget athletes.

One of the biggest one that jumps out for me is the brand continuity. This idea that if you loved anything we've ever done, we should be able to fulfill that dream for you today and not with the exact same thing necessarily like we're not going to sell you the exact model that rolled off the line in one thousand hundred and seventy seven.

But like you get to participate in the feeling and you get to feel the same way about our brand today that you did then. And we're onna find all these interesting ways to provide you fan service. It's almost like going and watching the new star wars movies where if you like the original films, even though these aren't like the highest like highest grade directing and writing in the world, like we are delivering all sorts of fan service moments to you.

And i'm not saying that like portions not making the best cars in the world, they make some of the best cars in the world, but they also provide all these opportunities for fans. service. It's worth a huge multiple of what you invest in IT, if you can alive everything correctly.

IT gets back to the forty, fifty years sales cycle with this too, right?

Everybody dreams, I mean, your whole life you're dreaming my grab, dreaming of owning a port, which is again, kind of funny as we talk about the SUV and the volume they do. Little girl or boy, you don't dream a kan like like few kids kids are getting dropped off in those at school is kind of my point but you do dream of a portrait even though what's the same thing, right?

Dug, you ve talked about this when you worked them for A A decade ago and you were much Younger, like they didn't pay you much, but you ve got to drive nine eleven, and that was like the cool as frequent .

and everybody you wanted to work there, we get unsolicited resumes. Es, all the time of line, like pay wasn't great. And but like I did that name, you know, work for people that's so cool. And just being a part of IT and then you are having .

the car was a huge deal. I love IT. All right. Well, grading feels a little bit on on this episode.

And we killed greeting, but we do have dog to mira with us. So we are going to give porsha a dog for and it's an acquired adjust to the dogs war. It's you know we can't grade the entire company on handling. So we had to figure out some categories that we can a evaluate them on as I know that there .

are any weekend categories.

It's a David.

what criteria you think acquired to just a dog score?

We simplified this down to um to just three categories for the acquired dug score, revenue growth, profitability and defensive ability like what you want to own portrait as a stock. Uh, and I think those are the three components .

sort of closing your eyes to where they are trading today because you always have to like a value and treat Price. And are you excited about the company's prospects ten, twenty, thirty years from now?

So let's do revenue growth first. Growth has been impressive at this scale, not at the rate of the highest growers that we have seen IT, but still none. There's impressive prospects going forward, though for revenue growth, I think, are still quite strong. We're obviously a very different market environment than we have been the past few years, but portia is incredibly well positioned on evs relative .

other to face.

yeah. So I think they're strong as they electrify the rest of their line up, strong, uh, bulcke for revenue growth there. I also think that even as we're heading into a more depressed macro environment in the past few years, I suspect also will be more resilient in their growth than other a other luxury brand manufacturers. So I give you a seven on revenue growth potential.

I basically agree with you, america. I wanted yet on on a them versus other luxury manufacturers. It's sorted to pender to find luxury. I think they'll fare Better than Mercedes and B M W una downturn and like wayworn than furry. I think they're in this interesting place where like they it's like leave at on they have some cash sensitive buyers.

But because so much of their revenue is based on those S V S that probably will not use resiliency.

there are con buyers who will become q 5 yers。 yeah. S yes.

A for I really isn't a league of bits on though, the broader universe of bmw, Mercedes, all the japanese brands, tesla, etta in the amErica four, you know, all the four brands, the heavy brands ah.

any position, almost other a there's .

also thing you will lead to the colors, the money they are trudging for colors like we've done this. You've perfected this with so many options and people are just paying, paying, paying. And IT seems like there's no end to like what portion can kind of flew their customer r is for.

And IT just seems like that's only going to continue to be more and more of a thing going forward. There's become this entire sub culture around like specking. Your portion is like perfect way and that .

is obviously big margin stuff. And i'm yes, next is profitability quite quite strong for the automotive industry, very strong um not strong relative to the technology industry in software or apple.

That's right. We didn't say that earlier, but uh, porches a twenty nine percent gross margin. Apples are forty three percent gross margin, right?

And I believe courses Operating margins are in the high teens low twice.

I mean, i'd love to own a business that has twenty percent of every dollar, the bottom of great .

you earning. Ilo, yes, that's a great business. I think I go seven again on profitability.

It's a nine for the auto industry and it's like a four compared to the most businesses that we study .

on acquired because we only study business.

right? I'm sitting here .

in this might .

be a Better high margins are pretty impressive considering that the car business, that's .

what i'm .

for. The ease of the episode were agreeing on a score here. I score five feels like a good score and honestly, like I think five is the highest score you can give in .

the audio industry on profit.

which is like almost not in the bottom industry. It's like a completely different luxury category.

Yeah that's so true. Just happens to make .

cars so I am giving um uh because cars you cannot give a ten, nine, eight, seven or six. I am going to give poor shit a five. In terms of profitable .

and .

was the last defensively. So this is the biggest question. Does porches margin profile and customer love and brand value just only go down from here as they continue to grow? Like will we think of them as A B M W in ten years when we see more on the streets?

I just don't think so. From when I work there till now. IT is amazing to me, how much more people have become cestre porters.

Every cars and coffee event has become sort of a defect of portion event. The used ones, the vintage ones, have just shot up in value to an unbelievable level. Portion is more love.

Now I think that any other points, history now will IT diminish as a result of that. Probably, right? You can, you can only be at a certain level for so long, at a high level for so long.

But it's been incredible to me to watch porches rise even just over the last ten years. And how much people like love IT and obsess over IT compared to how I used to be IT isn't for IT doesn't have that brand equity that for ori does. But it's cut more than you to think and it's especially get more new thing for IT. Company that mostly makes us SUV.

I think you put IT really well earlier when you said people are like you, a very person or a port person and like the fact that portia gets to .

be and that comes no, is asking.

are you like this person like they .

are away with murder by being lumped in.

right? Somehow they're be able to both produce an SUV that get some three hundred fifty thousand units annually. yes. But also mentioned the same breath is for ori. In terms of like enthusiast.

I am like literally attended of ten on this because I think this is a thing that I still don't really understand how they executed this so well. And they've done IT Better than any other company in the world.

right?

It's probably true. They went from making the nine eleven the everyday super car, to now they are like an everyday super car company, right? They have a whole gradient of everyday super card that you can buy, but they're all everyday .

super card and and yet people still dream. It's crazy. I agree. I completely agree. And IT. And again, if the love only seems to be growing even as their model line expands to what we would consider to be less desirable cars and is amazing, and like, he is amazing, they pull that off.

I think that that is my bracelet for this is, uh, something I took from the L V M to episode of evaluating brand power. 看 女 票。 Is there anything that could happen that would completely kill portion? I don't think so.

Nothing that they would realistically do. I mean.

but even get, let's say they did. You know what? This is what we learn from the the episode gucci, everything you could think of to kill a brand. They did that. But the heritage there that I can always be resurrected, going to be value individuals .

still has this out of good. Yes.

you can never completely eradicated.

And I think portion is the same brain and gets to a certain level. Is that even possible to kill?

I don't think so. And if you reach that level, that's when you have real brand power.

Yeah and I think .

purses at that level because let's say they make a bunted decisions and they killed the company that goes bankrupt. Body will buy IT out of bank. Yeah, I ten and ten. So that gives the acquired ducks score for porsha a twenty two out of thirty, out of thirty, which which by doug, pretty beauty good. You're highest dug score ever.

seventy two or seventy Better than so what can .

set the time?

Quick carvel.

i'll start, uh, because i've had no opportunity to consume any media in the last three months. That is not specifically for required research. I have a random website that I haven't used in six months, but I used six month ago and is awesome to recommend.

And that is resort past dot com. Have either review ever been to read com? It's like a airbnb for a amenity at resorts. This is awesome. So how did I but when I go on vacation, I typically won't stay in the really fancy hotel.

My wife, I will just like book a condo or an airbnb or something um and they're right next to really fancy hotels, right? And so what resort passed us as they go to the hotels? They say, look, I know your pools are like not full most of the time. We have some and I don't exactly know how real time their inventories or if they be, are able to like buy big blocks of the front. But like a hundred box a day or two hundred box a day, you can go and get a day bed or a cubana or I have .

many you've been holding .

out me so I Jenny, I do this. We will do the same thing you do. But like, I didn't know there was a platform for, I just call the hotel will book a massage at this point. Me like, oh, and then with the massage you get the like right. But now also .

passed over there. You likes a cara G T of resort S.

Uh great uh my car val is um I go down these youtube raby holes which is probably how originally I got to you but i've been on a sign field cast interview h rabbit hole yeah and there is an amazing compilation of all four of the cast members doing charly rose interviews.

And he was so good, I mean, problematic person, but like he was one of the legendary best interviewers of all time and he did a bunch of interviews with all for them, surprisingly, a naively for me coming in. Jason Alexander is by far the best interview. He is so articulate, like, incredible.

If you see him interviewed anywhere, talk and talk to anywhere like contemporary ia extemporaneous sly, he is pretty little good. He.

uh, you would never know, because he's so different than .

the George character. So biggest difference of all of them .

in that bit on curb on curb enthusiasm. There's just like whole art of the show about how like jasie Alexander is not at all like George and how dare you perceive him that way and then it's like Jessie Alexander and situating two, Larry David, what a loser the George character is. And Larry takes a personal leagues. It's based on here.

I should say, five, Larry David in this compilation of cher's conversation. theah. It's so good.

It's so good. I think about an hour twenty total. But it's worth IT interesting juries in here. Juries in there. Yep, they're all in there.

Interesting OK. Mine is a youtube r named westland diesel. Have you guys heard of him? No, I got surprised either.

Will anybody who is listening to this, he creates it's like he's a kind of a car, youtube, but mostly he just does crazy stuff. He lives in tennessee and has a big property. And like did you see that the thing went viral like on twitter elsewhere?

If the tesla that was unlike twenty foot tall wagon wheels, he like done that, he bought a for rural and put IT in a um one of those like bubbles that like boomers put inside their garage and and I just started throwing stuff at IT like uh a latter and like an act and like a sledge hammer to see if I would like break the bubble and like damage to the car. He drop to mercy's juag n through a house. Um he got a he got a chevy pick up with with tires so big that he was able to drive .

IT out into a bay and florida big .

bear he's like like.

dude, perfect on heroin.

It's like that and he's like this. He's like from indian and he was in tennessee. So he's like just kind of like backwards, dude. But channels gotten so big that it's allow them to do just dumb stuff.

And he has become my utter guilty pleasure because you put on his video and you're going to see like deep destruction of something that a lot of people hold deer and then you're going to see a lot of companies in the comments with people being like, I can't believe you would do that to look for h my god as a youtube R I also feel like this is like the greatest thing ever because he takes what the haters say and just like turn IT up even more and I have to be like, nice and i'm so sorry is here he's like, forget about these people are going to blow up he flew a helicopter inside of his garage like, trash T. V. But I that other people .

do this.

Yeah, right, right. I do wonder sometimes about, like the danger of youtube and like, okay, IT takes now flying a helicopter inside your garage to get views. Guys thought I had a ferri. That was enough. You must you have .

talked about this a lot that like you feel when i'm we're going to be another episode 0 that like you started at a time and we started at a time when you didn't have to， I feel, do stuff like this.

drop in through houses, different thing, but highly recommended.

It's great content.

That's actually a great dog. We have not talked about like everything that you do give us so like a little bit insight and I I think David teas were onna do IT in an interview together as a as a separate episode, but like give us a little inside into the dog demir e empire and what you have going on.

A working people check in out, right? I make youtube videos. My channel is my name, which has become very complicated now that I have a business on a channel. Also maybe regret doing that, but just dog demo.

And then I also run an automotive like a car auction website for enthusiasts cars called cars and bids um and we're selling something like thirty cars a day or auctioning thirty cars a day, cars of right now. yes. So all just all like enthusiast cars, you know porches and B M W and .

things of short. You are one of the most successful youtube s in the world. You are also an entrepreneur who built a tech marketplace, internet marketplace business and just take a very large investment from the turning group, one of the investors in marketplace and content businesses out there.

Incredibly impressive. Thank you for spending so much time with us doing this collapse. This is super fun. It's really rare that we get to chat with somebody who is not an executive at the protagonist company and also deeply gets about the products and the kind of business respect of something league. I don't think there's anybody else we could have done this.

They maybe making himself .

you would be able bias I think yeah.

it's the bias that you get worry yeah.

yeah.

no matter yeah.

So thank you.

dog. yeah. Thanks so much. Thank you. Thanks for for having me was a lot of fun.

IT really was prepping for. This was so interesting. Learning all this history that I did know, even having worked there was great. So fine, thank you guys.

Check out our second show, A C Q two. If you want more acquired, we just recorded, uh, a couple more episodes such that we have get ready to come out that i'm very, very excited about. That, of course, is a way for you to go deeper and nurse er into topics that just either are ready for the main show or perhaps are too current for the main show since what we try to do here is uh, tell the big canonical stories. Often times there are stories in flight where we just want to talk to experts about what's happening, like jack sapper in A I talking about what it's doing a to the B2B set lan dscape rig ht now and whe re pro fit pol.

ls may eme rging in tha t ana lysts. That was a great conversation with him. We had David to from real all the hits.

David, we've got a slack. We would love to see you there. We're gonna talk about the epsom acquired dm slash slack.

And if you would like to come deeper into the acquire kitchen, you should become an L P, where we will, at least once the season, have you help us select one of the episodes, in fact, completely deferred you to select one of the. And beyond that, we also will be doing by monthly zoom calls. So, uh, we can get some feedback directly from all of you and get to meet more of you.

So acquire that F M slash lp, if you would like to become an lp. Now with that listeners and a huge thank you to our partner crime on this episode dug demurs. We'll see .

you next time. See you next time. Easy you busy, you busy, you who got a true.