Porsche (with Doug DeMuro)

It's definitely Porsche. Marsha. Yeah, definitely don't say. Porsche. Definitely don't say Porsche. Family says it more like like'cause I met one of them at one point, they say it more like Not like Porsche, but more like Porsche. Like but it's hard. I think it's a German thing and I think it's difficult to but so we all say Porsche, Porsche. If you say Porsche with a German accent, it comes out like Porsche. Yeah. Yeah, yeah, yeah. Yeah, that's probably exactly what it is.

Welcome to season twelve, episode six of Acquired, the podcast about great technology companies and the stories and playbooks behind them. I'm Ben Gilbert. David Rosenthal. And we are your hosts. Today we tell the story of Porsche. If you liked our LVMH episode, you are gonna love this one. And not just because it's a European luxury brand, there is possibly even more family drama, creeping takeovers, and complex corporate structures at play.

But why is Porsche, the brand and the product, so special? The company has struck an incredible balance of both building some of the world's finest supercars while also being a great daily driver, unlike, say, a Ferrari or a Lamborghini. Of course, these are expensive daily drivers, with the average Porsche costing$110,000, but they have managed to nail being a prestige brand with pricing power and make a ton of cars.

at 350,000 per year. Today we'll 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 it certainly didn't start this way. Today's story has Nazis, tanks, the first electric vehicles, and, like most luxury brands, some misadventures in the 1980s. Oh yeah. And if you like quirks and features, you're gonna be pumped about our partner in crime to help us tell this story, Doug DeMuro.

Doug is one of David and my favorite YouTubers and content entrepreneurs. He operates the largest independent YouTube channel focused on car reviews with millions of subscribers. He also used to work at Porsche Corporate and is about as big of an enthusiast of the brand as you'll find anywhere. In fact, we are filming this episode now sitting in his garage in front of a very special Porsche, Doug's Carrera GT. Welcome to Acquired, Doug. Thank you for having me.

It's wonderful to have you here. Well listeners, if you want to know every time an episode drops, sign up for email updates at acquired.fm. Join the Slack. We'll be talking about it after this episode, acquired.fm slash Slack. And without further ado, David, take us in. And listeners, this is not investment advice. David and I and Doug may have investments in the companies we discuss, and this show is for informational and entertainment purposes only.

To set the stage a little bit, I think that even though it's a marketing phrase. It's worth sharing a little bit of history because it is more than just a marketing phrase. Right. So there's a pretty long and incredible history of science and engineering in Germany and Austria. It goes all the way back to the scientific revolution and Johannes Kepler. And actually before World War Two, Germany had produced more Nobel laureates in scientific fields than any other nation in the world.

Folks like Max Planck, Erwin Schrodinger, Kurt Godell, and you know, Albert Einstein, like these are all German and Austrian 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 looked more like a tricycle than a car, but predecessor of a car, was created by a German inventor in eighteen sixty four named Siegfried Markus. And I say probably

Because nobody really knows because Marcus was Jewish and the Nazis destroyed all records related to him during the war. We're gonna talk a lot about the Nazis here. in a minute. Either way, though, Germany definitely did create the first successful production consumer automobile. It was a vehicle called the Benz. patent motorwagen, and that was made in eighteen eighty five by Carl Benz. I recognize that name, Ben. Indeed, you probably do, as do most listeners.

Now, around the same time, another German inventor named Gottlieb Daimler sets up his own motor company. And then in the early 1900s, 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 network, of course. We are talking about Mercedes. I had no idea. That's where the Mercedes Navy. Yeah.

Yeah, crazy. So Benz and Daimler end up merging in nineteen twenty four, and thus Mercedes Benz is born. But okay, you might be asking, what does this have to do with Porsche? Well, turns out quite a lot.

Because in nineteen oh six Daimler scores a pretty big win in this fledgling German auto industry when they recruit the current Potting Prize winner The potting prize was for Austria's automotive engineer of the year to come be their new chief engineer at Daimler, one doctor Engineer Honoris Causa Ferdinand Porsche. Now, the uh whole doctor, engineer, honorist causa thing, uh, it's a bit of a red herring, although Portia, the person and the company would make quite a big deal about it.

The dude never even finished college, let alone got a PhD. It was an honorary degree that he got later in life. Wait, the Doctor Porsche is like doctor like the Seuss Doctor. Well, he had an honorary doctor. He was already doing stuff though. He was engineering and creating. Yes. Hence the honorary doctorate.

Yes, nonetheless, he definitely was a badass engineer. And we're gonna talk about all of the things, the amazing things that this guy creates. But we also gotta state this up front, and this is as good a place as any. Ferdinand Porsche and many other folks in the family and in the early Porsche and Volkswagen, as we will see days. were also huge Nazis. And Ferdinand himself not just was a Nazi, but was a very close personal associate of Adolf Hitler. He was a member of the SS.

And, you know, we're gonna glorify him and many of these other folks here of their 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 Nazis were so big and powerful they kind of just got, you know, coerced or they collaborated. It's like No, this dude. He was. Real big Nazi. He he was definitely a Nazi.

So when Ferdinand takes this uh new post as the head of engineering at Daimler, he moves his family from Austria, where he was the potting prize winner, to Stucker. In Germany. And uh Doug, you probably have some more context on this, but Stuttgart is basically like the Detroit of the German auto. industry. And it certainly has become more that way since Porsche was as we'll get to,'cause Mercedes Benz is there and it really does feel like, yeah, manufacturing cradle, especially for cars.

Yeah. And I think it's not even much like Detroit, it's not even just the car companies, but all the suppliers and the subcontractors. Everybody you meet in Stuttgart, just like when you go to Detroit, works for Porsche or Mercedes Benz or a supplier or something like that. It is like the industry town. So Portia Ferdinand

It it's not a short period of time. It's two decades like that. He is running the engineering and the car design for Mercedes-Benz. While he is there, towards the end of his time, kinda as we're getting into the lead up to World War II. 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 mass market automobile. Now, back in the US, there was the Model T and Henry Ford, that existed. But Ferdinand's vision is a small car. The Model T was A large car, like a like a modern small automobile that Germans everywhere can can buy.

Which was important because in Germany in that time, car ownership was not anywhere near as as big as it was in the United States. Apparently only two percent of Germans owned a car versus thirty percent of Americans by the nineteen thirties. And so mobilizing Germans was Not something that had happened in math at that point. So this really was a challenge to build a car that could be affordable enough for the average German person to buy it.

And indeed it was a challenge because the board of Daimler Benz uh rejects it. Uh they're like, no, like we w we can't do this. We make expensive cars for wealthy people. Right. They get into a huge fight over this, and Ferdinand ends up leaving the company pretty acrimoniously in 1929. So much so that like And Doug, you worked at Portia. You have content. Like I think to this day, the rivalry between Mercedes Benz and Porsche, like there's there's some bad blood there.

It heats up and it cools down and there's m there there's more to discuss on that in the future for sure. But they ultimately do s share that town too. So like There's rivalry, but like they're also, you know, you hang you have beers with those you know, you can't avoid hanging out with Mercedes-Benz employees also. Love it.

So once he leaves, Ferdinand 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 Daimler Benz, but other car companies in Germany and and Europe and I think in America too, on their designs and like do some work for them and maybe even design cars for them. And he names it the doctor, engineer, honoris causa Ferdinand Porsche construction und Bertungen Fur Motorin und Fargenbau.

I apologize to any German speakers out there. That is that is that's But to be fair to you, it's a lot. It's it's it's a mouthful. I studied French in college, you know, like and uh that translates as the doctor engineer honoris causa, Ferdinand Porsche. Consulting and design services for motor vehicles company. And this is the beginning of Porsche of the Company. And up until 2008 and 2009, which we will get to much later in the episode, that is the company that makes Porsches.

Yeah. I mean if you look up like the stock of Porsche and you pick the right Porsche and there's a couple we'll talk about, that's still the full name of the company, is all of his honorary things. So when he's starting this new company, he enlists the financial support of two people. One is his son-in-law, his daughter Louise's husband, one Anton Piesh. Remember that last name because it is also going to be very important as we go along here. And the other person is Adolf Rosenberg.

Now, if you are a Porsche history nut, you probably know about Anton Piesch. You probably don't know about Adolf Rosenberger. Because shortly after they start the company, uh, Rosenberger was Jewish and he gets arrested by the Gestapo, he gets imprisoned, he eventually bribes his way out and escapes to America. But during the war, Porsche and the Nazis totally appropriate his stake and portion. He's written out a history. Okay, so this new Ferdinand company In nineteen 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 Ferdinand's vision, the small affordable car for the people, a Volkswagen, you might say in German. That car would go on to become the Volkswagen Beatle and the company that contracted Porsche to build and design it.

was Volkswagen, which was established to do so by Adolf Hitler. I had heard rumors over the years, like, oh yeah, there's there's like a Nazi connection here. Like Adolf Hitler founded Volkswagen. Yeah, that's bigger than a connection. Yeah. Th there's not a connection because it's the same person. Right. It is it is the thing. Yeah, Facebook, I feel like that has some kind of like Zuckerberg association, but I've never really put it together.

Yeah, yeah. There's some there's some link between Mark Zuckerberg and Facebook. Like I just gotta say this early in the episode, we may as well like point it out already. It is crazy how comfortable we all are driving Volkswagens and Porsches when it was like not just a little Nazi affiliated, like founded by Nazis. And yet the way the world has evolved, like people kind of became okay with it.

All the German brands. I mean, you know, most of them use Jewish labor in their factories at that time and Obviously very different people run the businesses now and so you just kinda put it out. And you know m generations have gone by. Less so on the Porsche side of things, more so on the Volkswagen side of things, as we'll see with the history here.

There is kind of like pretty incredible refounding of Volkswagen after the war. Um and I think if it were not for this refounding that we'll talk about in a minute. Uh it would not exist today. Yeah. Um, but uh yeah, just wild. Friggin' Adolf Hitler. So the Beatle, this this you know, people's car, Doug you might know this, did it go on to become the most popular car ever in the entire world? Yeah. Yes, it is very hard to get actual production and sales data, especially for old cars.

produced in many countries over many years. I mean, they were building them in in Latin America through a couple of years ago, maybe two thousand three or something. And so it's like difficult to figure out. But it obviously, whether or not it was the most or one of the most, it was obviously the effect of that car is is clear, you know, today. Yeah. I I tried to think. I could not think of any other model.

I believe the Beetle, the original Beetle, was is likely the single longest produced and largest uh both in terms of length of time and number of units produced of a single generation.

of a car. Like the Civic, the Mustang, the F one fifty definitely custom more than the Beatle. But like th those aren't the same cars. Right. Like the Beatle was the same freaking car until the new Beatle in nineteen ninety It's interesting what do you think about the Beatle because young people today look at it as like a cute classic car. Right. But like at the time.

It was what you drove to drive your family around. And we'll talk more as we get to post war, but like at in Germany at the time as like a real, you know, important practical family car. This original Volkswagen, the Hitler Volkswagen, one of the 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

It's a new city in Germany known as the then called the City of the Strength Through Joy Car. That was the the what they wanted to call the the Beatle originally. The strength. That was like a Nazi phrase. That'd be much more German than that. Yeah, yeah. And um this is Wolfsburg. Uh like this is the city that uh Volkswagen is still located in today. Hitler created it.

And not just Volkswagen, but like the Volkswagen Group, one of the largest car conglomerates in the world that owns many other brands you're familiar with, all out of Wolfsburg. All out of Wolfsburg. So Hitler creates Volkswagen, he creates Wolfsburg. They do start production of the Beetle before World War Two starts. They only make about two hundred units. These are super rare today. They f you find a pre war Beetle. Then World War Two begins in S on September first, nineteen thirty nine.

As you would expect, Volkswagen, all the Volkswagen and Porsche operations get repurposed to making military vehicles. There's a bunch of dark stuff. Everything Doug, you mentioned earlier, forced labor. concentration camps. This was the Nazi war effort. It it all happened. We're gonna 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 Volkswagen operations from the Porsche operations for the next re the rest of the century and into the twenty first century. So ironic given that they are now one company again. Right. First off. No, well, or are they? That's the question.

And the funny thing is also they always they danced around, even in this period and then in the decades after that, and then of course now there was always kind of flirting with each other. Yeah. So first on the Volkswagen side, I alluded to this a minute ago, is a pretty amazing story what happens because you would think like there's no way you can't imagine that Volkswagen would survive post World War II given what we now know the Or J.

The guy, right. The company. So what happens is Wolfsburg ends up in the hands of the British. At the end of the war. Uh, and there's this whole crazy thing in Germany of like all the Allied armies are coming in and literally Germany and Berlin ends up getting split into East Germany, West Germany, East Berlin, West Berlin. Wolfsburg is in the hands of the British.

And remember, because it was a political organization, it wasn't a company before the war, nobody owns it. It's this like orphaned organization. It's super unclear. There's no like proprietorship 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 Volkswagen technology and operations. Like the Beatle was almost a British car.

Yeah. But supposedly the British didn't want it. The British saw the plans for Volkswagen for the the Beatle and said, No one's gonna ever wanna buy that car. It's crazy to think about now. And it gives you an idea of how the British would operate their car industry. There's constant missed opportunities. But

They literally looked at like this the drawing, you know, they few the models that they had, the few that they had built and they said, nah, that is they literally said it is not commercially viable. Wow. Wow. So okay, the British government kind of lacked vision for this. But a singular 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 were, like on the ground managing it.

Major Ivan Hurst, a legendary figure in Volkswagen history, he finds one of the pre-war production Beatles, the 200 that were made. He starts driving it around. He's like, Hey, this thing's actually pretty good. I think we can maybe do something with this here. He also sees, and this becomes increasingly obvious as the post World War Two state of world affairs takes place here in Germany, of like, hey, that like the Cold War is about to start.

He realizes that West Germany needs a economic revitalization here. We need to restart German industry because hey, the iron curtain is falling just to the east here. So he amazingly proposes and convinces the British command. To leave the factory in Wolfsburg, maybe 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 20,000 Beatles.

that the British military is gonna adopt and use as their main military transport. So not as like a tank, but like a not an armored beetle, but like they're gonna use it to drive officers and stuff around. Yeah. From that seed order, like That is now the new Volkswagen. So it's like yes, Hitler started it, but then Ivan Hearst

Totally. Now, one of the things that I find interesting about the Beatle is that each Europe was so war-torn after World War II was the whole all these places 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, UK had the mini, Italy had the Fiat five hundred. France had the Citrone two C V. They all kind of looked similar.

Wait, these are all based on the beetle? No, no, no, but they all came from the postwar era where they needed something small and cheap to like remobilize. The citizenry, 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 Beatle became a global hit, whereas in those countries it was more, you know, in their area.

Don't see a lot of uh citrions in Yeah, no, but the two C V 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 Cruise around it. Yeah. Super interesting. So that's Volkswagen. But put a pin in them. We'll come back to them in about fifty years. Uh because there's a lot more to say on on Volkswagen. And fifty years, that's about how long they would make that one model of the Beatle.

Yes. The new Beatle would get introduced, I think, in nineteen ninety-eight, and the first ones post-war were made in like nineteen forty-eight, so yeah. Crazy. Isn't that wild? It's insane.

Okay, so what about Porsche? Well they have a bit of a different pattern. So after the war And we should say during the war, Ferdinand Porsche was designing tanks and other military training. Designed the elephant anti tank tank, the most powerful land based tank ever created. A terrible, but B like just the range of design talent that he had. Like he designed the Beatle and he designed the largest anti-tank tank. Couple years.

Yeah. And also some of the very first hybrid and electric cars in history. But at that time battery technology wasn't advanced enough, and so you're lugging around this huge weighted battery pack to get almost no juice out of it. And so it didn't really go into production. He was a genius. This is also it runs in the family too. Many of his descendants are both engines and cars geniuses. After the war, Ferdinand and the son-in-law, Anton Piesch are both arrested by the French as war.

Tried in France, they end up being imprisoned for two years in France. And uh Ben, you did a little research on this, right? I think the technical thing they got him on, which is why they only had two years was for the forced labor that they took the imprisoned Jews and forced 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 and out of prison. Quick to you. Out of war criminal prison.

So Ferdinand's son, Fairy Portia, who had been working in the business, I think a little bit before the war and then and then during the war too, um, he's also arrested for war crimes too at the end of the war. He gets released after six months. in the summer of nineteen forty six. And he and his sister Louise are like

Oh what are we gonna do? You know, we gotta rebuild the family, are we gonna restart the business? Let's go figure things out. They return to the family's kind of ancestral home in Austria. And that happens to be quite convenient because during the last days of the war, as Stuttgart and other large scale German military production facilities were getting bombed by the Allies. Porsche.

About twenty or so of the best, most talented engineers and production people that they had, and they moved them out of Stuttgart. And they move them to the Austrian countryside so that they wouldn't be, you know, targeted by the so that the Allied bombers wouldn't know where they are. And uh this is pretty crazy. They are literally operating Out of a sawmill in a farming village in southern Austria named Gmund, we're talking about like a couple thousand people maybe that 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 Porsche? So there is this incredible history of Porsche called Excellence Was Expected that was written by Carl Ludwigson. And we have to owe a big thank you to him uh for the research for this episode. This work is like I mean the photos, the archive work that are in this this volume, it's it's incredible.

I read a coffee table book that that was like the complete illustrated history of the nine eleven because for this episode and this topic You want a visual history. And so it's not like there's audiobooks 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. There's just such a like um like visceral, tangible quality to them that is that we don't usually cover on acquired. Right. Okay. So Fairy and Louise. go back to Austria. They're there in Gemund. Uh and uh they're like, well What if we start a new company and

See what we can do around here. I mean, there's some vehicles we can start fixing up. This is literally like the Sony story. If you remember uh when Sony first got started in Tokyo at literally the same time, they started by fixing radios. Right. the the the second Porsche company, Porsche construction in uh G M B H, which is an Austrian company that they start to do this. They start up like fixing old, you know, military vehicles that are around there in Austria.

Unlike Sony in Tokyo though, where there were a lot of radios in Tokyo, there weren't a lot of cars in Gamun. Ha ha. So pretty quickly they're like, Huh. We don't have any more cars to fix up. And uh Bad business. Yeah, well, not a not a large market, uh, shall we say. At this point, Fairy 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 a, you know, small car, car for the masses, a Volkswagen. But uh he always had one major problem with the Beatle, which was that it was slow and it just was not fun to drive. So during the war, he actually had a custom Beetle made that he drove during the war uh with a supercharged engine. And uh Ferry said uh later in a nineteen seventy two interview, I saw that if you had enough power in a small car.

It is nicer to drive than if you have a big car, which is also overpowered, and it is more fun. On this basic idea, we started the first Porsche prototype to make the car lighter and to have an engine with more horsepower. Doug, can you contextualize 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 be people who ran and say, No, there were a lot of sports cars before but

it was really a thing of uh enth real enthusiasts, wealthy people, that sort of thing, would would buy cars to go motor racing in the era of, you know, brass era and that kind of stuff. The concept of creating like something more affordable littler that was still fun was like it was kind of an interesting idea that r you know this was a real it was a touchstone of a concept that has really been taken obviously by them and refined and others as well.

I went in in research I when I looked up, you know, some of those sports cars pre Porsche. And you look at them and these things are like Franken cars. They are huge. And the engines are the like the engine bays in the front of the cars are two thirds the length of the car. There's this one Ferrari from that era. And I look at I'm like, how do you even steer this thing? Like it looks like a boat.

The 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 it was unwieldy. Yeah. I mean even like to this day the Carrera GT sitting behind us, that's not a large cost. Right. Right. And that was a Porsche thing. And it was a an even more of a Porsche thing at at this Time.

And David, you said a word there that if people aren't into cars, they may not know this supercharged Doug. What does it mean to supercharge a car? you know, an engine takes in air and that's kind of air helps air mixes with the fuel and it creates

combustion and that more or less that's how a combustion engine works. A supercharger push like pushes in even more air to create more power, basically. So the term supercharged would be referring to like takes the same engine, but adds this thing to kind of force more power through. Like literally force more air in. Yeah. And then I don't think turbos had been invented yet, and turbos would obviously become a big thing for Porsches much later.

The concept of turbo is actually fairly similar to supercharging, except that it spins something that adds even more air basically, and and thus turbochargers. uh result in power kind of being produced as the car makes more power, it makes more power. If that makes any sense. It kind of like spins itself up in a faster way. Um and there's kind of pros or cons to either either of them. And for those following along at home, this is like end of the forties, nineteen forty seven type era. Yeah.

Those couple years after the war when everything was kind of getting figured out. So Fairy has this idea. He's like, oh, I liked driving my supercharged Beetle. This was really fun to have a small car that also had a lot of power in it. What if we take this small operation of our, you know, elite team here in Gamun and uh we try and build a car that does that? And hey, it also, you know, turns out that um

Well, we built the Beetle, A, so we know how to work with the Beetle. There are a bunch of Beetle parts around. The Beetle was the, you know, main kind of chassis platform for a lot of military vehicles for for Germany during the war. What if we take a lot of those parts? And um the basic architecture of the Beatle, which is a rear-mounted air-cooled engine on a small car, and we try and put something together here. And this becomes The legendary Porsche three fifty.

For some context on this, you can buy an old Beetle today for, I don't know, ten, fifteen thousand dollars at auction, maybe even a Beetle like a classic one from the fifties or sixties. Three fifty-sixes. regularly sell for about three hundred thousand dollars at auction and special ones go for well, well, well above a million. This is a big idea. The the gulf between a Beetle and a three fifty six Different thing. Is a large. Right.

Doug, why is the desirability of these cars so different today? The well, I mean production numbers is probably the biggest component of that one, right? They made literally zillion beetles. Um and the 356 is special 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 and a special moment and

a lot of them also weren't treated all that well. Ultimately the three fifty six not affordable, but they made a decent number of them. They got to be relatively cheap. It was the old used Porsche 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 Porsche history.

Yeah, this was another thing. So obviously in Gamun and then and then even when Portia moves back to Stuttgart here in a minute, um, their production capability is not nearly as large as Volkswagen. So they need to price these things pretty high. They priced them at$3,750, the German equivalent of$3,750 in the late 40s. That's about forty-two thousand dollars. But we're we're talking about war-torn Europe that you're trying to sell this in. Like 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 dollar sports car, like there are enough people who it turns out are interested enough. in Fairy's vision for a small, fun, fast sports car.

Initially it was slow. They it took'em a while. The first couple of years they only made like a couple hundred of them or something 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 in 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, it was the earlier ones were these big giant things that were only operated by enthusiasts who knew how to work them.

But like post World War two, there was a lot of optimism. There was more in in Britain it was happening too. The MG was coming out with their sports cars, Austin Healy, Jaguar. 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 drive them and enjoy them. And that really became a thing. And in Germany it was the three fifty six. So

That takes us to you know the late forties here. They're starting to produce the 356 in Gamun. At the end of nineteen forty seven, Ferdinand Porsche and Anton Piesch get released from French prison. They come back to Austria, the family's all together, and they kinda gotta decide.

what to do here. Right around that same time, Volkswagen's getting back up and running, you know, Hearst is running it. It's it's like the vision they're gonna, you know, make the Beatle for Germany and for the world. They come back to the Porsches and they say, Hey, we still want to do business with you. And in fact, we actually want to expand the scope of our business with you guys, uh, even more than it was before the Because we could still really use

you know, technical design consulting work and really leadership from you individual Porsches here at Volkswagen. I mean, after all, you designed the Beatle. Two 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 Porsche company that you've set up. So how about this? They propose two things.

One, they say, let's reinstate that old German Porsche Company, the doctor, engineer, honorist cause a blah blah blah. Uh we'll recreate the German Porsche Company. It'll resume doing the technical design and consulting work for us here at Volkswagen. In return They give that German Porsche company, literally the sweetheart deal of a lifetime, a royalty on every beetle sold worldwide. No way. Yes. This is how intertwined these two companies are. Yep. So

Sorry. The deal is we want your Austrian company to distribute our Volkswagens and in order to coerce you to doing that. And the consultant. We also want the consulting work. Okay. Yeah. But but Ben, you're on the right track. This is a hell of a sweetheart deal for the Porsche family. I mean uh you are right to be w saying why would the German government do this? Do you know? What kind of royalty? It was enough that it was it was very meaningful. Very meaningful cash flow.

Probably not even at the time not even clear just how right amazing it would be. Right, nobody knew that the Beatle was gonna become the international pit that it would. But but but it also th the German government did know that this was a lot of value. And they also may or may not have known that on the Austrian Porsche side for the dealership distribution side.

That was also a lot of value. So we're not going to talk as much about the Austrian operations of Porsche 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 Porsche company becomes the largest car dealer network in Europe, not just for Volkswagens, but for

all types of automotive brands. They're doing billions of annual revenue within a few years. 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 rights to Volkswagens. And they're in countries not just in Austria, they're all over the place.

Yeah, they're all over the place in Europe. And even more incredibly, so what the family decides is that Ferdinand and Ferry, the original Ferdinand and his son Ferry, they're gonna move back to Stuttgart and take over retake over the kind of German operations of Porsche. Louise and Anton, the son-in-law, they're gonna stay in Austria and run this dealership business. Anton dies in nineteen fifty-two, and Louise is the one who builds this business. Like Louise and her children

turn that into this huge, you know, the largest car dealer network in Europe. Incredible. Wow. Doug, the way the value chain evolved for selling cars, there's this very clear delineation in in the US at least, until Tesla, of separating the dealership from the manufacturer. There is no direct to consumer. Was that already like obvious at this point in history when Porsche kind of s has these two different companies?

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

I think there also might have been a technical reason, which is um, even though this new Volkswagen was reconstituted as a company, its 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 holds twenty percent of Volkswagen, which is crazy. Yeah. Um, yeah, they would IPO Volkswagen, I believe, in nineteen sixty or nineteen sixty one. So it was um even though it was a company, It was a German national company. And so to operate in other states, other countries in Europe, they probably needed third parties. Yeah. Yeah, wild, right?

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to some of the biggest companies in the world, you can check out century.io slash acquired. That's s-n-t-ry-.io slash acquired, and just tell them that Ben and David sent you. Yes, and they are offering two months free to all acquired listeners. Yes. Thank you, Sentry. So Ben, you hit on this a minute ago. What the hell? Why is the new Western-controlled West German post-Nazi government giving this deal of a lifetime to these former Nazis?

And it's not just we'll pay you for the cars you distribute that we make, we will pay you for all cars that we make, every Beetle, regardless of whether you distribute it or not. Yes. Yes. To the German company. And then the Austrian company has exclusive rights to distribute it. It's a crazy deal. So here's what's going on. It actually, as crazy as it sound, makes sense. So we talked about a minute ago the Iron Curtain and the Soviets link.

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 paramount importance.

So like the Marshall Plan that people probably know about, like this is why the Marshall Plan happened. And this is essentially part of this philosophy of like we don't care that these people used to be Nazis, but for Porsche for Mercedes-Benz, for lots and lots of German industrialist companies, the reason that they get restarted and re reinjected with steroids, so to speak, is like, hey, we got an existential threat next door, we gotta rebuild. we got to make

The industrial base. Now, the deal that they give them does come with an implicit string attached, which is they basically say to to Porsche and other companies. We 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 oddest 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 15, 20% of your income. But for these new old industrialists above a certain income, Germany sets the marginal tax rate at 95%. Whoa.

Yeah, like people are complaining that oh you live in California, oh my gosh, I'm paying thirteen percent state income tax on top of federal. Like imagine if the marginal tax rate were ninety five. Right. You would just have no incentive to earn any additional dollars. Right. And that's on the personal side. It's it's equally bad on the corporate side. Any profits are taxed. So what are they trying to do here? They're trying to incentivize capital reinvestment in the industrial base.

So they're basically saying to Portia and others set all this up and we are going to create all the incentives such that you will plow all of the money, all these royalties we're giving you from the Beatles, et cetera, into building up your production capabilities and investing in R D and new models and et cetera, et cetera. And I mean it sounds crazy on paper, but like my God, it actually works. Like and it works really freaking 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. Porsche becomes like it becomes pretty institutionalized there of like don't take profits, instead reinvest them in new models and R and D racing, uh, to the great benefit of the brand. Yeah. So I mentioned one of the things that Porsche invests in over the years is race cars and racing.

And this is is super interesting. None of us are racing historians. Uh that's a whole nother branch of the automotive industry. So here we're 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. カーモーケット and professional racing market was very blurry. Very, very blurry. Right.

And it turns out that even though, you know, manufacturers, including Porsche, would make special versions of cars for racing for Le Mans being the most famous race uh at the time, um, you know, and others around the world. It wasn't like like you look at an F one car today or you look at a Le Mans car, like like th there is no connection between that and something you can buy. The U or I would not be able to even operate.

So a super obvious point to illustrate this is um folks are probably you know known 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. They they were also Professional race car drivers. Professional as it were at the in the time period. Yeah, they competed in like real races in addition to being a Imagine Brad Pitt jumping into Lamar Right.

They'd uh uh they'd kill well, I I was about to joke, they'd kill themselves. Um James Dean did kill himself in a Porsche 550 spider, which Porsche would make a kind of dedicated racing type vehicle, although it was also a consumer production vehicle, the 550. That car that never would have happened if Porsche wasn't in incentivized to invest all their profits. Like, I I mean, maybe you can say I'll do like the legendariness of that car. I mean, they sell for what, five million dollars plus to

Real five fifty spiders. They only made ninety of them in the end. And so like it was a car that in theory you could go and buy. 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 were really like, let's go racing and like do it. Um, but like you said, you could a person could walk into it that not a dealership necessarily, but like just order one. Yeah. Um, but it is a it is an absolute legend. It totally is.

Yeah. You kind of see this trend, this moment where you see the bifurcation 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 and plays at the local bar.

She is the SR seventy one pilot and this, you know, playing on a local bar stage is flying a Cessna and the machinery to do so is entirely different in the same way that you're talking about car racing splitting at this moment in the early fifties. Yeah. So back to racing. We were talking about the spider a minute ago. I got so excited about James Dean. But Doug, to your point.

Three fifty sixes in nineteen fifty one and nineteen fifty two win their class at Le Mans. They don't win it outright. Like other bigger, powerful cars win it outright, but they win their engine classes at Le Mans. And these are, you know, yeah, they're modified a little bit, but like You basically buy'em, but Yeah. And I think

This was pretty unique to Porsche's at the time. Certainly you could go buy Ferraris and Ferraris competed and whatnot, but like again, like we were talking about, the Ferraris were a different thing. Yeah. These weren't 356s. And I think they were probably also a lot more expensive than, you know, thirty seven hundred dollars. Plus an important distinction between Porsche and Ferrari in this era is that Porsche was

Largely focused on road cars 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. Whereas Enzo 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 race. He only sold road cars to kind of finance racing. And a lot of the road cars that he ended up selling were either based on race cars or just former race cars that he would just, I'm done with this crap. Uh whereas Porsche was selling three I mean, three fifty sixes were like being sold, like as a in pretty good volume.

There's this great, great, great Fairy Porsche quote about this, uh, which he would say later about the nine eleven, but I I think this also applies in early form to the three fifty six. The quote is, we have the only car that can go from an East African safari to Le Mans, then to the theater, and then to the streets of New York. And like that's such a It remains true. It's kind of like Porsche's

thing to this day, like how relatively usable the car is in just about any setting. Like you can drive it to work. You can actually take it on a racetrack. That like has remained sort of an ether, whether or not they're kind it's constantly a North Star for them, it is what they do more than anybody else.

Yeah. I I was trying to think of like what the right um kind of other luxury brand analogy is here. Cause Porsche definitely is a luxury brand. It's not like we're uh uh making uh apples and oranges here. Um It's kinda like a Rolex to me. Is that really good or venue? What do you think? Yeah.

Absolutely. It's uh you buy those watches to wear them. You don't buy them to keep them in a case in Aguilat. You know, they're steel. They're originally made for people who are swimming the English Channel or scuba diving. I think it's reasonable to also compare it to like continuing in the luxury world, like a Ramoa suitcase. Those aren't that expensive. They're m three times, four times more expensive than regular luggage, but like They're not a Louis Vuitton. Right.

But they're a lot more usable. You buy it to use it, it can kind of get a little beat up. That's why it's made out of stainless steel, also. I think that's probably the right it's I feel it's not a Birkenbag. Brands like this. Because it has both the breadth and the depth. Like there are enough people who are like, I love Porsche's because they're my cars I can actually drive, but they are supercars. Yeah. This thing behind us goes two hundred miles an hour.

Yeah. No, this thing behind us is a little bit of a different thing. And there have been and we'll get to and we and the five fifty spider is one of them, there have been some portions that kind of go One way or another in the philosophy, but like generally speaking, it's sort of a middle of the road going back to Fairy's quote about this exact thing can do all these things. Yeah. Doug, one question for you. I'm gonna keep going to you for terminology. David mentioned Laman. What is that?

There are various car races that are considered sort of the big car race, right? Like the ND500 is the car race of that racing series. Lama has always kind of been a place to prove technology. It's a twenty-four hour 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 period. It's really serious. It's always raining and it's always a disaster and it's in the middle of the night and it's difficult. And so like being able to win or win your class. Lamont is like the Monaco Grand Prix, the Super Bowl, if you will, of like vehicles racing in that sort of racer.

Also, this like um you know uh uh Porsche would I I think probably advance this argument that relative to the other races, it's closer to like what you want for a all-around car that would also be a drivable car because like Fuel efficiency matters.

It's also a road race. So it's not on a racetrack. It's literally on they close down 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, like cows were using this road, you know, two days before.

Yeah, right. Totally. So on the back of all this success and like James Dean and Steve McQueen and all this, as you would imagine, Porsche's start to become quite popular in America. So in nineteen fifty four, Porsche which I I don't think Ferdinand and Ferry like envisioned like we're gonna sell cars in America. This wasn't part of the business plan. But in nineteen fifty-four, Porsche sells five hundred and eighty-eight cars in the US.

which was forty percent of their entire production for the year. And that forty percent basically stays constant, goes way up for a while in the 70s and 80s, but um kind of never dips below that. Like America is a huge market for Porsches.

It's amazing to think that five hundred and eighty eight cars was forty percent of Porsche production. I agree with you by the way about your your point that they didn't really have America in the business plan. It's one uh one thing that to provide some context is important to keep in mind the number of like sports car startups

Happening in Europe at this time was significant, most of which listeners, viewers will have never really heard of because they all died. These came up, they they showed up, they they raced a little, they sold some cars, they failed.

And that there were tons of these. There was no concept that Porsche would be more successful than any of obviously the the the family hoped it would and it became that way. But so many families hoped theirs would too and they all failed. And somehow Porsche, you know Let me Well uh Part of it was the incredible success of the cars. A big part of it too was the royalty on the Beatles. Ha ha ha. That's a nice steady source of cash flow that you can invest in your operation.

Forced reinvention. 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 a ROI positive investment? We could be speculative'cause we know we got the money coming in. And Beetle continues to be more and more and more popular. It only continues to embolden them to reinvest. Right. So speaking of reinvesting.

As we get to the 1960s, like the 356 is great. This is an amazing car, but it's kinda, I don't know, Doug, where where you would put it. In my mind, it's kind of 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 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 in that era. And what was clearly starting to happen was other sports cars are showing up that were refining some of the principles. Yes. So we're now in the 60s, Ford announces the Mustang, Jaguar's got the E-type, um, Chevy comes out with the second generation Corvette, the Stingray.

And all these are starting to show up. All yeah, Austin Heel everything is like okay, there's a lot of Pressure. Yep. So okay. In nineteen sixty two, Fairy Porsche makes the decision like Three fifty six amazing, you know, rebirth of the company. We gotta invest profits and replace it with a new model. So for a couple of years, Portia had actually been working on a design.

for a sedan for a larger model. Seems heretical now. Right. I mean, if people look at the Panamera and it was actually like gonna be the second model of Porsche. Um I mean I feel that way. I every time I see a Panamera drive by, I'm like, why does Porsche make this car? But I see them driving by, so that's why they make this car. Right. China is why they make that. But we'll we'll get to that later.

So the next generation of Porsches, Fairy's son Ferdinand, uh known as Bootsy, named Ferdinand, named after his grandfather, founder of Porsche. I was working in the company and he had been leading the body design for this larger sedan that Portia was going to make.

Fairy decides for a bunch of reasons that to cancel the sedan project. Um, probably the most important reason was um kind of I don't know how much of this was government motivated and how much of it was just sort of like a cabal of like Mercedes and BMW, like they were the sedan makers and

Portia maybe could have challenged them, but was like, hey, you know, they've got their turf. We'll keep our turf in sports cars and like everybody'll be happy here. Anyway, they decide to cancel the project and uh double down on sports cars. At the same time Ferdinand Portia Booty, the the grandson. His cousin from the Austrian side of the family, Louise and Anton's son, also named Ferdinand, Ferdinand Piesch.

He's also joined the company. These two young Turks, the grandsons Ferdinand, are here in the company, and Piesh is working in the engine department. So turns out that he's a pretty brilliant engine designer. He comes up with and I believe even as a young kid, uh Doug, you may know more about this history. Like I think he really was the one that led the development of

the six cylinder boxer engine for Porsche. Now he didn't invent the six cylinder 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. 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 generation's working on.

Let's weave them together. Take the styling that Bootsy's done for the sedan. Take this amazing engine that Ferdinand has built for the racing operations. And uh let's see what happens when we put them together. And this is the birth of the Portion 901. 901. The 901. One. What what is that? Well uh this is why I mean I'm Doug, I'm sure you do this. Famous

I had no idea. I think most people have no idea. The nine eleven is only called the nine eleven because Peugeot 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 X0X And in fact, all Peugeot cars even to this day are named 205, 206, 207, 208. That's the two series the 308, 408, 508. And so they trademarked them all, just knowing that eventually that would that would happen.

Unbelievable. So I mean it makes sense. Porcha is like, well We can't really not sell in France. I mean France wasn't like the biggest market, but it wasn't a small market for it. Now the story that I hear have heard about this is that they said, Well, we got these badges that say nine, zero and one. Why don't we do nine one one because we have the nine and the one already? The nine eleven. The nine eleven.

Some of this may be more apocryphal than others. One of the things that I don't understand is why they wanted to call the car the nine oh one in the first place. And I was never really able to get great information about that. The three fifty-six was purportedly named because it was the three hundred and fifty-sixth like engineering project they did. Yep. But did they really do five hundred engineering projects between three fifty six and nine oh one?

So a couple details that I got on this from uh Excellence was expected. I believe, could be wrong on this, but I believe nine oh one was the name of the engine. that Ferdinand Piash was working on. And I think I I think that's the origin of it. Two, yes, in Porsche lore, it's that like the reason these model numbers are like these are the engineering projects that they start. But that's totally apocryphal. Like they jump around all over And now they go forward and backward.

Yes. Going back to the very, very beginning of the consulting company, they started with type seven or project number seven because they w didn't want to look like they were a brand new company. So like, oh yeah, we've already done six projects. This is project number seven. I forget who they were working for. It's like when you're starting a new company and you're you're sending your first invoice. You don't call it invoice number one

Exactly. It's exactly so like yes, the the lure is that, you know, all of our projects have model numbers and like the BS. Right. Uh so funny. And to be clear, so I admired designs of Porsche cars before doing the research for this, but knew basically nothing about the company or its lineup. 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. There's like I don't know. I didn't write them all down, but the nine six four and the nine five nine. It gets complicated because what ends up happening just like happens to every car is they start to get redesigned as they get.

You know, there's the years go on, they need newer models. They still call it the nine eleven. The only way to distinguish the newer version from the older version is to call it by the project number, which is nine six four, nine nine three, et cetera, et cetera. And so if you're really into it, you gotta know not just that it's a nine eleven, but which Yeah. And not all nine eleven say nine eleven on the back. So you can't even like use that as your reference.

It's a little complicated. Maybe that's part of the success of there's like sort of a language you have to speak in order to like get Porsche to an extent. And there's something to that. Well, I think it's really brilliant. I don't know how much this is intentional 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 Porsches. If you see a 9-11, you know instantly that it's a 9-11. It is iconic. It's one of the most iconic designs in the world. Yeah. And partly because they've essentially kept the shape the same. For the sense that Yes. Since nineteen sixty two. Yeah. So pretty immediately, like, this car is a big Um, nineteen sixty-two is when they start working on it. They first start selling it in nineteen sixty-four. They sunset the three fifty-six in nineteen sixty-five.

And so sixty six is the first year that's fully nine eleven for Porsche production. They sell almost thirteen thousand cars in sixty six, uh, which that's what, we what'd we say, ten, twelve years ago? They only sold Yeah, forty percent of their production. So they're now thirteen X in in ten years.

And that number of almost thirteen thousand nine elevens they sell was fifteen percent more than their best year with only the three fifty sixes. Like Doug, how would you characterize? Like what is what what makes the nine eleven 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 were a lot of sports cars and it was whatever. But of course, what has ended up happening is that this car has become symbolic of the sports car.

And I think a lot of people would if you were meant told to mention a sports car, they would say the nine eleven. It it it just has become like the car. And it was it like you say here, it was clear very early on that it that it had something special in this great combination of, you know, reliability, comfort, practicality, just like the three fifty six had been, but just better. Yep.

To my thinking, the Flat Six Boxer engine, which was a great engine that Ferdinand Piesch designed to go in this first nine eleven. There's something like cool and unique to that. Like we've been talking about the difference between Porsches and other cars here. This is a performance engine, but it's a six. Right. It's not an eight, and it's rear-mounted.

Right. So the three fifty six had a boxer four. It to explain what a boxer engine is, you know, a lot of cars, most cars ha well, these days most cars have inline engines where the cylinders are in a line. A lot of other cars

In the past have had V engines where the cylinders literally make a V for balance. The boxer engine, the cylinders are literally like across from each other. It's flat. They call it a flat engine, or a boxer, because the cylinder heads look like they're boxing each other as they go back and forth.

And the benefit of the boxer engine was that um it's got this great balance to it because it's like literally flat in the car. Um yes, it was unusual. I don't think it was necessarily unusual to do a six cylinder engine, although as time has gone on, it has

started to become more unusual, like that the police cars still have six cylinders, even as V eights and V tens became V twelves became more popular. But it was the thing. It was what they did. And it was part of that ethos of keep it l relatively light, relatively simple and like Strip things down to the core essentials of the car. An average person can walk off the street, buy one, operate. That's right. Drive to work. time. It wasn't crazy fast or anything else. Yep.

Now the three fifty six, the old three fifty six. It had four cells. Uh and so now the 9-11 have six cylinders and like you said, like it's not a world class, powerful, fast car, but it's it elevates the 356 into a much more like you can really achieve a lot more with this than you could with the 356s. This becomes super important from a business side for Porsche because

They price the nine eleven about fifty percent higher than they had the three fifty six. Now, what they do at first, they realize this is gonna create like a major price gap in our lineup here. We're gonna lose a lot of customers by by 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 they essentially kneecap the uh uh they they downgrade the nine eleven to be the entry level model.

Only as a stopgap. They don't want to do this permanently. They sell about three quarters of the units are the nine twelves, the cheaper four-cylinder ones, and one quarter of their sales are the more expensive nine elevens. The profit margins though on the nine elevens. Are so much higher than you. So Ferry starts thinking like, okay, and this was part of the plan all along, I think, let's create a whole new model. The old 356, we're gonna bifurcate it. Our performance

real enthusiast customers who are willing to spend and that we're going to make great margins on those models. That's going to be the 911. Let's create a new car that can replace, can be the entry level portion.

will eventually introduce the boxter. 20 plus years later, takes Portia a while to really get to the uh the the the perfect end state of this strategy here. But for this new car, Fairy says, Hey, we're not really equipped yet. to be running multiple lines as just us Porsche of the company, we need a partner for this new Let's turn to our good old friends at Volkswagen and jointly engineer and produce this new car with them.

So in nineteen sixty seven, Porsche kicks off a joint project with Volkswagen to produce a new mid engined roadster, which is a smaller, more compact car and mid engined, not rear engineed. Called the 914. And the idea is that they're going to make both a four-cylinder and a six-cylinder version of this. The four-cylinder version is going to be a Volkswagen. The six-cylinder version is going to be a Porsche. And uh Ferry puts

his nephew, Ferdinand Piesh, in charge of this joint project with Volkswagen. A very fateful decision, as we shall see. Now what ultimately happens with the 914? There's a change in CEO at Volkswagen and the new CEO Definitely sees the value in deepening the relationship with Portia and specifically the relationship with young Ferdinand. So he wants to continue the project.

But he's like, I I actually don't think that a sports car makes sense in the VW lineup. Why don't we just have all of these be portions? So the plan was originally to have some of the nine fourteens be branded VW and some of them be branded. But Volkswagen had made a little sports car called the Carmen Ghia. Yeah.

Previous to this, like in the sixties. And so the thought was they wanted to replace the Carmen Ghia, Porsche wanted a an entry level car, let's jointly develop it. Porsche gets the more powerful one, the nine fourteen six, the six cylinder, and Volkswanna get the four cylinder, but the decision was made, like you said.

The new VW CEO, he he actually gets a pretty good deal out of this. Um so he deepens the relationship with uh Ferdinand. He gives the car fully to Porsche, but in exchange, VW takes over all of Porsche's distribution in America. Huge huge deal. Huge deal for VW. So we're starting to reintertwining these companies just a little bit. 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 intertwined 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 this other company. Meanwhile on the VW 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 Porsche. Like this, even if it's not structured this way, this is a merger. Well, if history were a straight line, what you were saying would uh come to pass. Uh unfortunately it's not a straight line or or fortunately for for drama on our show.

Uh so you're absolutely right. The 914 goes on to be a huge success, sells way more units than the than the 911, which was the whole strategy. Porsche's cool with this. They're like, great, we're making our profits. On the more expensive nine eleven, we've segmented out our market. The nine fourteen is the entry level Porsche sells a hundred thousand units in the eight years that it's on the market. And I think it really shows, and uh Doug, you can comment on this, there is

Also a market for mid engine roadsters. I mean, including the one sitting behind us, regardless of price, like the these are pretty amazing sports cars. Porsche's previous to this had all been rear engines, the nine eleven, the the three fifty six, and so this was a mid-engine which had was starting to really take hold in the car world as the right

design because the engine in the middle is really the perfect balance. You kind of can put the engine right in the center of the car and it gives you like perfect weight distribution. When I always talk about sports cars, in my mind, like God intended sports cars to be mid engineed. That's how it's it's more difficult. The engineering is more difficult than front engine.

But that's how it should and rear end is just insane. But Porsche made it work. They've always been great at that. But mid-engine is how it should be. And when you say mid, this basically means that it's still obviously behind where the passengers sit, but in front of the rear axle.

In this case, now there are technical mid engine cars where the engine's in the front but behind the front axle. But most people when referring to a mid engine car are talking about a car that has the engine between the passenger compartment and the rear axle. Yeah. I think you have a video where you say the Cayman GT four RS, which is the Kamen and the Boxster, or the same it's the same lineage we're talking about here, is the best modern portion.

Yeah. I feel that way. But it's controversial because the nine eleven is the Porsche. Don't hate us in the comments. Yeah. I don't know, Doug. I feel like I've seen multiple of the best uh on your channel. Every car is the best when it comes out and then it's superseded by the next best. Yeah. Yeah. One of the differences between YouTube and um podcast world is uh titles and SEO is really important in the YouTube world. Right. Very

And I don't even take advantage of it as much as some of my my colleagues. Yeah. 哇 It's while we're on this topic here of um engines, I gotta imagine this is one of just the huge sea changes that is coming with electrification of performance cars, right? Like uh Yeah. Yeah. A whole different set of calculus. Like it doesn't matter. There is no engine anymore.

Yeah, although you still even in electric cars for a performance electric car, you still want the weight to be as close to the middle of the car as possible for a similar reason, honestly. But the engine component and all that other stuff, boxer. Yeah, yeah. Doesn't matter. It doesn't. It's gone. It's gone. Okay. So a minute ago, Ben you said like, Oh, this naturally would lead to a merging of, you know, VW and Porsche. And I was like,

Well so this was in the late 60s when the 914 launches. As we head into the 70s, the oil crisis happens in the 70s and sports cars become less of a thing. People are really worried about this. This is like a challenge to Porsche. It's particularly a real challenge to the nine fourteen. Interestingly, 9-11 sales stay relatively robust throughout the 70s.

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 the 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 head into the mid seventies, uh, even though it was a very successful car and project for Porsche as a whole, it starts becoming a real money loser.

So this creates a lot of tension in the company. This is kind of a a backdrop of stress. to another um family dynamic that's emerging, which is you've got these two Ferdinand grandsons that are kind of vying, starting to vie for control of the company. You know, they're now

Gosh, I don't know, probably in their thirties, maybe entering their forties. Fairies getting older here. Like who's gonna take over the company? We've got succession vibes here. On the one side, you've got Bootsy, Ferdinand Porsche. He's got the name. He's Fairy's. son. And he's a great designer. I mean, he designed the 911, maybe the most iconic car design ever. And this is German Ferdinand. This is German. Working actually producing the cars. But the other Ferdinand

the son of Louise and Anton was hired by the German company also. So he's also over working for the water. So yeah, he's hopped over. He's, you know, on the one hand, kind of like this dark horse kid, right? He's the Austrian side of the family. You know, you've got the car dealership business, blah, blah, blah. Go do that.

But he's also proved himself as like yep, an incredible engineer executive. He was in charge of this nine fourteen project. He managed it with Volkswagen. That was an incredibly successful car until the oil crisis, et cetera, et cetera. So he's like, yo. 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 in 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 seventy. Fairy and Louise together call a joint family supper. They're like

We're gonna settle things. I don't know, I'm speculating here, but I I suspect Fairy and Louise were m didn't have a lot of acrimony over it. I mean, they're brother and sister. And they had Louise had her company, Fairy had his company. They're both making a lot of money. They're both making a lot of money, everybody's 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 Ferdinand or the other is going to take 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 Ferdinands. Good.

Ferry. Ferry himself. Who's running the c Ferdinand's long den at this point? The the original Ferdinand. They're gonna continue 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. I mean, because it's not like it'd be one thing if they were like, oh, you know, we're really not that good at this, like we should hire professional men. These are led the generational talent. in the car industry, and the best solution they can come up with is, you know what? We're all done here.

This is crazy. I would be so fascinated to get video footage of what actually went down in that room and the logic that they could walk themselves through to this is actually the best outcome. There's some direct quotes from a lot of them and excellence was expected and like

As you can imagine, it's a very delicate topic. Uh, and they're also German, so like they're very, you know, prim and proper. But um, 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 kinda reunite as a family and like i I think he said something like, There were still tensions, but we could go to each other's birthdays again. You know, something like that.

So I mean I guess in that you know, if you value family above all else Crazy. Especially crazy decision because like you said, they were they were killing it. They were Been the family business until this point and it had been a very successful one because of the efforts of the family. And especially you got Fernand Piash. Now looking back on this, we know what happens to Ferdinand Piash, which we'll get to. But you've got him on this up and coming track where he's so legit. Oh my god.

It's like no you're out. Crazy. I mean he definitely was so pissed. So let's talk about what happens here. Bootsy, he goes off and he founds Porsche design. So there exists these weird, there's like Porsche sunglasses out there. You can buy Porsche designed laptops, like all this stuff. That's him. That's a totally new company that he started. It has now been reabsorbed into the broader Porsche conglomerate. Um, but that was started right. He was like, all right, great. I want to be a designer.

That's the past. That he goes down. The same thing happened in the Gucci family for anyone who's seen the the Gucci movie with Adam Driver. There's sort of a family member who wanders off and does some like effectively like brand licensing. He's like, I'm gonna take the family name and make some money off it. Which is obviously what was happening.

I think he also was a very talented. I mean, he designed the god in the 9-11 for God's sake. Like he's talented, but but yes, trading on the name here. The other Ferdinand, PS. So this guy, oh my god, he is a he's a G. So at first He's like, I imagine inspired by his grandfather, he's like, I'm gonna go start my own engineering consulting company and consult for other car companies. He does do that for a little bit.

But pretty quickly thereafter, remember, VW and the new CEO really wanted to build this relationship with Portia with Piesh. He gets recruited to come in and take over Audi for VW. I don't think he originally I think he enters working within Audi, but then very quickly becomes the head of the Audi brand for Volkswagen. And Doug, at this point in history, what does the Volkswagen Group own brandwise? That's an interesting question. The brands that we know, I think it was just Volkswagen and Audi.

And Audi had been a separate company. had been a separate company and it's also important contextually here to to to to make one really important point about Pish and Audi. At that time Audi was a joke. Audi was not what it is now. Like now you view Audi as a legitimate competitor, Mercedes and BMW. Back then it was more like how Sab would have been treated like it was a s absolute second or third tier brand that no one could possibly you know, it was not it was not a brand that was desirable.

Would it be like today, um Infinity. Like I know you you owned a uh Kia, right? It's um but like you know, Kia and Hyundai are trying to enter the luxury market and keep a like really That level of like, eh, I'm gonna stick with Mercedes. Yeah. Was the Audi five thousand the thing that kind of saved them and brought them back? The contrary, actually, that car was the one that had the famous scandal in the United States where the 60 minutes

found that it unintended acceleration where it would accelerate which turned out to kind of be unfounded, but their s reputation was like severely, severely damaged by that. Um but that was this era. That was this era. Audi needed a turnaround. Volkswagen got out of their leg. We don't know what the hell to do with this thing. We got BMW and Mercedes. They're killing it. So Piash comes in and like

I mean this dude is good. Like he's this was such a mistake to force him out of Porsche. So he turns around Audi and like builds Audi into you Doug, like you said, the Audi we know today. And he's so successful that in 1993 He gets promoted and becomes CEO of Volkswagen. So you get this situation where they kicked him out of running the company and then he goes and ends up Running. It's wild.

Wild. I mean, he oversaw and launched the new Beatle. Uh, like literally his grandfather's legacy, the Beatle, he turned over the Beatle model to the the new Beatle. How long was Ferdinand Piesch running Volkswagen? long time. 1993. I believe he was chairman until 2015, 2016, maybe? Oh yeah. He develops this reputation of being this just iron fisted, like I can only when you say I can only imagine how upset he was when they made the decision to end the family involvement.

He has this rep of being like incredibly angry and everything must be to his standard. And so I can only imagine how angry he was at that time. He also um he had thirteen children by I think four different women. Yeah. He was that typical, you know, how you think of like a German industrial. It around this time Volkswagen started really gaining a lot of brands. So in the late nineties they bought Lamborghini.

Um, they owned two Europe only brands, one for like Spain and one for like Eastern Europe. And y they repurchased the Bugatti, the rights to the Bugatti name, which had gone to an Italian company. Um and they brought it back to France where it was like initially existing. Yeah, restarted. I mean uh Doug, you kind of said but to put a bow on it of what a baller Piesh was. Um in nineteen 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, Fernan Piash is looked at as like exactly what you're saying. The guy. Everybody knows his impact. Everybody knows how effective he was. And the families, Portia's just like, yeah, no, you gotta get out of here. Unbelievable. Maybe he wouldn't have had the motivation to do who knows? Who knows? Just wild.

Volkswagen, much bigger company than Porsche, right? Like he got kicked out of his own company, so he went and ran a much bigger one that competes with it. He grew even bigger. Yeah. Yeah. yeah yeah yeah Yeah, wow. So back to the Porsche side. This decision was was just really not good. Really not good. So the first CEO who comes in, the first professional manager CEO.

actually is somebody who has been with the company for a long time. Uh Ernst Furman uh becomes the first non family member CEO of Porsche. He was actually part of the original elite engineering crew back in the sawmill and Gamun. So he has a long history with the company. Unfortunately, he was probably a better engineer than a manager, though. His first move is to scrap the 914 and instead introduce the 924. The 924 was another joint project between VW and Porsche.

The problem with the 924, I I I think it actually was a decent car. Uh Doug, you actually reviewed a nine forty-four recently, that which is the kind of next iteration of it. I think it well, you you can say I think it was a good car, but it's not a Porsche. It's a front engine, water cooled, like it's

Suffered from that stigma for sure. The saving grace was it was actually a pretty good car to drive. And so over the years, and even at the time, it was kind of accepted as hey, we all get that it came from a Volkswagen, but so did the beloved 914, and it drives pretty well. Yeah. So like people people were like, Yeah, well we'll we'll we'll take this as the entry portion of the of the time. But it wasn't A nine eleven. It wasn't a nine eleven. And it wasn't a nine fourteen either, really. Like

Was a totally different thing. Yeah, the nine fourteen was a small, lightweight, compact, roadster, removable top. The nine twenty-four was a it was definitely a different kind of situation. So Furman had a quote on it when kind of, you know, asked about like, what is this? Uh 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.

Oof. I mean, I guess that's true, right? And that's also true of the nine fourteen, but like Well that's the quiet part loud. Can you come up with something that is not using the word not to describe who wants it? Like, how about you say who would want it? Yeah. This is for the poor customers. Right, right, right. And and again, but also it's just like in in the whole philosophy of it, it's not a Porsche. Even more concerning

is the nine twenty eight. So Furman makes a decision as the new CEO of the company that it's time to replace the nine eleven. And uh I I again, you know, maybe like let's give him some credit. This is the 70s, the oil crisis is going on, like there's um safety regulation. This is post-Ralph Nader and unsafe at any speeds, like It's maybe reasonable to think that a rear engine sports car isn't like a great strategy to be pursuing here.

And unsafe at any speeds, that was like a federal report that came out that said like basically all cars on the market are unbelievably unsafe and people our citizens should not be driving around to them, and so all cars need to change. And regulation started to really show up like in this time period. That the in the car world, the sixties are kind of viewed as like the last bastion of just like anything goes. And some very special cars came out of that era.

In the seventies everything started to get the oil crisis was a big factor because that started to screw with emissions. And then you had all these regulations about bumpers and safety and seat belts that, you know, were very important and beneficial. But at the time it was like, oh, they're killing our fun.

It is astonishing how much safer cars have gotten. I mean astonishing. You look at these like cute old Porsches, they're so much smaller. Right. And you look at the big ones today and you can lament, oh cars have gotten so big, but cars have also gotten so much safer. Far. And they're faster than they were back then. So it's it's kind of the best of all worlds. And in most cases, they're more efficient also. Hmm.

Totally. So in 1978, Furman introduces the portion 928 with the stated intention that this is going to eventually replace the 911. They keep selling the 911. He says, we'll keep selling the 911 as long as we get demand for I think it was at least like ten thousand units a year or something like that. But you know, once the nine twenty eight's on the market and demand dips for the nine eleven, we'll stop making them. Not

I wanna defend the nine twenty eight a little bit here because it was a it this is an important moment in Porsche's history. When 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 356 went away. And that was the Porsche. Like how now you say like oh I have a Jeep and you're referring to the Wrangler. Like that was a p the Porsche was the 356.

And so that went away. And for the 9-11, it only made sense at some point the 9-11 would also go away. The crazy thing about the 928 in the Porsche world is that it was a front engine V8 car, which Porsche 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 really make a lot of power. Cadillac had like eight-liter V8s that made like 150 horsepower. I mean it 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 it didn't seem that insane. And the Jaguar E-type had just been replaced. That was the big competitor. It was another sports car. That had been replaced by the XJS, which was now a V8. Comfortable automatic transmission car. Mercedes-Benz did the same thing with the SL class. It went from like a little fun sports car like the 9-11 to a big V8.

kind of relaxed leather luxury cruiser, that sort of thing. And so it made sense that Porsche would maybe want to head in that direction also and start thinking about moving past the 911 just as they had moved past the 356, you know, 20 years before. There was some sense to it.

So the nine twenty-eight comes out in nineteen seventy eight and As we reach the end of the seventies and into the eighties, as we also have talked about a lot on this show, everything that the seventies was in terms of um austerity, oil crisis. 17% interest rates and massive inflation. Uh the 80s was um not that, shall we say. Not that. It was a uh rising tide that lifts all boats. Lots of disposable income. Wall Street is ripping. A lot of pinstripe.

Yeah, it 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 928 and the 924, succeeded by the 944. And still the 9-11 people still wanted them. I think largely because of that, although I'm sure there were other reasons too. So the Porsche and Piesha families.

when they exit operationally from the business. They still own the business. So they're still like the supervisory board. They get fed up with Furman, they oust him and they bring on a new CEO. an American as CEO of Porsche, one Peter Schutz Famous. He comes in and he redraws the nine eleven production line. And Doug, I know you have some uh firsthand experience of the legendary.

Great the great one of the great stories in the auto industry. The 928, though I just provided an impassioned defense for it. Um It why it never felt like the right car to Porsche. It never felt like the right car to especially the employees who had kind of fallen in love with this nine eleven. It had been in production now at this point for probably twenty years, twenty-five years maybe. And um

The 911 was Porsche to a lot of these people. And the fact that it was going to get replaced by the 928 was this sad thing. And it had kind of really hurt morale uh in Stuttgart at the factory, all the way up to the to some of the people at the top. And so the great story is that uh you know, the nine eleven, everybody knows the impending cancellation is coming. It's still going, but it's coming this beloved car.

And so uh Schutz, Peter Schutz, the American CEO, is sitting in the uh the the office of Helmuth Bott, who's the chief of engineering for Porsche. And there's a line on the wall that shows where all the products stop and start and the you know, you timeline. And this is like a like on a whiteboard or Yeah, like on a whiteboard or something. Back to the wall.

And so they're sitting there talking about it. They know that morale 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 at the uh uh uh of the people. And that's what was said. Like there's a thing in German culture where like when something has been decided, it's been decided.

An edict has been given and the car's out. I mean the nine twenty eight is on sale. Like it has shown up to replace the nine eleven in the spirit of these other cars of the time V eight front engine. It made sense. It was what they were gonna do. But the morale was low and they knew this and so

shoots stands up, he's 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 cr all the way onto the wall and extends the nine eleven's timeline, you know, indefinitely, including onto the literal wall. Now this story, of course, is this is like the stuff of legend in Porsche. Like Peter Schutz, the American CEO, saving the 9-11 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 180 and decision? Right, especially if you're you're trying to you're trying to like boost the uh the reputation of the CEO among the among the workers. He drew the line, right? And there's a perfect line at which is Schutz just looks over at the chief engineering and goes, Do we understand each other? Right. And then he walks out.

I always wondered if the story was true. I worked at Porsche uh ten years ago and um had become friends with Porsche's general counsel in North America. When Peter Schutz retired, he moved to Naples, Florida and he He the general council at Porsche and Peter Schutz were neighbors in their homes in Naples.

And I one day he went over to his house and asked him, you know, is the story real? Did it happen? And apparently Shute said, not only did it happen, but Helmet Bought was grinning like the Cheshire cat when I drew that line. Like it was like this moment, like we're gonna do this. And it like really apparently really in in in his words, it really actually was a true story. That's so great.

That's awesome to get that validation'cause there's so many of these stories that we tell on the show where like we're like this is probably apocryphal and there's really no way to verify it. Now, of course, if your shoots you'd want to tell the story because it's become so famous, but You know, from his mouth at least, the story is real. It's a great story. Yeah. Like I mean, literally he extended the line of the production line onto the wall. Right. So do they keep making both cars?

Yeah. So they kept making I think they made the nine twenty eight until nineteen ninety five. I but it was Vita King who comes in in a minute who uh finally kills the damn thing. The problem with this decision, you'll get into more economic realities of this situation as the 80s kind of draw to a close, whatever, but the problem with this decision was the company was planning on ending the 9-11. And so by drawing that line, symbolic though it was, we're gonna keep doing this.

It also committed a lot of the company's resources to now refreshing something that they hadn't planned on refreshing. Yeah. So In the go go years of the early through mid eighties, no problem. Right. More. Let's we'll do a we'll do an ICO. We'll issue some NFTs. For twenty twenty one. Yeah, exactly. Exactly. In fact I think Schutz was like, Let's make airplane engines. Yes. Yeah, I think he was. Yes. Oh my god.

And on the back of, you know, these go go years and success, they're selling the nine eleven, they're selling the nine twenty, they're selling a lot of nine forty-fours, like they sold a ton of those things. the families take the company public. So just like a lot of these, like we talked about on the LVMH episode, a lot of these European luxury brands, craftsman brands.

Uh they did an IPO. They thought they were being smart. They sold, I think, a 30% stake in the company, but all non-voting shares. Like, oh, we're not gonna no, you know, no corporate raiders here. Nobody will have any voting control except the families. Like, it is impossible that somebody could, you know, attack us.

Because the families all alone, you know, it would have to be somebody inside the families who would attack us. Why would that ever happen? Hmm. Well, everything goes great. The stock, you know, doubles within the first year that it's on the market, but Then nineteen eighty seven, long term capital management blows out, you know, the end of the go go years of the eighties.

Not good. Not good for Porsche. And not good in a lot of senses. Like, A, just period, economic climate, not good for anybody. B, you're making luxury sports cars. Now, as we talked about in the 70s. The oil crisis in the 70s was really was bad for Porsche. It was really bad for the 914. The 911 was pretty robust. Like it was very resilient. I think the same is again true here at the end of the 80s.

But they've still got the nine twenty and the nine forty four on the market and like those things started sucking wind big. It's a not a good situation because now you have three aged products. And so the economy is slowing and your cars are not really competitive. Yeah. So Shoots though, he continues production of all three lines. And not only does he continue production,

he reinvests especially in the nine twenty four, nine forty four line. They even refreshed it a third time to the nine sixty eight. I mean same basic car. Yeah. Like they're investing resources in this car and at the You probably have a s 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. Right. 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 manufacturer. And it just so happened that at this time, you know, Japan was kind of having an economic boom and

As a result of that, they started making these sports cars, the exact sports cars you're describing. So the Nissan 300 ZX just has to show up, the Toyota Supra, you know, all these cars are showing up. And by the way, they don't have four cylinder 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 a nine sixty eight.

I mean it is uh I feel like I'm uh I'm sort of uh in my history, probably all of us barely, you know, starting to enter consciousness here. Uh You know, this is pre Fast and the Furious, but not that pre Fast and the Furious. All those, you know, Japanese cars that like, you know, that got tuned up, the Supras especially. Yeah. This is

They were all starting just starting to come in then and starting to blow up. 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 911 isn't threatened by this. Right. But the 944, 968, hell yeah, is threatened by these. Like nobody's buying those.

And the nine twenty eight by then was so old that sales were a trickle by ninety. There were three products, which was the nine 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 nine eleven by that point. Only make things even more confusing. And then there was the nine twenty eight, which was the front engine V eight like flagship car. That nobody wants. That nobody.

So they literally only made three cars and they were all three number nine cars? It was a complete disaster. I mean, the Porsche's never named Carswell, even now. But like, yeah, at the time you had again, you had to like speak the language. You had to like and by the way, the nine elevens all said Carrero on the back. So everybody's like, what the hell is a nine eleven? You know, is this a nine eleven? Why does it say Carrera? It never made any sense.

Yeah. All Carreras are nine elevens, but all nine elevens are not Carreras today. That has changed over the years. Then there was a trim level of the 924 called the Carrera. It was actually called the Carrera GT, which they later named this car. Right. None of it it was all confusing. No you had to be like a German who was into this stuff to like figure out the precision level with which it it made sense.

So as all this happens, Portia's now a public company. The stock price To decline precipitously. And they floated thirty percent of it. 30%. No voting control. But the company, they're really like uh cresting the treetops here as they're you know beginning their descent. At one point, Porsche's market cap was less than 400 million euros. Crazy to imagine. Zero. And I believe also at that time they didn't have any debt.

So, like, truly, like the markets believed that Porsche was worth nothing. It wasn't like, oh, there's value here, but there's a big debt burden on the company. It was an unbelievably difficult time. And it's kind of funny to think about because now people think of Porsche as Porsche. Like this crazy company. It's one of the hottest brands, like you said, probably most of one of the most valuable brands. And it's only thirty years later.

30 years later, it was dire straits. I pulled up the US sales figures for Porsche from this era, which is so insane to me. They dipped in 91, 92 to 4,100 units. That was worse than 1965 sales. They had routinely sold between thirteen and thirty thousand cars a year throughout the sixties, seventies, eighties. Thirteen and thirty thousand. And in the US at ninety-two they dipped to forty 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 have any voting control, um Everybody starts to think the only thing that can happen here is this company's gonna get bought out. One equity research analyst actually in a 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, you know.

some amount of value for their stake rather than just have it go to zero. So Gets fired. But it's not like that fixes anything. I think it was 1987 when he gets fired. Over the next six years, they cycle through, I think. four, three or four more CEOs. Brutal. None of which really figure it out. There is one bright spot though, uh however, which if this were a normal acquired episode, we would just skip, but we've got Doug. Um the nine five nine.

Yeah, Porsche Porsche it's actually the nine five nine an and an another interesting component offshooting that, but the nine five nine comes out at that time, which is like their first supercar, so sort of the predecessor to this car.

And it actually wasn't commercially successful, sort of in keeping with Porsche's world at the time. But it w it did uh it was kind of a a testbed for some new technology, including four-wheel drive and a supercar, which has now pretty much become standard fare. The 959 was really the first car that had that.

After the nine five nine, Porsche was so desperate though that they started taking on projects for other manufacturers. And so it's known in the car world, but not as much in the general world. Porsche built a Mercedes Benz, which was called the 500E. It was a mid-sized sedan. Mercedes didn't have the capacity. Or didn't really want to do it. That's l in the Porsche factory in Zuffenhausen in Stuttgart. Like who designed it?

Mer it was a Mercedes car, so it was a Mercedes E-class, like a regular Mercedes sedan, but with a larger engine. And Mercedes felt that having Porsche involved would give it some sports car credibility. Porsche literally produced the car. And then Audi did the exact same thing. Audi needed more credibility because they were still kind of a fledgling luxury car brand. They wanted to get into the sports realm because that's where a lot of money was being made.

And so Audi came to Porsche and said, Can you help us develop a car? And it was called the RS2. And I actually had one and just sold it last year. It was a station wagon. And that was the conditions under which Porsche agreed to build the car. They said, We'll do it, but we don't want you to compete with our cars as a coupe.

you know, a sports car, so we build it if you build the station wagon, which essentially touched off the like high performance station wagon thing, which Audi is still known for to this day more than almost any other thing. But Porsche was so desperate, they even allowed Audi to license their name and put it on those cars. So the the RS2 had Porsche breaks, the branded Porsche. The Porsche logo appears in the badge.

Like the literal emblem on the side of the car. Porsche was just like, yeah, fine, because it literally kept the lights on in Stukart. It it's Zufenhausen. So when you They're just mortgaging the brand. Desperate. They were lit, they were completely desperate. So when you mentioned like the Porsche Mercedes-Benz relationship, that 500E was an interesting thing because. Around Porsche at the time there were a lot of ways that it could have gone totally wrong.

And I went there and I did a factory tour a couple years ago. And the guy who gave the tour had worked there for like 25, 30 years through this time period. And he said that in his mind and in the mind of a lot of Porsche employees at the time, Mercedes-Benz helped save Porsche. Mercedes could have built that car. But their brothers in Stuttgart down the street. We're having really tough times. Here's a project that you can work on to keep the factory workers gone. 哇

Wow. And it was literally like you have empty production lines. So even though you're not 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 I may maybe this was part of the circumstances, you have union contracts you get pay these people whatever, here you're not gonna make money. But like let we're doing it. Well and it's something. It's a project for you.

Your lines go instead of losing money on having to pay the yeah. Right. Wow. It was a tough era. It was like indescribably tough. And I think this is lost on a lot of younger people who have only seen Porsche in the world of crazy expensive cars and all the money they charge for colors now and all that. There was a period where it almost all came to Not that long ago. Not that long ago. It wasn't like this was in the fifties. Like we were alive. This was real stuff.

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So David, this thing that Doug just referenced to me, the money they they charge for colors, you can do a thing today where you go to buy a Porsche and their online configurator and they have the paint from every single Porsche ever produced in history. And so you're like, you know, there was really something about this particular 911 in this year. I really loved this paint. You can pay them something like$15,000 for your Porsche to be in that particular Yeah. Yes. That's exactly it.

Imagine the Porsche of the eighties, early nineties like commanding that kind of it would never have happened. But now the brand has changed so much that like fifteen grand for a color, people are like falling all over themselves to do it. Yeah. Why not? The other thing that it's emblematic of, which I think we haven't really talked about yet, of what makes Porsche special, is this unbelievable heritage.

Like the design language that they use, what the 9-11 is. And you mentioned earlier they don't really change it that much from, you know, generation to generation. There's this sort of obsession with put something out there and then spend years and years and years.

tiny little tweaks and refinements, making it the like platonic form of what it can be. And there's this like, obsession with if you loved Portia 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 as a child wanted a 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 wanted back then.

It's so funny. I feel like the sales cycle for a 9-11 has gotta 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, right? It was always a weird aspect of the brand that like you actually weren't necessarily only marketing to like adults. You also had to market to like

People who would cultivate this passion that you knew that would become a thing later when you weren't even in an executive or you weren't even working there. But like that's 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 Porsche 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's something they learned in their like rise from the ashes after this eighties period? But you have to assume they didn't expect You know, in nineteen forty eight that they would ever even be in the position to deliver that, right? In nineteen fifties.

Like you said, I hadn't quite thought about, but I was planning to tell this story of like, oh my god, Furman wanted to kill the 9/11. What a dumb idea. But it was like natural they killed the The natural thing would have been to kill the biggest. On it, it's insane. But at that time it seemed like, you know, now all these icons have emerged and all this lore has emerged over the years. But when you really think about you put yourself in the perspective of those eras.

Okay, so Porsche's in this tailspin. The two eras that happen next are both equally amazing.

So in nineteen ninety three, a guy named Vendelin Videking. gets appointed as the CEO. Now he had actually started his career with Portia in the 80s. As all this crazy stuff is happening, he was like a loud voice of protest against all the, you know, shoots and um Furman era 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 production system at Porsche, which uh they must have been like the last auto manufacturer in the world. I I don't know if Ferrari uses the Toyota production system, but like this wasn't um new technology at this point in time, right? Remember Porsche's bleeding cash. Being more efficient and more profitable in your operations for whatever cars you can sell is pretty important. He's like the like the Tim Cook of of Porsche here. He gets promoted to CEO.

And When he does, speaking of Apple, He kind of pulls a Steve Jobs return like moment. He cuts the product lines down to just. The 911. So this is the right thing that needed to be done, but it's also kind of crazy. He kills the 944, 968, he kills the 928.

He takes everything back down to just the nine eleven and you know, like analyst people like car, you know, magazines ask him, um, what's your strategy for an entry-level Porsche? And he says, uh, Porsche's strategy for an entry-level Porsche is a used Porsche. Such a good line. Such a good line. Such a good line.

So by the ninety-five-96 production year, the nine eleven is the only portion model left on the market, which hasn't been the case since the three fifty-six. Like this is uh this is kind of crazy. Also, what kind of company makes one product? Like how I mean, seriously, what are like do they believe that this is a transitionary period or do they believe like this is the long term strategy?

No, it's not like Wita King was like, I am a cost cutter and I will cuss everything down. Like he is much like he he has big ambitions. Okay. Big, big, big ambitions. This is a transitionary moment. He does want to expand the Porsche model line. As we shall see, he greatly expands it. So I think this is pretty brilliant and certainly for the financial performance of the company was brilliant and its survival. I think 9-11 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 Volkswagen, what if we have the new entry-level model instead share a platform with the 9-11? And so what he does is he says, let's take the front end of the 911, of the next generation 911, the 996.

and use that exact same front end, same headlights, same hood, same everything, and then made it with a new entry level Rito back end, the rest of the chassis of the car, revive the old nine fourteen concept that was so successful, mid engine roadster model with a uh how would you describe the it's not a convertible. Yeah, no it is. It is the monster was a full convertible. Yeah, yeah, yeah. And and it's also important to point out the interiors were almost entirely shared as well.

Oh the interior's where yeah, like the steering wheel and like The wheel, all the buttons, in fact if you get into a boxster, which was a two seater car, it has a coat hook on the back of the seat because the nine eleven had a coat hook on the back of it. But there's you can't put a coat in a boxster. The seat is right up against the but they shared everything.

Ah wow, interesting. So Doug, what you're alluding to, this is the Porch of Oxter, which becomes a huge success. And I think the reason for it is that it genuinely is to anybody looking at it, like this is a Porsche. Yeah. Not that stupid quote that Furman had of like, this is for people who don't want a nine eleven and don't care about performance. This is like, no, no, this is a freaking Porsche. Share the design language.

It shared the design language. And I think Videkin's thought was the the entry-level Porsche has always been looked at as a second class citizen, like like his like Furman literally said, which was true. I mean everybody thought it, but he said it. How do we make it not look like a second class citizen? And the answer is make it look like a 9-11 and make it literally share. I mean, it didn't even just look like it literally had the same fenders, the same, you know, headlights and hood.

And also from a production and profitability and operations standpoint, 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 then at this point in time between the nine eleven and the new box?

The thinking was that they would continue to move the nine eleven up market, more expensive, more power. So the Boxster comes out in ninety seven for the ninety-seven model year, and it was a huge deal. I mean, it was on the cover of every car magazine. The whole Porsche has a new car. This is incredible.

It had two hundred horsepower and the nine eleven of that era had about three hundred. So it was a significant difference. Plus the nine eleven was just more of a m it was bigger, it was wider, it was faster, you know, it was a more it was more of a muscle car. Is it fair to say that um then and and I think maybe even especially now with the Boxster and the Cayman, the Kamen is the hard top model of the of the Boxter. It's also a different kind of experience philosophy.

And it has over time it has evolved even more significantly from ninety seven. Now the nine eleven is kind of playing more of a luxury car, like touring car role almost where, you know, with the special colors and the stitching and all that. And it seems like the more Porsche has focused more of its sort of true sports car efforts on those. Mm the mid engine cars as they call them, the Boxer and the Cayman.

Yes, it's the entry level Porsche for sure. But it's also it's not like you feel like crappy if you're buying one. You're like, Oh yeah, no, I'm buying the best version on the market of this particular product. it was mid engine again. So you you know, arguably it was the m the correct place for it. It it felt like a true Porsche sports car. For the first time Porsche's, you know, entry level car felt like that in decades. Yeah.

So uh Vita King has this awesome quote about the strategy for this. We didn't want to flee from the competition into higher prices, meaning like not be in the entry-level market at all. He says, we don't want to be Germany's Ferrari. We don't want to be a big fish in a pond that's shrinking, but rather a growing fish with more room to move in a larger lake.

I feel like Vita King and Don Valentine of Sequoia Capital would be like brothers in arms here. Like they're targeting big markets. That is the strategy. But they're targeting them in a Porsche way. So Vita King, like, I don't know how much this was his thinking all along or that he was just emboldened by the success of the boxster. He really means it. He gets into SUVs. And this I mean, I even as like a teenager at the time.

I not being that much of a cargo, but I just remember people being like, Porsche's making an SUV? Have these people lost their freaking minds? Like who who on earth would buy a Porsche SUV? Also, I gotta say, like, maybe all cars were kind of ugly in this period, but I remember when I looked at the first cayenne, I was like, So it's like a Toyota?

It wasn't the most attractive car. There's no question about that. Everybody hated the design language. And you know what? It's been twenty years. It has not grown on me. Ha ha ha. Yeah, the Makan looks really good, I think. The new cayons look great too, honestly. The ever since they redesigned in twenty eleven, but those early cayons, you see'em now and you're like, still ugly.

It also just doesn't look like a Porsche to me. Like there's not enough that's brought through from the heritage of the how do you describe the back on a nine eleven? Right. That's sort of like sloping. What happened was the cayenne was an interesting situation because Porsche was kind of a first mover.

They weren't exactly Mercedes came out with a SUV first in night for the night nineteen ninety eight model year called the M class, which was a that was a revolution. And they built in America, which was a really big revolution. BMW came out the X5 in 2000, and that was also a revolution. The M-class, Mercedes never had the sporty pretense that BMW did, so that car was just for suburban family.

The BMW X5 actually had to be sporty and was like, oh, so not only can luxury brands build SUVs, but they're sporty. So Porsche comes out in 03. I mean, they beat Audi. Audi didn't come out on the SCV till 07. Porsche was there like early, early, early.

So, but the problem was Porsche had no clue. Because they were early, they had no clue what to do. And so I remember at Porsche talk when I worked there talking to some of these people about the early cayons, Porsche literally didn't know what to offer in a SUV. To the point where they actually legitimately asked some of their American employees

Do we need to offer gun racks as an option for the American market? They just didn't know. They literally were only building sports cars and they just they had no concept, no concept of like what people would want and what The early cayons had an optional spare tire on the back, like like Jeep Wranglers do. Like you could get that. You still see them driving around.

Part of this was a cultural, you know, German thing for sure, but uh like not understanding America. But um I don't think anybody understood like I don't think there were any super expensive SUVs on the market. The only ones were Land Rover, but they were focused so far on off-roading. But part of the reason the cayenne was ugly when it first came out is because Porsche decided, we're Porsche, we're gonna do it best.

And so they come out with an SUV that is both amazing on road and off-road. And the early cayons actually have an unbelievable off-road capability. They have a two-speed transfer case, they can go to high low gearing off-road. They have air suspension that can lift them up and lower them. They had all this off-road hardware that like

you would never put in a luxury performance SUV now. But because Porsche 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 it looked The the l i it just wasn't it didn't it wasn't executed that well from a styling 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 a hundred thousand dollars on an SUV. Right. This was before the days of an Escalade even. Cayenne came out in O three. Escalade came out in ninety nine, so it was it was the Escalade was a hand. Lyty, fifty grand.

And they were just, at that time, they were just Tahoes that looked nice. Like now Escalate has become a real thing. But at that time, it wasn't Porsche was really pushing into some new territory. Like it was a crazy decision. And SUVs were becoming so important in America that I think there were just like a lot of wealthy people out there and a lot of status focused people that were like, Yeah, there's an SUV I can spend a hundred grand on. Like hell yeah, take my money, you know.

And also th there's a practicality of I kinda need a minivan, but I don't want to drive a minivan. And so I'm driving this new emerging class of SUV. But if I have money I kinda want the Porsche version of it. Totally. And Porsche must have been thinking hey, we've got all these customers who love our sports cars, and we have this brand name that's always been associated with performance. How else can we hook these together? They have families. Right.

And so and in and by the way, with those families, they're buying an X five. And it's like, why don't we Right. Yeah. And the danger here, if you're at home and you didn't know how this ended and you were a smart business person, you'd be thinking, Well, this is gonna borrow against their brand equity. Like this is gonna drain the bucket, not add new love to the brand bucket. And the magical, incredible, amazing thing about Porsche is

They have doubled down on this strategy. It has become a huge part of their business. They generate a ton of margin on the SUVs, and it has not borrowed against their brand equity. It has increased the love for the brand.

'Cause at the same time and just before, they had given a huge shot in the arm back to the performance with the Boxter and the nine nine three, nine eleven, and then also done the SUV, which they partner with Volkswagen. with Ferdinand Piash. Uh it kind of makes peace a lot between the two. So Kiersh's running Volkswagen at the time comes out with the Tuareg, which was Volkswagen's SUV, and that's the that served as the basis for the original Kayan. Really? Yeah.

Yeah. Porsche starts a new whole new production facility in a new part of Germany in Leipzig, uh, to make it. And then ultimately shortly thereafter Makes this kind of The Kuroji teeth. Same. Production facility.

That's right. They were built in the same place. And you know, I think that goes back to the point you just made that Porsche, the the SUVs, yes, you'd think you come out with an SUV, it destroys your brand credibility. We've seen this with Maserati come out with all these sedans and now nobody wants one.

But Porsche always made sure to be making other cool stuff and to keep coming out with other cool stuff, reinvest in the performance, like you said. And so they used this new factory that Kayan was built in to also create this supercar. And that was important. It really showed people, hey, they might be making an SUV, but they're also making this. For people who are just listening to the audio, this is the career of GT sitting behind us.

Okay, we've alluded to this amazing machine behind us. Like what is this thing? The Carrera GT in my mind is the greatest driving car ever built. And a lot of people actually say that I it's not objective by any means, but a lot of people who have driven, you know, this and a lot of other cars kind of feel that way about this car. It was a true analog supercar, which means manual transmission. There's very few driver aids in this car.

Um like you'd get in a modern car stability control, traction control, that sort of stuff is either non-existent or heavily dialed down. Full carbon fiber body, like no expense was spared basically. And the coolest part was that the powertrain, which is a big V ten, was shared with Initially it was developed for Formula One racing, and then it was evolved to Lama racing. And in neither cases did it ever actually see the light of day. They created a Formula One engine, it didn't work.

It's a little bit like the original nine eleven engine that Ferdinand Piche designed for racing, but then only made it into the It that's exactly like that. The crazier thing here though being in that time you could do that because there were no emissions regulations. The concept of taking a race car engine today

And putting it into a road car is just non-existent. Like to get a Lama or Formula One engine homologated for road use is just like mind blowing. So that's the that's the cool thing. And and this car has Um, it originally came out, you know, in this era and and was thought of as cool and special and whatever, but its legend has sort of grown since then as sports cars have moved away from some of the things that made this car so special.

specifically this analog feel. You know, all exotic cars now are automatics and hybrids and all 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 it, of like unlike a lot of Porsches and the nine eleven, like this is something that you need to be really know what you're doing to operate this thing. You can't if you let it 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 at especially by modern standards, cars have gotten so much more powerful than this. You know, a new Audi RS3, which is just an Audi s high performance Audi sedan that you can buy for sixty five, seventy thousand dollars is faster than this car Zero S.

Like it's not that crazy by modern standards, but at the time it certainly was something. Yeah. Um Like today cars like there's so much stuff technology in cars that is designed to keep you from like doing stupid stuff.

And that this car was kind of the end of that era. And I think that's why it's so special. It was like the last of these cars that really you could get into trouble. Like you could and and Paul Walker died in one. Um and there were some other deaths too that weren't quite as high profile, but there were some serious um accidents and s and some people died and um and and maybe still will, you know. I don't it's it's still out there and it's still a dangerous car.

The weirdest thing about high-end cars that have lore associated with them is typically when someone high profile dies in it, the value goes. Right. It's like a it's like an artist. It's like paintings. Yeah. I think that car people had always known the car had kind of this reputation.

Porsche about this. Porsche got sued. Yeah. It went and went to jury trial. Porsche was found liable, at least partially liable. Wow. And and that's a big deal if you're an automaker, because they got thirteen hundred of these out there. Right, right, right. Was um, and and this is the value of the car now. Like production was initially intended to be higher than it ended up being. They stopped it early and so they had a.

some some weird issues happen. There was a changing regulation that forced 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 it first came out. The sticker price was four hundred and forty thousand dollars.

And they dropped fast. You could get'em in oh eight, oh seven, oh eight, you could get them for two fifty all day long. And now you can't there's they don't exist under a million dollars. That's a crazy thing. Wow. Should have all invested in Career GTs. Yeah. What Apple stock or Career G T Carrera G T would be a lot more fun to own than I But it would have. They all completely took off.

Wow. I it's funny. I thought that this, you know, was gonna be a fun little digression about the career of GT, but I realize now actually. This is a super important point to the business history. While they were drawing on the brand equity to make the SUV, 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 as the S. It also had that effect, it also helped legitimize that facility.

Because up until that point, except for the ones built in Austria, all the Porsches had been built in Stuttgart, in Zuffenhausen, in that factory, that same factory for all these years. And so this car helped legitimize, like, oh, we might be making a factory in East Germany where we're building SUVs, but we're not straying too far. We're still doing our thing.

So this point is an interesting one because it is something that other luxury brands do as well. I remember reading when Louis Vuitton first started coming out with the more approachable wallets and clutches and ways that you could tiptoe into participating in the brand story. They were also releasing$100,000,$200,000 special handbags that

were new products or new collaborations with other designers that sort of told you, no, we're still Louis Vuitton. We all we just have this other way to be a part of our brand. Right, right. And Portia would go on to do it again, which I'm sure we'll talk about shortly. Oh yeah. So on the back of this like incredibly bold plan and turnaround and success by Vitekig, I mean he becomes a legend and Porsche goes from death's door less than 400 million euro market cap when he takes over to by 2007

Porsche's market cap is thirty two billion euros. Crazy. A better investment than a Carrera GT, in fact. So they never had to have any like help once they scraped that bottom of whatever it was four hundred million dollar market cap. Nope. Portia is saved. It will be independent forever. Families will never have to sell. That equity research analyst can eat his words. Ha ha. No, not quite. Uh there's another chapter to the story. So that's a hundred X market cap growth. Is that right?

Did you say three hundred million to thirty two billion? market cap growth in a decade. Occasionally there are these hundred baggers available in the public markets and like you only know about them looking backwards, but like it's crazy. You don't have to be an early stage venture capitalist to find these. They exist elsewhere sometimes.

Porsche of all things. Of all things. I suspect in most of these cases, though, to take advantage of it, you would have had to have kind of been insane. Like to have invested in Porsche at that point, even if you would have. You had told a person in nineteen ninety three, hey, this guy's coming in. He's gonna kill the entry level stuff.

Go back to doing entry level stuff and then do an SUV. You'd be like, uh, how do I get out of this stock? Like where do I Because he was the fourth CEO or whatever and it wouldn't have yeah, I don't want to be any part Clutching its straws, it would seem, but uh Like buying Amazon in 2001 or two when things looked the absolute bleakest. Like that's how you could have gotten a hundred bagger on the public markets. I maybe even a thousand at this point. But like, come on, who would have actually

Yeah. And the 32 billion euro market cap, it's not crazy because by this time, Porsche is doing almost two billion euros a year in operating. profit. Turns out these SUVs and making only supercars uh is a very profitable lot of margin there. And... China was starting to take off at this time too. So the final sort of chapter to the Vita King uh era on the product production side was the Panamera. The sedan. Portia makes a sedan. Now, Doug, I'm curious your thoughts on the Panamera.

I I'd always also been like Porsche made a sedan, it's kind of weird. It 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 Panamera and the Cayenne too really helped Portia enter China.

Question. Looking back, that has become especially true as Porsche's business and all luxury brands' business have grown in Asia. At the time, though, I think they just They had an SUV, they had done that, so it was like, all right, you know, sedan is the next the next place we want to compete. Let's let's replicate the success we had in the SUV.

And what do you think changed in the corporate psyche 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 to like, let's have a pull a full product suite just like everyone else? Probably that hundred X uh gross. Don't you think? I mean, I think they looked at it and said, Holy crap, Boxer made us a ton of money, came and came and it made us a ton of money. Cayenne showed up and made us a ton of money.

We got cash. Let's like go after, you know, the Mercedes S class and the BMW seven series, the big luxury sedans from their German rivals, because they knew there was profit there and they could do it better like they had done with the Cayenne. And honestly, it it would have worked and and did work. Uh

It was not what brought down the company. Not at all. Like you think like if you were naively following along, you might think, and then they got too big for their britches and you know they expanded the product strategy too much and the brand came crashing. Like, no, no, no. Like this worked. Uh It worked beautifully. Um, just ultimately uh under different ownership. So let's talk about uh what we've been alluding to all episode here. the German regime.

still is not very favorable to distributing profits. Just the corporate tax rate alone disincentivizes uh spinning off cash flow and incentivizes reinvesting. At this point under Vita King, Porsche 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 internally with all the money they're making?

They can't do anything. So they start looking around for other places to put the cash. Now At the time, there were rumors circulating in the auto industry that Volkswagen had their eye on Vietking, and they were looking to recruit him to be the successor to Ferdinand Pierre. We're now in Work the first time to pull the guy the best guy over at Porsche over, let's do it again.

So I think uh Ferdinand Piesch took over as CEO of the whole VW group, I believe in the same year that Vita King became CEO of Porsche in 1993. Ferdinand's obviously much older. Coming towards the sort of twilight years of his career, you can see how this would make sense if it were true. Whether it's true or not, I'm sure Vitekin gets rumors. V King's really, you know, kind of feeling himself here at Porsche, right? Like uh he's uh hard to imagine a better run.

He gets the idea. He kinda has like a uh sort of Justin Timberlake uh social network moment of, you know, million dollars isn't cool, you know, billion you know what's cool, a billion dollars. Being the CEO of Volkswagen isn't cool. You know what would be cool? If we at Porsche bought Volkswagen, I'll become the CEO of VW Group when I buy you. Ha ha ha. Uh remember though Ferdinand Piche is chairman and CEO of Volkswagen Group. He's also a Piche.

He's also on the supervisory board of Porsche because he's also a key member of the family that owns Porsche. sitting active CEO of Volkswagen as a family member of the Porsche Piesh family. has voting shares in Portia. And is on the board, the supervisory board of Porsche. So uh they thought they were done with the family drama here. It's uh uh turns out there's there's another chapter. So isn't it obvious then that it would be hard for Porsche to take over Volkswagen?

Well, Portia, and thus the families, needed something to do with the cast. And at the time when they start this. VW shares are a pretty good investment. Like they're not trading super highly. Like it's pretty clear to them that it's undervalued. And VW is a critical partner to port.

So I believe certainly certainly to the public and probably also to the families, Vita King positions this as like, hey, we're deepening the partnership. Uh they don't announce like, hey, I'm trying to take over VW, you know, out of my seat at Porsche. September two thousand five, Porsche spends four billion dollars to acquire twenty percent of the VW group on the open market. Uh, it's kinda a little creeping takeover vibes that you alluded to in the intro.

At this point, Vita King and Porsche's CFO joins the Volkswagen board. And then they keep buying shares, but using another patented Bernard Arnault 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 derivatives rather than the shares themselves.

Yes, and in VW's case in particular, there was actually a law in on the books in German law called the Volkswagen Law. Oh yeah, this is crazy. that was designed to prevent a takeover of VW because the state of Lower Saxony still owned the twenty percent share in Volkswagen, still does to this day, and it was considered sort of a national treasure and they didn't want it to be taken over by corporate raiders.

They didn't envision that it would be another German auto company that would try to take it over. So it was impossible for uh an actual direct takeover to happen. I'm literally gonna read from the Wikipedia here because the Wikipedia is extremely well written. Under the Volkswagen Law, no shareholder in Volkswagen AG could exercise more than twenty percent of the firm's voting rights regardless of their level of stock holding. This law was supposed to protect the Volkswagen group from takeovers.

In October two thousand and five, Porsche acquired an eighteen point five three percent stake in the business, and in July two thousand six, Porsche increased that ownership to more than twenty five percent. Yes, and part of the reason this all was able to happen is there was a lot of speculation that this German Volkswagen law uh would be illegal under new EU regulations. In two thousand seven, Vitikant creates a new separately publicly traded holding company for

the family's ownership of Porsche. So it's there's still the Porsche operating company, the old doctor, engineer. Yeah. A G operating company. There's now a new holding company that owns 100% of the operating company and the VW shares that they've been acquired. And this is Porsche S E. S E holding. And here's where things start to go awry. Vita King starts loading up the holding company with debt, with cheap debt, in 2007 to go buy more VW shares on the market.

ultimately ten billion dollars of debt that he puts on this holding company. He's got Ferdinand Piesch signing off on this. Right? Like why would Piash go along with this? I think the best as I could figure out is that Piesch was not happy with the then current CEO of Volkswagen and was looking for a way to get his first successor out. So he clearly he was trying to recruit Vita King too. So like he was benefiting from this too. Right. Yeah. He was gonna have his cake and eat it too, I guess.

Head heads I win, tails you lose. So as Porsche's buying all these VW shares on the market with the debt that they're loading up on the holding company, the float of VW shares that are actually available on the market. starts shrinking precipitously. Just because remember, the German state of Lower Saxony still holds twenty percent. Portia now owns 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. Right. So that only leaves thirty percent left. Then you've got all the insiders, like you know, Piche and everybody else, like who knows how much equity they hold, plus maybe some long term holders or funds that aren't gonna sell. The amount of VW shares trading hands on the open market shrinks to pretty close to zero.

Um we know that, you know, markets are supply and demand, uh just like this car sitting behind us. If there's not a lot of supply available, prices are gonna go Didn't they go up so much that Volkswagen like briefly became the most valuable company by market cap in the world? Yes, they did. So as all of this is happening. Lehman Brothers College. Absolutely.

Which this was, you know, this is the Black Swan event that Vita King couldn't have predicted. Like he's not dumb. He knew he was taking risks here, but like So Lehman Brothers collapses and it's crazy what happens. So during the week after the collapse in October two thousand eight, that's when Volkswagen Group becomes the most valuable company in the world. Hedge funds have been shorting Volkswagen. You get a short squeeze that happens and the stock just goes through the roof.

So you would think that this is like the best thing that's ever happened to Porsche and Vita King. They now own more than fifty percent of the most valuable company in the world. They're invincible. I believe the threshold that they needed to get to was seventy five percent in order to consolidate VW's financials into Porsche. And so they had announced that their intention was to buy up to that threshold and to get there. So you think this is great, but this is

Terrible. This is the undoing of Porsche and Vita King because they've got this debt. Lehman's just happened. So like clearly they're not going to be able to refinance any of that. And yes, VW's share price is in the stratosphere, but it's not sustainable.

Because if Porsche were to start to sell any of their shares, which they're gonna have to to service the debt really soon, the share price is gonna completely crater because like this is this is like an artificial price. It's just because of the short squeeze that it's that high. So Portion now is like completely trapped. They can't sell to service the debt because then the share price will crater.

They can't buy because they can't take out any more debt. Uh, so they're just kind of like stuck in stasis at this point in time. Why can't they sell?'Cause if they sell, they get a bunch of cash by not liquidating that many shares because it's so valuable. They're not gonna be able to sell that many shares at this price before the the Right. So they basically can't get gonna be buying. Lehman just happened. Right. Wow, fascinating. So at this point. Ferdinand. Good old Ferdinand.

Who hasn't moved a single piece on the chessboard? No, he's just watching he's on the Porsche board and he is still chairman of the VW board. He's no longer CEO, but he's still chairman of VW. This is when he turns on Vita King. So he and Volkswagen announce publicly to the market that they no longer believe that Porsche is a financially viable entity. Yeah. Uh As a deep trusted partner, right? We believe.

And uh they say that they have to say this because Portia is a greater than 50%, you know, owner of VW. And so they, you know, have to disclose this to the market. Um, and that as a result of this extraordinary circumstance. VW, led by Ferdinand, is willing to bail out their partner Porsche and save them by purchasing the Porsche operating company. for yeah in the neighborhood of three to four billion euros to, you know, get them out of this predicament.

Wait, and then just to unpack the statement a little bit more, what he's basically saying uh to like make it more explicit is a key partner of ours is went so deeply into debt. to try and buy Paying our shares that they can't service that debt and are now about to be insolvent and default on loans. Yes. So therefore we will help them out by What is it? Buying them for

They they floated a price of three to four billion euros. Which remember, like a couple of months ago, this company portion was trading at 10x. Whoa. This is literally Ferdinand saying to Vita King, if you come at the king, you best. Yeah. This is exactly what is going on. Yeah. Whoa, indeed. So there's a whole flurry of negotiations. You know, this is all against the backdrop of it being October two thousand eight. Yeah. Within a few months by January two thousand nine, Vita King is gone.

as CEO of Porsche. Supposedly when he exits the building, he exits to a standing ovation from Porsche employees, which I mean he kind of 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 Porsche, the operating company, in two tranches over three years. They buy fifty percent up front.

three years later in twenty eleven, um they complete the purchase, it ends up being about eight and a half billion euros total. So between that opening volume of three to four and the thirty two. 32, it lands at eight and a half. What's even crazier about that? The undisputed hands-down, you know, home run winner in everything is, of course. the Porsche and Piesh families and Ferdinand they emerge as the largest shareholders, the families personally, in VW group.

So Porsche S E, this new holding company they created that was buying VW shares. Yep. Already owned fifty percent of VW. And then VW paid eight and a half billion dollars to buy Porsche. So the families own fifty percent of VW and they just got eight and a half billion dollars for Porsche. So they already were pretty high up there in the rankings, but after this transaction, they are now in the top call it fifteen wealthiest families in the world. Oh my god. Mm-hmm. So posting.

Both tranches. Uh, after Porsche AG, the operating company, is fully owned by VW, what does the family own? 32% of the VW group, which remember now, also owns Portia, but they have over 50% of the voting power. So they control VW groups. Mm-hmm.

It's so crazy. VW The Company bought Porsche the Company, but really Porsche the family owns. it all owns it all. And they just got an eight and a half billion dollar cash out. Wow. Yeah. Crazy. So here's the thing now. We're now in twenty eleven when the second tranche of the buyout happens. Um you know, we're deep in the great financial crisis and the recession. Um Porsche the business.

It's fine. The drama is all around Porsche of the hedge fund, you know, and the financial shenanigans, um, and the families. The actual operating business, the cars, sales are fine. Porsche has one down sales year, only one during the financial crisis. Um, and then everything else is is up. Uh a big part of that is the investment in China. Uh, and China starts really, really growing through the early 2010s for Porsche. Also, this is when they come out with the 918 spider. Um their next

Supercar at this moment in time, there's all this, oh, Porsche is now owned by VW and consternation. They're like, Yeah, we can still make the best cars in the world. Yeah. And the 918 helped to introduce um like plug-in hybrid technology, which Porsche knew it would be going in that direction. And so the 918 was like another like example we were talking about before of how they like covered the cayenne with the Career GT by saying we're still doing this.

The 918 helped them say, hey, we're gonna make hybrids, which is viewed as this like. che you know, like little car, the Prius. And so you think of, well, here's a hybrid and we're gonna do hybrids, but we're gonna start top down with this crazy, crazy supercar. Talk about supercars for a minute, because I think it's important to understand like they don't always make a supercar, right?

Right. It's like a once in every ten or fifteen year cycle they're making one. But it's a very yeah, it's a rare and special thing that they do it. And it seems to be they do it only to kind of prove something or prove a technology. Like the nine five nine was all wheel drive and this car was kind of this new production facility and and the nine eighteen was the plug in hybrid technology. And how many years do they make'em for when they decide they're gonna do it?

It's a short model run. So this car they made twelve hundred and seventy, which is considered a lot for a supercar. The nineteen eighteen they only made nine hundred and eighteen units. And in fact, that was considered a lot for a supercar. Its biggest rivals at the time uh which were the McLaren P1 and the LaFerrari, they didn't combine to make 918 of those. Wow. But the the 918 Spider is what a two million dollar car?

These days. Yeah. It was it was new it was like nine nine nine hundred or so, maybe a million after you got a bunch of stuff and it's double. It's done well. All the supercars have done well. Well, I bet I'm sure you'll talk about this in a minute, but um Porsche is the master just of like you there is a base price, but you're not gonna spend the base price. You're gonna spend like forty percent more.

But even at even if you figure it the base price was like nine hundred grand, they made nine hundred and eighteen and you do the math. Doing a supercar is real money to be made fairly quickly as opposed to a cayenne that's a long tail and you make them over a long time to spread out the cost and all that. Yeah. And so this supercar was a plug in hybrid. I don't think I ever knew that. All

All supercars are now. But the nine eighteen spider was Porsche saying, We're gonna go into this plug in world because they knew what was coming up. I mean we'll get to it in a second with the Tycon, but they knew what was coming up that hybrids and electric cars were gonna be a thing. And so instead of introducing that with a with a

SUV, for example, which is where the they should have, right? Because that's where the market wants it. They said, no, we're gonna do it with the supercar and show people we're gonna do it and we can do it well, and then we'll trickle it down. What What did the car world think of this?

It's important to keep in mind that nineteen eighteen spider being a plug in hybrid, it had a electric component, but it also still had a massive V eight in it that had a zillion horsepower screaming and all that, you know. And it was the same with the La Ferrari and the McLaren P1. They still had massive engines also, so it was fine. It wa the the next crop of supercars will probably be full electric.

And so that transition, I think, is going to be more controversial. The interesting thing that's setting seems to be setting Porsche apart now, though, is that they're um standing behind it. Ferrari has already said that the technology's old, all the plug-in stuff, we don't want to be any part of the law Ferrari. And so like no one's really sure how that's going to age. Oh, those are gonna be orphaned cars. Exactly. And orphaned multi million dollar cars.

Exactly. It's a scary situation if you own that car and the battery's gone, you don't know what to do. You go to the supplier. But Porsche has always been big about standing behind the cars in part to preserve resale value and to make sure that owners of the next supercar know that they'll be protected. And so like this car is already almost twenty years old, all the parts are still available, that kind of thing. That's the smart brand thing.

But it's not easy. Like if you really think about it, plus Ferrari, they don't need to. They don't care. They can make the next one, the next one. They keep finding rich people. They only make what, thirteen thousand cars a year at Ferrari? Yeah. It's a small operation. So like For already just it still don't really care about their customers a lot. What what's the rule of luxury? Dominate your customer. Uh Ferrari was owned by somebody at some point though, right?

Yeah, there were all these oh god, Ferraris's story that is a crazy one also, but the Fiat group eventually had stepped in because Enzo had just driven the company to but in his pursuit of racing had like driven the company into financial It wasn't his pursuit of, you know, derivatives.

No, it was quite different. It was actually a very Italian thing versus the Pursuit is kind of a very German thing. But um yeah, that was a real bad situation also. Oh none of those companies are independent anymore. It's not it's not really possible either because of the way that regulations are structured, um 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 this this in some senses may have worked out well for Porsche because um it would have been difficult to get Porsche to kind of work on the corporate average fuel economy standards. Because the all their cars are kind of inefficient, but because they're under the Volkswagen umbrella, you can kind of get that whole spread and it and it works a little bit easier.

All right, listeners. Now is a great time to thank one of our favorite companies and one that has become essential to how we make acquired anthropic and their newest flagship model, Claude Opus 4.6. Which we have been making heavy use of here at Acquired HQ. I actually just uh leased some space for the new acquired studio here in Seattle. Woo and when the landlord sent over a a pretty simple lease I thought, Oh, this is totally something I can review myself.

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It's amazing. You told me about that. I've actually been using it a lot here for writing show notes. I end up with so much detail in my like fifty, sixty, seventy page script documents that I'm like way too close to the material. And I need a fresh set of eyes for what the big points are as I write up the show notes for each episode. And uh I used it for something similar too. When we were preparing for our Super Bowl Innovation Summit.

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So if you're ready to tackle bigger problems, get started with Claude today at Claude dot AI slash acquired. And if you want to explore their enterprise offerings, just tell them that Ben and David sent you. Yeah, okay. Well great. So this is perfect to r to wrap up on the the history of Porsche here. Um as part of the VW group, they come out with the Makan, which is a huge success both in the America and China. And this is the mini compact SUV.

Right. The cayenne is the mid size and the macan is the compact. Okay. Exactly. And a lot of Volkswagen stuff shared with all these cars. Engines are shared across uh tons of model lines now. So Interesting, which is such a departure for a Porsche, but That's right. It's ex for an engineering company to doing this kind of sacrilege. But the engine in the cayenne turbo, which is the best cayenne, is in the Lamborghini Urus.

An Italian car, the Bentley Bentega, a British car, but Volkswagen owns all of these. It's in the Audi RS6 and the Audi SQ7. It's like it's everything is now just spread across all these brands. Is it little bit echoes of our our Lockheed Martin episode that we just did. The heritage of the great airplanes, the great Porsches is this independent and you know, engineering, small team culture. But to operate today within the content, you have to be part of this.

So the McConn's a big hit. Um and then we just alluded to it with the the Tyka and the the mission E is the concept uh that they introduced in twenty fifteen. So like yeah pretty early. I guess the the Tesla Model S came out twenty thirteen, twenty twelve. Twelve two thousand twelve model year. So Portia was pretty early with the the concept for Mission E. Yeah. Yeah. Not everybody was sure that was gonna catch on.

Electric vehicles, I don't know. I don't know, I don't know. And a lot of people were slow as a result. Yeah. Um In fact like entire nations were. Like Japan is five years behind everyone in electrics. It's the weirdest thing. It's like they just like woke up last year and were like, Oh my god, this is gonna happen.

In the car world, I mean at least five years by. Toyota just started just came out with their first electric car like yesterday. Like I'm not exaggerating. It was like eight weeks ago. We gotta talk about that another day on acquired. Like how did that happen? I mean they were the they were the forefront of hybrids. The Prius the they invented it all and now they're like electric, I don't know. They're still like waiting and seeing electric.

Wild. So the Taekon comes out, it's a very phenomenal car. Like I think people are a little unsure at first, but then it's super well received within like three years. Yeah, no, it's it is it's been well received. It drive drives like a Porsche, which I think was everybody's fear about an electric car. That you'd lose the engine sound, you'd lose the feel of it. But the Tycon does indeed drive like a Porsche. Why do you think they came out with us sedan?

It was a mistake for sure. Yeah. Yeah. I think I think probably because development started about when they started Mission E. And that was in fifteen and sedans 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 SUVs. You look at Rivian, pure SUV and truck, Hummer EV, they're all there's a ton. Um I think Porsche made a mistake. Yeah. But relative to the other traditional auto manufacturers.

I I get the sense Portia, you gotta be in the top tier of like best positioned for an electric feature. Yeah, yeah, no, absolutely. And and they'll continue to innovate. There's an electric Macon is coming soon, so they say. And so it'll be fine. Um and Tycon, I mean, one could argue that Porsche needs to come out with an electric sporty car first because That needs to you if you come up with electric SUVs, that's your first one, it's like eh.

They have no plans for an electric nine eleven, right? I mean that's what they would they would tell you if you asked them, that's what they would say. But let's be honest here, like It it's the future is electric. There will be electric versions of all these cars and probably within our not so distant lifetimes they will be purely electric. Interesting thing about the Tycon. So you mentioned the next supercar will be uh no an all electric one.

I haven't driven in a taikon. I have watched videos of people driving in a I'm like, what do you what else do you need to do to make this a supercar? You know, the thing about electric cars is they all can accelerate incredibly well. And that's like insane. And Tycon is faster than this, it's faster than everything. It does zero to six in like two seconds. Isn't it also like tuned to drive like a track car where your fifteenth lap is gonna be just as performant as your first lap?

Yeah, and so it's beneficial in that too. But at the end of the day, a four door car, especially one that's made in

not limited quantities is never gonna have the effect that like a supercar, Halo car has on like really showing people what a brand can like do. And so they will, I suspect in the next couple of years, they will come out with a the next supercar, which will be You know, look like this and they'll only make a thousand and it'll cost two million dollars and it will be fully electric and two zero to sixty and one and a half seconds and be

What do you what are the performance characteristics of the next generation of supercars gonna look like? Like what do you Humans can't go zero to sixty in like a second. So that 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? They this car is now not that fast by modern standards. So you start to look for other things that make them special, which is the feel, the sound, etc. I was, I had a press car dropped off the other day, a Kia EV6 GT, which is the electric Kia crossover.

It is sized and designed to compete with like the Toyota Rav 4. Okay. But this is the high performance version, it does 0 to 60 in like 3.2 seconds. It's faster than Crow GT. So yeah, like what does a supercar even mean anymore? Like ultimately, like what does it offer that a

Kia EV six G T for by the 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. I mean, 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. They're fast, but they're not really sports cars.

And so I guess that's gonna kind of be the future. But you're right, power is being democratized. Everyone can now access a car that does zero to sixty in three seconds. Right. And so I don't know. It's it'll be interesting to see how the sports car responds. Well, so that brings us to today, um, when, or or I guess more accurately, last fall, September 2022, when um VW group re-IPO'd uh Porsche.

The Porsche re IPO is the largest European IPO of all time. The initial market cap of Porsche at trading was about$75 billion. Today that's up to about a 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 commingle it with a bunch of other stuff. And so like all shareholders of Porsche can purely just be shareholders of Porsche. 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 VW's portfolio. It's fine. It's Interesting though, like d Doug to your point, operationally though, you can no longer extricate these companies. So you can financially extricate them.

Purportedly. But even then, how do you how do you uh financially extricate like development costs of a powertrain that's used in multiple vehicles or a platform that I mean the Tycon. Congratulations. How do you you know? It's all it's all intermingled.

So yeah, if it's not actually operationally any different, then you do have this question where you're like, okay, value was unlocked by just looking at the market caps, but like 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. Ludvigson, Carl Ludwigson, who wrote Excellence was expected, he published a new edition of it last year.

And in the forew to it, he said the reason I did it now is that the old independent Porsche is is is done. Like th this is a completely different company now and I can fully put a bow on that original Porsche. So even though there was a re IPO of Porsche, it's never gonna be the same old independent Porsche. And by the way, you can choose to buy Porsche A G, the independent spin-out of uh VW, or you can also on the stock market go and buy Porsche S E, the family holding company.

I didn't realize that that's still on the market. So uh some other interesting things about Porsche today. The family, as we mentioned, has complete control both of VW and Porsche. So in some ways it's still the same old Porsche, even though it's all commingled. Um here's the sort of nail in the coffin in my opinion argument on is it a separate company or not. Oliver Bloom is both the current CEO of VW Group and Porsche.

Yeah. 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? Right. I guess Vita King was right. He was right in everything that he was doing. He just um he didn't win the Game of Thrones. Right.

Fascinating. So digging 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 taken too. So the 911 has sort of grown slowly over time. The 718, that's the Boxster Kayan, not a lot of revenue coming from that.

Yeah, that's sale sports car sales just slow. It's just not the same. But it helps give them more legitimacy. Yeah. And the Panamera does have pretty decent sales, but still nothing compared to the monster that is the the SUVs. Yeah. When you look at where they're sold, this is quite interesting. China is, as Porsche would account for it, their largest market.

But the reason that I put that caveat in there,'cause it's at twenty six percent, is is China, they split out Germany from Europe and call them two different regions. So they have Germany Germans like a true German would. Yeah. Like J Germany is ten percent and rest of Europe, excluding Germany, is twenty three percent. So, you know, it's all of Europe together would be bigger than China, but Germans.

One of the interesting things is you know, the Chinese only buy four doors. They only want four door cars. There's almost no'cause there's no heritage Porsche in China. It's a luxury good. It's a it's a cool brand that sells SUVs. And there's a lot of chauffeur driven vehicles there. And so like they don't like it's almost none as Pors sports car sales in China. Wow. Hard to believe. But we think of Porsche as such a sports car brand. It's like part of the ethos of it. They're just like a kind.

Right. Wow. Yeah, I mean I we're used to it now, but I remember the first time I was seeing Porsche SUVs it's like, well that's That's a sports car brand. This is weird. Right. Right. But for them they never had the sports car brand, so it's just like normal. It's crazy. North America is very close to China. It's twenty four percent in terms of sales, and then the rest of the world's 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 that's Wow. So Last year they delivered about 350,000 cars. Man. So this really is a scale organization at this point. This is not Ferrari. This is not Lamborghini. These are

mass manufactured vehicles. And I know they would say, Oh, we're not a mass market thing, which is true in some ways when you s your average selling price is$110,000. But like if you're making$350,000 of something, that's a mass market brand. That's interesting. I I compared the brand to Rolex earlier. I think from a brand perception that's true, but uh from the operations of the company, it really is it's Louis Vuitton. Like they make a Louis makes a lot of stuff.

This is the correct analog. So I had this in my notes much later, but I want to bring it forward right now. Portia is Louis Vuitton, Ferrari is Hermes. Yeah. And I think that this whole time I uh while researching, I always had this like broken thing in my brain where I was like

How how do they make so much stuff when they're Hermes and they're not Airmes? They were once Hermes, but as soon as they started making the SUVs, that's not who they are. They have tiered access to luxury s 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 SUVs have managed to like get under the radar of the people who buy the sports cars and the sports cars have this still have this elevated viewpoint, even though you can actually go to a portrait dealer and lease them a con for I don't know, seven fifty a month, whatever it is, you know? Right. Right. Right.

On the scale thing though, there is another order of magnitude up, and these do these other brands do feel much cheaper. So at around two and a half million a year is BMW and Mercedes-Benz. And it does feel like Porsche is in a much different class than BMW or Mercedes Benz in terms of the sort of um hoity toidiness associated with it when you get to drive it 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 Porsches, would we all feel the same way that, oh, it's just a BMW? Probably. Like there there should be an inverse relationship between scale and brand perception. But they have managed to find this like mismatch or like To your point, it's like skating under the radar where they are able to make a lot of SUVs and still maintain right what they have. And the question is for how long?

Right. Or or at what scale? At what scale? Like at what at what if it if it doubled again? Like you it's interesting about BMW because if you think about it, if you saw Porsches as often as you saw BMWs, would it be special? Of course the answer is no. So What do you think the average selling price of a Ferrari is? Cross all there. Two fifty. Three thirty. That's insane. That is insane. Three X's. Three X portion. How many Ferrari's are made every year? Uh, thirteen thousand.

thirteen thousand versus three hundred and fifty thousand. It's so funny because in the enthusiast world, there's often a are you a Porsche person or a Ferrari person? Like they're not really Right, these are two very different beasts. And it's fair to be like, are you a nine eleven plus supercar person or a Ferrari person? But the rest of Porsche shares the name Porsche, but is a completely different thing. Right. Yeah, they're nowhere near each other.

It's almost like Porsche should go get even more aggregate market cap by like spinning out just their like hypercar or their The nine elevens. Yeah, like j just the The stock ticker is P nine eleven. Yeah. In Germany. Huh. Man, that's crazy. Friday three thirty you said? Ferrari's average selling price is three hundred and thirty thousand. Three thirty. It's interesting, right? Like, I mean, you're Doug DeMiro. Um, you own a career GT, you don't own uh Makan. Yeah.

Well, yeah, I mean I I uh but they're cool. I mean I would get one. I'd recommend'em to a lot of people. But I that's a good point. Like I haven't went and got a Porsche SUV. Truthfully the the reason is ridiculous. I I don't wanna drive like things of that name brand like on a daily like my wife would never be seen in a like a Porsche Nora, you know, do you know what I mean?

It's the funniest thing'cause um one of my David, my closest friends, drives a Porsche McCann and his wife drives an Audi. Oh, this is a totally different thing. This says something very different about who I am. She was driving his car the other day and she was saying, Ugh, I hate being seen in this Porsche. Or that you don't want to be driving around a seventy-five thousand dollar Porsche and yet this thing that you have

It's ridiculous. I know. It's a it's an interesting point. I never really considered that. I just I I like to be casual for my normal cars. Also, I think that like having the Porsche SUV is kinda like a it's almost more in your face than this. Like if you bought a s you're a connoisseur, if you have a a sports car, if you buy the SUV it's like Uh it's that could be for the br I love them by the way. They're awesome cars. I just didn't offer me.

Right. It's like getting um like the Masters logo embroidered on your golf clubs. You know, it's like o okay, like I know you didn't play in the Masters, but like Well, okay, that's cool. Right. It's it that's exactly how I look at it. Like, okay, that's that's fine, but I just it's not I'm gonna I'm gonna stay kind of low key in my normal life. What do you think I drive? Uh It's got um model three.

That's a good guess. That's what David drives. And that's probably what I would. Uh uh Mazda CX five. Oh yeah, okay. Yeah, those are good cars. The Porsche McConn of the uh mainstream content. Japanese Porsche McCon. 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 too.

Uh okay, some more uh back to Porsche. Uh so a couple other interesting observations just for listeners trying to keep track of home of like what do the profiles of these businesses look like? I always think gross margin is an interesting place to look to understand the strength of a brand. Because it's basically showing like what can you mark up over your cost of goods sold and sell it to people and still have them swallow that price. Right.

BMW, as we mentioned, 10 times more units of BMW sold than Porsches, uh, are down at 17% in terms of gross margin. So they they really aren't. Marking up much above their cost of goods in order to ship those cars. Mercedes a little bit better at 23%. Porsche is at 29%, so about 50% higher than BMW. Ferrari is forty-eight percent. So people who are buying Ferraris Do not care what it costs. People just pay and pay and pay. And by the way, the three thirty average price thing, like

I I'm just like still astonished by it. That's an unbelievable amount of money when you really think about it for thirteen thousand cars a year. And f uh to put it another way, because let's round forty eight percent uh to fifty percent. If you have fifty percent gross margins, it means you go buy a bunch of stuff, you assemble it, and then whatever it costs you, you double that to sell it to the customer.

I mean Ferrari's still charging like two grand to put Apple CarPlay as an option in their cars. I am dead serious. Like heated seats are like eight hundred bucks extra in Ferraris. You get the idea. Yeah. I forgot your options list will you go crazy. So, switching gears but staying on gross margins, because David, you brought up LVMH earlier. LVMH's gross margins, sixty-eight percent. It turns out you can mark up leather way more than you can mark up card. Interesting.

Like at some point, there there is some sensitivity to like you can't just make every Ferrari cost eight million dollars. Because like there's so much real hard cost. In cars that are just not in other luxury goods. And so you have this opportunity to Fibray and cheap.

unbelievable price premiums in all the stuff LVMH owns. If you can touch it, uh if it if it feels good on your hands or it looks good to your eyes or it smells nice, you have the opportunity to mark it up way more than sitting in something that is going to thrill you. How interesting.

This is really interesting trying to understand w which of these businesses you'd sort of rather own. And gross margin isn't everything, but it is amazing that L VMH 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, has Barnard Arnault and LVMH ever made a run at 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 card businesses. It's a lot of stuff. It's a lot of It's it's a it's a it's a different business and it's a lot. Distribution's hard. Yes. And it takes a really special type of person and and and team to run it. I mean it's it's engineering and art, whereas there's not engineering in anything that LVMH owns. I mean I'm sure there's people who work there whose title are engineer, but it's Cra no it's crafts. Yeah. It's it's craftsmen. Sixty eight percent. That's a yeah.

So if I were to guess, I would say maybe Bernard Arnault has kicked the tires on like Ferrari, Lamborghini, but more on like licensing agreements than trying to own those businesses. Cause I just don't think it actually works into the rest of the flywheel in the same way. Like you gotta You gotta own a factory that makes these cars, you gotta do all the RD. Plus scalability's harder. You alluded to the the dealerships and the distribution.

Distribution's hard, you're shipping stuff on giant boats all the way across the world and all that.

Should we talk power? Moving to an hour. Off the talk power, yeah. So for any listeners who are new, um and based on the Lockheed episode, a l a lot of listeners are new, there uh is a section that we do called Power, which is a way that we try to figure out Uh, what enables a business to achieve persistent differential returns above their nearest competitor? 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're 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 Ferrari. Ferrari couldn't make the number of cars that Porsche does and maintain those margins, so that's not really a fair like

direct comparison in terms of who their right who their competitor is. But BMW also makes ten times more cars. So that may not also be the right comparison. And this I think is a an interesting point, which is Porsche's 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 um making so few things that you can barely, you know, even work with the company.

Yeah, they definitely Especially relative to Ferrari have scale economies being part of the VW group that they can be in SUVs in a way that Ferrari can't. I think you're right that scale economies enable them to be in the SUV business, which has great margins. Yeah. And that's a that that's a thing that you would need to have all these deep partnerships with other other car brands in order to do that or be owned by one. Yeah.

I think that is a differentiating factor against Ferrari, but obviously lots of other car brands are in the SUV business. The heritage is obviously an enormous factor. The brand And brand is the obvious big. Yeah, the big one. I suspect that the German engineering thing also plays a role. Like I think now not against BMW and Mercedes Benz, but certainly against like the Japanese. I'm sure their margins are much, much higher than the Accurs and the Lexuses of the world.

And they even though like 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 alluded to earlier has this incredible reputation that helps them s okay, this car's just simply built better. It's European. It's German, you know. And does that I think for a long time that expressed itself in reliability of Porsche's relative to other luxury car manufacturers.

Today is that as much is reliability as much an advantage for Porsche as it was in the past relative to other brands? Reliability is still excellent, supposedly, based on the J D power studies and all that. Now the question of whether it's actually important for people making the decisions by the cars, I'm not so sure. How many of those S E V customers are leasing and don't really care if the thing stays reliable? I don't know.

Um, but there is some component of just like quality that you just feel. I mean, it's certainly true. So you get a BMW or Mercedes-Benz and it's just not as nice. It's not the same. Like the it you have this feel. It's it's it's certainly more special. There's a specialness to it. 왜? Okay, so moving through them, branding, yes, obviously. Like especially if uh if you're trying to enter

uh any space and compete with 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. And You can't you can't manufacture it either. Right. Like there there's there are Literally. br heritage automotive brands. Right. They are. They're just gonna take seventy five years. Right.

Maybe. I mean like the there is never gonna be another situation where the link between racing and production cars is like it was when Porsche was getting started. Yeah, but there'll be another racing. Like there's another thing. I think that's that's myopic to think that like seventy five years from now people won't obsessively care that some new brand was forged in the 2020s that had some other Genesis qua about it that's like the equivalent of

racing versus production cars. You could imagine at some point Tesla's a heritage brand. People are gonna be like, there was this crazy eccentric founder. Yeah, no, I agree with that. But it will take Yeah. As many decades as you think. And It'll have to be for something else though. It can't be for racing. Like it's something else r uh related to the cars. Right. It would have to be for something else. Some of the people. Performance is a commodity now.

The Koreans have been around for twenty five years and there's no like emotional attachment to any of those cars, even the older ones. I don't know. Hmm. Brand is it?

Brand, scale economies enabling the SUV line, I think that was a good one. There's not really counterpositioning, I don't think. There was in the younger days, especially the racing younger days, especially with the aggression of Porsche's advertising, Porsche ads have been some of the most iconic Uh just brand advertising of all types.

And they were brash. The reason it's counter positioning is because a lot of car like Very high-end cars would never dream of showing their brand in such a gritty way and giving their brand voice such a risky proposition. I'm thinking of two in particular.

The most famous one, of course, is the nine nine three turbo, the arena red nine nine three turbo. Um in the at the ta portion they would put up one picture of the car and then there was always a tagline. That was like the thing for decades. The famous one was kills bugs fast. That's what everybody remembers. So good, so good. The other one that I'm thinking of is nobody's perfect. My favorite. Yeah.

That ad was great. I had one for my nine nine six turbo that I owned a nine eleven years ago and I had it framed and it said calling it transportation is like calling sex reproduction. Which is a great example of no other luxury brand. No way. Yeah.

But that yeah, I loved uh David, I had the same favorite one of Nobody's Perfect because what they did is the bulk of the ad, when you look vertically down, is the top ten winners at Lama and Porsche has nine of the ten. And it's just Porsche, Porsche, Porsche, Porsche, Porsche. Number eight. What's the eighth? Yeah. And then it's Porsche Porsche. No, but it's perfect. Yeah. So good.

Yeah. All right. So that's m modest counter positioning, but not really anymore. Um, switching costs. I actually don't think there are switching costs in the car industry. I think there's this really interesting thing where like Uh Doug, you're gonna laugh. My car before the Mazda CX5 was a Honda C R V. And like I I I c I completely reevaluated with fle with fresh eyes. There was nothing about being a part of that old ecosystem that carried forward to the new ecosystem.

Like Apple where you're dialed into everything. Yeah. Yeah. M less and that is that's gonna become less true, I suspect, with all the tech that's in cars, but uh yeah, I agree up until this point it certainly hasn't been a thing. Yep. There's no network economies. There's like really no benefit to you own a Porsche, therefore I own a Porsche and I get value out of you owning a Porsche. It's not particularly a thing, other than we can like go to Carson Coffee together. Right. Uh

Process power, this is probably where I would slot German engineering 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 Stuttgart that they own is like some magical thing. No. All right, that does it for power. Playbook. We've talked a lot of playbook along the way, but I'm curious for ones that jumped out at you that we uh we haven't hit yet.

Yeah, I know we just talked about it a a a bit, but um 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 adjacent activity to the core.

um business of the company that adds so much to the brand value and is worth investing in. I'm just trying to think if there's anything else like this. But uh I mean because Persia has invested billions in racing In all sorts of races. But it's not like there's like uh software competitions out there that you know you could enter your software in to like build your brand prestige. Yeah. That's right. That's an interesting point. Are there any other companies Do things.

Or industries that have like a showcase. Right. Like a very expensive showcase where you have to go build a completely different product line or What uh is like this is the athletic apparel industry um and Nike. Yeah. Like they spend uh all of their marketing budget on athletes. One of the biggest ones 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 gonna sell you the exact model that rolled off the line in nineteen 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 gonna 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 risk.

like r 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 Porsche's not making the best cars in the world. I'm I'm They make some of the best cars in the world, but they also provide all these opportunities for fan service. It's worth a huge multiple of what you invest in it if you can align everything correctly. It gets back to the forty, fifty year sales cycle with this too. Right.

Everybody dreams. I mean, it's your your whole life. You dream I grew up dreaming of owning a Porsche. Which is again kind of funny as we talk about the SUVs and the vol and the volume they do. If you're a little girl or boy, you don't dream of winning a cayenne. Like like you kids at the kids are getting dropped off in those at school is kind of my point. But you do dream of a Porsche, even though that's the same thing. Right.

Doug, you've talked about this when you worked at Porsche a decade ago and you were much younger. Like They didn't pay you much, but you got to drive a nine eleven and that was like the coolest freaking thing. And everybody wanted to work there. We get r unsolicited resumes all the time, blah, blah, blah. And like pay wasn't great. And but like you it had that name, you know, I worked for Porsche. That's so cool. And just being a part of it and then yeah, having the car was a huge deal.

I love it. All right. Well Grading feels a little bit odd on this episode. And we killed Gritty. But we do have Doug DeMiro with us. So we are going to give Porsche a Doug score. And it's an acquired adjusted Doug score. It's uh you know. we can't grade the entire company on handling. So we gotta figure out some categories that we can uh evaluate them on as a I don't know that there are any weekend categories for uh Yeah, no, not really. Alright, so David, what what criteria do you think?

Acquired adjusted Doug score. We simplified this down to um to to just three categories for the acquired Doug score. Um Revenue growth, profitability, and defensibility. Like would you want to own Porsche as a stock? Uh and I think those are the three components of. Closing your eyes to where they're trading today because you always have to like evaluate entry price and all that. But like are are you excited about the company's prospects 10, 20, 30 years from now? Yeah.

All right, so let's do revenue growth first. Growth has been impressive at this scale. Yeah. Not at the rate of the highest growers that we have seen, but still nonetheless impressive. Prospects going forward, though, for revenue growth. I think are still quite strong. We're obviously in a very different market environment than we have been the past few years, but Porsche is Incredibly well positioned on EVs relative to other That's actually my whole bull case.

Yep. So I think there's strong as they electrify the rest of their lineup, strong uh bullcase 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 Porsche will be more resilient in their growth than other uh other luxury brand manufacturers. So I give it a seven on revenue growth potential.

I basically agree with you numerically. I have one knit on on uh them versus other luxury manufacturers. It's it sort of depends how you define luxury. Like I think they'll fare better than Mercedes and BMW in a downturn and like way worse than Ferrari. I I think they're they're in this interesting place where like they have it's like Louis Vuitton. They have some Cash sensitive buyers. Right. Because so much of their revenue is based on those SUVs that probably will not be as resilient.

Right. There are Makan buyers who will become Q7 buyers. Yeah. Q five buyers. Yeah. Yeah, totally. Uh Ferrari really isn't a league of its own though. The broader universe of BMW, Mercedes, all the Japanese brands, Tesla, et cetera, um, in the America, Ford, you know, all the Ford brands, the Chevy brands. Oh, yeah. Of course he's very well positioned. Porsche in a recession than like almost any other car company in the world.

Yeah. There's also this other thing of like the you alluded to the colors, the money they're charging for colors. Like they've done this, they've perfected this with. so many options and people are just paying it and paying it and paying it. And it seems like there's no end to like what Porsche can kind of fleece their customers 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 subculture around like specking your Porsche in this like perfect way. And that is obviously big margin stuff for them. Yeah. So I'm seven, you're seven. We're a pretty unified Seven? Yeah. Seven out of ten. Yep. Uh, next is profitability, quite, quite strong for the automotive industry. Yeah. Very strong. Um not strong relative to the technology industry and software or Apple.

That's right. We didn't say that earlier, but uh Porsche is a 29% gross margin, Apple's a 43% gross margin. Right. And I believe Porsche's operating margins are in the high teens, low twenties. I mean, I'd love to own a business that has twenty percent of every dollar that I earn coming out the bottom. That's a great business. When you're earning forty billion dollars around yes, that's a great business. I think I'd go seven again on profitability.

It's a nine for the auto industry and it's like a four compared to most businesses that we study unacquired because we only study the very best businesses in the world. It's not a media business. It's not a technology business. Right. Kevin might be a bit high. That's what I'm sitting here thinking. The car business requires so much, just so much cost. Yeah, I'm gonna revise my score down to five. For the ease of the episode, we're agreeing on a score here. It's okay.

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. We're talking about Ferrari, apparently. Yeah. Which is like almost not in the auto industry. It's like a completely different luxury category. Yeah, that's so true. Just happens to make cards. So I am giving um uh because cars you cannot give a 10, 9, 8, 7, or 6, I am going to give Porsche a five in terms of profitability. Yeah.

What was the last one? Defensibility. Yep. So this is the biggest question. Does Porsche's 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 BMW in ten years when we see'em around the streets? I just don't think so. From when I worked there till now, it is amazing to me how much more people have become obsessed with Porsches. Every cars and coffee event has become sort of a de facto Porsche event.

The used ones, the vintage ones, have just shot up in value to an unbelievable level. Porsche is more loved now, I think, than at any other point in its history. Now, will it decr diminish as a result of that? Probably, right? You can't 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 Porsche's rise, even just over the last 10 years and how much people like love it and obsess over it compared to how it used to be.

It isn't Ferrari. It doesn't have that brand equity that Ferrari does, but it's got more than you'd think. And it's especially got more than you'd think for a company that mostly makes SUV. I think you put it really well earlier when you said uh people are like, Oh, are you a Ferrari person or a Porsche person? And like the fact that Porsche gets to be in that conversation. Right. Nobody's asking are you a Lexus person? It's like they're getting away with murder by being lumped in right.

Right. Somehow they were able to both produce an SUV that gets them three hundred and fifty thousand units annually. Yes. But also mention the same breadth as Ferrari in terms of like enthusiasts. I'm like literally a ten out 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. Right. They went from making the the 911 the everyday supercar to now they're like an everyday supercar company where they have a whole gradient of everyday supercars that you can buy, but they're all everyday supercars.

And y and yet people still dream it's crazy. I agree. I completely agree. It's and it's and again, it the love only seems to be growing even as their model line expands to what we would consider to be less desirable cars. It's amazing. Like you said, it's amazing they pulled it off.

I think that's right. So my barometer for this is uh something I took from the LVMH episode of evaluating brand power. Can you kill it? Is there anything that could happen that would completely kill Porsche? I I don't think so. So nothing that they would realistically do. I mean

But even okay, let's say they did, because you know what this is what we learned from the LVMH episode. Gucci, everything you could think of to kill a brand, they did that. But the heritage there, that it can always be resurrected. Like Gucci is always going to be valuable. individual still has this thought of Gucci as like holy crap, this is And I think Porsche is the same. If the brand gets to a certain level, is it even possible to kill

I don't think so. And once you reach that level, that's when you have real brand power. Yeah. And I think Porsche's at that level. Cause let's say they make a bunch of decisions and they kill the company, it goes bankrupt. Somebody will buy it out of bankruptcy. Huge value still in the brand. Huge value is still there. Yeah. All right, ten out of ten. So that gives the acquired dug score for Porsche a twenty two out of thirty. Out of thirty. Which which by Doug Grady standards Yeah.

That's pretty good. Your highest dug score ever is Seventy two or seventy four, something like that. Somewhere in that range. Yeah. You can't get any better than that. So Portugal's at the top. Yeah. Quick carvats. I'll start. Uh, because I've had no opportunity to consume any media in the last three months that is not specifically for acquired research, I have uh uh

random website that I haven't used in six months, but I used six months ago and it was awesome to recommend. And that is resortpass.com. Have either of you ever been to resortpass.com? It's like um Airbnb for uh amenities at resort. Oh this is awesome! So like What did I not know about this? I go on vacation, I typically won't stay in the really fancy hotel. My wife and 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 ResortPass does is they go to the hotels, they say, look, I know your pools are like not full most of the time. Can we have some and I don't exactly know how real time their inventory is or if they are able to like buy big blocks of it up front. But for like a hundred bucks a day or two hundred bucks a day, you can go and get a day bed or a cabana or you know, a have the

Hotel. Dude, you've been holding out on me. So I, Jenny and I do this. We will we'll do the same thing you do. But like I didn't know there was a platform for it. I we just called the And see what you can do. Yeah. Or or we'll book a massage at the spa. I mean like oh and then with the massage you get the like Right. But now I'm just Analog resort pass over there. Ha ha ha.

Oh, great. Uh my carve out is um I go down these YouTube rabbit holes, uh, which is probably how originally I got to you. Um, but I've been on a Seinfeld cast interview rabbit hole. Yeah. And there is an amazing compilation of all four of the cast members. doing Charlie Rose interviews. And he was so good. I mean, problematic person, but like his he was one of the legendary best interviewers of all time. And he did a bunch of interviews with all four of them. Surprisingly,

Uh 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 or talk in talk anywhere like contemporaneous extemporaneously, he is pretty legit, yeah. He is uh you would never know'cause he's so different than the George character. Yeah, so different. So he's exactly Biggest difference of all of them for sure. Have you seen that that bit on Curb?

On Kirby Enthusiasm, there's this like whole arc of the show about how like Jason Alexander is not at all like George and how dare you perceive him that way. And then it's like Jason Alexander is insinuating to Larry David what a loser the George character is. And Larry takes it personally because it's based on his

Oh, that's so great. I should have said five L uh Larry David is in this compilation of uh Charlie Rose conversations too. Yeah, it's so good. It's so good. I think it's about an hour twenty total, but it's worth it. Jerry's in there too. Jerry's in there. Yep. They're all in there. Interesting. Okay, mine is a YouTuber named Whistlin Diesel. Have you guys heard of him? No. Not surprising. Neither will anybody who is listening to this.

He creates it's like he's a kind of a car YouTuber, but mostly he just does crazy stuff. He lives in Tennessee and has a big property and like did you see that the thing that went viral like on Twitter and elsewhere of the Tesla that was on like twenty foot tall wagon wheels? He like has done that. He bought a Ferrari and put it in a um one of those like bubbles that like boomers put inside their garages and and then he just started throwing stuff at it like

a a ladder and like an axe and like a sledgehammer to see if it would like break the bubble and like damage the car. He dropped a Mercedes G Wagon through a house. Um he got a he got a Chevy pickup with we with tires so big that he was able to drive it out into a bay in Florida. Oh my god. He's the Mr. Beast of Car. Mr. Beast of the Car World. He's like it's like dude perfect on heroin.

Right. It's like that. And he's like this he's he's like from Indiana and he lives in Tennessee, so he's like just the kind of like backwoods dude. But he's the channel's gotten so big that it's allowed him to do just dumb stuff.

And he has become my utter guilty pleasure because you put on his video and you're gonna see like deep destruction of something that a lot of people hold dear and then you're gonna see a lot of compli complaints in the comments of people being like, I can't believe you would do that to a Ferrari. Yeah. As a YouTuber I also feel like this is like the greatest thing ever because he takes what the haters say and just like

Turns it up even more and I have to be like nice. I'm so sorry, sir. Like running a business here. He's like, forget about these people. I'm just gonna blow it up. He flew a helicopter inside of his um garage. What? That's a good episode. I highly read. Oh I gotta watch that. This is all just like trash TV, but it is so good to watch. I love that other people do. Yes. 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. Like I started, I had a Ferrari. That was enough. Right. Like you must feel you've talked about this a lot that like you feel when we're gonna do a whole nother episode of just you and us uh chatting, but um That like you started at a time and we started at a time where you didn't have to I feel bad. Different thing. But highly recommended. It's great content. That's actually a great uh Doug, we have not talked about like

everything that you do, give us a like a little bit of insight. And I I think David Tease, we're gonna do an interview together as a as a separate episode, but like give us a little insight into the Doug DeMiro Empire and what what do you have going on and where where can people check it out? Right. I make uh 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 um just Doug DeMiro. And then I also run an automotive like a car auction website for enthusiast cars called Cars and Bids. Um and we're selling something like 30 cars a day or auctioning 30 cars a day on cars and bids right now. Yeah. So m all just all like enthusiast cars, you know, Porsches and BMWs and things of that variety.

You know, the short version is like, you are one of the most successful YouTubers in the world. You are also an entrepreneur who built a tech marketplace, internet marketplace business and just took a very large investment from the Turning Group, one of the best investors in marketplace and content businesses out there. Uh incredibly impressive. Thank you for spending so much time with us doing this collab. This is great.

And it's super fun. It's it's really rare that um we get to chat with somebody who is not an executive at the protagonist company. And also deeply gets both the products and the kind of business aspect of something. Like I don't think there's anybody else we could have done this with. It may be Viking himself. Uh he would be a little biased, I think. Yeah. It's it's the bias that you gotta worry about. Yeah. Only imagine. Yeah. So thank you. Doug, thanks so much.

Thank you. Thanks for for having me. It was a lot of fun. It really was. Prepping for this was so interesting, learning all this history that I didn't know even having worked there. It was great. So fun. Thank you guys. All right, listeners, now is a great time to talk about one of our favorite companies, Statsig.

Yes, long time acquired partner. There is a reason why the best product teams at companies like OpenAI and Notion, Atlassian, Figma, Rippling, Brex, and more rely on Statsig, whether they are iterating on their core product features or shipping AI powered experiences at scale. In the crazy speed of today's AI world, shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly.

The real advantage is how quickly you learn what changes actually created value for customers and how fast you can use that signal to guide what you ship next. Whether it's a feature tweak, a pricing change, a performance improvement, or an AI update like a model change or prompt adjustment, they're not relying on instinct. They're measuring what actually moved engagement, retention, and ultimately revenue.

And as more teams build with AI, that learning loop becomes even more important. Building with LLMs introduces non-determinism into your product experience. The same input doesn't always produce the same output, and behavior can shift in subtle ways in real-world use. So doing offline evals will give you part of the picture.

But you can really only understand the impact once your product is live with real users, and then you can measure how their behavior actually changes. It's very different than the way that you would ship features in a pre-AI world where you knew exactly what the Software was gonna do in production. Yeah, exactly.

So this is where Statsig comes in. It brings experimentation, feature flags, and product analytics into one unified system so teams can ship safely, test rigorously, and directly link what they changed to how users actually behave. The result is a tighter feedback loop and learning that compounds over time so you don't just ship more, you ship better.

So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com slash acquired to get started. Check out our second show, ACQ2, if you want more acquired. We just recorded uh a couple more episodes actually that we have getting ready to come out that I'm very, very excited about. That of course is a way for you to go deeper and nerdier into topics that just

either aren't 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. Oftentimes there are stories in flight where we just wanna talk to experts about what's happening. Like Jake Saper in AI talking about what it's doing uh to the B2B SaaS landscape right now and where profit pools may emerge in that. Yeah, or Avla Cole, the CEO of Angelist. That was a great conversation with him. We had David Shu from Retool.

All the hits, David. We've got a Slack. We would love to see you there. We're gonna be talking about this episode, acquired.fm slash slack. And if you would like to come deeper into the acquired kitchen, you should become an LP. Where we will at least once a season have you help us select one of the episodes. In fact, completely defer to you to select one of the episodes.

And beyond that, we also will be doing bi-monthly Zoom calls so uh we can get some feedback directly from all of you and get to meet more of you. So acquire.fm slash LP if you would like to become an LP. Now, with that, listeners, and a huge thank you to our partner in crime on this episode, Doug DeMiro. We will see you next time. We'll see you next time.