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its definitely portia！
portia！
portia yeah！
definitely dont say porsh！
definitely dont say the family says it more like like i met one of them at one point they say more like not like portia， but more like portia like but its hard i think its a German thing， and i think its difficult to but so we all say portia， portia yeah！
if you say porsh with a German accent， it comes out like portia yeah！
so i think its someone like yeah！
yeah！
yeah！
we will yeah thats probably executed who got the true！
welcome to season twelveepisode 6 of acquiredthepodcast about great technology companies and the stories in playbooks behind them Iben Gilbert im David Rosnfall and we are your hosts today we tell the story of portia if you liked our lvmh episode， you are going to love this one and not just because its European Luxury brand there is possibly even more family drama creeping takeovers and complex corporate structures at play but why is portia the brand and the product so special the company has struck an incredible balance of both building some of the worlds finest supercars will also be Inga great daily driver unlike say a Ferrari or Lambergina of course， these are expensive daily drivers with the average portia costing a hundred and ten thousand dollars， but they have managed to nail being a prestige brand with pricing power and make a ton of cars at 3500 per year today will study how they cultivated such a vibrant community， which conveniently for them is comprised of extremely wealthy people， but it has not always been this way， and it certainly didnt start this way today story has not these tanks the first electric vehicles and like most luxury brands， some misadventures in the ninese oh， yes and if you like quirks in features， youre going to be pumped about our partner in crime to help us tell the story dog demuro dog is one of David and my favorite youtubers and content ers he operates the largest independent YouTube channel focused on carreviews with millions of subscribers he also used to work at portia corporate and is about as big of an enthusiast of the brand as youll find anywhere in fact， we are filling this episode now sitting in his garage in front of a very special portal drugs Carrera gt welcome to acquire dug thank you for having me to wonderfully have you here wallisters if you want to know everytime in episode drops sign up for email updates at acquireddata fm join the slack will be talking about it after this episode acquireddatafm slash slack and without further ADO David Takeus in and listeners this is not investment advice David Nigh and Dug may have investments in the companies we discuss and this show is for informational an entertainment purposes only to set the stage a little bit i think that even though its marketing phrase。
the German engineering thing its worth sharing a little bit of history because it is more than just on marketing phrase right， so theres a pretty long an incredible history of science and engineering in Germany and Austria， goes all the way back to the scientific revolution Aneohanus Kepler， and actually before World War， two Germany have produced more Nobel lariates in scientific fields than any other nation in the world folks like max plank url when shroadinjure Kirk Godel， and you know Albert Einstein， these are all German in 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 car was created by a German inventor in 164， named sigfried Marcus and i say probably because nobody really knows because Marcus was Jewish and the notcies destroyed all records related to him during the war were gonna talk a lot about the nosys here in a minute either way though Germany definitely did create the first successful production consumer automobile was a vehicle called the bench pattern motorwagon and that was made in 185 by Carl bends i recognize that name bends indeed you probably do as you most listers now around the same time another German inventor named gotlib diamonr setup his own motor company and then in the early nineteen hundreds， they have a model that theyre producing goes on to be quite popular is named after the daughter of one of their biggest dealers in their dealing that work of course， we are talking about mercities i had no idea thats where the Mercedes name he did that yeah， yeah， crazy so bends and diamoner end up merging in 1924 and us Mercedes bench is born but OK， you might be asking what is this half to do with partial well turns out quite a lot because in 1906， diamonaret scores a pretty big win in this fledgling German auto industry when they recruit the current pottinga prize winter the padding prize was for austrious automotive engineer of the year to come be there new chief engineer a diamoner， one doctor engineer honoris causeferdinand portia now the uh whole doctor engineer honors causething uh its a bit of a red hering although portia， the person and the company would make quite a big deal about it the dude never even finished colleged little one got a PhD it was an honorary degree that he got leader in life wait the doctor portia is like doctor！
like the suse doctor well！
he had an honorary doctor he was already doing stuff， though he was engineering and creating yes！
hence the honorary doctor yes noneless hedefinallywas a bad as engineer and were going to talk about all of the things the amazing things that this guy creates but we also got a state this upfront and this is good places any Ferdinand portia and many other folks in the family and in the early portia and Volkswagen as we will see days were also huge notys and fernann himself not just was a nasy but was a very close personal associate of adeoff Hitler he was a member of the ss and you know were gonna glorify him and many of these other folks here of their business and engineering contributions but like that doesnt mean that these are good people so keep that event yeah this isnt like one of those people that you hear oh well you know at that point in time。
the notes were so big and powerful they kind of just got you know course or they collaborated its like no this do you know he was there was about real business yeah？
yeah he he was definallynot so when ferden and takes this new post as the head of engineering at diamonr he moves his family from Austria where he was the potting prize winner to stickguard in Germany and a dug you probably have some more contexon this， but stickguard is basically like the destroy of the German auto in this yeah and it certainly is become more that way sense Portia was as well get to because Mercedes Benz is there and it really does feel like yeah manufacturing creator especially for cars yeah and i think its not even much like deploy its not even just the car companies but all the staryers of the subcontract everybody you meet instagart just like when you go to Troy works for portramercities bends or a supply or something like that it is like the industry town yeah so portia Ferdinand its not a short period of time its two decades like that he is running the engineering and the card design for Mercedes bats while heis there towards the end of his time kind as were getting into the lead up to World War two he comes up with a concept， he thinks that he can produce a small affordable car that can really become the first German and European mass market automobile now back in the us there is the model t in Henry Ford that existed， but ferdinansvision is a small car the model t was a large car the like a like a modern small automobile that Germans everywhere can can buy。
which was important because in Germany in that time carownership was not anywhere near as as big， as it was the United States apparently only two percent of Germans own to carverses， thirty percent of Americans by the nineteen thirties and so mobilizing Germans was not something that happened in mass 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 Diamond Benz reject uh theyre like not like we we we cant do this we make expensive cars for wealthy people hmm right they get into a huge fight over this and ferden and ends up leaving the company pretty acormoniously in nineteen 29 so much so that like and dug you work to porch it you have content like i think to this day the rivalre between Mercedes Benz imporcial like there！
theres some bad blood it heats up in it cools down and theres there is more to discuss in that in the future for sure but they ultimately do share that town to so like theres rivalry but like theyre also you know you hang you have beers with theres you know you cant void hang out with Mercedes bends employees also love it so wanthy leaves fordining bumps around for a little while and then in nineteen thirty one he starts a consulting firm to kind a advise other car companies not diamond bands。
but other car companies in Germany and in Europe and i think in America to on their designs and like do some work for them and maybe even design cars for them and he names it the doctor engineer honors， causeferden and portia construction and Burton gin for motoring and fartion Bal i apologize to any job with features that are that is that but to be fair to you its a lot， its its amount full i studied French in college you know， like and that translates as the doctor engineer owners cause a Ferdinand push consulting and design services for motor vehicles company and this is the beginning of course of the company and up until 20829 which we will get too much later in the episode that is the company that makes purchase yeah！
well！
yeah i mean if you look up like the stock of portia and you pick the right portia and theres a couple will talk about thats still the full name of the company is all of his honorary things is only starting this new company he enlistes the financial support of two people one is his son in law his daughter Louise is husband one antonps remember that last name because it is also going to be very important as we go along here and the other person is adeoff rosenburger now if you are a portia history， not you probably know about antonps， you probably dont know about adeoff rosenburger because shortly after they start the company uh rosenburger was Jewish and he gets arested by the guest opo he gets imprisoned he eventually， bribes his way out in the skips to America but during the war portia and the naxies totally appropriate his stake in portion hes written out a history well OK， so this new ferden and company in nineteen 34 theyland 一 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 vision the small affordable car for the people a vox， a wagon you might say in German that car will go on to become the Volkswagen beetle and the company that contracted portia to build and design it was vokeswagen， which was established to do so by adeoff Hitler， i had heard rumors over the years like oh yeah theres theres like a nasy connection here like adeoff Hitler founded yeah volkswell its bigger than a connection yeah they theres not a connection because its the same person！
the fried is is the thing yeah Facebook i feel like that has some kind of like Zockerberg association， but Ive never really put it together yeah yeah theres some theres some link between mark Zuckerberg in Facebook click i just gotta say this really in the episode we may as well like pointed out already it is crazy how comfortable we all are driving vokeswaggins and purchase when it was like not just a little！
not the affiliated like founded by notcies and yet the way the world has evolved like people kind of became OK with it all the German brands i mean you know most of them used to wish labor in their factories at that time and obviously very different people run the businesses now and so you just kind of put it out of your mind and we know what generations of gone by also。
you less so on the participate things more so on the foxy inside of things as well see with the history here there is kind of a pretty incredible refounding of volkswag yeah after the war yeah and i think if it were not for this refounding， that will talk about in a minute it would not access today yeah um but uh， yeah this while freaking aid off hiddler yeah！
sounded vogs like it so the beetle this this you know， peoples car dog you might know this did go on to become the most popular car ever in the entire probably yes！
it is very hard to get actual production and sales data of especially for old cars。
especially for cars like the beetle， which were 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 years something and so its like difficult to figure out。
but it obviously whether or not was the most or one of the most it was obviously the effect of that cars is cleared you know today yeah and i am i i try 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 link of time and number of units produced of a single generation model of a car like the civic the Mustang the f one fifty delay test for more than the Beetle but like the those arenthe same car right the Beetle was the same freaking car until the new Beetle in 19 interesting what do you think about the Beetle because young people today look at it is like a cute classic car but like at the time it was what you drive to drive your family around and well talk more as we get to post war but like it in Germany at the time as like a real you know importantpracticalfamily car this original Volkswagen the Hitler Volkswagen one things you can do when you start a company as a fascist dictator you can create a new city to housethis company in which he did so Hitler creates a new city in Germany known as the then called the city of the strength through joy car that was the the what they wanted to call the the beetle originally the strength through joy the strength through that was like a not see yeah that you get much more German than that no yeah yeah and um this is wolfspark uh like this is the city that uh Volkswagen is still located in today hit when operated it and not just Volkswagen but like the Volkswagen group one of the largest car conglomerates in the world that owns many other brands are familiar with Alladof Wolseberg， Aladd wolfspurg， so hillarcreates volkswag and he creates wolfspurg 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 find a pre war beetle then World War two begins in subdontseptember first 1939， as you would expect Volkswagen all the Volkswagen import operations get repurvice to making military vehicles there is a bunch of dark stuff everything dug you mentioned earlier force labor concentration camps this was the nather effort it it all happened were 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 fracturers and separates out the Volkswagen operations from the Portia Operations for the next read of the rest of the century and into the twenty first sentry so Ironic given that there now one company again right first off were are they no well or are they thats 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 yes！
so first on the volkswag inside i alluded to this a minute ago is a pretty amazing story what happens because you would think like theres no way you cant imagine that volkswagem would survive post world were to give in what we now know store by the guy right the company so what happens is wolf spurg ends up in the hands of the British at the end of the war uh theres 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 Wolfsberg is in the hands of the British and remember because it was a political organization it wasnt a company before the warn nobody owns it its this like orfound organization its super unclear theres no like propriatorship of it so the initial plan that the British come upwith they were going to dismantle the factory and ship it over the Britain， and essentially have Britton appropriate the Volkswagen technology and operations like the Beetle was almost a British car yeah！
but supposedly the British didnwant the British saw the plans for Volkswagen for the the Beetle and said no ones gonna ever want to buy that car its crazy to think about now and it gives you an idea of how the British were up right there car industries const missed opportunities but they literally looked at like this the draw you know they feed the models that they had few that they had built and they said math that is they literally said it is not commercially viable wow well！
so OK the British government Kindle act vision for this， but a singular British person did see division 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 beedles the two hundred that were made he starts driving it around hes like hey， this things actually pretty good i think we could maybe do something with this here he also sees this becomes increasingly obvious as the post world were to state of world affairs takes place here in Germany of like hey， the like the cold words about to start he realizes that west Germany needs a economic revitalization here we need to restart German industry because he the aincurtain is falling just the east here so he amazingly proposes and convinces the British command to leave the factory in wolfsburgment may be easier than i thought because the bridge didnt want it apparently and also to place an initial order a seed order to restart the company for 2000 beetles that the British military is going to adopt unused as their main military transport so not as like a tank but like a not an armored beetle but like theyre going to use it to drive officers and stuff around yep from that seed order like that is now the new volkswag and so its like yes Hitler started it but then i have an hearsed yeah totally now one of the things that i find interesting about the beetle is that each we Europe was so wartorn after world were two 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 bedle you know uk had the mini Italy had the feat five hundred France had the sitrene to cv they were all kind of looked similar way these are all based on the beetle no！
no！
no but they all came from the post war era where they needed something small and cheap to like remobize the citisonry 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 beetle became a global hit whereas in those countries it was more you know in there area you dont see a lot of a situations in a yeah no but the two cd was a 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 two thats walkfaggan but put a pin in them were come back to them in about fifty years uh because theres a lot more to say on on vokesagain and forty years thats about how long they would make that one model of the beetle yes， the new beetle would get introduced i think in 1998 and the first ones post were were made in like nineteen forty eight so yeah， crazy isnt wild， but its insang OK so what about portal well， they have a bit of a different path so after the war i we should say during the war fornet portia was designing tanks yes， and other military training design the elephant antitank tank the most powerful landbased tank ever created a terrible， but be like this just the range of design talent that he had like he designed the beetle and he designed the largest antitank tank were that a couple years yeah！
and also some of the very first hybrid and electric cars in history but at that time， battery technology wasnadvanced enough and so youre luggered around this huge weighted battery pack to get almost no jue set of it and so it didnt really go into production he was a genius。
this is also it runs in the family to many of his descendants are both engines and cars genius after the war ferden and into the sun in law and Tom ps are both arrested by the French as work criminals triedin France they end up being imprisoned for two years in France and Ben you did a little research of this the technical thing they got him on which is why they only had two years was for the first labor that they took the imprisonjus and force them to work in the factories but all the other work crimes that were stacked against them ended up not being charged and so quick trip in another presa quick to your add of work criminal prison yeah， so Ferdinand son very portia who had been working in the business i think a little bit before the war and then and then during the war two um hes also arrested for horn crimes to at the end of the war he gets released after six months in the summer of nineteen 46 and he and his sister Louise are like oh what are we gonna do you know？
we got to rebuild the family or we gonna restart the business lets go figure things out they return to the families kind of ancestrualhome in Austria， and that happens to be quite convenient because during the last days of the war as stuck guard and other large scale German military production facilities were getting bound by the allies portia took about twentyyears so of the best most talented engineers in production people that they had and they moved the magicic guard and they moved them to the Austrian countryside so that they wouldnbe you know targeted by the so that the allied bombers would know where they are and this is pretty crazy they are literally operating out of a Saumal in a farming village in southern Austria， named gmund were talking about like a couple thousand people may we dont live in this area yeah and David are you getting all this from i know you read like five hundred dollars worth of textbox on portia， so there is this incredible history of portia called excellence was expected there was written by Carl lead Vic send and we have to oa big thank you to him for the research for this episode thiswork is like i mean the photos。
the archive work that are in this this volume its its incredible i read a coffee tablebook 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 its not like theres audiobooks and kindle books that we could do our normal amount of research on all this stuff is in these like huge heavy bound pictoron books。
these are amazing objects that like are being produced this to such a like um like visual tangible quality to them that is that we donusually， usually cover on acquire OK so very in Louis go back to Austria theyre there in gamoon uh and theyre like well what if we start a new company and see what we can do around here when theres some vehicles we can start fixing up this is literally like the Sony story if you remember a whensony first get started in Tokyo， at literally the same time they started by fixing radios right portia the services business the the the second porcia company porshop construction in Gmbh， which is an Austrian company that they start hmm do this they start up like fixing old Dyno， military vehicles that are around there industrial unlike Sony in Tokyo though where there were a lot of radios in Tokyo there werena lot of cars in commund so pretty quickly theylike ha， we dont have anymore cars to fix up and a bad business yeah well about a not a large market uh shall we say at this point fairy has an idea and it turns out its a pretty damn good one he definitely liked and agreed with his fathers vision for a you know small car car for the masses of Alkswagan but uh he always had one major problem with the beedle， 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 drive during the war uh with a supercharged engine and ferry said a later in a nineteen seventy two interview， i saw that if you had enough power in a small car， it is nicer the drive then if you have a big car， which is also overpowered and it is more fun on this basic idea we started the first partial prototype to make the car later and to have an engine with more horsepower dog can you contextualize what a big moment in like world history？
this is yeah， i mean its an interesting concept because sports cars in general werent a thing that much they were and theres gonna be people around and say no there were a lot of sports cars before， but it was really a thing of uh in the real enthusiast wealthy people that sort of thing would would buy cars to go motor racing in the air of you know Brass air and i can sum the concept of creating like something more affordable littler that was still fun was like it was kind of an interesting idea that you know this was a real， it was a touchstone of the concept that is really been taken obviously by them and refined in others as well。
i when i n research， i when i look up you know some of those sport cars Preportia and you look at them yeah things are like franking cars they are huge right and the engines are the like the engine base in the front of the cars are two thirds the length of the car right is this one ferry from that era and i look at im like how do you even steer this day go like it looks like a boat the thought at the time really was you wanna go faster more more power？
which across creates more wait， which across creates the need for more power and they did that but it was unwieldy yeah！
i mean even like to the state query gt sitting behind us thats not a large car right？
right and that was a portia thing and it was a an even more of a portia thing at at this time totally， and David you said a word there that if people arent in the cars they may not know this supercharged dug what does it mean to supercharge a car basically you know when engine takes an air and thats kind of air helps air mixes with the fuel and it creates us combustion that the more or less thats how i combustion works supercharger push it like pushes in even more air to create more power basically so the term super charged should be referring to like takes the same engine but adds this thing to kind of force more power through the late it literally force more errand yeah！
and then i dont think turbos had been invented yet in turbos would obviously become a big thing for purses much later the concept of troubles actually！
fairly similar to supercharging accept that it spins something that， adds even more air basically， and and thus， turbo chargers result in power kind of being produced as the car makes more power it makes more power if that makes any sense， yeah， it kind of like spins itself up in a fasterway um and theres kind of prosercons to either either of them and for those following long at home。
this is like end of the 4947 typepara yeah！
those couple years after the war when everything was kind of getting figured out， yeah， so fairy has this idea is like oh， ilikes driving my supercharged speed all this is 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 gamoon and we try and build a car that does that and hey， it also you know turns out that um well， we build the bedle a a so we know how to work with the beetle there a bunch of beetle parts around the Beetle was the real main kind of chassy platform for a lot of military vehicles for the for Germany during the work what do we take a lot of this parts and um the basic architecture of the Beetle， which is a reamounted air cooled engine on a small car and we try and put something together here and this becomes the legendary portia three fifty six some context on this you can buy an old beetle today for i dont know ten fifteen thousand dollars at auction maybe even a beetle like a classic one from the fifties or sixth three 56 regularly cell for about 300 dollars at auction and special ones go for wellwell well above a million this is a big idea the golf between a beetle and a three totally different thing is a large right dug wise！
the desireability 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 three 56 especially because it really kind of was one of the the real touchstorm 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 specialtime and a special moment and a lot of them also werent treated all that well， ultimately the three fifty six it was not affordable， but they made a decent number of them they got to be relatively cheap it was the old used portshow for a while in the sixth and sevties and so not that many of them were saved and now its kind of revered as when we look back as as this major moment in portia history yeah！
this was another thing so obviously in commune and then and even when portal moves back to stock guard here in a minute um， their production capability is not nearly as large as walkswagen， so they need to price these things pretty high they pricethem AT375 0 dollars the germinequit one of three thousand 50 dollars in the late fories， thats about 42 thousand dollars today but we were talking about war torn you right that youre trying to sell i said like thats a lot of money heres the crazy thing theres a market for that even in war torn Europe for A40 dollar sportscore like there are enough people who it turns out are interested enough in varies vision for a small fun fast sports car initially it was slow they they took them a while the first couple 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 sportscore really taking off like i mentioned before it was the earlier ones were these big giant things that were only operated by indusious you know how to work them but like postworld were two there was a lot of optimism there was more in in Britain， it was happening to the mg was coming out with their sports cars Austin， Healy Jagwar these cars all kind of were borne from this post were period of like hey！
these cars have been refine to the point where we can use them and drivemen 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 theyre starting to produce the three 56 in commune now the end of nineteen 47 Fordname portia and Antom Phash get released from French prison they come act to Austria the families all together and they kind of get a decide what to do here right around that same time volkswaggins getting back up and running you know hearst is running it its its like the vision theyre gonna you know make the beetle for for Germany and for the world they come back to the portions and they say hey， we still want to do business with you and in fact， we actually want to expand the scope of our business with you guys uh even more than it was before the war because we could still really use you know technical design， consulting work and really leadership from you individual portions here i vokeswagen i mean after all you design the beetle to though now you know were not a government organization in the same way anymore we need distribution and you guys have this new austriin portia company that youve set up so how bout this they propose two things one they say lets reinstate that old German Partia company the doctor engineer honest cause a blah will recreate the German portal company it will resume doing the technical design in consulting work for us here at box wagon in return they give that German partia company literally the sweetheart deal of a lifetime eroilty on every beetle sold worldwipe no way yes， yes！
this is how entertain these two companies are yeah so sorry the deal is we want your Austrian company to distribute our volkswagins and in order to coworse you to doing that work in the consulting work we also want the consulting work OK yeah！
but but Ben youre on the right track this is a hell of a sweetheart deal for the porcerfamily i mean you are right to be saying why would the German government do this so do you know what kind of royalty？
it was enough that it was it very meaningful！
very meaningful cash flow and probably not even at the time！
not even clear just how right amazing it would right nobody knew that the beetle was gonna become the international right hit that it would but but it， but it was also the the German government did know that this was a lot of value and they also mayor may not have known that on the Austrian portia side for the dealership distribution side that was also a lot of value so were not going to talk as much about the Austrian operations of porshop for the rest of the episode but it becomes a huge business so by the time in the early 2 thousandwhen， it all gets consolidated back into one company for most of the two separate histores that was the larger company by revenue so the Austrian portia company becomes the largest car dealer network in Europe not us for volkswagence but for all types of automotive brands。
theyre doing billions of annual revenue within a few years here i mean what are not opportunity to be given a distribution network just as the car is starting to become like a big thing exclusive distribution！
right two volksiagens and there in countries not just a nostria theyre all of not place yeah！
theyre all over the place in Europe and even more incredibly so what the family decides is that ferden and fairy the original ferden and his son fairy theygonna move back to stock art and take over retake over the kind of German Operations of Portia。
Louise and Antonthe Sunlaw theyre Gonna stay in Austria and run this dealership business antondies in 1952 and Louise is the one who builds this business like Louis and her childrenturn that into this huge you know the largest cardeal or network in Europe well dug the way the value chain of all for selling cars theres is very clear deleation 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 portia could have these two different companies。
its interesting question i suspect the answers more less in some brands i bet they were selling direct to consumer and some i bet they werent some of the smaller ones may be i suspect the reason this workout is because vokeswagen didnt i mean these companies didnt want to be the ones who were distributing all these cars across and doing all they were focused on meaning factoring i think there also made it 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 saxany within west Germany， which still to this day whole 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 right company literal to operate in other states other countries in Europe they probably needed third parties yeah well， yeah well right， OK listeners now is a great time to think one of our big partners here acquiredservice now yes！
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a major partner of both Microsoft and Nvidia i was at nvidiasgtc earlier this year and Jensen brought up service now and their partnership many times throughout the Keynote so why is service now so important to both Nvidia and Microsoft companies weve explored deeply in the last year on the show well ai in the real world is only as good as the bedrock platform its built into so whetheryoulooking for AI 的 supercharged developers an it empowerent， streamlinecustomerservice or enablehr to deliver better employee experiences service now is the platform that can make it possible interestingly employees can not only get answers to their questions。
but they are offered actions that they can take immediately for example， smarter selfservice for changing 41K contributionsdirectly through ai powered chat or developers building apps faster with ai powered code generation or service agents they can use ai to notify you of a product that needs replacement before people even chat with you with servicenals platformat your business can put ai to work today its pretty incredible that service now build ai directly into their platform so all the integration work to prepare for it that otherwise would have taken you years is already done so if you want to learn more about the service now platform and how can turbochargesthetimetodeployai for yourbusinessgoovertoservice now dot com slash acquiredand when you get untouch just tellthembedondavid sent you thanks service now okay！
so Ben you hit on this a minute ago what the help why is the new western controlled west German post not see government giving this deal of a lifetime to these former noties and its not just will pay you for the car as you distribute that we make we will pay you for allcars that we make every beetle regardless of whether you distributed or not yes yes to the German company and then the austring company has exclusive rates to distribute it is a crazy deal so hereswhatgoing on um it actually as crazy as it sound make sense so we talked about a minute ago the iron curtain and the Soviets like so hardfresh to remember now but Germany post war was ground zero for the cold war like the battle against the sovia union was happening right there right next door and so for the west reconstituting the west German industrial base was of paramout importance so like the Marshall plan the people probably know about like this is why the Marshall plan happened and this is essentially part of this philosophy like we dont care that these people used to be not sees but for portia for mercethese bends for lots and lots of German industrial is companies the reason that they get restarted and re reinjected with steroids so to speak is like hey， we got an exessential threat next door we got a rebuild we got a make some card the industrial base now the deal that they give them does come with an implicit string attached， which is they basically say to to porshop another companies we were 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 was Germany does is they create one of the audience tax incentive systems Ive Ive ever seen so for ordinary people in west Germany post war， the taxrate was very low the maximum amount of taxes that any normal person would pay， would be like fifteen twenty percent of your income but for these new old industrialists above a certain income Germany sets the marginal tax rate AT 90 五 percent wow！
so they basically cap your income yeah！
like people are complaining the only living californio my gosh pain thirteen percent stated of tax on top a federal like imagengineif the marginal tax rate were 95 percent right， you would just have no incentive to earn any additional dollars right and thats on the personal side its is equally bad on the corporate such any prophets are attacks so what are they trying to do here？
theyre trying to incentivize capital reinvestment in the industrial base， so theyre basically saying to portionanother set all this up and we are going to create all the incentives such that you will plow all of the money， all these royal tees were giving you from the Beatles etc into building up your production， capabilities and investing in rnd and new models and etc， etc and i mean it sounds crazy on paper but like my god it actually works like it works really freaking well， do you think there was some guarantee that the text rates would lower someday maybe and i think they did but um as will see portia becomes like it becomes pretty institutionalized there of like dont take profits instead reinvestsome in new models and rnd racing uh to the great benefit of the brand yeah， so i mentioned one of the things that portia investin over the years is racecars and racing and this is is super interesting none of us are racing historians thats a wholeanother branch of the automotive industry so here were in the late forties early 50 racing in this era doesnt look at all like it looks today it hadnt professionized yet so the line between consumer enthusiast carmarket and professional racing market was very blurry， very very blurry right and it turns out that even though you manufacturers， including portia would make special versions of cars for racing for lemons being the most famous race uh at the time， um you know when others around the world， it wasnt like like you look at an f one car today or you look at elements car like like they there is no connection between that and something you can buy and you or i would not be able to even operate it so a super obvious point to illustrate this is um foxer probably you know no names like James Dean or Steve McQueen these famous Hollywood actors that were known as like you know they did all these race carfilms that they were also professional racecar driver is like yeah professional as it were at at the in the time period yeah they competed in like real races in additions to be actics edged in Brad Pitt jumping the lemon right theyda theycut well i was about to joke theykill themselves um James din did kill himself in a portia five fifty spider which portia would make a kind of dedicated racing type vehicle there was also a consumer production vehicle the five fifty that car that never would happen if portual wasnan incentivize to invest all their prophets like i mean maybe you can say how do like the legendariness of that car？
i mean they selfare what five million dollars play today five they only made ninety of them in the end and so like it was a car that in theory you could going by but while the three fifty six was like the sports car that you could gentle men race the five fifty spiders for people who like were really like lets 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 it is an absolute legend it totally is yeah do you can see this trend this moment where you see the bification between anybodycan do it and what the very best of the world kind of look like that seems to be true across everything in the world today in the way that like what tailor 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 like she is the SR71 pilot and this you know playing out a local bar stage is flying assessna and the machinery to do so is entirely different in the same way that youtalking about car racing splitting at this moment in the early 50 yeah so back to racing we were talking about the spider a minute ago i get so excited about jamesdean but dug to your point three fifty in nineteen fifty one in nineteen fifty two win their class at lamonds they dont win it outright or right other bigger powerful cars win it outright but they win their engine classes at lamonds and these are you know yeah theyre modified a little bit but like you basically buy em right yeah！
yeah， then that that was kind of a special thing， but that was that was the point of those classes it was that there were cars for people who could kind of go by a car on street modify！
and i think this was pretty unique to purchase at the time certainly you could go by foraries and ferries competed in what not but like again， like were talking about the foreies were a different thing yeah！
these werent three 5060 and i think there are probably also a lot more expensive than the 37 万 dollars plus it type an important distinction between portion this error is that portia was largely focused on road cars and then the roadcars 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 were as Enzo very famously he just wanted to race and he hated his customer his his road cart customers deeply it wasnis thing he just wanted a racing 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 racecars or just former race cars that were just im done with this crab uh whereas portil was selling three i mean three 56 were like being sold right as a in pretty good volume theres this great great gray fairy portia quote about this uh what he would say later about the nine eleven but i i think this also applies in earlyformed the three 56 the quotas we have the only car they can go from an east African safari to lamands then to the theater and then to the streets of New York and like thats such a unique thing especially in this era like any car it remains true itkind of like purchase thing yeah to this day like how relatively useable the car is in just about any settinglike you can drive it to work you can actually take it on a racetrack that like has remain sort of an ethor whether or not there its constantly a north star for them it is what they do it version anybody else yeah i string think of like what the rate um kind of other luxury brand analogy is your get a defining is a luxury brand its not legally uh uh making a apples largest here um itkind only a Rolex to me is that really good yeah what you think yeah absolutely it said you buy those watches to wear them you dont buy them to keep them in a case in oggle at you know theyre still theyre originally made for people who are swimming the English channel or scuba diving i think its reasonable to also compare it to like continuing in the luxury world like a remoa suitcase those arent that expensive theym three times four times more expensive than regular luggage but like theyre not a louvaton track right and so but there are more useble you buy it to use it it can kind of get a little bit up thats why its made out of stainless steel also。
i think thats probably the right is this i feel not a birkin back like brands like this are so valuable because it has both the breadth and the depth like there are enough people who are like i love porchos because theyre my cars i can actually drive but they are supercars yes！
this thing behind this goes to whatever yeah now！
this thing behind this is a little bit of a different and there have been and weget to and we end the five fifty spiders one of them there have been some purchase that kind of go one way or another in the philosophy but like generally speaking it sort of the middle the road going back to fairness quote about this exact thing can do all these things yeah dug one question for you im to keep going to you for terminology David mentioned lemon what is that lemon is like the various car races that are considered sort of the big car races right like the nd five hundred is the car raceof that racing series the ma has always kind of been a place to prove technology its a twenty four hour race so you switch drivers when its always been a place where some of like it proves like the endurance in the capabilities of a car and of a manufacturer over that time period its really serious always running and its always a disaster， and its in the middle the night and its difficult and so like being able to win or win your class lamaze like the monocogrant pre the superball if you will of like vehicles racing in that sort of racer。
theres also this like um it was a portiof would i i think probably advanced this argument that relative to the other races its closer to like what you want for a all around car that would also be a drivable car because like fullefficiency matters use matter is also a road race so its not on a racetrack literally on the closedownroads in the French countryside and enrace on the road and so theres like some component of like instead of purpose building a car for a circuit like cows were using the threat 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 portius start to become quite popular in America， so in 1954 Portia， which i dont i dont think Fernand very like envisiod were like weve gonna sell cars in America this wasnpart of the business plan， but in 1954 portia， cells 588 cars in the us， which was 40 percent of their entire production for the year and that 40 percent basically stays concygoes way up for a while in the seventies。
but um Cant never dips below that like America is a huge market for purchase this amazing to think that 58040 percent of Portier production i agree to you by the way， by your your point that they didnt really have American the business plan its one at one thing the project provides some context important， even mind the number of like sportscars startups happening in Europe at this time with significant， most of which listeners fewers will never really hurt of because they were died these came out they they showed up they they raised a little theysoldsome cars they failed and that there were tensities there was no concept that porshop would be more successful than any of a obviously the the family hoped it would and it became that way but so many families hope there is would two and theyll failed and somehow portia you know group well！
uh part of it was the incredible success of the cars um the big part of it two was the royalty on the Beatles that thats a nice steady source of cash for that you can invest in your upwith for three invention so youre doing stuff like racing youdoing stuff like looking international youlike what can we invest in that？
like were not sure if its a roi positive specilative？
we could be spective because we know we got the money comin and beetle continues to be more and more more popular it only continues to involve them to reinvest the right so speaking of reinvesting as we get 29 is like the three 56 is great this amazing car but its kind of i dont know dugwhere where you would put it in my mind its kind of its not quite a modern car its like its like close you know its not a model t but right its its its its not a right its 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 current that era？
and what was clearly starting to happen？
was other sports curs are showing up that were refining some of the principles yes！
so were now in the sixties 4 denounces the Mustang jaggorys got the etype um Chevy comes out with the second generation corveat the stingray and all these are starting to shop all yeah lost in heal everything is like OK theres a lot of pressure yep so OK in 162 very portia makes the decision like three 56 amazing you know rebirth of the company we got a invest prophets and replace it with a new model so for a couple years porchai had actually been working on a design for a sedan for a larger modelseams heretical now right？
i would do people look at the Panamera right？
oh we know it was actually like gonna be the second model what for you um i mean i feel that way as every time i see a Panamera drive by im like what is portal make this car but i see them driving by so thatwhy they make a car China is why they make that well get to that later so the next generation of portions ferries son Ferden and a known as booty name ferden and named after his grandfather found was working in the company and he had made leading the bodydesign for this larger sedan the porter was gonna make fairy decides for bunch reasons that to cancel the sedan project um probably the most important reason was um kind of i dont know how much this was government motivated and how much of it was just sort of like a couple of like Mercedes and bmw like they were the sedan makers and portion may be couldve challenges them but those like hey you know theyve got their turf wekeep our turf in sports cars and right everybody will be happy here anyway， they decide cancel the project and a double down on sports cars at the same time ferden and portia booties the the grand sum his cousin from the Austrian side of the family Louis an antons son also named Ferdinand fornampyes hes also joined the company these two young Turks the grandsons Ferdinand are here in the company and ps is working in the engine department so turns out that he is a pretty brilliant engine designer he comes up with and i believe you missing young kid dug you many more about the history like i think he really was the one that led the development of the six cylinder boxer engine intersporshow now in an event the six right box or engine but the engine that ends up in the nine eleven that is like still to this day the model for the nine eleven engine comes from him i think heworking on it for a racing car project that ends up not coming together fairy says OK， lets take these two coutfailed projects that you know the next generationsworking on lets weave them together take the styling the bootsiesdone for the sedan take this amazing engine that fordann and is built for the racing operations and lets see what happens when we put them together and this is the birth of the portion 901 the 90 one i David im not familiar with that model yeah？
what what is that well！
uh cause this is why i would do im dug im sure you do this is oh， thats be famous famous for like i had no idea think most people of no idea of yeah the nine eleven is only call the nine eleven because pujo of all companies had a trademark in France for any car with a modelname of any number， any Roman number with a zero in the middle and then any other number so X0X and in fact。
all pusual cars even to this day are named 252627 2AWAY thats the two series the three away， four away， five away， and so they trademark them all just knowing that eventually that would that would happen unbelievable！
so i mean it make sense forces like well， what we do we cant really not sell in France wasnt like the biggest market。
but it wasnt small market for a name and the story that i hear have heard about this is that they said well， we get these bages that say nine one why dont we do nine one because we have the nine the one right， hence the nine elevente？
hence the nine some of this may be more popular than other what are the things that i dont understand is why they wanted to call it carthe 901 in the first place and i was never really able to get great information about that the three 6 was purportedly named because was the three hundred sixth like engineering project they did yeah but did they really do five hundred engineering projects between three 300 once so a couple details like out on this from uh excellence was expected i believe could be wrong on this but i believe nine was the name of the engine project that Ford name peash was working on and i think i i think thats the origin of it two yes in partial lore its that like the reason these model numbers are like these the engineering project right they start， but thats totally a pockeful like they jump around they jump 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 7 because they want didnt want to look like they were brand my companies are like oh， yeah， we already done six project this is project number seven i forget who they were working its like when youre starting a new company in your your sending your first invoice， you dont call it invoice number one its exactly so like yes！
the the lore is that they dont all of our projects have model numbers like the bs right uh so funny and to be clear so i enjoyed designs of portia cars before doing the research for this but do basically nothing about the couple years line up icertainly never own one and it took me a longtime in the research to realize that there are a lot of car designs that start with nine that are all nine eleven there is like yes i dont know i didnwrite all day with the nine six four and the nine five nine it gets complicated because what ends up happening just like happens every cars they start to get redesigned as they get you know theres the years goon they need newer models they still call that i love you only distinguish the newer version from the older version is to call it by the project number。
which is 964993 etc etc and so if youre really into it， you gotta know not just that its a nine eleven but which no version it is and not all nine eleven say nine eleven on the back so you cant even like you most at as your no references little complicate maybe thats part of the successive theres like sort of a language you have to speak in order to like get portia to an extent and theres something to that why i think its really brilliant i dont know how much this is intentional versus its evolved this way with the brand but like to me。
its just so brilliant because there is this tribe language to purchase if you see a nine eleven， you know instantly yeah did it a nine eleven it is iconic is one of the most iconic designs in the world yeah and partly because theyessentially kept the shape the same yeah for the sense the sense this sense nothing yeah so pretty immediately like this car is a big head um nineteen sixty two is when they start working on it， they first startselling it in nineteen 64 theysunset the three fifty six in nineteen 65 and so sixty six is the first year thats fully nine eleven for partial production they sell almost thirteen thousand cars in sixty six uh， which thats what who would we say ten twelve years ago they only sold yeah forty percent of the product thousand yeah， so theyre now thirteen next in in ten years and that number of almost nine eleven they sell was 15 percent more than their best year with only the three 56 like dog how would you characterize like what is what what makes the nine eleven so special its important to keep in mind at the time you didnt know right it was just like this thing this like sports Carl they had come up with and again there are a lot of sports cars was whatever？
but of course， what is ended up happening is that this cars become symbolic of the sports car and i think a lot of people would if you were told the mention a sports car they would say the nine eleven it it just has become like the car and it was it it like you say here it was clear very early on that it that we had something special in this great combination of you know， reliability， comfort！
practicality just like the three fifty six had been but just the better yeah to my thinking the flat six boxer engine which was a great engine that fordname phash design to go in this first nine eleven theres something like cool and unique to the like weve been talking about the difference between portions another cars here this is a performanceengine but its a six right its not an a and its rear mount right so the three of six had a boxer for is to explain what a boxer engine is you know a lot of cars most cars had well these days most cars have inlineengines were！
the cylinders were an align a lot of other cars in the passive had v engines were， the cylinders literally make a v for balance the boxer engine the cylinders are literally like across from each other its flat they call a flat engine or a boxer because the cylinderheads look like theyre boxing each other， as they go back and forth and the benefit of the box or engine was that um is got this great balance to it because its like literally flat in the car um yes， it was unusual i dont think it was necessarily unusual to do a six liner 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 V8 and v tens became a 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 la relatively light！
relatively simple and like strip things down to the core essentials of the car an average person can walk off the street by one operated thats right drive to work have a great time it wasnt crazy， fast or anything else yeah now the three fifty six all three fifty six it had four cylinders uh and so now the nine eleven f sixders and like you said like its not a world class powerful fastcar but its it elevates the three fifty six into a much more like you can really achieve a lot more with this than you could write the three fifty this becomes super important from a business side for porshop because they priced the nine eleven about fifty percent higher than they had the three fifty six now what they do it first， they realize this is going to create like a major price gap or a line up here were going to lose a lot of customers by by elevating so they do a stop gap at the same time that they introduce the nine eleven they also introduce the nine twelve and the nine twelve is a nine eleven with the old three fifty six four cylinder engine in so they， they essentially need cap the uh uh they they downgrade the nine eleven to be the entry level model only as a stafgap they dont want to do this permanently they sell about threequarters of the units are the nine twelves the cheaper for some other ones and one quarter of their sales are the more expensive nine elevens the profit margins theyre on the nine elevens are so much higher so very starts thinking like okay， this is part of the plan all long i think lets create a whole new model the old three fifty six were gonna buiphicated are performance real enthusiast customers who are willing to spend and that were going to make great margins on those models thats gonna be the nine eleven lets create a new car that can replace can be the entry level for shop will eventually introduce the boxter twenty plus years later takes portia awhile to really get to the the the the the perfect end state of this strategy right， but for this new car， ferry says he were not really equipped yet to be running multiple lines as just us for shade the company we need a partner for this new card lets turn to our good old friends add Volkswagen and jointly engineer and produce this new car with them so in 1967 Portia Kicksoffee joint project with Volkswagen to produce a new MID engine Roadster nevertually smaller more compact are in MID engines not rear engine call the nine fourteen and the idea is that theyve gonna make both a four cylinder and a sixth cylinder version of this the four cylinder versions gonna be a bulkswagen the sixlinderversions gonna be a portal and a fairy puts is neffie， preferden and yes in charge of this joint project with volkswai in a very fatfuldecision as we shall see now what all ultimately happens with the nine fourteen theres a change in ceo at Volkswagen and the new ceo definallysees the value in deepening the relationship with Portia and specifically the relationship with young Ferden and so he wants to continue the project but hes like i actually dont think that a sports car make sense in the vw line up why dont we just have all of these b portions so the plane was originally to have some of the nine fourteens be branded vw yeah some of them be branded portia Volkswagen had made a little sports car called the Carmen gia yeah previous to this again the sixties and so the thought was they wanted to replace the Carmen gia portia wanted a entry level car lets jointly develop it portia gets the more powerful one the 94 the six cyder and voqs want to get the fourth cylinder。
but the decisions made the yeah he said the new vwc oh！
he he actually gets pretty good deal out of this um so he deepens the relationship with the yeah fortnand he gives the car fully to portia。
but in exchange vw takesover all of purchase distribution in America huge deal huge deal for vw so were started new reader planning these companies just a little bit here that deal is an enormously wide ranging partnership because youre trading distribution from one side of your business with the ability to create a product on your other side i mean its its basically merging the companies， because its so massively entertwined now in this partnership where its not like oh yeah， we partner with them on this one small little thing its like no arm car that we expect to sell more of than any other car is made by this other company meanwhile on the vws out of things its like America the most important and largest growing car market in the world we we now own the distribution for portia like this even if its not structured this way， this is a merger well。
if history were a straight line， what you are saying would come to pass， uh unfortunately its not a straightline or or fortunately for for drama on our show uh so youre absolutely right the nine fourteengoes on to be a huge success way more units than the than the nine eleven， which was the whole strategy portions cool with this， theylike great wemaking our profits on the more expensive nine eleven websegmented out our market the nine fourteenistheentry level portia sells hundred thousand units in the eight years that its on the market and i think it really shows or no dug you can comment on this there is also a market for mid engine roadsters im in including the one sitting behind us regardless of price like the these are pretty amazing sportcars yeah！
portions prevised this had all been reerengines the nine eleven the the three fifty six and so this was a manager， 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 get like perfect wait distribution when i was talk about sports cars in my mind like god intended sports cars to be mid engine thats how its its more difficult the engineering is more difficult than front engine but thats how it should in brer engine just saying but porter made it work there are always even graded that but mitengers how should be and when you say mid this basically means that its still obviously behind where the passenger sit but in front of the rear axle in this case now， there are technical mid engine cars were the engines in the front but behind the front axle but most people when referring to emit engine car are talking about a car that has the engine between the passter compartment and the rear axle yeah！
i think you have a video where you say the camingt for rs， which is the capative the box or the same the same lineage were talking about here is the best modern portia yeah！
i feel like what but its controversial because the nine eleven is the portia but dont hate us with comments！
yeah， i dont dug i feel like ive seen multiple the best on your channel oh！
yeah！
everycar is the best when it comes out and then it superseeded by the next Ben there you go you are one in the differences between you two bend um paddcast world is a titles and seo is really important in the YouTube world right very and i dont even take advantage of it as much as some my my colleke well， its a wow around this topic year of um engines i cant imagine this is one of just the huge cchanges that is coming with electrification of performance cars right， like uh， yeah， the whole different set of calculus like it doesnmatter there is no engine anymore yeah！
although you still even an electricars for a performance electric car you still want the wait to be as close to the middle of the cars possible for a similar reason honestly， but the engine component and all that other stuff boxer yeah， yeah！
doesnt？
it doesnt got OK so a minute ago， Benny said like oh， this naturally would lead to a merging of you know vw importion i was like well， so this is in the late sixth when the 94 launches as we head into the seventies， the oil crisis happens in the seventies and sports cars become less of a thing people are really worried about this this is like a challenge to partia its particularly a realchallenge to the nine fourteen interestingly nine eleven sales stay relatively robust throughout the seventies because its a luxury good right like just like an anyresession and an even like sector targeted ones like the oil crisis in the auto industry for true luxury goods like those people like the market for that is very resilient the nine fourteenthough very different story so as we had into the MID700ES uh even though was a very successful car and project for portia as a whole it starts becoming a real money user， so this creates a lot of tension in the company this kind of a backdrop of stress to another um family dynamic thats emerging， which is youve got these two ferden and grandsonns that are kind of vying starting a viforcontrol of the company you know there now gosh i dont know probably in there thirds may be entering there 40 ferries getting older here like whos gonna take over the company weve got succession fives here on the one side youve got booty Ferdinin Portia hes got the name hes fairyesson and hes a great designer hedesign the nine eleven maybe the most iconic cardesign ever and this is German fordinand this was German first working actually producing the cars but the other fordenand the son of the reason Anton was hired by the German yes， he is also yeah hes so yeah hes hopped over hes you know and the one he kind of like this dark course， kids right hes the Austrian side of the family you know youve got the card dealership business follow i go to that， but hes also approved himself as like yeah unincredible 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， etc， etc so hes like yo this should be my company tensions of course， start to rise and something pretty incredible happens you know weve come across on the show there are lots of stories out there of family businesses and succession and how all this happens i dont think theres another caseof anything going down like this that ive ever heard of so in the fall of nineteen seventy fairy and Louise together call a joint family summit they like were gonna settle things and i dont know im speculating here but i i suspect ferry and Louise were didnt have a lot acer money over that mean theyre brother ancestor， and they had Louise had her company， fairy had his company theyboth make a lot of money theyboth making a lot of money everybodys happy this is between the childrenhere， so they call a family summit at the end of it they come to a very very surprising decision they dont decide that one further nand or the other is going to take over instead they make the call that the families are going to completely enjoyently exit operating the business everybody out of the pool， not the two fordnans got fairy， fairy himself whois running the conferenanslongdang at this point the original Ferdinand theyve gonna continue owning the company， but they will no longer manage the company they will know longer operate the company they will know longer design cars they will know longer make product decisions frankly this is just insane i mean cause its not like be one thing if they were like oh you know， were really not that good at this like we should hire professional men these are led the generational talits in the car industry and the best solution they can come up with is you know what were all done here is crazy i would be so fascinated to get videofootage 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 are some direct quotes from a lot of them in excellence was expected and like as you can imagine its a very delicate topic uh and theyre also German so like theyre very you know priming proper but um i think very he basically admit hes like yeah there probably was a better solution to this but like it did mean that we could kind of reunite as a family and like i think he said something like there were still tensions but we could go to each others birthdays again you know something like that so i mean i guest in that you know if you value family above all else crazy rational is still its crazy crazy decision cus like you said they were they were killing it they were the family business until this point and it would have been a very successful one because of the efforts of the family and especially you get fernnph now looking back on this we know what happens different nanph for get to but yougot him on this up and coming track or hes so legit oh my god and he must have been so pays like no youre out crazy i mean he definitely was so pissed so lets talk about what happens here bootsy he goes off and he foundsporcia design so there exists these weird theres like purchase sunglasses out there you can buy portia designed laptop like all this stuff that him that thats a totally new company that he started it is now been reabsorbed into the broader portia conglomerate um but that was started right hes like alright great i want to be a designer thats the path that he goes down the same thing happened in the Gucci family for anyone whos seen the the Gucci movie with Adam driver the sort of a family member who wanders off and does some like effectively like brand license in hes like i wanna take the family name and make some money off yeah， which is obviously what was yeah here up i think he also was very talented i mean design to get the nine eleven forgets right like keys talented but but yes trading on the name here the other forednand yes， this guy oh my god he is a hes a g so at first hes like i imagine inspired by his grandfather hes like im gonna go start my own engineering consulting company and consolelothercard companies he does do that for a little bit but pretty quickly they after remember vwand the new co really wanted to build this relationship with partia with yes， he gets procruded to come in and take over Audi for bw i dont you originally i think he enters working with an Audi but then very quickly becomes the head of the Audi brand for Volkswagen and dugat this point in history what does the Volkswagen group own brandwise yeah！
thats interesting question the brands that we know i think it was just Volkswagen and outi um Audi have been a separate company Audi had been a separate company and its also important contextually here to to make one it really important point about posing outi at that time outi was a joke the Audi was not what it is now like now you view audias a legitiment competitor mercitiz and BMW back then it was more like how sob would have been treated like it was a sap solutesecond or third tier brand that no one could possibly you know it was not it was not a brand that was desirable at that would be like today um infinity like i know you you own the keya right at some vent like get a key and hunda are trying to enter the Luxury market yeah maybe on that level of like um im a sick with Mercedes yeah was the oudy five thousand the thing that kind of save them and propping back on the contract that car was the one that had the the famous scandal in the United States for the sixty minutes found that it unintended acceleration where would accelerate， which turn out to kind of be unfounded but this reputation was like severely？
severely damaged by that um but that was this error that was this error the oudy needed to turn around vokelike and get out either like we dont help to do this thing we get bmw in versity is there killing it so ps comes in and like i mean this dude is good like he this was such a mistake to force him out a portia so he turns around i and like builds out i into you dug like he said the outy we know today and hes so successful then in 1993。
he gets promoted and becomes ceo of Volkswagen so we get the situation where they kicked him out of running the company and then he goes a mess up running offline as wild a wild i mean he oversaw unlaunched the new beetle uh like literally his grandfathers legacy the beetle he turned over the Beetle model to the the new Beetle how long was fordennps running vokeswagen it longtime 9093 i believe he was chairman until 20152016 maybe you 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 hehasthis wrap of being like incredibly angry and everything must be to his standard and so i can only imagine yeah how angry he was a he also um he had thirteenchildren but yeah i think for different minute like a lot of kids yeah it was that typical you know how you think of like a German industry yeah at the round this time Volky i can started really gaining a lot of brands so in the late nine years they bought lambergate they own two Europe only brands one for like Spain and one for like eastern Europe and they re purchase the boogadi the writes to the boogady name which had gone to an Italian company um and they brought it back to France where it was like initially hmm existing yeah restarted i mean dug you kind of said but to put a bow on it of what a ballerps was um in nineteen 99 the global Automotive elections foundation they award him the car executive of the century and by the way thats like uncontested in the car world for nanphas looked that is like exactly what youre saying the guy everybodyknows his impact everybody knows how effective he was hmm the families purchase just like yeah no！
you gotta get out here unbelievable maybe he would have had the motivation to do who knows who knows just wild but focus i can much bigger company than portia right？
yeah he got kicked out of his own company so he went and ran a much bigger one that competees with it that then he grew even bigger yeah！
yeah！
yeah！
yeah well， so back to the participde this decision was was just really not good who 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 Ernst Ferman becomes the first nonfamily member CO of Portia he was actually parted the original elite engineering crew back in the sawmail in gamoon so he has a long history with the company unfortunately he was probably a better engineer than a manager though his firstmove is descript the nine fourteen and instead introduce the nine twenty four the nine twenty four was another joint project between bw importia the problem with the nine twenty four i i i think it actually was a decent car a dug you actually reviewed a nine 44 a with that which is the kind of next iteration of it i think it will you you can say i think it was a good car but its not a portia its a front engines water cool like it suffered from that stickmuffer sure the saving Grace was it was actually a pretty good carted drive and so over the years and even at the time it was kind of excepted as hey we all get that it came from a vokeso i can but sort of the bee love it nine fourteen and it drives pretty well yeah so like people people like yeah what will take this？
as the entreporch of the of the time。
but it wasnt a nine eleven it was not a nine eleven and it wasnt a nine fourteen either really， it was a totally different thing and the nine fourterooms this small lightweight compact roadster removable top the nine 24 was a it was definitely a different kind of situation so Ferman had a quote on that when gonna you know ask about like what is this uh he says the nine 24 is aimed at new clients who either cant afford a nine eleven or are not necessarily looking for the performanceof a nine eleven oof i mean i guess thats true！
right thats also a true of the nine fourteenbut like can you call the right way you want a position your branding the quiet part loud you yeah these can you come up with something that is not using the word not to describe who wants it what i have it you say who would want it yeah this is for the poor customers right。
right， right， and i think it but also with this like in in whole philosophy of it， its not approach even more concerning is the nine twenty eight so ferman makes a decision as the new ceo of the company that its time to replace the nine eleven and uh i！
i i get you know maybe like lets give him some credit this is the seventies the oil crisis is going on like theres um safety regulations this is post refnator and unsafe at any speeds like its maybe reasonable to think that a rear engine sports car isnt like a great strategy pursuing here and unsave it 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 are citizen should not be driving around 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 bastin of just like anything goes and some very special cars came out of that era and the seventies everything started to get the oil crisis was a big factor because that sort of screw the missions 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 other killer fun it is astonishing how much safer cars have gotten astonishing you look at these like cute old portions theyre so much smaller right and you look at the big one stay and you can limit oh cards of gotten so big but carsible so much safer far and theyre faster than they were back then so its its kind of the best of all worlds and most cases theyre efficient also。
hmm totally so in 1978 forman introduces the portion nine twenty eight， with the stated intention that this is going to eventually replace the nine eleven they keep selling the nine eleven he says well！
keep selling the nine eleven as long as we get demand for i think it was the least like ten thousand units a year something like that but you know once the nine twenty eight on the market and demand dips for the nine eleven will stop making them now i wanted to find the nine twenty eight a little bit here because it was a if this is an important moment history would we look back on it now it seems insane that the nine eleven would go away like how could that be but its important to keep in mind that like the three 56 when away and that was the portia like how now you say like oh i have a Jeep and youreferring to the Rangler like that was up the portia was the three fifty six and so that went away and for the nine eleven it only made sense at some point the nine eleventwould also go away the crazy thing about the nine 28 the portial world is that it was a front engine V8 car， which portia had never pursued before and was more kind of an American thing but in the context of the time， its not that insane that they went after this all sportcars were starting to get bigger and more powerful， and becauseof the oil crisis， and becauseof 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 didnearlymake a lot of power catalogue had like 8 leader V8S that made like a hundred and fifty horsepower was embarrassing stuff because they had to put so many emissions controls on that by the time you actually got the power out was a disaster so we didnt see that unsaying and the jaggory type had just been replaced that was the big competitor was another sports car that had been replaced by the xjs which was now a vate comfortable automatic transmission car Mercedes bends did the same thing with the SL class it went from like a little fun sports car like the nine eleven to a big V8 kind of relaxed leather Cru Luxury cruser that sort of thing and so it made sense that portia would maybe want ahead in that direction also。
when start thinking about moving past the nine eleven just as they had moved past the three fifty six you know twentyyears before there was some sense to it so the nine twenty eight comes out 178 and and as we reach the end of the seventies and end of the eighties as we also have talked about a lot on the show everything that the seventies was in terms of um austerity oil crisis 17， percent interest rates and massive inflation uh the eighties was um not that shall we say not that was a uh rising tide the list all boat lots of disposable income walle street is ripping a lot pin stripes yeah seems like actually a really good time for fast cars seems like a good time for fast cars entity it was including for the nine twenty eight the nine twenty four sixty by the nine 44 and still the nine eleven people still wanted them i think largely because of that although im sure there were other reasons to so the portion of pessia families when they exit operationally from the business， they still own the business， so theyre still like the supervisory board they get fetupwithfarmen they oust him and they bring on a new ceo an American as co of Portia， one of Peter shots famously he comes in and he redraws the nine eleven production line and dug i know you have some uh first and experience of the legend very great the great when the great stories in the auto industry。
the nine twenty 8， though i just provided an passion defense for it um， it would never felt like the right car to portia never felt like the right car to especially the employees who had kind of fallen in love with this nine eleven i did been in production now at this point for probably twenty years， twenty five years maybe and um， the nine eleven was portilate to a lot of these people and the fact that it was gonna be it replaced by the nine twenty eight was this sad thing and i had kind of really hurt moral uh introduceard 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 the you know the nine eleven everybody knows the appending cancellation is coming its still going but its coming this beloved car and so uh shoots Peter shoots the American ceo is sitting in the the office of the helmet bot whos the chief of engineering for portion and theres the line on the wall that shows were all the products stop and start and that you know we timeline and this like a like on a white board yeah， these on a white board something to the wall right and so theyre sitting there talking about it they know that morale is low they know that the company wants to keep the nine eleven even though it you know it should be replace because its old you know thats the thinking of the of the people and thats whats was was said like that was thing in German culture like when something is been decided its been decide an edict has been given the cars out i mean the nine twenty is on sail like it is showup to replace the nine eleven in the spirit of these other cars of the time the eight front internet made the sense that was what theyre gonna do but the morale was low and they knew this and so should stands up hes got a marker in his hand hestands up he walks up to the timeline on the on the wall and he draws a line on the timeline drawthe way on to the wall and extends the nine eleventstimeline you know， indefinallyincluding onto the literal wall now this story of course is this is like the stuff of legend impartial like Peter shoots the American ceo saving the nine eleven in this moment and a lot of talk about whether this actually happened like did he actually just draw the line and make the complete one 80 this is a good story to inventif you need to be a boostic right especially if youre trying to youre trying to like boost the the reputation of the ceo among the yeah among the workers he drew the line right and theres a perfect line that which is shes just looks over at the chief engineering goes do we understand each other right and any walks out i always wandered if the story was true， i worked at portia uh ten years ago and um had become friends with portius general council in North America when Peter shoots retired， he moved to Naples， Florda， and he the he the general council portia and Peter shoots were neighbors in their homes and Naples and i one day he went over to his house in asking you know is the story real did it happen anapparently shoots said not only did it happen but helmet bot was grinning like the Cheshire cat when i drew that line like it was like this， moment like were gonna do this and it like really apparently really in in in his words it really actually was a true story wow！
so great thats awesome to get that validation because theres so many of these stories that right how on the show were like were like this is probably a pockeful and theres really no way to verify it now of course。
if your shoots， you dont tell the story this is become so famous but you know from these valid at least the story is real its a great story yeah！
i mean literally he extended the line right of the production line right on to the wall right？
so do they keep making both cars yeah！
so they kept making i think they made the nine twenty eight until nine nine five it was a vediking who comes and in a minute who uh finally！
kills the damn thing the problem with this decision youll get into more economic realities of this situation as the eids kind of draddor would close whatever， but the problem with this decision was the the company was planning on ending the nine eleven and so by drawing that line symbolic that was were going to keep doing this it also committed a lot of the companies resources to now refreshing something that they hadnt planned on refreshing yeah？
so in the gogokid years of the early through mid eighties no problem， right， no more lets wedo， a wedo！
a ico will issue some of these exactly twenty one yeah， exactly in fact， i think shoots was like lets make airplane engines yes， yeah！
i think he was yes oh my gosh and on the back of you know these gogokid years and success theys selling the nine eleven theys selling the nine twenty theys selling a lot in nine 44 is like they sold Upton 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 craftmen brands uh they did an ipo they thought they were being smart they sold i think a thirty percent stake in the company but all nonvoting shares like oh were not gonna no you know no corporators here nobody will have any void in control except the families like it is impossible that somebody could you know attack us because the family so 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 its on the market， but then 1987 longterm capital management flows at you at the end of the gogo years the eids not good， not good for partia and not good in a lot of senses like ages period economic climbing not good for anybody be youmaking luxury sports cars now as we talked about in the seventies the oil crisis in the sevenes was really was bad for course， it was really bad for the nine fourteen the nine eleven was pretty robust like there was very resilient i think the same is again true here at the end the eighties but theyve still got the nine twenty the nine 44 on the market and like those things started secondwind big time its 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 yes， so shoots though he continues production of all three lines not only does he continue production he reinvestspeciallyin the nine 24944 align theyeven refrested a third time to the nine sixty eight same basic car yeah like theyre investing resources in this car and at the you probably have a better sense than me but like another aspect of the kind of recession at the end of the eighties was the exchange rates with European currencies got hit really hard right and so relative to the agent currencies in the us so it became i dont know call it ten twenty thousand dollars cheaper to buy an equivalent entry level sports car from a Japanese manufactory and it just so happened that at this time you know Japan was kind of having a macinyeah boom and as a result of that they started making these sports cars the execsports cars rescribing so the Nicon 300ZX yeah！
the shop the Toyota Supera you know all these cars are showing up and by the way they dont have for salner engines and theyre 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 is a feel like im a im sort of a in my history probably all of us barely you know starting enter consciousness here uh you know this is pretty fast in the furious。
but not that pretty fast in the furious all those you know Japanese cars that yeah you know they got tuned up the superas especially yeah this is that they were all starting just starting to come in then and starting to block and they offered just as they do it hey！
this great great value proposition of like big power for not as much money yeah and again the nine eleven isnthreatby this right？
but the nine 44968 的 hell yeah！
threatened by this like nobodys buying this in the nine 28 by then was so old that sales were a trickle by 90 there were three produx， which was the nine the entry level， which was the nine 44 that became the nine sixty eight then there was the nine eleven， which was actually the nine six four nine eleven by that point it only make things even more confusing and then there was the nine 28， which was the front engine v8 like flagship car that nobody want that nobody want so they literally only made three cars and they were all three number 9 cars it was the complete disaster i mean it portions never named cars well 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 everybodys like what that was about you know is this like i eleven why does it say carrera never any sense and all carreras are nine eleven but all nine eleven are not carreras today that has changed over the years then there was a trim level of the nine twenty 4 called the carrera there was actually called the querygt which they leader named this car right none of it it was all confused no you had to be like a German who was into this stuff to like figure out the precision level with which it made sense so as all this happens forces now a public company the stock phrase starts to decline precipiously！
and they floated thirty percent of it they floated thirty percent now no voting control yeah！
but the company theyre really like a crusting the treetops here as theyre you know beginningtheir descent at one point porses market cap was less than 400 million years crazy termatt like almost zero and i believe also at the time they didnt have any debt so like truly like the markets believed that portia was worth nothing it wasnt like oh， therevalue here！
but theres big detburden on the company it was in unbelievably difficult time and its kind of funny to think about because now people think of portia is portia like this crazy company its one of the hotdest brands like he said problems， but one of the most viblebrands and it only thirty years later， only thirtyyears later it was diyer straight i pulled up the us sales figures for portia from this error so went saying to me theydipped in 9192410 units that was worth the 1965 sales they had routinelysold between thirteen and thirty thousandcars year throughout the sixty seventes eighties， thirtein and thirty thousand and the us said 92 they dipped to 40100 cars that was the level that they that we were talking about it was it was complete diar states so even though the public doesnt voting control um everybody starts to think the only thing that can happen here is this companies can get bought out one equity research channellist actually！
in a in a research note， said that he thought there was A98 percent chance that the families would have to sell and that they would accept you know some amount of value for their state rounded and just have a go to zero so shoots get fired， but its not like that fixes anything i think it was nineteen eighty seven when he gets fired over the next six years， they cycle through i think 434 morecosfirtle none of which really figured out there is one bracspot there however， which if theres were a normal required episode， we were just skip！
but weve got dug um the nine five nine yeah first up first its actually the nine five nine and an an another interesting component offshooting that， but the nine five nine comes out at that time which is like there first supercar so sort of the predecessor to this car and an actually wasnt commercially successful sort of in keeping with portus world at the time but it was it did uh it was kind of a test bed for some new technology including for wheel drive in a supercar， which has now pretty much become standard fair the nine five nine was really the first car that had that after the nine five nine porshop was so desperate all that they started taking on projects for other manufacturers and so its known in the car world but not as much in the general world portia filter Mercedes Benz which was called the five hundred e was a midsized sedan Mercedes didnhave the capacity or didnreally want to do it they felt a said dan it for Mercedes in the portia factory in Zuffan thousand wow in stewguard like who designed it was a Mercedes car so was a Mercedes e class like a regular Mercedes sedan， but with a larger engine and Mercedes felt that having Portia involve would give it some sports car credibility Portia literally produced the car and then Oudy did the exact same thing oudy need more credibility because they were still kind of a fledgling Luxury car brand they wanted to get into the sports around， because thats where a lot of money was being made and so Audi came departure and said can you help us develop a car and was called the rs to when actually hadnt just sold it last year it was a stationway again and that was the conditions under， which portia agreed to build the car they said wed do it but we only compete with our cars as a coupe you know of sports cars， so we both you build the station wagging， which essentially touched off the like highperformance stationwagging thing， which Audi is still known for to this day more than almost any other thing， but portia was so desperate they even allowed Audi to license their name and put it on those cars so the rs two had portia breaks their branded portia the portia logo appears in the badge like the literal emblem on the side of the car portia was just like yeah fine because it literally kept the latest on instagart it its its so when you said， is morgging the brain they were desperate they were li they were completely desperate so when you mentioned like the portal Mercedes benzrelationship that five hundred was an interesting thing because around portia at the time there were a lot of ways that it could go on totally wrong and i went there and i did a factory to her a couple years ago and the guy you gave the tour work there for like 2530 years through this time period and he said that in his mind and in the mind of a lot of portia employees at the time mercedesigns help save porcia Mercedes could have built that car but there are brothers in stuetgartdownthe street were having really tough times heres a project that you can work on the keep the factory workers gone well ah， and it was literally like you have md production lines so even though youre not gonna make a lot of margin on this lets at least like you can be our contract manufacture yeah like when you have union contract i may maybe this was part of the certain that you have union contract get paid these people whatever here youre not gonna make money but like let wedoin it and its something its a project for you keep your lines go instead of going losing money on having to be the well yeah right it was a tougher it was like indescribably tough and i think this is lost on a lot of younger people who have only seen portia in the world of crazy expensive cars and all the money they charged for colors now and all that there was a period where it almost all came to yeah not that long ago not that long ago that is it wasnt like this？
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you will also get a thousand dollars off when you become a paying customer make sure you go to vetadcom flash required so David this thing that dug just referenced to me the money they they charged for colors you can do a thing today where you go to buy a portia and their online configurator and they have the paint from every single portia ever produced in history and so youre like you know there was really something about this particular nine eleven in this year i really loved this paint you can pay them something like 15 dollars for your portia to be in that particularly the library wine yes， its exactly at imagine the portia of the eiders early nines like commanding that kind of it would never have happened but now the brand is changed so much that like fifteen range for a color people are like falling all over the right to do it now why not the other i think that the templematic of which i think we havent really talked about yet o of what makes parties special is this unbelievable heritage like the design language that they use what the nine eleven is you mentioned the earlier they dont really change it that much from you know generation to generation theres this sort of obsession with putsomething out there， and then spend years in years in years tiny little tweaks in refinements making it the like playtonic form of what it can be and theres 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 childhood nine eleven， guess what its still around itstill looks about the same。
its still the same level of designability that you wanted back then its so funny i feel like the sales cycle for a nine eleven is got to be forty or fifty years right， like kids fall in love and then you cant really buy one until your in your forties or fifty so it was always a weird aspect of the brand that like you actually。
werennecessarily 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 wereneven in a an executive or you wereneven working there but like thats part of the brand is like hooking people young and making them feel like this is a cool thing so dog this thing that were talking about this idea that if you love to push a ever we want to deliver on that promise today do you feel like that consistency has been there since the very beginning or do you feel like that something they learned in there like rides from the ashes after this eids thats good question you have to assume they didnt expect you know in nineteen 48 that they would ever even be in the position to deliver that right in nineteen fifties also like！
he said i hadnt quite thought about， but i was planning to tell the story of like oh my god firmen wanted to kill the nine eleven what a dumbidea is like natural they kill right that the natural thing would have been to kill looking back on her its 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 errors OK！
so purchase in this tailspin， the two errors that happened next are both equally amazing so in 1 九九三 i got name vendlin avidacing gets appointed as the ceo now he had actually started his career with portion in the eighties as all this crazy stuff is happening he was like a loud voice of protest against all the you know shoots and um firminara decisions he resigned and left the company they recrued him back in the early nines to take over his head of production and he implements the toyoto production system at portia， which uh they must been like the last automake sure the Wright i dont Ferrari uses the toyoto production system but like this wasnt a new technology at this point in time right remember process bleating cache being more efficient and more profitable in your operations for whatever cars you can sell is pretty important hes like that like the Tim cook of of portia here hegets promoted to see you， whenwhenhe does speaking of apple he kind of pulls a Steve Jobs return like moment he cuts the product lines down to just the nine eleven so this is the right thing that needed to be done but its also can crazy he kills the nine 44968 he kills the nine twenty eight he takes everything back down to just the nine eleven and like analyst people like car you know magazines ask him um whats your strategy for an entry level porsh and he says a portia strategy for an entry level portia is a used portia， such a good line such a good line such a good line so by the 9596 production year， the nine eleven is the only porter model left on the market， which hasnbeen the case since the three fifty six like this is a this is kind of crazy also， what kind of company makes one product like how i mean seriously what are they do they believe that this is a transitionary period or do they believe like this is the longterm stratno its not like we can was like i am a costcutter and i will cost everything down like he is much like he he has big ambitions can big big big ambitions this is a transitionary moment he does want to expand the partial 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 nine eleven enthusiaser 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 nine eleven and so what he does is he says lets take the front end of the nine eleven of the next generation nine eleven， the nine， nine six and use that exact same front end， sameheadlights， same hood， same everything， and then made it with a new entry level， read a back and new to rest the chassy of the car revive the old nine fourteenconcept that was so successful mid engine roadster model with a uh how would you describe the not a convertible yeah？
no， it is it is the master was a full convertible， yeah！
yeah！
yeah！
and in its also important point out the interiors were almost entirely shared as one wow， the interiors were out yeah like the steering wheel and the wheel all the buttons infact if you get into a boxer， which was a two seater car， it has a code hook on the back at the seed because the nine eleven had a code hook on the back of there you cant put a code in the box or the seeds right up against the。
but they shared everything i interesting so dug what youre alluding to this is the porter boxter， which becomes a huge success and i think the reason for it is that it genuinely is to anybody looking at like this is a portia yeah， not that stupid quote the Ferman had of like this is for people who dont want a nine eleven and dont care about our performance this like no， no！
this is a free comportion it shared the design language it shared the design language and i think videkinstought was the the entry level portia has always been looked at as a second class citicent like like his like ferman， literally said， which was true， i mean everybody thought it， but he said it how do we make it not look like a second classes？
something answer is make it look like a nine eleven and make it literally literally share i mean it didnt just look like it literally had the same fenders。
the same you know headlights and hood and also from a production and profitability now relations this is so great youre now sharing so many components not with anotherautomanufacture but with yourself right so dug whats the difference then at this point in time between the nine eleven and the new boxer。
the thinking was that they would continue to move the nine eleven upmarket more expensive， more power so the boxture comes out in 97 for the 97 model year and it was a huge deal i mean it was on the cover of every car magazine the whole portion is a new car this is incredible they did 200 horsepower and the nine eleventof that error had about 300 so was a significant difference plus， the nine eleven was just more of a it was bigger， it was wider， it was faster， you know， it was a more！
it was more of a muscle car is a fair to say that um dan and and i think maybe even especially now with the boxer and the cayman the cayman is the hard top model of the of the boxer its also a different kind of experience。
philosophy and it has overtime it has evolved even more significantly from 97 now the nine eleven is kind of playing more of a Luxury car like touring car role almost were you know what the special colors in the stitching and all that and it seems like the more purchase focused more of its sort of true sports car efforts on those the mid engine cars is they call the boxer in the cayman yes！
its the entry level per so for sure， but its also its not like you feel like crappy if youbuying one， youlike oh you know im buying the best version on the market of this particular product and it was mid engine again so you if it is you know？
arguably it was the correct place for it felt like a true portios sports car for the first time porses you know entry level car felt like that in decades yeah！
so uh vediking has this awesome quote about the strategy for this we didnt want to flee from the competition into higher prices meaning like not be in the entry level market at all he says we dont want to be germinis Ferrari we dont want to be a big fish in upon thats shrinking but rather a growingfish with more roomto move in a larger lake i feel like media king and downcapital would be like brothers in arms yeah like there targeting big markets that is the strategy but theyre targeting them in a portia way so vidiek like i dont know how much this was his thinking all long or that he was just embolden by the success of the boxer he really means it he gets into suvs and this i mean i even is like a teenager at the time i not being that much of a cargo i just remember people in like purchase making an acview of these people lost their freaking minds like who who on earth would by a portia suv also！
i get a say like maybe all cars were kind of ugly in this period but i remember when i look at the first client。
i was like so its like a Toyota it wasnt the most attractive car theres no question about that everybody hated the design language and you know what its been twenty years it has not grown on you know yeah， the Macon looks really good the new the new kinds look great to honestly this ever since they redesign it doesnt live but those early kinds you see em now youre like still likely， it also just doesnt look like a portia to me like theres not enough thats brought through from the heritage of the you describe the back on a nine eleven right that sort of like slapping what happened was the chain was an interesting situation because portia was kind of a first mover they werent exactly Mercedes came out with a SUV first in night for the night 998 Modelur called BM class， which was a that was a revolution and they built in America， which was a really big revolution BMW came out the x five in two thousand， and that was also a revolution the m class mercities never had the sporty pretense that BMW did so that carves just for suburban families the bmw X5 actually had to be sporty and was like oh so not only can lutry brands build as if views but theyre sporty so portia comes out no three i mean theybeat come out the SVT to los seven portia was there like early early， so what the problem was portia had no clue because they were early they had no clue what to do and so i remember at portia talk when i work theyre talking to some of these people about the early clients portia literally didnt know what to offer in a suv to the point where they actually at legitimately asked some of the American employees do we need a offer gun rax as an option for the American market they just didnt they literally they were only building sports cars and they just they had no concept no concept of like what people would want and what the early clients had an optional spare tier on the back like like jeffranglers do like you could get that you but i see him run run in it part of this was a cultural you know German thing for sure but uh like not understanding America but um i dont think anybody understanding i dont think there were any super expensive suvs on the market the only ones were land over but they were focused so far on off roading but part of the reason the Kayen was ugly when it first came out is because portia decided were portia were gonna do a best and so they came out with an scv that is both amazing on road and off road and the early kayons actually have an unbelievable off road capability they have the the two speed transfer case they got highlowgearing off road they have air suspension they can lift them up in lowerum they had all these off road hardware that like you would never put on a luxury performancecv now but because portui didnwhat customers would want they decided to give them everything and so the result was it was a big bulky heavy card carry all this hardware and so it looked the the la this just wasnt it didnt it wasnexecuted 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 wasnanything else that was like a i can spend a hundred thousand dollars on an suv right this was before the days of an escalated even Kayen came out no 3 escalade came out 99 so was it was the escladit 4050 and and they were just at that time they were just tahos that look nice like now esclitis become a real thing but at that time it wasnt portia was really pution into some new territory yeah！
it was a crazy decision and suvis very coming so important in America i think there were just like a lot of wealthy people out there and a lot of status focused people that were like yeah theres an scv i can spend a hundred grand on who hell yeah take my money and also。
let theres a practicality of i kind of need a minivan but i dont want a drive a minivan and so im driving this new emerging class of suv but if i have money， i kind of want the portia version of totally an portia must have been thinking hey！
wegot all these customers who love our sports cars we have this brand name thats always been associated with performance how else can we hook this？
right they have families right and so an in in by the way with those families theyre buying in next five and its like why dont we right yeah and the danger here if youre at home and you didnt know how this ended and youre a smart business person yoube thinking well this is gonna borrow against their brand dec right like this is gonna drain the bucket not add new love to the brand bucket and the magical incredible amazing thing about portia 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 yeah！
it is increased the love for the brand i think is at the same time in just before theyhad given a huge shot the arm back to the performance with the boxer and the nine， nine， nine eleven， and then also done the suv， which they partner with Volkswagen with further name Phash i kind of mixed peace between the two peshes running Volkswagen of the time comes out with the tour egg。
which was Volkswagen s SUV and thats the wthat serve does the basis for the original client really yeah！
portia starts a new whole new production facility in a new part of Germany and leapseg uh to make it and then ultimately shortly thereafter makes this car the courage at the same and you know production facelate thats right they were built in the same place and you know i think that goes back the point you just made that portia the the suvs yes！
youd think you come out with an suv it destroys your brand credibility weve seen this with mozalready come out of all these set hands and not nobody wants one but partial always made sure to be making other cool stuff and a keep coming out with other cool stuff reinvestment the performance like you said and so they used this new factory that kind was built in to also create this supercar and that was important it really showed people hey， they might be making a suv， but theyre also making this， so theyre license are just listing to the audio this is the career gt sitting behind us the career git so we OK weuded to this amazing machine behind us like what is this thing the querity t in my mind is the greatest driving car ever built and a lot of people actually said i i its not objective by any means but a lot of people who have driven you know this and a lot of other cars i feel that way about this car it was a true analogue supercar which means manual transmission theres very few driver aids in this car um like youd get a modern carstability control traction control that sort of stuff is either， noneexisting 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 was developed for formula one racing and then it was evolved to Lamar racing and in neither cases that it ever actually see the late of day they created a formula one engine it didnt work out its a little bit like the original nine eleven engine the fortname ps design for racing， but then only made it into the right it thats 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 roadcar is just not existent like to get a Lama or formula one engine homoligated for road use is just like mind blowing so thats the thats the cool thing and and this car has um it originally came out you know in this era and and was thought of his cool and special on whatever but its legend his sort of grown sensed 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 is kind of the end of the end my senses this car to has a reputation partly because paar walker died in it yesterday unlike how lot of portions in the nine eleven like this is something that you need to be really know what youdoing operate this thing you can it has if you let it get away from you？
itll kill you yeah it has a reputation for being difficult to drive， which i think is somewhat unfounded but also， a especially by modern staners cars get switch from powerful this you know a new audirs three， which is just an audisist highparent audii sedan that you can buy for 6530 dollars faster than this cars here the sixty like its not that crazy by modern standards but at the time it certainly was something yeah um but i guess like today cars like theres so much stuff technology in cars to the key design to keep you from like doing stupid stuff and that this car was kind of the end of that era and i think thats why its so special was like the last of these cars that really you could get into trouble an and Paul walker died in one um and there were some other deaths to that werent quite as high profile but there were some serious um accidents and some people died and um and maybe still well。
you know i dont its itstill out there and its still a dangerous car the weirdest thing about high end cars that have lore associated with them is typically when someone high profile dies at it。
the value goes up right its like a like a hardest its like painings yeah！
i think that car people had always known the car has kind of this reputation they were like lawsuits gets portal portia getsued yeah， when went to Jury trial purchase fund label at least partially label wow， and thats a big tail for your automaker because they got thirteen hundred these out there right very five label production was um and this is the value with a car now like production was initially intended to be higher than yeah ended up being they stopped early and so they had a they had 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 flutting dealerships with them earlier than they expected to the card didnsell well， when it first came out， the sticker price is 40 dollars and they dropped fast you could get them in a way to seven a way you could get them for two fifty all day long and now you can theres they dont exist under million dollars？
its a crazy thing should have all invested in career GTS about apple stock or career GTS career GT will be a lot more fun to oh， that i dont need seven of our whatever right， but it would have they all completely took off wow！
i is funny i thought that this year was gonna be a fun little digression about the career 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 cache back in the bank of the brand equity yeah！
um and to do it on the same production line and it also had that effect it also helplogitimize that facility because up until that point except the ones built in Austria， all the purchase had been built in stucketin Zeus in that factory， thats same factory for all these years and so this car helps legitimize like oh we might be making a factory in these Germany were building suvs but were not string too far were 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 louvaton first started coming out with the more approachable wallets and clutches and ways that you could tiptowin to participating in the brand story they were also releasing dollar two hundred thousand dollar special handbags that were new products or new collaborations with other designers that sort of told you know， were still louisaton， we all we just have this other way to be a part of our brain right？
right and portray would going to do it again what some should talk about shortly？
oh， yes！
so on the back of this like incredibly bold plan and turn around and success by vedicate i mean he becomes a legend and portia goes from deaths door less than 4 hundred million yearl market cap when he takes over two by two thousand market cap is 32 billion Euros crazy the better investment then a career GT in fact。
so they never had to have any like help once they scrape that bottom of whatever was 4 hundred million dollar market cap no portion is saved it will it will be independent forever。
families will never have to sell that equity research analyst can eat his words。
not quite uh theres another tap to the story so thats a hundredex market cap growth that right， did you say three hundred million to thirty two billion？
yes， that is a hundredex market cap growth in a decade occasionally there are these hundredbaggers available on the public markets and like you only know about them looking backwards but like its crazy you dont have to be an earlystaged venture capitalist to find these they exist else sport of all things of all things oh！
i suspect in most these cases though to take advantage of it you would have kind of been insane like two of investor at that point even that told a person in nineteen 93 he this guys coming in hes gonna kill the entry level stuff go back to doing entry level stuff and then do an suv you feel like uh how do i get out of this stack like where do i think he was the fourth ceo or whatever it would did i dont want me any part clutting its straws it would seem but uh its like buying Amazon in two thousand one or two when things look the absolute blecust like thats how you could have got in a hundred backer on the public market i maybe even wasnat this point but like come on who would have actually done that yeah and of the thirty two billion Euromarket cap its not crazy because by this time， Portia is doing almost two billion Euros year in operating profit turns out these suvs and making only supercars uh is a very profitable lot of merge in there and China was starting to take off at this time to so the final sort of chapter to the vehiking era on the product production side was the panamera the Sedan portia makes a sedan now docum curious your thoughts on the pinamera i had always been portion weird it looks kind of weird um i think from doing the research now i think it large part of the intention of it was to really target the China market and it became successful globally to but i think the Panama and the Kayen to really helps porch a enter China question looking back that has become especially true as portions business and all Luxury brands business grown in Asia at the time that i think they just they had an suv they had done that so was like all right you know sedayan is the next the next place we want to compete lets lets replicate the success we had in the suv and what you think changed in the corporate side he 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 have a pull a full product suite just like everyone else probably that hundredx uh growth dont you think i mean i think they look at it and said holy crap box your media ton of money came and came and it made us a ton of money client showed up a media ton of money we got cache lets like go after you know the Mercedes class and the bmw seven series the big Luxury cidance from their German rivals because they knew there was profit there and they could do it better like they had done with the client and honestly 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 nively following along you might think and then they got too big for their bridges and you know right they expanded the product strategy too much in the brand came crashing like no， no no like this works uh yeah it work to beautifully um just ultimately a under different ownership so lets talk about what weve been alluding to all episode here the German tax regime still is not very favorable to distributing profits just the corporate tax rate alone disincentivises uh spinning offcash flow and incentivises reinvesting at this point undervediking purchase doing everything they possibly can to reinvest in new models， new lines like theybuilding a new production facility what were could they do internally with all the money？
theyre making they cant do anything so they start looking around for other places to put the cache now at the time there were rumors circulating in the audio industry that vokeswaagin had there i on veking and they were looking to recruit him to be the successor to ferden and yes were now and work the first time to hold together the right best guy over at push over lets do again so i think uh fordnampash took over a co of the whole VW group i believe in the same year the vtoking became ceo of portia in 193， fortnans obviously much older coming towards the sort of twelve years of his career you can see how this would make sense if it were trip whether its true or not ive sure vita can get srooms of it Vikings really you do can feel themselves here at forceright like hes a hard to imagine a better run he gets the idea he kind has like a sort of just intimble like social network moment of you know million dollars is in cool you ability you know whatcool billing dollar being a ceo of Volkswagen isncool you know what would be cool if we are partia， but vokesoagain ive become the ceo of VW group when i buy you uh remember though Fernameps is chairman and ceo of Volkswagen group hes also a ps hes also on the supervise reboard of portia because hes also a key member of the family that owns portia yeah！
the sitting active ceo of Volkswagen as a family member of the porshop ps family has voting shares in portia yes！
and is on the board the supermisereboard of porcia so uh they thought they were done with the family drama here its a turns out theres， theres another chapter so isnt obvious then that it would be hard for portia to take over Volkswagen well portia and does the families needed something to do with the cache and at the time when they start this vw shares are a pretty good investment like theyre not trading super highly like its pretty clear to them that its undervalued and vw is a critical partner to portion， so i believe certainly， certainly to the public and probably also to the family is vtheking positions this is like hey were deepening the partnership uh they dont announce like hey im trying to take over vw you know how to i see the porshop September two thousand spans four billion dollars to acquire twenty percent of the vgroup on the open market uh is kind of oh creeping takeovervives a uelated to in the interop at this point Vita king and purchase CFO joins the Volkswagen board and then they keep buying shares but using another patented Bernard Arno technique they do it mostly using various derivatives and options contracks so theyre buying like the rights to buy shares in the future and thats usually ways to get around regulatory stuff right like then your not exceeding caps if youre buying derivedos rather than the shares themselves yes and in VWS case in particular there was actually a law in on the books in German law， called the volkswag in law oh！
yeah！
this is great that was designed to prevent a takeover of vw， because the state of lower saxany still own the twenty percent share in vokewai install those to this day and it was considered sort of a national treasure and they didnt want it to be taken over by corporate raiders they didnt envision that it would be another German auto company that would try to take it over。
so it was impossible for a an actual direct takeover to happen im literally gonna read from the Wikipedia here because the Wikipedia is extremely well written under the Folkswagen law no shareholder in Folkswagen。
ag could exercise more than 20 percent of the firms voting writes regardless of their level of stockholding this law was supposed to protect the Volkswagen group from takeovers in October 2005 PORTIA acquiredin 18 point 53 percent stake in the business and enjoy 206 PORTIA increase that ownership to more than 25 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 a legal under new eu regulations in two thousand vedican creates a new separately publidholding company for the families ownership of portia， so its theystill the portia operating company， the old doctor engineer ag ag operating company theres now a new holding company that owns a hundred percent of the operating company and the vw shares that theyve been acquiring then this is portia se porchase， portia se holding and heres where things start to go arrive vdiking starts loading up the holding company with debt with cheapdebt in 207 to go by more vshares on the market ultimate a ten billion dollars of debt that he puts on this holding company hes got fordinn pH signing off on this right like why would psh go along with this i think the best is i could figure out is that ps was not happy with the thancurrent ceo of oxy again and was looking for a way to get his firstsuccessor out so he clearly he was trying to recruit vdiking to， so like he was benefiting from this to right yeah he was gonna have his cake needed to i get right when tells you lose yeah， so as purchase buying all these vw shares on the market with the debt that theyre loading up on the holding company the float of vw shares that are actually available on the market starts trinking precipiously， because remember the German state of lower saxneys still holds twenty percent Portia now owns more than 50 percent because they had kept buying after that twenty five percent using all the cheapdebt and they got all the way up to fifty percent right， so that only leaves thirty percent left then yougot all the insiders like you know phash and everybody else like who knows how much equity they hold plus maybe some longterm holders are funds that arena sell the amount of vw shares trading hands on the open market shrinkstopretty closeto zero we know that you know markets are supply in demand and just like this car sitting behind us if theres not a lot of supply available prices are gonna go up didnt they go ups so much that Volkswagen like briefly became the most valuable company by market cap in the world yesterday so as all of this is happening leem Brothers collapse， which this is you know this is the black swan event the vediking couldn of predicted like hes not dumb he knew he was taking risks here but like yeah， seleven brothers， collasses and its crazy what happens so during the week after the collapse in October 20， thats when Volkswagen group becomes， the most valuable company in the world headfunds have been shorting volkswag and you get a shortsqueeze that happens and the stock just goes through the roof clears all the demand for borrowing the shares to do the shark selling so you would think that this is like the best thing thatever happened departion and be the king they now own more than 50 percent of the most valuable company in the url theyre invincible i believe the threshold that they needed to get to with 75 percent in order to consolidate vws financials into partia and today it announce that their intention was to buy up to that threshold or to get there so you think this is great， but this is terrible this is the undoing of portia and vediking because theyve got this debt leeminds just happened so like clearly theyre not going to be able to refinance any of that and yes， vw shared prices in the stratisphere， but its not sustainable because if portia were to start to sell any of their shares， which theyre gonna have to service the debt really soon the sharepriceis gonna completely creator because like this is this is like an artificial price is just because of the short squets that its that high so portion now is like completely traft they cant sell to service the debt because then the shared price will creator they cant buy because they cant take out anymore debt uh so theys kind of like stuck in stasis at this point in time why cant they sell？
because if they sell， they get a bunch， a cache by not liquidating that many shares because its so valuable theyre not going to be able to sell that many shares that this price before the the price crashes right so they basically cant get whos gonna be buying lemon just happened right wow！
fascinating so at this point yes。
Ford name good old Ford name who hasnt moved a single piece on the chest board no！
he is just watching hes on the portia board and he is still chairman of the vw board hes no longer co but hestill chairman of vw this is when he turns on vehiking so he and volkswaigan announce publicly to the market that they no longer believe that portia is a financially viable entity！
as a deep trusted partner yeah！
as we believe and uh they say that they have to say this because portia is agreedo them fifty percent you know owner of vw and so they you know have to disclose this the market um and that is a result of this execution ary circumstance vw lead by fordnan is willing to be allowed their partner portia and save them by purchasing the portia operating company for yeah！
the neighborhood of three to four billion euros to you know get them out of this predicomment wait and then just to unpack the statement a little bit more what hes basically saying at it to like make it more explicit is a key partner of ours went so deeply into that to try buying our shares yes， that they cant service that debt and are now about to be insolvent and defaults on loans yeah， so therefore， we will help them out by what is it buying them for they they floated a price of three to four billion years！
which remember like a couple months ago this company was trading at ten extat wow！
this is literally fordnand saying to vea king if you come at the king！
you thats not miss this exactly what is going on yeah wow， indeed so theres a whole flry of negotiations you know this is all against the backdrop of a being October two thousand eight yeah within a few months by January 2009， vdikingis gone as co of parties supposedly when he exits the building he exits to a standingovation from portia， please， which i would he kind of deserves even though like all of this craziness he did go abridge too far like he did save the company vw does end up buying portia the operating company in two trunches over three years they by fifty percent up front three years leader in twenty eleven um they complete the purchase it ends up being about eight and a half billion Euros total so between that openingvolity of three to four and the thirty two thirty two it lands at eight and a half whats even crazier about this？
the undisputed hands down you know home run winner in everything is of course， the portia mph families and Ferdinand they emerge as the largest shareholders the families personally in vwgroup so portia se this new holding company they created it was buying VW shares yep rd owned fifty percent of VW and then vw paid eight and a half billion dollars to buy portia so the families own fifty percent of vw and they just got eaten half billion dollars for portia， so they already were pretty high up there in the rankings， but after this transaction， they are now in the top call it 15 wealthiest families in the world oh！
my god so posts both trunches uh after portia ag the operating company is fully owned by vw what does the family own thirty two percent of the vwgroup？
which remember now also own sport？
but they have over fifty percent of the voting power so they control vw group its so crazy vw the company but portia the company but really portia the family owns it all！
owns it all and they just got an eight and a half billion dollar cache out wow！
yeah！
crazy so heres the thing now for now in 2011 when the second ranch of the byout happens， um did work deep in the grave nantial crisis and the resession um porcie the business its fine the drama is all around portionthe headfund you know and the financial shananigans um and the families the actual operating business the cars sales are fine portia has one downsales year， only one during the financial crisis um and then everything else is is up a big part of that is the investment in China， uh and China starts really really growing through the early twenty tens Forportia also， this is when they come out with the nine eighteen spider， um their next supercar at this moment in time， theres all this oh purchase now owned by vw and consternation they like yeah， we can still make the best cars in the world yeah！
and the nine eighteen help to introduce um black plugin hybrid technology which portion knew it would be going in that direction and so the nineteen was like and not like example， we were talking about before of how they like covered the cayen with the querity t by saying westill doing this the nine eighteen helpthem say hey were gonna make Hybrids which is viewed is this like she you know like little car the prised site you think of well heres the Hybrid and were gonna do Hybrids but were gonna start top down with this crazy crazy supercard talk about supercars for minute because i think its important understand like they dont always make a supercar right right its like a once then every ten or fifteen years cycle theymaking one but its a very yeah its a rare and special thing that they do it and it seems to be they do it only to can approve something， approve a technology like the nine five nine was all wheel drive and this car was kind of this new production facility and and the nine eighteen was the plugin hybrid technology and how many years today make them for when they decide theyre gonna do its a short model run so this car they made twelve hundred and 70 considered a lot for a supercar than i eighteen they only made nine hundred eightunits and in fact that was considered a lot for a supercar its biggest rivals at the time， which were the mclearent p one in the lauferrori they didncombine to make nine hundred eighteen of those wow！
but the the nine eighteentspider is what a two million dollar car these days yeah！
it was it was new was like nine nine nine hundred or so maybe a million after you get a bunch of stuff and its double done well all the supercars are done well well！
ill bet im sure youtalk about this in a minute but um portia is the master just of like you there is a base price but youre not Gonna spend the base price youre gonna spend like forty percent more than the but even at even if you figure it。
the base price was like nine hundred grand they made 98 do you do the math doing a supercar as real money to be made fairly quickly as opposed to a cayan thats a long tail and you make him over a long time to spread out the cost on them yeah and so this supercars was a plugin Hybrid i dont think i ever knew that all all supercars are now but the nine eighteen Spider was portia saying were gonna go into this plugin world cause they knew what was coming up women will get a second with a tykon but they knew what was coming out the hybrids and electric cars were gonna be a thing whats so instead of introducing that with a with a suv for example， which is where the they should have right because thats what the market want， said they said not were going to do the supercar and show people were gonna？
do it？
we can do a well and then well trickle it down what did the car world think of that its important to keep in mind the nineteen spider being a plugin hybrid it had a electric component， but it also still had a massive v8 in it that had a zillion horse power scream in on that you know and it was the same with the lawferarion， the McLaren p one they still had massive engines also， so it was fine it what the the next crop of a of supercars will probably be full electric and so that transition i think is gonna be more controversial the interesting thing that settings seems to be setting portia part now there is that theyre standing behind it ferarias already said that the technologies old all the plugin stuff we want to be any part of the left Ferrari and so like no ones really sure how thats gonna age those are gonna be orphaned cards exactly orfinds multimillion dollar cards yes， exactly its scary situation if you own that car and the batteries gone you are not today you go to the supplier the porch has always been bigaboutstanding behind the cars in part to preserve resell the ion to make sure that owners of the next supercar know that theyd be protected and so like this car is already years old all the part is still available like oh thats the smart brand thing it is the spark branding to do but its not easy like if you really think about it for plus for art。
they dont need to they dont care they can make the next fun the next one like that the keep finding rich people they only make what thirteen thousandcars year at Ferrari yeah！
its a small operation so like Frei just its still dont really care about their customer solat what whats the rule of luxury dominate your customer Ferrari was owned by somebody at some point theyre right yeah， theyre all these oh， god feraries a story that is a crazy one also， but the feat group eventually had stepped in Kazenzo had just driven the company to but in his pursuit of racing had like driven the company into finance。
it wasnt his pursued of video derivatives like oh！
no， its quite different it was actually very Italian thing versus the pursuit drums kind of a very German thing yeah， but um yeah that was a real bad situation， also none of those companies are independent anymore， so its 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 work that well for porshop， because um， it would have been difficult to get portier to kind of work on the corporate average field economy standards because the other cars are kind of an efficient， but because theyre under the volkswagan umbrella。
you can kind of get that wholespread and it works a little bit easier our sponsorfor this episode is a brand new one for us stat seg so many of you reached out to them after hearing their ceo vj on ack two that we are partnering with them as a sponsor of acquired yeah for those of you who havent listenedbjstory is amazing beforefoundingstativj spent 10 offacebook where he lead the development of their mobile app ad product， which as you all know went on to become a huge part of their business he also had a front row seat to all of the incredible product engineering tools that let Facebook continuously experiment and roll out product features to billions of users around the world yep。
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OK look great， so this is perfect to to wrap up on the the history of portia here um as part of the vw group they come out with the Macon， which is a huge success yeah！
both in the America and China and this is the mini compact suv right the kind is the midsize and the Macon is the compact OK exactly and a lot of Volkswag and stuff shared with all these cars engines are shared across tons of model lines now， yeah！
engers， which is such a departure for a portal。
but thats right its expo for an engineering company to doing this kind of secretly but the engine in the Cayenne Turbo， which is the best chain is in the Lamborgini urus at Italian car the Bently Bentega？
a British co but Volkswagan owns all of these its in the audirs 6 in the audsq 7 its like its everything is now just spread across all these brands is a little bit echos of our our lucky Mart episode that we just did the heritage of the great airplanes the great sources is this independent and your engineering small team culture but to operate today with yeah then the content you have to be part of this so the maccounts make hit um and then we just alluded to it with the the tyke and the missionhe is the concept uh that they introduce in 2015 so like yeah！
pretty early i guess the the Tesla model s came out twenty thirteen twelve two thousand model year supporter was pretty early with the the concept for mission a year yeah， not everybody was sure that was gonna catch on electric vex i dont know！
i dont know！
i dont know a lot of people were slow as a result yeah！
um！
in fact like entire Nations were like Japan as five years behind everyone in electrics its the weirdest thing its 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 but Toyota just started came out the first electric car like yesterday like im not excited hes like eight weeks ago why we got a talk about that another day on acquiredlike how did that happen i mean they were the how did that they were the four front of hybrids totally the prius that would they invented all another like i like i dont know theystolic waiting and seeing how electric wild so the takeon comes out its a very phenomenal car like i think people are a little unsure at first， but then its super well received within like three years yeah no its it is its been well received it drives like a portal？
which i think was everybodys fear about an electric car that yous the engine soundyoulose the field of it but the tikon does indeed drive like a portia 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 missiony and that was in fifteen insights were still a big part of the market but most brands now that are coming out with electric cars is their first car or coming out with sevs you look at rivian purecv and truck commerez the all theres a ton um but i think portray made a mistake yeah！
but relative to the other traditional auto manufacturers 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 no continued theres the electric macon is coming soon so they say and so itll be fine umm and i can i mean one could argue that portion needs to come out with an electric sporty car first because they need if you come out the electric you visits your first one its like a they have no plans for electric nine eleven right， i mean thats what sure would have they would tell you if you ask them thats what they would say but lets be honest here like it its the future is electric there will be electric of versions of all these cars and probably within are not so distant lifetimes they will be purely electric interesting thing about the tykon so you mentioned the next supercar will be on all electric one i havent driven in a tikon i have watched videos of people driving it im like what do you what else do you need to do to make this a supercar you know the thing about electric cards they all can accelerate incredibly well， and thats like insight and tyconis faster than this is fasterthan everything it does year sixth like two seconds but it was isnt also like tune to drive like a track car where your fifteentthap is gonna be just as performance as your first yeah and so its beneficialnot to but at the end of the day A4 door car especially one thats 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 years they will come out with a the next supercar， which will be you know look like this and theyll only make a thousand and itll cost two million dollars and it will be fully electric into ser to sixty and one and a half seconds and even more yeah what did what did the performance characteristics of the next generation of supercars can look like like what do you humans can go yeah i sixty and 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 cars now mind that fast by modern standard， 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 card dropped off the other day a key AEV6GT， which is the electric key across over it is sized and designer compete with like the Toyota rav for OK， but this is the highperformance version does Zerda sixteenth like three point two seconds is fastric so yeah like what is a supercar？
even mean anymore like ultimately like what is it offer that a key at EV6C for by the way fifty one thousand dollars well does not offer and the answer just has to be like its lower， its wider so it can it handles better i mean thats one of the big missing things from a lot of these fast accelerating electric cars is the theyre not necessarily like sports cars really theyre fast， but theyre not really sports cars and so i guess thats gonna kind of be the future but youright power is being democratized everyone can now access a car that does your sixth in three seconds right and so i dont know its itbe interesting to see how the sports carresponse well？
so that brings us to today um when or or it is more accurately last fall September twenty twenty two when um vw group Reipo uh portion the portia Reipo is the largest European IPO of all time the initial market cap of portia at trading was about 75 billion dollars today thats up to about a hundred billion dollars call it nine months later as the investment bankers would say like theres a lot of value unlocked by making this its own company。
which i think is legitimate i think theres an element to being able to own one of the premiere luxury companies in the world without having to cominglet with a bunch of other stuff and so， like all shareholders of portia can purely just be shareholders of portia and you when you look at the financials and you understand like OK， they have incredible margins relative to you look at the rest of vws portal and fine its interesting！
though like the dug to your point operationally， though you can no longer extricate these right companies so you can financially extricate them but portedly？
but even then how do you？
how do you？
if financial extrcate like development cost for power training thats used in multiple vehicles or platform， i mean the type i mission theres now diversion of a ti of the TikTok call the etron GT how do you you know？
sol its all intermingle so yeah if its not actually operationally any different， then you do have this questionre 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 its interesting livexin？
carlivixin， who row excellence was expected he published a new addition of it last year and in the forward to it， he said the reason i did it now is that the old indepenportion is is is done like this？
this is a completely different company now and i can fully put a bow yeah yeah that original purchase so even though there was a reipo of portia its never gonna be the same old independent partia yeah and by the way you can choose to buy portia ag the independent spin out of uh vw or you can also on the stock market go and by portia se the i didnrealize that thats still on the market so uh some other interesting things about portia today the family as we mentioned is complete control both of vw and portia so when some ways its still， the same old portia even though its all commingled um here is the sort of nail in the coffee or my opinion argument on is it a separate company or not oliverbloom is both the current ceo of VW group and portia yeah， we share production facilities and you share distribution and you share a ceo and you share components and you like at what point and what where are these separate companies right？
i guess medika was right he was right in everything that he was doing he just um he didnwin the game of throwns 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 theres a good amount of it that comes from the takean to so the night eleven as sort of grown slowly over time the 七八 thats the boxture Cayenne not a lot of revenue coming from that yeah thats sits worst cars sales just slow yes is not the same！
but it helps give them more legitimacy yes！
and the Panamera does have pretty decent sales but still nothing compared to the Monster that is the the suvs yeah when you look at where theyre sold this is quite interesting China is as portia would account for it theyre largest market but the reason that i put that copy out in there because is it 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 germinwould like Germany is ten percent and rest of Europe excluding Germany is 23 percent so you know its all of Europe together would be bigger than China。
but Germans one of the interesting things is you know the Chinese only by fordoors they only want four door cars theres almost note because thereno hair did portal in China its a Luxury good its a its a cool brand that cells scvs and theres a lot of show for driven vehicles there and so like they dont they italmost none has sports sports car sales in China well hard to believe but we think of course such a sports car brands like part of the ethoseof it theyre just like a client right wow！
yeah， i mean it were used to it now but i remember the first time i seen portia sevis is like well thats this sports carbrand this is weird right， but for them they never have the sports carbrand so its just like normal crazy North America is very close to China as 24 percent in terms of sales than the rest the world about 16 percent so interesting thing when you start to look at both the amount of cards that they make now cause its huge and the margin structure associated with that， so last quarter they delivered eighty thousand cars and thats growing about twenty percent year over years， so that order they delivery those wow so two last year they delivered about three hundred and fifty thousand cars man so this really is a scale organization at this point， this is not Ferrari， this is not lamborgini these are massmanufactured vehicles and i know they would say over not a mass market thing， which is true in some ways when you se your average selling prices hundred and ten thousand dollars， but like ifyoumaking 三五零 ofsomething at the massmarket brand yes！
it is i i compared the brand to roll exearlier i think from a brand perception thats true but from the operations of the company really is its blue if a totton like they make a Lily 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 live at on Ferrari is ermez yeah！
and i think that this whole time i at well researching i oh， i just had this like broken thing in my brain where i was like how how do they make so much stuff when there airmeads and theyre not airmes yeah， they were once airmes but as soon as they started making the suvs thats 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 a such a high end brand its almost like the suvs have managed like get under the radar of the people who by the sports cars the sports cars have this still have this elevated viewpoint even though you can actually go to a porter dealer and leave some acon for i dont know seven fifty a month whatever it you know 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 portia is in a much different class than bmw or mercds bends in terms of the sort of um hoy tweetness associated with it when you get to drive it， you get to own one and i i think that that clearly shows and the question is if they made ten times as many portions， would we all feel the same way that oh， its just a bmw probably like there there should be a inverse relationship between scale and brand perception， but they have managed to find this like mismatch or like to your point 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 get what it was if it if a double the gain like you its interesting about bmw because if you think about if you saw porches as often as you saw bmw is what it be special across the answer is now so what do you think the average selling price for ferrarias across all there to fifty three thirty oh， thats insane that is insane three axes three exportions say s reexportion how many far as are made every year 啊 13S35YES its so funny because the enthusiast world is often a are you a portia person or Ferra person like theyre not really right these are two very different beats yeah and its fair to be like are you a nine Eleven plus supercar person for a forary person but the rest of portia shares the name portia but is a completely different thing right yeah there nowhere near each other its almost like portia should go get even more aggregate market cap by like spinning out just there like hypercar there and i the nine elevens yeah like just the view stock ticker is p nine eleven is it really yeah yeah in Germany 哈 man thats crazy far is three thirty average selling price three and thirty thousand three thirty its interesting right like i mean youre dug the miro um you own a courage you dont own a macon yeah well？
yeah i mean i i uh but theyre cool i mean i would get when i recommend to a lot of people but i thats a good point like i havent went and got a portia sav trueefully the reason is ridiculous i i dont want to drive like things of that name brand like on a day like my wife would never be seen in a like a portia normal you know do you know i mean its the funniest thing because um one of our David myclosesfriends drives a Portia Macan and his wife drives an outi oh！
this is totally different thing this is something very different about who i am ha， she was driving his car the other day and she was like i hate being seen or that you dont want to be driving around 75 thousand hour portia and yet this thing that you have ridiculous i know its its interesting point i never really consider that i just i i like to be casual for my normal cars also。
i think that like having the portia suv is kind of like a its almost more in your face than this like if you want us， we are kind of sewer if you have a sports car if you maybe suv。
its like match that could be the i love them by the way theyre awesome cars i just not for me right its like getting um like the masters logo employeered on your dolphlubs you know its like o OK like i know you dont play in the masters but like 我 OK？
its cool right its it thats exactly how i look at it like OK！
its thats fine but i start im gonna stay kind of looky in my normal life what do you think i drive 啊 its got a model free thats a good guess thats a David drives and lets try what i would i must see x five oh！
yeah okay， yeah， those are good cars the Portia Macon of the exstream cars that is the Japanese portia Macon if you ask my colleague， they would say that but i think it just is a normal but i like them theyre good i recommend those to people to uh OK？
some more uh back to porshop uh is a a couple other interesting observations just for listeners trying to keep track of home like what the profiles of these businesses look like i was think growth margin is an interesting place to look to understand the strength of a brand because its basically showing like what can you mark up over your cost of good soul and sell it to people and still have them swallow that price right BMW as we mentioned ten times， more units of BMW sold than portions are down at 17 percent in terms of growth margin， so they they really arnt marking up much above their cost of goods in order to um ship those cars uh Mercedes a little bit better at 23 percent portia is at 29 percent so about fifty percent higher than bmw Ferrari is 48 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 um im just like so assunish by thats an unbelievable amount of money when you really think about it for thirteen thousand cars here and to put another way because lets round 48 percent uh to fifty percent if you fifty percent growth margins it means you go by a bunch of stuff you assemble it and then whatever it costs you you at to sell it to the customer！
apple Carplay as an option in there cars i am dead serious like heed seats are like 80 box extran for us 哼！
you get the idea yeah up for the options lets look crazy so switching gears but stay on growth margins and can David you brought a lvmatcher earlier LV matches， growth margins， sixty percent？
it turns out you can mark up leather way more than you can mark up cars interesting like at some point there there is some sensitivity to like you cant just make every Ferrari cost 800 dollars because like theres so much real hard costs yeah in cars， theyre just not in other luxury goods and so you have this opportunity to carbon fibrate deep unbelievable price premiums in all the stuff lvchoans if you can touch it uh if it if it feels good on your hands or it looks good your eyes or it smells nice youve the opportunity to market up way more than sitting in something that is going to threllyou how interesting this is really interesting trying to understand which of these businesses youd sort of rather own and growth margin is in everything， but it is amazing that lvme h is truly a league of their own on on growth margins yeah！
going into doing this episode i sort of wondered in the back of my mind has Bernard are no nlvia match ever made a run at any of these yeah Luxury auto companies and if they have not maybe， this is the reason why like theys in a better business yeah！
it hard busines its a lot of stuff its a lot of sense its a， its a， its a different business， a lot and it distributionsorter yes！
and it takes a really special type of person and an team to run it i mean its its engineering and art whereas theres not engineering in anything that lvme zones i mean that ive sure theres people who work there whos title or engineer but its cri i know its craft yeah！
its its craftmen percent thats a yeah so if i were to guess。
i would say maybe Bernard or no his kick the tires on like ferrara lambergeni， but more on like licensing agreements than trying to own those businesses cause i just dont think it actually works into the rest of the flywheel on the same way like you get out get a owner factory that makes these cars you get to do all the r and d plus skilabilities harder and you alluded to the dealerships and the distribution distributionsared your shipping stuff on giant boys all the way across the world on that should talk power movement talk power yeah so for any listeners who are new and based on the locky episode a lot a lot of listeners are new there uh is a sectionally due called power， which is a way that we try to figure out？
uh what enables of 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 youre 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 portia having better growth margins than bmw or mercities， but not as good as far i couldnt make the number of cars that portia doesnmaintain those margins， so thats not really a fair like direct comparison in terms of who there right， who there competitor is， but bmw also makes ten times more cars， so that may not also be the right comparison and this i think is an an interesting point， which is purchased kind of an alleged of their own in making the number of cards that they do its 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 SUV is anyway！
that Ferrari cant i think youright that scale economies enable them to be in the suv business。
which has great margins yep and thats a that thats a thing that you would need to have all these deep partnerships with other other car brands in order to do that or so it doesnt by one yeah i think that is a differentating factor against Ferrari but obviously lot of other carbranser in the suv right business the heritage is obviously an enormous factor the brand the brand is the obvious big is the yeah the big one i suspect that the German engineering thing also plays a role like i think not not against bmw Mercedes bends but certainly against like the Japanese im sure there are margins are much much than the accurors and allexes of the world and they even know the look when you really look at it on paper it doesnmake sense theres 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 okay this cars are simply built better at Europeas German you know and does that i think for a long time that expressed itself in reliability of purchase relative to other Luxury car manufacturers today is that as much is reliability as much an advantage for purchase it wasnt pass so the reliability is still excellent， supposedly based on the jd power studies not add now the question of whether its actually important for people making decisions by the carsm not so sure how many those sev customers are leasing and dont really care things days reliable i dont know um！
but there is some component of just like quality that you just feel i mean its certainly true so you get a bmw Mercedes Benz just not as nice its not the sign like did it you have this field its its its certainly more special theres a specialist hmm OK so moving through them branding yes obviously like especially if youre trying to enter any space and compete with a luxury brand uh you dont have the heritage theres just no way that you have the the seventy five years of people believing in your brand and thiswilling to pay extra margin dollars for it so thats the obvious one and you can you canmanufacture it either no like there theres there are finding anymore brand heritage automotive brands right they are theys 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 portui was getting started yeah！
but there will be another racing like theres another thing i think thats thats my object to think that like seventy five years from now， people wont obsessively care that some new brand was forged in the twenty 20 that had some others in a sequel about it thats like the equivalent of racing versus production cars you could imagine that some point Tesla is a heritage brand feeling we like there was a crazy eccentric founder yeah？
no i agree with that， but it will take yeah as many decades as you think， and itll have to be for something else that we cant be forracing like is something else real related to the cars right it would have to be for something else something said performances a commodity now the Koreans have been around for twenty five years and theres no like emotional attachment any of those cars even the older ones no！
no no hmm brand is it brand scale economy is enabling the suv line i think that was a good one theres not really counter positioning i dont think there was in the younger days especially the racing younger days， especially with the aggression of purchase advertising push ads have been some of the most iconic just brand advertising of all time and they were branch the reason its counter positioning is because a lot of car like very high and cars would never dream of showing their brand and such a grid way and giving their brand voice such a yeah risky deposition im thinking of two in particular da well the most things one of courses the nine nine threeturbo the original read nine nine threeturbo that was like the thing for deckets the famous one was kills bugs fast yeah thats it everybody your members so good！
so good the other one um that im thinking of is nobodys perfect my yeah that is great i had one for my nine and sixturtle that i under nine eleven years ago i had a framed and it said calling it transportation is like calling sex reproduction the yeah， which is a great example of no other luxury brand would no way we touch that yeah！
but that yeah i loved uh David， i the same favorite one of nobodys perfect because what they did is the bulk of the ad when you look vertically down， is the top ten winners at lamma and porch has nine of the ten and it just portal porshop！
porshop！
porshop portal like number so good yeah right modest counter positioning， but not really anymore um switching cost i actually dont think there are switching costs in the car industry i think this is really interesting thing were like uh dug youre gonna have my car before the Mozda cx five was a Honda crv and like i i like i completely reevaluated with flat with fresh eyes there was nothing about being a part of that old ego system that carried for to the new ego system unlike apple where dialed in every yeah！
yeah more lesson that is this gonna become less too i suspect with all the tech thats in cars but uh yeah i agree up until this point it certainly has a better thing yup theres no network economies theres like really no benefit to you own a portia therefore！
i own a portia and i get value out of you own inga portia but not particularly a thing other i can like go to Carson coffee together right uh process power this is probably where i would slot German engineering uh of all the things that weve talked about and then the last one corner resource i dont think theres a particularly corner resource here its not like the the square footage in student garth they own is like some magical thing yeah， so alright that does it for power playbook weve talked a lot of playbook along the way。
but im curious for ones that jumped out of you that we uh we havenhit yet yeah i know we just talked about it a a bit but um for me the racing thing is interesting even though we didnt spend that much time on the details of it throughout the history i dont know that weve covered any other companies where there is this kind of like a json activity to the core um business of the company that had so much to the brand value and is worth investing in i just trying to think of theres anything else like this but uh i mean yeah has invested billions in racing in all source of racing， but its not like theres like a software competitions out there right or you could enter your software into like right build your brand prestige yeah right thats right thats interesting point are there any other companies that do things like that or industries that have like a showcase right like a very expensive showcase where you have to go build a completely different product line or you know what uh is like this is the athletic apparel industry um and Nike yeah like they spend yeah all of their marketing budget on applets one of the biggest ones that jumps out for me is the brand continuity this idea that if you love anything！
weve ever done we should be able to fulfill that dream for you today and not with the exact same thing necessarily like were not gonna sell you the exact model that role off align in 1977 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 were gonna find all these interesting ways to provide you fan service its almost like going and watching the new star wars movies where if you like the original films， even though these arent like the highest like Ra， highest grade， directing and writing in the world like we are delivering all sorts of fan service moments to you and im not saying that like purchase not making the best cars the world they make some of the best cars the world but they also provide all these opportunities for fan service its worth a huge multiple of what you invest in it if you can align everything correctly right？
it gets back to the 4050 year sales cycle with this two right everybody dreams i mean its your your whole life you dream my group dreaming of owning a portia， which is a again kind of funny as we talk about the suvs and the volume they do your little girl or boy you dont dream a cayan like it like feed kids kids are getting dropped off in those at school is kind of my point but you do dream of a portia even though whats the same thing right you dug you talk about this when you work it portia a decay to go and you were much younger like they didnt pay you much but you got to drive a nine eleven and that was like the cool is freaking and everybody you wanted to work that we get right on solicid resumes all the time by like pay wasngreat and but like yeah you it had that name you know you work for partia thats so cool and just being a part of it and then he i having the car was the huge deal i love it all right well grading feels a little bit out on this episode and we killed grading but we do have dog to mirror with us so we are going to give portia a dog score and its an acquiredijusted dogs for its a you know we cant grade the entire company on handling so we got to figure out some categories that we can uh evaluate them on as a i dont know that there are any we can categories for business business alright？
so David what what criteries so we we acquiredadjust a dugscore we simplified this down to um to to just three categories for the acquireddugscore um revenue growth！
profitability and defensibility like would you want to own portia as a stock uh and i think those are the three components sort of closing your eyes to where they are trading today because you always have to like a valuate entry price and all that but like yes or are you excited about the companysprospecs ten twenty thirty years from now yeah！
alright， so lets do revenuegrowth first growth has been impressive at this scale， not at the rate of the highest growers that we have seen it but still nonetheless impressive prospecs going forward though for revenue growth， i think are still quite strong were obviously in a very different market environment than we have been the past few years， but portia is incredibly well positioned on evs relative to other thats actually。
my whole office yep so i think theres strong as they electrify the rest of their lineup strong uh ball case for revenue growth there i also think that even as were heading into a more depressed macro environment in the past few years i suspect porcier will be more resilient in there 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 want that on on uh them versus other luxury manufacturers its it sort of depends how you define luxury like i think theyll fair better than mercities in bmw no downturn and like way worse than free i i think there theyre in this interesting place where like they have its like leave it on they have some cache sensitive buyers right because so much of their revenue is based on those scvs that probably will not be as resilientes right there are macon buyers who will become Q7 buyers yeah！
q five buyers yeah！
yeah！
uh Ferrari really isnt leak of its on the broader universe of bmw Mercities， all the Japanese brands， Tesla etc um in the America for you know all the four brands， the Chevy brands oh， yeah！
anyreaders is very well position a resession then like almost any other car company yeah！
yeah theres also， this other thing of like the you allude to the colors the money theycharging for colors like theyve done this theyperfected this with so many options and people are just Bang it， Bang it， Bang it！
and it seems like theres no end to like what portal i can kind of fless there customer is for and it just seems like thats only gonna continue to be more and more of a thing going forward theres become this entire subculture around like specking your portia and this like perfect way and that is obviously big margin stuff for them yeah so im seven so your seven i think were pretty unique seven yeah seven and 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 thats right。
we didnsay that earlier but uh portions A29 percent growth margin apples A43 percent growth margin right， and i believe portions operating margins are in the high teens low 202 i mean id love to own a business that has twenty percent of every dollar that i earn coming out the bottom thats a great business when youre earning 40 billion dollars。
yes， thats a great business i think i go seven again on profability its a nine for the auto industry yeah！
and its like a for compared to most businesses that we study on acquiredbecause we only study the very best businesisin the world right？
not a media business！
its not a technology business right im sending her thing is seven may be a bit high margins are pretty impressive considering thats the car business yeah， thats what ive sending here thinking the car business requires so much， just so much cause yeah！
im a revised my score down to five for the ease of the episode were agreing on a score here OK， yeah， like score like this five feels like a good score and honestly like i think five is the highest score you can give in the audio industry on profile unless you check my ferri apparently yeah， which is like almost not in the auto industry like a completely different luxury category yeah， thats searchtrip just happens to make cars so i am giving um uh because cars you cannot give a ten， nine， eight， seven， or six i am going to give portia a five right in terms of profability， was a last one defensibility yeah， so this is the biggest question does portions， 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 states。
i just dont think so from when i work there till now it is amazing to me how much more people have become set with portions every cars in coffee event has become sort of a defacto portia event they used ones the vintage ones have just shot up in value to an unbelievable level portia is more love now i think that an anyotherpointness history now will it diminish as a result of that properly right you cant you can only be at a certain level for so long at a high level for so long but its been incredible to me to watch porcious rise even just over the last ten years and how much people like love it and obsess over it compared how it used to be it is it for it doesnt have that brand equity that for our does but its cut more than you to think and its especially cut more than you think for a company that mostly makes us uv i think you put it really well earlier when you said yeah！
people are like or are you？
a ferrara person or a portia person and like the fact that portia gets to be in that conversion the asked right is insights no is asking are you a Lexus person？
its like theygetenawaywithmurder by being lumped in right？
right somehow theyre able to both produce an SUV that get some 35 units annually？
yes！
but also mentionthe same brethos Ferrari in terms of like enthusiass im like literally a tenant of ten on this because i think this is a thing that i still dont really understand how they executed this so well， and theyve done it better than any other company in the world right？
right？
its probably true they went from making the nine eleven the everyday supercar to now there like an everyday supercar company right？
they have a whole gradient of everyday supercards that you can buy but theyre all everyday supercard and yet people still dream its crazy i agree i completely agree its and its in again it they love only seems to be growing even is there modeling expanse to what we would consider to be less desirable cars its amazing i like you said amazing they pulled off i think its right is so my parameter for this is a something i took from the lvamato episode of evaluating brand power can you kill it？
is there anything that could happen that would completely kill porcia i i dont think so nothing that they would realistically do i mean but even OK lets say they did cause you know what this is what we learned from the lvate episode Gucci everything you could think of to kill a brand they did that but the heritage there that it can always be resurected right Gucci is always going to be valuable individual still has this thought of Gucci as like home yeah practice you can never completely eradicated and i think portia is the same that brain gets to a certain level is it even possible to kill i dont think so and i want you read to that level thats when you have real brand power yeah and i think purchase at that level because lets say they make a bunch decisions and they kill the company it goes bankrupt somebody will buy it out a bankhuge value still have brand huge value is still there yeah all right ten no ten so that gives the acquire dug score for partia A2 十二 out of thirty out of thirty， which by dug group standards pretty good thats pretty good your highest dug score ever is 7274 something that range yeah she get you can get any better than that yeah。
so Porsche set the top yeah quick carvouts ill start uh because ive had no opportunity to consume any media in the last three months that is not specifically for required research i have a uh random website that i havent used in six months， but i used six months ago when is awesome to recommend and that is resortpass dot com have either review ever been to results dot com its like um Airbnb for uh amenities at resorts oh！
this is awesome！
so how did i not know about when i go on vacation， i typically wont stay in the really fancy hotel my wife and i will just like book a condo or near b and b or something um and theyre right next to really fancy hotels right and so what resortpast us 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 know exactly know how real time there are inventoriys or if they are able to like by big blocks of it upfront but for like a hundred bucks a day or two hundred bucks a day you can go and get a daybad or a cabana or be you know i have a 蛮 ities of the of the fancy hotel you been holding out of me so i Jenny night do this？
we will wedo the same thing you do but like i didnt there was a platform for that i do we just call the hotel dont see what you feel like yeah or or will book a message at the spot me like oh and then with the message you get the like right but now and along resort pass over there this is there like the career gt of resort pass， uh great uh my carval is um i go down these YouTube rabbitholes uh， which is probably how originally i got to you um but ive been on a signfelled cast interview oh yeah Rabbit hall yeah and there is an amazing compilation of all four of the cast members doing Charlie rows 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 interviews with all forthem surprisingly coming in Jason Alexander is by far the best interview he is so articulate like incredible if you see him interviewed anywhere talking talk anywhere like contemporaneas extemporaniously he is pretty legit yeah he is uh you would never know cause hes so different than the George character yeah so different so he is exbiggest difference of all of them for sure have you seen that that bit on curb on current Thusyosw theres this like whole Ark of the show about how like Jason Alexander is not at all like George and how dare you perceivehim that way and then its like Jason Alexander is insineating to Larry David what a loser the George character is and Larry takes it personally because its based on his sorry i should say five la uh Larry David is in this compilation of uh challeries conversation yeah its so good its so good i think its about an hour twenty total！
but its worth it interesting Jerry is in there to Jerry in there yep theyre all in there interesting OK mine is a youtuber named whistlin diesel have you guys heard of him？
no no ive got surprised i need or either will anybody whois listening to this he creates its a hes a kind of a car youtuber but mostly he just does crazy stuff he lives in tennesy and has a big property and like did you see that the thing in when viral like on Twitter and elsewhere of the Tesla that was on like twenty foottall wagon wheels he like thats 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 any just started throwing stuff at it like a ladder and like an ax and like a sledgehammer to see if it would like break the bubble and like damage the car he dropped over cities you agent through a house um he got a he got a chevey pick up with wheat with tires so big that he was able to drive it out into a bay in Florda oh we get hes the mr beast hes the mr beast of the car world sort of hes like hes like dude perfect on heroin right its like that and hes like this hes like from India and he was intensive hes like just like kind of like backwards dude but hes channels gotten so big that its allowed him to do just dom stuff and he is become my order guilty pleasure because you put on his video and youre gonna see like deep destruction of something that a lot of people hold dear and then youve see a lot of complex complex， the comments of people being like i cant believe you would do that to a forge as a YouTube i also feel like this is like the greatest thing ever because he takes what the header say and just like turns it up even more i have to be like nice and im so sorry sir business here hes like forget about these people are just gonna blow it up he flew a helicopter inside of his um garage a good episode i highly regular i gonna watch that these what this is all just like trash tv but it is so good to watch。
so highly relove that other people do this yeah right right？
i do wonder sometimes about like the danger of you tube and like OK？
it takes now find a helicopter inside your garage to get views like i started i had a Ferrari that was enough right not like you must feel you talk about this a lot that like you feel when were gonna do a whole another episode of just you enough uh chatting but um that like you started at a time and we started at a time right？
you didnt have to right i feel bad do this staff like what diesels out there dropping g wagons through houses such different thing but highly recommended what the great content thats actually！
a great dog we have not talked about like everything that you do give us so like a little bit of insight and i i think David ts were gonna do a interview together as a as a separate episode but like give us a little insight into the dog demuro empire and what you have going on a work working people check it out right？
i make a YouTube videos my channel is my name， which is become very complicated now that i have a business or on a channel also maybe regret doing that， but um just dug demuro and then i also run an automotive like a car auction website for enthusiast cars called cars and bids um and were sound something like thirty cars a day or auctioning thirty cars a day on cars and bids right now yeah！
so all just all like enthusiast cars you know portions and bmw and things of that veriding you know the sort version is like you are one of the most successful youtuvers in the world you are also an entrevenue who built a tech market place， internet marketplace business， and just took a very large investment from the turning group one of the best investors in marketplace in content businesses out there uh incredibly impressive thank you for spending so much time no us doing this colas great so interesting super fun its its 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 respect of something like i dont think theres anybodyelse we could have done this with they may be baking himself i he would be a little bias i think yeah its the bias that you get to worry yeah yeah totally imagine yeah so thank you dont yeah 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 didnt even work there was great so fun thank you guys check out our second show acq to if you want more acquired。
we just recorded a couple more episodes actually that we have getting ready to come out that im very very excited about that of course， is awake for you to go deeper and nerdier into topics that just etherared 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 cononical stories oftentimes， there are stories in flight where we just want to talk to experts about whathappening like Jake saper in AI talking about what is doing uh to the btob SaaS landscape right now and where profit pools may emerge in that yeah or of like Kotlin the ceo of angelist has a great conversation with him we have David should from retool all the hits David wegot a slack we would love to see you there were gonna be talking about this episode acquire data， FM slash slack and if you would like to come deeper into the acquire kitchen you should become an lp where we will at least once a seasonhaveyou 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 by monthly zoom calls so uh， we can get some feedback directly from all of you and get to meet more of you so acquiredatafmslash lp if you would like to become NLP now with that listeners and a huge thank you to our partner in crime on this episode dug demuro we will see you next time。
