Ferrari: What happens when you staple a luxury brand to a sports team? (Audio)

Ben Gilbert 0:00 Okay, David, so the question, do you have a favorite Ferrari?

David Rosenthal 0:04 Ooh, that's a tough one. I would never actually wanna get behind the wheel of it, but I think I gotta go with the F40.

Ben Gilbert 0:13 Of course.

David Rosenthal 0:14 I remember just being like a kid in elementary school and getting a model of one and thinking like, "Oh my God, this is the most incredible machine that mankind has ever created."

Ben Gilbert 0:23 Yeah, it's the defining supercar.

David Rosenthal 0:25 Yes, yes. How about you?

Ben Gilbert 0:27 I actually have two. One is the car from Charles Leclerc's wedding.

David Rosenthal 0:31 Ooh.

Ben Gilbert 0:31 It's the 1957 250 Testarossa.

David Rosenthal 0:34 Mm.

Ben Gilbert 0:35 And the car from Ford v Ferrari, that 1966 330 P3 is just beautiful. It's got these curves. It looks like a spaceship. It's gorgeous.

David Rosenthal 0:45 Ah. Beauty and power, the story of Ferrari.

Ben Gilbert 0:48 Yes. All right. Should we do it?

David Rosenthal 0:50 Let's do it.

Speaker 0:51 Who got the truth? Is it you? Is it you? Is it you? Who got the truth now? Hm. Is it you? Is it you? Is it you? Sit me down. Say it straight. Another story on the way. Who got the truth?

Ben Gilbert 1:08 Welcome to the Spring 2026 season of Acquired, the podcast about great companies and the stories and playbooks behind them. I'm Ben Gilbert.

David Rosenthal 1:16 I'm David Rosenthal.

Ben Gilbert 1:17 And we are your hosts. Almost everyone needs transportation. It is a giant market serving a huge human need, and it is one of the top three things that households spend money on, along with their housing and their food. And the automobile has become the default way that humans move around the world.

David Rosenthal 1:37 And that is not what we're talking about today.

Ben Gilbert 1:39 [laughs] And this episode has absolutely nothing to do with any of that. Today's episode, listeners, is about selling dreams.

David Rosenthal 1:47 Ooh, yes.

Ben Gilbert 1:48 We are talking about Ferrari, one of the most paradoxical companies that we have ever studied here on Acquired. Ferrari ships very, very few cars, around 14,000 per year. That is approximately the number of Toyotas that are sold every 10 hours.

David Rosenthal 2:08 [laughs]

Ben Gilbert 2:09 But of course, we know Toyota and Ferrari are a silly comparison, so what about a company that we have covered in the past? Porsche.

David Rosenthal 2:16 Yeah.

Ben Gilbert 2:16 Even Porsche ships 22 times the number of cars that Ferrari does. And yet, even though almost nobody owns a Ferrari, only about 180,000 people globally, they have among the highest brand recognition. I would argue that over a billion people know what a Ferrari is.

David Rosenthal 2:37 Easily.

Ben Gilbert 2:37 Which means, David, that Ferrari has the highest ratio of people who know about their products to people who actually own their products of any company in human history.

David Rosenthal 2:48 [laughs] Uh, I, I think we gotta scope it to companies that make products that are nominally available for purchase by consumers, but-

Ben Gilbert 2:57 Yes.

David Rosenthal 2:57 But yes. [laughs]

Ben Gilbert 2:58 Yes, like the space shuttle is a product, but you can't go, go buy a, a space shuttle.

David Rosenthal 3:04 [laughs] Yeah.

Ben Gilbert 3:04 So I would say Ferrari is the only ultra-luxury brand that has reached mass cultural awareness.

David Rosenthal 3:11 Yeah.

Ben Gilbert 3:12 There are some fun numbers just to keep putting this in perspective. There are 10 times more Birkin and Kelly bags made each year over at Hermes than there are Ferraris, and there are 70 times more Rolexes made each year than there are Ferraris.

David Rosenthal 3:24 Yeah, it's wild.

Ben Gilbert 3:25 The paradoxes continue. People are dying for their SUVs, and yet they limit them to just 20% of total volume.

David Rosenthal 3:33 Wait, wait, what is this SUV of which you speak?

Ben Gilbert 3:35 I'm sorry, Ferrari Utility Vehicle, 'cause they would never-

David Rosenthal 3:38 Yes, the FUV.

Ben Gilbert 3:40 Yes.

David Rosenthal 3:40 The Ferrari utility vehicle.

Ben Gilbert 3:42 Ford, here's another good one, makes 160 times the number of cars that Ferrari does, yet Ferrari has a higher market capitalization. They're worth more than the Ford Motor Company.

David Rosenthal 3:54 [laughs]

Ben Gilbert 3:55 And Volkswagen and Honda and Stellantis and Mercedes-Benz. This company is worth so much more than most giant manufacturers. Ferrari makes all of their cars mostly by hand, inefficiently, and one-off in a single town, Maranello, Italy, and they have the highest margins in the entire auto industry. Of the very few cars that they do make, this is my favorite one, David, about 80% of them are earmarked specifically for people who already own a Ferrari.

David Rosenthal 4:27 Right. Right, right. [laughs]

Ben Gilbert 4:29 So that means there's less than 3,000 new customers buying Ferraris in any given year.

David Rosenthal 4:34 It's actually completely insane-

Ben Gilbert 4:37 Right

David Rosenthal 4:37 ... when you think about it.

Ben Gilbert 4:38 This funnel narrows pretty tight. So how on earth did Ferrari manage to build this incredibly valuable business while selling their cars to almost nobody? Well, the answer is bloody. It is half a century of death and speed and love and feeling alive, and of course, there are some of the most clever business model mechanics that we have ever studied here on Acquired.

David Rosenthal 5:01 It really is very Italian, you might say. [laughs]

Ben Gilbert 5:03 Yeah.

David Rosenthal 5:04 It's beautiful. It's tragic. It's romantic.

Ben Gilbert 5:06 There's death, sex, betrayal, and, uh, very, very fast cars. Well, listeners, if you are interested in the big takeaways from each episode in writing, you should join our email list at acquired.fm/email. You can also get past episode corrections, exclusive behind-the-scenes photos that we found during our research. We'll be sending some of those out for this episode, and you can vote on future episode topics. Plus, we will give away a little hint about the next episode each time. That's acquired.fm/email. Come talk about this episode with us in Slack at acquired.fm/slack or by clicking the link in the show notes. And before we dive in, we wanna thank our presenting partner, J.P. Morgan Payments.

David Rosenthal 5:50 Yes, just like how we say every company has a story, every company's story is powered by payments, and J.P. Morgan Payments is a part of so many of their journeys from seed to IPO and beyond.

Ben Gilbert 5:59 So with that, this show is not investment advice. David and I may have investments in the companies we discuss, and this show is for informational and entertainment purposes only.David Rosenthal, take us to Italy.

David Rosenthal 6:11 Ooh, all right. Well, we start in 1898 in the medieval Italian town of Modena with the birth of our hero, Enzo Anselmo Giuseppe Maria Ferrari, better known, of course, either by the name of the company he would found that bears his last name, Ferrari, or to his hundreds of millions of fans around the world simply as Enzo. So Enzo is born here in 1898 in Modena, the second of two sons, and his mother, Adalgisa, is a beautiful young woman, and his father, Alfredo, is 12 years older than his mother. And his father runs a successful metalworking shop and is kind of like a, you know, fairly well-to-do middle class entrepreneur about town. And Enzo and his father are, are often at odds growing up, but, uh, part of his dad does rub off on him in this sort of entrepreneurial influence. His dad, uh, says something to him which sticks with Enzo for the rest of his life, "A company is perfect when the number of partners in it is odd and less than three." [laughs] I.E. don't take on partners.

Ben Gilbert 7:24 Oh.

David Rosenthal 7:24 Always be self-sufficient. [laughs]

Ben Gilbert 7:25 That's a great quote.

David Rosenthal 7:27 We should say that much of this history, this whole episode comes from the fantastic really definitive biography of Enzo called Enzo Ferrari, written by Luca Dal Monte, who worked at Ferrari and Maserati for many years and then after he retired, dedicated about a decade of his life to researching and writing this definitive biography. It's really excellent. So anyway, his mother and his father are always fighting, they're always yelling, arguing, swearing, and this has a very different effect on each of their two children. For Enzo's older brother, who is named after his father, he's also named Alfredo, nicknamed Dino to tell them apart, he, Dino, becomes like the golden child. He's the peacemaker, the pleaser, the striver, the smart and successful one. He's gonna make his parents proud and he's gonna take over the family business. Enzo, on the other hand, as the younger brother, he just takes right after all the sort of less savory parts of mom and dad. He's mischievous, he doesn't apply himself in school or pay any attention, and, you know, why should he? His family's got money for the place and time. His older brother, Dino, the golden child, you know, is gonna make them proud. He's gonna take over the family business. Enzo can just kinda knock about town. He dreams of someday maybe becoming a journalist or a opera singer, mostly so that he can, you know, hang out with the showgirls.

Ben Gilbert 8:44 Oh, what could have been, a very different Enzo Ferrari.

David Rosenthal 8:47 Ah, well, his life is an opera, as we shall see. So there's one thing, though, that really captivates Enzo's spirit, which is the new modern sporting and leisure pursuit of automobile racing. And one blissful night when Enzo is a teenager, he declares to his best friend his true intention in life, "I am going to be a racing driver." And that dream does indeed come true, but probably not in any way that Enzo expected-

Ben Gilbert 9:18 [laughs]

David Rosenthal 9:18 ... that night, because very shortly thereafter, World War I breaks out and two tragedies happen to Enzo in quick succession. First, his father, Alfredo, contracts pneumonia and dies, unrelated to the war, he just got pneumonia and, and suddenly died. Shortly thereafter, his older brother, Dino, the golden child, goes off, enlists in the Italian army, where he also contracts pneumonia and dies. So Enzo is left alone with his mother that he needs to support. The family business is gone, and because Enzo has never applied himself, he has no discernible skills or ability to continue it or, you know, really do much else that would, uh, provide gainful employment for him here. That was supposed to be Dino's role in the family. Now, before Enzo can stop to really think, he too gets drafted into the army, where he also comes down with pneumonia and nearly dies, but he survives. He's the one who survives.

Ben Gilbert 10:17 Oof. He has a quote later in life where he sort of acknowledged this emotional burden and his life's work that he would go on to create, where he said, "I feel alone after a life crowded by so many events and almost guilty of having survived."

David Rosenthal 10:32 Yeah. I mean, the title of his memoirs is My Terrible Joys. [laughs] Tells you everything you need to know right there about Enzo's life.

Ben Gilbert 10:39 Yep.

David Rosenthal 10:39 So when he comes back home to Modena at the end of the war, he has no hope, but he does still have his dream of motor racing. And remember, he's still like a teenager basically at this point, a late teenager, early 20-something. He starts making noise to his mom about selling the family house to finance buying a racing car, and that he's gonna go out and race this car and win prize money to support them. [laughs]

Ben Gilbert 11:05 It's an audacious plan.

David Rosenthal 11:06 It's an audacious plan. His mom is like, "Uh, no." [laughs]

Ben Gilbert 11:11 [laughs]

David Rosenthal 11:12 "How about instead, how about this? Why don't you go try to get a job at a car company and see where things go from there?" Enzo's like, "Okay, okay, fair compromise." So his mom arranges for him to travel to Turin, big city in the northeast of Italy, where he interviews for a job at Fiat. And Fiat is the biggest Italian car company at the time, and will come back up many, many times in this story. It is, as you all probably know, uh, essentially the Ford Motor Company of Italy, and the family behind it, the Agnelis, are the wealthiest and most important industrialists basically in the history of Italy. And today they own and control both Stellantis, which is the merged result of Fiat, Chrysler, and Peugeot, and they also own and control Ferrari. Don't worry, we'll get there.

Ben Gilbert 12:00 We'll get there, but n- not for, I mean, the better part of a century here.

David Rosenthal 12:04 Yes, yes. So back to Enzo here in 1918. Fiat, of course, rejects his job application because, again, he has no discernible skills, but Enzo is persistent, and in 1919 he lands a job at a new startup automobile company called CMN, and there-He pledges his future salary, like the next several months of his salary, to purchase for himself one of the company's sports cars that he then goes off and takes racing. [laughs] So he didn't have to sell his house to finance this dream, but he did pledge his future salary.

David Rosenthal 12:39 Now, this is an important point to land here. With very few exceptions, one of which we'll talk about in just a minute, motor racing at this point in time was a private individual sport. Drivers generally bought and raced their own cars, either because they were independently wealthy and successful and could afford their own staffs and mechanics to maintain these cars. These were folks known as gentleman racers.

Ben Gilbert 13:05 That's right. I've heard that term.

David Rosenthal 13:06 Yes. And, and this is the group of people that ultimately, once Ferrari gets founded, become Enzo's core client base. Or the other group of drivers at this time are like Enzo. They're these kinda like hustlers and dreamers who manage to glom on somewhere in the car industry and leverage that into entering races. But basically motorsport was this like passionate sort of privateer pursuit.

Ben Gilbert 13:28 Not organized professional racers on highly paid teams.

David Rosenthal 13:31 Yes. So Enzo enters into this world, and he does pretty well, well enough not only to send some prize money back home to mom, but also to attract the attention of Alfa Romeo, which is Italy's other large car company at the time, although much, much smaller than Fiat, and Alfa has one of Italy and Europe's few, if not only, in-house racing teams. So even though most racing that is happening is privateers, Alfa has their own racing team, which is pretty unique for Europe at the time. So they scoop up this young, hotshot, talented driver, Enzo, to come and race for them. And now this is a huge coup for Enzo. Like, basically his whole dream as a teenager is coming true. He's racing. He's making money from prizes. He's part of this Alfa Romeo team that's gonna support him, provide him great vehicles to race, and also mechanics and everything he needs. So he hatches a plan that he's gonna cash in on this newfound fame and notoriety by starting his own business. He's gonna be an entrepreneur, just like his dad. So at age 22, in 1920, Enzo starts his first company, a coachbuilding business in Modena called Carrozzeria Emilia. Now, what is a coachbuilding business? [laughs] This is another really important point to understand about the car business at this point in time. For most companies, and especially car companies that were making sports cars, the actual bodies or the coaches were built and designed by third-party coachbuilders. The cars were just an engine and a chassis that the car maker would deliver.

Ben Gilbert 15:15 Hmm.

David Rosenthal 15:15 And then the clients would go to a coachmaker, like this one that Enzo is starting up, and have them build the body to their taste and specifications that would go on top of, you know, the mechanics of the car.

Ben Gilbert 15:26 Yeah. It reminds me of our Rolex episode, where the movement makers were totally different than-

David Rosenthal 15:31 Yes, yes

Ben Gilbert 15:31 ... the case makers, which were totally different than the jewelry stores that sold them, not the sort of integrated way that we know it today of the movement maker is often the same as the case maker, and then you often just sell sort of pseudo-directly.

David Rosenthal 15:45 Yes, totally. In this case, it's actually a holdover from the horse-drawn carriage days, where the coachbuilders built carriages, but they obviously didn't supply the horses, so [laughs] yeah. So the same thing starts to emerge here in the early automobile industry. So Enzo's admittedly pretty half-baked plan here is that thanks to his sure-to-come, you know, new fame and fortune as an Alfa Romeo race car driver, customers, Alfa Romeo customers, and customers of other car companies, are gonna come banging down his door to build their car bodies, to build their coaches. What the connection is between being a good race car driver and being a great coachbuilder, I'm not sure, and, uh, neither is the market [laughs] because the business does not go well. It's a failure, and within two years, Enzo is bankrupt. Now, perhaps relatedly, Enzo's sorta mettle as a professional race car driver also proves to be good, but he's not great. He has all the talent, all the skill, but he comes to realize he doesn't have the one final thing that separates the true motorsport champions from everyone else. He's too afraid to die. He can't push himself and the car to the point that's really, really, really on the edge.

Ben Gilbert 17:04 The limit, as they say.

David Rosenthal 17:06 The limit, yes. Part of this, of course, is his sorta haunted past. You know, the deaths of his brother and father. Death has had this huge presence in his life. But also, it's very much his present. So once he joins the Alfa Romeo team, there's two sorta senior drivers on the team who really take him under his wing as mentors, and they become friends, and Enzo watches them both die during races at the wheel, the first of which, Enzo was the first person to find him, and he actually literally died in Enzo's arms.

Ben Gilbert 17:33 Oof.

David Rosenthal 17:34 And so after all these experiences, Enzo just, he can't push himself to do the same thing over and over like they did.

Ben Gilbert 17:41 And that is the sick reality of racing, at least in this point in history, is it is the people who are absolutely willing to go right up to that line and, and maybe cross it.

David Rosenthal 17:52 Yeah, often cross it.

Ben Gilbert 17:53 I mean, it kinda depends where you put the line. Those who win are the ones who are absolutely willing to die.

David Rosenthal 17:59 I mean, on our Formula 1 episode, we talked about through the '70s, right, there was an average of more than one death a year in-

Ben Gilbert 18:06 Yep

David Rosenthal 18:07 ... Formula 1 out of a field of only, like, 20 drivers. So yeah, that's the reality for a very long time in this business. And paradoxically, that's also part of the appeal. So in 1924, Enzo makes the decision to quit racing, cast off the coachbuilding business, and instead open a Alfa Romeo dealership.In Modena.

Ben Gilbert 18:30 Oh, I didn't know this.

David Rosenthal 18:31 Yeah. He's now married. He wants to have a family. His son, naturally named Dino, would be born a few years later. Dino after his father and brother. Basically, he's going down the time-honored path of retired ex-athlete with some degree of notoriety opens local car dealership. [laughs]

Ben Gilbert 18:47 [laughs] Pioneering.

David Rosenthal 18:49 Pioneering. Now, toward the end of his racing career, Enzo had also gotten more involved in the actual management of the team and gotten to know some of the managers of Alfa Romeo, the company itself, so he still has these close connections to the company, which are certainly gonna help him in becoming a dealer. And then the very next year, the Alfa Romeo board of directors makes the inexplicable decision to drastically cut back on their racing activities, and they're gonna keep the company team, but only gonna enter a few races, and the budget is gonna be cut. And so Enzo's like, "Whoa, whoa, whoa, whoa, whoa, whoa, whoa, whoa. [laughs] Hang on a sec here. I need the publicity from the Alfa Romeo racing team. That's my only, like, connection to fame here and why people would come to my dealership and buy my cars. Uh, I, I kinda need to have Alfas racing on a regular basis." So he goes to Alfa Romeo headquarters in Milan with a proposal. "I understand that you wanna cut the expense, you know, sort of day to day of running your own racing team. What if I take it over? And all the races that you don't wanna run, you bless me, your dealer, Enzo Ferrari, as the official racing agent of Alfa Romeo, and I'll put together my own private team. I'll hire the drivers. I'll hire the mechanics. I'll cover the costs."

Ben Gilbert 20:05 Right. It's like a fully outsourced racing team that's just kind of a contract relationship. You don't have to have this on your books. This is a sort of loose affiliation.

David Rosenthal 20:14 And for Enzo, what better marketing activity could you imagine than to become the quasi-official racing agent, sorta second team of Alfa Romeo?

Ben Gilbert 20:24 Yep.

David Rosenthal 20:25 And thus, the first iteration of the Ferrari business is born, the Scuderia Ferrari, which is the name that he gives to his new racing team, Scuderia being stables in Italy. It's a stable of drivers and cars for Alfa Romeo. And the Ferrari racing team to this very day in Formula 1 and elsewhere is the Scuderia Ferrari. That is the SF that you see on the Ferrari shield everywhere.

Ben Gilbert 20:52 Yep, and for a team that would go on to adopt the prancing horse, I, I am loving the thick metaphor here with the stable and the-

David Rosenthal 20:59 Oh. [laughs] Enzo, as we shall see, is a natural born marketer. So important to note a couple things here. The Scuderia Ferrari is very much intended to be a junior partner to Alfa Romeo.

Ben Gilbert 21:13 Mm.

David Rosenthal 21:13 Or at least Alfa intends it that way. But Enzo does in the back of his mind have broader ambitions. As we alluded to with the whole coach-building thing, unless you're one of the few new at this point really mass assembly line consumer car companies like Fiat or like the Ford Motor Company over in America, the line and the barrier to entry between being a, like, a garage who develops and maintains racing cars and graduating to making your own cars that you sell to the privateers who go racing is pretty thin. And Enzo's always got this in the back of his mind, and he's got some examples out there. So there are other garages, for lack of a better word, out there in Italy at the time that have made the jump from developing race car versions of other cars made by other manufacturers to selling their own cars, the prime example being Maserati right there in Modena, right across town, the Maserati brothers.

Ben Gilbert 22:17 In the video game world, this is, uh, modding.

David Rosenthal 22:20 Yes.

Ben Gilbert 22:20 You're sorta taking someone's kinda basic game and souping it up into something really special for you that you're customizing.

David Rosenthal 22:26 Yep. So for Enzo, in the back of his mind, he's like, "Okay, this is my opportunity to build my own team, hire my own engineers and mechanics, use hopefully my team's success combined with the Scuderia Ferrari brand that I'm building. Maybe someday I too can launch my full-on car company like the Maserati brothers across town."

Ben Gilbert 22:45 Hmm.

David Rosenthal 22:45 So as he gets going with his grand master plan and, you know, developing the Scuderia, he knows that he needs to build up more than just his own operations. He also does need to build a brand if he's gonna sell his own cars someday, and specifically, he needs a logo, and he's got the perfect one. But before we tell the story of the legend of the Ferrari Prancing Horse, now is a great time to thank our presenting partner, J.P. Morgan Payments.

Ben Gilbert 23:15 Yes, and one thing that kept coming up, listeners, in our research for Ferrari is just how global they have been from their early days, of course, headquartered in Italy but selling cars to the US and around the world, as we will soon get to, from those early days. And behind any company operating at that scale, there is a massive engine orchestrating money movement behind the scenes.

David Rosenthal 23:39 That's right. It's an enormous amount of complexity, paying suppliers in one currency, collecting receivables in another, managing exchange risk, adding vendors and suppliers, and of course, staying compliant in all these regions. When you're really early stage, moving money across two or three currencies, you can manage it yourself, but going from three to 20 is, like, a completely different situation.

Ben Gilbert 24:00 Yes, and the companies that get this right, that make those strategic investments in payments infrastructure early, those are the ones that scale. That's what J.P. Morgan Payments cross-currency solutions are built for. They send payments in 120 currencies. They receive payments in 40 across more than 200 countries and territories. That means that you get seamless integration through their APIs that plug directly into your existing treasury workflow, and that gives you real-time visibility and control over your transactions.

David Rosenthal 24:31 The whole goal is to make global money movement invisible, and because there's so much complexity required behind the scenes to make it feel invisible, the stability and scale of J.P. Morgan's global payments network plus local market infrastructure is really what makes it possible.

Ben Gilbert 24:44 It is one of those things where the scale is the product. If you do the math, there are tens of thousands of combinations of currencies that you may need to switch in between, not something you wanna take on yourselves. So listeners, if your business is moving money across borders and you need cross-currency payment solutions that do the hard work for you, check out jpmorgan.com/acquired, and just tell them that Ben and David sent you.Okay,

Ben Gilbert 25:09 David, so where does the famous, infamous prancing horse for Scuderia Ferrari come from?

David Rosenthal 25:17 Yeah. How did all those Ferraris come to have a black prancing horse on them?

Ben Gilbert 25:21 And I gotta say, it is the strangest thing looking at some of these old pictures because the first thing that the prancing horse went on was these Alpha Romeo cars.

David Rosenthal 25:31 Yes, yes.

Ben Gilbert 25:31 And so there's these old pictures of a Alpha Romeo badged car, in the fender sort of in front of the door, there's a Scuderia Ferrari prancing horse.

David Rosenthal 25:40 Yes. It's bizarre to look at today.

Ben Gilbert 25:42 Yeah. Listeners, we'll, we'll send that out in the email.

David Rosenthal 25:44 So back when Enzo was a promising young racing driver, one of his early fans and supporters was a noble Italian count and countess, whose son Francesco Baracca, had been Italy's number one ace fighter pilot during World War I, like World War I dog fighting, and Baracca had won 34 aerial victories before he was tragically killed in combat right before the end of the war.

Ben Gilbert 26:15 Mm.

David Rosenthal 26:15 And on his airplane, he had painted as his symbol and a good luck charm, the black prancing horse. Now he's like a national hero, and everybody in Italy knows about Count Baracca and his exploits during World War I, and his parents are fans of Enzo. And so one night after the war, the countess tells Enzo, "Why don't you paint the black horse on your car? It will bring you luck." And to symbolize this gift, she gives Enzo a photo of her son in front of his plane before he was killed with the horse and with an inscription from her below it that Enzo should use this symbol.

Ben Gilbert 26:55 That's a official endorsement right there.

David Rosenthal 26:57 Yeah, absolutely. Oh, absolutely. So here we are now. Enzo is launching his, his Scuderia, his stables, you know, his horses, and he knows that this is the moment to put the gift to use as the Scuderia's logo. It's perfect, stable, horses, but it's more than that. This man had been a national hero. Everybody in Italy knows him and knows the symbol, and Enzo has had it bestowed upon him, not just with, you know, his mother's blessing, but with the explicit direction to put it on his race cars.

Ben Gilbert 27:28 [laughs]

David Rosenthal 27:28 So Enzo takes the prancing horse, he places it within a yellow shield, yellow being the city color of Modena, with the three colors of the Italian flag above. This is just a genius marketing move. The prancing horse reflects both the Scuderia and links Enzo and the team to this national hero. The shield reflects his intention to do battle on the racetrack, and the Italian colors reflect the ultimate ambition to establish this team, this company and its future cars as the Italian national team and sports car company.

Ben Gilbert 28:05 Yep.

David Rosenthal 28:06 So in our research, I spoke to Luca di Montezemolo, the legendary Ferrari chairman who would ultimately succeed Enzo, and really in many ways be his heir, as we will tell in this story.

Ben Gilbert 28:18 Important to note, different Luca than the Luca who wrote the book, David-

David Rosenthal 28:23 Yes, yes

Ben Gilbert 28:23 ... that most of this narrative is based on.

David Rosenthal 28:25 Yes. And I asked Montezemolo, you know, you knew Enzo probably as deeply and as well as just about anybody who's still alive today, and there's this kind of popular legend that Enzo was just a racer. He only wanted to race. He didn't really care about business or road cars, and the, all the road cars only existed to fund his racing activities.

Ben Gilbert 28:46 Oh, this is the biggest thing about people today. When I say, "Oh, we're doing an episode on Ferrari," they say, "Oh my gosh. Yeah, it's such a crazy story 'cause, you know, Enzo really just wanted to race cars and he built this car company, but really that was just sort of to finance the racing, and he doesn't even care about those road cars. He's not really a business guy. He just wants to make great cars with great engines and, and send them racing."

David Rosenthal 29:08 Completely false. [laughs]

Ben Gilbert 29:10 [laughs]

David Rosenthal 29:10 Montezemolo confirmed when I asked him. Enzo was a natural born entrepreneur and marketer. He, he really was Italy's Steve Jobs in every aspect. I mean, think about it. What was Steve Jobs? Steve Jobs was, was not an engineer. He was a marketer, the same as Enzo. Enzo is not an engineer. He's not a car mechanic. He can't build the cars himself.

Ben Gilbert 29:34 But they both had a sort of understanding and deep appreciation for the technical things that enabled their visions to be possible.

David Rosenthal 29:42 Yes. Enzo would say about himself when asked that, you know, he's not an engineer, he's not a car designer, he's no longer a driver even though he runs this team. He is, quote, "An agitator of men."

Ben Gilbert 29:56 [laughs]

David Rosenthal 29:56 And that perfectly described Enzo, and I think, you know, perfectly describes Steve Jobs too.

Ben Gilbert 30:00 Yep.

David Rosenthal 30:01 So if you think about it, what is Enzo doing here with the brand that he's building? There's the prancing horse, and then what's the other famous, you know, visual symbol associated with Ferrari? The red.

Ben Gilbert 30:13 Mm-hmm.

David Rosenthal 30:13 Ferrari red, rosso corsa, that he adopts here. And sure, you know, Ferraris are red because red was the assigned national racing color of Italy, but come on, Enzo is the one who embraced it and imbued this rosso corsa with so much more than just the national racing color of Italy. It's not Alpha Romeo's colors. It, it's Ferrari's colors.

Ben Gilbert 30:34 Right. When you draw a picture of a race car today, let's say you're 10 years old, you're coloring it red, and you're coloring it red because that is Ferrari red.

David Rosenthal 30:42 Yes. And what does red represent? It's passion, it's blood, it's desire. It's all of this that is all deeply wrapped up into a Ferrari. I mean, just look at Italy's other luxury super car company today, Lamborghini. You know what their colors are? Not red. [laughs] In fact, their color is every color but red-

Ben Gilbert 31:02 [laughs]

David Rosenthal 31:04 ... because Ferrari has co-opted it.

Ben Gilbert 31:05 Yep.

David Rosenthal 31:06 So back to the Scuderia here. After a couple years, in 1933, the golden opportunity arrives for Enzo. Alpha Romeo finally decides that it is going to disband its official racing team entirely and designateScuderia Ferrari as its official racing operation in all races all across the globe. So Enzo acquires, quote-unquote, "The entire Alfa operation, engineers, mechanics, everything," and his dream has come true. He is not only Alfa Romeo's official racing team, but by this point in time, Alfa had been nationalized by the fascist Italian state-

Ben Gilbert 31:49 Mm

David Rosenthal 31:49 ... by Mussolini. So he is Italy's official national racing team. There's just one problem, though, which is that Alfa got out of the racing business for a reason, because Hitler is coming to power in Germany, and one of Hitler's most, you know, kinda important national agenda items is making sure that his German auto industry is the best, and that he proves it on the racetrack, just like-

Ben Gilbert 32:19 Mm

David Rosenthal 32:19 ... you know, the Olympics. So throughout the rest of the 1930s, the German state is supporting Mercedes and Auto Union, which would go on to become Audi today, and their cars are just dominating European Grand Prix racing. So Enzo and Ferrari are, like, sent out there, [laughs] you know, by Alfa and the Italians to compete, but i- it's a fool's errand.

Ben Gilbert 32:40 Mm.

David Rosenthal 32:41 And so in 1938, Alfa and Mussolini kinda, you know, fed up with losing, they actually acquire the Scuderia Ferrari and remake it, you know, as part of Alfa Romeo into this official sort of government entity.

Ben Gilbert 32:55 Huh. So they decide, "Actually, we do wanna put resources behind this, and now you're kind of the only game left in town since we shut down the other operations." [laughs]

David Rosenthal 33:04 Yeah, I mean, at the end of the day, this is just rearranging deck chairs because the, the war is coming.

Ben Gilbert 33:10 Mm.

David Rosenthal 33:10 So the very next year, Hitler invades Poland, and World War II begins. Needless to say, European automobile racing is, uh, on hold indefinitely.

Ben Gilbert 33:21 Yes.

David Rosenthal 33:21 During this period, Enzo gets into a fight with Alfa Romeo management and manages to get himself fired. [laughs]

Ben Gilbert 33:29 Yeah, this is 1939. He cares about one thing, and that's auto racing. It's just not the strategic priority for Alfa Romeo as a company or for the country, and so I think this, this friction kinda leads to it. The crazy thing is his separation agreement, I, I think he got paid to, to leave, but-

David Rosenthal 33:48 Yes

Ben Gilbert 33:48 ... you know, he... It's, it's a firing, forbids him for four years from, A, building cars to race them, and B, using the name Ferrari associated with a racing team or a car builder. Like, he, he d- he lost the rights to his own name for four years.

David Rosenthal 34:07 Well, I mean, you know, he gave them up to the Italian government, essentially.

Ben Gilbert 34:11 Yep.

David Rosenthal 34:11 So speaking of which, during the war, Enzo creates a new company to feed the Italian war effort that he names Auto Avio Construzioni, auto and aviation construction, which is very... He sneaks that auto in there, 'cause -

Ben Gilbert 34:29 Not really supposed to be building cars and racing them, but, like, I'm doing other stuff, too.

David Rosenthal 34:33 Yeah.

Ben Gilbert 34:33 It's not called Ferrari.

David Rosenthal 34:34 It's not called Ferrari, but this same company is better known today as Ferrari Societa per Azioni, or Ferrari S.p.A., the Ferrari joint stock company that is publicly traded on the New York Stock Exchange under the ticker RACE.

Ben Gilbert 34:50 Yes. Best stock ticker ever.

David Rosenthal 34:52 Best stock ticker ever, indeed. So what is this company doing? They're, they're not making cars, even though auto is in the name. They're making machine tools in the workshops, in the, essentially, factory that Enzo has created there in Modena. And on each tool throughout the war effort that they make, Enzo has them stamp the Prancing Horse-

Ben Gilbert 35:12 [laughs]

David Rosenthal 35:12 ... and the word Scuderia Ferrari Modena, clearly signaling his intentions after the war of, uh, you know, [laughs] what, what he's gonna do.

Ben Gilbert 35:20 I bet those are some very valuable collector's items if you can find them.

David Rosenthal 35:24 So anyway, Enzo and his factory are pretty good at making these machine tools, and they become part of the war effort. So as the war wears on and the Allies, you know, push into Europe, Enzo and the government start to worry about them bombing the factory in Modena.

David Rosenthal 35:41 So in 1943, he decides that he's gonna move all of his operations out to a small little town in the countryside to avoid the bombing. He's gonna go about 15 kilometers south of Modena to Maranello, and that's why Ferrari, to this very day, is in the small little, you know, hamlet of Maranello, not in the bigger city of Modena.

Ben Gilbert 36:04 Yep.

David Rosenthal 36:05 So even despite the move to Maranello, the factory does get bombed twice during the last days of the war. After the war, that leaves Enzo kinda at a crossroads. The factory's not quite in ruins, but it's in, you know, they've been bombed twice.

Ben Gilbert 36:24 Disarray.

David Rosenthal 36:24 Disarray.

Ben Gilbert 36:25 Significant disarray.

David Rosenthal 36:26 Yeah, disarray. And he's just spent the last four or five years building machine tools and gotten pretty good at it.

Ben Gilbert 36:35 Yep.

David Rosenthal 36:36 And then Enzo gets a visit from an old racing pal, an Italian, but one who spent the war not in Europe, but in exile in America, Luigi Chinetti, the man who brings Ferrari to America. So Luigi and Enzo met way back when Enzo joined the Alfa Romeo racing team as a driver, and Luigi was a mechanic on the team, who also then became a driver, and he ends up in New York. And when the war is over, Luigi goes back to Italy to visit Enzo, and he tells him about America. So this is a quote here from Brock Yates' biography of Enzo. Brock Yates was the longtime editor of Car and Driver magazine.Canetti described the miracle that was America, the aggressiveness of its people, their childlike inquisitiveness, and their bourgeois credulities. Yet there was a rich upper class whose taste were European. He had seen them, met them, gained their trust as he kept their aging European automobiles operating through the war years. He knew they would pay a king's ransom for Enzo's elite machines, and he, Luigi Canetti, meant to exploit that naive colonial lust. [laughs]

Ben Gilbert 38:00 What writing.

David Rosenthal 38:01 What writing. Enzo agrees. Now, legends would say later, and Luigi I think would probably perpetuate this himself, that Luigi is the one who convinced Enzo to abandon the machine tools business and focus only on cars again after World War II. That's false. [laughs] Enzo was planning to anyway. There's, there's no way that he really was gonna go into machine tools.

Ben Gilbert 38:27 I mean, by 1943 his non-compete is up.

David Rosenthal 38:29 Yes.

Ben Gilbert 38:30 And he's allowed to use the name again.

David Rosenthal 38:31 Yes.

Ben Gilbert 38:31 And so, you know, the clock's ticking.

David Rosenthal 38:33 The clock's ticking. But it is true, Luigi definitely convinced Enzo about America.

Ben Gilbert 38:39 Mm.

David Rosenthal 38:39 And America was critical for Ferrari.

Ben Gilbert 38:43 And you know what wealthy Americans are extremely interested in when they're considering if they're gonna buy a extremely expensive, rare automobile? They love that cold shoulder of a artist creating the car mysteriously in some small town in Italy, who's just interested in racing. He's not interested in mass market cars. You're just lucky to get one of these racing cars, and he couldn't even care less about you.

David Rosenthal 39:10 Oh, yeah. Oh, yeah.

Ben Gilbert 39:11 That sells cars.

David Rosenthal 39:12 And boy, does Enzo know it.

Ben Gilbert 39:14 Yeah, he totally leans into this. This is, like, part of the perpetrating of the myth. This is why everybody believes, oh, he wasn't really a businessman, he just wanted to race cars.

David Rosenthal 39:21 Yeah, I mean, oh, he- the, the whole persona of Enzo Ferrari, you know, the dark sunglasses.

Ben Gilbert 39:28 Oh, yeah. What's the tidbit you got on the sunglasses?

David Rosenthal 39:30 It was an act. You know, he would wear the sunglasses in public, and at, you know, press interviews, and in meetings with clients or whomever, and then everybody else would leave the room, and he'd just take them off and put them on the table. [laughs] He didn't wear sunglasses all the time, only when crafting his image. But, uh, yeah, he leaned into it.

Ben Gilbert 39:48 Yep.

David Rosenthal 39:49 So one way or another, machine tool business is out the window, and Enzo is back in cars. 1947 is the first year that they get going with the newly renamed Auto Construzioni Ferrari, now that he can use the Ferrari name.

Ben Gilbert 40:06 Mm.

David Rosenthal 40:07 In 1947, they build three cars just for team racing, just for the Scuderia, in which, during the year, they enter 14 races and win seven of them. Pretty good.

Ben Gilbert 40:20 Mm.

David Rosenthal 40:21 50% win rate for-

Ben Gilbert 40:22 Yeah

David Rosenthal 40:22 ... you know, the, uh, newly rebuilt Scuderia Ferrari. They didn't sell any of those cars.

Ben Gilbert 40:28 Yes. Enzo Ferrari, to this point in history, has not sold a car yet.

David Rosenthal 40:33 No. [laughs]

Ben Gilbert 40:33 I mean, how old is he, David?

David Rosenthal 40:35 He is, in 1947, he's 49 years old.

Ben Gilbert 40:38 I mean, this is, like, this great classic sort of founder myth of the young hotshot who starts this thing. Uh, Ferrari, yes, it's a racing team, but it is a car company who sells cars to consumers, and by age 49, Enzo had never done that.

David Rosenthal 40:53 Yes. Now, he has established the brand and the myth and put all the pieces in place to create Ferrari, but yes, he did not sell a single car to a customer until 1948 when they introduce the Ferrari 166 Barchetta at the Turin Motor Show. And Luca Dal Monte in his biography writes, "For Enzo Ferrari, the 166 MM Barchetta was a declaration of intent, a sports car with a sensual shape, as fast and powerful as it was beautiful and elegant. It was the foundation on which from that moment on he would build every road model. Cars capable of winning races on circuits and roads all over the world, and at the same time being the protagonists of the most prestigious concours d'elegance in the four corners of the earth." What a great description of what a Ferrari is.

Ben Gilbert 41:50 Absolutely. Enzo is really figuring out how to create desire here.

David Rosenthal 41:54 Yes, yes. These machines are beautiful, and they are deadly. That is the point. You can enter them in a race, you can be competitive, you might even win, as we see in a second, and you can drive them around town and look beautiful and elegant, when they work. [laughs]

Ben Gilbert 42:17 [laughs] Yeah, the Ferraris in this era in history that we're talking about here, you know, the late '40s, '50s, the '60s, these were not the most reliable machines, especially the road cars.

David Rosenthal 42:30 I think you could also lump in the '70s-

Ben Gilbert 42:32 [laughs]

David Rosenthal 42:32 ... and the '80s. Large chunk of the '90s.

Ben Gilbert 42:35 I mean, it is this fascinating thing about luxury that reliability is not actually a relevant part of the equation-

David Rosenthal 42:41 No

Ben Gilbert 42:41 ... of how desirable, h- how much do I lust after this machine?

David Rosenthal 42:45 I think it's from the luxury strategy book, uh, anti-law of marketing number something or other is ensure that your product has enough flaws. [laughs]

Ben Gilbert 42:53 Yes.

David Rosenthal 42:53 Boy, do Ferraris have a lot of flaws.

Ben Gilbert 42:55 Yep.

David Rosenthal 42:56 So this first Ferrari, the 166 Barchetta, they produce about a dozen of them that year in 1948, both to race themselves with their own team drivers and also sell them to wealthy private clients. Two of the very first models are sold to American clients through Luigi Canetti.

Ben Gilbert 43:17 Mm.

David Rosenthal 43:17 One to Tommy Lee, who is a wealthy Cadillac dealer in Los Angeles, and one to Briggs CunninghamWho is one of the Procter & Gamble heirs.

Ben Gilbert 43:26 Oh.

David Rosenthal 43:27 You get a sense of, like, who are the customers in America.

Ben Gilbert 43:31 Right. They're setting the precedent.

David Rosenthal 43:32 Others are sold to various European racers and nobility, including Italy's own most celebrated industrialist, Gianni Agnelli, the patriarch of the Agnelli family, which owns Fiat. Some might say the Henry Ford of Italy.

Ben Gilbert 43:52 The founding family of Fiat.

David Rosenthal 43:54 Yeah.

Ben Gilbert 43:54 Not only the owners, but the founders. He was one of the first Ferrari customers?

David Rosenthal 43:58 He was, indeed. He bought a 166 Barchetta.

Ben Gilbert 44:01 That's an amazing full circle.

David Rosenthal 44:03 Poetic.

Ben Gilbert 44:03 We'll come back to that at the end of the story.

David Rosenthal 44:05 Oh, yes, we will. So then the next year, Luigi Chinetti, he's a real believer in the potential of these machines that Enzo is building to make a lot of money and generate a lot of desire. So he takes one of the 166s and he enters it in the first running of the 24 Hours of Le Mans to be run after World War II, the first, you know, post-war running of Le Mans. And the, the car that he takes, Enzo doesn't think the 166 is ready for Le Mans. He doesn't wanna enter. But Chinetti says, "No, no, I'm gonna go do it." So he takes a privately owned car, owned by the British nobleman and gentleman driver, Lord Selsdon, and they win. They win Le Mans. [laughs]

Ben Gilbert 44:55 Oh, wow.

David Rosenthal 44:55 Like, the whole thing.

Ben Gilbert 44:56 Not endorsed by Ferrari the company, just a-

David Rosenthal 44:58 No

Ben Gilbert 44:59 ... sort of gentleman driver.

David Rosenthal 45:00 It is the first major international race victory for a Ferrari car, but it's not run by the Ferrari team. So this is a big deal. This is the first time it's being run after the war, and here's this startup Italian... Well, I mean, startup, everybody knows the heritage of Enzo Ferrari and who he is. But here's a Ferrari winning. And it's, like, the perfect illustration of the business model and Enzo's entrepreneurial genius. You know, he's got the brand. It's the Ferrari that won, but it doesn't even have to be his own racing team.

Ben Gilbert 45:31 Right. Oh, that's interesting. It creates just as much consumer desire for those cars, whether it's him entering the competition or not.

David Rosenthal 45:37 All anybody knows, and all anybody in America definitely knows, is a Ferrari just won Le Mans. And man, I gotta get my hands on one of those things.

Ben Gilbert 45:45 And it really validates the engine. I mean, this is famously Enzo Ferrari's reputation, is he was an engine guy. He's got a few sort of great quotes on this. His comment is, "I sell engines, and the car I throw in for free."

David Rosenthal 46:00 [laughs] Yes.

Ben Gilbert 46:01 [laughs]

David Rosenthal 46:01 Such a great quote. [laughs]

Ben Gilbert 46:03 Another great one, "Aerodynamics are for people who can't build engines." [laughs]

David Rosenthal 46:08 [laughs] That's like that one, uh, the AMD guy, uh, "Real men build fabs."

Ben Gilbert 46:12 Yes.

David Rosenthal 46:12 Yeah. [laughs]

Ben Gilbert 46:13 Yes. Eventually, Ferrari would become very much about aerodynamics in addition to engines.

David Rosenthal 46:18 Yes, yes. But we know where Enzo's heart always was.

Ben Gilbert 46:21 Yes. He also famously was a late adopter of new technology.

David Rosenthal 46:26 Oh, yeah.

Ben Gilbert 46:26 This is very, very different today, but in the early days, I mean, we're gonna talk about Formula 1 here shortly, but in those early days of F1, other teams figured out, hey, you should probably move the engine to be a mid-engine, sort of above the rear axle, n- not in the front of the car. And Enzo is very, uh, like, he's biding his time. He's like, "We'll wait and see," and he's got this idea [laughs] that in a carriage, the, the horse pulls the carriage.

David Rosenthal 46:49 Yeah, God put the horse in front of the carriage so the engine's-

Ben Gilbert 46:52 [laughs]

David Rosenthal 46:52 ... going in front of the car, yeah.

Ben Gilbert 46:53 Surely the engines sh- should be in the front, yes. And it took years to, to adopt the sort of correct, most balanced way to do it 'cause he not only wanted to be a late adopter of technology to sort of let other people prove it out, but also because he was in a position to do so. As a very early sort of luxury pioneer here, he realized that it only helped build the Ferrari myth-

David Rosenthal 47:17 Yes, exactly

Ben Gilbert 47:17 ... to talk about the old ways of doing things.

David Rosenthal 47:20 This is the point. It's all about the myth-building. Enzo knew exactly what he was doing.

Ben Gilbert 47:26 He even, there's funny entries in the historical record here where in the same month that Enzo is out there talking about how the engine belongs in the front of the car, in Maranello there are teams who are constructing next year's mid-engine car. So th- say one thing, do the other.

David Rosenthal 47:43 Yes, yes. Very Enzo. It's worth a moment here to talk about what actually is Ferrari at this point in time, after Le Mans, and when they're selling the 166 because it's pretty pioneering. It's three separate things all under the same roof. It's its own professional racing team, it is a world-class racing car constructor that builds cars both for its own team and for private clients, and it's also all of the support infrastructure that you need to do both of those things. So it's not like Chinetti and Lord Selsdon could just buy a 166 and drive it up to France and, like, enter Le Mans. You gotta tune these things for the race that you're driving, and Ferrari is providing that for his own team and for his clients. This is pretty revolutionary. Nobody else had really created something like this before. You know, other car manufacturers, as we talked about with Alfa or Mercedes or, or even for a point in time even Fiat, had their own racing teams, but they were separate operations. Like, think about the Mercedes racing team today. You know, it is a completely separate operation.

Ben Gilbert 48:58 Yes. Or most of the F1 operations today that carry the name of a constructor, of a, a car brand, they're actually separate companies that happen to be owned by-

David Rosenthal 49:07 Yeah, separate locations.

Ben Gilbert 49:08 Yes.

David Rosenthal 49:09 The whole thing. Like, yes, there is some tech transfer I'm sure from the Mercedes F1 team to AMG performance cars, but, like, it's a tenuous connection.

Ben Gilbert 49:18 Whereas in Maranello, they're sitting there on the same plot of land.

David Rosenthal 49:22 For many decades in the early history of Ferrari, it's the same people.

Ben Gilbert 49:26 Yep.

David Rosenthal 49:26 Same people making the same cars under the same roof. Pinnacle of motorsports.Road cars that you can buy, built and maintained and serviced by the very same people. That is an incredible proposition as a client. I mean, and if you think about it, it's really not that different from any other luxury company heritage out there, like Thierry Hermes and his sons making saddles for the nobility and the new haute bourgeoisie on the boulevards in Paris, and also making saddles for the jockeys jumping and racing on the weekends. They're the same people making the same saddles. Enzo and his team are the same people making the same cars.

Ben Gilbert 50:04 But I think you nailed this point that I think is a little bit lost today, which is even then, in 1950-ish, you're not just gonna go buy a Ferrari and then race it. This is a highly maintained, serviced thing that is not just like a product that you own. It is a bundle of product and services that get it ready for any given situation.

David Rosenthal 50:27 Yeah, we joked earlier about the, you know, you could drive these things on the street when they worked. That was part of the point, like they were built to be racing machines.

Ben Gilbert 50:37 Right.

David Rosenthal 50:37 And a lot of clients didn't race them or, you know, if they did race them, raced them not very well. But the point was you could. This was a weapon [laughs] . This is not a mode of transportation.

Ben Gilbert 50:49 That's a trade-off clients were intentionally willing to make. This is not the most practical car. It's gonna have all sorts of issues if I wanna use it as my daily driver, but it's an amazing race machine. And because I race, or maybe not because I race, I wanna own a race machine, and so I'm buying it, trade-offs and all.

David Rosenthal 51:03 Yes. Yes. So then in 1950, the pinnacle of motorsport arrives, the new Formula 1 World Championship Series, as we talked about at great length on our Formula 1 episode. And Ferrari, of course, would become one of the founding teams and the only F1 team continuously operating from the beginning of the sport all the way through to today.

David Rosenthal 51:31 But of course they are. [laughs] Participating in the pinnacle of motorsport, as we've just been talking about, is integral to what Ferrari is. And if you buy a Ferrari as a client, what you are buying is a direct connection to that ongoing heritage in a way that you are not with any other auto manufacturer.

Ben Gilbert 51:52 At least not at this point in history, in 1950. There have been many others who have tried that strategy since, obviously less successfully than Ferrari, and we'll talk about why. But yes, this is the Ferrari formula that they uniquely execute well on.

David Rosenthal 52:08 Yep. So as we continue the operatic life of Enzo Ferrari here, the re-entry into the racing business and the new pinnacle of motorsport in Formula 1 unfortunately comes with renewed tragedy. Enzo would hire the young Alberto Ascari, who is the son of one of his two mentors who died when Enzo was racing for Alfa Romeo, and Enzo would take Alberto under his wing, treat him almost like a surrogate son, until in 1955, Alberto is killed practicing in a Ferrari at Monza at exactly the same age that his father died. And Enzo vows that he will never become emotionally close to a driver again. He's witnessed too many deaths in his life. But unfortunately for Enzo, death during this time was only just beginning to reenter his life and his company.

Ben Gilbert 53:06 And the next death is really the one that kinda defines the rest of his life going forward.

David Rosenthal 53:13 Yes. But before we continue this beautiful tragedy of Enzo Ferrari and his company-

Ben Gilbert 53:20 Now is a great time to tell you about one of our favorite companies, Vercel. Vercel is building the defining developer infrastructure platform for the agentic era. And importantly, just like Ferrari, the crucial part is that every part of the system is engineered to work together at the highest possible level. It's all about performance. And they're not just a deployment platform or just a framework builder or just an AI cloud anymore. They've become the agentic infrastructure company.

David Rosenthal 53:52 And that title actually carries real meaning. It's infrastructure built for agents, where they are first-class users of the platform alongside human developers. It's also optimized for human developers who integrate agents into their workflows. And most importantly, it's infrastructure that acts with agency. So zero config deploys, automatic scaling, self-optimizing performance. The platform handles itself. Self-driving infrastructure, as, uh, they like to call it.

Ben Gilbert 54:19 Yes, which makes sense when you look at what's already running on Vercel. OpenAI, Polymarket, Stripe. Vercel built the modern platform for the web, which puts them in a really strong position for the agentic web.

David Rosenthal 54:32 Yep. Their AI gateway sandbox and AI SDK are trusted by everyone from solo founders to the largest global enterprises, and they just shipped something really exciting, Chat SDK, which lets you build agents across Slack, Teams, Google Chat, Discord, and more, all from a single code base. The AI SDK alone gets downloaded 10 million times a week, which is up from seven million times a week when we recorded our last episode on F1 last month.

Ben Gilbert 55:02 Vercel really is the one-stop shop for everything you need to build in the agentic era, tools, frameworks, infrastructure, the whole system engineered to work together. You can learn more at vercel.com/acquired. That's V-E-R-C-E-L.com/acquired, and just tell them that Ben and David sent you.

David Rosenthal 55:21 All right, so here in the 1950s, the truly, truly beautiful and truly, truly tragic opera of Enzo and Ferrari continues. First, let's talk about the beauty, the Ferrari 250 series, which for some of youMeans a lot. For the rest of you, we're talking about the Ferris Bueller car. [laughs]

Ben Gilbert 55:47 [laughs]

David Rosenthal 55:48 Undeniably one of the most beautiful automobiles ever manufactured.

Ben Gilbert 55:55 But David, did you know it is the Ferris Bueller car, but the car you see on screen is actually not a Ferrari.

David Rosenthal 56:03 Yes, it's a replica, and Ferrari sued the replica maker after the movie, right?

Ben Gilbert 56:08 That's right. Believe it or not, it is essentially a retrofitted Ford.

David Rosenthal 56:12 Yes. [laughs] Deeply ironic given what we are gonna talk about in a minute here.

Ben Gilbert 56:17 And then there's a second version of it that I think is even a less real drivable car that they used when it slid out the glass and fell down and smashed on the ground. So-

David Rosenthal 56:26 Burst into flames

Ben Gilbert 56:27 ... they did not wreck a real Ferrari. In fact, there is not even a real Ferrari in camera-

David Rosenthal 56:33 [laughs]

Ben Gilbert 56:33 ... in that entire movie, or at least in that shot.

David Rosenthal 56:35 Yes. You don't need to worry. No 250s were actually harmed-

Ben Gilbert 56:38 [laughs]

David Rosenthal 56:38 ... in the making of Ferris Bueller's Day Off.

Ben Gilbert 56:41 Yep.

David Rosenthal 56:42 So as we talked about, the first Ferrari that Enzo sold to clients was the 166, but less than 100 of them were ever made.

Ben Gilbert 56:53 Which must mean that there was demand for 101 because-

David Rosenthal 56:56 [laughs]

Ben Gilbert 56:56 ... there's the, the famous Enzo Ferrari quote that is the business strategy today, "Ferrari will always deliver one car less than the market demand."

David Rosenthal 57:07 [laughs] I think that actually might be the strategy today. Back then with the 166, there was demand for a lot more [laughs] than 101.

Ben Gilbert 57:17 Yes, that's true.

David Rosenthal 57:17 But they could only make 100. So in 1952, Ferrari comes out with the 250 series, and this is the first real production Ferrari. And over the next set of years throughout the '50s, Ferrari manufactures a few thousand of them, so, you know, still a very, very boutique, you know, essentially handmade sports car manufacturer, but a lot more scale than the 100 or so.

Ben Gilbert 57:45 Yeah, real production volumes.

David Rosenthal 57:46 Yeah. And as we were alluding to earlier, this car is just stunning no matter which variant of it you're looking at it. The, the one in Ferris Bueller's Day Off is a 250 GT California. It is truly, truly beautiful, and it was designed not by Enzo Ferrari or even anybody who worked at Ferrari. It was designed by Battista Pinin was his nickname, Farina, and his Pininfarina coachbuilders. So remember earlier when we talked about Enzo's first business venture was he was gonna be a coachbuilder, [laughs] turns out that was not his calling in life. But that was the calling in life for Pininfarina. He was basically the Michelangelo of car body coachbuilders, and Enzo totally realized it, totally glommed onto it, and built this beautiful partnership with Pininfarina, first Battista himself, and then his son Sergio, and then multiple generations. That lasted 61 years. This was a multigenerational partnership. It lasts all the way up until 2013.

Ben Gilbert 59:01 The LaFerrari?

David Rosenthal 59:03 The LaFerrari halo car was the first fully in-house designed Ferrari. And during those 61 years, I believe every single road-going production Ferrari, except for one I think, was designed by Pininfarina.

Ben Gilbert 59:18 Wow, it's quite the run.

David Rosenthal 59:20 It really is. So Luca Dal Monte in, in his book writes, "Enzo was looking for someone who could complement the mechanics of his cars with their body designs. Body and engine, elegance and power, had to go hand in hand and had to be born and grow together." He said that he was not looking for a tailor but for a coachbuilder who worked at his side and conveyed in the shape of the body the power and philosophy of his cars. "The coachbuilder," he said, "must be involved from the beginning of the project, not merely called upon to dress a finished project." It really was a partnership between Enzo and Pininfarina.

Ben Gilbert 59:58 As much as Enzo would kinda m-make noise about, "Oh, I just make engines and then, you know, we slap some aluminum on. I, I don't really care what the aluminum is," uh, no, these things were thoughtfully designed and built hand in hand.

David Rosenthal 1:00:10 Yeah. Pininfarina was like the Jony Ive to the Enzo Steve Jobs.

Ben Gilbert 1:00:14 That's a great analogy.

David Rosenthal 1:00:15 That, in fact, Jony Ive is gonna come back into the story [laughs] later as we shall see.

Ben Gilbert 1:00:19 Yep.

David Rosenthal 1:00:20 It's probably also worth a quick moment here to talk about the sort of Italian nature of beauty and luxury versus the French nature of beauty and luxury that we've covered on-

Ben Gilbert 1:00:32 Hmm

David Rosenthal 1:00:32 ... Hermes or LVMH. In both cases, French luxury and Italian luxury, what you are buying when you are buying one of these products is a mixture of craftsmanship and a dream that it represents, but the sort of nature of those two ingredients are different between French and Italian luxury. The primary ingredient in French luxury is the dream, and specifically the dreamlike connection to French royalty and this, like, mostly-

Ben Gilbert 1:01:03 Hmm

David Rosenthal 1:01:03 ... imagined past that, you know, if you buy a Birkin bag, or if you buy a Louis Vuitton trunk, you too can be like the bygone French royalty.

Ben Gilbert 1:01:13 Of the nobility.

David Rosenthal 1:01:14 Yeah.

Ben Gilbert 1:01:14 Yes.

David Rosenthal 1:01:14 Exactly. Exactly. You can live that dream. You can live that life. And the beauty that's associated with that is, you know, very regal, very soft, very refined, very elegant.

Ben Gilbert 1:01:25 And quiet. It's not yelling at you.

David Rosenthal 1:01:27 Yes.

Ben Gilbert 1:01:28 There, there's no engines involved.

David Rosenthal 1:01:29 [laughs] There are no engines involved, that is for sure. There are French car makers, but we're not gonna make any episodes about them, shall we say? [laughs]

Ben Gilbert 1:01:37 [laughs]

David Rosenthal 1:01:39 Italy, though, doesn't have the same kind of history.As France. I mean, it's got, like, the Roman history and all that ancient history, but it doesn't have the same royal lineage and history. So with Italian luxury, the primary ingredient is the craftsmanship.

Ben Gilbert 1:01:54 Mm.

David Rosenthal 1:01:54 And that's embodied in the design and the passion. The myth, the dream that you're buying is about reinforcing that passion, that emotion that went into the product. And the best way I can think of to illustrate this is just the centrality of the designers. Like, who are the designers at Hermes? If you really know the house, if you really know Hermes, you probably know who the designers are. But for most Hermes clients, it's just like, "Oh, this is Hermes."

Ben Gilbert 1:02:23 Yep.

David Rosenthal 1:02:23 In Italy, it's totally different. You could have Gucci, but it's like, well, which Gucci is that? Is that Tom Ford Gucci, or is that Gucci and the Wilderness Gucci? Or name your other designer, like Giorgio Armani or Donatella Versace or Valentino or Brunello Cucinelli today. Like, the actual people and the designers and their passion and their personality is much more central than in French luxury.

Ben Gilbert 1:02:45 That's interesting. I'm not sure I totally agree with the distinction, but a thing that I will say is you go to Paris to absorb the history and look at the fine museums, and you go to Italy to feel something.

David Rosenthal 1:02:57 To live the good life.

Ben Gilbert 1:02:57 To let loose.

David Rosenthal 1:02:58 Yeah.

Ben Gilbert 1:02:59 To, to live your life in the fullest, to let your hair down. I mean, it's a whole different side of life they are asking you to embrace when you are doing something distinctively Italian.

David Rosenthal 1:03:09 Yes. It is a very different kind of thing. And in this era, right after World War II, the greatest designers and the greatest innovators in Italy were the car designers. [laughs]

Ben Gilbert 1:03:21 And these are death machines.

David Rosenthal 1:03:22 Totally.

Ben Gilbert 1:03:23 You're on the edge. You're living every ounce of life that you possibly could to the fullest. These are death machines, and they are being designed by the era and the country's m- most esteemed designers.

David Rosenthal 1:03:35 Yes, yes. They are beautiful death machines.

Ben Gilbert 1:03:39 Beckoning to risk it all.

David Rosenthal 1:03:40 [laughs] That is exactly on point. And thus comes the yang to the yin of beauty, which is this tragedy and death that is such a part of Ferrari and motorsport. So we talked about in 1955, Alberto Ascari, the sort of, you know, surrogate son, if you will, to Enzo, is killed at Monza. The very next year, in 1956, Enzo's own son, Dino, who he's been grooming to take over the business-

Ben Gilbert 1:04:09 He's the heir

David Rosenthal 1:04:10 ... continue the family lineage. His heir, his actual heir, dies at age 24 of muscular dystrophy. So not in a race car, but a horrible, tragic disease.

Ben Gilbert 1:04:21 I mean, and that's even more tragic.

David Rosenthal 1:04:23 Yeah. It's more romantic if he had died in a race car.

Ben Gilbert 1:04:25 And Enzo has spent 24 years since Dino's birth keeping him safe. I mean, doing everything that he can control in his worldly power to not be around race cars.

David Rosenthal 1:04:36 Yes, yes. That's such a great point.

Ben Gilbert 1:04:38 I mean, he's not racing them. He's trying not to have Dino race them. He's not meeting the drivers anymore. He's trying not to get too wrapped up in the, the lives of the drivers, and yet his son is still taken from him in this horrible illness that he cannot control, and is pure randomness and awfulness.

David Rosenthal 1:04:55 That's such a great point. And it is truly shattering for Enzo. This is the shattering event among many shattering events in his life.

Ben Gilbert 1:05:01 Yep.

David Rosenthal 1:05:01 Because it's, of course, the grief for his lost son, but it's also the grief for his empire. Like, he, it's, it's gone. He has no heir anymore. The line won't continue. So after Dino's death, Enzo stops going to races. It's sort of like a self-inflicted punishment that, you know, if Dino can't be here with me to go to the races, then I will no longer travel to and go to the races, to my great terrible joys.

Ben Gilbert 1:05:28 And it is both the end of his family line, or so he believes at this point in history, but also it's the end of sort of the inherited company. That this is an old school era of capitalism where the company would be passed down through the male heir in the family.

David Rosenthal 1:05:44 Yep.

Ben Gilbert 1:05:44 I mean, today Ferrari is a publicly traded company with m- multiple families and owners and parent companies and holding companies involved. Enzo's assumption here is that none of that is gonna happen in the far future. It is that Dino, my son, will own it, and his descendants will own it.

David Rosenthal 1:06:02 Well, if you know anything about the shareholding structure of Ferrari today or its board of directors, you might say, "Wait a minute."

Ben Gilbert 1:06:10 There sure is a Ferrari who owns it.

David Rosenthal 1:06:12 Yeah. Isn't there a current member of the Ferrari board of directors named Piero Ferrari, who owns 10% of the company and is also the biological son of Enzo, who very much would've been alive at this time?

Ben Gilbert 1:06:27 Yep.

David Rosenthal 1:06:28 So Enzo had an affair. Enzo had many affairs. But one of his affairs with a woman named Lina Lardi produced a son, Piero. And the just devastatingly cruel reality of Italy in that time and place is that illegitimate children by law did not exist. They were invisible. Piero was invisible at this point in time. So Enzo knows he has this other son, who he loves, but who will never inherit his empire.

Ben Gilbert 1:06:56 And when you say invisible, he certainly isn't a Ferrari.

David Rosenthal 1:06:59 No.

Ben Gilbert 1:07:00 He's not taking that surname. Divorce was illegal at this point.

David Rosenthal 1:07:03 Yes. Divorce was not legal in Italy until the 1970s.

Ben Gilbert 1:07:07 So in the eyes of the law, like, not an heir.

David Rosenthal 1:07:10 Yeah.

Ben Gilbert 1:07:10 Not capable of being an heir.

David Rosenthal 1:07:12 A tragedy is the only word that I can think of to describe it. So that was 1956, and then in 1957 at the Mille Miglia race in Italy-

Ben Gilbert 1:07:26 Which th- this race, this is this amazing, uh, legendary race through Italy that ran 1,000 miles.

David Rosenthal 1:07:33 Yes.

Ben Gilbert 1:07:34 And it runs from 1927 to 1957. It is beautiful and bloody.

David Rosenthal 1:07:42 Yeah.

Ben Gilbert 1:07:43 There is at least one death in every single year except 1927And a small span, 1931 to 1934, and another two-year span of '36 to '37, but basically this was this race that everyone came out for and watched death.

David Rosenthal 1:08:03 Yeah.

Ben Gilbert 1:08:03 And Enzo has a quote on this. He loved the Mille Miglia. He said, "It is the race of the people. One may say that the whole of Italy leans forward with her eyes on the tarred strip of road somewhere along the course on Mille Miglia Day. It is a day when I feel that my life is useful."

David Rosenthal 1:08:21 Mm. Wow, I didn't realize that this 1957 race is the last one.

Ben Gilbert 1:08:25 It is the last one.

David Rosenthal 1:08:26 It ends with this. Wow. So at this race in 1957, again, two years after the F1 crash that killed his driver protege, one year after the death of Dino, a Ferrari flies off the road and into the crowd, killing the driver and nine spectators, including five children. And after the race, Enzo is charged by the Italian authorities with manslaughter.

Ben Gilbert 1:08:54 Was he even at the race?

David Rosenthal 1:08:56 I don't believe he was at the race, no.

Ben Gilbert 1:08:57 But he's the owner of the company that made the car, and there's a high death count.

David Rosenthal 1:09:01 Right. Well, it's not just that he's the owner, it's that he is the architect of this slaughter, basically, which is exactly what the Catholic Church charges him with. So not only is the Italian state, the police, you know, charging him with manslaughter, the church, the pope, comes after him. So the Vatican's official newspaper runs a story after the race with the headline of Industrial Saturn. Saturn, of course, being the Roman god who devoured his own children. And it calls Enzo, quote, "A modern Saturn become industrial tycoon, he continues to devour his sons, as in the myth, so unfortunately in reality." Ultimately, Enzo is acquitted after long process in the legal case, and he reaches a compromise with the Vatican that he can continue racing and Ferrari can continue to sort of exist as this sort of national champion within Italy.

Ben Gilbert 1:10:02 Oh, is this as long as they're not Italian drivers?

David Rosenthal 1:10:05 Yes, as long as he agrees to never hire Italian drivers. You know, basically, like you can kill young men as long as you don't kill our young men. [laughs]

Ben Gilbert 1:10:13 Ooh. Brutal.

David Rosenthal 1:10:16 Oh, man. But all of this, this whole era, this just weighs incredibly, incredibly heavily on Enzo.

Ben Gilbert 1:10:25 And you might be wondering, like, why do the drivers, why are they okay with the death? Why is Enzo okay with the death? Enzo viewed this as a fundamental human expression of striving. H- his comment is that one drives at high speeds in order to transcend oneself.

David Rosenthal 1:10:41 Yeah.

Ben Gilbert 1:10:41 And many of the drivers would sort of echo this same thing. Ken Miles, who is a very famous race car driver, actually on the Ford and Shelby, y- the US side that we'll talk about here shortly, his quote on this is, "I'd rather die in a racing car than get eaten up by cancer."

David Rosenthal 1:10:57 Hmm.

Ben Gilbert 1:10:57 And it's this idea that, look, we're gonna die, but I get to feel like I live the most life by putting my life at risk and living right on the limit.

David Rosenthal 1:11:06 I mean, it's kind of actually like a way of fighting back against death.

Ben Gilbert 1:11:11 Yes.

David Rosenthal 1:11:11 These cars are weapons to fight against death. You can come right up, and you can, like, stare death in the face, and you can hopefully say, "Not today," or-

Ben Gilbert 1:11:21 [laughs]

David Rosenthal 1:11:21 ... or not. So again, paradoxically, all of this tragedy is just great for business. This is part of the attraction. It only makes Enzo and his Ferraris more globally known, more romantic, more coveted. But it's like for Porsche when James Dean died in the Porsche 550 Spyder or in the modern era when Paul Walker died in the Carrera GT. That made those cars legendary. [laughs] That made people want them.

Ben Gilbert 1:11:49 Yep.

David Rosenthal 1:11:50 And here's Ferrari, it's even more. His cars are being labeled by the pope as forbidden fruit. If you're a young man or if you're a, more accurately, a middle-aged man having a crisis, like, you know, [laughs] what more could you desire?

Ben Gilbert 1:12:03 And, yeah, i- if the pope says y- you just can't do this one thing, what's the one thing you're gonna be interested in doing?

David Rosenthal 1:12:08 Yeah. [laughs]

Ben Gilbert 1:12:08 It's like, it's like a toddler. No, y- you, as long as you don't have candy-

David Rosenthal 1:12:11 Yeah

Ben Gilbert 1:12:12 ... you can do anything you want.

David Rosenthal 1:12:12 [laughs] Exactly. So throughout the late '50s, sales of Ferrari 250s are just ramping. You know, they are flying out of showrooms across the world, and particularly in America. By 1960, production reaches 300 cars a year. You know, they're making more or less one 250 every working day. And by 1962, it's 500 cars a year. And I believe at this point, distribution is sort of roughly divided a third, a third, a third between local Italian clients, American clients, and then the rest of Europe. And production just keeps growing by, call it, 50 to 100 cars a year throughout the early '60s, and there is plenty of demand.

Ben Gilbert 1:12:55 Yep.

David Rosenthal 1:12:56 By 1963, though, Enzo's now getting older. He turns 65. He's had all this death. He publishes his memoirs, which, you know, as we said before, are aptly titled My Terrible Joys. His plan by this point is that he'd be getting ready to hand the company to Dino, but Dino is dead. At a press conference that's held, one of the journalists asks Enzo, "You know, you're, you're older now. What will happen to Ferrari when you're gone?" And he replies with the famous quote from King Louis XV in France, "Après moi, le deluge." [laughs] Chaos, you know, the French Revolution, it's all coming after me. It's all gonna end with me. And of course, Piero at this point is already working in Ferrari. He's an employee at Ferrari, but it's a secret that he's Enzo's son, and he knows he can never-

Ben Gilbert 1:13:46 Ooh

David Rosenthal 1:13:47 ... inherit it.

Ben Gilbert 1:13:47 I didn't realize it was still a secret.

David Rosenthal 1:13:48 Yeah. I mean, people within the company know, but it's like you don't talk about, "Hey, Piero is actually Enzo's son." So the question that the journalist asked remains, though.What's gonna become of the company? [laughs]

Ben Gilbert 1:14:02 Right.

David Rosenthal 1:14:03 Well, enter the Ford Motor Company and Ford v Ferrari.

Ben Gilbert 1:14:09 Yes. So listeners, most of this is from the book Go Like Hell, which is the book that Ford v Ferrari is based on.

David Rosenthal 1:14:15 The movie, yep.

Ben Gilbert 1:14:16 So in 1963, Henry Ford II, which notably this is the grandson of Henry Ford I. There was Henry Ford, then Edsel, then Henry Ford II, and he's, he's looking to make his mark. I mean, he, at this point, it's third generation ownership. Ford is this great American company. There's a lot of people that are sort of throwing barbs saying, "Well, I mean, it was your grandfather, and then that was your father, but, like, how much of this is really you?" That's starting to kinda weigh on him. He decides that Ford needs to be in the racing business to change their image and stimulate sales for the new generation. Now, over in the racing land of Ferrari, they're on a hot streak. We've been talking about their production at this point in time, but they had just won Le Mans in 1958 and then all in a row, 1960, '61, '62-

David Rosenthal 1:15:05 Mm

Ben Gilbert 1:15:06 ... '63, '64, '65. So if you are interested in entering racing, either you gotta beat Ferrari or you gotta own Ferrari.

David Rosenthal 1:15:14 Yeah.

Ben Gilbert 1:15:15 So The Deuce, as Henry Ford II was known. [laughs]

David Rosenthal 1:15:19 What a great racing moniker, The Deuce.

Ben Gilbert 1:15:21 Right? Right? Oh, and Enzo's got some great ones, too.

David Rosenthal 1:15:25 Yeah, I mean, ultimately in his older age, he becomes The Grand Old Man, but what was he before that?

Ben Gilbert 1:15:30 Il Commendatore. [laughs] And The Drake.

David Rosenthal 1:15:33 Yes.

Ben Gilbert 1:15:33 He's, he's got some great ones. So The Deuce over in America gets word, weirdly through their German subsidiary, that a mysterious letter has arrived from the German Consulate in Milan that an internationally known Italian automobile factory was interested in selling.

David Rosenthal 1:15:54 Hmm.

Ben Gilbert 1:15:55 S- so already you should k- kind of-

David Rosenthal 1:15:57 All right, there's something going on here

Ben Gilbert 1:15:58 ... be a little suspicious of how this information comes to Ford. B- but Ford is not. Ford just goes, "Oh, this is interesting. Let's try and figure out who's thinking about selling." Well, it doesn't take him long to figure out that it is Ferrari.

David Rosenthal 1:16:10 It's Enzo.

Ben Gilbert 1:16:10 Yes. They begin sort of a process to try to buy it, and Ford at this point has basically no racing capability of its own. This is an entirely new muscle for them. So they make an offer to buy Ferrari. The asking price was originally 18 million, but somehow Ford manages to easily negotiate it down to 10 million. So again, a little mysterious, l- little suspicious. Like, maybe that was a little bit too easy.

David Rosenthal 1:16:39 [laughs]

Ben Gilbert 1:16:40 The agreement that is drafted and hits Enzo's desk, I mean, think about what could've been. Th- this is the craziest pitch. There are two companies that are formed. One is called Ford Ferrari. It is 90% owned by Ford, and it would make road cars. There's a second called Ferrari Ford that's 90% owned by Ferrari. That's the racing team.

David Rosenthal 1:17:05 The racing team, yep.

Ben Gilbert 1:17:06 So this document is on Enzo's desk. He digs into it, and he's looking through the fine print, and he kinda realizes, "If I want to go racing and Ford does not want to go racing, who decides?"

David Rosenthal 1:17:19 [laughs]

Ben Gilbert 1:17:19 And of course, Ford says, "Well, we're, we're buying your company. We have the final say."

David Rosenthal 1:17:24 Ultimately, I control the budget.

Ben Gilbert 1:17:26 Right. So Enzo, of course, hates this, and in dramatic fashion, he blows up the deal right at the finish line, all while the papers had been reporting, you know, the information leaked that the Americans were about to buy this Italian national treasure. Makes big headlines when the deal blows up. You can imagine why this is in Ferrari's public relations interest based on e- everything that we've been describing about their business strategy, of course. Then Henry Ford II is absolutely incensed, and he has this great quote. In May of 1963, he goes to his lieutenants and he says, "We will go to Le Mans and beat his ass."

David Rosenthal 1:18:02 [laughs]

Ben Gilbert 1:18:02 "We're gonna race him."

David Rosenthal 1:18:05 [laughs] And Enzo's probably like, "thick and dumb Americans" the whole time. [laughs]

Ben Gilbert 1:18:09 [laughs] Yes.

David Rosenthal 1:18:10 There's this great quote in the Bracciante's book about Enzo and his opinion of the Americans, which is something like, "He realized the fundamental truth to selling European luxury goods to Americans. Treat an American like a hick, and you'll own him for life." [laughs]

Ben Gilbert 1:18:28 Oof. That, that hurts.

David Rosenthal 1:18:30 Yeah.

Ben Gilbert 1:18:30 That hurts. So the whole Ford v Ferrari movie is what happens next, and it's, it's a great movie with Christian Bale and Matt Damon. And while it's, of course, dramatized, the bones of the story are actually pretty factually correct.

David Rosenthal 1:18:42 Yep.

Ben Gilbert 1:18:42 So I highly recommend it. So what happens is Ford, who at this point says, "We got an unlimited budget. We just gotta go beat these guys," enlists the help of Carroll Shelby and the driver Ken Miles and sort of a real crack team of American mechanics and, and racers. They actually do, after a few years, beat the Ferraris in the 1966 Le Mans race, finishing with Fords in first, second, and third. It's this incredible story, but ultimately, this is a complete sideshow.

David Rosenthal 1:19:12 Yeah, what's, what's really going on? What are Enzo's true intentions here?

Ben Gilbert 1:19:16 So this is done, of course, to market the exclusivity of Ferrari and how they're the mark to beat, and it's a great tactic to sell cars. But it's also to signal that Enzo is willing to do a deal.

David Rosenthal 1:19:28 Hmm.

Ben Gilbert 1:19:28 He is willing to sell the company. That's why he wanted all the papers writing about the fact that he was, but it had to be on his terms with the right partner, and he had to be able to go racing.

David Rosenthal 1:19:38 Yep. It's kinda like Enzo and Ferrari got a dual benefit out of this whole saga. One, as you said, like, this is only great for the myth and the legend of Ferrari, of like, "Oh, we were going to sell to these big, ugly Americans, but they wanted to take our racing from it."

Ben Gilbert 1:20:00 Right.

David Rosenthal 1:20:00 "And we said, 'No, you'll have to kill us in order to take it.'"

Ben Gilbert 1:20:03 Exactly. And it is this Italian national treasure. I mean, that's real. That is the cultural export of Italy.

David Rosenthal 1:20:08 Yep.And it was a way to signal to the market like, "Hey, I might be open to a deal."

Ben Gilbert 1:20:13 Yes. So any last little misconceptions you have about Enzo Ferrari not being an excellent business person and negotiator, that should be completely dispelled at this point. So David, what happens next?

David Rosenthal 1:20:26 So all the Ford versus Ferrari drama was going down between the years of 1963 and call it 1966, '67.

Ben Gilbert 1:20:36 Yep.

David Rosenthal 1:20:37 Through all this, Enzo's doing great. He's in his late 60s at this point, but he's loving life, as much as Enzo is capable of loving life. He's healthy. He's reinvigorated by this battle. Everything's going great. And then after all the Ford drama, in 1968, Enzo contracts kidney disease, and it's pretty bad. Like, he thinks this is probably actually going to be the end.

Ben Gilbert 1:21:05 And statistically, he was right.

David Rosenthal 1:21:07 Yeah. And it gets so bad, as we'll see in a moment, that shortly after this in 1970, he goes into organ failure and has to be hospitalized for months. Like, he, he really should have died at this point-

Ben Gilbert 1:21:19 Yep

David Rosenthal 1:21:19 ... in time. But as always for Enzo, fate has other plans.

David Rosenthal 1:21:24 So once he comes down with the disease, he gets serious about actually selling the company. And he sniffs around, he talks to his old buddies at Alfa Romeo. They sort of work on a deal not to Enzo's liking. Really, at the end of the day, though, there's only one correct buyer for Ferrari, and it's Gianni Agnelli and the Fiat empire. So in 1969, Enzo strikes a deal with Gianni to sell 50% of Ferrari to Fiat immediately there in 1969 with a secret agreement that triggered upon Enzo's death, which again he thinks is imminent, Fiat will acquire another 40%, taking their stake to 90%, and 10% of the company will transfer to Piero. Once Enzo dies, his plan is to, as much as he can, legitimize Piero, give him the Ferrari name, and give him a 10% stake in the company so that the bloodline, to some extent, as much as it possibly can in that time and place, will continue. And part of the deal with Fiat, just like he wanted with Ford, is that, "Fiat, you can take control of the road car business, but I'm gonna retain final authority over racing. You know, I know that my end is near, and I wanna spend my last days on this earth doing what I love, which is running the racing team."

Ben Gilbert 1:22:57 The incredible irony was the end was nowhere near.

David Rosenthal 1:23:01 Nowhere near. [laughs]

Ben Gilbert 1:23:02 And actually, th- the world would change enough between this moment and when he would eventually pass that Piero is able to take over as Piero Ferrari, son of Enzo.

David Rosenthal 1:23:13 Yes. Yes, yes.

Ben Gilbert 1:23:14 So how many years was it between, uh, 1969 is when the 50% sale to Fiat, he doesn't pass away until-

David Rosenthal 1:23:22 He lives another 20 years.

Ben Gilbert 1:23:23 Yes.

David Rosenthal 1:23:23 Yeah, 19 years. Yeah.

Ben Gilbert 1:23:24 1988. Like, he lives until I was born-

David Rosenthal 1:23:26 Yes

Ben Gilbert 1:23:26 ... is, is where's the sort of the end of his life.

David Rosenthal 1:23:29 Well, he lives to launch the F40, which is the last car that Enzo launches.

Ben Gilbert 1:23:33 So there are two really interesting things about this deal. One, Enzo started his career by applying for a job at Fiat-

David Rosenthal 1:23:41 Yes

Ben Gilbert 1:23:41 ... and was turned down. So that's a total full circle moment there. The other full circle moment is that Gianni Agnelli was one of the very first Ferrari customers-

David Rosenthal 1:23:51 Yes

Ben Gilbert 1:23:52 ... of their road cars. It's amazing. And when you look at the actual deal, this, this blew my mind, David. If you do the lira to US dollar exchange rate in 1969, they ended up selling half the company for a little under three and a half million dollars-

David Rosenthal 1:24:09 Wow

Ben Gilbert 1:24:09 ... valuing all of Ferrari at 6.8 million.

David Rosenthal 1:24:12 Wow. Oh my goodness.

Ben Gilbert 1:24:15 Enzo really wanted to do this deal, and I think he determined at this point in history, I'm, I've not seen this written in a- anywhere, but I'm reading into this, you know, even Ford thought it was worth somewhere between 10 and 18 million earlier in the decade. Enzo basically had one bidder.

David Rosenthal 1:24:31 Mm.

Ben Gilbert 1:24:31 And he thought, "I have no exit path other than this. This needs to land with Fiat, and whatever the price is, it is." And so I think Fiat basically got a steal on this because it needed to stay in Italy, and it needed to go to a strong, thriving car company.

David Rosenthal 1:24:47 Car company, and, and family in the Agnellis.

Ben Gilbert 1:24:49 Yes.

David Rosenthal 1:24:49 Interesting. Well, all of this just underscores the most critical point here. I think this is probably the moment in history where the false legend that Enzo only cared about racing and wasn't a real entrepreneur emerges from. 'Cause if you look at the fact pattern, it makes sense here. Like, he wanted to spend his last days racing. He did this not great deal with Fiat.

Ben Gilbert 1:25:11 Yeah.

David Rosenthal 1:25:11 The only reason this happened is 'cause he truly thought he was about to die.

Ben Gilbert 1:25:16 Yep.

David Rosenthal 1:25:16 And he really did just wanna spend his last days on earth running the racing team, and he wanted to ensure continuity for the company and a role for his son, Piero, going forward. That's what happened here.

Ben Gilbert 1:25:29 The state of Ferrari is kind of grim at this point, too. The factory needed investment. The racing program was unbelievably expensive. They're starting to face very real competition from Lamborghini. They were founded in 1963 specifically to challenge Ferrari, at least Lamborghini Motors, which we'll come back to. And there was manufacturing headaches happening because of Italian labor unrest. And so asking someone to take on Ferrari's operations was a tall order i- in addition to needing to sell.

David Rosenthal 1:26:02 Yes. I'm glad you brought up Lamborghini. Lamborghini had just launched the Miura, the Lamborghini Miura, at this point in time, which was a truly excellent car.

Ben Gilbert 1:26:11 Yep.

David Rosenthal 1:26:11 Like, a better Ferrari than a Ferrari at the time. So there was real headwinds in the business, and this is really why Fiat and Gianni Agnelli had to be the buyer to steward Ferrari through this period. Now, as we said earlier,Fate had plans other than death for Enzo. Right after the sale in 1970, Enzo does go into organ failure and is hospitalized. He's away from the business for many months, which really makes it incredibly fortuitous that he had already done the deal with Fiat, so there was management to keep the company running while Enzo is away. Miraculously, though, he recovers. [laughs] And in the spring of 1971, Enzo, the grand old man, is back in Maranello at the head of Ferrari. But it's a Ferrari that he barely recognizes from when he left.

Ben Gilbert 1:27:10 Hmm.

David Rosenthal 1:27:10 Fiat has come in, and this is where he intersects with another young man who would go on to carry the legacy and the spirit of Ferrari for really the next 40 years and into the next generation, and build Ferrari what it is today.

Ben Gilbert 1:27:32 With a break in between.

David Rosenthal 1:27:33 With a little break in between. Luca di Montezemolo. But before we tell Luca's story, now is a great time to thank our longtime friend of the show, ServiceNow.

Ben Gilbert 1:27:45 Yes. A year ago, nobody was talking about AI agents, and now if you are a large enterprise, you probably have AI everywhere, copilots and models and agents all spread across every team.

David Rosenthal 1:27:58 Which sounds great until you realize none of it is really connected.

Ben Gilbert 1:28:02 Exactly. This actually reminds me of Ferrari on race day. It's not just about having the fastest car. It's about coordinating thousands of signals across tires and fuel and brakes and more, all in real time to make the right decision. That is where companies are with AI right now, tons of intelligence, but not a lot of control.

David Rosenthal 1:28:21 And that's the shift. Intelligence is becoming a commodity. The hard part now is making all of that AI actually work together inside a real organization securely, reliably, and in sync.

Ben Gilbert 1:28:32 That's what ServiceNow has been building for over 20 years. Today, they run the workflows behind more than 85% of the Fortune 500, which amounts to over 80 billion workflows a year. So in a very real way, a big part of the world already works with ServiceNow.

David Rosenthal 1:28:47 And with their AI control tower, they're giving companies a single place to manage all of it, not just agents, but every AI system across the business.

Ben Gilbert 1:28:54 Yes. So listeners, it's not just about AI that thinks. It's about AI that actually works. If you're thinking about how AI really operates at scale, go check out servicenow.com/acquired and just tell them that Ben and David sent you. Okay,

Ben Gilbert 1:29:10 so David, Luca di Montezemolo, at least the first act of Luca anyway.

David Rosenthal 1:29:16 [laughs] Of Luca's story, yes. So in 1971, when Enzo gets back to the office in Maranello after his hospitalization, he tunes in to a fateful talk radio show where he discovers a young man who will bring a breath of fresh air into his life, Luca. So Montezemolo, to many of you listening, is already a living legend. I mean, as much as anyone in Ferrari history besides Enzo, Luca di Montezemolo is Ferrari. And as I mentioned, I was very lucky to get to speak with him for a few hours and research for this episode, and I also got to watch this great movie about him that has just been made. It's called Seeing Red. It's with Chris Harris, the Top Gear presenter.

Ben Gilbert 1:30:08 Yeah. How did you get that? 'Cause that's not out yet.

David Rosenthal 1:30:11 Yeah, it's not distributed outside of Italy yet, but I got a link to watch it. It's directed and produced by Manish Pandey, who wrote and produced Senna, the Senna movie.

Ben Gilbert 1:30:20 Wow.

David Rosenthal 1:30:20 It's really, really excellent. When it's available in whatever geography you live in, very, very, very much worth watching. So Luca was born in 1947, the same year that the modern Ferrari commenced operations.

Ben Gilbert 1:30:36 Very poetic.

David Rosenthal 1:30:37 In Bologna in Italy, but he moved to Rome as a child, where his best friend growing up is Cristiano Ritazzi, who is the son of Susanna Agnelli, Gianni Agnelli's sister. So Luca grows up almost like a member of the Agnelli family.

Ben Gilbert 1:30:56 Hmm.

David Rosenthal 1:30:56 His best friend is, you know, one of the Agnelli heirs. And Luca comes to develop a close relationship with Gianni, and he would say Gianni was like a combination of an older brother and a father for me. So in 1970, young Luca moves to New York City to go off to study international law at Columbia Law School. Around the same time, though, he's also pursuing another career as a rally car driver.

Ben Gilbert 1:31:26 Really?

David Rosenthal 1:31:27 Like a rally car driver, right, yes, yes. I don't think I've ever seen a Ferrari rally car.

Ben Gilbert 1:31:33 I don't think these two things have ever intersected. These universes are about as far apart as you could possibly get.

David Rosenthal 1:31:40 [laughs] Yeah. But this is how Luca starts in motorsport. And so that one fateful day in 1971, Luca the rally car driver is a guest on this popular call-in talk radio show, and an audience member calls in to basically accost Luca and chastise and criticize the entire motorsport industry. Kind of much like the Pope in 1957, starts just laying into Luca, this caller, talking about how motor racing is evil, it's dangerous, it's bad for the environment. Like, "This is a sport just for rich people. It has no value in society." And Luca, impassioned, rises to the occasion, and he gives this passionate defense of motor racing. He speaks eloquently, poetically. He shuts down this caller and really gives this incredible response. And who happens to be listening to the program but Enzo Ferrari.

Ben Gilbert 1:32:40 Unbelievable.

David Rosenthal 1:32:41 You just can't make this stuff up. You really cannot make this up.

Ben Gilbert 1:32:44 And he's kind of this perfect person, 'cause if Enzo's gonna take a liking to him here, I don't know what you're about to say, but if he's kind of Enzo's guy, but he's also-A pseudo family member of the Agnelli family. It's kind of this perfect candidate pool of one.

David Rosenthal 1:32:57 Yes. So Enzo calls up the radio station and he's like, "I gotta know who this kid is. I wanna get in touch with him."

Ben Gilbert 1:33:05 [laughs]

David Rosenthal 1:33:05 "Who is this rally car driver?" And literally the quote, Luca told me that this is what Enzo told the radio station. Enzo said, "This boy has big balls." [laughs] "I wanna talk to him." [laughs]

Ben Gilbert 1:33:17 Wow.

David Rosenthal 1:33:17 Uh. So Luca and Enzo meet, and Enzo says to him, "I like you. You know, you've got big balls." [laughs] "I've been away from my business for too long, and I need some help. What I really need, I need an assistant, but I need a spy who can go-"

Ben Gilbert 1:33:36 [laughs]

David Rosenthal 1:33:36 "... throughout the organization and report back to me what is actually going on in my company." [laughs]

Ben Gilbert 1:33:42 Mm.

David Rosenthal 1:33:43 You don't have to ask Luca twice here. He takes the opportunity and goes to work for Enzo as his assistant here in the early '70s. Now of course, at some point along the way here, Enzo also learns of Luca's connection to the Agnelli family-

Ben Gilbert 1:33:59 [laughs]

David Rosenthal 1:33:59 ... which only makes him even more attractive. He's like, "Ooh, now I can have a spy at Fiat and the Agnelli family too, so great." [laughs]

Ben Gilbert 1:34:06 Right.

David Rosenthal 1:34:06 So the first thing that Enzo assigns him to do is go figure out what's going on with sales of the road car business. Like go spend some time with the distribution network, understand who the clients are, understand who the collectors are, who are the dealers. So Luca does. He comes back, he reports. It's not good, as you were alluding to, Ben. This is a pretty tough time for Ferrari here in the '70s. The oil crisis is underway. Any car with an engine size over two liters was taxed at a incremental 40% in Italy-

Ben Gilbert 1:34:40 Mm-hmm

David Rosenthal 1:34:40 ... and throughout much of Europe. The whole sports car industry is basically in the dumps. So Luca reports all this back to Enzo, and Enzo's like, "Okay, great. You passed your first test. Things aren't good on the road car side of the business, but like at the end of the day, that's Fiat's problem now. Okay. My real assignment for you, [laughs] I want you to go to the next Formula 1 race. Just go, just observe. Just tell me what you think is going on with the team."

Ben Gilbert 1:35:08 Yep.

David Rosenthal 1:35:08 Now at this point here in like 1973, '74, things are really bad for the Ferrari F1 team. They haven't won a drivers or constructors championship for 10 years, a historic drought for Ferrari. So Luca goes, he observes a race, and he calls Enzo up and he says, "Hey, look, I advise that we just take the cars home and we don't race them. We have no chance of winning."

Ben Gilbert 1:35:34 Oof.

David Rosenthal 1:35:35 And Enzo's like, "Okay. Okay. Well, we're not gonna take them home, but we need to get competitive again. What are, what are we gonna do?" And Luca's like, "The issue is that the sport has changed. This isn't just an engine sport anymore or power."

Ben Gilbert 1:35:50 Mm-hmm.

David Rosenthal 1:35:51 "We're now in the era of Colin Chapman and Lotus and-"

Ben Gilbert 1:35:54 Aerodynamics.

David Rosenthal 1:35:55 "Aerodynamics and the chassis is way more important, and the Ferrari team is stuck focused 100% on the engine. Like we have no chance of winning." So Enzo says, "Okay, here's what I'm gonna do. I'm gonna make you, Luca, the team manager of the Ferrari Formula 1 team, and your mandate is to fix this. I can't fix it. I'm Enzo. I'm like the engine guy. You go in."

Ben Gilbert 1:36:20 Mm.

David Rosenthal 1:36:21 "You can be the new blood. You can fix this."

Ben Gilbert 1:36:23 And this is amazing because this is quite the quick promotion for Luca. I mean, it's like a guy he found that he brought in to be his assistant, I mean, he was much more than an assistant, but that was his title.

David Rosenthal 1:36:35 Yeah, he's not even 30 years old yet.

Ben Gilbert 1:36:36 Then suddenly you're managing the Formula 1 team, which historically is the driver that creates all the lust that sells the cars. Like this needs to start working.

David Rosenthal 1:36:47 Yes. Oh, Luca has this great, great quote on the nature of the connection between Ferrari's performance on the track and the business selling road cars. He says, "There is not a direct correlation between Ferrari victories on the track and the number of cars that you can sell. But if for many years you do not win, it means that you do not add wood to the fire of the myth."

Ben Gilbert 1:37:12 Mm.

David Rosenthal 1:37:12 "The myth of Ferrari is based on competition on cars. In the competition you can win or you can lose, but you cannot only lose."

Ben Gilbert 1:37:22 Hmm.

David Rosenthal 1:37:22 It's so perfect.

Ben Gilbert 1:37:23 It is perfect.

David Rosenthal 1:37:25 So Luca comes in as team manager, and he revamps the team. He brings in great chassis folks, he brings in great aerodynamics folks, and the most important thing, he goes out and recruits Niki Lauda to come in as their number one driver. And in 1975 with the new team, the new approach, Luca as manager, Niki Lauda wins the drivers championship for Ferrari, and Ferrari wins the constructors championship, ending the 10-year drought. And there is great rejoicing. Luca is now revered across Italy, he's not even 30 years old yet-

Ben Gilbert 1:38:04 Wow

David Rosenthal 1:38:04 ... as this young hero who has come in and saved essentially the national team of Italy from this despairing period.

Ben Gilbert 1:38:13 It's amazing. And the funniest thing is imagining as you describe these conversations that Luca's off doing stuff and he comes back and reports to Enzo. W- where is Enzo's house in all this when he's sort of like recovering from the illness?

David Rosenthal 1:38:25 [laughs]

Ben Gilbert 1:38:25 And it is around the corner from the Ferrari factory in Maranello. It's this farmhouse. And in this exact period, actually a couple years before in 1972, so after the illness but before the Niki Lauda F1 victory, they actually build a-Full racetrack adjacent to Ferrari's headquarters that goes around Enzo's house. So Enzo can walk out of his farmhouse and watch them testing the cars on this, I mean, truly unbelievable custom racetrack only for Ferrari's research and development.

David Rosenthal 1:39:02 Yes. It's incredible. But he needs Luca, the young guy, to come in and change the culture. Enzo can't do it. He's too bound. He's a prisoner of his own myth and his own legend.

Ben Gilbert 1:39:11 Yep.

David Rosenthal 1:39:11 Uh, so all of this is great, truly, truly great. There is rejoicing throughout the country, but there's just one problem, which is Enzo's pretty used to Enzo being the guy. [laughs]

Ben Gilbert 1:39:22 [laughs]

David Rosenthal 1:39:22 So he starts to get a little jealous of young Luca. Now, they always have a great relationship. There's not, like, personal animosity here, but a couple things happen. The next year in F1, there's the truly crazy tragedy of Niki Lauda catching on fire.

Ben Gilbert 1:39:40 Horrific.

David Rosenthal 1:39:41 Actually catching on fire at the Nürburgring. He's severely burned. He should have died. He does not die, and he wants to come back and race. He's in contention for the championship. He ends up not winning the championship that year, even through this great act of bravery to try to come back.

Ben Gilbert 1:39:56 But almost does, remarkably. If you're interested in this, go watch the movie Rush. It's awesome.

David Rosenthal 1:40:01 Yes. So good. Enzo, though, remember, he's very experienced with these race car drivers and their brushes with death. Enzo, I think, kind of loses faith in Lauda as a driver after that. He's like, "Oh, no, he fears death now."

Ben Gilbert 1:40:15 Mm.

David Rosenthal 1:40:16 Luca still believes in him, though, so there's, you know, some conflict there. Again, it never gets personal. I think they truly do always kind of love and respect each other, but all of this combines. Luca can't stay at Ferrari, so they ultimately decide it's better if Luca leaves the F1 team, leaves day to day at Ferrari, and goes to work for Fiat in Turin. He remains on the board of Ferrari, Luca does, but he goes day to day to Turin and kind of closer to the Agnelli empire. And I think Enzo thinks that he's gonna still have a spy now in Fiat with Luca, which maybe he does, maybe he doesn't. But sadly, this is another tragedy. This is kind of the end of the glory for Ferrari in racing during Enzo's life. They had this great moment together, and for the rest of Enzo's life, there's some ups and downs, but mostly the Ferrari glory on the racetrack is gone and doesn't return until Luca returns after Enzo's death.

Ben Gilbert 1:41:21 Much later. And there's this glorious, amazing return of Luca, and there's this unbelievable run in Formula 1, and the Ferrari road car business becomes stronger than ever, but basically none of it in Enzo's lifetime. In fact, the last 10-plus years of his life is a real whimper-

David Rosenthal 1:41:40 Yeah

Ben Gilbert 1:41:40 ... in the history of Ferrari. The road car business falls on some real ugly times.

David Rosenthal 1:41:45 Yeah. It's funny, I, I had written in my script here about the last days of Enzo Ferrari. They do mostly end with a whimper, not a bang. But there is one little bang. [laughs]

Ben Gilbert 1:41:56 There absolutely is.

David Rosenthal 1:41:57 His last car, Ferrari's first official supercar, halo car. There were unofficial GTO homologation versions of race cars, and now those things sell at auction for, like, 40, 50 million or more.

Ben Gilbert 1:42:13 One of them sold for 70 million.

David Rosenthal 1:42:15 Yeah. So those cars existed in Enzo's past, but there was never a model that was made just to be a available for purchase by our best clients, but a true, true supercar until the F40, which fittingly is the last car that Enzo makes before he dies in 1988.

Ben Gilbert 1:42:37 All right, so tell us about the F40.

David Rosenthal 1:42:39 Oh, man. [laughs] Talk about a death machine. [laughs]

Ben Gilbert 1:42:45 [laughs]

David Rosenthal 1:42:45 The F40 was just this incredible raw beast. If you look at pictures or video of the interior of the F40, [laughs] this is not a luxurious vehicle. There's no leather. The door handle is a piece of string. This is the rawest racing machine in its purest form.

Ben Gilbert 1:43:06 It is, "Can we throw out everything that is not absolutely required so we can have the lightest weight vehicle possible?" And it's crazy. We'll put a photo of the interior of this cabin i- in the email. It is a lot of carbon fiber, but not, like, cool-looking carbon fiber.

David Rosenthal 1:43:22 No, like raw carbon fiber.

Ben Gilbert 1:43:24 "This is the absolute minimum that we could ship." And David, to your point, this thing, while it is a supercar the same way that the F50 and the La Ferrari and the Enzo and the F80 are supercars, this is not a luxury supercar.

David Rosenthal 1:43:40 No.

Ben Gilbert 1:43:40 When you're sitting in this car, you're not sitting in here thinking like, "I'm a rich person." You're sitting in here thinking like-

David Rosenthal 1:43:45 "This thing is trying to kill me [laughs] at every angle."

Ben Gilbert 1:43:47 "I'm in some sort of test harness."

David Rosenthal 1:43:49 Yeah.

Ben Gilbert 1:43:50 Yes.

David Rosenthal 1:43:50 Oh. Yeah. I mean, the videos online of people crashing Ferrari F40s are tragic, of course, because they're amazing machines, but if you get in this car and you do not know exactly what you're doing, you're gonna crash.

Ben Gilbert 1:44:06 It's interesting. The F40 sort of punctuated the end of Enzo's life or the end of the Enzo era in this really interesting way because it is a supercar the same way that the modern cars are about supercars. They're, they're these high-performance machines. But it had every flaw of the Enzo era of Ferrari. It wasn't practical. It was purely about being a race car and made every compromise possible to get there.

David Rosenthal 1:44:33 Yep, Ferrari will never make another one like it again. We should say also what F40 means. It was the 40th anniversary of the commencing of operations of the modern Ferrari, so from 1947 to 1987 when the F40 came out. SoThen the next year, at age 90, the grand old man does finally pass away. Enzo Ferrari dies in the summer of 1988. Poetically, just after his death, Ferrari, in the next Formula One Grand Prix that is run after Enzo's death, finishes one-two.

Ben Gilbert 1:45:14 [laughs]

David Rosenthal 1:45:15 Wins at Monza.

Ben Gilbert 1:45:17 Oh my God.

David Rosenthal 1:45:17 The Italian Grand Prix. And that is the only race that Ferrari won that season.

Ben Gilbert 1:45:24 [laughs]

David Rosenthal 1:45:25 [laughs] Either the gods were smiling upon Enzo in death-

Ben Gilbert 1:45:31 Or Bernie Eccleston's fix was in.

David Rosenthal 1:45:33 Yes, the fix was in.

Ben Gilbert 1:45:33 [laughs]

David Rosenthal 1:45:33 Either way, it was poetic. For the next couple years, though, oh man, the sort of slow motion disaster at Ferrari continues unabated on both sides of the business.

Ben Gilbert 1:45:45 Real quick, before that, though, it's worth highlighting. So th- the Agnelli family ends up getting the 40%, Piero ends up getting the 10%, but an interesting thing to note, the valuation is extremely different this time around.

David Rosenthal 1:45:59 Yeah, you found detail on this. I couldn't find it.

Ben Gilbert 1:46:01 So a good friend of the show, Arvind Navaratnam from Worldly Partners, uh, scoured all of the old annual reports that he could find. And in the 1988 annual report, it reports the amount of lira to acquire the remaining 40% of Ferrari.

David Rosenthal 1:46:18 Ooh, I'm so curious. What was it?

Ben Gilbert 1:46:20 If you do the exchange rate at that time, it is $77 million, which valued the company at $192 million in 1988. Much different than the, what was it?

David Rosenthal 1:46:32 Six, seven million in 1969. Yeah. I mean, two things are simultaneously crazy right here. One, how much the valuation increased from the first time. Second, that Fiat and the Agnelli family [laughs] acquired 40% of Ferrari for [laughs] a valuation of 192 million. Unbelievable.

Ben Gilbert 1:46:54 Or that they acquired 90% of it for, what, $72 million.

David Rosenthal 1:46:59 Yeah, in aggregate.

Ben Gilbert 1:47:00 Yeah.

David Rosenthal 1:47:00 Wow. Wow. Wow.

Ben Gilbert 1:47:02 Or that as recently as 1988, it was worth only $192 million.

David Rosenthal 1:47:06 Right, right.

Ben Gilbert 1:47:06 I mean, this is a company today that's worth, uh, recently over $90 billion, but today $55 billion.

David Rosenthal 1:47:14 Yes.

Ben Gilbert 1:47:14 In 1988, 192 million.

David Rosenthal 1:47:17 Well, this really just highlights how different a company Ferrari was when Enzo died.

Ben Gilbert 1:47:25 Yes.

David Rosenthal 1:47:25 And how much Luca di Montezemolo transformed it when he came back and became the chairman. But for the moment when Enzo dies, the sort of slow motion disaster just continues unabated. Fiat's attempt, their best solution to fixing the problem of the road car business, is to produce more [laughs] road cars, which is the cardinal sin of luxury strategy management. Just as one example, Ferrari, during these years before Luca comes back, Ferrari produced 7,000 Testarossas over the seven years that the Testarossa was in production. Compare that to Lamborghini. Lamborghini only produced 2,000 Countaches during a period twice as long. They made Countaches for 16 years. By any normal car company, we're talking s- tiny numbers no matter what. But when you're talking about something rare and exclusive and so special as what a Ferrari should be, and then you have a company that you don't even really consider your competitor over there making a more exclusive product and managing it better, that's not a good situation.

Ben Gilbert 1:48:42 No, it is not. And another crazy frame on that, if you look at the production of total Ferrari cars, not just one model, but total cars, in 1982 it was 2,200. If you look in 1991, that grew all the way up to 4,500.

David Rosenthal 1:49:01 Oof.

Ben Gilbert 1:49:02 They just kept ramping, ramping, ramping and making more cars.

David Rosenthal 1:49:07 Yeah. Not the right fix. [laughs]

Ben Gilbert 1:49:09 Not the right fix.

David Rosenthal 1:49:10 So you mentioned 1991. That was the last year of this interregnum period before Luca comes back. It's so bad, demand has evaporated so much for Ferraris that for the first time in history, cars are going unsold. They have to furlough the factory workers and shut down the factory. And so when it comes to this, Gianni Agnelli finally calls up Luca and says, "It's time for you to return. We need you to come back. We are," quote, "putting Ferrari in your hands." And Luca di Montezemolo returns to become chairman of Ferrari. We should note, it's gonna be important here in a minute, in Italy, chairman of the company is actually the most important and powerful title, and the CEO reports to the chairman. So at this point, when Gianni calls Luca back, he's been gone from the day-to-day at Ferrari for almost 15 years. After Ferrari, he did a short stint at Fiat, and then he stayed in the Agnelli empire. He became CEO of the beverage company Cinzano, which is another Agnelli family company. And so he had gained CEO experience. And then the reason that Luca couldn't come back to take over Ferrari as soon as Enzo died was he had become the organizer and president of the Italia '90 World Cup. So the World Cup in 1990 was in Italy. And-

Ben Gilbert 1:50:48 That's right

David Rosenthal 1:50:49 ... Luca organized the whole thing. [laughs] And there's great stories associated with that. My favorite is that heConvene for the sort of final evening ceremony of the World Cup. For the first time, the Three Tenors. The Three Tenors didn't exist-

Ben Gilbert 1:51:05 Oh, nice

David Rosenthal 1:51:05 ... until the World Cup. And the way he convinced Pavarotti to join, 'cause he was the big star, he didn't wanna join, was he gave him an F40. [laughs]

Ben Gilbert 1:51:14 [laughs]

David Rosenthal 1:51:15 And thus, the Three Tenors were born.

Ben Gilbert 1:51:17 That is awesome.

David Rosenthal 1:51:18 So once the World Cup is over, Giovanni's like, "Okay, enough messing around. You gotta come back. Fix this."

Ben Gilbert 1:51:22 Mm.

David Rosenthal 1:51:23 So the first thing Montezemolo does when he knows he's gonna return to take over Ferrari after Enzo, he goes and he buys a 348, the flagship Ferrari sports car at the time, just to sort of see the state of things. Like, how bad was it really? I'm gonna go buy my own-

Ben Gilbert 1:51:44 [laughs]

David Rosenthal 1:51:44 ... 348 and test it out. And Luca's actual quote on this is, "The Ferrari 348 was a shit car."

Ben Gilbert 1:51:52 [laughs]

David Rosenthal 1:51:52 "It was the worst car we ever made. [laughs] Everything was missing. It had no personality. It had no technology. It wasn't state-of-the-art in anything. It had no power. It was all missing." He, he talks about when he was driving it, he would pull up to stoplights and try and race the other cars off the line and see how it would perform. You know, kind of drag race at stoplights.

Ben Gilbert 1:52:14 [laughs]

David Rosenthal 1:52:14 He was like, "I was getting beaten off the line by Volkswagen Golfs." [laughs]

Ben Gilbert 1:52:19 Oh.

David Rosenthal 1:52:19 In a Ferrari. [laughs]

Ben Gilbert 1:52:21 Brutal. What do you attribute this to? What, like, uh, the, Ferrari has deteriorated. It's fallen apart in this era. The, the cars have no personality, but they also have no performance, and they're impractical, and they're over-making them, and no one wants them. What's wrong? Like, why have the wheels come off the bus here?

David Rosenthal 1:52:40 It was Fiat. It was all they knew how to do. They came in of, like, "Oh, the, the way we can fix this is we increase production. We'll cut costs, so let's share some parts with Fiat-"

Ben Gilbert 1:52:48 Mm

David Rosenthal 1:52:48 ... "cars." You know, Ferrari road cars went from being the same thing, built by the same people as the racing cars, as the F1 cars and the Le Mans cars in the same factory to, in this period with Fiat control, they're really not the same thing. You know?

Ben Gilbert 1:53:06 Mm.

David Rosenthal 1:53:06 These are... It's would be too far of a stretch to say they were repurposed Fiats, but they had lost that true connection to race machines.

Ben Gilbert 1:53:17 Mm.

David Rosenthal 1:53:18 And so Luca comes back and says, "We gotta fix this." So a- at the time, the Japanese sports car industry was on the rise, and all the car enthusiasts were saying, "Ferrari's dead. The Italian car makers are dead. The Japanese have taken over." Luca has the test drivers at Ferrari go out and buy a Honda NSX and do, like, his own version of the Pepsi Challenge. Like, go out there-

Ben Gilbert 1:53:42 [laughs]

David Rosenthal 1:53:43 ... drive the NSX as hard as you can around the test track. Drive our cars. Drive the 348 as hard as you can around the test track. And they come back, and they're like, "Yeah, I mean, there's no competition. The NSX just blows us away."

Ben Gilbert 1:53:57 Wow.

David Rosenthal 1:53:58 I mean, how sad is that? It's a Honda. A Honda.

Ben Gilbert 1:54:02 That's completely lost to history today. You don't hear anyone talking about... And it, it, Ferrari's this sort of, like, untouchable, apex brand that it's hard to imagine that happening just, you know, as recently as the early '90s.

David Rosenthal 1:54:14 Right. I mean, it's one thing if Lamborghini is beating them. I mean, that's bad. That's really bad. But if Honda is making a better sports car than Ferrari, there's a real, real problem.

Ben Gilbert 1:54:25 Yep.

David Rosenthal 1:54:26 So how's Luca gonna turn this around? He comes up with three priorities: the team, the technology, and the myth.

Ben Gilbert 1:54:36 Mm.

David Rosenthal 1:54:37 So number one, the team, the Formula 1 team. We have to fix the Formula 1 team. Going back to his great quote, you know, there's not a direct correlation between victories on the track and cars that you can sell, but the team feeds the myth. If you don't add wood to the fire of victories on the track, the flame of the myth will die. You cannot only lose.

Ben Gilbert 1:55:01 Yep.

David Rosenthal 1:55:02 So the team hadn't won a championship since 1979. Luca goes out and recruits the dream team, like, the greatest set of F1 team members that had ever existed in history. Jean Todt, team principal. Ross Brawn, race engineer. Michael Schumacher, Ferrari number one driver. And it takes a couple years for Luca and the team to turn this around, but this is just absolute domination that they unleash on the field.

Ben Gilbert 1:55:40 By the end of the decade, there would be five straight years, 2000 to 2004, where Michael Schumacher won every single Drivers' Championship five years in a row, and Ferrari won every single Constructors' Championship five years in a row.

David Rosenthal 1:55:54 As we talked about on the F1 episode, it, it was a problem for Formula 1. The sport became too boring because Ferrari always won.

Ben Gilbert 1:56:00 Yep.

David Rosenthal 1:56:01 In total, under Montezemolo's tenure, Ferrari wins 19 Drivers' and Constructors' Championships, which is more than Enzo.

Ben Gilbert 1:56:13 [laughs] That's amazing.

David Rosenthal 1:56:15 It's incredible how he turned the team around, just like he did back as Enzo's assistant back in the day.

Ben Gilbert 1:56:20 All right. Then the technology.

David Rosenthal 1:56:21 The technology, the cars. We can't have a Honda NSX outclassing a Ferrari. Ferraris are about our heritage and our myth, but they are also about looking ahead. We can't be selling 250s repainted for the modern era.

Ben Gilbert 1:56:38 Yeah. And this is really where the feelings about technology change, where Ferrari went from a late adopter of technology when it's sort of proven to really pushing the bleeding edge. And today, Ferrari spends a good amount more on R&D as a percentage of their revenue than most other car companies. It's become sort of a, a signature of the company.

David Rosenthal 1:56:59 Yep, and this absolutely was a hallmark of Montezemolo's turnaround. Enzo didn't really care that much about technology. [laughs]

Ben Gilbert 1:57:07 That's interesting. Yeah.

David Rosenthal 1:57:08 Yep. So first thing they doWe gotta fix the 348, the flagship sports car. So they revise it, they do some stopgaps, but ultimately as soon as possible, they kill it and replace it with the 355, which was just a glorious car.

Ben Gilbert 1:57:25 And this just checked every box. Amazingly, it was modestly priced, so it was a $127,000. So modest by Ferrari's standards anyway. It was much more sort of user-friendly to drive. It actually made sense if you weren't a track car driver to drive this car. It was really the workhorse of the turnaround, and by 1997, it accounted for 70% of sales.

David Rosenthal 1:57:51 Wow. Wow.

Ben Gilbert 1:57:53 The 355, I would put it in the category of like a Rolex Submariner, of this thing that is a signature of the brand, is perfect product market fit, is priced perfectly, and just d- deeply understands why the customer is buying it.

David Rosenthal 1:58:07 Yep.

Ben Gilbert 1:58:08 The other thing to note before they launched the 355 is Luca massively cut production. So I mentioned that in 1991, Ferrari [laughs] had made 4,500 cars, which is just this giant inflation. By 1993, just two years later, Luca brought this down to 2,300. So cut it almost in half-

David Rosenthal 1:58:28 Yep

Ben Gilbert 1:58:28 ... in those two years. And production would start climbing again. You know, as I mentioned, the 355 was really well-received, and they started really building up their back order list again, but interestingly, it would not eclipse that n- 1991 peak of 4,500 cars again until 2006, a full 15 years later.

David Rosenthal 1:58:47 Yeah. We need to not just fix the myth of Ferrari, but we need to protect it. And this was Luca's third and most important priority, the myth. Luca came from a very different background and life experience than Enzo. Luca is the one who realized that Ferrari is a luxury company. To Enzo, Ferrari was a racing company that sold a connection to that to its clients. And Enzo was a marketing genius, and he came up with the prancing horse and the red and the myth of Enzo, but you couldn't talk to Enzo about how Hermes was managing its business, you know? Enzo had no idea what Jean-Louis Dumas was doing over in Paris. Luca knew exactly what Jean-Louis Dumas was doing over in Paris. Luca is the one who institutes weightless. [laughs]

Ben Gilbert 1:59:44 Mm.

David Rosenthal 1:59:44 Luca is the one who institutes presentation ceremonies when your car is delivered. Luca is the one who institutes custom luxury leather luggage that comes perfectly fitted to your Ferrari. [laughs]

Ben Gilbert 2:00:00 [laughs]

David Rosenthal 2:00:00 Luca institutes the luxury strategy at Ferrari.

Ben Gilbert 2:00:03 Where did Luca come up with this strategy? Like, did he adopt the luxury strategy from somewhere else? Did he invent it from whole cloth?

David Rosenthal 2:00:10 I think it's just he comes from such a different background and world experience than Enzo. Enzo didn't know a Birkin from a Coach bag.

Ben Gilbert 2:00:18 Right. He grew up in Modena.

David Rosenthal 2:00:20 He grew up in Modena. And then after Dino's death, he never gets on an airplane again. He doesn't leave this one region of Italy, whereas Luca has lived all over the world. He's run the Italian Cup. He's been CEO of an alcoholic beverages company. He knows all the luxury families. He knows all the luxury companies.

Ben Gilbert 2:00:38 Mm.

David Rosenthal 2:00:38 And he studies what they do.

Ben Gilbert 2:00:41 Yeah. It's interesting. That makes total sense. The other big piece of his strategy is anytime you see a Ferrari, it needs to scream Ferrari at you, and in a way that was really exemplified by the 355. It looked like all the cool classic Ferraris and the race cars, but it was much easier to drive. So there should be sort of a unification between the stuff we're selling to people and the race cars.

David Rosenthal 2:01:04 Yes. This was another key understanding of Luca's. These cars needed to be drivable. [laughs] In Enzo's day, you could get away with the excuse of, "Yeah, these cars aren't really gonna function on the road because they truly are intended to be race cars." By the 1990s into the 2000s, that's not gonna fly anymore. The people who are the clients who are buying these cars, they wanna be able to drive them on the streets.

Ben Gilbert 2:01:28 Yep. He does a handful of other tactics that I would say set the company up for success in the short term but add risk in the long term. A- and there's a big need to. I mean, Ferrari was operating in the red when he came in. They generated losses, like real income statement losses from 1992 to 1994, and by '96, they were back to break even, and, and by '97, they were profitable. But I would say all the ways to generate profits were not the best long-term solution, and it took them time and a lot of effort to dig out of that hole.

David Rosenthal 2:02:05 Mm.

Ben Gilbert 2:02:05 One of which was licensing the brand for merchandise.

David Rosenthal 2:02:09 [laughs] Yes. Now, there, there's a pro and a con here, but yes, I thought that's where you were gonna go with this.

Ben Gilbert 2:02:15 Yeah. So there were some smart things, licensing the brand to put on luxury goods and some sportswear. They even started licensing it for toys. And when you're licensing the brand, that's basically 100% margin. I mean, it drops straight to the bottom line. So when you're in dire straits, it's, it's really good, and so it has obvious allure. But they put the prancing horse on some real garbage over time. My favorite is by 2009, so, you know, this is a full 15 years later, they put the prancing horse on an Acer netbook.

David Rosenthal 2:02:50 Yes, yes!

Ben Gilbert 2:02:50 You remember netbooks, David?

David Rosenthal 2:02:53 [laughs] Oh, yeah. I was wondering if you were gonna find this. [laughs]

Ben Gilbert 2:02:56 Just so destructive to their brand.

David Rosenthal 2:02:58 Oh.

Ben Gilbert 2:02:58 It's the apex luxury brand of cars, like, one of the greatest brands in the entire world, and they have licensed it to this, like, underclocked, plastic, little piece of crap computer.

David Rosenthal 2:03:08 Yes.

Ben Gilbert 2:03:08 That is, like, the microcosm of brand destruction, like, the reason to resist the heroin of brand licensing.

David Rosenthal 2:03:16 Yes. The Acer laptopWas a real [laughs] low point.

Ben Gilbert 2:03:20 [laughs] But there's a lot of crap that it's on.

David Rosenthal 2:03:23 There's a lot of crap that there's on. Now, there is some nuance here. If we were talking about Louis Vuitton or Hermes or Patek Philippe or Rolex, this would be all bad. There would be no good reason besides easy profit dollars to do this. Ferrari is a different thing.

Ben Gilbert 2:03:47 Yes.

David Rosenthal 2:03:47 It is an apex luxury brand unquestionably in the same way as all of those companies, but unlike those companies, it also has a couple hundred million rabid fans-

Ben Gilbert 2:03:58 [laughs] Yeah

David Rosenthal 2:03:58 ... that it needs to serve. And also unlike those other companies, there's not actually a tension there. Ferrari clients and Ferrari collectors aren't upset by the fact that Ferrari has a couple hundred million, you know-

Ben Gilbert 2:04:16 Right

David Rosenthal 2:04:16 ... commoner fans out there. In fact, they're happy about it.

Ben Gilbert 2:04:19 Right. Ferrari is both a luxury brand and a giant international sports team.

David Rosenthal 2:04:24 Yes, yes. [laughs] Exactly.

Ben Gilbert 2:04:26 They always talk about the Tifosi.

David Rosenthal 2:04:28 Yes.

Ben Gilbert 2:04:28 You know, the hundreds of millions of people who are just fans of the brand and the, the spirit and the team.

David Rosenthal 2:04:32 Yep. Yeah, Hermes doesn't have a couple hundred million teenage girls around the globe that have posters of Birkins on their walls that they have to please.

Ben Gilbert 2:04:41 Right. Ferrari is Hermes and Manchester United smashed together.

David Rosenthal 2:04:45 Yes, yes.

Ben Gilbert 2:04:45 Yeah, and that makes it super different. So I guess to your point, that does validate the licensing their brand for merchandise strategy-

David Rosenthal 2:04:52 Yeah

Ben Gilbert 2:04:53 ... much more than-

David Rosenthal 2:04:53 I mean, hey, look, it doesn't validate the, uh, you know, Acer netbook. [laughs]

Ben Gilbert 2:04:57 [laughs]

David Rosenthal 2:04:57 But, uh, there is, like, some actual justification to the activity.

Ben Gilbert 2:05:02 Yeah.

David Rosenthal 2:05:03 So manufacturing. Should we talk about how that changes under Luca's tenure?

Ben Gilbert 2:05:09 Yeah, so I know a lot about manufacturing today. Did Luca really bring Ferrari's current manufacturing to life?

David Rosenthal 2:05:18 I think so, or at least he started it. It was really important to him that the factories be first rate, so he brought in great architects to redesign the factories. And this is when, if you look at video or photos of Ferrari factories today, they have trees in them. He brought in the trees.

Ben Gilbert 2:05:35 Mm. Yeah, they're absolutely beautiful. We'll link to some factory tours in the show notes. I think my favorite thing about Ferrari is the manufacturing process, and it's both because of how cool it is from a nerdy perspective, but also th- the business model that enables for them. So after 1994, Ferrari does not have a stock of cars. They're not just sitting there at dealerships. They're not just sitting there at the factory. They don't manufacture them and then find buyers. It's the other way around. So for every single car, they only start manufacturing it after you order and you customize it. And it's important to know that by this point in history, every Ferrari is unique. There's so much customization that starts happening that every one that rolls off the lineup is actually its own custom car. I mean, maybe just a little detail here or there is different, but you will not find two that are identical.

David Rosenthal 2:06:33 Yep.

Ben Gilbert 2:06:33 So Ferrari factories are vertically integrated to the nth degree. Most car manufacturers these days are systems integrators. Kinda lame. They're just buying from a network of thousands of companies that make common parts that basically go in all of our cars as contracts to the big brands. And, yes, the brands do some specification, and then they take whatever it is, some long timeframe, five to 10 years, to actually build out the full supply chain, source the thousands of parts from all the suppliers, and then integrate them into a car. Not Ferrari. They have trucks that roll up to the factory with raw ingots of aluminum, and they are casting entire engines themselves right there in Maranello. Everything happens on one plot of land. They build engine molds out of sand. They have 700-degree Celsius furnaces, and they operate an entire foundry right there on site. They do the same thing for body panel work and stitching the seats and more.

David Rosenthal 2:07:29 Yes. It, it really reminds me of Rolex in this regard. And there's another dimension that it's different from just about every other car manufacturer out there. Most other car companies, even the Porsches and the Audis and the Lamborghinis, a lot of the models that they're making are based on shared platforms.

Ben Gilbert 2:07:51 Mm.

David Rosenthal 2:07:51 So, like, we'll get into this more toward the end of the episode here, but the Lamborghini Urus, the Lamborghini SUV, that is the same platform as the Porsche Cayenne, which is the same platform as the Volkswagen Touareg. When you buy a Lamborghini Urus, you are buying a car that is essentially a Volkswagen Touareg.

Ben Gilbert 2:08:10 Or an Audi Q8.

David Rosenthal 2:08:12 Yeah.

Ben Gilbert 2:08:12 Is that right?

David Rosenthal 2:08:13 One of the Qs, yeah. No Ferrari shares a platform with any other car.

Ben Gilbert 2:08:17 But you're right. When you're a big family of brands like this, you are looking for economies of scale and ways to share more across your line. And you're right, not Ferrari. It's the complete opposite.

David Rosenthal 2:08:28 Yeah. And some of this was starting to creep in in the last years of Enzo and the interregnum period when Fiat was taking control. Like, there were some Fiat parts and switches that were making their way into Ferraris, and Luca stops all of this. He's like, "No, no, no. The only things that go into Ferraris are Ferraris." [laughs]

Ben Gilbert 2:08:47 It's what makes us different.

David Rosenthal 2:08:49 Yes.

Ben Gilbert 2:08:49 And because everything is so customizable, like we were talking about, every single one that rolls off the line is unique, they have left their manufacturing process to be very flexible and manual. They can make any car on any line. There's humans doing manual work at every station except for one, and that one is where they affix the windshield 'cause you, for safety reasons, don't wanna have people doing that. But it is crazy and unheard of across the car industry to be able to make any car on any manufacturing line. Now, you might say, "Well, that's really inefficient," and it is. I mean, they, they don'tinvest in making a automated production line that can easily make lots of cars.

David Rosenthal 2:09:30 Efficiency is not the point for Ferrari.

Ben Gilbert 2:09:32 Right. They would make for a terrible scaled car company. Ferrari can operate on a much shorter timescale between design and actually getting a car out to customers since there's less overhead in getting started. And it is, it's a, it's a double-edged sword. You would never wanna do 100,000 cars a year with the Ferrari model. In fact, you, you barely wanna be doing 14,000. But the pro is that they can be really iterative and really responsive to new ideas.

David Rosenthal 2:09:59 Yep.

Ben Gilbert 2:09:59 They can change their engine casting spec without involving a supplier and asking them to do a rebuild of something, and they can also get learnings from their F1 team quickly into cars since it's right across the street.

David Rosenthal 2:10:12 Yep.

Ben Gilbert 2:10:12 I think this is, like, one of the interesting nerdy business model characteristics of the pros that come from a manufacturing process that sort of doesn't invest in overhead and doesn't allow for the cheapest incremental marginal car to roll off the line. It's more about how do we maintain sort of the most flexibility at any given point? 'Cause we're selling expensive cars, and we've got the margin to absorb it.

David Rosenthal 2:10:38 Well, really this is how bespoke handmade craftsmanship applies to a modern automobile company. You know, it's the same dynamic as the other luxury companies, as Hermes or... You know, you think Hermes is investing in efficiencies in their factories? Like, hell no.

Ben Gilbert 2:10:55 [laughs] Right. And part of what you are buying if you are interested in buying a Ferrari, especially w- let's say you came into this, you didn't want a Ferrari. You leave this episode, and you're like, "Actually, I do kinda want a Ferrari." Part of what you are buying is the lore that I just shared. You kinda like the fact that this is a, yeah, there's robots, but, like, a pseudo-handmade, bespoke, inefficient manufacturing process to make it. It's wrapped up in the value proposition.

David Rosenthal 2:11:18 There is a team of artisans and experts aided by technology that is making my Ferrari.

Ben Gilbert 2:11:24 Yes. That's exactly right.

David Rosenthal 2:11:26 Yeah. It's super cool. So that's manufacturing. We've talked about Luca's embracing of the luxury strategy for Ferrari. Let's talk about markets and growth-

Ben Gilbert 2:11:35 Yes

David Rosenthal 2:11:36 ... and international.

Ben Gilbert 2:11:37 Yes. So when we're talking about caps on the number of cars they create, it's not that you can't produce any more units without diluting your brand. It's that you can't sell any more units into your current market-

David Rosenthal 2:11:51 Correct

Ben Gilbert 2:11:52 ... without diluting your brand. New markets are perfectly allowed as long as it doesn't change the perception in the current markets that, oh, no, there's suddenly lots of Ferraris zooming around the streets. A geographic segmentation can be a great luxury strategy. So he goes to start selling in China meaningfully for the first time, and the timing couldn't have been better since in Europe it was becoming less fashionable to display your wealth.

David Rosenthal 2:12:17 Mm.

Ben Gilbert 2:12:17 China, it was perfectly acceptable.

David Rosenthal 2:12:19 Very fashionable. [laughs]

Ben Gilbert 2:12:21 Yes.

David Rosenthal 2:12:21 Extremely fashionable.

Ben Gilbert 2:12:22 And this is a strategy that they then continued to run. Any time a new geography sort of came up in global wealth or disposable income or was okay with becoming flashier, then suddenly th- there's a whole new area where you can sell your Ferraris without changing perception in existing markets.

David Rosenthal 2:12:40 Yes. And there's another subtle point here that applies very specifically to Ferrari. They make so few cars and sell so few cars to a given geography that it really is a special experience every time you even see one on the road.

Ben Gilbert 2:13:00 Yep.

David Rosenthal 2:13:01 And it's really important not to dilute that. Owning a Ferrari is a truly rare and special experience. But even just seeing one, even just being next to one, should be a rare experience. The minute that that stops being rare, part of the myth dies.

Ben Gilbert 2:13:16 The funniest thing is since a large number of Ferraris are owned by people with 10, 20, 30 Ferraris, they actually can soak up a lot of the units into garages that you never see anyway. [laughs]

David Rosenthal 2:13:29 That you never see. Yes. [laughs] Yes.

Ben Gilbert 2:13:30 Yeah, so if you're Ferrari and you're trying to manage scarcity, you sort of have an incentive to continue selling to the same person over and over and over because it is a way to generate a sale without having the problem of a Ferrari out on the streets feeling commonplace.

David Rosenthal 2:13:45 Yes. Now, there is one other related thing that Ferrari takes on during this time, which is a lot of Ferrari clients, particularly American clients, really want a family Ferrari.

Ben Gilbert 2:14:04 [laughs]

David Rosenthal 2:14:04 They've got more use cases in their life for automobiles than Ferraris give them opportunity to use it for.

Ben Gilbert 2:14:14 You mean to tell me that a 45-year-old man who really, really wants to be out on the track or sort of envisions himself out on the track actually has most of his time where he can't be on the track, but he wants to feel awesome and fast and risking his life and associate with a brand kinda like Ferrari? But gosh, that's actually just not the reality of his life these days.

David Rosenthal 2:14:37 Right. Right. He might need to drive his kids to school, or you might need to be driven by your chauffeur to an important business meeting. Really, you would like a four-door Ferrari for that.

Ben Gilbert 2:14:48 Ugh, David, stop.

David Rosenthal 2:14:50 Ugh, I know. I know.

Ben Gilbert 2:14:51 Disgusting.

David Rosenthal 2:14:51 I know. I've... Well, it is disgusting, and that is why-

Ben Gilbert 2:14:55 [laughs]

David Rosenthal 2:14:55 ... during this era, Ferrari takes on the Maserati brand under its wing. So the Maserati brothers that we referenced earlier in the episode, that company after their ownership had gone through a whole series of ownership changes, and the brand had had its ups and downs over the years. It ends up in the hands of Fiat. And in the late '90s, Fiat says, "Why don't we give Maserati management over to-"Ferrari. And then we can, you know, have this connection between the Ferraris and the Maseratis, and we can have models that are Maseratis that are not Ferraris. These are not Ferraris. But there is a connection, and, you know, we're happy to sell you a Quattroporte if you want it or a GranTurismo if you want it, and, uh, that's what they do. And so this is when the Quattroporte, the Maserati Quattroporte, launches in America.

Ben Gilbert 2:15:53 Mm.

David Rosenthal 2:15:53 And to great demand. Unfortunately, in the beginning, it was not a very good car [laughs] .

Ben Gilbert 2:15:58 [laughs]

David Rosenthal 2:15:58 It took them a few years to, uh, iron the kinks out, at least on the reliability front. But it's a brilliant brand strategy. It's almost like Rolex and Tudor. A Tudor is never gonna be a Rolex, but you can have a great use case for a Tudor.

Ben Gilbert 2:16:11 I was gonna make that connection. I was thinking about it. But I don't think-- I mean, Maseratis are not made in Maranello, right?

David Rosenthal 2:16:17 No, they're not.

Ben Gilbert 2:16:18 So Ferrari gets the sort of market intelligence of what happens when we launch a Maserati in a market and kinda learnings from customers, but it's not like there's, uh, manufacturing synergies or o- on-campus learnings from prototyping new things. I think they're pretty separate in their sorta R&D.

David Rosenthal 2:16:39 Yes.

Ben Gilbert 2:16:40 So they showed great restraint in never launching a Fiat Ferrari car or standardizing on platforms the way that the Volkswagen Group does.

David Rosenthal 2:16:50 Yep.

Ben Gilbert 2:16:50 Yeah. I, I think remarkably, Ferrari has had the soul of a standalone company, even though it was, for a very long period of time, ninety percent owned by Fiat.

David Rosenthal 2:16:59 Yep, and Luca is a huge part of that, as is Piero, too.

Ben Gilbert 2:17:03 Yep.

David Rosenthal 2:17:03 Him having the ten percent ownership stake and place on the board keeps that continuity to Enzo and the Ferrari family, even in a ten percent minority ownership way in the company.

Ben Gilbert 2:17:13 Yep.

David Rosenthal 2:17:14 Well, speaking of Ferrari also being part of the Fiat and Agnelli empire, something pretty big is about to change here as we enter the early 2000s, which is Gianni Agnelli passes away, and all of a sudden, the Fiat empire is now in crisis. But before we tell the story of what happens next there and how it incredibly ends up with the IPO of Ferrari [laughs] -

Ben Gilbert 2:17:52 [laughs]

David Rosenthal 2:17:52 Now is a great time to tell you about one of our favorite companies, Statsig.

Ben Gilbert 2:17:58 Yes. So listeners, as we've been talking about all episode, Ferrari builds cars designed for speed and precision. These are incredibly powerful machines, but every component is also engineered so the car performs predictably, even when you're pushing it to the limit.

David Rosenthal 2:18:14 And you know what? That is a great metaphor for modern software development. [laughs]

Ben Gilbert 2:18:21 [laughs]

David Rosenthal 2:18:21 Teams today can ship faster than ever, especially teams building with AI coding tools. But when you're moving so quickly, the challenge becomes knowing which changes actually improved the product. Because when you go faster, you also increase the risk of unintended consequences.

Ben Gilbert 2:18:35 And that is especially true when AI is involved. LLMs, of course, introduce nondeterminism into the product experience, so the same input doesn't always produce the same output. Small changes to prompts or models or user experience can actually have surprisingly large downstream effects. You can learn a bit from offline evals, but the real signal comes from real users.

David Rosenthal 2:18:57 Yep, and that is where Statsig comes in. Statsig gives product teams the control systems for fast product development, experimentation, feature flags, and product analytics all in one place. Teams can ship quickly, roll out changes safely, and measure how those changes actually impact users with a much tighter learning loop.

Ben Gilbert 2:19:16 Statsig lets you keep moving Ferrari-level fast while, uh, making sure that what you're doing actually does make the product better. So if you wanna ship fast and know what's actually working, go to statsig.com/acquired to get started.

David Rosenthal 2:19:31 So in 2003, Gianni Agnelli dies. Tragically, the logical heirs to the Agnelli empire in the next generation had also already died young.

Ben Gilbert 2:19:44 Mm.

David Rosenthal 2:19:45 So when Gianni dies in 2003, his brother, Umberto, takes over, but he only lives for another year, and then he passes away in 2004. When this happens, the empire is in chaos. Meanwhile, the Fiat business is really struggling. Sales have been falling off a cliff. The company has a mountain of debt, and the share price is, like, [chuckles] trending towards scraping the bottom here.

Ben Gilbert 2:20:12 Mm.

David Rosenthal 2:20:13 So the last surviving Agnelli of Gianni and Umberto's generation is Susanna, mother of Luca's best friend growing up. She calls Luca after Umberto dies and asks him to take over as Fiat chairman and replace Gianni and Umberto in addition to Ferrari. So Luca will stay at Ferrari, but he will now come and serve the Agnellis as sort of a steward and a bridge to the next generation while they get the house in order and hopefully try to save Fiat along the way.

Ben Gilbert 2:20:46 So he's chairman of the parent company.

David Rosenthal 2:20:48 He's now chairman of Fiat and Ferrari.

Ben Gilbert 2:20:50 Which they own ninety percent of.

David Rosenthal 2:20:52 Yes. And at the same time, the chosen next heir in the generation below in the Agnelli family is a man named John Elkann, who you might have heard of. Today he's a celebrated investor and head of Exor, the publicly traded holding company, which is the Agnelli family holding company. He's twenty-seven years old at this point in time, though [laughs] . He's a kid. He's like Luca back in the day when Enzo tapped him to take over Ferrari.

Ben Gilbert 2:21:23 Yep.

David Rosenthal 2:21:23 So Luca and John Elkann have to work together to try to save Fiat.So the first thing they do is they turn to Sergio Marchionne, who is a turnaround expert and financial engineer extraordinaire, who has been CEO of SGS, which is a Swiss consumer products testing company that is also part of the Agnelli family investment empire, and he's completely turned around SGS and saved the company there. And they tap him to come in and help them do the same thing with Fiat. So he joins as CEO in 2004, with Luca as chairman and John Elkann as the Agnelli family representative.

Ben Gilbert 2:22:08 Which it's interesting to note here, the Agnelli family empire is larger than just Fiat.

David Rosenthal 2:22:13 Yes. And this is how they really differ from, like, Ford and the Ford family. The Ford family was always focused on the Ford Motor Company. The Agnelli family, Fiat was the crown jewel, but they invested in and built many businesses-

Ben Gilbert 2:22:25 Yeah

David Rosenthal 2:22:25 ... over the years, uh, throughout the generations.

Ben Gilbert 2:22:27 They really diversified out of just one company.

David Rosenthal 2:22:29 Yep. So the three of them together miraculously turn around Fiat and save it from the abyss through the combination of a couple things. First, they launch the smash hit new Fiat 500, the mass market platform, the city car for Europe. There was some precedent for this earlier. Volkswagen had relaunched the Beetle in 1997, and so that was some of the inspiration. But the Fiat 500 truly was an amazing success.

Ben Gilbert 2:23:02 Yep. You've seen this car many, many times.

David Rosenthal 2:23:05 Yes, and especially in Europe. Like, it's p- it was popular in the US, but if you live in Europe, you saw the Fiat 500 all over cities throughout Europe. It sells a million units in five years. It wins the 2008 European Car of the Year Award. It's truly, truly a special car that saves the company.

Ben Gilbert 2:23:23 I gotta say, it's so funny that we feel the need here on the Ferrari episode to extol the virtues of the Fiat 500.

David Rosenthal 2:23:30 [laughs]

Ben Gilbert 2:23:31 Uh, but it ends up becoming actually very important and path-dependent to Ferrari's trajectory from here and why a few things happen to Ferrari.

David Rosenthal 2:23:39 And it was designed by a man named Frank Stephenson, who had been Luca's in-house design guy at Ferrari-

Ben Gilbert 2:23:49 Mm

David Rosenthal 2:23:49 ... when Luca was just at Ferrari. So there's a Ferrari connection and lineage there-

Ben Gilbert 2:23:53 I see

David Rosenthal 2:23:53 ... that gets pushed up to the Fiat 500. Now, the other thing that happens, and this is all Sergio's doing, he totally restructured the operations at Fiat. He was, like, an efficiency and cost-cutting specialist, and at a company like Fiat, that actually is, like, really, really important.

Ben Gilbert 2:24:10 Mm.

David Rosenthal 2:24:10 The other thing he did is Fiat had a ill-fated partnership with GM, with General Motors. Sergio gets them out of the partnership and engineers GM paying $2 billion to Fiat in order to end the partnership, and I think without that $2 billion, the company almost certainly would've died.

Ben Gilbert 2:24:30 Wow, he is a magician.

David Rosenthal 2:24:32 He really is a magician. So Sergio, Luca, and John Elkann come into Fiat in 2004. Within two years, they have returned the company to profitability. They've got a handle on the debt. 2007, the Fiat 500 comes out. It's a massive success. 2008 hits, the financial crisis. All of the US car companies are in really bad shape.

Ben Gilbert 2:25:00 Man, it's crazy that Fiat just barely got their house in order in time.

David Rosenthal 2:25:05 Just barely.

Ben Gilbert 2:25:06 Otherwise, they could've been down with the rest of the global economy.

David Rosenthal 2:25:09 Well, Sergio says, "We can play offense here."

Ben Gilbert 2:25:12 Mm.

David Rosenthal 2:25:14 So he engineers a partnership with Chrysler, which had been quasi-nationalized, taken over by the US government at this point in time.

Ben Gilbert 2:25:25 Right. They were in the worst of the positions of Ford, GM, and Chrysler.

David Rosenthal 2:25:29 The big three automakers in the US, yes. So they engineer a partnership in 2008, Sergio does with Chrysler, and then fully acquires the company in 2014.

Ben Gilbert 2:25:40 And that creates FCA, Fiat Chrysler Automobiles?

David Rosenthal 2:25:43 FCA. And basically for free. [laughs] Fiat paid either zero or almost zero in sort of equity value for Chrysler.

Ben Gilbert 2:25:53 Wow.

David Rosenthal 2:25:54 Yeah. It truly is amazing what they did, and saved the company too. I mean, Chrysler and Dodge and Jeep and all of its brands are a thing today and part of Stellantis today because of what Fiat and Sergio did during the financial crisis.

Ben Gilbert 2:26:08 And Stellantis is the name for the merger between Fiat Chrysler Automobiles and-

David Rosenthal 2:26:14 Peugeot

Ben Gilbert 2:26:15 ... Peugeot. Okay.

David Rosenthal 2:26:16 The French company.

Ben Gilbert 2:26:17 Okay. [laughs]

David Rosenthal 2:26:18 Yeah, one of those French car companies that, you know, we're not gonna make an episode about. [laughs]

Ben Gilbert 2:26:22 [laughs]

David Rosenthal 2:26:23 So as everything is stabilizing at Fiat and returning to success, in 2010, Luca steps down from the Fiat chairmanship and returns solely full-time to Ferrari. John Elkann assumes the Fiat chairmanship then. He's now ready to-

Ben Gilbert 2:26:39 Mm

David Rosenthal 2:26:39 ... you know, be the steward and heir of the Agnelli family and work with Sergio in running the Fiat empire. But there is one cost to taking over Chrysler, which was that in doing so, Fiat had to assume Chrysler's debt.

Ben Gilbert 2:27:00 Mm.

David Rosenthal 2:27:01 Including about five and a half billion dollars that it owed the US and Canadian governments for the bailout.

Ben Gilbert 2:27:09 Mm.

David Rosenthal 2:27:10 So when this happens, the combined debt load for FCA, Fiat Chrysler Automobiles, balloons up to over $11 billion. Fiat announces to Wall Street as part of the merger, though, Sergio does, "Hey, we've got a plan, and we are gonna reduce that from over $11 billion to one billion or less over the next four years by 2018." [laughs]

Ben Gilbert 2:27:32 So they are forecasting a lot of cash flow, that-

David Rosenthal 2:27:35 Yes

Ben Gilbert 2:27:35 ... "Hey, this business is gonna be great-

David Rosenthal 2:27:37 Well

Ben Gilbert 2:27:37 ... super profitable. We're gonna eliminate $10 billion of debt."

David Rosenthal 2:27:41 They are forecasting a lot of debt reduction.

Ben Gilbert 2:27:44 [laughs]

David Rosenthal 2:27:44 Some of that will come from cash flow.

Ben Gilbert 2:27:46 Okay.

David Rosenthal 2:27:47 And some of that might come from other places.

Ben Gilbert 2:27:50 Mm.

David Rosenthal 2:27:51 So Sergio needs, you know, a lot of cash to meet his promise to Wall Street and pay down the debt. Where's an easy place to find it? He's gonna IPO Ferrari and use the proceeds to help pay down the Fiat Chrysler debt. Now, we should note, through all of this, if you couldn't already foresee it, there was a huge conflict and power struggle brewing between Luca and Sergio. These two guys were both incredible auto company operators, but, like, cut from totally different cloths.

Ben Gilbert 2:28:29 Yeah.

David Rosenthal 2:28:29 Luca is the ultimate car guy. He's a great businessman, and he's a great executor of the luxury strategy for Ferrari, but in his mind and his heart, the cars always have to come first. The great business decisions come out of the great car decisions. Sergio, on the other hand, is not a car guy. [laughs]

Ben Gilbert 2:28:50 [laughs]

David Rosenthal 2:28:51 He came from a consumer products testing company. He is a financial engineer and an empire builder. And actually, the great tragedy to this act of Ferrari is it could have been a beautiful partnership-

Ben Gilbert 2:29:03 And was for a while

David Rosenthal 2:29:04 ... between the two of them. And was, truly was. They saved Fiat together. But ultimately, Luca and Sergio are not gonna be able to coexist and share power within the same structure. And for a while, Luca going back to just Ferrari-

Ben Gilbert 2:29:21 Makes it work

David Rosenthal 2:29:21 ... felt like it was, it w- it was the solution that made sense. His passion was Ferrari, his history was there. He could go back to running it and be very happy, and Sergio could leave it alone and continue running the Fiat empire. But once Sergio needs the cash to pay down the Chrysler debt and turns to Ferrari, they're on a collision course.

Ben Gilbert 2:29:42 Mm.

David Rosenthal 2:29:42 Because IPO-ing Ferrari is, like, completely anathema to Luca's way of being. Becoming a public company means you gotta deliver consistent, predictable growth, which means hitting a drumbeat of shipping more cars, making more models, adding more clients, raising prices. It's not like Luca doesn't wanna do these things in a vacuum, but he wants to do these things very thoughtfully and over an extended period of time, not on a Wall Street calendar.

Ben Gilbert 2:30:14 And to have flexibility.

David Rosenthal 2:30:16 Yes.

Ben Gilbert 2:30:17 Not opposed to any of those things, just the way that you and I aren't opposed to doing things with Acquired, but we don't wanna be locked in and committed. You want some organic-ness to how you run the business. You want the products to be these living, breathing things. You wanna be able to rapidly change your mind in the face of new market conditions.

David Rosenthal 2:30:35 Yep. I mean, hell, one of Luca's very first actions when he came back to Ferrari after Enzo's death was to cut production by half.

Ben Gilbert 2:30:44 Right. [laughs] Right. Can you imagine doing that as a publicly traded company?

David Rosenthal 2:30:47 Yeah, making, to announce to Wall Street like, "Oh, hey, we think the right thing to do next year is to cut our production by half. Hope you're with us."

Ben Gilbert 2:30:53 Now, interestingly, at first, yes, they're publicly traded, but don't they only float 10% of Fiat's 90%?

David Rosenthal 2:31:03 Yeah. Well, so here's what happens. Thanks to the Chrysler acquisition, it's not an option not to pay down the debt. The company, Fiat, the empire, has to get the money, so the choice is kinda made for them. They have to side with Sergio.

Ben Gilbert 2:31:17 'Cause they have to go public, and he's kinda the guy to run it as a public company.

David Rosenthal 2:31:21 I mean, taking Ferrari public is part of the plan of how this whole thing is gonna work.

Ben Gilbert 2:31:26 Yeah. Do you think Luca was not a public company CEO?

David Rosenthal 2:31:30 I think Luca probably had zero interest in taking Ferrari public, and I think he had even less than zero interest in using proceeds from the Ferrari IPO and the other financial engineering that we're about to talk about to save Chrysler [laughs] and Fiat. Luca did not care about any of that.

Ben Gilbert 2:31:51 Whereas on the other side, Sergio is kind of exactly the guy you would want to manage the Street, to look for all the ways that the Ferrari business is, quote-unquote, "unoptimized," to realize the full value of the asset. He's, like, the sort of leader that investors salivate over.

David Rosenthal 2:32:07 Yes, yes. So in September 2014, Sergio unceremoniously fires Luca as chairman of Ferrari. The pretext is that the Ferrari F1 team has performed poorly in recent years, but-

Ben Gilbert 2:32:24 Which was true

David Rosenthal 2:32:25 ... I mean, was true, but, like, for God sakes, just a few years earlier, Luca had engineered, you know, the greatest dynasty in Formula 1 history with-

Ben Gilbert 2:32:32 Yes

David Rosenthal 2:32:33 ... Schumacher and Brawn and Todt, and, like, you know. Everybody knows what's really going on here. Also, part of the reason that the Ferrari Formula 1 team wasn't performing well at this point in time was that Formula 1 had switched to hybrid powertrains, and Fiat never developed hybrid technology. So Ferrari didn't have anywhere to turn to to get a head start like some of the other manufacturers that could-

Ben Gilbert 2:32:56 Mm

David Rosenthal 2:32:56 ... turn to hybrid technology. So it was gonna take a while for Ferrari no matter what. At the end of the day, though, it's, it's sad. Like, this is not how Luca's time at Ferrari should have ended. So Bernie Ecclestone, you know, the-

Ben Gilbert 2:33:13 Bernie

David Rosenthal 2:33:13 ... F1 impresario who Luca did very much not always see eye to eye with, gives a quote to the press when Luca is fired that sums it up better than I can. Bernie says, "Luca leaving is for me the same as Mr. Enzo dying. He has become Ferrari. You see him, Luca, you see Ferrari. You don't see anything else. You don't see Luca."

Ben Gilbert 2:33:39 Mm.

David Rosenthal 2:33:40 The context that you need to know for this quote that makes it even more impactful is if you listen to our F1 episode, you know that there was the FOTA breakaway attempt of the group of teams that just a few years before this had tried to bust Bernie's hold on F1 and break away and start a rival-Formula Racing League. That was led by Luca. [laughs]

Ben Gilbert 2:34:04 Oh, wow.

David Rosenthal 2:34:05 Luca was like Bernie's arch adversary just a few years earlier.

Ben Gilbert 2:34:09 And so for Bernie to be this cordial-

David Rosenthal 2:34:11 And here's Bernie paying tribute to him like this.

Ben Gilbert 2:34:13 Yeah. Huh.

David Rosenthal 2:34:14 Yeah. So with Luca gone, the path is cleared to IPO Ferrari. And in 2015, Fiat and Sergio float, as you said, Ben, 10% of their 90% ownership stake in Ferrari on the New York Stock Exchange for an initial total market cap of Ferrari of 9.8 billion, which raises just under a billion dollars in cash that Fiat uses to pay down the debt.

Ben Gilbert 2:34:45 So 2015, Ferrari publicly traded, worth $10 billion. That is up from the 192 million figure that we had talked about back in 1988.

David Rosenthal 2:34:56 [laughs] Right. But still nowhere near the heights that it would reach in the years to come.

Ben Gilbert 2:35:02 But that is Luca's legacy, that delta.

David Rosenthal 2:35:04 That, totally. That is turning Ferrari into a real business there.

Ben Gilbert 2:35:07 Yep.

David Rosenthal 2:35:08 So a billion dollars in cash proceeds from the equity sale and the IPO.

Ben Gilbert 2:35:14 That, that helps. That, that contributes-

David Rosenthal 2:35:16 That helps

Ben Gilbert 2:35:16 ... to the total 10 billion that you need to reduce your debt by, but-

David Rosenthal 2:35:20 Yeah, to go from 11 down to 1.

Ben Gilbert 2:35:21 Yeah.

David Rosenthal 2:35:22 You know, it helps, but it's not a lot. Well, Sergio had another, um-

Ben Gilbert 2:35:29 [laughs] This one is ridiculous

David Rosenthal 2:35:31 ... financial engineering coup up his sleeve. As part of the spin-off of Ferrari and the whole transaction, they effectively transfer another $3.2 billion in Fiat Chrysler debt to Ferrari. So in total, Fiat Chrysler, out of this transaction, gets almost $4 billion in debt reduction. That'll make a dent. [laughs]

Ben Gilbert 2:35:56 That'll make a dent.

David Rosenthal 2:35:57 That'll make a real dent.

Ben Gilbert 2:35:58 The interesting thing is it was perfectly fine to do this because Ferrari turns into a great, great business that is perfectly capable of paying down all that debt that was just transferred to them.

David Rosenthal 2:36:11 Yes, yes, absolutely. You know, we're sort of telling the story from Luca's side here. From Sergio's side, this all makes total sense.

Ben Gilbert 2:36:19 Right.

David Rosenthal 2:36:19 There was very little risk involved in this transaction.

Ben Gilbert 2:36:22 Right.

David Rosenthal 2:36:23 It's actually quite genius.

Ben Gilbert 2:36:24 Right. It helped Fiat Chrysler become a real going concern, [laughs] successful company, one that exists today, and Ferrari is a great little engine to pay down debt.

David Rosenthal 2:36:33 Yeah. Uh, and not just a little engine. Like, the value unlock that happens at Ferrari here, to use investor speak, is unprecedented. [laughs] The company IPOs at a $9.8 billion market cap in 2015. Within a few years, it's trading at, you know, what, 90 billion, flirting with 100 billion market cap.

Ben Gilbert 2:36:55 Yeah. As of a few years ago, they hit 90 billion.

David Rosenthal 2:36:58 Yeah. Way, way, way higher than Stellantis' market cap. [laughs]

Ben Gilbert 2:37:02 Yes.

David Rosenthal 2:37:03 If you're the Agnelli family, this was a great financial transaction for you.

Ben Gilbert 2:37:08 It is interesting. When you, you often hear investors talk about unlocking value by spinning something off, and getting rid of the conglomerate discount, and isolating centers of value. That totally happened here. Ferrari was not appreciated by investors when it was nestled inside of Fiat for the real gem that it was. And as a publicly traded company on its own reporting its own financials, people piled in.

David Rosenthal 2:37:32 Sure attracted a lot of investor demand.

Ben Gilbert 2:37:34 Yep.

David Rosenthal 2:37:34 And still does.

Ben Gilbert 2:37:35 Yep.

David Rosenthal 2:37:36 So man, like so much about this story, you can't script what happens next. All is going according to plan. The Fiat empire has never been better. Fiat is saved. Chrysler is saved. Value is unlocked at Ferrari. And then in 2018-

Ben Gilbert 2:37:56 Just three years later

David Rosenthal 2:37:57 ... just three years later, the same year that Sergio had promised to Wall Street that he would pay down all of the debt at Fiat Chrysler, he dies suddenly and unexpectedly.

Ben Gilbert 2:38:09 This story, oh my God, again, and again, and again, those closest to Enzo himself, Ferrari the company, tragedy.

David Rosenthal 2:38:17 Tragedy. Sergio unexpectedly dies of cardiac arrest following complications from shoulder surgery. Nobody expected that he was gonna die.

Ben Gilbert 2:38:27 No.

David Rosenthal 2:38:27 So once again, the whole empire is thrown into chaos. It's in a much better and more stable place than when Gianni died, but still, within Ferrari, there ends up being kind of a parade of CEOs over the next couple years.

Ben Gilbert 2:38:45 Caretaker CEOs.

David Rosenthal 2:38:46 Yes. Culminating in 2021 when the current CEO of Ferrari, Benedetto Vigna, is hired, and he's a new choice for the company.

Ben Gilbert 2:38:58 Complete outsider.

David Rosenthal 2:38:59 A tech guy.

Ben Gilbert 2:39:00 A former, I believe, physicist, or at least physics undergrad, who ended up going into semiconductors. And if my memory serves, he holds the patent for the accelerometer.

David Rosenthal 2:39:13 Yes.

Ben Gilbert 2:39:13 Or at least one of the patents for the accelerometer in the original iPhone.

David Rosenthal 2:39:18 Yes, i- in the iPhone and, you know, basically all mobile phones today, the accelerometers that are used there, that's, that's Benedetto.

Ben Gilbert 2:39:24 A semiconductor guy.

David Rosenthal 2:39:25 Which actually makes a lot of sense for the direction that Ferrari and technology is heading.

Ben Gilbert 2:39:32 Yep.

David Rosenthal 2:39:33 So the question is, what happens at the company after the IPO? Well, on the one hand, a lot of the things that you would expect. Ferrari does increase production. They go even further into the luxury retail goods market.

Ben Gilbert 2:39:51 And in particular, on this luxury retail goods market, it's interesting. They sort of bifurcate the strategy. The first thing they do is they, they clean up all the old crappy merchandising, and they kind of narrow it to this brand licensing in very specific categories with very specific partners. So Luxottica for glasses, Montblanc for pens, Richard Mille for watches, and Puma for shoes. So there's this like sort of cohesive, yeah, we're gonna make stuff for the Tifosi, but like there's a luxury associated with our brand that, you know, we have to stay true to. Then-They go into a lifestyle category of their own, of first-party products.

David Rosenthal 2:40:30 Yes.

Ben Gilbert 2:40:31 David, what is this?

David Rosenthal 2:40:32 This is essentially Ferrari runway fashion.

Ben Gilbert 2:40:34 [laughs] That's one pillar of it, anyway. But yeah, I mean, it, it's this acknowledgement of, hey, there's a lot of people that wanna participate in the Ferrari brand who are very affluent, and they don't wanna go buy any of these things from our partners. They want products from us that aren't cars. And traditionally, most of our customers, I don't know, 90% are men, and men in their 50s. I think the average age is 52 of a Ferrari buyer. I believe 35% of people who are buying the lifestyle merchandise they're creating are women. They're really opening up the aperture of Ferrari represents something, and can we give people m- more tokens-

David Rosenthal 2:41:15 Yep

Ben Gilbert 2:41:15 ... to sort of adorn themselves in Ferrari and not just cars?

David Rosenthal 2:41:18 Yep.

Ben Gilbert 2:41:19 It's an interesting strategy. I'm not sure I would do it.

David Rosenthal 2:41:21 [laughs]

Ben Gilbert 2:41:22 I get why they're doing it. I'm not sure I would do it.

David Rosenthal 2:41:24 Yes. All that to say, certainly there are initiatives that come about as a result of Ferrari now being a public company and needing to show predictable growth and new avenues of growth to Wall Street.

Ben Gilbert 2:41:38 Including theme parks.

David Rosenthal 2:41:40 [laughs] Including theme parks, yes.

Ben Gilbert 2:41:41 They've opened two very different style theme parks, one in Spain and one in Abu Dhabi right next to the F1 racetrack there. From what I can tell, it's going well. I, I think they're totally outsourced to third-party partners to, the, the same way that you would treat a licensing deal. But [laughs] I'd like to go to one at, at some point.

David Rosenthal 2:42:00 Yeah.

Ben Gilbert 2:42:00 When I first read that this is what they'd done in the last 10 years, uh, it was a little bit of a head-scratcher. But I get it, that people wanna experience the brand in a more visceral way. These products are so full of emotion and passion that merely seeing one drive by you once every few months on the street is not exactly the way to, to cultivate fandom.

David Rosenthal 2:42:17 Yep. So that's sort of one side of the ledger. On the other hand, a lot less than you'd expect actually changes. In fact, Ferrari becomes even more independent. You know, if you take as a axiom that the most important part of the soul of Ferrari is a Ferrari being a Ferrari and not being a rebadged [laughs] Fiat 500 or Volkswagen Touareg, Ferrari today is even farther away from Fiat than it was before the IPO. It really kind of reestablished Ferrari as its own separate entity.

Ben Gilbert 2:42:54 Yeah, so today it's still 10% owned by Piero Ferrari. A little over 20% is owned by the Agnelli family with their holding company Exor. But that 20% was 90%-

David Rosenthal 2:43:06 Right, right

Ben Gilbert 2:43:06 ... before the IPO, and what, 81% right after the IPO. So they have really sold down that stake over time. 68% of it is now owned by public shareholders. I mean, that, that is an independent company. However, the voting shares are a different story. So together, Exor and Piero have the right to vote about 49% of the voting shares. So it doesn't take much for them to control the vote on any given decision as long as they vote together. They just need to go sway 1 or 2% of the public float to vote with them as a block.

David Rosenthal 2:43:44 Yes, that's true. I think the really interesting thing to look at is how the Ferrari model range has evolved-

Ben Gilbert 2:43:54 Yes

David Rosenthal 2:43:55 ... in the years since the IPO.

Ben Gilbert 2:43:57 Yes. Oh, I'm so glad you took it here. So Ferrari effectively makes four types of cars that consumers can buy. 85% of units shipped fall into what they call the range. These cars are a few hundred thousand dollars each, of course, before any personalization or customization.

David Rosenthal 2:44:17 So this is the collection of sports cars and GT grand touring cars that have always been the core of Ferrari.

Ben Gilbert 2:44:27 Yep.

David Rosenthal 2:44:27 You've got your mid-engine V8s and V6s. You've got your front-engine V12s. And you've got your hybrids that have been a relatively new addition.

Ben Gilbert 2:44:36 Yep. This is your Amalfi, your Roma, your Tessarossa, your 12 Cilindri, these sorts of models. So that's 85%, and actually sometimes it flexes up even higher if they are not shipping a supercar at the moment. 'Cause the supercar that we had talked about, the F40, the F50, the Enzo, the La Ferrari, and now the F80, these are not being made all the time. They just make 'em for, I don't know, 24 months once a decade.

David Rosenthal 2:45:02 Special occasions.

Ben Gilbert 2:45:03 Yeah.

David Rosenthal 2:45:04 Shall we say. So at the end of the Luca era, that was the product lineup. It was the core range and the occasional halo supercar. That was it.

Ben Gilbert 2:45:14 Now 10% are what they call the special series. These'll run you between 500,000 and a million, again, before customization. David, what are these?

David Rosenthal 2:45:25 These are, like, the special versions of-

Ben Gilbert 2:45:29 [laughs]

David Rosenthal 2:45:29 ... the range cars, the high performance. You know, if you take, like, BMW, you know, you've got your regular BMWs, and then you've got your M series. Or Mercedes, you've got the regular Mercedes, and then you've got the AMGs.

Ben Gilbert 2:45:39 Oh-

David Rosenthal 2:45:39 I mean, all of that, I feel-

Ben Gilbert 2:45:40 ... Ferrari people would scoff at you for making that comparison.

David Rosenthal 2:45:42 Part of me is dying by making this analogy for Ferrari. But it's telling, right, that this was added. This never existed before, and now there's, you know, essentially the M series or the AMG series of the Ferrari range.

Ben Gilbert 2:45:56 Yeah. And they're a little more racy than the typical models. They're not track-only. I mean, this isn't like the XX program or the Ferrari Challenge or any of these, like, cars that they make for racing in very specific competitions. But these are racier versions, higher-end versions, in more limited production of the range cars, more or less.

David Rosenthal 2:46:15 Yep. And there's a lot of demand for them.

Ben Gilbert 2:46:17 Yes. And the way I just described that, someone at Ferrari is very mad. Fans of the brand are gonna jump all over me for all the nuance that I missed there. But anyway, that's the special series. Then th- the remainder-Are the Icona series.

David Rosenthal 2:46:31 Yep.

Ben Gilbert 2:46:31 That'll run you about $2.3 million for the current one, this V12 Daytona SP3, and of course, the supercar, which depending on the year, is only 1 to 5% of the units that they ship, but it's extremely important to their profits given those supercars run three and a half to five million dollars. And, and we'll come back to just how important it is to their profits.

David Rosenthal 2:46:56 Yes, yes. So basically what they've done is they've added a second series to each aspect of the core lineup before the IPO. They've kinda doubled the model range.

Ben Gilbert 2:47:07 The Icona exists for a very particular reason, and I will explain that in a minute when we get to financials.

David Rosenthal 2:47:12 Ooh, okay.

Ben Gilbert 2:47:13 I think they kinda backed into it. The stated reason is that they pay homage to Ferraris from history. You know, the Daytona was-

David Rosenthal 2:47:19 Yep

Ben Gilbert 2:47:19 ... this very famous one.

David Rosenthal 2:47:20 Or the Monza, et cetera.

Ben Gilbert 2:47:21 But I'll hold my tongue for now o- on exactly how they, they backed into it.

David Rosenthal 2:47:25 Great. I think I know where you're going-

Ben Gilbert 2:47:26 [laughs]

David Rosenthal 2:47:26 ... but we'll save it.

Ben Gilbert 2:47:27 It is also worth noting, clients who were invited to the supercar or the Icona class, these people own at least 10 new Ferraris, maybe 20-plus Ferraris in a garage. These people are tens of millions of dollars deep into buying Ferraris.

David Rosenthal 2:47:45 Yes, these are the Birkins and the Kellys. You don't just walk in off the street and buy one. You need to buy a lot of scarves, et cetera, before you get invited to buy an Icona or a supercar.

Ben Gilbert 2:47:56 Yes. I mentioned earlier that every car that they make is unique as a part of their manufacturing process. They do take that to the most extreme. [laughs] There are models that are literally called one-off.

David Rosenthal 2:48:09 [laughs] Yes.

Ben Gilbert 2:48:10 So they will make you n- and, and not just like you can change the seat color, they will make you a custom car with a custom body style for very, very, very special VIP customers, and they never disclose them.

David Rosenthal 2:48:22 Yep. Okay, Ben,

David Rosenthal 2:48:24 one model that you didn't talk about is the FUV. [laughs]

Ben Gilbert 2:48:32 [laughs] Yes, and you are not, uh, speaking with a lisp there. That is, it is the Ferrari Utility Vehicle.

David Rosenthal 2:48:37 The Purosangue, the pure blooded.

Ben Gilbert 2:48:39 Yes. So this is a delicious tidbit of Ferrari-ism. The market really wants an SUV. 60% of Porsches sold at this point are SUVs. They're expensive and beautiful soccer mom and soccer dad cars.

David Rosenthal 2:48:53 Yep.

Ben Gilbert 2:48:54 And when you go upmarket from Porsche, even to Lamborghini, which looks a lot like Ferrari from a production volume standpoint, they only make 11,000 cars a year also.

David Rosenthal 2:49:04 And importantly, is part of the VW, Volkswagen group-

Ben Gilbert 2:49:08 Yes

David Rosenthal 2:49:08 ... along with Audi.

Ben Gilbert 2:49:09 Yes. Astonishingly, over 60% of Lamborghinis now sold are their SUV.

David Rosenthal 2:49:16 Yes.

Ben Gilbert 2:49:17 I mean, the classic idea of, like, guy driving a Lambo around the street, 60% of that brand's [laughs] cars are soccer mom and soccer-

David Rosenthal 2:49:26 Yep

Ben Gilbert 2:49:26 ... dad mobiles.

David Rosenthal 2:49:27 It's the exact same thing that happened with Porsche. Porsche was the 911 company, and now they're the Cayenne and Macan company.

Ben Gilbert 2:49:33 If I ever get a distastefully large amount of crypto winnings, I'm gonna go buy a Lambo, but it's gonna be an Urus.

David Rosenthal 2:49:39 [laughs]

Ben Gilbert 2:49:39 Just to... [laughs]

David Rosenthal 2:49:41 Oh, no.

Ben Gilbert 2:49:41 Just for the irony. [laughs]

David Rosenthal 2:49:44 [laughs] I hope in bright green.

Ben Gilbert 2:49:45 Yes, yes. Okay, so people really want one from Ferrari. So what does Ferrari do? They don't call it an SUV. They call it an FUV. They debut a low-top, four-door, almost SUV called the Purosangue, and as you mentioned, it translates to pure blood or thoroughbred, and it's almost as if they're saying, "Yes, this is still a Ferrari. In fact, we're, we're almost even overcompensating with the name and saying, 'We really insist it is as thoroughbred of a Ferrari as you could possibly own,' by naming it that."

David Rosenthal 2:50:14 And it has a naturally aspirated V12 as its engine.

Ben Gilbert 2:50:19 Yep. I mean, it is, it's a, it's a real Ferrari under the hood.

David Rosenthal 2:50:21 Yes.

Ben Gilbert 2:50:21 The really disciplined thing that they did, though, they capped total production at 20%. This ensures that when you see a Ferrari on the road, it will stay your classic idea of what a Ferrari is. It really protects the brand, and it sacrifices a lot of short-term profits. And I gotta say, I have immense reverence for the company for this sort of discipline.

David Rosenthal 2:50:42 And it keeps this core pillar of Ferrari that just seeing one should be a special event. They are not gonna go sell 60,000 Purosangues. They're selling about 2,500 to 3,000 of them per year globally. You are not going to see one on the streets tomorrow or the day after that or the day after that.

Ben Gilbert 2:51:03 Yes. I saw one this week, David, at an event that we were at valet parked outside, and I thought, "Oh, I've actually never seen one of those before."

David Rosenthal 2:51:11 Yeah.

Ben Gilbert 2:51:11 Which is exactly how it should be every time you see a Ferrari.

David Rosenthal 2:51:14 Yes.

Ben Gilbert 2:51:15 So the other thing about their model range is they have become very diligent about their wait list too. They're essentially sold out these days for the next two years. Most car companies could not tell you what their sales will look like next quarter, but as of today, Ferrari knows exactly what their sales will be and to who through the end of 2027 at least, maybe into early '28. And if you want one sooner, you're gonna have to buy a used one.

David Rosenthal 2:51:40 Yep. All right, Ben, so how much do these models cost? And what were you teasing earlier with the, uh-

Ben Gilbert 2:51:48 The Icona?

David Rosenthal 2:51:49 Thoughts on the Icona series. [laughs]

Ben Gilbert 2:51:50 [laughs] Okay. So the average selling price of a Ferrari is about $500,000, up from $350,000 in 2022.

David Rosenthal 2:51:59 Wow.

Ben Gilbert 2:51:59 So they have taken price a lot in the last few years. Now, the models technically start at $280,000, such as the Roma Spider, but A, that's on a two-year wait list, and B, that's before you do any customization.

David Rosenthal 2:52:13 Right.

Ben Gilbert 2:52:13 And customization adds anywhere from 20% to 100% of the price [laughs] of the car. Even more importantly, in explaining that $500,000 number, that is an average, and averages hide the most interesting data. Y- y- y-

David Rosenthal 2:52:26 Yes

Ben Gilbert 2:52:26 ... you know, you have to pull it apart and look at the distribution. So as we consider the range, the special series, the Icona, and then finally the supercar, l- let's look at the distribution.Ferrari is incredibly top-heavy as a business, and I mean this in two ways. One is the obvious way. The most engaged customers obviously contribute an outsized amount to Ferrari's revenues. If you're a guy buying 20, you're a hugely, hugely [laughs] important part of Ferrari's business. But two, more interestingly, the most expensive models provide a huge amount of the profits-

David Rosenthal 2:53:02 Yeah

Ben Gilbert 2:53:02 ... for the entire company. So let's look at just the F80, their current supercar. And by the way, all of these were sold out before the car was even announced to the public.

David Rosenthal 2:53:11 Yes.

Ben Gilbert 2:53:11 That is how sold out it is. There are reasonable estimates that the F80 average selling price is about $4 million. They're making 799, so that is $3.2 billion of Ferraris just in that car.

David Rosenthal 2:53:26 Wow. [laughs] $3.2 billion of Ferraris in 799 examples.

Ben Gilbert 2:53:34 Yes. Now, that's retail, so let's assume a 10% retail margin that goes to the dealership, so $2.9 billion of F80 revenue to Ferrari. Let's assume those deliveries happen about over the course of two and a half years, which means that, give or take, $1.25 billion of revenue in the first 12 months is going to Ferrari from that supercar. That's 15% of revenues for the year just from that one car model. But that is not the whole story. Ferrari has disclosed that the Icona and the supercar models have higher margins than the rest of the line.

David Rosenthal 2:54:12 Of course they do.

Ben Gilbert 2:54:13 And I've seen lots of very credible estimates. They're way higher. Like, I've seen 80%. I've seen 90% gross margins for the supercar.

David Rosenthal 2:54:21 Wow.

Ben Gilbert 2:54:22 And this is intuitive. You can imagine when Ferrari throws an extra $10,000 of something nice in the supercar, they mark it up a lot more since the buyers are wildly price insensitive. So I think that it's not crazy to assume that while that car will contribute 15% to revenues in the first 12 months, it's more like 30% of Ferrari's annual-

David Rosenthal 2:54:44 Profits

Ben Gilbert 2:54:45 ... profits just from that one supercar in its first year. It could be even higher than 30%.

David Rosenthal 2:54:51 Wow, yeah, so it's critically important to the business.

Ben Gilbert 2:54:54 The business is in the supercars.

David Rosenthal 2:54:57 Yeah.

Ben Gilbert 2:54:57 I mean, this isn't quite true, but it is funny to think about this framing. The Ferraris you see driving around occasionally, those are just peanuts for their business.

David Rosenthal 2:55:05 [laughs]

Ben Gilbert 2:55:05 And it's really all about the ones that are locked away in the garages that you don't see that actually make the money.

David Rosenthal 2:55:12 Right.

Ben Gilbert 2:55:12 If you think about the F40 and where Enzo was in his life and where the company was when they released that, I think they had no idea the business model they unlocked with this limited-run supercar.

David Rosenthal 2:55:23 Yeah, that's totally true. And where I imagine you were going with the Icona series is like-

Ben Gilbert 2:55:27 [laughs]

David Rosenthal 2:55:28 ... boy, wouldn't it be nice if we had a whole nother series with maybe not quite as good dynamics as that but, like, pretty good dynamics.

Ben Gilbert 2:55:37 And gosh, it's a real shame we only have supercars once a decade.

David Rosenthal 2:55:41 Yeah.

Ben Gilbert 2:55:41 I wish we had something that was still pretty expensive and still pretty desirable and still close to as good of margins to smooth out that pesky seasonality.

David Rosenthal 2:55:51 Those down years when we don't have the supercars, yeah.

Ben Gilbert 2:55:54 That's exactly right. So that is what you are looking at with the Icona.

David Rosenthal 2:55:57 Yep. Yep, that makes sense to me.

Ben Gilbert 2:55:58 The other thing that you should know, uh, listeners, when you're sort of thinking about Ferrari, 'cause we've said a lot of model names here, and that is odd, right? Most car companies have over the course of 30 years very few car models. They run them for a long time. When we did our Rolex episode, you, you heard us talk about the Submariner from, I don't know, 1965 and the Submariner from today. It's one sort of continuous evolving line that maybe your grandpa had, and your dad had one, and you have one. Ferrari's the exact opposite. Over the next five years, they intend to launch four new models per year on average. That's 20 new model names in the next four years, and they discontinue models very quickly after launching them, so every four to five years or so, to really enforce each one of these things is very unique, very exclusive. Now, why doesn't everyone do that? Well, most people have to invest a huge amount upfront in tooling, but Ferrari doesn't. They can bespokely spin up a brand-new car that never existed because they can do their own really nimble manufacturing process.

David Rosenthal 2:57:08 Right. They have such a different manufacturing process than any other major or boutique auto manufacturer. And this is the thing that the super boutique hypercar companies like the Paganis or the Koenigseggs, et cetera-

Ben Gilbert 2:57:22 But those are, like, way, way... I don't know. Pagani's probably 1/50 the manufacturer of Ferrari or something like that.

David Rosenthal 2:57:28 Well, right. And those companies don't have all the tooling and manufacturing prowess that Ferrari does, so they can only make their models once a decade or maybe not quite that long. But they can't turn around and make new models and keep the momentum going year after year-

Ben Gilbert 2:57:46 Right

David Rosenthal 2:57:46 ... in the same way that Ferrari can.

Ben Gilbert 2:57:48 Four new models every year. And the really impressive thing about Ferrari is the cars are just different enough where they deserve different names, but a lot of the R&D and the components are carried over. When you look at the internals from some of these cars to the next generation that carry a different name, that have a different body style, th- they are different, but you can see the manufacturing learnings. I don't wanna say they reuse components, but they're, they're heavily inspired by a lot of the fixed-cost work that was done before.

David Rosenthal 2:58:21 Yep, very interesting. Okay, so you mentioned dealerships a minute ago and their margin. How do dealerships work in Ferrari?

Ben Gilbert 2:58:27 Yeah. So in the past, dealerships worked a lot more like the traditional model, where dealers would have clients, and they would get to allocate cars.Now the allocation is done centrally by Ferrari, and the dealerships really serve more as distribution, operations, and service. And I've been thinking about it less as a dealer network and more as a franchised service and delivery infrastructure with Ferrari owning the actual customer relationship.

David Rosenthal 2:58:57 Yeah.

Ben Gilbert 2:58:57 It's like you get to own the, the local franchise in your city that takes care of this stuff, but they're Ferrari customers. They're not really your customers.

David Rosenthal 2:59:04 Yeah. And Ferrari now centrally controls the wait list.

Ben Gilbert 2:59:07 Yes. Dealers do, however, play a huge role in the secondary market, and Ferrari knows it's in their interest to have a thriving secondary market since, given how few new cars there are, the entry level Ferrari is really a used Ferrari.

David Rosenthal 2:59:22 Yeah.

Ben Gilbert 2:59:23 And so it's the way to sort of cultivate the next generation of owners. So they incentivize dealers to buy and sell by giving them 100% of the economics on a secondary market transaction-

David Rosenthal 2:59:34 Mm

Ben Gilbert 2:59:34 ... rather than being involved in that in any way. So dealers often exist as a way to source used Ferraris for buyers.

David Rosenthal 2:59:43 And the secondary market for Ferraris is enormous. There's a crazy stat out there. Over 90% of all Ferraris ever made, going all the way back to 1947 and the 166 Barchetta, are still on the road.

Ben Gilbert 3:00:01 That's right.

David Rosenthal 3:00:01 Nobody scraps a Ferrari. Like an ordinary car, it depreciates down to zero because it will eventually be scrapped. Ferraris only go off the road if they're involved in a terrible crash and, you know, can't be restored.

Ben Gilbert 3:00:14 There have been 330,000 Ferraris ever made, and almost 300,000 of them are drivable today.

David Rosenthal 3:00:20 Yes, still on the road, still owned, still operated. It's truly incredible.

Ben Gilbert 3:00:24 It is incredible. Now, if you're Ferrari, it would be nice to participate in this whole secondary market somehow in sort of a tertiary way.

David Rosenthal 3:00:32 Yeah. Tell us about Ferrari Classiche.

Ben Gilbert 3:00:34 [laughs] So let's say you buy a used Ferrari, or you're getting yours ready for sale. It sure would be nice if there was a certificate from Ferrari saying that they looked it over, and they looked at every part, and it's genuine. Well, good news, there's a program for you called Ferrari Classiche, and for just six to $10,000, you can get it looked over and get just such a certificate.

David Rosenthal 3:00:55 [laughs] Now, it's interesting here. Ferrari is militant about what meets the bar for Ferrari Classiche certification.

Ben Gilbert 3:01:05 Yep.

David Rosenthal 3:01:06 It has to all truly be original