1309: Saturday Matinee: Business History

Summary

History Daily: Saturday Matinee – Business History

Episode: 1309
Date: January 31, 2026
Thematic Focus: The genesis of the VW Beetle as an instrument of Nazi industrial policy and its transformation into a global pop culture icon.

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Episode Overview

In this special "Saturday Matinee," History Daily spotlights Business History, a podcast hosted by Jacob Goldstein and Robert Smith. The episode unravels the surprising origins of the Volkswagen Beetle, the world's best-selling car originally conceived as a Nazi project under Adolf Hitler. Through witty banter and deep research, Goldstein and Smith explore the intertwining of business innovation with the grim realities of 20th-century Germany, state-sponsored industry, propaganda, forced labor, and, ultimately, postwar transformation.

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Main Points & Structure

1. Setting the Scene: From Hollywood to Nazi Germany (04:52–06:32)

• The episode opens in late 1960s Hollywood, where the VW Beetle’s charisma wins it the lead in Disney’s Herbie the Love Bug.
  • “They treat it not so much like a car as like a cute little puppy. They’re like, petting it… tapping the car.” — Jacob Goldstein [05:52]
• The discussion transitions to the car’s origins, highlighting the irony: this symbol of peace and love was Adolf Hitler’s idea for German domination.

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2. Germany’s Economic Crisis & Hitler’s Vision (08:00–10:32)

• Post-WWI Germany: devastated by reparations, hyperinflation, and the Great Depression.
• Hitler’s rise to power included promises of material prosperity via “Volks-” products: radios, refrigerators, and above all, a people’s car (Volkswagen).
  • “The Nazis have this term… Volksgemeinschaft, which means people’s community. And it is their dream… Of course, crucially, for Hitler, the Volk doesn’t mean all the people in Germany… It means the Aryans and not the Jews and not all the other undesirables.” — Jacob Goldstein [09:54]
• Hitler’s early public push at the 1933 Berlin Motor Show: the pledge for a mass-produced car as a symbol of German renewal.

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3. The Impossible Dream: Design Specs and Economic Hurdles (12:09–13:59)

• Typical German cars were too expensive for the average worker (2,000 Reichsmarks, about two years’ salary).
• Hitler’s specs: 990 Reichsmarks, seating for four or five, at least 50 mph, optional machine gun mounts.
  • “[Hitler says] you should be able to mount machine guns on it. Not for the family vacation, but you know, for other things.” — Robert Smith [13:08]
• German automakers balked at the plan, doubting its economic viability and fearing ruin.

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4. Enter Dr. Ferdinand Porsche (17:05–18:48)

• The industry hires Porsche, expecting a negative report; Porsche, instead, says yes and becomes the chief designer.
• The prototype’s design is instantly recognizable: the “round little hedgehog” car—the Beetle.
  • “I would describe this car, except you have seen it—it looks exactly like every Volkswagen Beetle you have ever seen. From the very beginning, it’s that round little hedgehog looking car.” — Robert Smith [18:25]
• The design’s innovations: round shape (aerodynamic, cost-saving), engine in the rear, air-cooled (suitable for German conditions).

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5. The Problems of Mass Production (22:07–25:23)

• Building a prototype is one thing; mass production is another entirely.
• German automakers don’t have the know-how for Ford-like assembly line manufacturing.
• Henry Ford: admired for mass production and notorious anti-Semitism. Hitler idolized Ford, displaying his portrait and reading “The International Jew.”
  • “You know it’s bad if you have a picture of Adolf Hitler on your wall. But even worse is if Adolf Hitler has a picture of you on the wall.” — Robert Smith [26:46]
• Porsche visits Ford’s Michigan plant, learns about modern production, and brings the knowledge back to Germany.

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6. The Nazi Factory: Workforce and Propaganda (27:39–31:25)

• The Deutsche Arbeitsfront (Nazi Labour Front) funds the factory using stolen union money.
• Workforce: not best talent, but loyal Aryan youth and Hitler supporters.
• Aspirations: 150,000 cars/year, scaling to 1.5 million—beyond Germany’s existing total car population.
• Rebranding: the KDF (Kraft durch Freude) Wagen—“Strength Through Joy” wagon, a model of Orwellian nomenclature.
  • “It is so, like, amazingly Orwellian. And you’re like, oh, right. This is what Orwell was writing.” — Jacob Goldstein [29:39]
• The infamous savings plan: workers put aside part of pay for a car, but the economic math doesn’t add up.

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7. War, Slave Labor, and Atrocity (34:51–38:38)

• WWII halts the people’s car project; the factory makes war material and militarized Beetles (Kubelwagen).
• Enslaved labor: Polish women, Soviet POWs, Dutch students, Jews from concentration camps, forced to work in appalling conditions.
  • “They are like so badly treated and starved by the time they get there that they can’t do much and they start to literally die off.” — Jacob Goldstein [36:48]
• Babies born to enslaved women are abandoned to die—365 dead by war’s end.
  • “By the end of the war, 365 children died as a result of neglect and inadequate nutrition. Basically every baby sent to this facility died.” — Jacob Goldstein [38:38]

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8. Aftermath and the Postwar Transformation (39:35–40:54)

• With Allied victory, Porsche flees; the enslaved workers revolt; the Americans liberate the factory.
• Irony: America’s competitive market and auto industry (GM, Chrysler, Ford) outproduced the German war machine.
  • “One of the reasons the Allies won was what Hitler wanted—the Allies out produced the Germans, largely using factories owned by GM, Chrysler and even Henry Ford.” — Robert Smith [39:35]
• The episode ends on the brink of the Beetle’s postwar rebirth, promising a “successful conclusion” next episode.

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Notable Quotes

• “[The Beetle] was dreamed up by Adolf Hitler in part to conquer and subjugate his European neighbors.” — Jacob Goldstein [07:10]
• “Fuhrer, we have some notes on the Volkswagen, on your big plan… Nobody’s going to do that.” — Robert Smith [14:11]
• “Strength Through Joy... This is what Orwell was writing.” — Jacob Goldstein [29:39]
• “If you can get people to pay for a thing where you haven’t even built the factory, that is good for you.” — Jacob Goldstein [31:39]
• “How does this utter failure of a plan by Adolf Hitler… go on to make a cute car beloved by Americans? That’s the story for next time.” — Jacob Goldstein [40:36]

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Memorable Moments & Tone

• The playful chemistry between hosts keeps the episode fresh even during grim sections, combining humor, amazement, and deep historical knowledge.
• Visual descriptions—Hitler “petting” the Beetle; Beetle as “a hedgehog in armor”—help humanize and contextualize the story.
• Grim reminders of the human cost underpin the lighter tone—atrocities are confronted head-on but are not allowed to overwhelm the narrative.

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Key Segments & Timestamps

• Hollywood and “Herbie” Origin Story – 04:52–06:32
• Hitler’s Vision and “Volk” Nation-Building – 08:00–10:32
• Car Design, Porsche, and Economics – 17:05–19:01
• Ford: Admired and Feared – 25:23–26:57
• Strength Through Joy: Brand and Propaganda – 29:12–30:44
• Slave Labor and Factory Atrocity – 34:51–38:38
• Allies’ Victory & Beetle’s Postwar Fate Teased – 39:35–40:54

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Final Thoughts

This episode of Business History (featured on History Daily) offers a compelling, nuanced exploration of the VW Beetle’s dark origins, the perils of command economies, and the moral complexities of innovation under totalitarianism. With part two promised, listeners are left eager for the story of how a Nazi project became a global symbol of fun and freedom.

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For more in this series, follow Business History and History Daily.

Transcript

[Grainger Announcer]

If you're the purchasing manager at a manufacturing plant, you know having a trusted partner makes all the difference. That's why, hands down, you count on Grainger for auto reordering. With on time restocks, your team will have the cut resistant gloves they need at the start of their shift and you can end your day knowing they've got safety well in hand. Call 1-800-GRAINGER Click grainger.com or just stop by Grainger for the ones who get it Done.

[Narrator/Host Intro]

The Business of America is Business that catchy line was delivered by President Calvin Coolidge, though if you've heard it before, you should know it's a misquote. Speaking to the American Society of Newspaper editors in Washington, D.C. on January 17, 1925, Kuhn Coolidge's actual words were after all, the chief business of the American people is business. They are profoundly concerned with producing, buying, selling, investing and prospering in the world. Either way though, the sentiment is the same when it comes to business. Americans get down to business. But I have a suspicion that Americans aren't alone in this. Sure, there may be weird foreign traditions of midday siestas, taking all of August off, or having comprehensive health care and medical leave, but I think the business of the world is business. Which means the history of the world is business too. After all, many of the very earliest examples of written language we have appear as business receipts, payroll records, and customer complaints, all written in cuneiform on small clay tablets. So on today's Saturday matinee, let's explore the history of business with the new podcast Business History. In this episode they explore how Adolf Hitler created that iconic symbol of peace and love, the VW Beetle. I hope you enjoy While you're listening, be sure to search for and follow business history. We've put a link in the show notes to make it easy for you.

[Grainger Announcer]

If you're the purchasing manager at a manufacturing plant, you know having a trusted partner makes all the difference. That's why, hands down, you count on Grainger for auto reordering with on time restock. Your team will have the cut resistant gloves they need at the start of their shift and you can end your day knowing they've got safety well in hand. Call 1-800-GRAINGER clickgrainger.com or just stop by Grainger for the ones who get it done.

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[Robert Smith]

Where are we gonna start this story, Jacob?

[Jacob Goldstein]

The place is Hollywood. The time is the late 1960s. Yes, we are on the lot of a big Hollywood studio. They're making a racing picture and they need to figure out what car the hero is gonna drive. They know it's gonna be something small, sporty, foreign. And so what they do is they get a bunch of candidates, a bunch of possible cars.

[Robert Smith]

So maybe an Aston Martin, like a.

[Jacob Goldstein]

Little Fiat Volkswagen Beetle. And they park em on the studio lot right outside the commissary. And they just let like the ordinary people who work at the studio check out the cars as they're coming and going. And they watch how the people react to the cars. And with most of the cars, people do what you expect. Maybe they kick the tires. Is that actually a thing? Is it just a metaphor?

[Robert Smith]

No, I think it's like back when rubber was bad.

[Jacob Goldstein]

Really, like your foot would go through. Is that what it is?

[Robert Smith]

Dude? I don't know. You want a little bounce on the tire?

[Jacob Goldstein]

Okay. They like, you know, play with the steering wheel Whatever. But when the people get to the Volkswagen Beetle, they act in an entirely different way. They treat it not so much like a car as like a cute little puppy. They're, like, petting it. Yeah. They're tapping the car.

[Robert Smith]

Brace it. Yeah, yeah.

[Jacob Goldstein]

And the producers see this and they think, oh, this car is different. This car has charisma. This car is a star. And they were originally gonna call the movie Carboy girl. Why not?

[Robert Smith]

60S, yeah, sure.

[Jacob Goldstein]

But they loved the Beatles so much that they ended up calling the movie the Love Bug.

[Robert Smith]

Herbie, the Love Bug. I remember this from my childhood.

[Jacob Goldstein]

I remember Herbie Goes Bananas, the sequel. Of course, it had the novelization, which I bought at the book fair and liked. The movie was a hit, I think the second biggest GROSSING Movie of 1969, right behind Butch Cassidy and the Sundance Kid, another classic. And of course, so was the beetle, late 60s, peak beetle. The car is in fact about to become, in a few years, the best selling car of all time. A record that it still holds. And maybe my favorite thing about the Beetle, in a perverse way, this cute little puppy dog hippie car was dreamed up by Adolf Hitler in part to conquer and subjugate his European neighbors. I'm Jacob Goldstein.

[Robert Smith]

And I'm Robert Smith. And this is Business History, otherwise known.

[Jacob Goldstein]

As Boy Boy Podcast, otherwise known as a show about the history of business.

[Robert Smith]

These days we talk a lot about industrial policy, the role of government in commerce. When should a government intervene in the free market and decide what to manufacture? You know, pick winners and losers, determine the prices of things. Even Hitler tried to do all three, and it was a disaster. Except for the car itself. It turned out to be pretty successful.

[Jacob Goldstein]

The most successful car in the history of cars.

[Robert Smith]

In the 1930s, Germany was a wreck. It had lost World War I, had unsustainable reparations put on it the Treaty of Versailles. It had the inflation of the 1920s.

[Jacob Goldstein]

And the environment, the inflation of all inflations.

[Robert Smith]

Wheelbarrows full of money. You've seen the pictures. And then coming in the 1930s, there is a global depression and Germany is just hitting the skids. It's got 30% unemployment, utter poverty. And Adolf Hitler comes in with his promises.

[Jacob Goldstein]

Yeah. So 1933, Hitler comes to power, of course, promising that he's going to, you know, make Germany the greatest nation on Earth. And one important part of his promise is material prosperity. Right? Germany is. It's not just a country in the depression, not just a country that has been burned with reparations. It is much poorer than France, the United Kingdom, and much, much poorer than the United States. And so part of Hitler's program, his promise, is to figure out how Germans can get the kind of mass produced goods that ordinary people in the United States are now buying.

[Robert Smith]

And that's exactly what the Germans wanted to hear at this time. Sure.

[Jacob Goldstein]

And in particular, you know, mass production and mass consumption is built on this idea of sort of the people. The mass of people. Right. And the mass of people is really important for Hitler and the Nazis. Right. There is this German word Volk, like Volk, and it can mean people or it can mean nation. The Nazis have this term, and I will say now, I don't speak German, as you will hear in this show, but the Nazis have this term Volksgemeinschaft, which means people's community. And it is their dream of the Volk as a nation. And of course, crucially, right, for Hitler, the Volk doesn't mean all the people in Germany.

[Robert Smith]

No.

[Jacob Goldstein]

It means the Aryans and not the Jews and not all the other undesirables. So Hitler comes to power with this promise of prosperity and he starts promising all this Volks stuff. There's the.

[Robert Smith]

You can do it. You can do it.

[Jacob Goldstein]

Volks Kempfanger Radio.

[Robert Smith]

People's radio.

[Jacob Goldstein]

Volks Koolschrank.

[Robert Smith]

People's refrigerator.

[Jacob Goldstein]

The Kuhl. The Volks Traktor Tractor.

[Robert Smith]

Tractor, yeah.

[Jacob Goldstein]

And then maybe the Fuhrer's favorite, in fact, the Volkswagen.

[Robert Smith]

And it's interesting because that Hitler really prioritizes this. You know, just a few weeks after he takes power in 1933, he goes to the Berlin Motor show, which is amazing. Right. But I mean, I guess the time is busy.

[Grainger HVAC Technician Announcer]

Right.

[Jacob Goldstein]

He's got a lot to do.

[Robert Smith]

Yeah. And he's like, what do we need to do first? A car.

[Jacob Goldstein]

Yeah.

[Robert Smith]

And maybe because of the symbol of prosperity, or maybe because he's already thinking about what a car can do. And it's at that motor show, 1933, that he announces this dream of the Volkswagen. Yeah.

[Jacob Goldstein]

And this dream for him, it means a lot of things. Right. There is also this idea that, like, when the Volk have cars, it will help unite them as a people.

[Grainger HVAC Technician Announcer]

Right.

[Jacob Goldstein]

If you think of traditional rural poverty, like, you don't have a car, it's hard to go from town to town. But if everybody has a Wagen, then all the Volk, they can go and see the beautiful countryside, they can go and visit their neighbors.

[Robert Smith]

They are distinct regions and in fact, were separate countries at one point. Right.

[Jacob Goldstein]

Not that long before this.

[Grainger HVAC Technician Announcer]

Yeah.

[Robert Smith]

Yes. So it brings them together as a country. And then there's another part of the plan which is at this point, because there are not a lot of cars in Germany, not a lot of Germans know how to drive. And Hitler has this desire to take new territory and in order to do that he is going to need young men with guns who can drive somewhere.

[Jacob Goldstein]

And Germany really is far behind here.

[Robert Smith]

Right.

[Jacob Goldstein]

Like in the U.S. at this point, there's something like one car truck for every five people.

[Narrator/Host Intro]

And.

[Jacob Goldstein]

And in Germany it's more like one car truck for every 150 people.

[Robert Smith]

Amazing. And it's interesting because Germany invented the car. Yeah, they invented the car. And there were other small cars for sale, but they were really expensive. They were almost just bespoke hobby vehicles. Right?

[Jacob Goldstein]

Yeah. Like even a cheap car in Germany at this point costs something like 2000 reichsmarks, which is around two years salary for a typical worker. And much more expensive, I should say, than basic cars in the US were at this point.

[Robert Smith]

Right.

[Jacob Goldstein]

Germany had not mastered the mass production of the good cheap car the way Ford and GM had in the United States.

[Robert Smith]

So Hitler's dream car manufacturing and that it be cheap enough that the German people can afford it. So Hitler says, no, it cannot be 2,000 reichsmarks. It should be 990 reichsmarks. I love this. Like he's at a 99 cent store. 990 rex marks, which is less than half the price of the going car. And according to Hitler, like he has all these ideas for it, it should seat four or five people. So a German family can travel around. Right. It should go at least 50 miles an hour. You know, that way you can get to Moscow in a timely way.

[Jacob Goldstein]

Put the blitz in the Blitzkrieg.

[Robert Smith]

Exactly right. And he says you should be able to mount machine guns on it.

[Jacob Goldstein]

Sure.

[Robert Smith]

Not for the family vacation, but you know, for other things, you never know other plans. Right.

[Jacob Goldstein]

And now there are German carmakers in Germany. Right. There's still a private industry at this point in the country. And they look at Hitler's specs and price and they say no way. You know, they are of course aware that cheaper cars are made in the US but the German market is way smaller than the us. There are fewer Germans. Germans are much poorer. So even if the automakers could get all of the knowledge, could build a factory like the ones in the United States, they're just, just isn't a German market big enough to get the economy of scale to sell a car this good at a price this low?

[Robert Smith]

And the Carmakers, you know, they get together and they're like, so who's going to tell the Adolf Hitler that we can't do it, man?

[Jacob Goldstein]

Fuhrer, we have some notes on the.

[Robert Smith]

Volkswagen, on your big plan. You've told everybody at the auto show.

[Jacob Goldstein]

What? No, nobody's going to do that.

[Robert Smith]

So what does a company do when it doesn't want to deliver the bad news? They hire a consultant.

[Jacob Goldstein]

Yes. That's what they're for.

[Robert Smith]

Yeah. They're going to have the consultant write a report to the Fuhrer that says as an independent observer, it is not possible to make a car and sell it for 990rex marks.

[Jacob Goldstein]

And pretty soon they find their man, automotive engineer by the name of Dr. Ferdinand Porsche. We'll talk about him after the break.

[Robert Smith]

We will.

[Grainger HVAC Technician Announcer]

If you're an H Vac technician and a call comes in, Grainger knows that you need a partner that helps you find the right product fast and hassle free. And you know that when the first problem of the day is a clanking blower motor, there's no need to break a sweat. With Grainger's easy to use website and product details, you're confident you'll soon have everything humming right along. Call 1-800-GRAINGER Click grainger.com or just stop by Grainger for the ones who get it done.

[Grainger Announcer]

If you're the purchasing manager at a manufacturing plant, you know having a trusted partner makes all the difference. That's why hands down, you count on Grainger for auto reordering. With on time restocks, your team will have the cut resistant gloves they need at the start of their shift. And you can end your day knowing they've got safety well in hand. Call 1-800-GRAINGER Click grainger.com or just stop by Grainger for the ones who get it done.

[Grainger HVAC Technician Announcer]

If you're an H Vac technician and a call comes in, Grainger knows that you need a partner that helps you find the right product fast and hassle free. And you know that when the first problem of the day is a clanking blower motor, there's no need to break a sweat. With Grainger's easy to use website and product details, you're confident you'll soon have everything humming right along. Call 1-800-GRAINGER clickgrainger.com or just stop by Grainger for the ones who get it done.

[Grainger Announcer]

If you're the purchasing manager at a manufacturing plant, you know having a trusted partner makes all the difference. That's why hands down, you count on Grainger for auto reordering with on time restocks. Your team will have the cut resistant gloves they need at the start of their shift and you can end your day knowing they've got safety well in hand. Call 1-800-GRAINGER Click grainger.com or just stop by Grainger for the ones who get it done.

[Jacob Goldstein]

Okay, that's the end of the ad. When we left, the German automakers had just decided to hire as their consultant one Dr. Ferdinand Porsche.

[Robert Smith]

I'm guessing he is not a medical.

[Jacob Goldstein]

Doctor, he's not even an engineering doctor. He's an honorary engineering doctor.

[Robert Smith]

But the doctor's important. Maybe he gets the respect to the Fuhrer. He can lay the truth to him and just say that it is not economically possible to build a cheap car.

[Jacob Goldstein]

Well, yeah, and certainly Porsche is like legit at this point. He's been working in the auto industry for decades. He's in his mid-50s, he designed cars for Daimler, he worked on racing teams. And at this point he is in fact a consultant. He's running a consultancy and he gets this call from the automakers to be the, you know, bad news consultant. And he takes the job. He says, yeah, sure, I'll study this, I'll write a report. But he's like, no, I'm not going to tell the Fuhrer. No, I'm going to tell him yes.

[Robert Smith]

Hell yes.

[Jacob Goldstein]

Hell yes. And I'll be the man to make his Volkswagen dream come true.

[Robert Smith]

German hero.

[Jacob Goldstein]

And so he gets to work designing the people's car of Hitler's dreams and pretty quickly comes up with this little scale model. And there are these amazing photos of Porsche and Hitler looking at a model that's like, I don't know, a foot long of what will become the Beetle.

[Robert Smith]

I would describe this car, except you have seen it, it looks exactly like every Volkswagen Beetle you have ever seen. From the very beginning, it's that round little hedgehog looking car.

[Jacob Goldstein]

And in this photo you can see Porsche is on the left and Hitler, like full on Hitler, swastika armband, mustache, slick down hair. He's like petting the bumper.

[Robert Smith]

Just like the people at the movie studio 30 years later.

[Jacob Goldstein]

Yeah, yeah. And so we can talk about the design itself for a sec because it is so iconic is an overused word, but it really is. And they just nail it from the jump.

[Robert Smith]

Remember at the time, American cars in the 1930s are long and sort of flat. I mean, if you picture it right, there is a flat radiator grille on the front and then a long flat hood where the engine is and Then the top tends to be flat and long. Those cars look like a coffin, if you can imagine the kind of boxiness of them.

[Jacob Goldstein]

Right, yeah. Whereas the Beetle, it's incredibly round. And so there are a few things going on here. Right. One is at the time, this roundness, I mean, it is in fact aerodynamic. It conveyed modernity. Right. And in design, the Germans loved modernity.

[Robert Smith]

There's also a fact about a circle, which is a circle has the most area inside it for the least amount of circumference. So if you're building a car and you're trying to make it cheap, you can use less metal to make it circular and make it feel inside like there's more space.

[Jacob Goldstein]

There's one other photo here that's amazing and it goes with what we're talking about. Same, same scene in this instance. Porsche is like lifting up the back what would be the trunk in a normal car. And Hitler is like gazing over to look and he's delighted. And I have to say, I find happy Hitler scarier than angry Hitler.

[Robert Smith]

He is kind of laughing his ass off. Because when you open the trunk of the car, what you see in fact is the engine. And I don't know if you've ever seen this in a Volkswagen Beetle, but the engine is in the back, which is an innovation at the time.

[Jacob Goldstein]

Well, and also putting the engine in the back is part of what allows the front to be so round.

[Robert Smith]

Right.

[Jacob Goldstein]

In other cars at the time, the engine was in the front, the radiator was in the front, so you needed that big rectangle. And the air cooled piece of this is key because there's not like modern anti freeze yet. The Germans don't have garages and so it would basically freeze in the winter, particularly if you were like driving say.

[Robert Smith]

To Moscow or just outside of Moscow.

[Jacob Goldstein]

15 miles outside of Moscow.

[Robert Smith]

Yes, exactly. Let's do one more picture. This one is from a few years later. Porsche has now built a full size prototype of the Volkswagen Beetle. It is a convertible. And you can see in this photo, Hitler is sitting in the back. And this is a detail I just love about this photo. There are beautiful bars behind the front seat, the sort of bars that you might see on a roller coaster. Right. And these were made so that Hitler could ride in the back of a Volkswagen and stand up and hold onto the bar with one hand and with the other hand, well, you know, you know what's gonna happen with the other hand. Yeah.

[Jacob Goldstein]

Heil me. Sieg Heil. I don't know what Hitler says when he does the Heil Hitler. Yes. So it's the Heil Hitler mobile. And of course he loves it.

[Robert Smith]

Of course he loves it. But a prototype does not mean that you can actually build this car or build it cheaply. That's what Porsche is not telling it.

[Jacob Goldstein]

Well. Right. And this is like one of the great lessons of manufacturing.

[Robert Smith]

Right.

[Jacob Goldstein]

Like, it's actually not that hard to build a prototype.

[Robert Smith]

Right.

[Jacob Goldstein]

To design a car. What they have to do now is build a factory, which really means kind of invent a factory. Right. Like, optimizing a factory to build quality products at scale cheaply is a profoundly hard problem. And this is the problem that the German auto industry knew all along was going to be there. They knew all along that, sure, you could design a prototype, but you can't build it profitably and sell it at the price Hitler insists on selling it at. Mein Fuhrer, we have some. Some thoughts about the Volkswagen. Yeah, they basically drag their feet, right? Because they know, like, to try and build this factory and make this car and sell it at the right price would drive them out of.

[Robert Smith]

So Hitler sees this happening and he's like, no, we're going to make this car. And so he goes back to his favorite place, the auto show in 1936, and gives another speech. I have to say, I just never knew this part of Hitler's obsession.

[Jacob Goldstein]

But he did give a lot of speeches. Yeah, we knew that part.

[Robert Smith]

I just didn't know the auto show part of it. Right. And so here is what he says to the assembled auto manufacturers. I have given orders to pursue the preparations for the creation of the German people's car with relentless determination. And I will bring them to a conclusion. And that, gentlemen, will be a successful conclusion. No. Successful conclusion. That quote, by the way, comes from Bernhard Reicher's great book, the People's A Global History of the Volkswagen Beetle.

[Jacob Goldstein]

So we're at this stalemate, right? Hitler wants the car. None of the companies that build cars in Germany want to build it. And into this stalemate steps the Deutsche Arbeitsfund, which is the Nazis national labor organization. And by this point, mid-30s, they are rich and powerful because when Hitler took power, what they did was they threw the heads of Germany's unions into concentration camps and took all the money from the unions.

[Robert Smith]

And instead of using that money for the benefit of their union workers, they decide they're going to use this money to get the Fuhrer's favor.

[Narrator/Host Intro]

Right.

[Robert Smith]

To do what he wants and to put money into a factory.

[Jacob Goldstein]

Yeah. They are going to build the factory to build the people's car and to run the project they pick some kiss.

[Robert Smith]

Ass they found off the street.

[Jacob Goldstein]

Dr. Ferdinand Porsche. Yes, yes. So where are we now? Porsche has his design.

[Robert Smith]

Yes.

[Jacob Goldstein]

He has his source of capital. He has money, but he lacks human capital. Right. This very important piece of industrialization of progress. Right. Nobody in Germany knows how to build a factory that's efficient enough to make cars at the scale that Hitler is dreaming of. And as efficiently as Hitler is dreaming of. Like nobody knows how to do it.

[Robert Smith]

This is one of those unappreciated facts about industrialization and the industrial revolution. You think it's just the machines? It is not the machines. It is people who can run the machines in a really productive, effective way. And the way you set up the machines and the way they all communicate with each other is something that is proprietary knowledge. It takes years to do.

[Jacob Goldstein]

Yeah, I mean, the classic framework for economic growth was land, labor and capital. And then like a hundred years in somebody, Paul Rumer actually I think was like, no, no, it's land, labor, capital and knowledge.

[Robert Smith]

So who knows how to build a big factory with a assembly line to.

[Jacob Goldstein]

Make cars, buy the hundreds of thousands for the masses. Henry Ford, who literally invented mass production of cars, kind of invented modern mass production. He has perfected this in an amazing way.

[Robert Smith]

Yeah, of course. Henry Ford is really famous for two things. That assembly line you mentioned and hating the Jews. Famous anti Semite.

[Jacob Goldstein]

Yeah. And like not just like, oh, everybody used to hate the Jews. Like he really put his heart into it.

[Robert Smith]

Really did. He industrialized the Jew hating.

[Jacob Goldstein]

He, he, he paid for this newspaper, the Dearborn Independent, that published this series called the International Jew.

[Robert Smith]

Oh, was that pro or con? International Jew?

[Jacob Goldstein]

Well, let me clarify. They consolidated the series into a book and the book was called the International the World's Foremost Problem. Hitler was a fan of the book. He actually had copies of it in his office in the twenties translated into German. And he also had on his wall a portrait of Mein Heinrich of Henry Ford.

[Robert Smith]

You know, it's bad if you have a picture of Adolf Hitler on your wall. But even worse is if Adolf Hitler has a picture of you on the wall. Like, that's as bad as it gets.

[Jacob Goldstein]

That's peak. So yes. So Dr. Porsche and a few of his colleagues are able to travel to Michigan to see Henry Ford's incredible plant. Incredible sort of temple of mass production and efficiency. Learn from it and go back to Germany to build the factory.

[Robert Smith]

And what they saw really was a miracle. At the time, the river Rouge plant, where raw materials like raw steel would go in one end. They had power plants, transformational. All of the industrial machinery.

[Jacob Goldstein]

They had a foundry and cars roll.

[Robert Smith]

Out the other end. Yeah. Like, it is a miracle at the time. And they think, oh, we got to build this for the Fuhrer.

[Jacob Goldstein]

Yeah. And so they go out to basically the countryside where nothing exists, and they start building. They build, you know, the factory, but they also build a power plant and a foundry and houses where the workers are gonna work. And the workers, by the way, are not just anybody. The workers themselves are gonna be the Volk. It's gonna be the car. Buy the Volk for the Volk. So everybody they're recruiting are like, Hitler Youth.

[Robert Smith]

It is a fascinating experiment in a way, Right. Because the Henry Ford plant was the product of the free market competition. Workers came and learned at the plant, but could work at other car manufacturers or bring back skills from other car manufacturers to the Henry Ford plant. Here's Hitler saying, well, I know what it should look like, so let's just do it without competition. Let's not bring the best workers, but the most loyal workers, the Aryan Youth. Like, let's bring them. Let's set the price. Let's make this happen.

[Jacob Goldstein]

The dream was to build 150,000 cars in the first year, going up to 1.5 million cars a year, which is like more cars than there are in all of Germany at this point. And so in 1938, Hitler goes to this ceremony to lay the cornerstone at the factory. And he gives, wait for it, a speech defending the idea and talking about the haters. Actually, he says something like, you know, people told me this was a terrible idea, impossible. But here they are breaking ground on the factory.

[Robert Smith]

Hitler says, in fact, I hate the word impossible.

[Jacob Goldstein]

And around this point, they decide to rename the car. They've just been calling it the Volkswagen, like the Volks, everything else. But around this time, they decide they're going to call it the Kraft Dirsch Freude, the Strength Through Joy Wagon. KDF for short.

[Robert Smith]

It's amazing. I just want to say it again. Strength Through Joy. And this is 1938, so there's not a lot of joy left these days in Germany. That's how you know when they start to name the car Strength Through Joy.

[Jacob Goldstein]

I mean, it is so, like, amazingly Orwellian. And you're like, oh, right. This is what Orwell was writing.

[Robert Smith]

This is what he was talking about. Strength Through Joy.

[Jacob Goldstein]

And in fact, KDF Strength Through Joy was like a brand for the Nazis at this Point there was like KDF cruise ships and the Arbeits Front, this labor group that remembers bankrolling the factory. They're like, into kdf and part of the idea, I think, is they are basically underpaying the workers, but trying to, like, kind of make it up or keep them happy enough by giving them these little baubles, like little KDF vacations and hopefully a car.

[Robert Smith]

So at the end of this ceremony where they're gonna start building the factory, Hitler drives off in one of these KDF cars. Ferdinand Porsche sat beside him. Porsche's son is driving it. The crowd of 55,000 people goes wild. The New York Times says this is a public relations coup. And they call the car, when they're describing it in New York Timesian language, a shiny little Beetle, which is the first time we hear this referred to as an adorable bug.

[Jacob Goldstein]

So they've just laid the cornerstone. The factory is not built yet. But Dr. Porsche, not a real doctor. And the Arbeitzfront, they have this clever sales model, actually a model that Meinheinrich Henry Ford had used earlier, and that is this. Ordinary Germans could sign up for, like a savings plan where they pay in fair five Reichsmarks a week, which is like, you know, a typical German makes maybe 25 reichsmarks a week. So like a significant chunk. And once they'd saved 750reichsmarks or so, so this is like a few years of savings, they would get an order number for their brand new strength.

[Robert Smith]

Through Joy Wagen, I can see the advertising campaign, I'm assuming at this point in 1938, it's a little encouraged by authorities to give up your wages for this car that may or may not come.

[Jacob Goldstein]

I mean, it is certainly good business. Let's set aside at the point of the gun for a moment just to say if you can get people to pay for a thing where you haven't even built the factory, that is good for you.

[Narrator/Host Intro]

Right?

[Jacob Goldstein]

Because now they are providing the capital that you need to build the factory to deliver the car. And in fact, through compulsion or otherwise, people do sign up. They have something like 250,000 orders come in, which is a lot, although to be clear, not nearly enough to make the car economically feasible. Right. They're going to need to build so many more if they ever want to sell it at the rs990 that Hitler said and not go bankrupt.

[Robert Smith]

If you're taking notes at this point, saying, well, I mean, kind of seems like a good idea, you're taking all this money from people Building the factory, promising the cars, they're actually creating construction jobs. You know, you had this economically devastated Germany which now is seeing action, right? People have jobs, money is flowing, all this sort of stuff. I should say that if you have a command and control economy like this, you can make the economy have a sort of sugar high very quickly, right? You can get people to work in all of this. But long term, you are producing a car that costs more than you're gonna sell it for. Like eventually, like I think Germany could have come up with a great cheap car, but it would've required a lot of different companies competing and finding, you know, incremental progress. Rather than this, we're gonna lay out the whole plan and do it immediately.

[Jacob Goldstein]

But you know, as it happens, long term economic growth is not gonna be the main question in Germany in the years following 1938.

[Robert Smith]

Yes, because in 1939 I know what happens. Germany invades Poland. It's World War II. Let's take a quick break and then we'll continue with the story.

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[Jacob Goldstein]

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[Jacob Goldstein]

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[Jacob Goldstein]

And so initially this KDF factory starts making just very sort of classic war things like aircraft wings and fuel tanks. But it's not going well. You know, it wasn't built to build whatever aircraft wings. And so Dr. Porsche, not a real doctor, says, remember Fuhrer, you had the idea of like the machine guns and like building it to say invade Poland. Why don't we do that? Why don't we take this cute little round Volkswagen and turn it into like an attack wagen.

[Robert Smith]

And I've seen a picture of it and it's amazing. You can still see the beetle shape under it. But it looks as if a hedgehog is sort of wearing medieval armor. It's. It's much more boxy. The car is jacked up a little bit higher, you know, so that it could drive over, I don't know, the fields of Poland and attack people.

[Jacob Goldstein]

They call it the Kubelwagen, the bucket car. And there's one modification that's just interesting to me that they make, which is they actually have to make it so that it can drive slower, I guess, without stalling out. Right? Because it has to drive at the speed that the army marches. So now they have the model of the car they're going to build to further the war effort. But all those Hitler Youth who were working in that KDF factory are now off fighting the war. They are gone. And so here is where it starts to get much worse, frankly. This is a story about the Nazis. Perhaps, unsurprisingly, it's going to get bad right now.

[Robert Smith]

So.

[Jacob Goldstein]

So the Nazis arrange for basically enslaved Polish women. Poland has been conquered by this point. Enslaved Polish women to be sent in to be forced laborers at this factory. Hundreds of them, 300 of them. But it's not going that well, of course. You know, these women are being forced to make a car that is being used to subjugate their own country.

[Robert Smith]

And they're untrained and it's just not working out.

[Jacob Goldstein]

So they fire the guy who's running the factory and they bring in Portia's son in law, a guy named Anton Piech, and he just brings in all of the enslaved workers that he can. He goes from hundreds to thousands. There are Soviet soldiers who had been taken prisoner, but they are like so badly treated and starved by the time they get there that they can't do much and they start to literally die off. There are Dutch students who refused to sign a loyalty pledge. They are delivered to the factory. And more and more they're bringing in Jews from concentration camps, along with their SS guards who are making them work.

[Robert Smith]

At this point, the workers are making the Kubelwagens, right? They're also making military stoves, weapons, parts for missiles. This is a pure military industrial complex at this point, and it is a profitable one. You know, the Porsche family, they are charging the Nazis to do all of this and making a huge profit because they're not paying their workers. Right.

[Jacob Goldstein]

And there's one detail from the official history of Volkswagen that I want to mention about what happens at the factory around this time, and that is this. Some of the enslaved women brought to the factory were pregnant when they arrived or became pregnant later. And what they started doing was taking the babies from their mothers, you know, right after they were born. And they said they were putting them in a nursery, but really the nursery was just abandoning them to die. Like here I'll quote from the official history. It says by the end of the war, 365 children died as a result of neglect and inadequate nutrition. Basically every baby sent to this facility died.

[Robert Smith]

It's late 1944, at this point, 1945, early 1945, and the Allies are closing in on Germany. They are starting to bomb the plant, the Volkswagen plant. They're moving closer and closer to Germany itself.

[Jacob Goldstein]

So Porsche and his son in law Pierre, they've actually been like squirreling away millions of Reichsmarks this whole time. And they flee to Austria.

[Robert Smith]

And this is the chance as the plant is falling apart, that the prisoners there have been waiting for. They take over what's left of the factory and they start to hunt down the worst of their oppressors, the guards and the management that were like enslaving them.

[Jacob Goldstein]

And then finally, sometime around April 15th of 1945, the Americans occupy the Volkswagen factory. They find the starving, enslaved workforce and the nursery where the babies had died. You know, they see everything. The Nazis have lost, the Allies have won.

[Robert Smith]

And one of the reasons the Allies won was what Hitler wanted. The Allies out produced the Germans, largely using factories owned by gm, Chrysler and even Henry Ford. Mein Heinrich. Right. They built the bombers and the tanks and the jeeps that allowed the US and the Allies to win the war.

[Jacob Goldstein]

Yeah, I mean there is this, there's this phrase people use, the arsenal of democracy. Right. And it's really interesting. Like the American industrial economy and in particular the car makers that had developed in this competitive private market for decades when the war came, were turned to basically government production to make military vehicles. But because of what they'd honed in the private market, they were amazing at it and they out produced the Nazis and that was key to winning the war.

[Robert Smith]

So how does this utter failure of a plan by Adolf Hitler. No. People's car destroyed factory a legacy of evil. How does that company go on to make a cute car beloved by Americans?

[Jacob Goldstein]

That is the story for next time. Part two of the Beetle, when we.

[Robert Smith]

Bring this story to a conclusion. And that, gentlemen, will be a successful conclusion.

[Jacob Goldstein]

Appreciate the commitment to the bit.

[Robert Smith]

Yeah, try it. Our producer is Gabriel Hunter Chang. Our engineer is Sarah Brugiere. And our showrunner is Ryan Dilley.

[Jacob Goldstein]

I'm Jacob Goldstein.

[Robert Smith]

And I'm Robert Smith. We'll be back next week with another episode of Business History, a show about the history.

[Jacob Goldstein]

Wait for it. Of business.