The New Industrial Revolution

In this first activity, I want to challenge your mentality by suggesting it is the right time for you to consider a new and simple business structure for your company. The new business model for this modern industrial revolution is that of outsourcing, so you will also have to learn to manage contractors rather than employees… a very different proposition. We will get into the details of outsourcing later, but first I want to take a look at how life was before industrialism, how it changed so dreadfully during the age of the machine, and how the new era offers us a chance to go back to the future, a time when people naturally balanced work, home and church.

We are in the beginning stages of a new industrial revolution, one that will disrupt the workplace as dramatically as industrialization did in the eighteenth and nineteenth centuries. This time, however, it is a good thing for skilled workers whereas back then it was disastrous.

Although it might not yet be obvious to you, I believe that this revolution offers everyone the opportunity to rewind life back to a gentler time when people balanced work, family and church. At the same time the new era offers an unprecedented opportunity to attain financial freedom. All this and more is available to a single entrepreneur. Secrets of a Successful Startup is not just about building a successful company, but also working on your mentality as a business builder in a new era. Companies once thought to have 100 year lives are going bankrupt at an alarming rate because their structures, procedures and leadership mentalities are not adaptable enough. For the first time since before industrialism the individual skilled worker has a huge advantage, but to take it requires working on both aspects, structure and leadership style.

Imagine building a $100 million company from a spare bedroom in your house that is converted to an office, while working less than 5 hours a day with that time split into dedicated work periods separated by dedicated time with family, walks in nature and even an afternoon nap. It sounds too good to be true, but I am not just a management consultant or pop economist suggesting the possibility, that is what I have done for the last 20 years, and not once but three times.

To do it requires a complete change in mentality from the old to the new industrial revolution. Mentality is defined as how we automatically react to sensory input. So, if when you are presented with a business threat or opportunity, your automatic reaction is to call a meeting or hire someone to handle the situation, you have the mentality of the last revolution.

In the era of the new industrial revolution you need to adapt quickly or die. That means you do not just need to have a lean company structure, you have to be a company-of-1. With the right mentality you can respond to any changing market or business decision in an instant. You can direct every function of the business from your office chair, you can build a global market with a little insight and a few technology tools, and you can make optimal decisions without fear. To develop that mentality and the business structure around it requires we first understand what life was like before and after the invention of the machine. So we first go back to the future.

There is a modern myth that unions and champions of worker’s rights have bravely reduced worker hours from inhumane to tolerable. It is only part of the story. This myth is typically defended by a comparison of the modern forty-hour week with its eighty-hour counterpart in the nineteenth century. The prevailing belief is that slavery-like hours prevailed for centuries. Everyone knows the novella A Christmas Carol by Charles Dickens, with societal reluctance to give a worker even one day of rest, but in reality, those atrocious conditions only existed for the short duration of industrialism. Prior to that period, skilled workers did not have to work very much at all.

Imagine working less than six hours a day and also having half the year off as rest days. It sounds fanciful to us today, but that is exactly how it was before machines were invented.

Pre-industrialism.

This is a description of the average person’s workday in 1570 England. It is not what we have been indoctrinated to believe.

The laboring man will take his rest long in the morning; a good piece of the day is spent afore he come at his work; then he must have his breakfast, though he have not earned it at his accustomed hour, or else there is grudging and murmuring; when the clock smiteth, he will cast down his burden in the midway, and whatsoever he is in hand with, he will leave it as it is, though many times it is marred afore he come again; he may not lose his meat, what danger soever the work is in. At noon he must have his sleeping time, then his bever in the afternoon, which spendeth a great part of the day; and when his hour cometh at night, at the first stroke of the clock he casteth down his tools, leaveth his work, in what need or case soever the work standeth.
-James Pilkington, Bishop of Durham, ca. 1570

The Industrial revolution began in Britain around 1740, spread to France and from there to other countries on the continent. Before capitalism, however, Britain and elsewhere was an agrarian and handicraft economy. Although the population of London quadrupled between 1520 and 1600 to 200,000, it was still only 3% of the population of England and the next biggest city, Norwich, had only 12,000 people. History presents us with graphic descriptions of plague, fire and squalor in the seventeenth century lifestyle, but in reality, those experiences applied only to the major cities of London, Paris and Rome. When child mortality is removed from age statistics people in their 30s, 40s, 50s, 60s, and 70s died at approximately the same rates as they do today. Lifespan has remained relatively unchanged for 1500 years.

Elsewhere, the majority of people lived in a village-centric culture consisting of cottages and rooms surrounding a communal green area close to the local manor. Villages were the soul of the nation, and development of the country lay in development of such self-centered, self-sufficient villages, which developed all by themselves and independent of each other.

The villagers worked on crafts or agriculture, making products needed by the village or the manor. Sustainability wasn’t just a cool word, it was how people actually lived. It was in the common person’s DNA. A blacksmith made farming tools from disused weapons. An apothecary treated ailments using herbs and spices. The people worked right where they lived and often inside their homes. A home-based office and business are not a modern idea.

Other people made baked goods or weak beer, (only the very poor or sick drank water) or they weaved or whittled wood into musical instruments or cutlery. Then they sold their wares from the kitchen window, or from barrows and baskets on the green. There was no concept of commuting, or rush hour.

People did not work long hours, nor many days a year. The rhythm of life was gentle; the pace of work comfortable, life balanced between work, church, and family, perhaps just what most people wish for now. Our ancestors may not have been rich as we judge it today in terms of having things, but they had no need nor desire for things when they had an abundance of what they needed for a balanced life including leisure time.

A typical working day stretched from dawn to dusk (sixteen hours in summer and eight in winter), but, as the Bishop Pilkington has noted, work was intermittent – called to a halt for lengthy breakfasts, long lunchtimes, the customary afternoon nap, and supper. Depending on time and place, there were also mid-morning and mid-afternoon refreshment breaks.

These rest periods were the traditional rights of laborers, which they enjoyed even during peak harvest times. They were not simply downing tools and eating where they work as we do today. Workers went back inside their home, and if they were working remotely in a field for instance, that included walking back and walking out again. According to Oxford Professor James E. Thorold Rogers the pre-industrial workday was not more than six hours.

An important piece of evidence on the working day is that it was very unusual for servile laborers to be required to work a whole day for a lord. If a serf worked an entire day, this was counted as ‘two-days-works.’

To most people today this lifestyle sounds idyllic. It is, however, how I structure my workday and life and how I have worked and lived for almost two decades. I believe it is in our DNA to live a balanced life, and that doing so leads to a more productive use of work time as well as a heightened sense of well being. Structuring the day between focused working periods separated by leisure (including walks and napping) has significant benefits for brain productivity. Modern science is only just coming to the realization of how damaging it is to the brain when you work 8 to 10 hours a day and how little actual productivity takes place in the modern workplace schedule.

The University of North Carolina’s Barbara Fredrickson has shown that positive emotions broaden minds, build interest, and energize, while negative emotions restrict thinking, and discourage receptivity to new things and initiative. It stands to reason, then, that having a balanced life would tend to lead to more positive emotions with all the attendant benefits.

One of the things that makes people feel positive at work is work-life balance. People who feel they have good work-life balance work 21% harder than those who don’t, according to a survey from the Corporate Executive Board, which represents 80% of Fortune 500 companies. That does not mean 21% longer hours, but more productivity when at work.

It is not just about how many hours a day, but also how many days a year you work that matters. During pre-industrial times, slack periods accounted for a large part of the year and adherence to regular working hours was not usual. The calendar was filled with holidays. Official — that is, church — holidays included not only long “vacations” at Christmas, Easter, and midsummer but also numerous saints’ and rest days. These were spent both in sober churchgoing and in feasting, drinking and merrymaking. In addition to official celebrations, there were often weeks’ worth of ales — to mark important life events (bride ales or wake ales) as well as less momentous occasions (scot ale, lamb ale, and hock ale).

All told, holiday leisure time in pre-industrial England took up about one-third of the year. And the English were apparently working harder than their neighbors. The ancien règime in France is reported to have guaranteed fifty-two Sundays, ninety rest days, and thirty-eight holidays. Half the year was rest. In Spain, travelers noted that holidays totaled five months per year.

The peasant’s free time extended beyond officially sanctioned holidays. There is considerable evidence of what economists call the backward-bending supply curve of labor — the idea that when wages rise, workers supply less labor. During one period of unusually high wages many laborers refused to work “by the year or the half year or by any of the usual terms but only by the day.” And they worked only as many days as were necessary to earn their customary income — which in this case amounted to about 120 days a year, for a probable total of only 1,440 hours annually, or four hours a day.

Skilled workers were the ‘middle class’ of the time. They tended their own gardens, worked on textiles in their homes or small shops, and raised farm animals. They were their own bosses. One contemporary observer noted, “their dwelling and small gardens clean and neat, —all the family well clad, —the men with each a watch in their pocket, and the women dressed in their own fancy, —the Church crowded to excess every Sunday, every house well furnished with a clock in elegant mahogany or fancy case… Their little cottages seemed happy and contented… it was seldom that a weaver appealed to the parish for a relief… peace and content sat upon the weaver’s brow” (Thompson 269).

Industrialism

During the period known as the Industrial Revolution, came technological, socioeconomic and cultural disruptions that significantly deteriorated the living conditions for skilled workers. In particular, the invention of the Spinning Jenny and Power Loom, which permitted increased production with a smaller expenditure on human resources meant they could no longer live at their own pace or supplement their income with gardening, spinning, or communal harvesting.

The same observer (Thomson) later commented: “A quarter [neighborhood] once remarkable for its neatness and order; I remembered their whitewashed houses, and their little flower gardens, and the decent appearance they made with their families at markets, or at public worship. These houses were now a mass of filth and misery.”

The relaxed, balanced, nature-driven lifestyle of the average worker in the romantic renaissance period vanished in the industrial age. The use of new basic materials like iron and new energy sources such as steam led to a rapid change from village-centric culture to the ‘factory system.’

Machines were invented and capitalism arrived as the mechanism for increased production as well as power and greed.

Machines also created a need for workers with basic reading and writing skills. In 1833 the British became involved in education for the first time. Prior to that education was closely attached to religious orders. Now education became compulsory so poor children could learn reading, writing, and arithmetic in order to be fodder to work the machines when they reached the age of 12. They became the first commuters, and eventually whole families, villages and towns migrated toward the location of the machine.

In America, education was largely an elitist and religious right until after the Revolution. In 1870 all states had tax-subsidized elementary schools and America had the highest literacy rate in the world.

It is hard to write about this disruptive force of mechanization without feeling that industrial ‘progress’ was at a high cost to the average family. Something magical was lost during that time and the concept of a balanced life was rendered impossible. Now we all have lots of things and the appearance of richness, but what have we given up for it?

Seemingly overnight, the invention of production machinery brought a seismic shift in lifestyle and conditions. Compulsory public schooling, commuting, long work days. Machines made money only when they were working so for the first-time work-shifts came into being to keep the machine grinding 16 hours or more a day. Unsurprisingly, lifespans of working people plummeted during this time.

In the first sixty years or so of the Industrial Revolution, working-class people had little time or opportunity for recreation. Workers spent all the light of day at work and came home with little energy, space, or light to play sports or games. The new industrial pace and factory system were at odds with the old traditional festivals which dotted the village holiday calendar.

Plus, local governments actively sought to ban traditional festivals in the cities. In the new working-class neighborhoods that shot up close to the machine, people did not share the same traditional sense of a village community. Owners fined workers who left their jobs to return to their villages for festivals because they interrupted the efficient flow of work at the factories.

It has taken a gradual and difficult movement over 200 years to reduce this voluntary slavery from inhumane to tolerable. Even so, a 2014 national Gallup poll of modern workers put the average number at 47 hours per week, or 9.4 hours per day, with many saying they work 50 hours per week or more, which is still twice as much as our ancestors worked before industrialization.

Long hours mean a less balanced life because the worker is stressed out by the time he or she gets home. The American Stress Institute estimates that American businesses lose $300 billion a year because of work-related stress. About one million Americans stay home from work every day because of stress and tension felt at work. The Bureau of Labor Statistics found the average amount of time off due to stress at work was 20 days. According to Brain Rules, three things matter in determining if a workplace is stressful or productive: the type of stress experienced, the balance between stimulation and boredom, and the condition of home life. ‘Work-family-conflict’ is at the root cause of stress and depression.

Post-industrialism

Today, we are experiencing another industrial revolution, one almost as disruptive as industrialism, but this time in a positive way. I believe that we have come full circle. We live in a time when we can, if we choose, bring back into our lifestyles what was lost. Technology now allows most slaves to the machine to return to their previous hamlet lifestyle. Many people have become telecommuters although they are often still slaves to the machine, which today is the computer and the endless round of tele-meetings.

However, advances in science also allow us to understand how the brain works as well as the lifestyle habits than can enhance brain output and those that damage the brain. Later on, we’ll see just how damaging 50-hour workweeks are to the brain and how fruitless half of those hours are to productivity.

In most industries now automation rules, and you can work from anywhere and engage a global audience. You can be your own boss again using ideas and skills to customize offerings to individual customers, all with the click of a mouse or subtle change in software program. There has never been a better or easier time to start your own venture, and there have never been so many possibilities created by technology to be your own boss again, set your own hours, and live a balanced life while achieving financial freedom.

Economist’s like Klaus Schwab define the First Industrial Revolution as one that used water and steam power to mechanize production. The Second used electric power to create mass production. The Third used electronics and information technology to automate production. Now a Fourth Industrial Revolution is building on the Third, the digital revolution that has been occurring since the middle of the last century. It is characterized by a fusion of technologies that is blurring the lines between the physical, digital, and biological spheres.

Said Klaus Schwab, Founder and Executive Chairman of the World Economic Forum,

‘There are three reasons why today’s transformations represent not merely a prolongation of the Third Industrial Revolution but rather the arrival of a Fourth and distinct one: velocity, scope, and systems impact. The speed of current breakthroughs has no historical precedent. When compared with previous industrial revolutions, the Fourth is evolving at an exponential rather than a linear pace. Moreover, it is disrupting almost every industry in every country. And the breadth and depth of these changes herald the transformation of entire systems of production, management, and governance.’

A common concern in my conversations with business owners is that the acceleration of innovation and the speed of disruption are tough to anticipate and react to. Once stable conglomerates are now failing because their structures make it impossible to adapt fast enough to new threats or to embrace new technologies. Being an entrepreneur has many distinct advantages in this fourth revolution, but adaptability is at the top of the list. For the first time in centuries the skilled worker holds the power and advantages again.

As a single-person business owner, however, you have to develop a mentality of adaptability. If your typical response to a new threat is to call a meeting or hire an employee to deal with it, you will struggle to survive. The great news is that as a single-person business owner there is no one to call to a meeting, and there is no need to hire anyone. You can now do it all yourself. You are the omnipotent entrepreneur.

On the supply side, the introduction of new technologies creates entirely new ways of serving existing needs. You no longer have to build that infrastructure yourself. You now have access to global digital platforms for research, development, marketing, sales, and distribution so the business structure of this new era is more favorably an outsource model. You can simply contract with someone and scale up or down resources as needed, or as your budget allows. Cashflow management is easier. This is important because until now 82% of all company failures, regardless of size, were for cashflow management issues.

On the demand side customers have more power than ever. It used to be said that a happy customer told seven people and an unhappy one told over 20 people. Today, a single customer can influence hundreds and thousands of other people almost instantaneously. It becomes imperative then to not only make the customer happy but to delight him or her (or it).

All of this is exciting, but one challenge you face is to change mentalities from the traditionally structured workplace of industrialism to the new outsource model of the digital age. In many ways it is a mentality of going back to the future.

Most people have been indoctrinated in a hierarchical company structure and are slow to recognize the need for change. The majority of new CEOs I meet want to immediately hire an executive team, and then when they are onboard, they begin the notorious rounds of update-meetings. That is now considered old school management style. Such structures are dinosaurs and companies run this way will become extinct because they cannot adapt to market or technology changes quickly enough.

Today the executive team is you. That means you need to understand every business function, and every discipline, not just the one you built a standard career in. There are no meetings to call and no one else to blame or credit. You are it. You are accountable. You are the decision-maker. You are the omnipotent entrepreneur.

Of course, you also need to raise your mentality from a $50K mom & pop style business to that of a global multi-million-dollar business. Either one takes the same effort. There is pure magic in thinking big and we’ll discuss that later, but it requires you to be willing to change mentalities. I’m not talking about positive thinking, that is for the fools who continue to robot march to the workplace and set goals. I’m talking about completely changing your perspective of yourself and the world you interact with.

The new business model for this revolution is that of outsourcing, so you also have to learn to manage contractors rather than employees. It is a completely different situation requiring a different skill set. Outsource vendors have a high level of expertise, so if you tend to be more of a control style person, you’ll need a further mentality shift to that of trust and hands-off. It is not an easy adjustment for many people, but we’ll look at tools and techniques to help you.

We will get to all of these things, but the first thing you have to adjust to is changing the mentality of how you work as a entrepreneur. Let’s look at the five-hour workday and why it is the optimal structure for this new era. Then we’ll explore the conundrum of replacing hiring employees with contracting vendors and consultants. These three activities will adjust mentality from traditional views to something very different.

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