History of Job Search, The Industrial Revolution

When George Washington became President, we were mostly a rural country. In fact, when he was inaugurated, three-quarters of working Americans worked on a farm.

And with the 2010 Census coming up, it’s interesting to remember that the very first census in 1790 showed that out of 3,929,326 Americans at the time, only about 200,000 of them lived in towns larger than 2,500 people.

So how did we change from a country of Jeffersonian yeoman farmers to a nation of Dilbertville cubicle gophers?

If free market capitalism is about, well…, free markets, then why don’t we still buy, produce, and consume everything in markets? I mean the old kind of market, the ones that existed long before Piggly Wiggly and Von’s. The type that you can still see abroad when you travel — the butcher and the leather-maker and the guy selling vegetables from his farm — all under one roof. Why aren’t chocolate and butter and sugar still sold from large sacks by small mom and pop vendors? Why were open-air markets with individual entrepreneurial producers superseded by closed-door offices, brand-name underwear, and warehouse clubs?

And why, when change was so slow for so long — when George Washington’s farm in Virginia was organized pretty much the same way as the ancient Romans’ latifundia two millenia earlier — why are all these wonderful modern products like steel, computers, and mobile phones conceived, produced, shipped and sold in a way that would be utterly alien and incomprehensible to the Father of our Country? Why so much change in these particular two centuries?

The short answer is that we got a lot better at producing stuff, and then we discovered that many of us working together produced exponentially more and better stuff than when we worked alone. And because working together was the way of the future, we invented the concepts of job, and of managers, and of middle management, to tame the awesome power unleashed by our discoveries.

The slightly longer answer is that the Industrial Revolution improved the productivity of manufacturing processes, transportation, and energy so greatly that independent household production was overwhelmed by the vastly greater output of the new methods. And this greater productivity had far-reaching implications for how modern economies were organized into corporate entities. A field called “Theory of the Firm” attempts to answer why firms exist in a free market, what they do and don’t do, and how they’re structured. The math of greatly increased and improved technologies meant that the nature of the firm itself had to change.

The Industrial Revolution, and the follow-on effects from it, spread over two centuries from the middle of the 1700s to the dawn of the Atomic Age. The Industrial Revolution in the UK marked the beginning of the transition from ancient production methods to something new and different.

First, Great Britain went mad for canals. People were very pleasantly surprised at the superiority of transporting people, livestock, and cargo by artificially constructed canals as compared to transporting them by horseback or on foot across the countryside. As a result, they built a lot of canals, which increased trade and meant that markets for items produced at a distance grew larger. The subsequent inventions of the cotton mill and the steam engine likewise saw dramatic improvements in the production of textiles and the supply of energy and power. (Interestingly, it is at this time that ‘Luddite’ enters the language — Luddites were bands of hand-crafting artisans that destroyed the new machines for fear of their livelihoods. Protests against outsourcing and mechanization have a long, if ineffective, history.) Seeing these advances in productive capacity, engineers, scientists, and average citizens spent more and more effort on creating new technologies which were hoped to have similar outstanding results.

It was in the United States, with its lack of pre-existing interest groups to hobble experimentation, where the Second Industrial Revolution was able to “try-out” many different possible permutations. This “American Idol” of industrial organization gave birth to winning organizations that would eventually, in the 20th century, become globe-spanning corporations capitalizing on the new methods in every sector.

My favorite historian of American capitalism is Alfred D. Chandler, Jr., and his most engaging and transformative work is the Pulitzer Prize-winning “The Visible Hand.” Professor Chandler had retired by the time I got to Harvard Business School, but I looked him up in the directory, called him on the phone and met him for a memorable (for me) lunch in the Faculty Dining Room.

Now, Professor Chandler was a giant in his field. He’d been the consulting historian and research associate for Alfred P. Sloan’s autobiography “My Years with General Motors.” Bill Gates called it “probably the best book to read if you want to read only one book about business.” Sure enough, when I read it after college, I was amazed and intrigued by this engaging revelation of the struggles of the first modern CEO as he fights, and ultimately wins, two battles: the first, with Ford Motor Company for global dominance in the automobile industry, was made possible by the second, his battle with the unruly managerial problems generated by the huge bureaucracy required to run General Motors (looks like the bureaucracy eventually killed the company, but it did take a century). With “My Years” and then “The Visible Hand” and his later work “Scale & Scope”, Chandler plunged very deeply into understanding the role that managers played in the development of American, and world, capitalism.

It was an amusing and a bit of an awestruck lunch — the pupil lapping at the feet of the teacher. It was 1998, and he said he’d recently found out that Microsoft had expanded into applications, and wasn’t that quite interesting from the standpoint of vertical integration and a whole host of specialized economic terminology that was lost on me. And I was bewildered by his ‘discovery’ as Microsoft had been producing Word and Excel all my adult life. But for the historian, I guess, decades pass as quickly as pages turn in a book.

I did get Professor Chandler to sign my copy of “The Visible Hand”, which still holds pride of place on my “Favorite Books” bookshelf. And in the intervening years, I’ve thought a lot about the lessons I’ve learned from the book (especially the importance of time to market — for example, Heinz beat competitors by several months in utilizing “automatic-line canning” and is just one of dozens of examples of companies that remain household names a century later because of superior time to market.) But it’s only recently, as I’ve turned to understanding the history of job search, that I’ve connected his thesis to our present reality.

“The Visible Hand” shows how jobs, managers, and management were the end result of the Industrial Revolution in free market societies. In fact, the book’s subtitle is “The Managerial Revolution in American Business.” Chandler writes that, “as late as 1840, there were no middle managers in the United States — that is, there were no managers who supervised the work of other managers and in turn reported to senior executives who themselves were salaried managers.” Pre-Industrial small scale cottage producers remained the norm.

By the mid-18th century, we’d invented the enabling technologies behind railroads, telegraphs, and steel. These inventions proved to be orders of magnitude more efficient, powerful, inexpensive, and effective than the methods they replaced. Coal replaced wood as the primary source of energy in cities. The railroad was proving superior to canal or horse-based transportation. The telegraph made communications far easier and faster. And steel was mass produced for the first time following the introduction of the Bessmer process.

As they implemented these new technologies, owners stumbled on to another discovery: with Industrialization, larger firms produced even more, proportionately, than smaller firms.

This was an astounding and historically unprecedented discovery. And for the purposes of the actual success of these Industrializing technologies, the most important discovery. For all of recorded history, each person in a particular time and place used substantially the same methods to produce eggs, sew clothes, or chop wood as everybody else. Making your own clothes, or food, or farm implements, on your farmstead or plantation was the norm. There was no advantage, at the household level, to divvying up and specializing the labor, except in cases where technical craft skills were required. But scale advantages simply did not exist.

The Industrializing technologies changed that. Suddenly, with these astounding inventions, it began to be the case that 10 guys working together could produce not just ten times the amount of a single individual, but 100, or 1,000, or 1 million times as much. And 100 guys working together were even more than 10 times as productive as 10 guys. The size of the organizations producing coal, or steel, or textiles, swelled to numbers unseen in world history.

And this is interesting because whereas the market (and markets) had previously been the primary mechanism for organizing both supply and demand, with the Industrial Revolution, according to Chandler, “administrative coordination [became] more efficient than market coordination.” That is, organizing production came to be more effective when done within the walls of the firm rather than without.
From that discovery came the establishment of larger and larger firms. All of which required more and more managers. And managers of managers. And then specialized managers for various functions within the now larger organization populated by managers.
Thus, Chandler explains, “the careers of the salaried managers who directed these hierarchies became increasingly technical and professional. In these new business bureaucracies, as in other administrative hierarchies requiring specialized skills, selection and promotion became increasingly based on training, experience, and performance rather than on family relationship or money. With the coming of modern business enterprise, the businessman, for the first time, could conceive of a lifetime career involving a climb up the hierarchical ladder. In such enterprises, managerial training became increasingly longer and more formalized.”
With the Industrial revolution, we have arrived at a place different not just in type, but in typology, from the past. As Chandler writes, “the multiunit enterprise administered by a set of salaried middle and top managers can then properly be termed modern.”
These modern industrial organizations had enormous appetites of every kind: for capital, for raw materials, for customers, and… for employees.

And in these emerging workplaces, the responsibility for recruiting, training, coordinating, teaching and managing the new workforce and these new managers fell to the managers themselves.

And if you’re recruiting on an industrial scale, the old “help wanted” sign in the window or “inquire within” at the plant gates will not be sufficient. You need something equally industrial in reach and ability.

You need a newspaper.

This entry was posted on Tuesday, December 22nd, 2009 at 9:39 pm and is filed under History of Job Search. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.