225. Andrew Mason: When Your Plan B is a Billion-Dollar Idea

As the nineteenth century was turning to the twentieth century, Frederick Taylor grabbed a stopwatch. He stood next to a worker, and instructed that worker on exactly how to pick up a chunk of iron.

Over and over, Taylor tweaked the prescribed movements. Grip the chunk of iron in this way, turn in this way, bend in this way.

Once Taylor found the optimal combination of movements, he taught the process to other workers. Their productivity skyrocketed.

“Taylorism,” as it came to be called, brought us leaps and bounds forward in productivity. Today, the remnants of Taylorism are ruining productivity.

After Taylor’s intervention, the workers who were moving only twelve tons of iron a day were now moving forty-eight tons of iron a day. They quadrupled their productivity.

Only a few decades before Taylorism, most people’s concept of time was more closely linked to the movement of the sun than it was to the stopwatch hand. The availability of daylight, the height of a stalk of corn, or the day of first frost that signaled the coming of winter, ruled the work of farmhands.

Many of Taylor’s workers objected to having their movement so closely watched and timed, down to the second. Actually, more accurately than that -- Taylor’s stopwatch timed according to the hundredth-of-a-minute.

But, “scientific management”, as it was called, swept through the industrial world. Companies couldn’t stay in business without adopting it.

The goal of Taylorism was to produce the most work possible in the minimum amount of time. As Taylor watched the movements of the workers, he was trying to reduce waste. He wanted each motion to be as quick and efficient as possible. He wanted each hundredth of a minute to bring the job closer to being done.

But, Taylor discovered there was a limit.

Logically, there’s no point in a worker sitting idle. Logically, if the worker keeps moving iron, he’ll move more iron than the worker who stops for a smoke break.

Intuitively, if you want to get the highest output possible out of the minimum amount of time, take your efficient movements, and fill all of the time with those movements.

But, Taylor discovered, it didn’t work that way.

There’s a concept in economics called the point of diminishing returns. We can see the point of diminishing returns in action if we imagine Frederick Taylor filling the yard of Bethlehem Steel with workers.

Imagine Frederick Taylor has one worker moving iron in the yard of Bethlehem Steel. Thanks to following Taylor’s prescribed movements, that worker is moving forty-eight tons of iron a day.

Then, Taylor adds another worker. Now, the workers are moving ninety-six tons of iron a day. Taylor can keep adding workers, and the productivity in the yard will keep going up by forty-eight tons for each worker Taylor adds.

Until...

Until they start to run out of space. There’s just not as much room in the yard for the workers to pick up the iron, and move it from one place to another. They get in each other’s way, they run into each other, or one worker will have to wait for another worker to finish his job before that first worker can finish his job.

At first, it’s not a huge problem. Taylor has merely reached the point of diminishing returns. The point of diminishing returns is the point at which each additional production unit -- in this case, the production unit is workers -- each worker doesn’t return as much benefit as the previous production units did. The return is diminishing.

At some point, Taylor adds a worker, and doesn’t get an additional forty-eight tons of production. He gets only forty. Like I say, it’s not a huge deal. They’re still moving more iron than they were before they added that worker. Their margins are high enough on the labor costs that they’re still making more profit.

Now, let’s apply this concept to a single worker. Only now the production unit isn’t the workers themselves. The production unit is time. As Taylor filled the available time with motion, the output of a worker rose.

But at some point, Taylor hit the point of diminishing returns. As he filled the available time with efficient, optimized motion, at some point, the additional time filled didn’t bring the returns that the previous units of time did. Maybe he tried instructing the worker to move three chunks of iron in ten minutes, then had no problem adding a fourth chunk of iron within that ten minutes. He could string together these ten-minute units, one after another. He could fill up a day with those units, and get the output he expected.

But then, at some point, moving an additional chunk of iron in that same unit of time didn’t bring Taylor t...