Listen to the podcast episode here, or read the transcript below for Work Less and Paddle More, with guest Stephan Aarstol, founder of Tower Paddle Boards.
Kelly Scanlon
Welcome to Talking Business Now. I’m your host, Kelly Scanlon. Thank you for joining us.
We’re Talking Business Now with Stephan Aarstol, the CEO of Tower Paddle Boards, a beach lifestyle products brand based in San Diego. Stephan is also the author of “The Five Hour Workday,” a book that captured attention in more than 20 countries.
A serial entrepreneur, Stephan is also the founder of the No Middleman Project, Tower Electric Bikes and several others. In 2010, when Stephan launched his current company Tower Paddle Boards, Mark Cuban invested $150,000 when the company’s lifetime sales registered only $100,000. Since then, Tower Paddle Boards has achieved more than $40 million in sales and is regarded as one of Shark Tank’s biggest success stories.
In this episode of Talking Business Now, Stephan talks to us about the five-hour workday he implemented, what worked, what didn’t work, and I don’t know about you, but if I could achieve the level of success Stephan has working just five hours a day, well, I want to hear about how to do that. Welcome, Stephan.
Stephan Aarstol
Hey, thanks for having me on, Kelly.
Kelly Scanlon
All right, don’t keep us in suspense. Why did you decide to move your company to a five-hour workday?
Stephan Aarstol
There were a couple of reasons really that came together at the same time. The first one was we had achieved a level of success. So, we were like, we proved we can be successful. We started in 2010. And in 2014, we were the number one fastest growing private company in San Diego as, you know, a five-person surf company.
The next year, we were number 239, on the Inc 500, and we were doing about $5 million in revenue with a team of five. And so we felt we had achieved some level of success, and I felt we had a seed of a brand. And so my thoughts started to gravitate towards how do we build this like big enduring brand? What do we do? What are brands that have done that doing? And one of the things I came across—you know, it’s one of many things these brands do, but one of them is they sort of live their brand authentically.
Kelly Scanlon
Absolutely.
Stephan Aarstol
Yeah. So you have like a brand like Patagonia and sort of the stances they make all aligns perfectly with their brand, and I think that becomes more and more important in the world as the world gets more and more transparent. So I think this is like the future of brands. You have to be an authentic brand. So here we are a beach lifestyle company, and we were primarily selling paddle boards, but we also had surfboards and stuff. We’re two blocks from the beach, but we’re working like a startup, right? And it didn’t really align with our brand. So, we’re telling people to go, you know, work hard, play hard and knock out and go surfing in the afternoon. But we’re not doing it ourselves.
Kelly Scanlon
Yeah, you’re lucky to see the sun on any given day.
Stephan Aarstol
Exactly. And a lot of people came into the company because they were attracted to that lifestyle and, you know, we’re working like a startup. So, we really wanted to make a shift there, because we’re like, we’ve got to walk the walk. So that was one side of it.
The other side of it was really the timing of it, you know, 2015, the US was near full employment. It was getting harder and harder to attract, like incredible talent. And the reason we were able to grow so fast is we started in 2010. And at that time, you could just put a job on Craigslist and get like some brain surgeon that wanted to work for $40,000. It was so easy to hire incredible people.
And so I needed to figure out some kind of a hack on how to get these great people because we were still a startup. We couldn’t just afford to, you know, pay twice the salary. It’s like, how can we creatively do this to renegotiate with labor? So that’s what we did. And the experiment was—and another part that was sort of a basis for this is, this is how I had kind of been working for the last 10 or 15 years. I was walking out of the office at one, two in the afternoon. But when I came into the office, it was head down, knock my work out, you know, no screwing around, and then get out of there.
Kelly Scanlon
Yeah, so you thought if your associates or your staff could, you know, adopt the same kind of a mindset, nose to the grindstone, they could be out in five hours too. You’d already proved it.
Stephan Aarstol
Yeah, and not only did I prove it, every one of my entrepreneurial peers was working the same way. And then you had the regular American workforce, which was working longer and longer. And this doesn’t make any sense. Like, why can’t I apply what I’m doing and try to get the same motivations for what I’m doing, give that to my employees?
So, here’s what we did. We rolled out the test of a five-hour work day, I think, in May 1, or June 1 of 2015. We were going to do it for three months. And I told everybody and it sort of surprised them. I mean, I just said, “Okay, we’re going to work 8 am to 1 pm, straight through, no lunch. And I’m going to give you your life back here. And we’re going to do this for three months. And then, you know, at the end, we’re going to roll back to regular. But my ask is that you have to figure out how to be as productive or more productive than you are now. Or you’re going to be fired.
Kelly Scanlon
So you didn’t really have a set process for them to follow. It was basically figure out a way to get what you’re doing now done. So, you left that up to each individual to do that.
Stephan Aarstol
Yeah, this was not a scientific experiment. We were not bringing in productivity experts. I was just like, squeeze everybody for time and see what what creativity … and the idea here is we were creating an artificial constraint, like an unrealistic artificial constraint, which a lot of these people, when we throw it out there, the shipping guys are like, well, this works for you guys in the office. You sit at a desk and stare at computers, you’re not really working anyways. We actually have to unload containers and ship these packages, and we’re going to ship 50% more of this year. It’s not going to work for us.
But the magic of it was that as soon as we implemented that, okay, they started measuring. Like, well, how long does it take us to ship a package? And they started looking at the software. And we weren’t like a backwards company. We were already a very technology, you know, young internet-focused company. But they started to use the software they already had. They learned how to really use it. And they reorganized the warehouse. They did like they sort of timed stuff. And within six weeks, they went from five minutes per package to 2.6 minutes per package.
Kelly Scanlon
Wow! Cut it in half.
Stephan Aarstol
The crazy thing is we’ve been doing this for five years. That was really the thing about the five-hour work days. A lot of people, when they when they hear about what we were doing, they would say, well, that works for your company. You guys are this internet company. I’m like, “Whoa, you know, we did it in our warehouse. We did it in our retail store. We did it in our customer service. We just stopped answering the phone after one o’clock.” We did it in all aspects of our business. And whoever was in that part of the business, they just said okay. They started thinking about how they were working, instead of just working harder. And I think that was honestly the trick
Kelly Scanlon
Three months—you gave it three months. How did that work out at the end of the three months? Did you continue with that? Was it successful? What kind of lessons did you learn not just those immediate lessons where people started timing, which I imagine you got some great KPIs that came out of that. But what lessons did you learn over an extended period?
Stephan Aarstol
Everything seemed successful after three months, so we just continued doing it. Our revenues went up 50% that year. We were just working less. Everything was firing on all cylinders. And I felt the productivity hadn’t really dropped off. We continued to do it for about two years.
We’re in a stand up paddle board industry. So that had kind of peaked and was sort of coming back down. A lot of people were copying what we were doing. We were also an online seller that had leveraged Amazon to a great degree. But you know, Amazon has changed a lot. And Amazon started to take over the world during this process. So, we got to a point where probably 60% of our sales were on Amazon. And then we decided that was not a profitable channel anymore, and we walked away from about four and a half million in revenue.
So, our revenue started the downturn. So, a bunch of factors were coming into the business. It wasn’t just this five-hour workday, doing this or something else doing this, because the extent of our scientific measurement of this is: Are revenues going up or going down? How is our profitability? How happy is everybody? That type of stuff. Right?
Kelly Scanlon
Right.
Stephan Aarstol
But after about two years, you know, we had a revenue downturn. And so then, as a startup company, you know, you’re sort of luxury of doing experiments, and it goes out the window, you’re like, well, maybe we can’t do that. But also, we had a team of nine people, and we lost four of the people in a 90-day period in early 2017.
Kelly Scanlon
Half your staff.
Stephan Aarstol
Yeah. And the whole reason I did this, exactly in a small company, which is even harder to stomach, and I lost some pretty critical people. And I’m like, I mean, these are kids in their 20s, making really good money, working five hours a day, in a company, like a pretty fun, you know, techie surf company in California. Why is anybody leaving this job? It just didn’t make any sense.
Kelly Scanlon
Yeah, why can’t I keep them?
Stephan Aarstol
And that, honestly, the whole impetus for putting the five-hour workday there, was to attract better staff and then keep them, right? Because you know, you just have turnover in today’s world, like, how do you attract the best people put them to work for you? And that’s how you grow a company I think in the knowledge world. That wasn’t working. So, I sort of decided that there was two things. Either this just doesn’t even motivate people to stick around or attract better people. And the second thing was that it had become an entitlement. Like pretty quickly, right?
Kelly Scanlon
Yes. Yes. That just an expectation, right?
Stephan Aarstol
Yeah. And so some of the people that were in the company at the time, they weren’t even there when they when we earned the five-hour workday, right? When we went from it.
So, as the company sort of evolved, it became just like, okay, we just worked a five-hour workday. And we just started working in the same way of our eight-hour workday. That was sort of the bad side. On the positive side, we did become a company very focused on productivity tools. Like that became sort of our—our company, culture was, you know, identifying productivity tools and finding hacks. But, we also —and I didn’t realize this even right at the time when we got rid of the five-hour workday, but I think we broke the company culture. Because before we were a startup, you know, working long hours kind of in the trenches together. That when you do that you form really strong bonds with everybody you work with, right?
Kelly Scanlon
Yes, all in the trenches.
Stephan Aarstol
It’s like going to war.
Exactly.
Kelly Scanlon
And that’s startup culture, and that’s why it’s so intoxicating, right? When we start walking out the door at one o’clock every day, you know, work is just this thing you do before lunch, to afford this luxurious lifestyle you have. You know, your outer world becomes much larger. And that is great for, you know, humans and workers, right? It’s not so great for the company. Because then people are very, very willing to leave that company because it’s just this part of my life. So that was the things that didn’t work.
But I love the sort of the efficiency mindset that we were creating—the idea to, you know, automate tasks, and to create sort of productivity hacks and identify productivity tools. So that was, that was good. So, when we went away from the five-hour work day, we still did it in the summers. So, we did it from June 1 to the end of August. And that is also the time, you know, as a watersports company, when we did 70% of our revenues. So, we squeezed people for time during our busy season, because that’s where the benefit is. And then in the offseason, we went to startup hours so that we could enjoy the benefit of sort of the startup culture, while also getting sort of this efficiency, you know, summer efficiency count.
And we did that for about three years. Revenues continued to decline, and we had some other issues, but we, you know, really, the online retail landscape changed, and we had to adjust. And we diversified. So, you know, we thought, okay, maybe paddle boards isn’t the thing of the future. So, we diversified into tower electric bikes, you know, a direct-to-consumer ebike company, as sort of, okay, now, if this disappears, maybe this one will rise. We diversified offline. We invested about $300,000 in an event space called Tower Beach Club here in San Diego, like a 4500-square-foot waterfront event space, that now we’re in the offline world of business, right? And if Amazon eats our online businesses, we still have this offline thing. And then, of course, the pandemic hit and it ate our offline business.
Kelly Scanlon
It’s never boring when you’re a business owner, is it?
Stephan Aarstol
You never know what’s going to crush you, but if you’re diversified in just sort of all the creative ways you can think of, then nothing really can crush you. And this is, really, I think, where the future of the world is going. You have to create sort of this “anti-fragile” company—your costs are really low, you’re diversified in sort of crazy ways. And then like, nobody can sort of kill you.
Kelly Scanlon
Given everything that you just said, there were some very good things that came out of the five-hour workday, some great insights. And there were also some shortcomings that you knew you needed to address, but they weren’t enough for you to give up on it completely. You reintroduced it with a new twist during the summer. You worked the shorter five-hour workday hours. Talk to us about why even though it didn’t quite work out, as it planned, why do you encourage leaders to still try maybe some off-the-wall or out-of-the-box initiatives and incentives at their companies, whether it’s the length of the workday, or whether it’s other things.
Stephan Aarstol
I mean, that really wasn’t the end of the story to us, we did it in the summers, the five-hour worked. And then when it came to the pandemic, we didn’t do it at all, because we thought we were going to go under, right? And I said, “Okay, we can’t do this.” So we walked away from it.
But now we are re-implementing it, but only following years where our revenue increases, right? So then 2021, we’re going to have it because we doubled revenues in 2020. So next year, and we’re gonna do it from August 1 to the end of November, we’re gonna have it almost like as a benefit to the company that they earned, right? And I think that’s a critical part to get rid of the entitlement. And even when we’re on the five-hour work day, we’ve got to earn it for next year. So, the pressure is sort of constantly on. And then if you don’t earn it, you don’t earn it, right?
Everybody knows, well, we didn’t do so good. We’ve got to double down and work hard. If you do earn it, it becomes this sort of company-wide benefit that we’re all working together towards this thing every year. And so, I think, that will help solve the entitlement problem, right?
As far as, you know, why to do experiments? I mean, the one thing here is we’re kind of doing this experiment to get better staff. So, I think in the in the modern knowledge worker world, the ability of your company to win in whatever niche you’re in, is your ability to attract the best people. I mean, that’s it. And then, you know, empower them to do what they’re going to do. And in the work world is a lot different. So, you know, there wasn’t a plan to even write a book about the five-hour work day. We did this in 2015. But then, towards the end of the year, I had written some articles and like INC magazine, or Fast Company or something, and one of the articles got like 10,000 social shares.
Kelly Scanlon
You hit a nerve. Yeah.
Stephan Aarstol
Yes. Usually, the articles I wrote would get five or 50, right, like nothing. I’m not a known writer. And I was like, “Wow, like people resonate with this.” I think everybody intuitively understands that we’re wasting a lot of work in the workplace here. So, we decided to write this book and we put a book in every paddle board, because it aligned perfectly with our brand. This would spread the idea and then we ended up getting, you know, a ton of press about this, you know, the five-hour workday, and it’s really spread to a lot of parts of the world. And there are hundreds of companies now experimenting with different ways of shortening the workday or compressing the workday.
One of the interesting things is when I went to write the book, it forced me to go back and look at the history of work, which I was somewhat clueless on. Like, I had no idea that the eight-hour workday was not just for all history.
It was basically invented in like 1913 basically. And what was it invented for? It was invented for the Industrial Revolution. Technology came along, and it changed the world, right? And how you know, the world first started reacting to that was in the early 1900s was the factory workers. They had these machines now. And they had people and they said, “Okay, well, the machines go 24 hours a day. So, we’re going to start working the people, you know, 12 hours a day, 14 hours a day, 16 hours a day. And it became a problem like a health problem, and a turnover problem. In Ford Motor Company, it was something like 70% turnover on a yearly basis. And in the US, one half of 1% of the US workforce was being maimed or killed on the job. This is just like, a national tragedy, right?
Kelly Scanlon
Yeah, Upton Sinclair’s “The Jungle”—it chronicled it. I mean, it was a huge problem. We’ve just always been familiar with the eight-hour work day. It’s just ingrained in our culture, our society, and nobody thinks twice about it. And I think too the pandemic has forced a lot of companies to rethink their approach to work, not just necessarily the length of the workday, but whether employees need to be on site and a whole host of other things.
Stephan Aarstol
Yeah, I mean, it’s interesting that this happened, I mean, the timing of all this. Because what the pandemic is, is basically an unrealistic constraint. Okay, you can no longer travel for business, you can no longer travel overseas to source your products, you can no longer you go to the office. It just sort of changed everything and then said, “Okay, now figure out how to do what you were doing before. And that forces creativity.
This is why, in my opinion—and this is part of the reason we did the experiment—this is why startups are successful. Put three guys in a garage, and you give them no money, and no connections and no brand. They’re starting from nothing. And they inevitably can disrupt $100 million company, and I would almost put the odds on the three guys in the garage, right? And the reason for that is the constraints. People think that constraints are constraining. No, they are a creativity creator. Basically, you put those constraints, you can’t do it the way everybody else does it, you have to find a creative way to do this differently.
So, that gets back to your point of why should companies experiment? Because they want to create these constraints. And they want to start thinking creatively because somebody else is doing that. And that too, is going to disrupt them.
And I think, you know, a five-hour work day, it’s not a magic bullet, you know, we only do it like, you know, four months out of the year. So, I wouldn’t recommend a year round. But I believe that every company anywhere in the world, no matter what they do, if they said, “Hey, this summer, we’re going to do a five-hour workday for three months. And then for sure, we’re going back to the regular workday, but I’m going to give you your summer back. And I want you to figure out how to work faster. And if you can’t, you’ll be fired.” They would—everybody would train their workforce to work at twice the speed they do now. And when they go back to the regular, they would have basically two times the workforce work for them.
Kelly Scanlon
It would be an interesting experiment for people to do. Let’s talk about something that I introduced at the beginning of the episode. And that was the investment by Mark Cuban. He introduced what $100,000—no, he introduced or he invested $150,000—into a company at a time when your sales were still very low—$100,000 annually. But a decade later, that appearance on Shark Tank and the investment continue to pay dividends. So, talk to us about that.
Stephan Aarstol
It was less about the investment of the money that really helped. It was it was probably more of the fact that Mark Cuban was the person that put that money in. Because at the time we were, you know, a paddle board brand that nobody really knew. We were a search engine optimization company.
So, if you google paddle boards, we were at the top of the search engines. That’s actually why we got on Shark Tank, we didn’t apply to be on there. They just called me out of the blue one day and said, “So, we’d like to have a paddle board company. We found you. We think, you know, you have an interesting story. Would you like to be on the show?
And so five weeks later, I’m pitching on the show. Two days into that, I was sort of sequestered up in LA two days into that. They said, “Well, by the way, Mark Cuban is going to be a guest shark on this show.” And it was like season three, and I’d never seen the show. And I didn’t know who these other sharks were and was worried about remembering everybody’s name. But I’m like, I know Mark Cuban, right?
And so I looked at him as really a celebrity endorsement. I mean, usually, if you’re going to be able to use, you know, Mark Cuban’s, you know, face on your website, you’re going to pay him 150,000 a year, right? So, we had it the other way, which was, it was perfect. So we became sort of the Mark Cuban company.
And then, really, the reason that we were able to grow so fast is because as, you know, a search engine optimization company, basically what you’re doing is you’re creating great content. And then you’re getting a lot of links into your website from high trust other sites. It’s almost like a PR campaign.
Well, because we were on this sort of new TV show that was very sort of young and interesting at the time, it was very easy for us to get press about being on the show. So it wasn’t so much of being on Shark Tank. It was the fact that we were able to get my, you know, newspaper from my hometown and, you know, my business school and everybody to link into our website about “Hey, this, you know, young hometown boy is gonna be on Shark Tank, basically.” And so we were able to get a bunch of high trust links. And that’s really what projects—
Kelly Scanlon
You leveraged the marketing aspect of it.
Stephan Aarstol
Yeah. And there’s a perpetual benefit to that. So, basically, our traffic tripled. And then we also, you know, improved our brand, because we had this sort of, “Okay, this is a real company that I trust, there’s this billionaire behind it.” And, you know, we sort of we sort of went from there.
Kelly Scanlon
It gave you credibility.
What should our business listeners be Talking Business Now about in 2021?
Stephan Aarstol
The scariest thing to me is how fast the world is moving now. Harvard did a case study on our company of selling on Amazon, a tower paddleboard or something like that. And they did it back in 2015, 2016. And I’ve spoken at Harvard about half a dozen times on this. Every six months or a year they do a class, and I go out there and speak. The case study is should you sell on Amazon? How should you sell through Amazon? Should you sell the retail? There’s like four options you have.
And in the past, you know, six years, the correct option has changed. Every, you know, time I go there, it’s a 180 flip of what you should do. And if you look at when we started this business, you know, Amazon was probably taking maybe 10-15% of American retail, online retail, right? And today, it’s probably 50. It’s north of 50. It might even be 60%, of all online retail in the US is going through Amazon. Online retail disrupted, you know, offline retail, and all the, you know, middlemen like disappeared.
And then Amazon is now disrupting, like online retail. And what’s happening is like a new middleman is coming, you know, up. And this is why we got off of Amazon, because now they’re taking 50% of revenue of every transaction. And you have the same thing happen happening with Google, essentially, if you want to, you know, advertise on Google, you’ve got to pay to advertise there. And it’s an efficient, you know, advertising model. And they’re basically sucking like 50% of the revenue out of every transaction. So, you’ve got these two big middlemen that have replaced all these little middlemen. And this is the nature of the online space.
You know, I got into the online world in 1999. That’s when I came out of graduate school. And I worked in the medical imaging industry for, you know, a small portal of news and information, stuff like that. And we went from, you know, unknown startup to dominant industry leader in three years. And that’s where I sort of learned that in the New World, like, everything tends towards monopoly, like very quickly, in sort of a scary fashion.
This is what, you know, business leaders have to sort of struggle with today is how to how to survive in that market that moves so fast and tends towards, you know, monopoly. It’s a very scary world. That’s how, you know, I’ve been looking at this as like, how do we make ourselves anti-fragile, and that’s why we have diversified.
We have a new company called NoMiddleman.com, which is basically, it’s the Amazon antidote. Basically we’ve aggregated all the direct consumer brands like us, like Tower Paddle Boards and Tower Electric Bikes that we feel are like, sort of the top brands in their little niche of whatever they sell direct to consumer. And we just sort of created an everything showroom of all these companies. You go on there, and then you can find, okay, here’s the three to five top companies that sell boots, and then you click through and you buy from them direct. It doesn’t take any—it’s just an information source.
Kelly Scanlon
yeah, a resource portal.
Stephan Aarstol
This is kind of where the world has to go, in my opinion. It has to go towards curation. But as business leaders, you got to say like, “How do we operate? How do we survive in this world?
Kelly Scanlon
Yeah, as you say, it’s moving so quickly. But again, talk about unrealistic constraints. Well, this is a real one, but it’s a constraint and people are gonna have to figure it out, as you say.
It has been wonderful having you on the show today, Stephan. Lots and lots of good insights, again, towerpaddleboards.com. Any other ways to contact you or get more information about what you do?
Stephan Aarstol
Yeah, we’re still a fairly small company, so you can just go onto those websites. TowerPaddleBoads.com, PowerElectricBbikes.com. Email anybody and you can get in touch with us. Our social media is all at Tower Beach Club. It’s not just the event space—it’s just sort of our overall brand umbrella.
Kelly Scanlon
Well, it’s been wonderful having you and we wish you lots of success. Thank you very much.
Stephan Aarstol
Thanks for having me on, Kelly.
Kelly Scanlon
And I’m your host, Kelly Scanlon. Thanks for joining us on this episode of Talking Business Now. Be sure to tune in next week when we talk with Josh Christopherson, founder of iCue Technology, on how AI-powered learning can address common problems in adult learning and skill development. And don’t forget to visit TalkingBusinessNow.com to subscribe to the podcast and to sign up for our weekly newsletter that offers more insights into our guests, and the topics business leaders should be Talking Business Now about in 2021.
