Entrepreneur Stephan Aarstol dreamed Tower Paddle Boards into existence. After being introduced to the concept of dreamlining by reading Tim Ferriss, Stephan put it out into the universe that he wanted to start a surfing business.
Several years later, when a friend introduced him to paddleboarding, something clicked. Stephan knew this was the path for him, and he founded Tower Paddle Boards in 2010. Shortly thereafter, he was contacted by Shark Tank and invited to pitch on the show. He caught the attention of billionaire Mark Cuban, who invested in the business in 2012.
The financial success was great, but Stephan founded the business because he loved the surfer lifestyle. Many of his employees were drawn to the company because they were also passionate about beach life. So when the team often found themselves working startup hours (Read: all the time), Stephan knew something had to change.
He instituted a five-hour workday for his team. Folks would arrive in the morning and were free to leave anytime after 1 pm. This arrangement was great at first. Employees developed rich lives outside of work and enjoyed the perks of essentially working half days.
But then, something shifted. Two years into the five-hour workday experiment, Tower lost a handful of employees back-to-back. Who would ever leave behind such a fantastic work perk, Stephan wondered?
It turns out, the half-day setup became a hindrance to retention. Because people were spending so little of their time at the office, they didn’t feel a connection to their fellow employees and to the business. That disconnect from the company culture made it easy for them to pick up and leave.
This revelation led Stephan on a quest to understand the history of our workweek expectations. His research led him all the way back to the Industrial Revolution of the 1800s and to the early 20th-century assembly lines of Henry Ford. Tune in to the episode for the whole fascinating history of work in the United States.
In developing a deeper understanding of why we work the way we do and how our hours and company culture affect a team’s output and commitment, Stephan has found a balance that allows his team to enjoy flexibility and freedom while also wanting to stick around for the long term.
Episode Transcript
Rob Ristagno: This is the CEO Campfire Chat with your host, Rob Ristagno. Taped in front of a live studio audience, join us to hear successful growth stories from middle-market companies, just like yours. Sponsored by the Sterling Woods Group.
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Rob Ristagno: Welcome to the CEO Campfire Chat, recorded live in front of a studio audience of leading executives. I’m your host, Rob Ristagno. And today I have the privilege of introducing you to Stephan Aarstol. He’s the CEO of Tower Paddle Boards. And this may seem familiar because he’s a Shark Tank winner, Mark Cuban invested in him in an earlier season of Shark Tank. Welcome, Stephan.
Stephan Aarstol: Hey, thanks for having me, Rob.
Rob Ristagno: All right. And we’re going to start this episode like we start every episode with the game of five questions because CEOs do not have time for 20 questions. So first question here, what is the vision for your company?
Stephan Aarstol: We want to be sort of a holistic beach lifestyle company. So a direct to consumer take all the other middleman out of it and build a big company that does that.
Rob Ristagno: And who is your ideal customer?
Stephan Aarstol: Anybody who loves the beach. I mean, basically just sort of the beach lifestyle. We’re trying to propel people to live that lifestyle whether they’re at a beach or anywhere around the world. So it’s really not a certain demographics. It’s across all ages, sexes, races, just people who like the beach.
Rob Ristagno: And related to that, what is your value proposition to them?
Stephan Aarstol: I mean, initially we started in paddleboards, so it was half price paddleboards and everything is kind of half price. With sort of the globalization of the world, you can basically directly source things and sell them to customers for half the price. Consumers largely haven’t enjoyed sort of the benefits of globalization, because basically the distribution model is we’re real people in stores and real estate in these expensive countries. And so all of the profits, it’s just more profitable for those companies to sell stuff to people. Because all of a sudden we could make shoes for $5 instead of $25, consumers didn’t see the benefit of that. And I think when the internet came around, they should see that, but somehow just bigger middlemen have popped up.
Rob Ristagno: You said you’re cutting out the middlemen and you’re just as good, but less expensive than anything else?
Stephan Aarstol: And better. People can actually contact us. Most brands, I think, you buy those through a store for the people don’t know anything about it. So with us you just call us up and get me on the phone and the people who designed the product.
Rob Ristagno: Excellent. All right. Number four, what is the best part of being a CEO?
Stephan Aarstol: It’s just seven years ago, or maybe 15 years ago I guess now, I read a book by Tim Ferriss, The 4-Hour Workweek, and one of the things in there was, it was called dreamlining. You basically envision your future life, what would you really like to do? And you really define very clearly what you’d like to do. And what I wanted to do at the time was be the CEO of a surf company. I was like, that would be the perfect job, right? And then a buddy took me paddleboarding in 2010. And I started looking at that and it looked like a big, big business, bigger than people thought. And I said, wow, that’s actually really close to a surf company. And so it just sort of met. And I had planned this out three or four years ahead of time, and then it just presented itself. So I knew that was the way to go.
Rob Ristagno: Create your own opportunity. I love it. And what’s one thing that’s going to make or break the year for your company?
Stephan Aarstol: I don’t know if there’s one thing or not. Maybe just sort of staffing. Staffing is really, really tough right now. To hire good people is almost impossible. We have good people, but if we lose anybody, replacing them is going to be tough right now.
Rob Ristagno: Let’s pull the string a little bit on this hiring thing, because I think it’s a key theme that we hear across all of our interviews around the campfire. You talked about your customer’s value proposition, but what’s the value proposition to a potential employee?
Stephan Aarstol: I mean, honestly the reason we’ve been able to attract great employees is the direct to consumer. When we launched in 2010, that’s when Warby Parker was launching a lot of these direct to consumer pioneers. So it was somewhat of a techie company, but at the same time, we were a surf company. So a lot of the people that were just really into surfing, they wanted to work for our company. And then we were able to attract really good people because of those two things. In 2015, one of the reasons we went to the five-hour workday was in 2010, super easy to hire people. 2015, not so much we were at near full employment. And so we renegotiated with labor. I said we’re going to give these people a better deal, give them the same salary, but only work them five hours a day as sort of a carrot to recruit the best people and retain them. And strangely that didn’t work.
Rob Ristagno: Hmm. Tell us a little bit what were you thinking and what were you hoping that that would happen?
Stephan Aarstol: Yeah, I mean, it’s kind of how I had worked the last 10 or 15 years as a… I was a solo entrepreneur up until 2010 and then I had a staff. So I was still sort of coming into the office head down working and getting out whenever I wanted to. But my staff, we were working like a startup, two blocks from the beach. And so part of it was we wanted to live our brand the Tower beach lifestyle brand basically. And we were, we were living like a startup. But the other part was we needed to recruit good people and bring them in. And some of the things actually really worked with the five-hour workday. We still do it in summers, following years where we increase revenues, but we’ve had a couple of variations of it. We initially did it for two years straight and some things fell apart. And one of the things that was really shocking to me is it didn’t help us recruit better people or retain the people we had. They didn’t care about five-hour workday.
Rob Ristagno: Wow. It was not a recruiter maybe because it gets me thinking about companies that offer unlimited vacation. It almost seems like that doesn’t get any weight on it either. So that’s a big surprise then that it wasn’t really a recruiting retention benefits.
Stephan Aarstol: Yeah. And the other thing it was money is not a recruiting or retention. I mean, at least at the levels that we were at, it was basically alignment with purpose of the company. We were getting people, good people, because they wanted to be in a tech company. And then also aligned with their surfing interests. So we were already getting those people and the five-hour workday money, it was nice, but they would get hired at 40,000 and they would leave at 80,000 2 years later and feel not compensated and they would be great to get in there. So it was just weird this learning about how do you maintain and attract and maintain a staff?
Rob Ristagno: Tell us a little bit about some of the other roadblocks that you hit?
Stephan Aarstol: Well, I mean, that was the big thing. It was about two years into this, we had a 90-day period where at the time we had nine people in the company and four of those people left within a three month period. One I fired, so that was my fault. But the other three people were young kids making good salary, working a five-hour day and they’re leaving. And I’m just like, this is not working. Right? What’s going on here. So I almost was like, they don’t appreciate this. We’re going to go back to startup hours. And we ended up doing it in the summer and then we’d do start up hours in the off season. So we just did that and it was sort of a knee-jerk reaction. We said, we’re going to throw out the five-hour workday and just do it during the summer.
Stephan Aarstol: The things that we actually really liked was it basically trained everybody and gave us a culture of efficiency, identifying productivity tools and then spreading that across the company. And that’s kind of what I wanted to do. So you squeeze people for time. And so when we rolled it out, we said, okay, everybody, we’re going to walk in the door at 8:00 AM, walk out at one, there’s no lunch. And you have to figure out how to be as productive or more productive than you were before, or you’ll be fired. So I’m giving you your life back, but there’s an expectation here too. I was trying to emulate sort of the reward/benefit system of an entrepreneur. If you work hard, you can have great things. You can live this sort of extraordinary life. If you slack off, you’re going to go out of business.
Stephan Aarstol: And we were trying to emulate that for employees and it actually did work to train people to identify productivity hacks. Everybody became sort of a productivity expert and they analyzed how they were working. And I think it trained our staff to work at twice the speed. Our revenues were up 50% the first year we did it. So it didn’t seem to have a bad part of productivity or profit line. So that was fine, but it didn’t keep people around. So that was a problem. And I think it broke the company culture because before we were a startup, everybody was working in the trenches long hours, you form very strong bonds with one another. And I think in those types of companies, it’s hard to leave, right? Because you’re not necessarily leaving the company, you’re leaving the people that you work with.
Stephan Aarstol: And so when people are walking out the door at one o’clock, the rest of their life becomes pretty extraordinary. I mean, their workweek is better than most people’s vacation week. And then you have the weekends as well. Right? And so they get into a lot more other stuff. Work is just this thing they do before lunch to afford this extraordinary lifestyle. And I think the bonds between the people at work lessen. And so it’s very easy for them to leave that company, which was a total surprise to me.
Rob Ristagno: Actually, one thing that you mentioned, you mentioned some productivity hacks. Just curious if you could share with the audience a few notable or memorable productivity hacks.
Stephan Aarstol: It was across every discipline within our company. Our shipping, they were already using shipping stock software called ShipStation. Right? But they just weren’t using the software to the degree that it could be used. And when pressure was put on them and all of a sudden, “Hey, you guys can go surfing if you get your work done early,” they dug into the software and they programmed the software with all the weights and measurements and stuff like that. So it worked at basically twice the speed. And they started measuring everything and timing everything. So when we rolled this out, it was taking about five minutes per package that we shipped. We’re a very sort of small volume of shipping, but pretty high price point. And then within six weeks, they got that down to 2.6 minutes per shipping. Almost in half.
Stephan Aarstol: Now we’ve been operating our company for six years at this point. And I’m like, whoa, what a waste of time. Right? Nobody looked at this. And we’re a small company, but most companies out there are small companies. We don’t have efficiency, experts analyzing everything. And what this did is we didn’t give them a playbook and say, here’s the efficiency things like you should do. It’s just, you got your job, test and measure some things and figure out what works and what doesn’t work. One of the big tenants of this is something called management by absence, which is you just, and this was basically an idea in Tim Ferriss’s book. You just completely stopped doing certain things and see what breaks. So the whole idea of a five-hour workday is you stop being at work after one o’clock and see what breaks. Your retail shop closes. You don’t answer the phone. People can’t say–what breaks? Does anything break? Okay. If nothing really bad breaks, okay. Maybe that was stupid for us to be doing that in the first place.
Stephan Aarstol: This is very relevant today because in the pandemic, with five-hour work we put an artificial constraint on our company. And in startups, that’s what creates… that’s why three guys in a garage upset a hundred million dollar company just because they have no money, they have no resources and they have no people. They have to find some hack and by finding that hack, they develop a competitive advantage and they disrupt a hundred million dollar company. You can almost bet on the three guys in the garage. Right? And it happens time and time again.
Stephan Aarstol: So with five-hour workday, we were just creating a constraint. And then, okay, now it’s going to force us to find creative solutions. In the pandemic, there was this constraint put upon everybody in a lot of different areas. Okay. All of a sudden you can’t go to trade shows. Well, I’m pretty sure that exposed that trade shows were completely stupid thing to do, right? I mean, for most people, it was this big boondoggle, a waste of money. Business trips, largely a boondoggle. Meetings, do you need all these meetings? Do people even need to be in the office? And those artificial, that real constraints, forced a lot of creative thinking. And I think that really will change how we work to better our ways of working.
Rob Ristagno: I’m actually just curious on this theme of constraints, you mentioned eight to one. I presume it was in-person in the office. So you still had some constraints. So your constraint was, you couldn’t work more than that, but you were also required to be there during those hours and in-person. So now how much you…. generalize some of your learnings as people are struggling in the–I don’t want to say post-pandemic era because it’s not post yet–but people are trying to figure out, should not… I mean, not necessarily how many hours, but which hours and where. How do they sort through this, given what you learned from your five-hour workday experiment?
Stephan Aarstol: Yeah. We didn’t force them to leave at one o’clock. We said we’re going to stop answering the phones. We’re going to close the door for the shop. If you can’t get your work done, you continue to work. That’s fine. You can work overtime, just like in a regular salary job where you’re there until five, some people are there till eight. And if something is pressing to do, everybody’s on salary, so get your work done. But if you’re knocking the ball out of the park and you walk out at one, nobody says anything. It’s just like walking out at five if you’re in a regular thing. So that was the constraint there.
Stephan Aarstol: Now, when you go to remote work, I think this is a disaster. And so in my book, The Five-Hour Workday, we sort of look at the history of work and we look at what we were doing and why it was working. We did this stuff maybe a year or two years after we started, there was no intent to write a book initially, but I started writing articles about this. And a lot of people were really interested in it. So I figured we’d write a book and we’d put that book with every paddleboard because it dovetailed with our company culture, our beach lifestyle.
Stephan Aarstol: But by writing that book, it forced me to look at the history of work. I had no idea. The eight-hour workday was just invented in the early 1900s. And it was a lot of why the eight-hour workday was invented was for factories. The Industrial Revolution came along. All of a sudden the machines were going 24 hours a day. The boss has started working people longer and longer and longer to a point of they were getting maimed or killed on the factory floor. One half of 1% of the US workforce is being maimed or killed on the factory floor in the early 1900s. And turnover was 70% because they were testing the limits of what humans could do physically, because we were trying to keep up with the machines. It became a problem, very similar to what we probably had. We had a turnover problem. How do I attract and retain workers in the knowledge economy? That’s really what the five-hour workday experiment was about.
Audience Member: You made one reference to the retail store. I don’t know if you still have it or not, but were you able to sell the same amount at the retail store in only five hours compared to being open all day? I mean, that sounds hard to do.
Stephan Aarstol: Yeah. Yeah. My assumption going into this is that we wouldn’t, but now I’ve got to give you background on the company. So probably 95, 97% of our sales is online. We’re a direct to consumer brand nationwide, worldwide. So we do very little sales for the San Diego community through our retail store. We have an office, we have the retail store if anybody wants to come in. So it’s not a huge part of our business. So we were okay if it did fall, but honestly it didn’t fall. Before we were open, and I don’t even think we were open our full hours. Maybe we were open 10 to five or something like that. It was listed on our website and people read the website and then they came to our store. We weren’t open on weekends, even though we were a retail store. We’re not 7-Eleven, we’re not selling coffee and Slurpees and stuff like that. We’re selling paddleboards, which people buy every five years.
Stephan Aarstol: The fact that eight hours or 10 hours being open in a retail store was kind of a ridiculous proposition. I mean, a lot of our customers were on the East Coast. So they would call us in the morning and we weren’t answering the phones until 11:00 East Coast time. So people get that in their head and that’s kind of what I thought too. But honestly, people just self-correct it. Same thing with calling in just it was at a faster clip between those hours. And then if somebody calls after, we would get back to them the next day. We were very good about a one day turnaround for follow up. And there were honestly no complaints, very little complaints.
Audience Member: Thank you.
Rob Ristagno: Other questions from the audience?
Audience Member: Yeah. I’ve got a question. Obviously, in order to do that, you want to leverage technology wherever you can. What did you find to be helpful? Because very often the technology does not connect you well with a client. It gives you more efficient to talk to them, but there’s still that human interaction piece is missing. I’m just curious how you did that?
Stephan Aarstol: Yeah. It was different for, like I said in the shipping department, it was this ShipStation that helped them do their job faster. We’re basically a retailer, but we use a website to basically automate that interaction. If you look at Amazon, it’s really hard–and in the early days it was even harder–to get Amazon on the phone. I don’t even think they had a phone number and you’d have to hunt it down. Right? If somebody found their phone number and called them, they assumed something was broken, right? So they were automated and they were trying to automate it, but you don’t want to automate it to the phone tree where you get 10 things, and then nobody ever gets back to you.
Stephan Aarstol: There’s bad automation and there’s good automation, for sure, for sure. The ability to buy stuff at any time and have it delivered to you is super handy. So that’s one of the automation things. I put up a website, I’m not even sure if this website is even still live, I think it got hacked, but it was fivehourworkday.com. And we put a white paper on it with 35 or 37 productivity tools that we identified in all of our different disciplines. And there would be very simplistic things like one thing is LastPass. It’s a password saving thing that you put in your browser, right? And then it’s like a vault for all of your passwords. And then you go to login to something and it prompts to put in your passwords and it’s very secure.
Stephan Aarstol: And then when you go start some new service or whatever, you hit a little button and it recommends a password and you can have passwords that are 50 characters long. Right? And you never have to remember passwords. And it’s one-click doing that. Well, prior to that, I was not using this prior to the Five-Hour Workday. And our general manager, this young girl, she found this and she was using it. And then she sort of told the whole team. And I was like, okay, well that might save me a little time. It saves me one or two hours a week. In sourcing, another tool it’s called panjiva.com. So as a paddleboard company, we develop new products like paddles. And we came out with skateboards and now we’re into electric bikes. We did regular bikes before, but a lot of it is we’ve got to develop products and then we’ve got to source those products overseas.
Stephan Aarstol: Historically, how you would do that is you would go to China and you’d get a man in China and take 10%. And then you have all this travel back and forth. And then you start the production and you get that samples, but then you have to go back there. And then when they’re producing, you got to have some QC guy on the line doing that. And there’s this whole problem. And it takes years to get a product and a factory running good. Right? And then that factory goes out of business and then you’ve got to start the process all over again.
Stephan Aarstol: Okay. So that was how they did in the old days. And then when Alibaba came around, when Alibaba was in the early days, it’s sort of more like Amazon and it does all these different things today. But in the early days it was a sourcing tool. So it just said, “Hey, you want to buy paddleboards? Here’s all the factories that make paddleboard in China.” But it was a thousand factories. And 20 of them were real factories. 500 of them were sort of middlemen. And then 400 of them were complete scams. So you when you send a $50,000 check to these people, you lose that $50,000. Right? But that was better sourcing than the old school way. Okay. What Panjiva does is after 9/11, everything that came into the country is public information. Okay, well, what’s the weight of the container? What’s a general description of the container? Where did it come from? The address and name of the company and where did it go to? The address and the name of the company.
Stephan Aarstol: So there’s Panjiva. They put that online and they made it searchable, right? So now sourcing, you can do it in your underwear on a couch and say, I need paddleboards. And it will show you, okay, here are all the paddleboard shipments month by month. Where they came from and where they went to. And then you can zero in on the factory and see, well, that factory supplies for all of these companies. You can zero in on competitor and see where do they get all their stuff from. And yeah, I mean, that is just like magic information. I mean, you can see basically market share. That’s something that you can now do in two hours what used to take you two years and you can do it better.
Audience Member: Wow. Can I make another comment? You mentioned about trade shows about how that was a extraneous expense and all. And at least for me, that used to be the social event twice a year where you could kind of reward your employees that they’re useful, bring their spouses and go. Because we’d come to San Diego, for example, as part of the shows. And that was a lot of fun and that’s all missing and I’m going to virtual trade shows now. And not only does it not have that same social interaction, but they’re boring. The other one’s were fun. I’m just curious how you trade that off. I mean, is there a way to get that social interaction because it’s important for the camaraderie?
Stephan Aarstol: I agree a hundred percent there. With our company, we do all-company trips. We go to Costa Rica or we’d go to Tulum or something like that. That’s just within our company. That’s not the rest of the industry. So you’re right. You do need a social element. When you go to efficient, everything efficient, efficient, efficient, even the idea of this working remotely, which I’m not in favor of. I think this is going to be a complete disaster is because of that social element and more so because you know why we do the five-hour workday, 8:00 AM to 1:00 PM. Everybody’s on the field at the same time, it’s because you want to get smart people on the same field at the same time. And you get what I call ‘idea sex,’ which is I bounce this idea off this person, they iterate off of that. That disappears when you go to remote working. So you’ve hired all these really expensive people and you’re having them work in a silo. But I think the companies that allow their workers to work remotely, I think it’s going to be a complete disaster.
Audience Member: It’s easier to leave the company like you said. You leave, you’re leaving the people you work with. And if you really don’t know them that well, what the heck?
Rob Ristagno: Yeah. How can CEOs grapple with that though because some of the CEOs I’ve talked to told me they feel like they’re being held hostage, that if they don’t allow remote, forget about right now with health concerns, whatever. But once everyone feels safe, they feel like they’re being held hostage by people who demand to work remotely. Otherwise they’re going to quit or go to another or not take the job.
Stephan Aarstol: Yeah. It’s a Pandora’s box that’s been opened. And I think there’s going to be two losers. It’s going to be everybody. So the one half is the companies that say you guys are coming back to the office. 30% of their work staff, I’ve already read that that number is due up out the number of people that are going to quit their job if the companies forced them. So they’re going to lose 30% of their people and some of their best people probably. But I think that is the correct move. But in the short term, they’re going to get hammered those companies. Especially now because you can’t hire the other people back and you can’t give them a remote job. And so they’re going to lose right now.
Stephan Aarstol: And then five years from now, the companies that are just like, oh, you guys work wherever you want, do whatever you want, take five jobs, whatever, we’re not going to check anything. We just–we’ll trust you. Then those companies are going to lose in the marketplaces to the companies that did force the workers to come in. But it’s going to be one group losing and then the other group losing. And if you look at that on the macro economic scale, it’s going to be just disaster. Yeah.
Audience Member: And what’s interesting, and this really isn’t so much from a business standpoint, but I have a group I meet with every Friday morning. It’s a men’s group and we’ve been remote for the last year or whatever. And we’re now going to go back to meeting in a little room. You can’t split it up. I mean, the people that don’t come to the room are not going to get experience the at all of the people that are in the room. So we’ll see, it starts tomorrow morning.
Stephan Aarstol: You don’t have the social element. So a lot of the good things are disappearing in this. And that’s a challenge. I mean, another guy brought that up. This is what is the, what is the social impact of this? I don’t think we’re thinking about that. And there’s going to be a big question. The other thing is with even the five-hour workday and especially like remote work, there is, you know, five, 10% of the population that will do really well in that. And as a company, you can let them do that. And that will actually let them be more productive. Like these are the same kids in, you know, high school or college that got an A, and they were just sort of pissed off because they didn’t get an A plus. Right? But that’s 5% of the population, maybe less the rest of the population, like, you know, 95% is going to take advantage of anything you give them.
Audience Member: Oh, along those same lines, I’m kind of curious that, it seems to me like, you know, remote work or coming back to the office for five hours would be a reasonable trade off. And I’m surprised that doesn’t have more of an impact on the people you hire and keep. And then what you’re saying is just, I’m just surprised by that. That would be a really great trade off for somebody can I got to go in the office, but it’s only five hours a day. And by the way, then I’m done. It’s not like I’m working from home eight, 10 hours a day.
Stephan Aarstol: With this whole like work less or work remote–changing work. There’s a lot of experiments being done. But the one thing that I think people are missing is why you can work less. And essentially what’s happened is. Just like the Industrial Revolution, they put these assembly lines in, right? And it was assembly line of machines. You put the people working eight hours, the machines working 24 hours. So that was a hundred years ago. If you fast forward, what’s changed now is communication. The internet. We’ve had basically the information revolution, right? So the assembly line of today is information flow. It’s like, I email you, I send something to my factory overseas, they get it back to me. If any of those people is off or like there’s a time delay, it delays your processes. Right? And so the there’s a lot of people that are talking about like a four day work week, you know, we just go to a three day weekend.
Stephan Aarstol: The problem with that is, you’re basically, your assembly line of information comes to a grinding halt, you know, on the weekend. And then that’s why Monday is so hard now because you got to get things moving again. And then if anybody is out, it just really slows down your whole process. And if you can’t just like lean over and talk to somebody or Slack them really quick and they respond to you, it slows down your process. So a lot of the most productive people that I’ve seen out there are really working two to three hours a day, seven days a week, like and entrepreneurs will go on vacation and we’re answering a few emails and people will say, oh, these guys are workaholics. Like, this is crazy. Yes. But I’m in the Bahamas and you know, you’re not, and yeah, maybe I’m a workaholic, but I’m doing an hour of work a day, you know, just to keep that assembly line of information flowing, that’s how to be highly productive.
Stephan Aarstol: So that’s why, you know, when we’re reducing hours and this is what they did back in the day too, they first reduce the number of hours they went from. It was 12, 14 hours a day to eight hours a day, six days a week. And then they reduced the number of days and they were doing shifts on, you know, of people on machines. A lot of people, you know, in the today’s world, it’s, it’s just you and your information flow. So if you do just field a couple of phone calls in the evening, go home at one o’clock, but still be accessible to field a couple of things and push a few things that will make you work at two or three times the speed. So that that’s a critical difference.
Rob Ristagno: There’s actually something I’m curious about. I still live in work in Denmark and very strong work-life balance there. The joke is don’t stand in the hallway at 4:30 because you’ll get run over by everyone leaving. I did feel however that everyone was just as productive. That was one thing is I came from working from a big job at McKinsey working 80 hours a week and I went to this environment here and I thought there was going to be a huge productivity drop-off and there was not. One hypothesis is that I felt like there’s a lot less politics on the job. And maybe just because I don’t speak Danish and there politics were going on and I didn’t understand. But did you see any of that? When you went in during the summers, when there’s the five-hour workday or did you see just, there’s not time for some of the annoying stuff that exists in corporate America?
Stephan Aarstol: Yeah. It’s definitely a different mindset. And I think this is definitely cultural from country to country. So when we wrote the book, we got press in like 20 countries. We got a tremendous amount of press for this book and we didn’t really try to get press, but one of the biggest places was in Germany and Europe. It was pretty crazy. I mean, they were sending film crews over. We were getting interviews all over Europe. They were putting us on the front page of newspapers. And my friends are like, yeah, of course the Europeans love this socialistic crap. You know, the French are like rioting in the streets if they have to work three hours. And I said, that is actually some of it. And that’s what’s going on. That’s why, you know, the French reporters were very interested in this.
Stephan Aarstol: The biggest interest was in Germany. And Germany, it was basically exactly how I was looking at this. It was like, you’re going to get fired if you’re not as productive or more productive, because everything in Germany is like, you know, the trains run on time. They pride themselves on efficiency, right? That’s the German thing. They have a, you know, relatively small country to the US and some of these other, you know, massive countries that have the biggest economies, but they’re only like fourth or fifth, you know, they’re right there with a lot less people, a lot less natural resources. And why are they? Because they’re very efficient. They see themselves, they see America as like these, you know, obese people who work like 60 hours a week and, you know, die of heart attacks. There’s the high divorce rate.
Stephan Aarstol: And so they think we’re just like throwing time. And we’re just like, you know, workaholics on, you know, drug addicted and all of this, like, you know, crazy stuff, which largely it kind of is. What you’re saying, that politics there is in Denmark there, you know, you didn’t get run over to the hallway at 4:30 in the US like, you know, the boss is going to be looking in the parking lot to see who’s left at 7:00. And that’s how you’re going to get a raise or not get a raise. And it’s, it’s the, you know, red badge of courage in the US to how many hours did you work? I worked 60 hours. Well, I worked 70 hours. I’m Elon Musk. I worked 110, you know, that’s crazy. It’s are you really productive? Cause some people like Elon Musk can work 110 hours.
Stephan Aarstol: Like, you know, Mark Cuban is my business partner in this company. And he’s not a big fan of the, you know, the five-hour workday when it came out, but he’s not a fan of the eight-hour work day. Right? He works around the clock in the evenings and he’s a billionaire, there’s no need for him to work. But he actually can sustain that level of work. But again, that’s the, you know, 5% that can, can work like that. You can’t put that on a whole company. You can’t put that on a whole nation of workers. It just doesn’t work. And so that’s where a lot of the ills in our society I think are coming from is we have high divorce rate. We have a high drug problem. We have a high anxiety, obesity, you know, heart attack problem in the US, it’s largely due to our work culture.
Rob Ristagno: Huh. Makes sense. And by the way, speaking of Mark Cuban, for the audience, if you’re not aware, Stefan actually is a winner on Shark Tank was on show Shark Tank. And maybe this is a good transition to our final segment today: Campfire Games. We like to wrap up a little bit of fun. and this week we have a special edition of Shark Tank trivia for you. So are you ready to see how you do?
Stephan Aarstol: Yeah. Let’s hear it.
Rob Ristagno: All right. So as of 2019, which shark on the American version had made the most number of deals?
Stephan Aarstol: I would say Mark Cuban.
Rob Ristagno: You got it. Yep. Okay. According to Inc magazine, roughly 100 pitches make it on air each season, but how many people send in applications?
Stephan Aarstol: I don’t know. I would guess, I would guess like 35,000. You know, when we were on, even if you pitched and you got a deal only like 75% of those companies like aired. So you could get a deal and not even air. So there’s companies that you don’t even see on there.
Rob Ristagno: And by the way, you’re exactly right. 35,000 is the answer that if I had a hundred dollar bill in my pocket, I would give it to you right now. Just like Price is Right.
Stephan Aarstol: A strange fact is that we didn’t even apply to be on the show. They called us out of the blue one day and asked if we would want to be on the show.
Rob Ristagno: All right. And according to an article in Forbes, what percentage of deals that are made on the air end up completely falling through and never happened?
Stephan Aarstol: I would say two thirds fall apart.
Rob Ristagno: I’ll give you partial credit. 43% completely fall apart and 30% get modified. So roughly only a third stay the same. All right. And last one, according to The Hustle, what is the average deal size in cash, and what is the average amount of equity given up?
Stephan Aarstol: So I’m going to say on the equity–and it’s changed over the years, cause they used to have smaller companies–but it used to be, the magic number was 30% in the early days. They would all want 30% because it didn’t make it worth their time to do any other percent for these small companies. But now it’s probably 10. So I would say 20% is the equity size. And then I also, the money is different. Like we raised $150,000 at the time and that was, you know, it was a small deal, but it was a decent-sized deal. They were giving us a valuation of half a million on our company. But now the valuations of these companies are $5 million. They’re like 10X. So I’m going to say it’s in the middle. So say a two and a half million dollar company, 20%, let’s say $500,000 cash. And 20% is the equity.
Rob Ristagno: Pretty close, pretty close. And this data might be a year or two old. So $286,000. So probably all the 12 years of history before the recent increase are weighting it down. And 27%.
Rob Ristagno: Very close. So anyways, well, thanks. Tell us a little bit more, if you want to learn more about your book or about Tower, where can we go to learn more about your products, your company and your content?
Stephan Aarstol: And so we didn’t talk too much about that, but our products are inflatable paddleboards. We’re sort of the worldwide leader in that direct consumer. They’re, you know, like 500 bucks. And so that’s towerpaddleboards.com. And then we’ve also sort of diversified into electric bikes, which was a booming, booming industry. So we make electric for beach cruisers, you know, very high-end beach cruisers. And those go for $1900 in a retail store. That would be about a $4,000 bike. That’s at Tower Electric Bikes. And then if you’re in San Diego here, we turned our office into like a beach club and we rent it out for weddings and events and stuff like that. So that’s the Tower Beach Club and that’s sort of offline diversification for us, because most of our stuff is online and we’re kind of getting our hat handed to us by Amazon sort of taking over the world there. But it’s definitely a dynamic world.
Rob Ristagno: And the book, once again, it’s just titled the Five-Hour Workday?
Stephan Aarstol: Yeah. The Five-Hour Workday and you can get that on Amazon.
Rob Ristagno: Thanks, Stephan. Lots of interesting ideas and concepts, and I bet we’re all walking away today with some challenged assumptions—things we could try out. Before we wrap up this episode of the CEO Campfire Chat, it’s time for the CEO Data Point. And to that end, I’m going to welcome Joe Galvin, the Chief Research Officer of Vistage Worldwide. Welcome, Joe.
Joe Galvin: Hey Rob. Well, I think this week’s Data Point is the CEO confidence index. On a quarterly basis, we survey our CEO community and get between 1,500 and 1,600 small- and mid-sized business CEOs to respond. And in our most recent survey, that we completed in early June, the Q2 confidence index came in at 108.8, which is the ninth highest score we’ve ever received in the 13 years we’ve been doing this.
Rob Ristagno: Wow. Ninth highest.
Joe Galvin: Yeah. There was a brief spike after the tax cuts, 2018, Q1 2018 and then seven consecutive quarters between the end of 2003 and 2005 coming out of the dot-com bubble. And what it shows is going back to a year ago, it’s the fourth consecutive rise of pretty significant numbers that we’ve seen as we’ve recovered and come out of the recession, courtesy the pandemic. So we’re seeing this surge, an economic surge, and we see the confidence of our CEO community buying into that surge and looking for ways to capitalize on it.
Joe Galvin: Again for the 37% of companies whose revenues were equal to or greater than coming out of this, before the pandemic, and for the 40-some that are between zero and 25%, everyone’s looking to now recover, but not just recover, but to grow into this economic surge. This economic wave that our community is lining up behind has got a lot of energy behind it. And the belief is that we’ll continue to be on the upside of the growth cycle for the next two to three years, at least. So the time is right to reignite that growth engine and take advantage of where it’s going and our community firm believes that.
Rob Ristagno: Excellent, Joe, good news all around. Thanks for this week’s Data Point. And for more research from Joe and his team, be sure to check out Vistage.com. Vistage Worldwide is a membership organization for leaders to refine their skills, make better decisions, get better results. In fact, there’s over 24,000 members right now. Vistage has been around for 60 years, and Vistage members outpace their competitors by growing 2.2 times faster than them. So you can do it, too. Again, Vistage.com.
Rob Ristagno: That will do it for this episode of the CEO Campfire Chat. Thanks, Joe. Thanks, Stephan. I’m Rob Ristagno. For prior episodes and bonus content, be sure to visit us at CEOCampfireChat.com. See you next time around the fire.
