We've Been Here Before: Steam, Iron, and Innovation of the First Industrial Revolution

Cars that drive themselves. Algorithms that write passable fiction. There is no domain or sector that AI doesn’t disrupt. Robots taking our jobs? Not exactly breaking news. About 265 years ago, another tech disruption happened - steam engines started their noisy “careers” in England's mines and factories. The transition was not smooth. Workers rioted. Industries vanished. New social classes emerged from the coal dust. And yet, we adapted, and we wouldn’t be here without that disruptive invention. What can we learn from our transition from field workers to factory hands to digital innovators? 

When Steam Changed Everything

In the late 18th century, England’s landscape of quaint cottage workshops for skilled artisans was quickly changed by brick factories with belching chimneys - industrial acne on the face of the countryside. The catalyst? James Watt's improved steam engine. While Thomas Newcomen had invented an earlier version in 1712, Watt's design was the iPhone to Newcomen's flip phone, using 75% less coal while delivering more power. Watt's innovation made industrial-scale power economically possible.

The steam engine was what economists now call a "general purpose technology" (GPT), similar to electricity, computers, and AI (Bresnahan & Trajtenberg, 1995). Such technologies fundamentally change economies by creating many downstream innovations across different sectors, far beyond their original application. Consider the effects of steam engines:

Manufacturing: The textile industry was amongst the early adopters of steam-powered automation. Mechanical looms replaced centuries-old handcraft methods and by 1820, a single worker with steam-powered equipment could produce 200 times more cotton cloth than a manual worker just fifty years earlier (Crafts, 2004). Talk about efficiency! But steam's applications didn’t stop there. It went on to change metalworking, paper-making, food processing, and pretty much every manufacturing sector.

Transportation: The railway was next with George Stephenson's "Rocket" demonstrating steam locomotion's potential in 1829. Within decades, over 20,000 miles of railway track crisscrossed Britain, reducing freight costs by 60% and passenger travel times by 80% (and we now know who lost in the “train vs horse” effectiveness game). Steam-powered ships changed oceanic transport (along with other maritime innovations we wrote about previously) that made global commerce reliable and predictable for the first time (although we’re yet to grasp the full impact of the current changes to global trade).

Mining and Materials: Steam pumps changed mining by draining deeper shafts and steam-powered drills and hammers increased extraction efficiency. This enabled previously unthought of access to coal and minerals, feeding new industries and creating a virtuous cycle of technological progress.

Agriculture: Steam-powered threshers and plows mechanized farming, beginning agriculture's long transformation from human and animal power to mechanization.

Printing and Communication: Steam-powered rotary presses, introduced in the 1840s, could print 10,000 sheets per hour compared to 250 on manual presses, making information cheaper and more widely available through newspapers and books (go deeper with our previous blog on printing press revolution).

These changes show the unpredictable way general purpose technologies spread through an economy. Steam power make existing processes faster. It also completely changed work, created entirely new industries, and enabled previously impossible achievements. When Watt was refining his engine, he couldn’t even imagine many of steam's most transformative applications! 

This pattern of downstream innovations is similar to what we might be witnessing with AI - a general purpose technology with initial applications (like memes generation and very similar resumes creation) may be just the preview of more profound changes. We are already anticipating innovative uses across healthcare, scientific research, education, and there are probably uses across industries we haven't yet reimagined. We can see the technology's potential but can hardly imagine all the ways it will affect our reality in the coming decades.

The Workforce in Transition

Parish records from industrializing areas show massive population shifts as people moved from rural communities to factory towns (urbanization!). Census data from Manchester shows its population exploded from 25,000 in 1772 to over 300,000 by 1850. Such growth is similar to the boom of tech hubs like Shenzhen or Silicon Valley.

As with any story - there were winners and losers:

Displaced Workers: Handloom weavers saw their wages collapse by 60% between 1800 and 1830, according to economic historian Robert Allen. The "Luddite" movement - skilled textile workers who destroyed machinery between 1811 and 1816 - represents perhaps the first organized resistance to technological unemployment.

New Occupations: Factory records from the period show the emergence of entirely new professions: machine operators, mechanics, engineers, factory managers, and railway workers. By 1851, over 40% of Britain's workforce had transitioned to industrial occupations - roles that hadn't existed a generation earlier.

Skills Transformation: Training shifted too. Traditional seven-year craft apprenticeships were replaced by shorter, focused factory training. The Institution of Civil Engineers (founded 1818) and the Institution of Mechanical Engineers (founded 1847) created new qualification systems for technical professionals, world's first modern engineering credentials.

Alongside these professional systems, the Industrial Revolution also led to the rise of organized public education, especially in England. Factory owners, religious groups, and social reformers began to see education for the working class as both a moral imperative and an economic necessity. The 1870 Elementary Education Act made education compulsory for children aged 5 to 13. This provided basic literacy and numeracy to millions of working-class children, equipping them for industrial employment and enabling greater social mobility. It also laid the foundation for a global model of mass, state-sponsored education that persists today.

There was, of course, deep anxiety about these changes. Yet within decades, industrialization had created more jobs than it destroyed, though the transition was certainly painful and uneven. Just as mechanical power automated physical labor, AI now automates cognitive tasks. Roles like legal research, medical diagnosis, and content creation that were once safe from automation are now at risk. But history suggests new roles will emerge, and we already see the signs… new roles like prompt engineers, AI ethicists, and human-AI collaboration specialists. These may be just the beginning. The bigger question is how fast the transition will come about and how painful and how equitably distributed the change will be.

Lessons for the AI Age

What might we learn from the steam revolution?

1. Reimagining Organizations

Successful factories during the Industrial Revolution weren't just artisan workshops with steam engines bolted on - they required entirely new organizations to be formed:

From vertical -> horizontal integration: Factory records show how production was sliced into specialized steps rather than having a single craftsperson complete entire products. This was the original assembly line before Henry Ford made it famous. Today's organizations similarly need to rethink workflows around human-AI collaboration rather than simply automating existing processes. The digital equivalent of "just add steam and stir" rarely works. In this new paradigm, many jobs are being pixelated—deconstructed into granular tasks that can be distributed across humans and machines, requiring organizations to reassemble workflows with both capability and context in mind.

From craft guilds -> industrial management: New specialized managerial roles emerged to coordinate increasingly complex production systems. The rise of professional managers, documented in company archives from pioneering factories like Soho Manufactory, shows how new coordination mechanisms become necessary when technology reshuffles the work deck. We need to develop work orchestration or rather “workestration” skills the workers need to build in order to manage human and digital “workers.”

Recent McKinsey research shows that organizations achieving the greatest AI success are those reimagining their business models around AI capabilities rather than simply automating existing processes. As in the 1800s, technology alone isn't enough, organizational innovation must tag along!

2. The Ps in the pod - Policy, Protection, and Progress

Historical records show how governments and institutions walked the tightrope between technological progress and social stability:

Protective tariffs -> market expansion (policy): Britain initially shielded some traditional industries but ultimately embraced free trade, recognizing that expanding markets was necessary for industrial growth. The transition from the Corn Laws (which protected agricultural interests) to their repeal in 1846 demonstrates this evolution in thinking—from economic protectionism to "sink or swim" (progress) Critical lesson for today, for sure!

Poor laws -> factory legislation (policy): Social policies evolved from the punitive Speenhamland system to more constructive approaches like the Factory Acts of the 1830s-40s, which set standards for child labor and working conditions (protection)—the 19th century version of "we should probably regulate this" (progress).

The recent EU AI Act and emerging regulatory frameworks in other countries reflect a similar attempt to balance innovation with protection (policy). Organizations adopting AI need similar balance and support workers through transition (protection and progress).

3. Systemic Skills Development

The Industrial Revolution triggered systematic approaches to workforce development:

Apprenticeships -> technical education: Archives from the Mechanics' Institutes (founded in the 1820s) show how new educational institutions emerged to meet industrial needs. It began as informal workplace learning that then became a systematic technical education—the original "learn to code" movement, but with more coal dust.

Craft knowledge -> engineering science: University curricula incorporated scientific principles relevant to industry. The founding of institutions like University College London (1826) with its focus on "useful knowledge" shows how higher education pivoted from classical learning to practical skills.

Work-based learning  -> credentialed pathways: The 19th century saw the rise of not only technical institutions but also structured qualifications that validated new kinds of knowledge. The creation of the City and Guilds of London Institute (1878) formalized vocational training, offering certification that allowed individuals - particularly those from the lower classes - to advance socially and economically through demonstrated competence.

Measuring Transformation: Then and Now

How did societies measure the impact of the Industrial Revolution? Here are some intriguing parallels:

Then:

• Factory productivity increases (5-10x output per worker in textiles between 1780-1860)

• Transportation efficiency gains (70% reduction in shipping costs by 1830)

• Wage premiums for technical skills (engineers earned 3-5x typical worker wages)

• Urban growth rates (Manchester grew 1200% between 1772-1850)

Now:

• Productivity increases from AI implementation (significant improvement in knowledge work, World Economic Forum's 2025 report)

• Cost reductions in routine tasks (10-20% in product development and knowledge management, McKinsey, 2025)

• Skill premiums for AI specialists (~20%+ above traditional technical roles)

• AI-related job postings increased by 61% in 2024, significantly outpacing the overall job market growth of approximately 1.4% (Verdict, 2025)

Human Element Remains Important

Perhaps the most important lesson from the Industrial Revolution is that technology alone doesn't determine outcomes. How we as humans respond does. The countries that ultimately benefited most weren't those with the earliest or most advanced technology, but those that best managed the social transition through education, infrastructure, and adaptive institutions.

The economic historian Joel Mokyr argues that Britain's early industrial success came from its technological innovations and more importantly from its flexible institutions, investment in human capital, and pragmatic adaptation of social structures to new realities. Similarly, organizations today will succeed with AI not simply by deploying the most advanced algorithms, but by thoughtfully integrating these tools with human capabilities and organizational structures.

As we continue with our own technological revolution, we should remember that while steam engines transformed how people worked, they didn't eliminate the need for human creativity, judgment, and adaptability. Similarly, AI will change jobs but unlikely replace the core human capabilities that make organizations successful.

One notable difference remains: the pace of change. The Industrial Revolution unfolded over generations; our AI revolution is compressed into years or even months. No pressure!

---

This is a post in our year-long series "We've Been Here Before." Subscribe to our newsletter to receive monthly insights about historical transformations and their lessons for the AI age.