I have a theory about why turf wars like this happens: the more successful and wealthy an entity, the greater opportunity there is for a manager to take wealth instead of make it. When you’re scrappy and broke, the only path to success is to make the company successful. When the company is rich and multitudinous, an individual can gain more from politics and turf wars rather than actually trying to push an already high enterprise value higher. The “maker:taker” opportunity ratio changes, and so does the type of personality the organization attracts.
> Pournelle's Iron Law of Bureaucracy states that in any bureaucratic organization there will be two kinds of people":
> First, there will be those who are devoted to the goals of the organization. Examples are dedicated classroom teachers in an educational bureaucracy, many of the engineers and launch technicians and scientists at NASA, even some agricultural scientists and advisors in the former Soviet Union collective farming administration.
> Secondly, there will be those dedicated to the organization itself. Examples are many of the administrators in the education system, many professors of education, many teachers union officials, much of the NASA headquarters staff, etc.
> The Iron Law states that in every case the second group will gain and keep control of the organization. It will write the rules, and control promotions within the organization.
This (and other organizational failures and technological innovations) is why there will always be startups and small businesses eventually where there was once a big entrenched business or two (or sometimes three).
There is also, of course, whole new industries and niches to be created out of nothing, value and wealth is never a finite pile. It's mostly a matter of human effort to find and break out these new areas. Sometimes just reinventing things as the old talent grows old and dies off, providing value in learning history.
What we have to note is that the 2,000 Admiralty officials of 1914 had become the 3,569 of 1928; and that this growth was unrelated to any possible increase in their work. The Navy during that period had diminished, in point of fact, by a third in men and two-thirds in ships. Nor, from 1922 onwards, was its strength even expected to increase, for its total of ships (unlike its total of officials) was limited by the Washington Naval Agreement of that year.
That sounds like an ironclad law. But is there empirical evidence for it? And a rational explanation behind it? I mean it's very strict as a rule: "in EVERY case the second group ... ".
Strong claims like that require strong evidence and a theory of WHY that would (always) be the outcome.
I'm thinking of society as large. That is an organization too. Are we doomed by bureaucracy?
When management becomes separated from both the people at the coalface (the people actually doing the jobs the organisation needs to do) and the founders/president/CEO, then behaviour changes. In most organisations, this is at 3 layers of management
(not including the actual workers and the top management layer, so 5 layers deep for the whole organisation). After this point, presentation and political acumen outweigh all other factors for the middle management layer, because all other factors can always be "spun" to look good, or blamed on a scapegoat, etc. - there's no direct link between what the middle-manager did and what the result was, so presentation matters more.
Once that happens, the organisation will promote people who do politics well. It's only a matter of time before the entire organisation is focused on internal politics (apart from the people actually doing the work, who become pawns in political moves). As the organisation grows and the layers expand and more layers of management become disconnected, it gets worse.
In a company, eventually the company will get disrupted and die off. In a government that's not a thing, and it'll just keep expanding and playing politics. This gets worse for government departments headed by a politician, because the politician is very focused on getting something they can boast about to their electorate in the few years they have in the department. And they're usually very familiar with the kinds of political games being played.
Source: We studied this in my MBA, it's a known thing. If I still had my textbooks I could dig out a reference.
Think of it in terms of thermodynamics. The first group requires extra energy relative to the second group to perform roles of leadership, since those are secondary goals. The second group is instead naturally drawn to the roles of direction of the group. Thus, the lowest energy state will be one where the second group is in charge. Over time, things will gravitate to that state as it is the global minimum.
Eventually the bureaucrats become the senior leadership and then they protect themselves.
This grows like a cancer: it starts from the bottom of the pool with people with no much skills, but looking for promotions while people with skills are looking for work results. In some very large companies I worked in (or with), techies focus on work while less competent people become managers; techies regard managers initially as admins that do work techies don't want to, but then the managers take over the organization and make it rot. This is initially far from senior leadership's sight, when it becomes visible it means most of the organization is already affected and it is too late. In most cases HR is helping with this because HR is completely disconnected and not understanding techies and the power dynamics ("those geeks nobody understands") and side with the bureaucrats because HR is also a form of bureaucracy (you don't get in HR is you are a brilliant STEM graduate).
They may offer resistance to the control of the second group but they don't fight as hard to take that control (because they focus on doing the work) so are eventually overpowered
There will be a lot of datapoints supporting that “law”... the problem is that it’s subjective.
Everyone hates “education bureaucrats”, but if the mission is educating children, at some level the state of the institution is critical to that mission.
I don’t really believe you could do such a thing empirically. I mean it just depends on scale as you indicated. I have never been a fan of ‘social’ sciences either.
Just like Christensen’s Dilemma books are mostly just anecdotes combined with patterns in history. As many such business books are.
But in my short time on this planet I’ve seen it in countless forms where I strongly believe it deserves such a title as “iron law”.
I don't have empirical evidence, but it mirrors the 2nd law of thermodynamics (entropy always increasing). Most "concentrated" things tend to dissipate away.
> Are we doomed by bureaucracy?
When empires collapse, you get small offshoots starting up somewhere nearby. If you search "tree life cycle" on google images you will see the analogy I'm trying to get at :)
Yes. This is why Moon, Mars, etc colonies are important - it is like small startups wrt. BigCo which is our Earth civilization reaching the state of disfunction.
You may have posted this many times, but this is my first time seeing and it explains so much about what is going on right now in my life. It doesn’t give me hope, but it gives some clarity around what otherwise seems like dysfunction. Thank you!
Apple is actually bigger by employee count, however about half (I think) are retail employees in the stores.
So yes - a very large organisation. However Apple's chip design teams are much, much smaller than that. And because Apple mostly doesn't do chip design those teams are likely able to work like a startup, without much internal politics or in-fighting. Where as all of Intel's 100,000+ employees are basically devoted to chip design and manufacture.
Apple as a whole, though, is starting to look rather sick from the same sort of problems that Intel has. Under Jobs there was an energy and clarity of purpose that's been lacking for some time. The drift in Apple's core businesses are obvious. The iPhone has been stuck in turgid incrementalism for a long time now, and has already been largely "disrupted" by Android which sold into cheaper markets and used that to fund R&D budgets that match Apple's. We don't think of it as disruption because Android arrive so soon after the iPhone and thus there was no obvious delayed "disruption event", Apple just had their market share capped by the refusal to compete on price, which is why Apple fans have for years been forced to make arguments about why Apple is successful because they take a larger profit margin than others.
Their core Mac business has also been adrift for many years now. I and many others actively avoid trying to upgrade because things frequently get worse rather than better. The first decade of the century saw constant innovation in the Mac business, after all their best people were reallocated to the iPhone and iPad, quality entered a long period of decline. macOS releases struggled with regressions and rarely introduced new innovations worth caring about. Their apps and hardware have also stalled with own goals and unforced errors like the keyboard fiasco <looks at butterfly keys with holes in the plastic from ordinary levels of use>.
Developer experience and docs are another area of problems, there was a good rant about it posted here the other day.
All these are due to organisational rot, and most obviously, a form of in-fighting between iOS / macOS in which the iWorld got the best people and resources, leaving macWorld to pathetically try and steal things from the other group occasionally, regardless of whether it made sense for a laptop context or not.
I get the idea that Apple's culture of secrecy applies just as much to internal projects. So while the total headcount is huge, the headcount involved in any given project is small, and unlikely to be affected by the rest of the organisation because they don't know about the project.
Thanks for making me aware of this.
I’m interested in finding the derivation of this law. Intuitively it sounds sort of like Grisham’s law were bad money drives out good, but it can’t be quite that simple, can it? Is it more of an empirical thing? I know I am being lazy just asking but a quick search turns up only statements of the law. I can make up my own thinking behind it but I’d like to get it from Pournelle if possible.
(Aside: Rothbard was great at this sort of logic chaining I think)
Also nice rabbit hole generally here!
Turf wars are a symptom of thinking you are smarter than everyone else ... and what group makes the greatest effort in this counter-productive egotistical exercise? Silicon design engineers.
Wouldn't most employees fall under the first category, and managers and executives the next? And employees are paid to carry out goals. while employers take care of the organization and set the goals. With this modeling of the situation, the second group always had control to begin with. They're management.
And there's always corruption and politics where there are humans, be it in the mailroom or the boardroom.
> Wouldn't most employees fall under the first category,
Tell that to any college/university in the western world!
There's a reason tuitions have risen so high and it's largely been cited as the ratio of admins to teachers as being at least 10:1 when it used to be much closer.
I personally blame cheap gov subsidized credit for this quickly forming trend, which only took ~2 decades to have a devastating effect on students who come out of school without a degree which can somehow pay back such debt (which we in STEM are fortunate and I personally dropped out early).
This law is the reason term-limits and liquid-democracy are such strong tools.
Term limits are best implemented where someone must take on a different job every x years. This doesn't solve the problem of entrenched vampiric bureaucrats entirely, but it at least pushes them towards the chopping block.
Liquid democracy is a type of democracy where people give their voting power for particular issues to whoever they trust most for that topic. Then that person may pass the cumulative votes onto someone they trust and believe in. The point of liquid democracy is to empower people who are actual experts in a subject. Rather than having laymen vote in ways that just empower the most socially adept.
The entire skillset involved with gaining power is so time-consuming, it's incredibly rare for someone to have it and an actual technical skill at the same time.
Term limits are a terrible idea. They reduce the power and expertise of elected representatives in favor of the permanent government, civil service and lobbyists. On top of that they encourage corrupt behavior as you know you’re not getting elected so there is no reason not to beyond the threat of legal consequences.
> Disentangling Accountability and Competence in Elections: Evidence from U.S. Term Limits
> We exploit variation in U.S. gubernatorial term limits across states and time to empirically estimate two separate effects of elections on government performance. Holding tenure in office constant, differences in performance by reelection-eligible and term-limited incumbents identify an accountability effect: reelection-eligible governors have greater incentives to exert costly effort on behalf of voters. Holding term-limit status constant, differences in performance by incumbents in different terms identify a competence effect: later-term incumbents are more likely to be competent both because they have survived reelection and because they have experience in office. We show that economic growth is higher and taxes, spending, and borrowing costs are lower under reelection- eligible incumbents than under term-limited incumbents (accountability), and under reelected incumbents than under first-term incumbents (competence), all else equal. In addition to improving our understanding of the role of elections in representative democracy, these findings resolve an empirical puzzle about the disappearance of the effect of term limits on gubernatorial performance over time.
A: Power corrupts - is not a joke. Reelection doesn't prevent corruption at all. It's a complete non-factor.
B: Elected officials are supposed to be the overseeing representatives, rather than functional executives.(think board vs C-suite). Elected executive is overall a poor idea.
It's not just one study, either. This isn't the area of political science I work in. Amongst those who do, it's an essentially universally-held belief that term limits for legislators are empirically a bad idea.
It's a shame. I like the idea of not concentrating power.
What about the people who project themselves as being experts in a very believable fashion but are actually not experts? Human nature would tend to cause these people to double down on their own self delusion rather than admit they don’t actually know what they are talking about. How do we guard against that?
I have a similar theory as to why rapidly growing companies become toxic environments (of which politics and turf wars are a symptom). When a company is small and has a low profile, its employees are in it for the company. They believe in the product or service that the company is creating, and but into its mission.
When the company becomes successful and starts to grow, it starts to attract people who don't really care about the company and its mission—they are in it only for themselves. They only want to improve their lot, and are willing to play politics and backstab as required to get ahead..
If the company is only growing slowly, they can weed these types out during the interview process. But if they are growing quickly, they don't have time to interview properly and slowly and surely the company is transformed from a cooperative, mission-driven organization to one where employees are fighting against themselves.
Unfortunately these politically minded types are the ones who quickly rise up the ranks, and once most of the top areas of the company are populated by assholes, there is no cure.
> When a company is small and has a low profile, its employees are in it for the company. They believe in the product or service that the company is creating, and but into its mission.
In the history of the world, 99% of people has been "in it" for the salary. Who gives a rat's ass about the company or the product?
I think just avoiding the people "willing to play politics and backstab" can be a big improvement (for employee happiness and the bottom line / shareholders)
I’ve been thinking similar thoughts about politics. Normal countries can turn into superpowers, and then it looks (from my non-politically astute eyes) as if politicians fight for power over the nation at the expense of the nation itself, and in so doing turn the superpower back into a normal nation.
An additional set of guesses to add on: some individuals are temperamentally better at the extraction than production, prefer it, are more able to exercise deceit, and have less regret or self shame.
Wasn’t meaning to be cheeky. Have been thinking about this for a few years and those are observations that took a while.
There’s analogies to building institutions in developing countries. See the constitution in the Ukraine (I think) or South Africa. Ginsberg commented publicly and Brayer agreed with (at a talk I attended) from a “source code” perspective those constitutions are superior to the American one. Sort of v2 efforts where you can adopt best practices. Yet most people would agree those younger nations don’t have stronger institutions and than the US.
So there has to be both an individual and organizational component.
This next comment is completely unbaked and probably terribly phrased, so please read it gently: in addition to the rest of the comments, I believe there is also (and I understand this is a terrible analogy) a “standby passive observer” mechanism mentality similar to how Hitler came to power. Conceptually, people that get hired externally should maybe be >50% of any large organization maybe. Those employees need to see repeated instances of malicious political acts go by (“hey aren’t we going to do something here”) and learn that sort of complicit passivity.
That’s probably a terrible analogy, but notice that there seems to be nothing the three or four people in this threat that worked at Intel could do to alter the company’s direction (obviously) but more importantly there’s also a tone of dread and finality in their words, and they seem to have all chosen to have left.
So, it seems, like nation building, a complicated problem to understand and solve.
Part of this comment made me think of Albert Hirschman's 'Exit, Voice, and Loyalty' [1] - at least as I have understood the argument, comparing the 'standby passive observer' to the 'loyalty' standpoint, and the commenters as having chosen the 'exit' option. Hirschman's book is still on my reading list though, together with his 'The Passions and the Interests' - my impression of his work is mostly based on the episodes of Alphachat where they discussed his life and work [2,3,4]
Thank you!!! Will Amazon. This is one of those back burner questions that festers and your material seems like it might lead to an unlock! Appreciate it.
As well as the formal, visible institutions like constitutions or legal frameworks there are a lot of invisible ones like cultural norms.
In a lot of countries the most powerful institution is "family first" (sometimes extending that to ethnic or religious in-group second).
The (currently) successful countries got that way with a different norm, "same rules for everyone".
I'm viewing the emphasis on family first in recent Disney/Pixar movies with increasing concern. Sure it sells better in China, but at what long-term cost?
>In a lot of countries the most powerful institution is "family first" (sometimes extending that to ethnic or religious in-group second).
>The (currently) successful countries got that way with a different norm, "same rules for everyone".
Which successful countries are these? As far as I can tell, the richer, more resourceful, established tribes don't follow the same rules as everyone. They might not be as blatantly corrupt as others, or the corruption may be more higher level with more plausible deniability, but "family first" is human nature.
"Same rules for everyone" countries: the archetype would be England after the civil war, where it became established that it didnt' matter if you were related to the King (or were the King), the law applied to you also.
(Of course there are varying values of "everyone." Most countries pretty much excluded half of the adult population until recently.)
For "family first" countries: this is the default mode for humans, so pretty much every country at one point or another. Nigeria and India would be two ountries where it's important to be related to the right people. India's caste system further reduces opportunities for many, perhaps most, people. For more extreme examples: Yemen, Afghanistan.
“Same rules for everyone” resonates very strongly here in New Zealand. There is a book-length study [1] on our national obsession with ‘fairness’ (contrasted with the USA and ‘freedom’).
Constitutions are just pieces of paper. If people don't uphold them - they aren't worth the paper...
You could have a constitution that says - everyone is free and we decide how to govern ourselves voluntarily.... And still get a country like Switzerland.
Doesn't have to be a superpower. Look at all the autocrats that set themselves up in various African states. If anything, the success of a power grab depends on weak institutions leading to poor incentives to be "well behaved". This could be at a large established corporation, or a nation-state in disarray after a revolution.
When billions are raining from the sky, whether you do good work or not, the rational plan is to fight over those free resources, rather than work to create new ones.
> coined in 1977 by The Economist to describe the decline of the manufacturing sector in the Netherlands after the discovery of the large Groningen natural gas field in 1959
I think scale might matter too. Companies are partly public goods problems. Each individual's hard work benefits the whole company. As a result they will undersupply hard work. If the company is size N, they only share 1/N of the total benefit they provide. So, the public goods problem bites harder when companies get big - even holding the level of competition in the market constant.
The graph of the distribution for value per person must be wierd, and definitely not flat. Maybe based on a power law, but I am unsure how to model the people that provide negative value, for example bad managers.
Well, the question is how much of the output they get :-)
Though actually note that the classic Mancur Olson result is "the exploitation of the strong by the weak". That is, the person who has the largest share of output contributes disproportionately much to the public good.
Simple proof: write individual i's marginal benefit from the company's total effort X as
s_i f(X) - x_i
where s_i is i's share of the output f(X), and x_i is i's own effort.
Taking everyone else's effort as given, i will equate marginal benefit of own effort to marginal cost, so that total effort solves
s_i f'(X) = 1
equivalently
f'(X) = 1/s_i
Now suppose the person with the largest share satisfies the above. Then everyone with a smaller share must have
f'(X) < 1/s_i
and therefore, if they are contributing more than the minimum possible, they have an incentive to reduce their contribution. So, this extreme version has that only the largest "shareholder" does any work. (A more realistic model has a convex cost of effort, so smaller shareholders do something, but they still contribute less than their output share.)
Your assumption is that the organisation is a cooperative - the employees get a share of the output of the organisation.
Intel is not a cooperative.
Fungible employees (the majority?) are paid a market clearing price (salary) for their effort. The company can derive much more value from an employee and the employee earns very little of the excess (perhaps bonuses to align working incentives).
Supposedly, in knowledge work like programming, the distribution follows a pareto distribution: for n people, sqrt(n) produce half the productive output.
The 'resource curse' might have the causality wrong though in many circumstances.
Maybe those countries would find themselves in a similarly bad state (or worse) without those resources. Maybe their bad state is due to historical reasons - being former colonies with very little power on the world stage - and resources just couldn't help much.
The resources curse really is about staying bad, not turning bad. We must realize that all countries 300-400 years ago were 'bad' by out perspective.
Countries with a dominant resources that only found them when they were already developed don't suffer from the 'resource curse'.
In such cases not having resources doesn't mean you turn into Switzerland or Canada rather it means that it will be harder for one dominant dictator to hold on to power. In some African countries that are now proto-democracies, dictators simply couldn't hold on to power without easily available resource base.
Bruce Bueno de Mesquita work in 'The Logic of Political Survival' and '
The Dictator's Handbook' is quite interesting.
Having a certain superpower send funds, training, and arms to right wing militias and established dictators certainly helps maintain the resource curse.
this is a common trope - but Canada has lots and seems ok.
Also the USA is the poster child for this; it's arguable that without the California gold rush there would be no USA as this is what is thought to have capitalised the federal government sufficiently to impose order on the west and fight the south.
This seems true, but I guess I also have more empathy for decision-makers: to me it seems like it is far from obvious who should take on which projects. Pretty much by definition, the organization is structured so that its current projects have sensible homes, but when a totally new project comes up, it is unlikely to fit perfectly anywhere in that structure. If it did, it wouldn't be totally new!
None of the options for dealing with this seem great. I've seen "internal incubator" type things which are designed to come up with new ideas, but honestly I'm not a fan of these. The structure incentivizes prototyping new "left field" ideas, but those ideas are likely not to gain any traction, and if they do, it is likely to be a mess to transition them into real projects within the more normal operations of the organization. And it does nothing for projects that are clearly important from inception, even if new; the "left field" incubator is not the right place to put something that isn't a crazy idea being tested but something known to be important.
The problem I've observed is also that (for performance / reward purposes), managers lie as hell when it comes to their team performance. The bigger the company, the less actual signal is received by upper managers because everyone doctors the hell out of this numbers. It might be impossible to even KNOW who the best team in your company is.
Yes. In fact, I would argue it should not be possible to have this "the best team" - if teams in different parts of the org are directly comparable, then they must be doing the same exact thing, and why do you have multiple teams scattered around doing identical things? That is, a well structured org will have teams working on Thing A and Thing B. If a brand new Thing C comes along, it isn't either Thing A or Thing B, and you have no real information on how good either team will be at Thing C, all you can know is how good they are at Thing A and Thing B respectively.
Fair point, and that sounds pretty awesome for getting data on things, but a luxury most don't have. I suspect nearly every organization where this is the case is doing it accidentally rather than conscientiously.
You put it so well, having worked in both large and small companies - I can attest to this theory. An exception might be SpaceX where you have a strong dictator at the top and any annoyances of tribal war get direct authoritarian spanking.
> An exception might be SpaceX where you have a strong dictator at the top
I think a similar thing is happening at Amazon (the strong dictator stuff, I mean), and it's my hunch that Google has started following Intel's trajectory, they just haven't realised it just yet.
The more perceptive ones at Google have realized that and quit in mass over the past few years. Since Sundar and the rest of the McKinsey gang took over, it has been just death to Google by a thousand cuts.
In some ways, this is the result of equality through having paid salaries for politicians. While the previous arrangement of having to be independently wealthy excluded most people from getting into politics, it did mean that it wasn't a career choice. It was something you did after you gained wealth and experience, at the end of a career in an actual industry and most likely running a business or being a senior manager, or you were wealthy to begin with. While the arrangement was not perfect by any means, it did mean that the politicians of that era were men of substance with a wealth of knowledge tempered by real-world experience. Politicians who go into it as a career straight from university lack any serious real-world experience outside politics, and I'm afraid to say they aren't up for the job. Their heads are full of political ideals but they mean little to the rest of us who just want competence and level-headed decision making.
I think there's a relatively straightforward and fair solution to the problem, and that is to require a certain amount of experience before being permitted to stand as a political candidate. You could do this by having a minimum age limit (e.g. 35), or by having been employed or being an employer for a certain number of years e.g. 15. This would ensure that the people representing us have gained a little understanding and experience of the world we live in and the real needs of the people they serve. Right now, I feel politicians of all stripes are almost completely divorced from the rest of us, and the consequences of their actions.
I do feel it is somewhat foolish that any job in the real world, from management through to the lowliest worker requires years of experience, multiple qualifications and certifications, training and assessment. But politicians require no independent assessment of their capabilities. The ballot box is not a high enough bar when all the candidates are of low quality.
While the arrangement was not perfect by any means, it did mean that the politicians of that era were men of substance with a wealth of knowledge tempered by real-world experience.
Yes exactly. I don't hold with the notion that the head of the NHS has to have been a doctor or the head of the MoD has to have been a soldier - there is value in being about to look at thing objectively with an outsider's perspective. But at the same time, I do absolutely believe that the Chancellor of the Exchequer should be someone, from any industry, who has employed people and had to make payroll on payday come hell or high water.
It would also benefit everyone if some life experience was required before becoming a teacher.
The ballot box is not a high enough bar when all the candidates are of low quality.
Agreed again, voting now is about holding your nose and choosing the least-worst. I want "none of the above" on the ballot paper and if it wins, the real candidates are banned from politics for life. Repeat until some decent candidates show up. But none of our incumbent politicians would ever pass that law for obvious reasons.
The point about teachers is also something I think is quite neglected today. A teacher with real-world experience of their subject is vastly better than someone who has known nothing of the world outside education. And that's of value far beyond the subject matter: they can provide career guidance and real-world perspectives of all kinds that less experienced teachers simply can't provide. Certainly some of the best teachers I had were those who had done real work.
Regarding the Chancellor of the Exchequer, I absolutely agree. But I think it should go further. I think all MPs should have direct experience of running a business and having to make payroll. Too many of them lack understanding of the reality of what a business is, and how the economy runs. It would temper some of the most extreme and dangerous actions, from taxation to social welfare spending. Too many think businesses are "rich" and can be taxed with impunity to pay for things of dubious benefit. It's easy to be profligate with other people's money if it seems like it's there for the taking. Experience might make them think about how to grow the economy to benefit us all, and reduce unnecessary expenditure. They might also think more carefully about supporting small businesses while ensuring large multinationals also pay their dues. I personally paid more corporation tax than several multinationals, despite earning less than the living wage.
For the first time, I set up and ran my own small consulting business for the past two years after being made redundant. (I'm also in the UK.) It was a small-time business with only one client for a couple of small contracts, and I since got a new permanent position. But the experience of having to do all the company registration, contract negotiation, invoicing, bookkeeping, dealing with accountants, paying corporation tax, and finally getting it all wound up was an invaluable experience which will likely be of great benefit in better understanding the businesses I work for. It gave me a proper appreciation of the realities of running a business, including all of the responsibilities you have to shoulder. I think every elected politician should have this experience. Every self-employed person in the country has a better understanding of the practical reality of economics and taxation than most of our politicians. And I think all politicians should be aware of the reality of what the rest of the country has to bear in response to the decisions they make.
A company and a sovereign state are completely different things.
It depends on the level you look at. For example the political skills of a manager to advance themselves at the expense of the organisation and their subordinates is identical whether at Raytheon or the DoD (to use an American example).
Despite their size, I think they're still in the startup phase where they have a large number of starry-eyed (pun intended) folks coming in because of the mission. That really is Musk's secret - you can get a lot done churning through people.
You could imagine the division responsible for mobile chip design to be of similar size to a mid-sized company like SpaceX. The optics are the same. You're right Intel is massive - the logistics department at Intel doesn't have any friction with the teams tasked with mobile chip design.
perhaps not in absolute terms, however In the launch industry they are almost as massive if not bigger . spacex also employees 8,000+ people. That is a scale large enough for it to have similar problems of intel size companies.
> Normally the people who rise up the ranks are the politically astute
Don't discount Nadella's political astuteness. I think it would be more accurate to say he is not merely politically astute, but instead able to combine his skill at internal politics with customer empathy and technical intelligence.
The conversation in Satyas own book of the trip to try to recruit some HP exec with Balmer where Satya pushed to take over some division and Balmer reluctantly agreed on the flight down to SF but told Satya he better be able to execute and quickly or he should work on his parachute skills, alone is hilarious when viewed through the lens you describe.
I just read that part of the book[0]. Actually, Satya says that Ballmer offered him the position because MS had to answer to AWS.
>[...] Steve had invested in it because [search][1] would require the company to compete in a sector beyond Windows and Office and build great technology—which he saw as the future of our industry. There was tremendous pressure for Microsoft to answer Amazon’s growing cloud business. This was the business he was inviting me to join.
>“You should think about it, though,” Steve added. “This might be your last job at Microsoft, because if you fail there is no parachute. You may just crash with it.” I wondered at the time whether he meant it as a grim bit of humor or as a perfectly straightforward warning. I’m still not quite sure which it was.
But yeah, funny, though.
[0] The book is Hit Refresh, if anyone is curious.
[1] It was Bing:
>There was no mention of the cloud in that year’s shareholder letter, but, to his credit, Steve had a game plan and a wider view of the playing field. Always a bold, courageous, and famously enthusiastic leader, Steve called me one day to say he had an idea. He wanted me to become head of engineering for the online search and advertising business that would later be relaunched as Bing, one of Microsoft’s first businesses born in the cloud.
Thank you for the quote! I would be a bit skeptical of any highly ambitious executive’s self-described potentially revised historical narrative of their ascent, however his words are his words.
I don’t know about you but if my boss made a parachute joke while currently in a private plane flying south, it would be a scary thing.
There was a comment in one of the Google biographies that the execs fought so much (maybe bill Campbell? RIP) that Sundnar became the person to unwedge the egos and therefore got selected on that basis.
It's hard to think of a 'successful' tech org without a massive ego at the top. So far Sundar hasn't shown he has what it takes. Is a massive ego required to drive these orgs?
"When you’re scrappy and broke, the only path to success is to make the company successful. When the company is rich and multitudinous, an individual can gain more from politics and turf wars rather than actually trying to push an already high enterprise value higher."
Extremely well said, and having worked at two (initially) successful behemoths so far, I couldn't agree more.
I agree with you and a lot of the things people who are responding are saying but the one thing that keeps popping in my head is that Apple who is disrupting in this case isn't exactly the lightweight scrappy contender as put forth in the parables and anecdotes. If the hypothesis is true for Intel why is giant Apple not suffering from the same mercenary middle management / toxic political BS?
Apple historically has concentrated leadership to a T (see: the Steve Jobs mythos) I don't recall hearing anything about Intel being nearly as centralized.
Steve Jobs apparently demolished internal units, with the following outcome:
> As was the case with Jobs before him, CEO Tim Cook occupies the only position on the organizational chart where the design, engineering, operations, marketing, and retail of any of Apple’s main products meet. In effect, besides the CEO, the company operates with no conventional general managers: people who control an entire process from product development through sales and are judged according to a P&L statement.
Apple is very differently organised from most big corporations, it has whats known as a functional organisational structure. Marketing, operations, software engineering, hardware engineering, etc.
Most corporations are organised around product groups, but what happens when the mobile products group comes up with a new device and wants to sell it to corporate clients? The enterprise products division might not like that. Imagine if Apple had a Mac division selling laptops, they might not have been happy about the Phone division coming out with the iPad and keyboard cases.
To be fair, I think many of their Mac-related problems over the past few years are a result of no one being able to defend the line internally, too. Management is a difficult problem.
I think this is a misunderstanding. The problems with the Mac have not been due to neglect, but due to very aggressive forward looking and innovative advancements of the platform some of which just failed.
You don’t develop all new low profile keyboard technology, an original touch sensitive display interface system, a new hinge mechanism, a custom integrated security and image processing chip (T2), and a unique 5k display system through neglect. The problem is some of these advancements were simply misconceived. It wasn’t lack of interest or investment, it was poor execution of some of the new developments.
Steve Jobs used to say that being better necessarily meant being different, but being different means taking risks and sometimes they don’t pay off.
Apple bought fell for the whole "Post-PC" mirage when the iPhone & iPad were on a tear: the desktop Mac was definitely neglected for years with no advancements while manpower was directed at iOS & iOS devices. What they did come up with, was the form-over-function trashcan Mac "Pro" with severe thermal limitations. They only got it right on their next attempt (some 2+ years later), after being publicly called out for neglecting their pro customers (Final Cut Pro X and the trashcan Mac were the final straw for a lot of video professionals who switched to Windows).
For a while, the software quality of new OS releases was night and day, comparing iOS and OS X. It was clear where the focus was. Apple's org structure has it's weaknesses.
The biggest problem is the form-over-function design. The same applies to the new one as well, though it's not as bad. In both cases, they are missing out on the business market who need a workhorse. Both are priced out of most people's budgets. We end up buying Mac Minis and struggling with their limited capabilities and expansion options. Their whole strategy here is poor. They don't have any midrange options between the two extremes.
Perhaps we just have a different opinion, and that's OK. I don't work at Apple, so I have no deeper insight, other than to me, it looks like the Mac branch has been flailing with no clear direction for some time now. They may have the money to try things, but there no one steering the ship, so to speak.
I'm sure they have it, but it occurs to me that they did go through a near-death experience that might have caused some of the worst baggage to abandon ship, and for a while afterwards they probably knew that it was possible for even a company as big as Apple to go under.
Now that it's been a while, it wouldn't totally shock me if they ended up drifting Intel's way eventually.
Explained somewhat by the nature of the innovators dilemma and the products they're making:
- x86 chips for PC were Intel's cash cow so doing anything to disrupt that revenue stream would be fought against
- Apple's cash cow is the phone itself so they don't particularly have any dogmatic loyalty to one type of chip as long as the phone sells
Now if there were a technology to come up agains the iPhone (glasses anyone?) they'd probably face the same conundrum; disrupt themselves or be disrupted?
That was completely conventional and expected per the innovators dilemma - they moved to a higher margin product with more features. iPhone was innovative and impressive for many reasons but it did not short circuit innovators dilemma.
While Steve Jobs was alive, he served as Apple's lodestone and BDFL. It's only been 9 years since his passing, so any rot that might exist probably wouldn't have grown enough (taking into account their culture of secrecy as well) to be externally visible.
Pournelle's Iron Law of Bureaucracy states that in any bureaucratic organization there will be two kinds of people:
First, there will be those who are devoted to the goals of the organization. Examples are dedicated classroom teachers in an educational bureaucracy, many of the engineers and launch technicians and scientists at NASA, even some agricultural scientists and advisors in the former Soviet Union collective farming administration.
Secondly, there will be those dedicated to the organization itself. Examples are many of the administrators in the education system, many professors of education, many teachers union officials, much of the NASA headquarters staff, etc.
The Iron Law states that in every case the second group will gain and keep control of the organization. It will write the rules, and control promotions within the organization.
> the greater opportunity there is for a manager to take wealth
Pieter Hintjens (creator of ZeroMQ) wrote a lot about this, and how organizations from big companies to small charities to software projects ought to design their internal structures of roles, titles, voting, auditing, to defend themselves against this kind of attack. Particularly if there's any kind of treasury, an opportunist will become tempted to take that role, but any kind of credit will attract people who want to take the credit without doing the work, power structures will attract people who want the power, and programmers who "just want to code" and avoid politics will find themselves at the bottom of a dysfunctional infected organisation structure with no power, no credit, and being instructed by distorted requests.
IIRC he tried to design the ZeroMQ organisation so that there wasn't any way for one person to insert themselves in a key point.
I'm not sure where on his blog I was reading that, but it's related to his writings about psycopaths[1] as the opportunists, and might be part of his book Social Architecture[2]
Of course; when Guido Van Rossum left Python[1], he titled his email "Transfer of power" and commented "I am not going to appoint a successor. So what are you all going to do? Create a democracy? Anarchy? A dictatorship? A federation?". No doubt a lot of people would like to insert themselves as new "Benevolent Dictator for Life" - imagine the uproar if Guido had appointed a successor who nobody had heard of, but had recently bought Guido a luxury yacht. What would "fork the entire thing" look like - would Apple do it? Google? FreeBSD? Microsoft? RedHat? Would the Python dev core fracture into competing groups of stay vs leave? Just because you /can/ fork it, doesn't mean nobody has any power or influence.
Or when people complain about Linus Poettering and Systemd, either how it came to be in certain distributions, or how it took over certain subsystems, or people's behaviour around it - isn't that politics and power structures?
Or that recent post on HN ( https://news.ycombinator.com/item?id=25076197 ) where the Cairo project appears to have nobody left who is able to make a release and the last few years of releases were done by one person working at Samsung, and there hasn't been one since he left, and presumably there was no organizational structure for how to distribute this power to several people, or how to choose and "promote" someone to the job, or if nobody wants to do it, how years worth of effort came to end up on the rocks where nobody even cares anymore, isn't that a broken or absent organization one way or another?
I'm not sure. In his article on "Building Online Communities" (http://hintjens.com/blog:117) he says he experimented with building online communities for three years and gathering results, and that ZeroMQ is his biggest success (at being organised to defend to both vendor capture, or takeover by a single powerful/competent/rude contributor). For background of why that was his focus, he wrote this (http://hintjens.com/blog:125#toc15) about his experiences with working on OpenAMQ:
"""In late 2009, the Chair and Red Hat sat down and decided, in a secret meeting, to rewrite the spec. [...] From scratch. By himself. After years and years of committee work. After years of investment by others in working code. Without asking anyone except Red Hat. And then, to force this spec through the working group using his usual tactics: bullying and lobbying. [...]
One of my spin-off projects was the Digital Standards Organization, and I came to understand what was needed to protect a standard from predatory hijack. I summarized the definition of a "Free and Open Standard" as "a published specification that is immune to vendor capture at all stages in its life-cycle." What the "free" part means is, if someone hijacks your working group and starts to push the standard in hostile directions (as Red Hat did), can you fork the standard and continue? Does the license allow forking, yes or no? And secondly, does the license prohibit "dark forks," namely private versions of the standard?
If either answer is "no," then you are at the mercy of others. And when there is money on the table, or even the promise of money, the predators will move in. The AMQP experience gave me a lot of material for my later book on psychopaths. [...]
If we'd managed to build a thriving community around OpenAMQ, it would have survived. So the lesson here is simple: community before code. Today this is obvious to me. Eight years ago, it wasn't."""
And reference this (http://hintjens.com/blog:120) Social Architecture FAQ which talks about rude but highly skilled people contributing to projects (read that with "community before code" and the quote "if you want to go fast go alone, if you want to go far go together" in mind).
Likewise, the wikipedia article for Social Architecture has been listed "not notable" for the past four years, and hasn't seen any meaningful edits since 2016.
With respect to the author, I'm not surprised. Nerds like ourselves enjoy "discovering" ideas, slapping pretentious labels on them, and then evangelizing them to the whole world... without checking if other people know more about those ideas than we do.
> Likewise, the wikipedia article for Social Architecture has been listed "not notable" for the past four years, and hasn't seen any meaningful edits since 2016.
I'm not seeing his book being panned on your Reddit link, I'm seeing ad-hom attacks on him because of his lack of credentials or some unrelated behaviour they don't like.
Is there any actual panning of his book by someone who read his book, in your link? Or anyone who engaged in good faith - e.g. it's a book about his experiences of problem behaviour patterns that hurt others?
The larger point is that the audience he chose to market to, rejected his ideas. Whether or not his audience was acting in "good faith" is irrelevant to his failure to communicate.
It’s time horizons too. The time horizon of creating the next great thing can be 3-5 years. An office politician can spend a lot of time grabbing value rather than creating it in that time span. This is one reason to be suspicious of senior folks who job hop too much.
I suspect some of it is also driven by 'impact-based rewards', i.e. valuable projects get the team paid more.
It means there's immense incentive for teams to monopolize skill and reduce other teams' value so they get picked. It also encourages posturing as strongly as possible, rather than accurately, since it's all based on perception - it's not like you can prove you'll do a better job than another team. To make it worse, if a highly valuable project seems like it might fail, the company will likely throw more resources at it - the risk to the team for getting in over their head is relatively low (and still looks great on a résumé), compared to the risk to the company.
I was thinking precisely this as I read parent's comment. These are managers/teams fighting in zero-sum game (or something they THINK is a zero-sum game) for a bigger share of stock bonuses of the existing extremely valuable company. Take that win and that bigger chunk of a massively valuable company, and in a way you don't really care what happens with the phone chip market; by the time it really pays off big, in 6 or 8 years, you might be somewhere else anyway.
Whereas, in a smaller company with a smaller pie to divide amongst folks, the growth of the pie is the most important thing.
In sum humans do not always optimize towards one variable like success / fitness.
Instead they optimize to many things like money, prestige, power, security, and so on. Much like you can't describe health as a single thing, when you collapse your insight to a single variable you miss everything in your simulation of how reality works.
This applies to an individual level but especially applies towards a cooperative level with multiple individuals. When we cooperate (or just act in ambiguous situations) sometimes trying to collapse your actions to "mental shortcuts" aka Heuristics in Judgment and Decision-Making to borrow some thinking fast and slow language further reduces insight.
Some institutions do persist for a very long time. The Japanese monarchy, the Catholic Church, and the old universities at Oxford, Bologne etc, are particularly prominent examples.
I agree, and I'll add more to it. In a very small company, there simply isn't enough space for any individual team or segment to diverge significantly from the overall success of the company. When your company is very large, often the needs of various sub-groups might not be in alignment with overall company success, even if they're still trying to make money for the company.
A great example comes from this article. The group in charge of the Pentium product line would not be thrilled to see the Celerons launched, since that would cannibalize their sales. Obviously for long term success of Intel this was the right move, but from the perspective of the Pentium team this might be a horrible idea.
Reminds me of this article I just read. In a totally different domain, but if there is so much wealth, it is easier to just a part of it, instead of creating new wealth.
What you're saying might/might not be true in general, but it is not relevant to Intel. Intel has for decades had internal teams compete. It's a purposeful choice that they stuck with despite despite the numerous times it has failed them, the blood on the floor, and the departure of engineers they wanted to keep.
However the small companies almost always have VC investors, which brings negative effects which are approximately as awful (just in totally different ways).
If you can find a small self-funded company that isn't gonna get squashed next time Masayoshi Son sneezes, it'll be the best job you've ever had.
the greater opportunity there is for a manager to take wealth instead of make it
And what I view as completely irrational is the fact that in so many cases, the self-interested option is actually to work together and do something meaningful that advances you far more than chasing a quarterly metric.
This is why extremely steep marginal takes rates improve economic efficiency. If you can’t get rich by playing office politics you might as well enjoy making a good product.
> If you can’t get rich by playing office politics you might as well enjoy making a good product.
It seems to me this would go the other way. Making a good product (in the sense that it's successful in the market) is what you want a company to do, but that's the thing mostly aligned with the profit incentive.
If profits are taxed heavily then spending resources on making a better product so that more people buy it doesn't make you a lot more money, but spending resources on office politics brings non-monetary personal benefits like status and control, so managers would have a greater relative incentive to do those things. See e.g. Soviet Union.
One of the biggest problems today is actually that the tax code provides incentives for corporations to retain profits within the organization rather than paying them out to shareholders to invest in something else, which results in inefficient corporate bloating.
Corporate tax rates can be lower, ideally at 0, but I doubt our current system incentivizes corporations retaining profits. On the contrary, recently many needed to be bailed out because they paid out too much to shareholders instead of saving enough for a rainy day.
Making a better product also doesn't necessarily lead to profits. That's an oversimplified perspective. There's a far greater correlation between monopoly power and profit. In some cases this monopoly status comes from truly groundbreaking work. Not in all cases though.
> Corporate tax rates can be lower, ideally at 0, but I doubt our current system incentivizes corporations retaining profits.
Multinational corporations commonly avoid taxes by keeping profits offshore in a low tax jurisdiction. In order to pay the money to shareholders they have to repatriate them and pay corporate income tax on the money, and then the shareholder has to pay tax again on the dividend or the capital gain from the buyback.
Or they can leave the money where it is, not pay any of those taxes and invest it in some index fund from there. But then the money is stuck inside the corporation, and gets invested in some index fund instead of potentially going to some higher risk/reward investments that some of the original shareholders would have chosen.
> On the contrary, recently many needed to be bailed out because they paid out too much to shareholders instead of saving enough for a rainy day.
COVID-19 isn't a rainy day, it's a once in a century pandemic. Most companies have never made enough money to be able to survive it, and the ones that did still shouldn't be hoarding it just in case. Systemic problems get solved through systemic actions, e.g. lowering interest rates or sending stimulus checks. To expect companies to have saved enough money to survive rare systemic events without that is to penalize and destroy any company lean enough to have been unable to save it to begin with.
> Making a better product also doesn't necessarily lead to profits.
Making a worse product in a competitive market has a strong relationship with going out of business.
> There's a far greater correlation between monopoly power and profit.
But that's an independent problem. The solution there isn't to raise taxes, it's to break up monopolies.
> Multinational corporations commonly avoid taxes by keeping profits offshore in a low tax jurisdiction.
That does happen, but many including the biggest tech companies found a clever way around it. Via a combination of ultra-low interest bearing bond sales and share repurchases. It does the same thing but avoids those taxes. So there's no incentive for profit retention on net.
> COVID-19 isn't a rainy day, it's a once in a century pandemic.
Part of going into business is accepting risk, including systemic risk. That's why the corporate veil exists and it's generally positive for the overall economy when weak businesses fail. A strong business would have an operating model that can withstand such risk.
> To expect companies to have saved enough money to survive rare systemic events without that is to penalize and destroy any company lean enough to have been unable to save it to begin with.
Maybe those companies shouldn't have been in business then and that capital would have been better deployed somewhere else. I'm surprised that opportunity costs of capital allocation are ignored when defending bailouts. They introduce market inefficiency and reward complacency.
> Making a worse product in a competitive market has a strong relationship with going out of business.
In principle, yes. In reality, most markets are not competitive to that degree. Perfectly competitive markets don't exist in a modern regulated economy. We can talk about removing regulatory burden to make this true, but that's not where we are now.
> That does happen, but many including the biggest tech companies found a clever way around it. Via a combination of ultra-low interest bearing bond sales and share repurchases. It does the same thing but avoids those taxes. So there's no incentive for profit retention on net.
The loans allow the money to be transferred back into the domestic entity, but there are then restrictions on issuing more in dividends or buybacks than you have in profits, and borrowing isn't considered profit. So they can get the money back into the US and use it for wasteful empire building but they can't give it to the shareholders -- it makes the problem worse.
And buybacks have more advantageous tax treatment than dividends but they're still taxed as capital gains on the difference between the price you bought the shares and the price you tender them for, which doesn't happen if the money stays inside the corporation.
> Part of going into business is accepting risk, including systemic risk. That's why the corporate veil exists and it's generally positive for the overall economy when weak businesses fail. A strong business would have an operating model that can withstand such risk.
You're using two incompatible definitions of weak. In the first case you want weak businesses to fail because they're inefficient, i.e. they're consuming more resources than they produce and go bankrupt. In the second case the business fails because there is a situation resulting in a temporary loss of revenue (shutdowns) but the business still has operating expenses (e.g. rent) and is too efficient to have enough slack to bridge the gap. The inefficiency wasn't caused by the business occupying space it couldn't use, because at the time nobody could use that space -- the loss was a sunk cost to society at large.
If you let them fail then when the temporary situation ends there is greater market concentration because the leanest companies failed, which allows the remaining ones to charge higher margins due to the reduced competition to the detriment of their customers or suppliers.
> I'm surprised that opportunity costs of capital allocation are ignored when defending bailouts. They introduce market inefficiency and reward complacency.
This is why "bailouts" should be distributed uniformly without regard to risk of failure, e.g. through lower interest rates or fixed sum payments to everyone. Then you're not rewarding the most precarious companies because they get no more than anyone else, but you still prevent them from failing. Meanwhile those in a stronger position can use the money they received to increase investment or consumption, which is what you want in a down economy anyway.
> In principle, yes. In reality, most markets are not competitive to that degree.
It still works like that in practice much of the time. Blockbuster's product wasn't as good as Netflix and now they're gone. GM's product wasn't as good as competing ones and it led them into bankruptcy. Blackberry, Sears, RadioShack, Circuit City, AOL.
It could happen more than it does, but it still does.
> but there are then restrictions on issuing more in dividends or buybacks than you have in profits, and borrowing isn't considered profit. So they can get the money back into the US and use it for wasteful empire building but they can't give it to the shareholders
The argument has been subtly shifted here, from businesses not being able to return capital in the form of dividends due to taxes to business not being able to do so due to loan covenants. Irrespective of the latter point, it is clear that given low interest rates, repatriation tax policy has no effect on incentives for capital repatriation. The biggest most profitable companies that pay out large dividends and do share buybacks make frequent use of this.
As for the loan covenant restrictions, from an economic stability perspective, it's very poor incentive design to allow companies to repay dividends when they're not profitable. This is in effect what you mean when you say "restrictions on issuing more in dividends or buybacks than you have in profits". A business thus impacted should focus on getting profitable. Liquidation is also an option. Dividends and buybacks should not be.
> This is why "bailouts" should be distributed uniformly without regard to risk of failure
This policy sends a message that foresight doesn't matter and reinforces a short-term oriented time horizon. Not only is that worse for society, it's worse for business in the long-run due to investment disincentives. Providing temporary support to individuals or local small businesses to preserve communities, especially vulnerable ones, is a different story and this is not an argument against it. Bailing out large well-managed businesses on the other hand makes no economic sense, these businesses can easily be restructured, sold, and given a new lease on life under new ownership. Antitrust concerns should be handled by courts, not by bailouts.
> increase investment or consumption, which is what you want in a down economy anyway.
Not all investment is equal, some investments have a much better return than others. Good policy incentivizes the latter as opposed to incentivizing indiscriminately. Investment for the sake of investment leads to waste and is bad for the economy in the long-run.
> and is too efficient to have enough slack to bridge the gap. The inefficiency wasn't caused by the business occupying space it couldn't use, because at the time nobody could use that space -- the loss was a sunk cost to society at large.
This is very oversimplified. Larger businesses can tap into financing, working capital, and have many other tools available to deal with this. And if they can't, that's not efficiency, that's poor operational discipline. Since the owners stand to gain when such a business does well, they should be ready to lose when things go poorly. It shouldn't matter if the cause is one akin to a force majeure.
> Blockbuster's product wasn't as good as Netflix and now they're gone.
Netflix had a much lower cost of capital in the beginning and also a much lower fixed expense. In their case not having storefronts improved the product but that's not a fixed relationship. One can come up with many cases where the opposite holds. Therefore it only applies to that particular case and doesn't support the general argument. Similar nuances exist for the other anecdotal examples listed.
F.A. Hayek provides great arguments against government intervention in the economy. There can be a role in providing assistance to individuals or communities, Hayek was famously supportive of both, but it's important to not let that bleed over into market dynamics which must remain competition-based.
Are you saying that low profit enterprises create more value?
The thesis is attractive but also makes me wonder about Apple, high profit and also highly creative.
holy cow this is so, so apt. i am stealing this explanation for the rest of forever. this is exactly why this happens... i wonder how to structure organizations / incentives to alleviate this.
Not just attracts - rewards and cultivates, too. People already working somewhere don’t have immutable personalities. If an employer is a bad influence on its employees, problems will manifest not only with new hires.
