How Doomed are Large Organizations?

We now take the model from the previous post, and ask the questions over the next several posts. This first answer post asks these questions:

  1. Are these dynamics the inevitable results of large organizations?
  2. How can we forestall these dynamics within an organization?
  3. To what extent should we avoid creating large organizations?
  4. Has this dynamic ever been different in the past in other times and places?

These are the best answers I was able to come up with. Some of this is reiteration of previous observations and prescriptions. Some of it is new.

There are some bold claims in these answer posts, which I lack the space and time to defend in detail or provide citations for properly, with which I am confident many readers will disagree. I am fine with that. I do not intend to defend them further unless I see an opportunity in doing so.

I would love to be missing much better strategies for making organizations less doomed – if you have ideas please please please share them in the comments and/or elsewhere.

Are these dynamics the inevitable result of large organizations? 

These dynamics are the default result of large organizations. There is continuous pressure over time pushing towards such outcomes.

The larger the organization, the longer it exists, and the more such outcomes have already happened, both there and elsewhere, the greater the pressure towards such outcomes. 

Once such dynamics take hold, reversing them within an organization is extremely difficult.

Non-locally within a civilization, one can allow new organizations to periodically take the place of old ones to reset the damage.

Locally within a sufficiently large organization and over a sufficiently long time horizon, this makes these dynamics inevitable. The speed at which this occurs still varies greatly, and depends on choices made.

How can we forestall these dynamics within an organization?

These dynamics can be forestalled somewhat through a strong organizational culture that devotes substantial head space and resources to keeping the wrong people and behaviors out. This requires a leader who believes in this and in making it a top priority. Usually this person is a founder. Losing the founder is often the trigger for a rapid ramp up in maze level.

Keeping maze levels in check means continuously sacrificing substantial head space, resources, ability to scale and short-term effectiveness to this cause. This holds both for the organization overall and the leader personally. 

Head space is sacrificed three ways: You have less people, you devote some of those people to the maze-fighting process, and the process takes up space in everyone’s head.

Central to this is to ruthlessly enforce an organizational culture with zero tolerance for maze behaviors.

Doing anything with an intent to deceive, or an intent to game your metrics at the expense of object level results, needs to be an automatic “you’re fired.”

Some amount of politics is a human universal, but it needs to be strongly discouraged. Similarly, some amount of putting in extra effort at crucial times is necessary, but strong patterns of guarding people’s non-work lives from work, both in terms of time and other influences, are also strongly necessary.

Workers and managers need to have as much effective skin in the game as you can muster.

One must hire carefully, with a keen eye to the motivations and instincts of applicants, and a long period of teaching them the new cultural norms. This means at least growing slowly, so new people can be properly incorporated.

You also want a relatively flat hierarchy, to the extent possible.

There will always be bosses when crunch time comes. Someone is always in charge. Don’t let anyone tell you different. But the less this is felt in ordinary interactions, and thus the more technically direct reports each boss can have and still be effective, and thus the less levels of hierarchy you need for a given number of people, the better off you’ll be. 

You can run things in these ways. I have seen it. It helps. A lot.

Another approach is to lower the outside maze level. Doing so by changing society at large is exceedingly hard. Doing so by associating with outside organizations with lower maze levels, and going into industries and problems with lower maze levels, seems more realistic. If you want to ‘disrupt’ an area that is suffering from maze dysfunction, it makes sense to bypass the existing systems entirely. Thus, move fast, break things.

One can think of all these tactics as taking the questions one uses to identify or predict a maze, and trying to engineer the answers you want. That is a fine intuitive place to start.

However, if Goodhart’s Law alarm bells did not go off in your head when you read that last paragraph, you do not appreciate how dangerous Goodhart Traps are.

The Goodhart Trap 

The fatal flaw is that no matter what you target when distributing rewards and punishments and cultural approval, it has to be something. If you spell it out, and a sufficiently large organization has little choice but to spell it out, you inevitably replace one type of Goodharting with another. One type of deception becomes another.

One universal is that in order to maintain a unique culture, you must filter for those that happily embrace that culture. That means you are now testing everyone constantly, no matter how explicit you avoid making this, on whether they happily embrace the company and its culture. People therefore pretend to embrace the culture and pretend to be constantly happy. Even if they do embrace the culture and are happy, they still additionally will put on a show of doing so.

If you punish deception you get people pretending not to deceive. If you punish pretending, you get people who pretend to not be the type of people who would pretend. People Goodhart on not appearing to Goodhart.

Which is a much more interesting level to play on, and usually far less destructive. If you do a good enough job picking your Goodhart targets, this beats the alternatives by a lot.

Still, you eventually end up in a version of the same place. Deception is deception. Pretending is pretending. Fraud is fraud. The soul still dies. Simulacrum levels still slowly rise. 

Either you strongly enforce a culture, and slowly get that result, or you don’t. If you don’t and are big enough, you quickly get a maze. If you do and/or are smaller, depending on your skill level and dedication to the task, you slowly get a maze.

Hiring well is better than enforcing or training later, since once people are in they can then be themselves. Also because enforcement of culture is, as pointed out above, toxic even if you mean to enforce a non-toxic ideal. But relying on employee selection puts a huge premium on not making hiring mistakes. Even one bad hire in the wrong place can be fatal. Especially if they then are in a position to bring others with them. You need to defend your hiring process especially strongly from these same corruptions.

My guess is that once an organization grows beyond about Dunbar’s number, defending your culture becomes a losing battle even under the best of circumstances. Enforcing the culture will fail outright in the medium term, unless the culture outside the organization is supporting you. 

If you are too big, every known strategy is only a holding action. There is no permanent solution.

To what extent should we avoid creating large organizations? 

Quite a lot. These effects are a really big deal. Organizations get less effective, more toxic and corrupt as places to work and interact with, and add more toxicity and corruption to society. 

Every level of hierarchy enhances this effect. The first five, dramatically so. Think hard before being or having a boss. Think harder before letting someone’s boss report to a boss. Think even harder than that before adding a fourth or fifth level of hierarchy. 

That does not mean such things can be fully avoided. The advantages of large organizations with many degrees of hierarchy are also a really big deal. We cannot avoid them entirely. 

We must treat creating additional managerial levels as having very high costs. This is not an action to be taken lightly. Wherever possible, create distinct organizations and allow them to interact. Even better, allow people to interact as individuals. 

This adds friction and transaction costs. It makes many forms of coordination harder. Sometimes it simply cannot be done if you want to do the thing you’d like to do. 

This is increasingly the case, largely as a result of enemy action. Some of this is technology and our problems being legitimately more complex. Most of it is regulatory frameworks and maze-supporting social norms that require massive costs, including massive fixed costs, be paid as part of doing anything at all. This is a key way mazes expropriate resources and reward other mazes while punishing non-mazes.

I often observe people who are stuck working in mazes who would much prefer to be self-employed or to exit their current job or location, but who are unable to do so because the legal deck is increasingly stacked against that.

Even if the work itself is permitted, health insurance issues alone force many into working for the man. 

When one has a successful small organization, the natural instinct is to scale it up and become a larger organization.

Resist this urge whenever possible. There is nothing wrong with being good at what you do at the scale you are good at doing it. Set an example others can emulate. Let others do other things, be other places. Any profits from that enterprise can be returned to investors and/or paid to employees, and used to live life or create or invest in other projects, or to help others.

One need not point to explicit quantified dangers to do this. Arguments that one cannot legitimately choose to  ‘leave money on the table’ or otherwise not maximize, are maximalist arguments for some utility function that does not properly capture human value and is subject to Goodhart’s Law, and against the legitimacy of slack

The fear that if you don’t grow, you’ll get ‘beaten’ by those that do, as in Raymond’s kingdoms? Overblown. Also asking the wrong question. So what if someone else is bigger or more superficially successful? So what if you do not build a giant thing that lasts? Everything ends. That is not, by default, what matters. A larger company is often not better than several smaller companies. A larger club is often not better than several smaller clubs. A larger state is often not better or longer lasting than several smaller ones. Have something good and positive, for as long as it is viable and makes sense, rather than transforming into something likely to be bad. 

People like to build empires. Those with power usually want more power. That does not make more power a good idea. It is only a good idea where it is instrumentally useful.   

In some places, competition really is winner-take-all and/or regulations and conditions too heavily favor the large over the small. One must grow to survive. Once again, we should be suspicious that this dynamic has been engineered rather than being inherent in the underlying problem space. 

Especially in those cases, this leads back to the question of how we can grow larger and keep these dynamics in check. 

Has this dynamic ever been different in the past in other places and times?

These dynamics seem to me to be getting increasingly worse, which implies they have been better in the past.

Recent developments indicate an increasing simulacrum level, an increasing reluctance to allow older institutions to be replaced by newer ones, and an increasing reliance on cronyism and corruption that props up failure, allowing mazes to survive past when they are no longer able to fulfill their original functions.

Those in the political and academic systems, on all sides, increasingly openly advocate against the very concept of objective truth, or that people should tell it, or are blameworthy for not doing so. Our president’s supporters admit and admire that he is a corrupt liar, claiming that his honesty about his corruption and lying, and his admiration for others who are corrupt, who lie and who bully, is refreshing, because they are distinct from the corrupt, the liars and the bullies who are more locally relevant to their lives. Discourse is increasingly fraught and difficult. When someone wants to engage in discourse, I frequently now observe them spending much of their time pointing out how difficult it is to engage in discourse (and I am not claiming myself as an exception here), as opposed to what such people used to do instead, which was engage in discourse.

We are increasingly paralyzed and unable to do things across a wide variety of potential human activities. 

Expropriation by existing mazes and systems eats increasing shares of everything, especially in education, health care and housing.

I don’t have time for a full takedown here, but: Claims to the contrary, such as those recently made by Alex Tabbrok in Why Are The Prices So Damn High?, are statistical artifacts that defy the evidence of one’s eyes. They are the product of Moloch’s Army. When I have insurance and am asked with no warning to pay $850 for literally five minutes of a doctor’s time, after being kept waiting for an hour (and everyone I ask about this says just refuse to pay it)? When sending my child to a kindergarten costs the majority of a skilled educator’s salary? When you look at rents?

Don’t tell me the problem is labor costs due to increasing demand for real services.

Just. Don’t.

Some technological innovations remain permitted for now, and many of the organizations exploiting this are relatively new and reliant on object-level work, and thus less maze-like for now, but this is sufficiently narrow that we call the result “the tech industry.” We see rapid progress in the few places where innovation and actual work is permitted to those without mazes and connections, and where there is sufficient motivation for work, either intrinsic or monetary. 

The tech industry also exhibits some very maze-like behaviors of its own, but it takes a different form. I am unlikely to be the best person to tackle those details, as others have better direct experience, and I will not attempt to tackle them here and now.

We see very little everywhere else. Increasingly we live in an amalgamated giant maze, and the maze is paralyzing us and taking away our ability to think or talk while robbing us blind. Mazes are increasingly in direct position to censor, deplatform or punish us, even if we do not work for them.

The idea of positive-sum, object-level interactions being someone’s primary source of income is increasingly seen as illegitimate, and risky and irresponsible, in contrast to working for a maze. People instinctively think there’s something shady or rebellious about that entire enterprise of having an actual enterprise. A proper person seeks rent, plays the game starting in childhood, sends the right signals and finds ways to game the system. They increase their appeal to mazes by making themselves as dependent on them and their income and legitimacy streams, and as vulnerable to their blackmail, as possible. 

The best way to see that positive-sum games are a thing is to notice that the sum changes. If everything is zero-sum, the sum would always be zero.

The best way to see that these dynamics used to be much less severe, at least in many times and places, is that those times and places looked and felt different, and got us here without collapsing. Moral Mazes was written before I was born, but the spread of these dynamics is clear as day within my lifetime, and yours as well.

Did some times and places, including our recent past, have it less bad than us in these ways? I see this as almost certainly true, but I am uncertain of the magnitude of this effect due to not having good enough models of the past.

Did some times and places have it worse than we do now? Very possible. But they’re not around anymore. Which is how it works.

The next post will ask why it was different in the past, what the causes are in general, and whether we can duplicate past conditions in good ways.

 

 

 

This entry was posted in Death by Metrics, Immoral Mazes Sequence, Moral Mazes, Uncategorized. Bookmark the permalink.

15 Responses to How Doomed are Large Organizations?

  1. Eric Fletcher says:

    This touches on a hard-to-argue point: confiscatory tax rates on high incomes are (likely) a good thing, even if the money collected was literally burned, because it would change the relative value of capturing 90% of a market vs 30%. Currently, it seems like people are willing to work 10 times as hard to get 3x more value (as the founder / top dog, you effectively get compensation proportional to gross profit). Would they be willing to do that for only 1.25x value, (with the rest being taxed away – note that we aren’t trying to collect income for the government, so it doesn’t matter that “no-one” is actually paying the theoretical 80 – 99% tax rates on those theoretical higher incomes).

    • TheZvi says:

      I strongly disagree with you on this but appreciate the direct/honest case being made.

      Your instinct seems to be that large incomes result mostly from capturing value at the expense of others, and such actions are zero sum. Thus, when Microsoft or Amazon succeeds, they do so because they capture value that would have gone to others, but they do not while doing this net create value.

      My instinct is that while this can be the case, it is definitely not the default case, and getting someone to work less hard by taking away their incentive to work hard is likely to mean that less value is created for others, as well, even before they are taxed. I do not believe this changes when someone’s income crosses some threshold.

      Confiscatory taxation would also directly hurt the maze problem by preventing founders from retaining control of large companies.

      This is to say nothing of the practical problems with confiscatory taxation levels, which are another matter entirely.

      A few posts later I will list potential solutions to maze issues. I do not think confiscatory taxation is a reasonable option. I also do not list forcibly splitting up large companies, because of the practical costs – the government is the biggest maze of all and this would only make it that much more powerful – but it is possible I should include it for completeness.

      • michealvassar says:

        I think that forcefully privatizing large companies is worth listing.

        I’m not in favor of Warren’s wealth tax ‘as is’ but if we could double it and make it only apply to liquid wealth, then we would be going somewhere.

        Regarding whether great wealth comes from value creation or value capture, I think it all depends on how great. IMHO, almost every fortune between a few tens of millions and a few hundred million is due to value capture or small businesses that grew slowly but steadily. Almost every fortune of many billions is due to value creation, and the creators, like Bezos, usually capture only a small part of the value created.

        Such value creators would not be terribly deterred from that value creation by a tax on liquid wealth however, even a high one, as they are capable of making their liquid wealth grow much faster than the general public. So long as the tax codes are simple, so their interests remain aligned with the much larger number of people who get smaller returns on liquid wealth, they will do fine, but complicated tax codes would force them to focus more on control of the government in order to retain their wealth.

      • Manx says:

        I think you must include it for completeness. The government used to actually execute on its antitrust responsibility – it broke up the telephone companies. It’s not clear that capping the max size of a corporation is any different than anti-trust action.

  2. PhilippeO says:

    It seems to me that Moral Maze could be hindered simply by limiting pool of applicants.

    Look at 19th century Methodism Banks : 1) All their employee from Boss to clerk is Methodism, so everyone has skin in the game 2) Competition is much less, so manager need to participate in mazes is reduced 3) Heredity (Boss son-in-law) is main cause of promotion, not “success”.

    These could apply to Jewish Banks, Old Etonian Government, Lebanese trading company, etc.

    • michealvassar says:

      Definitely. Slightly flawed concepts of fairness are a major generator of mazedom, and more importantly, an iron bar against escaping from mazedom.

  3. bugsbycarlin says:

    Mazes happen over time; the trouble comes with eternal life. Lestat the vampire would have been fine if he’d just died.

    If you’re a founder, it seems one useful option is to give your company a legal death sentence. “This corporation shall last no more than sixteen years, at which time it will be dissolved and all assets divided among shareholders according to…”

    This helps keep the maze builders out because they may not see a whole career’s worth of horizontan, especially towards the end.

    • TheZvi says:

      I do not believe that this would work in a legal sense of being enforceable in cases where you can make a lot of money not doing that. Alternatively, all you’re doing is forcing a sale to a maze when the deadline approaches, lest it all go to waste. And I don’t see a reasonable way to make such commitments legally stick.

      Also, if they did stick, it would make getting VC money impossible.

      The idea of ensuring death is good, though.

    • Eric Fletcher says:

      Sixteen seems like a really, really small number for such a thing.
      Separate from that, having any sort of pre-ordained end date generates all sorts of bad effects as the end nears (ref any study of repeated vs one-time prisoner’s dilemma type studies)

  4. Lots of conditions for scale have been trending up continuously since at least the industrial revolution, effective closeness in terms of communication and ability to transport things, more complicated creation/manufacturing processes, more trade and crosslinking, etc. All of that, plus knock-on effects from that (more complex markets, regulation, etc) are maze-positive.

  5. One type of hierarchical organization that resisted mazes is a military in a major war. If a sub-unit of the organization can be directly affected by outside action that will expose managers as incompetent and force them out.

    “Major” war means one where the enemy can actually destroy units and/or invade the homeland. There’s a whole bunch of complaints in military circles about how maze-like it’s become since the end of WWII. Hackworth’s About Face has a bunch of personal examples of a high-performer frustrated by being stuck in a maze.

  6. Alsadius says:

    I find it interesting that I work for a firm that ought, by usual standards, to be one of the most hellacious mazes on earth. It’s over a century and a half old, has somewhere over 80,000 employees, and we’re a bank. A *Canadian* bank, no less – hardly a stodgier group out there than Canadian bankers. But I don’t see all that much evidence of mazes.

    – I’m a line employee, with the CEO seven levels above me. (Compare to, what, 25 in the book Moral Mazes?) From looking around the org chart, this depth is pretty typical, so it’s not just my department.

    – There’s no culture of short-term job-hopping to escape consequences that I can see. Going up my entire management chain, everyone between me and the CEO has a long dwell time in their jobs, with decade-long positions being fairly typical. Literally none of them have moved since 2015, and four of the seven have been in place since about 2005. The CEO looks on paper to be the exception, with a lot of 1-2 year positions climbing the ladder, but a lot of it looks like the same base job with added responsibilities and a new title tacked on.

    – The object-level job is a fairly core focus as far up the ladder as I have eyes. My three-levels-up manager keeps fairly close track of projects done at the line employee level (he oversees about 300 people, give or take, so it’s still practical), and I’ve been at awards nights and the like with my +4 and +5 level managers where they at least act like they know the broad strokes in enough detail that it’s probably not all bullshit.

    I have a theory – we avoid BS because our stats are measurable. When my +4 level manager comes to our department’s annual conference, he gives us details on group performance that are *extremely* detailed. We know our assets under management (a number in the hundreds of billions) to the penny, because that’s the business we’re in. We know client retention, we know new business, we know profit, and we can analyze these numbers in fairly straightforward, hard-to-game ways. Business groups have clear functions, almost all of which are easy to measure, and each layer of manager oversees a particular function of naturally-grouped employees. And while the industry is pretty conservative, there’s plenty of competitive pressure, and no ability to coast.

    It might also be worth noting the bits of the company where I have seen maze-like symptoms. The only person I’ve heard talking bollocks in a management position was the “Senior VP of Products and Strategy”, a consultant who’s held a series of positions with titles like “Group Optimization” and “Senior Manager, Role Design”. All the stuff that’s nearly impossible to measure. And naturally, this individual talks in a painful wall of buzzwords, and my manger(who’s been at meetings with this person) thinks they’re a terrible, backbiting, political weasel. Likewise, there’s some talk about a tech project group being prone to inviting 30 people to meetings so that they don’t offend anyone who wanted to be there, even if only three are actually needed. I won’t claim we’re a zero-politics utopia. But we’re pretty good. And sure enough, we’re reliably ranked as the best bank in the country by most measures, and known in the industry as the one that hires a lot of the smart people.

    • michealvassar says:

      I’m pretty sure that Canada is much less corrupt in general than almost every other country. Maybe not Iceland or Switzerland? I’m very interested though in filling in the details of my model.

      Would it be possible to plan a phone call in order to explore this in more detail?

      • Alsadius says:

        I’m not opposed, but I only saw this message now, and I see no obvious way to contact you. On the off chance you see this, the best way to contact me is my Reddit account – https://www.reddit.com/user/Alsadius/. Send me a message there, and I’ll see it pretty quickly.

        (Well, it’s not the *best* way, but I try not to tie my real identity to my web identity in a public forum. And this will still get the job done.)

  7. Pingback: The Road to Mazedom | Don't Worry About the Vase

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