VERY long story short:
- The people at the top (what he calls Sociopaths although not necessarily in a negative sense) need a layer of people below them to both do the work and take blame for when things go wrong
- The people in the middle (he calls them Clueless) need to be hard working and smart BUT, crucially, not smart in a "political power" sense. In other words, you want them smart enough to do the work but not smart enough to figure out they are being used.
- The people at the bottom basically do the minimum to get by and are just there for the paycheck (he calls them Losers)
It's the middle layer that most people think of when they think of "why is a manager incompetent?". The smarter folks have put that incompetent person there precisely because they are not smart enough to figure out "the game".
Summary of the Principle:
As if, if they were smart enough, they would do...what?
The implication is that you can't have a stable situation in which people are being "used" with their knowledge. That doesn't make sense to me.
My perception is that what keeps the system stable is that different classes of people have different value systems, and they accordingly dehumanize other types, which keeps them from encroaching on others' territory.