Here are my reasons for saying this:
For all of the economist's sagacity that the author has and evidently brings to this piece, the author's underlying case against modern hierarchical corporations seems to boil down to a populist analysis that is not so much a proof as a set of ill-developed assertions.
The author claims (a) that hierarchical managements lead to "corporate serfdom" and to "Soviet-like" dominance within the framework of the corporation itself, thereby crushing creativity and wasting resources, (b) that all this is made by possible by "toxic finance," and (c) that it is all "co-dependent with political structures that are losing democratic legitimacy fast."
Corporate serfdom? Toxic finance? Co-dependent on illegitimate political structures? This lumps every early-stage startup with every mega-corporation that has ever existed and, in effect, calls them all illegitimate. And that is a political assumption about "corporations" in the abstract, not an empirical analysis, because it cannot possibly be defended as an empirical analysis. Is it serfdom to join a YC company as a founder or an employee? Is YC a toxic funder? If the answer to both is no, does all this change once startups get bigger? How about a startup that purports to offer a different form of corporate culture ala Google? Are there serfs working at Google? Is their funding toxic? Or does this just apply to a Walmart or a Standard Oil or other mega-corporation that does not specifically do creative work in the tech field? Does hierarchical management consist of simply having the normal forms of corporate government - a board of directors and corporate officers - or does it come about only when people are given authority to hire and fire, to supervise the employment of others, and to direct them in what to do in their jobs? Is this all good, efficient, and respectful of human talent and creativity when the organization is small but soulless and deadening and even "Soviet-like" only when the corporation becomes large? If there is such a distinction, where is that line crossed? And does this mean that the corporate form is not innately evil but that a large organization of whatever type, organized hierarchically in its management structure, is what brings in the evil.
What, then, does Valve offer that makes it different? It too is a corporation. It is privately owned by a few persons who have had the luxury of screening all employees so as to hire only very bright, highly self-motivated persons to do predominantly creative forms of work. Working with such employees, Valve has been able to build a successful model by which these bright, motivated employees get to choose 100% of their projects and have complete freedom on how they manage their own time and on what results they seek to achieve. It all sounds like an amazing work environment but how many businesses get to focus in this way on creative forms of work or get to screen carefully to make sure they only hire self-motivated employees? And how many businesses have the luxury of doing this without needing to raise outside capital through their early stages? Moreover (and the author himself raises this point), to what extent can this scale? Can such a model work if the company grows a thousandfold and suddenly has 40,000 employees? Of course, the model inevitably breaks down at some point along the way because the environment in which the Valve employees currently function is highly unusual if not unique.
Unless human nature should radically change owing to technological progress (a dubious assumption in my view), we can continue to expect that, in any large group, there will always be those who fail to carry their weight, those who seek to take advantage, those who are incompetent, and those who are plain bad actors making life difficult for those around them or trying to cheat the company or steal from it or whatever. A hands-off management that lets all such persons do whatever they want will very quickly find itself immersed in problems and, ultimately, some mechanism needs to be put in place by which employees are managed, are disciplined, are rewarded, are redeployed, etc. in ways that conform to the goals of the organization and not necessarily with those of each individual actor within that organization.
Every form of business organization needs people with a vision to set its model and its goals and to direct people and resources in a way that maximizes the opportunities of successfully reaching those goals. In some situations, some or even all of the impetus for this can come from those who work in common without an overriding authority. Those situations, though, are by definition highly unusual at best. Valve may be one of them and even then it has to managed at some level even by its benign oligarchs who own it. And, even if technological progress could someday supplant the need for corporations, this piece does not make the case for how that will ever be possible. It is, then, an intriguing piece (with thought-provoking elements) but suggestive and incomplete at best in its main argument about Valve and marred by populist assumptions in its broader themes about corporations generally.
Yes, this is written from the standpoint of a startup business lawyer who has dealt with corporate forms of organization for some three decades now. This may give my views an inevitable bias in that direction but it also gives me a close familiarity with how such corporate forms work. From that perspective, what the author says just doesn't ring true. Business organizations generally aren't places where free-flowing creativity will hold sway above all else. The Valve model may be great but I just don't see it being made broadly applicable to the vast majority of businesses as they operate today or as I can even conceive of them operating in the future.
If you look at bossless firms that are successful, they come in sizes ranging from GitHub at founding to WL Gore (3B in revenue, 30k employees). Scale in terms of firm size is not an issue. However every one of these companies, is narrowly focused. Every one has a narrow mission. There is no way to replace Microsoft or Dupont with a single bossless organization any more than Gore has replaced Dupont. The scale limitation for bossless organizations is that of bredth of focus. Without a narrow focus, whether it is a specific kind of plastic or video games, there is nothing to organize around. Without this, there cannot be spontaneous order.
A way to think about this would be the difference between agriculture and permaculture. Large firms of today are like giant factory farms. They are highly ordered by human standards, but in so doing, the complexity cost is high and so productivity is reduced. In a permacultural environment, the scale may be smaller, the order is organic rather than artificial (curves instead of straight lines, multiple species together instead of monocultures, etc), but they are more productive with fewer human inputs. The complexity cost is low.
A bossless organization that works well does so because it channels human nature in the right directions. As William Gore, founder of WL Gore, said, every successful organization has a lattice structure, which may or may not be aligned with its hierarchy.
It is true that these organizations have two major challenges, namely hiring and firing, but these are not problems which don't admit of solutions. The solutions are just different than they are in a hierarchical model.
I do think that bossless organizations will rise up and take over large sections of the economy, but if they do they will be smaller than the companies they are replacing. We will have a more just economy in large part because it will be dominated by a larger number of players and hence it will be more competitive. Ecosystems will win out over machines in the end ;-)
That's also one of the reason most big and successful open source projects manage to get away with much less explicit organisation.
You may not have heard of them but I am sure you have heard of at least one of their products: Gore-Tex(R).
I just started working a few entry level IT jobs and I am seeing how sad this really is. A change request to restart a server takes 4-weeks and is turned down by a CTO who doesn't understand IT needs. The CTO implements a new policy without discussion with IT which renders a passion project by members of the company to be scrapped.
Startups are corporations. They work just like one. Sure they offer perks like free pop, food, paid lunches, breaks, naptime, pool table, ping pong table and so on. This isn't a management style, its a employee benefit.
When it comes to management, startup companies seem to approach business in the same way. A CEO who has the CTO/CFO/CIO reporting to them. Then there is someone else who reports to someone else who reports to someone else. It's a cycle of killing ideas. If one person doesn't like the idea somewhere along that chain, probably at the top somewhere, it won't get any traction. If ideas keep dying employees become discouraged to use their spare time to implement new procedures to decrease inefficiencies.
[i]"How many businesses get to focus in this way on creative forms of work or get to screen carefully to make sure they only hire self-motivated employees?"[/i]
I am sure Valve hires its fair share of garbage. By garbage I mean employees who last 3,6, 12 months before they find themselves looking for a job. In the start it must take long to adapt and understand the operating procedures and workflow. But if you are a person dedicated to getting something done you will implement something or join someone who is working on something awesome. In that first year you will show value and if you don't the rest of your employees will tune you out. Another thing is their hiring procedures are probably much better than an organization. Instead of having HR and then a manager from the department for hiring or a selected individual it's probably more spread out and allows all employees to interview new employees to see if they would fit their teams.
[i]Every form of business organization needs people with a vision to set its model and its goals and to direct people and resources in a way that maximizes the opportunities of successfully reaching those goals. [/i]
This is the traditional thinking where there is one person who knows more than everyone. If this was the case we wouldn't be inventing and developing all these new tools. One person doesn't have the answer.
1) An ownership society, one where the workers direct their own production as if they own the business, increases a sense of responsibility.
2) if you tell people what to do, most will do not much more than the minimum they think is necessary.
There are other examples too, like Honeywell's honeycomb structure, which works very much like the GE plant, except in the field of power plant operations. At one point, Honeywell took over a plant in Thames, and the executives observed the employees. They would watch them do things in a hopelessly inefficient way, and ask them why they do it that way. The response was almost always because "that's the way 'they' make us do it". Honeywell executives declared war on 'they' in the plant, literally having actors come in dressed up in 'they' shirts, who they hunted down and kicked out of the plant. The point was to drive home that there is no 'they' anymore, the people that work there are responsible for everything that happens. Case in point, some time after that, a regular bottom of the rung employee fired a contractor on the spot for severe safety violations. The contractor went to the plant manager in protest, asserting that the employee couldn't do that. The manager's response was along the lines of, "it appears that they did." Of course, all these good things must have some downsides. In the case of Honeywell, there was a disastrous coverup that went undetected for some time caused by oversight failures related to nuclear waste reading. An employee took full ownership of the reading process, and wouldn't let anyone else near it, after they detected a bad reading, because they believed they may be fired for it. There were massive NRC fines, though the situation never really became dangerous. To be blunt, not only are these not new ideas, there are well known major issues that can arise from them, and there is a lot of information available about the potential issues and there mitigations.
Another fun example from my own life, this time from NASA, with some key details changed without altering the narrative. One day, my mother, who works at NASA on the assembly of spacecraft, called me and started asking me engineering questions related to the heating and cooling cycle of different kinds of compounds, and the effect they could potential have on bonding. She had some concerns about a practice that had been going on at work. The assemblers were freezing a thermal epoxy compound before applying it because it was a bit easier to apply that way. She believed it could be an issue because of expansion and contraction, and asked them to stop. They didn't, so she went to their supervisor, who did not believe it was an issue. She also went to her boss, and her bosses boss, both of whom failed to respond. She also summarized her concerns to both in writing. From what she was describing to me, I told her it did not sound like she was overreacting, and that bonds could potentially fail in space, but that I couldn't really say what the risk actually was without more information.
At this point, she had three options. She could do nothing, since she had already covered herself and reported it, she could go to the head of the program, or I suggested she could go tell the lead thermal engineer exactly what she told me. She told the lead engineer first thing the next day, and he flipped out. The compound was only certified for application at room temperature. Work stopped, and he went with her directly to the head of the program. Each tube of paste about the size of a tube of toothpaste costs about $10,000, and there were about 10 tubes in the freezer alone that would have to be discarded. In addition, the practice had been going on for months, all the work might have to be undone. In this case, the resolution was not negative. The engineer was able to certify the compound for application at the reduced temperature, after destructive testing, so there was no significant loss. That won't always be the outcome, it could have gone very differently, with either a failure in re-certification or in space. NASA has had other failures from similar issues, most prominent being Challenger. In this case, it's not a boss-less environment, but a complete management failure, approximating a boss-less environment (supervisor was waiting to retire, boss was not coming to work, but having secretary turn on computer, open office door, and place coffee on desk so it would appear he was there, etc).
The overall point is, this stuff isn't new. Just because it works for Valve, doesn't mean it will work for everyone else. Valve does not have a huge need for internal controls because of the nature of the business, and ultimately of the product. Smart and motivated people want to work at Valve because they want to make games. No manager at Valve, and somebody gives a friend a bunch of free games. Worst case, they steal the password database and customer credit card numbers. If the same structure fails at Honeywell, there is a major safety violation and a bunch of people die. It could be downright dangerous to apply these ideas without fully exploring the potential consequences of doing so. Further, these types of management structures are well known, and there has been some significant research into the types of problems that can come up, and what can be done about. GE, for example, does extensive mandatory training at Durham on compromise, conflict resolution, and group decision making.