I am deliberately using this blog to explore and try and provoke discussion of the “hard questions” involved in expanding the study of emergent orders, particularly Hayekian spontaneous orders. We need to do this to prevent Hayek’s insights from becoming the preserve of a narrow political agenda which automatically discredits them in the eyes of people with other intellectual, political, or ethical priorities. When this happens, research and learning is replaced by circling the wagons and subordinating insights to dogma. This brings me to my trouble-making post for today.
When F.A. Hayek wrote the Road to Serfdom he included an important but virtually ignored chapter: “Why the Worst Get on Top.” In it he explained why totalitarian parties had such a strong propensity for the very worst people to rise to the top. Left unexplored by Hayek, but in plain sight to any alert reader, was the insight that most of the factors Hayek observed in totalitarian parties also applied in any large instrumental organization. Hayek later returned to some of these insights about the anti-social nature of organizations when he wrote in Law, Legislation and Liberty that many anti-market values were “atavisms.” Again, the problems Hayek described were largely universal elements in organizations.
Hayek made a basic distinction between spontaneous orders and “made” organizations, that is, organizations created to serve some purpose or hierarchy of purposes. For the most part scholars have focused on Hayek’s concept of spontaneous order, and particularly its role in refuting claims that rational planning can better order economic production than the “anarchic” market. Exploring the nature of instrumental organizations was left aside.
I believe this failure has hamstrung efforts to develop Hayek’s insights, and much of my recent work has been an attempt to correct this oversight. The basic point is simple: the very spontaneous orders that enable some organizations to become successful also threaten their continued success because they enable unexpected competitors to arise. Kodak Film never imagined it would be reduced to a relatively minor role by digital cameras. No one has seen an adding machine recently. And so on.
Even more traditional competition can threaten the most successful or organizations, as Japanese autos demonstrated to the Big Three of GM, Ford, and Chrysler. What helps an organization rise to the top can also sink it. Therefore as a rule only innovative and relatively new business organizations will genuinely like spontaneous order processes in the market. And similar insights apply to successful political organizations in democracies.
But there is still more that is very important.
The Problem of Sociopathy
I have argued in many places that corporations, are attempts to create organizations responsive only to acquiring market feedback. That is, to value money over every other value. Any CEO who allows other values to get in the way of share value runs the risk of being ousted in a hostile take-over by people who believe those shares are “under valued.” Therefore, compared to private companies corporations will have a strong tendencies to act as if only money matters, and as much of it as possible. In a pure case, everything within its world is either a means for making money, an impediment, or irrelevant. Privately held companies reflect the character of their owners, for better or worse. Publicly held companies have removed owners’ character entirely from their motivations, and in the present case when so many shares are owned by mutual funds, many “owners” have no idea what they “own.”
If a human being regarded everything and everyone as a means to his or her purposes, and otherwise without value, they would be classed as sociopaths. Corporations are essentially institutionalized sociopaths and the more they are subject to pure market feedback the more true this is. They may do good things, but if so they do them not because they are good, but because they are profitable.
This creates a second troubling level in large publicly held businesses.
When a person has to administer a business that is organized to act like a rational sociopath, more sociopathic people will tend to rise above less sociopathic ones of equal talent. Sociopathic individuals will feel more comfortable acting within the morally vacuous decision-making matrix than will people most of us would regard as more normal. This is a direct extrapolation from Hayek’s “Why the worst get on top.” We are not talking an invariant law. The Russian Communist Party eventually gave us Mikhail Gorbachev, after all, and we are much the better off for it. But it is a tendency.
What sparked this post was an article I just encountered.
From $20 to $1500
Progesterone is a drug for preventing miscarriages and premature births in higher risk pregnancies. It has been available for years. The drug was made by compounding pharmacies and has long been widely employed. During this time it has been available for around $20 a dose, administered weekly. “Progesterone is so cheap to make and we never had a problem with the compounding pharmacies making it.” says Dr. Jacques Moritz, director of gynecology at St. Luke’s-Roosevelt Hospital in New York.
Progesterone recently won FDA approval to be marketed in the US as “Makena,” exclusively for seven years by KV Pharmaceutical of St. Louis. FDA laws prohibit pharmacies from making FDA-approved products. Now doctors are legally obligated to stop using cheaper versions of the drug. KV has announced a price hike on this long-used drug: from $20 to $1500 a shot. And no, this is not a typo.
This is completely rational behavior from the standpoint of increasing share value. A CEO who did not do this would become vulnerable to a group seeking to take over the company, oust current management, and then impose the price increase.
For obvious political reasons KV’s people are saying they will act to make Makena available to poor mothers. But the only reason for the price hike is to extort as much money from families as the company believes the market will bear while not provoking a political backlash. Middle class others and insurance companies will not be so fortunate.
The usual reasons pharmaceutical companies give for high prices do not hold water. This treatment has been around since 1956, can be and has long been made by doctors using already existing pharmaceuticals, and the FDA’s tests on effectiveness were paid for by NIH, that is, by you and I. As Dr. Kevin Ault, associate professor of gynecology and obstetrics at Emory University School of Medicine, observed, “All the upfront development of the drug was done by the National Institute of Health. You and I paid for that with our tax dollars, it’s not like this pharmaceutical company is trying to recoup its investments in research and development, as is usually the reason for the price of new drugs.”
Only a sociopath would create such a price hike in a substance whose sole reason for existence is to save the lives of babies, a person utterly without conscience or possibly with an ability to rationalize anything. The price increase from $20 to $1500 guarantees serious sacrifices by many young families, at best a huge increase in insurance rates for programs covering pregnancies, and almost certainly an increase in miscarriages. Many people will do without and hope for the best. Sometimes the best will not happen.
Here is the interesting theoretical dilemma: market forces have generated powerful sociopathic organizations that have become the strongest financial forces in American society. Dealing with them is a serious challenge to anyone arguing the virtues of the market. And if my interpretation of Hayekian reasoning is correct, the problem will get worse the more a market develops.
This is not an argument for replacing the market. Not only has Hayek demonstrated this cannot wisely be done, if it were done it would strengthen the power of instrumental organizations. Clearly replacing the market is not a viable option. On the other hand, a theoretical paradigm that cannot examine this problem clear headedly will be unable to address the tendency for emergent orders to generate forces with a powerful stake in bringing those orders under their control and turning a framework essential for liberty into a framework harboring a new and brutal kind of oppression. To my mind what we need to explore is strengthening the role of civil society vis-a-vis the market order. But that is largely unexplored territory.
Studies in Emergent Order 
Gerard Bendiks
March 15, 2011
“Only a sociopath”….could exist in a market that has been severely constricted due to legislation, ie, a political act. Obviously, if that market wasn’t constricted due to legislative acts the sociopath wouldn’t last a minute trying to sell a good for $1500 (or even $25) that everyone else is selling for $20.
Market forces always exist. The question is whether that market is forcibly restricted/distorted (in terms of action and information flows) by the only entity that CAN do such a thing, ie. the political class or is open to ALL information flows and actions.
Donnie McLeod
March 30, 2011
I once thought Japanese firms had an advantage because they did not have a quarter end. They could ponder on what was possible. I learned that American shareholders had an advantage because they could flow money away from pondering companies and to firms which were at war with the quarter end. I have since learned that American’s have a disadvantage because of the quarter end. American firms were created, and shareholder value flowed with sales incentive plans to drive American’s into bankruptcy. If you had any feelings of quilt that was not squeezed out of you buy the Presidents award incentive trip to Hawaii you found something more satisfying to do. What you left was a concentration of the 1% of any population who can not care because they can not care. But they bring fear, which is corrupting force on knowledge transfer, self-interest. I predict they are vulnerable to being taken out by fearless companies, were the need to contribute in a meaningful way, what makes us collaborative monkeys will be used to share wealth as wealth in created. I see opportunities to short firms without remorse because they are vulnerable to loosing their shareholder value.
Gus diZerega
March 15, 2011
I will not get into an argument over whether regulations constitute restrictions on market activity – they do – and that this should or should not happen – that varies in my opinion.
My point is importantly different, and one that I would like to see hard core laissez faire folks address: that organizations AS SUCH have these proclivities, and that organizations organized to respond only to price incentives and nothing more are particularly prone to this kind of behavior, and to attracting this kind of leadership.
David Emnauel Andersson
March 15, 2011
The recipe for a drug meets the standard definition of a public good: it’s non-rival and comes with high exclusion costs. Thus, in the case of IPR, there is indeed a problem of the sort Gus is alluding too.
I’m less certain that the pursuit of money profits has adverse consequences regarding firms’ production of goods with strong private-good characteristics (e.g. rival, low-exclusion cost goods such as tables or bananas). Isn’t the Hayekian point that profits (in this case) signal social benefits? (true, the social benefit will reflect the distribution of assets/income, but surely it is not the role of corporations in its profit-seeking role to affect the asset or income distribution in society according to someone’s normative ideal — although it could of course still be done by individual owners when they decide what to do with their dividends or capital gains: consume more yachts or give it away to some favored cause).
There is of course a number of “goods” that do not fall so neatly into either the private or the public good category (e.g. education), but isn’t it the case that publicly listed firms ( as regards goods with overwhelming “private-good” characteristics) may engender greater social benefits than privately held ones, exactly because they can be relied upon to pay greater attention to the bottom line.
Note that this is not necessarily a libertarian argument. Many non-libertarian economists would argue that governments, not firms, should redistribute income, provide public goods etc., while firms should not concern themselves with anything other than profits (admittedly, many of these “liberal” economists favor current copyright and patent laws , but that’s not the point here).
Gus diZerega
March 15, 2011
David-
If I read you correctly, you are missing my point. I have no problem with profits, and I completely agree with Hayek’s analysis of their role in the coordination process the market makes possible. I also agree that some kinds of goods are better suited to ‘pure’ market production than others.
I am addressing a different issue, one that economic analysis such as you are giving seems to have difficulty addressing. An analysis that looks at only the abstract spontaneous order dimension of social life, important as that is, and assumes that organizations acting within those orders are analytical black boxes, has no ability to understand those organizations.
“Just as” political scientists generally misunderstand the market (and democracy) because they use habits of thought acquired from studying organizations to understand the market, so I think market economists have a similar problem understanding organizations, but with a reverse source of difficulty. This is why I think classical liberals’ discussions of power are so naïve from the perspective of people in other social sciences.
ALL organizations are subject to many of the same processes that Hayek analyzed in an entire chapter , “Why the worst get on top,” in The Road to Serfdom, and that he returned to on numerous other occasions. Totalitarian parties are extreme cases of a wider problem.
The tendency for sociopathic individuals (people with no or next to no conscience) to rise to the top in totalitarian parties is not due to their individual brilliance so much as to organizational dynamics in enabling some kinds of people to rise. I have argued the same problem exists in large corporations, in part because any leader who allows values other than profit maximization to influence his or her actions runs a risk of being ousted in a take over bid. The story of California’s Pacific Lumber is a classic example.
In addition, organizational politics is a politics of personal manipulation as one rises through a hierarchy. It calls on different skills than does being a entrepreneur in the market or a creative scientist. Some people find that kind of activity enjoyable, others do not. Competent sociopaths, people who are able to avoid the most immediately self-destructive behavior of some sociopaths, tend to be good at this kind of thing. So in the context of a large corporation, sociopathic behavior has an edge in internal politics while behavior that takes values other than money into consideration is potentially strongly penalized.
Given that corporations are so biased in their dynamics of leadership selection behavior like what I related in a pharmaceutical company makes sense. It is what we would expect.
A decent human being, even when given an opportunity to have sole production for a product because of a governmentally provided privilege, would not have raised it 1500%, guaranteeing an increase in miscarriages and premature births.
This issue becomes very important when we look at the real world, where there is a continual interplay between organizations and attempts to influence the rues that generate spontaneous orders, and use the resources their leaders control to try and create security and perhaps increased power for themselves. This is true whether those organizations are corporations, labor unions, political parties, churches, or anything else.
Organizations in general tend to redefine whatever they are created to do in terms that serve the organization first. The strength and weakness of corporations is that there is less tension between their founding purpose and their redefinition than in other kinds of organizations. A corporation’s purpose is not to give consumers good products or services, it is to make money. That is why people purchase its stock. Whatever enables it to make money most easily is preferred.
This impact of this principle is modified by the “principle agent problem” and corporations’ efforts to bring their principle agents under control have increased the advantage for leaders who treat everything and everyone as resources for the benefit of the organization, and therefore for its share values. To the degree these leaders can equate the benefit of the organization with personal benefits, sociopaths will follow their fiduciary duties.
On the other hand, the extraordinary rise in top management’s salaries compared to those in other countries, or to previous American experience, suggests to me that competitive pressures at the very top have been brought under a measure of control. Principle agents have increased their independence from shareholders. If they have not, there is a more worrisome possible explanation available here: http://www.commondreams.org/view/2009/07/27
The character of corporate leadership is important at the level of lived life, whatever the models one uses might say.
One example is that corporations are major influences in promoting political centralization of regulations because the more they can centralize a regulatory regime, the more their power to influence regulations in their favor grows relative to others’ ability to do so. Another is their role in determining how the law defines property rights, such as “intellectual property.”
In other words, the analytical separation of government from the market, when used as a guide, guarantees bad social policy. They cannot be separated in the final analysis.
My target here is the common argument among classical liberal circles that “letting the market decide” is the key to good policy. There is no such thing once we take into consideration that there are many spontaneous orders responding to different complexes of values, that the rules that order actions within them have to come from somewhere, and that organizations within them have interests often at severe variance with maintaining their subjection to spontaneous ordering processes. Letting the market decide is not the first principle, it is an important subsidiary principle that often but perhaps not always should apply after a great many other issues have been provisionally settled.
The end goal of my argument here is to shift the locus of freedom in society from the market to civil society, which is not quite the same thing.
David
March 16, 2011
Gus,
I think I do understand your point. And, certainly, there are lots of corporations that are interested in manipulating laws and regulations in a way that makes it easier for them to preserve or increase their profits (the lobbying by the Disney Corporation etc. for extending the time frame and scope of copyrights is one of many examples).
But could it not also be true, at least in some cases, that seemingly “altruistic” behavior by some forms is not so much altruistic but long-term (rather than short-term) profit-seeking. A firm that offers greater job security and higher salaries than they could get away with might stimulate the employees to become more loyal to the firm (less opportunistic behavior) and more commited to engaging in learning processes that are much more useful within their firm than outside of it. Or, likewise, the (sometimes imagined but sometimes real) commitment to environmental standards my be a response to consumers’ increasing concern with environmental effects. So both “altruism” and “environmentalism” may actually be consistent with profit-seeking behavior (although with a time horizon caveat, so that this may only be true of firms that seek long-term rather than short-term profits).
What am I trying to say here? Basically, that it is not a foregone conclusion that the worst rise to the top, especially if owners and managers have low rates of time preference. Although I admit that it is a possibility that is sometimes observed. I guess empirical studies will have to settle which tendency is stronger (and not a case study of one firm but rather a study of a substantial number of firms, which could perhaps show which tendency dominates; “the worst get on top” or “the best get on top” or some intermediate mixture. My hypothesis is that we will see a mixture).
Gus diZerega
March 18, 2011
Of course the possibilities you raise can happen. They do happen. But it better not impact current share value negatively, or be noticed if it does. Howard Schulz, who built Starbucks, provides far more benefits health wise than is normal. He does so NOT because of the market, but because of how he grew up. He is not a sociopath, obviously. See this Businessweek interview
http://www.businessweek.com/magazine/content/04_47/b3909098.htm
Schulz is safe because of his remarkable performance as an entrepreneur. But once he is gone, and the ethical motivations he has are absent, future CEOs can be guaranteed to whittle the benefits away to the industry level because most such men are not so much entrepreneurs, especially along Schulz’s line, but managers. They value “efficiency.”
We see this over and over in the lives of organizations, where the founders or geniuses who create them are often very different from those who tend to come after.
What you are saying is that good leaders can take a long-term perspective and do good while doing well. Of course. I tried to make it clear I was describing tendencies.
Mikhail Gorbachev rose to the top of the Soviet hierarchy and proved to be a man Reagan could trust, and has proven himself ever since to be sincerely devoted to public service on a global scale. No one could have predicted that.
I think you will agree the deck was loaded against such a man rising to the top in the former USSR. But he did anyway.
The pharmaceutical company I described in my original post is run by sociopaths who would prefer to make monopoly profits at the expense of infant deaths and ruined lives, than to make substantial but lesser monopoly profits with fewer infant deaths and fewer ruined lives. And it is not at all unusual. I gave the example of Pacific Lumber as why the market forces people to not just make a profit, but to make a maximal profit. There are a great many such examples.
If Hayek is correct in his argument as to why the worst get on top in totalitarian parties, the SAME arguments translate to a disturbing degree to instrumental organizations in general. That is the point.
David
March 19, 2011
Gus,
In general terms, I agree with you. But what I’m trying to get to is that the “badness” of the worst (and the extent by which the worst defeat better people) is related to the existence and nature of the feedback system. Bad people may predominate in political parties in democracies, but they are not as bad or as predominant as in one-party systems (Gorbachev was a greater anomaly in the USSR than he would have been in the US). Likewise, protected monopolies (such as the companies controlled by the sons of Suharto, Mubarak et al.) are likely to get worse owners and/or CEOs than companies subject to market feedback. While I think that the average American politician is worse than the average American citizen, they would be worse still if everyone had to belong to the same political party (the production analogy would be if every individual producer had to belong to the same conglomerate).
Gus diZerega
March 19, 2011
Agreed, David. To say that organizations in democracies and markets are less likely to be dominated by bad people than they are in dictatorships and controlled economies is true. Profoundly true.
But I think if we leave it at that we are not understanding the full extent of the problem I am describing or of exploring possible ways to ameliorate it while preserving the creative potentials of instrumental organizations and the capacities of spontaneous orders to preserve meaningful freedom.
I have argued that any existing organization has at best an ambiguous relation to the spontaneous orders within which it operates, and a powerful systemic incentive to bring that order under control. If this is an intrinsic problem, as I argue it is, it increases the likelihood of bad people arising to the degree they succeed in doing so.
The issue is dynamic and not just a case of either/or. To think in dichotomies like that means that a relatively free market and relatively democratic system is to be preferred over one that is not (I agree) while ignoring the forces that can turn a relatively free system into one which increasingly is not free.
As I understand American reality giant corporations and financial institutions are as much government entities as they are private ones. They are now active in conspiring against traditional political and economic freedom, and getting worse. Think of the recently exposed activities by the US Chamber of Commerce, in collusion with the “Justice” Dept. and military research to destroy private oversight, destroy people’s reputations, attack their family members, and in general act like the mob – short of machine gunning their targets. (For a little bit, see http://thinkprogress.org/2011/03/19/chamberleaks-berico-palantir/ ) These are criminal minds.
The libertarian argument to “shrink government” is worse than useless, far far worse than useless. It ignores the major reason that government grows in ways that destroy freedom. They aim at social welfare for the weak and general programs for everyone while downplaying what is really going on with the powerful. And they in practice seek to shrink just those elements in government which oligarchs find sometimes in the way, like the EPA or class action suits. To call this “big government” without also calling it “big oligarchy” is to support the oligarchy that dominates the government.
The decades-long refusal of “free market” intellectuals to give more than lip service to this issue, while in most cases systematically ignoring exploring, or even acknowledging, the potentials of alternative institutional arrangements as compatible with economic liberty, speaks many volumes to the vacuity of contemporary classical liberalism.
I think that Hayek’s model of spontaneous orders can revitalize classical liberal thought into more than a bulwark against a now non-existent threat of central economic planning while turning a blind eye to the real threats to a free society. But to do so we need to fully explore both the tensions between organizations and spontaneous orders and the dynamics in a society with many spontaneous orders rather than pretending that “the market” is the only such order, or the only one which matters.
David
March 20, 2011
Gus,
I think that you’re exploring an interesting hypothesis, but one which has still not been adequately surveyed. Maybe it is not just the relative size of a government that matters, but also its absolute size (this is a hypothesis of mine, but is ignored by most libertarians, who think that the US government is somehow smaller than, say, Denmark’s). For example, if you look at the corruption index of Transparency International, one of the first things you notice is that the least corrupt countries tend to be small in absolute terms (controlling for the formal level of democracy and economic development level). For example, if you look at the 6 developed English-speaking countries, you get the following list with global rankings in parentheses:
1 New Zealand (1)
2 Canada (6)
3 Aústralia (8)
4 Ireland (14)
5 United Kingdom (20)
6 United States (22)
Likewise, if you look at the ten least politically corrupt countries in the world, you get this list:
Denmark, New Zealand, Singapore (all tied in first place), Sweden, Finland (tied in fourth), Canada, Netherlands, Australia, Switzerland, Norway. And, yes, I realize that Singapore is an authoritarian anomaly here.
What this suggests to me is that legal corruption (and governmental-corporate or military-industrial complexes certainly strongly indicate corruption problems) grow with the size of the population, given the economic development level (since poor countries tend to be even more corrupt). And note that this disregards the legalized or implicit corruption that is involved when specific companies get tax breaks or government bailouts. Maybe we need to redefine “small government” if we want to keep it as an ideal. What do you think?
Donnie McLeod
March 30, 2011
I would say another corrupting factor is God. America a God fearing place lets its citizens die because if it looked after them it thinks every one is lazy and would do nothing. Nonsense, people will do what they can do when they find themselves lending a hand, that is relevant from their perspective not what the guy with the carrot stick needs them to do. Being asked to do what you can’t do is setting your DNA up to kill you starting with depression. Being asked to do something because you can do it is the best reason in world to get up in the morning. This happens more in countries without God, Denmark. That is why the Pentecostals call it a failed state. There is no place for Jesus like under America’s Christian Conservatives were he has a monopoly. These off course leads to empowering those that do not care because they do not have the DNA to care. For them lying and taking what is not theirs is easy especially if they have a nod from an authority figure, which lets them ignore any learned morality. So Christians Conservatives empower the natural born thugs to benefit from corruption. Blame God first.
Gus diZerega
March 20, 2011
I think you are on to something important, David. I didn’t know about the evidence you present, but it strongly correlates with other stuff I have noticed.
I have been struck with the fact that Europe’s smaller countries (in population) have been extraordinarily successful places for most all their inhabitants, despite often having larger areas of domestic life regulated/managed by government than larger countries – and the same patter seems to extend from Europe and Canada to the US. This is true even if the little places have far fewer natural resources. This is particularly true if we hold level of economic development relatively equal.
Olaf Palme, Sweden’s assassinated PM, often walked the streets of Stockholm unguarded. A friend of mine and his wife were there and saw Palme and his wife on the sidewalk near them, and mentioned it to some Swedish friends they were with. Their friends replied something like “Let them alone. They deserve their privacy.” Clearly the emotional and physical distance between Sweden’s top official and the average Swede was not great compared to the pathological distance between the President and average Americans.
The bigger the organization the greater the distance between its top people and others. Percs of the job increase this distance – like limousines with tinted windows so they see out but no one sees in, private jets, exclusive gated neighborhoods – all the little and big ego boosters that magnify distinctions beyond the real to the imaginary. Such huge distances I believe have to be corrupting on both ends. In both cases the sense of “we” gets weaker and the distancing “they” gets stronger. If this is true a lot seems to follow.
One of the more interesting implications is might shed light on corruption. The larger the organization the greater the distance between those on top and those elsewhere within it. Others become more and more “they” rather than “we.” I suspect this increases corruption at lower levels and corruption at higher levels as well.
I remember reading somewhere that the poor have more compassion than the rich, as evidenced by the percentage of money they donate to help others. The analysis argued this was because it was easier for them to identify with suffering. One reason was that the rich rarely had to depend on others in the same way. As a consequence they got a different sense of relationship to other people, with a greater sense of their relative competence. Empathy depends on ability to identify with another. I remember reading somewhere this was a major reason Nazis did all they could to make concentration camp inmates physically unlike their guards or the civilians the guards would encounter outside their job.
This suggests the greater the distance between people the more extreme the suffering must become for others to identify with it. This proposition could be tested – and I suspect Japan’s disaster is evidence for its truth.
Also, rising in an organization requires focus, competence, and luck. The kind of focus required depends on what the organization is like and in large ones I would hazard the guess knowledge of how institutional power is distributed and works is very important. Image might also be increasingly important over substance because of knowledge problems. So large organizations will reward people with competence in these fields – and that gives an advantage to people who are ruthless over others with equal skills otherwise. Normal people will not make the sacrifices and do the manipulation that the ruthless find helpful in organizational politics. The bigger the organization I would suggest the greater the spread here.
In addition, the bigger the organization the greater the distance between its top people and others. Percs of the job increase this distance – like limousines with tinted windows so they see out but no one sees in, private jets, exclusive gated neighborhoods – all the little and big ego boosters that magnify distinctions beyond the real to the imaginary.
I think issues such as these move to front burners once we take seriously the distinction between organization and spontaneous orders, and really seriously begin investigating the dynamics within and between them. One implication seems to be that when tasks can be accomplished by different organizational sizes, the smaller the size the better.
Donnie McLeod
March 30, 2011
I think you are right. I think we often forget who we are as a species. I blame the God myth for that. Ad-hoc teams is in our DNA. Society is a construct. The lone individual killing a saber tooth cat is a fairy tale. The extension of saber tooth cats buy 5 or 6 guys at a time. Teams where the whole is greater than the sum of the parts. Where knowing and sharing everyones weakness is vital for the good of the species. Where it is also vital to keep out any of those who fill the evolutionary niche, that is good for the species when an intra-species cull is needed, such as a famine. When rape, killing, cannibalizing, hiding and lying are noble attributes for the good of the species. But not when you are taking on a predator such as a saber tooth cat. New models of organizations can emerge that appreciate that are fearless, and scalable from 5 or 6 up to hundreds of teams of 5 or 6.
Donnie McLeod
March 30, 2011
Thank you. In Canada our emerging Christian Right Prime Minister is said to be a fan of Hayek. But I think you would say that is oxymoronic. When Stephen Harper ignobly lies to steal a majority government, in a month or so, he will unleash on Canada and the world what Hayek very rationally feared. I have no idea what Hayek thought led to fear driven organizations. But I suspect there are three types of people, those that are good the species in relatively good times, if they do not contribute in some meaningful way they get depressed and die and if they do feel they are contributing in some meaningful way they will say; “I never worked so hard, had so much fun or was stretched beyond what I thought I could do”. There are those who need to take. There are those who are good for the species when we need an intra-species cull, psychopaths, sociopaths or the thug selling bird in the Monte Python dead parrot skit. They can’t care if the parrot is dead or alive. I prefer to think of this 1% of any population as intra-species predators, because they fill an evolutionary niche, for the good of the species in a famine . Through that in a mixing bowl and you get liberals and conservatives. Liberals and the predators tend to repel. The conservatives and the intra-species predators tend to attract. The conservatives make use of the predators practiced ability to lie and because from what I have read they give deference to authority. I understand it only takes a nod from an authority for an intra-species predator to start to cull. I think there is a place on the stock market for fearless companies. Appreciating the power of contributing in a meaningful way as a tool in hiring selection while with intention keeping the takers and the predators out. Knowledge flow inside such an organizations would flow at the fast pace of 6 people per meeting as apposed to in target competitor a fear driven organizations where knowledge flows at 12 people per meeting and knowledge is corrupted by irrational fears and self interest. The fearless leader would love this model because in a time of external threat knowledge would flow up. Trust would be systemic, because those motivated by doing are more likely to share and reveal their weakness or mistakes if they feel their are no takers or thugs around. Any way thanks for your article. It gives me lots to ponder on, while I am collecting maple sap from from 7 maple trees today.
Makarios
April 26, 2011
It occurs to me that, if an organization is large enough, the people who will rise to the top are people whose motivation and skills are not related to any corporate objectives, but chiefly to climbing the organizational structure. In other words, their core competencies are not manufacturing or marketing drugs (for example), but manipulation of situations and of other people to obtain their own objectives. To the extent that they do have skills in areas that contribute to corporate objectives (such as manufacturing or marketing), these are seen by them as ancillary–as means to the end of their own self-advancement.
In a really large organization, virtually every position of authority will ultimately be filled by someone who could not care less about what the organization is supposed to be doing, but who is concerned only with feathering his/her own nest. This can apply to an organization like a university or the U.N. as well as to any for-profit corporation.
Cheryl Schwartz
September 2, 2011
The actions of NATO concerning LIbya fit the definition of a sociopath to a “T”.
Gus diZerega
September 22, 2011
Sorry for the long wait Cheryl- I was in the Yukon and also hacked and lost access to everything. Neither is good for staying on top of things.
I think all large organizations have an innate tendency to decline towards sociopathic behavior. The logic of Hayek’s argument in Road to Serfdom in his chapter “Why the worst get on top,” which he used to explain why Soviet rulers were so cruel, in many respects applies to all organizations of any great size. At the same time, as Gorbachev demonstrated, it is not inevitable – just a strong tendency.