That is the most insightful exposition on the failings of management theory i have ever seen, and all without the need to spread it out through novel length.
And as the world consolidates and bifurcates into lumbering mega-corporations and nimble scavengers and upstarts,
This is exactly the speciation that happened with dinosaurs / mammals. I wonder in a cyber-punk future where this is already accomplished (we’re almost there) what would be the meteoric event that could extinct Google, Facebook, etc. and leave only small, adaptable companies, and what would be a future after that.
The choice of image was probably partly inspired by the example of dinosaurs and mammals, which I think reduces how struck we should be by any match-up.
If I may ask, do you have a preferred email address through which I can ask you some questions which wouldn’t quite work out as comments to the blog-post?
Do they? This is a genuine question, I don’t know enough about the socio-economy of revolutions to form an idea. I can see how the Russian revolution could disrupt the biggest economic player, but how about the French Revolution? On the other hand, the Arab Spring didn’t seem to have levelled the biggest Middle-Eastern industries...
As you point out, (very) large companies are not know for being nimble and adaptable. A radical change in the political and economic environment is a much more massive shock to them then to small players. Generally speaking, such a radical change would be caused either by a revolution (but not by e.g. a palace coup) or by losing a war.
But even without revolutions, look at the composition of the Dow Jones index which is supposed to represent the biggest industrial companies in the US. In 1899 these companies were:
This is a bit confusing, but almost all of them, actually, modulus name changes, acquisitions, and antitrust actions.
GE is still GE.
Continental Tobacco Company is split, and the biggest part is now Lorillard, which makes Newports and other cigarette brands. But parts were split off and turned into parts of basically all the major cigarette manufacturers now. This was due to antitrust.
US Steel is still huge, and Federal Steel, Tennessee Coal, Iron and Railroad Company, and American Steel & Wire Co. are part of it now. National Lead Company is now (basically) CompX, The American Sugar Refining Company, after antitrust action is now part of C&H Sugar, which makes Domino Sugar. Pacific Mail Steamship Company was bought, and turned into American President Lines, which is a huge shipper today.
Changes in value are mostly not due to lack of adaptability, but change in the types of businesses that make money.
We were originally talking about a “meteoric event that could extinct Google, Facebook, etc. and leave only small, adaptable companies”.
At issue here is the identity of a (large) company. When a company dies, its assets do not disappear, its brand names are usually bought by someone, its managers move on to other positions, even its corporate culture may survive in smaller chunks of the company that continue to exist under new ownership. Eventually that all disperses and the former company’s ghosts dissipate, but it can take a long time.
So I can say that Continental Tobacco Company is dead because it doesn’t exist any more and you can say that it still lives on through Lorillard and other companies. Both statements are true enough and the real question is what do we mean by a company “going extinct”.
But if a company evolved repeatedly, and transformed itself, it’s hard to say that the change was due to inflexibility. And in many ways, massive shocks are easier for large companies to absorb, due to their greater institutional capacity. I’m arguing that a “meteoric event that could extinct Google, Facebook, etc. and leave only small, adaptable companies” is actually the opposite of what would occur. Instead, any large-scale change allows the organizations that have the deepest pockets and largest capacity to thrive, destroying smaller companies.
Of course, in the wake of a disaster, new crops of innovative companies show up. This happens most clearly in my experience in reinsurance after a major disaster and resulting bankruptcy of some old firms. But it’s a different dynamic than the one discussed.
But if a company evolved repeatedly, and transformed itself
The issue is still the identity: is it the same company?
massive shocks are easier for large companies to absorb, due to their greater institutional capacity
I think that depends on the kind of shock. Shocks which call mostly for staying power to wait out the storm, yes. But shocks which require rapid adaptation, I have doubts about.
Your chapter 5 is about disaster recovery. It is staying power because your goal is to return to the status quo ex ante. Adaptation is needed when you find yourself in new circumstances which will not go away.
For an example of a company which failed to adapt, see Kodak.
Wow.
That is the most insightful exposition on the failings of management theory i have ever seen, and all without the need to spread it out through novel length.
Thanks.
Glad you thought it was useful—but that’s the first time I’ve ever seen a ribbonfarm post praised for brevity!
Off-topic:
This is exactly the speciation that happened with dinosaurs / mammals. I wonder in a cyber-punk future where this is already accomplished (we’re almost there) what would be the meteoric event that could extinct Google, Facebook, etc. and leave only small, adaptable companies, and what would be a future after that.
The choice of image was probably partly inspired by the example of dinosaurs and mammals, which I think reduces how struck we should be by any match-up.
Very true—see the more explicit parallels to ecosystems in my earlier piece on scaling companies; www.ribbonfarm.com/2016/03/17/go-corporate-or-go-home/
It explains why companies need to end up bureaucratic when they scale, and on the way it talks about the analogy to living systems in various ways.
If I may ask, do you have a preferred email address through which I can ask you some questions which wouldn’t quite work out as comments to the blog-post?
Google’s email service, with my lesswrong username.
They are usually called “revolutions”. As in French, Russian...
Do they? This is a genuine question, I don’t know enough about the socio-economy of revolutions to form an idea. I can see how the Russian revolution could disrupt the biggest economic player, but how about the French Revolution?
On the other hand, the Arab Spring didn’t seem to have levelled the biggest Middle-Eastern industries...
As you point out, (very) large companies are not know for being nimble and adaptable. A radical change in the political and economic environment is a much more massive shock to them then to small players. Generally speaking, such a radical change would be caused either by a revolution (but not by e.g. a palace coup) or by losing a war. But even without revolutions, look at the composition of the Dow Jones index which is supposed to represent the biggest industrial companies in the US. In 1899 these companies were:
The American Cotton Oil Company
Federal Steel Company
The Peoples Gas Light and Coke Company
American Steel & Wire Co.
General Electric Company
Tennessee Coal, Iron and Railroad Company
The American Sugar Refining Company
National Lead Company
The United States Leather Company (Preferred)
Continental Tobacco Company
Pacific Mail Steamship Company
United States Rubber Company
How many are still around?
This is a bit confusing, but almost all of them, actually, modulus name changes, acquisitions, and antitrust actions.
GE is still GE.
Continental Tobacco Company is split, and the biggest part is now Lorillard, which makes Newports and other cigarette brands. But parts were split off and turned into parts of basically all the major cigarette manufacturers now. This was due to antitrust.
US Steel is still huge, and Federal Steel, Tennessee Coal, Iron and Railroad Company, and American Steel & Wire Co. are part of it now. National Lead Company is now (basically) CompX, The American Sugar Refining Company, after antitrust action is now part of C&H Sugar, which makes Domino Sugar. Pacific Mail Steamship Company was bought, and turned into American President Lines, which is a huge shipper today.
Changes in value are mostly not due to lack of adaptability, but change in the types of businesses that make money.
We were originally talking about a “meteoric event that could extinct Google, Facebook, etc. and leave only small, adaptable companies”.
At issue here is the identity of a (large) company. When a company dies, its assets do not disappear, its brand names are usually bought by someone, its managers move on to other positions, even its corporate culture may survive in smaller chunks of the company that continue to exist under new ownership. Eventually that all disperses and the former company’s ghosts dissipate, but it can take a long time.
So I can say that Continental Tobacco Company is dead because it doesn’t exist any more and you can say that it still lives on through Lorillard and other companies. Both statements are true enough and the real question is what do we mean by a company “going extinct”.
But if a company evolved repeatedly, and transformed itself, it’s hard to say that the change was due to inflexibility. And in many ways, massive shocks are easier for large companies to absorb, due to their greater institutional capacity. I’m arguing that a “meteoric event that could extinct Google, Facebook, etc. and leave only small, adaptable companies” is actually the opposite of what would occur. Instead, any large-scale change allows the organizations that have the deepest pockets and largest capacity to thrive, destroying smaller companies.
For some examples of how large companies are better are building resilience, see Chapter 5 of “How Civil Institutions Build Resilience” (a report I co-authored) http://www.rand.org/pubs/research_reports/RR1246.html
Of course, in the wake of a disaster, new crops of innovative companies show up. This happens most clearly in my experience in reinsurance after a major disaster and resulting bankruptcy of some old firms. But it’s a different dynamic than the one discussed.
The issue is still the identity: is it the same company?
I think that depends on the kind of shock. Shocks which call mostly for staying power to wait out the storm, yes. But shocks which require rapid adaptation, I have doubts about.
I think the linked piece makes a convincing argument that it’s not just about staying power.
Your chapter 5 is about disaster recovery. It is staying power because your goal is to return to the status quo ex ante. Adaptation is needed when you find yourself in new circumstances which will not go away.
For an example of a company which failed to adapt, see Kodak.
True—I wasn’t referring exclusively to chapter 5 when I said that’s the argument the linked piece makes. And again, it’s not just about staying power.