I recently attended a conference called Gartner Marketing Forum, from the research firm Gartner, which does $3B in year in revenue. The most prominent VP there, who gave multiple keynotes, said “everyone thinks they’re in the most messed up organization in the world—and they’re right, because we’re all human!”
Personally, I’ve thought recently that the following question is not in fact a rhetorical one: given how incompetent and unmotivated so many people are, how do we even keep the lights on in this society?
I think that’s not a rhetorical question. A manager or leader has to figure out how to work with the team they’ve got. And millions of people in that role have figured out how to do it well enough. At least we’ll enough to grow the status quo, which of course is not good enough and is in aggregate a huge threat to the sustainability of the human race. But individual organizations function consistently with dysfunction that’s shocking when looked at in isolation.
Yeah, the more I know about how some things work, the more I am surprised that anything at all works.
Maybe we are so insanely productive, that even with 99% of human output wasted, the remaining 1% is enough to keep the lights on? But then, how wonderful could the world be if we could somehow use 10% of the output instead?
But more likely, it is something like the individuals believing all kinds of bullshit in far mode, but acting rather reasonable in near mode. There are all kinds of incompetence at places where incompetence does not mean immediate disaster; but when the dangers become imminent, someone will use their common sense (and perhaps work overtime) to do the right thing, and to prevent the lights from going out. Well, most of the time; because sometimes the last moment will be already too late to prevent the things from blowing up.
Or perhaps human work is mostly repetition, and you don’t need highly competent people to do the same thing they did yesterday. Only once in a while circumstances change enough that someone has to work overtime and/or things blow up.
I personally think we don’t need to posit a mechanism that explains why people’s wrong beliefs don’t cause immediate disaster for companies. In my worldview this is fully explained by selection effects in the market, both at the level of organisations and at the level of individual employees. Since long-term views are very hard to link to individual outcomes, the selection pressure is weaker here.
I’d like to point out that this does suggest that organisations and companies fail and go bankrupt regularly, we just don’t hear that much about the quick failures (which I think fits reasonably well with observations, but I haven’t looked into this all that much).
This is in fact also an/my answer to the non-rhetorical question why anything works at all. I disagree with Kirkpatrick in attributing this to individuals, which seems to suggest there is some class of millions of managers who have attained some mystical level of competence that somehow doesn’t scale to groups.
Maybe it’s not technology that’s killing of corporation but incompetence?
As a corollary this would explain why government bureaucracy is often so inefficient, selection effects can’t kill of disfunctional government departments.
Very interesting observations! Personally I’d perhaps phrase it the other way around, not ‘incompetence is killing corporations’ but more something like ‘what changed in the past 70 years that allowed people to build long-living corporations back then and not now, assuming today’s regular company deaths are caused by incompetence?’. My personal guess is that either back when these long-living companies were founded (~1890’s) there was much more low-hanging fruit on the market, allowing less efficient companies to still survive, or alternatively that today’s economic environment is much more risk-tolerant so the selection for competence happens much more *after* founding a company.
I agree fully with the government bureaucracy remark, although I suspect there are a ton of other very important effects at work there too (for example, out of all organisations I expect governments in particular to have high accountability and regular run-ins with Chesterton’s fence, both of which increase bureaucratic load).
This is a disturbing line of thought, and… while I think this is not a complete explanation, it feels like it explains a lot.
The word “incompetent” does a lot of heavy lifting here, though. What exactly it means in this context? Do we play motte and bailey with meanings “a complete retard, making random decisions” and “less awesome than Elon Musk”?
Because if we assume that people are complete retards, then the market selection is not strong enough to explain what keeps the lights on. (Mathematically speaking, there are much more possibilities to screw up things, than the number of companies trying to provide electric power.)
So I guess the correct interpretation is that people are sort of competent, but the selection effect allows (some of) them to achieve more than their personal competence alone would predict. A complete retards would ruin any company, but if you find people who have a 10% chance of keeping the company running… then you simply need dozens of them in dozens of companies, and some of the companies will survive. But because the situation changes, the survival dice will be rolled again later, and the person who kept the company running yesterday may fail to keep it running today.
EDIT: This interpretation also fits the “low hanging fruit” hypothesis: For simple types of companies, you can find people who have a 10% chance to keep them running. For difficult types of companies, you can only find people who have a 1% chance. But if there is enough money, enough people will try it, and some of these companies will survive, too. Their life expectancy will be much shorter, though.
It could even provide an answer to Eliezer’s post about competent elites: similarly to Peter Principle, if you are a super-competent person whose chance to keep the company running is not the usual 10%, but rather 50%, it is more profitable for you to actually try running a more complex company (where you have the 10% chance, and anyone else has 1%) instead. So it is true that more competent people end up in more complex companies, and at the same time, people end up in positions that exceed their personal competence.
I think ‘competent’ should in this context mean something like ‘has the ability to, after being pointed to a gap in the market, build and/or keep functional a company that fills this gap’. This agrees fully with what you said, there is an extreme lot of wiggle room between ‘total retard’ and this sense of competent (in fact, I think almost everybody lives in this wiggle room). Furthermore, I think it makes sense to naively think that the abundance of successful companies suggests a lot of people are competent in this sense, whereas I claim this is not the case.
There are not a lot of CEO of big companies and those who are believed to be competent can draw huge salaries. Even if all the CEO would be competent the total pool of people might be still quite small.
There’s also the interesting question of why we have successful cities that have lifespans of hundreds of years that get a lot less management and why companies that are managed by a CEO fail so often.
Why is the organization form of a city so much more stable?
Because demand for cities isn’t volatile? Like, if you’re a company, you’re operating in the market, where people have a choice whether to use/buy your product/service. If what you’re producing isn’t high-quality/doesn’t meet a market need, your company fails (and the quality of the product is often a direct consequence of a CEO’s decisions).
Conversely, with cities there’s a lock-in: people build lives there; they invest in their houses, communities, and personal relationships. Cities are not nearly as fungible as (almost all) products. So even if the city is poorly run, people have strong incentives to stay there rather than moving elsewhere.
Plus, a city is more than its organizational structure: it’s the geographical features, the businesses that operate there, and the people who live there. (To some extent the latter two are downstream of the city’s organization, but they’re definitely not fully determined by it).
tl;dr it’s a lot easier to lose customers than to lose citizens. I don’t think the situations are all that comparable or that we can learn anything meaningful about competence by looking at the success of the average city.
Not completely surprised but would wonder how much of that is accounted by merger and it that should be considered the same as failure/bankruptcy cases.
I suspect the technology that would make mergers less costly has increased since the 50s. If so there were perhaps mergers that were not taking place but would have.
I recently attended a conference called Gartner Marketing Forum, from the research firm Gartner, which does $3B in year in revenue. The most prominent VP there, who gave multiple keynotes, said “everyone thinks they’re in the most messed up organization in the world—and they’re right, because we’re all human!”
Personally, I’ve thought recently that the following question is not in fact a rhetorical one: given how incompetent and unmotivated so many people are, how do we even keep the lights on in this society?
I think that’s not a rhetorical question. A manager or leader has to figure out how to work with the team they’ve got. And millions of people in that role have figured out how to do it well enough. At least we’ll enough to grow the status quo, which of course is not good enough and is in aggregate a huge threat to the sustainability of the human race. But individual organizations function consistently with dysfunction that’s shocking when looked at in isolation.
Yeah, the more I know about how some things work, the more I am surprised that anything at all works.
Maybe we are so insanely productive, that even with 99% of human output wasted, the remaining 1% is enough to keep the lights on? But then, how wonderful could the world be if we could somehow use 10% of the output instead?
But more likely, it is something like the individuals believing all kinds of bullshit in far mode, but acting rather reasonable in near mode. There are all kinds of incompetence at places where incompetence does not mean immediate disaster; but when the dangers become imminent, someone will use their common sense (and perhaps work overtime) to do the right thing, and to prevent the lights from going out. Well, most of the time; because sometimes the last moment will be already too late to prevent the things from blowing up.
Or perhaps human work is mostly repetition, and you don’t need highly competent people to do the same thing they did yesterday. Only once in a while circumstances change enough that someone has to work overtime and/or things blow up.
I personally think we don’t need to posit a mechanism that explains why people’s wrong beliefs don’t cause immediate disaster for companies. In my worldview this is fully explained by selection effects in the market, both at the level of organisations and at the level of individual employees. Since long-term views are very hard to link to individual outcomes, the selection pressure is weaker here.
I’d like to point out that this does suggest that organisations and companies fail and go bankrupt regularly, we just don’t hear that much about the quick failures (which I think fits reasonably well with observations, but I haven’t looked into this all that much).
This is in fact also an/my answer to the non-rhetorical question why anything works at all. I disagree with Kirkpatrick in attributing this to individuals, which seems to suggest there is some class of millions of managers who have attained some mystical level of competence that somehow doesn’t scale to groups.
That matches reality. The average age of companies in the SAP500 is now at 20 years and was 60 years in the 1950s: https://www.cnbc.com/2017/08/24/technology-killing-off-corporations-average-lifespan-of-company-under-20-years.html
Maybe it’s not technology that’s killing of corporation but incompetence?
As a corollary this would explain why government bureaucracy is often so inefficient, selection effects can’t kill of disfunctional government departments.
Very interesting observations! Personally I’d perhaps phrase it the other way around, not ‘incompetence is killing corporations’ but more something like ‘what changed in the past 70 years that allowed people to build long-living corporations back then and not now, assuming today’s regular company deaths are caused by incompetence?’. My personal guess is that either back when these long-living companies were founded (~1890’s) there was much more low-hanging fruit on the market, allowing less efficient companies to still survive, or alternatively that today’s economic environment is much more risk-tolerant so the selection for competence happens much more *after* founding a company.
I agree fully with the government bureaucracy remark, although I suspect there are a ton of other very important effects at work there too (for example, out of all organisations I expect governments in particular to have high accountability and regular run-ins with Chesterton’s fence, both of which increase bureaucratic load).
This is a disturbing line of thought, and… while I think this is not a complete explanation, it feels like it explains a lot.
The word “incompetent” does a lot of heavy lifting here, though. What exactly it means in this context? Do we play motte and bailey with meanings “a complete retard, making random decisions” and “less awesome than Elon Musk”?
Because if we assume that people are complete retards, then the market selection is not strong enough to explain what keeps the lights on. (Mathematically speaking, there are much more possibilities to screw up things, than the number of companies trying to provide electric power.)
So I guess the correct interpretation is that people are sort of competent, but the selection effect allows (some of) them to achieve more than their personal competence alone would predict. A complete retards would ruin any company, but if you find people who have a 10% chance of keeping the company running… then you simply need dozens of them in dozens of companies, and some of the companies will survive. But because the situation changes, the survival dice will be rolled again later, and the person who kept the company running yesterday may fail to keep it running today.
EDIT: This interpretation also fits the “low hanging fruit” hypothesis: For simple types of companies, you can find people who have a 10% chance to keep them running. For difficult types of companies, you can only find people who have a 1% chance. But if there is enough money, enough people will try it, and some of these companies will survive, too. Their life expectancy will be much shorter, though.
It could even provide an answer to Eliezer’s post about competent elites: similarly to Peter Principle, if you are a super-competent person whose chance to keep the company running is not the usual 10%, but rather 50%, it is more profitable for you to actually try running a more complex company (where you have the 10% chance, and anyone else has 1%) instead. So it is true that more competent people end up in more complex companies, and at the same time, people end up in positions that exceed their personal competence.
I think ‘competent’ should in this context mean something like ‘has the ability to, after being pointed to a gap in the market, build and/or keep functional a company that fills this gap’. This agrees fully with what you said, there is an extreme lot of wiggle room between ‘total retard’ and this sense of competent (in fact, I think almost everybody lives in this wiggle room). Furthermore, I think it makes sense to naively think that the abundance of successful companies suggests a lot of people are competent in this sense, whereas I claim this is not the case.
There are not a lot of CEO of big companies and those who are believed to be competent can draw huge salaries. Even if all the CEO would be competent the total pool of people might be still quite small.
There’s also the interesting question of why we have successful cities that have lifespans of hundreds of years that get a lot less management and why companies that are managed by a CEO fail so often.
Why is the organization form of a city so much more stable?
Because demand for cities isn’t volatile? Like, if you’re a company, you’re operating in the market, where people have a choice whether to use/buy your product/service. If what you’re producing isn’t high-quality/doesn’t meet a market need, your company fails (and the quality of the product is often a direct consequence of a CEO’s decisions).
Conversely, with cities there’s a lock-in: people build lives there; they invest in their houses, communities, and personal relationships. Cities are not nearly as fungible as (almost all) products. So even if the city is poorly run, people have strong incentives to stay there rather than moving elsewhere.
Plus, a city is more than its organizational structure: it’s the geographical features, the businesses that operate there, and the people who live there. (To some extent the latter two are downstream of the city’s organization, but they’re definitely not fully determined by it).
tl;dr it’s a lot easier to lose customers than to lose citizens. I don’t think the situations are all that comparable or that we can learn anything meaningful about competence by looking at the success of the average city.
Cities do need customers for the products that they export as well. Otherwise they can’t import the food to feed their population.
Not completely surprised but would wonder how much of that is accounted by merger and it that should be considered the same as failure/bankruptcy cases.
I suspect the technology that would make mergers less costly has increased since the 50s. If so there were perhaps mergers that were not taking place but would have.