Scale is causal to bureaucracy.
Bureaucracy is a simplification process.
As things scale, they naturally become more complex, and attract bureaucratic solutions.
The problem is that too much simplification in a complex world will get you killed.
Too much simplification creates too many unresolved corner cases.
Over-simplification causes incentive distortion.
Simplification takes away discretion and responsibility from staff.
Simplification causes the top talent to leave for better challenges, which causes the need for more simplifying processes.
Most companies curtail freedom as they get bigger.
Freedom (and discretion and responsibility) is replaced with bureaucracy.
The most innovative larger companies are able to maintain, or even increase, freedom as they get bigger — at least for a small, powerful group within the company.
Apple has handed over concentrated power to its design group.
Quotes:
“We should look with favor upon every combination of every kind upon the part of our competitors; the bigger they grow, the more vulnerable they become. It is with Firms as with Nations, ‘Scattered possessions’ are not in it with a solid, compact, concentrated force.”
— Andrew Carnegie, Andrew Carnegie, Chapter 31, p. 573.
“If you dummy-proof the process, you only get dummies to work there.”
— Reed Hastings
"The problem is that at a lot of big companies, process becomes a substitute for thinking. You’re encouraged to behave like a little gear in a complex machine. Frankly, it allows you to keep people who aren’t that smart, who aren’t that creative."
— Elon Musk
“The great defect of scale, of course, which makes the game interesting—so that the big people don’t always win—is that as you get big, you get the bureaucracy. And with the bureaucracy comes the territoriality—which is again grounded in human nature. And the incentives are perverse. For example, if you worked for AT&T in my day, it was a great bureaucracy. Who in the hell was really thinking about the shareholder or anything else? And in a bureaucracy, you think the work is done when it goes out of your in-basket into somebody else’s in-basket. But, of course, it isn’t. It’s not done until AT&T delivers what it’s supposed to deliver. So you get big, fat, dumb, unmotivated bureaucracies…. The constant curse of scale is that it leads to big, dumb bureaucracy—which, of course, reaches its highest and worst form in government where the incentives are really awful. That doesn’t mean we don’t need governments—because we do. But it’s a terrible problem to get big bureaucracies to behave.”
— Charlie Munger
“Sears had layers and layers of people it didn’t need. It was very bureaucratic. It was slow to think. And there was an established way of thinking. If you poked your head up with a new thought, the system kind of turned against you. It was everything in the way of a dysfunctional big bureaucracy that you would expect.”
— Charlie Munger
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