Duck! and Gather

The Deadening Effect of Monolithic Hierarchy

Posted on: November 21, 2011

This is a long post. To save you reading all the gory details, let me first deliver these ideas in the form of a tweet:

Corporations are zombies. The longer we work for them, the more we become like them, and less like the children we once were.

Now tweets are not exactly the best medium for conveying complex, subtle notions. Case in point: the phrase “corporations are zombies”.

I realize that this phrase sounds pejorative. But it’s not. It’s a legal definition.

Zombies are the undead — the living dead. So the above phrase can be restated as “corporations are the living dead”.

How are corporations living beings? Well, the U.S. Supreme Court seems to treat corporations as people, under the Constitution.

But if corporations are living people, then how are they also dead things? The answer comes down to money. The lifeblood of a corporation is money. Money is a dead thing. Doesn’t mean it’s bad. Just means it’s dead.

If you or I slice our own jugular veins, we’ll bleed to death. That’s called suicide. How does a corporation bleed to death? It runs out of money. That’s called bankruptcy.

Now since money is dead, Corporations are dead too. Well, at least they are legal fictions.

It’s amazing to me that dead, legal fictions have such incredible power in our present culture. This power is such that pizza is now a vegetable. Got that one from a client of mine.

But the incredible power that I am discussing in this post is the amazing deadening effect that corporations seem to have on their employees. It doesn’t mean that every corporation has this effect on every one of their employees. Just that it seems to be a pervasive effect.

To define this corporate deadening effect, it helps to look at our children. What characterizes children?

To me, it’s their flexibility. Their amazing capacity for curiosity, learning, growth, and transformation, in all ways — physically, socially, emotionally, and cognitively. The self-repair capabilities of children alone is amazing.

Now compare this to very old people. Very old people tend to be inflexible. Not all of them. Just most. Especially the ones on their death bed. (With some notable exceptions.)

Now I come to employees of large corporations. Each employee has a job. For the vast majority, this job is sharply defined, involving more or less repetitive actions. The job is sharply defined not only in the scope of the work, but in its location within the monolithic hierarchy of the corporate org chart.

In most such jobs, the qualities of curiosity, learning, growth, and transformation are typically not valued. At least, not nearly as much as consistency/steadiness/sameness.

Why am I thinking about these things? It’s probably due to four dynamics: (1) I’m a consultant, who is an employee of a very tiny corporation; (2) I have a young daughter; (3) I have clients that span “garage” startups, to funded ones, to public companies, to law firms, to patent “trolls”; and (4) it’s Thanksgiving week — a quiet business week — affording time for reflection.

I go hiking with some of my clients, and engage in extended conversations — outside the scope of our work — with many more of them.

Some of the people who are my clients move in and out of startups and corporate jobs, and between corporate jobs.

What I’ve noticed is that it is when my client/colleague/friends are in the process of moving in the above way, they become much more interesting as human beings. That is, they evidence more curiosity, learning, growth, and transformation during these times. They are more flexible.

Another example is colleagues of mine with whom I go hiking who are employees but who are not in the process of moving. I’ve noticed that ones who are employees of monolithic hierarchies tend to need to “slough off” the “deadening effect” of their jobs early on in the hike. Usually that’s the uphill portion of the hike. Then on the downhill, these people have “cleared” themselves of this effect, and have once again become flexible child-like people.

Employees of really small startups seem immune from this deadening effect.

What’s the upshot of all this? Am I saying that corporations are “bad” or that the people who work for them are “bad”?  Hardly.

As I said, corporations are legal fictions, hence incapable of being “good” or “bad”. And the people working for them are just people, like all of us, doing the best we can, given what we believe. They’re not “bad” either, just for doing their jobs.

All I’m writing about here is this odd effect that seems to be unstated in our culture. The effect is that the longer we’re in a corporate job, the “older” we seem to become (i.e. closer to death). Then when we undergo radical moves, in and out of these jobs (not just intra-company transfers), or into a startup, it’s like the movement wakes us up to our youthful humanity.

Note that what I’m saying here is not that some people are by definition more innovative or creative or curious than other people. I’m saying that all people have the capacity for these youthful things. After all, we were all once children. I’m just observing the dynamics that seem to bring these child-like qualities out in people versus deaden them.

This is a nascent observation of mine. I’m not saying it’s gospel. Just saying that this is what I’m seeing.

And I’m throwing it out here to see what you think.

9 Responses to "The Deadening Effect of Monolithic Hierarchy"

First, I disagree with your characterization of corporations (or any business) as being “dead”. Businesses are made up of people, who are usually alive. Without these living people, the business would not exist. Businesses are as alive as the people who work there decide they will be.

Second, while I can see the analogy of money as being the life-blood of a business, it is not the *only* factor in determining whether the business lives or dies, just as blood is not the only factor in a human’s life or death. After all, one can die while still being able to produce and pump blood. Rather, much like humans, it is the ideas which a company produces which determine its life or death. Good ideas allow the generation of new blood/money. Bad ideas lead to death/bankruptcy. The lack of ideas is analogous to brain death, and will ultimately lead to death, even if it doesn’t happen right away.

Super! A disagreement. Actually two. Let’s start with the first: “I disagree with your characterization of corporations (or any business) as being “dead”.”

I’m guessing you’re neither a lawyer nor an owner of a corporation. I’m both. So let’s explain with an example. I am a co-owner of a small LLC called “Jack Polymath LLC”.

Besides being a co-owner of that business, I also serve as an executive officer/employee of the business (I’m the “Principal” a.k.a. CEO).

In addition to being co-owner and CEO, I, together with my wife, are also landlords to the business. That is, the business rents out office space in a home owned by my wife and I and pays us rent.

The business has its own bank account, separate from our personal bank account. The business also has its own tax ID, separate from my SSN and my wife’s.

As far as the State of California and the U.S. Government is concerned, the business is a separate “person” from me and my wife.

This separation is critical to the “LL” in “LLC”. “LL” stands for “limited liability”. What that means is that if the business Jack Polymath LLC runs into trouble, and somebody sues the business, they have to sue the business, not me or my wife. Should they win the lawsuit, they will draw from the assets of the business, not from those of my wife and I.

You say: “Businesses are made up of people, who are usually alive. Without these living people, the business would not exist. Businesses are as alive as the people who work there decide they will be.”

True, but you’re missing the previous paragraph. The previous paragraph is about liability or responsibility. Who is responsible for the fuck-ups of the business? The “people” you write about? Or the business?

The answer is: it depends on the form of the business. If the form is a sole proprietorship, or a partnership, then the people running the business are responsible.

But if the business is a properly managed corporation (an LLC, for example), the people are not responsible. The corporation is.

And this little distinction, my friend, is the root of the problem with monolithic hierarchy corporations. No person in the monolith is legally responsible for the fuck-ups of the corporation.

Here’s your second disagreement: “[Money] is not the *only* factor in determining whether the business lives or dies … it is the ideas which a company produces which determine its life or death”.

Sure, money is not the only factor. But it’s the most important factor. I’m glad you brought up “ideas” as another factor.

Jack Polymath LLC is a consulting business that has clients spanning the life of corporations. Two current clients are “garage” stage startups.

I do work for both of these clients. I can tell you unequivocally that the ideas behind these two clients are extraordinary. They are revolutionary.

One of the ideas involves wireless power. The other involves plastic recycling. I can’t tell you what the ideas are — they’re stealth companies right now. I’ll just say that if these two businesses succeed, the world we are living in will look and act very differently.

In fact, these two businesses are such good ideas that I think we’ll have little problem getting patents issued that cover the ideas. The ideas are really that novel and useful.

Here’s the punch line for you: If we don’t get funding (read: money) for these businesses, they will die.

Yeah, even if the business dies, the patents might issue. And yeah, others might pick up on the ideas later. And yeah, if these clients are smart, they’ll hang on the the patents in that case, and sue the hell out of the later companies that copy their patented ideas.

But usually what happens when a startup can’t raise funds is that the founders kill the project, move on to other gigs, and let their patents lapse, or sell them for pennies on the dollar to so-called patent “trolls”.

One of our clients just got a commitment for half the funds his business is seeking. We had a celebratory dinner last Sunday night in Palo Alto.

I can tell you that, emotionally speaking, that commitment was like rain on a desert that hasn’t seen rain in years. This is a life giving commitment. We are all very excited. A baby was born on Sunday. A new life.

Whose life? The business’s life. The rest of us people connected to the project? We’re doing fine in any case. Even the founder of this business. This fellow is one of those genius serial entrepreneur types. He has other great ideas. His current idea is a very good one, but it’s not his last.

The other client, the clean tech business, is still waiting for the first commitment. We’re earlier in the fund-raising game. So it’s not time to panic yet.

But if we get no commitments of money for this great idea by next summer or fall, the idea might well die as a business, and live on only in the patent office.

Money is the difference between life and death for this business.

As it is for all businesses.

I understand that one of the purposes of a corporation is to limit personal liability. But that doesn’t make a corporation “dead”. Limiting risk is something prudent people do. Prudent LIVING people, because the dead are beyond caring about such things.

Try getting insurance (another way to limit risk) on a dead guy sometime. My wife, who has 25+ years in the insurance business, tells me it would be kinda hard. 😛

Like any living entity, there is more than one factor required to initiate or sustain life. Blood alone can’t do it. Food alone won’t make it either. Just as both oxygen AND food are required to sustain even the simplest life form, both ideas AND money are required for businesses to survive.

So the real question is: Which is most important? You say it is money. I contend it is ideas.

Money without ideas sits in a bank and does little to nothing to add to wealth. You can say that it can exist alone, though only in a vegetative state.

OTOH, ideas without money will attract money (see your examples above) to add to wealth of both investors and proprietors. They are both necessary for the business to live, but the ideas are what causes the business to add to wealth.

utabintarbo — Just saw your Jan. 2 comment. Thanks.

Suggestion: Ask your wife how many people can get insurance that covers them even for their own completely irresponsible behavior. The insurance industry has a term for that behavior: “moral hazard”. Sound insurance companies try to limit the effect of moral hazard, otherwise their profits are harmed.

Now over to the corporation. Corporations can behave completely irresponsibly, yet that doesn’t harm the limited liability of the people involved.

Like Mr. Romney, you are confusing the people involved in the corporation (employees, managers, shareholders, etc.) with the corporation itself.

If they were one and the same, we wouldn’t need corporate law. Partnership and sole proprietorship law is all we’d need.

What do you think these corporations are? How about the Hudson’s Bay Company that was “born” in 1670 and is still “alive”? What Methuselah humans is it comprised of?

ubintarbo — You write “both ideas AND money are required for businesses to survive”.

If you leave “ideas” unqualified, then I’d agree. Corporations need people to run them — even holding companies with no human employees, managers or owners. All people have ideas. Good ones, bad ones. Old ones, new ones. Copied ones, original ones. etc.

Ideas are just what go through the heads of all non-brain-dead people.

But if you limit your statement to “good ideas” or “innovative ideas” or something along those lines, then I think what you’re saying is much more interesting, and easily debunked.

Re the latter, I have one word for you: Microsoft.

My wife tells me people get covered for stupid shit all the time. Getting the providers to cover them for this stuff is part of her job.

Corporations exist precisely to limit the personal liability of the employees and officers. They also exist to provide a legal framework for outliving those employees and officers. Yet without those employees and officers the corporation cannot exist. There is no dichotomy between the corporation and the people within it. Even “shell corporations” have to be set up by people and have a certain utility to those people.

You seem to hold the notion that the concept “corporation” exists in some Kantian nuomenal realm separate from the people and ideas which compose it. Sorry, there is no metaphysical “form of the corporation” for you to tilt at. Corporations exist because they solve the aforementioned problems for the people that create and work within its legal framework. Using it as an a priori pejorative (see “Mitt Romney is a Corporation” as an example) will change nothing. It merely makes you appear puerile.

utabintarbo — Have you ever heard of the legal notion of “piercing the corporate veil”? The whole idea of the law of corporations is that your corporation damn well better be a separate entity from you otherwise your corporation will lose its limited liability.

The clear separation between humans and corporations — built into the law of corporations — is what makes a corporation a corporation, not just an “alter ego” of the people running it (another legal term for you :)).

If you’ve read some of my other posts, you’ll note that I have no problem with corporate law, and especially no problem with “small” “young” corporations. In fact, I’m a strong believer that corporate law as applied to startups is a critical component of innovation (i.e. one of the key of Silicon Valley).

The problem with corporations is when they grow big and old. One of the reasons is that the personal reputation of the managers becomes divorced from the company.

Example: Facebook is worth ~$100B today, making Zuckerberg worth $28.4B, giving him 57% control of the company. Any criticism leveled at Facebook (privacy, etc.), will be felt by Zuckerberg as personal criticism to him — even though he is protected by limited liability.

I believe this human morality keeps a “checking function” on the young companies.

Fast forward 60 years. Zuckerberg is long dead or at least long divorced from the company. The managers of Facebook in 2072 have no connection to the founders. Facebook is raking in the money.

That day, I say, Facebook will be very, very dangerous.

Look around you at the companies/industries founded in the ’30s, ’40s and ’50s.

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for the money has gone too far

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