Re: Gervais principle

• Margin Call condenses sociopathy into one line: “It wasn’t brains that got me here, I assure you of that” https://www.youtube.com/watch?v=LTDS6SHwA6w
  • At least to me, the obvious interpretation was that it was balls. Daring, willigness to do what it takes, ruthlessness.

Preamble

I have been recently itching to comment on bureucracy, organization, incentives, and rational disobeyance.

There is one work of organization theory, that originally opened my eyes to the nature of the modern work life. It builds on the work of Company Hierarchy (the cartoon by Hugh MacLeod), and is to a degree influenced by William H. Whyte’s the Organization man. Unsatisfied with these works, Venkatesh Rao (a management consultant) builds his own, complete theory why modern corporations working like they do, is not an accident, it’s not a symptom (except perhaps on a meta level), it is more or less intentional optimization when taking into account the incentives, by persons who truly wield power (this is not always the top executives, but it does correlate), leading into apparent dysfunctionality that has significant purposes. (Say, unnecessary layers of organization serve to make assigning blame and consequence to unknowing subjects easy and low-cost.)

This work of organization theory is the Gervais Principle, Or The Office According to “The Office”. I keep recommending it people - as something that helps you get office politics on an intuitive level, as something that lets you approach a salary negotiation with minimal loyalty towards the organization, as something that gets at the heart of why modern organizations keep mutating but (almost) never becoming close to optimal. But it is hard to explain why Gervais Principle cuts at these knots so well. So I guess since I couldn’t explain it briefly, I’ll explain it in length, post-by-post liveblogging and explaining the insights that seem most relevant to me, and then we might get back to our regular blog programming.

Part 1

The company hierarchy

Idealized organizations are not perfect. They are perfectly pathological.

So while most most management literature is about striving relentlessly towards an ideal by executing organization theories completely, this school, which I’ll call the Whyte school, would recommend that you do the bare minimum organizing to prevent chaos, and then stop. Let a natural, if declawed, individualist Darwinism operate beyond that point. The result is the MacLeod hierarchy. It may be horrible, but like democracy, it is the best you can do.

My interpretation here is that the common organization theory is naive and presents a way to organize your organization that would, in theory, be in some degree more optimal than the natural chaos of the organization if it worked. But the naivety means that the theories never work, fully. They fail to account for the fact that there are actual factual real-world incentives that are constantly pulling the executives, middle management, and workers away from following the so-called optimal way of working.

The company hierarchy, illustrated https://ribbonfarm.wpenginepowered.com/wp-content/uploads/2009/10/hughMcLeodCompanyHierarchy.jpg

I’ll put it in my own words first, and then we’ll observe what Venkatesh thinks:

• Sociopaths are the “will to power” Nietschean protagonists of their own lives, in theory. They know that the structure and loyalty and other imaginary bindings of the organization are well - imaginary. This doesn’t mean they care zero bits about them, but it means when they care they are deciding to do so - not imagining that they are contributing to the theoretic platonic ideal of a “fair” organization, or expecting to be paid back for their loyalty, if they don’t themselves arrange for the compensation.

• The Clueless are well, clueless. The clueless are people who have a blind loyalty to the organization, or one of the executives, or some other higher ideal, and they try to perform to their highest standard for the sake of this beneneficiary. The Clueless can truly believe in the companys mission, in it’s people, it’s values, it’s products, or some other in-theory-praiseable thing to believe in. But they are Clueless, since they do not see that the organization’s stated values and goals are not the organizations revealed preference. (The organization’s revealed preference is a combination of being a Molochian perpetual motion machine, and being a sum of where the steering applied by the Sociopaths takes the organization.) (Sometimes Clueless try to steer the organization, but because they are blind to the material, nihilistic reality of the organization, this rarely goes well. We’ll address this later.)

  • määrittävänä tekijänä cope: “Ai mua ei kutsuttu tonne. En mä olisi halunnutkaan.”

• The Losers are losing - in economical terms. They have struck a bargain where they labor and receive compensation for their labors, and someone else extracts the surplus of their labor. Some people claim that everyone not born rich is a loser in capitalism and the system should be swapped - but they don’t realize that any alternative system you swap it for would still benefit the Sociopaths more than the Losers.^{power-corrupts} (Looking at it through a Gervais Principle lens.) Through a Gervais Principle lens you always have options - you could will to power yourself up from your bootstraps and extract value. ( TODO: insert an example of this.)

Of all organization men, the true executive is the one who remains most suspicious of The Organization. If there is one thing that characterizes him, it is a fierce desire to control his own destiny and, deep down, he resents yielding that control to The Organization, no matter how velvety its grip… he wants to dominate, not be dominated…Many people from the great reaches of middle management can become true believers in The Organization…But the most able are not vouchsafed this solace.

Back then, Whyte was extremely pessimistic. He saw signs that in the struggle for dominance between the Sociopaths (whom he admired as the ones actually making the organization effective despite itself) and the middle-management Organization Man, the latter was winning. He was wrong, but not in the way you’d think. The Sociopaths defeated the Organization Men and turned them into The Clueless not by reforming the organization, but by creating a meta-culture of Darwinism in the economy: one based on job-hopping, mergers, acquisitions, layoffs, cataclysmic reorganizations, outsourcing, unforgiving start-up ecosystems, and brutal corporate raiding. In this terrifying meta-world of the Titans, the Organization Man became the Clueless Man. Today, any time an organization grows too brittle, bureaucratic and disconnected from reality, it is simply killed, torn apart and cannibalized, rather than reformed. The result is the modern creative-destructive life cycle of the firm, which I’ll call the MacLeod Life Cycle.

(company lifecycle image https://ribbonfarm.wpenginepowered.com/wp-content/uploads/2009/10/compLifeCycle.JPG )

I don’t really have any way to make this denser.

A Sociopath with an idea recruits just enough Losers to kick off the cycle. As it grows it requires a Clueless layer to turn it into a controlled reaction rather than a runaway explosion. Eventually, as value hits diminishing returns, both the Sociopaths and Losers make their exits, and the Clueless start to dominate. Finally, the hollow brittle shell collapses on itself and anything of value is recycled by the sociopaths according to meta-firm logic.

MacLeod’s Loser layer had me puzzled for a long time, because I was interpreting it in cultural terms: the kind of person you call a “loser.” While some may be losers in that sense too, they are primarily losers in the economic sense: those who have, for various reasons, made (or been forced to make) a bad economic bargain. They’ve given up some potential for long-term economic liberty (as capitalists) for short-term economic stability. Traded freedom for a paycheck in short. They actually produce, but are not compensated in proportion to the value they create (since their compensation is set by Sociopaths operating under conditions of serious moral hazard). They mortgage their lives away, and hope to die before their money runs out. The good news is that Losers have two ways out, which we’ll get to later: turning Sociopath or turning into bare-minimum performers. The Losers destined for cluelessness do not have a choice.

Based on the MacLeod lifecycle, we can also separate the three layers based on the timing of their entry and exit into organizations. The Sociopaths enter and exit organizations at will, at any stage, and do whatever it takes to come out on top. The contribute creativity in early stages of a organization’s life, neurotic leadership in the middle stages, and cold-bloodedness in the later stages, where they drive decisions like mergers, acquisitions and layoffs that others are too scared or too compassionate to drive. They are also the ones capable of equally impersonally exploiting a young idea for growth in the beginning, killing one good idea to concentrate resources on another at maturity, and milking an end-of-life idea through harvest-and-exit market strategies.

The Losers like to feel good about their lives. They are the happiness seekers, rather than will-to-power players, and enter and exit reactively, in response to the meta-Darwinian trends in the economy. But they have no more loyalty to the firm than the Sociopaths. They do have a loyalty to individual people, and a commitment to finding fulfillment through work when they can, and coasting when they cannot.

The Clueless are the ones who lack the competence to circulate freely through the economy (unlike Sociopaths and Losers), and build up a perverse sense of loyalty to the firm, even when events make it abundantly clear that the firm is not loyal to them.

Which brings us to our main idea. How both the pyramid and its lifecycle are animated. The dynamics are governed by the Newton’s Law of organizations: the Gervais Principle.

The Gervais Principle and Its Consequences

Sociopaths, in their own best interests, knowingly promote over-performing losers into middle-management, groom under-performing losers into sociopaths, and leave the average bare-minimum-effort losers to fend for themselves.

The Gervais principle differs from the Peter Principle, which it superficially resembles. The Peter Principle states that all people are promoted to the level of their incompetence. It is based on the assumption that future promotions are based on past performance. The Peter Principle is wrong for the simple reason that executives aren’t that stupid, and because there isn’t that much room in an upward-narrowing pyramid. They know what it takes for a promotion candidate to perform at the to level. So if they are promoting people beyond their competence anyway, under conditions of opportunity scarcity, there must be a good reason.

Scott Adams, seeing a different flaw in the Peter Principle, proposed the Dilbert Principle: that companies tend to systematically promote their least-competent employees to middle management to limit the damage they can do. This again is untrue. The Gervais principle predicts the exact opposite: that the most competent ones will be promoted to middle management. Michael Scott was a star salesman before he become a Clueless middle manager. The least competent employees (but not all of them — only certain enlightened incompetents) will be promoted not to middle management, but fast-tracked through to senior management. To the Sociopath level.

And in case you are wondering, the unenlightened under-performers get fired.

footnotes