Well, this is yet another “second-to-last post” in the Gervais/MacLeod series (See: Part 1, Part 2, Part 3, Part 4, Part 5, Part 6, Part 7) as I’ve realized that I need to cover one more topic: human nature, especially in the context of the corporate organization (e.g. Theories X and Y). What is it? Is it inherently good, or evil? Is it natural for people to be altruistic, or selfish? I addressed the morality and civility spectra and it should be obvious that I am neither committed to the idea of an inherently bad or good human nature. Mostly, I think people are localistic. We are altruistic to people we consider near to us in genetic, tribal, cultural, or emotional terms. We’re generally indifferent to those we regard at the periphery, favoring the needs of our tribe. Good and evil don’t escape from this localism; they just handle it differently. Good attempts to transcend this localism and (perhaps cautiously) grow the neighborhood of concern: expanding it to all citizens of a polity, then all humans, then all living beings. Evil, not always being egoistic, turns this localism into militancy. Both involve an outside-the-system comprehension of localism that is somewhat rare, leaving most people in an alignment considered neutral. Morally neutral people are best described as weakly good. Assuming they have a strong sense of what good and evil are, they’d prefer to be good, but this preference is not strong and they do not have a burning desire to seek good at personal or localistic risk.
The civility spectrum, between law and chaos, reflects peoples’ biases toward organizations and those who lead them. While lawful good people will oppose an evil society and chaotic good will support a good one, the truth about most societies and organizations is that they are themselves morally neutral, so a person’s civility (bias in favor or against establishment) will influence her tendency to oppose or support power more than the sign-comparison of her and its moral alignments. Lawful people think organizations tend to be better than the people who comprise them; chaotic people think they tend to be worse than the people who make them up. For my part, I’m chaotic, but just slightly. I think that individual people average a C+ on the moral scale (A being good, F being evil) and organizations tend to average a C-. Chaotic bias makes it natural to see corporations as “evil”; in reality, most of them are indifferent profit maximizers.
Interesting enough, software engineering is intrinsically chaotic. Because software requires exact precision, while human communication is inherently ambiguous, large software teams do not perform well. The per-person productivity of a large development team is substantially lower than that of an individual engineer. A team of 10 might be 2-2.5 times as productive as a single engineer. This leads us, as technologists, toward the (chaotic, possibly faulty) assumption that organizations are inherently less than the sum of their parts, because that is clearly true of software engineering teams.
Management theorists have questioned human nature, generating two opposite sets of assumptions about the typical employee of a corporation.
Theory X (presumed egoism): employees are intrinsically lazy, selfish, and amoral. If they are not watched, they will steal. If they are not prodded, they will slack. They are not to be trusted. The manager’s job is to intimidate people into getting their work done and not doing things that hurt the company.
Theory Y (presumed altruism): employees are intrinsically motivated and inclined to help the organization. If they are given appropriate work, they’ll do well. The manager’s job is to nurture talent and then get out of people’s way, so they can get work done.
Theory X is socially unacceptable, but a better representative than Y of how business executives actually think. Theory Y is how executives and organizations present their mentality, because it’s more socially acceptable. So which is right? Neither entirely. Theory X is ugly, but it has some virtues. First, it can be, perversely, more egalitarian than Theory Y. Theory X distrusts everyone, including the most talented and best positioned. Executives are no better than worker bees; everyone must be monitored and a bit scared. Theory Y, which is focused on talent and development, requires (non-egalitarian) decisions about whom to develop. Second, Theory X is more tolerant of scaling, because large-scale societies run (by necessity) on X-ish assumptions. To keep a Theory-Y organization intact, you cannot hire before you trust. Only in the technological era (where small groups can deliver massive returns) has it been possible for growth-oriented organizations to hire so selectively as to make Theory-Y organizational policies tenable.
My ideology (e.g. open allocation) might be seen as “extreme Theory Y”, but that’s not because I believe Theory Y is inerrant. It’s not. Reality is somewhere between X and Y. I believe that organizations ought to take the Y-ward direction largely (on this spectrum) for the same reason that archers aim slightly above their targets. With the actual leadership of most organizations tending toward egoism and X-ness, an organization that doesn’t set inflexible, constitutional Theory-Y pillars (for some concerns) is going to suffer a severe X-ward bias. X-ism is tolerable for concave industrial work, but in the convex world, organizations need to be somewhat Theory Y. How X (or Y) should an organization be? There’s actually a very simple and absolutely correct answer here: trust employees with their own time and energy, distrust those who want to control others’. It really is that simple– a rarity in human affairs– and to continue with anything else is moronic. Employees who volunteer to use their own energies toward something they believe will benefit the organization should be trusted to do so; those who exhibit a desire for dominance over others should be deeply distrusted.
There’s one thing I haven’t addressed, which is which Theory is actually more in force. Theory X was the industrial norm from antiquity to about 1925, when Henry Ford discovered that being a jerk (which almost all industrialists at the time were) was bad for business. High wages for employees meant a strong consumer base. Eight-hour work days were just as productive as longer ones, with fewer accidents. While there were some severe bumps in the road (Great Depression, World War II) the following 50 years saw the emergence of a large middle class, and a changing workforce. Theory Y, at least in aspiration, set in, along with the growth of positive psychology and even the 1950s-70s countercultures, which were more of a reaction against perceived hypocrisy (in organizations claiming to be Theory Y) .
With Theory-Y organizations– especially in research and development– we cracked the German Enigma, sent people to the moon, advanced science more in one half-century than had ever been thought possible, invented the Internet, and grew the global economy at an astounding 5.7 percent per year. Theory Y was the dominant organizational culture from 1925 to about 1975. Then something happened in the counterculture. The 1950s counterculture was mild, liberal, and cautious about the potential for organizational overreach, but tame by modern standards. The 1960s took these seeds of dissent to their logical (civil rights, Great Society) and illogical (Tim Leary, Weathermen) conclusions. The 1970s counterculture was transitional, meek, and reactive to the failed aspirations of the 1960s. In the 1980s, the counterculture was: Let’s Be Dickheads Again. Thus emerged the golden age of private equity, rampant cocaine use (exacerbating its already-present tendency toward context-free arrogance and vacuous superiority) among the upper class, and pro-corporate “greed is good” mentalities. The yuppie generation disgusted their (cautiously liberal, as befit the 1940s-60s) parents with how illiberal and materialistic they were.
Theory Y failed in the 1980s. If your employees are coming into work looking to steal your secrets and launch their private equity careers, you actually can’t trust them. This decade of betrayal, greed, and organizational dissolution proved Theory Y inadequate. Bad people exist at all levels. Some people will try to steal from their employers, employees, and colleagues.
If the Gilded Age nightmare of Pinkertons and company towns was the height of Theory X, and the mid-20th century United States was that of Theory Y, what came after? The chaos of the 1980s settled down, and I think what emerged in its wake can be called Theory Z. By 1995, corporations had been looted at bottom and top (mostly, at the top) and had ceased to inspire. Technology startups were taking on corporate behemoths of much greater size. People at the bottoms of corporations (MacLeod Losers) were beginning to recognize that presumed upward mobility could no longer be believed in. The arrogant egoism of the coked-up 1980s ubermenschen had faded somewhat, but the bilateral altruism existing between the paternalistic corporation and employee was forever gone as well. People returned to localism in personal alignment: trying to do right by the people they care about, and the people near them.
Theory Z (prevailing localism): a few employees will be unusually egoistic or altruistic, but most are going to be localist. Interpersonal loyalty will bind them together, and growing affinity within the group will encourage “pro-social” behavior. People who feel excluded by the group will defect; those who feel included will cooperate. The manager’s job is to build a great team– to use an intuition for human localism to direct that tendency toward pro-organizational behaviors– and to marginalize or separate from (i.e. fire) those whom it excludes.
Theory Z is the most accurate of the 3 “human nature” calculi put forward thus far, insofar as it covers most of an organization. One might also note that these 3 theories correspond neatly to the MacLeod hierarchy. The executive suite (MacLeod Sociopaths) tends to be dominated by Theory-X mentality. These people know that they shouldn’t be trusted, so they aren’t inclined to trust anyone else. Clueless middle-managers tend to overestimate human nature and have a Y-ish bias. MacLeod Losers want to be socially acceptable and get along well with the group. The Loser world, driven by interpersonal and team affinity, is a Theory-Z one. They want to get along, and will manage their effort level to the exact point that keeps in the best social standing– the Socially Acceptable Middling Effort (SAME).
Theory Z may be the most accurate model of the MacLeod Loser class that does most of the work in an organization. This said, Theory Z also has some severe defects, having generated a cargo cult of teamism. Organizations waste time and money on pointless “team-building” paraphernalia: “mandatory fun” retreats that no one enjoys, in-office perks that adolescentize the workforce but detract from actually getting stuff done. A person is judged not on her individual merits, but based on (a) the social status, outside of her control, of the team on which she has landed and (b) as a tiebreaker, her performance on that team. The top people in the organization (rather disgustingly) call themselves “the leadership team”. Teamism also creates closed allocation, of which I’m not a fan. People who attempt to serve the organization directly by moving to more appropriate teams (which their native teams and managers view negatively as attempts to swing to higher-status teams) are viewed as “not team players” and, instead of being allowed transfer, are discarded. Teamism is especially defective in software, where large teams are almost never productive. Theory Z conformity actually solves the industrial problem: what’s the best way to manage concave work? Concave work is that in which the difference between mediocrity and excellence is minimal in comparison to that between mediocrity and noncompliance (zero) and variance reduction (at which management excels) is desirable. It doesn’t solve the technological problem that emerges when we confront convex work, in which the difference between excellence and mediocrity is critical and that between mediocrity and nonperformance is negligible.
The industrial paradigm is heavily oriented toward concave work. To see that, consider educational testing. Students are given very easy problems (most of the difficulty being in artificial resource limits– timed, closed-book exams) so that an average performer will get 85 percent right. The pass/fail line is then set at 70%– in other words, no more than twice the defect rate of the average. If we wanted to re-orient exams toward a convex world, we’d give students very hard problems so that average performers only get 20% (the pass rate might be 10-15%) and call excellence 40%. I’m not actually saying that’s a good idea– I’m out of my depth on these sorts of educational issues– but this is just one way in which in the presumed concavity of industrial work is visible in the pedagogical training people get before entering it.
Why did Theories X, Y, and Z exist? What will replace them? To answer this, it’s useful to look at humanity in several stages– agrarian, industrial, and technological– based on the prevailing rate of economic growth. In the agrarian era, from 10000 BC to about 1750, economic growth was slow (0.01 to 1.0 percent per year) and generally imperceptible in a human lifetime, especially in comparison to the local rises and falls of empires. Most people who wanted to get rich had to steal or kill. Mercantilism was the predominant economic theory, slavery was he most common form of organizational labor, and Malthus was right– not in his modeling of food production growth as linear, it being a slow-growing exponential function; but in his assumption that human population growth exceeded agrarian economic growth. (England didn’t have a Malthusian catastrophe, the Industrial Revolution intervening, but an overwhelming number of societies have had them. Some have argued that England, in the 19th century, outsourced its Malthusian problem to Ireland.) Economics in the agrarian era could be approximated as zero-sum; with population growing as fast the economy did, the average human’s standard of living didn’t improve much. Machiavelli probably wrote The Prince as satire, but it was apropos of the political climate of the time, and any time before or up to about 250 years after that.
The industrial world came into being gradually, with the advent of science and, later, rational government. It started in the late 17th century, and by the 18th, progress was (while slow) visible. Malthus, despite his pessimistic projections, acknowledged that growth existed: it just wasn’t happening very fast in 1798– about 0.9% per year. This rate being too slow to sustain human population growth, economics truly earned its name of “the dismal science”. Personally, I define the industrial threshold (very arbitrarily) as the point (early 19th-century) at which global economic growth reached 1.0% per year. Since I define the technological threshold at 10% per year, we haven’t gotten there yet. (More on this here.) But the most interesting companies (technology firms oriented toward convex work) have that capability.
The architects of the industrial world were quick to realize that coercive labor wouldn’t suit their needs: the jobs were too complex and variable to leave to people who’d been deprived of all autonomy (slaves). This had to be replaced with a semi-coercive model in which employees had some freedom: they’d need to have a boss to survive, but they could choose which one. Industrialists studied sailors (pirates, privateers, explorers and merchants– all different in how ships were run) to learn about group sociology apart from the agrarian state. They studied militaries, large organizations which had left important duties to non-coercive labor (and less important ones to semi-coercive conscripted labor) for centuries. They looked at prisons to see how free people handled the temporary loss of liberty that would be similar to a merchant’s conscription into a middle-management office role. (Slaves were rarely put into prisons, but beaten or killed.) As most complex organizations of the time were semi-coercive, vicious, and prone to violence (that was often a part of the business) this naturally led into a Theory-X mindset: bring ‘em in, and don’t beat ‘em so hard they can’t work, but don’t trust ‘em either.
The zero-sum world of agrarian humanity suffered a major blow in the mid-19th century when the industrialized nations began abolishing slavery, but human behavior is slow to change. Progressive mentalities began to form within nation states, but the old ways of interaction still existed between them, and also between advanced nations and the colonized people. That blew up spectacularly in the World Wars. By 1945, it was evident that being a jerk was not going to work anymore. Racism, for one example, lost all intellectual respectability after what Hitler did. Militant localism (jingoism) had to be replaced by a climate of prevailing respect and positive-sum thinking. The U.S. rebuilt the economies of nations it had defeated at war, instead of inflicting further economic penalty as occurred after World War I. The corporate analogue of these changes came out of positive psychology and political progressivism: Theory Y.
Unfortunately, while Theory Y built good organizations, it left them unable to defend themselves against bad people, as the 1980s showed us. Academia and basic research, in the U.S., still haven’t recovered from the barbarian attacks. Rather, it’s ongoing. Global economic growth dropped– from 5.7% per year to about 3.5– due to society’s disinvestment in progress and science. (It has recovered somewhat, to 4.8%, largely because of the declining relevance of the gutted U.S.) The chaos of the 1980s left working Americans bereft of faith in institutions and in the people they worked with. This led to the more cautious and accurate Theory Z, which correctly models human localism but prescribes a managerial style based on conformity and mediocrity– solving the concave/industrial problems, but failing at the convex/technological ones.
So, what is human nature? Are people inherently altruistic, egoistic, or localistic? We’ve seen a tendency toward localism– somewhere between altruism and egoism– as a default. Does this mean that “human nature is localistic”? Can we say that human nature is morally neutral (rather than good or evil, as some philosophers have suggested)? For my part, I don’t. I’m not convinced that it’s anything, because I don’t hold strong beliefs in human nature. I’m not sure that there’s a there there. We can understand biophysics mathematically, observe sociality, and experience spirituality, but a complete understanding of ourselves eludes us. “Human nature” is a “God of the gaps”.
Personally, my philosophical and religious beliefs are most in line with Zen Buddhism. It would be un-Zen to say that I am or am not a Buddhist, so I won’t, but I believe that the Zen approach to reality is among the most accurate. Most phenomena are empty. People tend weakly toward moral good, but circumstances can easily steer normal people toward lawful evil (Milgram Experiment) or even the chaotic kind (Stanford Prison Experiment). Theory X presumes a hostile human nature, as a slaveowner might. Theory Y presumes an altruistic one, leaving organizations unable to defend themselves against bad actors. Theory Z correctly concludes the human default to be localism but settles prematurely for mediocrity and cargo-cult teamism. None of these are well-equipped to tackle the needs of the technological era, in which the fast rate of growth and change necessitate unlocking creative energies, while a certain caution is needed regarding those who might wish to subvert the organization, or gain inappropriate dominance over it.
Theory Z gets what Y did not– that there are “toxic” bad actors out there that the organization must reject– but takes a stupidly teamist approach. People aren’t fired from Theory-Z organizations because they’re harmful, bad people, but because they’re “not a team player”. The effort is almost never exerted to assess alternative possibilities to individual defect, such as (a) a defective or poorly-configured team, (b) bad management, or (c) no-fault lack-of-fit. All of these are more common than the extremely damaging but rare toxic individual.
In the convex world, creative output isn’t going to come from “teams”, at least not in the managerial sense where the teammates have little control over membership and organization, and in which “team” is conflated with “career goals of the manager”. (Note: a manager who says “not a team player” is actually saying, “not a me player”.) Theory-Z management tries to control human localism, corralling people together and saying, “Be a team, now!” That doesn’t work very well. Rather, the creative energies that can produce technological-era progress come from individuals who sometimes choose to form teams, and sometimes to work alone.
Why is Theory Z just as foolish as X and Y? X and Y inaccurately claim “human nature” to have a strong directional bias toward self-serving egoism or pro-organizational altruism. It does not. Theory Z maintains a belief in “human nature” and assumes it to be inflexibly localist, because that’s an observed default. I maintain that “human nature” is pretty damn empty. People are mutable. Don’t settle for bland localism; you’ll get pointless institutions that way. People can be very good; try to make it happen. They can also be very evil; try not to have that happen. They will sometimes form teams; that is fine. They will sometimes work alone; that is also fine. Judge people on their actions and not assumptions about some “nature” that is illegible at best and nonexistent at worst.
How does one convert this into an actionable management style? Lord Acton said it very well:
Judge talent at its best and character at its worst.
Theory X fails because it allows no room for excellence (talent at its best). Theory Y fails to account for bad actors (character at its worst). Theory Z throws its hands up in the air and mediocritizes: let’s all just get along and be a team. How do we assess talent or character? The truth is that we can’t; we can only look at peoples’ actions. In practice, this usually gives us enough data. If people show even the potential for excellence, that should be explored and encouraged. On the other hand, it should be very rare (if ever?) that a person is presumed to have good character and given more power over others than is absolutely necessary. So I actually nailed it, already, above. Here is an upgrade of Theory Y that is more robust against problematic people:
Theory A: trust employees with their own time and energy; distrust those who want to control others’.
That is where I’ll stop for today.