Meritocracy is the software engineer’s Prince Charming (and why that’s harmful).

One of the more harmful ideas peddled to women by romance novels and the older Disney movies is the concept of “Prince Charming”, the man who finds a young girl, sweeps her off her feet, and takes care of her for the rest of her days. It’s not a healthy concept, insofar as it encourages passivity as well as perfectionism in mates. But it also encourages women to make excuses for bad (and often abusive) men. Because the archetype is so unreasonable, men who can make themselves seem to fulfill it are the manipulative and sometimes abusive ones, not genuine good (but flawed) men. I’d argue that software engineers have a similar Prince Charming.

It might begin as a search for “a mentor”. Savvy software engineers take knowledge and favor from multiple people, but every Wall Street or Silicon Valley movie showcases a mentor/protege relationship as the path to success. Meet this magical person, and he’ll take care of your career from there on out. That doesn’t exist for most people, either, and most software engineers learn that around age 25. Their counterreaction is to develop a bizarre self-reliance in which they start refusing help, wanting to work alone, and denigrating those who advance their careers based on “politics” or “connections”. Having too much dignity to wait for a magical mentor to rescue them from mediocrity, they insist on their new Prince Charming, an interpersonal force that will recognize and elevate talent: meritocracy.

The problem with meritocracy is that every organization claims to be one, yet almost all organizations are deeply political. Software engineers are not a subtle breed, so I must imagine that they imagine most non-meritocracies perceive themselves as such, and admit so much, and that’s clearly not true. Oil companies, banks, startups and dysfunctional academic bureaucracies all have this in common: they believe in their own meritocracy. Otherwise, they wouldn’t be self-consistent and stable. “We’re a meritocracy” means nothing. And what is “merit”? Organizations make promotion decisions not to recognize some abstract principle of “merit”, but on what is perceived to be in the short-term, narrow interest of the organization. It’s not what software engineers mean when they use the term merit, but one could argue that political acumen is organizational merit. The people who are promoted in and end up dominating organizations are… those most able to convince organizations to promote them, whether through delivering objective value or by trickery and intimidation. It’s a self-referential, Darwinian sense of “merit” akin to “fitness”. Darwinian fitness is neither a matter of good, bad, or anything other than the ability to self-replicate.

Of course, I know what software engineers mean when they say they want to live in a “meritocracy”. They want important decisions that affect their working lives to be made by the right people. The problem is that the ability to make good executive decisions is almost impossible to measure, reliably, especially on a timeframe that businesses would consider acceptable. Political machinations can happen, on the other hand, in split seconds. Saying something stupid in a meeting can end someone’s career, even if that person is, in general, a good decision-maker. It takes too long to select leaders based on the quality of their decisions, so organizations develop political side games that end up consuming more energy, time and attention (especially at high levels) than the actual work or purpose of the organization. Generally, this side game takes on the feeling of a war of attrition. Nonsensical pressures and busywork are added until people embarrass themselves out of contention, or their health fails, or they leave to pursue better options, leaving one person standing. Software isn’t different from that, with the long hours and posturing machismo and general disregard for health.

By believing in meritocracy, software engineers trick themselves into making excuses for awful companies and bad bosses that hurt their careers, destroy their confidence, and unapologetically exploit them. When they enter organizations, they tend (at least, when young) to want to believe in the self-professed “meritocracy”, and it’s hard to let such an idea go even in the face of adverse evidence. When these engineers are betrayed, it’s practically an ambush.

Older, savvier engineers know that few workplaces are meritocracies. In general, the claim of “meritocracy” is nothing more than a referendum on the leadership of the company. For this reason, it’s only in the midst of an open morale crisis (in which firing the obviously unhappy people isn’t viable because almost everyone is obviously unhappy) that one can admit to the organization’s non-meritocracy.

The expensiveness of it all

Software engineers’ belief in meritocracy costs them money and career advancement. By conflating their organizational position (low, usually) with personal merit, their confidence falls to zero. Computer programming, if marketed properly, ought to be “the golden skill” that allows a person unlimited mobility within industry. However, we’ve allowed the businessmen who’ve colonized us to siloize us with terms like DBA, operations, data scientist, etc., and use those to deny opportunities, e.g. “you can’t take on that project, you’re not a real NLP programmer”. As a class, we’ve let these assholes whittle our confidence down to such a low level that our professional aura is one either of clueless youth or depressive resignation. When they beat us down, we tend to blame ourselves.

Our belief in meritocracy hurts us in another way, in that we justify things being unduly hard on us. We hate the idea of political promotion. Perhaps, on first principles, we should. What this means is that engineers are promoted “confirmationally” rather than “aspirationally”. In HR-speak, confirmational promotion means that they’re given formal recognition (and the organizational permission to operate at the level they have been) once they’re already working at the level signified by the title. Aspirational promotion means that people are promoted based on potential, but this opens the door for a host of clearly political promotions. On paper, confirmational promotion is superior, if infuriatingly slow. (It requires people to blow off their assigned duties and to take unrequested risks.) Engineers, of course, prefer confirmational regimes. And what’s wrong with that?

Engineers don’t like to negotiate, they don’t like politics, and they’re against favoritism. Most have a proud self-reliance that would leave them uncomfortable even if personally favored. They’re also, in general, irreverent toward title as long as they believe they’re fairly paid. To them, confirmational promotion is right. The problem? Everyone but engineers is promoted aspirationally. Engineers need long, completed, successful projects to get bumped to the next level. What, pray tell, does it take to become VP of Product or Senior Manager as opposed to Manager, or to rise on just about any of the nontechnical tracks, in most tech companies? Absolutely nothing. There is no fucking magic there. You have to convince someone to “see something” in you. That is, you have to play politics.

To the engineer’s chagrin, playing politics comes easily for most ambitious people. It sure isn’t rocket science. Getting over one’s own moral objections is, for most people, the hardest part. The result of this is that nontechnical tracks, including management tracks that often cross over engineers, are characterized by easy aspirational promotion driven by favoritism and politics. The “meritocratic” engineering track is clearly much more difficult. There are people over 35, with IQs over 140, who haven’t made “senior engineer”, for fuck’s sake. (At a “mere” 125 IQ, you’re smarter than 97% of the nontechnical VPs at most tech companies.) It’s characterized by confirmational promotion, instead. And this is a point of pride for software engineers: it’s really hard to climb the ladder, because one is competing with the smartest people in the organization, and because while favoritism exists, political promotions are much rarer on the engineering track than on non-technical tracks (largely because promotions in general are rarer).

This is something that software engineers don’t really get. What do job titles actually mean in organizations? Companies will say that “Director” means one thing and “VP” means another, with some jargon about “the big picture” and a person’s responsibilities within the organization. The truth is that they mean very little, other than serving as political tokens that prove the person was able to get them. “Director” means, “he was able to negotiate a salary between $X and $Y from HR”. Not more.

Where it leads

If you ask an engineer whether he thinks he’s ready to be VP of Engineering or CTO, you’ll get a half-hearted, self-deprecating answer. “You know, I might be ready to lead a small team, but I’m not sure I’m at the VP/Eng level yet.” Cluelessly, he believes that “the VP/Eng level” exists objectively rather than politically. On the other hand, if you ask a nontech the same question, he’ll take it without hesitation. Even if he’s terrible at the job, he gets a generous severance (he’s a VP) and will fail up into a better job. The relevant concept here is the effort thermocline, or the level in an organization where jobs stop being harder with increasing rank, but become easier (although, more political). It can be politically difficult to get a job above the effort thermocline, but it’s ridiculously easy to keep it. At that point, one has power and credibility within the organization sufficient that one cannot, personally, fail due to a lack of effort.

Nontechs, except for clueless people in their 20s who haven’t figured out what they want to do, go into work with one purpose: to get promoted beyond the effort thermocline. That’s not to say that they’re all unambitious or lazy. They’re just realistic about how the game works. Even if you want to work hard, you don’t want hard work to be expected of you. If you’re an SVP and you show up for work every day and put in an honest effort, you get credit for it. If you’re a worker bee, you get nothing for your 8-or-more hours per day. It’s just what you’re expected to do.

Above the effort thermocline, promotion is political, and people stop pretending otherwise. When you get “into the club”, you’re permitted to speak frankly (and hear frank speech) about how the organization actually works. The issue with the engineer’s mind is that it clings to a belief in right and wrong. It’s moralistic. It struggles to accept what people really are. Engineers don’t want to contend with the basic fact of most organizations, which is that they’re politically corrupt and dysfunctional, because most people are lazy, greedy, and weak. I’d likewise argue that this is connected to the low levels of acquired social skills in people like software engineers. It’s not a neurological disability for most. They never learn to read cues beyond a subconscious and juvenile level, because they hate what they see, which is that humans are mostly defective and that many are horrible.

Engineers don’t like the concept of the effort thermocline, or of political promotion in general. As much as they can, they’d refuse to have it within their ranks. I’d tend to side with the engineers. Who wouldn’t, from first principles, prefer a meritocracy over a political rat’s nest? The business responds by turning off political promotions for most engineers– while the rest of the organization continues to get them. The result is that, while they start off well in terms of pay and occupational dignity, engineers are being surpassed by the nontechs (who gleefully accept political promotions and feel none the worse for it) by age 30 and, by 40, are undervalued and way underpaid relative to their worth to their companies.

Engineering tracks in organizations are notoriously title-deflating, in comparison to the rest of the business world. Most software engineers would be appalled by how little talent and work ethic are required to become a non-technical VP at even the most esteemed tech companies. Many of these people are lazy (11-to-3 with 90-minute lunches) and just plain dumb. And by dumb, I don’t mean programmer dumb (understands the theory behind neural networks, but has never put one in production) but actual shame-to-the-family, village-idiot stupid. You know how towns in the Midwest used to bus their “defectives” to San Francisco in the mid-20th century? Well, so does the corporate world, and they end up as nontechs and upper management in tech companies.

Conclusion?

Meritocracy is the Prince Charming of the software engineer. It doesn’t exist. It never has, and it never will. Some have asked me to comment on recent HR issues occurring at open-allocation technology companies. The only thing I can say is that, yes, open-allocation companies have serious political issues; but closed-allocation companies have those same issues and more. Open allocation is strictly superior, but not a panacea. When there are people, there is politics. The best an organization can do is to be fair and open about what is going on, and hope to achieve eventual consistency.

Every organization defines itself as a meritocracy, and most engineers (at first, until they are disillusioned with a company) will tend to believe it. They aren’t stupid, so they don’t believe their companies to be perfect in that regard, but they (cluelessly) tend to believe that meritocracy is a core value of the leadership. Almost never is that the case. “We’re a meritocracy” is code for, “don’t question promotions around here”.

The Prince Charming delusion of meritocracy is dangerous because it leads people to make excuses for bad actors. Every company has to lay off or fire people, and frequently these choices are made with imperfect information and under time pressure (one large layoff is less damaging to morale than several small, measured, layoffs) so often the wrong people are let go. A self-aware organization understands this and lets them go gracefully: with severance, outplacement assistance, and positive reference. A delusional “meritocracy” has to cook the books, create psychotic policies that impede internal mobility for everyone, and generate useless process in order to build phony performance cases. In practice, just as many people are let go as in established (and less delusional companies) but their reputations have to be demolished first, with bad project assignments and hilariously disingenuous “performance improvement plans“. Personally, I’d rather see the honest, times-are-tough, layoff than the tech company’s dishonest “low performer initiatives”, much less the permanent (and destructive) rolling layoff of stack ranking.

The biggest casualty, however, of the typical engineer’s head-in-sand attitude toward political promotion is that they never stop happening to everyone else. Engineers just make themselves ineligible. Engineers want promotion to be confirmational (that is, resulting from demonstrated merit) rather than aspirational (that is, based on potential and, therefore, subjective, personal, and political). The problem with this is that, after 10 to 20 years, most engineers haven’t been able to demonstrate even 20% of what they’re capable of. They kept getting crappy projects, were never allowed to finish anything, were rushed to produce work that broke under strain, and their lack of finished accomplishment (due to political forces often not their fault) left them ineligible for promotion to more senior roles, but too old to even pretend in the junior roles (hence, the age discrimination problem). After that gauntlet of false starts and misery, they’re still answering to nontechnical people and executives who had the benefit of aspirational, political promotion. By refusing to play politics and believing in the false god of meritocracy, they deprived themselves of the full spectrum of causes for advancement. Politics, however, went on regardless of whether they believed in it.

This false meritocracy is very clever when it comes to reinventing itself. Few expect a large company like, say, Alcoa or Exxon-Mobil to be a meritocracy. Engineers have figured out, as a group, that “big companies” become political. The response? Startups! Venture capital! The actual result of this has been to replace well-oiled and stable (if inefficient) corporate non-meritocracies with the mean-spirited and psychotic non-meritocracy of the VC-funded ecosystem and the feudalistic reputation economy that the leading investors, through collusion, self-dealing, and note-sharing, have created. The cheerleading of intellectually charismatic figures like Paul Graham and Marc Andreessen has managed to create a sense of meritocracy in that world, but belief in those idols also seems to be waning, and I’m proud to say that I contributed to that loss of faith.

If meritocracy is impossible, what should we do? As individuals, we need to learn to fight for ourselves. It’s not undignified or desperate or “pushy” to look out for our own interests. It’s what everyone else is doing, and we should get on board. As a collective, we need to have honest introspection on what we value and how best to achieve it. Perfect meritocracy within any organization is impossible. It is good to strive for that, but bad to believe it has been achieved anywhere. Eventual consistency and technical excellence are achievable, and we should aim for those.

Before we do anything, though, we need to learn how to fight for ourselves. Bringing frank knowledge to the good, in that fight, is what I’ve been striving to do all along.

The right and wrong way to lie in business, Part 2

In the previous essay, I opened an honest discussion of the ethics and practice of lying in business. I argued that it is better to tell one large-enough lie than a hundred small lies, and that the best lies are those to establish social equality in spite of an existing trust-sparse environment. That is, you lie to flip one’s bozo bit to the “off” position, but not to go any further and certainly not in an attempt to establish superiority over the other party. I also argued that one should aim to lie harmlessly. People who spread malicious gossip ruin themselves as much as their targets. They become, figuratively and literally, bad news. Now I’ll cover a third principle of lying in business: own the lie.

3. Owning the lie.

Lies, even ethical ones, can be corrosive to relationships. People have a visceral aversion to being lied to. When you lie to someone, you’re making the statement that you don’t believe the person can be trusted with the truth. In reality, most people can’t be trusted with the truth. The truth is too complex, they’ll only understand it partially, and often conclude against you based not only the truth but on their own superficial, limiting prejudices. However, it’s not socially acceptable to tell people that you can’t trust them with the truth. You can’t just say, “I’ve inflated my job titles because we barely know each other, and I’m afraid that you’ll write me off if you know that I was only Director, not a VP”. This means that you never want to be caught lying to someone. It’s less damaging if you tell the lie to a group that they happen to be a part of.

Lying to someone is corrosive because people take it personally. This means that, when you decide to lie, you have to be comfortable telling the lie to everyone. Moreover, you have to act, going forward, as if the lie were true. There’s a saying in creative writing, most often applied to poets, that the bad ones borrow and the good ones steal. Incompetent people lack the originality to deviate from a found gem, so they replicate it in a way that is overly literal and clumsy. The adept creators, on the other hand, know that very little in the world is entirely original, so they willingly take ideas from disparate sources and merge them in a way that is uniquely theirs. A similar rule applies to lying in business: steal, don’t borrow. If you’re going to lie about something, you must be prepared to continue lying about it until the end of time. People are unable to detect truth in others, so they fixate on consistency (which is hypocritical, because human beings are deeply inconsistent) instead. The result of this is that, for any lie you intend to tell, you must make sure it is consistent with existing written facts, and live in a way that continues to be consistent with it.

Things that are inconsistent put people ill-at-ease. For example, Wall Street has a negative reputation among the public and, while some of that’s earned, much of it’s not. People hold a negative view of markets in general, and a large part of that is that they appear inconsistent. The “fair value” of a corporation can rise or drop by a billion dollars in a day for no apparent reason. (More accurately, there is a trade-off between availability, efficiency, consistency at a given time, and consistency across time. Markets favor the first three and abandon the fourth.) To people who want everything to be “fairly” priced, it seems like something shady is going on. How can it be that the “fair value” of something changes so erratically? In reality, nothing shady is (at most times) going on; it’s just that the platonic “fair value” doesn’t exist. To the general public, however, this feels like inconsistency, and hence there are complaints about “price gouging” when market forces drive the price of gas to $4 per gallon.

Of course, there are bad things that happen on markets. There are manipulators, dishonest schemes, and moral hazards pertaining to risk (especially when derivatives are used) all over the place. Markets also do a great job of local optimization (what is the best price for butter?) but fail at achieving equally important global targets, such as avoidance of poverty and social breakdown, enforcement of human rights, protection of the environment, and universal healthcare. Much that happens on Wall Street deserves to be despised, and I don’t intend to claim otherwise, and much of the American corporate system is far from a free market anyway. I simply purport that the visceral dislike humans have (and have had, for centuries) for market mechanics has little to do with the actual abuses, and is more a result of an overreaction to their obvious (but not morally objectionable, since supply and demand do change, sometimes rapidly) inconsistency. Something that is constantly changing (such as a claimed “fair price”) is distrusted. That applies to human beings as well. An intelligent person changes his views when they discover new information, or just because they think about a problem in a different way, but a politician whose ideology evolves is called a “flip-flopper”.

So what does it mean to own a lie? Many people, when they tell a lie for the first time, get petty enjoyment out of it. “I got away with it!” Don’t fall for that petty “rush”. It’s actually really easy to get away with most lies. That’s why the consequences for being caught are often so disproportionate to the offense. Many companies, at least by their outward claims, hold a zero-tolerance policy toward lies on resumes because, in fact, 95 percent of those lies are never caught, requiring the penalty for those who are caught to be at least 20 times the possible gain. (Moreover, in that other 5 percent, those are usually people who are going to be fired anyway, and put under re-investigation because the company wishes to renege on a contractual executive severance, or to somehow extort the caught liar.) Getting away with a lie is actually the typical, default, outcome. It shouldn’t be celebrated. One definitely shouldn’t take in the petty thrill of “getting one over” on someone. Some people get addicted to that thrill and become the purveyors of small or harmful lies: the blowhards and gossips. That’s useless, because it’s so easy to get away with lies.

When you decide to lie, to improve your career or reputation, you’re not “getting one over” on anyone. You’re taking a non-truth and making it true. You will forever act as if it were true. The people you’ve lied to haven’t been defeated or bested. You’ve had no win against them. You changed the truth independent of them. You, then, told that truth to them. You related to them as equals, not as if they were gullible inferiors.

If the above sounds vaguely psychotic, it’s not my intent. Yes, if you’re going to use a lie, you must own it. For example, if your lie is that a previous employer placed you in its high-potential program, you have to stop complaining about that company and how unfair the place was. It’s best to convince yourself that the lie was true, because it has become the new truth. Now, if one began owning delusions, one might tend toward (if not psychosis) pathological narcissism. That’s clearly not good. Instead, I would argue that one should only tell ownable lies. That restricts the scope of what one can lie about, which is generally a good thing. Lying is somewhat of a surgical art. You have to change one aspect of “the working truth” without creating inconsistencies or having too many side effects on unrelated “working truths”. It’s far from easy to do it right.

I initially said to “lie big”, and I stand by that. By “big” I mean effectively and tactically. The social costs of lying (even if not caught) are severe enough that one should not lie without an agenda. A hundred small lies become impossible to keep up. That one should usually lie harmlessly, and restrict oneself to ownable lies, push downward on the scope of reasonable lies and keep a person from lying too big. Some people lie about the college they attended. That’s a terrible idea. Faking a four-year experience, to one who has actually had it, is pretty much impossible. If the lie can’t be owned, then don’t tell it.

What is the truth? How can it be “modified”?

The concept of truth is much more complicated than people like to admit. “It is 39 degrees in New York City.” Is that a true statement? As of 8:16 am on April 6, 2014, it is objectively true (at least, according to The Weather Channel). At other times, it will be false. There is nothing about New York that makes it inherently 39 degrees. That’s a property of it at a given time, and the world on April 7 will be nearly indistinguishable (apart from trusted written record) from one in which New York’s temperature was a different number. “In Inception, Cobb dreamt the entire thing.” Is that true? People debate it, and while I’d rather not spoil the movie, I think the evidence points a certain way on that. But is it a fact? No, it’s a conclusion one draws from presented fiction. There’s a book (I won’t name it, because that would spoil it) where the titular character discovers that she’s a character in a book, written for a woman (call her Helen) who’s “real”. Of course, Helen’s also a character in a book, so “Helen is real” is not a truthful statement about reality about intent. The author intends her to be real within a universe that is fictional. Ah! But can anyone other than the author speak to intent? And couldn’t that author truthfully (or, at least, consistently) represent his intent in myriad ways?

You should never lie in a way that contradicts an objective fact. This should be obvious. Don’t cook the books; you will probably get caught. The good news, for those who need to lie, is that most human behavior and judgment (especially in business) is based on pseudofacts, which are much more manipulable. “Erica is good at her job.” “Stanley was formally recognized as a high-potential hire.” “Andrea does not get along well with the team.” “Jason was only promoted because he’s the boss’s favorite; Jason must have something on him.” All of those sound like factual statements, but are completely subjective.

Great minds discuss ideas, middling minds discuss events, and base minds discuss people. (Most minds are base, and great minds are base some of the time.) Ideas stand alone on their own merit and can be debated from first principles. The extreme of this is mathematics, where things are objectively true (within a specific formal system) or not. Even “controversies” within mathematics (e.g. the Axiom of Choice) pertain not to whether the axiom is valid mathematics (there is a valid mathematics with Choice, and a valid one without it) but to the subjective question of which of these equally valid mathematical frameworks is more useful and deserves more study. As for events, those stand in for facts in a more parochial but also more applicable way. “2 plus 2 is 4″ is a factual theorem that is always true, everyhwere. “The temperature in New York at 8:16 am was 39 degrees” is an event, or a piece of data, relevant to one place and point in time. We can reason about why the seasons exist, in the realm of ideas, and such explorations have informed humanity’s understanding of the solar system and, eventually, the cosmos; but if we want to know what to wear for a trip, we’re better off with empirical data (events) pertaining to the weather we can actually expect. Further down the line, we have the business world, still driven by emotion far more than by data. There, judgment of people (the ultimate bike shed) outweighs anything else, and one should do whatever is necessary (lie, intimidate, cajole, bribe) to make sure the relevant parties come down on the right side.

In the realm of ideas, a lie is an objective falsehood like “2 plus 2 is 5″. One should assume that those will always blow up, making the liar appear foolish. However, in the realm of events, lies can be inserted relatively easily. “At 8:16 am on April 6, 2014; the temperature in New York was 60 degrees.” That’s false, but it could conceivably be true. New York, in April, has cold days and warm days. Nothing contradicts it (although there are other, more reliable, readings that would call it into doubt, since New York isn’t known for microclimates). Even with that written record, it’s theoretically possible (if unlikely) that one observation point recorded a valid 60-degree reading while the rest were around 39. All that said, the realm of events has got to remain mostly truthful. Let’s say that the world of mathematics is 100% truthful. Events that are recorded as true in various databases (climate, physics experiments, business) are probably true 99.9999% of the time. Occasionally, there’ll be a ridiculous reading. When it comes to people, especially in business, it’s mostly non-truth that we call “reputation”: social-status-biased judgments that, while full of exaggeration and rumor, are used because they’re the best proxy we have. Not quite lies, not quite truth. Bullshit would be a good technical term. Most of the information we use to judge other people in the business world is bullshit: non-verifiable, non-truthful non-lies. “Sam left because he couldn’t hack it.” “Teresa wasn’t a team player.” “Bill was the obvious leader of the group.” “Mark only wanted to work on the fun stuff.” These statements are utterly subjective, but it’s their subjectivity (and their bullshittiness) that makes them so powerful. People are viscerally drawn to those of high status. Merit is something we invent because we want to believe we’re more than animals, and that our decisions are made from more of a high-minded place than they actually (for most people) are. Status is what humans judge each other by, and it’s almost all bullshit. Sam (above) left because his lack of pedigree had his superiors dropping low-end grunt work on him. Teresa’s high intelligence intimidated those around her and she was saddled with the “not a team player” epithet. Bill claims he was the leader of the group, and the rest were too meek to oppose him. Mark was an objective high performer but disliked for his political views, and “only wanted to work on the fun stuff” was the only charge that could stick, in the effort to damage his reputation. All of that stuff, above, is judgment of people (complex organisms, simplified with labels like “not a team player” or “high performer”) given false objectivity. One lies because one needs to fight it, and to “correct” unfavorable judgments of oneself.

False events and the new truth

To lie effectively, one has to operate in the realm of events, which is the world of middling (and practical) minds. In the realm of ideas, it is hard to lie, because bad ideas usually end in some sort of contradiction or failure. The judgment of people can’t be addressed directly, because it’s not socially acceptable to discuss, directly, what people are actually trying to figure out. Let’s say that you’re under attack. I’ll use, again, the case of a negative reference when seeking a job. Your ex-boss is saying that you were a poor performer and that he wouldn’t hire you again. What is the best counterattack?

  • A. “Well, he’s a jackass.”
  • B. “That’s because he’s a child molester.” (Assuming that’s a lie.)
  • C. “You know, that’s funny, because three months after I left, he called me begging to re-join his team. He even offered me a 20% raise.” (Assuming that’s a lie.)
  • D. “He never liked me, because I’m a Red Sox fan and he’s a Yankees fan.” (Assuming that’s a lie.)

The answer is, of course, C. But why is it C? Let’s eliminate the other three. Answer D violates “lie big”. It’s a small lie and it’s just not believable. There might be a few people who are so vested in sports fandom that they’d ruin someone’s life over it, but they’re rare and typically don’t acquire organizational credibility such as a management position. It’s a small lie. When you use a small lie as “the explanation” for something negative in your past, you lose credibility, because even if you may not have deserved the hit against you, you’re showing a lack of insight into what happened. So strike D, that’s a no-go. Answer B violates “lie harmlessly”. It’s understandable that one would be angry when facing a negative reference, and wish to ruin that person’s reputation and life. That might be a worthy project in its own right. However, the practical need at the moment is to recover from the accusation of poor work performance, not to damage the one making the claim. “He’s a child molester” doesn’t answer the question. It raises more questions. (How do you know? Why haven’t you reported him?  It’s too big of a lie, way too harmful, and doesn’t help you. His being a pervert doesn’t invalidate his accusation against you.

We’ve stricken the two obvious bad answers. What about Answer A, which is arguably the only truthful answer (non-jackasses don’t ruin their ex-subordinates’ careers, so I can call A “truthful” from first principles) among the four? Aside from the general prohibition against “bad-mouthing” ex-employers– that’s a prohibition that might not apply here (negative references put you squarely into atypical territory, and when you have to choose between your reputation and an ex-employers you always favor yours)– why does “he’s a jackass” fail you? You’re addressing judgment of people directly– too directly, in fact. That’s not socially acceptable, because gossip is so low-minded. You have to make it look like you’re discussing objective events. If you don’t have any, make some up.

Most of the judgment-of-people bullshit (to use the technical meaning of bullshit, which is a non-truthful non-lie, neither true nor false because the claim is of such low value that its truthfulness is undefined) can be subverted with the insertion of non-truthful events. Bad reference from an ex-boss? Repeat again: “three months later, he begged me to rejoin his team.” Bad performance review interfering with internal mobility? “I accidentally upstaged him in a meeting with his manager by having an idea that his boss really liked. He tried to take credit and, being loyal, I actually let him, but his boss still attributed it to me.” Fired from a previous job? “I left on amicable terms, and my manager has repeatedly said that the door’s still open.” Ex-boss said you’re “not a team player”? “Man, he told me not to work so hard because it was making the rest of the team insecure. I thought we were past that, but I guess not.” You can almost always recover from a smear, even when cloaked in false objectivity, by inserting non-truthful events (verbal conversations, with no record, are the best) into the stream. When you do so, you’re not “telling a lie”. You’re changing the truth. Those conversations, even if they never happened physically, now did happen. You make it a fact that your ex-boss begged you to rejoin his team, and your choice to remain with your new job (your professionalism) is actually why he’s smearing you. This makes the explanation for his smear against your performance much simpler than the complex array of things (typically, a months-long story that caused bad things to happen to a good person) that actually happened. It’s a mind-fuck, I won’t deny it. That’s why one shouldn’t lie often.

Ethics, past and future

I’ve put forward that there are good and bad liars. A “bad liar” could be the ineffective kind or the unethical kind. The ineffective ones are the blowhards. They may or may not get caught in specific lies, but they fail to achieve their desired effects. Seeking to elevate their social status through non-truth, they undermine their own credibility and become laughingstocks. Those who strive to achieve social superiority through lies usually end up that way. It’s much better to lie just enough to establish equality and basic credibility– that is, to overcome the prejudices that emerge in a trust-sparse system. Doing this requires that one’s lies simplify. The problem with blowhards is that they’re so in love with their own (exaggerated or outright made-up) stories that they litter the “claimed event stream” with complexity and lose credibility.

Let’s step away from the blowhards (really, they aren’t that interesting) and ask a higher-minded question. What differentiates the ethical liars from the unethical ones? This is a subjective matter (I’m sure not everyone will agree with my definition of ethical) but I think the crux of it is that ethical liars focus on fixing the past: making it simpler and cleaner so it goes down easier. They’re manicuring their own reputations and removing some hard-to-explain bad luck, but not trying to mislead anyone. On the other hand, fraudsters intend to deceive about the future. Con artists want their targets to believe in high-impact future events (specifically, financial returns) that simply aren’t going to happen. Ethical liars are making it easier for counterparties to make the right decision for both parties, and using non-truth to overcome the pernicious, lose-lose, inefficiency of a trust-sparse world. Often, simplifying non-truths about the past are necessary to overcome embarrassments that, trivial as they are, might disrupt the trust needed to build a future that is properly coherent and (paradoxically) more truthful than what would emerge if those non-truths weren’t there. Unethical liars, on the other hand, want their targets to make what are, for the target, wrong decisions. That is, I think, the fundamental difference. Ethical liars simplify the past to make the future truthful. Unethical ones want the future to contain even more untruth (specifically, untruth that benefits them).

It is bizarre that, in the judgment-of-people theatre of business, the best way to achieve truth is (sometimes) with a strategic lie. I don’t know how to resolve that dissonance. It’s probably connected to quite a few of the deeper philosophical questions of general human politics. That’d take at least another essay to explore.

Until then, go forth, beat the bad guys, and lie carefully.

The right and wrong way to lie in business, Part 1

There’s a New York Times article entitled “The Surprisingly Large Cost of Telling Small Lies”. According to it, the best strategy for success in business is never to lie. Not surprisingly, few people can get through even a short conversation without telling a lie. I don’t disagree with the premise that honesty is often the best approach to forming a genuine, long-term relationship. However, it wouldn’t be honest for me to give the advice that one should never lie in business. In fact, there are times when it’s the optimal approach, and even cases when it’s ethically the right thing to do.

It’s rare that someone will say, under his or her real name, that people should lie on their CVs or have peers pose as ex-managers on reference calls or otherwise misrepresent their prior social status. I won’t exactly go that far. If the purpose of your lie is to turn a truthful 90th-percentile CV into a pants-on-fire 99th-percentile one, you should usually spare yourself the headache and not lie. If you have an ex-boss who hates you and has cost you jobs with negative references, you probably should have a peer fill in for him. These are judgment calls that come down to a case-by-case basis, and I don’t think the general problem has a simple solution.

What I can offer are three principles for lying in business: lie big, lie harmlessly, and own the lie.

1. Lying big

By “lie big”, what I really mean is, “lie effectively”. The lie has to be big enough to matter, because unskilled and small lies will drag a person down with unanticipated complexity. You can easily paint yourself into a corner. We just don’t have, as humans, the cognitive bandwidth to keep up ten unrelated lies at the same time without becoming utterly exhausted.

The cost of a lie isn’t, usually, being caught. Perhaps 99% of the lies people tell to inflate their social status are never explicitly caught, but they can do damage on a subconscious level. Social interaction is a real-time problem, and the psychological overhead involved in keeping up a network of lies is often detectable. The lies themselves aren’t detected, and the conscious thought, “he is lying”, probably never occurs. However, the liar appears less genuine. Astute people will find him “fishy” or “sketchy”. He might seem like he’s trying too hard to impress people, or that he’s a “politician”. Nothing formally sticks to him, but he doesn’t warm hearts or earn trust. That is the most common case of the person who lies too much: never caught, but never really trusted. He’s a blowhard, full of himself, and probably doesn’t have the best motivations.

That, above, is the logical endpoint of too many lies. How to people get to blowhard status? Small lies. Pointless, minuscule lies that inflate the liar’s status but in a meaningless way, like cheating at a golf game. In sitcoms, these “white lies” blow up in some hilarious way and are resolved inside of 20 minutes (“oh, that Jack!”) In real life, they tend to just accumulate. People don’t like confrontation, and it’s more fun to egg the liar on anyway, so they prefer not to call the blowhard out on his shit. They’d rather watch him make a fool of himself. The only people who’ll do that for the blowhard are his best friends; but some people are so addicted to the petty thrill of tiny lies that they alienate everyone and have no friends. Then, they’re past the point of no return.

One big lie that achieves a strategic effect is infinitely superior to the cognitive load and social upkeep of a hundred little lies toward the same effect. Make the lie count, or don’t lie.

So, what are some good reasons to lie? This is going to sound completely fucked-up, but the best reason to lie is to earn basic trust (a technical term that I’ll define later). Now that I said something that sounds obnoxious, let me explain why it’s not. People lie, most of the time, for one basic reason: social status modulation. This establishes a taxonomy of lies that gives us four categories: (I) up-modulating status to equality, (II) up-modulating status past equality, or to superiority, (III) down-modulating status to equality, and (IV) down-modulating status to inferiority. I’m not going to focus on down-regulation here. Type III lies are usually harmless omissions, justifiable as social humility, and Type IV is sycophantic and rarely useful. So, let’s focus on the upward lies: types I and II. Type I lies are to establish equality, and those I recommend. If you’re an entrepreneur dealing with an investor who’s never been fired, then you’ve never been fired (even if you have). Type II lies are the lies of the blowhard. Avoid those. Once you are lying just to seem smarter, better, or more connected than the people you are lying to, you’re going to come under a hundred times more scrutiny. If you only lie to establish equality, the level of scrutiny is much lower, because to scrutinize your claims is to assert superiority, and people (even in positions of power) generally aren’t comfortable doing that.

So, the best reason to lie is to up-regulate one’s status to equality, and not beyond it. People who fixate on superiority become small liars. Rather than lying strategically, they’re so focused on being dominant at everything that they lie even when the stakes are petty, and eventually make fools of themselves.

That said, when is it right to lie? Examine your past, your job history, and reputation. Are you a social equal with the other party, and would you expect him to feel that way? You need not be more accomplished; he might be older or just luckier. You need not be richer. You do need to be a social equal. Figure out what that means in your given context. Next, are you looking to form a long-term friendship or a “weak tie”? If the former, try to avoid generating new lies. If you’re interested in forging genuine friendships, honesty really is the best policy. Weak ties have different rules. A weak tie is a tacit understanding of social equality and credibility. It’s only about what I’ve termed “basic trust”. You don’t get a lot of time in which to form (or not form) it. You’re going to be judged superficially. It’s not enough to be a person of merit; you have to look like one.

A theme that continually recurs around the question of honesty is complexity. Small lies generate a nasty complexity load. Even though you won’t be caught on specific lies– because if you’re a known blowhard, no one cares– you’ll start to lose your general credibility (basic trust). Astute people can practically smell the smoke of an overheated mind. Complexity is the devil. In software, it’s a source of bugs. In data science, it’s a source of “over-fitted” models with no predictive power. In politics, it’s a source of exploits and loopholes. In social interactions, it’s a source of general enervation. People throw their hands up and say, “I can’t figure this shit out”, and it’s just lose-lose. When you want them siding with you, they back away slowly.

So when is it the absolute right strategy to lie? Sometimes, the truth is too complex for people to handle. The lie might be simpler, and this might favor it, especially under the superficial judgments that form (or break) weak ties in business.

Take the biggest disappointment of your career, dear reader. Chances are, there were multiple contributing factors. Some were your fault, some weren’t. There were probably months of warning signs along the way. This setback or disappointment will be different for everyone, so let’s come up with a model example: a two-year-long “hero story” that still leads to a negative outcome, such as being fired. On the social market where weak ties are formed, are most people willing to hear a story that complex, and expend the cognitive energy necessary to come down on the right side? Nope. They hear the words “I was fired” and the “bozo bit” goes into the on position. Everything else becomes a story of a weak or unlucky person trying to justify himself. In these cases, it’s better to present a simple lie that goes down easy than the complex truth. It might even be more socially acceptable. For example, “bad-mouthing” an ex-employer is usually more disliked than telling a bilaterally face-saving story (that is, a lie).

This importance of weak ties and simplicity to the heart of it, which is the (above-mentioned) notion of basic trust. Basic trust doesn’t mean that a person is trusted in all things. Would you, as reader, trust me with a million dollars in cash? Probably not. However, you’re reading what I am writing, which means you trust that what I have to say is worth your time. Basic trust is the belief that someone is essentially competent and has integrity. The person is worth hearing out, and treating as a social equal. This is more bluntly termed the “bozo bit”, or “flipping the switch”. If the bozo bit is “on”, that person’s input is ignored. If it’s “off”, that person will usually be treated as a social equal, regardless of differences in rank or wealth.

Organizations can be trust-sparse or trust-dense, and tend to “flip the switch”, collectively, at once. Elite colleges are trust-dense, insofar as students generally trust each other to have valid intellectual input. Some people may lose that trust (because there are idiots everywhere, even at top schools) but new people start out with the bozo bit in the “off” position. There’s a basic trust in them. Most companies become trust-sparse at around 50 people. The way one can tell is to examine its attitude toward internal mobility. Formal performance reviews are already a sign of trust-sparsity, but when those become part of the transfer packet, the organization is stating that it only considers managerial input in personnel decisions. Trust sparsity is the rule, and non-managerial employees (i.e. those who haven’t been vetted and placed on a trusted white-list) have their bozo bit “on”. At a later point, organizations become trust-sparse even within the managerial subset, and begin requiring “VP-level approval” for even minor actions. This means that the organization has reached such size that even the managerial set exhibits trust sparsity, and only a smaller subset (those with VP-level titles) are trusted by the organization.

Trust sparsity is unpleasant, but something one must contend with. If you cold-call a company or send a resume without a personal introduction, you have to prove that you’re not a loser. One might find high-status arrogant people with shitty prejudices (“I don’t hire unlucky people”) abhorrent. Abstractly, I might agree with that dislike of them. That doesn’t mean they’re never useful. I wouldn’t want to have a meaningful relationship with a hiring manager who thinks anyone with a less-than-perfect career history is a loser, but he is a gatekeeper, and I might lie for the purpose of using him.

When should you lie in business? There is one good reason. You lie to “flip the switch” on your bozo bit. It’s that simple. In a trust-sparse organization, or the world at large, it often takes a reasonably big lie to achieve that. Lying by saying that you earned “Employee of the Month” in July 2007 won’t do it, because that’s one of those small lies that really doesn’t mean anything; you need affirmation that your previous company considered you a genuine high-potential employee. (You were placed in the semi-secret “high-potential program” and had lunch once a month with the CEO.) So lie big. Make the lies count, so you can make them few, and keep that complexity load down. Massage your past and reputation, if needed. Change a termination to a voluntary departure. If it suits your story, back-recognize yourself as a leader or a high-potential employee by the organization where you last were. Flip that bozo bit into the “off” position, establishing social equality with the other party. And lie no more than that.

2. Lying harmlessly.

It is my reckless honesty that has me speaking on the rectitude of certain classes of lies in business. Good lies are those that get past peoples’ prejudices to establish basic social equality and form useful “weak ties”. I do not advocate being unethical. If you make a promise you can’t possibly deliver, you’re doing the wrong thing and deserve the punishments that fall upon you. If you claim to be a licensed doctor and you’ve never set foot in a medical school, that’s job fraud and you deserve to go to jail. That’s not what I’m talking about.

If you massage dates on your resume to cover a gap (remember that a simple lie can be better, socially, than a complex truth) then that’s ethically OK; you’re not doing anything wrong. (Still, don’t get caught on that one. Many in business have Category 5 man-periods over even the smallest resume lies. Best to keep lies out of writing.) If you falsely claim to been in the top bonus bucket during your analyst program, because the private equity firm to which you’re applying won’t interview you otherwise, you’re doing no wrong. They deserve to be lied to, for having such a shitty prejudice.

Lies that hurt people are more likely to be caught than those that don’t, and most lies that hurt people are flat-out unethical. Avoid that kind. Your goal in lying should be to make yourself win, not to have others lose.

In a trust-dense setting, one should never have to lie, and one generally shouldn’t lie, at all. It’s lies that bring the organization or subculture toward trust-sparsity in the first place! On the other hand, trust-sparsity admits opportunities in which one can lie while causing no harm to anyone. In trust-sparse settings, people are assumed to be low-status idiots (“bozos”) unless formally recognized otherwise, with accolades such as job titles and managerial authority, and they’re almost never given the opportunity to prove otherwise. If a person of essentially good character and ability can use strategic non-truths to establish credibility, and lies no more than is necessary to do that, then no harm was done. In fact, it can be ethically the right thing to do. The person simply took ownership of his own reputation by inserting a harmless non-truth. This “flipping one’s own switch” is subversive of the general trust-sparsity, but trust-sparsity is goddamn inefficient at any rate, and society needs this sort of lubrication or else it will simply cease to function. This is why, in the MacLeod analysis of the organization, so-called Sociopaths (who are not all bad people, but generally political and willing to employ the forms of dishonesty I uphold) are so necessary. Without lies, nothing gets done in a trust-sparse world.

The problem is that people often do lie harmfully. There are two major kinds of harmful lies. The first is a false promise. This ranges from outright job fraud (claiming a capacity one does not have) to the sympathetic but reckless, but not consciously dishonest, optimism of the typical entrepreneur. I am in no way advocating promises that one cannot keep. Rather, I’m advising people to bring their reputation and status to where they belong, but not past that point. Don’t claim to be a surgeon if you’re not. The second (very common) kind is the lie to hurt others: rumors invented to disparage and humiliate. In addition to being generally unethical and toxic, they’re almost always counter-productive. No one likes a rumormonger or a bearer of bad news, even when that news is believed to be truthful.

Occasionally, one is in an adversarial situation where lying about another person is required. An example would be a bad reference. It’s best to avoid bad references by having peers substitute as ex-managers, but one might get caught in the blue, betrayed unexpectedly or nabbed by a “back channel” reference check. (Note: subvert back-channel reference checks by faking a competing offer and imposing time pressure. If you ever face a back-channel reference check, you failed in getting the offer fast enough.) In that case, my advice is: discredit, don’t humiliate.

You might be very angry when you find a negative reference. You have the right to be angry. You’ve been sucker punched. You might be tempted to say, “That’s because I caught him sleeping with his secretary.” Don’t do that! (At least, don’t sabotage his personal life while looking for a new job; keep your projects separate.) You’re better off with a lie to the effect of, “That’s funny, because he asked me to come back three months after I left. I declined respectfully, but he must be bitter.” That discredits him, but it doesn’t embarrass him any more than is necessary to do the job. You can’t appear to enjoy delivering news that makes someone look bad. With the affair with the secretary, you’re reveling in your ex-boss’s (made-up) demise. With the latter, you’re painting yourself as a top performer (even your ex-boss recognized it) and leaving the other party to connect the dots (that the bad reference is an artifact of the ex’s bitterness).

Also, one must always assume that, when lying about another person, that person will learn of the lie. So “discredit, don’t humiliate” is an aspect of a more general principle, “intimidate, don’t frighten”. You want your adversaries to be intimidated. Timid people shrink from action. They’ll shut the fuck up about you and let you focus on better things (like selling yourself, not justifying yourself in light of rumors). Frightened people, on the other hand, are humiliated, angry, and unpredictable. Even though fright is more of a psychic punishment than timidity, having severely-punished people on the stage is not good for you.

Lies (or truths) that destroy people tend to have enough kinetic energy to boomerang. Even the people who had the news first, unless they’re investigative journalists and the news is truthful, will be hit hard. Negative rumors are best avoided in all contexts: don’t start them, don’t spread them, and don’t even hear them in public. That is the general rule. There are (very rare) times when it is best to break it, and those involve frank combat. In frank combat, you don’t seek to humiliate or frighten your enemies. You have to destroy them, before they destroy you.

Competition is not enough to justify lying harmfully. If the only way to win among multiple candidates for a promotion is to lie harmfully, it’s probably worth passing on that round. (Maybe the other candidate actually is a better fit for the role.) If someone’s legitimately outperforming you and you lie harmfully to bring her down, you’re committing a grave wrong. It’s a much better use of the energy to befriend and learn from her. Jobs are short, but careers are long, and a rival in one bardo is often a great friend in the next. Good-faith competition is not frank combat, and the rule of “lie harmlessly” (or, better yet, not lying at all) still applies. Frank combat exists not when you are being outperformed in good faith, but when your reputation is being attacked. You didn’t choose war, but it chose you.

In frank combat, the best policy is still to lie with minimal harm, but not to shrink away from force if you need to use it. If a stun gun will work, use it instead of the revolver. Only use lethal force if the assailant won’t respond to anything else. The guideline of “discredit, don’t humiliate” applies when it can, but some people just won’t accept that they’ve been discredited (i.e. shut the fuck up) until they’re down for the count. That is a rare case, but it’s the one in which nasty, negative rumors might be the best way to go. Even then, there’s a subtlety to it. Not only must the rumor be believable, but you have to deny it in the public. Negative rumors, most of the time, aren’t so devastating because people actually believe the non-truths. Rather, it’s because they lower the target’s status, generate complexity (leading to people, as discussed above, just giving up rather than rendering judgments) and paint the person as one who “fits the mold” for the rumor, even though you, personally, haven’t taken a stand and won’t call it true.

All this said, frank combat is quite rare and always best avoided. Like a bar fight, no one wins. There’s pain, there’s losing, and there’s losing big. Winning at frank combat is like winning an earthquake. Go out of your way to avoid it.

Most ineffective liars don’t intentionally put themselves into frank combat. The problem of harmful liars is that, like the small liars, they enjoy the petty win over the other person and lose sight of the one valid purpose of lying in business: to flip one’s own “bozo bit”. Unless someone is calling you a bozo, you gain nothing by setting his “bozo bit” back into the “on” position, and you make the world worse (trust sparsity). People who lie harmfully contribute to trust sparsity, also known as discord, and Dante has them in the Eighth Circle of Hell for a reason.

(Part 2 will come out later this week.)

Why your organization is intractably political, and how to fix it.

There’s a lot of advice out there on the Internet for corporate leaders on how to make their organizations less political. Everyone hates office politics; it’s all that shit that deprives an organization of its ability to do the right thing, causes good people to leave in disgust or get fired for the wrong reasons, and enables bad people to rise, and eventually causes the organization to fail in ways that seem obviously preventable from the outside. Ben Horowitz has a lot to say on the tactics of fighting political behavior. I don’t disagree with what he says, but I’m going to take a different approach, from a higher level.

First, one has to define what politics is, in this sense. See, one can argue that politics is the art of making human organizations work well, in which case for something to be “political” isn’t wrong. The American “founding fathers” were, quite literally, political architects. Democracy and meritocracy are fundamentally political ideas. When people complain about a decision they found to be “political”, they’re actually saying that it’s corrupt. In neutral terms, all promotions of personnel in a workplace are political, even when made correctly, because politics is all about the distribution of power. When people complain about office politics, they’re really complaining about corruption in the political environment of the office. People often refuse to use the more accurate words, like “corrupt” and “dysfunctional”, as those are impolite and impossible to hedge. After all, it’s easier to say, “well, the decision was political” (a statement with no content, because all political decisions are political) than, “the wrong decision was made” or “the decision was made for the wrong reasons” (i.e. corruption). You probably won’t get fired for saying that your organization or team environment is more “political” than you like; while using the more direct term, “corrupt”, will raise eyebrows.

Then, the question we should be asking is, why is office corruption so common? Ben Horowitz defines politics as, “people advancing their careers or agendas by means other than merit and contribution.” That is, of course, where corruption starts. It begins with illicit “carrots”– people getting favors they don’t deserve. In the beginning of an organization’s lifecycle, this isn’t that harmful– the wrong people are getting more than they deserve, but the civilians aren’t getting less– because the expansion creates a surplus. Unfortunately, every organization will, at some point, cease to expand– at least temporarily. Then, peacetime carrot-hoarding gives way to wartime stick-brandishing. Ben Horowitz, taking the perspective of a business leader trying to prevent such things, describes the ugliness of office politics at its beginning– people rising who shouldn’t– but most people experience the pain of office political corruption at its end, when it takes the form of good people getting fired, good efforts being unfairly sidelined, and organizational dysfunction reaching the level of an existential threat– and, often, by this point it’s too late to do anything about it.

Why, in human organizations and societies, do bad people advance? Just as “rich people” are neither the best nor worst nor smartest people in the world, but (disregarding inheritance) merely those who are best at making money (a tautology) the people who run human organizations are not necessarily the best or worst but, by definition, those who are best at turning human organizations toward their own desires. This isn’t a surprising conclusion, but it must always be remembered. Very few organizations, if any, have a robust enough immune system to root out and exclude the psychopaths who would become individually fit at the the organism’s expense.

Psychopaths are undesirable people, but there aren’t a lot of them in the world: possibly 2 percent of the general population. I think it’s intellectually very lazy to blame psychopaths for humanity’s dysfunctions, as if the better-inclined 98 percent were somehow blameless. Politics, done right, is all about building structures that are resilient against incompetent and malicious people, no matter how popular or charismatic they might be. Most of the great work done in politics by European and American intellectuals in the 17th and 18th centuries was based on this insight: focus on structure, not on personalities. This seems obvious now, but it’s something that most societies in human history– run by charismatic actors, then their progeny– missed, which is that structure is more durable than faith in some quasi-divine human or caste. A good king might turn bad, trust the wrong people, or hand the throne to an undeserving son. The only way to build a sustainable government is to design it with bad actors in mind because they will come, and some of them will be remarkably attractive and popular people. Without structure (e.g. a constitution) it will be extremely difficult for society’s guardians to resist them.

Corporations don’t have evolved political structures. They don’t have constitutions. In a non-pejorative and literal sense, they are plutocracies: governed in proportion to the financial stakes of the investors. (Financial stakes of the workers are not considered; this is one of the root moral problems with corporate capitalism. A step in the right direction would be a bicameral system in which each worker gets one vote, and both houses must clear a measure, but I digress.) The tendency, over time, toward political dysfunction is almost guaranteed. In truth, most company founders don’t worry about the long-term threat of organizational dysfunction; once the company has made them rich, it has served its purpose. Companies aren’t really designed with hundred-year visions; they don’t need to last that long to make the important people rich. The institutional erosion that occurs as people serve their own needs over the organization’s objectives is not a threat, so long as it occurs at a slow enough rate.

Let’s say, however, that one does wish to solve this problem in a meaningful way. We’re ruling out quick-and-dirty next-quarter solutions or mashed-potatoes heuristics, because we actually want to build a hundred-year organization. It should outlast its leader, which means it needs a constitution. (Employee Bill of Rights? It’s not a bad idea.) It needs to come up with a principled and transparent way of handling compensation, without becoming so complex that the most well rewarded are those who play the system. It needs to have a clear purpose, otherwise it will default to the standard corporate purpose of making management rich. A lot of this stuff I won’t cover, for now. I’m going to get to something more basic, and something organizations do that makes it impossible to avoid corruption but, in fact, encourages it.

Core insight: political corruption emerges when people all covet the same scarce things.

This is why, for just one example, well-running governments attempt to limit or even eradicate the influence of money over political decisions. Money exists in economies, by necessity, as a way for people to trade and get things they want. An undesirable side effect of this is that money becomes something that everyone wants. Money simplifies, but it also creates a bilge.

No matter what it is– real estate, jewelry, illegal drugs, reputation, or sex– anything scarce that everyone wants will be surrounded by the worst kinds of human behavior. If everyone wants it, it’s surrounded by sharp knives.

The conclusion to take from this is that anyone who wants a healthy organization needs to build one where people want different things. If five people are vying for the exact same promotion, four of them will lose and become toxic. The long odds faced even by the strongest contender will create an environment where all of them are ready to break the rules on a moment’s notice. I find it almost self-evident that the only way an organization can function, in the long term, is if the things that people want for themselves are different, to minimize those sorts of conflicts. They can share in a communal vision, sure; but people go to work for mostly selfish reasons and it’s best that the things people want for themselves be different.

That seems impossible, from a basic economic perspective, insofar as people trade labor for income and wish to do so at the most advantageous rate. Isn’t money one thing that everyone wants? Yes, but it’s probably possible, in the workplace, to have it be the only thing everyone wants. Then, there’s only one potential hotspot– compensation– and it can be dealt with in a principled and transparent way. There’s actually some really good news here, which is that I think it is possible (at least in software) to create an organization in which most people will (a) consider themselves well-compensated, and (b) be, in fact, compensated better than they would at other companies. Executives make less, in the short term; they’re paid in the long term through the superior health of the organization. An outline of what this would look like is given here.

At any rate, I don’t think most of the political nastiness in organizations comes down to money per se. I’ve met plenty of bad actors in the course of my career, and most are no richer from the bad activity than they’d be had they played a more decent game– several are poorer for it. People don’t sabotage others’ careers or ruin reputations for financial reasons so much as they’re about status. Getting more money is a side perk of winning that game, but often they play it just because they enjoy blowing up other people and warming their ugly faces in the managerial sun. Social status, to them, is an end of its own. The toxic people who destroy organizations will engage in social competition even if there is nothing at stake. It’s just what they do.

There are some crucial things to understand about toxic people (assholes). First, the only way to win is not to attract them. Even if an asshole is defeated, humiliated, or killed, he is victorious because he corrupted whatever good person condescended to fight him. It’s also impossible to exclude assholes because whatever social exclusion mechanisms a group of humans invent will, over time, be co-opted by assholes and used as a weapon against the good. Second, toxic people are attracted to social competition for its own sake– not because they want better lives for their kids or even larger cars, but simply because they enjoy humiliating other people. Third, assholes will gravitate naturally toward the largest and baddest social competitions– the major leagues. Non-assholes will behave badly in competition for scarce resources, but do not seek such engagements out; assholes gravitate toward such regions of contest and make them worse because damaged social ecologies amuse them. All of this is good news, because it means that one who understands what attracts assholes can learn how not to attract them.

Given that assholes enjoy social competition, and are especially attracted to the largest social contests, the best strategy is to avoid creating all-office social contests. Yes, there will be pissing matches that flare up from time to time over one scarce resource or another; but the asshole isn’t usually interested in the small-scale battles with trivial stakes. He wants to play in the big games that involve a whole office, draw in plenty of involuntary participants, and where winning or losing determines who gets promoted and who gets sacked. If there aren’t such conflagrations around, the asshole will likely get bored and, after starting some small shit (which must be stopped) he will leave for a better fight.

How do organizations destroy themselves, then? Simply put, they encourage everyone to want the same things. They create “up-or-out” cultures where not getting promoted– or even the image of not wanting fast promotion– can result in sudden termination. They attach an increasing array of inappropriate perks to job titles (I know of one company that has a manager-only in-office gym) in order to create a climate where everyone wants a fancier title. Almost by intention, companies use envy to motivate their people because it’s easier to homogenize the motivational array than to accept its inherent heterogeneity. Many of these firms explicitly want their employees all to want the same things, but that’s a recipe for disaster. When there’s that much competition for the same stuff, you get the social contests that attract assholes. Once these toxic people have taken over the social ecology, it’s very difficult to get them out.

In reality, in a healthy workplace environment, people all want different things. Some people want good work experience so they can apply to business school. Some want a short workday and will work very efficiently if they can leave at 4:00. Some want recognition and leadership opportunities. Some just want to coast, but will support their managers’ careers with a loyalty not seen in the ambitious. Some want to run the company, and some want to be out of that company in two years. Some want to make a lot of money and will work very hard if properly paid. Some just want interesting problems to solve. When there’s heterogeneity, it’s quite likely that most or all of the peoples’ desires can be met without anyone getting trampled. The ambitious will work hard and get the promotions they want, and the unambitious are left alone. Heterogeneity of desire makes it possible for everyone to get subjectively large share of the pie; because the finite resources of the company (including intangibles like managerial approval and job titles, which are not technically finite but subject to dilution) are of unequal value to different people, it’s usually possible to find an arrangement where everyone wins. It’s not always easy– I could probably formalize it as an NP-complete problem– but it can be done.

There is one “problem”, if it can be called that, with heterogeneity in desire, which is that it does make it harder to read a social hierarchy. People tend to evaluate another’s social status in terms of his ability to get what he wants. Heterogeneity makes that illegible, because while it’s usually clear what people have, it’s not clear what they want, which makes it hard to tell who is succeeding and who is failing. Does the guy working in the Denver branch office want to be in Manhattan, or does he really like the mountains? The problem is that an organization’s chain of command typically must be legitimated with some form of distributed social status, but the only way to create such a beast (noting that our social-status modules evolved in small-group contexts) is through material signals. Yet, with the value of all things being subjective, the only way for this to work is almost to coerce people into wanting the same things, making everyone’s social status visible. That’s where this desire to homogenize desires (don’t want your boss’s job? Then get the fuck out of here!) comes from. No matter how competent, the 55-year-old programmer with no desire to advance into management must go, because his existence refutes the idea that everyone should desire supervisory accolades and, eventually, introduction into the management club.

In addition to the intentional desire homogeneity that organizations create in order to assess social standing, there are also unintentional varieties that emerge when there’s a general lack of diversity in staffing. Consider the VC-funded startup world (“VC-istan”) and the engineers there. One surprising observation about more than 90 percent of these “tech” startups is that the software engineering done in them is terrible. Why is that? Almost all of the programmers in them are white, male, and under 30. That’s not inherently a bad thing– I don’t think that white men under 30 (I was one, until a couple months ago) are any worse or better than any other group– but it leads to a homogeneity in desire that is toxic to a technical culture (“launch and flee” behaviors become common). In the startup world, those engineers all want the same thing: to be funded founders someday. That’s not going to happen unless they get (a) management positions of VP/Engineering or higher, and (b) investor contact and mentorship, preferably starting 24 months before they strike out on their own– so they can arrange funding for their new ventures while working their day jobs. What you have is an environment in which all the people want the same things. That inherently leads to the worst kinds of behavior. No organization can have everyone as a leader; but many of these companies end up hiring tens of clones of the same ambitious young person, and then struggle when no one is ever willing to truly follow.

This homogeneity comes from a common conceit, “We hire only the best”. Far more than 0.1% of people work at companies that claim only to hire the top 0.1 percent. What people often mean, when they say that shit, is that they only hire people exactly like them, except preferably just slightly inferior in some legible way (younger, shorter, less attractive). To use Mitch Kapor’s phrase, their supposed meritocracy is more of a mirrortocracy. This lack of diversity kills the organization as it expands. With everyone wanting the same scarce resources, the organization gives way to political in-fighting before it can even get started.

The antidote to this behavior is to accept heterogeneity. I’m not talking about diversity only, because a company can have a diverse crowd, by typical metrics, of people who all think the same way. Rather, I mean that organizations should encourage the natural tendency of people to want different things from them. Unfortunately, this is really hard to do. Most organizations create an environment where getting anything done requires jockeying for managerial approval– yet another finite resource that generates toxic social contests. I think that the only way to solve that one is to rethink hierarchy and start fresh from the ground up.

One fundamental difference between teachers and managers

I’ll just drop right into this with what that “fundamental difference” is.

Among teachers, the demanding ones are often the best. Among managers, the demanding ones are usually the worst.

I don’t intend to imply a strict relationship, but there’s a strong correlation in both cases. In school, most people remember that the most effective teachers were also the hard-asses. They required that you learn the material, assigned homework every night, and wouldn’t allow bullshit to get past them. They actually read the papers submitted, and had useful comments. The weaker and lazier teachers gave easy A’s (to make their students go away) and had low expectations. Sure, there were exceptions. There were good teachers who were soft graders, and bad teachers who were tough and assigned lots of homework. On the whole, though, the correlation between difficulty and effectiveness was clearly positive. That was a classic decision for a student: do you take the course with the hard, great teacher or go for the cakewalk but learn less?

The good teachers were hard because the “pain” (which is just that of extracting discipline from the natural entropy of a young mind) truly was for our benefit, and because demanding hard work from their students also requires so much of them. Many of the best teachers in high school and college worked 55 or more hours per week. Being a tough grader and demanding teacher is, itself, demanding. Without the “stick” of a bad grade, a typical 15-year-old doesn’t have the foresight to overcome his own laziness and study enough. Good teachers knew this and pushed.

In the work world, it’s the opposite. Incompetent, failing, and otherwise bad managers tend to be the most demanding ones. Good managers, if they’re demanding, are only so in a certain way. The good demanding manager (a rarity, less than 1 in 100) wants you to reach your full potential and, while asking that you do your best, manages the situation to your benefit even if you fail. Bad managers, on the other hand, are constantly fighting to save their own asses, and will throw their reports in the line of fire to buy more time for themselves, and generally turn into hard-asses not because they expect greatness but because their ineptitude creates constant peril. For them, anyone showing less than undivided loyalty becomes, if not an enemy, a scapegoat when one is needed (and that’s often, because they keep screwing up). The bad manager is demanding and difficult because he’s constantly making mistakes and his underlings, if they are to survive, must not only fix them but do so with a smile, so as not to seem disloyal.

Where this mismatch between the two styles of relationship (teacher vs. manager)  is seen most clearly is in grading. Good teachers can be harsh graders, because grades don’t matter very much except as a motivator, and because there are genuine fairness concerns around academic grades that don’t apply to workplace performance reviews (which ought to be a formality). A good teacher unapologetically gives a C for mediocre work; the message is clear, but the long-term career damage of a C is (despite what students think at the time) almost nonexistent. For a contrast, good bosses always give glowing performance reviews (to show support for the reports’ careers) and, if there are genuine performance concerns, has the discussion verbally only. I’ve known professors to give “public” (inflated) and “private” (realistic) grades, the former looking good on the transcript but the latter curved to a C for average work. This duplicitous grading system seems silly in an educational context, but it’s exactly what a good manager does: criticize and direct in private, sometimes being harsh about it, but support and praise (unconditionally) in the public.

For teachers, being demanding generally means she actually cares. She has a secure job, but still works hard in the pursuit of doing it well. That’s a really strong positive signal. On the other hand, when you face a demanding boss, you have to answer this question: is he pushing you because he genuinely wants you to become great and is showing you the way, or is it just to make you serve his own career, which may be in peril (meaning that yours is, as well)? If it’s the latter, find a way out.

Gervais / MacLeod 25: State- and truth-seekers, plus the emergence of the Technocrat

I started the Gervais / MacLeod series on February 19, 2013, and there’s one miss on my part that has been bugging me. Namely, I failed to flesh out the concept of the Technocrat except in moral terms. Technocrats were the “good Sociopaths”, the people who combined strategic intelligence, dedication, and a lack of respect for authority but whose drive and talents brought them to good places, not bad. This moralistic correlation exists (as a correlation, not a universal rule) but it’s not the fundamental nature of the Technocrat to be good. There’s something that makes them tend to be good, but not all are.

Over time, I’ve found this categorization to be problematic. The lower MacLeod tiers (Losers and Clueless) don’t carry a moral weight, so who am I to split the upper one (Sociopaths) between “good” and “bad” ones? Recently, however, I think I’ve discovered the tool that separates the two sets. It isn’t about morality per se but about something that often overlaps with it: whether a person is a state-seeker or a truth-seeker.

What’s a state-seeker? And what’s a truth-seeker?

Abstractly, almost everyone sees himself as a truth-seeker. Before I’ve even defined the terms, I’m pretty sure that most people have put themselves in this category. I disagree. Most people– probably 80 percent– are state-seekers. Also, there’s nothing inherently wrong with that. As humans, we’re built to be state-seekers. When I explain what each means, that will become pretty obvious.

State-seekers use what social resources and power they have or can acquire to bring human arrangements to desirable states. Truth-seekers want to bring them to truthful ones. Obviously, most people want both; so it doesn’t get interesting until those two goals conflict. Here are a couple of examples:

  • Andrea manages a team of five workers who’ve all been with her for fifteen years. It’s a tight-knit crew. Four of her workers are great, but Bob has become ineffective and toxic to the rest of the group. Everyone agrees that they’d be better off with Bob out of the mix, but no one wants to see him, personally, fired. They’ve known him for too long, met his kids, et cetera. If Andrea’s a state-seeker, she’ll try to isolate Bob and minimize the damage, but she “can’t fire him” because he’s been with the team for too long. If she’s a truth-seeker, she’ll fire him– preferably fairly, with severance and a good reference to recognize the time when he was valuable, and to help him bounce to a better job– because Bob really isn’t part of the team anymore, and firing him is the only truthful thing to do.
  • Carol has aspirations to be a film actor. If she’s a state-seeker, her primary concern will be getting in and “becoming” a movie star. How does she get a good agent? How does she make the contacts? If she’s a truth-seeker, she’ll be more interested in whether she should be a movie star, and constantly assessing whether she has the talent (as well as whether the Hollywood game is worth playing).

Now, it might seem strange to consider how I presented truth- and state-seekers. State-seekers want desirable social arrangements, and truth-seekers want correct ones. What good, however, is an undesirable truth? The answer is not obvious. There’s a strong argument that can be made, in many circumstances, for concealing undesirable truths. That is, in fact, what most people (again, the state-seeking ~80 percent) will reflexively prefer to do. Isn’t a bit perverse to seek the truth beyond what’s socially acceptable? Well, often it’s not popular to be that way. That’s why most people aren’t truth-seekers. It’s a lonely road. State-seeking is easier, more harmonious, and less risky.

The truth-seeker’s problem is that she never fully buys into the going assumptions about what’s desirable. Can the group really evaluate what’s best for it, in the long term? Can she do that? How confident should she be in her knowledge? She might want to be a movie star, but if she lacks basic talent for it, that simply would make no sense. Truth-seekers are too skeptical of what arrangements are considered desirable (knowing such things are prone to fashion) by that group and in that time to sacrifice accuracy and honesty. On the whole, they’d rather have correctness and knowledge than comfort and harmony. The truth-seeker’s distrust for her own assumptions now about what is desirable leads her to prefer truth, so that she can make better decisions in the future, even if her presumptions about social desirability prove to be wrong.

Does this mean that truth-seekers are morally superior? No. In fact, there are plenty of honest state-seekers who dislike lying because it feels disrespectful, aggressive, or malignant. There are also dishonest truth-seekers, who are either too incompetent to crack their own self-deceptions, and there are others (although this is rare) who are masterful at creating “new truths” that serve them, and creating a “reality distortion field” in which those are now true. Mad Men‘s Don Draper (the most honest whore in the whorehouse) comes to mind. What makes him an attractive presence is that– unlike the social climbers around him, those being obvious state-seekers out for self-advancement– he is a truth-seeker. He wants to get the right answer, do the best possible work, and put all the bullshitters in their place. However, he’s not perfectly honest, given that the real Don Draper died before most of the events in the show, and also considering that he thrives in a fundamentally dishonest business (advertising, or exploiting human weaknesses for profit).

Finally, if I were to make a bet on it, I’d bet that most people consider themselves to be truth-seekers, but I don’t think they are. State-seekers, when presented with a classification of human behavior, tend often to associate themselves with what they want to be. Truth-seekers tend to know what they are. I suspect that most state-seekers would self-identify as truth-seekers; but I could be wrong.

What do state-seekers want?

I’ve discussed truth-seekers and their desire to get the right answer, egos and emotions be damned. People tend to find truth-seekers to be robotic, overly analytical, and insensitive. In fact, these accusations tend often to be true of us. We aren’t the most sensitive to others. We’d rather be right. This isn’t because we’re egotistical (some of us are; but as a group, I don’t think we’re worse than baseline) but because we consider deception and the propagation of inaccuracy to be harmful to all parties involved.

State-seekers tend to fall along a spectrum with two endpoints: altruistic and egoistic state-seekers. Altruistic state-seekers want group harmony. They want people to be happy, groups to be inclusive, and conflict to be rare and easily resolved. They’re rarely dishonest, but not because they have an intellectual commitment to the truth; rather, because they understand the damage that discovered untruths bring to the social fabric. They tend to lie only when they’re very confident that the lie will never be uncovered. Egoistic state-seekers tend to want self-advancement. These are the narcissists and psychopaths and assholes we all know and love.

Most people are state-seekers somewhere between those extremes; they tend toward moral neutrality and, as I discussed in previous posts in this series, localism. They aren’t universal altruists or degenerate egoists; they tend to operate in the interest of a small group.

Ambition

With humanity divided into two sets according to a certain behavioral bias– the relative favor given to truth versus desirable social states– I am also going to address ambition, and that I’m going to split into three levels or categories.

  • Subsocial. People with subsocial levels of ambition do not threaten or upset others with their goals. In fact, most people would rather see them be more assertive. To make it clear, the “sub-” prefix does not mean that such people are “unsocial” or defective in any way. I am saying that their level of ambition is below (hence “sub”) the upper limit of social acceptability (the “at-social” threshold). They don’t make any enemies.
  • At-social. In the middle are people whose ambition levels are right at the level of social acceptability: probably somewhere around the 85th percentile for women and the 90th for men. They’re seen as “go-getters” and “team players”. They are driven enough to garner respect, but not so assertive as to draw negative stereotypes upon themselves. They live right at the socially acceptable maximum. This is rarely a pleasant place to be (hence the stigma of the MacLeod Clueless) because the at-social level of ambition has a person showing enough drive to suffer, but not enough to break ahead of the pack.
  • Aposocial. At this level, the person’s ambition has gone beyond what’s considered polite or socially acceptable. The aposocial person may work so hard that people suspect he “doesn’t have a life”. Or he may not work especially hard (MacLeod Sociopath) but will simply do things to accomplish his goals that others find objectionable. Some aposocial people are very good, morally speaking, and some are bad; but they’re rarely nice in either case.

We now have six categories of people. I’ll address how each one interacts with the MacLeod hierarchy.

  1. Subsocial state-seekers tend to be the more popular and active of the MacLeod Losers. They like the comfort of an in-crowd, and form their own clubs (e.g. Finer Things Club) and events (e.g. office parties) although those are rarely consequential. In general, they aim for group harmony, and tend to go out of their way to be accommodating and nice to people. However, they can also be parochial and vicious (see: Angela in The Office).
  2. Subsocial truth-seekers are the rationally disengaged. They do not give more to the organization than, based on how it treats them, it deserves. This means that they tend to be minimum-effort players who generally understand the organization well and what is required to succeed in it, but rarely consider it worth it to chase that carrot; it’s too small and too far away. In The Office, Creed is the ultimate subsocial truth-seeker. Subsocial truth-seekers are a different set of MacLeod Losers: they know exactly what’s going on, but lack the drive to win the game.
  3. At-social state-seekers are people who evolve into the MacLeod Clueless. Sometimes, it’s because they want to lead or hold power; other times, it’s because they’re driven to do what’s best for the group. Now, at-sociality generally isn’t very truthful because it entails having just enough ambition to suffer (in many cases, on a supervisor’s or group’s behalf) but not quite enough to get ahead. The self-deception of an at-social state-seeker tends toward contagion sometimes, which makes him a natural match for Clueless middle-management.
  4. At-social truth-seekers are incredibly rare, because the at-social level of ambition is so awkward and often unsustainable for a truth-seeker. I guess the label I would affix to them is “TED Speakers”. They are genuinely earnest in seeking the truth, but not aggressive enough about it to do anything that would compromise their popularity. They tend to have an optimistic conviction that social desirability/acceptability and truth are almost never in conflict, while I would argue that they (as a group) underestimate how often such conflict does occur. They are earnest when it comes to truth-seeking, but not as aggressively as the “ninja” aposocial truth-seekers. They’re almost never the first to uncover socially unacceptable truths; but they’re good at marketing such discoveries once a small set of “early adopters” have accepted them.
  5. Aposocial state-seekers are people whose drive to push a social state toward a desired outcome is often found unnatural or even perverse. That is, their state-seeking goes far beyond what is socially acceptable (hence “aposocial”). The altruistic ones are seen as rabble-rousers and radicals. The egoistic ones are seen as sociopathic cutthroat menaces (which most of them are). These are the classical MacLeod Sociopaths who make organizations succeed (i.e. bring them to more desired states) in spite of themselves.
  6. Aposocial truth-seekers are the ones whose desires to get to the right answer, similarly, drive them to places far away from the socially accepted comfort zone. They don’t shy away from unpopular truths; they dive right in. They’ll burn ass to get the right answer, make an organization the best it can be, and not only solve the problem but solve it well. Popularity and social harmony are often sacrificed wholesale in the quest for absolute truth and excellence.

Whither into morality?

Nothing about the six categories above is strictly moral. There’s a diversity in ambition level and favoritism of state versus truth, and none of this requires or precludes moral decency. In fact, there are good and bad people in all six categories. However, are there correlations between category and morality? In general, I’d say the answer to that is “Yes”.

On the ambition spectrum, subsocial people tend to map to the MacLeod Loser tier, regardless of whether they favor truth- or state-seeking; and at-social people tend to fall into the Clueless tier. Whether a person favors truth or state does not seem to have a major effect, for these tiers, on how people behave or where they land in a social hierarchy. When people operate within the bounds of social acceptability, it just doesn’t matter much what they favor. When people restrict themselves (as most people do) to the sandbox of social acceptability, it doesn’t matter much what they try to build, because there just isn’t much sand to work with.

Indecent people at the subsocial or at-social levels of ambition certainly do local damage. They bruise egos, cause unjust firings, and reduce operational efficiency. However, they don’t seem to have vicious macroscopic effects except in already-reeling organizations (that have been brought to that state by higher-level malignancy or negligence). They aren’t, in general, going to bring critical failures to the organization. Likewise, morally decent people at the subsocial and at-social ambition levels cannot save a company that has fallen into indecency at the aposocial level, because they will almost never shatter the distorted reality that their superiors have created.

Thus, the interesting play happens at the aposocial level. Not only history, but the more mundane ticking of organizational evolution, tend to be driven by people whose ambitions exceed the socially acceptable; those whose drive makes them inherently non-redundant.

State-seekers tend to evolve into Politicians. I choose this word in favor over “Sociopath” because I don’t think they’re all bad, and the world needs politicians. There are plenty of deeply kind, honest, and also aposocial people who tend to be state-seekers. Why? Well, truth is often unkind to peoples’ immediate sensitivities, and it’s a defensible moral stance (if very different from how I, personally, tend to operate) that it is better for people to be happy than for them to be fully informed of the truth in a situation (since many truths are painful but provide no actionable information).

It’s the aposocial truth-seekers who evolve into the Technocrats. It’s probably extremely obvious at this point that they are one and the same. Most Technocrats are good people; but it is not a hard-and-fast guarantee. Still, the odds are strong that a randomly-selected Technocrat will not only be morally decent (which most people are, except in perverse contexts) but so committed to decency as to be genuine organizational assets. You want these guys (and girls) on your team. However, it’s rare that you can get by with having only Technocrats at the aposocial level of ambition. Why? In poker terminology, they tend to play the cards extremely well but not the people. Their relentless pursuit of truth, in fact, blinds them to human irrationality and the pervasive power of ego. I’d like to think that a Technocrat-only organization could work, but I doubt that such a thing could scale (as a functioning company) into the general population.

What about the Politicians? Are they good or bad, in general, as a group? It’s hard to tell. There are good, altruistic leaders among them who manage to create order out of human disarray and thereby drive a set of people to achieve more, in coordination, than it otherwise would. There are also myriad degenerate social-climbers, dishonest deal-makers, and outright criminals in that set. What determines the type of Politicians an organization gets is what that organization stands for. That is, I would argue, the fundamental issue with corporate capitalism. These corporations, in fact, stand for nothing. Their only purpose is to grow in footprint, make more money (which is then dispensed, unevenly and according to political forces, to executives) and take over a larger segment of the economy. There are, of course, plenty of organizations not geared toward that; but the general state of a large private-sector organization is one so hogtied by sectarian in-fighting and bike-shedding that the only “common language” left is profit maximization. This creates an uninspiring place to work, but also one whose leaders reflect its own values: greed über alles.

This brings head-first into a moral debate I haven’t yet resolved: is greed good? The answer is far from simple. Aposocial ambition is often seen in the best people, but is that greed? Or does “greed” only denote material aspiration, which we tend to understand as necessary at low levels of material wealth but pathological at high levels (with no agreement whatsoever among people about where that transition lives)? I’m not going to tackle that question in its entirety. There’s good greed and bad greed, and it would take another essay to flesh that out. I will say this much. Once companies have become short-term profit-maximizers, with cultural health and employee morale downplayed, the type of ambition that tends to be rewarded in individuals is the empty kind– the unconditional work ethic, the need for “a leadership role” despite any coherent cause to lead– and that’s bad. When it’s empty ambition that gets a person promoted (and it often is, because managers prefer the unconditional work ethic that comes along with it) the company will, over time, be handed over to the worst kind of Politicians, the ones truly deserving the “Sociopath” label.

It takes aggressive truth-seekers (Technocrats) to unseat such people and reverse their damage, but those very Technocrats are often the first ones shot down in the typical fire-at-will American corporation.

Gervais / MacLeod 24: Fundamental Theorem of Employment

In analyzing the economics and sociology of office-style Work, an inefficient set of institutional patterns that affects hundreds of millions of people, I’ve often had to ask the question, “Why are so many jobs so bad?” Plenty of positions are inaccurately or dishonestly advertised, many shouldn’t exist at all, and job openings that should exist often don’t. What’s going on with all this? And how should an individual person choose jobs, in light of the inefficient market? I’ve come to a conclusion that, despite the complexity of these issues, is refreshingly simple and, while failing to capture all cases, surprisingly powerful and appropriate to the vast majority of jobs. I might call it the Fundamental Theorem of Employment (FTOE).

A person is hired to do work that the hiring person (a) cannot do for himself, or (b) does not want to do.

Corollary: It is extremely important to know which of the two is the case.

These are, in general, two different cases. A person hires a maid to do undesirable work of which most people are capable, while he hires a doctor to do work that he can’t do for himself. It’s essential for each person to know which of the two cases applies to his or her job. Most jobs can be clearly delineated as one or the other. We’ll call the first category of jobs– a person is hired to bring expertise, skill, or capacity that the hiring manager does not have– “Type 1″; and the “boss doesn’t want to do” jobs, “Type 2″.

In a Type 1 job, you have leverage and you get respect because you’re delivering labor that the manager (a) does not have the ability to render himself, and (b) much more importantly, cannot accurately evaluate. Your boss is forced to trust you. Often, he will trust you just to reduce his own cognitive dissonance. In a Type 2 job, you rarely get any respect; you’re just there to do the worst of the work. You’re not trusted very far, and your manager thinks he can do your job just as well and twice as fast. In the career game, getting stuck in the Type 2 world is a losing proposition.

That seems simple enough, and the advice derived from it is fairly traditional. Build skills. Develop expertise. Become a “unicorn” (a person whose combination of skills makes her unusually rare and confers leverage). Get Type 1 jobs. The real world, of course, isn’t quite so simple; and it might be hard for an individual to tell which of the two possibilities applies to her job. I’m here to tackle some of the more complex cases that pop up in reality, and analyze which dynamic of behavior is more accurate to each.

Below are some cases that don’t necessarily fall into a clear Type 1 vs. Type 2 delineation, and require further analysis.

Excess capacity. Most large companies don’t hire for a specific role, so much as they increase (or decrease) their total headcount based on business needs, cash flow, and economic projections. Companies”don’t hire specifically for Type 1 or Type 2 work; they’re concerned with the economics, not sociology. Most people, in truth, are hired into firms to serve as “excess capacity”; that is, hired into a general-purpose labor pool so there is some slack in the schedule and there are internal candidates for vacancies. Whether a person ends up in Type 1 or Type 2 work isn’t driven by some abstract “general will” of the firm but by the needs of specific managers where that person lands. Unfortunately, this often puts a person into Type 2 work by default.

Depending on the company, the manager of the new employee’s team might not have had any input into the hiring of that person. Sometimes, the company just says, “here are some guys”, and that tends to result in a lot of undesirable work being offloaded onto them. Or, that person may have been hired for a position that was shortly after filled internally, or made redundant, leading to a need to make work for the new hire. The point of all this is that if you can’t identify (and preferably quickly) some X for which (a) a manager needs X, (b) the managers knows he needs X, and (c) you’re very good at X; you just become a fresh hire looking for something to do.

Simply being “excess capacity” isn’t necessarily bad. If there’s honestly about the fact, then management can set an appropriate arrangement. “You can work on whatever you want most of the time, but when you’re needed, you’re expected to be available.” Then, a person has the time and allowance to seek Type 1 work where he or she will add more value. Some companies explicitly set aside time for self-directed work (e.g. 20% time) in acknowledgment of the need for slack in the schedule. Others do not, and fall into a Type-2-driven default pattern of rippling delegation.

In large companies, people are hired for macroeconomic reasons that don’t conform to the Type 1 vs. 2 delineation explicitly, leaving the question unanswered: does the employee become a respected advisor whose expertise confers a certain automatic credibility, or a grunt to which the worst work is delegated?

Automation

Especially relevant to technical work is the role of automation. If work is undesirable, someone will try to “kill” it by programming a computer to do it faster and more reliably than a human. For many business processes, this is easy. For some, it’s quite hard. For example, it took years of research into machine learning before computers could accurately read hand-written addresses. At any rate, computers turn out to be perfect repositories for the worst of the Type 2 work that no one wants to do. They do it without complaint, and much faster. They’re cheap, as well. This is winning for everyone.

Computer programming has its own weird interaction with the FTOE. Business problems were traditionally solved with lots of low-paid and ill-respected manpower, so corporate growth mostly came down to the delegation of Type-2 labor as the beast grew. However, the magic of software engineering is that a small bit of more challenging, more fun work (automating painful processes so that the task is complete forever before the novelty of the new job wears off) can replace a larger amount of bland, tedious work. Most of business growth is about Type-2 hiring: bringing in more people to do the work that the bosses don’t want to do. A competent software engineer can take on the Type-1 task of automating all that junk work– if management trusts her to do so.

Management doesn’t, in general, care how the mountain of traditionally undesirable work is done. If it’s done well by ten bored humans who occasionally quit or fail but are easy enough to replace, that’s the familiar “devil you know”. If someone else can come along and perform the much more enjoyable task of automating that work for good, that’s better because it saves a lot of money and pain. Sort-of. There’s a problem here, and it’s one that every software engineer and software manager must understand.

The relationship between software engineers and management is fraught with conflict. There are few industries where there is more tribal dislike between workers and management than in software, and the problem isn’t the people so much as the interaction of incentives and risks. Software itself (like any industry) generates a lot of undesirable (Type 2) work; but in software, there’s almost always a way of automating the bland work away– a hard, Type 1, sort of job. The danger of that is that the automation of undesirable work might take more time than simply completing it, while the engineer’s impulse (which is almost irresistible) is automate immediately and without regard to cost.

This provides two very different paths to completion: one that is low in variability but boring, the other being more fruitful but riskier. What goes wrong? Without diverging into another subtopic, management participates more fully in an employee’s downside than upside risks– if the engineer does great work, it reflects on that engineer; but if the engineer fails expensively, it reflects on the management– so managers tend to favor low-risk strategies for that reason alone. It’s not that software engineers or managers or bad people; the risks are just improperly aligned.

Solving this problem– aligning incentives and structuring companies to take advantage of opportunities for automation, which almost always improve the firm’s success in the long term– would require another essay.

Defensive rejection

Above, I’ve proposed that people hire others to do work in one of two cases: undesirable work, and work that the person doing the hiring can’t perform. There isn’t always such a clean-cut distinction. Most people don’t have the humility to recognize their limitations, and so they tend to overestimate their ability to perform work that they know little about. The extreme case of this is defensive rejection, in which a person denigrates a class of work as being menial, unimportant, or trivial to compensate for a lack of knowledge about it.

Many software engineers are going to recognize that the attitude of “the business” toward their work is often a case of defensive rejection, and that’s right. But we, as a group, are far from innocent on that front. We tend to take the same attitude toward marketing and business people. The truth is that the good ones are highly capable in ways that most of us are not; most of us just lack the basic competence to separate the good ones from the bad. When one lacks visibility into a field of work, one tends to associate all people who do it with the average competence of the group, which usually leads to an unflattering stereotype for any high position (because most people in it are, in fact, unqualified to hold it). That leads to the incorrect conclusion (also seen with politicians, of whom the average performance is poor) that “none of them are any good”. 

When defensive rejection is in play, the underlying truth is that the manager is hiring in type 1; the employee is brought on to do work that the manager can’t do for himself. Unfortunately, the manager’s insecurity and hubris generate a type-2 context of “I could do that stuff if I wanted to”. The subtext becomes that the work is bland, detail-oriented dreck that the manager is too important to learn. This is the most frustrating type of job to be in; one where the boss thinks he can do your job but actually can’t. It means you have to deal with unreasonable expectations despite low overall status and perceived value to him and to the company as a whole. That’s horrible, but it’s also freakishly common as far as scenarios go, and it leads to the engineer feeling set up to fail– asked to do impossible things, then treated poorly when inevitable failure occurs.

Apprentice systems

There’s one other scenario that doesn’t fit nicely into the Type 1 vs. 2 delineation: the apprentice (or protege) context. At first thought, apprenticeship might seem to be strictly Type 2, since most of the work that apprentices spend their time on is make-work that has ceased being interesting to superior craftsmen. However, apprentices bring a Type-1 function by being able to do one thing the master cannot: perpetuate the work (and, more importantly, the upkeep of a valued tradition or institution) through time. If you’re sixty years old, a twenty-year-old apprentice can continue the work forty years (on average) longer than you can.

Modern private-sector corporations don’t have much use for apprentice structures and guild cultures, because they no longer see that far into the future. No CEO gets job security by setting up a culture of mentorship that might yield excellence ten years down the road. In this next-quarter culture, apprentice systems have mostly been thrown overboard. Long-term vision is far out of style for most modern corporations.

That said, there’s a value in understanding this old-style system. Why? Because even managers are uncomfortable with the naked parasitism of Type-2 employment (e.g. “I’m just hiring you to do the crap I don’t want to do, while I fill my time with the career-building and fun work”) and often attempt to recast the role as an apprenticeship opportunity. That is, at least, how every subordinate job is presented; an opportunity to learn the skills necessary to get to the next step. There are varying degrees of earnestness in this– some managers truly see their reports as proteges, while others see them as mere subordinates.

In negotiation theory, this is sometimes called a standard: a promise that is understood not to be fully delivered (most people realize that most bosses just see their reports as repositories for undesirable work, and that the apprentice metaphor is mostly rhetorical) but that may still be cited in policy to get an arrangement more in accord with that standard than one might otherwise get (“appealing to the standard”). Even people in power are uncomfortable explicitly departing (“breaking the standard”) from something previously promised.

If you want to move from Type-2 to Type-1 employment (and, believe me, you should) then the first thing you have to do is get qualified for that kind of work; the best way to make sure your boss gives you appropriate work (to gain that qualification and validation) is to continually appeal to the standard of the master/apprentice relationship– and hope that your manager doesn’t have the audacity to break the standard.

Why is FTOE important?

It’s important to understand the Fundamental Theorem (and being trained as a mathematician, I know it’s not actually a theorem so much as an observation) of Employment, above, because people tend to discuss conceptions of “the job market” as if they were forces of nature. They’re not. A job exists because someone needs or wants another person to perform work, and the expensiveness of that generally means that one of two cases applies: the person doesn’t want to do that work, or the person cannot do that work. Regardless of the work itself, the social contexts that arise from those two subcategories could not be more different. It’s very important to know which one applies.

The advice that comes out of this is to find a way to qualify oneself for the Type 1 work. That’s harder than it looks. Becoming good at highly-skilled work is the first half of the battle, but there’s a social component that can’t be ignored. Software engineering is a prime example of that. The whole point of the bastardization of “object oriented programming” (which, by the way, has become the exact opposite of Alan Kay’s vision of it) that has grown up in the enterprise is to coerce software engineering into Type 2 commodity work. Having generating scads of low-quality, brittle code, it can be called a failure. Yet that mentality persists in the world of corporate software engineering, and it will be a while before the business starts to recognize software as Type 1 work.

While one is progressing through the validation process that is more drawn-out than building the skill set, I think there are two key strategic necessities. The first, again, is to appeal to the standard (as above) and re-cast any Type 2 social context in employment as a mentor/protege role. The second, and more importantly, is to always drive toward a Type 1 context. The question should be asked: “What am I here to deliver that no one else can?”

The Disentitled Generation

Anyone else up for some real rage? I can’t promise that there won’t be profanity in this post. In fact, I promise that there will be, and that it will be awesome. Let’s go.

People don’t usually talk about these things that I talk about, for fear that The Man will tear their fucking faces off if they tell the truth about previous companies and how corporate office really run themselves, but I am fucking sick of living in fear. One can tell that I have an insubordinate streak. It’s a shame, because I am extremely good at every other fucking thing the workplace cares about except subordination; but that’s one thing I never got down, and while it’s more important (in the office context) than any other social skill, I’m too old to learn it.

Let’s talk about the reputation that my generation, the Millennials (born ca. 1982 to 2000), has for being “entitled”. This is a fun topic.

I’ve written about why so-called “job hopping” doesn’t deserve to be stigmatized. Don’t get me wrong: if someone leaves a generally good job after 9 months only because he seeks a change of scenery, then he’s a fucking idiot. If you have a good thing going, you shouldn’t seek a slightly better thing every year. Eventually, that will blow up in your face and ruin your life. Good jobs are actually kinda rare. I repeat: if you find a job that continues to enhance your career and that doesn’t make you unhappy, and you don’t stick with it for a few years, then you’re an idiot. You should stay when you find something good. A genuine mentor is rare and hard to replace. That’s not what I’m talking about here.

The problem? Most jobs aren’t good, or don’t make sense for the long term. Sometimes, the job shouldn’t exist in the first place, provides no business value, and is terminated by one side or the other, possibly amicably. Sometimes, the boss is a pathological micromanager who prevents his reports from getting anything done, or an extortionist thug who expects 100% dedication to his career goals and gives nothing in return. Sometimes, people are hired under dishonest pretenses. Hell, I’ve seen startups hire three people at the same time for the same leadership position, without each other’s knowledge of course. Sometimes, management changes that occur shortly after a job is taken turn a good job into an awful one. This nonsense sounds very uncommon, right? No. Each of these pathologies is individually uncommon, but there are so many failure modes for an employment relationship that, taken in sum, they are common. All told, I’d say that about 40 percent of jobs manage to make it worthwhile to keep showing up after 12 months. Sometimes, the job ends. It might be a layoff for business reasons. Sometimes it’s a firing that may not even be the person’s fault. Most often, it’s just pigeonholing into low-importance, career-incoherent work, leaving the person to get the hint that she wasn’t picked for better things and leave voluntarily. Mostly, this political injection is random noise with no correlation to personal quality. Still, I think it’s reasonable to say that 60% of new jobs fail in the first 12 months (even if many go into a “walking dead” state where termination is not a serious risk, but in which it’s still pointless and counterproductive to linger). That means 13 percent of people are going to draw four duds for reasons that are no fault of their own. One in eight people, should they do the honest and mutually beneficial thing which is to leave a job when it becomes pointless, becomes an unemployable job hopper. Seriously, what the fuck?

So let me get one thing out there. Not only is the “job hopping” stigma outdated, it’s wrong and it’s stupid. If you still buy into the “never hire job hoppers” mentality, you should fucking stop using your company as a nursing home and instead, for the good of society, use an actual nursing home as your nursing home. I’m serious. If you really think that a person who’s had a few short-term jobs deserves to be blacklisted over it when the real corporate criminals thrive, then letting you make decisions that affect peoples’ lives is like letting five-year-olds fly helicopters, and you should get the fuck out of everything important before you do any more damage to peoples’ lives and the economy. I’m sorry, but if you cling to those old prejudices, then the future has no place for you.

It needed to be said. So I did.

The “job hopping” stigma is one rage point of mine, but let’s move to another: our reputation as an “entitled” Millennial generation. Really? Here are some of the reasons why we’re considered entitled by out-of-touch managers:

  1. We “job hop” often, tending to have 4 to 6 jobs (on average) by age 30.
  2. We expect to be treated as colleagues and proteges rather than subordinates.
  3. After our first jobs, we lose interest in “prestigious” institutions, instead taking a mercenary approach that might favor a new company, or no company. 
  4. We push for non-conventional work arrangements, such as remote work and flex-time. If we put in 8 hours of face time, we expect direct interest in our careers by management because (unlike prior generations who had no choice) we consider an eight-hour block a real sacrifice.
  5. We question authority.
  6. We expect positive feedback and treat the lack of it as a negative signal (“trophy kids”).

Does this sound entitled? I’ll grant that there’s some serious second-strike disloyalty that goes on, with a degree of severe honesty (what is “job hopping” but an honesty about the worthlessness of most work relationships?) that would have been scandalous 30 years ago, but is it entitled? That word has a certain meaning, and the answer is “no”.

To be entitled, as a pejorative rather than a matter-of-fact declaration about an actual contractual agreement, implies one of two things:

  1. to assume a social contract where none exists (i.e. to perceive entitlement falsely.)
  2. to expect another party to uphold one side of an existing (genuine) social contract while failing to perform one’s own (i.e. one-sided entitlement).

Type I entitlement is expressed in unreasonable expectations of other people. One example is the “Nice Guy Syndrome“, wherein a man expects sexual access in return for what most people consider to be common courtesy. The “Nice Guy” is assuming a social contract between him and “women” that neither exists nor makes sense. Type II is the “culture of entitlement” sometimes associated with a failed welfare state, wherein generationally jobless people– who, because they have ceased looking for work, are judged to be failing their end of the social contract– continue to expect social services. These are people whose claims are rooted in a genuine social contract– the welfare state’s willingness to provide insurance for those who continually try to make themselves productive, but fail for reasons not their fault– but don’t hold up their end of the deal.

So, do either of these apply to Millennials? Let me assess each of the six charges above.

1. Millennials are “job hoppers”. There’s some truth in that one. The most talented people under 30 are not going to stick around in a job that hurts their careers. We’re happy to take orders and do the less interesting work for a little while, if management assists us in our careers, with an explicit intent to prepare us for more interesting stuff later. Failing that, we treat the job as a simple economic transaction. We’re not going to suffer a dues-paying evaluative period for four years when another company’s offering a faster track. Or, if we’re lucky, we can start our own companies and skip over the just-a-test work entirely and do things that actually matter right away. Most of us have been fired or laid off “at will” at least once, and we have no problem with this new feature (job volatility) of the economy. None of us consider lifelong employment an entitlement or right. We don’t expect long-term loyalty, nor do we give it away lightly.

2. Millennials “expect” to be treated as proteges. Not quite. Being a cosmopolitan, well-studied generation exposed to a massive array of different concepts and behaviors from all over the world, we expect very little of other people. We’ve seen so much that we realize it’s not rational to approach people with any major assumptions. The world is just too damn big and complicated to believe in global social contracts. Getting screwed doesn’t shock or disgust or hurt us. It doesn’t thwart our expectations, because we don’t really have any. We simply leave, and quickly. For us, long-term loyalty is the exception, and yes, we’re only going to stay at a job for 5 years if it continues to be challenging and beneficial to our careers. That’s not because we “expect” certain things, and we aren’t “making a statement” when we change jobs. It’s not personal or an affront or intentional “desertion”. We can do better, that’s all.

3. Millennials don’t have respect for prestige and tradition. Yes and no. We don’t start out that way. The late-2000s saw one of the most competitive college admissions environments in history. Then there’s the race to get into top graduate departments or VC-darling startups or investment banking– the last of these being the Ivy League of the corporate world. Then something happens. Around 27, people realize that that shit doesn’t matter. You can’t eat prestige, and many of the most prestigious companies are horrible places to work. Oh, and we think we’re hot shit until we get our asses handed to us by superior programmers and traders from no-name universities and learn that their educations were quite good as well. We realize that work ethic and creativity and long-term diligence and deliberate practice are the real stuff and we lose interest in slaving away for 90 hours per week just because a company has a goddamn name.

4. Many of us expect non-conventional work/life arrangements. This is true, and there’s a reason for it. What is the social contract of an exempt salaried position, under which hourage expectations are only defined by social expectations rather than contract? As far as I can tell, there are two common models. Model A: worker produces enough work not to get fired, manager signs a check. Model B: worker puts a serious investment of self and emotional energy into the work as a genuine working relationship would involve, and management returns the favor with career support and coherence. Under either model, the 8-hour workday is obsolete. Model A tells us that, if a worker can put in a 2-hour day and stay employed, he’s holding up his end of the deal, and it’s management’s fault for not giving him interesting work that would motivate him to perform beyond the minimum. Model B expects a mutual contract of loyalty to each other’s interests, but does not specify a duration or mode of work. Model B might be held to generally support in-office work with traditional hours, for the sake of collaboration and mentoring, but that opens up a separate discussion, especially in the context of individual differences regarding when and how people work best.

5. Millennials question authority. True, and that’s a virtue. Opposing authority because it is authority is no better than being blindly (or cravenly) loyal to it, but questioning it is essential. People who are so insecure that they can’t stand to be questioned should never be put in leadership positions; they don’t have the cojones for it. I question my own ideas all the time; if you expect me to follow you, then I will question yours. It’s a sign of respect to question someone’s ideas, not a personal challenge. It’s when smart people don’t question your ideas that you should be worried; it means they’ve already decided you’re an idiot and they will ignore or undermine you. 

6. We expect positive feedback and respond negatively to a lack of acknowledgement. That’s true, but not because we believe “everyone’s a winner”. If anything, it’s the opposite. We know that most people lose at work and would prefer to play a different game when that appears likely to happen. No, it’s not about “trophies”. A trophy is a piece of plastic. We get bored unless there’s a real, hard-to-fake signal that we aren’t wasting our time. Not a plastic trophy, but management that takes our career needs seriously and complete autonomy over our direction. We know that most people, in their work lives, end up with incompetent or parasitic bosses who waste years of their time on career-incoherent wild goose chases, and we refuse to be on the butt of that joke. Does this mean that we’re not content to be “average”, and that we require being on the upside of a zero-sum executive favoritism to stay engaged with our work? Well, in order to have it not be that way, you need to create a currently-atypical work environment where average people don’t end up as total losers. With all the job hopping we do, we don’t care about relative measures of best or better. We want good. Make a job good and people won’t worry about what others around them are getting.

I think, with this exposition, that there’s a clear picture of the Millennial attitude. Yes, we take second-strike disloyalty to a degree that, even ten years ago, would be considered insolent, brazen, and even reckless in the face of the career damage done (even now) to the job-hoppers. We’ve grown bolder, post-2008. Quit us, and we quit. It’s not that we like changing jobs every few months– believe me, we fucking don’t. We’re looking for the symbiotic 5- or 10-year-fit, as any rational person would, but we’re not going to lie to ourselves for years– conveniently paying dues on evaluative nonsense work while our bosses spend half-decades pretending to look for a real use for our underutilized talents (only to throw us out in favor of fresher, more clueless, younger versions of ourselves)– after drawing a dud.

Is the Millennial attitude exasperating for older managers, used to a higher tolerance for slack on matters of career coherency? I’m sure it is. I’m sure that the added responsibility imposed by a generation characterized by fast flight is unpleasant. It is not, however, entitled. It’s not Type I entitlement because we don’t assume the existence of a social contract that was never made. We only hold employers to what they actually promise us. If they entice us with promises of career development and interesting work, then we expect that. If they’re honest about the job’s shortcomings, we respect that, too. But we only expect the social contract that we’re explicitly given. I’d also argue that it’s not Type II entitlement because Millennials are, when given proper motivation, very hard-working and creative. We want to work. We want genuine work, not bullshit meetings to make the holder of some sinecure feel important.

What are we, if not “entitled”? We’re the opposite. We’re a disentitled generation. We never believed in the corporate paternalist social contract, and most of us are comfortable with this brave new world that has followed its demise. Yes, we’re mercenary. We respond in kind (in fact, often disproportionately) to genuine loyalty, but we’re far too damn honest to pretend we’re getting a good deal when we’re thrown into a three-year dues-paying period rendered obsolete in a world where fast advancement is possible and fast firing is probable for those who don’t advance. I’m in software, where, by age 35, becoming a technical expert (you need a national reputation in your specialty if you want to be employable as a programmer on decent terms by that age) or an executive becomes mandatory. As this leaves 13 years to “make a mark”, one simply will not find people willing to endure a years-long dues-paying period that one would want to hire. Asking someone to risk 2 of those 13 years on dues-paying (that might lead nowhere) is like asking a person to throw 15 percent of her net worth into a downside-heavy investment strategy with no potential for diversification– a bad idea. Reasonable dues-paying arrangements may have existed under the old corporate social contract of cradle-to-grave institutional employment, but that’s extinct now. So should be the “job hopper” stigma and the early-stage dementia patients who still believe in it.

Gervais / MacLeod 22: Inferno

In Part 21, I wrote a summary of the modern Organizational Problem. For a recap of the highlights:

  • As machines take over boring, commoditized work, the only stuff left for humans is convex work where enabling excellence is more important than excluding failure, which is not even possible if the work is difficult enough to be interesting. Traditional, risk-reductive approaches to management fail on convex work. 
  • Companies evolve, due to the inevitable corruption attendant to their internal credibility markets, toward a sociological state that is internally stable (due to the Effort Thermocline) but renders it unable to compete on the market, and prone to moral abandon. This either drains them slowly (rank culture) or causes them to lapse into ethical depravity (Enron) that brings down the whole house.

Most of my focus, in Part 21, was on the macroscopic, impersonal forces that act on organizations. I mentioned conflict between lawful evil and chaotic good, as well as the ancient mechanisms (induced depression) through which lawful evil asserts itself, both briefly, but now I’m going to do a deep dive into the micro-scale illnesses of the organization, tunneling through all the layers, in an attempt to find solutions at each level.

I’ve dedicated quite a few chapters to trust. I’m fairly confident that I’ve solved the root financial problems already. I’ve also discussed the toxicity of distrust. We’ve covered a lot of ground, both technical and soft. What I believe I have achieved is to unite the sociological, the economical, the moral, and the financial elements of the organization. We’re almost ready to Solve It: to tackle the Organizational Problem. In Part 21, I summarized the macroscopic details of organization decay (industrial and moral) but the problems are most tractable at the microscopic scale. We need to descend into the often personal hell of corporate life.

The structure of our journey through the problem, stratum by stratum, I’ll put in this part (Part 22). I have, however, needed to split what was intended as a “final post” into two. Part 23 will discuss the solution and follow the same structure.

Let’s waste no time in getting ourselves to the gates of Corporate Hell.

First Circle: Opacity

We come to Limbo, the first circle, where we confront the sin of opacity. Are most people in Corporate America being fairly compensated? I’d argue that they’re not, but the real crime isn’t what they’re being paid. It’s that they’re deprived of so much information that they have almost no insight into their actual value, and no leverage.

Ultimately, no one knows what human labor (or any asset) is “worth”. It’s generally impossible to come up with fair values for everything in a coherent way. That’s why markets exist: because valuation is an extremely difficult computational problem that’s best performed by “selfish” actors (investors and arbitrageurs) equipped to take advantage of distributed knowledge. It’s easy to compute a “fair value” for commoditized material assets. For human labor, it’s much harder. Finding a fair value for it is inherently difficult even under the best conditions.

On the market for human labor, most people can’t tolerate the volatility that would be seen on a highly-liquid exchange market (e.g. the U.S. equity market) where values shift by 20 to 30 percent per year. Most people would not be able to survive, at current compensation levels, if the labor market had that kind of volatility. So liquidity (which makes commodity markets more liquid and efficient) is not something most would desire. It would have their talents reallocated (i.e. job changes) on a monthly basis.

People (even those who love capitalism uncritically) have a hard time believing in markets. Can a $200-billion company really lose or gain $1 billion in true value in a day? Well, there’s a paradox inherent in markets, which is that price volatility and fairness seem to be (surprisingly) positively correlated. A price can absorb lots of signals and exhibit Brownian drift (which is probably harmless, in the long term) that makes it appear inconsistent because, clearly, the true value didn’t change that much in so little time. Or, it can absorb very little signal and have more superficial consistency, but less fairness, insofar as this begets illiquidity, “custom pricing“, and high premiums for middlemen. Markets either have to be pseudo-inconsistent (prices fluctuate based on small margins of supply and demand that are often almost random in their time of emergence) and fair, or consistently unfair. Most peoples’ salaries are set by the latter type of market, with unfairness layered on by asymmetries in information.

With human labor, people are stuck in a bad position. I am in support of a basic income, but that’s not the world we live in. The need for a monthly income puts them into a state of extreme risk aversion– devastating and pernicious, but so ubiquitous that people fail to recognize it as perverse; it’s just usual. While they’d make more (on average) if they could supply services directly to the market, the income volatility that doing so would involve is much more than most people have the financial means to stomach. They’d rather get a consistent low rate for their labor (paid during sickness and on vacation and, if one excludes at-will termination, regardless of uncontrollable fluctuations in work quality) than deal with the vicissitudes of an impersonal market that only cares about what they produce, even if the latter is much better for them in the long run (and might deliver savings that leave them able to escape the corporate shackles).

What’s the problem? It’s not that wages are “unfairly” low. I can’t even assess whether that’s the case. Employment is an insurance trade, and low wages exist because of the risk premium. What’s a “fair” risk premium? One can’t assess that without building a market. We don’t know, and that’s the problem. The crime is that people really don’t know how much genuine risk reduction (if any) they’re getting. Since they can be fired “for performance”, while most white-collar jobs make performance impossible to measure objectively, I’d say it’s very little. There’s also a very strong argument to be made that labor is unfairly treated because a few major players on the other side control the market. So I have very strong suspicion that most of these trades are unfair but, without a market to appeal to, there’s no proof.

The evil is in opacity. People enter the MacLeod Loser trade– taking a subordinate role in an established organization, rather than engaging with the market directly– in order to get rid of financial risk that most people have too little wealth to tolerate. In exchange, they get low wages that keep them in financial semi-desperation. They don’t know how much risk-reduction they’re actually getting (at-will employment) and, because the market is so tightly locked-down by major players, they don’t know what a risk-neutral fair price for their work is, so they can’t assess what they’re paying their employers for this insurance. Are they getting screwed? Probably, but I can’t prove that because it’s impossible to compute with a fair price. I can prove another evil: they have no way of knowing whether they’re getting screwed. If they could evaluate their own deals and judge them fair, I wouldn’t be one to argue with them; but they will never be in access to that information. Management keeps such a tight-lipped approach to everything important– compensation, personnel policies, promotion guidelines, career planning– and, worse yet, brings brutal punishments onto those who share such information. Although this is technically illegal, many companies make it a fireable offense to disclose one’s own compensation.

With opacity, the severe asymmetry of information leaves one side unable to evaluate the fairness of the deal. The deal might be totally fair, but often it won’t be. This is why I made such a strong argument in favor of transparency in compensation. The poison of opacity must be driven out with force.

Opacity isn’t only about the financial aspect. It’s also about domination (managerial mystique). The manager knows the employee’s salary, but not vice versa. That’s intentional. Most companies bring their people into submission by hiding important information, scaring people into disadvantageous panic-trading, and taking the (highly profitable) other side. For concave labor, this didn’t damage operations too much; for convex work, it does. People need a certain amount of empowerment and information to do convex work well. They rarely get it, because management intervenes. I won’t say that management has no role in the technological-era, convex-labor world; but it will have to become a more dignified, advisory role involving the provision of direction and mentoring, rather the carrot-and-stick extortion that exists now.

Most corporations evolve a set of rent-seeking high officers who rob investors and employees alike. They plunder investors through misappropriation of capital and dishonest representation of risk, while they use opacity over all important information to scare employees into terrible, panic-driven trades and subordination. Where does this lead? We must look at the winners of this trade, and that takes us right into the Second Circle: parasitism.

Second Circle: Parasitism

Every organization has people in it who have ceased to contribute, but continue to hold important roles and draw high compensation. Purges of “deadwood” (or “low performer” witch hunts) are usually directed at the bottom, but the worst problem employees are always people at the top (who’ve ceased to think of themselves as “employees”; they’re executive royalty!) Sure, there are small-scale subtracters at the bottom; but the worst are usually dividers at the top who suck all life out of the firm. Parasitism and even outright theft occur at all levels, but there’s a point (Effort Thermocline) where their prevalence increases sharply.

Low and opaque wages, fast firing that negates the promised risk reduction, and a general lack of respect for employees, all represent the “unfair” aspects of the corporation that we know and hate. There’s also an assumption that “the assholes at the top” are capturing large amounts of surplus value. That’s often right. Below the Effort Thermocline, value is created; above it, it’s captured.

Why do companies tolerate a class of rent-seeking parasites who add nothing, when it might be better for morale to fire them all and redistribute the proceeds to employees (profit sharing) and investors? Well, it turns out that much of regular economics (going back to Marx) makes a fatal error, which is to conflate labor and management, the latter being a subset of the former. On paper, that’s true. Sociologically, it’s not: managers do not see themselves as labor, and do not act as such, and are not viewed as labor by other workers. By the technical terminology, CEOs are still “labor”, even though their compensation is not set by a fair market (but through self-serving deal-trading with other CEOs on whose boards they sit). In their minds, executives are the real owners. Here’s a breakdown of the corporation, with square brackets ([]) representing terminal nodes:

(Company)-----+
.             |
.     +-------+---------------+
.     |                       |
. [Capital]                   |
.                         ("Labor")-----------+
.                             |               |
.      [Executives]--------(Mgmt.)            |
.      a.k.a. Sociopaths      |               |
.                             |               |
~~~~~~~~~~~~~~~~~~~~~ EFFORT THERMOCLINE~~~~~~~~~~~~~~
.                             |               |
.                     [Middle Managers]       |
.                     a.k.a. Clueless         |
.                                             |
.                                         [Workers]
.                                         a.k.a Losers

The old Marxist way of looking at the company has two tiers: bourgeoisie and proletariat. Capital vs. labor. That made sense when industrial processes were simple enough that anyone who held capital could manage them. If you wanted a good vs. evil narrative, you could equate capital to the rent-seeking slaveowners who had oppressed humankind for millennia, and labor to the slaves, and conditions for workers were so poor that you’d essentially be right. However, as the factories and machines and operations became more complicated, owners had to put professional, non-owning managers on the payroll, and that created the three-tier company: owners vs. managers vs. workers.

That gets us to three tiers, but there’s a distinct change of flavor between upper management (executives) and the floor-holding mere managers in the middle, who are still accountable for doing work; how’d we end up with four?

First, it should be obvious that managers are on the advantageous side of a principal-agent problem with investors because they control the books. While investors have right to interrogate management, being the owners of the enterprise, they rarely know what questions to ask. Second, they have even more advantages over the workers, being able not only to fire them but also (if daring enough to risk a lawsuit) able to inflict long-term damage using work’s feudalist reputation economy. They have a position of power over both sides, and one that can be very profitably (for them) exploited.

I would also argue that workers are investors. The modern concept of the career developed as an antidote to this socially unstable dynamic of owners against workers. For many people, that sharp dichotomy between the two categories is deeply anachronistic, because workers have the option of moving up to higher-skilled labor in the modern, fluid economy. “Worker” is no longer a permanent class, at least in theory. So workers are investors of time. Finally, with public equity ownership and 401(k) plans, they are literally investors.

Yet there’s a lot of opacity in the labor market, especially pertaining to careers. Is the career game a free market, or a feudal reputation economy? When you have what claims to be a market economy, but that uses opacity as a tool of exploitation, and clearly copied half of its pages from pernicious feudalism, there’s a lot of fear that can be exploited. High levels of ambient fear will separate people into “protectors”, vassals, and peasants. Out of an anarchic power vacuum that cannot last for long– peoples’ nerves can only take so much– brutal strongmen rise into power. That’s where executives come from.

Executives are a subset of managers who arrogate themselves to be the real owners of the company, more important than passive investors and simply more powerful than workers. The owners-versus-workers dichotomy comes back, this time between rent-seeking, non-producing executives above the Effort Thermocline, and a labor sector that includes the terminal middle-management (Clueless) who failed to include themselves in that arrogation, and the risk-averse non-strivers (Losers).

So, executives are the ones who get to such a level of invulnerability that they command large salaries just for “making decisions”. The morally degenerate, high-status ones most willing to abuse their principal-agent advantage create sinecures where they have lots of power, but no responsibility. Now there’s a four-tier enterprise: investors vs. executives vs. middle managers vs. workers. This mirrors the MacLeod hierarchy precisely (with investors, being organizationally passive, not on the chart).

Managers can rob investors financially by misleading them, and they can steal from employees on the credibility market, or by misleading them about the career-building value of the work they are doing, and those who excel at both tend to develop an outsized social status and become the executive Sociopaths. Those who either refuse or are unable to participate in such robbery will linger in the less dignified middle management tier and become the Clueless.

Investors and (non-executive) employees share a lot in common, in truth. Employees are investors of time, and often literal investors as well. So why are executives so easily able to rob the rest of the company blind? Shouldn’t investors and workers (often the same people, since most workers’ retirement assets are invested in corporate bonds and equities) band together and drop a pipe on that shit?

It’s a nice idea, but it turns out not to be so easy. First, let’s take an investor’s standpoint. Corporate governance is– and I mean this literally and non-pejoratively– a plutocracy. It’s voting, proportional to investment. Unfortunately, any aggregative voting system is at risk of corruption, because there are a lot of passive players who don’t really care either way, and who will be inclined to swing their votes for personal favors: cheap votes. That’s why vote-buying must be made illegal in a democracy: there are a lot of people out there who would swing their votes for $100. Advertising, for one example, is all about capturing the advantage that a brand holds over cheap voters who prioritize product image over quality. The civil danger of cheap votes is that a voting bloc’s power grows as the square (in statistical impact, measured by variance) of its size, which means that people who develop the ability to harness cheap votes and tie them together become extremely powerful, and can hijack the system even if they’re only able to buy a small share of votes. Cheap vote problems are typically solved by electing representatives whose job is not to be cheap and giving them disproportionate power, but also empowering voters to fire them, on the assumption that they’ll do a better job than the political machines that specialize in cheap-vote trading. That’s why management exists. Permanent managers are held to be more effective in running the company than a plutocracy subjected to cheap-vote abuses.

When that runs poorly, management loots and investors lose. In truth, as a cynic, I’d argue that if typical management had its way, there would never be profits. What would be profit would go directly toward the executive payroll.

On the side of labor (true, non-executive labor) there’s a different cheap votes problem. Employees are the cheap votes. How often does a low-level worker take up cause against his employer, risking termination (likely) and damage to her reputation (a possibility, in the feudal reputation economy of references and resumes) in doing so? It’s so rare that it makes the news, and such people are often blacklisted and ruined for doing it. Whistleblowing is an activity where there’s a fixed amount of punishment to be allocated to a variable number of adversaries, which makes isolated whistleblowing so dangerous it rarely happens, and with no one willing to be the first, one sees a culture of terrified silence. A powerful company can pretty easily ruin a single person’s professional reputation– with frivolous lawsuits against her, negative references, and possibly negative statements to the press about the departure. All of this is illegal, but she’s a single person up against a company with limitless resources. On the other hand, if 20 people blow the whistle, the company can’t discredit all of them. It must go into “damage control mode” to repair its image. It will offer generous settlements. If a thousand people act, and talented people start losing faith in the company and leaving, the firm will actually need to change its behavior. However, conditions are such that unethical companies and managers can, like Gus Fring, hide in plain sight, because people are too scared of whistleblowing’s consequences for the opposition ever to get to 20, much less a thousand.

Opacity is justified by expediency (“we can’t have transparent compensation; that would just be crazy“) but it conceals the fact that a powerful set of people abuse information to rob investors and workers to an extreme degree. Is it a conspiracy? No, I wouldn’t go that far. As I said, executives hide in plain sight. They don’t hide the fact, for just one example, that those who fight opacity by openly disclosing their salaries are socially excluded, isolated, and eventually fired for it. (This, also, is illegal. Disclosure of salary is protected; it’s an anti-unionbusting provision.) It’s pretty well known what happens, in the white collar world, to people who disclose their salaries. The true dishonesty pertains not to the social norms, but to their reasons for existing. Managers claim they fire those who engage in salary discussion because it’s “rude” and “threatening to team cohesion”, when their real motivations are more sinister.

Executive parasitism is a huge problem for most companies– much more of one than operational inefficiency or unfavorable market conditions. Its severity is one thing that the trust-averse “Theory X” got right: given too much power, people will turn to parasitism as they focus on protecting what they have. The problem with Theory X is that the gun points the wrong way. In Theory X corporations, prevailing distrust is used to justify abuse of workers by management, while management must be trusted by both sides (workers and investors) have no other choice– they are just too far out of power. Theory X uses prevailing distrust to shift power to those who are least deserving of any trust.

The old, Marxist, model puts investors and workers on two sides of a chasm, with each side despising the other. Theory-X management steps in and tells investors, “Hire us, and we’ll keep your workers from stealing from you”. That’s their sales pitch. (In the modern economy, workers who favor their career goals over the organization’s are seen as “time thieves”; I disagree, but that’s a side note.) It turns out that professional managers are very good at preventing stealing; they want all the action for themselves!

Workers and investors don’t belong on opposite sides of some hadal chasm anymore. We need to recognize our common enemy: looting management. The “workers vs. investors” concept made sense in 1848 when the vast majority of people were not only desperately poor, but locked into dead-end labor with no chance of improvement. There was no such thing as a career or a 401k. It’s not true in 2013. Workers can be well-compensated and treated well if they develop unique skills that give them leverage. Their main obstacle as “career capitalists” is not knowing what the market will value, nor the true long-term needs of society that they might be able to fulfill (later on) for a profit. Their managers certainly have no interest in showing them the way. That brings us into…

Third Circle: Career incoherency

If workers can be viewed as investors (the careerist perspective) then a question arises: why do so many people end up stuck in poor investment strategies that, quite visibly, pay off poorly? A well-managed asset portfolio can appreciate by 6% per year without any work. People (at least in the top 15% by talent, and maybe more) ought to be able, pretty easily, to garner 8 to 15% annual increases (at least for a good 10 to 20 years, at which they’re into very-high-skill labor legitimately wealthy) through their control of one of the most important variables, which is how hard they work. Yet we don’t see that.

Becoming great at something– good enough to make a substantial living on the free market at convex work– requires the proverbial “10,000 hours” of deliberate practice. I don’t care to debate the exact number; that’s certainly the right order of magnitude, and it’s probably within +50% for most fields of endeavor. At 10,000 hours, most people should have independent reputations and credibility, and the right to access the market’s will-to-pay (or, at least, their own company’s) directly rather than through a manager/pimp taking god-knows-what (opacity) percent. That would take 5 years, given a typical 2000-hour work year. Yet most people don’t even get there in 25 years. Why? Most of them are assigned to crappy work which confers no career benefit. They’re putting 2000 hours in at “work”, but they’re not getting deliberate practice. This is the norm in organizational employment, and most people never really get out of the dues-paying period. They’re lucky if they get 200 hours of quality work in a year, which means they never become good at what they do. The lack of developed skill leaves them with no leverage and they can be exploited into perpetuity.

In the long term, and for society, this is devastating. One of the first things an economist learns about the Third World is that cheap labor is a curse, because it makes labor-saving technologies (that would make society richer) too expensive by comparison. Why buy a dishwasher when you can pay someone 30 cents an hour to do it? National elites become addicted, unknowingly, to cheap labor and their countries decline. Why invest in people, for the future, when you can exploit them in the present? The long-term result of this is that everyone (even that national elite) loses. This is more true than ever in the corporate world. Corporate managers are averse to training employees out of a fear that more marketable underlings will be likely to leave them. In reality, the reverse seems to be true. Good people leave jobs because they stop learning, not because they learn “too much” and find better employment elsewhere. I’m an unapologetic job hopper and I would easily stay at a job (perhaps for 10 years, perhaps until retirement) if I genuinely believed I was improving my market value by 20% per year. But if I’m not learning anything, then my rate of growth is negative 5 percent per year, which I just won’t tolerate.

Career coherency exists when one’s job requirements also serve one’s career– there is no conflict between the immediate work assignments and the person’s long-term career goals. People do their best work when career coherency is the case, and (except for the MacLeod Clueless) they will do as little as they can get away with amid incoherency.

Of course, career incoherency is depressingly common. Companies tend to load the junior or politically unsuccessful with fourth quadrant work that “just needs to get done”, so people get resentful and leave. The truth is that only the MacLeod Clueless take career-incoherent assigned work very seriously. Losers manage themselves to the Socially Accepted Median Effort (SAME) but slack off beyond that point, while Sociopaths often blow it off entirely. A common Sociopath response to being assigned career-incoherent work is to fail badly at it, but in such a way that the blame can’t be directly assigned to him (to use Venkat Rao’s terminology, a “Hanlon dodge”). This is a hard balance to strike, but extremely powerful when it works. What eventually happens is that management, should it distract him with crappy work, is punished just enough that future crappy work is sent elsewhere, but not so severely that it makes the Sociopath look incompetent or noncompliant. He performs poorly while retaining plausible deniability, and it helps if management is a little bit scared of him (“if I keep giving him low-yield assignments and he fails, maybe he’ll blame me“). The Sociopath figures out just how far he will get the benefit of the doubt, and plays accordingly.

In general, the best and worst employees of a company tend toward a self-executive– meaning that they serve investors’ interests and their own directly, ignoring the interference of parasitic executives– and almost insubordinate pattern of behavior. What about the moral and industrial middle classes? Those are the ones most affected by the prevailing culture. In a rank culture, they’ll be compliant and superficially loyal. In a tough culture, they’ll be viciously competitive. In a self-executive culture, they’ll tend to be technocratic and organizationally altruistic. The very good and very bad are pretty much the same whereever one goes, and both categories will blow off career-incoherent management and work (although for very different reasons) so it tends to be people in the middle who define, and also who are most defined by, the corporate culture.

What happens if a company shuts off self-executivity? Do the very-good and very-bad stop being insubordinate? Absolutely not. The very good are pushed into increasingly desperate public stands for what is right. It should be predictable what happens to them: they get fired, or humiliated so badly that they must resign. The very bad, however, tend to be good enough at playing the people to stick around. When self-executivity is outlawed, only outlaws will be self-executive (i.e. be able to get anything done). The result of this is an environment similar to the violent black markets that emerged in the Soviet Union; the shadowy nature of transactions puts a lot of otherwise unconnected baggage and friction on them. Even staid products like lightbulbs, when there was a public shortage, often had to be obtained from characters more like speakeasies than hardware stores. A modern analogue is the market for illegal drugs. Yes, most of the products are poisonous, but the violence surrounding this economic activity has a lot more to do with the illegality of the trade than the toxicity of the product, which most serious players in the business never even use.

When you shut off self-executivity, you shut off internal innovation– to a point. The very-good insubordinates will still tilt at windmills, and be summarily fired for the quixotry. The very-bad will furtively pursue innovations on their own, but with malevolent intent. That’s how you get evil innovations like Google’s “calibration scores”, which were an obvious (and, sadly, successful) move to sabotage the company. Those are the direct product of what happens when self-executivity is pushed to the black market.

In the short term, under desperate circumstances, debate and self-executivity must be curtailed out of the need for focused dedication toward a coherent definition of corporate success. This is one reason why, while I support open allocation, I recognize it as inappropriate (at least at full extent) for the needs small, bootstrapped companies. They should pursue open allocation in spirit and values, but shipping a coherent product takes first priority. However, large and wealthy technology companies have a moral responsibility to implement open allocation; if they shirk it, they not only fail morally but, because they cease to have a culture worth caring about, they also demolish themselves through brain drain.

Why do companies shut down self-executive behavior? Why aren’t employees allowed to manage their careers and contribute directly to the company’s internal market? Self-executive work is, empirically, typically worth at least three times as much as traditionally managed work. (In software, it’s more like 10, hence the phrase “10x programmer”.) So shouldn’t there be infinite demand for something that makes everyone 3+ times more productive? Well, to answer that one, we must progress further into corporate hell…

Fourth Circle: False scarcity

One prevailing trait of the Clueless is that they never question arguments from scarcity or desperation. “Deadlines” must be met, and “there’s no money in the budget” is taken at face value. This enables the Sociopaths at the top to create a false scarcity that’s empowers the Clueless to do reprehensible things that they otherwise wouldn’t. It’s the opposite of 1984. In Orwell’s depiction of totalitarian socialism, people were misled with false claims of prosperity. Corporations go the other way, by creating a phony scarcity while million-dollar bonuses are funneled to the executive thugs who enforce it.

That’s where career incoherency often comes from. The company “just can’t afford” to do things properly, to compensate fairly, or to invest in employees. Things just need to be done, this way, and now. Debate and a progressive outlook can’t be afforded. The “emergency mode” in which there might be justifiable cause for curtailing employee autonomy and long-term concerns becomes permanent.

Why does this actually work? It seems counterintuitive. Soviet governments lied about being rich and exaggerated growth figures to improve morale; American corporations claim to be poorer than they are. Why? Wouldn’t that damage morale?

I lack a more global perspective on this, but I think that false scarcity is most effective in an American setting, where individual prospects trump corporate morale. People aren’t going to be especially bothered by the idea that their company is poor or unsuccessful, as long as they have a good place in it. They’d rather the firm be rich, obviously, but they care more about their individual station and long-term career prospects than the organization itself. Caring about the macroscopic reputation of one’s firm is a luxury for real members of it (executives, who have something to lose if it goes down). What is the firm’s prestige, they ask, going to do for me? Americans (moreso than other nationalities) are happy to work for unsuccessful, uninspiring, and even desperate institutions if there’s personal gain (compensation, promotions, career opportunities) to be made in doing so. One major exception is academia, where social status is somewhat divorced from compensation. In the rest of the economy, people don’t mind working for macroscopically mediocre institutions if they have an inside track to a legitimate role.

In this way, companies don’t lie to their own people about how successful or strong they are. Instead, they present themselves as somewhat weak and hampered so that whatever bone is thrown to a worker seems like a genuine favor. “We have no raise pool this year, but we really want to keep you so I fought for days and got you a 2-percent cost-of-living increase, which no one else is getting.” Excluding academia, Americans would rather have excellent positions in mediocre companies than crappy, subordinate positions in excellent companies. In a opaque regime where workers rarely know what others are getting in terms of compensation, career development, and project allocation, the self-effacing company can mislead a large number of workers into believing, each, that they are favorites: what you’re getting is meager, but everyone else is getting less.

The false scarcity has one toxic side effect. Sociopaths recognize it as a negotiation tactic and leave it at that, but the Clueless actually buy into it and “volunteer” to enforce its directives. So they end up shutting down self-executivity, as the desperation mentality evolves into cargo cult of “urgency” enforced by idiotic middle managers. For an analogue; in the 1990s, there was a fad where unskilled programmers would direct compilers to inline aggressively because “it makes the code go faster”. That’s not always true, and it’s not the whole story. Some code runs faster when the compiler is told to inline heavily but, in general, people are not smarter about such details than the compiler writers, and abuse of inlining makes the generated code substantially worse. The word urgent is the manager’s variety of “inline-all”. “It makes people work faster.”

False scarcity is a present-term negotiation tactic with deleterious long-term effects. Let’s take the Socratic method to an employee asking his manager for a raise. Here’s a conversation from Anywhere, U.S.A. between manager (Kim) and employee (Larry):

Larry: …so based on the market for Widgeteers in this region, I believe I should be making $85,000.

Kim: I can’t give you a raise, Larry. You’re already at the maximum salary for Widgeteer III’s.

Larry: I know that, but I’ve been doing the work of a Widgeteer IV for almost two years. Even you’d agree that I do more work than John did, and he was a Senior Staff Widgeteer when he retired.

Kim: You’re welcome to apply for promotion in February, but I won’t be able to support you. You need three consecutive 3′s on your performance reviews and I can only give you a 2 this year. Meets Expectations.

Larry: Explain to me why I’m a Two. I was a Three last year and I’ve only improved.

Kim: Last year, I had 24 review points to give out for the Proton team, but this year Jake got three more review points for his team because he’s fucking Janice, so I get three points less. I only have 21. I have to give Alex a 3 or he’ll mope and get nothing done for a year– you know how he is– but with only 21 points, if I give more than two 3′s, I have to give someone a 1. The damn paperwork that comes with a 1, well… you just wouldn’t believe it.

Larry: Would you be able to move me to the Neutron team? I’m sure you have plenty of points for that project, given the launch.

Kim: The Neutron team does not have enough headcount to accept Twos. We don’t want people who meet just Meet Expectations.

Larry: But you just admitted that I deserve to be a Three!

Kim: Go take your Meets-Expectations ass somewhere else, Twoser. I knew you were a Two the day I met you.

Larry: Well, wait. What is it that the Neutron team seeks? Maybe I could learn the skills now, and when a slot opens up, I could make the transition smoother.

Kim: We have deadlines. There’s no way that I can allow you to learn on company time. We just don’t have the slack. You need to put your head down and keep working on Proton.

Larry: So I can’t move to Neutron because I don’t have the skills, and you won’t let me take the time to learn them, even though it’s a project of much higher business value?

Kim: That’s right.

Larry: What if I spend a day per week learning Neutron, and come in on Saturdays?

Kim: I wouldn’t normally ask you to work on Saturdays, but if you’re going to come in on weekends, I ask that you work only on your assigned project. I can’t have you getting distracted. If I suspect that you are using Saturdays to pursue side projects and you are doing it on company resources, I will have to write you up for insubordination.

Larry: What if I work on my assigned project on Saturdays, and spend Fridays with the Neutron team?

Kim: Larry, I am not in on Saturdays and I am not going to come in on the weekend just to make sure you get your work done.

Larry: But you know that I get my work done!

Kim: The performance review I am writing says ‘Meets Expectations’. One point lower and you’d be a ’1′ and I’d have to write a Performance Improvement Plan. This would require me to write a negative summary of your performance, with dates and events to create the perception of legalistic precision when really it’d be all bullshit and we’d both know it. You are not a One, but you are clearly a Two, an expectations-meeter, because I have no more review points to give you. That means that I am disallowed from knowing that you get your work done.

Larry: What if I apply to the work-from-home program, but still come into the office five days a week, so that I can work Saturdays remotely?

Kim: That is an option, but your file says you live in zip code Q6502. You would be in a Category IV location for cost-of-living, and I would have to dock your pay by $6,500. So that is not going to get you your raise.

Larry: So what happens if I apply for transfer to a team that has more room for growth?

Kim: I will send you links to appropriate resources and make introductions to other teams’ managers for you, but then I will put negative commentary about your performance on your personnel file that you won’t be able to see. No one will want you, for the simple reason that I have credibility and you don’t. You won’t know what I’m saying and will have no way of appealing it. In this way, I am like a feeder who makes his captive unhealthy, sexually repulsive to other men, and preferably immobile so as to have complete dominance over her because no one will want her once she is morbidly obese. The difference between you and a bedridden feedee force-fed 18,000 calories per day is that you won’t know that it’s happening, and it will be entirely out of your consent. Then, I will allow your position to be cut from my team in a trade that gets me a $5,000 personal bonus and 2 more review points so I can get Bob promoted and not have to deal with his damn high-pitched voice anymore. You will have three weeks to endure transfer interviews in which you will have no chance, because I’ve already smeared your performance review history, at the end of which you will be fired not by me, but by a person you’ve never met.

Larry: Well, that might not be so bad. Is there a severance package?

Kim: We don’t like severance packages because it means we are rewarding failure. Besides, there’s no money in the budget[pauses, lowers voice] However, my promotion packet is coming down to decimal points, so those “360-degree” reviews of bosses that usually don’t matter? This might be the one time in a hundred where director-level people give a shit what people like you have to say. If you let me write your review, we can work out a story that gets you $20,000. How’s that sound?

Larry: Make it forty thousand.

Kim: 27-five. A pleasure!

This might seem like an attempt at anti-corporate humor. It’s not. Conversations like this actually go down all over the place in Corporate America. I’ve probably seen every perversion in this (except for the word “Twoser”) at least once.

Corporations have a problem with abuse of process, but there’s something else that pervasive scarcity allows. Abusive process. It comes down the snake and the grass. The snake is seen as vicious and malignant. The grass is viewed as being compliant and beneficent. But what covers the snake, so it can strike? The grass. The corporate grass has a good-cop, bad-cop flavor. There are abusive policies that exist (justified by false scarcity constraints and an overzealous need for bureaucratic consistency) that are so severe that nothing can get done unless exceptions are made, but exceptions are made so often that people view them as harmless, like a too-low speed limit in a place where no one is ticketed unless actually at an unsafe speed. The rules on paper are the ugly, barren ground that would be exposed without plant cover. Then, there are the “nice guy” makers of exceptions who enable people to actually get stuff done. They’re the grass. The snakes are the ones who have the power to turn off the making of exceptions in order to bring down a rival. 

The worst scarcity companies generate is the scarcity of work. The “problem” with self-executive employees is that they tend to generate projects that management never imagined. They create work for themselves. Good work. Work of a much higher quality than is typically seen in something assigned by management, because they’re self-motivated. This is good for them and their employers, but their managers view it as a negative. They might outshine the master.

This brings us to the so-called “lump of labor” fallacy. How fallacious is it? Is the demand for labor fixed and limited, or can it can grow as people and society progress? On one hand, there will always be limitless demand for making peoples’ lives better. On the other, structured work environments generate a pernicious and visible work scarcity.

If demand for work is truly finite, you get a competitive society where the fight to “get” work is more defining than the actual doing of work. If it’s limitless, you get structural cooperation as people work to make each other (and themselves) more productive. Most economists consider the “lump of labor”– that there’s a finite amount of work to go around, leaving us in zero-sum competition for it– to be an erroneous and regressive mentality. In the abstract, they’re right. Adding value, improving processes, and making peoples’ lives better should always have limitless demand.

However, within the typical corporation, the lump-of-labor mentality is pervasive and almost a permanent fixture. You need the attention of a manager (a professional “no man”) to get a project sanctioned. “Plum projects”– the rare case of desirable work that has high-level sanction– are handed out as political favors. High-impact work is directed only to the managerially blessed; most people don’t get any of that and are loaded up with fourth-quadrant evaluative nonsense with no purpose other than the living out of a painful dues-paying period. Sure, in the real world that exists outside of this corporate bullshit, there’s limitless need for people to make life better, often by implementing ideas that no executive would ever think of. However, under the corporate regime, there is a fixed (and small) amount of sanctioned work that it will accept as sufficient justification for retaining an employee. This means that the lump-of-labor slugfest– a race to the bottom among MacLeod Losers and Clueless as even the fucking process of getting to do real work becomes competitive– is very much in force over corporate denizens.

As corporations begin to believe their own false-scarcity myths (perpetrated by Sociopathic robbers at the top, and implemented by Clueless useful idiots in middle management) they start to fall under the delusion that they’ll fail outright unless all work is directed toward “sanctioned projects” as defined by a small, powerful set of people. Executives are often too far out of touch to have any clue what projects deserve sanction, and middle managers are both distracted by their own career needs and hobbled by their own tendency toward Cluelessness. Thus, they tend to generate a “sanctioned project” pool that is not only small but also increasingly divorced, as time goes on, from the company’s actual business needs.

It’s the increasingly myopic scope of “sanctioned projects”, and the morally degenerate competitive infrastructure (closed allocation) that builds up around them, that makes most corporate workplaces so horrible. But what’s the alternative? Can workers really just be allowed to define their own work? Well, it works for Valve and Github, two of the most successful companies out there. With self-executive work being worth 3 to 10++ times as much as traditionally managed work, it’s an unambiguous win for a company that can afford the risk and, with computational machinery now extremely cheap, that essentially only requires trusting them with their own time.

So why is this so rare? We have to go into a deeper Circle of Hell for that…

Fifth Circle: Trust sparsity

I focused heavily on trust in parts 17 (financial trust and transparency), 18 (industrial trust and time management), 19 (living in truth vs. convex dishonesty), and 20 (simple trust vs. Bozo Bit) because it’s increasingly clear how much damage is done to organizations by the lack of it. When you see large companies “acq-hiring” mediocre engineers at $10 million per head, it becomes clear that firms are desperate.

What are they desperate for? These “acq-hiring” firms have plenty of engineering talent in-house, but they get to a point where the prevailing assumption is that all of their own people are incompetent, lazy, and ineffectual, so they staff important projects with external jackasses bought in at a panic price. This behavior is a lot like impulsive hoarding, where a person’s living quarters become so messy that he has to buy a new winter coat every November not because he wears out the old one, but because his house is too much of a mess for him to find it again. The one difference is that, for the metaphor to apply fully to acq-hires, he’d have to be spending $15,000 on a $200 coat.

Why do companies hire so many people but trust so few of them? I examined this in Part 20, but the gist of it is that, while the larger concept of trust has degrees and variations, simple trust (whether a person is treated as competent and worthy of respect) tends to be binary (“bozo bit”) and it is usually a global systemic property of a group of people. It is either trust-dense, meaning people are generally held to be independently credible, or trust-sparse, which tends to generate a dysfunctional array of warring cliques. In a trust-sparse environment, being without a clique leads to isolation, exclusion, and failure, so the pressure to become part of one generates a feudalistic pattern of behavior.

Because simple trust is a binary and systemic property, one person “flipping the switch” can turn off the lights for good. It just doesn’t take much. Trust density, although the core of any healthy business, seems to be fragile. What makes it this way? I’ve concluded that there’s a cardinal rule that organizations, unless they want hell to break loose, must follow: don’t hire before you trust.

Most rules in business have exceptions. Not this one. Only hire people with the intention of investing simple trust– trust to do the right thing with their own time– in them. If you hire someone who proves unworthy of simple trust– it’s uncommon, but it happens– than fire him. Don’t be a dick about it– write a generous severance package– but get him out as quickly as you can. Also, don’t keep an unethical high performer around just because he’s “hard to replace”. You need a company where everyone can be afforded simple trust and, if you lose that, it’s almost impossible to get it back.

Plenty of companies hire people with full intention never to make them real members of the company. They’re brought in for grunt work, because it seems less risky to hire a schmuck off the street (the hiring can be undone) than to automate the undesirable work (a project that might fail). Bad move. This addiction to cheap labor accelerates itself because a trust-sparse company can never find and trust capable people who’ll automate the crappy work, which is what should be done. Soon enough, the company is one where new hires spawn with the Bozo Bit in the “on” position, which creates resentment between the old and new hires. No one likes being seen as a “bozo” and it turns out that the most reliable ways to turn off one’s bozo bit are generally considered unethical (convex dishonesty). The corrosion is pretty much immediate.

Why in the hell would a company sell off its culture, and hire people it distrusts? I’m actually going to sample from evolutionary biology and invoke r- and K-selection. An r-strategic species aims for rampant proliferation but low quality of individual offspring. A hundred may be born, but only a few will survive. On the other hand, a K-strategist aims to have few, highly successful, offspring. In humans, women tend toward K-selection (because of the natural reproductive bottleneck) while men can be r- or K-strategists. However, r-strategic behavior in men leads to positional violence, maltreatment of women, and population catastrophes. Civilization began when humans discovered monogamy and, instead of successful men having tens of “wives” (sexual slaves in a harem) and hundreds of children, with no paternal investment; they were encouraged to have few wives (often, only one) and a smaller number of children, in whom they invested highly. In other words, civilization began when men were forced to be mostly monogamous K-strategists, ending the extreme frequency (death rates of 0.5 to 1 percent per year) of male positional violence and enabling stability.

If we view business as a reproduction– of work processes and values, knowledge and relationships– then we find that there are also r- and K-selective business strategies. K-strategist “parents” (bosses) want to have few “children” and invest in them highly, treating them as proteges or advisees. More common are the r-strategic corporations that hire a bunch of people, invest nothing in their careers, and expect only a few to thrive. For concave work, the r-strategic approach was probably the most profitable one, since adding more heads meant pulling in more dollars. But the 21st century is showing us that, for convex work, a K-strategic approach to business expansion is the only way to go.

It is bad that these r-selective companies hire before they trust, and it is also dishonest. When recruiting, companies engage people by telling them a story of what kind of work they’d be doing as trusted real members of the team while failing to state that most new hires will end up in the untrusted, bozo category for arbitrary reasons. It’s when that happens that companies start to evolve credibility black markets, and the panicked trading that transfers power to ethical degenerates sets in. To understand the process behind this, we have to descend yet again, into…

Sixth Circle: Passive aggression 

Tough cultures believe that within-company competition is beneficial and makes people work harder and produce more. They’re wrong. Rank cultures tend toward “harem queen” dynamics as people jockey for managerial favor. That’s bad as well. Dysfunctional companies, and that’s most of them, tend to be marked by passive-aggressive behavior and social competition. The contest for the artificially scarce resources (good projects, managerial attention) that success depends upon, and the fear of ending up in the bozo category, generate patterns of behavior so negative that they ruin a company outright.

This style of degeneracy is hard for managers to detect because, when workers are engaged in it, they appear affable and dedicated. They race against each other to work the longest hours, and take on responsibility to gain power over critical nodes of the company. This is also why it’s critically important to fire unethical high performers, no matter how “indispensable” they seem. Unethical people, unless they are completely devoid (like, bottom 1%) of social skills, will always seem like high performers, and they will always appear indispensable. They develop the skills of shifting blame and taking credit so rapidly that by their early 20s they have more experience in manipulating people (yes, that includes you) than most people have in a lifetime. They always seem too important to get rid of. Don’t fall for that. You can afford to fire an unethical high performer, especially because he’s probably not a legitimate high-achiever; you can’t afford not to.

Social competition is what the truly toxic use in order to get their way. They isolate targets and rivals, and they often take advantage of the false scarcity in work allocation to make sure that the best people get the worst work, driving them out. Clueless middle managers, who take complaints from ladyboy favorites at face value, are typically oblivious to the demoralizing backstabbing that goes on in front of them. They’re just bad judges of character. It always gets me when managers say they infallibly shut down anyone who tries to “play politics” under them; if anyone is visibly playing politics, he is clearly unsuccessful at it, and perhaps he took the blame for someone else’s political plays. Sociopaths, on the other hand, don’t care too much about the character of people working for them either way, so long as those aren’t a personal threat to their goals. Clueless don’t know about all the nasty politics that exists below them; Sociopaths can see it but don’t care.

On the whole, however, people tend to agree that ethical character is important; even Sociopaths don’t want to deal with those who will rob them. Character is far more important than talent. The problem is that it’s very hard to judge a person’s ethical mettle. How does one know what a person would do in extreme circumstances, when such conditions are so rare? That’s where human social dynamics come into play. People assume, often wrongly, that the little betrays the big. In a heterogeneous world, this fails in a major way. If someone pronounces words in a slightly different and characteristic way, that’s called an accent and it’s not a sign of stupidity. If someone can’t work 80 hours per week, that’s not a sign of poor ethical character but an artifact of typical human limits and of health problems that are irrelevant at the 40-hour level. Yet, human social organisms tend to believe, in spite of the ridiculousness of it, that social reliability (the little) betrays true character (the big). Thus, companies tend to attempt to measure ethical character through superficial reliability contests, and the amusing thing there is that, even though they consistently backfire by promoting the bad people who are most used to such contests, corporations (especially tough cultures, where reliability tests are the point) continue to use them.

Winners of reliability contests tend to be the worst people, because the artificial “crunch times”, deadlines, and scarcity push people to their limits and strain their social resources. Psychopaths are naturally adept at manipulating this in order to make sure others faceplant first, leaving them standing. Psychopaths don’t tire in social competition because it’s fun for them to watch everyone else burn out. Management, in general, is not capable of figuring out when this is happening. The psychopath presents himself as a high performer, and colleagues are too scared to tell the truth.

Most of these reliability contests, not by design but through ignorance, are built in such a way that the psychopaths are most adaptive to them. The social competition dynamics of a reality show (e.g. Survivor) and office politics are at least a million years old. Since psychopathy is most likely an individually fit (but socially harmful) r-strategy, it co-evolved with that nonsense. It turns out that “the bad guys” have been hacking our social reliability competitions for a thousand times longer than we’ve had language to describe any of these ideas. 

I’ll take a concrete example, which is the stigma associated with “job hopping”. Why is it there? Employers understand that the most dangerous people are the high-talent unethical ones. They’re right. And job hoppers tend to be high-talent “disloyal” people; at the least, they don’t give loyalty away for free. Unfortunately, since there’s no way to measure ethical character, the rage is taken out on people who have “too many jobs”. Well, through various consulting projects I’ve had access to more data on this matter than most of these HR idiots could see in twelve lifetimes, and I have the answer on that: unethical people don’t hop from job to job, continually subjecting themselves to social change and potential disadvantage. Instead, they most commonly ingratiate themselves with upper management early on, build deep trust over time (since that’s the only way to do it) and, when the opportunity emerges, betray everyone in one fell swoop. Knowing the power that comes with seniority, they’re more prone than the general population to long job tenures. Unethical people tend to have a Doppler Effect in which there’s one perception of them from ahead and above them (that they are affable, subordinate, dedicated) and there is another, much more accurate, view from those below and behind them whom they consider unworthy of impressing.

The best way to avoid taking on a large number of unethical people is not to attract them. It is, in general, impossible to detect them until they’ve done their damage, so the only strategy is passive defense: build a (K-strategist) company that won’t attract them. This ties into trust sparsity. Unethical people love trust-sparse environments, because those mean there is a Bozo-Bit switchboard to be found, played with, and used to gain power. That brings us to the chief accelerant, as well as byproduct, of trust sparsity. We come to the Seventh Circle. Headlong into the flames we go…

Seventh Circle: Extortion

I’ve said my piece about closed allocation being a form of extortion, because the conflict of interest between people and project management forces the employee to serve the manager’s career goals or face isolation, firing, and possible humiliation. “Work for me or you don’t work here.” It’s far from true that managers are the only people guilty of this behavior. Companies have been targeted by morally bankrupt programmers who built defects (“logic bombs” and back doors) into their systems. It’s expensive and humiliating to be extorted, and the emotional scarring can last for a long time.

That extortion leads to distrust should be so obvious that it doesn’t need explanation, so we’ll treat it as self-evident. Some of the “scar tissue” that companies develop is a direct result of previous extortions by employees, management, counterparties, and investors. Some more of it is cargo-cult transplant scar tissue that executives transcribe, without knowing why it exists, from one company to another as they move about. The tendency for companies to evolve toward a “Theory X” distrust of employees– sometimes without knowing why– comes from this replication of other companies’ post-traumatic policies.

Most of the other Circles of Hell tie into this Seventh. What is the benefit that it confers to a psychopath to have access to the “Bozo Bit” switchboard of a trust-sparse company? What, precisely, is most social competition? It is extortion. When a venture capitalist threatens to “pick up a phone” and turn off interest among nominal competitors if you don’t accept an abusive term sheet, what is that? What is the purpose of feudal reputation economies? Oh, right.

What is extortion? When does negotiation, which is unambiguously acceptable, go into black hat territory? I would say that extortion has a few defining characteristics:

  • There is an asymmetric power relationship, usually conferred by social access to people capable of extreme physical or social violence (esp. harm to reputation).
  • The extorter is attracted to the extortee by the latter’s participation in productive activity, in an attempt to draw a share of the profits through coercion. For this reason, the extortee’s success will only draw more extortion.
  • The harm is sometimes presented as a punishment, but is an extreme one and usually in retaliation toward something the extortee has the right to do. In other cases, it’s presented as an offer of “protection” (from oneself, or one’s hired thugs.)

Extortion is the epitome of parasitism. It adds nothing to the ecosystem. Rather, it feeds off the profile of the most productive players. Extortion is not the same as blackmail. They’re similar crimes, but there’s a fundamental difference in why each is illegal. Blackmail is illegal because it’s selective, corrupt law enforcement: even if the blackmailer has the right not to report the crime (this differs by jurisdiction) he does not have the right to selectively do so based on a personal payment. Extortion is illegal because it’s a drain against productive activities, as extortionists ratchet up their demands, often putting producers out of business. It is also exceedingly common if not made illegal, and hard to drive out even then.

Is management (in the classic corporate sense) extortion? I’ve made this claim before; can I defend it? Well, let me explain it in detail. Managers ought to have the right to terminate a relationship, just as employees do. In a small company, this would mean the end of employment. But in a large company, should managers have unilateral termination authority? Absolutely not. Do they? From a Clueless perspective, no. From a cynical (and accurate) perspective, they do. Companies rarely afford managers unilateral termination because it’s too much of a lawsuit risk; but they give the manager so much credibility (especially if performance reviews are Enron-style, meaning that they’re part of an employee’s transfer packet in internal mobility) that they can engage in “passive firing” (damage to employee’s reputation, often deliberate and invisible to the target, that makes him ineligible for internal mobility). Why do they allow this? For the sake of “project expediency”. Companies grant this power to managers out of the misguided belief that the trains simply won’t run on time unless bosses have that power. They can’t grant unilateral termination explicitly (lawsuit risk) so they create mean-spirited performance review systems and passive-firing infrastructures toward the same goal.

How is managerial authority most often used, both in rank and tough cultures? The subordinate employee is coerced into throwing all her weight into the manager’s career goals, with the scraps given to her own. What exactly is that? Again, it’s pure extortion. Companies permit it, because the manager has credibility.

The whole point of a credibility market is to allow extortion in the name of “project expediency”. Does it actually serve that purpose, and improve project success? No. The extreme success of open allocation proves that companies don’t need extortionist managers. While there probably is a need for some of what is called “management” in most companies– for training, direction and guidance only– there is no evidence, anywhere, that a healthy company benefits (except in short-term, existential emergencies that require “my way or the highway” leadership) from this sort of behavior.

One might notice that all of the six Circles above tie into managerial extortion.

  • Opacity gives power to management over employees’ long-term careers, since they have no clue what the actual economic landscape or market climate is, especially if they face an adverse manager (reference problem).
  • Parasitism is the obvious goal of the extortionist, but extortionists find the organization’s fear of parasitism (“low performer” witch hunts) to be an effective tool of aggression.
  • Career incoherency is a result of widespread extortionist managerial culture. It’s the manager’s right to say, “You work for me or for no one here” that forces people to do work of limited or no career value.
  • False scarcity is what encourages people who might object to the extortion, instead, to passively tolerate it. This is the “project expediency” argument; many companies believe (falsely) that nothing will be achieved, and the company will die, without extortionist thugs (using the threat of harsh credibility reductions) to police the bottom.
  • Trust sparsity is the philosophical underpinning of the extortion market. It creates the “Bozo Bit switchboard” which is the holy grail of a psychopath.
  • Passive aggression is enabled by a perverse and intentionally dysfunctional bureaucracy where people can cause harm through inaction. I know someone who was fired because his boss forgot to write a performance review, and the default rating assigned in the no-review case happened, that year, to fall under the 5% mandatory-fire cutoff. Whether this was a case of forgetfulness or passive aggression is beyond my knowledge, I honestly have no idea. But many companies operate on an original sin principle where employees are ruined (no credibility) unless protected by a manager. And what is mandatory “protection”?

It’s extortion that is at our enemy’s heart. That’s the core of corporate evil, at least on the internal front. It must seem that we’re at the bottom, but we don’t yet have full explanatory power over what motivates so goddamn much extortion. What makes people extortive? Is that truly “human nature”, or is it merely human behavior when people are subjected to humiliating false scarcity and nonsensical, dehumanizing processes? Let’s go into that, right now. It’s an ugly place, but we’ve been through plenty of those…

Eighth Circle: Powerlessness

Evil exists, and lawful evil is a defining force of intra-corporate social competition. However, maybe there’s room for compassion: sympathy for the damned. Why, we might permit ourselves to ask, is there so much bad behavior in the corporate context? Is it the stakes? That’s the Theory-X explanation. There’s a lot of money in it; ergo, people steal. I don’t buy that, because work isn’t the highest-stakes thing people do, and there are processes with more importance and less moral corruption. Theory Y’s explanation of bad behavior at work is that it tends to be self-accelerating; people are naturally inclined toward good action, but one bad behavior leads to several more, with the victims often unable to retaliate directly and, therefore, propagating the misery through the company. That’s quite true, but it doesn’t explain the first injection of evil. Where does that come from? Theory Z, being agnostic on the broader moral questions, takes the teamist approach of planting “fire brakes” between teams so that any submodule (person, team, department) that turns toxic can be sloughed off in isolation. (This is why internal transfer is so hard– a fact that extortionist managers love, obviously– in a Theory-Z organization.) Who’s right?

Theory Y is mostly right, but probably only 90% correct. There are first-strike extortionists and thugs out there. They exist. Bad people are real. An organization that can’t defend itself against them will perish. While passive defense (not attracting them) is best, companies do need to keep a watchful eye on this behavior. The problem with this is that extortionists get their first practice on the people the organization cares the least about, and are already well on a roll by the time the negative behavior becomes a visible problem.

Companies tend to get their moral policy utterly backward. They take a Theory-X attitude toward their people in general, imposing restrictions designed to guard the firm against extortive behavior and theft. However, it’s impossible to get anything done in such an environment. That’s why trust-sparsity generates convex dishonesty, even in heroes (“stone soup”) who are forgiven after the fact. The result of this is that trust-sparse companies must make exceptions, and they do this based on million-year-old social protocols originally designed to encourage K-strategists to deny sexual favor to unworthy and unsavory r-strategists. There’s nothing wrong with that. As a product of human evolution, I’m glad that the K-selective machinery exists. But the psychopaths have a million-year track record of hacking it and getting in. They do the exact same thing to trust-sparse companies. Firms need to defend themselves with something else.

Total denial doesn’t work, because companies can’t operate if they never trust anyone; and conditional denial leads to the victory of psychopaths who’ve spent a million years making themselves exceptions to other peoples’ (well-advised) rules.

What we need is to go the other way, to full-on trust density, and release all non-extortive power to employees. The company must grant autonomy and freedom to serve the business goals to everyone, except to those who attempt to steal or extort, which it must terminate immediately. It turns out that this is a stronger way of policing ethical behavior, because the people on the ground (a) actually care about organizational health, and (b) aren’t afraid to speak up when they see problems.

What’s the alternative? What dominates corporate life for most people? Powerlessness. If trust-sparsity is allowed, then anyone can become an untrusted member of the group, and almost everyone is exposed and afraid. If that’s the case, then all but a few people are in a disempowered and humiliating position. Lord Acton told us that power (of the extortive kind) tends to corrupt, and he’s right. Powerlessness, however, also corrupts.

Power makes bad people evil, and it makes weak people (and that’s a large pool, sadly) bad. Powerlessness, on the other hand, makes good people ineffectual, bad people similarly evil, and weak people both bad and strong. How do I mean that? What could possibly occur through powerlessness that makes the weak strong? Individually, they’re defeated, but they become cheap votes (see above) for the true bad guys to corral and deploy. Since the statistical voting power of a bloc is proportional to the square of its size, and blocs of the weak become substantially more cohesive amid powerlessness and fear, they become strong when under direction from evil. This is why Clueless middle-managers, although few are innately unethical, can easily be misled toward criminal activity.

What is the end game of the corporation when people are powerless? Well, it generates the MacLeod pyramid, and also accelerates its degeneracy. Make people more powerless, and:

  • Losers will become increasingly apathetic, content to draw a salary for no contribution which is (despite some economists’ claims to the contrary) not a comfortable arrangement for most. The Socially Accepted Median Effort (SAME) will drift toward zero. Even managers will tolerate non-contribution as it becomes clear that no one is able to get real work done, anyway.
  • Clueless develop an awareness of low performance (theirs and others) and their overactive superego drives them toward overcompensation. This adds back-and-forth “Brownian management” to the mix. It only adds noise because, while these Clueless are eager, they lack coherent strategic direction.
  • Sociopaths rebel and sabotage operations if they are personally rendered powerless, but they’re also (unlike most) prone toward assessing power in relative terms, so a Sociopath who is macroscopically powerless might still be happy to improve his personal power base by trading on the credibility market. Sociopaths can tolerate macroscopic powerlessness if they can still double their micro-scale power at a sufficient rate. 

This seems to be the end state of dysfunction: powerlessness. Companies fear extortion by employees– as they, perhaps, should, because it happens– but they go so far as to disempower those inclined toward good-faith experimentation and creativity. Then, people lose all reason to care about the health of the organization. Why would anyone care about a company that views her as a bozo? She shouldn’t. She should take what she can and get out once something better is avaiable.

We come to the bottom of the Eighth Circle and find a black hole in the center of the floor. We look into it, and see no bottom. It’s just a chasm. To most people, it would be terrifying. Few of the denizens of the other circles, as miserable as they may be while they are, would dare to enter it, but we’ve come this far. We need to complete our journey, so let’s get on with it. Let’s jump into the hole and find the bottom…

Ninth Circle: ??????????

We start to fall, and in the thin air down here, we continue to accelerate for a long time. It’s not painful, although the air is somewhat hot and it is very loud to be falling this fast. As we get to about a thousand miles an hour, we realize we have time for somewhat of a side conversation. While we drop, it looks like we have time for an aside about religion, and then about economics.

Yes, I said religion. Don’t worry. It will make sense when we get to the bottom, but while we’re careening toward the center of the earth, let’s talk about it.

Westerners (especially detractors of religion) tend to believe that religion exists to allay fears about death, even though religious belief predates faith in any desirable afterlife. (Babylonians, for example, believed in a repulsive afterlife state.) Actually, religion exists to guide people through their fears about life. Religion has had enough on its hands in helping people understand this world. At any rate, I’m most simpatico with Buddhism, so I’m going to discuss the first of the Four Noble Truths. Commonly interpreted as “all life is suffering” (dukkha) it is better interpreted as meaning, “there is suffering in all (samsaric) life”. Rich and poor, animals and humans, and even the traditional gods and demigods (if they exist) of other religions are in a world where dukkha is possible. Shakespeare’s Hamlet referred to “the thousand natural shocks that flesh is heir to”, and he seems to have been discussing the same thing. There’s an overarching theme: life is difficult and there is pain in it. The ancient Greeks blamed a woman named Pandora; Jewish and Christian mythologies involved a snake in the Garden of Eden. Both myths implicated curiosity (philosophically, this could be related to the idea, through rarely formalized this way, that evil exists because we want to know what it is) while the Eastern approaches focus on attachment.

The Western Christian arc evolved a doctrine called original sin, even though it’s not strictly Biblical. I don’t find it to be a useful concept at all. It has been used to justify horrible actions in the past such as the cultural (and sometimes physical) genocide of non-Christian people and, in my mind, it serves no value. It takes the view that we deserve to be punished and are (without supernatural intervention) of negative worth. It’s anti-humanist. I take a more Eastern approach to human nature: there is no such (inflexible) thing. Therefore, there can be no “original sin”. There are ignorance, karma, suffering, and a myriad of biological impulses we have to sort out, but total depravity is nonsensical. It just might be, in fact, one of the worst concepts ever.

Original sin found its way into the “Calvinist work ethic” that outlived actual Calvinism, and has since become a fully secular doctrine. According to the original-sin economics, people are devoid of human value unless made productive (“saved”) by a large, successful, and rich institution. Individual people have no credibility, and being on the job market is taken to be so humiliating that a person should fear being there (even though, since companies can fire at-will, everyone is always on the job market). Companies, however, do have credibility. Prestige. Reputation. It’s all the same thing. They can save. Independent individuals, however, are seen as depraved and damnable, especially if they’ve been unemployed for “too long”.

It’s bad enough that we have to deal with this original-sin nonsense in the greater society, which is one reason why the United States will always be thirty years behind Europe when it comes to healthcare and a modern insurance (they are not as ashamed to use the word “welfare” here) state. That’s bad enough; it really sucks, actually. However, we even have it within companies. You are not credible unless a member of the (mostly corrupt) priesthood called “management” speaks for you. If you seek another job within the company, your performance reviews are part of the transfer packet, even though that’s almost illegal. (It is not, technically speaking, illegal for companies to include HR history in internal mobility decisions, but it is illegal for managers to interfere malevolently with work performance, which includes internal mobility if such options exist. Therefore, a negative review that is visible in the transfer process is, in fact, already in violation of the law.)

What does this original-sin mentality buy us? It creates an economy where almost everyone is in danger of falling to the bottom, or being excommunicated, and this fear creates an economy of extortion so vast and toxic as to be self-perpetuating. That’s what we’ve got, thanks to our original sin mentality.

The evil isn’t capitalism or communism. It’s much older than that. It’s the belief that most humans are devoid of any value, and require salvation through some process that is actually the whim of a corrupt clerical hierarchy.

I haven’t solved the Organization Problem, and at 12 kilowords already I’ll have to put that in Part 23, but I’ve found it…

We land on the bottom. This is it. The Ninth Circle. Here we are. I light a torch and there’s… nothing here. It’s just a cave. Have we passed through the center of the earth and into the antipodes? It is a comfortable temperature here. It does not look like Hell.

Is this a ruse? No, it doesn’t seem to be. There seems to be nothing Hellish about this spot. Maybe that’s the point.

In fact, I might remind you that you were never in a cave (much less Hell) at all. You’re reading text on a computer screen! If you pictured a descent into Hell, that was your doing (but I hope it didn’t disturb you too much) and no one else’s, because that hell didn’t exist.

So let’s look at this Ninth Circle of hell: there is no there there. So it is, also, with the Corporate Hell. Yes, there are extortions and people are powerless, and there is a common fear of loss of income. This is all nasty stuff. There’s plenty of ugly behavior. The beast is cruel and yet… where is it? Who is it? It’s vapor! It exists because it lives in minds, and because we care– too much, perhaps– about it. Quite possibly, it lives in your mind. It has certainly raged on in my mind. That’s how I know what it is. Now I wish to kill it, on a global scale. I want these extortionists driven back into the shadows from which they came. I have no idea how long or how much work it will take to succeed, but that’s no excuse not to try.

Given the non-substance of our enemy, and the fantastical nature of the Hell that it has created for us, maybe we can. Maybe we can end the cycle of extortions and powerlessness for good. We know that the Emperor has no clothes. We’ve known it for decades. Maybe we, as a generation, can summon the courage to laugh at his tiny balls.

It might not be so clear, and it might take another essay (Part 23, coming up) to show this, but each of these levels taught us something about the organization, and all of them contain subproblems that must be solved. The structure of the solution will mirror, somewhat, the “Inferno” shape of the problem, which has been given here. So that’s what comes next, in part 23. Stay tuned. It won’t be long.

Gervais / MacLeod 21: Why Does Work Suck?

This is a penultimate “breather” post, insofar as it doesn’t present much new material, but summarizes much of what’s in the previous 20 essays. It’s now time to tie everything together and Solve It. This series has reached enough bulk that such an endeavor requires two posts: one to tie it all together (Part 21) and one to discuss solutions (Part 22). Let me try to put the highlights from everything I’ve covered into a coherent whole. That may prove hard to do; I might not succeed. But I will try.

This will be long and repeat a lot of previous material. There are two reasons for that. First, I intend this essay to be a summarization of some highlights from where we’ve been. Second, I want it to stand alone as a “survey course” of the previous 20 essays, so that people can understand the highlights (and, thus, understand what I propose in the conclusion) even if they haven’t read all the prior material.

If I were to restart this series of posts (for which I did not intend it, originally, to reach 22 essays and 92+ kilowords) I would rename it Why Does Work Suck? In fact, if I turn this stuff into a book, that’s probably what I’ll name it. I never allowed myself to answer, “because it’s work, duh.” We’re biologically programmed to enjoy working. In fact, most of the things people do in their free time (growing produce, unpaid writing, open-source programming) involve more actual work than their paid jobs. Work is a human need.

How Does Work Suck?

There are a few problems with Work that make it almost unbearable, driving it into such a negative state that people only do it for the lack of other options.

  • Work Sucks because it is inefficient. This is what makes investors and bosses angry. Getting returns on capital either requires managing it, which is time-consuming, or hiring a manager, which means one has to put a lot of trust in this person. Work is also inefficient for average employees (MacLeod Losers) which is why wages age so low.
  • Work Sucks because bad people end up in charge. Whether most of them are legitimately morally bad is open to debate, but they’re certainly a ruthless and improperly balanced set of people (MacLeod Sociopath) who can be trusted to enforce corporate statism. Over time, this produces a leadership caste that is great at maintaining power internally but incapable of driving the company to external success.
  • Work Sucks because of a lack of trust. That’s true on all sides. People are spending 8+ hours per day on high-stakes social gambling while surrounded by people they distrust, and who distrust them back.
  • Work Sucks because so much of what’s to be done in unrewarding and pointless. People are glad to do work that’s interesting to them or advances their knowledge, or work that’s essential to the business because of career benefits, but there’s a lot of Fourth Quadrant work for which neither applies. This nonsensical junk work is generated by strategically blind (MacLeod Clueless) middle managers and executed by rationally disengaged peons (MacLeod Losers) who find it easier to subordinate than to question the obviously bad planning and direction.

All of these, in truth, are the same problem. The lack of trust creates the inefficiencies that require moral flexibility (convex deception) for a person to overcome. In a trust-sparse environment, the people who gain people are the least deserving of trust: the most successful liars. It’s also the lack of trust that generates the unrewarding work. Employees are subjected, in most companies, to a years-long dues-paying period which is mostly evaluative– to see how each handles unpleasant make-work and pick out the “team players”. The “job” exists to give the employer an out-of-the-money call option on legitimately important work, should it need some done. It’s a devastatingly bad system, so why does it hold up? Because, for two hundred years, it actually worked quite well. Explaining that requires delving into mathematics, so here we go.

Love the Logistic

The most important concept here is the S-shaped logistic function, which looks like this (courtesy of Wolfram Alpha):

The general form of such a function L(x; A, B, C) is:

where A represents the upper asymptote (“maximum potential”), B represents the rapidity of the change, and C is a horizontal offset (“difficulty”) representing the x-coordinate of the inflection point. The graph above is for L(x; 1, 1, 0).

Logistic functions are how economists generally model input-output relationships, such as the relationship between wages and productivity. They’re surprisingly useful because they can capture a wide variety of mathematical phenomena, such as:

  • Linear relationships; as B -> 0, the relationship becomes locally linear around the inflection point, (C, A/2).
  • Discrete 0/1 relationships: as B -> infinity, the function approaches a “step function” whose value is A for x > C and 0 for x < C.
  • Exponential (accelerating) growth: If B > 0, L(x; A, B, C) is very close to being exponential at the far left (x << C). (Convexity.)
  • Saturation: If B > 0, L(x; A, B, C) is approaching A with exponential decay at the far right (x >> C). (Concavity.)

Let’s keep inputs abstract but assume that we’re interested in some combination of skill, talent, effort, morale and knowledge called x with mean 0 and “typical values” between -1.0 and 1.0, meaning that we’re not especially interested in x = 10 because we don’t know how to get there. If C is large (e.g. C = 6) then we have an exponential function for all the values we care about: convexity over the entire window. Likewise, leftward C values (e.g. C = -6) give us concavity over the whole window.

Industrial work, over the past 200 years, has tended toward commoditization, meaning that (a) a yes/no quality standard exists, increasing B, and (b) it’s relatively easy for most properly set-up producers to meet it most of the time (with occasional error). The result is a curve that looks like this one, L(x; 10, 4.5, -0.7), which I’ll call a(x):

Variation, here, is mainly in incompetence. Another way to look at it is in terms of error rate. The excellent workers make almost no errors, the average ones achieve 95.8% of what is possible (or a 4.2% error rate) with the mediocre (x = -0.5) making almost 5 times as many mistakes (28.9% error rate), and the abysmal unemployable with an error rate well over 50%. This is what employment has looked like for the past two hundred years. Why? Because an industrial process is better modeled as a complex network of these functions, with outputs from one being inputs to another. The relationship of individual wage into morale, morale into performance, performance into productivity, and individual productivity into firm productivity, and firm productivity into profitability, can all be modeled as S-shaped curves. With this convoluted network of “hidden nodes” that exists in a context of a sophisticated industrial operation, it’s generally held to be better to have a consistently high-performing (B high, C negative) node than higher-performing but variable node.

One way to understand the B in the above equation is that it represents how reliably the same result is achieved, noting the convergence to a step function as B goes to infinity. In this light, we can understand mechanization. Middle grades of work rarely exist with machines. In the ideal, they either execute perfectly, or fail perfectly (and visibly, so one can repair them). Further refinements to this process are seen in the changeover from purely mechanical systems to electronic ones. It’s not always this way, even with software. There are nondeterministic computer behaviors that can produce intermittent bugs, but they’re rare and far from the ideal.

As I’ve discussed, if we can define perfect performance (i.e. we know what A, the error-free yield, looks like) then we can program a machine to achieve it. Concave work is being handed over to machines, with the convex tasks remaining available. With convexity, it’s rare that one knows what A and B are. On explored values, the graph just looks like this one, for L(x; 200, 2.0, 1.5), which I’ll call b(x):

It shows no signs of leveling off and, for all intents and purposes, it’s exponential. This is usually observed for creative work where a few major players (the “stars”) get outsized rewards in comparison to the average people.

Convexity Isn’t Fair

Let’s say that you have two employees, one of whom (Alice) is slightly above average (x = 0.1) and the other of whom (Bob) is just average (x = 0.0). You have the resources to provide 1.0 full point of training, and you can split it anyway you choose (e.g. 0.35 points for Alice, and 0.65 points for Bob). Now, let’s say that you’re managing concave work modeled by the function L(x; 100, 2.0, -0.3), which is concave.

Let the x-axis represent the amount of training (0.0 to 1.0) given to Alice, with the remainder given to Bob. Here’s a graph of their individual productivity levels, with Alice in blue, Bob in purple, and their sum productivity in the green curve

If we zoom in to look at the sum curve, we see a maximum at x = 0.45, an interior solution where both get some training.

At x = 0.0 (full investment in Bob) Alice is producing 69.0 points and Bob’s producing 93.1, for a total of 162.1.

At x = 0.5 (even split of training) Alice in producing 85.8 points and Bob’s producing 83.2, for a total of 169.0.

At x = 1.0 (full investment in Alice) Alice is producing 94.3 points and Bob’s producing 64.6, for a total of 158.9.

The maximal point is x = 0.45, which means that Alice gets slightly less training because Bob is further behind and needs it more. Both end up producing 84.55 points, for a total of 169.1. After the training is disbursed, they’re at the same level of competence (0.55). This is a “share the wealth” interior optimum that justifies sharing the training.

Let’s change to a convex world, with the function L(x; 320, 2.0, 1.1). Then, for the same problem, we get this graph (blue representing Alice’s productivity, purple representing Bob’s, and the green curve representing the sum):

Zooming in on the graph sum productivity, we find that the “fair” solution (x = 0.45) is the worst!

At x = 0.0 (full investment in Bob) Alice is producing 38.1 points and Bob’s producing 144.1, for a total of 182.2.

At x = 0.5 (even split of training) Alice in producing 86.1 points and Bob’s producing 74.1, for a total of 160.2.

At x = 1.0 (full investment in Alice) Alice is producing 160.0 points and Bob’s producing 31.9, for a total of 191.9.

The maxima are at the edges. The best strategy is to give Alice all of the training, but giving all to Bob is better than splitting it evenly, which is about the worst of the options. This is a “starve the poor” optimum. It favors picking a winner and putting all the investment into one party. This is how celebrity economies work. Slight differences in ability lead to massive differences in investment and, ultimately, create a permanent class of winners. Here, choosing a winner is often more important than getting “the right one” with the most potential.

Convexity pertains to decisions that don’t admit interior maxima, or for which such solutions don’t exist or make sense. For example, choosing a business model for a new company is convex, because putting resources into multiple models would result in mediocre performance in all of them, thus failure. The rarity of “co-CEOs” seems to indicate that choosing a leader is also a convex matter.

Convexity is hard to manage

In optimization, convex problems tend to be the easier ones, so the nomenclature here might be strange. In fact, this variety of convexity is the exact opposite of convexity in labor. Optimization problems are usually framed in terms of minimization of some undesirable quantity like cost, financial risk, statistical error, or defect rate. Zero is the (usually unattainable) perfect state. In business, that would correspond to the assumption that an industrial apparatus has an idealized business model and process, with the management’s goal to drive execution error to zero.

What makes convex minimization methods easier is that, even in a high-dimensional landscape, one can converge to the optimal point (global minimum) by starting from anywhere and iteratively stepping in the direction recommended by local features (usually, first and second derivative). It’s like finding the bottom point in a bowl. Non-convex optimizations are a lot harder because (a) there can be multiple local optima, which means that starting points matter, and (b) the local optima might be at the edges, which has its own undesirable properties (including, with people, unfairness). The amount of work required to find the best solutions is exponential in the number of dimensions. That’s why, for example, computers can’t algorithmically find the best business model for a “startup generator”. Even if it were a well-formed problem, the dimensionality would be high and the search problem intractable (probably).

Convex labor is analogous to non-convex optimization problems while management of concave labor is analogous to convex optimization. Sorry if this is confusing. There’s an important semantic difference to highlight here, though. With concave labor, there is some definition of perfect completion so that error (departure from that) can be defined and minimized with a known lower bound: 0. With convex labor, no one knows what the maximum value is, because the territory is unexplored and the “leveling off” of the logistic curve hasn’t been found yet. It’s natural, then, to frame that as a maximization problem without a known bound. With convex labor, you don’t know what the “zero-or-max” point is because no one knows how well one can perform.

Concave labor is the easy, nice case from a managerial perspective. While management doesn’t literally implement gradient descent, it tends to be able to self-correct when individual labor is concave (i.e. the optimization problem is convex). If Alice starts to pull ahead while Bob struggles, management will offer more training to Bob.

However, in the convex world, initial conditions matter. Consider the Alice-Bob problem above with the convex productivity curve, and the fact that splitting the training equitably is the worst possible solution. Management would ideally recognize Alice’s slight superiority and give her all the training, thus finding the optimal “edge case”. But what if Bob managed (convex dishonesty) to convince management that he was slightly superior to Alice and at, say, x = 0.2? Then Bob would get all the training, and Alice would get none, and management would converge on a sub-optimal local maximum. That is the essence of corporate backstabbing, is it not? Management’s increasing awareness of convexity in intellectual work means that it will tend to double down its investment in winners and toss away (fire) the losers. Thus, subordinates put considerable effort into creating the appearance of high potential for the sake of driving management to a local maximum that, if not necessarily ideal for the company, benefits them. That’s what “multiple local optima” means, in practical terms.

The traditional three-tiered corporation has a firm distinction between executives and managers (the third tier being “workers”, who are treated as a landscape feature) and its pertains to this. Because business problems are never entirely concave and orderly, the local “hill climbing” is left to managers, while the convex problems (which, like choosing initial conditions, require non-local insight) such as selecting leaders and business models are left to executives.

Yet with everything concave being performed, or soon to be performed, by machines, we’re seeing convexity pop up everywhere. The question of which programming languages to learn is a convex decision that non-managerial software engineers have to make in their careers. Picking a specialty is likewise; convexity is why it’s of value to specialize. The most talented people today are becoming self-executive, which means that they take responsibility for non-local matters that would otherwise be left to executives, including the direction of their own career. This, however, leads to conflicts with authority.

Older managers often complain about Millennial self-executivity and call it an attitude of entitlement. Actually, it’s the opposite. It’s disentitlement. When you’re entitled, you assume social contracts with other people and become angry when (from your perception) they don’t hold up their end. Millennials leave jobs, and furtively use slow periods to invest in their careers (e.g. in MOOCs) rather than asking for more work. That’s not an act of aggression or disillusion; it’s because they don’t believe the social contract ever existed. It’s not that they’re going to whine about a boss who doesn’t invest in their career– that would be entitlement– because that would do no good. They just leave. They weren’t owed anything, and they don’t owe anything. That’s disentitlement.

Convexity is bad for your job security

Here’s some scary news. When it comes to convex labor, most people shouldn’t be employed. First, let me show a concave input-output graph for worker productivity, assuming even distribution in worker ability from -1.0 to 1.0. Our model also assumes this ability statistic to be inflexible; there’s no training effect.

The blue line, at 82.44, represents the mean worker in the population. Why’s this important? It represents the expected productivity of a new hire off the street. If you’re at the median (x = 0.0) or even a bit below it, you are “above average”. It’s better to retain you than to bring someone in off the street. Let’s say that John is 40th percentile (x = -0.2) hire, which means that his productivity is 90. A random person hired off the street will be better than John, 60% of the time. However, the upside is limited (10 points at most) and the downside (possibly 70 points) is immense so, on average, it’s a terrible trade. It’s better to keep John (a known mediocre worker) on board than to replace him.

With a convex example, we find the opposite to be true:

Here, we have an arrangement in which most people are below the mean, so we’d expect high turnover. Management, one expects, would be inclined to hire people on a “try out” basis with the intention of throwing most of them back on the street. An average or even good (x = 0.5) hire should be thrown out in order to “roll the dice” with a new hire who might be the next star. Is that how managers actually behave? No, because there are frictional and morale reasons not to fire 80% of your people, and because this model’s assumption that people are inflexibly set at a competence level is not entirely true for most jobs, and those where it is true (e.g. fashion modeling) make it easy for management to evaluate someone before a hire is made. In-house experience matters. That is, however, how venture capital, publishing and record labels work. Once you turn out a couple failures, with those being the norm, it might still be that you’re a high performer who’s been unlucky, but you’re judged inferior to a random new entrant (with more upside potential) and flushed out of the system.

In the real world, it’s not so severe. We don’t see 80% of people being fired, and the reason is that, for most jobs, learning matters. The above applies to work at which there’s no learning process, but each worker is inflexibly put at a certain perfectly measurable productivity level. That’s not how the world really works. In-born talent is one relevant input, but there are others like skill, in-house experience, and education that have defensive properties and keep a person’s job security. People can often get themselves above the mean with hard work.

Secondly, the model above assumes workers are paid equally, which is not the case for most convex work. In the convex model above, the star (x = 1.0) might command several times the salary of the average performer (x = 0.0) and he should. That compensation inequality actually creates job security for the rest of them. If the best people didn’t charge more for their work, then employers would be inclined to fire middling performers in the search of a bargain.

This may be one of the reasons why there is such high turnover in the software industry. You can’t a get seasoned options trader for under $250,000 per year, but you can get excellent programmers (who are worth 5-10 times that amount, if given the right kind of work) for less than half of that. This is often individually justified (by the engineer) with an attitude of, “well, I don’t need to be paid millions; I care more about interesting work”. As an individual behavior, that’s fine, but it might be why so many software employers are so quick to toss engineers aside for dubious reasons. Once the manager concludes that the individual doesn’t have “star” potential, it’s worth it to throw out even a good engineer and try again for a shot at a bargain, considering the number of great engineers at mediocre salary levels.

One thing I’ve noticed in software (which is highly convex) is that there’s a cavalier attitude toward firing, and it’s almost certainly related to that “star economy” effect. What’s different is that software convexity has a lot inputs other that personal ability– project/person fit, tool familiarity, team cohesion, and a lot factors that are so hard to detect that they feel like pure luck– in the mix, so the “toss aside all but the best” strategy is severely defective, at least for a larger organization that should be enabling people to find better fitting projects, which makes a lot of sense amid convexity. That’s one of the reasons why I am so dogmatic about open allocation, at least in big companies.

Convexity is risky

Job insecurity amid convexity is an obvious problem, but not damning. If there’s a fixed demand for widgets, a competitor who can produce 10 times more of them is terrifying, because it will crash prices and put everyone else out of business (and, then, become a monopolist and raise them). Call that “red ocean convexity”, where the winners put the losers out of business because a “10X” performer takes 9X from someone else. However, if demand is limitless, then the presence of superior players isn’t always a bad thing. A movie star making $3 million isn’t ruined by one making $40 million. The arts are an example of “blue ocean convexity”, insofar as successful artists don’t make the others poorer, but increase the aggregate demand of art. It’s not “winner-take-all” insofar as one doesn’t have to be the top player to add something people value.

Computational problem solving (not “programming”) is a field where there’s very high demand, so the fact that top performers will produce an order of magnitude more value (the “10X effect”) doesn’t put the rest out of business. That’s a very good thing, because most of those top performers were among “the rest” when they started their career. Not only is there little direct competition, but as software engineers, we tend to admire those “10X” people and take every opportunity we can get to learn from them. If there were more of them, it wouldn’t make us poorer. It would make the world richer.

Is demand for anything limitless, though? For industrial products, no. Demand for televisions, for example, is limited by peoples’ need for them and space to put them. For making peoples’ lives better, yes. For improving processes, sure. Generation of true wealth (as Paul Graham defines it: “stuff people want”) is something for which there’s infinite demand, at least as far as we can see. So what’s the limiting factor? Why can’t everyone work on blue-ocean convex work that makes peoples’ lives better? It comes down to risk. So, let’s look at that. The model I’m going to use is as follows:

  • We only care about the immediate neighborhood of a specific (“typical”) competence level. We’ll call it x = 0.
  • Tasks have a difficulty t between -1.0 and 2.0, which represents the C in the logistic form. B is going to be a constant 4.5; just ignore that. 
  • The harder a task is, the higher the potential payoff. Thus, I’ll set A = 100 * (1 + e^(5*t)). This means that work gets more valuable slightly faster (11% faster) than it gets harder (“risk premium”). The constant term in A is based on the understanding that even very easy (difficulty of -1.0) work has value insofar as it’s time-consuming and therefore people must be paid to do it.
  • We measure risk for a given difficulty t by taking the first derivative of L(x; …), with respect to x, at x = 0. Why? L’(x; …) tells us how sensitive the output (payoff) is to marginal changes in input. We’re modeling unknown input variables and plain luck factors as a random, zero-mean “noise” variable d and assuming that for known competence x the true performance will be L(x + d; …). So this first derivative tells us, at x = 0, how sensitive we are to that unknown noise factor.

What we want to do is assess the yield (expected value) and risk (first derivative of yield) for difficulty levels from -1 to 2 when known x = 0. Here’s a graph of expected yield:

It’s hard to notice on that graph, but there’s actually a slight “dip” or “uncanny valley” as one goes from the extreme of easiness (t = -1.0) to slightly harder (-1.0 < t < 0.0) work:

Does it actually work that way in the real world? I have no idea. What causes this in the model is that, as we go from the ridiculously easy (t = 1.0) to the merely moderately easy (t = 0.5) the rate of potential failure grows faster than the maximum potential A does, as a function of t. That’s an artifact of how I modeled this and I don’t know for sure that a real-world market would have this trait. Actually, I doubt it would. It’s a small dip so I’m not going to worry about it. What we do see is that our yield is approximately constant as a function of difficulty for t from -1.0 to 0.0, where the work is concave for that level of skill; and then it grows exponentially as a function of t from 0.0 to 2.0, where the work is convex. That is what we tend to see on markets. The maximal market value of work (1 + e^(5 * t) in this model) grows slightly faster than difficulty in completing it (1 + e^(4.5*t), here).

However, what we’re interested in is risk, so let me show that as well by graphing the first derivative of L with respect to x (not t!) for each t.

What this shows us, pretty clearly, is monotonic risk increase as the tasks become more difficult. That’s probably not too surprising, but it’s nice to see what it looks like on paper. Notice that the easy work has almost no risk involved. Let’s plot these together. I’ve taken the liberty of normalizing the risk formula (in purple) to plot them together, which is reasonable because our units are abstract:

Let’s look at one other statistic, which will be the ratio between yield and risk. In finance, this is called the Sharpe Ratio. Because the units are abstract (i.e. there’s no real meaning to “1 unit” of competence or difficulty) there is no intrinsic meaning to its scale, and therefore I’ve again taken the liberty of normalizing this as well. That ratio, as a function of task difficulty, looks like this…

…which looks exactly like affine exponential decay. In fact, that’s what it is. The Sharpe Ratio is exponentially favorable for easy work (t < 0.0) and approaches a constant value (1.0 here, because of the normalization) for large t.

What’s the meaning of all this? Well, traditionally, the industrial problem was to maximize yield on capital within a finite “risk budget”. If that’s the case– you’re constrained by some finite amount of risk– then you want to select work according to the Sharpe Ratio. Concave tasks might have less yield, but they’re so low in risk that you can do more of them. For each quantum of risk in your budget, you want to get the most yield (expected value) out of it that you can. This favors the extreme concave labor. This is why industrial labor, for the past 200 years, has been almost all concave. Boring. Reliable. In many ways, the world still is concave and that’s a desirable thing. Good enough is good enough. However, it just so happens that when we, as humans, master a concave task when tend to look for the convex challenge of making it run itself. In pre-technological times, this was done by giving instructions to other people, and making machines as easy as possible for humans to use. In the technological era, it’s done with computers and code. Even the grunt work of coding is given to programs (we call them compilers) so we can focus on the interesting stuff. We’re programming all of that concave work out of human hands. Yes, concave work is still the backbone of the industrial world and always will be. It’s just not going to require humans doing it.

What if, instead, the risk budget weren’t an issue? Let’s say that we have a team of 5 programmers given a year to do whatever they want, and the worst they can do is waste their time, and you’re okay with that maximal-risk outcome (5 annual salaries for a learning experience). They might build something amazing that sells for $100 million, or they might work for a year and have the project still fail on the market. Maybe they do great work, but no one wants it; that’s a risk of creation. In this case, we’re not constrained by risk allocation but by talent. We’ve already accepted the worst possible outcome as acceptable. We want them to be doing convex work, which has the highest yield. Those top-notch people are the limiting resource, not risk allocation.

Convexity requires teamwork

Above, I established that if individual productivity is a convex function of investment in that person, and group performance is a sum of individual productivity, then the optimal solution is to ply one person with resources and starve (and likely fire) the rest. Is that how things actually work? No, not usually. There’s a glaring false assumption, which is the additive model where group performance is a simple sum of individual performances. Real team efforts shouldn’t work that way.

When a team is properly configured, most of their efforts don’t merely add to some pile of assets, but they multiply each others’ productivity. Each works to make the others more successful. I wrote about this advancement of technical maturity (from multiplier to adder) as it pertains to software but I think it’s more general. Warning: incompetent attempts at multiplier efforts are every bit as toxic as incompetent management and will have a divider effect.

Team convexity is a bit unique in the sense that both sides of the logistic “S-curve” are observed. You have synergy (convexity) as the team scales up to a certain size, but congestion (concavity) beyond a certain point. It’s very hard to get team size and configuration right, and typical “Theory Z” management (which attempts to coerce a heterogeneous set of people who didn’t choose each other, and probably didn’t choose the project, into being a team) generally fails at this. It can’t be managed competently from a top-down perspective, despite what many executives say (they are wrong). It has to be grass-roots self-organization. Top-down, closed-allocation management can work well in the Alice/Bob models above where productivity is the sum of individual performances (i.e. team synergies aren’t important) but it fails catastrophically on projects that require interactive, multiplicative effects in order to be successful.

Convexity has different rules

The technological economy is going to be very different, because of the way business problems are formulated. In the industrial economy, capital was held in some fixed amount by a business, whose goal was to gain as much yield (profit or interest) from it while keeping risk within certain bounds deemed acceptable. That made concavity desirable. It still is; stable income with low variation is always a good thing. It’s just that such work no longer requires humans. Concave work has been so commoditized that it’s hard to get a passive profit from it.

Ultimately, I think a basic income is the only way society will be able to handle widespread convexity of individual labor. What does it say about the future? People will either be very highly compensated, or effectively unemployed. There will be an increasing need for unpaid learning while people push themselves from the low, flat region of a convex curve to the high, steep part. Right now, we have a society where people with the means to indulge in that can put themselves on a strong career track, but the majority who have a lifelong need for monthly income end up getting shafted: they become a permanent class of unskilled labor and, by keeping wages low, they actually hold back technological advancement.

Industrial management was risk-reductive. A manager took ownership of some process and his job was to look for ways it could fail, then tried to reduce the sources of error in that process. The rare convex task (choosing a business strategy) was for a higher order of being, an executive. Technological management has to embrace risk, because all the concave work’s being taken by machines. In the future, it will only be economical for a human to do something when perfect completion is unknown or undefinable, and that’s the convex work.

A couple more graphs deserve attention, because both pertain to managerial goals. There are two ways that a manager can create a profit. One is to improve output. The other is to reduce costs. Which is favorable? It depends. Below is a graph that shows productivity ($/hour) as a function of wages for some task where performance is assumed to be convex in wages. The relationship is assumed here to be inflexible and go both ways: better people will expect more in wages, low wages will cause peoples’ out-of-work distractions to degrade their performance. Plotted in purple is the y = x or “break-even” line.

As one can see, it doesn’t even make sense to hire people for this kind of work at less than $68/hour: they’ll produce less than they cost. That “dip” is an inherent problem for convex work. Who’s going to pay people in the $50/hour range so they can become good and eventually move to the $100/hour range (where they’re producing $200/hour work)? This naturally tends toward a “winners and losers” scenario. The people who can quickly get themselves to the $70/hour productivity level (through the unpaid acquisition of skill) are employable, and will continue to grow; the rest will not be able to justify wages that sustain them. The short version: it’s hard to get into convex work.

Here’s a similar graph for concave work:

… and here’s a graph of the difference between productivity and wage, or per-hour profit, on each worker:

So the optimal profit is achieved at $24.45 per hour, where the worker provides $56.33 worth of work in that time. It doesn’t seem fair, but improvements to wages beyond that, while they improve productivity, do not improve it by enough to justify the additional cost. That’s not to say that companies will necessarily set wages to that level. (They might raise them higher to attract more workers, increasing total profit.) Also, here is a case where labor unions can be powerful (they aren’t especially helpful with convex work): in the above, the company would still earn a respectable profit on each worker with wages as high as $55 per hour, and wouldn’t be put out of business (despite managements’ claim that “you’ll break us” at, say, $40) until almost $80.

The tendency of corporate management toward cost-cutting, “always say no”, and Theory-X practices is an artifact of the above result of concavity. So while I can argue that “convexity is unfair” insofar as it encourages inequality of investment and resources, enabling small differences in initial conditions to produce a winner-take-all outcome; concavity produces its own variety of unfairness, since it often encourages wages to go to a very low level, where employers take a massive surplus.

The most important problem…?

Above is a lot about convexity, but I feel like the changeover to convexity in individual labor is the most important economic issue of the 21st century. So if we want to understand why the contemporary, MacLeod-hierarchical, organization won’t survive it, we need a deep understanding of what convexity is and how it works. I think we have that, now.

What does this have to do with Work Sucking? Well, there are a few things we get out of it. First, for the concave work that most of the labor force is still doing…

  • Concave (“commodity”) labor leads to grossly unfair wages. This creates a natural adversity between workers and management on the issue of wage levels. 
  • Management has a natural desire to reduce risk and cut costs, on an assumption of concavity. It’s what they’ve been doing for over 200 years. When you manage concave work, that’s the most profitable thing to do.
  • Management will often take a convex endeavor (e.g. computer programming) and try to treat it as concave. That’s what we, in software, call the “commodity developer” culture that clueless software managers try to shove down hapless engineers’ throats.
  • Stable, concave work is disappearing. Machines are taking it over. This isn’t a bad thing (on the contrary, it’s quite good) but it is eroding the semi-skilled labor base that gave the developed world a large middle class.

Now, for the convex:

  • Convex work favors low employment and volatile compensation. It’s not true that there “isn’t a lot of convex work” to go around. In fact, there’s a limitless amount of demand for it. However, one has to be unusually good for a company to justify paying for it at a level one could live on, because of the risk. Without a basic income in place, convexity will generate an economy where income volatility is at a level beyond what people are able to accept. As a firm believer in the need for market economies, this must be addressed.
  • Convex payoffs produce multiple optima on personnel matters (e.g. training, leadership). This sounds harmless until one realizes that “multiple optima” is a euphemism for “office politics”. It means there isn’t a clear meritocracy, as performance is highly context-sensitive.
  • Convex work often creates a tension between individual competition and teamwork. Managers attempting to grade individuals in isolation will create a competitive focus on individual productivity, because convexity rewards acceleration of small individual differences. This managerial style works for simple additive convexity, but fails in an organization that needs people to have multiplicative or synergistic effects (team convexity) and that’s most of them.

Red and blue ocean convexity

One of the surprising traits of convexity, tied-in with the matter of teamwork, is that it’s hard to predict whether it will be structurally cooperative or competitive. This leads me to believe that there are fundamental differences between “red ocean” and “blue ocean” varieties of convexity. For those unfamiliar with the terms, red ocean refers to well-established territory in which competition is fierce. There’s a known high quantity of resources (“blood in the water”) available but there’s a frenzy of people (some with considerable competitive advantages) working to get at it. It’s fierce and if you aren’t strong, the better predators will crowd you out. Blue ocean refers to unexplored territory where the yields are unknown but the competition’s less fierce (for now).

I don’t know this industry well, but I would think that modeling is an example of red-ocean convexity. Small differences in input (physical attractiveness, and skill at self-marketing) result in massive discrepancies of output, but there’s a small and limited amount of demand for the work. If there’s a new “10X model” on the scene, all the other models are worse off, because the supermodel takes up all of the work. For example, I know that some ridiculous percentage of the world’s hand-modeling is performed by one woman (who cannot live a normal life, due to her need to protect her hands).

What about professional sports, the distilled essence of competition? Blue ocean. Yep. That might seem surprising, given that these people often seem to want to kill each other, but the economic goal of a sports team is not to win games, but to play great games that people will pay money to watch. A “10X” player might revitalize the reputation of the sport, as Tiger Woods did for golf, and expand the audience. Top players actually make a lot of money for the opponents they defeat; the stars get a larger share of the pool, meaning their opponents get a smaller percentage, but they also expand that pool so much that everyone gets richer.

How about the VC-funded startup ecosystem? That’s less clear. Business formation is blue ocean convexity, insofar as there are plenty of untapped opportunities to add immense value, and they exist all over the world. However, fund-raising (at least, in the current investor climate) and press-whoring are red ocean convexity: a few already-established (and complacent) players get the lion’s share of the attention and resources, giving them an enormous head start. Indeed, this is the point of venture capital in the consumer-web space: use the “rocket fuel” (capital infusion) to take a first-entrant advantage before anyone else has a shot.

Red and blue ocean convexity are dramatically different in how they encourage people to think. With red-ocean convexity, it’s truly a ruthless, winner-take-all, space because the superior, 10X, player will force the others out of business. You must either beat him or join him. I recommend “join”. With blue-ocean convexity (which is the force that drives economic growth) outsized success doesn’t come at the expense of other people. In fact, the relationship may be symbiotic and cooperative. For example, great programmers build tools that are used all over the world and make everyone better at their jobs. So while there is a lot of inequality in payoffs– Linus Torvalds makes millions per year, I use his tools– because that’s how convexity works, it’s not necessarily a bad thing because everyone can win.

Convexity and progress

Convexity’s most important property is progressive time. Real-world convexity curves are often steeper than the ones graphed above and, if there isn’t a role for learning, then the vast majority of people will be unable to achieve at a level supporting an income, and thus unemployed. For example, while practice is key in (highly convex) professional sports, there aren’t many people who have the natural talent to earn a living at it. Convexity shuts out those without natural talent. Luckily for us and the world, most convex work isn’t so heavily influenced by natural limitations, but by skills, specialization and education. There’s still an elite at the rightward side of the payoff distribution curve that takes the bulk of the reward, but it’s possible for a diligent and motivated person to enter that elite by gaining the requisite skills. In other words, most of the inputs into that convex payoff function are within the individual actor’s control. This is another case of “good inequality”. In blue-ocean convexity, we want the top players to reap very large rewards, because it motivates more people to do the work that gets them there. 

Consider software engineering, which is perhaps the platonic ideal of blue-ocean convexity. What retards us the most as an industry is the lack of highly-skilled people. As an industry, we contend with managerial environments tailored to mediocrity, and suffer from code-quality problems that can reduce a technical asset’s real value to 80, 20, or even minus-300 cents on the dollar compared to its book value. Good software engineers are rare, and that hurts everyone. In fact, perhaps the easiest way to add $1 trillion in value to the economy would be to increase software engineer autonomy. Because most software engineers never get the environment of autonomy that would enable them to get any good, the whole economy suffers. What’s the antidote? A lot of training and effort– the so-called “10000 hours” of deliberate practice– that’s generally unpaid in this era of short-term, disposable jobs.

Convexity’s fundamental problem is that it requires highly-skilled labor, but no employer is willing to pay for people to develop the relevant skills, out of a fear that employees who drive up their market value will leave. In the short term, it’s an effective business strategy to hire mediocre “commodity developers” and staff them on gigantic teams for uninspiring projects, and give them work that requires minimal intellectual ability aside from following orders. In the long term, those developers never improve and produce garbage software that no one knows how to maintain, producing creeping morale decay and, sometimes, “time bombs” that cause huge business losses at unknown times in the future.

That’s why convexity is such a major threat to the full-employment society to which even liberal Americans still cling. Firms almost never invest in their people– empirically, we see that– in favor of the short-term “solution”, which is to ignore convexity and try to beat the labor context into concavity, that is terrible in the long term. Thus, even in convex work, the bulk of people linger at the low-yield leftward end of the curve. Their employers don’t invest in them, and often they lack the time and resources to invest in themselves. What we have, instead of blue-ocean convexity, is an economy where the privileged (who can afford unpaid time for learning) become superior because they have the capital to invest in themselves, and the rest are ignored and fall into low-yield commodity work. This was socially stable when there was a lot of concave, commodity work for humans to do, but that’s increasingly not the case.

Someone is going to have to invest in the long term, and to pay for progress and training. Right now, privileged individuals do it for themselves and their progeny, but that’s not scalable and will not avert the social instability threatened by systemic, long-term unemployment.

Trust and convexity

As I’ve said, convexity isn’t only a property of the relationship between individual inputs (talent, motivation, effort, skill) and productivity, but also occurs in team endeavors. Teams can be synergistic, with peoples’ efforts interacting multiplicatively instead of additively. That’s a very good thing, when it happens.

So it’s no surprise that large accomplishments often require multiple people. We already knew that! That is less true in 2013 than it was 1985– now, a single person can build a website serving millions– but it’s still the case. Arguably, it’s more the case now; it’s only that many markets have become so efficient that interpersonal dependencies “just work” and give more leverage to single actors. (The web entrepreneur is using technologies and infrastructure built by millions of other people.) At any rate, it’s only a small space of important projects that will be accomplished well by a single party, acting alone. For most, there’s a need to bring multiple people together, but to retain focus and that requires interior political inequalities (leadership) to the group.

We’re hard-wired to understand this. As humans, we fundamentally get the need for team endeavors with strong leadership. That’s why we enjoy team sports so much.

Historically, there have been three “sources of power” that have enabled people to undertake and lead large projects (team convexity):

  • coercion, which exists when negative consequences are used to motivate someone to do work that she wouldn’t otherwise do. This was the cornerstone of pre-industrial economies (slavery) but is also used, in a softer form, by ineffective managers: do this or lose your income/reputation. Anyway, coercion is how the Egyptian pyramids were built: coercive slave labor.
  • divination, in which leaders are elected based on an abstract principle, which may be the whim of a god, legal precedent, or pure random luck. For example, it has been argued that gambling (a case of “pure random luck”) served a socially positive purpose on the American frontier. Although it moved funds “randomly”, it allowed pools of capital to form, financing infrastructural ventures. Something like divination is how the cathedrals were built: voluntary labor, motivated by religious belief, directed by architects who often were connected with the Church. Self-divination, which tends to occur in a pure power vacuum, is called arrogation.
  • aggregation, where an attempt to compute, fairly, the group preference or the true market value of an asset is made. Political elections and financial markets are aggregations. Aggregation is how the Internet was built: self-directed labor driven by market forces.

When possible, fair aggregations are the most desirable, but it’s non-trivial to define what fair is. Should corporate management be driven by the one-dollar, one-vote system that exists today? Personally, I don’t think so. I think it sucks. I think employees deserve a vote simply because they have an obvious stake in the company. As much as the current, right-wing, state of the American electorate infuriates me, I really like the fact that citizens have the power to fire bad politicians. (They don’t use it enough; incumbent victory rates are so high that a bad politician has more job security than a good programmer.) Working people should have the same power over their management. By accepting a wage that is lower than the value of what they produce, they are paying their bosses. They have a right to dictate how they are managed, and to insist on the mentorship and training that convexity is making essential.

Because it’s so hard to determine a fair aggregation in the general case, there’s always some room for divination and arrogation, or even coercion in extreme cases. For example, our Constitution is a case of (secular, well-informed) divination on the matter of how to build a principled, stable and rational government, but it sets up an aggregation that we use elect political leaders. Additionally, if a political leader were voted out of office but did not hand over power, he’d be pushed out of it by force (coercion). Trust is what enables self-organizing (or, at least, stable) divination. People will grant power to leaders based on abstract principles if they trust those ideas, and they’ll allow representatives to act on their behalf if they trust those people.

Needless to say, convex payoffs to group efforts generate an important role for trust. That’s what the “stone soup” parable is about; because there’s no trust in the community, people hoard their own produce instead of sharing, and no one has had a decent meal for months. When outside travelers offer a nonexistent delicacy– the stone is a social catalyst with no nutritional value– and convince the other villagers to donate their spare produce, they enable them all to work together. So they get a nutritious bowl of soup and, one hopes, they can start to trust each other and build at least a barter or gift economy. They all benefit from the “stone soup”, but they were deceived.

Convex dishonesty isn’t always bad. It is the act of “borrowing” trust by lying to people, with the intent to pay them back out of the synergistic profits. Sometimes convex dishonesty is exactly what a person needs to do in order to get something accomplished. Nor is it always good. Failed convex frauds are damaging to morale, and therefore they often exacerbate the lack-of-trust problem. Moreover, there are many endeavors (e.g. pyramid schemes) that have the flavor of convex fraud but are, in reality, just fraud.

This, in fact, is why modern finance exists. It’s to replace the self-divinations that pre-financial societies required to get convex projects done with a fairer aggregation system that properly measures, and allows the transfer of, risks.

Credibility

For macroscopic considerations like the fair prices of oil or business equity, financial aggregations seem to work. What about the micro-level concern of what each worker should do on a daily basis? That usually exists in the context of a corporation (closed system) with specific authority structures and needs. Companies often attempt to create internal markets (tough culture) for resources and support, with each team’s footprint measured in internal “funny money” given the name of dollars. I’ve seen how those work, and they often become corrupt. The matter of how people direct the use of their time is based on an internal social currency (including job titles, visibility, etc.) that I’ve taken to calling credibility. It’s supposed to create a meritocracy, insofar as the only way one is supposed to be able to get credibility is through hard work and genuine achievement, but it often has some severely anti-meritocratic effects. 

So why does your job (probably) Suck? Your job will generally suck if you lack credibility, because it means that you don’t control your own time, have little choice over what you do and how you do it, and that your job security is poor. Your efforts will be allocated, controlled, and evaluated by an external party (a manager) whose superiority in credibility grants him the right of self-divination. He gets to throw your time into his convex project, but not vice versa. You don’t have a say in it. Remember: he’s got credibility, and you lack it. 

Credibility always generates a black market. There is no failing in this principle. Performance reviews are gamed, with various trades being made wherein managers offer review points in exchange for non-performance-related favors (such as vocal support for an unrelated project, positive “360-degree reviews”, and various considerations that are just inappropriate and won’t be discussed here) and loyalty. Temporary strongmen/thugs use transient credibility (usually, from managerial favoritism) to intimidate and extort other people into sharing credit for work accomplished, thus enabling the thug to appear like a high performer and get promoted to a real managerial role (permanent credibility). You win on a credibility market by buying and selling it for a profit, creating various perverted social arbitrages. No organization that has allowed credibility to become a major force has avoided this.

Now I can discuss the hierarchy as immortalized by this cartoon from Hugh MacLeod:

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Losers are not undesirable, unpopular, or useless people. In fact, they’re often the opposite. What makes them “losers” is that, in an economic sense, they’re losing insofar as they contribute more to the organization than they get out of it. Why do they do this? They like the monthly income and social stability. Sociopaths (who are not bad people; they’re just gamblers) take the other side of that risk trade. They bear a disproportionate share of the organization’s risk and work the hardest, but they get the most reward. They have the most to lose. A Loser who gets fired will get another job at the same wage; a Sociopath CEO will have to apply for subordinate positions if the company fails. Clueless are a level that forms later on when this risk transfer becomes degenerate– the Sociopaths are no longer putting in more effort or taking more risk than anyone else, but have become an entitled, complacent rent-seeking class– and they need a middle-management layer of over-eager “useful idiots” to create the image (Effort Thermocline) that the top jobs are still demanding.

What’s missing in this analysis? Well, there’s nothing morally wrong, at all, with a financial risk transfer. If I had a resource that had a 50% chance of yielding $10 million, and 50% chance of being worthless, I’d probably sell it to a rich person (whose tolerance of risk is much greater) for $4.9 million to “lock in” that amount. A +5-million-dollar swing in personal wealth is huge to me and minuscule to him. It’d be a good trade for both of us. I’d be paying a (comparably small) $100,000 risk premium to have that volatility out of my financial life. I’m not a Loser in this deal, and he’s not a Sociopath. It’s by-the-book finance, how it’s supposed to work.

What generates the evil, then? Well, it’s the credibility market. I don’t hold the individual firm responsible for prevailing financial scarcity and, thus, the overwhelmingly large number of people willing to make low-expectancy plays. As long as that firms pays its people reasonably, it has clean hands. So the financial Loser trade is not a sign of malfeasance. The credibility market’s different, because the organization has control over it. It creates the damn thing. Thus, I think the character of the risk transfer has several phases, each deserving its own moral stance:

  1. Financial risk transfer. Entrepreneurs put capital and their reputations at risk to amass the resources necessary to start a project whose returns are (macroscopically, at least) convex. This pool of resources is used to pay bills and wages, therefore allowing workers to get a reliable, recurring monthly wage that is somewhat less than the expected value of their contribution. Again, there’s nothing morally wrong here. Workers are getting a risk-free income (so long as the business continues to exist) while participating in the profits of industrial macro-convexity. 
  2. De-risking, entrenchment, and convex fraud. As the business becomes more established, its people stop viewing it as a risk transfer between entrepreneurs and workers, and start seeing it (after the company’s success is obvious) as a pool of “free” resources to gain control over. Such resources are often economic (“this place has millions of dollars to fund my ideas”) but reputation (“imagine what I could do as a representative of X”) is also a factor. People begin making self-divination (convex fraud) gambits to establish themselves as top performers and vault into the increasingly complacent, rent-seeking, executive tier. This is a red-ocean feeding frenzy for the pile of surplus value that the organization’s success has created.
  3. Credibility emerges, and becomes the internal currency. Successful convex fraudsters are almost always people who weren’t part of the original founding team. They didn’t get their equity when it was cheap, so now they’re in an unstable positions. They’re high-ranking managers, but haven’t yet entwined themselves with the business or won a significant share of the rewards/equity. Knowing that their success is a direct output of self-divination (that is, arrogation) they use their purloined social standing to create official credibility in the forms of titles (public statements of credibility), closed allocation (credibility as a project-maker and priority-setter), and performance reviews (periodic credibility recalibrations). This turns the unofficial credibility they’ve stolen into an official, secure kind.
  4. Panic trading, and credibility risk transfer. Newly formed businesses, given their recent memory of existential risk, generally have a cavalier attitude toward firing and a tough culture, which I’ll explain below. This means that a person can be terminated not because of doing anything wrong or being incompetent, but just because of an unlucky break in credibility fluctuations (e.g. a sponsor who changes jobs, a performance-review “vitality curve”). In role-playing games, this is the “killed by the dice” question: should the GM (game coordinator who functions as a neutral party, creating and directing the game world) allow characters, played well, to die– really die, in the “create a new character” sense, not in the “miraculously resurrected by a level-18 healer” sense– because of bad rolls of the dice? In role-playing games, it’s a matter of taste. Some people hate games where they can lose a character by random chance; others like the tension that it creates. At work, though, “killed by the dice” is always bad. Tough-culture credibility markets allow good employees to be killed by the dice. In fact, when stack-ranking and “low performer” witch hunts set in, they encourage it. This creates a lot of panic trading and there’s a new risk transfer in town. It’s not the morally acceptable and socially-positive transfer of financial risk we saw in Stage 1. Rather, it’s the degenerate black-market credibility trading that enables the worst sorts of people (true psychopaths) to rise.
  5. Collapse into feudalistic rank culture. No one wants a job where she can be fired “for performance” because of bad luck, so tough cultures don’t last very wrong; they turn into rank cultures. People (Losers) panic-trade their credibility, and would rather subordinate to get some credibility (“protection”) from a feudal lord (Sociopath) than risk having none and being flushed out. The people who control the review process become very powerful and, eventually, can manufacture enough of an image of high performance to become official managers. You’re no longer going to be killed by the dice in a rank culture, but you can be killed by a manager because he can unilaterally reduce your credibility to zero.
  6. Macroscopic underperformance and decline. Full-on rank culture is terribly inefficient, because it generates so much fourth-quadrant work that serves the need of local extortionists (usually, middle managers and their favorites) but does not help the business. Eventually, this leads to underperformance of the business as a whole. Rank culture fosters so much incompetence that trust breaks down within the organization, and it’s often permanent. Firing bad apples is no longer possible, because the process of flushing them away would require firing a substantial fraction of the organization, and that would become so politicized and disruptive as to break the company outright. Such companies regularly lapse into brief episodes of “tough culture”, when new executives (usually, people who buy it as its market value tanks) decide that it’s time to flush out the low performers, but they usually do it in a heavy-handed, McKinsey-esque way that creates a new and equally toxic credibility market. But… like clockwork, those who control said black markets become the new holders of rank and, soon enough, the official bosses. These mid-level rank-holders start out as the mean-spirited witch-hunters (proto-Sociopaths) who implement the “low performer initiative” but they eventually rise and leave a residue of strategically-unaware, soft, complacent and generally harmless mid-ranking “useful idiots” (new Clueless). Clueless are the middle managers who get some power when the company lurches into a new rank culture, but don’t know how to use it and don’t know the main rule of the game of thrones: you win or you die.
  7. Obsolescence and death. Self-explanatory. Some combination of rank-culture complacency and tough-culture moral decay turn the company into a shell of what it once was. The bad guys have taken out their millions and are driving up house prices in the area and their wives with too much plastic surgery are on zoning committees keeping those prices high; everyone else who worked at the firm is properly fucked. Sell off the pieces that still have value, close the shop.

That cycle, in the industrial era, used to play out over decades. If you joined a company in Stage 1 in 1945, you might start to see the Stage 4 midlife when you retired in 1975. Now, it happens much more quickly: it goes down over years, and sometimes months for fast-changing startups. It’s much more of an immediate threat to personal job security than it has ever been before. Cultural decay used to be a long-term existential risk to companies not taken seriously because calamity was decades away; now, it’s often ongoing and rapid thanks to the “build to flip” mentality.

To tell the truth about it, the MacLeod rank culture wasn’t such a bad fit for the industrial era. Industrial enterprises had a minimal amount of convex work (choosing the business model, setting strategies) that could be delegated to a small, elite, executive nerve-center. Clueless middle managers and rationally-disengaged (Loser) wage earners could implement ideas delivered from the top without too much introspection or insight, and that was fine because individual work was concave. Additionally, that small set of executives could be kept close to the owners of the company (if they weren’t the same set of people).

In the technological era, individual labor is convex and we can no longer afford Cluelessness, or Loserism. The most important work– and within a century or so, all work where there’s demand for humans to do it– requires self-executivity. The hierarchical corporation is a brachiosaur sunning itself on the Yucatan, but that bright point of light isn’t the sun.

Your job is a call option

If companies seem to tolerate, at least passively, the inefficiency of full-blown rank culture, doesn’t that mean that there isn’t a lot of real work for them to do? Well, yes, that’s true. I’ve already discussed the existence of low-yield, boring, Fourth Quadrant busywork that serves little purpose to the business. It’s not without any value, but it doesn’t do much for a person’s career. Why does it exist? First, let’s answer this: where does it come from?

Companies have a jealously-guarded core of real work: essential to the business, great for the careers of those who do it. The winners of the credibility market get the First Quadrant (1Q) of interesting and essential work. They put themselves on the “fun stuff” that is also the core of the business– it’s enjoyable, and it makes a lot of money for the firm and therefore leads to high bonuses. There isn’t a lot of work like this, and it’s coveted, so few people can be in this set. Those are akin to feudal lords, and correspond with MacLeod Sociopaths. Those who wish to join their set, but haven’t amassed enough credibility yet, take on the less enjoyable, but still important Second Quadrant (2Q) of work: unpleasant but essential. Those are the vassals attempting to become lords in the future. That’s often a Clueless strategy because it rarely works, but sometimes it does. Then there is a third monastic category of people who have enough credibility (got into the business early, usually) to sustain themselves but have no wish to rise in the organizational hierarchy. They work on fun, R&D projects that aren’t in the direct line of business (but might be, in the future). They do what’s interesting to them, because they have enough credibility to get away with that and not be fired. They work on the Third Quadrant (3Q): interesting but discretionary. How they fit into the MacLeod pyramid is unclear. I’d say they’re a fortunate sub-caste of Losers in the sense that they rationally disengage from the power politics of the essential work; but they’re Clueless if they’re wrong about their job security and get fired. Finally, who gets the Fourth Quadrant (4Q) of unpleasant and discretionary work? The peasants. The Losers without the job security of permanent credibility are the ones who do that stuff, because they have no other choice.

Where does the Fourth Quadrant work come from? Clueless middle-managers who take undesirable (2Q) or unimportant (3Q) projects, but manage to take all the career upside (turning 2Q into 4Q for their reports) and fun work (turning 3Q into 4Q) for themselves, leaving their reports utterly hosed. This might seem to violate their Cluelessness; it’s more Sociopathic, right? Well, MacLeod “Clueless” doesn’t mean that they don’t know how to fend for themselves. It means they’re non-strategic, or that they rarely know what’s good for the business or what will succeed in the long-term. They suck at “the big picture” but they’re perfectly capable of local operations. Additionally, some Clueless are decent people; others are very clearly not. It is perfectly possible to be MacLeod Clueless and also a sociopath.

Why do the Sociopaths in charge allow the blind Clueless to generate so much garbage make-work? The answer is that such work is evaluative. The point of the years-long “dues paying” period is to figure out who the “team players” are so that, when leadership opportunities or chances for legitimate, important work open up, the Sociopaths know which of the Clueless and Losers to pick. In other words, hiring a Loser subordinate and putting him on unimportant work is a call option on a key hire, later.

Workplace cultures

I mentioned rank and tough cultures above, so let me get into more detail of what those are. In general, an organization is going to evaluate its individuals based on three core traits:

  • subordinacy: does this person put the goals of the organization (or, at least, his immediate team and supervisor) above her own?
  • dedication: will she do unpleasant work, or large amounts of work, in order to succeed?
  • strategy: does she know what is worth working on, and direct her efforts toward important things?

People who lack two or all three of these core traits are generally so dysfunctional that all but the most nonselective employers just flush them out. Those types– such as the strategic, not-dedicated, and insubordinate Passive-Aggressive and the dedicated, insubordinate, and not-strategic Loose Cannon– occasionally pop up for comic relief, but they’re so incompetent that they don’t last long in a company and are never in contention for important roles. I call them, as a group, the Lumpenlosers.

MacLeod Losers tend to be strategic and subordinate, but not dedicated. They know what’s worth working on, but they tend to follow orders because they’re optimizing for comfort, social approval, and job security. They don’t see any value in 90-hour weeks (which would compromise their social polish) or radical pursuit of improvement (which would upset authority). They just want to be liked and adjust well to the cozy, boring, middle-bottom. If you make a MacLeod Loser work Saturdays, though, she’ll quit. She knows that she can get a similar or better job elsewhere.

MacLeod Clueless are subordinate and dedicated but not strategic. They have no clue what’s worth working on. They blindly follow orders, but will also put in above-board effort because of an unconditional work ethic. They frequently end up cleaning up messes made by Sociopaths above and Losers below them. They tend to be where the corporate buck actually stops, because Sociopaths can count on them to be loyal fall guys.

MacLeod Sociopaths are dedicated and strategic but insubordinate. They figure out how the system works and what is worth putting effort into, and they optimize for personal yield. They’re risk-takers who don’t mind taking the chance of getting fired if there’s also a decent likelihood of a promotion. They tend to have “up-or-out” career trajectories, and job hopping isn’t uncommon.

Since there are good Sociopaths out there, I’ve taken to calling the socially positive ones the Technocrats, who tend to be insubordinate with respect to immediate organizational authority, but have higher moral principles rooted in convexity: process improvements, teamwork and cooperation, technical and infrastructural excellence. They’re the “positive-sum” radicals.  I’ll get back to them.

Is there a “unicorn” employee who combines all three desired traits– subordinacy, dedication, and strategy? Yes, but it’s strictly conditional upon a particular set of circumstances. In general, it’s not strategic to be subordinate and dedicated. If you’re strategic, you’ll usually either optimize for comfort and be subordinate, but not dedicated, because that’s uncomfortable. If you follow orders, it’s pretty easy to coast in most companies. That’s the Loser strategy. Or, you might optimize for personal yield and work a bit harder, becoming dedicated, but you won’t do it for a manager’s benefit: it’s either your own, or some kind of higher purpose. That’s the Sociopath strategy. The exception is a mentor/protege relationship. Strategic and dedicated people will subordinate if they think that the person in authority knows more than they do, and is looking out for their career interests. They’re subordinating to a mentor conditionally, based on the understanding that they will be in authority, or at least able to do more interesting and important work, in the future.

From this understanding, we can derive four common workplace cultures:

  • rank cultures value subordinacy above all. You can coast if you’re in good graces with your manager, and the company ultimately becomes lazy. Rank cultures have the most pronounced MacLeod pyramid: lazy but affable Losers, blind but eager Clueless, and Sociopaths at the top looking for ways to gain from the whole mess. 
  • tough cultures value dedication, and flush out the less dedicated using informal social pressure and formal performance reviews. It’s no longer acceptable to work a standard workweek; 60 hours is the new 40. Tough culture exists to purge the Loser tier, splitting it between the neo-Clueless sector and the still-Loser rejects, which it will fire if they don’t quit first. So the MacLeod pyramid of a tough culture is more fluid, but every bit as pathological.
  • self-executive cultures value strategy. Employees are individually responsible for directing their own efforts into pursuits that are of the most value. This is the open allocation for which Valve and Github are known. Instead of employees having to compete for projects (tough culture) or managerial support (rank culture) it is the opposite. Projects compete for talent on an open market, and managers (if they exist) must operate in the interests of those being managed. There is no MacLeod hierarchy in a self-executive culture.
  • guild culture values a balance of the three. Junior employees aren’t treated as terminal subordinates but as proteges who will eventually rise into leadership/mentoring positions. There isn’t a MacLeod pyramid here; to the extent that there may be undesirable structure, it has more to do with inaccurate seniority metrics (e.g. years of experience) than with bad-faith credibility trading. 

Rank and guild cultures are both command cultures, insofar as they rely on central planning and global (within the institution) rule-setting. Top management must keep continual awareness of how many people are at each level, and plan out the future accordingly. Tough and self-executive cultures are market cultures, because they require direct engagement with an organic, internal market.

The healthy, “Theory Y” cultures are the guild and self-executive cultures. These confer a basic credibility on all employees, which shuts off the panic trading that generates the MacLeod process. In a guild culture, each employee has credibility for being a student who will grow in the future. In self-executive culture, each employee has power inherent in the right to direct her efforts to the project she considers most worthy. Bosses and projects competing for workers is a Good Thing. 

The pathological, “Theory X” cultures are the rank and tough cultures. It goes without saying that most rank cultures try to present themselves as guild cultures– but management has so much power that it need not take any mentorship commitments seriously. Likewise, most tough cultures present themselves as self-executive ones. How do you tell if your company has a genuinely healthy (Theory Y) culture? Basic credibility. If it’s there, it’s the good kind. If it’s not, it’s the bad kind of culture.

Basic credibility

In a healthy company, employees won’t be “killed by the dice”. Sure, random fluctuations in credibility and performance might delay a promotion for a year or two, but the panicked credibility trading of the Theory-X culture isn’t there. People don’t fear their bosses in a Theory-Y culture; they’re self-motivated and fear not doing enough by their own standards– because they actually care. Basic credibility means that every employee is extended enough credibility to direct his own work and career.

That does not mean people are never fired. If someone punches a colleague in the face or steals from the company, you fire him, but it has nothing to do with credibility. You get rid of him because, well, he did something illegal and harmful. What it does mean is that people aren’t terminated for “performance reasons” that really mean either (a) they were just unlucky and couldn’t get enough support to save them in tough-culture “stack ranking”, or (b) their manager disliked them for some reason (no-fault lack-of-fit, or manager-fault lack-of-fit). It does mean that people are permitted to move around in the company, and that the firm might tolerate a real underperformer for a couple of years. Guess what? In a convex world, underperformance almost doesn’t matter.

With convexity, the difference between excellence and mediocrity matters much more than that between mediocrity and underperformance. In a concave world, yes, you must fire underperformers because the margin you get on good employees is so low that one slacker can cancel out 4 or 5 good people. In a convex world, the danger isn’t that you have a few underperformers. You will have, at the least, good-faith low-performers, just because the nature of convexity is to create risk and inequality of return and some peoples’ projects won’t pan out. Thjat’s fine. Instead, the danger is that you don’t have any excellent (“10x”) employees.

There’s a managerial myth that cracking down on “low performers” is useful because they demotivate the “10x-ers”. Yes and no. Incompetent management and having to work around bad code are devastating and will chase out your top performers. If 10xer’s have to work with incompetents and have no opportunity to improve them, they get frustrated and quit. There are toxic incompetents (dividers) who make others unproductive and damage morale, and then there are low-impact employees who just need more time (subtracters). Subtracters cost more in salary than they deliver, but they aren’t hurting anyone and they will usually improve. Fire dividers immediately. Give subtracters a few years (yes, I said years) to find a fit. Sometimes, you’ll hire someone good and still have that person end up as a subtracter at first. That common in the face of convexity– and remember that convexity is the defining problem of the 21st-century business world. The right thing to do is to let her keep looking for a fit until she finds one. Almost never will it take years if your company runs properly.

“Low performer initiatives” rarely smoke out the truly toxic dividers, as it turns out. Why? Because people who have defective personalities and hurt other peoples’ morale and productivity are used to having their jobs in jeopardy, and have learned to play politics. They will usually survive. It’ll be unlucky subtracters you end up firing. You might save chump change on the balance sheet, but you’re not going to fix the real organizational problems.

Theories X, Y, and Z

I grouped the negative workplace cultures (rank and tough) together and called them Theory X; the positive ones (self-executive and guild) I called Theory Y. This isn’t my terminology; it’s about 50 years old, coming from Douglas MacGregor. The 1960s was the height of Theory Y management, so that was the “good” managerial style. Let’s compare them and see what they say.

Recall what I said about the “sources of power”: coercion, divination, and aggregation. Coercion was, by far, the predominant force in aggregate labor before 1800. Slavery, prisons, and militaries (with, in that time, lots of conscription) were the inspirations for the original corporations, and the new class of industrialists was very cruel: criminal by modern standards. Theory X was the norm. Under Theory X, workers are just resources. They have no rights, no important desires, and should be well-treated only if there’s an immediate performance benefit. Today, we recognize that as brutal and psychotic, but for a humanity coming off over 100,000 years of male positional violence and coerced labor, the original-sin model of work shouldn’t seem far off. Theory X held that employees are intrinsically lazy and selfish and will only work hard if threatened.

Around 1920, industrialists began to realize that, even though labor in that time mostly was concave, it was good business to be decent to one’s workers. Henry Ford, a rabid anti-Semite, was hardly a decent human being, much less “a nice guy”, but even he was able to see this. He raised wages, creating a healthy consumer base for his products. He reduced the workday to ten hours, then eight. The long days just weren’t productive. Over the next forty years, employers learned that if workers were treated well, they’d repay the favor by behaving better and working harder. This lead to the Theory Y school of management, which held that people were intrinsically altruistic and earnest, and that management’s role was to nurture them. This gave birth to the paternalistic corporation and the bilateral social contracts that created the American middle class.

Theory Y failed. Why? It grew up in the 1940s to ’60s, when there was a prosperous middle class, but in a time of very low economic inequality. One thing that would amaze most Millennials is that, when our parents grew up, the idea that a person would work for money was socially unacceptable. You just couldn’t say that you wanted to get rich, in 1970, and not be despised for it. And it was very rare for a person to make 10 times more than the average citizen! However, the growth of economic inequality that began in the 1970s, and accelerated since then, raised the stakes. Then the Reagan Era hit.

Most of the buyout/private equity activity that happened in the 1980s had a source immortalized by the movie Wall Street: industrial espionage, mostly driven by younger people eager to sell out their employers’ secrets to get jobs from private equity firms. There was a decade of betrayal that brutalized the older, paternalistic corporations. Given, by a private equity tempter, the option of becoming CEO immediately through chicanery, instead of working toward it for 20 years, many took the former. Knives came out, backs were stabbed, and the most trusting corporations got screwed.

Since the dust settled, around 1995, the predominant managerial attitude has been Theory Z. Theory X isn’t socially acceptable, and Theory Y’s failure is still too recently remembered. What’s Theory Z? Theory X takes a pessimistic view of workers and distrusts everyone. Theory Y takes an optimistic view of human nature and becomes too trusting. Theory Z is the most realistic of the three: it assumes that people are indifferent to large organizations (even their employers) but loyal to those close to them (family, friends, immediate colleagues, distant co-workers; probably in that order). Human nature is neither egoistic or altruistic, but localistic. This was an improvement insofar as it holds a more realistic view of how people are. It’s still wrong, though.

What’s wrong with Theory Z? It’s teamist. Now, when you have genuine teamwork, that’s a great thing. You get synergy, multiplier effects, team convexity– whatever you want to call it, I think we all agree that it’s powerful. The problem with the Theory-Z company is that it tries to enforce team cohesion. Don’t hire older people; they might like different music! Buy a foosball table, because 9:30pm diversions are how creativity happens! This is more of a cargo cult than anything founded in reasonable business principles, and it’s generally ineffective. Teamism reduces diversity and makes it harder to bring in talent (which is critical, in a convex world). It also tends toward general mediocrity.

Each Theory had a root delusion in it. Theory X’s delusion was that morale didn’t matter; workers were just machines. Theory Y’s delusion is rooted in the tendency for “too good” people to think everyone else is as decent as they are; it fell when the 1980s made vapid elitism “sexy” again, and opportunities to make obscene wealth in betraying one’s employer emerged. Theory Z’s delusion is that a set of people who share nothing other than a common manager constitute a genuine (synergistic) team. See, in an open-allocation world, you’re likely to get team synergies because of the self-organization. People would naturally tend to form teams where they make each other more productive (multiplier effects). It happens at the grass-roots level, but can’t be forced in people who are deprived of autonomy. With closed-allocation, you don’t get that. People (with diverging interests) are brought together by force outside of their control and told to be a team. Closed-allocation Theory Z lives in denial of how rare those synergistic effects actually are.

I mentioned, previously an alternative to these 3 theories that I’ve called Theory A, which is a more sober and realistic slant on Theory Y: trust employees with their own time and energy; distrust those who want to control others. I’ll return to that in Part 22, the conclusion.

Morality, civility, and social acceptability

The MacLeod Sociopaths that run large organizations are a corrosive force, but what defines them isn’t true psychopathy, although some of them are that. There are also plenty of genuinely good people who fit the MacLeod Sociopath archetype. I am among them. What makes them dangerous is that the organization has no means to audit them. If it’s run by “good Sociopaths” (whom I’ve taken to calling Technocrats) then it will be a good organization. However, if it’s run by the bad kind, it will degenerate. So, with the so-called Sociopaths (while it is less necessary for the Losers and Clueless) it is important to understand the moral composition of that set.

I’ve put a lot of effort into defining good and evil, and that’s a big topic I don’t have much room for, so let me be brief on them. Good is motivated by concerns like compassion, social justice, honesty, and virtue. Evil is militant localism or selfishness. In an organizational context, or from a perspective of individual fitness, both are maladaptive when taken to the extreme. Extreme good is self-sacrifice and martyrdom that tends to take a person out of the gene pool, and certainly isn’t good for the bottom line; extreme evil is perverse sadism that actually gets in a person’s way, as opposed to the moderate psychopathy of corporate criminals.

Law and chaos are the extremes of a civil spectrum, which I cribbed from AD&D. Lawful people have faith in institutions and chaotic people tend to distrust them. Lawful good sees institutions as tending to be more just and fair than individual people; chaotic good finds them to be corrupt. Lawful neutrality sees institutions as being efficient and respectable; chaotic neutrality finds them inefficient and deserving of destruction. Lawful evil sees institutions as a magnifier of strength and admires their power; chaotic evil sees them as obstructions that get in the way of raw, human dominance. 

Morality and civil bias, in people, seem to be orthogonal. In the AD&D system, each spectrum has three levels, producing 9 alignments. I focused on the careers of each here. In reality, though, there’s a continuous spectrum. For now, I’m just going to assume a Gaussian distribution, mean 0 and standard deviation 1, with the two dimensions being uncorrelated.

MacLeod Losers tend to be civilly neutral, and Clueless tend to be lawful; but MacLeod Sociopaths come from all over the map. Why? To understand that, we need to focus on a concept that I call well-adjustment. To start, humans don’t actually value extremes in goodness or in law. Extreme good leads to martyrdom, and most people who are more than 3 standard deviations of good are taken to be neurotic narcissists, rather than being admired. Extremely lawful people tend to be rigid, conformist, and are therefore not much liked either. I contend that there’s a point of maximum well-adjustment that represents what our society says people are supposed to be. I’d put it somewhere in the ballpark of 1 standard deviation of good, and 1 of law, or the point (1, 1). If we use +x to represent law, -x to represent chaos, +y to represent good, and -y to represent evil, we get the well-adjustment formula:

Here, low f means that one is more well-adjusted. It’s better to be good than evil, and to be lawful than chaotic, but it’s best to be at (1, 1) exactly. But wait! Is there really a difference between (1, 1) and (0, 0)? Or between (5, 5) and (5, 6)? Not really, I don’t think. Well-adjustment tends to be a binary relationship, so I’m going to put f through a logistic transform where 0.0 means total ill-adjustment at 1.0 means well-adjustment. Middling values represent a “fringe” of people who will be well-adjusted in some circumstances but fail, socially speaking, in others. Based on my experience, I’d guess that this:

is a good estimate. If your squared distance from the point of maximal well-adjustment is less than 4, you’re good. If it’s more than 8, you’re probably ill-adjusted– too good, too evil, too lawful, or too chaotic. What gives us, in the 2-D moral/civil space, is a well-adjustment function looking exactly like this:

whose contours look like this:

Now, I don’t know whether the actual well-adjustment function that drives human social behavior has such a perfect circular shape. I doubt it does. It’s probably some kind of contiguous oval, though. The white part is a plateau of high (near 1.0) social adjustment. People in this space tend to get along with everyone. Or, if they have social problems, it has little to do with their moral or civil alignments, which are socially acceptable. The red outside is a deep sea (near 0.0) of social maladjustment. It turns out that if you’re 2 standard deviations of evil and of chaos, you have a hard time making friends.

In other words, we have a social adjustment function that’s almost binary, but there’s a really interesting circular fringe that produces well-adjustment values between 0.1 and 0.9. Why would that be important? Because that’s where the MacLeod Sociopaths comes from.

Well-adjusted people don’t rise in organizations. Why? Because organizations know exactly how to make it so that well-adjusted, normal people don’t mind being at the bottom, and will slightly prefer it if that’s where the organization thinks they belong. It’s like Brave New World, where the lower castes (e.g. Gammas) are convinced that they are happiest where they are. If you’re on that white plateau of well-adjustment, you’ll probably never be fired. You’ll always have friends wherever you go. You can get comfortable as a MacLeod Loser, or maybe Clueless. You don’t worry. You don’t feel a strong need to rise quickly in an orgnaization.

Of course, the extremely ill-adjusted people in the red don’t rise either. That should not surprise anyone. Unless they become very good at hiding their alignments, they are too dysfunctional to have a shot in social organizations like a modern corporation. To put it bluntly, no one likes them.

However, let’s say that a Technocrat has 1.25 standard deviations of law and chaos each, making her well-adjustment level 0.65. She’s clearly in that fringe category. What does this mean? It means that she’ll be socially acceptable in about 65% of all contexts. The MacLeod Loser career isn’t an option for her. She might get along with one set of managers and co-workers, but as they change, things may turn against her. Over time, something will break. This gives her a natural up-or-out impetus. If she doesn’t keep learning new things and advancing her career, she could be hosed. She’s liked by more people than dislike her, but she can’t rely on being well-liked as it were a given.

It’s people on the fringe who tend to rise to the top of, and run, organizations, because they can never get cozy on the bottom. We can graph “fringeness”, measured as the magnitude of the slope (derivative) of the well-adjustment function and you get contours like this:

It’s a ring-shaped fringe. Nothing too surprising. The perfection of the circular ring is, of course, an artifact of the model. I don’t know if it’s this neat in the real world, but the idea there is correct. Now, here’s where things get interesting. What does that picture tell us? Not that much aside from what we already know: the most ambitious (and, eventually, most successful) people in an organization will be those who are not so close to the “point of maximal well-adjustment” to get along in any context, but not so far from it as to be rejected out of hand.

But how does this give us the observed battle royale between chaotic good and lawful evil? Up there, it just looks like a circle. 

Okay, so we see the point (3, 3) in that circular band. How common is it for someone to be 3 standard deviations of lawful and 3 standard deviations of good? Not common at all. 3-sigma events are rare (about 1 in 740) so a person who was 3 deviations from the norm in both would be 1-in-548,000– a true rarity. Let’s multiply this “fringeness” function we’ve graphed by the (Gaussian) population density at each point.

That’s what the fringe, weighted by population density, looks like. There’s a lack of presence of people at positions like (3, 3) because there’s almost no one there. There’s a clear crescent “C” shape and it contains a disproportionate share of two kinds of people. It has a lot of lawful evil in the bottom right, and a lot of chaotic good in the top left, in addition to some neutral “swing players” who will tend to side (with unity in their group) with one or the other. How they swing tends to determine the moral character of an organization. If they side with the chaotic good, then they’ll create a company like Valve. If they side with lawful evil, you get the typical MacLeod process.

That’s the theoretical reason why organizations come down to an apocalyptic battle between chaotic good (Technocrats) and lawful evil (corrosive Sociopaths, in the MacLeod process). How does this usually play out? Well, we know what lawful evil does. It uses the credibility black market to gain power in the organization. How should chaotic good fight against this? It seems that convexity plays to our advantage, insofar as the MacLeod process can no longer be afforded. In the long term, the firm can only survive if people like us (chaotic good) win. How do we turn that into victory in the short term?

So what’s a Technocrat to do? And how can a company be built to prevent it from undergoing MacLeod corrosion? What’s missing in the self-executive and guild cultures that a 5th “new” type of culture might be able to fix? That’s where I intend to go next.

Take a break, breathe a little. I’ll be back in about a week to Solve It.