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Culture War Roundup for the week of September 16, 2024

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One aspect of "empire building" is that size of your empire correlates with your position in the company hierarchy, and your position correlates with your compensation.

I generally believe in more in free markets than in planned economies, and consequently I am capitalism-pilled on of the Western corporate organization structure. It looks much too much like a Sovjetized planned economy. Like in a planned economy, management upwards from middle level in the hierarchy is seldom compensated for their management and leadership skills. They are compensated because of their advantageous position in the food chain: if the leadership has a vision, they can't make it happen without giving orders through middle strata. The feedback back up ... comes through the middle strata. The productive units and teams of the organization have learned to communicate and align their work with the distant cousin units ... through the middle strata in the hierarchy. In any large enough white-collar company, the cost of management-level failures are diffuse and difficult to blame on anyone in particular. Individual contributor level productivity failures can be pinpointed on the individual and their manager. When whole organization no longer meets the targets? Much more difficult to prove who was in charge of the failure. Stock owners may complain, but don't know enough of the day-to-day operations to demand informed precise corrective actions.

Your theory makes sense a priori but I don't understand why we don't see firms that are run internally like a free market dominating the supposedly inefficient command-based firms which we actually see.

Couldn’t you say Wall Street kind of works like this? Bonuses are allocated to different desks based on their P&L and are usually a larger % of comp than salaries are for more senior employees. Also professional services like consulting, law, accounting etc. are typically “eat what you kill” at the partner level at least and directly measure employee productivity through billable hours

(0) Some products and services are so complicated to manufacture that making them competitively requires certain size.

(1) If the megacorp has monopoly / oligopoly / regulatory capture on the markets, they can deliver more than enough largesse to both owners and the management without need to optimize their processes. (Boeing receives orders because not everyone can buy Airbus planes without doors that disintegrate midair -- Airbus has limited production capacity.) And if you have the capital, you can buy off the competition, which is easier than try to fix your corporation.

(2) Running a company like a planned economy is bad, but perhaps running it with an internal fake market economy is worse. Stands to reason that you try to design a fake market with both benefits of market and benefits of integration, it is easy to mess it up and obtain only the downsides of both.

I do wonder why we we see more acquisitions leading to mergers than "unmerged" companies. Why own a megacorp when you could own a collection of leaner, smaller companies? Capturing large enough of size of the market beats the command-rule inefficiencies? Perhaps, (3), the modern IT and communications makes the command economy to work well enough on the scale that wasn't possible with the tech-level of 1970s?