Why Self-Organized Networks Will Destroy Hierarchies

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by DFW ALL Oct. 13, 2011

“Hierarchies are systematically stupid and inefficient, for the following reasons.

1. Hayekian information problems: The people in authority who make the
   rules interfere with the people who know how to do the job and are in
   direct contact with the situation. The people who make the rules know
   nothing about the work they’re interfering with. The people who make
   the rules are unaccountable to the people who do know how to do the
   work. Consequently, all authority-based rules create suboptimal
   results and irrationality when they interfere with the judgment of
   those in direct contact with the situation.

   People in authority make stupid decisions because the people who know
   more than they do are their subordinates, and the only people who can
   hold them accountable know even less than they do.

   The only way the people doing the work can get anything done is to
   treat irrational authority as an obstacle to be routed around, the
   same way the Internet treats censorship as damage and routes around
   it.

2. Groupthink: Hierarchies systematically suppress negative feedback on
   the results of their policies. As R.A. Wilson said, nobody tells the
   truth to a man with a gun. Hierarchies are very good at telling naked
   emperors how good their clothes look.

   Hierarchies also systematically suppress critical thinking ability in
   their members. Psychological studies have found that people in
   positions of authority become less likely to evaluate communications
   based on their internal logic, and instead evaluate them based on the
   authority of the source.

3. Opacity from above: A major theme of “Seeing Like a State,” by James
   Scott, is that states try to make populations “legible” from above,
   and hence more amenable to control. We might add a “seeing like
   a boss” corrollary about the analogous phenomenon inside hierarchies.
   The problem is that such legibility is very costly, if not
   impossible, to achieve.

   Hospitals are a good example. Most of the paperwork that nurses are
   required to fill out results from the fact that management doesn’t
   trust them to do what it wants them to do without some independent
   means of verification. But the paperwork is worthless, unless
   management operates on the assumption that those same nurses can be
   trusted to fill out the paperwork honestly. It all boils down to the
   fact that management knows their interests are diametrically opposed
   to those of the nurses, but there’s no way to actually get inside the
   nurses’ heads and look out through their eyes and thereby overcome
   this fundamental agency problem. So bosses constantly look for new,
   ineffectual gimmicks to get around the problem, resulting in endless
   layers of new paperwork that are as useless as the old paperwork.
   
   Conclusion: To the extent that hierarchical organizations leave
   subordinates with freedom of exit, they are not coercive in the same
   way that the state is. But given that hierarchies are artificially
   prevalent because of state policies, and those who work within them
   do so as a necessary evil resulting from artificial constraints on
   the range of competing opportunities, the hierarchy resembles
   a microcosm of statist society, in which the agency and knowledge
   problems of authority internally mirror the irrationalities created
   by state authority in society at large.
   
   So long as the predominant production methods required large
   aggregations of capital beyond the means of individuals and small
   groups, and corporate hierarchies were propped up by state ones, the
   cultural pathologies of hierarchy were surmountable. But
   technological change is rapidly eroding the requirement for capital
   outlays, nullifying the advantages of capital ownership, and
   increasing the vulnerability of hierarchy to external and internal
   attacks by self-organized networks.
   
   So hierarchies, increasingly, lack the resources to compensate for
   their handicaps — even with help from the state. The state will only
   bankrupt itself, along with corporate hierarchies, in trying to prop
   up the old order.”