Group items tagged

How much we need to trust others depends on the context,

how much we trust ourselves,

our ability to understand the context we are in

When we trust, we re-allocate that energy and time to getting things done and making an impact

the more information and/or experience we have, the better we can decide whether or not to trust

Trust is a tool to assess and manage (reduce and/or increase) risk, depending on the situation.

Trusting someone implies making oneself more vulnerable

When we don’t trust, we exert a lot of energy to keep up our guard, to continually assess and verify.  This uses a lot of energy and time.

If the alternative is worse, we might opt for no trust

As we let ourselves be vulnerable, we also leave ourselves more open to new ideas, new ways of thinking which leads to empathy and innovation.

the more we can focus on the scope and achievement of our goals

trusting is efficient….and effective

Being vulnerable is a way to preserve energy

It lets us reallocate our resources to what matters and utilize our skills and those around us to increase effectiveness…impact.

If we are working together, we need to agree on the meaning of ‘done’.  When are we done, what does that look like?

“Control is for Beginners”

Strategic sloppiness is a way to preserve energy

Build on the same shared mental models

use the same language

As the ability to replicate something has become more of a commodity, we are increasingly seeing that complex interactions are the way to create ‘value from difference’ (as opposed to ‘value from sameness’).

allow for larger margins of error in our response and our acceptance of others

higher perfection slows down the tempo

We can’t minimize the need to be effective.

Efficient systems are great at dealing with complicated things – things that have many parts and sequences, but they fall flat dealing with complex systems, which is most of world today.

make sure we hear and see the same thing (reduce buffers around our response)

timing

intuition

judgment

experience

ability to look at things from many different perspective

to discover, uncover, understand and empathize is critical

focus on meaning and purpose for work (outcomes) instead of just money and profit (outputs)

When we have a common goal of WHY we want to do something, we are better able to trust

When we never do the same thing or have the same conversation twice, it becomes much more important to figure out why and what we do than how we do it (process, which is a given)

But it’s income that mostly interests us, not wealth, because income is the currency of the modern economy. Gone are the days when the only way to acquire an upper-class income was to marry into a family fortune.

Being born into or marrying wealth never stopped being the easiest path to acquiring a fortune

A fanatical miser, Getty was ever-fearful that his fortune would dissipate.

The return on capital (r) almost always exceeds economic growth (g).

“a very large share, perhaps a majority, of corporate profit hinges on rules and regulations that could in principle be altered.”

The clearest such pattern is that r really was, at most points in history, greater than g, if only because g was seldom much to write home about, especially back when economies were primarily agricultural. (Inflation, I learned from reading this book, didn’t really exist before the 20th century.)

The big driver of income inequality, Piketty says, isn’t labor income. It’s capital.

Only when you add in capital income does the gap widen to 15 percentage points

really, the 0.01 percent, a cohort Piketty dubs “supermanagers”—to receive much of its remuneration in the form of stock options and other capital holdings.

Typically, r is four to five times g, but the ratio gets larger as capital accumulates across generations

Baker also suggests that the tendency for large amounts of capital to realize a higher return isn’t solely attributable to the superior financial instruments they have access to; it may also have something to do with rampant insider trading, which could be policed more closely.

Interestingly, however, there is one last bastion of economic activity that proved remarkably resistant to the triumph of the market: firms, companies and, later, corporations. Think about it: market-societies, or capitalism, are synonymous with firms, companies, corporations. And yet, quite paradoxically, firms can be thought of as market-free zones. Within their realm, firms (like societies) allocate scarce resources (between different productive activities and processes). Nevertheless they do so by means of some non-price, more often than not hierarchical, mechanism!

they are the last remaining vestiges of pre-capitalist organisation within… capitalism

The miracle of the market, according to Hayek, was that it managed to signal to each what activity is best for herself and for society as a whole without first aggregating all the disparate and local pieces of knowledge that lived in the minds and subconscious of each consumer, each designer, each producer. How does this signalling happen? Hayek’s answer (borrowed from Smith) was devastatingly simple: through the movement of prices

The idea of spontaneous order comes from the Scottish Enlightenment, and in particular David Hume who, famously, argued against Thomas Hobbes’ assumption that, without some Leviathan ruling over us (keeping us “all in awe”), we would end up in a hideous State of Nature in which life would be “nasty, brutish and short”

Hume’s counter-argument was that, in the absence of a system of centralised command, conventions emerge that minimise conflict and organise social activities (including production) in a manner that is most conducive to the Good Life

Hayek’s argument was predicated upon the premise that knowledge is always ‘local’ and all attempts to aggregate it are bound to fail. The world, in his eyes, is too complex for its essence to be distilled in some central node; e.g. the state.

The idea here is that, through this ever-evolving process, people’s capacities, talents and ideas are given the best chance possible to develop and produce synergies that promote the Common Good. It is as if an invisible hand guides Valve’s individual members to decisions that both unleash each person’s potential and serve the company’s collective interest (which does not necessarily coincide with profit maximisation).

Valve differs in that it insists that its employees allocate 100% of their time on projects of their choosing

In contrast, Smith and Hayek concentrate their analysis on a single passion: the passion for profit-making

Hume also believed in a variety of signals, as opposed to Hayek’s exclusive reliance on price signalling

One which, instead of price signals, is based on the signals Valve employees emit to one another by selecting how to allocate their labour time, a decision that is bound up with where to wheel their tables to (i.e. whom to work with and on what)

He pointed out simply and convincingly that the cost of subcontracting a good or service, through some market, may be much larger than the cost of producing that good or service internally. He attributed this difference to transactions costs and explained that they were due to the costs of bargaining (with contractors), of enforcing incomplete contracts (whose incompleteness is due to the fact that some activities and qualities cannot be fully described in a written contract), of imperfect monitoring and asymmetrically distributed information, of keeping trade secrets… secret, etc. In short, contractual obligations can never be perfectly stipulated or enforced, especially when information is scarce and unequally distributed, and this gives rise to transaction costs which can become debilitating unless joint production takes place within the hierarchically structured firm. Optimal corporation size corresponds, in Coase’s scheme of things, to a ‘point’ where the net marginal cost of contracting out a service or good (including transaction costs) tends to zero 

As Coase et al explained in the previous section, the whole point about a corporation is that its internal organisation cannot turn on price signals (for if it could, it would not exist as a corporation but would, instead, contract out all the goods and services internally produced)

Each employee chooses (a) her partners (or team with which she wants to work) and (b) how much time she wants to devote to various competing projects. In making this decision, each Valve employee takes into account not only the attractiveness of projects and teams competing for their time but, also, the decisions of others.

Hume thought that humans are prone to all sorts of incommensurable passions (e.g. the passion for a video game, the passion for chocolate, the passion for social justice) the pursuit of which leads to many different types of conventions that, eventually, make up our jointly produced spontaneous order

Valve is, at least in one way, more radical than a traditional co-operative firm. Co-ops are companies whose ownership is shared equally among its members. Nonetheless, co-ops are usually hierarchical organisations. Democratic perhaps, but hierarchical nonetheless. Managers may be selected through some democratic or consultative process involving members but, once selected, they delegate and command their ‘underlings’ in a manner not at all dissimilar to a standard corporation. At Valve, by contrast, each person manages herself while teams operate on the basis of voluntarism, with collective activities regulated and coordinated spontaneously via the operations of the time allocation-based spontaneous order mechanism described above.

In contrast, co-ops and Valve feature peer-based systems for determining the distribution of a firm’s surplus among employees.

There is one important aspect of Valve that I did not focus on: the link between its horizontal management structure and its ‘vertical’ ownership structure. Valve is a private company owned mostly by few individuals. In that sense, it is an enlightened oligarchy: an oligarchy in that it is owned by a few and enlightened in that those few are not using their property rights to boss people around. The question arises: what happens to the alternative spontaneous order within Valve if some or all of the owners decide to sell up?