You may remember my prediction that by 2100 corporations would be run as democracies rather than monarchies, an idea I also put into the Incatena.  This was partly based on conviction and observation, as well as the experience of a few collectively owned and/or run companies.

But there’s a new poster child for democratic governance of corporation– Valve, as explained and put in context here by its resident economist, Yanis Varoufakis.

Some companies famously allow employees to put a fraction of their time– 10% or 20%– into projects of their own choice.  At Valve, that percentage is 100%.  All employees choose which projects to work on.  And Valve is famously successful.

The immediate advantages are obvious: you’re not stuck in a job or project you hate, so motivation and retention are high. Plus dumb ideas, even if they come from the CEO, are likely to be suppressed.

Now, Valve makes creative stuff, so intuitively this model fits their business.  Still, it’s worth pointing out that most creative-stuff companies, from EA to book publishers to Hollywood, are as hierarchical as any tsardom.  If anything, creative types are more capricious and unresponsive than (say) manufacturers.  Physical things usually come with their own metrics, but who’s going to tell George Lucas that he’s doing storytelling wrong?

The obvious objection is that if your company performs a service, like banking or insurance or flying planes, there’s a lot of scutwork and it wouldn’t get done with the Valve model.  (This is my pet theory, in fact, on why Episode 3 and/or Half-Life 3 hasn’t come out.)  But this isn’t so much of a showstopper as a problem to be solved.  If it even exists: we won’t know if the model fails for banking till someone actually runs a bank this way.

As Varoufakis puts it, the genius of the market is that incentives take care of this problem society-wide.  If not enough people are making veeblefetzers, then there’s an incentive for entrepreneurs to get into that market.  In the Valve model the incentive internally is really employee interest, and fortunately people are interested in different things.  If that alone isn’t enough, there’s always more traditional incentives, like raising pay in the scutwork department.  Or maybe it turns out that you outsource the scutwork to a company that specializes in it (and which itself could be run democratically).

Why haven’t more companies tried this approach?  It can’t be because it doesn’t work or scale, because it hasn’t been tried enough for us to know that.  So I think it’s inertia.  People are just too used to the tycoon, despite a couple hundred years’ experience showing that most tycoons aren’t that smart after all.  (There were brilliant kings, too, but that doesn’t make monarchy a real success.)

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