People are very excited about the blockchain, convinced it’s going going to replace cash, or gold, or credit cards, or even the internet. I’ve even read claims that it’s the most important invention since little things like money and democracy. Starving through a failed attempt at utopia has taught me to align with the skeptics who point to the lack of proven use cases (other than fraud and crime), and with the pranksters who make fun of the claims of salvation.
The world of the blockchain is in a state of flux. This is normal for movements, and especially so for the definitions of words to be shifting quickly. I experienced this directly as Puppet was helping to create the DevOps space. Today, when we say ‘blockchain’ we mean a specific set of features provided by the code underlying Bitcoin; some might add the requirement for smart contracts, as added by Etherium.
This definition won’t last.
I think that when we look up in five years, the word will mean something quite different. As the conversation inevitably shifts from hype about its universal applicability to finding practical use cases, I am convinced the term ‘blockchain’ will invert from its maximalist form, including all possible features, to a much more minimal form, defining a base set of functionality that is suitable to solving far more problems. Different implementations will layer features onto that base set, but all of these derivatives will be called ‘blockchain’ (which will soon have purists crying we’re not using the “real” blockchain).
It’s that base set of functionality that I’m interested in. I’m hoping the world’s excitement over the complete package can turn into momentum around a more flexible solution. What can we take away, and what can we do once we strip things down?
Let’s start with the most obvious thing we don’t need: Lack of trust. Free markets are built on trust, so it’s silly to try to build one that doesn’t. I just don’t run into many problems that can only be solved if I never trust anyone. Even writing that out makes me cringe.
I’m interested in power tools, user productivity, and helping teams, which inherently means I’m interested in people who know and trust each other. That isn’t to say data validation and simple synchronization are never helpful, but trust between people is not a problem. So take out that whole part of the story.
Next up is consensus. Let’s be honest: You don’t really want the world to have access to most of your data. And most of you who do, well, it probably doesn’t want to see it. This solution for deciding whose copy of data is right? I don’t need it.
That isn’t to say there aren’t important consensus problems; it’s just that the blockchain’s version of them is not useful to me. I do actually struggle with managing conflicts in my own work. I’m writing this essay on one of the six devices I regularly work from, and I obviously want it to transparently synchronize between the rest. I can dream about never having conflicts, but in the real world I need a simple way to handle them when they happen. That’s my consensus algorithm. If I use the Blockchain’s, then one chunk of work wins and the rest of the work gets thrown away. That might work well in some environments, but is obviously a non-starter for my personal work. Instead, I need an algorithm that gives me control over managing my own work streams.
I expect a blockchain hodler would flip at calling this a “consensus algorithm”. It’s not. It’s more like a tool for managing merge conflicts. If you buy into the blockchain, you’ve added a ton of complexity that can and should be handled by a person.
It’s not a big leap from managing conflicts between one person’s devices to managing conflicts within a team. This is still an important problem, one wrestled with by anyone building online collaboration tools, but requires nothing like the level of infrastructure built into the blockchain. After all, I trust myself. I trust my team. I like to be able to verify, but I’m more worried about mistakes and data loss than I am about intentional subversion of the system. And actually, the current solution is horrible for teams. It’s one thing for someone else’s work to cause yours to sit in a queue for a bit, it’s another thing entirely to have your code thrown away because someone is in front of you.
Taking out the trust-less consensus allows us to remove the worst part of bitcoin: Proof of work. This is how parties in a blockchain transaction fight to have their work accepted and others’ rejected. If they win, they are rewarded with a token, which is how they’re “paid” for their work.
We don’t need any of that.
We’ve already established we don’t need an automated, trustless process for deciding who gets to update the database (and we’ve concluded we don’t want conflicting just thrown away). As a result, this whole mechanism can just be removed. Good thing, too, because bitcoin is in the process of consuming all of the world’s natural resources in the name of never trusting anyone. This also simplifies the problem of scaling these databases. Bitcoin is stupid slow because its proof of work system is stupid slow. Remove that, and any iPhone can trivially record new data as fast as you want.
Now that we don’t need proof of work, we also don’t need, surprise!, the currency itself. In a trustless system, tokens are used to compensate the networks recording the transactions. This is now so cheap we don’t need to reward people to do it.
There you go. Now you’ve got the blockchain, except without cryptocurrencies, trustless transactions, consensus algorithms, or proof of work.
The blockchain without blockchain.
It’s important to note: It’s not that I think none of these features are ever useful in any case. It’s that none of them are necessary to get the most important features out of the blockchain, and each of them should only ever be added to a system if they’re truly needed. In most cases, YAGNI.
What can we do now? Well, obviously, now that we’ve removed so much functionality we can do a lot more. General purpose languages are more powerful than specialized ones, and a more flexible database is a more powerful one. The current set of blockchain features can really only be used for a narrow set of use cases, and even those seem to be more theoretical than actual.
What’s left?
A database. That’s what the blockchain always was anyway. It’s built on Merkle trees, which means you can validate every change back to initialization if necessary. This makes it kind of trustless: I can validate your work, rather than just trusting your word of what you did. This ability actually encourages me to trust you more with my data, though.
Check back later for more about what I mean.
This article is the first in a series of indefinite length. I’ll explore the consequences of this stripping away. I will also address some of the potential I see for full current blockchain feature set. I look forward to approaching this topic from a different direction.
I don’t know what the rest of the world thinks when they use the phrase ‘power tool’, but for me it’s visceral, literal. My experiences using them and watching them transform my family’s work permeated my time building Puppet. These power tools aren’t little plugins to expensive frameworks, they’re large capital investments that dramatically change your job.
I grew up building houses with my dad. The worst task he gave me was trying to paint a set of louvre doors for a closet while in high school; I had to flip the doors over every 90 seconds to catch drips getting through the slats. After three days of misery, my father relented and rented a paint sprayer, with which we finished the job the same day, at a much higher quality.
Around the same time, my dad would rent a pneumatic nailer for big framing jobs. By the time I finished college a few years later, that critical tool went from borrowed to owned and traveled everywhere with him. Initially used only for large jobs, most contractors now have multiple nail guns to cover framing, trim, and every other use case, and the air compressor needed to power it is as important as electricity.
It might not be obvious, but both of these are examples of automation. You replaced a very manual process - applying paint, or nailing things together - with a machine. If this were a factory, these days you’d call those machines robots, but because it’s a construction site, we just call them tools.
And these tools were expensive. Even with how much faster we finished that painting job, I expect it cost more to rent the sprayer than to finish the work manually, because of how little he was paying me. (This does ignore the soft costs of listening to me complain, which were likely high.) Even today paint sprayers and nail guns are often rented rather than purchased, because good ones cost a lot of money and aren’t needed all the time.
It’s no surprise that discussions of tools and productivity are easier to understand from my experience as a carpenter than as a sysadmin. There’s plenty of room for arguments about what is or is not a software power tool, but when it costs more than a week’s wages, it trails a bright orange cord everywhere it goes, and it can nail your hand to the wall while you’re standing at the top of a ladder1? It’s a power tool.
There’s a common story about what robots and automation do to people like my dad (and both of my brothers, who followed in his footsteps): It steals their jobs and ruins their lives.
What utter poppycock.
If you think of your job as driving metal spikes into wood, then a nail gun is a mortal threat. But if this is your value add, your biggest danger was never automation. My dad never sold his ability to join raw materials together quickly; he sold homes, he sold the opportunity to enjoy your house and family more. How did these new power tools affect that?
They were awesome. Painting and nailing are classic examples of menial, low-value work, and yet we spent most of our time on them. All of the differentiation we offered to our customers was packed into a narrow slice of work, because implementation took so much time and money. As we were able to bring more powerful tools to bear, the menial work shrank and larger portions of our time could be spent on design work, customer interaction, and tuning our customers’ homes.
Interestingly, my father’s next career step was even more pointedly about experiences enabled by tooling. He took a job with a state hospital in Tennessee, fabricating custom furniture for severely disabled patients. Suddenly he was using industrial sewing machines for upholstery, and partnering with medical professionals to design multiple beds for each patient, enabling them to be happier and more comfortable (and also avoid bed sores, thus saving hundreds of thousands of dollars per patient). Given the tragically minimal budget allocation for this kind of work, every dollar saved through automation and tooling directly delivered health and happiness to his patients.
It’s no wonder I see the value in power tools, that I am more conscious of the benefit they can deliver than the loss of low-value menial work.
I had a similar experience as I was building Puppet. I would meet executives and salespeople (I don’t know why it was always them) who would say, “Oh, automation? Great, you can fire sysadmins!” No. Beyond the obvious reality that I was selling directly to my users, who would never buy on the promise to fire their coworkers, that was just not why we were valuable.
Puppet gave people a choice between lowering cost but keeping the current service quality, or keeping your costs flat while providing a much better service. “Wait, making things better is an option? I didn’t know that!” Most companies were aware that their IT sucked, but they only knew how to measure and manage cost, so that’s what they did. Once you believed in the power to make things better, power tools turned out to be great investments for both the user and the buyer.
By letting people spend more time on the parts of their work they enjoyed, the work that makes them special, we also delivered higher quality experiences for their customers and constituents. “Spend less time firefighting and doing menial work, and more time shipping great software.” If the heart of your skillset is clicking buttons or responding to outages, Puppet might have been a threat to you, but our users knew where their real value was. We helped them spend more time there and less time on the boring, low value stuff. The sysadmins hated the work, the customers hated to need it, and the executives hated paying for it. Great, done, don’t worry about it.
That’s partially why productivity has stagnated2. The world has not changed that much - some of the greatest improvements to productivity come from making large capital investments in tooling for your workers - but how we spend our money has. People balk at a $5k computer, when the Mac IIci would cost more than $13k in today’s dollars just for the hardware, yet was a powerhouse in desktop publishing. This is to say nothing of how the mobile app stores have driven down what people are willing to spend on software.
Yes, Adobe’s software is expensive, but it’s that price because it delivers so much value. If it didn’t, no one would buy it. Every large market should be so lucky as to have the collection of power tools that graphic designers get. It sounds crazy, but we’re suffering from not enough expensive software. Instead of building the most powerful software possible and finding customers who see its value, companies are building the simplest thing they can and trying to get everyone to use it.
There are bright spots in the industry, like Airtable and Superhuman. I’m hoping they help to shift momentum back to automating away the tedious work and enabling focus on what humans excel at.
More powerful tools improve your life, but they also make you happier even if you can’t buy them. They tantalize you, promising you great returns, if only you can come up with the cash. And they’re maybe just a little bit scary, warning you that buying them is not enough. You must master them.
A friend of ours managed to do this when working alone in the time before cell phones. ↩
Yes, I might be being simplistic to make a point. ↩
What Voltaire and the Flaw at the Heart of Economics Have to Teach Us About Software That Doesn’t Exist
Voltaire’s Candide juxtaposes an optimistic philosophy with unbelievable tragedy. He was angry at the 19th century philosophers who proclaimed that we lived in the best of all possible world while destruction and death unfolded around Europe on an epic scale.
We might hear the claim that we live in the best of all possible words and scoff. Of course, we’re too enlightened to be such naïve optimists. But are we? Isn’t the belief tempting? Or even, doesn’t the behavior of those around you make more sense if you realize they believe this, at least a little bit?
Economists are theoretically rational, analytical, big picture thinkers, but at the root of modern economics is a belief shockingly close to Candide’s parody of optimism. They have what they call “The Efficient Market Hypothesis” (EMH), which roughly states that all assets are valued fairly. This is built off the idea that asset values in an open market are fair because they include all available information, and all the actors in that market are behaving rationally in regard to both the asset and the available information.
This theory tends not to trigger the cynicism that Voltaire does. Intuitively, it sounds not just right, but defined as so. Isn’t an open market essentially a mechanism for finding the fair value of an asset? It’s not so simple. And when it goes wrong, it does so spectacularly.
Modern economists cannot be as destructive as the great thinkers of the 18th century, whose big ideas justified eugenics and many other horrors. Just because they cannot as easily be used to justify mass murder does not mean they should not be accountable for the downsides of their obviously incorrect theory.
“No”, I hear you say, “the EMH is not wrong; it’s correct by definition.”
Economists have convinced us of what Voltaire was protecting us from: We live in the best of all possible markets, where all information is public and all assets are fairly valued. If the market does not value something, that it must actually be worthless.
But of course, if that were true Warren Buffet would not have become a billionaire buying stocks that were worth more than the market was paying, the finance industry could not have been built on advising clients about public stocks, and you’d have no need for lemon laws or other regulations that fight information discrepancies. Nor would Kahneman and Tversky have won the Nobel Prize for demonstrating that actors in an economic system behave anything but rationally, puncturing the EMH for good. Thankfully, this has forced the field to begin to grapple with its flawed underpinnings, but many modern beliefs are implicitly built around these bankrupt theories.
You might be patting yourself on the back right now for not being silly enough to draw Voltaire’s ire, but it’s baked into the value system of the world around you, especially if you live in the US.
The market moves from irrationally ignoring new technologies like the blockchain to irrationally dumping money on them, without any fundamental change to justify the shift
Investments are made based on proximity and serendipity rather than rationality and opportunity size
We tend to claim that the rich earned their status through hard work, rather than recognizing the role of privilege, inheritance, and luck in their status
Of course, not everyone in the market operates with such optimism, but each of us is biased in this direction. It affects our thinking whether we want it to or not.
“Ok”, you say, “even if I accept some people make optimistic investment decisions, what does that have to do with software?”
Great question. If we live in the best of all possible markets, where all information is public and all assets are fairly valued, then we can trust the market’s assessment of what software should and should not exist. Lack of software to solve a problem is a sign that it’s not worth solving.
If, on the other hand, our world could be better, or if our market is imperfect at valuing assets, then we can’t trust intuitive conclusions about where value resides. This is most true when it comes to valuing unsolved problems. It might be that a given problem has no solutions because it is not worth solving, but mundane reasons are more likely to be at fault.
Most great companies exist because they provided something the market did not know it wanted. Their founders encountered a flaw, and managed to build something great in the opportunity created by it. Henry Ford claimed if he’d have given people what they wanted it would have been a faster horse. The market knew how to value them, but not cars. Before Apple, the market did not value personal computers. Before Google, the market valued directories but not search engines. Before the iPhone, the market valued expensive phones for professional use but not personal.
These value statements were market failures, and their resolution generated billions of dollars for the companies resolving them. Now, of course, the market sees great value in what these founders have created, but not because the market is so smart; it’s because it can no longer fool itself.
It’s easy to grow despondent in the face of such obvious market failures. If the wisdom of the crowds, the great invisible hand of the market, can be so wrong, what hope does a lonely entrepreneur have? I take a different way.
I luxuriate in these misses.
They surround us. We bathe in them. Yes, many great companies have grown into critical market gaps, but even with all these successes, there are untold problems whose solution should be valued but is not.
Only once you reject the market’s flawed opinions about what matters, you begin to see nearly limitless opportunity. There are so many more unmet needs than there are perfect solutions. These are your opportunities.
Of course, just because the market dismisses a space doesn’t mean there’s a great opportunity there. It’s your job to know the problem, your customer, your user, your buyer well enough to draw your own conclusions, to develop enough certainty that you don’t need someone else to tell you what to believe.
Because that’s the real point: Trust yourself, not a bunch of paternalistic optimists.
I did more writing in 2017 than I ever have before, probably more than I had done in my entire life. I stated at the outset my desire to write in order to learn, and publishing regularly has delivered. More importantly, it forced me to capture and share many of the results of my R&D. The writing topics were primarily venture capital, the software startup ecosystem, and founder optimization, but one of my weaknesses is a drive to the meta, spending time on the tools and systems rather than the work itself. Unsurprisingly, this ground is as fertile in prose as it is in code.
I have done all of my writing on Ulysses, which has been a good tool. I do miss much of the power of Vim for managing text, but the usability trade-offs are usually worth it. Plus, Vim is not exactly strong on wrapped text. Ulysses’s most important capability for me is that it transparently syncs between my phone , both of my iPads, and all three of my computers (yes, I know). I can open any document on any device with no worries (given my iPads are on LTE, and thus can always download updates). Second to that is the ease of getting data out. I was able to text a 5k word document directly from Ulysses on my phone to two different people, because it converts anything to PDF and can send out via the share sheet. It publishes directly to most platforms, so I used it to post everything to Medium. I do wish its backend storage was more visible, so I could version control everything in git, but you can’t have everything.
The only time I ran into troubles was publishing my travel writing - I was copy/pasting photos from Apple’s Photos app into Ulysses, then publishing into Medium, and it turned out that no part of this process downscaled the photos, meaning each was about 20MB. This is fine when you’re on solid wifi, but not so good from a campground in Yellowstone. The primary reason I did not write during the second month of my trip is it was just too painful to publish. Ulysses really fell down here, because when it works, it works great, but when it fails it is miserable. I’d just sit and stare at my iPad for ages, with no visibility of failure or success until the very end, and it would often manage to upload the text but not the photos. The only fix for this was to delete the draft from Medium and try again. Not so great.1
Over the year I became concerned, though. I heard about Andrew Chen, who built a following on successive publishing platforms (e.g., Blogger), each popular and well-funded, only to have the companies disappear (because that’s what Silicon Valley does to most companies). He eventually realized that the only way to consistently reach those who were interested was via email; it’s never going away, subscriber lists are easily portable, and of course everyone knows how to use it. He had to move from letting a platform own his audience to taking control directly, and email was the only real way to do that.
I think Medium is pretty good, and at least for now it has no shortage of funding. Even last year, though, it made well-publicized efforts to retool its business, a clear sign that whatever it was doing before wasn’t working. It seems unwise to bet that a follower on Medium will have any meaning in a few years.
It just so happened that I ended the year with an experiment in their new business model. My series on Venture Capital, in partnership with NewCo, was published behind Medium’s paywall. While the experience was positive overall, and I got paid more for those pieces than I have for, um, all of my other writing ever, earning money isn’t my real goal in writing. Yet, paying writers is exactly what Medium has to figure out in order to attract the content and audience it wants. I appreciated the extra attention working within their paywall provided, but I came out thinking it’s unlikely to be the right path for me in the long term. My goal is to maximize the reach of my writing, and it’s more about the arc of all of it rather than a couple of heavy-hitting pieces getting the most attention, which means our respective goals are orthogonal at best, and in direct conflict at worst.
While I have not written about it, I spent a lot of last year fascinated by email, inboxes, and how we consume content. I’ve been a deep fan of RSS from the Bloglines days (Unread is my reader of choice these days), but RSS is mostly dead (thanks, Google!). The kinds of sites that produced great feeds back in the day grew too big for a hobby. They became either wildly profitable for a small team and thus got destroyed with ads and shitty content (hi Boing Boing!) or people had to back away because it was just too much. Mainstream publications like the NYTimes might still publish RSS feeds (I literally have no idea), but RSS is a poor fit for how much content they produce.
When I look around, it seems that the RSS feeds of ten years ago are now awesome newsletters. See how often your favorite sites talk about their newsletters vs their feeds. I’m pretty confident I’ve never heard a podcast ask me to sign up for a feed, but many casually mention their newsletters. (Well, to be fair, podcast feeds are just RSS, so in that sense it’s survived, but I think we can agree it’s a very different use case.) The market has moved.
This shift is not all peaches and cream. The superiority of email as a publishing mechanism has not brought with it a superior reading experience. Long form content from writers I follow does not belong in the same inbox as requests for coffee meetings, yet that’s where we are. (I asked the Feedly CEO if they would please please add newsletter subscriptions to their platform, and he could only say they were considering it. If you want to build the newsletter reading app, hopefully with an index of great letters to subscribe to, count me in as an early contributor.)
Even with its downsides, I’ve decided to move my writing to my own site via a newsletter-first publishing model. From now on, everything will be published first to that site and the newsletter (sign up now!). There will be exceptions, when publications offer enough exposure that I give them some period of exclusivity. I will also indefinitely duplicate each piece to Medium on a delay, to take advantage of the audience I already have there.
There are enough examples out there that I’m pretty confident this is the right long term answer, but it’s early enough that it feels like an unstable experiment. Like most, I love and hate email, and I am a bit bummed about the extra infrastructure involved in this system.
If you’re still an RSS person at heart, you can always just subscribe to the feed, and if Medium is your bag, at least for now you’ll be able to see everything there, too. Of course I can’t promise how this plays out in the long run - else it would not be much of an experiment - but you can bet I’ll work hard to find the right way to talk with the people most interested in what I have to say.
One note before I go: I could not have made this transition without the help of Mike Julian. He helped set up each of the services, mediated the hiring of a consultant to modify the site, and connected all of the services together. He’s got a great book on monitoring, and is available for consulting on monitoring and observability. I can’t recommend him enough.
Thanks for following on so far. I’m excited about another year of writing.
It’s worth noting that Apple’s iCloud Photo Library did wonderfully here; I could upload every photo to my iPad, and it would sync when it had good data, and sit quietly when it did not. I love asynchronous protocols. ↩
Modern capitalism raises the flag of the free market while pitting centrally planned organizations against each other
It’s quite a journey from being born on a commune to raising more than $87m in funding at a software company. This journey forced me to wrestle with existential questions about my true beliefs, and how they intersected my life as an entrepreneur. One’s work is rarely a pure reflection of ideology, but companies need a clear and authentic strategy, which requires a tight alignment between company operations and the founder’s philosophy. I have discovered more about those differences between what I believe and the best ways to grow a corporation while studying economics - that is, how money is made and exchanged - than any other area.
A worldwide conflict between communism and capitalism defined the latter half of the twentieth century. The United States’ ideological battle was the central drama of my childhood, and it was with a combination of glee, pride, and “told you so!” that my fellow Americans watched the wall fall in Berlin, and the USSR dissolve shortly thereafter. I expect few would deny that the US is the standard bearer for capitalism.
Yet, there’s a flaw at the heart of this claim. While the United States operates as a free market economy, the key agent within modern capitalism - the corporation - works more like an authoritarian state. Given how much of our world is built around corporations, this truth and its impacts are critical.
I grew up apart from America’s passion for capitalism. In the era of Reagan, I was living on a commune. My parents did not earn money for their labor, and we didn’t have personal property. My family left the Farm when I was 8, and as I matured, my ideological roots were in conflict with the US’s nonstop pro-capitalism message. As I joined the workforce and eventually started my own company, I found myself attached to neither the communal roots of my childhood nor the Wolf of Wall Street world I moved into. I grew slowly in convictions, as I encountered problems in the course of scaling a company.
The first real conflict came when it was time to hire managers. I founded a company primarily because I did not thrive as someone else’s employee, so what led me to think others would? More importantly, anyone who has ever operated at the front line is aware of the severe costs imposed by the separation between the people who do the work and the people who make the decisions in hierarchies. Hiring managers was just going to make the company do worse, not better, right? Right?
I expect three of you are gleefully shouting, “Yay, holacracy!” right now, while the rest are confused and either offended or think I’m an idiot. I did consider a manager-less world, but a little research provided only examples of disaster, because the only available options just replace an explicit power structure with an implicit one. In other words, it’s still hierarchical with the founder on top, but now decision making is opaque and the system is easy to exploit because of the lack of controls (which looks surprisingly like the cult/commune I grew up in).
Those who are confused or offended by the idea that managers make performance worse would be informed by a deep dip in economics. One of the core principles of the free market is that central planning committees can never be as efficient or as effective as the people doing the work. By definition a free market economy lacks a decision-making hierarchy; the ‘free’ means every agent (individual or corporation) can decide for themselves, without needing permission from a manager above.
While there are many aspects of modern American capitalism I reject, this one I wholeheartedly support1. The downsides of a strong central executive were taught to me early.
Like many other communes, the one I grew up on routinely failed to feed its people - my parents speak with horror of the ‘wheat berry winter’, when we lived on little else. While his people were short on food, the founder of the Farm was off touring Europe as the 3rd drummer in a band, “bringing our message to the world”.
Thankfully none of us starved to death, but the failing was similar to what most communist countries experienced: The central organization could not feed everyone. For years, I assumed this was just incompetence, whether at the scale of the Farm or China. The truth was far more structural. Millions starved during the Great Leap Forward because the central organization was trying something impossible: Managing the productive output of an entire country. The Planet Money podcast tells a great story of how this central planning was walked back in China, but the general point here is that these communist countries did not just nationalize the means of production, they tried to centrally control all of it from within a small group.2
When people talk about communist countries not being a free market, this is what they mean: They tell the farms what crops to produce and in what quantity, rather than letting them decide for themselves. China even went so far as to dictate what hours a farmer should start and stop working, and then directed managers to ring a bell for transition times to control every little group of farmers. Anyone who’s ever had to punch a clock into a rigid, dysfunctional hierarchy is likely getting painful flashbacks about now.
It should be immediately obvious why this fails miserably: The distance between the central planning committee and the farmer is so great that good decisions are nearly impossible. It’s nearly impossible for critical feedback to make it from the edge, where the farmers are working, to the central planning committee in time to affect decisions, and then for those decisions to make it back to the edge in time to be useful. The podcast linked above also points out how unmotivated the farmers were under this regime, cutting productivity even further. Those who have studied lean manufacturing, agile development, and DevOps are likely seeing parallels here.
The result was catastrophe. When a corporation is painfully inefficient it loses money and might have to do layoffs, but when a country fails at growing food, its people starve to death. I don’t mean to imply that central planning was the only cause of famine under communist rule - there were political operations that led to mass starvation, just like in the West - but learning more about these helped crystallize what I do truly prefer about capitalist models. It also converted the phrase ’the free market’ from a catchy slogan into something meaningful to me.3
The most important feature of free market economies is that each person within them is able to make independent decisions in their own best interests4. If you’re a farmer, you can decide what to grow, how much to grow, and when to work to develop your crop. Heck, you can even choose not to be a farmer any more. Success is merely dependent on your finding a buyer for your work at a price you can tolerate. Any given year might not be perfect, but your decision making gets better over time as you learn to respond to customer demand.
This pattern is easy to understand in any system where the people doing the work make the decisions. If you’re a jeweler, you can decide what to make, how much to sell it for, and what to spend your time on. Same if you run a small restaurant, lead local tours, or are a one-person shop doing house remodeling. It’s a free market, where you can charge what the market will bear, and you can quickly and efficiently respond to its whims, ensuring that you are getting the best use of your time.
This was a powerful organizing principle for a long time. The history of human commerce developed largely this way: One person, or as many people as could fit in one shop, would turn labor into a product, then find a buyer for it. Most large-scale efforts were organized by the state of the time: Monarchs and the landed gentry, who were the only ones capable of marshaling enough resources to build palaces, roads, and other large construction projects.
This began to change in the 17th century when corporations like the Dutch East India Company were able to deliver massive windfalls to investors by pooling money and using it to extract resources from colonies. There was a step change in the 19th century, as corporations went from generating wealth to building and owning infrastructure. It’s one thing to outfit a single ship for a year-long voyage, yet another to maintain railroad schedules across the United Kingdom, or run a telegraph network around the whole US. These aren’t just short-term money-making exercises, they’re long-term commitments with big capital outlays and large returns over years and years.
We still live in a free market economy, but it’s not one Adam Smith would recognize. Instead of individual or small operators, ours is composed almost entirely of corporations. Really big corporations. And these companies, they use the same kind of central planning that we so despise in communist systems. I know. I’ve done it.
By the time my company got near 500 people, we had a multi-week planning process, where the leadership (i.e., me and my lieutenants) set out top-level goals, built a top-down plan to accomplish them, then drew information from the front line to see where it needed change. We called this a bottom-up plan, but it was only bottom-up from the perspective of numbers - how much money we’d have, what our costs were, etc. - rather than from the bottom of the organization. We could see no way to have a system where the people doing the work built a plan for the organization. Even thinking about it now, my reaction is, “How would they know what my goals are?”
That’s the kind of question you can only ask in an authoritarian state, not in a free market economy. My goals became my company’s goals, and the only real way to ensure people worked toward them was providing a plan. You might argue that a corporation should focus on shareholder value, but that doesn’t help make decisions about what the company should actually do.
Great leaders find a way to listen to everyone in the company, but in the end, leadership is about making decisions. That’s essentially the definition of the word. And we all know leaders who did not bother to listen, or just did not need to in order to be great; today’s most vaunted tech leader, Steve Jobs, was famously disrespectful of the opinions of others, yet made a lot of world-changing decisions (not all for the better).
This is exactly why working in a big corporation is so stifling. If you’re in a small company, the executives are close enough to the front line that it’s more like working in a tribe, but in a big company, the leadership is so removed from whose who do the work that executive teams operate like the politburo we so decry in communist countries. Certainly the bureaucracies are no more enjoyable or forgiving.
I find it both ironic and painful that my inability to work for someone else resulted in my creating a company that involved a lot of smart, capable people working for someone else.
I wish I had a solution. If this were an easy problem, its solution would already be pervasive, because the benefits are massive. Just in terms of efficiency, we’ve seen how much better the free market is than planned economies, but it also has a hugely positive impact on quality of life. People are happier when they’re in control.
I know the solution is not more freelancing and contract work, which America’s corporations are addicted to. That’s the worst of both worlds: The exploitative nature of capitalism with the inefficient bureaucracies of communism. Transactions on the free market work because they’re good for both sides, but most people only accept part-time contract relationships today when they have no other real choices.
Holacracy certainly isn’t the answer. It’s fundamentally flawed because of its implicit power structure - Tony Hsieh still runs Zappos, even if he does not use a central planning committee to do it - but the biggest problem is it makes no mention of economics. Without a clear system for scoring the transactions (i.e., money) it’s impossible to build a free market.
This problem of how to handle economics within a non-hierarchical company might lead some to think of using blockchain tokens as an internal currency. This is impossible today, beyond the fact that the world of blockchain is mostly about fraud and black market sales. The biggest problem is that we have no idea how to value most of the work people do. I mean, we might know that what a developer should get paid for a year’s work, but how much is that work worth? The majority of the work done in modern corporations is incredibly hard to value, which is partially why companies are so inefficient and make so many bad decisions.
That brings up an even bigger problem - companies today hire workers to make money from their labor. In other words, they generate profit because they pay their employees less than they’re worth. If everyone could trade their labor for exactly the amount of money it was worth, the corporations that employ them would have a much harder time making money. Instead, in modern corporations the shareholders and the executive team - again, the central planning committee we so despise - make the majority of the money, while the front line does all the work and makes very little. This is true even at the big tech firms; software developers might be well paid relative to hotel workers, but they’re paid a pittance compared to the founders and executives. This might speak to why we have no solution yet - free market corporations would tend to reduce concentrations of wealth, which would be terribly disruptive to the current system.
Like I said, I don’t have a solution. But at least now I know what makes the current system so painful, and it gives me some hope that we actually can come up with a better answer. I know I’ll be working harder in the future to manage the downsides of what we have today.
Although I might stress the “well regulated” part more than most modern economists. ↩
I’m a tech founder and recovering SysAdmin. I helped found DevOps and grew up in open source. These days I am convalescing from a decade of physical and mental neglect while running Puppet.
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