Niels Pflaeging (What's wrong with hierarchical organizations and how to fix it?)
In this episode of The Judgment Call Podcast Niels Pflaeging and I talk about:
- What's the prototype of a 'democratic' (flat) organization? What companies are examples of that?
- Is Mariana Mazzucato right that innovations are mostly based on taxpayer funded research?
- Why the US military is a surprising example of a 'flat organization'?
- and much more :)
Niels Pflaeging is the founder of red42, a leadership philosopher, management exorcist, speaker, author, and advisor.
Niels' latest book - Organize for Complexity: How to Get Life Back Into Work to Build the High-Performance Organization - is now available on Amazon.
Welcome to the Judgment Call Podcast, a podcast where I bring together some of the most curious minds on the planet, risk takers, travelers, adventurers, investors, entrepreneurs, or simply mindbogglers. To find all the episodes of this show, please go to iTunes, Spotify, YouTube, or go to judgmentcallpodcast.com for more resources, including how to become a guest, how to advertise, and to see all the lectures, podcasts, and books I would like to, would like you to listen to or read, please also go to our website at judgmentcallpodcast.com. Like this show, please consider leaving a review on iTunes or Like us and subscribe to us on YouTube that will make it easier for other users like you to find us later on. This episode of the Judgment Call Podcast is sponsored by Mighty Trouble Supreme, full disclosure, this is also my business. What we do at Mighty Trouble Supreme is to find the best travel deals for you as they happen. We do that in economy, premium economy, business, and first class, and we screen 450,000 new airfare deals every day just for you and present the best based on your preferences. Thousands of subscribers have saved up to 95% on their airfare deals. In case you didn't know, Americans and Europeans can already travel to more than 80 different countries again, South America, in Africa, and in Eastern Europe. To try out Mighty Trouble's premium for free, go to mightytravels.com slash mtp, that's too much for you to type, just type in mtp4u.com, mtp4u.com to start your 30 day free trial. I'm here today with Niels Flaging, and then Niels is the founder of Red42. He is a leadership philosopher. He's a management exorcist and speaker, author, and advisor. And he also wrote a couple of books. The latest one is Organize for Complexity, How to Get Life Back into Work to Build the High Performance Organization, which is now available on Amazon. Welcome to the Judgment Call Podcast, Niels. How are you? Thanks for inviting me, Thorsten. It's a pleasure to be on your podcast. By the way, you gave me a great opportunity to do some marketing, cheap marketing. You said this is my latest book, which it isn't. Of course, this is my latest book. But seriously, this is the new book. The other one is five years old. Absolutely. Absolutely. We want to know all about it. One thing that really struck me when I was going through some of your work, and I looked at a couple of your YouTube videos, you do a lot of keynotes, and I read into the book for a little bit. I admit I haven't read it entirely. But a lot of reviews said it's very easy to read. It's kind of in a style that is away from the difficult management books that we have out there. And I really like the core message. But one thing that really struck me, and I wanted to ask you that first, is you talk a lot about beta. There's a beta codex. That's something you promote. I really don't know, to be honest, what it actually describes, and I want to learn more about that. But the idea to promote, to go from alpha to beta, is something that kind of goes counter a lot of general culture. We want to be hedge funds, we want to be generating alpha. And sociology, you want to be the alpha in the group. How does beta fit into this? Yeah, that's a very good point, because that is really what I've been promoting for more than 15 years now, overall. The beta codex, it's the alternative to command and control. It's the alternative to pyramid shaped organizations. It's the opposite of management of social technology. And as you just mentioned, it's a pretty hard sell, because we are so hooked on command and control. Our business, the metaphors, the drama, the heroism, it's all about command and control, about people at the top pushing people at the bottom. It's still like we are stuck in the industrial age 100 years ago, in a pre democratic age, which is, at the time of this recording, of course, a very important matter as well. How to make organizations more democratic, so that our society is like in the US, where we have this democracy crisis currently going on. How can we make the world of work and organizations more democratic? And we have totally failed, utterly failed as a scene or as a total of business people. People in business, people working, we have failed to make our organizations democratic. And that's what beta or the beta codex is about. It's about consistent decentralization, but giving power to the periphery. It's about federalization of organizations instead of creating command and control steered pyramids. Yes, so that's what I gathered from what I know so far, and that's probably just 1% of 1%. What would you basically say is that organizations, and you refer to an org chart as the tool of, say, oppression. So there's a hierarchy inside an organization, which I think we all take for granted. And we feel like there's all these levels of bureaucracy and titles, and often we hand out titles because it's cheaper to actually give people raises real attention within the company. And you say that a lot of this structure was built and coming out of the industrial age where you had a couple of people, the management, who were the only people allowed to think. And then there's the workers who literally work the machinery, kind of work in a field or with machinery, and they shouldn't think as little as possible. And that seems like the working model from 100 years ago, but what I felt reading through this, and I know you developed this much further. Isn't it already the past having corporations already changed in some way, probably not all the way where we want them to be, but haven't they already changed. Well, actually, I live in Silicon Valley in San Francisco. I can't count of anyone who has such a very strong structure in place anymore. There's still as bigger the company gets, there's still hierarchies and there's different titles people hand out. But it's all about teams, I feel. Yeah, what you just said, it makes much sense in a way. But look at this. What if, you mentioned Silicon Valley, where you feel at home, what if the Silicon Valley were the perfect example for how shallow the transformation so far has been. How pervasive command and control still is how we are beautifying to ourselves command and control. I mean, in the Silicon Valley, there are arguably beta organizations, as I call them radically decentralized organizations. Google has been one of my most beloved examples for many years now, not as much anymore because it has also fallen into command and control into interfunctional divisionalism and so on. Of course, there are exceptions to command and control in the business world, but to claim that the Silicon Valley is a good example for how we have overcome command and control. That would be, I think we would, that would be an utterly inappropriate claim, you know, companies that are the epitome of Silicon Valley like HP, you know, how you look back at it. It's a total command and control organization and that's why it's lacking utterly lacking success and has been lacking success for many, many decades, you know, since the 1980s or 90s, at least. Command and control is very pervasive. And of course, with the times is capable of changing its face, its face of beautifying and adapting to two times. Today, lots of management concepts are proclaimed as being about self organization and liberalization. Let me give an example, design thinking, OKRs, holacracy. Those are concepts that claim to be about self organization somehow or about modernism. They are exactly the opposite, certainly they still blow the horn of command and control of steering from the top. And I think it's easy to, it's easy in this year 2021 to be somewhat caught in the play that's happening in the game of facades, let's say, that is happening in organizations. I would argue that the real transformation has only happened in very few organizations, very few companies. And some companies, of course, have done beta for decades, like Southwest Airlines, Handelsbank in the Swedish Bank, Toyota. I think Davita in Colorado is a great example as well. Boards are in the Netherlands. Here in Germany, we have DM Dorgel, massive retail company, Aldi also from Germany and Trader Joe's, of course, associated in the U.S. And those are some of the few weeks of W. Al Gore, not to forget now. And then there are several examples, you know, quite a few dozen. But most of the other organizations are still firmly in command control. And the org chart, as you said, you said it's something we take for granted, right? Remember that Charlie Chaplin made a movie about the absurdity about, let's say, fascist character of org charts and let's say the disconnection of the working person from the purpose and the real functioning of the organization and the functioning of the enterprise, you know, and this disconnect, we haven't really solved it because in the, let's say, 1990 or 100 years since Charlie Chaplin's movie, I think, 1890 years, we haven't really solved the problem. And that should, and I think now this lack of democratization of work, it backfires in many of our societies and many of our countries. So it's a serious matter. It's very powerful what the concept you have in mind. And the thing I hated most when I still had a traditional company, so to speak, were performance reviews. As a manager, as a founder, I sat into those and then I had some of those always thought that's just bullshit. None of this should exist. And we also see that each of our departments are a source for constant frustration, at least for founders, when they scale their companies. The weighty setup right now is a source of, I would say, politics and less. There is an administrative function, which is often now set into software, but there is a political function that kind of takes the joy out of running a company. And the last couple of years when I started companies, most of them were fully virtual, so they didn't have an office. The people were either set up as independent contractors, all of them were remote. And some of them were working in teams, some of them are working by themselves. What I felt, and I think this is where you're going, correct me if that's wrong, but we kind of see a group of people, teams, and in your example, it could be a DM local retail outlet. There may be 10 people, maybe it's 20 people that work as a local team. And from the outside, say, as someone who runs this organization, I only interact with a certain API. I define certain inputs and outputs. I give you that much and I expect that much. So often that is a P&L story, but it doesn't have to be. For developers, when you think about GitHub, they self organize into something much more useful where their own strength come out much stronger. And there's no milestones, there's no project management and open source. I think this is closest to what you have in mind. I think that's scaled really far. And there's applied outputs and inputs to an extent to what you want from that software, what users want from it. And then the individual can choose in which area he or she wants to really work at. Is that kind of what you have in mind that you kind of take the responsibility from a manager who says, OK, this is what we need to do. And you kind of go towards a team approach where people say, OK, this is kind of what I have. This is what I can give you. This is what I can sell to the same organization or to outsiders and define those APIs and then just keep improving the product and the P&L. That's a tough one. Because what I felt from what you just said, as much as I would like to agree with you that we are on a good track, that organizations are on a good track, that Silicon Valley is heaven. And the future of work is coming because now everybody can work from home because of COVID. As much as I would like to believe that crap, to be a little bit provocative here as well with you. I mean, this is supposed to be a session in which you can provoke me as well, of course, in the same way. But here's the thing. I would like to believe that technology solves the problem. And you just said, you use a metaphor that companies are putting more weight on freelancers or more people become freelancers and so on and connected externally with the organization. And you use the metaphor of the API. There is an API between those freelancers and the company. And that's lovely. The problem is that it's not like that because the problems we solve at work are not complicated problems. The interface of an API, you can use it for complicated problems where you can have, you know, algorithms, rules, how things function. And organizations, human beings, stuff like innovation, et cetera, do not function that way. You cannot create APIs. I would give you an example that illustrates the problem very nicely. I think one of the best companies in the world once was Google. It was a brilliant company. And from the Silicon Valley as well, which we already talked about, Google was a fantastic organization. In fact, I'm not quite sure that it is still such a fantastic organization to be you. No, I would disagree. It isn't great anymore. But it certainly was until 2010 or so. It certainly was a great company. Here's the thing. One of the greatest insights, I think, that they had at Google was that whole office is not a good idea if you want to be innovative. Which is an idea that then Melissa, what's her name? The CEO of Yahoo? The number one. That's one of the first scandals that came along when she went to see, she left Google and became CEO at Yahoo. She said, home office is over. We cannot have home office. She brought that idea in from Google, actually. And it was a scandal in the Silicon Valley as far as I can remember. In the media, it was quite a scandal because of course the idea of Google always was we must keep these nerdy software workers and these super smart dudes and girls. We must keep them together on a cool campus and we must allow the dogs in their dogs. They can bring the dogs and everything. And we have these great restaurants so that they can chat. They can, as introverted and silent as they may be, we try to maximize the opportunity for encounter, for collaboration, for also the emotions that come with it so that we can enable to become a hot house for innovation. And that is very serious. You cannot run an innovative company with people with freelancers who sit in their home offices. It's just socially impossible. Agnes, I think we're talking about a couple of things. One is how innovation works. And I agree with you, serendipity, cross pollination, those are just very important things. I mean, just random conversations and then you make experiences, you find treasures of knowledge somewhere else and you transport it somewhere in a different sector and it certainly becomes innovative. So absolutely true. And for this, it's good to be in the same office, but here's the thing. Once people are remote, it's much more scalable. So obviously the hard question to solve is how can we be in the same mindset but not in the same office? Nobody has solved that yet. I give you this. I do think this is going to happen though. There's just little bits of innovation that already lead that way. I talked to Daniel Rose yesterday. He has a fully remote accelerator. So he never sees the teams. He never does any person do diligence. He basically only relies on data, on psychometrics as well, and gives people up to a million dollars. But I've never seen them, right? I mean, they're in Africa, they're in Nigeria. So they take some risk in this. That business will probably achieve exactly the purpose it was created for, which is to sell it to angel investors or whatever as soon as possible. And that's okay. He is an angel. I'm not criticizing the bullshit business and the bullshit hype that is going on in the US, especially in the Silicon hype, dramatically. And I'm not criticizing that. It's legit. As long as there are stupid people buying those fake companies, like the one you just said, it's totally digital, totally scalable. But let me try to cut through the bullet for a moment. The idea of scaling businesses is like the, it's like just tech hype language, you know. A company doesn't scale because a company or an organization is a social, a living thing. It cannot be just scaled. You can scale many things, but not social stuff just like that. A company doesn't scale because it's not a machine. It's not a complicated, a dead thing. It's a living thing. So when you grow, when a company grows, you don't really, you do not grow a company. A company grows and then you have effects. For example, if we grow our bodies, if we take the stimulants and so on and do the fitness, there will be some decay in some places. You know, and it may not, it may hurt our bodies. And the same happens to organizations. You're going to just grow or scale businesses. That assumption, it's part of the current hype that was, that is very much the US thing. And you know, I'm talking from Germany, you're talking from Mexico right now. And we're talking about a phenomenon that is pervasive everywhere in the world, of course, but especially rooted in the US. This hype, this illusion that comes along every 10 years or so, which leads to a huge bust. We overhype certain things. And the scaling, let's say, the scaling. Yes, I think you are taking two things at once. I agree with you, the hype. I'm a big critic of the current hype, especially in IPOs. And most of the companies that go IPO are bullshit. I fully agree. And if I really only propelled them, they sell to the next idiot by there. There is very little value in most of them. But here's the, I think a lot of people are missing. And I think there's a lot to optimize there. When we go back to the dotcom boom, I'd say 90%, probably more than 90% of these companies were crap and they should have never gone IPO. They shouldn't have gotten any money. But there were a small percentage, maybe 1%, maybe 5%, who truly created a lasting innovation based on lots of layers of existing innovation. And those eventually became really big. I mean, when you see the amount of traffic that goes through, and you can say, oh, traffic is just traffic, but traffic is usually connected to eyeballs. The amount of traffic that goes through infrastructure layers, say at Google or even Yahoo, this is insane. I mean, this is like 80% of the worldwide internet traffic goes through one single organization. And those obviously have found a way to monetize this over time. So most of the companies we have currently are equally crap and they cannot scale. Some figure out on a software layer, and maybe not so much on a social layer, they figure out how to grow and become the fastest growing company in the history of the world, like Google did. Yeah, but you're just defending the ripoff economy, let's say the value skimming economy that is the US economy right now. And it is a pattern that has been popularized internationally. There is a great book by a wonderful economist and author, Mariana Matsukato, who distinguishes this kind of economy that you are describing, which is value skimming from the value creation economy. And we are now separating this well, especially in the US, where every bank theft, every loan, hype business, all the Wall Street over acceleration that we create, all the hype we create around the new Enron Tesla all the time and other companies like that. I mean, we're not talking organizational structures here right now, organizational models. We're talking a little bit about the economics of the politics of economy. I picked up a book from Mariana Matsukato, the entrepreneurial state. I'm not the one that you, that you just referenced. I kind of like that. I like what she was talking about. I think I disagree with her in a lot of places, but her central thesis in that book was, and I think this is similar to your point, is that a lot of innovations come out of basic research. They form a certain layer. And then there's a company that sits on top of that monetizes that, and very often it's taxpayer research that created the innovation. I think that is her point of the entrepreneurial state. Which is also the history of the Silicon Valley is Navy investment, military investments. Indeed, she misses a lot of points because I think she misses very much. I think the point that's gone missing is when we show the photos, black and white photos of garages in the Silicon Valley where supposedly the big innovation started. That's a lie. It's fraud. And that is what I think I want to discuss. We are claiming that private investment. You just used that narrative again saying that, oh, Google Yahoo, they created so much innovation. The big monstrous companies of now are the ones that survived the dotcom crash and then the 2008, 2009 crash. And that's what makes the whole fraudulent ripoff economy and the boom and bust cycles that the US economy and other economies go through. That kind of justifies it all. And that's where economists like Mariana Mazzucato step in clarifying, well, we put taxpayers money into certain industries like the Silicon Valley. And the whole Silicon Valley is really a Navy and a military animal. And to deny that and to say, oh, and then those companies don't have to pay taxes because they are so innovative. We are really driving. I mean, that's what makes society more divisive. I think you're describing a popular view right now. I'm not going to go along with that. No, it depends where you look right in the US. I think there's a certain mainstream view that have really adopted that, the failings of capitalism, so to speak. I'm not talking about what we're trying to get at just on this point. Research happens. That's a really interesting topic. We should talk about what Mariana misses is that these innovations, many of them are stacked in layers. Usually, because we use the existing layers of technology to create the next one, everything is dependent on everything. So basically, you can trace it back to the old testament, anything we ever invented is being used to create a modern company. And a lot of these things are not protected by patents. And I agree with you. Silicon Valley's strength is not innovation per se. They often steal stuff and then raise a lot of money. It's mostly figuring out how to use those innovations and put them in the hand of a consumer and get them adopted. That's very different value proposition, I think, than sometimes companies make out there for themselves. But I think this is their core value. I'm not sure what I can say. I'm not a critic of capitalism, by the way. Not at all. I think capitalism is the perfect social technology for the problems that we are facing, economy wise. The problem is that once you create something like the military industrial complex that has really been created, especially in the US, which is more a war economy than an innovation economy. And I'm saying this as a political being. I'm saying this as someone who has lived in the United States for five years in New York. So this is not meant cynically or ironically or in any way depreciating what any country might be or what this over accentuation of winner text at all. This is really a dangerous thing and it is based on so many myths. I mean, the people who are being ripped off are not just the people who really do the innovation. By the way, somebody else I recently read about an innovative person, Hedy Lamar, the also actress who was a great inventor. The Navy actually ripped her off of her patent, which has become a core element of Bluetooth, the communication patterns that she invented. This ripping off has been going on forever, of course, historically, and we have gotten used to it. But the main problem, I believe, is that we are putting too much and this leads us back maybe to the topic of organizations. We have over accentuated heroism, you know, the CEO Elon Musk. What's the Apple dude's name. You know, I tried to forget it from time to time. Steve Jobs or exactly we are over accentuating as if Steve Jobs invented the iPhone. That's that's what business I read fast company. I had it. I read it for years actually every every couldn't stand it anymore. This this bullshit that heroes create everything. It's, it's just nonsense. That's not what innovation is innovation very much and we are circling back to the topic maybe organizations are about social density. Innovation is about social density. Human and societal advancement at democracy is about social density and that is why division is so harmful to democracy organizations innovation and social societies advancement dividing organizations into functions, or let's say the American society become to become so viciously divided between two fractions, Democrats and Republicans. All these things will always cripple innovation, you know, racism, prejudice against others. All these things cripple our societies and human advancement we cannot have that going on anymore. And we can fight it in societies we must fight it in societies that's a point that Mariana Mazzucato also makes. And any economist like myself must make this point, make this point from time to time. But in organizations healing organizations will mean to reintegrate integrate functional, you know, instead of having functional division to reintegrate functions into small teams in the periphery that can run their business in the independently. And there's a parallel so to speak between what we are what we have to achieve in society and what we have to achieve in organizations. And one example for how to heal an organization would be to make sales departments human resources departments which we mentioned earlier to make them superfluous and to reintegrate into the normal work. I think your, your approach is very laudable. And I think you're on to something big there. I feel like this is already underway, probably less in Europe than it is in the US and I agree with you every company goes. It's probably a hybrid still, because we still a lot of CEOs a lot of entrepreneurs still have this old model in their mind and they haven't really gotten rid of it. I think we got off the wrong track earlier. This doesn't what I wanted to say you don't have to be remote but remote kind of and you don't have to be freelance you don't be flexible and you're working agreements in order to pull this off. It's a way how you approach it you you have that how you approach complexity how you approach problem solving so idea idea to create small teams is fantastic. I'm not sure it lends itself to every type of organization. I know what examples you quote are really interesting. Well, I don't know you the expert. So I don't have an easy time to do this, but the question is, how do you do this they let me let me give you an example that's probably a little harder. Let's talk about Boeing. So big widespread, sometimes remote lots of suppliers value chain. How do you think it would work for Boeing? Very well. The secret of organizations is dirty secret of organizations in a way is that they already consist of many, many small teams that actually create the value and that act in. Yeah, in quasi autonomous ways. These quasi autonomous ways of course this this this level of self organization is of course hindered by budgeting or charts performance appraisal steering with fixed targets bonus systems individualization. You know, all these things and also, of course, the way that careers are accelerated and manufactured and administered in organizations in our departments all that crippled self organization, but Boeing secretly secretly as large as the company may be. It still consists of people of people of teams that have, I mean virtually, so to speak, it consists of many, many small teams that interact with each other and that create value for each other with each other. Only that you can see none of that in the org chat, only that HR knows none of that, only that department heads and whatever heads and vice presidents presidents they may have they sit on a totally different structure which has function divided silence. And the those teams that we are talking about those actually value creating teams, you know, they are not visible. They are hidden by the org chat, which is why all charts are a crime against value creation actually, they should be abolished, which is not an obvious thing how to do how to achieve that how to run an organization 200 300 400,000 people maybe without an org chat or let's take a million people organization like Walmart. It's not obvious. And I think we are and I think our conversation here is a great example of that in a way you doubt you doubted that it's possible, which is okay. I know that kind of dialogue, you know, this Oh, I doubt that it's possible, you know, you're an expert but I still doubt it. I always hear that I've been hearing that for 17 years now. And it's like, it's like, let's imagine a world in which the concept of race is unknown. It's hard to imagine right because now we are all invested by this is this idea of race and division and different groups. We are what's an idea like that is in the world. We cannot get rid of it easily. And that's just with a with an idea of management with which Frederick Taylor perfected or created 100 or so years ago, with that idea of management and functional division and the top steering the bottom and dividing between thinkers at the top and at the bottom. This idea does not fade away easily. These ideas are manifested in so many patterns and tools, some of which we already mentioned like budgeting fixed target performance and praise. In other words, we talk of performance, top performance, high performance, low performance, high potentials, low potentials. And so these ideas are so deeply embedded in us in our concepts in our world, words and language business and language even that this this hypothesis that you offered earlier that there's, there's something like alpha and beta pyramid and peach decentralized organization they are, they are living well along inside modern organizations that is unfortunately, that is just a beautiful mess. Our organizations are at best schizophrenic today. I think what would you describe it. It's already happening and it is the future. The question is how how fast is that roll out and how can we make it faster. So, I think it happened over the last 20 years already. And again, I think Silicon Valley was the proponent of this, like companies like Google. We have the same problem now with institutions in the US. I think the exact same problem applies as you say there's a schizophrenic inside view to what a university is which is different from the actual value generation and what students want out of the university in the US. The same is true for many schools now, even for high schools, all the way down to kindergarten, where there's new approaches that exist, but they haven't been adopted by the institutions and it goes all the way into politics, that there is a small core value generation teams. And Jordan Peterson describes them as it is 80 20 rule. So there's a very small amount of people in an organization that create the most value and a much more valuable than everyone else. The problem has always been, and I don't know if this year approach can solve this. It's often hard to figure out who are these people to who are my most productive employees and who do I really need to support them and kind of let go of everyone else. I think for a lot of organizations that has become completely invisible. And even if they wanted to take that step, they're not able to identify those people within their own ranks. So that's make make them bloated and in my mind, very open to, you know, political inflammation, so to speak, they're being compromised by ideology in order to protect their profits. Not that they like one politics or the other much more, but they use this in order to create an additional marketing hype and to make more money out of a broken system, I feel. And I think what you describe, if it would get more more visibility, it will bring people together because I think the core value proposition of finding these people and having them self organized and then kind of create a bubble around them. It's wonderful. Yeah, I'm you you have so many, so many issues and at a certain piece of what you just said, I heard Jack Welsh from the 1980s or 90s speaking, you know, I've never had Jack Welsh. I never met maybe something influence me. Yeah, I think I think nobody in US business today is not influenced by Jack Welsh. You know, it's because he represented that corporate heroism for such a long time, I think 30 years that he had a massive influence on business people everywhere in the world. So it's just that, you know, there are so many echoes from the past ringing running in our in what we say in what we think. And of course, what I'm suggesting, which is not at all my model, by the way, the beta beta codex is not my model. It is a model that we found around 20 years ago, a movement called beyond budgeting, the beyond budgeting roundtable founded an organization set were successive at the time and that didn't have budgets and that didn't have command control and that didn't have org charts and so on. And of course, among the companies that this research body, the beyond budgeting roundtable of which I was a director what we found where organizations like AES from the United States, wonderful energy company that has diminished greatly diminished for several reasons. We found companies, of course, like Dell at the time, that's a great, you know, in terms of organizational model today, but 20 years ago, it was a great case. And we found organizations like Handelsbank and WL Gore, and so on. And of course, one of the pioneers Toyota, and I think that's that would the, you know, taking that as an example for what is happening today, and what has happened over the last 50, 60 years in the business world, I think that serves as a great example. Instead of saying, Google created something new, which I think they didn't, you know, business organizational wise, they didn't product wise. Yes, business wise, not so much. And I think Toyota serves as a great example to where we stand today, you know, John Uptag wrote, I think, a trilogy of novels of great novels about the rise of Toyota in the US. And everybody has heard about Toyota, right? Lean is totally derived from Toyota and so much else. Actually, the agile movement and Scrum was already also derived from Toyota. Everything that could be, or most of the things, let's say 30, 50% of what's great and modern in organizations comes in some way from Toyota. Now here's the thing. Look at the car industry internationally today. The rise, I mean, I would argue that Toyota is the perfect beta organization or one of the perfect examples of a beta organization. They are not perfect, but they are the perfect example of a radically decentralized, consistently non command and control, a consistently not bureaucratic, not hierarchical organization. And here's the thing, we know exactly how Toyota produces cars better than everybody else makes, you know, is more innovative than the conventional car companies and the other thing, so we have known all these secrets for decades. Many authors like Jeffrey Leica have written books and books and books about it, and I myself wrote a lot about Toyota as well, about the case. However, look at the car companies today. General Motors, Ford, Fiat, Volkswagen, even Daimler, BMW, Porsche, they are all very much command and control. They haven't got rid of command and control. But they're still around. How do you describe that they are still around? Is that the companies that they just supported by subsidies? Why are they still around there, so inept at managing? They are not, they are, of course, supported by, let's say, considerable advantages in terms of taxation and so on. I mean, these companies have profited from politics and from lobbying. I mean, for example, Volkswagen, I think, still has the biggest market share, and that is obviously not the case because their cars are so brilliant, but because there's such a perfectionist, you know, patterns in place that promote the success of an organization, not the success, really, but the best survival of a company like Volkswagen. And I think General Motors, the whole of Detroit, of course, is no different. If you want to learn something really about the epic struggle between command and control, alpha, as I call it, and radically decentralized organizations or beta organizations, as I call it, read the NUMMI case study from the 1980s. NUMMI was a factory in, I'm not sure where, Tennessee or something? I'm not sure where it was. NUMMI was a factory, a DM factory, with the biggest problems that you can imagine in terms of quality and morale and so on. The worst factory in the General Motors universe. And then in the 80s, I think at the start of the 80s, Toyota took 50% share in that factory. And within just 12 or 18 months, they had a stellar performance, and their problems with unions and so on, and inefficiency, ineffectiveness, and with worker strife had gone away. That is one of the most interesting examples, I think, of what a beta organization can achieve and of how easy it is to become, or how little time you need to transform an organization from command and control to beta. What you're saying that long term, if a company is better managed, it should create better products at a lower price, right? So we might not see this for a year or two, but as you say, the management structure can be changed, and it's relatively quick transformation in terms of KPIs. Shouldn't we see this rollout kind of self propelled? It's a new technology, so to speak, in your management technology, and it's been around for 20 years, which isn't a ton of time, but it is a bit of time, and Toyota has probably done this for 50 years, as you say. Shouldn't it have outcompeted everything else? I don't want to stop you from creating misperceptions. The beta codex, or the concept that I'm talking about, the name, that is recent. The beta codex network was founded in 2008, but the model, as I tried to explain, is older. It goes back to the 1970s in the case of Handelspanken and WL Gore. It goes back to the 1980s in the case of SEMCO, a Brazilian company that is a stellar example of democratic organization. It goes back to the 1950s and 60s in the case of Toyota. So these kind of radically self organized, decentralized organizations have existed for a long, long time. In fact, when the social dynamics movement was founded on the American East Coast, and its instigators were people like Kurt Levene and so on, when the T groups, the social dynamics movement were founded. At the time, the scientists behind those initiatives, they, of course, also looked at the marketplace and tried to find organizations that were radically decentralized at the time. One organization they found, that was in the 1950s, I think, and mid 1950s or so, one of the most dramatically decentralized and democratized organizations in the world they found was a British coal mine. Of course, that company doesn't exist anymore in this shape. But at the time, in the 1950s, there were already radically decentralized beta organizations around, only that we had little understanding of the laws behind those models. Few people really understand what's behind the organizational model of Toyota. Toyota people, at the sensei, at least at Toyota, have a great way of explaining it, but it's little understood, often ignored. Often we reduce the greatness about organizational models such as that of Toyota or Google until 2011 or so. Often we confuse the organizational model with the tools or practices they use. For example, these days, 2021, we have something of a hype, at least in Germany, I'm not sure how it's in the United States, around OKRs, which supposedly made Google great, which is just utter nonsense. OKRs, the method about targets and objectives. I don't think people know what that is. I don't know either. Relatives and key results. It's a ridiculous, steering and monitoring method that Google has been using since its early days, and they took it from, I think they discovered it, that method at Intel in the 1990s. So Intel has been one of the pioneers of that method, and Google applied it. Again, in my opinion, it was always the worst, worst, worst practice and tools that Google used, that were successful in spite of that bullshit, not because of it. And today, there's a certain hype and certain scene around that, of people fooling themselves at fixed targets and those indicator systems, which are heavily, that must be worked heavily, that require heavy investment, heavy overhead, and that accomplish nothing. Many people fool themselves that the methods make organizations successful, and that is one of the myths of businesses and organizations. It's not the tools. A fool with a tool is never a tool, you say in English, and that's a brilliant way to put it. Tools change nothing. However, we need more democratic, more federalist principles in organizations to accomplish more decentralized, more self organized, more consistently market driven organizations, that are necessary to succeed in a complex world and complex markets. That's the point I'm making in my books and my talks. The world has changed. It changed in the 1970s or 80s. The latest, we're not in the industrial age anymore, so we need appropriate organizational models, and organizations have not transformed that by and large. Yeah, I think it's tough for these organizations. They've been around for a long time to make that transformation, especially if they're so profitable. I think the ultimate determination is usually, are you still profitable? These days, you can always go to Congress and try to get a bailout, but before that, that was the ultimate impetus to look at things, what we could change and experiment with. Unfortunately, this is one of my big themes. This force to drive change in your own organization has been reduced by all this fake money, by another round of QE, by more inflation. That's a real problem. I think maybe that hindered the rollout of new management technologies probably as well, as it hindered entrepreneurship. One thing I wanted to ask you, and I was having a special forces former, special forces veteran on the show a couple of episodes ago, and they have the Army or the Navy have a very, very restrictive top down system, but it ends usually at the team that's actually like special forces, the team that's actually in the battlefield. Those are very autonomous. There's a huge training effort that they go through that actually isn't training, but it's selecting people who have the right talent because they are recruiting 18 year olds to put them in a very changing, very diverse battlefield. They need to find people who can adapt to this and still perform under that pressure. What they've been coming up with, they kept that old organization of the Navy or the Army in place in military, but then created these bubbles of high autonomy around that to make these teams as effective as possible. Do you think that's a model that works consistently or is just a hyper WC for a while, and is that something that corporations also should look at? Yeah, the narrative you just offered, I think there are misperceptions in it, and the narrative that you offered is that military today is a hybrid between centralization, decentralization, maybe or so on, but I think that's not the case at all. I think the military has been a pioneer of decentralization, consistent decentralization. Of course, in an organization that requires its employees to ultimately face death, there are some variations of the pattern of how to organize and what other kind of rituals that you need in that kind of organization to keep it consistent. So rank, for example, of course, in the military is very important, which doesn't mean it's a common control organization, and I think that's the core misunderstanding that was embedded in your question. The fact that military is strong in rank and status does not mean that it is a common control. If you look at the research done by organizations on decentralization, you will find that the American military was pumped, I'm not sure how much money, but definitely millions in researching decentralization in the 1960s and 70s. Why? Because of course, the American military suffered such brutal failures, brutal defeats, starting the Korean War. I mean, every war after World War II, the Americans lost it. More and more money was spent, but all the military efforts failed. Korea, the Korean War, some in between, Afghanistan, other failures as well, the whole thing, disastrous, but also Vietnam. I think Vietnam promoted a certain shift in perception that decentralization was necessary, because of course, that general who was also at Ford and then went to the World Bank, what was his name? McNamara. McNamara was the epitome, you know, the hero of centralized decision making, of theory. And the McNamara ideal of, we just pumped the double of soldiers into that country, Vietnam, and then we will have the double results. None of that was true. In fact, you cannot scale war. We already discussed scaling, and McNamara ultimately proved that you cannot scale success, that you cannot scale an organization, you cannot scale a war and so on. So after that, the Vietnam disaster, and not in the Trumpish sense, but an actual disaster, after that experience, the military researched decentralization profoundly, and many thinkers from the field of cybernetics, Margaret Wheatley, for example, their research or their insight came from this kind of research and programs in the military to discover what decentralization could look like. What we now have is military operations everywhere in the world with soldiers that are highly, you know, that's why we talk about intel all the time, because every soldier must be informed in the field. There are beautiful movies about decentralization in the military. One of the movies I like best is Black Hawk Down. I always remember watching Black Hawk Down, not because it's such a great story, but because the helplessness of the general who's in charge, who's in command, in a situation where not a defeat is happening in the field, in Somalia, if I remember well. That is so perfectly, so crisply shown in that movie. I always recommend to understand decentralization in the military. I always recommend Black Hawk Down because it has a strong message that goes well beyond the firing. So what the American military learned in the 1970s was decentralization, you know, putting, with holding, in charge. There are many, many movies about this. One is with Jake Gyllenhaal, that's fantastic as well, in a way. Now, organizations, corporations have not done the same. That is a tragic. The military has accomplished decentralization. I'm not saying that military operations are perfect or that there are no ethical questions about that. I'm not saying that, but organizational model wise, they have decentralized. Corporations by and large haven't. So we still need to see that. And the big, big problem is that markets became more complex, more dynamic, more globalized in the 1970s and 80s, and most corporations haven't done anything to decentralize. We still run the same common goal, abortion models epitomized, for example, by sales departments, HR departments, running as a show by heads of business, and COOs, supposedly running the business. I like your analysis. I think it's spot on. And we find it now, which is, I find kind of backwards. When I was talking to Mike Sorrell, who is a former Navy CO, he runs a company now that teaches companies about recruiting, because he's applying the training and the leadership analysis that Special Forces do to a company. And he says, you can do this. You don't have to go. He broils it down, but I think you guys should talk, because you look at the same problem, but in a different, very different perspective, through a very different prism. He looks at it through the recruiting angle and says, basically, they're recruiting from the wrong people. They're recruiting basically people who fake their CVs or fake their interviews, because they're looking for specific skills that they might have or might not have, but it does say anything about their performance. So that's what he calls talent. And I think this comes out in this game of decentralization. And I found this kind of ironic that, when this might be your point all along, that, you know, something where you feel like it is an industry or as a whole is something relatively flexible, which is the world economy or the US economy. But I think we have this problem in lots of places that they have to learn recruiting from the military, which is a bureaucratic superstructure with millions of layers of bureaucracy in between. I find this very ironic. Yes, the business world is struggling with where to learn from, where to find the great examples. I think the sad reality is that the best run organizations are the most boring ones. Great organizations, which is why Tesla can never be a good company, and it isn't a good company. It is not boring enough. You know, it's not doing business. That's what becomes visible every day, I think, if you read about what supposedly is going on at those hype companies. Let's take Airbnb, or Airbnb, which is the next group on, of course, and Tesla is the next end run. And it's so visible because they're so overhyped, so sexy. A really cool company, Toyota, they're not sexy. Nothing interesting. Nothing fancy is going on. The CEO, men or women, is not a hero. And that's a good company. A good company is boring, you know, except of the occasional real innovation that's happening at Toyota, for example. Of course, they are capable of innovating, and there are some sexy moments. But a command and control organization from the outside looks much more appealing, more attractive. Heroism sells. It also sells to media. And the sad reality, I think, is that due to this, like, misguidance of our attention, we look at the wrong places, for example. And I agree with you, we shouldn't exactly look at the military for recruiting practices, because it's not a business. If you are a business, I think you should look at companies like Southwest Airlines, Handelsbank, and WLGore, and so on. And also Google until, you know, the 2020s, or until the 2010s, I want to say. If you look at those companies, how they recruited, you find interesting patterns. For example, HR played no role in the whole process. Of course. Yeah, which is very important, never let HR people filter or decide. I have seen this first hand, how HR people have no clue of how to filter out. Oh, yeah, yeah. I'm behind the percent degree. I think any entrepreneur I talk to says the same thing. That's the biggest enemy inside the company. Okay, I don't want to blame HR people either, but here's the thing. By definition, it's not the people, it's the role in the organization. It's not necessarily the people. The people might be just fine. So, of course, the wisest principle for recruitment, for selection, for hiring people should be teams hiring new peers, or peer recruiting, or peer to peer recruiting, or how do you want to call it, we call it peer recruiting, or teams recruiting new members. And of course, this is something I learned from Google. It is very wise to add to that the right of the CEO or CEOs also to veto a recruitment decision. I heard of examples where Larry Osterge stopped hiring processes of individual people because they always had the right to revise, to be the last people to revise the formalities, the papers, the documentation from the recruiting process, and they sometimes rejected candidates. They were never allowed to hire people that would be rejected by the business, but after 7, 12, or 20 people had interviewed the candidates, they would review the process and had the right to reject. And then what people in the business could do is to start the whole thing over and over again. But again, going through all the recruitment phases, by the way, my ex wife, she went through all this, so I know this firsthand how this works. And it worked. That's a good process. Peer recruiting, that's the best process there is, which doesn't mean that, for example, CEOs wouldn't have no say in the process. It means that everyone who does a recruitment interview has the same right to reject a candidate, and that's the only decision that matters, to reject candidates that you don't want inside your team, inside your having, inside your organization. And this kind of highly democratic recruiting process, it's not at all pervasive in organizations. What's the contrary? What I see in organizations, I see a lot of organizations, still CEOs recruit alone, managers recruit alone, guided and aided by HR who understand nothing of the business usually. So we still have very much command control process, also of promotion. If I see that we're still doing assessment centers and recruitment centers, and how are they called? Promotion centers, you know, these kind of standardized tests, which are among the most budget command control rituals that you can, the most important rituals in business. Yeah, I mean, you can maybe make that argument that a lot of these things are, if I compare the psychology or, you know, the way people look at the human mind changes every five years right now. The Big Five is a big deal. There was Greg Myers before. There were all kinds of tools, but they kind of go through these phases. And I think in companies, because they have so much trouble to identify who are actually those 20% who are really the effective people, who I need to support them, they go through phases where they kind of try tons of different tools, but without really taking them seriously, without really wanting any real change, because what they feel like, everything works, because I mean, the company makes money. This is what the shareholders incorporated these companies for. But they kind of want to cycle through a number of different tools that kind of keep them innovative on the surface. But I think the real management innovation and stuff you describe for some companies, this is like a wall change for a lot of companies, for startups, I don't think it is. But for a lot of companies, I can see this is an enormous change. I almost feel they're not interested in this. You have to rebuild most of those companies from scratch to get the people into that mindset. And I mean, competition, right? Because we have capitalists and the old companies need to die and more productive companies need to grow up. We need to be more productive. Okay, you're throwing so many hypotheses on me. It's hard to keep track of things. That's the whole idea. Yeah, you're the master of confusion. You're confused. I get dizzy. But I'm also enchanted by your... You're doing very well, you're doing very well. And also, let's not forget, we're not supposed to be taking ourselves too seriously in this session. So let me just subjectively choose one of the topics that you just... Of course. I would argue that in the world of business, we are lacking theory, robust theory, and we're lacking conviction. We're lacking willpower. And let me again use the Bill of Country. The country I love so much, the United States of America as an example. It took very intelligent, brutally smart people to make up democracy and to fight for it. Sadly, in the United States, only the men are remembered and not so much the many women who played an important role in establishing, inventing democracy and establishing it. Democracy has a long history and it took democracy... Let's say, even the French Revolution, of course, wasn't the starting point of democracy. It was just one of the momentums, one of the notable historic moments. And then thinking the writing of the Constitution in America. I went to Philadelphia to see the important documents as well and the important sites, of course. So if you look at the history of democracy, which is really a thing that's in the flow all the time, was to reinvent and update democracy all the time. This kind of invention of a consistent model for our time of governing societies in this case, self governing of the people, when the people being in charge. Something like that hasn't happened in the business world. The only true philosopher, the only big philosopher that we have in the world of business is Frederick Taylor, maybe another guy from Philadelphia, a guy from the United States. And he gave us command and control a hundred years ago, which is not his fault because at the time American democracy was not perfect. And as a Quaker or a woman who protected slaves and hid away slaves to hide them from death. I think Frederick Taylor was a political person. He had a social ideal, but the means that he came up with as an engineer to make organizations more just, more fair, more balanced, more, let's say, society promoting, democracy promoting, they were imperfect. And I think we cannot blame Frederick Taylor for being imperfect and for being a child of his time. I blame us. I think we are the problem. Not Frederick Taylor and not even Jack Welch. I think we are the problem because our societies are far more democratic than they were at Frederick Taylor's time. And we haven't even remotely tried to make them more democratic. That's what I'm fighting for. That's why I invite everyone, also you to join the Beta Codex movement. And ultimately, it's a movement for making organizations more federalized, more decentralized, more democratic, more up for complexity and fit for human beings. And of course, to strengthen the conditions to sustain value creation, which includes innovation from my point of view. So that is what the challenge is. Yeah, I think we are definitely pulling the same string, I feel. You have a different terminology and a different way to look at the world, which I think is awesome. I want to hear all about it. There's lots of points where I feel like I would disagree and I think I see the world differently. But it doesn't mean that we both think this is the goal. Going towards a way to empower people is fantastic. The problem always is, and I think the corporation exemplified this so well. And I think you made that point earlier, and I want to talk about the hero myth. What you see as the hero myth is, and the US has been so good at marketing and sales their whole life, especially marketing. What that is is basically creating a narrative and making it convincing and then finding a channel that transports it to people in a convincing manner. It used to be TV, it used to be radio, now it's the internet, and it's these themes that come up in social media. Those are, in my mind, it's just the former strength of American marketing genius of really talented marketers in the US that have taken those narratives. And the hero myth is one that's in build in all of us, so we respond to it. There's lots of other core narratives and archetypes to respond to. And people have used those and hijacked those, set it up with really cheap AI, and now push people into these, I don't want to say boxes, but into these realities of their own, where they're kind of helpless because there's so much information, there's so much AI that pre determines information and selects it for them, not necessarily within the farious idea, but in a way that these, like the hero myth, are being recycled for pure marketing gig. And everyone wants to market something, right? Donald Trump wants to market himself and his corporation. You want to appeal to voters, you want to buy stuff, you want to travel, you want to buy another Netflix account, like the amount of marketing that's going on in the US, and now this is on the world scale, but it's obviously the ground zero in the US. Your reality is kind of like in the movie, like Minority Report, you're constantly surrounded by marketing messages, and at some point you don't even know, like CNN is a pure marketing message now, obviously, it doesn't sell computers or phones, it sells a political affiliation. And these things, what happened is we've used those archetypes like the hero myth and companies have hijacked those to just wrap it around, a lot of bullshit, I fully agree with you, but it doesn't mean that these narratives are bad, and it doesn't mean that marketing is that, it's just, I actually don't know how the human mind right now, and like unprotected, it doesn't have their own AI, how the human mind can make sense of information anymore, because there's so much out there by really powerful data giants, that just, it screws your reality, all of us see a different reality, and it gets really tricky to find out, even in a conversation with an open mind, and very few people do this anymore. What is actually the overarching picture of reality, this is like the real problem we see with these bullshit companies, that's why they thrive, right, because they have the ability to screw reality for a lot of people. Yeah, let me overlook that you claimed, what you just said, I think you claimed that the telephone and TV and the internet were invented in the United States. I would just... No, no, not invented, it's something that they're being sold, not invented. But yes, the thing, I didn't talk about inventions at all, I didn't try to, maybe came out the wrong way. But I think you circled back to the question that matters, so many things are said, so many things are believed. There's so much, such a big burden from the past in businesses and in societies and in our beliefs and so on, and education systems promote beliefs that seem strange today. So how to sort the whole thing, and this is exactly the point of the work that I do, so please allow me to offer a possible solution. I think the solution is practical theory. The solution is practical theory, and this is something that I got from Kurt Levine who coined this expression, practical theory. He said that there's nothing as practical as good theory. If the world spins faster, which it doesn't really, but if the world seems to spin faster to us, because we are so overwhelmed by information and supposed innovation and concepts and stuff that comes up and the internet accelerates everything, in the face of this kind of acceleration of information flow, at least, and maybe even of innovation, in the face of all this, we need theory. We need a will, our wanting, our will must be subjected to a higher purpose. And that is why I talked so extensively a couple of minutes ago about democracy. Only if you feel in your heart that democracy is the only way, and that the price of democracy in the US must be union first and second, as a consequence, the abolition of slavery, and so on. That's when you become Abraham Lincoln. You need the theory, the understanding of what democracy is and what defines it, which he beautifully talked about, and also of the consequence. So only if you have a theory that's in your heart that becomes a higher purpose or a conviction, a belief of sorts, or let's say a strife, you know, only then can you judge what's there. I agree, I agree, this is beautiful, but I don't think democracy is the right layer to look at. And if you look into the founding fathers, Benjamin Franklin always said, you know, democracy is basically two wolves and one lamb trying to figure out what they're going to have for lunch. For Benjamin Franklin, democracy was a tool to use in order to drive prosperity and to drive a process of American happiness or world happiness, so to speak. But he notices how vulnerable that is, and it is bound by deeper layers of belief. No, no, I think you misinterpret Ben