by nostrademons | 2025-10-09 14:06:21+00:00
I've wondered sometimes what the root of this dynamic is, and why corporations are as inefficient as they are. I've come to the conclusion that it's deliberate.

When I look at top-level decision-makers at my Mag-7 employer, they are smart people. Many of them were go-getters in their earlier career, responsible for driving some very successful initiatives, and that's why they're at the top of the company. And they're very intentional about team structure: being close enough to senior directors and VPs to see some of their thinking, I can tell that they understand exactly who the competent people are, who gets things done, who likes to work on what, and then they put those people at the bottom of the hierarchy with incompetent risk-averse people above them. Then they'll pull them out and have them report directly to a senior person when there's a strategic initiative that needs doing, complete it, and then re-org them back under a middle-manager that ensures nothing gets done.

I think the reason for this is that if you have a wildly successful company, the last thing you want to do is screw it up. You're on top of the world, money is raking in from your monopoly - and you're in zugzwang. Your best move is not to play, because any substantive shift in your product or marketplace risks moving you to a position where you aren't so advantaged. So CEOs of successful companies have a job to do, and that job is to ensure that nothing happens. But people's natural inclination is to do things, and if they aren't doing things inside your company they will probably be doing things outside your company that risk toppling it. So you put one section of the company to work digging holes, and put the other section to work filling them in, and now everybody is happy and productive and yet there's no net external change to your company's position.

Why even have employees then? Why not just milk your monopoly, keep the team lean, and let everybody involved have a big share of the profits? Some companies do actually function like this, eg. Nintendo and Valve famously run with fairly small employee counts and just milk their profits, some HFT trading shops like RennTech just give huge employee dividends and milk their position.

But the problem is largely politics. For one, owning a monopoly invites scrutiny; there are a lot of things that are illegal, and if you're not very careful, you can end up on the wrong side of them. Two, owning an incredibly lucrative business makes you a target for competition, and for rule-changes or political action that affect your incredibly lucrative business. Perhaps that's why examples of highly-profitable businesses that stay small often involve staying secret (eg. HFT) or being in an industry that everybody else dismisses as inconsequential (eg. gaming or dating).

By having the huge org that does nothing, the CEO can say "Look, I provide jobs. We're not a monopoly because we have an unfair advantage, we compete fairly and just have a lot of people working very hard." And they can devote a bunch of people to that legal compliance and PR to make sure they stay on the right side of the government, and it also gives them the optionality to pull all those talented people out and unmuzzle them when there actually is a competitive threat.