7 ms·

Great article. Anyone who has worked for a large, established corporation knows from personal experience that internally they are a lot like the Soviet Union,

• vitorbal 14y ago
  you can read the story about how he started working with valve on this post: http://blogs.valvesoftware.com/economics/it-all-began-with-a-strange-email/ http://blogs.valvesoftware.com/economics/it-all-began-with-a...
• ralfn 14y ago
  One has to wonder why "large" companies even exist in the first place. Why a building full of freelancers could not do the exact same thing. And then it dawned on me: Valve is providing a "firewall" to unfair competition, financial insecurity, brand awereness, and legal risks. And then it just gets out of the way. Maybe, the pure existence of large corporations, is a sign of capitalism failing. Being large should not give an advantage: yet it allows for a reportaire of anti-competitive behavior. Maybe they should do a nation wide experiment, in smaller country: what happens if you take away the legal standing of all "companies" and "employment". What if all economic relationships can only exist between individuals? Im not suggesting its some kind of magic bullet, i just wonder how competitive it would be. Will such a system adapt (to changes in the market) and optimize (cutting out middlemans) more quickly? Will it be truly bottom-up?
  • seiji 14y ago
    Take a look at http://en.wikipedia.org/wiki/The_Nature_of_the_Firm http://en.wikipedia.org/wiki/The_Nature_of_the_Firm Given that "production could be carried on without any organization [that is, firm] at all", Coase asks, why and under what conditions should we expect firms to emerge? Since modern firms can only emerge when an entrepreneur of some sort begins to hire people, Coase's analysis proceeds by considering the conditions under which it makes sense for an entrepreneur to seek hired help instead of contracting out for some particular task.
    • jseliger 14y ago
      This is an excellent answer. Peter Thiel uses some similar ideas in his answer about why people form companies: http://blakemasters.tumblr.com/post/20400301508/cs183class1 http://blakemasters.tumblr.com/post/20400301508/cs183class1 : If we want technological development, why look to companies to do it? It’s possible, after all, to imagine a society in which everyone works for the government. Or, conversely, one in which everyone is an independent contractor. Why have some intermediate version consisting of at least two people but less than everyone on the planet? The answer is straightforward application of the Coase Theorem. Companies exist because they optimally address internal and external coordination costs. In general, as an entity grows, so do its internal coordination costs. But its external coordination costs fall. Totalitarian government is entity writ large; external coordination is easy, since those costs are zero. But internal coordination, as Hayek and the Austrians showed, is hard and costly; central planning doesn’t work. The flipside is that internal coordination costs for independent contractors are zero, but external coordination costs (uniquely contracting with absolutely everybody one deals with) are very high, possibly paralyzingly so. Optimality—firm size—is a matter of finding the right combination.
      • toddh 14y ago
        This is pre information revolution thinking combined with ideas generated by the fears of an age when socialism/communism was really was competing with democracy as a form of social organization. This muddled thinking makes no sense presently, especially given Corporations are purely creations of the government monopoly of power and should be anathema to any free thinker. For those not fighting the last war led by generals like Hayek, all coordination costs follow the technological cost curve as there is no longer a difference between internal and external actors.
• sophacles 14y ago
  Regarding your PS: Valve hired him as "cheif economist". This article explains it all: http://blogs.valvesoftware.com/economics/it-all-began-with-a-strange-email/ http://blogs.valvesoftware.com/economics/it-all-began-with-a... I seem to recall an HN discussion about it, but am too lazy to track it down :).
  • cs702 14y ago
    Thanks. Also a great post.
• nodata 14y ago
  I'd like to see if Valve's model scales to a much larger number of employees.
  • DougWebb 14y ago
    It may not need to; they could take the approach of splitting the company into several smaller companies that are each an ideal size for this management style. I don't recall the name, but there is a manufacturing company (clothing, I think) that does this. Collectively the company has thousands, maybe tens of thousands of employees, but they're organized into independently run shops with around 500 people each.
    • carterschonwald 14y ago
      Gore dOes this
    • clarnet 14y ago
      Making the parallelism of firms as federations (not sure if is a correct assumption), this can surely relate with Proudhon's ideas about federations and confederations: http://www.ditext.com/proudhon/federation/federation.html#7 http://www.ditext.com/proudhon/federation/federation.html#7
    • Qworg 14y ago
      Morningstar Farms does this as well.
  • einhverfr 14y ago
    How big is much larger? 9k employee businesses exist on this model. The scale issue is NOT number of employees. It is breadth of focus. You could have an operating system company, or an office productivity business, or a video game console company, but it is hard to see people organizing Microsoft in a bossless company without breaking it up first.
• DanielRibeiro 14y ago
  This part is particularly enlightening: The idea of spontaneous order comes from the Scottish Enlightenment, and in particular David Hume who, famously, argued against Thomas Hobbes’ assumption that, without some Leviathan ruling over us (keeping us “all in awe”), we would end up in a hideous State of Nature in which life would be “nasty, brutish and short