An Admiral in the Pentagon called his staff together and announced: “Somewhere in this office there’s a bottleneck,” a young Lieutenant from the South spoke up: “Suh, in my long association with bottles, I’ve always found the neck to be at the top.” (As I remember it from Reader’s Digest, Humor in Uniform circa 1952)
Truer management words were never spoken. At the top of every hierarchical system sit executives making management decisions: CEOs, CFOs, CTOs, Generals, Admirals, Presidents, Congresses, Dictators, Kings, Popes, Cardinals and Bishops; just to name a few. These executives and their management teams form decision making bottlenecks which become more limiting as their systems get larger and with the passage of time (for more on the time aspects read my Life Cycles of Executive Teams). Executives become increasingly detached from events on the ground, receiving heavily filtered information from entrenched bureaucracies― that know career advancement depends upon telling executives what they want to hear, not what they need to hear―overwhelmed with the number and complexity of issues, influenced by parasites and the parasitic beliefs they carry (some of them are called Lobbyists), taking more time to respond, necessarily making more global, less locally apt decisions; decisions implemented ever more poorly through heavily filtered entrenched bureaucratic chains of action.
It is the number of bottlenecks, their sizes and distribution of sizes which largely determine the health and growth potential of any society. It matters not where the bottlenecks develop―business, government or religion―but how long they remain in place and how many there are. Unfortunately for mankind, the default condition, which the Industrial Revolution temporarily broke out of, is to develop one dominant, eternal, political/economic/religious bottleneck administered by a small group of people who inherited their roles; who are by and large no more competent to run things than anyone else. In the default state there is little growth and little opportunity for most people; and even those in charge, when competent, find that the size and complexity of the task are simply beyond human capacity; incompetent managers aren’t burdened by such self-awareness and build memorials to their achievements.
There is a natural tendency for management bottlenecks to merge with other ones and form fewer, larger and more complex ones; the short term benefits of scale coax mergers just as the force of gravity coaxes, over larger time scales, the coalescence of matter into planets, stars and coherent galaxies. Thus we have seen, over the last few decades, local financial institutions merging into ever larger ones, run by fewer, ever more highly paid managers, until they became a handful of failing global institutions too large to fail, because their failure would destroy society as a whole; but long before that, far too large to manage competently. The centralizing migration applies to all businesses, to governments and to religious institutions.
The principle involved is this: centralization might bring tactical benefits, but the tradeoff (every change involves a tradeoff) is that it always increases strategic weaknesses. Sometimes the benefits are worth the increased strategic risks and weaknesses, such as pooling public or private resources to undertake major projects like railroads, airlines, highways, dams, power grids, communications, mines, factories, social welfare, etc., or forming a military to resist invasion. But somewhere up the scale of size and longevity, as one approaches the too big to manage threshold and before it reaches the too big to fail one, the tactical benefits accrue only to management insiders and to institutional parasites―to increase or guarantee their personal security or personal status ―without benefitting either the organization or the greater community which it serves. For in this region of size-duration scale, the management strategy changes―by necessity―from adapting to the needs of the community in which the organization operates, to controlling that community’s expectations for the benefit of management; in a logical attempt to adequately simplify the management job. “What’s good for General Motors is good for the United States” was a classic utterance of this imperative back in the 1950’s. In truth, when such a strategy takes hold it is time to break up the institution. Its natural dying process can take decades and wreak havoc; it needs to undergo apoptosis.
In the late 1980s, I had the good fortune to do business with mainland China as the CEO of a relatively small company making industrial microcomputers. Between 1984 and 1989, I spent a total of 4 months in China on 7 visits there. On the last visit was in Beijing the day after martial law was lifted. I have enormous respect for the Chinese people, and even a healthy respect for the management capabilities of the Chinese government in how they set about to extricate China from the default condition of over-centralization, acculturated by centuries of Imperial rule followed by a 40 years of Mao and the Communist party. I’m not suggesting that they still aren’t over-centralized, they have a long way to go in breaking up business-education-political bottlenecks. But, in the last 25 years they’ve made progress in separating political and economic management, and in distributing economic decisions without going through a period of total chaos; progress that is remarkable in human history. To my knowledge, only Great Britain from 1690 to 2000 made a similar transition, much more slowly, and under much more favorable conditions! (Japan made such a transition only after the chaos of losing WWII). Russia tried, and has thus far failed to make the transition.
What the Chinese leaders realized was that 40 years of central rule by a handful of people had resulted in an aged leadership without younger, qualified risk-takers to take over; with few exceptions, the survivors of the Cultural Revolution (only the last in a series of management debilitating exercises) were those who took no risks, and those fortunate enough to have attached their lips firmly to the behinds of upwardly mobile superiors .
On my first business trip to China, I was overwhelmed by (senior) managers who wanted to do business. Meeting after meeting was followed by “memo of understanding” after “memo of understanding.” I was impressed. I was excited about our prospects! A second trip later in the year had similar results, but by then I began to realize something: no one I had negotiated with was able to make a decision. They all passed our memos of understanding up the ladder―to somewhere in the bowels of the national bureaucracy―for permission to act. (I also met with, and was out-toasted by, one of the top 100 leaders of mainland China on my first trip; the worst hangover of my life prevented me from accepting a second, unheard of, invitation to resume mutual toasting the following evening. We were about as well received as one could hope for.)
Chinese leadership had realized that they lacked future qualified leaders long before my first visit. They had established special economic zones, like Shenzhen between Hong Kong and the rest of the mainland, with economic systems modeled on Hong Kong, and they permitted people throughout China who wished to give risk-taking a try the option to migrate to these laboratories of Capitalism (a self-filtering process much like that of the immigrants who chose leaving family and friends and risking the USA rather than remaining in stagnant conditions of their homelands). Meanwhile, they kept their centralized lid on the rest of the mainland to avoid chaos while they waited for a new generation of qualified managers to develop, some of whom have now moved into leadership roles in business and in the Central Government and who continue the upgrading process. (The crises and massacre of June 1989 and its aftermath were deplorable, hurt the lives of people I knew and nearly upset the applecart.)
The Soviet Union, on the other hand, also opened up its government/industrial bottleneck some 20 years ago; but Russia and several other Soviet States have fallen back into centralized, authoritarian rule. They too lacked any qualified, risk taking leadership and had taken no steps to develop same. Well, there were a few qualified risk takers because in any centralized system of government, business or religion there are still a few die-hard risk takers operating outside the system: crooks, black marketers and heretics. Guess who took over many of the Russian business institutions to the detriment of the country as a whole and eventually provided one of several excuses to return to the default condition?
I will return to the topic of bottlenecks in future blogs, because understanding their tradeoffs and characteristics reveal essential keys to sustainable, healthy economies. There are similarities and differences in the bottlenecks found in the human brain, businesses, governments, and in computers. In 2002 I gave a talk comparing these architectures, for which the powerpoint slides are available.
Large governments and large corporations do not breed enough competent decision makers to sustain healthy societies or healthy economies. The first generation of leaders may reach the top because of merit, the next generation, on the average far less competent, largely gets there through inheritance; that is from personal relationships with former leaders.
