Why too many businesses look like communism

I have been reading a couple of books by historian Yuval Noah Harari and Steven Pinker – two great thinkers of history and cognitive science.  In Sapiens and Homo Deus, Harari has an interesting take of why Communism, for all intents and purposes, failed. In Pinker’s Enlightenment Now, he shows how Democracy has flourished in the past 30 years – doubling from 50 countries to over 100 in that period.  The world is safer, more prosperous and healthier then ever in history

It got me thinking that a lot of what Harari talked about is how I see many leaders run their business.

Why do I think business management is too often similar to communism?

Communism relies on central processing, power, money and decision-making.  That is how most business are run.  A few people at the top of the organization get information fed to them so they can make decisions on where to spend money and put resources. The problem with this approach is that you can never be sure that you are getting all the information you need, that the information is correct and what the true impact of your decisions are.

The best, most-efficient, innovative and highest velocity businesses are run as distributed data processing systems.  They hire the right people, put them in the best position to succeed, leverage and grow their strengths and then trust them to make most of the decisions.  They do this because they know that these people are closest to the information.  They have insight, training and experience that those in the C-Suite do not have.  Here is a great video by David Marquet that illustrates the point brilliantly.

You will see that Marquet had to distribute decision making because he had no other choice.  The problem most leaders face is called ‘The Curse of Knowledge’.  It is hard, when you know the answer, to let others figure it out for themselves. It is even harder to let them fail when you know it is inevitable. This happens often because we prioritize going faster over going further.  This is one of the main reasons why businesses eventually hit a wall after a sustained period of growth – the top team runs out of bandwidth and energy.

If you want your company to scale and you do not want to spend 100 hours/week doing it, you must teach others and then trust them to make most of the decisions. When you do this, they are happier and more fulfilled at work, the business runs more smoothly and you spend your valuable time on predicting the future instead of managing the present.

Too many of us fall into this “minkhole” (a rat hole that feels REALLY good – thanks Rick!).  We like making decisions. We like giving feedback and advice.  We are probably good at it or at least we like to think we are. It feels good.  We enjoy helping others. 

When producers and consumers do not communicate directly but rely on a central body to make all of the decisions and this body determines and rates abilities, and then distributes information and resources according to needs, we are reproducing communism – a failed system.

Capitalism is a better system. Please note that I am not promoting crony capitalism.  I am for conscious capitalism where all stakeholders are valued, heard from and considered.  Capitalism is a distributed processing system.  It connects all designers, producers and consumers directly allowing them to exchange information directly and make decisions freely. This type of capitalism promotes distributing the work of analyzing data and decision making between many independent but interconnected processors.  It celebrates the good of the many over the good of the few or the one.

Conscious capitalism relies on teams, a strategic execution system and often produces more cash than its rivals that work through a centralized system.  Today, information, technology and change move too fast to funnel all the information up to a central body that then deliberates and hands down a decision. Nowadays, the opportunity has passed before the central body finishes its process or even meets to deliberate and decide!

My upcoming book, Further, Faster goes into more detail of how you can run your business at the speed of capitalism.  According to Home Deus: A Brief History of Tomorrow, “Capitalism did not defeat communism because capitalism was more ethical, because individual liberties are sacred or because God was angry with the heathen communists. Rather, capitalism won the Cold War because distributed data processing works better than centralised data processing, or at least in periods of accelerating technological change. …when….all the important decisions are taken by an elderly apparatchiks, they can produce nuclear bombs but not an Apple or a Wikipedia.”

This is the era we are in, where innovation and speed of decision making are paramount.  Learning from history, we can see our way forward. It is not command and control. It is a distributed system where the leaders are making all around them better and trusting them to make most of the decisions. When you do this, you can focus on taking the guesswork out fo growth by focusing on predicting the future.

Lastly, it is proving to also be the most profitable way to do business over the long term.

Be Exceptional!

Bill  – Certified Premium Scaling Up/Gravitas Impact Coach
(bill@catalystgrowthadvisors.comwww.catalystgrowthadvisors.com)

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