Do human designed systems always end up centralized?

Something that I’ve been thinking about recently is the tussle between decentralized organizations, where there is no clear authority but rather every participant is on their own, and centralized organizations, where there is a clear authority in charge. And the more I thought about it, the more it seemed to me that human created systems almost always end up centralized.

Decentralization is the more natural organization structure. If you look at nature, you’ll see what I mean. Evolution shows that everything we see in the world was created without a central authority[1]. The plants and animals all around us came to be not by centralized planning but instead through the mere act of each living thing being interested in its own survival and replication.

But when it comes to humans, I think we prefer centralization, at least in the way we design things. If you look at the history of human organization, like governments or businesses, a pattern begins to emerge. Our systems start decentralized but over time become more centralized.

Take the most obvious of all forms of human organization, government. In the very beginning, the family was the only form of government for human beings. No one family had any more authority than the next.

Then as populations increased, we moved from the family to the tribe, the tribe to the village, the village to the city, and the city to the nation where we are today. Each of these steps increased centralization. We even attempted to take the next step and create a world government[2]. Though that didn’t succeed, there are still a number of more centralized government organizations that exist today like the EU and UN.

Even if you look at other human designed systems, which are supposed to be known for decentralization, like markets, they still tend to centralize over time. That’s why we have some banks that exist that can’t actually fail. By definition, something isn’t decentralized if it relies too much on one entity to survive.

The same thing is true of one of the most promising technologies we’ve ever created, the internet. When it was first started, it was intended to be an open platform for all. A place where anyone could create their own website and put it up for all to see, no approval needed. All that was required was a computer connected to the internet to host it.

While these basic principles are still true today, the internet became more centralized over time. Look at how most people spend their time on the internet and it’s mostly between 3 or 4 different companies’ websites or apps. That doesn’t seem so decentralized. Even something as seemingly decentralized as creating and hosting your own website as become largely centralized today. Only the truly dedicated host their own websites anymore.

This trend towards centralization seems inevitable. Some people will always be more motivated than others to seize power and control. And they will be able to do so because the rest of us like convenience and simplicity.

It’s a lot easier for me to order everything through one website, like Amazon, then to have to go to 10 different websites to get my clothes, food, books, devices, etc. And don’t even get me started on how much of a pain it is to do anything on Craigslist (which is still a centralized service).

This also goes beyond the digital too. It’s a lot more convenient for me to not have to field my own security detail and instead rely on my city’s police force to protect me and my loved ones.

Even if you look at the latest technologies promising decentralization for the masses like the blockchain, it’s already appearing to be moving towards more centralization. One company, Coinbase, has something like over 40% of all Bitcoin wallets in existence. On top of that, it is estimated that 1,000 people own 40% of all Bitcoin. Even individual projects, like Bitcoin itself, have only a small group of individuals who control all the decisions.

While I personally think decentralized organization is the better form of the two, the more I think about it, the more it seems to me that any human designed system eventually becomes centralized. When people are involved, the drive for convenience and power are hard to overcome.

One lesson from this is that perhaps we’re bad at designing decentralized systems that are convenient? If you ever tried to host your own website or set up your own Bitcoin wallet, you’ll know that it can be quite challenging. It shouldn’t have to be this way but it does seem that we’re not that great yet at making systems that can be both convenient and decentralized. This is something we need to work on more.

Not everything is bad news, however. Using a hybrid combination might actually give us the best of both worlds. Jared Diamond, the author of Guns, Germs, and Steel, has a great essay about human systems and organization. In the essay, he takes a look at the role of fragmentation across various societies throughout history. A key takeaway is that there seems to be an optimal level of fragmentation for a society. For the most innovation and prosperity, you don’t want your society to be too fragmented or too unified. Too fragmented and communication between entities is poor, leading to stagnation. Too unified and one crazy person or group of people can ruin everything.

The good news for us is that there are examples of this organization structure in society today. In government, the founding fathers of the United States had the brilliance to set up the country’s government to be a combination of decentralization, the states, and centralization, the fed[3]. The states allow for experimentation, while the fed provides the infrastructure for all to communicate and trade.

In business, a number of highly successful firms practice this hybrid approach. One of the most famous examples is Warren Buffett’s Berkshire Hathaway. Berkshire Hathaway owns a number of different companies that largely function on their own in a decentralized manner, yet the parent company maintains control over capital allocation and provides support to its subsidiaries if needed.

While we may never be clever enough to design our systems as elegant as nature, if we take a hybrid approach to our own organizations we’ll have a better chance at success. I hope we take heed from history as we begin to build our newest forms of organization.

[1] This statement obviously conflicts with those who view God as a centralized designer of everything. I assume Charles Darwin was right but even if you are someone who doesn’t believe in evolution, I ask you to still approach this essay with an open mind throughout. After all, all of today’s religions are human designed, centralized systems.

[2] I’m referring here to the League of Nations, as it was planned by Woodrow Wilson.

[3] You can have your own opinions on the current state of affairs in the United States but it’s hard to argue the form of government set up in 1776 in the US wasn’t an act of ingenuity.