If you’re not following WaitButWhy Tim Urban’s latest masterpiece series, The Story of Us — do so now!
As I’m writing this post, the series is still unfolding, so instead, I want to focus on a small piece of it, covered in Tim’s The Enlightenment Kids post and its real-world applicability in the much smaller context of a single business.
In the post, Tim offers his narrative for how the US Founding Fathers(aka “The Enlightenment Kids”) designed a system to address the pitfalls of dictatorship — the prevailing system at the time: taking the standard dictator and splitting it into 3 parts:
- The Constitution — replacing the dictator's ability to generate and modify rules on a whim with a standalone document with significant constraints on how they can be changed.
- The Citizen Body — replacing the dictator’s head in making decisions on what goes on inside the country and its action on the international stage.
- The Government — replacing the dictator’s cudgel in enforcing the rules.
While this almost 250 years-old modification to how countries are run is now widely adopted (57% according to Pew), it is hardly the case for organizations, where the overwhelming majority is still running using an authoritarian model of governance.
Rather than using hand-wavy claims about “distributed decision-making”, “eliminating hierarchies” and the likes, the transition outlined above is a much more powerful way to explain what Holacracy and other forms of progressive organizational governance aim to accomplish.
The other big shift that Tim covers is how freedom is supported. Under the new regime, freedom is constrained so people can have more of it. Sounds a bit counter-intuitive at first.
Under the old regime, everyone starts off with unlimited freedom. Until conflict arise. Since everyone can do whatever they want, if they have the power to pull it off, the person with the bigger cudgel (power) will use it to restrict the freedom of the person with the smaller one. Resulting in an outcome in which a handful of powerful people have a lot of freedom and the vast majority of people have very little of it.
The new regime follows a different rule: Everyone can do whatever they want, as long as it doesn’t harm anyone else. In exchange for giving up the freedom to harm or bully others, you could live a life entirely free from anyone bullying you. No one would be completely free, but everyone would be mostly free:
Fast-forward almost 250 years, and Zappos finds itself in a similar situation. In an economic context, your economic freedom is reflected in your budget and the ways you’re allowed to allocate it. Having mostly adopted Holacracy, Zappos now tries to solve the next challenge: finding an alternative to the top-down budget allocation process so that its teams will have more economic freedom to pursue economic ventures.
And it ends up with a similar solution: market-based dynamics (MBD). While the idea has been around since at least the 1990s, this is probably one of the boldest attempts that I’ve seen to implement it in earnest. I won’t go into the full details of the system, but highlight one highly relevant principle. At the core of MBD is the “triangle of accountability”:
The triangle of accountability states that any team at Zappos can do whatever they want so long as they remain accountable on each side of the triangle:
- Accountable for staying true to the core principles, behaviors, and mindsets that define us as an organization
- Accountable for continuously delivering beyond their internal and/or external customers’ expectations
- Accountable for breaking-even on its P&L (where costs and expenses don’t exceed its funding and/or income)
The same pattern emerges again, similar to the Enlightenment Kids, Zappos too had to constrain freedom in order to provide more of it.