The Failure of Monoliths

Fred Wilson is a smart man who I respect highly. After all you don’t become successful in the venture capital field without having some clue of what is going on and while I may not agree with him all the time what he says is definitely food for thought. Such was the case with his post today called Bustup Not Bailout where he proposed that instead of propping up monolithic corporate monopolies we need to encourage the bust up of these giants that are too big to fail.

While he was writing this with the current <yawn>crisis</yawn> surrounding the automotive industry in the U.S. I would agree, but I would also suggest that we need to carry this far beyond just the automotive industry. A couple of weeks ago it was GM and Chrysler in preliminary talks about a possible merger now this week it is GM on the verge of bankruptcy. From massive consolidation to a total deconstruction but absolutely no radical thinking thinking on how a giant company like GM could be an industry leader and try something new and different to save the company.

It is as if an attitude of “if we can’t be the biggest and the best then we don’t exist” is the mission statement of every corporation. The old fallback seems to be when in trouble to consolidate everything and make ourselves bigger so we appear stronger. As Fred said in his post

And yet the govt’s answer to our problems is to push for more consolidation. Its nutty. Scale and complexity is the enemy of innovation and what ails most of the large businesses in this country, auto in particular, is a structural lack of innovation in the industry architecture.

He’s right – the government is an equal participant in this concept of bigger is better attitude. When in fact they should be leading the way in encouraging these corporations to look at new ways to ensure their survival.

I’m not sure how many people will actually remember a book called The Peter Principal that was once the bible of business. The premise of the book was that anyone within a company will at some point be promoted up to a level where they are actually incompetent in that new position. I would suggest that this principal could apply to corporations in that they will continue to grow until they reach a point where they are no longer competent to maintain growth and fiscal responsibility.

As a society we have always been led to believe that bigger is better. After all this was the idea behind our whole free market ideology. the bigger we are the more power we have and the cheaper we can churn out the products that make us so big. Even though people like E.F. Schumacher proposed in his book Small is Beautiful: Economics as if People Mattered that we didn’t need to follow this path of corporate growth just for the sake of size and power it was pretty much ignored. However I think that much of what he wrote about in the early 70’s is still applicable today. We don’t need monolithic corporations that have spread themselves around the world like a bad virus.

Even within the tech world that surrounds us it is all about getting bigger. It is all about those small startups being funded by people like Fred being bought up by companies like Google, Microsoft or some other larger tech corporation. It is all about consolidating everything within ever increasing in size corporations. We have become enamoured with things like transparency, brand and sharing everything but to what end as the companies we entrust all this data to are only concerned with what their buy-outs are going to be. In turn companies like Google, Microsoft and other major tech corporations continue to get bigger. No more do we seem to believe in companies being able to come to market with a solid business paln and want to be able to just be a successful business.

But look where this praying at the base of the monoliths have gotten us. We are in the middle of an economic crisis that has been brought on by people running these corporations in all sectors looking to do nothing more than line their own pockets. They have driven these failing corporations into a financial abyss while granting themselves golden parachutes big enough to support small nations. We are paying them to fail and as a result I believe that we have reached the point of the Corporate Peter Principal.

Our current corporate structure is nothing more than legalized executive boardroom theft. It is time for the monoliths to be torn down and a new humanized corporate structure and belief system to be put in place. This is what the government should be encouraging instead of bailouts that aren’t doing anything except make a tiny 1% (or less) of the corporate world a little richer. They should be encouraging corporations to look at new ways of destructuring themselves that benefit both the workers and the consumers. Instead of WalMarting our society so that we constantly expect cheaper quality for a lesser prices because that is all we can afford the government should be encouraging corporations that are willing to change this mindset.

Handouts or whatever you want to call them don’t work. In the end it is the consumers that pay the big price. If corporations need handouts then they are doing business the wrong way and should be looking at ways that they can fix their own mess. It shouldn’t mean though the firing; or laying off, of thousands of people just because the boardroom wants to add a few more zeros to their salaries and stock options. We should be encouraging businesses that aren’t looking for the Google or Microsoft buy-out. We should be encouraging companies that want to be successful with their own right.

I believe that just as we could be at a technological crossroads we are also at a business ideological crossroads. I believe that we need to finally realize that bigger is not better. I would like to believe we don’t need a world where business is goeverned by monolithic corporations.

How about you?