I think you miss what, in my opinion, is the most relevant point: The collaboration phase doesn't change the splitting phase, they are independent.
That means that never mind what you did in the collaboration phase, what decide the result in the splitting phase, is your place in the hierarchy.
Of course, that leads to those low in the hierarchy investing less, as they know that, never mind what they invest, what decide what they will get is the hierarchy that is already decided.
Most businesses do not do this. They rely entirely on decisions from higher up, which are often uninformed about small-picture things, even if they understand the big picture.
If the business has solid fundamentals and basically needs to keep making incremental improvements and watch the money roll in, almost any management structure will do it.
But if a business has needs exit a market with poor fundamentals, and that requires them to close factories, end product lines and fire people? The people getting fired won't be happy about that. So if your management structure requires their consent, you're going to have a bad time.
> They rely entirely on decisions from higher up, which are often uninformed about small-picture things, even if they understand the big picture.
That's the thing.... you can't really understand the big picture without understanding the small one. We lionize Bill Gates because he often knew more about about the details of software decisions than the low-level employees who presented plans to him.
Maybe people are defending hierarchy because it's worked reasonably well in many different parts of their lives? Are there any large, successful businesses that aren't hierarchical? What about large governments?
Not really. Its good for applying established processes and resisting change, which includes being good at making quick decisions on situations that have been anticipated (but, also, often very bad at making quick decisions outside of the realm of pre-considered possibilities.)
Now, hierarchy may not produce the most correct decision making, but it does produce decision making (not even "quick decision making", just "decision making"). Nonhierarchical organizations can't guarantee that. I also think there are large categories of business, design, marketing, or engineering decisions about which groups might never reach a consensus because each position is true and correct and attainable in isolation, but are not attainable when combined together.
I strongly believe that good engineering is all about optimizing compromises, and that it's irrational human nature for us to even think that "no compromises" solutions to any nontrivial problems even exist. We might convince ourselves that the compromises we're making don't matter, but all that does is help hide a potential source of future problems. Compromise isn't a dirty word in engineering, or at least it shouldn't be.
That's what having a hierarchy gives you- a way for people to argue their position as strongly as needed, an understanding that it's natural for people to focus on different ways of looking at the same problem and coming to conclusions that are simultaneously correct and incompatible, and a mechanism (the hierarchy) that ensures action by either enforcing compromise or just picking a winner in situations in situations where a decision must be made but more than one correct but incompatible solution is being fought for within the group.
Organizational structures without hierarchical authority structures, e.g. network models, don't necessarily rely on consensus; they may well have distributed authority where decisions can be made at the point in the organization where the issue is encountered, rather than being kicked up a hierarchy until it reaches someone authorized to make it.
> Now, hierarchy may not produce the most correct decision making, but it does produce decision making (not even "quick decision making", just "decision making"). Nonhierarchical organizations can't guarantee that.
I don't see any evidence that that is particular true of hierarchy as opposed to non-hierarchical organizations. Hierarchical organizations are certainly not incapable of analysis paralysis; having a hierarchy doesn't guarantee a decision.
Hierarchies might promote consistency in the decisions that do get made, but that's a different issue.