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Comment by coffeemug | Hacker News Reader

Could you explain this more? Who are the operations people? (finance? HR?) Who is the money side? (product? sales?) How exactly would "operations people" have leverage if they knew how the "money side" worked? Like, what specifically would they do? Also leverage over whom? And ultimately, couldn't whoever all these groups eventually report to (the CEO but possibly lower) resolve all this by firing some people?

I don't have a good model of how these things work. I encountered it first hand, but couldn't develop a good model after a long time of thinking about it. Tons of things happened that I didn't understand at all, and I couldn't understand why higher-level people wouldn't just resolve it.

Help understand this better?

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The way I was thinking of it:

- The 'operations people' / 'workers' ('the competent' in the post I was replying to) are the actual work-doers who create the company's product or provide the company's services.

- The 'money people' are the people in financial and managerial positions who deal with money coming into and out of the company, and who make the financial decisions.

Usually the latter, who know how much people are paid and how much the company makes, take considerable pains to withhold this information from the former, who have specialist skills but are often not business savvy. This is because the company's profit comes from creating as large a gap as possible between the income that the company makes and the wages and other expenses that they pay.

In a small company this information is directly withheld from the staff, but they tend to have some idea. This is part of why small companies tend to either pay better than, or have smaller margins than, large companies.

In a large company, part of the purpose of middle management is to isolate the money people from the operations people so that the operations people don't find out how much they're actually worth to the company. If you find out that you're getting paid $100 to make $10,000 for the company, you're going to be pissed, and either demand a pay raise or leave.

Edit: To be clear, I don't mean to say that middle management are stupid, by any means. Part of their role is, however, ignorance (wilful or imposed, feigned or genuine) of the company's financials.

This model doesn't quite make sense to me. The layer of idiocy is extremely expensive-- not only do you have to pay their salaries and associated operations costs, but they also introduce enormous inefficiencies. Everything moves slower. It's hard to find important information because it's lost in a sea of bullshit. People make locally optimal decisions that are suboptimal for the company.

The costs of all this are enormous. Is maintaining this army really cheaper than just handing the reigns to ops people and paying them more in proportion to their increased leverage?

Yes, because it also makes the ops people easily replaceable. On a small scale you can have a tyrant sys admin controlling a company, but on a company scale, nothing is more terrifying than someone other than the CEO being in control

Why does eliminating the bullshit layer mean enormous amounts of power have to be concentrated in any one person's hands? You can hire two sysadmins.

There cannot be two tyrants. Two sysadmins in, one sysadmin out.

It's not a layer of idiocy - that's a common misconception (which I didn't help with, tbf) and unfair to good middle management. What it is is a layer of isolation. And they do also serve another real organisational need, to help coordinate the workforce. Without such a structure, organisation cost is O(N^2). When your business model is paying smart people $X to build a thing, then selling the thing for 10 * $X, you can't let the smart people know that the thing is sold for that much or they'll start demanding more money (or quit and start their own competing company selling a better product for 4 * $X.)

Money side is like a mini-VC like ecosystem inside a large corp; people on the money side spend the money in whatever ways they need to maintain their little fiefdoms. Additionally, and with their new found power, they'll layer in a bunch of morons to prevent operations people - who's sole job is to eliminate inefficiencies everywhere - from understanding that the money side is basically a giant game.

If the operations people ever fully understood how badly the money people are fucking things up, they'd have leverage to use against the players on the money side and it'd be game over.

It's a way to establish power and extract value out of what would otherwise be a more efficient company or system, since those efficiencies don't benefit you directly. The company might do better but your incentives align in a way to extract value from it. If the customer gets burned, or poor quality products get launched, the feedback mechanism is broken. Consolidating power and crushing the competition is more tangible than anything the business actually does.

Which is why stock compensation was expected to help this, at least in theory.

> It's a way to establish power and extract value out of what would otherwise be a more efficient company or system, since those efficiencies don't benefit you directly. The company might do better but your incentives align in a way to extract value from it

This is a fancy way of saying corruption. Twisting the system to be used for your own ends, be they strategic, or just straight-up cash-in-my-pocket, is corruption.

Operations workers can see the daily inefficiencies and profit from them, or inject themselves into processes and decisions in ways that will benefit them. Adding a layer of moron/process/politics slows or halts this bad behavior, at the cost of increased overhead and inefficiency.

Sounds like an abridged version of The Gervais Principle.

I take that to mean, people in ops using their ability to bring the company to a grinding halt by turning off all the infrastructure with the aim of extracting things like better pay.

The most powerful force for reform is talented and skilled people finding ways to make money that isn't subject to the games played in large bureaucracies. As they do other things, those other things outcompete the big bureuacracies and those bureaucracies either adapt (thus reforming) or wither away (thus getting replaced by something better).

The problem with this is that government is easily swayed by megacorp money. That money actually creates additional regulation, first by spooking people into thinking the megacorps need to be reined in then by using their influence to ensure the congresscritters hungering for megacorp attention create regulations that are more damaging to industry upstarts than to megacorps that currently dominate their industries. As a result, all these business regulations end up strengthening the hold of industry dominators over their industries, and they just find ways to keep their games going, serving goals wildly different from what most people imagine they really serve. As a result of those regulations being so crushingly bad for small industry upstarts and basically just a drop in the bucket for megacorps, the businesses that could have unseated the current kings -- with an influx of great talent leaving the megacorps -- end up being ground up by regulatory costs until they give up and get bought out by the megacorps, then destroyed or absorbed into efforts opposed to the companies' original high ideals.

Once in a while, someone manages to break through the competition glass ceiling, but usually it's at the cost of selling the soul of the company's original vision and becoming exactly what they originally meant to make obsolete.

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