Even with this infighting and whatnot going on Amazon is still doing amazing things. I'd be interesting to see what it'd look like if they were able to execute everything well.
It seems that's also a crucial role of the exec - if they see something that needs to be happening and it's not, they need to get in there make the necessary changes.
There is a theory that gets posted here from time to time that As hire As and a few Bs that get through the filter, Bs hire Bs and a few Cs get through the filter, and so on down the line until you have hired people you really shouldn't have.
The other theory is promote until incompetent.
My guess is much more mundane, when you hire middle management they act like middle management. Which works as long as Their sphere of responsibility and control is well defined. When you need to cross cut concerns middle management actively fights against it. All most like using inheritance for code reuse and having deep inheritance hierarchies.
Additionally, managers are human, and will make mistakes. Often it's like the frog-in-the-pot story--you don't notice the little mistakes, only the sum of their results.
I suppose the answer is "yes," given that MS seemed to manage with a minimal number of middle managers, at least based on the Joel Spolsky story shared elsewhere in this thread.
Middle management is really dangerous for this reason. Managers effectively are stuck with blinders; their one and only job, and often the only thing they know how to do (frequently through surreptitious or less-than-stellar means), is to keep their team and/or department sitting pretty in terms of normal company metrics. This correlates both to the resource allocation given a team and the rewards allocated specifically to the individuals that comprise that teams (including the manager, of course), which is why people appreciate "good" managers, until something unanticipated comes up and is killed by this rigid process.