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"The reward for success in most companies is to be able to hire more people"

This is because the more people you manage the more powerful you become, the guy with 100 reports is more valuable than the guy with 20 reports. Those 100 reports could sit in their chairs all day and drool but 100 is always better than 20.

Yes, and (maybe sounds silly), how does that actually work? I mean, companies aren't democracies -- then, how does it matter that one guy has 100 droolers^H^H reports and the other guy has 20?

Is it that everyone subconsciously thinks that "they are more people so they get to decide"?

I don't think this is formalized in any way? (There's no written rule that says "bigger team gets to decide")

This and your other comment in this post are such spot on sage advice and align so well with my own experience I feel we must have worked in the same companies. Thank you for putting words to some things.

Yes and thanks for sharing your perspective as a (former) manager.

I start thinking that many misbehaving managers, would stop over hiring and such bad things, if the organization was able to give them the right incentives. (But how? Hmm, there were some books mentioned in a comment elsewhere, by the author of the article.)

I mean that many managers want to do what's good for the organization, but because of they way things are, they cannot. (Because then some other manager, who prioritizes his/her own career and influence, "takes over everything".)

I wonder what would happen if a company added a rule: Max team size is 10. End of over hiring (well, up to 10)? But would have other odd consequences.

Is there a particular reason you made every sentence into its own paragraph except for two of two sentences and one of three? Made this kind of hard to read.

Intercompany competition is something that's not addressed often enough

I believe they're talking about intracompany competition, actually.

> The reward for success in most corporations is to be able to hire more people.

In business:

1. success => more budget

2. failure => budget gets cut

In government:

1. success => budget gets cut

2. failure => more budget

Not necessarily true. In my company the rule is: 10 offshore devs/testers get nothing done => hire 20, if that that doesn't work, hire 50. The actual work could probably be done by 2 or 3 competent people.

Are you sure your company isn't doing government contract work? I made the expensive mistake of hiring government contractors once. They did a great job of sending me massive bills while accomplishing nothing at all. I fired them and refused to pay those bills. They threatened to sue. I replied I had all their documentation and progress reports that showed they accomplished nothing. Never heard from them again.

I’ve seen that in every sector (.com, .edu, and .gov) — there’s a huge management culture pushing untruths (e.g. “a good manager can manage anything”) and contempt for the actual workers which causes those pathological outcomes anywhere so afflicted. Part of what makes it popular is that when one contracting company produces another 8-9 figure write-off you can blame them and try again with the latest set of expensive suits swearing they’re completely different, but it’s harder to shirk responsibility if it’s people who report to you.

This is more common in government due to politics: if agencies aren’t allowed to hire competent technical staff, the contractors will be poorly supervised but when it fails the same people who cut staffing will use it to argue even more things need to be contracted out. Again, the problem isn’t the sector but the lack of an effective feedback loop.

the lack of an effective feedback loop.

Of course. The feedback loop for government is different from that for business. Failure in business means going out of business. This powerfully incentivizes business to stop rewarding failure. Like when Alexa lost $billions and Amazon cut off its funding.

No such feedback exists for government operations.

Do you mean Alexa instead of Azure?

Yes, thank you for the correction. Azure is Microsoft's!

Feedback loops definitely exist for government: contracts are cut or sent to other companies, agency heads are grilled by Congress and replaced, budgets are cut / reallocated, entire agencies are combined or split apart, and politicians win or lose elections. They're not necessarily as effective as we'd like but they certainly exist.

> Feedback loops definitely exist for government

I didn't say otherwise. I said they were different loops.

I don't think your theory "Company efficient and rewards good work, Government inefficient and punishes good work" holds in reality. From what I have seen most large organizations are full of people that are good at navigating organizations but don't really care about the end product. And they keep hiring similar people so bureaucracy keeps growing. I have worked at Siemens, IBM and now a medical device company and it's been the same everywhere. Enormous amounts of money are spent on things that make no sense and nobody in power cares as long as they look good. And the paper pushers keep growing.

That's why big companies stagnate and fail, and get replaced by younger ones that haven't accumulated all the bloat yet.

But government departments and agencies are never axed, no matter how useless they are.

For example, in the public schools:

1. fail to get kids to meet grade academic standards => teachers get a raise and more budget

2. gifted programs succeed => gifted programs get canceled

That’s not an example, it’s just wrong.

School performance is heavily politicized so many people have an incentive, sometimes financial, to say public schools are failing but what actually happens is what close to a century of research has shown: student performance tracks their household socioeconomic status, but we tend to approach the problem backwards for ideological reasons and see it as “improve school performance to fight poverty” when every bit of data says it should be “deal with poverty to improve school performance”.

Have you heard of Katharine Birbalsingh before?

She's a headmistress in the UK that specifically tailors her school's offerings to lower-socio kids who don't have educated/literate parents at home, and her GCSE results beat out the majority of middle-class schools.

There are some similar examples in Australia too. I know the previous principal of Frankston Primary School managed to get above average AIMS results from a cohort consisting of basically pure white trash.

I guess the point is that, even though this may be true overall, there are clearly examples where excellent schools have thrived in spite of poverty/illiteracy, and tailoring schools to the demographics of the local area could help millions of disadvantaged kids.

Yes, some schools have standout performances. These are usually the result of a very charismatic and driven individual. None have been replicable.

The most famous case is that of Jaime Escalante:

https://en.wikipedia.org/wiki/Jaime_Escalante

The school system worked hard to undermine and destroy his work.

The brutal honest truth is that few teachers WANT to work with disadvantaged kids in the slums.

In my country they are experimenting with giving them a bonus but it just isn't worth it.

If failure is never the school's fault, why do they keep getting more funding?

You have to look at the details: for example, is the enrollment static or do you see things like more students requiring support services which we’ve chosen to put on schools rather than funding through a national health service like most of our peer countries? That one’s especially important when making historical comparisons because the United States no longer excludes special needs kids or tracks lower-performing poor kids into work. Comparisons with other countries are similar - people will talk about countries like Singapore being far ahead but once you compare similar SES cohort performance, the effect becomes much smaller.

Is it the case that the amount of money spent on infrastructure is increasing unnecessarily or because previous generations voted against maintenance until things failed completely?

Is spending going up due to teacher salaries or because the solution to perceived problems is adding more layers of much higher-compensated management who will reliably divert staff time away from education?

Again, I’m not saying that everything is perfect with no room for improvement but rather that there’s both deliberate misrepresentation (e.g. the charter school industry literally banks on this belief) and significant confusion caused by trying to find a cheap fix for complex social problems.

In the public schools, there is zero incentive to educate the kids. That doesn't bring in more money. Failing to educate brings in more money, after all, the laundry list of excuses are all there to justify more money.

That doesn't work in business. You fail, you go out of business. Nobody cares why you fail, nobody listens to excuses.

>In the public schools, there is zero incentive to educate the kids

I can't imagine many teachers feeling this way, seriously. Not everything requires life-or-death financial pressure to encourage excellence.

> I can't imagine many teachers feeling this way, seriously.

Even the most well-intentioned teachers behave according to their incentives.

> Not everything requires life-or-death financial pressure to encourage excellence.

I didn't say everything. After all, I work on D for free. But you simply cannot run an organization with tens of thousands of people in it and expect excellence when there is zero incentive for excellence. It just ain't gonna happen.

Teacher pay is 100% based on length of service and which college degree. Nothing else. Nothing. It matters naught whether a good job is done or not. Even if one wins "Teacher of the Year", it is worth exactly $0.

Financial incentives are not good motivators for excellence. Numerous studies have borne this out. When money is used as an incentive, people start cutting corners.

> Financial incentives are not good motivators for excellence.

Yet they drive the entire economy. They work better than anything else. Other systems have been tried repeatedly that rely on:

1. the lash

2. altruism and ideology

3. threats of going to hell

are pretty lousy motivators.

We're talking about people, not economies. Financial incentives work up to a point, and then they start perverting behaviour. Better motivations for people on an individual level within an organization are autonomy, mastery and purpose, eg. give them an objective that seems meaningful, and give them the freedom to master the skills needed achieve that goal in a way they know works for them.

Nothing works as well as money.

Giving people autonomy, mastery, and purpose can help, but that simply does not scale.

I agree. You know these kids aren't just "variables". You learn to know them, build relationships with them and try to make them succeed as much as is possible. Some people really are quite detatched from the social link.

No Child Left Behind handled #1 by closing failing schools. The problem is that it was designed to close more things than it replaced, so eventually you'd run out of schools. Which is convenient if what you actually want to do is send everyone to private religious schools.

Anyway, this is an example of libertarian first principles thinking. The problem with first principles thinking is that in the real world it's literally always wrong (because there are always factors you forgot about), but that this doesn't convince people to stop doing it, because they know it must be true despite it never in practice being true. Does the profit motive actually stop Google or Uber from constantly doing useless makework projects and releasing unprofitable products?

> it never in practice being true

You mean companies never fail and go out of business? It happens all the time.

> Does the profit motive actually stop Google or Uber from constantly doing useless makework projects and releasing unprofitable products?

Did you read in the news recently that Amazon axed Alexa? Because it was losing $billions?

Besides, it's rarely possible to tell in advance whether a new product line will be successful or not. The thing to do is try it and see. If it fails, you axe it. If it succeeds, you put more investment into it.

It's like a TV series. "Yellowstone" was wildly successful, and Paramount is pouring money into prequels and sequels. "The Time Traveler's Wife" didn't do well, so no second season.

Exactly as free market principles predict.

> You mean companies never fail and go out of business? It happens all the time.

It's true that "if you can't make payroll, the company goes out of business" but anything less unoptimal than that also happens all the time. Individual executives who cause the failures get promoted, bad products with price-insensitive customers/investors live on, unprofitable business lines in otherwise surviving companies can live forever, managers grow their teams for non-economic reasons, customer brands of failed companies get bought and relaunched by anonymous Chinese companies instead of disappearing.

(Wrt this website, capitalism has given former YC president Sam Altman multiple McLarens and a New Zealand apocalypse bunker despite his never having a known productive job in his life.)

> Did you read in the news recently that Amazon axed Alexa? Because it was losing $billions?

That wasn't a rational decision. Amazon started Alexa on a whim, didn't monetize it on a whim, and canceled it on a whim. In a large company, the R&D people who develop products are often walled off from knowing about finances because the execs don't want corporate finances to be widespread knowledge, and so their yearly performance reviews are based on inventing cool stuff rather than if they were profitable or not. So the execs just didn't decide to tell them to do profitable stuff, then got bored and cancelled it instead of doing that. Too bad for anyone who got laid off, but it wasn't their fault.

(It's strange for them to claim it was losing billions though. It sure seemed like they were selling a lot of licenses, and Amazon is usually known for good cost control. Where was it all going?)

> It's like a TV series. "Yellowstone" was wildly successful, and Paramount is pouring money into prequels and sequels. "The Time Traveler's Wife" didn't do well, so no second season.

The TV industry has lots of cost-insensitive customers because most people don't cancel their cable/streaming accounts every month even if they don't use it. So they don't have perfect signals here either.

Netflix in particular is famous recently for constantly cancelling series even if they're doing well. And when something underperforms just a little they also cancel it, when they probably could've invested a bit more to improve it instead. This is actually hurting them because it reduces customer trust, which suggests they really just like cancelling things - or at best, they're irrationally sensitive to the possibility actors might ask for a raise next season.

> anything less unoptimal than that also happens all the time

That's why there's always opportunity for a competitor to step in, do better, and take their lunch. Happens all the time.

> Amazon started Alexa on a whim, didn't monetize it on a whim, and canceled it on a whim

How do you know this?

Besides, I can see from your post that you know how to run businesses better. Maybe you do. I recommend you start one - you'll get rich!

> Does the profit motive actually stop Google or Uber from constantly doing useless makework projects and releasing unprofitable products?

Large companies are like mini-governments with their own kind of politics. We tolerate them because despite all the useless make-work that happens in a large company, we usually find that it's still far more efficient than a bunch of smaller companies would be.

And when a publicly-traded company gets too large for its own good, corporate raiders can step in, acquire it on the cheap and spin off its parts into leaner and meaner firms. The whole process is driven by the expectation of efficiency.

Yup. Look what happened to Kodak and Sears.

This just isn't true. In US public schools both individual and institutional compensation is tied to meeting or exceeding academic standards with sufficient numbers of students.

This is completely false. There is no merit pay. The teachers union makes sure of that.

Yeah, you're just flat out wrong on this one. Google it.

> Google it

That's not a cite. Please cite your evidence.

Hahahahahah! Compensation has nothing to do with outcomes. Great trolling!

In my experience for government:

1. Spend all your budget => equal or greater budget

2. Spend less than your budget => budget gets cut

This applies everywhere.

This feels like an oversimplification: it would be foolhardy for the government to cut funding for e.g. a bridge if it begins to run over, because paying $500M for an incomplete bridge is a significantly worse outcome than paying $600M for a finished bridge.

> it would be foolhardy for the government to cut funding for e.g. a bridge if it begins to run over

Exactly. They failed, so they get more budget. Happens with nearly all government projects. It's almost as if the department/contractor knows that if they fail they'll get more budget. Hmmm...

Having to pay more money to a contractor mid-job is also a common theme in free-market home renovations/construction because the same incentives exist for the homeowner as they do for the government in your example. How has the free market solved it using tools the government refuses to use?

People experienced writing these contracts don't have those problems.

I've hired contractors to renovate. They get paid the contractual amount if they complete it. If they fail, they don't get paid till they fix it.

It's not rocket science. See this thread for what happens with Boeing and their customers.

The free market solves this problem by a thing called "Contract Law" which is enforced by the courts.

8% of construction projects from major companies ($5 billion+, publicly traded) are either on-time or on-budget. Obviously a smaller number are both.

If you can really solve this problem, you can make a ton of money.

Meanwhile, non-trivial projects with clauses like yours are less profitable and therefore tend to be the first delayed when resources are scarce. Which they frequently are. Unless you overpay by default. After all, "on budget" doesn't matter if the budget is 100x what other people are being quoted

Meanwhile, how you described Boeing contracts doesn't seem plausible.

I used to work for Boeing. You can also see it in the local paper what happens when Boeing fails to meet a contract.

> Exactly. They failed, so they get more budget. Happens with nearly all government projects

No it doesn't. Programs are cut or cancelled outright all the time. The important question is not whether they're failing or succeeding but whether they're believed to be necessary. Projects that are necessary get more funding if they are failing, like schools. Well duh.

Projects that are succeeding and have budget left get trimmed. Again, duh.

Projects that are unnecessary or no longer necessary get cut regardless of budget.

That's just good governance. The same pattern happens in the economy.

> No it doesn't.

How about those zillions spent to eliminate homeless encampments? They're spending something like $50,000 per homeless person. Hasn't put a dent in it. What is happening?

More budget! It's called the Homeless Industrial Complex for a reason.

> Projects that are necessary get more funding if they are failing, like schools

Yup, failing means more budget!

In which case, it seems like your blame is misplaced: the government is not particularly guilty of waste (although not innocent either), but is instead is mostly powerless to prevent private contractors from abusing the public's interest.

> the government is not particularly guilty of waste

Sorry, but LOL. For one fine example, the cost of a NASA launch vs the cost of a SpaceX launch.

> is mostly powerless to prevent private contractors from abusing the public's interest.

The government? Powerless? The government writes the contracts. There are a vast array of regulations specifically aimed at government contractors.

I'm talking about bridges. Depending on political proclivities, anybody can find an example of government waste to suit any particular argument.

The observation is very simple: if the government estimates and allocates $500 million for a bridge and finds a contractor that claims to be able to do it for that price, there's very little reasonable power we can grant them to make the contractor meet their claimed budget. We could allow the government to throw contractors in prison for bilking them but, well, we already allow that (and it doesn't recoup the costs anyways).

Regulatory capture and special interests seem to be the bigger problem here. Complaining about NASA without considering why the government so fecklessly pays Lockheed Martin et al. billions a year is short-sighted.

> anybody can find an example of government waste to suit any particular argument

True, as those examples are everywhere one looks.

The trick is to find one that is efficient.

> he observation is very simple: if the government estimates and allocates $500 million for a bridge and finds a contractor that claims to be able to do it for that price, there's very little reasonable power we can grant them to make the contractor meet their claimed budget.

Yet private companies contract stuff out to other companies all the time, and the contracts get done on time and on budget. For example, take Boeing. Boeing gets a contract from Delta to build, say, 50 airplanes for $5 billion, to be delivered on June 1. Every day Boeing is late, Boeing pays the airline a penalty. If Boeing runs over budget, Boeing eats the difference, not Delta. If Boeing fails to deliver Delta 50 airplanes, Boeing pays a big penalty to Delta.

Now, if Delta wants to change the spec after it is signed, well, they gotta pay Boeing. If Delta doesn't pay the bill, they get sued by Boeing. If Delta wants to reduce the number of planes they contracted for, Delta pays a penalty.

See how that works?

And Boeing does their damn-dest to be on time and on budget.

Very often contractors come in over time and over budget in private sector as well. I've cleaned up after contractors who have done it, and we've done it too. There's nothing magical about the private sector, it's the exact same problem. Do you want 4/5ths of an app that no one else will figure out how to finish in a reasonable time, or do you want to pay us more than we asked to finish? The choice is obvious, predictable, and observable if you've ever been involved in contractor relationships.

Oh, I have been involved in contractor relationships. If I don't meet the spec on time, I don't get paid.

I've also watched contractors who are paid a $$$ bonus for every day they are ahead of schedule. It's amazing how fast they work. I remember one group that received $10,000 each for delivering on time. This was back in the 80s, when that was real money. There was no way that project was going to be late.

May I suggest your outfit hire better contract lawyers.

Do you recall after that earthquake in LA the city hired a construction company to rebuild a freeway interchange that collapsed? They offered ONE MILLION DOLLARS PER DAY to complete it ahead of schedule.

The contractor broke all records and got it done months ahead of schedule. Everybody was happy.

Isn't it amazing how that works?

We don't hire contractors, we are contractors. And we are hourly. Not interested in getting $3/hr because the shit is much harder than you/we thought.

If you are paid hourly, what happens when you stop progress? I bet the money stops. Being paid hourly means you're going to be closely monitored.

Sure, but we aren't talking about them not working, we're talking about things getting done on time "or else."

> In government: > >1. success => budget gets cut > >2. failure => more budget

So the US military has been failing for 70 odd years then?

Since the Korean War, yes, that sounds about right.