Businesses in our country and most others are managed in the same way that medieval fiefdoms were centuries ago. Managers up and down the chain of command have nearly absolute authority to hire, fire and direct the activities of employees, so long as this is done within broad regulatory boundaries, within company policy and within the wishes of those higher up the company chain of command. When we hire-on, we swear allegiance (remember that employment agreement?) and surrender freedom. In exchange, we gain some degree of economic protection and sustainability.
It works, but not well enough and someday this way of running a company will be relegated to the history books. Sociologists and management professors will ponder for years, how direct rewards throughout the chain of command ensured authoritarian rule in business would persist for centuries, even though it had been proven grossly inefficient as a structure for government.
During the past 250 years, we have seen nations transform into various forms of representative government. Citizens of these countries are more free to go about their business, and as a result, we have seen the rise of innovation and commerce. While it is true some innovation will happen no matter what form of government we live under, it is virtually guaranteed the fastest and most robust innovation occurs in a free society. Clearly, centralized control and lack of freedom are impediments to innovation and commerce.
Now rewind to the days of authoritarian rule in Europe. If we could go back in time and suggest to the the King, the monarch, the duke, lord… that nearly everyone would be better off (except for the dictator himself) if decision making was shared and everyone enjoyed a bit of personal freedom. His nation state would become far more powerful by handing power and decision authority to the people. What are the chances that he would go for it? Nada.
We see the same thing today. Even with visible proof of the economic power of free societies, we have dictatorships and authoritarian ruling parties clinging to power in North Korea, Cuba, much of the Middle East, Africa… all surviving on the backs of their people whose freedoms are restricted in order to perpetuate the present regime. Ruling elite give up only when forced to or when there is nothing left. Their people are stuck in dire economic conditions.
Business Executives profess their adoration for free society and free trade. And still, with this irrefutable macro economic evidence laid out before us, they operate their own businesses with authoritarian rule and closed borders.
And this is why it will end. Some people, perhaps a few random groups bound by common interest, are going to band together into companies that fulfill all the legal definitions of a corporation and yet they will organize themselves and produce value in ways that absolutely defy current assumptions about “business management” by authoritarian rule.
Why will this happen and how will these new bands of economic freedom fighters succeed? Because these new companies will produce more economic value, faster and more efficiently than any other form of business management. And therefore, they will become more economically powerful than any company the world has yet seen.