Gervais / MacLeod 5: Interfaces, meritocracy, the effort thermocline, and a solution.

Today, I continue my analysis of the MacLeod hierarchy and the Gervais Principle. (See: Part 1, Part 2, Part 3, Part 4.) I’m going to analyze the interfaces between the three MacLeod tiers in order to tease out the magic that makes it all work. How do three disparate types of people get along seamlessly? What prevents the existence of the Sociopaths and Losers from “cluing in” the Clueless?

In doing this, I’ll also analyze the concept of “meritocracy” in the corporate world. Every company seems to think its internal mechanics are meritocratic. VC-istan sees itself (despite the heavily manipulated market) as the ultimate in meritocracy. Is there truth in this? That I’ll address.

The Loser/Clueless interface: differential social status

The separation between the Loser and Clueless tiers comes down to differential social status (DSS). Here, “social status” includes not only in-crowd membership and popularity, but also the hard currencies: job titles, division of labor and compensation. Based on work experience, education, and negotiation skills, people have certain “market levels” of social status that they can expect to get in a new company. The difference between what a person has at a current job and what she can get on the market in a new job is DSS.

It’s not uncommon for a person’s DSS to become negative, when she improves faster than her company allows her career to advance. She can improve her standing by finding another job. In fact, in slow-to-promote organizations, negative DSS becomes common over time. “Familiarity breeds contempt.” This may explain why most organizations do a poor job of promoting from within– they have a systematic tendency to downgrade their own people relative to outsiders, the latter being untarnished by years of political fighting. People who grow “too fast” for most companies become used to negative DSS and underestimation, and end up with a “job hopping” trajectory.

That said, most people will have DSS close to zero. Relative to the noise factor inherent in taking a new job and the tendency of social status toward illegibility, whatever they have effectively a rounding error. For our purposes, we will say people with such close-to-zero DSS have “zero DSS”. Losers, when they play social games, tend to form in-crowds that don’t matter, such as the “Finer Things Club” and the “Party Planning Committee” on The Office, but these have no effect on compensation or division of labor. They’re diversions, and they don’t generate meaningful DSS.

There are three common things that will create a non-zero DSS. The first is for management to recognize someone formally with a job title or promotion, which creates positive DSS if management takes the accolade more seriously than the external market would. The second, which generates negative DSS, is for a person to be embarrassed or develop a negative reputation among colleagues. (If that person gets a negative reputation with management, she usually just gets fired.) The third source of DSS, probably most painfully common to my readers, is for a person to improve without it being recognized. This person’s DSS goes negative not because of organizational adversity, but because the organization refuses to allow someone to advance at the rate at which she actually improves, leaving her in a role and on work that’s below her frontier of ability.

Most corporate denizens aren’t noticed in any special way by management or their colleagues at large, nor do they improve fast enough to generate the third category of DSS. The result is that it’s most common for a person’s DSS to be close to zero.

Organizations have a love/hate relationship with DSS. On one hand, it’s a means of self-definition for the organization, and a way to motivate people. Those with positive DSS are going to behave like owners, because they’ll experience a drop in working conditions, compensation, and quality of work if they lose their jobs. Those with negative DSS serve a pariah or “omega” function: a way for an organization to state what it dislikes. DSS gives organizations a banner and a way to proclaim their values by promoting those who exemplify them. On the other hand, DSS is unstable. People with negative DSS will leave, of course. Regarding positive DSS, Sociopaths and Losers, when they find themselves with it, will usually try to parlay that into persistent, outside-of-firm social status and improve their long-term career prospects. If you’re strategic and have positive DSS, this is what you want to do with it: convert it into something that’s not contingent upon one organizational role. This improvement of their external alternatives reduces that positive DSS.

With the concept of differential social status well-understood, we can approach the Loser/Clueless interface. Losers have DSS right around zero, like most people. They could get other, equivalent jobs. What keeps them loyal and in-place isn’t the economic superiority of what they have, but the fact that they prioritize comfort and stability over the potential for gain. Additionally, when Losers get positive DSS they will, because they are strategic, convert it into genuine improvement of their overall career standing. One of the most incredible moments in The Office is when Pam, a receptionist converted into an unsuccessful saleswoman, uses the organizational “fog of war” following a management takeover to invent a new job for herself– a salaried Office Manager role. Pam is a MacLeod Loser, but a smart and very strategic one who uses her positive DSS (being married to “rising star” Jim, and having been with the company for much longer than the new management) to get improvements that actually matter: a better job title and more pay. The result of this is that Losers don’t tend to build up a bankroll of DSS. They convert it into forms that are more persistent and useful. If they can rise to a higher level in the organization, they do so and become Losers there (which is better than being a Loser at a lower level.) Clueless, on the other hand, will build DSS because they never cash it in.

It’s the Clueless who climb ladders, pay dues, and take on additional responsibilities in order to develop positive DSS, which they perceive as a two-sided loyalty. Venkat Rao argued The Office to be the first American workplace drama to peer into the world of the Clueless. I disagree. Willy Loman, in The Death of a Salesman, is the archetypal literary Clueless. Loman is a true believer in the importance of being well-liked. He builds up a bunch of relationships that, in the end, don’t matter and won’t save him. The loyalty is not reciprocated. He fails to convert his transient DSS into something more stable and, as he ages, it goes away.

So, how shall we separate the Loser and Clueless tiers? Losers, in general, do not exert themselves to build up positive DSS. When they get it, they attempt to convert it into something less contingent and more permanent. Sociopaths pursue DSS but only as a mechanism to rise to the top of the organization, which means they cash it in likewise. Clueless, apart from Losers, are those who sit on a fat bankroll of untapped and local social capital. They keep their DSS as it is, being true believers and wanting to show personal investment in the company. So what differentiates Losers from Clueless is a persistent pattern of nonzero DSS.

The Clueless/Sociopath interface: the effort thermocline

More interesting than the Loser/Clueless interface is the one that separates the Clueless and Sociopath tiers: the effort thermocline. Low in the organization, jobs get harder and more demanding as one rises the ranks. Salaried office workers work harder than hourly employees. Middle managers often work harder than the people they supervise, having more to lose. In the Loser and Clueless tiers, each promotion means higher standards, longer hours, and less job security.

There’s a level at which the jobs stop getting harder with each step up, and start getting easier at a rapid rate. Middle managers, in most organizations, are glorified grunts with front-man responsibility for meeting deadlines and deliverables, but no authority to define them or set priorities. However, there’s a level in each organization where the perks of the job include autonomous control over the division of labor and an extremely lenient performance evaluation process. It’s the “good old boy” club of upper management. It’s the level at which the top brass say, “Welcome, you can breathe now.” This group can be clubby and petty like any gossip-ridden small town, and this can make life within it very stressful, but judgment based on effort and sacrifice end.

The separation between these two worlds is the effort thermocline. That thermocline is the highest that a typical organization will allow someone to rise by working hard. It’s the top of the Clueless tier, the bottom of the Sociopath capstone, and if it’s serving its purpose well, it’s a one-way mirror: opaque from below, transparent from above. Executive Sociopaths, from the other side of the thermocline, appear (from below) to be working hard. Because they control not only the division of labor but the physical space, they can manufacture the image of high effort and investment while they enjoy the comfort of a private office and take the “fun work” for themselves. Losers, to some extent, know what’s up, but they’re so far from that theatre that they don’t really care about it on a day-to-day basis. The veil is for the Clueless, who must be tricked into seeing superior Cluelessness when they look up.

The purpose of the effort thermocline is to create an image of effort-based meritocracy at the bottom. This ruse makes people work hard, and it also creates social stability because people aren’t too eager to rise. Most Losers genuinely don’t want their boss’s jobs, because they realize they’ll be expected to put forth 50-200 percent more effort in exchange for about a 20-percent pay raise. Most Clueless see their bosses as superior– more talented, more experienced– and consider themselves ineligible (at least, at the time) for the roles above them. The only people who expect to rise rapidly (skipping the demanding middle ranks if possible) are the Sociopaths. As soon as they have something to trade, they look for a market.

Above the effort thermocline, being seen as hard-working isn’t especially important. In fact, it can be detrimental. If you have to work 12 hours per day, you’re probably inefficient. Sociopaths see the sacrificial lambs in the Clueless tier as chumps. Sociopaths actually “get” organizational politics. They understand that their progress within the organization will be based not on how much of themselves they put into an impersonal, organizational meritocracy (that doesn’t exist) but on how well they trade assets with important individuals. Effort is just one asset; credibility, relationships and information are often more important, and often easier to attain.

This enables us, as well, to look at some differences between the true Psychopath and the Technocrat (“good Sociopath”). The most successful Clueless have an unconditional work ethic, while Psychopaths and Technocrats are all about working smart. They define that a bit differently, however. Psychopaths like to manipulate people; Technocrats aim for improvements and genuine efficiency. They’re both hackers, but they enjoy different kinds of hacks.

Organizations that are going to generate MacLeod classes (and I will argue, later, that they need not necessarily do so) rely heavily on the effort thermocline. It’s the spine of the organization. Just above it are the lowest-tier Sociopaths who get direct information from the base of the company. As the executive suite’s filter, they have an enormous influence over what information is presented, when, and how. Top-tier Clueless could have this power if they wanted it, but their earnestness prevents them from seeing or exploiting the editorial control they could exert. To them, furnishing information is a duty, not something to be selectively performed. Thus, the information flow into the upper ranks of the company will generally come from the Sociopaths just above that thermocline, who perform the first filter.

Top-tier Clueless provide an obvious benefit as well, which is that they set the pace for the world below them. The most dedicated, productive Clueless are held up (at least superficially) as role models for the organization. Additionally, they take final responsibility for operational issues. Low-level Losers can blame circumstances for failures, nonproductivity, and mistakes. If the Loser’s computer breaks, he can sit tight and wait for IT to fix it. The perk of being a Loser is that the organization is tacitly responsible for maintaining your work conditions. Sociopaths cleverly define their jobs so as to have no hard responsibilities or deliverables. It ends up being the Clueless who are held responsible for keeping the lights on, resolving communication difficulties, and doing the ugliest work.

Technology, VC-istan, and meritocracy…

In my last post, I discussed the pseudo-meritocracy of VC-istan. What makes VC-istan successful is that it generates a context in which highly intelligent people can be rendered Clueless. When the ruse is new, peoples’ psychological immune systems haven’t formed yet and the smartest people, who would converge to MacLeod Loserism or Sociopathy in a normal corporation, can buy into it. Free markets are, on their own terms, meritocratic. The heavily manipulated market (by VCs and acquirers) looks like such. What makes VC-istan so brilliant is that the effort thermocline is extra-organizational. It’s not an organizational promotion that launches a person beyond the veil. It requires getting an entirely different job description.

For hard technological work, the MacLeod hierarchy is clearly dysfunctional. Losers are good at delivering grunt work reliably, but it tends to require a large number of them to do a major project. In technology, the result of this is intolerable communication overhead. Clueless tend to solve the wrong problems, unless micromanaged. Sociopaths, if they turn “black hat”, are outright dangerous. Whatever it is that causes the MacLeod hierarchy to emerge, the technological world would do well to eliminate that.

VC-istan’s pretense is that it has eliminated or obsoleted the MacLeod hierarchy, which is clearly dysfunctional. That’s actually not the case. The hierarchy has re-emerged. The solution is disposable companies. Sociopaths, as anywhere, find ways to trade social assets at a profit and become the major players. Many are not investors or “tech press”; in fact, I would guess that most of the Sociopaths are executives who’ve cultivated relationships with investors and can get themselves plugged into de-risked companies with absurdly high compensation. Clueless are the ones who suffer all the pain and risk. Losers are unemployable. Over time, this Loserlessness (despite the fact there’s a lot of losing going on) bifurcates the Clueless caste into Clueless-Losers and Clueless-Sociopaths. These mid-grade classes exist as Clueless rapidly become clueful, but are generally transient states. Clueless-Sociopaths are the ones who will readily screw their colleagues over but still believe that “delivering” is more important than acquiring credibility and trading social assets. Clueless-Losers are the ones who keep faith in the lofty “vision” (read: marketing) of their companies but have learned to tolerate subordination and are gradually realizing that their future and their firm’s (or VC-istan’s) will diverge.

With all this, the MacLeod hierarchy seems to fly in the face of the high-minded concept of meritocracy. In fact, MacLeod organizations are meritocratic not only on their own terms, but on multiple sets of terms. Losers, in general, don’t care either way whether their organizations are meritocratic. They can see the lie, but it doesn’t upset or anger them, because they don’t care to play in the higher leagues where the lie is in force. However, the differential social status of the Clueless, in addition to the opacity of the effort thermocline, create the appearance of a meritocracy from a Clueless position. That keeps these “useful idiots” happy and striving. For their part, Sociopaths also perceive a meritocracy, if only because they define merit as “what you can get”. To a Sociopath, the idea that there would be any definition of merit other than raw power, status, or money is laughable.

This leads me to a brief exploration of what I call localism and globalism. I borrowed it from machine learning and mathematical modeling. A global model is one that imposes underlying structure and uses that for prediction, while a local one uses nearby data and discounts distant observations. For example, if one were to predict average annual temperatures of geographic locations, the tendency for polar locations to be colder than equatorial ones is a very strong global feature. If you were to predict temperatures based on only one variable, latitude is what you’d use, and it would serve well for the majority of places, but not all. On the other hand, local data has value insofar as it can capture variations (altitude, ocean currents) that are specific to small regions. Rome is very warm for its latitude because of the Mediterranean Sea and the Gulf Stream; Lhasa, quite cold because of its altitude and continental location. Ultimately, the solution to most complex problems is going to require a mix of local and global approaches.

The age-old debate between planned and market economies is related to this. Socialism is an approach that sets social-justice standards (“no one should be without appropriate health care”) and expects to apply them globally. Central planning imposes globally-oriented solutions on a diverse world. (This is one of the reasons why Marx believed communism needed to be worldwide.) Capitalism allows individuals to exploit local information for personal profit, with the desire, because such exploitation will require trade, that some of the surplus will be dissipated into society in the process. Neither of these two approaches, standing alone, is adequate. Societies, it turns out, need both. Laissez-faire capitalism tends to diverge into undesirable states when power disparities reach a certain critical level of self-perpetuation. Without some wealth transfer back into the poor, absolute libertarian capitalism devolves into oligarchy and, as it perpetuates itself across generations, aristocracy. On the other hand, outright command economies cannot make use of the wealth of distant, local information out there and stagnate, in addition to becoming extremely corrupt. In either case, the elite becomes a locality that is both incapable of solving global problems or serving other localities, and disinterested in doing so.

Corporate organizations are an interesting beast, in this light, and it’s useful to assess how the MacLeod Clueless and Sociopaths approach them. Ultimately, the corporation’s purpose is to provide some of the security of socialism while serving a capitalist purpose on the external market. Policies are set to impose fairness constraints that are held to be global up to the extent of the organization. The corporation takes on the hard, dirty work of competing on a tooth-and-claw market, but internally, it’s supposed to provide its employees with the comfort of a well-run, stable command economy in which the demands on them and their compensation will be regular and reasonable. This is the risk transfer that Losers tolerate, which is why they can’t be considered actual “losers”. Their low compensation (from an expected-value perspective) is due to the premium they pay for this comfort and abstraction. What corporations create is a story of internal globality. Most importantly, employees get a guaranteed minimum income based on the value of their skills.

The World is big and unwieldy and heterogeneous and scary. It’s a chaotic mess. Corporations intend to create order within the mess, and leave interaction with the scary Without to an exalted caste (in truth, comprised mostly of rent-seeking Sociopaths) called “executives”. They’ll handle that stuff. Employees can live in comfort and stability.

An analogy for this might be a cruise ship, which provides the comforts of a hotel in an environment where most people lack the skills necessary to survive. Losers are happy to remain above-decks. They enjoy the abstraction. Clueless, on the other hand, want to graduate from passengers to drivers. They’re willing to deal with bilge pumps and engine rooms. They want to “learn the ropes”, as if such objective principles existed. Although they are the actual (unwitting) muscle of the company, Clueless have a childlike eagerness to become “adults”, failing to recognize what Sociopaths already know: there are no adults. In the corporate world, there is no “God”. You get what you can get.

It’s the Clueless who believe in objective corporate policies, enforce written rules because they are rules, and sustain the fiction of a globalist meritocracy where talent within the organization will always be allocated toward its best use. Sociopaths, on the other hand, tend to be aggressive localist players who already comprehend that the best way to “get ahead” is the old-fashioned, localist, way: trading favors, peddling influence, and leveraging information. Clueless believe in a paternalistic, globalist system that will take care of everyone, and intend to gradually grow into a “leadership” role. Sociopaths focus on the local problem: moving themselves forward by exploiting features and people that are close to them.

Neither localism nor globalism is innately superior but, strategically, the localist approach is bound to be more successful within the modern corporate organization. Sociopaths can be either localist or globalist in orientation but, in the workplace, they take the more effective localist approach. Sociopaths win because, ultimately, the “global-within-local” concept is, in most corporate organizations, fictional. The people running these companies have no real stake in the globalist fairness constraints put forward as the organization’s values. The real dominating behavior is localism.

For one example of the ruse, let’s consider the legal obligation of corporate executives to represent the immediate financial interests of shareholders, even if the action taken is socially irresponsible. That “obligation” doesn’t exist. It’s a fiction, designed to give what these Sociopathic executives want (aggressive, self-promoting localism) a globalist spin: it’s just the law. The Clueless buy into it, and believe that “the company” is doing all these bad things because it has no choice. What is actually happening here is that executives have figured out that there’s profit to be made in taking a localist approach, and they want in. Executives are supposed to be the fair stewards of a fairness-and-process-oriented (i.e. globalist) organization dedicated toward capitalist purposes, but they become localists within them. Managers and the more adept employees have caught on to localism as well and taken up a strategy of careerist job-hopping instead of loyalist dues-paying. Good for them, too. They get it. The result of this, on the large scale, is the breakdown of the Clueless-o-polis of the paternal organization.

Transcending the MacLeod hierarchy

The MacLeod hierarchy emerges because of a tension between globalism and localism, and the tendency for globalism to be implemented half-heartedly. People who are rich– here, I’m not talking about financial wealth so much as risk tolerance and the ability to withstand intermittent, short-term failures– want the localist right to exploit information (opportunities for profit) as soon as they discover it. Among the rich, there are those who intend to take the high road (Technocrats) and make the world genuinely better, and the degenerates (Psychopaths) who will exploit anything, even if it’s a negative- or zero-sum cost externalization. Those who are poor and don’t have the resources, capital, credibility or connections to survive a failure prefer the safety net provided by a globalist institution, whether it be a large private company or a government. The Losers are the poor who understand the trade (and defect if the organization shows malevolence or extreme incompetence) and take part, because they prefer or need stability. The evil of such organizations is not that the risk transfer exists and that the poor are rewarded “unfairly” by losing in expected-value terms– that is basic finance (here applied, additionally, to non-financial assets like social stability and credibility). It’s that the Psychopaths at the top of many organizations will do anything possible to drive the exchange rate (not set by a fair market) on this risk transfer as far out of whack as they can get it. The end-state is an organization where the low-level Losers get almost nothing in the way of risk reduction, but give up a lot in terms of compensation and advancement potential (that might enrich them and bring them out of involuntarily Loserism).

My contention is that the MacLeod hierarchy doesn’t emerge only out of peoples’ psychological traits and emotional tastes for various forms of risk. If that were the case, it would be inevitable, and organizations would invariably tend toward pathology. I don’t think it’s so. I think that the MacLeod issues come from rich and poor, which are not limited to financial wealth. So where do rich and poor come from? Ultimately, on the organizational setting, they come from credibility, which I’ve discussed previously. In most companies, the credibility of a non-managerial employee is almost zero. Credibility is intentionally made scarce within the organization. What happens when you lack credibility? Your ideas aren’t taken seriously, you don’t get to define appropriate use of your own working time, and if it goes to zero, you’re typically fired. In the MacLeod world, Losers acquire just enough credibility to feather a nest and, once done, stop gambling. Clueless lay down enormous amounts of effort to get credibility, mindless of the diminishing returns, and get some moderate amount. Sociopaths find the credibility black market (there always is one) and find the most efficient ways to cheat the system, and they get the most credibility of all.

At this point, we can discuss the four work cultures and their tendencies. The planned cultures are guild and rank cultures, and those have globalist intent. Professions, in fact, are globalist beyond the extent of one company, and usually exist to create a guild culture outside of it. The better of the two planned cultures is the guild culture, which replaces power relationships with mentors and proteges. The “boss” is a teacher. The pathological planned culture is the rank culture where blind subordination becomes requisite. The market cultures are the self-executive and tough cultures. Both hold the employee responsible for delivering value to the firm, and allow for localist autonomy of sub-organizations, but the difference is that the self-executive culture gives employees more time to bring their ideas to fruition and more opportunities for good-faith failure. Tough cultures have tight deadlines and no control over scope-of-work for low-level employees. The self-executive culture is the healthier of the two market cultures, and the tough culture is the pathological one.

What unifies the two healthy cultures, and the two pathological ones? It comes down to employee credibility. The credibility floor in the tough and rank cultures is zero. Employees are not held to be implicitly credible. An employee who can’t demonstrate hard value-add on a minute-by-minute basis fails in a tough culture. One who is disliked by his manager fails in rank culture. Both of these cultures, in functionality, are defined by the fear-driven, cutthroat, unethical, and often harmful activities in which normal people will engage when there’s a threat of their credibility levels dropping to an unacceptable level.

The healthy cultures, on the other hand, set a credibility floor, although they do it in markedly different ways. The guild culture has a rigid seniority system, but assumes the junior employee to be a student and therefore of value– especially future value– to the organization. The self-executive culture is a more localist, market-driven culture, but with the assumption that each employee has some quantum of irrevocable credibility– a real vote that can’t be taken away by a priapic manager.

Companies that establish a credibility floor will still exhibit shifts of influence and, if nothing else, inequalities in soft power. There will be cliques and the best one can do is to render them fairly harmless. There will also be attempts to game the system and amass credibility through a variety of means. Credibility trades, although they “shouldn’t” exist, will. That’s human nature. The difference is that, when a credibility floor exists, one doesn’t have the panic trading (which Psychopaths love, because it’s easiest to exploit) that generates organizational pathology at such a rate that it’s uncontrollable. The trade of credibility still exists, but it’s mostly harmless and does not reach a level that creates unmanageable organizational pathology. When there’s a credibility floor, the rate of corrosion is slow enough that attentive management can reverse the damage. When the credibility floor is zero and panic trading defines the organization, institutional corrosion is so rapid and ubiquitous that it can’t be halted. 

I must make one note, here: companies that intend to function without corrosion and pathology must establish a credibility floor. That’s not to say that they must employ unproductive or harmful individuals indefinitely. If someone punches another employee, he’s still “credible” in the abstract, but he’s every bit as fired, because what he did was wrong and dangerous. The purpose of a credibility floor isn’t to say that no one ever gets fired (that’s a horrible idea) but to prevent people from, in RPG terms, being “killed by the dice”– that is, fired because of credibility fluctuations, and not because they deserve it.

It’s the absence of a credibility floor that generates a permanent Loser caste (whose exchange rate in their requisite risk transfer becomes increasingly unfavorable) and a fear-driven, tunnel-visioned Clueless “useful idiot” class, leaving both groups prone to exploitative Sociopaths. So the question becomes, then: how does an organization create a credibility floor? How can one globally legislate an amorphous, hard-to-define, and often very local social asset? That’s an incredibly hard problem to solve, and where I intend to go next.