Monthly Archives: August 2015

A Market of Sole-Proprietorships

One aspect of proprietism that needs the most development is the concept of de-hierarchying organizations into a spontaneous market of sole-proprietorships. I’m going to attack this vague notion by marrying several independent concepts together.

1. Markets v. Hierarchies

When I wrote this post, I mentioned an extremely important paper, Electronic Markets and Electronic Hierarchies by Thomas W. Malone, Joanne Yates, and Robert I. Benjamin. In it, Malone, Yates, and Benjamin establish the paradigm that goods and services move through the value chain through one of two possible forms of organization: hierarchies or markets. Think of the value chain or value-added chain as the sequential steps a good goes through as it goes from raw materials to finished products in the hands of consumers.

For example, let’s say that widget rocks are mined from the forests of Guerrero, Mexico by a local company, Los Wijetos. The company coalesces widget rocks into sheets of solid widget using a decades old and reliable production process that involves soaking the widget rocks in an acidic cocktail and heating them in giant vats. Los Wijetos sells the widget sheets to an American company, Natural American Widgets, who has the widget sheets drop-shipped to a third party in China who cuts the widget sheets into widget pieces and assembles them into widgets. NAW then has the product shipped to the US for quality testing and packaging. After that they ship the widgets in volume to widget distributors, who then sell to widget retailers, who make widgets available for consumers to purchase.

Every step from the raw widget rocks to the finished product that the consumer takes home is a step along the value chain, and value is added at each step. Some steps, like when NAW sells to distributors and those distributors to retailers, are conducted through a market. In a market, the widgets are distributed via the laws of supply and demand: each widget manufacturer competes with other widget manufacturers to have the distributor’s business. Contrast that to the more hierarchical relationship between NAW and the Chinese contractor; NAW sends the all the widgets to be cut exclusively by the contractor and only the contractor.

2. Your Customer is Your Boss

In previous posts I have highlighted that proprietism takes the market form of organization all the way down to the level of individuals within an organization. In this post in particular I discussed the concept of customers as your employer. In this worldview, the words “boss” and “customer” are virtually interchangeable. Think of it this way: you work in marketing for NAW and your boss pays you in exchange for a service–your labor. Your boss’s boss pays her in exchange for a labor service as well–to manage you and her other direct reports. Your boss’s boss may have a similar labor contract with the owners of NAW. Who do the owners report to? The owners own a widget manufacturing operation, so technically they report to their customers–the widget distributors. The distributors are paying the owners of NAW for widgets, and for any other associated ancillary services.

In Service Excellence, Price Pritchett, Ph.D. stated boldy in 1989 what I was getting at in the above-mentioned article.

Without paying customers, nobody has a job. The organization will shrink, wither, and eventually die unless there are people willing to pay for what you do. Customers vote daily on how well you do your job, and they vote with their money. If your competitors serve the paying customers better, you lose the vote.

Furthering this perspective is the notion of working under a “tour of duty” rather than “guaranteed” employment for life (I put the word “guaranteed” in quotation marks because layoffs became a standard cost-cutting practice from the 1980s onward). A tour of duty makes the boss=customer perspective more explicit, because you literally have a contract administered by your supervisor (that is easily renewable if you do a decent job) stating the labor expected, time-frame, and compensation for the “job.”

3. Holacratic Perspective

In my last post I described Brian Robertson’s idea Holacracy, which throws away hierarchies in favor of circles that contain roles. Staff members own roles like property, and work is organized and delegated in meetings. I have never worked in a Holacracy-run company, but from what I have read, I can see a metaphor in which meetings are like contract-negotiations. Tasks, projects, and policies are brought up discussed in the open market, and work is organized naturally following laws of efficiency and taking the path of least resistance.

4. ESOPs

Of course, employee stock ownership plans are essential to most technical discussions of proprietism. They have their place here as each role and each project an organization undertakes has a value–an objective or subjective portion of the overall worth of the entire organization. Workers are properly incentivized to invest in and grow the organization when they are compensated directly with shares of that company.


Wikipedia contributors offered some differing descriptions of markets:

Markets facilitate trade and enable the distribution and allocation of resources in a society. Markets allow any trade-able item to be evaluated and priced. A market emerges more or less spontaneously or may be constructed deliberately by human interaction in order to enable the exchange of rights (cf. ownership) of services and goods.

In summary, if you roll these four concepts together, an organization takes the shape of a market in which collaboration and competition (let’s not shy away from that word–we all want to do a good job and shine above the rest of our coworkers and can do so without resorting machiavellian tactics) organizes labor services through the laws of supply and demand.