I have been re-reading The Federalist Papers ahead of the US presidential election. Highly recommended. It is remarkable how many of the problems that American politics currently experiences are predicted by Madison and Hamilton. The section about how both sides of the argument were anxious about the President being able to elect judges to the Supreme Court for example. Or the section about how to appropriate the number of Senate seats, where it appears that Hamilton and Madison were actually on the losing side (they wanted proportionate but as we know it was eventually decided that senate seats would be fixed on a per state basis).
I’ve been thinking about how to form the ideal constitution for a business. Like governments, businesses seem to recursively re-learn all the important lessons of their own self sustenance over and over again through generations. Hire bar raising talent, be frugal, think long term, don’t be mean to each other, diffuse managerial power among domain experts and more. I’m going to continue to read about and think about this and try to develop some kind of framework for it. I imagine you can see the form it would take if you listed out the practices and values of every current trillion dollar company, and crossed out any items that didn’t span all of them.
The main constitution around which a constituent of a government is written is the people. In business, this would be the customer. The business forms around the needs of the customer, the employee, investors, management and vendors are all serving the customer. Like a government, you would want to diffuse the appropriate mechanisms of control to the customer such that the business can continue to sustain and serve their changing needs over time. A business faces the same failure modes of inevitable mediocrity, corruption and unsustainability. You’d want to design a system that allowed for significant antifragility to those risks over time.
The constitution of business would involve defining the roles and responsibilities, at the highest level, of the following:
- Board members provide oversight, somewhat analogous to a senate or supreme court, appointing the chief executive
- The chief executive provides a definition of who is and is not a customer, appoints and organizes the management team in service of customer needs
- The management team provides domain expertise across all the relevant functions required in service of the customer, and oversight and organization to individual contributors
- The individual contributors produce work in service of a customer and are valued as a proxy to the value that work offers the customer
It’s a fun exercise, because it makes you realize how little intentional thought goes into making the actual business into a system for customer value. Defined this way, it actually provides clarity about how to make decisions and diffuse power. It’s the responsibility of founders to have these difficult conversations and bring structure to these many values based trade off decisions. Because each customer is different, as defined and in practice, the constitution of one business may not overlap with that of another. Similar to nations, you end up with diversity based on the will of customers. To build a successful nation (business), you need to functionally serve the needs of a vast and diverse pool of citizens (customers). More on this in the near future.