[onitica]

I just did a quick skim of the article, and call me naive if you want, but in the theory of spontaneous order why is Valve necessary? Obviously, the time and labour of Valve's employees is worth more than what Valve is paying them, otherwise Valve would not be turning a profit. I'm assuming that employees really have 100% work time for their projects as you claim. Then in essence Valve is providing facilities and connections (to other smart employees) in return for the lion's share of the labour profit. Is that really worth it for the employees? Once they have the connections wouldn't it benefit them more to split off their own companies, in a co-op horizontally structured company?

Don't get me wrong, I think traditional corporate structures are often abominations and I think Valve is a great company. It just seems to me that if you take the spontaneous order philosophy to the extreme than corporations in general just become unnecessary overhead.

[meric]

Economic profit is a function of land, labor and capital. Taking out profit from labor still leaves the other two; You still need shareholders to finance the initial purchase of land and capital, and the shareholders still demands compensation for risk.

The corporation becomes unnecessary overhead if the company is owned by the employees, but then you have issues of what happens to the equity when an employee retires, and thus having an employee become a shareholder.

I think the word I'm looking for is a collective, and looking into the past, despite Valve I still don't think it works. The very idea has caused the deaths of millions of people implementing it.

I think Valve is a great idea; the idea being, the employees of the company get to decide everything in the company besides a few hard rules. Example:

Rule 1: shareholders get 50% of the profit.

Employees can decide how much is spent on profit-sharing schemes and salary versus how much to save for the company, to invest in new equipment, whilst following the rule. Employees dictate all aspects of business strategy.

Failure to abide the rule simply ends in the shareholders dissolving the corporation.

Ideologically it doesn't differ much from corporations you see today. The CEO, an employee, typically has free rein over the company until he does something really stupid, in which case he gets fired by the board. This "new idea" is simply making a hierarchical organisation a horizontal one, i.e. all employees are now co-CEO's. You still have leaders but they are distinguished neither by status or wealth.

[onitica]

I completely agree a horizontal structure is a better working environment for employees. I don't know how the compensation packages at Valve works, but I'm betting the shareholders (and executives at the top who are given shares) are getting the vast majority of the profits, just like most corporations. I bet a lot of the most talented employees at Valve are vastly overproducing the amount they are paid, and could easily gain much more personal equity even after trading some for enough land and capital to start a company themselves. Not saying everyone should start a company, I haven't yet so I guess I'm being a bit hypocritical here.

Good reply. Like I said I figured I was being a bit naive in my post.

[bryanlarsen]

Sounds like a worker's cooperative to me. Many examples of such exist, but they are shackled in the United States because they do not enjoy the legal protections that corporations do.

[meric]

It's a long comment so I'm breaking to a second reply.

A horizontal company to a hierarchical one is akin to a group of amoeba compared to an animal.

As a group of amoeba grow, it simply splits into multiple groups. An animal will grow very big, much bigger than any single group of amoeba, but it is vulnerable. Stab it and it dies; once the central nervous system is dead, all other cells will die off eventually. You can't stab a group of amoeba. To kill amoeba you have to kill every single individual one.

Large companies today are much more likely to make mergers and acquisitions than to make divestments. Divestments are only made when a group within the company appears to be unlike any other. I think horizontal companies are more likely than large companies to make divestments. The only other horizontal company I know of, Semco, is an example that is evidence supporting this; it is a company controlled only by employees. At times it has split off its services as separate companies, with the separated companies remaining horizontal, and most of them are very profitable.

http://en.wikipedia.org/wiki/Ricardo_Semler#Semco_1990.E2.80...

[maxerickson]

W. L. Gore is a fairly well known example of a more horizontally structured company.

Some conglomerates, like Berkshire Hathaway, also eschew structure, at least to some extent.

[takluyver]

I am not an Economist, but what you're discussing reminds me of John Lewis, a British department store & supermarket chain. It's owned by its employees, through a trust, and they all get a share of the profits as well as some say in the running of the company.

[algorias]

Valve provides the connections and environment of trust without which spontaneous order can't occur. It also flattens peoples risk profile (lower risk, lower reward), which is actually quite desirable for most human beings.

[saraid216]

> Obviously, the time and labour of Valve's employees is worth more than what Valve is paying them, otherwise Valve would not be turning a profit. I'm assuming that employees really have 100% work time for their projects as you claim. Then in essence Valve is providing facilities and connections (to other smart employees) in return for the lion's share of the labour profit.

I think you're underestimating the value of those facilities and connections. That is the overhead.

Also, the time and labor is valued higher because they're employed together; that same time and labor would not be as valued outside the company.