Taleb, CEOs, Middle Management, and the Corporate Ladder

Anyone who talks to me or reads this blog will learn pretty quickly that I am a big fan of Nassim Nicholas Taleb. That guy has changed my thinking about the world more than any other person I can think of except Ayn Rand. Much of what he writes about are things I have been thinking for the last decade or so but never could put into words. Taleb does this. He tells us what we already know.

One of the things that Taleb pointed out to me is that Corporate America is a crapshoot. It is one thing to go out and learn a skill and get a job with that skill. It is another thing to go out and become a "manager." A great example of this would be a dialysis clinic staffed with RNs and health professionals with training in healthcare but overseen by a guy who managed a Western Sizzlin steakhouse previously. (This is a real world example.)

If you get the idea that management is a bullshit job, you are not far off the mark. Essentially, the corporate ladder is a giant survivorship bias structure rewarding the lucky and the ruthless while punishing the unlucky and the honorable. Your fortunes in this system are determined by events almost entirely outside of your control and taking credit for success you did not create and dodging blame for failure you probably didn't create either. A great example of this dynamic is the career of Carly Fiorina who went from being a lowly secretary to being CEO of H-P where she was essentially fired for being a stupid bitch.

Managers spend time adding and polishing ornaments on their resumes which mean nothing. The MBA degree and the "Six Sigma Black Belt" are examples of this nonsense. Most managers are considered good if they stay in their offices and read self-help books all day. Bad managers engage in robust tomfuckery. Back at Hell, Inc., I noticed when the wheels rolled through that all of our numbers across the board would drop and would go back to normal upon their departure. I figured it would be the opposite as things shaped up when these guys came to crack the whip. I know better now. Managers don't run things. Employees run the show, and the managers are gnats riding on an elephant's ass.

This isn't to say that all managers are useless. Even Led Zeppelin had a manager. Managers do best when they manage and coordinate efforts. They are like traffic lights. They don't drive the cars, but they do keep them from running into each other. These people are worth every penny they are paid which is usually not very much. But once you get beyond a few rungs on the ladder, these people don't add value anymore. They are removed from the action. Their time is then spent in conference calls, meetings, and filling out reports. The more ambitious will form a team to craft a new mission statement and organize a trip for a team building exercise involving falling into other people's arms and some rock climbing. Other hours are filled reading books about turning good companies into great companies or the best way to manage time. These people are paid well for adding no value and spend most of their time justifying their existence. But when the shit hits, they try to claim it isn't their fault. They deny, lie, and run for cover. This is "leadership."

Taleb points out that middle managers are simply coin flippers in a room, and the one who flips heads ten times in a row becomes CEO. This would explain Carly Fiorina. But CEOs actually do add value to a company. A good CEO can make a huge difference. I think of Steve Jobs as a prime example. That guy has proven his worth over the years. But he is not someone who slimed his way through middle management. He demonstrated leadership and was an entrepreneur. Considering the many unlucky breaks he has had, I can't dismiss his success as a mere fluke the same way I can with Bill Gates. As for Carly Fiorina, she ain't no Steve Jobs.

Most of the waste in a company comes from the middle layers. You could kill off a huge section of middle management in a corporate jet mishap, and the company would end up doing better as a result of having fewer bloated salaries to pay. The pyramidal structure of an organization should be replaced with a tower. Most large companies could be run by a staff of 20 people. This is because most companies are run by a staff of 20 people. Everyone else in middle management is along for the ride.

They way people move up the pyramid is easy. Get put in charge of a winning division, take the credit, and get a promotion. Get put in charge of a losing division, take the blame, and get fired. Since most of this comes down to pure luck, winners and losers are generated at about the same rate as people flipping quarters. If you have the luck to fall into a conglomerate like GE at the beginning of a 20-year bull market, you become Jack Welch. If the bull market collapses, you become Jeff Immelt. Jeffrey rose during the same bull market but will not survive the bear. His last flip was tails.

Middle managers are paid a lot, but that is because that is what it takes to enter into such a risky profession. Nurses who change bedpans and truck drivers enjoy a great degree of job security. Middle managers do not. They are fired with the regularity that you would expect of coin flipping. At Hell, Inc., I watched my 50-something year old hub manager get fired after a long career in the industry to be replaced by a young whiz kid who had dazzled the folks higher up the chain. They fired Mr. Whiz Kid six months later. He burned brightly but for a short time. He finally flipped tails. And so it goes. . .

The best advice I can give people is to learn marketable skills and get a real job. Learn computer programming. Become a dentist. Become a brick layer. You can make good money at all these jobs. You just aren't going to make middle management big bucks or ever be CEO. But that should seem as tragic to you as realizing you are never going to be a movie star or win the lottery. So what? I like what Taleb had to say about this:

Hard work will get you a professorship or a BMW. You need both work and luck for a Booker, a Nobel or a private jet.

The reality is that a really good lifestyle is within the grasp of anyone willing to work for it. But we eschew this good lifestyle because we are taught to covet the grand lifestyle of the lucky coin flippers. We ride in first class and curse because we don't own the plane. This is why I always go back to my essay The Definition of Rich to help assuage my grief over this gross injustice.

The corporate ladder is a crapshoot, and the best way to win the game is to not play the game. At Hell Inc, my embattled hub manager resorted to playing Jock Jams over the PA as a way to motivate workers. It was really pathetic. But the reality was not that the workers were lazy, but that brass didn't want to pay a million bucks to upgrade the sortation system that was a bottleneck to the operation. There was plenty of gas, but the fuel line was broken. But it is cheaper to replace a manager and his replacement than to face reality and replace million dollar hardware. Those guys flipped tails. Whoever got the windfall of the new hardware flipped heads and was promptly declared a "genius" and given a promotion. And so it goes. . .

If all of this sounds like a demotivator for your career, it is. My readings and my experience have taught me that the best way to live your life is to expend tremendous effort pursuing modest goals. This is because the fabulous goals depend on luck which you can't control. This means becoming an accountant instead of a CEO. This means getting a real black belt instead of a Six Sigma Black Belt. This means going to dentistry school instead of business school. The certain path to good trumps the dubious path to great.

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