On the interaction of centralized and distributed organizations

    What is the difference? What are their advantages and disadvantages? How to go from one to another? What happens when they collide?

    What is the main difference between centralized and distributed organizations?

    Neither the fact of the distribution of data storage, nor the possibility of remote work are such a difference, since a centralized organization can also organize storage in different data centers with the necessary degree of redundancy and the possibility of remote access 24/7.

    The number of relationships between participants in an organization can also be comparatively large in both types of organization.

    The difference is thatdecisions that are then implemented in a centralized organization are made by a limited group of people without the possibility of influence on them by others .

    As a result of this, the effectiveness of the organization from the point of view of the majority decreases.
    A decentralized system that can avoid such a decrease in efficiency will be more competitive.

    What causes a decrease in efficiency in centralized systems?

    Inadequate use of intellectual resources


    To achieve maximum efficiency, the control system must be no less complex than the managed one.

    A large system of many people is complex. When it is managed by a small number of people, they simply do not have enough time or brain resources to make all the necessary decisions that are optimal in each case. Therefore, in order not to lose control over the system, they simplify it by introducing additional restrictions, setting a rigid structure, and thereby reducing efficiency.

    The enlargement of centralized organizations through mergers or acquisitions leads to the fact that previously independent structures are integrated into a single corporate structure, reorganized to common standards, combed “under one comb”.

    For their former leaders (newly-minted unit heads), the possibility of making decisions decreases, the management system loses degrees of freedom, becomes simpler, and therefore less effective.

    We know in history an example of competition between centralized and distributed systems.
    In the Soviet Union there were huge factories with a large number of workshops (foundry, tool, assembly, galvanic, etc.) under a single factory management. In contrast to this, “in the West”, the functions of these workshops were performed by separate organizations having contractual relations among themselves, and not subordinate relations. Their effectiveness was higher, including for this reason.


    What is the disadvantage of a centralized model in this aspect?

    The centralized model does not use the intellectual resources of most people to make decisions.

    These resources are dead weight. A person who is surrounded by all sorts of instructions and normative documents cannot contradict them and make decisions that increase efficiency, and average decisions cannot be equally effective in all cases.

    System Resource for Personal Purpose


    Before each person who has at his disposal any resource provided by the organization to carry out the work, a dilemma always arises. Whether to use this resource for its intended purpose, conscientiously fulfilling its duties, or use it for personal purposes.

    This choice is always there.

    The secretary can lay out solitaire instead of work, the programmer can work on a side project during working hours and on working hardware, the janitor can store his things in the equipment room. Cook - to dilute the soup, taking away some of the products.

    In higher positions, this process takes the form of bribes, kickbacks, and “cutting the budget,” to the extent that organized power groups use the organization exclusively for their own purposes, leaving its declared tasks only on paper.
    In any case, the efficiency of the system is reduced from the point of view of its users. The soup becomes liquid, the terms are drawn out, prices are rising.

    The introduction of control does not save. If there are relatively few controllers, sooner or later they will also want to act for personal purposes and will be integrated into the system. If everything is controlled, then this will no longer be a centralized system.

    Efficiency in this aspect would be higher in case of decentralization of ownership of resources.

    If the programmer works on his computer, and the janitor stores the shovels in his (or rented with his own money) shed, then there is no room for abuse. It turns out service-oriented architecture, outsourcing. And in the aspect of misuse of funds, it will be more effective than centralized.

    Division of labor


    The division of labor increases efficiency. How is this happening?
    To do any work, you must first figure out how to do it and get the necessary knowledge and skills. Moreover, this can take significantly more time and effort than the actual performance of the work.

    Therefore, it is much more effective to teach one person so that he then does the work a thousand times than to teach a thousand people, each of whom will do the work once for himself.

    In addition, with the development of science and technology, the amount of information on a specific subject area can no longer fit into one head.

    It used to be just a doctor. And now there are a lot of them: from the dentist to the pathologist.
    Previously, there was one general designer. And now a whole set of system engineering and management majors.

    With increasing levels of technical development, the division of labor is not just a way to increase efficiency. This is a way to do at least something.

    And we see that the division of labor is climbing ever higher.

    At first it appeared among the workers in the form of a conveyor. Then there were various engineering specialties. Further, systems engineering has changed the manufacturing process itself.

    At every step there was a forced decentralization of decision-making.
    And if in production it already gets to the top managerial positions, then in state building, in managing property rights, in choosing top management, they did not go further than imitating democracy and separation of powers into executive, legislative and judicial.

    As the division of labor increased the efficiency of production, so it will increase the efficiency of the social spheres of life.

    For example, if now a person in power in a centralized system can independently modify the organization he runs, hire and fire staff, and at the same time manage its work, this will be less effective than relatively narrow specialists in each of these areas.

    What would happen if a pilot of a racing car could (and should) have to turn nuts in a car at his own discretion, hire and fire mechanics and monitor the purchase and supply of fuel?

    When a structure designs one, another builds, a third hires personnel, and a fourth manages its work (and all of them are not subordinates of one, but each is a professional in their field), the system becomes more efficient.

    Recruitment


    Talent is not inherited. "Nature rests on the children of geniuses."

    If a team of strong-willed and capable people has built a centralized system for themselves, they will definitely want to pass it on to their children.

    In addition, since there is a constant struggle for top positions, the criterion of loyalty is used more often than the assessment of abilities. And the higher a person’s position, the more noticeable it is.

    In fact, in a centralized system, management personnel are selected from a smaller number of candidates. As a result, the positions of decision makers are not the most capable, which also reduces efficiency.

    Moreover!

    Ability to make decisions is not enough. Appropriate education and experience is also needed.

    The elite of a centralized system constantly limits both of these in areas affecting the strength of their power, which further worsens the quality of decisions made throughout the system.

    In a distributed system, education and the opportunity to try yourself in any field should be available to anyone. Moreover, the search and training of suitable people should be carried out continuously.

    Need for efficiency


    In a centralized system, a participant receives resources from a superior. The very highest level extracts them, putting any external resource under their control.

    Usually by violence. The petty king waged war on a neighbor. Based on resources from the robbery, he built his centralized structure.

    The resource could be a silver mine, a gold deposit, a convenient place on the trade route, cheap labor in third world countries, or the possibility of issuing foreign currency.

    An organization built on a resource, either through physical coercion (taxes or binding laws), or by raising prices for its services (having previously organized a monopoly by conspiracy or destruction of competitors), begins to squeeze additional resources from the “sponsored” population. Becomes a "stationary bandit."

    Thus, the resource collected from the majority also becomes the support of centralization mechanisms and is distributed within the elite using the organization for these purposes.

    Centralized systems expanded, absorbing external resources, colliding, fighting and destroying each other, using the resources of the defeated enemy.
    New hungry workers in Mexico, China, Korea, etc. were ready to work for pennies. New deposits and assets became an external resource for the growth of centralized organizations.

    But the expansion is over.

    The last spurt of this system is the growth of bubbles in the markets, i.e. fictitious appreciation of assets.

    When the external resource runs out, the collective stationary bandit, the elite, begins to squeeze more and more resources from ordinary people. This process leads to the impoverishment of the majority and makes the middle class poor. And the flow is running out anyway.

    In fact, a centralized organization with power concentrated at the higher levels can exist only if there is some kind of external resource being mastered.
    Only in this case, efficiency is not a determining criterion for selection. And all the problems described above do not kill the system, but are part of the mechanism for developing this resource.

    Centralized structures are designed to use resources “falling from the sky”. Without these resources, they become less effective than distributed ones.
    What happens when all external flows have dried up, and there’s nothing more to take from the population?

    From the position of the elite


    In conditions of lack of resources, people who previously united in a centralized structure and received their part of the resource begin to go beyond the roles prescribed by him. They see that the situation is deteriorating, and begin to wonder, why do they need such leadership that does not provide an influx of resources?

    The cost of services of higher parts of the hierarchy becomes extremely high, which requires their reorganization in the direction of greater efficiency, and perhaps even elimination.

    Examples include the collapse of the Samsung conglomerate, Brexit and EU
    problems .

    Moreover, here we are not talking about ordinary people who are dissatisfied with the country's leadership. Dissatisfied will be the powerful representatives of the elite, occupying high positions. The same retinue that plays the king.

    It is clear that they will want to return to the old and proven methods. To robbing a neighbor.

    But, at the country level, an obstacle to this is the availability of nuclear weapons. So the nuclear powers will plunder the rest and remain as competing centers of power, unable to obtain resources from outside.

    Moreover, technological chains now stretch across the whole world. The elites will have to eat each other very carefully to maintain the technological level.

    There is competition with additional external conditions - it is impossible to physically destroy a competitor, take away resources from it or crush it economically.

    An example is the economic umbilical cord connecting the United States and China. The huge export from China to the United States cannot simply be stopped without negative consequences for everyone.

    Where there is competition, there is a need for efficiency. This is where all the shortcomings of centralized systems will appear.

    In each of them, the elite of the upper level, having demolished the top of the pyramid of power, will face the question "what next"? There is no new leader with an external resource source. If you start bickering among themselves, “good” competing neighbors will “help” and destroy the system until the process chains are completely broken and degradation occurs.

    The situation itself will require the elite to organize civilized, real competition in their midst.

    From the position of the people


    The crisis. There is no work or it is low paid. Reserves are consumed or taken away by the elite in various ways, from new taxes to currency devaluation.

    There are no prospects for improvement. There is no trust in centralized organizations. There is a request for an independent infrastructure.

    Both the elite and the people form a request for “rules of the game” that allow civilized competition and are not dependent on strong players, i.e. request for decentralized infrastructure.

    Direct collision


    Any centralized system is always looking for a new resource that you can "profit from".
    In a situation of a completely divided world, this resource can only be competitor systems, including decentralized ones.

    In addition, new opportunities and resources appear constantly, and centralized structures inevitably “grow” on them.
    It is impossible to get rid of them forever. They will constantly “try to tooth” the environment in order to capture as many resources as possible and grow as much as possible.

    How can decentralized systems be protected?

    If there is a serious enough resource on which a centralized system can "fatten", then nothing.

    A centralized system with sufficient resources can destroy (or marginalize) any decentralization attempts. Its lower efficiency is compensated by the ability to share part of the mastered resource with the lower levels of the hierarchy, ensuring their loyalty.

    However, in the event of a lack of external resources, participants in the centralized system themselves will begin to participate in decentralized interaction, “corroding” it from the inside.

    A centralized system will have no one to fight outside. And inside, attempts to crush decentralization will stumble on sabotage of their own parts, and at all levels of the hierarchy.

    A decentralized system will grow inside a centralized one, and nothing can be done about it.

    Patterns


    Thus, the internal organization of a community of people can take one of the states, depending on the availability and degree of development of an external resource, as well as on the availability and degree of development of technology of decentralized systems.

    If there is a resource, people sooner or later organize themselves into a centralized system that lives on it until its exhaustion.

    After this, "confusion and reeling" begin. The system is falling apart into parts that begin to fight with each other. Losers become a resource for maintaining a centralized winners structure. At this moment, conditions are created for the demand for decentralized infrastructure. If there is no such infrastructure, then the cycle of war of all against all repeats itself again and again. If it is, then people begin to use it.

    The winning subsystem begins to gobble at the expense of the rest and simultaneously destroy the decentralized germs until it becomes a new universal centralized structure.

    Depending on how strong it is and how developed decentralization technologies are, a parallel decentralized structure “built” on the same people who are part of a centralized system can remain in it.

    In any case, the cycle will be repeated until decentralization support technologies reach a certain level, which allows temporarily generating “virtual” centralized structures, delivering “partisan” attacks on elements of a stationary centralized structure or responding to attempts to build a centralized structure “from scratch” on a new or selected one resource. In this aspect, something like Meganesia Alexander Rozov or “The Murder Policy” by Jim Bell should turn out.

    Conclusion


    Answering the initial question about the method of transition to a decentralized construction of society, we can say that it consists in providing the society with tools at the right time that can make up a decentralized infrastructure. The rest will happen "on its own."

    The modern cryptocurrency boom during the crisis just expresses both the public interest in such an infrastructure and attempts to create it.

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