The Legacy

Being over a thousand years old, Russian heritage is certainly a very impressive part of its national legacy. Yet not everything we carry over from our hallowed antiquity will be useful in the ultra-competitive, modern world. When reflecting upon the systems of governance and decision-making, Russia can trace a virtually unbroken line of autocratic, top -own rule from its early beginnings. Mongol invasion, Moscow knights,  all-powerful Czars (later rebranded as chairmans of the communist party of the Soviet Union) represent fairly analogous systems of large scale “problem solving”. Or to be exact, a system of un-solving and creating a terrible waste in the process. The most recent regime managed to rebrand that message yet again as “the power vertical”.

What exactly have hundreds of years of repeated top-down hierarchical rule left as generally accepted methods of management and governance? What decision making systems have become prevalent among both the general public and elites? Giving the timescale involved we are not really talking about a few odd habits here and there, we are talking about a system as a whole that has been massively ingrained into the culture. It’s a whole system of behavioral patterns and social interactions accepted by all as “self evident”, since they have been used in the country since “dawn of times” – literally!

One prominent feature that is instantly apparent to anybody dealing with Russian business, is the strict management hierarchy, which is very similar to Asian-styled dominance and obedience. Let’s call this management system a Khanocracy.

Axis of Khans

Every khanerarchy obviously needs a khan. It need not be a big khan. It can be your boss, your project manager, anybody with any relative authority and few direct reports will do. It can be yourself.

  • Khan is always right. Khan never admits mistakes, (as that would weaken his absolute power).
  • Public disloyalty to khan is treason. Khan always punishes disagreement or disobedience by underlings, otherwise they think he is weak.
  • Khan never does anything that makes him look weak. Even if it means doing something astonishingly stupid.
  • Khan directly controls and micromanages what underlings do. Thats his right as a khan. At same time khan doesn’t communicate much with underlings. That yet again looks weak.
  • Khan must keep his current position no matter his skills or knowledge in relation to that position. Khan should always try to climb to a higher position whether or not he has the skills or knowledge necessary.
  • Public loyalty to the khan is the only merit. Everything else is optional.
  • Khan will extract all monetary value for himself from his current position. Thats why bigger Khan assigned him to it.

When stated out loud such a system seems somewhat obsolete and even a burden to the creative environments of the 21st century. Unfortunately Russians have the ingrained habit to jump back into their natural khanist groove of hierarchy at slightest cue. Companies, organizations, teams, projects – it could be anything and everything.  Its almost subconscious.

What additionally confounds the problem is that the production methods of the late Industrial Revolution seem to conform to the same rigid hierarchical structure. Early corporations weren’t that much different internally from a typical obedience driven hierarchy, just softened up a bit thanks to the western tradition of law and civil liberties. One can look at an organizational chart from any big company and not find that much of a difference from that of a bunch of guys in furs kneeling at the feet of a khan with a horse, bow, and inflatable yurt.

IMB Org Chart 1963

The differences between early 20 century rigid industrial hierarchies and its much softer knowledge-economy cousins of the last decades are somewhat hidden from plain sight. Tree-like schematics may look similar yet the vast difference exists in operational models. Even the most prestigious MBA course will spend way more time explaining the details of the time-value of money or modern portfolio management theory rather than dealing with these subtleties.  When students in Russian business schools see the familiar tree-like hierarchy they consider themselves in familiar territory and therefore miss everything hidden between the leaves.

The Soft Power

Every organization must adopt some sort of hierarchical organizational principles, with key people managing throughout. Let’s call the people sitting in management nodes Bosses to contrast with original Khans. I’m going to present very idealized, perhaps almost romantic, view of the Silicon Valley startup environment. It’s even more liberal than the mainstream western business tradition. Not all attributes would hold true for every single Valley high tech corporation. Only the best of the best (Google, Apple) can say they are close to being fully compatible with such a Platonic ideal of creative talent management. It is an everyday struggle for most of the companies to reach even half of the goals listed here. Yet this is the vector towards which all Valley startups or big corporations aspire.

Only the best of the best (Google, Apple) can say they are close to being fully compatible with such a Platonic ideal of creative talent management

The most fundamental truth is that the “Boss position” is just a job for a person with good organizational and management skills. Its not better or worse then any other job. A Boss earning less salary than his or her subordinates is a common occurrence.  In this world, the concept of ”loyalty” is senseless. A Boss’s employees may be absolutely unique individuals with unique skillsets: developers, designers, artists, editors, copywriters, animators, bloggers, marketing specialists,3d modelers, sketchers, ux experts, etc etc etc. The advise and feedback of these diverse and talented individuals will be absolutely incomprehensible to the Boss’s expertise in management. So as to not go crazy trying to understand it all, his only practical choice is to trust them to perform as they see fit in their own respective domains. High tech economy creates so many unique and deep specializations that even the thought of a single person understanding all its aspects and making relevant decision all by himself is a delusion. Only communication and delegation allow such teams to work together.

The Boss’s role is to coordinate the collective efforts and information flow within his team, and motivate the members when they hit a bottleneck. The Boss is completely dependent on his team to produce  tangible results, upon which the Boss’s own performance will be measured. Stories of “rockstar” primadonna performers, capable of performing amazing feats of technological power or creativity, yet who bring with them massive personal problems, and make their Bosses bend over all out of shape to please the primadonnas are frequent in Silicon Valley. Many Valley organizations during annual performance reviews give employees options to anonymously rate their managers; the resulting score directly impacts the managers  annual compensation.

Arguments and disagreements inside the team and with the Boss are common. Smoothly merging a diverse set of incompatible skills is difficult. Finding commonalities between different fields so as to encourage collaboration is challenging. A Boss’s management and human skills are tested in finding resolutions to these daily conflicts. The duty of each team member is to present his expertise, his domain point of view, and exposing all facets of a problem to the team and Boss. The result is often many sore throats and bruised egos that lead into very constructive compromises or even brilliant solutions.

Direct control and micromanagement are useless artifacts of prehistoric management, that have been abandoned for decades. To remove even the temptation to micromanage, Google makes their directors have 100-150 direct reports. Every senior person in organization (with noteworthy exception for junior guys who do need mentoring) is very talented, otherwise they wouldn’t be hired in first place. Therefore they will find on their own the best way to apply their skills to given problem. The concept of “ownership” of problems, domains, and areas of responsibility is common. The vote of a domain owner is decisive, no matter what relative position he holds in organization. A Boss is most certainly not talented in all areas his reports are, and won’t even try to give them specific advice. All he can do is to define broad areas or desired results and let his team figure out the rest. Managers at early Microsoft were known to never take a position or use their authority to dictate specific decision during team conflicts. They reasonably argued that being the people with the least amount of technical information, they should have nothing to do with making a technical decision.

Now you’ve got three people in the room: a designer, a developer, and a manager. Who’s the person who knows least about the problem? Obviously, it’s the manager. [..] At Microsoft, the manager would usually refuse to make the decision. After all, they have the least information about the problem.
Joel Spolsky

Mistakes are embraced, declared, and discussed. Mistakes inside the team are blessings. Out there, behind the walls of given company there are always five rutheless, well funded competitors. They will use and exploit any mistake a company will make. Discovering a mistake early, and getting the team to recover from it early and quickly  is a default action. Learning from one’s mistakes is a huge part of the Silicon Valley culture. Since startups always explore unknown waters, mistakes are common and often. Thats how startup constantly improves and self corrects in uncharted waters. The meritocratic culture is centered around personal talent. In discussion and open debate the only “strength” recognized is expertise in given area or well reasoned argument which turns other members of the team, usually the ones which do not share same professional domain, to the side of the orator. Since winning one argument usually does not help much next time in an argument about a different topic the general idea of relative “strength” and “weakness” to be gained through arguments is fairly pointless.

The Bosses in Silicon Valley make “open communication channels” almost a religious cult

The Bosses in Silicon Valley make “open communication channels” almost a religious cult. They opt not to have their own closed offices, but to sit right in middle of their teams. Mark Zuckenberg, in the new Facebook office, placed his desk to be most equidistant point from all sides of the building, thus making that point the easiest to be reached by every other employee as they mingle in the office. This example is a practical consequence of team diversity described above. Since the Boss is completely dependent on the diverse and unique skillset of his team, his only way of connecting with reality is to communicate, communicate and communicate with his team. The position and title in an organizational chart has no direct correlation with salary or compensation. For years

Microsoft has prided itself on having a completely parallel career track for developers, which had nothing to do with their formal management skills. Developers were so valued that they could receive massive multipliers to their salary and stock positions without ever managing any teams or people. Position assignments are strongly influenced by organizational meritocracy. It is common for employees (developers, artists, etc) to interview and hire their own Bosses, depending on which will be best for the team. Of course, vertical career growth is desired by many. However it always comes with a clear understanding of that position’s responsibilities – which are often many. It not that rare that a person tries to bite more then he can chew and then asks to be demoted back to old position.

Cardinal Talent Rule

As one digs deeper and deeper into the actual workings of high tech management hierarchies, it becomes apparent that there really is no clearly defined organizational chart. Its more of big collection of fuzzy spheres and circles of different domains intersecting in many more dimensions then any org chart can show. Its glaringly different than the typical Russian management hierarchies.  We can continue to list even more subtle differences. However more or less it all boils down to one thing, which we will call the Cardinal Talent Rule. From that rule one can pretty much derive everything else. This rule will need a bit of explanation to really understand it. Bear with me.

From the outside, Silicon Valley may look like an ideal world. Like the “Avatar” movie: all the beauty, harmony, blissful creation of ever better technologies appearing year after year. However if you look below the surface it is actually a bloodthirsty jungle, in which endless competitors fight for scarce resources and similar markets.

The parade of mind-bending products & technologies do not show up as some sort of happy arrangement where we all hold hands, sing songs and strive to do good. It comes from brutal Darwinian competition for resources: press coverage, conference presence, angel/venture/late stage funding, key talent, etc. The scarcity is built into the system. Without scarcity the competition wouldn’t be so intense, and resulting products wouldn’t be as great. The times when – for short periods – the Valley actually goes into oversupply are known as bubbles, and they do end fast…and painfully.

What is the scarcest resource? Startup will always be a more challenging endeavor than a regular company. The market is unknown, revenue sources are unknown, and everything is in the dark. Therefore, the demand for startup early stage employees is much greater than for people in similar positions in more established companies. Bigger companies have real markets, real revenues, and therefore are pay better. The Startup job is therefore much more challenging. And because of the hardships of entering or even creating new markets, the quality of work must be at its best. Being in a startup is a very demanding job, requiring one to deliver stellar results, for much less money but with insane work hours….oh, and only the remote 1% possibility to strike it very rich. Needless to say what motivates people to join startups is not just that 1% remote chance, its the whole lifestyle of endless challenge.  It takes a very very unique kind of person, who likes and strives in such unpredictable conditions, all the time fully knowing they have options to be better paid and lead calmer lives in more predictable (boring) companies. And thankfully for all of us, the Valley has lots of people who want to do exactly that. In valley terms such startup-friendly people are called “rockstars”.

Silicon Valley may look like an ideal world. Like the “Avatar” movie: all the beauty, harmony, blissful creation of ever better technologies appearing year after year

The recurring scarcity is that there are never enough people of such caliber and talent to fill all positions in all startups. Time to time you see a rat race when pack of similar startups race in the mind bending VC rounds for some crazy amounts of cash, which are completely out of alignment with their revenues and market positions. Why do they need that much cash? Its really about one thing: talent. The real war is to get best and brightest people in a given domain before your competitors do. Brilliant people can figure out all problems. Shut out talent supply to your competitors and your startup already won half a battle. Brilliant rockstars are lifeblood of the valley. Bosses conversing in bars will be discussing how they spent insane amount of effort seducing rockstars to join their team. VCs will descend from the clouds at moments notice to help their portfolio startups recruit a key person.

This leads us to Cardinal Talent Rule. The key job of a Boss in any Silicon Valley company is to keep his rockstars happy and productive. To say rockstars are fickle is to say nothing. The whole humor of calling them rockstars or prima donnas is just about that. Every rockstar is to certain degree a “startup” of himself. He will use his time and talent only if he feels working within given startup and given team is bigger then working by himself or somewhere else or just plainly starting his own startup. The only correct solution to 1+1 equation in the valley is 1+1=10, and we’re not speaking in binary. Any part of a Boss’s ego or methods that will hamper natural cooperation among creative individuals (which is pretty much all the garbage on a Russian khan ‘slist) will be ruthlessly thrown away. Any mistake by the Boss or the company will result in rockstar immediately presented with multiple offers from competing startups. Any Boss who spent 5 seconds on a personal power trip will be faced with the duty of delivering the same results without his rockstar, but with the same competition that now has THAT rockstar! That is not a happy thought for any Boss to contemplate.

Survival of the Smartest

These lessons are hard to apply in the Russian environment. They cut deep across of many cherished Russian legacies. One must realize that the old history is over. The very loyalty and obedience that worked great in the defense of Stalingrad won’t win any high tech battles today. There have been more technological breakthroughs in the past twenty years than in the whole history of mankind. New world – new rules.

An important caveat to understand is that in the more and more globally interconnected world, local inefficiencies are exposed fairly quickly. If adhering to the legacy management style will hamper sufficient number of Russian high tech companies, it will only create a big advantage to countless energetic Indians, Chinese, Brazilians, Mexicans, and many others nations rapidly entering the high tech race. It is stingingly ironic, that the act of holding true to the ancient and cherished Russian legacy will accelerate the fading or disappearance of Russian prominence in the future.

There are many things intrinsically unpleasant to Russians. We don’t like to admit or discuss mistakes in public. We don’t like to publicly point out our mistakes to our Bosses. We just plain hate to listen to criticism from our direct reports. Etc etc as per list above. Yet there is no choice. Keeping mistakes secret will only make your products and team less efficient on world market where they will appear faster then you can type an URL into a browser. Russia must learn to encourage a culture of critique, open discussion, and constant self-assessment. Every problem you uncover internally means one less problem to be uncovered when your product or company is in the eyes of 2,000,000,000 of World Wide Users. Failure to create a business culture, which addresses such problems fast, will only further reduce your products and therefore future Russian presence on world stage.

It is stingingly ironic, that the act of holding true to the ancient and cherished Russian legacy will accelerate the fading or disappearance of Russian prominence in the future

Don’t ever micromanage anybody. Don’t let yourself be micromanaged. By micromanging somebody you demotivate them and prevent them from ever learning from their own mistakes. By letting yourself to be micromanged you accept the loss of most precious asset you have: your creative freedom.

Unconditional personal loyalty, punishment for disloyalty, public displays of “strength” by blindly applying naked authority, are outdated tools that should go directly to the garbage bin of history. You must building a meritocracy, meaning each and every personal status, action and decision must have merits. They come in the form of well thought out arguments, personal expertise, market data, and research. Opposing arguments should be in same form. You can not make any authoritative decisions without backing them up with merit-based support. The strength you project is illusion. The objective weakness you create is the same as always: you prevent your talented team from finding a merit-based decision for a given issue. Therefore you give competitive advantages to competitors.

Top talent will be scarce. Even in Moscow and other high tech centers there will be many fewer startup friendly people than in Silicon Valley. Therefore, the cardinal talent rule will be thousand time more relevant in Russian than it ever was here. Every startup rockstar will be extremely precious for the nascent Russian high tech community. The one and only job of key people in new Russian hierarchies will be retaining that talent and letting it bloom to its full creative potential. Perhaps for the first time in long and proud Russian history.