Can Anyone Reshape the State?

European Straits #155

Hi, it’s Nicolas from The Family. Today, I’m reflecting on Dominic Cummings’s ambition of reshaping the British state to make the most of Brexit.

Today’s issue is about reshaping large organizations in the context of the current paradigm shift. It was triggered by the British political climate.

You might know about Dominic Cummings, the architect of the victorious Leave campaign in 2016 and now Boris Johnson’s special advisor in Downing Street. He became well-known after Netflix released a movie about him—he’s been “cumberbatched” 😅 I myself, however, don’t know him well. From afar I admit I long saw him as a mere non-racist version of Steve Bannon 🤔

Trying to read Cummings’s prose hasn’t helped, as I find it quite inaccessible (see his indigestible essay on education and political priorities). “Too many notes,” was my initial reaction. But to be more precise, Cummings is like those teenagers learning to play the bass guitar and trying to play as fast and furiously as Billy Sheehan (a situation I know well, because I was one of them)—when in fact great music is all about embracing a spare style: check out Bootsy Collins’s “basic funk formula” 😎

Still, Cummings has been in the news a lot recently. There was his unusual job advert which set Twitter on fire this weekend. And then there’s his self-stated ambition of completely reshaping the British state, to which I reacted with a Twitter thread a few days ago and that I’d like to expand on. Read along 👇

1/ Why does Cummings want to reshape the state? One reason, mostly: he’s rightfully worried that Brexit will be a success only if Britain solves its real problems. And the number one problem is the imbalance between prosperous London and the impoverished rest of the UK. Rebalancing the British economy will require determined and effective public action. And that is likely not possible given the current state of the British state (or any Western state, as a matter of fact).

2/ I, like Cummings, am appalled by the ineffectiveness of the modern state 😖 I wrote about it in my book Hedge. (The illustration below was drawn for the book by Marguerite Deneuville.) There are several explanations for this sad state of affairs. One is the lack of resources, due to many factors including the embracing of ill-designed austerity. Another explanation is resistance to change: like any large organization, the state is difficult to move because most people, both inside and outside, prefer it when things stay as they are. There’s also the pusillanimity of politicians, who are more focused on that TV interview tomorrow morning than on achieving long-term goals. And then there’s the shape of the state as a cathedral-like organization. This kind of processed, standardized, hierarchical organization used to work marvels during the Fordist Age. But today’s Entrepreneurial Age rewards organizations with a very different shape from that of the state—and hence the idea of reshaping it.

3/ The idea that the state prevents politicians from delivering on their promises is nothing new, however. These days, France’s Emmanuel Macron talks about the “deep state” as a code word to describe those civil servants who want to keep the status quo at any cost. For the British, the main reference in that field is the great BBC sitcom Yes Minister/Yes Prime Minister that marked the 1980s and was said to be a favorite of Margaret Thatcher. There was a brief period, mostly during the 1990s and the 2000s, when politicians could provide the illusion of effective action with a sound communication strategy (that shift is described in a modern reenactment of Yes Minister called The Thick of It). But even that doesn’t work anymore. As Robert Phillips of Jericho Chambers puts it, now “it's what you do that counts, not what you say.” Voters are so well-connected to one another thanks to technology that they’ve developed an acute sensitivity to standard political bullshit. 

4/ So yes, in theory, it’s vital that we reshape the state. But how do you do it in practice? There are different problems, which I highlighted in my thread:

  • In countries such as the UK or France, the state is a social construct thousands of years in the making, and you simply can’t reshape that overnight. Remember that the relationship between politics and government is the oldest and toughest question in political science. Each country answered it with its own culture and came up with its own institutions. Like the French, the British didn't do that bad, and I’d argue that they’re still quite good.

  • The curse of developed countries is that you cannot rebuild the state from the ground up. We used to be best in class in terms of governance (in some cases we still are). But, for better or worse, we can't just get rid of what we have. 

  • You can't reshape the state by simply standing next to the boss. Dominic Cummings might have the impression that by virtue of sitting at 10 Downing St., he has influence over the organization below him. But government is about implementation and delivery, not power plays at the top.

  • Even it you want to get rid of the state and replace it with something else, remember Gall’s Law: “A complex system that works is invariably found to have evolved from a simple system that worked. A complex system designed from scratch never works and cannot be patched up to make it work. You have to start over, beginning with a working simple system.”

5/ Transforming a large organization is difficult and prone to failure (see General Electric for a recent example), but that doesn’t mean it’s impossible. Here’s what we know about what works:

  • As explained by Harvard’s Clayton Christensen, all large organizations that have overcome the innovator’s dilemma have taken the same path: not trying to reshape themselves, but creating something new and different on the side. There still aren’t many examples, however: IBM’s PC is one that Christensen frequently uses; Nestlé’s Nespresso is another that comes to mind.

  • Most of the time, that something new is barely connected to the parent organization. In fact, most of the output of corporate research is used by outside organizations rather than by whomever commissioned the research. Xerox developed the mouse, but it was Apple that innovated with it. You can imagine a scenario in which the new reshapes the old once it reaches critical mass, but that very rarely happens. Indeed, Apple became way bigger and more successful than Xerox, but it never considered acquiring Xerox. Why even bother 🤷?

  • There are some cases in which large organizations have reinvented themselves without making a detour to the outside, but these are so few as to make it difficult to draw conclusions: there’s Amazon turning into a tech company; Apple (see this article about how Steve Jobs shaped Apple’s governance and management to ensure continuous change); and then there’s Goldman Sachs.

6/ All of the above is why I think Dominic Cummings is bound to fail. Like many people with a Prometheus complex, he wants the best of both worlds. He wants the proximity to power and the intoxicating impression of being at the top, orchestrating it all. At the same time he wants to build new things. But it doesn’t work that way. If Cummings had the radical ambition of a Steve Jobs, he wouldn’t become a special advisor to Xerox’s CEO (in this metaphor, that’s Boris Johnson). Rather he would put as much distance as possible between himself and the top of the organization. He could then try to be a Robert Moses, having Johnson put him in charge of a new policy territory and then building his own fortress with absolute control so as to implement radical innovation. Or he could be a Jeff Bezos, leaving government altogether, going to build a successful GovTech startup (with Daniel Korski’s help 😉), and then supplying the state with a new product designed within a radically different culture. 

7/ But no, Cummings wants to have it all. Imagine if the head of Google X had authority over every other senior vice president at Google, including the ones in charge of business and operations. Either they wouldn’t last a week, or the whole group would spend so much time and energy fighting against each other that they would ultimately destroy the whole organization from the inside. Why do you think R&D departments are always separated from the rest? Because, as explained in Hedge

Strict separation was a way to provide autonomy to the researchers rather than locking them into the main organization. It was also a way to isolate the main organization from the apparent chaos that reigned in the realm of scientific research.

And why do you think the optimal model is now to build a startup on the outside? Because, unlike a bureaucrat or a special advisor, an entrepreneur has nothing to lose. In his current position, Cummings has A LOT to lose, which is why he’s determined to endure the suffering that comes with battling the entire civil service. But that will all come at the expense of effective action.

Indeed, Cummings thinks he has the kinetic energy of the Brexit campaign to help him. But he’ll find out that the energy of a campaign rarely translates into the capacity of reshaping the state. Today, Brexit is practically done. Most people who pushed for it are now satisfied. And Cummings will likely discover that they’re missing in action when it comes to building new things. (And, again, he will also find that in today’s world you can’t spin your way out of ineffectiveness anymore.)

8/ There’s no lack of precedent for all this. Trump’s Steve Bannon is one. Remember when journalists wrote at length about his ambition of “deconstructing the administrative state”? Well, six months after that, he was out. Karl Rove, once a special advisor to George W. Bush, is another example, as detailed in this 2007 article in The Atlantic:

Rove’s greatest shortcoming was not in conceptualizing policies but in failing to understand the process of getting them implemented, a weakness he never seems to have recognized in himself. It’s startling that someone who gave so much thought to redirecting the powers of government evinced so little interest in understanding how it operates. Perhaps because he had never worked in government—or maybe because his standing rested upon his relationship with a single superior—he was often ineffective at bringing into being anything that required more than a presidential signature.

I know of many examples within the French government: people who bet everything on being radical and ended up spending a lot of political capital for minimal reform because they had to show something to the voters. (Think: Sarkozy.)

9/ One thing I’ve never understood is why all those people who introduce themselves as strategists don’t actually act like strategists. They want to change everything, but that’s not what strategists do. While innovation is about breaking constraints, strategy is about embracing them. And so if those people were serious about delivering results, they would deal with the reality of the situation and embrace it as their own.

The state is a giant bureaucracy? Well, use it for what it does best. Not happy doing that? Well, get out and build something else on the side (why do you think I left government 10 years ago?). Anything between those is bound to fail, and Cummings will likely be remembered for all the shouting and chest thumping, followed by no actual results. In Italian opera, singers can spend hours singing “Andiamo, andiamo!” 🎶 and yet they never leave the stage. Likewise, Cummings can spend years saying that he’s changing everything, but there’s a high probability that it all remains in place in the end. (Unless the state simply crumbles out of exhaustion, thus weakening the resistance from the inside, but I wouldn’t equate that with success in reshaping it.)

10/ 20 years ago, Tony Blair understood that what mattered was implementation and delivery. He proved to be a good strategist because he decided to use what he had rather than restarting everything from zero. He had good reasons to do so: he was Labour, and so he had to endorse the state as an effective tool for delivering change (which is, after all, part of Labour’s strategic positioning). But he also wanted to improve delivery, which is why he invited Sir Michael Barber to set up what became known as the Prime Minister’s Delivery Unit (BTW Cummings wrote about it).

It so happened that as an inspecteur des finances I investigated that unit on behalf of the French Government in 2006-2007. And the key finding as to why it worked was that Blair imposed strict discipline from the top down, leading by example. That meant:

  • He (almost) never missed a meeting, and always arrived on time.

  • He was perfectly briefed and entirely focused.

  • He listened intently so as to take action.

  • He gave clear instructions both to the unit’s team and to the Cabinet.

Does that seem like Boris Johnson to you? I don’t think so, and Cummings will soon discover this important law of the world: You’re only as good as the master you serve.

(Again, that explains startups and entrepreneurs: if you want to tackle a big challenge, you’d rather serve no one.)

Please scroll down for a comprehensive reading list on transforming large organizations.

🎉 Starting the year strong. I’m honored that my book Hedge: A Greater Safety Net for the Entrepreneurial Age was featured in the annual reading list of O’Reilly Media’s Next:Economy newsletter. Here’s the whole list: part 1 and part 2. As for Hedge, you can read all about it here and ⚠️ buy a copy on Amazon ⚠️ if you don’t already have one.

📕🇫🇷 Hedge will soon be published in French by Les Editions Odile Jacob. It’s due for release in the third week of February. It’s not exactly a translation as I’ve been reshaping the book’s outline a lot and adapting it for the French/European context. The launch of this edition will be supported by a series of conferences titled Nos Jours heureux, during which I’ll dig deeper into particular topics discussed in the book. The first one will be on Thursday, January 16 at The Family in Paris. Here’s the link to register: Nos Jours heureux : Un contrat social pour l’âge entrepreneurial.

₿ For those interested in crypto (and all of you should be), a group led by Balaji S. Srinivasan just launched Nakamoto, “a venue for quality technical, philosophical, and cultural writing that is of general interest to the crypto community as a whole, for beginner and expert alike”. You can have a look at the first contributions, including Balaji’s inaugural one: Bitcoin becomes the Flag of Technology. It all looks very promising!

My colleague Kyle Hall and I translated a Twitter thread about Nespresso that I published in French in 2014. Some things have changed and some sources are outdated, but I still think that it’s an interesting precedent of successful corporate innovation, from which many lessons can be drawn: Lessons from Nespresso.

Here are more readings about transforming large organizations:

And two recent Cummings-related pieces:

From London, UK 🇬🇧

Nicolas