Updating a few mental models in the past month, and how to view work in the modern context is one of them.

Views are personal, and a combination of what I’ve experienced, read, and gotten wrong along the way.

I am assuming most people reading this work in the modern economy, what’s popularly called the knowledge economy. The work done inside it is knowledge work. The person who does this work is the knowledge worker. I’ll just call this person the worker for the rest of the article.

“Knowledge worker” was a term coined by Peter Drucker, by the way.

What prompted this was an observation: most modern companies, or at least the ones I’ve worked at, operate in the knowledge economy but run on mental models of management from the Industrial Revolution, borrowed heavily from Frederick Taylor’s “Scientific Management.” I think it made total sense in its time. I think it’s mostly irrelevant now. I want to specifically get into how decision making happens inside organizations…

Taylorism cracked the code for the assembly line. You run experiments on how to build a product, FAFO until you find the optimal way, then build a machine or train workers to follow a rigid, step by step script, and keep them doing the exact same thing forever. Output shoots up. If anything breaks, the decision shoots straight to the top. Thinking happens upstairs, execution happens downstairs. Fair enough.

But Taylorism collapses the moment the worker knows more about the task than the manager ever could, because for knowledge work, the task IS the thinking.

And what happens when you paste those exact same industrial principles onto modern knowledge work?

You build dumb organizations!

Here’s how it plays out. Decisions get bottlenecked at the top, but the top is almost always completely out of touch with the actual work. The person right there in the trenches, the one with the highest resolution view and the fastest feedback loop, is handcuffed and forbidden from making the call. Because they’ve been forced to stop thinking, they stop caring about the outcome. They can’t be held accountable for a decision that wasn’t theirs, so they easily make the manager the scapegoat when things go sideways. Worse, because the worker outsources their thinking, they never learn from the feedback loop. Over time they actually get dumber. Decisions keep rolling down from an out of touch leadership, and everyone from top to bottom pays for it.

There’s a counter-argument here: what if the worker is so laser-focused on their own little world that they end up wrecking the wider project or the organization?

(There’s also the skin in the game problem. If the worker has little to no stake in the outcome, the incentive to put in the extra effort is compromised regardless of who’s deciding. I want to keep that out of scope here, but my argument is incomplete without it, so noting it.)

Take a simple, extreme example. An employee’s productivity might skyrocket if they just load up on extra credits for Claude, but that unvetted spend might blow a hole in the company budget. Less cash for marketing, which bleeds the whole org over time. No one sees these macro-constraints better than management. That right there should be the actual job of the manager: provide enough context about the organization, without overwhelming the worker, so they can make the call themselves and own the outcome. The solution can’t be centralizing every choice at the top just to avoid friction. The toll of command and control ends up a net negative for everyone.

The management’s job can shift from directing execution to setting objectives and clearing the road. Management by objectives, as they say.

When I started researching about this, turns out that similar arguments were already made by thinkers in different contexts, decades ago!

Hayek made basically this exact case in 1945, except about entire economies instead of companies.

His point wasn’t that central planners are dumb. It’s that knowledge is scattered across a million people in a million untransmittable little pieces, so no single node, however smart, can hold enough of it to plan well.

The price mechanism works precisely because it doesn’t need anyone to understand the whole system. A price moves, you adjust, done. Nobody needs a memo explaining why wheat got expensive.

In fact, this got me thinking on whether we can replicate the price mechanism inside organizations. Still thinking about it, will write in detail about it going forward.

A loose way of thinking but useful analogy:

Think about how we view the relationship between the state and free markets. What if we apply a similar model to organizations?

The state’s involvement should exist purely to ensure fair competition, so the free market can run at absolute efficiency on its own.

The same dynamic can govern the relationship between an organization and its employees. Leadership sets the guardrails and the context. The workers use their local intelligence, and the loop back to leadership, to actually drive the work forward.