How Business Is a Lot Like Life

What does this say about a company whose leaders push it to the edge of chaos?

What this means is that the edge of chaos is a condition of relentless discomfort. That's first. But it is always uncomfortable when an environment has aspirations or structure that is so strong that your discomfort makes you constantly hone your competitive edge. Sure, we all know of organizations where people are relentlessly uncomfortable because those companies are simply miserable places to work -- where the energy that's produced by being uncomfortable simply goes toward unproductive or unsatisfying things.

Go back to how Capital One manages the tension. They hire hard-charging individuals and tell them to be entrepreneurial. You have to come up with new ideas every day of the week and ignore everybody who gets in your way. You're supposed to grow 20% a year. Those are all things that amplify the extreme entrepreneurialism in the company -- but how do you keep it from self-destructing? Along with growth rates and customer-retention rates, people at Capital One evaluate their own employees on what they call "behavioral anchors": Do you get things done through other people? Do you play well as a team member? Overall, the company's productivity arises from the fact that the structure of its corporate design allows all of the entrepreneurial stuff to have coherence. The important thing to remember is that innovations rarely emerge from systems with high degrees of order and stability. On the other hand, completely chaotic systems are simply too hot to handle. That's why it's important to find the edge of chaos, where a company can experience upheaval but not dissolution. The edge of chaos is not the abyss. It's the sweet spot for productive change.

Your third law involves self-organization and emergence. Where can we see that law at work?

Maybe the best way to understand self-organization is to describe what happens when it's not allowed to work -- when the old command-and-control business model is practiced. Remember January 1999, when a blizzard closed Detroit Metropolitan Airport and canceled outbound flights? Snowplows kept the runways open, and a number of inbound planes were able to land throughout the evening. Most carriers were able to bring their planes to the gates to off-load their passengers. But not Northwest Airlines.

Northwest's ground staff seemed paralyzed by indecision, held hostage by rigid policies and practices. Nearly 4,000 passengers were virtually imprisoned on 30 Northwest flights for as long as eight hours without food, water, or working toilets. Fights broke out. Passengers threatened to blow open emergency-exit doors. Northwest pilots screamed at ground staff over the radio to tow the planes to the gates before they lost total control of the situation.

The fact is that Northwest's inflexibility in adhering to rules and procedures for passenger safety caused them to overlook many possible solutions to the problem. They could have towed the planes close to the gates and let the passengers off on the tarmac. They could have let them off on the runways and bused them to the terminal. They could have brought service vehicles out to the planes with food, water, videos, baby formula, and diapers. What was missing that night in Detroit was self-organization. It would have been entirely different if the company's leaders had told the ground staff, "We have a huge disruption on our hands. Be innovative and imaginative, and demonstrate to each other and to our customers that we can come through when it counts." Instead, Northwest lacked the capacity of a living system to self-organize.

If that's a negative example, where in business can you see a positive case of self-organizing systems and emergence at work?

The opposite of the Northwest example would be the way that Linux has spread. It's an organization of open-system software programmers, now numbering 35,000 worldwide, who have managed to generate software for servers that now claim 35% of that market. This is a truly remarkable army of people, all independent, who come up with effective and robust solutions in their software because it's constantly being tested and is evolving in real time. It's a far more effective way to develop, test, and release software than its competitors' traditional commercial releases.

At the other end of the technology spectrum, Tupperware Worldwide is a powerful, successful self-organizing system. Each dealer is self-employed and must recruit others to host home parties. Those who excel as hosts become dealers, and the most-successful dealers become team leaders of protégé dealers. Today, more than 80% of all homes in the United States have at least one Tupperware product in them. Tupperware sales exceed $2 billion a year.