Apple & Elon Musk: Battling With Bureaucracy

Jack Manning

Jack is a 3rd year BESS student. In these piece he discusses Apple’s decline in innovation in the face of a growing bureaucratic structure, and Elon Musk’s intolerance of the phenomenon.

Bureaucracy quenches entrepreneurship. It’s a well documented phenomenon. Taking Apple’s relative decline in innovation in recent years, the blame will be placed on tightening hierarchical structures, and employees’ unwillingness to take risk given ballooning wages and job security. Given this reality Elon Musk’s aversion to bureaucratisation becomes clear, as he continues to succeed in cultivating an intrapreneneurial spirit within Tesla and SpaceX.
There is a dearth of innovative activity within heavily bureaucratised firms. Danish professor Jesper B. Sørensen, in his 2006 study on the subject, unequivocally concludes that those who work in large and old firms are less likely to become entrepreneurs. Backed by a slew of sources, he holds routinization, and a heightened opportunity cost associated with leaving, accountable.
This claim – that as firms grow larger their creative capacity diminishes – echoes Saxenian’s famous exploration of the underpinnings that allowed Silicon Valley to thrive. Her 1994 comparison between entrepreneurial activity at the valley and Boston’s Route 128 foreshadows the bleak state of the valley currently. Route 128, domineered by massive machine-like firms, acted to shield workers from entrepreneurial goings-on outside. A reliable flow of generous wages and job security within such rigid hierarchies dissuaded the more ambitious employees from taking risks. This left Route 128 lagging behind the trailblazing valley.
Where this leaves Apple presently – one-time architect of such profoundly revolutionary technologies – is the question. Gardere, Sharir & Maman’s article, The Need for a Long Term Vision with Apple and Samsung, is a fierce petition to these two tech titans to return to their innovative pasts. Times that were defined by reckless, risky and courageous experimentation today seem nigh-on alien, as Apple slaps an extra gigabyte of ram in its flagship smartphone to raucous applause.
The trio blame Apple’s stringent hierarchical structure for its weakening output of originality. This bureaucratisation, they claim, restricts the flow of ideas between the upper management at Apple and the rest of the company – something altogether necessary for intrapreneurial activity to flourish. They charge the firm with excessive focus on short-term profits.
Apple’s net income worldwide from 1st quarter 2005 to 3rd quarter 2018 (in billion U.S. dollars

apple-share-price

Figure 1 | Source: www.statista.com

In Silicon Valley particularly, Apple and other tech titans’ seemingly endless growth quashes potential cutting-edge innovation, in that would-be start-up pioneers are scooped up quickly by cushy wages and perks. The Economist early last September acknowledged that innovation on the part of employees within these giants remains possible, albeit to a dampened degree – given the homogenised nature of their operations.
To point the finger at a lack of creative direction on the part of Tim Cook would be reductive. Rather, the rigidizing of Apple’s internal structures as its revenue explodes time and again (see figure 1) ought to be scrutinised. The relentless innovation that occurred at Apple throughout the last decade was foundationally collaborative and facilitated by the disruptive spirit that permeated the entire company. Apple, in light of its market cap having surpassed 1 trillion USD earlier this year, is beholden to these trends of bureaucratisation.
Fighting upstream against the bureaucratic current is one Elon Musk. “The breeding grounds for entrepreneurial firms are more likely to be other entrepreneurial firms,” wrote Gompers, Lerner & Scharfstein in 2003 – particularly apt when considering Musk’s ferocious innovation at both Tesla and SpaceX.
In an interview conducted by Innovation Leader with Musk biographer Ashlee Vance, Musk’s aversion to hierarchy is cited as the main contributing factor to his firms’ profound ability to stave off bureaucratisation. Musk runs “a very flat structure,” according to Vance.
Space X’s arrangement as a private entity must too play a role in one-upping its competitors. Established aerospace companies such as NASA are by their state-owned nature heavily bureaucratised, and are hence ill-equipped to compete with Musk’s inexorable innovation. Musk’s lack of reliance on government funding dodges the hindrance of bureaucratisation at the hands of the state. This paves the way for an ecosystem in which daring and unrestricted experimentation can blossom.
However, Musk himself and the no-holds-barred philosophy he embodies almost certainly matters most. He is firmly against all-things-bureaucracy – from his hostility towards unnecessary meetings (“You haven’t said anything. Why are you in here?” goes the alleged confrontation with an evidently mute employee) to his loathing for unions – “Managers & workers [should] be equal [with] easy movement either way. Managing sucks btw. Hate doing it so much.” This reluctance to manage suggests an all-too-keen awareness of the detrimental effects of hierarchy on innovation.
Rigid hierarchy means barriers between managers and subordinates, and barriers – which can grow to be insurmountable all too quickly – result in an environment in which more risky and out-there ideas (i.e. the potentially ground-breaking ones) never see the light of day. This is the force Musk reckons with as he carries out his vision rooted in unselfconscious, ceaseless innovation.
As firms grow larger they should look to Musk’s all-out warfare against creeping bureaucracy as a guide to sustaining innovation. The rigid verticality baked into Apple’s ecosystem serves only to inhibit originality on the part of its employees. That so many would-be groundbreaking entrepreneurs are sucked in by its offering of vast salaries stands as a warning to innovative start-ups everywhere.

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