Winning with class
What businesses are made of
There are two components to businesses: exploiting a resource that you somehow got ahold of, and using your own imagination to create innovative solutions to new problems.
In technology, among typical exploitation services, we have: internet service providers (selling bandwidth), hosting companies (selling storage), mobile carriers (selling part of the spectrum), web lockers (selling stolen intellectual property), payment platforms (selling ease of use). This is, of course, an over-simplification, and thankfully many services in these areas are not accurately described here.
Typical creation services are: teaching (selling knowledge), programming (selling know-how), design (selling good taste), marketing (selling hot air), etc. All of these cannot be simply optimized as a function of simple variables, because they are hazardous, it's no longer simply dividing a resource in order to squeeze as much money as possible from the customers, it actually requires a creative process, which is typically long-winded, hard to predict, and poorly documented.
If you object that, for example, programming is easy to quantify, it has been too long since you have worked on something non-trivial. If you object that design is a straight-forward process, you clearly have no sense of taste. And if you don't understand how marketing impacts the success of a company, you are probably looking up to Apple starry-eyed, dumbfounded. But enough about this.
From a capitalist, number-crunching perspective, creation services suck, precisely because they're so much harder to deal with than exploitation services. To counter this problem, software development companies often attempt to sell the same product to many clients (which leaves them with the problem of coming up with a product general enough to be of interest to a significant number of clients, yet specific enough to be realized in a reasonable timeframe).
But there is another approach, which has been arguably popularized by economists, and it is to turn creation services into meta-exploitation services. By considering creative employees as a resource that you effectively contract, in small chunks, to your clients, your business starts to look very much like a typical exploitation business, with its well-known mechanics, easy to optimize. From a macroscopic point of view, it seems to be the ideal solution.
People are not resources
The approach I have just described above is nothing new or exceptional. It has been put in practice by almost every large company which pretends to offer creation services. Crowd-sourcing often is a misleading alias for meta-exploitation. By letting creative people fight for contracts in an open market, not only is a tremendous quantity of effort wasted, but the respect due to any person's work is completely disregarded.
In fact, open markets for programmers, designers, etc. are the ultimate admission of failure to understand how the creative process works. It is effectively equivalent to saying: "We don't have a fucking idea who will come up with shit or gold, when, or why. But maybe if twenty different persons attempt doing the same thing, one of them will succeed."
Such a model is very tempting to the web-minded entrepreneur. After all, it requires very little maintenance: creative people sign up themselves, contracts are posted by clients themselves, and the whole negociation for price and quality of execution is done fully by either party without any manual intervention. In other words, it is web scale. It's the Facebook dream.
Very little thought is required, however, to realize that this model is fundamentally broken. Design and programming are not disciplines that one creator can leave off and another one can pick up easily. If, for programming, the industry has been evolving towards extensive testing, and documentation efforts - supposedly lowering the entry barrier for the next programmer, seamlessly switching from one person to another remains but a sweet dream. As for design, can you imagine asking a designer to document his whole thought process, concept, inspirations, methods that are behind a particular piece of work so that another designer could continue his work?
The reality is quite simple. No matter how much process you try to apply to design, programming or other creative activities, no matter how many layers of management you shove on top of them, you will never be able to come up with an algorithm to optimize the workflow.
Programming has not been automated yet, because it cannot be automated. AI has been just around the corner since 1970, and we are still barely coming up with chatbots that can hold reasonable conversation (given an enormous statistics database / learning volume). The reason we cannot automate programming is because it is a creative act, and creativity resembles love in that there are many ways to stimulate it, but using force is bound to fail.
Class is a fugitive quality
Turning a creation service into meta-exploitation is quite honestly a disgusting business practice. Yet, as I mentioned, almost all the big companies are doing it, and the reason they are big now is that in the predominant business context, it tends to generate a lot of cash. Mammoths tend to want to deal with other mammoths, not with smaller, fast-moving animals. Multi-million dollar contracts are exchanged between enormous, inefficient entities, to satisfy established practices codifying which kind of company you can do business with, as a mammoth. This is, for example, why small, talented web creation studios don't get contracts from the Department of Defense — they simply cannot match the level of suitcase bullshit and corporate pedigree that is obligatory in that kind of relationships.
Taking a few steps back, we see two typical interaction scenarios: mammoths dealing with other mammoths, exchanging millions of dollars for overrated results, and small teams dealing with small clients, exchanging thousands of dollars at a time for (often) underrated work quality. What can we gather from that situation?
I don't believe mammoths are ready to deal with small groups of talented people yet. I honestly don't expect this to change in the next few decades. However, it is possible to create a successful business with a small team, focused on a work of love and determination. GitHub is one of my favorite examples: bootstrapped, making so much profit that they're hard at work figuring what to do with all that cash, growing their team organically while maintaining a friendly company culture, staying focused on providing a high-quality social code hosting platform, while paying beer rounds in pretty much every city they travel to! Compare this to Google, which has clearly been overtaken by administrivia in the last ten years, seems to be mostly busy acquiring young start-ups, and which continues to be ridiculed almost every time it attempts to deviate from its core business.
Then again, it depends on your definition of success. Would you rather make a billion by dehumanizing people, showing a complete lack of respect for both your craft and your clients, abusing an illegitimate possession of resources which ought to be basic human rights? Or would you rather make a million by working in a small team using your creativity, and be able to go to sleep with peace of mind, knowing that it's by your own efforts that you have won the battle, your own creativity, and that this success was forged in the respect of the persons you collaborate with?
Final words: expanding the horizon.
It is not just about programming and design. The same schemes above apply to the music and cinema industries, which have been particularly in focus these last few weeks. As time passes and technology evolves, it is slowly becoming clear in my mind that maybe, just maybe, the current Hollywood movie production model is not going to be sustainable for long anymore.
Vimeo is full of creative people showing every day that you don't need a military budget to make a vivid piece. Digital equipment has made video acquisition almost costless, all that's left is working with talented people, having a knack for telling stories and transmitting emotions, and leveraging social media to publish your work for virtually no cost.
As well as small development studios can achieve what big companies struggle to pull off, small, dedicated production teams shoot their way through my heart like megaproductions seldom do. And maybe, ultimately, that is the solution to an economical problem as well. Is the world ready to give up global culture?