Introduction to Decentralization

Abstract

This is an introduction to decentralization. The authors distinguish centralized from decentralized organizations and show their respective uses and limitations in differ-ent contexts. A centralized hierarchy is the most efficient architecture for solving the particular limited problem it was designed to address. But centralization is not the optimal organizational structure under highly dynamic conditions. Rigid power allocation means the organization can’t easily reorganize to adapt to unanticipated challenges from the outside. Clear rules lead to internal corruption when the letter of the law overrides the spirit of the law and members compete for power. New sources of information are ignored since they don’t have existing lines to the decision-making authorities. Information at the edge is lost. The authors show that advances in technology have given decentralized systems the efficiency they have lacked in previous eras and that allowed them to be out-competed by centralized systems. Decentralized organizations thrive under the types of changing circumstances that break centralized organizations. Information at the edge is naturally incorporated and communicated so the system can adapt to external threats. Decentralized organizations are more stable. Decentralized organ-izations do not crash in response to new external problems like crystalline hierar-chies do. Decentralizing allows an organization to adapt to change and chaos. De-centralization, while it may be seen as wastefully redundant, gives every member greater autonomous power.