Strategy mercantilism

There's a lovely term I've heard used to describe a pattern of questionable decisions in large companies: strategy tax. Let's say you're part of a team in a big company, working on... I don't know, a video hosting site. You try to make the best product you can, listen to your users, and things are going pretty well. Until one fateful day, someone upstairs hears about your comment system, and they say "hang on, our social product has a comment system, you should integrate with it". Never mind that it sucks, you need to use it anyway, because that's what's best for the company.

One way of thinking about this is that if these were two companies rather than one, both free to splash about in the frothy ocean of free-market capitalism, what would happen? Well, unpopular-shitty-social-network company and popular-video-hosting-site company wouldn't really have any reason to make a deal. Maybe popular-video-hosting-site would even shop around and find out that actually-popular-social-network has a much better deal to offer in exchange for integrating with them. But this is the real world, and you're not two companies, you're one company. So you can't make that good deal. In fact, you can't even make the medium deal of just sticking with your regular comments. You have to accept the worst deal, even though it costs you. And that cost is the strategy tax, the price of having a strategy.

Although it's a catchy name, I'm not sure tax is actually the best word here. In economic terms, you could call it a kind of deadweight or efficiency loss. Alternatively, you could interpret stategy tax as meaning strategy tariff, an artificial penalty that a non-strategic option would have to exceed to be used over your strategic one. If you think of this idea in terms of trade policy, it bears a lot of resemblance to the debate around free trade: if your homegrown product sucks compared to the external competition, do you prop it up or just let it fail? In that sense, perhaps the best term is strategy mercantilism.

Although it's usually used to talk about big companies, for a smaller group or even for an individual this idea can still be useful. If you institute some process, you are artificially distorting the decision market. If you say that all help requests must lead to an internal improvement, you remove the option for your employees to make that decision based on its merits. I've occasionally tried to add extra structure to what I write, with things like experiments, retrospectives, or ongoing series, and my experience is always that it makes things much harder. There's something that would be the easiest or best to write at the time, but that's not the decision I go with because I have my thumb on the decisionmaking scale.

Of course, strategy isn't always bad, often it's very good, but I'm making the argument that it is always inefficient. Any time you make a large-scale decision that requires overriding your small-scale decisions, you're throwing away the value that those small-scale decisions could generate. Strategic decisions do provide you with value, and that value might outweigh the inefficiency, but it's an inefficiency nonetheless.

Some external party who can figure out how to achieve the same ends with less strategic losses will be able to do what you're doing more efficiently, and since they're not restricted by any kind of mercantilism they may just come and eat your lunch.