Introduction to Decentralization
Craig Calcaterra, Wulf A. Kaal · 2021
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 or- ganizational 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 in- formation are ignored since they don’t have existing lines to the decision-making au- thorities. 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 outcom- peted 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 exter- nal threats. Decentralized organizations are more stable. Decentralized organizations do not crash in response to new external problems like crystalline hierarchies do. De- centralizing allows an organization to adapt to change and chaos. Decentralization, while it may be seen as wastefully redundant, gives every member greater autono- mous power. The book can be accessed here: https://www.amazon.com/Decentralization-Technologies-Organizational-Societal-Struc- ture/dp/3110673924/ and here: https://www.degruyter.com/view/title/569051 Electronic copy available at: https://ssrn.com/abstract=3782192
Cite: Craig Calcaterra, Wulf A. Kaal, Introduction to Decentralization (2021). SSRN: https://ssrn.com/abstract=3782192. https://doi.org/10.2139/ssrn.3782192
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