Trust vs capital

Recently I came across an article that boldly claimed in crude language that truly non-hierarchical organisations do not exist and never will exist. Given the success of several non-hierarchical organisations that I am aware of, given that I am part of one such organisation, and especially given the text was penned by an author representing an organisation in the sharing economy, I was more than a bit disappointed.


There is no shortage of articles claiming the world is inherently hierarchical, ranging from simplistic opinion pieces to scientific papers from various disciplines.

Networks vs hierarchy

To avoid pointless arguments about labels and semantics, I am going to stick to the following dictionary definitions.

  • hierarchy : (a) a system or organisation in which people or groups are ranked one above the other according to status or authority (b) an arrangement or classification of things according to relative importance or inclusiveness
  • authority : the power to give orders, make decisions, enforce obedience, and influence others
  • network : a group or system of interconnected people or things

There are two key differences between hierarchies and networks as defined above:

  1. The connections in a hierarchy form a directed tree, whereas the connections in a network may form any kind of graph
  2. A hierarchy always depends on a ranking/importance metric, whereas a network only depends on the formal definition of a graph

In other words, hierarchies always have a human social and political aspect shaped by human perception and culture, whereas networks need not.

Whilst undoubtedly hierarchies have been part of the social furniture throughout written human history so far, the following observations are worthwhile considering before elevating hierarchy to a fundamental law of human nature, biology, or perhaps even physics:

  1. The growing body of knowledge about pre-historic human societies points towards highly egalitarian forms of organisation, and to strong social norms against any individual attempts to gain power over others
  2. The digitally networked world has fundamentally altered human patterns of interaction, and has created information flows that do not adhere to any ranking/importance metrics – even if there are some who actively attempt to reverse this emergent behaviour within digital networks
  3. By definition, a hierarchy is a social construct, and like all social constructs, it only functions to the extent that members of a group believe in its relevance and have a shared understanding of the specific rankings within the hierarchy
  4. All human observations of the biological world are biased by our human perspective, including current cultural baggage relating to hierarchical forms of organisation
  5. Referring to spatial containment in the physical world as a hierarchical form of organisation is a reflection of human [grandiosity] bias rather than a reflection of human dominance over the universe

The real challenges with hierarchical forms of organisation result from cultural inertia and from the extreme level to which humans are culturally programmable.

We do not yet have enough evidence to know to what extent it is possible to transform large hierarchically organised social groups into non-hierarchical networks, but there is no shortage of examples of groups that have emerged over the last few decades that operate on a set of principles that do not include a social ranking/importance metric.

It is conceivable that a shift towards non-hierarchical forms of organisation is a generational cultural shift that is only accessible to digital natives and those who are not deeply embedded in traditional pre-digital cultures.

Learning vs power


A hierarchical organisation is the antithesis of a learning organisation

This observation is backed up by evidence from thousands of organisations that strive to improve or establish a culture of innovation. All effective approaches for continuous improvement (such as Kaizen, Toyota Production System, Waigaya, …) and innovation (Open Space, collaborative design, …) share one common principle:

The belief in the existence and relevance of social hierarchies must be suspended

This is no accident. By definition, hierarchies confer power on specific groups and individuals, with immediate effects on the ability of a group to learn and adapt to a changing environment. Any form of hierarchy or power indicates dampened feedback loops. Power can be understood as the privilege of not needing to learn.

Competence vs authority

Looking under the hood of any hierarchical organisation and analysing communication and collaboration patterns reveals three social structures:

  1. The official hierarchy as specified in an organisation chart or similar artefact, which defines the scope of various “authorities” within the organisation.
  2. The unofficial hierarchy, which reflects the actual coercive power structure, which inevitably emerges within all hierarchical structures, and serves as the career climbing ladder within the hierarchical structure.
  3. The competency network within the organisation, which is the union of all the multi-dimensional domain-specific competency rankings that individuals allocate to the other members within the group. Whilst this network includes social rankings, each individual independently allocates competency rankings to other group members, leading to a multi-dimensional network rather than a tree based on a unidimensional ranking.
    In concrete terms, within a given organisation I may have a preferred contact for ERP software problems, and may know of another couple of less preferred contacts for ERP problems, and my colleague may have a different preferred ERP problem solver. And of course I would engage with my preferred ERP expert primarily in relation to ERP issues and not in relation to problems related to new product development.

The competency network is the only social structure that directly supports the purpose of an organisation. Whilst some parts of the competency network may bear similarities with the official and unofficial hierarchies, many parts will diverge significantly from the official structure.

As another concrete example, in my local community, I may have a preferred dentist and may know a few less preferred dentists, and my neighbour may have a different preferred dentist. Of course I would not engage my preferred dentist to solve plumbing problems or transportation problems – all competency ratings are domain specific.

The existence of competency networks represents an inconvenient truth for all authorities, it contradicts the simplistic claim that a lack of hierarchy leads to chaos and dysfunction. However, removal of an established hierarchy does not automatically result in a well-oiled competency network. Cultural inertia can keep fear, mistrust, and in-group competition alive, and easily leads to the emergence of new oppressive hierarchical structures.

As far as I can tell, all those who claim that hierarchical organisation is an inevitable result of [human] nature confuse unofficial hierarchies with competency networks. Only the former roughly correspond to trees. The latter tend to be much more complex graphs that are not governed by any simple one-dimensional ranking. It can be argued that in terms of resilience and adaptiveness, unofficial hierarchies are as least as counter-productive as official hierarchies.

All healthy and resilient communities have a well-functioning competency network. If a healthy community also claims to have a hierarchical structure, the hierarchy tends not to be associated with significant decision making power.

Agency vs disengagement

One simplistic argument sometimes advanced to “prove” the universality of hierarchy refers to the function of animals, citing the brain as the dominant locus of control or the subordination of fingers to the hand and arm, etc. What all these arguments ignore is that agency and control is the result of interactions between billions of cells, not emanating from any top level cell, and that modularity in terms of organs or spatial containment at other levels of scale does not conform to the definition of hierarchy.

Hierarchical structures compromise the learning ability of a group by inducing fear and reducing the level of agency perceived by the individuals within the group. What may be perceived as a well-functioning organisation by the authorities within a hierarchy is characterised by cultural inertia and increasing levels of disengagement amongst those who do not benefit from the hierarchical arrangement of power.

Hierarchical groups are easily out-competed by non-hierarchical groups. Whilst the latter benefit from the wisdom of crowds (a group of collaborating and independently thinking agents) the former suffer from the stupidity of crowds (a mix of disengaged cynics and a small group of ego-centric authorities preoccupied with in-group competition).

Trust vs capital

A good way to understand competency networks is via the notion of trustworthiness and the nurturing and maintenance of trusted relationships. Trust is a meta-belief that allows propagation and installation of beliefs in a network of agents.

Trust between two agents develops through an ongoing process of maintaining shared understanding, and it correlates with the intensity and duration of maintaining shared understanding.

A competency network is the graph of experience-based pair-wise trustworthiness ratings in relation to various domains between the members of a group.

Trustworthiness ratings are tied to specific pairs of individuals; they are not directly transferable and they can not easily be aggregated. This limitation probably was one of the key reasons for the small size of pre-historic hunter-gatherer societies.

The invention of money was a more or less “successful” attempt to decouple trustworthiness ratings from specific pairs of individuals. Throughout history money has been used as a proxy for trust. The relationship between money and trustworthiness has always been on very shaky ground, regularly leading to (a) wars – the option that showcases collective human stupidity, and (b) debt jubilees – the option that showcases some level of human self-understanding and empathy.

Modern capital, even in its digitised form, including cryptocurrencies, still suffers from the flawed assumption that somehow it is possible to divorce trustworthiness ratings from specific pairs of individuals, and to aggregate and liquidate such ratings. Yes the social delusion seems to work, but in a world of exponentially accelerating transactions, only over increasingly short time horizons.

The real opportunity for human society lies not in the invention of ever smarter forms of liquid capital and in-group competition, but in the recognition of human cognitive limits, and in the recognition of the extreme value that resides in competency networks.

The age of digital networks for the first time gives us the opportunity to construct cognitive assistants that help us to nurture and maintain globally distributed human scale (= small) competency networks – networks of mutual trust.

Humans knew how to build and maintain mutual trust many hundreds of thousands of years ago, and our brains are still designed to operate on mutual trust. It is time to tap into this potential and to combine it with the potential of zero-marginal cost global communication and collaboration.

Distributed collaborative competency networks

We are only beginning to rediscover the potential of competency networks, but I believe there is more than enough evidence on the table to dismiss the myth of hierarchical organisation as a law of nature.


Describing how to bootstrap competency networks on top of a dysfunctional economic platform, and describing concrete operating principles for such networks goes beyond this short article.

Related questions and experiences can be shared and explored in depth at the upcoming CIIC workshop on 2 December at AUT in Auckland and at RMIT in Melbourne. Join us!

… and in case you can’t join us in December but have relevant contributions, by all means, please comment below. Or join us at the subsequent CIIC, which is never more than three months away.

Dates and times


3 thoughts on “Trust vs capital

  1. Hi John,

    Great stuff, as always. I have some minor points of disagreement, or perhaps when discussed the will be “yes, and” points:)

    Fast feedback for now: couple of points of clarification:

    You need to flip your former and latter here “Whilst the former benefit from the wisdom of crowds (a group of collaborating and independently thinking agents) the latter suffer from the stupidity of crowds”

    Your point “The direction within a hierarchy always depend on a ranking/importance metric, whereas the edges in a network only depend on the formal definition of a graph”. These two observations appear to be orthogonal: edge, extent or containment vs direction. You might always want to clarify what the direction you’re identifying related to.


    • Hi Paul,

      Thanks, errors fixed!

      Not sure how the second sentence you reference got garbled up into sloppy language. Have updated to what I meant to write:

      “A hierarchy always depends on a ranking/importance metric, whereas a network only depends on the formal definition of a graph”.

      Would be great to see you at CIIC on 2 December!



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