Years ago, I watched a strange phenomenon unfold at a company where I knew someone on the inside.
The CEO made some bizarrely destructive calls that, frankly, undermined the entire organization. Powerful investors were upset. So upset that you might imagine that they would punish that CEO. Then that CEO went to them and asked for more money, on extremely generous (to him) terms. He got it.
Why did big screwups from the leader cause increased funding? It stems from a concept I’m calling Chaos Budgeting.
First, the obvious core idea: Every organization (as large as a country, as small as a household) has a balance sheet. That balance sheet has tangible assets, but also intangibles like morale, brand positioning, etc. One of the important intangible assets it has is stability (or its antonym, chaos).
And now, the surprising corollary: an organization can only take so much upheaval. If someone ramps up the chaos so that the budget is maxed out, their opponents can’t spend it — even to hold them accountable in the short term.
The organization was so unsettled — so chaotic — that those with a stake in it felt bound to tamp down on it and increase stability, even if that meant rewarding the person causing that chaos. Why did they have a stake in it? Because it was working on an important, time sensitive mission where failure would cause ripple effects across the landscape. It was too important to fail.
If your stability/chaos budget is spent, you can’t spend it to hold people accountable.
I think we can see this dynamic around us in surprising ways. In 2016, the country as a whole was open (maybe eager) for some chaos. Trump won. By 2020, though, we had a ton more on our balance sheet. Covid! Norms! Impeachment! A lawless executive. And the country was yearning for more stability. Not only did that help Biden win the general, it explains why Bernie lost the primary. His campaign was talking about expansive executive orders, litigating their proposed laws in the supreme court — chaos, in order to overturn “corrupt establishment politics”. Primary voters made the determination that the country could no longer afford that brinksmanship; he lost.
This helps explain why terrible people at work can’t be forced out, or why bad CEOs get severance packages and salutes rather than their dirty laundry spilled.
It explains why relatives who cause drama and act hostile keep getting invited to family gatherings — their bad behavior is priced in. But kicking them out would cause too much short-term chaos debt.
Now, this isn’t a huge insight, nor is it One Weird Trick to always get your way. That organization I was following? When things settled down, investors were able to derisk their support and make it no longer Too Important To Fail.
What does this mean for navigating groups as a founder, staffer, investor, volunteer, or citizen? I’m not sure. I have a few small ideas, but I’m still chewing on it.
- Don’t ever max out your chaos budget — because then accountability gets screwy.
- When people avoid creating ‘thrash,’ they might be protecting the organization’s stability reserves
- There’s a tragedy of the commons here: multiple actors competing to spend the same chaos budget. Unclear if you should dive in yourself or try to find a way to solve the tragedy.
- When you see people in the news break things destructively, maybe this is part of their plan.
I don’t know. I bet there are bigger, more important insights to be had here. Let’s keep thinking about it.