#42 One From Many VISA and the Rise of Chaordic Organization

Dee Hock, the visionary founder of Visa, shares his introspective journey from a conservative businessman to an advocate for decentralized, self-organizing systems in his book, "One from Many: Visa and the Rise of Chaotic Organization." Hock recounts his radical decision to leave Visa at the height of its success, driven by an inner voice urging him to seek a life beyond corporate power and wealth. His autobiography reveals his struggles with the "four beasts" of ego, envy, avarice, and ambition, and his quest for deeper meaning, leading to a solitary life of writing and physical labor. Hock's work on Visa exemplifies his belief in the chaotic organization, a concept that harmoniously blends chaos and order, mirroring the self-organizing patterns of nature. Despite Visa's remarkable success, Hock views it not as a model to emulate but as an archetype to learn from and improve upon, underscoring the importance of reevaluating our approach to organizational structures in the face of a rapidly changing world.

• D. Hawk experienced a childhood immersed in literature, nature, and love, which influenced his unconventional ideas leading to Visa's creation.
• Hawk's parents had limited formal education, and he was drawn to reading from a young age, though it's unclear how he obtained books.
• He describes a life of hardship, including using an outhouse in freezing conditions, and his mother's comforting gesture of warming his bed with a heated rock.
• Hawk lived in a world of his own, filled with nature, ideas, and imagination, and felt a stark contrast when confronted with the rigid structure of institutions like school and church.

"Nothing in my first six years prepared me for the shock of institutions with school and church came crushing confinement and unrelenting boredom."

This quote encapsulates Hawk's early realization that the natural world he loved did not reflect the institutional environments he encountered, which were confining and monotonous.

• D. Hawk developed the concept of chaotic organizations, blending characteristics of chaos and order, mirroring nature's organizing principles.
• Hawk's concept was influenced by his reading of the book "Complexity," which discussed spontaneous order arising in complex systems.
• He believes that institutions created by humans are often poorly organized and do not reflect the complex, diverse, interconnected, and self-organizing nature of the world.
• Hawk coined the term "chaotic" by combining the words chaos and order to describe his vision for Visa and other organizations.

"The hubris of science is astonishing. It will come as quite a surprise to countless poets, philosophers, theologians, humanists, and mystics who have thought deeply about such things for thousands of years, that complexity, diversity, interconnectedness, and self organization are either new or a science."

Hawk's quote highlights his belief that the principles of complexity and self-organization are not novel scientific discoveries but have been understood in various fields for millennia.

• Hawk's professional life was marked by intense conflict with traditional corporate structures and a quest to realize new organizational concepts.
• After founding Visa and leading it to maturity, Hawk made the difficult decision to leave at the height of its success, driven by an inner voice urging him to seek life's deeper meaning beyond business, power, and money.
• Visa's founding story is intertwined with Hawk's personal journey, including his battle with the "four beasts" of ego, envy, avarice, and ambition, and his choice to pursue isolation and contentment over traditional markers of success.

"Visa's not an end. Give it up in the business world as well. Completely irrevocably. Now, in time, you will understand."

This quote reflects Hawk's internal struggle and eventual decision to walk away from Visa and the corporate world, guided by an inner voice that promised understanding in time.

• The Founders Podcast explores the life and ideas of D. Hawk, including his approach to building organizations and his deep contemplation on the subject.
• Hawk's writing, described as almost poetic, indicates a profound understanding of organizational design that the podcast host finds unparalleled.
• The podcast host's personal circumstances, including illness and the development of a members-only podcast feed, are shared with listeners.

"He has thought more deeply about the way to build organizations than any other person I've come across so far."

This quote from the podcast host acknowledges Hawk's profound impact on the understanding of organizational structures and his unique approach to building them.

• Visa began as a non-profit owned by banks and was part of Bank of America, called Bank America, before becoming an independent consortium.
• The organization's function as a central ledger for financial transactions between banks contributed to its growth and eventual public offering, which was the largest U.S. IPO at the time.
• Hawk's leadership and innovative ideas were critical to Visa's transformation into a company with a massive market cap, surpassing many traditional banks.

"Since Visa's intermediate rates between banks and clears transactions between issuing banks and acquiring banks, it is the ultimate central ledger, or platform, for finance."

This quote explains Visa's role in the financial industry and its significance as a central platform for transactions, which contributed to its enormous valuation and success.

• During his isolation, Hawk developed a disciplined writing habit, producing works that reflect on the human condition and organizational design.
• His autobiography, "Autobiography of a Restless Mind," is filled with aphorisms and insights into his philosophy on life and contentment.
• Hawk's reflections reveal a person who values time, liberty, and contentment over wealth and status, and his writings offer a window into his thoughts and values.

"Through the years, I have greatly feared and sought to keep at bay the four beasts that inevitably devour their keeper, ego, envy, avarice, and ambition."

This quote from Hawk's autobiography highlights his personal struggle to maintain humility and contentment, avoiding the pitfalls of ego, envy, greed, and ambition.

• D. Hawk describes his various jobs before and during college, which included physically demanding and unglamorous roles.
• He views these jobs as a natural part of life and making a living, emphasizing the dignity in work without complaint.
• Hawk's autobiography, "Autobiography of a Restless Mind," discusses the value of hard work and the futility of whining.

"None of it seemed demeaning. It was life, it was making a living. It was what proud men did without whining."

This quote illustrates Hawk's belief in the inherent dignity of all work and the importance of a strong work ethic without resorting to complaints.

• In college, Hawk was introduced to classical literature and began to understand the capabilities and limitations of the human mind.
• He developed a critical view of institutions and the power dynamics within them, which began during his early schooling and persisted into adulthood.

"Another dean put me in the way of the classics and some understanding of both the powers and limitations of the human mind."

Hawk credits a college dean with guiding him towards classical literature, which helped shape his understanding of human intellect and its boundaries.

• Hawk's early career in the consumer finance industry is marked by non-conformity and innovation, leading to rapid growth in business.
• His success, however, attracted corporate demands for conformity, revealing the tension between individual ingenuity and institutional orthodoxy.

"Protected by remoteless anonymity and insignificance, four lambs, whose average age was 20, trashed the company manual, ignored commandments, and did things as common sense conditions and ingenuity combined to suggest."

The quote describes how Hawk and his young colleagues, referred to as "lambs," disregarded the company's established procedures in favor of their own common sense and creativity, leading to significant business success.

• Hawk explores the dysfunctional nature of mechanistic industrial age organizations, which prioritize procedure over results and discourage innovation.
• He meets Dick Simmons, who, unlike Hawk, uses his intelligence to exploit the system's absurdities for his own amusement rather than outright rebellion.

"What Simmons was trying to teach the lamb was not then ready to learn. It took him decades to synthesize the lesson. In industrial age organizations, purpose slowly erodes into process. Procedure takes precedence over product that should never happen."

This quote summarizes the lesson Hawk eventually learned from Simmons: in traditional organizations, the original purpose is often lost to procedural bureaucracy, hindering productivity and innovation.

• Hawk describes a personal low point where, despite being unemployed with a family to support, he is unable to bring himself to apply for unemployment benefits.
• This experience strengthens his resolve to never be financially vulnerable again, leading to a period of intense work to secure his family's future.

"Sick at heart, I drove slowly home to explain to a bewildered, pregnant young mother of two that entering the line was something I could not do. I did not know why then. I still don't."

Hawk reflects on the difficulty of facing his wife to explain why he could not bring himself to join the unemployment line, highlighting a deep-seated aversion to accepting help that even he does not fully understand.

• Despite achieving business success through unorthodox methods, Hawk considers himself a professional failure by conventional standards due to his nonconformity and rebellious nature.
• Throughout his career, Hawk continues to read extensively across various disciplines, seeking to understand the interconnectedness of different fields and becoming increasingly obsessed with the dynamics of organizations and power.

"After 16 years of unorthodox management and unblemished results, the sheep, by the standards of industrial age command and control organizations, was a failure."

This quote encapsulates Hawk's self-perception as a failure in the eyes of traditional corporate structures, despite his successful outcomes, due to his refusal to conform to established norms.

• D. Hawk explores why organizations are dysfunctional, which is a key theme in the transcript.
• He questions the effectiveness of traditional organizational structures and their adaptability to modern challenges.

"Why are organizations dysfunctional?"

This quote sets the stage for a discussion on the systemic issues within organizations that prevent them from functioning optimally.

• Individuals are increasingly in conflict with organizations, which is a pressing issue according to D. Hawk.
• The conflict arises due to a mismatch between individual needs and organizational structures or goals.

"Why are individuals increasingly in conflict with the organizations?"

This quote highlights the growing tension between personal values and the demands or culture of organizations.

• Society and the biosphere are in disarray, as noted by D. Hawk.
• The interconnectedness of organizational dysfunction and societal issues is implied.

"And why society and biosphere increasingly in disarray?"

D. Hawk suggests that the problems within organizations extend to broader societal and environmental issues.

• D. Hawk describes the dire personal circumstances leading up to the creation of Visa.
• He details the historical context of payment systems before the advent of computers.

"With three young children, a heavily mortgaged house, no job, little money in reserve, it was impossible to stay out of a dismal swamp of depression."

This quote paints a picture of D. Hawk's personal struggles before founding Visa, setting the stage for the company's origin story.

• D. Hawk draws an analogy between the industrial and computer ages.
• The industrial age extended human muscle, while the computer age extends the mind.

"Is there some analogy between the industrial machine age as an extension of muscle and the computer age as an extension of mind?"

This quote reflects on the transformative impact of technology on human capability and society at large.

• The credit card system before Visa was inefficient and prone to fraud.
• D. Hawk describes the disorganized state of credit card operations in banks prior to Visa's establishment.

"Most bankers looked down their noses at the card business, placing it lower on the scale of respectability than auto dealer financing, only then gaining skained acceptance by banks."

This quote reveals the low esteem in which the credit card business was held by bankers, which contributed to the system's inefficiencies.

• Visa emerged from a chaotic and disorganized payment system environment.
• The card business was seen as a low priority by banks, leading to a lack of investment and attention.

"By 1968, the fledgling industry was out of control. No one knew the extent of the losses, but they were thought to be in the tens of millions of dollars, a huge sum for the time and for the size of the system."

This quote emphasizes the severity of the problems in the credit card industry that Visa aimed to solve.

• D. Hawk criticizes the lack of innovation in organizational concepts.
• He suggests that despite changes in form and label, the foundational ideas of organizations have not evolved significantly.

"There has been no new commonly accepted idea of organization since the concepts of corporation, nation state and university emerged, the newest of which is several centuries old."

This quote underscores the stagnation in organizational thinking and the need for new models like those proposed by Valve.

• Valve Corporation is highlighted as an example of rethinking organizational structure.
• D. Hawk praises Valve's efficiency and profitability per employee.

"Valve is actually rethinking the answer to that."

This quote points to Valve as a case study in successfully challenging conventional organizational models.

• D. Hawk emphasizes the importance of focusing on how things ought to be rather than how they have been or are.
• He cites Valve's approach to product and company design as exemplary.

"Understanding events and influencing a future requires mastering of four ways of looking at things as they were, as they are, as they might become, and as they ought to be."

This quote captures the essence of a forward-thinking approach to innovation and design.

• D. Hawk outlines the magnitude of the problems faced by the credit card industry before Visa.
• The losses were far greater than initially estimated, highlighting the need for a radical solution.

"Losses were not in the tens of millions as everyone had thought, but in the hundreds of millions and accelerating."

This quote conveys the urgency and scale of the financial crisis in the credit card system that Visa was created to address.

• D. Hawk differentiates between healthy and unhealthy organizations.
• Healthy organizations are driven by hope, vision, values, and constructive behavior.

"Healthy organizations are a mental concept of relationships to which people are drawn by hope, vision, values and meaning, along with liberty to cooperatively pursue them."

This quote defines the attributes of a healthy organization and the positive behaviors it encourages.

• Organizations and societies decline when they lose hope and excitement about the future.
• D. Hawk echoes Elon Musk's sentiment on the value of optimism.

"Businesses as well as nations, races, and tribes die out not when defeated or suppressed, but when they become despairing and lose excitement and hope about the future."

This quote links the survival and prosperity of entities to their ability to maintain a hopeful outlook.

• D. Hawk focused on the ideal vision of what Visa ought to be.
• Despite numerous obstacles, he was driven by a belief in the concept's potential.

"Did I believe it was what ought to be? Ah, that was another question, indeed. Powerful enough to draw me on."

This quote highlights D. Hawk's commitment to his vision for Visa, regardless of the apparent impossibility of the task.

• Visa's formation was a process of self-organization and evolution.
• D. Hawk reflects on the unlikely success of Visa, given the absence of traditional power structures.

"Only in hindsight does it become clear as the dawn that the need to rely entirely on the power of purpose, principles, and people was what brought visa into being."

This quote reflects on the foundational elements that allowed Visa to emerge successfully from a challenging environment.

• D. Hawk presents a metaphorical view of organizations, with heaven representing purpose, principle, and people, and hell representing rule and regulations.
• He suggests that the best organizations are those driven by higher purposes rather than bureaucracy.

"Heaven is purpose, principle, and people. Purgatory is paper and procedure. Hell is rule and regulations."

This quote encapsulates D. Hawk's philosophy on the ideal structure and focus of organizations.

• D. Hawk shares his belief in persistence during the sales process.
• He maintains that repeated rejections are part of the journey towards eventual agreement.

"I had held fast to the notion that until someone has repeatedly said no and adamantly refuses another word on the subject, they are in the process of saying yes and don't know it."

This quote reveals D. Hawk's tenacity and strategic approach to persuasion, which was crucial in building Visa's network.

• D. Hawk expresses regret over the potential for a monopoly in the payment processing industry.
• He fought against the idea of duality, where member banks could own both Visa and Mastercard, leading to a potential monopoly.

"I was deeply convinced that there could and should be many card systems within the consumer banking industry."

This quote shows D. Hawk's commitment to competition and his belief in its importance for the consumer banking industry.

• D. Hawk discusses the potential negative impacts of banks having complete freedom to become owner members of both Mastercharge and Bank of America card systems.
• He argues that this would limit consumer choice, reduce competition, and could lead to a monopoly or merger.
• Hawk believes that preventing interlocking ownership is essential for the emergence of new payment systems.

"I was equally convinced that complete freedom of banks to become owner members of both the Mastercharge and Bank of America card systems would foreclose the emergence of new systems and severely limit consumer choice."

This quote illustrates Hawk's concern that allowing banks to have unrestricted ownership in both major card systems would stifle the development of alternative systems and reduce options for consumers.

• Hawk shares his personal experience of dealing with stress and threats during his professional challenges.
• He describes taking long walks in the woods, even breaking the law to do so, as a means to find solace and solutions to his problems.
• He relates to his own experience of loss and the realization that personal hardships are part of a larger, uncontrollable life cycle.

"There I would climb for hours, licking my wounds in the hope a solution would appear."

This quote shows Hawk's method of coping with stress by immersing himself in nature, seeking both physical and emotional healing.

• Hawk discusses his efforts to combat the duality of ownership in the payment system industry, which he believes would lead to a lack of competition.
• He recounts the legal battle with the Department of Justice and the banks' owner members who sued him.
• Hawk expresses regret for not being able to prevent the duality, which he sees as a failure that resulted in the current duopoly in the payment systems.

"If we do not prevent duality now, there will never be more than two bank card systems pressure to diminish their competitive figure, perhaps even to merger."

This quote captures Hawk's prediction that failing to stop banks from owning both Mastercharge and Bank of America cards would lead to a permanent duopoly and reduced competition.

• Hawk reflects on his career and the mixed feelings of pride and regret he harbors.
• He acknowledges the success of Visa but also feels that it did not fully realize its potential.
• Hawk questions whether the decisions he made were influenced by fear or a lack of courage.

"To this day, I often have regret I did not screw my courage to the sticking point and fight on, go down then and there, unbowed and unrepentant."

This quote reveals Hawk's internal conflict and his enduring doubt about whether he made the right decision in not continuing his fight against duality.

• Hawk addresses the myths of entrepreneurship, emphasizing the hard work and emotional toll it takes.
• He stresses that the entrepreneurial experience includes both highs and lows, and that it's important to acknowledge the full spectrum of emotions involved.
• Hawk encourages entrepreneurs to innovate rather than replicate existing models.

"Judged by orthodox methods of objective measurement, growth, size, profit, market share, and volume, Visa has been a phenomenal success."

This quote highlights Hawk's recognition of Visa's success in traditional business metrics while also hinting at his deeper reflections on the company's true achievements and shortcomings.

• Hawk critiques mechanistic, Industrial Age organizations for lacking understanding and wisdom.
• He challenges listeners to consider whether they will perpetuate outdated models or create innovative new systems.
• Hawk emphasizes the importance of self-awareness and the power of individual choice in shaping the future.

"Are we to cling to the archaic, increasingly irrelevant, industrial age internal models of reality and the organizations and leadership they have spawned?"

This quote challenges the audience to think critically about the relevance of traditional organizational models in the modern world and encourages the pursuit of innovation and self-improvement.