The New AI Org Chart

**Nathaniel Whittemore** (0:00)
You know that with agents in AI, everything inside the enterprise is changing. And today we are talking about the new AI Org Chart. The AI Daily Brief is a daily podcast and video about the most important news and discussions in AI.
Now today, we are doing a classic long reads episode that will actually start with a read. The theme is one that I think is super interesting, and I'm constantly keeping an eye on, which is the way that AI and specifically agents are changing the org chart. The idea is that AI is not just impacting the way that individuals do their work, it's impacting the way that work gets done overall that changes the fundamental shape and structure of the organization. Now we're going to look at one big essay about this theme, and then some interesting anecdotes from inside a company that is at the forefront of this, and the essay that we start with comes from Jack Dorsey, who of course recently made news with the 40% layoffs at Block. The piece was released about a week ago on Block's web page, and was actually co-authored by Jack and Sequoia partner, Roelof Botha. The piece reads, At Sequoia, we see that speed is the best predictor of startup success. Most companies are focused on AI as a productivity enhancer. Few are focused on the potential of AI to change how we work together. Block is showing what it looks like to fundamentally rethink organization design, ultimately harnessing AI to increase speed as a compounding competitive advantage. 2000 years before the first corporate org chart, the Roman army solved a problem that every large organization still faces. How do you coordinate thousands of people across vast distances with limited communication? Their answer was a nested hierarchy with a consistent span of control at every level. The smallest unit was the contubernium, eight soldiers who shared a tent, equipment, and a mule, led by a decanus. Ten contubernia formed a century of 80 men under a centurion. Six centuries made a cohort. Ten cohorts made a legion of roughly 5,000. At each layer, a named commander held defined authority, aggregating information from below and relayed decisions from above. The structure, 8 to 80 to 480 to 5,000, was an information routing protocol built around a simple human limitation. A leader can effectively manage somewhere between 3 and 8 people. The Romans discovered this through centuries of warfare. Even today, the US Army's hierarchical chain follows a similar pattern. We now call it span of control, and it remains the governing constraint of every large organization on Earth. The next big change came from Prussia. After Napoleon's army destroyed the Prussian forces at the Battle of Jena in 1806, a group of reformers rebuilt the military around an uncomfortable truth. You cannot depend on individual genius at the top. You need a system. They created the general staff, a dedicated class of trained officers whose job was not to fight but to plan operations, process information and coordinate across units. Scharnhorst, one of the reformers, intended these staff officers to quote, support incompetent generals, providing the talents that might otherwise be wanting among leaders and commanders. This was middle management before the term existed. Professionals whose purpose was to route information, pre-compute decisions and maintain alignment across a complex organization. The military also formalized the distinction between line and staff functions. Line advances the core mission, staff provides specialized support. Every corporation still uses this vocabulary today. Military hierarchy entered the business world through the American railroads in the 1840s and 1850s. The US Army lent West Point trained engineers to private railroad companies, and these officers brought military organizational thinking with them. Staff and line hierarchies, divisional structure, bureaucratic systems of reporting and control, all of it was developed in the military before the railroads adopted it. In the mid-1850s, Daniel McCallum of the New York and Erie Railroad created the world's first organizational chart to manage a system stretching over 500 miles with thousands of workers. The informal management styles that worked for smaller railroads were failing. Train collisions were killing people. McCallum's chart formalized the same hierarchical logic that the Romans had used. Layers of authority, defined reporting lines, structured information flow. It became the blueprint for the modern corporation.
Frederick Taylor, often called the father of scientific management, optimized what happened within that hierarchy. Taylor broke work into specialized tasks, assigned them to trained experts, and managed through measurement rather than through intuition. This produced the functional pyramid organization, a structure optimized for efficiency within the information routing system that the military had pioneered and the railroads had commercialized. The first real stress test of functional hierarchy came during World War II. The Manhattan Project required physicists, chemists, engineers, metallurgists, and military officers to work across disciplinary boundaries towards a single objective under extreme secrecy and time pressure. Robert Oppenheimer organized Los Alamos into functional divisions but insisted on open collaboration across them, resisting the military's instinct to compartmentalize. When the implosion problem became critical in 1944, he reorganized the lab around it, creating cross-functional teams unlike anything in corporate America at the time. It worked, but it was a wartime exception led by a singular figure. The question the post-war business world faced was whether that kind of cross-functional coordination could be made routine. With the growth and globalization of companies after World War II, the scale limitations of functional design became acute. In 1959, McKinsey's Gilbert Klee and Alfred DiCipio published Creating a World Enterprise in the Harvard Business Review, providing an intellectual framework for a matrix organization that combined functional specialties with divisional units. Under the leadership of Marvin Bauer, McKinsey helped companies like Shell and GE implement these principles, balancing central standards with local agility. This became the professional or modern corporation that propelled the post-war global economy. Over time, other frameworks emerged to address the complexity, rigidity and bureaucracy of matrix structures. The McKinsey 7S framework, developed in the 1970s by Tom Peters and Robert Waterman, distinguished the hard Ss, strategy, structure and systems, from these soft Ss, shared values, skills, staff and style. The core idea was that structural elements alone were insufficient. Organizational effectiveness required alignment across cultural traits and the human factors that determine whether a strategy actually succeeds. In more recent decades, technology companies have experimented aggressively with organization structure. Spotify popularized cross-functional squads with short sprint cycles. Zappos attempted holacracy, eliminating management titles entirely. Valve operated with a flat structure with no formal hierarchy. Each of these experiments revealed something about the limitations of traditional hierarchy, but none solved the underlying problem. Spotify moved back towards conventional management as it scaled. Zappos saw significant attrition. Valve's model proved difficult to scale beyond a few hundred people. As organizations grow into the thousands, they revert to hierarchical coordination because no alternative information routing mechanism has been powerful enough to replace it. The constraint is the same one the Romans faced and the Marine Corps rediscovered in World War II. Narrowing span of control means adding layers of command, but more layers means slower information flow. Two thousand years of organizational innovation has been an attempt to work around this tradeoff without breaking it. So what's different now? At Block, we're questioning the underlying assumption that organizations have to be hierarchically organized with humans as the coordination mechanism. Instead, we intend to replace what the hierarchy does. Most companies using AI today are giving everyone a co-pilot, which makes the existing structure work slightly better without changing it. We're after something different, a company built as an intelligence or mini-AGI. We are not the first to try to move beyond traditional hierarchy. Hire's Raidenhoi model, platform organizations, data-driven management, these are real attempts at the same problem. What they lacked was a technology capable of actually performing the coordination function that hierarchy exists to provide. AI is that technology. For the first time, a system can maintain a continuously updated model of an entire business and use it to coordinate work in ways that previously required humans relaying information through layers of management. For this to work, a company needs two things. A kind of world model of its own operations, and a customer signal rich enough to make that model useful. Block is remote first. Everything we do creates artifacts. Decisions, discussions, code, designs, plans, problems, and progress all exist as recorded actions. It's the raw material for a company world model. In a traditional company, a manager's job is to know what's happening across their team and relay that context up and down the chain. In a remote first company where work is already machine readable, AI can build and maintain that picture continuously. What's being built? What's blocked? Where resources are allocated? What's working and what isn't? That's the information the hierarchy used to carry. The company world model carries it instead. But the capability of the system is only as good as the quality of the customer signal feeding it. And money is the most honest signal in the world. People lie on surveys. They ignore ads. They abandon carts. But when they spend, save, send, borrow or repay, that's the truth. Every transaction is a fact about someone's life. Block sees both sides of millions of transactions every day. The buyer through Cash App and the seller through Square, plus the operational data from running the merchant's business. That gives the customer world model something rare. A per customer, per merchant understanding of financial reality built from honest signal that compounds. The richer the signal, the better the model. The better the model, the more transactions, the richer the signal. Together, the company world model and the customer world model form the foundation for a different kind of company. Instead of product teams building predetermined roadmaps, you build four things. First, capabilities. The atomic financial primitives, payments, lending, card issuance, banking, buy now, pay later, payroll and so on. These are not products. They are building blocks that are hard to acquire and maintain.