Summary of "Can you run a company as a perfect free market? Inside Disco Corp"
The Financial Times article explores Disco Corp, a Tokyo-based semiconductor equipment manufacturer valued at $20.8 billion, which has operated under a radical free-market experiment since 2011. This system eliminates traditional hierarchies, with no bosses issuing orders, and employees’ decisions are driven by an internal virtual currency called “Will.” Below is a detailed summary of the article’s key points:
Overview of Disco Corp and the Will System
- Company Background: Founded in 1937, Disco Corp is a leading manufacturer, producing approximately 75% of the world’s machines for cutting, grinding, and polishing semiconductors. It employs nearly 7,000 people and is headquartered in Tokyo.
- The Will System: Introduced by CEO Kazuma Sekiya in 2011, Will is an internal currency that governs workplace interactions. Employees earn Will by completing tasks, compete for tasks via auctions, and are fined Will for inefficiencies. The system determines quarterly bonuses, with Will balances converted to yen.
- Operational Mechanics: Sales generate Will (e.g., ¥1bn in revenue creates ~400mn Will), which sales staff distribute to other teams for tasks like manufacturing or R&D. Employees negotiate Will payments informally or through auctions, with dynamic pricing based on task desirability or scarcity of skills.
- Penalties and Rewards: A team of eight manages 772 penalty and 337 reward items. For example, employees are fined for incorrect addresses or negative press, and everyone starts with a negative “existence cost” (e.g., 10,400 Will/hour for mid-ranking staff, 26,600 Will/day for Sekiya).
Implementation and Evolution
- Origin and Trial: Sekiya, inspired by video games like Final Fantasy, proposed Will in 2008 to make employees care about individual performance, not just departmental averages. After initial resistance from Toshio Naito, head of management accounting, a trial began in 2011 with the application department using paper “Will Accounting Slips.” Positive results led to a company-wide rollout.
- Cultural Shift: Managers were barred from issuing orders, and employees gained autonomy to choose tasks via a company app. The system has evolved with over 100 app updates, and more than 1,000 employees have only known Will during their careers.
Impact and Outcomes
- Business Performance: Since 2011, Disco’s operating margin rose from 16% to 36%, and its stock price has quadrupled. The company attributes increased market share (~50% in dicers and grinders) and productivity to Will.
- Employee Incentives: Will determines ~40% of bonuses, with top earners like a 41-year-old employee making ¥59mn in 2023. The system fosters competition, reducing overtime (down 9% since 2015) and unnecessary meetings.
- Cultural Dynamics: The “Coliseum” hosts weekly contests where employees pitch ideas, betting Will on outcomes. This, part of the Performance Innovation Management (PIM) system, drives ~4,800 annual contests, fostering continuous improvement akin to Toyota’s Kaizen.
- Challenges: The system has drawbacks. It may undervalue long-term tasks (e.g., R&D for future machines), incentivize short-termism, and create pressure. Some employees, like former field engineer Kate Hoch, found the demands overwhelming, and others left due to rigid structures like the mandatory “Application University” for new hires.
Sekiya’s Vision and Control
- Leadership Philosophy: Sekiya, an engineer and self-described “company man,” sees Will as translating external motivation (money) into internal drive, creating a “super strong” organization. He compares Will to a trust-based “village community” but acknowledges similarities to China’s social credit system.
- Centralized Power: As “central banker,” Sekiya controls Will’s supply, issuing new currency for “special projects” (~50% of Will in circulation). Critics, including former employees, argue he alters rules to align outcomes with his goals, creating an “autocratic” duality as both CEO and system arbiter.
- Workplace Policies: Sekiya’s belief in in-person work led to high Will fees for remote work during COVID-19, subsidizing factory workers’ bonuses. Disco’s overtime (42.8 hours/month vs. 15 for peers) and disclaimer against work-life balance prioritize productivity.
Critiques and Limitations
- Not a True Currency: Economist Tony Yates argues Will is not a currency but a spreadsheet tracking contributions, as it’s non-transferable outside Disco and tied to yen. Internal monopolies (e.g., HR) and lack of savings or loans limit its free-market purity.
- Trust and Relationships: Will’s effectiveness relies on trust, not pure price discovery. Employees may underbid to build relationships, and trusted workers may be favored over lowest bidders, deviating from free-market ideals.
- Employee Experience: Some former employees describe a “pressure-cooker” culture, with constant competition and rule changes causing chaos. The system may not suit all, as seen with high turnover among some engineers.
- Short-Term Bias: Tasks without immediate revenue (e.g., long-term R&D) may be undervalued unless Sekiya intervenes, potentially harming long-term innovation.
Broader Context and Reception
- Industry Interest: Sony, Toyota, and Panasonic have studied Will, but none have adopted it, possibly fearing disruption. Sekiya likens rivals’ hesitation to avoiding Gorbachev’s reforms, which led to unintended consequences.
- Academic Perspective: Professor Hiroshi Ono praises Will for making employees value time as money, allowing Sekiya to avoid micromanaging. However, he notes its reliance on a close-knit community, unlike real-world economies.
- Cultural Significance: Disco’s experiment has drawn attention for challenging Japan’s hierarchical corporate norms, with posts on X highlighting its “radical HR system” and likening it to a “love child of holacracy and Principles.”
