When he talks, Dee Hock is charismatic and compelling. But people listen to him for one reason: credibility. Unlike most visionaries – or management consultants – Hock has put his ideas into practice. More than 25 years ago he oversaw the creation of a business that was organized according to the same principles of distributed power, diversity, and ingenuity that he advocates today. And that business has prospered – to put it mildly.
Since 1970 it has grown by something like 10,000%. It continues to expand at roughly 20% per year. It now operates in some 200 countries worldwide. It serves roughly half a billion clients.
And this year, its annual sales volume is expected to pass $1 trillion.
This is one of Dee Hock’s favorite tricks to play on an audience. “How many of you recognize this?” he asks, holding out his own Visa card.
Every hand in the room goes up.
“Now,” Hock says, “how many of you can tell me who owns it, where it’s headquartered, how it’s governed, or where to buy shares?”
Confused silence. No one has the slightest idea, because no one has ever thought about it.
And that, says Hock, is exactly how it ought to be. “The better an organization is, the less obvious it is,” he says. “In Visa, we tried to create an invisible organization and keep it that way. It’s the results, not the structure or management that should be apparent.” Today the Visa organization that Hock founded is not only performing brilliantly, it is also almost mythic, one of only two examples that experts regularly cite to illustrate how the dynamic principles of chaos theory can be applied to business.
It all started back in the late 1960s, when the credit card industry was on the brink of disaster. The forerunner of the Visa system – the very first credit card – was BankAmericard, which had originated a decade earlier as a statewide service of the San Francisco-based Bank of America. The card got off to a rocky start, then became reasonably profitable – until 1966, when five other California banks jointly issued a competing product they called MasterCharge.
Bank of America promptly responded, franchising BankAmericard nationwide. (In those days, banks were forbidden to have their own out-of-state branches.) Other large banks quickly responded with their own proprietary cards and franchise systems. A credit card orgy ensued: banks mass-mailed preapproved cards to any list they could find. Children were getting cards. Pets were getting cards. Convicted felons were getting cards. Fraud was rampant, and the banks were hemorrhaging red ink.
By 1968, the industry had become so self-destructive that Bank of America called its licensees to a meeting in Columbus, Ohio to find a solution. The meeting promptly dissolved into angry finger-pointing.
Enter Dee Hock, then a 38-year-old vice president at a licensee bank in Seattle. When the meeting was at its most acrimonious, he got up and suggested that the group find a method to study the issues more systematically. The thankful participants immediately formed a committee, named Hock chairman, and went home.
It was the chance Hock had been waiting for. Even then, he was a man who thought Big Thoughts. Born in 1929, the youngest child of a utility lineman in the mountain town of North Ogden, Utah, he was a loner, an iconoclast, a self-educated mountain boy with a deeply ingrained respect for the individual and a hard-won sense of self-worth. And he stubbornly refused to accept orthodox ideas: before he’d started with the Seattle bank he’d already walked away from fast-track jobs at three separate financial companies, each time raging that the hierarchical, rule-following, control-everything organizations were stifling creativity and initiative at the grass roots – and in the process, making the company too rigid to respond to new challenges and opportunities.
He’d been a passionate reader since before he could remember, even though his formal schooling ended after two years at a community college. He read history, economics, politics, science, philosophy, poetry – anything and everything, without paying the slightest attention to disciplinary boundaries.
What he read convinced him that the command-and-control model of organization that had grown up to support the industrial revolution had gotten out of hand. It simply didn’t work. Command-and-control organizations, Hock says, “were not only archaic and increasingly irrelevant. They were becoming a public menace, antithetical to the human spirit and destructive of the biosphere. I was convinced we were on the brink of an epidemic of institutional failure.”
He also had a deep conviction that if he ever got to create an organization, things would be different. He would try to conceive it based on biological concepts and metaphors.
Now he had that chance. In June 1970, after nearly two years of brainstorming, planning, arguing, and consensus building, control of the BankAmericard system passed to a new, independent entity called National BankAmericard, Inc. (later renamed Visa International). And its CEO was one Dee W. Hock.
The new organization was indeed different – a nonstock, for-profit membership corporation with ownership in the form of nontransferable rights of participation. Hock designed the organization according to his philosophy: highly decentralized and highly collaborative. Authority, initiative, decision making, wealth – everything possible is pushed out to the periphery of the organization, to the members. This design resulted from the need to reconcile a fundamental tension. On the one hand, the member financial institutions are fierce competitors: they – not Visa – issue the cards, which means they are constantly going after each other’s customers. On the other hand, the members also have to cooperate with each other: for the system to work, participating merchants must be able to take any Visa card issued by any bank, anywhere.
That means that the banks abide by certain standards on issues such as card layout. Even more important, they participate in a common clearinghouse operation, the system that reconciles all the accounts and makes sure merchants get paid for each purchase, the transactions are cleared between banks, and customers get billed.
Visa has been called “a corporation whose product is coordination.” Hock calls it “an enabling organization.” He also sees it as living proof that a large organization can be effective without being centralized and coercive. “Visa has elements of Jeffersonian democracy, it has elements of the free market, of government franchising – almost every kind of organization you can think about,” he says. “But it’s none of them. Like the body, the brain, and the biosphere, it’s largely self-organizing.”
It also works. Visa grew phenomenally during the 1970s, from a few hundred members to tens of thousands. And it did so more or less smoothly, without dissolving into fiefdoms and turf wars. By the early 1980s, in fact, the Visa system had surpassed MasterCard as the largest in the world. It had begun to fulfill Hock’s vision of a universal currency, transcending national boundaries. And Dee Hock was seen as the system’s essential man.
“Utter nonsense,” Hock says. “It’s the organizational concepts and ideas that were essential. I merely came to symbolize them. Such organizations should be management-proof.”
In May 1984, at 55, Hock put his beliefs to the test. He resigned from Visa and three months later, with his successor in place, dropped completely from sight. Six years later, in an acceptance speech as a laureate of the Business Hall of Fame, Hock put it this way: “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. In 1984, I severed all connections with business for a life of isolation and anonymity, convinced I was making a great bargain by trading money for time, position for liberty, and ego for contentment – that the beasts were securely caged.”
Visa never missed a beat.