The best analogy I can think of for how to think about scaling an organization to think distributed is the contrast between communism and capitalism methods of government. Objectively speaking, one is not necessarily better than the other, but in practice one scales better in our current world.
Communism is centralized command-and-control, it is a non-distributed organization. In theory, if you had perfect knowledge and ability to react in real-time, there would be minimal waste and demands would always be met with the right amount of supply. In practice, it hasn’t played out this way, probably because we don’t live in a world of perfect data and instantenous data processing abilities. Capitalism in contrast, relies on that invisible hand, it argues that in efficient markets, supply-and-demand will balance itself through price discovery. There might be some degree of loss in the beginning but it will come to an equilibrium fast and the overall oversupply or undersupply will be minimized.
In capitalism, when the government wants people to spend money, they lower interest rates. Instead of directing, they guide. They create incentives for the market to move in the desired direction but they don’t direct. In communism, there’s a required a feedback loop to central command so it can process the data and tell each type of producer the next steps. This often leads to either over-production or under-production because it’s easy to have incomplete information or data processing delay.
Leading a distributed organization is similar to working with monetary policy. We want to create the right incentives, we want the default thing to be the obvious thing. We want to build the necessary tools and safety-nets so that people can focus on their objectives and not worry about duplicating work. We want teams to operate independently, instead of relying on upper-management (central-command) for next steps.
Leadership cannot scale to have perfect knowledge of everything teams do, otherwise the leadership team ends up having massive reporting apparatus just to track work output and teams will end up idle waiting for the next instructions. Instead leadership needs to empower teams to want to act in their own best interests because those interests. Leadership can guide teams by helping them clearly define KPIs, but how they go about achieving those KPIs should be left in their hands, doing anything differently will only disempower.