The Shirky Principle

The clearest documented case is American tax filing. In 2002 the tax software industry signed a deal with the Internal Revenue Service. The companies would offer free filing to lower and middle income Americans, and in exchange the IRS agreed not to build a filing system of its own. The programme was called Free File.

On paper it covered around seventy percent of taxpayers. In practice it reached two to three percent. Intuit, the maker of TurboTax, added code to its own website that hid its free product from search engines, so people looking for it could not find it. It later removed the code, and eventually settled with state attorneys general without admitting wrongdoing.

Meanwhile the industry spent heavily to keep the arrangement in place. Intuit spent more than eleven million dollars on federal lobbying between 2008 and 2012. In 2016 alone Intuit spent two million and H and R Block three million, some of it on the same effort. Much of it was aimed at return-free filing, the system where the government sends you a pre-filled form built from information it already holds from your employer and your bank, which you check and sign. Dozens of countries already do this. A study by researchers at the Treasury, the Minneapolis Federal Reserve and Dartmouth later found that between sixty-two and seventy-three million American returns could be accurately pre-filled from information the government already has.

The campaign was not always visible as one. ProPublica traced a series of opinion pieces and letters to Congress, written by a rabbi, a state NAACP official and a small town mayor among others, all opposing return-free filing in strikingly similar language, back to a public relations effort connected to Intuit.

Intuit itself was candid about the stakes in the one place a company has to be. In its securities filings it told investors that government encroachment at federal and state level represented a continuing competitive threat to its business.

In 2019, after ProPublica's reporting, the IRS scrapped the clause preventing it from building its own system.

Nobody in that story had to be dishonest. A company whose product exists to make a painful process bearable will rationally defend the painfulness, because the pain is the market. That is the whole mechanism, and it runs anywhere the same shape appears.

Which is why it is worth looking closer to home. The team built to handle a recurring crisis quietly needs the crisis to recur, or the team has no reason to exist at the size it is. The department that manages complexity has no reason to simplify the thing that justifies its headcount. The vendor whose contract renews because the problem persists is not going to solve it completely, and will not need to decide to sabotage anything for that to be true.

One question does the work, asked about any team, vendor, process or supplier: does this thing win when the problem shrinks, or when it persists? Where the answer is that it wins when the problem persists, you have found something that will never fix itself, and no amount of good intent inside it will change that. The fix is structural. Change what the thing is rewarded for, or expect it to keep tending the problem it was built to end.

One honest limit. This is a named pattern with well documented cases and a sound incentive logic behind it, not an effect anyone has measured across organisations. Treat it as a lens that keeps turning out to be useful rather than as a law.

The Innovator's Dilemma

Clayton Christensen, 1997

Kelly drew the parallel himself when he named the principle. On why capable organisations reliably fail to adopt the thing that would replace them, and why the failure is rational from the inside.