Suddenly I'm connecting the relationship between "budget based economics" and "agile" as commonly implemented. It's trying to fit creativity into a budget. In the places that do it well, it's like "We're supposed to make some really great art, here's the crayons we can afford, sorry if it's not exactly right but it's what we could manage, do whatever you can, we will take it!" In places that do it poorly, it's like "we need you to make the Uber of the Mona Lisa, I'm gonna need you to find a way to make that work, but we can totally be flexible on this, which crayons do you need."
The key differences being that in one case there's well defined constraints on resources but open ended results, and in the other the resource constraints are poorly defined but the end result is much more fixed.
I have never even understood the approach. The sub-budgets within an organization seem so arbitrary and become games in and of themselves, often leading to frivolous purchases just to use up the budget and not get your budget slashed.
Does anyone know when this came into favor? What was used before? What are the alternatives?
Managers play games because they are looking out for their own team, not the company's bottom line. Budgets constrain this. Overspending is bad, but so is underspending, because they are tying up resources - companies will have a desired internal rate of return (maybe something like 10%) - if they can make 10% on their investments then a manger tying up capital is costing a lot.
Maybe https://www.joelonsoftware.com/2006/08/10/the-identity-manag... is Joel Spolsky's suggestion - get the team behind the goal, keep morale high, and share information. Sharing information at least cuts down on some of the issues. Keeping morale high isn't always possible - you need someone to drive it, a great founder / CEO can do it to some extent (see Steve Jobs) but it has a limit at scale.
Splitting orgs into more or less independent businesses gets done sometimes.
Bezos just turns everything into a clockwork machine, I think.
Ray Dalio has spent half his life and an unbelievable amount of money trying to solve this problem, some would say with very mixed results (see the book "The Fund" - my reading is he basically tried to create a system where everyone is indoctrinated and rated against his principals, but it just doesn't work as well as he hoped).
There's better and worse ways to try to get around the Principal Agent Problem, but it's a very hard problem.
