Why Wikileaks will be the death of big business and big government.

I confess that I’m torn. I had the same cranky reaction to Time’s Person of the Year choice as pretty much the entire Internet: It’s hard to see the calculation that makes Mark Zuckerberg more influential than Julian Assange in 2010. Still, there’s something about this conventional wisdom that’s annoying in its own right.

When people riff about the impact of Wikileaks, you typically hear how it’s forever changed diplomacy or intelligence-gathering. The more ambitious accounts will mention the implications for journalism, too. All of that’s true and vaguely relevant. But it also misses the deeper point. The Wikileaks revolution isn’t only about airing secrets and transacting information. It’s about dismantling large organizations—from corporations to government bureaucracies. It may well lead to their extinction.

At the most basic level, organizations have two functions: They make stuff (loosely defined) and they coordinate the activities of makers of stuff. The efficiency with which they do these things helps determine the organization’s size. So, for example, IBM can produce its own keyboards, or it can outsource its keyboard-making. Which option it chooses depends on whether IBM can produce keyboards more cheaply than a supplier can; and on whether it’s harder for IBM to coordinate with the supplier—getting the keyboards built correctly and on time—than to sort out those details internally. Even if the supplier can build keyboards more cheaply, IBM might decide against outsourcing because dealing with its in-house keyboard-maker is easier than dealing with outsiders.

A government agency faces a roughly analogous choice. The State Department, say, can focus entirely on managing relationships with foreign governments. Or it can perform other tasks on top of that, like providing development aid. Because it’s generally easier to work with people who operate from similar assumptions, rely on the same data, and share a common set of goals and values—which is to say, it’s easier to coordinate with co-workers than with outsiders—organizations often perform these functions in-house. Indeed, that’s one reason they’ve historically grown so large. This has even been true over the last generation, when many business gurus predicted that information technology would make outsourcing nearly frictionless.

Now consider what happens when you plug Wikileaks into this equation. All of a sudden, the very same things that made it more efficient to work with your colleagues—the fact that everyone had a detailed understanding of the mission and methodology—become enormous liabilities. In a Wikileaks world, the greater the number of people who intimately understand your organization,* the more candidates there are for revealing that information to millions of voyeurs.