Comment by pksebben

The point being that the informality arises organically. People are capital-b Bad at risk assessment and planning; we are much, much better at responding to current stimuli.

Also, flat is a structure (albeit a simple one). To use an abstraction, think of a house. When you move in, the house is flat (organizationally speaking). There are floors, and that's it. This means you can place things anywhere they make sense to. Sure, it's inconvenient to have to add a dresser here or a shelf there when one doesn't already exist, but you can adapt the space to your current problems. Over time, you add things and change stuff to be less flat, which means that if you've been living there a long time there is more friction to implement things that you may not have known you were going to need at first. Your fridge is insufficient, but instead of getting one that works for what you need you now need to move all the things between the fridge and the door, move out the old fridge, and only then can you move the new one in.

With a 'flat' org - you start each project with this fresh slate. Each project can adapt it's policies and org chart to match what's important for that project. This way, you don't end up using an organization that is primarily suited for content distribution to make a game (a win that i think is obvious in Valve already) or using an org built around an advertising platform for a browser (a deficiency blatantly obvious in Google).