I explain it in the third paragraph but to illustrate it further: Consider a function. A function that is 1 line long is immediately understandable. At 10 lines, it is readable within a minute or two. At 100 lines, it is maybe legible to someone who lives in that function. At 1000 lines, it is a black box. Human organizations are the same way.

You might suggest refactoring, which is what companies do too. They create departments, promotion ladders, org charts, and mission statements. The problem is that abstractions leak by design. As your abstractions accumulate and change outside your view, your ability to understand the entirety reduces.