I think if you're very picky about having just the right people at the "bottom", and just the right people/person at the "top" (because even in Valve's supposedly flat hierarchy there's still someone on top: Gabe) then it can go up quite aways. But yes, it's probably inevitable that it eventually fails and devolves into department, fiefdoms, politics, etc. You can push it out but can't put if off forever. But you know what? That's not necessarily a bad thing. There are plenty of companies that can be viable and successful with 5-100 employees. Not everything has to be a megacorp.