Fast vs Big

A friend sent me a great article today called  “The Hi-Res Society” by Paul Graham. For anyone interested in startups, business in general, or where our society is heading, it is well worth reading. Here are a few snippets that caught my attention, plus a few thoughts on each:

“...in the late twentieth century something changed. It turned out that economies of scale were not the only force at work. Particularly in technology, the increase in speed one could get from smaller groups started to trump the advantages of size”

There has always been a fascination in many corporate circles with size. This is (partly) justified by economies of scale but often has much to do with ego and emotion. Why do people’s resumes cite achievements in terms of how big the budget they managed or the deal they worked on? Why do mega-mergers and acquisitions happen so often, despite evidence showing that the vast majority of deals fail to add value? And why has the phrase “too big to fail” been bandied around so much lately, with even more size being the proposed solution?

“Now it turns out the rule “large and disciplined organizations win” needs to have a qualification appended: “at games that change slowly.” No one knew till change reached a sufficient speed”

There’s no doubt speed is growing in importance in business today. Speed to market. Rapid decision-making. Ability to adapt quickly to changing circumstances. The notion of comparing the “economies of speed” with the “economies of scale” is intriguing … and I think a valid one. There are real, economic costs to moving too slowly:  money spent on activities that no longer matter; employee turnover or disengagement; lost sales due to an outdated product range; and so on.

Large organizations will start to do worse now, though, because for the first time in history they’re no longer getting the best people. An ambitious kid graduating from college now doesn’t want to work for a big company. They want to work for the hot startup that’s rapidly growing into one. If they’re really ambitious, they want to start it.

Puts an interesting angle on the war for talent, doesn’t it?  Think about Google – in 10 years, they’ve gone from a startup to a mega-corporation, based heavily on a talent-driven strategy. Get the best people. Challenge them. Foster an entrepreneurial environment.   Although, the scale that success brings will pose an increasing challenge to Google, perhaps eroding that which drove their rise.

Even if Internet-related applications only become a tenth of the world’s economy, this component will set the tone for the rest. The most dynamic part of the economy always does, in everything from salaries to standards of dress. Not just because of its prestige, but because the principles underlying the most dynamic part of the economy tend to be ones that work.

The cultural and social implications of this shift will be enormous. There are many assumptions and traditions engrained in the ‘big is better’ paradigm that will be discarded … but this won’t happen overnight. Nonetheless, I think the prospect of a more entrepreneurial society offers great hope for us all – both in terms of ‘material’ standards of living as well as our satisfaction with work & life more generally.

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2 thoughts on “Fast vs Big

  1. I like the phrase "Economy of Speed". A quick google search suggests that you may have coined the phrase, at least as a juxtaposition to "Economy of Scale".It has however already been used in articles on tri-athletes and narcotics!

  2. Thanks! Wish I could claim "economies of speed" but it looks like at least IBM got there first .. including this presentation way back in 2001. And I imagine economists have been talking about it for much longer than that. Nonetheless, you don’t hear nearly as much these days about the impact on a firm’s economics of "speed", compared to "scale" or "scope". A reminder that big is not necessarily better than fast can’t hurt!

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