Some thinks that scale is only possible via economies of scale.
They can’t see that operating at scale doesn’t necessarily imply economies of scale.
Economies of scale is not the only way to scale.
Organisations can also scale via economies of network.1
What is the difference?
Economies of scale means that one entity is in charge of the production and distribution of items for everyone. Think of Ford for cars, or Microsoft for software: one company controls the production and distribution of software for all its users. That’s economies of scale.
Conversely, economies of network means that as many entities as possible can be in charge of production and distribution. Think of all kebab joints (or restaurants if you wish): the distribution of kebab scaled, yet no entity is in charge of all joints.
Furthermore, if one kebab joint shuts down, its failure does not undermine the network of remaining kebab joints. It can even make it stronger: the trial and errors of all joint operators make the network of joints stronger. People talk about what works and what does work. Successful recipes go around freely. Those recipes that don’t only kill joints that make those mistakes.
Conversely, with economies of scale, Microsoft can learn from the trial and errors of all users, however, if there is a problem, for example, if a virus or a bug spreads through Microsoft’s infrastructure, all users can be affected.
Microsoft can learn from the usage of all users, and reinforce its heteronomy over users (i.e. power to govern users), however, when Microsoft makes a mistake, all users (and their businesses) suffer.
The question of how we scale matters because it is related to the question of fragility and antifragility.
One could say that the infrastructure of kebab joints is antifragile: recipes are distributed freely; anyone can open a joint.
When a joint fails, 1. its failure does not endanger the network, and 2. others can learn from the mistakes of all.
Conversely, other type of infrastructures, such as the banking infrastructure, are fragile: the failure of one single bank can lead to the failure of the whole banking system. Each new layer of technology complexity adds fragility, every day. Microsoft (and I don’t care about Microsoft, there are many many other technology companies like Microsoft) and other such technology companies are also fragile.
If we can see that economies of scale imply fragility, and economies of network imply antifragility, we might want to think about what technological system we want to adopt. As a business owner, I do not want the technological infrastructure I need to be like the banking system: a
system I can’t do business without, yet which make my business fragile.
If we can see this, how can we use digital tools that rely on infrastructures that are more like network of kebab joints, and less like banks?
If a kebab joint goes out of business, say, down the street; you can carry on doing business. You have other options for lunch.
If a bank fails (and it does not even have to be your bank), and other banks fail, all our businesses are at risk.
So if we can see that scale is not necessarily about economies of scale, we might want to ask: how can we rely on digital infrastructures which don’t put our businesses at risk?
This business (my business) is more like a kebab joint, if I fail, others can step in my stead, and you can carry on doing business with the digital tools I provided you with.
How so?
Because I use freely distributed software, as in freely distributed like kebab recipes.
Next: see Open Source misses the point.
Zamagni via Schneider↩︎