Organizations and Scalability

From The Nature of the Firm

A firm will tend to expand until the costs of organizing an extra transaction within the firm become equal to the costs of carrying out the same transaction by means of an exchange on the open market or the costs of organizing in another firm.

What we’re talking about today is not marginal fluctuations in transaction costs but almost a complete collapse. That’s why a terrorist group that has made almost no effort to organize can function at least comparably to the most powerful army in the world. Or blog can sell more books a month than a medium sized bookstore as a secondary revenue stream.

I can’t really tell you what it is that I do because I don’t have job descriptions. I’m not even formally employed by two of the people I work for – if I was it would create more problems that it would solve. Which is why the idea of hustling is so important. You have to be able to function independently or you’re not worth anything. So the whole notion of scalability is being turned on its head because what you do might not need to be scaled – you might be enough.

But that takes time, effort and constant experimentation.

Other reading:

The Rule of Five – John Robb (blog post)

Dreaming 5th Generation Warfare (blog)

RMMB: John Boyd 2.0 (discussion)

Here Comes Everybody: The Power of Organizing Without Organizations – Clay Shirky

The Starfish and the Spider: The Unstoppable Power of Leaderless Organizations – Ori Brafman

Charlie Wilson’s War: How the Wildest Man in Congress and a Rogue CIA Agent Changed the History of Our Times – George Crile

The Cathedral and the Bazaar: Musings on Linux and Open Source – Eric S Raymond

Written by Ryan Holiday
Ryan Holiday is the bestselling author of Trust Me, I’m Lying, The Obstacle Is The Way, Ego Is The Enemy, and other books about marketing, culture, and the human condition. His work has been translated into thirty languages and has appeared everywhere from the Columbia Journalism Review to Fast Company. His company, Brass Check, has advised companies such as Google, TASER, and Complex, as well as Grammy Award winning musicians and some of the biggest authors in the world. He lives in Austin, Texas.