"Sorry, Love the Idea, But it Doesn’t Scale” (ENG)

I’ve got three children. And in a way, you could say they are the core of my investment portfolio. I invest a lot of time and resources in them. They are lousy business ideas from a scaling viewpoint. There will be no hockey sticks. No 100x returns on investment in regular business terms.

They won’t scale. And that is precisely the point.

I don’t want nor expect scalable returns. The output that matter to me is not even measurable. And if all things go the way I’d like it to, I won’t even be around to see the full extent.

The most important things in life doesn’t scale.

Scalability is a product of a rational and production oriented view of the world, tied to ideas of resource extraction, leverage, and production to get ”more”.

More of what? Hollow gains?

What truly matters cannot scale.

Yet, scalability is of major importance for investors. It is often celebrated in technology and business contexts as a way to maximize efficiency and impact.

Impact? Of what kind?

”We only look for scalable solutions for this problem.”

”If we can standardize this, the TAM will be huge.”

”The network effects here gives financial leverage.”

So when we scale, what do we loose?

Depth. Automated customer service may be scalable. But often the experience is subpar to talking with a real human. 

Variation. Scalable solutions tend to flatten out local and cultural variation. Homogeneity is often a result in the hunt for scalability.

Robustness. What’s scalable in terms of human enterprises is often centralized and with single points of failure. Fragile.

There is a vast number of non-scalable investments out there with great payoff. By funding and nurturing what’s not scalable, we gain in many important areas. Some of which are:

Antifragility. Depth. Variability. 

But funding that which doesn’t scale has mostly been left to countries—and to a smaller extent charities and NGOs.

Given our outlook today, I believe we need to revisit this strategy.  

The corporate layer most of us are working within resides on top of another layer which is often forgotten. This layer is a foundation that itself has a core of non-scalable investment, essential to human dignity and social cohesion. Just like externalized costs, it is not accounted for.

Could it be that there is a systemic risk in not being more interested in this layer from a corporate standpoint? With very few exceptions, corporations today do not care much about it.

Mondragon is the only real exception I have found so far.

The rug pull will be rough if the foundational layer goes south. And who knows how long the idea of countries will persist. It may be time to start to invest more in the non-scalable, and support alternative, resilient structures that are able to alleviate the outcomes if nations aren’t able to support anymore at some point in the future.

What is a non-scalable investment your corporation could do?