Scale Ruins Everything

Given that we've been throwing cash at every conceivable idea for the last ten plus years, yet when speaking of unicorns we still have to refer back to airbnb and uber, seems like we're well past "peak unicorn" and well into the "horse with a mild concussion" era.

It’s not that scale ruins everything, it’s the pursuit of scale that ruins everything.

I have thought a lot about antitrust recently and realized that it’s an overlapping problem with the VC unicorn problem. People get so hung up with being bigger/biggest, faster/fastest, that they minimize or ignore pathological side effects.

What if we have a progressive tax structure on business based on scale? Partly on size, partly on market power?

For example, what if corporate income tax were tied to the logarithm of the number of employees+contractors? What if the corporate income tax increased with the market share in markets served?

These kind of ideas have very low impact at small scales, but after a certain scale they start to have such a huge effect on bottom line that they disincentive growth for its own sake.

And they’re self-regulating and largely objective, unlike our current antitrust laws in the US.

Comical to suggest that AirBnB "ruined communities" or "destroyed the dream of home ownership" as if decades of federal, state, and local government policy had not already guaranteed those outcomes.

Uber & Airbnb were really exploring a time-honoured model that has predictable effects. Taking underutilized resources and shifting to a "rental" model increases utilization of assets, broadening accessibility, and thereby increasing wealth... while simultaneously increasing the value of the underlying asset (making it less affordable). This isn't a new thing, or a surprising thing, nor is the scale of it the problem.

Where we get into a problem is when, due to lack of competition, you start extracting almost all (or perhaps even somewhat more than all) of the value that you're adding. That leaves everyone else in the same boat they were in before the rental model showed up, except comparatively worse off because there's a ton of wealth in there that has been concentrated in the hands of a few.

This is the kind of thing that having more competition would help with.

One of the questions all this raises for me is: what fraction of successful startups actually make society better?

I'm sure to get pushback here, but my suspicion is: most do not. Looking at companies like Facebook, Amazon, or Google, I'm kind of think they made it worse. Yeah, I know, some people benefited. But net-net, I preferred having more and better bookstores to Amazon. I don't like what google has become at all. And Facebook has never been good.

I'm halfway through reading this and still not discovered what the point is.

Actually, it's more like the pursuit of large profits (and VC exits) through scaling ruins everything.

I like Airbnb, because it's made staying abroad much cheaper and nicer. I also like being able to rent a taxi on an app in a new town.

I’ve been thinking a lot about this. There seems to be an “optimal” scale for tech — Google used to be amazing and wonderful about a decade ago, until it reached a certain scale. So were Facebook, etc. And even the positive effects of darling unicorns like Uber and Airbnb are actually more in the business model they pioneered, rather than the app itself. In Eastern Europe I use Uber alternatives which are usually about as good as Uber or better. Only Airbnb is a “naturally” global company by its very nature, because it is for travel.

Maybe the natural limit to scale should be state sovereignty (i.e. protectionism). I actually believe that consumers benefit if countries ban or tax the likes of Uber and promote a homegrown alternative. (Imagine if each country had its own Google customized to the local language and culture, it might actually be a better experience for everyone). I’ve heard that Baidu and Yandex are better than Google for local content.

Too bad the EU didn’t catch on with this. Europe could’ve outcompeted the US by playing a different game on quality and boutique charm instead of scale. Instead of pathetically trying to become a large homogeneous market like the US (and then failing badly and then regulating “privacy” out of spite), the EU should’ve actually been protectionist in favor of its members and it would’ve been interesting to see what marvels could originate.

> Mark tried to think of the most harmless thing: keeping track of your friends, and organizing group photos. With comments!

Regarding "Facemash":

> Zuckerberg faced expulsion and was charged with breaching security, violating copyrights and violating individual privacy. Ultimately the charges were dropped.

https://en.wikipedia.org/wiki/Facebook

I misread the title as "Scala Ruins Everything" and was very confused by the comments.

> Those were the innocuous founding ideas behind DoorDash, AirBnB, Uber, and Facebook. At scale, they would ruin communities, put restaurants out of business, destroy the dream of home ownership, and eventually undermine democracy itself.

Impossible to assess. These things happened, but as a chemistry experiment. You'd need to be some sort of $Diety to track the individiual atoms in the solution and judge the alternatives.

Quit this fruitlessness while you're behind, say I.

> The bump in interest rates has cooled things down

This is the actual issue. When ZIRP was introduced (and then RE-introduced, sigh), it makes money appear to be worth almost nothing. Which means everything looks valuable.

> "society-bending hyper growth"

i like that phrase. Like black holes' hyper-gravity bending the fabric of space-time..

the article also reminds me of that book "The Limits to Growth" (from the 70ies?)..

To be honest, you could say this about capitalism in general. Everything has to be huge no matter what industry it's in or what the product is, just because shareholders demand that impossible infinite growth.

Any advance, early industrial revolution; late nineteenth century industrialization; twentieth century vertical integration; globalization; internet disintermediation etc. will cause some dislocation. Often unintended, and rarely foreseen. Ultimately it all settles down to a new equilibrium, until the next perturbation. It's a bit disingenuous blaming VC's, or scale, or anything exogenous. The system's capacity for change will always outstrip the current institutions' abilities to fully buffer the change. If we focused on improving the institutions responsible for that function we'd be performing a more useful function than trying to limit the change.

    "People just submitted it. I don't know why. They 'trust me'. Dumb fucks." 

- Mark Zuckerberg (when asked about how he obtained the information for his newly launched social network.)

Odd piece. It highlights some hyper-scalers but it needs to work on justifying 'how they ruin everything'.

"At scale, they would ruin communities, put restaurants out of business, destroy the dream of home ownership, and eventually undermine democracy itself."

Uh what now?

I'm grateful for VCs throwing money around at various things that may or may not work. We would not be in a better world if all money went into low risk investments.

Nice Artice!

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