Maybe Companies Should Be Smaller

I was scrolling through Twitter when I came across this thought-provoking suggestion:

I don’t think everyone would starve. I think productivity might rise. I put a high value on trust in the workplace, and I’ve been lucky enough to work in a small company in which I’m surrounded almost entirely by good, hardworking people. So I liked Sarah’s idea here.

Still, it wouldn’t be Twitter without some back and forth.

The economist Robin Hanson here (whom I had the chance to interview once) ripostes with a good point that it’s hard to scale organizations beyond 10 people without allowing in baddies (this tweet was probably how I found Sarah’s tweet):

But what if most organizations didn’t need to scale beyond 10 people to be effective?

Look, lots of people smarter than me have pointed this out: software is providing the scale/reach that hiring lots of people once did. It’s possible for 10 people to have the impact that 50 or even 100 might have had in the 20th century.

Instagram had 13 employees when it was acquired for $1B. Jason Fried and David Heinemeier Hanson built Basecamp with 51 employees. My own company has managed to serve businesses all over the world (with capacity to spare) with just over 80 employees – and even fewer at other times.

I would guess that most companies produce most of their innovation before their employee counts exceed Dunbar’s number (around 150) Anything after that has declining marginal returns for innovation, even if it does increase the distribution of that innovation. As more and more employees join, those inevitable baddies also sneak into the larger organizations, hide out, and parasitize everyone’s energies.

Within communities in which everyone can know everyone else, you can have trust, community, and accountability which can be huge competitive advantages. It’s worth considering whether those advantages are better than the efficiencies of greater headcount.

James Walpole

James Walpole is a writer, startup marketer, and perpetual apprentice. You're reading his blog right now, and he really appreciates it. Don't let it go to his head, though.

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