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DISECONOMIES OF SCALE
Economies of scale, and in particular large countries, have many pros (negotiation leverage, coordination for defense, lower transaction costs, some economies of scale) but also many cons.
Here are some:
(thread, 1/12)
Economies of scale, and in particular large countries, have many pros (negotiation leverage, coordination for defense, lower transaction costs, some economies of scale) but also many cons.
Here are some:
(thread, 1/12)
2/ LESS INNOVATION
Many separate entities can undertake many more experiments than a single large one, even though the large one has a larger budget.
In innovation, you just have to be right once.
Many separate entities can undertake many more experiments than a single large one, even though the large one has a larger budget.
In innovation, you just have to be right once.
2B/ Decentralized innovation allows for many experiments to be made, and capital to be allocated to what works rather than to what makes sense.
"The reason to avoid communism is not because it is inefficient, but because it tries to be too intelligent." – @rorysutherland
"The reason to avoid communism is not because it is inefficient, but because it tries to be too intelligent." – @rorysutherland
2C/ MORE FRAGILITY
Similarly, a fractal government can let its states and counties and cities implement many experiments and then do more of what works, instead of risking doing everything what makes sense but then fails.
Similarly, a fractal government can let its states and counties and cities implement many experiments and then do more of what works, instead of risking doing everything what makes sense but then fails.
2D/ In innovation, you just have to be right once; in risk management, you just have to be wrong at scale once.
Fractal governance systems are more resistant. Antifragile, even.
Fractal governance systems are more resistant. Antifragile, even.
3/ SLOWER REACTION TO NEW INFORMATION
Another misconception: centralization makes communication faster.
No. It makes distribution of orders faster.
But making orders and implementing them take longer.
Another misconception: centralization makes communication faster.
No. It makes distribution of orders faster.
But making orders and implementing them take longer.
3B/ Governors have more complexity to decide upon.
The peripheries take time to interpret, prepare & implement orders they didn't make.
Hopefully, the pandemic showed this.
The peripheries take time to interpret, prepare & implement orders they didn't make.
Hopefully, the pandemic showed this.
4/ WORSE DECISIONS
A misconception: the centralized can take better decisions, for it has more resources & more competent people
No.The centralized cannot understand the peripheries, so it only takes better decisions according to the criteria that the center knows & cares about
A misconception: the centralized can take better decisions, for it has more resources & more competent people
No.The centralized cannot understand the peripheries, so it only takes better decisions according to the criteria that the center knows & cares about
4B/ Centralization only looks efficient to the central observer.
(A point explained in http://luca-dellanna.com/what-will-we-have-learnt)
(A point explained in http://luca-dellanna.com/what-will-we-have-learnt)
5/ IN CONCLUSION
Yes, centralization has many economies of scale. But probably larger diseconomies of scale.
Yes, centralization has many economies of scale. But probably larger diseconomies of scale.
5B/ More importantly, a fractal approach can get most advantages of centralization without most of its disadvantages.
The center takes decisions that can only be implemented by the center (e.g. Defense), middle-levels take decisions that can only be implemented by them, etc.
The center takes decisions that can only be implemented by the center (e.g. Defense), middle-levels take decisions that can only be implemented by them, etc.
5C/ Decisions should be taken at the lowest possible level – not the highest competent one.
