Economies of Fail
Economies of scale have ruined our lives.
You may not believe that bold statement at first. Surely, you think, economies of scale have given us more for less. Bulk buying power lets us drive our enormous SUVs directly to Costco, where we can load up on 48 rolls of mindblowingly cheap toilet paper, which we can lug back to our enormous SUV (48 rolls don’t fit into a Yaris, friends), which we can finally unpack into our 3 car garage (you need that extra garage to store the 48 rolls). While the on-costs of buying that mindblowingly cheap toilet paper trump the per-unit savings, they provide us with a soft place to lay our head. In effect, economies of scale have created a form of unconscious bias in our lives. Unfortunately, we apply this misplaced thinking to things outside of toilet paper.
The economies of scale fallacy comes up a lot in conversations about scaling product teams. In his book Work Rules, Laszlo Bock makes a strong point about the value of outstanding talent: his rough metrics state that a brilliant engineer is not worth 2x what a good engineer is worth, but more like 300x. Bock argues that a good person will never come up with a breakthrough idea. Only an outstanding person will. Seth Godin captured it crisply in his blog from today:
The thing is: a 1x contributor can’t become a 10x merely by working ten times as hard. The physics of time won’t allow it, certainly, but it’s also because 10x doesn’t work on the same axis. It’s not about more effort. It’s about more insight.
While we all get this, something happens to our logic when we start thinking about growing teams and hiring people. If an outstanding person is worth 10x, or 300x, or somewhere in between, why do we hire by headcount? Why do we make product team decisions based on dollar per heartbeat? Why do we not spend an extra $10-20-30K on the right person?
In an economy where ideas, executed well, literally are currency, the value of the right hire, and the right team structure impacts the 8x-10x revenue multiplier directly.
A room full of 1x contributors is unlikely to ever build a unicorn.