Unscaled

1. AI and Unscaling are Remaking the Global Economy

In the twenty-first century, technology and economics are driving the opposite—an unscaling of business and society.

Shift from Scale. The 20th century was defined by economies of scale, where bigger was better. Now, the 21st century is witnessing a profound shift towards "unscaling," driven by AI and related technologies. This involves breaking down massive, centralized systems into smaller, more focused entities.

Disruptive Force. This unscaling is more than just startups disrupting established firms; it's a fundamental unraveling of the previous century's scale into hyper-focused markets. This transformation is causing disarray in work, life, and politics, signaling a change unlike any since the early 1900s.

New Opportunities. This shift presents fantastic opportunities for entrepreneurs, imaginative companies, and resourceful individuals who can leverage AI and digital technology to compete against economies of scale. The future hinges on embracing the economies of unscale, not clinging to outdated models.

2. Economies of Unscale Empower Nimble, Focused Companies

In an economy driven by AI and digital technology, small, focused, and nimble companies can leverage technology platforms to effectively compete against big, mass-market entities.

Renting Scale. Small companies can now rent the resources they once needed to build, such as computing power, access to consumers, and production capabilities. This levels the playing field and allows them to compete effectively against larger, more established firms.

Micro-markets. AI enables companies to learn about individual customers, allowing them to create products and services that cater to very narrow, passionate markets, even markets of one. This shift from mass markets to micro-markets is a core element of unscaling.

Competitive Edge. The old strategy of owning scale has become a liability. Companies like Dollar Shave Club and Tesla are outperforming giants like Procter & Gamble and General Motors by renting capabilities, targeting niche markets, and adapting quickly.

3. AI is This Century's Electricity, Powering Unscaling

Artificial intelligence is the primary driver, changing almost everything, much like electricity did more than one hundred years ago.

Foundational Technology. Just as electricity powered the 20th-century industrial revolution, AI is the driving force behind the 21st-century unscaling revolution. It's being infused into nearly every aspect of our lives, transforming industries and creating new possibilities.

Data-Driven Learning. AI's ability to learn from vast amounts of data is key to its transformative power. As more of our lives move online, the data generated fuels AI's ability to discern patterns, predict behaviors, and automate tasks.

Ubiquitous Integration. AI is becoming foundational in various sectors, from personalized education through platforms like Khan Academy to personalized healthcare through companies like Livongo. Overlooking or denying the impact of AI would be irresponsible.

4. Platforms are Key to Renting Scale, Lowering Barriers to Entry

The more platforms we build, the less an individual company—or lone entrepreneur—needs to do by itself in order to create, produce, market, and deliver a product.

Global Platforms. The rise of mobile, social, and cloud platforms has created a foundation for unscaling. These platforms provide essential services and infrastructure, allowing companies to focus on their core competencies.

Vertical Integration's Decline. Vertical integration, once a necessity for companies to control their entire value chain, is becoming less relevant. Companies can now outsource functions and departments to other companies, leveraging platforms to seem bigger than they are.

Accelerating Trend. The creation of platforms has accelerated since 2007, with smartphones, social networks, and cloud computing enabling new services and products to reach a global audience. This trend is reinventing the dynamics of business.

5. Unscaling is Transforming Major Industries

We are opening up new ways to solve some of the world’s great problems, including climate change and soaring healthcare costs.

Energy. The energy sector is shifting towards distributed generation, with homes and buildings generating their own power using solar panels and batteries. This is enabled by AI-driven smart grids that allow for the buying and selling of excess energy.

Healthcare. Healthcare is becoming more preemptive and personalized, with AI-driven diagnostics, remote monitoring, and customized treatments. This shift can reduce costs and improve outcomes by keeping people well.

Manufacturing. 3D printing is enabling distributed manufacturing, where products are custom-produced in small batches as they're ordered. This reduces waste, lowers transportation costs, and allows for greater product customization.

6. Policy Choices Will Determine the Outcome of Unscaling

We’ll need to make sure the unscaling revolution benefits society broadly, not just the wealthy or the technologically advanced.

Addressing Job Displacement. AI and robotics will automate many jobs, requiring policymakers to rethink the nature of work and consider solutions like guaranteed incomes and free education. Failure to address these issues could lead to social unrest.

Algorithmic Accountability. As AI systems play a larger role in our lives, it's crucial to ensure that algorithms are accountable and prevent automated discrimination or criminal acts. Businesses must prioritize transparency and ethical considerations in their AI development.

Preventing Monopoly Power. The tendency towards "winner-take-all" dynamics in digital industries could lead to monopolies controlling vital parts of the economy. Policymakers must be vigilant in preventing such monopolies from imposing rules that harm society.

7. Individuals Must Embrace an Entrepreneurial Mindset

The key to success for most people will be living an entrepreneurial life and becoming their own personal enterprises, selling services on demand through the cloud to many employers.

Personal Enterprise. A decreasing percentage of the population will rely on traditional full-time employment. Instead, individuals will need to become their own personal enterprises, selling services on demand through the cloud.

Lifelong Learning. Accessing education through on-demand services will be crucial for adapting to the changing job market. AI-guided courses and virtual reality learning will supplement traditional education and enable lifelong learning.

Adaptability and Passion. The most successful individuals will be those who can identify their unique strengths and passions and leverage technology to create value in a rapidly evolving world. This requires a mindset of continuous learning and adaptation.

Last updated: April 10, 2025