Do Economies of Scale Leave Room for Entrepreneurship?

One of the more telling circumstance in the recent recovery, is a subdued emphasis on entrepreneurship and new workplace formation. What emphasis does exist, often highlights those who already command a considerable portion of the marketplace - in particular for contributions which define how the marketplace functions.

As creative destruction and innovation continue to be discouraged in multiple areas, most profits have been sought along the outer scale where real arbitrage potential still exists. That's why - presently - there is more focus on entrepreneurial "hows" (or what becomes technological infrastructure design) than "what" (product diversity), for market domination. Only, this leaves even less room for alternative "hows" regarding societal options...let alone the "whats" of product definition which have become too centrally determined.

In the process, a growing fear of creative destruction has led to fewer calls for continued prosperity. Even so: when political constituencies agree that further growth isn't necessary, no one need be surprised when capitalism gets called out as though it were at fault for societal gridlock. Indeed: when too few emphasize growth, there is scarce difference between conservative or progressive perspectives, as to what both wish to preserve in any economic sense.

Think about the degree to which productivity has declined. To be sure there are service factors which account for the problem. Still, there's more at stake than services confusion. Through much of the 20th century, societies were able to rely on economies of scale which were the result of earlier disruptions and creative destruction. The problem here is that these earlier formations have long since matured, and yet have not been allowed to further evolve. As a result, institutions are now trying to use economies of scale in the wrong contexts, in order to make the difference.

Unfortunately, it's tempting to do so. Because economies of scale which carefully assign knowledge use, can generate the certainties that streamline management and daily operations. But knowledge use limitation has a considerable downside. For one thing, it's not always possible for individuals to optimize time management in externally defined environments - particularly the lower one goes into the skill chain. Even worse, knowledge use limitations only mean that fewer people (over time) are "needed" to do the necessary job, at all.

It's hard to let go of these methods because they've done far more than generate profits. This methodology has also provided incentives and certainties, in the lives of those who were able to follow the rules successfully. What's more, all of this generated product uniformity, and allowed entire fields of specialization to flourish.

But in a sense, specialization has become like planting a seedless watermelon: one sometimes wonders about the certainty of the seed supplier. After all, diverse possibilities for survival have already been ruled out - meaning one has to return to the single or primary source in the next season, just to plant the field. The specialist becomes cut off from other sources of inspiration or sustenance (outside of one's "field"), while product becomes "reliable" - if somewhat staid - over time.

Isn't all of this the best - indeed the only realistic approach? Economies in the 20th century benefited from scale to such a degree, that for a while it seemed as though the hardest thing about life would be chafing under the daily routine of a monotonous existence. Boring though it may be, legions fight to preserve that earlier certainty, today! May our lives be "interesting"? Hmmm...

And yet, both entrepreneurship and creative destruction are still needed for small scale aspects of product definition as well, in spite of possible appearances to the contrary. It's been too easy to forget that the work we do and the ways in which we interact with others, can at times be the most important product of all. Of course, that means completely discarding a lot of ideas, as to the most "efficient" means to achieve services productivity.

Only consider the confusing split in higher education as an example of the need for economic social representation. Is today's higher education a signaling product, a social product, or both? Economies of scale - in spite of their ability to determine product viability in the marketplace, have taken away too many entrepreneurial possibilities at the personal levels people find important. Digital technology cannot really provide creative disruption in education, until the social element is incorporated into the measured product.

Economies of scale for services would be problematic enough, if a growing social disconnect were the only issue at hand. In recent decades, economies of scale substituted for too many personal aspects of our lives. Unfortunately, it is becoming apparent that these processes have removed too many decision making and negotiation processes from our daily lives - all of which contributes to emotional instability. Our long run experiment in automated services has decreased our abilities to cooperate and relate with one another. What's more, inappropriate automation and scale in services, has prevented creative destruction and diversity in knowledge use applications as well.

While economies of scale will always be vital for manufacture and production, this more often holds for the creation and distribution of commodities and product separate from time. While these areas generally respond well to centralization, services need a completely decentralized approach. What's more, digital applications will eventually provide local means for greater product diversity than the centralized marketplace currently allows. Local digital production will generate personalized adaptations (particularly in building components) of the more generic elements which would remain quite profitable in a broader transportation framework.

Entrepreneurial ability is needed more than ever, to overcome the economic and social imbalances of the present. And a marketplace built on equal time access is needed, so that knowledge and skills sets can be locally arbitraged. It is difficult now for nations to move forward, because they have so many sunk costs in the numerous projects of the 20th century. Some of those projects no longer fit well with today's possibilities, just the same.