Rescaling the economies of scale

I’d like to work on rescaling the economies of scale. Let me start with a brief look at what’s meant by ‘economies of scale’. This is very simplified, and we could talk for days about different nuances and exceptions and such, and if you want to start that conversation, I’m up for it. But this model will suffice for me to explain what I mean by ‘rescaling’.

For any given product, we can find a number of ways to manufacture it. (A rubber ball can be fashioned by hand-kneading and rolling a bit of rubber, or by injection molding.) For each method of manufacture, we can separate costs into two buckets: setup and per-unit costs. (Hand-rolling balls has basically zero setup costs but pretty high unit costs, injection molding has high setup costs but quite a bit lower unit costs.) These costs mean that for any given product, there are a number of regimes, under each of which a particular manufacturing method is most economical.

So, at its simplest, the concept of rescaling the economies of scale means using the same ingenuity we use in devising those different methods of manufacture to improve upon the tools which are part of those methods, as well. We figured out how to make rubber balls cheaper by using injection molding, now let’s figure out how to make setting up molds for new products cheaper, too.

And of course, we do that. At least, whenever a production process is not completely vertically integrated, and the product is under competitive stress, then there are separate firms making tools for the process, and they are subject to competitive pressure to reduce their prices. The successful ball maker will seek and find cheaper alternative vendors for the mold making process.

So, not necessarily a radical idea, looked at that way. It might be a little more radical to say that my reason for wanting to rescale things is so that smaller producers are empowered to use more sophisticated production methods for smaller batches. To shrink the gap between the concepts of ‘prototype’ and ‘small production run’. To help bring the promise of mass customization to fruition. To allow more people to scratch their own itches. To give more little ideas a chance to come to life without having to appease the mighty powers of capital. OK, that last one is probably skirting radical, so I’ll stop there for now.

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