Monday, June 14, 2010


Scale is an important word in the education world. It's especially important in the business-of-education world. In the business world, more generally, what matters most is not really the quality of your product, but rather the number of people you can get to buy it. That is not to say that quality doesn't matter, but rather that it matters only insofar as it is a means to the end of scalability.

Little wonder that business people look at the education world and say things like, "Good teachers don't scale!" Or "Yes, it's a great idea for a curriculum (or a school, or a nonprofit), but does it scale?" On the one hand, they have to do that, especially as funding for education comes more and more from venture funds and an increasingly business-oriented federal government. On the other, it ignores the fundamental reality of learning: it is not a product, but an experience, and you can't sacrifice customization for scale.

Standardized production is, of course, the engine that drives scalability. Back when Henry Ford revolutionized automobile production with the assembly line, his advantage was in scale, and his disadvantage was in customization. "You can have a Model-T in any color, so long as it's black," was the joke, as I recall. Meanwhile, the original makers of the car in Germany produced more stylish, fancy machines for a more elite audience.

That is the drawback of not scaling: it limits your audience, and most often limits your audience to those that can afford it. That's not really a problem, as far as our culture is concerned, when it comes to material things like cars or computers. We don't really begrudge the wealthy their Aston Martins. No, what is frustrating is the access to personalized services, the ability to skip long lines at the airport, the capacity to enroll their kids in the best and most expensive schools. Rewards are one thing, but self-perpetuating advantages are another all-together.

The ironic thing is, rewards, for the most part, do scale. Oh sure, not everyone can have the fanciest cars or the newest mobile device or what-have-you. But the main reason for that is because companies see a bigger profit margin at higher prices. It has almost nothing to do with production costs, and everything to do with exchange. If I will pay $50,000 for a BMW, it doesn't matter that it costs the company the same $10,000 to make the car as it costs Hyundai to make theirs, what matters is that BMW is built on making that $40,000 profit off of fewer customers, while Hyundai is built to make $2,000 in profit off of lots more customers.

That's oversimplified, to be sure, but the point is that, from a material standpoint, most of what we pay for in our time does scale. Shopping at WalMart or Target is not so different than shopping at Pier One, fundamentally. It's just a different audience, and a different business plan. In the end, however, profit is profit, production is production, and purchase is purchase.

Nowhere is this more evident than in software. Each new sofa produced adds to costs, and while my position is that, thanks to the prevalence of scalability in the world of economics, the cost of production has almost nothing to do with the cost of the purchase at the other end, it is certainly the case that some material goods are made with higher-quality materials, and that they are therefore marketed and sold in more expensive circumstances. In software, on the other hand, there is no additional cost for each new unit sale. Symantec pays very nearly $0 to get Norton Antivirus from customer #50 to customer #5,000,000. In short, the entire cost of the product, for customer #5,000,000, is determined by what he is willing to pay for it, and not by the production cost at all. As a corollary, Symantec benefits most not from improving their product, but from finding a way to sell more units and spending their money on deals with companies like Dell to make sure Norton is preloaded on new PC purchases.

In this sense, software is scale incarnate. Each piece of code certainly takes work to make, and from a historical-economic perspective the software writer certainly deserves compensation for that work, but there is a tremendous philosophical, social, and cultural disconnect between the software engineer and the user that it seems to me that no existing system of economics adequately addresses the situation.

The problem is this: in the scalability world, there is no consideration of the importance of material things and interpersonal relationships for human existence. Products are merely purchasable and scalable. Exchange, indeed, has all but exited the equation. A thing, or a piece of code, or a service, is made, and then it is put into some mysterious world where it is purchased on a greater or lesser scale. The producer is compensated, usually, in a way that is far abstracted from those sales, and the purchaser's relationship with the producer is abstracted as well. The entire process, indeed, is mechanized and in fact is itself the victim of scale.

Consider eBay or Amazon, ostensibly connecting people who are selling with people who are buying, and therefore working against, in some sense, the impersonality and abstraction of scalable economics from the real world. Except, the materials exchanged here - and here there is exchange - are abstracted. I may get a real book or a real CD, but nowhere do I come in any kind of meaningful contact with the origin, maker, materials, or work that went into that book or CD. The buyer and the seller are dealing outside the world of scale, but are doing so across a platform which does indeed scale, and Amazon and eBay extract from the system - the abstract, inhuman system - their capital.

I will freely admit that I do not understand modern economics. I will, however, assert this: I don't believe that anyone does. In my interactions this year with a number of Stanford MBAs, it strikes me that almost none of them has a meaningful handle on economy of scale, at least from any kind of human perspective. Whereas Adam Smith, Karl Marx, and a host of other historical economists spoke of their terms in human contexts, there is no human context in modern economics, and where humans are a part of the picture, their leverage point is in designing and assessing scalability.

It would take, I think, some combination of economist, philosopher, anthropologist, sociologist, mathematician, and some other fields to unravel the modern economic picture. Of course, in these specialized times there's little impetus for that, and so the work that mostly gets done in each and every of those fields - even when it touches on the others - remains un-synthesized. To me it is clear that there is a difficult-to-define problem in economics, both in the sense of the current "recession" and in the sense of broad problems of income disparity and poverty, for example. But I think the problem has not been defined - and much less has any kind of solution been offered - because there is no meaningful human framework through which the problem can be considered. We have an economics of scale, but no human scale on which to measure it.

I began with education, here, because it operates in stark opposition to the material and meta-material world of sofas and software. Good teaching, the business people are right, does not scale. But that does not mean that software and scalability are the inevitable and best paths for learning. It might be that customization - and not fake customization like what Apple gives you - has to do with human-to-human interactions, and not making choices about wallpapers or avatars. In that case, customization isn't even the word. "Relationships" is. It might be, then, that in education, the reason that you cannot scale is because education and learning have to do with relationships, and not products. Education is not alone in this, but it is indicative. And it's one of the biggest holes in the modern economic picture. We have networks, of course - which are an attempt to understand scaled relationships - but that only begs the question: what is a network, what are those relationships upon which learning is built, and who is playing what role for whom?

It might turn out, if we look closely enough at even the largest scale products and companies in the world, that at their heart are the same anthropological, sociological, and, yes, educational questions that require a departure from the specialized, production-oriented, inhuman economics of scale.

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