Diseconomies of Scale
The phenomenon where increasing the scale of production leads to higher per-unit costs, opposite of economies of scale. Often caused by coordination complexity, bureaucracy, or resource constraints.
Used in the Books
This term appears in 2 chapters:
"...linear scaling) - Larger territories have more boundary to defend (perimeter problem) - Defensive costs increase faster than territory size - Result: Diseconomies of scale in defense Digital territories: - Network effects mean 2× users provides >2× defensibility - Each additional user increases switching costs for al..."
"...linear scaling (network value ∝ users^2) is unstable because it depends on market and regulatory contexts that shift. Case 4: Volkswagen Group - Diseconomies of Scale and Coordination Collapse Volkswagen AG, the world's second-largest automaker by volume (~8 million vehicles, 2022), exemplifies **diseconomies of s..."
Biological Context
Large organisms face biological diseconomies: longer transport distances, coordination challenges, and heat dissipation problems. A blue whale can't just be a scaled-up mouse—fundamental constraints change with size. This is why the largest animals aren't simply bigger versions of small ones.
Business Application
Large companies often suffer diseconomies: slower decision-making, communication overhead, reduced employee motivation. At some point, the costs of coordination exceed the benefits of scale. This creates natural limits to firm size and opportunities for smaller competitors.