No sustainability without appropriate sizes

The size of a business has a significant impact on its ability to drive a radical green transition proactively. 

Today, we will introduce you to:

1. The Big Picture: Why care about size and sustainability
2. What are the Economies of Small
3. How to leverage an appropriate size in your business, balancing economies of small and large scale, to drive a radical green transition.

Those are the three core themes of our upcoming book, "Economies of Small." 

Additionally, these are the three core themes we are creating tools for and teaching about here in the Post Growth Guide going forward. 

Before we dive into the email

For the Danes: The book will be published in Danish on October 24. The Book Launch Party will take place on October 28 in Copenhagen. Sign up here: https://www.smådriftsfordele.dk/boglancering

For everyone else: We are working on getting the Publisher to translate into English. If you are interested in an English version, sign up here (every email helps us convince them that it should be translated):

1: The Big Picture: Why care about size and sustainability 

The climate and biodiversity crises have their roots in the overproduction and overconsumption of a global minority, leading to devastating consequences for everyone, particularly the global majority.

A crisis driven by excessive production cannot be solved by changing only how we produce; we must also produce and consume less, because there is no empirical evidence that we can deliver sufficient reductions in energy and materials while continuing global growth as we have in the past.

If we cannot continue to pursue growth blindly, we must have the ability to stop and achieve growth independence eventually. And to do that, we must understand when the right time is to stop growing, meaning: What is an appropriate size for your business?

That's the simplest way for us to explain why it's crucial to consider the connection between size and sustainability.

2. The Theory: Economies of Small

"Economies of Small" is a play on words, with the dominant theory of "Economies of Scale" in business. The funny thing is that that theory should really be called "Economies of Large Scale", because it mainly focuses on that.

As long as we only have that language and concept for thinking about size in business, you will always lean towards getting bigger, because that's the only direction where you can win. In that theory, you do not gain from being small.

However, that is a critical misunderstanding which others before us have pointed out. But their arguments on how a small size can benefit a business have remained fragmented. Our contribution has been to read, discuss, experiment in our businesses, and synthesize this into a coherent theory and framework that you can start implementing in your business.

We have done so based on the work of Vandana Shiva, Donella Meadows, Vanessa Andreotti, Nassim Nicholas Taleb, E.F. Schumacher, Agner Erlang, and many more. And, business examples such as Slow Coffee, iFixit, Ecosia, Zingerman's, Einhorn, 37signals, Buurtzorg, and many more. We stand on the shoulders of tiny giants.

The economies of small are a counterweight to the already known economies of (large) scale. They start diminishing at some point in your growth. You can be small without achieving them, just as you can be large without economies of large scale. You can use them to drive a radical green transition, and you can choose not to. That's a choice. However, they do offer you options, which economies of large don't.

The Four Economies of Small are:

Tangibility: This advantage is about the value of tasks and their context being concrete to the decision-maker. The smaller the company, the closer the decision-maker is to the task. This forms the foundation for making sound decisions and is a vital part of being able to experiment with high quality.

Flexibility: This advantage is about the value of versatility and the ability to change direction quickly. These are two different functions stemming from the same dynamic. The smaller the company, the less it is locked in by specific technologies, standardization, and bureaucracy. This provides greater flexibility to be versatile in its production or services and to respond to diverse needs from humans, as well as animals and plants. It also offers greater flexibility in handling unpredictability, because the entire company can rapidly adapt to a new reality.

Accountability: This advantage is about the value of taking ownership of decisions and their consequences. The smaller the company, the greater the impact of each task's outcome—both good and bad—on the decision-maker, because they are closer to reality, and it is clearer what each individual contributes. This creates fertile ground for doing work one can be proud of.

Resilience: This advantage is about the value of long-term survival. The smaller the company, the smaller its operations are in relation to the buffering capacity of its surroundings, which can protect it from internal failures and external crises. When a company actively chooses to remain small, it can build its own buffer with the resources it would otherwise have spent chasing growth, thereby strengthening its long-term survival. It is about having the backbone to prioritize what you believe in, even when it does not pay off in the short term.

3. The Method: Leverage economies of small to drive radical green transition?

We will unpack this more in later emails, as there is a lot to discuss (or, if you are a Dane, you can soon read it all in the book). However, we will provide a brief introduction to The Method for leveraging an appropriate size to drive a radical green transition.

It has three phases, each with a series of questions for you to answer. They are all summarized in the model below.

Here is a short intro to each phase:

1. You must define your limits. The leading science must guide them, but in the end, the concrete limits must come from you; you must translate it into something that makes sense for your business. You have many decisions to make. Such as evaluating what your meaningful size factors are(units produced, number of employees, resource use, etc), at what size is your business large enough to be profitable in the short run, but also resilient in the long run, and how does that size enable you to scale your impact in other ways than growing?

2. You must protect your limits by having an ownership structure and a finance type that allows you to choose not to grow when it doesn't make sense to grow anymore. You need balancing mechanisms to help you stay within the limits you define, and you must anchor both limits and balancing mechanisms in a way that makes you respect them over time.

3. First, you must organize and orient yourself in a size-relevant way. So, if you are small, 

organize yourself in a way that you can leverage that. Do not replicate the same strategies as large businesses do. Secondly, you must leverage the economies of scale to drive a radical green transition. To illustrate, this is what Einhorn did when collaborating with Thai and Malaysian partners to establish The Regenerative Rubber Initiative, independently of Einhorn, allowing others to buy into the supply chain, which other companies might have considered a business secret. Thereby, Einhorn and its partners scaled their impact on regenerative agroforestry (where the partners are smallhold farmers, which is not a coincidence).

There is so much more to be said. We do so in the book, and we will add tools, courses, and explainers here in the Post Growth Guide platform over the coming years.

And again:

For the Danes: The book will be published in Danish on October 24. The Book Launch Party will take place on October 28 in Copenhagen. Sign up here: https://www.smådriftsfordele.dk/boglancering

For everyone else: We are working on getting the Publisher to translate into English. If you are interested in an English version, sign up here (every email helps us convince them that it should be translated):