Naval Ravikant argues that technology is shrinking the optimal company size, enabling billion-dollar businesses built by tiny teams using APIs and outsourced functions. A modern Facebook could be built with a few hundred people today, he says, but displaced workers from large firms may struggle because small companies demand adaptability and technical skill.
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I really firmly believe that the actual efficient size of a company is shrinking very rapidly. And so the future will be almost all startups, like I think most of the world and most business will adopt the startup mentality in the sense that there will be small companies loosely connected and coupled to each other almost through APIs or processes for their needs. The Industrial Revolution way back when, before I was born, created this massive clustering effect where basically said there's economies of scale from having factories and so everybody has to gang together in these 5,000, 10,000 person companies. And I think that trend has now reversed thanks to information technology. And you could have a future where maybe your son or daughter will wake up in the morning and there'll be a message on their phone or in their brain implant or Google glasses or whatever the heck it is. They'll have a couple of job offers right that morning. They'll pick the one they want to do for the next two or three or three days. They'll do that through a series of kind of APIs and interfaces the rest of the world, and then they'll get rated and they'll get feedback. So in the future we're all Uber drivers, right? Or we're all driving Lyfts around with pink mustaches or delivering people's food or. But I think the contract work trend is going to increase and I think the size of your average company is going to decrease. I think we're going to see more and more billion dollar businesses built by four or five people and it'll stay at that. And so I think that is one thing. For example, the venture capital industry does not believe. I think the venture capital industry still believes that you're going to have to put a couple of hundred million dollars into some company at some point to continue scaling it. I don't think that's true. I think you will be able to break out and outsource pieces that today you don't think are outsourceable. Like you will be able to outsource your sales, you will be able to outsource your revenue collection, you will be able to outsource your bookkeeping reconciliation. You may not outsource the final stage of hiring, but you outsource the early stage of it. So there's going to be lots and lots and lots of small companies loosely coupled. This is really bad news for all the people who were laid off in the last recession because they don't think that way. They are going to go and try and find jobs at big companies and a lot of the jobs that are going to be created now are going to be at small companies, which are going to require them to be more dynamic, more adaptable, more information savvy.
I think we won't see things like Facebook anymore, where a company in eight years goes from a handful of guys to thousands in a huge camp, sucking up as much talent as they can.
I think any entrepreneur worth their salt could today build Facebook. If they were building Facebook today and they had the same feature set, they could do with a few hundred people.
Wow.
It's just that if Facebook and Google are in the situation that large companies end up in, where the founders know that 80% of the people in there are not really needed, they just don't know which 80% you can't identify. They're all lost now in the politicking.
