Finding scalability - The key to implementing ideas into practice

 

John List's The Voltage Effect: How to Make Good Ideas Great and Great Ideas Scale is another good book on the practical application of microeconomics. The powerful title on a voltage effect is just a way to introduce the key concept of scalability. Every business firm wants to gain economies of scale, but the concept can also be applied to any idea as well to production practices. Scaling of ideas is much harder than most people think. Marginal benefits often decline.  For List, gaining scalability is the voltage effect. 

List describes how much of human behavior is not scalable. What makes sense and works with a small group does not often work when applied to larger groups or is attempted to be replicated. This problem goes back to the fundamental issue that incentives matter. If you focus on the wrong incentives, most projects will not scale. The book focuses on many fundamental microeconomic issues: 

• Any research work especially with field experiments is subject to false positives.
• Know the subject audience and whether your subjects drive the results.
• Is the desired effect driven by the chef or the ingredients employed.
• Are there spillover effects, the problem of externalities. 
• What are the costs of gaining scale and when do you quit.

Microeconomics has been viewed by many as a dry subject, but List turns the dismal science into a tool for extracting unique answers to complex problems. The challenge for all who want to find scalable answers is to do conduct good experiments in a complex world that is not within a laboratory.

As said on the first page - 

"Scalable ideas are all alike; 

every unscalable idea is unscalable in its own way."