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Big is Fragile: An Attempt at Theorizing Scale

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  • Atif Ansar
  • Bent Flyvbjerg
  • Alexander Budzier
  • Daniel Lunn

Abstract

In this paper we characterise the propensity of big capital investments to systematically deliver poor outcomes as "fragility," a notion suggested by Nassim Taleb. A thing or system that is easily harmed by randomness is fragile. We argue that, contrary to their appearance, big capital investments break easily - i.e. deliver negative net present value - due to various sources of uncertainty that impact them during their long gestation, implementation, and operation periods. We do not refute the existence of economies of scale and scope. Instead we argue that big capital investments have a disproportionate (non-linear) exposure to uncertainties that deliver poor or negative returns above and beyond their economies of scale and scope. We further argue that to succeed, leaders of capital projects need to carefully consider where scaling pays off and where it does not. To automatically assume that "bigger is better," which is common in megaproject management, is a recipe for failure.

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  • Atif Ansar & Bent Flyvbjerg & Alexander Budzier & Daniel Lunn, 2016. "Big is Fragile: An Attempt at Theorizing Scale," Papers 1603.01416, arXiv.org, revised Jun 2017.
    • Handle: RePEc:arx:papers:1603.01416
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    References listed on IDEAS

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    Cited by:

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    2. In, Soh Young & Weyant, John P. & Manav, Berk, 2022. "Pricing climate-related risks of energy investments," Renewable and Sustainable Energy Reviews, Elsevier, vol. 154(C).
    3. Gregory, Julian, 2020. "Governance, scale, scope: A review of six South African electricity generation infrastructure megaprojects," Utilities Policy, Elsevier, vol. 66(C).
    4. Bent Flyvbjerg & Alexander Budzier, 2019. "Report for the Commission of Inquiry Respecting the Muskrat Falls Project," Papers 1901.03698, arXiv.org.
    5. Detlef Müller-Mahn & Kennedy Mkutu & Eric Kioko, 2021. "Megaprojects—mega failures? The politics of aspiration and the transformation of rural Kenya," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 33(4), pages 1069-1090, August.
    6. Bent Flyvbjerg & Alexander Budzier & Daniel Lunn, 2021. "Regression to the tail: Why the Olympics blow up," Environment and Planning A, , vol. 53(2), pages 233-260, March.

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