Big is Fragile: An Attempt at Theorizing Scale

Ansar, Atif, Flyvbjerg, Bent, Budzier, Alexander and Lunn, Daniel (2017) Big is Fragile: An Attempt at Theorizing Scale. In: The Oxford Handbook of Megaproject Management. Oxford Univeristy Press. (Accepted)

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.

Item Type: Book Section
Keywords: Project management, operations management, megaprojects, megaproject management, fragility, scaling, economies of scale, cost overruns, schedule overruns, benefit shortfalls, cost-benefit analysis, welfare economics, debt management, large dams, hydroelectricity
Subject(s): Operations management
Project management
Related URLs:
Date Deposited: 30 Mar 2016 10:57
Last Modified: 08 Sep 2016 13:57
Funders: n/a
URI: http://eureka.sbs.ox.ac.uk/id/eprint/6099

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