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Big is Fragile: An Attempt at Theorizing Scale

Atif Ansar, Bent Flyvbjerg, Alexander Budzier, and Daniel Lunn, 2017, "Big Is Fragile: An Attempt at Theorizing Scale," in Bent Flyvbjerg, ed., The Oxford Handbook of Megaproject Management (Oxford: Oxford University Press), Chapter 4, pp. 60-95.

39 Pages Posted: 4 Mar 2016 Last revised: 29 May 2017

Atif Ansar

Saïd Business School

Bent Flyvbjerg

University of Oxford - Said Business School

Alexander Budzier

University of Oxford - Saïd Business School

Daniel Lunn

University of Oxford - Department of Statistics

Date Written: April 2017

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.

Keywords: Megaprojects, megaproject management, project management, fragility, scaling, economies of scale, cost overruns, schedule overruns, benefit shortfalls, cost-benefit analysis, welfare economics, debt management, large dams, hydroelectricity

Suggested Citation

Ansar, Atif and Flyvbjerg, Bent and Budzier, Alexander and Lunn, Daniel, Big is Fragile: An Attempt at Theorizing Scale (April 2017). Atif Ansar, Bent Flyvbjerg, Alexander Budzier, and Daniel Lunn, 2017, "Big Is Fragile: An Attempt at Theorizing Scale," in Bent Flyvbjerg, ed., The Oxford Handbook of Megaproject Management (Oxford: Oxford University Press), Chapter 4, pp. 60-95.. Available at SSRN: https://ssrn.com/abstract=2741198

Atif Ansar (Contact Author)

Saïd Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

Bent Flyvbjerg

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

Alexander Budzier

University of Oxford - Saïd Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

Daniel Lunn

University of Oxford - Department of Statistics ( email )

1 South Parks Road
Oxford OX1 3TG
United Kingdom

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