Unscaled: How AI and a New Generation of Upstarts Are Creating the Economy of the Future

by Hemant Taneja, Kevin Maney

Unscaled identifies the forces that are reshaping the global economy and turning one of the fundamental laws of business and society -- the economies of scale -- on its head.

An innovative trend combining technology with economics is unraveling behemoth industries -- including corporations, banks, farms, media conglomerates, energy systems, governments, and schools-that have long dominated business and society. Size and scale have become a liability. A new generation of upstarts is using artificial intelligence to automate tasks that once required expensive investment, and "renting" technology platforms to build businesses for hyper-focused markets, enabling them to grow big without the bloat of giant organizations.

In Unscaled , venture capitalist Hemant Taneja explains how the unscaled phenomenon allowed Warby Parker to cheaply and easily start a small company, build a better product, and become a global competitor in no time, upending entrenched eyewear giant Luxottica. It similarly enabled Stripe to take on established payment processors throughout the world, and Livongo to help diabetics control their disease while simultaneously cutting the cost of treatment. The unscaled economy is remaking massive, deeply rooted industries and opening up fantastic possibilities for entrepreneurs, imaginative companies, and resourceful individuals. It can be the model for solving some of the world's greatest problems, including climate change and soaring health-care costs, but will also unleash new challenges that today's leaders must address.

Genres: Business, Artificial Intelligence, Nonfiction, Technology, Entrepreneurship, Economics, Education

240 pages, Hardcover

Published March 27, 2018

About the author

I am the CEO of General Catalyst, a founder, investor, and author.

My vision for General Catalyst is to be the world’s foremost investment and transformation company, supporting global resilience through applied AI. I first laid out my AI thesis in my 2018 book Unscaled. I believe in investing in the critical systems that underpin modern democracies and their allies.

I am an early investor in Stripe, Samsara (NYSE: IOT), Snap (NYSE: SNAP), Gitlab (NASDAQ: GTLB), Grammarly, Gusto, Applied Intuition, Anduril, Ro, and Canva. My recent focus has been on Applied AI and sustainability with focus on companies like Crescendo and Re:Build Manufacturing.

My 2020 book, UnHealthcare, co-authored with Dr. Stephen Klasko, CEO of Jefferson Health, details our thesis for how the healthcare system needs to transform a “sick care” system into a Health Assurance system that is proactive, accessible and affordable. I have helped create several companies to architect a health assurance system in America including Livongo, Commure, Transcarent, Tendo, Homeward, and Hippocratic.

I also serve as the Founder and Chairman of the Health Assurance Transformation Company (HATCo) that is working closely with several major health systems worldwide to drive their transformations.

I’m an advocate for Responsible Innovation, as outlined in my 2022 book Intended Consequences: How to Build Market-Leading Companies with Responsible Innovation.

In addition to my roles serving on many of our portfolio company boards, I am also Co-Founder and Chairman of the non-profits Responsible Innovation Labs and Advanced Energy United, trustee at Northeastern University and the Stanford School of Medicine Board of Fellows, and am a founding board member of Khan Lab School, an innovative K-12 school.

I hold five degrees from MIT: M.Eng. EECS, S.M. Operations Research, S.B. Biology, S.B. Mathematics, and S.B. EECS. And I’m a proud husband and father to three kids.

Reviews

[Daniel · Rating 5 out of 5]

Taneja is a venture capitalist and invests in lots of new companies, so his insights are useful at least for 3-5 years. Previously, successful companies grow bigger and bigger, and they scale up. Through mergers, they become truly gigantic firms and have many products and are competitive because they own factors of production. The new wave of companies, on the other hand, will be nimble and rent factors of production. So an entrepreneur can rent Amazon Web service for cloud storage and computing rather than building its own servers. It can use Stripe for its payment services rather than using the banks. It can outsource its marketing through Google and Facebook, and manufacturing to cheaper countries. That leaves the company extremely nimble and together with AI makes customised products for consumers.

Taneja is optimistic about technology making our future better. AI is going to become much better by having access to more and more information. Unfortunately that will also make the platforms bigger and bigger, with monopolies emerging as the biggest firm will have the most data and therefore the best AI. What if they flex their monopolistic power? Unfortunately we don’t have many good answers there.

The author also touched on new powerful batteries working together with a new power grid upending the power company incumbents. He thinks that AI will miraculously cut health care cost, though so far that had been elusive as there are many many factors involved.

He is not to concerned about robots taking all our jobs; he thinks human ingenuity will always trump robots, provided we are become more entrepreneur-like. He is more worried about virtual reality ensnaring us in the virtual world, further detaching us, Matrix-style.

Overall a fascinating book and I learnt much from it.

[Nick · Rating 5 out of 5]

This is one of those books that's fun to read even if the future doesn't turn out the way the author suggests. The basic insight here is that whereas economies of scale used to be the key to biz success, now the Internet and software and the cloud and so on mean that you can "rent" scale rather than having to own it, so the proverbial 2 kids in a college dorm can start the next industrial giant. Further, AI, the cloud, The Internet of Things, 3D printing, Blockchain, big data, and all the rest of it are making business faster, nimbler, and cooler. So "unscale."

Taneja says that the last time something like this happened was in 1900 with the rise of the giant scaled companies in the steel and energy industries, for example. He then dives into a few specific industries, and here are his predictions:

Something called The Active Grid will make for small, nimble energy companies;
In healthcare – genomics and AI will make for personalized medicine;
In education – tailored learning and little classroom networks will bring down giant universities;
In finance – AI will help you save and get smarter about money;
In media – content will be personalized (in fact, it already is); and,
Consumer products will also be personalized.

Sounds like a fun future. Bring it on.

[George · Rating 3 out of 5]

Mixed feelings about this book. It covers an important topic with unknown long-term implications. I was expecting to go deep on these topics given the author's access to many of the key people & companies behind these changes. Instead, I felt it touched on many topics, ideas, and implications without doing deep on anything in particular.

The good:
Short, fast read surveying the technology drivers, real-world case studies, and people behind the Unscaling trend.
The last three chapters on policy, corporate and individual implications and prescriptions are the most interesting and valuable imho.

The bad:
The bulk of the book (middle) describes what is happening across several industries. This section felt repetitive and cursory. Maybe 50% too long.
Some of the supporting arguments, examples and prescriptions for the central thesis (unscaling of companies, market-of-one, enabled by AI) were a bit of a stretch, undermining the credibility of the core thesis. One often feels as if every causal factor falls under the banner of "unscaling enabled by AI" with every prescription being to "app-i-fy" every business & government department. If you have a hammer, everything looks like a nail....

Overall though, I enjoyed the book, and recommend reading it.

[Laura Carpenter · Rating 3 out of 5]

Fast read, quite thought-provoking. It's difficult to give this a rating... only time will tell how accurate many of Hemant's predictions are. That said, give this book a try if you want to wrap your head around AI and why personalization in all facets of life (education, media, consumer goods, etc.) is only going to accelerate.

[Akshith Rao · Rating 3 out of 5]

Hemant does a great job in explaining his investment thesis: " the unwinding of scaled up industries into specialized firms that serve niche customers". He takes this thinking and dials it up to 11 to predict how this will effect each sector. Although he mentions the companies from his portfolio that are trying to disrupt each sector, i would have appreciated if he would have gone beyond them.

I give this book 3 stars (okay maybe 3.5) because of the lack of dialogue on how this unscaling can get postponed or halted altogether due to various factors. Hemant talks only about how regulation needs to change to enable unscaling and not the other way round. Also, although he mentions some ways this unscaling is already producing harmful effects in the form of echo chambers, esp Social media, it would have been great if he pointed to more harmful things that can start happening in the near and long term future.

All in all, The author has filled this book with his unrelenting optimism that somehow leaves you on the upside of how things are going to be in the future long after you keep this book down.

[Josh · Rating 3 out of 5]

"The cloud is essentially the meeting point of Moore's Law and Metcalfe's Law -- where data, computing resources, and connectivity have merged." (page 18)

We find that hardware is butting against the limits of physics and the network effect has become a mainstream aspect of (many people's) life. This book looks at how unscaled (i.e. rent your capacity?) our world might become over six sectors (part 2 of 3 in the book).

I think I like the word untethered more than the author's choice of unscaled. We may be unscaling economies by moving from vertical integration (make & market your product) to horizontal specialization (do one of make or market, for whomever rents your capacities).

Maybe the book could have been a short essay (part 1 of book?) to prefix full volumes on all the other topics: six sectors in part 2 and, from part 3, relevance to each of policy, corporation, and individual. (Making a set of nine volumes? I might read that. Will anyone make me reading recommendations?)

[Charlie · Rating 5 out of 5]

This is a great book and is must reading for anyone trying to put AI, VR and AR into context. Further, while many industry influencers are speaking about how large corporations are struggling to keep up with more nimble, tech-savvy startups, this book explains WHY. During the 20th century, it was all about building scale. In the 21st century, technologies are reversing everything, hence "unscaling". Whether in medicine, education, media, CPG, etc. etc., it's about responding to niche audiences with hyper-targeted products, as opposed to trying to sell a mass products to mass audiences. My only beef with this book is the author's ad nauseum mentions of his and General Catalyst's investments in many of the companies mentioned. But he still gets 5 stars!

[DoGG · Rating 5 out of 5]

In the 21st century corporations aimed to develop enough scale necessary to deliver mass market products and services (“What can we build for the most people?”). They achieved this by vertically integrating to control all aspects of production. Once they were big, this scale (i.e., low incremental cost to produce additional units of the product/service) became their competitive advantage and barrier to entry for newcomers. Consequently, they focused more on efficiency than innovation. Scaled corporations force consumers to conform to them and their mass market product.

Today, bogged down by their own scale, these large corporations are having trouble competing with
hyper-focused “unscaled” upstarts who rent – rather than develop – aspects of scale (platforms, cloud computing, mobile, social media, contract manufacturing, and, critically, AI (which allows tailoring -- “automates the concept of personal service, making it economical to offer that kind of attention to everyone”) needed to deliver highly personalized products and service that delight very narrow markets, sometimes even markets of one ("What can we build to make each individual happy?"). The service conforms to the consumer.

In industry after industry and across the global economy, these upstarts are peeling away business and consumers from scaled-up incumbents (e.g., Warby Parker vs. Lens Crafters, AirBnB vs. Hiilton, The Honest Company vs. P&G, Spotify vs. Tower Records, Amazon vs. Barnes and Nobles, Youtube TV vs. Time Warner Cable, Facebook news story vs. local newspaper, etc. etc.). This seems likely to accelerate during the next two decades, fundamentally transforming existing industries while creating new ones. Key challenges include managing the risks of AI (ethics, accountability), defining the future of work and managing the transition to this new economy, and the risk of monopoly powers.

In healthcare, consolidation and vertical/horizontal integration across all types of organizations (payers, providers, drug makers, etc.) was necessary to achieve the scale that allowed mass-market availability. The result, however, was a business model focused on maximizing utilization and further consolidation. This meant a system oriented around sick care, demand outstripping supply, and poor experiences. An unscaled approach using AI means more personalized, more pleasant, more effective, lower costs care that focuses more on wellness than just sick care.

[Kit · Rating 3 out of 5]

Even to this day, AI is still embryonic even though its practical implications are already bleeding into our day to day lives: our social media, our Google searches, our medical records and the content that suits our "profile". In this way, Unscaled is no different than most texts discussing the possibilities of AI - it is still speculative, with interesting examples of the use cases.

Unscaled argues that AI will give more opportunities to entrepreneurs who is able to customise the product to their customer the way they want it. The essence of the argument in Unscaled is about using AI to customise to a customer's need - whether it is in the fields of education, content, commercial goods and finance. The argument is a valid one - we are generating more data than we know what to do with, and AI will be able to identify patterns which improves our consumption patterns.

However, in terms of the opportunities for entrepreneurs, the winners will be the corporations rather than the twenties-led startups. I personally think the AI arms race will either be won by large corps or governments which may or may not benefit the end user (that's you). Covid has affected some of these businesses already, which gives the corps an even larger slice of the AI pie. Even the early promises of companies such as Voodoo Manufacturing (which rents out its 3D printing capabilities) has closed its doors this year.

Taneja, like tech writers of this era also urges the ethical implications of AI, which is an important discussion that should be addressed sooner rather than later. Unscaled is a good read, and while it provides good examples of the current and potential use cases of AI, much of it is still speculative in an industry that's changing almost daily.

[John Dudley · Rating 4 out of 5]

My wife brought this home from her work in healthcare, but I saw an education section and so I tore through that part, then I went back read the intro and the first 3 sections and the last. I skipped the other features, so this is not a rating based on a full read. I found the parts I did read to be extremely fascinating and very forward thinking. The section on Artificial Intelligence makes a lot of sense and has intrigued me to learn how I can apply it to my work in education - which is also an important section of this book, Even though I took a lot of new ideas from this read, and it certainly inspired great thinking, there are several points where the structure turns into speculation backed by hyperbole. I would have preferred less of that and more nuts and bolts of how some of these ideas could go from the design table to reality. I would still recommend the individual topic sections (health, education, finance, etc.) for those in these fields, however.

[Roger Grobler · Rating 3 out of 5]

The unique perspective of this book is that the economy is becoming unscaled. Scaling worked in the past and created the behemoth multi nationals that rule the economy. The author argues that we are moving into an age where young upstarts can do what the big companies do at a local and small scale thanks to the availability of resources previously only accessible if you had scale. It is a compelling thought, but reminded me a bit of “The World is Flat” by Thomas Friedman. The world turned out to be not so flat at all.

It is a solid book about AI and exponential technologies, repeating a lot said in many other current books on AI. If you have not read a book on AI, this is a solid introduction. If you have read a few books, there is not that much that is new.

What this book is not, is a Lindy book...

PS: I listened to the book as an audiobook, and will also read it as a book, as there is a lot of good content, albeit not that original, and certainly not timeless.

[Jules · Rating 2 out of 5]

Pros: The author does a good job of talking about the problems with scale and how these market forces came to be. The pitch of this book is ‘renting’ pieces of mass-market scale left by conglomerates could lead to a better future. There are some hopeful examples rallying the reader to consider global interests like education and medicine being served in new and agile ways.

Cons: The approach In Unscaled is venture capital centric with a focus on cloud tech and entrepreneurship renting their business foundation from big corporations. I was left with questions like what happens with the ‘rent’ goes up? What happens when these market forces that we would come to rely on start to liquidate assets now needed for health and education? How do you can account for the leadership, intuition, and morals needed in this model? I didn’t find these answers were answered thoroughly enough for me.

[Shaka Mitchell · Rating 4 out of 5]

Lots to think about in this book and I lack the expertise to comment on all of it. A few thoughts however: at times the book felt like a puff piece for Hemant's VC fund and its investment decisions. I.e., of course he thinks the business he's invested in will be wildly successful and lead their respective industries.

That being said, the idea that the 20th century was all about "scaling up" and the 21st will be more personalized, etc., resonated with me. While I think some of the ideas are still far-fetched (people selling excess solar energy, universal basic income) others seemed spot on (online learning vis a vis largescale universities, urban farming). I think he underestimates the regulatory hurdles that exist in fields such as energy and prescription drugs but these areas nevertheless warrant serious consideration.

[Shreekant · Rating 3 out of 5]

Pros:
1. Great book and makes some great arguments on how AI is going to take over the world.
2. Covers examples from sectors such as Energy, Healthcare, Finance, Education, Media and Consumer products
3. The next generation of entrepreneurs will work on startups in AI who would unscale by way of personalization.
4. The era of build to scale is over...

Cons:
1. The writing is very dry and did not grip me.
2. It felt like reading a huge paper or sitting in a classroom vs reading a book.
3. The examples of the startups are mostly (if not all) the investments of General Catalyst managed by Hemant Taneja

[John Lam · Rating 4 out of 5]

Insightful but lack of concrete suggestions

This book is insightful reading about how AI will change the world. The author goes through different areas like energy, education, health, etc and provide examples of how AI is already changing those domains. The conclusion is that AI will change the way we live and the best way to prepare is to be curious, adaptive, and become a life long learners. Those advice are good but lack specific steps to guide readers how to understand and work with AI.

[Andrea Galvez · Rating 3 out of 5]

Insightful, thought-provoking and - in some ways deeply unsettling - this is a book for today's and tomorrow's business leaders, in whatever shape those take. Unfortunately, this book is incredibly repetitive . I found that in some places the author literally repeats himself word-for-word, as if it were written to be referenced rather than read. This made it tempting to skim and potentially miss an important point.

[Steve Carr · Rating 2 out of 5]

This is a low rating for me, but the book didn't deliver. Conceptually, it's brilliant: after decades of industry fixation on scaling, technological developments will now benefit the smaller, nimble organization. Yet the nuggets here had to be mined between promotion of start-ups in which the author invested. I appreciate the inclusion of examples, but the lionshare seemed to serve an ulterior purpose: affirmation of wise venture capital allocation. Five stars for the concept but, unfortunately, two for the execution.

[Monzenn · Rating 3 out of 5]

High 3. If I read this maybe two years ago I would have been much more impressed. It also tests my principle that I shouldn't penalise a book based on its stance, only the soundness of its narrative, because his narrative is quite problematic. Overly optimistic of AI (and too general with that) and a bit dismissive of the consequences - maybe pays lip service to policy but that's it. On a better day I might relent to a low 4 but not today.

[Ganesh Sreeramulu · Rating 5 out of 5]

While the book speaks about the advancements in technologies that could lead to a hyper-personalized and contextualized businesses (that have already started , or yet to start) ; the key take away for me was AI will not just be the enabler of the above, the but world of AI will be ruled by the big companies with their massive platform centric approach to AI. AI needs scale . The rest in the ecosystem may spin off innovations at the edges based on the above AI platforms

[Dario · Rating 4 out of 5]

Decent read, very repetitive

There are a lot of examples that I found very interesting and reading the authors take help me formulate some of my expectations and ideas of the future - not always because I agree with the author.

At times it feels like the writer is trying to hard to put everything in context with the main theme of the book - unscaling.

[Ravi Mikkelsen · Rating 5 out of 5]

How will AI and personalization of services and goods affect our lives in the coming decade? The author covers a broad introduction and then goes into just enough detail on several topics like energy, finance, medicine, and education to give someone a better idea of how to think about how unscaling in these industries will affect them.

[Kenisha · Rating 2 out of 5]

Oof- this started out really interesting but began to drag on and feel repetitive. It makes some good points about the opportunities of the unscaled economy, while addressing none of the complications and opportunities for manipulation and vulnerability. It would have been much more enjoyable if they had cut out at least a third of the rambling content. I had to force myself to finish it.

[Joshua Napoli · Rating 3 out of 5]

Rif on Long Tail

The book refreshes the "Long Tail" concept with a good list of up-to-date examples. I wish that the book looked at the changing structure of Long Tail marketplaces that evolved over the past 15 years or so. Are niche ideas supporting any creators? Or is the benefit only to the platforms that distribute the niche ideas?

[Fred · Rating 4 out of 5]

At first I didn’t like this book. It seemed like constant run-on ideas and paragraphs. But the more I read, the more it made sense and the more I understood. We’re entering a new age. An age led by technology & AI. I recommend this book

[Jake Hattis · Rating 3 out of 5]

Great insights but also just too American

A cool vision of the future and what it means for business. I’m not sure I agree with everything, especially on the healthcare side of things but still a great read.

[Melissa Dees · Rating 5 out of 5]

Excellent!

I wish that I could summarize all the thought provoking information in this book. The transition through to this new age may be unsettling and it may not follow all of the author’s thoughts but it is worth reading simply to have your brain consider the possibilities.

[Mike Tekula · Rating 3 out of 5]

Some interesting examples of 1-person businesses, but I guess in spite of the subtitle I expected more range. This book is almost entirely about AI software businesses. A very exciting space no doubt, but if that niche doesn't speak to you, there's not much else here.

[Theodore Kinni · Rating 3 out of 5]

Economies of scale are anchors that are making large companies less and less competitive, argues VC Taneja. This forthcoming book explains how to transform them.

[Heathyr · Rating 5 out of 5]

I have no hesitations in giving this book a five star rating. This is a great book.

[Christopher Hellstrom · Rating 4 out of 5]

Paper, NYPL