The slack you cut to look efficient was where the learning lived.
Lean thinking is hard to argue with: minimize invested capital, maximize return, and treat anything beyond what the expected load requires as waste. Pressure-vessel engineers quietly reject it. Under the principle of leak-before-failure, a vessel is designed to leak at a weld seam before it can explode. That weak point is a designed inefficiency. It costs performance under normal conditions and saves lives under extreme ones.
If deliberate inefficiency is good engineering for a tank, could it be good management for a company? Venkatesh Rao’s answer is yes, and his reason has less to do with safety than with learning.
What lean can learn
Lean thinking enables closed-world learning. You know the question and the kind of answer you are looking for, failure modes are anticipated, and recovery from failure is quick and predictable. Once you know what works, that is how to make it cheaper.
Fat thinking deploys more capital than necessary and accepts lower returns. What it buys is open-ended learning: work where you do not yet know the question, the fruits may take years, recovery times are unpredictable, and a discovery might rewrite the rules. A lean budget cannot pay for that, because every dollar has to be justified by a return someone could forecast in advance. The slack in a fat system is not waste. It is the antifragility budget.
The same slack also keeps the company alive long enough to collect. A lean system that maximizes expected return per unit of capital can go to zero when the unexpected arrives, while a fat one gives up some return for a better chance of surviving, and, as ergodicity explains, only survivors get to compound.
Economies of scale and scope are closed-ended learning, so fast-followers can skip the risky early phase and copy. Economies of variety come from running many experiments, and they are where genuinely new knowledge comes from. Fat companies look inefficient to lean analysts, and they produce the innovations lean companies then copy. Lean economies have growth reflected in numbers but are zero-sum. Fat economies have unaccounted learnings in nooks and crannies but are non-zero-sum.
Where to put the fat
None of this makes lean thinking wrong. An economy of fat companies has high churn, and a known process run fat is simply expensive. The pressure vessel’s designer did not over-build everywhere either; they chose one place to fail first, which suggests that the question is not whether to be lean or fat but where to put the fat. Leak-before-failure is a way of allocating the antifragility budget: deciding which parts to over-design so that the rest can fail safely.
Rao pushes the idea one step further, to value itself. Companies should not try to maximize value capture. A company that captures enough to survive and lets the surplus spill into learning, capability, and other people’s innovations is funding a future no lean model can price. How much spillover a company can afford before it stops surviving is the question lean accounting has no way to ask.
References:
- Venkatesh Rao, Fat Thinking, Ribbonfarm
- Luca Dellanna, Fragilization