The Chronicle

of a ColdFusion Expatriate

"Blitzscaling" Is Inhumane and Nobody Should Do It

May 14, 2021

“Blitzscaling” is a distastefully martial portmanteau of “blitz,” which is German for “lightning,” and “scaling,” which in this context means business growth. It may have been invented by—and was definitely popularized by—Reid Hoffman, who wrote the eponymous book.

It’s a concept for how to grow a business very quickly, and it works. But it carries with it tremendous social costs.

Reid Hoffman is a billionaire tech entrepreneur who helped found PayPal and LinkedIn, and who presumably knows a thing or two about scaling up a business, as well as being, in this writer’s opinion, rather obsessed with scale itself.

The basic premise of “blitzscaling” (and I’m going to keep quoting it because I refuse to acknowledge that it is actually a word) is “prioritizing speed over efficiency in the face of uncertainty.”

The idea is not fundamentally a bad one, and Hoffman’s book discusses some meaningful and valid ways that tech companies can trigger exponential growth. One is simply by virtue of tremendous margins inherent in digital goods, and the other is through “network effects,” which is increase in the value of a good from increase in the number of participants (think marketplaces, social networks).

Where I take issue with the thesis, and where I believe companies have followed this path and done actual societal harm, is when venture capital enters the mix, which is practically universal in the tech industry.

In practice, based on the book, “blitzscaling” typically involves dumping venture capital into growth at all costs, foregoing any steps that would significantly hinder that growth even if necessary for the business’ long-term survival.

One example given is Uber, which leveraged capital investment to undercut existing private transportation options, like taxis, and quickly built a huge, loyal customer base. This works, of course, because everyone loves to receive a high-quality product at an impossibly low cost.

In a “blitzscaling” company, investment allows the business to temporarily suspend the rules of the free market, and Hoffman urges founders to push into those uncertain waters bravely, with little concern for risk, because risk mitigation creates friction for growth.

But what happens when the venture dollars run out?

Such a business now finds itself beholden to large and influential investors, who would very much like to see margins remain as wide as possible. In Uber’s case, this means that there is tremendous pressure to keep fares and benefits paid to drivers low, as customers have been trained to expect this service at an unreasonably low price and the company can no longer afford to simply eat the difference.

These companies then become social bottom-feeders, driving another wedge in our steadily growing income gap to drag huge numbers of marginalized contributors (Uber drivers, Amazon warehouse workers) through the dirt behind them, while soaking all of the profits up into distant shareholders’ pockets.

“Blitzscaling” is aptly named, because it is a war against the common people.

These “blitzscaled” businesses are touted as revolutionary, as “disruptors.” But is it any surprise that consumers will flock to buy high-quality goods and services sold at unsustainably low prices?

Rather than creating virtuous cycles of free and fair exchange, “blitzscaling” companies give consumers idealized experiences built on the backs of a practically enslaved labor force, bootstrapped through hundreds of millions of dollars of opportunistic capital investment. Once the investment runs dry and true market dynamics take hold, what is left is a Wall Street success story perched atop a mass of over-leveraged immigrants and working poor.

This is as much a condemnation of venture capital as it is of “blitzscaling,” but perhaps the two go hand-in-hand.