A management book published in 1975 described the difficulty of scaling technology companies. More manpower does not translate into faster output because software work has coordination, communication, and ramp-up costs. Experience on a large mainframe operating system project showed that each new worker increases communication complexity exponentially. Training newcomers reduces time available for existing workers, compounding delays. For decades, no clear workaround emerged. Startup performance data from 2021 and funding patterns into 2022 suggest productivity cannot be purchased simply by hiring more engineers. In 2022, AI deployment began to change capital allocation dynamics, enabling model companies to achieve immediate improvements with smaller teams and higher revenue per employee.
"In 1975, a software engineer named Fred Brooks published a management book that described the inherent difficulty of scaling technology companies. He called it The Mythical Man-Month, and the title gestured at a simple insight: more manpower doesn't mean faster output. Put simply, scaling the output of a software team is completely different from increasing the output of workers at a widget factory. Ten more workers gets you ten more widgets. But ten times more capital and ten times the number of programmers does not get you ten times more lines of code."
"Brooks knew this from experience. Working on IBM's 360 mainframe operating system project, he watched software organizations collapse under their own complexity. Every new worker contributed exponentially to communication costs. New people needed training, and ramp-up time means they are slow to produce. Existing workers had to stop what they were doing to train the newcomers - a double whammy that compounded with every new hire."
"For 50 years, no one found a way around it. Of the 66 unicorns (startups worth over $1 billion) that were flush with cash in 2021, 30 haven't raised funds since, and 11 have raised at lower valuations. Although other factors were undoubtedly at play, this is yet another data point that illustrates productivity can not be bought simply by hiring more engineers."
"Since 2023 a new set of laws have begun to govern how capital gets deployed, ones that more or less render the Mythical Man-Month* irrelevant. This is apparent if you look at companies pouring capital into AI models and seeing immediate returns in research and model capability. Model companies have managed to deploy more capital with smaller teams and produced outsized revenue growth as a result. In fact our internal data show that the larger AI companies have nearly three times the revenue run rate per full-time employee as non-AI software and tech companies."
#software-engineering-management #productivity-scaling #communication-overhead #ai-and-capital-deployment #startup-funding
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