Economies of diversity

In business you hear a lot about economies of scale – the idea that if you produce or consume a lot of something you can expect it to be cheaper per unit. But I’ve been wondering recently about whether there’s a different kind of benefit you can get from deliberately trying to create diversity in a group.

I first started thinking about it in relation to our cohorts at BGV. Part of the point of accelerator programmes is that they give you an economy of scale. Paul Graham and the Y Combinator team’s initial realisation was that you could make 10 small investments for the cost of one traditional angel investment and that the teams needed many of the same things which you could provide in bulk. It’s the same for us. We’d be a very expensive way to invest £150k in a single startup but spread across ten it makes more sense.

We’re also able to leverage more expertise and valuable connections for the teams because of their diversity – they all work in different subject areas. It’s classic Mark Granovetter where ‘the strength of weak ties’ is really important. A team working in urban planning can help a team working on primary education because they know people who work in that world – maybe not well, but often those relationships and introductions are the most useful. Having a diverse group of founders on the programme also helps us avoid too much groupthink because people have genuinely different experiences and skills.