The Rule of 3 and 10 – Everything Breaks When Tripling in Company Size

Mid-way through the book Tools of Titans: The Tactics, Routines, and Habits of Billionaires, Icons, and World-Class Performers, the author Tim Ferriss interviews Phil Libin, the founder of Evernote. Phil shares a lesson he learned from Hiroshi Mikitani, the founder of Rakuten, the largest online marketplace in Japan, on “the rule of 3 and 10” where everything breaks when tripling in company size.

From the book:

He was the first employee at Rakuten, now they’ve got 10,000 or more. He said when you’re just one person, everything kind of works. You sort of figure it out. And then, at some point, you have three people, and now, things are kind of different. Making decisions and everything with three people is different. But you adjust to that. Then, you’re fine for a while. You get to 10 people, and everything kind of breaks again. You figure that out, and then you get to 30 people and everything is different, and then 100 and then 300 and then 1,000.

The idea is that things break in the company at these multiples of 3 and powers of 10. Startups figure it out when smaller but then struggle as they grow without realizing they hit the next 3 and 10 milestone and haven’t adjusted.

Entrepreneurs should think about the rule of 3 and 10 and be cognizant of what needs to be reinvented as the startup grows.

What else? What are some more thoughts on the idea that things break at company sizes that are multiples of 3 and powers of 10?

One thought on “The Rule of 3 and 10 – Everything Breaks When Tripling in Company Size

  1. Totally agree about things breaking at threes and tens. I’ve worked in a startup with 6 others that had three extras join. We then had to plan time away, balance workloads, share key accounts etc.

    All my teams of one, two or three work. Four and they can’t get consensus on decisions, one starts to slack off and they can’t communicate as well. This image says a lot about communication channels:

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