One or more embodiments of the present invention provide a technique for effectively managing virtualized computing systems with an unlimited number of hardware resources. Host systems included in a virtualized computer system are organized into a scalable, peer-to-peer (P2P) network in which host systems arrange themselves into a network overlay to communicate with one another. The network overlay enables the host systems to perform a variety of operations, which include dividing computing resources of the host systems among a plurality of virtual machines (VMs), load balancing VMs across the host systems, and performing an initial placement of a VM in one of the host systems.