Stowe Boyd

After buying data on more than 23,000 publicly traded companies, Bettencourt and West discovered that corporate productivity, unlike urban productivity, was entirely sublinear. As the number of employees grows, the amount of profit per employee shrinks. West gets giddy when he shows me the linear regression charts. “Look at this bloody plot,” he says. “It’s ridiculous how well the points line up.” The graph reflects the bleak reality of corporate growth, in which efficiencies of scale are almost always outweighed by the burdens of bureaucracy. “When a company starts out, it’s all about the new idea,” West says. “And then, if the company gets lucky, the idea takes off. Everybody is happy and rich. But then management starts worrying about the bottom line, and so all these people are hired to keep track of the paper clips. This is the beginning of the end.”

The danger, West says, is that the inevitable decline in profit per employee makes large companies increasingly vulnerable to market volatility. Since the company now has to support an expensive staff — overhead costs increase with size — even a minor disturbance can lead to significant losses. As West puts it, “Companies are killed by their need to keep on getting bigger.”

For West, the impermanence of the corporation illuminates the real strength of the metropolis. Unlike companies, which are managed in a top-down fashion by a team of highly paid executives, cities are unruly places, largely immune to the desires of politicians and planners. “Think about how powerless a mayor is,” West says. “They can’t tell people where to live or what to do or who to talk to. Cities can’t be managed, and that’s what keeps them so vibrant. They’re just these insane masses of people, bumping into each other and maybe sharing an idea or two. It’s the freedom of the city that keeps it alive.”

- Jonah Lehrer, A Physicist Turns the City Into an Equation

Consider this idea: the most successful companies of the future will be those that operate more like cities. ‘More of a village than an army’, as I wrote in Defining Social Business:

Metaphorically, a social business will seem more like a village than an army, and where a lot of 20th management approaches will be obsolete. We can expect these features:

ubiquitous use of social tools, and social networks,

greater levels of personal autonomy,

self-organization of groups and projects,

very porous boundaries with the world,

high reliance on non-financial motivation, or personal meaning and purpose,

internal marketplaces for ideas and talent,

and senior management operating more like Hollywood producers or investors than autocrats.

Or perhaps a CEO operating like a mayor? Would senior management actively create a context in which their control was limited and much of the company’s activities were not directed by top-down commands?

As Gibson said, ‘The future is already here; it’s just unevenly distributed.’ Many companies have some of these characteristics, but very few have all of them.

I will be pursuing these ideas, and topics related to them, in my Future of Work research initiative this year. Stay tuned for a manifesto in the early new year.