Too big and fail?

A recent study (1) shows that fastest growing cities are not the most prosperous. Business leaders may want to take inspiration from this finding as they incorporate size and growth into the goals of every executive. Growth is important, for sure, but growth for the sake of it or objectives that focuses on becoming “big,” are not necessarily good. In the 90s, the leaders of a high growth pharmaceutical company (2) set out to become the largest company in the world. They did and in the process destroyed $400 Billion in shareholder value. Contemporary information and internet companies are on a similar path to doom as they dabble in every field in which they have no competence in.

Countries and cities have to focus on per capita metrics rather than aggregate numbers as a way to measure progress. It is not growth of the population or size, that is important – just the opposite. Fast growth in aggregate numbers may indicate weakness in many different dimensions including infrastructure, health and education. As the world’s fastest growing and highest trade surplus country presides over the largest and most painful migrations of life in and out of cities, it has to ponder the implications of it all. Just as large companies, large cities and countries are likely pushing themselves to the brink of disaster. If the growth is engineered by monopoly power, currency manipulations or subsidies, such failures will be catastrophic.

Stable growth with a happy, healthy and educated population is a necessary condition for long term survival – for companies, cities and countries.

(1) New study finds fastest-growing cities not the most prosperous. Published: Thursday, July 19, 2012 - 13:07 in Mathematics & Economics. Source: SAGE Publications

(2) Flexibility : Flexible Companies for the Uncertain World. http://www.amazon.com/Flexibility-Flexible-Companies-Uncertain-World/dp/1439816328/ref=sr_1_3?ie=UTF8&qid=1342925184&sr=8-3&keywords=gill+eapen