Week 23, 2022—Issue #207
Scale: Organisms, Cities, and Companies
Each week: three ideas to help us build better organizations. This week: three ideas about scaling and growth. Originally published on June 10th, 2022, in the WorkMatters newsletter.
I’ve just finished Geoffrey West’s Scale: The Universal Laws of Life and Death in Organisms, Cities and Companies, a book about the surprising mathematical regularities that can be found in nature and organization.
This is my 10,000-foot summary:
1. Organisms
Organisms scale sublinearly, leading to economies of scale and bounded growth.
You might expect that an animal that is twice the size of another would require twice as much energy to stay alive, but that’s not the case. Organisms don’t scale linearly, they scale sublinearly, meaning that they become slightly more energy-efficient the bigger they become… up to a point. As you might expect, there are biological limits to how big organisms can become — restrictions that limit both growth and lifespan. (Note that these restrictions apply to individual organisms, not ecosystems).
2. Cities
Cities scale superlinearly, leading to increasing returns and unbounded growth.
If you’ve ever looked at a schematic of your city’s power grid, you might have thought it had an organic quality to it — and it kind of does! Physical infrastructure follows the same type of sublinear scaling laws as organisms do. But what’s more interesting is the fact that socioeconomic activity scales superlinearly, meaning that the bigger the city, the more wealth, innovation, crime, and COVID-19 you’ll find! There’s in theory no limit to this growth, just as there’s no limit to the city’s lifespan*.
3. Companies
Companies scale sublinearly, leading to economies of scale and bounded growth.
So what do you think? Do companies scale sublinearly like organisms do, or do they scale superlinearly like cities? The answer is somewhat counterintuitive. Although companies, like cities, are man-made structures of sorts, they actually scale sublineraly like organisms! Companies become more efficient but less innovative as they grow. And just like organisms, they eventually stagnate and die. (The current half-life of a US publically-traded company is somewhere around 10 years).
How might we build companies that scale like cities?
That’s the million-dollar question, and it’s the reason why there’s so much interest in business ecosystems these days. Writes West:
“The fact that companies scale sublinearly, rather than superlinearly like cities, suggests that they epitomize the triumph of economies of scale over innovation and idea creation. Companies typically operate as highly constrained top-down organizations that strive to increase efficiency of production and minimize operational costs so as to maximize profits. In contrast, cities embody the triumph of innovation over the hegemony of economies of scale.”
As authors Hamel and Zanini explain in their book Humanocracy (see #133), it’s high time that we do away with that traditional organizational model:
“To be more innovative, adaptable, and inspiring, our organizations need new DNA. They need to be rebuilt on human-centric principles. Tweaks to existing systems and processes — a smidgen if mindfulness training, a dollop of agile teams, a spritz of digital transformation, or a fresh cost of analytics — will never produce nonlinear improvements in organizational effectiveness. For that to happen, we need to go back to first principles.”
Specifically, we need a new ecosystemic organizational model that enables our companies to scale like cities — superlinearly and without bounds.
That’s all for this week.
Until next time: Make it matter.
/Andreas
In theory, socioeconomic growth is limtless. In practice, it’s limited by the city’s physical infrastructure. More activity leads to more energy use, and more trade leads to more traffic, etcetera. And so while socioeconomic activity can grow unhindered for a while, it will, at some point, hit a limit in the form of blackouts or traffic jams. To grow past this point, the city needs continuous and sustained innovation (e.g., smart grids, autonomous cars) that enables the physical infrastructure to accommodate further growth — but that’s another book.
How can we build better organizations? That’s the question I’ve been trying to answer for the past 10 years. Each week, I share some of what I’ve learned in a weekly newsletter called WorkMatters. Subscription is free. Back-issues are published to Medium after three months.
