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"Too big to fail" is a colloquial term in describing certain financial institutions which are so large and so interconnected that their failure will be disastrous to the ...


Don,
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Greg

"...all these people are hired to keep track of the paper clips."

This is the end of the organization NOT because of the cost of hiring paper-clip-counters, but because this is the surest sign that the company is unable to attract and hire trustworthy people of sound judgment (or treat trustworthy people like trustworthy people).

I am amazed at companies that will let an employee use a $500k piece of equipment, but can not trust this person to make a $20 purchase.

Anne Miller

I wonder about the way that the statement that "cities scale" is evaluated. Does it take into account quality of life, stress and crime statistics? I would argue that just because "cities scale" by a limited set of measures doesn't mean that they scale when you consider an extended set of measures. So, given that I am not sure that "cities scale" it would be interesting to me to hear what others think about drawing a parallel between "bigger is better" for not only cities and companies... but education and government bureaucracy also.

David Grover

I think the emphasis on "counting paperclips" is a misdirection. That happens, for sure, and I've worked in companies where the financial bureaucracy overwhelms operational efficiency.

But I think there's a lot to be said for purely socio-cultural ossification, as well. Companies where the average tenure is long may be loath to solve problems at the department or unit level because groupthink has convinced them the problems are hugely complex, and so their efficiency just degrades over time. New employees join and may push against this culture, but they either succeed, are assimilated or excluded, and in my experience the latter two are more probable than the former.

I personally spend a lot of time refactoring dinosaur data management systems, so I see this all the time. But its extremely common at companies older than about ten years, and much more virulent in companies where the average tenure is very long.

Mark Johnson-Lewis

Wondering if you're also looking at the nonprofit field - in particular as there is lots of talk about "scaling" what works. e.g., everyone wanted to "scale" the Harlem Children's Zone, etc. And I am a survivor of a nonprofit that was on an unsustainable track of growth, in that growth was the only way to survive. I think there's lessons to learn on both sides, although the dynamics are different (profit motive, vs. social change, etc.).

pscoop

OK this is a tangent but it's clear there is an economy of scale *for the city*, i.e. a doubled population requires on 85% increase in infrastructure, but results in significant increase in land/rent which in turn would raise salaries.

An aspect of a cities economy of scale is geographical. San Jose doesn't scale by acquiring Eugune, Newcastle, Lyon, and Johannesburg. "space required per capita shrinks, thanks to denser settlement and a more intense use of infrastructure" happens because cities are constrained geographically (or sometimes by artificial geography of greenbelts, zoning, etc), however corporations tend to grow by moving to bigger offices, creating new offices, or acquiring new companies. These things are typically the catalyst for structure and process which in the end bogs down even the best companies.

Larry

You may well have already thought of this. It would seem that evolutionary biology has some useful perspective on scaling up excellence. I might describe the theory of evolution as a cybernetic model for evidence-based change, including the right size for any organic system in a given environment. In the case of really big banks, certain components or subsystems (e.g., the CEO, the board)of the larger organic system that is the bank act counter to the long term welfare of the larger system. Oh, and I would have thought that corporations are biological systems as well.

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