“But it turns out that cities and companies differ in a very fundamental regard: cities almost never die, while companies are extremely ephemeral. As West notes, Hurricane Katrina couldn\u2019t wipe out New Orleans, and a nuclear bomb did not erase Hiroshima from the map. In contrast, where are Pan Am and Enron today? The modern corporation has an average life span of 40 to 50 years.”
\n
\n“This raises the obvious question: Why are corporations so fleeting? 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. \u201cLook at this bloody plot,\u201d he says. \u201cIt\u2019s ridiculous how well the points line up.\u201d The graph reflects the bleak reality of corporate growth, in which efficiencies of scale are almost always outweighed by the burdens of bureaucracy. \u201cWhen a company starts out, it\u2019s all about the new idea,\u201d West says. \u201cAnd 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.\u201d
\n
\n“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 \u2014 overhead costs increase with size \u2014 even a minor disturbance can lead to significant losses. As West puts it, \u201cCompanies are killed by their need to keep on getting bigger.\u201d
\n
\nFor 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. \u201cThink about how powerless a mayor is,\u201d West says. \u201cThey can\u2019t tell people where to live or what to do or who to talk to. Cities can\u2019t be managed, and that\u2019s what keeps them so vibrant. They\u2019re just these insane masses of people, bumping into each other and maybe sharing an idea or two. It\u2019s the freedom of the city that keeps it alive.\u201d<\/p>\n
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