Size Does Matter!
Small Rules!

Size matters!
Small rules!

** "For Nations, Small Is Beautiful," reads the headline of a Financial Times article (12.04.07) by Gideon Rachman. Mr Rachman begins as follows: "Europe seems intent on slicing itself up into ever smaller pieces. ... Kosovo is likely to declare independence—making it the seventh new country to emerge from the wreckage of Yugoslavia. The Soviet Union has given way to 15 new states. Even in Western Europe, there is talk of Belgium dividing in two, while a pro-independence party has taken power in Scotland. People tend to treat countries that split up a bit like married couples. It is a sad event. ... But if the formation of new countries can be achieved peacefully, it is usually a cause for celebration. This is the age of the small state." Rachman goes on to provide a bucketful of supporting evidence. For example, four of the five richest nations in the world have populations of less than five million. (The U.S., number four, is the exception.) Five of the seven most competitive countries, according to the World Economic Forum, have populations of less than 10 million.

Support for this idea comes from many quarters.

** The peerless Japanese thinker, Kenichi Ohmae, wrote years ago that the age of the "city-state" had returned. Richard Florida, our premier student of the "creative class," which in turn is the engine of modern economic growth, backs into something like the city-state argument when he shows how a minuscule number of postal ZIP Codes account for a stunning share of U.S. patents. Likewise, biotech start-up founder many times over (formerly of Harvard B-School) Juan Enriquez, in As the Future Catches You, argues that "The future belongs to small populations who build empires of the mind, and who ignore the temptation of—or do not have the option of—exploiting natural resources."

** Some (many, most, virtually all) have argued that the only way to deal with globalization is through consolidation—and that tomorrow's winners will gobble up so much market share that you will be "on the bus" or "off the bus." But, in a November-December Foreign Policy article, titled "The World's Biggest Myth," author Pankaj Ghemawat claims otherwise. "Some believe globalization is a force for good. Others see it as a global curse. These two camps agree on almost nothing, except that globalization leads to increased market share for fewer players. In fact, both sides couldn't be more wrong." The detailed statistical analysis Ghemewat presents makes it clear that, in even our largest industries, the "consolidation equals more share" hypothesis is far more often wrong than right.

Irrefutable fact is, from nations to corporations ("Is CitiGroup Too Big to Manage?"—headline, several times repeated in the last couple of weeks), size ain't all it's cracked up to be. Tiny may not always be beautiful ... but, by and large, hyper-big and growth for growth's sake are a loser's strategy, time & time & time & time again.

(I'm tuned into this in general, but, at the moment, in particular, because when you read this I will have ventured from Vermont to Dubai for my last seminar of 2007. In my lectures I refer to the emergence of this great modern city-state as "the single most extraordinary act of pure imagination that I have ever been privy to.")