Cities, companies, and innovation – Why cities keep growing

A theoretical physicist and researcher of complex adaptive systems, Geoffrey West asked himself what social systems have in common with biological systems: Could it be that cities or companies actually follow the same underlying principles like plants or animals? Is London a great big whale? Is Walmart an elephant?

In earlier work, he and his team had investigated the role of networks, scaling and growth in biological systems. Hence these concepts could serve as the launchpad for their research into social systems and especially cities. Acknowledging that each city has emerged and developed in its own unique setting (history, culture, and location), West wanted to lift the vail of superficial differences and discover the commonalities that all cities share, regardless of size or setting. And he did so using the insights gained on biological systems.

Heureka – Lots of commonalities

The first step of the effort was straightforward: search for networks in cities. That turned out simple enough, if you just think about all the aspects of infrastructure and utilities, which keep a city going: roads, sewage systems, energy grids, even the number of filling stations, they are quintessential networks.

For the second step, West and his team ploughed through available data to arrive at quantifiable results. And they found their ingoing assumption confirmed: like biological systems, city infrastructures scale in a sublinear way. The exponent in this power law is around 0.85: at double the size, a city saves around 15% resources to build, maintain, and run its infrastructure (more precisely: to increase city size by 100%, only 85% more resources are required for infrastructure). That turned out a universal principle, regardless of culture, history, or location of a city: West and his team found it reflected in city infrastructures in the Americas, across Europe, and in Asia as well.

That’s a clear indication of the economy of scales in city infrastructures. It demonstrates the efficiency gain that larger cities have, and this makes further city growth both desirable and sustainable.

Oops – Striking differences

However, West and his team did not only find their initial assumption confirmed. As they dug deeper into the data, and started looking beyond city infrastructure, they discovered striking differences between cities and biological systems.

Maybe that does not come as a surprise: many aspects of cities have no biological analog; things like wages, educational and research institutions, cultural events, or patents are actually human inventions; they were created by humans. And as West and his team investigated these aspects of cities in their search for scaling effects, they actually found more than they had expected: all these quantities systematically scaled with city size. But surprisingly, they scaled in a superlinear way (according to a power law with an exponent that is approximately 1.15). In a city of double size, these quantities are 115% higher. Bigger cities generate a significant gain in wealth creation, productivity, and innovation, as Geoffrey West points out:

Because you can take the same person, and if you move them to a city that’s twice as big, then all of a sudden they’ll do 15% more of everything we can measure.

Cities function, they exist through the interactions between people. They are attractive and successful, because cities facilitate the network of human interactions, providing a density and frequency that is a lot higher than in rural settings. This observation has been discussed among sociologists for several decades already; consider, for example, Jane Jacobs and her seminal work on The Death and Life of Great American Cities.

West’s original contributions to this debate are in the mathematical model to describe these phenomena and in the solid data analysis to underpin the model. Through his work, we now have tools to compare the development of different cities and to predict their future trajectories. His theory is an abstraction out of necessity, so individual cities may well deviate from it; still the grand scheme remains universally applicable.

The description of the universal principles of city scaling is significant in itself. That infrastructure elements scale in a sublinear way with city size, whereas socio-economic aspects show superlinear scaling: these are tremendously powerful insights. They help us understand why cities are so important to human progress: The bigger a city, the wealthier, more productive, and more innovative its citizens (sic!) are; at the same time, the resources required to build and maintain infrastructure decrease with city size.

So we might stop the investigation here and conclude that bigger cities are everything we ask for: They should be more affordable and sustainable, while more productive and innovative than smaller cities. That might be all we need to know about cities to discuss their role in a society’s innovation supply chain. But the story is not at all so simple.

Still, there’s no free lunch

As West and his team went even deeper into their data, they found that –exactly like wealth creation, productivity, and innovation–  crime, disease, pollution scale with city size in a superlinear fashion. As West points out, cities are not only the source of many of our solutions, they are also the root of many of our problems. This result –remember this is about complex social systems, and argued from a physicist’s perspective– perfectly reflects the observations offered by historian and archaeologist Ian Morris in Why the West Rules – For Now:

Rising social development generates the very forces that undermine further social development. I call that the paradox of development. Success creates new problems, solving them creates still newer problems.

West agrees with Morris that innovation is the key tool society employs to manage this dilemma. When emerging problems need to be solved, and their solutions give rise to yet other problems, then we are in a relentless race, trying to stay ahead of the problems, trying to innovate faster then new problems pop up.

In this scenario, urbanisation is not just an option we may choose or reject. Rather, our cities need to grow out of necessity, in order to keep the innovation engine running. But West goes even further in his analysis. He observes that keeping the innovation engine going will not be enough to keep the problems in check. Instead, we’d need to rev the engine up, continuously increasing the pace of innovation, innovating faster and faster.

This fascinating concept clearly deserves further attention, but before I can delve into that in a subsequent post, I’ll first turn to West’s observations on companies and how they relate to innovation. And once again, he offers a couple of truly remarkable and surprising insights.