Kathy Fogel, Randall Morck and Bernard Yeung compiled lists of the ten largest employers in each of 44 countries across the world, in a recent study published in the Journal of Financial Economics. Fogel and her colleagues discovered that countries with rapid churn into and out of this elite group had faster growing economies. This relationship even seems to be causal, because high turnover in one year is correlated with fast economic growth over the subsequent decade. It also holds up after statistically controlling for other factors. Fogel, Morck and Yeung also argue that the key factor is not “rising stars” but “disappearing behemoths”. Failure, then, is ubiquitous, survivable, and even useful.
I’m struck by the fact that in Silicon Valley the talk is all of “fail faster” and “double your failure rate”, while over on Wall Street the phrase is “too big too fail.” Which of these two economic sectors has added more value to the US economy in the past couple of decades?
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