Consider, for the sake of argument, the possibility that perfect efficiency is unachievable. Almost physically impossible. As a company gets larger, certain k

Consider, for the sake of argument, the possibility that perfect efficiency is unachievable. Almost physically impossible. As a company gets larger, certain kinds of inefficiency in hiring and utilization become absolutely inevitable. With that premise in mind, how many employees does a company "need"? If it would need fifty in that universe of perfect inelastic spheres with no friction or similar effects, how many times that does it actually need in the real world of such efficiency-robbing factors? In my experience, the answer is two at best and more often, around five. The incremental work product from each new hire diminishes more rapidly than many realize, but the incremental revenue might still make such hires worth it. As Dan points out, a few percent increase in efficiency from optimization can be huge. It might take multiple people quite a while to achieve that, and it will still be worth it. There might be another group of several people trying something else that doesn't pan out, but that doesn't mean they were unproductive dead weight either. Bigger companies have to take risks too. They just take them differently, and the cost is more obviously attributed to them instead of the market. Maybe a single startup could do what Twitter (for example) does, in fairly short order. Even that's unlikely when issues of scale etc. are considered, but that's not even the point. That single startup is not a valid point of comparison, because it doesn't count the cost of failed experiments. Add up all of the startups trying to do what Twitter does, including the failures, and that probably be a better estimate of how big Twitter (Uber, Netflix, whatever) needs to be.