It works remarkably well at scale. In fact, this is the defining trait of all cities, states, and nations that became historical points of reference like Troy, Athens, Rome, Constantinople, Venice, London the US and possibly China in the future.

Each of them thrived because they embraced diversity and freedom, etc. giving themselves access to a much larger pool of skilled talent.

Venice offers the clearest example. At its height, they could appoint someone as unconventional as a sub-Saharan Muslim to command their fleet (think of Othello). But the moment they shifted to a locals-only approach for key positions, their dominance began to crumble.

The problem is that usually locals feel cast aside. And while they too get the benefits, they rarely see them as such… They feel entitled and screwed. Don’t care about the big picture.

Ps. Of course this is very high level as each of these cities / states / etc collapsed under slightly different circumstances.