In recent decades, the small states of northwestern Europe have been hailed as models of good governance. These societies have used encompassing, cohesive social networks, where “everyone knows everyone,” to reform public policies and restructure their economies with remarkable speed. At first glance, these pint-sized success stories would appear to hold few lessons for larger, more heterogeneous polities, where diverse, loosely connected sectors and regions compete to influence national-level outcomes. This paper, however, argues that small cities may resemble small states in their capacity to construct cohesive, cross-sectoral networks. While lacking the fiscal and regulatory tools of a nation-state, reform-oriented, municipal actors can use the “politics of interconnectedness” to accelerate restructuring by constructing collective myths. Focusing on Waterloo, Canada, a poorly resourced, thinly institutionalized environment where collective action should be least likely, the paper demonstrates how policymakers and firms could use the image of Waterloo as an IT leader to rapidly transform the region’s industrial base. In doing so, the paper contributes to separate literatures on both small states and cities. In addition to demonstrating how cities can learn from small states, the paper uses regional-level, empirical material to highlight the importance of interpersonal relationships in small, European states.