There are a few problems with that:

We instantly lose economies of scale. While a software company might be able to scale up with 100 so employees, the same does not apply to most other industries. Goods will be more artisanal, but also more expensive.

It's already hard enough to solve problems of a global scope. Increasing the number of countries from ~200 to ~7.9 million will make this impossible. Sure, microcountries could band together for a specific purpose to become macro-countries of a size large enough to solve a specific problem, but such an arrangement would be highly unstable: I can imagine a farming micro-country and the fishing micro-country that lives down-river having major disagreements on fertiliser run-off, for instance