As you build your settlement, it will be tempting recruit all sorts of troops and diplomats into your ranks. Cavalry are both swift and powerful for raids, archers give you good defense, thieves could be fun, and assassins sound neat, and… before long, you will have a city that can do a little bit of everything, but nothing very well.
On the other hand, if you focus on doing just one or two things in a city, then in a few months it will be able to pack a hefty punch.
A city which builds only Tier 2 cavalry, for example, will be able to launch hefty attacks against targets on plains and hills. A city which specializes in just one type of Advanced diplomat will find that few can defend against it. A mountain-top city with a big garrison of archers is one that few would dare raid or attack.
On the other hand, a city with a few hundred of each troop type and a couple of hundred of each diplomat , is a city that cannot really do anything at all. Its diplomatic attacks will founder against specialized defenses, its diplomatic defenses will protect only against small incursions, its armies are weak in both attack and defense.
Better to do a couple of things well, than to be able to do everything really badly.
[Update: for some examples, I’ve now written this post.]
The Wisdom of Kurdruk 
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These are good points, but how should capital cities be set up?