Will companies become smaller because coordination is cheap, or larger because AI rewards data, capital, distribution, and centralized control?
Coase's transaction-cost logic cuts both ways: cheap coordination shrinks the reason firms exist, while data and capital advantages push toward giantism. The empirical race is on.
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All three answers now have serious articulations: Smith's verification-cost analysis of whether AI produces solopreneurs or monster firms, Hockenmaier's case for the biggest companies ever, and a formal coordination-cost model predicting networks of specialized agents in high-velocity sectors.
a vast horde of solopreneurs, and a few monster companies employing huge numbers of wage earners
Transaction-cost analysis: verification costs determine whether AI produces atomized outsourcing or larger integrated firms.
AI lowers internal coordination costs while strengthening data and distribution moats — value concentrates in fewer, larger firms.
Coordination-cost model predicting high-velocity sectors shift toward networks of specialized execution agents, with falsifiable predictions.
AI lowers internal and external coordination costs at once, making boundaries fluid rather than uniformly larger or smaller.