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Yes. The work of Ronald Coase on why businesses exist at all is more relevant than ever. Coase asked the question: "why is there such a thing as a business and

Yes. The work of Ronald Coase on why businesses exist at all is more relevant than ever. Coase asked the question: "why is there such a thing as a business and why are they the size they are? Why isn't everyone an independent contractor? Conversely, why isn't the whole economy one big conglomerate". His answer is essentially transaction cost and co-ordination overhead. So logically as technology changes those, the natural size and configuration of businesses and other organisations changes. What has ended up happening is that modern communications has made it much easier to do business to business transactions over larger distances than before, which has led to centralising to a smaller number of specialist firms rather than a larger number of geographically spread firms. This has been very noticeable in areas like law as well. There was a time when a manufacturing business in the Midlands had a local accountant, local law firm, etc. Now that is all centralised in a small number of cities. This has led to a more hub-centric global economy than ever before. Now you might expect that this same effect would also encourage more remote working which would have the opposite effect on firm concentration geographically. It seems to have turned out that the effect of the same technology within firms has been less drastic. In other words, while it has led to more remote working and more part time working from home, it has not had the drastic effect of completely blowing up the nature of the team. I suspect this has something to do with human nature and with transaction cost. Basically making a b2b relationship more geographically distant has turned out to be easier than physically dispersing a team within the low transaction cost company boundary. Google does search for everyone... but Google employees are usually expected to spend at least a few days a week physically co-located with their teams. All the world's widebody aircraft engines are made by only two manufacturers... who choose to concentrate their own design operations geographically. As a result, paradoxically it seems that modern technology has led to more geographical concentration rather than less. If we want to counteract that in the UK, we need to create counterweights to London. To a certain extent that already exists for things like aerospace and high end automotive - if you were starting a new business there you'd be crazy not to do around Derby. The challenge is that in most other areas London is so dominant that its dominance becomes a self fulfilling prophecy. No idea how to do that though. The effect of transport links on all this is quite hard to predict as well. Do you end up making well connected cities and towns economic extensions of London in terms of creating employment there? (Might as well start a tech company in Birmingham if it's so close to London). Or do you just turn them into commuter communities?

pjc50 7y ago
Upvoted for Coase; far more people on HN should read his work, because those questions you mention are extremely critical to explaining a lot of things. All the "gig economy" firms are practical Coasianism.
- Mvandenbergh 7y ago
  You might be interested by the idea of "Coasian Hells" which are situations where someone has tried to set up a delivery structure that doesn't match transaction costs. Good examples: -UK rail (in practice train operators, the railway operator, and rolling stock leasing companies spend vast resources trying to charge each other for things) -Boeing's supply chain for the 787 Basically every failed outsourcing project has failed because the people designing it did not understand the implications of Coase
thu2111 7y ago
So this leads to the question of why firms don't like remote work (on average) and whether that might change. My guess is it's a combination of: • Corporate videoconf systems being unbelievably atrocious and unreliable compared to consumer tech. • Ditto for standard communication tools like Outlook. • The current generation of non-tech CEOs mostly being older people who either don't actually use electronic comms much, or don't like using it. E.g. my CEO doesn't use Slack at all, even though everyone else does, and most of his email is handled by his assistant. When he does write emails they're usually just one or two lines long. • Remote work places far greater weight on reading and writing ability, areas where many people are surprisingly weak but reluctant to admit it. Physical meetings are much easier on people, both in terms of requiring less mental effort and allowing people to just zone out rather than work. The latter two have no obvious fixes. On the other hand, corporate videoconf infrastructure that doesn't suck seems like it should be easier to fix. The perennial problem of "I'm five minutes late because {the dialin was missing, didn't work, my microphone was muted, etc}" is entirely solvable with better software. Unfortunately the industry's best people all focus on consumer workloads where scaling to massive success is comparatively easy and sales-free.
- 7y ago

pjc50 7y ago

Upvoted for Coase; far more people on HN should read his work, because those questions you mention are extremely critical to explaining a lot of things. All the "gig economy" firms are practical Coasianism.

Mvandenbergh 7y ago
You might be interested by the idea of "Coasian Hells" which are situations where someone has tried to set up a delivery structure that doesn't match transaction costs. Good examples: -UK rail (in practice train operators, the railway operator, and rolling stock leasing companies spend vast resources trying to charge each other for things) -Boeing's supply chain for the 787 Basically every failed outsourcing project has failed because the people designing it did not understand the implications of Coase

thu2111 7y ago

So this leads to the question of why firms don't like remote work (on average) and whether that might change. My guess is it's a combination of: • Corporate videoconf systems being unbelievably atrocious and unreliable compared to consumer tech. • Ditto for standard communication tools like Outlook. • The current generation of non-tech CEOs mostly being older people who either don't actually use electronic comms much, or don't like using it. E.g. my CEO doesn't use Slack at all, even though everyone else does, and most of his email is handled by his assistant. When he does write emails they're usually just one or two lines long. • Remote work places far greater weight on reading and writing ability, areas where many people are surprisingly weak but reluctant to admit it. Physical meetings are much easier on people, both in terms of requiring less mental effort and allowing people to just zone out rather than work. The latter two have no obvious fixes. On the other hand, corporate videoconf infrastructure that doesn't suck seems like it should be easier to fix. The perennial problem of "I'm five minutes late because {the dialin was missing, didn't work, my microphone was muted, etc}" is entirely solvable with better software. Unfortunately the industry's best people all focus on consumer workloads where scaling to massive success is comparatively easy and sales-free.

7y ago