In his seminal paper, The Nature of the Firm, the great Ronald Coase stated that the optimal size of a firm in an industry will decrease as transaction costs in the industry decrease. The Internet has proven to be a singular tool to reduce transaction costs across almost every industry, so according to Coase, the size of the firm will shrink in response. My view is this phenomenon has only begun and will accelerate dramatically over the next decade.
The on-demand economy. The consumerization of enterprise. The bottoms-up economy. Micro-schools. Citizen journalists. Social media. All of these are symptoms of the same phenomena: the decimation of the firm. Transaction costs are being drastically lowered, enabling small companies to do what large companies used to do.
Everyone understands that firms can be smaller. The non-obvious conclusion is that firms should be smaller.