The question Coase asked in 1937

A 27-year-old economist asked a question no one had asked before: if the market is so efficient, why do companies exist?

If buying from the market were always better, every task would be purchased from a different vendor and no organization would need to exist. Ronald Coase answered: companies exist because coordinating internally is cheaper than negotiating, contracting, and policing every task. That is called transaction cost.

That cost defines the size of a company. It grows up to the point where doing something in-house is no longer cheaper than buying it externally, and it stops growing there.

Now look at what agents do to that number.

When one person can delegate, monitor, and verify ten processes instead of two, the cost of coordination falls by a whole factor. And when that happens, the company’s boundary moves.

That is why this training does not start with technology. What changes is where the boundary sits between what the company does and what it buys, and how much hierarchy it needs to function. Technology is the means to that end.