

Bosses Don't Wear Bunny Slippers: If Markets Are So Great, Why Are There Firms? - weel
http://econlib.org/library/Columns/y2008/Mungerfirms.html

======
sdurkin
Very interesting article. It suggests that ability to organize outside firms
is directly correlated with effectiveness of outsourcing. So if computers
increase the ability to organize outside firms, then they must increase
outsourcing.

So the question becomes, will computers ever increase the ability to organize
outsiders to the point where the firm disappears altogether? (This kind of
scenario was suggested in <http://paulgraham.com/opensource.html>)

My answer would be eventually yes, but not in the near future. Computer
communication tools are still startlingly primitive. Based on experiments in
office
microgeography,(<http://www.nytimes.com/2008/01/07/technology/07link.html>)
being closer to people still makes it far easier to exchange information.

~~~
umjames
"My answer would be eventually yes, but not in the near future. Computer
communication tools are still startlingly primitive. Based on experiments in
office
microgeography,(<http://www.nytimes.com/2008/01/07/technology/07link.html>)
being closer to people still makes it far easier to exchange information."

And interrupt people in the zone.

Any information exchange between people in an office (especially programmers)
works much better when the people involved are at equal talent levels.
Otherwise, the lesser-talented people bug the crap out of the more-talented
people with questions that could have been answered with a simple Google
search.

~~~
sdurkin
Yes, I would agree that is one of the many costs associated with a firm.

However, I would say that the point of the article is that the increased
coordination and communication of firms outweighs the associated costs of the
office environment at present.

One could argue that the internet makes the office/firm model of doing
business obsolete by reducing the costs of outsourcing. To some extent this
has already happened in the open source community as well as in user generated
content websites such as wikipedia. In these cases, sophisticated projects are
designed and built by individuals working at many locations.

The crucial (and seemingly odd) distinction is that these projects are
undertaken by individuals for no pay. I would argue that this allows some
flexibility in the projects. Jobs, money, and lives rely far less on the
success of an open-source project than on the success of a profit driven firm.

It remains to be seen whether the contribution model of wikipedia could be
translated to a bid model that would replace the traditional for-profit firm.
In some industries, such as programming, the bid model has lower costs of
decreased cooperation, and thus has occurred more quickly. However, I cannot
see it taking root in "heavier" industries (engineering, manufacturing,
consumer services) without a significant improvement in computer communication
tools.

~~~
Prrometheus
"The crucial (and seemingly odd) distinction is that these projects are
undertaken by individuals for no pay. "

When you pay someone, you need trust and contract enforcement.

------
pchristensen
The firm is an abstraction that lets many people (employees, managers, etc)
appear as a single actor in market. As with all good abstractions, the market
doesn't care how it's composed, only how it functions. The abstraction would
leak in the case of horrible labor conditions causing strikes or causing labor
as a whole to organize and affect all firms, or other cases like that.

------
curi
There are imperfectly organized firms because the market doesn't provide
perfect answers, it helps us to gradually create knowledge. As people here may
know, firms are gradually coming to play a less dominant role in the world,
and small, agile startups a larger one. And this change is happening not
because someone decided it should, or anything like that: it's part of the
free market.

