What a firm should keep inside
once agents make coordination cheap.

Halfway through an essay about selling to software, Brian Flynn, a San Francisco builder whose profile points to Katch, a startup that pays people to capture what agents need verified, stops to concede something: “Not all transaction costs are falling equally. Integration, compliance, and security review are still expensive.” Then he moves on, because his essay is about the costs that are falling. I think the sentence he moved past is the one a company of a few hundred people should plan around.

His essay opens with an economist most managers have never read, and the argument only works if you know what that economist actually said.

A question from a lecture in 1932

Ronald Coase presented the argument in a lecture in Dundee in October 1932. He was 21. It appeared as “The Nature of the Firm” in Economica in November 1937, and in 1991 he received the Nobel Prize in economics “for his discovery and clarification of the significance of transaction costs and property rights for the institutional structure and functioning of the economy.”

The puzzle was simple. Economists said prices coordinate an economy. Yet inside every firm, work is coordinated by people giving instructions, and some firms were enormous. If the market did all the coordinating, firms would have no reason to exist. In his Nobel lecture he put his answer in plain terms: “there were costs of using the pricing mechanism. What the prices are has to be discovered. There are negotiations to be undertaken, contracts have to be drawn up, inspections have to be made, arrangements have to be made to settle disputes, and so on. These costs have come to be known as transaction costs.”

A firm, that little planned society, could only continue to exist if it performed its co-ordination function at a lower cost than would be incurred if it were achieved by means of market transactions and also at a lower cost than this same function could be performed by another firm.Ronald Coase, summarizing his 1937 article in his Nobel lecture, 1991

Read as a manager, that sentence is a price comparison. Payroll sits in-house and cleaning is contracted because, at some point, one was cheaper to organize inside and the other cheaper to buy. Nobody reruns the comparison very often. Agents change both sides of it at once, which is why the boundary of a firm does not simply shrink.

Agents made buying cheaper

Flynn’s essay is about the market side. An agent “can discover a service, check its price, and call it in a single HTTP roundtrip. No proposal. No demo.” His conclusion follows Coase directly: “When search costs collapse, the default shifts from ‘build it in-house’ to ‘buy it on the open market.’” He gives his own worked example. An agent researching which data service to use spends $0.10 to $0.50 and 10 to 25 seconds reasoning it through, while a specialized catalog answers for $0.01 to $0.02 in under 200 milliseconds. In his words, “7-50x cheaper and 50-100x faster.”

The models themselves are bought this way now. Balaji Srinivasan, author of The Network State, described it last year: once a model is part of your workflow, “it’s easy to swap in a new one,” so “you essentially have budget for AI contractors in each vertical.”

Building got cheaper too

The other side of the comparison moved just as fast, and it pushes the opposite way. Aaron Levie, CEO of Box, wrote in December about a ten-person services firm that never had custom software, because building it would have taken several people. “Now, someone on the team builds a prototype in a few days, proves out the value proposition in a matter of days.” The cost of doing something yourself fell, so work that used to be bought, or skipped, comes inside.

Sometimes there is nothing to buy. Nikita Bier, former head of product at X, wrote in September that when X looked for bot detection, “there was not a single company that brought together all the latest technologies so we had to do it all in-house.” And sometimes the thing you bought becomes cheap to replace. Greg Isenberg, CEO of Late Checkout, which builds and runs a portfolio of small companies, put it bluntly the same month: plenty of companies “stay with outdated software vendors only because switching is painful, and once rewriting is cheap, that lock in starts to break!”

Flynn sees the same pull back inward from where he stands: “As models get cheaper and more capable, some services get absorbed back into the agent.” The services that survive, he writes, have “proprietary datasets, real-time feeds, hardware-dependent computation.” So the boundary moves in both directions at once. Generic work goes out to the market, specific work comes back in, and what decides it is whether anyone else has what the task needs.

The cost that falls fastest is inside the firm

Coase’s comparison has a third term people forget: the cost of organizing inside. A large share of a company’s headcount exists to coordinate, which means passing work between people and keeping them aligned.

in a world where AI handles the glue work...handoffs, specs, coordination, the need for internal labels shrinks fast.

In the same post Isenberg wrote that “most legacy titles were invented to make headcount legible to org charts, not customers,” and that “the future of work is flatter. fewer layers. fewer middle steps. more output.” The small end of the market shows what that looks like. In 2025 John Collison, co-founder of Stripe, interviewed the indie founder Pieter Levels about “how he’s making $3m a year as a one-person company.” This June Nicolas Finet, CEO of Sortlist, published how he runs prospecting, call prep, follow-up, no-show recovery and weekly reporting as five agents with one shared memory. His instruction is the Coase question in one line: “stop thinking in headcount and start thinking in jobs.” He reports the whole setup “runs for about $400 a month in tokens,” and is careful about the limit: the agents “do not close.”

Larger firms are testing the same thing. Coinbase’s “one person teams,” which I covered in the note on the new org chart, are the inside version of this: one person carrying work that used to need a handoff between three roles.

Checking the work and settling disputes stay expensive

This is where Flynn’s caveat matters. Go back to Coase’s list from 1932 and check each item against what agents do.

Discovering prices is close to free for an agent. Negotiating, in Flynn’s model, moves into the protocol, with the price returned in the response. Contracts become allowlists and spending limits. The last two items on the list are the ones agents have barely touched. Inspection, meaning checking that the work was done right, is still hard, and Flynn’s own data shows it.

2/44

Services with fully working endpoints in one sweep of an agent service catalog, cited by Brian Flynn.

53%

Of direct service calls that succeeded in the same data.

87%

Success rate of the recommendation layer that chose between services.

Settling disputes is the other one. When an agent buys the wrong thing, someone in the company still answers for it. Flynn expects enterprise buying to “re-optimize around ‘allowed, trusted, and auditable’ alongside ‘fast and cheap.’” Each of those three words is work that a person inside the company has to do, which means integration into the systems you already run, a security review before anything touches customer data, and someone who checks the output.

There is one more cost Coase did not list, because in 1932 it lived in people’s heads: what the company knows about its own customers, exceptions and past decisions. A vendor cannot sell you that, and an agent without it makes generic decisions. I wrote about why that record compounds in the note on company context. For the boundary question it means the specific knowledge stays inside, and it needs an owner.

What I would rerun at a 300-person company

Coase’s test is still the right one. The prices in it changed, so the answers from the last time anyone ran it are out of date. These are the five comparisons I would put in front of a leadership team.

1. Every outsourced task with a clear output. Price it three ways: the current supplier, an AI-native supplier that sells the finished work, and one of your own people running agents. The third option did not exist when the contract was signed.
2. Every tool you bent your process around. If the team uses a narrow slice of a large product, ask what the narrow version would cost to build and maintain. Keep the systems of record, and question the rest.
3. Every role whose main job is routing. Handoffs, status reports and specs for other teams are the internal coordination costs falling fastest. Redesign those roles with the people in them, before anyone draws a new chart.
4. Everything only your company has. Customer history, exception rules, pricing logic and supplier relationships are what agents need and no vendor can supply. That work moves inside, and someone should own it by name.
5. The costs that do not fall. Budget for integration, security review and checking agent output as permanent line items, with an owner, before buying more agents.

Most of the money in this exercise sits in the first and third items. Most of the risk sits in the fifth, because a company that buys cheaply and skips the inspection has only moved its transaction costs to the day something goes wrong.