Companies provide value beyond lowering transaction costs
A factor in this calculation is the fact that companies do far more than reduce transaction costs. Companies muster resources, including intangible resources such as corporate culture and shared knowledge, which contribute positively to society and the economy beyond simple cost reduction. Companies today compete more on the basis of value creation than on the basis of generating internal efficiencies. Markets aren’t static either, as companies place bets on innovation that redefine markets and create new ones.
There’s also the human dimension. Companies are their brands and brands matter. The emotional connection between consumers and company brands remains a powerful bond. For people as employees, there are clear perks to being part of a formal organization, including benefits, access to resources, and the opportunity to collaborate and create with a diverse set of peers.
Further disaggregation of the traditional company is likely
But as markets continue to transform, companies — their purposes, structures and activities — will undoubtedly change, too. As transaction costs plummet, value creation will continue to shift from behind the walls of the company out into the network space. Companies will become hyper-lean and will procure everything as a service — from robotics capabilities to manufacturing equipment.
The future unit of funding might become specific projects and ideas — or even virtual networks of connected entrepreneurs — and not companies. Ad hoc assemblages of atomized contributors might organize themselves around a particular service or market. The act of value creation will create companies, rather than the other way around.
The future could see decentralized autonomous organizations that run on blockchain technology enter into contractual relationships with people or machines, build networks of autonomous agents that interact with one another, and perform specific objectives by software code. These ownerless entities would own, buy, sell and trade assets of all sorts without ongoing human guidance. From a functional perspective, these autonomous markets could look and behave like human-staffed companies from the outside.