The Future of Firms and Automation
The ability to create autonomous agents like Mr. Meeseeks for any task raises questions about the future of firms and their role in the economy, as companies may no longer need to outsource tasks or partner with other firms, and instead, can replicate the necessary expertise and capabilities internally.
Conglomerates and Economic Dominance
The first firm to achieve complete automation could potentially form a conglomerate that dominates the entire economy, as they would be able to replicate any task or service without relying on external partners or suppliers, and could scale their operations with unprecedented speed and efficiency.
Ronald Coase's Theory of the Firm
According to Ronald Coase's theory, firms exist to reduce transaction costs, and the lower the intra-firm transaction costs, the larger the firms will grow, which suggests that advances in technology and automation could lead to the formation of massive conglomerates that internalize most of their transactions and operations.
Implications for the Economy and Society
The emergence of such conglomerates could have significant implications for the economy and society, as they could potentially disrupt traditional industries, create new opportunities for growth and innovation, and raise questions about the role of government and regulation in a highly automated economy, and will likely require a reevaluation of the social and economic structures that underpin our society.
AI firms will lower transaction costs so much relative to human firms. It’s hard to beat shooting lossless latent representations to an exact copy of you for communication efficiency! So firms probably will become much larger than they are now.
But it’s not inevitable that this ends with one gigafirm which consumes the entire economy. As Gwern explains in his essay, any internal planning system needs to be grounded in some kind of outer "loss function" - a ground truth measure of success. In a market economy, this comes from profits and losses.
Internal planning can be much more efficient than market competition in the short run, but it needs to be constrained by some slower but unbiased outer feedback loop. A company that grows too large risks having its internal optimization diverge from market realities.
That said, the balance may shift as AI systems improve. As corporations become more "software-like" - with perfect replication of successful components and faster feedback loops - we may see much larger and more efficient firms than were previously possible.
The market continues to serve as the grounding outer loop. How does the firm convert trillions of tokens of data from customers, markets, news, etc every day into future plans, new products, and the like? Does the board make all the decisions politburo-style and use $10 billion dollars of inference to run Monte Carlo tree search on different one-year plans? Or do you run some kind of evolutionary process on different departments, giving them more capital, and compute/labor based on their performance?
What is Coase theorem? How does it apply to this discussion?
Wouldnt AI remove the information asymmetries? We could take this focus back into a single company, where the AI have full knowledge of every department, task, and transaction.
Can you elaborate on that?