Coordination as a Scarce Resource
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An additional point worth noting is that there is tremendous social value in reducing coordination costs, but it's nearly impossible to capture that value, so it's very under-provided.
What does lowering coordination costs look like? Trade meetups, conferences, and similar events or locations to foster communication and coordination (Like EA and LW meetups and forums,) as well as trustworthy information sharing - which is costly to individuals and mostly benefits others. (Like Givewell, which provides analysis that doesn't benefit itself, so it is a largely trusted broker.)
I'd be very interested in thinking about what other general strategies could exist - they seems like great targets for world optimization.
Definitely sometimes true, but there are also many areas where the agent doing the coordination is the one extracting all the profit (like most marketplaces). Related: Laws of Tech: Commoditize Your Complement
It's rare that commercial businesses and market extract anywhere near all of the surplus, but it's a good point.
How many of these are of the same type, e.g., material suppliers?
In a startup (~50 employees) that I worked in we had
- more than 25 tech suppliers (mostly cloud-based software service providers)
- more than 15 suppliers specialized in the business domain including print and payment service providers.
- more than 20 other suppliers, e.g. HR, office
- many clients, with more than 15 that require special handling
I totally agree with the core point that coordination is a limiting factor.
off the top of my head:
3 shipping logistics
7-8 material suppliers
1 supplier of physical premises
1 supplier of machinery and support
2 payment services providers
1 banking service
1 loan servicer
3 e-commerce service providers
Love your posts! I’d recommend publishing them at a slower pace so people get a chance to see and read them. It’s also a bit confusing on LW when several posts are published on the same day, and you can’t tell which one is first in the series (just from the front page).
If coordination services command high wages, as John predicts, this suggests that demand is high and supply is limited. Here are some reasons why this might be true:
- Coordination solutions scale linearly (because the problem is a general one) or exponentially (due to networking effects).
- Coordination is difficult, unpleasant, risky work.
- Coordination relies on further resources that are themselves in limited supply or on information that has a short life expectancy, such as involved personal relationships, technical knowhow that depends on a lot of implicit knowledge, familiarity with language and culture, access to user bases and communities, access to restricted communication channels and information, trust, credentials, charisma, money, land, or legal privileges.
- Coordination is most intensively needed in innovative, infrastructure-development work, which is a high-risk area with long-term payoffs.
- Coordination is neglected due to systematic biases on an individual and/or institutional level. Perhaps coordination is easy to learn, but is difficult to train in an educational context, and as such is frequently neglected by the educational system. Students are therefore mis-incentivized and don’t engage in developing their coordination skills to anywhere near the possible and optimal level. Alternatively, it might be that we teach coordination in the context of centrally coordination-focused careers (MBAs, for example), but that many other careers less obviously centrally focused on coordination (bench scientists) would also benefit - a problem of interdisciplinary neglect.
Note that, if the argument in my review of interfaces as scarce resources is correct, then coordination can also be viewed as a subtype of interface - a way of translating between what a user wants and how they express that desire, into the internal language or structure of a complex system. This makes sense. Google translates natural-language queries into the PageRank algorithm, Facebook translates “friends” into databases and networks, and Amazon, like any store, translates the user’s desire to “buy a product” into an extremely complex sequence of supply-chain actions.
Not all resources/interfaces are best viewed as forms of coordination, although virtually all forms of economic activity depend heavily on coordination to get things done. A non-coordination purpose of some resources is to meet basic individual survival needs, such as agricultural production. While this is obviously necessary to facilitate coordination as well, I don’t think most people would tell you that they avoid starvation in order to better coordinate.
The most actionable advice I can take away from these thoughts stems from point (3) and (5) above. As people proceed in their careers, they naturally gain access to skills, contacts, and other information that is translatable to other roles and jobs. Each job is a chance to “harvest information” that is locally abundant in one environment and port it to another environment where that information is scarce.
In considering what job to take, applicants should form a detailed model of what information they’ll be able to harvest from their employer. Employers likewise should consider what information they can harvest from their new employee. This puts a new spin on the increasing tendency of employees to change employers and even careers. Rather than a sign of disloyalty or fickleness, it’s just the natural result of an economy efficiently incentivizing and engaging in valuable information exchange.
If coordination is indeed a neglected skill, then it’s important to figure out whether it’s teachable, but neglected by the educational system; or unteachable, but learnable. Figuring out what is useful and what skills are required to coordinate effectively in a particular line of work seems like a key component of useful experience, and a topic to steer conversations toward in dialog with mentors and more experienced peers.
"This puts a new spin on the increasing tendency of employees to change employers and even careers. Rather than a sign of disloyalty or fickleness, it’s just the natural result of an economy efficiently incentivizing and engaging in valuable information exchange"
this is very interesting idea! sadly, i have no idea how to check it.
Oh boy I love this. Quite obvious, but such elegant analysis!
I have one example on top of this:
There is a phenomenon called “teal organizations”, where they replace top-down management with trust. Everyone in the company gets to decide which actions to take, as he’s probably the person closest to the problem. This is counteracted by additional responsibility to always ask someone more experienced than you when you make a decision — but instead of waiting until he gives you orders, you ask him yourself. Also, it doesn’t have to be your boss, it can be more meritorious colleague.
Sorry for the mixed description, you can read more at Reinventing Organizations by Frederic Laloux or at their website. There are many examples of successful organizations that works like that: Zappos, Valve are ones of the popular.
Overall, I love the series. Very deep and to the point, plus a lot of examples.
I think one additional area you can plug in here is regulation and federal business/commercial law as well. When that is done well it really should reduce coordination problems and relax constraints.
However, I thin one can says relaxing the coordination constraints is (probably) a necessary condition for increasing rewards at the object/skill level it doesn't seem to be a sufficient condition.
Still, as ALexei says, I do like you posts and make an effort to pay attention when I see one posted.
Good points. Personal to Prison Gangs makes a similar point about regulation, along with several other phenomena - litigation, credentialism, tribalism, etc. Based on the model in the OP, all of these are increasing over time because they solve coordination problems more scalably than old systems (e.g. personal reputation).
With regards to coordination vs object-level skills, I think a decent approximation is that object-level skills usually need to be satisficed - one needs to produce a good-enough product/service. After that, it's mainly about coordination: finding the people who already need the good-enough product you have. To put it differently, decreasing marginal returns usually seem to kick in much earlier in object-level investments than in coordination investments.
More generally, would it be reasonable to say that legibility relaxes coordination constraints? That feels like it helps crystallise something I've been mulling over.
If you have a map of a city, you don't need to find someone who knows the city to navigate it. If you have accurate birth and death records for a country, you don't need to talk to local leaders to find out things like "how many people are avoiding taxes" or "how many people are dying of malaria". If you know exactly what quality of wood a forest is going to produce, you don't need to talk to all of the forest managers to find out which one is most suitable as a supplier.
Interesting point. Rings true, though I'll have to mull it over a bit. Certainly important-if-true.
The thought about the margins for object level and coordination level seems right. Perhaps another aspect to consider in that context is sources of increasing returns. The object level seems much more like the internal economies of scale. The coordination space seem much more like Smithian external economies/network type effects (which suggests my initial view was in error).
I think this post was pretty causal in my interest in coordination theory/practice. In particular I think it helped shift my thinking from a somewhat unproductive "why can't I coordinate well with rationalists, who seem particularly hard to get to agree on anything?" to a more useful "how do you solve problems at scale?"
Was so surprised that nobody's raised this point that I made an account just to make it.
Large organizations and highly placed individuals who solve coordination problems can make lots of money for reasons other than market efficiency. Most obviously, because they are in the best position to be rent-seeking. Coordinators take advantage of network effects to make themselves indispensable, then have every incentive to enshittify - to use their position as a coordinator to extract rent and dictate what activities can be coordinated (picking up rideshare customers) and which cannot (coordinating contract negotiation, selling products the coordinator disapproves of, etc).
This isn't so relevant to your point about freelancers, and I agree with the general point that coordination is enormously valuable to society. But coordination would also be well-paid and 'taut' would in a world where coordination incentivizes net-negative economic efficiency via rent extraction.
All these problems could be interpreted as alignment or intelligence problems. In many cases, the actors involved do not care enough about the outcome. Or when they do care, they are not intelligence enough to connect their actions to their incentives.
Here are two essays from a similar perspective.
Discussing the division between the coordination economy and production/satisfaction economy:
https://macroflaneur.substack.com/p/the-coordination-economy
History the coordination and production constraints since hunter gatherer till today:
https://macroflaneur.substack.com/p/coordination-vs-productivity-the
Of course, just because decreasing coordination costs is good in general doesn't mean it's good for you in particular. There may well be somebody in India who can do your job better than you for a fifth the pay (telecommuting, probably), and it would be disastrous for you if someone solved your boss's coordination problem with that person. Trump campaigned on a platform of erecting barriers to foreign competition, and his election says quite a bit about how many people dearly wanted such a thing.
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