Definition

Historical principle (1930s) that large organizations exist because internal transaction costs are lower than external transaction costs. Ismail argues this law is now obsolete in exponential times because: (1) digital platforms have made external coordination nearly free, (2) small distributed teams now have lower transaction costs than internal hierarchies, (3) organizational complexity (approval chains, silos) makes internal transaction costs rise with size. Therefore, the competitive advantage of size is gone. Small coordinated teams using platforms beat large hierarchies.