Will AI make companies outsource more, or less?

Noah Smith · Noahpinion · June 29, 2026 at 09:16 · ⏱ 13 min read  | Read on Substack ↗
Summary
AI has ambiguous effects on outsourcing: it may further lower transaction costs and accelerate solopreneurship, but could also increase verification costs due to AI-driven fraud and agent unreliability, pushing firms toward larger in-house structures. The market implication is that the net effect on corporate concentration and employment models is uncertain, with a possible bifurcation between many solopreneurs and a few giant firms.
  • New business creation surged post-pandemic and remains elevated, partly due to technology enabling 'solopreneurs' with zero employees.
  • Stripe Economics reports solopreneurship has been rising since 2008, accelerated by pandemic, Obamacare, tax changes, and internet tools.
  • AI agents can replace specialized human roles, allowing single individuals to run businesses that previously required teams.
  • Transaction cost theory (Coase, Williamson) explains outsourcing decisions; the internet lowered costs and increased outsourcing.
  • AI may increase transaction costs by enabling fraud and making long-term trust between AI agents expensive to verify, pushing activity back in-house.
  • The article hypothesizes a future with both a 'vast horde of solopreneurs' and a few monster companies with many wage earners.
Read time 13 min
Length 13,352 chars
Category macro
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