Former Google CEO Schmidt: AI Can Eliminate Most 'Coordination Tax', Making Companies Flatter
In a podcast, Schmidt proposed that AI can replace three coordination tasks in organizations—information gathering, upward reporting, and team alignment—thereby reducing the number of people engaged in planning and coordination. He defined the 'coordination tax' using his own experience as CEO, where he attended 12-hour meetings daily, and provided two practical examples: one pair of founders uses AI to check on Fridays whether company activities contradict their values, while another executive uses an AI replica to manage subordinate progress. He estimated that a company with 10,000 employees might lay off two or three thousand people, but explicitly stated this is merely speculation.
Schmidt described his daily routine during his tenure as CEO of Google as a form of tax: 12 hours a day, five days a week, with most time spent listening to people explain projects and decisions. He named this drain the "coordination tax" and identified three specific components—gathering updates from various parties, passing them upward, and keeping teams aligned. His argument is that AI assistants can take over these three tasks, making companies flatter and faster.
The distinction of this framework lies in separating "coordination" from "building." Schmidt said companies still need people who build products, do sales, deal with regulators, and lead teams; what will be replaced are those "glue people"—roles handling planning and coordination. He cited an example of a friend whose rapidly growing company cut 20% of its staff, including these glue positions; the friend later received death threats due to the layoffs.
The two practical cases Schmidt provided are more concrete than the layoff numbers. A pair of founders ask an AI assistant every Friday to flag any activities at their company that conflict with their values; another executive created an AI version of himself to check on an employee's progress, give instructions, and respond when help is needed. Schmidt expressed ambivalence about the second example—he said it sounded potentially abusive and worried him, but also acknowledged it did speed up that executive's decision-making.