Abstract-Controllability and observability have long been recognized as fundamental structural properties of dynamical systems, but have recently seen renewed interest in the context of large, complex networks of dynamical systems. A basic problem is sensor and actuator placement: choose a subset from a finite set of possible placements to optimize some real-valued controllability and observability metrics of the network. Surprisingly little is known about the structure of such combinatorial optimization problems. In this paper, we show that an important class of metrics based on the controllability and observability Gramians has a strong structural property that allows efficient global optimization: the mapping from possible placements to the trace of the associated Gramian is a modular set function. We illustrate the results via placement of power electronic actuators in a model of the European power grid.I. INTRODUCTION Controllability and observability have been recognized as fundamental structural properties of dynamical systems since the seminal work of Kalman in 1960 [13], but have recently seen renewed interest in the context of large, complex networks, such as power grids, the Internet, transportation networks, and social networks. A prominent example of this recent interest is [16], which, based on Kalman's rank condition and the idea of structural controllability, presents a graph theoretic maximum matching method to efficiently identify a minimal set of so-called driver nodes through which time-varying control inputs can move the system around the entire state space (i.e., render the system controllable). The method of [16] is applied across a range of technological and social systems, leading to several interesting and surprising conclusions. Using a metric of controllability given by the fraction of driver nodes in the minimal set required for complete controllability, it is shown that sparse inhomogeneous networks are difficult to control while dense homogeneous networks are easier. It is also shown that the minimum number of driver nodes is determined mainly by the degree distribution of the network. Many other studies of controllability in complex networks have followed, including [20], [19], [23], [24], [21].One issue with the approach taken by [16] and much of the follow up work is that the quantitative notion of controllability discussed in [16] (namely, the number/fraction of required driver nodes) is rather crude in some settings. This was noted, for example, by [18] in response to the surprising result in [16] that genetic regulatory networks seem to require many