One but not both

The future of work is framed as a challenge for employees. But companies might be in a more fragile position.

Four months ago tomorrow Trump declared the COVID-19 pandemic a national emergency. 

Research firm Cowen polled consumers in March, asking how much longer they thought the pandemic would impact their daily lives. 42% of respondents said 1-3 months. Oops. 

At the time of that first survey, just 6% of respondents thought the pandemic would be a 12+ month event. The firm’s latest data gathered in late June now shows that 30% of consumers think their lives will be disrupted by the pandemic for at least another 12 months. 

And so after experiencing widespread denial about the depth and severity of the pandemic crisis to come in the spring, there remain fewer holdouts. It now takes ever-stronger doses of anti-reality serum to believe your life hasn’t been disrupted drastically by the pandemic, to believe that these effects won’t be long-lasting, to believe that someday soon we will “go back” to whatever it is we thought was true before the crisis. 

To use Rumsfeldian thought leader parlance, there are, at this stage of the crisis, far fewer unknown unknowns about **waves hands everywhere** all of this. 

In March, for example, it certainly seemed bad to be an airline operator or a restauranteur. In July, it is clear just how bad this is. In March, it seemed good to be a company that sold video conferencing software. In July, it is clear just how good this is. 

We could on and on with these sorts of examples.

These are all sort of differential diagnoses. But I think it is important to acknowledge that they are findings worth acting on with some sort of intention. I’d wager, for instance, that few restaurant operators right now believe they can safely and economically pursue what Eugene Wei calls the Deus ex Vaccina strategy. Meanwhile, the last few weeks have been flush with headlines about airlines cutting headcount in the months ahead. For the businesses unable to conveniently put off decisions about how the pandemic has changed their operations permanently, the future is now. 

And while it is likely that I am a bit too focused about the future of work because there are two of us splitting 600 square feet, one desk, and one IKEA kitchen table every day, the permanently temporary state of WFH seems untenable. With more than a quarter’s worth of data about what works and what doesn’t when your previously centralized workforce is sitting at the dining room table while their kids try to learn long division on Zoom it should be clear that your company’s investment in office space is good or bad and, in the future, either going up or down. 

But I suspect that “should” is doing a lot of work in that sentence. On the Invest like the Best podcast this week, Charlie Songhurst, the former head of strategy at Microsoft, outlined the very negative future of work too many companies are unthinkingly hurtling towards when it comes to the distribution of their workforce. 

I think one of the things that's going to be very interesting is I do think there's a sort of U-shape curve where, for companies, you either have to be remote or you have to be centralized. The bit that's going to be absolutely nightmarish is if you have a hybrid mix.

Because what that'll lead to is everyone at headquarters will have a political advantage over everyone that works remotely, and so you'll end up promoting people who chose to move to headquarters rather than work remotely.

So you'll end up promoting the more politically aware, which is probably the most toxic criteria you could have for long-term productivity of the firm. 

In May, I argued against the framework that this pandemic is bringing 10 years of change forward into 1 year. Not because I thought it would be specifically untrue, but would be generally less true than implied by the phrase, which has, again, a TED-like rhythm and cadence to it. Fading any and all proclamations that sound TED-like is a good heuristic.

But I think I am softening on this view and I’m now way more open to the possibility that it is indeed true that tons of things will change permanently because of this crisis. Maybe even a decade’s worth.

So but back in May, the most specific area of change around which I was skeptical was office space because, well, some executives that make bigger decisions than me felt the same!

Elsewhere in the interview, Songhurst says another lasting impact from COVID seems likely to be companies no longer viewing themselves as constrained by the “accidents of geography” when it comes to hiring. Songhurst’s positive framing of geography getting a downgrade in someone’s career trajectory is specific to startups that are, definitionally, more flexible in their corporate structure than incumbents. The businesses with big, outstanding CRE decisions to make are the large firms that, in contrast, actually depend on this geography as a screen. And probably want to keep this in play.

For many industries — think finance in New York and tech in San Francisco — aspiring employees move to these cities to intentionally eliminate the random chanceness that comes with trying to break into an industry. The geography itself is the draw and the random chance is which firm they land with, not the other way around. 

Companies don’t really like this framing. It suggests the brand of their firm doesn’t really matter to ambitious young employees but that it is instead the brand of the industry and the city in which they are located that are the draws. Over time, for example, there are specific differences that emerge between those who work at Credit Suisse, or JP Morgan, or Goldman Sachs. But surfacing these differences often takes more time than most recent grads spend at a given bank. The traditional two-year investment banking rotation that kicks off a career in finance renders the name on the door irrelevant. It’s why there was buzz about this system cracking five years ago. 

And so for strong companies, eliminating the geographic limits on recruiting, hiring, and growing is appealing. If you are a strong firm with a great brand and tons of high-caliber prospects banging down your door, then geography does seem to be an unnecessary and artificial constraint on talent acquisition and, in turn, growth. 

But I suspect that many companies are less confident in their ability to appeal to prospective workers than they care to admit. Working for a company that is tearing apart democracy and actively sowing division among voters is more appealing if when you leave the office 1: you’re in very pleasant Northern California and 2: everyone else you live near works at companies doing versions of the same. Doing this same work for less pay — which the CEO of one of these companies suggested would happen in a distributed future! — but with the flexibility to live near where you grew up (and want to raise a family) in suburban Atlanta isn’t quite as appealing if all your neighbors hate you because of said work. 

And while little about recent economic history in the U.S. suggests labor is likely to exert broad leverage over capital, this crisis is for some but not all trends an accelerant. And L was indeed flexing a bit on K in the run-up to the pandemic (though, to be fair, from historic lows). 

And so I think there is a chance significantly higher than zero that workers forced to reckon with life in a distributed white collar workforce view their current professional pursuits as not worth sucking it up for. The initial phase of this crisis might’ve been most jarring to workers but the longer it drags on the harder it gets for employers. 

Companies, then, would do well to heed Songhurst’s words of caution on the future composition of their workforces. You can transition into being a fully distributed company with an HQ-in-name-only and all of your employees working from home or you can organize your workers the old fashioned way in an office. 

But this is an “or” decision, not an “and/or.” You can do one, but not both.


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