The Post-Covid Return to a “Work from Work” Economy Misses a Massive Opportunity
Early in the Covid-19 pandemic, after a few months of a surprisingly seamless work from home experience, businesses across America raced to envision how the pandemic had opened our eyes to a new future. With productivity up, flexibility up, and employees dexterously adapting to a more nimble digital world of enhanced collaboration, the future seemed to offer blue sky possibilities. Suddenly, we realized, the boundaries of the past no longer needed to limit us – not the clunky hassles of commuting, not the restrictive constraints of geography, not the land rent premiums on downtown real estate, not our endless addiction to the exhaustion of business travel, and not the annoying, not to mention unhealthy, distractions of the in-person office. Like a weight lifted from the public shoulders, we realized our former world dependent on the physical office was clunky, limiting, inefficient, and outdated.
Not only was work being done better in the digital realm, but the fact that it was offered exciting possibilities for a more interconnected efficient economy. The future, it seemed, was boundless. Suddenly the “garden city” dream of spacious living in tune with nature seemed possible without sacrificing the efficiencies of the modern “economies of scale” economy. Suddenly we could work without being weighed down by commuting and geography. The world was but an oyster. Thanks to technology that was much further along than any of us realized and the possibilities it unleashed, the present in 2020 seemed to offer a much clearer picture of the progressive workplace of the 21st century than the economy of 2019, which, suddenly, seemed a clunky and outdated relic of yesteryear whose inefficiencies we could finally discard.
As it turns out, corporate America has decided to never mind all that.
After months of speculating, corporate America has retrenched. The boundless vision of the future, be damned, many of them have decided. 2019, it turns out, is much closer to where we’re headed than 2020. Nostalgia for the “clunk” of the in-person office seems well on its way to bulldozing the creative possibilities that Covid-19 once had opened up. Slowly, companies are giving up the new era and crawling back to their offices, to their commutes, to business travel, to the old-fashioned daily grind, and re-embracing the limitations of the old world. Few have had the courage to ditch the in-person office. When it came to putting their money where their mouths were, few businesses have had the courage to think differently.
Sealing the deal was JP Morgan CEO Jamie Dimon, who in April issued a shareholder letter wailing about the “serious weaknesses” of virtual working. In it he cited numerous clichés contending that cohesion is better when people are in person, including “spontaneous” learning and the “apprenticeship model” for employee training. His fretting is consistent with a corporate consensus that has emerged that prioritizes these old world reservations over any more visionary possibilities for the future
It’s clear that the “return to the office” future lacks vision. Any time there is innovation there is retrenchment. In the new era of the automobile many contended the horse and carriage would stay forever. When the railroad came along many cities bet on canals. And when newspapers started dying, many print journalists doubled down. This is another of those instances of an en masse lack of courage. But this one is more serious. By retrenching to “work from work” rather than looking more ambitiously to the future, we’re also missing out on what would have been a massive possibility to change our world for the better.
America could have realized a “bigger tent” workplace economy
One of the biggest opportunities the digital workplace has wrought is the opportunity to finally burst through the boundaries wrought by the limitations of geography in hiring. Had we embraced this reality, the possibilities to our economy would have been nearly infinite.
We know this is the case because the history of cities is a case study in understanding that productive output becomes exponentially larger as economies of scale increase. The birth of the automobile was significant, for instance, because it allowed the radius of population from which companies pull talent within urban regions to exponentially increase. By tripling the average speed of commuting, it in turn increased roughly tenfold the job-seeking population from which companies could solicit recruits. As people’s flexibility in living and working conditions expanded, companies were better able to optimize talent for their industries and become bigger, and productivity increased radically. It also reduced the land rent premiums on living in the core of cities. The growth of the automobile reduced companies’ dependence on downtowns, and today the overwhelming majority of Fortune 500 companies are not headquartered in city centers. The expansion of the commuting radius wrought from the automobile also allowed for the expansion in products available – groceries today sometimes include 100 to 1000 times as many varieties of items as grocery stores a century ago because they can draw upon a larger radius.
The gains in productivity wrought from the larger economies of scale that were made possible through automobile commuting – generally roughly tenfold increases in the job catchment population – would have been dwarfed by the growth in productivity made possible through the boundary-less digital economy. Much was made of Amazon’s decision to locate its new HQ2 second headquarters in Washington, DC, in large part because DC afforded greater access to top-end talent than other cities. In a truly digital employment marketplace, however, such decisions would be unnecessary. While Washington, DC offers abundant top-end talent to companies like Amazon, that talent is still but a fraction of the numbers they would have access to if they could draw upon all the talent of the world to support their white collar services.
By breaking forth from the shackles of urban geography, suddenly companies would expand the boundaries of their talent pool from a few million at most to the entire planet of 8 billion, a 4,000-fold increase. Imagine the possibilities. We know economic output grows exponentially based on the labor pool, and in this case we can hardly even fathom how much better the output of companies could be if they could literally draw talent from anywhere. For the talent’s sake, it also would eliminate the need to make often difficult compromises between job opportunities and living preferences, something with nearly immeasurable value. That companies have chosen the limitations of the urban economy labor pool instead of exploring the possibilities of the boundless global economy labor pool, sacrificing nearly infinite gains in productive possibility along the way, shows just how little vision and economic understanding goes into such decision-making. Jamie Dimon may sing the praises of the percentage of two point gains in productivity that may be wrought by cohesion from retrenching to the in-person workplace. But he ignores the massively greater increases he might have seen if he hadn’t chosen to bound his labor pool by geography. In his case, his elite company may survive. Smaller companies with less prestigious names may struggle far more: for them, boundless geography would be a major selling point.
America could have realized a more sustainable future
If we were serious about sustainability and were starting from scratch, we would never create a world in which virtually all white collar workers expend the resources of living dual lives in two different locations, their home and their business, as a matter of course every day. Especially since this dual existence requires the massive transportation energies of moving hordes of the population unnecessarily between the two twice a day. The model is fundamentally inefficient. Even if energy expenditures at home are cut by 50 percent when people are at work and vice versa, the need for both still comprises a massive waste of waste, water, and energy resources, not to mention building construction resources. The innovations of Covid-19 offered us an opportunity to correct this massive inefficiency of our contemporary world. And yet we didn’t seize the moment. Instead you’re likely to see companies continue to gloat about modest symbolic improvements in the performance of their lighting or challenges to their employees to bike to work. All toward the goal of single digit percentage increases in energy performance, if any at all. It demonstrates how un-serious the corporate world is about their commitments to sustainable performance that so many casually shirk what would have been such a dramatically bigger and easier opportunity to achieve a massive one-time gain in efficiency by eliminated the needless redundancy of multiple physical lives for people, not to mention the pointless massive drain of resources exhausted every day to move people back and forth across the universe.
America could have realized better livelihoods
Amid these productivity gains in both economic output and environmental performance, it is also lost that Covid-19 showed perhaps the clearest pathway ever to achieving the utopian “garden city” ideal for how to balance humanity’s instinctive desire to live amid nature with the economic necessity of clustering for the division of labor. We have written before on both: the empirically tested models showing humans are better off in their mental health living at the lower densities more in tune with nature that we have evolved to crave, and the similarly empirically tested contradictory models that economic output increases exponentially as the division of labor and economy of scale increases. For centuries urban planners have toiled how to create the physical conditions that would integrate the garden and the city, nature and machine, with an endless stream of new principles and priorities for how to make the city more livable, and the country more productive, with an eye toward satisfying both of these realities simultaneously.
The virtual economy opened up by Covid-19 offered opportunities that would have seemed a godsent to past garden city visionaries like Ebaneezer Howard or Frank Lloyd Wright. They wouldn’t have dreamed to have been gifted such an obvious solution so such fundamental trade-offs. That people could live wherever they wanted while losing at most a few percentage points in net collaborative productivity is a massive net-win for everyone involved, most pointedly in the way it will manifest in ultimate human happiness.
Amid all of the decision-making about the post-Covid workplace, the assumption that happiness is a mono-directional question shaped by people’s access to in-person water cooler chatter misses the forest for the trees: happiness is wrought much more broadly by people’s ability to have geographic choice, to disaggregate themselves from the stresses of city living, from the burden of urban expense, and from the heart-wrenching trade-offs they otherwise often have to make between living closer to job opportunities or living closer to family.
We could have realized better net happiness – like, empirically, we could have by giving people the opportunity to once and for all free themselves of the crushing stresses of big city living for jobs if they choose – but we chose not to do that.
We could have re-balanced our country
One of the macro-factors lost in the decision to re-embrace “work from work” is the role that work has played in creating the fundamental divisions that are tearing apart our country. This would have been a great opportunity to support more balanced reinvestment, but again, we chose not to do that.
The gains of coastal megacities – and the accompanying ballooning expenses incurred – is a direct outgrowth of demographic shifts that have been segregating our country along economic lines for generations. For years the top end talent of small communities has been fleeing for the urban center of their states, with the top end talent of those centers fleeing for the larger urban centers on the coasts, while lower-end and blue-collar talent languishes behind. The result has been a massive brain drain out of small communities toward large communities and a glaring segregation of the country along economic output and potential. As big cities on the coasts have grown and thrived, it has come by sapping the talent form much of the rest of the country, leaving that remainder wallowing in a less productive past. The result is cultural dissention and an economic set of poles that are barely recognizable to one another. The underlying reason all of this has happened is that high aspiring achievers have long felt they needed to re-locate to urban centers in order realize prosperity.
Breaking down the land rent premium on those big cities would have been a massive pathway to undoing this destructive trend. By reducing the imperative for people to live in big cities to see prosperity, we might have re-introduced value to smaller cities elsewhere throughout the country. We’ve seen perhaps no better opportunity in years to take steps toward undoing our untenable national divide. And yet we instead to re-embrace the kinds of approaches that will lead us to greater segregation and dissention. And we didn’t have to.
We should have learned to be smarter about public health
While there is staunch competition, perhaps the most appalling aspect of the work-from-work retrenchment is that it continues to view the Covid-19 pandemic as a one-off random chance event, rather than a warning sign from which we should heed lessons. Covid-19 should have taught us about the perils of building our lives around unnecessary conditions that breed vulnerability to pandemics. We should have learned broad lessons about how to make our society more pandemic-proof by limiting unnecessary time piled top of each other breathing and coughing on each other, either by eliminating the in-person office as a long-term proposition or by limiting the dangerous trend toward “open workplaces” and “shared spaces” that are incubation dishes for viruses and other illnesses. And yet most workplaces are viewing the pandemic not as a set of lessons for the future, but instead as a one-off event to be moved past – barreling ahead as quickly as possible back to office environments of that will fester just as much germ-sharing as before. Viewing Covid-19 as a one-off in this way is a massive failure to learn.
But it’s worse that than. Ever opportunists, many companies have chosen to use the possibility of legacy work-from-home operations to actually increase the density of their workplaces, under the premise that fewer people will use those spaces on a daily basis. Rather than expanding workplaces for greater social distancing or committing to the prudent pursuit of greater personalized workspace, many are instead pushing on their employees more interactive and denser space, which will only exacerbate the public health risks of the in-person workplace.
It’s rather remarkable that after all of the brainstorming and hand-wringing of the last two years that the in-person office of the future may in fact turn out to be more, rather than less, dangerous to employees and an even greater incubator for the next pandemic. And it didn’t have to be.