Companies tend to flock to large cities for two main reasons. One is that working in-person increases the odds of spontaneous “collisions” between people, leading to serendipitous discoveries. These collisions can be between people who work at the same firm, people in the same industry, or even across industries.
The second reason is that cities have large labor markets. A company is more likely to find an ideal candidate for a given task or job in a large market. As UC Berkley economist Enrico Moretti pointed out, better matching results in higher employee salaries and higher profits for employers. The size of the talent pool "is particularly important for workers with highly specialized skills, such as high-tech engineers, scientists, mathematicians, designers, and doctors."
Both reasons highlight the fact that cities are networks. They enable a faster and more efficient flow of information. The information that flows through cities can be raw (data) or refined — sifted and organized to create a new idea. Cities are also good at disseminating meta-information — learnings about how to refine specific types of information and who is best suited to do so.
In short, larger cities enable an intense flow of information that results in more innovations and higher productivity.
The biggest concern about remote work is that it is not productive. Remote does not afford the type of in-person collisions that happen in a large city — and it doesn’t allow managers to supervise people constantly. But remote work does allow an even more efficient matching of candidates and tasks within a talent pool that is much larger than any individual city.
Researchers are still trying to figure out whether, on balance, this will result in higher productivity and more innovation. The results are mixed, but they are better than expected. Stanford University’s Nick Bloom has been leading the research on this topic and estimates a 5% boost in productivity due to “re-optimized working arrangements.” I previously pointed out that “those who thrived initially might burn out if they stayed home for a more extended period” while “those who struggled might do much better once they’ve mastered new tools, once they have access to alternative spaces near home, or once children, housemates, and partners are back in school or at work.” In any case, we can assume that “the technologies that allow us to work, learn and socialize remotely will only get better.”
All this is still true. But current research ignores a more important shift. Remote productivity surveys focus on the performance of office tasks at home. But the real remote revolution will be a reinvention of work itself, of how people communicate and process information, and of how companies interact with talent.
To understand what this means, we can return to the example I wrote about last week. OnlyFans do not simply take the offline (adult entertainment) experience and replicate it online. Instead, it offers a new value proposition that reflects a different set of tradeoffs: The customers get less physical proximity but more frequent attention, and they get to interact with world-class performers at a lower cost than taking a local girl on a date. And they get to do all this from the comfort and privacy of your home.
We can argue about the merits of this value proposition. But many people seem to find it appealing. And it can be delivered to more people by fewer performers and a smaller supporting cast of engineers, marketers, and designers.
Something similar will happen in other professions. Just like OnlyFans, the white-collar labor market is likely to land on a new set of tradeoffs: access to more specialized talent but fewer people located in the same place; having employees spend less time in person but have intense and meaningful interactions once a week or once a month; increasing reliance on freelancers and contingent workers while maintaining a core team of extremely high-paid professionals. Some companies will choose to go 100% remote; others will differentiate themselves by being 100% on-site. The new normal does not mean moving office tasks to another place, it means doing completely different tasks, in new ways, and (sometimes) by different people.
If we think of cities as information networks, it is evident that remote work could result in a much faster flow of at least some information. For example, some people can read 10 times faster than others or listen to a podcast at twice or three times the average speed. Such people can process much more information, but office-based work forces them to operate at much slower speeds (you can’t click a button to change the speed of the meeting you’re in, and most office communication doesn’t happen in writing). Remote-first companies rely heavily on written, asynchronous communication, enabling people to make the most of their skills. Such companies miss out on the type of information that can only be communicated in person, but they gain the ability to process other kinds of information much faster.
Remote work can also redefine the way talent is matched to tasks. We currently think of matching as a simple process of finding the right person for the right job. But remote work is likely to be much more modular than office-based work. Remote processes make it easier to incorporate contributions from people who are not full-time employees and may be involved with multiple other projects and clients. So, remote does not just allow matching tasks to a much larger pool of talent. It also enables a much more intensive use of such talent.
This, in turn, implies a change to the structure of whole corporations. Many of them will evolve into formless networks that can mobilize vast resources but have fewer fixed commitments. But that’s a whole different article.
For now, the important thing to note is that cities are productive and innovative because they enable a fast and efficient flow of information. And the internet is likely to allow even faster and more efficient flow, resulting in more innovation and productivity. It’s up to us to figure out the workflows that make the most of this opportunity.