Moontower #61


Last week I riffed on geo-arbitrage. Twitter, Visa, Square, Spotify, Alphabet are all pushing their chips in on remote work. Lots of people are excited about a remote work future. Ramp Capital’s post The Death of Cities lists data points suggesting the TAM for remote work is a wide blue ocean. Less than 5% currently WFH but 80% want to. (Link)

I’m not going to make predictions. My understanding of remote work is a mix of hearsay and personal impression. So that’s what you’re getting this week. Opinions and a semi-rant in The Money Angle.

First, my take on remote work in advice format: Be excited without being a sucker.

Don’t Be Pollyannish About Remote Work

  • Sahil Lavingia, founder of Gumroad, tweets: Everyone loves remote work until they realize 7 billion people will soon be competing for the job they have.
  • If you choose to work remotely somewhere especially somewhere remote, you need to appreciate its full costs. This Wall Street Playboys post was terrific when it was published pre-covid. Now it’s a must-read. One of the reasons why companies are allowing people to work remotely is so they can’t move, get paid less and they know they are stuck and can’t do much about it! I will add that this is valid not just for remote workers but for anyone who chooses to work for a company that’s far away from the center of their industry. The I-banker in Denver has limited opportunities if he loses his job. Don’t think his boss isn’t aware of that. (Link)
  • Zuckerburg nixed the pure geo-arb. The SF salary requires you live in the Bay. Byrne Hobart explains Facebook plans to adjust salaries based on cost of living. He also thinks the effect on expensive cities to be muted. Superstar cities will be less affected since many are dual income and it pays to be close to the office. (Link)
  • Working remotely can also be awful. I have a relative with a bird’s eye seat in a major CRE brokerage. One of his clients is a Fortune 50 company with a WFH culture. He describes it as “truly backwards. The culture causes bureaucracy and weird politicking. You have people trying to assert their domain virtually and put as many traps and stops around their domain as possible.”

So working from home isn’t just work-without-pants. It has its share of downsides. It’s crucial to be aware of them and how the negatives compound over time by compromising your negotiating position and limiting your options.

But if you can be honest about the negatives you deserve to be honest about the positives. Not commuting, living where you want. All great. These are the details of something even greater which excites me about remote-work.

Why I’m Excited About The Impact of Remote-Work

I’m excited about choice and its downstream effects. Geo-arbitrage is the wrong model for how to think about an explosion in remote work. Sure in the near-term there might be low-hanging geo-arbs. But arbs never persist. Hobart explained that Facebook is a price-setter. As a large and growing employer their behavior leads. There’s no economic basis for employers to allow the employees to capture all the surplus in a geo-arb.

Instead as Hobart wrote:

tech workers will be teleported back about half a century, to a time when your standard of living was the same whether you lived in the Midwest or California, but you could choose CA because the weather was better.

Instead of geo-arb, I recommend thinking of the new world as an efficient frontier of combinations of job and location. Make $150k in SF or $100k in Raleigh. There’s no magical arbitrage point available beyond the envelope of the frontier but there are many more points lying on the efficient curve. When many of you were designing your life you used to feel like there were just a few choices. NYC, SF, DC, Boston. Maybe Austin. 5 cities. Now you have 50 states.

Even if this was a choice before, it might have been harder to find. The growth of WFH will lead to continued innovation in WFH practices to reduce the frictions. The experience will improve and that will feedback into even larger remote work menus. The more granular we can make location/comp tradeoffs the better.

Covid accelerated the growth of WFH. But more importantly, it accelerated our understanding of what it can mean.

WFH Is Not Just About Preferences. It’s About Priorities.

Covid has been a “great pause” (at least for office workers). You rediscover omitted joys. You redefine what is and isn’t essential. A moment to catch the sunset. The stillness where you notice the pebbles in your shoe. Their all-in costs are suddenly more legible.

Many people have created new habits they want to preserve (Yinh and I want to be less scheduled when “normalcy” returns). We all have a golden opportunity to affirm our priorities. It won’t be easy. During this timeout, your conscious mind decided you don’t want to slide back into all your old patterns. But muscle memory is strong like bull. You can’t re-program by words alone. It will take action. Turns out there is a big one available.

Where Do You Need To Be?

By disentangling work from location, we (are forced?) get to make choices that we felt were made for us. If I want to do X, I had to live here. Given the chance to be remote, you may suddenly find that simply maintaining one of these new-during-Covid habits is like buying a fern. It’s a half-measure at best. What you really want is a whole new scenery. Aligned with the values that you finally had a moment to reflect on.

Your actual desires are more apparent with the fog of FOMO lifted. Trying to decide if you want to build a pool when it’s 90 degrees out is not a good way to make decisions. Don’t waste this chance to think clearly.

When we are in the environment we want to be in, whether it’s in urban jungles or just jungles, we can live in closer accordance to what we need. As you’ll see this is much more than a personal victory…

Deus Ex Machina

This not a reference to that movie with the hot droid. It’s a reference to the meaning of that strange Latin phrase. From Google’s interception of Wikipedia, deus ex machina is a “plot device whereby a seemingly unsolvable problem in a story is suddenly and abruptly resolved by an unexpected and unlikely occurrence.”

In this week’s Money Angle, find out why WFH can be the deus ex machina to a wider American problem.

The Money Angle

Money is an important driver of what jobs people take. Especially at the level where basic needs are at stake. But at some point, flexibility in location, hours, and benefits gain relative importance. The more negotiable the mix the better chance we have of creating sustainable work situations for people. Sustainable means less burn-out, less disability, less dissatisfaction, and more productivity.

The growth of remote work shades in a fuller menu of points along the efficient job frontier. It creates more shots at sustainability. You can choose to work for less cash if it means a better overall life fit. (I know of a few people, moms to be precise, who were thrilled when employers allowed them to work 4 days a week for a 20% pay cut).

Why Is Sustainability So Important?

When I introduced the Moontower Retirement Model, I mentioned “how destructive I think the whole vision of retirement is as portrayed by Charles Schwab commercials. The fact that it takes a moment to figure out if it’s a financial commercial or a Viagra ad is enough of hint that drugs are being sold in both cases.” The entire notion of retirement is unsustainable.

The average American’s savings are inadequate to even cover an emergency. Forget having enough savings and social security to survive with dignity from 65 to 85 or 90. The presumption that investment returns will make up the shortfall even if everyone invested is fragile at best and quite likely nonsense.

The classic idea of retirement has outlived its usefulness. It is a vestige of a bygone era and was targeted to people who did back-breaking work. The cost of this charade is staggering. Underfunded pensions even after a 10-year bull market. Politicians needing to kick all cans lest they be forced to do arithmetic that doesn’t work in plain view. Too many lonely, poor senior citizens.

What Is The New Retirement Look Like?

More working years. But of a different type. Working years that don’t just feel like a thing to get-over-with. The future of work has the chance to be more sustainable. The subject is vast, beyond the scope of this post. But an emerging efficient frontier trade-off between salary and location offers a promise of better-centered lives. We should agree that matching ourselves to our environments is a public good. A sustainable balance means we can work more years. A double bonus. We save for more years and withdraw for fewer years. It is the only viable solution to the pension crisis.

If remote work means more sustainable working lives then WFH will be the pension crisis’ deus ex machina. And that’s a bigger cause for hope than the short-run sprint of getting paid SF wages while Zooming from a lakeside cabin.

To learn more:

  • I’ve summarized the roots of the pension crisis as told by Charley Ellis. (Link)
  • Once Facebook tells you how much they’d pay you if relocate to Boulder, Asheville, Nashville, Summerlin, or wherever you’d like to be, check Atmos to see what you can rent or build. Find your own efficient frontier. (Link)
  • Matt Mullenweg, founder of WordPress, explains Distributed Work’s 5 Levels of Autonomy. What does it mean to jump from remote to remote-first? How about from asynchronous to autonomy? (Link)

For remote-work to truly sustain us, we should, when practical, aspire to the pinnacle of the pyramid — autonomy. Daniel Pink identifies autonomy as 1 of the 3 pillars of human motivation (the other 2 are mastery and purpose). If we can grease the rails of motivation maybe we can scrap the retirement parties that in hindsight turn out to be death sentences.

Moontower Money Wiki Update

I’ve completed the section Evergreen Beliefs That Work Together. It has 4 parts:

  1. The Gift Of Market Efficiency
  2. Investing Is A “Loser’s Game”
  3. Time And Human Capital
  4. Towards A Prescription

While the wiki is ultimately about investing your savings, this particular section goes nicely with the topic of today’s letter which is really about a chance to live our lives better by maximizing the returns to our human capital not our financial capital.

Check the wiki updates. (Link)

Last Call

  • Here’s a highly relevant math topic to all of us. If a person tests positive for a condition or antibodies that doesn’t mean we are 100% certain of the test result. How certain we can be depends on the false positive rate of the test and how common the condition is in the first place. David Epstein uses great examples to actually make the Bayesian math intuitive. (Link)
  • His explainer reminded me of my favorite intuition for solving the “Monty Hall” problem. The 1000 doors example. (Link)
  • Do you know what fnords are? I didn’t either. Turns out they are tetragrammaton (I had some religious education) of modern journalism. This post has some antibodies to the inception. (Link)

From my actual life 

For much of the past year my guitar lessons have focused on solos. My instructor considers where I am then assigns challenging but makeable solos that will “unlock” a new technique or concept. I like learning about the background of the songs and guitarists whose solo I’m studying. I’m currently learning the solo for One Of These Nights by the Eagles. With disco being popular, the Eagles took a stab at a song in that style.

From Wikipedia:

“We wanted to get away from the ballad syndrome with One of These Nights…While they were recording the album in Miami, the band also shared a studio with the Bee Gees, and according to Henley, the “four-on-the-floor” bass-drum pattern is a nod to disco.”

The solo, recorded separately in LA, is a sharp departure from the rest of the song’s vibe. The solo is “composed of blues-based licks and sustained string bends using an unusually meaty distortion tone”

Doug Frey said “With Don Felder in the band now, we can really rock…[we] wanted One Of These Nights to have a lot of teeth, a lot of bite—a nasty track with pretty vocals.”

My teacher, Patrick, is friends with Felder. He added some more color. At this time the Eagles were writing their 4th album and Felder just joined the band. They were already very popular in the US (they wouldn’t reach international stardom until Felder writes Hotel California a couple of years later). Felder comes into the studio and his first assignment is to lay down a solo for One Of These Nights. The solo has a tight, highly compressed tone. As I am trying to learn it it’s very clear as the technique requires choking off the sustain on the notes to mimic the staccato attack. It’s strangely aggressive given the song’s style. Patrick explained how he could hear the nervous energy that drove it.

It turns out it was the first take. It could have been a brainstorm. But context is everything. To the band, a first take counts for nothing but to Felder, the new guy stepping up to the plate, it counted for everything. He had something to prove. The whole “you never get a second chance to make a first impression” type thing.

The mindset of something mattering to you if it doesn’t “matter” is powerful. In Last Dance, someone argues that, even more than innate ability, Jordan’s greatest gift was his ability to be present. It made regular-season games matter. If you can fabricate meaning when there is none you have a superpower. It’s an answer to nihilism. You naturally channel Eminem’s “Lose Yourself” as you walk out to mow the lawn.

So that first Felder take was the final take you hear on the track. Sometimes nobody cares about a moment but to you it’s everything. But the meaning you give it can turn out to matter to everyone.

Fwiw, I was never a huge Eagles fan but the History Of The Eagles doc on Netflix is outstanding. Although, I hear the contentious parts are just one side of the story…

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