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. (Link)