The Rise of Distributed Teams

Happy Friday! Blair here, guest writing on The Margins today. Let's talk about remote working

Whether you call it “remote” or “distributed” working, or the somewhat dated term “telecommuting,” the idea of using the internet as a replacement for the co-located office model isn’t particularly new. People have done it for decades, though strangely, acceptance of the practice has differed much more between individual companies than across sectors. In some parts of the knowledge economy, “remote” working (not my preferred term for lots of reasons, but that’s a different discussion) has become commonplace, while in others, it’s unheard-of.

https://news.gallup.com/poll/184649/telecommuting-work-climbs.aspx

In 2019, hundreds of thousands of knowledge economy workers - working in tech, media, law, consulting, management and much more - pay eye-watering rents to live within commutable distance of giant coastal metropolitan cities, because this is where those jobs are. After long commutes, they arrive in offices only to don noise-canceling headphones (a prerequisite in any open-plan office) and perform most of their team collaboration through email, chat, collaboration software and the like - over the internet. This absurd situation is a major contributor to economic and social unrest over the scarcity of affordable housing in expensive metros, homelessness, income inequality, uneven economic opportunity, industry diversity and much more.

Witness, the collaboration!

The economic case for remote working almost makes itself. Instead of paying top dollar for expensive urban office space… don’t. Instead of bidding wars over compensation in San Francisco or New York, pay Hampton Roads or Kansas City salaries, and retain those employees for longer to boot. Most importantly, recruit the best talent available, not just those who happen to live within a 30-mile radius of company HQ. In an industry based primarily on human capital, this would seem to be a slam-dunk proposition.

And yet, employers have not exactly moved in droves to adopt remote working. In some sectors, the reticence is almost comical. Take media, for example. Whether you look at BuzzFeed or Vice or The New York Times, most of these companies’ contributors - who mostly write words for a living - are required to live in NYC or DC. Tech’s reluctance about remote working is even more remarkable. There’s even a stock joke about it which has become a cliché: “Silicon Valley tech firm building products that let people collaborate over any distance. Must relocate to San Francisco.”

There’s really no question about whether remote working “works” or not. The practice has been successful at lots of firms for a very long time. One obvious example happens at virtually every big company, which inevitably adopts some form of remote collaboration: the New York office must work with the San Francisco, LA and Paris teams on this project or that one. Another widespread form is more informal. It’s an open secret that well-connected insiders can negotiate remote working arrangements for themselves at most tech employers. Even at companies that officially frown on remote working, individuals with sufficient political juice can usually get permission to do so. There are hundreds of people at Google, Apple, Facebook and other “relocation required” companies who do this. Most companies and managers rightly decide that they’d rather keep a good employee who wants to move rather than lose him or her.

And yet, these same companies nearly all refuse to hire anyone directly into a remotely-based role. Why?

The Opposition to Remote Work

Most of the reasons given for eschewing remote work amount to a lot of vague hand-waving. The real reasons are more pedestrian, and call into question a lot of our accepted wisdom about the tech industry’s commitment to “innovation.”

For one - VCs generally hate remote working. Many VCs oppose remote working models for the same reason they require their invested companies to be located near their own corporate offices - like needy bosses anywhere, investors want “throats to choke” nearby. Moreover, while there is no evidence that companies with remote staffing models underperform (in fact, the truth might be the very opposite), the question suffers from an important attribution problem. No one has ever done a post-mortem on a failed company and pointed to its co-located working model as an issue.

Another reason, and probably the biggest one, is about the very nature of disruptive technology. Disruptive technologies that challenge the fundamental assumptions of a given market are alternately threatening to incumbents or deemed irrelevant and futile. Like 1.5-inch hard drives or digital cameras, remote working models flip the economics of co-located human-capital-based companies on their head, but require organizational (and sometimes cultural) change that is difficult for incumbent firms to make. Regardless of how difficult hiring may be in Silicon Valley, few individual managers want to bother fighting HR to hire remotely. Lots of established tech firms are organizationally unprepared to adopt widespread remote employees. Much like Kodak deciding it was pretty much A-okay continuing to make film cameras, the costs of remaining co-located are so baked-in that they’re hard for big tech firms with stock prices at all-time highs to see. This is especially the case for true believers who have swallowed whole the Silicon Valley mythology of itself as a meritocratic haven of the smartest, hardest-working people on Earth.

Remote Work is Already Here

Nevertheless, remote working models are spreading - and disrupting. Elastic, the creators of Elasticsearch and a fully remote company of over a thousand employees, went public last year and currently boasts a market cap of about $6 billion. GitLab, which has expressed plans to go public in 2020, is another fully distributed example. It’s impossible not to include fully-distributed firm Automattic, whose product, Wordpress, powers 30% of websites on the internet. InVision, makers of the ubiquitous design software, Parse.ly, the next generation of content analytics, and Zapier, makers of task automation software, are all growing quickly, and all fully distributed. Just last month, Stripe announced that its fifth engineering hub, which will comprise over a hundred new employees (and not just engineers), will be exclusively remote as well.

These companies are not “BigCos.” A common myth about remote working is that it’s just for mature firms of thousands of employees, where rapid iteration and growth is neither necessary nor even possible. Indeed, these firms use their distributed nature as a tool of growth. Not only can they more easily recruit the talent they need, but they also reduce their burn rate and lengthen their runway. That said, there is less ping-pong and beer in the office. Nothing comes without tradeoffs, after all.

Downside: no Blue Bottle nearby.

Is remote working perfect? No. The tools could improve, and best practices are still being debated. Engineering is still the business function most likely to hire remotely, though the reasons apply equally to marketing, product, management, design and pretty much everywhere else. But co-located working isn’t perfect either, and the big difference is that butts-in-seats doesn’t scale nearly as well, especially at San Francisco commercial real estate prices.

If you believe that the internet is pretty much done growing, then ignoring remote work is probably the right call. If, on the other hand, you see these as the early days of the web’s growth, then remote working is the logical extension of that vision - for those individuals and firms able to seize it. Who will be the Kodak of today’s tech industry? Time will tell.


What I’m Reading

The New Wilderness: Why are Silicon Valley giants suddenly so eager to talk about, and even propose frameworks for, privacy legislation? Maciej Ceglowski (aka @Pinboard) points out that it’s largely because they’re attempting to re-frame the issue away from limits on surveillance capitalism itself. Silicon Valley correctly foresees some sort of privacy regulatory push as probably inevitable, and Google and Facebook, among others, want to ensure they have a hand in defining its boundaries.

Because our laws frame privacy as an individual right, we don’t have a mechanism for deciding whether we want to live in a surveillance society. Congress has remained silent on the matter, with both parties content to watch Silicon Valley make up its own rules. The large tech companies point to our willing use of their services as proof that people don’t really care about their privacy. But this is like arguing that inmates are happy to be in jail because they use the prison library. Confronted with the reality of a monitored world, people make the rational decision to make the best of it.

That is not consent.


The Changing Structure of American Innovation: This sometimes-punishing longread nevertheless makes an important point about our continued ability to turn public investment in basic research (via universities) into realized productivity gains. It’s worth remembering that many, if not most, of the artifacts of modern life - from transportation to food safety to the very internet and whatever device you’re reading this email on - are derivations of some U.S. government research grant or another. Silicon Valley itself is mostly a second or third-order outgrowth of Cold War-era defense spending on applied research.