The Future of Work: The Distributed Workforce

We're in the early innings of seeing a drastic shift of how Americans work and live. The past two months, white-collar employees have been forced to learn how to work remotely. By now, there’s people who hate it, people who love it, and some who have a love/hate relationship with this new working style.

Regardless of your personal feelings, I believe this new way to work has everyone taking a step back and thinking about how our future businesses will be founded, built, and run.

Here’s what I think happens over the course of this year and longer-term:

  • Short-term: white-collar employees are not going back into offices
  • Long-term: these same people will ultimately get to work wherever they want, regardless of where their employers are located

Short-term: No one’s going to the office.

In the short-term, most people will not be returning to work in the office. There is fear for our safety because of the uncertainty about the outcomes of the virus. Will there be a second wave? How easily can I get infected? Are there long-term side effects? These are questions where we don’t have confident answers.

In a survey conducted in May, 74% of people indicated they would either work remote or only go to the office if required, even if workplaces required people to wear a mask and gloves while in the office. Upon shelter-in-place restrictions being lifted there are a substantial number of employees who won’t feel safe returning to work. They have to take public transportation, walk through downtown with thousands of people, and then show up in an office surrounded by people. Even in offices that make accommodations for social distancing and take other precautionary measures, people won’t want to take these unnecessary risks if not required. The beauty is that our working norms have changed so quickly that these workers won’t be forced to take these risks! We’ve now realized our people can be effective working from home.

Long-term: Work from anywhere!

The Tech Renters are already leaving …

Employees from Facebook and Google have left The Bay Area after these companies have notified their teams that there’s no need to come back into the office this year. Twilio expects that 20% of their employees will transition to working remotely going forward. Jack Dorsey went even further with Twitter and Square, allowing these employees to work from home forever.

We’ve seen this same sentiment from other founders across the Tech spectrum as well.

I don't think I've talked to a single CEO who is planning on going back to 100% in office just as before.

— Austen Allred (@Austen) May 12, 2020

These trends will not stop. The floodgates have opened. And everyone is re-thinking their lifestyle and working style going forward. The primary reason someone lives in a location is because that is where they work. Why live in a city with the highest cost of living if you don’t have to?

The new Hub and Spoke model

In the mid to long-term, we will transition into a world where not everyone needs to live in an urban area to work for a particular company. For example, if you work at Facebook or Google and your team is located in HQ, you’ve had to live in the Bay Area for the past decade. Going forward, you can live and work from anywhere in the world. Whether that is your home, local coffee shop, or satellite office. This is the Hub and Spoke model. To be fair, the Hub and Spoke model has been in place from the past as businesses have HQs and satellite offices. However, the hubs have typically been much larger than the spokes. Now, we will see a more even distribution of the hub vs. spoke population.  

Untitled 4.jpg

The Technology workers follow the trend

In 2018, roughly 700,000 left California and almost 100,000 of those people moved to Texas. In the past five years, we have seen growth in states that have a reasonable cost of living, low tax rates, business friendly policies, and great weather. The states that have a high cost of living, high tax, and too many startup costs for business have seen a consistent decline of population and revenue.  

winners and lossers.png

However, for those of us in technology, Silicon Valley has been the destination because this is where you build the future. We have not had the luxury of our fellow citizens to move and work anywhere in the country, because the opportunites we seek are located in Silicon Valley (or at least we tell ourselves this narrative). The Venture Capital dollars are stockpiled on Sand Hill Road, the best talent is in this region, and startups gather in the Mission and SOMA. The most valuable tech companies have all the jobs here. So you move here to work for an establish tech monopoly or join a venture-backed startup. Because you are ambitious and you want to build the future.

But in a world where we can have distributed workforces with employees working in offices, coffee shops, and their own homes, these companies will be built across the country. As distributed workforces become the norm, certain Tier-2 markets become very desirable because you have similar lifestyle benefits to the Bay Area such as great weather, beautiful scenery, many outdoor activities, and great food. If the career benefits are relatively equal because of the distributed workforce, people will flock to the place with a decent cost of living that provides a great lifestyle.

Because of this, demand for real estate in Tier-2 markets such as cities in Texas, Florida, and Arizona will continue to rise. The rise of demand for multifamily and residential is obvious. For commercial real estate, companies will begin to look for flexible workspaces that allow their employees to come into an office. No one is going to want to be locked into a long-term lease, but rather lower-length options that allow companies flexibility to increase and lower real estate capacity, dependent upon where they are hiring employees and where these employees are moving. Commercial real estate operators will have to adjust to this new trend.

A rising numbers of entrepreneurs, successful business, and jobs that become more distributed across the U.S. instead of concentrated on the coasts. I believe these will be positive trends for the overall growth and innovation of America.

Flexible work styles, distribution of talent, and the freedom to live anywhere we want. What more could we ask for?