Prepare to return to the office

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David Oshinsky in his book “Bellevue” quotes Thomas Jefferson’s reaction to the 1793 yellow fever epidemic in Philadelphia, then the nation’s capital:

“By November the streets were deserted, and more than ten percent of the city’s fifty thousand residents were dead. Most of Congress was gone, along with President George Washington and Secretary of State Thomas Jefferson. For Jefferson, a defender of rural values, the epidemic was a mixed blessing, with a powerful lesson attached. ‘The yellow fever will discourage the growth of great cities in our nation,’ he confidently wrote a friend, ‘(and) I view great cities as pestilential to the morals, the health and the liberties of man.’”

Obviously, Jefferson was wrong. As have been all the myriad predictors of the coming demise of high-density big cities throughout American history. There are two main reasons why: First, concentrated talent working face-to-face significantly boosts productivity. And second, people — particularly young professionals — want to live in high-density, high-amenity urban neighborhoods.

In this post I want to focus on the enduring value of concentrated talent working face-to-face. Edward Glaeser in “Triumph of the City” explains it this way:

“Within the United States, workers in metropolitan areas with big cities earn 30% more than workers who aren’t in metropolitan areas. These high wages offset the higher costs of living, but that doesn’t change the fact that the high wages reflect high productivity.

“The only reason why companies put up with the high labor costs and land costs of being in a city is that the city creates productivity advantages that offset those costs. Americans who live in metropolitan areas with more than a million residents are 50 percent more productive than Americans who live in smaller metropolitan areas …

“Pundits and critics have long argued that improvements in information technology will make urban advantage obsolete. Once you can learn from Wikipedia in Anchorage, why pay New York prices? But a few decades of high technology can’t trump millions of years of evolution. Connecting in cyberspace will never be the same as sharing a meal or smile or kiss. Our species learns primarily from aural, visual and olfactory clues given off by our fellow humans. The internet is a wonderful tool, but it works best when combined with knowledge gained face-to-face, as the concentrations of internet entrepreneurs in Bangalore and Silicon Valley would attest. Every one of Harvard’s economics students uses technology constantly, but they also get plenty out of face-to-face meetings with their peers and professors. The most important communications still take place in person, and electronic access is no substitute for being in the geographic center of an intellectual movement.”

Employers learned these lessons the last time they tried to let employees work from home. In a New York Times article entitled “The Long, Unhappy History of Working From Home,” David Streitfeld writes:

“Companies large and small have been trying for decades to make working from home work. As long ago as 1985, the mainstream media was using phrases like ‘the growing telecommuting movement.’ Peter Drucker, the management guru, declared in 1989 that ‘commuting to office work is obsolete.’”

Telecommuting was a technology-driven innovation that seemed to offer benefits to both employees and executives. The former could eliminate ever-lengthening commutes and work the hours that suited them best. Management would save on high-priced real estate and could hire applicants who lived far from the office, deepening the talent pool.

And yet many of the ventures were eventually downsized or abandoned. Apart from IBM, companies that publicly pulled back on telecommuting over the past decade include Aetna, Best Buy, Bank of America, Yahoo, AT&T and Reddit. Remote employees often felt marginalized, which made them less loyal. Creativity, innovation and serendipity seemed to suffer.

Marissa Mayer, the chief executive of Yahoo, created a furor when she forced employees back into offices in 2013. “Some of the best decisions and insights come from hallway and cafeteria discussions, meeting new people and impromptu team meetings,” a company memo explained.

Tech companies proceeded to spend billions on ever more lavish campuses that employees need never leave. Facebook announced plans in 2018 for what were essentially dormitories. Amazon redeveloped an entire Seattle neighborhood. When Patrick Pichette, the former chief financial officer at Google, was asked, “How many people telecommute at Google?” he said he liked to answer, “As few as possible.”

It is almost certain the current pandemic will not alter those realities long term any more than the 18th century yellow fever epidemic did. The way to build and maintain company culture and to enhance innovation and productivity is through face-to-face interaction of concentrated and diverse talent. And those talent concentrations are most prevalent in high-density big cities.

Lou Glazer is president of Michigan Future Inc.

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