[This post will tie together some of my older posts in a more intuitive manner, to reflect some of the new realities that we confront in the post-COVID era, and the adaptive responses to that modified reality.]
I’m a huge fan of paradigm shifts. For the most part, our lives accept certain paradigms which hardly ever change, and thus we never examine their logic until those rare occasions when they start to come apart. This is the first in a number of posts about paradigm shifts, either those which are in the process of shifting, or those which perhaps should be reexamined.
I have written on related topics before, going back to January 2021, where I started to muse about relocation; subsequently, I’ve discussed what makes cities desirable, thought about how cities might flatten out away from their centers, lauded the advantages of being near major airports, and noted how cities adapt to economic conditions and challenges.
This article about the rise of Meta-cities (a collection of connected cities surrounding an important metropolis) from the Harvard Business Review retriggered some of my creative juices; although this article looks at intercity flows to determine the importance of any hub, I would argue it’s more of a spectrum, from the downtown core to increasingly remote urban, to suburban, to exurban, to other cities in the greater metro area, and finally cities with strong (mostly air, but probably rail in Europe) links as highlighted in this article.
Challenging working assumptions
The paradigm I wanted to discuss here is the idea that a job means working with a defined group of people every day in order to perform designated tasks, coordinating with other people squirreling away on related endeavors. The justification for this is largely the theory of the corporation as a friction-minimizing entity, the idea that the raison d‘être for organizations is driven by the lower transaction costs of having dedicated employees compared to going out to the market for every service, as well as other benefits like safe-keeping of proprietary data and strategy. Ronald Coase won the Nobel Prize in 1991, for addressing this topic in The Nature of the Firm, and other real world economics work. It’s outside of the scope of this issue, but some Internet-enabled startups have reduced certain transaction costs enough so that more and more corporate functions can be reliably outsourced rather than requiring those capabilities in-house (in-house servers vs cloud storage is a good example).
Along with this seemingly reasonable paradigm came a piggyback paradigm where this work involved a central physical location, or a set of physical locations, where all employees came together to “work” every day. This paradigm persisted well into the Internet era, where the rationale was largely unquestioned, even as alternate and more efficient interaction methods were being developed.
COVID changed the equation, by materially raising the costs of physical interaction (albeit temporarily). This didn’t negate the benefits of the lower friction value of a corporation, but it did call into question the second paradigm — the conventional but unquestioned wisdom of the necessity for everyone to congregate in the same physical locations. The necessities of COVID showed that quite a lot of work could be done offsite, while having some rather substantial benefits for remote work — lower frictional costs and time-savings of eliminating commutes, the ability to concentrate on specific tasks, better work/life balance and flexibility.
However, there are at least two caveats here. The first is that this primarily affected only what economists call tradable jobs (knowledge workers, where their output can be transmitted over the Internet, for instance), as opposed to non-tradable jobs which require a physical presence. Another way to characterize this is as brain vs brawn (going back to my last piece about being a dishwasher). You will find it hard to have a plumber fix your leaky toilet by scheduling a Zoom meeting with them, similar to most kinds of health care, food delivery, hair styling, etc. — anything which requires in-person interaction.
The second caveat is that I think many managers, even though they are essentially knowledge workers, like the daily scrum of a physical office because it helps their ability to manage — walking around and informally checking out “what’s going on?” — satirized in the movie Office Space — but the lack of a physical presence makes those coordinations harder to do, and most production-oriented employees are loathe to schedule agenda-less Zoom meetings for informal chats with their managers.
Office presence favors managers, WFH favors workers
So my hypothesis is that the traditional physical presence paradigm makes general coordination, and particularly managing easier (because of lower frictional costs), but at the working level, it incurs a significant cost (every worker has to commute) without materially affecting the ability to deliver the end product (from the worker’s point of view, not the manager’s). The other tension which cannot be ruled out is that middle and upper management might wonder whether their supposedly critical roles have been shown to be far less value added than they purport, leaving them vulnerable to cost cutting exercises when the teams that report to them work just as well remotely. In-person interaction also allows building of goodwill (and some cases bad will) better than remote dialogue in any relationship, which is critical to many higher level functions (“do I like this person?” “can I truly trust this person?”).
The current “back to office” battles (one prominent example here) almost always pit management in favor of a return to the pre-COVID high commuting cost model, against non-management employees are largely opposed to giving up the increased flexibility of the COVID period, especially if they can demonstrate little material decline in productivity (while benefiting their work-life balance). Although managers theoretically hold directive power, the working level is actually performing most of the work, and so there is a bit of a standoff.
Game theory around flexible work would suggest a potential exploit for more aggressive (and/or less competent) employees — materially increasing face-time in the headquarters, in order to manage perceptions on a real-time basis. “Ass-kissers” would essentially use proximity to power to try to make end runs around high competency remote workers, potentially leading to inefficient outcomes; management would need to be aware of these cheat codes. Eventually there may even be a stigma to being in the office frequently without obvious reasons, as if they needed political sprinkles to make up for their dearth of competency.
Further out, if some companies attract better skilled workers because of flexible WFH policies, it will be fascinating to see if they start to outcompete their back-to-office competitors in the same sector, making it clear which structure is more viable. My sense is that fully remote paradigms will have some serious problems as well (in the management, motivation, and coordination dimensions), just as fully back-to-office is inefficient; eventually, I think a variety of thoughtful, well-managed hybrid models will emerge as the winners, but much iteration and scar tissue will probably be required.
Relocation implications: flattening metro areas
The world is in the process of slowly relaxing the second assumption, the idea that we need to go to the office every day like a worker bee. Although the new equilibrium hasn’t decisively emerged, it does seem clear that the equation around where to live has become more flexible, because the overriding constraint of needing to be close to the office has been relaxed, allowing other priority dimensions (schools, spouse workplace or lifestyle, leisure activities, space vs cost) to rise in importance.
While I’m aware of overweighting my own data, I’ve noticed a large number of my friends from San Francisco moved out of the city center to the Bay Area periphery (and many of us ended up in Los Angeles). The relaxation of physical presence assumptions, combined with the punitive tax regime of California persuaded some high earners to decamp for Texas or Florida.
One of my friends in New York suggested the optimal location for someone working in Manhattan might be at the ends of one of the subway lines, allowing for a (admittedly longer but endurable) car-free commute a few times a week, while facilitating a suburban lifestyle and cost structure.
Worker bees might be more receptive if managers met the line workers halfway — rather than a single metropolis office for everyone, a main metro office (perhaps half the current size), with a number of far cheaper satellite offices in the suburbs (based on a cluster analysis of where employees had decided to live, and where it might be profitable to recruit) could present an efficient compromise — a work-like environment for some home-work separation and collegial camaraderie, reduced rent costs, and some of the intangible economies of scale that managers are missing. It would be a sign that the corporation acknowledged and was ready to facilitate the new reality of job geography. It would essentially flatten out the metro job pyramid — instead of everyone going to a central location, the viable work space would be the larger metro area or Meta-city.
Flattening the work week too
A year or two back, I was visiting my corporate HQ in the suburbs of Denver on a Friday, and noticed the sparse parking lot compared to the previous day. When I asked someone about this, they said the new pattern was that many people work from home on Friday (and Mondays), thus gaining the semblance of a four day weekend — they could go away on Thursday night and return Tuesday morning, and work remotely on the Fri/Mon. Even if they didn’t “go away” per se, for parents with children of school age, the prospect of two days at home per week without the distraction and responsibility of kids seemed very attractive. Face-to-face coordination and important meetings could be done on the new in-person work week (Tuesday to Thursday), and for once the corporate leaders could really enhance work-life balance rather than just paying it lip service. For most jobs, there’s a balance between coordination activity and pure squirreling away on your own — two days a week for solo tasks which require focus and concentration seems more realistic than the pre-COVID one-week-fits-all assumption.
Whoa Nellie: constraints and caveats
Life is not frictionless. Sometimes we don’t fully optimize our lives because something is good enough and the friction generated (the moving process can suck) by the optimization isn’t worth it. Most people have a variety of responsibilities, people they need to listen to, and people they’d like to be near, so not everything is a work-oriented optimization. At the same time, mathematically speaking, any time you relax a constraint, the pool of possible solutions becomes larger, and that’s almost always a positive development. And in this case, my point is that this particular constraint has been rather rigid and semi-dictatorial until the present day.
I don’t want to minimize practical considerations — other reasons why someone’s current residence might be optimal: children in school, caring for elders, being part of a community or social group, affinity for the urban lifestyle (which tends to be younger professionals), rent control, etc. So I don’t expect a massive shift like the migration of the wildebeest on the Masai Mara, just a tentative trickle from early adopters, whose lifestyle encourages fast followers, and then a wider movement. That said, the term digital nomad is already useful to describe large numbers of mostly young knowledge workers; many countries have created digital nomad visas precisely in order to attract this growing population.
New transportation paradigms could eventually contribute to flattening
The Internet, and the communication and videoconferencing layers which followed, provided the foundational layer for remote work (or more precisely: “work from a place other than a central office”).
Existing transportation networks (public transportation, highway and road networks, air networks) provided the initial canvas for rethinking relocation, because although the new paradigm is a slow shift away from the city center, it still involves necessary transportation linkage for periodic commutes.
The obvious measure would be to measure door-to-door transit time — being able to get to the main office within an hour or 90 minutes for instance. A higher order measure might be “contrast-adjusted door-to-door time” — because it’s far more ‘impressive’ to go from an Alpine ski chalet, a Montana ranch, or a Hawaiian beach house to an urban office, than it is from an average slice of suburbia, given the dramatic change of scenery and mindset. Increasingly the wealthy will try to do just that, and new transportation paradigms may factor into those strategies.
E-bikes are probably overlooked as potential game changers — but they are probably the most important innovation in last mile transportation in a long time (maybe since the non-electric bicycle!). Roughly 40 million e-bikes were produced in 2023; about half of those were manufactured in China. For medium and long distance commutes that don’t have efficient public transportation options (and many don’t, because of last mile issues), personal cars are necessary. If commute distances were to shrink (because they were to a suburban satellite, for instance), then e-bike commuting could become far more viable, especially because bike safety is probably enhanced in the suburbs (less dense than urban, easier to add bike lanes, fewer pedestrians and general chaos); car use could drop to the point where rentals or ride-share could be far more efficient than ownership.
A much-touted futuristic transportation mode is the E-VTOL, essentially an electronic helicopter-like aircraft with potentially greater safety and less environmental impact, but a variety of other tradeoffs (range, capacity). A large number of both startup and incumbents are optimistic about this niche, predicated on advances in motor, battery, and control technology, but nothing has entered into production yet.
However, before the advent of E-VTOLs, I would argue that we are overlooking a subset of existing infrastructure which should increase in prominence: the regional airport, along with small jets and turboprop aircraft — which feeds in nicely to the construct of the Meta-city. The advent of Surf Air Mobility, connecting regional airports in the California region and around the US, might have been a bit too early for the market (they seem to be struggling, as reflected by their stock price), but I think their strategy of connecting underutilized regional public use airports will eventually find an important niche as the catchment area of Meta-cities continues to grow. In advance of this, I imagine those who can afford to lease or buy a Cessna Grand Caravan or similar class aircraft (less expensive than fractional jet membership) may lead the way in demonstrating the virtues of a Meta-city lifestyle, from places like Bozeman (MT), Santa Fe (NM), or Whistler (BC), among many others.
Will E-VTOLs (and accessible portals / vertiports) enable different use cases for large yachts, making it feasible to live offshore while having the luxury of having a movable base?
California Forever: the forging of a wealthy utopia
While some of this might seem airy-fairy, some of these strategies are already in play. California Forever appears to be a group of wealthy Silicon Valley dreamers who have adopted a playbook out of Ayn Rand’s Atlas Shrugged to build a protected enclave for the paranoid elites, this time in Solano County California, rather than Colorado. I might describe it as Sim City: Billionaire Bro Edition — they are looking to build a metro area from the ground up. The plan is broad and audacious and frighteningly well funded — therefore creating local apprehension — there has been considerable outreach to stem some of the inevitable local community resistance, that gives the local community guarantees (so they might support the ballot initiative) — but far less is said about the kind of tech-forward Utopian community they intend to create. The fact that the group had been buying large tracts of lands in stealth mode, and was eventually revealed to include some of the grandest technorati in the Bay Area helped fuel fears of a community for the modern day Illuminati.
The proximity of this community to Travis AFB is almost certainly not a coincidence — while currently a military airport, it has two 10,000 ft runways capable of accommodating nearly any size commercial aircraft — my bet is that they have designs on an eventual conversion to civilian use; Travis is only 52 miles by air to SFO (probably 20-25 min in a helicopter or E-VTOL), and an hour’s drive to Sacramento (SMF). Since military airports are usually quite loud (the enormous C-5 Galaxies are the biggest users of Travis), then the surrounding population is acclimated to the noise; plus if you own all the land around an airport, who is left to complain?
Final words
The confluence of a loosening of the daily office presence constraint, along with new transportation strategies, will eventually enable new platykurtic modes of work-life balance (despite the resistance of the old guard), flattening both the physical presence of the work week away from the central office, and eventually flattening out major cities into broader Meta-cities. The initial shifts will be both from the digital nomad class (young and tech literate), and to a lesser degree, the wealthier classes more focused on leisure-work balance (and who are probably happy to live at a comfortable distance from the non-wealthy).
The corporate office should flatten out somewhat into a hub and satellite structure, with commutes becoming variable distance (more to the satellites, less to the hub); this could drive Meta-city growth and integration, like a planet and its various moons (except with high speed shuttles). Hopefully it means a reversal or at least a slowing of the (leptokurtic) rise of the megacity, and all the complicated high density logistics that are required for places inhabited by over 10 million people (roughly 30-40 megacities exist, depending who is counting). It might even put a dent into the real estate truism of “location, location, location” by changing how we think about the value of a location, because adaptations in the way we live and work should modify what we want out of a residence and a working environment, and because new work plus transportation paradigms may increasingly enable alternative solutions which were previously unworkable.