Working without the commute

This post originally appeared over on Medium.com

The regular way of (white-collar / office) working in the coming years will be quite different to that of the last decade, but also quite different to how most people are predicting.

This is going to be one of those articles where the author talks about what may happen in the future, after some of the Covid-19-related restrictions ease. Why add to the steaming pile? In my case, I want to put forward a view that is different from most of what I am seeing, and also because it is good to have documentation of a prediction so that it can be tested in the future for how well it tracked to reality.

The majority of articles I’ve read about future ways of working seem to predict that the future will be like the present. Principally, that we are currently working from home and that this will continue. Bloomberg reports that Google has seen the equivalent of $1b a year in savings from not having people working and travelling between offices. Additionally, around two thirds of employees in US companies would rather work from home than get a $30,000 raise. So, it seems there are benefits to both employers and employees in letting the current situation continue.

I’ve noticed that in my own experience, there has been a significant productivity improvement in working remotely. Firstly, I work longer, as some of the time I would have spent commuting is spent working instead. Secondly, unproductive time at work spent in travelling between meeting rooms, and waiting for meeting rooms to be vacated, has been eliminated when using online meetings. Lastly, I am able to multi-task more effectively during remote meetings, as I can triage and process emails in a way that would have been more difficult to do in person. So, even putting costs like property rental, cleaning and energy for lighting/heating/cooling aside, I expect many employers will experience a productivity hit if all their workers return to the office full-time.

However, these benefits to employers exist regardless of where the remote employee is working from. Significantly, many employees do not have ideal conditions at their homes to work remotely. For example, if there are multiple people trying to work remotely from the one dwelling and there aren’t enough working spaces to share. Or if the dwelling is too small to have a working space that is ergonomically set up for healthy long-term working — I have seen some people working from small bedrooms. However, the reason such people are still working from home is largely due to restrictions relating to Covid-19, and as these restrictions ease, it’s fair to ask, where would they prefer to work?

The answer seems to be that they’d prefer to work somewhere without a commute. Even before Covid-19, research showed that people hate commuting. One study referenced by Forbes back in 2016 equated removal of a commute with a $40,000 raise, which is an interesting correlation with the work-from-home survey result above.

Additionally, people do value and benefit from the social interaction that they receive in a workspace. This is often at odds with remote working, where online social interaction may need to be a scheduled activity rather than happening informally as part of bumping into people in corridors or kitchens. Meals are a traditional social occasion, but food and drink can’t be readily shared over a video call.

If you put together the value of remote working, the desire for a minimal commute, and the social benefits from working alongside other people, the natural conclusion is that we will see a surge in interest in co-working spaces near people’s homes, once Covid-19 backs off. In Australia at least, many of the co-working spaces have been in the same geographical areas that major corporate offices have been, as the proposition has been in providing flexible offices near to corporates. However, we can expect the proposition to shift to providing flexible offices near to employees.

While co-working businesses have taken a big hit during the Covid-19 lockdowns, up until 2020 there had been a strong trend of growth in adoption of co-working spaces. A March 2020 study by Coworking Resources showed 17% growth in number of users and number of spaces over the previous two years.

Additionally, there are spaces that are similar to co-working spaces that will likely support this demand. Many local libraries supply internet connectivity and bookable desks. Similarly, some cafes are also happy for locals to work from their premises and use their Wi-Fi if they are buying food and drink. In a world where remote working is normalised, arrangements like these might be made more official.

Of course, such spaces do not offer a free alternative to employers providing offices. The costs will need to be borne by someone. Perhaps reduced commuting costs (vehicles, fuel, parking, tickets, etc.) and home costs (energy, internet, etc.) could offer some compensation to employees. Perhaps employers will see the cost savings and productivity gain compared to offices and also provide financial support, or even get into the co-working space business themselves.

There are also questions about how to maintain business confidentiality in a space where there may be employees from competing organisations also working there. Co-working space designs can help mitigate this, as well as suitable IT solutions, but it will remain a risk to be managed. It is not dissimilar to working from an airport lounge or having work discussions in a taxi or cafe, so shouldn’t be considered a new risk.

I hope that we will see more forecasts about the future ways of working that go beyond working from home or even hybrid working. While many people and businesses want to retain the benefits of remote working, working from home is not going to be the only solution. Shared working spaces, close to people’s homes, will almost certainly be part of it.

Diversification is the silver bullet

This post originally appeared over on Medium.

So, they say there are no silver bullets, but for dealing with uncertainty, diversification is as close as you can get. Instead of betting that the future will turn out one way, spread your bets across a diverse portfolio of likely possibilities.

I haven’t buried the lede, so there is going to be no surprise twist here, but I wanted to tease this out to show how widely applicable this concept is.

Company boards are made up of directors that need to make decisions about the future of the company. No-one knows the future for certain, so the background and experience of the decision-makers is critical for how good their decisions are. Instead of having every decision-maker with the same background and experience, having a spread of backgrounds and experiences improves the quality of the board. There are several pieces of research showing this, but one example reported in Forbes shows that, compared with individuals, a gender-diverse team makes better decisions 73% of the time, and teams that also have age and geographic diversity are better 87% of the time.

There is a danger that this seems completely obvious. Let’s just pause for a little and consider that it’s actually a little counter-intuitive. There is a proverb that has been around since the 16th century that too many cooks spoil the broth. Certainly, for a complicated task, an individual with deep expertise can often accomplish it better than a team. In fact, to underline that point, the same study reported in Forbes from before noted that diverse teams are more likely to struggle to put their decisions into action.

The difference is between complicated and uncertain. A complicated task can be made easier through the application of appropriate tools, skills and experience. Applying these things to an uncertain task doesn’t make it less uncertain. Producing a 7 day weather forecast is complicated. Getting it completely correct is uncertain.

This same logic applies in the world of venture capital. A VC firm will raise a fund to invest in a portfolio of startups, rather than just one. However, the same VC firm will typically seek out startups that each aim to win in a single market or technology area. Knowing which startup will become a unicorn is uncertain, so is best approached in a portfolio fashion. A VC fund of $50M could include something like a dozen startups, and there’s a well-known rule of thumb that only a third of startup investments will return more than their initial investment. (On the other hand, executing a startup is a complicated endeavour, and it benefits from simplifying and focussing where possible.)

Sometimes a VC firm develops an investment thesis for their fund, such as where they believe a particular technology or market should be the focus for their investments. Here’s a collection of over a dozen different VC investment theses, but a stark example is when Kleiner Perkins announced in 2008 that they would form a fund to invest in iPhone (and later iPad) app companiesdue to their belief in the potential of Apple’s iPhone. However, such VC firms still consider the winners in that space to be uncertain, and hence diversify their investments across multiple possible winners, e.g. Kleiner Perkins ended up investing in 25 companies. Similarly, investors in such a focussed fund (known as limited partners) are likely to diversify their investments across multiple VC funds, in order to mitigate the uncertainty that a particular investment thesis is wrong. An example here is Yale’s endowment fund, which historically invested in funds across VCs such as Andreessen Horowitz, Benchmark and Greylock Partners.

When it comes to corporate innovation, the lessons are the same. A particular corporate should take a portfolio approach to emerging opportunities. There might be some hypotheses that a corporation has developed about the opportunity sizes in particular markets, products or technologies. However, no one knows for sure how the future will turn out, so spreading risk across multiple opportunities is prudent.

The recent book from Geoffrey Moore called Zone to Win argues that a company can incubate only one major new business at a time, or risk spreading executive attention and corporate resources too thin. While there are examples of large companies like Amazon, Baidu, Apple, Google and Microsoft who are able to incubate multiple such initiatives at once, there are few companies at this scale.

However, when the expenditure and resources required to progress a new initiative are relatively small, and the likelihood of success of such an initiative is still very uncertain, it makes a lot of sense to spread the company’s investment across a number of these initiatives. Diversification may involve a range of possible time horizons, market segments, product areas, or technology domains. Spread the risk to increase the chance of overall success.

Whether it is the uncertainty relating to having relevant experience for board-level decisions, knowing which startups will hit home runs, or picking the right opportunities to explore within a corporate innovation function, the silver bullet is the same. Diversify across a variety of good options.