Big Tech Wont Be the Same If Everyone Works From Home – Yahoo Finance

(Bloomberg Opinion) -- As the coronavirus pandemic continues, Bloomberg Opinion will be running a series of features by our columnists that consider the long-term consequences of the crisis. Thiscolumn is part of a package on the future of tech and innovation.

Theres no question that we are being saved by technology during the pandemic, as we use Zoom for our education and entertainment and rely on Amazon for just about everything else. Still, we may need to worry whether Big Tech itself will retain its strength in innovation after the crisis, given that companies wont have as many employees working side by side in the office anymore. About 60% of Americans who have been working from home say they would like to continue doing so once the pandemic is over. Many employers are also happy to permit it.

For all the obvious conveniences, distance work has its drawbacks. Elite tech companies, in particular, run the risk of losing the highly effective corporate cultures theyve built. And tech labor could end up increasingly commoditized and underpaid. If the remote working trendbecomes the norm for tech, Silicon Valley might end up losing a lot of what has made it special.

Lets consider how this might play out.

Bay Area companies follow a similar model: Build the organization by hiring and bringing together smart people.(1)This emphasis on cognitive ability is combined with high-powered incentives, such as large salaries and options, to drive performance;all sorts of weirdness are tolerated if accompanied by intellect and a focus on results.

This model, which has served tech firms (and us) well, is in danger. It was already the case that living in the Bay Area was remarkably expensive, creating pressure to rely on workers living elsewhere and working at a distance. But the limitations of the model ran deeper too.

From the beginning, the idea of building a company around the smart people had its drawbacks the most obvious being, there are limits to how many very smart people you can find and successfully recruit. It is easy enough for everyone to be impressive when the company is small (imagine the early days of PayPal, when Peter Thiel, Reid Hoffman, Elon Musk and Max Levchin were a dominant force).But general expansion will, by definition, dilute the original flavor of the organization.

Yet as tech companies(2)grow, they have to employ more than just programmers and tech geniuses. They need lawyers, communications people, facilities people and many more ordinary workers, including in sales and, yes, government relations. This is a natural development, but unfortunately, it means the original culture becomes less about glorifying tech smarts. Furthermore, performance in these other roles often has more to do with interpersonal skills and less to do with the sheer programming and tech savvy so prominent in many of the founders, again leading to a shift in corporate priorities. Even if these companies dont end up run by lawyers, over time they will still lose much of their distinctive flair.

The sudden move to distanced work has greatly sped up this process. So even as tech companies grow more essential, the geographic distribution of company activity will also make them less unique. Theyll start to resemble a typical cross-section of the workforce, with all of the routines and bureaucracy that most other companies experience. Theyll have less fire in the belly to disrupt and overturn previous institutions.

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One of the early salvos came from Twitter, when the company announced that its workers could stay home forever. Presumably, the company has been finding that the pandemic-driven move out of the formal workplace has been just fine. So why not continue with that arrangement and even offer it as a perk to workers?

FacebookInc. similarly announced that employees could work from home indefinitely and that they neednt live near Menlo Park or their other offices. The net effect for Facebook will be a larger pool of talent to choose from, but perhaps a less cohesive atmosphere in the company as a whole.

If Twitter, Facebook and other tech companies shift toward everyone working from home, it will mean less reliance on esprit de corps and morale to ensure performance, and more management using direct financial incentives and project- and output-based monitoring. Virtual tools can help organize teams, but they simply cant replicate the intellectual frisson of gathering the smart people together, and this could damage performance and innovation. As performance weakens, wages will fall, if only slightly, which will lead to a further reduction in performance and worker quality. Facebook already has announced that individuals who decided to live in cheaper areas and telecommute may receive lower pay.

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There is some evidence that when employees work at a distance, they dont put in extra hours or extend themselves for the benefit of co-workers. That probably means a better work-life balance for many people, but perhaps also inferior performance from a lot of companies over the longer haul.

This move away from workplace morale as a motivator will help self-starter employees, but it may not be good for tech labor overall. In essence, without a local workplace ethos, it is easier to commoditize labor, view workers as interchangeable and fire people. The distinction between protected full-time employees and outsourced, freelance and contract workers weakens. A company can make the offer of, If you hand in your project, we pay you, to virtually any worker around the world, many of whom might accept lower wages for remote roles.

The idea of a headquarters will not go away, however, so the true geographically-centered insiders may keep their privileged status and also their high productivity. But overall, the tech industry may increasingly comprise commoditized workers who have probably never met the boss or each other.

Another problem will be the onboarding of new labor. Telecommuting works best when everyone on the team already trusts one another and shares expectations. But as new workers are hired, it gets harder to develop relationships and create shared understandings. One solution is to onboard new workers by having them meet everybody in person;this will likely happen at first. But eventually corporate groups will rely less on trust and corporate culture and more on sheer direct incentives and measurement of output. Again, parts of the tech corporate ethos will wither and disappear.

Finally, all of these developments are unlikely to help the influential state of California. Recent events have shown that California is economically vulnerable: Although the numbers of Covid-19 cases and deaths have been relatively low, the state has been hit hard in its entertainment, tourism and winery businesses. Now the future of the Bay Area is in jeopardy as well, because even if the tech companies prosper throughout the crisis, their employees will be spread out over many more locations. I would not wish to be long San Francisco office space.

Of course, many people would prefer to see more tech jobs redistributed to other parts of America and the world. But let us not forget the unique status of California as a significant generator of so many of Americas innovative developments, including hippie culture, gay liberation, the environmental movement, the tax revolt and Reaganism, the ascendance of tech and much more. Whether or not you like all of these, a poorer, less special California may not be in our long-term interests as a nation.

For all the bashing of the tech companies that goes on these days, we may be sorry to see their culture, and their home, becomesignificantly diminished.

(1) Such generalizations usually trigger a lot of pushback, but still it is my personal impression that average employees at say Google or Facebook are quicker and brighter than those in most companies on the East Coast or elsewhere, with the exception of the quantitative financial sector.

(2) Disclaimer: the major tech companies (or affiliated foundations) discussed here are donors or potential donors to my university and research center.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Tyler Cowen is a Bloomberg Opinion columnist. He is a professor of economics at George Mason University and writes for the blog Marginal Revolution. His books include "Big Business: A Love Letter to an American Anti-Hero."

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Big Tech Wont Be the Same If Everyone Works From Home - Yahoo Finance