The Donut Effect, Airbnb Remote, Remote Forever? | #180
April 29th, 2022: Greetings from Austin! I’m going to be off next week as I’m taking my seventh-week sabbatical. The goals of these weeks are to be unscheduled, explore a bit more, and see what emerges. I may end up writing something but no promises.
This week I’m revisiting remote work, including a roundup of some of the most interesting research emerging from the shifts in work, living, and costs of living.
#1 AirBnB goes remote, gives all employees 90 days abroad
Among unconventional path seekers that I talk to remote work is almost good enough but what would really make it work is if they could leave the country and live abroad. Right now, many companies make you tell them your location and also track you in some cases, so your options for extended travel can be limited.
The CEO of AirBnB announced two days ago that the entire company will be shifting to a remote-first operation. This included five key principles:
#1 Work anywhere: “You can work from home or the office—whatever works best for you”
Pretty standard for remote work
#2 Compensation parity: “You can move anywhere in the country, like from San Francisco to Nashville, and your compensation won't change”
A divide is emerging between companies willing to do this and others that will not (it seems google indexes pay to your “home” location).
#3 True remote international option: “You have the flexibility to live and work in 170 countries for up to 90 days a year in each location”
Most companies who are “remote” now only allow you to spend a little time outside of the country. This is pretty impressive but likely makes a bit more sense for a company like Airbnb. I would guess there will be a lot of focus on local market learning for people spending time in those regions.
It will be interesting to see what % of comp comes back in via AirBnB rentals 😂
#4 In-person retreats: “We’ll meet up regularly for team gatherings. Most employees will connect in person every quarter for about a week at a time (some more frequently)”
We should be suspicious of anyone framing remote work as something where you never see your colleagues. Almost all the most successful remote companies are deliberate about in-person team time.
I think they’ll be a lot of innovation in this space not to mention the potential for new businesses to create high-quality retreat experiences
#5 Operations designed around remote: “To pull this off, we'll operate off of a multi-year roadmap with two major product releases a year, which will keep us working in a highly coordinated way”
Remote work without rethinking operational rhythms is a trap. Standardizing releases of product launches helps give people a clear roadmap of how to think about when to meet up in person, and how to make different tradeoffs based on where they will be living throughout the year.
In 2020, I wrote a massive post for Holloway on remote work and I discovered that most of the companies that were “remote-first” (they may have offices but everything is designed around being able to work remotely) all had a remix of the above five positions and I think this might be a better way to think about remote work.
It’s not remote or in-office, it’s choosing your setting across a number of different characteristics:
Remote work is really a fragmentation of the rigid ways we’ve been designing how to work. If I had to guess, I’d say we’ll end up with 3-4 types of remote work that emerge and all will have their own specific draw for different types of companies and talent.
#2 Remote Economics
There’s a really good guest post by Adam Ozimek in Noah Smith’s substack this week. It builds on a lot of economic themes I’ve written about over the past couple of years plus adds in some data from 2021.
Here were some of my takeaways from his collection of research
People are placing real economic value in the form of reduced compensation and other factors for more flexible work
Formerly lower rents and housing prices in “donuts” around cities have increased dramatically relative to the city and a lot of the discount of living further away has been erased. If I had to make a prediction it would be that the “donut effect” will become a very popular term by end of the year.
In a paper, he found that this effect was biggest in “large urban areas with lots of occupations that could be done remotely, high housing costs, and where a large share of workers used to commute in.”
A lot of benefits for remote work have gone to high-skill high-wage employees, especially those who fled to the “donuts” or lower-cost of living locations. Here is a chart showing migration trends from the central business district (CBD) outward for SF and NYC
This has had a large effect on rental and housing prices in these donuts. Here is another chart from Ramani and Bloom on the 12 most expensive US cities. Here we can see that low and mid-density rental prices went up while all density except central business districts went up for houses
There’s been a lot written about how this has amplified inequality. While this might be true in the short-term, Ozimek, Autor and others have research showing that the wage penalty for lower-skilled service workers in urban areas has been pretty high and that new economic opportunities through migration will enable more people to move to lower-cost cities
This flips a trend that MIT Economist David Autor has covered in his research. This chart is an eye chart but the way to read it is simply to look at the red line. As the slope decreases over the decades, it means that the wage premium of lower-skill workers is being erased in urban centers:
These new migration patterns will shift how we think about work, where people decide to live, and what types of new cities and towns might emerge downstream of newly revealed preferences
There has been an explosion of new technology and companies that have just started to emerge to serve how companies are working in new ways.
If you are a nerd like me this is definitely worth reading in full including many of the linked research papers. I am optimistic and Ozimek is for the same reasons:
However, what we should not do is succumb to a myopic pessimism that focuses on the direct costs and not on the wider benefits and potential of remote work. There is too much near-term, short-run, pessimistic thinking. Even those who are thinking boldly tend towards the negative, with predictions about the end of cities. I have seen this not just among pundits and economists, but business people in the private sector as well. I think there is ample case to look towards remote work with optimism and excitement.
#3 Remote Forever
Many business leaders I talk to see going all-in on remote work as a strategic advantage. Greg Galant, founder of Muckrack, and others launched the Work Remotely Forever pledge in 2021 and have 77 companies signed on including some like Convertkit, Baremetrics, Automattic, Chess.com, Dribble, Memberful, Zapier, and others.
A solid place to look for a job if you are interested.
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That's a useful breakdown of what goes into making "work from anywhere" feasible.
I keep seeing shallow and polarized discussions around the subject: by the way people discuss this, it seem that it was an overnight change.
And I keep saying that "work from anywhere" is just and incremental improvement on what they have built around the years in terms of culture and ways of working.
Lots of companies right know are giving their employees some degrees of freedom in terms of flexibility, but without the support of a culture, processes and and organizational design, it is just a cosmetic change.
They had to come up with some flexibility in terms of "benefits" because of the competitive pressure to do so, but they are missing years and years of organizational and cultural work needed to make it work organically.
While for a company like AirBnB it is just the latest, incremental evolution, for most companies to have conceded flexibility due to competitive pressure (or simply copy&pasting what other have been doing) will present the challenge of having to do all the cultural and organizational work that they haven't done in the past.
Agree - love the dimensionality and the optimism associated with this analysis and summarized perspective. In beginning doctoral research on the subject of remote/hybrid work and empowerment I have only recently learned that while it so much about physical location, it is about psychological connection for engagement and associated outcomes like retention, creativity and well-being. With whom, where and how people interact to create, solve, and produce will add even more dimensions to these. Perceptions about the experience or potential for it, will likely be quantifiably more predictive than the options to work in another country. Finally it feels like the relative bold openness to the ‘restructure of the workplace’ may be moving faster than the individual’s ability to process where they want to be, why and how. I wonder how organizations might continue to be as adaptive as they have been since 2020 and nurture the awareness of this process with individuals. Thank you Paul for the the thoughtful analysis and presentation of these factors.