I’ll give it a year…

Everybody is talking about working from home and how it will become a kind of new normal with fewer people working in offices and more people working remotely all the time or most of the time. Company executives of major firms like Barclays already claim that flexible working and working from home will become the new norm and thus the need for office space will be significantly reduced. This perception is further reinforced by the observation that in many companies, productivity has increased during lockdown. 

My theory is that productivity in lockdown has gone up or down depending on how many children you have and how old they are. But once schools are open, working from home saves you the commute that can be (and typically is) spent working. So, employers get an hour or so of additional work from each employee every day. Additionally, there are fewer interruptions at work from a colleague who passes by and just wants to ask that one question that popped on his mind, etc.

But if you ask me, I think working from home will not become the norm and office space will not be reduced permanently.

To understand why I think that is the case, we have to abandon the first-order thinking of many CEOs and engage in some second-level thinking. 

Historically, we had much worse pandemics than the current one, most prominently the 1918 flu pandemic and the Black Death during the Middle Ages. In each case, cities were much harder hit than villages and the countryside due to their higher density. Thus, people who could afford it, fled the city (as Isaac Newton famously did in the 18th century before he got inspired for his law of gravity by an apple falling from a tree). But why did they come back after the pandemic was over? Why did cities recover extremely quickly after every outbreak of the Black Death and the 1918 flu?

Because cities provide something that the countryside per definition cannot: Proximity. 

Proximity to customers and suppliers significantly reduces the cost of doing business in cities. And because businesses want to be close to their customers, they hire people in cities where their offices and factories are. Thus, jobs are in cities, not in the countryside and as a result, people come back to cities and unsafe areas again and again, because that is where the economic opportunities are. 

On top of that, cities have better infrastructure that makes it easier to transport goods and provide services to customers. As a result, cities provide true economies of scale that are impossible to match by spreading out into the countryside.

But you may argue, we live in the world of the internet, Zoom calls and email. Surely, that has reduced the need for physical proximity and enables us to work from home much more productively.

Well, that depends on how you measure productivity. Yes, we may get more things done while working from home which enhances productivity in the short term. But productivity is not just a question of how many things you get done in a day. Productivity in the long run is about how well we cooperate and how we innovate to stay ahead of competitors and serve our customers better. And in a world where entire teams work from home this long-term driver of productivity gets completely eliminated.

What we know about innovation is that it cannot be ordered from above. “Be innovative, now!” is about as likely to work as “Be creative, now!” Innovation typically arises from the chance encounter of two people who normally don’t talk to each other like the annoying colleague who passes by your desk and wants to ask a question that just popped in his head. Or a conversation about seemingly irrelevant things like this article between colleagues that creates a spark of insight that leads to innovation. In a sense, what I am trying to do here with these posts is not only to take a step back and encourage people to take a broader view of the world, but to help people think outside the box and become more innovative. In an environment where everybody is working from home, these chance encounters and blue-sky conversation simply don’t happen anymore and innovation and productivity stalls.

Instead, working from home fosters silo thinking and tribalism. If we can connect to our co-workers and team members only through email, Zoom, and the telephone, it requires an active effort to engage with them. The result is that we tend to interact more closely with the people we tended to interact closely with before the pandemic (e.g. our immediate superiors and team members and the people we get along with really well). But we tend to interact less with people that we had less contact with before. 

In a world of employees working from home a team slowly disintegrates into different groups and in the worst-case scenario, tribalism and office politics starts to kick in as colleagues are perceived less as team members and more as competitors. 

Remote work has been pushed time and again for the last 20 years or so. Some people believe it hasn’t worked because the technology wasn’t developed enough, and video calls were too cumbersome. But I think, remote work hasn’t worked because humans are social animals. And we need physical contact with other human beings to build trust and cooperate with them. Obviously, there are some jobs that don’t necessarily need that much cooperation with other people. This is why you can run a call centre with people working from home and develop software with teams all of which work from home. But if you want to provide a more complex service that requires cooperation between different people with different expertise, then physical proximity is an essential requirement for success.

Don’t expect that insight to dawn on your average first-level thinker, though. Many companies will experiment with work from home and then abandon these experiments in a year or two when they notice that it doesn’t create as many efficiency gains as they hoped. Meanwhile, businesses with second-level thinkers should seize the opportunity to foster innovation and teamwork to take market share from businesses that fall into the trap of saving cost through work from home experiments.