The impact of technology on corporate real estate: A Panglossian future?

Amos Tversky and Daniel Kahneman introduced the concept of Loss Aversion in 1984 (1), highlighting people’s tendency to strongly prefer avoiding losses to acquiring gains. Most studies suggest that losses are twice as powerful, psychologically, as gains. Lose £100 and we will feel a remorse that easily outweighs winning a £100.

In a similar fashion we find it very hard to see future positives when confronted with short term loses. We understand easily what we have lost but cannot imagine what there is to be gained. Furthermore, as Frederic Bastiat wrote in an 1850 paper (2), ‘That Which is Seen, and That Which is Not Seen’ man has a tendency to “pursue a small present good, which will be followed by a great evil to come, rather than a great good to come, — at the risk of a small present evil”.

Put these together and it is no wonder that, by and large, the future of work, real estate and the workplace is misunderstood. The strength of argument put behind thinking of the traditional Office as a ‘sustaining technology’ as opposed to something crying out for ‘disruption’ is intense. It fits perfectly into Clayton Christensen’s worldview, where innovations are resisted by incumbents, laughed at, and dismissed right up to the point where they reach a position where they can no longer be resisted.(3)

It is time to be more positive, to stop holding on to a belief system that is no longer applicable. Yes, much is going to change in the next ten years (as it has done in the last ten) and things we are used to are going to disappear. There is though ‘a great good to come’, if we become cognisant of the huge technological forces at work and learn to embrace new ways of living, thinking and feeling. We need to co-opt technology to augment our lives, our society, and our planet. A computer can beat any human chess player, but cannot beat a human working in conjunction with another computer.(4) As society becomes ever more digital we must resist digitising the past. As Mark Twain said, “History doesn’t repeat itself, but it does rhyme.” The future will reflect human predilections, but these will be repurposed around technological capabilities.

Below are several developments that will reshape ‘work, rest and play’. And that is ‘will’ not ‘may’; it is up to each of us to make the most of this inevitability. We can shape change, we cannot resist it.

You should assume the office really is dead.

Only by embracing the fact that technology has removed the need for an office to undertake work (5), will you reimagine the office as somewhere that does have a real, enduring purpose.

We used to need an office because that was where we could access the technology, data and people we needed to get our work done. This is, barring a minority of companies, no longer true. And anyone who still thinks ‘water cooler’ moments make it all worthwhile clearly isn’t living in the real world of social media and streaming, anything, anytime information.

Do believe the hype, the robots ARE coming and they will take 30–40% (6) of todays jobs. And most of those will be the jobs that people do in the office right now. Any work that can be codified will be codified, and thereafter automated.

So what then is the point of the office? Well, to understand that you need to focus intensely on what is is that we humans can do, that computers can’t. And that boils down to things that cannot be codified, are unique, require social intelligence and are an amalgam of disparate, unstructured inference and intuition.(7)

Then, and only then, will you be able to see the future of the office. It has one, but not as most of us currently know it.

Machine learning is a double edged sword.

A big difference between computing today and just a few years ago is that, whilst the notion of computers as being sentient is currently fanciful, they can now do things off their own bat that previously required human instruction. Think of it like a game of ‘if this then that’; where once the ’that’ needed to be pre-defined for the ’this’ to take effect, computers today can infer or induce what the ’that’ is. The machine can learn from the data it has to hand. It can deduce that if X occurs the next thing to happen will be Y. In effect machine learning means machines can build their own decision trees (8). And therein lies the rub. The positive is that we can enlist the help of the machines with complex analysis or the development of predictive analytics. The negative is that the bar is being raised as to what the machines can do without our help.

You need to assess what questions the machines should answer themselves, and what ones you need to work on together, in partnership.

The ‘Death of Distance’ will return.

In 1997 The Economist’s Frances Cairncross wrote a much lauded book, The Death of Distance (9). It posited the idea that communications technology would free people to work wherever they wanted to, and that people would gravitate to the places that suited them most, safe in the knowledge that they could work anywhere. Well, much to the delight especially of technology naysayers, this hasn’t come to pass. In fact people have gravitated en masse to already successful cities, and clusters of like minded companies have formed in crowded, urban city centres.

But the death of distance is a real phenomenon and will re-assert itself in the years ahead. If you think of Netflix, or Apple TV, or streaming music services like Spotify you just take them for granted. But ten years ago none of these things could have existed, as the technology required simply did not exist. Whilst many scoff at the companies that went belly up in the Dot Com crash of 2000, the fact is most of the big failures were simply ahead of their time. It is a question of what behaviour is enabled by technology. To date, distance has not died as people need to be near each other because the tools and infrastructure they require are not universally available.

However, this is an evolutionary process and as demand grows so does supply. So we now, for instance, have multiple ’Silicon Valley’ type tech centres around the world; London, Berlin, Stockholm, Tel Aviv etc. And a world is developing where every talented coder does not have to move to San Francisco to partake in the technology industry. And the connectivity, and hardware/software, to genuinely be in multiple places at once, is now becoming commonplace.

Like e-commerce, the point is not to aggregate figures across the whole market and infer minimal impact, but to look at those areas where sizeable numbers of people or companies are starting to work in a different way. Disruption is when something not as good as, but dramatically cheaper than the incumbents starts to gain traction. Like the lily pond analogy, not a lot happens for a long time and then suddenly everything changes.

So consider that Automattic, who make WordPress which powers a quarter of all the worlds websites, is an entirely remote company. Or the dispersed, networked nature of companies like AirBnB, or Uber, operating in hundreds of companies largely through online collaboration. And the plethora of on-demand companies springing up to provide you with what you want, wherever you want it, at the press of a button.

All of this involves the death of distance. People connected by technology, not place. And it is growing.

The advantages, once you adjust your thinking, are huge. As Bill Joy has said “No matter who you are, most of the smartest people work for someone else.” Being constrained by one’s immediate surroundings is something the digital age removes. As Venkatesh Rao writes in Breaking Smart (10), the command and control nature of many businesses is dying and with it the limiting closed mindset, based around order, process and industrialised production. There is a big world out there, talk to it.

There is no such thing as Work/life balance, and that is good.

When you can do your work anywhere you do not need to parcel your life up in this way. Work is becoming more and more about getting things done than being present, at your desk, for a set number of hours each day. At the heart of smart working is judging progress by what gets done, productive collaboration and developing ones business in an agile, iterative way. And this does not necessarily involve a contiguous number of hours. Or presence in one place. So for those lucky, or smart, enough to have jobs that they enjoy, that have purpose and that enable them to demonstrate their skills, the whole notion of work/life balance is old hat. Work/life is a blend, not an either or.

Assume everything is mobile (11).

With 4 billion people across the world owning a phone, and replacing it roughly every two years, the mobile is increasingly the first screen people use to access anything. In the western world, where smartphones are de rigeur, each of us has a 1990’s supercomputer in our pocket. And we have this with us almost all the time.

The Cloud rules.

And part of the reason your smartphone is so powerful is because it can access pretty much anything via The Cloud, and can offload complex tasks to server filled data centres via The Cloud. In practice you have the total computational resources of the world in your pocket. If you are not serving your employees, suppliers, partners and customers via The Cloud you are missing out on an huge opportunity.(12)

Connectivity matters.

Harnessing the hardware power of your smartphone and the resources available via The Cloud requires good connectivity. Wallis Simpson once said ‘You cannot be too rich, or too thin’ — if she were alive today she would add ‘or have too much bandwidth’. It matters.

Whereas the real estate mantra “location, location, location” still retains a validity, in a networked world it is “connections, connections and connections” that really matters.

Work is being unbundled.

So much office work is a process of aggregating data from different people, in different departments, and then organising this for reporting or presentation purposes. Once aggregated and distilled, in all likelihood any facts and figures included are a static snapshot of a moment in time.

This process is a construct of the analogue, non networked, age and will disappear in the digital one. Such work will be unbundled, in the sense that distinct processes, applications and API’s will be developed that tie together all this information, via pre-defined (or on demand reprogrammable) templates into real time data feeds that short circuit the whole panoply of manual tasks currently required.

Much of the work that is currently performed via Excel spreadsheets will transition to Cloud based applications, either automatically supplied with data points or supplied via mobile or tablet interfaces.

And with real time, contextual and analysed data to hand, it can be both more widely distributed (hence the flattening of hierarchies) and more valuable and responsive to human designed interpretation and decision making. Companies will have more people working with more accurate data more quickly than ever before.(13)

Software is on-demand, available as a service.

If you look at the way large successful startups are using software you’ll see that the old ‘as long as it’s Microsoft’ days are over. Where it would be typical to run a one supplier stack of applications across your whole business it is commonplace nowadays to meld together, via public API’s and Cloud hosting a wide range of services from 3rd parties specialising in their own particular area. So, if you take Uber as an example they use Google Maps to locate you, Twilio to text you, and SendGrid to email you. With this sort of approach, where software is considered on a modular, plug and play basis, you can concentrate on delivering an exceptional customer experience, and deliver this at speed and with great flexibility.(14)

In addition, with all these services available off the shelf and on-demand, you can be as powerful in a tiny startup as the largest multi-national. The difference, of course, is that you’ll be more flexible in your business modelling and a great deal faster to market. Execution is key, as ever, but today the playing field is pretty much level.

And the result of all this is?

With all of the above going on I hope it is clear that the work we do, and how we’ll do it, as well as the environments that will enable this, will change in the years ahead.

I see the following coming to pass:

The young will continue to congregate in either ever smaller apartments, or flat/house shares (or purpose built new blocks mimicking University life) in the city centre. If you cannot afford your own place then renting right in the heart of the action makes sense.(15)

They will make the most of this but there are limits to how much of their salary people will be prepared to pay in rent. As has been said before, London could follow New York (purportedly) and eat its own creative class.(16)

At some point the allure of city centre living will meet the harsh realities of cost and increasing numbers of people will leave the capital. Primarily for city centre locations in 2nd, 3rd tier UK cities. This is of course a gradual process but a tipping point will be reached. For current hub cities this will be game changing, but for countries as a whole it will be positive as regional centres up their game and attract/offer higher paying, higher skilled employment.

Pure dormitory locations will suffer badly, as they offer neither good jobs or interesting lifestyles.

The zoning of areas will break down, as it becomes increasingly anachronistic to think of places as somewhere you work or somewhere you live. Cities will become dotted with local communities where housing, office space, retail and leisure uses are mixed up and people move around different environments as the need, or urge takes them.

Many of these areas will redefine existing High Streets and turn them into multi purpose communities, rather than single purpose retail destinations.

It will become commonplace to find purpose built apartment blocks incorporating working space as well as retail and leisure uses.

In major city centres large buildings, that once would have been single purpose offices will follow the same pattern, becoming vertical villages.

A large percentage of offices, perhaps 40–60%, will become variants of the co-working spaces we see sprouting up all over the place today. These 3rd spaces, will be sort of hybrid work/home environments that are much more pleasant to spend time in than most people are used to (17). And because the nature of work will have changed so much, emphasising human skills augmented by technology, they will need to be as smart thinking requires the right kind of stimulation.

The centre of super prime cities will be reserved for weekly get togethers, with a continuation of the trend for less but longer commuting journeys as people’s circumstances change and the need for some decent space increases. The flip side of this will be a growth in live/work purpose built communities, in and outside historic market towns.

Property owners will morph into full stack service providers as this world of ‘office as a service’ takes hold, and the demands and requirements of occupiers increases. Those who do it right will be rewarded with more customers spending less time overall in their properties, but paying significantly more on an hour by hour basis.

All of the above will be underpinned by a wave of exponentially developing technologies that will provide extraordinary tools for developing exceptional customer experiences, great human relationships and meaningful, prosperous businesses.

Something to aspire to I think.

Antony

First published in Work & Place magazine October 2015

http://workplaceinsight.net/wp-content/uploads/2015/10/Work-Place6.pdf

1 Kahneman, D. and Tversky, A. (1984). “Choices, Values, and Frames” (PDF). American Psychologist 39 (4): 341–350. doi:10.1037/0003–066x.39.4.341.

2. http://bastiat.org/en/twisatwins.html

3. See http://www.claytonchristensen.com/ for more on Professor Christensen’s work.

4. The future AI? Helping human beings think smarter/ http://www.wired.co.uk/magazine/archive/2014/12/features/brain-power

5 Goodbye to the office — http://sethgodin.typepad.com/seths_blog/2010/06/goodbye-to-the-office.html

6 Since 2001, 65% of librarians have gone, and almost half of all PA’s and secretaries. Of course, new jobs have risen up to replace these losses.

7 Creativity vs Robots — http://www.nesta.org.uk/news/future-shock/creativity-vs-robots

8 Predictive Analytics: the Power to Predict Who Will Click, Buy, Lie, or Die. Eric Siegel, 2013

9 The Death of Distance: How the Communications Revolution Is Changing Our Lives. Frances Cairncross 2001

10 Breaking Smart http://breakingsmart.com/season-1/ — Venkatesh Rao

11 For the demise of the desktop PC see Ofcom CMR 2015 http://stakeholders.ofcom.org.uk/market-data-research/market-data/communications-market-reports/cmr15/ and for the rise of the smartphone see Ben Evans’ “the smartphone is the new sun” http://ben-evans.com/benedictevans/2015/5/13/the-smartphone-and-the-sun

12 The Unbelievable Power of Amazon’s Cloud — http://www.theatlantic.com/technology/archive/2015/04/the-unbelievable-power-of-amazon-web-services/391281/

13 For more on this see http://ben-evans.com/benedictevans/2015/5/21/office-messaging-and-verbs

14 Software For The Full-Stack Era http://techcrunch.com/2015/07/25/software-for-the-full-stack-era/#.gvvyzn:UJIY

15 Tomorrow’s Home: Social Trends Report http://www.spaceworksconsulting.co.uk/projects/social-trends-and-the-built-environment/

16 Rohan Silva — London could lose it’s creative class. Dezeen. http://www.dezeen.com/2015/07/10/creative-people-designers-new-york-move-los-angeles-cautionary-tale-london-warns-rohan-silva/

17 WeWork are starting down this path — http://uk.businessinsider.com/startups-are-opening-co-living-spaces-so-you-never-have-to-leave-home-to-go-to-work-2015-8?r=US&IR=T

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