The Geography of Remote Work

Tech seems to have abolished distance: people are increasingly connected and communication is cheaper than it’s ever been. Armed with an Internet connection and a smartphone, we can work from anywhere! Remote work is a growing phenomenon for many companies willing to reduce office space and cut costs or to recruit and keep talent by offering them more flexibility.

Yet both economic activity and population are increasingly concentrated in just a few areas, while many more places become economic and demographic deserts. Why do people flock more and more to these areas when they could choose to live and work in cheaper places? If distance is dead, then why is real-estate more and more expensive in large cities? Why are digital nomads—a growing trend in the startup world— still so marginal?

In fact geography has never been more critical. As illustrated by all the questions raised by many international companies after Brexit, the localisation of one’s headquarters matters a lot. As for individuals, whose careers are full of ups and downs and turns, the importance of living in a dense ecosystem has never been greater.

Distance may be dead, geography has never mattered so much!


Distance is dead

Communication has become a commodity. Online services such as Skype or Google have made all communication services into a commodity. The time of price-fixing deals between mobile phone companies (the 1990s) is long gone. People now have so many alternatives to text messaging (Facebook Messenger, WhatsApp, Google) they can barely remember the time when text messages were expensive. When it comes to instant messaging, Internet made traditional phone companies seem completely antiquated.

In 1997, Frances Cairncross, a British economist and journalist, published a book titled The Death of Distance. At the time, a minute of telephone communication between the USA and Europe was still charged 80 cents. Yet Frances Cairncross foresaw that distance would be dead when it comes to communication.

The German Reich’s Post service launched the world’s very first videophone service in 1936. Since then, the triumph of videophone communication has been a standard item in most sci-fi movies. Even though it took time for videophone services to actually be used and even though these services still leave a lot to be desired, they have now finally become a reality for many workers and users.

Telepresence is spreading in the corporate world where virtual meetings have become common. Face-to-face meetings have not disappeared—far from it—but many companies want to cut the travel costs of their executive staff. It’s become much more common for workers to spread across different time zones to schedule late—or early—video meetings. Skype, Google, Facebook, or WhatsApp have made communication cheap and spread the use of video conversations. But because these services aren’t always high-quality, other corporate actors, like Cisco and HP, have developed more sophisticated corporate tools that require costly studios.

The smartphone revolution has made the lack of infrastructure (roads, highways) slightly less dramatic for some countries. Developing countries have leapfrogged to a new communication technology, going directly to mobile long before everyone was equipped with landline phones. According to the World Bank, a 10% increase in the number of mobile phones can bring about nearly one extra GDP point. It’s a powerful development tool.

In the startup world, collaborative tools such as Slack have transformed the way people work. Email and phone are on the decline. In startups, remote work is made easy by the use of such collaborative tools. Distance is thus very relative. Teams are often organized virtually.

Meanwhile, in their private lives, users have massively converted to videophone communication and ‘augmented’ reality. They do “Skype dinners”. They use Facebook Live. Many of them leave a video service on at all times. For hyper-connected users, telepresence is indeed a reality wherever they happen to be.

Digital nomads have been all the rage since the success of Tim Ferriss’s The 4-Hour Workweek, published in 2007. They are said to have changed work and space profoundly. So long as they have wifi (and the proper devices) digital nomads can work from anywhere, preferably a Thai beach. In the small world of IT developers and graphic designers, the phenomenon is real enough. Nomads are the consequence of the transformation of work relations and the exponential growth of freelancing. The nomads are most often independent workers and entrepreneurs. In some cases, companies even choose to do away with offices altogether and use coworking spaces instead.

Coworking space in London

Long live geography for individuals

Yet digital nomads are still a marginal phenomenon. One just needs to look at the rise of real estate prices in big cities like San Francisco, Hong Kong, London, Paris, and even Berlin, to see that people tend to flock to high-density areas rather than leave these areas to enjoy empty beaches. In Europe, many rural areas are emptier than ever before. Paradoxically enough, though distance is dead, the concentration of people and companies in some areas tends to increase, while other areas tend to become economic and demographic deserts.

High-rise living, Hong-Kong style

Although they are theoretically free to choose where they work, very few digital nomads and remote workers choose to live and work in rural areas. The need to be in a community of like-minded individuals and to dwell in economically rich areas is stronger. Fewer people (including the so-called nomads) have a driving license precisely because they plan to spend all their lives in high-density areas where public transportation and ride-sharing services are widespread.

“According to a new study from the University of Michigan, the percentage of 16- to 44-year-olds with driver’s licenses has decreased significantly in the past few decades. But it’s been particularly pronounced among the youngest part of that group. The percentages of 20- to 24-year-olds who had licenses “in 1983, 2008, 2011 and 2014 were 91.8%, 82%, 79.7%, and 76.7%, respectively.” Almost a quarter of young adults don’t even know how to drive. How did we move from a country where having a car was the single most important sign of independence to one in which respondents actually told researchers that they were “too busy” to get a license?” (The New York Post, 2016)

Because they have increasingly complicated and messy careers, most people are forced to stay in high-density areas where they have more professional opportunities. The need for a dense personal and professional network is all the bigger when you need (or want) to switch jobs regularly. Furthermore, as traditional institutions such as unions, corporations and government are doing less to protect individuals against risks, we will need to rely on our families and networks even more. The line between personal and professional networks is becoming increasingly blurry: each and every one of us is trying to grow their own personal “startup”, as Reid Hoffman, LinkedIn’s CEO, explained in The Startup of You. So the “creative class” has never been so urban. Even just a few decades ago, there were many more lawyers and doctors in small towns and rural areas. (There still are a few, of course, but many small towns and villages find it increasingly hard to have a doctor, for example).

LinkedIn Speaker Series: Jeff Weiner, Reid Hoffman and Ben Casnocha

Independent workers, freelancers and other gig workers use “third places” increasingly often. The number of these places has risen very fast over the past few years. The concept was first introduced by sociologist Ray Oldenburg in the last 1980s to refer to all the places that are neither home nor office. In his influential book The Great Good Place, Ray Oldenburg argues that third places are important for civil society, democracy, and civic engagement. Many people launch and test new ideas in such places. So really, working on a beach in Thailand is not that common for most nomad workers, who, more often than not, need the dynamism of urban coworking spaces—and a proper wifi connection which can’t be had everywhere!

“Oldenburg calls one’s “first place” the home and those that one lives with. The “second place” is the workplace — where people may actually spend most of their time. Third places, then, are “anchors” of community life and facilitate and foster broader, more creative interaction.” (Wikipedia)

Additionally, all areas are not equal when it comes to education. Nomads with children will tend to choose to live where the education offer is denser. Among those who could actually choose to live and work in the country (more experienced remote workers), many have children old enough to go to school. For them geographic freedom is a bit more limited. Although home schooling is indeed a growing trend, it is still negligible.

Last but not least, the very small “elite” of hyper-connected entrepreneurs who can actually work anywhere they choose, have earned that freedom after many months or years of hard work and networking in high-density places. It’s still hard to grow a network on a desert island!


…and for companies

For a company, the choice of one’s headquarters matters a lot. As shown by all the discussions around Brexit, there are regulatory, tax and monetary factors that can represent life-altering barriers for companies. Most of all, recruiting talent is increasingly a matter of life and death: it is key to be where the talent is.

In the industrial age, when factories and machines represented huge costs, companies chose to locate their production in areas where space could be cheaper, often far from city centers, where workers could also find cheap housing. Factories could be found anywhere: in the outer suburbs of large cities or in rural areas. In a way, the industrial age contributed to a better geographic distribution of jobs, activity and people. Geography didn’t matter so much. Then companies relocated their factories in third-world countries with a cheaper workforce. Transportation costs were so low that again geography didn’t matter so much.

In the digital age, conversely, the concentration of companies in high-density areas is increasingly high. Because more value can be created in less space (there is no need for big factories anymore), it is easier for companies to be where everybody is—where real-estate is expensive. Synergies, intersections, emulation, cross-fertilization are what makes the “ecosystem” a reality for a company. You just have to be where the others are if you want to be in a position to recruit them.

San Francisco

The localisation of a certain class of assets, like data centers and warehouses, is increasingly strategic for numerous companies. For example, for high-frequency trading companies, a nano-second can make all the difference so they can’t afford to locate their centers too far. For Amazon, the promise to deliver everything within 24 hours has forced Amazon to have more warehouses closer to big urban areas. Finally, transportation costs are bound to increase in the near future as some major lines are increasingly saturated.

Our work space has changed profoundly: flexible furniture, open spaces and smaller spaces have become the new norm. But at the same time, geography matters more than it used to. Because a company can concentrate more assets in less space, it becomes possible to concentrate all activities in a high-density area where all the users (clients) and workers are also concentrated. The higher concentration of talent and opportunities in a dense area is what drives innovation and creativity.


Conclusion

We no longer work the way we used to. The young (and the less young) expect more flexibility. Our work space has changed completely with the emergence of smartphones and laptops. The very notion of work is undergoing unprecedented transformations.

Yet we do not work from everywhere. For people as well as companies, it has never been more important to be where everybody else is. So some areas are becoming more dense, which makes it harder for workers to find affordable housing.

Perhaps one day we will actually be able to rely on our virtual avatars, work from anywhere and travel the world. For most of us, that day has not yet come.