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Coronavirus might spell the end of tech hubs. That’s a good thing

Originally posted on wired.

If we get remote work right, Silicon Valley will finally lose its mojo

The world is currently running a forced mass experiment in remote working – and some of the most important technology companies have decided that there’s no going back. In the wake of the Covid-19 pandemic, Facebook, Twitter, Shopify and others have announced that they’ll offer a permanent option to work from home to most employees. It’s a shift that, if sustained, will have profound consequences – not least for how we think about innovation.

Some commentators have expressed concern that a world of remote-first work will be a less innovative one. The classic way of thinking about innovation clusters like Silicon Valley hinges on physical proximity: a critical mass of innovative companies located close to one another allows for the creation of a highly skilled workforce, knowledge spillover between firms, and the emergence of specialised providers serving the cluster’s unique needs.

More broadly, many thinkers on innovation talk about the importance of serendipity – the accidental collision of minds and disciplines that can beget new brilliant ideas. Serendipity seems more likely when colleagues, and even competitors, are bumping into each other in an office’s corridor or in coffee shops and coworking spaces. The argument goes that none of that will happen if we’re all sitting in home offices at the end of an internet connection.

I’m more optimistic: far from breaking innovation clusters, remote work, if executed well, can create a new model for collaborative innovation – one that overcomes the limits of existing clusters and unleashes human potential around the world.

Three things make me especially hopeful. First: although existing physical innovation clusters have given much to the world, they suffer from diseconomies of scale that greater adoption of remote work can overcome. Second, the shift to remote work is already incentivising the creation of new tools and practices that will make collaboration at a distance more effective. Third, in the long run, the “talent effect” of bringing vastly more people into the innovation ecosystem will greatly outweigh any frictions that are created by lack of proximity.

Diseconomies of scale in innovation clusters – the mechanism by which the larger a cluster grows, the more expensive it gets for workers and companies to be part of it – were not discussed until recently. But in the past few years well-known entrepreneurs and investors have highlighted the challenges of living and working in Silicon Valley and some have voted with their feet. Rising rents, lack of diversity and closed-mindedness are frequently cited – and well evidenced in the academic literature too. Remote work solves this, at least in theory.

Until recently, though, the power of remote work was limited by primitive tools and organisational practices. If your boss is in the office and you’re dialling into a meeting on a poor internet connection, remote collaboration is not great. Zoom, Slack and other tools have made things a little better. But there’s now a huge incentive to found and fund companies working on new tools. I expect hundreds of millions of dollars of venture capital will flow into collaboration tools this year and we’ll look back on today’s software as a very rudimentary version of the remote work toolkit. Perhaps in remote work VR, so often maligned as the permanent bridesmaid of technology, will finally find its killer app.

Just as importantly, the world is rapidly learning how to organise for remote work. Companies such as GitLab have pioneered working practices that make it easier for teams to get the most out of each other remotely. GitLab’s CEO has noted that it’s not an easy transition to make, but I expect that the learning from tens of millions of workers stuck at home will mean that best practices diffuse and compound rapidly

Finally, remote work will allow orders of magnitude more people to participate in the innovation economy. There’s no doubt that human capital is the key ingredient in the success of clusters like Silicon Valley. Innovation requires a highly specialised, skilled and diverse workforce. Such people are distributed globally, while innovation clusters are, almost by definition, local. Despite all the benefits of innovation clusters, the requirement for physical co-location has been one of the most important bottlenecks on innovation.

Removing that bottleneck will have a far-reaching impact. As we’ve expanded globally at Entrepreneur First, we’ve discovered that so much exceptional talent can be found outside major startup hubs, and realised the power of plugging such people into a global innovation ecosystem. We’ve also been surprised at how smoothly our approach – bringing talented and ambitious individuals together to build teams – has translated into a remote-first world, despite the lack of in-person interaction.

Perhaps the most frequent – and fruitless – question politicians ask about innovation is, “How can we build the next Silicon Valley here?” The answer used to be “you can’t”. But, perhaps, the new answer is “you don’t need to”. If the world gets this transition right, there’s an opportunity for many more countries and vastly more people to reap the benefits of innovation clusters without having to build one on their doorstep.

It won’t be easy, not least because there are lots of challenging side effects to manage. The impact on wages of the globalisation of knowledge work and the effect on commercial real estate could be huge if many firms choose to stay remote permanently. Equally, there’s evidence that “hybrid” working, where a core group of people remain physically in the same location, makes remote workers into second class citizens and dampens any positive effects. And a permanent commitment to remote may be too much to swallow for many companies.

But I suspect some will swallow the pill.The pandemic, for all the devastation it’s wreaked, has given us a glimpse – albeit a frustrating, low resolution version – of a more innovative, more collaborative, perhaps even more inclusive world.

Matt Clifford is the chief executive and co-founder of Entrepreneur First. He tweets from @matthewclifford

Source: wired

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