One of the major themes playing out for both startups and large technology companies is a move away from centralized teams and toward embracing decentralization and remote work.
To date, technology has been a centralizing force for people, prompting them to cluster around cities and corporate headquarters. There is, however, a strong argument that we are at the tipping point and that this trend will reverse toward remote-work and decentralization.
There are obvious technological, social and economic factors enabling this. But if we move into an era of large-tech-company (and startup) decentralization, the biggest impact may be on the electoral map and politics.
Historical Context: Technology and Centralization
In the 1990s when the internet was very young, many believed we were at the dawn of a remote-work-from-anywhere era. Just as the car made moving out of the city into the suburbs viable and desirable for many, the idea was that the internet would make it possible for people to live remotely in the most beautiful places and telecommute to any job.
What happened was the opposite. Cities in general were made stronger, more vibrant and more valuable by technology. The fun and interesting people and things to do in a city became easier to discover. Job opportunities in cities became easier to find and a more liquid labor market opened up. Things like Uber made transportation in cities easier (or so the story goes). Cities even used technology and surveillance to become safer.
The promise of efficient remote work enabled by great video-conferencing and communications technology languished. Suburbs and exurbs couldn’t leverage many of the technology advantages that dense cities could capitalize on.
The same broad-stroke pattern also played out in the organization of high-performance companies.
The best companies came to realize that centralization into the minimum number of locations was a massive advantage. Being in one (or just a few) locations allowed the best companies and rising technology giants to be extremely nimble in how they allocated and reallocated talent across teams. It allowed for maximum communication between people laterally which, in theory, led to more innovation. And, of course, it added efficiency in the high-quality services for employees they wanted to provide.
The occasional experiments at decentralizing labor in the last 30 years (like Google’s global explosion of offices after their IPO, and subsequent consolidation back to just a handful of offices) reinforced the narrative that great companies should centralize their Human Resources.
Today: The Reassurance of The Decentralization Narrative
Four major factors are clearly today pushing back the centralization thesis.
The first is technology. Video conferencing has been promised for nearly a generation, but the “rich” post-IPO price of Zoom in many ways is reflective of the fact that we are finally there (or at least very close), where remote meetings are viable. Tools like GitHub, Asana and Slack, it can be argued, are combining to complete a truly effective remote-work platform. Even before we talk about things like VR on any practical terms, technology is finally coming online to make remote-work a competitive model.
The second factor is cultural. For years people have talked only about the benefits of open-office floor plans in maximizing lateral communication on teams. Now though, everyone is coming to recognize their limits and costs. People are moving back toward closed offices, phone booths, and shutting down noisy and distracting open company forums. The ideal is shifting.
The third factor is simply economic. In the broadest sense, centralization is always more economically efficient than decentralization, until the cost of centralization rises too high. This happened with Moore’s law, stuffing transistors on chips. It is happening with cities and companies as well, though admittedly mostly because of housing politics. Nonetheless, any resident of San Francisco or Seattle recognizes that as the cost of living rises, it outpaces the benefits of centralization for many. That is leading big companies and startups away from hyper-centralized models.
The final factor, which is often overlooked, is politics. If you take a historical view, generally speaking, the benefits of centralization are efficiency and the cost of centralization is risk. When you put all your resources in one place you can be very efficient, but you submit yourself to the whims of one municipality with little bargaining power. When you distribute your resources to many places, you become resilient to attacks in any one location.
There was a time when technology companies wanted to have as little exposure to different regulatory bodies and municipalities as possible. The idea was that if you didn’t have an office in a given country or city, then it was hard for that government to come after you meaningfully. You could pick one friendly place (California) and avoid entrapment everywhere else.
However, in the era we are entering, with more hostile relationships between governments and tech companies at all levels, the better strategy might be to be present everywhere. If technology companies can distribute their workforces all over the country and the globe, then they can be in a position where they are benefiting people locally everywhere, and are not trapped by any one country, state or city.
This means that any government (at least any democratic government) going after the companies will have to contend with citizens who are in favor of the company. It also means that, with a distributed workforce, the company can credibly threaten to “leave” and take away a benefit from locals if any government goes after them—in a way that would be impossible today. Amazon can’t credibly threaten Seattle if the government oversteps, nor can Google threaten the Bay Area.
I have written before about how I believe that Uber is better positioned politically than Airbnb in their global city-by-city regulatory battles because Uber has more local customers and workers who are invested in the platform. To be sure, to date, Uber has faced more challenges than a Google, or an Amazon, or a Facebook at the local and regional level. Still, despite those challenges, the fact that Uber has both consumers and effectively employees earning money around the globe could be an asset to the company in the future.
As the world gets more contentious it makes sense for strong companies to defend themselves by making sure that their employment base is more broadly distributed.
The Next Few Years of Strategic Decentralization
Imagine for a moment that large coastal technology companies go from centralizing their workforces to intentionally following a policy of distributing them across the country and the globe.
Simply allowing workers currently in major technology “cities” to move while still keeping their existing incomes would—I believe—cause at least some workers to take advantage of the massive cost-of-living differential between cities and everywhere else.
However, imagine that the companies incentivize employees—with benefits and cash bonuses —to leave their major hubs in the Bay Area, Seattle and New York and move to smaller cities in the middle of the country, and around the world.
I think that this is sound business, and smart local politics. But—even beyond these important but mundane realities—the impact on the electoral map could be more dramatic.
To be sure, the raw number of technology company workers today isn’t that large, but in some smaller states and cities election margins come down to tens of thousands of votes. You can imagine, therefore, that the movement of some tech employees into new areas could have a meaningful impact.
I am confident that in the coming years we will look back at this era as one where technology companies flipped from centralizing to decentralizing talent.
But, it is possible that we will also look back at this era in history and note how enormous an impact technology played in national politics, not because of social media, but because of the massive shift technology drove in distributing workers across the country more broadly.
Zoom may save us yet.