Remote working: What the ‘tech exodus’ means for the Silicon Valley

Long before the pandemic, pundits predicted that remote work would reshape Silicon Valley. Newspaper stories about California tech workers setting up home offices in more affordable West Coast locales date back to the 1990s. In the most recent explosion of Bay Area housing prices, some startups made a splash for their remote-only policies, and at least one offered a “de-location package” to incentivise moves anywhere with lower housing costs.

Yet remote work has by no means been the industry’s default. Apple and Alphabet have long been deeply office-oriented; Yahoo, Best Buy and Reddit ended up reversing course on their flexible work arrangements in the past decade. Indeed, until the coronavirus rewrote the terms of telecommuting, Silicon Valley stood as the 21st century’s prime illustration of the virtues of industrial clustering — the idea that creativity, innovation and economic output will thrive in places where people with similar knowledge sets are close together. The tech industry’s current extreme clustering has been credited with boosting productivity, too. Little wonder that the major players have designed ornate, amenity-laden campuses to keep workers on site for as many hours as possible.

How much will coronavirus tamper with the Valley’s secret sauce for innovation? That’s now an open question as a number of tech workers are leaving their motherships. Alphabet, Facebook, Twitter and other bigwigs announced plans for significant portions of their workforces to remain remote even after offices reopen.

Susan Wachter, a professor of real estate and finance at the University of Pennsylvania’s Wharton School, has studied the importance of industry clustering. She believes that the shift to remote work will largely be a good thing for tech companies, in that it can create more capacity for them to hire and grow. In recent years, the Bay Area’s absurdly high housing costs (pre-pandemic, the median one-bedroom rental in San Francisco surpassed $3,700 a month) created a barrier for new talent and even retaining workers.

“It was nearly impossible to get young talented people to join the workforce at wages that could cover those prices,” Wachter said. But the pandemic’s new paradigm “will make it possible to expand and increase Silicon Valley’s size, not in a geographic cluster sense, but in a network sense.” She envisions the formation of what she calls “neighbourhood nodes,” where divisions of employees constellate in communities up and down the West Coast. Silicon Valley will still be the hub, she said, but its geographic dominance may lessen as new nodes rise.

Connective infrastructure might be the key to where these satellite nodes form, at least in the “next normal.” But what gets lost when companies no longer convene hundreds or thousands of highly educated and innovative employees in a single site, allowing bright minds to bump up against each other in the cafeteria and in the moments after a meeting lets out? While remote work is getting good results for some companies, performance is slumping at others. Breaking up the motherships could similarly carry some long-term costs for the tech industry. For example, newer hires will miss out on skills grown alongside more experienced colleagues, diminishing their ability to develop new ideas, Wachter said. Entry-level workers’ career growth could also be hampered in the absence of other nearly employers. “They gain tremendously from being part of a geographically clustered pool,” she said. “For them, this is not good.”

On the other hand, those workers may also finally be able to afford a place to live.