The Sentinel #9: A Hybrid WFH Post
Marissa Mayer, Saving Cities and The Taking of Pelham 123.
Sometimes you have a good idea and flesh out an outline over three days, only to see a better essay has already come out. I recommend this excellent and provocative substack post on phones and loneliness written by Noah Smith. I am in fact happy-sad when this happens. I console myself by thinking happy thoughts that I am at least thinking of some credible ideas.
So, instead, I wrote about Work From Home (WFH), and Hybrid Work Equilibria. First, let’s begin with Marissa Mayer.
I start this post with the Good Old Days (GOD) of tech optimism when Facebook was all about connecting people when the newly hired CEO, Marissa Mayer tried to cut Work From Home to save a struggling Yahoo.
Everyone I talked to then, in their long Bay Area commutes (which have only gotten worse over time) hated the idea, including and especially the crowd that wanted Marissa Mayer to fail. Those were also the days for high hopes (only a month before Sheryl Sandberg’s Lean In was published) for successful tech company woman CEOs — a social possibility that has not yet been realized in the Valley.
Here is the Memo that leaked on February 22, 2013.
YAHOO! PROPRIETARY AND CONFIDENTIAL INFORMATION — DO NOT FORWARD
Yahoos,
Over the past few months, we have introduced a number of great benefits and tools to make us more productive, efficient and fun. With the introduction of initiatives like FYI, Goals and PB&J, we want everyone to participate in our culture and contribute to the positive momentum. From Sunnyvale to Santa Monica, Bangalore to Beijing — I think we can all feel the energy and buzz in our offices.
To become the absolute best place to work, communication and collaboration will be important, so we need to be working side-by-side. That is why it is critical that we are all present in our offices. Some of the best decisions and insights come from hallway and cafeteria discussions, meeting new people, and impromptu team meetings. Speed and quality are often sacrificed when we work from home. We need to be one Yahoo!, and that starts with physically being together.
Beginning in June, we’re asking all employees with work-from-home arrangements to work in Yahoo! offices. If this impacts you, your management has already been in touch with next steps. And, for the rest of us who occasionally have to stay home for the cable guy, please use your best judgment in the spirit of collaboration. Being a Yahoo isn’t just about your day-to-day job, it is about the interactions and experiences that are only possible in our offices.
Thanks to all of you, we’ve already made remarkable progress as a company — and the best is yet to come.
Jackie
I love the term “Yahoos” by the way. Reminds me of the less-known fourth volume of Jonathan Swift’s Gulliver’s Travels. In 2013, Yahoo CEO Marissa Mayer had officially pushed for banning the company's employees from working from home.
To become the absolute best place to work, communication and collaboration will be important, so we need to be working side-by-side. That is why it is critical that we are all present in our offices." (emphasis in bold is mine).
Do you think that’s disagreeable? Let’s fast forward exactly 10 years. Here is Andy Jassy on Feb 17, 2023, asking Amazon workers to come from home into work 3 days every week.
Collaborating and inventing is easier and more effective when we’re in person. .. Learning from one another is easier in-person. Being able to walk a few feet to somebody’s space and ask them how to do something or how they’ve handled a particular situation is much easier than Chiming or Slacking them.
Read the whole memo here. It was almost as if it was written by the same PR company!
In 10 years, we know that requiring office presence and remote-only, both have big problems. In fact, I would argue that…
Hybrid is the only way!
Even as the employee preferences diverge from the employer preferences in the figure above, the data shows people like the happy middle.
Every day, employees would prefer to stay home and employers would like them to show up at work. The divergence is somewhat like the game The Battle of Sexes (an old-fashioned Game Theory name and newer nomenclatures just haven’t stuck). A couple would like to go out together: One prefers Football and the other prefers Opera. Clearly going to the same event leaves one of them (who prefers the event) better.
But wait. If it was a simple game like that, then employees would prefer to work from home all the time, and employers would, like Marissa Meyer required, make the employees come into the office all the time. But, the data here, while sharing some features with the game, shows more nuance.
First, only the employees act. Employers can mandate actions, but employees may quit in response to the directive.
Secondly, the chart shows that the employees don’t like to work from home (WFH) all the time. Many employees would like to come in some days of the week (for collaboration), even though WFH is convenient. It is also possible that employers like WFH for some days — paying rent is costly. Offices could operate with less space/capacity if some of the employees are on WFH all the time. This is why Hybrid is the only way to go.
The data shows that the gap between employee preferences and employer preferences is narrowing over time but there are vast amounts of geographical and social differences in what kind of jobs for which such narrowing has occurred.
Moreover, the gap between employee expectations and employer preference is much smaller for the higher-income white-collar workers (who live in cities — we will talk about this shortly). Secondly, it turns out that the quantum of WFH days is higher for high-income, white-collar labor in cities.
Nevertheless, there exists a persistent gap. Fixing the gap is only achieved by trial and error. Add to this the fact that mixed equilibria are hard to achieve.
Discreteness Problem.
Let’s look at the gap again. It looks like the employers would like 28% WFH which is above 3.5 out of 5 workdays at the office (and less than 1.5 days at home). In contrast, the employees are at a preference of 45% WFH, which is a smidgen less than 3 full days at the office.
Firms find 3 days of WFH and 2 days at the office as too unproductive, leading them to eventually nudge for more days at the office. Amazon moving to 3 days at the office from two days is an example of such an effect. Quickly after the pandemic, several east coast banks have moved to requiring 4 or even all 5 days of coming into office, likely increasing the cost of hiring and retaining the talent pool.
On the other hand, employees like 3 days of WFH and 2 days at the office. Hence the grumblings of the white-collar workers when asked to come to work 3 days at Amazon. (They would prefer to come for 2 days to the office).
The main point is that bridging the gap “midway” is hard. Part of the issue is that there is no way to mandate 3.5 days because weekly regularity is of value. Increasing the degrees of freedom leads to more coordination problems.
“Be here every Tuesday and Thursday and every other Wednesday” doesn’t work well.
Firms would nudge closer to 4 days at work, and employees close to 2 days. Making employees work 3 days seems to be a compromise that leaves everyone equally mad.
Is Wednesday the New HUMP Trough Day?
Let’s examine the coordination problems. People like to go to work for collaborations. No point going when half the crowd is missing. So, which days should people come into the office? This data has also split the crowds.
Fridays were never a candidate for coming to office. People take off on Fridays before long weekends. Summer Fridays are often a thing in New York. Even banks became a little flexible on Fridays, allowing jeans and non-monochromes. So, when WFH came tumbling down upon us, it became clear that Friday was never coming back as a full work day at the office.
Before the pandemic, I would have assumed that Wednesday would have been a good day for WFH. Traditionally, it made sense. Work in the office on Mondays & Tuesdays, followed by work from home on Wednesdays, and have a chill latter half-week at work, since Fridays are anyway slower.
Post-pandemic, as things take slow turns changing and vacillating, the evidence is split. Some surveys have shown a number of people showing up at the office on Wednesdays. Several offices have been trying to squeeze in Wednesdays by making people come to the office on Tuesdays and Thursdays.
In cities, increasingly Wednesdays are also seen as party evenings, as more and more people work from home on Thursdays and Fridays, there is some new trend that ”Wednesday is the New Thursday”.
Hybrid Work has Saved Cities after the Pandemic
A fascinating thing that transpired in the last 10-15 years before covid was the significant growth in the economy and population of US cities. Cities became desirable places to live, as suburbs became a bit boring, (in fact wealth has shrunk in the suburbs). Traditional economic gathering locations such as malls are in crisis. Crime in cities has been in steady decline (although there was an uptick during the pandemic). Cities are going through a period of rebirth and rejuvenation.
It is a truth not universally acknowledged, that every company in possession of good fortune wants to be in a city. Which city should they go to? (“SF sucks, Austin is the new SF!”) It is all a matter of debate and taste. The truth is Gen Z loves cities (despite the data showing an increasing incidence of loneliness) because it helps to use their downtime.
The pandemic seemed to kill cities, but it appears that (most but not all) cities are back. Mainly because of Hybrid work. Once you spend a long day at home in front of a screen, how you spend the limited off-time becomes more important. I am no party person, but this seems to make sense.
To observe how cities are truly back, watch the film The Taking of Pelham One Two Three (not the 2009 film, but the 1974 version starring Walter Matthau) and observe the grim seventies of New York City, which bears little resemblance to current day post-pandemic NYC. The hero is tired. Commuters are tired. Mayor has no money. Everything is grim. Even the miscreants are really not having any fun. A beautiful time capsule of why the generation deserted the city in the evenings.
Also, consider the NFL. Until recently, NFL franchises routinely forced cities to build them new stadiums with public funds, under the threat of moving. A tragic case in point is St. Louis, which wooed the Rams from LA with all kinds of benefits, only to lose them back to LA after decades. In 2016, voters in San Diego overwhelmingly rejected funding most of the cost for a new $1.8 billion stadium for the Chargers, who promptly packed up and left for Los Angeles to share a privately funded stadium built by the Rams. We will see more such actions.
Even as Amazon is pausing HQ2 construction due to pandemic layoffs, I believe Tech firms, even more so than sports franchises, would like to be present in cities such as Miami and Austin because those cities have become increasingly desirable places to live. Most importantly, much of the white-collar talent (who are a mainstay of the WFH movement) love to reside in those cities.
Next week, a special newsletter ahead of the Academy Awards. Stay well.