Adam Ozimek On Remote Work

Uri Bram: I’m excited to be here today with Adam Ozimek, economist and writer, and now chief economist at Upwork and a leading expert on remote work. Adam you’re also one of the original econbloggers and I feel like I’ve been reading you for more than a decade, which feels wild.

I want to start with a slightly weird question for you: if we had perfect teleports for humans, so we could instantly and costlessly move from any place to any other, what would our work and living patterns look like? Would we all live in the countryside and just pop into the city for meetings and restaurants? Would we even have cities?

Adam Ozimek: That causes so many pieces to move at once that it's actually less telling than you'd think, because you end up in such a weird hypothetical. For example, cities have value that is due to the concentration of amenities there. Restaurants cluster near people, people cluster near amenities.

In this hypothetical of zero transportation costs, that would no longer be the case. As a result, you can't really hold separate the locations of amenities in this hypothetical, as they would change.

Thus when you ask, "would we pop into the city for meetings and restaurants?" it sort of presumes that some cluster of economic activity would still be there and we'd want to teleport to be close to it. I'm not so sure about that: you wouldn't necessarily pop into cities for restaurants and meetings because the restaurants and meetings wouldn't necessarily be there anymore.

Over time, stuff gets located where it is demanded. So cities might not empty overnight, but over time, new restaurants would be built way out in Montana where land is cheap and where you can visit for free in zero time.

Uri Bram: Ahaha this is great. Obviously what I'm aiming for here is an analogy to the actual world of work in the next ten years. Zoom lets us teleport, in some limited sense, (fairly) costlessly and (fairly) instantaneously. Does the teleport idea have any relevance? Are there better analogies for what remote technologies will do to our patterns of living and working?

(I would happily read any sci-fi novel by you where the protagonist is a swanky restaurateur in Montana)

Adam Ozimek: Zoom is a bit like teleporting. And with VR that might be increasingly true. To go back to the original question but focus my answer on this more directly, I think cities do have value for the clustering of amenities and also for the clustering of work that needs to be done in person. Zoom allows us to talk and interact and share digital whiteboards, but you can't hold a screwdriver while I turn a wrench on the same engine over Zoom.

Nor can you zoom into a restaurant and get much pleasure from staring at food on your computer screen. Indeed, the continued existence of concerts so long after high quality concert videos have been available suggests that a variety of amenities have visceral qualities that digital is not a substitute for.

Uri Bram: I have to say I (long ago) read the econ literature about clustering and concatenation, but I didn't entirely understand it, or at least it hasn't stuck.

Adam Ozimek: Hypotheticals have become a lot less hypothetical, which makes it easier to digest I think.

Uri Bram: Is there a sense in which those of us who work remotely are building a cluster on the internet? Or is that just technobabble?

Adam Ozimek: No I would agree with that. It is very easy to reach communities of experts on Twitter and engage with them in an ongoing and productive way

Uri Bram: Also I feel that thing about embodiment, by the way. Certain experiences seem to have very visceral elements where digital versions are just not at all a good substitute. Though I suspect it's also because we're at this stage of replicating embodied experiences in digital formats and it just doesn't work, versus coming up with new kinds of interaction and experience that are native to the digital sphere and actually work better there.

Maybe Twitter is an example, for all the bad sides of it, it's a new kind of communication that isn't just a replica of something we do in person

Adam Ozimek: I think replicating versus creating new is a very powerful and important point. If you look at Bloom, Davis, and Zhestkova's cool paper, they show that patents related to remote working have surged during the pandemic. The next few years I predict will increasingly absorb some of the visceral experiences of in person interactions, and also add brand new components. The side-chat in a Zoom meeting is a good example: that is clearly an improvement in group communications, and not just a replication.

Here's the Bloom et al chart by the way:

Uri Bram: This all seems like a good segue to your views about General Purpose Technologies, and how so far everyone is largely missing their importance about remote work -- can you say more about that?

Adam Ozimek: Another way that people are thinking too narrowly about remote work is that they should be filing it under what economists call general purpose technologies or GPTs. The impacts are broad, they will affect a variety of industries and have a ton of downstream impacts. This is not like the invention of a specific computer, it's like the invention of the computer.

One way to think about this is the difference between how it will affect firms that already exist as the attempt to cobble their operations, culture, and management structure into remote working versus new remote first startups. Being remote from the very beginning means building entirely new ways of working around remote.

I think we will see a lot of new and interesting stuff there, and it will in some industries provide incumbent firms with a greater leg up than has traditionally been the case.

Uri Bram: Can I quickly digress you and ask if you have theories for why people (seemingly, in my view) find this insight hard to grapple?

I realise I’m stacking the deck by picking this example, but it really does feel as if the world has just been electrified and we're arguing about whether electric light is really that much better than gaslight, rather than all the new things that were literally impossible previously and are about to be invented.

And maybe I'm wrong but I sense that the response isn’t generally people saying "GPTs exist, but we don’t believe remote work is one of them,” which would be coherent, it's more like... a conceptual misunderstanding about GPTs even existing, I think?

Adam Ozimek: The automobile is a great example of this. There really were people who after the invention of the automobile argued that it was vastly inferior to horses, and based on the world at the time they had a point. Most roads in the country were dirt, and horses did a lot better in mud than cars did. But thinking that this would always be the case is clearly an example of thinking too short-run.

I would definitely say we are seeing this with remote work today. I would say there are a few varieties of critics: urbanists, extroverts, non-remote occupations, and downtown office building owners.

The downtown office building owners are pretty self-explanatory. If I owned a $100 million office in San Francisco, I would also be very critical of remote work and not want to see it as important or disruptive.

Urbanists take us back to earlier in our conversation to the question of "why do cities exist?" A big part of the story has always been the power of agglomeration. It is historically productivity enhancing and creates knowledge spillovers when people in the same industry and occupation cluster into a giant labor market.

The idea that people can work together equally or more productively at a long distance via remote work is threatening to the story of agglomeration. It doesn't mean agglomeration doesn't exist for some jobs or industries, but it does mean that on the margin it may be less important than it used to be. Since urbanists have long used the massive importance of agglomeration as a key part of their argument for cities, I think some of them find remote work threatening and seek to dismiss it.

Extroverts like to be around people every day, and historically the economics of the modern firm has favored this way of working. The fact that they prefer the way it has historically made sense has confused people to believe that it makes sense simply because they like it. As introverts well know, just because a way of working isn't your preference doesn't mean it won't be embraced.

Finally people in non-remote occupations are simply projecting. I am a trial lawyer, a mechanical engineer, a physical trainer... my job can't be done remote, therefore remote work doesn't work.

Uri Bram: Yes that absolutely baffles me about The Discourse around remote work -- I feel like you're constantly having Twitter conversations where other people say “not every job could be remote! Also, some of the pandemic effects will be temporary!” and you saying "...yes? But 20% of workers going fully remote is obviously a massive shift with huge consequences?”

Adam Ozimek: Yes people think "not every job can be remote" is a powerful rebuttal when in fact it is very directly implied by my remote work forecasts. I think about 20% of jobs will be fully remote and another 15% will be hybrid. So the reality is these people are correct about the median job, it won't be remote. But that doesn't mean remote work won't be a huge deal for tens of millions of people and have a significant impact on the economy.

Uri Bram: I feel that, like a lot of people, I have done this calculation and asked myself "how much would you have to pay me to show up at an office every day?" and it's at least 2x and probably 3x my compensation, and I suspect that even then I wouldn't find it worth it.

I had this discussion when taking my current role, which I adore, but where my one condition was "I will not do it if I have to commit to living anywhere specific permanently"

Adam Ozimek: When Upwork hired me they asked "are you sure you don't want to move out here to California?" I said "There is a price for everything, but you would be crazy to pay it."

But they were very comfortable with a remote hire as a remote company, and so it wasn't a very serious discussion. In contrast, I think a lot of companies very much will be having that discussion of how much do we need to pay to keep people in the office.

We did a survey a few months ago that shows that a lot of people are thinking like this. Millions say they are willing to quit their jobs over remote work.

Uri Bram: I know you’ve written and thought a lot about the other side of that ledger, too -- what remote work does to companies -- can you tell us a little bit about that?

Adam Ozimek: I think another way that remote work will have spillover impacts is on the nature of the firm, to put it in econ jargon. Once you are working remotely with your workers, I think it makes it easy to hire outside services and remote freelancers to do certain things.

For example, if you find that all of the accountants in your firm can do their work remotely, you could let the accounting department go remote or at that point you could simply hire an accounting firm. After all, you will be engaging with both at the same remote arms length. We did a survey of 1,000 hiring managers, and we found that growth in demand for remote freelancers has gone up, which I believe in part reflects this phenomenon.

From that same study, I looked at the percent of work done by outside services and by freelancers by area of work (like finance, accounting, design, human resources, etc) and I found that both types of going outside the firm tend to be related.

So I think in this way, going outside the firm more can allow firms to specialize more in core competencies, to create more of the specialization of Adam Smith

Uri Bram: Basically I see this a lot, and it feels like there's a certain fixed cost to just.... orienting your organisation towards hiring freelancers, at all.

In my case, I know it's kind of ridiculous but there's a certain mental barrier to learning how the freelance platform works, to deciding to actually use them, whatever. And there's a ton of small tasks that are just-about-personally-doable for a generalist -- little bits of graphic design, audio production, transcription, whatever -- and in each individual case I would usually think "it'll only take an hour, I can do this myself". But this is clearly not efficient, I am bad at all of those things.

So as either the costs of the freelance platforms fall -- mainly psychological costs, some kind of Trust Cost, some kind of "my friends use this and helped me get set up and told me it's really good" cost -- I finally overcome the block, re-orient my organisation towards using lots of freelancers, and voila.

Adam Ozimek: This is what a lot of small business people face. They often have to do dozens of things that aren't their core competency. Accounting, customer service, graphic design, social media marketing, legal, web development.

Small businesses make up a lot of our customers at Upwork because this work is naturally done by a freelancer because it is fractional. Most small businesses do not need a full-time web developer. They have occasional web developer needs.

Platforms like Upwork also help because the time cost to hire is a lot faster. You can look at a lot of freelancer profiles very quickly without having them come into the office of your small business and chat. When you have a dozen fractional job needs, hiring speed is important. It makes sense to do this remotely, it makes sense to do it on a platform with freelancers.

Uri Bram: I do actually advise people a lot to just practice hiring freelancers online for small jobs, before they actually "need" to. Hire a graphic designer for, I don't know, your birthday party invitation, or to make some art for your music, or just a poster to put on your wall honestly. If you can afford some tens or hundreds of dollars for a hobby project, instead of asking a friend to do it or doing it yourself, just... try hiring a freelancer so that you overcome that initial hump, because when the need hits you it might hit very suddenly and it's better to just be ready already.

(Also, this is a little off-topic, but one piece of advice I would give to any young professional college graduate – again, if you can afford it, but $100 will go a long way here –  is to go on Upwork and hire a few freelancers for literally anything to learn about management, delegation, thinking about work through the lens of a manager, etc.

I think it would give you a huge and unusual leg up when moving into management but also be really helpful in learning how to be managed, what your managers might be frustrated with or confused about or generally why they might communicate or act in ways that make very little sense until you've been there).

Adam Ozimek: Yes delegation is a huge skill, and working with freelancers on your project or small business is a great chance to learn that delegation. For small businesses, starting small is good advice too. We find that many will start with a one-off need, and then find on-going use cases.

By the way, we are also seeing extra interest on the other side of the platform thanks to remote work. Businesses are finding that hiring remote freelancers is easier once they have learned to work remote, but people are also looking to go independent as a way to be a remote worker.

I think this is partly because people have gotten a taste of the freedom and flexibility that comes with being a remote worker, and being a freelancer takes you even further in that direction.

It is also a way to be fully remote today without having to negotiate with managers and be subject to the whims of future managers.

Uri Bram: Adam, this is super fun and I'd love to talk forever but I feel like we should wrap up. I have one last question, which feels strange to say but it’s about how cool your life (personally) seems to be. I only know what I see on Twitter obviously, but you seem to be having a way better time and doing more interesting things than most people I know. And to me that seems to be enabled by choosing not-to-live-in NYC or SF – would you agree?

Adam Ozimek: I will admit that owning an arcade/bowling alley/restaurant is something that not all economists get to enjoy. In fact few people get to do it. I really enjoy getting into outside projects, and I enjoy the process of business so-to-speak. But part of it is also a compulsion that I feel like something should exist and it should exist exactly as I think it should. It shares a similarity with normative economics, which is a belief in how things should be.

In some ways, it's not so so different from being an economist or writer. You have a vision of something you want to bring into being in the world, and you hustle to make it happen.

Living where I do certainly helps. It would be hard to come up with a business idea in New York City that 1,000 entrepreneurs who live there and have a bunch of capital haven't come up with already.

There's something about a smaller and less efficient market that leaves more opportunities.

The economist in me knows that bigger markets create more niches too, and have more consumers, so it's not all that one-sided. But in my case, I feel that living where I do presents opportunities.

To be clear though that is opportunities of a specific kind. As an economist, big city labor markets offer more job opportunities. But for me, I have a very good match remotely so that doesn't matter. It's hard for me to believe as a full generalization entrepreneurship is easier in small towns and cities. But for the ones I have created, that seems so so far.

By the way it also helps that I live in a growing place: more customers and employees every single year. There are many small cities and towns in Pennsylvania that are shrinking and are therefore very bad places to be an entrepreneur.

Also I will say that I have probably half a dozen other business ideas, and many of them are wackier than an arcade. So check back with me in like a decade and see what weird stuff is next.

Uri Bram: Well I'm really looking forward to that. It's been such a pleasure talking to you – where can our readers find you online?

Adam Ozimek: They can visit my Twitter at twitter.com/modeledbehavior. They can also see my research at Upwork.com, visit my restaurant at decadeslancaster.com, or buy my children's shoes at zimmermanshoes.com/

Uri Bram: Amazing. Thanks so much for coming on, it’s been a delight.