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January 04, 2017  |  permalink

The Office of the Future Is…an Office

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(Originally published at Backchannel on January 4, 2017.)

When siblings Jonathan Smalley and Melanie Charlton began brainstorming a startup in her Annapolis basement in 2014, they were unwittingly following in the footsteps of Bill Hewlett and Dave Packard, the pair who plotted the trajectory of their namesake company, Silicon Valley, and ultimately the zeitgeist from the splendid isolation of their Palo Alto garage. But Smalley and Charlton chose a different path, relocating to Washington, D.C. expressly to join the city’s first WeWork outpost. “We had been working from home, alone,” recalls Charlton. “Once we moved in, immediately everything began to change.”

They weren’t looking to change the world; their firm, Brilliant Communications (later shortened to the vowel-challenged Brllnt) would design the apps and sites and services for those who did. So they set out to meet their neighbors through liberally dispensing help, advice, and round after round of Nintendo’s Mario Golf paired with WeWork’s infamous free beer.

What followed reads like a parody of millennial startup culture — Smalley the salesman in his cutaway-collared shirts; Charlton the chic creative lead; her Shiba Inu, Cinna, starring in the annual “Dogs of WeWork” calendar — but it worked. They met 400 people in the office that year, including nearly half their clients, many of whom sat literally down the hall. They acquired a neighboring three-person firm the next year, began pitching for larger business with a trio of others, and poached WeWork’s own community manager to coordinate their efforts. By last summer, Brllnt had quadrupled in size to 16 people, with another half dozen freelancers on call.

“Like anything else, the space is what you make of it,” says Smalley. “If you want to meet people and forge relationships, you can do that — otherwise, it’s just an office. Our approach all along was to build a community inside.”

Brllnt’s symbiotic relationship with WeWork hints at a much larger shift in how we organize work, and where. The startup’s choice of a host was not coincidental. With more than 80,000 members spread across 112 locations in 32 cities worldwide, WeWork represents something new in the annals of the office: a talent pool with the scope and scale of a multinational corporation whose collective brain is there for the picking. Whether it justifies its $16 billion valuation, it’s already one of the biggest beneficiaries of two trends driving the unbundling — and rebundling — of creative work.

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The first trend is how the shared office and the network have replaced the solo entrepreneur in her garage as the incubators for new companies and ideas. “Coworking” didn’t exist a decade ago, and today there are nearly a million people globally working alongside peers who aren’t necessarily their colleagues. Workers in these spaces consistently report making more connections, learning skills faster, and feeling more inspired and in control than their cubicle-dwelling counterparts inside large companies. They also have different expectations from cloud workers content to commute from their couch.

“They want connectivity, they want density, and they want fluidity — the ability to move quickly from role to role,” says Jonathan Ortmans, president of the Global Entrepreneurship Network and a senior fellow at the Kauffman Foundation. “I think all three things lend themselves especially well to shared work environments.”

The second, more powerful trend is the steadily climbing number of freelance, independent, contingent, and temporary workers — more than 53 million Americans at last count, including 2.8 million freelance business owners. Survey research by the economists Lawrence Katz and Alan Krueger suggests that nearly all of the 10 million jobs created between 2005 and 2015 fall under this heading, attesting to the rise of the “gig economy.” This structural change is exhilarating if you’re armed with a laptop, Obamacare, and a high hourly rate; not so much if your family needs a steady paycheck.

This stems from the fact that corporations are quietly hollowing out. A third of the average company’s workforce was contingent or contractual in 2014, according to the supply management firm Ardent Partners, which expects this percentage to rise to 45 percent this year. At the opposite end of the spectrum, solo entrepreneurs have steadily increased spending on freelancers. In 2013 (the last year for which IRS data is available), contract workers comprised 36 percent of sole proprietors’ labor costs, up from 20 percent a decade earlier.

As a result, entrepreneurs have more freedom than ever in assembling talented teams, as Brllnt’s founders would attest. The trick is finding them — then vetting, negotiating with, working with, and ultimately paying them. And this has to happen somewhere — we can’t all be digital nomads.

WeWork and its forerunners literally sit at the convergence of these trends. Rather than going to work at a “job” with your “colleagues” in an “office,” your workplace becomes the local embodiment of what the McKinsey Global Institute has dubbed “talent platforms” — the online exchanges connecting people to projects, talent, and resources. In typical McKinsey fashion, the firm estimates that these platforms — including everything from Uber to Upwork and LinkedIn — could add $2.7 trillion to global GDP by 2025. The next target for disruption is the office itself.

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Why is this happening now? The one-word answer is technology. The slightly longer explanation comes from the economist Ronald Coase and his Nobel Prize-winning work on the nature of the firm. When the “transaction costs” of contracting with talent are high — as they were in 1937, when he formulated his theory — companies hire and compensate employees internally, producing post-war behemoths like General Motors or IBM. But when they’re low and falling, due to the rise of the Internet and the collapse of organized labor, you get 50 million gig workers and counting.

One result is that new kinds of organizations appear — smaller, ad hoc teams that are loosely joined and agile — along with new institutions to support them. This is where companies like WeWork come into play, by adding a physical space in which potential coworkers, clients, and partners can cross paths, and by offering services that make it easier for them to connect.

WeWork, it’s worth noting, is neither the world’s largest office space-as-a-service chain nor the most profitable — that would be Britain’s Regus, worth roughly a third as much on paper. WeWork’s great innovation was to convince companies of all sizes that sharing an office with hundreds or even thousands of strangers was an opportunity instead of a liability. Today, a tenth of the Fortune 500 maintains at least a part-time presence there, totaling more than 11,000 members nominally belonging to the likes of Microsoft, McKinsey, Salesforce, and Dell. Once paranoid, corporate tenants have at last grown comfortable rubbing shoulders in the mix.

Management consultants have evangelized for years about business “ecosystems.” As in the food chain, even apex predators are enmeshed in a complex web of partners, suppliers, customers…and prey. But until the advent of shared workspaces, these relationships rarely manifested in the workplace (unless you were a consultant). Today, you might meet a client or investor while pouring yourself a mimosa; tomorrow, she might invite you to work out of her office.

This is already the case in Holland, where one of the country’s largest insurers has taken the unusual step of welcoming strangers inside. A few years ago, Interpolis partnered with the Dutch free coworking chain Seats2Meet to share spaces within its buildings. The first, located inside its headquarters and furnished with vintage carousel horses, has become a popular outpost for visiting customers, alumni, and curious employees. “It’s a place where my colleagues can meet people from the outside and immediately build something with them,” says Bob van Leeuwen, the Interpolis strategist who conceived the project.

Though it’s fun to imagine your future co-founder might be sitting behind you, most of us can’t afford to wait. Which is why WeWork, Seats2Meet, and others are building their own talent platforms to compete with LinkedIn, gambling that curated propinquity will trump the latter’s size (and degrading signal-to-noise ratio). At WeWork, for example, community managers frequently consult the company’s own social network to assist members in finding the right UX designer — which is how Brllnt met several of its clients. As machine learning and social network analysis tools such as Conspire and Collaboration.ai are brought to bear on these networks, it’s not hard to imagine algorithmic matchmakers spotting these latent connections well in advance.

Because as Brllnt’s co-founders will tell you, the value of shared workspaces stems from face-to-face conversations with your peers. “As we’ve scaled our business, we’ve managed to scale our partnerships” with other firms,” Smalley says. “They’ve given us insight into problems we had to later face.” According to one survey of coworkers, 84 percent had consulted with fellow members, 60 percent had created new friendships, and nearly half (46 percent) had “innovated” in collaboration with another member. Working together makes you smarter.

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One reason startups and soloists are leaving their garages, basements, and office spaces is the increasing strength and ease of digital workflow tools, which make it possible for one to work from anywhere — thus inspiring them to rethink where they should work. Between Slack, HipChat, Dropbox, and Asana, we’re living in the golden age of hyper-intuitive collaboration tools. But what’s been missing are equally intuitive apps for everything else — negotiating who does what for how much, ensuring the work gets done, that deadlines are met, people get paid, and the tax man is satisfied. That’s especially true of tasks unique to partnerships that dissolve as quickly as they form.

As Stowe Boyd, a consultant and futurist who’s worked with Microsoft, Google, and IBM, among others, sees it, most of today’s collaboration tools are outdated, and leave out key parts of the process. For example, “the trickiest part — negotiation — is handled over email or a telephone call and never captured in the project itself.” Building a platform that does all of that while obscuring enough of the underlying complexity to be useful is a lot harder than writing another chatbot.

The largest such network to date belongs to Upwork, the freelance marketplace created from the 2014 merger of Elance and oDesk. With ten million members earning more than $1 billion annually in gross annual billings (of which they tithe 10 percent), Upwork has invested heavily in matchmaking, monitoring, payment, and managing reputations, gradually compressing its average time-to-hire from three days to three hours. “We’re online dating for businesses and freelancers, except we know what happens after they meet,” says Rich Pearson, its senior vice president for marketing. “We know how many people they hired, what skills they actually used, and what their performance rating was.”

Pearson imagines managing “private talent clouds” on behalf of customers who could bring reinforcements aboard with a click, rather than after a background check. (He’d better move fast — Work Market already does this on behalf of thousands of customers, including Walgreens and Cisco.) The idea should appeal to entrepreneurs and corporate behemoths alike.

Deloitte, for example, is building what chief talent officer Mike Preston calls “bench strength” — a thousands-strong reserve of expert alumni, niche talents, and part-timers who can be summoned in a pinch. Given the churn of a firm its size (225,000 people worldwide), Deloitte has taken the enlightened view that its true workforce extends into both the past and future of its present employees.

Then there’s the question of how to provide benefits to pop-up ensembles of workers. TaskRabbit co-founder Kevin Busque is tackling aspects of this challenge with his new startup, Guideline Technologies. The goal is to first radically simplify retirement plans for small- to medium-sized businesses and then untether them from employers altogether. To that end, Guideline has partnered with Vanguard, the low-fee mutual fund company, created its own easy-to-use app, and added a solo 401(k) option in which workers can sponsor themselves.

Another company angling to reinvent back-office functions is Justworks, a New York City-based startup striving to shoehorn the legal requirements of HR into an app. “Our goal is to become the ‘employment layer’ for Americans,” says CEO Isaac Oates. “On top are millions of businesses, and on bottom are thousands of governments. And in between is a spaghetti of relationships.”

Left unsaid: the company that can untangle that — or at least sufficiently hide it — has a multi-billion-dollar business on its hands. Justworks, Guideline, and their many competitors are all chasing the same grail: an Amazon Web Services-inspired model allowing virtually anyone to run industrial-strength HR and accounting from their phones.

For a firm like Brllnt — which relies on Slack and runs on JustWorks — the flexibility provided by these tools has already influenced how, where, and with whom they work. Rather than obviating the need to cram into a fishbowl, today’s business climate made sharing a workspace that much more attractive. Despite the hype, technology didn’t end up killing the office. It enhanced and reinvented it, instead.

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Greg Lindsay is a journalist, urbanist, futurist, and speaker. He is a senior fellow of the New Cities Foundation — where he leads the Connected Mobility Initiative  — and the director of strategy for LACoMotion, a new mobility festival coming to the Arts District of Los Angeles in November 2017.

He is also a non-resident senior fellow of The Atlantic Council’s Strategic Foresight Initiative, a visiting scholar at New York University’s Rudin Center for Transportation Policy & Management, a contributing writer for Fast Company and co-author of Aerotropolis: The Way We’ll Live Next.

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