Economic Lens: Prosperity by proximity – don’t give up on the office just yet

Working remotely may feel comfortable, but Dallas Gislason argues there are some big benefits of being near our peers and colleagues in physical settings.

SIPP Economic lens - Sept 2023
Photo Credit: AntonioGuillem.

A caveat before reading: I realize some readers may offer the “OK, Boomer!” eye-roll as they read this. (I’m actually a Millennial, but that’s beside the point.) Please know, I’m not against your happiness or your preference for working at home if that’s the case. I’m not trying to force you back to the office, either. I only want us all to consider how to build productive, happy teams going forward. The evidence tells us this should involve at least some in-person proximity to other humans!

“Speak for yourself!” he asserted. “I’m an introvert and prefer to work at home uninterrupted! Plus, I’m way more productive there!” 

You’ve heard this before. Maybe you argued. Or maybe you went all in and let your office lease expire in favour of a dispersed team where tools like Slack and Zoom remain your saving grace. Maybe this approach actually works for you, and you find your employees or colleagues happier and more engaged. If that’s the case, good for you for figuring it out. 

But. The evidence tells us that you might be the exception to the rule.

We’ll explore this in a moment. First, let’s look at recent data on remote work. In short, Canada is #1 in the number of days people spend at home, with an average of 1.7 days per week (May 2023 data).

Source: From the Working from Home Around the Globe: 2023 Report released in June 2023. Full report can be found here.

These data may tell us a few things about Canada: 

  • Despite being a resource-dependent economy, our labour market is dominated by the types of service and knowledge work that make remote work possible. 
  • Our workplace culture may be more flexible than in other countries.
  • Members of our workforce have shifting values (less desire for long commutes, perhaps even as a trade-off to team proximity or climbing the career ladder).

Don’t get me wrong — there are benefits to remote work

Leaving the long commute behind reduces GHG emissions and increases valuable time with family or time for exercise (assuming you don’t walk or bike to work, then the opposite might be true!). Long commutes also contribute to lower civic engagement, increase your risk of getting divorced and even contribute to the rate of obesity. Also, according to BCAA, owning a car in BC costs over $10,000 annually. 

SIPP Economic lens - Sept 2023
Photo Credit: Credit: Jordi Calvera Solé.

Plus, our office environments are often not conducive to quiet, focused work. As this Douglas magazine article by Jim Hayhurst demonstrated, the office can be disruptive for certain types of work or people. 

But, benefits aside, doing all of our work apart from each other comes with costs — to us, our teams and the economy too.

The macro effects of proximity

More than 15 years ago, Pulitzer-winner Thomas Friedman wrote a book called The World is Flat. His position was that with the emergence of globalization, free trade and online tools becoming more dependable, the divide between have and have-not nations was about to close. Impoverished regions would get a healthy dose of equality as people living there could now have the same access to good digital jobs as people living in wealthier places. 

SIPP Economic lens - Sept 2023
Photo Credit: Vasyl Dolmatov

In 2023, many years later, how has this played out?

Some developing countries over the early 21st century have modernized significantly — with China and India being the clearest examples. You could also argue that more people can work from anywhere, and you’d be right. If you have the skills to be a digital nomad, you can live anywhere with an Internet connection. This is true. 

However, the phenomenon of a flat world unhindered by geography did not turn out to be the great equalizer. In fact, the world got increasingly more ‘spiky.’ Despite the Internet and free trade, places rich in educated people and capital became even wealthier. Good jobs continued to concentrate in expensive, high-value cities and regions. And people continued to flock to them, too.

This doesn’t appear to be changing. For example, a recent report from the Brookings Institution found that 50 per cent of all postings for “A.I.-related” jobs in the U.S. were based in just six metropolitan areas, with the Bay Area of California dominating. If the world were truly flat, then software and other technology jobs would certainly be the first to go all in on remote, dispersed teams, right? 

So, what exactly is going on here? 

In 1920, economist Alfred Marshall’s agglomeration theory predicted that industries within similar sectors would locate in cities and regions (where even their competitors were located) to receive proximity benefits such as shared labour supply or access to specialized suppliers.

Seventy years later, Harvard’s Michael Porter introduced Cluster Theory, which gained popularity worldwide as metropolitan cities (and entire national governments) attempted to build their own versions of “Silicon Valley” — the most productive cluster in history. By their definition, clusters require close geographic proximity — of firms, competitors, suppliers, and people. The more knowledge spillovers between and among companies occurs, the better. The more specialization occurs within the cluster, the better. The richer the cluster is with established companies, academic research and programs, startups and entrepreneurs, talented personnel, specialized training, etc., the better. 

If you’re launching a growth-oriented, capital-intensive company in whatever sector, there’s no doubt that these knowledge spillovers and other proximity effects appeal to you. Despite being more expensive, this is the advantage of dense, dynamic cities. The benefits are many. 

For talented people, cities remain the greatest prospect for viable career options. Even if you work remotely, you may stick close to the city in case you want to switch it up, or if you lose one gig, you can switch to another. Or perhaps your spouse, social life or hobbies keep you close to the city. 

Combine these two forces: people in proximity to each other and businesses in proximity to each other — and you have an environment with the potential to be creative, innovative and productive. For these reasons, cities will always have higher rates of productivity and innovation per capita than rural or remote areas. 

The case for hybrid-at-minimum workplaces

However, as a measure of productivity (such as GDP/capita), Canada’s economy has been stagnating in real terms, and the OECD forecasts Canada will have the lowest productivity growth out of 32 countries between 2020 and 2030. I worry that a remote-first workforce would further this decline. To counter that, we must be willing to make our workplaces more conducive to success by facilitating the best of both worlds. 

Here are some ideas:

1. Productive collaboration

A Harvard study was released in 2023 on the impacts of remote work versus in-person proximity of software engineers within a Fortune 500 company. Among a range of findings, they found employees who worked in physical proximity not only got better quality feedback on their coding than remote peers, but their turnover rate was lower. This was especially true for younger workers and women.

 These findings are striking because the product of a software engineer is purely digital and can be done remotely. Yet working remotely has clear costs and for some team members more than others. 

A 2022 study by the National Bureau of Economic Research looked at technology startups that worked close to each other. The study found that the closer the companies were located to each other within the same building, the higher the rate of knowledge spillover between the team members and companies. In other words, they could both be aware of and adopt new technologies and processes faster than would be possible by working apart from each other.

Other research (like this one explored by Forbes) has shown the link between the diversity of teams and the rate and quality of innovation. Diverse teams that build rapport, work through problems together and challenge each other (more on this here).

2. Learning and career progression:

My sister works in the communications field and recently received a promotion. As someone who loves and respects her, I know it was 100 per cent because she deserved it. That stated, a few months earlier, she told me most of her teammates chose to work remotely (mainly to avoid the long commute into downtown). But because she lived close by, she would go in every day where it would often be just her and the executive director of their team in the office. They would solve or discuss problems together or engage in impromptu chats over lunch or coffee. 

Now, should that manager have an opportunity to promote one of these team members to a new position, would the fact that one of them showed up in person each day play into that hiring decision? I’d argue the answer, more often than not, is yes. You might say this is unfair, but we’re all biased in many ways. Not only that, but any HR professional will tell you that networking and relationship-building play into finding good jobs. 

It is what it is. I think remote-only workers will lose out on opportunities. And if they’re okay with that, then fair enough. 

There’s also the less understood aspect of career progression of “learning through osmosis.” By being near and around more experienced people and part of diverse teams, we can soak up knowledge that aids in our ability to make better decisions or at least be informed by different opinions and worldviews. Doing this in remote settings will be a difficult proposition.

3. Serendipitous opportunities

This is the most difficult argument to make because it’s hard to quantify serendipity’s role in one’s career and/or business success. 

I’m sure we can all think of examples where we decided to attend an event, walked around a certain corner, or sat up at the bar instead of a table — and something unexpected happened that led to a new opportunity. I can recall several examples in my career: one led to me delivering a keynote at a conference in Goa, India when I was 25 years old. An amazing experience of interacting with peers from 19 different countries that only occurred because I struck up a conversation with the right person at the right time.

The difficulty is that we will never know about the chances we didn’t get when we didn’t leave the house. They simply never materialized and, therefore, are impossible to measure. Only by increasing our “serendipity surface area” will we realize how it works. The pandemic made serendipity almost impossible, and though it can still happen through online chat groups or social media, I think there’s a case for showing up over and over and increasing our chances for real-life happenstance. 

What can we do with this information? 

Induced, deliberate collaboration

I recently spoke with the CEO of a Victoria-based creative agency whose employees work in several cities. He said they intended to let their current office lease expire in favour of a more collaborative environment where their remote workforce can gather monthly (or whenever needed) for the specific purpose of team collaboration and team building. He wanted a space where intensive and enjoyable in-person work could be easily facilitated, and then the team could disperse until the next time.

This “collaborative pulse” might be the ideal future of work. Other teams may pick a day or days of the week where everyone is in the office and going through various projects or even doing team-building stuff (like going out for lunch together or bringing in a guest speaker for a lunch n’ learn). This way, they maintain the benefits of remote work while at the same time being deliberate about the role and importance of collaboration, learning through osmosis and other uses of proximity.

Amenity-rich neighbourhoods and places

If humans are social creatures, then it’s our job to nurture cities, neighbourhoods and places that help facilitate connection. This is why downtowns and central business districts aren’t going anywhere. No other part of cities can deliver social, culinary or cultural assets at scale. Sure, it’s nice to have certain services within walking distance of our homes (this is the case put forth by the 15 Minute City movement I fully support), but many of these services require economies of scale to be viable and won’t work in every neighbourhood.

“Society is no comfort. To one not sociable.” — William Shakespeare

But as our friend Bill Shakespeare pointed out, we are not equally social. Some people truly are more productive and happy at home. And power to ‘em if that’s the case. However, there’s still evidence to suggest their contributions are highly valued within in-person collaborative environments. The key is striking the right balance. 

Caveat after reading

Q: How many introverts does it take to change a lightbulb?
A: Why does changing a lightbulb have to be done together?

See? That wasn’t so bad (the article, I mean. The joke was terrible). I’m not forcing anyone back to the cubicle. I’m only suggesting that collaboration, learning through osmosis (or helping others learn and grow!), and increasing the likelihood of unexpected opportunities for growth or career progression are all essential to healthy, vibrant teams. 

And yes, the introverts are valued and will gain from this teamwork, too. However, it’s up to all of us to nurture environments (and neighbourhoods) that bring these aspects to fruition for all types of people. The best of both worlds is indeed possible.

Dallas Gislason is the Executive Director of Community Economies at South Island Prosperity Partnership (SIPP), the economic development alliance for Greater Victoria he helped found in 2016. Dallas has applied his passion for building resilient and inclusive economies through projects and boards in various parts of Canada, the U.S. and abroad. He’s lived on Vancouver Island since 2010.