Could a remote-work revolution spread tech outside its clusters?
Steve Case and other proponents of creating new technology hubs see hope, but they say the status quo may put up a serious fight.
Where will the next Silicon Valley rise? Champions of spreading tech opportunities into new hubs believe the coronavirus-driven shift to remote work could boost their efforts — as long as the crisis' economic ravages don't set them back even further.
"Every company is distributed right now," said Patrick McKenna, an entrepreneur and investor who sits on the board of One America Works, which has helped bring tech jobs to Pittsburgh and is expanding its efforts to other cities. Today's involuntary work-from-home revolution, he said, will spark so much innovation that "Zoom is going to be like the Flintstones a year from now, I promise you. Quote me on this."
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About three-fourths of business executives said in a recent Gartner survey that they expected to shift some jobs to permanent remote status. Meanwhile, LinkedIn's latest workforce report showed a 28% increase in March in remote job postings. Firstbase, a startup that helps set up remote workers, has seen its waitlist grow from 600 companies in early March to 1,250 as of mid-April.
"Anecdotally, we're hearing that large companies are definitely going to persist" in letting employees work remotely, Firstbase CEO Chris Herd said. "It's going to be such a massive market."
The trend could become part of a greater tech expansion from places like the Bay Area, Seattle, New York and Boston — the regions that attract the most venture capital funding — to areas like the Midwest and the South. That could spread economic opportunity, gather more diverse talent, and possibly soothe some of the problems that have come with industry concentration, such as sky-high housing prices, unbearable traffic and income inequality.
But those outcomes are no guarantee. Other backers of the push to build new tech hubs, such as AOL co-founder Steve Case, note that the economic effects of the pandemic are hitting smaller companies harder. That could entrench the power of the big tech companies with firmly established bases.
"Employees could become a little less enthusiastic about startups, as opposed to working at a [bigger] company that just seems safer," Case said.
Google this month bought more space in San Jose with room for nearly 3,000 workers. Amazon recently bought an office building in the East Bay that could hold at least 1,000 employees. It's unlikely the big tech companies will move many employees out of their towers and campuses.
On the other hand, smaller companies that survive the crisis amid major belt-tightening may give more serious consideration to hiring talent outside the Bay Area and other tech clusters.
McKenna said that's important if the United States wants to solve an opportunity gap that he said factors into the country's larger political and cultural divides.
"If someone graduates from the University of Pittsburgh and moves to Silicon Valley, they have more opportunity. That's just a reality we all acknowledge," he said. One America Works' mission, he said, is to make it possible so that "everybody can win by accessing talent you need in the right places."
Revolution, Case's venture capital firm, is trying to do the same thing. Its "Rise of the Rest" fund has invested in more than 100 companies across the nation in a range of industries. Case, who co-founded internet pioneer America Online in Virginia in 1985, has backed rising cities where, he said, people can find a "quality-of-life benefit, if you prefer a place with a tighter community, where it's easier to get around and easier to buy a house."
Case thinks it's too early to tell whether this "shake-the-snowglobe moment" will meaningfully change the geography of the tech industry. But he hopes the crisis has a "boomerang effect," with many people who moved from someplace else to Silicon Valley reconsidering where they'd like to live.
Maybe now's the time for tech workers to go back to where they grew up or went to school, he said. Because people are forced to stay home and have more time to reflect on their lives, "more of those conversations are happening now."
Then again, Case said, the economic doldrums might spur venture investors to keep the funding spigots flowing only where they already are: in the valley and a few other interconnected places.
"The seeds have been planted and continue to be the roots of our innovation system," said Patrick Kallerman, research director for the Bay Area Council Economic Institute, a pro-business think tank.
"Silicon Valley has a unique culture," said Marina Gorbis, executive director of the Institute for the Future, a nonprofit think tank. "A lot of immigrants came here to innovate. There's a whole infrastructure of networks. It's hard to re-create that on the same scale."
The Valley has proven to be resilient before, bouncing back from the dot-com bust and the recession that followed, and from the Great Recession several years later, said Rachel Massaro, vice president and director of research at Joint Venture Silicon Valley, a San Jose nonprofit that analyzes the region's economy.
"The region has dealt with large impacts and we have recovered," she said, "but they changed the way things were. There will be winners and losers."
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Those who study tech hubs and the effects of industry concentration, like Mark Muro, senior fellow and policy director of the Brookings Institution's Metropolitan Policy Program, said as well that winners will emerge from today's shocks — and they are likely to be tech giants.
Though "new habits plus new fear may allow some dispersion" in the tech industry, Muro said, he takes a pragmatic view. Huge companies with plenty of cash could buy distressed assets. "Do we in a year start seeing a lot of acquisitions by Google, Microsoft and Apple?" he asked. "Because we're going to see a collapse of other businesses."
Nicholas Bloom, a senior fellow at the Stanford Institute for Economic Policy Research, who has studied working from home, said the widespread move to telecommuting could mean a realignment in where people choose to live, whether they try new states or simply new counties. Employees who flocked to high-priced cities to be near their jobs may want to move to the suburbs, he said, adding, "The downtown San Francisco real estate market will get killed."
Lauren Hepler contributed reporting.