covid19

The Great Dispersal: 4 Reasons You Should Move Outside the City

/ Adam Smith / 2 Comments

DISCLAIMER: This article represents my personal views and not those of my employer or any affiliated organizations.

This year we’ll have driven east and west across the country twice. We’ll have visited over 23 states: California, Nevada, Arizona, New Mexico, Utah, Texas, Colorado, Wyoming, Montana, Idaho, Washington, Nebraska, Iowa, Missouri, Kentucky, Wisconsin, Illinois, Indiana, Ohio, West Virginia, Maryland, Pennsylvania, and New Jersey.

On a fateful night in March, immediately after returning from caring for my father (who was fresh out of the hospital) in Wisconsin, New York City was on the verge of a crisis. We narrowly made it back to New York for fear of a domestic flight ban, and here was NYC about to go into lockdown due to the virus crisis. So after just having been told nobody was going back to the office, we packed our bags, gathered as much as we could, and booked a flight to Palm Springs the next morning.

We’ve spent the last 8 months living on the road. It’s not something we’d expected to be doing this year, but it’s a pleasant surprise. I’ve been thinking about doing this for years, but kept waiting for the right chance to work remotely. The only limitation is that we can’t leave the country. So within these 4 borders, we’ve made the most of it.

Joshua Tree, California AirBnB
Yes, that’s me!

A decade of cost of living increases in major metropolitan areas has exhausted urban residents, and often priced out new transplants. Those would-be transplants have settled on more mid-size cities that weren’t so prohibitively expensive. During the crisis, San Francisco has witnessed an unprecedented 35% drop in rent. The most high profile shifts recently have been Elon Musk‘s and Oracle‘s announcements that they’ll relocate to Austin, Texas. Another benefactor has been Miami, whose Mayor Francis Suarez has recently courted VCs from Google, Andreessen Horowitz, and others – ending the week with a discussion on the popular Clubhouse app. As much spotlight as that city receives, however, there are plenty of other areas that are making waves.

A recent U-Haul study catalogued which states their consumer base were making one-way moves to.

The list came out as follows:

1. Tennessee

2. Texas

3. Florida

4. Ohio

5. Arizona

….Continued.

As you can see here, Americans aren’t moving to any one place, and they’re largely avoiding coastal states (sans Florida). Middle America is going to see a boom like it hasn’t seen since WWII. Read more about that in my article “Why Are We Ignoring the Midwest?“.

What Are the Perks?

  1. Cheaper Cost of Living

The pandemic has resulted in an unforeseen real estate boom. Shortly after prices dropped in March 2020, buyers snapped up homes at a rate unseen since before the Great Recession. Note that those were permanent home purchases, not rentals. Mortgage rates continue to drop to record lows, even as we enter the new year. Will those buyers sell their homes and move back to the city when the pandemic is over? Highly unlikely. For the areas that benefitted, they will receive a longterm influx of commerce and development.

The real estate market will always have peaks and troughs, and with the next dip in the market, we may see even more buyers getting in on growth opportunities in those scattered areas. Think of it like an investment in a small, lesser-known company. They’re getting in at the ground level with a lot of upside potential.

2. Shifting Demographics

Any way you look at it, the country is more divided politically and culturally than in recent memory. A historic exodus of urban workers has rewritten the political landscape. This includes largely “blue” liberal urbanites moving to smaller “red” cities and states, as well as “red” conservative rural dwellers moving to mid-size cities with newfound opportunities. 2021 may look a lot more “purple” than any of us realize. And with that will come cultural shifts. We may find that mid-size cities feel a lot more like metropolitan centers, and that metropolitan centers become more focused on suburbs, much like how workers in San Francisco and Seattle have commuted to the outer reaches of their cities for work.

Digital Nomads in Remote Living

3. Decentralized Urban Areas & More Space

The “city center” is going to matter less, and we may see more compartmentalized “cities within a city” as the pandemic tapers out. Recent research has found that many companies realize the loss in time productivity and overhead they experience keeping an office, and mandating workers to take 1 hour-each-way office commutes. I recently wrote an article on the subject, “What Will Happen to Cities?“

With many post-pandemic return to office plans seeking to have no more than 50% of their workforce on-site at one time, that other half of the workforce needs to go somewhere. They’ll spend that time in their home communities, and hopefully will have everything in 15 minutes of where they live — Groceries, schools, shops, healthcare and more. Having a co-working space close to home can provide an in-person meeting space for much more intensive meetings. This can create the physical closeness with clients and colleagues we had before COVID, while providing socially distanced safety precautions.

Joshua Tree, California AirBnB

4. “Work Anywhere” and Live on the Road

Services like AirBnB, Vrbo, HomeAway and other companies were some of the hardest hit by the pandemic. However, they’ve seen a surge in rural bookings. AirBnB’s remote area listings earned $200 Million in June 2020, a 25% increase from the previous year. One of their new slogans is even “Go Near”, emphasizing local travel. On our journey, we’ve stayed in these types of rentals the entire time.

While many have opted for mortgages outside the city, for apartment renters, the practicality of being tied down to a lease is just not there. Why have a set lease for a year, when you can live anywhere you want within the country for months at a time?

Conclusion

Being in a big city isn’t for everyone. Some love it, and will continue to. The biggest development of the past year is that now you have a CHOICE.

• Do you want to live in a big metro like New York or L.A.?

• Do you want to live in a mid-size city with more space to breathe, or for your kids to play?

• Do you want to take a “gap year” and travel without even having to quit your job?

Any of these options are yours. It’s 2021 and the year just started.

What are YOU waiting for?

The Great Dispersal: We’re Never Going Back to the “Office”

/ Adam Smith / 5 Comments

DISCLAIMER: This article represents my personal views and not those of my employer or any affiliated organizations.

If few like the traditional office environment, why would we go back to it?

What even is an office? You go to an office every day. Where are the roots of office culture?

At its most basic parts: “An office is that part of business enterprise which is devoted to the direction and co-ordination of its various activities.” No part of that definition which mentions it needs to be conducted in a physical space.

What’s the future of the office?

Office Culture Through the Ages

The word office stems from the Latin word “officium“. Interestingly, an officium was not a place, but rather an often mobile ‘bureau’, in the sense of a human staff.

Offices began in classical antiquity as part of a large palace or temple. The “chancery” rose in the Middle Ages as a place where most governmental letters and laws were written. In the 18th century, large conglomerate companies first came about, requiring many offices for clerks. Flat-top desks actually began around this time, as a way for managers to easily see activities of employees. By the 1950’s, it became clear that privacy had to come along with discretion, and we got the cubicle.

Workplace culture in the 1950’s was much more hierarchical, and soon cubicles started to be denigrated by workers as “little boxes”, while upper management received the corner offices. That brought us to the “open office” layout, now the de facto standard for major companies around the world.

Pre-Pandemic Office Culture in the 1950's

And yet, “the office” has both positive and negative connotations.

For many people, the office is a separate environment from home, where they can relieve themselves from the pressures of home life and focus on work. Many modern companies also have a fully stocked kitchen with snacks and drinks on-the-house. Some even regularly get catering at no charge to the employee.

You have to live in close proximity to the metropolitan area your office is in. You lose maybe 2, even 3 hours of commuting time on the way to and from work. You have to attend events and office gatherings as well, which you’re not formally compensated for. In doing this, you lose time to see your significant other or kids.

COVID-19 heralds a new era. It represents all kinds of other risks and precautions to be taken. As workers return to offices in 2021, you may see temperature checks, one-way walking paths, assigned seating during meetings, and plexiglass shields everywhere. Simply riding the elevator presents a whole other kind of conundrum.

Offices just don’t make sense anymore.

What Does the Future of the Office Look Like?

Shows like the Jetsons imagined a future where George Jetson went to work in a flying car that fit into a suitcase, to an office where a boss remotely checked in on him via telescreens. While we may not be driving flying cars, they were not too far off with remote working. Unlike the TV show, there’s no reason to micromanage someone OR force them to come into an office. Post-pandemic, it seems common sense that eliminating large office spaces and not forcing commutes creates huge savings in both overhead costs and productivity.

Okay. So What are Some Solutions?

  1. The Home is the New Office: Here’s an obvious one. Many companies are subsidizing office equipment for employees’ homes. Of course, there are certain things or equipment that couldn’t be included there.
  2. Co-Working Space: Companies could keep a shared space for those who wanted to come in. This space could house equipment or services employees couldn’t use at home. Spaces like Convene can be rented out on short notice. There are also reports that furnished apartments are growing in use by remote workers visiting cities.
  3. “Hot Desks”: An expansion on the co-working space idea, hot desking allows employees to use the same space at different times of the day. This could be an even bigger cost savings for smaller companies, in cities where real estate costs are high. Read more on how cities are changing here.
  4. “3-2-2” Work Weeks: Following the themes above, many have advocated for 3 days in the office, 2 days working remote, and 2 days off. In-office staff’s calendars could be staggered to meet office capacity limitations.
  5. Quarterly Conferences (Virtual or In-Person): With “Zoom fatigue” setting in, in-person interactions are still valuable. Every quarter, companies could hold in-person conferences where staff drive in, or fly in, to convene one-on-one about the events of the next quarter. In early stages, the seats could be spaced out and the majority of the time would be spent in breakout rooms. I just attended my first virtual conference, which included group activities, breakout sessions, and more.

 

Regional Segmentation Will Matter Less

When a workforce is spread across the globe, it is important to break it into manageable regions. That is here to stay. However, remote working opens up bandwidth. Workers in North America will share time zones with their South American counterparts. European times are adjacent to African/Middle Eastern times. And Asian times largely overlap with India and Australia. For example: If someone from your New York office takes an extended trip to Bogota, Colombia, they will be on a relatively unchanged time schedule. In a recent article, I laid out the common sense reasons and cost savings to move to the Midwest.

Flexible Hiring & Time Off

Flexible vacation is a growing benefit of many companies. While it’s not truly “unlimited”, as long as you have your manager’s approval, you can take the time off. There’s stats upon stats about how working mothers should not have to end their career because of a pregnancy, but have the best of both worlds: driving their career and parenting from home.

An uptick in temporary maternity and paternity leave policies has also meant a continually shifting workforce. This opens up space to bring on freelancers, or allow colleagues to try new disciplines while those workers are away. It could also open up regional opportunities for, say, someone in Santiago, Chile or Buenos Aires, Argentina to work with a team in New York. There would also be less limitations on hiring outside the major world commerce hubs, for example, in oft-overlooked regions like “Middle America”, “The North of England”, or in Pacific island countries for Asia-Pacific.

Not Everyone Will Want to Work Remotely

There are certain people who will want to come into an office – Parents who need a separate working environment, as well as those who have a small dwelling and need extra space to work, free of distractions. Some people find working remotely to be isolating or disorienting. At the same time, companies are seeing the need to deliver increased autonomy and trust to workers to fit their lifestyle.

Conclusion

Sprawling cubicles of yesteryear are left to “Dilbert” and the dustbin of history. The overhead costs of keeping an office open, and the pain of a commute and daycare for working parents makes ditching the office an obvious choice. In the 21st century, professionals are remote-ready and in-person interactions should be on their time.

The workplace evolved over centuries of history, why should it stop now?

 

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The Great Dispersal: What Will Happen to Cities?

/ Adam Smith / 7 Comments

DISCLAIMER: This article represents my personal views and not those of my employer or any affiliated organizations.

Empty Subway Car During COVID-19 Pandemic

What will happen to cities?

In the wake of corona, New Yorkers and other city dwellers made the realization that “Hey, maybe I don’t need to be at the center of the knowable universe!”. They decided to venture out into what they once deemed “flyover states”. Many remember when Brooklyn was perceived as “unlivable”, only to be brought to the top of hype in the 2000’s. New York City has suffered many “deaths” over time – The 1977 blackout, the 1987 recession, 9/11, the Great Recession, Hurricane Sandy… take your pick. Depending who you ask, New York City has come back from the dead so many times it’s not worth counting. I’m not here to talk about that.

Major metropolitan areas will still exist in a post-virus world. They will, however, be changed significantly. Cities will be less centralized, a trend that has been going on for decades. They will not just have to welcome a global workforce that wants to move there, but will be subject to that workforce’s demands. Physical place will take little importance to how business is done. I wrote an article on this migration earlier this year. Many will leave metro areas entirely, in a trend we could call The Great Dispersal.

Empty Restaurant during COVID-19 Pandemic

The “3 R’s” (restaurant, brick-and-mortar retail, and commercial real estate) industries have taken a tremendous hit during the virus:

It’s highly unlikely big cities will continue with their current state: Sidewalk tent restaurants outside of actual restaurants, retail stores acting as proxies for e-commerce, and giant skyscrapers sitting empty.

Where Do We Go From Here?

Restaurants

For the immediate future, we will have to find a way to sustainably accommodate dining. It should be more comfortable, not outside, and enforce compliance. This could involve the use of “lampshade” pods which block transmission of droplets, do not require the user to wear anything, and don’t interrupt the dining experience.

Ghost kitchens which offer no in-person counter and only receive takeout orders have become popular. They also cut down on front-of-house overhead for restaurants’ famously razor-thin margins. This may mean that workers get their food from a restaurant, and eat it somewhere else – Such as a park, or other socially distanced environment.

Retail

Brick-and-mortar stores may begin to embrace their function as carry-out centers. Retail stores, especially big box retailers, are already functioning as reserve stock rooms for their e-commerce properties. While most entrances are automatic (foot pedals could help), many consumers are uncomfortable with having to grab products that other customers touch.

We could see checkouts functioning much like layaway counters to eliminate this. Employees bring items to you, and there is little need for the aesthetic gleam of restocking, store displays and shelf-facing.

Real Estate

As office buildings in major metros sit empty, many are proposing a conversion to mixed-use functions, living spaces and other purposes. I witness this in my neighborhood of the Financial District, Manhattan – Where old bank towers were successfully converted to high-rise apartments. NY Governor Cuomo recently reviewed a proposal to do exactly that in Midtown Manhattan.

Suburban low-rise offices could turn into hospitals or living spaces as well. These residential conversions could finally start to fill the need for affordable housing. If you’re from New York, this may be shocking. Nobody expected this much housing inventory to open up, when we constantly hear about housing lotteries and lack of space.

Times Square Empty during COVID-19 Pandemic

Conclusion

The virus may last a long time. We’ve seen in 2020 that economies will not stay locked down forever, and will adapt. We could see a post-virus transition sooner than we think. There is opportunity in crisis. The world will go on. As with all crises, this too will end.

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Why Are We Ignoring the Midwest?

/ Adam Smith / 9 Comments

DISCLAIMER: This article represents my personal views and not those of my employer or any affiliated organizations.

A 2012 report from the United States Census put the population of the Midwest at 65,377,684 people. As of 2019, the U.S. population is projected at 328.2 Million. If we go by that figure, the Midwest represents at least 20% of the U.S. population. So why are we so uneducated about it and its populace?

This summer, I will have been on a road trip through many states in the Midwest: Nebraska, Missouri, Iowa, Illinois, Wisconsin, Indiana, Ohio. Many events have unfolded around Minneapolis, Minnesota the past few months. As of August 17th, 2020, Milwaukee, Wisconsin played host to the 2020 Democratic National Committee – The city where I was born. But due to the virus crisis and other circumstances, Milwaukee has largely been left in the dust.

When you think of the Midwest, it probably conjures up familiar images. Wide open fields. Little population. Few jobs. Low diversity.

That may be true of some parts, but that’s largely not representative of the cities. We’ve had intense waves of migration both from other U.S. regions and internationally. We host refugee programs and international students from around the world, who permanently resettle in the Midwest. For instance, Minnesota and Wisconsin play host to large Muslim and Hmong communities, among many others. Midwest cities have the same varied demographics of any major city. This map hints at just how diverse our country is.

“Many Rust Belt cities have minority populations that statistically outpace those in other parts of the country. The largest per capita Muslim population in the United States is here, in Dearborn, Michigan. With so much emphasis placed on the manufacturing sector, many overlook the largest employers in the region: hospitals, retailers, and institutions of higher education. Of the handful of cities in the United States that support an Orthodox Jewish population, many are in the Rust Belt. A century ago, the region’s cities were often populated primarily by non-native English speakers. For example, in 1900, over 75% of the residents of Cleveland, Ohio, were foreign-born or first-generation immigrants.”

“To sum up such a diverse region with a few adjectives, or a rags-to-riches story of exceptionalism with a message of individualism at its core, is both misleading and dangerous.” – ‘Our Collective Ignorance about the Rust Belt is Getting Dangerous‘ – Time

The “Rust Belt”

When hearing about the Midwest, you’ve probably seen an image like the one above in Detroit. Most of us have heard the story. The Midwest was the jumping off point for the drive westward, during the “Gold Rush” and the “Oregon Trail”. Industry prospered during the Industrial Revolution, and gave way to a manufacturing boom up to the 1960’s, when everything went bust. Michael Moore’s “Roger and Me“, coverage of Flint, Michigan‘s water crisis, and reports of Chicago’s crime rate have chronicled this ad nauseam. Now write that image out of your head.

There’s more to the region than that in 2020, even if there’s plenty of truth to the “Rust Belt” story. While the factory boom of the 1950’s gave way to population loss in the 1960’s – Those factories are being repurposed and reused.

The documentary “American Factory” on Netflix is a great case study in this. It chronicles the purchase by a Chinese company of an old GM plant, which they then staff with both American workers from Ohio, and Chinese workers from their headquarters. It’s not all roses though, as the two cultures have heated dialogues and even a union strike. Yet, both of each groups’ humanity shines through. In Wisconsin, we almost saw a similar scenario with Foxconn opening a plant there, attracted by tax incentives. However, closing the deal proved difficult, and it eventually didn’t happen.

Maybe the most telling tale of the Midwest economy, though certainly not the only one, is J.D. Vance’s “ Hillbilly Elegy “. In this autobiography, Vance describes his journey from abject poverty in Kentucky and Middletown, Ohio to graduating from Yale. He talks about the difficulty of adapting from a humble, yet heart-wrenching childhood upbringing to the highbrow cultural motifs of the Ivy Leagues. A childhood plagued by poverty, drug abuse and despair amongst his community, and a sense of being “stuck” where he was.

Though a first generation collegiate, going to college was looked down upon. He had to change the way he talked, how he thought about money, even his table manners. Vance knows so many people on the bottom rungs of social advancement undergo this struggle to assimilate to “professionalism” while maintaining the humbleness or scars of their upbringing. Yet, he’s very level-headed in his viewpoints on helping more people follow the path he did.

Now, audiences of Midwesterners and East Coasters alike listen to his bottom-to-top story. Vance recently founded a Venture Capital fund to literally invest in Midwest businesses. He also became an advisor to Rise of the Rest Seed Funds, which “invests in passionate entrepreneurs that are based outside of Silicon Valley, Boston, and New York City.”

Relocation of Infrastructure

There are also many Midwest investor groups specifically focusing on Black, Latinx, Indigenous businesses. The Midwest Investors Diversity Initiative, “ a coalition of investors, is dedicated to increasing racial, ethnic, and gender diversity on corporate boards of companies headquartered in Midwestern states”. Black Midwest Initiative is a “committed to advocating for the lives of people of African descent as they are situated throughout the Midwest and Rust Belt regions of the United States”. The Illinois Hispanic Chamber of Commerce, “connecting the vibrant Hispanic Business Community of Illinois”. It hosts LatinX Incubator, which seeks to grow the pipeline of LatinX entrepreneurs contributing to the Chicago innovation economy.

Are We Talking about the Positives?

Cost of Living

This video snippet, “Why government agencies should move from D.C. to the Midwest” makes a very clear case. The once robust infrastructure in Rust Belt cities saw massive mid-century population losses once big companies shut down or moved away. These cities are built to be twice as big as they are. They have international airports, public transit, a well-built highway system, even sports teams and performing arts centers. If these government organizations were to move there, they would lower their overhead, gain access to large talent pools, and bring down cost of living in their home cities on the East Coast.

Smart People

With COVID-19 changing the way people work and live forever, expensive coastal cities have lost their sheen. Midwestern cities represent the perfect foundation for remote work. with less expensive homes, conveniently located resources, and not nearly as much urban congestion. Unlike the Great Recession, where people including myself moved to big cities like New York — We may see the opposite happening post-COVID. Let’s call it the Great Dispersal.

There has been all kinds of innovative new businesses opening around the Midwest. One example: Sherman Phoenix blossomed in Milwaukee’s Sherman Park neighborhood after 2016 civil unrest over a fatal police shooting that rocked the community. The space reclaims a former BMO Harris bank damaged in the unrest. It now hosts 27 Black-owned businesses, community events, and supports transforming shuttered buildings to functional spaces.

Remote Work

The Midwest has some of the top universities in the country. We are historically renowned for our educational institutions. Northwestern, Notre Dame, and the Big 10 (University of Chicago, Purdue University, Michigan State University, University of Wisconsin — Madison and others). While physical location may not be as important in the new paradigm, having many well-educated people clustered in one area is. And while the Midwest has lacked the high-flying jobs of the coasts, many aspects of collegiate jobs are now global.

There’s a cluster of very smart people looking for more opportunities. Some of them have relocated to the coasts, like myself, going up against the cadre of elite schools and finding themselves up against stiff competition and generational pedigrees. However, many have stayed in the area, and helped it blossom. Both of these groups are just looking for meaningful investment in their ideas.

How Can You Help?

One interesting highlight of this was the documentary Generation Startup. The film profiles 6 recent graduates as they undergo the challenge of creating startups in Detroit, Michigan. I attended the screening 2 years ago, and met all these bright young people. While occurring pre-COVID, it shows how much easier it is to be an entrepreneur when you’re not paying most of your income for an apartment in NYC or San Francisco. It also enables entrepreneurship from economically challenged people, not requiring the nest egg that big cities would. According to Crunchbase, Midwest startup exits generate 5.17x the median multiple vs. other regions.

In the time of COVID, remote work has become the norm, for the foreseeable future. Many companies have realized substantial cost savings with their staff working remotely — No need to stock office kitchens, lowered electricity usage, and in some cases, they’ve let their office leases expire, becoming a completely virtual workforce. There’s no longer a need for “location bias” when it comes to work that can be done on a computer. And with distributed workforces comes service economy jobs and more.

So, Milwaukee was good enough for the DNC. The Midwest was good enough to hold America’s 3rd most populous city. Midtown Manhattan is a ghost town.

Remote work is here to stay.

The “Great Dispersal“ is spreading professionals around the country.

Are you ready to hire a Midwesterner?

Are you ready to relocate your office or home to the Midwest?