“We have introduced so many frictions to people’s lives by forcing them to move.”
Prithwiraj (Raj) Choudhury, the Lumry Family Associate Professor at Harvard Business School, studies the future of work — specifically the changing geography of work. What happens to cities, to immigration policies, and to issues around gender equity when more companies let people work from anywhere?
Choudhury earned his doctorate from Harvard, has a bachelor’s degree in computer science from the Indian Institute of Technology, and an MBA from the Indian Institute of Management. Prior to academia, he worked at McKinsey & Company, Microsoft, and IBM.
For more on Choudhury, go to HBS.edu or follow him on Twitter (@prithwic).
The full episode transcript is below.
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(Intro Music)
MATT MULLENWEG: So here we are. It’s been more than three months into this global transition to remote work. And let’s be honest, a lot of this has been difficult and exhausting and even for folks at Automattic, who have been doing distributed work for 15 years, it’s quite different when there is a global pandemic and economic uncertainty everywhere.
But there have been a ton of positives too. I’ve heard from many friends who are working in knowledge-worker roles and they’re saying “I never want to go back into a full time office,” particularly with the restrictions that these physical offices are probably going to have. So they’re seeing benefits in their productivity, their lifestyle, and their connection with their families and their life. So there is uncertainty but there is also opportunity.
Today I am excited to speak with Raj Choudhury, a professor at Harvard Business School, who is focused on questions around the geography of work and the outcomes of mobility on productivity. He has studied this question very closely and I was excited to find out what he has learned. So welcome, Raj.
RAJ CHOUDURY: Hi Matt, thanks for having me.
MATT: Oh it’s a real pleasure. What brought you to study all this?
RAJ: So I’ve been studying essentially the future of work, but the topic I have been studying for a long time is geographic mobility. So that includes studying both cross-border migration but also what happens to productivity when people move within the same country.
And as I was doing that research for the past eight, nine years, I discovered that there are lots of reasons why people do not move. So yes, there’s productivity benefits when they move but there are tons of reasons we have immobility. So the obvious reason would be immigration, but dual careers, even the cost of living, which might be super expensive in a place like Silicon Valley, might constrain geographic moves.
So as I was doing that research, I was thinking of solutions to that problem. And then I stumbled upon that U.S. Patent Office experiment with letting people work from anywhere, which would presumably solve this problem of trying to move people to Alexandria, Virginia. So that’s how I arrived at this topic.
MATT: And people moving for work in the U.S., I have heard it’s gone down actually over the past 20 years or so.
RAJ: That is correct. So we are in this era of not only people moving less within the country but also internationally. We just have all these constraints on immigration not only in the U.S. but it’s tightening in many parts of the world. So the other great example would be what’s happening with Brexit and what it means for the talent coming from continental Europe. Yes, so I think we are in this phase of immobility on the rise.
MATT: So here’s where I say something random I’ve heard and you can tell me whether it’s correct or not. I’ve heard part of the, one of the hypotheses for why in the U.S. mobility was going down was double-income houses. So it was harder to find two new jobs in one city versus one new job.
RAJ: That’s true. And there is also research done by other colleagues, not me, which has shown that in those dual-career situations, Matt, it’s typically the wife who is the trailing spouse. So women have made disproportionately greater sacrifices in dual-career situations. And that’s among many of the reasons why I am super excited about working from anywhere.
MATT: Because even if one spouse can get that flexibility, they can maintain. If one spouse has it and one spouse doesn’t, they can still move, because one of the jobs is not geographically constrained.
RAJ: That’s true. And one of the subpopulations that I’ve been working closely with for whom this is a huge deal is military spouses, because they just have to constantly be on the move. And now they don’t have to experience a break in their careers. So I think that group and many other groups have been tremendously benefited with work from anywhere.
MATT: That’s awesome to hear. Because if we get this right it benefits so many people’s lives.
RAJ: Correct, yes.
MATT: These past three months I don’t think any of us would have predicted, but it must be a boon for your data collection and research. So what has happened that you found surprising or unusual or heterodox?
RAJ: Actually I would argue that these three months are such an anomaly. This is not normal work in any way. Even under normal, remote work, you are not having to homeschool kids, you’re not prohibited from going to the gym, you’re not stressed out because of people being sick in your family. So I feel that this will be less relevant for research in terms of driving generalizable findings.
So what I’ve been doing is I’ve been studying work from anywhere years before the pandemic and I feel once we come back to a more, quote/unquote, “normal” situation it will be, again, fun to see what happens with which companies and which workers stick with remote work. I think that is something I’m super excited to study going ahead.
MATT: Yes, there have been a ton of announcements already — Stripe, Shopify, Facebook, Square, Twitter. Is there anything coming out of that? Are we seeing more mobility from their employees or any early indications? I know it’s too early to see big data but…
RAJ: Yes. I think there’s been tons of very exciting announcements. And I can tell you about one project which I am personally working on very closely and that relates to TCS, which as you would know is the largest IT service company headquartered in India. I hesitate to call them an Indian company because they are truly global. They have 500,000 employees, they have three campuses in China, they have campuses in the U.S., they have a campus in Hungary and of course tons of campuses in India.
And what they did in the past six weeks was the CEO made an announcement saying that 75 percent of their workforce would become remote in three years. So that is one situation I am working closely with because this… It’s probably four to five times of Facebook and they have built all these campuses and for them now to go 75 percent remote, I thought that was super interesting in terms of the challenges they have to overcome and the change in the processes and the culture and whatnot.
MATT: One thing I heard from other companies when they worked with partners in India that had offices, it was harder for people to work from home because they might not have the home setup which is as productive as the office, meaning literally internet, power, etcetera. Have you come across anything like that?
RAJ: So I feel that’s still true in parts of not only India but parts of emerging markets. But I feel with now better fiberoptic connectivity and all the transitions… In the case of India, just this one single Reliance Jio sort of proliferation has increased internet penetration and speeds tremendously. So I feel that is less of a concern now.
And just given the tradeoffs. So I was speaking to a group of TCS employees and many of them said they will now leave large cities, like Chennai, and move back to their native villages because that’s where their family lives, that’s where they really want to live, given a choice.
MATT: We ran into this in South Africa. We bought a company based there and a lot of people would want to go into the office, it was just much harder to get fast internet at home, like it was maxed out at DSL. I even had a colleague outside of Austin that ended up having to put a tower on his property because he’s a little more in the country and there wasn’t a good wired service. So he had to move to some point to point wireless.
When you think of the hierarchy of distributed work, internet is probably the base. It’s like the oxygen in the room for getting that.
RAJ: Sure.
MATT: I’m curious if wireless will be able to support mass people doing high bandwidth things at the same time. It’s definitely scaled far beyond what I would have imagined. But we shall see.
RAJ: Yes, you’re right. But the way I think about this, Matt, is not only internet and wireless but it’s also the host of other services that remote workers would need, including schooling, good quality schools, healthcare. But I feel it’s a chicken and egg. So my conjecture, my belief at least is if large numbers of people experience a reverse brain drain and move back to middle America or move back to smaller towns in emerging markets, those services will follow.
So the other project I’m working on right now is with Tulsa Remote. So Tulsa Remote, as you might know, has been —
MATT: Yes, I just blogged about that.
RAJ: Yes, so I’ve been working with them and it’s been a super interesting situation to study from many, many perspectives for me.
MATT: Do you want to talk about it really quick for the podcast listeners?
RAJ: Sure. So Tulsa Remote started about two and a half years back and the intent was to bring remote workers to live in Tulsa, Oklahoma. So they offered, as an incentive, $10,000 to each person moving. And these were people moving from the coasts, from Houston, Texas, and they would be all working remotely. And what they keep saying…
So, as I did all this work over the past few months, they keep saying that $10,000 is just the starting point for the discussion to begin. So no one would move their family and their lives for $10,000, they would move for other reasons. And one of the reasons might be it’s cheaper to raise a young family in Tulsa, Oklahoma. Or you are the kind of person who wants to really contribute to a city which desperately needs to think about diversity.
So they have been extremely successful. They moved I want to say about 200 to 250 people in the past. And this is all pre-pandemic. But they got like thousands of applications.
MATT: Wow.
RAJ: And the applications were extremely diverse. They were people from all parts of America, all races, and a large number of women who moved. And the wonderful thing that it did was in choosing who should come they involved the Tulsa local community. So there was actually a wonderful event that they organized where community members voted with Post-Its on applications just to make sure that these guys coming in would feel welcomed by the community.
MATT: That is pretty cool, although I don’t know why you’re taking people from Texas. [laughter] I’m in Houston right now, actually.
RAJ: Yeah.
MATT: One of the big fears that people have for distributed or remote work is that people will not be as productive, like if they’re not in the office how do I know they’re working. What have you found there so far?
RAJ: I think that’s one of the fears. So I feel the setting that I studied extremely carefully was the U.S. Patent Office setting. So there actually the benefit was that productivity was extremely objectively measurable. You knew to almost the day how many patents were being examined by each patent examiner, so shirking was less of a concern. But I can see that to be a general concern in many settings that people will just shirk and there will be free riders on teams.
The other concern I have… and I don’t think people will explicitly state this… but managers seem to have this expectation in many cases that their questions… they’ll tap a shoulder, ask a question, and people will respond in the minute. And I feel the change in mindset, which is critical, so as I studied there all-remote companies such as Gitlab and Zapier, the realization I had again and again was you will not get an answer right away because people might be in a different time zone.
So you need to move towards asynchronous communication, put your stuff on Slack, and then just trust that people will wake up and answer your question. But I don’t think that’s an easy habit to change. And you might have a perspective on that given your experiences. But I feel the fear of shirking and giving up that freedom or that flexibility of letting people answer two hours after I posed the question would be the two biggest changes in habit.
MATT: Yes. I think that if you can unlock that asynchronicity it’s really, really powerful for organizations. But it is an adjustment, particularly for managers. Shirking, I think that you have the problem that people could do less work but then it’s easier to see because you have solved the problem for people who would do everything that looks like work in the office — they look professional, they show up at meetings, they ask questions but weren’t actually producing anything.
RAJ: Correct.
MATT: Which I think is maybe a larger epidemic in the professional world.
RAJ: Yes.
MATT: Where a lot of people do the things that look like work but aren’t actually contributing to your bottom line.
RAJ: Yes, yes, you’re totally right. I feel especially… If the productivity measures are objectively defined, I am sort of like… You know, many people have asked me in the past few weeks what do you think about surveillance, putting automated software on computers. And I keep thinking that is a horrible idea, that has to backfire. I feel yes, you need some productivity measures that are objectively defined but you totally need to trust people, your colleagues, your subordinates. That trust is going to be a key part of the culture of being a remote organization.
MATT: Do you yourself work distributed with your team?
RAJ: I do, yes. So I have been doing this even before the crisis and I still have to be physically at Harvard while teaching but who knows, maybe in a decade that will change as well.
MATT: Yes, are classes going to be reopening there?
RAJ: We don’t know yet. I think there will be some hybrid form is my expectation but I don’t know. I’m going to teach in the spring, which might be different from the fall, so who knows.
MATT: That will be interesting to see. So much of the value it seems like from these higher institutions, especially the super prestigious ones, comes from people being together.
RAJ: Correct. But I think the general principle… And that collocation argument can be made for any organization, right?
MATT: Mhm.
RAJ: And before I stepped into the world of Gitlab and Zapier and Seek, my prior, like many others, was that this can work for certain rules, so maybe if the person is working independently, for coders and designers this might work, but then working with Zapier and working with Gitlab and working with Seek, I have come to realize that this can work for any role, any level of the hierarchy, as long as you have the supporting organizational processes and the culture baked in to support this.
MATT: What do you think the macro economic implications are for this new way of working?
RAJ: I think about that all the time. And especially, as you probably would have realized by now, the form of remote work I am most excited about is work from anywhere. So it’s not the work from home that is being forced on us right now. So in work from anywhere once again you can choose where to live. So you can relocate to a smaller town or to your country, back to your country, or even to a rural area.
And you might work from home there or you may actually work from a co-working space. So the Tulsa Remote people are actually offered a co-working space in this facility in Tulsa that is called 36 Degrees North. So you could choose to work at home, that’s totally cool, but you don’t have to.
So when I think of work from anywhere, I feel there are lots of very, very interesting macroeconomic implications. First, you will experience a reverse brain drain coming back to the smaller towns of middle America and back to the emerging markets. We will see urban decongestion. So we’ve been predicting two and a half to three billion people to live in the cities, maybe we will actually see half of that. And once the white collar folks move back, there has to be blue collar folks who are incentivized to move back too because there’ll be more construction in these smaller towns, there will be more services in the smaller towns.
So the climate outcomes, the urban congestion outcomes, you can just think about all the second-, third-order effects. And I feel that is the thing that really excites me about the phenomenon.
MATT: Yes, the blue collar work moving seems to make sense, right? I imagine it’s not called trickle-down economics but is there an academic term for when people move back and start injecting their salary back into the local economy?
RAJ: Yes, it’s a classic multiplier effect. So once enough white collar people move back there’ll be construction, there’ll be all kinds of needs for restaurants, and healthcare workers and everyone else. And then what might happen is that this urban mass migration that we have seen with… not only in the U.S. but worldwide… and some of the cities in the emerging markets are really, literally breaking at the seams.
So if you go back to my home town of Calcutta or Taka or Bangalore, it takes three hours to get from point A to point B, which is ridiculous, right?
MATT: Wow.
RAJ: And with all kinds of negative externalities on climate outcomes and whatnot. Water — water resources are just like completely out of proportion in those locations. So I feel once enough people, the white collar force, moves back, the blue collar force will not have to leave those smaller towns or the hinterlands of those smaller towns.
MATT: And is that because these towns, or these cities in emerging markets, grew up too quickly versus where in the U.S. they were able to grow over hundreds of years and build more infrastructure along the way?
RAJ: That’s partly one. But I also feel, just given the dynamics of what I would call agglomeration economy, something that Ed Glazer and Enrico Moretti at Berkeley and others have studied, there was almost a gravity pull towards these extremely large global cities. So Bangalore got identified with the IT service industry, Delhi with the NCR region, with call centers. The same thing happened in Manila, the same thing happened in multiple Chinese cities.
So I feel once we now let people choose where to live, especially if a large number of millennials start not moving to the cities… And the other interesting thing about millennials is this global… the globe-trotting that goes on with the digital nomads. So if we see enough of these complementary phenomena, then we’ll see less congestion in the cities and then the blue collar work doesn’t have to move to the city and live in terrible conditions in the slums.
MATT: Sometimes I wonder as well if we’re seeing a homogenization of cities where cities are starting to look more like each other than they do the more rural areas even surrounding them.
RAJ: Correct.
MATT: Because there is this kind of like global culture that much of the economic growth has been concentrated in. I have heard it called the Airbnb aesthetic, [laughter] the exposed brick, the Edison lightbulbs, the open plan seating. But that was all in an environment that really rewarded people being physically proximate as one of the benefits.
RAJ: Yes.
MATT: And that was already under I feel like attack from an academic point of view, meaning that open plan offices appear to be less productive than when people had privacy, or private doors, and now it’s under attack from a biological point of view, where now that has an increased risk from something like a coronavirus.
RAJ: Correct, yes.
MATT: Interesting, interesting. You mentioned Ed Glazer?
RAJ: Yes.
MATT: Who are either your colleagues or people doing research in the field that you think everyone in remote work or distributed should know about that they don’t?
RAJ: So I guess the thing is remote work was so out of the paradigm of mainstream prior to this crisis. There has been research of course, so Batia Wiesenfeld at NYU has been studying remote work, Ravi Gajendran at the University of Florida has studied remote work. There is a very, very good paper by Nick Boom and colleagues at Stanford where they looked at this Chinese call center. There was an actual experiment there where they measured productivity before and after working from home. And then we, I did the work with the U.S. Patent Office.
But I feel the field academically is probably still at very, very early days. And now I see tons of people joining the field, which is great, so I’m super excited about that.
MATT: What would be most helpful to your work? You probably have dozens of CEOs listening to this as distributed companies.
RAJ: I guess what I’m super interested about is whether this crisis… I will tell you what I’m not excited about, Matt, and then I’ll tell you what I’m excited about. I know a lot of academic energy is being spent trying to understand whether productivity will dip or not dip in these three, four, six months. And I feel that is an exercise which is not very helpful because once the crisis is hopefully behind us soon, we will not be in a crisis anymore, so why do we want to generalize the findings from a crisis? And just my prior productivity is going to dip.
And academically the thing is studying remote work now is confounded, as we say in economic parlance, by the stress and the lack of child care and the lack of separation between the work life and the family life. What I am much more interested about and excited to study with anyone who is interested is whether this crisis acts as a turning point for remote work and especially work from anywhere to move from an HR discussion to a CEO discussion.
And with others like the TCS CEO, like Facebook, like the companies you mentioned, whether CEOs start thinking of work from anywhere and remote work as a device to hire talent globally… So now I could hire folks from Iran who will never get a visa to come and work in the U.S., or this might be a great way to engage Chinese talent, which is going to get a lot of pressure from immigration going ahead. Whether this would be a great way to bring more women back into the workforce or make them more productive. So I feel those discussions are really, really cool and I am happy to engage with anyone who wants to have that discussion.
MATT: I am also really excited about that. Also for Automattic we are doing it with global pay equity. So we’re not discriminating on the basis of geography and the pay, which I think also opens up a lot of opportunities for all of those places you just mentioned. Although I think Iran and China are.. happen to be places where it’s difficult for us to hire because of the firewall in China blocks most of our services, and I think there’s some sanctions in Iran.
But we have folks in 77 countries otherwise and we try to keep people in the same ranges regardless of what geography in the U.S. or internationally, we think same pay for same work. And that could inject a ton of economic opportunity into places where there’s been less with the way the economy has developed so far.
RAJ: No you’re totally right. So I’ll make three quick points. So the first thing I’ll say is that I’m seeing a lot of opportunities and business models development where Canadian startups, and I am actually working very closely with one of them, they are trying to arbitrage this current impasse with the U.S. immigration system. Because what you can do in a near shore center in Vancouver or Calgary or Halifax is essentially take the people who are getting rejected for U.S. H1B [visas] or a green card, put them in Canada, and they get expedited visa processing there and then they can just work remotely for whichever tech company they used to work for in the U.S. So that’s the first thing.
The second thing is, of course as you said, now it’s not only Canada and the western coast of Canada, now you have the ability to hire talent in Kenya, in northern Scotland, in Bangladesh.
So actually I’ll tell you about Bangladesh. I visited that country last year and I asked a group of CEOs, god forbid if the textile sector collapses, which is happening right now, what would be your next industry? And the answer was it’s going to be software because they have a very large chunk of independent developers who are all on GitHub, they’re all on Stack Overflow, they are incredibly talented, but there is no software firm there to hire them.
So I think work from anywhere is just a gold mine for any global software company to find these pockets of talent in Bangladesh or Kenya or wherever this talent exists. So I guess that’s the discussion. And the gender issue as well. I keep coming back to that because I feel this is such a wonderful device to ensure equity on gender, based on everything I have seen with trailing spouses and the sacrifices women are forced to make.
MATT: What is your take on the pay equity? I have actually had executives in other countries, like India, tell me we’re going to mess it up because the market, the local market won’t support that sort of thing or if it does it will totally distort it and people will have issues with their families and… I don’t know, they seemed to be pretty against it.
RAJ: So let me understand your question. You’re saying that when a company does work from anywhere should you keep the wages at an equitable level or should you play around with the wages? Is that the…?
MATT: Yeah, if the average wage in a different country is 30K versus 60K or something, should you be proportional to that?
RAJ: And I’ve been asked that question a lot recently given what I think the Facebook announcement mentioned that they will allow 50 percent workers to work from anywhere but there might be wage consequences. The way I think about this, Matt, is at least the context I studied super deeply, the U.S. Patent Office, they did not cut wages. So this was actually more money in the pockets of people when they moved to cheaper locations. And more than half of the people in the Patent Office moved to cheaper locations.
I feel if a company adjusts wages downwards, it just immediately creates the potential for a competitor to say, hey we’re going to do work from anywhere but no wage deduction. Right? So I don’t know why the equilibrium will be wage deduction. Just putting my economist hat on, I feel the equilibrium will be some company arbitraging this and saying we are going to skim the talent on the right tail of the distribution by not reducing wages downwards.
MATT: That’s what we’ve been doing, so… But I have also heard on the other side, folks in the wealthier countries, worry that this will bring down the average. Like if there is a global minimum wage it’s probably not $15 an hour like they’re moving to in the U.S. So what’s the answer there? I’ve seen people say that people are worried about robot automation but actually global… equality opportunity to global jobs will probably have a bigger impact on the middle class in America than almost anything else.
RAJ: Yes but the flip side of that argument is that even if I’m in America, I don’t now have to live in Silicon Valley and support Silicon Valley cost of living. So if indeed that happens, like hypothetically that happens, then the option available to the Silicon Valley worker is to move to Tulsa where it is way cheaper to live and it’s probably an order of magnitude closer to what the emerging market cost of living is in many parts of the emerging markets.
So I feel that is the equilibrium that might emerge. Yes, if the wages on average get depressed but it’s still equitable, then the expectation would be that in the U.S. people would leave the super expensive cities and move to places which are cheaper to live.
MATT: But like you mentioned, they might not have the infrastructure for things like education yet. One thing I’ve heard from Bay Area friends is they want to move but their kids are in a school that they really, really like and there is no equivalent of it in some of these… in a place like Tulsa or Houston yet.
RAJ: That’s true. And that might change very dramatically. But also that might change because the schools themselves might go partly remote, right? So I feel there are lots of opportunities to innovate on business models for everything, including schools.
So I was actually with a group of 1,000 principals from India a couple of weekends back. And they have amazing teachers and I told them look, you have amazing teachers teaching this class of 50 people while there’s an ocean of students all over the world, especially in emerging markets, so why don’t you think about remote business models where you can leverage the human capital you have? I feel remote work now will extend across all the layers of our society, including all kinds of services.
MATT: That makes a lot of sense and it’d be powerful if it could happen. I know the distributed education experiments haven’t been as successful, at least the ones that I’ve seen yet. But it feels like if we can do work really well and be even more productive from a work point of view, learning should be part of that.
RAJ: Yes. And just one random thought. You mentioned what would be an interesting thing for CEOs to think about? I feel, just like the academic research in remote work is in its nascency, I feel the one area where we are still in nascency, and that’s just my view, is how we do our virtual communication. So be it Zoom or Google Hangouts or Microsoft Teams. So I feel there can be lots of imagination in how we organize our… how we conduct our virtual communication using VR, ER.
So I feel that is one area where I would imagine there would be a lot of interesting things to work on and customize technology to the business models. A school might need different kinds of communication technology compared to a software company, compared to a manufacturing company.
MATT: And the software does make a huge different. It’s funny how… Automattic actually had very few meetings before we adopted Zoom because there were just… they weren’t very good.
RAJ: Yes, yeah.
MATT: People would talk over each other, it wasn’t very high quality, it would be laggy. And I don’t think it was fully a positive thing. I think the pendulum swung where we started doing too many meetings and we had to walk that back a little bit just because the tool afforded it.
RAJ: Yes.
MATT: I think a lot of folks are experiencing that right now where they’re on eight or ten hours of Zoom calls a day and that is not the same as being in a conference room for eight hours. It’s exhausting in a different fashion.
RAJ: Yes. And you’re totally right. So you know… and we talked about asynchronous, that just makes me feel that we need to celebrate asynchronous, we need to have… So Slack is a great tool, it’s a great improvement at least in my opinion. But it’s not the end of the world. I think we can put a lot of imagination in how to do asynchronous communication, but also synchronous communication. And I feel that is one area where I would urge people to think harder and be extremely creative.
MATT: Check out my “Five Levels of Distributed Autonomy” post. I really try to push to asynchronicity as the ultimate level.
RAJ: Yes.
MATT: One thing I have also been trying to get people to do is to change the terminology, which I will introduce for your consideration. Which is remote implies that you are away from something and that there is a central. So I’m really trying to get people to move towards either distributed or decentralized as a way to describe this new form of work because you really want every node in the network to be at equal footing, not that there is a hub and spoke, like I think offshoring or near shoring or remote work has traditionally been tried.
RAJ: I like that. Yeah, no, you’re totally right. I think the thing I keep thinking about is of course we have had all these all-remote models, now we are having some large companies…
So Dell is the other large company we didn’t talk about. They, as you probably know, they have been aggressively pushing distributed or remote work, whatever you may call it. But once we have a critical mass of companies being majority-remote, then we probably need a complete change in terminology because that will be the common paradigm and then the office might be the exception, right?
MATT: Yes, we need a word that says the office is the remote thing, not the… yeah. [laughter] You had mentioned… I actually didn’t know Dell was doing a ton of distributed work. That’s good to know because that’s kind of in my backyard, in Texas. You mentioned the H1B visas. I think some of the companies you mentioned, like TCS and Accenture, are the majority of those, right?
RAJ: That is true. But you know, we just got hold of this amazing data set on the I129 applications for the H1B. So there’s a completely, in my opinion, unscientific cap to the H1B visas. It’s 65,000 plus 20,000 every year. There’s no scientific basis for why it’s not 66,000 or 100,000 or why there should be any cap. And we have looked at the I129 applications, which is an order of magnitude more than 65,000.
MATT: Can you define what that is really quick?
RAJ: So it’s an application to participation in the lottery. So there is a lottery. You have to pay $460, file this application, and then you are part of this annual lottery that the USCIS runs.
MATT: Is that the Green Card lottery or is it different?
RAJ: No, this is the H1B visa lottery.
MATT: Ohh gotcha, gotcha.
RAJ: They only give 65,000 H1B visas and additionally give 20,000 visas for people with a U.S. masters. But the number of applications to participate in the lottery is way more than 85,000. And if you look at the distribution of the company —
MATT: What’s the number of total people who ––
RAJ: I want to say it’s upwards of 300,000 at least.
MATT: Wow, yeah.
RAJ: And you’d be surprised at how many manufacturing companies, U.S. manufacturing companies participate. There’s healthcare with lots of applications from the Philippines, so they try to… there is a large contingent of nurses coming in from Philippines. So it is not just these IT service companies.
And I feel no one has done this study before and we are trying to do it now, no one has calculated the loss to American startups for not getting an H1B visa. Because you are participating in the lottery, if you really wanted a talented engineer and couldn’t get that person, you don’t have a subsidiary, like Microsoft or IBM, so you lost that person forever. What is the loss to a startup for losing out on the lottery? There is no study. And I think it’ll be a very interesting thing to at least document.
MATT: Politically what do you think will happen there, especially in an environment when unemployment in the U.S. is at historic highs?
RAJ: Your guess is as good as mine. [laughter]
MATT: What would you like to happen, I guess is a good question.
RAJ: I can tell you at least what is happening. So I feel that the Canada arbitrage model is happening. And you might call that arbitrage, you might call that being just super smart, but they have figured this out.
So in the U.S., the data, if you look at the data, the bulk of the immigrants who come into the country are coming in on a family reunification visa. And I have nothing against that, I think that is wonderful. But Canada, as a proportion of total visas, gives out a much larger share of work visas. And they have now found these ways to grant work visas in a super expedited way, even as quickly as two weeks.
And there are startups which have negotiated special deals with the Canadian government saying we will find the best talent in the U.S. which is being asked to go home and we’ll move them to Canada, just give that person a visa within two weeks. So they receive the person in an airport, they do the exact same job as before, nothing has changed, but now they are paying property taxes and local taxes in Canada and not in the U.S. So that’s what’s going on right now. So I feel some… We need to pay attention to that from a policy perspective, the local economy perspective of the spillovers that we talked about in the U.S.
MATT: I think I saw that of the cities in North America that are growing, most of them are Canadian, which is funny because Canada itself is only like 38 million people.
RAJ: Yes.
MATT: But if these people are going to cities but cities are also desegregating a little bit because there’s more reasons to live in the suburbs, what happens to the benefits of cities as well? You hear about the creativity born of collisions or the environmental factors that make cities more efficient than when everybody is in the suburbs?
RAJ: That is an interesting question and I can speculate. I feel two things might happen. We might have more livable cities if a chunk of people move to the suburbs or even farther away. We might have much more livable and much more desirable cities.
The cities might still act as a location for temporary collocated events, so even if everyone is spread out all over the country, or all over the world, you might want to do an event every quarter or every year where people come together and then you are not only showcasing new technologies, you are also very actively socializing. You may want to do that event in Hawaii as well, that’s totally understandable. [laughter]
But I think there will also be an upgrade at least in the context of emerging markets on the physical infrastructure and the social infrastructure for the smaller towns, which is wonderful. Because you cannot move, in the case of India, one billion people to the cities, and in the case of large African countries, like Kenya or Nigeria, they have similar problems. So I feel the infrastructure and the quality of life will become better in the smaller towns. So you’ll see that and the cities might become more livable. So it might be a win-win for both cities and towns.
MATT: I have heard even in Manhattan and San Francisco, just with the people who left the cities because of the pandemic, to get out of the city, it has made everything a lot… It’s just taken a little bit of the pressure off the infrastructure.
RAJ: Sure, yes.
MATT: And for San Francisco, even, 50,000 people or 20,000 people would be pretty significant as a percentage.
RAJ: Yes, yes, exactly.
MATT: I guess we are also getting into one of the hardest problems of politics and morality, which is how big of a tent do you talk about? If someone is getting wage pressure on a downward level in San Francisco, yes, they can move within America but it’s helping these smaller cities all over the world. What is the moral compass and calculus there?
RAJ: It’s an incredibly important question to think about but I feel geography can be a great leveler in terms of creating opportunities and wages because there are lots of people… First of all, there’s decades of research on migration, which is documented that not everyone can move given tons of reasons. And we talked about decreasing mobility in the U.S. even in the past few decades. And even if you move your living conditions are probably much worse than if you had not moved. Right?
MATT: Why is that?
RAJ: Think about the international migration that happens from all over South Asia into the Gulf. So these guys are going to work as construction workers or as restaurant workers, and they are probably making a decent wage, that’s why they’re going, but they’re sharing four people to a room. If you read some of the stories that have been documented about these migrants, it’s just terrible, right?
MATT: Yeah.
RAJ: Or the construction workers who move to cities to build these buildings and then move onto the next city and the next building. So I feel if they’re closer to home they not only have a better quality of life, they also have better social networks. So in places where there’s no insurance, social insurance safety net it’s much better to be closer to home because that is where your community or your friends are, your family is. And I feel geography can be a huge leveler in terms of improving economic outcomes and quality of life outcomes.
MATT: What should an enlightened government do there? Because, like you said, some of these stories of the migration, or the immigrant workers the Middle East, sound horrific. And they have I think in some countries even a majority of non-citizens in the country but conditions which sound like modern-day slavery.
RAJ: Yes, it’s a complex problem which doesn’t have one good answer for all sectors and all countries. So of course the construction workers have to move but if more construction work is moving back to other parts of the world, then they probably don’t have to move in the numbers they are moving right now. But in some sectors, you don’t need people to move if work becomes more distributed or what I call work from anywhere.
And I feel it cannot be a subsidy solution that the government is taking care of everything. I feel the economic geography itself needs to correct for many of these frictions. And if the economic geography corrects for these frictions, then, on average, lives and quality of life will improve.
MATT: And like you said, they could be closer to their families or social networks. And typically these visas are generally for solo people.
RAJ: That’s true, that’s exactly true. And so I’ll just give you one example. In China, I just finished this project, there is actually a visa, they don’t call it a visa, but there is an administrative document called a hukou, which needs to be transferred if you are moving from a small town to Beijing or Shanghai. So every person in China gets a hukou at birth and it’s tied to the location of birth and if you are not able to move that hukou to a large city then you don’t get healthcare in the large city and your kids can’t go to school there.
So what the Chinese economy has done for several decades now has leveraged, actually, the hukou to make sure that these migrant workers come and work for a few months. So they come in July to these coastal cities and they stay till mid-January, just before the Chinese New Year and then they clear out, they all go back because they have no incentive to live permanently.
So the kids are all left behind, the kids are being taken care of by the grandparents, and there is actually a whole generation of kids which has got into tremendous problems. And I read somewhere Jack Ma talking about this generation of left-behind kids, fixing their lives is going to be one of his priorities going ahead for the rest of his career.
So I feel we have introduced so many frictions to people’s lives by forcing them to move. And now, if work from anywhere becomes truly a phenomena these Chinese workers don’t have to come every July to the coastal cities, then they can stay where they are, the kids are benefited, they are benefitted, the local economy is benefitted, I think it’s going to be an awesome thing over all.
MATT: What else is going on globally that you’re excited about? Should every city in the U.S. be doing something like the Tulsa experiment or if everyone does it does that negate Tulsa’s ability to attract better talent there?
RAJ: No, I feel we are far away from the equilibrium. So I know Vermont did something similar two years back. The Tulsa experiment was actually done by the George Kaiser Foundation. So it was a private initiative. And my understanding is there’s some discussions going on with the government now to say that if indeed the remote workers come and stay for a period of time there will be some sort of compensation that the government will pay because it’s getting taxes.
But the state of Vermont did something very similar. And I’m just excited about this, Matt. I feel we need experiments to try to get people back to Detroit, you name your favorite small town in the U.S. I feel we need both government as well as private-capital enthusiasm to make this a bigger movement. The equilibrium is decades ahead of us, I think.
MATT: What do you think it will do to the tax base in places like California?
RAJ: Sure, so there will be changes but I’m sure like… And I’ll tell you one thing that I’m studying right now in India, it’s a very interesting story. So in India, they don’t have a hukou, they don’t need a document to move from one place to the other, but there is something called a ration card and the ration card essentially entitles you to subsidized food, which is a huge deal for these migrant workers.
And it has not been possible for several years now to make ration cards portable across India. So ration cards are given based on where you are born and if you move to a different city or a different state you don’t get subsidized food because the ration card is not portable. And the main reason it’s not portable is that fiscal transfers between states — so the state that is experiencing a migrant, or receiving the migrant, is saying why should we pay that migrants subsidized food? That state, the home state should pay us a fiscal transfer. So taxes would be a similar thing.
But I feel if there’s enough private companies doing this there will be government action following it and that’s what’s happening in Tulsa. They have been successful for two years and now the state of Oklahoma, and just given what’s happening with the oil economy there, they are now talking. So I feel policy makers will only engage if there is enough private companies engaging in these initiatives.
MATT: Do we end up in a place where cities really have to compete on quality of life?
RAJ: That would be a good thing, right? So I feel if people have more choice and on average if the quality of life is improving across cities… So one of the books that I got hooked on years back was Hillbilly Elegy. It just opened my eyes to what middle America is. And it broke my heart, like many others. So I feel we need… and now with work from anywhere we have a mechanism, which is elegant and it’s a win-win for the company and the worker, which has an impact on society and smaller towns. So I’m personally super excited about this.
MATT: Cool. If there is an executive listening to this who agrees with you or is seeing that productivity is down in this pandemic, work from pandemic environment, versus work from anywhere, what would you encourage them to look for as things open back up? It sounds like you would encourage them to stick with it anyway.
RAJ: Yes. And I would actually encourage them to think really hard not as an HR policy but think about what remote work, or let’s call it distributed work or work from anywhere, could do for the company’s strategy. And what I mean by that tangibly is what does it mean for having a better hiring policy where you can now hire globally, what does it mean for if you are a CFO, what does it mean for staring at an empty office for three months and what it tells you about the value of that incremental marginal office campus you were planning to build, what does it mean for women in the workforce, what does it mean for career continuity of people? So I feel it’s a great opportunity for us to engage in these conversations and have these conversations at the C Suite and not at the HR manager level.
MATT: Well I think that’s a really powerful place to wrap things up. Raj, thank you so, so, so much. If people, as I expect they will, want to hear more from you, where can they find you?
RAJ: So I have my HBS website and my twitter handle is @prithwic.
MATT: Cool. Well, you’ve got a new follower here. And I can’t wait to see what other research you’ve found. And if myself or Automattic can ever be of help there, please let me know.
RAJ: Absolutely, Matt, I look forward to staying in touch.
