I work closely with some people who make these kinds of decisions and ime it's not commercial real estate (though I'm sure there might be isolated cases of this happening - Washington DC's city government is a notable example of this)
Based on my network, their reasoning is a mix of:
- communication breakdowns due to the difficulty of building an async communication model (remember that most people are not as text/writing and async driven as Internet commenters on a tech forum), and operational work like quarterly planning, QBRs, product line prioritizations, etc can be done much faster in person instead of over 10-15 Zoom calls over 3-5 weeks.
- situations where remote workers are domiciled in a different location from where they were hired AND they didn't tell HR (this leaves companies legally liable for various tax, business incorporation, and safety regulations)
- the occasional case where a major security incident occurs due to lack of in-person verification (eg. The recent North Korea remote worker scandal, the ongoing Snowflake breach)
- Justify US headcount. One of the portfolio companies I was an observer for went public a couple years ago. When they switched to remote during the pandemic, they realized they could cut down their entire US engineering presence and overhire in Eastern Europe, Israel, and India and drastically reduce margins. Most larger institutional investors are clamoring for this now, and they have a point to a certain extent. IBM, Google, Crowdstrike, and Amazon have unofficially started this, and I'm not surprised if other companies are doing the same
There are ways to change an organization to resolve these issues, but they are hard, expensive, and not scalable for large organizations.
Headcount is never secure as AOPs are not set in stone. Always remember that - it takes 1 bad quarter for headcount projections to be completely upended.
But justifying US headcount can be done by using a mix of points 1 and 3 that I mentioned.
It's already pretty rough for new grad right now for that reason, and it's only going to get much worse.
I have a friend in his 40s and I asked him about his opinion on WFH. He doesn't like it. He prefers to go to an office and be around people. He also doesn't have much in the way of interests or hobbies. I suspect a lot of RTO decision makers fit a similar profile.
I feel sorry for the live to work people and it would be unfortunate if they were in the decision makers. But that does make sense because that's probably how they climbed the ladder into those positions.
Sad. I'm mid-40's and consider RTO to be an outdated waste of time and money for both the employees commuting and causing pollution and the company leasing office space for no purpose. Ironically, Dell's inside and outside sales staff have been WfH for 20+ years.
"Every mom that I talk to at Dell says that they are looking for other jobs because they need the remote work," said one employee.
I actually wonder if this is a significant factor. I work with some new moms and they are definitely dropping the ball all over the place while trying to watch over the new kid. Sensitive subject too so hard to even acknowledge or do anything about for their managers I would imagine.
It looks good for shareholder value for this quarterly report, when you stop giving big raises (no promotions) and when mobile talent resigns (no need to pay severance) both reducing opex.
The work they did in the previous quarter is being sold right now and driving revenue numbers up.
It's the work that they won't do next quarter that won't hit shelves for even longer that will impact revenue eventually that they're missing out on, but that isn't measured in their financials.
Interesting contrast to many companies, where there was some kind of RTO mandate. It's subtly interesting that Dell lets people stay remote, but promises them no advancement:
> Those who chose remote are no longer eligible for promotion or able to change roles.
In some ways it's kind of a mercy; you don't have to leave! But it also feels like a weird out, a way to escape having to fire people & maybe/probably end up paying for unemployment. It leaves it up to the employee to eventually quit out.
For folks wondering who is pushing CRE interests in RTO - it is the board members and investment funds that invested in tech companies - they also invested in CRE back in the 2012-2019 period. When workers don't come back, it is hurting these same investment firms that own all these funds.
But it only hurts a small percentage of their portfolio. They'd much rather you all millions of workers sacrifice their lives commuting than they lose 5% of their wealth.
Agreed, I'm convinced there are two forces at work here (a little tinfoil hatty maybe, I'll admit):
- Local (city/state) governments who want to bring people into downtown areas to spend money are threatening to revoke tax breaks companies receive for having an office in their city/state.
- CRE lobbyists convincing city governments to do the above, threatening with a dystopian outlook of a downtown core riddled with abandoned buildings.
It's been frustrating to see how the past decades of focus on the office and the suburb have left American cities so vulnerable to this kind of dilemma. There's a simple solution: create a pleasant, walkable downtown that people will want to actually live in.
The problem is most office spaces are not easily converted to liveable spaces. They basically need all kinds of plumbing and wiring and structural work.
Nah, the plan doesn't matter. It's things like limited plumbing through the core, elevators taking up excess space, structural supports limiting layouts.
It doesn't really matter where you run the facades, it's all the other stuff people want like bathrooms that require significant reworking.
Affordability is great, but it'll be dictated by supply and demand. If, like contemporary SF, supply is strangled, then nothing will possibly fix affordability.
Why would the corporation care about what local governments and lobbyists want? They would be taking all the risk of managing disgruntled employees forced to come back.
> behind the scenes I strongly suspect commercial real estate interests are doing their best to stop WFH
There is a lot of money to be made in WFH, in particular around tooling and residential real estate. The simpler answer is we're still figuring out in which roles and cultures which work modes work best.
Depends on how you define real estate interest. If you include the government, the corps might be facing tax ramifications. Many places got property tax deals since they brought people downtown. Those deals might evaporate if the seats aren’t being filled. The corps might face loan modifications if the value of the property drops a certain percentage.
They totally do. We all do things for people in our peer group. I just can't imagine someone being involved in the decision making for WFH/RTO thinking how good that would be for their buddies that are invested in commercial RE unless there's a direct link between their company and the RE they're returning to. Unlikely that someone makes decisions at Dell thinking it might influence the decisions of other companies doing the same which in turn might benefit one of their buddies.
If there was an investment company holding both big chunks of commercial RE and the companies that occupy said RE I'd think this was more likely.
The "commercial real estate conspiracy" angle always strikes me a little like the tail wagging the dog. The market cap of the set of all companies making the RTO/WFH decision must dwarf the market cap of Commercial Real Estate. Yet, somehow, Commercial Real Estate is pulling the strings and making the decisions? Not sure I buy it.
> The market cap of the set of all companies making the RTO/WFH decision must dwarf the market cap of Commercial Real Estate. Yet, somehow, Commercial Real Estate is pulling the strings...
a) The business districts of many cities become much smaller or (in some cases) effectively nonexistent if they don't have folks coming into the city's office buildings and going out for meals and entertainment throughout the day. This makes for a substantial reduction in sales tax revenue due to the reduced sales, and (for places that aren't like California and have the ability to actually make meaningful increases in property tax income over the years) property tax revenue as the on-paper value of those commercial properties plummet because there's neither people willing to put their asses into leased seats, nor foot traffic to feed those businesses anymore. This makes cities DESPERATE to get asses in seats and willing to threaten or bribe businesses with local offices to make it happen.
b) Market cap is a handy proxy to get an idea of what the size of a business might be. Given that nVidia is currently the biggest publicly-traded company in the world according to this metric, one should notice that it's a metric that really needs to be evaluated in concert with others to get a full and accurate picture of what's going on with a particular business. (It's particularly instructive to notice that if a company were to sell all of its publicly-traded stock, it would receive WAY less for the sale than the "Wow, look at that market cap!" numbers would indicate it should.)
The argument I’ve seen is that management of these companies is heavily invested in commercial real estate themselves, so corporate management has a conflict of interest in RTO in that it benefits their personal investments rather than the company.
Management is usually heavily compensated via the stock of the company they are managing, precisely to align incentives and overcome conflicts of interest like that.
But it's pretty clear these CEOs leverage their assets to invest in things they can directly use to make liquid. They can't sell their stock options but they can take out loans and get real estate.
I work closely with some people who make these kinds of decisions and ime it's not commercial real estate (though I'm sure there might be isolated cases of this happening - Washington DC's city government is a notable example of this)
Based on my network, their reasoning is a mix of:
- communication breakdowns due to the difficulty of building an async communication model (remember that most people are not as text/writing and async driven as Internet commenters on a tech forum), and operational work like quarterly planning, QBRs, product line prioritizations, etc can be done much faster in person instead of over 10-15 Zoom calls over 3-5 weeks.
- situations where remote workers are domiciled in a different location from where they were hired AND they didn't tell HR (this leaves companies legally liable for various tax, business incorporation, and safety regulations)
- the occasional case where a major security incident occurs due to lack of in-person verification (eg. The recent North Korea remote worker scandal, the ongoing Snowflake break)
- Justify US headcount. One of the portfolio companies I was an observer for went public a couple years ago. When they switched to remote during the pandemic, they realized they could cut down their entire US engineering presence and overhire in Eastern Europe, Israel, and India and drastically reduce margins. Most larger institutional investors are clamoring for this now, and they have a point to a certain extent. IBM, Google, Crowdstrike, and Amazon have unofficially started this, and I'm not surprised if other companies are doing the same
There are ways to change an organization to resolve these issues, but they are hard, expensive, and not scalable for large organizations.
>- situations where remote workers are domiciled in a different location from where they were hired AND they didn't tell HR (this leaves companies legally liable for various tax, business incorporation, and safety regulations)
This right here is entirely a result of government leveraging employers as a social control mechanism, that hitherto hasn't been so much of an issue; but with things like the Internet and computers, has now become highly disruptive to comply with.
The answer to "who gets the tax revenue?" has previously been "the jurisdiction of record for the employee". Anything more fine grained than that starts to become indistinguishable from serfdom, and reels of government overreach.
> This right here is entirely a result of government leveraging employers as a social control mechanism
Not everything is a conspiracy.
I like using roads, my local library, my public schools, and my local park.
The issue is if my employer thinks I'm domiciled in Texas but I am actually working from Portugal, then my employer is paying taxes to Texas but not Portugal.
This pisses off Portugal as there is basically an additional person who's using public services but not paying for them (income and corporate taxes make the majority of tax revenue).
We can check their balance sheet. Dell doesn't even report "Land and Improvements" anymore. The last time they did in 2021, it accounted for ~3.8% of their total assets--a tiny drop in the bucket.
Take Apple, who just built their spaceship campus: Land and Improvements is ~6.6% of their assets. Google, who own most of Mountain view are ~18% real estate.
So, I suppose maybe that tail is wagging the dog... For some companies?
It's interesting how very quickly this got buried.
At the time of this writing, three hours after posting, I have to go back twenty-four pages to find it, in amongst things with 2/3rds to almost 1/10th the points, posted one, two, five days ago.
I actually expected that it got flagged, and was surprised to see that it hadn't.
Here’s a definition for you, it sounds like you need one:
Solidarity, A bond of unity between individuals, united around a common goal or against a common enemy
Based on my network, their reasoning is a mix of:
- communication breakdowns due to the difficulty of building an async communication model (remember that most people are not as text/writing and async driven as Internet commenters on a tech forum), and operational work like quarterly planning, QBRs, product line prioritizations, etc can be done much faster in person instead of over 10-15 Zoom calls over 3-5 weeks.
- situations where remote workers are domiciled in a different location from where they were hired AND they didn't tell HR (this leaves companies legally liable for various tax, business incorporation, and safety regulations)
- the occasional case where a major security incident occurs due to lack of in-person verification (eg. The recent North Korea remote worker scandal, the ongoing Snowflake breach)
- Justify US headcount. One of the portfolio companies I was an observer for went public a couple years ago. When they switched to remote during the pandemic, they realized they could cut down their entire US engineering presence and overhire in Eastern Europe, Israel, and India and drastically reduce margins. Most larger institutional investors are clamoring for this now, and they have a point to a certain extent. IBM, Google, Crowdstrike, and Amazon have unofficially started this, and I'm not surprised if other companies are doing the same
There are ways to change an organization to resolve these issues, but they are hard, expensive, and not scalable for large organizations.