The near future of work is a topic of much debate and speculation. One interesting comparison that has been made is the idea that there are 1.4 billion prime ministers in India. This hyperbolic analogy highlights the fact that everyone in India seems to have an opinion on how the country should be run, much like how opinions about work-from-home (WFH) differ dramatically.
The debate surrounding WFH is comparable to discussions about high-involvement products like cars and smartphones. People care deeply about this topic and have varying views on the desirability of WFH. Some see it as an either-or choice, while others advocate for a hybrid approach that combines office and remote work. The optimal level of hybridity is a hotly contested issue, with no definitive answer.
To truly understand the future of work, a more comprehensive and dynamic approach is needed. Superficial and reductionist reasons given for the shift back to the office, such as a CEO’s narcissism, do not provide a complete picture. A thorough analysis is required to evaluate the fundamental driving forces behind this trend.
One key factor is the cost-efficient internalization of transaction costs. Firms exist because entrepreneurs find it more cost-effective to produce goods or services in-house rather than procuring them from the market. The same principle applies to work. In many cases, the transaction costs associated with remote work are higher than those of office work. Complex issues can be easily resolved during face-to-face office meetings, whereas scheduling virtual meetings can be time-consuming and costly.
Another factor is the office’s role in addressing the principal-agent problem. This problem arises when conflicts occur between self-interested parties in a transaction. In the context of work, it refers to the conflict between principals (employers) and agents (employees). The office provides a controlled environment where principals can monitor and discipline agents effectively, reducing agency costs. With widespread WFH, agency costs have increased, leading to issues like shirking and decreased accountability.
These factors suggest that the office will remain a pivotal gathering place, at least in the near future. It is not just a matter of an executive’s competence to manage remote work; it is a fundamental structural issue. The office has proven its value in terms of coordination and motivation, which are essential tasks for any organization.
Before the Industrial Revolution, work from home was the norm. However, as industrialization took hold and economies of scale became important, the factory system emerged as the more cost-efficient and effective mode of production. Similarly, in the post-industrial era, the office has been proven to be the superior choice for work. Resorting to widespread WFH would be a regress, not progress.
In conclusion, the future of work will likely involve a combination of office and remote work. The office will continue to play a pivotal role in coordinating and motivating employees. The reasons for the shift back to the office are rooted in fundamental structural issues and the need to minimize transaction costs and agency costs. While the debate over WFH will continue, it is important to consider the underlying factors and dynamics that shape the future of work.