The Remote Work Effect

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Silicon Valley is a mindset, not a location.Reid Hoffman, LinkedIn Founder

At the onset of the remote work era, people living in the world’s most expensive cities were the first to jump ship. A Pew Research Center study found that 1 in 20 Americans moved in response to COVID-19, often spurred by the prospect of more space, lower living costs, and convenient access to nature.* The biggest exodus was from San Francisco: almost 40% more people moved out of the city in 2020 than the year before.*

By December, a fresh bid to become the next Silicon Valley had emerged—and like Silicon Roundabout before it, the idea started on Twitter. Delian Asparaouhov, principal investor at the venture capital firm Founders Fund, was one of the many Californians who’d become disillusioned with San Francisco during the pandemic’s first year. Among the growing discontent on social media, he tweeted:

Tweet from Delian Asparaouhov: “ok guys hear me out, what if we move silicon valley to miami”

Seeing the rising likes and retweets on Asparaouhov’s tweet, Miami’s Mayor, Francis Suarez, responded with a classic venture capitalist line:

Tweet from Mayor Francis Suarez: “How can I help?”

The resulting hype became a meme in itself. Mayor Suarez printed t-shirts with his tweet etched in the iconic neon pink and blue shades of Miami Vice. A billboard appeared on the Bay Area stretch of US Highway 101, broadcasting one of Suarez’s subsequent tweets: “Thinking about moving to Miami? DM me.”

Between July 2020 and July 2021, nearly a quarter of a million US residents decided to make Florida home;* Miami saw the single biggest percentage increase—15%—in tech workers over that year than any other American city.* But what politicians like Cameron and Suarez didn’t pause to consider are the negative consequences of Silicon Valley’s success, and whether similar hubs will follow the same path. The influx of innovators to California undoubtedly boosted the state’s economy and lined investors’ pockets, but it also forced San Francisco’s working poor to live in RV communities and for homeless camps to spring up on vacant plots of land.* The city has become so expensive, even the tech talent that made it thrive can no longer afford to live within its limits.* The Silicon Valley dream has, for many, become more of a nightmare.

In the past, innovation clusters represented the best opportunity for cities to attract knowledge workers, but with remote teams becoming more common, that old equation is breaking down. The incentives for individuals to live in overpriced urban centers have disappeared, making it much more difficult to reproduce the network effects that once propelled Silicon Valley’s innovation ecosystem. Mayor Suarez was playing the same hand as Cameron in East London—but remote work has changed the rules of the game.

While workspace and business travel were once dictated by the company a person worked for, remote work moves the decision-making power from organizations to individuals. As more people choose to work from anywhere, flexible, remote jobs are replacing what were once office-based roles.* Remote work hasn’t just transformed companies, it’s changed mainstream attitudes towards location. Long-held assumptions about opportunity and place have shifted, and more people are weighing their options. Residents of old power capitals like London, Paris, and New York have already shown their willingness to move to more appealing destinations—to so-called “Zoom Towns” near national parks and other sites of natural beauty in the US, and “Nomad Villages” on European coastlines.**

Policymakers in lesser-known cities have even begun competing for remote workers by offering them cash grants. From $2K in Savannah, Georgia to $15K in St. Clair County, Michigan, some incentive programs throw in perks like coworking space memberships, access to local business communities, and help with finding housing and schools in the area. Regional governments expect the programs to deliver significant economic impact.

Tulsa Remote, which launched before the COVID-19 pandemic, in 2018, pairs $10K grants with community business events for remote workers who relocate to Oklahoma’s second-largest city. In 2021, a review found that for every dollar Tulsa spent on its program, $13.77 was generated in local labor income.* The same study showed that one new local job was created for every two household members brought to Tulsa. All told, the Tulsa Remote program is estimated to have contributed $62M to the local economy in 2021.

Topeka, Kansas also anticipates a return on its investment. “What we found is that $10K in remote incentives translates into $50K in economic impact in just one year,” said Bob Ross, Senior Vice President of Marketing at the Greater Topeka Partnership, the area’s economic development agency. “Then you add in the soft benefits of the intellectual and cultural impact [those remote workers] will be making and it’s $10K very well spent.”*

Table: Select incentive programs in the US. Source: William Russell, CNBC.

The dissipation of knowledge workers isn’t unique to the US—a similar effect is reshaping Europe. Modest cash incentive programs for remote workers have launched in Malta,* Italy,* and Spain,* while Greece and Portugal are offering a reduction of 50% on income tax for seven years.* Mediterranean countries have suffered severe brain drain in the first part of the 21st century, while also hosting the world’s most rapidly aging populations. Policymakers recognize economic incentives and nomad visas in such places are now vital. Providing formal pathways for nomads to integrate could be their best hope for reversing decades of economic stagnation.

As governments seek to attract and retain talent, they’re beginning to act like startups. In the early days of the web, the software engineering skills needed to build internet businesses were hard to come by. Companies like Google, Facebook, and Amazon had to get good at sourcing and keeping hold of the right workers. As these brands expanded their operations, ambitions, and influence, they optimized their talent acquisition strategies—not only to attract the best people, but also to make access harder for their competitors. Venture capital business models encourage tech companies to monopolize user bases—to do that, they need to monopolize talent too. The scramble for jurisdictions to win remote workers marks a new chapter in this global battle for talent.

It’s unlikely Miami will be the next Silicon Valley. It’s even less likely to be in Topeka, Tulsa, or somewhere in the Mediterranean. Instead, opportunities are decentralizing away from innovation clusters and dispersing across geographies and time zones. As attitudes towards location shift, there’ll be no one, single destination for innovation. The future of innovation, like the future of work, is distributed and global. New remote work hubs are emerging, and they’re in a strong position to carve out cultural and economic niches for themselves.

Today, the question on policymakers’ minds isn’t what will attract wealthy investors or scrappy nerds. Now, they’re asking what nomads want instead.