Urban Kibbutz, Toilet Office, Home Gym, and Baby Bust

Quick takes on the news at the intersection of the physical and digital worlds.

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Office Down the Toilet

People used to leave their homes to go to the bathroom. When tech made indoor plumbing possible, homes added a new room for the toilet seat. The rich went first, and bathrooms gradually trickled down until they became standard.

The same thing will happen with offices, says Angela Lashbrook. Over the past few months, people have been buying desks, ergonomic chairs, monitors, green screens, and other accessories at record levels. Now that they have a great set up at home, they are more likely to keep using it forever.

Of course, just like toilets, having one at home doesn’t mean you’ll never go anywhere else. People will still go to the office, but only when there’s a good reason. For some jobs, this means very often. For others, less so.

The impact of home offices doesn't have to be huge to be significant:

Unbundling Work from Employment

It’s not just offices that are changing; corporations are, too. As Li Jin reminds us:

At the turn of the 20th century, in the wake of the Industrial Revolution in America, agrarian society and cottage industries gave way to urbanization, mass production, and corporate employment. At the dawn of the 21st century, new internet platforms are empowering a shift in work once again, from traditional employment arrangements to independent work that allows for greater autonomy and monetization of uniqueness and creativity at scale.

As Ronald Coase pointed out in 1937, a corporation is like a centrally-planned economy: Physical and Human Resources are allocated based on executive decisions (as opposed to the the invisible hand and processing mechanisms of the free market). If free markets are so efficient, why do corporations exist?

Coase pointed out that it would take too long for companies to find, contract, and train/adapt the right person or resource each time they wanted something done. As a result, it is often more efficient for a corporation to “own” 100% of some people’s time, even if a lot of that time is wasted and many tasks could be done better by someone else.

But already in 1937, Coase could envision a world in which technology would dramatically reduce the cost of finding, contracting, and training people. As I summarize in my book, Coase concluded that:

"if companies had free, on-demand access to the employees, tools, and supplies they lack at any given moment, they would have no need to employ anyone or invest in equipment."

The Passion Economy

Companies have been outsourcing non-core activities for decades. Now, even core activities can be performed by individuals that are not formally employed by anyone. Often, these activities are not even “outsourced” by any single company; instead, they emerge independently.

The media industry was first to feel the internet’s impact, but the shift did not end there. Authors that previously worked for the New York Times or The Atlantic are now setting up their own paid publications. Designers that previously worked for Apple or IKEA are selling their goods directly to the public. People that never worked, well, anywhere, at suddenly making money by reviewing toys on YouTube.

Individual creators are empowered by platforms such as Shopify, Etsy, and Substack that provide infrastructure, distribution, and legal support that were previously available only to large corporations. Li calls this the Passion Economy.

The Passion Economy is different from the Gig Economy of Uber drivers and Postmates couriers. You probably don’t remember the name of your last Uber driver, but you do remember the name of the person who writes your favorite paid newsletter or hosts your favorite YouTube show.

A future where fewer people have stable jobs is also a cause for concern. But that won’t stop it from coming about. Ironically, gig workers might ultimately receive better legal protections and a government safety net. Creators (like me) who earn more and are not oppressed by Uber or Amazon will have to fend for themselves. Freedom has its price.

The COVID Baby Bust… and Housing Boom

Speaking of passion, Bloomberg reports that “the U.S. could see 500,000 fewer births next year”. Locking everyone at home was expected to create more opportunities for procreation, but it looks like it had the opposite effect. People are stressed, overworked, and financially strapped.

Meanwhile, the US homeownership rate made its biggest jump in history, reaching a level not seen since 2008.

People are too stressed to have a baby but brave enough to buy a home? These are not the same people. The homebuyers are probably older Millennial or Gen X families who already planned to move out of the city over the next 1-5 years. They are moving now because (1) interest rates are low and mortgages are cheap; (2) employers allow them to work remotely; and (3) many of them spent lockdown in the suburbs and finally had time to look for a house.

The decline in births suggests that the growth in homeownership is not sustainable. Young people who are delaying marriage and pregnancy today will have an impact on home purchases tomorrow. A further decline in births will have knock-on effects on housing, employment, consumption, and cities at large.

But while the COVID Baby Boom failed to materialize, we might still get a Post-COVID Baby Boom. Statistics from Tinder show a “surge in activity” in states that are coming out of lockdown.

There was pent up demand for housing among older Millennials; there is also pent up demand for procreation among younger ones.

Doing it at home

If young professionals aren’t making babies, what are they doing instead? Working out. A new type of fitness company is emerging to bring high-end experiences into people’s homes.

Earlier this week, Tempo announced a $60 million funding round. Tempo has built “the first home fitness system that uses 3D sensors and A.I. to analyze your motion and provide real-time rep counting, form feedback, and weight recommendations.”

Tempo is following in the footsteps of Mirror, the startup that pioneered the use of “smart furniture” as a channel for personalized fitness classes at home. Last month, Mirror was acquired by Lululemon. As I pointed out in my book, Mirror can serve as an ideal channel for people to discover and try on new clothes (virtually). Its acquisition by a brand that sells “athleisure” clothes shows I’m not the only one considering these possibilities.

But Tempo’s 3D sensors hint at something even more exciting. The same technology that allows a fitness instructor to track your posture and motion can also allow a doctor to examine you, remotely, in unprecedented detail. And with slightly higher bandwidth (5G?), it can enable you to “teleport” your whole body into a virtual meeting room. One more reason to skip the office.

It’s no surprise then that among Tempo’s new investors is Tishman Speyer, one of the world’s largest real estate developers and operators.

Localism is the best Socialism

The ability to access more services at home does not mean people will never go out. It probably means they’ll be less inclined to commute and more inclined to engage with people and businesses within walking distance to home.

The kibbutz is a type of collective agricultural community that originated in Israel in the early 20th Century. Adam Neumann hyped it as the inspiration to create WeWork. Offices never had too much to learn from these rural outposts, but cities do. And across Israel, a new type of urban kibbutz is emerging.

These new types of communities are not out to replace cities. They emerge within cities to create deeper connections between neighbors, enable the sharing of resources, pool financial risk, and augment (or replace) existing urban services such as education and childcare.

Here’s Dina Kraft’s description of one such community:

16 members live here in four apartments, including members with children; another 14 members live in another building nearby, and a smattering live in apartments in the neighborhood. Members share not only living space, but some of their possessions, and pool their incomes.

Covid-19 gave these communities an opportunity to shine. Lockdown is much nicer among good neighbors, homeschooling is much better in a group setting, and working from home is much easier when the kids can “camp” across the hall or up the stairs.

Israel’s original kibbutzes did not work. Financially, they required constant government bailouts. Socially, their efforts to rewire humanity proved too radical for most people — especially the attempt to get children sleep in a communal house, away from their parents. That stuff is never coming back.

But the idea of a gentler urban community where people pool resources and “insure” each other against risks makes sense. The need for it will grow as middle-class jobs become less stable, government education becomes less relevant for the 21st Century, and the boundaries between work and home continue to blur.

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