Could kill off cities as we know it

Imagine if you didn’t have to battle other commuters to make it here every day? Picture: Mark Stewart

MANY companies are releasing technology to make working from home easy. If you find one that works, pay very close attention.

If working from home becomes functional, many office workers may no longer have to live near their offices, or even in the city at all. That’s a giant chunk of the economy. It could set off a cascade that changes everything — including reducing the value of property inside cities and lifting the value of property everywhere else.

Cities seem to be forever, but they actually ebb and flow with the patterns of the economy. Detroit is the clearest example in the world of a city that disappeared when its industry disappeared, but even Perth — where the end of a mining boom has seen property prices fall for nearly two years — illustrates the way cities rise and fall with big economic trends.

During the 20th century, agriculture ceased to be the most important industry in Australia, as the next graph shows. It got overtaken by manufacturing, which then got overtaken by services. Both of which made the cities of Australia bigger and richer, while rural areas grew more slowly, if at all.

Source: SGS Economics and Planning

Source: SGS Economics and PlanningSource:Supplied

Cities near major ports tended to do especially well, as international trade became more and more important. That’s why real estate prices in Sydney are higher than in Dubbo. But don’t think the process of evolution is over. Big trends can change cities again.

For most of the 20th century, the big blocks of the suburbs were the most expensive and desirable. Now people are paying millions for tiny houses built for struggling factory workers. They want to be close to city centres because that’s where the jobs are.

Source: SGS Economics and Planning

Source: SGS Economics and PlanningSource:Supplied

It is the rise of the services economy — insurance, banking, law, consulting, telecommunications, government and software — that has made city centres so vibrant. Those businesses work best when their employees are all in one place — for now.

But those companies have every incentive to make people work from home — office real estate is among their biggest expenses. The minute working from home (aka “telecommuting” aka “telework”) becomes seriously functional, big business will be all over it in a flash.

THE TECHNOLOGY IS ON THE WAY

OK, I admit it — they’ve been saying this for ages.

I found this quote from 1979: “…just over 21 per cent of the UK labour force could be home-based in 1981.”

That never happened. Neither did any of the optimistic predictions since. A handful of tech companies are “fully remote” — but not many. Somewhere between one and five per cent of people are telecommuting in Australia, according to statistics from 2013. That’s really not a lot of people.

If you extrapolate the trends, you might think working remotely is never going to happen. The world got far more city-centric during the 20th century, even as we invented the postal service, then the telephone, the fax, and finally the internet.

But the app era has made something very clear about technology. It’s not the idea that matters, it’s the execution. For example, you can invent a social network, but until it is as good as Facebook, you won’t get mass adoption.

Meanwhile a technology as simple as texting can get a huge new lease of life when Whatsapp releases a texting app that makes texting a lot better.

Source: Facebook. This chart is now two years old and Whatsapp now has over a billion users.

Source: Facebook. This chart is now two years old and Whatsapp now has over a billion users.Source:Supplied

The point is that ideas are easy and execution is hard.

The idea for technology that improves working from home already exists: “Just make communication and collaboration easy!” The execution of that idea has not been invented yet. The telephone wasn’t enough, and neither was email or Skype.

Yahoo famously banned working from home in 2013 to raise productivity. New research from America found evidence when people work from home they procrastinate a lot more. That’s obvious and just one of the things technology needs to fix.

I work from home and often use software called Self Control, which blocks websites so I can actually focus and get things done. That is not a joke, that’s the actual name of the software, and yes, I am slightly embarrassed that I need self control to be supplied externally.

COULD SLACK KILL OFF THE CITY?

Lots of companies are working on products that might make working from home better than working in the office. They range from Skype to Google, but one notable one is an American company called Slack. (Seems like kind of an apt name, but it is an acronym for Searchable Log of All Conversation and Knowledge.)

Slack provides a system that lets teams chat with each other — on work topics and other things. It has grown to almost six million weekly users within three years of launching.

If Slack’s chat channel proves to be the trick that makes working from home not just easy but also productive, the consequences could be massive. Some people will continue to live in a big city even if they don’t have to commute, but they won’t necessarily want to live near the centre. Others will flee for the mountains or the coast.

Of course, any effect won’t happen quickly. Or it might never happen if some other trend came along to counteract it. But it is worth keeping a close eye on, because it could eventually up-end everything we know about cities, and the value of infrastructure like office towers, freeways and metropolitan trains.

There’s not much we can do to prepare as individuals, but, if your company starts installing software to let anybody work from home, it could be a good time to start to think about investing in a little bit of land in the country.

Jason Murphy is an economist. He publishes the blog Thomas The Thinkengine. Follow Jason on Twitter @Jasemurphy

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