Oct. 15, 2020

Is Silicon Valley losing its luster?


For decades, we’ve assumed geographic proximity to other innovators was a prerequisite for innovation—to change the world, you need to be in a coastal tech hub like NYC or Silicon Valley. You know what happens when we assume.

Today on Business Casual, you’ll hear from Steve Case, the co-founder and former CEO of AOL who cofounded the investment firm Revolution, which funds startups from non-coastal states. Case, who’s practically entrepreneurial royalty in the tech industry, argues that funding innovators outside our coastal hubs begets more economic success for more people.

Listen for an insightful and analytical temperature check of the ways our assumptions hold us back and an honest proposition for how we change them. 

Transcript

Kinsey Grant, Morning Brew business editor and podcast host [00:00:07] Hey there, everybody, and welcome to Business Casual. I'm your host, Kinsey Grant, and it's time to rethink everything you've ever thought about Silicon Valley. Ready? Let's get into it. [sound of a ding]


Kinsey [00:00:18] It's a strip of land in Northern California, home to some of our world's most innovative companies and richest entrepreneurial storytelling. Its biggest city has the third-highest GDP per capita in the world after Zurich and Oslo. It's grown to represent more than a geographic location. And instead, occupy a folklorish place in our collective business minds. HBO made a series about it. I'm talking, of course, about Silicon Valley. Over the last generation, it's become the place to go if you want to make it big in tech. 


Kinsey [00:00:48] Along with New York and Boston, Silicon Valley has come to represent the need for geographic proximity to innovation. If you want to change the world, you've got to be near people doing the same thing, right? Well, maybe not. The last six months have shown us that being near people and companies isn't exactly the prerequisite we thought it was. Talent across the country and the world has flowed where it wants, for better or for worse. 


Kinsey [00:01:12] We're talking this week about what you need to make a startup successful, aside from a good idea. Today, we're going to stress test whether closeness to a coastal innovation hub is one of those must-haves. My guest today is essentially entrepreneurial royalty here in America. Welcome to Business Casual, Steve Case. 


Steve Case, co-founder and former CEO of AOL [00:01:31] Great to be with you. Congratulations on the one-year anniversary of this podcast. It's awesome. 


Kinsey [00:01:35] Thank you so much, Steve. It certainly has been quite the interesting year. A little background about you. Entrepreneur, investor, businessman. I think best known probably as co-founder and former CEO of AOL. And I just have to admit, Steve, I grew up in an AOL household. Just for nostalgia purposes, before [laughs] I started this recording, I played on YouTube the AOL dial-up internet connection sound and "you've got mail" sound. 


Steve [00:01:57] Oh, yeah, I love that sound. Most people thought that was an annoying sound—modem [indistinct]. I thought it was cha-ching, cha-ching [indistinct]. 


Kinsey [00:02:04] It brought me right back. I will hold back from asking you to imitate the sound. [laughs] 


Steve [00:02:11] Yeah, good thing. Good thing. 


Kinsey [00:02:11] [makes a modem-type sound] And I'm not going try either. So jokes aside, these days, and most importantly for our conversation today, Steve co-founded the investment firm Revolution. You focused on this Rise of the Rest tour, which funds startups from non-coastal states, cities, and towns [indistinct], you know, we're not talking about when we say these innovation hubs that are traditionally innovation hubs in our minds. So, we're going to talk about the possibility of making innovation hubs out of any city or any town, regardless of where it is. I have to ask, before this conversation, where you're joining us from? Are you in a rural area? [laughs]


Steve [00:02:44] Yeah, I'm in a place called Warrenton, Virginia. It's about an hour outside of Washington, D.C., which is where Revolution is headquartered. 


Kinsey [00:02:50] All right. We love Virginia. I told Steve before this started, I went to school in Virginia and I have a soft spot in my heart for rural Virginia. So we are gonna get right into it. Are you ready? 


Steve [00:03:00] I'm ready. Let's go. 


Kinsey [00:03:01] Sweet. So let us start by understanding how these big coastal hubs, when we think of Silicon Valley and Boston and New York and at times, maybe D.C., have come to be innovation hubs in our country. Why these cities? 


Steve [00:03:14] Well, first of all, the whole idea of venture capital is a relatively new phenomenon. Sixty, seventy years of venture capital, [indistinct], was sort of the jet fuel that powered most of the most successful startups. So it's relatively new idea, it started initially in New York, but then the center of gravity quickly became the San Francisco area and then also some in Boston. So, even a half century ago, that's where venture capital started building. So the capital piece is part of it. 


Steve [00:03:39] Obviously, the talent piece is part of it as well. There a lot of people who decided to go to the Silicon Valley area or Boston or New York City because there are great universities there. And a lot of people then would say, once they graduated from NYU or MIT or Stanford or what have you. So the talent piece was critical. 


Steve [00:03:57] And also, Silicon Valley in particular has done a great job in creating this culture around risk taking, a culture around fearlessness, a sense that anything is possible. So it's a mix of capital and talent and culture that's really kind of driven the success. But I would say [indistinct] the intro in referencing AOL. Two thoughts. One is that 35 years ago this summer, we actually started AOL. And back then, only 3% of people were online, and they were online an hour a week. So we've come a long way from those early days when nobody knew or cared about the idea of getting online. But of course, now because of this pandemic, we're kind of living our lives basically online. So that's one thing. 


Steve [00:04:37] The second thing, though, is also interesting to me, which is what I think of the first wave of the internet, where it really was building the on-ramps, getting the world connected. It actually was fairly regionally distributed. Silicon Valley did not dominate there. AOL was based in the Washington, D.C., area. PC companies like IBM were in Florida. Dell was in Texas. The big communications company, Hayes, was in Atlanta. A big online service then called CompuServe was in Columbus, Ohio. The communications company, Sprint, was in Kansas City. It was actually fairly distributed in terms of that first wave of getting everybody online. 


Steve [00:05:14] It's only really the second wave when it shifted from building the internet to building on top of the internet, building apps, software services on top of the internet. That's really when Silicon Valley's kind of dominance, really, has happened. I think that will change again in this next third wave with the internet. 


Kinsey [00:05:30] I guess, why with the second wave did these cities come to the forefront? What exactly—we talked about culture and where the money is and where the talent is—but how come those weren't major deciding factors in the first wave of the internet, but they were for the second? 


Steve [00:05:46] Because in the first wave, and I think it'll be similar in the third wave, some of the alliances, partnerships that needed to be formed were in different parts of the country with major communications companies, personal computing companies, media companies, things like that. I think it will be true again as we move into the third wave—healthcare, and other kinds of sectors. And it wasn't just about the software. The software was sort of the table stakes. 


Steve [00:06:08] It was also some of those systems-level partnerships and integration you were able to put in place. The second wave really was predominately about software. It really was the app economy, apps on smartphones, and these huge successes, Facebook, and so forth, that were sort of these dorm room startups that were relatively small. And there were people who created a really cool app, it spread virally. Everybody who was using it figured out a way to monetize it. 


Steve [00:06:30] So it's a big success that led to more power in places like Silicon Valley because the engineers and the entrepreneurs who wanted to be part of this innovation economy figured that's where the action is. That's where the money is. That's where the other people are. And you saw in many parts of the country a huge brain drain, people growing up, you're going to some of these top universities in different parts of the country. They felt like they had to leave. There was an opportunity there. And that's quite a challenge to some of these cities. We're hoping we'll see in the next 10 or 20 years a slowing of that brain drain, and even a boomerang of people returning. And frankly, the pandemic has accelerated some of that boomerang. 


Kinsey [00:07:09] Yeah, certainly. I want to talk about the impact of the pandemic too. Obviously a huge factor in terms of where we're doing the work that we do. I wonder what the role, first, of the cities is in deciding that these are going to be the hubs. What sort of incentives—or financial incentives, I guess this is what I'm getting at here—are the cities offering that's attracting these startups to these big innovation hubs that we've been talking about. Is there any sort of financial incentive there? 


Steve [00:07:35] Well, right now, the smart cities and states are recognizing that their strategy around economic development should shift from getting big companies to move their headquarters or open a factory, which is what's driven a lot of a lot of the economic development strategy the last 20 or 30 years, and instead, focus on startups, really the new company, some of which will fail, but some of them will end up being successful and being the big Fortune 500 companies of tomorrow. If you look at the business sector, there are really three parts of it. And it kind of gets mushed together, particularly on the government side. 


Steve [00:08:11] Small business, obviously critically important, accounts for a lot of jobs, and particularly given the pandemic, there's a lot of concern about restaurants and others kind of going out of business. That's a key sector that's important. But it actually, as a sector, does not create new jobs. If a restaurant goes out of business, it's probably replaced by another restaurant, probably employ about the same number of people. That's true for other small businesses. 


Steve [00:08:32] Interestingly, the big businesses, the Fortune 500 companies as a sector, don't create jobs either. Yes, some are growing like Amazon, but some are declining like General Electric. As a sector, they don't create jobs. The job creation in this country is new companies. Startups. So if we're only backing startups in certain places, like Silicon Valley, not other places, we shouldn't be surprised a lot of people in this country are feeling left out. They are feeling left behind. They aren't part of the innovation economy. They see the disruptions in places like Silicon Valley potentially hurting their family, hurting their communities in terms of job loss, not job creation. 


Steve [00:09:07] So that's why there's been more of a focus in recent years. Hopefully it will accelerate, but we shouldn't just be fighting to get the big companies to move. We should be fighting to help figure out ways to make those little companies more successful, how to make it easier to get started, a little easier to scale. And one particular example happened a couple of years ago. It was when Amazon launched its headquarters—second headquarters search. I think it was 230 cities applied. And I guess if you're [indistinct], you had to apply because people were critical if you didn't take a shot at it. 


Steve [00:09:36] But if those same 230 cities had spent half of the time they spent on their Amazon bid and put half of the money they put on the table for Amazon into their startup community, they could create the next Amazon. And that really needs to be much more of the focus. Not on the companies of the past, the industries of the past, but more the companies of the future, and the industry of the future. 


Kinsey [00:09:57] Yeah. That's really compelling to think that it's less about where is Facebook going to rent its next big office park, or where is Apple going to create this giant spaceship [indistinct]. [laughs] It's trying to create new companies. One really interesting point that I think you brought up is that there are negative externalities for people who are living in these big cities, these coastal hub cities, even if they're not working for the companies that have made them into hub cities. You don't have to work for Apple to deal with these ballooning prices of real estate in the Bay Area. What other sort of negative side effects are there for the people who live in these in these cities, even if they're not working for these, quote unquote, innovative companies? 


Steve [00:10:36] [indistinct] you say that, quote unquote, innovative companies spin off lots of other jobs and opportunities? That's mostly a positive. I saw that when AOL was growing in the Northern Virginia area. We went from dozens of employees to hundreds of employees, a thousand employees. But there are tens of thousands of other jobs that were created in the community because of the success of AOL. More houses got built, more restaurants that opened, more stores got built. So it's a positive spinoff effect. So you can't just track the direct jobs from these companies. You have also track the broader spinoff impact. 


Steve [00:11:08] But as you know, sometimes you can go too far, and sometimes the other jobs in the community are so important. Suddenly, people can't afford to live there and then they have to move further and further away, and you lose some sense of community. So the question is, how do you strike the right balance? And instead of having a few superstar cities, where essentially the big job creation is happening, the big economic growth is happening, which has some huge positives, but also, as you say, has some negatives. How do you strike a balance and focus on other cities, help them rise up as startup hubs, in the process help create more jobs in the innovation economy and also more jobs in the broader community? 


Steve [00:11:49] And that's what we're trying to do with the work we do with the Rise of the Rest. We love Silicon Valley. We're proud of Silicon Valley. It continues to be the, not just the pride of America, but the envy of the world. It will continue to be the leading ecosystem in terms of startups for decades to come. But rather than have so much action, focus on a place just like Silicon Valley. How do we spread the [indistinct], spread the capital, spread the talents, spread the jobs, spread the economic growth? 


Steve [00:12:14] And the data here is pretty shocking. Last year, 75% of venture capital went to just three states: California, New York, and Massachusetts. They got 75% of venture capital. The other 47 states got just about 25%. Actually, if you go beyond place and look at people, it gets even worse. Last year, over 90% of venture capital went to men, less than 10% to women, even though women are half our population. And last year, even though Black Americans represent about 14% of our population, Black entrepreneurs got less than 1% of venture capital. 


Steve [00:12:44] So, just look at that data. It does matter where you live. It does matter what you look like. It does matter who you know, what school you went through, things like that. And we just need to create an innovation economy that really is inclusive, and we really need to take steps to level the playing field so everybody, everywhere really does have a shot at the American dream. And everybody in every community can feel more optimistic about the future and what's happening with innovation, as opposed to nervous and anxious that the disruptions we celebrate in Silicon Valley are going to hurt them. 


Kinsey [00:13:14] Right. Absolutely. And to your earlier point that so much of the way that tech talent and tech innovation, and maybe just talent innovation in a more general sense, flows has to do with where the venture money is. There obviously is this moral imperative to make sure that we are funding people equitably, funding businesses equitably. And we've obviously seen that that has not happened. But I think even in a more calculated sense, the valuations are pretty high in these cities where all of this money is kind of like centralized. So it would make sense to invest in companies. You can get a better deal when you're investing outside of these big, you know, these big three cities that we're talking about. 


Steve [00:13:52] Yeah, that's right. It's a classic supply-demand. If most of the venture capital is in one place, and most of that capital is focused in companies in that place and in that region, by definition, you know, things are going to get bid up, and the valuation of those companies will be higher than those same companies in other parts of the country. So it's a, we call in the investment world, sort of an arbitrage. There's a gap. And so I think smart investors are beginning to realize that. 


Steve [00:14:16] As you said, there is a fairness argument to it in terms of leveling the playing field, in terms of opportunity. But it's also, we think, it makes tremendous financial sense. Investors make money if they have a slightly contrarian strategy. If they're doing what everybody's doing, generally it doesn't work out so well. Right now in the venture capital world, everybody is sort of doing the same thing. And we think over the next 10 or 20 years, that will shift, and that will benefit more entrepreneurs in more places, will help some of these cities that have been in decline, and start rising again. 


Steve [00:14:45] And so we're very excited about that future, and it ties in with what I said the very beginning about what I can think, it's going to be the third wave of the internet, which is when the internet really meets everyday life. Does it deal with issues like how do we stay healthy? What do we do? [indistinct] How do we move around cities? How do we even think about smart cities? Well, that's going to require partnerships with companies, many of whom are in the middle of the company. The most important healthcare companies are not on the coast. They're in the middle of the country. Some of the most important healthcare institutions, research universities, are in the middle of the country. 


Steve [00:15:17] So partnerships are going to become much more important in the third wave. A lot of the talent is in different parts of the country. We just need to encourage it to stay there and grow there as opposed to feel like it has to leave to have a shot. 


Kinsey [00:15:28] Yeah. And I have to imagine if I'm the CEO of a company, I want to cast the widest net possible to make sure that I am attracting the top talent. And to me, if the only talent I'm willing to attract has to be in that city where my HQ is, you're leaving a lot on the table. 


Steve [00:15:43] Absolutely. And again, this is not a new idea. Even though the pandemic has accelerated some of these trends, most of the big tech companies have, over the last decade, started deploying their workforces both geographically around this country and also around the world. So there are very few companies that have sort of a dominant headquarters like they might have 20, 30 years ago. And Facebook, Google—all of them have really large offices outside of Silicon Valley already and will continue to build those out. They'll continue to add new cities. They'll now also add the ability of working remotely for the folks who prefer that. 


Kinsey [00:16:18] So do you think, Steve, that this sort of prosperity and talent concentration in a handful of specific cities in the United States is exacerbating the wealth gap in our country? 


Steve [00:16:29] Yes, there's a huge problem, as you know, with income inequality, but it's tied to essentially a problem of opportunity inequality. There are certain people in certain places that are given opportunity that other people other places don't have. And that is leading to a divide in our country. Obviously, there are a lot of political tensions and divides, and some of those are because of the economic tensions and divides. 


Steve [00:16:54] There are definitely people who are feeling that the things that we're celebrating in terms of innovation aren't really benefiting them. And sometimes maybe it's even hurting them, and they're angry about that. And it's understandable that they're angry about that. So the question is, how do we make sure that we are creating the jobs of the future? This is not a new challenge for us. If you look at the data, 200 years ago, over 90% of Americans worked on farms. That was sort of the agricultural revolution that then kicked off technology productivity. Now, less than 2% of us work on farms. 


Steve [00:17:30] Thankfully, we retrained people so instead of working in farms, they were able to work in factories, and that powered the whole industrial revolution. More recently, we've made this transition to the technology revolution, and we have not done such a good job of retraining, and we've not done a good job of spreading those jobs more evenly across the country. So absolutely, it ties in with the tensions that are there that we're seeing even in the political climate. We need to do a better job of creating more opportunity for more people in more places, and leveling the playing field so everybody really feels like they have a shot. 


Kinsey [00:18:01] Yeah. And I have to think that this talent gap that exists for, especially for highly skilled workers, is the byproduct of an education gap. So I think, you know, solving that should maybe be step one of making sure that people can access the resources that they need to access in order to become one of these, quote, skilled workers. 


Steve [00:18:19] Yeah. And there's multiple education gaps, obviously. In the K-12 side, I think we do need to do a better job of encouraging more creativity, more collaboration. I think those are some of the key skills of the future, not just more kind of rote learning. And also from the university side, we just need to recognize—we talked about this a bit earlier—but some of the very best universities in our country are in the middle of the country. The talent is going to those universities. The sad thing is often when they graduate, they feel like they have to go to some other place because there are not real jobs there. 


Steve [00:18:52] In Ann Arbor, Michigan University there. Larry Page, one of the founders of Google, was at school there. He decided he couldn't stay there. He had to go to San Francisco. In Pittsburgh, Carnegie Mellon—arguably the best university in the country, maybe the world—around robotics. Historically, people would graduate from CMU and go to other places. How do we create—and we're starting to see that, both Ann Arbor and Pittsburgh are examples of rising cities—how are we creating the startup ecosystems, the innovation clusters, so that the next generation of people going to those schools can really stay there? 


Kinsey [00:19:24] Yeah, it's certainly—I don't want to say difficult, maybe interesting is a better word—it's interesting and difficult to think about what comes first. It's almost a chicken or egg. Do you have to build up the city that attracts the new companies to start there and create new jobs, which then injects more money into the city itself, which means you can get better education. It's a loop, and it's trying to figure out where the best entry point for that loop, I think, is. So we are going to move on in just a second to figuring out where we go next. But first, we're gonna take a short break to hear from our partner. —


Kinsey [00:19:56] And now back to the conversation with Steve Case. So, Steve, you said that Silicon Valley became what it is today because of the second internet revolution. But we're heading into the third. Where is the next Silicon Valley? Is there a next? [laughs]


Steve [00:20:11] Well, I don't think there'll be a next Silicon Valley. I think there'll be dozens of Silicon Valleys. That's sort of my hope. Part of the reason with our Rise of the Rest fund we've invested in so many different cities is we're really trying to identify great entrepreneurs all across the country and we're also trying to do we can to catalyze stronger startup communities all across the country. So this a little bit like [indistinct]. I do get the question, OK, you've invested in 75 cities, like what are your top cities? [Kinsey laughs] It's a little like we've got five kids, and I don't want to answer that question, who's my favorite? 


Kinsey [00:20:39] Oh, come on. You definitely have a favorite. [crosstalk between Kinsey and Steve]


Steve [00:20:39] We love all our cities. And we're trying celebrate, you know, kind of what's happening in each of these cities and do what we can to drive a little bit more collaboration. One of the challenges in these rising cities, and again, it's one of the things that's so great about Silicon Valley, is that culture in Silicon Valley of possibility, of, you know, kind of when people there hear a pitch from an entrepreneur, they think about how big it could be. In many parts of the country, when people hear a pitch, they focus on the risk factors. They focus on why it might fail as opposed to why it might succeed. 


Steve [00:21:15] So creating that culture of possibility and wonder, I think is important. Another thing where we need to focus more on in these rising cities, again, this is where Silicon Valley is so strong, is they're hyperconnected. There's a network density there that is critically important. In many of the cities we visited around the country as part of our Rise of the Rest tour, things are kind of disconnected. 


Steve [00:21:37] The big companies are not really working with the small companies. And the mayor is not really paying attention to the startups, and the university is not necessarily encouraging entrepreneurship on campus. So trying to drive more collaboration, more connectivity in these cities is critical as well. So, I have some sense, based on what we've seen so far and where we've invested so far, over the next 10 or 20 years, which cities might rise and really become the next kind of great startup ecosystems. 


Steve [00:22:05] But the reality is what happens over the next decade in those communities is going to be the real determinant, and if there really is a commitment to support entrepreneurs, create a stronger startup culture, and win the battle for talent, win the battle for capital. Those are the cities that are going to rise. I think many will surprise us if we look back 20 years from now, kind of what's happened. 


Kinsey [00:22:27] Yeah. I think it's incredibly important to expand our view of what a startup is and what a startup opportunity looks like. It's not always building robots out west in the Bay Area. [laughs] A startup can be a lot of different things. A small business can be a lot of different things. And when we think about the ways that that momentum begets momentum, to borrow your words, I think we used to experience things like this a lot more in the United States. We used to be full of industry towns, even in the south. In the Rust Belt, we used to see these industry towns popping up all the time. And I guess the big question for me here is, as our economy evolved to focus on what it focuses on now, how come these cities couldn't evolve to keep up with it? 


Steve [00:23:08] It's a mix of factors. But also, if you look at some of these megacities—and you mentioned New York earlier, that it was a draw for you—and it is a draw for a lot of people who are interested in the media industry or in the financial services industry. And similarly, Hollywood's always been a draw for people interested in entertainment. Now Silicon Valley is a draw for people interested in technology. But what's changed over the last half-century, in New York, while there still might be some advantages to being there if you want to be on Wall Street or you want to be in the media world, that industry has already dispersed around the world. It's not as dominant in New York as it was before. It's now a choice. 


Steve [00:23:46] Similarly, while the Hollywood area continues to be a magnet for a lot of people who want to be in the entertainment industry, movies, music, things like that, that industry also has distributed around the country and around the world. Some people might choose to be there, but they don't have to be there. Fifty years ago, they did have to be there. 


Steve [00:24:04] What we're saying is the same thing is going to happen to Silicon Valley. Some people will choose to be there. Others will choose to be elsewhere and can still participate in the innovation economy. The reason it played out the way it did is partly because of the second wave of the internet, when it really became all about software and apps. There was an advantage because it was just about getting a team together that was coding, to be together in a single place. And in the third wave, when the expertise in terms of the domain expertise around industries is important, being closer to those partners and closer to that expertise is going to create an advantage for these rising cities. 


Kinsey [00:24:43] You said participating in the innovation economy from wherever. What are your thoughts on changing how much compensation an employee gets based on where they are physically located, regardless of what they're doing? 


Steve [00:24:57] Well, I think there's some inevitability to that because when people are recruiting talent, they're generally trying to figure out what the comparable salaries are for their particular sector in that particular place. I was a little surprised—I think it was Facebook that was the first to say that people can work anywhere, but over time, we're going to adjust the salaries. If you pick a city where the cost of living is lower, you're going to get a salary that's lower. 


Steve [00:25:21] I would have thought they would have let it play out a little bit more before they declared that was the answer. Ultimately, this is a battle for talent, and they will pay what they need to pay, have to pay, to be competitive in their particular industry and in the particular cities where people are locating. In the short run, I would imagine most companies will not make adjustments. They'll say, not quite sure how this is going to play out. We want to give people more flexibility to work remotely, but we don't want to create disincentives so they leave our company and go someplace else. So they likely will maintain salaries for some period time. 


Steve [00:25:55] But then as things kind of gel a little bit, there probably will be some adjustments. I'd frankly be fine with that. I'm actually hoping that more folks who are working for these big Silicon Valley tech companies do decide to continue to work remotely, and that some of them, over time, will decide to not just work for that big tech company, but work for a little company that might challenge that big company. 


Kinsey [00:26:16] Yeah. 


Steve [00:26:16] That's my hope of what will happen over the next 10 years. So, if everybody wants to head back to San Francisco once we get a vaccine and so forth, obviously that's their choice. My hope and frankly, my expectation, is some, maybe many, will decide to stay where they are right now and build their life there, you know, kind of their family there and also their career there. Initially, probably continuing to be [indistinct] the company they're already working for. 


Steve [00:26:41] But over time, likely will migrate to doing other things in that community. That will help shift this talent battle, that will help accelerate the boomerang of people returning, these cities rising. That will then accelerate the capital going to those cities, that will accelerate the big breakout unicorn successes in those cities, and that will get that increasing returns, network effect, dynamic, working in more cities. And then at that point, we'll hopefully wake up and have a country that is more unified, that there is more of a level playing field, there really is hope and opportunity everywhere, not just in a few places for a few people. 


Kinsey [00:27:15] Absolutely. This entire conversation, I think, has spoken to the absolute incredible impact that you can have when you do invest in these smaller cities, these up-and-coming cities. You can really change lives and do good in the economy on the whole. So, going to take a quick break to hear from our sponsor. When we come back, we're going to change the lens through which we're looking at all this. [laughs] —


Kinsey [00:27:39] And now back to the conversation with Steve Case. Steve, we've danced around the subject a little bit here. It's obviously been front of mind, coronavirus, this pandemic, the recession. One of the big headlines early on was that we had these big tech companies coming out and saying work from home, either for the next year, year and a half, or we're gonna be a remote, empathetic workplace forever. 


Kinsey [00:28:01] And I think that really set the bar for a lot of companies to take up similar attitudes and policies. It also has led to this conversation of a mass exodus from these cities. We've spoken some about how people will still want to go back to San Francisco and New York. They are still great cities. But, what do you make of this narrative of a metropolitan exodus heading for the suburbs and the ex-burbs? 


Steve [00:28:24] I don't think there's going to be a mass exodus. I think that's a little extreme, a little hypey. But clearly, there's going to be some exodus. Indeed, there already has been some exodus. And some people are going to just be moving to those places temporarily and then returning to the cities they came from eventually. But some really will decide to stay there. 


Steve [00:28:44] I think it's been a little bit of a wakeup call. I think there are a lot of family discussions now about what really do we want as a family in the next 10 or 20 years and what really are the best career opportunities. And maybe the assumption that we had to be in a certain place in order to have a certain kind of opportunity, maybe that's not the case. And maybe we were a little shortsighted in terms of thinking more broadly about how we think about our lives and our families and our communities and our friends and other kinds of things. 


Steve [00:29:13] So I think that it's been a little bit of a "shake the snow globe" moment. And exactly how things settle out, I think it's a little early to say, but I'd be surprised if there wasn't a meaningful number of people that did decide to make a change. So is it going to be a mass exodus? Is Manhattan going to be hollowed out? No, of course not. You know, there will be a lot—it's a great city—there'll be a lot of people who return there. People who never lived there decide now's the time to go there. And that's totally fine. 


Steve [00:29:42] But there will also be a lot of these Rise of the Rest cities that show greater momentum. I saw even recently—in Bozeman, Montana, for example, is suddenly the real estate market is super-hot and there's no homes available because a bunch of people say, you know, I always thought of maybe living in some other place. I always kind of liked Montana. This pandemic kind of forced me out of my comfort zone and forced me to relocate someplace and, come to think of it, we want to stay here. So I think there will be that kind of acceleration of this talent boomerang. 


Steve [00:30:13] I think that will be in the long run very helpful to this whole effort around the Rise of the Rest, this whole effort around regional entrepreneurship, this whole effort around leveling the playing field and backing startups everywhere who can create economic growth everywhere and create jobs everywhere. 


Kinsey [00:30:29] Yeah, I mean, if we're gonna slave away in front of a computer at a desk all day, if we know we can do it in Bozeman, Montana, why aren't we gonna do it. [laughs] I think there certainly is quite the argument to be made. And I've also somehow managed to find myself in renovating vans, tick tock, lately. [laughs] People who have gotten the go-ahead to work whenever they want to work, buy a van and live everywhere. You can do that these days, which is kind of crazy, but I guess thank you to the internet for that. 


Kinsey [00:30:55] One interesting outcome that I've spent some time reading about prior to this, and I think we've spoken some about this in this conversation, this idea that we'll have the kind of hub-and-spoke system for big tech companies that already exist. They'll have this big HQ, but then they'll have little kind of offshoots around the country that people can go to if they need to. They can feel a little more proximity to an actual headquarters. What do you think that means for tech innovation in general? Do we need the "let's bump into each other in the hallway" and that's how we come up with this great idea in order to actually innovate further? 


Steve [00:31:31] [indistinct] depends on the company and sort of the stage of the company. But clearly, there is something to being together physically. And I think people have lost a little of that in this remote world. I think it's worked for most people, most companies better than they thought, but it's still not perfect. But that doesn't mean that in order to have those kind of conversations, brainstorming, other kind of things, you all have to be in the same headquarters. 


Steve [00:31:52] And frankly, it's not scalable. If you have a company that has 100,000 employees, they're not going to be in the same building. They're certainly not going to be on the same floor, for sure be in the same meeting room. It's gonna be spread around the city and if you're gonna spread it around the city, why not spread them around the country. 


Steve [00:32:07] I think that's the insight that most of the big tech companies have had over the past decade, which is why, really all of them, now have opened up multiple offices. When Amazon was doing their second headquarters, the search certainly got a lot of attention. Ultimately, the D.C./Northern Virginia area was selected, but they've also picked a half a dozen cities where they are going to build significant presence. I remember they said 5,000 employees in Nashville, for example. So this is already starting to happen. 


Steve [00:32:33] And so we have to figure out ways to encourage that and also ways to essentially be smarter about managing a hybrid workforce. I think it's relatively easy if you're running a company, if everybody is in the same office. It's proven to be easier than most thought if everybody's remote. I think what's going to be hard is this next phase we're gonna be in, in the next year or so, in which some people are gonna be in the office, but some people are gonna be remote. And that's going to be super-tricky in terms of managing teams and culture and building trust. 


Steve [00:33:02] And there will be a dynamic that the people who are working remotely are going to fear they're missing out. It's a little like the play "Hamilton"—they're not in the room where it happens. [Kinsey laughs] And so this is going to be very tricky to manage as we move into this next phase. But ultimately, companies can't scale unless they have great people, and they need to figure out flexible ways to attract and keep people, including allowing people to work in other places, whether it be their own satellite offices or remotely kind of from their homes. 


Kinsey [00:33:30] All right. Steve Case, thank you so much for taking the time to come on this show. I think one of the best parts of my job is when we get to take these long-held ideas and sort of flip them on their heads and really poke and prod and figure out new ways of thinking about them. And I definitely think we did that today. So, thank you so much for the insight and the transparency. I really appreciate your time. 


Steve [00:33:49] Thank you very much. I enjoyed it. And congratulations again on the success of the podcast. 


Kinsey [00:33:54] Thank you. 


Kinsey [00:34:01] Thank you so much for listening to this episode of Business Casual. Steve mentioned that I recently interviewed his friend, Eric Schmidt, the former CEO of Google. It was a great episode, if I do say so myself. So go check it out if you have not already. And by then, you'll have gotten a full picture of what we're all about here at Business Casual. So once you finish, leave us a rating and a review. It's a huge help and we welcome honesty. Thank you, and I'll see you next time. [sound of a ding]