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Monday, July 27th

Interview with Joseph Fuller:
Professor at Harvard Business School

 

As COVID is ravaging across the globe, companies in every industry are faced with shifting the way they build and deliver value. In our season premiere episode, we welcome Joseph Fuller, Professor of Management at Harvard Business School. During our discussion, we cover hot topics like which business trends have been accelerated by COVID, the attributes of companies that will be winners and losers in the future of work, and the emergence of marketplaces and platforms that match talent and clients.
Joseph is also the leader of the Harvard University’s Future of Work initiative and co-host of the podcast Managing the Future of Work. A 1981 graduate of HBS himself, he is currently researching the evolution of the role of the CEOs and the C-suite in public companies.

 

Gabriel Luna-Ostaseski: So today's guest is Joseph Fuller, Professor of Management at the Harvard Business School, Professor Fuller is also the leader at the university's Future of Work initiative, and co-host of the podcast on Managing the Future of Work. In 1981, he graduated from HBS himself. Joe is the founder and CEO of a global consulting firm—Monitor Group, which was then acquired by Deloitte in 2012. He's currently researching the evolution of the role of CEOs and C-suite in public companies. So, welcome to the show Joe. So, so happy to have you here.

 

Joseph Fuller: Hey Adam, I'm excited to join you.

 

Gabriel Luna-Ostaseski: Fantastic.

 

Joseph Fuller: Now as somebody who does a podcast, it's great to be sitting in the other chair for a change.

 

Gabriel Luna-Ostaseski: We're looking forward to coming on with you, in—what is it—in a month or so. We're gonna be on the HBS podcast.

 

Joseph Fuller: You'll be joining us on Managing the Future of Work podcast.

 

Adam Jackson: Awesome.

 

Gabriel Luna-Ostaseski: I'm really, really looking forward to that. As a starting point, Joe, we've got a lot of interesting ground to cover and different kind of layers to peel back here, you have an incredibly interesting vantage point, both in working as an entrepreneur, then also now working with executives at large enterprises and also entrepreneurs that are building companies in the future of workspace. One of the things that you've talked about frequently is the growing skills gap, and the impact that that has on a company's ability to remain competitive. Can you talk a little bit about the areas where you've seen these large enterprises have a growing skills gap? And maybe some of the risks that that poses to enterprises in the coming decades.

 

Joseph Fuller: One of the multiple effects of digitizing companies in the economy is that suddenly, it doesn't matter what industry you're in, you're looking for the same talent as everybody else. And that is going to be turbocharged by COVID-19 and all the various systems-effects, which I'm sure are obvious to your listeners. That has all sorts of implications for companies. The first is a lot of companies have had a long history of sourcing talent that have some type of deep domain knowledge. So if you're an oil and gas company, you go to the University of Texas. You go to the University of Oklahoma and hire people who work petroleum engineering graduates; or if you’re an aerospace company, you go to Princeton or University of Washington and hire aerospace engineers. And they’re still going to be needed. But when everybody needs data architects, machine learning specialists, AI specialists, people who are comfortable and in the know on those domains; digital marketers, digital product project managers—suddenly you've got not competition between Lockheed, Northrop, Boeing, or Raytheon for Space Engineers. You've got Raytheon competing with Goldman Sachs, competing with Capital One, competing with Delta Airlines, competing with J propulsion reps—

 

Gabriel Luna-Ostaseski: And Google, right?

 

Joseph Fuller: And Facebook and Google. Exactly. And we've already seen through the great work of Professor David Autor at MIT, and my colleague, Ed Glaeser at Harvard. This emergence of cities that have become outsized catchments, if you will—catchment areas for that type of talent. Now imagine your company in the great Midwest or even in a terrific city like St. Louis—great cultural infrastructure, high quality of life. You know, major sports teams that don't know if they meet the standards of wide body jets landing there regularly, but some corporate clients used to have said, if you've got an NFL team and a 747 lands in your city, that's a real place. Um, shows how day to day 747s. In any case, if you’re an employer there and you're trying to get world class talent in those domains, maybe you can attract people who grew up in St. Louis or they’ve got a spouse or S.O. with an important job or trying to position in St. Louis, or their folks are there. Whatever. But how do I win if I’m not in one of those cities with these privileged positions that are emerging—the Washingtons, the Bostons, the New Yorks, the San Franciscos, the LAs, the Torontos—and I'm competing against the types of companies we just talked about, who are located there. Companies have historically had the bias—we're gonna hire the best candidate that applies for the job, and is willing to accept it on the terms and conditions we offer. What if no one will accept the jobs on the terms and conditions we offer, particularly if you're not an interesting industry to the beholder, you're not in an interesting, attractive location to the beholder. If you fall into the trap of hiring the best person that applied, as opposed to a person that actually has the state-of-the-art skills you need, you're going to find yourself a very unattractive spiral.

 

Gabriel Luna-Ostaseski: Yeah, it’s really interesting. We have an advisor, James Everingham, who was CTO at Instagram, and now he’s working on other Facebook projects. One of the things he said is, “There's no city on the face of the planet that has the volume of technical talent that companies need to be able to accomplish their product.” So it's like this kind of false idea, right, even in San Francisco, the mecca of all these tech roles. Companies struggle every single day to find the talent that they need. All right, so, if that's the reality, right, like if every company is struggling with this massive competition for talent, then why have companies been so slow to adopt distributed models or freelance models? Why is this still a small percentage of their total workforce?

 

Joseph Fuller: Well, there are several reasons. The most obvious, and the most difficult to overcome, is that it is alien to the DNA of most companies, particularly large companies to engage people in important roles that do not work for the company. There's a myth about most executives, which is that executives—kind of like markets, and like competition, they don't—they like control. And, so they’re playing—relying on a market mechanism to supply key talent is a kind of a scary thing. Most importantly, even more importantly, all the policies and procedures of companies, whether it had to do with information security, performance reviews and evaluation, the way projects are organized, basically are—start with the origin of, we all show up at a single site, we have titles and job descriptions that impart to us decision rights and which are known to everyone else, and work is structured and allocated and reviewed and quality controlled through that lens, and anything that moves further away from that lens torques all those processes. 

 

I have some new research coming out at the end of the year, on the extent to which employers are relying more on contingent labor or gig workers, whatever you want to call them, in higher-skilled positions. And the number of companies that are sampling it have gone up considerably. But when you talk to those companies, what you hear very consistently is, “We can only take this so far because the workers don't understand our culture. They don't understand other processes here, they're affected by what they're doing. So we have to really define the work very narrowly for them.” It can be, in some instances—we haven't done the hard work to actually tell this person what we need. One of the greatest things about employing someone is you can have a meeting with them and say, “Well, gosh, we really haven't thought about this enough. I'll get back to you,” as opposed to, “I have to do the hard work of writing a specification that actually anticipates what I need.” And so, there are a lot of impediments to this, Gabe, but I think that the talent shortage, which is going to be absolutely turbocharged—I mean that's an understatement—can be a whole new stage to the rocket caused by COVID. It is going to force people to rethink this, and I think, like in a lot of competitive challenges, the companies that get smart about doing it faster, gain a competitive advantage.

 

Gabriel Luna-Ostaseski: Is this like—I think it's sometimes helpful to separate here. How much is legacy perception versus reality? How much of this is just—this is the way we've done things? The same way when the internet came along and Blockbuster said, “Hey, people want to come to our stores to rent movies, they want the tactile experience of wandering the halls and picking up plastic little boxes.” That was the legacy perception. So help us understand how much of this current reality around how companies access talent and working with freelancers or contract workers. How much of what's standing in their way. It's just legacy perception versus real risk or fear.

 

Joseph Fuller: I think it's—

Gabriel Luna-Ostaseski: —a real risk or a real reality.

 

Joseph Fuller: Yeah. I think it's actually—there's a lot of reality to it. Start with the controversy about benefits, and who—who is a contract worker versus who was a full time worker, a bit of a controversy in California. You also have multiple instances of contractors, particularly visible ones would be the security intelligence space of contractors who have stolen massive amounts of information, including, essentially, the CIA's core hacking tools stolen by a contractor and now part of that turns out was that their internal security practices were beyond primitive, but also, they basically said once you're part once you're inside the wall and you've got the security clearance, then we don't really need to protect against you. You have a real question, and this is going to be off. This can be a hard thing for companies to do. You have a real question about are these skills so critical that they have to be native to your company? That's a very very legitimate question.

 

Adam Jackson: So yeah, I think those are kind of two separate points, right. Sorry for interrupting. It is an important one, though. So, on the security side, do you think worker classification is a predictor or increases or decreases likelihood of intellectual property theft?

 

Joseph Fuller: Not really, no. But I do think that if I'm working in an advanced domain and I don't have a certain talent—maybe a lot of my current employees don't have the technical skills to steal anything, but even if they do, my ability to vet someone and understand if they are trustworthy is much higher if I have a long term employment situation with them. Have they been consistent workers, or have they been erratic in some way? Have there been behavioral or disciplinary problems? And so, it's a consideration, and if you're human resources in a big company—let's just do a little bit of roleplay—you're saying, Adam, we really need these digital natives, we really need these people who can run these complex projects, we really need people who understand AI—we need to hire them. That's what the operator or so called hiring manager says. And HR’s responses, “You know, we can't figure it out. We don't know how to do that. And who would want to come work for us anyhow?” These are no-joy answers, right. And if you're coming in and saying, “Well we've got this solution, we're going to hire these people from—off a gig platform.” There's a tremendous amount of perceived risk in that. “That's the best I can do, okay, so we're going to rely on a gig platform,” and that person then does something untoward. HR worries about everything from cybersecurity to harassment, to people being sued because they didn't provide benefits, whatever it is. In so many big companies, the functions in these big companies are compliance-oriented and risk management-oriented. And that’s the shared DNA they're really really constrains this.

 

Adam Jackson: That makes sense. I think, to sort of double down on the point you were just making around core tech. So what we've learned in our journey here on Braintrust, where we connect these very hard-to-hire, very experienced product managers, designers, developers with US Fortune 1000—companies that are struggling to hire these folks in-house. What we've learned is that core tech companies—companies where their core value prop, their core moneymaker is tech. I’ll use my last company, Doctor on Demand, as an example. They have no interest in these gig platforms because—it is to your point—it is so core to what they do. And so our sales team just stopped trying to sell to doctor-on-demand and core tech companies that, without that core tech, they’re dead. Alternatively, like the rest of the economy is fair game right so we've made great strides in healthcare, where tech is important, but their core offering all the physicians and the providers or car manufacturers right, I'm telling you, it's engines and drivetrains, and branding, it's less about software so we've had a lot of progress there, it's interesting finding.

 

What do you think, Joe—when did these distributed teams become a strategic imperative, like what's the tipping point do you think?

 

Joseph Fuller: Skills available, obviously, is one. I think, another is that there's this real recognition, which is a counterweight to some of these impediments to change that we've been discussing—which is that the kind of hierarchical, functional structure of companies is just kind of getting to the end of its useful life. It's been downsized; it's been outsourced; it's been rationalized. The typical, big kind of Fortune 500 company or G2000 company—they barely finished their last transformation project before they start the new one. And the cynicism and transformation fatigue that it creates among employees is very palpable. And more importantly, the alienation it creates in precisely the type of people you desperately need to keep is high. So a lot of companies have—and they were always reluctant to share those data—I'm not going to name any names, but it's in lots of the white collar-oriented companies, whether it's healthcare, financial services, professional services. Their voluntary turnover rate is inversely related to performance. So their best people turnover the highest rate.

 

Adam Jackson: Interesting.

 

Joseph Fuller: And their economic linearities there. It’s—the best people are the people who got the best skills, they've got the best network, they're the ones that a customer or competitor’s most likely to poach. Actually, they’re the most confident that they say, I can't take it anymore. I quit—that they're going to get another good job. And, you know, the bottom quartile person is really grateful to work for a great outfit like this that pays well and hope no one notices that they're a slow boat in an envoy. But nonetheless, there's this recognition that something's got to give, and so, you see in a lot of big companies now, we're gonna go to an agile structure. And that's pumping in all the same problems that I was recounting earlier about adopting more reliance on talent platforms because agility doesn't match up well with the way they do performance assessment, with the way they allocate rewards, with the way they hire people and assign talent their title structure, and there where people are located. I think, actually, COVID is going to be a big advantage, Adam, in the adoption here because it's doing several things. First of all, it's obliging reluctant companies to work remotely.

 

Gabriel Luna-Ostaseski: Yeah.

 

Joseph Fuller: No choice. So they kind of are saying, 

 

Gabriel Luna-Ostaseski: All companies are remote.

 

Joseph Fuller: —you know what. Yeah, exactly. And so, alright. I'm kind of getting more comfortable with this. And even when people keep—start going back to work in a more traditional way, the notion of you know, “Well, I worked fine when we're COVID, so maybe we could work with some engineering talent or some project management talent on a remote basis.” And another thing that's going to happen is people are going to have all their legacy projects and their digital acceleration projects, so there's no way in god's green earth, they've got enough talent for that. They're gonna say, we looked—we know both these things are priority, we're not staffed for, we're going to have to sample, and they have to have a decent experience, they'll understand, they can keep coming back.

 

If there's one other thing that is going to happen to COVID—and this is just a bald-faced assertion on my part but it is based on some conversations with, at this point, several dozen C-Suite executives—historically, companies staff themselves. If you think about kind of a wave sine, their ambition, because they want to own everything, they want to control it. They kind of staff up to clip the top of the wave sine in their forecast, they want to fully staff to exploit their margin and their growth opportunities when they can. That's the intrinsic logic here and across all markets. When you add up every competitor’s forecast, you come to twice as much demand growth as there's actually going to be, inevitably people miss. I think the logic of that is going to change. I think companies are going to staff on the trough. They don't want to have human beings when they can avoid it. They have no idea you can plan for this environment, but you can't forecast forward. They're gonna try to go lean. And as they go lean, they're gonna see opportunities that they're missing because they can't—they don't have the man hours to pursue it. I'm not talking about selling more pizzas, and they're going to have to find an alternative, because they're not going to want to make a commitment to more headcount, and they're not going to be willing to do it with a long enough lead time to lay on the town. They're going to have to go to a short highly credible short lead time solution,

 

Adam Jackson: Almost everywhere, where we got over the last two or three decades on manufacturing, we built this just-in-time manufacturing supply chain which unfortunately just bit us right in the ass here.

 

Joseph Fuller: Did you, too? It got us in Boston.

 

Adam Jackson: I mean,I couldn't buy toilet paper for three months in San Francisco. That's interesting, what you're saying. I love this point, so, we may see this sort of inversion, where we move to more agile and just-in-time human knowledge worker staffing with companies, but maybe we'll end up with a more robust and redundant and less-efficient, physical good supply chain.

 

Joseph Fuller: Could be, and there's another completely different question here which is I've been talking to some companies about repatriation of manufacturing capacity, and the first thing they start talking about is they can't they couldn't get the skilled workers. We're not talking about AI specialists here, we're talking about industrial engineers and shop floor workers.

 

Gabriel Luna-Ostaseski: We've talked about something a little bit earlier, you were touching on these different, say, seniority or levels or skill levels of talent and how the balance of power has shifted a little bit there. We—it's funny, we actually just did a research study with Tessa Forshaw actually, on the future of work. I'll make sure to send you a copy, and what we named that shift was, we called it the talent-led revolution. Because in our study, what we found when we looked at highly skilled technical talents, it's like 28 to 35, and what their outlook of their careers are. There were three interesting things we've got: number 1, 75% of them chose autonomy over salary. Really interesting, right? For the first time in the last 50 years or so, the balance has shifted. The second thing is that 90% of them wanted to control their own schedules. They wouldn’t have to go to an office, wouldn’t have to take a bus for two hours from San Francisco to Mountain View. And then 90% of them plan to freelance for the balance of their careers. Really interesting how that kind of balance of power has changed, where these people know that they're in very very high demand, and frankly, listen—Google, Facebook—these companies, they are tech companies in Silicon Valley and can't even keep them. How's the company in the Midwest going to attract that person to leave San Francisco and go and move to Omaha or St Louis or any of those places? It's just not going to happen. So the model needs to change for them to figure out, “Okay, if I can't get them to move here, how do I get them to work?”

 

Joseph Fuller: Right. And if I can't afford the—what I'll call the economic value of the offer provided by a company with a higher margin with, we can have more structurally profitable industries to come back to my real roots. How do I take the budget I've got and get the output I need, given the fact that I can't afford someone on a 12 month, a year basis?

 

I think there are a couple of issues here. Of course, there's a kind of a self-reinforcing cycle—the people you're polling now understand that that alternative has never been more viable. And will only get more viable.

 

Gabriel Luna-Ostaseski: Exactly. 

 

Joseph Fuller: So if you're getting this response, by the way, in a quite dire economy, not dire for these types of skilled people, but we're being—I was talking to another friend earlier this morning about where he's involved in the behavioral health business, and they're doing polling about anxiety and depression in the workforce, which is quite high and growing, and by the way, growing in skilled workers, it's not just people who have been bartenders or waitstaff, and/or hotel hospitality, you know, room cleaners, housekeeping, and are worried about their jobs never coming back. There is, however, a counterpoint here which is people between 25 and—actually, 17 and 32 have been saying, “I don't want to be like my parents, since Cain and Abel.” Right, so there's a whole lot there's a whole lot different experience about regularity of income if you've got a house, a mortgage, two kids, and a third one on the way. And we also know that there's a big sociological, anthropological part of work. And if people can create counterbalances to what they actually get from work, emotionally and psychologically, then that will enable this phenomenon to move at a faster pace. If not, it may be there'll be some reversion, especially for some of those older workers.

 

One other thing I just want to say is, I think, this actually comes back to what employers have to think about. I think employers have got to think about the quality all-in quality of work life for people. That's a phrase that was very au courant to the 70s—QWL. And I say that because my father was a CHRO of General Motors when it was the biggest company in the United States, and not by headcount but in terms of profitability. And so they talked a lot about how they cause the balance and work life to pay off. And whether it's the two hour commute, or the—another thing, I think, is an example of this is set vacation levels or everyone's expectation is that, Gabe, Adam, and Joe at Cicero are all colleagues who will always be here by nine o'clock every morning. All of that happens to fly in the face of life at home, particularly the caregiving obligations that a lot of adults have, whether it's to watch out for their folks are sick or invalid or chronically-ill spouse, or kids. All of those considerations are going to influence who is willing to work under what terms. And I think just as innovation as a big company is going to have to take place where you source talent, how you structure processes so you can get the right talent, the right place, right time, irrespective of employment status. And it's going to be one of multiple new definitions of work for companies. Historically, the definition has been one of three: work full-time, work part-time, work for somebody else that I've hired who do the work for me. I think there's going to be white collar seasonal work. There's going to be white collar part-time work. They're going to be white collar gig workers. They're going to be much more collaboration between suppliers and customers so they're going to be work teams—not like building a power plant where you've got GE and you've got Bechdel and things like, that but completely new types of relationships. It's the only way you can get the talent deployed, but it’s going to be integral to creating a quality of work life that balances fulfillment, income, personal choices, and becomes a platform by which you can get the right configuration of people, when you need it, at an economics you can afford.

 

Adam Jackson: We've been a joy—love that point. We've been—Braintrust has been a little bit of a petri dish for this model.

 

My last company, Doctor on Demand —we have roughly half the people kind of huddled in San Francisco, and the other half sort of spread around the country and it worked well and it was sort of one foot on the boat and one on the dock, they created these kind of other—well, if not an HQ, what does that mean, and that kind of stuff. And so with Braintrust, we took a totally different tack where there is no HQ, everyone's spread out everywhere. It's sort of like, if it doesn't happen on Slack, it didn't happen, so let's keep everyone inclusive. We do the no-vacation tracking, so work whenever you want. We have four people in Europe. At first, we're like, “Oh shoot, how's that gonna work?” And it turns out like, man, now we got a 16-hour or 20-hour efficiency work day. It was really cool, and because you got to pass the baton back and forth, it increases the fidelity of your communication. Things aren't lost on Zoom calls or phone calls. We think we're onto something here. We're certainly not like, people don't come to us for the salary, I'll tell you that. We’re a scrappy startup paying sub-market rates, as most do. But what we found is this ultimate freedom where people can work from any city they want. We don't even know where people are half the time; these days are different, obviously, the lockdown. This is where—the experiment has gone well so far, but one thing I worry about is burnout. Which—burnout, we didn't invent that. That's been an American staple for generations, as the Europeans like to mock us about, rightfully. What we worry about is, “Okay, well, if you take unlimited—if you can have unlimited vacation, they end up taking none. What was the point, right? Any thoughts on—I'm creating that balance you can start alluding to.

 

Joseph Fuller: Yeah, I think it's one of the fundamental questions for me. I was talking to a very large tech company near you. Its senior levels, they said, their engineers or software people are roughly 37% more productive in COVID than before. And that is a massive number. It's—no commute. There's no cadence to the workday, so all of a sudden you realize it's 7:45 at night and you were still working on your project, and maybe if you're single or you've got teenage kids who don't want you to bother them in any case, you didn't kind of realize that. You don't—you know, there's some disadvantages to massage chairs and sushi, you know. I think I’ll go and get some sushi. The work life balance thing—it's a very—I want to come back to something I talked about: the alienation of risk from institutions to individuals in the United States over the last hundred years. That's the alienation of a different type of risk, that I don’t have colleagueship in the traditional sense. Is there still going to be the company softball team? Is there still going to be the United Way drive? Is there still going to be ‘bring my daughter or son to work’? Okay. Your son or daughter may have been to your workplace multiple times as they want to use your printer or came to ask you a question or they were deciding to photo bomb.

 

Adam Jackson: Mine be popping all the time here.

 

Joseph Fuller: I think it's great. Of course, my youngest kid is 29, so the fact that one of them's here a lot and another one's here almost as much is a blessing. But my dog bombs my Zooms a lot, and I'm getting a second one in a couple weeks. I think, by the way, this is a terrific entrepreneurial opportunity. What do you—how do you help people do that? Are there services? Are there ways to make social connections? Are there waived for—we know that self-affiliating groups are a highly plausible way to affect behaviors that affect health. For example, pre-diabetics. There may be some dynamism there, but a lot of people, if you look at other data about employees in big cities, people say, “Oh, I really want to live in New York because there’s so much to do, there are all these cultural institutions and great shopping and great restaurants,” and they go to their investment banking office and they're there 16 hours a day and they meet some friends at a bar and they never go to the MET,, they never go to New York Public Library, they never go to Ellis Island. So, how—in the aspiration, “Oh I'd like to live anywhere to do my work and maybe I'll spend—be in four different countries, three months a year, that's great, until you get a kid.” There are a lot of questions to be asked about this, we're just kind of in a frontier, where innovators like you guys can get—allow people to get—really make those choices. And as kind of the next wave of this type of service, by sharing more of the economics with them, therefore kind of being a magnet, I expect for the best talent, which will get you the best projects because you've got a market-matching logic there that should work. You'll be right at the edge of seeing whether how much of this is cheap talk and how much of what works and what do people need. You may have an opportunity to start creating some type of community service capability to help people respond to those challenges that Adam was talking about.

 

Gabriel Luna-Ostaseski: So what are—those are great points. Joe, you and I talked a little bit about this—Adam and I have spent our entire careers operating, investing, and advising in marketplace business models here in Silicon Valley, right, across all different industries from healthcare to ride-sharing and everything in between. These business models have become the most dominant business models of the last 20 years. These proprietary network effects. But, what we saw on the front lines was that the gig economy was in—is an economic disaster. Essentially, what it did was it transferred a risk and it lowered the average minimum wage. And you also had incredible wealth concentration as a result of this, like in Uber’s case, you got 10 people that become deca-billionaires and you have drivers living out of their cars. We're just in these early stages of seeing what comes next. I guess what I'd love to talk about is—what do you think the impacts are when a new model comes along that basically crushes fees to zero, And also, you know, redistributes ownership and control to the users, versus another 10 people in Silicon Valley, that were already rich before this.

 

Joseph Fuller: You covered a lot of territory there. I want to make one retrospective point and then talk about your question. My retrospective point is, I think there's been a big difference between platforms that had an asset arbitrage element to those that had a Labor Rate arbitrage element. Actually, some of the secrets of some of the bigger ones like an Airbnb and Uber is that, to my mind, they really have as much to do with putting other people's assets to work for you in ways that weren't immediately apparent to them.

 

The second thing and this is something I sometimes get in a bit of an argument with my labor economist friends, but my belief is that models like that came into account. It came into being not and did not create a low skill, low paid underclass. They came about because there's a very large people with very limited skills, and therefore, the business model recognizes that there are people who—being basically a property manager, basically a driver—there's a large population of those people, and therefore they are available at very low prices. Since the whole business model relies on that essential barbelization, the economics that you're describing, it's highly vulnerable to what you're seeing now in jurisdictions like California suddenly saying, “We don't like the socio-economic impact of this, so we're going to raise that unit cost of labor, which will drive the demand function back down the curve.” Now, in terms of the effects of the next generation of that as you're trying to build, I think, the first is that it creates immense pressure on the existing capacity, and what we've seen regularly when you have new business models that have structurally advantaged economics is not that the incumbents say, “Oh gosh. Too bad. I guess we'll go out of business.” So there's a death struggle that goes on for a long period of time. And clever incumbents will figure out ways to introduce new features, change the value proposition to try to keep the carousel spinning. The second thing that happens is that there is a history of cooperatives. And in some ways, one could analogize between what you're doing at Braintrust and, historically, cooperatives. The history of cooperatives is not very encouraging.

 

Gabriel Luna-Ostaseski: Yeah, poor incentives, right, Joe.

 

Joseph Fuller: Yeah, it's exactly—it's incentives. There's a certain tragedy of the commons working in there. Also, a cooperative where everybody has essentially look-alike economics—not in terms of rewards but, more or less, they're the rate of demand for them, the rates they get paid, the volatility of the demand is very similar; but as soon as you have a very diverse population, all of a sudden you've got problems reconciling people's interest. And frankly, it's an unusual person—you guys are in that category that have this type of vision. Most people that take advantage of your platform—by that I mean, you know, become professionals on your platform—they haven't thought deeply about how this all works at a structural level, but they can get aggravated by something that happens, or worse yet, can have some really bad ideas that they start sharing with a bunch of other people on the platform, because it's not a bad idea that’s evil or sinister or cynical, it's just that they don't really understand how this works. And if and when the leadership starts saying, “You don't really understand how this works, we need to—let me explain it to you,” in this day and age, that's more of a view of cynicism and as a confirmation that there's something not credit-worthy going on the knot. The answer becomes one of participation and access to the economic value created, but a very very clear set of governance mechanisms.

 

Gabriel Luna-Ostaseski: Yeah.

 

Joseph Fuller: I’m just saying that you won't have—this is gonna be a slightly awkward phrase, but cooperative with corporate governance. Not a cooperative with democratic governance.

 

Adam Jackson: So, corporate governance, meaning there's a clear visionary leader, sort of centrally-kind of leading the network in the effort?

 

Joseph Fuller: It means that there is an allocation of decision rights. That's very clear. I’m going to use a rather bizarre analogy here, but as far as I'm concerned, the single, most obvious variable that explains the success countries have had responding to COVID is the degree to which technocrats are in charge of the response.

 

Adam Jackson: Sure.

 

Joseph Fuller: And there are some other mechanisms like they had modeled things like this or they experienced things like this. So the tiny Taiwanese were great at this, because they have a technocratic government, but democratic, fiercely contested electorate there, so it's not China, but democratic—it's technocrats in government, they had done—dealt with SARS, they dealt with a couple of massive earthquakes, they had warred game the hell out of this, and the various institutions already had lots of familiarity with each other and they they already knew what they needed to do to respond. Success, as opposed to the US, with greatly distended decision rights—local, state, national, lots of—very few technocrats in policy-making decisions. Such a big government that there are multiple different technocratic institutions that you have to align, all of which feed themselves as—

 

Adam Jackson: The sort of corporate-led green zones, right. Like, you're better off being a citizen of Amazon than you are a citizen of California.

 

Joseph Fuller: Yes. Exactly. And so, you have decision rights about information—you distinguish the information rights, consultative rights, decision rights, if there is going to be some representation of the commons, their rights and privileges and the mechanism for doing that is known, and the only thing you know about this type of structure is whenever a right or privilege is conceded to the members of the cooperative, it is permanently conceded, it can never be withdrawn. So you have to proceed with extreme caution. You want to have it—on one shoulder you've got your idealistic “we're changing the world for the better” angel, and on the other, you've got your steely-eyed “this has to work for everybody, and someone's got to run it” angel. And I'm calling them both angels, because if that second one isn't there, the vision fails.

 

Adam Jackson: Yeah, I appreciate the analogy. I think it may mean that that's a government versus business analogy, and I think business is far simpler than government. The stakeholders are simpler than motives or you can almost boil it down to kind of mercenary. So we’re doing—I love talking with someone who thinks about governance on this. We're running a lot of experiments here with Braintrust, but one of the more interesting ones is around governance, and so we are a tokenized network, meaning we have the tokens secured by blockchain instead of shares of stock. It's not a company, it's a global organization and one token equals one vote. The only way to get the tokens is to help build the network, and that means invite talent, curate talent, invite clients, code, actually physically build the network for us—we have now almost 1000 people doing all the above. And you can’t buy the tokens. You can—we've sold a small number to some VCs just to help us bootstrap the thing off the ground, but in general, we're not in the token-selling business, we're in the network off it. So then fast forward, what you get—so, we're on the run of what's called the sort of progressive path to decentralization, where everything starts very centrally-controlled today, but we will eventually—Gabe and I aren't going to go away completely, most likely, but we certainly won't control it after a while. What then happens is one token, one vote; you can delegate if you like but we think that's interesting, because what if the Uber drivers, instead of just being utility—people who execute a function on a network actually had a vote. Or what if the Door Dashers actually had a vote? Do you think when DoorDash decided to start pocketing all the tips that the Dashers would have voted for that? Or when Uber decided to pocket all the surge pricing? Our theory here is that when the network can vote on things that matter, it will continue to vote in favor of its constituents, instead of this disproportionate fee-extracting middleman. That's what we're here to do is kill that middleman and turn him into software.

 

Joseph Fuller: Yeah. Well, I completely get the vision. It’s to the extent I am capable of understanding crypto networks and tokens, I get the—I applaud the vision. What I would say is having a structure of governance is not anti-democratic and it's not, doesn't in any way, work against the model you're describing. The question becomes, vote on what? So, in any—in a conventional public company, you get to vote for or against the slate of director nominees, and if there's an activist, there may be some who were put on the ballot by the activists that’s not recommended by management, or you get to vote on the auditor, you get to vote—advisory vote on the compensation package, and things like that. If you vote in the presidential election. You know, you will have the choices available, but we don't ask people to vote on should there be 10 or 11 carrier battle groups in the Navy or should we add to the—there was actually once a national mohair stockpile (doesn't exist anymore) but back in the day we didn't ask people if we should add to the National Air stockpile. So there. There's something between mohair and should we do something that would fundamentally affect the legitimate expectations of people who own tokens.

 

Adam Jackson: Yeah, I mean it's sort of the California proposition system. Right. Which is what—

 

Joseph Fuller: Yeah. Right. Exactly. Exactly. And one of the best things that ever happened to Massachusetts is there was a fierce fight on the proposition system, and this is in 1920, I believe, and was barely defeated. And thank God.

 

Adam Jackson: Living in the Republic here. Many good arguments against our direct or valid proposition system. But again, I would push back though. Business is easier than government. Here in California, where the proposition system has gotten this thing where anyone who bought their house before 1980 doesn't pay property taxes anymore. Well, congratulations. Now it's all—now we have a 13 [inaudible] percent income tax to subsidize people who live in their homes for free on the ocean. That's bad governance, but it's government, right, it's not business.

 

Joseph Fuller: It wasn't the design intent either, but it's a good lesson because right with a very specific design intent, very idealistic, progressive year of, you know, gold star initiative, suddenly gets perverted and that's what happened with green mailers. You guys are probably too young to remember green mailers, but they were the original activists who would buy a bunch of stock and basically browbeat a company into buying their stock back at a price above market to just go away, that we didn't open—no one who was at the original—in the early days in the New York Stock Exchange ever envisioned that perversion of the system of spreading risk.

 

Gabriel Luna-Ostaseski: Joe, we'd love to transition to something we call the lightning round.

 

Joseph Fuller: Okay.

 

Gabriel Luna-Ostaseski: So the idea here is kind of like a stream of consciousness, one or two-sentence answer of the first thing that comes to mind. There's no right or wrong answer.

 

Joseph Fuller: This is risky. I'm not good at short answers, as I've proven to your listeners.

 

Adam Jackson: Well, as long as you don't have a hard stop, we'll keep going. I'm throwing you into the conversation.

 

Joseph Fuller: Actually, I do have somebody coming up, but let's do a quick lightning round and then we can live to fight another day if that's—

 

Gabriel Luna-Ostaseski: Then you get to poke and prod us on your podcast—

 

Joseph Fuller: Right. There you go. And my revenge will be sweet.

 

Gabriel Luna-Ostaseski: Alright, so first one is, what have you learned about yourself during shelter in place?

 

Joseph Fuller: I have learned that I am singularly bad at being bored. And it's very hard to resist the temptation during an endless number of Zooms not to have an inventory, let's say, of articles I want to read open on one side of my screen and zone out, and then somebody says—oh god, I really don't know what the last five people said, so I have to battle that.

 

Adam Jackson: That's fair. Joe, what's one old way of working, pre-COVID that you hope never comes back?

 

Joseph Fuller: That's an interesting question. I think it would be elements of lots of jobs that require hugely inefficient and unnecessary travel. It’s the wear and tear, as a former CEO, the wear and tear on me, the wear and tear on my colleagues, the green effects. I mean there are all sorts of things which are going to get revisited, and I have a lot of sympathy for the people in the hospitality and travel industry that could be affected, but this crisis, I think, will lead to, on a pro-rata basis, 30-40% reduction in business travel is just historical anomalous.

 

Adam Jackson: I hope you're right.

 

Gabriel Luna-Ostaseski: All right, Joe. So, Silicon Valley, traditionally, has been kind of the mecca of technical talent and, you know, one of innovation for the past few decades. Do you believe post-COVID and and in the next decade, Silicon Valley on the way up or on the way down?

 

Joseph Fuller: I think on the way down. I think the quality of work life issues will have this magnificent topology, and all those things that I talked about earlier, that people don't use but cling to our counterweight to this, but it's everything from the housing costs, commute costs, and if you look at the unemployment rate for engineers by date of birth, in California, it goes up consistently. And it doesn't turn out to be rooted in that you're 50, you're incapable of learning a new language. It's if you’re 50, you're unwilling to work 75 hours a week, whether it's what's expected in what jobs are available, or you don't want three hours in your car every day, or whatever. And then things like—we know that people move relative to marginal tax burden. You want to see a community that's booming right now: Boulder, Colorado; Creek courtesy of Sacramento, California; Salt Lake City, courtesy of Sacramento, California. And we know this in Massachusetts because of tax and other policies in Massachusetts in the 70s and 80s, we created Southern New Hampshire's a place where actual businesses ended, as opposed to nothing, which is what it had in the 50s and 60s. So I do think that all adds up. Also, you're not, you're just not—yeah, for venture capitalists and whatnot, they'll still be that allure, because if I'm on 12 boards, they all have to be within a 45-minute drive of my office. But now the type of work practices, types of things you were doing at Braintrust are going to allow more geographic dispersion.

 

Adam Jackson: That's a good segue actually, what do you think are the attributes of the companies that will be winners and losers in the future of work?

 

Joseph Fuller: Winners are going to have a sharp focus on quality work life for mission-critical workers, and they're going to get off the ridiculous association of mission-critical workers are senior and have big titles. One thing COVID has done is show us who really the essential worker is. I don't have to go to Harvard Business School, but the security guards do, and so, there’s really thinking about who drives value-add in your strategy and how the whole package works for them. I think that, by the way, substantial care-related benefits are going to, over a long period of time, like 10 to 15 years, asymptotically approach health benefits as a—and this is assuming you don't end up in the single-payer model as important in job selection. I think companies that are going to be successful are going to be those that understand that they cannot graft change into their organization. A good example would be in AI domains, companies have traditionally looked at AI through the lens of how do I use AI to improve my current process. I mean that's, I can't think of a dumber way to frame the question. What can this do when I have to arrange a process, is the right question. So companies who are going to fail continue to bring that mentality—bring a risk-averse mentality. In companies that do not find ways to have a dynamic access to talent. I'm not trying to play to the audience here; this is very consistent with my written—my published work. One of the things that is going to accelerate the decline of major European companies as being powerful in the global stages—they have hopelessly illiquid labor markets. A lot of European friends used to have like 11 offices there when I was a CEO, but sorry, you cannot—if you're hamstrung about how you can access talent and where they have to be, you're just not going to keep pace.

 

Adam Jackson: Joe, it's ironic but two of our biggest clients on Braintrust are Nestle and Porsche.

 

Joseph Fuller: Actually, I’m not surprised. Nestle's a truly global company. And as you know, has got very strong managerial control at the country level. Porsche has stayed a company that always wants top talent. I just wish I could afford their products.

 

Gabriel Luna-Ostaseski: I think we're wrapping up here. Maybe one last question and we'll do a wrap here. So this one kind of comes from, or is inspired by a famous contrarian, Peter Thiel. What is something that you believe in strongly, that's an unpopular view today about the future of work?

 

Joseph Fuller: Well, I can think of two, but I'm only going to say one out loud. I don't believe that the vast majority of people want to have two-dimensional relationships with colleagues. I think the vast majority of people are intrinsically social. That is an expression of humankind. Working together, whether you're building pyramids or writing code, that creativity is enhanced by interaction of different types—there's a lot of literature on that. We're gonna have to get to some next normal, which allows for that, while learning from the many insights, like, we don't have to travel so much, you can be more—you can make more accommodations for people's quality of work life, things like that that we have learned and we're learning through this, but I don't—the future is all really great Acer screens and 5G, and that suppresses things that a lot of what's actually important about work is to human beings.

 

Adam Jackson: Joe I could go two more hours with you, this was such a fascinating and an enjoyable conversation.

 

Joseph Fuller: I'm gonna have to think about stealing the lightning round for our podcast. I think it's a great idea.

 

Adam Jackson: Thank you. Yeah, it's fun. So, Joe, tell me where people can read more about you, find you, get in touch with you?


Joseph Fuller: Well, Harvard Business School is a very easy place to access, so if you were interested in some of the things we've done—our podcast series, are our writing, our newsletter there—you just Google, “Managing the Future of Work, Harvard Business School, Joe Fuller” and it's going to usually be the second site, because our Managing the Future of Work executive education ad will appear at the first site. But also, you can email me through—actually, my biography card at Harvard Business School, there's a click to email, but it's pretty easy protocol—jfuller@hbs.edu (like education), and we're going to continue to turn out a lot of research, we got some new things coming that I'm pretty excited about, particularly some things that are going to talk about economic opportunity and equality, which I wish I was—I'm delighted I didn't have the ability to anticipate the situation we have on our hands now, but I'm also pleased that we understood this barbelization of incomes was—is a deeply pervasive and threatening thing, and we've been researching it, and more on that this Fall.