Automattic CEO Matt Mullenweg on building a fully distributed company

Read Matt’s history of Automattic: “On Building Automattic.”

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On today’s episode, Automattic editor Mark Armstrong interviews our usual host Matt Mullenweg to discuss the history of the company and how its distributed culture emerged from conditions that many startups face. They go deep on the tools and processes Automattic has developed to keep everyone connected, even if they’re scattered across the globe.

The full episode transcript is below.

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Mark Armstrong: Hi everybody. Thanks for joining the Distributed podcast. I’m not Matt Mullenweg, I’m Mark Armstrong. I’m the founder of Longreads, which is part of Automattic, and I’m on the editorial team working with Matt on the Distributed Podcast.

So today I wanted to take a step back from the interviews Matt’s been doing and find some context for how Matt got here in the first place, how he became interested in distributed work, and it all starts with the history of Automattic. So that’s what we’re going to talk about today. We’re going to talk to Matt about how he got here, how he actually decided to build a company that had no offices, and what worked and what didn’t. Thanks for listening.

Now where are you right now?

Matt Mullenweg: I’m actually in San Francisco, California.

Mark: And I am in Seattle. This is basically how we record this podcast for people who are remote. We have a Zoom connection, we use GarageBand, a tool called Zencastr, and we put it all together and it sounds like we are having this intimate conversation right next to each other. But this is a very good symbol of how distributed work has changed and the technology has changed.

Matt: Yes. 

Mark: So take me through the very beginnings of Automattic and how you ended up with a distributed work model in the first place.

Matt: Well at the very beginning I had moved from Houston to San Francisco, actually, to take a job with CNET Networks. And they were actually an early adopter of WordPress. So they offered me a job as a product manager to drop out of college in Houston. I drove across the country with my mom and got a little apartment in San Francisco.

Mark:  Did you apply for the job?

Matt: So what had happened was, I had said if I hit number one on Google for the search term “Matt” I would shut down my site and go out on top, like MJ. So that happened. Partially because most WordPresses included a link to the main developers, of which I was one. And they all said “Matt” and so those links started helping me rank first for Matt. So I just replaced my site with a little black screen that said this happened and I came out to San Francisco. Because this got some news when this happened. A bunch of people reached out.

Mark:  So at this point, you had already started WordPress. Did you already have in the back of your head the idea of building a company around WordPress or were you thinking, well this CNET thing will work out for a couple of years and see how it goes?

Matt: I’m guessing this was probably 2004. At the time, there was no indication that anything related to WordPress could ever make money. [laughs] It was very much a voluntary project. And there weren’t really examples, certainly not as there are now, of consumer open source becoming a commercial thing. But what I did know was I was already collaborating with folks all around the world having a blast and using basically all my free time to get online, hang out in IRC, which was kind of like an early pre-Slack chat system, and basically code with these people who were also passionate about making publishing easier.

Mark: So you’re doing all this work on something that you love and then you’re commuting into an office in San Francisco. What was the office experience like? Was this the moment where you were like, “I never want to work in an office again so I will never do that?”

Matt: No, the opposite. It was amazing. [laughs] CNET was one of the first companies to actually set up a headquarters in San Francisco. Most of the major companies were and are down in Mountain View or Cupertino or some place else in the Bay Area… San Jose… But I looked very, very close to the CNET office and then when I moved in, my patron there, a guy named Mike Tatum, got me this really cool office right above the door, like a corner office. 

And I remember this VP came by and in the course of the conversation, “Hey, where are you from, how are you doing, what you going to do here,” etcetera, he started to look around and be like, “Man, this is a nice office.” You can guess what happened next. Two weeks later I come to the office and there’s a note on my door. “Oh we’re doing an office move.” And I got moved to an interior office in the same section, still on the third floor, but more of an interior, non-window office. 

But then there was a general re-org in the group I was in, and that whole floor got taken over by GameSpot. That was doing really well. And they literally moved my group into the basement, [laughter] the very, very first area. So now I was not just no-window, I was in this very small area and that was around the time I think I started to think this might not be for me.

Mark: So you’re putting together the idea for Automattic as a for-profit company that then would contribute to the WordPress open source project. So you’re viewing this as an opportunity to merge the two ideas of the non-profit, open-source side and a for-profit company that feeds into it. Is that the original idea?

Matt: So the original idea I actually pitched at CNET. They had a lot of cool domains, famously com.com, download.com. And one day I got a list of all their domains. They had probably a thousand from different acquisitions and stuff. And I went through them and I was like “All right, well, could be cool.” And I came across one called Online.com. 

So the idea in the pitch I made to them was let’s make a version of WordPress that anyone can start with. So instead of having to know PHP and configure a database in FTP and all these things, let’s make it self-serve, where you can just click a few buttons and get one. That could be Mark.online.com. It could be your online home and you could have a blog and a profile and all this cool stuff. So I really pitched that quite vigorously.

But at the time what was going on was this colossal battle between blogs and traditional publications and two, every single internet giant had a blogging system but they were scared to call it blogging. So Yahoo had one called 360, AOL had Journals, Microsoft had something called Live Spaces, and then of course Google had Blogger. And so it appeared that all the internet giants — and those were the internet giants at the time — all had something in this space and CNET, one, thought they couldn’t compete, and two, thought that blogs were just gonna be like noise and politics and mess and junk and they were really going to bet on professional publications. 

They were at the time locked in — News.com, which was a tech publication, was battling — or ZDnet was battling with Gizmodo, which was one of the early blogs started by Nick Denton and the Gawker Network, and Engadget from Jason Calcanis and Pete Rojas and those folks were also just getting started. So they saw themselves locked in this epic battle of professional versus amateur and didn’t want to do with anything related to blogging. 

So I said “Well, I have to do this. I’m going to leave and start this.” And CNET very graciously invested in what became Automattic but asked if I could stay a few months to finish up some of the projects I was working on. So I did. But in those few months, I went ahead and started Automattic. I already knew the people I was working with as the other lead developers of WordPress and started trying to convince them to leave their jobs. [laughs] 

And the first one actually was a fellow named Donncha Ó Caoimh, who was over in Blarney, Ireland. And he had started a different fork of the software that became WordPress. His was called B2++, I believe. And we decided to merge that with WordPress and make that WordPress Multiuser, which later became WordPress Multisite — basically a version of WordPress that was multitenant, that could have lots of people clicking a few buttons and starting a blog. And I want to say the second was either Ryan Boren or Andy Skelton. And I was technically the third because I stayed a few extra months to finish up things at CNET, and then we started Automattic.

Mark: Already you’ve built the beginnings of this company and you’ve already got employees that are spread out all over the world. So was that simply, “Okay well, these are the people I trust and want to work with and so we’re going to build a company that way,” or was there more deliberation around that?

Matt: One aspect was definitely having no money. [laughs] I was just paying Donncha and these other folks out of my CNET salary basically, and for servers and things, starting to rack up some credit card bills. So it was very much like — well, moving is really expensive [laughs] and we’re already working together, and, in fact, those were the days when we’d all work very, very long hours. So if you’re working 10 to 16 hours a day, you’re overlapping quite a bit with someone who is, say, in Ireland. And we had this awesome, almost relay thing where I’d work until night and then he would wake up and start working. And then I’d sleep, wake up, and there’d have been a whole cycle of things done to the software. It actually allowed us to iterate very quickly and brought in some asynchronicity very early on to our interactions.

Mark: At this point, how are you communicating with each other?

Matt: Probably we used AIM. AOL Instant Messenger, which is now shut down, IRC, and we were either still on SourceForge, which was kind of like an early GitLab or maybe at this point had switched to hosting the code on WordPress.org.

Mark: So this is a lot of baseline foundational communication that sounds very familiar to me even in current day Automattic.

Matt: We actually still run IRC servers to this very day. [laughs] And some people like to use them.

Mark: Yes.

Matt: But the evolution at the time, AIM was definitely the most popular chatting platform. At some point we switched to Skype again for chat, not really for voice. But I do remember some of those early voice calls where we, for the first time, would talk to each other and have what maybe [were] our first meetings. And the average meeting cadence at that time was probably three per year. We didn’t do a lot of them. It was really very much a written communication style.

Mark: And you hadn’t met in person yet.

Matt: None of us had met in person. Around that time was when I hosted the very first WordPress meetup in the world, which ended up being eight people at an Indian place, which is still there on Third Street, called Chaat Cafe. Those eight people ended up being pretty interesting. There was Chris Messina, who at the time was involved with Drupal Project, and would later go on to invent the hashtag. Scott Beale of Laughing Squid, which is now a large WordPress webhost. Om Malik, who was a journalist at Business 2.0 and later started GigaOm, became one of the earliest WordPress users. And someone who I met for the first time, which was Ryan Boren, who was one of the first major contributors to the core of WordPress. And he was, I want to say, an embedded systems engineer at Cisco. 

Mark: There is a point though where you are going to then bring Automattic to investors and raise some money. How did they react to this idea that you didn’t have an office, [where] everyone was all over the place?

Matt: We didn’t really plan to raise investment in the beginning, we were just focused on making money to be honest. So we thought that we could have add-ons for WordPress.com. I think some of our early ones were custom CSS for customization and domain names, so this would allow people to be a business model. This idea of ringtones for blogs so you could buy customizations or add ons, actually not dissimilar to what we do today. And then we started to also do partnerships with different hosting companies who provided hosting and then could pay us for essentially new customers.

So that was the early business model and that started to make a bit of money, enough where we could each take a modest salary of a few thousand a month. And that was the plan. We didn’t have a ton in the bank, there was enough for a few of us to work on WordPress full time. And that was really just a dream. I mean, the company was created to have a place where we could be paid to contribute to open source and so we were all happy as clams.

Mark: It seems like you had gotten far enough along with the growing group of contributors and employees that you were already proving that distributed work was working. So by the time you ended up bringing in outside investors or other partners, that wasn’t really a question anymore. Is that right?

Matt: I met some different investors, folks like Tony Conrad and others, but I was at this point 21, [laughs] so, pretty young. And that was the era, pre-Zuckerberg, pre-all these other things, where you brought in adult supervision. So the model was really Eric Schmidt. Adult comes in and professionalizes the business. 

And I didn’t really want that until Om Malik introduced me to a fellow named Tony Schneider, who had sold a company called Oddpost to Yahoo It was the original Ajax Gmail predecessor that allowed you to have a very web-application feel in the browser. They were the first to do that, that I had seen. But he wasn’t going to stay at Yahoo. So Om had done a cover story on the company for Business 2.0, and he said, “Hey you’ve got to meet this kid from Texas.” And he told me, “Hey you’ve got to meet this guy Tony, he’s not going to stay at Yahoo too long.” 

So we met and really, really hit it off. Tony is an amazing individual. He came from Switzerland, moved to California, ended up going to Stanford, had a few start ups under his belt, including this very successful exit at the time to Yahoo, and was a CEO. And I was like, “Ah, this guy is my business soulmate.” If this is the adult, [laughs] I can totally bring in an adult — this guy is amazing. And I learned so much from him.

That was with the expectation, that Tony would join the following year when he was able to leave Yahoo. [He] ended up raising the first round for Automattic, which was about $1.1 million from folks who we actually still work with today, like Phil Black at True Ventures, Doug Mackenzie, Kevin Compton at Radar — so that first early round. And I was the CEO for I forget how long, the first however many months before Tony joined, and then we started working together.

Mark: Was there ever any pressure to eventually — “Okay, this is great, I love distributed work but we also need some physical offices?” How much pressure had come in, in those early days?

Matt: Well first we’d just use our investor’s offices. So at the time Blacksmith, which was the predecessor to True Ventures, had a space in the Presidio. So Tony and I would just get together at restaurants and coffee shops and then, if we ever needed to have a meeting or something like that, we’d go to this awesome office in the Presidio. 

Later True, when they formed, moved to this awesome pier called Pier 38. They very presciently were like, “Okay, we’re a VC, we’re only this many people, but we can get this office space that’s a few thousand square feet. Let’s just put a few tables at it.” So one table was GigaOm, one table was Automattic. Upstairs was Bourbon, which later became Instagram. So there was a cool center of early startups that would have a little desk here.

Tony and I would go in there and meet or work from there but there was no reason to try to move the rest of the company there, because they were perfectly happy being where they were. I think Donncha was just about or had just gotten married. Immigration seemed really tough; there were a lot of barriers. So I was like, “Well, this is working, so let’s just continue to hire people wherever they are.”

However at the time it wasn’t clear that that was the thing we were always going to do. A lot of investors said, “This will work when you’re 10 people or 15 people, but at some point you need to get an office or you need to bring everyone to one place.” So we always kept that in the back of our mind as something that we might need to do. And [we] always had this small headquarters, first a desk, in the True Ventures space. And then we moved across the hall to a bigger space where we hosted lots of events and meetups. 

This idea that we needed something to be the official address of the company persisted really until… gosh, when did we shut down our office? Was that 2016?

Mark: It was a couple years ago, mhm.

Matt: We actually continued having a headquarters really until then. Partly this idea that on average, as we started to scale, about ten percent of the people we hired were in the Bay Area, and the ones who did like to go into the office in San Francisco. We assumed as we got bigger and bigger that the ratio would continue at 10 to 15 percent. And it turns out it mostly did. 

But what changed was that traffic and everything got so bad, parking got so bad in San Francisco, that even the people we’d hire in the Bay Area didn’t really want to commute. And then the tools for collaboration got better and better and so they didn’t really need to.

Mark: It’s interesting because there is a lot of this early Automattic history that you’re in San Francisco and you need to be in San Francisco physically in terms of the existing power and money, I guess, to be able to get a foothold for the company.

Matt: I think I felt like that as the leaders of the company we needed to be in San Francisco but the rest of the company didn’t. So it was great for Tony and I. We actually didn’t really have any new funders until 2013, 2014. And we were relatively unique at the time in that we had one West Coast VC, Blacksmith, later True, but our other investor was on the East Coast, called Polaris. So we were already distributed from our initial funding and that was unusual for an East Coast VC at the time, to invest outside of their geography.

Mark: Will we ever get an office back in San Francisco?

Matt: Yes, we probably will. [laughs] If something really interesting comes back up we’ll get a small space but it will probably be a secret. It will probably be just for board meetings and investor stuff, not something that is really an office like we have had in the past.

Mark: I want to switch over to some of the culture inside of Automattic since the early days. Automattic has its own creed. For those of you who have not read it before, you can go to Automattic.com/creed. But one key line from that is “I will communicate as much as possible because it’s the oxygen of a distributed company.” 

I know how it is today, and we can talk about that in a second, but in the early days did that mean that every single conversation was public, and there were no private conversations? What was transparency and communication like in those early days?

Matt: Yeah it really was, because there wasn’t really any reason to not have everything be open. The whole company was in one chat room. We had no teams, we had no managers, it was totally flat. We just organized around projects and code really. And there was such an advantage to knowing everything else that was going on. And we were doing enough things that you could know everything else that was going on and there was a lot of information sharing, or seeing the flow of code commits and code changes and conversations.

You got a shared collective intelligence of everyone at the company pitching in on every idea. So although we didn’t have formal product managers or a ton of designers or things like that, because everyone was using everything. We use WordPress ourselves, and seeing things that went through, you got a lot of real time feedback, almost like real time user testing with your colleagues, that ended up speeding up the iteration cycle and leading to some very usable products, even in the early iterations. 

Mark: That probably brings us to P2, [which] I believe was introduced in 2008. So for those who don’t know, P2 is essentially a WordPress theme for groups to share status updates with each other. I personally still see it as the foundational tool of all communication inside of Automattic to this day. But I went back and looked up your first post on Update-A-Matic, which is the all-company blog inside of Automattic, and I can see that you wrote the quote “Finishing up meetings.” That was the entirety of your P2 post.

Matt: [laughs] Well it was pre-P2. We just had an internal blog and we used it much like Twitter, which at the time was called TWTTR. The idea was just that — originally the prompt on Twitter, which is “What are you doing?” or “What’s going on?” or something like that. And so you would post literally whatever you were doing at that second. [laughs] So, finishing up meetings… 

Mark: This is like people tweeting what they had for breakfast or whatever?

Matt: That was the goal, actually. So a way for us to put things on there. And then we started to see that it was useful to have a place that you could have comments on or could do threads. We used it for keeping data. 

Mark: So P2 was not introduced yet as an actual thing, this was still just the internal blog?

Matt: It didn’t come until many years later. So it was really just this internal blog in IRC. What was, from the very beginning of Automattic, was this concept of meetups. Actually early on we did two ,I think, in one of those early years with five to 15 people. 

One that stands out in my memory, because it was an utter disaster, [laughs] was Stinson Beach, which is a place where I think we all fit in one, maybe two homes. We went on Stinson Beach, which is north of San Francisco, and we didn’t really know what to do at a meetup. So I think we assumed that we should just have all day long meetings and debates. [laughs] This drove, I won’t name who, but it drove someone crazy and it ended up being — I think there was a walk out of one or two people. [laughs] Voices may have been raised. It did not go well. 

At the time the valid feedback was, “Why are we sitting around, just arguing about things for hours and hours, not getting anywhere, not driving to decisions? And, by the way, we could do some of this written. Why does it need to be in real time, people reacting to information versus considering it, thinking about it and writing a response in a deliberate way?” Which — if you think about it — is a much, much better way to have a debate or an exchange of ideas than people just reacting in real time to whatever information is popping up in their head.

So that first meetup was a little bit of a disaster [laughs] and we decided to move them to once a year [laughs] and make them more organized. So we introduced the concept of meetup projects, or hack weeks. So the idea is we would get together and start and launch a number of things during that week as a way to do things we wouldn’t normally do, and just have fun. It was very much getting together and just working intensely alongside someone. [Which] was, and honestly still is really fun, [but] was hard to replicate with the tools at the time.

Mark: I think that holds to this day, this idea that the meetup should be a social event as well because you’ve got the entire rest of the year, and you have all of these tools in which you can organize and communicate and brainstorm. And so really pinpointing the specific things that you can only do in person together — and that’s also building relationships and building trust with each other — that you can then go back and be honest on Slack and P2. 

Matt: Exactly. Those meetup projects ended up creating a lot of things that became very crucial to Automattic today. So it evolved what first was called Prologue, which was the early version of a theme for WordPress, which put the posting on the home screen, so again, very much like a Twitter built on WordPress that looked a lot like what early Twitter looked like at the time, which was just a box and a list of posts.

And then that evolved at a later meetup into what we call P2, which basically took Prologue and made it real-time, so that as things were posted they would show up without you having to reload the page to get new comments or anything. So that was the evolution of what became what was and still is to this day the most important communication tool inside Automattic.

Mark: It’s an interesting segue to today because you’ve got P2 that are now hundreds of P2s, team and project P2 websites across the entire company. And then we have this global search tool in which people can search across every one of these websites. We also have a field guide which is more evergreen pages of documentation. 

But the P2 is where most of the deep communication is. And I’m raising this as a segue to today because seeing your original “Finishing up meetings” post and then seeing a post just the other day from Nick Momrik on our HR team, about the growing word counts of our P2 posts [laughter] as a trend, I think we can see that P2 has not fundamentally changed but how we use it has changed, especially once we started to embrace something like Slack.

Matt: Let me paint a picture of P2 so people listening can know what it’s like. So imagine on, kind of like a website, with a main area and a sidebar, and in the main area there is a post box at the top so you can type in there and click “post” and it shows up immediately, much like a Twitter or a Facebook. Below that is something that can be a post of any length but all the comments are in-line, so all the conversation happening next to a post, which again, doesn’t need a title, can be right there, and they pop up in real time. 

And on the right, on the sidebar, can be widgets that allow you to search, might have a list of people on the team, could have a schedule, could have notes, could have links to things, to resources, could have target launch dates or a countdown timer. And so the sidebar — it becomes kind of like your ultra-customizable home page for your team or project. 

The key for us was, as you mentioned — transparency was our default for most of our communication. The one thing that didn’t really work for that was email. So we’d email each other ideas and threads and brainstorms but then if someone new joined the team they had no way to catch up to those emails. And there was all this intelligence and data and wisdom being lost in people’s inboxes. 

Also, our email was busy at the time because support was all done through email and “support@” was just an alias for “everyone@.” So every support thread we got would go to everyone in the company and whoever replied first would claim that email or that ticket. 

So P2, Prologue, this internal blog, became a way for us to eliminate email. So anything that I would normally email, let’s say “Hey Mark, I’ve got this idea for a podcast, I think it should be X, Y, Z.” I would just post that as a blog post and you could see it whenever, and you still got that general intelligence that anyone else could see it and choose to interact with it or add their two cents to it, which is both a blessing and a curse. [laughs] It’s a blessing when you want the two cents and it’s a curse when you’re crushed under a sea of pennies. 

Mark: I want to go back to today. One could argue, at least from my experience — I joined, just for the record, in 2014 — but one could argue the past two years at Automattic have seen some of the most dramatic changes since you’ve started organizationally. We’ve grown very quickly. We’re now at 900 employees. And where we once were a strictly flat organization — we made up our own titles — we now have executive roles, product roles, and actual hierarchy. Can you talk about what’s changing and why at this stage and why it’s important?

Matt: Sure. A common misperception about Automattic was that we were non-traditional infrastructure. And that probably stems [from] — I avoided creating any hierarchy or really teams or normal company structure until we were maybe 50 or 60 people, and it became really, really necessary. So that’s where that comes from. But really since then, which is, by the way, the time chronicled in Scott Berkun’s book “A Year Without Pants,” which was — he was joining partially because I was like “Oh we need someone who’s done this before to help us create these teams,” but ever since then we’ve had a completely normal org chart, a completely normal hierarchy.

Although I’m a strong believer in how we work being non-traditional, distributed, it’s still really important for lines of accountability and for people to know where they fit and have one-on-ones and all those sorts of things. So that part of Automattic has always looked kind of normal. 

Mark: Essentially we’ve got team structures, which are — teams can be, what, eight to 10 people per team and they’ve got a specific focus? What is the ideal team size?

Matt: How we have approached Automattic is in a fractal way. So the idea is that if you zoom in or zoom out of Automattic it looks like the structure that is self-similar in many ways. So when Automattic was ten people, we had a designer, a businessperson, a bunch of engineers and we’d all work together to iterate on our area. 

So our team structure inside Automattic is very much modeled on that cross-functional idea where you get everyone together and you just — it’s that classic idea, a two-pizza team or whatever you want to call it. Get people working together with the autonomy and all the know-how that they need to ship and iterate with users, ideally as frequently as possible. Then when that gets too large, much like cell division, you split it into two identical teams and now you have two teams of, let’s say five doing cross functional work. 

As that grew, we eventually had divisions and now business units that are made up of divisions. Our largest business unit probably has two hundred and sixty people in both product and engineering and design. But still, if you zoomed in on one of those teams it would look very much like the teams that we had a decade ago.

Mark: And the tools too look very similar. So we still have the P2, as we’ve gone over, we use Zoom for video conferencing, as you and I are doing right here, then of course Slack came into the picture. That was shortly after I joined the company and that very much started with you, right? I feel like we were experimenting with it and then you decided let’s go all in.

Matt: I appreciate the credit. [laughter] With many things at Automattic, we give the teams a lot of autonomy. So we tried to adopt HipChat before other things that were a little better than IRC. It just didn’t take. I want to say probably the mobile team or there was some team inside Automattic that adopted Slack and then it was optional for people to get on it. Many, many did and we utilized their free version. 

I also knew Stewart from his Flickr days and so I knew a lot of the people involved with it. And in fact, a very early Automattician joined Slack pretty early on. I think she was one of the first 20 or 30 there. So we had that connection as well.

It just got so good. And my decree was more that we still had a chunk of the company that was really holding out on IRC and didn’t want to sign into Slack. And for communication tools it’s really, really important to have everyone on the same thing. And we were going through a lot of growing pains. Our non-IRC was mostly through Skype, or if IRC would go down we’d use Skype and that was just really awkward because then you would have to add everyone who joined the company manually. So it was just a very weird process. 

And so Slack, everyone being on there, the directory, all the things that everyone knows and loves about it, it was just so darn convenient. It really seemed like a better version of IRC. And, in fact, a lot of the conventions in Slack are directly modeled after IRC, like the reason why public channels have a hash in front of it. That is taken directly from how most IRC clients work. So it was pretty natural and, just for communication standardization, seemed important. So that was what I think eventually got our Systems team onto Slack.

Mark: I think it fundamentally changed how we even used our other tools, like P2. Whereas P2 maybe was more of a conversational tool in the past, now it’s a little more announcement-focused or this is our plan-focused [tool]. What would your take be on how P2 has evolved in the world of Slack?

Matt: It totally depends on the team. I would say this is one of the things that has changed most. I don’t know if it’s for the better but I’ll observe it in a neutral way. That as we hired more and more people that then come from the online collaboration or open source space — which, to be honest, there’s only so many people who have worked in an open source project or things like that. [laughs] They brought an approach to P2 that was a little bit more like announcements, like you said, and more meeting-centric, so needing more of that kind of synchronous real time communication and get everyone on the same page. 

And I think that coincided a bit with Zoom, which honestly makes meetings a lot easier than they’ve ever been and more pleasant than anything we’ve done in the past. So I think also people just wanted to connect better. We have a lot of psychological diversity in the company. I would say early on [we were] very much composed of introverts, including myself, for whom text was really our first choice of communication. And as the company grew, a lot more extroverts, or people who wanted to use voice or see each other as they converse. And so it was hugely controversial early on, even the idea that we’d have an audio-only meeting was widely debated for why that’s needed, if for nothing else than it’d be inconvenient for everyone not in a couple time zones. 

But teams can choose their own way. So as more and more teams had more and more people that were maybe composed of these or that wanted the real time synchronous communication and the tools got better, we started to use that more. And so on a team-to-team basis it varies a lot. 

I love, for example, our VIP team — that’s the enterprise part of Automattic — uses P2 I think the best of any team or division within the company. They put really everything through it. Their Slack is still busy but they really put a lot of thought and their P2 is great to read. It’s funny, it has GIFs, it’s fast, everyone has it pretty dialed in there.

Other teams have gone to where they might only make a few P2 posts a month, which if you’re doing that you’re not using it for daily communication, you’re not using it for real-time saying what you’re doing and keeping people up to date. You’re using it more like one-way announcements.

Mark: This raises the question of what skills are necessary to succeed inside of Automattic? Because I think there is a little bit of a — with P2 being so central and with written communication being so central and the fact that WordPress.com is a website and a blog hosting platform — that a lot of the most successful elements come around being able to blog internally as well. Do you believe that’s true?

Matt: I try to be pretty active on P2s. Call it an average of maybe a hundred posted comments per month. And my total word counts, I think it’s over a million words now that have been posted to these internal sites. And it’s really one of the richest treasures I have in my time in Automattic because everything is archived, everything is searchable, everything is there. And if I need to remember what I was thinking in 2012 when we made X, Y, Z decision, hopefully that decision is documented and the debate around it, and it becomes this huge source of wisdom, which I think allows the company to evolve in a more informed way. We try to only make new mistakes in having that entire history of the discussions and the collaboration that led to where we are today on these internal blogs. I think it allows us to move faster, smarter and better as we blaze a new trail.

Mark: It raises some other questions about talent. And one of the great promises of distributed work has been the idea that we can find talented people all over the world. But there are also trade-offs to what skills and talents this culture prizes versus, say, an in-office culture that’s more extrovert-focused or verbally-focused. What would you say the major trade-offs are and are they worth it? 

Matt: As I said, different teams work different ways. So there are teams that do very little written communication and communicate mostly through Zoom or audio or things. And so a nice thing about Automattic is whatever your work style is, you can generally find a team that matches that. If you want to be on a team that uses IRC and then basically never has any Zoom meetings, we got that. If you want to be on the team that has daily stand-ups, we got that too. And so by switching teams or divisions within Automattic you can get what might — you might need at a different company to switch companies to find your ideal work and collaboration style.

Q: You have mentioned here if a team wants to experiment with something — what are the experiments that you have maybe heard about recently that we haven’t tried inside of Automattic that you think we really should prioritize and try?

Matt: One that has come up is Invision, which is a distributed company, actually has everyone work East Coast hours. I don’t think that would be right for our entire company. We’re already too distributed for that, but it would be interesting if a team which was largely American-based agreed to overlap the exact same hours, if they would find that beneficial or just inconvenient. 

So that’s how I would want to approach any of these experiments is, say, find a team, at least 10 people, 15 people, who want to try something out, and see how it goes and have them do it for a fixed time period. Do a pre-mortem, do a post-mortem, see what are the learnings from it, and then what are the next actions we want to take from those learnings. 

Q: Is there enough creative tension or friction in a distributed company that maybe some form of self-censorship takes over, or we’re too polite with each other and we don’t raise the questions we need to raise? Do you think that is a valid concern?

Matt: This is why I have become relatively recently obsessed with the idea of an idea meritocracy. Have you read the book “Principles” by Ray Dalio yet? It’s a really impactful one in that you’re not going to agree with it but it will make you think differently. And one of the things he emphasizes is even in their in-office culture that the comfort that people have with challenging ideas and the openness people have to their ideas being challenged is crucial to getting the best outcome. 

Because if either of those is missing you get sub par outcomes. And because when you’re communicating on text it can be so easily misread, people hold back. I do think that’s 100 percent true. It’s less bad on audio or video but definitely in text communication you just don’t have that nuance. All the emoji in the world can’t recreate the kind of timbre and tone of voice and all the additional data we get when we’re actually talking or seeing each other. 

I think a lot about that, and I’ve been thinking a lot about how to foster that. Google talks about psychological safety being key to the high performance of teams. How to foster that where we think that good ideas can come from anywhere and everyone is comfortable presenting and defending vigorously anything they believe in.

Mark: One other thing I’d like to do real quick is just a quick speed round in equipment breakdown. Tell me a little bit about your workspace. Now you travel a lot; you’re in a lot of different cities, tell me a little bit about your must-have items?

Matt: [laughs] Yeah, check out the What’s In My Bag post for the kinds of things I use every single day. It’s the 15-inch MacBook, it’s the cables, it’s the Sennheiser headset for being on calls. I find audio quality is far more important than video quality for creating a great meeting. At home to me that’s the ultimately luxury. [laughs] 

My favorite part from being distributed is when I am able to work from home, which is probably a minority of the year, but I love it because you can have your music you like. I like having a candle on the desk. [laughs] I like the temperature to be a little bit warmer because when I work my hands and feet tend to get extremely cold for some reason. Normally they’re fine but for some reason when I’m on the computer they get ultra cold. I recently installed the instant hot water thing at home. So in my sink I can get near boiling water and make tea. On my desk I always have a notebook. I love paper notebooks for writing things down, I find it’s a lot less distracting than trying to type things out. 

For a while I used to try to have desktops, like an iMac, and in fact the new iMac Pro is — I still have one of those in Houston. But I’ve really gone to where I like a great monitor, [and plugging] it into the 15-inch is the easiest. And I love these new ultra wide monitors. LG makes them. I think I have one that’s 34-inch and one that’s ginormous, 38 inches wide and curved. And using that, it feels like a panoramic experience. 

I knew that I was spending too much time on Google Sheets when I was like, “Oh my goodness” and I stretched out the sheet all the way to the 38 inches of this ultra wide monitor. I was like, “I can see everything!” It felt almost omniscient. But I was like, “I’m in spreadsheets too much.” [laughs] I need to load up some JavaScript.

When I’m at home, I use a Logitech BRIO camera, which is a high-end, 4K-webcam that they have. I find it has a much better aperture so it creates better colors and light in low-light situations, which is often where it is. If I don’t have good natural light wherever I am, I have some desk lamps — just soft light that I can put there so I don’t look weird or back-lit [laughs] wherever I am. If I’m on video I try to — I actually think of it probably much like a webcam YouTuber would. Like, “What’s the lighting like, what’s the audio, how can I present well there in a professional manner?” And I actually see a lot of folks at Automattic curate their background, having things they like in their background. Because you actually end up looking at yourself, what’s behind you, a fair amount when you’re on Zoom or Hangouts or one of these things.

Mark: A couple quick speed round items. Phone calls, love them or hate them?

Matt: It’s actually a resolution of mine to pick up the phone more. I don’t really receive phone calls because it’s all spam now but I love all the non-phone things, like Facetime audio, Zoom, Slack Audio is actually really good. And one thing I’m trying to do more is actually switch mediums. So if I’m finding I’m having a long text conversation with folks, I try to balance the audio. 

And it’s also nice in that some folks — my mom is getting older and sometimes it’s hard for her to read the text. So it’s always really nice to hop onto that. Video is really nice too. I got my mom one of these Google home devices that had a built-in camera. So you can use Google Duo — that’s actually the only reason you would ever use Google Duo to make a video call — to her and it lights up this device that’s by where she usually hangs out. So I’ve found that’s actually been really, really lovely as a way to drop in and stay connected with a loved one who I don’t see as often as I would like. 

Mark: Final question. Twenty years from now, what percentage of jobs will be distributed?

Matt: You’re turning my questions back on me. I am going to say… Well, I kind of don’t want to say so that future guests can answer this without knowing my answer. I do believe there is a window where distributed companies have a real advantage for recruiting, retention, and everything. That window is probably three to five years before the incumbents really embrace this. 

I then think that job seekers are going to learn to ask more sophisticated questions. So they won’t just say can I work from home or not, they really dive in to where do decisions get made, where the center of gravity for the organization is, can their career advance as much being not where the headquarters is or in a distributed fashion as it would if they were say in Mountain View, at Google. 

And those types of more subtle questions will be the things that — as the internet giants embrace the surface of distributed work but perhaps not the deep spirit — all the things that are currently bundled with that — and startups like Automattic or Invision or UpWork — I guess are we still a startup? But companies like that. The bar will change. I’m looking forward to that happening.

Mark: Thank you, Matt.

Matt: It’s been fun chatting. 

Mark: That was Matt Mullenweg. Thanks again, Matt, for taking the time to speak with us about the past, present and future of Automattic. If you want to read more from Matt, you can always go to his blog ma.tt, and he is also Photomatt on Twitter. Thanks for listening.

VC Arianna Simpson on Distributed Work and the Blockchain

Read more about Arianna Simpson in “Is Remote Work Bull***t?”

Subscribe to Distributed at Pocket Casts, Apple Podcasts, Spotify, RSS, or wherever you like to listen.

“Remote Work is Bull***t.”

When venture capitalist Arianna Simpson tweeted this opinion, she never could have guessed the massive response she would receive. In this episode, Arianna has a chance to clarify her thoughts on remote work. Then she explains how “programmable money” on the blockchain could lead to a new world of smart contracts and distributed work arrangements.

The full episode transcript is below.

***

MATT MULLENWEG: Back in March, Arianna Simpson tweeted an offhand remark that went crazy viral.

“Unpopular Opinion: Remote work is mostly bullshit.”

Arianna had no idea that thousands of people would like the tweet, and hundreds would weigh in with their thoughts, some pushing back, others hailing the blunt honesty of her “unpopular opinion.” As a true believer in distributed work, I naturally had to get in touch with Arianna when I saw the tweet.

Arianna is an early stage investor, with close to 40 investments to date, many of which deal with the blockchain and cryptocurrency projects. I wanted to find out: How is it that someone, who knows so much about distributed software that’s created among globally-distributed teams, has such a pessimistic view of distributed work?

It turns out, as it often does, that Arianna’s thoughts on distributed work are more nuanced than her tweet might lead you to believe. We discuss her reservations with remote work, we cover some of the things that traditional office arrangements are really good at providing workers, and we explore how companies can give their employees the best of both worlds with a hybrid model.

But things really get cooking when we started talking about how the blockchain could one day be used by distributed companies to pay workers in far-flung locations with stablecoins that are pegged to a traditional currency. When money becomes programmable, all kinds of interesting contracts and financial arrangements open up, making it easier than ever for the distributed company of the future to partner with workers all over the world.


ARIANNA SIMPSON: My name is Arianna Simpson and I run a fund called ASP. I’ve been an investor for the past several years, first general VC, and now running a crypto-specific fund.

Matt: So you’re into distributed systems.

Arianna: I am.

Matt: One of the reasons I really appreciate you coming on — and a goal of this podcast is — I wanna have the very best versions of why people should be in the same place, as well as making the case for distributed work. We are obviously in the same place right now.

Arianna: Yes, we are.

Matt: We are in a tiny studio in New York City, and this is nice, right? Because we’re having a higher-fidelity communication.

Arianna: Mhm.

Matt: This all started in a tweet. Do you remember the tweet?

Arianna: The tweet heard round the world! Oh yes, it was kind of Paul Revere-ish in its quality in that sense.

More

Pluto VR Cofounder John Vechey on the Virtual Office

Read more about John Vechey in “For Years, VR Promised to Replace the Office. Could It Really Happen Now?”

Subscribe to Distributed at Pocket Casts, Apple Podcasts, Spotify, RSS, or wherever you like to listen.

“A new form of communication”

After leading PopCap Games to a successful exit, cofounder John Vechey started Pluto VR to help humanity transcend physical location through a virtual reality chat app. In this episode, John explains how VR might be used in distributed workplaces to enable people to have high fidelity meetings that capture the nuances of human conversations.

The full episode transcript is below.

***

Matt Mullenweg: We’ve been hearing about virtual reality since the late ’80s, but this technology still hasn’t yet leapt from the pages of science fiction into our universe—at least not into the mainstream. The VR revolution seems to be always just around the corner, but some people believe that we really are on the verge of something that’s going to change everyone’s lives.

John Vechey, cofounder of Pluto VR, is one of those people. He’s specifically interested in how VR is going to change the way we communicate. John found success as the founder of PopCap Games–you may know them as the folks behind your favorite mobile games like Bejeweled or Plants vs. Zombies. After selling PopCap, he transitioned into virtual communications.

I wanted to speak with John because he’s got some big ideas about how VR will one day be used for work.

Pluto VR is building a communication platform that will allow people with VR headsets to talk to each other in a way that feels far more immersive than a phone call or a video chat. His goal is to seamlessly recreate the experience of speaking with someone face-to-face, with shared presence and context. He wants remote conversations to have more fidelity, so they can capture the nuances and subtleties of communication that humans are used to experiencing.

If distributed work is going to take off, we’re going to need really good communication tools. But how realistic is it to assume that we can have virtual offices that are so lifelike and useful that they replace physical ones? Are we really anywhere near this dream?


Matt: Hello, this is Matt Mullenweg, we are on the Distributed.blog podcast and I’m talking to John Vechey, who I’ve known for a few years now. John, tell us a little bit about your early career so we know how to catch up to where you are now.

John Vechey: So in 2000, I started a company with some friends called PopCap Games. And at the time, PopCap was like, we’re gonna make some games, but instead of for games, which at the time was pretty much sixteen to twenty-five year old males, we’re gonna make games that everyone can play. Our first game was a game called Bejeweled.

Matt: I love Bejeweled! I played it on the Palm Pilot.

John: Nice. And that was like the original, like, great format for it with the touch of that stylus.

Matt: With the pen, yeah.

John: Yeah. Bejeweled, Plants vs. Zombies, Peggle, we started as a web game company, transitioned to a downloadable game company and then a multi-platform company and then eventually a mobile company. So over the course of like fourteen years there was a lot of different phases of PopCap.

Matt: Of those, which did people get most obsessed about?

John: Of our games, like, Bejeweled and Plants vs. Zombies were our most popular. And people got obsessed about them in different ways. In Bejeweled 2 we put a Zen mode in so you couldn’t even lose. All you could do is just play. Like, it would never hit a losing condition and there was just points that would rack up. And it was one of those things where I realized that there were people that had spent over a year’s worth of hours playing that mode.

Matt: Wow.

John: Right?

Matt: Last night I told friends I was coming here to Seattle to do this interview and Plants vs. Zombies came up, and it turns out both of them had taken a whole Thanksgiving where they just got obsessed with it and went through every possible level.

John: Yeah. And I think that’s the Plants vs. Zombies story ’cause it had a linear aspect to it that Bejeweled didn’t have. Bejeweled was more like an arcade game and Plants vs. Zombies was like an exploration and collection game. And so you’d hear stories about people like yeah, we went on this vacation and we just beat Plants vs. Zombies, that’s what we did for a vacation. [laughter] I’m like, that’s cool.

Matt: No I totally get it. So PopCap sold to Electronic Arts, right?

John: Yeah, in 2011. We were around four hundred people.

Matt: And was PopCap all in one office?

John: We had a joke at some point that the sun never set on PopCap. So we had offices in Seattle, San Francisco, San Carlos, Vancouver, Dublin… period, I think that’s it. [laughter] So we had a lot of offices and all offices were pretty — I mean they were all kind of doing a mix of regional work and game development so it was definitely a lot of travel.

Matt: So you were a multi-office?

John: We were multi-office, yeah.

Matt: Most of the people working there went into some office somewhere in the world everyday.

John: One of the weird things about PopCap was one of the cofounders, Jason, who was the creative director, he was always remote.

Matt: Wow.

John: So we had this really weird thing where one person was distributed and that actually shaped our culture of game development.

Matt: Where was he?

John: He was up first in Vancouver Canada and then he moved to Vancouver Island. The core of what we were was always distributed. And he came down quite a bit but in some ways it was frustrating for him because he’s like, well, I can come down and not get work done or I can just stay up and get work done.

Matt: You’ve been running companies and doing highly creative and successful development with games for a long time. Why don’t you introduce us to what you’re working on now?

John: I left EA in 2014 maybe, after working there for three years. I knew I didn’t want to make games anymore and so I started looking around at what was happening and I went to D.I.C.E, a gaming conference, and saw Palmer Luckey talk. And he talked about what virtual reality was doing and how it was closer than anyone realized and —

Matt: Say who Palmer was.

John: Palmer was the founder of Oculus. It’s a VR headset and it was bought by Facebook. And I saw this presentation, and I was like, wow, this could be really world changing.

Matt: It must have been a good presentation.

John: There was a lot of passion behind it. And it was like, I wonder if any of this is real. But it was. It was real enough to at least be like, hey I wonder if there’s something there. And so I started just going around town being like, hey let’s say I want to do this type of thing or that type of thing in VR, does anyone know anyone I should talk to? How would I do that, right? I wasn’t an expert in VR.

And I met two co-founders, Jarrod and Forest, who had this startup called Impossible Object. I head up north into the far Seattle suburbs into this studio they had, where they had this high-end professional motion capture set up, and then an Oculus development kit. And their first words were like, take your pants off and put this suit on. So I had to like, put this motion capture suit on.

And I had experienced a bunch of different experiments that they had done where I could like walk around the room, I could look at my own body, I could manipulate things with my hands — things that weren’t possible with the current consumer VR hardware. And so I was like, that was amazing, what are you doing with this? What’s your plan? And they were like, well we’re not thinking that anyone’s gonna buy this forty-thousand dollar motion capture system, but we think this is where VR is going, so we’re trying to learn as much as we can about the future five years from now, instead of trying to think about how to develop for the world right now, which is gonna rapidly change.

Matt: And those are your co-founders at Pluto?

John: Yup. And then with another person that I was friends with.

Matt: How do you go from this mixed reality thing to thinking about work and how people collaborate together using these technologies?

John: I had come from games and I didn’t want to make games. Jonathan, one of the other co-founders, had come from animation, didn’t wanna —  

Matt: Why didn’t you want to make games?

John: I was just done with it. You know, you do something for fourteen years and you just want a break maybe.

Matt: So one of your co-founders also was done with games.

John: Well he had been in animation. He came from Disney Animation for fourteen years.

Matt: Wow.

John: Yeah. So his career was interesting ’cause he started with Lion King and ended with Frozen and he’s like — and everything in between was very different than either of those extremes. [laughter] He was like, it was like a long walk down and then a looong walk back up.

Matt: Interesting.

John: And I think I was sitting there being like, well I really don’t want to get into VR and then start a game company. So for us, what was important about coming together was that there was something that existed above us and above any kind of decision-making power structure, even ownership structure. Our purpose was to help humanity transcend physical location. So that was important, and that we could align ourselves around that was the second thing.

And then the third thing, what was it? So really we felt that the power of what was happening with virtual reality at the time wasn’t just that you could go to a place, but that you could go to a place with someone else.

Matt: Hmm.

John: It wasn’t just like cool, I can essentially take a drug and space out, it was more about like, well what can we do together? And we took it even farther, like what if right now we’re so tied to our physical location, right? Like just today alone I got up, I went to an office, then I went to go have a meeting in one part of town. I came back to the office to have lunch, went over here, right? I’ve already done more trips than I would care to do. It’s nice to be in a car for a little bit, it’s nice to be on a bus for a little bit, but it’s not really serving my life. I could’ve been more present working on something, reading, or just sitting out in the sun.

Matt: Help humanity transcend physical location.

John: And we spend a lot of time on each word.

Matt: Help humanity, as opposed to robots.

John: I think you can actually break it down literally one word at a time. Like “help,” what does that mean? It’s like, to aid, to be a part of, to make something possible that wasn’t possible or make it easier for other people. So I think that the help part really for us came down to — we don’t need to own the solution, we just need to be part of creating something bigger than us and helping other people do something. Like, we are in service of other people.

And then “humanity” is like, who is it? It’s humanity. It’s not companies, it’s not tech bros, it’s not Americans, it’s everybody. Every choice we make we need to think how is this helping all of humanity, right?

Matt: At a global level.

John: At a global level, at an able-ness level, at a gender level. Really being like hey, we need something that serves and can help everybody. And then “transcend,” right, that’s like a — we spent a lot of time on that word.

Matt: [laughs] That’s a big word.

John: It is. And so for us it’s about moving beyond, making something thoughtless. So if you think about things that have transcended something before in our society, you can certainly say commerce has transcended physical, I think would be a pretty fair thing to say. What else has transcended?

Matt: ‘Cause now we have credit cards and…

John: Yeah, how much do you touch physical money, much less prioritize your life around it?

Matt: Yeah.

John: It’s pretty rare that you’re like, oh I’ve really gotta go to the bank to do this large financial transaction with physical currency, right?

Matt: Yeah, almost never. Are there technologies in the past that you feel like helped humanity transcend location that you find inspiring? ‘Cause that was actually one of my first thoughts is like, from the telegram to the phone to email, you know, all these sorts of things. Like, we are more connected than ever and I think it’s the primary thing responsible for our progress. So in theory, if your mission is successful, and this new technology brings humanity closer together, it’s just like upgrading the routers and ethernet between a data center. Like, it’ll get faster and better and we’ll be able to create better things.

John: So there’s been this history of community of making the physical limitations smaller to communicate over a longer distance and then at the same time there is a higher quality of communication. And so you think about the telegram to the telephone to the mobile telephone, but then you pretty much get to audio chat and then you add some video — and we’ll talk about video in a second — but then that’s it. And then it’s in-person, but there’s this giant gulf between what it means to be in-person and what means to use video chat or talk on the telephone.

There is all this information you get from in-person that you don’t get from those other mediums. And that information is what is fundamental to what we’re trying to do and it’s fundamental to our purpose. Because you can’t just say we’re making a better video chat. Great, humanity has transcended physical location. You’ve gotta do something that we can’t even imagine right now. The closest we can get is a high def video of you but you’re never watching a video being like, I feel like I’m in the same space as you.

Matt: So what is Pluto today?

John: What Pluto is today is the start of a new form of communication. We call it shared presence and this idea that you can share our presence with someone and feel present. And so we have an alpha version of an IOS client right now that we’re working on. So IOS to IOS, one to one.

Matt: But that has to be a flat screen, right?

John: Yes, it has to be a flat screen but it doesn’t have to feel like a flat screen.

Matt: What does that mean? Mind blown. [laughter]

John: It’s like imagine if you were looking through a portal.

Matt: So I would be holding up my iPhone and then on the screen I’d see you sitting in a chair across from me?

John: And instead of it feeling like you’re looking at video of me, you’re feeling like you’re looking like — think like a magic portal, right? So it’s just a portal in space and you’re just like, oh yeah, I’m holding my hands up like a little rectangle, I’m still looking at you. And it just happens to be that we’re in the same physical space and I’m doing this, but what happens if it’s like, oh, it’s like a magical portal and you can be anywhere?

Matt: So for our listeners, John was just holding up his fingers right in front of his eyes. Now if my phone were there though, the camera would only be showing you like my eyebrow and eye, one eye.

John: Correct, if I –

Matt: So it seems like we normally position these things for the sake of the person on the other side.

John: Right. And so what happens is when you’re communicating with a shared presence and Pluto’s product, there’s a mutualism —

Matt: To position it so you see my face, I need to hold it farther away, right?

John: Yeah. So you can’t just do a small segment of it. And it’s one of those things where it’s like, there’s things you can do on video chat that you can’t use Pluto for. Pluto is really bad for walking. ‘Cause just imagine you’re walking backwards and I’m walking forwards and we’re still trying to talk, like it doesn’t — that’s not how walking communication works.

So like Facetime, for example, or video chat, is really, really good for that type of communication. But if you’re in a long distance relationship and you really wanna connect with someone, Pluto is way better, right? You sit the device up on a stand or on a table or something and it’s like that portal and you can really look at each other. It’s like we’re talking like real human things, like you feel more present.

Matt: What am I seeing on the screen?

John: You’re seeing something that could look like video but doesn’t feel like video.

Matt: What does that mean?

John: One of the challenges that we’ve learned over the past four years of Pluto is it’s really hard to describe what we’re doing in a way that is satisfying.

Matt: Better to experience?

John: But when you experience it you’re like aha, that’s it.

Matt: So you’re working on a beta ISP app.

John: Yes.

Matt: You have something on Steam, right?

John: Yeah it’s alpha software.

Matt: And you’ve got something on Steam, right?

John: Yeah. So a year ago we released an alpha on Steam and that’s the VR client. So that’s more of an avatar-based human representation. But you have your full screen view and so it’s great for ten person conversations super natural, you have a body language because when you’re using the motion controllers and you’ve got your head movements, like, you feel like oh that’s a person.

So there’s this weird mental thing where if we’re in VR and you look just like you and you’re moving around while you’re talking and then you left, you changed your human representation to be nothing at all like you, and you came back, my mind would so quickly pick up that it’s you.

Matt: Because of the way I move?

John: The way you move, the way you time your movements with your voice. It wouldn’t take longer than a couple minutes for my mind to replace what I was seeing visually with the feeling of you.

Matt: So how this enhances what we would get over a Zoom call, for example — ’cause we have a sense of location, we’d have some way where I’m getting a higher bandwidth sense of your presence…

John: Yeah.

Matt: We’re on just a 2D kind of camera based video call.

John: Yeah.

Matt: Anything else people should be thinking about?

John: I mean, that’s the fundamentals right now. So we actually think there’s three key elements to the communication service we’re building. One is the shred presence. That’s like, when you’re in a conversation, what’s the quality? The other two elements are shared context. So in real life you have all kinds of information to know when and how to engage in a conversation and what’s appropriate or not. Like, [when] we’re all in the same physical office building, you treat it differently than if you randomly run into a coworker in a coffee shop, which is different than if your coworker randomly showed up at your house, right? So there’s all this content you have about physical location that gives you insight and control over when and how to engage.

Matt: Am I in this Pluto virtual room all day and you kind of come and knock on the door, or do we schedule it like a call?

John: Right now it works like a call. But I think, when I talk about context, there might be like, oh drop in, if I’m in the work hours, like, John can just drop in and be like hey, whattcha doin,’ right? It could also be like, oh, we schedule a call and as soon as we’re both available for that call we just automatically see each other.

Matt: Hmm, huh.

John: So let’s just take — you’re on [a] three-person call, right? So fundamentally in video chat you can see each other’s video, you can hear each other’s audio, there is no sense of space for audio and there’s no sense of space for video. There is no correlation between what someone is looking at and what your think they’re looking at.

On Pluto, on a three-person video chat, you would hear everyone spatially. So where their mouths were is where the sound would come from.

Matt: And then so everyone would turn in that direction?

John: I mean if that was appropriate. Like you don’t—  

Matt: But then I would need a camera wherever I’m turning to, right?

John: And that’s the thing. So certainly right now we’ve done a three-person experiment and on an iPad Pro it works. So when you get a small screen it’s harder, but in iPad you have the depth of a three-person conversation so that you see enough so that when you look at me, the other person, the third person, knows that you’re looking at me.

Matt: So let’s say we’re a three person meeting, myself and let’s call Joe over there is talking —  

John: Hi Joe.

Matt: — and Joe says something and then I look at you like…

John: Can you believe this crap?

Matt: That would be a very strong signal to everyone.

John: Right, right. And Joe would see that. And I would know you —  

Matt: But today if we’re all on a Zoom you can’t do that.

John: Correct.

Matt: I have to send a backchat or something.

John: Right, that’s a perfect example and that’s something you get in real life that you don’t get in video chat right now. We believe in the medium term, right, in the next like three years, there’s gonna be this moment, like the iPhone moment where there’s gonna be a piece of spatial computing hardware —  

Matt: What’s spatial computing?

John: So spatial computing at the fundamental level is when computing understands the physical three-dimensional world, it’s also when it can display things to humans in a way that’s more natural to the three dimensional world that we experience.

Matt: So we perceive it in 3D as well?

John: We’ll perceive it in 3D, right. So that can be virtual reality where you put goggles over your eyes and all you’re seeing are pixels, you think they’re 3D and you can move around and use your hands with a controller. And then you’ve got HoloLens or Magic Leap, which are like mixed reality devices, and those are ones where you have a lens over your eyes and you’re mostly seeing the physical world but then it can project digital objects as if they’re mixed with the physical world.

And then if you think about mobile computing in 2000, it wasn’t one device. Mobile computing was your GPS, your Game Boy, your PDA, your cellular phone. And then over the course of time, there was this time where the iPhone came out.

Matt: It started to coalesce into one.

John: Yeah, this is one thing.

Matt: So you feel like spatial computing is going through a similar coalescence?

John: I think it’s gonna happen in a very similar way, where you’re gonna see all these different things that don’t seem related to each other or they seem like they’re competing with each other and then at some point someone’s gonna release a piece of hardware that has some attributes —  like it’s gonna be wearable, it’s gonna be always on or always with you. So either you can always walk around with these glasses or you just — they’re easy to pull off and put on, kinda like the phone. You’re not technically always using it but it’s always kind of on, it’s really accessible to start it, it’s gonna be able to do a virtual reality mode and a mixed reality mode. That inflection point is somewhere in the future, call it two to four years, if you will.

Matt: How does Pluto use spatial computing?

John: Starting with our purpose, it’s like, help humanity transcend physical location. What we’re kind of doing strategically is looking at the different areas of spatial computing, and then asking ourselves, how can we best transcend physical location in that form of spatial computing? So we’re looking at virtual reality and we’re saying, how can we do that in just VR? And then we’re looking at augmented reality, like on the iPhone Xs — what is transcending physical location as a communications product look like there? And then we’re gonna do the same on mixed reality, like the Magic Leap or the HoloLens.

And then what we’re doing is saying okay, those all have different strengths and different weaknesses but we need to make sure that that’s creating one communication service and so that you could essentially say we’ll be ready for the inflection point hardware, when we can have all these different devices that seem very different at an experience level but they all interoperate and they can all create the same communication experience no matter which ones you’re on in any direction.

So you could be on an iPhone talking to someone in virtual reality and you should feel like I’m physically present with them. You should also feel that from an iPhone to an iPhone or an iPhone to a HoloLens.

Matt: Help me understand the problem that’s being solved. One of the reasons I like Zoom is they have what I call the Brady Bunch view. You can see a bunch of small videos all next to each other. So I’m on a meeting with six of my colleagues, we’re all on video, we have good headsets, the audio is good, it’s a really good experience.

John: Yeah.

Matt: We’re communicating, we’re talking, it’s not perfect. People are looking at their camera, which isn’t necessarily aligned with where the people are… What’s the problem there that we need to improve [upon]?

John: So if you could instantly be in the same room with those group[s] of people for that same conversation, and then instantly not be in the room with those same group[s] of people, would you choose that over Zoom? So you’re gonna have an hour long meeting —  

Matt: What would be the advantage of being in the room?

John: The quality of communication that you can have in the room, the body cues, the visual cues, the pace of the conversation, the empathetic experience you can get in person is very different than you can get even on the best that video chat can provide. And it’s because video chat — It’s like, you don’t have a “video,” that’s not a human centered concept, it’s a very computer centered concept. And so it isn’t how you experience people. And so if you had those same six people and they were just all holograms around the room and they were indistinguishable from them in the physical world…

Matt: So there must be something location wise, right? Because I feel like video gets you maybe eighty percent of the way there. You can hear inflections in voice way better than text, we can all agree there, right? You can see someone’s mood, you can get some idea of how present they are there. So is there something about where we’re located relative to each other as opposed to this flat plane that makes it better?

John: Yeah so there’s where you’re located, there’s how you experience each other — So right now we’ve got these microphones in front of us and these headphones on. We don’t actually have positional audio. So if you close your eyes and you hear my voice, where is it coming from? You can’t really point to it, it’s like a nebulous —

Matt: It’s kind of coming from both sides of me, yeah.

John: Yeah. But if we didn’t have the set up of the podcast, you could point to me.

Matt: I could locate you, yeah.

John: Yeah, you could point. And if I moved around the room, with your eyes closed, you could point to me. So on video chat, you don’t really have that choice. But on Pluto, for example, that’s a choice that you do have. How are you physically related to each other in space? It’s a core part of connecting with people is that spatial awareness.

Matt: One of the nice things — we talked about screen sharing but one of the nice things about some of these is that they are multi modal. So we’re sharing links, we’re chatting as well as having the kind of — there’s different layers that the communications happen on, including some of these backchannels.

John: We don’t believe that like you’re gonna run the Pluto app and then you’re gonna be in the Pluto app all day. We think that’s ludicrous. It’s like you’re gonna be running hundreds of applications. And so it does happen like that where you’re on the call and you drop a little note to your Slack channel when you’re [in an] in-person meeting and then maybe get a response back. It might be lower in-person but you’re still, it’s still a common thing.

Matt: I don’t know if this is the ultimate thing but it seems like people are just going to use this to check Facebook while they’re on meetings.

John: Which would break presence. And so a lot of what’s important about presence, shared presence, is like an integrity to the interactions. Right? It’s like, my eyes are where my eyes are, you see where my eyes are looking. And so we’d probably say right now with everything that we know, with all the experiments and research we have done, is that it’s okay to do that but we have to, we’d want to signal that your attention was elsewhere. You might not want to share with me what you’re doing but in real life, you know, like if you’re checking Facebook while we’re talking I have some signals, we might want to retain those ’cause it makes better communication.

Matt: I think that’s the downside of conference calls today. There was probably a point when conference calls were good, maybe when the internet was boring, VR is always right around the corner. I remember playing a Virtual Boy, did you ever do that?

John: Yeah.

Matt: But it’s still not mainstream yet. How many people have all the headsets, millions?

John: Yeah, tens of millions.

Matt: Maybe tens?

John: Yeah, so like —

Matt: But not a hundred yet?

John: No probably not a hundred.

Matt: And active usage is probably a lot lower?

John: It’s definitely a lot lower. I mean, so like —

Matt: I think I own one but I don’t —

John: Yeah, like Steam VR, for example, which is probably, for PCVR, is the number one channel, has probably fifty — a hundred thousand DAU, daily active users, who use VR and do something in VR. That is not an exact number but it’s — they’ll have ten, twenty thousand simultaneous users. So it could be a couple hundred thousand daily users. So we’re still doing a lot of learning about what does it mean to transcend physical location, how do we do things, what technologies enable our use case. We don’t have that many ways to communicate. And what we’re doing is saying we’ll have a new one.

Matt: What’s the matter with that? We seem to be getting along pretty well.

John: That’s a interesting take on the world, Matt. [laughter] One could say there is a little bit more war and suffering and destruction than we maybe need.

Matt: So you’re not part of the Steven Pinker camp that things are maybe better than they have ever been?

John: Not necessarily, no. I think that there are ways that things are better and then there are ways that it’s easy, especially in a western country and especially as a white dude, to be like, oh things are great, things are so much better than they have ever been, and to be missing how bad things are for people and how that’s a societal choice we make, not a limit of constraint.

Matt: And you think this is caused by our mediums?

John: I think — I mean I don’t know — I don’t think it’s caused by that, but I do think communication mediums are tools and like all tools they cut both ways. And I’m definitely not of the “technology for technology’s sake” is an answer to our woes — it’s like, hey, it’s just more tools. You need to take a look at social networking, it’s provided a lot of good and it’s provided a lot of bad. What we have to do as a society, we have to somehow make sure that the technology we’re making is serving humanity.

Matt: I’ve heard a lot of non-profits actually starting to do VR experiences ’cause they say that people can really experience in a visual sense, much in the same way you and I went to Ethiopia to experience some of what was going on there, they can get that thing without having to fly halfway across the world. That also worries me though because we have gotten very good at sort of inciting human emotions.

John: Yeah.

Matt: And we’re not rational beings. And so if I was hooked up to this Pluto ten years from now, amazing system, what is the advertising in that that detects my exact mood and tailors a message exactly to that?

John: That’s a good question. I mean that’s part of the reason why we’re really focused on communication. And so like we’re not trying to create the meta verse.

Matt: Say what the metaverse is.

John: So the metaverse is the idea that like there’s a universe that has — It’s all digital and you go into this world and in this world you can do anything. So if you think about Snow Crash, how that started, I think that coined the term metaverse.

Matt: Which is a novel by Neal Stephenson.

John: Thank you, Neal Stephenson. You take a look at like Ready Player One. So in those cases they’re metaverses. In each case they’re like, oh the people are plugging into these worlds.

Matt: In Ready Player One he has a 360 treadmill so he can walk, a suit, and the suit exercises him, right?

John: Yeah, and then he —  

Matt: He can lift weights with it and —

John: Yeah and he puts goggles on his face.

Matt: Goggles on. So he can essentially have total freedom of movement and is moving around in this virtual world.

[clip of movie plays]

John: So much so that almost all of his life is existing in that virtual world, such that that is more of his world than the physical world where he’s living in a stack of trailer parks.

Matt: Which some people might define their internet experience as that today, like their friends or connections already transcend their physical space.

John: Oh yeah. I mean one of my closest friends is someone I play this board game with online and I’ve never met him. He lives in France, but we play this game a couple times a month and we always spend half the time talking as we do playing. So it’s like he’s just as much my friend as someone else is.

Matt: You’ve said you felt like we’re two or three years away. What give you that kind of confidence? ‘Cause you’re not a guy who says those things lightly.

John: There’s movements happening and starting with like OpenXR, which is an open standards body — participation in that and that they’ve got the provisional specification that — they just announced it at a game developers conference. So things like that are now saying hey, what if, as an application developer, you could just do a spatial application and that could run anywhere? So concepts like that — Like right now, if you want to make an application, if you want to make an iPhone Air application, it’s completely different than doing an Oculus Rift application, which is different than a Magic Leap application. But with OpenXR spec it’s really exciting because, as that gets adopted and more run time supported, you’ll just be able to make a spatial application and it’ll be able to work anywhere.

Matt: Tell me a little bit about Pluto the company, just as we start to wrap up. How many people is it today?

John: We’re about twenty people.

Matt: And how do you work together? Do you have some sort of futuristic — Do you all wear VR headsets all day?

John: Yes. So all of our stand ups are in VR.

Matt: Say what a stand up is.

John: A stand up is where like they — everyday all the engineers get into VR — actually they’re often sitting — and then they just go around the room and so I do a check in, here’s what I did yesterday, and here’s what I’m getting done today and there’s some live troubleshooting of issues if need be.

Matt: So everyone is in the same time zone or do you have people all over the world?

John: Right now everyone at this moment is in the same time zone.

Matt: It helps a lot, yeah.

John:  Yeah, we’re still very collocated because what we’ve done is made the choice to have an in-person culture and then we’re now slowly eroding at that, just to create a more distributed layer on top of that that leverages Pluto.

Matt: So the Pluto office somewhere that everyone goes into everyday.

John: Yes, we have a Pluto office. But then I spent thirty days working from Venice Beach, California. And especially — ’cause like hey we’re about to launch the IOS version, we need to use it a lot. And so I’m like, great, I’m —  

Matt: So you took one for the team in Venice Beach?

John: Well what was cool is that it seemed like that. But then I’m like well I’m more connected with people, probably ’cause I’m talking to them more, but we could really maintain a connection, so much so that we had two employees start while I was gone and I had two meetings with one, three meetings with the other, and there’s this moment where you’re like wow, I feel like I’m with you, when I saw them in person it wasn’t like, nice to meet you, it was like, oh we’ve been hanging out.

Matt: Do you imagine a day some day where no one goes into the office at Pluto?

John: Yes. So we’re actually actively working on kind of the Pluto 2.0 phase. And that is one where we will be office optional. So we do have a need for an office because we do have a lot of cutting edge new hardware.

Matt: I bet, yeah.

John: We have a laboratory type thing and that does require physical space. But we are moving towards a world where what it means to be a full time Pluto isn’t tied to where you’re physically located. So it’s really — this year is the year of how do we live our purpose? We’re at the forefront of that, not at the backend of that.

Matt: Twenty years from now, what percentage of jobs do you think will be distributed?

John: Oh I think it’s gonna be like eighty percent, ninety percent. I think it’s gonna be a huge percentage.

Matt: Thank you again.

John: Yeah, thank you, Matt.

Matt: This was John Vechey. I really appreciate you coming by.

John: Yeah.

Matt: Looking forward to seeing more of Pluto in the future.

John:  Thanks for having me.


Matt: That was John Vechey. You can find him on Twitter at @johnvechey, that’s J-O-H-N, V-E-C-H-E-Y, and check out Pluto VR at plutovr.com.

When I was playing around with my janky Virtual Boy headset in 1995, I never could have imagined that one day there would be hundreds of millions of people using VR. But that future is already here, so it feels pretty safe to assume that a lot of us will do work in VR very soon. Distributed employees work best with a wide range of communication technologies, but there’s something special about face-to-face communication in 3D space. Here’s to folks like John who are trying to bring that experience to people who are communicating across oceans and beyond.

Thanks for joining us.

Read more: For Years, VR Promised to Replace the Office. Could It Really Happen Now?


Upwork’s Stephane Kasriel on Fixing the American Dream

Read more about Stephane Kasriel in “The American Dream Is Broken, and I Think We Have a Shot at Fixing It.”

Subscribe to Distributed at Pocket Casts, Apple Podcasts, Spotify, RSS, or wherever you like to listen.

“The American Dream is Broken, and I think we have a shot at fixing it.”

Stephane Kasriel, the CEO of Upwork, thinks that most work, as we think of it today, is in need of an overhaul. In this episode, Stephane explains how changing the way we think about work can simultaneously give workers freedom and flexibility, enable companies to operate more efficiently, and revitalize local economies all over the world. He also shares tips on how companies can make smart moves toward a distributed work model.

The full episode transcript is below.

***

Matt: To start off, say your name and how long you’ve been here, just so people have a sense of you. And then we’ll talk.

Stephane: Sure. So my name is Stephane Kasriel, I’m the CEO of Upwork. I joined the company close to seven years ago. Initially I was running product management and design and then when our head of engineering left, I became the head of product management, design and engineering. And then a couple years later, when the CEO left, I got promoted and became the CEO of the company. And that was about four years ago.

Matt: Awesome. How big is Upwork? How should people think of it?

Stephane: You know, that’s a great question, how big it is it depends if you define it by employees or everybody in the workforce. There’s about fifteen hundred people who work at the company, about four hundred of them are full time employees of Upwork Inc., the company, and they mostly work in one of our three offices in the U.S. We have an office in Chicago, we have an office in the South Bay — in Mountain View, and then we have an office in San Francisco.

But then we have another eleven hundred or so people that are what we would call freelancers and they work from home — they work from about five hundred different cities in the world, which is pretty impressive.

Matt: That’s a lot of cities.

Stephane: I’m not sure I can name five hundred cities in the world, so that’s a pretty big part of the world. And part of the reason why we call them freelancers is because that doesn’t have a legal meaning. And so some of them are full time employees of Upwork but they just happen to work remotely. Some of them are independent contractors or whatever is the equivalent in that particular country. And then some of them are essentially what the U.S. would call leased employees, meaning they get a W2 but they get a W2 from something called Upwork Payroll, which is our product.

So as you can imagine, we use our own product to manage our entire remote workforce. And so depending on the employment law and all of the other considerations that are embedded in the product, they end up being classified differently. And because this whole discussion was pretty long, we call them freelancers.

Matt: [laughs] And Upwork is now a public company.

Stephane: Mhm, yeah.

Matt: Tell me about that.

Stephane: Yeah we took the company public in October of last year, which is something that we had wanted to do for a long time. The reason being, you know, a lot of companies go public because they need to raise a lot more money. In our case, we’ve been cash flow positive or break even for many, many years, so we did not need to raise the money. What we really needed was to raise the awareness.

And I think the labor market is obviously one of the biggest markets in the world, like a hundred trillion dollars or so, of which remote work can be a very substantial part of it, and I think Upwork can play a role in trying to create a better future of work. Like I think the current present of the labor market is pretty messy — and we can talk about that if you want — but it’s pretty broken for a lot of people in the world. And we think we can be a driving force in creating a better future but we need a big, big loudspeaker in order to be able to influence people. And being a public company just allows us to have a lot more visibility, a lot more credibility, than what we used to have. And that’s been the main driver for doing this.

Matt: And that also means all your numbers are public. So what’s the rough size of the business now?

Stephane: Yeah so this year we’re going to do on the order of about one point seven billion dollars.

Matt: Wow.

Stephane: And it’s growing pretty nicely so it’s going to be much more than that next year.

Matt: That’s super cool.

Stephane: Mhm. And I should mention that’s the amount of business that is done on the site, what we call gross services volume, or GSV — we looked at the financials of the business, gap revenue is… about fourteen point something percent of that one point seven billion. So the gap revenue in 2018 is on the order of two hundred and fifty million dollars.

Matt: That’s incredible.

Stephane: But what I really care about, to be honest —  

Matt: Is the gross.

Stephane: Is the gross. Because that’s how much money we give in the freelancer’s pockets. Fundamentally our mission at this company is to create economic opportunity so people have better lives. And the way we measure that is the amount of money that goes into people’s pockets. So revenue is how much we get to keep, we are a for-profit company, we need to make money too, we need to hire all these people and continue to build the business and all that stuff.

But the real reason why this company exists is for the GSV, right? It’s the money that goes and allows people to be more free, be more flexible, live anywhere in the world that they choose to live in and be able to have access to jobs that they would not be able to get otherwise.

Matt: Would you call that number your north star metric?

Stephane: Yeah. I mean the one number — like, when I look at our all-hands and what we talk about all the time, we don’t talk about revenue, we don’t talk about EBITDA. I mean obviously we have a finance team and we have an accounting team and they really care deeply about this stuff but I would say the reason why people join this company either as full time employees or as freelancers and either in an office or remote, is because they get to create jobs for lots of people. And the proxy for that is how much money goes into the freelancer’s pockets.

Matt: You mentioned earlier that work was a little broken.

Stephane: Mhm. Very broken.

Matt: Tell me more about that.

Stephane: Well I think we’re in a place right now where if you live in San Francisco, for instance, where, ya know, we are based here, you have — If you are highly skilled you have access to amazing economic opportunities, great jobs, working for some of the most amazing companies in the world.

But the cost of living has been rising faster than your salary. The average rent in San Francisco has been growing by about seven percent per year for the last forty-five years, so you compound that, it’s become outrageously expensive. What we see is that young people, young college graduates, when they move to the Bay Area, spend close to seventy percent of their disposable income on rent. And that’s despite the fact that they have a pretty lousy apartment and they typically have roommates. And that is more than twice as much as the overall U.S. market right now, right?

So you’ve got a place where [there are] great jobs, great environment, very international, very dynamic, all that stuff, but completely unaffordable to live in. And then meanwhile you just go a couple hundred miles away from here, you go to Stockton, you go to Modesto, you go to Fresno, you go to Sacramento, let alone going in the Midwest of the country, and you have places where it’s extremely affordable to live in and frankly it’s actually very nice to live in. There’s plenty of beautiful places outside of the Bay Area where you really want to live but there’s no jobs.

So fundamentally we are in this economy where if you’re a young person in particular and you don’t already have real estate that belongs to you and you might even have a ton of college debt to get started, you have this catch 22, where if you live in the middle of the country you don’t have a job and if you live in the big cities in the U.S. you have a job but you have no money, and either way it seems like a pretty bad outcome. And it doesn’t need to be that way.

It’s the last evolution where we missed — we missed a turn. The first industrial revolution you had to move people from the farms where they used to be working to the assembly line because physically we were manufacturing our goods and you had to be on site and the whole nine-to-five was because the machine was gonna run from nine-to-five and so you had to work when the machine was gonna run because frankly at the time machines were expensive and humans were pretty cheap and so it made sense that way, right?

But you fast forward to the fifties where manufacturing started to slow down in the U.S. and a big part of the western world and the service industry knowledge work became a big thing. And increasingly a bigger part of it was done in office towers and cube farms. And if you think about it, that was — I would say — a bad metaphor.

The cube farm is the modern version of the assembly line except that none of the work that you do in the cube farm actually has to be done on the cube farm. And increasingly work can be done from anywhere, and increasingly it doesn’t need to be done from nine-to-five, increasingly it doesn’t need to be this long term, one-on-one relationship between an employer and an employee. But somehow we missed the transition and we are continuing to operate as if work had to be done the same way.

And you could say so what’s the big deal? Let’s keep doing it. But the reason why it’s a big deal is like — not to get into politics or something — but there is increasingly, in the Western world, a group of, a part of the population that is saying this system is not working for us. And you have the myth of the American dream, the idea that if you’re highly skilled and working hard, you should be able to be successful increasingly depends on where you were born or where you live or how much wealth your parents have and whether you’ve been able to go to college or not as a result. And that is not what — I’m an immigrant in this country, I signed up for the American dream. And I think it’s pretty broken right now and I think we’ve got a shot at fixing it.

Matt: When I moved from Houston to San Francisco my rent went from eight fifty per month, which I paid half, to twenty-seven hundred dollars a month. And this was 2005.

Stephane: Yeah. It’s gotten worse since then.

Matt: So compound that by seven percent per year since then.

Stephane: It’s bad.

Matt: For a similarly sized place, ya know? A little bit of an upgrade. Yeah. How about you? Do you remember your old rent when you lived in France?

Stephane: Well I moved here in ’97 and I remember when I moved here people were saying don’t buy a house, it’s crazy, some of these houses are worth a million dollars. There is no way this is going to last. And of course the same houses now are probably three or four times that. You know, eighty percent of houses in San Francisco cost more than a million dollars.

Matt: Eighty percent?

Stephane: Eighty percent. There’s not a ton of people in the world, even if you work for a tech company — like the amount of money you need to save in order to have a down payment to be able to afford a million dollar house and then you pay, you know, one point something percent of property tax. I mean it’s really hard to afford a good life in the Bay Area right now, even if you are a data scientist working at Facebook. If you are not in tech and you’re just an average worker trying to get by, it’s a real struggle.

Matt: It’s kind of amazing as well. We think of the Bay Area as this engine of innovation but the percent of the economic activity that just goes to landlords is astounding.

Stephane: Yes. Historically there have been more billionaires coming from real estate than from tech in the Bay Area. [laughter] Little known fact.

Matt: You have so many cool stats about the Bay Area. [laughter]

Stephane: Twenty years of doing this. But you know the thing is, it doesn’t need to be that way. And I think this whole distributed company, remote workforce, whatever you want to call it movement is finally the awakening by the tech industry [to the reality] that we are part of the problem. Part of the reason why jobs have been destroyed in plenty of places in the country while all of the new jobs were created in a small number of areas is because of tech.

And overall it’s a good thing. Right? Increasing productivity makes people richer. We need innovation, we need automation. By the way, we don’t make as many kids as we used to so we need more robots to actually help us grow the economy — like, all these things are true. But the problem is the jobs that are being displaced are not in the same location and don’t need the same skills as the jobs being created and the displacement of the jobs comes from us, the tech industry, right?

And so I think increasingly there is both a practicality of — as a small start up you just can’t hire good developers in San Francisco because if they are really good, they are paid so much more money by the big tech companies that you can’t possibly attract them. So there’s a very down-to-earth, like, you-don’t-have-a-choice type of approach to this.

But I think increasingly there’s also a bigger social calling for realizing that hey, there’s some really great developers and great marketers and great everything else over there, and we can really help these people get a better life by giving them a job instead of trying to poach people from Google who will then poach them back. This very zero sum game, red ocean type of approach of the war for talent, the way it’s conducted in the Bay Area.

Matt: If we allow the economic opportunity to be world wide, won’t that just mean more accumulation of capital by the companies themselves? So Google has to pay their employees very high salaries because they’re in this competitive market.

Stephane: Mhm.

Matt: If the global average was much lower than that, let’s say a third of what it was in the Bay Area, the extra profit would just go to Google shareholders or the company itself.

Stephane: Well I think it’s — the economy is not a zero sum game, right? In an ideal world workers are better off and companies are better off. I mean that makes it much more attractive than if it’s a win-lose where yeah Google is worse off but Google’s employees are better off. I mean that’s going to be how to convince the CEO to then convince their board, to then convince their shareholders, right?

So in an ideal world you get to a place where — and that’s what we tried to do at Upwork, right? We tried to make sure that the companies are better off because they get access to talent that they would struggle to get otherwise. They don’t necessarily need the talent full time and so they can pay by the hour or by the task. And frankly they may not be that attractive to the workers in the first place because, if you’re a highly skilled worker in today’s economy, your skills are in high demand and you get to choose where you work.

Matt: Yeah.

Stephane: And for most companies, they really struggle. Not everybody is not attractive to workers as much as they’d like to [be]. And so sometimes — so, on the company side, some of it is driven by cost savings. For some companies, in particular very small companies that are bootstrapped and before they get VC funding and what have you, the ability to pay developers less than what they would pay locally can be a driver.

But for the most part it is just accessing the talent and being able to work with people on demand. And that is not incompatible with the fact that people are better off because they get to have more flexibility in their life, work on their own terms, and frankly potentially move to a part of the country where the cost of living is lower.

Matt: They could leverage that income way more.

Stephane: Yeah. For years we have had way more people signing up to become freelancers on Upwork than we’ve had companies signing up to post jobs on Upwork. I mean we have huge demand constraint, meaning we don’t have enough jobs for people. And that to me is an indication that people are ready for this.

The reason why people do this is because there’s really little not to like about being a successful freelancer on a platform like Upwork. You have the freedom and the flexibility and you make more money than whatever your local job market is, which might still be less money than if you lived in the Bay Area but then you don’t have the cost of living of the Bay Area.

Matt: Yeah and actually after we first met, Automatic became a much bigger client of Upwork.

Stephane: Thank you. Good.

Matt: So I’ll put in the plug here that we’ve been a happy customer. And if you’re listening to this and you’re constrained in some way, Upwork has lots of people who can help you. So. But you did say earlier that you didn’t love the wealth going to landlords.

Stephane: Mhm.

Matt: Yet we are in an office right now.

Stephane: Yes.

Matt: Tell me about why you’re paying a landlord for this space.

Stephane: You know, that’s a fun debate. In particular, this office here belongs to Google, like everything else in Mountain View. Google has notified us that at the end of our lease they are not going to renew. And so as a result we are about to sign a new lease in another office space. And there was a real debate as to whether we go and spend millions of dollars a year again on yet another office space, or whether we just do what you guys did, which is close the offices and have everybody work from home.

And you know, it’s a tradeoff. I think, like, here’s my selfish point of view on this. So we are in a small — describing it for the listeners here, right? We are in a small conference room where there is a big TV with a webcam on it. The reason is because most of the work we do here is going to be with people that are remote.

There’s about a hundred and fifty people in this office, there’s about fifteen hundred people in the entire company, so ninety plus percent of the people that you’re gonna be engaging with are unlikely to be in this office, which means ninety percent of the time you’re gonna be on video conferencing. And the average time of commuting to this office for our employees is about forty-five minutes each way.

Matt: Really?

Stephane: Yes.

Matt: Wow.

Stephane: Traffic in the Bay Area.. By the way, that’s another thing that’s broken is congestion in all of these cities that were never designed for the level of density that we have today. And so people are going to spend an hour and a half every day to come to a place where ninety percent of the people they need to talk to are not physically present, plus this costs us millions of dollars a year. There is an argument for shutting it down.

I think, you know, if we had started as a fully distributed company, which a lot of companies are doing today, right? I mean some of the companies that you are talking to never had an office and they started from day one being distributed. I don’t think we would have ever signed up to get an office at some point.

Some people here in this company have been working in this office for a decade and when we told them hey you might have to work from home, a lot of people were not very excited about it. So we decided, you know, in the grand scheme of things it’s not philosophically aligned with what we want to do as a business. But in the grand scheme of things it doesn’t cost that much money, right? I mean the entire budget for this company is in the hundreds of millions of dollars a year so a relatively small percentage of that goes into office space.

And ultimately, we care deeply about employee satisfaction and people really loving their job. And so we had enough people saying look, we have always operated this way, we totally embrace remote work — like, we fully realize that ninety percent of the people at this company work from home, but we, the people in Mountain View, don’t, and we’d like to keep it that way. [laughter] So you know, like…

Matt: So will the new office be bigger, will it be nicer? Can you make the office worse so people don’t want to come in?

Stephane: It’s actually not gonna be much bigger partly because generally I would say we’re expanding outside of the Bay Area more than we’re expanding in the Bay Area. I mean philosophically what we tell people is hire the best people you can find anywhere in the world with one caveat, which is time zones.

We want to make sure that if people are gonna have a good work/life balance, they need to have time zones that are somewhat aligned. So you don’t want to have somebody from India, somebody from Australia, somebody from France, and somebody from the U.S. having to be on the same agile development team, ’cause then somebody, at least one of the people does not sleep, ever, and that’s really, really painful for everybody.

Matt: Yeah.

Stephane: So we try to align people by time zone. But other than that, if you find an amazing developer in Chile and a great salesperson in Greece, great. You know, like, why on earth would you force yourself to hire them just in the neighborhood? So the U.S. is only about five percent of the global population or whatever the latest number is, but roughly that number. So the odds of having ninety-five percent of your workforce in the U.S., let alone ninety five percent of your work force in the Bay Area, which is a tiny, tiny population, is pretty low.

Matt: Yeah. Although by that argument, isn’t more than half the world’s population in non-U.S. and European time zones?

Stephane: Yes. So one thing that I think is gonna change over the next decades, and this is a very risky prediction that I’m making because I might still be alive…

Matt: [laughs] Hopefully you are.

Stephane: But if you think about how the world is organized today, it’s very much organized by — and I always get them confused — latitudes, horizontally. The northern hemisphere tends to work with the northern hemisphere, and the southern hemisphere — and that’s due to climate and it’s due to the days when we were farmers. Right?

Matt: Yeah.

Stephane: I mean agriculture in France is very similar to agriculture in the U.S., very different from Nigeria. But in a knowledge economy what really matters is not physical resources, it’s intellectual resources. And what really matters is time zone alignment. So this idea that the U.S. is outsourcing IT to India and outsourcing BPO to the Philippines from a time zone standpoint, except for a few things like QA where maybe the follow the sun model where the developers in the U.S. write code during the day and the QA team in India contest it during the night, which is day there. But if you are trying to be doing more like synchronous, agile type of development, time zones are a real issue.

So I think the real prediction would be that there is a lot more alignment between North America and South America. And that if you’re going to be offshoring software development, and you are based in the U.S., you should be doing it much more in Chile or in Argentina than you should be doing it in India. And for that reason, to your point about the southern hemisphere, if you look at Europe, the real alignment should be with Africa, right?

Like, if you look at France and Morocco, it’s already happening. A lot of call centers for French companies are happening in Morocco and that’s historical because [there are] former colonies where people still speak French. But there is also Mauritius, which speaks English. I mean there is a lot more alignment from a time zone standpoint, north and south, than there is east and west.

Matt: I think we need to go to Mauritius for some research.

Stephane: I totally should be doing [that]. A great place for kitesurfing.

Matt: It’s actually on my bucket list.

Stephane: Yeah it’s awesome, beautiful place.

Matt: So you talked about investing a few million dollars to have this office, to really serve the people here. From your point of view as a CEO, what are other investments you’re making in employee productivity and happiness?

Stephane: Oh there’s plenty. But I would say let’s start by the office itself. So we want to make the office be as remote friendly as possible because the one thing that really doesn’t work is if people in the office think that they are more important than people outside of the office.

And I think in our case, we have so many more people outside of the office, and it’s a norm in the company, and we train people, and it’s a big value part of the company. So I think people are just generally very aware of making sure that the remote people get preferential treatment over the onsite people. But it’s harder to do it when you have ninety percent — when it’s reversed. Most companies have ninety percent of people in the office and ten percent of people that are telecommuting or remote working or what have you.

And establishing the right technology. The video conferencing equipment, really good audio. And then cultural norms. Like understanding that the person who is on the video conference call can interrupt and, in fact, you want them to interrupt, because it’s harder for them to indicate with body language that it’s their turn to talk. So having the tools and the training and the norms to be able to make sure that remote people are really successful and, in particular, how that happens in the office.

Matt: What are some tools? You mentioned audio.

Stephane: Yeah, just buy good equipment. When people, like back in the days, and I’m not gonna mention old tools, but there used to be tools which would take fifteen minutes before you could get started. I would start with the obvious — it’s always the video. So when people are just on [a] phone call, you hundred percent lose the body language. By the way, when you don’t see people, they also tend to be doing something else at the same time, nobody is listening to anybody, and the conversation tends to be extremely ineffective. So always do video unless there is a very good reason why that can’t be done.

Matt: Although I do like when I’m on audio calls and I can walk around my room or like sometimes I do little stretches.

Stephane: Yeah well ya know…

Matt: On video it’s a little awkward to do that.

Stephane: I mean there are some very legitimate reasons why some people — there’s also some people that just don’t want to be seen for very legitimate reasons and that’s okay. And I think you also need to be culturally sensitive to some of these things. My point is there is a real value in seeing eye contact and the body language and all that stuff that you lose if you just do phone calls.

So generally I would say do video whenever you can. I would say have the level of empathy for the people that are remote, that make sure that you don’t have the water cooler discussions with the people that are in the office that are essentially making it harder for the remote people to know what’s going on.

Invest in face to face meetings. So we do regular meetups. Usually the teams that need to work together hire a freelancer on Upwork who is kind of a virtual assistant/travel agent who figures out where everybody is based, and based on that, what are some reasonable cost flights that would take them all to a nice place.

Matt: Oh cool.

Stephane: And then they rent a bunch of Airbnb’s, they stay there for a couple of weeks, there is a lot of working together during the day and I’m sure there is a lot of drinking together during the evening. And so there’s this more informal social connection that frankly gets lost over video conferencing. It’s hard to have a beer with someone.

You know, companies try to have the more informal stuff but every once in a while, having people meet face to face. And by the way, usually after two weeks what we hear from, especially from the developers, is “Enough of this whole social thing,” like, “I feel like I’ve spent too much time with the PMs and the designers and I want to go back and do my thing.” [laughter] And so quite often after ten days also everybody is happy to go back.

Matt: To go back, yeah.

Stephane: And then after that, the level of interaction, the ability for people to have conflict — it’s easier to disagree with somebody that you have a personal relationship with. And conflict is important. If everybody always agrees and nobody ever dissents, then you typically don’t have a really good outcome. So building these social ties really helps in having a more productive working relationship moving forward. So it’s an investment, it’s not cheap to travel people around the world.

It’s also a big perk. You know, some of the people who work at this company have never traveled abroad before and when they know that one year they’re gonna be in Bulgaria and another year they are going to be in Sicily — the person sitting next to me had a trip in Bali a couple of years ago, which out of all places doesn’t seem central but apparently I hear that that was pretty good.

Matt: Somehow that was the most central thing for that team, yeah.

Stephane: Exactly, very essential to go spend time in Bali. But it’s a great perk for people and I think generally it’s something that is hard to measure the ROI but I think it’s probably the right thing to do for the company as well.

Matt: So I want you to put on your Upwork advocacy hat for a second. There are some people listening to this that are probably in fully office-based companies.

Stephane: Sure.

Matt: How should they start to explore shifting that?

Stephane: Yes. So I think you shift — first of all it’s a change process, so you find people that are excited about the change and not people that are resisting the change. You know, if you want to prove that it doesn’t work, you know, — ot to give names of companies that we all know that stopped allowing remote work — like, if you want to make it fail, you can make it fail. Generally if you want to make anything fail you’re gonna make it fail, right? So start with people that are excited about embracing the change.

I would say ideally start with allowing well established people that already know the company in and out and allow them to go work remotely. One of our customers, the way they started is they had a developer who was from China and who decided to move back to China. And he was one of their earliest developers, he knew how things got done, he knew the code really well, he knew everybody back in the Bay Area. And he progressively started building a remote workforce that was partly in China, partly everywhere else, from there and they became pretty big Upwork customers.

I think it’s easier if you start with somebody who really understands how things get done. And then if your first remote person is also so remote that they don’t know anybody in the company, it’s just putting them at a disadvantage. If you do start with people outside of the office, I would say at least for the first few, have some form of on-campus training for them where you bring them into the company, have them spend a few weeks with people just to build that social connect, understand how things get done, and then you allow them to go back and work remotely.

But I think after that, you need to go big. You know, the thing that doesn’t work is if ninety-nine point nine percent of your workforce is sitting in the office and zero point one percent of your workforce is remote, they are always going to be at a disadvantage because they’re never gonna be top of mind.

Matt: They’ll be second class citizens, yeah.

Stephane: Right, exactly. Like, I mean the water cooler to me is the perfect example, right? If most of the conversations happen in a way that is excluding the remote people and is favoring the local people then they are never going to be successful in the long run.

Matt: So how do you go big?

Stephane: Well I think you start by looking at which parts of your company are growing. I mean hopefully you’re a growth company. If you’re a shrinking company it’s a different problem that you might be solving. But if you’re a growth company, figure out where you’re gonna be hiring a lot of people and that’s a very logical place to say we want X percent of these people, ideally more than fifty percent, to be anywhere in the U.S. or anywhere in the world. And because you’re going to be hiring a lot of people pretty quickly, it’s going to get momentum in the company.

But I would say I think what people need to watch for is the sense of isolation that the remote people are going to have, right? For them to be successful, you need to go out of your way to help them be successful. If people feel like they don’t belong, then they are not gonna stay.

One of the frankly biggest benefits of distributed teams that I don’t think people talk about so much is how much longer remote people stay in your company compared to Silicon Valley based people.

Matt: Tell me about that. Do you have any stats there?

Stephane: I mean I can tell you. Of the first fifteen engineers that this company hired, and this was fifteen years ago, twelve of them are still at the company. There [are] not a ton of fifteen year old companies in the Bay Area that still have their first early employees. And the reason is because like one of them lives in the middle of Siberia.

Matt: Literally Siberia?

Stephane: Literally. [laughter] In a place that, from what I hear, used to be kind of owned by the KGB and used to not be on U.S. maps. [laughter] I think he is loyal to us because he loves what we do and because we pay him really well and all that stuff. But partly also because frankly I don’t think there’s a ton of other jobs in the middle of Siberia right now.

Matt: Yeah. [laughs]

Stephane: So there is definitely like a — I would say a social contract for those types of workers that is very different. And I would say for instance, one thing we have started to do a few years ago is we allow people to de-locate. So a lot of companies relocate people, they do college recruiting elsewhere in the U.S., try to bring them to Silicon Valley, which adds even more to the drama that I was talking about earlier.

I think what makes a lot more sense is to do the opposite. Some people just say “Look, I have kids and I want them to grow up in a different environment,” or “I have my parents are getting older and I want to go live…” whatever the reason is. But a lot of people say I would love to keep this job, but I’d love to go work somewhere else.

Matt: I was actually one of those. I was [in the] Bay Area and as my parents started to get older, I wanted to go back to Houston so I de-located.

Stephane: There you go. But in your case, you had started your own company so you get to choose to do it however you want it. I think for a lot of employees, they ask permission from the employer and the employer says, “Well too bad, you need to leave the company.”

Matt: As a CEO, you know, you have to be where the people are. So if we had had an in-office culture, I couldn’t be not there.

Stephane: It would have been harder, yes.

Matt: Yea, it would’ve been, I think, impossible actually.

Stephane: Yeah, yeah.

Matt: So because we were distributed, that’s what allowed me to be in different places.

Stephane: Yes.

Matt: I will also confirm that Automatic as well has really off the charts retention. And I attribute that partially to the distributed model. Now correlation and causation — like, do we also do other things —  do Upwork and Automatic both do things maybe other ways that make people want to stay that happens to be highly correlated with the distributed first approach?

Stephane: Sure. I mean there’s a bunch of things, right? I mean we have people who work on Upwork either for us or for some of our clients for whom there is just no traditional job that would work for them. We run this study every year called “Freelancing in America,” and in the later study we were asking people, like, “Would you ever take a full time job?” And for a few years we’ve been asking this question, which is, “How much money would a traditional employer have to pay you to convince you to take a full time job?” And every year it’s come back with fifty percent of freelancers saying “No amount of money.”

Matt: Wow.

Stephane: And you’ve gotta wonder, like, well that seems like a big, I mean that’s a big number — no amount of money — right? [laughter] So there’s something there and we need to dig a little bit deeper.

So this year we asked additional questions to understand like, why are you saying this? And it turns out that forty-two percent of full time freelancers, and these are not Upwork freelancers, these are freelancers in the U.S. in general, forty-two percent of freelancers said they either have a physical or mental disability too that makes it hard for them to travel to an office or to be in an office — veterans with PTSD and people with Asperger’s — like, all sorts of physical or mental reasons why the traditional labor market does not work for them.

There is another bracket of people that are saying, “I have care duties, I have young children, I have a sick spouse, I have elderly parents,” but for whatever reason, the whole nine-to-five grind, plus the two hours of commute, just does not work with my life.

And then the third bracket of these forty-two percent of freelancers was essentially saying “I live in a part of the country where there are no jobs.” And this is in the U.S. right now, this is a U.S.-based study, and there’s just tons of people that say “I’m college educated” or “I’m highly skilled, I want to work hard but I just happen to live in a part of the country where there’s no jobs and for any kind of reason, I just can’t move.”

And by the way, mobility in the U.S. keeps declining every year. So people are less and less inclined to move, especially across states. And in fact, what’s been happening in the last few years is the reverse to what’s happened historically. Historically it’s the gold rush, people go from the Dust Bowl to California because that’s where all the opportunities are. And increasingly people are not moving at all and when they do, they do the opposite because they just can’t afford to live in the coastal areas anymore. And they go back to their more economically-depressed parts of the country not because they think they’re gonna get great jobs, but just because they are being chased away from the rising costs of living.

Matt: There is a — and this might be related to this — but a lot of companies might consider certain roles being better for being distributed or not.

Stephane: Mhm.

Matt: When I walked into this office a few hours ago I was greeted by not a physical receptionist but a virtual one.

Stephane: Sure.

Matt: So tell us about that. I would say office receptionist is probably an area that almost everyone with an office would assume you need someone there.

Stephane: Sure, yeah, I mean I think generally everybody assumes a lot of things about — this job has to be on site. And I would just allow people to challenge themselves and really — the five whys. Like, why does it need to be on site? [laughter] No, but seriously, why does it need to be on site? And if you ask the question five times, maybe you’ll say “Yes, it has to be on site,” right?

I mean clearly there are some jobs, you know, there are people here that clean the office, clearly at least with the current state of technology there are no remote controlled robots that they can move around to vacuum and all that stuff so some jobs surely need to be done on site. But I would say most of these environments, they are an exception, not the rule.

To the example of the receptionist, it’s a little bit tongue in cheek, it’s a good branding exercise, but it’s also a great job opportunity. The two women that do this, they have two shifts, they live — one lives near Detroit and the other one lives in the very far suburbs of Chicago and, you know, if you asked them, they would say yeah, this is by far the best job that I could ever get.

So the reality is, I think in our case it’s aligned with our brand and so visitors get excited about the idea that they have a remote person greeting them in the office. Maybe in a more traditional company this would come out as being a little bit weird but it works pretty well. So they are on the screen and they have an ability to open up the door and they can ping us through our messaging system, which obviously is part of the Upwork product. And you know, we go and greet people.

And Faith, I don’t know which one you saw, but Faith has been with us for —

Matt: Faith welcomed me. It was an awesome experience.

Stephane: Yeah, I think she’s been with us for like eight years and if you ask her, she loves her job. I met her for the first time last year, she actually came to one of our all hands and I had never met her before and we had a — it was very emotional and it was great to meet with her physically. But I see her multiple times a day over video conference.

Matt: And I got the sense as well that people would come, which is what happens at normal offices, by the way, like, you go, you talk to the receptionist and then someone comes to meet you.

Stephane: Mhm.

Matt: Especially Silicon Valley offices. I got the sense that people coming to meet, ’cause I saw a few of that while I was waiting, had a real relationship with Faith. Like she knew their names, they knew her.

Stephane: Of course, yeah.

Matt: Like, it was pretty neat.

Stephane: Yeah, she’s actually a real human being, she just happens to be living a few hundred miles away from here but you know she cares about us and we care about her and she’s part of the team.

Matt: And do those two people cover all three offices or are there two per office?

Stephane: They cover two offices. I think we’re trying to figure out the whole Chicago thing. Like I’m not sure if — which is ironic ’cause Faith lives close to Chicago. But I think there’s a couple of other people doing Chicago. But yes, technically — actually there’s two entrances in this building so she covers both entrances and one in Chicago. So she has three screens in front of her, which, by the way,  purely from a cost savings standpoint makes sense. Right? We probably pay her less than she would get paid in the Bay Area and she can do multiple offices, which she couldn’t do if she was physically present.

So to your earlier question about can it be a win-win, we do something that’s right for the economy, right for her, we save money and she has a better job and makes more money than she would make otherwise.

Matt: And the money she makes goes into that local community.

Stephane: Well yeah, that’s another thing that economists have been studying for a while. They call it the local multiplier effect. And so the idea is if you have a highly skilled, highly paid person in an economically depressed part of the country, on average they create another four jobs. So what happens is they make a sufficient amount of money and they need to go to the dentist, they need to go to the movie theater, they are going to consume goods locally and so that’s gonna create jobs for the baristas and create jobs for the local retail shops and what have you.

Matt: That’s one job, you also run — I forget the percentage but let’s call it the vast majority of the company — in kind of a distributed fashion.

Stephane: Mhm.

Matt: How do you manage, as a CEO, productivity and performance across that, especially as a public market CEO?

Stephane: Yeah well I think I get that, from what I can tell, productivity for remote people is at least as high and probably a little bit controversially higher than it is for local people.

Matt: [laughs] If you were going to theorize why it might be higher for people not in the office, what would that be?

Stephane: Just, there’s fewer interruptions, for one thing. I mean the culture of — I can turn around and tell you, ask you a question — well for a lot of jobs it takes you awhile to get back in the zone. You know, definitely as a developer, having the sales person or the designer constantly distract you while you’re trying to write code and then it takes you thirty minutes to just get back into what it is that you are trying to do, and by the way, you have introduced a bug along the way because you don’t really remember what you were doing. So that’s part of it.

Part of it is that you don’t have to commute to work. It’s just like whatever time you’re going to be spending for work is gonna be spent for work, it’s not gonna be two hours a day spent in a car that ultimately either eats [into] your personal life, which means it becomes a grind and you don’t stay as long in the company because you get burnt out, or it comes from your working hours, in which case you don’t work as many hours and you don’t get as much done.

I think the down side, the thing that I hear a lot from people — like the two biggest objections I hear — like this can’t possibly work for us — one is culture. This can’t be good for our culture, like, how could people feel like they belong? Which is not true, but we can talk about that.

And then the second thing is oh, but we need to brainstorm, we need to ideate, we need to move fast and like — collaboration over video conferencing and Slack and whatever tools you use is not as good as it is on the white board. And I think that’s actually true. I actually think that when you are truly trying to figure it out and you are in the initial early phases of a project — that’s why we do these meetups, right? If you really don’t know what you’re doing and you’re really trying to hash it out, then working synchronously rather than over messenger, you know — higher throughput, higher level of interaction —

Matt: Yeah, bandwidth.

Stephane: Bandwidth does help. So yeah, go fly across the country and go meet physically together for a couple of weeks while you figure it out.

Guess what, for most jobs that is a very small percentage of the time. Most of the time, especially if you’re a slightly later stage company and you’re iterating on the nth time on your payments infrastructure or what have you, it tends to be a little bit more programmatic. We have three month quarterly roadmap cycles and people have relatively clear roles and we are relying on strategy and all that stuff. And for the most part the dispatching of tasks using Jira and the clarification using Slack — I mean we use our own version of Slack, which is embedded in Upwork, but whatever people want to use, and then when you need to [have] a quick sync up meeting, as a daily stand up, over video conferencing or what have you, it works pretty well.

And I think there is also this — what I hear a lot of people is comparing the ideal scenario, which is, boy, if I could have exactly all the same people, paid exactly the same amount of money and be as loyal to me and stay for as long of a time and it could all be local to me, then that would be even better than my current situation. And it’s like yeah but that’s not the choice.

The two options you have is deal with local talent who, by definition, [are] not as strong as global talent because it’s a tiny subset, pay them the local rates, which are tied to the cost of living, which is always going to be higher than the global rate, have them not stay with you for nearly as long because they’re going to get poached by somebody else sooner rather than later, and by the way, in the agile world where we document a lot less than we used to and a lot more is in people’s brains when they leave, it’s really, really painful for everybody. Right?

So that’s the real tradeoff. It’s the distributed model versus the lots-of-compromises model. And I think that’s what’s quite often missed in the conversation.

Matt: Are we recreating these problems? So before maybe the person in the cubicle next to me could interrupt. But now everyone in the company can interrupt me on messaging or Slack. So what are we recreating and what should we try to keep?

Stephane: Yeah I would say, like, people need to recreate norms in general and think about what makes sense and what doesn’t. I would say it’s easier to ignore a synchronous text message than it was to ignore the person who is desperately trying to wave at you and attract your attention.

Matt: [laughs] It was a little awkward to do that before.

Stephane: Yeah, but you know, like, at the end of the day it’s a cultural norm. If you as a CEO impose the norm of as soon as you get a dash — sorry, Dash is our internal tool — as soon as you get a Skype message or a Slack message or what have you, you have to respond within the next five seconds, then yeah all you’ve done is replicate in a virtual way the same type of behaviors that people used to have in the office.

If you’re allowing people to work more asynchronously and in particular when you have multiple time zones, the respect of saying “It’s ten p.m., unless it’s really, really urgent, I probably don’t need that person to respond to me until tomorrow morning.” Like, that level of tolerance for synchronous work I think will end up leading to better productivity for the most part.

You know, one of the things we tell our developers is you should not get blocked for multiple hours but you also should not get help after two minutes of trying. [laughter] Right? So there is a window and — I don’t remember where [the window is] today — but I think we tell people, “Like, try for fifteen minutes and then ask for help.” And I think when you ask for help, help will come fast because people know that you’ve given it a fair shot.

But at the same time you don’t get blocked for four hours, wasting your time, because somebody probably has the answer. And its finding the right level of tolerance for when you should be interrupting somebody else versus when you are so stuck by yourself that you should be interrupting somebody else.

Matt: Yeah. And CEO to CEO, something I have been learning as well is that because of the power dynamics of where you are in the company, or where I am, if I send that message, even if I don’t need a response till tomorrow, if someone sees it at 10 p.m., even if they’re not responding, they’re stressed out about it, things like that.

So I’ve actually started batching things. I keep a text file using Simple Note that I keep all my questions that occur to me in the hours where they often occur to me, which is usually off hours, or I’m traveling or something, and then try to batch those at more work appropriate times. Just because of that dynamic, people would respond, even if they know — even if I say it’s not urgent. [laughs] They’re thinking about it.

Stephane: Yeah. If the CEO does not follow the cultural norms of the company then the cultural norms won’t happen. My previous assistant is on maternity leave right now and when we decided to hire somebody new I was getting a lot of push back that the person had to be in the office. And I said no, she doesn’t have to be in the office. And people were like, no of course she has to be in the office, she needs to greet your visitors and all that stuff. And I’m like frankly I can greet my own visitors. [laughter] I’m pretty sure I can do that.

So we hired somebody through Upwork a few weeks ago. And she’s not far, she’s in Half Moon Bay, but she’s far enough that she works from home and she takes care of her horses and doesn’t want to come to the office.

Matt: Horses?

Stephane: Horses. Yes, she’s on a farm. And it works just fine, you know? And so I think part of it is — model your own behaviors. Like if you expect the company to be a very distributed company, then I should do the same thing.

Like one of my direct reports is based in Chicago. She’s like semi-local but remote. And generally I would say we are all spread, the leadership team of this company is spread between this office, the Chicago office, the San Francisco office and then people having to travel for all sorts of reasons. And so most of our meetings are also fairly distributed. So I think us modeling the behavior makes it more credible when we also tell other people to do the same.

Matt: You literally wrote a book about distributed work and engineering teams.

Stephane: Mhm.

Matt: Tell me what you learned about different types of teams working together in a distributed fashion.

Stephane: So I wrote this book many years ago. Thank you for reminding me, I had totally forgotten about it. But I wrote it —

Matt: Oh [laughs] it was — part of my prep was checkin’ it out.

Stephane: Thank you. But I wrote it at a time when we had switched from doing traditional waterfall type of development, which was still big in the early 2000s, to doing agile. And as part of the transition we had said “Hey, even though most of us have done some form of agile development at some previous company before, [there are] a lot of people that haven’t gotten the training and we should hire trainers from the outside.”

So we interviewed a bunch of consultants that were doing agile training and all of them told us you can’t do agile and be distributed. Agile means physically co-located. And I was like, “Well that’s bullshit.” [laughter] I don’t think that’s true at all. Like, I think there is absolutely no reason why that’s the case, but clearly you are not qualified to [be] training us on this because you don’t believe it can be done.

And so we decided to start essentially documenting how we thought agile should be done in a distributed environment and then we practiced it for a while and then I ended up documenting it for other people because, frankly, I was talking to all of these startup founders and they were asking me how do you guys operate an engineering team at scale in a distributed way. And I just thought okay well this is — rather than me repeating myself a hundred times, let’s just write it down and describe how it works once and for all.

Matt: Cool. Tell me a bit about your exec team and the org structure of Upwork.

Stephane: Yeah, I think we are organized I would say in a relatively traditional way for a tech company. It’s very functional. And so there is somebody who runs marketing, somebody who runs engineering, somebody who runs product, somebody who runs legal, HR, finance, sales and operations, and they all report to me directly, and then they each have team members, some of whom are employees, some of them are freelancers, some are remote, some are local, and it’s organized that way.

I would say there is one specific part of our organization that — you and I had this discussion a little bit earlier, off the mic. We also do a lot of managed services for our clients. So we have clients where we deliver the work for them. And of course we, with a quote, [have] freelancers. And so we have freelancers that are on Upwork that work for Upwork. We have freelancers on Upwork that work for a client but essentially for Upwork who then subcontract it to the freelancers. And then of course we have hundreds of thousands of freelancers that work directly with the client.

So there’s an interesting continuum of — when you say who works for whom, it’s almost, like, not so super clear. You know what I was telling you earlier, like, we have enterprise clients who regularly ask us, like, can you please do this for us? And I’m like, sure, “we,” quote/unquote, will do it for you but the “we” is a freelancer.

And so whether the freelancer works for us and we pay for them, or they work for us but we cross charge them to the client, or they work for the client who hired them and pays them directly, these things are almost very fuzzy, if you will. Like, ultimately it’s human [beings] that do work for a specific company through an agreed-upon engagement in a remote way and it’s very fluid how this happens.

Matt: That is pretty fluid. What would be a typical day for you? One on ones, direct reports, meetings?

Stephane: I would say I wish they were perfectly structured and very typical. I would say I spend as much time as I can with customers. Because we try to be a very customer driven company. So I talk with freelancers, I speak with agencies, I speak with our enterprise customers, we do dinners with customers, all that stuff. Then I have weekly one-on-ones with all of my direct reports. We have regular, I would say, updates on some of the key initiatives, like just before this I was chatting with our legal team about a potential new thing that we’re going to offer to our enterprise customers that they need to finalize.

And then, you know, increasingly I also spend time with investors. And that’s the pluses and the minuses of being a public company is that we used to have a very stable base of investors historically as a private company and now that our stock is open for the public I run a second marketplace, which is in addition to running the Upwork marketplace, I run the marketplace for the Upwork stock. And so there is also supply and demand. The more I can get demand for the stock, the more the price is going to go up.

Matt: What is the biggest misconception of those public investors that they have about Upwork?

Stephane: Oh, misconceptions about Upwork? I think we have tried really hard to make sure they don’t have misconceptions about us. Yeah, I’m not sure. I would say the biggest misconception in our world in general is this idea that work needs to be done on site, but I wouldn’t say it’s with investors. I think it’s…

The thing that frankly keeps me up at night and the thing that constrains our ability to completely fulfill our mission is the fact that there are so many people looking for work everyday on Upwork than there are jobs available. Every day [there are] over ten thousand people who apply to join Upwork, we only have jobs for about two hundred of them.

Matt: Wow.

Stephane: So literally we are going to turn down, every single day, ninety eight percent of the people who sign up. And it’s not a happy message, right? We are going to say you might be amazingly qualified but we just don’t have enough work for you. And so workers are convinced — like, people want to do this and the thing that’s really blocking — the complete unlock of doing this at a much bigger scale than we do today is convincing companies to change how they operate.

And so that’s why I spend an inordinate amount of my time on working with enterprise clients, working with SMBs and really trying to get to the point of — now this does not need to be done on site and no you don’t need to quote/unquote “own” the worker, which is a complete misnomer anyway. Like the idea that you own your employees and you don’t own the freelancers. Like, nobody owns anybody, we are all human beings here and we are free to go where we choose to. And the way you retain people is you give them meaningful, exciting things to work on and you treat them the way you’d like to be treated. It’s not based on whether they get a 1099 or a W2 and they are on site or what have you. But there is a lot of, just, misconception about how work gets organized in corporate America that we are really trying to change.

Matt: You made a very good case for the practical reasons to go more distributed. Is there a moral reason?

Stephane: Yeah, I think the moral reason is what I said earlier. Forty two percent of freelancers have a physical or mental disability, have care duties, live in the wrong part of the world, wrong being defined by the norms of the traditional labor market. You can have an impact, you can create opportunities for these people.

You know, when the Bureau of Labor Statistics in the U.S. says that the unemployment rate in the U.S. right now is three percent or whatever the latest number exactly is, it misses a big part, which they also report on, but nobody ever talks about. It’s called labor participation rate. That is the percentage of adults between — so they have different trenches but let’s say between eighteen and fifty-something that participate in either — they are either employed or they are unemployed. And that number is about sixty percent.

So there’s essentially a real unemployment rate of about forty percent. And of course they are not unemployed, many of them are freelancers, but for many of these people, they just can’t participate in the traditional job market the way it’s defined. So yes, there is a social aspect to this. Yes, you can increase the diversity of your work pool.

People in the Bay Area are complaining that they don’t have enough of X, Y, Z type of workers, African Americans being an example. You know what, [there are] a ton of really, really highly qualified African American developers in Atlanta but if you just hire them in Silicon Valley and you force people to relocate — like, [there are] a lot of them that just don’t want to relocate and they won’t.

And so if you open up the aperture of what you do and you are willing to hire people that are super hard working, probably more dedicated to you than any of your traditional workers will ever be because you’ve massive changed their life, you can have much more diversity, you can have much more social impact, and you can frankly do something good for your company at the same time. It’s not either/or.

Matt: What percentage of jobs would you say are distributed today or remote?

Stephane: I think it’s still very small. What the U.S. government tracks is telecommuters.

Matt: [laughter] That’s such a funny term.

Stephane: And I don’t remember the latest number, you know, but like telecommuter typically means you’re local, you just don’t go into the office everyday because you’re somewhat far away and your traffic kind of sucks. And that’s great. I mean obviously if somebody lives fifty miles away it’s probably nice that you allow them to work from home a couple of days a week, but it’s still, like, you’re still stuck in a suburb of Chicago or the suburb of New York or what have you.

If you’re truly looking at a fully distributed workforce, I think it’s still a pretty small number. Now if you’re looking at freelancers, not just looking at full time employees, it’s a much bigger number, right? So the estimate we’ve had for a number of years — you know, we track this number of freelancers in the U.S. through our annual survey and it’s about thirty five percent of the U.S. workforce that’s doing some amount of freelancing. And increasingly — and they made, through freelancing last year they made about one point five trillion, so that’s about seven percent of U.S. GDP.

Matt: That’s a good amount.

Stephane: So it’s a pretty substantial amount. And it’s back to my point about —

Matt: A lot of room for Upwork to grow too.

Stephane: Well yes, it means we are a very, very small part of a much bigger pie. People tend to obsess about this whole gig economy, [or] on demand economy. Like us and Uber and TaskRabbit and whoever else, if you add all of us up we are like, [a] single digit percentage of the true freelance economy. Like, most of it is done in a fairly traditional way where, as a freelancer, you have your own professional network and you re-engage with clients, and it’s highly inefficient.

I mean the idea that as a small business I’m supposed to figure out who the best independent lawyers and the independent recruiters and independent designers are by looking at the yellow pages or wherever it is that you find them. And then on the other side, as a freelancer, you spend an inordinate amount of time on business development, networking, trying to find the next gig.

Matt: Billing.

Stephane: Billing, getting paid, like, nobody ever pays you on time if it’s not done electronically through a platform. And so that’s the stuff that we are trying to fix through Upwork is basically streamlining all of that stuff so that as a freelancer you can spend less time on business development and administrative tasks and more time on what you actually like to do, which is being a great designer or a great developer or whatever it is that you do as a specialty.

Matt: It reminds me of commerce in the US. Like, we think ecommerce is so huge because we always have Amazon boxes in front of our house. That’s still like single digit percentages, all retail and commerce that happens just in the U.S., not even globally.

Stephane: Yeah. I mean the reality of having a really, really big market is that it takes a very long time to get to a big percentage of it. So e-commerce, twenty plus years in, is about ten percent of U.S. retail. Upwork type of platform based freelance work is definitely in the low single digits of the freelance economy, let alone the other labor markets.

Matt: Wow. So let’s fast forward as the final question. Twenty years from now, what percentage of jobs do you think will be distributed?

Stephane: Oh, I think the jobs that can be distributed — because there’s always gonna be local jobs — it’s gonna be the majority.

Matt: The majority? Wow.

Stephane: Yeah. I mean I think like the — first of all, there’s a generational cut of this. So we study both the supply side, so the freelancer side, through our Freelancing in America study, we also study the buyer side of this through what we call the Future Workforce Report, which is coming out right now. And I can give you — the highlight of it is that the young generation, so managers on the buying side of the equation, managers that are gen z and millennials are much, much more likely to leverage freelancers and allow remote work than the baby boomers.

And what’s happening is the baby boomers are fast exiting the workforce. I mean they were there on the manager side, right, they were the managers. Until recently the typical director, VP and, let alone CEO and other execs of a company, was a baby boomer. And they are not digital natives and there is still a lot of managing by facetime and a lot of very traditional conceptions of how work should be organized and how management should work. They are very fast exiting the workforce and they are increasingly getting replaced by millennials. The oldest millennials are thirty-eight now. They’re not exactly kids anymore, right?

Matt: I’m close to that actually.

Stephane: Yeah, yeah.

Matt: I think I’m one of the older millennials.

Stephane: Well exactly but you’re a digital native and you have a totally different behavior towards work and towards collaboration than what my generation had, let alone the one before. And so what’s happening — part of the reason why it’s gonna be fifty percent and it’s relatively easy to predict is that it’s already fifty percent in that generation.

So what’s happening is the baby boomers are exiting the workforce — by the way, they are coming back as freelancers, they are coming back as entrepreneurs, and when they do they suddenly awaken to the idea that, hey, maybe this “digital online” thing actually works. But they are no longer the CEOs and the CHOs of companies and they are being replaced by younger people for whom it’s totally obvious that this should be how it gets organized.

So I think [it will be] the social, economic, [and] political pressures, along with the generation replacement, along with technology that keeps getting better and better. You know, when we started this company, I wasn’t there, but when the founders started the company, the idea of remote work done over an expensive landline and a fax machine — [laughter] It was crazy. Like visionary way too early, right?

Matt: Yeah it’s changed.

Stephane: And you look today, like broadband is fairly ubiquitous in many parts of the country and many parts of the world. A lot of the tools we use are in the cloud, you can do video conferencing pretty much for free. Like, every device you have has a webcam. And so it’s already gotten a lot better. And I think you’ll see the next wave of technology, whether it’s augmented reality,  it’s much better chat tools — I mean there’s gonna be all sorts of things that make the location so much less relevant. Fundamentally if everybody is using AR goggles in order to do 3D modeling of a product, we are all watching the same thing virtually, so whether we sit next to each other or we are far away from each other, it matters a lot less.

I think the only thing that will stay probably forever is time zones. So like I don’t think we’re gonna fix the fact that when it’s the middle of the night for you, you probably don’t want to be at work. And that’s why I think the world will be much more organized vertically and much less organized horizontally.

Matt: Longitude versus latitude.

Stephane: Whichever way that is, yes. [laughs]

Matt: Well we could obviously talk a lot more but thank you so much for this time. Also, thank you for the leadership that Upwork has in this — what I think of as a revolution of distributed work. I’m really looking forward to the story getting more out there and hopefully we can chat again sometime.

Stephane: Of course, thank you for having me.

Matt: Of course. Appreciate it, man.

A new podcast, 15 years in the making.

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Matt Mullenweg, cofounder of WordPress and CEO of Automattic, embarks on a journey to understand the future of work. Having built his own 850-person company with no offices and employees scattered across 68 countries, Mullenweg examines the benefits and challenges of distributed work and recruiting talented people around the globe.

Produced by Mark Armstrong and the team at Charts & Leisure: Jason Oberholtzer, Whitney Donaldson, Cole Stryker, and Michael Simonelli. Theme music by Jason Oberholtzer. Cover art by Matt Avery.