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> I think this is all bullshit. It most likely has to do with rental contracts the company signed and not wanting it to go to waste. This is the sunk cost fall
by add-sub-mul-div 3y ago
> I think this is all bullshit. It most likely has to do with rental contracts the company signed and not wanting it to go to waste.
This is the sunk cost fallacy. While you've overlooked it, I promise you they haven't. If they already have the lease, they'd be happy to let the building sit empty without paying for utilities, security, etc. They'd be happy to offload facilities costs to employees.
- willsmith72 3y agoI don't buy that for a second. To C-level executives and the members of a board, if we're paying for an office, 99% of the time they're gonna say "use it". They're not thinking about sunk costs.
- jonas21 3y agoNobody thinks that way. If they could save money right now by not paying for utilities and support staff without sacrificing productivity, they absolutely would do it. And eventually that lease is going to come up for renewal, and they'd love to be able to cut costs then too. Bringing everyone back to the office makes that impossible, but they've decided it's worth it.
- willsmith72 3y agoJust not true. I literally know of business owners/C-levels who think this way. "We're not just gonna leave this space here empty when we're already paying for it". Things like utilities and support staff on large business park leases are often included or heavily discounted, not to mention that they're usually tax-deductible. Where are you getting your info?
- smarmgoblin 3y agoTFA suggests these companies hold large amounts of commercial real estate as long-term investments, so “let the lease expire” is likely not an option.
- shuntress 3y agoMaybe I'm misinformed but if they are leasing the space doesn't that mean they don't own it? EDIT: And if they DO own it, it they would probably prefer to pay some rental management company to rent it out as office space for passive income rather than fill it with their own expensive employees.
- smarmgoblin 3y agoI think you’re right, and there are multiple reasons executives don’t see office space as a “sunk cost.” A small part may even be that they value work done in-office more than work done remotely. But just pointing out it’s not the most plausible objection to remote work.
- bbor 3y agoWhat is the job of a chief executive? Optimists say “make the company more profitable”, pessimists say “grow personal wealth and prestige“. Given the widely reported cases of decision makers in big tech also holding massive investments in commercial real estate, along with general “damn kids are lazy and want to WFH so that I can’t watch them” dogma, makes me a pessimist.
- sir0010010 3y agoI remember reading arguments that executive should try to maximize the value of their shareholders' portfolios rather than just the firm itself. Which leads to interesting incentives that don't exactly align with the benefits you would want to get out of a market economy, such as firm A not entering firm B's market to avoid driving down retail prices, even if it would be beneficial for firm A on its own. So, the argument would be that if a lot of a firm's shareholders also own commercial real estate, it would be in the firm's shareholders interest for RTO, even if it wouldn't be in the individual firm's best interest.
- TheCoelacanth 3y ago"Sunk cost fallacy" is a phrase precisely because it's something that people often do. No one would have bothered making up a name for it if people consistently avoided making that mistake.