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The Past, Present And Future of Coworking

The Bureau team caught up with Tony Bacigalupo, who founded Manhattan's very first co-working space in 2008. Here's his take on the past, present, and future of co-working.

Bureau: Tell us a bit about yourself.

Tony: My name is Tony Bacigalupo, and I started Manhattan's first coworking space. It was called New Work City and opened in 2008, we ran it until 2015, and had a heck of a ride.

Along the way, coworking became a big deal, so I started writing and speaking more, and got active in the online communities where people talk about building these spaces. That’s when I transitioned over to helping people build coworking spaces everywhere. Now I have a network of coworking spaces all over the world that I coach and help make successful.

Bureau: What made you decide to start NWC back in 2008?

Tony: I was working from home, and wanted to be around other people. At the time when I was first discovering all this, in 2007, I had a laptop, I had the ability to work anywhere with Wi-Fi, but there weren't really places to go. You could work in cafes, sure, but that wasn’t what I was looking for—I wanted people to hang out and collaborate with.

And I discovered this community called Jelly, which is this casual work event where we would meet once a week to hang out on our laptops and work together, and it was a really fun gathering—and I fell in love with the idea of that community and wanted to have it all the time. I discovered there were these places in other cities called coworking spaces, but no one in New York had build one yet. So I led that effort with the help of some amazing friends.

Bureau: When you founded New Work City—more than a decade ago, at this point—what was it like finding a space? Did you go to a landlord and say, “hey, we're just going to have a bunch of people who aren’t colleagues and don't work at the same company in the same space?”

Tony: It was very difficult, honestly. Landlords were wary of the idea, they tend to be risk-averse, but in fairness it was a strange notion at the time. The idea of having not a single business, but many people who run their own businesses, working for themselves, coming in and out of a space—a changing population of people every day—seemed risky. A number of landlords didn't want to work with us, which is ironic because in later years, once we didn't need them anymore, quite a few landlords asked us to open a coworking space in their building.

We ended up getting started by subletting—actually subletting from a existing sublet—from a startup that had extra space, which lowered the barrier tremendously for us. For our first dedicated space, we worked directly with an individual landlord who owned a building and was willing to meet with us, sit with us and talk face to face, which made a huge difference.

It’s amazing to think that only a decade ago, the concept of coworking and flexible office space was almost unknown in the real estate world.

Bureau: Right, and over the last decade, coworking has obviously blown up, with WeWork and Breather and many others. Why did this happen? What are the key catalysts, macro or perhaps in the way the nature of work has changed, that have made coworking important?

Tony: Yeah. There are a number of large trends at play that are driving this from a few different directions, but I'll go over a few that come to mind.

We’ve already touched on this a bit, but from a technology standpoint, the fact that many kinds of work have transitioned largely to a form that can be done on a laptop, anywhere there's Internet, is so revolutionary that it's hard to overstate.

So that's led to a grand shift in our relationship with our work. There are trade-offs to remote work, but one of the salient aspects is that people can be a lot more flexible with the way they allocate their workspace.

The explosion of independent and freelance work is another big factor at play here. Obviously this is connected to the technology driver—freelancers, small business owners, creators and gig economy workers have so many ways to collaborate and engage with customers. With the growing viability of these business models comes an increased need to house these solopreneurs and small teams.

Corporate culture has influenced the rise of coworking as well—companies searching for ways to reduce overhead and find competitive advantage in hiring are embracing corporate remote, open concept floorplans and hoteling. But technology and the freelance economy are probably the two most significant catalysts.

Bureau: How do you think about the different players in this space? You have behemoths like WeWork, and then you have independent spaces of the kind you probably consult with, which are perhaps smaller and more thematically oriented. How do you segment coworking providers and how do they differentiate from one another?

Tony: There's a few ways of looking at it. For one, to reframe the question a little, and I think we’ll speak more about this, but when I think about the future of coworking, it feels apparent to me that we’ll probably just call it working. We’re going to drop the co. Coworking is a transformative force and an industry, but it’s also a movement that will change the status quo of work and physical space in a broader way.

To answer your question specifically, there are a number of big brands going after a particularly lucrative part of the market, which is private office rentals and corporate clients. These companies want to be more flexible with their office space, and are willing to pay a margin to not lease and manage a space on their own. The WeWorks of the world, this is the direction they’re headed in.

I try to make an analogy to coffee here, which is that WeWork is kind of like Starbucks, where they're the big brand and number one. A lot of people only go to Starbucks because that's the experience they can count on. But a lot of people never go to Starbucks because that's who they are. These people want to go to the local shop and barista.

Just like there’s a thriving ecosystem of chain coffee shops and local businesses, there will be local coworking platforms that thrive. For all of the talk about the size of WeWork, it's absolutely dwarfed by the industry—there are on the order 10,000 independently run coworking spaces.

Then there’s the way coworking is influencing other public spaces. You and I know that hotel lobbies and lounges in NYC are a new kind of ad-hoc coworking space. Churches and places of worsiop are these amazing local gathering places that are starting to host coworking projects—I’ve worked with a few as clients. Libraries, public spaces, you name it.

The value of these hubs is clear enough that corporate brands are getting into the mix too. Here in NYC, companies like Lululemon, AWS, even Kellog’s Cereal have coworking spaces where you can go hang out for free.

Between all these players, what I tell my clients is that the marginal value of providing a desk is rapidly approaching zero. So a big part of what I do is working with spaces to differentiate and create more value than a chair and internet access.

Bureau: What do you think some sources of that differentiation could be?

Tony: One mind-blowing stat is that for all the growth that coworking has seen, the vast majority of potential co-workers aren’t members of any space—97% of the market is not being served.

One of the main reasons for that is because renting a desk in a coworking space is really expensive for an individual, especially if you're a freelancer or small business owner. There needs to be more value.

The key is shifting the relationship away from desk rental as a dynamic and towards value accruing from the environment. Being around like-minded people to share wisdom and camaraderie, trying to figure out taxes and health insurance and sales together—the community, helping each other, that’s the real value.

So maybe you see more coworking spaces that say explicitly, come join our program to grow your businesses, set goals, hold yourself accountable and fight distraction. That’s how the workspace becomes the secondary delivery vehicle for a community experience more valuable than the space alone. Renting office space is unsustainable as a focus.

Bureau: I'm almost reminded of medieval guilds, where you have folks who are sort of colleagues but not really part of the same team—you're doing your own thing, you have your business, but you're still connected and help each other where it makes sense.

Tony: Absolutely, to a large degree we're coming back to that—work was way more communal for much of history. In the 20th century this consolidation that happened, with lots of people working under the same big corporate roof, but I’m more convinced that this was a blip that won’t last.

Bureau: Last question to tie it all together—when it comes to the individual worker, how will coworking impact the culture of work? What do we lose, and what do we gain?

Tony: What we lose, for the time being, is the full-service experience that a traditional employer used to offer. This was the deal: you give up autonomy over your physical work experience, your culture, you assign that to an employer to manage for you. But in exchange, the employer does everything—you know exactly how much money you make, vacation time and clear benefits, and these hygiene factors make working easier.

When you co-work—and we’re focusing primarily on the freelance and independent consumers of coworking, and less corporate clients here—you have total power but also total responsibility. Issues around money management, health care, retirement savings are on you to figure out.

Where it has to go, one way or another, is that these problems will start getting solved. You’ll see larger coworking spaces begin to offer a full stack of services. WeWork, of course, would be excited to offer you health care and a 401K for a price. But I think it’d be nice to see alternative structures, other ways that collectives of workers can access these things. In community-driven spaces, we can start to replace these employer-driven constructs with peer-to-peer equivalents.

There’s a lot of work to be done here, but I think we’ll see infrastructure created very soon that will eliminate this drawback while preserving the core freedom of choosing your place, your culture, your people as you work.

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