Joe Fuller: Welcome to the Managing the Future of Work podcast from Harvard Business School. I’m Harvard Business School professor and visiting fellow at the American Enterprise Institute, Joe Fuller. This episode is one of a series of special dispatches on the sweeping effects of Covid-19 on our economy, society, and the future of work. In addition to our regular podcast episodes, we’ll be bringing you shorter and more frequent interviews with business leaders, policy makers, and leading scholars on the coronavirus. Canadian company, MobSquad, helps pair international tech workers with US companies. As founder and CEO, HBS alumnus Irfhan Rawji is seeing Covid-19’s effects on the workplace up close. He joins me today to talk about the advantages and challenges of the distributed virtual organization that MobSquad helps companies access. Also through his work in venture capital, he’s observing how a variety of businesses are dealing with the pandemic. In addition, he’s board chair of both The Organic Box grocery service in Alberta, Canada, and Activate, a public-private partnership for stroke reduction. Those activities give him unique insights into food supply, small business, health care, and the Canadian health care system’s response to the coronavirus, making him a very interesting person to engage at this point in time. Welcome, Irfhan.

Irfhan Rawji: Thanks for having me, Joe. It’s a pleasure to be here.

Fuller: Well, we’re delighted to have you back engaged at HBS, even though it’s under some pretty unpleasant circumstances. Why don’t we start off talking a little bit about MobSquad. How are you seeing this economic downshift—that’s affected Canada and your US client base—affect demand? Is it universal? Is it by technology? Are you seeing demand increase? How’s it all unfolding?

Rawji: That’s a great question. There’s definitely been headwinds and tailwinds as the world has been shifting underneath our feet here. In terms of headwinds, for sure, you’re seeing clients take longer to make decisions to use a nearshore partner like MobSquad, because I think decisions generally right now, especially for B2B sales, are slowing down. But in terms of tailwinds, the idea of remote work—and of having people work nearshore and then distributing your team—has never been hotter. So in many ways, nothing has changed, and in many other ways, the mindsets have changed. Many executives we’re talking to, they’re more comfortable with remote work now than they were before, because the theoretical objections that they would have to remote work historically have gone away, because they’ve seen—with their staff that are now working in a distributed way—that it actually does work pretty seamlessly. They’re also pretty excited about the idea of de-risking their business. The idea of having different pockets of employees in different places to de-risk your businesses seems to be very popular. Frankly, having employees in a different country in a different context in a different regulatory environment is also positive. If you think about all the risks that can hit us as business people, we didn’t see this pandemic coming at us as a risk. But having a nearshore team in Canada actually is a solution to a risk like this that we hadn’t seen before.

Fuller: So one thing we are certainly also observing is, so many large companies are so lean in their staffing that, when they get some anomaly, some unexpected event, that suddenly creates incremental demand for work, they really just don’t have any alternative but to go out and access third-party resources.

Rawji: I think that’s right. They don’t have an alternative, especially domestically. The talent market, just given how you get high-performing talent on the technology side, is basically through the visa system, the H-1B system—that takes 6, 12, 18 months to get somebody in, so you just don’t have the ability to switch quickly—versus via Canada, we can bring international resources here in under four weeks. So you actually can move very quickly under the system that we have at MobSquad. I think the second thing is, having the ability to have distributed teams actually de-risk skinny teams, because if you think about something like coronavirus—if it was to impact a team, and everybody’s sitting in one location—that has a massive impact on a business, versus if you were distributed. You’re seeing now trading floors moving into multiple spaces for many of these big banks. The reason is, you can’t afford to have the entire team go down. If you have very important resources to your company—and for technology scale-ups, their software engineering teams are the most important talent they have—being able to distribute that actually de-risks you from something like this pandemic.

Fuller: Irfhan, in addition to being CEO of MobSquad, you’re a very active venture capital investor with really a broad array of investments, different sectors. You’re not just focused on tech or business services. There are already articles in the prominent press about how this is going to affect the venture capital industry more broadly, their portfolio companies, even the types of investments that people are going to be prepared to back in the future. Now you invest both in Canada and the United States. What are you seeing, and how do you think this is going to shake out?

Rawji: It’s a very interesting time for technology scale-ups and startups. If you think about a typical business that maybe is moving from a period of strong profitability to less profitability, maybe the biggest challenge they’re going to have is hitting a debt covenant and looking for a waiver. For a scale-up that’s burning cash, if their revenue declines, their burn rate goes up and their runway shortens. You combine that with a financing window that maybe is shut or shaky at best, you’re looking at a lot of companies that are thinking about potentially having an existential issue right now. So the layoffs that I’m seeing in scale-ups and startups as a percentage of workforce are greater than other businesses I’m looking at. I think the reason is, this existential issue, they have to cut burn. That’s going to have a profound impact on the level of innovation that we see in our economy over the next two or three or four years as we see a number of these companies die. At the same time, I think you’re going to see a lot of companies prosper, because as their competition is wiped out, their ability to scale and grow will be enhanced. And so we’re going to see some real winners here. So for VCs like myself, as a venture partner at Relay Ventures, we’re really looking at a portfolio and saying, which of these companies with extra fire power can use this environment, where there’s shifting sands, to become a winner in this environment? Think about something as simple as advertising. If you were to look back three or four or five weeks ago and look at Facebook advertising and Google advertising, my bet is that there’s less of that happening today than there was a month ago, because people are cutting their marketing budgets. That means, for the same dollar, you’ll get better mindshare with your consumers right now, and so you could be more efficient. So I think winners will really emerge out of this, but we’re going to see a lot of carcasses along the way.

Fuller: Is that going to be one of those classic the rich get richer, and the new and impertinent startup gets a staff position at a Google or a Facebook?

Rawji: I think that’s entirely possible and probably likely, right? As you see the level of competition decline, as you see a number of these companies not make it, it’s a winner-take-all world, especially with startups. I think you’re going to see that accelerate in this environment. The second thing I think we see that is worth thinking about is, what has fundamentally changed now, and how does that change the thesis of all of your investments? I think, fundamentally, there will be a recession, there is a recession, there might be a depression. That will create challenges, but also opportunities, right? So there’s an opportunity for the winners to take market share. The second thing that I think is changing right now is a fundamental change in the consumer psyche. For some companies, that’s going to be a positive, and for some companies, that’s going to be a negative. Some of them are obvious, right? So we’re less likely to want to be in places where there are mass amounts of people in small spaces. We’re more likely to be comfortable with remote work. So I could see MobSquad being a winner out of this.

Fuller: Another business that seems to be a winner is food delivery services. With your investment in Organic Box, you’ve got a farm-to-table, farm-to-doorstep service available in the Calgary area. How are you seeing this epidemic, this pandemic, affect their demand? Because it seems that maybe in your portfolio, you’ve got one of those businesses that may perversely benefit from what’s going on.

Rawji: Yeah, this thankfully points very clearly to the beauty of diversification in one’s financial portfolio.

Fuller: Yeah.

Rawji: The New York Times last weekend showed the varying categories of consumer spend, and which were the winners and which were the losers. Obviously, airlines and cruise ships are losers. The number one winner was online grocery. And so we have an investment in an online grocer. I think what’s happened here is a number of trends that we were seeing grow over time have been accelerated pretty dramatically because of this pandemic. So let me give you a few things that we’ve seen over time that I think have been true for consumers for the last 10 or 20 years. Number one, the interest in health and the tie-in to high-quality food and health. I mean, we’re an organic food distributor, and people care more about their health in a pandemic than they would have otherwise, because we think about it every day, we hear about it every day. You can’t turn on the television or the radio and not hear about health. The second thing is, people care now more, I think, about local than they did even three months ago. We’ve always cared about local and local sourcing, because we think that’s an important thing to support our local economy. But if you think about the global supply chains that, in many ways, are falling apart right now, how much do we want to have our food system be at risk for this? So people are voting with their dollars to say, “Actually, I think that a sustainable local food system is an important thing.” The third thing is, the business that we’re in is delivery, and I do think that people are now thinking more about the idea of spending less of their time in higher-risk environments. Is there any benefit to going to a grocery store now, rather than just having it delivered to your door? You’re taking definite risk risks that maybe we didn’t know about six weeks ago, but we certainly know about it today. I think all of these things have changed dramatically. When you add them up, and you stack those things together, you end up with what The New York Times calls the number one winner of the pandemic. I think, of these things, that health is really important, and that our food system needs to be sustainable locally, and that we shouldn’t put ourselves in risk of Covid or other germs by being in environments that maybe we shouldn’t be in. I think those things are things you can’t unsee. So while I don’t think you’re going to see the level of growth that we’ve seen week on week here over the last three weeks continue, I don’t think it’s going back to where it was. This is one of those psyche things that has fundamentally changed and I think we’ll point to 20 years from now and be like, “That was the reason this happened.”

Fuller: Any concerns about how the supply chain for food is going to hold up in the intermediate term? We’re already hearing reports out of Europe that the normal migrant produce pickers that come from Eastern Europe to Italy to Spain to France are not available. The same is about to be the case in the UK. France is calling for volunteers from various corporate jobs who are on furlough to become fruit and vegetable pickers. Somehow that doesn’t fit with my vision of the typical French corporate executives, but maybe I’ve just spent too much time in the wrong arrondissments in Paris. Are you beginning to see any of those concerns at your supply chain? Or do you think it’s going to hold up?

Rawji: We haven’t seen that yet, and I am very hopeful that it holds up. You know what? Let me say two things about this. The first is, why have we seen short-term shocks? We saw a lot of panic buying. And I’ve had a lot of friends ask me, “How is our food system going to do? Is it going to keep up?” And I said, “Well, all the farmers are still farming. As far as I could tell, the sun is still shining, and the rain is still raining, so the food will come.” The second thing is, the food manufacturers continue to manufacture and process food the way they always have. So, unless you’re eating twice as much food today as you were three weeks ago, we shouldn’t have a problem. This is a short-term blip. So I think that that’ll normalize. And we’ve already seen that. Again, grocery went up 50 percent overall according to that Times article. It’s down to, plus or minus, plus-7 percent, I think, right now. It’s normalizing, because people panic bought. And so we thought that would be the new normal, that you would eat twice as much per week. Well, that’s just not what’s going on.

Fuller: Yep.

Rawji: In terms of labor, I do think that we are right to be concerned that we have the right level of labor to help our farmers farm. I’m less concerned about that when I hear about the fact that we’re looking at 20 percent, 25 percent unemployment, with that disproportionately impacting blue-collar workers or gig workers. When we think about gig workers being the ones that potentially are hit the most, who are usually the ones that are willing to work extremely hard—if you think about people in the gig economy, the things that they’re willing to do, I think they’re willing to pick vegetables and fruits—so I think it’ll normalize itself out. I’m not worried about it. We haven’t seen a challenge yet, but fingers crossed.

Fuller: Irfhan, as someone who went to graduate school in the United States and obviously is investing in the United States, you’ll be well aware that the Canadian health care system is a constant topic of discussion in the US, ranging from highly complimentary to much less so. You invest in health care, and you observe what’s going on in Canada. Can you talk a little bit about what you’re observing about how the health care system in Canada is responding to the pandemic, and what lessons you’re drawing from that as an executive and as an investor?

Rawji: Yeah, it’s obviously a topic of daily conversation, I think, in each of our countries, what’s happening with our health care systems. I think that a high level of Canadians are incredibly proud of our public health care system. And I think that’s serving us very well right now. We’re behind our health care workers. We are inherently incented—not only from a health perspective and an economic perspective, but from an ownership perspective, because we own the health care system—to ensure that we flatten the curve. So the discussions here have a slightly different nuance to them, in that the system and its costs are borne by the public. So we should do everything we can—not just from a health and economic perspective, but from an ownership perspective in the system—to flatten the curve. I think the biggest thing that will be something to study and to watch is the fact that the US health care system is one of very few—if not the only—private systems in the world, whereas the Canadian system’s a public system. There’s no disincentive in Canada to get tested, there’s no disincentive to get treated. There’s no risk, there’s no cost. In the United States, there is a potential risk. Potentially, you’re a foreign national that’s not supposed to be in the US right now. Or potentially you don’t have health care coverage. Maybe you don’t get tested, maybe you don’t get treated. If you stay out in public, and you continue to spread the virus, I think you may see that it’ll take us longer to get control of the situation, to flatten the curve, in the United States than in Canada and other places, because of the difference in how we approach health care. I think that this’ll be a topic of conversation for many years to come.

Fuller: Well, that’s an interesting perspective. Of course, it may encourage you to be exercising pretty strict border controls if that is the case.

Rawji: It is ironic, in that I think the US government was the one that wanted to harden the borders more than Canada, because we recognize the interdependence of our economies and, frankly, the camaraderie of our people. So we don’t see the border between Canada and the US maybe the way we see the borders with other countries.

Fuller: Well, Irfhan, thanks so much for joining us and sharing your point of view from all these various perspectives you have about what’s going on with Covid-19 and how all of us should be thinking about it.

Rawji: Thank you so much for your time, Joe, and be healthy and safe.

Fuller: Thank you for listening to this special episode of the Managing the Future of Work podcast. To find out more about our project on the future of work and for more information on the coronavirus’s impact, visit our website at hbs.edu/managing-the-future-of-work and sign up for our newsletter.