Bill Kerr: It’s spring 2022, and we’re two years into the pandemic-induced experiment in remote and hybrid work. As businesses grapple with return-to-work choices, many are gravitating toward the hybrid approach—combining flexibility and in-person collaboration. But hybrid can be difficult to manage equitably and productively. That’s why some business leaders are pressing for a return to pre-Covid business-as-usual. Others, however, see more potential in going virtual.

Welcome to the Managing the Future of Work podcast from Harvard Business School. I’m your host, Bill Kerr. My guest today is Drew Houston, co-founder and CEO of Dropbox. Dropbox falls solidly in the remote work or “virtual first” camp. We’ll discuss Dropbox’s origin and evolution and its recent transformation to a predominantly remote organization. We’ll talk about the company’s strategic shift from file storage to organizing cloud content. We’ll also look ahead to what AI and machine learning can bring to distributed work. Welcome to the podcast, Drew.

Drew Houston: Thank you. It’s great to be here.

Kerr: Drew, it’s hard to think Dropbox is only 15 years old, thereabouts. What was the original vision of the company, and what motivated you?

Houston: Sure. Well, I just finished undergrad, and I had a lot of trouble keeping track of my stuff, and I did all the things we used to have to do back then—carrying thumb drives and forgetting them and emailing myself stuff. What I really wanted was just one folder where I could have all of my files in sync and built it initially for myself. The idea just took off and very quickly took on a life of its own.

Kerr: Was there one moment that really kind of sparked you and said, “I’ve got to do this”?

Houston: Getting into Y Combinator, getting our initial funding from Sequoia Capital, things like that. But even things just like, I posted a video of how Dropbox works on a lot of the sort of tech news sites, and the video went to the top of Dig and Reddit, stayed there, drove tens of thousands of beta signups. I remember sort of pacing around my apartment as this was happening, thinking, like, we’ve got a live one.

Kerr: So tell us a little bit about the kind of product vision that you began with and some of its evolution over the last 15 years.

Houston: We founded Dropbox back in 2007. That also happened to be the year that the iPhone launched, and the year before that was the year that Amazon Web Services launched. And a lot of the world went from having one device or, like, just a laptop to having two computers. So you have a laptop and then a smartphone in your pocket. And then that created this new problem where, how do I get to the latest version of my things and keep everything in sync? We had customers of all shapes and sizes. So people are using Dropbox at home, typically for photo sharing and photo backup. They’re using Dropbox at work, and in many cases running their businesses off of Dropbox. That wasn’t initially what we had in mind, per se. But then there are all these adjacent use cases for how we could make the experience better. And there’s been a lot on that kind of evolutionary path.

Kerr: We teach a case about Dropbox in our first-year entrepreneurship class, and there’s a quote from you in the case about how, I think its’ your grandmother uses it for recipes, and your lawyer uses it to mark up legal documents, and that general purpose nature of the technology. Dropbox began to focus around the individual, the consumer, and then over time, I think, began to increasingly lean into the business side. How did that process unfold?

Houston: Well, we followed our customers. I mean, a lot of people realized that Dropbox is a great way to get things between their home PC and their work PC. A lot of our customers realized that, through our shared folders, instead of using their servers at work, they could just throw things into folder and set things up really quickly without having to get IT involved. Suddenly, I start sharing it with a project group, and then it spreads from there. So then a little team becomes a department, becomes the whole company. And so that whole mode of viral mode of growth really propelled a lot of those early years. And it’s something we really engineered, too. I mean, we were all inspired by the rise of the consumer internet and the mechanics of how that happened. So we were always thinking about how do we promote Dropbox or how do we get our customers to be our best evangelists? So when I told you about Dropbox, if you didn’t have it yet, then if you signed up with my link, you would get some free space, I would get some free space. So we gamified different things. But really, just the natural sharing motions of our users took us into millions of different businesses without having to have a salesforce. It was a really powerful engine.

Kerr: Then you worked up to ultimately being able to come to the CIO or the CTO and say, “This is already in your organization. How can you better harness it?”

Houston: Yeah. This was also during the rise of SaaS and during the rise of the consumerization of IT. I’d say that initially there’s more of an adversarial relationship, because all these new apps are coming over the walls, or the employees are choosing the tools they want to use instead of just using what’s pre-installed by IT. So working with our customers to build out enterprise-grade security, that was a journey we went on very early.

Kerr: I think one of the original—and still to this day—consumer delights about Dropbox is the quote, “It just works, and it gets the files from one place to the next.” As you think about it in more of this efficient workplaces kind of model, is there a broader version of “It just works,” or are there new things that you have to prioritize in that workplace environment?

Houston: I think we’ve gone through this one-way door, where the connection between the work itself and the physical environment where it happens has been permanently severed. Work can happen from anywhere. Millions of companies—and a huge percentage of planet—have kind of relocated their headquarters to the cloud. That’s a huge change. And when you think about it, really the digital environment is what matters—much more than the physical environment. When you actually look at what’s on that screen, it’s kind of a mess. So most of the time, you might have a Zoom window up, but underneath that just think about 100 tabs open. There’s things pinging you and blinking at you. And you sort of step back from that and think about cognitively what helps us perform at our best. It’s common knowledge, we perform at our best when we can focus, when we’re not being interrupted, when we’re well rested. But it’s as if our digital environments are designed, instead of facilitating that, they’re basically making focus impossible. The issue is what used to be 100 icons on my desktop are now 100 tabs in my browser. And even worse, imagine if the icons on your desktop just disappeared every week. Like, most of us have to close our browsers because they get too overloaded, and then all your stuff that you’re looking at kind of disappears. So there’s this new challenge of, okay, sure I’m a Dropbox user but I also use Google Drive and OneDrive and Figma and all these new cloud tools. And they don’t work with files, they work with the URLs. But it’s a real challenge to organize things. You have to visit each different site if you want to search for something. There’s all these challenges with the experience that we’re well positioned to address.

Kerr: I recall you once visiting our class and describing the technical challenges that came with the original version of Dropbox. Do you think that with the tabs and bringing all of that into one place, is that as complex of a technical challenge as the original? Or are there other challenges you face toward realizing that vision?

Houston: When it comes to organizing all cloud content, it’s a very analogous problem. I’d say the second part is the whole renaissance of machine learning and AI. There’s a lot of building blocks we have today that we wouldn’t have had in 2007.

Kerr: So tell us about how you’re thinking about leveraging AI and other technologies to accomplish this shift in where Dropbox is and the way that the world around of work presents itself to us.

Houston: Well, AI presents an enormous opportunity to help us with getting organized, to offload a lot of our intellectual busy work to machines the way that we’ve offload a lot of our physical busy work to machines. So what does that look like? Well, I mean, I think when you open up your email client on your phone, there’s probably a badge on it that says, like, tens of thousands of unread messages. The tools just pass through all of the overload onto the user in ways that I think would make the creators of email cringe. AI is really about predicting things and categorizing things, and the underlying math and the basic premise of AI are about that. And so when it comes to, well, what is important or, like, which of these documents go together or are part of the same kind of cluster, the algorithms of AI are really good at that. In the future, there’ll do even more things. So summarize this document for me, or give me all the things related to this. I think AI will help us create better filters for our attention to sift through all of the clutter and present only the things that are important. How do we get to a world where you open up your laptop and only the important stuff shows up? Or how do you get to a world where, instead of having to manually file things into folders, things that are logically similar are already grouped for you? And then you combine that with all the integrations. Each company becomes its own silo. Instead of having one search box, you’ve got 10. And these are things we’re actively working on—universal search and being able to do a self-organizing Dropbox. These are themes that we’re doing a lot of active development.

Kerr: Let’s spend a little time talking about just though the last two years with the pandemic. And being the CEO of a large organization—we’re recording in April of 2022, so go back to March of 2020—what was it like to shut down the offices? And what were the biggest things that were on your mind at that moment?

Houston: It was crazy. I remember sitting in our offices in Mission Bay in San Francisco and getting called down to kind of the boiler room there, this network command center, which I had never been in before, which was, like, “Okay, things are happening right now. What’s going on?” I don’t think any of us were envisioning that it could be a couple years. And it was literally the next day you’re running a 2,500 person company out of a little kind of porthole on your screen at home. It was very weird.

Kerr: What were the implications for Dropbox as a company from inbound client requests? What were they saying? “We need more of this,” or “We need this feature.” How did that play out for you?

Houston: I talked to a design firm in Australia. They’re like, “One day we were in the offices, the next day we weren’t. There was just one problem: All of our servers were physically located in the office, and we had no way to get to them from home. So we had to do this emergency migration to Dropbox. And it worked great. And instead of working from three physical sites, we were now working from dozens. Everybody was working from home, but we were really working from Dropbox.” And so a lot of similar stories like that. It was amazing that this all worked, that knowledge work was able to continue the way that it did. I mean, you don’t even want to think about, like, 10 years before what the impact this might have had. But then our employees. Right? So folks had family members who were either medically at risk or economically threatened, all the layoffs and furloughs that were happening back then. So first just helping getting everyone settled. But then, as we thought of it, it was clear that this was one of the biggest changes to knowledge work we’ll ever experience. And the floorboards have been ripped up by this crazy pandemic. But when you sort of step back and realize, well, we don’t have to put them back down exactly the way they were before. This is a once-in-a-lifetime opportunity to really be intentional about how the nature of work, what should a work week look like? What is the purpose of a physical space? How should we relate to each other? What are the different kinds of tasks that need to happen? When we thought about our customers saying, “Hey, we work in Dropbox,” or “Dropbox is basically our digital environment, which means you’re our working environment,” that completely changes how you think about what you build. So it ended up becoming a very creatively fertile period for what we built and changed a lot of the direction of what we were doing.

Kerr: That’s great. And then, as you think about going into the second year of the pandemic, all the way up until now, perhaps one of the biggest manifestations has been the challenges of finding labor, workers, what some have called the Great Resignation. How has that played out?

Houston: In our experience, it has been more of a Great Reshuffling or Great Musical Chairs than just resigning and opting out of the workforce entirely. So this created problems and opportunities. Well for us, for Dropbox, around October 2020, we announced our Virtual First working model. And we had a very strong in-person culture before the pandemic, so this was a big shift. But we were basically saying that we’re not going to ask people to come to work every week. We’re not going to have individual workspaces in the office. The offices will become convening and collaborative spaces, because we think there’s a lot that you can get done from home, and there’s a lot of benefits for flexibility. And then we’re going to have these really concentrated in-person experiences, or really be thoughtful about how do we bring people together and convene people and use that time to build a lot of relationships and culture in a short period. One of the positive implications is that we can unlock pools of talent from anywhere. So while we had an elevated attrition, like most companies, but then it was a total boon for recruiting. So on balance, it is very positive for us, but it’s really disruptive. We’ve lost a lot of that kind of interpersonal connective tissue by going remote. And I think the world is certainly, we’re all thinking, certainly a lot of the productivity companies are thinking about, how do we get some of that back?

Kerr: Yeah. Let me go back a little bit though to your Virtual First decision. What were the most important factors for Dropbox making the very sort of strong, aggressive choice that it made? And then, do you have any early feedback about what went right? What went wrong? What are you kind of calibrating as this kind of six months and eight months goes by?

Houston: You have to think about what are the basic tasks of work? And what is the role of the physical environment? And for us, the primary question was, how do we get the best of both worlds here? So how do we get the best of the remote experience? How do we give people the flexibility, not having to commute, all the other benefits? But there are some drawbacks to that, where it’s fatiguing. It’s very difficult to build relationships over Zoom. But then how do we get the best of the in-person experience? What you want to avoid is the worst of both worlds, where I think the sort of great compromise there, the default hybrid compromise that a lot of a lot of companies have chosen, is basically, “Well, we’re fine not doing five days a week in the office. So we’ll do two or three.” The challenge with that is you don’t have the flexibility, because you still have to be in commuting distance, you’re still spending a meaningful percentage of your time commuting. And then there’s all these logistical things that like, “Okay, is it the same? Does everybody come in on the same two days?” In which case, 70 percent of the time the office is empty. If not, then you’re coming into a half-empty office, which kind of defeats the purpose of coming in. And you don’t have the community. What we didn’t predict was the degree to which people just sort of spontaneously moved to the edges or just outside of commuting distance.

Kerr: Yeah. So many things I want to further unpack about this, but let’s start with just the Bay Area in particular, which has been the dominant talent tech cluster over the last 30–40 years. How do you see this playing out in terms of, if the talent has moved to the periphery—or, in your case, as fully remote as feasible—what will that do to the Bay Area and by extension to Boston and to other very strong tech centers?

Houston: Yeah. Well, I think on balance, it’s good for employees, it’s good for companies, and I think it’s good for society overall. For employees, now, regardless of where you live, you have access to great jobs. All of the benefits of these tech companies and their growth and the great jobs that they’ve created were previously reserved only to a few Metro areas. That’s good for companies because, in our case, we’ve been able to unlock pools of talent that we never would’ve been able to access. I think the world has certainly been struggling with, still is struggling with, just the inequality of opportunity.

Kerr: One of the questions I know organizations struggle with, or at least try to think through, is pay equality across cities, especially as you take what used to be a very concentrated workforce and an expensive location and they distribute them out. Has Dropbox announced anything or set a policy around pay?

Houston: Yeah. We adjust for cost of living and did before the pandemic. The two extremes are either same work should get same pay regardless of location or we have market-based compensation, and it depends on where you live. I think the market’s going to figure this out.

Kerr: Let’s go back to the culture, and you described Dropbox as having a very strong in-person culture. How has it evolved as you’ve continued Virtual First? Do you see it having very different properties when you come out on the other side of this transformation versus when everyone was in person?

Houston: Well, I think what we aspire to in our culture is still the same. Our company values and what’s important to us hasn’t really changed. The way we relate and the way we come together certainly has. The way you operate has to be more thoughtful. For example, when you have people in ... One of the benefits of working from home is the flexibility and, to a large extent, the ability to choose when you work and not being physically tied to a nine-to-five commuting setup. Then, especially if people are in a lot of different time zones, a downside of it is work can spill over into every waking moment and become totally exhausting and unsustainable. That’s not good for our team. It’s not good for the company. It’s not good for anyone. I think it’s a big contributor to the burnout and resignation dynamics you’ve seen. There have been a lot of great companies that have been remote, or primarily remote, for a long time. Our team did a great job of studying their practices and what worked for them and boiling down a lot of the principles and practices into toolkits that we’ve actually open-sourced. Anyone can go search for the Dropbox Virtual First Toolkit, and it includes a lot of the best findings from other remote companies and other research that we’ve done in our own findings. There’s certain things you have to think about, like how do you schedule work time? We have a concept called “Core Collaboration Hours,” for example. You try whenever possible to limit the meetings, especially for people that are across time zones, to a certain band during the day instead of being stuck with an 8:00 AM, 7:00 AM meeting for one time zone and then an 8:00 PM meeting for the other side of the world. Trying to do some top-down coordination and rules of engagement to avoid work spilling out everywhere. I think all managers and all employees have to develop new muscles around, and new awareness around, “What’s the nature of the task I’m trying to do? What’s the right venue?” There are a few different modes. You can be in face-to-face mode, which has strengths and weaknesses. You can be on video, which has strengths and weaknesses. Or you can be async, which has strengths and weaknesses. It’s not like one is categorically better. Match the task to its strengths and similar things for the other modes.

Kerr: Yeah. You’re highlighting, I think, a really core linchpin in all this, which is the manager. At the C-suite, one can see the advantages. Your Chief Financial Officer is just delighted about maybe the reduced capital expenditures. The frontline worker has some great opportunities now to rebalance life. But that manager has a very different and harder task. Tell us a little bit more about the toolkit, but then to what degree have you tried to push managers in a similar direction? Do they get to have discretion as to what they take from the toolkit versus deciding other pieces? How do you see those rhythms and routines developing over the next year or two?

Houston: Yeah. I think a big question that all leaderships have to answer is, “What do we want to decide? What decisions should we be making as the senior team? What do we want to open up to the rest of the organization?” I think you want to be pretty limited in terms of what you mandate. At least we’re still in the exploration phase of all this. We’re leaving managers a lot of discretion. Our company’s going to run a lot of experiments. We want to learn from what works and what doesn’t and double down there on what works.

Kerr: Maybe even at a broader level, long term, we sometimes think about the social contract between a firm and the employees. Do you think this is permanently changing the key elements to that social contract? Is it more just changing how I experience work every day? But what you would be wanting to provide to a Dropbox employee and what a Dropbox employee would expect from you will be the same in 2025?

Houston: Absolutely. Massive change to the social contract. Companies used to expect a monopoly on your time between when you arrive at the office and when you leave. Companies are used to dictating the physical environment, a lot of the how you do your work. Then, after March 2020, all that disappeared. There’s a lot of benefit to the employee around flexibility. To the company, there’s a lot of benefit, too. It’s mutually beneficial to have this flexibility and to not necessarily have to specify exactly how someone gets their job done. But then it also puts more responsibility on the employee to be effective and to figure out and focus more on outcomes than just face time or just hours logged. That’s actually a pretty significant challenge. As you said, managers are now having to confront all of these new challenges around, “How do I design the nature of work for my team and answer all these questions I didn’t have to before?” How you communicate needs to change, and a lot of the most-effective remote companies have had to move to a more written, narrative driven, documented culture. That hallway conversation or just those interstitial moments have now all disappeared.

Kerr: One of the adjacent areas here is that virtual can be a good stepping stone toward being more contract based, involving more gig workers. Do you see that changing for Dropbox in terms of its employee base, greater expansion of those non-FTE-type roles as part of being the Virtual First organization?

Houston: Well, we’ve certainly seen this among our customers. I think we’ve all been amazed at the degree to which the freelancer population has been growing in the whole creator economy. That is an area where the Great Resignation has driven a shift is from working for a company to working for myself. We found that to be a big opportunity for us. Creative teams have really loved Dropbox, because we handle big creative assets, big files. If you’re producing a TV show, or if you’re a podcast, or anything involving large media, Dropbox tends to work really well for those audiences. As people go into business for themselves, they’ve asked for a lot of new things from us. In addition to our mainline product roadmap around organizing all your cloud content, our customers have pulled us in some new directions. For example, we have a new product called “Dropbox Shop” that helps people monetize their content, because we saw dynamics like a yoga instructor who used to run in-person classes couldn’t do that anymore during the lockdown. Then that had to shift to videos, started having video classes. If you take a video of a class, we found that a lot of our customers were collecting payment through PayPal and then sending a secret Dropbox link. Really, all they want to do is hit “share” on a piece of content and, say, charge five bucks for this, but we didn’t make that possible. Dropbox Shop allows anybody to have a storefront for virtual goods. That was something that was not on our radar three years ago.

Kerr: Maybe on a slightly darker note, cybersecurity. Obviously, there’s been ransomware attacks. Then with heightened international tensions, how do you see that as developing over the next few years, especially as it connects into virtual work and distributed employment?

Houston: Most companies, most of the time, if you walked in the building, you were on a secured kind of company network with a firewall. It was pretty common to have this kind of hard shell and soft interior mental model. But now, what is the perimeter when you have 1,000 employees in a dozen countries just using their laptops? And that’s another area where we’ve really put more emphasis in our roadmap, is helping small businesses, and especially small business that might not have an IT person, right, keep their information safe. Dropbox has always given you kind of a big rewind button that lets you undo these kinds of changes, but maybe our customers didn’t connect the dots between that feature and being able to protect against a ransomware attack.

Kerr: Maybe as a final question, Drew, just over the next five-year horizon, maybe seven years, what’s on top of your mind for Dropbox and kind of the next stage of its evolution?

Houston: I’m really excited about our opportunity to organize your working life. My dad would come home. He literally had a briefcase. He’d put his briefcase down and not think about work until the next day. So this is an achievable end state. We just sort of lost the plot for a little while. As we kept piling on, as five tools went to 10, to 100, to 1,000, somewhere the tools went from helping us do the work to becoming the work—as anyone who’s responded to a Slack at 11:00 PM can attest, right? More communication is not always better, and more tools are not always better. But these situations can improve. What we need is not necessarily another 1,000 tools, but a smarter system. So that’s certainly top of mind. And I think Dropbox has a large role to play starting with your content. How do you get all your stuff in one place, but then how do you organize your working life? That’s certainly top of mind for me, and a really exciting problem to work on.

Kerr: Drew Houston is the co-founder and CEO of Dropbox. Drew, thanks so much for talking with us today.

Houston: Thank you.

Kerr: We hope you enjoy the Managing the Future of Work podcast. If you haven’t already, please subscribe and rate the show wherever you get your podcasts. You can find out more about the Managing the Future of Work Project at our website hbs.edu/managingthefutureofwork. While you’re there, sign up for our newsletter.