Sparcity is Entropy to Innovation

Most companies in our portfolio are distributed to some degree, and I believe remote teams are here to stay. But founders should recognize the inherent challenges and take measures to mitigate them.

In recent years, I’ve observed a religious fervor in favor of remote work, particularly in tech. There’s plenty of thought leadership making persuasive arguments in favor of distributed teams. Opposing views, such as Amazon’s return to office, are usually met with outrage. I believe this topic is more nuanced, particularly in the context of nurturing innovation.

Conway’s Law tells us that systems will be shaped by the underlying organizational structure. This idea was first discussed in 1967, when the constraints were captured by nodes and edges in an org-chart. Today we are operating in a multi-dimensional space where, in addition to reporting structure, individuals can be distanced by geography, time zone, language, cost (flights, hotels), and so on. Even for a particular tolerance of “distributedness,” the precise organizational topology matters: distance between teammates is worse than that between densely clustered teams.

When I engage in some friendly sparring online, the same flawed assumption bubbles up: that innovation in technology is primarily transactional, a simple matter of assigning tasks and waiting for results. I’ve heard countless perspectives about how people “just get their stuff done” faster from home, or how office presence is merely performative. Some brag about multiple full-time remote positions, presenting it as a way to fight the oppression of corporate employers. A manager can signal virtue with claims of “not caring as long as the assigned work is completed.”

But “getting your work done” misses the essence of innovation in technology. There is never a master plan that simply needs execution. The trajectory of a company emerges from the creative chaos in between top-down vision and trench warfare. In technology, we don’t pay for completed tasks – we pay for ideas, judgment, and intuition. Anyone can have a curve-bending epiphany, nourished by seemingly casual conversations that happen more naturally in person. The conversations that happen over beers or weekend BBQs spawn ideas that no amount of Zoom calls could replicate. It isn’t about mandatory fun or forced socialization – it’s about the natural exchange of thoughts when barriers drop.

I’ve seen this dynamic play out in what I call the “black market of favors” – informal collaborations that arise between colleagues who have built real relationships. As a developer, I often found myself prototyping features quickly for product managers who had become friends, motivated not by formal requirements but by personal connection and the prospects of free dinner. These off-the-books exchanges often drive innovation more effectively than formal processes.

The same patterns emerge in hiring. The best talent flows through networks of people who’ve worked together and want to do so again. It’s why tech hubs exist, and why Silicon Valley became Silicon Valley. The assumption that we can replicate these network effects through purely digital means remains unproven.

Incentives matter too. Remote can push us toward transactional relationships. Managers are left with blunt motivators such as terminations and promotions. Stock compensation can help, although it’s trickier with distributed teams. But the bigger loss is purpose. People don’t push boundaries because of KPIs or quarterly reviews. They do it to prove something to peers they respect, to justify the trust of those who brought them in, to be part of something bigger than a list of deliverables.

Building a successful technology company is extraordinarily challenging. While distributed teams offer undeniable advantages in terms of talent access and operational flexibility, there are limitations. The goal shouldn’t be to assemble a workforce – it should be to build a team, with shared purpose and genuine relationships. This requires careful consideration of how we structure our organizations, balancing the benefits of flexibility against the inherent human needs that drive innovation.