Work 2.0: The One-Room Commute

This is Hidden Brain. I'm Shankar Vedantam. Like millions of people around the world, Stanford economist Nicholas Bloom has been working from home since March 2020. Instead of a university classroom, he now uses a spare bedroom. Sometimes one of his 4 kids pops in while he does meetings over Zoom. He'll never forget this one time when he was in a very important call with some business executives trying to help them with a research project. About 20 minutes into the call, this happened.

It was 2 of my kids starting their daily practice on the bagpipes. I was thinking, oh no, no, now is not the time. I had to like say quickly to everyone in the meeting, I'm sorry, there's something going on in the background, mute myself and like run into the toilet. Ah, to take the rest of the meeting in there because it was the only place that was quiet enough. And our house isn't that big, and, you know, the soundproofing is just dreadful. The toilet's about the only sound-bunkered room, so I'm sure I'll be back in there again taking calls.

Probably many calls because Nick is an expert on the economic, cultural, and social implications of working from home. Now, in an almost surreal twist, he's living his research day in and day out, just like many of us. So is working from home working?

So many people said, you know, we thought we'd be great at this. We thought we could deal with it. I thought I was mentally strong. Or, you know, I didn't like many of my employees, but I realized after, you know, 3 or 4 months, maybe I did miss them.

This week on Hidden Brain, the final installment in our Work 2.0 series. We revisit a favorite show about the psychological challenges and the possibilities of working from home in the COVID era and beyond. Support for Hidden Brain comes from Instagram. Instagram Teen Accounts' automatic protections limit who can contact teens, the content they can see, and the time they spend on the app. Teens are automatically placed into Teen Accounts. Teens under 16 will need a parent's permission to change any of those settings to be less strict. Learn more about Teen Accounts and Instagram's ongoing work to protect teens online at instagram.com/hiddenbrain. Thanks for listening. I need a lawyer.

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I know there was endless joking about working from home, shirking from home. You know, working remotely, remotely working. So, you know, they, they would wind me up and claim I was watching those old-fashioned black and white, you know, TV movies that were on during the day or watching the cricket, being British. But I honestly, I promise you I was working, but it didn't feel like other people thought that was true.

You probably had the cricket in the background though, didn't you?

Yeah. I mean, I have to say I'm not a big fan of cricket unless it comes to revising for my exams, during which point the cricket became fascinating. 'Cause, you know, it was like anything's fascinating compared to revising.

The assumptions that people have long held about working from home, you can see them reflected in our searches online. Some time ago, Nick looked at what you see when you search for the phrase working from home on the web.

You know, I gave a few talks. I have to say, before COVID I did a bit of, you know, research and talks and stuff over the years for quite a while. And one thing I used to explain to people is one good way to tell how negatively viewed working from home was, was just to go into Google or Bing and just search, do an image search under the words working from home. And if you do that, I screenshotted it and showed it in a TEDx talk in 2017. And, you know, I showed the top 15 hits, the top, you know, the top 2 rows of images, and they were basically naked people, cartoons, people juggling babies on their lap. There are honestly, out of the 15, there are only 2 that were positive images. There were 13 that were just, they were like terrible. You know, the worst was a guy in a jacuzzi drinking champagne, which was, it just, it was so negatively viewed.

So some years ago, and this is long before the COVID pandemic hit us, a news story broke about a certain company in Silicon Valley. Listen to this clip from NBC's Today Show. Disgruntled employees leaked an internal memo from human resources that bans telecommuting, saying some of the best decisions and insights come from hallway and cafeteria discussions, meeting new people, and impromptu team meetings. Speed and quality are often sacrificed when we work from home. So Nick, tell me why Yahoo CEO Marissa Mayer wanted to cancel the company's policy to allow employees to work from home.

Sure. She took over and she was seen as, you know, someone who was to turn around the company. And she said not long into her tenure there, she discovered there's a whole group of people that were working from home, but many of them were just not logging in the entire day. There wasn't much assessment that was going on. It was clear while some of them were doing really well, others were basically using it as a way to take an extended holiday. And you know what's kind of intriguing? When I spoke to her, she said, look, working from home can be great, but you need a performance evaluation system. You need to make sure that the people at home are actually working rather than goofing off. And she said, at that point, we didn't have one in Yahoo. So I basically temporarily paused the working-at-home scheme until we got a performance system in, and then relaxed it back a bit. But yes, it generated a storm of media back in 2013. I still remember now.

Yeah. So you've done research into whether Marissa Mayer was right in terms of the effects of working from home on productivity. But before we get to the science, I want to talk a moment about the history of how we got to these attitudes about working from home. So long before COVID people who didn't work in an office were seen as the exception. But what's interesting is that when you look down history, most people would have found it odd to work anywhere other than their homes.

Yeah, you're exactly right. What's happened now has made history so odd. So if you go back to 1750, just on the eve of the Industrial Revolution in the UK, Basically, we all worked at home. We worked in the fields or occasionally as skilled craftsmen, but no one was really working anywhere else than home. And then office work or factory work really started off with offices. So places like Manchester in the UK started to, uh, have industrial machinery. And of course, to do that, you needed scale buildings and, you know, people needed to start to commute. But I should point out, back then, you know, in 1800, when you talk about commuting, you were walking to the factory that was really not that far away. The major offices started around 1900 when big companies had, you know, growing amounts of paperwork, and they just have vast halls full of clerks that would come in and process piles of paper. And, you know, oddly enough, despite the complete change in technology over the next, you know, 120 years, up until, you know, January of this year, we were still very much focused on, uh, coming into the office on a kind of 9-to-5 schedule.

And isn't it interesting that along the way, the cultural norms and psychological norms sort of evolved with these workplace arrangements so that people who work from home came to be seen as less ambitious or less employable, less talented maybe? In other words, it became almost déclassé to be working from home.

Yeah, exactly. It's one of those things you can almost— economists might call it a general equilibrium effect, which means even if one firm figured out working from home was great, It was hard for them to change it alone because there's a negative stigma. And, you know, no employee wants to have it maybe on their CV that they worked at home for years because other firms think it is bad. And so, yeah, exactly right. I mean, just to be clear, the 4 things we need for working from home are internet broadband, uh, laptops, and video calls. And all of them have been around since the mid-2000s. So the last one to come out was video calls, and that was really the dawn of Skype.

Mm-hmm.

Hello?

Can you hear me?

So Skype comes out in 2003.

It's me. I'm in California.

It's kind of mainstream by 2005, '06.

Hello? Hey there. Hey. Hey.

So really, for probably 15 years now, we could have effectively worked from home. But it was the whole social norms that, up until now, have held us back.

How are you? It's so typical of me to talk about myself. I'm sorry. And there's this enormous inertia in the system because we've built entire cities around the idea that there's going to be this urban core where people work and suburbs where people live. We built highways and public transit systems to ferry people from residential neighborhoods to commercial neighborhoods. You know, it's almost as if once that initial model separating the workplace from the home got fixed in people's minds, there was an inertia that got built up around it that became essentially unstoppable.

Yes, exactly. I mean, I think one big change post-COVID that's going to be driven both by working from home and also the other issue is social distancing. So I think in future, a lot of that real estate is probably going to be converted into apartments. And it's going to be, you know, the price of it's going to drop a lot, and it's going to attract conversion into apartments. So we're going to have much more mixed living modes whereby those skyscrapers aren't all offices, and we don't all live out in the suburbs. Instead, you know, there's more people living in the center on lower rents, and there's less commuting because it's the only way we're going to be able to shape it. And of course, included in that less commuting will be more working from home.

When we come back, Nick Bloom tells us about his unusual experiment at a Chinese travel agency where half of the workers stayed in the office and half were allowed to work from home.

We did a lot of interviews and they just said it's really depressing, or they fell victim to one of the 3 great enemies of working from home. The bed, the fridge, or the television.

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Thank you.

Support for Hidden Brain comes from Progressive. Whoever says saving money is hard doesn't know that new customers who bundle and save with Progressive save hundreds. Because switching your home and auto insurance is better than cutting down on those iced lattes you love. Switch to Progressive and see if you could save. Get your quote today at progressive.com. Progressive Casualty Insurance Company, affiliates, and other insurers. Not available in all states. This is Hidden Brain. I'm Shankar Vedantam. Nick Bloom is a researcher at Stanford University. For years, he has studied the phenomenon of working from home and asked a deceptively simple question. Are people more productive or less productive when they work from home? Nick, you were teaching a class at Stanford in 2010. And you had a student in the class from China, and you got to chatting With him, he told you about a problem his company was having back in China. What was the problem?

You know, as backstop, you know, the situation was pretty weird. I was teaching a PhD, a graduate economics class in Stanford, and I have about, you know, 15 to 20 students in the class. One of them I figured out relatively soon, maybe, you know, a third of the way into the course, was James Liang. From talking to him, who was the CEO and co-founder of this huge Chinese travel agent. And he said that they were growing really fast, doing very well, but they were based out in Shanghai. And their challenge was office space in Shanghai was incredibly expensive. And so they wanted to figure out how to grow without sinking vast amounts of money into ever-increasing size of expensive offices. And so they were thinking about a working-from-home program.

So you decided to work with this Chinese company called Ctrip to find out whether working from home was good or bad in terms of productivity. And you did more than just simply conduct a survey. You decided to conduct an experiment.

Yes. The great thing was, because James is a PhD economics student, he was open to what's called doing a randomized control trial. So quite formally, they went to— in Ctrip, they got 2 divisions, hotel and airfare. There were about 1,000 people in them. And they asked them, who wants to work from home? Amazingly— well, not interestingly, maybe as much as amazingly, only half of them volunteered. So just to be clear, you know, a lot of people don't want to work from home. So the volunteers tended to be slightly older, more likely to have kids, live further away. But then they took these 500 volunteers and had a formal randomization. So James, uh, you know, on Ctrip TV drew a ping pong ball out of an urn and it said even. So that meant people with even birthdays. So if you were born on the 2nd, 4th, 6th, 8th, 10th, et cetera, of the month, you were in the treatment sample. So you actually got to work from home for 4 days a week for the next 9 months.

Mm-hmm.

And if you were odd like me, I'm the 5th of May, you, You were the control group, and you remained in the office for the next 9 months.

A few other notes about the experiment. For the workers who went home 4 days a week, they all came into the office on the 5th day. That was when they did things that were best to do in person, like team meetings and trainings. And managers were always in the office. The main worry for Ctrip was the fear that all companies seem to have, that the remote employees would get distracted And not be productive. But Ctrip had a plan to deal with that. If they had declines in productivity, they figured that those would be offset by the huge savings in rent. In fact, this calculation was one of the reasons they agreed to run the experiment in the first place, to see how many dollars they saved on rent versus how many dollars they might lose on productivity. And then the results came in.

So, you know, it was— the results were honestly amazing. And this is why, you know, it was so valuable to have 9 months, because initially we were thinking, this can't be true. What you saw was the working-from-home employees were 13% more productive than the people in the office. Just to be clear, that is an enormous uplift. That's almost a day extra a week simply from having the same people in the same team doing the same job, which is answering telephone calls, dealing with customer complaints, taking bookings, etc., now working at home rather than the office.

And did they actually calculate a dollar figure in terms of increased productivity, not just from the increased productivity, but from the savings on rent?

Yes, so they estimated they saved around $2,000 per employee per year from working from home. And, you know, Ctrip was like, as you can imagine, was incredibly positive about this. And at the end of the experiment, announced they're rolling the scheme out to the entire company.

So now employees who really hated working from home, were they allowed to come back and start working out of the office?

Yes. You know, a striking finding, again, totally unexpected was, well, you know, there are 2 things, 2 elements of this. One is initially they offered to 1,000 employees, only 500 wanted to work from home. Our view would've been, honestly, many more people would've taken it up. But a lot of people do not want to work from home. One reason is the people that want to come to the office are young and single. As we know, in the US, about a third of people meet their spouse in the workplace. Something similar is true in China.

Mm-hmm.

The other thing is, after the end of the 9-month experiment, remembering everyone in the experiment had volunteered, around half of the people that won the lottery to work from home actually changed their minds and decided to come back into the office. And the control group who'd all volunteered, you know, 9 months ago, had just lost the lottery, but at this point were allowed to do whatever they want. Only a third of them actually ended up going home. So there was a huge move away actually after people had tried it out against working from home 4 out of 5 days a week, which again was very surprising. We thought, you know, employees are partly paid on performance. So since they're performing 13% more at home, their pay's gone up. But even so, large numbers of them, more than half of them, were voting in a sense, voting with their feet because they asked to actively come back into the office with all the commute costs and hassle that involved.

Isn't there a real irony here, Nick, which is that the company thought that people were going to be less productive, but in fact, people turned out to be more productive and people thought they wanted to work from home, but once they actually did, they actually wanted to come back to work?

Yes. It comes back to, I think what we really need and what employees want on average is a mix. So Ctrip at that point was only offering 4 out of 5 days a week at home. I think, you know, I've actually again caught up with Ctrip very recently. If you'd moved to a system whereby they could have worked from home 1 or 2 days a week, that would have been far more popular. Now, for logistical reasons, they didn't offer that. But most employees— and we saw this in the experiment, I should say— for the first 2 or 3 months, they were really happy, uh, they were very positive on it. But as time went on, we just got increasing reports and complaints about loneliness. And it's very depressing being at home day in, day out, working there. You're on your own. And so, by the time it came to the end of 9 months, many people were quite surprised, but they said, I can't hack this. I want to— we did a lot of interviews, by the way, a lot of focus group interviews. And they just said, it's really depressing. Or they fell victim to one of the 3 great enemies of working from home. The bed, the fridge, or the television. So something basically went wrong. And they said, look, save me, get me out of here. I want to come back to the office. I mean, it's quite astounding, but I'm sure many people can empathize. You know, for me, I'm really missing my colleagues. I like being at home. I mean, I live with my wife and 4 kids, but it kind of gets isolating. And I'd love to be able to go back into the office and at least for 2, 3 days a week. And that's the same thing we saw in Ctrip.

So in other words, partly what you're seeing is that there might be benefits from working from home that are just— regardless of who you send home, there are some advantages, certainly in terms of saving on office space. But it may be that the people who actually are best suited to working from home are the people who actually want to be working from home. So some amount of flexibility from the point of view of the employees might be part of the productivity equation.

Yes, exactly. I mean, the 2 big things I took out of this and from more recent work I've been doing is the importance of choice and flexibility. It turns out on choice, people have just really different views, and it's very hard to know, you know, what people's views are. Depends a lot on what their home circumstances are like. Do they have space, a spare room? You know, do they want to be at home? Is their apartment nice? And then on flexibility, it's actually really hard to tell. So in Ctrip, we just discovered in the focus groups, so many people said, you know, we thought we'd be great at this, we thought we could deal with it, I thought I was mentally strong, or I didn't I feel like, you know, I didn't like many of my employees, so I actually wanted to go home. But I realized after, you know, 3 or 4 months, maybe I did miss them. It's like that old saying, absence makes the heart grow fonder. And it seemed to be true. You know, as hard as it is to imagine, I'm sure there are some people out there now thinking, even that really annoying guy, Tony in accounts, maybe I'll miss him a bit, et cetera. That seemed to be what we're seeing with Ctrip in China.

And also maybe the champagne in the jacuzzi starts to get old after 4 months. You also had some interesting findings from the Ctrip experiment when it came to quit rates. Tell me what happened in terms of retaining employees, what you found.

Yeah, another striking finding was quit rates fell by half for the people that worked from home. So the firm collects a lot of surveys, and they reported in the surveys they were far happier. You know, I'm sometimes slightly skeptical. I don't know whether, you know, it's hard to know the firms are surveying response to its firm, the employees to the firm. But, you know, the much more important thing is they're voting with their feet. So Ctrip, uh, has about a 50% quit rate for its employees. That, it turns out, that's almost identical to the average in the UK, US, Australia, many countries. 50% is about normal. So most people stay about 2 years in a job before moving on. For the working from home employees, their quit rates halved from 50% down to 25%, which of course for the company was a huge upside because it avoided a large chunk of the pain of hiring and training and getting people up to speed just for them to then quit.

So I'm wondering if one of the things that people forget when they think about the old negative stereotypes of working from home, that people are easily distracted, they're going to be distracted by the fridge and the TV and the bed, that they actually forget the workplace is also a source of distraction. The workplace is often— there are multiple things going on. Slack channels that tell you about the free food that's being given away on another floor of the building. And, you know, there's someone's birthday going on. It's not as if the workplace is a highly focused, concentrating environment either.

No, exactly right. So just to explain, for the 13% higher productivity from working from home, about a third of that was the home-based employees were more productive per minute. And that's entirely because home is on average actually less distracting and From the interviews, you know, there are some hilarious stories that came up. My favorite was the woman that said, you know, when I'm in the office, uh, it's so distracting. The woman in the cubicle next to me clips her toenails. She takes out this, you know, this toenail clipper and she clips it under the table. And she said, under the desk, she said she thinks I don't notice, but I tell you, I notice. I notice. It's disgusting. Uh, you know, there's that. There are stories of World Cup sweepstakes of there's a cake in the breakout room, somebody's boyfriend and girlfriend have left, you know, you can imagine. So home, you're exactly right, home is distracting, but the office turns out to be significantly more distracting. And so actually you can work more efficiently per minute, at least in this experiment.

So I understand with the Ctrip study, some people who were working from home wanted to come back, perhaps because they felt like they were losing out to colleagues who were in the office all the time. Maybe the colleagues were getting more face time with the bosses. So in some ways, the experiment didn't do away with the social norm that working from home was inferior. It basically laid it out as a short-term experiment.

Yes. So the one dark side I'd say of working from home from the experiment was the drop in promotion rates for people working from home. So if you control for performance, remember the people at home are 13% more productive. They should have been promoted at a much faster rate. And it turns out they were promoted You know, less rapidly. In fact, they're roughly— their eventual promotion rate is roughly half for those at home versus at the office. So there's a huge drop in promotions. And when we asked them, it turned out looking into this, there's a couple of factors. One is you're working from home, you're forgotten about. And so that's a serious downside that you're in a team of 15 and let's say there's 3 of you working from home and the rest in the office, you can be passed over. The other thing that was tricky to how to deal with when you spoke to Ctrip, They said, well, look, part of being promoted is knowing your colleagues and knowing about the firm culture, etc. And that does come from being in the office and having lunch and coffees around. So, you know, it's, it's a bit of a balance. Some of the extra productivity at home is because they're spending less time chit-chatting over coffee, but some of that chit-chat turns out to actually be pretty useful.

What happens when hundreds of millions of people don't make a choice to work from home? But a global pandemic suddenly makes the choice for them. You're listening to Hidden Brain. I'm Shankar Vedantam. Support for Hidden Brain comes from Principal, the perpetual pen tapper, the arbitrary fridge reorganizer, The holiday party planner that starts in May. Principal knows your star employees have their work quirks. Principal also knows how much those employees mean to your business. You need them. They need benefits. Work with Principal so they can help you help your team with a retirement and benefits plan that's right for them. Principal Life Insurance Company, Des Moines, Iowa. Support for Hidden Brain comes from U.S. Bank. With the U.S. Bank Smartly Visa Signature Card, you earn an unlimited 2% cash back on every purchase. No quarterly activations, no categories to track, just unlimited 2% cash back on every purchase. Visit usbank.com/smartlycard to learn more. The creditor and issuer of this card is U.S. Bank National Association, pursuant to a license from Visa USA, Inc. Some restrictions may apply.

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Yeah, it is a weird experience. I was doing something the other day looking at the frequency of the word working from home. in US newspapers. So I looked at the top 50 US newspapers and it went up 12,000% between January—

Wow.

And April 2020. So yeah, it's, um, I mean, I'm fascinated by it. I'm living it. It's very odd to be, uh, researching something that you and all your friends are living, you know. I— all my friends and relatives, etc., are going through exactly the same issue. I should say that in the US currently only 40% of people are working from home, so 30% of people are not working, and 30% of people are working on business premises, which are typically essential service workers. But for those of us that are working from home, in many ways, we're actually in the lucky minority that we're able to work and able to do this safely at home.

So one of the things that's very interesting about the current shift for this 2 in 5 workers, this 40% of workers that are working from home, is that the change has happened so suddenly and is so widespread that it seems to have changed norms overnight. So Zoom calls and emails and phone conversations are now the default. They're no longer the second-class citizen in the workplace.

Yeah, exactly. You know, it's funny, I was talking to a friend of mine that lives in London, uh, and he works for a US company, and he's trying to set up an, uh, you know, a startup of the same company subsidiary in, uh, South Africa. And he was saying he, up until, you know, now he was always on Zoom, but he was always, you know, or whatever, Teams, he was always the odd one out in the sense that everyone else was in the room and he was typically dialing in. He said suddenly he felt on a level with everyone else, that everyone was on Zoom. And I had a similar feedback actually. I was giving a presentation to, uh, one of the national labs in the US, and somebody there was disabled and was saying— she was saying, you know, in some sense it's been a great leveler for me because I struggled to get into the office and back, but now, you know, we're all on Zoom and being physically there really doesn't matter. So it has had some unusual effects, both positive and negative. In fact, You know, just one final anecdote. I was talking to someone that starts a high-tech— runs a— she founded a high-tech company, uh, out in the Bay Area. She, you know, she was born in India and came over and started the company here. And she was saying she notices on Zoom who speaks up is quite different from who does it in person. And she was saying, you know, Americans are like amazingly loud in meetings, uh, and there's some cultural and gender differences that are quite different when you're on video calls. A number of people that previously didn't spoke up have now felt actually empowered to talk because they find it less intimidating on a video call.

Very interesting. I understand you've completed a survey of nearly 2,000 Americans. Paint me a picture of the people who report making a successful switch to working from home and the people who can't or don't.

So, you know, one huge factor is clearly education. So, it's not that being educated makes you better working from home. It's that being educated means you're in the type of job that means you can probably work from home. So, if we look at working from home jobs, they tend to be much more managerial, professional. You can imagine, you know, they're the kind of things that are typically done beforehand in the office, and so it can be easily shifted home. If you look at, say, a high— you know, people with a high school degree or less, so those that left school at, you know, 16, 17, 18, they're far more likely to be in retail, maybe in construction, manufacturing, the types of things you need to be on site. So, education has become an enormous divider actually in terms of who can work from home. The other couple of factors that we picked up on, again, kind of links to wealth and education, is having functional internet. It's astounding that only 65% of Americans in our survey report having internet connectivity good enough to run a video call, a high-quality video call. So, you know, for those of us that are living in nice parts of cities, it seems totally standard. You have, you know, good internet. But a lot of poorer urban areas or rural areas, they have internet, but it flakes in and out. And so, you can't really have video calls. The other thing is having space at home. So, people who have been able to make this a success report having their own room that's not their bedroom so they can work quietly. In the survey data, only 49% of Americans have their own room that's not their bedroom. So, most people, are working from home in a room, you know, their husband or wife in the same room or kids running around, etc. So I, I just want to be, you know, very clear, COVID working from home is not great. Post-COVID, I think, will be this nirvana where we're doing it, you know, 2, 1, 2, 3 days a week, our kids are back in school, we have proper equipment, we have peace and quiet of our own room because, you know, our husband and wife, they're out of work, and so we can get on with it.

So what I hear you saying, of course, is that there is this massive worldwide experiment that is unfolding before our eyes. There's already some data starting to come in about its effects. I just read a paper by Lingfang Bao and colleagues. They analyzed the effects of working from home arrangements as a result of COVID by examining productivity at Baidu, which is one of China's biggest IT companies. And they get mixed results. Some people report higher productivity. Others, especially people working in big teams on complex or highly collaborative projects, They report lower productivity. Does that surprise you at all?

No, I think, you know, the stories we're getting out from talking to firms and from the data is what I would call day-to-day things, which is kind of continuing activities you've always been doing, which is a bit like what the folks I was talking about in Ctrip, they're basically making calls and taking bookings. That seems to work pretty well. So that you're just, you know, repeating what you've done before, nothing too innovative, nothing too unusual or new. And you know, the peace and quiet at home works quite well. What appears to be more of a struggle is more creative activities, bigger team group activities. So I'd say that's more long run. It's kind of like what as economists you might call intangible investments, and it goes back to quips. You know, guys like Steve Jobs made that. You know, oh, they and a quote from Marissa Mayer: You've really got to be in the building and talking to others. You know, kicking back. You know, talking over the water cooler to come out with some of these ideas. So. So I think in the short run, productivity is actually looking surprisingly good. What I worry about is, you know, innovation and creativity. For example, you know, next year's new iPhone, will that be that impressive? Because, you know, all the innovation and research that's going into it right now, I presume it's much harder to do working from home.

Right. And this, you mentioned Steve Jobs a second ago, you know, this is almost a mantra in Silicon Valley, which is, The chance encounters that happen when people work together, they bump into each other in the hallway and in the kitchens. Steve Jobs basically designed Apple to encourage chance encounters. So really the question that you're asking is what happens when you turn off that serendipity?

Yeah. What's amazing is there's so much money invested by firms in this. You think of the billions and billions of dollars that high-tech firms, but also investment banks A lot of professional service firms have spent on super fancy offices. They're trying to persuade people to come in. So the amazing artworks, the, you know, the incredible free food, the ping pong table, the, you know, the table football table, the astounding, you know, floor-to-ceiling glass, the incredible gardens— all of that is to drag people into the office. Hi everyone, my name is Kevin, and today we're going inside the multi-million dollar Treehouse conference room. Now—

Got a knot in your back? Schedule a massage. Looking for inspiration? Attend a talk with a world leader. We have our bike room. Our bike room holds 92 bikes. It's all about encouraging our employees to reduce their carbon footprint. First of all, you notice that you're getting a view and natural light, which is important.

There's research that's shown how natural light and views Help people focus and process information in a more effective way. I think it is important, you know, from my own experience. Honestly, just if I self-introspect, a lot of my, you know, best research pieces have come from discussions over lunch and in conferences. But so I think it is really important. But I must say that, you know, the research base on this is, uh, is not entirely conclusive. And there's certainly fantastic, you know, creations that have happened by people honestly working alone. You can come up with lots of examples of that too.

I'm wondering, I mean, the picture you're painting here, if you asked me at the start of 2020, can 40% of the country work from home? I would have probably said, no, it would be very hard, probably impossible. And clearly now, that's been proven untrue. I think a large number of people are making it work. But I think the picture that's emerging from this conversation is how complex the question actually is and how much it's connected to individual people's life situations. I mean, I've gotten to spend more time with family over the last few months as I'm working, which has been Wonderful. But I can also imagine there are people perhaps who might not want to spend large amounts of time with family. Maybe they don't have a happy family situation, or maybe they're single and they're living by themselves and it's extremely lonely. And so the idea that there's a one-size-fits-all rule that's going to mean everyone working from home is more productive or everyone working from home is more unhappy, that simply breaks down, doesn't it?

Exactly. So again, you see this so much in the survey data. So just to give you one figure, We ask people post-COVID, how many days would you want to work from home? And 20% of people say none. You know, 20% of people do not want to work from home whatsoever. And they may be many of the types of people you mentioned, you know, they have very small apartments or, you know, they don't have great family situations. Then there's 25% of people that want to work from home 5 days a week. They never want to go back to the office again. And then the remaining 55% are a big spread. So this is something, having worked for years in all kinds of different parts of economics research, I can't think of an area I've seen there's such differing views. So the average is, the average person, if there's such a person, wants to work from home typically 2 days a week, but that average hides enormous variation. So I think for firms, choice is going to be absolutely essential to get this right.

You know, I recently came by this spot in the news on CNBC about the real estate market in New York City. Take a listen, Nick. The big worry here and the big numbers was this rapid rise in empty apartments. The inventory of rental listings soaring 85%. We now have a vacancy rate that is the highest in Manhattan on record. So Nick, beyond what happens to workers and companies, what do you think the effects of COVID and working from home might be on cities and where we decide to live?

So I have to say, I think it's not good for cities. So just to be clear, there's plenty of people saying, well, cities have seen this all before. They always bounce back. There's been plenty of pandemics. That's true. But if you look, for example, they bounce back, but they take a long time. And in the words of Keynes, John Maynard Keynes, in the long run, we're all dead. So Just as a you know what one anecdote if you look at London, I was watching something on CNN with somebody saying you know of course London recovered after the plagues. That's true. But if you look at the data, ten years after the Great Plague, thirty percent of buildings were still empty. So I you know my prediction is prices will drop dramatically. It's not that skyscrapers or apartments remain empty from the clip they are right now. But I wouldn't be surprised to see prices of, say, Manhattan, you know, apartments and office buildings falling by 30 to 50%. And that's the way you keep them occupied. Wow. You, you know, people, and I should be clear, I'm not sure it's a bad thing because it's rebalanced. It would take us back to say 2000. It would rebalance a bit the, the country. Rural areas have been left behind and the center of cities have done incredibly well. Uh, if we rewind that by 20 years back to 2000, you have just a more balanced national setup without such an affordability crisis in the center of cities.

There's still much we don't know about what life will look like in a post-COVID era. Will we go back to the way we used to work in the old days, back when more people commuted to an office and the definition of a workplace was a physical space that you shared with your colleagues? Or will we permanently pivot to an era where remote work is more the norm? I asked Nick to predict which way our work practices would evolve and by extension, our communities writ large.

I'm pretty sure most of this will be permanent. So, you know, I can give you the— there are 4 reasons that are driving permanence. Firstly, this has turned out to be a great experience in the sense that 70% of companies reported Working from home has turned out better than predicted, so they're much more enthusiastic. Secondly, the stigma seems to have evaporated. So again, in survey data, you know, three-quarters of people report their perception is a big drop in stigma. Thirdly, investment. So we collected data, and the average person in America has invested 12 hours and about $1,000 setting up working from home. So you know, to take me personally, I spent a while figuring out. How all these, uh, you know, Zoom and, uh, Teams and Chime and everything works. And I bought a proper webcam and a mic and, you know, tried to organize the room a bit. And then finally, social distancing. My prediction is, just to put figures on it actually, is before COVID 5% of working days in America were full-time at home. During COVID it's about 40%. So 40% of working days are at home. Post-COVID, from talking to firms and from our surveys, it looks something like 20%. So we're going to wind back a bit from where we are now because no one's going to be full-time at home, or very few people, but we're well above what we were before COVID I'm wondering, Nick, if you're hiring an employee, maybe you are less interested, is the employee in the same zip code as I am or in the same city as I am?

Maybe now, if you're a company, you actually can hire more widely. Maybe you can actually look to rural areas or even other countries for labor in ways that you couldn't earlier. In other words, it actually might unleash a lot of people who previously could not find their way to an expensive Manhattan job interview now can actually be in the running for that job.

No, exactly. I think this is going to be great for rebalancing the economy. So many of what I see the political troubles in the US and also my homeland, the UK, are from this increasing, growing rural-urban divide. And the rural parts of the country felt left behind, felt forgotten about by urban elites, et cetera. Now, if suddenly we allow both people to move out of cities into the countryside, but also jobs to move. So even if nobody moves, if employers can now hire people in rural areas more easily, that's gonna rebalance things. And so you can imagine if we're working from home, let's say 3 days a week and only coming in the office 2 days a week, you can be recruiting people far out deep into rural areas.

So if a Stanford professor like you can work at Stanford, but pay rent in, let's say, Kansas or in Oaxaca, Mexico, why would someone like you choose to live in Palo Alto?

Well, this comes back to, I guess, inertia. I mean, it's a good question. If, imagine COVID lasts, the pandemic horrifically lasted for 5 years, A lot of people will be asking themselves that question, why am I living in such expensive areas? It works for us living here. My kids are in local schools and we have friends locally, et cetera. But I guess if it's lasted forever, and again, just to be clear, post-pandemic, I see us going back into the office 2, 3 days a week. But there are certain jobs, I think it's become clear that they can just be done entirely remotely. And for those jobs, you may well see a lot of people moved, you know, to, you know, you might live in Hawaii, you might live next to the beach and then, you know, code for Facebook, uh, and there's nothing wrong with that. And if that works out, actually, that's great. You may fly to, you know, Silicon Valley once every other month to meet in person and spend the rest of your time living out in Hawaii or, you know, living up on the ski slopes. So I think we'll see a big increase in that. And in fact, if you look, if you look at the reports from real estate agents, they are talking about there's been an explosion of people wanting to buy what's called lifestyle properties. So, you know, beautiful ranches deep out in the countryside that, you know, you can buy a small Manhattan apartment or you can buy a 200-acre ranch out in Wyoming. And if you can work remotely, you know, maybe you go for the latter.

But again, you have this divide, don't you? Which is that this is speaking now to the people who are the wealthiest people who are able to think that way. And if you don't have the education, the technology, the support from an employer to do this, there's really going to be this bifurcating caste system.

Yes, although I think in terms of moving people out to rural areas, you know, it pushes in both directions. You're exactly right. The people who can work from home are educated, and so they gain a lot of the direct benefits. It is true, though, if a lot of, say, wealthy New Yorkers move out into the countryside, when they're out there, they're going to demand services, you know, restaurants and go out to gyms, et cetera. And, you know, they'll no doubt pay more tax revenue, they'll improve local schools. And so, that will indirectly spill over to, you know, people that are out there that maybe can't work from home, but will get some of the indirect benefits. So the inequality impact's a bit mixed. I think it will really reduce inequality if we can rebalance things a bit away from cities. It's not like, you know, I was born in London, I lived in London until I was 30. I'm basically a city person, but it's also clear that even for me, one of the reasons I left London and came out to the US is it was just too expensive to live in. And I think it will be better for society if cities were, you know, not so unbelievably expensive so you could have a more mixed set of people lived in them and there's more You know, basically diversity across the US rather than becoming so geographically segregated by income, which is what's been happening until recently.

What's been your most embarrassing work-from-home moment these last few months?

Um, my most embarrassing— well, I mean, I'll tell you one. This is the classic early days of Zoom. Uh, I was on a, uh, a video call. It was a Zoom call, and I screen shared with some, uh, A couple of co-authors, and I'd forgotten to turn off screen sharing. And at some point, one of them was talking, and I was, you know, as you do, was, uh, losing, you know, concentration and went to start doing some emails and was typing a reply. And my co-author suddenly said, hey Nick, you do realize you're still on screen share? And, you know, he'd very politely taken a while thinking I might turn back, but, you know, for the last 5, 6 minutes, he must have been maybe even 10 minutes watching me type emails out, clearly paying no attention. One of the things you have to realize when you are working from home is the office norms just don't apply. So it's completely reasonable if you're working from home to have a cat walk across your camera or a baby crying in the background. And one of my colleagues has just had a baby, and you know, that baby is often sitting in his lap during conference calls, and he is cute, and it is the way it is. In the office, it would seem weird, but I like the fact that working from home Working is a little bit more relaxed. Yeah, I from think that's a good thing. home, there's a new set of rules around what's reasonable.

Economist Nick Bloom teaches at Stanford. Or to be more precise, he teaches from his spare bedroom and sometimes from his bathroom when his kids are practicing the bagpipes. Nick Bloom, thank you for joining me today on Hidden Brain.

Thanks. It's been fantastic. Thank you for having me.

Their concern is that they want to have Kurdish— excuse me, my kids are here. Live television.

Cold air continues across the area tonight.

Potential for some frost and freeze for some of us.

Warm up, it's going to take— Maple.

David Cameron was talking Talking about— oh, I'm really sorry, that's my son arriving. Sorry, I'm really embarrassed. Sorry, hold on one second. Sorry. Yes, you can have tea biscuits. I'm really sorry about that.

Yeah, okay, well, let's— we'll leave.

All right, welcome back. I'm gonna be back in studio on Monday, so I thought I'd bring my daughter Lena with us. No. Hey, can you say it's gonna be sunny today? No, it's gonna be hot. Okay, good work. Lots of upper 80s and low 90s over the next 7 to 10 days. This didn't go as planned. Jackie. We recently checked back in with Nick Bloom to get his perspective on how working from home has evolved in the year since we first ran this episode. You might expect that with the COVID-19 pandemic more under control, control in the US, more employees would be returning to the office. But some preliminary data suggests working from home is just as prevalent. According to Gallup, 45% of US employees worked at least part-time at home in the fall of 2021. Nick Bloom says there's one major reason for this. Right now, there's a hot labor market in the US. Because of the pandemic, many workers decided to quit their jobs or change career paths. So organizations are realizing that if they want to hire new employees and even keep the ones they have, they should offer at least 2 days per week of working from home. Some companies are choosing a hybrid model, like working from home on Mondays and Fridays, while others are offering 1 full month per year of working from anywhere. In other words, Nick predicts, working from home seems to be here to stay. Hidden Brain is produced by Hidden Brain Media. Our audio production team includes Bridget McCarthy, Laura Querelle, Ryan Katz, Kristen Wong, Autumn Barnes, and Andrew Chadwick. Tara Boyle is our executive producer. I'm Hidden Brain's executive editor. Our unsung hero today is someone who has made it possible for the Hidden Brain team to work from home successfully. His name is Yitbarak Arefne. Hi, I'm Yitbarak Arefne. And he's a business expert with Apple in Washington, D.C. When our show moved to independent production in 2020, we needed new computers. Yit, as he's known, patiently walked me through the process of setting up a business account for our new company and ensured we got our computers on a tight turnaround. It helped that he's something of an audiophile himself. Thank you, Yit. For more Hidden Brain, be sure to subscribe to our weekly newsletter. You can find it at news.hiddenbrain.org. That's news.hiddenbrain.org. If you enjoyed our Work 2.0 series, please do share it with friends, family members, and of course, your coworkers. I'm Shankar Vedantam. See you soon.

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