Conversations with Tyler - Nicholas Bloom on Management, Productivity, and Scientific Progress

Episode Date: August 12, 2020

What might the electrification of factories teach us about how quickly we'll adapt to remote work? What gives American companies an edge over their competitors on the international stage? What value do management consultants really provide? Stanford professor Nick Bloom's research studies how management practices, productivity techniques, and uncertainty shape outcomes across companies and countries. He joined Tyler for a conversation about which areas of science are making progress, the factors that have made research more expensive, why government should invest more in R&D, how lean management transformed manufacturing, how India's congested legal system inhibits economic development, the effects of technology on Scottish football hooliganism, why firms thrive in China, how weak legal systems incentivize nepotism, why he's not worried about the effects of remote work on American productivity (in the short-term), the drawbacks of elite graduate programs, how his first "academic love" shapes his work today, the benefits of working with co-authors, why he prefers periodicals and podcasts to reading books, and more. Read a full transcript enhanced with helpful links, or watch the full video. Recorded July 13th, 2020 Other ways to connect Follow us on Twitter and Instagram Follow Tyler on Twitter  Follow Nick on Twitter Email us: [e-mail] Subscribe at our newsletter page to have the latest Conversations with Tyler news sent straight to your inbox. 

Conversations with Tyler is produced by the Mercatus Center at George Mason University, bridging the gap between academic ideas and real-world problems. Learn more at Mercadis.org. And for more conversations, including videos, transcripts, and upcoming dates, visit Conversationswithtyler.com. Hello, everyone. Today I'm honored to be chatting with Nick Bloom, who is Professor of Economics at Stanford. I sometimes put it this way.

If I read a new and interesting article, whether it be on productivity in science, the productivity affirms, how effective it is to work from home, the effect of uncertainty on economic output, and then I think, well, who's the most likely economist to be a co-author or author of this article? That one person is Nick Bloom. Nick, welcome. Thanks very much for having me on Tyler. It's great to be here. Let's start with your piece with co-authors on whether progress in science has slowed down.

and you argue that it has, I would ask which are the areas where progress in science has not slowed down? Oh, that's a good question. Why, that's not what I'm normally asked about. Where has it not slowed down? I mean, I guess in some senses, I mean, I'm not drawing in any deep personal insight here, but just looking at the valuations of firms and exciting areas, but it's going to be things like AI. I mean, I guess social media, genetic medicine. I think of what's going on at Stanford. I know there's a huge explosion of work in Stanford. Several of my friends and colleagues on campus are working on genetic medicine. I mean, all kinds of amazing things there, actually, wearables. So one of my friends here is actually working with Apple on getting

devices like in the Apple Watcher. It can check your heart rate and tell you in advance that there's complications in your heart and basically pre-warn you. So I don't want to be too super pessimistic that all science is dying. And you're right. You're exactly right. In the research we looked at it, we showed, for example, progress on cancer had an acceleration in the 80s and 90s. It's just, it seems that field after field eventually starts a decline, and there aren't enough new fields that are growing to offset the bulk of the current fields that are declining. So if progress in Moore's Law is slowing down, progress in crop yields is slowing down, cross-sectionally, what is different about the areas where progress in science is speeding up?

I mean, in some senses, they're new. It's just, you know, it seems pretty obvious. This is why it's useful to have economists to look seriously at the data. In the sense, it seems pretty obvious that individual areas are going to slow down. So, you know, the wheel was a fantastic innovation, but at some point, you know, progress slows down. And, you know, the horse and car and, you know, corn yields. And you can just go through innovation after innovation. They're incredibly important, but at some point, of course, progress in those areas slows down. And you mentioned Moore's Law.

So the number of transistors you can pack onto a silicon chip has been roughly doubling every two years. And that was kind of Moore's law, and that's been roughly held constant, actually, for about 50 years. It's just we've been pouring in way more scientists into that. So we estimate since the 70s, there are 18 times more scientists, just to hold that constant. So in that sense, if you're putting in a lot more scientists to generate the same increase in compute power, you'd say that progress is slowing down. Now, that all seems obvious that each field is slowing down. The question is, are there enough new fields that are coming into being to offset? that. And it just appears that at least since the 1950s in the US, the answer is no, there are new fields

coming on board, but just not fast enough to offset the decline. How do we know what counts as a new field? So you mentioned progress in genetics, but Mendel was some time ago. You mentioned the wheel, but Tesla now has a phenomenal valuation. That's the wheel plus electricity. Electricity is another old sector, right? So aren't some of the old sectors currently the most dynamic? Well, Tesla is the electric motor. I mean, you're right, the electric motor. I think the first cars, again, it's not my expertise, but I think the first cars were, in fact, electric cars back in like 1900. Whether you call that a new field or an old, I mean, a part of that is driven, the progress

is driven on batteries. So batteries, we looked at this. Actually, one of the, there are several areas you looked at in our paper. We never actually, so I had a paper with Chad Jones, John Van Rinn, and Michael Webb, looking at whether innovation and productivity is slowing down. And we looked at several sectors to try and evaluate this. and some of them lacked complete data and either inputs or outputs, but one of them is batteries. And batteries have made slow but steady progress.

And recently, you know, for example, lithium-arm batteries are much more effective. But recently batteries have got to the stage where electric cars are feasible because you need to obviously store enough energy. So it's not so much the electric motor is a new idea. It's that batteries make it possible. If you want to ask what areas in you, I would, you know, practically look at, say, patents. So there's an enormous amount of debt or stock, you know, new companies floating on the stock market. Patens are a very simple way to look at what technologies are new in the sense that they add new fields. And you look at patterns that don't seem to patent or cite much that's gone before them.

They're truly radical. And there's a huge research literature on exactly this. Now, if I understand your estimates correctly, efficacy per researcher, as you measure it, is falling by about 5% a year. that seems phenomenally high. What's the mechanism that could account for such a rapid decline? Yeah, so the big picture, just to make sure everyone's on the same page is, if you look in the U.S., productivity growth, in fact, I could go back a lot further. It's an interesting, you go but much further,

and you kind of think of European and North American history. So, you know, in the U.K. that has better data, there was very, very little productivity growth until the industrial revolution. So, you know, literally from the time the Romans left, and whatever, you know, roughly kind of 100 AD until 1750, technological progress was very slow. So sure, the British were, you know, more advanced at that point, but not dramatic. So the estimates are like 0.1% a year, so very low.

And then so the Industrial Revolution starts, and it starts to speed up and speed up and speed up. And, you know, technological progress in terms of productivity growth peaks in the 1950s at something like 3 to 4% a year and then has been falling ever since. And then you ask, you know, that rate of fall, it's 5% roughly. It would have fallen if we held inputs constant. But the one thing that's been offsetting that fall and the rate of progress is we've put more and more resources into it. So again, if you think of the US, the number of research universities has exploded,

the number of firms having research labs. Now, Thomas Edison, for example, is the first lab about 100 years ago. But post-World War II, most large American companies have been pushing. huge amounts of cash into R&D, but despite all of that increase in inputs, actually, productivity growth has been slowing over the last 50 years. So that's the sense in which it's hard and harder to find ideas. We're putting more inputs into labs, but actually productivity growth is falling. But let's say paperwork for researchers is increasing, bureaucratization is increasing. How do we get that to be negative 5% a year as an effect? Is it that we're throwing kryptonite

at our top people? Your productivity is not declining 5% a year, or is it? COVID aside, right? COVID aside, you know, I don't, yeah, it's hard to tell, it's hard to tell your own productivity. I mean, right, it always feels like, I mean, oddly enough, you know, I always feel like, ah, you know, the stuff that I did before was better research ideas and then, you know, something comes on. I'd say personally, it's a bit, it's very stochastic.

I find it very hard to predict it. I'm increasingly comes from working with basically great and often younger co-authors. Why is it happening at the aggregate level? I think there are three reasons going on. So one is actually come back to Ben Jones, who had an important paper, which is called, I think, believe, Renaissance Man. So, I mean, this came out like 15 years ago or something. It was the idea was it takes longer and longer for us to train.

So just in economics, when I first started in economics, it was standard to do a four-year PhD. It's now a six-year PhD, plus many of the PhD students have done a pre-doc, so they've done an extra two years. So we're taking three or four years longer just to get to the research frontier. So there's so much more knowledge before us, it just takes longer to train up. So that's one story. A second story I've heard is research is getting more complicated. So I remember I sat down with a former CEO of SRI, Stanford Research Institute, which is a big research lab out here that's done many things.

For example, Siri came out of SRI. And he said, increasingly it's like interdisciplinary teams now. So it used to be you'd have, you know, one or two scientists could come up with great ideas. And now you're having to combine, I can't remember what he said for Siri, but he said, you know, there are three or four different research groups in SRI that were being pulled together to do it. And that, of course, makes it more expensive. And we think of, you know, biogenetics, you're kind of combining biology or genetics or bioengineering. There's many more cross-field areas.

And then finally, as you say, I suspect, you know, regulation costs, various other factors are making it harder to make, you know, to undertake research. A lot of that's probably good. So it's less of it. I mean, I'd have to look at individual regulations, but health and safety, for example, it's probably a good idea. But in the same way,

that is almost certainly making it more expensive to run labs. And in fact, COVID is a huge pushback from talking, you know, I was talking just before the shutdown to a good friend of mine, and she said, just a big lab that has a number of animals and longer running experiments going on. And in fact, the shutdown has been extremely expensive.

And then we reopen a social distancing, of course, the costs are going to go up again. So these are all factors pushing on, you know, your point of regulation is just expensive running research. But what if I argued none of those are the central factors? Because if those were true as the central factors, you would expect the wages of scientists, especially in the private sector, to be declining, say by 5% a year. But they're not declining. They're mostly going up. So doesn't the explanation have to be that scientific efforts used to be devoted to public goods much more, and now they're being devoted to private goods?

And that's the only explanation that's consistent with rising wages for science, but a declining social output from per research for scientific productivity. Okay. So great question. There are two responses before I lose track in it. So first is, you know, I'm about to say, I forgot the fourth reason. So you're right, a fourth factor on this could be, Just as a simple empirical fact, the share of R&D in the U.S. and Europe, which we have best figures on this, funded by the government, has been declining over time. So, in fact, in the U.S., when you go back to the 60s, roughly two-thirds of it is funded by the government and one-third by private firms, and now it's the reverse. And in fact, it always made me wonder, when I first pulled out this data six, seven years ago, it made me wonder about the story of Stanford, because when I arrived at Stanford, I was talking about. that Stanford pre-war really was like a finishing university. It wasn't really a big deal. And post-war, Stanford got its big break because of lots of research from NASA dollars. And I was kind of thinking, well, you know, government R&D is not such a big factor anymore.

It's mainly private firms. And that's because post-war, it was the big driver, and the government's pulled back from R&D and private firms have taken over. And the reason that's, you know, the fourth possible driver to decline in productivity, as you point out, is government R&D tends to be more focused on the R&D, the research and private R&D more on the deal of development. And the R you may think has more spillovers, longer run benefits, and is what's going to drive longer on growth. So, yes, that will be another role for policy.

In fact, I'm embarrassed I left it out, but a big drive would be, I mean, it feels hard to be saying this being in a university, but the government should fund more public R&D. I can come back and answer the Santa's Wages question if you want, but I can see you have a question because we're looking at each other on Zoom. But if you assign the blame to government, ideas are a global public good. Isn't it true that global governmental expenditure on R&D in absolute terms is up, even if it may be down as a percentage of budgets or total R&D,

and thus say scientific progress in the United States, which can draw upon governmental support in China, Japan, India, the UK, Switzerland, should still be going up. And it has to be within private scientific progress, that there's a diversion of effort away from public goods and toward more private goods, or no. No, it's a good question. It's certainly true. Our paper only focused on the U.S., the puzzle gets much harder if you include global R&D. So you see that productivity per researcher or a research dollar is falling in the sense of the rate of progress per dollar we're spending. I mean, you've looked at that. I mean, just to be clear, this is not a new thesis.

You know, you have your book The Great Stagnation and Patrick Collison, for example, has work on this more recently. And, you know, there's, Jesus, that book, The Death of Science, I'm embarrassed, I've forgotten who the author was. John Horgan. Yeah, that's it. And so the puzzle gets even more extreme if you look globally,

because, of course, now, you know, it's tricky because Europe has become slightly less of a powerhouse, but obviously Asia has completely taken off. And the amount of R&D being spent and, say, India and China has exploded. As that offset the reduction in US publicly funded R&D, certainly is a share of GDP, It's not obvious.

One reason is there's plenty of evidence on knowledge bill over as being localized. So there's a lot of evidence, for example, that you're more like to co-author with your colleagues and your own university or in the same firm. I mean, I guess the same firm is more obvious. But if that was true, you may think the transmission of ideas from China to the U.S. is less effective than within the U.S. I also don't know if the increase in Chinese and Indian R&D by their government sectors is enough to offset the reduction by the U.S.

and others in the right areas. It may be that a lot of developing companies. countries, R&D is more, say, defense and national security focus, which I suspect has lower tradeoffs. And the nice thing about the U.S. and things like the National Science Foundation, the NIH, Institute for Health, is they would put huge amounts of funding on very basic research and had broad value. I mean, you know, MIT researcher goes to the NSF, gets funding for research.

They tend to be focused on very basic things that of interest to broad science, and that has, I suspect, the largest value in. Apart from possibly giving them more money, how should we improve the NSF and the NIH? How can we raise their productivity? I mean, the more money seems the most obvious part of it. There's obviously secondly how you distribute it. And again, I remember seeing a couple of papers on how exactly you evaluate research proposals and it's hard.

And you know, do you get insiders within the field to evaluate it who tend to have been more informed but tend to be, you know, more vast towards their own field or outsiders? I think the broad issue is, I mean, I'm not aware of any huge criticisms of how the research agencies hand out their money. I'm sure there's lots of quibbling around the edges. I've been involved in refereeing for the NSF, for example. I've always been very impressed the way they've run it. And the ESRC, for example, in the UK. I think the big issue is just their budgets. Their budgets sure are growing, but they're not growing nearly as fast as GDP. And so as a result, government is basically pulling back from R&D. It's being at some extent replaced by universities.

So if you think of these elite universities, their enormous endowments are partly being funneled into early stage R&D. And in fact, it's why, you know, another fascinating observation on the US is increasingly growth is being driven by kind of knowledge flows out of elite research universities. So just even in the stock market, the stock market over the last 10, 15 years, is almost entirely been driven by high tech. And, you know, high tech in many ways, you can think of it as clustering around elite universities. US research universities. So they are stepping into some extent to fill the gap left by government. How much of the measured productivity edge of American multinationals is just tax arbitrage and where profits get assigned to? I never really thought a huge amount of it was that. My personal view, I guess this is, again, biased by my research is American firms in

particularly just fantastically well managed. So I've done a lot of work for many years looking at management practices, trying to collect data in cross-country surveys. And to explain what I mean, management practices, you know, the basics around do you collect information and use it to improve yourself? So think of, you know, lean, collecting information all the time and having improvement processes. And secondly, do you train and promote employees, try to promote the best people, trying to avoid things like, you know, promoting family, friends or long-serving employees? So meritocratic HR systems. And I don't know to say American firms are perfect. They're definitely not perfect. There are many management scandals. But on average,

American firms are much better managed, and they take that with them abroad. And there's this whole literature that's been sometimes called dark matter or, you know, explaining why we seem to have this endless negative balance of trade, but positive balance on investments abroad. American companies seem to make huge profits abroad. And one big explanation is they're just exploiting lots of this intangible capital, which we think of as good management. So American multinationals around the world are well managed, and they make a lot of profits where they're located in the UK, in France, in Ghana, in Thailand, wherever they are. And that's helping keep the U.S. economy afloat that return profits.

So I don't see that as being related to transfer pricing and offshore tax manipulation. That is a factor, but I think American firms are primarily driven actually by better innovation and better management. Why hasn't information technology boosted productivity more? Right? So productivity is sluggish. IT has been taking off like crazy. Companies, big business is what uses IT.

How do we fit the whole picture together? Yes. So, you know, this is another kind of age old debate. Goes back to Robert Solo's quip about we in the New York Times. You wrote it, I think, in 86. You see computers everywhere except in the productivity figures. So you're right. You know, Paul David and Tim Bresnan at Stanford,

My colleagues have had various, you know, this again, as an old literature about general purpose technologies, these technologies that change society. And at least two previous ones with the steam engine, the electric motor. And the big question is, why haven't computers done that? They seem as transformational as the previous two. But I mean, as we discussed, productivity growth rates in the US have been declining since the 50s and don't seem to have picked up much anyway with computers. I think the primary reason people make, you know, argue for this is you need to change

society in order to exploit this. And in fact, in an odd way, COVID, the pandemic and working from home is one example of this. So all the technology necessary for working from home. So just to be clear, the internet and email, cheap personal computers and video calls have all been around since the late 2000. So the last piece, Skype, came out in 2003. But it isn't until the pandemic that we actually massively embraced working from home. Why is that? I think it's just social norms and firm organizational practices for slow to change. So I think something holding back the impact of ICT is firms and society doesn't change that rapidly. And, you know, a good example, Paul David mentions about electricity, that when electricity came in, which I believe

in the 1910, 1920s, factories were slow to adopt it. And the reason was, in the older factories where it had a big steam engine or even water wheel, it made sense to have the building very verticals. you'd have four stories around this one central shaft, which belts would connect to, which drove all your mechanical power. With electricity, instead, you can have lots of little localized electric motors, which is a large flat building. So, you know, that explains. If you look at really old-fashioned factories and like the center of, you know, Manhattan and places where they were built 200 years ago, they're very tall buildings. Modern factories are low, slung, massive sheds. But, of course, when electricity came in, it's very hard to reshape all those buildings, and it takes decades.

and it's kind of like that with reshaping the management organizational structures of society. I think that's one reason why it's taken so long for IT to affect productivity. So Italy has had almost no per capita income growth for about 20 years now. Is that because of the deficiencies of Italian firms? That life in Italy hasn't changed enough? I mean, Italy is just a productivity basket case. When I talk to, you know, Rafael Siddin, for example, my, you know, long-term co-author, when I talked to her about Italian productivity, I mean, a lot of the issues you hear about

regulations, you know, political instability, challenges of the education system, migration. I mean, you know, another thing for Italy, it's even more so for Greece, actually, is that a lot of Southern Europe has suffered from a large negative brain drain. I know lots of, you know, highly able Italians, but they basically tend to, you know, many of them I know that are in the US and the UK, and they've left the country because it's poor economic prospects. So, you know, Italy is almost a laundry list of what's gone wrong on what not to do. But I think a lot of it comes down to poor government and, you know, that then feeds through into all these policies that make it hard for firms to innovate.

Italy's R&D performance isn't great. It's very uncertain. It drives a lot of people abroad, the education systems, Paul. What exactly is the value of management consultants? Because to many outsiders, it appears absurd, that these not so well-trained young people come in, They tell companies what to do. Sometimes it's even called fraudulent if they command high returns. How does this work?

What's the value added? You know, I don't know if everyone knows, but I worked at McKinsey for about a year and a half. So, you know, I should state that. I don't longer work for them. I don't take any money for them anymore. I mean, that was a long time ago. That was almost 20 years ago. But just from that and from my research, you know, there's two or three things they do.

I mean, it is true on the negatives. To start at the negative side, the critique that's often, thrown at them is they either tell you the obvious you know they ask to borrow your watch and tell you the time or they tell you things that the CEO normally knew but she or he basically didn't want to fess up to tell the workers and it is true that I felt there was some element of that that you know there was one project particularly when I was involved in I remember it seemed to us to be reasonable clear what to do I think it seemed to be reasonably clear to the division I had what to do but it was hard for her to tell the whole group and, you know, McKinsey came in.

You know, the project was highly successful. The division improved dramatically, but it was partly we were there to bolster evidence. The third element, I think, is generally useful. And I've seen this. And, you know, when I think of the randomized control trial in Dada and India, where he hired a censure to work in a number of firms is a lot of management improvements aren't that obvious to people on the ground. So just to give you one example, then back in history, after World War II,

the big movement in the U.S. was what's called, mass production. So Henry Ford had the production line and the idea is you just scale up, get bigger and bigger and bigger and make more and more, you know, forwards and roll it off in a massive factory set up. Toyota and the Japanese car manufacturing sector at that time in the 1950s, because they're obviously so devastated by the war, didn't have access to capital and had to produce things on a small scale. And they went for an alternative system called Lean. And the whole idea of lean is that you try and spot mistakes and immediately, you know, stop the line. It's very painful in the slow run. If you stop, see a problem in the car, you stop it, you go through it,

you figure out, and then you restart. And it takes time to start off and it's a slow burn. But by the 1980s, the Japanese car factories were clearly starting to dominate. They had lower costs and higher quality. In fact, there's a great MIT book called the machine that changed the world, the documents that. Now, if you think of the way consultants are operating in the 90s, 2000s, it isn't obvious to many firms that Lean was a far better way to run your factory, that you really want to introduce these Kaysen production process, et cetera, and consultants come in and help you adopt them. And it's not just factories, healthcare.

So there's been a huge transformation in Lean health, whereby when you go in and see adopt, you really, really don't want that to be processed mistakes. And Lean is actually very good at reducing quality defects and improving productivity. So that's the area where consultants are great. I remember when I was at McKinsey and one of the projects I did with a retailer, we had someone that used to work at Toyota. And this Toyota guy had been there for three, four years and was just fantastic. He went around the retailer and said, you know, here's the kind of tools we used to in Toyota

and just applied them. And it was extremely valuable. So that's the positive side of managing consulting. Highlighting things that maybe ex post after the event are obvious why it works, but in advance, you know, it just aren't. Given the high returns to management advice to India and other emerging economy, is what's the main constraint that prevents that from being scaled up much more. Why don't those consultants just transform those management practices and productivity levels?

Yes, a great question. I've long thought about this. I think the biggest, one of the major constraints, India and Novesa has been out there a lot. And one of the huge constraints says the legal system. So I'll just go through it. So in India, you know, the actual law as it's written down in the statute book is, you know, But it's good that there's no obvious issues with it, at least as people I talk to, but the big constraint is processing cases through the courts.

So the courts are dramatically undersupplied in terms of judges. And so what happens is it's very slow to process cases through court. As a result, when you talk to Indian firms, are very skeptical of taking any issues through the court system. So just to be clear, if you're in the U.S. and you're a manager and you discover somebody stealing stuff from me, you're pretty likely to report it to the police. and then it goes to the court system, that manager faces, you know, potential prison. They clearly lose their job.

They have a big loss of career-owning state. So in the first place, they probably won't do it. If the courts were the binding constraint, why doesn't that make all management advice for India worth less? Why is that particularly an issue with respect to scaling? Because they all live under that court system. Okay. I was going to say, well, one solution you'd think for, you know, I mean, I use India,

but it's basically all developing countries and including, honestly, large parts of southern Europe is private equity. So look, you see all these badly run firms. Why doesn't PE come in, buy up firms and turn them around? The problem is the legal environment is not great. So I remember talking to someone that said it was Blackstone came in a big PE firm, bought a large retailer, sorry, a large apparel manufacturer in India and really struggled because sure they could improve management practices, but profit wasn't going up. And it was, you know, there's a lot of money basically illegally leaking out of the company. And because the legal system was weak, it was hard to turn this around. So then you're right, the alternative, but look, even if private

equity doesn't come in, why can't they do it organically? And they are. So to be clear, you know, management practice in India, which I know best have been improving over time, there are some very successful Indian multinationals like Tatar Alliance. The issue is that isn't scaling. If you think of it, the frontier of management practice is improving every year. We're getting better at managing firms in the US. And below that frontier, there are countries that are closer, say, northern Europe, that are further, say, Southern Europe and even further below the developing world. And they're improving, too. It's just there's a big gap, and it takes time for, it's like innovation. It takes time for it to diffuse. And a better legal

system would accelerate that. If you're going to have, you know, ruthless private equity backed by, you know, tough laws, I think it would be, you know, that would be, it would be painful, economically and socially, but the growth rate would improve because you'd have much more transfer of management practices. You mentioned the machine that changed the world, also with favorite book of mind. What's another book on management you find especially rewarding? Another book on management. You know, I'm not a huge book reader. Having said that, I've been recently reading Hillbilly Elegie, which is fantastic, but I tend to, you know, as oddly enough, I tend to be a huge reader of news, like, you know, the Times, the Wall Street Journal, the economist, the

F.T. I'm trying to think management books. I'm sure as soon as the interview's over, I'll kick myself and think there was some fantastic book. Let me repoint the question. Why are management books so bad? If I ask myself. If I had to go into a big Barnes and Noble and had to read all the books in one section, management might be the last section I would pick, even though I'm an economist and to a more modest extent to manager. Why is there so much junk in that area? It's endogenous that you don't read more of it, correct? Yeah, I mean, there are great books, I'm sure. I don't mean to imply they're terrible. I'm sure they're, I'm going to, you know, as soon as this is over. Enter terrible. You go to the history section. Most of the books are at least pretty good. Yeah, I, you know,

one issue that struck me why I got into management in the first place, it just to explain what I've been doing. For years, I've been working with a huge coalition of people. So I mentioned Raphaelisodin, John Van Rina, Hanata Lemos, Danieleska, Eric Binheliske, Eric Bindjolson, Luce the Foster. There's a huge group of us, Scott Olmacher, that have been trying to measure management practices across firms and countries, just very methodically, in some ways, very boringly, running, we must have surveyed several million organizations by now to create a big data set. And we take populations of firms, run these surveys, collect data, and compare them. Now, that was just, you know, Most of the books that I read that are popular, good to great and built to last,

and things like this are generally based on individual anecdotes and case studies. And I think that's quite, I mean, it's great for teaching. I use case studies and Harvard Business School case studies all the time to teach because it's very inspirational. But they're always positive stories of how, you know, Mrs. X or Mr. Y turn the firm around. But they're not great for research. And the reason is I know from personal experience having to write one case study, I wrote a case study on a firm that I was owned by someone that was in my Stanford MBA course called Gold Kodas, and it's called The Challenge of Change. And the problem was, we wrote this case that it was a fascinating company that actually eventually got taken over by private equity in India.

And they were a huge, very successful apparel firm. But we had to get legal sign off from everyone involved. So we interviewed six or seven people, and they all had to legally sign off and say they were fine with used to using the material. And you can imagine what that does for selection effects. It means that basically these books are own, you know, it's very hard for them to get proper information on firms that do badly because they refuse, you know, they threaten lawsuits. So I think a lot of management research is correct. You know, most of these books are probably saying the right thing.

The problem is, but every story you want to come up with every theory, there's a book supporting it. So it's kind of hard to know where to look. What we really need, ideally is, you know, what we're trying to build. I wouldn't say it's our research, but more our data that hopefully people will use because it's publicly available data is to, you know, say, look, here are five hypotheses of management. Is this supported in large-scale data?

I think that would put more discipline and then therefore put more credibility on these books. If teaching management techniques to companies are so effective, can we expect similarly large gains to teaching personal productivity techniques to individuals who, if anything, should absorb it more rapidly, right? No collective action problem. But it seems overall self-help books, life coaching, they seem pretty ineffective. How do we square that larger picture? I'm not sure they're pretty in it. I don't know how

it would evaluate it. There is a large, you know, I can flip it around. I take the economist take. I'm going to kind of take your line on this, which is there is an enormous volume of like self-help books and podcasts and newsreels, etc. And the fact that they exist means people are spending a lot of time reading them. And I presume if you assume that people are rational, it means they get value out of it. I actually find these things quite useful. I'm not sure I absorb most of the tips. know, I guess my mental model is, like, I listen to some, I mean, I don't tend to listen to stuff, but I read a lot. And I read something, there may be 10 tips in there. In fact, before the podcast started, I was talking to Dallas, your, you know, your producer, and she was, she'd sent me

this whole list of things on what to do with your microphone and video. And I had read it all. In fact, she concluded a link and I went on to that. I found a couple of them really useful. I'd say 90% of them I'd seen, or maybe it wasn't applicable, but 10% were great. So I actually think that potentially are quite helpful. The issue is maybe on the evidence base, again, as an economist, ideally, you'd have an RCT, how you'd execute, it's not obvious, but you know, you may take a thousand Americans or, you know, a thousand Spaniards or something, some sample and then give 500 them intensive self-help coaching for a month and see what happens. I mean, quite possibly somebody's done this. I don't, you know, it may exist, but that would be my way to evaluate these kind of interventions. Then you must think people are remarkably productive and effective because self-help books are very cheap.

The advice Dallas sent you, that was for free. So if you think of it in terms of marginal value, given the low price, the marginal gains to being more productive personally, well, you must be very close to the frontier, right? But that strikes me as counterintuitive. I see people sort of screwing up all the time, not realizing their potential. I think the market for talent is remarkably inefficient and that people don't do their very best. Well, there's two issues. I think one is you've got to consider what would be like without it.

So, you know, humanity is dramatically more productive than it was and some of it could be self-help. The other issue is, I think, this unknown unknowns, the problem is you don't know what you don't know. And just, again, as a personal anecdote, I was thought I was reasonably given energy, kind of energy efficiency. And my brother came round, you know, before COVID and point there was a couple of years ago and point you that, look, I should be using LED bulbs throughout the entire house rather than the old halogen or CFL fluorescent ones.

And, you know, my brother's an engineer and I kind of sat down and went. through the numbers and it paid off within two to three years and that's clearly a fantastic rate of return. And so pretty rapidly, I switched out every single bulb in my house to LED. But, you know, I didn't know it until someone had pointed it out. X post, it seems kind of obvious. I could have easily gone to, you know, Amazon and worked out the cost of it, worked out the electricity uses and done the calculation. I just never thought of it. So a lot of this just is, like Dallas's recommendations, I can't remember what she said. There's various things. That's it. She said, you were using this microphone, turn the gain thing down to zero.

I didn't realize that. And there was a knob at the back of the microphone. I'd never even looked at it. I then looked at it and saw, oh, yeah, there is that, you know, turned it down to zero and hopefully it sounds okay. But I think a lot of it is honestly, see this in firms all the time.

When we were out in India, or when I was in McKinsey, you'd often give pieces of advice, and ex post, it was really useful. So, for example, just as another concrete piece of, you know, analysis, when I was out in India, a big issue and a lot of modern management is quality defects. So we went, these companies,

or large companies making, say, fabric, that goes into making shirts and trousers and, you know, upholstery coverings. And a lot of the learnings from coming out originally from Japan is you should, you know, zero in and quality defects and fix them instantly. So essentially said, look, your factory of 100 looms, we're going to take, you know, six looms at the back row and have a quality defect index and have a quality control process, a Kazan process. And after two to four weeks, it was so effective in spotting repeated issues that the factory owner said,

This is great. It's worth the effort setting up this QDI index and this committee. We're just going to roll it out to the whole factory. But in advance, they're skeptical. So I think that's, you know, there with so many things in life. Unfortunately, we just don't know what we don't know. And so we're skeptical on advice. How about this are you on Chinese management?

Chinese management has, you know, I don't have fantastic recent data. So I'll give you my best data. We surveyed them last on, you know, at scale in 2005. At that point, they were roughly in limer GD. They were okay. They weren't fantastic. I've had some other surveys, but they're not internationally comparable more recently. They're pretty good.

I have to say manufacturing. A lot of what drives good management practices is being large, being around for a while, being open to competition. China has, and having educated employees and China has those inputs. So a lot of their manufacturing firms in particular are big. They're competing ferociously with other companies. They actually, China's education systems, churning out vast numbers of engineers. and they've been operating now for a while.

I suspect at this point now, Chinese manufacturing management is pretty good, actually. It's harder to tell in other sectors, particularly those are not internationally comparable. You know, they're financial services. Who knows, it's much. That's harder to evaluate. But typically, if you want to look for well-run companies,

you know, it's size, levels, high levels of competition, open to trade, educated employees, no family firms, where it's handed down by primogenitor, you know, the eldest son inherits it. If you, you know, go into the sectors that don't have these issues, then you tend to see very good management. And China typically tick most of those boxes of manufacturing. Over 20 years ago, your Stanford colleague, Frank Fukuyama, wrote a book on trust.

And he basically said, well, China will never have successful large firms in the way that Japan does because there's not enough trust in Chinese society. That seemed plausible at the time, yet obviously it's turned out to be wrong. I mean, what did we miss about China? since you emphasize trust and corruption and ability to delegate authority without too many bureaucratic checks and balances. And ex ante, China seemed bad on all those things. And yet, Chinese big business has done pretty phenomenally well. A lot of trust, I think, derives from rule of law.

And so in China, again, I mean, this is getting sensitive into politics, but there's rule of law around political system, which I really don't want to comment on. But there's rule of law around things like contractual enforcement, which turns out. to be important for trust between firms. So, you know, if you tie Le Cowan set up a company and give me a contract for three years with providing ball bearings, I'm going to go and put a bit of money into R&D and improving them set up a process. If you then, you know, say, after six months, I've changed my mind, can I see you and get the money back? And if I can effectively do it through the court system, I can trust you. So that's maybe a kind of odd concept of trust. It's not based on some, you know, cultural, religious thing. It's based on the fact that the legal

system works. And if you look in, for example, the world value service measures interpersonal trust, trust measured there is highly correlated with the effectiveness of the legal system. So some of the lowest countries in the world in terms of trust are some of the, you know, the African countries whereby the legal systems in chaos because they're undergoing civil war and the highest countries are like Norway, Sweden, North America. So I, you know, currently in China, the rule of law is applied to commercial contracts, I think is reasonable. I'm not an expert, but you don't hear endless stories of, you know, scandals and corruption, at least as commercial contract go.

And I think that's what enables these large firms to grow. When we've collected survey evidence, you know, in reverse, we definitely don't hear endless stories of managers ripping off firms and stealing ideas, which is a big problem. So just to reverse it around, what happens in countries with very weak legal systems where you can't trust anyone is you hire your family members. So if I own a set up a company and I can't trust any outsiders, I start to stuff it full of, you know, sons, daughters, brothers, brothers-in-law, sisters, sisters, sisters, and aunts, uncles, etc. Now, that's good because I can trust them. But the problem is, you know, these people aren't

naturally the best managers to run the place. And of course, as I get bigger and bigger, I'm running out of good family members. So do I appoint a second cousin or that pretty incompetent, you know, younger son of mine? And, you know, you can imagine the tradeoffs that are going on. But it means that unless you have a proper legal system and, you know, which generates trust, it's very hard to grow large firms without professional managers. How do you think about trust and management in England versus trust and management in Scotland? I don't know if my wife is a Scot. Yes, of course.

My mom is Scottish. So I don't think they're that different, actually. I mean, having now lived in the US, even the US-UK difference, I don't think is enormous. Having, you know, increasingly as I travel around the world, you realize that there are huge differences between northern and southern Europe that strikes me as quite striking, actually. You know, England and Scotland are very similar. We effectively have the same legal system, you know, the same educational standards. My mother-in-law, who's in Glasgow, I should send to this podcast, will probably kill me for saying that.

But, you know, the Scots, as you'd point out, I've had some of the most successful, you know, members of British, you know, the kind of British government, like Gordon Brown and various prime ministers. They've overrepresented, but I don't think they're very different. I think, in fact, in reverse, they're really pretty similar. But the Scots have done much better fighting against the pandemic in the public sector. If you look at globally known brands, I know England has a greater population, but it seems to do disproportionately better than Scotland does. So it seems to me the two cultures are not that similar across critical margins.

Maybe there are small differences in an absolute sense, but those compound into large differences in final outcomes. It's an interesting point. The Scots also voted what I would say is the right way on Brexit. They're against Brexit. I mean, I'm going to be very open here. I was against Brexit because Britain leaving the European Union, I think is bad economically for the UK. And I think it's kind of this whole concept of being a little England and they're looking in in, inwards.

Scotland voted against Brexit quite resoundingly. And it's true that they've handled the pandemic much better. Why that is, it's not clear. I mean, I regularly talk to my mother-in-law in Scotland. They, in some ways, they seem to be more educated, at least as far as I'd sit in the way they vote. Their OECD measured levels of education are not higher. I'm not aware of any other striking differences. I think I like Nicholas Sturgeon, who is the, I think is what's called the first minister.

She's effectively the prime minister of Scotland. She's done a very good job. She locked down faster in Scotland. I think that's why they dealt with the pandemic sooner. Again, on the pandemic, I'm not enough up to the news on England versus Scotland, living in the US to give more of an answer. But I am aware the Scots have done better on that, and they certainly did better on Brexit. Does Scotland have a different cultural notion of hooliganism?

you know about the famous old firm rivalry, Celtic Rangers, you probably think no. You know, the two Glasgow, you know, I know in Scotland I really spent vast about my time in Glasgow. I don't think it's caught. I wasn't expecting, Tyler, I think, to be asked about Scottish football hooliganism, but as far as I'm aware, no. I mean, the interesting thing, by the way, on technology, one of the issues that afflicted the UK was hooliganism. And, you know, there's kind of various elements of it. One was just, you know, fighting and violence. But another one was racism.

And both of them, technology has been fantastic at combating. Just on, you know, on both of them cameras in the grounds, ID cards, online. There was an incident just over the weekend. I was looking just this morning about the racial comments made against a Crystal Palace football player that the police checked through online and turned out to be a 12-year-old boy in the west of Midlands making this stuff. But just in terms of the ground, technology is improved. attendance at sports games because of this, we can stamp it out. And that's something that doesn't show up in productivity figures. So another concern you could have, and there's being a

big debate in terms of productivity, is it the case that the quality of life has risen in ways that we're not measuring it? I could get into that debate. I think the answer is primarily no, but you could make that claim. And, you know, hooliganism has been pushed back a lot by technology. If policy uncertainty is so important for the macro economy, pre-COVID, why was the reign of Donald Trump just fine for the American economy because there was high uncertainty. I woke up every morning not knowing what would happen or what would be said. I'm not sure exposed that uncertainty was realized until COVID, but in fact it was realized on a massive scale. Yet Exante, the uncertainty didn't seem to have much of a negative drag. Yeah, Donald Trump, in terms of

economic performance, how would you assess it? Before COVID, he, you know, it was fine. You could some ways be slightly, I mean, again, I'm not a Trump supporter, so definitely doing me wrong. You could be mildly positive on it and saying, look, he took the Obama boom and continued it. And as expansions go on, maybe you think it's harder and harder to keep that expansion going. Growth didn't pick up, but it also didn't slow down under Trump. So that would be a passing grade. It wouldn't be fantastic. It wouldn't be terrible either.

One thing that aided growth under Trump was the corporate tax cuts. There's another political uncertainty in changing his mind all the time. and honestly, a lot of bad policy with reduced growth under Trump. Net, it seems to net it out to about zero. It was no higher or no lower than in Obama's second term. So the policy uncertainty was a negative, but there were other things he did that were positive. It's also true that under Obama,

there was considerable policy uncertainty because things like the debt ceiling debate in the fiscal cliff. And who you blame is less obvious there. So Congress was fighting. You know, the president, Obama, wanted to pass various pieces of legislation. and couldn't. The same thing is true now, of course, so we have a mixed control of Congress. I think Trump made it a lot worse, you know, to fault him quite explicitly, he just changed

his mind and he also didn't listen to advisors. So when he talked to firms, it's very hard to predict which way policy was going to go because a lot of decisions didn't seem entirely thought out, rational, predictable, I don't know what words you use, but firms would complain about, we didn't see this coming and, you know, he changed his mind on tweets. And that, by the way, U.S. physical investment even before COVID was not great. But that could be intangibles, right? Yes. I mean, the stock market is doing well.

Yes, but the stock market does not reflect the U.S. economy. The stock market, for example, right now is 30% high tech, which is only 7% of U.S. jobs. And also, when interest rates drop because the economy slows, it makes the stock market go up because it's suddenly a relatively better investment. So I think it's the stock market and the state of the U.S. economy are only weekly linked. Maybe take the 1960s, which is one of the golden errors of macroeconomic growth, many wonderful things about it. It seems policy uncertainty was quite high. There was the Cold War.

There was the Vietnam War. There was the Civil Rights Movement, not fear how it would turn out. There were riots in cities all the time. We were on the verge of major changes in regulatory policy, right? Like the environmental movement. So anecdotally, very high policy uncertainty. Things proceed just great, it seems, or no. You know, this is why long run measures are actually useful.

It's very hard. When you talk to people, they often raise different eras, as particularly more or less uncertain. And often it's driven by, you know, their own personal experiences. And there's actually a phenomena. I mean, it's interesting you raised the 60s. It's actually a phenomenon to think the past was more certain than the present. Because you see the past as having happened.

You forget all the alternative scenarios that could have been. So just on data, the 60s in terms of stock market volatility were quite low, in terms of macro volatility were moderately low. There was the whole great moderation. And the 18, 70s and 80s were very volatile macro growth, but the 60s were reasonably calm. In terms of our index, economic policy uncertainty index,

where he scraped newspapers, it didn't appear to be particularly high levels of uncertainty. So you could argue newspapers, you know, in that era, it wasn't clear how completely open they were. Watergate was kind of opening the floodgates of being more transparent.

But I don't see, in the evidence I've seen as the 60s, a period of particularly high policy uncertainty. So you're right, those incidents happened, but in other areas like domestic economic policy, again, I'm going off newspapers, but on average, in stock market reactions, it doesn't seem to be pretty particularly high. I mean, the two great spikes in the stock market volatility, by the in the 60s, with the Cuban missile crisis and the assassination of JFK. We're speaking in July 2020. Given that there's so much working at home going on right now, how long will it take before tech company productivity

declines as people grow frustrated or disconnected or they become too restless, it's too hard to bring on board new hires. How much time do we have before things really start to fray? Great question. Just to be clear, my thoughts on working for them in the short run, working from home, for those of us that can, just to be clear, only something like 40% of Americans can work from home. But for those, but that accounts for something like 50, 60% of GDP because they tend to be a higher earning individuals. So for those of us that can work from home, the evidence looks like in the short run that increases productivity as long as you've got reasonable conditions like proper internet and a room, your own exclusive room to work in.

The big question, you know, that's research. I've been, you know, I had an old paper looking in China and we showed very large increases in why I call short run productivity from people working in call centers. The big unknown in which is little evidence I'm working and I know other people are looking at this too, which is what's the impact on longer run productivity, which the concept of come back the beginning of the podcast is about kind of creation and innovation. So lots of claims, including, you know, Steve Jobs before he passed away, made several comments about, he wanted people to be in the office. You know, you have to be there for the new ideas come up from

water cooler discussions and meetings and one-on-one stuff. And obviously, under COVID, that's all stalled. So none of that will really show up right now. You know, you can get away with three to six, maybe even nine months, probably of not radically creating new things. But in the long run, I fear there'll be a drop in, say, patenting in 2021, 2021, 2022 because of this. And a question is how firms respond. My guess is, so I'm talking to a lot of US companies, is they will return partly to the office. So I think in the long run, working from home will be fine because we'll be in the office three days a week and two days a week at home.

So that's kind of the best of both worlds. I don't think you need to be in the office five days a week to be creative, but you do need some time each week with colleagues. So I'm not too worried now. What I think will be problematic is if we're in late 2021. we were still all 100% working from home. Then I would really worry about impacts and productivity. So your long-term co-authors should be those who are at Stanford or Berkeley,

but your short-term co-authors can be anywhere. I know my co-authors are just all over the place. I was going to say one of the things I really miss about working home is going to seminars and conferences, and particularly kind of, you know, the two last conferences I went to before lockdown. One was in Mexico, Itam, and one was in Melbourne at Monash University. They're both fantastic because they were small. And I got to basically talk to everyone there.

And that's the kind of thing that generates for me, co-authors is talking to someone of the quirky idea that comes up with something. So oddly enough, most of my co-authors are not at Stanford, which seems to disobey my own rule. I don't know why that is. Mostly I have overlap with them physically at one point or another. They're former students or former colleagues, like when I was at the UCLA or LSC. Steve Davis, I worked with a lot, and it's at Chicago.

I never physically overlap with him. You know, two are they like Ivan Afara Zhaji Lin. I met them at Ohio State University. If you can do it, why can't tech companies do the same? Okay, so let's take Ivan and Zauji Lin from Ohio State University. I first met them physically. I went to give her a seminar at Ohio State University. I sat in Zanji's office for half an hour.

We kind of got excited about a research idea. That was the critical meeting point. I'm not sure what would have happened if we'd done it remotely. And after talking to him, I thought, you know, this guy seems great. It was a really interesting idea. continue to communicate by email. So my thought is that it kind of matches roughly what a lot of Silicon Valley types say is the initial spark or idea is much more effectively generated in person.

Often it's over lunch or over coffee. So this is the sense in which productivity now, so I've been running masses of surveys under working from home to try and get the sense of how people are feeling. And both firms and workers are overwhelmingly positive about working from home. But that's now, I mean, again, to be clear, that's July. and we're kind of three to four months into the lockdown. My theory is if it were full time working for him five days a week for another six to nine months,

it's going to be much more discontentment. In fact, I saw that in China. When we did the C-Trip study, people were working from home for nine months. And towards the end of it, it started to really grind and drag on. That was more about loneliness, but there's the other issue is in terms of being productive and being creative. For our final section of the conversation, I have a number of questions about your own productivity. This is called the Nick Bloom production function. Are you ready?

Go ahead, thank you. Now, most people at top five schools in economics, as you know, also have PhDs from other top five schools. But Nathan Nunn has a PhD from University of Toronto, and your PhD is from University College, London. What had made you an outlier in this regard, and what do you think have been its advantages and disadvantages for you? I, you know, for me doing my PhD at UCI was extremely fortunate.

Oddly enough, I've had this discussion of a lot of people that are applying to Stanford's PhD students. I'm not sure if I effectively sales or undersells Stanford, but there's tradeoffs when thinking about grad school. It's true if you go to an elite grad school, you're surrounded by a fantastic cohort and have great faculty. On the other hand, it's hard to work often with faculty because there's so many other students around.

At the time, I was at UCLA, I was doing my PhD in the late 90s. The number of other PhD students was very thin. It wasn't a big program. mostly there's a mix. Many of them were not interested in ultimately going into academia. So I was one of the few students that was focused. I mean, there were a few others. Don't get me wrong. They were like five or six in my year, but there's a much smaller cohort, say, compared to Stanford, but there's 25 a year. As a result, it was much easier for me to work with faculty. So, you know, folks, not just faculty at UCLA, but others through the IFS. So people like, you know, Richard Blundell, John Bunnreen, and Rachel Griffiths, Frank Windmast, Steve Bond. These guys were sitting around, you.

Lucy channels. I remember she was sitting right on the other side of the desk from me. I'd speak to Lucy as a grad student. It's fantastic. This was someone that'd been out or Rachel for, you know, five, ten years. Having that exposure is great. If I'd been in an enormous cohort of 25 of us per year over six years, I never would have got that. So were the top five schools overrated for economics graduate study? I think the question to ask is what's the value added. So remember, the top five schools recruit by far the best students. I know Stanford ranks the students and we tend to get those to, we make offers to those at the top of the list. We do pretty well out of that. We typically get, you know, pipped by MIT. So the question is, what's the value

added? And it's never been obvious to me what that is. I suspect it's positive, but I'm not certain. And it's definitely not uniformly positive. For me, almost certainly it was a better off having gone to UCL was a fantastic outcome for me versus anywhere else. And because I got to work with all these people early on. I was also, I'd just say, very lucky because the IFS at that era was big into what they called microconometrics, which is basically using panel data, which turned out to be exactly the way to go. So I was kind of fortunate. I mean, I was clearly fortunate. I just happened to be in a university. It was on the rise at the time. And you began your career at the British Institute for Fiscal Studies. How did that shape your subsequent research and how you think? Was that a mistake?

Was that a wonderful start to have? It's, again, highly unusual, yes? Yeah, the IFS was great. I, when I finished my, I did a master's at Oxford. I wasn't intending to go into research at all, actually. I applied for a lot of investment banks and other, I applied for IT jobs. I mean, I remember getting an offer from BZW, now kind of long-closed British investment bank to go work in the IT department and thought,

very seriously. So, you know, all over the place. I took this job at the AFS. Turned out to be fantastic. One is it really inspired me to get interest in economics. They answered, you know, what I would call pub economics questions. So what I mean is in the British sense, there are questions you can talk to your friends in the pub about, which are the same ones, frankly, that, you know, the New York Times or anyone, they're kind of not obstruse things like what happens in this model when alpha goes to seven, but more like how would, you know, increase growth rates. So the RFS was very much about inspiring me to do this stuff. And it was also entirely empirically focused. So again, that was in an era where empirical economics wasn't so dominant. It is much more dominant now. But so I just basically focused on data. And I was lucky at the RFS, I could. could do a part-time PhD. Just to be clear, when I started there, it was not a PhD student.

And they had a program encouraging people to go do part-time PhDs at UCL. So from there, I then went to start my PhD about nine months after joining the RFS at UCL. So I was oddly kind of an accidental PhD student. It was not something I ever had in mind. And what do you think it is in either your personality or your background that led you to take these unusual paths? Because again, there's somewhat atypical, as you know. Yeah, I mean, at the office at some point, I left and went to work in McKinsey. I went to the UK church. Also atypical, right?

Most people just go straight through, research, research, research. I was clearly very lucky. So I wouldn't advise probably my, certainly going to work in McKinsey, as in leaving your PhD and going to a non-academic job, you know, on average is not a good path. I was just extremely fortunate that I managed to get back into academia after us. I wasn't there for that long for, you know, under two years. And I was fortunate that people I worked before were running a research center. so John Van Rina, particularly the CP, took me back as what's called a research officer.

I mean, I was, I was like a kind of suited up RA. And then I started working on two areas. One was management. The management one turned out to be a fertile area to look and just because there was not much data and uncertainty. I honestly was, again, fortunate on timing. Because when I started looking at it, it was during the period of the great moderation. So when I was working on uncertainty, I was looking at things like 9-11 as an enormous

uncertainty shock, started to get into the topic. But, you know, business cycles were kind of, quiet, people weren't working on that that much. And then suddenly, of course, 0809 happened and then COVID. So in hindsight, I wouldn't advise that path. The issue is, you know, it's like first and second order stochastic dominance. It's, on average, the path I took was probably a less, you know, good path to take. It turned out for me individually due to circumstances and good luck. It worked out well. Now, your dissertation was on the topic of adjustment costs. Is there a lens through which I can read a lot of your subsequent major topics as actually all being about

adjustment costs, speeding up progress in science, copying management productivity techniques and why it's so hard. The effects of uncertainty, it's hard to adjust to it. Are you still working on adjustment costs? Yeah, you know, this kind of, it's like my first academic love was adjustment costs. It seems strange to say that. I remember Bob Hall saying he went to some NBR event and saying there was a huge shouting match about adjustment costs. And he said, how can anyone get so excited about, you know, Bob who has some famous papers on adjustment costs? It's kind of funny. How can anyone get so animated and excited about something so boring? And, you know, Bob and I, many others have worked in it. I got really interesting.

I realized halfway through my PhD, it was hard to excite other people about adjustment costs. I'd honestly start talking to people. Again, coming back to the pub, economics thing, my friends are meticulous about it, and their eyes would start, eyelids was like drooping. They were just boring into tears. And that's how I kind of ended. up morphing to look at uncertainty. So I realized if you have high adjustment costs, as in it's expensive to hire someone and far or invest and disinvest, uncertainty is really costly because you can't change your mind. But yeah, it has colored my thinking a lot. I was trying to think of, I'm blanking what it was, but the other day I was talking to someone about something to do with

management and talking about how it's a big issue of adjustment. That's right. I think about working from home. So just to be clear, under COVID, with social distancing working from home, I think this is going to last for another, you know, let's say a year. It's hard to know. If after a year more we are still social distancing working for, we've been in that regime for up to 18 months. And a lot of firms are going to have adjusted individuals to that process. And you can call it inertia. You can also think of it as adjustment costs, but this is why I think a lot of what's happening now is going to stick because of that. And yes, in some senses that has colored my thinking. And just you personally, relative to your level of talent, are you a person of high or low

adjustment costs when you need to adjust. You know, as we get older and older, it feels like adjustment costs become higher and higher. You know, I have these three areas I'm working on, I guess, innovation. I started working on management and uncertainty. The two, I guess I started working more recently. I mean, innovation just, again, this is a random thing. Years, I mean, I don't know how long ago it was. I had a summer internship and I'm paid internship at the ministry long gone in the UK

called the Department of Trade and Industry to do a project looking at patents. I mean, it's just like 30 years ago. I remember pulling up all the data on patents and that kind of interest, innovation, stuck. I tend to think I built up so much knowledge and interest in, particularly manager and uncertainty innovation. I tend to mostly focus on that. Although recently through, you know, fortuitous luck is working with another couple of co-authors. Again, I've never overlap with Fattie Givenen and Sergio Salgado, looking at, you know, inequality in firms and skewness and other topics. I mean, for me, I really like to read broadly rather than deeply. It's It's an odd thing to say, but every Monday, for example, a Sunday night, the National Bureau of Economic Research has their vast email of all the recent papers.

I tend to try and scan every title and abstract. I read the papers a lot. I like The Economist in The Economist magazine. It's good. It's kind of often been a source of ideas, actually. We were talking before the call. I listen to your podcast. Actually, listen to a lot of podcasts because I try and go out for a walk or a run for about an hour every day.

I'm mostly listen to podcasts. I'd say, well, if I'm getting too tired, I have to switch on to music. But yeah, I think for me, that's been helpful for coming up with new research, I do. And what do you think will be the next different thing that you do? It's not just an extension of current work. Jeez, that's hard to say. My best guess is, as you should say, the other thing that's really helpful for me is working with co-authors will be some, you know, bright, sparky co-author grad student would

suggest we should look at X and, you know, maybe they're not that interested in. I say, no, that's a great idea. And, you know, maybe at some point it turns into a collaboration. Often, or I'm giving a seminar, a lot of great ideas come from just, you know, just for those that don't go on the academic seminar, the way the academic seminars work is, you know, because at GMU, not that long ago, but you go and give a talk and then normally you get meetings in the morning and the afternoon. So a classic day would be you turn up at 10 a.m.

You have half-hour meetings and then at lunch and there's a talk in the afternoon and then dinner. And what I really like is those one-on-one meetings because you're talking to lots of people for half an hour. And I find them mentally really tiring because you're like fully on. And I actually, whenever I meet people, I go to their website, look them up for half an hour, 20 minutes beforehand and really try and learn about what they work on. It takes a lot of time. But it's, I find it really valuable. And that's the great source of ideas. So I'm personally also suffering in the sense of productivity. As I mentioned, I think the US economy is from working at home full time because those one-on-one meetings have stopped.

And my own production function in some ways of continuing current projects is fine. I can do that. But I do feel that if this carries on for another year, I feel like the US economy are going to suffer a little bit in terms of struggling to come up with new ideas because there's not so much one-on-one discussion. I'm not randomly meeting people. So I can easily Zoom with current people I know on, but it's much harder to come up with random people at seminars.

You would have gone to, but clearly help. Nick Lume, thank you very much. Tyler, thanks very much for having me. That was great. Thanks for listening to Conversations with Tyler. You can subscribe to the podcast in iTunes, Stitcher, or your favorite podcast app. And if you like this podcast, please consider rating it on iTunes and leaving a review. This helps other people find the show.