Pivot - Future of Work: Why Remote and Hybrid Are Here to Stay

Episode Date: March 27, 2024

It's Part 2 of our Future of Work series. Kara and Scott chat with Stanford economics professor and the "Guru of Remote Work," Nick Bloom. Bloom explains why he thinks flexible work has been good for both employees and companies, and why he believes it will increase in the coming years. He also shares a few predictions. Follow Nick at @I_Am_NickBloom Follow us on Instagram and Threads at @pivotpodcastofficial. Follow us on TikTok at @pivotpodcast. Send us your questions by calling us at 855-51-PIVOT, or at nymag.com/pivot. Learn more about your ad choices. Visit podcastchoices.com/adchoices

Support for Pivot comes from Virgin Atlantic. Too many of us are so focused on getting to our destination that we forgot to embrace the journey. Well, when you fly Virgin Atlantic, that memorable trip begins right from the moment you check in. On board, you'll find everything you need to relax, recharge, or carry on working. Buy flat, private suites, fast Wi-Fi, hours of entertainment, delicious dining, and warm, welcoming service that's designed around you. delicious dining, and warm, welcoming service that's designed around you. Check out virginatlantic.com for your next trip to London and beyond, and see for yourself how traveling for business can always be a pleasure.

Hi, everyone. This is Pivot from New York Magazine and the Vox Media Podcast Network. I'm Carol Swisher. And I'm Scott Galloway. And this is our special three-part series on the future of work, where we look at the business and technology trends that will shape the workforce, employment, and the very nature of work. Today, we're going to do a deep dive on remote work and what the future of your workspace looks like. Some numbers to get us started, about 20 to 25% of workers in the U.S. work from home,

at least part of the week, according to Goldman Sachs. The percentage of U.S. companies offering flexible work increased from 51 percent to 62 percent during 2023, according to Forbes, though 38 percent of those businesses still prefer their workforce to be in person. We're going to talk through all of this with our guest who's been studying remote work for the last 20 years. Nick Bloom is an economics professor at Stanford Business School. He's been called the guru of remote work. Nick, welcome, guru. Thank you for having me on. Great to be here. No problem. I've been doing remote work for the last 20 years, but we can get into that in a minute. You've written that the return to

office debate is over. Work from home is here to stay. Why do you think remote work has won the battle, so to speak? Basically, it's profitable for companies. I mean, that is the bottom line. We live in a capitalist economy. Why is it profitable for companies? If you look at hybrid, which is when you come in, say, two, three days a week, turns out that doesn't really affect performance, but has a big reduction on turnover rates and turnover is expensive. If you look at fully remote, where you're at the office five days a week, turns out that's usually cost effective

because you don't have to pay for offices. Imagine a back office staff typically in this setup. So someone doing HR, payroll, data entry, you don't have to pay for office space for them and you can hire them nationally or globally. So in both cases, it's really profitable for firms to go to hybrid or fully remote. Sorry, we hear a lot about the success of the hybrid model.

Where does that fit in? Hybrid's about 30% of people. So I'll give you some rough numbers. Of Americans, 60% never work from home at all. So they come in every day, think essential services, you know,, retail manufacturing. Another 30% are hybrid. So I'm at Stanford.

Most of my students, MBAs, execs are in this hybrid world. You're typically going in three days a week, Tuesday, Wednesday, Thursday, home Monday, Friday. And then there's a final 10% that are fully remote. That is mostly actually back office, you know, data entry, call centers, payroll, but there are some high-end tech coders, folks like that. So let's bring in Scott then, because Scott is a proponent of in-office work. Go ahead, Scott. Nice to meet you. I'm fascinated by this stuff. My sense is this is the change coming out of COVID. Everything's sort of, most everything's returned to normal except for this.

And I'm fascinated by the knock-on effects. And I'll list two, one economic and one societal. One, it strikes me that there's just going to be an enormous transfer of trillions of dollars in value from commercial to residential real estate. And two, I've said for people under the age of 30, I think it's a disaster because while we don't like to talk about it, relationships begin at work and young people need socialization. talk about it. Relationships begin at work and young people need socialization. So I see it as one, an enormous economic shift and two, really detrimental to the relationships and even the mental health of young people. And I'm curious if you agree with those theses. Yeah. So it depends what you mean by remote. So yes, young people tend to want to come into the office. I'll just give you an example. I actually polled my undergrads in Stanford. I have a class of 50 of

them and polled them. They said basically half of them want to work from home precisely zero days a week when they start their first job, and the other half said one. And the reasons they gave were like, I want to be mentored. I want to be socially, as you mentioned, Scott. And also they said, look, my apartment is not going to be very big. There's five of us sharing it together. You know, where am I going to work from home? I don't want to be in my bedroom. When you look at folks in their late twenties, particularly thirties and forties. So it's interesting. I asked my MBA and exec students this, and you get a very different answer. They typically say, well, they have kids. Exactly right. They want to be, want to be in the office three days a week, work from home two or two and three, and they say, yeah, I have kids. I have a spouse maybe at home. I live further away.

There are also some people that want to be fully remote. They may live far from the office, but the bigger thing is there's just an enormous mix. So it's not true most people want to be fully remote. A third of people do roughly not true most people want to be fully remote. A third of people do roughly, but most people want to go in typically two, three days a week. And for reasons you say, they want to learn, they want to socialize. They just don't want to go in five days a week. That's where the kind of the grind ends up being. Who are the, just a follow-on question there, but when you're talking about US commercial real estate, it's one of the largest asset classes in the world.

And when you look like, I mean, this really is a shock to that asset class. If people are coming in three days a week, that's at least mathematically a net destruction in 40% of the demand for certain types of this asset class. What do you think, what are the second order effects economically of people no longer going to these giant steel structures that, like the pyramids, we come to marvel at, but maybe, you know, may not use any functional purpose moving forward? What do you think are, if you were advising a hedge fund on the ramifications economically of remote work, what are the second and third order effects here? So yes, winter has come for commercial real estate. It's not quite as bad as you'd think. So the office, the typical office worker is in say three days a week. Turns out they all want

to come in on the same three days, which is Tuesday, Wednesday, Thursday. So this is what's being called the hybrid squeeze. But yes, it's still bad. There are some people that are not fully remote, and there are some companies that are shifting around. The big impact, what we see is what's called the donut effect. So big US cities, big cities around the world are seeing folks move out and spending, move out from the city center out to the suburbs. So take San Francisco, a city I know well, because I live nearby. downtown is really struggling. People are only going in, say, three days a week. They're spending less on lunch and coffee. A bunch of folks have said, I don't need to live here anymore if I don't need to come in every day.

So the suburbs are booming. So the suburbs are really up. It's the city centers that are struggling. And there's just been a kind of shift, a donut in the sense the center's gone soft, but the edges have done actually very well. Interesting. So you do think remote work numbers are actually going to increase totally remote in the next few years. You've described the trajectory of work from home as a sort of Nike swoosh curve. There's going to surge after a brief plateau. So certainly in the long run, it's going up. That's a pretty safe bet. The reason is the technology is getting better. So the number of folks working from home is up about five fold versus pre-pandemic so every hardware firm software firm think microsoft

google apple or the startups all the venture capitalists i talked about in the valley are very focused on better technology so right now you know we're doing this on riverside on small laptops that kind of you know they're so, so audiovisual. If you do five, 10 years from now, that's going to be massively better, maybe holograms, maybe 3D. That is going to make it more appealing and more effective to be hybrid and remote. So in the long run, the trend is very clear. In fact, we have data amazingly going back to work from home in the US, back to 1965.

So if you go back, looking back about 50 years, what you can see is it's been doubling roughly every 15 years. So it's been on a pretty steep long run upward trend with a huge surge in the pandemic. But I think that trend is going to resume in a few years to this gradual long run growth. So a lot of CEOs and company leaders continue to want their employees back in the office saying it's better for productivity and collaboration. Amazon's Andy Jassy wrote in a 2023 memo that collaborating and inventing is easier and more effective when we're in person. JP Morgan's Jamie Dimon has said that remote work doesn't really work for creativity and spontaneity. It doesn't really work for management teams. I talked to a bunch of young people and one of their CEOs did a similar thing and they said, and he was doing it from his house in Hawaii. He was ordering us around from

his house in Hawaii. So can you talk a little bit about this? Because if leaders don't want this, is it just there's going to be new leaders that don't care or do they have a point? No, they certainly have a point. So to be clear, most people are going to be hybrid. So tell you what, Andrew Jassy is doing at Amazon. So Amazon is having folks come in three days a week. And you know, if I owned Amazon stock, I'd probably do about the same. So you just don't need to be in five days a week. So you can get your creativity juices, your connectivity, your mentoring, if you're well organized and teams come in together for three days, the other two days, you save them the commutes, quiet, you can concentrate. So that's kind of where things have settled down, actually. If you look at managers, professionals that typically now are coming in three days a

week. Scott? So as a Gen X slash boomer that's run companies, I'll give you a reductive analysis and you tell me where I've got it wrong. My sense is that this is an enormous unlock for what I call caregivers, people taking care of kids, people taking care of seniors, because it frees up to sometimes two plus hours a day for them to care for other people or just take 15 minutes to go check on dad or the kids or whatever. A huge unlock. At the same time, I do think that, and it increases retention, just it opens up a whole swath of people who might otherwise decide to leave, or they decide to leave the corporate world later. At the same time, I do think you're really missing an element of productivity. And that is when I was running

companies, I would get eye contact with somebody and they go, I want to talk to them about something, grab them, pull them into a conference room, talk to them really quickly, as opposed to scheduling a Zoom call. It does strike me that the companies, there will be an outlier group of companies in certain services industries that demand everybody be in the office all the time, that shoot out the rest in front of the rest of everyone because of that creativity and that serendipity of in-person. What do you think of the notion that it increases retention, but there'll be a class of companies, really high-performing companies,

that see in-the-office mandate as a competitive weapon? So it's a good hypothesis. I'm certainly on board that you need some days a week in for collaboration communication. If you look in the data, so if you look at, say, the Flex Index, it's looked at US companies, including the S&P 1500. What you see is companies that are somewhat more remote are actually growing faster. Now, that's a correlation. It doesn't mean causation, because, for example, tech firms tend to be more remote. They tend to also grow faster as an industry.

But there certainly isn't any evidence that say hauling folks back into the office for five days a week. In fact, there was another study that came from Pittsburgh about full return to offices. Company performance doesn't improve after you haul them back in. What seems to happen is employees get upset and you see attrition rates go up. So I'm in favor of you know if it were my yeah i'm involved in advising i'm an investor in a few companies i'm totally on board with say two three days a week the thing i'd push back on is five days a week why do you

need people in on friday there's lots of evidence that people benefit from a bit of quiet time a bit of reflection um you know a lack of commute at least one maybe two days a week and that's where the uh tension is well let me let me just follow up on that i'll take the other side now or the more progressive view and that is i've noticed not a data driven but anecdotal evidence that there's a huge correlation between back to the office mandates and companies run by guys in their 50s who have someone else taking care of their kids and can afford to live near work. So yes, the Pittsburgh study is pretty fascinating. It said, look, we've looked at the RTO mandates for the S&P 500. There are 137 of them that have put them in place. They said, what do we find? They said three things. Firstly, they tend to happen when a company's doing badly.

So it's kind of, you know, things that are going wrong, you're casting around for an excuse and you blame it on work from home. They also said it tends to happen in companies with an older male CEO. So you're right on the numbers there. Fact two is they matched that up to Glassdoor data on employee sentiment. And not surprisingly, employees didn't like it, sentiment dives. More interestingly, their view on the manager's ability also drops. So they tend to be more skeptical of the ability of their manager. And in fact, three of their founders, they looked at performance after the RTO mandate and stock returns. They said it was flat. So it's not worse, but it's not better. So, you know, I kind of read that in the UPS and a few other announcements recently have felt a bit like this.

A company's hit a rough patch, maybe bad luck, maybe bad management. You know, the CEOs had one more roll of the dice. And that roll of the dice is to blame work from home and haul everyone back in and buy themselves another six months to a year. I think that's probably exactly true. It's an old guy who wants things the same. Let's take a quick break. When we come back, we'll talk about the impact of AI on remote work, and we'll ask the professor, the other professor, possibly the better professor, for a few predictions. Fox Creative. This is advertiser content from Zelle. When you picture an online scammer, what do you see?

For the longest time, we have these images of somebody sitting crouched over their computer with a hoodie on, just kind of typing away in the middle of the night. And honestly, that's not what it is anymore. That's Ian Mitchell, a banker turned fraud fighter. These days, online scams look more like crime syndicates than individual con artists, and they're making bank. Last year, scammers made off with more than $10 billion. It's mind-blowing to see the kind of infrastructure that's been built to facilitate scamming at scale. There are hundreds, if not thousands, of scam centers all around the world. These are very savvy business people. These are organized criminal

rings. And so once we understand the magnitude of this problem, we can protect people better. One challenge that fraud fighters like Ian face is that scam victims sometimes feel too ashamed to discuss what happened to them. But Ian says one of our best defenses is simple. We need to talk to each other. We need to have those awkward conversations around what do you do if you have text messages you don't recognize? What do you do if you start getting asked to send information that's more sensitive? Even my own father fell victim to a, thank goodness, a smaller dollar scam, but he fell victim and we have these conversations all the time.

So we are all at risk and we all need to work together to protect each other. Learn more about how to protect yourself at vox.com slash zelle. And when using digital payment platforms, remember to only send money to people you know and trust. Scott, we're back with our special series on the future of work. We're talking with Stanford professor Nick Bloom, who's been researching remote work for decades. AI is proving to be a double-edged sword when it comes to workforce, both creating and replacing jobs. I talk about

it endlessly. Talk about what it means for remote work from your perspective. Yeah, Cara, I think the group most at risk from AI are fully remote workers. So if I think of technology, I mean, I live in Stanford in Silicon Valley, so I see this all the time. If I think of technology, you can break it down into software and hardware. And the hardware to replace people like us is terrible. Like if you created a Nick robot, it's going to be vast and clunky and cost millions of dollars and terrify everyone because it just

doesn't look remotely human. But for the software, for the kind of actions and activities I can do, we're getting pretty good. There's a lot of stuff that can pass the Turing test. So what that means is if you're doing a fully remote job, that is relatively repetitive. Think call center, think data entry, think payroll. That kind of thing is a real risk of being replaced by AI. On the other extreme, if you're a manager, say coming in three days a week, maybe working remotely for two, I don't think you're at much risk in the near term. Because the kind of things you do, mentoring in person, taking people into side rooms, having team lunches, there's no physical robot that can come anywhere near doing

that. And by the way, coders, I've been talking to a lot of coders lately. A lot of this stuff will be done by AI coding itself. Anyone will beer from what, that's the big hope, presumably. The Wall Street Journal also had a piece the other week headlined, Americans don't care as much about work and it isn't just Gen Z. The article noted that while the labor market looks like it did before the pandemic, the nature of labor has changed profoundly with career and work not as central to people's lives. So it's kind of dovetailing into not being able to go into work and then not wanting to go into work and then not liking working. Yes, there's some evidence.

I mean, you know, you're reading the tea leaves here, but there's some evidence that Americans are less keen on working. If you look at working hours, they're trending down a little bit. People claim that the pandemic made us realize how mortal we are. I'm not sure how strong that is. It's certainly true. Americans work insanely long hours. If you compare us to the Europeans, we're working- Yeah, compared to Europe. We're becoming Europeans now, right? Yeah. And the crazy thing is Americans and Europeans used to work the same hours in the 60s. I don't know if people realize this, but in the 50s and 60s, we're on the same hours.

Americans took all of that growth, all that income and productivity we've had over the last 50 years and used it just to spend more money. We have bigger TVs, faster, larger cars and houses. Europeans instead use that to take a bit more time off. So Europeans are a bit less rich, but they have more holidays. And yes, I could see in the longer run, folks decide that they want to get paid a bit less and work a bit few hours per week. Scott? Do you have kids? Yes, I have four kids spanning, what, eight to 20. So a wide range of ages.

When they come into the work world and they said, Dad, I've heard you're pretty good at this stuff. What type of culture or company would you advise young people to look for and ultimately deploy human capital when they're young? What are the components of culture that you think young people should be looking at when they choose an employer? Well, I get asked this a lot. I actually have a number of undergrad advisors. Well, it's not just my kids, but students. I am generally steering them away from fully remote companies. So fully remote is great, but I suggest generally do that later in your career. I actually have one undergrad right now, she's doing incredibly well, has an offer from a fully remote company.

And I worry a bit. I worry about the ability to learn, to network, et cetera, if you're in your early 20s doing that. If you're in your- Mentorship. Yeah, exactly. Take another extreme in the other direction. You're 35.

You have three young kids. You're struggling to live in New York City because it's too expensive. You want to move out. You want to stay with the current employer. They offer you fully remote. That's now something that's seen potentially quite appealing. You've learned a lot. You have a lot of connectivity out of work.

It's the way to stick with the current job. So it's very much a life cycle stage thing. The other interesting thing, by the way, talking to companies is the tension I've heard from them a lot is they say, look, the 20 somethings want to come in and be mentored, but they need to be mentored by somebody. And the by somebody tends to be the early to mid thirties and forties. And these are the people that don't want to come in. And they're saying we have this real tension that, you know, somebody's got to do the mentoring

as well as being mentored. Yeah, that's true. The people that don't want to come in are the ones that should help them. It's work flexibility is what you're talking about, that people have to get in the mindset of, correct? The idea of being flexible. And work has not been the most flexible of places for most of my career, for sure. Although I have been almost fully remote forever,

just because I insisted on it. But is that like an asset for managers going forward, being flexible and not having answers? Or when you're talking to managers, what is the thing you would tell them? One is on working from home, I would probably set a schedule for your team. So if you're going to go hybrid, which is standard, I'd make sure that folks come in

on the same day. The three of us are working together. There's not much point Scott in on Monday, Cara Ewan on Tuesday, me on Wednesday, because we don't come in for the bagels or the office. We come in to see each other. So one thing would be just pick the same days. Say, I don't know, Tuesday, Wednesday. Intentional.

Exactly. What I call organized. The other is focus much more on performance and achievements and outcomes rather than inputs. So, you know, old style in the office management is desk watching. So if Scott's my manager, he's watching. I'm at my desk working away. When he walks by, is my screen on Word or is it on Champions League? You can't do that when I'm at

home. So what needs to be much more the focus on working from home is performance. Do I meet my sales targets? Is my output good, et cetera? That is best for the company. It also turns out to be best for the employee because it means if I'm at home on that day, I want to go pick my kids up or go to the dentist. I can do that and make up for it in the evening. So that's the big so what when I talk to companies, much more performance management, it's good for both sides and less desk and time watching. I just want to highlight that it would be so Champions League, and most importantly, Nick, who's your club? Who's your team? This will give away the date. My club is Tottenham Hotspur. They had a disastrous weekend. Spurs! All right. We're brothers from another mother.

Best venue in all of the UK. I'm sorry I interrupted you. Let him finish, Scott Galloway. Go ahead. No, no, no. I was about to say, I watched the Fulham match. It was just too painful. That 3-0 down, I was like, oh, my God. I haven't, you know, it's too bad.

All right. You two have to get back to work now. Stop this. Stop this ridiculous whatever you're talking about here. But this special episode is all about the future of work. I would like a prediction from you. What is your prediction where you see remote and hybrid work in five, 10 years or any old prediction you want to make, Professor Bloom? Other than Arsenal wins. It's top of the table. I'm sorry. Go ahead. Whatever that means. is top of the table.

I'm sorry, go ahead. Whatever that means. Interesting. So for the US, I think hybrid will grow. Hybrid is kind of the future coming in, say, two, three days a week, working from home

two, three days a week. Fully remote is less obvious. Initially you think, well, wouldn't fully remote also grow? The big threat to it is both offshoring. So if you're fully remote,

a bunch of these jobs may move to South America, but also, as we've discussed, AI. So my guess're fully remote, a bunch of these jobs may move to South America, but also, as we've discussed, AI. So my guess is we're going to see hybrid growing, five days a week in person shrinking, and fully remote is going to stay at about 10%. A big presence, but definitely a minority. Is there any economy that you think is going to really benefit that has the ratio of skilled workers who are English speaking to low wages should see a dramatic uptick as more as remote work gives their labor access to the market? I would guess if I had data that South American, Central American coders are doing really well, the number of startups I speak to that are taking Brazilians, Argentinians, Uruguayans to work, because they're in the same time zone. They've done really well. And, you know, you might think India, Philippines, etc.

They have very good language skills. Some of those India, Philippines jobs in the long run, I think, are threatened by AI. But certainly the ones that are higher end, which has been shipped down to, say, Brazil, I think is looking pretty positive. All right. Professor Nick Bloom, guru of Brazil, I think is looking pretty positive. All right. Professor Nick Bloom, guru of remote work, we really appreciate your time. Go Spurs! I like this guy. Oh, my God, stop.

You know, we could, Nick, are you making real money? You know, the Spurs are for sale. Do you want to put together a group of frustrated professors to buy a football club? All we need, I'm in for 10 grand, you're in for 10 grand. All we need is another 3 billion and boom, American professors own the Spurs. All right. Okay, professors who should be professoring. Go ahead. Sorry, Nick, you have the last 30 years, their support group tends to be a little bit older when I've been to matches than some of the success more recent. It's funny, whenever I've been, it's like a bunch of us, you know, I'm 50. I'm very typical of a Spurs fan.

It's harder to find 20 year olds because I haven't had such a- Well, I'm 49, but I still love the Spurs despite the fact that we haven't won a trophy. Stop it, he's my new friend. I can be who I want to be. Okay, okay. In any case, they can't have remote work.

So lucky them, the Tottenham, whatever the hells. Anyway, thank you so much, Professor Blum. Okay. Thanks very much, Kyra. Thanks, Scott. Thank you. All right. Scott has usually turned it into a sports situation, which I have no repertoire to respond

to you people. Anyway. You gave me a great idea. Literally, if I ever am in a position to buy a sports franchise, I'm going to call it the whatever the hell. The whatever the hell. That's amazing. What the fucks. That's a great name.

Mandacious fucks is what we should call it. Anyway, Scott, that's part two of our three-part series on the future of work. We'll be back with one more special episode where we're going to talk all about AI. We touched on it here. We're going to talk about it more. It is very important to the future of work, 100%. Now you can read us out. Today's show is produced by Lara Naiman, Zoe Marcus, and Taylor Griffin. Ernie Unertott is our sound engineer. He does a fantastic job. Also, thanks to Mia Silverio and Drew Burrows. Nishat Kerouac is Vox Media's executive producer of audio. Make sure you subscribe to the show

wherever you listen to podcasts. Thanks for listening to Pivot from New York Magazine and Vox Media. You can subscribe to the magazine at nymag.com slash pod. We'll be back next week for another breakdown of all things tech and business. Trust me, as the owner of the whatever the hells, if you are under the age of 30 or 35, before you collect dogs and kids, get into the office. It's a feature, not a bug.