Plain English with Derek Thompson - Is Hybrid Work Doomed?

Episode Date: October 14, 2022

Stanford University professor Nicholas Bloom joins the show to talk about how the hybrid work revolution is going, and how the weakened connection between work and home continues to change where Americans live, how they travel, how they spend their time, how they raise their kids, and even how much time they spend combing their hair (survey says: less!). If you have questions, observations, or ideas for future episodes, email us at [e-mail]. You can find us on TikTok at www.tiktok.com/@plainenglish_ Host: Derek Thompson Guest: Nicholas Bloom Producer: Devon Manze Learn more about your ad choices. Visit podcastchoices.com/adchoices

I'm Yossi Salick, and I'm the host of Bansplain, a show where we explain cult bands and iconic artists by going deep into their histories and discographies. We're back with a brand new season at our brand new home, the Ringer podcast network, tackling a whole new batch of artists, from grunge gods to power pop pioneers to new metal legends and many, many more. Listen to new episodes every Thursday, only on Spotify. Today's episode is a check-in on the future of work with perhaps the academic expert. that I trust more on this subject than anybody in the world. I think a good way into this topic today is to begin with some data. So there's a firm called Castle, Castle with a K, which manages the software that people use to swipe into office buildings.

And since 2020, they have tracked the number of people returning to offices in America's largest cities. So leading the way in return to office right now are the big Texas metros, Austin, Houston, Dallas. Even there, all of them are down more than a third from their pre-pandemic normal. But maybe most significantly, in the big coastal cities, Los Angeles, Washington, D.C., New York City, San Francisco, San Jose, Philadelphia. Fewer than 50% of white-collar workers are in the office.

Remote work is still a big, big thing. These numbers are higher than they were a year ago, and that's because a lot of companies have moved to the sort of to the second inning of the remote work, The hybrid work inning. This is sometimes called the three-two model. That's three days in the office, two days at home. But in the last few weeks, I've noticed this widespread anxiety about hybrid, this widespread fear that this is an arrangement that just won't work. Last month, Ian Bogost, a professor and tech writer with The Atlantic, wrote a very popular, very widely read article called Hybrid Work is doomed. He predicted that over time the office is going to exert this gravitational force, this undertow that will eventually pull workers back into the office. And hybrid work itself will collapse under the weight of its own contradictions. The future, therefore, is not this muddle in the middle, not this three-two model, but something more like everybody rushing back to office buildings. So is hybrid work the platform technology of the future of labor? Or is it just doomed? Today, I'm very excited to be.

bring you the Stanford professor Nick Bloom. I consider Bloom to be the top research expert in remote work trends in this country. Unlike people like me who parachuted into this subject in 2020, he has been studying and thinking about these questions for decades. And unlike people like me who just sit around and talk about this stuff, Professor Bloom runs a survey. He asks thousands of workers, hundreds of managers, what do you actually think about remote work? What do you actually want? How is this changing your life? How is it changing where you live? How you travel?

How you spend your mornings? How much time you spend on grooming? How much time you spend caring for your kids? Your commute time. My goal in this episode is to explore how, if the hybrid work revolution survives, it will touch on aspects of U.S. economics, innovation, and work far beyond what we imagine. I'm Derek Thompson. This is plain English.

Nick Bloom, welcome to the podcast. Thank you for having me on. So one of the things I love about your work is that you talk to employees, you talk to managers, but you also research this in randomized control trials. So in July this year, you published the result of a very clever study of 1,600 engineers, marketing and finance employees of a small, of, excuse me, a large tech firm. And this firm allowed people born on odd birthdays to work from home. on Wednesdays and Fridays,

and they kept the even birthday employees full-time in the office, sort of a lovely way to randomize this experiment. So what did you find from this RCT? Yes, exactly. So, you know, it's very hard to know how effective work from home is because normally people choose to or they're thrown into it because of the pandemic. And, yeah, we took 1,600 basically grads. So think of the, you know, he's probably much like your listeners,

you know, their professionals, finance, marketing, IT. we found three or four key things. So the first is most strikingly, they were much happier working from home. So you can get this either from surveys. So when he asked them on job satisfaction, work life, balance, stress levels, they're all significantly better

when they got to work from home for two days a week. Or probably more tellingly, the quit rates, they fell by a third, by 35%, which is an enormous drop. So that was, that thing. jumped out, and we've seen that just a backstep a bit in survey data, country after country that people report they value the ability to work from home a couple of days a week at about

the same as a 7 or 8 percent pay increase. So it's a pretty major perk. So happier workers, lower quit rates. You also found that remote workers worked more hours, which I think is a very interesting reflection of the fact that work is getting leekier. Our work days are becoming a little bit more like weekends. We can take time off. But also work is leaking into our weekends, too. And you found this. You found that weekend work is increasing for remote employees, which I think is going to get a lot of nods from people listening to us, this idea that if you can do your work from anywhere, well, it turns out you can also do your work at any time. So let's jump straight into the controversial stuff here. Jason Furman, former chief economist at the White House, frequent guests

in the show, had a very interesting response to your research. He said, it's bizarre. that economic research tells us that work from home is good from productivity, but also most managers and CEOs seem to dislike full work from home. So it's like someone has to be wrong here. Either the research is wrong or the bosses are wrong. So, Nick, who is wrong? Great. So first of all, I'm a big fan of Jason Furman and a lot of his work.

What I go to, there are three types of ways to organize this. So one is fully in person. and about 55% of Americans have to work fully in person because they've got no choice. So like anyone in McDonald's or Chipotle or in Transport, Entertainment, etc. So then you're only looking at the other 45%. And for them, there are two ways to organise it. One is hybrid where you're coming in, let's say, two, three days a week, working from home two, three days a week.

And the other is fully remote. I think fully, I'll start with hybrid. Hybrid, for professionals and managers, is almost entirely a win-win over coming in five days a week. So looking at the research, there are four big benefits of hybrid. One is employees are happier. Two is they're more productive. Three of it saves a bit of space and four it can support diversity initiatives. And I'm not going to go through them in detail, but there are four big upsides. As long as it's well run, there's pretty clear there aren't major downside. So hybrid, as in again, to be clear, coming in two, three days a week has dominated coming in full time.

the much trickier case is fully remote. Now, fully remote has some clear additional upsides, but also some clear downsides. And you're balancing off some pretty big numbers on both sides. So when you talk to firms, I've talked to a number of CEOs of fully remote firms, and notably, they're all in tech. But they say, look, the big upsides is you get rid of the office. It's about 20, 30 percent of the wage bills, a big saving.

And secondly, you can hire internationally. And for tech, you know, global talent's a big thing. But then say, look, there's some major downsides, though, which is, one is it's much harder to mentor people. So if you've got an organization that has a lot of 20-somethings, that's a real challenge. And secondly, it's harder to be creative. You know, problem solving can be tough when you're not in person. It's harder to build culture, et cetera. So I think if I was to go through it, for professionals and managers, hybrid clearly dominates coming in five days a week.

But fully remote is a bit of a choice, and it's not obvious. And I think some firms, notably in tech, which tend to have slightly less entry-level workers, more kind of more experienced workers will go fully remote. Other firms pretty much everyone outside of tech and some tech companies like Apple, Google, Microsoft are going to stick with hybrid. I have two responses to that, an agreement and a disagreement. So where I agree is that I think hybrid work and especially fully remote work is going to expand the relevant labor market in a way that.

probably allows for better fit over time, better fit for workers and better fit for managers. Like, just tell a quick story, if you're hiring for a great programmer job, it's easier to find a great programmer. If your labor market isn't just like the tiny little zip code that your office is based in, but rather potentially the entire time zone, the entire country, the entire continent, the entire world, if you can literally hire from anywhere, it's more likely you're going to get extraordinary talent to fill that position. Now, here's where I have my hang up when it comes to hybrid work. In your research, you found that roughly 20 to 30% of workers would prefer zero days in the office,

while about 20% of workers would prefer all five days in the office. This is one of the reasons why you say most of these companies should move to something like a three-two hybrid model. three days in the office, two days out. That seems like the appropriate compromise. But here's the thing. Imagine if I polled 100 people, and I said, do you like chocolate ice cream or vanilla ice cream? And 20 of them said chocolate, and 25% said vanilla.

And I said, great, it's going to be chocolate vanilla swirl for everyone. It's like, wait, half of this crowd said they just didn't want swirl. They didn't want that other flavor. So I'm worried that hybrid is going to suffer from like a swirl problem, that it turns out that up to half, if not more of the people who are being forced to work hybrid don't want this arrangement at all. Are you worried about this chocolate vanilla swirl problem for the future of hybrid work? So, you know, I'm very happy to talk about ice cream. So yes, we are on the swirl policy. The reason for that is when you have teams, basically people need to be on the same work. from home cadence within the team. So just if I step back, think of the reverse. Think of a team of 10 people and two of them are working from home all the time. Three are on hybrid. I don't know. The other five are coming in. You know exactly what will happen. You'll get real problems of cliques.

Meetings will happen in the office. If people zoom in, fine, but then, you know, the meeting ends and they still carry on over lunch in the corridor. There's plenty of research. In fact, I have it from an earlier randomized control trial of what's called presenteers and bias. And so in an earlier RCT, we randomized people into working from home four days a week versus coming in full time. And the folks that were working for them four days a week, their promotion rates, once you control performance, dropped by a half. And it was like a massive drop.

Wow. And when you went to ask managers, they said, well, look, partly it's, you know, to be honest, we're kind of forgetting about them. You think of it as a form of discrimination and we could maybe do better. But partly, they're not coming in. They're not really exposed to what's going on. They don't know some, you know, sensitive personal issues that would, help for management, firm strategy, etc.

So when you talk to companies, they're very unkeen to have teams, whereby some folks come in and some don't. I mean, a second reason beyond presentiers and bias is, if you're the folks that are coming in three, four days a week, but your colleagues aren't, it's kind of annoying. You talk to people that are operating what's called disorganized hybrid where you're all coming in two, three days a week, but on different days, they're saying, you know, I came in on Monday, but half the office was empty. A lot of my colleagues went now.

I spent much on the down Zoom. At the end of the day, I'm thinking, why did I commute in and out just to spend all day on Zoom? So what it really points to is for firms, there's a massive payoff for at least team by team for having consistent policies. So that when people are in, they're all in together,

you can meet in person, have big meetings, lunches, client events, etc. And when they're home, they're all home. And that means that having some meetings,

vanilla and some eating chocolate, as in some fully at home, some fully in the office doesn't really work. It's actually not good for performance because people aren't connecting properly and it's also causes presentiers and busts. So where we are now is if you think of, just take Apple, big company Apple, they start the pandemic of 150,000 employees. I think what Tim Cook did was about right. He's basically going for the midpoint, which is typically, I think initially it was three. It's now two days a week in the office, three at home. that's kind of the average of what employees want. Of course, there are some people that would love to be fully remote.

If they feel strongly enough about it, maybe they could set up teams in Apple that are fully remote teams, all those folks will move on. There are others who would want to come in five days a week. I think at least for an inherited stock of workers, which have every preference in it, you're probably best off picking something in the middle that's best for productivity.

And I'm aware that a lot of people on either extremes are not happy, but it's kind of like imagine doing that, But rather than two flavors of ice cream, there's 27 flavors of ice cream. I have strong views. And in the end, vanilla turns out to be everyone's second or third choice. You're kind of saying, well, look, I get that a lot of people, you know, but they wouldn't choose vanilla, but they're not so radically far off it. And we're going to go with that.

And it turns out to work pretty well. Speaking of present-tis, you have this idea that, or there is, I think, this idea in the news media that workers mostly want to work from home while managers mostly want them in the office. And that is the tension. The worker says, I want to stay. The manager says, come in, come in. But it was really interesting. Maybe one of the most interesting details or factoids in the entire presentation that I read of yours

is that among young people under 30, just 24% of them say they want full-time remote work. That is the lowest of all groups. And in fact, none of the groups, none of the age cohorts, prefer to work from home every single day. This question specifically about young people. Why do you think young people in your surveys are the least likely to say they want to be remote full-time? Yes. You're right. You know, the media, I don't know who to blame.

It's like, you know, journalists only write what people like to read. So, you know, it's like negative stories sell, sensational stories, sell. I get it. You know, there's incentives all around. But the fact is, you're correct that a lot of stuff in the media plays on this story that all the employees just want to work for my own forever and managers want them in. That's really not true. And as you point out, if you look at 20 to 29, three courses them want to come in. And the reason is mentoring is so much better in person, socializing is so much better in person.

So I have tons of students every year from Stanford to go get jobs and I talk to them after they leave. I stay in touch with a bunch of them. And those that got jobs in 2020 and 21 that were fully remote, you know, it wasn't a great experience. They were saying it's lonely, it's isolating, it's hard to learn. I remember one of my students, she went to work for a tech. firm. She was saying, I don't even know stuff like how many hours people work, and I can't use

some of the software because it's hard to learn. So when you look at young people in particular, they're the folks that want to come in. Typically, they want to come in three to four days a week. They like maybe one to two days a week of work from home, which is a bit less stressful. You know, you don't have to get dressed. You don't have to commute. If you look at older folks, so people in their 30s, particularly 40s with young kids, that's the demographic that's more happy more in favor of work from home. Although even as you point out with that group, the majority don't want to work from home full time,

but they're more like three and a half days a week. They want to work from home. Okay, so I've said something pessimistic about the future of hybrid work. Let me say something optimistic about the future, which is that I think it's vastly underrated in most discussions of remote work, that even if you hate this, even if you're a person who thinks that remote work just does not work, period,

guess what? It's going to work a lot better in the next few years. This is a technological revolution. And the first inning of every technological revolution kind of sucks. The prototype always sucks. The early tech always sucks. And as you've pointed out, as many, many times, the share of new patent applications supporting work-from-home technology has doubled since January 2020.

So the technology here should just get much, much better. Work from home should get more appealing, more productive. Why don't you just tell me about some of the technology? or tech spaces that you're most optimistic about in terms of improving the work from home experience. So there's a, I mean, I'll get you're exactly, I'll give you a bunch of examples then try and highlight one that maybe everyone's not aware it's changed so much. So there's things like holograms, virtual reality, augmented reality. You know, one I was talking to a firm the other day about, which is about video cameras.

And they're saying old school, so pre-pandemic, there's normally one camera in a conference room. and when you have a team of five, six people they're in a video call, often the cameras, you know, be knocked or pointing in the wrong direction or you might get somebody's ear or half their head or tiny, you know, it's just poor.

And they said, look, in the future, we're going to have a couple of things. Cameras will get a lot cheaper and higher quality so they can zoom in and out easily. And we're going to have much better software like AI that's going to control which cameras being used and what they're showing. And think about a sports match.

If you go watch a football game on TV, It's like amazing. You feel like you're there and you see incredible footage. That's because they have 10, 12 cameras at least, and including one on a blimp hanging above it, that they're using and they're switching between. And of course, they have humans doing that. Now, will AI ever get as good as that?

No, but it's going to get dramatically better, at least, and it's going to mean, look, it's going to be far easier to have someone connect in to different groups. I mean, another very local example, by the way, just to end on, is Zoom. So I updated my laptop back in April 2020, and in fact, my new laptop crashed had some problems. I had to pull out my old one. And my old laptops restarted, and it was on Zoom.

The last thing it must have been using was Zoom back in April 2020 when I closed it down. And I looked at it and it was like, wow, this looks so bad. The whole version of Zoom, you forget that things like being able to move the boxes, how many boxes they are, a lot of the functionality, the chat functions, a bunch of that stuff that we take for giving has dramatically improved, even in Zoom, just because it's incremental, but it's way better now.

If anyone can find like a January 2020 version of Zoom, you'll discover how radically improved it is versus that. And the same is true for teams. If you use teams, actually, when they started the pandemic, you only had four boxes. I mean, now it seems insane that that was the case, but they went to nine and then 49 pretty quickly throughout 2020. I think that in 10 years we're going to look back at the work from home experience right now and think it's absolutely pathetic.

I mean, I think just the eye position alone, this idea that our computers constantly make it look like we are looking away from the screen when we're talking to somebody. I feel like that in particular is the sort of thing that we're really going to fix. And I know some people are also interested in in replacing the computer, the laptop as the locus of work with the TV, just allowing people to sort of work from their couch and look at their television and have built into the smart Samsung TV some kind of working function so that you can press a button, talk to someone really, really quickly while watching TV and then turn it off. You know, there are downsides to this. It means that a lot of people are spending a lot more time looking at screens at home. I think that's not entirely a good thing, but I think that a lot of these technologies are going to get significantly better than the next decade. You're sir, I keep thinking, a huge screen with somehow a bunch of tiny cameras impregnated into it so that whenever you're looking at it has your eye level. So if you look at somebody's eyes, their head, I find this all the time, it's so human to want to look at somebody's face, but you realize when you're looking at their face on a Zoom or a team's call, you're actually, as far as they're concerned, looking down, you know, looking at their waist or something.

There's so much of this stuff. And these are fixed. I mean, they're not totally straightforward. You need to change the position of cameras and maybe put the middle of screens. But all of this stuff, you're exactly right in five to ten years. Because work from home, the number of people work from home has gone up five to six X. The market size is exploding. So every hardware and software company, including a lot of startups as well.

They're like focusing. It's like Lord of the Rings. It's like Sauron's gaze is focused on it. It's like the entire economy, a lot of innovation is getting. is suddenly changed direction and focused on work from home. And the rate of progress is just exploding because of them. Let's talk about how remote's going to change the country, because this is not purely a labor phenomenon.

This is a movement that is changing where we live, what offices look like, what cities look like, what urban economics looks like. And you've done a lot of really interesting work on all of this. So first, very simple question. The donut effect. This is your coining. Tell us what is the donut effect.

Yeah, exactly. So Homer Simpson always loved donuts. So it's easy to call something a donut effect as they find, you know, easy to remember. What it says is something that's so true, I've seen data in the US. And in fact, for many cities around the world, is over the course of the pandemic, a lot of folks moved out from the city centers into the suburbs. So just to explain why, you know, you're a banker in New York or a techie in San Francisco. You used to have to go into the office five days a week. Now you've only got to go in two days. days a week. What are you going to do? Well, for a lot of these folks, particularly, they have young kids, they may think, look, I'm going to move out to the suburbs. I get a bit more space. I actually get a home office. And we are seeing that happen en masse in big cities around the world. And for listeners, it's having, you know, it's directly affected all of you. Maybe it's not obvious because it's affected rents and property prices. So we looked at Zillow. And what you see in Zillow is property prices across the US generally have gone up because interest rates are low,

although that may be about to stall, rents have been going up, but there's been a big gap opened up between city centres and the suburbs in terms of the rate of change. So, for example, in the largest American cities, rents have gone up by about 40% in the suburbs, but have gone up by only about 10%

versus pre-pandemic in the city centers. In fact, in San Francisco, and in New York city center rents on average, no higher than they were back in the beginning of 2020. Whereas out in the suburbs, you know, if you look at the suburbs of San Francisco, have almost doubled. Right. And with the donut effect, just really quickly, it is largest for, the effect is largest for the largest metro areas, is that right? Or small cities seeing a similar

effect? No, exactly. So if you look at the biggest city, so in America, that city is above about a million. So Seattle, Boston, the kind of bottom size range of that, these cities have seen big donut effects. When you go to small, if you look at like, say, Chattanooga or something, you know, that's a quarter of a million people, even if you move out to the suburbs, you could still commute pretty easily. So there isn't so much of a sense of a core in a suburb, but for big cities,

and it's not just the US. I was looking at data the other day from a credit card company and looking at expenditure, which is another way to track where people live, and you see it's all shifted out to the suburbs away from city centers. And what about moves between cities? So you see, you know, the donut effect to certain extent,

I think you can explain by saying, look, you take someone who lives in I don't know, Brooklyn or Manhattan, the pandemic strikes. They're in their early 30s. They've wanted to move out of downtown New York eventually, and the pandemic accelerates that decision. So they move to New Jersey, Westchester, upstate New York, et cetera. But what about moves between metros? I think there were some hopes in the early endings of the pandemic that you'd see some evening out of talent. Some so-called Zoom towns would be created that would benefit from the outflow of workers from New York City and Los Angeles and San Francisco. Are you seeing that yet in your data?

Yes. This is joint work with Arjun Romani. And in fact, Arjim was showing me yesterday, the very latest data where we have incredible data where you have the full address of Americans per month so you can trace all their moves. What you see is of the folks that fled city centers during the pandemic, about 60% of them, this is from big cities. 60% went to the suburbs of the same big cities. So if you left central New York, you stayed in the area, probably because your employer is still there. But there's around 35% that went to smaller cities. So these are the folks that are maybe there's Zoom towns, but they're saying, look, I'm just going to leave New York altogether. I don't know. I'm going to go to Cleveland, Ohio, or wherever. And then the remaining

5% went to very rural areas. And that 5% is small in number, but for certain rural areas, those that are basically nice, you know, beach towns and stuff, they've seen a pretty large influx. even 5% of the population in city center is quite a lot, even 5% of the flow out is quite a lot. But mainly, they've gone to the same big city suburbs, but you're right, a large bunch have gone out to smaller cities that have benefited. And how is this affecting big urban economies? Because, you know, empty offices mean fewer people in central business districts. That means fewer people with less foot traffic in front of retail windows, which means less

spending in downtown areas. I mean, tell me if you're seeing... in your data a significant reduction in spending per person in downtown areas? So, yeah, there are three groups that are losing out from this. One group is folks that own office space and... Oh, we're getting to them in just a second. The second group is retail. So if you look at people that own retail space and retail stores, in city centers, they have definitely done badly. I've seen data on it. I don't know per person. I just know total spend. That is significantly down. The numbers that are still typically 20, 30 percent

down versus pre-pandemic. Most of that is shifted out to the suburbs. So it's not that the expenditure's gone away. I mean, the American economy is doing pretty well. It's just shifted location. So, you know, think of for San Francisco from downtown has shifted out to East Bay, you know, North Bay, etc. The third group, I should point out, the group that I feel,

in some ways, the worst for because the most problematic is mayors. You know, the governments of big cities. Because they've basically seen their tax base erode, a lot of businesses, and tax expenditures moved out, at the same time that their cost for things that mass transit have gone up because no one's using it. So you think of Bart or the New York subway, you know, they have pretty fixed costs,

but ridership is down and looks like it's permanently down by about a third. So now they're running on large deficits. They're going to the government. We need money, otherwise we're going to have to close the whole thing down. And the government is saying, you know, there's the government in New York or San Francisco, these big cities, like, well, hang on,

our tax revenues way down. And so it's not surprising people like Eric Adams and London Breed are trying to get people back to city centers. And it's not that tax revenues disappeared. It's just moved out of their area. It's moved out to the suburbs. So there are plenty of suburban cities that are obviously doing really great. They must have an amazing bonanza of tax money. And it's basically reallocating some of that tax money from the suburbs to help subsidize city centers.

Otherwise, we're going to be back to that 1980s problems of, you know, higher crime rates because we're going to struggle, to pay for police, for public services, etc. I think it's been so interesting to look at the last few months for most of 2022, the people who were most outspoken about remote work were not CEOs who, you know, through the great resignation and during a period when quits were high and unemployment rate was low, they seemed very reluctant to scream at people to tell them to come back into the office. But it was the mayors who were making fun of remote people. And I think Eric Adams, mayor of New York, was, you know, it might have been him or someone,

else saying that people who worked from home, you know, whatever, they, they smelled and they never got out of their PJs, and it was pathetic to never leave your house. You know, and it's been stunning to see, yeah, they are the ones who are really feeling it, because if you're a CEO, yeah, it kind of sucks to not have people back in the office. You're a manager. It sucks to not have people back in the office. But as long as they're being relatively productive, you're not seeing anything implode. Whereas if you're the mayor of a city, you are seeing your tax revenue, your tax base implode,

which is really serious. One more question here. I mean, how nervous are you that we are headed back to something like a 1970s scenario where remote work empties out to a certain extent, urban economics, which means that you have persistently higher crime in downtown areas, which has a kind of flywheel effect where it further discourages some people from living in those downtown areas. Do you see any of those flywheel effects happening right now, or is it way too premature to say that we're seeing a 1970s redux in urban economics? No, I am worried. And you're right. You know, CEOs are probably net up on it.

Look, for most firms, hybrid work from home has improved, you know, increases profits because it reduces labor costs and puts up productivity. And you're exactly right. Eric Adams, London, read these folks that people who are at ground zero, the most negative impact then, plus people that own a lot of real estate in city centers, but you know, they don't tend to get listened to too much. If you take my local city, San Francisco, actually, yesterday's having lunch with a friend of mine. He went to downtown, he had to meet his lawyer to do some stuff. And he said the place was absolutely deserted. It was like the

middle of the week. And partly it might be crime, partly a lot of its work from home. But those are kind of related when cities empty out and police budgets are stretched. You can see wise, you know, there's less people around, there's less resources to stop crime. In some ways, you're kind of nervous. On the other hand, I should note that in 2019, before the pandemic, the big concern for cities was the affordability crisis. So being out in Silicon Valley, for Stanford University, for example, it is really, it still is. It's very hard, often to hire because it's so expensive to live here. And for firms and people in San Francisco, if you're in tech, sure, you can pay big bucks, but, look, if you're trying to hire,

police or, you know, fire or nurses or retail, or basically essential services or, you know, core workers, their salaries that you typically offer just don't cover the cost of accommodation. So these people have these horrendously long commutes or, you know, just can't take these jobs. So I feel a bit mixed in some ways, you know, this is the solution to the 2019 affordability crisis. A lot of techies and bankers are moved out. Property prices have fallen. I think as long as the city doesn't go bankrupt and is continue to support services,

I think it's probably good. The only risk is, you know, like New York almost went bankrupt in the 70s or stopped. Some Californian cities have gone bankrupt. They then cut back on services. And it's very problematic if you're cutting back on things like schools. There's a real long-run cost to that. So that's why I raise the fiscal situation for the government. And again, it's not that the money's not there. The money, the tax takers just moved out to the suburb. So there probably needs to be some kind of redistribution. Well, one of this is really strange is that, you know, you would think that rents would come down in places like Los Angeles, New York, but instead, the rent, the average monthly rent Manhattan just hit a record of 5,000. The typical rent is up nearly 50% since the pandemic in a lot

of other metros, especially in Florida, like Miami and Tampa. Because what's happening is that you are seeing this donut effect, but it's coinciding with a run on houses, a period of low vacancy rates among apartments and homes, and this period of general inflation. and high spending. So it's a very strange position where you are, in fact, seeing people leave downtown areas, but you're also not yet getting the benefit of significantly lower prices for living in those downtown areas,

which is a little bit odd. I want to move on to offices. So people are moving. Offices are not moving. Offices cannot move. They don't have legs. And I really wonder how long the situation can hold because I look at some data like from Castle,

which is a Cal, is a company that tracks swipes of fobs at 2,600 buildings in about 140 cities. And it finds that employees are not anywhere close to returning to offices. No major city is above 60% of its fob swipe levels pre-pandemic. DC and San Francisco are in the mid-30 percentages. That means the majority of work days in these major cities are now work from home days. I want to know whether this is in line with your data, because if it's totally off, that'd be interesting to know.

But more deeply, what our city is going to do if their downtown commercial real estate is in a permanent depression? Yes, so mostly, yes, it's in line with our data. So again, we're surveying, what, 10,000 Americans a month. Offices are kind of ground zero for work from home. So of our survey panel, of the typical American worker, only 40% of them work in offices.

So to be clear, the other 60% work, you know, retail, factories, schools, hospitals, etc. If you look at the 40% of working offices, that's like working from home on steroids. So every number you can think of roughly doubled. So rather than go from 5 to 30, that's gone from more like 10 to 60%. And then that matches up exactly the castle data way. Basically, you've lost about half of the footfall into offices. Person days are roughly half that it was pre-pandemic. In terms of the impact, yes, there has been a retail apocalypse. So if you are, you know, Starbucks in the center of New York or San Francisco, your trade is down, probably by 50% because most of that trade came from office workers and they

just aren't coming anymore. In the long run, there's going to be a lot of closure of retail, particularly food and drink. That's just going to kind of basically have to downsize until supply meets demand. A lot of offices will probably shut down or their leases, valuations would drop a lot until, you know, they're, you can imagine creatives or I mean, the rents dropped by a half or two-thirds. You know, you can find people moving. They just take more space. That's particularly true for bad quality offices.

So if you look, there's what's called A-B and C-grade. And A-grade's like really nice, new, you know, clean. That's something fine. That's recent. What's in problem is B and C-grade, which tenants don't really want. In the long run, I guess, you know, to the extent you can convert this to residential, that's great. The problem is it's not always that easy.

Think of an office building doesn't have enough bathrooms for residents. But some of this at the margin is going to convert. Some of it's just going to be more spacious, lower density. We may find other uses for it. You know, it is a struggle. I don't, you know, the people in some ways are losing it. The owners are a lot of retail and office buildings. That's mostly big investors held by, you know, endowments and our pensions, to be honest,

hold that stuff. I don't feel that bad. I feel worse for the small businesses that have obviously gone out of business, that have kind of lost custom. But I think cities are pretty robust. They will mostly react. Economies are very flexible. The only areas, as I mentioned earlier, I'm concerned about it's government budgets.

And if partly government needs to, government, to be honest, in city centers, is going to need to cut on expenditure a bit as well. So I was talking to a mass transit agency the other day. And they were saying our unions are predicting we'll be back to 100% of ridership in 2023. And that is just not happening. And the sooner we adjust, the easier it is because doing a bang, bang, adjustment when you go bankrupt, is far more painful than saying three years from now we've got to be here. For example, let's only replace one and two people that retire or leave so that we can slowly downsize.

I wonder, and I'm not going to torture the food metaphor here, but if you might see a mini-donet effect where that retail franchise that is shut down in the Central Business District moves to the residential area of that downtown area. So, for example, I live in Washington, D.C. Not going to give up my home address here, but I live in a residential area of downtown D.C., which is there's not a lot of businesses or corporate offices around me.

And a lot of new restaurants have opened up recently, some taco places, some coffee places. So could you see, like, imagine like little mini donut effects where the residential areas of cities get a little bit frothier in terms of their commercial economics? Totally. No, no, that's exactly. So when I mean city center, we're defining city center is very narrow. So it's like seven or eight zip codes, right? Think of New York as right in kind of central southern Manhattan. And exactly. So anywhere that's residential has much more, as you pointed out, much more spending path throughout the day. There's a bunch of work from home workers. And these folks are still often going out for lunch and ordering on DoorDash and Uber or Grubhubh, whatever, and going out for dinner. They're now just doing it near where they live. And so again, this activity is not going to. way, it's just moved from, you know, core city centers out often mostly to the suburbs of the

same big city. So there's probably not much less expenditure across New York as a whole, but it's moved out to the boroughs from, you know, away from central Manhattan. I want you to tell me to close the most interesting, surprising knock-on effect of the remote work revolution that we haven't touched on. I will, by way of nomination, say that I was totally fascinated by the slide in the report that you sent me that found that personal grooming has declined by about one-third for those who work from home. But when you split it up by gender, for women, daily personal grooming time has fallen from 30 minutes to 18 minutes, while for men is fallen from 25 minutes to 20. And that means that men in your survey spend more time

on personal grooming during work-from-home work days than women. Like, that was kind of stunning to me, be like, you know, shaving time is something that they just, you know, necessarily keep. But as a result, men have more personal grooming time only under work from home conditions. That was a surprising little nugget. Anything else like that that we didn't touch on that you think is just a fascinating, surprising knock on effect from this massive phenomenon that we're talking about. I think one thing I'm interesting. I think, you know, in the longer one we may see is effects on labor supply and demographics. So I've been working on working from home for almost 20 years.

And various things got me into this. I mean, one of the thing is I'm one of four kids. Both my parents worked. They used to try and work from home a little bit to deal with childcare in the school holidays and use that plus holiday. And it's clear that for, you know, couples where both couples work, child care is a challenge. If you can work from home, we may see, you know, pushes up fertility rates a bit. it's easier to have kids.

It could also change things like retirement ages. There's a lot of older folks. Again, actually interesting, thinking my parents that didn't really want to stop work entirely, but found going into work, commuting in and out every day for five days a week, was pretty tiring. And so if you suddenly say, look, rather than do, you know, whatever it is, eight to five, five days a week plus commute,

you can work from home for three days a week, or pay you, I don't know, half the amount. A lot of people would jump at that and much more phased out graduate autonomy. To be honest, is what professors do. If anyone's wondered about, you know, some very ancient professors at universities that seem to be taking it easy, they are. I mean, professors kind of gradually phase out. So I think that for students, there's some students that may work a little bit, they could do it remotely, people with, you know, both men and women that are looking after young kids. So the other angle, not just demographics, I think, is on labor supply, you could

see a few percentage more people working and really happily working because they're able to do two, three days a week. Because when you have the concept of work from home, which is called flexi place, turns out to be highly correlated with flexi time, the ability to choose your hours. And so the fact that two of them go together and that flexi time is what people that are kind of marginal on working really value, that's a potentially another huge long run benefit. I also think very relatedly that this is going to have really interesting implications. for travel. I mentioned the horrifying word leisure. There are other horrifying words that are sometimes employed here like workcation. But the point is that as long as you're going to have this sort of

blending of work and leisure time, it is easier to take those four-day weekends, go to the beach, go to Charleston, whatever, and keep your computer on you on the Friday and Monday on either side of that four-day weekend, or the Monday or Tuesday of that four-day weekend. Keep your computer. computer somewhere near you and be somewhat tethered to work even as your spouse and children are on a de facto vacation. I think that you're going to see a lot more of that kind of blending, too, which could theoretically be pretty stimulative for the entire travel industry. It's amazing to think how many things can change when you went tether work from home. And I really appreciate all the work that you've done on helping illuminate all of those implications. So Nick Bloom, thank you very, very much.

Thanks so much for having me on. It's been a great conversation. Thank you for listening. Plain English is produced by Devin Manzi. If you like the show, please go to Apple Podcasts or Spotify. Give us a five-star rating. Leave a review. And don't forget to check out our TikTok at Plain English underscore. That's at Plain English underscore on TikTok.