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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 Houston Dallas.
Even they’re 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 percent 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 Revolution, the hybrid work inning, this is sometimes called the 32 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 in Tech writer with the Atlantic wrote a very popular very widely read article called hybrid work.
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 muddled in the middle.
Not this 32 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?
It just doomed.
Today, I’m very excited to bring you these.
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?
I was just changing your life.
How is it changing?
Where you live, how you travel, how you spend your morning’s?
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 us, economics, Innovation and work.
Far beyond what?
We imagined I’m Derek Thompson.
This is planning.
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, he published the result of a very clever study of 1600, engineer’s marketing and It’s employees have a small of excuse me, a large Tech firm, and this firm allowed people born on odd, birds days 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?
So, you know, it’s very hard to know how effective work from home is because normally people choose to of their thrown into it because of the pandemic.
And yeah, we took six 100 basically grads so think of the he’s probably much like your listeners.
You know that professionals Finance marketing.
It we found, you know, three or four key things.
So the first is most striking you they were much happier working from home.
So you can get get this either even from surveys or any ask them on, you know, 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 there quit.
They fell by a third by 35%, which is an enormous drop so that was that was that thing jumped out and we’ve seen that just to back, stab it in survey data for 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 seven, or eight percent pay increase.
So it’s a pretty pretty major part.
So have your workers lower, quit rates.
You also found the remote workers worked more hours, which I think is, Very interesting reflection of the fact that work is getting leakier.
Our work day is are becoming a little bit more like weekends.
We can take time off, but also work is leaking into our weekends to, and you found this, you found that weekend work is increasing for remote employees, which I think is going to get a lot of NOS when 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 the white Frequent guest on the show and 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.
Yeah, Jason Furman, a lot of his walk is what Why go through there are three types of ways to organize this.
So one is fully in person and about 55% of Americans, have to work freely in person because I got no choice.
So, like any one of, you know, McDonald’s which are partly or in transport entertainment, Etc.
So then you’re only looking at the other 45% and for them, there are two ways to organize.
It one is hybrid where you’re coming in.
Let’s say, two three days a week working from home to three days a week and the other is fully remote.
I think fully her, I start with habit.
It professionals and managers is almost entirely a win-win overcoming in five days a week.
So looking at the research, there are four big benefits of hybrid.
One is employees are happier to is there more productive three of its saves a bit of space and for 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 well.
Run there’s pretty clear there aren’t major downside so hybrid as in again to be clear coming into three days a week as dominated coming.
In full-time, the much trickier case is fully remote now familiar, right?
Has some clear additional upside, but some also, some clear downsides and you’re kind of, you’re bouncing off, some pretty big numbers on both sides.
So when you talk to Farms, you know, I’ve talked to a number of CEOs and fully remote firms or a notably, they’re all in Tech but they say, look, the big upside is you get rid of the office.
It’s about 20-30 percent of the wage because a big saving and secondly, you can hire internationally and for Tech, you know, Global talents a big thing.
And say look.
There’s some major downsides though, which is one is it’s much harder to Mentor people.
So you got an organization as a lot of 20-somethings.
That’s a real Challenge.
And secondly it’s harder to be creative problem.
Solving can be tough.
When you’re not a person.
It’s harder to build culture, Etc.
So, I think, if I was to go through it, hide it from 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 motor blind act, 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 and 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.
Overtime better fit for workers and benefit 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 it.
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 percent of workers, would prefer zero days in the office.
While about 20 percent 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 3-2 hybrid model three days in the office, two days out that seems like the appropriate compromise.
But, here’s the thing.
Imagine if 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, 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?
Very hard, very happy to talk about ice cream.
So yes we are, we are on this world 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 thing you’ve ever a team of 10 people and two of them are working from home all the time, 3 H & hybrid.
The other five are coming in, you know, exactly what happened, you’ll get real problems of clicks meetings happen in the office.
If people zoom in fine, but then, you know, the meeting ends and they still carry on over lunch and the corridor, there’s plenty of research.
In fact, I have it from an earlier randomized, controlled trial of what’s called presenteeism bias.
So, in an earlier RCT, randomize people into working from home for days, a week versus coming in full time, and the folks that were working for him, for days, week their promotion rates, once you control program, Formance drop by a half, it was like a massive drop where how and when you went to ask managers they said we’ll look partly it’s, you know, to be honest it’s what 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 young keen to have teams whereby some folks come in.
And some don’t mean a second reason.
Presenteeism bosses if you’re the folks that are coming in 34 days a week but your colleagues aren’t, it’s kind of annoying.
So you talk to people that are operating what’s called disorganized hybrid where you’re coming into three days a week but on different days there say you know I came in on Monday but the half the office was empty.
Lot of my colleagues Runners but much the down.
Zoom at the end of the day.
I’m thinking, why did I commit in and out just to spend all day on Zoom.
So what it really points just for fun.
Seems there’s a massive payoff for at least team by team for having consistent policies.
So that when people are in there, all in together, you can, you know, meet in person have big meetings, present lunches, client events, Etc.
And when they’re home, they’re all home and that means that, you know, that having some eating vanilla and some making chocolate, as in some fully at home, some fully in the office, doesn’t really work.
It’s at, you know, good for performance because people aren’t connecting properly and is also causes presenteeism boss.
So, where we are now is, You think of just take apple big company, Apple, they started to pandemic, the 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 is now two days a week in the office through our home, that’s kind of the average of What employees.
One 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 from move on there are other sort of Want to come in 5 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 and are happy but, you know, it’s kind of like imagine doing that.
But the rather than two flavors of ice cream, there’s 27 flavors of ice cream, they have strong views and in the end, vanilla turns out to be ever on second or third choice, you’re kind of saying look, I get that a lot of people, you know, but they wouldn’t choose vanilla.
They not so radically far off it and I’m going to go with that and it turns out to work pretty well.
Speaking of presenteeism, you have this idea that or there is think this idea, 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 was really interesting.
Maybe the one of the most interesting details or factoids.
And in the entire presentation, that I read of yours, is that among young people under 30, just Eighty-Four percent of them.
Say they want full-time remote work.
That is the lowest of all groups.
And in fact, none of the group’s, none of the age cohorts prefer to work from home every single day.
Specifically the 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.
Yeah, you know the media, I don’t know who to blame.
It’s like, you know journalist, Tony right?
What people like to read so You know, it’s like - story Sal Sensational stories so I get it, you know, there’s incentives around but the fact is you’re correct that a lot of stuff in the media plays on this story.
They’ll all the employees, just want to work from home forever and managers want them in.
That’s really not true.
And as you point out, if you look at me, 20:29 three-course 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.
Do their jobs and I talk to them after they leave us, then touch with a bunch of them.
And, you know, those that got jobs in 20, 20 and 21 that were fully remote, you know, wasn’t a great experience.
There 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 let you know.
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.
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 yet the commute if you look at older folks.
So people in their 30s, particularly for these are young kids, that’s the demographic, that’s more.
Happy in more in favor of work from home or they 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.
I want to work for him.
Okay, so 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.
It’s gonna 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 pointed out as many many times, the share of new Application 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 Technologies or text spaces that you’re most optimistic about in terms of improving the work from home experience?
So there’s a mean I’ll get your exactly I’ll give you a bunch of examples then Tron 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 affirm 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 with her 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 just 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 qualities they can do.
In and out easily, I’m going to much better software like AI is going to control, which camera is being used and what their show 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 any including one on a blimp hanging above it, that they’re using an S switching between and of course, they have humans doing that.
Now, we will a I get ever get as good as that.
But it’s going to get dramatically better.
At least in is going to mean Look, it’s going to be far easier to have someone Connect into different groups.
I mean another very local example, by the way just to end on is zoom.
So I yeah, I updated my laptop back near you know about in April 20 20.
And in fact, my new laptop crashed at some problems had to pull up my old one.
And my old laptops, we started and it was on Zoom.
The last thing I 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 Look so bad.
The old version, the zoom, you forget that things like, being able to move the boxes.
How many boxes they are?
A lot of the functionality of the chat function is a bunch of that stuff that we take forgiven has dramatically improved, even in Zoom, just because there’s incremental but it is way better.
Now, if you can if anyone can find like, you know, 20 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 pan, Emmett, you only had four boxes right 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 were going to look back at the work from home experience right now and think is 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 and Killer 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, that 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.
There are there are downsides to this if he’s 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’s that a lot of these Technologies are going to get significantly better than next decade your sir.
I keep thinking it on 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 some of these eyes that head, I funded some time on it.
It’s so human to want to look at somebody’s face, but you realize, when you’re looking at their face on a Zoomer A team’s call, your actually as far as they’re concerned looking down in are looking at their waist or 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 5 to 10 years because what from home.
The number of people work from home has gone up 5 to 6 x.
The market size is exploding.
So every hardware and software company including a lot of startups as well and like, focusing is like, Lord of the Rings is like, saurons, glad gaze is focused on it.
It’s like the entire economies.
A lot of innovation is Gaze is suddenly changed Direction and focused on what from home.
And the rate of progress is just exploding because of them.
Let’s talk about how remote 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?
So, how did Miss Simpson?
Always loved doughnuts.
So it’s easy to cook to go something a Fact is they are fun, you know, easy to remember what it says, it’s something that’s so true.
I’ve seen data in the US.
And in fact, the many cities around the world is over the course of the pandemic.
A lot of folks, moved out from the city centers into the suburb.
So just to explain why, you know, you’re a banker in New York or tacky and San Francisco.
You used to have to go into the office five days a week now you’ve only got to go into days a week.
What are you going to do well for a lot of these folks particular have young kids you may think.
Look, I’m going to move out the Suburbs.
I get a bit more space actually get a home office and we are seeing that happen on mass 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 u.s. generally have gone up because interest rates are lower though, you know, that may be about to stall rents have been going up.
But there’s been a big gap opened up between Dissenters in 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 percent versus pre-pandemic in the city centers and in fact, in San Francisco and the New York City Center rents on average, no higher than they were back in the beginning of 2020 was out in the suburbs.
You know, if you look at the suburb of San Francisco rental, almost double, right?
We and with the donut affected just really quickly.
It is largest for the effect.
As largest for the largest metro areas, is that right or small cities seeing a similar effect know, exactly.
So if you look at the biggest city, so in America that cities above about a million.
So Seattle, Boston of their kind of bottom size, range of that.
These cities have seen big going out of fact, when you go to small, you look at, let’s 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 census in a core and a suburb For big cities and it’s not just the US.
I was looking at day to the other day from a credit card company and looking expenditures and other 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 they do not affect to a certain extent.
I think you can explain by saying look you take someone who lives and I don’t know Brooklyn or Manhattan depend emic strikes.
They’re in their early 30s.
They’ve wanted to move out of downtown New York eventually and the pandemic accelerates that and so they moved to New Jersey Westchester Upstate New York Etc.
But what about moves between metros?
I think there were some hopes in the early Innings, the pandemic that you’d see some evening out of talents in 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, I should.
Yeah, this is Joint work with Arjun Romani and in fact I dream of show me yesterday, the very latest data whereby when 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 focus that bled City centers during the pandemic about 60% of them.
This is from big cities. 60% went to the suburbs of the same big city.
So if you left Central, New York you stayed in the area, probably because your employer still there but There’s around 35% the went to smaller cities.
So these are the folks that are maybe they’re Zoom times but they’re saying, look, I’m just going to leave New York altogether.
I’m going to go to Cleveland Ohio or wherever and then the remaining 5% went to very rural areas and the 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 because even 5% of the population city Center’s quite a lot to even five Center.
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 of gone out to smaller 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 are losing out from this one group is focused on office space and 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’re definitely done badly.
I’ve seen data and identify a person.
I just know total spend that is significantly down the numbers are so it typically 20-30 percent down versus pre-pandemic most of that has shifted out to the suburbs.
So it’s not that this And she’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 and North Bay, Etc.
The third group, I should point out the group that I feel in some ways, the worst book is most problematic is, is mayor’s here.
The government’s have big cities because they basically seen their tax base a road, a lot of businesses and tax expenditures moved out at the same time that their cost for things like mass transit have gone up.
Because No one’s using it to think about of 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 for he money.
Otherwise we’re going to have to close the whole thing down and the government is saying I you know, the government in New York or San Francisco these big cities like what hang on our tax revenues way down 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, has 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 Center’s, otherwise are 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 from most of 20:22 the people who were most outspoken about remote work, we’re not CEOs who threw 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 mayor’s who were making fun of remote people.
And I think Eric Adams, mayor of New York was might have been hammered someone else saying that people who work from home, you know, whatever that 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 setting to see yet.
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 not have people back in the office, but as long as you’re being relatively productive, you’re not seeing anything implode.
Whereas if you are 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 how nervous are you that?
We are headed back to something like a 1970s scenario.
Leo 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 now open 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 hear exactly, right.
London breed these folks that people who are Ground Zero the most negative impact then plus people are owned a lot of real estate in City centers.
But you know, they tend to get listen to too much.
If you take, take my local city, San Francisco and so yes, there’s having lunch with a friend of mine.
And he went to downtown, she had said he had to meet his lawyer to do some stuff and he said the place was absolutely deserted.
It’s like the middle of the week and partly.
It might be crime.
Partly are a lot of its work from home but those are kind of related when cities empty out and please, budgets are stretched.
You can see why it’s, you know, there’s less people around, there’s less resources to stop crime.
I in some ways you’re kind of nervous.
On the other hand, I should note that in 2019 before the pandemic, the big Sun for cities was the affordability crisis?
So being are in Silicon Valley, for Stanford University.
For example, it was 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 have a fire or nurses or retailer basic essential services or your co-workers, their salaries that you typically offer, just don’t cover the cost of accommodation.
So these people have these horrendous Honestly long commutes or units can 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 and 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 stop doing some California cities have gone bankrupt, they then cut back on services and that is very problematic.
Look back on things like schools.
There’s a real long run cost that.
So that’s why I raised the fiscal situation for the government and is again it’s not that.
The money is not there, the money, the tax take is, just moved out to the suburbs.
So the probably needs to be some kind of redistribution.
What were 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 percent 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 is 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 for living and there’s 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 castle is a company that tracks swipes of fobs at 2600 buildings in about 140 cities, and it finds that employees are not anywhere close to returning to office has Has no major city is above 60% of its fob.
Swipe levels pre-pandemic, a d.c. 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 a, this is in line with your data because if it’s totally off that be interesting to know but more deeply what our City’s going to do, if they’re downtown commercial, real estate is in a permanent depression, Yes.
So firstly yes, it’s in line with our data.
So again, we’re surveying, but 10,000 Americans month offices are kind of Ground Zero for work from home.
So of our survey panel up there, a typical American worker, only 40% of them work in offices.
So, to be clear, the other 60% working at retail factories schools, hospitals, Etc.
If you look at the 40% the work in offices there 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 for more like 10 to 60 percent and then that matches up exactly the castle data way.
Basically you’ve lost about half the football into offices person days, are roughly half that it was pre-pandemic in terms of the impact.
Yes, there’s been a new has been a retail apocalypse.
So if you are, you know, Starbucks in the center of New York or San Francisco, your Traders 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 Me 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, there can imagine creatives are artists a minute.
The rents drop by half or two-thirds.
You know, you can find people moving.
That is 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 grades like really nice new, you know, No clean, that’s something fine.
What’s in problem is B and C gray, which tenants are really want in the long run, I guess, you know, to the extent, we can convert this to residential, that’s great.
The problem is, is not always that easy, think of an office building doesn’t have enough bathrooms for residential building with some of this at the margins going to convert some of its 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, a losing at the owners are a lot of Retail and Office Buildings.
That’s mostly big investors held by, you know, endowments and power, pensions to be honest, hold that stuff.
I live for that bad that I feel worse for the small businesses that have obviously gone out of this kind of lost custom, but I think cities are pretty robust.
They were mostly, I react, economies are very flexible.
The only areas, as I mentioned earlier, I’m concerned about his government budgets and it’s partly government needs to go.
And to be honest, and City centres granita.
Cut on expenditure a bit as well.
So I was talking to a Mass Transit Agency other day and they were saying, our unions are predicting will be back to 100% of ridership in 2023.
And I was that is just not happening.
And the sooner we adjust these are is because doing a bang-bang adjustment and you go bankrupt as far more painful than saying three years from now we go to be here for example, lets you know, only replace one and two people that retire or leave so that we can slowly downstairs and wonder and I’m not Torture, the food metaphor here.
But if you might see a mini donut effects 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., how can I get 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 I 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, early.
So, but I mean City Center, we’re defining City Centre is very narrow.
So it’s like seven or eight zip codes, right?
Think of New York is Ryan, kind of central Southern Manhattan and exactly.
So anywhere, that’s residential a seems much more.
As you point out much more Pat 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 doordarshan Uber or GrubHub whatever and going out for dinner then I’ll just doing it near where they live.
And so again this activity is not going away it’s just moved from you know, core City Center’s 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 borrower’s 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.
The found that personal grooming, it 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 Minutes while for men has 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 that maybe like you know, shaving time is something that they just you know necessarily keep.
But as a results men have more personal grooming time.
Only under work 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 Is a fascinating surprising knock-on effect from this massive phenomenon that were talking about.
I think one thing I’m interested I think, you know, in the long run we may see is effects on labor, Supply and demographics.
So I’ve been working on working from home for almost 20 years and very things got me into this 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 do a child care in the school holidays and use that plus holiday and it’s Play that for, you know, couples where both couples work choke, has a challenge if you can work from home, we may see, you know, pushes up.
Fertility rates a bit so easy to have kids.
It could also change things like retirement ages as 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 communion 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 or 55 days a week plus commute, you can work from home for three days a week.
What pay you?
I don’t know, you know, half the amount.
A lot of people jump at that and much more phased out, Brad, retirements, to be honest, is what professors do.
If anyone’s wondered about, you know, some are very ancient professors at universities, is seem to be taking it easy.
They are, I mean, you know, professors kind of gradually phase out.
So I think that for students are some students that may work a little bit of they could do it.
Remotely people with yum, yum.
Both I’m 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, the concept of work from home, which is called flexi Place turns out to be highly correlated with Flexi time the ability to choose her hours.
So the fact the two of them go together and that flexi time is what people that are kind of margin on working really value.
That’s a potentially another huge one 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 work ation, 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 A and Monday on either side of that four-day weekend or the Monday or Tuesday of that of that four-day weekend.
Keep your 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 to which could theoretically be pretty stimulative for the entire travel industry.
It’s amazing to think how many things can change when you went to other 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.
There are thanks so much for having me on has been a great conversation Thank you for listening.
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