When You Start to Miss Tony from Accounting

If you’re one of the 40 percent of Americans now working from home, you might be reveling in your daily commute to the dining room table. Or you might be saying, “Get me out of here.” Economist Nicholas Bloom joins us from his spare bedroom to ponder whether working from home is actually working. 

The transcript below may be for an earlier version of this episode. Our transcripts are provided by various partners and may contain errors or deviate slightly from the audio.

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

Nicholas Bloom: It was two of my kids starting their daily practice on the bag pipes. I was thinking, "Oh no, now is not the time." I had to say quickly to everyone in the meeting, "I'm sorry, there's something going on in the background," mute myself and run into the toilet to take the rest of the meeting in there because it was the only place that was quiet enough. Our house isn't that big and the soundproofing is just dreadful. The toilets about the only sound bunkered room so I'm sure I'll be back in there again taking calls.

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

Nicholas Bloom: So many people said, "We thought we'd be great at this. We thought we could deal with it. I thought I was mentally strong. I didn't like many of my employees, but I realized after three or four months, maybe I did miss them."

Shankar Vedantam: The psychological challenges and the possibilities of working from home, this week on Hidden Brain.

Shankar Vedantam: Before economist Nick Bloom became a professor at Stanford, he worked in London for a consulting company. He often worked from home, and back then his coworkers made a lot of assumptions about what he did all day.

Nicholas Bloom: I know there is endless joking about working from home, shirking from home. Working remotely, remotely working. They would wind me up and claim I was watching those old-fashioned black and white TV movies that run during the day, or watching the cricket being British. Honestly, I promise you, I was working but it didn't feel like other people thought that was true.

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

Nicholas Bloom: Yeah, I have to say, I'm not a big fan of cricket unless it comes to revising for my exams during which point the cricket became fascinating. Anything's fascinating compared to revising.

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

Nicholas Bloom: I gave a few talks, I have to say, before COVID I did a bit of research and talks and stuff over the years for quite a while. One thing I used to explain to people is one good way to tell how negatively viewed working from home was, was just to go into Google or Bing and do an image search under the words, "Working from home." If you do that, I screen shotted it and showed it in a TEDx talk in 2017. I showed the top 15 hits, the top two rows of images, and they were basically naked people, cartoons, people juggling babies on their lap.

Nicholas Bloom: Out of the 15, there were only two that were positive images. There were 13 that were just terrible. The worst was a guy in a jacuzzi drinking champagne, which was... it was so negatively viewed.

Shankar Vedantam: Some years ago, and this was long before the COVID pandemic hit us, a news story broke about a certain company in Silicon Valley. Listen to this clip from NBC's Today Show.

Speaker 3: Disgruntled employees linked an internal memo from human resources that bans telecommuting, saying, "Some of the best decisions and insights come from hallway and cafeteria discussions. Meeting new people and impromptu team meetings. Speed and quality are often sacrificed when we work from home."

Shankar Vedantam: So Nick, tell me why Yahoo CEO Marissa Mayer wanted to cancel the company's policy to allow employees to work from home.

Nicholas Bloom: Sure. She took over and she was seen as someone to turn around the company. She said, not long into her tenure there, she discovered there's a whole group of people that were working from home. Many of them were just not logging in the entire day, there wasn't much assessment that was going on. It was clear that while some of them were doing really well, others were basically using it as a way to take an extended holiday. It's kind of intriguing when I spoke to her, she said, "Look, working from home can be great but you need a performance evaluation system. You need to make sure that the people at home are actually working, rather than goofing off. At that point we didn't have one in Yahoo so I basically temporarily paused the working at home scheme until we got a performance system and then relaxed it back a bit."

Nicholas Bloom: It generated a storm of media back in 2013. I still remember now.

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

Nicholas Bloom: Yeah, you're exactly right. What's happened now has made history so odd. If you go back to 1750, just on the eve of the Industrial Revolution in the UK, basically we all worked at home. We worked in the fields or occasionally a skilled craftsman, but no one is really working anywhere else than home. Then office work or factory work really started off with offices, places like Manchester in the UK started to have industrial machinery and of course to do that, you needed scale, buildings, and people needed to start to commute.

Nicholas Bloom: I should point out, back then in 1800 when you talk about commuting, you were walking to the factory that was really not that far away. The major offices started around 1900, when big companies had growing amounts of paperwork and they just had vast halls full of clerks that would come in and process piles of paper. Oddly enough, despite the complete change in technology over the next 120 years, up until January of this year we were still very much focused on coming into the office on a 9-5 schedule.

Shankar Vedantam: Isn't it interesting that along the way, the cultural norms and psychological norms sort of evolved with these workplace arrangements so that people who work from home came to be seen as less ambitious, or less employable, less talented maybe. It became almost declasse to be working from home.

Nicholas Bloom: Yeah, exactly. It's one of those things, economists might call it a general equilibrium effect which means even if one firm figured out working from home was great, it was hard for them to change it alone because there's a negative stigma. No employee wants to have it on their CV that they worked at home for years because other firms think it is bad. Yeah, exactly right. Just to be clear, the four things we need for working from home is internet, broadband, laptops and video calls. All of them have been around since the mid 2000's. The last one to come out was video calls and that was really the dawn of Skype.

Speaker 4: Hello? Can you hear me?

Nicholas Bloom: Skype comes out in 2003.

Speaker 4: It's me, I'm in California.

Nicholas Bloom: It's kind of mainstream by 2005, 6.

Speaker 5: Hello?

Speaker 6: Hey there.

Speaker 7: Hey.

Speaker 8: Hey.

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

Speaker 9: How are you? It's so typical of me to talk about myself. I'm sorry.

Shankar Vedantam: There's this enormous inertia in the system, because we've built entire cities around the idea that there's going to be this urban core where people work, and suburbs where people live. We built highways and public transit systems to ferry people from residential neighborhoods to commercial neighborhoods. It's almost as if once that initial model separating the workplace from the home got fixed in people's minds, there was an inertia that got built up around it that became essentially unstoppable.

Nicholas Bloom: Yes, exactly. I think one big change post COVID, that's going to be driven both by working from home and also the other issue is social distancing. Just to be clear, high rises, skyscrapers in the center cities have two amazingly tough challenges. One is getting people to the front door. We think of Manhattan or London or Shanghai, or Mumbai, you've got to get people there and that involves often the subway or the tube. It's basically impossible to do that. The second is getting them from the front door to their office on the 20th floor which involves using the elevator.

Nicholas Bloom: Both of those are huge challenges. I think in future, a lot of that real estate is probably going to be converted into apartments. The price of it's going to drop a lot and it's going to attract conversion into apartments so we're going to have much more mixed living modes whereby those skyscrapers aren't all offices, and we all don't live out in the suburbs. Instead, there's more people living in the center and lower rents, and there's less commuting because it's the only way we're going to be able to shape it. And of course included in that there will be more working from home.

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

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

Shankar Vedantam: Nick Bloom is a researcher at Stanford University. For years he has studied the phenomena of working from home, and asked a deceptively simple question: are people more productive or less productive when they work from home?

Shankar Vedantam: Nick you were teaching a class at Stanford in 2010, and you had a student in the class from China and you got to chatting with him. He told you about a problem his company was having back in China, what was the problem?

Nicholas Bloom: As backstop, the situation was pretty weird. I was teaching a PhD, a graduate economics class in Stanford, and I have about 15 to 20 students in the class. One of them I figured out relatively soon, maybe a third of the way into the course was James Liang from talking to him, who was the CO and co-founder of this huge Chinese travel agent. He said that they were growing really fast and really well, but they were based in Shanghai and their challenge was office space in Shanghai was incredibly expensive. They wanted to figure out how to grow without sinking vast amounts of money into ever increasing size of expensive offices.

Nicholas Bloom: They were thinking about a working from home program.

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

Nicholas Bloom: Yes, the great thing was because James was a PhD economics student, he was open to what's called doing a randomized controlled trial. Quite formally, in Ctrip they got two divisions, hotel and airfare, there are about 1,000 people in them and they asked them, "Who wants to work from home?" Amazingly, well interestingly maybe as much as amazingly, only half of them volunteered. Just to be clear, a lot of people don't want to work from home. The volunteers tended to be slightly older, more likely to have kids, live further away.

Nicholas Bloom: Then they took these 500 volunteers and had a formal randomization. James, on Ctrip TV, drew a ping pong ball out of an urn and it said even. That meant people with even birthdays, if you were born on the 2nd, 4th, 6th, 8th, 10th, et cetera of the month, you were in the treatment sample so you actually got to work from home for four days a week for the next nine months. If you were odd like me, I'm the 5th of May, you were the control group and you remained in the office for the next nine months.

Shankar Vedantam: A few other notes about the experiment. For the workers who went home four days a week, they all came into the office on the fifth day. That was when they did things that were best to do in person, like team meetings and trainings. Managers were always in the office. The main worry for Ctrip was the fear that all companies seem to have, that the remote employees would get distracted and not be productive. But Ctrip had a plan to deal with that: if they had declines in productivity, they figured that those would be offset by the huge savings in rent.

Shankar Vedantam: In fact, this calculation was one of the reasons they agreed to run the experiment in the first place. To see how many dollars they saved on rent, versus how many dollars they might lose on productivity. Then, the results came in.

Nicholas Bloom: The results were honestly amazing, and this is why it was so valuable to have nine months, because Initially we were thinking, "This can't be true." What you saw was the working from home employees were 13% more productive than the people in the office. Just to be clear, that is an enormous uplift, that's almost a day extra a week, simply from having the same people and the same team doing the same job, which is answering telephone calls, dealing with customer complaints, taking bookings, et cetera, now working at home rather than the office.

Shankar Vedantam: Did they actually calculate a dollar figure in terms of increased productivity, not just from the increased productivity but from the savings on rent?

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

Shankar Vedantam: Now, employees who really hated working from home, were they allowed to come back and start working out of the office?

Nicholas Bloom: Yes, a striking finding, again totally unexpected was... there's two things, two elements of this. One is initially they offered to 1,000 employees and only 500 wanted to work from home. Our view would've been honestly, many more people would've taken it up. But a lot of people do not want to work from home. One reason is the people who want to come to the office are young and single. As we know, in the US, about a third of people meet their spouse in the workplace. Something similar is true in China. The other thing is after the end of the nine-month experiment, remembering everyone in the experiment had volunteered, around half of the people that won the lottery to work from home actually changed their minds and decided to come back into the office.

Nicholas Bloom: The control group who'd all volunteered nine months ago, had just lost the lottery, but at this point they're allowed to do whatever they want, only a third of them actually ended up going home. There was a huge move away actually after people had tried it out, against working from home four out of five days a week. Again, was very surprising, we thought employees are partly paid on performance so since they're performing 13% more at home, their pay has gone up but even so, large numbers of them, more than half of them were voting with their feet because they asked to actively come back into the office with all the commute costs and hassle that involved.

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

Nicholas Bloom: Yes, it comes back to I think what we really need, and what employees want on average, is a mix. Ctrip at that point was only offering four out of five days a week at home. I've actually again caught up with Ctrip very recently, if you'd moved to a system where they could have worked from home one or two days a week, that would have been far more popular. For logistical reasons they didn't offer that. Most employees, and we saw this in the experiment I should say, for the first two or three months, they were really happy, very positive on it. But as time went on we just got increasing reports and complaints about loneliness and it's very depressing being at home day in and day out, working there, you're on your own.

Nicholas Bloom: By the time it came to the end of nine months, many people were quite surprised, but they said, "I can't hack this." We did a lot of interviews, by the way, a lot of focus group interviews, and they just said it's really depressing. Or they fell victim to one of the three great enemies of working from home: the bed, the fridge, or the television. Something basically went wrong and they said, "Look, save me. Get me out of here. I want to come back to the office." It's quite astounding but I'm sure many people can empathize.

Nicholas Bloom: For me, I'm really missing my colleagues, I like being at home. I live with my wife and four kids, but it kind of gets isolating. I'd love to be able to go back into the office at least for two or three days a week, and that's the same thing we saw in Ctrip.

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

Nicholas Bloom: Yes, exactly. The two big things I took out of this, and from more recent work I've been doing is the importance of choice and flexibility. It turns out in choice, people have just really different views. It's very hard to know what people's views are. It depends a lot on what their home circumstances are like, do they have space? A spare room? Do they want to be at home? Is their apartment nice? Then on flexibility, it's actually really hard to tell. In Ctrip we just discovered in the focus groups, so many people said, "We thought we'd be great at this, we thought we could deal with it. I thought I was mentally strong. I didn't like many of my employees so I actually wanted to go home, but I realized after three or four months, maybe I did miss them." It's like that old saying, absence makes the heart grow fonder. It seemed to be true.

Nicholas Bloom: As hard as it is to imagine, I'm sure there are some people out there now thinking, "Even that really annoying guy, Tony in accounts, maybe I'll miss him a bit," et cetera. That seemed to be what we're seeing with Ctrip in China.

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

Nicholas Bloom: Yeah, another striking finding was quit rates fell by half for the people that worked from home. The firm collects a lot of surveys and they reported in the surveys they felt happier. I'm sometimes slightly skeptical, I don't know whether... it's hard to know the firms we're surveying the response to the firm, the employees to the firm. The much more important thing is they're voting with their feet.

Nicholas Bloom: Ctrip has about a 50% quit rate for its employees. It turns out that's almost identical to the average in the UK, US, Australia, many countries. 50% is about normal. Most people stay about two years in a job before moving on. For the working-from-home employees, their quit rates half from 50% down to 25% which of course for the company was a huge upside because it avoided a large chunk of the pain of hiring, and training, and getting people up to speed just for them to then quit.

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

Nicholas Bloom: No. Exactly right. Just to explain for the 13% higher productivity from working from home, about a third of that was the home-based employees were more productive per minute. That's entirely because home is on average actually less distracting. From the interviews, there's some hilarious stories that come out. My favorite was the woman that said, "When I'm in the office it's so distracting. The woman in the cubicle next to me clips her toenails at work. She takes out this toenail clipper and she clips it under the desk." She said, "She thinks I don't notice but I tell you, I notice. I notice, it's disgusting."

Nicholas Bloom: There's that, there was stories of World Cup sweepstakes, of, there's a cake in the breakout room. Somebody's boyfriend and girlfriend have left. You can imagine. Home, you're exactly right, home is distracting but the office turns out to be significantly more distracting, so actually you can work more efficiently per minute, at least in this experiment.

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

Nicholas Bloom: Yes. The one dark side I would say of working from home from the experiment was the drop in promotion rates for people working from home. If you control for performance, remember the people at home are 13% more productive, they should have been promoted at a much faster rate. It turns out they were promoted less rapidly. In fact, the eventual promotion rate was roughly half for those at home versus at the office so there's a huge drop in promotions.

Nicholas Bloom: When we asked them it turned out, looking into this a couple of factors. One is, you're working from home, you're forgotten about. That's a serious down side that you're in a team of 15 and let's say there's three of you working from home and the rest in the office, you can be passed over. The other thing that was tricky to how to deal with, when you spoke to Ctrip they said, "Well look, part of being promoted is knowing your colleagues and knowing about the firm culture, et cetera. That does come from being in the office and having lunch and coffees around."

Nicholas Bloom: It's a bit of a balance. Some of the extra productivity at home is because they're spending less time chit-chatting over coffee. But some of that chit-chat turns out to actually be pretty useful.

Shankar Vedantam: What happens when hundreds of millions of people don't make a choice to work from home, but when a global pandemic suddenly makes that choice for them? That's next.

Shankar Vedantam: The COVID-19 pandemic has reshaped the world. Hundreds of thousands have died and millions have lost their jobs. Virtually overnight, working from home in many countries has become not an exception, not a perk, but just the new normal.

Shankar Vedantam: Nick, you've been preaching the virtues of working from home for years. I'm curious what this feels like. You don't really move the needle on that and then suddenly, boom, thousands of companies and millions of people start doing it overnight. Have you suffered whiplash?

Nicholas Bloom: Yeah, it is a weird experience. I was doing something the other day looking at the frequency of the word working from home in US newspapers. I looked at the top 50 US newspapers and it went up 12,000% between January and April 2020. I'm fascinated by it, I'm living it. It's very odd to be researching something that you and all your friends are living. All my friends and relatives, et cetera are going through exactly the same issue. I should say that in the US currently, only 40% of people are working from home. Thirty percent of people are not working, and 30% of people are working on business premises which are typically essential service workers.

Nicholas Bloom: For those of us that are working from home, in many ways you're actually in the lucky minority that we're able to work and able to do this safely at home.

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

Nicholas Bloom: Yeah, exactly. It's funny, I was talking to a friend of mine that lives in London and he works for a US company and he's trying to set up a start-up of the same company, a subsidiary in South Africa. He was saying he was always on Zoom or Teams but he was always the odd one out, in the sense that everyone else was in the room and he was typically dialing in. He said suddenly he felt on a level with everyone else, everyone was on Zoom. I had a similar feedback actually, I was giving presentation to one of the national labs in the US and somebody there was disabled. She was saying, "In some sense it's been a great leveler for me because I struggled to get into the office and back, but now we're all on Zoom. Being physically there really doesn't matter."

Nicholas Bloom: It has had some unusual effects, both positive and negative. In fact, just one final anecdote, I was talking to someone, she founded a high-tech company out in the Bay area. She was born in India and came over and started a company here. She was saying she notices on Zoom who speaks up is quite different from who does it in person. She was saying Americans are amazingly loud in meetings and there's some cultural and gender differences that are quite different when you're on video calls. The number of people who previously didn't speak up, have now felt actually empowered to talk because they find it less intimidating on a video call.

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

Nicholas Bloom: One huge factor is clearly education. It's not that being educated makes you better working from home, it's that being educated means you're in the type of job that means you can probably work from home. If we look at working from home jobs they tend to be much more managerial, professional, you can imagine they are the kind of things that are typically done beforehand in the office. And so can be easily shifted home.

Nicholas Bloom: If you look at say, people with a high school degree or less, those that left school 16, 17, 18, they're far more likely to be in retail, maybe in construction, manufacturing. The types of things you need to be on site. Education has become an enormous divider actually in terms of who can work from home. The other couple of factors that we've picked up on, again kind of links to wealth and education, is having functional internet. It's astounding but only 65% of Americans in our survey report having internet connectivity good enough to run a high-quality video call.

Nicholas Bloom: For those of us living in nice parts of cities, it seems totally standard you have good internet. But a lot of poor urban areas or rural areas, they have internet but it flakes in and out so you can't really have video calls. The other thing is having space at home. People who have been able to make this a success report having their own room that's not their bedroom so they can work quietly. In the survey data, only 49% of Americans have their own room that's not their bedroom. Most people are working from home in a room their husband or wife in the same room, or kids running around et cetera.

Nicholas Bloom: I just want to be very clear, COVID working from home is not great. Post-COVID I think will be this nirvana where we're doing it one, two, three days a week, our kids are back in school, we have proper equipment, we have peace and quiet of our own room because our husband or wife, they're at work so we can get on with it.

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

Nicholas Bloom: No. I think the stories we're getting out from talking to firms and from the data is, what I would call day to day things, which is kind of continuing activities you've always been doing. Which is a bit like what the folks I was talking about in Ctrip, they're basically making calls and taking bookings. That seems to work pretty well. That, you're just repeating what you've done before, nothing too innovative, nothing too unusual, and the peace and quiet at home works quite well.

Nicholas Bloom: What appears to be more of a struggle is more creative activities, bigger team group activities. I'd say that's more long-run. It's kind of like what as economists you might call intangible investments and it goes back to quips guys like Steve Jobs made. Or the quote from Marissa Mayer: you've really got to be in the building and talking to others. Kicking back and talking at the water cooler to come out with some of these ideas.

Nicholas Bloom: I think in the short run, productivity's actually looking surprisingly good. What I worry about is innovation and creativity. For example, next year's new iPhone, will that be that impressive because all the innovation and research that's going into it right now, I presume it's much harder to do working from home.

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

Nicholas Bloom: What's amazing is there's so much money invested by firms in this. You think of the billions and billions of dollars that high-tech firms, but also investment banks or professional service firms have spent on super fancy offices. They're trying to persuade people to come in so the amazing artworks, the incredible free food, the ping pong table, the table football table. The astounding floor-to-ceiling glass, the incredible gardens. All of that is to drag people into the office.

Speaker 10: Hi everyone, my name is Kevin and today we're going inside the multi-million-dollar tree house conference room.

Speaker 11: Got a knot in your back? Schedule a massage. Looking for inspiration? Attend a talk with a world leader.

Speaker 12: We have our bike room, our bike room holds 92 bikes. It's all about encouraging our employees to reduce their carbon footprint.

Speaker 13: First of all you'll notice that you're getting a view and natural light, which is important. There's research that's shown how natural light and views help people focus and process information in a more effective way.

Nicholas Bloom: I think it is important. From my own experience, honestly, just of my self-introspect, a lot of my best research pieces have come from discussions over lunch and conferences. I think it is really important but I must say, the research based on this is not entirely conclusive. There's certainly fantastic creations have happened by people honestly working alone. You can come up with lots of examples of that too.

Shankar Vedantam: I'm wondering, the picture you're painting here, if you asked me at the start of 2020, can 40% of the country work from home? I would have probably said, no it would be very hard, probably impossible. Clearly now that's been proven untrue, I think a large number of people are making it work. I think the picture that's emerging from this conversation is how complex the question actually is, and how much it's connected to individual people's life situations. I've gotten to spend more time with family over the last few months as I'm working, which has been wonderful, but I can also imagine there are people who perhaps might not want to spend large amounts of time with family. Maybe they don't have a happy family situation, or maybe they're single and they're living by themselves and it's extremely lonely.

Shankar Vedantam: The idea that there's a one-size-fits-all rule that's going to mean everyone working from home is more productive, or everyone working from home is more unhappy, that simply breaks down, doesn't it?

Nicholas Bloom: Exactly. Again, you see this so much in the survey datas. Just to give you one figure, we asked people post COVID, "How many days would you want to work from home?" Twenty percent of people say none. Twenty percent of people do not want to work from home whatsoever. They may be many of the types of people you mentioned. They have very small apartments or they don't have great family situations. Then there's 25% of people that want to work from home five days a week, they never want to go back to the office again. And then the remaining 55% are a big spread.

Nicholas Bloom: This is something. Having worked for years in all kinds of different parts of economics research, I can't think of an area I've seen there's such differing views. The average person, if there's such a person, wants to work from home typically two days a week. But that average hides enormous variation. I think for firms, choice is going to be absolutely essential to get this right.

Shankar Vedantam: I recently came by this spot in the news on CNBC about the real estate market in New York City. Take a listen Nick.

Speaker 14: The big worry here, and the big numbers was this rapid rise in empty apartments, the inventory of rental listings soaring 85%. We now have a vacancy rate that is the highest in Manhattan on record.

Shankar Vedantam: So Nick, beyond what happens to workers and companies, what do you think the effects of COVID and working from home might be on cities and where we decide to live?

Nicholas Bloom: I have to say, I think it's not good for cities. Just to be clear, there's plenty of people saying, "Well, cities have seen this all before, they always bounce back. There's been plenty of pandemics." That's true, but if you look for example, they bounce back but they take a long time and in the word of Keynes, John Maynard Keynes, in the long run we're all dead.

Nicholas Bloom: One anecdote, if you look at London, I was watching something on CNN with somebody saying, "Of course, London recovered after the plague." That's true but if you look at the data, ten years after the great plague, 30% of buildings were still empty. For the next ten or 20 years, this is a big blow for cities, particularly the center of cities. The things that are most troubled are going to be these high-rise buildings, the ten-plus-story buildings because you can't get to them. You can't use the subway with social distancing. From the survey data I've seen, 70% of Americans report even post-COVID they'll be very nervous about getting into a packed subway train.

Nicholas Bloom: Then once you're at the front door, you can't get up to the highest stories because you can't get in the lift without social distancing issues. My prediction is prices will drop dramatically. It's not that skyscrapers and apartments will remain empty. From the clip they are right now, but I wouldn't be surprised to see prices of say, Manhattan apartments and office buildings falling by 30 to 50% and that's the way you keep them occupied.

Nicholas Bloom: I'm not sure it's a bad thing because it'll take us back to say, 2000, rebalance a bit the country. Rural areas have been left behind and the center of cities have done incredibly well. If we rewind that by 20 years, back to 2000, you have just a more balanced national set-up without such an affordability crisis in the center of cities.

Shankar Vedantam: There's a fork in the road that's coming up so let's say optimistically that there's a good vaccine that comes along and all of us feel much safer about COVID than we do right now. Everyone can technically go back to work as we did in the old days, into workplaces. It could also be that the changes that we're seeing now, somehow become permanent because either companies decide it makes sense for them, employees decide it makes sense for them, cities and communities are organized differently. Which way do you think we're going to go Nick?

Shankar Vedantam: After COVID is in the rear view mirror, do you think we're going to go back to the way things were before?

Nicholas Bloom: No. I'm pretty sure most of this will be permanent. There are four reasons that are driving permanence. Firstly, this has turned out to be a great experience in the sense that 70% of companies reported that working from home has turned out better than predicted. They're much more enthusiastic. Secondly, the stigma seems to have evaporated. Again, in survey data, three-quarters of people report their perception there's a big drop in stigma. Thirdly, investment, we collected data and the average person in America has invested 12 hours and about $1,000 setting up working from home.

Nicholas Bloom: To take me personally, I spent a while figuring out how these Zoom and Teams and Chime and everything works. I bought a proper webcam and a mic and tried to organize the room a bit. Then finally, social distancing. As I mentioned, there is still plenty of concern from individuals that even post-COVID vaccine, they're nervous about getting in packed elevators and mass transit and so would be reluctant to come in. You can see why, COVID was obviously terrible, but there's been near misses. SARS, Ebola, MERS, and bird flu et cetera.

Nicholas Bloom: My prediction is, just to put figures on it actually, is before COVID 5% of working days in America were full time at home. During COVID it's about 40%, so 40% of working days are at home. Post COVID from taking to firms and from my surveys, it looks something like 20%. We're going to wind back a bit from where we are now because no one's going to be full time at home, or very few people but we're well above what we were before COVID.

Shankar Vedantam: I'm wondering Nick, if you're hiring an employee, maybe you are less interested, is the employee in the same zip code as I am? Or in the same city as I am? Maybe now if you're a company you actually can hire more widely, maybe you can actually look to rural areas or even other countries for labor in ways that you couldn't earlier. In other words, it actually might unleash a lot of people who previously could not find their way to an expensive Manhattan job interview, now can actually be in the running for that job.

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

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

Nicholas Bloom: This comes back to I guess, inertia. It's a good question, imagine COVID lasts... the pandemic horrifically lasted for five years, a lot of people would be asking themselves that question. Why am I living in such expensive areas? It works for us living here, my kids are in local schools, we have friends locally, et cetera. I guess if it lasted forever... again, just to be clear, post-pandemic which I hope and think is going to be potentially a year away when the vaccine comes out, I see us going back into the office two or three days a week.

Nicholas Bloom: But there are certain jobs I think it's become clear that they can just be done entirely remotely. For those jobs you may well see a lot of people moved to... you might live in Hawaii, you might live next to the beach, code for Facebook. There's nothing wrong with that. If that works out, actually that's great and you may fly to Silicon Valley once every other month to meet in person and spend the rest of your time living out in Hawaii. Or living up in the ski slopes.

Nicholas Bloom: I think we'll see a big increase in that. In fact, if you look at the reports from real estate agents, they are talking about there's been an explosion of people wanting to buy what's called lifestyle properties. Beautiful ranches deep out in the countryside. You can buy a small Manhattan apartment or you can buy a 200 acre ranch out in Wyoming, if you can work remotely maybe you go for the latter.

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

Nicholas Bloom: Yes, although I think in terms of moving people out to rural areas, it pushes them in both directions. You're exactly right, the people who can work from home are educated, so they gain a lot of the direct benefits. It is true, though, if a lot of wealthy New Yorkers move out into the countryside, when they're out there they're going to demand services. Restaurants, and go out to gyms, et cetera. They no doubt pay more tax revenue, they improve local schools. That will indirectly spill over to people who are out there that maybe can't work from home but will get some of the indirect benefits.

Nicholas Bloom: The inequality impact's a bit mixed. I think it will really reduce inequality if we can rebalance things a bit away from cities. It's not like... I was born in London, I lived in London until I was 30. I'm basically a city person, but it's also clear that even for me, one of the reasons I left London and came out to the US is it was just too expensive to live in. I think it will be better for society if cities were not so unbelievably expensive so you could have a more mixed set of people lived in them and there's more basically diversity across the US rather than becoming so geographically segregated by income, which is what's been happening until recently.

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

Nicholas Bloom: Gee, my most embarrassing work... I'll tell you one. This is the classic early days of Zoom. I was on a video call, it was a Zoom call. I screen shared with a couple of co-authors and I'd forgotten to turn off screen sharing and at some point one of them was talking and I was, as you do, was losing concentration and went to start doing some emails and was typing a reply. My co-author suddenly said, "Hey Nick, you do realize you're still on screen share?" He'd very politely taken a while, thinking I might turn back, but for the last five, six minutes he must have been, maybe even 10 minutes, watching me type emails out and clearly paying no attention.

Nicholas Bloom: One of the things you have to realize when you are working from home is the office norms just don't apply. It's completely reasonable if you're working from home to have a cat walk across your camera, or a baby crying in the background. One of my colleagues had just had a baby and that baby's often sitting in his lap during conference calls. It's cute and it is the way it is. In the office it would seem weird but I like the fact that working from home there's a new set of rules around what's reasonable.

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

Nicholas Bloom: Thanks, it's been fantastic. Thank you for having me.

Speaker 15: Their concern is that they want to have... excuse me, my kids are here. Live television.

Speaker 16: Cold air continues across the area tonight. Potential for some frost and freeze for some of us. Warm up, it's going to take... Maple.

Speaker 17: ... David Cameron was talking about... I'm really sorry that was my son arriving. Sorry. Hold on one second. Sorry.

Speaker 18: Can I have two biscuits?

Speaker 17: Yes, you can have two biscuits. I'm really sorry about that.

Speaker 19: Welcome back, I'm going to be back in studio on Monday so I thought I'd bring my daughter Lena with us. Can you say it's going to be sunny today? No? It's going to be hot? Okay good work. Lots of upper 80's and low 90's over the next seven to ten days. This didn't go as planned. Jackie.

Shankar Vedantam: Hidden Brain is produced by Hidden Brain Media. Midroll Media is our exclusive advertising sales partner. Our audio production team includes Brigid McCarthy, Laura Kwerel, Autumn Barnes and Andrew Chadwick. Tara Boyle is our executive producer. I'm Hidden Brain's executive editor. Special thanks this week to our former producer Thomas Lu.

Shankar Vedantam: Our unsung hero today is someone who has made it possible for the Hidden Brain team to work from home successfully, his name is Yitbarek Erefe Aine and he's a business expert with Apple in Washington, DC. When our show moved to independent production earlier this fall, we needed new computers. Yit, as he's known, patiently walked me through the process of setting up a business account for our new company and ensured we got our computers on a tight turn around. It helped that he is something of an audiophile himself. It's no exaggeration to say that if you enjoyed the episodes we put out in October, you have Yit to thank. Thank you Yit.

Shankar Vedantam: For more Hidden Brain, follow us on Facebook, Twitter or at Hiddenbrain.org. If you like this episode and like our show, please tell your friends. If they don't know how to subscribe to our podcast, please show them. Thanks for listening, I'm Shankar Vedantam.

[Bagpipe music]

Speaker 20: Wait dad. The last part of that should be pretty good, I don't know how long you wanted.

Speaker 21: Great, thanks.

Speaker 20: How long did you want?


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