EP98: Why CEOs Fight Hybrid Work - Even When They're Wrong

Interview with Nick Bloom / Hybrid Work Expert, Stanford Economist

HOSTED BY PAUL SULLIVAN

The Five Day Office Week is Dead - so says Nick Bloom, an economics professor at Stanford University and an expert on work-from-home practices. Yet some CEOs keep fighting a losing battle to bring it back. There is no evidence, Bloom says, that this will lead to anything good - and lots of research showing that inflexible work arrangements will cost companies millions when key employees leave and need to be replaced. So listen up managers and workers alike to ways to improve worker happiness and a company's bottomline!

---

Get our free newsletter covering all things fatherhood delivered straight to your inbox: https://thecompanyofdads.com/thedad/

Transcript

00;00;05;19 - 00;00;24;04
Paul Sullivan
Welcome to the Company of Dads podcast, where we explore the sweet, silly, strange and sublime aspects of being a dad in a world where men who are the go to parent aren't always accepted at work, among their friends, or in the community for what they're doing. I'm your host, Paul Sullivan. Our podcast is just one of the many things we produce each week at the company dads.

00;00;24;05 - 00;00;47;29
Paul Sullivan
We have various features, including the lead out of the week. We have our community both online and in person. Now, the new research library for all fathers. The one stop shop for all of this is our newsletter, The deaf. So sign up at the company of dads dot com backslash the dad. Today my guest is Nicholas Bloom, an economics professor at Stanford University and an expert on work from home practices.

00;00;48;02 - 00;01;07;14
Paul Sullivan
He came to my attention after I read an opinion piece in the New York Times entitled, The Five Day Office Week is Dead. He marshals data to show that the hybrid model is good for a company's bottom line. It cut overhead, boost productivity, and is profitable. That would seem like a dream scenario for a CEO, or at least a CFO.

00;01;07;16 - 00;01;28;20
Paul Sullivan
It also helps working parents. Where our interest lies. But still companies, including ones where most of the work is done by phone and computer. Like Goldman Sachs and JP Morgan are fighting the return to work battle. Nick is also a father of four and is one of four himself. So lots to talk about today. Welcome, Professor Bloom to the company.

00;01;28;23 - 00;01;29;17
Paul Sullivan
Yes.

00;01;29;20 - 00;01;32;28
Nick Bloom
Thank you. Nick is fine. Yeah. Thank you for.

00;01;33;01 - 00;01;44;06
Paul Sullivan
All right. So I'm a father of three. You have four. You're one of four. Is there an economic argument for for kids? Did I miss something? When I was at the end of Chicago.

00;01;44;09 - 00;02;00;13
Nick Bloom
No. There isn't. I, you know, I'm just one of four. It's not only where you end up. I don't think it was in. I don't know, there's plan or not plan, but. Yeah. Depends. I mean, economists see kids to some extent is consumption goods. So, you know, depends how much you like kids, to be honest.

00;02;00;16 - 00;02;09;04
Paul Sullivan
I didn't know if you were, like, helping the labor force, down the road or making sure any sort of pension is paid for by your contribution and kids.

00;02;09;05 - 00;02;26;29
Nick Bloom
It's true. It is true. If you go to, you know, the economics of developing countries, you know, this is subsistence. It's very much about kids, your savings. So if you go back, you know, 500 years when we just about working on farms, once you retired, that's it. You've got your kids and nothing else. But you know, that's no longer true with, you know, modern pension systems.

00;02;27;02 - 00;02;33;18
Paul Sullivan
I also think like kids in Palo Alto, they're probably a cost center for for many, many, many years.

00;02;33;20 - 00;02;35;26
Nick Bloom
Yes, that is true. That is true.

00;02;35;29 - 00;02;46;12
Paul Sullivan
All right. On to what we're here to talk about. What's the crux of the work from home versus office debate? As you see it today?

00;02;46;14 - 00;03;06;03
Nick Bloom
Well, partly, I think the debate is over. You know, so there's three phases. There's pre pandemic when there's very little work from home. And so people basically went into the office five days a week. So again I'm going to talk about grads. So look half of the workforce works in shops factories you know front line stuff. And they know they're still very much fully in person.

00;03;06;03 - 00;03;29;12
Nick Bloom
But if you think of grads, professionals, managers, etc., they really work from home pre pandemic early 2020 kind of 2021, a lot of people were close to fully remote. Now we've settled back into hybrid. And it looks like that's pretty much the steady state. And it's the trade off and the trade offs very much. The employees love the ability to work from home 2 or 3 days a week.

00;03;29;14 - 00;03;45;00
Nick Bloom
They value it about as much as an 8% pay increases the typical number. And there is you know, if you go beyond that, it looks like it harms productivity, but it looks like maybe two days a week at home is kind of a sweet spot. So firms are doing this to me to be honest because it's profitable.

00;03;45;01 - 00;03;59;00
Nick Bloom
So does any managers out there? Yeah, I've I must have talked to, 1 or 2000 managers and firms by now. They find it very profitable to allow people to work from home a couple of days a week. And that's why it stuck. And that's pretty much where it's going to be for a while.

00;03;59;02 - 00;04;17;24
Paul Sullivan
You know, think of like two polar opposites here. You know, Allstate the insurance company the their workforce is about 80%, remote, 20% in the office. And it was the flip side of that pre-pandemic. And then you look at somebody like Goldman Sachs where they're really fighting this battle for five days a week in the office, and both of which they do very different things.

00;04;17;24 - 00;04;34;24
Paul Sullivan
But as I said at the in the intro, it it's a computer, it's a phone. It's it's people skills. Why is there this debate, really raging now, now that we're sort of three years away from the pandemic where, you know, people proved that they could, work from home? I don't know how many people really want to be at home.

00;04;34;26 - 00;04;45;08
Paul Sullivan
All the time. As you said, sweet spot is maybe two days, a week. Yet some companies are really, drawing a line in the sand that it has to be five days a week. What is motivating that?

00;04;45;11 - 00;05;10;12
Nick Bloom
So I'll give you an example to explain it. But I think about Stamford. So we have about 20,000 employees. There's about 10,000 of our employees that come in every day. So think of folks that are, you know, food service, cleaning, security, transport, etc. they have to they have to come in every day. There is about 2000. At the other extreme that are fully remote, and these folks tend to be it support, HR, payroll.

00;05;10;17 - 00;05;29;21
Nick Bloom
The reason it works really well for them is we don't have to pay for an office. We can hire them across the country, which is clearly cheaper on payroll. And, you know, they're doing relatively individualistic jobs that they don't need so much face time. Then the remainder of our employees kind of about 8000, is hybrid coming in 2 or 3 days a week.

00;05;29;23 - 00;05;47;25
Nick Bloom
So if I then go to Allstate and Goldman's, the reason for the difference, I think is partly just what they do. So the more at one extreme, if you're in a call center, you're doing a coding, high end coding. You're doing something that's very well. We talked to, you know, before before they started recording and talking about journalism or your background.

00;05;48;02 - 00;06;07;16
Nick Bloom
There's a bunch of things where there's kind of deep, concentrated work that you're mainly doing on your own for that activity. You may be remote. A journalist, for example, could maybe be interviewing folks for two days a week so that at home for the other three, writing up at the other extreme, maybe they're, you know, you're creative in a marketing team or something where you need much more face to face.

00;06;07;18 - 00;06;22;28
Nick Bloom
You could typically see 3 to 4 days a week. Goldman's kind of goes to one extreme getting folks in five days a week, I honestly think is a mistake. You know, to put it bluntly, getting people to come Friday pisses them off. Big time is not worth it. If I look at.

00;06;23;04 - 00;06;27;03
Paul Sullivan
Is, is that a technical economics term right there that you just used pisses them off? Yeah.

00;06;27;03 - 00;06;30;22
Nick Bloom
It goes back to it goes back to Samuelson. If you looking.

00;06;30;24 - 00;06;31;02
Paul Sullivan
To.

00;06;31;06 - 00;06;49;25
Nick Bloom
Piss off to yeah. But I mean, if you're in the data, I did a huge randomized controlled trial. We randomized in a big firm trip.com, where the folks came in the office five days a week. They were the people that had even birthday say born on the second, fourth, six, eighth of the month or you worked at home Wednesday, Friday if you had an odd birthday.

00;06;49;27 - 00;07;10;27
Nick Bloom
What we found is there was no difference in performance. We've tracked them for six months, no difference at all. The big difference was the quit rates. If you're allowed to work from home two days a week, you saw the quit rates went down by about a third. So I honestly think Goldman Sachs, J.P. Morgan, Tesla forcing people in particular on that Friday is just a mistake.

00;07;11;04 - 00;07;30;16
Nick Bloom
It just, you know, pays them off. You don't get any increase in productivity. It makes it harder to retain and recruit people, particularly people with young kids, particularly folks. Maybe the disability going from 4 to 3 days in the office or two is more of a style thing. On the other end, fully remote can be pretty problematic.

00;07;30;16 - 00;07;46;17
Nick Bloom
The issues you hear a lot around mentoring, innovation and culture as a result. It's kind of, you know, moderation is typically, you know, where things end up in many walks of life. And it looks like for the typical person, two, three, four days a week in the office is kind of this middle ground that seems to run up.

00;07;46;19 - 00;08;15;04
Paul Sullivan
You know, many people I talked to, and we're coming at it from the land of, of working parents, of caregivers who are trying to sort of, you know, find some sort of work life integration post, you know, pandemic. And the ones who are doing really well and thriving are the ones who have managers who have, a more progressive outlook in the ones who are struggling and quitting are the ones who have, managers who are sort of managing like, it's 19, you know, 99 or maybe at least 2019 is is it the crux of this?

00;08;15;04 - 00;08;28;19
Paul Sullivan
Is there some part of this where managers need, different training to get used to managing people who will not always be sitting next to them as they may have been, you know, pre-pandemic.

00;08;28;22 - 00;08;54;23
Nick Bloom
That is exactly right. So I tell your story. So I interviewed, Marissa Meyer, who was the CEO of Yahoo from 2012 to 20 1617. She was very famous or infamous, I guess, for having apparently banned work from home in 2013. And I spoke to her. I actually think she was about a decade ahead of her time. I think what she did was correct is just a PR department was, you know, we let her down her meet at somehow I spin doctors are terrible, but they act.

00;08;54;24 - 00;09;14;11
Nick Bloom
So why don't I tell you what she said? She said, look, when I took over, we didn't have the, you know, the most fantastic performance review system. So it's hard to tell what people are doing. So we were relying on kind of management. I'm watching so poorly. Viel, my manager, is am I like in the office at the desk typing away when you walk by is my screen on Zillow?

00;09;14;11 - 00;09;30;00
Nick Bloom
What do I look like I'm working or is it on, you know, Netflix or Champions League? Or am I kind of, you know, was chatting to the, fellow employee. I'm flirting with her and disappearing in the toilet for hours on end with my cellphone. You can kind of see roughly what I'm doing. I'm not claiming as great management.

00;09;30;01 - 00;09;46;08
Nick Bloom
I'll give it a five out of ten, but it's livable. It's kind of you can get by with it. Problem is, as you say, when you go to working from home, you don't have that. Basically, that's called input management. You watch the inputs of some their time in their effort. When you're working from home, you can't see people's inputs.

00;09;46;08 - 00;10;09;10
Nick Bloom
You no idea what they're doing. So she said, look, we really needed output management, which is like performance reviews, three six days assessments, etc. that is already better in the office. You're much better assessing people on what they do in the office. But at home is totally critical. So it turns out the single most important piece of management training, HR, is assessing people on performance, giving them feedback on that.

00;10;09;10 - 00;10;16;00
Nick Bloom
And for firms that didn't have that pre-pandemic, they really struggled in 20 2021. And I basically had to put that in place.

00;10;16;02 - 00;10;41;17
Paul Sullivan
You know, for people who forget. I remember Marissa Mayer very well, because when she was CEO, my wife, my wife, works in financial services and had worked at Yahoo at one point and Marissa had had a baby and came right back to work. And then she sort of infamously, installed sort of her own personal nursery, right next to her office so her child could be there while she worked at she she banned you know, work from home for other people so that that didn't, there are many reasons why leadership didn't go.

00;10;41;17 - 00;11;00;08
Paul Sullivan
Go? Well, that was one of them. But when you think about, you know, working parents, and caregivers and how, you know, things have changed, you know, post-pandemic, we like to talk in terms of caregivers is obviously not everybody's a parent. Or you may have a spouse who who doesn't work outside the home. It can help, but everybody will be a caregiver.

00;11;00;11 - 00;11;33;15
Paul Sullivan
When you think about the ways that companies could, you know, have more of a trust based management system so that they could, accommodate people, who could, you know, work synchronously a certain number of hours per day and then asynchronously the remainder of the day. Are there any companies that you have found who are really, leading the way on thinking about, you know, different modalities of of working the hours you need to work both, you know, when you can connect with your, your, your colleagues, but also all that mundane stuff that we could do, you know, any time of the day.

00;11;33;18 - 00;11;50;10
Nick Bloom
So what I give you, coming back to performance evaluation, the other reason this is great is like, if you're managing me, I really don't like the fact that you're going to say, hey, Nick, I want you to be online from 9 a.m. to 5 p.m. because it means I want to go pick my kids up from school or go to the dentist or go out.

00;11;50;10 - 00;11;54;27
Nick Bloom
I can't do well. I'd much rather is you say, hey, Nick, you just get your job done.

00;11;55;00 - 00;11;56;09
Paul Sullivan
And of course.

00;11;56;12 - 00;12;19;07
Nick Bloom
2 or 3 core hours, you know, maybe it's like 10 to 1 Pacific where everyone's around, but outside that you really want to have the flexibility to decide your day. So it turns out, coming back to the previous point, well, the big thing for both firms and employees is output evaluation. Because as an employee, I can then flex my day around it like, you know, pick your kids up, drop them off, go for a run, do whatever you like.

00;12;19;14 - 00;12;40;18
Nick Bloom
When you interview people, they say, look, the number one advantage of working from home is no commute. That's like a massive, benefit. But number two is flexibility. And so the thing you really want to avoid in companies is not trusting employees and micromanaging and having, you know, those, keystroke monitors, the thing you really want to do is say, I care about what you achieve.

00;12;40;18 - 00;13;07;29
Nick Bloom
I never evaluate that on that. How you get it done. You know, I'm going to leave you a lot of flexibility around that. And if you think of Big World and a lot of the tech companies investment banks, etc. generally, I mean, I worked at McKinsey years ago, used to put these things in to clients. And it's not rocket science is kind of, you know, you talk to my customers, my clients, my coworkers, look at some of the data and assess reasonably accurately whether I've achieved what I was supposed to been doing for the last 3 to 6 months.

00;13;08;01 - 00;13;24;00
Paul Sullivan
The managers that you that you've talked to, that you've interviewed, figure this out and seem to be having the most success with the post-Covid way of working. How are they doing it and how did they come to those management strategies? You know, what can they teach the rest of us?

00;13;24;02 - 00;13;52;20
Nick Bloom
Sure. So I think a few things have set it out. One is and even I've even changed my mind on this. So I'll be the first to say, you know, the data change. My view is the battle between what I call choice versus coordination. So early on in the pandemic 20 2021, I thought, look, if you're going to come into the office three days a week, you should let people choose tools really natural to do that turns out from talking to companies, looking at the data, interviewing people, the thing that really upsets employers most of all is coming and spending all day on zoom and going home.

00;13;52;23 - 00;14;11;16
Nick Bloom
They're like, why did I commute from, you know, and, you know, and, and 20 minutes to come in. And so one critical thing is team. My team or at the company level coordinate on the days in this. There's no point. You're in Monday, I'm in Tuesday, you're in Wednesday and Thursday, etc.. So one thing now is nobody's coming in on Friday.

00;14;11;16 - 00;14;30;10
Nick Bloom
So you know, kind of give up on Fridays. That's clear work from home. I would probably choose the vanilla flavor here is say come in Tuesday, Wednesday, Thursday. What that means is Tuesday, Wednesday, Thursday. You have lots of meetings, presentations, training. People shouldn't be sat for hours doing email. If they do, they probably don't need to be in, Monday Fridays quiet time.

00;14;30;10 - 00;14;50;20
Nick Bloom
So that's one big policy that's kind of norming out. Another interesting one that's kind of cool is some organizations are setting up maybe a remote couple of weeks or remote months. So again, take Stanford. We're very seasonal because students come and go. And over the summer of summer camps, some departments are very quiet. For July and August. You could say, look, it's not a holiday.

00;14;50;24 - 00;15;10;13
Nick Bloom
To be clear, but but it's going to close the office for August and you can just work fully remotely. And that is an enormous park. It's a quiet time anyway. So it's not particularly a cost for an organization. There's a set of things like that whereby you think, well, look, what's the point of the office, the office for people to come in and work together, train, kind of build connections.

00;15;10;13 - 00;15;16;01
Nick Bloom
Let's really focus on that. And then otherwise let people work from home and just evaluate them on what they perform.

00;15;16;04 - 00;15;34;05
Paul Sullivan
Do you think people need to be, you know, in the office and come together, maybe at least once a week, or is there any evidence showing that, you know, more, more remote firms when they bring people together for, say, monthly offsite or quarterly offsite that they can accomplish, similar goals?

00;15;34;07 - 00;15;52;09
Nick Bloom
It's so it depends massively on what you do. There's an enormous mix so fully remote. It's like when I'm going, I'm going to go something fully remote. When you are working from home on a standard Monday, Tuesday, Wednesday, Thursday, Friday, yeah. It turns out in the data 70% of fully remote jobs and basically all of them that are grad jobs tend to still have these offsite.

00;15;52;11 - 00;16;13;09
Nick Bloom
So click Classic company to someone like Atlassian. No, Airbnb, that'd be fully remote. But every six weeks they meet up for 2 or 3 days, you know, connect up. Is that enough? It depends on what you do. So if you're doing something, particularly if you're a new hire, like, I talked to a lot of undergrads, MBAs at Stanford and generally think look for mentoring particularly early on.

00;16;13;09 - 00;16;30;18
Nick Bloom
You probably want three, maybe four days a week. So that kind of setup isn't going to be ideal for a 23 or 24 year old, because you don't have that much face time. On the other hand, that kind of thing may be fantastic if you're a very experienced coder in your mid-thirties, you got two kids. You know you've been doing this for 15 years.

00;16;30;23 - 00;16;44;17
Nick Bloom
You probably only need to meet once a month in person or once every other month and do the rest. So that's like GitHub or Airbnb. Airbnb is going to have older, more experienced employees. So it depends a lot on the role and also who's doing who's in the room.

00;16;44;19 - 00;17;06;04
Paul Sullivan
If you're an employee and you're a high performing employee, because let's assume that you know, companies say they're managing for everybody, but you really don't want your top 30% to walk out the door and you're pretty confident your bottom 30%, then I have a lot of options. But this top 30%, if they're sort of chafing at, you know, the current management structure around, you know, anchor days or in-person days, which is remote days.

00;17;06;06 - 00;17;24;06
Paul Sullivan
Do you ever do you have any thoughts to them as to how that that, you know, high achieving employee can perhaps change the view of his or her manager to, to allow them to realize that, a more flexible with intentionality, working system may benefit everybody.

00;17;24;08 - 00;17;42;01
Nick Bloom
Yes, I totally so I've put out a lot of stuff if you, you know, I put up many packs and things on LinkedIn. The thing in the New York Times, The Economist, etc. I think it's a pretty easy argument to make and factually based on various research papers that letting people work from home two days a week is clearly a win for the company.

00;17;42;03 - 00;18;05;10
Nick Bloom
And we see this is overwhelmingly two, three one, two something, one two, three days a week. There's no exact number but some mix. So this is overwhelmingly standard now across finance law firms, tech firms, you know, manufacturing for managing professionals. Why is that. Well employees value it a lot. So recruitment and retention is a lot easier. And it doesn't seem to have any net effect on performance.

00;18;05;12 - 00;18;22;12
Nick Bloom
It's a different thing thinking about fully remote. So fully remote. The upside is you can hire national globally. So when I talk to fully remote people, they're like, well, you know, we can hire people in, the, you know, the southwest. Or we can have people, you know, in South America, Asia, etc., and you don't have any office space.

00;18;22;15 - 00;18;39;27
Nick Bloom
The downside is it looks like it's a bit harder to mentor young folks, you know, creativity, innovation, suffer a bit. So that's more of a trade off. But I think if you're being forced back five days a week, it's a very easy argument to make to say, look, you know, I don't need to be in on Friday.

00;18;39;27 - 00;18;59;27
Nick Bloom
I probably don't need to be on another day a week. If you organize things, we can have three really compact days of, you know, face to face time. Because if you go back to 2019, when you're in the office, you often spend 2 or 3 hours in any day on email, you know, doing PowerPoint, doing individual stuff, doing looking things up that can easily be pushed to Monday, Friday and have three very concentrated days.

00;18;59;29 - 00;19;14;14
Nick Bloom
And in fact, there's a famous study in the proceedings of the National Academy of Sciences and what's called bursting. So it's a great paper. What it does is it takes hundreds of subjects and breaks them up into three different experimental, so one of them, they have to cut, they all have to come up new ideas for this product.

00;19;14;14 - 00;19;31;17
Nick Bloom
And one of them, they're all basically pushed into the big room for six hours and asked, you know, that kind of post-it note? Hell have like everyone coming up the ideas and then, two is the exact reverse. They're all pushed into individual cubicles and said to think about it quietly on their own for six hours. Three is what's called bursting.

00;19;31;17 - 00;19;46;04
Nick Bloom
Had an ad together and then an asset alone and an hour together. An hour alone and not together. No, no. Freedom three turns out to do the best because you kind of need a mix. And that's what hybrid gives you. It gives you some quiet time on Monday and Fridays. You don't have to commute. You're, you know, recharged.

00;19;46;11 - 00;19;50;02
Nick Bloom
And then you have some active engage time. Tuesday, Wednesday, Thursday.

00;19;50;05 - 00;20;11;16
Paul Sullivan
Yeah, I know you're in the economics department at Stanford, but when you look at, you know, some of your colleagues in the business school, are those sort of future managers, future leaders or have have the courses changed so that they're clipping them to sort of manage in more of a hybrid environment where the Stanford MBA grad of 1993 versus 2023 might not have had that type of mentoring.

00;20;11;18 - 00;20;29;02
Nick Bloom
That I've done. Yeah. One thing is all teaching's in person. So we obviously in 20 2021 we taught online because of lockdown. But, you know, as soon as that was lifted we were all back in person. I also don't think it's that radical. So if you think of, you know, a typical MBA is probably going to work from home one maybe two days a week post-pandemic.

00;20;29;04 - 00;20;48;27
Nick Bloom
So just think back to 2019. The MBAs from Stanford probably are working 70 hours a week. That's probably a typical you know, they're pretty hard working, pretty focused. They're probably only in the office or a client side 50. They're probably already doing a bunch of stuff in it. You know, when I was at McKinsey, my weekly timesheets were eights, and a lot of that was evenings we can.

00;20;48;27 - 00;21;08;20
Nick Bloom
So we're moving in a, you know, a direction of rather than, you know, having 4 or 5 days in. But mostly the key things we focus on is, you know, performance evaluations, a lot of interpersonal stuff. I don't think it's that radical. If you're fully remote, it is quite different. So to be clear, yeah, I'm an advisor to an investor in a few startups.

00;21;08;20 - 00;21;24;13
Nick Bloom
They're kind of small tech startups. Some of them are entirely remote and they have really different. They have like 4 or 5 people that really engage really motivated them. I have 2 or 3 coders. One of them has coders out in Brazil, another one has some in Israel, for example. I mean, obviously they're they're they're struggling a bit now.

00;21;24;13 - 00;21;44;15
Nick Bloom
But you can imagine the broad idea is a couple of folks in the US, we don't have to pay for office space. We have these founders, they're engaged, they're motivated. But in bigger companies, typically our MBAs, probably in 3 or 4 days, we kind of don't see is that radical. So we haven't massively changed the teaching because the core of it is still there.

00;21;44;18 - 00;21;53;09
Nick Bloom
The core is as it was. If you're fully remote, I think it is somewhat more different. But, you know, very few MBAs are going into fully remote remote because of the mentoring issue.

00;21;53;11 - 00;22;04;07
Paul Sullivan
You know, an idea being floated now, has been floated for the past year or so is the four day week. What are the pluses and minuses of, a fixed four day week?

00;22;04;09 - 00;22;20;24
Nick Bloom
Okay. So this this it was just writing up a blog piece on this. And so my, my, overview on that is there are four versions. One are called magic and the other three are called muggle versions of the Harry Potter. So why do I go through the muggle brush? Actually, I'll start the magic version. So what's the magic version?

00;22;20;29 - 00;22;41;06
Nick Bloom
The magic version is you can get paid for five days, but you only work for four, but you produce five days worth of output, so you magically basically work one less day and everything's the same as before. When I talk to managers, they're like, massively offended by this. I'd say, like, you know, you mean me just totally wasting a day.

00;22;41;08 - 00;22;55;19
Nick Bloom
And we just, you know, do you think I'm an idiot? You know, this is a competitive industry. I have performance bonuses. I show you, I push my team hard, and then some will obviously say, well, there are these pointless meetings. And I say, well, sure, but you only know they're pointless after there's not like my calendar, says Nana.

00;22;55;20 - 00;23;20;12
Nick Bloom
And meeting 10 a.m.. Meeting 11 a.m. meeting 12:00 pointless meeting. It's like it's like lottery tickets until you've actually the lottery is drawn. Who knows? So that magic version I honestly, I don't think really exists. There's I, you know, the evidence is not really evidence is kind of, you know, PR pieces by funded. Then there are three Michael muggle versions just to here and now and I definitely quite interesting.

00;23;20;12 - 00;23;39;28
Nick Bloom
So one of them is what's called shift change. So quite a few organizations rather than say have folks that they're working say 40 hours, eight hours a day for five days, say, look, you're going to do for longer hours for sorry, for longer hour days. So manufacturing has done this for a long time. We do like ten hours a day for four days rather than eight for five.

00;23;40;00 - 00;23;59;06
Nick Bloom
The second is just part time. So in my first job, actually, I was doing a PhD and I asked to have one less day and be paid for one less day. And that, you know, you can do four other than five. The third is we're now working from home on Friday. So effectively for offices and public transit, you know, city centers is a three day weekend.

00;23;59;06 - 00;24;21;12
Nick Bloom
It's not really we're not working or are we working less but we're not not working. So those are really appealing to I'm totally in favor of them. So yeah, in some senses the four day week is here already, but just not the kind of magic version. That's the extreme end of some of the, I guess most I, most fervent supporters want, want us to move towards.

00;24;21;14 - 00;24;49;15
Paul Sullivan
You know, some some companies have figured this out pretty quickly. You talked about having worked at McKinsey consultants, figured this out, you know, but you talked that there's going to be in that near times piece a need to reimagine some things. And, you know, most of my attorney friends are going in for anchor days or doing this, but the only attorney friends I have who are going in five days a week are, of course, the attorneys who do anything involved with real estate because all of their clients demand that they be in a physical office because this is how they make their money.

00;24;49;21 - 00;25;11;28
Paul Sullivan
So when you're in industries like that, you know, real estate is not exactly, you know, horse and buggy, type type stuff, but the wholesale real reimagining of a real estate could be challenging. What do you say to those industries where the pushback is, hey, this is a bit more challenging, or our business depends on people being here in person, even if it if it really doesn't.

00;25;12;00 - 00;25;32;00
Nick Bloom
I mean that, as you point out, horse and buggy change comes and changes, you know, the state of the world. And when the car came along, people making, you know, courts saw a downturn in business. So it is definitely the case that we have hit peak office. I mean, that we just have too much office space in city centers, particularly nasty office space.

00;25;32;00 - 00;25;54;02
Nick Bloom
So what I see is the future is kind of here now. It's not even the future is big companies. Companies want nice offices in city centers. Why? Because if you're coming in three days a week for hybrid, you want to summer convenient. So Class-A office and city centers is doing okay. What's really suffering is going to class be like, not so nice because now why would I come in to meet in a not so nice office when I can work from home?

00;25;54;02 - 00;26;12;23
Nick Bloom
So that's definitely suffering. City center real estate is suffering. It's in the long run is going to adjust. I saw some estimates from JLL that it would take ten years and eventually office occupancy would drop, you know, will rise back to where it was pre-pandemic. That adjustment, though, is going to come from reduction in office space, not from people returning to the office.

00;26;12;29 - 00;26;33;02
Nick Bloom
So I think about it, you know, it's like Game of Thrones, winter has come to the office. Construction is great. There's very few new starts now. There's a lot of conversions. You know, even just today, there was yet another article in the paper in the Times, and I saw one earlier in the New York Times about, so the Wall Street Journal, about converting offices into residential.

00;26;33;02 - 00;26;53;09
Nick Bloom
So, yeah, it's an adjustment, like any big change, you know, like, in-person retail has been suffering a bit because of online. Well, city center offices, we're seeing a big shift out to the suburbs. So suburban offices are actually doing okay, too. What's really suffering is in meltdown as kind of city center offices. The other thing that's hit it a bit interesting is the slowdown of tech.

00;26;53;09 - 00;27;12;27
Nick Bloom
So it turns out tech only occupied about 8% of office space pre-pandemic, but was buying about 35% of new bill. So tech had a voracious appetite for buying up new build. And suddenly Tech's no longer expanding. So that's, you know, this this double whammy. You got two punches in the face. One is work from home and the other is the slowdown of time.

00;27;12;29 - 00;27;31;14
Paul Sullivan
Yeah, yeah. Professor Nick bloom from Stanford University, thank you very much for joining me today. And a company that's podcast. Last question. Just you know, for people who skip to the end, give it to me like you did in that New York Times piece. What is the PNL argument for managers to allow workers to go hybrid?

00;27;31;17 - 00;27;51;25
Nick Bloom
The argument is a lot of studies show the impact of hybrid. Let's say, coming in Tuesday, Wednesday, Thursday. Working for a Monday Friday on performance and productivity is about flat. You may think, well, wait a minute, there's two days of less space time. Surely that's bad? Yes, that's true, but there's also two days now you're saving at just over an hour a day commuting.

00;27;52;00 - 00;28;08;12
Nick Bloom
Some of that people used to work, and there's also two days it's quieter at home. So it turns out, and the data performance is about flat. So your net net zero and performance space, you maybe save a bit of space. But the big kick of the big saving of cash or the big profit line for firms is recruitment and retention.

00;28;08;15 - 00;28;36;27
Nick Bloom
So the numbers look like in the studies. People value work from home hybrid about an 8% pay increase, or it reduces quit rates by about 35%. If you're a company, every person that quits on you typically the numbers about half a year of salary for that person to hire someone trained them up. So look, if you have, you know, 150 K grads and you reduce that quit rates by a third, you may be save, you know, ten, 20 million a year for a bigger company, hundreds of millions really large companies.

00;28;36;27 - 00;28;59;16
Nick Bloom
So it's a it's a simple sales pitch. Yeah. You're basically doing. Yeah. It's like what's not to like performance is the same. We save a bit of space, we save a shedload on, recruitment, retention and salary bill. Like, why wouldn't we do it? So pretty much all firms are doing it. The few exceptions. There are some companies with very strongly minded CEOs.

00;28;59;19 - 00;29;18;17
Nick Bloom
And these, as you can think of them, you know, they've had hyper successful careers. There's some amount of chest beating going on. These people work 100 hours a week. They're have hundreds of millions invested in their companies through stock options, stock grants and you know, they're not like us. Their their world is work. When they walk into the office, everyone laughs at their jokes because they're the CEO.

00;29;18;17 - 00;29;30;06
Nick Bloom
And so they want to come back. But most of the rest of us from, you know, the C-suite down. I like to be honest. I have a family. I have life outside. I have other things going on, and I just like to be at home two days or three days a week.

00;29;30;09 - 00;29;32;27
Paul Sullivan
Thank you again, Nick. It's been great talking to you today.

00;29;32;29 - 00;29;37;07
Nick Bloom
Oh, hi. Thanks very much. Good to catch up.

00;29;37;09 - 00;29;57;15
Paul Sullivan
Thank you for listening to another episode of the Company Dads podcast. I really appreciate you tuning in week after week, trying to use this moment here to thank the people that make it possible. Number one of course held a mirror who is our podcast editor. We also have Skype. Terry, home to many of you know from Lead Diaries, he's taken over our social media.

00;29;57;15 - 00;30;18;04
Paul Sullivan
Terry Brennan is helping us with our audience development. And Emily Serban is there, each and every day helping with the web development and can't do any of this without, an amazing board, of advisors. So I just want to say thank you to all of you who help. And I want to say thank you to everyone who listens.

00;30;18;12 - 00;30;21;00
Paul Sullivan
And, hopefully you'll tune in again next week.

00;30;21;00 - 00;30;21;17

Thanks so much.