Ep71 “The Working From Home Revolution” with Nick Bloom

All Else Equal Podcast: Work From Home - A Deep Dive

Key Concepts:

• Hybrid Work: A work model combining in-office and remote work, typically 2-3 days per week in-office.
• Equilibrium Shift: The idea that external shocks (like COVID-19) can cause a fundamental change in established work patterns.
• Performance Reviews: Formal evaluations of employee output, crucial for managing remote work effectively.
• Coordination Mechanisms: Strategies for aligning in-office days to facilitate collaboration and culture building.
• Fertility Rate Impact: The surprising link between work-from-home arrangements and increased birth rates.
• Skill Premium & AI: The potential impact of artificial intelligence on job displacement and income inequality, and how it interacts with work-from-home trends.
• Personal Trainer Effect: The idea that physical presence (like a teacher or trainer) provides motivation and accountability that is difficult to replicate remotely.

I. Introduction & The Post-COVID Workplace

The episode centers on the evolving landscape of work from home (WFH) following the COVID-19 pandemic. Jules van Binsbergen and Jonathan Berk introduce Nick Bloom, a leading researcher in the field, to discuss whether WFH is a lasting change or a temporary phenomenon. Berk initially posited that WFH wouldn’t become widespread, viewing work as a necessary structure (“daycare for adults”), but acknowledges the potential for a shift in equilibrium due to technological advancements (like Zoom) and the pandemic as a catalyst. The discussion highlights the anecdotal evidence of returning traffic patterns suggesting a return to pre-COVID norms, but emphasizes the need for data-driven insights.

II. Current State of Work From Home (Data & Trends)

Nick Bloom presents current data (as of 2026) indicating that approximately 33% of the American workforce is hybrid (working from home 2-3 days a week), 10% is fully remote, and 60% is fully in-person. This represents a fourfold increase in the percentage of days worked from home compared to 2019 (7% vs. 25%). Bloom notes that the office market is struggling as a result of this shift. He emphasizes that WFH is “here to stay,” but not in the extreme form initially predicted during the pandemic.

III. Firm Profitability & The Three-Group Model

Bloom explains that firms are adopting WFH strategies based on profitability. He outlines a three-group model within typical large organizations:

1. Essential In-Person: Roles requiring physical presence (cleaners, food service, security, transport).
2. Hybrid Professionals: Faculty, administrators, and middle managers typically working in-office Tuesday-Thursday.
3. Fully Remote: Employees often located far from the office, hired for cost-effectiveness.

He argues that fully remote employees are often cheaper to employ, making this arrangement profit-maximizing for the company.

IV. The Trip.com Randomized Control Trial & Performance

Bloom details a randomized control trial conducted at Trip.com, a $50 billion travel agency. 1,500 professionals were randomly assigned to work in the office five days a week or three days a week. The results showed no effect on performance between the two groups. However, employees reported needing in-office time for mentoring, connection, and culture building. Critically, the study found a 33% reduction in quit rates among the hybrid group, saving the company an estimated $20 million annually due to reduced recruitment and onboarding costs. This supports the idea that hybrid work can boost profits.

V. Coordination, Performance Reviews & Enforcement

Bloom stresses the importance of coordination of in-office days to maximize the benefits of hybrid work. He cautions against allowing employees to choose their in-office days arbitrarily, as this can lead to a fragmented and ineffective work environment. He emphasizes that robust performance review systems are essential for managing remote work, as managers cannot directly observe employee activity. He also highlights the importance of enforcement of policies, citing an example of a Fortune 50 company with a poorly enforced three-day in-office policy. He states, “Enforcement of policy is about as important as the actual policy itself.”

VI. Long-Term Effects & Societal Impacts

Berk raises concerns about the long-term, unmeasured effects of WFH, particularly regarding socialization and the subtle learning that occurs through informal interactions. Bloom acknowledges these concerns, noting that classroom teaching is best done in-person. He discusses research suggesting that hybrid work can boost fertility rates, potentially by making it easier for couples to balance work and family life. He estimates that the pandemic may have led to 300,000 additional births in the US. He also predicts that AI may reduce inequality by disproportionately impacting professional jobs, while in-person roles remain more stable.

VII. The Role of AI & The Future of Work

Bloom suggests that AI will likely reduce inequality by automating tasks typically performed by highly skilled professionals. He acknowledges the limitations of current remote collaboration technology, citing the “personal trainer effect” – the need for physical presence to ensure engagement and accountability. He mentions the company Noro and their large-screen technology as a potential step towards more immersive remote experiences, but emphasizes that even with advanced technology, the benefits of in-person interaction remain significant.

VIII. Conclusion & Key Takeaways

The episode concludes that WFH is a permanent feature of the modern workplace, but primarily in a hybrid form. The decision to adopt WFH policies should be driven by profitability, with a focus on coordinating in-office days, implementing robust performance review systems, and enforcing policies effectively. While WFH offers benefits such as increased employee satisfaction and reduced turnover, it also presents challenges related to socialization, mentoring, and the potential for reduced productivity if not managed properly. The long-term societal impacts of WFH, particularly regarding fertility rates and the impact of AI, remain areas for further research.

Notable Quotes:

• Jonathan Berk: “Work is daycare for adults. Adults really need structure in their lives and that’s what the jobs provide.”
• Nick Bloom: “Anything that makes companies money tends to stick around.”
• Nick Bloom: “Performance reviews go critically with working from home.”
• Nick Bloom: “Enforcement of policy is about as important as the actual policy itself.”