Nicholas Bloom – TEDx Talk TRANSCRIPT
I’m guessing many of you are pretty suspicious about working from home.
When I worked in London, I worked in McKinsey and the Treasury, which is the finance ministry. My friends would tease me all the time about working from home. They would say working from home is shirking from home or working remotely is remotely working.
They were not very kind to me about working from home; they claimed I watched those old black and white movies all day and actually did nothing at all.
If you’ve travelled on the subway, you’ve probably seen these sketchy adverts that say things like “Work from home, earn thousands of dollars monthly,” which strikes me as, A, an implausibly large amount of money and, B, way too many exclamation marks even for someone who’s done middle-school English.
In another direction, if you listen to music or follow the charts, you may know this song: it’s “Work from Home” by Fifth Harmony. You can probably figure it’s not a very good representation of the positivity of working from home. This was about the cleanest cut photo I could get from the album; they had the most amount of clothes on in this picture compared to anything else.
To tell you how bad it is, the chorus line is:
“Ain’t nothing but sheets between us,
Let my body do the work,
You’re the boss at home.”
Which tells you this is really not about work, something else is going on.
So this is, you know, also very negative about working from home.
Online, it’s similar. If you go to Google or to Bing and you punch in “working from home” into image search, what do you get? Well, you get something that looks like this. A lot of pictures are basically naked people, cartoons, people juggling way too many babies to actually be doing anything constructive.
The reason I show you Bing is that Bing nicely shows you multiple other searches which are common searches that go with this. You can see other common searches are “working from home funny,” “working from home comics,” and my favorite one is “working from home in underwear.”
Apparently, people are regularly searching for it all the time, maybe you can push it up to top if you go and search for it now. And it’s not just online.
The media – I talk to journalists quite a lot, and journalists, most of the time, are actually working from home. Despite that, they were very suspicious about working from home when the big storm erupted after that leaked memo from Yahoo in 2013. If you cast your mind back, you may remember Marissa Mayer, the CEO of Yahoo.
Back in 2013, on a quite Sunday, some memo gets leaked out, claiming they are going to ban working from home at the firm. Marissa Mayer probably never could have guessed that in her long time at Yahoo, going through her start, her time there, all the ups and downs, and eventually exiting, this would be the event generating the most press coverage for her.
The press went wild for the next two weeks, there was masses of coverage in printed media, radio media, on TV media. And you can see here, I put up some examples from the Economist, from the Wall Street Journal, from the New York Times, from Bloomberg. All of it was debating very heavily about pros and cons of working from home.
On one hand, there were people saying, “They are loafing off, not doing anything; they’re watching TV in their underwear.”
The other side saying, “This is the workplace of the future; it’s a more productive way to operate.”
I should actually end by saying that probably the example of why working from home is potentially seen as so bad is – a friend of mine told me a great anecdote. She said her 12-year-old daughter went out shopping with some friends. Her 12-year-old daughter came back, and she had bought a baseball cap, and on the baseball cap it said “working from home.”
Her mom said to her, “You are not wearing that baseball cap out of the house!” As if it was like a T-shirt that said “Hey, big boy, I’m easy” or something.
Shows you how low the working from home has sunk as a concept. I work from home a lot. I’m very positive about working from home, and I actually think it has enormous potential, as much potential as, say, something like the driverless car.
Let me explain why.
The average American spends about 45 minutes a day commuting into work and about another 45 minutes a day commuting back from work. Almost all of that is done by car. There are about 150 million working Americans, there is probably about another 500 million people working in similar situations in Europe and South America and Asia and Africa.
Now, imagine if we could take just some share of those people and allow them to work from home on a daily basis. The enormous amount of time you’d save, the huge amount of money you’d save in terms of reduced car travel, and moreover, the amazing impact you’d have on reducing pollution. So I think it has a tremendous potential.
And then you should ask yourself: why do we focus so much on working in the office. This tradition has gone back a couple of hundred years to the Industrial Revolution. So I guess in many ways you can blame the British for this, but before the Industrial Revolution, around 1800, everyone basically worked from home: we were farmers, we were artisans, we were craftsmen.
Around 1800, modern workplaces started to be formed, we started to mass in factories and offices, and the modern form of commuting to the office and back or to the factory and back started to be set and stored.
But a lot has changed in the last 200 years, in a sense, we don’t need to be like this anymore. There’s modern communications, modern computer systems, the Internet.
So one of the things I want to argue is the way that we organize the office, the way we organize factories is something that is very backward looking, and it doesn’t need to be that way anymore. I have kids, and it reminds me a lot of these long summer holidays.
The summer holidays for three months is a huge challenge for parents. What on earth to do with your children for three months? You ask, “Why do we have these long summer holidays?”
Again, it’s one of these throw-back things because when the school day was starting to be structured a couple of hundred years ago, we’d release kids to go and harvest the fields. And I don’t know about any parents here, but my kids certainly are not doing any harvesting anymore in the, you know, the bare in the summer.
I’m going to argue working from home is a future-looking technology; I think it has an enormous potential. Now, that’s my claim.
What I’m going to talk about for the rest of the day is some evidence to support that. I wanted to collect evidence that was scientific. My father is actually a scientist, he does lots of drugs testing, I talked to him a lot about that.
If anyone here is in the pharmaceutical industry or works at the Federal Drug Administration, you know that to prove something like a medical device, you have to separate out into a large pool of subjects, randomly pick some treatment and some control, allow one to take the drug, one not to, and to follow them through for months on end.
So I wanted to do something very much like that for working from home, to scientifically test it. I was fortunate enough that I found a company that would do that with me, it’s called Ctrip. They are China’s largest travel agency, they have about 20,000 employees, they’re worth about $20 billion on NASDAQ.
Here’s a picture of their headquarters in Shanghai. They look like any kind of modern office: very dilbertesque, lots of desks and cubicles, and thousands of people working, taking calls, typing on their computers, dealing with customer complaints, coming out with new products, managing their team.
Why would they be interested in working from home? They’re interested in working from home because Shanghai is a phenomenally expensive place to run a business; it has incredibly expensive property prices. And they were growing rapidly. Their aim was to try and grow, but without increasing their office space.
It’s probably a similar thought for many people here that operate in the Bay area or in New York or in Chicago or London or Paris or Toronto or Tokyo or Johannesburg. Wherever you are around the world, office space is becoming very expensive in big cities.
So this is what motivated them to start down this road. Rather than to roll the whole thing out, they thought they would run a big working-from-home experiment. So they got a large number of volunteers from two divisions, that wanted to work from home, and they set it up as a randomized control trial.
In a very Chinese style, James Liang, who is the CEO, pictured here, drew a ping-pong ball out of an urn. The urn said “even,” which meant everyone who had an even birthday, so was born on the second, the fourth, the sixth, the eighth, the tenth of the month, got to work at home for the next nine months.
If you had an odd birthday, like myself, the first, the third, the fifth, the seventh and ninth of the month, you stayed in the office for the next nine months.
In fact, we tracked these two groups for about two years. This was to set it up as scientifically as we could.
Now, what did we find? Oh, oh…
Before we go to the results, I should point out – Here are the people working from home. It’s not clear, when looking at these guys, exactly what is going to happen. The person in the bottom right doesn’t look exactly very enthusiastic to me. I’m somewhat nervous, so are they, about some of these characters.
In the top right is another picture to show the downside of working from home. That’s her bed in the photo, so she has about a four-foot commute. Which is great and very efficient.
On the other hand, I personally really wouldn’t want to spend 21-22 hours a day in the same room, day in and day out. It’s certainly not for everyone.
To point out, just to get the experiment clear, they’re typically working in teams of 10 to 15 people, and they all have the same manager.
Here’s a team manager. She’s running her team: some of them are randomly sent home, some of them are randomly still left in the office, but they are all working under the same manager. Those at home come in one day a week. They may all come in on Wednesday; they’re at home on Monday, Tuesday, Thursday, Friday, the whole team is in the office on Wednesday.
She can monitor and see what’s going on, they’re all working the same shift. The only thing that’s really changing is where they work.
So, what do we find?
Before I show you the results, I want to prepare you by saying: remember what motivated it. What motivated it is that Ctrip was desperate to save money because they are paying an enormous amount to house all these people in Shanghai. Their view was to save a lot of money on getting rid of rent; they’d probably take a bit of a hit on people going home and basically goofing off.
I remember one of them saying they were worrying about them watching the Chinese equivalent of Jerry Springer or playing computer games. They were kind of mildly pessimistic, and they wanted to see what happens.
So what do we find?
Well, we found massive, massive improvement in performances: a 13% improvement in performance from the people working at home, which is huge! That’s almost one day a week.
How on earth did this happen? Where did this come from?
It came from two things. One is: people working from home really worked their full shift. If you’re in the office, you’re supposed to be there at 9 till 5, Monday to Friday, but they’d often come in late because their motorbike broke down, or they had a long lunch break because they were having a drink or two, they leave early for the cable guy.
Whatever it is, they were definitely not working all of the 9 to 5, Monday to Friday, whereas most people at home were much better at keeping time.
The second fact was it’s far easier to concentrate at home. For all of you that have worked from home, the office is actually an amazingly noisy environment. You’d hear stories of the person on the desk next door, how her boyfriend has just left her, she’s in tears; there’s a cake in a breakout room, Bob’s leaving, come join; the world cup of sweepstake is going on – whatever it is, the office is actually super distracting.
So that was finding one.
Finding two: quit rates dropped by 50%. So for anyone out here that’s a manager, you know the nightmare of endlessly advertising, interviewing, recruiting, training, getting up to speed employees only to see them leave again.
Ctrip’s quit rate is about 50% a year, which turns out to be about the average for the whole U.S. This again is an enormous impact. Basically, employees are voting with their feet; they love working from home.
Not only do the employees benefit, but the managers benefit because they can spend less of their time painfully advertising, recruiting, training, promoting, exiting again, and spend it more on work.
Finally, at the end of the experiment, it was so successful that Ctrip rolled it out to the whole company and let everyone change their minds. Some people actually gave up working from home.
There’s the old saying that the three great enemies to working from home are the fridge, the television, and the bed. Some people got overcome by one or many of those three. They literally said, “I can’t take it anymore, I’m coming back to the office.”
Other people changed their mind. What you saw at the end of it is performance goes up by 24% because only people that were left, people that were working from home, were people that could concentrate.
Choice in combination with working from home is just hugely impactful. It doesn’t need to be four days a week; it can be one day a week, but certainly some combination of a bit of working from home and a bit of choice is incredibly impactful.
So, what about Ctrip? They reckon they made about $2,000 more profit per person at home. They were superpositive; they rolled it out to the whole firm.
I want to end by saying I want to kill the cartoon stereotype of working from home. I love the Simpsons, I love Homer Simpson, he’s close to my heart, in some ways. I love this cartoon because, A, Homer Simpson is too lazy to actually to get dressed, he’s wearing his pajamas, or it looks like Marge’s nightgown, it’s hard to tell, and, B, he’s too lazy to even get to touch the commuties, pushing it with the broom.
I want to kill this stereotype of working from home and say there are massive benefits. For employees, they are much more productive and happier; for managers, you don’t have to spend so much of your time recruiting and training people all the time; for firms, you make far more profit.
In Ctrip’s case, they made $2,000 extra per person from saving rents and productivity. And for society, there’s a huge saving in reducing congestion, reducing driving time and ultimately, reducing pollution.
So think very seriously, I implore you to think very seriously about working from home, even if you try just one day a week. Give it a try; there’s not much to lose, and there’s a lot to get.