Why Stanford’s Nick Bloom thinks RTO is dead as a doornail

The drive to push US workers back into offices is fizzling out, according to Stanford economist Nick Bloom.

Bloom, one of the academics behind WFH Research, recently proclaimed return to office (RTO) mandates a dead end. His evidence? Stats showing the decline in the percentage of paid full days worked from home since the height of the pandemic has flatlined. In 2023, that percentage stayed steady at around 30%.

Supporting remote workers falls squarely into IT’s lap, and polls have shown tech workers tend to be particularly enthusiastic about working from home, so RTO’s ultimate fate is one of the most important factors shaping the future of work for IT and cybersecurity specialists. IT Brew chatted with Bloom about why he thinks RTO “died at the end of 2022” and won’t be coming back anytime soon.

On why RTO is “hugely profitable”

A typical firm, the numbers are it costs about 50% of somebody’s annual salary to have them quit, get a new person, train them up. So if you have a $100,000-a-year worker, and because you forced them back to the office five days a week, they quit, and you’ve actually just lost 50k…

Fully remote, there’s a wide range of impacts on productivity. Sometimes very negative, if it’s badly managed. Some like Github-style setup, with it lasting, can even find positive effects. When I talk to companies, the sales pitch on fully remote is you save about 10%. So you don’t have any overhead costs, and you’re dipping into a way larger labor market. Typically, you may be saving 20% to 30% for a given level of talent because you can hire them wherever you are. So fully remote is also hugely profitable, even if it’s negative on productivity.

On why to expect a “Nike swoop” where working from home rises again

In the long run, it’s pretty clearly going to rise. Why? Because technology is getting better and better. So you know, we’re on like smaller laptops and grainy videos, and bad microphones. It’s going to be holograms, augmented reality, better software and hardware…That is in the pipeline. In fact, the economics of it is what’s driving it…

The market for WFH products has got about five-fold bigger, because of the pandemic, so the rate of innovation has picked up a lot. I see this in Silicon Valley—tons of VC software firms, hardware firms, are like, “Oh my god, there’s so many people, there’s probably 70 million Americans working from home.” Now that’s an enormous market, and so that technological progress is going to make it easier at the margin.

On whether there’s a ceiling to how many people can work from home

So probably about 50% of Americans can work from home. For many of them, that wouldn’t be great; 40% currently are, so that’s pretty easy. There’s probably another 10% that maybe could, but it’s kind of tricky.

When you drive into a burger takeout place, the first thing you do is a little speakerphone, you shout into it and they take your order. When you drive around, they give it to you. Turns out that used to be on-site—really obvious thing, you just have them in the back of the kitchen. Nowadays that’s remote, because the person taking the order doesn’t need to be in the kitchen at all. They can be 500 miles away in Omaha...

I don’t know that there’s an upper limit. I’m not sure—at some point. I mean, massage therapy? Seems hard to do that remote.