In today’s episode, Jason Hartman shares some good news for the landlords. He also tackles money transfer inefficiencies in Bitcoin and The Feds System banking transfer system. Afterward, he welcomes Dr. Nicholas Bloom, Professor of Economics at Stanford University, to talk about the changes caused by the pandemic. Dr. Bloom describes the increase in work from home set up and asks about the productivity of the people working from home. They also discuss the effect of the work from home trend on the rental environment and the best way to fix the economy.
Announcer 0:02
Welcome to the creating wealth show with Jason Hartman. You’re about to learn a new slant on investing some exciting techniques and fresh new approaches to the world’s most historically proven asset class that will enable you to create more wealth and freedom than you ever thought possible. Jason is a genuine self made multi millionaire who’s actually been there and done it. He’s a successful investor, lender, developer and entrepreneur who’s owned properties in 11 states had hundreds of tenants and been involved in 1000s of real estate transactions. This program will help you follow in Jason’s footsteps on the road to your financial independence day, you really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 0:53
Welcome to Episode 1654 1654. And our guest today is a professor of economics at Stanford University. He co director of the productivity innovation and entrepreneurship program at the National Bureau of Economic Research senior fellow at the Stanford Institute for Economic Policy Research. And he will be with us in just a moment to talk about all of the very important things going on out there in the economy in the economic world. But first first, landlords will mostly consider this good news. Are you ready for some good news? Yes, you are. Alright, so a federal judge has found that the Center for Disease Control the CDC eviction moratorium is on constitutional. I could have told him that. But I guess we needed a federal judge with all kinds of experience. I don’t have to say it. It’s a second what is clearly true. Okay, the case is likely to be appealed to the US District Court of Appeals for the Fifth Circuit. But for now, US District Judge john Barker, in the Lone Star State of Texas. He says that the moratorium is unconstitutional. And you can’t do this. You socialist people out there. Yes, the CDCs eviction moratorium is unconstitutional. The landlord has the right to their money. Show me the money? Yes. Absolutely. All right. I think that’ll be enough sound effects for today. Okay, all right. No sound effects for today. So that’s where we are on this. And most landlords would obviously consider this to be good news. It will probably be appealed. And we’ll see what happens. But, you know, I kind of thought, what the heck does the CDC have to do with this? Why are they intervening in this? That’s just does not seem right. I can see if some other government agency did that. But the CDC that just sort of seems out of place. Okay. So here is something I was just interviewed on a podcast. And one of the things I shared on that show that will be aired on Thursday on another podcast out there, I thought was important to say to you, you know, over the years, I have talked so much about measuring sticks. Yes, I have, I haven’t necessarily call them that. But sometimes I have. And one of the most common measuring sticks for understanding the value of anything in the world of exchange, and goods and services. The most common measuring stick, of course, you know what I’m gonna say, it is gold, the shiny yellow metal that has mesmerized humanity for 1000s and 1000s of years gold, right. And if you measure if you use that measuring stick for the price of real estate, you see some interesting things. And in fact, I have invited just today I invited our expert, Dan Ammerman, who was just on the show, and he’s been on many, many times over the years. I invited him back again to talk about this because he’s got a bunch of interesting charts about measuring the price of housing in gold, because of course, we always need to ask the question, compared to what Yes, we do. I know I said no more sound effects, but I just felt it was needed there. Because compared to what is a very important question. So we could also compare the price of real estate to cryptocurrencies like Bitcoin, we could compare it to Silver, we could compare it to oil, we could compare it to.
Now this is sort of a slightly circular comparison, but not completely. We could compare it to the price of lumber, or copper. Now those two things are ingredients in the actual house. So it might be like self referential, right? You know, that might not be the best comparison, because it is somewhat self referential. But comparing it to something like especially Bitcoin is really interesting. And it makes you realize how incredibly cheap housing is. In fact, we would have to say the price of housing is a bargain. Yeah, it’s a bargain. You know, I don’t do accents very well. I, I know I don’t even have to tell you that because you just noticed how much I suck at accents. Not all of them. I do one really well. But uh, you know, it’s a bargain, right? Anyway, it’s a bargain. Housing is a bargain measured in Bitcoin. And it’s a pretty big bargain measured in gold. And it’s a pretty big bargain. When you measure it in the monthly payment, adjusted for interest rates, and inflation, and current housing prices, you know that housing is cheap. And I’ve already explained that one to you, right. But as an aside, since I did mention, the big cryptocurrency world when Janet Yellen came back on board when she was back in the news, because sleepy Joe Biden brought her back on board to be treasury secretary to her first act was to attack Bitcoin. And it was kind of puzzling, actually, like, Why is she talking about that? JANET? Haven’t you noticed? We got a whole bunch of other problems, a whole bunch of other things happening out there in the world. Why are you all focused on Bitcoin in your first, like public talk? After being, you know, the former Fed chair now you’re, now you’re in the Treasury? So I’m looking at two CNBC headlines, side by side, one from February 23? No, wait, sorry. February 22. Okay, February 22. Janet Yellen sounds a warning about, quote, extremely inefficient Bitcoin. Then, on February 24, two days later, ladies and gentlemen, and Mr. Potato Head, all of you, Mr. Potato Head, I mean, Mrs. Potato Head, no, Ms. Potato Head. Just, we’ll just call you Potato Head. And ladies and gentlemen out there. Do you know the potato head joke? Yes, there it is. Folks, I throw it out there. I didn’t think I could insert it in actually recommended it. So I put it in there. Okay, so the second quote, just two days later, ladies and gentlemen, is the feds system that allows banks to send money back and forth is down. This is not according to yours. Truly. This is CNBC. Yep. CNBC, two days apart. They’re quoting Yellen, Janet Yellen. And then they’re talking about how you know how Bitcoin is extremely inefficient. And then two days later, they’re talking about how the feds system for sending money back and forth is is down. It’s broken, doesn’t work. You can’t write fiction.
That’s good, folks. That’s what I posted on my Facebook today, I thought it was quite fascinating. So measure things in multiple forms. Mostly when currencies are measured. They’re measured against other currencies against a basket of currencies. So if you look at like the DX y, and that’s the dollar index. And you’ll see that there. I mean, is that the right way to measure the value of the dollar just by measuring it against the yen and the Euro, etc? Or is the right way to measure it against maybe cryptocurrencies, maybe against gold, maybe against the price of oil or lumber or pork bellies or soybeans or coffee beans, right? These are all commodities that are traded globally not attached to any one currency. So they have a more intrinsic value because they are used by pretty much everybody in the human race. And I would say those are better measuring sticks than other fiat currencies. Fiat Of course, means by authority by decree, and that is not a valid measuring stick. It’s perfectly valid sure, because they have legal tender laws that reinforce that Fiat and they have belief people believe in them. And Fair enough, that is a legitimate form of measurement. But it’s not enough. You have to measure it against things that have truly intrinsic value. So this stuff is real complicated, we will continue to explore it. And we’ll do some of that exploring with our guest. Right here. And right now, here we go.
It’s my pleasure to welcome Nicholas bloom. He is a William d. eberly, professor of economics at Stanford University, co director of the productivity innovation and entrepreneurship program at the National Bureau of Economic Research, and senior fellow at the Stanford Institute for Economic Policy Research. Nick, welcome. How are you? Great.
Dr. Nicholas Bloom 10:47
Yeah, thank you for having me on the show.
Jason Hartman 10:48
It’s good to have you. And you know, it’s interesting, because both you and I have been doing a lot of thinking and research and just pondering what is changing in the world of economics, especially as it relates to real estate. You’ve been talking a lot about remote work, you know, this was already happening, of course, COVID accelerated it. I think that the civil unrest, the riots accelerated is well, you know, just give us your broad thoughts. And then we’ll, we’ll dive in more deeply.
Dr. Nicholas Bloom 11:19
Yeah. So I mean, COVID, has just been an explosion of working from home, I’m going to talk a bit about numbers. And just to explain, I’m not pulling these from thin air, I have been doing a long research project with co authors from a time in Mexico in Chicago, where we’ve been interviewing two and a half 1000, Americans aged 20 to 64. That earned $20,000 more last year. So you have this panel of people who’ve interviewed two and a half 1000 of them per month, plus around 1000 firms and talking to a bunch of execs, and you know, some basic stylized facts is working from home has absolutely exploded. So pre pandemic 5% of working full working days in the US were working from home. So it’s very rare 95% of days on the business premises, at the peak of the pandemic that went up to 60%, which is like an enormous increase in America during May, you know, June, July, April was basically a working from home economy, right now is back down to around 50%. And we forecast eventually, it’s going to drop back down to around 25% post pandemic. So sure it’s going down. But just to point out, there is a sea change, versus a year ago to what we’re gonna see after COVID with a dramatic increase in working from home.
Jason Hartman 12:32
Yeah, okay. So what does that mean? I mean, back in 2012, you might find this interesting, Nick, I was saying to our listeners, geography is less meaningful than it’s ever been in human history. And of course, it it’s still meaningful Look, I mean, I’m a real estate guy. We all know, the three primary rules of real estate, location, location, location. And location is still important, but those expensive locations are not as important as they used to be. And by the way, just so you know, for context, the reason I was talking about this back in 2012, was in relation to autonomous vehicles. You know, when when you have a self driving car, you know, you it’s not so important to be close to an office, even if you have to go to an office, but nowadays, we’ve totally disassembled the whole idea of an office in general. And, you know, I mean, I’ve been working on and off at home for a long, long, long time, but, but a lot of people, you know, just weren’t doing it. They didn’t like it when Marissa, I can’t think of her last name. Yeah, yeah. You know, when she took over at Yahoo, for her reign, you know, she said, Everybody come back to the office, right? And so, and she didn’t like the remote workforce, but
Dr. Nicholas Bloom 13:50
she I actually interviewed up so I spoke to about a month ago, some detail so I can give you um, you know, exactly as you’re going this has a huge impact on real estate. So why don’t I to preface what I’m going to say explain what the future of work from home looks like, from, you know, endless, just talking to exact like Marissa Mayer, like, Eric, you’re on the, you know, the CEO of zoom, etc. So the story we see is, right now, there are two types of workers there are those that can work from home menu, and probably honestly, most of your listeners, they tend to have a college degree. Under the pandemic, most of them were there about half the population. The other half the population cannot work from home, they tend to be lower educated, lower earning, like think of people work in shops and factories. On the first half, which is basically everyone is listening, post pandemic, the huge majority of farms are saying those folks can continue to work from home but something like two days a week. So basically, CEOs say look under the band, and we have no choice you got to work from home. We don’t want people getting infected. Post pandemic. There’s a big problem with full time working from home. It’s hard to be innovative, it’s hard to be creative, and we have a problem with company culture. We want you back in the office, but you only need to come back three days a week. So the typical model is, you’re going to be back in the office a Monday, Tuesday, Thursday, we’re gonna have all our meetings and client events and trainings, then Wednesday, Friday, so you can work from home. So what does this mean? Well, it has huge implications for real estate, which is, if you look at what’s already happening, there’s kind of a doughnut effect around the biggest cities in America. So take San Francisco nearby where I live, downtown San Francisco, right in the heart of the city is having, like, you know, a commercial and residential real estate apocalypse right now. So rents are down by almost 30%. And why is that because if you only need to be in the office right now, basically no days week, but longer run, say three days a week, you don’t need to live in the central business district, you can live say an hour away, what’s doing really well is the suburbs of nice city. So where I live in Palo Alto is actually doing very well, East Bay is doing really well North out, you know, beyond Berkeley’s doing what really well, the same as big cities across the US. So a lot of people have made the, you know, very rational decision, if I’m only going to come into work three days a week, I’m less exposed to my commute. And I care more about the quality of my my home. So if I was to invest in commercial real estate, or be going, you know, sure, as in selling stuff, right, in the central business district, the very heart of downtown Manhattan Island, and actually buying up the stuff that’s about an hour outside. And that’s, you know, exactly what the markets doing.
Jason Hartman 16:23
So So, first off, we don’t know, if that whole idea of, hey, you need to come in, you know, post pandemic, that’s just what, you know, managers are sort of wishing for, because they’re not used to managing a remote workforce yet, right. They’re, they’re getting used to it. And there are all kinds of great technology tools that make that more plausible, nowadays. But, you know, they might be saying, Okay, come in three days a week, after the vaccine gets widely administered, or whatever, maybe, you know, we get herd immunity or whatever, right. So, you know, that might change. And the thing that’s interesting about it, is that we’re just seeing phase one of this now, when people are working on zoom, and they’re, you know, maybe they moved 30 miles away from work, versus they used to live 15 miles from work, but they’re still in a very expensive real estate market in your area, for example, or, you know, around New York, right? Though, all those markets are still very expensive, even if they’re not in downtown San Francisco or downtown Manhattan, but they’re gonna start to think, Well, you know, if I’m communicating at the speed of light, does it even matter? Can I just be 500 or 1000 miles away, and live in a much, much less expensive location, where I can get some more land some more breathing room, you know, maybe they’ll decide that they like suburbia, and in the cities are offering a lot less than they used to, you know, a lot of these businesses won’t reopen that made the city attractive, right. You know, a lot of the restaurants won’t reopen San Francisco New Yorker certainly having that problem. Thoughts like phase two.
Dr. Nicholas Bloom 18:05
Exactly. Right. So I’m actually I’m actually working on a paper right now is about to go out, like this week called why working from home a stick. So to be clear, working from home was already on an upward trend. So it’s doubling roughly every 12 years before the pandemic, the pandemic is accelerated, kind of 40 years to this. So what you hear from managers and and surveys from employees is, we actually like working from home, but we also like being in the office. So for full time in the office, which is pre pandemic is kind of dead. But I think full time working from home, we all you know, for many of us who are experiencing this is no, not perfect. And a lot of people are getting depressed, you know, the three complaints we have for managers is depression, innovation and issues around company culture. So I think long run is going to be much more of a mixed mode. So if you think about what you do on a day to day basis, there’s a certain amount of work that’s with other people, there’s more effective to come in, and there’s a certain amount of work was on your own reading, report writing and it’s often not critical. And that work can be shuffled into a couple of days a week. So, you know, then the question is, where do you live? So on the one extent, you could say, like, well, let’s all move to Wyoming or Alaska, Alaska, you know, the great wilderness, the problem is coming in for those two, three days a week is incredibly painful. In
Jason Hartman 19:14
fact, I’ve interviewed firms that have they’re gonna come in. That’s the sort of the question I’m posing, but okay.
Dr. Nicholas Bloom 19:19
I mean, I think the experience now speaks from, I mean, sure, there’d be some firms like Cora that said, they’re going to be fully remote, but they are the very small minority. And in fact, there’s a friend of mine, Kristi Johnson, that runs You know, I’ve spoken to two or three companies that run entirely remote firms, some are doing it before the pandemic. And what they used to do is they would meet up at Houston airport, or Chicago, like once a month for a couple of days to socialize, because they just couldn’t quite do it without any face to face time. So I don’t see most firms going to fully remote it just is not what managers want is not what they’re telling us. They’re not entirely happy with it right now. And so sure, I’m not saying there aren’t some outliers and also some other outlets like Netflix, Reed Hastings. So he wants basically everyone back in the office full time, the typical farmer is going to slowly slide back into three days a week, I just don’t think they’ll go beyond that.
Jason Hartman 20:08
Yeah. Right. So that’s the work from home component. Anything else you want to you want to say about the work from home component, because I’d like to talk about the economics in general talk about, you know, the money printing and the possibility of inflation or what’s coming down the pike.
Dr. Nicholas Bloom 20:22
No show I mean, the work from home, it’s kind of like, you know, it’s still true in America, you want to get the right city, if you just look at the growth of cities and the economies of certain areas, the coasts have done really well. But it’s less true. You want to be right in the center of those cities, I think, you know, urbanization is the center of cities have done fantastically well over the last 40 years, I remember going to visit the center of New York when I was in the early 80s. With my parents on holiday, it was super scary. There are two armed guards and McDonald’s in Times Square with guns because it was so dangerous.
Jason Hartman 20:52
New York is getting scary. Again, I have a lot of friends that live there, as I’m sure
Dr. Nicholas Bloom 20:56
that’s exactly what cities are going back, they’re nowhere going back to 1980, there may be going back to where they were in 2010 or 2000. So they’re still going to be more expensive and denser. The city centers aren’t going to be quite as extreme and the discussion of the woods affordability crisis seems to come to an end. So donut is really the way to think about it, the suburbs are back. And the centers are not dead, but they are not going to see the ramp and growth they have over the last 10 years.
Jason Hartman 21:21
Okay, so what about the broader economy? Talk to us about that, if you would, you know, especially what what we can expect in the future.
Dr. Nicholas Bloom 21:30
So, you know, there’s two phenomena going on. One is what I call like the square root recession. So basically, we had a massive drop, as we know, in the middle of this year, we got about half of it back. So quarter to 2020 was horrific GDP is down about it’s about down about 15% versus the end of last year, actually, we’ve got about half of that back in quarter three, then then the recovery at this point is kind of petering out. So this is the square root sense. And he had a big drop half recovery, and then it’s moving sideways again. And so that’s the kind of that’s the big trend. And it’s going to take another probably four or five years, I’ve thought to get back to where we were in 2019. So much as we saw the last time around 2008 2009, it took almost a decade to recover, I think it’s going to take about five years at least recover. And why is that? Well, you know, once firms go bankrupt, it’s hard to restart those companies, when people lose their jobs, it’s hard to get re employed. The other shorter run fluctuation is obviously what’s called the W shaped recession, the second lockdown. And you know, out in California, I’m sure they’re, you know, the whole country, there’s just an explosion of COVID right now. And so that is going to basically kill the end of this year and the beginning of next year is locked down, accelerate. So we’re in for a kind of a second mini dip. And then presumably, when the vaccine rolls out in March, April on mass, we’ll see a bit of a recovery. But you know, the bigger picture is, we’re on the right path, but that we are not going back to 2019. I don’t think for another three, four or five years, certainly not in terms of things like unemployment,
Jason Hartman 23:01
you know, some people thinking more conspiratorially, of course, think that the powers that be have really taken advantage of COVID and made it a much bigger deal than it really is. You know, you’ve heard all these arguments, of course, you know, I’m just wondering what you think about that. And the component of that that’s really interesting to me, is that in the latter part of 2019, the repo market was signaling very dire problems with the economic machine, you know, and then this came along, and everybody stopped talking about that. It’s, it’s interesting to say the least is, is this may be, you know, been a good opportunity to sort of paper over other problems that were already there, but weren’t seen by the general public yet. But But the people in the know, that understood how things worked, you know, in the system, we’re really talking about the repo market and how it was just collapsing in in the fall of 2019.
Dr. Nicholas Bloom 24:02
Yeah, I mean, there were a lot there are long run trends in the US that were not healthy. So just to be clear, if you look at for example, growth and productivity growth has been declining slowly over the last, you know, 50 years. And you see that in the last 20 years and interest rates and interest rates are incredibly low. And before the pandemic, they were kind of glued almost towards zero. And repo markets and other bond markets don’t work that well with incredibly low interest rates, and particularly when things go negative, various, you know, markets and banks have problems even deeper in current and capital accounts. So there are already issues. I mean, my own personal view is there’s a huge debate about how much to lock down early on to be honest, I wasn’t so certain we wanted such an extensive lockdown, I think by now is pretty clear. We would have been better off having a much faster, more aggressive lockdown. If you look at Asia. So Asia is very tough, managed to lock down aggressively in a way that would never fly and that you know, you can hear I’m British, it wouldn’t fly in the UK, Europe, the US, you know There’s some sense of personal freedom, which is good. I like our society that way. But it man, it’s hard to have the full lockdown. As a result, the virus, it’s kind of like a fighter, you keep punching him, he falls down, but you never knock him out. And so he keeps coming back up. He said, there’s horror movies that you know that the deadly monster never goes away. Unfortunately, we’ve this virus, you know, the, what’s happening now is we’re having a resurgence. And you know, whether or not you want to regulate, you just see consumers and workers from talking to firms don’t want to go and get affected. So the best way to honestly, you know, fix the economy is to get rid of the virus and binaries. I mean, by now it’s, you know, lockdown in the short run, but the main hope we’re all pinning is on vaccines.
Jason Hartman 25:39
So more unemployment, more small business closures. I mean, there’s this this massive consolidation going on. I mean, this is causing, you know, the big businesses, they can survive, you know, they can, they can issue bonds there, the stock market is doing great, but small businesses can’t survive this. What do you think that means for our future?
Dr. Nicholas Bloom 26:01
A, you’re completely correct. So, you know, there’s two phenomena going on. So one is size, and one is the stock market. So just on firm size, so I have some surveys with, you know, different companies, including with stripe payments processor, and you see very clearly, big businesses have done less badly than small business. offline, small businesses have been hit, you know, horribly, larger online businesses have done much better than the stock markets, obviously, the extreme version of that. So if you look at the stock market, 30% of its high tech, and those funds have done really well. I mean, this has been a boom for, you know, Amazon and Microsoft and Facebook, etc. So, yes, that’s an issue. And I think it’s an issue because of things like, you know, antitrust and competition. I don’t think now, as in, you know, December 2020, is the time to deal with this. But much like, if you cast your mind back to 2008 2009, because of the global financial crisis, we had too much banking concentration, by 2021 2022, we’re gonna have a kind of hangover effect of the pandemic, that we’re gonna have too much concentration in markets. So yeah, I think, you know, antitrust, encouraging new business creation is going to be important, because we’ve lost a lot of small businesses, and we have very concentrated markets, that’s not good. But in the short run, I guess I’d focus on kind of getting through this, then the longer run, come back to deal with high concentration ratio,
Jason Hartman 27:19
you know, there’s going to be no appetite for this antitrust, you know, movement against Google that’s just gonna evaporate all bad, which I think is very sad, because I think these companies have way too much power, and I think they’re abusing the power. Now, you may disagree. You’re sitting at Stanford. So I know a lot of these a lot of these people are your students, and, and, and so forth. But I just think that big tech companies are becoming pretty scary,
Dr. Nicholas Bloom 27:44
frankly, know that. I mean, they are they’re also put in an incredibly hard position on regulating what isn’t, and is not I mean, the tech companies and Mark Zuckerberg just take an example never set out to be you know, controlling what isn’t is not said online, or jack Dorsey at Twitter and I, I have a solution, I’m aware of the problem. I I’m in, let’s see, I’m generally pretty free market. So I’m somewhat nervous about going up and ripping up all of these companies. Because, yeah, historically, it hasn’t worked out. Well. I mean, government, you know, is not does not have a great track record of going and breaking up large, successful companies. But
Jason Hartman 28:22
well, I couldn’t agree with you more. But unfortunately, these giant companies have armies of lobbyists. So they’ve become the government. And interestingly, the government can use them by exchanging favoritism. Of course, you know, we won’t bother you, and we’ll let you run your duopoly. If you will do the censorship for us see, the government can’t censor speech, but they can use tech companies as a proxy to censor. So there’s all kinds of strange bedfellows and, and things going on. But, but you know, if you have anything to say about that, feel free But back to the kind of the topic at hand, like, you know, what I’ve called this, you mentioned the square root, back in February, I was talking about the modified square root, which means it is the square root starts low goes down and comes up higher. This one, in my opinion starts in now a lot of people are talking about it, but I was talking about it back in February, you know, it starts high, goes down comes up, but never goes as high again. And I think that’s the future we’re coming into where we see more concentration of wealth, more wealth inequality, but also, you know, maybe a good to some extent, rethinking of our values into, you know, a little bit more of a simpler life to some extent, you know, instead of people jetting around the world going to Europe and whatever, they’re buying a motorhome and going camping with their family, right. So, you know, there are chain changes in a lot of this stuff. I don’t know, you know, it’s it’s a different kind of psyche. I think we’re coming into Do you think that’s true?
Dr. Nicholas Bloom 29:55
No, absolutely not. On the economy. I think we’re gonna be permanently about four to 5% And poorer. So I have surveys and firm expectations, you just see a downward shift in the level. So we’re just not going to get back to where we were in 2019. We’re just, you know that we’ve taken a downward shift, and we’re back to basically track but we’re four or 5% or so we will forever now be four 5% poorer because of the pandemic. That’s a lot of money. It’s a couple of years worth of growth. You know, it’s better than it was in the middle of this year, and you’re about 12% down. But yeah, we’ll never get back to square one. And in terms of simpler life, I mean, I don’t have any data on this. But yes, it’s clear. From surveys I’ve seen, you know, there’s clearly a massive demand for business travelers down almost 50% come leisure travelers, is he looking today, something else but you know, flights are down over. Tourism right now is down over 90%. In terms of kind of international travel. I personally think that’s probably good. My sense is there’s too much traveling around, you know, putting out a lot of emissions into the upper atmosphere, which is pretty awful for climate, there’s a big distortion that aviation fuel is never taxed. So just to be clear, because it’s you know, as a plane, you can buy your fuel either in, you know, in London or Paris is very hard for governments to tax that stuff. So it’s effectively very cheap in comparison to driving your car. So there’s a huge distortion in the system. So yeah, personally, if you could fly, I mean, I’m flying. I haven’t been in an airport since March, I used to fly, you know, 2030 times a year. And I haven’t
Jason Hartman 31:22
been I’m the same. I was getting on a plane two, maybe even three times a month. And I haven’t I haven’t flown since late January, early February. Yeah, exactly. I’m
Dr. Nicholas Bloom 31:32
happy. I you know, it’s nice. It is very nice. So it is set with the Atlanta fed. We’ve been running a survey of the survey business uncertainty around some other questions about 500 us businesses. And one of them, we asked them about the future of business travel. And their forecast says it’s going to be down by about 40%, post COVID. And one big driver is the number of online meetings, we asked him what share of meetings with the external, again, people like customers and you know, investors was online pre pandemic, the numbers 15%, they said post pandemic is like 50%. So not surprisingly, a lot
Jason Hartman 32:06
of stuff we just don’t need to fly around today couldn’t agree more. And I think it’s great that people have been forced to adapt to that, because it’s just a lot easier, a lot less expensive, a lot more efficient. Which brings me back and maybe we’ll close with this because you’ve really studied the working at home concept. I didn’t ask you this before, Nick. But are people more or less productive working at home? This is, you know, the million dollar question. Maybe nobody knows the answer, because it’s spotty. But what what is your answer to that?
Dr. Nicholas Bloom 32:36
So you know, this is why I got into this topic working on that I did a big randomized control trial and working from home like a decade ago, if 500 people. So I give you this two part answer. In the short run, it seems like which is doing the same old, same old, it seems like people are actually more productive. And the reason is, you work a bit more time because you basically save your commute. And you’re also more efficient because there’s less disruption. So I have a disruptive you think home is this is you know, not under under lockdown and the lockdown are for kids. That’s pretty horrible with kids coming in and out. But normally, people are actually more productive, doing the same old same ideas and short run productivity is higher. Without boring you there’s a lot of different data and evidence on that. The thing that I think is problematic is what I call long run, which is being creative and innovative. And that I don’t think works as well at home. And that’s why after the pandemic, you need to come back in for probably two, three days a week. So, you know, post pandemic you can think is a win win. If we can come into work three days a week, it’s good for businesses, people are more productive, and you know, businesses are more profitable. And what happier off is very clear. People prefer to work from home for a couple of days a week. Currently, it’s kind of unpleasant. We’re there five days a week, we got kids running around with sharing rooms, the spouses and spotty broadband, etc. But, you know, in the long run one of the few upsides In fact, the question I get asked endlessly by executives, and we were talking about it and you know, the warm up to this interview is why on earth did we do this earlier, like Skype, video calls and cloud and laptops and email have been around for a long time I did a big project in 2010, where we took I mentioned 500 people and had them work from home. We did it in a week. So you know, why have humbled business has been doing that. And that’s the question that comes up all the time now. But at least people are recognizing that one silver lining of the pandemic.
Jason Hartman 34:22
Yeah, yeah, absolutely. So I don’t know if I got a clear answer on it. We talked about how the economy will be smaller, and I agree with you there, the world economy will be smaller. I mean, just just take the tourism down a notch and the business travel down a notch and suddenly, a lot of economies get a lot smaller just for that alone. But with all the money printing, inflation in the future,
Dr. Nicholas Bloom 34:48
you know, I’ve always worried about that. I’d have to say right now, the forecasts on the experts. If you look at you know, not getting too technical, like tips you can get from market forecast prices of inflation. They don’t seem to see much evidence for this in the last month, there’s been a bit of a hiccup in inflation forecasts are still very low. So somewhat surprisingly, honestly, My own view is we pumped huge amounts of money into the economy, we don’t see any evidence of inflation yet.
Jason Hartman 35:16
You know, I pray and and when we say inflation, you know, there is already some inflation, we’re just talking about much greater in play. Yeah. And that’s a figure of speech. But
Dr. Nicholas Bloom 35:26
what happened with two 3% a year, so prices go up when the Fed is aiming for 2% price increases a year. And look, if it’s anywhere between zero to 5%. Honestly, it’s not a problem. The problem is, if it hits 1020 30%, and you get into you know, what happened in the 70s, or it gets way beyond that, you get Zimbabwe type where, you know, the whole system breaks down. So we’re never going to get to Zimbabwe. But you know, when we get to five 6%, it’s slightly worrying, but we haven’t seen it yet. And so honestly, of the greater evil right now, and the greater risk is the recession. And so I personally am on board with pumping money, but there’s, you know, there’s some, it’s like any medicine, there’s some risk of a nasty side effect. And I think you’re right to highlight inflation. The other worry, for me is debt, by the way, we’re borrowing an enormous amount of money. And at some point, you know, pretty soon, you know, next year, particularly 2022, taxes, particularly top and tax rates are going to go up a lot to have to pay back for this. Because we borrowed you know, all time high levels of debt to GDP above anything we’d seen after World War Two, which until a year ago was the, you know, the record Max,
Jason Hartman 36:28
but but still much lower than Japan, for example. And what’s interesting is, if you compare a country to a household, you know, household can prudently have much more than 100% debt to GDP, or, you know, debt to income ratio, right? You know, just the house that they own, you know, alone, that mortgage will be maybe three times their income, for example, right. And then they’ll have a student loan, a couple of car loans, some credit card debt, I’m not saying that’s good, any of it except the mortgage, that’s okay. Because it’s so cheap, and it’s actually a good investment. But why can’t a country have a higher debt to GDP ratio, like a household? So it
Dr. Nicholas Bloom 37:09
can you’re absolutely right. So you know, the US is right now at about 110, maybe hit 120%. To get put it in perspective, the Britain often Napoleonic Wars well above 200%. So America could probably double its debt to GDP level and get away with it, of course, the interest payments go up, because it becomes more risky. The big issue is at some point, we’re going to pay that stuff back. You can’t borrow indefinitely. And as you know, you know, if you’re a household and you borrow for a big mortgage, you’re making those payments for the next 20 years. And so every dollar we spend now, somebody basically us in the future, our kids have to pay that stuff back. And it can take a long time. So I noticed the British only finally pay back the last pound of Napoleonic debt about five years ago, it’s quite long. So yeah, they finally retired that last bit of Napoleonic War that so we will be paying for the pandemic stimulus, you know, often our kids are going to be paying for this thing for the next 20.
Jason Hartman 38:05
Do we just retire the debt through taxes? And you know, truly paying it back? Because I don’t think that’s even possible. I think the way we we retire the debt is by inflating it away, right?
Dr. Nicholas Bloom 38:16
Well, I think you know, the Fed is going to make correctly make sure we don’t inflate it away. Because if you inflate away the debt, you inflate away a lot of people’s retirement savings at the same time. So we’re a target and part by honestly cutting spending raising taxes, and then slowly growing our way out. I mean, this, you know, you can grow our way out, look at the debt stays constant, and we grow debt over GDP studies shrinks. And if we also pay the debt off, it also shrinks. So I think it’s just gonna make, I mean, here’s the big worry. For me, we get hit by another bad event in 2026, that we need, you know, pandemic to, or I don’t know, a nuclear spill or some climate disaster, a vast hurricane that wipes out for cities
Jason Hartman 38:55
or an EMP or terrorist attack
Dr. Nicholas Bloom 38:58
that is sunspot. I mean, we just don’t have as much money left to deal with that. That’s the issue. So that’s kind of Italy this year. So Italy borrowed so much money the last time around for the euro crisis in 2020. didn’t have a lot of cash left. And it struggled much more with COVID. than say the us too. Sure.
Jason Hartman 39:15
Yeah. It’s so uncharted territory. Nick, give out your website and anything you want to share with people and any closing comment you have.
Dr. Nicholas Bloom 39:23
No, I mean, I you know, it’s an incredible I my website, if you just Google Search Nicholas Blum it comes up at Stanford. I you know, my you know, my closing comments is I would be nervous about you know, buying property in the center of the city’s got to suburbs I’m personally also somewhat nervous about the stock market I feel that it is overvalued. The stock market has diverged from the real economy in a way I’ve never seen before. So I agree. I personally wouldn’t be long the market I mean, I’m not I’m personally I’m not long the market. I’m nervous. It’s gonna fall enough to short
Jason Hartman 39:52
stocks in short, urban inner city real estate.
Dr. Nicholas Bloom 39:57
Yeah, that would be what I would do.
Jason Hartman 39:58
Yeah. And I I agree with you on both of those counts. So, Nick, thanks so much for joining us. Appreciate it.
Dr. Nicholas Bloom 40:04
Jason. Thanks very much lovely to catch up.
Jason Hartman 40:11
Thank you so much for listening. Please be sure to subscribe so that you don’t miss any episodes. Be sure to check out this shows specific website and our general website Hartman. Mediacom for appropriate disclaimers and Terms of Service. Remember that guest opinions are the rain. And if you require specific legal or tax advice, or advice and any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to iTunes or Stitcher Radio or whatever platform you’re using and write a review for the show we would very much appreciate that. And be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.
