One of the biggest cautions in investing is to be wary of claims that “it is different this time” when an un-historic or atypical valuation trend happens in equity markets. A good example was the valuation of firms with no revenue in the leadup to the internet bubble around 2000.
To extend the argument just a bit, we are going to be hearing all sorts of predictions that the Covid-19 pandemic is going to substantially or radically reshape business, government, education and consumer behavior on a permanent basis.
That is perhaps a different argument than saying some underlying trends might get a boost. More bandwidth, diversified supply chains, more remote work capabilities, more use of collaboration tools, better security, network resilience, use of food or meal delivery services, online shopping and more work from home are examples.
It is logical to suppose that, having become more acquainted with doing things a different way, there will be a lower threshold to maintaining some of those behaviors, post-pandemic.
But we might maintain some skepticism about how much behavior will change on a permanent basis. Consider the obvious case of remote work. Some of us have heard about the obvious value of telework or remote work for our entire professional careers.
And yet the percentage of U.S. employees working at home 50 percent of the time or more in 2020 is estimated at five million, representing 3.6 percent of the workforce, according to Global Workplace Analytics. And that is after 40 years of evangelization that some of us are personally aware of.
Predictions about the extent of telecommuting have routinely been far in excess of those figures. Definitions are likely an issue. In the past, “telecommuting” has generally been thought of as employees working “at home” sometimes--or full time--instead of at the office, campus or plant.
But some analysts might consider employees taking work home at the end of the day as “telecommuting.” That probably is not what most people have in mind when they think of remote work on a substantial basis.
Others say remote work includes any employees routinely working at home one day a week. That is telecommuting, to be sure. But it might not be what many have in mind when they think of remote work: working from home 50 percent to 100 percent of the time.
Another caveat is that those figures do not include the self-employed.
Still, it is undeniable that remote work is growing. Regular work-at-home has grown 173 percent since 2005, 11 percent faster than the rest of the workforce, which grew 15 percent, according to Global Workplace Analytics.
Remote work also grew almost 47 times faster than the self-employed population, which increased by four percent.
The point is that remote work trends--aside from people taking some work home from the office--have been in place for some time; were growing before the pandemic and will grow after the pandemic.
So the relevant issue might be whether the rate of change increases in a non-linear way. At least some believe that will happen. "We believe the COVID-19 pandemic has accelerated society's transition to broadband and digitization by at least a decade,” say analysts at MKM Partners.
But it is reasonable to expect that the gap between employee desire to work at home and the low percentage doing so has other explanations.
Global Workplace Analytics argues that 56 percent of employees have a job where at least some of what they do could be done remotely; 62 percent of employees say they could work remotely and desks are vacant 50 percent to 60 percent of the time. At yet only 3.6 percent of employees presently do so.
That suggests--as often is the case with new technology--that some major retooling of business processes or organizational culture or both are holding back much-higher rates of remote work. Only seven percent of U.S. firms make remote work available to most or all of their employees, Global Workplace Analytics says.
In makes sense that remote work happens most often when there are clear benefits for employers or employees, when the work tasks are amenable to remote work and when the relative isolation fits the emotional needs of the workers.
Sales, customer service,marketing, programming, health claims analysis and radiology are use cases where remote work is possible. Not all roles are that amenable.
But one also has to keep in mind that what most would consider routine “remote work,” happening 50 percent to 100 percent of the time, remains relatively rare. With the caveat that rates of change can hit inflection points, and that the pandemic might trigger an inflection point, remote work is not a technology issue.
Work processes and work cultures apparently have to change in significant ways before substantial remote work makes sense, and works.
Beyond that, the assumption that remote work always improves productivity is questionable. The productivity paradox (also the Solow computer paradox) is the counterintuitive observation that, as more investment is made in information technology, worker productivity may go down instead of up.
The existence of the productivity paradox has been noted since the 1970s. Before investment in information technology became widespread, the expected return on investment in terms of productivity was three percent to four percent.
Instead, we have tended to see improvements that are undetectable to perhaps one percent, in the 1970s to 1990s. Nor is there much evidence that matters in the United States, for example, have changed between 2000 and 2018, either.
Likewise, in the 20th century, gross domestic product growth was mainly driven by total factor productivity growth. Since the mid-2000s, however, productivity growth has been in decline, according to one analysis by researchers working with the Centre for Economic Policy Research.
None of that means a dramatic change in remote work is impossible. But it does seem unlikely.
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