Things That Can't Go On Forever

Things That Can’t Go On Forever

The late economist Herbert Stein is attributed with the saying that “If something cannot go on forever, it will stop.”  In economic circles this is known as “Stein’s Law.”

The expression became well known and quoted because it is a statement that seems so blatantly obvious. The irony is that much of human behavior and even public/economic policy is often directed by an implicit assumption that the future will look like the past. Consider your own situation; to what degree do your plans or forecasts depend on current/past conditions being perpetuated into the future? 

While I could go in multiple directions with that last line, the topic at hand is:

Remote “work,” my experience and views on the past, current and future situation.

THESIS

I do not know if or when this trend will reverse in any material way but in my view it should never have started. In my opinion and experience (more on that below) it has caused/is causing economic damage.

Let me be clear from the outset that this op-ed piece has nothing to do with the initial decision- making process that was dictated by the uncertainty and legal implications of the early part of the pandemic that began in March 2020.

This has everything to do with the “novel” ideas of those members of Corporate America that bought into the concept that employees “working” from home forever was a good business move and would constitute the “future.”

WHEN THE CAT’S AWAY

There has always been that certain part of the workforce that is outside the office – by necessity. A sales role is an easy example but there are others. The income of folks in these positions is tied to their performance and they need no other incentive. Every pay period is a performance review and if their productivity is lacking over a material timeframe, many - if not most - of these workers will voluntarily find new employment.

For the overwhelming remainder of the workforce, however, if they are left to their own devices, then productivity is going to suffer significantly. Their paychecks show up on schedule regardless of performance. The sort of oversight that comes with being in the office is removed. There is also a degree of competition and discipline that is exacted through interaction with colleagues in the office. All these factors play directly into productivity. This is all well-understood and I would even say elementary. 

ECONOMIC DAMAGE

Since the onset of the pandemic here in the U.S., my experience is that the service standards and corresponding productivity rate of the vendors that we deal with has deteriorated significantly. This experience is buttressed by my communication and dealings with other business owners and clients that report similar findings.

Examples include Emails and phone calls not being returned in a timely fashion – or not at all; Rarely, if ever, does someone pick up the phone when called, it seems that everyone is on a zoom call for the remainder of the day dealing with an issue that would have been settled with one quick phone call prior to 2020.  On a regular basis the sound of televisions, pets and children can be plainly heard in the background. Some folks are so disconnected that they will allow their pets to sit in their lap, while on video, during a teleconference call. 

To certain persons that claim such things are not material to their ability to focus, I have asked: “Would you care if your brain surgeon watched a sporting event on their phone while he or she was working on you?”   

I personally do not feel as though the service level that our office receives is even 50% of the pre-covid level.  

While this is all anecdotal to be sure, it’s also “grassroots” data.  I’m basing my opinion on direct communication with, and the experience of, a wide range of tenured professionals in charge of teams of personnel.  Anecdotal as it might be, it is not “nothing.”  I believe it to be quite material.  

What if this scenario is not just indicative of my experience as I have related it here but is also playing out on a larger scale across our economy?  

Consider this:  If a person’s wage stays the same but their productivity/output falls by 50%, that results in a 100% increase in the cost of that person’s output. As opposed to wages remaining flat, most of the people and sectors that I am aware of experienced pay raises during the 2020-2022 period. If my suspicions are accurate, think about how such increases in pay affects the true, inflated cost of the recipient’s output. 

When it comes to the destruction of wealth and the devaluation of currency, it is inflation, dear reader, that is the culprit you should be concerned with. If you’re a 65-year-old and suddenly discover that the healthcare estimate in your financial plan is actually going to be 3 times your forecast, what effect would that have on your probability of financial success?  What would be your reaction? Put off retirement? Sell some of your wife’s shoes? What?

CONCLUSION

There are signs that Corporate America has had enough of the remote “work” hysteria. In the last few weeks there are reports of various companies – UPS, IBM, SAP – that have issued mandates that their employees return to the office. If these employees were as productive remotely as they were at the office, then I do not believe this would be happening – consider the cost savings of doing away with the expense of physical real estate.  

Sometimes even the worst contrived ideas can take a while to run their course. But just as it is with selling your spouse’s personal property on eBay, it’s only a matter of time till reality catches up with you. 

-mike

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