The future of work, and cities

Ok this is the sort of speculative predictive post that I don’t usually indulge in. However, I think my blog is at the right level of obscurity that makes it conducive for making speculative predictions. It is not popular enough that enough people will remember this prediction in case this doesn’t come through. And it’s not that obscure as well – in case it does come through, I can claim credit.

So my claim is that companies whose work doesn’t involve physically making stuff haven’t explored the possibilities of remote work enough before the current (covid-19) crisis hit. With the gatherings of large people, especially in air-conditioned spaces being strongly discouraged, companies that hadn’t given remote working enough thought are being forced to consider the opportunity now.

My prediction is that once the crisis over and things go back to “normal”, there will be converts. Organisations and teams and individuals who had never before thought that working from home would have taken enough of a liking to the concept to give it a better try. Companies will become more open to remote working, having seen the benefits (or lack of costs) of it in the period of the crisis. People will commute less. They will travel less (at least for work purposes). This is going to have a major impact on the economy, and on cities.

I’m still not done with cities.

For most of history, there has always been a sort of natural upper limit to urbanisation, in the form of disease. Before germ theory became a thing, and vaccinations and cures came about for a lot of common illnesses, it was routine for epidemics to rage through cities from time to time, thus decimating their population. As a consequence, people didn’t live in cities if they could help it.

Over the last hundred years or so (after the “Spanish” flu of 1918), medicine has made sufficient progress that we haven’t seen such disease or epidemics (maybe until now). And so the network effect of cities has far outweighed the problem of living in close proximity to lots of other people.

Especially in the last 30 years or so, as “knowledge work” has formed a larger part of the economies, a disproportionate part of the economic growth (and population growth) has been in large cities. Across the world – Mumbai, Bangalore, London, the Bay Area – a large part of the growth has come in large urban agglomerations.

One impact of this has been a rapid rise in property prices in such cities – it is in the same period that these cities have become virtually unaffordable for the young to buy houses in. The existing large size and rapid growth contribute to this.

Now that we have a scary epidemic around us, which is likely to spread far more in dense urban agglomerations, I imagine people at the margin to reconsider their decisions to live in large cities. If they can help it, they might try to move to smaller towns or suburbs. And the rise of remote work will aid this – if you hardly go to office and it doesn’t really matter where you live, do you want to live in a crowded city with a high chance of being hit by a stray virus?

This won’t be a drastic movement, but I see a marginal redistribution of population in the next decade away from the largest cities, and in favour of smaller towns and cities.It won’t be large, but significant enough to have an impact on property prices. The bull run we’ve seen in property prices, especially in large and fast-growing cities, is likely to see some corrections. Property holders in smaller cities that aren’t too unpleasant to live in can expect some appreciation.

Oh, and speaking of remote work, I have an article in today’s Times Of India about the joys of working from home. It’s not yet available online, so I’ve attached a clipping.

Baumol Disease Index

In his excellent take on why┬áRohit Sharma’s 264 is bad for cricket, Niranjan Rajadhyaksha writes about the Baumol’s Cost Disease. This phenomenon, which was first described by William Baumol and William Bowen in the 1960s, describes the increase in cost of labour in industries that have seen little productivity. This has to do with an increase in productivity in other sectors which pushes up the clearing price of labour, which increases the costs of industries that have seen no improvements in productivity.

Based on this, we can construct an index on how industrialised an economy is, which I’m going to christen “Baumol Disease Index”. The basic idea is to pick a sector that is likely to be unaffected by productivity changes over the long term, and look at the median salary of workers in that sector in different countries and across different points in time. This can help us compare the relative levels of industrialisation and productivity in different countries, and in the same country over time.

In order to construct this index, we will take into account one sector which has a lot of “human input” and is unlikely to see much improvement in productivity thanks to mechanisation. My first choice for this was for employees of a company like McDonalds (taking off on The Economist’s Big Mac Index) but then that sector is not that insulated from greater productivity.

We could use the original example that Baumol and Bowen used, which is performing arts, but then performing arts is a winner takes all market – Iron Maiden will be able to command much higher ticket prices compared to the local orchestra thanks to their history and brand and perception of quality. So performing arts is not a great example, either.

Another good choice would be government bureaucrats, since their work is unlikely to be much affected by productivity. But then we’ve had some computerisation and that must have increased some productivity, and ability to be productive and willingness to be productive don’t always go hand in hand!

What about drivers? Despite the efforts towards development of driverless cars, these are unlikely to really take off in the next couple of decades or so, and so we can assume that productivity will remain broadly constant. The other advantage of drivers is that while salaries are tricky to measure (and we need to depend on surveys for those, with mostly unreliable results), taxi fares in different cities are public information, and it is not hard to separate such fares out into cost of fuel, cost of car and cost of driver’s time. This way, measurement of an average taxi driver’s income in different cities and countries, and at different points in time, should not be really difficult.

So, I hereby propose the Baumol Disease Index. It is the per month pre-tax expected income for a driver in a particular city after taking into account costs of fuel and car. This number is going to be imputed from taxi prices. And is going to be a measure of general levels of productivity and industrialisation in an economy. Sounds good?

And while we are on the topic of indices, you should read this excellent leader in last week’s The Economist on the profusion of indices. And since we have a profusion anyway, adding this one additional index shouldn’t hurt! And this one (Baumol Disease Index) measures something that is not measured by too many other indices, and is simple to calculate!

Howzzat?

Snow White meets Gandalf

I don’t know how to describe it. “Writing club” or “literature club” makes it sound too serious, and if it were indeed one, then we need not have put “informal” when we put it in our CVs. “Slander club” makes it sound like we were all bitches, which we were not – though I must admit that once in a while we used to bitch a bit. We weren’t even doing campus journalism – we were hardly regular, and never came in print. And we weren’t storytellers, either, since most of what we wrote was based on what actually happened.

Twisted Shout began when Hunger tried to murder War. However, the defining moment for the group happened when Snow White Meets Gandalf (a trilogy in five parts) was released. I must say it was a fairly random story. So random that most of you won’t understand it. If you are not from IIMB, you can give up every hope of figuring it out. If you are from IIMB but not from our batch, you might understand one joke in the entire trilogy. If you are from IIMB and from my batch and not from my section, you might probably understand half the stuff.

SWG had so many characters that I won’t blame you if you would get confused. Most of these characters are based on people in my batch and the batch senior to mine at IIMB. And it’s not a one-to-one correspondence between real and fictional characters. Some people in my batch were so colourful that multiple characters were based on them. On the other hand, the entire commie half of Sumo Yet So Far (my quiz team) had gotten merged into one character called Swaadisht.

We drew inspiration from several sources, with the primary source being our first test in Economics, which had a certain Queen Shilpa taxing coconuts. A number of other characters, and scenes were built based on interactions in class in term 1. There was heavy punning on people’s names, and even seemingly random sentences like “I find Aishwarya Rai so hot that I want her as my wife” found their way into the stories.

If my memory serves me right (it usually does in the long term), the first three parts of the Trilogy were written by Disease, who then proceeded to put NED (this was a full three years before the term NED was coined, btw). Madness, the correspondent from H Base, joined the great institution when he wrote the fourth part. The fifth part, which involved a Great War, based on the Mahabharata, was appropriately penned by War. And he had ensured that he gave due footage to himself, as well as to the Footage Queen.

The beauty of the series was that characterization was not constant. People would change sides more frequently than Disease would change his shorts – which means that they didn’t change sides too often, but did it once in a long time. Characters would disappear from the plot, and occasionally reappear at a strategic time. There would be sudden updates in relationships between characters – to account for similar changes in the real world. Every event of note that took place on campus, and even some insignifcant ones, got due footage. It was a masterpiece of its times.

Looking back at these stories today, I’m feeling nostalgic, and at the same time proud to have been part of such an august institution. We were to come up with a few other masterpieces during our tenure, but SWG would remain our best known work.

Two months back, more than three years after we had first folded up, we thought we should make an attempt to recreate the magic, and thus started the Twisted Shout blog. I admit that we haven’t been too regular in updating it, but each of us has been managing an important transition in our lives, and thus haven’t really had the time to update it. We hope to fix this in the coming months, though I’m not sure how funny we will be since we will be writing for a general audience. In hindsight, it was really easy writing for a restricted audience that knew exactly who each character was based on. Making inside jokes, it seems, is much easier than making generalized jokes.