- Knowledge of economics frameworks
- Data detective and mash-up skills
- Hypothesis-driven statistical modeling
- Cleverness about experimentation
- Culture of internalized data scrutiny
Not a bad set of skills.
Thursday, February 4, 2016
Why You Might Want to Hire an Econmist
Jed Kolko has an interesting blog entry titled "Should Your Tech Firm Have an Economist?" It is short and full of insights but a lot of our advantage comes from reducing uncertainty through careful analysis of the data. Specifically, he claims our comparative advantage comes from:
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I strongly believe that education and experience are two of the ultimate things in every field; if we have those then we don’t need to hire anyone. As a Forex trader, I mainly focus on education while experience comes with practicing regularly and due to OctaFX broker, I get plenty of opportunities for practicing and that’s through their demo contest like Southampton Supreme, it’s 90 minutes contest happening every Monday with unlimited prizes to be won which really makes anyone extra motivated.
ReplyDeleteAs Jed Kolko notes in his blog, economists have differentiated skills and training that can be valuable, however, many firms have teams of analysts that have some of the same analytical and statistical skills. Adding an economist to the team could be beneficial as they bring to the table the knowledge of economics frameworks and the ability to manage data differently in addition to analyzing it. Economists are more apt to develop theoretical models or hypotheses in addition to using statistical tools to analyze data in the decision making process.
ReplyDeleteMaking decisions with uncertainty can be mitigated by using random variables rather than exact numbers in cost/benefit analysis. This type of analysis can also identify associated risks. Economists also run tests or experiments in an effort to reduce uncertainty. They do this by identifying a control group and an experimental group to measure change. Difference in difference experiments first measure the difference before and after the decision, then the difference between the control group and the experimental group is measured.
Many firms focus on making decisions based on maximizing expected profits, when it could be more beneficial to make decisions based on the reverse; minimizing expected costs. Therefore, it is important to evaluate potential benefits/costs carefully in the decision making process using different forms of measurement. I don’t believe that it is not necessary to have an economist on staff, as diversity in education, skills, and experience among corporate team members should encompass most of the skills and traits that economists share.
Kolko, J. (1 February 2016). Should Your Tech Firm Have an Economist? Retrieved April 12, 2016 from http://jedkolko.com/2016/02/01/should-your-tech-firm-have-an-economist/
Froeb, L. M., McCann, B. T., Shor, M., Ward, M. R., (2014). Managerial Economics, a Problem Solving Approach, 4th Edition. Boston, Massachusetts: Cengage Learning.
The answer to this question is in two ways: a yes or a no. What I mean by that is if the company’s operations do not require an economist then no. But if the tech company is structured to function with the essence of an economist then I will say yes. Economist basically helps firms plan and make investments by analyzing and forecasting economic trends, size a market, estimate prices for product the firm is selling; or estimate prices for what it is buying. So they can be valuable to evaluate economic patterns and impact. For example, predicting an economic downturn helping the company to avoid potential losses.
ReplyDeleteAlthough, economists come with differentiated set of skills, training, and temperament that can be really valuable, their comparative advantages include building brand awareness, credibility, thought leadership, knowledge of economics frameworks, data detective and mash-up skills, hypothesis-driven statistical modeling, and cleverness about experimentation. I will suggest that in this modern world where the economy is heavily dependent and driven by technology, all tech companies must endeavor to have economist who can offer profound impact on strategy, product, impact-evaluation, and brand-building, using powerful tools and a unique approach to comprehend the growth of the economy
In our Managerial Decision Making course that I am taking at the same time as this Managerial Economics course, it is really nice to reflect on how our decision making skills are maximized when there is a balance between our intuition and our rational thinking.
ReplyDeleteTo be completely rational, we would always need all of the information available with a consideration of all the available options and real world demands do not provide us with the ability to consider all of these things.
However, if we completely went with our intuition, our biases and limits of experience may steer us in the wrong direction or give us a result that does not maximize our opportunity.
When we talk about random values and probability, we are attempting to quantify these particular uncertainties which are naturally qualitative in nature. To the point of the post above, having someone who can quantify these qualitative uncertainties and attempt to put comparative values using probabilities can perhaps define the risk associated with the uncertainty. Then you can compare the opportunity and consider the risk associated with that opportunity to best determine what the right decision is.
References:
Finkelstein, S., Whitehead, J., & Campbell, A. (2008). Think again: Why good leaders make bad decisions and how to keep it from happening to you. Boston, MA: Harvard Business Press.
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