Class Review

To begin my review of Econ 490, much of the class material covered was new to me. I would like to start with a couple of lessons and specific material that I benefited from the most. The book written by Bolman and Deal that was a complimentary text to the class taught me a lot about management and organizations as whole. It highlighted the various components of successful teams and organizations as well as show how and why less effective teams function. Hoping to be the leader of a team one day, maybe management, this was pertinent information for me. We built on the different types of managers in class and how each deal with conflict. Also further discussed in class was the incentive based way employees operate and how managers can make the office more efficient. This led to excel home works that explained the math behind this. I felt that the content discussed in class was always made more clear by doing the excel home works. I learned a lot from these. I also felt that the blogging in this class was a useful way to tie course material to real life experiences. Each week I would write up a very short, rough draft and continuously edit and add more leading up to Friday. When writing, it is good to take breaks and come back with a fresh mind. This allows you to re-read your work having milled it over a few times. I did not feel that this course was especially tasking. The excel home works were relatively challenging but not very time consuming. There was always videos that could help and professor Arvan was quick to respond to questions posted on the website. Blogging was a bit more time consuming if you drafted your posts as suggested. How much time you spent on them was entirely up to the writer. What you put into this class is what you got out of it.

I also found that the final project was especially useful. Most students have never read scholarly articles written for economics purposes. We took that to a new level when we had to read and critique an article that pertained to the class. This was much needed exposure that will help students transfer into graduate school. It sometimes seems daunting reviewing the work that has had so much more experience with economics but this project helped eliminate this fear.

One thing I would have liked to see in this course was an option to watch or listen to lectures online. Missing class caused you to fall behind and only sometimes were there online options to catch you up. I also would have liked more of the math behind the home works to be taught in class. The videos posted were very helpful but sometimes an in class visual would have made things much more clear. Although this might take away from the discussions on the blog posts, it may make the excel work done more useful.

In the future, perhaps after I graduate, I hope to continue blogging and reviewing economics articles. This class developed a style of writing for me that I had not been exposed to before. I would definitely suggest this course for economics and non-economics majors alike.

Reputation

Here, I am going to discuss my reputation as the captain of my travel baseball team and how I built the reputation that earned me that position. Upon making the team through a series of three days of try-outs, the coaches announced that they would be looking for three captains to serve as a closer tie between coach and team. These captains would also serve the purpose of running warm ups and other basic components of practice that didn’t require a coach at the ability level we were competing at. These captains needed to be well respected by the coaches as well as their teammates, and although I wasn’t the most athletic member of the team, I worked my way into this position. It began with coming to practice earlier than the mandatory time and staying later practicing small aspects of my swing and fielding. I initially did this just because I enjoyed the sport of baseball and practice acted as a nice get away from school and work. Quickly, my teammates and coaches noticed the extra work I was putting in and it influenced other members to stay longer. Not only was I the first one in and last one out but I also prided myself to keeping a high level of intensity while practicing. I was not one to take a rep off or have a lazy practice.

Although I don’t believe I ever “shirked” on my responsibilities in order to benefit myself, there were definitely moments where I wasn’t ecstatic to be a captain. Whenever the team had a poor performance the coaches came down on the captains much harder than they did the rest of the team. This additional accountability was stressful and sometimes felt unfair. In hindsight, it was definitely just a way for the coaches to make sure that they got their point across. Teammates generally listen more to each other so if the captains were sharing the views of the coach it made things a lot easier on the coaches. This did have an upside, however. When our team performed especially well it felt as if being captain entitled me to the victory.

In economics and organizations, I think shirking is a more prevalent topic. It seems that a lot of business is done just to maximize profits and not necessarily to stay true to moral codes or reputations. In business, giving up a reputation may earn you a hefty profit. For example, a company that has a great reputation for quality may decide to lower quality standards to save on production costs. If they can do this without substantially upsetting buyers, they can leave their reputation of quality for a higher revenue.

Principle-Agent Triangle

The standard principal-agent model discussed in class is bilateral for simplicity’s sake; in the real world the model functions more often as a triangle with one agent and two clients. The first example that comes to my mind is that of a stock broker. Here, the broker would be the agent, and the buyers/sellers of stocks and the firm the broker works for are both the principals. The agent’s job here is to match either a market order or a limit order from the buyer to that of the seller. A market order is the stereotypical way of stock buying. Buyers say how many shares of a stock they want to purchase and the broker finds a seller for that amount at whatever the current market price is. This can be risky for the buyer because the market can fluctuate before the broker is able to find the seller. A limit order is when the buyer sets a limit price and once the stock falls to that limit or below the broker can find a seller. This has a lower chance of being executed, but is safer for the buyer. The same problems can arise when selling a stock. The more trades the broker can facilitate, the more the firm reaps the benefits. Also, if the broker can create a trade between clients that use the same firm, the better off the firm is. For the broker, there is very little moral hazard, they make trades for the buyers/sellers when a match arises.

The case of a financial manager is very different. Just like a broker they are the agent of the principal firm and principal client. However, a financial manager has the power to invest and sell without the permission of the client. Here is where moral hazard becomes apparent, and the principals could not see eye to eye regarding the performance of the agent. The financial advisor could make a lot of trades, which would benefit the firm and hurt the investor, or the financial advisor could be very careful with trading and most likely benefit the investor and not the firm. The solution to resolving this tension relies heavily on the agent. The agent would have to work very diligently in finding a relatively diverse and high trade volume that provides good returns on investment. This way the neither principal is disappointed.


Also, if the company is in the market of a particular stock, then it is in the firm’s best interest to push that stock to its clients even if it does not better the client’s portfolio. In this case, the agent should find clients with portfolios that need that particulars stocks properties. Whether it be to further diversify or get into a new market, it should be to benefit that client.


The triangle principal agent case can be seen in any other type of broker such as that of one in real estate. More often than not, the agent has to accommodate two principals. Clearly, this can lead to conflict in which case the agent must diffuse the problem in a manner unbiased to either side.

Conflict in the Work Place

Pulling from chapter 8 of Reframing Organizations, Artistry, Choice, and leadership, by Bolman and Deal, employees contribute personal and social friction to the work environment. This is caused by the various personalities interacting in a work setting.

This friction or mismatching between personalities can be said about the upper management of the internship I worked for this past summer. The business was family owned, and the CEO happened to be the eldest of five brother that worked either directly for, or indirectly with the company. The company had been previously owned by the five brother’s father. For privacy sake we’ll say that the current CEO’s name was Tony. Ranging from management to consultation and marketing, the brothers played pivotal roles in the success of this company. The origin of conflict began when the company began the process of getting acquired. The youngest brother, Timmy, with some help of his father, was placed in a role working directly with the private equity firm and getting this deal to pass. Clearly, this aggravated some of the other brothers. It should also be pointed out that the CEO was not confrontational at all, and allowed Timmy to take this role without any problems. The elder brothers felt that they deserved, at the very least, a little more control of the major decisions that were going to be made in the following months. Due to a lack of communication between the middle brothers and the CEO, Timmy went ahead and essentially ran the makings of the deal with the help of his father and eldest brother Tony.

One situation that particularly irritated the other brothers, was the decision to potentially change the company name. The private equity company was unsure of whether they would keep the original name that the company had for many years or whether to change it to something easily recognizable with their portfolio. From Timmy’s side, he was trying to negotiate the highest price possible, and something like a company name might not be a subject he was willing to fight for. A choose your battles type of situation. The middle brothers began a plan of pushing the original companies name and history, by updating the office with pictures of the founder, and other historical touches to the office space. The original name and brand had a lot of branding put into it, after all the company was previously successful and buyers knew this company the way it was. This is where the lack of communication between the brothers became the main reason for conflict. If the middle brothers had just say down and expressed their desire to keep the original name, maybe Timmy would have realized its importance and pushed to keep it that way. In the end, the company was allowed to keep its original name while the Private Equity firm decides how to further its branding. Although this was a rather positive outcome, it did not stop the occurrence of various arguments between the brothers that had nothing to do with the original problem.

In the end, I think that if the CEO had been more commanding of the situation, and understood the desires of all the brothers, he could have diffused the situation. This particular conflict arose from members having informal roles and a lack of leadership from the CEO. It was his job to reach out and understand the way the others operate, specifically on a task and processes level.

Team Production and Gift Exchange

       In an article by Jonathan Haidt, from nytimes.com, he discussed gift exchange with regards to different make ups of team production and related it to the United States economy and Obama’s efforts to raise taxes on the one percent. Essentially, if people are not working together then they are much less likely to share rewards with one another. This reminds me of some of my experiences with group work in college.

               There has been only one group that I participated in that I felt every member carried their own weight. We were forced to elect a team “captain” that was intended to delegate tasks in a fair manner to the rest of the group. After electing this captain we decided to collaborate on each other’s tasks through google docs instead of working solo. For those not familiar with google docs, if you are invited by the creator of a document to edit, then you can freely edit the article without the owner’s permission. The quality of work that we produced was way more polished than the original creators work. On top of that when one person edited your work, it encouraged you to at least take a look at theirs. The more we collaborated the more we cared about the final product of the project. We received an A, and each of our members received the highest peer rating grade you could get.

               Clearly, I think the findings in the article relate to my experience. One example the article gives discusses a situation where two people pull ropes in tandem and receive marbles for their efforts. When both players do the same amount of work the player that receives more marbles is very inclined to share the deficit in pay. In my case, sharing the workload led to better grades and peer reviews. If we had handled our project without collaboration we would have been more selfish. We wouldn’t have contributed ideas to each other and most likely would have turned in lower quality work.

I have been in many groups where members are assigned tasks and then turn them in on the due date without other members reviewing their work. It has always led to lower quality work. Without collaboration, good ideas are not shared and single members are allowed to slack off on tasks. In the group that collaborated we kept everyone in check and were rewarded accordingly.  

 Evidently, working together has many benefits and this article by Haidt highlights that. When we work together, we not only begin to care for one another but we begin to care more about what we're working towards. It is only when every member of a team goes all-in do they create the optimal and most efficient outcome.

Managing Future Income Risk

                With regards to the future, I do believe I have put myself in a comfortable spot, financially, with a lot of help from my parents. Being an economics major, I believe that this bachelor’s degree alone will not fulfill my future expectations. I have chosen to add a business minor and am currently considering going to graduate school in an attempt to further my studies as well potential in the job market. Prior to being an economics major, I was within the industrial engineering program here. Having an engineering degree would presumably offer more job security and maybe a more financially stable future compared to a bachelors in economics alone. I have chosen to switch to economics, some could consider this a risk, because I find it more suitable to my interests. 

                This past summer I held an internship at a manufacturing company doing competitive pricing reviews as well as reviewing their current business plan. Besides this being a great experience and immersing me in a well-run business, it was also a great addition to my resume. I intend to use this as a springboard into a different summer internship in 2016. With aspirations to work for a private equity firm, I hope to get an internship at an investment banking firm. There is a lot of opportunity to create wealth in this industry

As far as debt goes, I have not accumulated any because I have very generous parents. I understand this is a luxury not all have but it is going to reduce my future risk immensely. When I leave college I will attempt to get a job near my parents so I can reduce living costs for the first years of my working life. After I have accumulated two years of savings I will begin to invest! Watching my brother invest for the long term over these past five years has really sparked my interest in investing. If you stay up to date with the market, diversify, and do your homework on your stocks, I see an enormous potential to reduce income risk.  

Aside from watching my brother invest, I have been lucky enough to experience both of my older siblings to enter the working world and purchase homes. Having not moved from the same suburb of Chicago all my life I had either naively assumed purchasing a house was simple, or just never thought of it at all. The whole concept of real estate was new to me. So many outlaying factors go into buying a house that turn it into a large investment. For example, buying a house in a neighborhood where property values are rising can aid financial stability in the long run. 

As a junior in college I would say I have made some solid choices with guards to future risk. Choosing a major I’m passionate about, my internship experiences and lack of debt should provide a smooth transition out of college. On top of that I have witnessed two sibling transition into their later lives. I believe these combined experiences have greatly lowered my future financial risk.

Hypothetical Implementation of "Illinibucks"

Implementing “Illinibucks” to allow students at the University of Illinois to cut lines with regards to registration and other services around campus, would make drastic changes to the way these services are provided. Having been a part of the Division of General Studies for two years at the University, I would allocate a majority, if not all, of my Illinibucks towards registration. Being in the DGS, I was always one of the last people to register and that led to having very eschewed schedules and undesired professors/classes. Through this hypothetical system I may have been able to move up the registration list. However, I feel that most students would prioritize there bucks for registration because it has such a large effect on your time spent in college. If there happened to be a tie in use of bucks, would it then differ to your year in school? If this is the case then we would essentially be back to the priority basis that we use for registering now. 

Due to a very high demand for early registration, I could see the University setting the price for this service relatively high to deter some students. For the deterred or less studious students, these bucks could be used to cut lines at concerts, sporting events, and maybe even registering campus facilities. The prices for these would be less to raise the demand. If the University could not lower the demand for early registration by raising its price, they could set a maximum amount of bucks allowed to be spent for this service. This would be similar to a government intervention in a real market. I would also wonder if the University would allocate the same amount of bucks to each student or would they allow students to purchase additional bucks. If this were the case, then the University would be giving an advantage to students who could afford this luxury. It would also affect the money supply and alter supply/demand. 

 

 Aside from that, would students have the bucks tied to their university account, or would they be allowed to trade bucks to other students? This would create another miniature economy where students spend bucks not for campus services, but for services from other students. Clearly, this could create legal issues for the University, but it would be interesting to analyze this situation if it came to fruition. For students who really wanted to register early, they could pay other students for their Illinibucks or do work for them. Due to the low supply of Illinibucks, they would raise in extrinsic value to the point that they could be seen as more valuable than real currency. 

The implementation of Illinibucks would be a very interesting experiment. It would illustrate many economic models as well as show how the students prioritize the services that the University provides.