Peter Diamond Econ 490: Final Post

Going in to the class, I knew a lot about organizations, but regarding mostly the people side of things.  I didn't know much about the economics of it.  So this class was interesting because it taught us about the distribution of preferences, production capabilities, efficient structures, and achieving goals within that setting.  I also thought the gift exchange and insurance lessons were very helpful to learn about, and probably enjoyed those the most.

Regarding the way the class is structured with the live class, I thought it was good.  Listening to any lecturer just talk for an hour and a half is tough, especially when no one wants to answer questions.  If I had to change something about the style of lecture, I would add some sort of extra credit for kids who answer questions.  It would encourage conversation and it would be more interesting hearing views from other students.  I'm sure kids have great ideas, but don't want to share it because they know responding has nothing to do with their grade.  I would also add some videos to keep interest up, and somehow incorporate games if that was possible.

In terms of the blogging, I enjoyed it.  The topics weren't too specific so you could kind of talk about anything and tie in your experiences without worrying about not answering the question.  The topics were interesting, and the fact that you responded allowed us to think about the question in a different manner after you critiqued us.  The way I went about blogging was nothing special.  I read the question, tried to think of examples where I've experienced it or seen it happen to someone else, and then wrote what I thought.  Didn't take any extraordinary effort or anything, but at the same time forced us to think.  For the excel, I would say that was a little bit harder.  The homework was good, but sometimes it wasn't always that easy to understand what equation to use when, even after watching the videos.  I would say depending on the difficulty of the excel, it would take me anywhere from 25 mins to 45 mins.  Didn't do too much if any preparation for it, besides watching the videos if they were given to help make the homework easier.

Finally, what I would have liked to see in the course to improve it, would be to start with making lectures more interactive.  Incorporate some games, get the audience to answer some questions, or watch some videos.  Give kids some reason to come to class.  I would leave the blogging the same.  And then for the excel assignment I would give instructions that are a little more clear.  Some were easy to understand, but some were harder.  And then I would say do the cider and donuts thing for the next semester as well.  That was a good call, and if you wanted to bring in snacks on other days that wouldn't be frowned upon.  Overall solid class.  

Peter Diamond Econ 490: Reputation

I would say one of the strongest reputations I ever had was when I was a member of the tennis team in High School.  Coming in as a freshman, I didn't know too many kids on the team, but I was one of the more vocal ones right off the bat.  I was also the best player out of all the freshman and sophomores, so I was named captain as a freshman.  So being captain immediately boosted my reputation, but in sports titles are one thing, but backing it up is a completely different thing.  Once I started winning match after match, and beating some of the top kids in the state, my reputation was pretty high, so much to the point that kids on other teams would come up to me after my match and ask for tips.  I would practice with Varsity, but play matches for the Fresh/Soph team because the coach wouldn't put me on Varsity.  So my reputation was very high among the team, and would only grow as the years went on.

The day when my reputation grew the most was the day of the conference championship.  I breezed my way through the tournament, and won conference (3 matches) while only dropping one game total.  This created some buzz around the conference, and the next day in school the varsity coach pulled me over and said, "can't wait to have you on varsity next year, everybody's talking about your dominant performance."  At that point, I had a reputation of this young stud tennis player, so that everybody in the school knew who I was.  To keep up my reputation throughout high school, and to even enhance it, I kept being voted captain, which meant a leadership role, and I kept winning.  I averaged about two losses on the season, out of 35 matches.  My reputation was solidified when my partner and I were in sectionals trying to get to state, and we were playing two kids who were both going to play D1 tennis the next year.  We ended up winning, and the whole school was talking about it the next day.  The key to keeping up your reputation is consistency.  If you think about all the good athletes who have great reputations, they're all consistent.

When I think about times that I've wanted to stray away from the behavior of my reputation, I can't really think of any.  With my reputation came the cheers for when we won, and not really any blame for when the team lost (because it wasn't my fault).  I got all the interviews with the newspapers, and all the benefits so there wasn't a time when I wanted a break.  I don't know of an example where I could have "cashed it in" by abandoning my reputation completely in order to gain something, so I can't really speak on that.

Everybody has a reputation, good or bad, and for the most part we control it.  So depending on what kind of reputation you want, you have to adjust and make changes to make your reputation desirable.

Peter Diamond Econ 490: Triangle Arrangement

I personally have never experienced being in a triangle like arrangement, but I have seen it from far away.  I watch a TV show called "Suits", and the main characters are a senior name partner, and an associate.  And it seems like in many episodes they participate in a triangle like arrangement.  But there is one particular case that I remember very well.

Mike, the associate, decides to take on a humanitarian case helping the families of victims from a deadly train derailment.  Mike meets with the client, Joe Henderson, the factory worker.  Henderson tells him the derailment was caused by inferior heat sensors that the company brass knew were faulty.  Harvey, Mike's boss and senior partner, tells him to drop the case, as their corporate clients don't like to work with firms that also handle whistle blower cases.  Mike decides not to because his parents also died in an accident, and insists this is personal.

This is an example of where both principals want something else from the agent, and they don't see eye to eye.  On one side, Harvey wants Mike to think about the long term and care about the clients who actually make the firm money.  On the other hand, Joe Henderson wants Mike to think about those who lost loved ones and not do what the typical hot shot lawyers do.

I only see one way to resolve this tension.  If Mike can get a huge settlement from the train company, he can make Joe Henderson and a bunch of the families who lost loved ones happy, as well as showing the other clients of the firm that no matter what case they handle, they can win, and win big.  Mike took the risk of pleasing one principal over the other, because he pursued the case when Harvey told him not to.  But I think he was confident that he wasn't going to lose, and that he's too valuable to the firm where Harvey wouldn't fire him even if he disobeyed.  Mike ends up winning and both sides are happy.

Being in a triangle arrangement is tough because you want to make everyone happy.  But all you can do is prioritize, try your best to please everyone, and if you can't do that, minimize the damages.

Peter Diamond Econ 490: Conflict

One of the most recent conflicts I got into that meant a lot was at my internship this summer.  During one of the projects I worked on we had to work in a group of six total.  Once I was assigned my group, I knew we would have a strong team because everybody was very impressive, but I also knew that everybody thought they were the best and there might be some tension regarding making final decisions.

Everybody was working well, and the project was coming along well, right until the end.  When the project was finished, we had to decide who was doing the conclusion.  Myself, along with one other kid wanted to do the conclusion.  I wanted to do it because I knew I was the best speaker of the group, and I wanted to leave a good impression with the audience.  The other guy wanted to do the conclusion to make sure he was the last person in the minds of the executives watching.  At this particular company interns don't get full time offers unless you absolutely blow away the execs.  So my partner thought that if he had the last say, he might have a chance at getting an offer.

I didn't really care about his intentions, but I cared because if he did a bad job, it would look bad on all of us.  And I knew this guy was not a good speaker.  So that's when the conflict arose.  This kid and I got into it a little during a meeting leading up to the presentation.  We both said why we wanted to do the conclusion, and left it all out on the table.  While I felt bad saying I was the best speaker, I had to do what was best for team.  Just like I accepted I wasn't the best at other things, I thought they would understand when I hinted that they weren't the best presenters.  Then the other guy pretty much put it out there that this is his presentation, he wanted to be the guy coming back for a full time job, and he wanted to have final say.

The other members kind of kept quiet during the meeting, but after would talk about it with me and the others.  Three out of the four others came up to me and said they wanted me to do it, so what we decided was to have a vote.  Myself and the other guy would present in front of the four other group members, and we'd bring in one other employee so that the vote wouldn't be even.  After presenting, the vote came in and I won.

The guy seemed a little mad, but after he saw the final presentation and all the execs praising the whole group, he lightened up and told me good job.

Looking back on it, the situation could've been avoided if we both sat back and didn't say what we wanted to, but I'm glad we did, because you have to communicate and talk about things in order to lead to the best product.  We had a great presentation, and the conflict wasn't a big deal after seeing the results.

Peter Diamond Econ 490: Gift Exchange

This example might be completely wrong, and have nothing to do with what the article was about, but I think the two are related so here it goes.

My example of gift exchange would be Secret Santa.  For the longest time now, I've been a part of Secret Santa at Christmas time.  What Secret Santa is, is that everybody gets assigned a random person, and they have to buy that person a gift.  This is a great idea, and everybody enjoys seeing what other people think they would like.  There is one problem though.  The creators of the game, at least in my situation, is that they didn't put a limit on how much you can spend.  In theory, you might get better gifts, but the problem is that every player is in a different financial situation.

This leads to people buying different levels of gifts, making the people who bought cheaper gifts look bad.  It ends up being a competition of some sorts, because you want to spend the most and look like the best friend compared to the other players.  The problem, is not that other people make more money and can therefore buy better gifts, the problem is that the rules should have never been made that you can spend however much you want.

If the rule was, for example, that there is a limit of $60 on a gift, then everybody can spend the same amount, buy great gifts, and still lead to healthy competition.  Instead of trying to see who can spend the most money, players would see who can do the most with the same amount of money.

This relates to the piece because like the author said, it's not a big deal that some kids have more marbles than others, it's a big deal that they got to create the rules before others had a say in it.  Having a lot money is totally fine, but creating an unfair system is not.  Let everybody have a say in the rules, and then make an executive decision.

Trust me, I want to have just as much money as the next person.  But I also want to do the right thing.

Peter Diamond Econ 490: Managing Future Risk

Ever since I was very young I would say I've been planning for the future.  I used to get paid three dollars for every A on my report card when I was in grade school.  And while I could have bought video games or toys, I saved up every dollar I got.  I saved all my birthday money and good grade money that by eighth grade I was able to invest $1000 in the stock market.  Now, I didn't know much about the stock market at the time, but I knew how to save money because at a very young age I knew that the future is never promised, so you need to have a good plan for it.

Skip ten years to now, and I would say more than ever I worry about the future, and that's why most of my decisions are based on 10,20,30 years from now, and not based on the present.

I am an Economics and Psychology major because I thought it could bring me more money in the future.  Most big money jobs like Investment Banking and Private Equity hire Finance/Econ/Accounting majors.  So if they look at me compared to other applicants, I have all the knowledge regarding numbers, but I also understand the people side of things, so I could excel when closing deals and forming relationships.  That unique characteristic that I brought made me more valuable, which lead to more money then, and will in the future.

My summer jobs I also chose based on the future.  After freshman year I worked at a law school because I was interested in law and knew I could make a ton of money if I was an attorney.  After sophomore year I worked at a private equity firm because if I excelled in that I would be making a million dollars a year by the time I was 28-30.  After I graduate I also plan on living at home for a year or two to save money.  Hopefully my job is in a big city so I don't need to buy a car either.  In my opinion there's no point in living a fancy life when you're young.  That's why I plan to save as much as possible when I'm young so I can enjoy the final 40 years of my life.

When kids are starting out, they should build a financial cushion, because you don't want to worry about paying bills in the future.  If you're worrying all the time then you can't focus on more important things like your work.  I don't live cheaply because I want a lot of money in the future, I live cheaply and make financial decisions because I don't want to worry in the future.  Simple as that.

Peter Diamond Econ 490: Illini Bucks

If the University of Illinois put into place an "IlliniBucks" system, I think it would be an awesome opportunity and learning experience for the students.  But I don't think it would work.

IlliniBucks could be used for moving to the front of the line in terms of registering for classes, moving to the front of the line at bars, or even moving to the front of the line at the bookstore at the beginning of the year when it's extremely crowded.  So many kids complain about these long lines, but as of now, there are only a few ways to beat the system.  At the bars, if you know the door guy then you can skip the line.  At the book store, if you're with a friend you can have them buy your book when they buy theirs and you can pay them back later.  And in terms of registering for classes, right now you can have older students or James Scholar students hold classes for you.  Those are the current ways to get out of long lines.

But with IlliniBucks that can all change.  I think most students would use the majority of their IlliniBucks to be the first ones to register for classes.  While skipping the line at the bar is fun, even if you don't you still end up in the bar at some point.  If you don't get the class you want, and get stuck in a bad class, there's no changing that if the good classes are full.  And most students will tell you, there is nothing like being in an awful class for a semester.  It's brutal.  I personally would use it to skip the lines at the bars if I were an upperclassmen, because we have first priority for class selection.  But if I was a freshman or sophomore, I would definitely use it to be the first one to register for classes.

Now clearly, there are many problems with this idea of IlliniBucks.  One, if they are priced too high, then nobody would use them..  If they are priced too low, then they will be overused and you might not even have them.  But the biggest problem is the idea in itself.  I don't think it would work.

If you tell kids that for five bucks you can skip the line at the bars, you would have a good number of students take that offer.  But then they just end up standing in a line with all the other kids who paid five bucks.  So they end up still having to stand in line, but now they've lost five dollars as well.  Same thing would happen at the book store.  Another long line would form of the kids who paid to skip the line.  Regarding registering for classes, if you tell the freshman and sophomores that you can pay five bucks to be the first ones the register, then you would lose all your James Scholars.  The one benefit of being a James Scholar is that you can register first.  But if that's not guaranteed anymore, then kids will stop doing the extra essay or whatever it takes to become a James Scholar.  Also, if freshman and sophomores end up paying more than juniors and seniors, then you end up having kids who can't get in to classes that they need to graduate, and they get screwed over, potentially having to stay another year.

The only benefit I see coming out of IlliniBucks is that it would create a black market, and that would be kind of interesting to see.  An IlliniBuck is worth something different to each student, so for the ones who want them more, and really want to get into that one class, they might pay a lot to buy an IlliniBuck off someone who hasn't used theirs yet.  It would be pretty cool to see how much money you could make.  It's similar to my high school.  My econ teacher gave Extra Credit Bucks to kids who received A's on their exams.  At the end of the semester, these Extra Credit Bucks would sell for $20-$50 each to the kids who were on the border of getting A's.  And they would be sold by the kids who got enough A's that they didn't need extra credit.  Very cool system.

Overall, I don't think this system would work.  There are too many kids on campus who would pay to skip the line, that the "Skip Line" would be just as long as the normal line.

Peter Diamond Econ 490: Successful Team

When I think of successful teams that I've been a part of, a few come to mind.  But the most successful I would have say would be a team I was a part of at my internship this past summer.  I worked at a company in the sports industry, and my team was in charge of coming up with ways to maximize the potential of an omni-channel strategy for their merchandise.  An omni-channel strategy is one where you connect the user experience from the brick and mortar store, the app store, and the online store, into one seamless experience.  So that was our challenge, and we had a group of 6 to get that done.

We decided that since we were all kids, we didn't want to designate one boss, because we all agreed it's tough to take orders from people your own age, and honestly we all think our ideas are better than the other guy.  So what we decided to do was divide the project into 6 parts.  And each part was a unique thing that each team member excelled in.  For example, one person was in charge of contacting outside companies because they were good with people.  Another person was in charge of writing material because they were a journalist.  And then another person was in charge of putting that material into a PowerPoint presentation because they were good with design and marketing.  So each person had their own little project if you will, and that allowed us to go all in on very specific parts, and then combining them in to one great presentation.  This relates to Katzenbach and Smith's point that all teams need the mission to be broken down into meaningful performance goals for each team member to pursue.  It allows everyone to feel like they own something, and gives them more responsibility.  It's like they own a stake in the company.

Another thing we did was use an outside person to be our project manager, because at the end of the day we all agreed we needed one person making the final decisions.  So we consulted a VP of Merchandise, and they met with us once a week to go over how the project was coming along, and offer any suggestions on how to improve.

The key to our successful team though, was honesty.  None of us were afraid to speak up and say if we disagreed with something.  A lot of people don't say when they disagree with someone because they don't want to make them feel bad.  But if the product you are putting out is bad, that's unacceptable.  You have to be 100% honest for the best quality.  We had our disagreements here and there but we knew it was in our best interests.

And finally, I think a key to us having a very successful team was that we had an agenda every meeting.  We started with what was accomplished between the last meeting and the current one.  We then moved on to what needed to get done for the next week, and then we talked about how we were going to get that done.  We also had each person speak for a couple minutes about progress on their individual parts, which brought everybody up to speed.

Overall, the key to a successful team is communication.  It doesn't matter how smart you are, how old or young you are, if you can communicate well and get the point and objective across, you can get the job done.

Peter Diamond Econ 490: Opportunistic Post

When I think of somebody who didn't act opportunistically when they had a chance, I immediately think of Dwyane Wade of the Miami Heat.

Dwyane Wade is a star basketball player in the NBA, and has won three titles with the Miami Heat.  He won two of those with Lebron James, but James recently left for the Cleveland Cavaliers to return to his hometown.  Many of the other key Heat players also left, and Wade was pretty much left alone.  The next best player was injured, so Wade was stuck with a bunch of rookies who were not ready to make a serious push for the playoffs.  So when Wade's contract was up, there were plenty of teams calling for his services.  And not just any teams, but one's that had very good chances of winning a title if they added a player with Wade's skills.

This was a great opportunity for Wade to get paid a lot of money, and go to a team that could win right now.  Dwyane Wade is 33 years old, so well past his prime, which means he only has a few years left to win another title.  He had plenty of opportunities right in front of him, which gave him the chance to win in the present, while the Heat are about 5 years away from contending.  But in the end, he didn't act opportunistically, and decided to stay and play in Miami.

Now why he did this, I think it was because of loyalty.  Wade is one of the most loved player's in the league, but if he left Miami then he would be hated by fans and an organization that he's been with his whole career.  I don't think he had it in him to leave Miami, and not be liked.  It's tough to leave something behind, especially when that thing is a team that gave you a shot at living your dream.  I think Wade stayed in Miami because of loyalty.  Winning three rings is more than most players can ever dream of, so I think he accepted that he was happy with three and decided to stick with the fans who have always stood behind and supported him.

Regarding whether the various explanations as to why people don't act opportunistically amount to the same thing, I think for the most part they do.  If you look at people who wait because good things come to those who wait, or people who think acting opportunistically might be unethical or lead to people looking down at them (like Wade), at the end of the day they're still after the same thing.  All of these people still want to accomplish their goals, it's just that some want it faster than others.  The ones who act opportunistically want the fast track to everything and take advantage of their opportunities.  Sometimes this means not caring what other think of your actions.  On the other hand, those who don't act opportunistically still want their goals, but are willing to wait and don't want to negatively affect others.

For example, I know someone who was the manager of HR working under the Director of HR at a health care company.  They asked him if he wanted to jump up to Chief of HR over his boss, and he said no.  He was worried about disrupting his relationship with his boss, and decided to wait and work his way up and let his boss take the position.  But someone ever lower than him took the initiative to ask about the CHRO position, and ended up getting it.  This guy acted opportunistically, seeing an opening and taking it.  While the manager of HR stayed at his position, as well as the Director of HR.  He wanted the CHRO position, just like everyone else, but wanted to do it the right way and not hurt any body's feelings.

They all amount to the same thing, but on different time tables.

Post #2: Experience within an Organization

After my sophomore year of college, I interned at a Private Equity firm in downtown Chicago, and I was thoroughly surprised and impressed by the structure of the organization and how it was run.

Being an intern, I expected to be doing the research and due diligence on potential acquisitions for the whole summer.  It made sense that the young guys would analyze and the older guys would make the pitch.  But after a couple of weeks I was asked to make the pitch to a group of investors about buying a company, not the full time employee I was working with.  I asked my boss why this was and he said that they simply run on a performance based system.  It doesn't matter how long you've been working at the company, if you're good and doing the best work, it's next man up.

This philosophy is something that I'm a big fan of, because I'm a firm believer in making decisions off results, not tenure.  While the people who have worked somewhere longer might have the experience, if someone else is outperforming you, then I think you should go with the hot hand.  This mentality allowed me to get great experience at a young age, that has set me up well for the future.  It's why the private equity firm I worked at had so many young execs, because they were the ones who delivered results, so they were moved up.

What this led to was some internal controversy though, because as you could guess the older workers felt disrespected when younger people were being given opportunities that should've been theirs.  It even got to the point where some workers wouldn't help others because if they got credit for the work then it would have a negative impact on the person who helped out of kindness.  So honestly, it wasn't the most collaborative environment, because everybody was competing.  It was interesting to see that even though some workers weren't happy, they wouldn't leave.  They knew they were still making a ton of money, but not getting as much responsibility.  This was mostly the people 35 and above.  While they were unhappy, they didn't let that drive them away.  On the other hand, the younger people who weren't happy, whether it be for working long hours or not working in the most happy environment, were quick to leave.  They seemed to value their happiness over money.

In my mind, I saw this as a stage in their life.  From 21-30, you can still discover and search for what you want to do.  Most people don't have to worry about a family or kids, so money isn't the most important.  But for the older folks, they have a responsibility of providing for their kids and putting food on the table, so even though they're unhappy, they need to get paid.

Finally, regarding the organization, I found the most interesting piece to be about there method of recruiting.  Almost all of their hires are from recommendations of current employees.  This means that people are telling their friends it's so awesome to work here, that they should do it too.  While I had an awesome experience, I know some people didn't, but the fact that they tell others to work there shows me how big money plays in picking a job.  Even if you can't stand coming to work everyday, if there are enough commas in your paycheck, you're good to go.  Very interesting.  I'd elaborate but doing what you love versus doing something for money is a whole conversation in itself.

For now, I'm glad I had this experience at the Private Equity Firm because it was my first real taste of what it was like to work in a performance based organization.  I learned a lot, and realized that at the end of the day, it's about results.  It doesn't matter how old you are, where you went to school, or whatever it may be, if you can deliver, you're the one who's going to get called on.

Peter Diamond Bio

Prior to receiving my alias, I had no idea who Peter Diamond was.  I didn't even know he was an economist.  But now that I do, here's a little bio about him.

Peter Diamond is an American Economist who is famous for his work regarding U.S. Social Security Policies.  He also worked as an advisor to the Advisory Council on Social Security between 1980-1990.

Diamond is Jewish and was born in New York City.  He attended Yale University receiving a Bachelor's in mathematics, followed by a Ph.D. from MIT.  After going to school, he worked as a professor at UC Berkeley before going back to MIT to be a professor there.  After 19 years, he was promoted to head of the econ department.

Peter Diamond has made many contributions to a variety of different areas including social insurance, labor markets, and government debt.  But Diamond has focused most of his career on Social Security.  Many times he has proposed policy adjustments, such as small increases in social security contributions using actuarial tables to adjust for changes in life expectancy and an increase in the proportion of earnings that are subject to taxation.  Diamond's views have impressed people so much that President Obama nominated Diamond to fill the vacancy on the Federal Reserve Board.  He rejected the offer though.

Peter Diamond's work is important because it relates to your everyday citizen.  It applies to all of our lives.  He analyzes social security and taxation, which is what we think about and deal with constantly.  He's not just talking about money, but about our money, and people care a lot about that.  His work is extremely important and he's very good at what he does, as shown by Obama's nomination.

I would say Diamond's work could be applied to our class because it was his paper that first explicitly modeled making trades and hiring workers, which results in equilibrium unemployment.  In our class we're talking about organizations and human capital, and his work that deals with hiring is part of how you maximize human capital.

Peter Diamond seems like a very interesting economist, and from the looks of it has had a significant impact in the economic world.


http://www.nobelprize.org/nobel_prizes/economic-sciences/laureates/2010/diamond-autobio.pdf

http://www.wsj.com/articles/SB10001424052748704302304575213850582215096

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