Sticky Wages

Fortunately I went home for the weekend where I could recount and get some insight on all three experiences our prompt inquires about.   I am actually going to start by talking about both of my parents who together have gone through all three experiences.

                My dad has been through a few rounds in the business world, none of which have knocked him out.  My dad was laid off of work a number of years back when the company he worked for was bought out. Given the choice of relocating to Seattle, with three kids finishing up high school, or staying in the area he chose to stay. I do not think he regrets his decision. He had developed a strong resume and had the skills to open his own startup consulting LLC.  He used the time to go back to get his MBA at University of Illinois. I have been able to see this operation come full circle as he now has a job where he is no longer self employed. For my example of someone who has carried a steady job I can look to my mom who has worked in a relations position for Aspen Group for a few years.

                It is a fairly strange period of unemployment/ self employment.  Because of the unemployment he used the opportunity to improve himself by staying proactive and improving his education.  As I said he got a non self employed job recently. You might think that his MBA made a significant improvement in getting the job he desired, but it seems that he feels the pay really is not that amazing or better in comparison to his old job. Where he did have to adjust was in the position he wanted. He waited for a while for the position he wanted to open up but he was told he was simply next in line for when that person left. He appreciates the safety of money but he really seeks after a level of challenge and responsibility that tests his skill set.  Wages were fairly sticky throughout the time. It is difficult to tell exactly what effect adding an MBA / self employment experience had on the process but it obviously was a point of interest to employers.

                Then there are the self employed years my dad had. I do not know the actual impact sticky wages had as there is much more to take into context. Starting up a consulting LLC will have its own issues of its own, especially since it was in its earliest stages. The downturn was difficult, but it did not seem to have a huge affect on my dad’s business matters.  He was still able to find clients. Who knows? Maybe he could have had much better business, but if you never experience good economic years, how do you know what you are missing?  It appeared to be just a tougher startup process. I am sure that it had an affect here or there that I have no idea occurred. (Dad-feel free to comment if you want)

                Then there is my mom who had a steady job. The downturn affected her differently as a number of employees from her company were laid off. People in the company had to absorb weaker bonuses than normal and cut down on some of the luxuries. She is their main relations employee and has a valuable set of relationships with important clients.  Her company was heavily affected, as they deal with construction. But if your work is valuable enough, they will keep you.  She has a real drive and passion that make her a strong employee who is worth the money.

  

Incentives

                After thinking for days I arrived at my topic…

I decided to start with a small policy from my childhood. Sometimes your parents have things they really want you to be good at that you have no desire to pursue. Let me introduce you to my reading program growing up.  My mom was a big encourager of our learning process and understood the importance of kids who could read well. Reading has obvious benefits as a skill and as a way to improve critical thinking and your own vocabulary. We were paid as children a penny a page to read books and when we finished the book we would collect our bounty. It would usually come out to about two dollars. I read quite a few books while this policy was in place, but there was an issue here of not being able to truly monitor if I was reading and she made us discuss what we read before she gave us our rewards. I do seem to remember skipping boring parts of books in order to increase my reading output. A second incentive process that I never quite reached occurred in little league baseball. My Dad said that if I ever hit a homerun he would buy me a Nintendo 64. As a kid as much as I desired the reward I simply did not know the process for getting stronger, or hitting the ball that extra amount. Once I realized this would probably never happen the incentive became just an interesting thought and nothing really to strive for. I would not say my performance fell because of that but there was a level of excitement that left me.

                I understand these are not quite the same as a grading scheme but they are interesting stories that show some moral hazard and a failed incentive system.

In my classes there have been some incentive schemes while grading. I have been in a number of classes where your attendance is a huge portion of your grade. These are most often lectures, so I do understand there is a different dynamic.  In those that are not lectures, I often simply show up and enjoy by listening. I will say that my favorite class ever was stylized in this very manner. I did not have my head lost in some note taking. I simply enjoyed the passion displayed and practicality of the information. He made me think, he did not drill memorization that could be forgotten after an exam.  Some grading schemes that have failed my learning miserably are those that consist of a few exams and nothing else.  Especially if the teacher is bad, boring, etc., and the material was required and nothing of interest, I can guarantee it goes in one ear and out the other… and that’s only if I am not dozing off.  My performance does suffer but my actual learning experience (or lack thereof) makes the class a waste of money. In all honesty it has a ton to do with pursuing thing you actually like, then incentive schemes mean nothing, but there are skills and knowledge that should be learned even if they are not exciting because they might be useful one day. These are where structure and incentives play their largest role, in my opinion. Even bad teachers can force me to learn through a strict grading system.

I don’t really think that there is much to be done as far as risk aversion in the classroom. Sure I will complete the extra credit offered but I don’t feel as though I go too far beyond that as far as dealing with grades.  I might suggest that the real risk aversion that I do occurs when registering for classes. That is where I do my best to select professors and courses that A.) Fit my vision B.) I can do well in. The real risk aversion occurs early. I have also taken more classes than required so I can just drop one if I do not enjoy it or do bad on an exam.

Marbles aren't Money and a Victim of Habit

                The idea that we actually have a part of the brain that is willing to share equally is pretty amazing. Part of the human mind actually appreciates fairness even if it means that you as an individual lose something of value. What seems often like an economic assumption (that people do all things out of selfishness) may at times be untrue.  It is something even chimpanzees do not appear to have. So whether you believe it is God-given ability or an evolutionary trait, it really is something to marvel at and as economists pursuing maximization of utility a new toy when creating theory.  I saw a few problems with the model of pulling a string to get marbles and then exchanging marbles. First of all they are little kids. They haven’t developed into the stubborn people that policy makers have to deal with. Then they are dealing with marbles. Change that to something the child actually puts a higher value on and then see what happens.  Money is not marbles.  Greed is part of the issue with wealth distribution. Even if someone really thinks that others deserve something, I feel as if money is a whole other ballgame. Feel free to argue against me but I think the comparison just is not realistic or useful.  Redo the experiment with something children would give up their whole life to accumulate that item.

                From my own experience this does not that often. It seems like that cheesy moment in a sports movie where the guy gives up his spot for the guy who has worked his butt off or just hasn’t been given a chance. Though this is minor and I can’t think of a specific example I know that this has happened. Imagine a bunch of little league baseball players get rewarded with 2 Gatorade bottles for a game well fought. All of the kids run to get their drink but the suppliers miscounted and inevitably “Little Timmy” just didn’t make it in time to get a bottle. Not involving any parent, one of the other kids offers him one of their bottles and they go on their way. It is a simple selfless transaction.  A work example might involve someone taking on my responsibilities as a student manager. We hold chains/down markers during practice and there is no real rule on whose job it is to hold them. If someone has had an easy day of standing around they may take the duty of the person who usually has to stand with a chain. There is no rule that says they have to, it is simply out of the desire for fairness and respect for that individual’s effort.  I recommend that you take a look at John’s example of note exchanging as it may be a slightly stronger example- and has to do with school.

                The next set of questions is slightly unclear to me but I will take a stab.  I will try to base this off of the second piece’s cookie for socializing example.  I think for me I will go back to my freshman and sophomore years and my poor attempts to find a group of people to socialize with. I did not enjoy the party scene my freshman and sophomore years, as it was simply not me, but that did not stop me from showing up and being that awkward dude who looks like he is lost and incredibly boring. I did not drink, but I enjoyed the company of others, even if it meant sacrificing comfort and not being able to form any remotely strong connections. Despite the lack of enjoyment in the activity, I kept going because of maybe a false sense of acceptance (not trying to be a psychologist). Whatever the reason I think that I adjusted; realizing people were everywhere, not just at my buddies’ apartment parties. I found my way into CRU which has been great for me and for hanging around people share appreciation for activities that I enjoy too.

Actions do the Talking

Ah yes, the old phrase “actions speak louder than words.” This common phrase, you could argue could be broken into a couple pieces. Do they really speak louder? Do they even speak? The main part that is the focus of our discussion is the latter. In what circumstances do our actions seem to speak on purpose or inadvertently?

The first thought that came into mine was relationships, from marriage, to dating, to even friends and family. Though its value depends on the person’s individual preference levels, actions can show someone what you may think of them. Let’s start with a positive example of actions with intent to send a certain message. Valentine’s Day, though on occasion a chore, often is used as a day to give gifts or serve your significant other in some way. Maybe a husband will buy his wife flowers, make her breakfast in bed, etc.  The intention of this message is usually to say I love and care about you. On a non intimate level maybe it is something like cleaning your room or cutting the grass to show you parents you value their pride in their household. The action of serving without being asked is a good way to communicate that you are thinking of someone else and that there well being matters to you. They can also be not so heartwarming. Let’s go fairly extreme. What if a burglar entered your household? What message do you want to send to that burglar? My guess is that you want to tell him he is not welcome. Rather than talk it out like gentlemen, you let him know you are there by rustling, turning on a light, grabbing a bat and chasing him out of the house.  I think they will get the picture.

How about sending signals when you aren’t intending to send them?  We could stick with close, possibly intimate, relationships as these messages may cause quite the ruckus, but let’s deviate from that topic. Instead let me focus on something that relates to my sports fan life. I have long been a Michigan and Detroit Lion’s fan. I entered college with the intent of being in the Lion’s front office one day. I had a conversation with a member of the Bears who suggested that I get involved with the football program at University of Illinois to improve my resume, then I could work for the Bears and move on to the Lion’s once I left college. Needless to say I got both desired positions and my future with the Lion’s was well on its way. When I arrived back home to my church I realized I had sent out a message that I had no intention of sending. Everyone wanted to hear about the teams and what it was like behind the scenes of the Illinois football program. I have been an inducted member of the wild Illinois fans due to my actions. I have yet to tell them where my allegiances still lie (Partially because it is fun to be wanted). Part of my job for the Bears included running a 16 foot flag out of the tunnel when the game starts and waving it around during the introduction. This does not exactly scream Lion’s fan. So while the overall purpose of this was to get a job with the Lion’s, the message being sent was far from it.

If there was a less related message I would consider the act of doing nothing to be quite powerful, in sending both intended and unintended messages.  I think this often rears its head in relationships but I’m sure it could find other instances.

Hypothetical Illinibucks

                The topic for this week is that what would happen hypothetically if we hypothetically had Illinibucks that could move you to the front of lines. If there was such a thing there would be a number of uses, a few of which we may have mentioned in class. There is registration.  As a fortunate person who is able to partake in a job with the football program, I have received the advantage of being able to register early, with the athletes.  Though I have not always jumped at the opportunity right away, I usually get all of the classes I want.  If you could pay money to be moved before many others, there would certainly be students who partake in this activity. How would price affect this sort of action? I believe that the price would not matter for the most part and that kids would look at it as just another fee to get the class they want. It would be incredibly unfair to students who pay significant portions of dollars for all the services the University provides. I suspect that no matter what type of pricing is involved, the University of Illinois would have a sort of lawsuit or complaining that would negatively impact the school’s image.

                Another event or opportunity for the illinibucks would have to do with sports. People buy vouchers or sign up for orange crush, then they wait for the opportunity to be first to turn in their vouchers or be first in line at the assembly hall. If they could gain an edge and save themselves inconveniences and potentially hours of their time, you would have a number of eager participants.  I can see this actually being quite effective for organizations, like the orange crush, that are required to raise funds. Pricing as always would seem unfair to some people but this is separate from education (or at least that would be my argument).  This would cause the biggest supporters, the kids with too much money and the craziest of the fans to get a spot on the court or in block I. The rest would be stuck up in C section or along the opposing sideline. I do not believe this policy would have near the effect on football due to the fact that the seats simply are not that much better in comparison. On the other hand the orange crush may face certain issues. Their numbers may decrease because students don’t see the need to be a part of orange crush when they will end up in the upper deck with no real advantage.

                Let’s continue by going back to registration. But let’s take a look at it at a smaller level. What about jumping ahead of the line for individual classes? This has a very similar feel to our first example. This one has a twist that makes it a little more interesting. By dealing with individual classes it is not nearly as universal and is not simply adding a fee, there is an actual specific selection process. As long as everyone has an equal amount of illini bucks and it isn’t just one overall fee this would add an aspect that may teach students how to manage money better. In reality all this would most likely do is cause complete chaos in the system and make too many people angry.

                In my opinion hypothetical illinibucks are most likely meant for anger, complaining, and scandals. It does not matter what price they are. I have gotten the classes I desired often without use of the early registration and never have been deeply involved in the illini fanbase.

Opportunism

The topic for this week was fairly applicable for this point in my life. According to the prompt opportunism is defined as taking advantage of circumstances.  There are times when we will give up something that will benefit us in order to give others a better circumstance, is unethical, or we know that there will be upcoming opportunities that outweigh the current one.

Though this may show a certain level of procrastination, the moment that was nearly perfectly applicable was Ahmad Bradshaw’s touchdown run in the Super Bowl earlier today. As the Patriot’s defense opened like the Red Sea (on purpose) Bradshaw burst through the line and could have galloped through the goal line in a moment of glory.  Scoring a touchdown was no doubt a likely dream for this young man’s life. It was the opportunity of a lifetime and would help leave a legacy. Just as he got to the Goal line he paused as he was about to take a knee to stop the clock. This would have destroyed an opportunity but would in the end give his team the opportunity for a chip shot field goal and the title of Super Bowl champions.  If you watched more than the commercials, you know the end to this story as Bradshaw stopped and inevitably fell into the end zone. Maybe he weighed the percentages of the Patriots possibilities of winning, was playing a joke, or accidently leaned too far. Either way, he made a good choice as the Giants went on to win and he got his personal moment. But there have been other instances of players taking knees before touchdowns, passing on personal glory and stats that will add dollars to their bank account for the greater good of the team.

I can also think of a moment during the Illini football season where personal opportunity was sacrificed for the team and the program. This story is filled with a bit more reluctance. I went to San Francisco for the Kraft Fight Hunger Bowl and wide receiver, AJ Jenkins, was not very far from having Illinois’ all time receiving record. Then as the game progressed AJ was only 3 yards away from the record. This is the all time record in Illinois History! He knew this and came up to coach begging for the opportunity to go for the record. I could see the begging look in his face and some frustration too. You see this was the end of the game and we could seal the deal by running the clock out meaning not passing to AJ. He agreed and though upset he did not throw a hissy fit or do anything crazy. He went out on the field and blocked for a few more plays and that was his career.  Had he had the opportunity he may have chosen otherwise. The coach also gave up the opportunity to give a kid he cared about the chance for the record. The possible reasons for the coach’s choice may be selfish in that he wanted to win to improve his record and better his chances of getting a job after the season. Then its possible he really cared about the rest of the team and the program. Winning 2 bowl games in a row had never been done in Illinois history. Know this coach for a few years I can quite sincerely say that I believe this was about making sure all the other student athletes walked away with a win. He would have certainly given AJ the shot in different circumstances but he passed on that opportunity for the greater good of the team. (However cheesy that may sound)

Sports though filled with arrogance, can also be one of the most humbling arenas.

Week 2

First, I wanted to apologize for the delayed response. I expected there to be a prompt, but I know “no excuses”. I realize that this will not be the case and in fact I am beginning to appreciate the ability to be creative with the whole concept. Also in response to professor’s post about his responses, the interesting part for entrepreneurship is learning the managing process and its dynamics.

                As I attempted to reflect on the past weeks classes I realized that besides my memory being not quite where I wished it was, is that my lack of reading really will provide me no benefit. In honesty, I wasn’t sure what was supposed to be read and to make an informative thoughtful blog post I needed to prepare much better. Oh well, it’s a growing process.

                Just off of memory, the thing that stuck out to me was what we discussed about horizontal and vertical integration. I think that if I were to make an educated guess the answer to what people are looking for is horizontal organization. After all we want to be known, our ideas to make a difference. Yet with all of this, we settle for the farm system approach. College and our grades determine what firm will be placed in and how high up we are placed. To tell you the truth, I am not sure which one is better for the success of a business or organization or where do we draw the line.  That might be a question that we discuss that I am sure I would find interesting. Personally just sitting here I know there will be a true answer as seems to be the case for many economic, political and abstract policies. It is always about context.

                The part I feel is what I am most interested out of the four frames that we discussed would be the human resource area. I believe that life is really about people and while structure, politics and symbolism have a place. The point of organization is motivating and getting people to do something they are legitimately passionate about and that that idea will drive them even when they might not appreciate the short term task. So my belief that the focus of any organization I run is building a passion and a belief in people. It is probably a bit romantic of a view but why should I strive for anything less? As we discussed in class, professor is an intellectual and so he pursues places and ways to develop what he cares about.  So I guess my idea here is that human resources should be prioritized as the number 1 starting framework.  I also feel like symbolism contributes pretty heavily. What are you conveying? Is it a friendly atmosphere where creativity and innovation are embraced. I probably lay on the opposite spectrum of a good mathematical, theoretical driven economist. I understand the importance of the politics and structure because without some sort of regulation people’s natural tendencies may not be towards the maximum productivity.

I do not feel as though I have much to add to the idea of transaction costs and our Hudson Bay activity.