Managing Future Income Risks

The prompt focuses on how we make decisions and how much they are based on considering the future possibilities or whether they are made because it seemed like a good choice at the time. I think the purpose of this prompt is to look back on decisions we have made and try to understand what caused us to make those decisions and whether we considered the uncertainty and risks involved in making such a decision. Many of the decisions I have made in the past have been based on the future and reducing income risks, whilst other decisions have been made simply because they seemed like a good decision at the time (sometimes regardless of the potential income risks).

While I do not have much of an idea of what job I will get, where I will work and what my salary will be, I have considered these when making decisions for my future. For example, when choosing my major when I was applying to colleges, I started looking at what skills are most sought after now as well as what skills are expected to be in high demand in the future (10 to 20 years from now). While I was already interested in Computer Science, this gave me a better incentive and more reason to opt for a major in Computer Science. I opted for Computer Science and Mathematics because I was always interested in Mathematics and I found out through research, that students who study Mathematics along with Computer Science are also highly sought after. Regardless of the demand in this field, I was taking a huge risk since I was going to be paying tremendous fees despite not knowing whether Computer Science was a field I really wanted to go in since I did not have much experience in the field.

After my sophomore year, however, I realized that I was no longer interested in Mathematics and decided to switch to Computer Science and Economics since I had already taken 3 Economics courses by that point and enjoyed them thoroughly. In this case, I felt there was a smaller risk than initially applying for a Computer Science and Math major. This was because I took a more informed decision this time since I was confident that Computer Science and Economics were both fields that I was interested in pursuing which is also increases my marketability for a job in the future since there is increasing demand and low supply of people with skills in both fields.

One of my friends who graduated last year applied for a major in Computer Science, but he chose that major because he felt that it was a growing field, despite not having much experience in it and not enjoying the experiences he had with coding. He struggled with keeping up with CS courses and ultimately decided to switch to a Civil Engineering major after his sophomore year, which was something he was always interested in, but had decided not to study it since he considered it to have fewer job opportunities after graduation. However, after switching majors he was doing much better academically and enjoyed his courses much more. After graduating, he got a job offer from one of the biggest automation companies in the world and is now working there. While he took a big income risk by changing his major, it worked out well for him in the end since he enjoys the work he does more than when he was studying CS. What I learned from him is that sometimes it is worth taking a risk to pursue what you really want to do, since he took a huge risk by doing so and it paid off for him.

Reflection Post

Before writing this post, my previous blog posts (and the prompts) seemed to address different topics and seemed to not have any connections whatsoever. The blog posts have so far addressed several topics: Transaction costs, Opportunism, Organization and structure of teams (and the features of high functioning teams), and transfer pricing (the idea of implementing a system of “Illinibucks”). Reflecting on my blog posts, most of them do not have many concrete connections with each other, but looking back, there are some instances or themes when I observed a connection. For example, when we looked at transaction costs and team structure, in my post about transaction costs, I spoke about working in a team during an internship where I felt there were transaction costs, which related to the discussion about team structure in which I talked about how group projects for classes work in different ways to teams in companies made up of employees. Also, the post about opportunism and Illinibucks were also similar in the way that opportunism was a concept that could be applied to the hypothetical system of “Illinibucks”, since opportunism would cause students to act in immoral ways, such as by misusing their allocation of Illinibucks. If Illinibucks were created, it would also create a black market for Illinibucks where students would buy and sell their Illinibucks for real money.

Initially, I did not completely understand how the prompts related directly to the course, sometimes because I did not understand the concept, although most of the time it was simply because I did not see any relation. For example, when I wrote the blog post about Opportunism, I did not quite understand how it related to economics at all, and specifically this course. However, after writing the blog post about Illinibucks and transfer pricing, I began to understand how opportunism relates to transfer pricing and how it explains human behaviour. By relating the concept of opportunism to scenarios I have observed in my life, I understood how the concept relates to several other concepts not only in this course but in economics in general. For other blog posts, the connection between the prompt and the course themes were very obvious, such as the blog post about team structure in which I was able to directly link my experiences to the themes of this course.

Thinking back on how I would write the blog posts, I noticed a few things that have changed. Firstly, I have become more confident about what I am writing about since the first blog post. At first I would be unsure whether the experience I was planning to write about was a good choice and whether I would be able to explain my thought process clearly to help the reader understand how my experience relates to the prompt and the course as a whole. Secondly, I started to provide more context in my post so that the reader can better visualize my experience and my point of view. In terms of the actual process, after the third blog post, I realized that I was having difficulties relating the prompt to the content of the course. Therefore, I since have started to read the prompt beforehand so that I have time to think about it rather than reading the prompt and then immediately start writing my response. Also, I started to write my response in different parts since I remembered that when it comes to writing long responses, this technique helps me since this way I have more time to come up with different idea to relate to my post. This is something I also do with coding assignments: I start early and work on it in small bits and pieces and sometimes I suddenly have a huge breakthrough which helps me to understand how to solve the problem.

I think there are a few things I would change about the prompt which I feel would provide more benefits to not only me, but to other students, the class and to the discussion as a whole. The key aspect of the prompt I would change is that I would try to make the prompt more clear when it comes to relating it to the course themes. As I explained, I struggled with this at the start of the semester and had the prompts been directly related to the course themes/contents, I would have better understood the concepts and fewer students, including myself, would misunderstand the prompt. Although this does not relate directly to how I would write the prompts, I think it would also help students if they could see sample blog posts about the same/similar concept since this would help avoid people misunderstanding the concept and creating an incorrect connection between the concept and their personal experiences.

x

Illinibucks

There could be many uses of Illinibucks if a pre-specified quantity was granted to every student. If Illinibucks could only be used to move to the start of a line, some potential uses of it could be allowing students to register/waitlisted for courses early (for courses that are popular and have fewer seats than demand for the class), reserving study rooms, gyms or other facilities and moving up in the waiting list for advising appointments or office hours. Regardless of the different possible uses of Illinibucks, there would be many issues that implementing such a system would cause. There are ethical issues of such a system since some students may not even get the opportunity to register for some classes or may have to wait a long amount of time for advising appointments and office hours if they do not have Illinibucks left. Also, however, is the issue with pricing for the different services students can buy with Illinibucks, since if the administered prices are too low or too high, it could have adverse effects.

One way I would decide to spend my Illinibucks would be for registering for some classes early. While I would not have to do this for classes in my major since I would have priority registration regardless, I would have to use some Illinibucks when deciding what gen-eds to take. In the past I have not had issues with registering for a gen-ed course since I plan what courses to take well in advance of my time ticket for registration, but since other students will likely use Illinibucks to register for a course early, I would have to do the same to ensure I get a seat in the class. Another way I would use the Illinibucks would be for appointments and office hours, since the lines for both can get extremely long, particularly for office hours. Instead of having to wait in line for 1 hour (or possibly much more), I would be able to use Illinibucks to get help on my difficulties immediately.

However, there could be various problems with the administered prices. If prices are too low, then students would use their Illinibucks freely and this could cause serious problems. For example, when registering for courses, if registering early costs a very low proportion of the allocated Illinibucks, since it is at the start of the semester (when most students won’t have used any of their Illinibucks), there is a strong possibility that many popular courses will become full extremely quickly and the waitlist will also grow immensely, meaning that students who want to register for the course at their actual registration time ticket, will have nearly no chance of successfully registering for that course. Low prices would also mean that students may use their Illinibucks for reserving facilities and skipping lines for appointments/office hours with excessive frequencies. This will create long lines of students who used Illinibucks to skip the line or be put on the waitlist, which does not actually give any student an advantage since everyone is using their Illinibucks.

If administered prices are too high, it would mean that students may end up using their entire budget at once and therefore won’t get much of an advantage out of it. Although this does mean that students would be more wary of where they spend their Illinibucks, it also means that if they have already used up their Illinibucks, they will have to wait in a long queue every other time, even if they urgently need to skip a line for what may be a valid reason. Therefore, the pricing of services offered for Illinibucks would be a key issue.

However, another major issue would be the ethical problems with Illinibucks. While some students would see it as unfair, such a system would most likely also result in a huge market for Illinibucks where students will try and buy and sell their Illinibucks for real money. Since Illinibucks would not be transferable, the buyer will get the seller to use their Illinibucks for them. This would clearly benefit wealthier students and while students who are selling Illinibucks may prefer the system since they can make real money of it, this clearly poses an ethical problem. While some students would prefer the implementation of such a system, other students may not and the advantage all students gain will never be equal. Therefore, while considering the benefits of Illinibucks, due to the various problems it would cause, I think it makes more sense to not implement such a system.

Team Structure

While I have been part of many teams with varying levels of success, most of them were successful in terms of how efficient they were, although I would not define those teams as ‘successful’ in a professional manner or a ‘high-quality team’.

Most of the groups or teams I have worked in have been assigned to me for group projects for classes. As a result, group members do not have any sort of commitment to working relationships with other team members, which is one of the distinguishing characteristics for a high-quality team. Since most of these groups tend to have the structure of a circle network and have a lack of motivation and equal participation, they are usually inefficient and lack collective accountability.

However, I have been part of a team I would say is successful, which was during my internship after my freshman year, when I worked for a company that provides business solutions. The team I was working with were in charge of mobile app development, meaning they would work on building mobile applications for clients. The team had around 20 members, who were all permanent employees and most of the team members had been part of the team for around 2 to 5 years. While I was only part of that team for 2 months, I recall observing many characteristics of that team that relate to Katzenbach and Smith’s 6 distinguishing characteristics of high-quality teams.

The structure of this team was a one-boss arrangement, although since there were several sub-groups under the boss that had a team leader, the structure that this team had was closer to a simple hierarchy, since there were 3 middle manager (team leaders) who would report daily proceedings to the boss as well as ensure that daily goals are being met within their own groups. However, the structure was also similar to a one-boss arrangement in that every morning all 20 team members would have a discussion (including the boss) for half an hour when all members are communicating with all other members and the boss.

In terms of teamwork, I noticed that all the teams were communicating within their groups as well as with other groups when necessary, such as when they are stuck on a technical issue which they are unable to resolve. In such situations, there seemed to be a seamless flow in communication and teamwork amongst most of the team members. While it is hard for me to comment on whether the style and structure of the team was suited for what the team was trying to do, I would say that this team was reasonably successful.

According to Katzenbach and Smith’s research, we as a team had the capability to perform better since there were some characteristics that we were missing in order to be a high-quality team. I think the team I was a part of matches the first characteristic perfectly, since while the manager would talk about the targets that need to be met, he would leave it up to the groups to decide on their plan, while only intervening when he felt a group was not performing to its potential. Also, the goals the groups would make were achievable and optimistic, although those were not always met, which indicated a lack of meeting their performance goals. The team size was optimal since it included 20 members, which avoided the complexities which come with adding more team members whilst maintaining a decent enough team size to ensure tasks are completed when planned. However, I noticed that nearly all team members only had a background in the technical requirements, and most members had little to no experience in presentation and communication skills, which are two key components for at least some members to have in order to perform at a higher level as a team. Finally, I think that we as a team were committed to relationships with fellow team members since everyone was in a good relationship, and they were nearly always were able to divide up the work without any quarrels based on what each member would be most effective working on any given task.

However, that being said, there were other ways the team could improve on motivating individual members if they are not meeting requirements and not standing up to the expectations of the rest of the team. That is part of what being a good teammate means, since you should be helpful, motivate them and stand up for each other. Doing so helps create a personal bond that increases collective accountability and ensures that each member has a better morale and feels motivated and encouraged to work with the rest of the team in order to help them become a high-performing team.

x

Blog Post 3

In everyday life, there are many times we act opportunistically and many times we decide not to despite having the chance to. Our decision whether to act opportunistically or not could be due to many reasons, for example not wanting to act unethically by taking advantage of others or taking advantage of the situation you may be in. There may even be several reasons for not acting opportunistically even when given the chance.

An example of when I had the chance to act opportunistically but decided not to was when I had the chance to take answers for an assignment for a class from one of my friends who was taking the same class with me during my first year. Since I was struggling to complete this assignment, I thought I should ask him to send me his answers since the assignment was due the same night. I had the chance to act opportunistically in this situation because I knew that he would say yes since we were friends, and I would have been taking advantage of him in that way. Finally, though, I decided not to act opportunistically in this scenario and did not ask him for his answers. However, my decision to not act opportunistically in this scenario was not based solely on one reason or decision. One reason I decided not to ask him for his answers and copy them was because it was unethical, but what affected my decision more significantly was the fact that I did not want him to get caught for cheating because he tried to help me.

An example of when someone I know had the chance to act opportunistically but he/she decided not to was when a friend of mine thought about stealing some snacks from a store a couple years ago. He finally decided not to because it was unethical but more importantly, he thought that if he got caught then there would be harsh consequences. Similarly to why I decided not to act opportunistically, he decided to act in this manner because of several reasons, the main one being consequences, but also partly due to the ethical implications, religious reasons (in other words, wanting to be a good person) and the fact that the food was not worth much.

Our decisions about whether we act opportunistically or not are not based simply on one reason, but rather a multitude of reasons. For example, whether taking advantage of a specific situation yields a non-insignificant advantage, whether we consider the ethical implications and the consequences of doing acting in such ways.

In my opinion, I do not think that every such instance amounts to the same thing regardless of one’s explanation for not acting opportunistically. I think every such instance is different, which is due to no small part of the reason for doing so. For example, imagine a situation, similar to that above, in which someone sees an opportunity to steal cash from a store. If one person (let’s call this person Alex), decided not steal because he thinks it is unethical, but another person, (let’s call this person Ben), decides not steal cash because he is scared of the consequences, I see those situations as different due to the reasoning for not stealing. This is because if there were no/lenient consequences, Ben would probably still steal, whereas Alex would not. The only reason the outcome was the same for both Ben and Alex was because Ben did not want to get caught and therefore decided not to steal. This is a specific and basic example, but in my opinion, this would apply to any situation when anyone has the chance to act opportunistically but decides not to.

Blog post 2

Over the last several years, I have had many experiences being in RSO’s as well as working in organizations as an intern. Every organization I have worked in is different in its own respect, whether it be the organizational structure, the size as well as the companies’ cultures and sub-cultures.

During the last summer, I interned as an automated tester at an IT company that provides tech consulting and business process services. When I joined the automated testing team, the team had a major backlog on their assignments and therefore my manager was busy with meetings and overlooking his subordinates, who were also busy with their own work. Therefore, for the first week, I did not get much work assigned to me and was often given vague assignments such as learning to use a software through online tutorials. During my second week, when I would go to my manager and mentor to check if there were any assignments that I could work on, they would be unable to assign me tasks since they were not aware of which tasks were already being worked on by other members of the team. This seemed to indicate that perhaps my manager was not communicating sufficiently and efficiently enough with his subordinates on tasks they were working on and deadlines for those tasks.

However, due to the workload, during my third week, many people were hired as temporary employees (for 3 to 6 months) and joined our team. As a result, they had to go through practical training for a week (they had already done on-site training for 1 week prior to joining). Since the other members part of my team had a lot of work on their hands, they were not able to communicate with the new employees effectively. This not only led to confusion about what they need to do to complete their training, but also made it difficult for the new employees to become familiar with their fellow team members and vice-versa. After this, there was still a lack of communication since the new employees were not being given tasks and would often be sitting idle since they would only be assigned small tasks for the entire day, and therefore would only work for around 1 to 2 hours despite being paid for the full day.

This is an example of a transaction cost to our team as a whole. Since there were several new employees joining our team, it was initially difficult to get used to the change. The change also meant that when both groups (new employees and employees who were there prior) struggled to work together since there was a lack of familiarity about what task should be assigned to who – based on their skill set and personalities. Another transaction cost of this situation is also to the business, since employees were being paid despite the organization not getting any return from them. However, since this is a huge company with annual revenues in the billions, this is a fairly insignificant cost, although on the larger scale it shows that there may be inefficiency and lack of communication in other parts of the organization. Also, after the first week of the new employees joining, despite the initial transaction cost, our team begun working more efficiently and became significantly more productive.

A transaction cost for me was when I was not able to communicate often with other members of my team because they were busy, and I did not have work assigned to me during my first two weeks. Regardless of the work me and my fellow interns were doing, this was barely a transaction cost to the organization since I was doing an unpaid internship, but it was nonetheless a transaction cost.

Blog Post 1

Maurice Allais was born in 1911 in Paris, France and later became a famous French economist and physicist who primarily studied macroeconomic theory and policies and helped pioneer the field. He was the first ever French citizen to receive the Nobel Prize in Economic Sciences, which he received in 1988 for his contributions to the theory of markets and efficient resource allocation. However, he did not get as much credits as other economists because he was committed to publishing his findings only in French rather than also publishing translations in English. As a result, there is a belief that Allais’ impact on economic theory would have been much more significant had his writings been in English. Nonetheless, Allais’ earliest writings have contributed significantly to what is now considered the generally accepted economic theory.

Apart from this, he is also known for his discoveries in utility theory, specifically decision-making under risk, in which he discovered a paradox about how people behave when choosing between various risks. This paradox is now known as the Allais paradox. Using this paradox, Allais was able to show that John von Neumann and Oscar Morgenstern’s widely accepted theory of maximization of expected utility was contradicted based on observations Allais’ had made about how humans behave when taking important decisions with risk involved.

Many of Allais’ observations and discoveries have been applied to the real world, for example Allais’ knowledge in the field was applied to helping set efficient prices for France’s many state-owned monopolies. Allais and his work have also been cited as a key source of inspiration by several young French economists and this will most likely have an immense impact on the field of economics in the coming decades. Allais has also had a huge influence on market theory by trying to generalize it since there are many dynamic aspects of the market in reality.

Allais’ work has been extremely significant in developing the field theoretically and understanding the way the world and humans’ function practically. Additionally, his work has also contributed via the many ways that his theories have been used in the real world. Apart from his considerable contributions to economic theory, Allais’ has also done research and published studies in relation to history and physics, specifically geophysics. For example, Allais carried out research about the behaviour of pendulums (their angular velocity) during a solar eclipse which yielded an unexpected anomalous effect. This effect is now known as the Allais effect. While proceeding experiments and research was carried out by several other scientists regarding this effect and have yielded mixed results, this shows that Allais’ impact outside the field of economic theory is still substantial.

Before taking this class, I did not know much about Maurice Allais’ contribution to field of economics, although I had come across his work in the past, specifically experiments he had performed in the geophysics field.

While most of Allais’ work does not have a direct link to the economics that will be discussed in this course, parts of his work have an indirect link and would be interesting to consider in discussion in relevance to any organization and its efficiency. Parts of Allais’ work can be applied to this course specifically and is relevant to the economics discussed in this course. Firstly, a large chunk of Allais’ finding concerns understanding human behaviour, and while it does not directly relate to the economics discussed in this course, parts of his study may be useful in understanding how employees would react in certain situations and expected behaviours when it comes to taking decisions involving risk, which is common in any organization. Secondly, Allais’ research and insights on setting efficient prices for state-owned monopolies could be interesting case studies to look at since it is at work in real life in many of France’s such organizations. Therefore, the effectiveness of such price setting measures and techniques can also be evaluated.