Class Review

I think ECON 490 was a very good class to take. I learned a lot about how organizations work that will help me a lot when I graduate and work for an organization. The thing I liked to learn about most was about matching preferences. We used the examples of medical schools but I know it could be applied to most other situations (hiring, admissions, drafting, etc.).

The blogging was one of my favorite parts of the class as well. It allowed me to take what I learned from the live class and apply it to things in my life which made me learn it much easier. 

The blogs usually took me about an hour to look up sources and formulate my thoughts into writing. The Excel homework usually took me much longer to complete; that homework typically took me about 2-3 hours to complete because of having to work the problems out before I found the correct answers. 

I can't really think of anything that I would have liked to see more about during the class, except maybe a little more on the hiring process but even that was covered pretty well. The approach with the blogging and Excel homework was a great way to learn the curriculum with the right amount of math and concepts.  

Organizations and Reputation

In this post, I will write as a consumer of products by the brand Nike.

Nike brands itself as a provider of many products, but completely limits itself to the sports industry. This isn't a bad thing, as this specialization has allowed them to not only excel in the sports market, but to dominate the sports market as well.

The company is known for its broad range of products pertaining to the sports industries. Their products range from their most iconic product, their shoes, to team uniforms, to training products, to sports' balls (footballs, basketballs, baseballs, etc.). It is nearly impossible to watch an athletic competition without seeing at least one player wearing something made by Nike, with the norm being entire teams sponsored by Nike with their uniforms, shoes or cleats, and other gear.

They developed their reputation through a combination of amazing marketing and a high-level of consistency in their products' performance. Their remarkable marketing comes through their long-list of superstars that are spokespeople for their products. In the sports world, nobody will buy a product unless the company has a superstar backing the product. This is mainly due to two reasons: if that superstar is willing to use their product, then the product must be good, and if the company is successful enough to afford this superstar, then the product must be good. No company stands close to Nike in terms of superstars representing their product, with Adidas probably being a distant second. The second aspect of their reputation comes from the overall performance of their products. As an owner of many Nike products, I can say that I know when I buy a Nike product, I am getting a good and reliable product, and this has allowed them to build a near-universal customer base. It is probably impossible to find an athlete that doesn't own at least one product of Nike.

In the sports world, people are always looking to get a leg up on the competition, and Nike has built their reputation on the reliability and high-level performance of their products, as well as the constant advancements of their products. This has allowed them to become the go-to brand in the sports market.

Reputation at Work

I work at a restaurant while attending school as a delivery driver. I have been employed there almost two years now, and developed a reputation over that time. My reputation is somebody who is goofy, but always reliable and hard-working. While drivers have come and gone through the restaurant, mainly being fired, I have consistently been employed there because of my nature to always show up at work on time, whenever I am scheduled, work for others when somebody doesn't show up, work hard while I am at work, keep personal opinions and relationships to myself, and go home at the end of the day. Because I have had consistent employment since I was 14 years old, along with my blue-collar upbringing, I have never been afforded the opportunity to be unemployed. Because of always having a job, always needing a job, and always wanting a job, I have developed a strong reputation as a reliable, good worker, which is definitely the case at where I work now. 

I keep my reputation intact and enhanced further by continuing how I have always approached work: always show up on time, never don't show up to work, keep opinions and personal relationships to myself, remain friendly, and work hard. I have never been able to "cash in" my reputation for personal gain because unemployment is not an option, and by abandoning my reputation as reliable I would probably lose my job. 

Principal-Agent

5An instance in which I participated in a triangle-like relationship is when I did valet in high school. I was an agent of both the valet company and of the country club and its members. 

One example of when the two principals didn't see eye to eye is when members would request that we didn't run to get their car because they either felt bad or because they wanted to have a quick conversation with somebody before their car was brought to the front of the country club. However, our valet company's owner always demanded that we sprint for the guests vehicle so this led to some minor confrontations with the owner of the company. He would see us walking and assume we were being lazy. The way our boss would resolve it was by yelling at us to sprint regardless of what the member said. 

A way to resolve it was by going by the principle that the customer is always right and do as they tell us. However, this satisfies one "master" and ignores management. It can lead to instances where you don't know who you are really working for, the customer or the owner. 

Parallel Experiences Involving Groups

My first experience was working with a team for a Global Studies course. The class was split into groups of five to complete a project and presentation on a war in South America called the War of the Pacific. This was my pleasant experience. I was assigned in a group with all girls that were very studious and organized. We met the first day that we were assigned our project. This allowed us to get a jump-start on the project that allowed us ample time for research and editing. We were also able to practice giving our presentation a couple times. Everybody seemed to get along very well. I think that this was partially because of friendly personalities, and partially because nobody was upset with another member because everybody performed their tasks in an efficient, high-quality manner. The members were also committed to their work. I would say that this was more of a commitment to getting a good grade than because of interesting content, however, because the content of the War of the Pacific was pretty dry. In terms of talent, everybody seemed more than capable of doing their share of the preparation and presentation, and this reflected in our presentation, which resulted in an A. 

My parallel experience was working in a group in a Political Science course. We were assigned to groups of four to complete a project and presentation on the National Park Service and the national parks that they operated. This time, however, my group was very disorganized. Everybody had busy schedules, or claimed to have busy schedules, and was unable to meet until 3 days before it was due. We were still able to put together a decent project, but that is only because of two consecutive all-nighters. Nobody was friendly with each other; everybody just wanted to get their part done and go on their separate ways. The class being a lower-level course, and the project being relatively easy, all the team members had more than enough talent or smarts to accomplish the project in a high-quality manner. It seemed as if the commitment to the class and the course material was not there. Also, this was evident during the presentation, as you could easily tell that our pieces had very little interdependence and was not coordinated well enough to display a healthy dynamic.

Team Production vs. Individual Production

http://campaignstops.blogs.nytimes.com/2012/02/20/how-to-get-the-rich-to-share-the-marbles/?ref=opinion&_r=0

I loved this article. I think that the biggest problem facing wealth inequality in our country is the morals behind this inequality. People think too economically some times. I know that this sounds bad for an economics class, but morals need to come into play more often. For example, it may be legally and economically alright for a business owner to pay his workers minimum wage for hard labor while his profits skyrocket into the millions, but is this the moral thing to do? People need to ask themselves sometimes, "Okay, I claim to believe in God and go to church every Sunday, but what does Jesus really think of me as I drive home from church in my new BMW, passing all the homeless people on the side of the street?". Don't get me wrong, I'm all about success and business and providing a comfortable life for your family, but there are ways of doing it that are honest and moral. I also find it interested that the article quotes JFK on his speech against Communism, when the basic idea of Communism is what the article is about, which is providing fairness to all.

I have had personal experiences which go FOR team production and shared rewards, and those that go AGAINST team production and shared rewards.

My first experience was working valet in the Chicagoland area during high school. Our tip system favored team production, as all the tips that were received during work were split evenly at the end of the night between all the valet attendants. This worked and it didn't work. It worked in the sense that everybody felt equal at the end of the night. However, in terms of work load, it didn't always work. Some people were motivated by this, and knew that a collective effort to get cars faster, be nicer to guests, etc., would result in more tips for everybody at the end of the night. Some people were not motivated by this, and would have the mentality that they didn't need to work hard because they would still receive the same tips, and would also create resentment among the workers. I guess it just depended on what type of worker you were.

My second experience is delivery driving for D.P. Dough while in college. We have a different tip system where everybody keeps whatever tips they make throughout the night. This works in that it requires self-motivation. Drivers come to realize that the faster they drive, the less things they forget, etc., will result in better tips, and that each driver is responsible for their own pay. This creates fairness in that each driver makes tips equal to their amount of effort. However, it can also be unfair. For example, as drivers, we are supposed to automatically take whatever orders are ready when we get back to the store and works on a first-come, first-serve basis (in other words, whoever got back first is next in line, second back is second, etc.). If you have good luck, then the orders that will be ready when you come back are prepaid and have big tips already. If you have bad luck, then the orders will be prepaid with small tips. This can create resentment if a driver keeps getting assigned to bad tipped orders and will feel it is unfair.

I think that the biggest reason why the valet shared tips was because everybody worked in the same vicinity and were accountable for their actions. It is also hard to be dishonest about sharing tips when everybody is working together. In contrast, I think that the reason why delivery driving uses individual tips is because it is too hard to monitor each drivers actions, and drivers can be dishonest about the amount of the tip.

Transfer Pricing / Allocation

The hypothetical situation is that a university could use credits that are allocated to students to be used for priority access to certain things. A couple things could be a candidate for a system that uses credits for priority access.

Sports tickets and items are things that could use this system. For example, if there is a limited amount of "good" seats at a football game, students could use their credits to have an advanced option to buy the tickets, with competition coming from other students as well as from non-students.

Another thing could be for school books and the condition of used books. A student could use their credits to gain access to higher-quality used books, assuming the different levels of quality doesn't affect the price (flat rate for used books).

Student parking is another thing that could benefit greatly from a system like this. Students could use their credits to have priority access to better and closer parking.

I do not believe that a credit system would be fair when it comes to registering for a class, simply because there is no merit or seniority involved. However, I believe it could be utilized in terms of class times, with students being able to use their credits to, for example, register for a 11am section instead of a 9am section.

I would use my credits for class times. I believe that a major factor in a student's success is the time that they have classes. I am unsure of the exact data, but I would be willing to bet that a class's average GPA is higher in sections scheduled later in the day. This would be my main priority.

If the administered price for priority access was too low, students would use their credits less sparingly, and it wouldn't create the fixed economy that is desired. However, if the administered price for priority access was too high, students would be too cautious with their credits and might create an excess of unspent credits.

I believe the best process would be to have a bidding process for priority access that would vary in lengths depending on the level of priority/item desired. For example, if a student has 100 IB (Illinibucks), that person could bid 20 IB for first access good seats at a football game. However, if another student wants the seats more, that student could bid 25 IB. This is fair because a student shouldn't have to pay a high price if no other students want an item and would let the market determine things importance. I believe this system would let the students decide what each thing was worth and would be the most fair.

Managing Future Income Risk

My future income is a major factor in my current decision-making processes. I have made decisions over the last couple of years that I feel have steered me in the right direction towards a safe income. 

My first decision was deciding a major. I come from a blue-collar family and area, so a degree in something that wasn't business-related or a high-paying profession wasn't an option. This made me decide on Economics, because it gives me a good background in how the economy works and how the economy can be manipulated for benefit. I believe that this will lead me towards a higher income profession.

Another decision was how I chose to spend my summers. However, the decisions I made in terms of work were geared towards immediate relief. Because of financial situations, I was forced to take higher-paying jobs over the summer in lieu of internships that would provide me with a more beneficial experience. 

In terms of loans for college, I chose to not borrow fully from the government and financial institutions because I feared accumulating debt. However, I still chose to loan a substantial amount because I believed it would pay off in the long-run to attend a top-notch university such as the University of Illinois at Urbana-Champaign. 

Other decisions I made were clubs I joined that I believed would look the best on resumes for future job prospects, a fraternity I joined because of extensive networking through tens of thousands of graduates, and choosing to work while I am at school to help alleviate financial obligations. 

I have three older brothers who handled this situation very differently. My oldest brother graduated from a university with a degree in Health Management, and took on much debt doing so, and is still having a hard time gaining a solid financial footing. My next oldest brother was the responsible one. He majored in Business Administration and chose to go to a small school where he received an athletic scholarship so that he would not accumulate much debt. He now has a good job and, while he is still in debt from school, is managing it very well. My next brother graduated from a university with a degree in Accounting, and like the rest of us, had to take loans to pay for it. However, when he graduated, he decided that joining the U.S. Navy was his best option, and is currently managing his future very well. 

Opportunism

Last year, I had the opportunity to invest money in a company's stock. Due to a family member working inside of the company that gave me information on investing in the company, I knew that there was a highly likely chance of the stock going up rapidly in the near future. Ethical concerns arose because I believed I had information that the general public did not have. Because of this, I chose to not invest in the stock. Even though the stock did go up rapidly in the coming weeks, I still felt I made the right choice.

There are multiple reasons as to why I chose not to invest in the company. While I was unsure of the exact law, I believed that I would be somewhat involved in insider trading. As this is illegal, and being a law-abiding citizen is important to me as an American, so that influenced my decision. I also believed that this was unethical because I had information that the general public did not have and it would be wrong to make money with an unfair advantage. Another reason was that I wasn't entirely sure of the advice, and the possibility of losing money was also in my mind and influenced my decision.

Ultimately, my various reasons came to the same conclusion: making money with an unfair advantage is not only unethical, but highly illegal, and I came to the conclusion that I couldn't proceed with the investment. While the possibility of losing money was a very different reason than ethical issues, it still led me to the same decision.

Experience Within Organizations

My experience within an organization is working with the Illinois Department of Transportation over the summer as an intern. While working as an intern, I was assigned to supervise and audit projects that were contracted out to private contractors and subcontractors for state-funded work on state-owned roads. This was within the Bureau of Construction of IDOT. The structure within the Bureau of Construction was split into separate field offices outside of the headquarters. Each field office consisted of a Resident Engineer, who was in charge, and about 2 or 3 Civil Engineers. Each field office was in a separate area of District 1, which consisted of Cook County, Lake County, DuPage County, and some other smaller ones. Each Resident Engineer was assigned a project which was to be completed in a certain period of time, usually about 60 days and within 10 miles of the field office. Each project was first bid on by private contractors, with the lowest bid usually winning (bid is the amount it would cost them to complete the project). After the private contractors began work on the project, our job was to supervise the contractors by performing several measurements and blueprint reviews each day, making sure that the private contractor was doing exactly as laid out in the blueprint. Periodically throughout the project, we would also audit the time and materials used by the contractor to ensure that IDOT was being billed correctly by the contractor.

To the best of my knowledge, the entire Bureau of Construction is a transaction cost. The production costs are represented by the private contractors. Similar to a proctor of a test representing transaction costs, our job was to ensure that the private contractors remained honest and stuck to the blueprints. In a world without dishonesty, our job would be unnecessary. Therefore, the work we performed was a transaction cost of road construction.

Herbert Simon Bio

Herbert Simon, 1916-2001, was an American social scientist that performed research in many fields, including political science, economics, sociology, and psychology. Herbert Simon's contributions to the field of economics are very interested. He is most famous for his theories on bounded rationality. Interestingly, he preferred to call his theories "satisficing", combining the words "satisfy" and "suffice" to attempt to explain the reasoning behind the human mind's cognitive limits for processing information. A major part of his research was his theory that individuals do not attempt to maximize their benefits from particular situations because of the near-impossibility of doing so. He maintained that not only would it be incredibly difficult for an individual to obtain all the information needed to perform such a process, the human mind simply isn't capable to process all this information for every situation. This was important because it was able to effectively explain human's tendency to settle for products or services that were satisfactory while not necessarily maximizing benefits; for example, such as buying a car you felt was affordable in one day rather than waiting one week to properly compare different vehicles at different dealerships.
I was unaware of Herbert Simon's significance to the field of economics before I enrolled in this course, and have learned much about him since. Herbert Simon's research is important to the study of the economics of organizations because it helps to explain why managers of organizations don't always make choices that maximize their benefits and make choices that satisfy simple goals because it is easier.