Here’s Susan Athey’s remarkably refreshing ideas on economists’ career in industry:

(Stanford GSB wrote in the introduction of the YouTube video)

“Economists are finding purpose outside of academia as their perspective becomes more valuable to technology companies… Susan Athey explains how economists offer new ways of mapping business objectives to metrics, incentives, and success.”

Very refreshing pov:

One of the things that’s been really interesting about the tech companies of the last 15 to 20 years is that, they’ve not only been innovating in terms of their technology, but also in terms of their business models.

And actually, most of the successful tech companies are some sort of platform company. Their marketplaces like Amazon matching buyers and sellers of products or eBay. They have advertising marketplaces like Google, all of these are platform companies.

And so, not only do they have to do technical innovation, but they also have to do business and economic innovation. There’s so many questions that come up in operating these businesses as well as in thinking about their strategy, they just have not been addressed before.

You can’t just call a consulting company and say like, what’s the best practice like I would for a factory? If you’re operating a marketplace like in Airbnb you have buyers, consumers who want to rent and you have sellers who are the owners of the homes. The marketplace has to really think about both sides of the market, on the sell side of the market the homeowners have to keep their calendars current…

[Keeping calendars current and provide high-level services] And they only do that if they have the incentives to do so, and those incentives in turn are created by the marketplace. So there’s a real marketplace management challenge that’s new to these tech marketplaces. And then the bigger platforms have strategic considerations that are quite profound…

Economists, especially micro-economists with game theory training, may design incentive structures, determine incentive strength, and identify major issues through data measurement and experimentation. Experiment design in marketplaces is complex, considering equilibrium effects and varying impacts across suppliers and competitors. Economists also help address regulation concerns, like antitrust policies or the rise of new service models (Uber, Lyft), requiring an analysis of costs and benefits and strategic data use.

That’s really when the economics comes in and so a lot of times that’s the stage where a firm will start try to bring in these expertise, and of course you hire your business people. But often these problems are so challenging and non standard that just a generic business background may not be enough.

Economists aren’t the only social scientists impacting tech firms; behavioral economists help design user interfaces that guide better consumer decisions. Consider symbols that indicate response times on marketplaces or review systems that minimize bias by hiding others’ ratings until yours is submitted. These are examples of economic principles at work in designing incentives for honest information sharing.

In a broad sense, economists bring a unique way of thinking, focusing on measurement, aligning metrics with business goals, and structuring incentives that drive sustainable outcomes.

People should have a little more respect for economists.🤪 Like, two economists walk into a bar…