Wednesday, December 2, 2015

Final Post

The broad topics of the course may have seemed like something that I had heard of before or thought I knew the gist of. This class explained the economics behind them and how they actually work within an organization. Bargaining was a topic that I was surprised to learn the economics behind. My previous assumptions of bargaining would be basic experience seeing bargaining on tv shows or doing so when negotiating with friends. Also transfer pricing was a topic that I had never heard of until this class. I feel that the online blogging helped to allow students to say what they believe on the topic without being afraid of being wrong or singled out in a class room. The feedback we received was helpful in ensuring our answers and supporting them in more detail. With blogging, I would read the prompt and think about an experience in my life that I could relate it to. In the beginning I struggled with the length and quality of my posts, but I feel that they have improved throughout the semester. As for the excel, I would take my time in reading the instructions and write down any formulas or concepts that I needed to understand. Each homework took me at least 45 minutes to an hour and some up to 2-3 hours. Some came with videos and lectures that helped to breakdown the formulas and concepts of the assignment. An approach to possibly improve the class would be to touch on the homework topic the class before it is due as opposed to the class the day it is due. We went into the homework assignments knowing little to nothing about the topic. However, I managed to complete every assignment and perhaps it is beneficial to make the students open the book and/or watch instructional videos to teach themselves the topic and work through the homework one step at a time.

Sunday, November 22, 2015

Personal Reputation

I talk about hockey a lot in my blog posts, because it has taken up a majority of my childhood/lifetime and i believe that these topics can in some way be related to my experience. In this case I thought of roller hockey in particular. I have competed in national tournaments every summer for the past 6 years where the best 10 players from each state make up a team. It is a very competitive tournament and many players go on to be sponsored or play some sort of professional level.

I started playing in this tournament a few years after all my competition did, but I was able to establish a reputation with my performance. There was one player in particular that everyone knew. He's sponsored, currently playing professionally, and stood out in every game he played compared to others. Then 3 years ago we had our awards ceremony. It was announced that in the tournament I had outplayed him and was the leading scorer which awarded me some free equipment. Days later i received a call from a scout that wanted to sponsor me. He referred to me as "the kid who outscored John Schiavo" and told me that a lot of people had been surprised at this outcome. After this, I realized I had established a reputation for my age level in roller hockey and from then on I felt the pressure of needing to be at the top of the podium. Every summer after that I compared myself to John and wasn't satisfied unless i came out on top.

At times, this reputation did go to my head and I became cocky with my performances before I had even accomplished anything. I started to care more about how many goals I, personally, scored instead of how many goals my team had to earn us a collective win. As a teammate I believe I would've been better off not knowing/having this reputation because it made me care too much about my individual performance.

At the time I received the call i was very surprised and excited to experience all that comes with a sponsorship. Instead, I "cashed it in" and decided that my college education and future career were more important than my roller hockey reputation. Since I came to college I haven't devoted time to roller hockey because of my time spent at school and playing ice hockey for the university's division 1 club team. The immediate gain I earned from this decision was the college experience. It also came with long-term gains of graduating with a reputable degree and starting a career that I can hopefully become successful in.

Friday, November 6, 2015

Principal-agent Model

An example of a principal-agent triangle that I have witnessed is the occupation of a financial advisor. This came to mind because of my aspirations of becoming a financial planner and the experiences i've had in interviewing for an intern position. 

The firm hires a financial planner, which is the agent for them. The planner then acquires clients who now look at him/her as their agent. The agent has to lookout for the best interest of his clients financial lives, the firm being successful, and the planner's own personal interests. One conflicting aspect that i discovered when interviewing and looking into financial planning is whether or not the agent earns a salary or commission. Clients will be hesitant of going with an agent that earns commission because he/she will have more incentive of self interest when giving financial advice. 

Essentially, if the agent is managing enough clients, regardless of the extent of their investments, then the firm will be content with the performance. In this case, then the agent just needs to make sure he/she does their job and puts their clients in the best financial situation they can be in. A way to resolve any issues would be to have the agents on salary, but that brings up an opposition that commission is an incentive for the agent. Some could argue that the agent would work harder and compete in the market on commission as opposed to logging hours of work and doing the bare minimum. This was heavily implied in one of my interviews. I was asked how I felt about being on commission and how I felt about competing in the open market of potential clients (principals).

I don’t exactly think that the agent could fail by satisfying one master because in either view, the agent is doing his or her job. If he/she satisfies the firm, then they are doing their job correctly and will continue to perform. If they satisfy their clients, then they are also performing well. Perhaps there is a situation where a financial planner is satisfying all his/her clients and isn’t bringing in enough revenue for the firm. In the manager’s perspective, they might be upset with the agent’s performance. To call this failing seems extreme though. In my opinion, this would call for a performance evaluation and urging the agent to reach out to either wealthier clients or to expand the agent’s clients.

Aside from the differences of salary vs commission agents and a performance review of quality vs quantity of clients, I haven’t witnessed any other issues in the occupation. It is a relevant career in todays society of teaching everyone about financial literacy while also being an example of a bilateral principal-agent model.

Friday, October 30, 2015

Group Dynamics

In the TV show, The Office, the firm realizes a conflict with a surplus in their budget. The accountant specifies that if they do not spend the surplus, then they will receive less money in their budget for the following year. Pam, a receptionist who spends all day sitting, hopes that the money is used to purchase new chairs for the office. Others are frustrated with the poop performance of the old copy machine and believe that the best allocation of the surplus is for a new copy machine. Michael, the branch manager, is put in a difficult situation because he needs to decide whether to purchase a new copy machine, new chairs, or perhaps report the surplus to corporate and receive a personal bonus for himself.

The latter of the three is the most selfish, and although he contemplates it he wouldn't jeopardize any of his relationships with his employees/friends over it. Essentially, Michael doesn't benefit from either purchase but he does need to make a decision. Some people didn't have an opinion and didn't care which was purchased. 

Eventually, everyone agrees on chairs because they would rather have something rather than nothing while Michael gets a bonus. This was the breaking point where all people realized that the firm would benefit from either purchase. After the purchase was made, the office was united and happy again. As for a post mortem situation I am not entirely sure if the problems could have been avoided. Both chairs and the copy machine are essential to the operating of the firm, but only some employees use the copy machine a lot and some employees sit more than others. Depending on the person, they would most likely rather have a new purchase that they would use the most. The only conflict of personal interest was that Pam, the receptionist, sits all day and also has to use the copy machine often. In this situation, I would probably go with what Pam decided because she would be making copies anyways.

Thursday, October 22, 2015

Team vs Individual Production

Over the past 15 years I have dedicated majority of my life to playing hockey. Every weekend was spent on the road for tournaments in Michigan, Iowa, Ohio, and many other states. Practices were 3 days a week for about an hour and altogether it took a lot of time away from other activities.

One of my best coaches made a statement that changed my opinion on my teams and also relates to this topic. He said "of all the teams that i've played on, the ones that were most successful were the ones that no one cared about earning themselves an individual scholarship, we all just wanted to win" which hit home with me since I was worried about earning myself a scholarship at that time.

What I took from his quote was that if all 20 something of my team mates and I put our efforts into helping one another succeed as a group, we would all earn ourselves scholarships somewhere down the road. It definitely made me feel like I had been a bad team mate growing up, because I always knew my personal stats and how I compared to everyone else instead of simply worrying about my team's record and chance at winning a championship together.

Another way I thought of looking at this approach in relation to hockey is how players determine their actions during a game. I find myself passing most of the time instead of shooting. I take just as much pride, if not more, in getting an assist as opposed to a goal. Another famous quote that I have heard is that "great players make those around him/her look good" which has always resided with me. If i hadn't scored or "contributed" to a team's win on paper then I was discouraged, but I also took pride in making plays and putting my teammates in positions for them to score or succeed.

In this case I believe that it is a share-the-spoils approach to have put my personal interest of earning a scholarship aside and done my part as best I could to make my team successful. As for the players now, only 2 kids went on to earn scholarships and one of them was drafted to the NHL. Now looking back on it, the player that was drafted was the least selfish of everyone on the team and didn't get much personal recognition at the time. He worked hard every day and scouts/coaches saw that which got him to where he is today.

In the future, I imagine that I will be working on a team or teams in my career. Each person will hope to eventually earn themselves a promotion, but should not sacrifice the success of the group. In order for our firm to maximize production we will each have to contribute as best we can and let everything else fall into place as it should. That doesn't mean that individuals can't put in extra work on the side or present individual ideas to distinguish themselves. As long as the first priority is to benefit the group then anything else would be considered pulling a rope for one's self.

I am curious to see how a work team environment will compare to that of a sports team, but I do believe that the concepts are interchangeable.

Sunday, October 18, 2015

Income Risk

On coming to the University I was in the division of general studies because I hoped to try to transfer into business or engineering, but wasn't sure what I wanted to do. After a couple semesters, my GPA wasn't ideal for getting into either program so I declared a major in economics with a business minor. I figured that for job eligibility this was the next best thing for me because I hope to work in finance. Every academic decision i have made has been with the intentions of getting the best job after college that i possibly can. 

The past 2 summers I spent my time taking 2 classes to get ahead on credit hours. This past summer i needed to take out a subsidized loan. I wasn't as concerned about the loan because it is subsidized, but once i graduate it will accumulate interest. With this in mind, I worked 40 hours a week all summer and opened up a savings account just in case i need it to pay off that loan upon graduation. After only 4 months i have a quarter of the funds to pay off the loan and still over a year and a half left in college. 

I have 2 older siblings who have entered the job field and made mistakes that I am aware of now. My older sister wasted money and loans by living in the city and going to a private college. My older brother took way too long to take his CPA and ended up just getting a job in sales. After seeing their experiences, I decided to try to go into finance and save as much money as I can starting now.

Sunday, October 4, 2015

Personally, I would use illinibucks if it meant that I could choose classes earlier. It would be beneficial for me in that i could choose classes that fit my schedule and perhaps review teachers or select a teacher that I have had in the past. For example, Professor Vazquez teaches econ 102 and 302. I had him for econ 102, did well in the class, and hoped to have him as my professor for econ 302. Students in the college of business had priority in choosing classes, so by the time i was able to, his classes were full and i took the class with a different professor.

My question would then be, if i purchase a spot in line, can someone else purchase on ahead of me or would the first spot be the most expensive and the price declines relative to the place in line. If the price were too low, then students would take advantage of them and the market would become much more competitive for each class selection. I don't think that the price could be too high. As far as I'm concerned, I could only have benefitted from having the voucher whether i was able to use it for just econ 302 or if i could use it for every class selection.