Saturday, July 11, 2009

My Favorite Things

Reason in Economics and marvel in management. These are a few of my favorite things.

Logically, people will ...

I fell in love - head over heels - in Economics for it is so rational. But my love clearly is not.

Economics makes so much sense in the at times nonsensical world. While usually true, economics could explain not all of today's phenomenon. As my Economics professor has put it very simply, when we study economics we do so in a "closed" world.

The key assumption here is that people are rational. In the real world, he added one variable, "a" in the equation and aptly termed it "animal". Like a beast it is, it is highly unpredictable but powerful - able to overthrow the entire economic reasoning. This animal is "market sentiments". Just like my love for the subject.

Once there were only white swans

Another very interesting concept which I learnt not from former education but from reading especially management books is that of "white and black swans". The story goes this way. Once people have always believed that only white swans exist. This was because no one has ever spotted a swan of another color. Then, this belief was debunked when black swans were sighted.

What is the morale of the story? Very often, we make decisions based on past trends. But past trends cannot predict the future as there are a lot of unknowns that lie ahead of us. Nothing is absolute as the world is constantly changing.

Putting the two together

When I put my two favorite things together, I learn to plan with the best information and yet be prepared for the uncertainties that lie ahead. Just like in the chorus of the song:

When the dog bites
When the bee stings
When I am feeling sad
I simply remember my favorite things
And I don't feel so bad....

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