Tech embraces dismal scientists
▶ Tech companies are on a hiring spree for economists ▶ There are “these new companies with tons of digitized data”
At an April meetup organized by the National Association for Business Economics (NABE), a Facebook researcher named Michael Bailey presented a working paper suggesting that a buyer in Detroit might be willing to pay more for a home if he had lots of Facebook friends living in a high-priced housing market like San Francisco. For the project, Bailey and his co-authors matched public records of 525,000 home sales to anonymized data for 1.4 million Facebook users.
The daylong meeting, held at the Federal Reserve Bank of San Francisco, was the first formal gathering of tech company economists, according to NABE Executive Director Tom Beers, and included numerous stars of the consumer internet. Hal Varian, the Google economist who helped develop the Adwords marketplace, was there; Keith Chen, of Uber, presented a paper on the company’s surge-pricing policy that refuted earlier research that said taxi drivers won’t work in the rain. Economists from Amazon.com, Netflix, and Linkedin elaborated on their work as well. “It was like a geek dream come true,” says Nela Richardson of the real estate brokerage Redfin.
The meeting gave participants a chance to trade notes about what it’s like to be at the forefront of a trend in the profession. U.S. companies went on an economist hiring spree in the late 1950s and 1960s, says Beers, as computers made econometric analysis possible and companies sought experts to forecast swings in the business cycle. Today, businesses are once again ramping up their hiring of economists, this time spurred by a boom in web-generated data and tools for storing and sorting it. Their job is to extract insights that can help businesses improve their products or user experience. Some also produce research to shape public policy. “Now you have all these new companies with tons of digitized data, and not only that, it’s data that describes human behavior,” says Andrew Chamberlain, chief economist at the jobs and recruiting website Glassdoor.
There were 11,500 economists working in the private sector as of May 2015, according to the Bureau of Labor Statistics, up from 5,580 in May 2010. Facebook’s data science team employs about 25 Ph.d.s in economics, says Bailey. That’s about the same number employed at a large U.S. bank, NABE’S Beers says. Amazon employs more than 60 economists, according to attendees at the NABE networking event, and its careers page lists more than 30 open positions. (The company didn’t respond to requests for comment.)
Stan Humphries joined Zillow in
“Some of the private data is garbage. It’s not that the people producing it are not as smart or that they don’t do hard work. The motivations are different.” —— Bill Mcbride, Calculated Risk
2005 to develop algorithms for estimating home prices. When the housing market started to crater, he emerged as a favorite source for journalists looking for data and commentary. “At a time when you still had industry people saying ‘Yes, we’ve had some correction in prices, but there’s nothing to see here, move on,’ I’d be the guy who came out and said, ‘No, we’re going to see another two years in housing recession; here’s why,’ ” says Humphries, whose current title is chief analytics officer and chief economist. “We felt being as accurate as we could would garner respect from consumers.”
Publishing data-driven research has become a popular strategy for web marketplaces and listings sites to showcase their depth of knowledge about a particular industry. That includes home renovation startups such as Houzz and Buildzoom, and jobs sites like Indeed and Glassdoor. More data is generally a good thing, says Bill Mcbride, who blogs about the housing market at Calculated Risk, but it pays to consider where it comes from and how it’s compiled. “Some of the private data is garbage,” he says. “It’s not that the people producing it are not as smart or that they don’t do hard work. The motivations are different.”
In the early days of the data boom, tech companies sought to entice big brains by allowing them to keep one foot in academia, says Susan Athey, a former chief economist at Microsoft who now teaches at Stanford. Recently, Amazon has emerged as an exception to that rule, says Athey: It keeps a tight leash on research produced by its in-house economists. Nonetheless, it’s managed to attract a team whose size and quality rivals the economics departments of top universities, Athey says, in part because the company offers access to unique data. “I can’t run an experiment on a couple of million people at Stanford. If you want to be aware of what interesting questions are out there, you almost have to go and work for one of these companies.”
The bottom line The giants of the web are assembling teams of economists that rival those at banks and universities.