Income Risk Management

Even if it is my last year in the college, I still cannot give an accurate answer when people ask me what I plan to do after college. It is hard for me to know the real implications about each step I took, until I really get into the condition. At this point, I will consider some of my risk minimizing process I took actually increases my loads. For instance, I chose to study aboard in the U.S. because it seems that an oversea background will enable me find a better position and have higher entry salary in China. However, the cost is expensive and I encounter the problem about where to locate myself. Even though I don't need to afford my tuition and accumulate any debt, I still felt like I owe my parents this amount of money.

I chose Communication when I applied U of I, and added Economics as double major. Choosing communication is my first approach to minimize future income risk. I was interesting in mass communication from my junior school and have some related background. As long as I have some productions in magazine and video, I thought it will be easier for me to enroll in a better university if I applied as a communication major. Communication tends to be a general subject and it trains people skills in communication. People with a communication degree can work in various industries, including marketing, consulting, and media. However, it is too broad and not professional enough. But I have a backup in my future career. My mother worked in media industry for more than 20 years and she has a strong network. I already knew that it is possible for me to obtain a job in her network. This decision solved my first concern: at least I can find something that I am interesting in after graduate.

After studying in U of I for a while, I was not satisfied with my original future blueprint and seeking for something might provide me a better future. I began to consider about working in the U.S. for a few years to gain some different experience then get my master degree, before I finally settle down in Asia. Honestly, I chose to double major in Economics is not because I am interested in Economics, but for a broader career range and learn more about the real world. I considered double major and studying in a minor were my second step of income risk management. As an international student, I confront a cruel fact: if you want to stay in the U.S., it is not about what kind of job you find and what is your salary, but about whether you can get a job offer with Visa sponsorship or not. There is not doubt that having two majors will make a person more competitive in job market.

Other approaches I took to manage income risk include internships, networking with different people, learning a new language, and studying aboard during summer. People always emphasize the importance of internship and networking since our freshman year. So everyone understand their functions. However, I think a new foreign language is a good tool in reducing income risk because people can manifest their language skill more directly. Moreover, it also provide some possibilities of job offer from another country. Even though my Chinese has fulfilled the college requirement, I still learned Japanese in the college because it will enhance my ability when working for companies targeting Asian market.

Even though I just have some rough idea about my future career now, I believe that everyone will figure out their way at some points. Another approach I may take is going to grad school. However, before I do it, I will definitely evaluate the benefits and risks.

Opportunism in Internship Decision

When there is a point for us to make choice, potential opportunism will occur in our decision making. For most international students on campus, finding a summer internship is not easy because we are restricted by visa status. Without an related background, I got a summer internship in a Chinese bank New York branch by having some relatives networking. Having an internship in the U.S., especially in somewhere near Times Square, it is a great boost on the resume and future job seeking. However, after I talked to the HR, I was told that this position is considering as volunteer, and the company will provide seldom training and actual tasks to interns. It is not an opening position, just like something over shadow. They offered this opportunity to their big clients’ children or employers’ relatives who want to make their resume looks better. 

After I talked to my previous colleague, who is also an alumnus, he told me that I may not learn something valuable from this internship experience because I’ve already interned in their Hong Kong branch last year. Besides, he told me that the company has concerned in confidential information, so people without contracts (like interns) cannot access to information and nothing to do. However, we both acknowledged that this opportunity will provide me a more persuasive work experience and look great in my resume. I was struggling with the deal because I also received an offer from a television station in China. Both internship were unpaid so I need to compare their payoff. I know that even if I can learn more and apply more knowledge in the internship in China, it will still be less persuasive in other countries. However, if I waste two months in New York without learning anything valuable, I will feel guilty to my time and money.

I finally choose the internship in my hometown. First, I am more interesting in TV production and willing to apply some of my relevant knowledge to it (I am double majoring in communication). It allows me do something more relevant to my future expectation. Indeed, this internship is not an easy job. I need to select topic, interview people and communicate with cameraman, write script lines, and edit videos after I get through the training. Even if the process was painful, I can finish a piece of TV news production all by myself. Second, the opportunity cost of working in my hometown will be less than working in the New York. I don’t need to worry about housing and budget. I can also go back home and spend some time with my family and friends. 

When considering opportunism in this case, I think the reward for taking the opportunity will be a better look in the resume and networking with people who will be benefit for me to settle down in the U.S. However, if I take this step, my resume will become more or less deceptive because it still looks great even if I am just in charge of writing address on the envelopes. Plus, I don’t want to work in a decent bank and finally learn nothing about banking. Even though I give up this opportunity, I still think my choice is great because I have a valuable summer.

Organization and transactional cost

I just started working in the Advancement Office under International Program Studies in U of I. My department is focusing on managing alumni relationship within international student, planning for donation and gifts for IPS, and promoting our college in a wider range of social media, including Sina Weibo and Wechat (Chinese popular social media). Our department need to report to IPS executive office, and IPS is under associate provost for international affairs. Comparing to other department and international student organization, we are quite small by just having two full-time and two student workers. I need to communicate our plans with another student interns and report my work to either the director or officer of the department. Because the communications within the department are quite straightforward, I assume that we actually minimize transaction cost within the department by using lots of face-to-face communication.

However, from my interview in last semester till now, there is a minor change within IPS office. We used to have a campus & public engagement department to do some outside communication. People decided to dismiss this office and merger its communication personnel to our department. Two people, who are responsible for social media strategies in Facebook and Twitter and management of Illinois International website, join our department. It is a reasonable transformation in organizational structure because we can save times in communicating our communication strategies cross-department. Moreover, our department is also trying to reach some new social media products, such as Pinterest. Having people who are in charge of different social media platform together will be helpful in generating ideas and reducing the uncertainty in unifying our communication strategies. I also think that it is better for us to promote different social media on others and enlarge the dimensions of our audience. 

I think the change in structure of organization reduces the transactional costs. Even if we did not necessarily involve with large transactional cost within my department, we need to inform and communicate with other department when we come up new ideas. This may cost time in writing proposals and setting up meetings. However, merging some relevant personnel together can reduce the cost and effort of communication outside organization from my department’s viewpoint. In a larger scale, considering the change based on IPS office’s perspectives, I believe that they reduce the cost in management and complexity of the organization. Even if the total salary they paid has not been changed because no one gets fire. The integration of two department and different communication channels may save their time and increase efficiency.

On the other hand, the merging of personnel might involve with additional cost in payments and staff training. All students workers involved with advancement should participate in training that takes around 10 hours. This would be a sunk cost for every new employers. They might also increase the risk on confidential information because there might be more people have rights to access those information. But until now, I think people from the original communication department still concentrate on their fields. It is good because there will be less waste in human resource and everyone's tasks have not been influenced by the transformation of organization's structure.

Amy Finkelstein

Amy Finkelstein, who was born in 1973, is the Ford Professor of Economic at the Massachusetts Institute of Technology (MIT), and the co-Director of the Public Economics Program at the National Bureau of Economic Research. Her research concentrates on public finance and health economics. She conducts research on market failures and public policies in health insurance markets. 

Finkelstein received her AB summa cum laude in Government from Harvard University and an M.Phil. in Economics from Oxford University as a Marshall Scholar. She received her PhD in Economics from MIT. She has received numerous economic award and honor, including John Bates Clark Medal (2012), a Presidential Early Career Award for Scientists and Engineers (2009), the American Economic Association's Elaine Bennett Research Prize (2008), and a Sloan Research Fellowship (2007). She was awarded John Bates Clark Medal under the age of 40 in 2012. And the award commended her research as "a model of how theory and empirics can be combined in creative ways."

I never heard about this person when I was assigned my alias. I am surprised for her achievement at such young age. Since her research is focused on health insurance market, I don't think her work will be relevant to the major topics we discussed in this class. However, her research on asymmetric information in insurance market and welfare implications of models with asymmetric information may help us understand organization's decision making under similar condition. 

Sources:

http://economics.mit.edu/faculty/afink/short

http://www.aeaweb.org/aea/AmyFinkelstein.pdf

http://www.bostonglobe.com/business/2012/04/27/mit-amy-finkelstein-wins-john-bates-clark-medal-economics/BNUhpRCqoSPNqgWXyDnb5J/story.html?camp=pm

Amy Finkelstein's Page in MIT Economics:

http://economics.mit.edu/faculty/afink/short

test

2013