By Steve Lohr

Sept. 3, 2016
For eight years, Peter Coles had an economist’s dream job at Harvard Business School.
His research focused on the design of efficient markets, an important and growing field that has influenced such
things as Treasury bill auctions and decisions on who receives organ transplants. He even got to work with
Alvin E. Roth, who won a Nobel in economic science in 2012.
But prestige was not enough to keep Mr. Coles at Harvard. In 2013, he moved to the San Francisco Bay Area.
He now works at Airbnb, the online lodging marketplace, one of a number of tech companies luring economists
with the promise of big sets of data and big salaries.
Silicon Valley is turning to the dismal science in its never-ending quest to squeeze more money out of old
markets and build new ones. In turn, the economists say they are eager to explore the digital world for fresh
insights into timeless economic questions of pricing, incentives and behavior.
“It’s an absolute candy store for economists,” Mr. Coles said.
The pay, of course, is a lot better than you would find in academia, where economists typically earn $125,000 to
$150,000 a year. In tech companies, pay for a Ph.D. economist will usually come in at more than $200,000 a
year, the companies say. With bonuses and stock grants, compensation can easily double in a few years. Senior
economists who manage teams can make even more.
Businesses have been hiring economists for years. Usually, they are asked to study macroeconomic trends —
topics like recessions and currency exchange rates — and help their employers deal with them.
But what the tech economists are doing is different: Instead of thinking about national or global trends, they are
studying the data trails of consumer behavior to help digital companies make smart decisions that strengthen
their online marketplaces in areas like advertising, movies, music, travel and lodging.
Tech outfits including giants like Amazon, Facebook, Google and Microsoft and up-and-comers like Airbnb
and Uber hope that sort of improved efficiency means more profit.
At Netflix, Randall Lewis, an economic research scientist, is finely measuring the effectiveness of advertising.
His work also gets at the correlation-or-causation conundrum in economic behavior: What consumer actions
occur coincidentally after people see ads, and what actions are most likely caused by the ads?
At Airbnb, Mr. Coles is researching the company’s marketplace of hosts and guests for insights, both to help
build the business and to understand behavior. One study focuses on procrastination — a subject of great
interest to behavioral economists — by looking at bookings. Are they last-minute? Made weeks or months in
advance? Do booking habits change by age, gender or country of origin?
“They are microeconomic experts, heavy on data and computing tools like machine learning and writing
algorithms,” said Tom Beers, executive director of the National Association for Business Economics.

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Understanding how digital markets work is getting a lot of attention now, said Hal Varian, Google’s chief
economist. But, he said, “I thought it was fascinating years ago.”
Mr. Varian, 69, is the godfather of the tech industry’s in-house economists. Once a well-known professor at the
University of California, Berkeley, Mr. Varian showed up at Google in 2002, part time at first, but soon became
an employee. He helped refine Google’s AdWords marketplace, where advertisers bid to have their ads shown
on search pages, based on the words users type into Google’s search engine.
Google’s insight was to avoid giving the best ad placement to the highest bidder. Mr. Varian worked to develop
a different model for ad placement, calculating the probability that a user will click on an ad and find the ad
relevant. It was a classic example of smart market design.
Since then, Mr. Varian and his team have applied their economic perspective to Google’s ad markets, the
company’s unusual auction for its initial public offering, bidding strategies for wireless spectrum, patent
auctions and purchases, and models for new businesses like driverless cars.
For the moment, Amazon seems to be the most aggressive recruiter of economists. It even has an Amazon
Economists website for soliciting résumés. In a video on the site, Patrick Bajari, the company’s chief economist,
says the economics team has contributed to decisions that have had “multibillion-dollar impacts” for the
company.
Another Amazon jobs site lists openings for economists. As of Friday, there were 34.
Seeing this emerging job market, the National Association for Business Economics held its first meeting for
technology company economists in April in San Francisco. Another is set for October in Silicon Valley.
Academia is also starting to take notice — and adapt. “It’s all happening so fast, it’s hard to keep up,” said
Susan Athey, an expert in the economics of technology at the Stanford Graduate School of Business who is also
a consultant to Microsoft.
Many economics students also take computer science courses, and some major in both. But a new course this
fall at Yale, called Designing the Digital Economy, seeks to blend economics and computer science in the way
digital economists do at tech companies. The instructor is Glen Weyl, an economist at Microsoft Research, and
the course will have guest lecturers from Amazon, Pandora and Uber.
The course is a pilot for curriculum change and perhaps a joint degree program focused on digital markets and
their design. Dirk Bergemann, chairman of the Yale economics department, explained that economics was
concerned with efficiency, prices and incentives, while computer science focused on algorithms and
complexity.
“In digital marketplaces, you are trying to address both sets of problems,” he said.

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Mr. Weyl predicts that the rise of digital marketplaces in the economy is just getting underway. Uber in ride-
hailing and Airbnb in room-renting, he said, may well be just the start of a redefinition of private property,
made possible by digital technology.
Things, according to Mr. Weyl, will increasingly be rented as services instead of owned. That is the long-term
vision of driverless cars: When a vehicle just shows up on command, far fewer cars will sit in driveways.
Transportation efficiency, resource consumption and industries will all be transformed, he said.
The same could be true for household goods, Mr. Weyl said. One possible situation: After you use your
espresso machine for breakfast, a drone comes to pick it up, and you rent it out for the day.
A current market-design challenge for Amazon and Microsoft is their big cloud computing services. These
digital services, for example, face a peak-load problem, much as electric utilities do.
How do you sell service at times when there is a risk some customers may be bumped off? Run an auction for
what customers are willing to pay for interruptible service? Or offer set discounts for different levels of risk?
Both Amazon and Microsoft are working on that now.
To answer such questions, economists work in teams with computer scientists and people in business. In tech
companies, market design involves not only economics but also engineering and marketing. How hard is a
certain approach technically? How easy is it to explain to customers?
“Economics influences rather than determines decisions,” said Preston McAfee, Microsoft’s chief economist,
who previously worked at Google and Yahoo.
Under chief economist Pat Bajari, Amazon has hired more than 150 PhD economists in five years. Bajari has
also cornered the market on what might be called “rookie economists” just out of school. That crowns Amazon
the largest employer of tech economists—with more of them working full-time than even the largest academic
economics department. Amazon is far from alone in this trend.
Some 50 tech companies “have been snapping up economists at a remarkable scale,” says Michael Luca, the
Lee J. Styslinger III Associate Professor of Business Administration at Harvard Business School. “All of the big
Bay Area tech companies have teams of economists, and lots of the smaller companies are starting to hire
handfuls of them.” The list includes Google, Microsoft, Airbnb, Uber, Facebook, and numerous smaller
companies.
Tech companies are turning to sharp economic minds to provide their unique lens on business problems like
advertising auctions and market design. The accelerating phenomenon has given rise to a new field within
economics called the economics of digitization. Research from the field is quickly finding its way into practice,
directly through the work of PhD economists, and in the classroom, as HBS and other business schools add
more tech-germane courses to their MBA offerings.

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Luca and co-author Susan Athey, the economics of technology professor at Stanford Graduate School of
Business and a pioneering tech economist herself, delve into the phenomenon in their paper, Economists (and
Economics) in Tech Companies, forthcoming in the Journal of Economic Perspectives.
“Inside tech firms there’s a huge competition for talent right now,” Athey says. “There are fairly junior PhDs
making in the high six figures or even seven figures because their expertise is just so valuable.”
What does a digitization/tech economist do every day? Problems they work on include:
Online advertising design. Advertising inventory on search engines is often sold via auction. Economists help
companies design those auctions, advising on everything from the type of auction to where to set reserve prices.
“Tech firms have also hired economists to solve challenges relating to the choice of outcome of advertising,
such as pay-per-click versus alternatives,” the paper states.
The role of ranking and incentives in marketplaces. The way marketplaces and intermediaries rank offers from
sellers or service-providers can be thought of as an incentive system. Economists are well positioned to analyze
issues such as short-term user behavior and the equilibrium impact on the marketplace as a whole.
Estimating advertising returns. Digital advertising provides marketers with renewed opportunity to measure
advertising effectiveness. Economists draw on both existing theories of advertising and the tools of
econometrics to test and evaluate advertising effectiveness.
Designing review and reputation systems. Platforms like Yelp and TripAdvisor contain hundreds of millions of
consumer reviews; online marketplaces also rely on reputation systems to facilitate trust between strangers.
Economists help companies design reputation systems, “focusing on understanding the systematic biases that
can occur in review ecosystems, and the design choices that might mitigate these biases,” according to the
paper.
Acquisitions, exclusive deals, and strategy. Economists draw on economic theory and empirical methods to
value exclusive deals in gaming platforms; analyze whether a market can sustain a new player; and how banks
should consider potential partnerships with, say, Apple Wallet.
Price setting. At Uber, a team of economists work on how to design and fine-tune its surge pricing system,
which changes fares in real time and increases prices during peak hours.
Building a partnership between business and academia
According to the researchers, successful digital economists share three broad skill sets: the ability to assess and
interpret empirical relationships and work with data; the ability to understand and design markets and
incentives, taking into account the information environment and strategic interactions; and the ability to
understand industry structure and equilibrium behavior by firms.
Working in a real-world setting with interdisciplinary teams on complex problems is part of the lure of the tech
sector, says Athey, a pioneer in the field. When Athey was an economics professor at Harvard, her work caught

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the attention of Microsoft CEO Steve Ballmer, who sought her advice about online advertising, later offering
her a position as Microsoft’s consulting chief economist, where she worked on the search advertising platform
and a host of other initiatives, including the creation of an economist-staffed research lab. Twice Athey took
leaves of absence from Harvard to work at Microsoft full-time.
At Microsoft, Athey says she was often the only economist on a particular problem, allowing her to share her
expertise with engineers and computer scientists while learning from them. It inspired a new research agenda
that she is now working on at Stanford.
Luca notes that it is not just newly minted PhD economists entering the field, ticking off names of professors,
many tenured, who have left positions at Harvard, Berkeley, Columbia, NYU, and UCLA to join tech
companies. The swelling ranks of tech economists dispel any uncertainty about whether it’s a tenable career
path—the data suggest that there might be more economists hired in tech companies than in policy schools in
recent years.
To lure an economist
As competition for talent intensifies, tech companies offer some latitude to attract top economists, which often
includes the ability to continue to publish, Athey says. At Microsoft’s academic-style research lab, for example,
economists are working on broader issues that aren’t necessarily Microsoft specific while using their expertise
to help shape products. They are also used on teams to focus on specific business problems, which often means
their research is not shared externally.
In academia, a growing set of economists are now teaching at business schools, which have been increasing
their course offerings relevant to the tech sector, such as designing experiments and digital marketing. At HBS,
Luca will teach a new MBA elective this spring focusing on experiments from a manager’s perspective. Twenty
years ago, the idea would have been unheard of in most business schools. But in an era of increasingly data-
driven decision making, MBA students will benefit from being conversant in these issues, Luca says.
The advent of digital economists is unlikely to kill collaborations between academia and tech companies. By
working with academic economists, tech companies benefit by getting deep expertise on a specific topic and
more generalized knowledge due to their familiarity with a large number of companies. An economist working
in a tech company, on the other hand, might mainly have knowledge of his or her own firm.
As economists work on questions their companies want answered, one challenge for them is not to lose sight of
societal issues that need attention. Luca, whose research focuses on user review ecosystems and online
platforms, points to a study he did on Airbnb’s design choices that unintentionally led to discrimination on the
platform as hosts rejected potential guests.

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“When we decided to research discrimination on Airbnb, it wasn’t on a question that Airbnb was lining up to
ask,” Luca says, adding that the company had denied the problem for years. “To some extent the onus is on
academic and policy economists to keep asking the questions that the companies aren’t asking.”
This article originally appeared on Harvard Business School’s Working Knowledge.

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Uber’s secret weapon is its team of economists
It’s hard to explain just how much economists love Uber.
Economists love Uber like a mother loves her child. They love it like the internet loves cats. They love it like
tech bros love Elon Musk.
Economists love Uber because it’s the closest you can get to taking the pure economic theory of textbooks and
summoning it to life. Uber created a massive open market, governed first and foremost by the forces of supply
and demand. Along the way it broke up the taxi monopoly, taught people to accept “surge” pricing, and ushered
concepts long confined to econ 101 into the popular discourse.
“Uber is, in many ways, the embodiment of what the economists would like the economy to look like,”
economist and Freakonomics co-author Stephen Levitt said on a podcast in 2016.
Economists don’t just love Uber—the company loves them back. Uber is so fond of economists that it employs
more than a dozen PhDs from top programs at its San Francisco headquarters. The group acts as an in-house
think tank for Uber, gathering facts from quants and data scientists and synthesizing them to arm the lobbyists
and policy folks who fight some of Uber’s biggest battles. Officially, this team is known as “Research and
Economics.” Internally, it’s also been called Ubernomics.
Ubernomics keeps a low profile, despite the fact that Uber has collaborated on research papers with economic
superstars like Levitt and former Obama adviser Alan Krueger. Its wide-ranging mandate includes studying the
consumer experience, testing new features and incentives, supporting Uber’s public policy needs, and producing
peer-reviewed academic research.
Plenty of companies hire experts to bolster their business, but Uber wants prestige, too. It wants its papers
authored by the best and brightest, and accepted by leading academic journals. Prestige, after all, confers
legitimacy, and this sort of soft power is the perfect complement to Uber’s hard-charging politics. The mission
of Ubernomics is simple: to prove, with cool and unemotional logic, that the rest of the world should love Uber
as much as economists already do.
It was all but preordained that Jonathan Hall would become an economist. His father, Robert, is a professor of
economics at Stanford and heads the National Bureau of Economic Research’s business cycle dating committee.
His dad’s first wife, Bronwyn, was an economist at Berkeley. His half-sister, Anne, is an economist at the US
Treasury.
When Hall was nine or 10 years old, he told a friend the world would be a lot simpler if the government set a
clear price for everything (his dad had to explain how a planned economy could go badly wrong). In fifth grade,
he said he wanted to be an economist when he grew up (his mom still has the scrapbook entry). Hall attended
Harvard, first for undergrad and then a PhD in economics. When he married in 2011, a quarter of the wedding
guests were economists.

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Most people who bother to get a doctorate in economics choose a career in academia and turn their noses up at
corporate research. Hall considered company research “fluffy.” But rather than snub the corporate world, Hall
thought he could raise the bar. He spent a few years working at Google in public policy and then, after a stint at
economic consulting firm Analysis Group, joined music-streaming company Pandora as a senior scientist in
2013.
In February 2014, a job listing at Uber caught Hall’s eye. The description of the position, Hall said, was
identical to one he’d written for himself when he worked at Google and carved out a niche as a policy
economist. Hall contacted Uber about the job and noted the company had borrowed language from the job
description he wrote at Google. “That got me in the door,” he said. He joined as Uber’s first in-house economist
later that month.
Hall, 34, saw in Uber a chance to do what he’d always wanted: Get in early at a fast-growing, audacious
company and build a high-quality research organization from the ground up. Uber specifically appealed because
it was disrupting taxis, an industry with a rich economic literature, and which economists often cited as an
example of government regulation leading to bad outcomes. Uber offered access to unprecedented data on rider
and driver behavior, delivered in real time. The cherry on top was that Uber was using surge pricing—prices
that changed with demand—“which economists think is the coolest thing in the world,” Hall said.
The Uber that Hall joined in February 2014 was a luxury town car service. There was no UberPool, no
UberEats, no trucking or driverless cars. Uber co-founder and then-chief executive Travis Kalanick was at his
bro-iest, peppering interviews with slang like “hashtag winning” and “boob-er.” The business was valued at
$3.5 billion by investors, a sliver of the roughly $70 billion valuation it commands today.
In the fall of 2014, Hall reached out to Alan Krueger, a famed labor economist at Princeton who had recently
chaired the White House Council of Economic Advisers for president Barack Obama, about working for Uber.
Krueger had written a paper with Hall’s dad, Robert, but Hall had never met him. Krueger was interested.
The Krueger paper was the launch pad Ubernomics needed.
Uber’s first economics paper (pdf), “An Analysis of the Labor Market for Uber’s Driver-Partners in the United
States,” appeared as a working paper in Princeton’s Industrial Relations Section on Jan. 22, 2015, co-authored
by Hall and Krueger. The paper found that most Uber drivers had another part- or full-time job; that drivers
liked setting their own schedules; and that most used Uber to supplement their income. The paper also offered
the first glimpse at what drivers were earning, based on Uber’s data. Across six major US cities, Hall and
Krueger reported the median driver earned between $16.20 an hour (Chicago) and $30.35 an hour (New York),
after Uber’s take, but before on-the-job expenses like gas and vehicle maintenance.
The 28-page paper earned widespread media coverage. That the study was dry and academic only seemed to
make it more appealing, a sort of antidote to the inflated and unsubstantiated marketing claims Uber had made

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about driver earnings several months earlier. But the project was tarnished by the fact that Uber had paid
Krueger, an arrangement that made its credibility easier to doubt among his high-minded peers in academia.
“We shouldn’t have done that,” Hall said in an interview earlier this year, declining to say what Uber paid
Krueger. “He would have done it for free had he understood what our team’s capabilities were.” Krueger didn’t
respond to requests for comment. In November 2016, Hall and Krueger revised the paper—Krueger wasn’t paid
for the revision—and it was accepted by the Industrial Labor Relations Review.
The Krueger paper was the launch pad Ubernomics needed. Over the next few years, the company landed
unpaid collaborations with academics at top US universities, including MIT, NYU, and Yale. Hall started to
receive dozens of requests a week from academics about working with Uber’s data. Earlier this year, Richard
Thaler, winner of the 2017 Nobel Prize in economic sciences, approached Uber about a possible collaboration.
Uber turned him down.
Before Uber’s love affair with economists, there was AT&T and Bell Laboratories. In the 1960s, AT&T faced a
number of regulatory challenges but felt the research on these policy questions was limited. It caught the eye of
economists when it began sponsoring conferences to increase discussion of these regulatory matters. The
company soon hired three academic economists to form an internal advisory group.
In 1968, AT&T established the Bell Labs economics research team. The company enlisted a few dozen newly
minted PhDs to study economies of scale, incremental costs, game theory, and whatever else they were
interested in. The gig paid better than most entry-level academic work, and everyone wore jeans. “It was like a
university without students,” said John Panzar, who joined Bell Labs from his Stanford graduate program in
1974 and later ran the group’s economic analysis unit. The Rand Journal of Economics, a respected academic
publication, began in 1970 as the Bell Journal.
The Bell Labs economics team benefited from the company’s sterling work in the hard sciences, whose
researchers had by then won two Nobel Prizes in physics. Economists could earn bigger raises and greater
recognition by doing work related to AT&T’s interests, Panzar said, but the first goal was to publish in
respected academic journals. “The new thing here was to hire economists who were going to do basically
academic-style research in Bell Laboratories,” he said.
Modern corporate economic research began with Hal Varian. After more than a decade at the University of
California, Berkeley, Varian began consulting for Google in 2002. He went on to help refine the online
AdWords bidding market that made Google one of the richest companies in the world, and to become its chief
economist. Varian is credited with the so-called Varian Rule, which says the rich have today what the middle
class will have in 10 years, and the poor a decade after that.
It didn’t take long for the rest of the tech world to catch wind of what Google was doing, and to follow suit.
Yahoo went on an economist hiring spree to help keep up with Google, poaching talent from top universities

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and industrial labs at Microsoft and IBM. Microsoft brought in Susan Athey, a highly regarded academic who
trained at Stanford, as its consulting chief economist.
Academics who made the leap to Silicon Valley were rewarded with data unimaginable to most university
researchers. Yahoo in the mid-2000s had roughly 500 million monthly visitors. Google presided over billions of
AdWords auctions. Microsoft had millions of customers and hundreds of thousands of advertisers. “Economists
have rarely had so much value to add in designing products and platforms that touch so many lives,” Athey said
by email. “That was exhilarating—instead of hundreds of academics citing a research paper, my work could
directly influence the economy as a whole.”
Like Yahoo and Google, Uber offers access to the kind of data that, as recently as 10 years ago, an economist
could only dream of. Uber’s more than 3 million drivers provide roughly 15 million trips, globally, every day.
Uber’s researchers can test vital questions about driver pay, customer satisfaction, and urban transit with tiny
tweaks to the company’s algorithms.
Uber doesn’t police what its collaborators write or publish, but it is choosy about who it works with. It’s no
coincidence that Ubernomics tends to study the thorniest matters facing the company. The goal is to “build a
body of evidence and then build a global policy framework around that,” said Amit Singh, Uber’s head of
global public policy. Insofar as there’s bias in the research, it comes not in the results, but from the questions
that are asked.
In 2015, when public officials condemned surge pricing as price gouging, Hall wrote a short paper that
explained how surge moved drivers to where riders needed them most, using trip data from an Ariana Grande
concert in New York. Uber policy operatives used the paper to talk down politicians who were interested in
restricting how much it could lift prices during busy periods. Hall and Krueger’s original paper on driver
satisfaction developed during a bitter legal battle over whether Uber had misclassified its workers as
independent contractors. The study provided Uber with the perfect talking points to defend the contractor
model, for example, that drivers liked to “be their own boss” and “set their own schedule.”
Insofar as there’s bias in the research, it comes not in the results, but from the questions that are asked.
“They’re pretty clear that they’re not going to give access to the data to people who are likely to find things that
are not favorable to Uber,” Lawrence Mishel, a labor economist and former president of the pro-labor Economic
Policy Institute, said of Uber’s researchers. Mishel has criticized how Hall and Krueger presented driver
earnings data without explicitly deducting on-the-job expenses. An analysis he released with EPI in May found
Uber drivers made $11.77 an hour after both commission and expenses, and $9.21 an hour when adjusted to
compare to the wages of a regular W-2 employee—significantly less than the headline numbers from Hall and
Krueger.
“I think we should give [Uber] some but not complete credibility,” Mishel said.

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In July 2016, Uber hired John List, a big-deal economist at the University of Chicago, as chief economist (a title
he shared with Hall). Amazon had approached List with a similar offer in 2010, but he declined after the
company said it wouldn’t allow academic publication. Travis Kalanick lured List to Uber by making clear that
publishing was part of the deal.
List assembled a small team of researchers to work on pay and pricing, and dubbed it Ubernomics. Not
everyone at Uber was fond of the moniker. “We all cringe at that name,” said Michael Amodeo, a spokesperson.
List published papers exploring why a gender pay gap existed among Uber drivers and how Uber should
apologize to riders who had bad trips. Behind the scenes, he also pushed Uber to add tipping to its app,
something Kalanick considered a disguised price increase and strongly opposed. List made an economic case
for tipping, arguing it would improve Uber’s service, make drivers happier, and put the company on even
footing with Lyft, which had tips.
Uber introduced tipping on June 20, 2017. The next day, Kalanick resigned as CEO after failing to contain
months of scandal and board infighting at the company. (Uber has said the two events weren’t connected.) Two
months later, Uber named Dara Khosrowshahi CEO. The regime change was felt by List, who said everyone he
worked with at Uber at a high level either quit or was fired. List left in May 2018. He’s now the chief economist
at Lyft.
Uber doesn’t have a lock on gig economy research, but the company’s economists have deftly woven their
findings into the literature. Hall and Krueger’s paper, for instance, has hundreds of academic citations and a
handful of footnotes in third-party corporate research (pdf). Krueger referred to his work with Uber in a policy
paper (pdf) he co-authored on modernizing labor laws. Krueger and Harvard economist Lawrence Katz then
cited that policy paper in a widely read study (pdf) on structural changes in the workforce that was published by
Princeton and the National Bureau of Economic Research.
This past spring, MIT published a brief of a working paper from researchers at Stanford that claimed the typical
Uber or Lyft driver made just $3.37 an hour, a shockingly low sum. The study received instant attention from
media outlets, which proclaimed things like “Uber drivers often make below minimum wage” and “MIT study
shows driving for Uber or Lyft is worse than literally any real job.”
Less than a day after the brief gained traction, Hall rebutted it in a post on Uber’s blog. Khosrowshahi shared
Hall’s analysis on Twitter, commenting, “MIT = Mathematically Incompetent Theories.” A handful of Uber’s
economic collaborators, including Krueger and Yale economist Judy Chevalier, also rallied to the company’s
defense on Twitter.
The researchers’ findings were indeed flawed. They based their analysis on self-reported earnings data from a
2017 survey of about 1,100 Uber and Lyft drivers. Because several questions in the survey were worded poorly,

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the Stanford researchers made incorrect adjustments to the monthly wages that drivers reported, artificially
deflating their final earnings number.
A few days later, Stephen Zoepf, the paper’s lead author, said he would revisit the findings and update the
paper. He thanked Hall for his analysis, while also issuing a subtle critique. “Transparency and reproducibility
are the foundation of any academic endeavor,” Zoepf wrote in a statement he shared on Twitter. “What Hall and
Khosrowshahi’s assessment laid bare was an assumption about revenue that I made in the absence of public
ride-hailing data and a paucity of independent studies outside Uber’s own analyses.”
The episode provided a glimpse of how Hall’s team springs into action and the academic soft-power it can
muster. The company’s research is a virtuous circle. Uber’s high-quality data attracts talented academics and
researchers, who write papers that raise the company’s profile and increase its credibility, attracting more
academics who write more papers and garner more legitimacy. Upending global transportation is a gritty
business. The next policy fight is just around the corner. Ubernomics is ready.
Why Tech Companies Hire So Many Economists
Susan AtheyMichael Luca
Over a recent coffee discussion, the COO of a multi billion-dollar tech company told us he was interested in
building an internal team of economists. He had collaborated with economists before and was excited about the
results. He now wanted to know how to bring the economist’s toolkit into more parts of the business. If he were
to hire a team of PhD economists, how should he begin?
We’ve had many conversations like this, as economists have begun to play a growing role in the tech sector,
and as companies have sought guidance on how to bring economists into their companies. For example,
Amazon has quietly hired more than 150 PhD economists. New hires have ranged from a chief economist (who
was previously a tenured economics professor) to newly minted PhDs, who are assigned to work on specific
business problems throughout the company. Specific projects cover everything from design choices around
Amazon reviews to estimating demand for products on Amazon.
Amazon is far from alone in its aggressive hiring of PhD economists. Companies ranging from Google,
Facebook, and Microsoft — where one of us, Susan, was previously the consulting chief economist — to
Airbnb and Uber now all have large teams of PhD economists. And dozens of other tech companies have hired
smaller groups of economists.
We’ve spent much of our careers researching issues related to the tech sector, and more recently helping to
build a community of tech economists — both in academia and in practice. And, motivated by this, we recently
wrote a paper in the Journal of Economic Perspectives, exploring the work that economists are doing in the tech
sector, and the ways in which the economist’s toolkit is a natural fit for tech companies.

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In the article, we highlight two central components of the economics PhD training that existed well before the
rise of tech firms, but turn out to be well-suited to this sector.
First, the field of economics has spent decades developing a toolkit aimed at investigating empirical
relationships, focusing on techniques to help understand which correlations speak to a causal relationship and
which do not. This comes up all the time — does Uber Express Pool grow the full Uber user base, or simply
draw in users from other Uber products? Should eBay advertise on Google, or does this simply syphon off
people who would have come through organic search anyway? Are African-American Airbnb users rejected on
the basis of their race? These are just a few of the countless questions that tech companies are grappling with,
investing heavily in understanding the extent of a causal relationship. Economists were responsible for asking
and answering all of these questions. Of course, causal inference is important in all sectors, but the tech sector
— where data abounds and experimentation is feasible — has been a leader in trying to complement intuition
with data. And these analyses have a big impact on the companies involved; for example, eBay’s advertising
analysis found that they had been wasting millions of dollars by inefficiently advertising on Google.
Second, economists have spent decades thinking about the design of markets and incentives, and this work —
which also predated the internet age — has found new applications in the digital economy. As online
marketplaces — ranging from Uber and Airbnb to Tinder and Paktor to advertising auctions — have become an
important part of the digital economy, economists have played a central role in helping shape them. For
example, economics research has thought carefully about the role of consumer search in shaping the design of
auctions for digital advertising. In her work with Microsoft, Susan used these ideas to help improve the quality
of Bing’s advertisements. Bringing economic theory into the design of marketplaces can have a big impact on
the bottom line. When Michael Ostrovsky and Michael Schwartz noticed that Yahoo!’s reserve prices were
lower than theory would suggest is the most profitable, they ran an experiment to tweak the reserve prices —
and helped the company increase profit by millions of dollars.
It’s exciting to watch the tech sector evolve, and to see the impact that the economics toolkit has had. Over the
past two years, we have co-organized a conference on economics in the tech sector, sponsored by the National
Association of Business Economists. This conference has highlighted the practical relevance of the work being
done by tech economists, and the companies that are now bringing an economics mindset into their decision-
making.
In our journal article, we further discuss the role economists are playing in the tech sector, and the types of
projects they are currently working on. However, we have also found that companies are often unsure of how to
begin creating an economics team. In practice, the range of roles is large. But companies looking to create an
economics team can start by asking the following questions. The answers will dictate where economists might
create value in the company.

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5 Questions Economists Can Help Tech Companies Answer
What are your goals around user growth, profitability, fairness, etc, and how is the design of your platform
affecting them? If your platform involves matching users or businesses, then market design economists can
likely help guide these decisions. Examples of firms where matching is central include marketplaces (Airbnb,
Tinder, etc) and review platforms (TripAdvisor, AngiesList). Some firms have started out as traditional retailers
or vendors selling their own products, and then transitioned to become a platform. An initial question facing
companies ranging from online retailers to financial services is whether to allow other firms to sell products or
services to their consumers alongside their own, and whether to do so only for complementary products or to go
so far as opening up to products that might directly compete with their own. Other relevant market design
projects range from modifying the structure of pricing to designing a reviews platform. For example, in a series
of papers, one of us (Mike) identified widespread racial discrimination on Airbnb, and proposed a series of
market design solutions that would reduce the amount of discrimination on the platform, while allowing the
platform to continuing growing. Airbnb ultimately incorporated many of these proposed changes, and created a
full time internal team dedicated to understanding and reducing discrimination. As discussed above, work by
Susan, Michael Ostrovsky, Michael Schwarz, and others has guided the design of advertising auctions and
shaped the core design of these ecosystems.
Are scale economies important for your company, your suppliers, or your customers? If so, opportunities for
mergers, acquisitions, and exclusive deals by your firm or your competitors are likely to occur and may alter the
strategic environment. Economic principles can help you understand what industry structures are likely to be
sustainable, as well as quantify how particular deals would affect the profitability of your business. Economic
principles can aid in predicting the response of regulators to changes in industry structure. For example,
economic modeling can help determine whether a market can sustain multiple competitors (e.g. Android and
iPhone), or is likely to end in a single dominant firm. For example, in many smaller countries, Google has more
than 90% market share in search.
How is your company affecting the world? Can you understand the value you are creating and effectively
communicate it to stakeholders? Are there negative, unintended consequences that you can better anticipate and
minimize? Are regulatory changes required for your company to succeed in the long term, or are you vulnerable
to the introduction of new legislation that might impede your business? Industrial organization and labor
economists can help to quantify the impact your platform is having on the broader economy.
Can economics improve your management practices and decision making? Economists study incentives, and
tech companies have many fascinating and important incentive design problems — ranging from setting a wage
structure for a sales team to determining which markets to enter. The set of outcome metrics used to evaluate
A/B tests can also have a large impact on what innovations engineers choose to pursue. For example, there is

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often a tradeoff in terms of speed of measurement (favoring short-term metrics) against the use of metrics that
capture a firm’s true objective (favoring metrics that may take weeks or months to be realized). This can have
important implications. In the context of email marketing, optimizing for short-term outcomes such as whether
a consumer opens an email solicitation may lead a firm to send emails that have eye-catching subject lines but
don’t ultimately lead to purchases.
How are you thinking about your data assets? Data is a critical strategic asset for most technology firms, and
there are many economic decisions involved, ranging from decisions about retaining and acquiring data, to
products and partnerships that generate or create access to different types of data, to whether a firm should try to
sell data in some form as an additional business line. Economic models can be used to value data, including its
impact on competitive strategy.
Beyond questions of how data can be used to improve platform design, economists might also contribute to the
question of how data can be used to shed light on the world. For example, tech data can inform policy and
complement standard government data. Tech data can also be used to develop valuable analytics packages, or
result in new products entirely. In other words, while it’s great to be product focused, online platforms are often
a microcosm for society, offering a testing ground for broad societal questions. Getting involved in these
discussions, when you think you have unique insights, can be fulfilling, allow you to discover new facts, and to
understand what unique perspective your company has. Using Yelp data to understand the minimum wage helps
policymakers, while also helping Yelp to understand its own data and have a seat at the broader policy table —
allowing it to do well by doing good. Many tech companies have similar slices of data that they can use to help
understand and improve the world around them, and some, such as Google (Google Trends), Zillow, and others,
have created free data sets that are available to researchers around the world, or open APIs that researchers may
access for low cost.
For companies looking to create or scale a team of economists, these questions should give a sense of how the
economics toolkit might fit into the broader set of problems the company is working on.

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