Economics is Everywhere: A conversation with John List

Last week, I spoke with John List, Distinguished Service Professor of Economics at the University of Chicago, for a How to Academy event.

Drawing on his collaborative research with Lyft, Uber, Walmart, Tinder, Google and many other leading companies, John highlighted the power of behavioural economics.

One of my favourites case studies was his ‘Dropped Wallet Game’. 💰

John collaborated with a US firm that offered short-term, high interest rate loans to small business owners with liquidity issues. The firm was facing a 50% default rate – their model for assessing risk just wasn’t working.

John implemented a new vetting process, whereby he would hand in a ‘lost’ wallet containing a phone number, a debit card and $20 to a business owner.

John tracked whether the owner sought to return the lost wallet (alongside the $20) and whether they had used the debit card.

Incredibly, the owner’s behaviours were predictive of whether they would later default.

To read about John’s work in more detail, I would strongly urge you to buy his latest book, The Voltage Effect: How to Make Good Ideas Great and Great Ideas Scale. ⚡

Male Uber drivers earn 7% more per hour than female Uber drivers.

John List revealed this incredible statistic during our conversation last week for How to Academy.

John, a Distinguished Service Professor of Economics at the University of Chicago, has spent nearly 25 years seeking to measure, explain and close the gender pay gap.

He suggests that “men and women face different preferences and constraints.”

At Uber, the pay gap exists for a series of specific reasons:

1. Men, on average, prefer to drive faster.
2. Men are more likely to strategically reject trips than women.
3. Women tend to avoid driving in places they perceive to be riskier, such as areas around bars and in high-crime neighbourhoods.

John notes that this is generally “good for the company, but bad for the driver”.

John believes the key to tackling these sort of constraints is to create a truly inclusive culture, where everyone’s voice is heard and respected. This allows for specific asymmetries to be identified, and in turn, addressed.

To read about John’s work in more detail, I would strongly urge you to buy his latest book, The Voltage Effect: How to Make Good Ideas Great and Great Ideas Scale. ⚡