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23 May 2019

Gasoline, insurance, depreciation, and repairs are all costs of owning a car. Which of these are opportunity costs in the context of each of the following decisions?

a. You own a car and are deciding whether to drive 100 miles for a weekend visit to a friend at another university.

b. You do not own a car but are considering buying one so that you can get a part-time job located 5 miles from where you live.

In general, why does the context in which you decide to do something affect the opportunity cost of doing it?

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26 May 2019

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Gasoline, insurance, depreciation, and repairs are all costs of owning a car. Which of these can be considered opportunity costs in the context of each of the following decisions?

a. You own a car and are deciding whether to drive 100 miles for a weekend visit to a friend at another university.

b. You do not own a car but are considering buying one so that you can get a part-time job located 5 miles from where you live.

In general, why does the context in which you decide to do something affect the opportunity cost of doing it?

What do you believe is the ultimate impact of technology on job creation? Should there be curbs to the pace of modernization?

(Answer in a paragraph(around 200 words))

What Econ 101 Can Teach Us About Artificial Intelligence

Here's why advancing technology often leads to more jobs for humans, not fewer

A Tesla Model X 75D semi-autonomous electric vehicle is parked at the Governor's Mansion in Olympia, Wash., this year. Goldman Sachs predicts that 25 years from now, driver employment will be growing by 300,000 less per year because of autonomous vehicles.

By Greg Ip

Aug 9, 2017

The first chart you draw in Economics 101 is the downward-sloping demand curve. It shows that when the price of something drops, people consume more of it.

This elementary rule of economics is remarkably helpful in discussing the effects of technological change. As I wrote last week, when technology makes something cheaper, we consume more of it, often by finding new uses. This lesson repeats through history: When coal-fueled steam power became more efficient in the 1800s, demand for steam power and coal spread. When automated teller machines made it cheaper to operate bank branches in the 1980s, banks opened more branches.

My column cites spreadsheet programs like Lotus 1-2-3, whose arrival in the early 1980s made repetitive recalculation vastly simpler and faster. This reduced demand for bookkeepers but created more demand for people who could run numbers in new and interesting ways, such as accountants and management consultants.

In a recent article for the Harvard Business Review, Ajay Agrawal, Joshua Gans and Avi Goldfarb, economists at the University of Toronto who study artificial intelligence, say that in the 1990s, economists didnât buy into the hype that the internet and the World Wide Web would upend everything:

âIt wasnât that we didnât recognize that something changed. It was that we recognized that the old economics lens remained useful for looking at the changes taking place. The economics of the âNew Economyâ could be described at a high level: Digital technology would cause a reduction in the cost of search and communication. This would lead to more search, more communication, and more activities that go together with search and communication. Thatâs essentially what happened.â

They apply that lesson to artificial intelligence and more specifically to machine learning, the use of powerful algorithms to make predictions from patterns in large quantities of data. Machine learning, they say, means many problems will be reframed as prediction problems. Autonomous driving no longer involves programming the car to respond in a certain way to a variety of controlled scenarios, but instead, to watch what humans actually do and then respond the same way.

How does this affect jobs? The authors says it depends on whether the technology competes with or complements what you do. Spreadsheets competed with what bookkeepers do (record keeping and calculation) and thus made them less valuable, but complemented what accountants and consultants do (analysis), and made them more valuable.

Mssrs. Agrawal, Gans and Goldfarb say that AI reduces the value of those who predict things for a living, such as whether a mark on an X-ray is a tumor, but it raises the value of those who use predictions to make judgments:

âWhen prediction is cheap, diagnosis will be more frequent and convenient, and thus weâll detect many more early-stage, treatable conditions. This will mean more decisions will be made about

medical treatment, which means greater demand for the application of ethics, and for emotional support, which are provided by humans.â

So AI will create winners and losers within and among industries and occupations. But what will the net effect be? More jobs or less, and for whom? This isnât knowable, but history suggests that while a specific occupation or industry may suffer losses, the aggregate effects will be positive. The growth in accounting and analytical jobs since the early 1980s is much larger than the loss of bookkeeping jobs.

Nor did all those bookkeepers necessarily lose jobs; many probably became accountants or analysts. As Mr. Gans told me, bookkeepers may have been best placed to exploit the capabilities of spreadsheets: âIf you were doing calculations all day as a bookkeeper, chances are you thought a bit about why you are doing that. When you got a spreadsheet, rather than doing one calculation per day you could do 10 to 50, so you had a better sense of what the [calculations] might say.â

Some readers said AI is a much bigger threat than spreadsheets because it has so many more potential applicationsâand they displace uniquely human abilities. I agree with the first part, less so with the second. I suspect workers in previous eras, whether they drove a horse and plow, handled a stock trade or connected a phone call, thought there was something about their job that a machine could never replace.

Will the disruptions this time around be greater? Maybe, but not necessarily. Goldman Sachs predicts that 25 years from now, driver employment will be growing by 300,000 less per year because of autonomous vehicles. Thatâs 25,000 jobs per month to make up, compared with the 5,000 per month that the decline in bookkeeping since 1985 represents. But itâs hardly insurmountable in a labor market where five million jobs are created and destroyed each month.

Others said I was ignoring the potential for rogue algorithms and robots to turn on us or strip us of our freedom.

The experts, of which I am not one, tell me AI is nowhere near that capability. (Before the robots can kill us they must first stop killing themselves.) And donât assume spreadsheets have been all benign. Excel may not have slain anyone Terminator-style, but it did help wound J.P. Morgan through its role in the âLondon Whaleâ trading disaster.

Which brings me to the final point. We should not confuse what technology enables us to do with how much better off it makes us. Spreadsheets enabled analysts to construct much more intricate forecasts of stock prices and the economy, but didnât make those forecasts any more accurate. AI may enable companies to better manage the risks of their products and actions, but those products and actions may not be more profitable. Many a CEO has wondered whether the money they spend on spreadsheet-wielding consultants yields any real value. Some day they may wonder the same thing about their AI-wielding consultants.

Entrepreneurship

1. Discuss what steps Craig took to develop and grow his business. (7 marks)

2. Illustrate the role Craig played in contributing towards the economy (8 marks)

clearrisk | craig rowe

Business is risky, but that is Craig Roweâs business - risk management to be precise. Craig,

the President of ClearRisk Inc., becomes animated and energized as he explains his line of

work. âRisk,â he says, âis not negative. It is when there is opportunity for a downside or an

upside.â Risk management is about formalizing the decision making process. People are

constantly assessing risks, whether it is instinctively in crossing the street or deliberately in

weighing the pros and cons of buying a car. âBusiness people,â he says, âengage in the same

process whether in deciding where to build a head office or whether to buy another company.â

the entrepreneur

Craig spent almost 20 years in the insurance industry, where he started right out of high

school. Over the years, he attained various insurance designations and completed many

business courses and ample on-the-job training. Craig is naturally entrepreneurial and also

operated his own consulting company and became involved in several insurance industry

associations. This allowed him to develop a large network of connections.

Craig found himself thinking and talking more and more about risk management. He realized

that if businesses did some basic things to manage risk they would save money. In 2001 he

wrote a book on the topic and later adapted the ideas in to a workshop which he presented

throughout Canada and the United States. Insurance industry professionals and other business

people noticed Craig and saw the logic in his message. Soon he was being invited to speak to

various associations and was asked to assist in writing material on risk management. When

dealing with clients of his consulting business, he noticed the same set of steps and questions

could be applied to different realities in different types of companies. He was sure that there

was something that could be packaged and sold to assist these companies.

He went in search of risk management software. He found some, but none applicable to small

and mid-sized companies and organizations. So he decided to build it. He teamed with David

dâEntremont who had the background provide technical expertise. Together they founded

ClearRisk. They developed a business plan which became their roadmap, even though it was

constantly being adapted to take into account new realities, circumstances and goals. Craig estimates they are on version 30 by now!

Craig decided to leave his job and pursue ClearRisk full-time. It was not an easy decision to

make as Craig had a young family at the time. He had to engage in his own risk management

process and weigh his options. He had almost 20 years of solid insurance industry experience.

He had an extensive network of contacts. He had entrepreneurial experience through his

consulting business. He knew the market. He knew what his customers needed and he knew

that he could develop a product to meet that need. He found a solid business partner to

complement his skills. So the timing was right and after 10 years of thinking, dreaming and

percolating ideas, Craig made the leap in 2006.

Craig says that the biggest challenge facing ClearRisk and any business, whether it is in

starting, sustaining or growing the business, is cash. ClearRisk needed capital to develop its

product. For any business to have credibility with lenders and investors, that initial money has

to come from the business owner. Craig and David secured an operating line of credit from the

bank based on personal guarantees.

Step 2 was to seek more financing to start implementing the business. Craig says that it is

important to look for money before you need it because you are building relationships and

confidence and convincing people that you are creditworthy. A business plan is a necessity but

âeveryone invests in people.â This applies to accessing financing from Business Development

Bank of Canada (BDC), Atlantic Canada Opportunities Agency (ACOA), or any government

organization, as well as private lenders and investors. It is necessary to raise private money to

leverage government money.

Another important factor in developing ClearRisk was being accepted by Memorial Universityâs

Genesis Centre, a facility which provides business and technical support to new and emerging

technology businesses. This added to their credibility and attracted the attention of angel

investors. Angel investors are business people with financial resources available to invest in

new promising businesses.

Technological businesses are expensive to grow and ClearRiskâs growth has been made

possible by private investors and organizations such as Growth Works (a venture capital

company). Ownership of the company is now shared with these investors and ClearRisk is a

corporation with multiple shareholders. One of the tradeoffs in taking money from investors is

that ownership becomes shared. Craig says, âYou can have a big piece of something small or

a small piece of something big.â He chose the latter.

Craigâs idea has grown immensely. He keeps the numbers to himself, but says sales have

grown exponentially. His primary market is North America and the ClearRisk software has been

launched in French and Spanish. Customers do not pay an upfront fee; instead, they pay an

annual fee for the software and support. ClearRisk is constantly improving its products. The

team is always enhancing features and improving functionality. Currently, they offer three

programs to consumers: ClearRiskâ¢ Manager, which enables an organization to build and

implement a risk management plan; ClearRiskâ¢ Tracker, which facilitates tracking insurance

claims; and ClearRiskâ¢ Trainer, an online instructional program which increases awareness of

risk and its management. The latter two products are offered in partnership with other

organizations.

ClearRiskâs web-based business is global; however, Craig is cautious about expanding beyond

North America. The insurance industries in the USA and Canada are relatively interconnected

and homogeneous. It would be very difficult to provide support to countries with different

regulations and different languages. ClearRisk offers a web-based software service so they

use web-based marketing, rarely using traditional media. They access all forms of social media

such as Facebook, Twitter, MySpace, and blogs and find the approach cost effective and high

impact. Social media facilitates the use of in-bound marketing.

In addition to web-based marketing, ClearRisk is now getting calls from referrals. Clients are

spreading the word to other businesses seeking a similar product. The demand for ClearRiskâs

product is expanding but Craig resists growing the team too quickly. Craig prefers a small team

and likes the dynamics of small groups. However, more sales people are needed and they will co-op

and computer science students to his company. He likes to hire young people. It is

rewarding to see them take shape and become leaders.

Craig speaks favorably about starting a new business in Newfoundland and Labrador. He

says that the provincial climate is positive. In addition to the practical and financial support

available, the provincial government has done a lot to assist business in recent years, including

reducing taxes and red tape and increasing funding.

When Craig reflects on the path his career has taken, he gives special acknowledgement to

Paul Johnson of Johnson Insurance as a business icon and an inspiration. Mr. Johnson

inherited his fatherâs small insurance office and built it into an innovative, billion-dollar

Company. Not only was Mr. Johnson a great businessman, he was a community-minded

Philanthropist. This is evident today throughout the capital city in the parks, trail ways, and the

Johnson Geo on Signal Hill. Mr. Johnson has influenced Craigâs professional and

Community life. In addition to Craigâs entrepreneurial success he is firmly rooted in his

Community; he currently serves as Chair of the YM/YWCA.

Craig has advice for young people who dream of starting their own businesses. He says to be

Informed, to go in with open eyes and to seek honest opinions from knowledgeable people. He

advises that an entrepreneur should realize that âthe odds are against you, but you need the

tenacity and perseverance to stick with it. It is important to understand your industry, to

understand the need for your product or service and ultimately to understand the risks before

you make the leap.â In business, managing risk is everyoneâs business!

1. Discuss what steps Craig took to develop and grow his business.

2. Illustrate the role Craig played in contributing towards the economy

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