P.S.D.

Wall Street firms are constantly looking for P.S.D.s- those poor, smart kids with desire to get rich. Ever since I heard the acronym, I have been thinking about coming up with a similarly catchy term for economists. After attending last week's department seminar, I finally settled on the three letters: persistent, smart, and different.

Persistent and smart are kind of self-explanatory. Different is the key here. Prof. Page's idea that diversification creates better societies is not new, but his efforts to build a theoretical foundation for such a concept is admirable. His story goes like the following. Everyone interprets noise-mixed signals differently. The diversification of interpretation is totally fine. It is the negatively correlated part of the interpretation that cancels out noises and delivers a better understanding of the real signal. Using the example of Goldman Sachs-ization of the Wall Street, Prof. Page told a very convincing story. When the bankers were trained differently and with diversified backgrounds, they might not get the correct answer individually. But collectively, they got it very close. Now every banker is trained at Goldman Sachs. Individually, they are much more close to the correct answer, but collectively, they are just like one another and their solutions are no better than the diversified group with lousy individuals. The Wall Street lost the valuable diversification by Goldman Sachs-ization.

I was totally sold on this idea. Being different is even more important in our business. We are a group of people who thrive on doling out opinions. Nobody will listen to you, the ten thousand and one economist, if you do not have innovative ideas. How do you get innovative ideas? Be different!