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- Grade K MBA - Lesson 1
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This Week’s Issue
A Quick Hello
The Instant Economist Simplified
A Quick Review
What is an Economist?
Division of Labor
Suggested Readings
Next Week…
A Quick Hello
A potential friend is only a ‘Hello’ away.
Welcome to the first issue of Grade K MBA, and thank you for reading! I am genuinely happy that you have decided to join the “class” and be part of this journey moving forward.
This newsletter, created by an MBA candidate, aims to simplify and demystify concepts from finance, economics, investing, management, and more. Weekly, I break down these topics into easy-to-understand explanations, while avoiding coming across as patronizing. Enjoy!
The Instant Economist
Photo from Amazon
“The Instant Economist” is, in my opinion, an absolute MUST-READ for anyone who wants to understand how the global economy functions. While the book does a great job simplifying complex topics, I strongly suggest you pick up a copy to read for yourself, I feel like we can simplify the topics even further.
So, for the first few months of lessons, I am going to rotate a good chunk of this newsletter between distilling down the chapters of “The Instant Economist” and other interesting topics.
But First, a Review
Taylor sets out to teach us how economists think and begins with a microeconomics understanding of the economy (the view of individuals). We learn how markets work in the context of goods, labor, and financial capital and also about unregulated markets, including monopoly, the environment, and poverty; he notes that although these issues can attract democratic government involvement, such intervention can fail. He concludes with macroeconomics (an overall view of the economy), with topics including economic growth, unemployment, and inflation. Taylor wants us to respect the power of market forces but understand where those forces fall short; he encourages a belief that government policy can be useful but, in some cases, can be useless or even counterproductive... Excellent.
What is an Economist?
Photo by Tima Miroshnichenko
In the very first chapter of “The Instant Economist” we learn what an Economist does, and how they think. Let’s distill down the main thoughts from the chapter, with a sprinkling of my own understandings and education thrown in.
Distilled Ideas
An economist's thought process is primarily centered around understanding and analyzing the ways in which individuals, businesses, and governments make decisions involving scarce resources. At a high level, economists think by employing a set of key principles and concepts:
Rationality: Economists assume that people and organizations generally act rationally, making decisions that aim to maximize benefits and minimize costs based on available information.
Scarcity: Economists recognize that resources are limited, and therefore choices must be made about how to allocate them to best satisfy human needs and wants.
Opportunity cost: When making decisions, economists consider the opportunity cost, which is the value of the next best alternative that is given up when a choice is made.
Supply and demand: Economists use the principles of supply and demand to understand how prices are determined in markets and how resources are allocated.
Incentives: Understanding that people respond to incentives, economists analyze how changes in policies or other factors can affect decision-making and behavior.
Marginal analysis: Economists often use marginal analysis to examine the effects of incremental changes in variables, which helps them understand decision-making processes and optimization.
Models and data: Economists build models and use data to test hypotheses, make predictions, and evaluate the impact of policies or other variables on economic outcomes.
These principles and concepts form the foundation of an economist's thought process, allowing them to systematically analyze economic issues and provide insights into the functioning of economies at various levels.
The Division of Labor
Photo by Pixabay
In the second chapter of “The Instant Economist” we learn about a crucial piece of the economy: the division of labor. Once again, allow me to try to distill this chapter down into its core thoughts
Distilled Ideas
The division of labor is an economic concept that refers to the specialization of tasks within a production process. By breaking down a complex task into smaller, specialized tasks, individuals or groups can focus on specific roles, which can lead to increased efficiency, productivity, and overall output.
The concept was popularized by Adam Smith, an 18th-century economist, in his seminal work, "The Wealth of Nations." Smith argued that dividing labor allows workers to develop specific skills and expertise, which leads to a more efficient use of resources and higher production levels. This specialization fosters economies of scale, which can lower production costs and ultimately result in higher profits and living standards.
In modern economies, the division of labor is evident in various sectors, including manufacturing, agriculture, and services. The concept has also expanded to encompass global trade, where countries specialize in producing specific goods and services and then trade with one another to achieve a higher standard of living for their citizens.
Suggested Readings
Photo by Abby Chung
Grade K MBA will be back next week with more breakdowns of economic concepts from “The Instant Economist”, as well as an explanation of what “the end of free money” means. If you want to read more about the economic topics broken down in this week’s newsletter you can check out some of the curated resources below!
What To Expect Next Week
Look, I get it. This wasn’t the most riveting first issue, but I wanted to set the ground work for discussions to come. Next week I will be sharing two case studies. One looks at how Sega attempted to dethrone Nintendo in the gaming market, and the other is lessons learned from the wild popularity of the game Tetris.
Until Next Time…
Thank you so much for giving this issue of Grade K MBA a read. I hope the insights into important economic concepts were useful to you.
If you are not yet subscribed to Grade K MBA, I would ask you to do so as not to miss any future issues (button below). Also, if you did find value in this newsletter, I ask you to forward it to someone else who may find value in it.
Be Good!
~Dan