Experts, who needs ’em? For many Britons who felt bombarded by warnings about economic doom ahead of the EU referendum, it’s become a dirty word.
Economists had a rough ride last year, but before dismissing the profession outright, spare a thought for them the next time you find that last minute hotel bargain or summon a cheap taxi ride home.
An expert helped to make it happen.
For far away from the world of GDP and current account deficits lies another where prices, opportunity and making money all come together.
The goals are simple. Consumers get cheaper and more useful things while producers find more efficient ways of doing things that makes them more profitable: welcome to the world of the micro economist.
Brave new world
There are no tweed jacket wearing professors at Spotify. In fact, on first entering the London office of the music streaming company, it’s hard to find any humans at all.
Packages are piled up at reception, while a touch screen device is the only way to announce your arrival.
Will Page, chief economist of the digital brand founded just over a decade ago in Sweden, emerges shortly after.
Page is leading a team rewriting a 60-year-old rulebook that insists the industry’s beating heart has always been selling records.
One of the company’s latest innovations is Fan Insights, a dashboard for artists and management companies that allows them to see how many people are listening to their music, favourite tracks, and crucially, where, when, and how long for.
“In the past, when someone purchased an album, all we’d know is they went to the till and purchased a CD, or to iTunes and purchased a download,” says Page.“What you did with it, we have no idea.”
Page describes this as the “transactional business” that has defined the music industry for between 60 and 70 years.
“What we’re doing is lifting the lid and seeing how that content’s being consumed, and we can monetise that.”
Spotify has become more successful at attracting paying subscribers. Revenues rose 80pc to €1.95bn last year, though this was accompanied by rising payments to artists, which pushed up losses by 10pc to €173m.
Page is focused on making Spotify profitable, and believes having the insight into listeners’ habits could get the company there.
He stresses that privacy will always be paramount, but says innovations like Fan Insights are now helping to connect artists to fans and sometimes reach markets they might not otherwise know were there.
Page cites the addition last year of Radiohead’s album A Moon Shaped Pool as a sign that more bands are embracing change.
Spotify is facing challenges on several fronts. Artists who believe music should always be paid for, consumers who can access illegal downloads and those who still value physical records.
In Radiohead’s case, frontman Thom Yorke made his dislike for free streaming services like Spotify clear in 2013, when he branded the company “the last desperate fart of a dying corpse”.
But this is changing. Page recently asked the band’s manager where he believed Radiohead’s top cities were in terms of the most listeners on Spotify.
“He said: ‘Easy – London, Manchester, Birmingham, Glasgow, New York, Chicago, LA.’
“I told him number two was Santiago, Chile. Number four is Mexico City.
“Now what does that mean to know that two of your top four cities have nothing to do with the US or Europe?”
While it’s not easy to ascertain whether that microeconomic knowledge influenced the band’s decisions, it’s worth noting that Radiohead will end its 2017 tour with not one but two dates in Mexico City.
Adapting to the future
With an academic background, Preston McAfee went on to work for Yahoo, Google and now Microsoft as its chief economist.
McAfee says he spends 40pc of his time “managing people”; the rest of his time is spent consulting internally and externally, as well as working with Microsoft’s engineers to smooth problems and figure out pricing strategies with management.
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He believes that harnessing the potential of workforces – often a company’s biggest outlay – will unlock more opportunities for companies and make employees happier.
“The biggest component [of most companies] is human resources. And yet this is the component you understand the least. That’s going to change.”
But what does this mean in a world where automation and the rise of the robot threatens around 15 million jobs, according to Andy Haldane, the Bank of England’s chief economist.
McAfee believes humans will not be left on the scrap heap – at least in the next few decades.
“You hear all this stuff about how robots are going to take over. In the near term I think we are going to empower people,” he says.
McAfee says companies now face a bigger challenge: the threat of being “Uberised”, where a start-up disrupts an existing market overnight.
“I don’t think there are any corner offices where companies aren’t worried about this,” he says.
“There’s no slam dunk here, but if you think about what Uber did to the taxi industry: they got cars to customers quickly and even put a tip in the price so when you get to the destination, you just get out of the car. There is no rocket science there, it was just about understanding the customer.”
Survival, says McAfee, will depend on companies changing what they see as their bread and butter – and quickly.
Understanding the customer is what drives Jonathan Hall, head of economic research at Uber.
“Choice”, “flexibility” and “independence” are words that often roll off Hall’s tongue, who believes variable work is the future of employment.
Hall, who joined Uber in February 2014 as one of the first members of the company’s data science team now spends a lot of his time shaping policy, sharing ideas with top decision makers using his experience at the company.
“I think what you’ll end up seeing is traditional jobs will be forced by competition to become more flexible. So you’ll find large employers will go to greater lengths to give employees control over their schedule.”
Hall is “very optimistic” about what will happen to the labour market in the face of automation.
“We’ve seen this in the past, the most famous example that I know of is when ATMs were introduced, the number of bank tellers tripled rather than went to zero. Some industries disappear, but there are always new ones that pop up.”
Hall believes the rise in popularity of driverless cars will help to push down delivery costs for online shoppers.
“In the future people will be able to do different kinds of work while they’re getting from point A to point B, and that will make the transaction cost of delivering something to a house essentially zero,” he says.
But the future may not be bright for everyone.
While technology has always helped to create more jobs because humans have always been needed to operate and design them, McAfee says in a world where machines are now designing machines, in the long run things might be very different.
“We’ve heard the mass unemployment argument all the way back to the Luddites: the machines are going to replace us. It never happened.
“But this time is different because it’s the first time that the machines are doing the thinking in any real way, and that’s different. Which way is it going to go? I don’t know.”