At an April meetup organized by the National Association for Business Economics (NABE), a Facebook researcher named Michael Bailey showed his peers how somebody in Detroit might be willing to pay more for a home if he or she had lots of Facebook friends living in a high-priced housing market such as San Francisco.
For their paper, Bailey and his co-authors had matched public records on 525,000 home sales to anonymized data for 1.4 million Facebook users.
It was the first formal gathering of tech company economists, according to NABE Executive Director Tom Beers, and included numerous stars of the consumer Internet. The other attendees at the daylong meeting, held at the Federal Reserve Bank of San Francisco, had similar tales to tell. Hal Varian, the Google economist who helped develop the AdWords marketplace, was there. Keith Chen, of Uber, presented a paper on the company’s surge-pricing policy that refuted earlier research that said taxi drivers wouldn’t work in the rain. Economists from Amazon.com, Netflix, and LinkedIn elaborated on their work as well.
Later, the group headed over to AT&T Park to watch the San Francisco Giants beat the San Diego Padres, 5-4.
“It was like a geek dream come true,” said Nela Richardson, chief economist of the real estate brokerage Redfin.
The meeting gave them all a chance to compare notes about what it’s like to be on the front lines of a new trend in the profession. U.S. companies went on an economist hiring spree in the late 1950s and 1960s as computers made econometric analysis possible and companies sought experts to forecast swings in the business cycle, Beers said. Today, businesses are once again ramping up their hiring of economists, this time spurred by a boom in web-generated data and tools for storing and sorting it.
Their job is to extract insights that can help businesses improve their products or user experience. Some also produce research to shape public policy.
“Now you have all these new companies with tons of digitized data, and not only that, it’s data that describes human behavior,” said Andrew Chamberlain, chief economist at the jobs and recruiting website Glassdoor.
There were 11,500 economists working in the private sector as of May 2015, according to the U.S. Bureau of Labor Statistics, up from 5,580 in May 2010. Facebook’s data-science team employs about 25 Ph.D.s in economics, Bailey said. That’s around the same number employed at a large U.S. bank, Beers noted. Amazon employs more than 60 economists, according to attendees at the NABE networking event, and its careers page lists more than 30 open positions. The company didn’t respond to requests for comment.
For young economists coming out of Ph.D. programs, tech companies can offer a respite from the academic rat race or a way to get closer to real applications of the problems they are trying to solve. Bar Ifrach, a data science manager at Airbnb, decided the private sector was a better place to explore his expertise in matching buyers and sellers, a classic economics problem that's crucial to many online businesses.
"I felt that academia was behind in terms of understanding the high-level questions that marketplaces deal with," he said.
For Issi Romem, chief economist at home renovation site BuildZoom, working in tech was a way to stay in the Bay Area after he completed his doctorate at the University of California at Berkeley in 2013 and offered brighter prospects than the crowded academic job market. Romem's work includes directing a team in Manila that scrapes building permit data from the websites of U.S. municipalities and publishing original research, such as a recent article comparing the geographic expansiveness of U.S. cities to local housing prices.
The idea is to build name recognition for the company, as Stan Humphries did. He joined Zillow in 2005 to develop algorithms for estimating home prices. When the housing market started to crater, Humphries adopted the title of chief economist and emerged as a favorite source for journalists looking for data and commentary.
“At a time when you still had industry people saying, ‘Yes, we’ve had home correction in prices, but there’s nothing to see here, move on,’ I’d be the guy who came out and said, ‘No, we’re going to see another two years in housing recession, here’s why,’ ” said Humphries, who is now Zillow's chief analytics officer. “We felt being as accurate as we could would garner respect from consumers.”
Publishing data-driven research has become a popular strategy for web businesses, including home design startup Houzz, and job sites such as Indeed and Glassdoor. More information is generally a good thing, said Bill McBride, who blogs about the housing market at Calculated Risk, but it pays to consider where it comes from and how it’s compiled.
“Some of the private data is garbage,” he said. “It’s not that the people producing it are not as smart or that they don’t do hard work. The motivations are different.”
In the early days of the data boom, tech companies sought to entice big brains by allowing them to keep one foot in academia, said Susan Athey, a former chief economist at Microsoft who teaches at Stanford University. Recently, Amazon has emerged as an exception to that rule, she said, keeping a tight leash on research produced by its in-house economists. Nonetheless, it has managed to attract a team whose size and quality rivals the economics departments of top universities, Athey said, in part because the company offers access to unique data.
“I can’t run an experiment on a couple of million people at Stanford," she said. "If you want to be aware of what interesting questions are out there, you almost have to go and work for one of these companies.”
(Updates with Nela Richardson's title.)