22 May So You Majored in Economics…
By Chrissy Lee
As an economics major, I spent many evenings during college wrangling problem sets, immersed in a world full of strange models where everyone is omniscient and companies produce only hot dogs and buns. My classmates dreamed of futures in investment banking or consulting at one of the Big Four, but those career paths never tickled my fancy.
So how on earth did I end up in PR after graduation? What the heck does economic theory have to do with the media industry?
In fact, quite a lot. Unwieldy formulas, regressions and cost curves aside, my economics degree taught me fundamental principles that apply magnificently to the communications industry. Here are five economic concepts and what they teach us about PR.
“No Such Thing As A Free Lunch”: There’s A Story Behind Everything
We say LaunchSquad enjoys free lunch every Monday, but this is false from the economist perspective. According to economic theory, we never get something for nothing, even if that something seems free. Everything comes at a price—and a story behind it. It can be obvious or hidden. In PR, it’s our job to look for creative, compelling narratives within a variety of companies, products and ideas. The “free lunch” adage reminds us to dig beyond the surface.
Information Asymmetry: Communication Goes A Long Way
Asymmetric information—the market failure when one person in a relationship has more information than the other—produces all kinds of problems. Car buyers wind up with lemons, reckless people get low insurance rates and first dates end in disaster. And in PR, information asymmetries can lead to a reporter misunderstanding your client’s story, or a client wondering why their product launch didn’t make the front page of The New York Times. Luckily, there’s a fix: communication. Successful PR has everything to do with education. Every day, we explain to reporters how our clients’ technologies work, we show clients the long term value of thought leadership and content programs, we teach new teammates how to craft a compelling pitch.
Price Elasticity: Know Your Audience
Elasticity helps economists understand how one variable will respond to changes in another (for example, how a Netflix subscription increase might affect account cancellations). This “response anticipation” is paramount in both economics and PR. How will journalists respond to my pitch? What kind of feedback will the client have on the byline we drafted? With everything we produce and communicate, it’s helpful to think about the potential response—and how to finetune your work so it achieves the ideal result.
Long Tail Distribution: Small Things Add Up
Popularized by Chris Anderson’s Wired story, the “long tail” phenomenon usually refers to an ecommerce strategy: sell less of more. For example, Amazon makes more collective revenue from its large selection of obscure books than from its relatively few bestsellers. In other words, the little things add up. While big, bold ideas are the key to successful campaigns, the small everyday stuff forms the foundation of effective public relations. Assigning action items after each meeting, proofreading emails before hitting the send button, stopping to say “thanks”—these are small activities that, together, amount to a whole that pleases clients, journalists and teammates alike.
Prospect Theory: Emotions Matter
A Nobel prize winner, this behavioral economics theory points to the bounds of human rationality. More often than not, people make silly decisions based on emotion, attitude or straight up FOMO instead of logic (case in point: long food truck lines outside LaunchSquad HQ at 11:30 a.m.). In PR, whether you’re managing a sensitive client situation or a stressful moment with a teammate, you are most effective when you acknowledge the presence of emotion—and accept that it often clouds people’s logic, including your own.
Are you a problem set cruncher turned PR human? Tell us about it in the comments!
Image c/o worldaffairsdigest.com