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Letter From a Former Student

Summary:
I received the letter below from a former student. It's somewhat edited, partly to hide his identity. He gave me his permission to post it. Hey Professor! My wife and I opened a business last fall. Have you ever been to an escape room? They are a fun way to spend an hour and challenge yourself mentally. It's been a great learning experience.I have applied sound economic thinking but I haven't done anything formal. I wanted to implement a tiered pricing structure. The minimum people to book at room is 4 with 8 as the max. I want to charge per person at 4 people and per if you book 8 spots. It incentivizes people to book in larger groups. My wife thought it was too complicated for people. It's

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I received the letter below from a former student. It's somewhat edited, partly to hide his identity. He gave me his permission to post it.

Hey Professor!

My wife and I opened a business last fall. Have you ever been to an escape room? They are a fun way to spend an hour and challenge yourself mentally. It's been a great learning experience.I have applied sound economic thinking but I haven't done anything formal. I wanted to implement a tiered pricing structure. The minimum people to book at room is 4 with 8 as the max. I want to charge $27 per person at 4 people and $25 per if you book 8 spots. It incentivizes people to book in larger groups. My wife thought it was too complicated for people. It's technically her business so we are a flat rate.

We have exported labor. [DRH note: He clearly means, in context, that they have offshored some of their tasks.] Have you ever used Fiver? It's a website where you pay someone $5 to do work for you. Like design your logo. There are hundreds of people around the world that do the work. I guess its sort of like Uber for services. We gave a guy a rough drawing of our logo and he came up with 3 options for $5. He had to iterate 2 more times until we got something we liked but it was $15 total. The guy was from Pakistan. We were getting T-shirts made and the local printing company needed the artwork to be in vector format. My cheapo software couldn't produce the right file and the right software was $100. $5 on Fiver got it converted. So we have 10 local employees that work in the escape room but it's like we have hundreds of employees around the world we can call on when we need them. Pretty cool I think!

We were the first escape room that opened around [redacted]. Now there is a copy cat opening. Which I think is awesome. I can't wait for them to open. A lot of people have never heard of escape rooms, so everything our competitor spends on advertising will benefit us for free. They are also smaller and already are advertising a higher price per customer. So I can't wait to increase my rates! [DRH note: I suggested that they consider keeping their rates constant, except that they should have even more of a tiered structure than the one he proposed in the first paragraph.]

Overall it's a great experience. We have made back our initial investment so everything from here on out is pure learning and experimentation. My wife has never been motivated by money. This is keeping her busy and she is much happier, which is worth a huge amount to me!! She has even applied to the Stanford Ignite Program this summer. Hopefully she'll spend a month out there this summer learning about business. I have actually used so much of my eMBA from NPS. It's pretty cool.

Well I'll stop bending your ear. I hope all is well with you and Best Wishes!!!!

Very Respectfully,

[Redacted]



David Henderson
David Henderson is a British economist. He was the Head of the Economics and Statistics Department at the OECD in 1984–1992. Before that he worked as an academic economist in Britain, first at Oxford (Fellow of Lincoln College) and later at University College London (Professor of Economics, 1975–1983); as a British civil servant (first as an Economic Advisor in HM Treasury, and later as Chief Economist in the Ministry of Aviation); and as a staff member of the World Bank (1969–1975). In 1985 he gave the BBC Reith Lectures, which were published in the book Innocence and Design: The Influence of Economic Ideas on Policy (Blackwell, 1986).

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