By Natalia Shcherbinina
Don Drummond, chief economist and senior VP of TD Bank, is set to retire at the end of June, at the age of 56.
Following retirement, he will contribute to Queen’s University, where he did his Masters of Arts in economics, as a newly appointed fellow and visiting scholar. Having worked for the federal Department of Finance for 23 years and for TD Bank for the past 10 years, Drummond has gained widespread exposure to both public and private sector economics and was responsible for the recruitment process in both.
This makes him one of the most qualified and knowledgeable sources of guidance for students aspiring to become economists.
Drummond provides Career Insider Business with his overview of the future of economics as a profession, advice for students on entering the field successfully and reflects on his own career path, supporting his insights with compelling examples from his own research.
Why did you choose economics as a profession?
In some of the provinces you take economics in high school, but we didn’t have that in British Columbia. So my first exposure to economics was when I got to my first year in university, and I liked it quite a bit.
As it often happens, students get swayed by professors into a particular direction, and I met a professor in my second year, he was the head of economics department at the time, who had an interesting approach to economics. He was able to take current events and put them into economic terms.
So whenever there was a political event or a social event, he would explain in economic terms how it was working, why it wasn’t working the way we anticipated and what we should do about it. This intrigued me because I was interested in various social problems and I thought an economist would have some value added to analyzing them.
Secondly, to be completely honest, I always anticipated I would be an English literature professor. What happened is I had the highest marks in my first and second year English literature classes, which were A- and B+, but with minimal effort I had an A+ in economics – it seemed to be an easier field to get a higher grade in!
In second year literature you had to read nineteen books, and you only had to read two in economics.
Your undergraduate degree is from the University of Victoria and your Master of Arts in economics is from Queen’s. How would you compare your experiences at the two schools?
Well first of all, they are wonderfully complementary. There were a number of people at the University of Victoria who did go on to Queen’s University – there was a set path or a transition between the two. I think the University of Victoria gave me an excellent background: I was a little bit nervous when I went to Queen’s, as the University of Victoria is a fairly small university and a lot of people in my Master’s class came from larger universities, but I ended up having a better background in economics than most of the other people.
I have no regrets about my choices whatsoever. It’s more beneficial than doing your Master’s degree in the same place as you do your undergraduate degree, which means you will be taught by the same professors, and you have already been exposed to their ideas. When I graduated from the University of Victoria, the two choices were the University of Western Ontario and Queen’s. I think what ultimately swayed me is the number of students who went from the University of Victoria to Queen’s.
Did you do your MA right after your BA? Is that something you would recommend to students?
Yes, I went straight from my BA into my MA. First of all, it would be very hard for the students to get a job doing actual economics with a Bachelor’s degree.
If you look directly at the job market, people who are working with a Bachelor’s degree are not really doing what I would say actual economics: they may have a research assistant position or doing more of a marketing job.
For example, we wouldn’t hire someone here with a Bachelor’s degree. Last year we hired two research assistants: what happened was we posted the positions looking for people with a Bachelor’s and received over 200 applications from people with a Master’s, so both of our research assistants have Master’s degrees. I also think there’s a fairly stable pattern to keep in mind: I worked for the federal Department of Finance for 23 years and I looked after their recruitment all the time.
There’s a fairly stable pattern of people who work for a while after their undergraduate degree, intending to go back to school but they don’t. Once you get away from studying and writing exams and you have money in your pocket, it’s a fairly strong allure. And I fell into that category to some degree: I was open to the idea of getting a PhD after my Master’s, but once I started working the idea became more and more remote.
Could you name some of the entry level positions available to students with undergraduate degrees in economics?
Certainly people with Bachelor’s would be able to find employment in retail banking. But in other areas, such as wealth management, an MA or an MBA is really the entry into the field. I mean times have changed and the bar just keeps getting higher in terms of education. An MA is only one more year and I find that the returns on that year are phenomenal.
I would like to ask you about the transition from studying economics to working in economics. What we learn in economic courses is very abstract from what is happening in the real world. What would your advice be to bridge the gap between the surreal economic models we learn in classes and the reality?
As someone who has worked with young economists for about 33 years, I think the notion that there’s something wrong with this separation is itself incorrect. Students are always saying that universities have to make it more practical. And I would say be careful, because there’s a notion of comparative advantages.
Universities have a comparative advantage in teaching theory, I as an employer have a comparative advantage in teaching application. Graduates who don’t know the theory behind economics are totally useless to me. I don’t have a comparative advantage in teaching them, I don’t have time to teach them, but what I can do is take someone who understands the theory and understands quantitative methods and help them create research with a practical application to that concept. And I am way more efficient in doing that than a university professor would be.
So I don’t care about them having experience in practical economics that much, it’s always a bonus if they have done a school project and applied the skills, in particular if it’s an MA or Bachelor’s or an Honours thesis.
Also, business managers always teach whatever’s current on their minds. But universities train brains, they don’t necessarily teach volumes of knowledge that would be applied in your practical work experience. And it is important to train your brain properly. So students who wish universities would include the practical stuff without the theory are incorrect, you can’t do the practical stuff until you know the theory. Universities spend four years teaching the technical quantitative methods and the theory to make sure students know it before they come to work.
Since the first course in economics we were taught that a lot of economic analysis comes from the “economic intuition” rather that technical knowledge of the subject. When speaking about becoming a great economist, how much of it would you say is economic intuition and how much is technical knowledge? How can one develop it?
The beauty of economics is in its simplicity. Virtually any concept in economics can be boiled down to supply and demand. The trick is, no matter which problem you confront, find the demand, find the supply, find if they balance and what to do if they don’t.
For example, newspapers lately outline the controversy of the possibility of a housing bubble. Well, define a housing bubble. To me, a housing bubble happens when the price increase is not justified by the balance in demand and supply. The demand is the sale of houses, the supply is the listing of houses. What is the relationship between the two things and have they been out of balance? In fact, they have been out of balance, the demand has been higher than the supply, and so there’s no surprise that the prices are increasing. So when I see headlines in the newspapers about the possibility of a housing bubble I boil it down to the economic roots of the problem, demand and supply, there is an answer that comes out of that. And the problem is likely to take care of itself.
I did a study on affordable housing and I found that the whole activist community is lost about what to do about it. Again, this is a problem of demand and supply. Supply thinks no builder can build an apartment until they get at least 800$ a month. The demand can only provide 400$ out of those 800$, so there is a 400$ gap between demand and supply and someone has to fill it. It doesn’t matter how you fill it, for example, by subsidies to the demand or supply. So this is the kind of economic intuition I’m talking about.
How important are math skills and how often do you use them?
I think math is extremely important. Not in the abstract sense, but of course most of what we do has a quantitative application and we certainly rely on econometrics a lot. We also do a lot of fairly simple math in the spreadsheets. I’m not a mathematician per se, but I took first and second year calculus and linear algebra and I find that they are adequate. I find that a lot of people don’t take math in their second year, in which case economics might get tough at the graduate level.
What is the most important concept or model in economics that helped you in your career and you think a student should master really well?
To me it’s how you simplify everything. As I have mentioned before, everything can be boiled down to the demand and supply. I’ll give you another example, there is a widespread concept that in around 2020 there will be a huge shortage of labour, and employers will be short hundreds of thousands of workers.
As an economist, you should be able to say that this can’t possibly be the case, because there always exists a price that clears the market!
And the price will adjust to lower the demand for labor and increase the supply. Your job is to state that the initial statement is false. Here’s how things might change: the real wage will rise, we can use offshore labour, employers can substitute capital for labour, and the universities will adjust entry into the programs to make certain areas more or less attractive for certain groups of students (for example, engineering for female students).
You have to sort through the issue and be able to state “no, that can’t possibly be the case”.
When considering a career in economics, do you think one is bound to become a particular kind of an economist (i.e. Keynesian, monetarist, etc.) or does one become an economist in general? Is it important to have an open-minded general perspective incorporating all views or to stick to a particular direction?
I think there are no economists that fit strictly into one category. Keynesian economics has been discredited for certain features: it’s useful for short-term stabilization perhaps, although there are doubts about that. I would also say that the recent experience has rocked the world of the monetary economists: maintaining a low inflation rate may be a necessary condition, but it is certainly not a sufficient one.
You have to realize that the world of economics is changing dramatically: the conventional job for an economist, certainly in the business world is largely disappearing. There aren’t any economic jobs at banks anymore. At the time I graduated, all the Canadian car companies had economist positions, all the Canadian oil companies had economist positions, as well as most of the insurance companies. None of them have economists working for them anymore.
What we see right now is the hybrid positions developing. One area where we see the increase employment is the risk area, and people are just starting to think about the systemic risk. A systemic risk is an economic concept, and it is something an economist should be doing. The positions themselves are changing as well.
For example, if someone starts a job in 2010 or 2011, I can guarantee that by 2020 and 2030 he’ll end up doing something completely different: they’ll either have to adjust and go with the flow or they’ll be thrown out. You’ll never end up with one particular philosophy or end up applying your skills in one particular way, you have to take what you have learned in university, be able to upgrade your learning, change your thinking.
This recession should have really rocked the economic profession, as we don’t really have an answer as to what went wrong. I think we have to go back and look at the models which we used to make predictions, we’ll realize that we don’t have the proper financial linkages to explain all the issues, they are simply not build into our models. So we have to change them.
During the recession, do you think the divergent views of economists help or hinder finding the solution to the crises?
I would say in terms of policy responses, the agreement was reached fairly quickly in terms of what needs to be done. Certainly a consensus has been reached concerning the fact that the interest rates had to be driven to zero, in order to increase liquidity. Another consensus that has been reached is to provide the stimulus packages.
And we see that one year later after providing the stimulus, we see that some countries are drowning in debt which they created themselves. So it wasn’t such a great idea. There was certain consensus on what caused it, my point is the way we think it worked is not reflected in the economic models.
Speaking of recession, it is often being said that this recession has been particularly hard on young people, as their unemployment is still very high. What advice would you give to young professionals entering the job market at this point? How can one differentiate oneself?
One interesting recent avenue of research is what happens to people who graduate during the recession or in a soft labour market. The results are very discouraging for someone in that situation, because your earnings remain lower throughout your entire lifetime, as compared to someone who graduates in a strong labour market.
The reason is they accept a fairly large discount on their wage. Once you accept the lower wage, it’s hard to get back up, as your next employer is unlikely to offer you a salary that is much higher than your previous one. Secondly, you tend to go into something that you haven’t been trained for. Sticking to our example in economics, you may have spent four or five years studying economics, but if you can’t get a job in economics, you may end up doing graphic design, for example. But you haven’t been trained to be a graphic designer, and you don’t have a comparative advantage in that, so your earnings will be lower.
Now in a few years, even if a job in economics becomes available, you are less likely to get it because you’ve been doing graphic design for the past several years. All you have on your CV is that you took some economic courses a bunch of years ago and you never applied it. Now going back to your question about doing a BA and an MA, if the choice is between doing a Master’s degree in economics and working in a field other than economics, you may be better off spending an extra year or two in university and graduating in a stronger job market, because otherwise your earnings may stay lower for a very long period of time.
When considering a potential employment opportunity as a young professional, what is your stand on the brand name (associated with large companies) versus learning opportunities more available in small dynamic teams/businesses?
It depends on people’s choices and the company. Taking TD Bank as an example, it seems to be an overwhelmingly large company, but in reality you work within a particular group. In a small company you would have an opportunity to make a stamp on it, and give your inputs, but there is a lot more flexibility in a large company. For example, there is a lot of movement between different sectors at TD: people move from the economics group into corporate banking, audit or risk management. If someone here is tired of doing economics, they can apply internally for hundreds or thousands of other jobs.
Natalia Shcherbinina is a recent graduate (BCom – joint honours in economics and finance) from McGill University’s Desautels Faculty of Management.
