A Conversation on Innovation

Just finished the book “The big short” by Michael Lewis. Highly recommended. Amazing story about the mortgage crisis. There are no good guys in the entire story. Everyone is either greedy, evil, or incompetent – often more than one of the above. In SIEPR conference there was a session on Dodd-Frank. Despite the two thousand pages everyone is focusing on the Whistleblower provision. It is easy to pick to attack any regulation regime. After the depression, we got Glass Steagall which mostly held the financial industry in check. After the Great Recession we have Dodd-Frank with no control on too-big-to-fail or doing anything meaningful about derivative, same derivative that Warren Buffett called the weapon of mass destruction.

Saw an interesting panel on education with Caroline Hoxby and Michelle Rhee. Caroline Hoxby is a professor at Stanford and does research on the education systems. Michelle Rhee was the chancellor of DC school system and she was  made famous by the movie Waiting for Superman. It was very interesting to have a researcher and on-the-ground practioner. It didnt hurt that both of them were very articulate. 

It appears that there is consensus on the following topics -

- The biggest difference in a student’s performance is “teacher value add”. Caroline quoted some work that said that if you take a student and give them a teacher in the bottom 10% vs top 10% in the same school, by the time the student graduates from high-schools there will be difference in performance as if the student got 9 yrs more instruction in the case of top 10%.

- Retention of teachers bsaed on performance vs seniority is something everyone seems to agree on. In DC Michelle Rhee was trying to institute, or has instituted, a system of evaluation based 50% on performance of students and others like in-class observation, etc.

- There seems to be no way to correlate teaching performance to what degress they have, what certifications they had, etc. You can only determine if someone was going to be good or bad after they have started teaching. And apparently after that everyone knows who the good teachers are - parents know it, students know it, principal knows it.

- There seems to be no correlation between how much money a school district spends and the student performance. As a country we have increased the investment in K-12 307% in inflation-adjusted dollars and the results have stagnated.

- While charter schools have generally had a positive record, there is huge variations amongst the performance of charter schools. And since most states seems to have  a restriction on the number of charter schools, it hasn’t been tested at a large scale either. So, charter schools are no panacea either.

-  There has been early experiments to see if student incentives work to improve performance. While there is only small amount of data available so far the data has been positive.

- While no-child-left-behind had provision for “restructring” of under-performing schools, nothing seems to have proven to work apart from hiring a new competent leader who brings his/her own team.

It is hard not to walk away with the following conclusion -

- Good schools seem a lot like building successful companies at the least the way they are structured. If the centralized planning didn’t work for creating wealth, why do we believe we can create an education systems through centralized planning. Unfortuntely there is not that much data on the voucher system. I heard form the education minister of India that education has to be government’s responsibility because there was no money to be made in educating poor kids through private sector. But maybe in US where I have heard numbers as high as $27,000 per year/per student expense in some school districts, there is enough money in the system to experiment with a completely private education system supported through vouchers.

- Certainly on a global level, public education systems hsa to be addressed. I completely believe if the system is failing in fairly substantive way, trying to improve it is probably futile. There needs to be disruptive innovation in how we think about it.  Need to look more into Khan Academy, or CK – 12 foundation.