Investing In The Humanities' Material Future

Tonight I attended the Commonwealth Club's program "Living in the Material World: The Future of the Humanities" to see how the experts from California Humanities and Joint Venture Silicon Valley plan to save the liberal arts. I am intrigued with how data and technology now allow starving artists to prosper.

The humanities have always needed champions. Rich families like the Medicis were legendary for their patronage of the arts. The catch is that it took huge piles of wealth to sponsor a significant amount of art. The Commonwealth Club's panelists noted the gradual slide of the humanities in university life from a common language of civic engagement in the Middle Ages to an afterthought today. Turning the tide means advocates need evidence that the humanities matter in a modern economy.

The evidence for the humanities' commercial viability abounds. The AAC+U and NCHEMS released a report in January 2014 documenting the long-term viability of liberal arts degrees in the job market. Our Club panelists noted anecdotal evidence that senior business leaders hire liberal arts grads for the broad-minded soft skills that aren't taught in business schools. Check out the Council of Independent Colleges' Power of Liberal Arts for confirmation that the humanities add value in business. It looks like English majors offer way more than a punch line for sketches on Garrison Keillor's A Prairie Home Companion.

One comment about successfully marketing museum visits to families was notable for what it implied about business. The tactic is viable because a live experience with loved ones is immediately shareable with what sociologists call an affinity group. Social media enables individuals to share their atomized experiences, but a photo of several family members allows sharing to instantly cross two or more affinity networks. Hey folks, that's the kind of business insight a non-humanities major like me brings to the table.

I am a fairly recent convert to the conversion of STEM education to STEAM, inclusive of the "A" for arts. I first noticed this change underway when I attended the Maker Faire Bay Area in 2013 and I was skeptical of its intent. I had gone from skepticism to acceptance at DesignCon 2014 because STEAM can prompt engineers to be more than linear thinkers. Technical domain experts increasingly realize that the STEAM paradigm incorporates the added value of the humanities.

There is enough room in the digital age for potentially unlimited attention to the humanities. The panel's Silicon Valley executive who performs commercially viable music after hours brings the quality focus and businesslike work ethic that the rest of the arts community should absorb. People working hybrid careers are the bridges between all of these worlds.

I still think some traditional academics will be very frustrated as MOOCs push traditional classroom education into obsolescence, regardless of whether Common Core's Socratic methods catch fire in classrooms. I'm pretty sure an AI avatar on a tablet can machine-learn its way through enough online interactions to make a simulacrum of Socratic instruction viable in MOOC curricula. I look forward to the first AI-driven MOOC platform that goes IPO. The humanities can finally enable money-making 21st Century enterprises.

Epigenetic Elitism In The Near Future

Civilizations are never trapped in amber.  They change as their ruling classes change priorities and tastes.  Two recent news items point the way to our civilization's next incarnation.

First, Stanford will grant free tuition to some capable middle-class students.  The ruling elite's noblesse oblige sensibility has been dormant for at least a generation, so this may be an attempted restoration.  The policy is less useful as a marketing ploy for low-income social groups whose children lack Stanford's prerequisites.  Second, significant life experiences cause epigenetic changes in brain chemistry that subsequent generations inherit.  Good experiences like occupational achievement, successful romantic conquests, and wealth-enhancing choices thus increase genetic quality.  Bad experiences for less fortunate people (like stress from child abuse or abandonment) decrease inclusive fitness.

The connection between the two items deserves explanation.  Upper-class citizens tend to have above average life experiences.  They obtain high-quality social goods like education, jobs, and romantic relationships with greater ease and frequency than lower-class people.  These kinds of people comprise the vast majority of the student body at Stanford and other top schools that won't need a tuition waiver.  They will not willingly associate with anyone from the free-riding minority who do not inherit robust epigenetic markers.

The children from rich families who have to pay for college usually refuse to socialize with anyone getting a free education.  I have experienced this phenomenon personally at both the undergraduate and graduate levels.  Economically disadvantaged students cannot fully benefit from a Stanford education if elite students shun them from their networks.  Children of rich families at elite schools query each other's backgrounds all the time.  They also consider visual markers like brand-name clothing and cars.  It is easy for them to pick out the lower-class students and label them as undesirable.  Their parents raised them to behave that way to preserve their family's way of life.

Elite families have long obsessed over perpetuating their bloodlines.  Science now has proof that humans can self-select for genetic quality.  Good epigenetic effects among the elite class will keep them well-suited for handling the stresses of high-powered occupations.  Success begets success, and successful people will mate with each other to perpetuate ruling class solidarity.  Wealthy people can afford trichostatin A treatments to wipe their mental slates clean and raise the epigenetic responses they will pass to their progeny.  The poor may not have such an option; I can see the Affordable Care Act's controls ruling trichostatin A an elective treatment not covered by the generous taxpayer.  University tuition waivers for the poor will probably not include hormone treatments to wipe away bad genetics.

Stanford and other schools can afford to throw table scraps to the lower classes while the Federal Reserve inflates asset markets.  That luxury will evaporate with the next market crash.  University endowment growth after the 2008 financial crisis is entirely a function of central bank monetary stimulus.  The American variant of Western civilization will still have the Horatio Alger legend and other such useful myths in its future.  It will have less interaction between social classes as the epigenetically fit offspring of elite families avoid their less fit fellow students at top universities.

The Haiku of Finance for 04/06/15

Education plan
Disrupt traditional school
Obsolete teachers

Education Startups Have A Path To Disruption

I kicked around some ideas a few months ago with some fellow entrepreneurs.  We were searching for a startup concept that would disrupt the educational establishment.  The persistence of No Child Left Behind and Common Core standards leaves little room in the future for educational enterprises that don't meet very clear goals.  There is a way forward that can generate wealth for the ambitious.

Every startup should begin with the Business Model Canvas.  They will refine this template as they go through the Lean Startup process and get their first Customer Development results.  It is no longer optional for tech startups in any sector to use these concepts.  They simply must apply them if they want to reduce their risk of failure.  Steve Blank and Paul Graham have written extensively on how startups succeed.  Reading their bodies of work saves founders a tremendous amount of time.

Accelerators now proliferate and some cater to specific verticals.  Education startups have their choice of Kaplan EdTech Accelerator, Pearson Catalyst, Imagine K12, or DeVry's DV X Labs.  Aspiring entrepreneurs should look at the track records of the startups coming out of those programs to see which one offers the best steroid power.

Workable education tech models need not be limited to MOOCs.  Online education models are easily scalable but the barrier to entry is extremely low.  The MOOC sector is already crowded and I believe the winners will be those that join established brands (i.e., the highest-quality private universities) to leverage accredited curricula.  Other verticals may present higher entry barriers, and will thus offer durable competitive advantages to the first entrants.

I think physical hackerspace franchises like TechShop are extremely flexible by providing a la carte hardware capabilities.  MOOCs are valuable because they make advanced academic knowledge universally available, but they cannot replicate physical laboratories.  Let's say some MOOC partners with a hackerspace network to offer accredited courses in the physical sciences under an Ivy League brand.  That market player would have incredible durability.

Identifying tools is easy.  Finding an addressable market is harder.  Education professionals who find their jobs frustrating are welcome to fight bureaucrats for the rest of their careers.  The obvious shortcut is to escape from the ivory tower or bunker schoolhouse and launch a game-changing startup.

Students Should Rise Above Without Debt After Education

I attended the Commonwealth Club again today to hear about how education breaks the cycle of poverty.  Students Rising Above (SRA) pitched the success stories of their intensive mentoring for low-income students bound for college.  I'm all about harvesting the unheralded talents of students from disadvantaged socioeconomic backgrounds.  Sociologist E. Digby Baltzell built a lifetime of research on the premise that ruling elites must recruit talent from upwardly mobile underclasses if civilization is to endure.  SRA is doing the right thing.  The rest of society should do a lot more.

The first obstacle society places in the path of the upwardly mobile is the difficulty of discharging student loan debt in bankruptcy.  The official Federal Student Aid guidelines on loan forgiveness, cancellation, and discharge describe strict conditions under which a bankruptcy court will discharge a student loan.  It's not impossible but it will require financial hardship.

The next obstacle I've observed is more nebulous.  The snobbery of students raised in elite households is real and very prevalent at top American universities.  I encountered this firsthand in the early 1990s and it has worsened along with income inequality.  The low-income students who are lucky enough to attend top-ranked universities will never truly find social acceptance from the vast majority of very privileged students they meet.  Class distinctions are hardening in America and having a brand-name degree is no longer a path to upward mobility.  I noted that SRA played two video studies of their best clients.  I found it telling that one became a teacher and the other became a non-profit worker after graduation.  Those are low-income, low-prestige occupations with zero upward mobility.  That's what the ruling class wants now for its non-pedigreed graduates.  We should do better.

The final obstacle I've noticed in society lies in the financial condition of the entities sponsoring financial aid.  The federal government cannot run persistent budget deficits forever and it will eventually try to destroy its unfunded liabilities with hyperinflation.  This will in turn destroy its ability to fund Pell grants and underwrite student loans.  Private sources of aid will fare no better.  The 2008 financial crisis devastated the endowment portfolios of Harvard, Yale, and other schools that had just made strong commitments to merit-based financial aid for low-income students.  I fully expect a repeat of that episode, with no recovery.  Private aid will have to fill the gap if private sources can survive hyperinflation.

Clark Kerr's California Master Plan for Higher Education defined clear roles for each tier of the state's post-secondary education system.  Changes in our society's structure are destroying this plan's ability to deliver value.  The junior colleges were intended to provide instruction in skilled trades for less intellectual students.  They have become feeder schools pushing academically unprepared students into four-year universities.  It should come as no surprise that college dropout rates are higher than ever.  A feeder system that encourages academically unskilled students to take on debt for degrees they cannot complete is a broken system.  Low interest rates have fed the student loan bubble but that will pop once the Federal Reserve loses control of the yield curve.  The crash in funding sources - any way it happens - will further destroy the sustainability of California's publicly funded university system.

I was pleased to hear SRA discuss the potential of MOOCs as course offerings for students who can't join their mentoring program.  MOOCs have the potential to completely blow away traditional resident universities in all academic subjects.  I believe we won't even recognize the educational landscape a generation from now once a critical mass of middle class and poor parents figure out that their kids can train themselves for any career online at their own pace for free.  No snobby brat can tell a poor kid they don't deserve a university education if the equivalent of that education is available on the Internet at no charge.  The rise of MOOCs is a free-market update to the Clark Kerr plan's noble goal of providing affordable education appropriate to all skill levels.

I will suggest one way forward.  I have written before on the potential for public option banks to address the financial needs of low-income citizens.  I think they can also address the needs of disadvantaged students.  If every state had a public bank, low-income students receiving financial aid through any government channels would be required to hold their money in this bank's no-fee checking accounts.  The banks could also be conduits for financial literacy education.  This ties together the delivery of aid and the maturation of the recipient.

My own merit-based scholarships to the University of Notre Dame and the University of San Francisco never benefited me.  Maybe SRA's clients will have better luck, especially with MOOCs.  They can rise above poverty without debt, or else they'll sink below into dead-end careers.  I made a career for myself anyway, as per my LinkedIn profile.  Poor kids can do it too.  

San Franciscans Misunderstand Middle Class Erosion at Commonwealth Club

I really like being a member of the Commonwealth Club of California but sometimes the people who attend lectures there need to be smacked upside their stupid little heads.  Today I attended a noontime panel on the danger facing America from a skewed allocation of wealth.  I'm pretty sure there was more collective intelligence among the three panelists than among everyone in the audience (minus me, of course, because my intellect reigns supreme).

The panelists correctly identified the risk of social instability from the erosion of the middle class, which in many societies throughout history has prevented open class conflict between the proletariat and plutocratic classes.  They noted that a majority of the US's GDP growth is now generated in a minority of its metropolitan statistical areas.  They also noted that the gap between rich and poor cities is increasing and persistent, with some cities becoming permanent enclaves of wealth and innovation.  It should go without saying that high-tech sectors generate a wealth multiplier effect that supports skilled service trades but the idiots protesting outside Twitter will never figure that out.

One economist on the panel was kind enough to identify some key factors that drive commercial real estate investment.  We've all heard the mantra about location, location, location for retail outlets.  Large commercial projects take it further into six factors:  income levels in a region; types of jobs available (especially high-skill, high-income); quality and availability of skilled labor; education; civic infrastructure; and the regulatory environment for business.  She noted that the US is falling behind other countries in middle-class job creation, infrastructure investment, and economic mobility.

It pays well to have expert panelists correctly diagnose a problem only if the audience members can absorb the lessons.  Sadly, that may be asking too much of the average San Franciscan.  The audience's questions expressed desires to redistribute wealth and raise taxes to spend more on public education.  That is the kind of failed statist thinking that has contributed to the destruction of the middle class.  Centrally planned redistribution has brought middle class entitlement programs to the brink of insolvency.  The public education model no longer delivers increased value for marginal increases in spending.  Putting more money into either of these failed paradigms will only exacerbate the middle class's woes with more taxes and less benefit.

The panelists knew the way ahead but the audience could see neither the forest nor the trees.  One panelist cited San Francisco's restrictive housing ordinances and "inclusive zoning" as a hindrance to development.  Competitive housing markets allow development and attract affordable housing.  The difficulty I see with getting from problem to solution was right there in the room.  The audience members from San Francisco love rent control and the quaint character of neighborhoods frozen in time.  No way are they ever going to vote for politicians who can give The City the policy reform it needs to make affordable development happen.  Just look at the anti-Twitter loudmouths on the street.  Try telling them that gentrification moves lower-income renters into areas where developers will meet their demand for low-income housing.  They won't understand and neither will most educated San Franciscans.

The cognitive dissonance the audience members expressed was amusing.  One guy asked what it would take to fill the high vacancy rate among East Bay and South Bay commercial properties with "high-paying jobs" (I think he meant business tenants, but he was an idiot).  A panelist later said that many urban areas would have to undergo a prolonged period of contraction to a sustainable level of concentration, starting with Detroit.  I may have been one of a few people in the room who saw the connection.  Read my own blog posts on Detroit.  Those vacant offices and stores in the Bay Area will remain vacant because their regions were overbuilt, and now they must be unbuilt.  No amount of job training will fix it until unused office space becomes farmland.

I would have started laughing in people's faces if this seminar had lasted one minute longer.  None of these idiots have a clue about why society is falling apart.  They need to read the panelists' works (specifically Dr. Enrico Moretti's The New Geography of Jobs, Dr. Claude Gruen's New Urban Development,  and Dr. Asieh Mansour's research) but I'm pretty sure they won't.  If they do, they won't learn anything that will change their minds.  I know exactly how to solve the middle class crisis and it won't be pretty.  Here it comes.  Entrepreneurs spawning MOOCs will cut the cost of education and eliminate the debt burden preventing young college graduates from saving for a home or starting a family.  The public education establishment and its union drones will fight that tooth and nail until they earn the public's wrath.  Smart urban growth will favor multi-use urban infill development that civic infrastructure can serve efficiently.  The enemies of common sense will close ranks to defend rent control and inclusionary zoning until municipalities that do favor those reforms attract all of the wealth creators away from San Francisco.  Only then, when all looks lost, will common sense return to the city by the bay after all of our current foolishness has been discredited.

I've always liked one of the quotes from T.R. Fehrenbach's This Kind of War that says something about how most human beings abhor competition, and that is why most people are acted upon by history instead of being the actors.  I will act upon these audience members as much as my will to power will allow and they will like it.  I took as many chocolate chip cookies as I could on the way out of the Gold Room because I didn't want them going to waste among anti-development fools.  Much of the knowledge available at the Commonwealth Club is similarly wasted on people who won't use it.  

Helping Kids Isn't My Calling In Life

I went to the movies today to see Ender's Game, a classic sci-fi story with a cult following and a concordance of literature discussing its morality.  My local multiplex is typically crowded with families dragging their kids along for a day of distraction.  Thankfully there weren't that many kids out today.  My theater was devoid of the usual pre-pubescent whining, crying, and general unruliness that follow children everywhere they go.  The silence was golden.

American kids are going to have plenty to cry about in the decades ahead so they'd better get it out of their systems right now.  Baby Boomers who didn't save will support politicians who promise to guarantee their entitlements from Social Security and Medicare.  That means today's kids get nothing.  Student loan debt for those kids who attend college will destroy their ability to buy a house or support kids of their own.  That means today's kids will own nothing.  Unionized teachers are dumbing them down to the point where they will have to download several years' worth of MOOC modules just to make up for what they never learned.  That means today's kids know nothing.

Oh yeah, Ender's Game was about kids.  I could forgive that because the kid characters in the movie were acting like adults.  They trained for war, built teams that balanced each others' strengths, and wrestled with moral questions.  That was a welcome relief from the real world, where most of the adults I've known act like children.  Don't come crying to me, kids of all ages.  I won't pay your way.  

Financial Sarcasm Roundup for 09/21/13

Here comes a late Saturday night sarcastic blast.  I saw some fun headlines that I just can't ignore.

BlackBerry's new phone is a sales dud and the company's overall numbers are horrible.  Last decade's must-have device at places like my previous employers is now unwanted.  Forget the "Market Ticker" rave reviews of the Z10.  Most smartphone users aren't hard core tech heads.  They don't need an engineer's dream product because they really only care about texting LOLcat pics to friends.

Harvard plans to raise a record amount for its endowment.  These things are planned years in advance but I can't help wonder about ulterior financial motives.  The student loan bubble is bound to burst and upper-income parents will eventually tire of paying full tuition so low-income students can receive merit-based subsidies.  Yes, folks, snobbery really does rule at these types of schools.  The Ivys and other elite schools need to move fast to digitize their best courses and brand them for online distribution because the MOOC revolution is going to destroy most colleges' business models.  The top-rung schools can survive if they focus on STEM laboratory work that can't be executed online.

The local tech community lends a hand to civic life through the San Francisco Citizens Initiative for Technology and Innovation.  It's cool that techies want to reinvigorate education but redesigning K-12 curriculum needs to accommodate the MOOC revolution.  See my rant about Harvard just above.  Otherwise, we'll end up with a bunch of unionized teachers sitting around on their larded posteriors while their motivated students zip ahead through self-paced online courseware.  Students can learn most of what they need online at home and commute to a magnet school once or twice a week to do STEM lab work.  

The Haiku of Finance for 08/22/13

Higher ed reform

Shut down many colleges

Waste of diplomas

Saving College Really Means Saving Securitized Student Loans

The Administration has a bold plan designed to keep American youth flowing into the post-secondary education pipeline.  This plan will rate institutions of higher education on the quality of after-college careers their graduates achieve and steer more federal grant money to those colleges that score well.  I think this plan is brilliant in several ways (from a plutocratic perspective, anyway).

It will reward those universities whose graduates gravitate toward high-paying occupations.  The Ivies and Seven Sisters alumni who go into law, finance, and corporate management will see their schools richly rewarded.  The for-profit diploma mills whose grads head back to the fast food counter will get nothing.  This will accelerate the college market shakeout that is long overdue.  A large number of people don't belong in college, so fewer colleges means more workers don't need to waste their time with something beyond their ability.

The next part of the plan's brilliance lies in its perpetuation of student loan indebted servitude.  It does little  to control students' costs.  It continues funding Pell grants and does not make student loans dischargeable in bankruptcy.  Helping economically disadvantaged students is nice but it will come at the expense of middle class students who will continue to be priced out of college unless they take out enormous loans.

Most significantly for the financial markets, the plan grandfathers pre-2008 loans as ineligible for income-based repayment plans.  This preserves the value of cash flows from students to loan servicers to holders of securitized student loan pools.  The Administration's plan is thus a backstop (or "bailout" if you please) for the valuations of collateralized Sallie Mae securities in the portfolios of every pension fund in the US.  That is the single most important thing to know about any plan for education reform in the US.

I like the plan's allowance for experimentation with competency-based models and MOOCs.  Those concepts will succeed just fine without federal funding so this federal "help" will probably end up corralling them into something the educational establishment can control.  That control will never succeed, of course, but regulators are going to try.  Information wants to be free and much of what we know as education will soon be free thanks to MOOCs.

The myth that credentialing leads to rising income and social status has served the nation's elite well as a cash cow.  It will disappear only after much resistance and probably a round of hyperinflation.  

The Haiku of Finance for 08/17/13

Digital courseware
Revolution in learning
Wisdom on demand

The Haiku of Finance for 05/11/13

College is a waste
No degree can replace work
Any job will do

College Is Bad If You're Poor Or Stupid

I've read a spate of stories today on how pursuing a college education is increasingly one of the worst life decisions an American can make.  It's even worse for people too poor to afford full tuition at a four-year school or too dumb to complete a bachelor's degree.  The Brookings Institution has discovered that college dropout rates are higher than ever and 20% of colleges result in a negative ROI for those who do graduate.  I hope they included both of my schools, Notre Dame and USF, in that negative ROI calculation.  Tons of serious policy research shows that America's $1T student loan burden is destroying capital formation and preventing millions of graduates from raising their living standards.  I never had any debt at all and I started building my nest egg with my first paycheck.  Poor students who pay full tuition subsidize merit-based financial aid for affluent students.  I got merit-based financial aid for both my bachelor's and master's degrees, so I'm one of the anomalous few who slipped through multiple cracks in a system designed to benefit anyone but me.

Don't think that my claims of negative ROI and lack of debt contradict each other.  My brand-name degrees didn't help me build wealth because none of my employers ever cared about my education.  I've had many non-productive, low-income years since graduating near the top of my MBA class.  Being debt-free helped me build wealth more than any brand-name degree, because my meager earnings that would otherwise have gone to debt service instead went into my portfolio.  The power of compounding in my 20s and 30s sustained me through many professional disappointments.  My frugality built my wealth.  My education did nothing for me.

I don't want to read any more policy prescriptions advocating loan forgiveness, reduced borrowing costs, more subsidies, more remedial classes, or more of anything that hasn't worked at all.  The simple solution is that high school students who are too poor to pay for college or too stupid to succeed academically just shouldn't pursue higher education.  The poor kid who's smart enough to qualify for full-ride merit-based financial aid can still grab the brass ring but that breed is very rare.

Poor people who avoid college have plenty of options.  Trade schools and online learning offer credentials that lead to immediate entry into the workforce.  Living simply and staying debt-free preserves income that poor people can productively invest.

Don't go to college if you're poor or stupid.  You'll regret it for the rest of your life.  I'm neither poor nor stupid but I regret every single day I spent in college classrooms.  I should have been working and saving instead, and I'd be much wealthier today without a BBA or MBA to my name.

The Haiku of Finance for 08/11/12

Harvard likes Facebook
Buys stock in hope for more growth
Totally stupid

College Grads' Earnings Head Down, Illegals Head To College

My headline should have grabbed your attention, especially if you recently went heavily into debt to obtain a bachelor's degree.  The WSJ reports that college grads' inflation-adjusted earnings have declined by about a tenth in a decade.  How does that sheepskin look on the wall now?  Hopefully it's loaded with a bunch of pretty calligraphy that has some aesthetic value, because it's not worth anything else. 

In a related development, state governments are cutting what they spend on K-12 education.  This probably does not result from any realization that a well-rounded formal education now has rapidly eroding earning power and is thus a poor investment.  It has more to do with the bloat that's accumulated in state-run schools for years thanks to unneeded technology toys (iPads for all!), useless administrators (i.e., multicultural curriculum specialists), and overinvestment in suburban schools that will be socioeconomically untenable as the viability of suburbs erodes. 

Whatever austerity measures are unfortunately visited on K-12 education should be more appropriately directed towards state-run collegiate systems.  Malinvestment in higher education shows no sign of slackening despite the disappointing WSJ report on earnings.  California's madness continues with the enactment of the California Dream Act, a law that would provide more financial assistance to the children of foreigners who break the law than to out-of-state U.S. citizens who want to study in the Golden State.  I am disgusted with this development and the blatant pandering to an interest group that it represents. 

Middle class earnings continue to disintegrate for educated professionals.  Legitimate government functions continue to hollow out with cuts to basic education.  California's response is to provide more subsidies for an alien presence within our borders that undermines the rule of law.  We should start asking college-educated U.S. citizens how they feel about subsidizing the educations of people who should not be here. 

Nota bene:  My own bachelor's degree from the University of Notre Dame is completely and utterly worthless. 

Stupid Schools Waste Your Tax Money On iPads

Public "education" gets dumber by the day.  The latest fad to catch the attention of school administrators is the iPad.  Some school administrators think buying iPads is a better investment than textbooks.  They failed to do the math.  A textbook costing $50 to $70 will last years; my textbooks did all through my K-12 years.  A $500 iPad is designed to become obsolete in a year or less; its apps require constant upgrades; and its battery has a limited life.  Apple's battery replacement service requires the entire iPad to be replaced, so schools will have to spend extra money backing up all of their iPads' data before shipping them in.  The $100 or more spent on an upgraded but blank iPad could have bought a couple of textbooks. 

Oh, BTW, schools in low-income neighborhoods just made their students targets for theft by forcing them to carry a $500 brand-name device home to complete their homework.  When Johnny gets jumped and robbed by some punks on his way home, he will be out one very expensive iPad (and the school will probably bill his parents!) and have no way to study for tomorrow's algebra test.  In even the most violent schools today, punks don't steal ordinary textbooks because they don't have a street value outside the school. Way to go, school administrators.  You've just increased the chance that your students will suffer bodily harm.

Most hardbound textbooks - math texts, English lit, etc. - don't change much from year to year and don't need "upgrades" like electronic material.  Spending foolishly on faddish toys is now a hallmark of school administrators who are at a loss when faced with educating Ritalin-addled children raised by video games.  How many city school districts will face budget shortfalls because of wasteful spending?  The muni bond investor's loss is the AAPL shareholder's gain. 

Apple has long had a dominant position in the education market, so introducing the iPad to its captive audience didn't require much penetration.  This is why Apple is so profitable.  It can count on the stupidity of the education establishment.  Smart move.

Full disclosure:  No position in AAPL at this time. 

Americans Want National Bankruptcy

The S&P has blasted its alarm in America's debt-ridden face and our citizens are responding as expected.  They want the deficit cut but don't want to cut the unfunded middle-class entitlements that are doing the most fiscal damage.  That would have been funny twenty years ago when we could afford deficit spending.  It's not funny anymore.  We've become addicted getting more from the government in cash than we pay in taxes. 

The public education system has done a wonderful job of preparing us all to handle budget math.  The consequences of this preparation will become apparent when the bond market forces our country into receivership.  The drama over whether federal spending hits the debt limit next week is a sideshow.  Washington will raise that limit and then the S&P's competitor rating agencies will start planning their own outlook downgrades (if they haven't written them already, just waiting to time the release). 

My fellow Americans are asking for everything and will get nothing - except economic pain.   

Stay Away From Trendy Graduate Programs In Web 2.0 Stuff

I recently received an email inquiry from a fan of my Yelp review of the University of San Francisco.  My fan wanted my opinion of USF's Master of Science in Web Science program.  I had no idea the school had such a thing and I really doubt that it's necessary for a Web 2.0 career.  I truly believe a stint with a venture-backed Web 2.0 startup will provide a more fruitful education than time spent in a traditional classroom.  My emailed response is below, in italics. 

Thanks for reaching out. I don't know anything about the MSWS program but it sounds like a waste of time and money. Most web developers studied the basics of computer science at some point and then learned about web applications through on-the-job experience.

There are a lot of dumb students at USF. They get jobs because their families are rich. Rich kids won't help you network because they think anyone not rich like them isn't worth helping. They won't go outside their social circle for people like us.

BTW, there are plenty of hot chicks in the SF Bay Area. You don't need to waste two years in school to meet them.

A USF master's degree will only help you if you already work in that career field because experience is far more important than education. USF starts programs like that as a sales tool to draw students who have money but no job prospects. The school just wants your money up front and doesn't care whether what you learn will help you find a job.

A better plan would be to skip the master's and learn to build websites on your own. Learn about things like knowledge management, data mining, business intelligence, and social media for FREE on the Internet. Working at Yahoo or Google for two years will teach you more about web stuff than a master's program, plus you get paid and won't end up in debt.

I hope this helps. Good luck.

Day Of Greed In Wisconsin From Unions

Arab street protests have given the world a "Day of Rage" on several different days.  Now some misguided Americans are making this concept their own to protest the imminent destruction of their union benefits.  The state of Wisconsin is doing the right thing by moving to curtail state employee unions' collective bargaining rights.  The state has even thrown the unions a bone by promising no layoffs in exchange for higher employee contributions to their own pension and health care benefits.  In other words, the state asks its employees to accept the same lifestyle deal faced by the private sector taxpayers who pay their salaries.

On the plus side, passage of this fiscally responsible legislation will make credit analysts look more favorably upon the state of Wisconsin's finances.  The state's muni bonds will look more secure and taxpayers will save on interest costs.  On the minus side, unionized teachers and other employees show how clueless they can be when sufficiently roused. 

Unions are responding to this common sense legislation with their typical childishness, greed, and arrogance.  This goes to show that union leaders just aren't intelligent enough to grasp economic concepts.  These protesters may be even more dense than the Teamsters at YRC Worldwide, which I didn't think was possible until I read the stories coming out of Wisconsin today. 

Wake up, unions.  Your time is almost up.  Do your members a favor by breaking the news to them that the days of generous benefits and job security for low-skill occupations are rapidly drawing to a close. 

Full disclosure:  No position in YRCW or Wisconsin muni bonds.

Chinese Tiger Mothers Needed In America

Count on somebody in America to get offended at the mention of standards and accountability.  Amy Chua's Battle Hymm of the Tiger Mother has stirred up a firestorm of criticism from overly sensitive American parents who can't handle the truth.  It's sad that our country has devolved to the point where it can no longer celebrate excellence. 

Ms. Chua raised her kids to be winners in lfe.  Her story is a how-to manual for parents who want to help their kids succeed.  The connection between her process and the result is obvious.  Setting high expectations for her kids and going the extra mile to help them meet those expectations became self-fulfilling prophecies.  Her kids' phenomenal accomplishments put many parents to shame.  Her critics, who are unfortunately numerous, buy into morally-neutral philosophies that imply medocrity is okay.  Such people make me depressed about America's future.  Blind people can't follow road maps. 

Tiger mothers know that old fashioned concepts like discipline, achievement, focus, standards, delayed gratification, and self-mastery never go out of style.  American educators and psychologists have forgotten that these traits, inculcated into American pioneers on the frontier and immigrants on the factory floor, made us into a world power.  A fetish for self-esteem has turned America into Bailout Nation.  Tiger mothers don't ask for bailouts. 

America needs a tiger mom of its own to smack it out of its anti-achievement funk.  I propose that the Administration appoint Ms. Chua as its Tiger Mom Czar to force an overhaul of Americans' parenting styles.  She can start by abolishing student loans so that kids who want to go to college have to earn merit-based scholarships (as I did for both undergraduate and graduate school) or delay education until they've saved for it on their own.  The absence of such a solution leaves the door open for China's own tiger moms to show their children how to replace us as the world's indispensable nation. 

Full disclosure:  Long FXI with covered calls.  Will go long SPY when America has a critical mass of tiger moms.