On Venture Capital and Education


By Jim Gordon [CC BY 2.0, via Wikimedia Commons]
If you care about education, it’s worth paying close attention to what’s going down in Silicon Valley. The hyperdrive capitalism of venture investment, with its raw focus on the rapid scale of the highest performing and rapid failure of all the rest, parallels and in some ways informs edtech and charter models.

There’s certainly a healthy and necessary space in education for a private marketplace of rapid iteration, scale, and fail. But there’s also a necessity for the less efficient but robust, slow-growth, long-term models of public schools.

In The New Yorker there is an interesting piece on Y-Combinator’s Sam Altman relevant to this. It’s interesting purely as a biopic, but scattered throughout are insights into the driving mindsets and ethics of Silicon Valley. Let’s take a closer look at some quotes from the article with the frame of education in mind.

Altman, as he nursed a negroni after dinner, had his own warning for the timid: “Democracy only works in a growing economy. Without a return to economic growth, the democratic experiment will fail. And I have to think that YC is hugely important to that growth.”

Democracy needs a heck of a lot more than just a viable economy. It needs strong civic institutions and an active citizenry that has a shared understanding of how to engage with those institutions and of their purpose. Public education should serve the public in cultivating shared civic knowledge and values.

. . . In his book “Hackers & Painters,” Graham calculated that smart hackers at a startup could get 36x more work done than the average office drone—and that they would, therefore, eventually blow up employment as we know it. He made this sound patriotic and fun; how could an oligarchic technocracy go wrong?

Indeed? How could a focus solely on only the most productive and efficient members of society go wrong? In education, imagine if we only invested in the most gifted and talented. The rest would be herded into service professions or unskilled labor. A meritocracy! Wait. Isn’t that more or less how things used to be before the advent of a public education . . .

. . . And he told me, “It’s bad for the companies and bad for Silicon Valley if companies can stay alive just because they’re [associated with Y-Combinator]. It’s better for everyone if bad companies die quickly.”

This is a driving philosophy of venture capital and rapid scale that Silicon Valley pursues. Scale the few most successful ventures rapidly, and fail the remainder. With schools, we could only invest in and scale the ones that demonstrated strong academic performance — all the rest we would close. Sounds good, right? Kids should only be in schools that have demonstrated their worth.

But there’s a problem with rapid scale in terms of sustainability:

. . .The truth is that rapid growth over a long period is rare, that the repeated innovation required to sustain it is nearly impossible, and that certain kinds of uncontrollable growth turn out to be cancers. . . Every great startup—Facebook, Airbnb—has no idea why it’s growing at first, and has to figure that out before the growth stalls. Growth masks all problems.”

A school could be high performing, but not such a great place to be.

This isn’t to say that there isn’t a place for markets in the education system. A market doesn’t have to mean Silicon Valley style scale and fail.

A more sustainable model can be seen in an article in the NY Times about MailChimp.

…it’s possible to create a huge tech company without taking venture capital, and without spending far beyond your means. It’s possible, in other words, to start a tech company that runs more like a normal business than a debt-fueled rocket ship careening out of control. Believe it or not, start-ups don’t even have to be headquartered in San Francisco or Silicon Valley.

. . . You can simply start a business, run it to serve your customers, and forget about outside investors and growth at any cost.

Schools that do this work are the ones that get better: they put their focus on service to their students and families and adapt accordingly.

But there’s other ways that those who abide by the scale and fail model are investing in, recognizing the limitations of a brick and mortar approach.  Venture capitalist Marc Andreessen (you may have heard of AltSchools?) lays out the long-game for software and tech in the education industry in this Vox interview:

Primary education in the US is a monopoly. It’s a public sector monopoly with very little competition. Even the charter schools end up under sustained attack for violating the monopoly. You see this most recently in New York with De Blasio trying to shut them down. A government-sponsored monopoly is not easy to move.

. . . New technologies tend to vaporize on impact with those institutions. The last thing a unionized public school wants to do is to fundamentally change how they operate. Of course they don’t want to adopt new technology. It’s antithetical to the philosophy.

So the solution? Software!

Look, there’s great potential for technology in the education sphere, and I think experiments like AltSchools and Udacity are well worth making. But Andreessen’s premise here is false. Having worked in NYC public schools for even the short length of time that I have, I’ve seen so many tech fads get readily embraced by educators and districts that it’s become ridiculous. Rather than “vaporizing on impact,” new tech fads rather seem to become desperately embraced and then just as hurriedly discarded. Harried educators and administrators would love it if a SMART Board or data system or robot would magically and rapidly improve the outcomes for their kids!

But I do think Andreessen makes a more balanced analysis and point here:

We can’t revamp the entire system. Nobody can. But I think more and more, there are gaps in what the current system can accommodate compared to what people actually want. There are opportunities to build on the edges, around the sides, parallel systems. And at the very least introduce choice. In the best-case scenario, it becomes a real challenger to the status quo.

I fully agree that there are massive gaps and many opportunities to better serve our nation’s students, and I for one welcome the evolution of edtech and tools and software, as well as the vibrant niches of effective charter models and networks. But we’re on a quixotic mission if we’re shooting for supplanting public education systems, rather than supplementing them.

The argument for why this is so can be viewed in statements that Barack Obama and Vox’s Ezra Klein have made about the function of public institutions vs. private ones (I’ve posted this before):

President Barack Obama at the White House Frontiers Conference:

The final thing I’ll say is that government will never run the way Silicon Valley runs because, by definition, democracy is messy. This is a big, diverse country with a lot of interests and a lot of disparate points of view. And part of government’s job, by the way, is dealing with problems that nobody else wants to deal with.

. . . sometimes we get, I think, in the scientific community, the tech community, the entrepreneurial community, the sense of we just have to blow up the system, or create this parallel society and culture because government is inherently wrecked. No, it’s not inherently wrecked; it’s just government has to care for, for example, veterans who come home. That’s not on your balance sheet, that’s on our collective balance sheet, because we have a sacred duty to take care of those veterans. And that’s hard and it’s messy, and we’re building up legacy systems that we can’t just blow up.

Ezra Klein in an interview with Tyler Cowen:

I will say one thing about both government and private-sector production, which is something that I do think is important is there is an advantage to being willing to do kludgy, difficult, somewhat unpleasant things.

. . . As you say, there’s an attraction — recognizing the government is inefficient — to just saying, “Well, let’s just do cash transfer for everything. Let’s go UBI for everything.” But there is a lot that government does, often not that well, that somebody needs to be doing, because a lot of the people you want to help are actually really difficult to help. This is something . . . this is one of the things I believe strongly in policy that we underrate.

A lot of what we’re trying to do in government is not help people who want “free stuff,” but is help people who are actually very, very difficult to help. This is particularly true in health care.

And particularly true in education. The work of education is a slow, complicated, incremental process that will benefit from new technologies, software, and schools, but that will not rapidly scale, and provides a public service that makes rapid failure of massive amounts of schools or students a nonviable option.

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