About this site

I was a Governing Board Member of the San Carlos School District, elected November 2007 and again in November 2011. This site was originally used for the purpose of communicating with school district constituents, however now it is used for surfacing ideas and expressing opinions on various subjects in education, politics, business, or otherwise.

Please note that any opinion express here is purely personal and does not necessarily reflect the position or opinion of anyone else or any organization with which I am, or have been, associated.

I will not accept anonymous comments, and all persons who post comments must have a valid e-mail address. Note that I reserve the right to edit, reject, or delete posts based on spelling, grammar, readability, or my judgment of what is appropriate discourse.


October 2018
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Rak, Palmer-Lohan, and S. McDowell for City Council

Having served as an elected official for eight years in this town, I’m often asked about my views on other candidates and generally what someone should look for in their local representatives. Whether one is examining the school board, city council, or even county supervisors, it’s natural to go through a litany of issues we think are important and research where each of the candidates stands on such issues. This approach is particularly tempting when we live in a community that has seen much change over the last few decades.

Although it is of course important to hear candidates’ opinions on the many issues and opportunities facing our town, we can’t predict with certainty what the new issues may be next year or even tomorrow, and even if we did it’s unlikely we as residents would have the background and perspective (let alone accountability) to be so certain in our position on them. I would argue that the strongest public servants (particularly on the local level) have seven defining characteristics:

1) They are critical, creative thinkers with good judgment;
2) They take the role very seriously, believe they can represent the entire community, and are not there to promote a single issue or constituency, be a spoiler, or otherwise lead some crusade;
3) They put in the time and effort to understand the complexity, nuance, and larger ecosystem around every issue;
4) They understand the proper (and potentially very positive) role of government as it relates to how we manage public goods, externalities, and other structural issues that don’t normally get addressed absent such government;
5) They appreciate the balance between representing the interests and viewpoints of their constituents and being a thought leader for their constituents;
6) They understand the balance between being accountable to the taxpayer and empowering the organization, its leaderships, and its staff; and
7) They can clearly articulate their vision and their overall thinking when they make decisions.

Picture1Serving on the city council is a tough job – I would say more difficult than it was for me on the school board because the breadth of both the issues and the constituents is much greater. Therefore, it’s even more critical that we apply the above criteria to our candidates.

Based on that, I am supporting three people for San Carlos City Council: Adam Rak, Laura Palmer-Lohan, and Sara McDowell. As you are probably aware, the San Carlos City Council has three open seats this year (three incumbents – Bob Grassilli, Cameron Johnson, and Matt Grocott – have decided not to run again), and five people have declared their candidacy for those three seats.

Of these three candidates I support, I have known Adam the longest. He and I served on the school board together for four years. Adam has a long history of community service and public policy, and he is absolutely dedicated to the notion that our public institutions have both the power and obligation to improve our community. On the school board, we worked together on many issues including building capacity for increasing enrollment, supporting the district’s vision for 21st century education, and improving the financial health of the district. He is an honest broker who works with his team to drive toward solutions, and most of you know he has been an active volunteer in the community since he moved to San Carlos almost two decades ago.

Laura Palmer-Lohan is also a long-time, active community member whom I’ve known for a number of years. She runs her own business and has been active in youth sports, arts, and involved in citywide issues such as serving on the San Carlos Single-Family Housing Advisory Committee. She is intelligent, thoughtful, and nuanced in her approach to the many issues facing San Carlos. In fact, what I find most appealing about Laura’s candidacy is that she seems to view all issues as opportunities – how can government agencies work together and/or work with businesses or its citizens to find creative solutions that serve everyone’s interests.

Although I only met Sara McDowell this year, I was impressed by both her background and her thoughtful approach to issues. She has a strong history of working in public policy, both from her many years of working at the federal level as well from her experience locally, such as serving as the Chair of the San Carlos Economic Development Advisory Commission and being on the board of the San Carlos Education Foundation. Her background and perspective makes her a real pragmatist, someone who understand the tradeoffs and balance that is inherent in every decision. (BTW, note that Sara is in the unfortunate position of having an opponent on the ballot – unrelated – with the same last name. It’s important to be careful when casting your ballot).

Adam, Laura, and Sara declared their intent to run many months ago, and they each have been working hard to meet with folks across the city, learn more and more about the issues, and properly prepare themselves for the role. They have been unique among the candidates in taking this approach, and it’s no coincidence that they are the ones that have earned the endorsements of dozens of community leaders. They all understand the big issues around growth, funding, recreation, and safety. All three take a comprehensive view of the city’s role and how, for example, it can work with partners to find necessary solutions. I’m particularly excited that they all seem to understand there is much potential for the City of San Carlos and the San Carlos School District to work together more to tackle issues related to teacher housing, transportation of students (and others), and youth sports.

I’m excited for the prospect of a San Carlos City Council composed of veterans Mark Olbert and Ron Collins (both of whom have proved to be thoughtful, critical thinkers who understand the ecosystem of our city and the power of its leaders to make positive change) with newcomers Adam Rak, Laura Palmer-Lohan, and Sara McDowell. These five have the potential to be an extremely thoughtful and productive body that will find (and fund) creative solutions to make San Carlos even more the “City of Good Living.”

Hindsight Bias and the Logical Fallacies in the Gun Debate

“Why wasn’t the Parkland shooter stopped by the FBI? They got a tip about him!” is a refrain we’re seeing a lot these days. It’s perhaps understandable, but it reminds us of the adage that “hindsight is 20/20” and more specifically illustrates what psychologists call hindsight bias, the idea that an event was predictable even though logically it would have been difficult to envisage beforehand. “I knew it all along” is a familiar refrain from people who never really could have known it all along. Hindsight bias also clouds our ability to recognize that in any given event, there is a wide asymmetry of information among people involved, and as such is particularly relevant in the ongoing gun control debate.

For example, in any crime, the criminal almost always has more information than the victim. They have the intention to commit such crime and the knowledge of how and when they will commit it, yet the victim is rarely privy to any of that information. Crime tends to be successful, even if later punished, because victims are caught “off guard.”

Of course, this phenomenon happens on a bigger scale as well. After 9/11, it because clear to all of us that terrorists could use an airplane as a piloted bomb, threatening more than just the passengers and crew on that plane. But it wasn’t obvious or very predictable beforehand because it had never happened before. The perpetrators had a lot more information than the victims about a new way to cause terror. So, it feels dumb to us now that we never had impenetrable cockpit doors before 9/11, but that is our hindsight bias at work.

Hindsight bias is particularly relevant in the aftermath of the Parkland shooting when some responded by criticizing how law enforcement failed to have seen this coming despite all of the “signs” and demanding better enforcement of existing laws. After any tragedy, it’s important to analyze what went wrong and study how to improve approaches to law enforcement, investigations, or any other matters that might mitigate future tragedies. However, it’s generally unfair to blame the local sheriff or the FBI for failing to stop the crime. Law enforcement officials get an overwhelming number of tips and complaints about individuals, so to imagine they will be able to have perfect foresight and identify ahead of time the specific individual who will commit such a crime (let alone when, where, and how) is unrealistic. We shouldn’t let the effort to improve crime prevention distract us from the more important issue, which is what policies would actually have the biggest impact on preventing future tragedies. Hindsight bias keeps us from crafting effective solutions for reducing gun violence because it leads us to believe we have or can develop the foresight needed to make simplistic or feel good solutions work. But we can’t and never will.

For example, we often hear the refrain that a “bad guy with a gun” is only stopped by a “good guy with a gun.” This sentiment is a perfect example of the logical fallacy of assumed foresight. A well-meaning person can buy a gun (and even be trained in its use), but they can’t buy foresight. The element of surprise almost always wins. Ronald Reagan was shot despite being surrounded by armed “good guys.” Fort Hood was full of armed “good guys,” yet two shootings occurred there in the last decade. In the Las Vegas shooting, no one could have predicted that a shooter would rent a room in that particular hotel on that particular day and target that particular crowd. No number of armed “good guys” at the concert could have protected the victims or stopped the shooter before he did incredible harm because he had the advantage of foresight. If anything, imagine the chaos that would have ensued – and the additional lives lost – had a someone in the crowd had a gun, inevitably leading to a gun battle among the victims! Armed victims who are caught “off guard” and have little information about the real threat would no doubt have exacerbated the tragedy.

This logical fallacy is not a new one – we’ve perpetuated for many years the myth that guns have value to individuals for protection. It may sound appealing to know you are armed and therefore protected from anyone who would harm you. But the data suggests otherwise. If one recognizes hindsight bias, it’s fairly easy to understand why the moment one purchases a gun, he/she is statistically more likely to be injured or killed than before the purchase. It’s because we can’t buy foresight. As we cannot know where and when any criminal may strike, it is incredibly more likely that such weapon will be used against us somehow. People often say, “if someone were breaking into my home at night, I’d want a gun then.” Sure, I get that – I’d probably want one too…if that were the scenario with which we’re presented. But that’s a false choice. The real choice I can make now is to buy a gun today and keep it for likely many years on the hope that on one night (one I cannot predict), I will be ready and able to use it for defense. The risk of having such weapon for many years far outweighs the potential benefit of having it at exactly the right time, at the right place, and using it in the right way to protect oneself. Hindsight bias and the failure to recognize the asymmetry of foresight make us mistakenly believe that we will know when and how to react, so it causes us to downplay or ignore the very clear risks of long-term gun ownership. Albeit there are certainly stories of people thwarting a home burglar with their firearm, these are dwarfed by the number of stories where such home weapons are used – either intentionally or accidentally – to harm or kill the gun’s owner or their family.

A dramatic example of this logical fallacy applies to recent proposals to arm teachers in our schools. Even if teachers were incredibly well-trained in the use of firearms, we still can’t give them the weapon they really need – foresight! They would have to carry a gun around likely for many years on the statistically small chance that an incident would occur at their school, of course on a date and time and in a manner impossible to predict, and at such time be ready, willing, and able to act. In any such incident, the likelihood that they would be injured, killed, or disarmed themselves is so much greater as long as there is an asymmetry in the foresight of the criminals compared to the victims. Additionally, the fact that this teacher would have to carry a weapon for years before any statistically unlikely incident were to occur, the school faces the much more likely possibility that this weapon would be stolen or used – either by a teacher, student, or another person – to cause grave harm.

If we truly want to reduce the epidemic of gun violence in America, we must recognize our own biases and not perpetuate these logical fallacies to promote policies – including the proposal to arm teachers – which at best make no impact and at worst dramatically exacerbate the problem. So, unless we become able to read the minds of our fellow citizens (which, if we could, would no doubt bring up Constitutional privacy issues), we must accept that criminals will always have the advantage of foresight. And policymakers must recognize that the impact of this advantage is highly correlated with the destructive power of the weapon – a surprise knife attack and a surprise semi-automatic rifle attack naturally have different results. We are left with the fact that most impactful way to combat gun violence must be the wholesale reduction in the availability of weapons to which inevitably foresighted criminals will have access.

Capitalism isn’t as Laissez as Many Think

Although core to the economic life of all Americans (and many other citizens around the world), capitalism as a system is often misunderstood or conflated with other “free market” notions such as Laissez-faire economics or even libertarianism. This is partly due to political expedience and partly due to the fact that capitalism is a complex subject requiring a reasonable understanding of a number of economic principles – principles that are not normally taught in school outside those who choose to focus on the “dismal science.”

Capitalism grew out of the notion of the “Invisible Hand,” a term coined by Adam Smith in The Theory of Moral Sentiments (1759) and promoted further in The Wealth of Nations (1776). His theories were related to the notion of Laissez-faire (literally “let do” in French) economics — a term already in use in the 18th century – which promoted the idea of private transactions being free from government intervention such as regulations, tariffs, etc. The point of this Invisible Hand is that individual transactions guided by self-interest produce the most desirable societal outcome (versus, for example, a central authority determining what is best for everyone). These concepts are the foundation of neoclassical economics.

We tend to think of Adam Smith as prescient. By most measures, capitalism has brought the greatest increase of wealth to the most citizens of the world compared to any competing economic system, although certainly this wealth and income has been unevenly distributed. Capitalism is based on an ideology of private ownership, the profit incentive, and competitive markets. This efficiency and built-in incentives, in turn, promote innovation and products and services of the highest quality for the lowest cost(1). Fundamental to capitalism are the notions of:

  • Consumers “voting” with their money;
  • Competition to drive cost reduction and improved goods and services;
  • Individuals working in jobs where they can make the most money for the value they bring; and
  • The discipline of self-interest (for companies, workers, and consumers).

Over the last two centuries, many countries have adopted a quasi-capitalistic system as the core to their economy, and it could certainly be argued that these modern economies (including the U.S.) allocate resources much more efficiently than competing systems such as socialism. No economist denies the power of the Invisible Hand; however, they have debated how powerful it is and where it works and where it doesn’t. This debate is the core to understanding capitalism, which isn’t synonymous with the “free market.” The former includes the latter at its core, but very few economists believe that a Laissez-faire approach can address all of a society’s economic (and certainly non-economic) issues. Free market economics is a construct, and like most constructs it works in a conceptual vacuum (or “on paper” as some would say). In reality, there are many pre-conditions, exceptions, and side effects to Laissez-faire economics. Only taken in this entire context can we understand capitalism and what approaches work and don’t work. Both policy makers and citizens need to understand the larger ecosystem of capitalism to support evidence-based economic policy.

It’s important to note that this paper only summarizes the major components and economic theories around capitalism – it isn’t a full economic analysis. There are entire academic disciplines (and years of research) in economics, psychology, and political science that provide a much more detailed and nuanced insight into capitalism. However, given the oversimplification of economics in the current political discourse particularly in the U.S., these high-level issues are important to highlight. The reader should also be aware that an economic discussion such as this is inherently narrow to strictly economic issues, and we must recognize that many societal issues are dealt with either outside the economic system or perhaps only tangentially related to it (e.g., enumeration of fundamental societal rights such as free speech, the government’s role in preventing discrimination, other social justice issues, etc.).

Pre-Conditions to Efficient Markets
Capitalism as we know it is based on a number of assumptions, as this efficient allocation of resources is only possible if every private transaction is based on “perfect information” (an economic concept that consumers and producers are assumed to have perfect knowledge of price, utility, and quality of all products and services). We know in practice it’s near impossible to have perfect information about anything, but we generally assume that close approximations will enable decisions good enough to still bring out that overall societal and economic efficiency. However, even approximating perfect information is often difficult to achieve. We get the closest to that efficient decision-making when (a) there is no “friction” in the system, (b) we make rational decisions, and (c) we can measure both the cost and utility of each good and service.

Economic friction is the hidden (or not-so hidden) costs, time, or other resources required to execute a rational transaction. These can be relatively minor (e.g., the time it takes me to write a check to a vendor and mail it) or it can be significant (e.g., it takes months for me to a find the right job). Laissez-faire economics only works perfectly when there is no friction, because the existence of such friction effectively alters the efficient allocation of resources by (i) not allowing markets to quickly adjust to supply and demand forces, (ii) mispricing resources in a non-transparent way, or (iii) by encouraging suboptimal decisions. However, like most issues, we ignore the minor ones and focus on the more significant areas of friction in the system. In general, there are three major areas where there could be significant economic friction – information, capital, and labor.

The ability to make a rational decision is, by definition, based on both buyers’ and sellers’(2) understanding exactly what they are buying and selling. Ergo, information must travel seamlessly and with minimal cost among all parties to a transaction. Most likely in real life, the seller will have more information than the buyer, and this asymmetry of information presents a significant inefficiency in the system (buyers purchasing the wrong items, etc.) and reduces the power of the Invisible Hand. However, the information revolution of the last few decades has certainly done a lot to promote more efficient transactions – think how more efficiently we spend our dining dollars now that we have Yelp! Despite this improved information velocity, an additional obligation to approximate a level playing field between both sides of a transaction may fall to the government – sometimes regulation is required to ensure all economic actors have access to the information needed to make an efficient transaction. This can manifest itself in numerous ways, from nutrition labels to truth in advertising laws to SEC investor disclosures. So much of government intervention is actually focused on making the market more efficient by empowering the Invisible Hand with the frictionless flow of information.(3)

As almost all economic transactions require some form of financial consideration (i.e., money), efficient exchanges can only be made if there is a free flow of capital. Like information, this is an area where we are relatively close to having a frictionless environment, as we can largely move money around the globe with minimal cost. There are of course significant barriers with capital controls and other restrictions especially as we think of international money exchanges, but this is another area where technology in the form of electronic payments (both institutional and peer-to-peer) definitely promotes a more efficient market by allowing all of us to make relatively low-friction global transactions. It’s also important to note that it normally requires a central entity to manage the money and the money supply to enable this frictionless system.(4)

The third area of potential friction – within the labor market – is the one that by its very nature is nearly impossible to make frictionless. People cannot be redeployed on the most optimal task for their abilities in a short period of time without costs. There are natural barriers to this, including physical location (most people are very tied to their communities, and the barriers to moving – both personal and financial – are incredibly high), training needed, and other “switching costs” of changing jobs. Naturally, a greater prevalence of “telework” reduces this friction somewhat, but there are too many structural issues to ever have a frictionless labor market. This dynamic will naturally result in a permanent side effect of capitalism – structural unemployment (discussed below).

The second big pre-condition is that each of us will always make a rational, self-interested, decision in everything we do. Although we can say that maybe we come close most of the time, this rationality is generally disproven through psychology and economics research.(5) This is one of those areas that maybe we can help shape over time (perhaps by a better and freer flow of information), but there is some acceptance that humans won’t always act rationally. However, this challenge is relatively minor compared to the inefficiencies introduced by fallible and corruptible humans. Whether it be oil spills, unsafe toys, or financial market manipulation, capitalism does not in and of itself protect the citizenry from unscrupulous, manipulative, or incompetent behavior. And because almost by its very definition, this behavior is hard to anticipate and hard to uncover until the damage has been done, it’s extremely difficult to have frictionless information upon which to make economic decisions. In some cases, governments regulate certain standards of behavior or production (e.g. food safety regulations) to check capitalism’s potential excesses.

Lastly, the nature of making a rational decision requires that the cost and utility (value to the purchaser) can be measured easily. If we can’t measure the value of something, how do we then make rational decisions? Albeit many things in the economy can indeed be measured, the nature of some goods and services make it difficult. Some activities cost more to measure than the value of the activity itself, and for some endeavors their value is more evident over the long term (e.g. education) and therefore difficult to use as a basis for making an investment years earlier. Also, there are services affecting multiple people where the group cannot come to an agreement on what they are worth (e.g., the value of saving a certain number of lives by putting a guard rail on that winding road). Therefore, you will often find government intervention in areas where it knows the private sector will not be able to accurately measure either costs or value (see the discussion of externalities and public goods below).

Capitalism image 1

Exceptions – Where Free Markets Don’t Work Very Well
Most economists will agree that there are a number of areas where the Invisible Hand doesn’t push things very well. One reason is that private transactions among a finite group of economic actors (often just two) tend to ignore secondary and tertiary effects of those activities. In addition, the nature of operating businesses creates situations where it is impossible to have efficient competition. The three major free market exceptions that need to be understood are (a) externalities, (b) public goods, and (c) natural monopolies. There are some overlaps among these, but they are distinct phenomena.

An externality is an effect (positive or negative) on an individual or other economic entity not party to a specific transaction. Like these other concepts, there are minor externalities and major ones, and policymakers will of course tend to focus on the latter. But make no mistake – externalities are everywhere. We just tend to ignore many of them, such as my neighbor’s failure to upkeep his house negatively affecting my property value. Of course, even with these relatively minor externalities, local governments (or homeowners’ associations) may put in laws and regulations specifically to minimize these types of externalities. Land use management by local governments is, in part, an attempt to manage externalities. The more classic example of a significant negative externality is pollution – there are negative health effects to many residents near a power plant even if that resident is not involved with, or is a customer of, the company owning such plant.(6) This is why government’s role is often to manage these negative externalities or even on occasion try to put a price on such effect. Economists call this “internalizing” an externality, having the costs and benefits affect mainly parties who choose to incur them. For example, some argue that a carbon tax would be an internalization of an externality and would more accurately (and therefore more efficiently) price carbon-based products. There are of course positive externalities, but we often tend to ignore these. An example could be the increasing value of a home based on a positive reputation of schools in that area.(7) In any case, any transaction with non-internalized externalities inherently creates an inefficiency in the market by either underpricing or overpricing a good or service relative to the one which would provide the most efficient allocation of the resource.

A public good is a needed product, service, or activity where the value is so dispersed among the citizenry that it is impossible or cost-prohibitive to measure the value provided to each person and/or extremely difficult to collect payment for such value. Also, a public good tends to be non-rivalrous, meaning its consumption by one individual does not reduce its availability to others.(8) Often the larger the scale of the service, the harder it is to measure the benefit (or collect payment) from this large population. The classic example of a public good is national defense – although citizens may disagree on its utility (hence the measurement problem as described above), whatever service does exist serves all citizens and it would be a foolish exercise to try to determine the specific utility that any individual receives from it. Other areas, such as roads and other forms of public infrastructure such as parks, streetlamps, and sidewalks, are also often classified as public goods, even if the value of having these does not likely benefit everyone equally. Public education is often thought of, in part, as a public good as well because the value of a child being educated extends beyond just that child. Even though we know it has value to the rest of society, it is difficult to measure and hence “price.” Therefore, public goods tend to be paid for by a public entity collecting taxes and fees rather than through a private-sector pricing model. However, there are a number of services which are considered private good/public good hybrids (e.g. toll roads), and governments certainly charge fees as well where they can approximately a private benefit even if related to a public good. Both the areas of education and health care, for example, have some characteristics of a private good but also many characteristics of a public good. In addition to the utility I receive, there are benefits to the remainder of society if I am both healthy and well-educated (by higher societal productivity as well as perhaps reduced costs in other public goods, such as crime prevention).(9)

The other major area that provides trouble for the Invisible Hand is the Natural Monopoly, a situation where a market is actually most efficiently served by a single provider. This tends to happen in industries where there are very high capital costs and the economies of scale prevent effective competition. Often a natural monopoly is one where the benefit of competition among providers is dwarfed by the costs of having duplicate infrastructure or systems to provide such services. The utility industry – particularly the delivery of electricity and natural gas – is a classic example of this phenomenon. Although having two or more providers of this service would create competitive downward pressure in prices, the added overall costs of each company having its own duplicative infrastructure (e.g. wires and pipelines, including to each home) would wind up increasing the cost for all customers. Therefore, most natural monopolies are allowed to exist but in turn are regulated by city, county, or state governments to ensure these providers don’t extract monopoly profits (see discussion of unnatural monopolies below). As technology evolves over time, some industries get disrupted, changing the natural monopoly economics. For example, many cities have looked at alternative, “green” energy providers that could put pricing pressure on legacy electrical companies. However, it would be inefficient to build a second energy grid, so one could imagine this industry developing over time where the “grid” remains a natural monopoly regulated by the government but allows for multiple competitive energy generators to connect to that grid. There are certainly other industries that are natural monopolies in whole or in part, including areas such as health care and education. Natural Monopolies are another area where the intervention of a regulating entity is required to achieve optimal efficiency.

Side Effects of The Free Market
So even if we recognize all of the pre-conditions of capitalism and manage all of its exceptions, there are still side effects of the free market, which then must be managed or mitigated by a government entity. Ignoring the multitude of non-economic societal effects of capitalism (long debated by politicians, philosophers, political scientists, and many others), we will focus on three major economic side effects – (a) structural unemployment, (b) distribution of wealth, and (c) unnatural monopolies.

Structural unemployment is a significant and widespread mismatch between the skills of potential workers and those needed in the economy. This often happens when a specific industry is disrupted and the existing workers in that industry are not able to seamlessly transition to work in other industries.(10) Structural unemployment is, in effect, a byproduct of the inherent friction in the labor market, because if there were no friction, we wouldn’t care if technology put certain industries out of business and/or workers out of a job because everyone would be immediately redeployed to other ventures. It’s also relevant to note that the economic friction from structural and other forms of unemployment is not uniform across sub-populations; for example, it is often more difficult for an older worker to find a new job if his/her skills no longer match the needs of the labor market. This is why government may intervene to support workers and communities affected by the normal march of capitalism and could include services such as job creation programs, training programs, and unemployment insurance.

The Invisible Hand is not just invisible, but also blind to anything except economic power. It makes no judgments of “fairness” and isn’t designed to promote everyone having similar (or even a minimal amount of) income or wealth. Even though average wealth is greater than in a non-capitalistic economic system, Laissez-faire economics tends to promote unequal distribution of wealth and perpetuates such inequalities. So, we have to recognize that economics has its limitations – most societies would argue that there are also moral considerations in resource allocations, such as support for the elderly or those with other limitations that prevent them from fully taking advantage of the opportunities of capitalism. Of course, almost one-quarter of the U.S. population is children, who generally don’t have the position to fully participate in a free-market economy. It’s is also important to recognize that even in a completely frictionless system, capitalism isn’t agnostic to one’s starting point – there will always be inherent advantages to succeed in the free market when one starts from a higher socio-economic level or has other societal advantages. This is why most capitalist counties still provide some sort of “safety net” (the size and scope of which varies greatly) and policies to mitigate the inherent “starting point advantage” (e.g., progressive taxation, services for under-resourced communities, etc.). But at the same time, it’s worth noting that economic power tends to buy other advantages, including political power, which can in turn mold the economic system further in favor of those already advantaged.

Through the normal machination of capitalism and without any check on its activities, (unnatural) monopolies will inevitably occur. This may happen due to factors that prevent perfect competition, high switching costs for consumers, or markets moving faster than rivals can keep up (another form of friction in the system). These monopolies often form by acquisitions and mergers, but they can also happen by a company’s great success allowing it to take over an industry. Why should we care if monopolies develop in the normal course of capitalism? Ironically, monopolies spawned by the free market then become inefficient allocators of resource. The lack of competition allows the monopoly to overprice and under produce goods and services, creating what economists call a “dead weight loss” of economic efficiency.(11) So, the principles of free-market capitalism – including the optimal allocation of resources (and hence maximum overall wealth growth) – would then demand minimizing the existence or powers of monopolies. This is why we see governments often putting restrictions on monopolies or enacting antitrust regulations to prevent them happening in the first place.

There are certainly other efforts required to minimize the side effects to the free market, including risk management (particularly in financial markets) as well as a robust justice system to enforce laws and ensure all economic actors are behaving transparently.

Capitalism Image 2

Role of Government
None of this analysis is to suggest that government intervention is a perfect solution to deal with any of the failings of capitalism. However, despite the oft-cited notion that government is the enemy to capitalism, governments have a key role to play in actually promoting capitalism’s very promise. And that role is distinct from the role of businesses and should be undertaken with its unique burden to deal with externalities, public goods, and minimizing friction in the capitalistic system.

It is important to realize that a government’s efforts may create their own inefficiencies in the system, but hopefully the goal would be to create value greater than the cost of such intervention. Of course, governments may put up barriers to capitalism for all kinds of reasons, not necessarily economic. Whatever the reason, the imposition of taxes, quotas, or other restrictions may create another friction in the system, potentially “misprice” goods and services (intentionally or unintentionally), or otherwise introduce inefficiencies or dead weight losses. However, smart government regulation can indeed make the free market more efficient by pricing in externalities or public goods, minimizing the inefficiencies of monopolies, reduce friction in the system, and dealing with the other exceptions and side effects of unfettered free markets.

Every country on earth debates the role of the private sector — and capitalistic or near-capitalistic systems of deploying resources — versus the role of the public sector, including both national and local governments. Every country debates the relative merits of economic growth, economic stability, economic equality, short-term vs. long-term prosperity, and a myriad of moral issues related to making such choices. Although hardly a perfect system, the capitalistic system in the United States has been the engine for immense growth in overall wealth and productivity, albeit not evenly distributed throughout the population.

However, it would be more than naïve to assume any system is perfect. Just because its general principles seemingly work most of the time, that doesn’t mean they always do. Unfortunately, many people (including elected officials) have a very limited understanding of economics and blindly apply the principles of Laissez-faire upon every situation without understanding the very complex and nuanced ecosystem (of which this analysis just scratches the surface).(12) If anything, left to its own devices, free-market orthodoxy (because it doesn’t take into account the issues discussed above) by design would wreak havoc on the society it is purportedly serving.

Two specific examples illustrate this point. We often here sectors of our political body pushing competition or vouchers in public schools without understanding the natural monopoly and public good characteristics of education. This very effort would in fact create a much more inefficient system for delivering education (in addition to the social challenges of increased inequality, etc.) Additionally, we can examine the more recent proliferation of false information peddled (primarily via social media) over the Internet. Although the increased velocity of this information should make capitalism more efficient, the assumption of “frictionless” information is that it must be accurate and trustworthy. Therefore, in the absence of some sort of regulatory framework, it’s possible that the unfettered free market would actually destroy one of the very pre-conditions of its own effectiveness. The implications could be devastating for the economy (as well as the democratic system).

Instead, smart government policy could actually optimize the promise of capitalism, and lawmakers should map their specific policies and programs to capitalism’s pre-conditions, exceptions, and side effects that need to be managed. Only with this approach can citizens better understand the reasons for certain policies, debate the utility of such solutions, and ultimately come up with the most effective allocation of any resource, public or private.

1. Of course, most people would argue that very few products are really of the “highest quality” – this is because even relatively efficient markets aren’t perfect markets and are subject to the “frictions” and other problems outlined later in this paper.

2. Note that I use the terms “buyer” and “seller” generically. Transactions also include many other types of dealings, including financial investments, where an investor is in the same position as a buyer of a good or service, and a fund-raising company is analogous to the seller.

3. It’s hardly coincidental that so many companies resist regulation that gives their customers more transparent information as this would reduce the seller’s built-in advantage of asymmetric knowledge.

4. Monetary policy is an entirely different subject altogether which is outside the scope of this paper.

5. Again, this is a whole other field of research which won’t be delved into here.

6. Pollution also has the characteristics of a negative pubic good (discussed below) because of the difficulty of measuring the effect on individuals not party to the transaction.

7. There is another economic concept called the “free rider problem” which is effectively an entity exploiting a positive externality. Depending on its severity and perceived fairness, this is often dealt with via public policy as well.

8. An economic “public good” has a stricter definition, but I am defining it more broadly for the purpose of this analysis.

9. Buyers can “opt out” of public systems in certain areas, including private education. But the use a private system doesn’t mean there still isn’t a public good effect of that transaction (it just normally isn’t priced into it).

10. There are other categories of unemployment such as frictional unemployment (being between jobs) and cyclical unemployment (caused by a general economic slump), and these have similar implications for the both the efficiencies of the market and needed public policy.

11) There are entire sectors of economic study devoted to understanding and measuring the effects of monopolies as well as analogous situations such as monopsonies and many other issues related to competition and pricing – all of this is outside the scope of this paper.

12) Many other areas to explore and not covered here include monetary policy, fiscal policy, international trade, tax policy, moral hazards of insurance, the relationship between federal and state policy, and many other microeconomic and macroeconomic issues.

All Business Experiences are not Created Equal…Certainly not for Future Presidents

The track record of businesspeople going into national political service is a mixed one at best. Our only president with an MBA, George W. Bush, reportedly had a difficult time managing the complexities of the office, and many of the other presidents with business backgrounds – such as Warren Harding, Calvin Coolidge, Harry Truman, and Jimmy Carter – also represent a mixed bag. It’s interesting to note that the most successful of this group, Harry Truman, was actually a bit of a failure as a businessman. Presidents of the United States tend to be lawyers or career politicians – why is this?

Clearly a lot of it has to do with the fundamental differences between business and government – structural and contextual distinctions that are often severely underappreciated by both political candidates and the public. Others have made these same observations, particularly for Presidents (see these articles from The Hill and Forbes).

Interestingly, current and former businesspeople are often more successful in state and local political offices. It’s possible this is due to less “political baggage” in these offices, including the smaller role of interest groups, the lesser influence of money, and other related factors. Particularly at the local level, elected officials are freed from much of the political dynamic because they often don’t have a desire to seek higher office.

More importantly, the type of business experience a person has plays a big role in how transferrable business success is to the political world. Even among most businesspeople who have sought and/or earned high political office, our current president is a special case. Despite the historically mixed track record of businesspeople in the White House, it’s no doubt that he was elected at least in part due to his perceived success in business. But regardless of one’s opinion on his political viewpoints, temperament, morality, or actual business success, it’s important to understand that Donald Trump wasn’t a businessman in the typical sense – the CEO of a large, public corporation – but rather the head of a private “family business” (albeit a large one).

This is a critical distinction because a family business is even more different from government than a typical shareholder-owned corporation is. Family businesses run in a much less complex environment. In the case of Donald Trump, he was the boss and made all of the decisions. He didn’t have to deal with any checks and balances, other than of course the scorecard of making a profit (which every business faces). Family business owners have no independent Board of Directors (if they have one at all); they have few, if any, other shareholders, and they are not even subject to public disclosure requirements. The entire business is essentially a closed book effectively run by one person, a person who is the “king” of that business. This is not to suggest that this is a bad model. Many American companies are “family businesses,” including my current one. But having a lifetime of experience in running your own show makes you even less qualified for politics, particularly national politics, than the historical collection of businesspeople-turned-politicians.

With Donald’s Trump narcissistic personality (which was no doubt only amplified by five decades of being the king of his own business), it’s not surprising he takes a “my way or the highway” attitude toward every task and every negotiation. But this approach tends not to work in government because the role is deliberately limited by design. Despite how much “power” the President (or any particular official) nominally has, politics is really a team sport. A President’s ability to get things done is predicated upon consensus and coalition building while of having billions of eyes on your every move.

The team dynamic of a family-owned business is also completely distinct from that of government. Employees of a family business are probably working there, in part, because they want to work for the owner. However, with the exception of top political appointees, most government employees are there for a different purpose and are often unmoved by the political philosophy of the person at the top (many stay through multiple administrations of different political parties). In choosing to often accept lower pay than they could make in the private sector, government employees are often there because they believe in the mission of their particular organization, its principles, and the relevant law. The recent examples of U.S. Parks employees’ standing up for their beliefs is a perfect example of how managing government employees is entirely different than managing those in the private sector (and particularly those in a family business). Even the attorneys in the Justice Department don’t really “work for” the President like a private attorney works for his/her boss. They are required to uphold the law and the Constitution, which can, at times, obligate them to oppose to their boss’ wishes.

However successful Donald Trump’s business career may have been, little in it would have caused him to understand this dynamic. Rather, it probably caused him to learn the opposite. Ultimately, his family business success prepared him to be ineffective as a national political leader. While many smart people have adapted to learn a completely new style of leadership, given his age, personality, and track record only a few weeks into office, it’s hard to imagine this old dog learning new tricks.

So, in addition to problems with his radical political agenda or questions about his mental stability, his business experience is likely to ultimately be his undoing. Donald Trump never really lived in a context where millions of people around the world can “throw sand in the gears” of his programs. The Constitution makes quite clear that the President is not really “in charge” in the way Donald Trump is used to being in charge. He doesn’t solely control the levers that affect our country, politically, economically, or otherwise.

His opponents are already figuring this out, and I suspect their tactics will only grow more sophisticated as the months go by. People are already leveraging the power inherent in our democratic style of government — whether it be sustained protests, boycotts, legal challenges, resistance from other countries, or grassroots campaigns aimed at supporters in Congress — to modify, stymy or block his initiatives.

Donald Trump may have run for the U.S. Presidency, in part, because he was hungry for power. If so, he failed to recognize the irony that, by winning, he would be giving up a fair bit of the control to which he had grown so accustomed.

Is the President really well?

I must admit that during the primary season, I was much more scared of a President Ted Cruz than I was of a President Trump because I imagined Ted Cruz as a more ideologically-driven politically-savvy politician who would get lots of bad things done much more easily. I imagined a President Trump as a sort of buffoon whose irrational behavior would just make him completely inert for four years. However, I failed to predict the depth of his sociopathy fueled by his inner circle of sycophants, and the utter breakdown of the “checks and balances” in our system. It seemed (at the time) only rational to think that even a Republican congress wouldn’t allow a fraction of what he was spewing on the campaign trail. So, far, I’ve been proven wrong. It is not an exaggeration to think that we may now begin the darkest chapter in U.S.history in my half-century on this planet. However, I am truly heartened my fellow citizens who are fighting back, including at all of the airport demonstrations yesterday and all of the attorneys who are seeking legal remedies.

But it’s now time for our other branch of government to act, the legislative branch. It has nothing to do with political party, but rather holding up core American values and frankly saving this country (and the world) from long-term and possibly irreparable damage. Trump is not a Republican, and Republicans in congress need to realize they are actually the opposition party to him. This starts by recognizing that America did not elect someone who is psychologically stable. If it weren’t for the fact that he is so dangerous, I’d actually feel sympathy for Donald Trump — it doesn’t require a PhD in Psychology to recognize that he is not well. He exhibits almost every classic sign of sociopathy/psychopathy. Even if you like some of his policies (which we can debate another time), how can this illness not be recognized?

The Education Competition Myth (and Why a Voucher System is Doomed to Fail our Kids)

It continues to be a great debate within the education community as to whether competition is a good thing or a bad thing. In fact, our current administration appears to be promoting an agenda of expanding “voucher” programs that are based on this notion that bringing choice and competition to the education world will improve the entire sector. There are those that argue that competition just works, regardless of the arena, and the pressure to perform better is a rising tide that will lift all boats. On the other hand, many educational leaders suggest that educators aren’t affected by these sorts of pressures, and that competition actually harms students. Unfortunately this debate misses the larger point in that the very premise of the debate itself is flawed. The question is not whether competition works or doesn’t work; the question is whether it can exist at all. For a healthy and effective competitive environment to exist, there are a number of prerequisites, and each of these needs to be examined in order to answer this fundamental question. For this analysis, these conditions are grouped into five different areas: (a) Customer Switching Capability, (b) Provider Capacity, (c) Clear Success Metrics, (d) Acceptance of Losers, and (e) Level Playing Field.

Customer Switching Capability
The first required condition for competition to exist is the ability for customers to change providers with minimal friction. Said another way, competition is based on the premise that “customers vote with their feet,” meaning they can easily pick (and change) the services and products that they feel best serve their needs. Implicit in this premise is the ability for customers to seamlessly change their provider without incurring extra cost, hassle, or some other side effect from making such a switch.

If customers cannot vote with their feet, then competition will have no effect. Let’s use an example of where such friction can exist. If you try two restaurants, and you decide that the one twenty miles away from you is superior to the one a block away from you, you may still make the trip and go to the farther one. The reason you can do this with minimal friction is that you don’t eat there every day, making the cost for the extra travel trivial. On the other hand, if you were somehow required to only eat at one restaurant each and every day, it would suddenly be a burden to drive back and forth to the farther restaurant. If physical distance (and associated time required) is a factor in consuming any product or service, friction is created proportionately to both that distance and the frequency in which that distance must be traveled to consume the product.

Schools, unlike restaurants, must be “consumed” every day by design. So, the choice of any family to pick schools is inherently limited — in many cases, the cost is just too high to travel every day to a distant school. So, even if there is a “choice” per se, there practically may not be one. And, even if changing schools were possible and practical, it can only be done at limited times. The disruption and potential harm caused by frequent school switching limits the ability of competitive forces to affect a change. Admittedly, one of the ways families can vote with their feet is by moving homes, but since where someone lives is the result of many factors (and practically, a family can only move a limited number of times), great friction still exists, and any competitive pressure would operate only over a long period of time, if at all.

So, here’s the rub – if physical distance is at all a factor, these very high “switching” costs make it unrealistic to believe that even if one school were obviously better than another, most families would have the seamless ability to pick the “better” school. What happens instead is the classic “cherry picking” effect whereby parents who have the means (time, money, or other resources) are better able to commit to sending their child to a different school, while those without the means in practice have no such choice. So, if the bulk of your “customers” can’t really switch, competitive pressure is limited and very slow at best.

Even for the parents who can exercise this choice, the situation is not all positive. If we give an incentive for them to travel to a more distant school, we potentially make it more difficult for them to actively participate in their children’s education — by volunteering at school, working on the PTA, and just being present on campus, especially in the lower grades. Often one of the main factors separating high performing schools from their lower performing counterparts is the partnership a school has with its parents. Choice associated with greater physical distance only hampers this partnership.

Provider Capacity
Another condition of successful competition is the requirement that the competitors can add capacity to meet the new demand (and/or raise prices) from these new customers who vote with their feet. That’s relatively easy for most businesses, but fairly difficult for a school whose service capacity is largely based on its physical capacity (and certainly a public school can’t regulate demand by price). And there is a limit to the number of schools that can practically locate in the same community before the student population is so fragmented among those schools that the diseconomies would dwarf the potential benefit of competition (making it more akin to a “natural monopoly,” analyzed in more detail below). So, at best, even if competitive pressures were to exist and customers could switch seamlessly, the actual providers — the schools –could only change very slowly to meet such demand.

Clear Success Metrics
The next condition of competition is to have a scoreboard. In business, this is fairly simple. A corporation’s duty is to maximize shareholder value. So, putting any other measure aside, one wins by increasing one’s stock price and providing a strong return to investors.

This is not true in schools. People often point to standardized test scores, but as metrics they are limited in many ways, including the fact that standardized tests measure only a small fraction of the value that schools deliver, and test scores more often reflect the population of the students than the quality of the school or its teaching. And perhaps most importantly, the value provided by schools is created — and is only evident — over a very long time horizon, making it extremely difficult to effectively compare institutions. Yes, all things being equal, higher scores are better than lower ones, but a singular reliance on them is not only deficient, but dangerous — at the end of the day, it doesn’t actually tell you how a school is teaching, and certainly does not indicate how your child is learning.

Lastly, we must ask to whom such value is delivered. As a stockholder in a company, it is fairly clear that I personally receive value when my stock’s price goes up, whereas the stakeholders in the success of public schools are much more diverse. Of course, the student receives a bulk of the value but so does everyone else in the community. In fact, the entire value proposition of public education is based on the notion that the public is better off when it pays to educate all of its future adults. How do we measure the value flowing to everyone else? This conundrum reflects the very nature of a “public good” and why we fund the service through tax revenue rather than through direct purchase from the consumer. I am the first to say that we need a better set of metrics to measure the value being created by schools, school districts, and even individual teachers. But even if we could objectively measure all of those things, it is extremely difficult to have an accurate scoreboard that measures the multiple dimensions of value delivered to the multiple beneficiaries over the long-term. Based on all of this, parents really don’t have full, complete, and comparative information (and often have incorrect or incomplete information) to make informed “buying” decisions that theoretically apply such competitive pressure.

Acceptance of Losing
Lastly, if competition breeds “winners,” it must also be acceptable to have “losers.” If one retailer goes out of business, I’ll buy from another. In schools, even if we knew with certainty that a school was underperforming (despite the problems with measurement and the time horizon mentioned above), do we want the school to lose? Losing often takes years, and we may find out years later that, although we put competitive pressure on the schools and eventually migrated most students to a better school, we sacrificed those kids that didn’t (or couldn’t) defect to the “better” school. It’s a pain if I spend some money on a product that didn’t work and then the company goes bankrupt, but it’s a tragedy to fail certain kids waiting on the pressure of the free market to work its magic. Kids only go through school once — we rarely get a “mulligan.” Unlike what is inevitable in business, we need all schools to win, so the relevant question may be how can we create an environment that allows all schools to be winners.

Level Playing Field
One of the fallacies of comparing business to public schools is that the former can pick its customers, whereas public institutions need to serve everyone. Inherent in the notion of competition is that you’re competing for someone — a certain sub-set of the population. If schools could freely compete like businesses (let’s say in a purely voucher system), there would be a big segment that no one would fight for. Those kids and their families would be left unserved or underserved.

But there is a good analogy in the private sector — natural monopolies. Natural monopolies are companies like utilities where the cost of creating competition is actually higher than the value of such competition (imagine five companies running electrical wires to your house – the massive inefficiency would dwarf the value of competitive pressure). That is why certain companies like utilities are allowed to keep their monopoly status but are regulated instead.

In markets where natural monopolies exist but “alternate” providers were allowed to compete, amazing unintended consequences emerged. When AT&T was broken up in 1984, the resulting seven “Baby Bells” were each required to provide service to every household in the country (”universal service”), while at the same time the market was deregulated to allow other providers to compete while not being subject to the same restrictions. The Baby Bells had to effectively “cross-subsidize” the costlier (often rural) customers with the more lucrative business customers, while the new firms didn’t need to. Guess what happened? New start-up telephone companies grabbed the lucrative business market, offering a better value as they weren’t forced to cross-subsidize. This wasn’t competition on a level playing field. Sound familiar? In many ways, this is exactly what private schools and charter schools do in relation to the overall public school system. They don’t create competitive pressure — rather many schools just cherry pick and create a larger burden on the public entity, which is required to serve all children, many of which require substantially more resources. This doesn’t mean there isn’t a place for charter or private schools – it just means it’s naïve to think that they are operating on the same level playing field. Certainly one can point to specific examples where the existence of a charter or private school made the community put pressure on the public schools to improve, but due to the lack of so many fundamental conditions for true competition, such examples will always be the exception rather than the rule.

Nothing herein should suggest that pressure to improve doesn’t — or shouldn’t — exist in public schools. It absolutely must to motivate school boards, superintendents, administrators, principals, and teachers to do the best job they possibly can. And just because we can’t define “winning” very well doesn’t mean that we don’t hold teachers, principals, and school districts accountable. But this is the fundamental role of our local political system. Each community needs easily accessible and useful information with multiple measures of success, and community members must stay involved and hold its schools accountable though their elected representatives. As public schools are certainly a “public good,” only this public and political process can provide public schools with the requisite funding to achieve the best outcomes and develop the best set of policies to promote excellent teaching and learning.

This is why any voucher system in education is doomed to fail. It is based on a faulty premise that competition can both exist and create pressure on the entire system to promote better outcomes for all. At best, it will give the illusion of choice where little actually exists, but at worst it will further distort the playing field and drain resources from the schools that need them the most and discriminate against those families with the least ability to make such a “choice” (effectively providing a subsidy to private schools and others that can “cherry pick” their students). So, instead of pitting every school against one another, let’s give all schools the resources — and then hold them accountable — to ensure that they are doing the best they can to help all of their students reach their potential and provide the “public good” benefit to all of us from a well-educated citizenry.

Why Government is Not (and Should Not be) Like Business

Political chatter seems to always center on how government is inefficient, inept, and wasteful; the oft-cited remedy for such failures is to make government act more like business. After all, isn’t it capitalism — the enterprising spirit, the competition, and the focus on the bottom line — that has made this country great? It is perhaps this sentiment, in part, which has fueled our electorate to support “outsiders” and “businesspeople” to the highest forms of our government.

As someone who studied economics and has worked in business for almost thirty years, I am very much a capitalist, so on the surface this point of view has appeal. But even a cursory review will demonstrate that these arguments miss the point — government institutions exist for a different purpose than businesses, and they should operate by a different set of rules. These distinctions are not trivial or accidental, but based upon the specific design and purpose of these institutions. I have grouped these distinctions into four specific areas to consider when we evaluate the effectiveness of our governing institutions and our elected leaders. These areas are (a) Mission and Focus, (b) Risk Profile, (c) Decision-Making, and (d) Measuring Value.

Mission and Focus
In business, the ultimate goal of the organization is to maximize the return to shareholders (i.e., make as much money as possible). A company’s “mission statements” is often its organizing principle to create value (e.g. Google’s mission is to “Organize the World’s Information”), but these mission statements are a means to an end…the end being to maximize shareholder value. This profit motive is the driving force behind capitalism and the catalyst for innovation, efficiency, and competition.

Government agencies, on the other hand, are not motivated by profit, but rather by a “mission” in the more literal sense of the word, e.g. to educate children, to keep the public safe, etc. In this way, government agencies are more akin to non-profits than for-profit corporations. This very purpose shapes the goals set by the organization, the types of people it hires, and the context in which those employees work.

Fundamental to a profit-maximizing business is the axiom that businesses choose what business they want to be in. In order to maximize return for shareholders, businesses must find what unique value they bring (versus their competitors) to what unique segment of the market. Business strategy is about focus and positioning — what product/service will I deliver, how will I deliver it uniquely compared to alternatives, and to whom will I deliver it. This last piece is critical — businesses get to pick their customers! Even thought it serves a huge market, Apple doesn’t make computers for everyone — it makes them for customers with a certain profile, and then markets those products with messages that resonate to those customer segments. When an organization picks its customers, it is also implicitly picking the customers it will not target or even serve at all. This holds true for General Motors, Time Warner, or your local Italian restaurant. Businesses need to deliver something uniquely valuable to a targeted market. (This is not to say that all businesses actively refuse to sell to certain people — it’s just that the very nature of their messaging and product focus, by definition, will appeal to only a subset of the market that they choose).

Contrast this to public institutions, which don’t have the luxury of picking their customers. By design, government agencies have to serve everyone in their domain, and the likelihood that such constituents are homogenous is very slim. Take public schools, for example. A private school — by definition — gets to choose what students it serves, and by doing so, it should excel. It can effectively become a specialist in delivering a certain type of education to a certain sub-population of students. Economists refer to this phenomenon as “cherry picking.” Public schools, on the other hand, must serve all children that live within that population, and of course the needs, abilities, and respective support structures for these children will be very different. The very requirement to serve a broad, heterogeneous population inherently makes a government agency less “efficient” as compared to its private entity counterpart. However, being less efficient does not mean it is not fulfilling its mission and purpose.

This is true because “efficiency” (in its narrowest sense) and “efficacy” are not necessarily the same thing. Particularly with government services whose missions likely involved some sort of universal delivery model, efficacy is achieved by something other than the strategy taken by an “efficient” business. For a local Fire Department, the most “efficient” model would be to staff the firehouse with only enough firefighters so that they are deployed close to 100% of the time. However, since fires don’t occur in regular intervals, such efficiency would result in the fire department not getting to certain fires. No citizen wants it to be their house that is missed by the firefighters, so fire stations staff up to ensure capacity for close the maximum perceived need, not the average forecasted need. Of course, this means that firefighters will be less than fully deployed for a good part of the day. But we should be ok with that, as it is much better than the alternative! So in this case, the firehouse is “efficient” with respect to accomplishing its mission, but not “efficient” in terms of a traditional business paradigm of output per person hour.

In business, it is competition which keeps organizations in check in terms of the prices they charge and the quality they deliver. With few exceptions (such as natural monopolies), this competition is fundamental to a capitalistic system. But competition often means that some entity wins and some entity loses. Losing could mean having the smaller market share, but it could also mean going out of business. In fact, businesses close down and others start up every day. Government agencies, on the other hand, don’t “compete” in the same sense, and it’s unrealistic to ask them to. Do you want to have two police forces fighting to get to the same crime scene first? Do we want government agencies to go out of business and others start-up on a regular basis? Of course not. Consistency of delivery is a hallmark of a public service. If my TV manufacturer goes out of business, well no big deal — I’ll buy my next TV from someone else. But for our armed forces, do we want a different organization managing the country’s defense every year?

Risk Profile
Risk is inherent in the capitalistic notions of profit maximization and competition. Businesses take risk. By and large, it is the businesses that take the most risk (and then in turn succeed) that deliver the greatest return to their shareholders. However, for every company that succeeds, many more fail. This is totally acceptable in a capitalistic system because it is this risk taking which fuels innovation and growth. However, no one in business would be willing to take these risks unless they had a system that protected their “downside.” The corporation was invented to do exactly that — it shields the individual owners, directors, officers, and other employees from individual liability. They are protected from financial loss (shareholders can only lose the money they put in, but not more) as well as legal liability in the case where the company causes harm to others (except in extreme circumstances). This is known as the corporate “shield.” The ultimate manifestation of this shield is the bankruptcy process. When a company goes bankrupt, it restructures or eliminates its liabilities. The corporation can be re-formed and start again, or it can be dissolved. In any case, the individuals within the company have no downside other than the money they invested themselves. In fact, the bankruptcy process in this country has been crucial to its economic growth. Without a bankruptcy system, companies would certainly not have taken the risks that they have, and without the risk taking, there would be little innovation or growth.

With very limited exceptions, government agencies don’t go bankrupt. The risk of their not being able to deliver on their services is just too great. Again, we’re ok with a restaurant going under, but what happens if my police force goes bankrupt? Do I not have police protection for a while? Therefore, government agencies by design will be more risk averse. The consistency of delivery of those services trumps the potential to optimize them.

In a government setting, risk is also measured in more than just financial terms. For example, no one argues that public schools are doing everything possible they can for all students — we know there can be improvements. Even though most school districts are constantly trying to improve curriculum and instruction and learn new “best practices,” schools will inherently move slowly and cautiously in making changes. The reason is simple. In a corporate setting, the risk of experimenting on a new product is limited (the risk is the loss of the investment made in that product), but do we really want to dramatically experiment with our children’s future? The price for being “wrong” is often just too high in delivering a public service. Of course, schools and government agencies should always look to improve, but it’s hard to fault them for being cautious.

Decision Making
Otto Von Bismarck allegedly remarked that “laws, like sausages, cease to inspire respect in proportion as we know how they are made.” The work of government is like sausage-making — slow, sloppy, and ugly at times. Why is that? I would argue there are two main reasons. The first is that it is the inevitable outcome of the government’s need to serve a broad constituency as well as the need to reduce risk as described above. Serving a heterogeneous constituency and being more risk averse will always make things a little slower. However, the other reason lies in another fundamental tenet of government — openness. We see the sausage making because we’re allowed to, and our very witnessing of this process inherently makes it more sausage-like! As someone who has worked for many companies over the last couple of decades, there were countless very painful decision decision-making processes, however none of them were visible to the public. Business interactions are by and large secret. Compensation levels of most employees are secret; strategic plans are secret; computer code is secret, and the discussion at board of directors meetings is mostly secret. This secrecy — or at a minimum the ability to choose what information is made public and what is not — is another cornerstone of capitalism. It allows companies to compete with each other, to shape their overall message to the market, and to manage their employees in the most flexible way. So, in most companies there is plenty of sausage-making; it’s just not visible to most of us.

Contrast this to public agencies, which by most measures are an open book. The very nature of the decision-making process of a public institution requires the input and participation of the public, and the nature of bringing in such a broad and diverse group of constituents into your decision-making process necessarily makes it slower and more complex. Board meetings of all elected bodies are held in public. All contracts are made public. All salaries are made public. The process to get bids on large projects is a public and inclusive process. From a businessperson’s perspective, these are all anathematic requirements — it would be viewed as impossible to run a real business that way. Could you imagine a scenario where any Apple shareholder can get three minutes to address the Board of Directors of Apple at every board meeting (not just the quarterly shareholder meetings)? But this seeming lack of efficiency and flexibility is the price for openness. And after all, as these are public institutions funded with tax dollars, would we expect our citizens to want something less than transparency? (Obviously there are areas of government that are secret — which include things such as war plans all the way to the identity of kids expelled from school — but in aggregate, the level of secrecy is miniscule compared to that in business. And that is how it’s supposed to be.) The public benefits from being part of this public process.

Even though governments are often accused of “waste, fraud, and abuse,” that is hardly limited to public institutions — it’s just that in the corporate setting, we just don’t often hear about it. This is why I find this critique to ring both hollow and hypocritical. Just because we don’t as often hear about mistakes or misconduct reported in the private sector, that hardly means it doesn’t exist, or even exist on a much bigger scale. Think Wells Fargo, Samsung, Volkswagen, Enron, Lehman, BP, Halliburton, et al — and these are just the ones that got caught! Anyone who has had any significant business experience has personally witnessed all forms of bad behavior — everything from padding expense reports to lying to customers to harassing employees to actual fraud. In any organization of humans — public or private — there will be those who abuse the system. It just so happens that the private sector has more tools to hide it. Personally I have witnessed all of this bad behavior in my business career, but most people can’t give specifics because they are bound by non-disclosure agreements – so many matters get settled outside of the public eye. So, I always find it ironic when businesspeople who decide to run for political office suddenly rail on government for their excesses.

Measuring Value
One makes decisions to affect value. The hope is that every decision we make enhances value somewhere, or why would we be making that decision? In business, every decision is about furthering the company’s mission. Fortunately, business has a common currency to measure that value — money. Profits are relatively easy to measure. Individuals within a business may disagree on the best way to achieve their goals, but the end game is rarely in dispute. This is not true for government institutions — in any sizable group of citizens, there will be honest disagreements on the goal. Even within a small city, some citizens will favor high growth and more development while others will want the opposite. Again, the institutions are designed to best serve the interests of the broadest group of people.

How does government measure the value it delivers? Certainly it takes money into account, and often this is subject to healthy debate among the citizenry as to the level of its spending. However, the real problem is that it is extremely difficult to measure the value of government output. This is driven by two distinct problems:

  • The fundamental difficulty in measuring the value (and agreeing on the value) of areas such as security, education, happiness, community, convenience, and recreation. Everyone values each of these things, but try to get people to tell you how much they are worth. They are fundamentally difficult to measure and impossible to get agreement on.
  • Government services affect an extremely long time horizon. Although businesses may do 3-5 year strategic plans, government services can affect people’s lives decades after they are delivered. How does the education I provide a kindergartener today affect his/her life twenty years from now? And how does it affect other people’s lives, in terms of economic growth, crime, or in other areas? Although few would argue that there isn’t such a long-term connection, it is daunting to try to measure that connection and near impossible for the citizenry to take that account when asking governments to make decisions today which affect theirs and other’s lives decades from now.

This is another reason why governments are often accused of waste, because often such waste is in the eye of the beholder. For example, if you are personally not in favor of government spending money on high-speed rail, then from your point of view, it’s a “waste” of money, whereas the proponent would consider it an “investment.” That perspective is completely independent from whether the money is spent “efficiently” to achieve its outcome. If you don’t support the outcome in the first place, then it’s “waste” to you. Public institutions have the burden of serving a much broader group of “shareholders” — the entire taxpaying public — who of course will rarely agree on the value or necessity of any particular initiative.

I believe capitalism is a beautiful thing. But it is clearly not perfect. Capitalism is conditioned upon the free flow of information, capital, and resources (the last being the most difficult) and it fails in certain areas like externalities and natural monopolies. And as they are run by fallible people, businesses are also fallible. Whether it is oil spills, unsafe toys, or financial market manipulation, capitalism does not in and of itself protect the citizenry from unscrupulous or manipulative behavior. Therefore, government is in the odd position of both being a promoter of capitalism (providing the regulatory environment to promote business and innovation) but also acting as the check on its potential excesses. Only the most orthodox of Libertarians would suggest that we don’t have an FDA with at least some regulation on the safety of our food.

All of this analysis is not to suggest that government can’t learn from business. Quite the contrary. Many innovations and methodologies developed in private enterprise have been and should be adopted by many government agencies. But we must recognize that government will always be a laggard by design.

One should also not conclude that public agencies are beyond criticism — of course not. There are legitimate differences in what we all value, and it’s reasonable to debate the role of our government agencies and the decisions made by our elected leaders. It’s also very reasonable to debate whether we should even have a certain government service, and if so, how much we should spend on it. However, in having this debate, we should remember the role of government and how it is distinct from many of our own experiences in business. It is unfair (and unproductive) to criticize our public agencies for doing what they are designed to do, but rather we should focus the debate on those things that are within their design — what do we value as a community and what are the long-term effects of government decisions made today.

What we learned from our first child’s journey through the college admissions process

As a parent, it’s easy to convince yourself that it has all led up to this – every parenting decision you have made to date has somehow molded your child to be ready to leave the nest and go to college. It’s all too tempting to think that where they go to college is not just a judgment on them, but also a reflection on you. Parents who have kids as young as kindergarteners attempt to picture the road for their children – a road that ends with college and a road that we as parents are responsible for paving. That’s a fairly big burden to carry.

So, no wonder that when one actually gets to be in sight of the college admissions process that we as parents place a lot of pressure on both ourselves and our child. It’s an inherently stressful journey due to its intrinsic uncertainty combined with the weighty importance we place on the outcome. Naturally, this stress is elevated when one goes through the process with your first child.

Having just finished this first journey, my wife, son, and I have learned a lot – some from the great advice we received from others, some from the mistakes we made, and some just serendipitously. A lot has changed since we went to college about 30 years ago, and we were surprised how much we didn’t know. We learned lessons both philosophical and practical, however the former were critical to actuate the latter.

I naturally recognize that every child is different, and everyone’s parenting style (and background and experience) is different, but hopefully many of these lessons will resonate for most. It’s important to note that if your child is a potential Division I athlete or an outstanding artist/musician/thespian, there are very specific elements to that journey that would differ significantly from ours.

The first thing you notice as a parent is how every school seems much more competitive and selective than it was a generation ago. This isn’t a mirage – it’s fundamentally due to a change in supply and demand. Although the supply of college enrollment slots has only grown minimally over the last few decades (only a handful of new universities have launched, and there has been generally modest enrollment growth from existing schools), the demand has skyrocketed. This is largely the result of the overall growth in the U.S. population, the percentage of U.S. high school students applying to college, and the growth of international students attending U.S. colleges(1). In addition, the Internet and the Common Application specifically have made it easier to apply to many more schools (I applied to five colleges whereas my son applied to 12). Because of the Common App and the relatively ease to communicate with prospective students in this digital age, colleges are more aggressive than ever in marketing to students. This allows them to reach potential students on a much broader scale than ever before. By increasing the number of applicants, they effectively lower their acceptance rates and become more “selective.”

The inevitable result from all of these factors is a lower acceptance rate across the board. Comparing acceptance rates from just 10 years ago, one sees dramatic declines at most schools. Here are a few examples at historically very “selective” institutions – showing 2006 vs. 2016 (2):

  • Stanford University (10% vs. 4.7%)
  • University of Chicago (38% vs. 7%)
  • University of Southern California (22% vs. 15%)
  • Vanderbilt University (33% vs. 13%)
  • Northwestern University (31% vs. 13%)

With a larger pool of students from which to draw and a lower acceptance rate, the requirements for admission get more rigid, including higher GPAs and standardized test scores. Also, as most schools report that a significantly higher number of students than those who get accepted would thrive at their institution, they are seemingly choosing between applicants who, on paper, may seem very similar. Ergo, from an applicant’s or parent’s point of view, there appears to be a lot of randomness in the system. Additionally, you quickly learn that some of the traditional “thumb on the scale” factors such as having an alumnus parent don’t hold the weight that they used to.

So, that’s the bad news. But there is good news as well. Because almost every school is more “selective” than it used to be, the caliber of the students has improved in all of these schools. Colleges that in the past may have been our “safety school” (or the one where our less accomplished high school peers attended) have suddenly become places that are both more selective with students who are quite accomplished.

There is an upside to all of this digital age marketing – students and parents can be exposed to many more schools that they might not have considered (or even heard of) in years past. Generally, more information is a good thing. Going through this process, one appreciates how many amazing schools are out there across the country (plus of course internationally if that can be considered). As a parent, you know a lot less than you think you did about hundreds of colleges. No doubt there are so many great schools (and some incredibly selective) that you probably never would have thought to consider based solely on your personal experience. The first lesson as a parent going through this process is recognizing what you don’t know.

Therefore, the biggest problem is not the uncertainty about getting into a great school but rather the awesome task of narrowing down the list of great schools.

The biggest lesson that we learned is to first let go of the traditional construct of how we view schools – that every school is somehow on one long linear scale with the best at the top and some school no one has heard of at the bottom. The nature of the “product” of delivering a higher education is so complex and rich that it eschews attempts to measure it on a linear scale. Not that people haven’t tried. There are tons of college rankings – the most well known being from U.S. News and World Report. It’s naïve to think that parents won’t check these rankings, but it’s important to keep in mind that they are inherently both flawed and easily manipulated. For more detail on how these college rankings work and why they are so problematic, search for Frank Bruni’s articles in the New York Times. He lays out very thoughtful arguments that demonstrate the shortcoming of college rankings and presents evidence that our children’s success in life is more correlated to what they do with their college experience rather than the pedigree of institution that they attend.

With this frame of mind, we can change the conversation from what is the “best school that our child can get into” to what is the “best school for our child.” But if all things were equal, wouldn’t you want your child to go to the school with the best reputation (assuming you can even measure that)? Of course, but never are all things equal. It’s really about trying to divine the best fit for that student, which is enough of a challenge already. Your own biases or your long-held impression of a school’s “brand” could make it harder to find that best fit.

It’s also important to recognize that as little you know about colleges, your student knows even less. Sure, they’ve heard of Stanford, some of the Ivy League schools, and probably the big football schools around the country, but their lens through which they view colleges is mostly shaped by what you tell them. If you denigrate a school because it’s where your not-so-bright friend in high school went thirty years ago, they’ll never be able to view that place objectively. This is why in our children’s high school, they avoid the term “safety school.” There are schools where the student is “likely” to gain admission and schools that are “reaches,” but these are less loaded terms. So, it’s important to keep in mind that you have a ton of influence as to how your child will view a school and how excited they will or will not be at the prospect of attending it.

One of the hardest – and perhaps most counter-intuitive – lessons is to largely block out everybody else’s opinions of individual schools. Just as you recognize biases in yourself, recognize that everyone else has their own. The views of grandparents are likely out of date, out of context and not objective related to their grandchild who clearly could just waltz into any college they wish. Even friends – some of whom have gone through the college admissions process with their children – likely have strong biases based on either what was a good fit for their own child or something related to their own experience. Don’t ask anyone who went to UCLA what he thinks of USC, or anyone who went to the University of Michigan what she thinks of the University of Wisconsin. The main exception to this rule is that you absolutely gain valuable insights from current students (or their parents) at a particular school you’re researching.

Besides making some assumptions on certain characteristics of good fit schools (size, location, etc.), the target list is narrowed by learning where my child has some shot of getting accepted. Many high schools use a tool like Naviance as both a college application management system as well as a research tool. If schools keep the data, a student can compare his/her grades and SAT/ACT scores to students from their same school who in the past got accepted or rejected from any given college. Although Naviance is a great tool if used well, it can force a parent through the five stages of grief:

  • Denial – “There’s no way you need this GPA to get into that school!”
  • Anger – “The whole system is crazy!”
  • Bargaining – “Well, maybe if my child can play sports, or maybe they’ll just interview really well, and they can get into that school.”
  • Depression – “My child is never going to get into a great college”
  • Acceptance – “I understand that there are so many more great schools out there than I had thought of, and my child will get accepted to one which is a great fit.”

It is important to keep in mind that even this kind of data leaves out many factors that are additionally important in predicting whether or not a student gets accepted into any college. This is where your counselor comes in to help guide the student to create a balanced list of schools – ones that are a “reach,” ones that are “likely”, and ones in the middle. However, we have found that there is “arbitrage” in the system – based on what high school your student attends, for any given college they may have a relative advantage or disadvantage versus the applicant pool at large. This can be based on the high school’s particular grading system and rigor (and how certain colleges view that) or it can be based on relationships built up between high school counselors and college admissions officers.

It would be very difficult (and near impossible for your child) to get a good sense of a school without visiting it. Clearly the need to travel (spending money and time) may limit how many schools you can visit, but I can easily say that this was the most fun part of the college search process (for me). It’s absolutely fascinating to see how schools sell themselves, what sparks your child’s interest, and learning what they really care about and what they don’t. You’ll likely be surprised, as there were schools that my wife and I found incredibly impressive, but our son didn’t. It’s hard to remember that it’s not about us! In any case, start every visit with an open mind.

Naturally you have to start with some filter to narrow down the list of schools to potentially visit – size of school, section of country, rural vs. suburban vs. urban, sports-focused, religious/secular, etc. We got great advice that if your family is traveling for a vacation, just make a visit to a local college (even if that particular school won’t likely be a target) as it gives you and your student context as to what a school with certain characteristics (size, location, etc.) looks like – remember, they have no idea! This will inform your child in helping determine the features they like (or don’t like) about schools. Some of the most informative tours we went on were ones that our son hated, because it really helped us all focus on what was important to him.

The biggest challenge with visiting schools is remembering everything you saw, heard and felt – frankly after a bunch of visits, the experiences start to blend together and you start misattributing observations. Although it would be difficult (and probably awkward) to take notes while on a tour, we always got together as a family right after our visit (often by sitting in one of the school eateries) and having our student write down notes of everything we heard, observations, etc. Keep those notes in a single notebook or other place where they can be retrieved later (and will come in handy for the student to reference specific things they learned when they complete their application). Some students also like to take pictures to jog their memories.

For some of our visits, we brought along our younger child who frankly was less than enthused to go on all of these tours. If this can’t be avoided, it worked for us to give the sibling a job. We made a game of it. The night before we were to go on a college tour, each family member “bet” on one word which would be repeated most often by the tour guide (e.g., “community,” “relationships,” “challenge,” “safety,” etc.) and then the younger sibling would just keep a little score sheet tabulating the frequency of each word. It get them busy and put a little humor into the process as well.

Lastly, don’t rely solely on what you hear in the information session and tour. They’re of course valuable, but you have to recognize that they are part of the school’s marketing – and some schools just market better than others. Besides feedback from current students (or their parents) that you know, try to spend some time checking out the feel of the campus and watching the student interaction – your child may be able to pick up on whether he/she could see themselves there. (This is more difficult if you visit when students aren’t in session, which sometimes you must do given everyone’s schedule). One specific tip we were given is to recommend that your child go up to a couple of random students on the campus, introduce themselves saying they are a prospective student, and ask them two questions: (a) what’s your favorite thing about this school? and (b) what’s your least favorite thing about this school? Some high school kids may be too shy to do this, but college students are generally happy to talk to them. In this very short conversation, the student will gain some very valuable insights. If the school offers the ability for a student to sit in on a class, encourage them to sign up for that. It will help them both sense the “vibe” of the students as well give them a glimpse as to what college classes feel like.

Despite the existence of the Common App, this process is a lot of work and is generally no fun for the student. But there are some things we learned which could mitigate the stress involved.

First, long before college application time, make sure your child has a resume. They should have this anyway as they may apply for summer jobs or internships, but we found that the resume was a great “cheat sheet” to remind him what to include in college apps – both when they have to fill out the activities/extracurricular section but also as ideas for what to include in essays.

But probably the most important thing we learned was to have your student start early. They will likely be resistant to this idea, but saving all of the work for the first semester of senior year can be very stressful. The Common App (and the University of California) essay prompts are published well in advance, so it’s possible for the student to start drafting some essays over the summer. (It may be obvious to say that a student should just copy all essay prompts into a single Word document so that it can be edited and sections can be reused for similar essays, and then when completely done copied into the online application form). Obviously the student should leverage their guidance counselor and any resources offered by their school to help guide them through the application, but having a couple of essays completed before senior year starts puts them in a much better position.

Also some schools put greater weight than others on “demonstrated interest” (visiting the school, contacting the admissions office, even clicking on links in e-mails they send, etc.). They do this because one of their biggest challenges is managing “yield” (the percentage of students who accept an offer). Your child should leverage the advice of their college counselor to see how he/she can best demonstrate interest. In general, a counselor is often a better “task master” than the parents for the entire application process, but at the same time a good college counselor should be one who reduces the stress inherent in the process (for both student and parent), not add to it.

There’s of course all of the other aspects of the college application process, including taking the SAT or ACT, getting teacher (or other) recommendations, and going on an interview (at colleges where they are offered). Think of all of this when planning ahead and trying to avoid as much of a crunch time during the senior fall. If you think your student would do reasonably well in an interview, have them sign up for those. We’ve heard conflicting advice on whether interviews make a difference, but it probably can’t hurt, and to practice interviewing is just a good skill to have regardless. They should just remember to be themselves, use the essays they have written and their resume as something they review before the interview, and make sure they have a few questions prepared to ask the interviewer.

If at all possible, encourage your child to apply early to as many schools as possible (to the degree it is permitted, e.g. you can’t apply Early Decision or Restrictive Early Action to multiple schools) – there is really no downside other than making sure the work is done, and there is only upside in both potentially boosting chances of acceptance and hearing back from schools earlier. In any case, pretend that the application deadlines are actually a week earlier than published. It’s always good to leave a little buffer just in case there is any problem with the submission, including any technical issues and making sure all other materials are in.

Naturally, many of your friends have children also applying to college, so many others you know are going through the same process, each with a likely different philosophical view and level of stress. And your kids are different people. This makes it awkward to have conversations with friends and family about colleges. Kids feel this same awkwardness in talking to each other. It’s hard to separate conversations about college with the feeling that someone in their mind is comparing students against one another – all related to this common notion of putting schools on a “better/worse” continuum rather than thinking about fit. Of course you can’t avoid most conversations, but you can avoid exacerbating the awkwardness by using social media – Facebook, Instagram, Twitter, or Snapchat posts about where your child got into school should probably be left until the school year is close to over.

Of course, even within your own family it’s hard not to turn every conversation into something about college, because it seems to always hang over you. Besides potentially increasing stress levels, disproportionate dialog may also make siblings feel a little left out. So, although it’s absolutely necessary to have many open and serious conversations with your child to figure out the best college fit, it’s also important to set aside some times to not talk about the process (maybe over dinners, etc.).

Most importantly, be patient and forgiving – with your child and between spouses. Periodically remind your child (and yourself) that they will get into a great school that is a smart fit for them. Remind them that getting accepted or rejected is not the same as succeeding or failing, and that what’s most important is how they take advantage of their college experience. Anecdotal evidence suggests that most kids are very happy with their ultimate choice of school and happy with their experience there. But even in the case where they are not, it’s not forever – they can change course and transfer later. In any case, despite what you may have thought when the kids were in kindergarten, you haven’t actually reached the “end” anyway – your parenting continues and hopefully will for many years!

(1) According to the Institute of International Education, there were about 427,000 international undergraduates at U.S. colleges and universities in 2015-2016, up 79% from over a decade ago.
(2) Source: Menlo School

Leaked Trump Speech Prepared for GOP Convention

According to anonymous sources, Donald Trump drafted this speech to deliver at the Republic National Convention in Cleveland in July. It’s incredible!

My fellow Americans, tonight is a special night indeed. Thank you for the honor of nominating me to be the Republican candidate for President of the United States. This is truly an historic occasion, but perhaps not in the way the most people think. I have faced huge obstacles in getting here today, yet due to the support of millions of Americans, I stand before you now as your nominee. When I first entered the race, I was mocked by the media and by the Republican establishment as just a reality star looking for publicity. But the voters took me seriously. When I mocked Mexicans and talked about building a big wall and having Mexico pay for it, every candidate on both sides of the aisle said I was xenophobic and unrealistic. But the voters took me seriously. When I mocked my fellow candidates on their looks, pundits said I went to far. But the voters took me seriously. When I talked about not letting Muslims in our country, the establishment said I was through. But the voters wanted more!

So what does this prove? It shows something amazing! Obviously, people are sick and tired of the politicians we have in this country – we have a bunch of losers! The people are looking for an outsider. Money rules in the U.S. political system, and I admitted to have taken advantage of that as much as I could. People have criticized me for donating to candidates of both parties, but of course I did. That’s how the system works. I have money – lots of money – and our system runs on money, and it would be stupid if I didn’t use my money to influence as many candidates as possible to benefit me and my companies. It would be bad for business if I didn’t.

The second lesson here is that – believe me – there are too many Americans that frankly aren’t very bright. No offense – I love you all, but you either can’t understand the issues, don’t take time to understand the issues, or are so emotionally driven by fear and hate that you will actually follow a demagogue. What I found most interesting is that the Republican establishment tried to stop me at every turn, yet they failed to realize the big irony – the fact that their politics of the last couple of decades – the politics of obstruction, exclusion, science denying, and fear – created the very conditions that allowed me to run and to win. Of course, they weren’t by themselves in doing this – they got a lot of help from our good friends at Fox News, who frankly doesn’t really care much about politics either. They just discovered that they can make money off the American people by being the mouthpiece of this fear. Trust me – they don’t put women like Megyn Kelly on the air because of their brains –she gets men to watch though! (By the way, the real reason I don’t like Megyn Kelly is not because she asked hard questions at the debate, but rather because she doesn’t take responsibility for being part of the problem. She stoked Americans’ fears for years, and then suddenly is shocked when someone runs for President embodying all of those ideas. And I do think she wants to sleep with me, so clearly she has some sexual tension issues).

It’s crazy that you all didn’t figure out that I got into this race as a bit of a stunt. I thought it would be fun to run my own little social experiment and at the same time mess with the Republicans, who have really become the party of stupid – and now a party that is in shambles – thanks to me! I will say that my experiment was an amazing success. I was constantly testing the limits of how far you would let me go. I mocked disabled people, and you clapped. I made up facts, and you clapped. I insulted and fear-baited. I even talked about dating my daughter, and that didn’t bother you! I bragged about the size of my penis, and you were impressed! I intentionally made up most of what I said –independent fact checkers said that over three-quarters of what I said was false – and the voters still supported me. I can say something like, “We’re going to win so much, you’re going to be sick of winning.” We laughed so hard when we came up with that line! And my favorite part of this experiment was how much money we raised! Even though I always talk about how much money I have – I am really rich, you know – people still go on my website and send me donations that I clearly don’t need.

My I.Q. is one of the highest – you know it, and I know it. So c’mon, don’t you think I know that we have airplanes that can fly over any border wall that can be built…I know you can’t torture family members of suspected terrorists…I know immigrants have been critical in making up the tapestry of American life…heck, I married two of them! Yet, you let me keep going, and it was fun, so I kept going! This goes to prove that the Republican Party (with the help of Fox News) bamboozled you all into being driven by fear and the politics of exclusion. Even with hundreds of pundits, current and former politicians, military leaders, and even comedians poking holes in most of what I said, fear and ignorance blinded you. I was huge – the biggest phenomenon in the American history of politics!

Now, I wasn’t lying about a lot of things I spoke about. We are being run by some very stupid people, but I mostly mean our Congress. It is also shocking that one of the two major political parties in this country can’t put up a candidate who has any sense. I was telling the truth when I said that Ted Cruz is a liar (and a complete nut job, by the way) and Marco Rubio is a lightweight. Jeb Bush and Ben Carson – seriously, guys? But perhaps they are just a reflection of the voters – the American people need to look in the mirror, because so many of them are frankly not that bright and a little nuts themselves.

The truth is that I don’t really care about a lot of the political issues – abortion, immigration, gay rights, gun rights, etc. Of course, I care about taxes – lowering them generally helps me, so of course I favor that. But frankly, I don’t want the job as President of the United States. That would be way too stressful and frankly my life is pretty good without it. I can live anywhere I want in beautiful homes and resorts, and I have my beautiful wife – isn’t she terrific! I am my own boss – who would want to deal with Congress and putzes like Mitch McConnell who also don’t want to get anything done. It would be way too frustrating for me to be President – I’m the best at business, and I’m great on television. And it pays a hell of a lot more than being President!

I’m the only one who could have pulled this off and throw this entire process – and this party – into chaos. It deserved to be broken. And it’s not a terrible thing that I probably just handed the Presidency to Hillary Clinton. I disagree with Hillary on some issues, but as I have said in the past, she is smart, hard-working, and does truly care about the American people. You know and I know that with the exception of some social issues like gay marriage (which is of course a good thing), this county has drifted pretty far to the right over the last couple of decades, and Hillary Clinton is fairly close to what mainstream Republicans were in the era of Reagan. She will do fine as president, and hopefully our leaders can come together instead of creating the level of obstruction that they did for President Obama.

So, I will go down on history. Not as the first outsider President, but rather as the outsider who finally exposed our crazy system. I talked about making radical changes in Washington, and what I did will do that, just not in the way you thought I would. Thank you again for allowing me to have a ton of fun – I promised something huge, and historians will say this was huge! Don’t be offended by my experiment on you; you couldn’t help yourself. Just take the opportunity to take your heads out of your asses and stop being so stupid. If you do, we will make America great again! Thank you and good night.

Stay Classy, San Carlos

Last night was my final San Carlos School District Board Meeting as a Governing Board member, and it was bittersweet. Thank you to all who came by to see my last meeting and went out to celebrate afterwards. In the middle of the meeting, there was also an incredible surprise by former Bye Bye Birdie cast mates and SCSD teachers who broke into a flash mob singing a parody of Put on a Happy Face — it was incredible thougtful and entertaining!

The past eight years have been incredible, and I have been so privileged to serve in this community. Posted to last night’s agenda was a brief overview of our accomplishments, the lessons that I’ve learned, and the plethora of people to acknowledge and thank.

A few weeks ago I outlined a list of changes to, and accomplishments by, our school district over the last eight years.

And about a month ago, I put together a white paper on the big lessons learned over these eight years of service. Thank you to all of the folks who have already sent me so much positive feedback on this — clearly so many of these lessons apply to other school districts and other local agencies.

Of course there is a ton of work to still be done in our school district – that is the nature of a dynamic learning organization with grand plans. Last night I touched on what I referred to as the three “big rocks” — areas that I thought would be important themes over the next decade:

The “Meaty” Parts of the Strategic Plan
I have been so impressed how our staff has embraced our strategic plan – in fact this change has happened quicker than I would have predicted when we wrote it. I realize it has taken a ton of work, and we’ve had a few bumps in the road. But as we look forward over the next few years, I would suggest that the level of work and difficulty will actually ramp up as we get into the areas that I consider the most “meaty” in the Strategic Plan – those notions that change the very structure of how we run a school system, such as:

  • Implementing real personalized learning (building the “ecology” around providing this experience – sorting through the myriad of tools, having the right policies, supporting educators, etc.)
  • Changing the role of the educator, and putting a structure behind the concept of the “educator broadly defined”
  • Redefining the relationship with the public so as to embrace a culture of risk taking
  • Reexamining the very structure of time, place, and student sorting in defining what is “school”

Changing the Conversation about Success and Progress
This, in and of itself, is a meaty part of the Strategic Plan, but it seemed worthy to call it out separately. I’m pleased with the progress we’ve made to date on our dashboard efforts and all of the new data we’re collecting, but it will absolutely be a challenge to create a measurement and reporting system that can accomplish all of the following:

  • Avoid reductionism so that information is relevant and placed in context
  • Highlight what’s truly important
  • Have information that is actionable at a board level as well as have a set of formative data for our educators and students
  • Somehow be able to analyze innovative efforts to help shape a culture in the community around risk-taking

Fundamentally, we have to try to measure our progress by looking at the areas we most care about – of course we want academic progress, but how do we genuinely know if our students are reaching their social and emotional potential and are becoming problem-solvers, critical thinkers, innovators, collaborators, and good communicators who are empathetic citizens and leaders? Cracking this nut would be a giant step forward in public education.

Making San Carlos Livable for Our Staff
We have a long-term affordability problem in the Bay Area – it will be increasingly difficult to live in this community. I can’t see any scenario where California education funding will permit us to, over the medium to long-term, pay all of our employees wages that will grow as fast as the cost of living. This is of course not just a looming crisis for SCSD, but for all public agencies and for the economy in general.

The problem with the crisis is that it’s a slowly moving one – we won’t wake up one day and say “wow, none of our employees can afford to live in the area” – it will happen slowly over time as it will get harder and harder for all to live near where they work.

So, I challenged the next board to think creatively about how we can continue to attract and retain quality employees in such a trend. Likely such as an effort would require more than just our school district – perhaps in partnership with the city, the County, the high school district, or even community-based organizations, we can think about creating housing for public workers. For example, I’d love to see a bond measure sponsored by both the school district and city to support all of the folks who work for public agencies. Universities and community colleges have historically done this, and I don’t see any reason why it can’t be done on the K-12 level – we’d of course have to make the case to the public, but I think the benefits would be very clear.

I wanted to use my final comments last night, and my final words here, to thank so many people that have both made my experience incredible and have contributed so much to this school district. I can’t begin to do justice to all of them, but I will highlight a few:

  • Dr. Baker – I’m very proud to have been on the team that hired our fabulous Superintendent, and it has been a distinct pleasure working with him and learning from him. His impact on our young people has been immeasurable.
  • District Office Team – I want to thank all of the folks who work in the district office, many of whom work incredibly hard and accomplish so much yet much of it is invisible to the community. I want to give a particular shout out to Mary Jude Doerpinghaus, Robert Porter, and Tom Keating, the senior folks at the district office with whom I’ve had the pleasure of working – they all are true thought leaders and innovators.
  • School Staffs –We’ve been fortunate to have great staffs at each of our sites. Our principals’ leadership has been crucial for our schools, and I want to thank all of our teachers who devote their lives to educating children and also thank our secretaries, counselors, librarians, para-educators, and custodians.
  • My Board Colleagues – Thanks to my board colleagues — Adam Rak, Kathleen Farley, Carol Elliott, and Nicole Bergeron — for all of their time, effort, and true mindfulness in serving. I have enjoyed working with them all, and I have appreciated how they are all honest and selfless servants for our children and our community. I also want to thank and acknowledge board members I’ve worked with in the past, including dedicated folks like Mark Olbert, Carrie Du Bois, and Tom Quiggle. I also want to thank Matt Kowitt, who has served for so many years as president of the Governing Council of Charter Learning Center and has been such a great partner and leader.
  • Other Elected Officials – Thanks to our city council members as well as our state legislators, past and present, who have represented this area well and have been big supporters of public education – keep up the fight! Also for all of the unselfish work they do on behalf of children, I wanted to thank so many of the other school board members in the County with whom I’ve worked on the San Mateo County School Boards Association – we have all learned a lot from each other!
  • Parents – Of course, San Carlos is the success it is in large part due to the amazingly dedicated parents who volunteer their time and donate their money to support all of our kids – I am so especially pleased how SCEF continually grows to remain such a powerful force in allowing this district to fulfill its mission – thank you to all of the folks who have been part of this and have worked so hard over all of these years.
  • Friends and Supporters – thanks to all of my friends and community members who, over the years, have voted for me, supported me, and have been confidants and sounding boards.
  • My Family – Last but certainly not least, I want to thank my family for their amazing support. My kids have grown up knowing how important it is to be involved in their community, and they have been my biggest cheerleaders. Of course, the biggest thanks goes to my wonderful wife Sara, who not only had to deal with my time commitments but also was there for me in every way possible through the celebrations and the frustrations. She is my best friend and best advisor, and she would always tell me when she thought I was right and when I was wrong. She also found time to be an incredible volunteer at our schools in her own right. I look forward to spending some Thursday night date nights with her!

Thank you all again for the amazing opportunity to play this part in our incredible village.