Can you throw money at the problem of charter school growth? We might find out.

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President Trump’s federal budget calls for over $150 million in increased spending on charter schools.

Florida’s House of Representatives just passed a “Schools of Hope” bill that would provide $200 million to non-profit charters that opened schools in neighborhoods with high concentrations of “D” and “F” schools (the Senate has note yet voted).

Given that the rate of new school openings has dropped over the past few years, these new funds, if approved, could stimulate the pace of growth of charter schools.

Some reflections:

Will Florida funds increase growth or shift growth?

It’s unclear whether the Florida funds would increase charter growth or simply shift growth away from other states towards Florida.

My guess is that it will increase growth for two reasons: (1) it’s hard to grow across state lines so I doubt out of state operators could absorb the full $200 million and (2) if the for-profit world is any indication, other states will follow Florida’s lead to compete for great charter schools, which ultimately will create a greater pool of growth funds across the country, which should stimulate new entrepreneurs as well as provide funds for operators to grow in their home states.

How much does money incentive growth in the non-profit sector?

For management teams, growth is much less lucrative in the non-profit sector than it is in the for-profit sector. Salaries go up a bit, but not 50-100X, and there is no cashing out of equity.

There may be some status associated with winning big grants and growing, but the lack of financial incentives to individuals is probably a big barrier to successfully throwing money at the problem.

How much does money change the emotional incentives of charter entrepreneurship?

Perhaps money will have a positive causal effect through non-financial channels by changing the emotional incentives of charter entrepreneurship.

It takes a special kind of person to open a charter school when the local district, the local teacher’s union, and half your friends are telling you charter schools are destroying public education.

But what if the federal government and (eventually) dozens of states were offering large amounts of public dollars for you to open a charter school?

When the President, the Governor, and the Mayor are all asking you to grow – and putting their money up – perhaps this changes your emotional inclinations?

How much does money lower the headaches of growth?

Perhaps incentives should be thought less in terms of accusing gains and instead in avoiding pain.

Ask a charter operator what the biggest headache is for growth and facilities will inevitably be near the top of the list.

To the extent additional funds can be used (or allow other money to be used) for down payments on facilities, these funds might help stimulate growth.

My Guess

I think a state package of (1) multiple state authorized charters and (2) money for buildings would have a positive impact on growth.

Local school board authorization and lack of facility funds are huge headaches for even the most sophisticated charter organizations.

Removing these barriers would be a positive step forward.

However, I do worry that the process of lowering barriers, increasing funds, and scaling great operators will not meet the demands of the political cycle.

As this Politico piece notes, it’s unlikely that the nation’s best operators are going to immediately scale in Florida.

My recommendation to Florida would be to mimic the growth of the federal charter school program: start small, spend the funds prudently, and the increase the amount of funding available as operator capacity to growth increases.

In other words, fight for 25 years of 10% growth, not a 2-3 year moonshot.

The stories we tell and the truths we hide: fairness, mobility, and inequality

Nature just published an article by Paul Bloom, Christina Starmans, and Mark Sheshkin.

Their argument: people care more about fairness than inequality, and policy makers and pundits too often ignore the difference between these two concepts.

In their own words:

Our own argument against a focus on inequality is a psychological one… people don’t care about reducing inequality per se. Rather, people have an aversion toward unfairness, and under certain special circumstances this leads them to reject unequal distributions. In other conditions, including those involving real-world distributions of wealth, it leads them to favour unequal distributions. In the current economic environment in the United States and other wealthy nations, concerns about fairness happen to lead to a preference for reducing the current level of inequality. However, in various other societies across the world and across history (for example, when faced with the communist ideals of the former USSR), concerns about fairness lead to anger about too much equality. To understand these opposite drives, one needs to focus not on whether the system results in a relatively equal or unequal distribution of wealth, but whether it is viewed as fair.

The authors might be right that humans care more about fairness than inequality, but I think people’s reasons for caring about fairness are wrong.

Here’s my current thinking on fairness – the related concept of mobility – and inequality:

Fairness is a fantasy.

I don’t believe that fairness is achievable. We don’t choose our genes, our environment, and we might not even have free will – so how is anything really fair?

Obama’s “you didn’t build this” line remains one of the most philosophically honest statements that a president has uttered since I’ve been following politics.

And an even more honest statement would have been: “you didn’t build you.”

I suppose you could redefine a “fair” society as one where people are able to live out the full potential of their genes and environment, but this hardly captures the totality of what people think about when they say they desire fairness.

In a perfectly fair world there would be little mobility. 

People often use mobility as a measure of fairness. The more rags to riches stories there are, the fairer a society must be. I think this is backwards. In a perfectly fair society, there would little mobility, as genes and environment would drive so much of outcomes. We’d be stagnantly sorted save for random shocks or to the extent that technological change affected what genes and environments were valuable.

The desirability of mobility is predicated on the idea that people justly move up or down a society’s rungs based on their own volition – and this is a fantasy.

 

People should care about inequality!

I’m open to the idea that people don’t care about inequality as much as liberal pundits think they do. But I think people are foolish not to care! When the inputs (genes and environment) are randomly sprinkled across humanity, inequality of outcomes should be a concern for us all, because, in the truest sense of the word, these outcomes are unfair.

Our are fantasies of use?

Perhaps. People desiring fairness as an outcome – and using mobility as a proxy for fairness – may help avoid things like free loading, distrust, and government tyranny. These myths might also increase hard work and entrepreneurship. I grant that these myths have survived many rounds of social evolution, and in this sense should warrant some respect.

But believing these myths comes at a great cost in that we falsely blame people for their bad outcomes and tolerate insanely brutal amounts of inequality to maintain the artifice.

It might just be better to live in a world where we say: “we know the world is terribly unfair and it’s no one’s fault so we are willing to push marginal tax rates and transfers as high as possible until we near the part of the curve where disincentives to work are  greatly hampering economic growth and screwing us all.”

Or perhaps society would function poorly in the face of us all admitting this reality.

I don’t really know.

Either way, our myths of fairness and mobility blind us to the reality the world is unjustly unequal.

Applying portfolio reforms to postsecondary problems

I just got back from a trip to New Orleans, which continues to be a well of friendship and inspiration.

I. Where should you spend the next philanthropic dollar? 

In a few conversations, the following questions came up:

  1. Are the kids we serve going to succeed in life after high school? What will their lives be like when they are 30? Will they be living meaningful and happy lives?
  2. Is the marginal dollar of philanthropy best spent on making the K-12 system better (after 10 years of improvements) or trying to overhaul the post-secondary landscape?
  3. If you wanted to radically improve post-secondary, what would you do?

II. Post-Secondy portfolio 

The K-12 portfolio mindset entails viewing an educational system in terms of operators (running schools) and seats (how many students are served).

This mindset could also be applied to post-secondary.

By 2020 or so, New Orleans will be graduating around 3,000 students a year.

Let’s say that about 1,500 of them will be prepared to succeed in a four year college; 1,000 of them will be prepared to succeed in a 1 to 2 year credentialing program; and 500 of them will need deep support to enter the workforce and exit crisis situations.

Of the four year college students, you might need 500 to 1,000 “KIPP to College” type supports to ensure students make it through.

For the credentialing programs, you’d need 1,000 seats that can reliably produce students with employable credentials.

For the crisis students, you’d need employment and social service operators that could transition students into jobs.

III. Post-Secondary investment intermediaries 

Instead of assuming this will naturally happen in New Orleans (or any other city), you could capitalize a new or existing non-profit intermediary to launch, recruit, and support post-secondary providers.

At the outset, the intermediary would create a business plan where it laid out how money it would need to get X% coverage on the aforementioned 3,000 seats.

High-Quality existing local providers (like the coding bootcamp Operation Spark) could cover some of the seats, and national providers like Match Beyond could be recruited in.

Overtime, you’d expand what was working, close what wasn’t, and support new entrepreneurs to keep innovation going.

IV. Getting funding streams right

Most states subsidize mediocre public universities; the federal government tops this off with Pell grants.

To make the 3,000 seat post-secondary strategy viable, you’d need to blend a mixture of public support and tuition to make providers sustainable.

Louisiana’s course choice provides a revenue stream for programs that started working with kids while they’re in high school.

Creating a new university that housed many of these programs could allow for the accessing of Pell grants.

Wage contigent loan programs could also be an option for programs that were consistently placing graduates in high-performing jobs.

V. Who are the entrepreneurs that will seek out the 10x play?

The early New Orleans K12 entrepreneurs felt that they could deliver something to students that was significantly better than the existing system.

They were right.

A post-secondary transformation won’t happen on its own.

It will take a set of entrepreneurs to put forth a plan, galvanize funding, and spend a decade building the new system.

Is this the right play? If so, who will step up?

Charters growing in your city? You have 5 options.

Charters schools continue to scale in urban areas. In many cities, charters serve over 30% of students.

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In 44 cities charters serve over 20% of students.

These 44 cities, as well as many others in the future, will have to evolve their educational systems to govern a mixed portfolio of school types.

What options are available to these cities? Here’s five, some of which will be much better for children than others.

1. Implode (Detroit) 

In Detroit, the school district responded to charter growth by bankrupting itself. It lost enrollment, took on debt, and continued its academic and operational dysfunction.

In failing to respond productively to charter growth, the district hurt students and cost taxpayers nearly a billion dollars.

2. Compete (Washington D.C.)

In Washington D.C., charters now serve nearly 50% of the students. During the past decade of charter growth, the district responded by becoming perhaps the highest performing urban school district in the nation.

The district lost nearly half its students and radically increased its performance.

The district didn’t really partner with charters, it just stepped up its game.

3. Coordinate and Collaborate (Denver)

Denver Public Schools responded to charter growth by coordinating with the charter sector.

For much of the past decade, it gave charters facilities to grow in neighborhoods where more good schools were needed. The district also set-up a unified enrollment system that made it easy for families to choose easily between district and charter schools.

While there have been some bumps along the way, for the most part the district has supported the best charters to expand and has closed the worst charters.

4. Blur the Lines (Indianapolis, Camden) 

A few years ago, the Indiana legislature passed a law that allows for Innovation Schools, which are authorized by the district, have many of the autonomies of charters, are governed by non-profit boards, but still sit within the district’s enrollment and accountability reporting.

With its Renaissance Schools, Camden has done something similar: Renaissance Schools are more tightly managed by the district, but still retain most of the autonomies of charters schools.

In both Indianapolis and Camden, the district has co-opted the best of the charter model while still maintaining a tighter form of local oversight and control.

5. Govern (New Orleans)

In New Orleans, the district responded to increasing charter growth by relinquishing its operational duties and transforming into a regulator.

Rather than operate schools, the district sets performance targets, monitors for equity, and annually opens great schools and orchestrates the transformation of failing schools.

This has led to unprecedented student achievement gains.

Which Way to Go? 

While I think the last option (govern) is the best way to go, cities have also seen academic growth by competing, coordinating, and blurring the lines.

These cities are the reason I’m skeptical of people who argue that charter growth will hurt traditional public schools.

There’s an emerging group of cities who are proving this clearly doesn’t need to be the case.

I’m hopeful that their successes will be replicated much more often than not.

What if unified enrollment platforms were 10x better?

An emerging group of cities – including Washington D.C., Newark, Camden, New Orleans, and Denver – have adopted unified enrollment systems. With these systems, families can enroll in schools across the city via an online application system.

This is a huge step forward. For too long, parents have not had enough information or access to the public schools in their cities.

However, the new enrollment systems are still in their infancy. The best version of these systems could radically improve public education. Unfortunately, we’re very far from this endgame.

I. Early Wins: Access, Equity, and Ranking

Access: With the best open enrollment systems, families who can’t afford a house in a fancy neighborhood can now finally transparently apply to a school in a more wealthy neighborhood.

As a result of increase in access, a recent study in Washington D.C. found that the new enrollment regime would likely reduce segregation over time:

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Equity: In most cities, traditional and charter schools play a ton of games with enrollment. Traditional magnet schools use opaque entry requirements. Bad apple charters don’t take in kids with special needs. There is no equity.

With online enrollment platforms, these problems go away, as schools are no longer in control of their enrollment.

Quite simply: the algorithm is fairer than the enrollment clerk.

Ranking: These new enrollment systems also allow parents to rank their top schools. This is extremely important.

First, a family’s high desire to enroll their child in a school can now  be translated into an increased chance that they actually get into this school.

Previously, high desire meant little unless you were connected, wealthy, or dogged.

Second, ranking allows  parents to publicly signal to government which schools are most and least in demand (which will ideally affect opening, expansion, and closure decisions). It also signals to school operators what attributes make a school in high demand.

By analyzing ranking preferences, researchers in New Orleans were able to correlate school characteristics with parent preference:

Screen Shot 2017-03-17 at 9.44.39 AMRanking transforms family desire into actionable information.

II. Unified Enrollment Systems are Mediocre Platforms

In preparation for writing this blog, I spend an hour on unified enrollment system websites. It was not a great experience.

Here is the school finder homepage from Washington D.C. – I couldn’t even find a way to filter schools by academic performance!

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Here is the search function for Newark’s enrollment system – you have to download a pdf!

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By comparison, here’s the search page from Zillow:

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On Zillow, you can easily search for homes based on the most useful search criteria. Yes, Zillow is surely better capitalized than your average enrollment system, but even with modest funds a city should be able to do better than a downloadable pdf.

III. Moving From Equity and Ranking to Matching and Prediction

More sophisticated uniform enrollment could offer two extraordinary improvements: they could better match families with schools, and they could better predict how any given student would do at a school.

Matching: Right now families mostly use enrollment systems for ranking: they know the schools they want and they use enrollment systems to express this desire.

What is not really happening (as far as I can tell) is sophisticated algorithms actually helping families match with schools.

For example, on Camden’s enrollment site (where you can thankfully filter by academic performance!), I found three schools that all met the “on track” performance criteria, and pulled up the comparison page:

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This does very little to help me choose between these schools. My preference variables are limited to very broad categories such as “art classes” and “after school programs.”

After playing around on these websites, I get very little indication that that the platform knows me or the schools very well. Compare this to Netflix, Amazon, or dating websites (previous life) – platforms where I feel like the algorithms know me better than myself.

Unified enrollment systems need to more deeply understand children and schools in order to make better matches.

Prediction: Right now, government accountability systems are a basket case of poor design (generally don’t weight growth enough), brutal politics (what politician wants to tell a bunch of communities they only have “F” schools?), and awful transparency (good luck trying to navigate your average state department of education website).

Most importantly, government accountability systems evaluate schools rather than make predictions.

As a parent, it’s one thing to tell you that a school is a “C+” – it’s another thing to give you a prediction of what will happen to your child if she attends the school.

With current date, we could probably gather basic information on your child’s age, gender, current academic performance, personality type, etc.,  and make a reasonably accurate prediction that if she attends school X she will have a Y% chance of graduating from high schools and a Z% chance of earning a post-secondary degree.

Good enrollment systems, over time, should become better and better predictive agents, and, perhaps, can end up augmenting (displacing?) government accountability systems.

IV. Root Causes and Potential Solutions 

I don’t yet have strong beliefs about the root causes of why these enrollment products aren’t getting better faster. But here’s some guesses:

Non-profits > government operated: Most of the enrollment systems are run by governments, which are not good at running tech products and have bad incentives around giving parents accurate information about schools. Non-profits would likely be better operationally and have better incentives, and avoid the privacy concerns associated with for-profits.

Lack of scale: Matching and predication can better with bigger data sets, and if all these systems are structured as isolated city based data silos, the algorithms will be dumber than they should be.

Weak Customer Demand -> Bad Economics: SchoolMint, from what I understand, is the most successful player in the market. For reasons I don’t underhand, this company has not developed a better product. Perhaps it’s because their government customers don’t actually want it. Or perhaps the economics don’t work (which might suggest philanthropy is needed).

If the above is true, a national non-profit should be backed to scale to enough size to create smart algorithms, and it should be financially structured in a manner that gets it out of the perverse incentives of being beholden to government or individual schools rather than families.

A philanthropic foundation with a great tech backbone could be well situated to support this endeavor.

V. Expectations

Better matching and prediction would probably not make the average student’s education experience 10x better, just as dating websites don’t inevitably lead to great marriages.

But I do think better matching and predication could increase the probabilities that millions of families could find a better fit for their children.

At scale, that’s a better world.

What will be the stable charter school and teacher union equilibrium?

It appears Kentucky may pass a charter school law.

News recently broke that Noble charter schools may become unionized.

Where is this all heading?

The Forces at Work: Charter Market Share will Continue to Rise 

Charter market share will continue to rise because (a) 40+ states allow charters and this number is increasing and (b) once a charter school is open it is difficult to close.

Yes, policies like charter school caps and moratoriums may slow charter growth down, but it will be incredibly difficult for union leaders to fully stop charters from growing in a world where charters are legal in 90% of states. Rolling back laws in this many states is unlikely.

Charter market share will continue to grow.

The Forces at Work: Unions Organize Where the Teachers Are 

A simple consequence of rising charter market share is a rise in the number of teachers who work at charter schools.

Unions received dues (and power) from having as many teachers as possible enrolled as members.

The more charter schools there are, the more it will be be worthwhile for unions to attempt to organize these teachers, for both financial and political purposes.

The Future of Union Incentives 

So we’re basically going to be in multi-round unionization game between unions and charter schools.

Most importantly, this new game (unionizing a lot of charters) will have very different incentives than the old game (unionizing a local monopoly).

Under the old game, the unions paid a relatively small price for being obstructionist: with only one school operator in town (the district), they didn’t have to worry too much about how their actions affected the performance or reputation of that school operator.

In the new game, the union has a new incentive structure: if they are overly obstructionist, they will reduce their ability  to unionize more charters in the future; however, if they are not obstructionist enough, unionizing a charter won’t slow down the growth of that operator (which is in the unions interest, as they want the district to last as long as possible, as it’s the easiest entity to unionize).

The unions thus want to add value to unionized teachers and at the same time hobble charter school growth.

The ideal play for unions is to: (a) unionize charter schools  (b) demonstrate value to their unionized charter teachers so they can unionize future schools (c) slow down the enrollment growth of unionized charter schools  (d) avoid having unionized charter schools go down in flames so they can unionize future schools.

My Guess

The conditions for charter school unionization are favorable compared to other sectors of the economy: you have a long history of unionization, strong and well-financed existing unions, an inability to outsource to other states or countries, and weak accountability for performance (compared to the financial market).

All of this bodes well for unionization.

But unionizing charters will require unions to moderate their behavior and become less antagonist with management, as they will be working in a market of providers rather than a district monopoly. This will require significant change in their leadership and culture. This is hard to do.

So where are we heading?

One interesting comparison group is nurses, which generally operate in a non-profit, physically anchored, and heavily regulated environment.

Overall, about 20% of nurses belong to a union.

And while most industries have seen declining union membership, nursing union membership has risen over the past 15 years.

nurse-union-fever

I think we will see the same thing happen in the charter sector.

That being said, given that unions have to independently organize each charter organization (which is very expensive), and that their success will be predicated on cultural change, I don’t think we’ll quickly move into a world of 100% charter unionization.

But will we see 20% of charter school teachers (compared to ~7% right now) organized in unions over the next decade or so?

I think so.