Obama’s pick for Education Secretary is Fantastic

I just realized today that Barack Obama’s new Education Secretary is Arne Duncan, the former head of the Chicago Public Schools.  He is a top notch choice who I think will do a great job.

I first heard about Duncan when I read Freakonomics a few years ago. He was the head of CPS when Steven Levitt and Brian Jacob were studying whether teachers were cheating on standardized tests by filling in or changing answers on students’ tests.  They ran some regressions and found a bunch of suspicious answer patters from a surprisingly high number of teachers.  When Levitt and Jacob brought their suspicions to Duncan and the CPS, Duncan ordered audit testing to try to confirm the results.  The retesting confirmed that the teachers were cheating for their students and Duncan ordered the firing of the guilty teachers.

Duncan could easily have swept the study under the rug and not allowed retesting, but he did not.  Instead, he made a tough decision that was unpopular with the teachers and challenged the status quo.  His choice got rid of bad teachers who were masking their poor teaching performance by cheating on tests.  It would be great to see others in government make these kinds of tough choices.  I think every government agency could benefit from people following Duncan’s example.

Hopefully, he can help bring some positive change to American schools with is hard work and innovative approach to public service.

Paul Graham’s 13 Sentences

Paul Graham is one of my favorite writers right now.  Here’s his bio from his website:

Paul Graham is an essayist, programmer, and programming language designer. In 1995 he developed with Robert Morris the first web-based application, Viaweb, which was acquired by Yahoo in 1998. In 2002 he described a simple statistical spam filter that inspired a new generation of filters. He’s currently working on a new programming language called Arc, a new book on startups, and is one of the partners in Y Combinator.

Y Combinator is a great idea that I wish would be replicated in other places.  I would love to see a similar program at the University of Wisconsin or in Madison.  Y Combinator:

[M]ake[s] small investments (rarely more than $20,000) in return for small stakes in the companies we fund (usually 2-10%).

All venture investors supply some combination of money and help. In our case the money is by far the smaller component. In fact, many of the startups we fund don’t need the money. We think of the money we invest as more like financial aid in college: it’s so people who do need the money can pay their living expenses while Y Combinator is happening.

For the last few years, he has written essays on life, business, startups, investing, education and many other interesting topics.  Some of my favorites, which I highly recommend along with the rest of his work, are After Credentials, Revenge of the Nerds, Why Nerds are Unpopular, How to Start a Startup and Why Startups Condense in America.

His recent essay titled Thirteen Sentences is a guide to what he believes are the thirteen most important things a startup should know about as it progresses.  His list is similar to what I tried to do for the Entrepreneur Deli last year in my post about the lessons I learned running ExchangeHut, but much better.
Here are a few of my favorite and what I believe are his most important pieces of advice:

1. Pick good cofounders.

Cofounders are for a startup what location is for real estate. You can change anything about a house except where it is. In a startup you can change your idea easily, but changing your cofounders is hard. [1] And the success of a startup is almost always a function of its founders.

2. Launch fast.

The reason to launch fast is not so much that it’s critical to get your product to market early, but that you haven’t really started working on it till you’ve launched. Launching teaches you what you should have been building. Till you know that you’re wasting your time. So the main value of whatever you launch with is as a pretext for engaging users.

5. Better to make a few users love you than a lot ambivalent.

Ideally you want to make large numbers of users love you, but you can’t expect to hit that right away. Initially you have to choose between satisfying all the needs of a subset of potential users, or satisfying a subset of the needs of all potential users. Take the first. It’s easier to expand userwise than satisfactionwise. And perhaps more importantly, it’s harder to lie to yourself. If you think you’re 85% of the way to a great product, how do you know it’s not 70%? Or 10%? Whereas it’s easy to know how many users you have.

8. Spend little.

I can’t emphasize how important it is for a startup to be cheap. Most startups fail before they make something people want, and the most common form of failure is running out of money. So being cheap is (almost) interchangeable with iterating rapidly. [4] But it’s more than that. A culture of cheapness keeps companies young in something like the way exercise keeps people young.

9. Get ramen profitable.

“Ramen profitable” means a startup makes just enough to pay the founders’ living expenses. It’s not rapid prototyping for business models (though it can be), but more a way of hacking the investment process. Once you cross over into ramen profitable, it completely changes your relationship with investors. It’s also great for morale.

Check out his essays at PaulGraham.com.  They are worth the read if you are interested in startups, education or creativity.

Facebook Must Be In Trouble

I recently blogged about the Facebook ads called “Get Your Obama Check.”  Those appear to be gone already, but they have been replaced by new ones with a similar message.  These ads are called “Ball out of control at 23”  “I make more than my dad” “Make $169 between classes” and a bunch of others.  They all feature really nice cars or just wads of cash.  Here are a few of the captions from the ads:

Make insane amounts of cash during class. Stop being broke.
I know its not fair.  Hes been working his whole life.  Its easy.
You can afford this car.  Its easy.
Stop being lazy.  Google makes you $5000 per month.
Again, they all link to the same “blog” complete with fake replies.  They all claim they only want $1 for delivery of their “info packet.”

Facebook must be really, really, really desperate for revenue if they are accepting this type of ad.  Facebook must not be able to get any reputable company to pay for CPM ads because, by now, everyone knows about their abysmal click through rates and the CPCs are pretty high for most college campuses.  That’s another tipoff that these sites must be scams or promise more than they deliver.  If they can afford to the CPC necessary to get play on the University of Wisconsin network, they must be paying at a bare minimum $.10 CPC.  Most likely its higher, closer to $.50, as that’s what I have paid in the past.

I understand that revenue is revenue, no matter the source, but Facebook should not be known for sending its customers to shady, get rich quick schemes.  Even if they are legal, I would not want to be known as a company to be dealing with these types of companies.  I wouldn’t want to direct my customers to these sites.
It will be interesting to see if these ads will generate a backlash eventually.  I’m thinking it will, as these types of ads bring Facebook into the MySpace realm, a move that Facebook has been trying to fight since its beginnings.

This is why we should have let the banks fail

Steven Pearlstein writes in today’s Washington Post about how the President of one of the smaller banks used some entrepreneurial skills to put some TARP money to good use.

Kim Price, the President of Citizen’s South Bank, located across the river in Charlotte from Bank of American and Wachovia, did not need TARP money because his bank was failing.  In fact, his bank was conservative and planned for a $3 million loss this year, but ended up with a $3 million profit.  Here’s what he did:

Like many healthy banks, Citizens late last year figured it was in for a tough couple of years with the national recession and the continued turmoil in financial services, which anchors the regional economy. So it applied and won $20.5 million in bailout funds from the Treasury Department on the usual terms requiring a 5 percent annual dividend payment to the government. A few weeks ago, while reading a newspaper article, Price came up with an ingenious plan for how to use it.

The article was about the reluctance of people to buy a house in the current market, and what kinds of incentives had been used successfully by builders and bankers to get them to close a deal. Two stood out: lower rates and the waiving of closing costs. And that got Price to thinking: What if Citizens were to use its federal bailout money to offer below-market mortgage rates with no closing costs to consumers who would buy a house, or a house lot, from builders and developers who had borrowed money from Citizens?

Price asked some of his loan officers to check with the builders and developers, who not surprisingly were excited enough about the project to be willing to chip in some money to help cover a portion of the forgone closing costs. So last week, Citizens launched its marketing campaign for the $20.5 million program, in collaboration with its builder-developer customers, offering 30-year loans with an initial teaser rate of 3.5 percent for the first two years, rising to a fixed 5.5 percent rate (the current market rate) for the balance of the loan.

Its great to see smaller banks succeeding while the big ones are failing.  Its unfortunate that an executive like Price who makes under $500,000 is not rewarded more for his success.  I would love to see someone with his talents have the ability to rise up in the banking industry during the current upheaval.  Instead, by bailing out the big banks, the same execs who got us into this mess continue to run their companies, huge salaries and all.  It’s crazy to me.  I understand that rationale behind the bailouts, but one would think at a bare minimum, the money could have been used in more interesting and worthwhile ways.

Pearlstein ends with this:

So here’s a question the House Financial Services Committee might put to the Titans of Finance: How is it that Kim Price, a community banker with an undergraduate degree from Appalachian State University, a tiny executive staff and a pay package that you would consider insulting, somehow managed to come up with a more creative use for his government bailout money than any of you?

Besides for the subtle dig at Appalachian State, which I would assume he would use for any banker who has a degree from any non-ivy, I would love to hear how these CEOs would respond.