Every Industry Gets Worse When Government Gets Involved

This is easily provable with Public Choice Theory, and consistently proven in practice.

Contrary to the absurdly naive belief that monopolizing an industry will produce “efficiencies”, it has the opposite effect.  All the wrong things are incentivized and no one has any clear signal of what creates value. (See “Socialist Calculation Problem“)

Antony Davies shared this depressing graph with me last week.  If you’ve been to a health care provider in the last few years, you’ve felt the pain this causes in the realm of customer experience.

 

Non-Physicians in Health Care

Why Golden Parachutes are Better Than Tenure

People argue for tenure as a way to allow risk taking, bold explorations into controversial ideas, and new frontiers in academia.  Without knowing their job can never be lost, how would professors have the incentive to take risks?  And after all, even if many don’t pay off, the most important advances come from big risks.

Any time you’re in a non-market or highly distorted market, it’s hard to know what really works and what doesn’t since genuine signals are absent.  Higher education is not even close to a functioning free market industry, so in order to assess the merit of claims about the value of tenure we ought to look elsewhere.

If tenure is really effective we should see it in other areas where risk taking and controversial advocacy are necessary.

It turns out we don’t really see it anywhere.  In a genuine market, it’s not used as a mechanism for incentivizing risk-taking behavior, even where such behavior is arguably far more valuable even than it is an academia.

Entrepreneurs do not have tenure.  Their risk has no subsidy or backstop except the safety net of their own skill and ability to earn a living elsewhere if the venture fails.  Raising capital from an investor is one way to create the space necessary to experiment with bold ideas, but investors fight to ensure the opposite of tenure.  They want seats on the board and the freedom to vote the founder out.

Inventors and artists need to explore wild, crazy, unthinkable ideas.  Yet tenure is not common in any private sector research labs or the entertainment industry and certainly not in the garages and basements of individual creators.  Intellectual property laws can provide a kind of hedge against risk for the tiny percentage of creators with the means to gain and defend IP, but on net IP actually increases the risk to inventors and artists (when other people gain patents and sue).  Even if IP is gained, it protects the creation, which still has to sell to consumers, it doesn’t ensure an income for the creator.

What about CEOs?  Especially in large publicly traded companies, CEOs need to be free to take major risks.  They need to alter the brand, company culture, product lines, production processes, and anything else that might be inhibiting growth.  CEOs need to advocate crazy ideas and bring bold new visions to fruition, with no guarantee whatsoever they will work or be well received by customers, employees, or investors.  Billions of dollars and thousands of careers are on the line.  Do boards offer them tenure as a way to ensure they are properly incentivized to make unpopular decisions or advance bold ideas?

Never.

But the need for such protection is real.  An incentive structure too hard on failed risk-taking would be hugely detrimental.  Instead of the beloved tenure, something else has emerged in the market.  The despised “Golden Parachute”.

CEOs of large companies get really nice compensation packages, even if they get fired or the company tanks.  This is a hugely valuable tool.  Without it, the CEO role would be undesirable, and bold changes would almost never occur.  If they know they won’t be left out in the cold after a risky idea fails, they’re more likely to try it.  Additionally, if the previous CEO wasn’t impoverished for failure it will make the search for a high-quality new CEO far easier.  No one wants to work for a place that might destroy them if things don’t work out.

The huge advantage the golden parachute has over tenure is that it protects the individual risk taker without letting them bring down the quality of the institution.  Tenure for CEOs would be a disaster.  Boards would be stuck with bad CEOs for life, embarrassing the company and making everyone suffer.  Golden Parachutes, in contrast, allow for a speedy dismissal of a bad executive before they bring down the firm, but still create an incentive structure for risk-taking on the part of CEOs.

While some level of protection from catastrophic failure or public opinion is valuable for encouraging risk-taking and innovation in some fields, tenure seems an inferior method than what emerges in the market.

Episode 64: Don’t Get Mad at Millennials – Declan Wilson on the Good Side of Gen Y

Declan Wilson, author of The Millennial Way, and curator of the blog A Millennial Type, joins me to discuss chasing dreams and Gen Y.

Declan is documenting his own personal efforts to transition from a 9 to 5 job to full-time writing and fatherhood.  We discuss the extent to which stereotypes about Millennials are true and whether all this talk about “lifestyle design” and fulfillment is just cheesy motivational claptrap.

This and all episodes are available on SoundCloud, iTunes, YouTube, and Stitcher.

Episode 63.5: Fridays with TK – “How I Was Almost Luke Perry”

What does it mean to sell out, water down, or compromise who you are?

What are the unseen costs of doing so, and the unseen benefits of resisting?

Today we discuss this in depth, including stories about how TK could have been as cool as Beverly Hills 90210’s Luke Perry if he hadn’t given in to peer pressure and how I nearly ended up a drug dealer.

Here’s Paul Graham’s essay referenced in today’s show.

Also mentioned were the books The Education of Millionairesand, The Last Safe Investment.

This and all episodes are available on SoundCloud, iTunes, YouTube, and Stitcher.

How to Play Basketball Well

The same way you do everything else well.  Practice, then reflect, then practice some more.

The common, conveyor-belt education system has a pretty bizarre approach to learning.  It doesn’t mirror any learning pattern that high performers in any field use.  It looks something like this:

Theory–>Theory–>Theory–>Theory–>Theory–>Practice (end)

In other words, you sit in classrooms studying things and memorizing knowledge from “experts” for nearly two decades.  Then you’re supposed to take all that theory and successfully practice it in the real world and live happily ever after.  Education is done, now you just go live well.  You’re supposed to succeed in the marketplace and life after only ever thinking about it.  Unless the theory is the practice – unless you’re learning to be an academic – this is a very bad way to learn.

I’ve written before about how absurd it would be if we taught bike riding the way we teach careers.  But I’ve been thinking a lot lately about an even better comparison, and one I know more about than biking.  Basketball.

How do you learn to play basketball?

First, you practice.  Maybe on a mini hoop, maybe on a full-sized hoop.  But you just start shooting and dribbling.  After you have the basic motions and movements and muscle memory down, you start playing with other people in actual games.  You play a lot of pick-up basketball.  Maybe you play in an organized team setting.  The coach might have you focus on specific aspects of the game or skills as you drill and condition.  You’ll scrimmage, run plays, and plot your approach to offense and defense.  You play, then a new concept is introduced, and you immediately play some more and try it out.  Then you stop to reflect and get feedback, tweak your approach, and play again.

At the highest level, this pattern is even more pronounced.  Good players practice a lot.  There is no world in which merely theorizing about basketball teaches you to succeed on the court.  Practice is always the first step and vastly more important if you have to choose one.  But when you go from good to great players, something else happens.  Theory comes into play.  The learning pattern for playing most successfully looks something like this:

Practice–>Practice–>Theory–>Practice–>Practice–>Theory…(ad infinitum)

Great players spend more hours in the gym than anyone.  But after they play the also reflect on their performance.  They review film from previous games.  They study what the offense did.  They observe what happened and theorize about why they were stopped in the paint by this or that defense.  They plan for the next game.  They review film of the next opponent and plot an approach to match.  They constantly reflect on the feedback they get from the real world of practice and play.  They seek out other achievers who have struggled with mental toughness, or strength building, or recovery from injury.  They employ motivational tactics and specialized training.

Notice the pattern because it’s very important.  Hours of film study and offensive scheming are of no value to the novice.  If you’ve never hoisted a ball in the air, learning the perfect placement of your index finger or the optimal use of trash-talk to gain a mental edge isn’t going to help you.  Theory is hugely important.  But it becomes important only when it has past practice upon which to reflect and future practice for which to prepare.

Notice also that, unlike the conveyor-belt education system, the basketball model is never done.  There is no end point.  It’s an ongoing process.  There is no graduation.  Michael Jordan, at the peak of his game and dominating the greatest ballers on the planet, famously came back from every offseason with something new.  He practiced.  He reflected and theorized.  He tested it with more practice.

In this model the role of teacher fades almost entirely.  Specialists with knowledge of the history of the game or the mechanics of the human elbow can be employed in specific situations when needed, but they are in no way the key ingredient to learning the game nor are they valuably employed until a whole lot of playing has occurred.  Instead, coaches and trainers emerge.  People who don’t tell you which facts about basketball are correct and must be memorized, but people who challenge you to get off your butt when you don’t feel like practicing.  People who help you in the process of reflecting on your unique game and keep you accountable to your unique practice process.  They are observers who watch you in the actual act of playing the game and provide real-time feedback from their vantage point.  They aren’t your authority – you can’t find a new coach anytime – but there for motivation and insight.  Some of the greatest players are famous for ignoring their coaches as often as listening to them even though they deeply respect them, which strikes me as a pretty normal and healthy way to see the relationship.

Another important thing about learning basketball is the value of mimicry.  How did the hook shot join the common arsenal of post players?  Because someone did it well and everyone who played against them realized how effective it could be and began to copy it.  How do you learn to crossover or headfake?  By being crossedover or headfaked at the playground and determining to do the same.

Learning happens more from being around people and environments than it does from consciously thinking about them.  You have to be immersed in the actual play of the game.

My friend and colleague at PraxisTK Coleman, our Education Director – loves the game of basketball probably even more than I do.  We don’t view this analogy as just a cute comparison.  I think success in any career is far more like success in basketball than it is like success in a classroom.  The principles of learning the game are the principles of learning to perform in just about every other arena.  This is why we are so focused on apprenticing at startups and small businesses – practice – and reflecting on the experience and how new skills and mindsets can make it better – theory – and trying them out – practice – and discussing…etc.  This is why our advisers have coaching sessions with participants, rather than giving them lectures.  Philosophy is hugely important to success in any field.  But only if you’re already in the field trying things out.

Kids aren’t practicing for life or career by sitting in the classroom taking tests.  They’re theorizing about it.  They’re not observing those who are successful (except, best case, at teaching) and mimicking them.  They’re reading what other people said about the successful.  They’re being introduced to a few fragments of the history of the game or uniform design or what one conditioning coach thinks about one approach to calf muscles.  They’re not being transformed into great players, they’re simply checking the memorization of lifeless, contextless knowledge off a list of assignments.

You can’t expect to win by studying.  You’ve got to play the game.

School is a 16-Year Internship for Professors

Want to learn something?  Be around it.

The habits, ideas, processes, and perhaps most importantly, incentives of the environment you want to be a part of will teach you vastly more than consciously studied facts.

Julian Jaynes, in his seminal book on consciousness, cites a study where students were told to compliment any girl wearing read.  Within a week, red outfits were everywhere in the school.  The girls weren’t consciously responding to factual knowledge but internalizing the compliments and altering their behavior subconsciously.  Jaynes argues that learning signals, skills, and even reasoning are not, in fact, conscious processes.  In fact, after taking in the basic structure, being conscious of learning gets in the way and slows the process.

This means the subconscious queues and incentives of the environment are a more powerful force in determing what you learn than whatever conscious topic is presented.  What you pickup on and get rewarded for and see others doing to succeed or fail shapes how your brain transforms and adapts to succeed.

This has some pretty interesting implications for schooling, from kindergarten through college.

The school setting, whatever subject is being taught consciously, is a single-file line-standing, speak-when-given-permission, the “expert” knows all right answers, zero-sum, obedience training program.  The clear “winners” in the school setting are the authority figures and those who best please them.  The academics and kids who do things that academics like.

In other words, school is a 16-year internship for being a professor.

You’re immersed in the daily habits, worldviews, problems solving methods, attitudes, and incentives of professors.  What you learn from shadowing academics isn’t whatever topic they might be teaching as much as how to be like them.

This is, of course, the ideal program if you want to be an academic.  I have many wonderful professor friends and I’ve met some young people who want to be professors.  The system was built for them, and it’s a good fit.  They should stick with it happily.

The problem is that most people have no idea that they are in an extended academic internship.  Most don’t want to be professors or they simply have no idea whether they do or not because they’ve never been around anything else.

You can’t discover what you might enjoy or be good at from academic books and practictioners telling you about it.  You need to experiment and experience it.  You need to be around people doing those things.  You need to apprentice with people other than just academics to learn what people other than academics do and how to succeed in that world.

Get out of the classroom and try real world stuff to find what you enjoy and are good at and immerse yourself in the subconscious learning of how to succeed in whatever environments you explore.  A few courses or books or a major can’t give you that knowledge while your subconscious is fully occupied with learning how to be a professor.

You might not be learning much from the conscious process of schooling (hence forgetting everything after the test), but you’re definitely learning something in school.  The question is, do you want to learn that something?  Will it help you, or set you back in a dynamic marketplace that cares only for value creation, not academic process?

Yes, this realization is precisely why Praxis was created – to give you a real-world apprenticeship with top entrepreneurs in a variety of industries and dynamic businesses.  Check it out.

Episode 63: The School Sucks Project, with Brett Veinotte

I’ve been a big fan of the School Sucks Podcast for a few years now, so it was awesome to have Brett on the show to discuss his work and what motivated him to launch it.

We discuss his personal history, the history of schooling, why conspiracy theories are valuable learning tools, and much more.

Check out all things School Sucks here!

This and all episodes are available on SoundCloud, iTunes, YouTube, and Stitcher.

Episode 62.5: Fridays with TK – Entrepreneurship for Young Minds

*Weird audio issues today, forgive the sound anomalies.

I’m kicking off what (I think) will be a regular feature on the podcast.  A Friday “tweener” episode where TK Coleman comes on to talk about…whatever comes up!

Today we discuss entrepreneurship, whether the word is too broadly used, the difference between entrepreneurship as an action and entrepreneurship as a career.

Check out the 60-day Teen Entrepreneurship Course discussed on the show and use the promo code “PODCAST” for a 30% discount.

This and all episodes are available on SoundCloud, iTunes, YouTube, and Stitcher.

Praxis and the PDP

One of the core building blocks of the Praxis educational experience is the Personal Development Project, or “PDP“.  A PDP is simple: a self-chosen 30-day challenge with tangible benchmarks and outcomes, documented and demonstrated.

Project based learning – tackling a challenge that the learner has individual, intrinsic motivation to tackle – is the most valuable method for transforming your mind and habits and building your personal capital.  It bypasses dichotomies between theory and practice by focusing instead on desired outcomes.  It’s about who you want to become, and what in your unique situation is most likely to help you get there.  This is the way most people approach physical health and fitness, but it’s surprisingly rare when it comes to mental and emotional intelligence, character, and skills.  It shouldn’t be.  It works.

So how do our participants get started with a PDP?  My favorite method is to let your obstacles take the lead.  Obstacles often hide or disguise themselves, so first you have to find them.

Jot down some bigger picture outcomes or goals or descriptions of the kind of person you want to be.  Maybe, “I want to be a published writer”, or, “I want to travel 6 months out of the year”, or, “I want to earn a living as a freelance designer”, or, “I want to be a go-to expert on nanotechnology that people interview”.  Think in terms of who you want to be and what kind of experiences and outcomes you want to have, not in terms of titles or labels.

Now that you have a handful of these big picture goals listed, pick one and ask yourself what is keeping you from doing or being that right now.  Maybe you’re writing isn’t sharp enough, or you are too insecure to submit to a publication.  Maybe you can’t afford the travel, or your design skills aren’t hireable, or you know nothing about nanotech.  Try to get specific in terms of what’s keeping from these goals.  “I’m not organized enough to handle multiple clients”, or, “I procrastinate too much” are good examples.

Now you have your obstacles.

Your obstacles are invaluable because they inform you as to what kind of activities are going to be valuable to you.  If procrastination is one of your major obstacles you could build a very basic yet incredibly powerful PDP where you, for example, read one chapter from “The War of Art” and write and publish a blog post every day for 30-days.  The mental tools in the book combined with the no-escape activity of daily blogging will absolutely and dramatically improve you ability to create even when the mood isn’t right.  You will become a better person in that 30 days and you will chip away at one of those obstacles – maybe even obliterate it altogther.

This is just one example.  Maybe you commit to reading five books on a topic in a month.  If you read five books on any topic you will immediately be in the top 5% of people with knowledge on the topic.  It’s surprisingly easy to make huge gains.

Whatever goals, obstacles, and activities you identify, the most important thing is doing it.  You must make progress on it every single day.  The beauty is, anyone can do something for 30 days.  It’s hard, but not so hard that you have any excuses.  You must make the activities measurable and demonstrable.  You must setup an accountability method.  At Praxis we do this by asking participants to build a personal website and publicly share their PDP activities and then document them as they complete it.  Thier advisors are there to coach and challenge them as they craft and complete the PDP’s.

In the end they have tangible evidence of how they increased their value that month – based on their own goals, not anyone else’s.  More importantly, they become more of who they want to be.  The principle of compound interest is powerful and it applies to more than money.  Improve yourself by 1% every day and soon nothing will be out of reach.

Whether a hard skill, soft skill, body of knowledge, a network, a mindset, or a habit: if you want growth and transformation – what real education is – I cannot recommend a PDP enough.

Try building your own.  If you have a hard time getting started, try one that we created at Praxis as an excellent entry point.  See if you can stick to it, making progress every day.  It’s a lot harder than you think, and far more rewarding than you can imagine.

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