Musings of a VC in NYC

Student Loans and the Education Bubble

I was early for a meeting on friday afternoon and found myself sitting in a chat between a University President and members of the faculty. One of the faculty members asked the President about the "education bubble." The President gave his thoughts on the topic and then unexpectedly turned to me and asked what I thought. 

I am a product of student loans. I got an engineering degree at MIT and a MBA at Wharton and paid for both of those degrees with a mix of family support, tuition credits for working while in school, and the maximum amount student loans I could take out. I spent much of my 20s paying those loans back. I remember when I made my last payment. It was a moment of great pride. 

I have made a tremendous return on my two degrees. Those student loans were an investment in me and they paid off big time. For the right student and the right institutions, there is no better investment that society can make than to pay for a high quality college and graduate education. Not only have I paid back the loans, but the Gotham Gal and I have made and continue to make generous gifts to a host of educational institutions. We will pay back the investments made in us many times over.

When it came time for our children to go to school, we have paid for the highest quality education we could find for them. We are fortunate that we did not have to take out loans to pay for those tuition bills. But if that were not the case, I am confident we would have borrowed the money to help them attend those institutions. So we are big believers in the value of a higher education and we have invested in it for ourselves and our children.

I told the University President and the faculty members all that. But I also told them that I am deeply concerned that about the cost of a high quality education and the fact that it is getting out of reach for many. And I told them that I am not sure the return on the investment is as high as it once was for many degrees. And finally, I told them that too many students are walking out of college with a student loan burden that is crushing and that they can't and won't pay back. 

So how you reconcile these two opposing views and what can we do about it?

Technology can help. But it is a tool not a panacea. Given the choice, most of us are still going to opt to send our children to MIT instead of the University of Phoenix. MIT and the other leading higher education institutions will increasingly use technology to improve the education they deliver and do so more efficiently. This may help alleviate the ever rising costs.

But we also need to get more creative about the financing of higher education. We should measure the return on investment students are getting from the institutions they attend and the degrees they obtain and tie the amount of loans they can get to the returns they are likely to achieve. Students that attend institutions that can deliver higher returns should be able to take out larger loans.

Repayment terms need to change as well. Loan repayments should be capped at a percentage of current income. I know a woman who has been out of graduate school for more than a decade who dedicates one of her two paychecks a month to paying back her student loans. She is spending half of her take home income on her student loans. That is nuts.

Bubbles are driven by easy money that drives irrational behavior. Our student loan policies have been doing some of that. We can and should change our policies to force more rational decisions in the purchase of higher education in this country. 

But we cannot forget the power of a high quality education to put our children on the best possible path in their lives. I am an example of what such an education can do for someone. And I know that there are many others out there just like me. We need to figure out how to reform the system in ways that don't cut that path off for students like I was thirty years ago.

After School Programming

I remember when I was in high school. A friend of mine and I stayed after school and built a rudimentary football game on a TRS80 using Basic. It was the first actual coding I had ever done. I didn't get into more serious stuff until college.

I honestly can't remember if we had a teacher supervising us or not. I don't even remember the name of my friend who I did this with. The whole thing is fuzzy. It was almost 35 years ago.

But those fuzzy memories came back into focus for a second yesterday when I saw that our portfolio company Codecademy launched After School Programming Clubs. Like its Code Year initiative, After School Programming Clubs is a packaging innovation more than anything else. It takes the core Codecademy software learning tools and packages them up so that students and teachers can organize after school programming clubs.

Although Codecademy now supports a number of languages, they are using their Javascript and HTML stuff for After School Programming Clubs. Here's a snapshot of the idea:

If you have students or teachers in your life that would want to create an After School Programming Club, send them here to get started.

The AFSE Rec Room

The Academy For Software Engineering (AFSE) is opening in a few weeks. Roughly 125 high school freshmen will be starting a four year program that is designed to prepare them for secondary education if they want that and also for a career in software engineering and web development.

The inspiration for AFSE was the computer science program that Mike Zamansky has built at Stuyvesant High School in NYC over the past 15 years. When I first went to visit Mike at Stuy a few years ago, I walked into his office through a room where a bunch of his students were hanging out after school. These high school students could have headed home after school, or they could have hit the streets. But instead they were hanging out writing code, listening to music, playing video games, and in general geeking out together. I thought "this is where the magic happens."

So when we negotiated with the DOE for space for AFSE at the Washington Irving Campus, I was insistent that we create something similar for AFSE. We got a room and Frank Denbow is leading the effort to deck it out.

He needs the following stuff:

Furniture: Bean bag chairs, couches, small tables, tv stands

Electronics: TVs, game systems, speakers

Books: Technology, entrepreneurship, etc

Misc: Anything else that you think might be interesting to high school students interested in computer science

If you can help, please email Frank @ frank at startupthreads dot com.

How to Be in Business Forever: A Class On Sustainability

Last fall I wrote a post on Sustainability and ended it with this thought:

I am tempted to develop a course on this topic. I think we need a lot more of this type of thinking in business. It seems in such short supply these days.

So I am excited to announce that I am going to teach a class on this topic. It will run the entire month of October and it will be integrated into MBA Mondays for the month of October.

I am using our portfolio company Skillshare's brand new Hybrid Class model so that anyone in the world can take this class.

Here is how it works (taken from this page outlining the course):

- This is a project-based class. You’ll work collaboratively with other students to complete your project at your own pace. Along the way, you’ll have project milestones, weekly resources, and office hours to help you with your project. Our project will be to build a "Sustainable Business Model Canvas."

- Every Monday morning, you’ll receive a weekly email with resources, readings and questions to guide you through your project. This will also be my weekly MBA Monday blog post for those who are regular AVC readers.

- Use the Discussions tab in the Skillshare class page to ask questions, share resources, and get feedback on your projects. You can also host or join a Local Workshop in your city to meet with other students in person.

- I will will host weekly livestreamed online Office Hours where I will answer questions, give feedback, and guide you to successfully complete your project.

If you want to take this class, you can sign up here. If you are a regular AVC reader or regular MBA Mondays reader, you are going to at least audit this class because it's going to be taking over the monday posts for the entire month of October. Either way, I am excited to do this. Sustainability is a big issue in business today and I think this is a great opportunity to get the key ideas and issues out there in a way that as many people as want can consume them.

The Next Generation

I got a tweet from a bot that told me yesterday was my fifth anniversary on Twitter.

@fredwilson Happy 5th TwBirthday! You've been around since 12 March 2007! twbirthday.com/fredwilson/

— TwBirthday (@TwBirthday) March 11, 2012

 

That got me thinking about how long I'd been doing the things I do every day on the Internet. And I responded with this tweet last night.

 

Ive been tweeting for five years today. Blogging for almost nine. Browsing for eighteen. Emailing for twenty three. Computing for thirty six

— Fred Wilson (@fredwilson) March 11, 2012

 

It was at age fourteen that I started going down to the West Point computer center and playing around with the mainframes they had there. It was 1975 and I was going into ninth grade. It was super cool to be able to create things on the computer. We mostly hacked up graphics stuff and crude computer games. And we didn't go often. There were only certain times of the week we could go and it was a bit of a walk from our home.

Contrast that to today. I met with about 140 eighth graders yesterday at one of our Academy For Software Engineering open houses. These kids don't have to walk a mile to a computer center that is only open to them a few hours a week in order to hack around. They have laptops in their schools and many of them have laptops at home.

When I meet with these eighth graders I like to ask them "if you had the coding skills to build anything, what would you build?" The answers are inspiring. One young man told me he wanted to build a better operating system. He was going to fork a version of linux and do just that. 

 

Me to a room of 8th graders "what do you want to build w/ coding skills?" one student "I want to build a better operating system" #impressed

— Fred Wilson (@fredwilson) March 11, 2012

 

Another eighth grader said he wanted to build a better social network, one that was based on the things that interested him and one that would connect him with kids around the world that were interested in the same things.

The girls in the room were full of ideas as well. They haven't yet reached the age when they are told they shouldn't be software engineers. I hope they can become accomplished software engineers before anyone tells them that.

These eighth graders were mostly born in 1998. They are the same age as Google. They have never known a world without a browser, a search engine, and a way to connect instantly to people on the Internet. They expect things to work a certain way and when they don't, they want to fix them. They are hackers by default.

If there is anything I've learned in the past few weeks as I've met between five hundred and a thousand eighth graders throughout the NYC public school system, it is that computers and the Internet are front and center in this generation's brain regardless of upbringing.

I suspect that is because this next generation has had access to computers in a way that preceding generations did not. As the cost and form factor of powerful computers comes down, computing reaches a broader segment of the population of America and eventually the world. And it is human nature to want to understand, control, and fix the things that you use every day.

So hacker culture is spreading from those with means to a much broader population. And this is happening on a global scale. It's impossible to comprehend what the result of this shift will be. But I think it's going to be transformative in many ways.

Textbook Cases

I read something today that I wish I had written. So I am going to cross post it. This post comes from Noah Millman and it is about the lame textbook thing that Apple launched recently. With that intro, I'll shut up and let you read Noah. The original post is here. If anyone knows how to reach Noah, I'd like to email him and tell him how much I liked his post.

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I see that Steve Sailer and Matt Yglesias are both wondering why Apple’s iPad textbook initiative is so lame. Sailer wonders why Apple isn’t exploiting the interactive possibilities of the tablet to make textbooks much more effective. Yglesias wonders why Apple (or the Gates Foundation) don’t just give textbooks away for free, and thereby both increase the appeal of the tablet and reduce costs to hard-pressed school districts.

The answer is: Apple is a big company, and the Gates Foundation is a huge philanthropy. Large institutions are not the places to turn to, generally, for disruptive innovations.

Apple has no reason to go head-t0-head with textbook publishers, any more than it has any reason for going head-to-head with music labels or book publishers. It’s a much sounder business strategy for Apple to coopt these complementary businesses and make them dependent on Apple. Which is precisely the strategy that Apple has pursued.

The Gates Foundation is a somewhat more complicated story. In their case, I’d say the complementary relationship is between the foundation and the foundation’s clients – and their clients are education reformers, not education professionals. Simply giving textbooks away for free would upset an incumbent that the reformers are not particularly targeting, and would not put in place any structure for the creation of new textbooks. And incubating new products really is beyond the scope of what the foundation does.

Within the world of regular public school education, educational professionals have distinctly limited ability to express any kind of preferences – and the Bush-era education reforms have reduced this scope even further. The target market for textbook publishers is the politicians who set the curriculum for the nation’s largest school systems where that curriculum is set statewide: California and Texas. It matters very little what an individual teacher in Houston or Oakland wants or needs – or thinks their students need.

If you want to see disruptive change in the textbook market, then, you’d need to identify both a potential supplier of the product with no stake in propitiating the incumbents, and a buyer of the product for whom the product solves a problem.

My suspicion is that your best bet would be to have the supplier and the purchaser be, in some sense, the same entity. And I can think of two parts of the educational landscape where that situation might obtain: the KIPP network of high-performing charter schools and the home-schooling movement.

KIPP has the advantage of having a centralized structure and access to funding to implement a strategy. They already create their own curricula. Creating their own textbooks would be the logical next step. If the educational advantages Sailer sees as the potential in tablet-based study really exist, KIPP – which is already very data-driven in its approach to education – would be ideally placed to realize them. Similarly, if the cost advantages exist – initially, reduced spending on textbooks; over the longer term, reduced spending on teachers, as highly interactive tablets made it possible to stretch teachers over larger groups of students – KIPP actually has the incentive to realize these as well. One downside might be that KIPP would have an incentive to retain intellectual property in anything they created – but if it was successful, it would probably spur other charter networks to respond, and the smaller networks would be well-advised to work together rather than independently, simply for reasons of scale, and therefore to do something more open-sourced.

The home schooling movement, by contrast, has no access to funding nor any decision-making structure – but it has the advantage of having a much larger network of individuals potentially capable of committing resources to the project. One could imagine a Wikipedia-style process of textbook creation, where hundreds of thousands of home-schooling moms and dads donate a small portion of the time they already spend on teaching their kids to producing or editing material for the virtual textbooks they all use. You would, of course, need some kind of central structure to handle the programming – but even much of this could be relatively decentralized once the essential framework was in place.

Working either through the charter movement or the home schooling movement would enable a tablet textbook project to start small, yield immediate returns to participants, and scale easily, while largely ignoring the interests of incumbent institutions. And it wouldn’t require the sponsorship of an Apple or a Gates Foundation. Working through the regular public school system, which would certainly require some kind of megadollar sponsorship, would start big, would have to coopt the interests of incumbent institutions, and would make it difficult to impossible to actually yield quick returns to the most important participants: the teachers and students in the classroom. Which, unfortunately, has been the fate of all too many big-think reform proposals for the regular public schools. Much more sensible to build something in more natural laboratories for innovation, and then figure out how to “port” an already proven solution to the regular system.

The Academy For Software Engineering

A number of years ago, I wrote a blog post talking about the need to teach middle school and high school students how to write software. In the comments (where the good stuff happens), a Google engineer told me to go down to Stuyvesant High School and meet a teacher named Mike Zamansky who had taught him to write code in high school. So I did that and thus begun my education into the world of computer science education in the NYC public high school system. What I learned was that other than Mike's program at Stuyvesant and a few other small programs, there wasn't much. So began my quest to see more computer science and software engineering in the NYC public school system. 

Yesterday I went up to the Morris High School in the Bronx to watch Mayor Bloomberg's State of The City Address. In a speech that was largely about the intertwined nature of education and the economy, he announced that the city is opening The Academy For Software Engineering this fall in the Union Square neighborhood of New York City. It was a proud moment for me and Mike Zamansky, who was seated next to me on the stage.

I want to personally thank the Mayor, his education team led by Dennis Walcott, and his economic development team led by Robert Steel for adopting an integrated set of technology, economic development, and education policies and then aggressively rolling them out city wide. The Academy For Software Engineering is just one part of a much bigger strategy of developing new industries and new jobs in New York City and making sure we have the education resources, both in K-12 and at the college/university level, to properly staff these new industries.

The Academy Of Software Engineering is not a "specialized school." It will be open to all students as part of the high school admissions process in NYC. The City's goal (and mine too) is to open up opportunities for many more students than the small number of specialized schools can deliver. Hopefully the curriculum that is developed and teachers that are trained at the Academy will get rolled out into high schools all over the city in the coming years.

The Gotham Gal and I have provided the initial financial support to hire a new schools team and recruit a top notch Principal. But we do not want to be front and center in this story. The team at the DOE and City Hall that has brought this school to life and the Advisory Board of educators and industry leaders (led by Evan Korth of NYU) should get way more credit for what has happened to date. And we will need more financial and industry support (as well as a fantastic Principal) to make this school a success. So if you would like to join us in this effort, please email me via the contact link at the bottom of this blog and let me know how you would like to help. This is an ambitious effort and we will need it.

Fredsquare

Our very own Kid Mercury has built a learning community (and game) called Fredsquare. The following is a guest post he has written to introduce all of you to it. I hope you'll visit Fredsquare, play the game, and learn a bit about startups too.

I am sure the Kid will love to get your feedback on Fredsquare in the comments too.

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FredSquare is an application I’ve hacked together for the AVC community. Its mission statement is to help startups learn. Here’s how it works:

Articles and videos from around the web that help startups learn are imported the site.

Comments on AVC tagged #fs are also imported. If you’re leaving a comment that you think helps advance the FredSquare mission – help startups learn – please feel free to tag it #fs.

Imported content, #fs tagged comments, and original content contributed by FredSquare members is curated and organized to create FredSquare University. I like to think of it as “Wikipedia for startups”: an encyclopedia-style reference source that we can use to continue learning, so that we can build the best startups possible.

Those with the Bouncer Badge are responsible for curating content and building FredSquare University. (Currently this is just me, though hopefully we can grow to more Bouncers in time when it is warranted). The more content of yours that Bouncers add to our University, the more Badges you’ll earn. Each Badge is assigned a numerical value, and the sum of your Badges is your FredScore. Boosting your FredScore will unlock privileges as our game develops (right to launch your own storefront and accept FredBucks, discounts on other stores, etc – but all that comes later, once the community has some more engagement).

While building an educational resource is the paramount goal, effectively serving our mission goes beyond creating an encyclopedia – for learning is an interactive endeavor, and we humans tend to learn most by doing. And so, the game mechanics of FredSquare also reward founders for building their startup. Here are some Badges founders can earn for engaging in activities that most startups need to do to as part of their path towards sustainable success:

Slide Deck (for publishing a slide deck)

Video Pitch (for creating a video pitch)

Engaged Users (for reaching 10,000+ authentic registered members)

Disruptive Strategy (for having a strategy that fits the framework of disruptive theory

Click here for a full list of badges.

My New Year's Resolution: Start Coding Again

It's that time of year for a new year's resolution. I've been thinking about mine all day. And then I learned about Code Year, a service built by our portfolio company Codecademy that helps you learn to code in 2012.

Here's how it works. You give Code Year your email address and they send you a new interactive coding lesson every week.

So my new year's resolution is to get back my long lost coding skills. I've signed up for the weekly email and plan to do them every week. You might want to join me. If so, go here and get started.

Raise Cache

On the evening of November 17th, the NY tech community is going to throw a party to raise $100k for HackNY. It is called Raise Cache and it should be a lot of fun.

At 8:30pm there is going to be a fashion show featuring members of the tech industry on the runway. I have a terrible feeling that I may be one of them. If so, I apologize in advance for embarassing myself, particularly to my wife and children.

At 9:30pm there is a party with open bar and a "in real life" turntable.fm DJ set. There has already been trash talking between the DJs who are listed here.

There is also a pre-show mixer if you can't wait to start partying.

All of this action goes down at the Armory on Lex and 25th in NYC. There are all sorts of ticket combinations and student discounts. You can see all of them here. The early bird sales close sometime on thursday so if you want to get a discount (other than student discount), get your tickets now.

HackNY is an amazing program and it deserves all of our support. This is a great way to show that support and also have some fun.

If you don't know what HackNY is, it's a summer program to bring top CS students from schools all around the country to NYC to work in our top tech startups. Here's a video that explains it well.