Stayin’ Alive or Moving Forward

Over the weekend, I listened to my friend, Jon Kiger, broadcast a radio show from the studios of WPEA in Exeter, NH where he was playing music and interviewing the Academy’s principal who requested that Jon play the disco classic “Stayin’ Alive.” I would not have chosen the Bee Gees, but in the matter of tastes, there is no dispute. Jon introduced me to WPEA many years ago and it was a great treat to hear him broadcast again through the marvels of Internet technology.


I began to ruminate that it would have been absolutely impossible for me to have enjoyed Jon’s show just a few years ago. So much has changed in the world and in many markets since I received my high school diploma and yet so little has changed in the delivery of education at the secondary school level. I attended a prestigious boarding school – Phillips Exeter Academy – and although the Exeter experience is an extraordinarily rich one, the delivery of education at even Exeter has changed very little relative to the changes in products and services since I left campus in the 1980s.


Unfortunately, over the past generation, educational institutions (especially primary and secondary ones) have not made the transformative changes made in other industries. Expenses have skyrocketed and students appear to get less and less for dollars spent on a relative basis when compared to almost everything else in society since my commencement. I recently compared the quality of work that I completed in fourth grade versus what my daughter had been assigned and prepared; there is sadly no comparison. On an objective basis, the work assigned a generation ago was more challenging and rigorous. But the bigger problem is that I do not believe that children today should even be following a “light” version of the same curriculum that I was given.


When I consider the amazing changes that have occurred in the quality of a variety of products and services since the 1980s – computers, autos, electronics, cable TV, cell phones, medical diagnostics, healthcare technologies and services, LED light bulbs, internet shopping, electronic trading, banking and communications, internet grocery delivery, and video on demand -- the list goes on and on. And still I have yet to see many significant changes in primary and secondary education. Technology has opened up opportunities for schools that never existed previously. When I attended high school, only a handful of schools could afford their own radio stations. With today’s technologies, there is really no reason why almost every high school cannot have its own online radio station. Costs to do so are now very low and the educational experience would be great. Multimedia communications grows in importance with each passing year. Mastery of the ability to convey (and also parse) a story with words, data, sounds, pictures and video is an increasingly important skill. Students should have the opportunity to practice these skills across multiple media channels as early as possible.


Technology opens up the possibility of an Exeter-like experience (similar to the experience available to classes a generation or two ago) for millions of students today. Such an experience could become affordable for millions (instead of about 1,000 students today) and with better uses of technology the Academy itself could make tuition more affordable for the students who currently attend. Indeed, the campus of Exeter itself has the capacity to take the “Exeter experience” even a leap or two beyond the possibilities open to these millions of students. Sadly, I think, our pedagogical practices remain solidly grounded in the 20th century. That statement holds as true for the so called “reformers” all over the country as it does for Exeter. The forces of the status quo are lined up very solidly against any change movement.


Primary and secondary education will change because they have to change. The current “system” no longer serves the students and does not serve the best long term interests of the teachers either. Everything was fine and dandy in Greece until that unsustainable economic model fell apart. Home prices always went up in the US until they no longer did. Learned individuals relied on these truisms backed up by solid statistical data. Well, according to the Department of Education, educational spending has outpaced GDP growth and never had a down year in the US; I predict that streak will soon end. This is a contrarian view. I am not one of the learned individuals relying on solid historical data.

Earning higher degrees leads to higher incomes is another commonly accepted adage. Yet it is not clear in a world of Bill Gates, Michael Dell and Mark Zuckerberg whether this adage will continue to remain true. Education and training matter, but it may not necessarily be the education and training that children are learning in primary and secondary schools unless we change our approach and curriculum.


Almost all careers and jobs today are being dramatically altered and even transformed by technological changes and are vastly different from what they were a generation ago. Yet what is being taught in schools and what and how schools test children are not much different from what I experienced. It should be much, much harder to take students from a generation ago and drop them into classrooms today than it would be if it were possible to do so; students would have a more difficult time adjusting outside of the classroom than inside it. It would be very difficult to take office or factory workers from 1975 and drop them into the working world of today. The world of work has transformed at a far greater pace than the world of the classroom and the classroom must catch up.


Mastery of a basic level of core facts and methods for life-long learning in school remain important. But many areas in the current curriculum are less important and must be de-emphasized or dropped to make room for new programs. Spelling has grown less important with spell check, but speed reading for content and precise vocabulary for communication of ideas have become more important. Studying a foreign language and communications are critical in a more global world as are the uses of statistics, data and analytics. And there are many curriculum items near and dear to some educators’ hearts that absolutely must go. Yes, we must kill long division and geometric proofs. We must teach word problems, algebra and basic programming to students earlier than we do. And science has to be about passion and discovery and inquiry-based with greater emphasis on science fairs and student led research. Moreover, physical education and health have become increasingly important in a sedentary world of ever-increasing obesity, heart disease and diabetes.


The pedagogical changes of the 21st century can take hold if educators are willing to throw off the shackles of the 20th century and embrace the changes occurring in the worlds of work and leisure today. To be successful educators will need to become revolutionary. They need to rethink the curriculum for the 21st century along the lines of what some of the homeschoolers (not the whacked out ones, however) are doing to make a real difference. Marginal changes are not going to get the United States where it needs to go, however.


To bring my educational ramblings back to WPEA and to Exeter. I believe most private educational institutions in the US are at the same point today where the US auto industry was in the 1980s. The products are too big, too expensive and not well suited for what consumers want and need. If they stay on their same course, I believe these institutions have less than 20 years before they will run into a wall of irrelevance. Indeed, perhaps they only have 10 to 15 years because everything is happening at a faster pace today. Costs and tuition are not under control. The institutions do not utilize technology effectively and efficiently. They desperately need to rework the curriculum to become more relevant before their current trajectory launches these schools into unchartered waters where they do not wish to go. There will always be some very wealthy parents willing to spend whatever it takes to give their children the “best” education on the planet. But unless private institutions are willing to put 80 to 90 percent of the student body on something close to full scholarship, they will not attract the same caliber of students as in the past. Their definition of “best” will have to be adjusted.


There is no law that states Exeter has to be the hallowed institution it has been since World War I or arguably even since the Civil War. The Academy cannot spend its way to success. It does not have the Milton Hershey school endowment and even if it did, the amounts spent on public education should serve as a warning. On the public side, we have doubled and tripled spending on education without any increase in output or performance. Education spending is a giant sinkhole unless we take an entirely different approach.


Exeter has spent increasingly large amounts per student in the years since I departed. I visited campus, met with students and had dinners with them for many of the 10 years between my 15th and 25th reunions and saw no discernable increase in the quality of education delivered. I could almost make the argument that students today are less articulate than they were a generation ago. I believe this situation has nothing to do with Exeter and perhaps more to do with the rise of isolating “personal communication” devices. The Academy touts the increase in standardized test scores among students over the past generation, but I think that statistic is as irrelevant as it is in the public schools. Teaching to the tests does not make us any smarter. Elite college admission rates have gone down with every year as global competition increases. We are not preparing students as well for a globally competitive world. This is fact not fiction. I am on the Board of Education for the Bedford Central School District and I see this played out every day. We need to outthink educators in India and China for there are four times as many students in those countries against whom we will have to compete.


At an 8% rate of increase, tuition doubles every 9 years. This growth rate is simply unsustainable and represents the trajectory the Academy and other private institutions have been travelling on for some time. The University of the South just instituted a decrease in the tuition rate for next year. This is the direction Exeter and other institutions should be considering – decreased tuition and significant cost cutting with substantial technology investment for the future. We should be making changes in our public school system as well, but our hands are hopelessly tied by the laws of the state of NY and our contract with the teachers’ union. It is a coming battle which will be fought in the media and perhaps also at the ballot box. Exeter has the luxury that such a battle can be waged behind closed doors in the board room if only there were the courage to do so. Nevertheless, I know the challenges in changing an institution – especially a not-for-profit with a large board. It is extraordinarily hard to do so.


I do not believe that primary and secondary education in the United States is going to fall apart in the next year or so. But I also believe that America does not have 10 or 20 years to figure out what to do and get it right. And I sincerely believe that if my high school does not begin to make dramatic changes today, by 2030 Exeter will remain too recognizable to alumni and alumnae and be a far wealthier place, but much less rich for it.

The Safety Czars (Parents and FDA) are Over-Regulating Us to Death

Valentine’s Day used to be about excitement, anticipation and a little bit of danger.  How would she respond to my Valentine?  Would he send me flowers?  Today, in schools and elsewhere, there is often no longer a sense of excitement and danger.  It has been replaced by duty and security.  Everyone in class must send a Valentine to every other person and Hallmark has mandated that we acquire items for our spouses and assistants or we are the schmuck in the room.  Valentine’s Day has become a safety net for an amicable way to say “thank you for who you are and what you have done for me for the past year.”  The Day has somehow lost its special place in the hearts of those in love or looking for love.

The process that has transformed Valentine’s Day is what I term the process of “safetification” that has transformed America slowly but surely over the past generation.  Modern American society appears to want a feel good insurance policy for a wide variety of activities.  Everyone gets a trophy for participating.  Parents, Coaches and Teachers are contributing to this new policy approach.  We are not the same nation of entrepreneurial thinkers and risk takers that we were even a generation ago when little league and soccer teams had tryouts.  Yes, the people of our great nation still come up with great ideas such as Facebook, but there are so many more obstacles and impediments to progress and entrepreneurship than there used to be in the past and these obstacles begin in childhood with how parents raise their children today.  And they culminate in our approaches to regulatory stances we take in the modern administrative state.  

I don’t know how safety has come to be perceived as one of the Über Values in our society.  Not so terribly long ago, mothers ate blue and other moldy cheeses and tuna and salmon and other fish filled with mercury and their children did not wind up with stunted development or birth defects in statistically significant numbers.  

A generation ago, children of a certain age often did not ride with car seats and (perish forbid) booster seats and they skateboarded and rode bicycles routinely without helmets.  Moreover, households did not have funky locks on doors and cabinets that frequently today frustrate parents.  There were no play dates and a parent could not reach his or her children anytime via cell phones; walky-talkies simply did not have sufficient range to keep track of where children were for much of the day. 

The children of a generation ago somehow survived these dangerous, traumatic experiences without protection and constant contact with parental units and went on to build some very impressive entrepreneurial enterprises in adulthood.  They built Apple and Dell Computer and Microsoft Corporation.  They created AOL, Netscape and Google.  They helped build Amgen, Genentech and Biogen Idec.  Will we see the same type of innovation in the future from the generation of helmet wearing, play-date arranging responsible and safe children?  I hope so, but I am not sure.  They may not be as risk taking as their Indian, Chinese or Vietnamese counterparts.

Today, the American regulatory environment that many companies face seems almost oblivious to any sense of risk versus reward.  The focus is solely on the risk and attempts to reduce risk at almost any cost.  There is no sense of giving consumers individual personal responsibility and freedom of choice.  The mantra appears to be “let’s treat them all as we treat our children today and create a safe environment for them.”  Everyone must wear figurative helmets, have arranged play-dates and have a cell phone so we know where they are.

Like the parents of the past, our past regulators used to look out for egregious excess and attempt to protect the public/children from truly unscrupulous types and real danger.  Now, regulators have become an impediment to innovation and growth. 

We are witnessing this scenario play out today with entrepreneurial companies that have produced drugs to fight obesity.  And, for example, I wonder whether FDA is the problem and no longer part of the solution for public health.  FDA has become so consumed with safety that there is no longer a balance of risk versus reward.  The Agency has forgotten the old adage that often the difference between a poison and a medicine or drug is dosage.  Witness what happened with Orexigen (NASDAQ: OREX) recently and what may happen with Vivus (NASDAQ: VVUS) in the not-too-distant future.  I can only hope that FDA comes to its senses by the time Vivus again seeks FDA approval.  The greater risk is in not considering the benefits in drugs designed to tackle the scourge that obesity has become in modern society.  Perhaps we need more of the mindset of parents from the 1950s and 1960s and less of the mindset of the parents of today? 

Healthcare IT – A Prescription to Stop the Hemorrhaging?

“ENTITLEMENT, n. – A right you believe you have that I cannot afford to pay.” – Graham Anderson’s most recent entry to Ambrose Bierce’s The Devil’s Dictionary.

As part of the American Recovery and Reinvestment Act of 2009, the Obama Administration pushed forward the Health Information Technology for Economic and Clinical Health Act (HITECH).  Beginning this year, the Act provides up to $36 billion in incentives over several years for healthcare providers (physicians, hospitals, nursing and other care-giving facilities) to adopt various healthcare information technologies.  The Act also provides penalties for those that are slow to adopt certain new technologies – particularly electronic health records.   Moreover, the Act charges the Secretary of Health and Human Services to invest in infrastructure necessary to enable the electronic exchange and use of health information. This Act certainly looks like the full employment act for healthcare IT consultants.  Accenture and IBM’s healthcare divisions are probably doing the happy dance in 2011 and beyond; Athenahealth probably couldn’t be much Athenahealthier as well. 

Will any of this money do any good?  Will any of this spending make our healthcare system any more efficient at delivering healthcare services and help reduce America’s crushing entitlement burdens?  Our nationwide healthcare system will probably become only marginally better as long as it remains in its current form.  If the money provides any benefits or gains in efficiencies, it will be because healthcare consumers will have greater access to personal healthcare data that is transferable among providers and patients will also have outcomes data for providers so that they may compare doctor and hospital performance outcomes versus delivery costs.  If we are lucky, perhaps providers will perform far fewer duplicative diagnostic tests.  And patients will then have the information to be able to choose better, more efficient healthcare providers.  Worse providers simply will get less business and, with any luck, will eventually go out of business.  Unfortunately, this process does not happen quickly.

Healthcare is also not a very rational market, and as long as we live in a third party payer world we are almost certainly doomed to overspend on such services.  That is why the costs for the final six months of life are overwhelming our society and emergency room visits are bleeding the life out of our country.

The undeniable fact is that individuals are willing to spend almost infinite amounts of other people’s money on their own healthcare or healthcare for their loved ones.  Most people do not have a moral problem with this situation when faced with it in real time.  When the alternative is a very serious health consequence or death, they will do whatever is necessary.  Thus, rational people (or their caregivers) will fight to their (sometimes literal) dying breath to extract the most “care” (read cost) they can from a third party payer system even if the care is not particularly good or beneficial. 

Today, patients often don’t know how effective treatments really are versus the myriad of costs associated with them.  Extracting additional information out of the system through much better uses of healthcare information technologies can only provide so much benefit as long as the system itself has incentives that are not properly aligned with making wise choices.  For example, for a patient beyond a certain age, should a third party payer system pay for a hip replacement instead of painkillers and a walker or motorized scooter and part time assistance?  In my opinion, individuals should be free to pay out of pocket for whatever services they choose, even if the benefit is marginal or non-existent.  But as a society that is picking up the bills, we must consider the risk of infection, healing time, rehabilitation, and all sorts of other costs associated with such procedures. 

In practice, it is very difficult to place a value on a life or a limb ex ante.  For the most part, I don’t think we need to get into that type of a philosophical debate to address the serious cost problem that we face.  To a certain extent, we must weigh all the costs of various treatment options against all the benefits and rarely do we do so today.  The problem is most acute in the last 6 to 12 months of life, but it exists throughout the spectrum of healthcare services.  Healthcare IT can help us frame how to consider some of these types of issues, but ultimately, we will have to have a system that will take into account costs and patient outcomes if we are to have any hope of realizing more than marginal benefits from a proposed $36 billion investment in healthcare IT.  No matter what we decide to spend on healthcare IT, if we do not change our fundamental approach to how we pay for healthcare, the United States will continue to spend more per capita on healthcare than any other nation in the world (and not get the best results except at the high end). 

As I see it, we have only a couple of longer term choices.  We can move to a sub-optimal, but much better system than we have today.  The US can move toward an integrated healthcare delivery model system run  more like that managed by organizations such as Geisinger.  Or we can move more optimally toward a high deductable, catastrophic plan or true insurance system supplemented with health savings accounts which patients control for non-catastrophic needs – i.e. relatively routine and preventive medicine.  Government then provides the funding for those who cannot afford to fund their own accounts to certain minimum levels.  Such a system would cost far less than what we do today because patients would be responsible with their own money for the vast majority of everyday decisions.  Ultimately, healthcare IT data would then help patients, who are allocating their own healthcare dollars, choose the best providers of services.  Patients making quality choices every day would help keep the quality of services up and the costs down with fewer mistakes made, fewer return visits to the hospital, better diagnoses, and faster recover times, etc. 

In combination with an overhaul of how we pay for healthcare, healthcare IT could provide a bandage to help stop the dollars from bleeding out of our pockets and into the system.  It will be some time before it is successful in doing so, however.