Freakonomics Radio - 9. Reading, Rockets, and 'Rithmetic

Episode Date: October 21, 2010

Government and the private sector often feel far apart. One is filled with compliance-driven bureaucracy. The other, with market-fueled innovation. But something is changing in a multi-billion dollar corner of the Department of Education. It's an experiment, which takes cues from the likes of Google and millionaires who hope to go to the moon.

You know, since my childhood, I wanted to fly into space. It was my mission, my passion, my drive, and it was something that I got stirred up in me during the Apollo program. What year were you born, Peter? So I was born in 61, and Apollo was going on in the late 60s. We landed on 69. And I was in fifth grade, sixth grade, getting interested in science during that time. And I started drawing rockets on every piece of paper I could find. And I was, you know, an early space cadet.

And it was different for me. It wasn't just interested. It was, you know, we have a calling in life. That was my calling. You must have felt that you were born at just the right time initially, right? You're a kid. This is starting up here. It's only going to get bigger and better.

And then what happened? And then the bottom fell out. And, you know, we got to the moon and then it stopped. And I was decimated by that. You know, I used to, that old biblical saying, the meek shall inherit the earth. I used to finish that by saying the rest of us are going to the stars. And we didn't. Meet Peter Diamandis.

He did get to launch a spaceship, but NASA didn't have anything to do with it. You know, this space program fell away. And I was like, OK, so how am I going to make this happen? How am I going to go? And how is everybody else going to go with me? And by chance, a good friend of mine gave me a copy of Lindbergh's book, Spirit of St. Louis. And I'm reading this book, and I find out that unbeknownst to me, Lindbergh made the trip across the Atlantic, not just on a whim or to prove something to friends. He did it to win a

$25,000 prize. And I'm making notes on the sides of the margins about how many teams competed, how much money they spent. And I was amazed. $25,000 drove $400,000 of expenditures by nine teams. And the guy that put the money only paid the winner. How cool was that? $400,000 worth of expenditures by all those teams. What kind of value did that produce then in terms of innovation? What was incredible was when Lindbergh made this flight, he changed the paradigm of what was possible. And the best measurement for that was the year

before Lindbergh flew, there were 6,000 passengers flying in the United States. 18 months after his flight, there was 180,000, a 30-fold increase. He changed the paradigm of, oh my God, if this 25-year-old kid can do it, then I can fly too. And really, it was the causative creation of a multi-hundred billion dollar aviation industry. Amazing. From American Public Media and WNYC, this is Freakonomics Radio. Today, reading rockets and arithmetic. A look at how a little bit of competition can travel a long way.

But can it make it all the way into the classrooms of America's school children? Here's your host, Stephen Dubner. The spacecraft that Peter Diamandis was responsible for launching, he didn't design it or build it or even pay for it. All he did was create a competition. Diamandis runs the XPRIZE Foundation, which offers cash prizes, big ones, to whoever does the best job of solving whatever challenge the Foundation dreams up. The first prize offered $10 million to anyone who could send a spacecraft with three people aboard

more than 100 kilometers above the Earth's surface and then come back, and then do it again within two weeks of that first launch. It worked. When you hear people talking today about the future of commercial spaceflight, they're talking about the movement that Diamandis started. That was back in 2004. One sunny day this past September in Washington, D.C., Diamandis handed out another $10 million,

this time to three teams of inventors, each of whom designed a car that is safe, reliable, and can travel more than 100 miles on a gallon of gasoline, or gas-equivalent energy. Today, we're living in a day and time where a man or woman who is passionate and driven can go out and build a spaceship, or a 100-mile-per-gallon-equivalent car, or reinvent how we educate. That's right. The XPRIZE Foundation is looking at education and poverty and a long list of other challenges, from curing AIDS to predicting earthquakes.

Another moon landing, too. As Diamandis would say, how cool is that? But the coolest part is how the incentives work. The XPRIZE Foundation gets someone else to put up the prize money. The spaceship sponsor was the Ansari family. The 100-mile-per-gallon car was sponsored by Progressive Insurance. And then they only have to pay the winners. All the other ideas get thrown in for free. It's not surprising that this kind of competition is catching on. According to McKinsey, the consulting firm, more than $250 million has been handed out for 60 new prizes in the last 10 years by all kinds of sponsors for all kinds of innovations.

In fact, on that same sunny day in September, when the Progressive X Prize was being announced, at the same time, also in Washington, D.C., there was another prize ceremony going on. With an even bigger handout, billions of dollars. I hope the morning went okay, and this is just a fantastic day to celebrate. I want to thank all of our political leaders, our education leaders. This ceremony was at the Department of Education. Secretary Arne Duncan was announcing the winners of the Race to the Top Education Reform Plan. Eleven states and the District of Columbia will share more than $4 billion in prize money to invest in their school systems. Wait a minute, wait a minute.

A multi-billion dollar government prize for states and their schools to compete for? Hi, I'm Arne Duncan, Secretary of Education in the United States. I want to know where the Race to the Top idea came from. Who designed it? I know you're a big basketball dude. I picture you home on your couch watching Final Four and thinking, hey, that's what we need, a winner's bracket for education. But I'm guessing it didn't really happen like that, right? No, there are a set of folks that just fundamentally believe that the status quo wasn't good enough. And the only way you challenge the status quo

is to give people rewards for success. So, you know, there may be some sports analogies there, but one of the things that really influenced me was in the Chicago Public Schools receiving a teacher incentive fund grant from the Department of Education, which was very important to us and helped us change our behavior in Chicago in ways that would never have happened without that incentive. Now, who did you have to sell the idea to of Race to the Top? It wasn't a hard sell. Everybody knows we have to get better. Everybody shared the same sense of urgency. And political leaders, educators, folks from day one absolutely understood this was the right thing to do.

All right. Forgive me for saying so, but it doesn't seem like a very governmental thing to do on some level, asking states to compete against one another for federal education funding. You do, after all, run the Department of Ed for the United States of America government. So why do you want to set these states against one another? Why set up the competition? Because I fundamentally think you're not setting states up against each other. This is really a test of each state's courage, commitment, and most importantly, their capacity to deliver

dramatically better results for students, for their state's children. So this wasn't about this state versus that state. This is about states looking within themselves. And even the states that didn't receive money, virtually every governor, every state school chief officer I've talked to have all said, we're moving forward with or without the money. So what this has done, this has moved the entire country. This isn't about a couple states that receive money. This is about a national movement to get our country where we need to go educationally. So it's one thing to have state education departments compete against one another or aerospace engineers. But how do you deliver on that? How do you make sure that you get dramatically better results like Arne Duncan wants? How do you know that you're not just

flushing billions of dollars into space? In just a minute, we'll hear from one company that has made experimentation a routine part of its employees' workdays. You've maybe heard of this company? It's called Google. Place your seat backs in the upright and locked positions. We're back with Freakonomics Radio from WNYC and American Public Media. Here's your host, Stephen Dubner. Sure, setting up a multimillion-dollar prize is going to get the attention of inventors, even educators.

But what next? Yes, it was a cash prize that got Charles Lindbergh to fly across the Atlantic Ocean. But how do you get the Wright brothers to invent the airplane in the first place? My name is Craig Neville Manning, and I'm an engineering director here in Google New York. Craig Neville Manning was one of Google's first 250 employees, which means that, yes, he's worth a few bucks, but also he's been promoted a couple of times. So he no longer just sits in a cubicle writing code. I find that if I'm having a tough day with a bunch of meetings and lots of email,

that I can restore my sanity by actually writing some code. So I sort of force myself to do it from time to time. Whereas for the average human being, that would destroy what little sanity they have. We're a weird group. Yes, you are. The engineers at Google have a particular incentive to experiment on the job. Given the success of the company, it's surprising more firms haven't copied it. It's called 20% time. So 20% time means that any Google engineer can take 20% of their time, say it's one day a week or one month and five, and do with that time something they think is important for the company or for the world, regardless of whether their manager thinks it's a good idea. And it's really a way for our engineers to come

up with a creative idea and then put that idea into practice to build a small prototype. And I feel like lots of ideas people have, most of them are bad, and you never find that out until you actually try to put them into practice. And when you do, you find out, you probably think of a different idea that's a much better idea. And so having that kind of freedom to experiment is important. When did 20% time start to happen? Right from the beginning. Why? How? So I didn't know whose idea it was in the very first place. But I think, you know,

Google came out of academia, Larry Page and Sergey Brin were PhD students at Stanford. And I think that academic ethos of you should always be trying new stuff because you need to do that to figure out what works and what doesn't. And they thought that was important because I think they saw that Google would go beyond just a search engine, which it has. And even for the search engine itself, you need to come up with different ideas because the technology's changed over the last 10, 12 years. Tell me, what are the greatest hits then that have come out of 20% time at Google? Well, Gmail was one of an engineer who worked on the main search engine and then accumulated a certain amount of time and decided, you know, what we really need to do is revolutionize

email. That was Paul Burkite. Now, let me ask you this. Had Paul not done that, had he not taken his 20% time and come up with that, would Google have gotten to Gmail? It's hard to know, honestly. There's a strong possibility that we wouldn't have. So for all the world that's out there, probably half of our listeners are by now Gmail users. They're thinking, holy cow, if Google didn't have this arcane 20% policy, my life would be a little bit worse. Absolutely.

Think about it for a minute. At most institutions, you have a lot of meetings. You ask 20 people to mark their calendars. You put them in a conference room for an hour. And then you try to come up with an idea. That's 20 person hours and one idea. Google's 20% time flips that model. Instead of one idea out of those 20 person hours, you get

20 ideas. And sure, most of them will fail. That's what happens when you experiment. But some won't fail. And now you've got something else, a culture of experimentation. That's what Google has built. That's what the XPRIZE Foundation is after, using competition as a lever. And that's what the U.S. Department of Education is tapping into with Race to the Top. During the application process, states had to show that they were already trying new things, whether it was modernizing their labor agreements or using more rigorous means to measure student data and teacher data. Public education is a big machine. It won't change overnight. But has Race to the Top produced any changes yet? I'll give you four.

Here's Education Secretary Arne Duncan again. One is 36 states to date have adopted college and career-ready standards. So that's a fundamental game changer. Secondly, we have 44 states who are now working together in two different groups to come up with the next wave of assessments. They'll be much better for students, much, much better for teachers. Give them real-time information in terms of what students actually are learning, not just what's being taught. Third, you saw a couple dozen states remove impediments to innovative schools, remove those barriers legislatively. And finally, it was fascinating.

I learned a lot coming to Washington. One of the things I learned, we actually had states that had laws in their books that prohibited the linking of student achievement to teacher evaluation. Imagine that. Well, every single one of those laws are now gone. So those four things have all happened already.

And I think the country will never go back to where it was before. Now Duncan gets to sit back and see what happens to the experiments he's funding. He's the education secretary as venture capitalist, spreading the seed money around, placing big bets on the most promising startups he can identify. One state he'll watch is Maryland. It's getting $250 million in race to the top money. Nancy Grasmick, Maryland State Superintendent

of Schools. Grasmick says her state is making drastic changes to get the Race to the Top money. Math and English teachers are getting graded based on student success. And Maryland, by virtue of being a winning state, gets to join a broader group of elite experimenters. One of the excitements for us is the ability to work with other states as they're grappling with this so that we can benefit from the knowledge base that we have in all of the winning states. The fact is that Maryland is drafting off two earlier race to the top winners, Delaware and Tennessee. They both drew up plans to more closely link teacher pay to student performance. In Delaware, that's Peter Shulman's job. He's head of the Delaware Department of Education's Teacher Leader Effectiveness Unit,

a name that only government could love. He's 35 years old, but he came to education late after working on a web startup and earning an MBA from Wharton. Giving a guy like him a job like this is in itself an experiment. Now, what do your Wharton MBA buddies, what are they doing, most of them? Not this. You have, you know, as the traditional stereotypes would apply, you have Wall Street folks, you have real estate, you have a big strong health care factor, and you have those who have chosen to start their own businesses.

And when you tell them that you are running the Delaware Department of Education Teacher Leader Effectiveness Unit, if you do tell them that, I assume you do, what do they say to you? So I get a variety of responses. Some say that's terrific to really be able to work in such a civic-minded arena, such an area that we really believe needs help in this country. Others roll their eyes and say they don't think change can be made and they might think I'm wasting my time. some of them might also say is, man, you're taking your skills and the way that you learn to think by getting an education like an MBA from a place like Wharton and bringing it into a realm where those skills and that way of thinking traditionally hasn't been appreciated. Now that you've had a foot in each world, how much does what you're doing now in the Department of Ed in Delaware resemble the work you've done in the private sector?

There are many parallels. I think when you talk about using analytics, driving for efficiency, putting in forth a continuous improvement model, these are aspects that work I think in any organization, both private sector as well as government. But what's interesting about education is to bring in an army of folks like myself would not work. It has to be a confluence of traditional educators and then potentially meet them with some skills that have been attained through the private sector or some skills that have been attained through other organizations. So new ideas are coming to schools, driven by a kind of thinking, even a kind of person, that isn't usually found in a government bureaucracy. Not everyone's going to like it. If you want to cause a true breakthrough, the day before something is really a breakthrough, it's a crazy idea. Here's Peter Diamandis again from the XPRIZE Foundation.

If it weren't a crazy idea, it wouldn't be a breakthrough. It'd be an incremental improvement. And so the question is, where in our governments and in our large corporations do we allow for crazy, risky ideas to be tried? In a government situation, if you tried a bold, crazy idea and it blew up in your face, there'd be a congressional investigation. So really, crazy ideas are in the purview of small companies, entrepreneurs who are willing to risk everything to make their dream come true. Literally, their lives, their fortunes. And we've seen that in our XPRIZEs where people have mortgaged their homes or lost their marriages or risked their lives. That's a little scary.

But hey, in the real world, there are real risks. You want winners? There will be losers too. You want a new solution, a new technology, a new education system? There's going to be a whole lot of people, noisy, well-funded, entrenched people, whose only goal is to defend the status quo. So bring on the crazy risky ideas. This cocktail of competition and experimentation, it has the potential to really change things, to fix things. Of course, it'll be messy. Of course, there'll be failures. But maybe it's worth thinking about carving out some 20% time in your own life, within your family, your company, your military unit, your school, even your government bureaucracy. It's inspiring.

Maybe we should start a free economics prize right now. Just think of the problems we could solve. Like, how do you get doctors to do a better job washing their hands in hospitals? How do you change the incentive structure for politicians so they're looking out for the public's long-term interests rather than their own short-term interests? How do I get my son to put the seat up when he pees? What would happen if you could take a bunch of monkeys and teach them how to use money, create a regular monkey economy, and then just sit back? Freakonomics Radio is a co-production of WNYC, American Public Media, and Dubner Productions. Our producers are Ethan Lindsay, who is still kicking himself for choosing computer

camp over space camp, and Christina Russo, who didn't win any Girl Scout merit badges and subsequently turned to journalism. Colin Campbell is our executive producer. The only prize he ever got was for cooking in the eighth grade. Michael Rayfield and David Herman are our engineers. You're enjoying their experiments now. Subscribe to this podcast on iTunes and you'll get the next episode in your sleep. You can find more audio at Freakonomicsradio.com. And as always, if you want to read more about the hidden side of everything, go to the Freakonomics blog at NYTimes.com.