When It All Goes Wrong

Great interview here. Rick interviews Jay.

I like the brains of both guys, and occasionally guest-blog for Rick and comment on Jay’s.

One good exchange:

Rick: …what are a couple of things that haven’t gone as well as you would’ve liked? What kind of hurdles have you confronted?

Jay: I can’t even begin to list the things that have gone wrong during these experiments.

We had a school come to see a play only to discover that the actors were told a different performance time. We’ve had performances cancelled by snowstorms. We’ve shown up at schools to administer surveys only to discover that no one was expecting us. We’ve had schools complain about nudity in the art museum and refuse to participate.

Everything that can go wrong, has.

The only wisdom I have acquired from these failures is to make sure that the cultural institution with whom we are partnering understands that things will go wrong and that our shared commitment to the research project can help us endure with good humor.

We’ve also learned that the research team cannot delegate the lottery or data collection to others. Cultural institutions don’t necessarily understand what “random” actually means; and asking teachers to administer surveys turns out to be a horrible idea. If we want things done a certain way, we have to do them ourselves.

However, there has been an upside to being a control-freak, which is that I’ve been able to spend a ton of time in schools over the last several years. I confess that I used to think I could learn more about schools by staring at numbers in a spreadsheet than by spending a lot of time in them. I now know how wrong I was.

Lots of Chinese school founders are entering partnerships. I am contemplating one as well. What are some lessons we might take from Jay’s interview?

1. Commitment to humor!

2. Spend time in classrooms. I’ve spoken now to several Chinese edu-founders or CEOs who do not spend much time there. They can’t describe the nuance of their own classrooms.

By contrast, the leaders of top charter networks like Success, AF, and Uncommon…believe me, they know what is happening, and have expert opinions on what they see.

3. Consider that Chinese education is a bubble.

My business partner Scott (and my wife Pru) would both agree: I am a cheerful skeptic. When someone says “Everything that can go wrong, will,” I nod in violent agreement.

Luckily for me, Scott balances me, and often sees the glass half full. As a team, we hope to strike the right balance.

What I see too much of in the Chinese market is preK-12 entrepreneurs with IPO dreams, whose answer to every potential problem is “rising demand.” There’s a gold rush mentality. People want to get rich.

Pretend we walked into Harvard Business School. We told some professors:

X is an industry where there are many well-financed start-ups, mostly led by people with very little experience in that business. What is X?

The professors might guess:

Legal marijuana, led by execs with little experience in farming or drug dealing.

Crypto currency, led by execs with little experience in finance or programming.

Dot com sector around 2000, led by execs with little experience computer programming. Actually many were HBS alumni.

These are bubbles. Yes, there may be fast-growing demand. But usually many of the start-ups die at some point.

This last example resonates with me.

I was in start-up mode for Match in 1999. Boston was the epi-center of the Dot Com industry. I knew many people my age starting internet companies. Then the bubble burst in March 2000.

My biggest philanthropic backer at Match was president of a dot com called Akamai. One day its stock was $400. Then it was $4.

Akamai survived. They later flourished. It’s the 4th largest tech company in Massachusetts, with an $11 billion market cap.

Akamai had 2 things:

a. Many of the smartest mathematicians in the world were on their team. These were MIT profs and grad students whose brains were just off the charts. They could genuinely solve a host of problems pertaining to “the math of internet traffic.” Their team was legit.

When the Dot Com crash happened, most teams didn’t really have these elite problem solvers, not the way Akamai did. Did they have fancy brands? Yes! Did they have affiliations with famous investors and boards of directors? Yes! Could they really solve problems the way Akamai staff could?

No.

b. What was the second condition?

From the WSJ:

Akamai is among a handful of dot-coms that not only survived the technology-bubble collapse but are starting to revive. Though each recovery story is different, many have one thing in common: They have transformed their sales efforts and often their business models to target paying customers among the Old Economy companies that Internet revolutionaries used to deride.

*

So to recap:

a. Maybe all these new Chinese schools will flourish, because demand. No bubble. Great!

b. Or maybe they will face competition they didn’t expect; teacher salaries that shoot up; parents whose demands for schools go higher; profit margins that get chewed down; etc.

Remember: the Dot Com bust happened even though there was (obviously) a ton of demand for internet companies.

Who knows? If that happens…

1. One theory for survivors is strong brand through marketing and affiliations and large capitalizations.

But those companies were washed away in the Dot Com crash.

2. Another theory is educators who are the equivalent of Akamai’s mathematicians: those who can solve all sorts of problems we haven’t even seen yet, for their partners and their customers (parents). Over time, that “true problem solving” becomes the brand…customers can’t help but tell stories of how much they love the service.

My guess:

Hope for “a”

Prepare for “b”

Do a solid job at “1”

But build your organization around “2”