2014-12-25 - Fashionable Nobel Laureate Designs Markets!

Fashionable Nobel Laureate Designs Markets!

 

 

Alvin E. Roth, Craig and Susan McCaw Professor of Economics at Stanford University

Alvin E. Roth, Craig and Susan McCaw Professor of Economics at Stanford University and Gund Professor of Economics and Business Administration Emeritus at Harvard University, shares his thoughts. A recipient of the 2012 Nobel Memorial Prize in Economics for his work in game theory, experimental economics, and market design, Professor Roth has been helping hospitals in the States and other countries design markets for kidney exchange based on game-theory principles among many other laudable accomplishments. You can read about Professor Roth’s ideas in his book Who Get’s What – and Why: The New Economics of Matching and Market Design, already out as an eBook and soon to be available in printed form. Nikkei Business will be publishing a Japanese version.

 

1. You have made significant intellectual contributions in the areas of game theory, market design, and experimental economics. Can you give us an overview of each of these areas and how you initially became interested in them? How are the areas interrelated?

Game theory is a set of mathematical tools for talking about economics, for talking about how people deal with environments where other people are also vested involved and their decisions all matter to each other. Game theory is a natural backbone for marketing design because game theory is about the rules; alternatively stated, the design of a market is its rules. Game theory helps us think how different rules might work in the design of markets. Experimental economics helps us test whether these designs are correct or not.

 

2. Can you briefly define repugnant markets for our readers who may not have previously heard the term? How are they different from other markets?

Repugnant markets are markets that we are inclined not to allow to exist. I tend to talk more about repugnant transactions than repugnant markets. A repugnant transaction is one in which some people would like to engage, but others do not think should be permitted. In addition, in transactions we refer to as repugnant people often have difficulty giving a concrete reason why they feel the transaction should not be allowed.

If you wanted to open a night club next to my house, that would produce a negative externality. The club would generate a lot of noise, and I would not be able to sleep. However, that is not normally what we refer to as a repugnant transaction. For instance, in the past ten years, a lot of change has taken place with respect to same-sex marriage. It is a transaction in which some individuals would like to engage. Some same-sex couples would like to marry one another, a desire that is very controversial here in the United States. Yet explaining why people object is difficult. People do not feel threatened that they would be compelled to marry someone of the same sex if same-sex marriage were legalized, but they may still think you should not be able to marry someone of the same sex. In contrast to my night-club example, the idea of ‘repugnant transaction’ is useful for thinking about same-sex marriage would be considered a repugnant transaction.

I became interested in these types of transactions through my work on kidney transplantation. Selling and buying organs for transplantation is illegal just about everywhere in the world. Black markets exist. There are people who would like to buy a kidney and others who would like to sell one. But the transaction is illegal in every nation of the world except the Islamic Republic of Iran. Something illegal just about everywhere is worth studying.

 

3. Can you explain the Stable Matching Problem in simple terms that non-economists would understand? How do the algorithms used to solve the problem operate?

Before I talk about algorithms, let me first explain what stable matching is. I spend a lot of my time studying matching markets, which are different from commodity markets. In the latter, prices decide everything. If you are purchasing a ton of a specific grade of coal, you are purchasing a commodity. You do not care who the seller is. You just want a good price. The role of the market is to find the price at which supply equals demand. But many, many markets do not work that way. Even if they make use of prices, the price alone does not determine who gets what. You must be chosen. In addition to choosing what you want, you yourself also have to be chosen.

Labor markets are an example. You cannot just decide to work for Stanford University. You have to be hired. College admissions is similar. You cannot just decide to become a student at Stanford University. You have to be admitted. All of these “transactions” involve money. Professors are paid. Students pay tuition. But the price does not determine who gets what. Stanford does not raise its tuition until just the number of students needed to fill classes remains. That would be the price at which supply equals demand.

In many markets, other institutions are involved in deciding who gets what. If the market is very competitive, and people can reach agreements with whomever they want, you can still ask the question What types of matchings should we expect? This question brings us to the idea of stability. In a labor market, we would consider a matching stable when all of the workers have been matched to jobs, and there are no employers and workers would rather be matched to each other but are not. In a highly competitive, free market, if two people who are not matched would rather be matched, you would have to ask the question What prevented them from matching up with each other? A matching is stable if no such pairs exist. I might not have the job I like most, but in that case, that must be because the employer prefers to hire someone else instead of me. A mutual attraction would be an instability.

One way to organize market places to achieve stable matchings is to have a centralized clearinghouse. We have a clearinghouse for American doctors, and in Japan, you recently have implemented a similar system. Doctors submit a rank-ordered list of the hospitals where they would like to work in their residency programs. The residency programs submit analogous lists rank-ordering their physician preferences. An algorithm is then invoked to produce a stable matching based on the two sets of preference lists. The algorithm operates as follows: Physicians apply to their first-choice hospital, where they are ranked ordered. The hospital rejects those that exceed their capacity. If the hospital can accommodate ten residents, physicians whose ranks are eleven or less lower are rejected.

However, the top ten physicians are not immediately accepted at that point. Rather, they are simply not rejected. Meanwhile, the doctors who have been rejected apply to their second choice. When the hospitals receive these new applications, they add them to the list of physicians who have not yet been rejected, then rank order the new, combined list. They once again reject physicians whose rank order is eleven or below. This process continues until no more additional rejections are made, in other words, no one wants to apply to another hospital. Either everyone’s application is currently being held, or they have applied to all the hospitals of interest, but been rejected. At that point, the hospitals send out acceptances to their top candidates. The doctors are matched to the hospitals holding their applications when the algorithm ends, producing a stable matching. Suppose, for example, I am a doctor who has been matched to his third-choice hospital. I know that my first and second choice hospitals did not want to hire me because I had to first be rejected by them before applying to my third choice. The fact that the hospitals rejected me indicates they have filled their openings with candidates they preferred over me.

 

Follow-Up Question: What is the role of price in this matching process?

Suppose I would like to work for Google. Of course, the compensation they offer will affect my preferences. In fact, one of the major factors people who will receive job offers from Google will be the salary compared to that of competitors like Facebook. Google does not set its wages low enough that just the number of applicants the company needs want to work there. Google jobs are good! Lots of people would enjoy working for the wages they offer. If Google is not attracting the employees it wants at the salaries they offer, they can always raise them. Clearly, wages are important. They enter the matching model I have just described through preferences. Other factors equal, I would prefer the higher salary, but that is not the only consideration in selecting an employer. I might be able to earn a higher salary at Google than at Stanford, but I prefer to work here. Conversely, Google may not have wanted to hire me but Stanford did. Lots of factors are considered, and price can be a huge one.

In kidney exchange, price does not play a role due to legal restrictions. But these exchanges are still different from commodity-type markets. When you purchase Sony stock, you do not care who the seller is because all of the shares are the same. When you make a job offer, you do not offer the position to everyone on the market, but to a specific person. In this case, you care about who, specifically, you are hiring. Money is not the only factor, but you do have to offer the person a salary. In the case of kidneys, the patient cares a lot about which one he or she gets, but cannot offer money for it. Markets comprise a continuum. They are neither pure commodity markets on the one end nor like the market for kidneys, where price does not play a role for legal reasons. The markets for most things are, rather, somewhere in the middle.

 

4. To what extent do you believe the government should be actively involved in market design? In what specific sectors do you feel government should especially be involved? Can we regard market design as one type of government intervention or regulation?

Design involves all the rules used to regulate markets. In this respect, regulation itself is a type of market design. Governments are one of the players in market design. Lots of markets are developed partly by governments piecemeal. Thinking about transportation in the San Francisco Bay Area, we have public options by and large run my municipalities, that is, by local governments; and taxis, which are private, but regulated by government. Taxis need a medallion to legally pick up passengers off the street. Now, we also have access to services such as Uber, which allow us to call a private car using a cell-phone application. These services are subject to much less regulation than taxis. Uber is a privately-designed market place mostly for private cars. Taxis are cars owned by individual companies or drivers whose conduct is regulated by cities. Finally, public transportation is owned and operated by the Bay Area transit authority. If I needed to go from here to San Francisco, I have all of these choices.

They are all designed differently but some are quite highly regulated. The train system is government owned and operated. Taxis are privately owned, but thoroughly regulated. For example, if I hail an available taxi, the driver’s supposed to pick me up. In this sense, the taxi is somewhat like a public utility. Uber drivers, on the other hand, do not have to pick me up if they do not feel like doing so. Here you have three types of market design and three types of regulation, in markets that are partly substitutes and partly complements.

Governments should set in law rules and regulations important for many markets. For example, even people opposed to government intervention favor government enforcement of property rights. I own a house. That means the title is registered in the county clerk’s office. I have a way of proving I am the owner if someone claims that he or she is. Property rights are clearly important. When we buy and sell, we want to be sure that the seller owns the property and that you will be the owner after purchasing it.

Even property rights are contingent, however. If you purchase a copy of a book I have written, you own that book. It’s your property. You can sell it. You can give it away. You can even throw it away. But you cannot copy it. Due to copyright laws, you cannot make and sell copies of the book you have purchased. Either I would own the copyright or my publisher would. In this way, our property rights are defined. When we talk about repugnant markets, you own your kidneys, and you can give them away. If you loved me, and I needed a kidney, you could give me one. But you cannot sell me your kidney. Property rights are part of market design. Because so many markets depend on property rights, by and large, we allow governments to define them.

Some, however, are defined by contract. If you purchase a condominium, you have a contract that defines your ownership. A cooperative apartment would have a different contract. My house is registered in a county office, but my ownership of an apartment in a building might be subject to private rules.

 

5. What do you feel the significant developments in the field of economics have been over the past thirty years of your career? Where do you believe future developments are likely to take place?

I’ll answer the question in two different ways. If you talk about the profession of economics, many techniques like game theory, experimental economics and market design have entered. Computers have also entered the field. When I was young, statistics were difficult to compute, but now everyone has a computer on his or her desk. Big data has entered as well. If you think about the economy, Aa lot of transactions are now conducted through the internet, generating massive amounts of data. Cash registers are now computerized, making check-out data available. For consumers, there are auction data and advertising data. More generally, computers are now widespread, and many more economic transactions linked to the internet has resulted in much more data. In addition, new ideas about the role of economists, what we should do and how we should do it, have emerged.

 

6. You were educated at Stanford, but taught for years at Harvard before returning to Stanford as a faculty member? What are the major similarities and differences between the two? How would you describe your experiences as a faculty member at both?

Both are elite American universities. As such, Harvard and Stanford are similar to each other in many respects: Both have excellent students. Both are concerned about the development of economics and the economics profession. The view from the window, however, is somewhat different. At Harvard, you tend to see New York City or Washington, D.C., but here at Stanford, you are inclined to see Silicon Valley. Accordingly, there is greater focus on entrepreneurial and start-up enterprises here. One reason I moved to Stanford is the greater interest in market design here due to the activities in Silicon Valley. Many companies like Amazon are market places. So are Uber and Google, which is essentially a market for advertisement. More and more companies are making markets, and many of those companies are here. 

 

2014-11-30 Harvard Business School Professor Amy C. Edmondson: "Teaming Takes You Further"

Teaming Takes you Further

 



 

Amy C. Edmondson

Novartis Professor of Leadership and Management, Harvard Business School

 

In 2011, Professor Edmondson was listed in the Thinkers50 list of management thinkers, published every two years. She is internationally acclaimed for her work on teams and “teaming,” the process by which a fluid arrangement of personnel work collaboratively across organizational boundaries. Before joining the Harvard faculty, Professor Edmondson served as director of research at Pecos River Learning Centers, where she designed and implemented organizational-change programs for Fortune 100 Companies.

Her recent book, Teaming: How organizations learn, innovate and compete in the knowledge economy (Jossey-Bass, 2012), is a must-read.

1.   Much of your work focuses on creating a learning organization. How would you define such an organization? What are its salient characteristics? How do they vary across cultures, if at all?

A learning organization is one that is capable of detecting changes in its environment and responding appropriately to continuously improve and innovate as needed. It is an organization that is able to withstand the ever-present reality of change in any business environment. I realize this is a very abstract notion, and one might think it is either impossible or widespread, depending on how you interpret the abstract idea. I am going to suggest that it is neither impossible nor widespread. In fact, most organizations are not learning organizations. But the few that are tend to experience extraordinary success over time, over the longer term, in a variety of different industries. It is an aspiration. It is also not dichotomous, you either are or are not. It is a set of capabilities one can improve, as well.

I do not have expertise in cross-cultural comparison other than my own experience traveling, studying, and writing cases on organizations in a variety of cultures, but not systematically. My sense is, not really. There are, of course, differences across cultures, but the meaning of a learning organization and the possibility of achieving one does not have to be a culturally distinctive or variable phenomenon.

 

2.   In your work Teaming, you assert that companies that form flexible collaborative teams are more likely to succeed in today’s turbulent business environment, but also note that hierarchical status, as well as cultural and geographic distance, prevent formation of such teams. Can you elaborate on each of these impediments to teaming, citing examples of how successful companies have overcome them?

In a sense, my book is about two things. One is the need for flexible, dynamic, on-the-spot forms of coordination and collaboration, as opposed to the kind of coordination that can be scripted and structured in advance (when we understand the work well enough to do that). When we cannot understand or predict the work in advance, say, a busy hospital emergency room or a product-innovation company, or firefighters, or any number of environments where the work is quite fluid, and the different kinds of collaboration are needed at different times in the work, I call that teaming. I’d say that it’s easy to understand in a logical way the need for that kind of flexibility, yet the human psychology can make it challenging to do it that way, for two major reasons.

First, it is difficult for people just to speak up to people they don’t know well and / or people above them in the hierarchy, especially with any kind of content that they fear will be unwelcome. I call it psychological safety when work environments have found ways to overcome that natural fear. Another way of thinking about that natural fear is as interpersonal risk. We’re not talking about workplace risk or physical safety. We are talking, instead, about interpersonal risk: the kind of risk that is at play when  I am thinking, “I don’t want you to think badly of me.” In that case, I am more likely to hold back—not approach you, not ask you questions, not offer my ideas—than I am to do all those things. We need an environment of psychological safety so people don’t hold back, so they bring their full self to the work. In sum, the first major hurdle is the lack of psychological safety that characterizes most workplaces unless something is done to create it.

The second major hurdle is the logistical challenges of figuring out whom I need to coordinate with at what time. This obstacle can be overcome with clarity about the goals, clarity about the clients—those who will receive the work—and a great deal of social capital in the organization, which means learning as much as I possibly can about who knows what; who’s good at what; who has what skills. This way, I can find them, whether through an electronic knowledge-management system or, depending on the nature of the work, a more local, informal system where I just know who people are and am more easily able to go to them. So there are psychological and logistical impediments.

Successful companies that overcome these two hurdles do it in a variety of ways partly dependent on the type of work, but I can say many organizations are recognizing this need. For example, in Teaming, I talk about Children’s Hospital in Minneapolis, Minnesota, in the U.S. I talk about the chief operating officer. The first thing she did was put in a new policy called blame-free reporting to make it safer for people to speak up about errors and potentially risky features of the patient-care environment. That’s sort of a policy move, but the other thing people do is train managers in the kinds of inclusive leadership behavior I have previously described.

To overcome the logistical challenges, Danone, a global company headquartered in Paris, creates many what they call “knowledge market places” to help people share their knowledge in a very playful and engaging setting, and let people know who they are and what they are doing so that these people come back. Using market places, Danone lowers the logistical and interpersonal challenges to finding each other in order to learn from one another.

The Danone example is in the book. Chapter 6, I believe. The knowledge-boundary chapter. It’s just a small case example, but they did a lot of creative things to increase the informal knowledge sharing, lowering both psychological and logistical hurdles to doing so. I have a longer case study on them in the Harvard system.

 

3.  How do you feel the factors affecting the formation and operation of collaborative teams vary across cultures?

One of the fascinating aspects about this case study is that people in this company initially resisted these programs because they thought they were very American. That’s not true, but they were not French. I am going to say this again later: There are cultural differences, of course. One of the most important cultural differences that people have written about is power distance. In Scandinavian countries, the power distance is thought to be quite low. It’s thought to be low in America, too. In Asia, power distance is thought to be high. Yet my research suggests that speaking up with bad news can be quite challenging in Denmark, and people in Japan are quite able to do so if the right organizational culture is in place. In other words, a cultural tendency can be overcome with excellent management. And a cultural tendency toward silence can be exaggerated by bad management, too.

 

 

4.   When you and David Garvin were interviewed by harvardonline.org, he cited GE as an example of a learning organization. Can you think of others? Would Google be considered one? Can you think of some Japanese firms that are learning organizations?

 Yes, I can think of other examples of learning organizations. I do believe that Google would be considered one. In fact, I recently read a new case study on Google by David Garvin explaining how they are learning how to better develop managers. In fact, I just read it yesterday. The case study is very good evidence of how they are developing a learning organization. Clearly, as an organization that has grown exponentially since its founding in 1998, the company has changed everything but the absolute core of their search engine. Google has changed how it runs itself, the additional products and services that it offers. It is an organization in a state of constant learning, and a good illustration of the power of learning. Another organization would be Southwest Airlines in the U.S. It has continually learned and improved its operational capability.

From my point of view, the quintessential learning organization is Toyota. That is the organization that showed us very early on what it means to be a learning organization, what it means to build into the DNA of how the company works the need for constant learning. The dominant image we have for the kind of learning that Toyota has virtually perfected is the continuous improvement kind, kaizen, the ability to invite every associate, no matter what job he or she does, to be constantly looking for small indications that something is not yet perfect. And also bring ways to make it better. Speaking up. People are invited in a literal way to speak up through the mechanisms in place. In my mind, Toyota shows the power of building organizational learning into the culture, into the work processes. The organization experienced remarkable growth as a result: success, quality, customer satisfaction virtually unparalleled in the market place. You do not have to look terribly far in Japan to find this illustration.

 

5.   You define teaming as teamwork on the fly, collaborating with many colleagues, often from multiple disciplines and cultures on multiple projects aimed at fluid goals. Because of the nature of teaming, you note that the trust essential to effective collaboration is difficult to establish. What can managers do to facilitate trusting relationships? What can individual contributors do?

One thing that managers can do is bring people together in settings where the goal is to make sure we understand three things about each other: 1. What are you trying to get done? 2. What skills do you bring? and 3. What are you up against? Just these three simple questions will go a long way toward building mutual understanding.

Let’s start with what individual contributors can do. To build trusting relationships, I think people need to first show curiosity about the other person. We are all subject to the blindspot of failing to recognize that we are not omniscient. I can be talking to you, but not really know what you are trying to accomplish, what you brings and know, and what you are up against, the hurdles you face. What are the barriers you see that you are trying to overcome? Maybe I can help. I need to ask first, then explain second. Everyone needs to display their curiosity, then also be willing to share their knowledge.

Managers can facilitate this sharing simply by creating formal and informal forums for individuals to become acquainted. I’m not talking about deep friendships, just the sharing of professional knowledge about who you are, what you know and bring, and what you need. The degree to which I know you does two things. One, it makes it easier for me to be myself around you. Two, it makes it easier for me to both appreciate and access the contributions that you can make.

  

6.   Do you think there is a relationship between the extent and effectiveness of teaming and office layout, U.S.-style, private offices / cubicles reducing it and open-office, Japanese styles, where everyone sits in a row with the section leader or manager at the head, increasing teaming? Have you ever conducted research on the effect of office layout on teaming?

 

I do think that there is a relationship. In both a visual and psychological way, private offices increase the barriers to open, flexible communication and teaming. Recently, I have been conducting research on the effects of office layout on teaming though the research is not yet completed or published. I’m seeing a great deal of experimentation on office layout in the U.S. It is quite interesting, something a lot of people are thinking about right now. They are experimenting with more open offices, more flexible, reconfigurable offices. The challenge with teaming is, “I need to work with you today and someone else tomorrow, and we need the hurdles to be low.” But while we are working intensely on something complex, we also need some privacy, a place where we can focus and do our jobs. It’s not a question with one answer, one perfect layout, so the flexibility needs to be present.

I’m doing some research in two different companies on how they are addressing the need for very fluid teaming relationships through more open office environments. I think it’s quite fascinating. With Melissa Valentine, now assistant professor at Stanford, I have done research on how the physical layout in a hospital, emergency-room setting can make a huge difference.  Keeping the whole area open, but having different physical domains where small groups of professionals—doctors, nurses, and the like—are working together at any one time, can improve coordination. We call this kind of structure a team scaffold. It’s not a formal team; it is far more fluid and flexible, but when individuals are working together during a particular day, they are in a particular physical domain of the large, open office space. The scaffold simplifies the teaming that they do to care for patients that day.

 

7.   In an interview related to your 2011 HBR article, you have indicated that in order for organizations to learn from failure, they must develop systematic skills for detecting it, analyzing it, and paradoxically, creating it. Referring to the last skill, why would an organization want to create failure? What distinguishes failure that is a source of learning from failure that is not?

No organization wants failure. That’s clear. Yet the fact is that no organization can innovate without encountering some failure along the way. Why is that the case? Because innovation refers to something that is brand new, desirable and useful in some market or setting. It’s virtually impossible, if not completely impossible, to come up with something new, useful, sellable just by simply waving a magic wand, and voila, there it is. Instead, innovation is created through experimentation – through trial and failure, and improvement, testing, focus groups and so forth. By the time you come up with something really new and innovative that will be a success in the marketplace, there necessarily have been failures along the way. The managerial trick is to have rapid failures—I call them intelligent failures—fast enough to innovate more quickly than the competition. If there were a way to innovate, to do basic research without failure, I would be very enthusiastic about that. But there isn’t, so we have to embrace failure.

The kind of failure that is a source of learning is the kind of failure where we have not done it before. A previous failure repeated is not a source of learning; it’s a source of waste. A failure that is a source of learning is first and foremost, one that is novel. It’s on the front lines of what we know. It gives us new information. That is the most useful type of failure for learning. However, any failure is a source of learning. Even a failure in a context where we know better and should be able to something perfectly is still a source of learning, because we need to stop and understand how something went wrong in something we should know how to do and ensure that the same failure does not reoccur.

If you divide the world into routine operations; complex, customized operations; and innovation operations, failures in any one of those contexts is a source of learning. But you learn different things. In routine operations, you learn how to make things even better so that we approach perfection. In complex operations, we learn how to solve problems that come about in new ways, and in innovation operations, we learn how to create something brand new and exciting that the world wants.

 

8.   Because of the particular nature of start ups, my sense is that creating a learning organization is even more important than in an incumbent firm, but also more difficult to establish due to resource constraints and driving focus on growing the business to a sustainable level. What suggestions can you make for helping start ups overcome this dilemma?

I think you are right. I believe learning is even more important for a small company. They face a stark reality that you either learn or die, and of course, most start ups die. They never make it to adulthood. That’s because you have a very major learning challenge, which is to identify the unique success formula that will allow you to find and serve customers in an operationally and economically viable way. The start-up has to attract customers’ attention, offer them something that they are willing to pay for, and it must be something that the startup can do more capably than available alternatives. The learning is literally both essential to success, and to a certain extent, more obvious to everyone. What startups and entrepreneurial companies have going for them is that they tend to recognize that they must learn, because they are hungry. They need success. They need to sort it all out. On the one hand, the urgency of learning is more real, but as you point out, they face resource constraints and greater challenges recognizing their priorities than more mature organizations.

In a forthcoming paper with Tiona Zuzul, who was one of my Ph.D. students and is now heading to the London Business School as an assistant professor, we argue that one of the major challenges for small, entrepreneurial firms is that they have to both establish the legitimacy of the firm while also engaging in learning at the same time. These dual mandates are somewhat in tension, in the same way advocacy and inquiry are in tension. That is, the startup needs to both convince the world of its value, and continue to establish and alter its value at the same time. If the leaders spend too much time out there advocating how great they are, they will spend less time and be less cognitively open to improving and changing who they are and what they do. New firms must have both the flexibility to keep changing and the clarity about the message at the same time, two phenomena that are in tension. We argue that to overcome this tension, you have to be very deliberate about it, very explicit because when you are not explicit about it, you will get caught on the horns of the dilemma. However, if you thoughtfully recognize this tension, there is a far greater opportunity to overcome it.

  

9.   Your acclaimed book Teaming was published in 2012. Have you been working on another since? If so, please tell us about it.

I have one other book that is an offshoot of Teaming. In 2013, Jossey-Bass published my book entitled Teaming to Innovate. It’s a short e-book, also available in paperback. The book is like a long essay in a way, because it’s only about a hundred pages. It’s five short chapters: Aim High, Team Up, Fail Well, Learn Fast, and Repeat. That book uses some of the examples in my 2012 book on teaming, but also includes new examples. It’s derivative from the longer book, but it’s exclusively about innovation, not about everything. That’s one book. Currently, I am also working on a book in the smart / green-city space.

 

 

2014-10-31 - UoPeople: Virtually Too Good to Be True!

HIP (Hard-Working, Innovative, Passionate) People Place

 

A noble purpose inspires sacrifice, stimulates innovation and encourages perseverance.

■  Gary Hamel

 

In an effort to develop future business leaders in Japan, where I am a university lecturer, I publish a blog in Japanese. Though I initially wrote about the work of other scholars and executives, I thought the blog would be more interesting if I could interview management leaders directly. My only concern was securing cooperation. Successful scholars and business professionals are extremely busy.

To my pleasant surprise, most have made time for me despite their often impossible schedules. I am delighted, indeed, moved. Not only have I enjoyed the privilege of being able to dialog with these individuals, I have found their talks inspirational. Each has exhibited exuberant passion and demonstrated the value of sheer hard work. Thinking about how much I have benefited from the interviews, I decided to establish this English blog to share them with a wider audience than Japanese readers. I am certain they will enlighten you. I hope they will inspire you.

 

University of the People (UoPeople) President Shai Reshef
http://uopeople.edu/

This time, Shai Reshef, founder and president of University of the People (UoPeople), spoke with me. As the first tuition-free, non-profit, online academic institution, UoPeople enables people who would not otherwise be able to attend college to earn a degree in business or computer science. I am confident you will be inspired by this interview on the University, founded on the belief that knowledge is a key ingredient of world peace. For furthermore further information and inspiration, you might also want to view the TED Talk by President Reshef linked below.

 

 

 

Shai Reshef: An ultra-low-cost college degree

https://www.youtube.com/watch?v=6kH-uYwt0qs 

 

1.     Can you tell us a little about your personal background, education, and career experience? What motivated you to study Chinese politics as a graduate student? How, if at all, is your interest in Asian politics related to your passion for education?

I learned Asian culture in my program on Chinese politics and history at Michigan State University. I am not sure that these studies have direct correlation to what I do right now, but I think studying Chinese and especially modern Chinese history led me to a strong realization of how people’s behavior and effort can change things.

I spent twenty years of my life in the for-profit education sector. Among other accomplishments, I established the first online university in Europe. In doing so, I witnessed how powerful online learning can be. We had students from all over the world. They stayed at home. Continuing their jobs, they were able to obtain a high-quality European education. At the same time, I realized that earning an online degree was nothing more than wishful thinking for many people. Because the program was too expensive, they could not afford it.

I eventually sold this business to go into semi retirement. Soon after, I realized I wanted to continue to work, but not doing more of the same. Because I am fortunate, because I have enough wealth, I felt it was time to give back. I also knew I would have to do so through education. Not only do I know this field best, more importantly, when you educate a person, you change that individual’s life. Ultimately, you can change the world. I want to have an impact on the world, and I believe the only way to do so is through education.

As I looked around, I realized that all of the resources that had made the online program I had established expensive were now available for free: open-source technology, free online resources, and cyber culture where people share with and teach one another and are open to one another. At that point, I realized that all I really needed to do is bundle all of these resources together. The University of the People is the outcome. 

 

 

2.    How did you conceive of the idea of providing universal access to higher education? In a world of many problems ranging from global warming to hunger to pollution, why has education, in particular, attracted your attention?

As mentioned, when you educate people, you not only change their lives but also the world. This is the primary reason why I have focused on education, which also happens to be the area that I know best.

 

 

3.     You started the University of the People in January 2009. What did your organization look like then? How has it evolved since? Where do you expect to be five years from now? More specifically, by what metrics will you assess your success?

The idea for the University of the People came from considerable thinking on the problems of education in the world along with the realization that all the resources necessary for creating a free, online university are now available. When I announced the establishment of the university at a conference called Verde in Munich, Germany, three people were on my team. The New York Times published an article about the university the day after I announced it. In response, I received hundreds of emails from people, including professors expressing their desire to help. The university was started by these people getting on board working to create the courses and develop the infrastructure. We also created a web page to teach the students about the university and how to apply, as well as a separate portal for actually instructing students. People around the world were working on the project by this time. As a result, in April we began the admission process, and we started teaching students online by September 2009, a mere nine months after announcing establishment of the University of the People. All of this work was done by volunteers.

Currently, 3000 volunteers run the university, supported by a small cadre of paid staff. Like me, the provost is a volunteer. However, the vice provost is a paid staff member. The deans are volunteers, but the Associate Provost for Academic Affairs is a salaried employee. Similarly, the Director of Finance is paid even though the CFO is a volunteer. We designed this organizational structure for two reasons. Because we rely on many volunteers, we want to use their time efficiently. Whereas many university professors squander an enormous amount of time navigating the bureaucracy, we remove this burden by using our paid staff. This way, volunteer faculty can focus on the tasks for which their skills are most important. Second, we have understudies who can immediately step up to the plate until a suitable replacement is found if a volunteer must discontinue due to other priorities or for other reasons.

We have already achieved several milestones. In addition to accepting over two thousand students from over 147 countries, we received accreditation this year. This testament to the educational quality of our program will help students land jobs when they graduate. The accreditation also makes them eligible to study for advanced degrees at other universities. The next major milestone is achieving financial sustainability. Though the University of the People is tuition-free, students are expected to pay $100 for each exam they take. To earn a bachelor’s degree, students must pass a total of 40 exams, ten per year. We offer a variety of scholarships to students who cannot afford to pay for the exams because our major mission is to ensure no one is left behind due to financial reasons. At the same time, the university receives one hundred dollars per exam, either from the student directly or through a scholarship. If we attain our goal of 5000 students by 2017, we will reach financial sustainability.

According to UNESCO, by 2025 over 98 million individuals in the world will not be able to attend college because no seats will be available. The University of the People is a model showing how to serve all of these people. If we can do it, other universities can, too. Instead of building universities, which will drain resources without meeting the demand for education, developing countries can establish online universities. The University of the People’s mission is to ensure these 98 million people are served. If other universities and countries do not join the effort, we will continue to grow until we achieve this mission.

 

4.       How do you see your curriculum developing over time? Do you currently plan to provide graduate and professional degrees like the MS in Computer Science, MBA, MPA, or Judicial Doctorate?

We have started creating a bachelor-level program in health science. Looking at the recent Ebola outbreak as an example, we realized that this field is an acute need in many developing countries. For this reason, health sciences will be our next program. We are also evaluating areas in which to develop a master program and plan to begin creating a masters course shortly.

 

5.     Before founding UoPeople, you worked for a for-profit education company. Comparing this experience to your current one, what would you say is the biggest difference between the for-profit and not-for-profit world? Would your mission of rendering higher education universally accessible be more easily achieved with a for-profit business model?

The University of the People operates like a for-profit business. We have a business plan and goals, and we evaluate ourselves on a monthly basis. We are exactly like any other business with respect to our daily activities. Because I am from the for-profit world, I believe the organization needs to have a plan and objectives. Individuals need goals and plans, too. And they all need to be measured closely and regularly.

That said, I will mention some differences. First, lots of people support the University of the People as a nonprofit that we would never be able to attract otherwise. The Chair of our Council of Presidents is the Chancellor of New York University. The Vice Chancellor of Oxford also serves on the council along with the Secretary of Education of the United States. Similarly, the Provost is from Columbia University. You would not attract these luminaries as a for-profit business. The University of the People also benefits from the assistance of 3000 volunteers.

On the other hand, fundraising would be easier if we were a for-profit enterprise. I chose a non-profit model because many are suspicious of for-profit education. Because our approach is so different, so disruptive, I knew people would be even more skeptical: They would assume that we were not serious, or perhaps that we had a hidden agenda. By organizing as a nonprofit, we have circumvented this problem and achieved legitimacy. People support us. If you look at the current state of for-profit American universities today, they are under attack. Seeing this, I am glad I am not a for-profit enterprise. As a nonprofit, I am positioned to prove my point, achieve my mission more quickly and easily.

 

6.      What challenges have you faced in establishing UoPeople? How have you overcome them?

The two major challenges we have faced are fundraising, as previously explained, and skepticism about whether a free university was a viable model that could ensure quality, receive accreditation, and operate sustainably. Our recent accreditation is helping us overcome these obstacles.

 

7.    Tell us about how instruction is provided in your specific distance-learning model. How is it different from MOOCs and other online platforms like Coursera? What feedback or critiques of your model have you received from these "competitors"?

The University of the People is quite different from a MOOC. Actually, I am a great supporter of MOOCs. First, they spread knowledge throughout the world, a contribution which I, of course, applaud. Second, the fact that famous universities like Stanford, MIT, and Harvard, among others, offer MOOCs, which are online education, endorse the validity of online learning. I really appreciate and admire MOOCs and I believe that they show a great importance in online learning. However, if you take a MOOC, you might attend in a virtual classroom containing 10,000, or 100,000 or even 200,000 other learners. At the University of the People, students are in classes of twenty or thirty. We use peer-to-peer learning, but the course is supervised by an instructor who responds to questions and monitors discussion. Students also receive personalized instructor attention. This was a very important part of our pedagogy.   

The students in our programs are also different from typical MOOC students. Eighty percent of Coursera or MOOC students already have a previous degree. Forty percent have a bachelor’s degree, and the same proportion has a Master’s or higher degree. A majority of the remaining 20% are university students. Though they may all have strong academic backgrounds, less than 5% of MOOC participants actually complete the courses in which they enroll.

MOOCs have received some criticism for not succeeding to reach the have-nots, but rather those who have had the opportunity of attaining higher education before, and therefore just widening the gap between the haves and the have-nots. In addition, although most MOOCs users have strong academic backgrounds, less than 5% of MOOC participants actually complete the courses in which they enroll. Many of our students, in contrast, have been through extreme hardships such as natural disasters and conflict in many cases. In spite of these obstacles, 95% of our students complete the courses they take, so I know we are doing something right.

I might also add that the University of the People is a university, and not an online course. As with other universities, students apply for admissions, follow a curriculum, and must pass courses. We grant degrees. MOOCs, in contrast, are stand-alone courses. You cannot receive a degree from a MOOC. Our model has not received critique, only praise.

8.    Your partners include the United Nations, New York University, Microsoft, and Hewlett-Packard, among others. Can you tell us about some of the collaborative projects you are currently undertaking with these partners and others globally?

HP has donated money and computers. They have also developed an internship program and scholarship program for women. Throughout their studies, these women are mentored by a HP employee. In Africa, Microsoft has provided complete scholarships to 1000 students, who have free access to Microsoft Certifications opportunities while at the university. The students are also mentored by Microsoft employees and will complete internships. Students may also be offered Microsoft jobs after completing their programs. As mentioned, the chair of our Council of Presidents is from NYU, as are all of our deans. Furthermore, many NYU professors are also volunteering for the University of the People. Our best students have the opportunity to transfer to NYU, where they enjoy full scholarships.

 

9.    How many students have graduated from the university in business administration? In computer science? What are their demographics (average age, age range, gender breakdown, geographic region)? In what organizations do they work?

Our students range in age from 18-66, with the average age being 29. With 30% female and 70% male (a number I’d like to see even out in the near future), our students hail from all over the world (US ~ 28%, Central and South America ~ 14%, Africa ~33%, Asia ~10%, and the rest from Europe, Oceania and South America), and work in a very broad spectrum of occupations.

 

10.   For Japanese students who would like to study at the University of the People, the English language is a major obstacle. Do you plan to provide online, ESOL courses for non-English speaking students? Do you anticipate offering instruction in other languages?

To study at the University of the People, students must first past the TOEFL or an equivalent exam. For those who have not, we offer a nine-week English course that they must pass to enter a degree program. However, we are not an English school. Students who do not know English will have to learn it elsewhere before they can apply to the university. If we someday have the resources, we would consider offering instruction in other languages.

 

11.   What advice would you give to others aspiring to found a not-for-profit organization or for-profit start up? Are the required skills different for each?

In both cases, you need to be passionate about what you do. You need a clear vision. You also need to know what your core business is and avoid becoming side-tracked by any activity that is not part of that core. Most important, never give up! Whether your organization is a for-profit or non-profit, the journey is a long marathon. No matter what happens, never give up. If you keep on keeping on, the results will eventually come.

  

12.   What pastimes do you enjoy when you are not working?

Over the past five years, I have been extremely involved with the University of the People. I enjoy my work a lot. In fact, if you ask me what I enjoy doing most, I would respond, “the work I am doing now.” In the sparse time that I have outside of work, in addition to meeting new people and reading, which I very much enjoy, I like to run. Running is my way of meditating. It clears my mind and helps me focus.