THE LAB

The passionate nerds in Revision Labs’ Learning 2.0 Lab have been brewing a new, more effectively customized yet community-inclusive model for organizational learning.  I tweet.  But given how much of their fancy philosophizing flies around the office, I thought a tangential blog about how people make decisions around education could be appropriate.

I’ve been working with Professor David Harrison and  SkillUp Washington on an upfront financing mechanism to help King County’s working poor onto a path of sustainability through education and training.  While that sounds boring and tedious (to me initially, at least), the essence for this need stems from the oft-overlooked heterogeneity of decision making models across socio-economic classes.

What?  I know, right?  Different people make decisions differently, and they all (to some extent) deviate from those archaic models of “rational decision-making” that we swallow and regurgitate in every Economics 101 class.

While we all respond to signals slightly differently, there’s a dramatic difference between how the low-income make decisions and weigh trade-offs and their middle and upper-class counterparts.  Cognizance of this alone can help us better customize public policy toward funding around training and education for the working poor.

Arlene’s Decision Making Model

“Arlene” is our avatar.  She is the traditional socio-economic underdog; over 25, under-skilled, working but earning annually less than 200 percent of the federal poverty line.  Arlene struggles to satisfy her basic needs, and the opportunity cost of enrolling in school and remaining actively enrolled is high.  The conventional incentives traditional students are motivated by (well paying job, financial security, social status) to persist through each semester are not the same for Arlene, who can’t consistently afford the time it takes to obtain a degree.  More importantly, her expected value of a degree as far lower, given a lifetime of internalizing social stigmas and/or low-paying, crummy past employment.

The oft-cited “rational” decision-making model is not ubiquitous.  Divergences from the standard model are most obvious among the low-income, who must choose daily between basic necessities like food and rent.  Their immediate future is mired in uncertainty, let alone long-term future, much unlike their middle and upper-class counterparts.

Low-income, often ethnic minorities and/or women, in King County (and everywhere) possess so few tools and resources that the constraints and preferences they juggle in making the most “rational” decision are frequently misaligned with a sustainable future.

Greater income volatility for low-income individuals increases their need for short-term credit.  Arlene’s time preferences and discount rate on future earnings is higher than middle and high-income earners; she can’t afford to prioritize education, given the many imminent constraints working poor face.  Arlene’s expected value of future full-time employment is diminished by daily uncertainties, and consequently far lower than what we may “rationally” predict.  Education has been shown to lower one’s discount rate in decision-making and permit the self-discipline that financial sustainability demands[1].

The inability to “afford” to wait to consume A (food, rent, childcare) over B (books and transportation to school) by Arlene and her counterparts reinforce barriers to graduation and full-time employment.  Arlene’s continued enrollment and active participation in community college and training programs is one of the most crucial building blocks of self-sufficiency, yet it is highly fragile and easily disturbed.  And the reason it is so fragile is because of the above: she can’t afford time and the expected value of that time spent on education is low, shrouded by uncertainty and past experiences.  Promises just aren’t as incentivizing for Arlene as they are for you and me.

An upfront financing mechanism that lowers the discount rate of re-enrolling next semester and raises the expected value of earning a degree would help clear Arlene’s path to self-sufficiency by making it more obvious and more certain.  A pay-as-you-go system that financially supports Arlene’s ambitions to become, for example, a registered nurse by providing partial upfront wages (that she would earn as an RN) would give her both the financial stability and confidence in the future necessary to complete the steps needed to do so.  It is precisely this lack of ready resources that reinforces the traditional barriers to entry to sustained training and employment.  This financing is an investment in human capital.  The outlay cost is the price of Arlene’s increased certainty in earning a degree that secures a good job.  The reward is the development of human capital, satisfying demand for high-demand industries, and the social and economic spillover effects of having the working poor move out of poverty.

We propose helping Arlene along the way to employment and bringing future financial rewards closer to home, before securing a job, and allowing her to repay the investment over time and below market-rate interest, post-employment.

[1] Bauer and Chytilover: The Impact of Education on Subjective Discount Rates in Ugandan Villages. March 2009.  http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1369803

Interesting!  A perfect pick-me-up bit of intrigue to fight the traditional Tuesday doldrums.

How does presentation affect consumer perception of quality?  In 2007, Washington Post writer Gene Weingarten set out to enliven the many marketing surveys done with a simple social experiment (see Pearls Before Breakfast, the article which won a Pulitzer Prize for Feature Writing).  Weingarten enlisted renowned violinist Joshua Bell, winner of the Avery achievement in classical music to play incognito at the Washington DC Metro station during a morning rush hour.  Bell used his $3.5 million dollar violin six classical songs, to the tune of $32 in tips over 45 minutes.  While thousands must have passed by, only a handful stopped to listen more attentively – even just briefly.

Possible conclusions to ponder (as articulated here):

In a commonplace environment at an inappropriate hour: Do we perceive beauty?  Do we stop to appreciate it? Do we recognize the talent in an unexpected context?

So what’s going on around you?

A while ago I set out with a friendly face and additional one-member camera crew to ask random people in Seattle what “social media” meant to them.  The purpose was to retrieve common sentiment regarding this popular phrase and improve my finesse with talking to strangers.

What struck me was that out of the 21 people who answered (9 short of a statistically significant sample size but my video-grapher was tired of following me around), a majority did not mention Facebook, MySpace, Twitter, and YouTube.  Instead, most interviewees used such personal deductive reasoning as:

“Well, social means group, not private, so the group?  And media means newspapers and magazines and TV so magazines and reality shows?”

Perhaps.  Social Media doesn’t yet seem to have the kind of ubiquitous definition as say, a fork.   And that could be a reminder of how new and constantly evolving “social media” is – as well as, more importantly, how its purpose can be so indefinitely customized.  Unlike a fork.

What was more interesting to me was that the teenagers I questioned were either dumbfounded or cynical.  The former of which made me nervous, the latter suspicious.

For example, one young man in his late teens responded with a tirade about how social media was owned by 10 percent of major corporations which dictate what we wear and who we talk to and what we think.

“I follow my own social norms,” he said.  He waved around a Smartphone during this passionate spiel, citing the “higher powers” he refused to succumb to.  The higher powers of Apple?  Cell towers?  Yahweh?

Similarly, an eloquent but bitter street vendor selling his hand-bound journals glanced periodically at his cell phone while condemning the “popular interests” were “guided by Barnes and Noble” and its corporate counterparts.

While a charming middle-aged mom proudly asserted her relative fame on Facebook, most people were downright apologetic and or embarrassed about their use of social networking sites and mediums.

What was most interesting to me was how nearly everyone commented on the need for “face-to-face” interaction with regard to meeting and connecting with people.  It seemed like they actually preferred this “old school” (as one man described it) method of engagement.

Are we just not aware that we’re using social media or are we in denial?  I wonder which is more likely to hinder personal engagement efforts?

1 Day (or 33 hours, or 1939 minutes) Until Seattle Greendrinks Kickoff Party!

(click here for event information)

5 DAYS (or 7600 minutes) until the 2010 Greendrinks Kickoff Event with Re-Vision Labs and Oikocredit!

can you tell we’re excited?

The below are two home videos. Aside from their obviously amateur style, can you can tell which one was filmed with a $2900 over-the-shoulder digital camera and which with a $300 hand-held?  Or which was edited using Final Cut and Soundtrack Pro and which with only in-camera editing and a simple (legal) iTunes import?

I know, right?

Hence this post.  Employment is generally an exchange between human capital — experience, education, aptitude — and physical capital — work space, computer, office supplies, etc. In the traditional employer-employee contract, you apply your knowledge to the employer’s tools to synthesize a product that ultimately supports everyone’s pocketbook.

But with the growth of small (startup) firms, especially those propelled by the Great Recession and those in the technical and “creative” industries, it is increasingly necessary to possess your own equipment (or have access to it, though that too is not free), and know how to use it before applying.  For example, software engineers and web developers needed to have had, at the very least, access to modern computer equipment prior to the job (likely throughout their youth or young adulthood).  Aspiring creative directors of advertising agencies need a polished “book,” graphic designers need a portfolio, filmmakers need a film.  This cannot be achieved by using the public library.  All of these require pricey hardware and software that is a) not easy to purchase oneself and b) barely accessible unless you’re paying tuition at a university or vocational school.

Clearly, purchasing and accessing the tools necessary to develop these technical and creative skills has serious implications socially, since those with the means and access to capital consequently get the job and perpetuate the cycle.  Fortunately, tools once available only to large firms and professionals can now be found under the blue light at Walmart.  On the hardware side, digital media equipment ranges from thousands of dollars to less than a hundred.  Thankfully, software is now frequently bundled into differently priced packages- I can purchase Adobe’s Photoshop Elements 8 for $80 instead of its Master Suite Collection for $2500.  Everyone can now be a filmmaker, to the loosest sense, with the most recent iPod nano (priced at less than $180), or with a right smartphone (which can be obtained very inexpensively with savvy finagling).

My musing stems from an indecision about whether to invest roughly $3,000 into my own 15″ Macbook Pro with Adobe Creative Suite and Final Cut Studio.  I want to excel at using production software to develop attractive digital media, but this cannot be achieved from ordering a textbook alone.  I need my own equipment.  I need to play with different tools, creating and re-creating, building a language of modern technical jargon and skills.

Or do I?  The question I’m now considering is whether I can do this with equipment that is “good enough” but not necessarily intended for professionals.  Can I keep my 4 year-old HP laptop or do I need to buy a modern Mac?  Will using the $79 Adobe Premiere Elements be as effective as the $179 Final Cut Express for generating quality YouTube videos?  Can I achieve great videos with the $179 Final Cut Express instead of the $1000 Final Cut Pro or is that equivalent to asking for a Zima at an upscale bar?  Will a 2.8 GHz processor be noticeably faster than its 2.66 GHz counterpart?

The same questions contribute to my indecision over a video camera.  Should I get the $200 Flip or spend twice as much on a Canon FS20 for its 2000x digital zoom and in-camera editing?  If both offer High Definition image quality, what additional quality am I paying for?  And will purchasing an additional $50 microphone plug-in produce much better sound quality than simply holding the video camera closer to someone’s face?

Essentially, what is the additional benefit to my development as a digital artist per additional dollar spent?  Is marginal reward directly and reliably proportional to the marginal cost?  Will I be comfortable with the resulting equilibrium?

The projected consequences of making the “cheap” decision in the face of hyper-competition and a deep recession is daunting.  Forget being the best, or even the best of the best; you have to be awe-inspiring to land a job in the creative industry right now.  The ramifications on social equity of this are daunting, as mentioned.  Are those privileged enough to own the best equipment more marketable?  Are those who don’t even in the running?

The question comes down to:

1.Will my potential employer be just as impressed with a good YouTube video as he or she is with a stylishly-printed DVD with original music mixes?

2. Is my employer (and/or myself) interested more in content or pretty packaging?

The answer, I believe, is that it depends.  Don’t you hate that?  Just another ambiguous, flexible variable to plug into the formula for success.  But it does depend on what your goal is.  Are you competing with indie filmmakers to get into Sundance?  Or are you advertising a product on Facebook?  What kind of product?  Who are your customers?  The Flip would probably be perfect under one scenario and infuriatingly too limiting in another.  And as I’ve learned the hard way, without a good storyline and footage, no amount of post production will turn nothing into something.

I’m reading, “Predictably Irrational: The Hidden Forces That Shape Our Decisions” by Dan Ariely (his blog and website here).  It’s fun and insightful, with plenty of fodder for examining our common sense decisions.

For fear of not being able to articulate the author’s more comprehensive argument, I’d like to simply share this one example (p.71):

…. There are many examples to show that people will work more for a cause than for cash. A few years ago, for instance, the AARP asked some lawyers if they would offer less expensive services to needy retirees, at something like $30 an hour. The lawyers said no. Then the program manager from AARP had a brilliant idea: he asked the lawyers if they would offer free services to needy retirees. Overwhelmingly, the lawyers said yes.

What was going on here? How could zero dollars be more attractive than $30? When money was mentioned, the lawyers used market norms and found the offer lacking, relative to their market salary. When no money was mentioned they used social norms and were willing to volunteer their time. Why didn’t they just accept the $30, thinking of themselves as volunteers who received $30? Because once market norms enter our considerations, the social norms depart.

Food for thought, happy Thursday!