Nathan Lustig

Bill Gates on Disease, Teachers and Mosquitos

Category : Technology
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Bill Gates returned to TED this year to give an update on what his foundation had been doing for the last year, along with how he thinks the world can start to solve two of the biggest problems in the world today: disease and lack of good education.  Gates’ presentation can be described in one word: Optimism.

Bill Gates’ TED Talk

The first half deals with malaria.  I had not realized that malaria was a problem in the US and other rich countries up until the 1950s.  It killed over 5m people worldwide during the 1930s and was not completely eradicated in the US until the 1970s.  Now, it only affects poorer countries, which happen to be around the equator.  Gates says that “more money is spent on baldness drugs than malaria drugs” each year. 

Most people would agree that our priorities are clearly misplaced.  This situation is a clear example of a problem that the market cannot solve completely on its own.  Poor people cannot provide the profit motive necessary for big drug companies to develop the cures necessary to eliminate malaria worldwide.  The Gates foundation, other charities and some rich governments should step in to fill the void.  Tax credits, grants and other incentives should be used to stimulate innovation in areas where there are not sure economic profits, but provide real social benefits.

I would also like to see a drug company cut their ad budget by 50% and use those billions to invest in a cure for malaria or another one of the treatable mass diseases, as drug companies now spend about an equal amount on advertising as they do investing in new drugs.  Imagine a big drug company cutting half of its Viagra, Propecia or Zantac ad budget to focus on developing a new malaria drug.

Imagine the positive (free) press that a company could get by doing this.  They could craft their new image around being an altruistic drug company and even run ads in the US touting their contributions to global health care.  Even a 25% cut in advertising in the US to invest in Malaria would be substantial.  This solution is probably too controversial for conservative drug companies, but it would be interesting to see.

I would also like to see one car company stop advertising completely and pass on the savings to consumers, or just keep the savings.  Everyone knows cars and brands of cars, so why bother advertising?  But that is another post for another time.

The second half of Gates’ talk focuses on what makes a teacher a good teacher.  Through research funded by the Gates Foundation, they found that a top 25% teacher improves student performance on standardized tests by 10%.  Unfortunately, the teacher’s performance is not rewarded.  In fact, teachers who many not be very good, but want to learn cannot even learn from good teachers because of contracts.

Gates touts the KIPP academy in Houston, another branch of the KIPP School that I talked about in a previous post, as a model for the future.  He says that the combination of giving children a chance to work hard, along with analysis of teacher performance produces results.  96% of children at the KIPP academy in Houston go to college.

I would love to see some sort of reward mechanism implemented for great teachers to help compensate them for their work.  Gates says that the good teachers are more likely to leave their jobs to change profession than bad teachers, so some sort of reward system is needed.  Gates is hopeful that many of these innovations can be brought to public schools in America, which will better help us compete internationally.

Obama’s pick for Education Secretary is Fantastic

Category : Political Science & Economics
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I just realized today that Barack Obama’s new Education Secretary is Arne Duncan, the former head of the Chicago Public Schools.  He is a top notch choice who I think will do a great job.

I first heard about Duncan when I read Freakonomics a few years ago. He was the head of CPS when Steven Levitt and Brian Jacob were studying whether teachers were cheating on standardized tests by filling in or changing answers on students’ tests.  They ran some regressions and found a bunch of suspicious answer patters from a surprisingly high number of teachers.  When Levitt and Jacob brought their suspicions to Duncan and the CPS, Duncan ordered audit testing to try to confirm the results.  The retesting confirmed that the teachers were cheating for their students and Duncan ordered the firing of the guilty teachers.

Duncan could easily have swept the study under the rug and not allowed retesting, but he did not.  Instead, he made a tough decision that was unpopular with the teachers and challenged the status quo.  His choice got rid of bad teachers who were masking their poor teaching performance by cheating on tests.  It would be great to see others in government make these kinds of tough choices.  I think every government agency could benefit from people following Duncan’s example.

Hopefully, he can help bring some positive change to American schools with is hard work and innovative approach to public service.

Paul Graham’s 13 Sentences

Category : Entrepreneurship
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Paul Graham is one of my favorite writers right now.  Here’s his bio from his website:

Paul Graham is an essayist, programmer, and programming language designer. In 1995 he developed with Robert Morris the first web-based application, Viaweb, which was acquired by Yahoo in 1998. In 2002 he described a simple statistical spam filter that inspired a new generation of filters. He’s currently working on a new programming language called Arc, a new book on startups, and is one of the partners in Y Combinator.

Y Combinator is a great idea that I wish would be replicated in other places.  I would love to see a similar program at the University of Wisconsin or in Madison.  Y Combinator:

[M]ake[s] small investments (rarely more than $20,000) in return for small stakes in the companies we fund (usually 2-10%).

All venture investors supply some combination of money and help. In our case the money is by far the smaller component. In fact, many of the startups we fund don’t need the money. We think of the money we invest as more like financial aid in college: it’s so people who do need the money can pay their living expenses while Y Combinator is happening.

For the last few years, he has written essays on life, business, startups, investing, education and many other interesting topics.  Some of my favorites, which I highly recommend along with the rest of his work, are After Credentials, Revenge of the Nerds, Why Nerds are Unpopular, How to Start a Startup and Why Startups Condense in America.

His recent essay titled Thirteen Sentences is a guide to what he believes are the thirteen most important things a startup should know about as it progresses.  His list is similar to what I tried to do for the Entrepreneur Deli last year in my post about the lessons I learned running ExchangeHut, but much better.
Here are a few of my favorite and what I believe are his most important pieces of advice:

1. Pick good cofounders.

Cofounders are for a startup what location is for real estate. You can change anything about a house except where it is. In a startup you can change your idea easily, but changing your cofounders is hard. [1] And the success of a startup is almost always a function of its founders.

2. Launch fast.

The reason to launch fast is not so much that it’s critical to get your product to market early, but that you haven’t really started working on it till you’ve launched. Launching teaches you what you should have been building. Till you know that you’re wasting your time. So the main value of whatever you launch with is as a pretext for engaging users.

5. Better to make a few users love you than a lot ambivalent.

Ideally you want to make large numbers of users love you, but you can’t expect to hit that right away. Initially you have to choose between satisfying all the needs of a subset of potential users, or satisfying a subset of the needs of all potential users. Take the first. It’s easier to expand userwise than satisfactionwise. And perhaps more importantly, it’s harder to lie to yourself. If you think you’re 85% of the way to a great product, how do you know it’s not 70%? Or 10%? Whereas it’s easy to know how many users you have.

8. Spend little.

I can’t emphasize how important it is for a startup to be cheap. Most startups fail before they make something people want, and the most common form of failure is running out of money. So being cheap is (almost) interchangeable with iterating rapidly. [4] But it’s more than that. A culture of cheapness keeps companies young in something like the way exercise keeps people young.

9. Get ramen profitable.

“Ramen profitable” means a startup makes just enough to pay the founders’ living expenses. It’s not rapid prototyping for business models (though it can be), but more a way of hacking the investment process. Once you cross over into ramen profitable, it completely changes your relationship with investors. It’s also great for morale.

Check out his essays at PaulGraham.com.  They are worth the read if you are interested in startups, education or creativity.

Facebook Must Be In Trouble

Category : Business & Advertising
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I recently blogged about the Facebook ads called “Get Your Obama Check.”  Those appear to be gone already, but they have been replaced by new ones with a similar message.  These ads are called “Ball out of control at 23”  “I make more than my dad” “Make $169 between classes” and a bunch of others.  They all feature really nice cars or just wads of cash.  Here are a few of the captions from the ads:

Make insane amounts of cash during class. Stop being broke.
I know its not fair.  Hes been working his whole life.  Its easy.
You can afford this car.  Its easy.
Stop being lazy.  Google makes you $5000 per month.
Again, they all link to the same “blog” complete with fake replies.  They all claim they only want $1 for delivery of their “info packet.”

Facebook must be really, really, really desperate for revenue if they are accepting this type of ad.  Facebook must not be able to get any reputable company to pay for CPM ads because, by now, everyone knows about their abysmal click through rates and the CPCs are pretty high for most college campuses.  That’s another tipoff that these sites must be scams or promise more than they deliver.  If they can afford to the CPC necessary to get play on the University of Wisconsin network, they must be paying at a bare minimum $.10 CPC.  Most likely its higher, closer to $.50, as that’s what I have paid in the past.

I understand that revenue is revenue, no matter the source, but Facebook should not be known for sending its customers to shady, get rich quick schemes.  Even if they are legal, I would not want to be known as a company to be dealing with these types of companies.  I wouldn’t want to direct my customers to these sites.
It will be interesting to see if these ads will generate a backlash eventually.  I’m thinking it will, as these types of ads bring Facebook into the MySpace realm, a move that Facebook has been trying to fight since its beginnings.