<html><body><P>American Enterprise Institute</P> <P>October 25, 2007</P> <P>[Edited transcript from audio tapes]</P> <P><BR> <TABLE cellSpacing=1 cellPadding=1 width="100%" border=0> <TBODY> <TR> <TD> <DIV class=BodyText>8:30 a.m.</DIV></TD> <TD> <DIV class=BodyText>Registration</DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText>9:00</DIV></TD> <TD> <DIV class=BodyText><EM>Introduction:</EM></DIV></TD> <TD> <DIV class=BodyText>Frederick M. Hess, AEI</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText>9:10  </DIV></TD> <TD> <DIV class=BodyText><STRONG>Panel I:</STRONG> </DIV></TD> <TD> <DIV class=BodyText><STRONG>The Role of Entrepreneurship in Education</STRONG></DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText><EM>Presenter:</EM></DIV></TD> <TD> <DIV class=BodyText>Stig Leschly, SRL Capital Management</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText><EM>Discussants:</EM></DIV></TD> <TD> <DIV class=BodyText>Morgan Brown, US Department of Education </DIV> <DIV class=BodyText>Michelle Rhee, DC Public Schools </DIV> <DIV class=BodyText>Elliott Sainer, Aspen Education Group</DIV> <DIV class=BodyText>Jon Schnur, New Leaders for New Schools </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText>10:30</DIV></TD> <TD> <DIV class=BodyText>Break</DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText>10:40</DIV></TD> <TD> <DIV class=BodyText><STRONG>Panel II:</STRONG></DIV></TD> <TD> <DIV class=BodyText><STRONG>Addressing the Human Capital Challenge</STRONG></DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText><EM>Presenters:</EM> </DIV></TD> <TD> <DIV class=BodyText>Christopher Gergen, New Mountain Ventures</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Bryan C. Hassel, Public Impact</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> <DIV class=BodyText><EM>Discussants:</EM></DIV></DIV></TD> <TD> <DIV class=BodyText> <DIV class=BodyText>David Harris, The Mind Trust </DIV> <DIV class=BodyText>Sharon Robinson, American Association of Colleges for Teacher Education</DIV></DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText>Larry Rosenstock, High Tech High</DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText><EM></EM> </DIV></TD> <TD></TD></TR> <TR> <TD> <DIV class=BodyText> <DIV class=BodyText>12:00 p.m.</DIV></DIV></TD> <TD> <DIV class=BodyText> <DIV class=BodyText>Luncheon</DIV></DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> <DIV class=BodyText>12:50</DIV></DIV></TD> <TD> <DIV class=BodyText> <DIV class=BodyText><STRONG>Panel III:</STRONG></DIV></DIV></TD> <TD> <DIV class=BodyText> <DIV class=BodyText><STRONG>Addressing the Financial Capital Challenge</STRONG></DIV></DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText><STRONG></STRONG> </DIV></TD> <TD> <DIV class=BodyText><STRONG></STRONG> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> <DIV class=BodyText><EM>Presenters:</EM></DIV></DIV></TD> <TD> <DIV class=BodyText> <DIV class=BodyText> <DIV class=BodyText>Daniel Pianko, Knowledge Investment Partners</DIV></DIV></DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText><EM></EM> </DIV></TD> <TD> <DIV class=BodyText> <DIV class=BodyText>Kim Smith, NewSchools Venture Fund</DIV></DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> <DIV class=BodyText><EM>Discussant:</EM></DIV></DIV></TD> <TD> <DIV class=BodyText> <DIV class=BodyText>Jim Shelton, Bill and Melinda Gates Foundation </DIV></DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> <DIV class=BodyText> <DIV class=BodyText>Nelson Smith, National Alliance for Public Charter Schools</DIV></DIV></DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> <DIV class=BodyText>2:05</DIV></DIV></TD> <TD> <DIV class=BodyText> <DIV class=BodyText>Break</DIV></DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> <DIV class=BodyText>2:15</DIV></DIV></TD> <TD><STRONG>Panel IV:</STRONG></TD> <TD> <DIV class=BodyText> <DIV class=BodyText><STRONG>Addressing Barriers and Changing Policy</STRONG></DIV></DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText><EM>Presenters</EM>: </DIV></TD> <TD> <DIV class=BodyText> <DIV class=BodyText>Larry Berger, Wireless Generation </DIV></DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> <DIV class=BodyText> <DIV class=BodyText>Ed Kirby, Walton Family Foundation</DIV></DIV></DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText><EM></EM> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> <DIV class=BodyText><EM>Discussants:</EM></DIV></DIV></TD> <TD> <DIV class=BodyText> <DIV class=BodyText>Don Shalvey, Aspire Public Schools  </DIV></DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> <DIV class=BodyText>Laura Smith, New York City Schools </DIV></DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText><EM></EM> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> <DIV class=BodyText>3:30</DIV></DIV></TD> <TD> <DIV class=BodyText> <DIV class=BodyText>Break</DIV></DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText>3:40</DIV></TD> <TD> <DIV class=BodyText><STRONG>Panel V:</STRONG></DIV></TD> <TD> <DIV class=BodyText> <DIV class=BodyText><STRONG>Making Supply-Side Reform Work</STRONG> </DIV></DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText>  </DIV></TD> <TD> <DIV class=BodyText><EM>Presenters</EM>: </DIV></TD> <TD> <DIV class=BodyText> <DIV class=BodyText>Anthony Bryk, Stanford University </DIV></DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> <DIV class=BodyText>Matt Candler, New Schools for New Orleans </DIV></DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> <DIV class=BodyText>Chester E. Finn Jr., Thomas B. Fordham Foundation</DIV></DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> <DIV class=BodyText><EM>Discussants:</EM></DIV></DIV></TD> <TD> <DIV class=BodyText> <DIV class=BodyText>Wendy Kopp, Teach for America  </DIV></DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText> <DIV class=BodyText>Chris Whittle, Edison Schools</DIV></DIV></TD></TR> <TR> <TD> <DIV class=BodyText> </DIV></TD> <TD> <DIV class=BodyText><EM></EM> </DIV></TD> <TD> <DIV class=BodyText> </DIV></TD></TR> <TR> <TD> <DIV class=BodyText> <DIV class=BodyText>5:10</DIV></DIV></TD> <TD> <DIV class=BodyText> <DIV class=BodyText>Wine and Cheese Reception</DIV></DIV></TD></TR></TBODY></TABLE></P> <P> </P> <P>Proceedings:</P> <P>INTRODUCTION and PANEL I:  The Role of Entrepreneurship in Education</P> <P>Frederick M. Hess:  I know it s great to see so many friends from around town and in from around the country.  Hopefully we ll have enough time during the day to give folks a chance to talk and catch up, but I d like to try to keep things on schedule because everybody is so busy and has multiple commitments, so we ll try to be very respectful of that.  </P> <P>I m Rick Hess, Director of Education Policy Studies at the American Enterprise Institute.  I d like to welcome you here to join us today for this conference on The Supply Side of School Reform and the Future of Educational Entrepreneurship.  </P> <P>The way this is going to operate is:  I m going to just take a couple moments up front to set up what we re talking about and to cover a couple of logistics.  We are then going to roll immediately into the first panel, which you see seated up here, and in the course of some brief intra-remarks the shape of the day should become clear.  </P> <P>Before we get started, first, I d like to thank the funders who have made this gathering and this research possible, The Ewing Marion Kauffman Foundation, for its generous support of all of this research and scholarship.  I d also like to thank the other funders who underwrite and support the AEI education program, including, particularly, The Serle Family Trust.  </P> <P>The second thing I d like to do, is, Thomas, please stand up.  I d like to thank Thomas Gift for helping to pull this whole thing together.  [Applause].  And, in particular, the reward for that is, if you have any questions or needs during the day, please grab Thomas or Morgan and Rosemary and Juliet.  They shouldn t be hard to find around during the day.  </P> <P>You will find copies of the papers that the authors are presenting today available out in the foyer.  You will also find, for those of you who don t like carrying around bulky stacks, the full collection of papers on these CD-ROMS that are also available out there on the breakfront.  </P> <P>With that, let me kind of explain what we re trying to talk about today and what we re hoping to accomplish.  What I want to suggest is that when we traditionally talk about school reform, whether we talk about it from inside of districts or outside of districts, we tend to suffer from the same conceptual mistake.  When we talk about reforming systems from the inside, we tend to talk about processes, we tend to talk about pedagogy in instruction, we tend to talk about all of these things that are vitally important, but we tend to talk about them in a way which presumes that we re going to work around the existing architecture, we re going to work around the existing plumbing, we re going to work around the existing talent and personnel, and, somehow, if we use enough duct tape and heavy glue, we re going to be able to make this whole thing fly in a way that it hasn t previously.  </P> <P>When we talk about reform outside, what we do is we tend to talk about social justice.  The choice community has, in my mind, a compelling argument, which is that if your child is stuck attending a lousy school, it s perfectly right and appropriate to make sure that the family has an option to get the kid into a better school.  </P> <P>But that tends to be where we stop when we talk about choice-based reform.  We talk about justice, we talk about opportunity, we talk about the right to choose.  It s probably not more than a double handful of people in the country who ve really talked seriously about how do you make sure that it s a choice among quality schools and quality operations over the past decade or more.  </P> <P>So, what I want to suggest, then, is there is a unifying problem to the way that we think about reform, whether we re talking about it from a district-centric perspective, or whether we re talking about it from a choice-based perspective.  It s the same conceptual error, two different manifestations.  When we talk about it on the inside, we give short shrift to the talent, tools, and machinery that one needs, whether one is a chancellor or a superintendent, to really get the job done.  How do we get them the people they need, how do we create new models to help them support and train and cultivate and keep these people, how do we give them the specific problem-solvers they need, whether they re tackling illiteracy or algebra instruction or anything else, and how do we give them the full compliment of tools that help them to solve the challenges they re facing?</P> <P>When we talk about outside, it s the same problem in a different shape.  It s unrealistic, in my mind, to expect that we re going to actually turn around the educational challenges in the places we care most by hoping that enough 25 year olds are going to figure out how to get standalone schools up and running and somehow take these things to scale through a magic application of frenzy and elbow grease.  What we need to do is think about how we can create the conditions in which we stack the odds in favor of success for these organizations, and what we do in terms of the infrastructure, expertise, and human capital and the resources that they need to succeed.  </P> <P>So what I want to suggest, then, is that when we think about a supply side model of school reform, there are two metaphors that are probably useful to keep in mind: one, when we think about fixing the districts from the inside out, it s useful to think of the race to the moon analogy.  When Kennedy set out to go to the moon in 61, there was not the assumption that we would get there by simply having the Department of Defense or federal agencies do more or less what they had done but more of it or more diligently.  There was understanding that we needed to think anew about how we were going to summon efforts, how are we going to engage private and public activity, how are we going to come up with the suite of tools that would make that activity possible.  That is what, to my mind, is a model supply side response from the inside.  </P> <P>On the outside, we talk a lot about choice-based reform and social justice and deregulation of schooling, but deregulation, of course, is no guarantee of anything.  Deregulation can give us Putin s Russia and Belarus, or it can give us desirable results.  [Laughter].  And, to my mind, one of the key insights which we have gleaned and which we know in areas like telecom and banking and anywhere else, is that we want to deregulate in smart and thoughtful ways.  A wonderful example of this was the Marshall Plan.  When Western Europe had been raised in 45, we didn t say, Oh good, everything s been torn down, doubtless we will like the results that spring forth.   We said, Look, we know that if we re going to like what emerges from the political economies that grow up, we need to think about, how do we structure the sets of laws, how do we seed the right political institutions, how do we create the right incentives and frameworks, and how do we make sure that the right people are on the ground to take advantage and lead these nations in a way that what would seem to advance liberal democratic ideals rather than retard them.   We tend not to do that when it comes to choice-based reform.  There is a notion that if we just deregulate, things will work out, and I think that is rarely the case, and particularly in a sector where we don t have the infrastructure and networks to support the people out there trying to make a go of it.  </P> <P>Well, what does this mean, then?  This means that our agenda today is to think and talk about these issues in a way that we routinely don t.  What would it look like to talk and think seriously about creating supply side conditions, in particular, for those of us in the room who are policymakers or reformers or scholars or practitioners or funders.  What does this mean, and how can this inform the way that we think about the work that we do?  </P> <P>All right, briefly, let me run through how the day is going to shape up.  On this first panel, I want to just try to get some of these notions, the fundamental insights of supply side reform on the table.  Stig Leschly is going to be sharing some thoughts about how do we understand the challenges of entrepreneurial reform, of devising new responses and new models for educational improvement.  And we ve got an all-star panel up here to then help us think through the implications of what he talks about.  </P> <P>The second panel is going to think particularly about the human capital and the talent development challenge.  </P> <P>The third panel, right after lunch, is going to address the financial capital challenge and the role of venture capital.  </P> <P>The fourth panel is going to talk about what it means to address the barriers to entry and to change policy in ways that makes it more possible for these entrepreneurs to come forth and devise the solutions that we need.  </P> <P>And, because all of this sounds great in theory, but because this is, at the end of the day, kids we re talking about, and we actually care about making sure we do this right, that last panel is going to talk about some of the challenges of making this work, particularly about the R&D challenge, how do we make sure that we re learning and doing this better with each successive decade, how do we understand the quality control challenge posed by this new environment, and what are we learning about what it takes to make this work in reality.  </P> <P>That s going to be the shape of the day.  I think it s going to be rewarding.  Again, you ll be able to find the papers out in the foyer.  You ll also be able to find them on CDs.  For those of you who don t like to carry anything away, all of it will be available on the AEI website.  The address will be up here during the day.  And for those of you who can t wait to get your advance order into Amazon, the collected and revised collection will be out with Harvard Education Press, September 2008, so get your Christmas orders in now.  </P> <P>With that, I want to go ahead and introduce this first panel and get things rolling.  Also, for those of you who track these things more closely, you know that this effort, in many ways, builds upon a previous volume that we did with Harvard, Educational Entrepreneurship.  For those of you who are interested to see what it said, it will be available out here during lunch, for those of you who are interested in getting your hands on a copy.  All right, Panel I:  The Role of Entrepreneurship in Education, Stig will be presenting first, Stig Leschly is Managing Partner and Founder of SRL Capital, a buy-out fund he established in 2005 to acquire undervalued businesses.  Stig previously served as a lecturer at the Harvard Business School, where his research and teaching focused on educational entrepreneurship, and where his cases of school reform continue to be widely used across the country by professors teaching these kinds of things.  All right, we have four discussants with us, who, to my mind, are really an unparalleled set of folks to talk about these issues.  Morgan Brown is the Assistant U.S. Deputy Secretary of Education for Innovation and Improvement.  He was formerly Director of the Division of School Choice and Innovation in the Minnesota Department of Education.  Sitting next to Morgan, you will see Michelle Rhee, the Chancellor of the District of Columbia Public Schools.  Prior to that position, she was the CEO and President of The New Teacher Project, which she founded in 1997.  Elliott Sainer is President of the Aspen division of the CRC Health Group, and formerly CEO and co-founder of Aspen Education Group, a boarding school for troubled and underprivileged children for which he earned the 2004 Entrepreneurial Leadership Award from the Education Industry Association.  And, finally, we have Jon Schnur, CEO of New Leaders for New Schools, a national non-profit, which he co-founded in 2000.  Previously Jon served as Special Assistant to the Education Secretary Richard Riley in the Clinton Administration, and as a Senior Advisor on Education to Vice President Al Gore.  </P> <P>Stig, would you please go ahead and get us started, Sir.  </P> <P>Stig Leschly:  Thank you, Rick.  All I can think of right now is duct tape and glue.  I think that s actually the topic of my talk.  I m going to be quick because there s a great panel here, so, I ll try to get out of the way.  What I m going to do in the next 10 minutes is to speculate for you, as best I can, about what it would take to reform, really reform, from the inside, even a single, large, urban school district in America.  At the outset, let me just establish and stress two facts worth highlighting.  The first is that big city school districts fail uniformly, severely, and persistently to remediate and prepare for college, non-white and poor students.  Achievement gaps by race and income exist today in big cities, more or less as they did in the 1980s, and unless I ve missed something, there s no variation at all in the trend.  As far as I m aware, there s not a single, large school district in this country that has ever changed in a meaningful, lasting way, results for disadvantaged kids.  So that s fact number one.  </P> <P>Fact number two.  Individual schools inside of big city school districts are astonishingly regulated in their daily work and choices.  They are subject to a crush of rules that control their day-to-day with astonishing force and granularity.  These rules emanate from labor contracts, primarily, and secondarily from pockets of state and federal law that control the intricate practices of schools, and from over-zealous district offices that also micromanage schools.  These rules, as a whole, decide who can and cannot work, who gets paid and why, how big or small schools and classrooms should be, which instructional techniques and materials should be used, how special education, gifted and foreign language speaking students should be taught, what training teachers should receive, how every minute of every day is spent, and on and on.  That s fact number two.  In their daily work, public schools and big city school districts are encoded in a severe granular set of rules.  </P> <P>So, with those two initial facts, here s the main point.  For an urban school district to truly change, for it to improve dramatically and permanently, it needs to reorganize itself in two unprecedented ways.  The first reorganization involves schools themselves, where, in my view, the rules that I just described, these massive contractual, legal and administrative constraints, need to be called off, and, where, simultaneously the authority to lead faculties and schools needs to be vested completely and unflinchingly in principles.  The logic of this school level deregulation and leadership clarification is professional teamwork.  Leadership clarity and operating freedom are the basic, necessary organizational conditions of professional teams and complex work everywhere.  Simply put, for adults to form and endure in teams that undertake complicated adaptive work, they need leaders and freedom to solve their problems.  </P> <P>Social science bears this out.  For decades university-based sociologists and social psychologists have studied the nature and organizational conditions of effective teams.  The overwhelming lesson from this body of work, which has been developed earnestly and without any particular interest in school reform, is that skilled teams universally demand high dosages of operating latitude and leadership clarity.  The private sector also illustrates this point.  Skilled private sector firms master creative, complicated work.  In fact, they re probably better at solving nuanced problems than any institution in our society, and they operate with few internal constraints and with simple hierarchical chains of command.  The most important lesson from the private sector for school policy is that genuinely complex, adaptive and skilled professionals thrive only in well-led and loosely regulated teams.  So that s the first component, I predict, of real reform in urban districts, school level deregulation and total leadership clarification in schools.  </P> <P>The second component of real reform in urban districts concerns their central offices and the need to create in them an unprecedented ability to govern and monitor schools and to route resources swiftly among them based on results.  This resource allocation mechanism is largely non-existent in urban public schools, but it is vital to create turnover among schools and to favor and reward strong school-level teams over weak ones.  To have its desired effect, resource allocation in large, urban districts needs to be quick, complete and objective.  It should have sensitivity to students and minimize disruptions among them.  But, in every other respect, it needs to be merciless.  In focusing on governing schools, central offices should revisit, and, in many cases, discontinue their extensive efforts to manage, control and remediate school-level work.  Central planning of school-level work does not succeed in practice, and conceptually misses the point that schools need to be challenged with full freedom to rise or fall, and that the defining function of central offices should be, as things unfold, to route children facilities and funding away from weak school-level teams and toward their stronger counterparts.  </P> <P>My speculation about the components of real reform in large districts, the sweeping deregulation of schools, this total leadership consolidation in principles, and this refocusing of paired central down offices on resource allocation is highly unlikely to occur.  It s probably like that space shuttle that Kennedy sent to the moon.  It requires a full reconsideration of labor contracts in big cities, at state and federal law that over-regulates schools, and it also involves trusting central offices in their newly downsized form to objectively, firmly, and persistently reconstitute failing schools.  The odds of all that are low, and mostly for political reasons.  What usually transpires in districts tends to be incrementalist and partial reform, reform that does little to address the rules that I ve described, and the breakdowns in teamwork and leadership that they ensure in schools.  </P> <P>The low probability of what I suggest does not make it less necessary, though, I think, nor does it justify compromise.  It just proves that reformers should hedge their bets on urban districts and continue to support the charter school movement, particularly lead charter schools and other choice-based reforms that circumvent traditional district schools.  </P> <P>Let me close there with the charter school movement and its place in the periphery of large, urban school districts.  The charter school movement can be a model for district reform.  It embodies the school level deregulation and leadership clarity for which I ve argued.  And, predictably, over the last 15 years, a small subset of charter schools have taken full advantage of their operating freedom and simplified leadership to assemble and maintain magnificently cohesive, resourceful, and successful teaching faculties, and to deliver mesmerizing results with low income and minority students.  </P> <P>Moreover, the charter school movement aspires to governance that focuses on monitoring schools and choosing among them.  So, at least on paper, the charter school movement exemplifies how to fund, govern and organize public schools.  In reality, the glaring and perfection of the movement is its inability to close struggling schools and reward the strong ones.  State charter laws, their political sponsors, and their authorizers, have taken the easy path.  Over the last 15 years, of the nearly 5,000 charter schools that have opened, approximately 11 percent have been closed, and only a small fraction of that 11 percent has been motivated by academic failure or mediocrity.  </P> <P>The failure of the charter school movement to sanction its weak schools and to invest without reservation in its top tier is as serious as it is predictable.  In both the charter sector and inside of urban school districts, it is wise to deregulate schools and empower the leaders, but it is only half the work.  Equally important is creating a larger mechanism for managing the enormous variation in school level performance that naturally results from freeing schools of their regulatory paralysis and challenging them to perform.  That mechanism is as absent in the charter school movement as it is absent in large, urban districts.  </P> <P>If the charter school movement could get serious and begin in earnest to police its failing in mediocre schools and reward without hesitation its top tier, then its quality would be on the mend.  The effect of this governance would probably dwarf all that we ll talk about today about supporting and remediating charter schools.  The movement would then also fully illustrate the way forward for reform inside of urban districts.  It would exemplify for urban districts how to organize schools with few rules and clear leaders, and how to route resources among them, based on results.  Thank you.  </P> <P>Frederick M. Hess:  Thank you, Stig.  Morgan?</P> <P>Morgan Brown:  Thanks, Rick.  I find really very little to quibble with in Stig s paper in terms of the vision that he paints for a decentralized, deregulated school districts with strong school autonomy, so I want to talk a little bit about what my perspective is from working in an office that is advertised as the quote/unquote entrepreneurial arm of the Department of Education.  Put aside the issue of whether entrepreneurship and federal bureaucracy belong in the same sentence, which is a decent question for someone to ask.  This tends to draw me toward the practical challenges that Stig focused on a lot at the end of his paper, and how they might be addressed, and what role the Federal Government might play in that.  </P> <P>First, just my take on the two main options that Rick did an excellent job of laying out regarding trying to force systemic change that might lead to something like Stig s vision of a charter district.  First, of course, there s the top-down overhaul approach, and although we ve seen some evidence of positive results in places like New York, Chicago and Philadelphia, my guess is that Stig would define a lot of those efforts as coming under the incrementalism definition that he talks about in his paper.  It also really remains to be seen, this hasn t really been tested yet, about whether the progress that has been made in those districts is sustainable after the dynamic, political or education leaders that put those changes in place move on.  </P> <P>Finally, we see the challenges of the top-down approach when we look at the efforts to restructure failing schools that have reached that level in the cascade of interventions and consequences that are No Child Left Behind.  In spite of a handful of success stories in places like San Diego, Chicago, Philadelphia, a recent JEO report pointed out that just 1 percent of all the schools that have reached that restructuring level have reopened as charter schools, which would be the most dramatic kind of restructuring or reconstitution potentially that would line up with what Stig has talked about.  </P> <P>The second approach is something that I ll call, more broadly, growing the open sector of public education, which I think has more promise for achieving some reform goals.  That s my particular bias.  I want to reference here that I m borrowing in this language a lot from my colleagues at an organization called Education Evolving, which is based in Minnesota, and you can find it on their website at educationevolving.org.  And two of them are actually here in the audience, one is Ted Kolderie, who some of you may know had a little something to do with why we have charter schools in this country, and the other one is Joe Graba.  They re both here if you d like to talk to them.  </P> <P>First, I like this because it gets away from the approach of trying to get the schools we need or the schools we want simply by trying to change the schools we have.  And, in doing so, we create new and truly different school models that can potentially have an immediate impact on students whose learning styles are not well served by the traditional school district system.  </P> <P>Second, it makes expanding school choice an integral part of the solution, which is not necessarily the case just because you create a decentralized, deregulatory school district.  Unless you re very intentional about making choice part of it, it will not necessarily have the beneficial impacts.  And I reflect upon my former boss, Minnesota Governor, Tim Pawlenty, who made a visit several years ago to the Edmonton School District because of what he had heard about their strong site-based management system that may be perhaps the strongest example that we re familiar with of that kind of approach.  But, it was interesting that when he got there, he heard from a lot of people that the resulting benefits or changes, such as they were in the District, were much more due to a very broad spectrum of choice there, including private schools that are part of the choice options there, more so even than the site-based management approach.  </P> <P>I do think there s some encouraging news on this front, acknowledging some of the things Stig pointed out about challenges for charter schools going forward.  The National Alliance of Public Charter Schools just released a report last week that said we now have 29 communities, many of substantial size, that are now serving at least 13 percent or more of public school students that are being served in charter schools.  So we have a number of communities and districts where charter schools are getting a fair amount of the market share.  And, of course, the question that follows up on that, which I think we may want to have some discussion about, is, what is the impact and how are school districts responding to that kind of external pressure?  And the woman to my left might have something to say about that when she gets up.  </P> <P>So, the question is that we re left with is, Are we doing enough at the federal level to support and facilitate entrepreneurship in education?  We basically have two tools, money and the bully pulpit, trying to change the conversation.  I think we ve done quite a bit.  We obviously provide more funding to start up new charter schools than any other entity.  We have programs like Transitions to Teaching that funded the teacher project in part, which Michelle ran.  We have the Teacher Incentive Fund, which is trying to pilot and pay for performance programs.  We ve done grants to organizations like Teach for America.  We have supplemental education services that engage a wide range of organizations and tutoring.  And, we have policy resources like our Innovations and Education Guides, which we recently released books on Closing the Achievement Gap in Both Charter High Schools and K-8 Schools to give examples of that and how they should be replicated.  </P> <P>Moreover, the Secretary has made a number of proposals for reauthorization to strengthen the restructuring components and expand school choice in No Child Left Behind.  But, as many of you know, there s a fair amount of opposition to that over on the Hill.  </P> <P>So, the answer is, we re doing more than any other previous administration, but we are not nearly doing enough.  And I ll just offer two examples of areas where I don t think we ve figured out how to move to the next step.  One is in solving this issue of the pipeline of school leaders, and Jon Schnur is here, so he ll answer all questions that you have regarding that.  The other one is how we move beyond looking at highly-qualified teachers to a more sophisticated discussion and definition about highly-effective teachers, a term the Secretary has used a lot, that will also allow us, I think, to accommodate that definition to a wider range of innovative schools that are focused more on outcomes than inputs.  Thanks very much.  </P> <P>Frederick M. Hess:  Thank you, Morgan.  Michelle?  </P> <P>Michelle Rhee:  Okay, I have a whole lot to say, so, I m going to talk really fast.  You know, when the Mayor s office originally approached me about taking this job, my first answer to them was, absolutely not, I have no interest in this whatsoever.  Because, after having run The New Teacher Project for ten years, and having worked with almost every large, urban district in the country, I thought, that is an impossible job, and the way that I m going to have the most impact is to sort of agitate from the outside, and I think that was not a bad idea that I had back then.  [Laughter].  Now that I m in this role, I mean, I think that I m sort of in a fascinating place.  The last four months have been just the most, I ll put it nicely, interesting four months that a person could possibly have, having had the experience that I did, and then coming into this.  </P> <P>So I have a few thoughts.  First, in terms of the concept about total school deregulation, if you look at how we actually take a district, as is, to potentially more of a model around school leader autonomy.  I just think there s a tremendous amount that you have to think about in terms of the process of how to get there and the timeframe over which we can get there.  I spent the first four weeks of September, basically the first four weeks of school, sitting down and meeting individually with every single principal in our district, and I actually have the luxury of doing that because we only have 156 principals.  </P> <P>And so, day in and day out, I was meeting with every single principal in the district, and it was fascinating.  First of all, people told me that this had never been done before.  Half the people came in and said, I ve been working here for 20 or 30 years, I ve never sat down with the superintendent before, which I just found unbelievable.  And, secondly, I followed the same script every time, pretty much, when I met with people.  I d say, first of all, I had all their data in front of me for the past ten years, and I d ask them, How long have you been at the school?  And they d say, seven years, so I d mark it, and I d look at the trend.  And then I said, What are you going to guarantee me, in terms of results for this year?  And I said, and before you answer that question, just imagine all the things that could happen.  We could have a flood at your school, and that means you re going to have to relocate for three months, two of your best teachers are going to go, all of those things, just assume that they re going to happen, and tell me, still, despite all of those things, what are you going to guarantee me as a leader of this school?  </P> <P>People did not know what to do with themselves.  They had never been in a position where someone was actually sitting down with them and saying, what are the goals that we re going to, at the end of the day, hold you accountable for?  And I actually have a very, very favorable principal contract where they serve at my pleasure.  And, so, I said, know that if you don t meet these goals, you re running the risk of not having a job the following year.  </P> <P>Just that, in and of itself, and the fact that that concept, and the idea of sitting down with the superintendent to have this conversation, was so foreign, means that something is wrong in how we re running these urban, public schools.  I d say that from that experience, what I can tell you is that we have a massive leadership problem.  I sat in meetings where, literally, I had some people who, their proficiency rates are in the single digits right now, and I said, what are you going to guarantee me, and I had one woman say to me, 50 percentage point gains.  I was like, I should just fire you right now because that s so stupid to say.  So, I mean, I have people who literally, they don t understand sort of what it s going to take.  </P> <P>So, as I m looking at my leadership core, we re not talking about having to replace 10, 20, 30 percent of principals.  We re talking about the majority of the principals who I do not think have the skills, the knowledge, or the wherewithal to actually do this job and to perform in a district that I m going to run.  So what mechanisms are we going to use over time to make sure that that s happening.  Because, the bottom line is that, if I gave principals the power right now to make their own decisions, I guarantee you they d make the wrong ones.  So, I have a small percentage of people who, they have the results, and I ve told those people, go, use whatever curriculum the way you want, you don t have to come to any meetings, you do whatever you want.  My job is to get out of your way and make sure that the whole district bureaucracy is out of your way, and allow you to do your job.  But, for the rest of them, I can t do that.  And part of the problem is that if we say, Over time that s what we need to move to and we sort of say, Okay, we re going to move to a completely deregulated system, give these principals the power, and the amount of time that it would take to actually sort of see, you re going to have the public complaining because they don t have a lot of patience.  And, so, I think that you would run into a circumstance very quickly where there s a year of deregulation and then you don t see master results, and people say, Okay, that doesn t work.  So, I think we have to think carefully about the process by which we go through this.  </P> <P>I think the charters play a huge role in this entire movement.  I think the charters are going to play a huge role in this city.  But right now, the charter school system is not operating the way that it should.  In an ideal world, the charter school system would be operating exactly how we want them to, which is the high-performers stay open, whereby get you more resources, and the low performers would close.  And then we could point to the charter school system as something that works.  But, right now in D.C., 30 percent of my kids are in charter schools, and the vast majority of those kids are not seeing any better results.  Now, we ve got a couple superstars, which is great, and all those charter schools would say that they are successful because they re not regulated.  So I m good on that.  But, the bottom line is that the majority of them still are not producing results for kids, and we re not shutting them down, and we re not doing any better on that.  So we can t look at the charter school system and say, That s the model that we should be moving toward.  </P> <P>Let me say a little bit about the Central Office, oh Lord.  For those of you who are from D.C., you may know this.  For those of you who are not, I just dropped some legislation in front of City Council that said that I wanted the authority to turn all Central Office employees into at-will employees.  And you would think right now that everyone does not know what to do with themselves.  Everywhere I go, I keep saying, You mean we want to hold people accountable for doing their jobs?  Is that that foreign a topic?  I ll tell you this, though, it s fascinating.  About four weeks into my tenure I started noticing that the people that I had brought in, and I brought a massive number of people in with me, were talking in a different way, and they were operating in a different way, and finally I brought them in the room together, and I was like, what are you guys doing?  Because they kept coming to me and saying, Well, I know you want to do this, but the rule says that.  And I said to them, Look, if you think that we are going to transform this district by simply being better bureaucrats, we better throw in the towel right now.  We are not going to work harder and follow the same rules and see significant results.  We re just not.  </P> <P>So we have to question every single rule that is in existence, and the ones that don t make sense for kids, I am not going to follow, period.  I don t care how much trouble we get in later.  And this goes to the contractual.  Early on, somebody came to me and we had a circumstance with a school where they had a teacher who had been there for eight years, got their administrator license, wanted to come into an assistant principal position that they had at the school.  I said, great, makes sense.  And the principal says, HR is telling us that we can t do it.  So I call down to HR, and I m like, What s the problem?  They said, We have eight unassigned APs right now.  They ve been exited from their building.  By the contract, we are not allowed to hire a new AP into the system until these excess people are placed.  And I said, Wo, we are not going to take this guy, who has relationships with the kids, who the administration feels great about, who already we know can be successful there.  We re not going to put that person into the slot because we re going to place some random person who can t find a job into that position?  And they said, Yes.  I said, No.  So, put the guy in the position.  I hung up the phone, and 15 minutes later they call me back, and they re like, You really can t do this because you re going to get in trouble.  And I said, I don t care, they can grieve, whatever.  We ll deal with that later.  This is the right thing to do for the kids.  And they were like, Here s the other problem with doing this, Chancellor, if you let this school do it, all the other schools are going to call us and they re going to want to do the same thing.  I m like, They re going to want to staff their positions with the people that they think are going to do the right thing for kids?  Great!  So word got around, we have to break the rules, that s the very clear thing.  </P> <P>Last thing, I think that there has to be just an incredible mindset shift in a city in order for all of this to work.  First of all, there s a massive parental advocacy campaign that has to be undertaken.  Because even in a city like this, where there is a lot of choice, parents are still not making the choices for the right reasons, or the reasons that we would want them to in the end.  They re choosing charter schools right now because the buildings look a little nicer, the customer service is a little better, which, is one thing.  But, the bottom line is, they re still choosing to go to schools that are still not serving kids, and that are not ensuring that students are performing at the highest levels.  And then I have other parents who don t want me to shut down schools.  And if you look at any of the data, you d say, these parents should be begging me to close down this school because it is failing these kids, and it has been for years.  So, the parental advocacy has to be huge.  </P> <P>The second thing, though, and this is what I ve noticed with a lot of my colleagues across the country, we need to have a mindset shift amongst the leadership of urban, public schools.  I see all 100,000 school-age kids in this city as my kids, and my job is to make sure that every single one of those kids is in a school that is producing strong results for them.  I don t care if it s a charter school, if it s a district school, if it s a contract school.  If I try to control D.C.P.S. and protect my territory, that s not looking out for the best interest of kids.  </P> <P>So I said, in the long run, in five years, eight years, whatever, I want to have a portfolio of schools in this city that are producing the strongest results for kids.  And I m not going to say right now that 20 percent or 30 percent or 50 percent should be charter schools.  All I m going to say is, whatever is working, we re going to replicate and grow and enable it, and whatever is not we re going to shut it down.  But that process of shutting down those schools is going to require a significant effort by the public in terms of information about what these schools are doing and not doing for kids.  </P> <P>Frederick M. Hess:  Michelle!  [Applause].  Elliot?  </P> <P>Elliott Sainer:  Well, one of the things that is very nice about coming here this morning, other than being in southern California, is it s nice to get out of the fires.  But, listening to Michelle really reinforces the fact I m very glad I ve been working in the private sector for all these years.  But, I thought Stig s article or chapter, I m not sure what you call it, was nice to read because I happen to agree with a lot of what he said, which obviously makes reading very easy.  I m involved with a company that operates around 30 residential schools and programs around the country for under-achieving and struggling kids.  Mostly in the private sector, rather than the public sector, I can t imagine how you can operate without some local leadership and authority.  </P> <P>I try to imagine my business, and all the things I ve done over my career, and it s hard to imagine getting anything done, and I think hearing some of the things that Michelle has said, and just knowing from seeing what goes on out in the L.A. Unified School District sort of reinforces that.  I mean, can you imagine?  You read the paper in L.A., and you read that they re still making mistakes a month and one-half after school has begun, in paying people properly and on-time in Los Angeles in the school district.  I mean, how can that possibly be?  How can you not pay people on time?  Yet, a company like UPS or Federal Express or UPS, I think, tracks on-time, real-time, about 15 million packages at any one time.  So, just think about that in terms of the private sector and the public sector.  So I think one of the issues is that the bar is set so low that making payroll will be seen as an achievement in L.A. Unified.  And I don t mean to pick on L.A. Unified, but it s really a pretty sad state.  </P> <P>The second thing I think I agreed with Stig about was the hire and fire and compensation authority.  We re all in the people business ,and you ve got to have good people.  If you don t have the right to hire those good people and retain those good people, it s going to be very, very challenging.  </P> <P>Stig mentioned in his article, he didn t mention it this morning, the whole concept of best practices.  In my experience, best practices really should be a guideline, not a sort of requirement.  Obviously you can learn a lot from best practices, but, very often, best practices don t work in every type of situation.  So, again, it goes back to the local control.  </P> <P>I want to get a couple quick comments, and then I ll finish about the role of entrepreneurship in education.  We focused on a niche, which is really under-achieving and struggling kids, and we got into that niche, really, because we said there was a problem.  And the problem was there were lots of kids who were ending up in psychiatric hospitals back in the late 1980s, and people didn t know what to do with those kids, and there were no alternatives.  So really, there s lots of those kinds of problems.  For those of you in the audience who are thinking about what can you do entrepreneurially, the first thing is just identify there are lots of problems, and really look at how you can try to solve them. </P> <P>Secondly, and it goes back to the people issue, is you must create a superior leadership team.  That reinforces everything you heard earlier.  We struggle in the private sector, frankly, maybe not as much, but nearly as much, in finding good leadership.  It s a key issue no matter where you re working.  Build on your strengths, broaden some of your services.  One metric I like to use in looking in our schools and programs and other programs that we ve acquired over the years is what I call the four P s, which is people, product, potential, and predictability.  People is obvious.  We re in the people business.  Product, in this case, obviously, is the curriculum, the school.  Potential, can you grow that business and continue to expand?  And, frankly, the hardest in the private sector is predictability.  We have lots of schools and programs that would do real well for a couple of years, and then there are leadership changes.  People get sick, people leave, things happen, and the real issue is, Can you maintain that kind of consistency over time.  I think that s a real challenge for all of us.  </P> <P>So, looking back at the issue about public schools, I think tweaking the system, in my opinion, is not going to make any kind of change.  And I really applaud some of the things you re trying to do and some of the other urban school district people are trying to do, because you ve got to make dramatic change because tweaking in the last 20-30 years really hasn t done anything at all.  Thanks.  </P> <P>Frederick M. Hess:  Thanks, Elliot.  Jon?</P> <P>Jon Schnur:  So, one of the great things that Stig did is start with kind of his interpretation of the fact base, and then given those facts, ask what are the implications for reform.  So, let me share from my experience.  I ve also had a very interesting last several years, having gone from a policy role to working to attract, support, and train good leaders working with nine school systems across the U.S. through New Leaders for New Schools.  80 percent of our people are in district schools.  20 percent are in charter schools.  It s been incredibly interesting to learn through that lens about school systems across the country, the leadership pipeline.  </P> <P>So a few facts that drive my thinking on this, from what I ve seen.  First, it s important to remind ourselves that our society and economy has changed so dramatically in the last several years.  People know this, but I think it s worth remembering, and this is kind of a key fact, that our kids now have to reach much, much higher levels of knowledge and skill in order to succeed, in order for us to succeed, than ever before.  Several decades ago, we had an economy where most kids could, in fact, learn at a low level, and a few at a high level, and that was arguably enough to meet the needs of our industrial age.  That s changed.  So we ve got to make dramatic, dramatic changes, educating all kids, including poor kids, kids of color, to very high levels.  That s essential for our success and for our kids success, and no one has done that at any scale in the U.S. or really anywhere globally in terms of educating poor kids at high levels.  We know it s urgent, and it hasn t been done on scale.  </P> <P>The next fact to me is that it clearly is possible.  Our kids from low-income families, kids of color, kids who have been historically underserved educationally can, in fact, succeed.  They have the capacity to do it.  And that s not just a hypothesis or a belief.  It s actually part of the fact base.  We now have a small number of schools across the U.S. and elsewhere that actually are educating kids from very low-income backgrounds at high levels.  It hasn t been done at scale, but it s showing that kids are capable of achieving this, even though most of our society doesn t believe that kids from low-income families, kids of color, kids who have historically been underserved can achieve.  Factually, it can be done.  </P> <P>So the question to me, the biggest question, is, If that s urgent, and it hasn t been done at scale, but it has been done on a small scale, what must we do in order to close the gap and take this to scale?  That, to me, is the most pressing domestic challenge of our time.  </P> <P>The last kind of fact base I d mention is, looking at those schools at a small scale, that have actually gotten results, the question is, what s happening in those schools, and what are the implications for what we could do to scale it?  And whatever you may think, ideologically, of charter schools or district schools, the fact is that most of the schools that we have seen that have made the most dramatic change in educating kids from low-income families are, in fact, not all, but most, charter schools, certain charter schools.  And, at the same time, there also are district schools that have made, within school systems, these kind of dramatic gains.  So it has happened in both cases.  On both sides, whatever your view about where we ought to go ideologically, the fact base is that most charter schools have failed to accomplish that, and most district schools have failed to accomplished that.  So I think there s no emerging immediate sectoral change that is actually going to produce dramatic change at scale.  </P> <P>So, in our own work, in leadership, it s similar.  New Leaders for New Schools has got a lot of momentum and a lot of support from a lot of people in this room.  We have cities competing to our work.  The reality is, we had 7,000 people apply, we selected 440, about 7 percent, and now we look at our results so far. One of the things I think that we all can just be transparent about is that I think New Leaders is doing better than what else is out there, but we re very, very far from where we need to be.  </P> <P>Two-thirds of schools led by our principals are out-performing their district counterparts, but when you look at the kind of gains that actually are worth something in terms of changing the trajectory of kids lives, only 20 percent of our own leaders, and as an advocate of my own organization, have made those kinds of dramatic changes.  I d say the implications are that we don t yet have the pipeline of absolute superstars who can make this change by themselves.  We have a subset that can, and those people ought to be supported the way that Michelle is describing.  I think we re going to rely on incredible management and organizational support at a systemic level, whether a school system under Michelle Rhee s leadership, or others, or under a charter organization or other organization that s actually providing the support, because I don t think we have enough heroes to do the work.  We don t have enough superheroes to do this without support from a well-managed institution.  </P> <P>So, for me, my closing comment is that, the role of educational entrepreneurship, and I would add R&D, is at a stage in our society where we do not know.  I have a lot more humility about this than I had six or seven years ago.  We don t know what it s going to take to get this to scale, and that means we have to try some dramatic things in places, have really good research and evaluation, let people do things that opponents might be afraid to let them try, and evaluate it and see the implications.  But I think the role of entrepreneurship and R&D is to try out some dramatic ways of getting things at scale, and success at scale, including in D.C. But then wait.  I say as frustrating as it may be, wait several years to say one kind of dramatic policy solution is going to change the country.  We don t have the answers yet, I don t think we have the human capacity to do it, which is why the efforts like Michelle s in D.C. are so important.  </P> <P>Frederick M. Hess:  Thanks, Jon.  Well, we ve got a bunch of ideas on the table here that I want to give you all a chance to respond to, but, Stig, maybe, let s open this up.  Jon made the point that somebody might read your piece, and say, Well, wait a minute, it s interesting in theory, but when I look across the country I see high performing schools in districts, as Jon suggested, and high performing schools in the charter sector, so doesn t that give lie to your notion that the key precondition for success at scale is going to be deregulation?  Might it not be that what we need to do is learn from what we re doing effectively, and these district schools are doing it well, and do more of that to make sure that these districts succeed?  </P> <P>Stig Leschly:  No.  If you look closely at I think the 200 charter schools that really close the achievement gap, 200 of the 5,000, and you get up close to them and see what s happening, I think you ll discover generic team dynamics in them.  You will observe incredibly cohesive, problem-solving, professional teams at work underneath their apparent observable design in the choices they make.  </P> <P>I think inside of districts, where you find occasionally the breakout schools, what has happened informally is exactly the same thing.  Usually in one way or another, one of Jon s leaders or one of Michelle s leaders, has managed, despite the overhang, to assemble 20 adults who believe in the same things, who want to fight hard for them, and who can learn over time.  So, that doesn t mean that these leaders are easy to find, nor does it answer the question about how to sequence change in a place like D.C.  I will just say this about these shortages of human capital, these shortages of teachers and principals.  They are enormous, and, they would be aggravated by deregulating and decentralizing control in school districts, but I think it would actually get us to the right problem, and I don t think we yet know, empirically, what kind of stimulus on the supplies and qualities of teachers reform work environments would have in districts.  I can t think of a fundamental reason why the labor markets in public schools dysfunction fundamentally because, at base, leading schools and successfully teaching in schools are magnificent jobs.  </P> <P>So the shortage and the distortions in the labor markets have to be because of the organizational formats of districts.  I think you can explain many of them in the charter sector as well by the incapacity of the movement to police bad schools and to create turnover among them.  So, we just need to get to that problem, and I happen to be optimistic when I hear statistics that Jon has 6,000 principals he didn t hire and Wendy Kopp has 45 trillion 23 year olds that she didn t hire.  I think there is some evidence that there is deep, deep supply of the people who can do this work, but we can t attract them and keep them, given the regulatory and leadership contests in these places.  </P> <P>Frederick M. Hess:  Michelle, obviously, in your previous role, you dealt a lot with these issues, both from the point of your TNTP role, and then from being inside D.C.  Where are the choke points in terms of finding and keeping these people that you re looking for to lead these schools and structure these teams?  </P> <P>Michelle Rhee:  I agree with Stig that my worry right now is not finding people who want to sort of join us.  We have, across the district, about 4,500 teachers, like I said before, 156 principals.  Actually trying to find great talent is one of the things that we have to be focused on, but it s not something that worries me tremendously because I think that, if we set up the right environment, we re going to get good people interested.  It s about setting up the right environment, though.  As I was coming in to this position, I was facing a situation where I had 20 principal vacancies, and I looked at the pool and it was just awful.  So, I decided that I wasn t going to hire any of these principals as permanent principals, I was going to hire them all as interims.  And I was going to tell them that, in the January/February timeframe, we were going to be holding interviews for those positions and they were welcome to throw their hat in the ring, but they weren t guaranteed anything.  And, I think that, as I look at why we were losing so many of those principals, we had a fair number of them who were moving to charter schools, and it s not rocket science to figure out why.  </P> <P>The other thing that I did early on in my first week was meet with a group of, what people told me was the group of principals to meet with, the people who have been here for years, who have seen results.  And, 2-1, what they were saying was that they were extraordinarily frustrated with how the district operated, that they were successful despite the system, and, to Stig s earlier point, I think that if you look at the high-performing schools within the district, they often not just succeed despite the rules, they break the rules.  They don t follow them, or they find ways around them.  That s how they re successful.  </P> <P>So, it can be done within a system, but only in these pockets.  You can t, the bottom line is, have a system full of principals who are not following the rules.  You ve got a small number of them who can, who have figured out how to not follow the rules and get away with it, and then all the excess people get tossed on to the schools who don t know how to work the system.  But, if you actually had a group of people who were all trying to do that, it wouldn t work.  </P> <P>So, setting the conditions in the right way to attract and retain better people is the right thing, and I think that right now we don t have a system that is set up for high-performers wanting to come in, or to stay in.  Because the bottom line is, if you look at high-achievers in any sector across this country, you want people who want to come into a job that they think is selective, that not anybody off the street could have gotten.  And then when they are out-performing their peers, they want to be recognized and rewarded for that.  They want to know that there s a trajectory for them.  That is the exact opposite of what we have in public education today.  </P> <P>Frederick M. Hess:  Jon, you probably want to speak to this generally.  And also I d like to ask, You re in a number of districts across the country wrestling with these issues.  Is there anything you ve seen that s particularly promising that folks should be aware of, or are there any districts that have settled on something which seems to make sense in terms of some of these challenges?  </P> <P>Jon Schnur:  Well, a couple more facts on some things that I ve seen in both districts and charter school.  We have schools.  We have New Leaders lead schools.  We had the most-improved school in Chicago last year, the most-improved school in Sacramento, and one of the top three in D.C.  We had others who were not as strong in all those cities.  When we look at what s happening in those schools, or lots of non-New Leaders schools, you ve got a superstar leader who s got certain kinds of knowledge and skill and beliefs that we could talk about if we had time.  But includes high expectations for all students, a sense of urgency, and a willingness for adults to be accountable for student achievement.  That includes being a strong manager and leader and getting teaching and learning.  And, it also, in every case, including in the districts, has had some way of doing things that the district didn t allow.  </P> <P>In Baltimore we had a school that was led by a new leader under alternative governance where he had the chance to restaff the school.  Interestingly, in that case, he then chose to keep 70 percent of the teachers and didn t keep 30 percent.  Now, this is one of the lowest performing schools in Baltimore, and I think it speaks to a couple of things.  There actually are a lot of teachers who, with the right leaders from the management, actually came in for the right reasons, can succeed, are people who do have the hunger to learn, though not necessarily the skills.  And, there s a subset of teachers who aren t.  But, for those people who think most teachers are just not capable of doing this work, most are with the right leaders from management.  And, at the same time, there s a real problem that there s a significant subset of teachers who, even if they ve got the skills at this point, don t have the kind of attitude and the willingness to coach and to learn that will allow them to be successful in closing the achievement gap.  </P> <P>So some autonomy is crucial, but it may not be exactly what people on either side might think is needed.  And, in every case where there s been success, there s been some kind of outside support in management, whether from a charter school organization or pockets of a school system, where they ve been getting some coaching and management from outside their schools.  But we don t have enough people, in my view, who can do this at scale without a really well built set of institutions, whether in the district side, or the charter school, to help lead in managed schools.  So I guess I d become more skeptical in the short-term of the idea of giving every school total autonomy.  But, I do believe that where you have the superstars, give them autonomy, and where you ve got systems with great leaders in management and a compelling plan, invest deeply in those places, whether district systems or charter systems, to help them succeed, and point the way for how the rest of the country can learn from them.  </P> <P>Frederick M. Hess:  Yes, looking at it from a little different perspective, I think one issue is whether you can find good leaders, but I think another real problem that urban public schools have is the timeline issue that chancellors don t stick around forever, people constantly change, and, even if you put in those kinds of systems and plans, you have a new leader come in and then they have their own ideas, and I m sure you go through that right now with your own district.  I like what Jon said about doing it incrementally, where you pick a handful of schools and really let go and let loose and let that fester a little bit.  I think that may be a better solution because you just don t have enough time in our political system to really make dramatic changes before everybody changes at the top.  </P> <P>Elliott, let me ask you about a specific application that s in your context.  It seems to me one of the challenges for the chancellor or for Joe Kline or Ernie Duncan or anybody else is that they re being expected to improve a range of schools serving a massive range of students, and they re expected to show steady progress across the board for all these populations.  It seems to me one of the advantages of what you did at Aspen, for instance, is that you all were in a position where you could say, Look, this is our clientele, it s narrowly defined, we have some pretty specific expertise, and rather than being expected to come up with answers for each and every population, you were in a position where you could demonstrate success by serving one very particularly described population with a very particularly drawn set of metrics.  Is that fair?  Is it an accurate characterization?  And, if so, how does that help us think about the challenge for folks trying to run larger districts or think about charters as a system?  </P> <P>Elliott Sainer:  Well that s fair, but, keep in mind that even in our own little world, where we re very narrowly focused.  We have lots of the same challenges about finding good leadership.  So, I can just imagine the sleepless nights that some of the school district superintendents and chancellors have because we can create our own culture.  We do let our local school directors around the country really have a lot of autonomy and authority to run their programs.  And, despite that, you have problems just finding enough good people.  The other problem you have with a lot of strong decentralizations is that sometimes you give people too much rope, and they hang themselves.  I don t mean that literally.  So, on balance, I think the decentralization has been a real strength of our company and of our culture.  On the other hand, you have to be careful, as you re going to expect some problems because of that, and you just have to learn to live with it.  </P> <P>Michelle Rhee:  I think one thing that I m realizing is that we have to very clearly define what the role of the central office is and then very clearly define what we want the role of school leaders or principals to be because I would actually differ with Stig on this.  I don t think that the role of the central office should be to regulate either, but I also don t necessarily think that govern is the right word.  I think that what I m trying to do right now at the central office within D.C.P.S. is to say, We don t run schools, we serve schools.  We have a role as a central office to give schools what they need so that you can get teachers paid on time, so the textbooks can get there, so that they can procure all their supplies that they need in a timely manner, and so that we are not standing in the way of schools being able to do their job, but we re actually facilitating that.  And I think if you talk to any of the great charter operators out there, what they d say is, to be able to do that at scale, is something that you actually have to have a central entity helping with to make sure that you re as cost-efficient as possible.  </P> <P>So, I think it s about the central office serving schools, and then also there s, obviously, this accountability.  Once you serve them, and you give them what they need, you ve got to hold them accountable for producing the results.  </P> <P>Morgan Brown:  I want to follow-up on one point Michelle made earlier, which I just think is really important, and we easily lose sight of in talking about how we re going to restructure or change these systems.  It s this issue of parental involvement and parental engagement.  We obviously realize that we still have many, many parents who are making a school choice because they are running away from something, not because they are choosing to make a positive, affirmative choice for a different school, and I m not in any way second-guessing that or judging that.  If I was, had my child been in an unsafe school or I found a school that had a more welcoming environment for whatever reason, even if the academics were not at an incredibly high standard, I could see myself choosing that school as well.  </P> <P>And this relates to another important issue, which is, we need to change the way, and I think this is one area where charters maybe have had an advantage, that districts talk to parents about parent engagement.  I visited a school that was featured in our recent book on K-8 Charter Schools Closing the Achievement Gap.  It s Pan American Elementary School in Phoenix, a very little, literally, a mom and pop school that s doing amazing things helping English language learners be proficient in reading.  They had changed the whole model of parent involvement.  Instead of saying to parents, come in and volunteer and do this and do that, the leaders said, You know what, we don t want you coming in and volunteering at the school and picking up this duty.  That s our job.  What we want to do is teach you how to be a constant advocate for your child in this school, or wherever you may go in the future.  And, so, they actually set up a parent university to help student parents understand how to do that.  They made parents real advocates for their students and helped them understand how to look at academic performance of schools rather than just saying, Hey, please come in and volunteer in the school on an after-school basis, and it s changed the way that whole community interacts for the betterment of those kids.  </P> <P>Frederick M. Hess:  Why don t we go ahead and open this up.  You ll see Juliet right here, and Rosemary over here.  Please catch their eye.  Please do us a favor of just identifying yourself by name and affiliation so folks know who is asking the question.  And, as always, I will make the request that people please actually ask questions rather than engage in that time-honored D.C. habit of making speeches from the floor, followed by a tilt in the voice.  [Laughter].  And, what I will do is, because we re mean guys.  If I don t see a question coming anywhere in the foreseeable future, I will ask you to please ask the question.  So, let s spare us all the moment of unpleasantness.  </P> <P>Jim Kohlmoos:  I m Jim Kohlmoos from Knowledge Alliance and I really appreciate all your comments.  I particularly appreciated what Jon Schnur was saying about the importance of R&D when it comes to entrepreneurship and providing new information, new data, and new knowledge about what s next in innovation.  Can you describe a little bit more, Jon, about what you were referring to as a system of R&D that feeds into your entrepreneurial decision-making?  </P> <P>Jon Schnur:  Yes, just briefly, I was describing what I think is important for the sector, nationally, and I can briefly tell you what we re doing in New Leaders.  In the sector nationally I just think that to achieve the kind of success we need in education, in my view, it s going to take 25 years.  When you set big, big goals, like energy independence or looking at things like the first phase of the civil rights movement, these things take time.  So, in my view, this is going to take a couple of decades to do.  And, so, one of the key questions right now, is, where you have the right leaders for management, the right ingredients for success at scale as a sector, we ought to be investing in both supporting them, and I would say a place like D.C.P.S. under Michelle s leadership is a great example of that, and figuring out how do you support those efforts at scale, along with investment in serious research and evaluation to look at both the results in places like those, but also what s been learned.  </P> <P>One, quick story on Milwaukee, my hometown.  People know the voucher debate there.  One of the things that I thought was the most disturbing early on about Milwaukee is that the supporters and the opponents of vouchers in Milwaukee when it was started agreed on one thing, which is, they stripped funding from the state level for any independent evaluation of what happened in vouchers in Milwaukee.  This, I think, is an indication to me that there was kind of an unwillingness for us to embrace, okay, really, what are the results.  I think the results are very mixed in Milwaukee.  It doesn t mean I don t think we need dramatically more autonomy in places, but I think it s important to create research and evaluation.  </P> <P>At New Leaders, we wanted to create a research base on the principalship, so we re partnering with RAND to look at achievement results in our schools, characteristics of our principals upon selection, skills as they develop, and, over time, we re going to look, with RAND s help, to correlate what seem to be the characteristics and skills and conditions in the school system that most correlate with achievement gains in the principalship so that, seven years from now, we think we can help produce more of a research-base on really what constitutes an effective principal.  </P> <P>Michelle Rhee:  Can I make a quick comment on that?  </P> <P>Frederick M. Hess:  Yes, please.  </P> <P>Michelle Rhee:  I think that we have become, in the education reform sector, a little bit skewed in terms of R&D and innovation.  I think that, particularly, the role of funders within this innovation has, I don t know where it s gone, frankly, because, in my mind, the role of external philanthropy in this arena sounds like a good idea, and there are no guarantees.  It might not work, but it seems like a sound idea, just funding those kinds of things.  Right now, in education reform, the philanthropic world only wants to fund things where you have guaranteed results.  </P> <P>Well, if we had guaranteed results, we could find funding from the government and every other place.  That s not the role of philanthropy.  We ve gotten to this place where we have, people who used to be venture capitalists, and venture philanthropists, and all that sort of stuff, but they re not operating the same way that they would in the business world, which is, you believe in an entrepreneur and then you fund them.  And now it s just, Only if you meet these certain metrics in this particular box then we ll fund you to go to scale.  And that, I don t think, is anything close to what we need in terms of philanthropy in this realm.  So I just think that s important as we talk about the sort of R&D and innovation we re going to put into this.  </P> <P>Frederick M. Hess:  Elliott, did you want to jump in on that?  </P> <P>Elliott Sainer:  Yes, sure.  I don t mean to sound anti-intellectual, because I m genuinely not, but there s a class of this R&D syndrome that I think is worrisome, and it s not the one Jon described at all.  It s the one that has to do with endless studies of instructional improvement and curriculum redesign and best practice modifications in schools.  There are subtle complicated problems on the margin about better forms of pedagogy, better curriculum, better programming, and better school design.  </P> <P>But the glaring gap in urban districts is power, not ideas.  It s what people like Michelle need, in my opinion.  It s not new intellectual property about some next subtle piece of pedagogy or design in schools.  What she needs is the power to address the 80 percent of the problem that is completely obvious and generic and which has to do with the deterioration of morale and attitude and continuous improvement and so on in schools.  What happens a lot in the pathology of district reform is that, because the hard questions can t get asked, you get an endless cycle of this incrementalism, which is often shrouded in research and design.  And, so just be leery of it.  You can t inject new ideas and new practices into diseased organizations and expect anything to happen.  It just happens to be the only option, generally speaking, in most urban districts.  </P> <P>Frederick M. Hess:  Rosemary, we have somebody?  </P> <P>Horace Robertson [ph.]:  I m Horace Robertson with the Consortium of Entrepreneurship Education.  I come from a perspective, living in White County, North Caroline, where we have the fourth fastest growing school system in the nation, and we have the largest trucking companies in the nation there, but the largest transportation fleet is the White County schools.  So I guess as I think about the leadership that you need, my question for Michelle and Jon is, What do you perceive needs to be done in order to deliver those leaders that are needed to lead public schools, lead schools effectively?  </P> <P>Michelle Rhee:  So, again, this goes back to my earlier point.  I think we need to really define what we fundamentally want leaders to do.  Right now, if you look at how my principals are spending their time, they re spending their time on the things that I would never want them to spend time.  The toilet is leaking, and so they have to call 12 different people to try to come out to get the toilet fixed, and that sort of thing.  It makes no sense because they re spending the bulk of their time on sort of the operational pieces as opposed to being in the classrooms with teachers driving quality instruction.  </P> <P>And, so, the way that the district has operated to date has necessitated school leaders to have this breath of expertise and knowledge because they ve had to sort of fend for themselves.  I think that we have to think about whether that s really sort of what we want them to do or not.  And if it is that we need people to sort of be those instructional leaders but to also be able to come in, create a vision, and then drive all of the adults in that school towards that vision, we re going to need a significantly different leadership pipeline than what we have right now.  If you look at how D.C.P.S. in the past has brought people into the principalship it s, you go to the APs.  And, how do you get an AP job, if you have good classroom management and you can control a cafeteria, then you re a good candidate for the assistant principal position.  That s not the criteria by which we should be choosing our next generation of school leaders.  </P> <P>Jon Schnur:  Ten years from now, once we have much more highly functioning systems, I think you may.  We ll have school systems that do more what good companies do, which is identify talent at the early stage, develop people, and groom them. You may always have a quarter or a third coming from the outside, but a lot come from inside, but through a merit-based approach over time and with people taking on increasing levels of leadership responsibility.  </P> <P>The challenge we face, in my view, is that most of our school systems, all of our school systems, that we re talking about, have this dramatic gap to close and do not, right now, have the practices that they need to succeed.  That s not because they re much worse than they were 10 or 20 years ago.  It s just that they haven t actually changed themselves to adapt to the challenges of our time.  </P> <P>The tough question for us, I think, in this period of change, is, How do you create this leadership pipeline as an engine for driving these highly-functional systems?  And, a few quick things.  One is I think what Michelle said, and actually one of the most important points that I found in Stig s presentation, is getting total clarity on leadership roles and alignment on that.  Right now, the evidence suggests that the right leaders do the kind of things that Michelle is saying, yet everything in our school systems mitigates against that.  So there isn t this relentless, systematic approach in the school systems that we want you to be responsible for achievement, to drive teaching and learning, and to support teachers to get that done.  So I think getting that clear in school systems is first.  Identifying talent early on and grooming them is second, giving people training based on what we ve learned.  And, ultimately, creating more of a merit-based, learning-based community of leaders in a school system I think will help retain people.  </P> <P>Frederick M. Hess:  Happily, the next panel also is going to delve into these human capital questions and talk about more questions of these.  Juliet, we have somebody?  </P> <P>Piper Davis:  Hi, I m Piper Davis from the SEED Foundation, and I wanted to ask about something that s come up a couple different times as far as we have this group of exceptional leaders, maybe the top 20 percent, who are very strong school leaders but need systems and structures in place to help them really succeed and drive their schools to excellence.  Michelle and Jon, but, anyone, I suppose, in general, what specifically are those structures and systems at the school level and at the district level, and over what time period can we realistically implement them in a big way?  </P> <P>Michelle Rhee:  So I think from our vantage point, it s a lot of the operational pieces.  I mean, if I think back to The New Teacher Project and running that, and why site-by-site our site managers were successful, it was because, frankly, each one of them did not have to worry about getting all of their staff on payroll and making sure that it was processed, and they had an HR department that was running the sort of recruitment efforts for their staff and the knowledge management.  All of those things happen centrally at TNTP so that the cite managers could be relentlessly focused on, I ve got to bring in 200 teachers into this program, they need to be of this quality.  So we were able to ensure that they had focus.  So if I look right now at our school leaders and what in an ideal world we would do to make sure we had great services around, versus the facilities issues.  That takes an inordinate amount of principals time right now.  </P> <P>The issues around procurement are another one.  They can t efficiently access their budgets so that they can buy the things that they need to buy.  And then the third is around human capital.  I think that the principals have to have the authority to build the staff that they think is going to effectively move the school forward, but there s a lot that could be done on the front-end in terms of building the pool of people so that principals have ready access to high-quality candidates, and that once the candidates are chosen, the logistics around getting those people on payroll, making sure that their benefits are taken care of, step increases.  All of those things are taken care of centrally.  </P> <P>Frederick M. Hess:  Elliott, do you want to share on this.  You re obviously in a very different context?  </P> <P>Elliott Sainer:  It s the same challenge.  I mean, really, it s really not too much different.  I think Michelle s comment earlier about the role of the corporate office resonated with me, because in our corporate office, I tell people out in the schools and programs, our customers are the local schools, and that s who, really, we re focused on.  We are there to support them, not really to direct things.  I think that our school people don t have to deal with the issues of facility management.  I mean, they deal with it, but it s not a major part of their day because we do have other staff who can pick that up.  And, so, it goes back to the whole issue, I said at the very beginning, that you ve got to have a focus.  And if you can get your people sort of focused on two or three main goals and the rest of the stuff sort of takes care of itself, I think you ll end up with, hopefully, better quality people.  </P> <P>Checker Finn:  Checker Finn, Fordham Foundation.  At least two of you talked fairly directly about closing down badly performing schools.  Stig did, Michelle did, maybe somebody else did.  I d like you to talk a little bit more about this.  It s one thing to close down a diner with cockroaches, or a gas station with leaking tanks.  There are lots of other diners and gas stations one can go to.  A school with 475 kids in it, to close it down is a sort of momentous responsibility.  We ve known for a long time how hard that is to do in district schools.  It s turning out also to be just about as challenging in the charter sector, both for political reasons, but also for what you might call humanitarian reasons and supply reasons.  The political reasons are obvious, the humanitarian reasons are obvious, the supply reasons are there may not be anywhere else, or anywhere else better, or anywhere else with space in it, for those 475 kids to go.  Talk a little bit more about how realistic is it to follow your recommendation to close down badly performing schools.  </P> <P>Michelle Rhee:  I think I m in a great position right now to start closing down schools because we are so under-enrolled as a district.  We have the facilities, so now is the time.  The master facility plan that was created by my predecessor called for closing 18 schools over three years, something like that.  I m going to close down more, and I m going to do it all right now, and I m going to do it on the right timeframe, so that we re announcing the closures now, or in the January timeframe for the following school year, so that we can figure out all the staffing issues, and then it ll happen again.</P> <P>Right now we re looking at closing down schools mostly for enrollment issues, but, in the future, it ll be for performance, and those two things are obviously linked.  But I feel like this comes down to the parental advocacy piece.  If you ve tried to close down schools anywhere, you know that people hate when you close down their schools.  But, and this is one of the stories I tell over and over, I went to a community in Anacostia where we re about to close down this school.  We should have closed it down, but they didn t make the decision, all that sort of stuff.  I went to go tour this school, and I got there early and walked across the street to a housing project where there was a group of men sitting out there.  It was the middle of the day, so I said to them, so what do you think about this school?  They said, this school is great.  We love this school.  The teachers are great.  They work so hard.  The principal has been here for 30 some years.  Don t close down the school, Chancellor.  And I m thinking to myself, this is not a great school.  Nine percent of the kids at this school are at proficiency or above.  There s a KIPP school that s six blocks away where 80 percent of the kids are proficient or above.  This is not a great school.  </P> <P>But we are not doing our job in taking the data to the people to say, 9 percent of your kids.  And if your kids are not operating on grade level by the time they re in the 3rd grade, the chances that they ever will are slim to none, and this it how it impacts their life chances and their life outcomes and their earning potential and their ability to take care of you when you get older.  We have to be out there talking to parents about those hard facts about how we are not serving their kids well, and we have to frame it in how this is going to better serve kids.  Because right now with the facility issues, my staff told me that the facilities department used to lead the community discussions about closing down schools.  That is the most insane thing I ve ever heard in my entire life.  How are you going to send some facilities people out into the community to talk about why we re closing schools?  This is a fundamental issue about giving kids a school program that is going to produce.  That has to be me.  It has to be instructional people, academic people, talking about what we need to see in schools.</P> <P>But I think if we do the right advocacy pieces, I truly believe that we can create an environment where parents are empowered, where they re informed with the right data, and where they are beginning to demand the change, because we are not going to see a wholesale transformation in this community unless the people who are suffering the most from the fact that these schools are not performing are actually demanding the change.  </P> <P>Frederick M. Hess:  Morgan, yes, please speak to this.  And, particularly, you alluded to the GAO report, of course, previously, which indicates that very few schools are being dealt with in any severe fashion.  Even year 5 or 6 or 7 under NCLP, is the Department playing the leadership role as effectively as it could in terms of informing public opinion of the way Michelle is discussing?  </P> <P>Morgan Brown:  Right, I mean, the thing that was discouraged about the GAO report is that the real options for restructuring, like reopening as charter schools, actually had a lower percentage of schools choosing it, than something that isn t even in the law, which is doing nothing when you get to the phase of restructuring.  And so this is one of the reasons the Secretary is proposing really tightening up that piece and making clear that we re talking about serious reconstitution and not another year of kind of corrective action.  </P> <P>But I think the reason restructuring is so difficult is, one, lack of political will, two, sometimes where political will exists, the knowledge resources don t exist.  You could have even a superintendent, let alone a principal, that really does want to reconstitute a school, but has never been trained, has no experience or training for doing this.  So that s another area where we have to try to address.  And then this third is so important, on the parent engagement piece.  And the encouraging thing is there are some examples out there of how to deal with this.  There are a couple different models.  One is the Chicago approach where you re simultaneously, and this takes a degree of sophistication, and Chicago had to learn this the hard way, but where you re simultaneously opening schools as you re closing others.  So it s not, Hey, we closed your school, this building is going to sit vacant, you ve got to find someplace else to go, it s, We re closing this school, but we are either reopening it as a better school, or, Here are other range of options we re opening to accommodate your children.  </P> <P>The other thing is that we ve got to start looking at restructuring as not something we got to do and get by the parents without them creating too much of a fuss, but as an opportunity for parent engagement.  The best example of this may be Gompers Middle School in San Diego where they engaged the parents and the community in the whole process of restructuring.  And when you listen to those parents talk about how positive they feel about that school now, it s because they re the ones that had a stake in doing it all the way along.  So we ve got to figure out ways to replicate that model of restructure.  </P> <P>Jon Schnur:  The good news on this is there are examples of places that have begun to do this, but there are a tiny number of examples, which is the bad news.  But, in Chicago, we ve experienced the one where the most improved school in Chicago last year was, in fact, a school that was closed by the way Morgan is describing and is now reopened.  The proficiency rates have more than doubled in the last three years.  It s not where it needs to be yet, but it s improved.  I would say the notion of, the language even of closing and reopening I think is really important, because when parents hear closing, they re like, Well, why are you going to deprive my children of an education.  The point is, actually, No, we re actually going to provide a better education than you ve been getting, is really important.  </P> <P>And then the leadership, I ll tell you again.  Ten years from now, we need to be in a position where we ve got enough leadership to do this at scale for the thousands of schools around the country.  I wish we had it right now.  I think the hard reality to deal with is that I don t think we have the capacity as a country to turn around the thousands of schools that need to be, and I think we have to make sure we are in some of the next several years.  It s a very hard question what you do in the short-term, but it can be done at least on a small scale, particularly in places like D.C. with the right leadership and concentration of talent.  </P> <P>Elliott Sainer:  Rick, let me put in just a real quick plug for those of you that are more interested in this topic.  The National Association of Charter School Authorizers put together a fantastic set of guides called Starting Fresh, which are probably the most practical guides I ve seen for school district leaders and officials about how you do this with the community engagement piece, with teachers, etcetera, and you can find them at their website.  </P> <P>Frederick M. Hess:  All right, Jul, I think we have time for one more quick question.  </P> <P>Martin Apple:  My name is Martin Apple.  I m the President of the Council of Scientific Society Presidents.  My question is, If you were to restructure and change teacher education so that the graduates were what you wanted for those visions that you ve just proposed, what would be significantly different? And if those teachers are now graduating from those institutions and people in the schools you re creating, what would they demand of you as leaders?  </P> <P>Frederick M. Hess:  Stig, I m going to give you the last word on this, and, partly, again, this leads us very nicely into the next session, I d just take a quick thought at it, and we ll come back to it.  </P> <P>Stig Leschly:  Right.  The best graduate schools for teachers that I know of are magnificent schools themselves.  And, I think there can be, shortly, in the next five years, let s say, fully alternative graduate schools of education that recruit, train, place, and also certify and give masters degrees to a new crop of teachers and that are based in residencies in magnificent charter schools, and, plausibly, in breakout inner-city schools as well.  What they then would learn in those places, I think, would be this layer of excellent practices that arise in schools that breakout.  But, I think, maybe even more importantly, what you would attract then, and foster, are all the general attitudes in teachers that I suspect actually dominate their effectiveness, which is courage and commitment and so forth and the certain belief, the certain correct belief structure in kids.  I think as it occurs now in conventional graduate schools of education, most everything I just described tends to breakdown.  I ll just leave it at that.  </P> <P>Frederick M. Hess:  Just to make sure everybody is clear on how this will unfold from here.  One, the panel did a magnificent job of getting these issues on the table.  The next panel, we re going to come back to this human capital and talent development question.  The next panel is going to tackle this question of resources and funding, which was raised by Michelle s point, particularly about philanthropy.  The panel after that is going to come to this question of rules and constraints and barriers to entry and barriers to creative problem-solving.  And then this final panel is going to get exactly to these questions of R&D and quality control.  So, what we ll have is an opportunity to delve into all these much more specificity through the day.  I d like to ask you to join me in thanking the panel for a wonderful start.  [Applause].  And, we re going to reconvene in 10 minutes, please.  </P> <P>[END OF PANEL I] </P> <P>PANEL II:  Addressing the Human Capital Challenge</P> <P>Frederick M. Hess:  All right, let s go ahead and get seated please.  Please go ahead and get seated.  I really don t want to be the one to tell Larry Rosenstock or David Harris or somebody that they ve got to simmer down, so let s make sure they ve got enough time to have the conversation and we can ask the questions we want to ask them.  </P> <P>That first panel I think got us off exactly where I was hoping the conversation would be.  This next panel addresses very concretely some of the questions that we put on the table, which is, particularly, how do we attract and cultivate and retain the talent that we need to create opportunities in problem-solving inside or outside of these systems?  </P> <P>The panel that we ve got to address this is, again, I think just a stellar assemblage.  Speaking first will be Bryan Hassell.  Bryan is Co-Director of Public Impact, a national education policy and management consulting firm.  He s the author, of course, of several books, including, The Charter School Challenge, and he was appointed by President Bush to serve on the National Commission on Excellence and Special Education.  </P> <P>Speaking second will be Chris Gergen, who co-authored with Gregg Vanourek, the second paper.  Chris is Founding Partner of New Mountain Ventures, an entrepreneurial consulting firm, again, along with Gregg.  He is Co-Founder of Smart Thinking, the nation s largest online tutoring provider.  </P> <P>We then have three discussants.  The first up will be David Harris, President and CEO of The Mind Trust, a non-profit organization that attracts and supports promising educational entrepreneurs in Indianapolis.  David formerly served as Charter Schools Director for Indianapolis, where he built one of the nation s most highly regarded charter school offices.  The second discussant is Sharon Robinson, Executive Director of the American Association of Colleges for Teacher Education, previously President of the Educational Policy Leadership Institute of the Educational Testing Service, and, prior to that, Sharon served as Assistant Secretary of Education for Research and Improvement during the Clinton Administration.  </P> <P>The third discussant is Larry Rosenstock, the Principal and CEO of High Tech High School in San Diego.  Larry, previously, of course, has taught carpentry for 11 years in urban high schools in Boston and Cambridge, Massachusetts.  Not every attorney you find does that kind of thing.  Larry also is a lecturer at the Harvard Graduate School of Education.  </P> <P>Bryan, why don t you please get us started?  </P> <P>Bryan C. Hassel:  All right.  There was a lot of talk on the last panel about human capital, and most of it was about the question of school leadership, how can we attract great school leaders and keep them and cultivate them?  I m going to take a little bit of a different angle here, even though it intersects greatly with the school leader question.  What I want to talk about is, how can we attract and cultivate entrepreneurs in education -people who can launch and grow highly-effective transformative ventures that can change the way education works?  </P> <P>Because school leadership is clearly one of the critical human capital needs we have, but we also, if we re going to meet all the goals that we have, need a range of organizations and institutions that do a lot of other things differently as well, such as find and prepare teachers very differently, find and prepare leaders very differently, utilize all of the amazing technologies that we have in our society now in ways that can transform education, revamp all the different systems that Michelle and others were talking about that don t work very well within most conventional districts, how can we get entrepreneurs that can launch organizations to solve all of these huge problems that we have?  </P> <P>Now, if you think about this kind of entrepreneurial venture, what I m focusing on here is this green circle, the founding person, or founding team, who has the entrepreneurial capability to launch and grow an organization that meets a great amount of need.  But there are a whole lot of other people that have to be involved in a venture as well, such as the senior team that supports that founding person or leader or team; board members, most organizations, whether they re non-profit or some kind of for-profit venture, have a board that gives strategic direction, perhaps funding and other resources; and then, of course, the many line managers and employees that make the organization work at a high scale.  </P> <P>And all these other blue boxes are important for a number of reasons.  One, they are, of course, essential just for the functioning of these organizations; number two, the existence of pipelines of these kinds of people are vital to attract entrepreneurs into a sector like education.  Entrepreneurs, people with a great deal of that kind of talent, have a lot of choices.  They could apply their entrepreneurial energies in any number of social sectors or for-profit sectors.  Why would they choose education?  There are a lot of factors in that, but one of them is going to be, do they think they can find the people they need to staff and lead their organizations and provide the kind of direction they need?  </P> <P>And then, finally, these other blue boxes are important because they potentially provide the next generation of education entrepreneurs, today s senior team members, today s line managers, who, whether principals or other kinds of managers in education organizations, could be tomorrow s entrepreneurs that launch the next wave of ventures that transform things.  </P> <P>So, that s how this discussion intersects in some ways with the last one, because we re talking about principals who, today, might lead schools, but tomorrow, might be part of the entrepreneurial core.  </P> <P>There s been a fair amount of research, most of it not very good, but some of it outstanding, about what does it take to be an effective entrepreneur?  I ve got some citations in the paper, if you really want to read that, there s a great paper in Rick s last book on this topic, by Kim Smith and Julie Peterson, which talks about some of these qualities.  These are probably familiar to you if you are an entrepreneur or know entrepreneurs.  </P> <P>This is an idea of the kind of people that I m talking about needing to attract more of into education, and it s not necessarily the kind of people that we attract now into the jobs that we have for people that want to work in K-12.  We value other qualities, perhaps above these, and, so, we re not necessarily getting all of the talent that we need in the entrepreneurial kind of work into education.  We re going to need to look both to outside sources, but also think about, how can we bring people into education, as teachers, as leaders, who have these kind of characteristics, who can then go on to become entrepreneurs in the future?  </P> <P>And, so, let s talk about a couple of potential sources of that, and, as I just described, one of those is inside education.  Many of you know that there are entrepreneurial teachers who have gone on to found some of the most compelling education ventures that we have in our country right now.  Mike Feinberg and David Levin, for example, the founders of the KIPP network of highly successful middle schools and now other kinds of schools; Michelle Rhee, of course, was once a teacher, moved on to found The New Teacher Project, another highly-regarded entrepreneurial venture, and there are many other teachers who have done similar things.  </P> <P>Also, folks who serve in leadership roles within conventional schools have gone on to become entrepreneurial leaders.  You ll hear later from Don Shalvey.  Don pretty much went through the standard public education ladder, teacher, assistant principal, principal, into the central office, finally a superintendent, and then ultimately moved then to become an entrepreneur as the founder of Aspire Public Schools.  This fellow, who looks kind of familiar to you, if you re facing this way, Larry Rosenstock, a former administrative within a conventional public school district, among many other roles in his biography, but has gone on to found High Tech High and all of its many entrepreneurial ventures.  </P> <P>Looking outside of education, we see people coming from a lot of different sectors to found some of the most successful entrepreneurial organizations.  Larry is going to be on the panel later, and Gregg founded Wireless Generation, a technology company that is doing very interesting work in education, they came from the business sector, the web world.  </P> <P>From government, you heard about Jon Schnur, the founder of New Leaders for New Schools, pedigree in government, the social sector; J.B. Schramm, the founder of College Summit, is someone who is working in social work and working with kids in a different way, moving to found College Summit that helps kids go on to college in unprecedented rates.  And even folks right out of college, perhaps on the rarer side, but, Wendy Kopp, the famous founder of Teach for America, founding that organization right after finishing college.  </P> <P>So there s a wide range of sources coming from outside of education, too.  But the numbers are very small, relative to the scale of the need that we have in our sector for transformative ideas and transformative ventures.  I gave just a few examples here.  There are many more.  But there aren t hundreds and thousands more that have achieved scale and reached all the kids that need to be reached, and reached all the needs that need to be reached.  </P> <P>Now what are some of the constraints?  We talked a lot about the policy and political constraints on the last panel, and there is a whole another panel on this, right Rick, so I m not going to belabor this, it s so hard to manage within conventional educational institutions because of all the constraints and rigidity.  There s also the phenomenon of spinning wheels.  Part of our contract, if we write these papers, is we have to mention at least one of Rick s books in our talk.  I managed to work it in here.  </P> <P>No, but, seriously, this is a phenomenon in education, I m joking, there s no such contractual provision, but there s a phenomenon in education of new superintendents coming in with new ideas and reforms that last as long as that person is there, and then they move on.  That doesn t create a great environment for entrepreneurs, unless they just want to have a one-year flash in the pan kind of operation.  </P> <P>The financial constraints are also important, and that s a subject of another panel, so I m not going to go into great detail on that topic.  </P> <P>There are also important cultural and structural constraints within the way education institutions function, and, specifically, what I m talking about here is the fact that the way jobs are designed within the career paths of education, they re not built to foster entrepreneurship.  Teachers work day-in and day-out, even at night, doing their teaching job.  There s not a lot of scope within that role for exerting entrepreneurial leadership within their school or within their district.  Principals, too, have a full slate, more than full slate.  We don t foster opportunities for entrepreneurship in the way that other organizations do, and that s where we re really eager to hear from Christopher and Gregg on their paper.  </P> <P>And then finally, I think a lot of people going into entrepreneurialism, potentially wanting to go into entrepreneurial lines of work, who don t think of education, or K-12 education, as being a place where there s a lot of scope for entrepreneurial activity, given the way the system is structured.  </P> <P>Now, fortunately, there are a lot of initiatives out there that are beginning to percolate to try to address this issue and bring more entrepreneurial people into education.  They have two groups that I want to mention, one is organizations that are specifically designed to recruit entrepreneurs into education, and then there s a second set that are designed to recruit people into other roles that could, in fact, ultimately lead to a pipeline of entrepreneurship.  But let me start with the first group of initiatives, and all these are described in more detail in my paper, but let me just give a few of the highlights here.  </P> <P>First, there s a set of organizations that are generally trying to recruit entrepreneurs to do a lot of different entrepreneurial work in education, whether that s starting new schools or new school organizations or some of these other kinds of ventures that I mentioned at the outset.  The New Schools Venture Fund, for example, is primarily thought of as a provider of funding in support to entrepreneurs, but a lot of work they do is recruiting, trying to find entrepreneurial people with the talent to do what s needed.  </P> <P>The Mind Trust, which you are going to hear about from David Harris, has, among other programs, a nationally unique education entrepreneur fellowship that s going to pay people for a couple of years to develop transformative education ventures in Indianapolis.  You ll hear more about that from David.  </P> <P>And then Teach for America, which is known for its recruitment of teachers, has recently launched a social enterprise initiative that is going to be designed to help its alumni move on to the next step of forming education ventures that can lead to results in ways other than being a direct teacher.  </P> <P>In addition, there are also several organizations out there that are specifically trying to foster the growth of successful charter schools, which is one way to exert entrepreneurship in education.  The Charter Schools Growth Fund invests in successful charter schools, which then want to grow into multi-school networks of schools.  Building Excellent Schools identifies individuals who then are going to form one school, at least to start with.  </P> <P>And then there are many organizations, only a few, maybe, that rise to this level, but organizations like New Schools for New Orleans, which you ll hear about later as well, in which the organizations are trying to reach out within a community and say, let s provide incubation, funding and space and support for people that have the potential to start a great charter school.  </P> <P>There s also, as you know, many initiatives that are designed to recruit people earlier in the pipeline, whether that s system leaders, school leaders, or teachers.  I m going to move on from that because I know that s a topic that we ve already discussed some, and Chris will also turn to.  </P> <P>Now what can we learn from some of these early initiatives?  One thing is just simply the value of making this whole entrepreneurial pipeline someone s job.  If you look several years ago, there weren t any organizations, or certainly very many, who got up every morning thinking, how can we recruit more entrepreneurial people into the K-12 pipeline?  Now there are at least a few, there are not quite as many as we need by any stretch of the imagination, but now this is a job that some people are taking on.  </P> <P>Another finding from these early experiences is how important it is to foster networks among the entrepreneurial people that are coming in through these routes.  This is also a finding that s echoed in the broader literature on entrepreneurship.  If you think about places like Silicon Valley, the networking is such a vital part.  It s not enough to have isolated entrepreneurial activity, people need to be able to work together.  </P> <P>A third finding is that though policy change, as we re going to discuss on later panels, would make it better and easier to recruit entrepreneurial people in, entrepreneurial folks also exert a lot of policy pressure once they begin to work within school districts and work within communities.  And we could have policy change being sparked by entrepreneurs, even though that s not their main job.  </P> <P>And, finally, I just want to remark at the closing that though there is a lot of interesting work going on, it s deeply insufficient relative to the need, the overall scale, the geographic limits placed on a lot of the activity, and finally the limits that we have now on how many teachers and leaders are likely to move into entrepreneurial roles, because of who we are recruiting into those pipelines, all place constraints on how well we are going to do in meeting this really important challenge.  And, luckily, Chris and Gregg have a lot of insights that might help us move beyond this.  </P> <P>Frederick M. Hess:  Great, thanks Bryan.    </P> <P>Christopher Gergen:  I just want to acknowledge, (a), my co-author over there, Gregg Vanourek, who is here with us, and I might throw a few questions to him if things get really heated up here.  Second, I want to thank Rick, on behalf of Gregg and myself, because we feel like we had the most fun job in terms of being able to go out and see some of the most exciting things that were happening outside the education sector.  All of us who spend a lot of time inside the education sector, sometimes it s nice to get a breath of fresh air, to start looking at what are some of the most exciting things that are actually happening outside the education sector that we want to be able to learn from and glean some lessons from.  </P> <P>So, with that in mind, here s what we want to try and capture, and you can read more about it in our chapter.  One is, we really want you to come away with a sense of what are the leading talent trends happening across the country right now, and, in fact, globally?  Second is that we want to really highlight some of the key talent practices.  We think there are seven of them that are worth noting, and we re going to come up with a few anecdotal examples of some companies that you may have heard of before, and some other companies you may not have heard of before.  And then we re going to wrap-up with, how can this actually be imported into K-12?  </P> <P>Now, on that note, one of the things that I want to help you do in the process of listening to this presentation and reading the chapter, is something that Gregg and I did, which is that we would read through some really fascinating and very cool examples, and we would have a conversation about it and say, do you think that would work for K-12?  And then we would say, I don t know, that s pretty hard, I can t imagine that would work in K-12.  </P> <P>And then we d turn and say, why not?  And, it was actually the why not conversation that got us really excited about what we could do in education if we actually took the barriers and parameters and prejudices and stereotypes away from our conversation and actually started having a real and tangible conversation about what could be done.  </P> <P>So, with that shift in mindset, let s go to the, what can be learned from outside the education sector?  So, you all may or may not be familiar with the term, war for talent.  It was something that was popularized by McKinsey & Company in 2001, they went out and interviewed 13,000 executives, and they saw that there is a severe and worsening drought for high-quality talent that s out there.  The war is on right now, and we all need to be paying attention to that, and sometimes in education people aren t even aware there s a battlefield.  And, so, we need to be paying very close attention to the idea that everybody is tuned in to this, especially in the corporate sector, because the war for talent is so severe.  </P> <P>Second, is this idea that there is a separation between the education sector and the rest of the world, which is patently false.  If you look at what the rest of the world is doing, and let me give you one example, which is West Point.  So, West Point graduates 900 various cadets a year, and one of the exercises that they do, a lieutenant colonel actually brought a group of his young charges to an elementary playground and challenged them to manage the elementary playground for 7 minutes, to try and figure out how to manage under chaos and uncertainty.  If they can figure out how to do that in an elementary playground, why can t we actually send some of our top educators to West Point to learn more about their leadership lessons?  So, we need to start pulling down the boundaries between these two things.  </P> <P>Just one other point on that, is, that, there was an interesting study that was looking specifically at, in fact, Rick pulled it together with Andrew Kelley, you know Rick is omnipresent here, I think I agree with Bryan that he just sort of likes to trot us out here to pull his stuff in, but, if you look at the study of 496 education administration programs, all of them were missing Jim Collins, Michael Porter, Clay Christenson, from the actual conversations and syllabi that these students are reading.  496.  This is staple business literature for MBA schools.  Why can t we actually start pulling the same kinds of things in?  And, hopefully we can start talking about that with Sharon, and I m sure she s got some examples of some people who are doing some really good things.  </P> <P>So, let s just look at sort of what some of the leading talent trends are.  One is that a lot of these companies are actually employing who are focused on the war on talent, an arsenal of talent development, talent recruitment, talent retention tools.  We can learn a lot from them.  </P> <P>Second, the rise of knowledge workers.  If you look at the 1930s, only a third of our economy was knowledge workers.  Right now it is estimated to be anywhere between two-thirds and four-fifths.  So, (a), increasing competition for good knowledge workers.  Second, there s this interesting, also trend of study, which has shown that there is, in the knowledge worker class, a greater differential between high-performing leaders and low-performing leaders.  So if you had a high-performing manufacturing manager, and you had a low-performing manufacturer, the difference wasn t that great.  When you get into knowledge work you can begin to see some pretty, the widening gap, which makes that competition all that much more intense for what s going on.  </P> <P>Third is that you see increasing rates of job mobility and decreasing rates of organizational loyalty.  If you look, for example, at the Bureau of Labor statistics, the average tenure right now for jobs is four years, and 23 percent of people who have been in jobs are there for less than 12 months.  So, you re seeing massive movement in terms of the workforce, and that s increasingly prevalent, as we ll talk about in a second, in terms of generation X and generation Y, our next generation of leaders, which, actually, I ll talk about in two points.  </P> <P>The other idea is this flattening, the whole concept of the world is flat, the idea that there s a commoditization of services, think call centers, for example, easily out-sourced.  It means that, again, there is a greater demand for some of the top talent and top jobs that we have out there, much more competition in general in terms of our economy, something that we need to be paying close attention to.  </P> <P>Boom and entrepreneurship and free agency, you may be at least aware on the outside in terms of some of these statistics, but they re pretty stark.  Let me give you one little example of that: There are, right now, more jobs being, more new companies being born right now than new babies in the United States.  So, if you think about the number of new companies that are being started all the time, and where they re coming from, it s pretty exciting to see what s happening with that.  We need to be able to tap into that.  One interesting other example of that is those new companies that are being created, right now they re generating over 50 percent of the jobs in our workforce right now.  </P> <P>Other things to take into consideration, demographic shifts, you are probably all aware with the impending retirement of the baby boomers.  It s right now anticipated that for every two experienced workers leaving the workforce, only one is re-entering.  So, you re going to, as you re paying attention to this generation X and generation Y and trying to bring them into the workforce, you ve got to be paying close attention to that.  </P> <P>And then, finally, this idea of changes in workplace values and priorities.  This is, again, most prevalent in terms of generation X and generation Y.  I think a good study of that was some of Richard Florida s work in terms of the creative class.  Right now 38 million people are considered to be cultural creatives, who are out there really putting pretty significant value in terms of creativity, individuality, difference and merit.  So let s think about that in the context of the education community right now.  That s one-third of the workforce.  </P> <P>So, that led us to think about, what are the leading talent trends that we are seeing in terms of the outside the education sector space?  One is that, Bryan mentioned, is that talent mindset is critical, and then it leads to talent attraction, talent development, retention and measurement.  And I ll treat each of those quickly in turn.  </P> <P>This is a very interesting slide. It s in our paper so I m not going to spend a lot of time with it, but if you look at the left-hand side, many of you should think, that should actually look fairly familiar to you in the education context.  Right?  We provide good pay and benefits, we think development happens in training programs, we treat everyone the same, and like to think that everyone is equally capable.  That is true of students, not necessarily true of teachers, not necessarily true of leaders of schools, not necessarily true of leaders of organizations.  </P> <P>The new way, on the other hand, means that, one, we need to make everybody accountable for talent, which is the talent mindset we re talking about.  This is the Larry Bossidy concept.  Larry Bossidy came into Allied Signal, which then became Honeywell, as part of a turnaround strategy, and the first thing he did was set a gold standard for talent, and saying, these are the kinds of people we want to come and have work for Allied Signal, and then he systematically went and evaluated his 400 top managers and ended up replacing 200 of them in four years.  That turned around a massive return on shareholder value over the course of the time that Larry Bossidy was there.  He took control and made it his responsibility, which is the reason for that quote at the bottom there.  </P> <P>The idea is that it has to be a central strategy to the organization. It s not just one HR responsibility, it s actually something that needs to be integrated into everything that we do.  So, you actually have to shift your strategy in order to be able to have the kind of recruitment and retention results that you re looking for.  </P> <P>And then you can look through the rest of them, you want to shift from purchasing to marketing in terms of the mindset that people are looking for, and you want to be able to bring people in, develop them in a very robust way, which is what we ll talk about here.  </P> <P>So, let s look at the outside talent practices.  Talent attraction is something that organizations outside the education sector invest a heck of a lot of money in.  If you look at the idea that search firms, for example, have seen double-digit growth over the course of the last 12 years.  You look at various companies that are starting to invest in this, massive amounts of dollars are going into internship programs, into active recruitment programs, etc.  </P> <P>And you begin to see some of the best case examples in terms of what things are going on, the signature experience that Cliffbar [ph.] has provided, for example, why would people want to come work there.  The idea of being able to invest heavily in development, we talked about it in the paper, retention, and then measurement.  It s amazing to me when we started looking, and I agree with Bryan when he was looking at entrepreneurship statistics, we were not able to get good measurement and good, valuable, relevant data coming out of the education sector in terms of what was going on.  We have to be better about our measurement in metrics.  </P> <P>So, read about Proctor and Gamble, in terms of all the things that they ve been able to put together, but, coming out of Cincinnati, Ohio, they ve been able to put together a true talent mindset, and through their talent mindset they ve been able to create 23 $1 billion companies, and they have an attrition rate of 7 percent, which includes retirement.  It s their opportunities to go out and do some amazing stuff, all by selling soap, in Cincinnati, and still being able to compete actively for talent.  Why can t we do the same thing in Dayton for charter schools?  </P> <P>So, that actually, look at the talent churn, Bryan touched briefly on that, and then education s secret weapon is that we are starting on the 50-yard line here.  The idea for the war on talent is that people, especially generation X and generation Y, want to go do something good with their lives, they want to be able to go have significant impact in the world that they re creating.  </P> <P>We have an opportunity to be able to bring great people in, but we need to be able to adapt the talent mindset, invest heavily in terms of the actual recruiting process, be able to invest in the development process.  And that has several implications in terms of talent development, of career tracks, being able to provide people with opportunities to have lateral moves, get experience outside of the sector, and be able to come back into the sector with some fresh ideas for how to turn it around.  </P> <P>So, I m out of time, read the paper, I ll be happy to take your questions.   </P> <P>Frederick M. Hess:  David?  </P> <P>David Harris:  Good morning.  Thanks to Rick for the invitation to be here.  It s a pleasure, and I really enjoyed reading Bryan, Gregg and Chris papers.  They re terrific.  My name is David Harris.  I m the President and CEO of the Mind Trust.  We are focusing on promoting education entrepreneurship in Indianapolis.  We really became interested, though, in the human capital issue when I was the Charter Schools Director for Indianapolis, Mayor Bart Peterson, who is the authorizer, in Indianapolis.  We have a very strong sector of charter schools, but we have been disappointed for a long time in the growth.  We don t have the number of charter schools that we would like to have.  We have 17, but we think that there s a lot more opportunity for growth there.  </P> <P>We have a great climate for growth.  We have an authorizer who is eager to grant more charters.  We have a strong law with no cap.  We have a community that has really embraced these schools in terms of serving on boards and providing other critical support.  The reasons that we identified for why we weren t growing our charter sector, is, one, we just didn t have the talent pool that we needed to support those schools, and, secondly, we didn t have the opportunities for education entrepreneurs to take the time that they really needed to design, develop, build and launch new charter schools.  In Indianapolis, all of our schools are either started by CMOs and EMOs or by existing local non-profits, all of which were able to provide that critical start-up support that s so essential to getting high-quality charter schools open.  </P> <P>So we launched The Mind Trust really to address these two issues, and we have two primary strategies that we re pursuing.  One, we ve created a venture fund that we re using to attract exceptional entrepreneurial education organizations to Indianapolis, and we ve used that venture fund to bring The New Teacher Project to Indianapolis, College Summit, and, just recently, Teach for America.  And it s extraordinarily important for us that Teach for America and The New Teacher Project are there because they re going to provide a pool of talent necessary to do a lot of the support work for education entrepreneurs, as Bryan described, but also to become education entrepreneurs themselves.  </P> <P>We didn t limit the Mind Trust focus to charter schools, even though that s the area that we had focused on, for a few reasons.  One, there are educational entrepreneurs doing fantastic work, work outside of the charter sector, and we wanted to be able to tap into that great work.  Two, if we wanted to attract talent, pools of talent, the most important work that s being done are being done by organizations that work primarily with school districts, Teach for America, New Leaders for New Schools, and The New Teacher Project.  And the third is that we thought if we were really about promoting education entrepreneurship, that we didn t want to limit the focus of the work that was being done, we didn t want to have a narrow focus and say that you have to work only in charter schools.  </P> <P>I realize that I forgot our second strategy, so I m going to go back and tell you what our second strategy was.  In addition to the venture fund, we ve also created, and Bryan alluded to this, a fellowship for education entrepreneurs to give them the time and space that they need to develop and launch new initiatives.  Another way to think about it is, really, as an incubator for transformative education initiatives.  </P> <P>Bryan and Chris both wrote in their papers about the barriers that education entrepreneurs face, and I want to talk a little bit about the impact of what those barriers have on the kinds of people who are actually, today, becoming entrepreneurs and what that might implicate for what we could do to support future entrepreneurs.  Again, to us, the biggest challenge that we saw was having the time and space during that critical start-up period.  Charter school people spend a lot of time lamenting the challenges of facilities as a huge barrier to grow the sector, but I don t think that even comes close to being a challenge as compared to just the opportunity for people to go out and build and design new charter schools and other entrepreneurial organizations.  </P> <P>Imagine someone who may have taught for five or ten years, gotten frustrated with the system, went to business school or law school, and now they re working as an executive in some corporation, but their real passion is public education, and they ve got an idea for a new charter school or other entrepreneurial venture.  </P> <P>What s the mechanism to get those people back into the sector?  Well, in Indianapolis there really wasn t a very good mechanism.  Michelle spoke earlier today about the challenges in the philanthropic side, getting people to invest in education entrepreneurs because they tend, foundations tend to prefer to invest in safer bets, which usually means organizations that have long track records of success.  So, that s a huge challenge.  </P> <P>How do we get those kinds of people into the sector?  But the fact that we don t have those people into the sector has a big impact on who is becoming education entrepreneurs.  Bryan gave a great definition of education entrepreneurship in his paper and alluded to it in his talk, and in Indianapolis the people who really meet that definition of education entrepreneurship are not the people who are leading the schools, they re people who are coming out of our non-profit sector.  Those are the people that have the visions and the relentless drive to turn those visions into reality for new schools.  </P> <P>And the reason that they re in a position to be education entrepreneurs is because they are employed by organizations that have given them the freedom to take the time to do that.  We ve got some sensational examples in Indianapolis.  We ve got a woman named Helene Cross [ph.], who is the President and CEO of a local drug and alcohol treatment hospital - that s a heartbreaking pattern of students who would successfully go through their treatment only to relapse when they went back to their high school.  Nationally, 70 percent of students who go through drug and alcohol treatment relapse when they go back to their high schools.  </P> <P>So, Helene took advantage of the Mayor s charter school initiative to create the state s first recovery high school.  It s been sensationally successful.  She s not the school leader, but she s really the entrepreneur who made that school happen.  We had the head of our Goodwill affiliate that s opened up four big picture high schools who played a similar role there.  </P> <P>I think there s a very positive lesson to be learned from that, and, that is, let s look at a lot of different places to find education entrepreneurs who can get into this work, and we think the non-profit sector is a great place, and we should nurture that, even a non-profit sector that s not focused exclusively, or even at all, on education.  Non-profits have people who are talented, people who are socially minded.  And, again, those kinds of organizations, at times, can allow their staff and other resources to be dedicated to public education.  </P> <P>But I think this positive lesson, there s also, the negative lesson is, what are we doing to provide people who don t have that same kind of support structure in place, the opportunity to develop and launch new transformative education initiatives?  And that is what our fellowship is really designed to do, to provide that opportunity.  </P> <P>What we offer is, first of all, through our fellowship, two years, because we think it takes a significant amount of time to really get something right, successfully launched.  We pay fellows, or, we will pay fellows, because we haven t awarded our first fellowships yet, but we will pay fellows $90,000 a year.  We re never going to be able to compete with the private sector, but we need to create incentives to get exceptionally talented people into the sector, and we think that we need to recognize it.  One way to do that is to provide them with a certain standard of living, particularly if we re going to attract education entrepreneurs who may be a little bit seasoned, might have life obligations, mortgages, kids, etc., that make it difficult to go through that very difficult start-up period that we know some of the great education entrepreneurs have undergone.  </P> <P>We offer a $20,000 stipend so that fellows, during the course of that fellowship, have the opportunity to get any sort of professional development they might need, to travel, both around the country and around the world to learn about best practices in other places.  We re going to provide fellows with a local champion, someone who can be an advocate for them, help them to be successful, help them to open doors to fundraising opportunities.  And we think because of the enthusiasm in our community for what we re doing, the fact that the Mayor is the Chair of our Board, we ve got Fortune 500 executives on our Board, and other civic leaders, that we re really going to be able to generate a lot of enthusiasm for people to support the fellows.  </P> <P>And, finally, we re going to create a network, Bryan talked about how important networks are, and these fellows are going to work together in the same office and have the opportunity to support each other.  We spent the last several months talking to people about the fellowship both in Indianapolis and around the country, and, really, I was struck with Chris point about how we are on the 50-yard line in talent development because there s such an interest in this kind of work, and there s a lot of emerging leaders who are socially conscious and want to get into this, and I just think that is dead on, and something that we absolutely need to capitalize on as much as possible.  </P> <P>I was just talking to Maia Blankenship from Education Pioneers, and they re having the same experience with the work that they re doing.  Every day we are going places and people are calling us, or we re running into them, saying, here s my idea, and here s what I want to do.  There s such a hunger and desire to get into the sector to do something meaningful that we need to figure out ways to continue to capitalize on that.  </P> <P>I see that my time is up.  One final point, very quickly, is, I think one of the challenges that we found as we ve been working with our districts to bring Teach for America and the other groups I mentioned in, is the challenges in the district.  And if we re going to continue to create opportunities to bring entrepreneurs into the sector, we ve got to figure out strategies for making the districts more hospitable.  One way to do it, the mayoral takeover I think is probably a great way, but isn t realistic in a lot of other places.  We ve done some things in Indianapolis, and, I ll talk about them later if anybody is interested.   </P> <P>Frederick M. Hess:  Thanks, David.  Sharon?  </P> <P>Sharon Robinson:  Good morning.  I really appreciate the opportunity to review these papers and to discuss them with you.  I commend both sets of authors, if you will.  In Chris and Gregg s paper, I enjoyed the opportunity to think about all the things that are going on outside of education to address the mission critical issue of talent development.  It was, it caused me to salivate, [laughter], to wonder what we could do if we had had the resources to bring the kind of focused disciplined efforts around recruitment, and then development of talent, and deployment of talent into the education sector.  </P> <P>But I also think it gave us a very, very important opportunity to focus on the broader workforce dynamics that we all will encounter regardless of the enterprise.  We re drawing our talent from the same pool, it s a universal pool, and we have to attract the talent that we need to the various enterprises that we are tempting to run.  And I think the churn that we are experiencing now as the Gen-X ers and Gen-Y ers, the millenials, enter the workforce and mature in the workforce, is something that education has not experienced before, and the notion of a 20-year, 30-year career, is unthinkable.  </P> <P>So, how do we keep our share of the talent pool dedicated to this important enterprise of educating the nation while competing with a lot of opportunities that will be more attractive economically, no doubt, is a very, very important question.  I think there s some great lessons learned, and the question of how you deploy these ideas inside of education is really an important one.  It, in fact, inspires a modest proposal that I ll make as I close these remarks.  </P> <P>As I thought about the analysis of dynamics inside education, Bryan, I really, I ended by saying, well, I wish you would look again, because, I would like to recognize, inside education, some efforts that have a lot of the hallmarks of entrepreneurialism, but, we don t call it that.  </P> <P>I thought about the National Foundation for Teaching Entrepreneurs, this is work that is going into schools all across the country for middle school and high school kids, they are thinking of going down into the elementary school, I hope they do, but they re bringing to these students the opportunity to understand how self-actualization means you know how to make a profit and make a difference.  That s an important educational outcome that teachers are getting support from the foundation to help develop within their students.  </P> <P>I thought about a set of case studies that I recently reviewed on urban teacher education where they talked about the challenge of helping all these candidates understand how to work with the community, recognize problems and barriers affecting student achievement, and attack them with the community and with other allies.  If I were thinking as an entrepreneur, I would think in terms of customer service, being results focused.  They called it advocacy.  </P> <P>And I also thought about the work going on at Hunter College where they re working a partnership with KIPP to launch the teaching institute for achievement.  </P> <P>I thought about some of the charter schools that are operating in New Orleans by schools of education, some of which are achieving very impressive results.  Right now I m told that their greatest need is the need for access to highly skilled psychologists to help students deal with post-traumatic stress, and, paper.  Entrepreneurs out on this high, very important venture, and they risk not meeting their goals because they need paper and psychologists.  They re actually reproducing textbooks in an effort to meet the urgent need of instructing those kids who have come back already.  </P> <P>And I also thought about an example at Old Dominion University, which is now about to break ground, if you will, on a public/private venture developed under the Community Development Corporation with the Norfolk Public Schools and the City, to provide housing for teachers so that they can actually afford to take a job in Norfolk and live in the community.  </P> <P>So, entrepreneurism is alive within the system.  We don t know of the resources.  We don t have many, we don t have much access to resources to support it and fan the flame.  And I don t offer these examples to say that, see, we re doing it, that s not what I mean to say at all.  I offer these examples to say that there is yet insufficient activity of this nature, and we need to find ways to support more of it, and one way to support more of it is to learn from all that we are doing.  </P> <P>So, my modest proposal is this, we can continue to celebrate the boutiques, both those sponsored by progressives, and those sponsored by other ideological perspectives, but, I think we need to create, dare I say, the new rules for human capital development within education by coming together to think seriously about how you move from a manufacturing mental model of human resource deployment to a productivity model of human resource deployment.  </P> <P>So, what if we said, as was mentioned earlier, every unit of productivity in education had goals, had productivity goals that they were expected to meet.  How, then, would we suggest expertise would be deployed in an effort to meet those goals?  How would we recruit, on a continuous basis, enough talent to keep productivity from flagging?  In other words, maintain predictability, stability, and results, because we can t afford to let some of the kids fail while we, oh, go to the talent pool and recruit.  </P> <P>We ve got to be able to do the work all day, every day, on behalf of the children who are showing up.  How many entrepreneurs do we need as opposed to those who are going to be the providers of the service, if you will?  How do we move from a model where every worker is doing the same thing at an isolated workstation, not looking right or left, above or below, simply straight ahead, to one that requires, inspires and support every worker to look across the organization, to access the resources that they need to get the job done?  </P> <P>I think we ve got to move from high standardization that takes the form of regulation and union contracts to a form of accountability oriented, productivity oriented management of this whole enterprise that would require, I guess to use Peter s term, a new mental model, that it does not yet exist.  We need to bring what we ve learned from all these boutique experiences, together with the academics and labor economics, the sociology, the demographers, and think about building it anew, and then, perhaps, we d have a way to get at this issue of systematic change, as well as greater predictability about our ability to attract and retain our share of the talent pool.  </P> <P>Frederick M. Hess:  Thank you, Sharon.  And, Larry?  </P> <P>Larry Rosenstock:  There s a big difference between being principal of a 350-year old public high school, as I was in Cambridge, and starting a charter school.  In the former, you have about this much agility, but you never have to worry about making payroll.  And, in the latter, you have about that much agility, but you have to make payroll.  Having tasted both poisons, I prefer the latter to the former, obviously.  </P> <P>I never thought of myself as an entrepreneur until my good friend Kim Smith told me I was one, one day.  Until then, I always saw myself as a student of creative non-compliance.  [Laughter].  And one of the benefits of being principal of a 350-year old high school is that it shaped my thinking about all the things in creating a new school that I didn t want to do, because I saw them up close and personal, and knew how bad they were.  So, a lot of it was avoiding a lot of things.  </P> <P>Just a word about our schools.  We ve got eight schools, public, not-for-profit charter schools.  We re K-12.  We are opening some other new schools.  We clustered them in villages with an elementary that feed two middles that feed three highs.  Our kids are selected purely by blind lottery, zip code based lottery.  The last Supreme Court case in July, with Kennedy s agreement, and the majority still allows for geographic-based de-seg patterns, and, so, we are still golden, that s what we do.  Unfortunately, since Sunday, some of our zip codes became depopulated, but we re dealing with that.  We have about 300 employees.  We have gotten 100 percent of our kids in college, and 60 percent are first generation college entrants, and they are obviously picked purely non-meritocratically into our schools.  </P> <P>So, we had a problem, and that s, I think, what I m here to talk about today, and that is the No Child Left Behind Act has an element in it that requires that teachers be highly-qualified, and their definition of highly-qualified is that a teacher either has a credential or is in a credentialing program.  I disagree with that requirement for several reasons, not as an academic researcher, but, as somebody in my 31st year in public education who has worked in three Ed schools, and taught in three Ed schools, and also has hired hundreds and hundreds of teachers.  </P> <P>I do not personally see the empirical link between a credential and the quality of a teacher.  I did perceive the barrier to entry that that requirement had for a lot of people that I was interested in hiring.  So, we hire, for example, I have a list of a few people I jotted down, a successful muralist with a BFA and an MFA degree, a former private school administrator and teacher with an MA in administration and Columbia Teachers College master, neither one had a credential.  Several UCSD graduates, very, very top flight in math and science, and did not have credentials.  </P> <P>Some community college teachers without credentials, some Ph.D.s in math and science who are college instructors who did not have credentials, some career changers, management consultant, a couple of other attorneys, like myself, journalists, and several engineers.  So, those people, a lot of them, their average ages in their early 30s, they ve got a lot of debt in the case of a lot of the young people that have advanced degrees in math and science from getting their Ph.D. or their master s degree, if they were to go to an Ed school they would acquire a lot more debt, and I would submit that 85 percent of what they would have gotten there would not have benefited them, certainly not in our school.  </P> <P>So, we knew that we had a problem, and because of the creative non-compliance tendency, we thought that we would, perhaps, become a credentialing agency, because, the definition is, you re either credentialed or you re in a credentialing program.  So that would mean if I hire you, and you don t have a credential, but you have a Ph.D. in mathematics, day one you are in our program.  To the surprise of many people, we got that in 2004.  So, just to give you some numbers, California needs 2,000 new math teachers a year.  The entire UC system, which is a large system, credentials 290 math and science teachers a year.  We credentialed 23 last year, but we re just getting started.  </P> <P>We then realized that we could only credential people who worked in our schools, because that was the limitation that was put on our license for credentialing, and, that, if we were to become a graduate school of education, we could credential people who did not go to our school.  And, so, we applied and just became, last August, the first new graduate school of education in quite a few decades in California.  So, within two or three years, we will have 40 to 50 grad students, who, unlike our students, will be chosen selectively.  </P> <P>And, several of us in Cambridge felt that the one problem with Ed schools, they are 80 percent coursework and 20 percent practica, and we should flip that to 80 percent practica and 20 percent coursework.  That s exactly what we got licensed for our Ed school to do.  So this means that we will have 40 to 50 people that we have selectively chosen, and 80 percent of them, their time, they will be working for free, in our schools, which I do think also helps meet our educational mission.  </P> <P>We hire 2 to 3 percent of the teachers who apply to us, about 10 percent of the people who apply get invited to what s called a bonanza.  A bonanza is something that happens on a Friday.  We ll have about 20 people there, meet for breakfast, everyone is given a little roster of where they re going to be teaching that day, they re observed by students, they re observed by administrators, they re observed by other teachers.  We have sort of a speed-dating situation where they sit in the center and the kids are the outside and kids get to interview them.  </P> <P>The directors of our schools have complete control over their budget, they have complete control over hiring and firing.  I could not get a teacher hired if I wanted to, but, I think a director knows that if somebody that they re really interested in didn t make it through the bonanza, didn t make it through show time, they re not going to get hired.  And, so, then about 10 to 20 percent of those people actually do get hired.  </P> <P>We think that the most important thing that we do is whom we hire, and the second most important thing we do is getting obstacles out of their way so they can do what they need to do.</P> <P>It s very important to note, before we did any of this stuff with grad schools, and any of this stuff with credentialing, when we set up the schools eight years ago, we have 180-day school year, 180 mornings a year the teachers meet for an hour and do very intensive collegial coaching and mentoring and looking at student work.  We meet for four weeks before the school year starts, two weeks after it ends.  So, I want to make a clear distinction between preparation of teachers and support of teachers and the typical mechanisms that teachers go through in order to get credentialed.  </P> <P>So, I guess, a couple things I want to mention, one is that, our teachers, here s a guy who, this is a junior class that did this book, Jay Voffer [ph.] is a Ph.D. from Stanford in Biotechnology.  Tom Ferenbacher [ph.] is a senior teacher who taught for San Diego Unified for many years.  Rod [indiscernible] looks younger than a 16-year old, and is a brilliant young math teacher who is getting his credential with us.  And we ve got people who have Ph.D.s in mathematics, and when they have difficulty explaining a math concept to a child they go to Rod because he has a, it s like when you have a 2-year old and you can t understand what they re saying, ask a 4-year old to tell you.  [Laughter].  I say that with great affection for him.  </P> <P>But all of the math and all of the science, everything in this book was done entirely, this is their fifth book, Jane Goodall wrote the introduction to the last two.  There are several examples on her website of the type of work that you can do when you hire these kinds of people and liberate them.  </P> <P>I just want to say in terms of entrepreneurship, to me it s all about the agility, it s just entirely, people used the word power before, power maybe, but, agility captures that better for me.  It s very hard to draw oxygen working in large districts as I did for 20 years.  So, in a sense, I would say that, well, when I first started 31 years ago, on September 1, 1977, right after law school, teaching carpentry in the Boston public schools, it was all about systemic change, and it s about systemic change right now, and it s been about systemic change for every day of the 31 years I ve been in this, so, excuse me if I sound cynical by saying that, first of all, there hasn t been a lot of change, and, secondly, I think that too much credit is given to districts to assume that they are systemic in the first place.  [Laughter].  </P> <P>And I guess, before I get in more trouble, I ll just say, in conclusion, that not in the governance sense, but in the practical sense, for us the graduate school of education has become the parent of the whole entity, because everybody is mentoring, everyone is coaching, I m teaching the same philosophy of Ed class that I taught at Harvard.  And, so, it s really becoming, in a very deep way, a wall-to-wall learning organization.  </P> <P>Frederick M. Hess:  Thank you, Larry.  [Applause].  Okay, with that, why don t we go ahead and open it up.  Please catch Rosemary or Juliet s eye as they re coming around.  Again, for those of you who have joined us since the first panel, I d ask that you please be kind enough to identify yourself by name and affiliation, and, as always, please ask questions.  Okay, who do we got?  </P> <P>Sara:  Hi, my name is Sara, and I m a 2004 corp member for Teach for America, and currently an MBA student at George Washington University.  I m interested in something that you kind of touched on, which was entrepreneurship amongst teachers who are currently teaching.  I m wondering, what can we do to really foster that?  Because I felt like when I was teaching that sort of spirit got killed in me because there wasn t enough time and I didn t have enough energy.  And, so, what can we do to really foster that in teachers who are currently teaching?  </P> <P>Frederick M. Hess:  Bryan, do you want to start on that?  </P> <P>Bryan C. Hassel:  Well, let me give one idea, which is actually, I think, more Rick s idea, we worked on this together on an earlier paper on this topic.  But, what if more schools were designed so that there were hybrid roles for teachers, where teachers could spend some part of their day teaching, and some part of their day doing work that we might think of as entrepreneurial, such as launching initiatives within the school, or within the district, that are designed to solve some kind of problem that the school or district has?  That s not completely lacking from our current school system, but that would be a very unusual job description for most teachers.  </P> <P>Not only would that foster entrepreneurship on the part of teachers by giving them experience, and, with that, that they could then parlay into more experience, and learn whether they wanted to do more of that in their career, but it would also be appealing to potential teachers who see their career as having an entrepreneurial flavor to it if they could see that they could have a job like that, rather than a job that only involved teaching day-in and day-out.  So that s one idea, but there are probably a lot of other ones.  </P> <P>Frederick M. Hess:  Larry?  </P> <P>Larry Rosenstock:  When we open new schools, we would, the only way that we would pick a leader of a new school, which we call directors rather than principals, would be what we call mitochondria, which come from the mother cell.  So, because we have design principles, and a cell biologist was visiting, and he said, you know, you talk about the design principles governing the design of your schools, but, in cell biology if that is a good analogy the design principles don t instigate growth, it s the mitochondria that instigate growth.  </P> <P>So, we have eight directors.  Their average age is 31.  They re all people who were successful teachers in our schools.  When they open a new school, which is, let s say it opens with a 9th grade, and they re going to have, let s say, 10 people working there, usually six of those would be people that they selected who came from one of our prior schools.  It s the safest way to open a new school.  So we try to create those opportunities.  The idea of hiring a principal from outside would be a scary proposition to me.  </P> <P>Christopher Gergen:  Just to pick up on one thing that Bryan said, and actually dove-tailed into what Larry was talking about, from the outside sector, some of you may be familiar with Google s 20 percent rule, where they are able to give a day a week to looking at other kinds of R&D projects, and actually a significant portion, I think, I can t remember what percentage it is, of Google s new rolled out products actually come from this 20 percent rule, I would like to be able to see the same kind of thing be present within schools that I ve visited.  </P> <P>Sometimes you see that, sometimes you see this really nice collaborative work where you see teachers, I ve seen it at High Tech High, I was just at a school yesterday in Kansas City, they begin to see some really good entrepreneurial activity, and it comes because people (a) have time to do it, (b) they ve got support to do it, and (c) that they re actually part of this network that Bryan s been talking about.  So, they re part of the network, both within the school, and, often, outside of the school, which is, I think, where we need to draw some of this energy from.  </P> <P>The most successful entrepreneurs that I have seen have been sparked because they ve got a great idea, and then they get a lot of runway to be able to help develop that idea, both in an intrapreneurial context, inside an organization, as well as an entrepreneurial.  </P> <P>Frederick M. Hess:  Rosemary?  </P> <P>Morgan Brown:  David, Mayor Peterson has obviously . . .  </P> <P>Frederick M. Hess:  Oh, Morgan, just in case somebody has joined us.  </P> <P>Morgan Brown:  Oh, sorry, I m Morgan Brown with the Department of Education.  David, Mayor Peterson has obviously chosen a very different strategy to try and reform urban public education from the typical mayoral strategy of trying to do a takeover of the school district.  Could you talk a little bit about why you chose that path and what he perceives to be the benefits of that, maybe particularly as it relates to this topic?  </P> <P>David Harris:  Well, we ve learned a lot over the last several years.  The Mayor got chartering authority in 2001, he remains the only mayor in the country that has this authority, and I think a couple of reasons that he pursued it, one is that he genuinely believed that we needed to create opportunities for parents to have more high-quality options in our community, and that we needed to foster that by creating charter schools.  He also believed that the external pressure that charter schools could provide on traditional systems would have a positive impact on them, although I think that that has been mixed in terms of its results.  </P> <P>In fact, interestingly, we ve had in Indianapolis, school districts that have embraced the charter initiative.  But it s not the school districts that are losing the most students as a result of the charters, but the students that have the most capacity to take advantage of the opportunities the charter schools present.  And, charter schools provided an opportunity to bring talented people into the sector who would otherwise not have been.  </P> <P>And what, the reason we ve started The Mind Trust is because we saw that while charter schools presented an opportunity, there are still significant barriers in that start-up phase that we wanted to help overcome.  And that s what our fellowship is really designed to do, to help spawn that.  But we also are beginning to see, and I started mentioning it at the end of my comments, the challenges that we face trying to engage our districts in entrepreneurial work, because, again, at the end of the day we re not only about seeing that the charter sector succeeds, but that we want the traditional sector to succeed as well.  </P> <P>I think that we need to continue to think about how we can ensure that the districts are doing everything that is realistic for them to respond to, or to embrace, education entrepreneurship.  One of the things that was a challenge for us when we brought Teach for America, and The New Teacher Project in College Summit to Indianapolis, is, I mentioned the superintendent was enthusiastic, and then we couldn t get the staff of the district to respond in a way that we needed to move those things forward.  </P> <P>So we actually, I went to the superintendent and said, we were thinking about hiring a former superintendent who worked with us on charter schools to do some consulting work for us, I said, what if, instead, we give you the money, and he can work for you on the projects that we want to work together on, Teach for America, and these things.  He loved that idea and that s made a huge difference in making those things happen, but it also reveals a real problem.  And, so, as the Mayor looks at the dynamic, charters are a critical piece of that, but we need to think about what we can do to change the dynamic within districts so that they re more supportive of these kinds of innovations.   </P> <P>Frederick M. Hess:  Larry?  </P> <P>Larry Rosenstock:  I think it s hugely important, what the Mayor is doing.  He s the real deal, and he really means it, and I ve had the pleasure of meeting him.  I think that we need multiple authorizers.  Imagine any industry, like, in California, you can only get your authorization from the school district, imagine being an entrepreneur, let alone working in any industry where the only way that you could get authorized is by the entity that you re competing with for revenue.  Right?  So, we just became, in California, the first state-wide benefit charter, which means, to the chagrin of quite a few school boards and teachers unions, that we can open schools anywhere in the state.  We re already authorized to do so.   </P> <P>Frederick M. Hess:  Joe?  </P> <P>Joe McTighe [ph.]:  Hi, this is Joe McTighe from the Council for American Private Education, I ll get into position where you can see me, actually.  Today s focus is really on entrepreneurship within government controlled schools, and, I guess the issue is, while that s not completely an oxymoron, I guess it does limit entrepreneurship to that which advances the definition that government has as to what constitutes a quality education.  </P> <P>But, in our society, pluralistic society, there are lots of answers to the question: what constitutes a quality education?  And, I guess most of those answers include the government s definition, but many go well beyond just upticks in math and reading scores on standardized tests.  So, my question is, what do you think of the government encouraging entrepreneurship outside of the government sector, encouraging families, communities, teachers, to establish and choose schools that reflect their definition and not just the government s definition of what constitutes a quality education?  </P> <P>Larry Rosenstock:  I ll take it.  There s a lot to that question.  I mean, one of the things that really, I m a Brown v. Board of Education guy, and one of the things that really troubles me right now is that we have apartheid schooling in America.  Our schools are more segregated than they were in 1953.  So, I do think that community control is good up to a point, but, as my friend Debbie Myers says, if we get to a point where we say, and this might not be what you re suggesting, but, if we get to a point where we say we can teach our own better than other people can teach them, if it doesn t work we have a problem, and, if it does work we actually might have a bigger problem.  </P> <P>So, I m not sure, and another point about this question of legislatures and stuff, just a modest proposal that I have, okay, because there s something about this fetish, and I use the word advisedly about standardized testing, that I think needs to be addressed.  I think that any legislative body that requires that a school have its standardized test scores, the standards be taken and be made public, that that body, the state legislature, the U.S. Congress, or school board, take the test and the results be made public.  I think it s very important that that happen.  [Laughter]  </P> <P>Secondly, I think that the teachers should have to take the test.  I really mean this.  And the results should be made public, not their individual schools, but the aggregate, and if anybody is still paying attention, and I would submit that nobody in this country will be after they see the results, then we should give it to the kids.  [Applause]  </P> <P>Frederick M. Hess:  On this larger question, Sharon, you might have some thoughts on this, are there different issues posed if we re thinking about folks who are being prepared to lead or provide an entrepreneurial kind of problem-solving in conventional districts versus unconventional public schools like charters versus privately operated schools or home-schooling environments?  How are these challenges different?  </P> <P>Sharon Robinson:  Well, see, I think that the unconventional publicly sponsored schools should have a purpose, like the more conventional ones should have a purpose.  I think that we should be learning from them.  These are the test fields, if you will, for different ideas.  While we need to learn from some of these ventures, we need to get what we ve learned quickly into the conventional system that s going to do kind of the commodity work.  I mean, the commodity work has to be done at a high-quality level as well.  </P> <P>So, we can t teach, at this moment I don t think we have a vision, or, I don t know, maybe you do, we can t teach all students right now in charter schools, though, if I had my druthers, I would put everybody in a High Tech High charter school.  I really mean that quite sincerely.  But, there are students for which High Tech High might not be the appropriate school.  I want them in an appropriate, high-quality school as well.  But it might look differently from High Tech High.  </P> <P>So the problem I m having is, we have these highly celebrated entrepreneurial ventures that leave us with the question of, is this where we re going, where I m thinking, okay, how, are we just going to just abandon the infrastructure that we already have?  Why can t we be more aggressive about bringing lessons learned into the system that does the commodity work?  So, I m just concerned that we could have a group of kids who would have, perhaps, a wonderful experience in one of these boutique programs, but then what are we doing deliberately to bring whatever that benefit is to the good of everybody else?  </P> <P>Frederick M. Hess:  Although, I guess, to go back, say, to the point that Stig kind of raised on the initial panel, I presume, Stig, I think you re out there somewhere, I presume Stig s response would be that what s working when these things are working in the new sector schools, or, to Joe s point, when they re working in private schools, it s frequently because folks are taking advantage of these degrees of freedom, effective educators and leaders, to form effective environments.  And then, in some sense, when we try to extract what are the instructional or pedagogical lessons, then, in some sense, we get the leftovers but we missed kind of the main course.  </P> <P>Sharon Robinson:  Well, yes, and I think that the, back to the point I was trying to make, see, you ve got to do this thing holistically.  The teacher s job now needs to be a job that is envisioned as more than just standing there delivering instruction.  The principal s job now has to be more than a job of keeping order and meeting the AYP.  It ought to be a job, all of them have the job of increasing productivity, focusing on, and doing what you need to do to improve results for the students who are there.  </P> <P>So, if you take that view of it, you teach these people to do the work that needs doing today, not the work that we needed to have done in a day when we were doing schools based on a manufacturing model.  I mean, we ve got all these mixed metaphors going on out there, and I think we need to get a clear vision of the new normal that we ve got to create, and that means all students have to learn to much higher levels of intellectual development because they all must learn to do non-routine, analytical, creative work.  </P> <P>Christopher Gergen:  Just a bit quickly, if you look at the definition, one of the other definitions of entrepreneurship, there s lots of characteristics of what makes an entrepreneur.  But, if you go back to some of the original definitions of entrepreneurship, it s shifting resources from one place to another to be able to produce higher returns.  And, so, if you re allowing for greater entrepreneurial activity, it allows for greater disruption, which then allows for higher returns, greater productivity, to Sharon s point.  </P> <P>The problem that we re facing, and Bryan s paper picks up nicely on this, and we see it as well, is that there is a dearth of opportunity within this sector for entrepreneurship activity in the first place.  So, disruption gets squelched.  And one of the other characteristics of an entrepreneur is somebody who is adaptively persistent.  But you want somebody who is adaptively persistent towards achieving the kinds of ends you re talking about.  If you feel like you can never achieve the kinds of ends, and you re constantly persisting, you re going to leave.  And, so, I think we need to be paying very close attention to a lot of those things and not miss that central point.  </P> <P>Larry Rosenstock:  Yes, I just want to add, I think a very good point is raised that High Tech High is obviously not for everybody, and no school is, and we really need to take schools on as we find them.  As a student of mine once said, if you re skating on thin ice, you might as well dance.  So, here goes.  </P> <P>I have this image of a schoolhouse, it s from having gone to PS86 in the Bronx, it s an east coast image, it s a big five-story brick building, and there s a huge syringe going through the roof.  Okay?  In my experience over the last three years, regardless of the external inoculants that others thought would be a good idea to change the place, and we could all list a lot of them, all of those efforts woefully underestimate the power of the immune system of that building to reject external inoculants.  Okay?  So, I see it as an inside game.  I just really do.  </P> <P>You ve got to basically get, you ve got, if you re trying to be a principal, I did it for years, you have, every time somebody did something stupid over 350 years in that building, they made more rules.  I did some stupid things and they made more rules.  They required me to go to school board meetings for a year as a punishment.  Okay?  And it was punishing.  It was punishing.  [Laughter].  </P> <P>But the real question for me, I just, my closing thing, I stand on the shoulders of two greats, Dewey said, the purpose of public education isn t to replicate society, the purpose of public education is to transform society.  And there s a serious question of will in that regard.  And I think Jefferson even said it better, he said, the purpose of public education isn t to serve the public, the purpose of public education is to create a public, and that s why I m an integrationist, and that s why I m a Brown v. Board of Education guy, because what s happening is, taking the schools as we find them we got to do, but, we really have been reduced.  We don t have to look too far from where we sit to apartheid schooling in America, and I think it s a shame.  </P> <P>Frederick M. Hess:  Rosemary?  </P> <P>Michelle Chin:  Hi, sorry, I m behind the pole.  My name is Michelle Chin and I work for Senator Cornin.  But, it seems to me, as you re talking about entrepreneurship at the leadership level, that it s also a symbiotic relationship between entrepreneurship at the student level.  And, to what extent does our curriculum and the current system that students are laboring under force a student to kind of channel their resources into a one-size fits all, or a standard model of thinking?  And, so, while we are encouraging entrepreneurship at the leadership level, when it comes down to the students, what are they learning?  Test-taking skills?  Are we teaching them creativity?  Are we allowing them enough space to find these non-traditional solutions?  </P> <P>Frederick M. Hess:  Really, that question, I think, really illuminates a nice distinction, because, the one hand is, what s taking place in terms of instruction and curriculum, and how some of these larger dynamics play out in terms of what we re teaching kids and whether we re comfortable with what that looks like.  I think the other piece of this, though, of course, is that the concept of creative problem-solving, of entrepreneurship, is a slippery one.  </P> <P>And, so, frequently what happens is we start off talking about, how do we create an environment where we re going to make it more possible for folks, that Bryan highlighted in kind of his initial remarks, folks are going to come up with ideas like New Teacher Project, or Wireless Generation, or High Tech High, how do we create an environment where we re attracting a lot of those people and getting them tackling problems in smart ways, like what The Mind Trust is trying to do in Indianapolis?  And we wind up just talking about, jeez, wouldn t it be nice to have a lot more people do a lot more innovative things in schools and districts, which is what we ve been doing for 40 years with very little success.  </P> <P>So, I think one of the things that that question really helps, really usefully reminds us to do, is, we have to have, we have to be very careful in the way we think about this and talk about this so that we don t move away from having a useful and constructive conversation about, what do we want kids to know, what do we want their educational experience to be like, how do we create an environment where we get people who are going to solve the problems that we face in the schools and move into this kind of conventional, jeez, wouldn t it be nice if we had more principals who were trying stuff every three months?  I think we too often kind of lose that distinction in this conversation.  Chris?  </P> <P>Christopher Gergen:  Just to pick up on sort of what we mean by entrepreneurship within education, Sharon mentioned earlier, NFTE, The National Foundation for Teaching Entrepreneurship, which I think is an interesting model.  It s a supplemental model.  It s designed to be an after school program. Occasionally it gets into the curriculum, but not very actively.  </P> <P>I think a more interesting conversation is something that s happening in Edenton, North Carolina right now, supported by the Kauffman Foundation, which is something we re involved with, which is looking at actually, how do you teach students the entrepreneurial mindset, and how are you teaching teachers the entrepreneurial mindset so that they can model that, and what does the entrepreneurial mindset mean?  And, we re, just to sort of, a slight tangent is that Gregg and I have written a book on life entrepreneurship, looking at how people are living increasingly entrepreneurial lives, and what does that mean?  And if you look at the core tenants of life entrepreneurship and the entrepreneurial mindset, I think it s something that we can all agree students should embrace, opportunity recognition, innovation and action, the ability to be able to take great ideas and put them into action in a supported way.  </P> <P>So, that is key for our continuing competitiveness in the 21st century.  It s part of the 21st century skills, you know, Morgan and others are paying attention to this, North Carolina is one of the 21st century states, that s why they re embracing this as a state.  Oklahoma, right now, with a creativity project that they re trying to get deep into, trying to understand creativity and innovation at the school level.  So you re starting to see some really interesting things that are starting to bubble up to Larry s point about, what is the entrepreneurial mindset, and how do we model that appropriately and provide opportunities for it within the school systems?  </P> <P>Larry Rosenstock:  I have a tiny example of entrepreneurship in education.  My student sold me a box of these for $25.00 each, and I found out that on Amazon they re selling them for $18.00 each.  [Laughter].  </P> <P>Frederick M. Hess:  With that, with that nod to the ingenuity of our students, I think I would encourage everybody to take a look at the papers, they re available outside or on the web at that address, Event 1522.  What s particularly, I think, useful here, is when we think about how do we tackle these human capital challenges that we ve identified, how do we attract people, how do we cultivate them, that, what Chris has done by talking about what s going on outside the sector, there s a whole bunch of very concrete ideas that should inform our conversation.  </P> <P>It doesn t mean we can do them, it doesn t mean we should do them, but there are ways that we can think and talk about these issues.  What Bryan has done inside the sector is talk about the way the conditions have shaped what takes place, the way in which they tilt the table in our favor or against what we re trying to do day-in and day-out, and, a bunch of really innovative efforts inside kind of the larger K-12 environment that have sought to attract us.  </P> <P>With that, it s been mentioned a couple of times again, so, those of you who are interested, this will be available out there during lunch.  Lunch is being served right out here.  We will reconvene at 12:50.  And, with that, I d like to thank the panel for a stellar session.  [Applause].  </P> <P>[END OF PANEL II] </P> <P>PANEL III:  Addressing the Financial Capital Challenge</P> <P>Frederick M. Hess:  As you recall, prior to the conversation and lunch, we talked about the human capital and talent development piece of the equation.  Obviously if we re talking about how are we going to find and attract people who can come up with the solutions that we need, a part of the question is, how do we make sure that those people are able to access the resources they need to get started, or to grow, or to thrive?   That s what this panel is really about.  It s about how we think about the financial capital side of the equation, not only how do we think about how we make those resources available to the people who are going to be able to use it to solve the problems we want to solve, but also what is the infrastructure, what are the networks that are associated with that capital that we need to think about?   </P> <P>We have two papers again, as with the last panel -- one that really looks outside of the K-12 sector to help us think about how we tackle these questions elsewhere, and then one that looks inside.  The author of the first is Daniel Pianko, writing with Joe Keeney.  Daniel is Principal for the Knowledge Investment Partners and the lead research analyst for the company s Presidium Fund.  Previously, Daniel served as Director of Strategy and Planning at Learn Now, a for-profit management company that was later acquired by Edison Schools.  Our second author, Kim Smith, is writing particularly about the financial capital inside the K-12 sector, especially in terms of the role of philanthropy.  Kim is co-founder and former CEO of the NewSchools Venture Fund, which she helped launch in 1998.  She was a founding team member of Teach for America in 1989, and went on to become founding Director of the Bayac Americore, a consortium of non-profits in the Bay area.  In 2001, Kim was featured in Newsweek s report as a woman of the 21st century -- the kind of woman who will shape America s new century.  Then we have two discussants.  First is Jim Shelton, Program Director in the Education Initiative at the Bill and Melinda Gates Foundation.  Jim formerly led The NewSchools Venture Fund in working with New York City Public Schools to craft their comprehensive reform strategy.  And, second, we have Nelson Smith, President of the National Alliance for Public Charter Schools, and previously the Vice President for Policy and Governance at New American Schools. </P> <P>Daniel Pianko:  Actually, it s ironic that you mention that, Rick.  It s funny, I ve been out of the charter school industry, kind of directly, since about 2002.  And when I worked for Jim, and Kim was Chairman of our Board, we had a wonderful experience with Learn Now.  And what s truly remarkable to me is in certain respects how similar things are.  The same people -- I m amazed by how many people I still know in this industry -- the same issues, the same problems.  I think it s important to, as I start going through this presentation, just mention that over that same time period, while charters have basically been growing, they are maybe still 1 to 2 percent of the K-12 population; in post-secondary, for example, the percentage of for-profit operators have grown from about 1 percent to about 5 percent of market share.  </P> <P>So, the education industry is changing, but because of capital constraints and issues I m going to talk about, it s not changing as quickly as other industries.  So, why are we here?  We re here because education is not on this list.  Education is the second largest segment of the economy.  This list is pulled from a list of 20 industries that folks invest in.  1 through 20 -- education is not there.  There are no significant or of-size publicly-traded K-12 education companies outside of the publishers.  There is no equivalent of Google or someone else that education investors can point to.  There is a handful of firms that invest in education companies; my firm is one of probably three or four with a stated mission to invest in education companies.  So, we re here because education isn t even on the list.  </P> <P>So why is that important?  I m sorry for folks in the back who may not be able to see as well.  I ve got three buckets here, green, red -- that s generally bad -- and kind of a mauve, which means okay.  Green (I ll just call it good for right now) -- some folks have complained about the level of investment, but, basic research is done in our society by non-profits, philanthropies, universities, governments.  Most people think that that s about $1B to $1.5B in the K-12 market.  </P> <P>Picking winners: this is venture capital, this is taking a company from three Starbucks to a $40B publicly-traded company.  This is the whole.  Currently, in 2006, $64 million was invested in venture money in education companies.  Okay? </P> <P>One point on the public markets: there are some publicly-traded education companies.  They tend to be publishers or other sort of standard, traditional old miney type businesses.  So, again, the largest companies are buying out companies before they can be fully commercialized.  I talk about that in the paper, but it might not be good for this session.  </P> <P>It doesn t have to be like this.  Post-secondary investing is thriving.  I don t have all the numbers on here, but one million students in the United States go to a for-profit university.  There is about $1B of capital that has flowed just in the last couple; there is probably, if you include the big public deals, probably over $10B of capital that has flowed into for-profit post-secondary education companies in the last, call it five years, and that s not an exact number, (but, if you really care, EduVentures will proudly provide it, I am sure).  </P> <P>You have household names that are for-profit publicly-traded companies, University of Phoenix, DeVry, Le Cordon Blue.  A little background here: the University of Phoenix was created by a disgruntled college professor in the 70s out of the UC system because no one wanted to educate working adults.  Today, non-traditional students, which is the vast majority of what the for-profit market is targeting, make up a very significant group -- any here who does post-secondary work will know that non-traditional students are the fastest growing students.  Ten percent of all students who received degrees in the U.S. received them online.  Of that, roughly half are from for-profit universities.  </P> <P>Small changes will alter what happens in sectors.  Just one little thing on venture, and this is really detailed in the paper, but The Small Business Administration created a loan program for venture firms -- The Small Business Investment Company Act, I think it was called.  That is, frankly, what created the venture industry.  You don t have to change the world, you just have to change a few policies and the impact will be huge.  </P> <P>Why is that important?  As I said when I started -- part of the reason why I, frankly, after Learn Now and then Edison, why I didn t go back into charter schools is because I kind of felt like Don Quixote, going against windmills.  There is a large established bureaucracy that, for better or for worse, is in place in public education in this country.  The systemic reform efforts -- in terms of saying, hey, come, start a charter school, that s a really good idea, invest or come help start charter schools -- I bet that $1B was invested in charter schools between 98 and 2002, on a for-profit basis; Edison alone is probably $500M or $600M of that.  The result is zero, in effect.  The market value of those markets today is maybe 10 percent.  So, investors are left with a bad taste in their mouth.  This extends across educational investing.  From about 97 to about 2001, something like $5B was invested in education companies; very little of that came back.  If you looked at your portfolio at the end of every couple of years, and you said, oh my God, I invested in Columbian, in third-market emerging growth stocks, well, you may not go back to that sector -- if you lost a lot of money in that sector -- anytime soon.  </P> <P>So how do you get us back?  Focus on opportunities that have a long-term definable way for us to be involved.  I really think there are three ways, and this is totally contradictory to what 99 percent of the people that are probably going to speak at this conference will talk about.  I m not going to talk about human capital.  Focus on niches, focus on areas that are not currently where the public entities are focused, away from the third rails of politics.  The private sector is not going to create markets.  We will follow where the public sector creates opportunities.  </P> <P>So, I m going to focus on one of the three ideas that we, Joe and I, thought about in terms of how to bring investors, for-profit investors, back to education.  Focus on a prize model.  What is a prize?  It means you go out and you say to anybody, Charles, if you fly across the Atlantic, I will give you $25,000.   Guess what?  Nine teams competed and spent well over $500,000, and Charles Lindberg, he won the prize, he ended up on the front page of every newspaper, and his investors probably ended up making some money.  </P> <P>How do you apply that to the education industry?  I picked one area.  I ll mention a few others.  But, pick high-value social problems that are clear, defined measurable results.  High school graduation: you guys all know the statistics that 30 percent of Americans never graduate, but, at the same time, it s measured in a clearly defined way.  Each state says, you are a high school graduate if you pass this test and you are not a high school graduate if you don t pass this test.  So, what do you do?  </P> <P>Give $10,000 to any organization that turns a high school dropout, as defined by the school district, into a high school graduate.  You will see for-profit, non-profit, hybrid school districts go after this money, and you will create a market separate and distinct from the existing markets.  If you commit to doing that over a long period of time, investors will come and find the best ideas.  Frankly, both non-profit -- I could see someone like Kim investing in something like this -- and, for-profit.  Imagine if right next to that University of Phoenix advertisement, every time you went online, was an ad: hey, come back to school.  Every student who turns from a high school dropout into a high school graduate saves society over $200,000.   Any investor who is a member of society, will say, oh my God, $200,000 of gain versus $10,000 of cost&   We ll say, great, go get him.  </P> <P>This can apply across a range of areas, some others easily defined as well.  Simple example: a couple of people talk about the textbook market as an interesting, non-market phenomena.  </P> <P>So the textbook market: what if you said, hey, the first person who creates a textbook that passes California state adoption that is open source will get $10M.   I bet you the Hewlett Foundation will join; all the other foundations trying to create open source textbooks right now are spending far more than $10M.  If you create that incentive, create the market, people will come, probably not a for-profit investor in that case, but you can imagine people rallying around the hope of either that $10M or, more importantly, their picture on the front page of every magazine after winning that $10M prize.  We ve talked a lot about going to the moon this morning.  Well, the X prize is a perfect example of that.  The first commercially manned flight gets $10M.  Why can t we do that for education?  Both small markets, like getting high school graduates, and big ideas, like, online textbooks that are also free.  Free textbooks, good idea, helps everybody involved, Americans spend about $8B a year on textbooks.  </P> <P>I ll just end with a quick aside.  I would strongly recommend anybody, and I didn t touch on this, who wants to know why it s tough for investors to invest in for-profit education to read Larry Berger s piece that you re going to hear about next.  I remember listening to -- Larry probably doesn t remember this -- I was a summer intern at a firm and Larry came and pitched, and we left, and we said, this is a wonderful idea, we d love to fund it, but all the reasons that are in Larry s piece made it extraordinarily difficult for a traditional venture firm to invest in the company.  </P> <P>There are a couple of other ideas.  One is to create an angel portal, an angel network.  Angels have put as much money as venture capitalists into business -- $25B, that s a lot of money, and very little of that goes to education right now.  It d be very simple to set up based on geographies and interests.  Hey, if you want to fund a cool new curriculum idea in your local area, you could very easily imagine a website that ties qualified funders to qualified business plans.  Very simple concept, very easy to do -- we don t need to reform the entire system to get money into the sector.  </P> <P>Another idea would be an In-Q-Tel. CIA realized about ten years ago, hey, we re not getting access to the latest technologies because small Silicon Valley companies can t work with a big bureaucracy.   Does that sound familiar?  Again, read Larry Berger s piece on how difficult it was for him, with a wonderful product, great resume, great funders, great everything, to get in the door.  So, the CIA created a firm that co-invested with other investors to fund companies that could contribute to our nation s defense.  Mapping technology is one of the things that they talk about as being one of the most successful things.  You may have seen Google maps and all those kinds of things -- well, the predecessors to all those companies were -- Actually, one of the main companies that was funded by the government.  </P> <P>A few differences between education and technology investing.  There are very few guys like me.  There are a lot of venture firms investing in technology.  So you may have to invest across the capital structure, and this may be too wonky and capital structuresque for you guys, but, trust me, it s fascinating; we could talk for hours about it.  </P> <P>Long sale cycle: if you re going to try to target the government, this is hard, any way you cut it.  Targeting the CIA, at least you ve got one big entity.  School districts, you ve got 16,000 of them.  So there are some solutions to that -- like a World Bank-like model, so you don t have to get 25 percent plus returns like a traditional venture firm.  </P> <P>I m happy to discuss these at length, and, remember, focus on niches: investors don t like being Don Quixote, and we d prefer to work with you guys to find market opportunities.   </P> <P>Frederick M. Hess:  Thank you, Daniel.  For some of us, this is not the way we re used to thinking and talking about education reform.  So, again, I d encourage you to give the paper a careful read where all this is spelled out in much more length.  Next up is Kim.  </P> <P>Kim Smith:  So, I warned Rick that he was breaking the rule by having the geekiest panel after everyone has eaten lunch, so, if you need to stretch a little bit, please feel free -- you won t distract us.  And if it gets a little geeky, feel free to ask questions, because we sometimes talk amongst ourselves in geek language. </P> <P>So, our take at NewSchools is slightly different from Daniel s in that our focus is exclusively on what we call social entrepreneurs.  So, that means, our lens is on the subset of entrepreneurs whose purpose is to transform the public school system.  So, we are a little unusual in that we invest in both for-profit and non-profit entrepreneurs, provided they are that type of entrepreneur, and what they re trying to do really has the potential for systemic change.  So, our website, I think, does a decent job of showing who we invest in.  </P> <P>This is really just an explanation -- we take a few paragraphs at the beginning of the chapter to sort of explain this, because it s a little bit unusual in terms of our slice.  Another term I thought it might make sense to just briefly lay out is -- because people sometimes get confused when you talk about the government and their role with education entrepreneurs.  The public sector provides operating capital, number two, so if you re a charter school you get fees per student, but really not very much of what we think of as investment capital.  We wanted to be clear that we re talking about investment capital startup for capital expenditures or for growth capital.  So that s really what we re focusing on in our paper -- the missing investment capital, even though, as a $500B plus industry, there s clearly a lot of operating capital out there.  So I just wanted to make that distinction.  </P> <P>I think one other thing in our paper that may be unusual to this community: there is a separate community focused on this issue of blended value return investments.  So I know a lot of this is super-geeky, but the main point of this is to say, there is a spectrum of capital available in the social purpose world.  The investors on this spectrum from left to right focused entirely on social return, which is what we re used to with foundations.  On the right, entirely on financial return on investment, which we re used to with traditional investors, banks, etc.  And then in the middle is this sort of murky, evolving space we call the blended value, or blended return space.  Jed Emerson is known for quite a bit of writing in that area, if you guys are interested in more on that sector.  So, we, at NewSchools, sort of cut across this entire spectrum, and we thought it might be worthwhile to just sort of lay out in the paper a little bit about the different players in here.  </P> <P>In thinking about this, we took a little time to step back and look at the more conventional capital markets to try to say: what is it that we see in the conventional capital markets that seem to be the components that really help it be more efficient and more effective capital markets?  I should say, I m not claiming they re perfect, and I don t want to hold them up as sort of an example we have to copy exactly, but, I do think that it s a very long-term, very healthy, very sustainable capital market structure in the U.S., and it s worth taking a look at it to ask the question, what, from it, can we bring into this sector that would help us have a more robust, more effective capital market?  </P> <P>So, we really felt we saw five main points.  There is a general agreement on the metrics and definitions of success.  I m going to go through each of these in turn, so I won t spend much time here: transparency, uniformity, availability of performance data, and that s comparable data.  So when you re looking at two different companies, you get very similar information on both of them.  And that s across industries, as well as geographies and so forth.  </P> <P>There s a robust ecosystem of intermediary organizations.  We ll talk a little bit more about what those mean, but they are information providers and service providers that are pretty absent in our field.  </P> <P>There is an infrastructure, that, honestly, most people probably don t even think about in terms of both human capital that is fed into those capital markets, but also policies, laws, regulations, tools, particularly the public stock markets.  That s where they are a little more transparent and you can see them, but they really run through the entire capital market.  </P> <P>And then lastly, in part, because of these other things, there is an incredibly large and diverse supply of capital because it s a relatively trustworthy system when it comes to information.  Investors generally know what they re getting, recent accounting scandals aside.  </P> <P>So, when you look at the social purpose capital markets, I think the main lesson to take is, it s a very immature market.  I think it s important to remember, when you notice that, that everything that exists in our conventional capital markets was created on purpose.  It is not a system that evolved organically and just happens to be like this.  We had some very purposeful design to the policy, to the infrastructure, and I think we re going to have to take that same approach to the social purpose capital markets.  We re just a very young market.  </P> <P>So, definitions of success: all this is kind of outlined in the paper, but, as all of you know in this room, there are deep disagreements about the definition of success, whether it s which students we re talking about -- is it short-term metrics, is it long-term, is it graduation, is it graduation from college, and how do we measure those things?  These disagreements are, in some cases, philosophical, but the net effect is that the policy world is a very volatile world, and everyone who looks at it from the outside, and Daniel talked about this, as an investor, says, it s not a very trustworthy market.  It changes too quickly.  We don t understand it.  We don t know how to judge whether a company is going to be successful or not.  What if they re a terrific company, a terrific team, but the rules of the road get changed on them halfway through, which, as we all know, happens frequently.  So, that volatility is really harmful.  It s clearly harmful to for-profit investors, it s one of the biggest problems, but, frankly, it s very harmful in the non-profit sector as well, because the same dynamics are at play, even though capital enters, it s much less effective because it s really just spread all over the place.  </P> <P>We really struggled with a recommendation on this one.  There are simply deep divisions in people s beliefs about this, and we re not, I think, going to change that.  So, at a minimum, what we can do, is, ask investors and entrepreneurs alike to be very clear about what their assumptions are, what their beliefs are, and what they think success is and how they believe they should be held accountable, and then measure that.  </P> <P>That sort of leads into the second point around performance data.  There are really two main types of performance data that are really hard to get: achievement data -- everyone in the room is very familiar with that and the second kind is organizational data.  As an investor, non-profit or for-profit, it is virtually impossible to get good data on sort of a simple question, like, if you want to run a terrific after school program, how many staff per children do you need, and how much should they get paid?  There s just very little benchmarking across any type of organization, and that is a real shame.  So we could do a much better job of that.  </P> <P>The last one is the geekiest of all, and that is financial data, and I guess the main point about that is, for non-profits there is a deep confusion on this difference between operating funds and real investment capital.  So, growth capital, in particular -- when you look in any organization that s trying to grow, not only is there a shortage of growth capital, but there isn t even an effective way to talk about or to show in your reports the difference in this capital.  So one specific suggestion we d love to see is what s called an equity equivalent developed in the non-profit sector, so that in addition to operating revenues, which, organizations raise in grants -- there s an opportunity to invest real growth capital that s not a fee for service model, to actually grow the organization.  </P> <P>Independent intermediary organizations -- there are two main types.  First, the sort of information organizations, in the private sector, bond rating firms, consulting firms, equity analysts.  There s a huge amount of information available to traditional for-profit investors; with social sector investors, there is an incredible dearth of information.  And the second type is investment intermediaries.  People are very comfortable in the traditional for-profit world, investing in venture capital intermediaries.  Almost no large-scale funds try to do that work themselves.  It s really unheard of, with the exception of corporate, strategic venture capital, say, Intel investing in businesses that will drive chip usage -- a very, very small part of the sector.  99 percent of venture capital is large funds investing in intermediary venture capital firms.  We don t see very much of that in the social sector, and I think we need to see more, and they need to specialize in early stage and growth stage because they require different types of skills, and, frankly, different kinds of leaders.  </P> <P>So I think there s an opportunity to have a much more robust ecosystem.  The last piece of the ecosystem that I think is missing is the capacity-building part, and that s come up across other panels today.  So, not just the human capital for teachers and leaders, but also the human capital who can go in and help organizations solve problems, deal with growth challenges that really people don t know how to handle because all of this is sort of new, it s a new field and we just need a much more robust human capital infrastructure and intellectual capital infrastructure.  </P> <P>Infrastructure as a whole, non-profit market very few regulations, the upside is lots of innovation, the downside is really no discipline.  Anyone who has raised funds in the non-profit sector will tell you, the kindest way to describe it is idiosyncratic.  It s a really capricious, crazy, capital market.  You just have to find people who happen to agree with you, and happen to have funds set aside to invest in what you re trying to do.  Often, leaders spend 60 to 80 percent of their time raising capital.  It s crazy.  On the for-profit side, Daniel has really covered that.  </P> <P>Lastly, we really believe we need more hybrid folks, that is, people who cross the sectors so that we can use the engines of both sectors to make this change happen, because it s too big a change we need to rely on one sector.  So we really need all three -- actually, I should have included the public sector.  </P> <P>So then, lastly, there are different problems in the different sectors.  The early stage, for-profit capital, is missing for K-12.  Really the growth scale is missing for the non-profit world.  And really the public sector is absent in supporting investment capital for the social entrepreneurs in education.  It s a shame.  They have a great opportunity, I think, in the public sector, to create investment incentives like new markets tax credits, like the credit enhancement fund they re doing for charter schools, and we need to expand the little ones there are and think more creatively about other ways to do that.  </P> <P>A couple quick examples.  There s a new movement for something called B Corporations, so there are for-benefit corporations instead of C corporations. </P> <P>Foundations: I d love to see really expand beyond the 5 percent of their endowment that s required per year, expand that to a much greater investment, use what s called program-related investments as a tool -- it could be loans, it could be equity investments, ideally through intermediaries, but, whatever way we can access that capital.  It just seems crazy to me that 95 percent of the endowment capital is not being used for social purpose.  </P> <P>Frederick M. Hess:  Kim, just to clarify, you re not suggesting that they actually pay out at a higher rate -- just that they make that capital available and then it would come back to the foundation?  </P> <P>Kim Smith:  I think they can do either way, depending on what the foundation s priorities are.  They can pay out more, or, if they want to recycle it as recyclable grants or loans or equity investments that come back, that s fine too.  Either way.  And I should say, I note in the paper that the Gates Foundation and Atlantic Philanthropies have both made a decision to not have their foundation run in such a way where its purpose is to sustain itself in perpetuity, that they will use their entire corpus and sort of pay it down, toward a purpose, toward a social purpose.  I think that s a brilliant and bold move.  Not a lot of groups are going to do that.  So this is a sort of less ambitious way to get more capital into the system.  </P> <P>And then for the public sector: I ve got some specific geeky ideas in the paper, and I m happy to talk more about that if it s helpful.  </P> <P>Nelson Smith:  And, first of all, if the Gates or any other foundation want to spend down their entire endowment, we want to help.  I can t go back to the office without making the shameless plug for the National Charter Schools conference, June, New Orleans: learn a lot and do good for the economy down there, cards are on the table.  </P> <P>So, I guess my job here is to kind of be the non-MBA on the panel.  I guess I m kind of a geek, but I m not an official geek, because I don t have an MBA.  This is my day because I began the morning at a meeting of the Board of a charter school that I serve on, and we had a long discussion of the financing deal for our new building, which is a large, large endeavor.  So I m looking at all of this as a consumer today, and kind of baffled by some of the complexity that these folks in the financial markets actually are causing, while in the process of doing an incredible good deed for the kids that our school serves.  </P> <P>One of the things that struck me in reading the papers -- and, by the way, I really do commend both of them to you, they re really interesting, and I especially commend the section about angel portals in Daniel s, because, as a graduate of Catholic schools, I got all excited, and then I discovered it was something else entirely.  But, one of the things that leapt out at me -- I want to just talk about maybe three basic points -- was that a lot of the infrastructure needs that we re talking about come down to information needs and clarity and data.  </P> <P>It really is interesting that I think three of the first five points that Kim made in terms of how conventional markets function, capital markets function, come back to an availability of high-quality data about quality and performance in their investments.  And we are, I think, just at the cusp of trying to understand that in the education entrepreneur realm, and, admittedly, much of what I will say will be about the charter school market -- it may not be broadly applicable to every other phase.  That s one of the reasons why we actually are working with NACSA, the Colorado league, and CREDO at Stanford, in a federally-funded project to create a set of indicators and performance measures and metrics applicable, we hope, across all kinds of charter schools, even within the diversity of that market, so that this conversation about what quality means can be held in a coherent way, and investors, as well as researchers, as well as state accountability officials will have a common language to talk about.  The first phase of this we re looking at academics, and then the next phase will be operational measures.  And benchmarking, as Kim mentioned, is a very, very difficult portion of this, but really important.  </P> <P>The second thing that I find really interesting is, maybe we re going to see some kind of harmonic convergence between the for-profit and the non-profit providers, or the social benefit providers.  We are really in a very young industry.  I mean, these markets are very immature, partly because the whole entrepreneurial wedge of the education industry is still very, very young, and we re seeing a transition between a very traditional, highly-regulated, almost all publicly funded education market, to one which is decentralized, comparatively deregulated, and funded by a whole variety of other kinds of partners.  So, getting the rules right, and getting the language right, it s not surprising.  </P> <P>One of the things that I think is striking about this transition, though, is the question of risk.  I mean, what venture capitalists do is to sort of find a great idea and take a rider on it.  As we heard this morning, they may stay with that investment for longer than some of our current funders do, which is a commendable thing.  But, you re still out there looking for the first instance of innovation, and not necessarily looking for the thing that s already been proven a few more times.  The more that you tend toward that kind of financing for the innovation that happens in the educational market, the more you have to contend with the fact that there s some risk involved on several levels.  </P> <P>I thought it was interesting this morning when Michelle Rhee was talking about having to acclimate parents to the notion that closing a school might not be a bad thing.  If we re talking about moving to a more fluid kind of environment, where the dollar is going to support quality rather than the stable kinds of institutions that traditional philanthropies and traditional investors have supported and that public dollars want to support, then we re going to have to enlist a whole lot of other people, predominantly parents, I think, as well as policy-makers, in understanding that new paradigm.  </P> <P>The third thing is, especially going back to our discussions this morning with the school board, what s the kind of Chevy version of this?  If you look at the organization chart for the financial deal that we re involved in, it s like the Normandy invasion.  And, last year, when I went to the Thurgood Marshall Academy s annual dinner, they called up to the stage all the various partners in their building deal, and they couldn t fit -- there were 35 different organizations involved.  </P> <P>So, on one level, this is the price of breaking through, and this is the price of finding, of creating the kinds of deals that can support these really leading edgy kind of entrepreneurs.  But, at some point, we have to be able to make this work for, what I always call, mere mortals.  We want to have high-quality schools, but the fact is that our industry, the charter school movement, is still about 80 percent independent startups and not affiliated with CMOs or EMOs or others that have these networks and know how to do these deals.  So, at some point, if we re going to solve the facility and growth problems, we have to simplify.  </P> <P>Finally, there s another issue that I just want to put on the table that I haven t actually heard directly addressed, although it s implicit in a lot of the efforts that we ve been talking about.  In your paper, Kim, and, Julie, you talk about first looking at the team, the human capital.  That s an important consideration for investors.  And, Daniel, in your paper with Joe, you talk about going to the people page first.  Well, we ve begun to notice that there are people who aren t on those people pages, and they play an important part in the charter school business.  Their kids are the ones who are largely in our schools, but, they have not risen to leadership within the rest of the movement, as authorizers, as heads of associations, or, as heads, typically, of charter management organizations, for-profit or non-profit. </P> <P>And so one of our board members, Laura Benedict, and her firm, Self Help -- and Jane Ellis is here today, just say hello -- actually dug down into this as part of an initiative we have on diversity in the charter movement, and looked at some of the lending patterns of several of the most socially motivated.  The communities that are way over on the left side of Kim s charts: we found that even there, of 192 deals that they looked at, 44 percent of which were to minority-led charter schools, there were some distinct differences, that the charter schools, the minority-led charter schools had average lower sized loans, and it was lower yet for those that were predominantly minority-led, with boards and principals as well.  But those schools were also more likely than the white-led schools to have made AYP.  And, when they looked at who was involved in the deals, the folks on the team, the folks on the people page, only 43 percent of the minority-led schools had business experience in their leadership or their board, as compared to 100 percent of the white-led schools that they did deals with.  </P> <P>Now, this is preliminary, and we have to then start asking why is all this?  There are a million reasons that go into this.  And, I just want to put that on the table because part of the discussion about this, from the perspective of the consumer, if you will, has to be access to all this capital.  Whatever the vehicles, and instruments, and however this evolves, we have to make sure that the folks on the people page, some of the folks at least, are those whose kids are in the schools as well.  Thanks.  </P> <P>Frederick M. Hess:  Thanks, Nelson.  Jim?  </P> <P>Jim Shelton:  So, there s a good part and a bad part to going last.  The good part is that you get to hear what everyone else has said, so you can try not to be redundant, but the bad thing is, that, especially when you agree with a lot of people on things, there s not a lot left to say.  So there are at least three things, though, that I do want to make sure that I repeat, because they were said in ways that, to use Kim s word, were a little geeky.  One of the big problems, as an investor now, that I find in the education space, trying to figure out what to invest in, is that we actually don t have good definitions to know what s really working.  We don t have good definitions of what we mean by success, and we don t have good metrics for tracking the things that we do think are success.  If you think about it in the general context of schools, in which we ve been talking a lot about, most of our metric systems don t track actually growth.  They track absolute performance at a set point in time.  Therefore, you don t know whether the thing you re looking at added value or whether the context changed or whether any number of things changed.  </P> <P>So, if you think about that, at scale, and you think about trying to attract investors who actually have very little experience in the education space, where they can t intuit what s going on, trying to get people who are not extremely savvy to invest in the space is going to be very difficult.  Because, let s assume that they assume that the market was rational, and that if things worked they would get bought.  Well, if I can t tell that something works, or, there s a lot of dissonance in the field about whether it works, or, there s a lot of dissonance in the field about even how you measure whether something works, then how do I, as an investor, make an informed decision about investing?  And that can t be underestimated: not knowing what works, and not knowing how to measure, stops a lot of things.  We can blame the capital markets, but there s a lot about the market itself of our education work that actually inhibits the ability to invest.  </P> <P>The second thing is that once you actually have -- let s say we could actually come up with a set of metrics that you could show at work, and we were in agreement in some spaces on what works, in fact, our market is actually not rational on the demand side.  So, people do not buy things just because they work.  As a matter of fact, they will buy things that don t particularly work, and they will ignore things that do seem to work, because of the dynamics of what is acceptable and easy to get done in the context of the political realities of our systems.  </P> <P>Now that is a lot of words to say: people buy stuff for a whole of reasons that don t have to do with what s good for kids.  And, if, in fact, I m an investor, and I can t count on the fact that if I find a solution that works I am going to be able to quickly, quickly identify buyers and get them to buy it, and buy enough of it to get me my money back, then why would I invest?  Why would I invest?  And forget about even the for-profit investors.  If I have a hard time believing that I am going to invest my money, and it s going to be able to catch on enough that the market, the people who can buy it, will buy enough of it to get it to a place where it can sustain itself, then why would I invest, because I know sooner or later, once I stop, it stops.  My impact is limited at the level of which I can fund, if I can t get the market to respond, especially to the extent that I actually believe that I am funding things that it makes sense for people to want to buy.  </P> <P>The third thing is, let s think about the context in which we re operating.  Actually, I ll save that one.  Let me come back to my real third thing, which is, really great business people -- this is my pet peeve, so, excuse me for a second -- really great business people, when they approach education, seem to lose all of their business acumen.  Present company excepted, sure.  </P> <P>But, I am shocked at how many outstanding business people get involved in the education space and start making decisions in ways that they never would in the context of their traditional businesses.  And, so, what happens is, you wind up with these distortions in the market of things that are working or being supported that shouldn t be, and things that can t get support because they aren t quite in line with somebody s philosophical, ideological, take your pick idea of what education is supposed to be like.  And that is problematic because when that happens, then the market, again, is not rational.  People who are not wedded to the space for some other reason other than making money, or, seeing sustained impact, don t jump in because they say, I can t count on things happening in a way that makes sense.  </P> <P>Confusion theory says, money doesn t come when the market is confused.  It s just that simple.  And, even our best, most thoughtful people -- we have got to start making decisions in the way that they would when they re being rigorous in their other areas, when it comes to the space in education.  Otherwise, we re always going to be the same set, a very small group of people, who are committed enough to education to invest our dollars just because we re committed enough to education.  And we hope that something is going to happen as a result.  </P> <P>Now, let me come back, then, to what I was going to say about the third point, which is, education, almost like no other, is a place where our cultural norms as a country get in the way of what we are willing to do for our kids.  In most other circumstances, people have no problem sending your kids to a for-profit hospital versus a non-profit hospital, spending money on drugs from for-profit companies, etc., etc., etc., etc.  In this country, we have decided, for whatever reasons, that education is sacrosanct.  It plays in in any number of different ways, where the capital markets say, look, we ve got big, big issues in this country where people don t believe that money, should be a driving force in education, when, in fact, money is always a driving force in everything in our country -- that s how it works.  But, the reality is that people then are afraid to invest in things that may upset the apple cart.  </P> <P>There are things that we know today make sense, that we believe, at least we hope -- remember what I said about number one, that makes sense, that people don t want to put their money into because of the controversy.  So, that brings me back, then, to the papers, the original papers.  I think Dan is right in his paper in talking about using these alternative kinds of mechanisms of financing, these alternative pathways to financing.  I think there are dollars out there that are not being tapped.  What I do believe is that when we start to talk about how you go from having breakthroughs to having long-term market systems that work for sustainable change, that some of those things run their course pretty quickly, and we ve got to figure out how to leverage whatever momentum can come out of those kind of innovations to push the market in the direction where the whole market can actually make a pivot.  That is both going to be about having capital market innovations and changing political context around what s acceptable.  I don t think that we can actually ignore that part of the equation as we talk about capital markets in the education space.  </P> <P>The second thing is that I think when you take -- I agree with everything in Kim s paper, surprisingly enough -- but I think one of the key implications is that if, in fact, we want to be in a world where we actually want to have organizations that are measured on this mythical dual bottom line, we have got to put the energy into figuring out, how do you build the industry metrics to figure out whether that is actually happening?  And, I ll put it to you this way, people have gotten to a place where the market works just fine for investment in your common utilities.  Forget about all the wild energy hedge fund stuff.  I m just talking about basic utilities that serve a purpose in our society and in the investment market because they provide a very clear, consistent type of return that people can count on.  That s a very important part of our capital markets, and it could just as easily apply to education on any number of fronts -- take your facilities challenge, take your schools challenge, it doesn t really matter.  </P> <P>The last thing I ll say on this, is, we spent a lot of time talking about charters, but the reality is that we re spending a lot of my time, personally, and out of the foundation, looking at other tool solution areas that are really important: data systems, human capital systems, aligned instructional systems, if you know that buzzword.  The same problems that we re talking about as if they apply to charters only -- they apply across the sector.  The market is irrational.  It s very fragmented.  Institutional players take out any sign of innovation before it gets a chance to get enough scale for people to get visibility on it.  So these are things that, even when we think about the leap frog of technology to the next generation of what education should look like, we ve got to figure out how to fix these things if we ever expect that kind of innovation to have impact on the field.  Thanks.  </P> <P>Frederick M. Hess:  Thanks, Jim.  I guess I have two questions I want clarify a bit for the audience before we open up the conversation.  First, several of you spoke about metrics, and Nelson, you made reference to Kim s; Kim, you obviously spoke about them.  Just to be clear, it sounds like you re talking about more than standard achievement data, and Jim, I guess it sounds like you re talking about even more than value-added achievement data.  So, could you give the audience examples -- that if we re not just talking about student achievement scores, even measured very thoughtfully, what are the other kinds of metrics that we need to be paying attention to?  </P> <P>Kim Smith:  Well, I think there are short-term student achievement metrics, which are poorly defined right now, but that s where most of the focus is.  I think we re lacking in better metrics, both value-added and longitudinal.  If you re an investor, there are quality investors in the private sector, like Warren Buffet, who choose to look at the information and make decisions for long-term bets.  Right?  It s rational.  Other people don t do that.  They make short-term bets.  In education, if you want to make long-term bets, there s just no way to get useful data on whether that proves correct or not.  I mean, there are lots of hypotheses; in some sense that s the debate between the progressives and the more structured, more traditional pedagogies.  Right?  One focuses on short-term metrics, the other says, no, that s wrong, if you focus longer-term it all works out in the end, but we don t really know if that s true or not.  Right?   So we just need a much more robust system on student achievement.  I really do think it has to start there.  </P> <P>But, for investors, the second piece, which everyone has mentioned, is the more operational, organizational stuff -- what does it really cost to do this work?  I mean, we re seeing this evolve a little bit, moving from the equity to adequacy argument on school finance, but, really, whether it s schools or tools or whatever, you need to know, how much does it cost to do this thing well?  Then people can make an informed decision about whether to invest in that or not.  We just don t know the answer to that now.  And there s not really the willingness to experiment with it.  Like, in our portfolio at NewSchools, when we invest in charter management organizations there are some very different underlying hypotheses, some of which are, it can be done well for what a very low paying state like California does, which Aspire does, and they ve done a great job of it; others are, no, frankly, it can t be done well for what the state offers and you must raise additional money per child to catch them up from how far behind they are.   Both reasonable assumptions, both need to be tested, and then they need to be tracked to figure out, well, what really is the difference?  Does having more money in that context make a difference, and, how much difference?  So, I think it s the mixture of student achievement data and operational organizational data that s sort of all missing, and, so, you re kind of double blind, basically.  </P> <P>Frederick M. Hess:  Daniel?  </P> <P>Daniel Pianko:  Probably the best recent example of this is actually the SES, Supplemental Educational Services, that just came down the pike.  You think about it -- the Federal Government came in and said, school districts, you can t get this billion dollars.   The Federal Government basically put a billion dollars out on the table and said, we re going to do supplemental educational services.  The problem from now, three-four years later, is, beyond all the organizational issues and everything else, fundamentally you can t check which program did better, for-profit, non-profit, I don t care, what percent of that gain was related to what happened in the classroom versus what happened in the program.  So, on both fundamental levels of evaluating whether this money was successfully spent, we totally don t have this information.</P> <P>Jim Shelton:  You know, it s interesting.  Just to stick with the Feds for a second.  The Feds have actually, over time, done some pretty significant work, and Dan actually points to a couple of examples.  I guess the easiest one is low-income housing, where they have been able, through just a couple of tweaks here and there, to provide some assurances that allow capital markets to flow much more easily to what was a pretty risky space as defined at the time.  And they did it because they thought it was important.  Dollars flowed.  And we realized a tremendous social benefit from it.  </P> <P>I think the same kinds of things can actually happen in the education space.  We need to go ahead and build on the kind of ideas that Kim put in her paper, and actually figure out how to actually weave those with some of the ideas that Dan had in his paper: I mean, there s a boatload of money that actually gets spent every year by the Federal Government on education research, or learning research, or biology and science of learning, or the brain, that, in fact, is not connected to any broader framework about the problems we re trying to solve directly in the space of education.  There s no linkage between primary research, solutions identification, product development and commercialization in the curve that Dan talked about.  </P> <P>So there s a bunch of funding that s already there that we could actually figure out how to reframe.  There d be a good opportunity there.  But I think it s both a combination of some advocacy around turning the knob a little bit, and also some thinking around how you put together a framework that actually brings some coherence to the way we spend our dollars today that should be leading to some solutions.  </P> <P>Male:  That s the missing pillar of No Child Left Behind.  In theory, this was supposed to provide for massive changes in schools and systems, and, in extreme cases, shut down of schools and then something else.  But the something else was never really addressed.  There is no supply side policy in there.  The funding, as it is, for starts, for entrepreneurs to do something with, it has never -- it s been stagnant the last few years, and it was never matched up with the concept of actually reshaping education.  So, it s a great question, and it ought to be integrated as we think about the reauthorization.  </P> <P>Morgan Brown:  Morgan Brown with the Feds.  Kim, thank you for mentioning the Charter School Credit Enhancement Program.  You mentioned you had some other geeky ideas about how the public sector can get more involved in this area, and I d like to hear some of them.  </P> <P>Frederick M. Hess:  Kim, actually say a couple words about the Charter Enhancement Program.  </P> <P>Kim Smith:  I think the Charter School Credit Enhancement Program is the closest thing we ve done in education to the low-income housing work Jim talked about, where you re just clever, and say, really the biggest engine we want to tap is the private sector.  So the role for philanthropy and government alike is to get in early and reduce the early risks so that then it can feed into the larger private capital markets.  </P> <P>So the Federal Government has a Credit Enhancement Program where they made a few grants so that that grant, public grant money, can be applied to a given charter school facility project to reduce the total, this is where it gets geeky, total cost of capital for that school so it s affordable, basically letting a charter school have an affordable facility.  And, in doing that, the sort of financial deal then becomes more stable, and it s appealing to the private sector, so banks will participate, and then the secondary mortgage market that buys the bank s loan, participates.  So you can just see it s this huge wedge of public money -- lets make this charter school deal make sense so that the banks lend, and then the secondary markets feel like it s an okay investment.  It s that same logic that I think we need to apply to other spaces.</P> <P>So, specifically, I think a terrific opportunity exists for a public private partnership, that you two should talk about after the panel, to create, I think, a competitive RFP process for tool development.  So we could have intermediaries, like NewSchools, and I would love to see five others in the field with us who would compete for a federal grant.  We d have to raise matching funds from folks like Gates and others, to go invest in early stage tool providers.  Right?  Because we re asking our teachers and leaders to work with more data, we want more metrics, all these things we ve talked about, but we re not giving them the tools they need to do that, and, frankly, no one is investing in the next generation of tools to make that possible.  </P> <P>So, what a great use of public capital to get that niche market rolling, where it s stable enough, and the tools are good enough, that then the private sector feels comfortable stepping in and doing later stage growth capital.  Those need to be privately-held companies, they need to be equity investments -- that s not something the government can do on its own.  It needs to be done through an intermediary, and then we can leverage the capital of the private capital markets.  </P> <P>I personally, and this is where I differ from a lot of other folks, believe those intermediaries need to be social purpose intermediaries because that s the only way they will prioritize the social impact of those companies.  I don t care that they re companies, but what I care about is that their tools make a difference for low-income and underserved kids.  A traditional private-sector investor doesn t have that flexibility.  So, I think that s a huge opportunity to say, here s what we want the system to do, what underlying tools do they need, so let s go help the private sector build them. </P> <P>So that s one idea, and I m happy to talk about a whole laundry list of other ones later.  </P> <P>Frederick M. Hess:  Now, Kim, when you talk about the social purpose dimension here, is it an either/or?  The audience might be a little confused.  You re talking about intermediaries that have the social purpose emphasis.  Is it possible to have a space where those coexist?  </P> <P>Kim Smith:  Oh, sure.  When NewSchools invests in an equity investment in a company, we always co-invest with other traditional venture capital firms.  It s just that at the board table we ll ask different questions, and we sort of create an opportunity for the entrepreneur whose goal it is to serve low-income students well to do that without feeling like it s at the risk of the success of their company.  We honestly believe our approach is the better one for a successful company in the long run, and some quality investors agree.  Other investors have very intense, short-term return pressures on them, so they would prefer to prioritize, say, growth, rather than outcomes.  We believe you have to do both.  You can be a social purpose investor as a for-profit or a non-profit, it really comes down to, when the two conflict, the social outcome or the return on investment, which wins?  And they can co-exist 90 percent of the time, but in the 10 percent where a decision conflicts, which wins?  </P> <P>One example: a charter organization can grow to serve low-income kids, but has to raise tons of philanthropy to get a facility.  Well, a middle-income community comes to them and says, we ll give you a building if you grow your charter schools here.  Which opportunity do they take?  The answer depends on which wins, the return on investment, or serving low-income kids.  Right?  So they make their decision based on which is the top priority.  Most of the time they can be balanced, but there are always a few cases where you have to decide.  Our point is, just, you have to be very clear, as both an investor and an entrepreneur, when they conflict, which is your top priority.  </P> <P> Male:  But, Kim, this was Jim s point too -- education is sacrosanct, and whereas in every other industry from housing to student loans to everything else, the answer has been, put out a program that funds results and be agnostic in terms of whether you re --</P> <P> Kim Smith:  The moment we use full metrics, when we can actually say here are metrics, meet them, then I m willing to be agnostic on structure.  For the time being, when it relies on personal judgment about how to manage trade-offs, then I need transparency on the front-end because we don t have useful metrics to hold people accountable to.  Does that make sense?  </P> <P> Male:  I would disagree, but I think it s a very valid question for policymakers in the room: do we really want to start a market here, or, are we similar to the conversation of the first panel?  Is there some sort of intermediate step we want or need?  I would, frankly, prefer to fund like an In-Q-Tel by that logic, and really, officially say, hey, we re going to provide low-cost capital to the Larry Berger s of the world if they --   Let me give you a simple example that would fit both.  If a tool gets into the What Works Clearinghouse, we will provide a credit enhancement, an equity investment, co-investment, whatever you want to call it, to any for-profit, non-profit, I don t care, form agnostic program.  That s a clear, measurable result, getting into the What Works Clearinghouse, getting someone to graduate from high school, and the Feds can come in and provide that credit enhancement to achieving that metric, and I hope the metrics exist right now because if not, then Kim is wrong.  </P> <P> Kim Smith:  I think that s fine.  I think there s a distinction between later stage investment -- which you re talking about, where they ve proven their case, in which case I m fine with what you said -- and early stage investment, where you are fundamentally taking a leap of faith on a hypothesis, and it just requires, I think, more judgment, where I m less clear we have the right metrics.  So, I don t think it has to be either/or; I think we can do both.  </P> <P> Alan Carter:  I m Alan Carter with the Education Industry Association.  We represent hundreds of for-profit education service providers.  We also have a non-profit arm, the Education Industry Foundation.  And one of the things we ve been struggling with is the relationship between the for-profit world and the non-profit world.  You say you need intermediaries.  We believe, probably, you need translators because they really do speak totally different languages, and if we re ever going to get the metrics like what you re talking about, how are we going to get those sectors to actually work together, collaboratively, to try to get the metrics, because usually you have one working against the other.  You have the private sector, who is there for wealth generation, in their minds, and you have the social sector that will sleep on the floor, but you don t have anybody in between trying to get these people together.  Who is going to pull them together in a room and let them talk and figure out the language barrier?  </P> <P> Kim Smith:  It s a great question.  My quick answer, and I m happy for others to take a pass, is, NewSchools has, from the beginning, ten years ago, had as half our agenda growing a network of what we call hybrid leaders.  It s a bipartisan network.  The reason we talk about hybrids is that very issue, cross-sector, and, frankly, I would add the public sector.  The public sector, the non-profit sector and the business sector, they do speak different languages; even when they re saying the same thing, they don t realize it, and they are sometimes saying different things.  And, so, we do a series of things, we have a summit each year, we publish.  There are a few programs.  Three of us happen to go to Stanford for our MBA. Stanford has a dual degree program -- it s one of the few in the country where the business school and the education school collaborate.  There s a class at Harvard Business School now on education entrepreneurship.  So I think your point is well-taken, it, again, goes back to the immaturity of field.  It s early, that s, for us, why I had that point up there under infrastructure, which, generally people think of as rules, but the last point was around what we call hybrid leaders and hybrid thinkers, which I think that is what we have to grow more of to reach your point.  </P> <P>Frederick M. Hess:  Nelson, do you want to comment?  </P> <P>Nelson Smith:  It s a great question, and I just think there s so much caricaturing that goes on.  I mean, I was really excited about the mention of Joel Gilberts idea for a B corporation, a social benefit corporation idea where you have a for-profit but it gets classified for, I guess, tax purposes as a social benefit corporation.  Great!  Why not?  I mean, we have greedy capitalists who happen to do a great job with kids, and we have sainted, non-profit operators who are complete incompetents, and neither sides guarantee an outcome.  The whole discussion ought to be about what works, what works for kids.  I think some people at either of those extremes have done tremendous disservices to their end of the movement.  So it makes it hard to get capital for a worthwhile non-profit because we don t like to work with you people because you re all about kids but you don t know how to operate an organization.  So, by the same token, the same caricature holds on the other side, the opposite.  </P> <P>So, I think it s really important that we actually get to the point of understanding what a good organization, a good, well-run organization does, and what the outcomes are for kids that we value most, including kids who are hard to measure by conventional ways, and that we get the policy community behind those definitions.  One of the problems we ve got is that you ve got schools that get renewed by authorizers who never collected any data, and do it in a very political way, and you have other schools for political reasons getting shut down when there s no evidence that they should be.  There s a whole other layer that we really haven t talked much about, which is all the ways in which good and bad policy and policy actors have a huge influence on this discussion.  </P> <P>Daniel Pianko:  If I could just say one thing, which is, as a crass, greedy, materialist pig at this table, the way to get an organization to do what you want is to provide metrics, I think the metrics are out there, and we re just not looking at them.  Okay?  A simple one that I started off with was get kids to graduate from high school.  Nobody is going to disagree with that as an outcome I don t think.  Anybody in this room want to disagree with the fact that it s better if a high school kid graduates from high school and has skills?  </P> <P>Nelson Smith:  It depends on what graduation from high school means.   </P> <P>Daniel Pianko:  But each state has a definition, and we can argue whether that definition is correct, a GED.  </P> <P>Kim Smith:  If you want to do that, you re going to have to use some other more commonly market accepted test, like an SAT or achievement test.  Score this, if you graduate and score this there has to be some kind of competency involved.  </P> <P>Daniel Pianko:  Fine.  Good.  Done.  Good.  I don t care, if you want to -- It s basic contracting 101, if you want to achieve a result with a for-profit entity, put the metrics you want to achieve in the contract, and balance them out.  In the non-profit, in the housing world, they say 20 percent of your housing has to hit certain benchmarks.  Go hog wild on everything else as long as 20 percent of your housing is there.  You know, for 50 percent of that, set the metrics, make it complicated, make it simple, give us the metrics, and then we ll go after it.  </P> <P>Frederick M. Hess:  Jim, do you want to get a last word in there?  </P> <P>Jim Shelton:  Yes, I actually do, because, it s interesting, it s funny, actually, so, you heard we all work together in a variety of forms.  </P> <P>Male Panelist:  I think everybody is imagining what those meetings must have been like.  </P> <P>Kim Smith:  They were lively.  </P> <P>Jim Shelton:  So, this was eight years ago. Dan actually came on to help us raise capital as Learn Now.  That was his primary function.  I ve actually talked about something he said at that time, which has stuck with me, which was -- he came from Goldman, so he knew quite a bit about raising capital in that context, and after having looked at our business model, looked at our business plan, looked at our original business plan versus our actual performance, and his point was those are actually really positive indicators, but he was befuddled by our inability to actually raise capital.  When we first started trying to raise capital, things like Napkin.com were actually getting money.  Right?  And, we had a board that was comprised of Kim and some other investors, some of whom were, what I ll say are good guy investors -- they re solid investors, but they brought an ideology that actually allowed them to have a really balanced perspective -- and an investor who didn t, and actually would fit in the greedy pig category.  And, it is because of the idiosyncratic nature by which decisions would get made among, both people external and internal to our investment structure, that we actually got to a place where we couldn t actually raise the capital and had to sell.  </P> <P>Now, at that time, it was clear that the metrics that were common were not the ones that were being used to determine whether or not this was a good investment.  And, so, we can t pretend like if we use the right metrics everything is going to work out okay.  We have cultural barriers, we have racial barriers that Nelson eluded to earlier, there are lots and lots of things, because of the ambiguity in our space, that allow a lot, of idiosyncrasies to get into the way money moves in this space, and we have to get much more rigorous.  And it s not going to be a simple, pick a metric and move to it.   It s going to be a let s really be thoughtful about how we can actually try and level the playing field here by getting clear about what we re trying to achieve and figuring out how we re going to do it.   </P> <P>One last second, because I was trying to figure out how I was going to do this.  In the back of the room there s a guy named Donald Hints.  Donald runs the charter network called Friendship Public Charter Schools that he recently started with the partnership with Edison.  When I met Donald, he had the largest charter network in the country, and had never, other than the investment he had gotten through Edison, gotten any money from outside the organization.  Now, this was an organization that, when it started, had extensive, 75-year social service history in Washington, D.C., an entrepreneur who had run large portions of large organizations, and the first large-scale grant he got from a progressive foundation -- us.  Let s not talk about the for-profit people.  We ve got a long way to go.  Thanks.  </P> <P>Frederick M. Hess:  I think that ends on a good note.  I would like to thank the panelists for an outstanding job.  </P> <P>[END OF PANEL III] </P> <P>PANEL IV:  Addressing Barriers and Changing Policy</P> <P>Frederick M. Hess:  We re going to go ahead and get started with our next panel up.  First, I have to say, for a self-professed geek talking about funding, I actually thought the last panel did a remarkably good job of stimulating interest, even before Jim pulled out his Mackenzie bag of tricks there with the stretch.  The next panel up gets to some of these issues, I think, in a way that is, obviously, a crucial part of this, but, also, in a particularly interesting piece of the puzzle, which is, How do we address the barriers that get in the way?  So, say somebody buys the concept that we need to think anew about how we find problem-solvers, somebody is sympathetic to the notion that we ve got to be more creative about finding these individuals and cultivating them, and that we have to think about how we fund them.  Well, there are still barriers, formal and informal, that get in the way.  The familiar ones we talk about a lot, things like caps on charter schooling, or charter school funding.  </P> <P>But what we also want to address here, in this panel in particular, are some of the less visible and more complex or more nuanced elements that can stifle entrepreneurship and impede our ability to come up with really effective and dynamic ways to solve problems that are confronting schools across the nation.  The first two papers are going to address this in different ways.  </P> <P>Speaking first is Larry Berger.  Larry is CEO and co-founder of Wireless Generation, a national firm that develops classroom technology.  Larry previously served as President of Interdimensions, a web solutions company.  </P> <P>Speaking second will be Ed Kirby.  Ed is going to talk about this in a slightly different way.  He s going to reflect back to the conversation on the first panel today about the political and policy challenges and how does one create space for entrepreneurial solutions to happen.  Ed is Manager of the Walton Family Foundations work in the school choice movement.  He previously served on and then directed the public sector team that launched and managed the Massachusetts charter school initiative in its initial years.  A little bit of context, Ed started his career as a high school English teacher.  </P> <P>Speaking third is Laura Smith, Executive Director of Human Resources for the New York City Department of Education.  Prior to this current title, she was charge for Joe Kline of creating an internal services market for empowerment schools in which her job title was essentially a market maker for bundled support packages for the Department s 1,400 plus schools in New York City.  </P> <P>Also, our second discussant is Don Shalvey.  Don has obviously been referenced a couple times here today already.  Don is CEO and co-founder of Aspire Public Schools, formerly served as Superintendent of San Carlos School District where he sponsored the first charter school in California in 1992, and before that Don had a long career as an educator in the traditional public system.  </P> <P>With that, Larry, why don t you please get us started?</P> <P>Larry Berger:  Is this on?  It s the technology guy, it s all these wires.  Speaking of which, since the company I run is called Wireless Generation if people want to turn on their cell phones and use their Blackberry s during this session, that s perfectly acceptable.  </P> <P>I do want to acknowledge Dave Stevenson, who is the co-author of this paper, and is responsible for any of the coherent aspects of it.  Just to explain a little bit of the context, Wireless Generation is a software company.  We really are trying to build some of those tools that will deliver clear metrics about quality and education, and are trying to build a new generation of tools and services that we really think might make a big difference.  But there are an unusual set of barriers that we face.  I think they re different than the ones that the folks who build new networks of schools are facing, so I m going to talk through those a little bit from the perspective of an on-the-ground entrepreneur whose company is trying to become successful in this, but as you heard from various earlier people, has a good track record of not getting funded by the smart people in this field.  </P> <P>I do want to say that the process of writing this paper was a highly therapeutic one for us.  I found myself sleeping better at night, and I was associating this kind of therapeutic advantage with this opportunity that Rick Hess had given me, and the following image started to sort of take shape in my life.  I gather that others here have that same sort of therapeutic relationship to Rick, and so, I wanted to thank you for making this possible.  [Laughter].  </P> <P>So, Rick did invite me to talk a little bit about what we do, that s not the purpose of this, just to give some context.  So, there s a thing teachers all across the country do right now on paper.  They sit down with young kids, who are not yet old enough to take standardized tests, and they do what s called observational assessment.  They re recording what they know about what the child can do in learning to read and do early mathematics.  They fill it out on pieces of paper like this where they have to tally up all the accurately read words and the self-corrections and the errors and you see them calculating that down at the bottom.  If you add this all up, teachers are spending 50 to 100 hours a year, so a lot of instructional days on this assessment process and this paperwork process.  </P> <P>What we did is just to take the recording of those and make it something that teachers could do it on a Palm Pilot so that they wouldn t have to handle all that paper.  And then, as a result of being able to do that on the Palm Pilot, we have the data in the digital form and we can report back to teachers some detail about the progress of their kids.  We can highlight, very early in kindergarten, or pre-kindergarten, the beginnings of the signs of something that might need more serious intervention.  We can send letters home to parents in English or Spanish or other languages about what parents could be doing with kids in their homes.  And then we can provide some detailed analytic support to a whole school district or a whole state to help them see in real-time the patterns of progress with different populations and where the challenges might be.  </P> <P>So that s the thing that we are trying to do, and, to some extent, it s sort of an early success story in that there are about two million kids in the database that we have, and about 120,000 classrooms.  So, it s grown a lot.  But while the company is flirting with profitability, it s certainly not there yet.  I m sort of, a little nervous now, because now that we ve become, in a few slide presentations, the poster-child for doing something promising but not successful and not able to access capital, I worry that if we ever actually succeed, this is all going to come tumbling down.  So, I ll try to avoid that.  Anyway, so that s enough about us.  Some of the stories I ll tell about barriers we face that will reflect back on us, but that s some background.  </P> <P>I do want to make this distinction a little bit more overt between the school builders and tool builders.  You ll notice a sort of strange difference in the background between the two of us, and it s not necessarily that the big money is in school building, but I think it is the case that the philanthropic world has been supportive of charters in pretty dramatic ways.  The most vivid example of that would be the NewSchools Venture Fund that tried to raise two funds at the beginning, one that was to support tool builders and one that was to support charters and networks of charters, and they have raised more than $100M worth of resources to do that growth in the charter sector.  But the entrepreneurship of the sort that Kim was talking about to build the tools that would support this work at scale has been extremely hard to get supported.  And, so, I tease this out a little bit, and then with the risk of sort of biting the hand that doesn t actually feed us, [laughter], but that might some day, I will tease out the fact that to us it s a somewhat fascinating thing that many of the fortunes that right now are supporting this kind of entrepreneurship in education.  It s sort of what people are saying about the business skills that applied in business not always applying in education.  There are folks whose whole success was about very centralized forms of standardization.  So, Wal-Mart, Microsoft, The Gap, Netflix, these are about big central efficiencies brought about by tools and systems that can enable it.  </P> <P>And yet, in the world of philanthropy, they tend to focus on niche, decentralized players who have a boutique quality.  Now, in fairness to them, I think that some of this is sort of timing in their overall strategy, which is to say that the hope is that those things get to scale, and that many of the big grants that those organizations have made have been about scaling those organizations.  And certainly, my probably most enthusiastic proposal at the end of this is that I think there s a great opportunity at the nexus of the school builders and the tool builders, as the school builders are trying to get scale and realize, uh-oh, we don t have the systems to do what we do at scale, and as the tool builders are trying to figure out, where is something on the demand side that s a smart demanding customer that can really help us get great products out there and prove results with them.  So that s sort of context for this, and then I ll start taking you through the barriers.  </P> <P>These three statistics are probably the kind of quick macroeconomic explanation of why there s a problem.  1/100th, and this is with a nod to Chris Whittle, who just pointed out that if you look at the federal funding for research and development in education, it is 1/100th, about 270M at IES, 1/100th the size of the funding of NIH to do R&D work in healthcare.  So, in terms of what the public s will is, in terms of where we want to see R&D, that s a pretty striking statistic.  </P> <P>3.5 percent is the amount of money that after you have paid the teachers, which consumes about 85 percent, you ve supported the facilities, kept the lights on, and bought the necessary, in the way that procurement works right now, textbooks and tests, this is about what s left in terms of discretionary dollars in budgets.  And as some really important things, like teacher incentive pay and class size reduction, well, one of those is important, are happening, those also put pressure downward in the amount of discretionary money.  And, so, when we think about what could happen if schools removed some of the other barriers, it s still a very small amount of their overall resources that are in play.  </P> <P>1.8 percent is just the amount of the education sectors in K-12 spend on IT.  It s not that IT is itself entrepreneurship and innovation, but, you can pair that to healthcare at 4 and construction at 5 percent.  It just means that there isn t an investment.  And to the extent that the money is being spent, it really isn t invested.  There s a certain critical mass of computers we re expecting to see in schools.  We re not actually expecting productivity gains or really substantial learning gains.  We just have to put up a good show that we are infusing some technology into education.  </P> <P>So that s the sort of macroeconomic barrier.  The next barrier, I don t know if this quite comes out, but this is my sort of visualization of the problem, is the oligopoly of big publishing, which is that a huge amount of the market is dominated by, at this point, what used to be four, are now just three players, who control, depending on which part of it you look at, usually about 85 percent of each of the different sectors.  If you re a little company, you have these very powerful players sort of owning most of the revenue on one side of the pareto curve that would normally describe an industry, and then, interestingly, you also have a huge amount of decentralized very small players defining almost the rest of the industry.  If you want to be a national player, you somehow have to bridge that gap.  </P> <P>Daniel made the point which is vivid to all of us in this space, that there just aren t that many companies in the middle, between the little local players who are often a retired teacher, a principal, who hangs out a shingle and runs a local professional development business, and the big guys who play this game in a very different way than we ve learned how to, and I ll talk about what some of those ways are.  And some of that is because when something gets promising enough, the big guys tend to buy it.  </P> <P>But it s also that a lot of the businesses in education are set up intentionally to be local players in their own backyard, and they re not actually trying to cross the chasm.  And that makes things complicated for a small company because you re both not as local as the local guy, and you re not able to play the thousands of sales people who know every superintendent game that the big guys play.  </P> <P> The sales process is maddening complex.  One of my favorite stories from this, is, I was speaking to the folks at the Stanford School of Education, who were from the business school asking questions about the education industry.  And one of the smart MBAs said, you know, it sounds, from what you re saying about the sale process, like, no one is really in charge in education.  And I said, no, no, if only that was it.  It s much worse.  Everyone is in charge in education.  And, so, the sales process, again, for a small company, entrepreneurial company, if it s going to take months and months and months to get to market with your product, it just delays the likelihood of a return, and while that can be an exciting and fun challenge, it can also make it hard for investors to put capital to work in you.  </P> <P>One of my favorite examples of this, that s George Bush senior, one of my favorite instances of sort of the way that schools get this sales process to drag out and make it very hard for companies, is the phenomenon of the education pilot, and I think many of the philanthropists here are also quite aware of this.  That s the idea that you see something promising and you decide that you are going to allow that promising thing to happen in seven classrooms in Columbus, Ohio.  And, so, the company that gets that contract is delighted because the door is open, but, in fact, the cost of serving that contract is often more than you could possibly make from it.  And, so, an innovation that you d like to keep investing in starts to cost you more than it should, or, you don t provide that support that you need to handhold that district, and things get bad in other ways.  </P> <P>This is not just an issue of how it would be convenient to us if we got big contracts right away.  It has a lot to do with the way that people build tools.  If you know that your tool is only going to be used by seven teachers, you make a bunch of decisions in the product design that you can handhold them and provide one-on-one professional development.  If you know that you have to make it work with 4,000 or 10,000 or 20,000 teachers, you do a very different level of product development, a different level of design of what it takes to scale.  I think some of the most successful products, and there aren t many in our space, are ones where someone took the leap to say, we re going to give this to every 4th grade teacher in New York City, or, we re going to provide this to every reading teacher in the state.  </P> <P>One of the biggest things that I worry about is the idea that schools think of teacher time as a sunk cost.  So the idea is that we ve already paid teachers to do the teaching, and, so, anything that makes them more efficient or more productive doesn t actually show up on our bottom line because we re not planning to fire them.  And, so, because of that, a bunch of things that are often what drive technology and innovation into other sectors, meaning, we can make the workers more productive, don t really apply in education because we re not counting productivity in any meaningful way.  A lot to say about that, but, I m running out of time.  </P> <P>Another big barrier is just that the short tenure of superintendents in the big urban districts, which are the customers who are big enough to fund some R&D, just tends to mean that if they don t make an interesting piece of R&D part of their first year or two, then there s two years that are required to actually create that thing and roll it out, and, statistically, on average, they are gone in that fourth or fifth year.  So, the kind of partnership that s required is often lost.  </P> <P>This is one of my favorite emails we received.  We recently hired a well-known education researcher who thereby came from the not-for-profit world to the for-profit world.  She got this wonderful email from a long-term friend of hers in the Department of Education, which I decided to blackout, just saying, it sounds like what you re doing is fascinating.  It s actually a problem we re trying to solve, but we have a policy that we don t actually meet with vendors, so, good luck, and I hope you ll respond to an RFP that we might put out in this field.  And Margaret wrote back to me, But, how do they know what they could buy if they won t actually meet with us?  I said, Welcome to our world.  So, I jumped ahead, so I m going to quickly just talk through a few proposals of things that could make some of this better.  </P> <P>The first one is the idea of forming consortia of the important and innovative players in education.  So the idea would be, right now, any one of these districts or non-profit organizations are probably too small on their own to fund exciting R&D, but many of them have the same set of issues.  They re all trying to figure out how to get better performance data, they re all trying to figure out how to support human capital improvement.  If we could get them to work together to achieve the kind of scale, because that s, I probably didn t hit this hard enough.  You know, 16,000 school districts, it s just too much small customer base to be able to do the kind of things that innovation requires.  So, these folks working together, whether it s Rajav in a small SEED School, or Arnie running Chicago, the partnerships around shared interest, and then the ability of funders to support a larger scale consortium, would certainly be helpful.  </P> <P>One of the other really important ones has to do with how districts procure.  So, if you wanted to build a beautiful concert hall in downtown LA, you wouldn t say, Well, I d like five architects to go build concert halls outside of Los Angeles, and then we ll review them, and we ll maybe list one or two of them, and people can decide which one we re actually going to move into downtown Los Angeles.  You know that if you want something remarkable to happen, you have to pick a team, give them resources, time, and the opportunity to collaborate with you to get to the right thing.  </P> <P>But if we look at the big expenditures in education, it s testing and tests, and these both work according to the five architect s model, where you have to show up with a finished textbook to get evaluated by the state of California or Florida or Texas.  And, so, if at the same time that they were doing that adoption they also said, And we re going to pick one team to start working toward the adoption five years from now, and we re going to also fund them, you d let innovation in around a line item that already exists.  It s not needing new money for education, it s just finding a new way to support it.  </P> <P>The other is, I think we re on the verge of having some disruptive business models.  So, this is just, we saw it that Wikipedia quickly replaced the encyclopedia industry.  Daniel wonderfully said that he was interested in giving $10M to the first Wiki-based textbook to get through a state adoption.  I m happy to announce, Daniel probably won t be happy to hear this, but, while it s not official yet because we have to get signed, the commissioner has to approve it, but the preliminary committee in Florida just recommended an early reading Wiki-based free open-source textbook that my company created, just got through the adoption process in Florida, at least the phase of it that isn t just the rubberstamp at the end.  So there is now one instance of that, and I think there are business models like that, which are on the verge of breaking open the way the industry works, and I think whatever we can do to get policy people aware of those, and able to support them, would be great.  </P> <P>And then my final one, the happy ending, is just the idea that I think we are finally at a point where the school builders are really focused on the issue of scale and what kinds of tools and resources they need to get there, and the tool builders are hungry to have the kind of quality organizations to interact with that they represent.  And, so, for funders and policy people, I think the potentially really big mistake is the school builders get to a certain size, and then people write them big checks, and there s some that s going on already, to do what s not their core competence, to build their own tools.  And when I try to talk those school systems, those networks of charters out of doing that, I ve figured out there is one technique that gets them to stop doing that, which is, you say, You know you are behaving just like a school district.  And that is the scariest language possible.  But I do think the idea that they would figure out how to work nicely together and each focus on our core competency and then as people are trying to supply tools we d have the next level of customers.  And as people who need tools to get to the next level, I think they d start to have some really great ones.  Thanks.  </P> <P>Frederick M. Hess:  Thank you, Larry.  That s great.  I ll take the moment to suggest that because Larry is a good soldier here, and marched through in my small-minded and tightly scheduled fashion, he didn t get a chance to share a bunch of the anecdotes which make the paper just outstanding.  So, one, I d encourage you to take a look, and, two, hopefully Larry will get a chance to share some of that more anecdotal information.  </P> <P>Larry Berger:  Shall I tell one while you re plugging in?  </P> <P>Frederick M. Hess:  Please.  </P> <P>Larry Berger:  My favorite example of the sales process in education was, we had prepared, after lots and lots of meetings, a big proposal to the Director of Literacy in a medium-sized district, and she said, I just really am not comfortable with the price tag on the proposal.  We said, W understand, is it a budget issue where you just don t have, I think it was $140,000, you don t have that much money?  She said, no, no, we actually, we have it in the budget, and we had set it aside for doing just this.  And I said, So is it that we didn t get the product right and you don t see that much value in it, to spend that much money?  She said, No, no, no, I think it s great, I think it s worth much more than that.  And, so, we said, So what exactly is the problem?  She said, well, $140,000 is more than I just spent on my house.  And I think in that moment, in itself, it s a perfectly reasonable response, but, what s going on is that there isn t, in the training that we give to people who become administrative decision-makers in district, any formal training in sort of how to think about return on investment.  </P> <P>And, so, it s the idea of, Well, what is the value we re trying to deliver, and what is that worth to us in teacher time and proved outcomes?  Some of that is missing metrics, but a lot of it is a kind of training and cultural thing, which is that her training, up to that point, had no moments of spending six figures.  And yet, she s the district literacy coordinator, and a district that is in fact spending tens of millions of dollars on textbooks and tests at her discretion.  So, anyway.  </P> <P>Frederick M. Hess:  Thank you, Larry.  Ed.  </P> <P>Ed Kirby:  Thanks.  Larry s comments about the investment side of the supply side of reform, and that investors are not providing investment to tools, I agree with him.  I probably disagree on terminology.  I do think our work is way too small and way too politically fragile.  I wouldn t call it boutique, though, at least not in its aspiration.  I think its aspiration, both the charter movement and the parental choice movement, is to fundamentally restructure how the business of schooling gets done.  So, if that s boutique, fine, but, I disagree.  But I will agree with Larry completely.  It s very, very small, and it s very, very tenuous.  </P> <P>I think, well, let me just say, I deliberately took the day off today so I would not have either to promote or defend the judgment of my employers on the one hand, on the other hand, I m a competitive guy, so I will respond to Larry s essential challenge, and it s in his chapter as well, which is an outstanding chapter.  Kim Smith and her team at NewSchools Venture Fund did try to raise money for their, whatever it was called, kind of tools side of the NewSchools Venture Fund shop.  I think I was actually involved in the decision process on behalf of the Walton Family Foundation.  There are probably a bunch of reasons why our Foundation and other investors chose not to go there, so I m not going to spend time on that.  I can think of one good one that would be my own, which is simply that the bread and butter contracts that Wireless Generation has to get its work done are with large urban systems.  I don t know much about Larry s work, I m guessing his tool is fabulous, but I also know that the investment community and the current wave of reform is probably not all that excited about purchasing tools for large urban systems that appear remarkably uninterested in serving their customers.  </P> <P>As you can see, I m a Michelle Rhee fan.  Her speech this morning is becoming a bit of a stump speech.  You can see it on YouTube.  She spoke to the Democrats for Education Reform a couple of weeks ago and made many of the same points.  It s very compelling and, in my experience, she s the first urban superintendent I can think of in recent U.S. history that is willing to speak with the clarity and honesty that she has.  </P> <P>You know, all this morning I sat in on all the presentations this morning, and I was struck by how many references there were to the regulatory structure, the rules that constrain work in the supply side of reform.  And the rules that were referred to, and that I address in my chapter.  They re federal, they re state, they re municipal, and they re not just the rules on paper.  They re not just the statutes and regulations, they are also the bureaucratic implementation of those rules on paper.  They are the bureaucratic quagmire.  They are the bureaucrats who are responsible for enforcing those rules.  We are awash in a quagmire of rules and the rules come from somewhere.  They all have very specific origins.  If you were to boil down what the origins are, they are usually built and expanded and protected by interest groups, and interest groups in affiliation with public officials, and they re built and protected to try and maintain a certain set of conditions that, as you can guess, are favorable to the interest groups that are promoting them.  </P> <P>This is simply a fact of American political life.  It may be an unfortunate downside of American political life, but it s also an opportunity.  The good news, I think, for the supply side of education reform right now is that the supply side can start building its own political power base to change those rules and to set up different regulatory contexts that actually promote and allow their work to expand.  The bad news is that this simply is not happening.  There are some fabulous exceptions out there, a couple of good charter school associations, some new political action work, but, in general, the charter movement is, what, 15 years old, and it is about 15 years behind on this topic.  </P> <P>The chapter that I wrote presents a small pile of recent examples.  I actually just went and surfed media clips for the last eight weeks to look for examples of interest groups anywhere in the country that were undermining reform.  I came up with a bunch, people have been making references to others through the day, Oakland, LA, Utah, Michigan, Ohio, Massachusetts, Florida.  This is all just in the last two months.  But for local flavor and for kicks, I thought I d tell a very recent story, like two weeks old, from right here inside the District, and it s about the Washington Scholarship Fund.  The Opportunity Scholarship Program is the first federal voucher program in U.S. history.  It is very small, it s 1,800 kids, and you may not see this on the screen, but it s a total annual federal expenditure of $13M.  </P> <P>So, relative to the scale of DCPS, or the scale of other reform initiatives like Charter Schools in DC, this is very, very small stuff, although, obviously, symbolically important.  And, here s the example story.  About 15 months ago, two very influential leaders in the district, and in the nation, actually, one, a senior senator from Massachusetts, the other a congresswoman from right here inside the District, neither of them fans of the Opportunity Scholarship Program, both on the record in that regard, asked the Government Accountability Office, known better to most of you acronymically as GAO, to conduct an exhaustive audit of the operations and financial management of the Washington Scholarship Fund, which is the federal contractor.  It s a non-profit group but it contracts with the USDOE to administer the program.  They wrote the request letter to GAO for this exhaustive audit.  </P> <P>The GAO, being good public servants that they are, launched a 12-month, 10-person audit of the program, which took an exhaustive request from our two elected officials, and turned it into a supercharged hyper-intensive exhaustive audit, and produced a draft summary report about two weeks ago.  The report, which I can t talk too much about having read, because it s the against the rules to have read it at this point in time.  On November 1st you re all going to get a copy for yourself online, but, it was helpful in some places, in regard to process and operations at Washington Scholarship Fund, but I can only characterize it as incredibly negatively biased.</P> <P>You ll be simply shocked to hear that the report was leaked to the City desk at The Washington Post within about 12 hours of it being sent around to various officials.  The City desk at The Washington Post thought long and hard about producing a story, which would have a thoughtful balanced headline, but, instead, decided to run with this.  Now, they put you see, Program Puts DC Kids at Risk.   The actual criterion to which they were referring is that some of the schools, private schools, serving DC kids in this program did not have sufficiently up-to-date permit regarding the zoning of their facilities.  That is what triggered the DC Kids at Risk statement.  </P> <P>That was the public damage.  Believe me, this is intensely damaging, particularly in a year where this program is up for reauthorization in Congress.  To me, this is not the dark side of the story.  It is a dark side, but not the darkest side of the story.  The darkest side of the story is what the private damage, the damage you won t read about in The Washington Post that happened to the Washington Scholarship Fund in the process.  What were the costs of the staff at Washington Scholarship Fund in responding to the 12-month study by the GAO?  5,500 hours of staff time, a financial cost, which is both staff time and legal fees that amounts to 23 percent of their entire administrative budget for the program, and that financial cost is 96 percent of what the Feds actually allot to the program for administrative costs.  Each year, the Federal Government gives this program $380,000 to essentially run the program for the year, and the response to the GAO cost about $360,000 when you tally up all the costs.  </P> <P>Here are three things that I learned in the process of writing this chapter, and it s not just based on my own experience, but it s also reviewing a lot of literature by some of the authors here, by Rick Hess himself.  And the things that I learned date back to some good literature in political science and kind of other disciplines outside of Ed reform.  Supply side reformers have forever generally overestimated what I call reform by enlightenment.  What I mean is the notion that if you build a compelling model of reform, a good charter school, a good network of charter schools, fill in the blank with whatever you see as a compelling model, that the regulators and those who set the rules will somehow show up, take notes, and go away and change the regulatory conditions to suit the expansion of that work.  Unfortunately, it just doesn t happen that way.  I think supply side reformers also generally underestimate the political bureaucratic control of reform.  It s been talked about all day here, but it s acknowledged without any follow-through about what could we actually do to change it.  It s sometimes talked about with a tone of almost an assumption that that s how things are, and they re probably not going to change that way.  </P> <P>The other thing is that regulatory terrain in education reform right now is controlled by opponents to education reform.  They are very good in advocating their side of the story, for the rules and conditions that allow the conditions that they have held onto for the last couple of decades, and will continue to.  </P> <P>Let me present a sort of move from skepticism to something more positive.  $1,800 is the gap right now, the average gap between a charter school, what a charter school student brings to school and what his counterpart in a sending district brings.  So, in other words, a district kid, on average, has $1,800 in public tuition dollars, more than his comparative charter student.  That $1,800 gap is something that is set by, it s inevitably the result of political compromise.  This is part of the regulatory process, and charter proponents have lost this fight in the enactment of charter statutes.  If you think about what the opportunity is to address that gap, let s say that it s addressed over the next ten years, and, done some in the context of the growth of the charter movement.  If you eliminate that gap through advocacy, you can get to classrooms, which, on average, will have $45,000 more dollars per classroom, or $450,000 more dollars per charter school, an average size charter school.  An average state charter initiative is about 50,000 kids.  That s $90M.  And if you project out ten years from now, maybe a charter movement of two million kids nationally, that s $3.6B.  </P> <P>There are a lot of references today to the financial, the need for capital and financial markets to engage in school reform.  There are huge opportunities already at play if you advocate for regulatory changes here.  </P> <P>I m going to skip through what I go over in my chapter, which is the kinds of advocacy that need to happen.  There s a lot of advocacy already happening in the reform movement, mostly in 501(c)(3) advocacy, which is essentially educating the public and public officials about the work.  What s happening less of is (c)(4) advocacy, which is actual legislative lobbying, and the more aggressive form.  Just on the (c)(4) side here, this is a picture of Howard Fuller and Representative Jason Fields in Milwaukee in a very successful Lift the Cap campaign a couple of years ago, in 2006, in Milwaukee.  The most aggressive form of advocacy political action, which, again, is the most under-developed aspect of advocacy in the reform movement.  And, yet, it is probably the most sophisticated aspect of opponents to reform.  </P> <P>I want to close by just showing you two quick examples of recent media work that s been done in that reform movement.  This was in the successful Milwaukee campaign, the Lift the Cap on the voucher program there.  This does not reflect anywhere near the amount of work that went into a four-year campaign to Lift the Cap, but it presents a bit of an image of what is possible in political advocacy in the reform movement.  That was Huey Long on the right, and TR on the left.  </P> <P>[Commercial begins]:  </P> <P>Male:  No, I cannot imagine telling my kids they cannot go back to St. Marcus.  Many would be so emotional.  It would be rough.  It d be real rough.  </P> <P>Male:  Governor Doyle could force up to 4,000 inner-city children to leave their schools.  It s wrong.  </P> <P>Male:  There is no good reason for the Governor to block student choice.  None.  If school choice is good enough for the Governor s family, I ought to be able to have it too. </P> <P>[Commercial ends]. </P> <P>Ed Kirby:  There is one more commercial I just want to show you.  This is probably some of the best paid media that s ever happened in education reform.  Here s a second example of it.  Now, again, this is just the tip of the iceberg of a campaign that uses (c)(3), (c)(4) and political action advocacy.  It took four years, but they eventually lifted the cap.  </P> <P>[Commercial begins]:  </P> <P>Male:  The neighborhood around me is like a lot of shooting and killing and gang banging.  </P> <P>Female:  For me to come from the hood, as I can say, to, like, class president, was really big for me.  It really was.  Kind of come a long way.  </P> <P>Male:  School choice is obviously working.  </P> <P>Male:  Governor Doyle would force up to 4,000 inner-city children to leave their schools.  It s wrong.  </P> <P>Female:  He s offending a lot of people with this.  Governor Doyle has just made a big mistake.  </P> <P>Female:  He s throwing away my dream.  </P> <P>[Commercial ends].</P> <P>Ed Kirby:  That s it.  Thank you.  </P> <P>Frederick M. Hess:  Okay, Laura.  </P> <P>Laura Smith:  I ll start talking while we pull the PowerPoint presentation.  I want to get to drive.  So I m going to talk from a couple different perspectives, because I ve done a couple different things in my life.  I was a tool builder at one point, and worked for an education technology company called Scientific Learning, which was assigned directly to public schools, and I was one of their first sales reps, so I share a lot of Larry s pain.  I ve worked with school builders because I worked for an organization called the New York City Charter Center for Excellence, with a great guy named Matt Candler, who you ll hear from later this afternoon.  So I worked with school builders and saw a lot of the challenges they faced.  And then somehow, as you may have heard Michelle Rhee say this morning when she was approached to go work for the school system she first turned them down.  I ve done that twice.  So I worked for the San Diego school system under Alan Bersin, had a tremendous experience out there, came back to the east coast, which is where I m from.  I thought I was done being a civil servant, and I ve now been with the New York City Department of Ed for two years.  </P> <P>I was trying to frame my conversation right now that I want to have just in the context of this conference in general.  I think essentially what we are trying to do in New York, when you think about it, around supply, we are essentially trying to create conditions where all of our principals can truly be school builders.  We ll often say to them in our general messaging, we want our principals to be the CEOs of their schools.  We truly mean that and want to give them resources and access to supports that are differentiated, and also give them the decision-making power to make decisions about what support they need to best serve their kids.  In addition to that, we re trying to just make access to all those external resources that are outside the system much more readily available.  So, empowering our principals with dollars, but also helping them purchase stuff.  Because, also like Larry, since I ve been on the inside of two school systems, it s incredibly complicated, and I ll talk a little bit about it.  </P> <P>So, a little bit about the New York City Department of Education.  Truly, our scale is staggering.  We have 1.1 million kids in 1,453 schools.  We have 140,000 employees.  I ghave an interesting statistic this morning I ll just throw at you.  Last year, of our 140,000 employees, we terminated 53 people, 28 of whom were teachers.  So, think about that.  We have a $17B annual operating budget.  So, again, it s massive.  We are looking for a CFO.  So, if any of you out there need a job.  </P> <P>When Mike Bloomberg was elected Mayor in 2002, he was also awarded mayoral control, so Joe Kline has served through both of Bloomberg s terms, and in his second term of reform.  I d say the three pillars of his reform agenda, which we call Children First, and you can find a lot of information about that on our website, have to do with accountability.  And that s not just at the school level, but we re now trying to drive it through the entire system and through our administrative level.  We ve really built a lot of structures and are giving our schools tools to support them in meeting their accountability targets, so really kind of flip the system on it s head, and I ll talk about that.  We also are publicizing report cards publicly for every single school.  And then when it comes to everyone else, when you take a Central Office, and how do you hold that accountable.  In my current role in human resources, we re implementing a performance management program for our senior leadership team and their key managers, so they have specific and measurable goals that they will be held accountable to by the Chancellor.  </P> <P>A little bit just about New York City and the supply side.  We have 60 charter schools and counting, since we had our cap lifted on the number of charter schools.  It was capped at 100, when the legislature was first passed.  The Department of Education as a school district, and we call the New York City school system, we call it the Department of Education.  We re one of three authorizers in the city.  Charter school developers have three options to go to.  I think the DOE kind of sees its role in three ways.  Yes, of course, their primary role is as an authorizer in overseeing the schools, but they also do support to schools because we provide a number of services to charter schools, and something we actually want to think about expanding, how do we provide more discretionary services for them.  And then, of course, also as an advocate.</P> <P>I think, if anything, probably like many systems around the country, advocacy work, in general.  I think we re trying to figure out how we truly engage parents in that network.  We ve done a lot to augment our parent and family engagement capacity.  We have a woman who is our CEO of parent engagement, and she used to be, I can t remember her official role prior, but she used to be, I think, one of our harshest critics.  You know, the mom at the meetings that would stand up and demand more for her kids.  Joel offered her a job and said, Please come join me in this and figure out how do we really create an effective entry point for parents and give them more information about all their options.  So that s some of the work that we re really trying to do, giving parents more information, and making our access to schools much more transparent for them.  </P> <P>And then also, if you re not familiar with it, the New York City Center for Charter School Excellence is a privately-funded non-profit organization that s been around for a couple of years that really is, they kind of function as a funder, and provide start-up funding for charter schools, support, and we do a lot of technical assistance programs, and I say we because I used to work for them, but also because Joel Kline and his Chief Operating Officer both sit on the Board of this organization.  But they also truly do a lot of advocacy work.  I think in the city we re lucky.  The Charter Center was a very strong advocate in getting the cap lifted, as is the New York State Charter School Association.  We had a lot of resources directed at that.  I think Ed pointed out aptly that they may not have always been coordinated and aligned, but we did have a sustaining and continued focus on that.  </P> <P>I just wanted to make the point, too, I think one of the things at the Charter Center that we tried to do was unlock the black box around compliance.  Charter schools, like public schools, are so heavily regulated, and Michelle talked a lot about the rules and the laws and the regulations.  And a lot of them I think are in place and they make sense because they have to do with student health and safety, etcetera.  But, a lot of what we just wanted to do was tell schools what those laws are because half the time it s so hard to even understand.  And I m not sure if Don is over there shaking his head and agreeing with me.  It s just so hard to understand, and charter school operators would come in and say, If someone could just tell me what it is I m supposed to do, I will do it, but I can t make heads or tails out of how I comply with this law.  </P> <P>A little bit about the Department of Education as a consumer.  So out of that $17B annual budget, we re spending about $1.2B a year procuring products and services.  About 30 percent of these numbers up here come directly from schools.  Part of what we are trying to do in empowering our schools is pushing more and more money directly out to our schools.  I think, and I didn t talk about it specifically, but I think on the previous slide I mentioned that since Joel has been Chancellor, we have redirected about $350M from kind of the central bureaucracy out to the schools.  </P> <P>So, as part of that, as we re redirecting money out to our schools, one of the things we re trying to also do is catalyze a market for internal services, which is something that government institutions aren t so used to doing.  It s something that s been around in the private sector for a while.  But we started doing that a couple of years ago and really took it to school in this current school year.  </P> <P>So, several years ago, we piloted what we call the autonomy zone, which was basically giving some principals who said, I just want more freedom.  We gave them that freedom to make certain decisions when it came to how they manage their school, and also gave them some additional resources.  We scaled that up, I d say, a level in the 06-07 year.  Basically, out of 322 schools sign-up and say, Look, I am willing to agree to meet very specific performance targets, and, in exchange, I won t be heavily managed by the school system anymore, and, in exchange for that, we gave them additional money.  Collectively, those 322 schools got an additional $46M in funding to use to meet their achievement targets.  </P> <P>So, it was interesting, because, about 60 percent of that money was spent to hire new teachers, or more teachers per session, which is, teachers are compensated hourly if they attend extra professional development, etcetera.  A big bulk of that money went to teachers, but a lot of it was spent to purchase additional services, etcetera, from the outside market.  But what we also did is we created this office, and Rick mentioned it earlier, that we called the Market Maker.  I, literally, in the halls of the DOE, was known as the Market Maker, which makes for really interesting dinner party conversation when you try to explain to people what your job is.  But, essentially, we wanted to create a function that would help catalyze this internal market.  So schools used to get support from the Central Office, they said, I don t want it anymore, but, if they wanted to, how could they buy it back.  </P> <P>So, I m going to read through these really quickly.  We created this office that we called the Market Maker, really to serve as a clearinghouse for schools to purchase services back from the Department of Education.  In the first year that we did it, which was last year, I want to buy a workshop for my teachers, and they d send their teachers off to a workshop.  That workshop had a price, and the money literally exchanged between the school s budget and a Central Office that was offering this service, which went right back to their budget.  So money was moving in the system, and was transacting.  So we had buyers and sellers.  This year, we took that to scale, really, across our whole system.  </P> <P>As we expanded this internal market, what we wanted to do, again, was take this concept of allowing schools to make decisions about the supports that they would receive.  We spent a lot of time thinking about, gosh, should all these schools, the empowerment schools where they re not heavily managed, and we realized, and you heard Michelle say this this morning, I m afraid if I let a lot of my principals make decisions, they won t make the right ones, and that was definitely a concern of ours as well.  We knew that many of our principals did have that capacity and we had invested millions of dollars in leadership development, but we knew there were some principals that would need those extra supports.  We wanted to create differentiated support packages that the principals could then buy, truly.  </P> <P>So, what we did is, we took this empowerment model that we already had.  We took four of our existing regional superintendents, who were some of our strongest educators, and said to them, Go create a support package.  If you are going to support a school, what would it look like?  You are supporting them and meeting their accountability targets, and developing their staff, etcetera.  So they created a package.  At the same time, what we also wanted to do, though, was, catalyze the external markets and outside partners also to provide that service.  Many of these folks that we were thinking about at the time had been intermediaries in our small school start-up work who had received grants from the Gates Foundation that were in their fourth and fifth year and about to end.  And we wanted to make sure there was a way to sustain these really useful partnerships.  We put an RFP on the street as well and basically gave our schools 14 options to choose from, and they went shopping and bought a support package.  It was great.  We literally had a trade fair where people walked around a showroom.  They could talk to these educators that were offering these different supports.  </P> <P>I m going to buzz through the rest of these pretty quickly.  So, just briefly, what our organizational structure, the Department of Ed looks like, because I think in this work what we ve really tried to do is bifurcate the support versus the accountability or oversight functions.  So, previously, where we would have the same people and the same office, both holding our schools accountable for results, but also supporting them, we ve kind of stripped those apart.  So we have, again, these school support organizations that are separate from our accountability function.  </P> <P>I m going to mention this really quickly.  This is something that Larry is very much involved in, but one way that we are trying to catalyze innovation with inside the system, now, is through a project we re calling Aerus, which is a big, kind of web portal and data management system that, for the first time, is really giving principals access to kind of aggregated data sources so they can really easily see how their students are doing, but also share best practices with other schools across the whole system.  We re trying to basically breakdown all those geographic boundaries so that if you have an innovation in one school, schools from across the city can learn about it, and they can rate vendors, etcetera.  So that s our Aerus program.  </P> <P>Very briefly, I m going to talk about, because Larry talked a lot about this, accessing external supply.  I ve been in the Department of Education for almost two years, and it s even still confusing for me to understand, the concept of, How do you buy something?  It s heavily regulated, so much documentation is required, and we are supposed to ensure the best use of public dollars, so there s some complicated processes that follow that.  But, when I look at Margaret Honey and the email that she got from you, unfortunately those conflicts of interest regulations are real.  And, technically, if Larry said, You know, let s go to lunch when we re back in New York, I cannot let him pay for it.  So, we can go to lunch, but you can t buy.  So a lot of, also, the work that the Market Maker team has been doing is just helping schools understand, again, What are those regulations that you have to comply with when you want to buy something?  Because, unfortunately, it s going to take a lot of work to change those, and we can work on that on one hand, at the other time, let s just help schools get through that.  </P> <P>One thing that we re trying to do.  So, normally when schools are purchasing large amounts of products or services, they have to do what s called a Request for Proposal.  I m sure many of you are familiar with that.  But, basically, lock-down a vendor for a period of three years, and if anyone else wants to buy something similar, they have to buy from that one vendor.  We ve moved to what we ve called this pre-qualified solicitation process that essentially is a continuous or more of a rolling RFP.  So if you are an innovator and you come up with something that s already in the realm of a service that the district has a contract for, you re not locked out for the term of that contract, so you can still be a part of it.  </P> <P>And, finally, for those of you who happen to be vendors, I just wanted to throw this up there, a little tongue and cheek, which is, you can find information about how to do business with the Department of Ed.  It still can be confusing, but there s a hotline there of folks you can call.  </P> <P>Frederick M. Hess:  Thank you, Laura.  Don, thoughts on this barriers question.  </P> <P>Don Shalvey:  Larry, you can take me to lunch.  [Laughter].  For those of you that are able, I d like to have you recall late October, early November, 1967.  The Beatles Magical Mystery Tour just came out, and I was in my third month of teaching for the first time in my life in a middle school in central California.  On a Friday afternoon, Robert Pena, the father of Christina Pena, showed up around 4:30 or 5:00 in the afternoon, and said, Mr. Shalvey, you have my daughter, and I d like to take you out for a beer.  It was the 60s, we did whatever we wanted to, I guess, in the 60s.  So, Robert Pena and I went out for a beer, and he said, You know, the difference between parents and teachers is that parents drink because they like to and teachers drink because they have to.  As I read Larry s paper, I thought that school developers drink because they like to, and tool makers drink because they absolutely must.  You re out of your mind.  I have no idea why in the hell you re trying to build a tool.  My remarks are to the point of what s the difference between the school builder and the tool builder in real life work, and how we really need one another, but how very different our lives are.  </P> <P>Aspire Public Schools has 21 small, high-performing schools in California.  We are California-based.  We never leave California.  We think there s a certain aspect of geography and closeness that matter to us.  Our goal is to get to be 65 schools because if we re 65 schools, we ll have a seat at the policy table.  There are, for those of you who are non-Californians, there are 1,000 school districts in California, and Aspire Public Schools, with about 6,300 kids, is larger than 796 of the 1,000 districts in California.  So, when we get to be 65 schools, and all 65 are high-performing, and all 65 serve 70 percent or more student population on free and reduced lunch, only San Diego and Los Angeles will have more schools than that.  That s our purpose around why we want to do our work, because if we do it well, the other six to eight 1,000 charter schools that are bent on quality will have a pathway to get there.  </P> <P>But it is so, absolutely so different.  We can partner, you can t.  I mean, in reality, we have to partner to do well.  We have to work closely with the school districts that sponsor us because we think that s much better than being competitive with them.  We don t poke a stick in anyone s eye.  So, we have good relations.  We have school board members and superintendents on our Board of Directors.  We have to partner by design.  We must, and think we can be local.  You can t.  For us to get anything done in California, you have to know every elected official, you have to understand who is going to be the Chair of Assembly Ed six years before they re appointed to that body, and you have to nurture and get to know them really, really well.  We spend a lot of time doing that.  We have to form unusual consortia, and you can t.  So, for example, we just are in the midst of a project where we are working with a low-cost housing developer where we are doing a four-acre school, and there are 40 single-family low-cost houses that surround that village.  What we can do together with a low-cost housing developer and us is far more significant than we could do the other way.  So, it s just a different world.  I mean, it s that, in California, we have this, What s the difference between Bill Clinton and Jerry Brown?  Bill Clinton never inhaled and Jerry Brown never exhaled.  I think the whole notion is, we re not exhaling, and, you can t.  </P> <P>So the dilemma that you have, and I m just struck by it, because we don t have that.  And one of the things I think we do have in common is that we re about impact seeking, and you are, and I don t mean this to be critical, you re about profit seeking.  One of the things that Nelson said earlier that we think is key, at least in the California climate, is, in California it s just not well received to do well while you do good.  And, that s why all of the organizations like ours that are trying to scale want you to give it to us because if we make impact, then, you know, you ll make impact, because, over time, that s what will happen.  </P> <P>What we re noticing is, if there s a good innovation, and we re talking about the fact that our kids are doing well because of that innovation, it ll get copied.  No one will tell you they re copying it, but it ll get copied.  It s like my years as a school district superintendent in San Mateo County, Silicon Valley.  22 superintendents came together once a month, we met for three hours, and lied to one another.  We never told the truth.  No one had a problem.  Then we got outside and because we wouldn t share, we d share quietly around what might be working and people would grab that.  </P> <P>So, the difference in doing our work, and I want to talk about our work in terms of getting a more appropriate climate for doing this work, is that we made some, I think, a lot of errors in the beginning.  One of our errors was to appeal to funders, and another one of our errors was to appeal to bureaucracy and to appeal to school districts.  In reality what we ve learned is that we have to appeal to our parents, literally have to appeal to our parents.  So we have, I ll use the area of Stockton, we have a couple of thousand kids in schools in Stockton.  We have 2,500 on a waitlist, and right now we are embarking on an interesting campaign.  If you re traveling Highway 99 in Central Valley, you ll see it, and we ll talk about it.  We have five billboards.  Those billboards are going up in January.  They re going to say, What is an Aspire school?  That s all it s going to say.  Three months later, those billboards are coming down, and new billboards are going up, and those billboards will say that an Aspire school has 100 percent of its graduates accepted to a four-year university.  That s all it s going to say.  And we re going to leave it there.  Because what we know is that the best way to make change is to scare people.  And if you re a parent, and you know your school doesn t send 100 percent of the kids to college, then you re going to wonder.  So, we really think that cooperative fright is the best way to make a change in California, and I wish you d just join the Aspire team and bring those little gadgets with you, and we ll all be happier.  </P> <P>Frederick M. Hess:  Thanks, Don.  All right, we ve time for a few questions, please catch Rosemary and Juliet.  </P> <P>Nancy Pels Pageant:  I m Nancy Pels Pageant with the Aspen Institute s Education Policy Program.  I wanted to ask, in connection with some of the comments this morning about the whole nature of aligning and trying to make progress at the same time we re being innovative and capturing the best of what s available.  Laura, you mentioned that in the various ways in which you ve changed the systems in New York, all of which have been hugely interesting and probably cutting edge if you are thinking about this in terms of what districts might want to do.  My one question is, In this transaction of buying services collectively and having this new pool, is this simply a financial expediency, or, when a school wants to buy a professional development service, is there something underneath that and behind that that gives them an extra set of tools and knowledge and options that make that a smarter buy?  </P> <P>Laura Smith:  That s a great question.  I think one of the tools that we re building to help do that is truly this Aerus system.  And, Larry, I think, is actually much more familiar with the intimate details of that.  It s a very powerful, data-sharing system that will allow teachers within a school, within networks of schools, because all of our schools in this new model that we ve moved to are in networks of roughly 20 or 25 schools that they ve self-affiliated into, have, literally, online spaces and workspaces where they re sharing information about this.  But they are sharing information about what works, what professional development works, what vendors they like or outside service providers, etcetera.  So, I think there have been geographic constraints around that to date, because if you have teachers getting together once in a while, they were often, especially in a place like New York City, we just couldn t leverage our own scale.  But I think by using the power of online tools and companies like Wireless Generation, we re going to be able to do that much more effectively so that they can make smarter decisions.  </P> <P>Larry Berger:  I ll also tell one story just from our own experience of this which is that some of those competitive dynamics, what are new to the principals.  I think that they re trying to get their head around this new market that they re a part of, but it has led to a set of behaviors that we see in New York City school principals, and even in the leadership support organizations.  Essentially, the groups are playing the role that the Central Office, in some ways, might have played before, which is there s a competitiveness among them.  So when we go to meet with one of the LSOs to say, well, we ve got these tools, do you want to make them available to your schools, they re full of questions.  So the other LSOs, are they using it, because, we don t want to fall behind them, or, and if they re not using it, and, so, there s suddenly a bunch of competitive interest.  It s the way that I would talk about another software company that was starting to move in on our space.  And, so, I don t know where that will lead, but, to see that among school administrators, instead of sitting back and waiting to see, well what s the Central Office going to dump on us next, suddenly they re consumers of these services and they re trying to make sure that they do better because there s also a marketplace for their job and I think that they feel that now.  </P> <P>Frederick M. Hess:  Juliet? </P> <P>Gregg Vanorek:  Greg Vanorek with New Mountain Ventures.  This is mostly for Ed, but I d be interested in any other thoughts as well.  We ve heard a lot today about the, some people have called it a toxic environment for entrepreneurs or innovation, other people have spoken to the policy challenges and the difficult politics involved.  On the one hand, if you re a practitioner in the field trying to do innovative things, you could conclude that it s myopic not to engage at that level, and it s not being strategic if you re not engaging in macro-policy issues, etcetera.  On the other hand, a lot of practitioners would tell you, I m giving up a lung just to stay alive because the environment is so difficult, and we re just fighting battles, and I don t have the bandwidth or the resources, etcetera.  </P> <P>So, I was hoping you could point to some examples of ways to come at that which would help people in the field operationalize attacking that, and, also, secondly, whether you have confidence that a consortium approach, of pooling resources and organizations together might be an effective way to go at that?  </P> <P>Ed Kirby:  Look, I am actually a big fan of reform by enlightenment.  I ve devoted a lot of my career to it, building compelling models for reform, whether it s the charter market or anywhere else, but I think it s not enough.  I think you need to have, on the one hand, compelling models of reform to enlighten people with, and, with the other hand, you need a large, powerful, mean, political sledgehammer to start clearing out some of the regulations that are standing in the way of the expansion of that reform.  I think it is, but to go right to your question, Greg, I think it s really too much to ask supply side entrepreneurs to do both.  So, for example, in New York, I don t think it s fair to ask, say, Uncommon Schools, which is a fabulous charter network, or, Achievement First, another, to also, at the same time, be picking up a night job where they re building the political power to expand their work.  But, New York is a classic and a fabulous kind of front-running example of where different teams are doing different things.  So, they re, in addition to Achievement First and Uncommon Schools, building fabulous models of reform.  There is the New York Charter Center, and the New York Charter Schools Association doing a lot of (c)(3) work, sometimes (c)(4) direct lobbying work, and then the newest kid on the block is political action for the very people I m talking about.  This is Democrats for Education Reform, which is a political action group that came out of New York s investment community.  Its Executive Director, Joe Williams, is actually here, today, with us.  What Dems for Ed Reform is doing is raising money to directly influence the election of pro-reform candidates and, on occasion, probably hurting anti-reform candidates.  </P> <P>So, there needs to be parallel teams operating.  Where there is, to me, I forget what word you used, but maybe a coalition or a pooling of resources, where the pooling of resources needs to happen, I think, and the strategy of all that, needs to happen on the part of investors.  I won t say philanthropic foundations, because they can only do the first of three.  They can do (c)(3) work, they can t do (c)(4) and political action work, but the same folks who are behind the endowing of foundations also have their own individual capacity to be cutting checks to political action.  It really is the investment, that investor side of the work that has a responsibility to be funding across both the enlightenment by reform side, and the political action side.  </P> <P>Joe Williams, by the way, has to raise a huge pile of money in the next four weeks, so you deep-pocketed Democrats can see him at the wine and cheese party at the end of the day.  </P> <P>Frederick M. Hess:  Joe, where are you?  So people can find you.  There you go.  </P> <P>Don Shalvey:  Joe, stand up.  </P> <P>Eva Moskowitz [ph.]:  Thanks, my name is Eva Moskowitz, and I m the CEO of the Success Charter Network.  I wanted to address my question to Don and Ed because you, at moments, seem to be saying opposite things, but, perhaps not.  Don, you were saying that you need to develop partnerships and not have a competition approach, and Ed seemed to be saying, Take out the bow and arrows and get to work, that you re envisioning a much more, a boxing match of sorts, to get the work done.  I don t know if people in New York are just not as nice people as in California, which might be the case, but I can t imagine doing the work that I need to do.  I m planning on opening, I ve got three more charters to open up three more schools next summer, and there s going to be a knock-down, drag-out fight.  And it s a fight at multiple levels.  It s the district.  It s the electeds.  It s a whole bunch of things.  I m just wondering, in California, it s sounding awfully heavenly to me that you can kind of do it through partnerships.  That would make my job a lot easier.  </P> <P>Ed Kirby:  Because Joe and Eva are sitting next to each other, I just want to point out, to me, Eva and Joe are kind of models of the future entrepreneurs of both the supply side and the political power side.  Joe is a former journalist.  He now has shifted into political action.  Eva actually comes out of the political world, but is now building charter schools.  They both bring hybrid experience across a range of skills.  The fact that Eva had to fight her political fights in New York City gives her an appreciation of what she needs to get done as a supplier.  </P> <P>I don t know anything about the question for Don, but, again, back to Gregg s vision of the parallel work here, I think whether it s Eva and her schools, or Don and his schools, their operations should be utterly, 100 percent focused on the X hundreds of students and families that they serve, and, ideally, those of us who have ed reform day jobs and are not responsible for specific schools, need to be figuring out how to be building the parallel teams around them such that whether it s Eva or Don, they re not having to fight these regulatory fights themselves, and they can focus on their core work.  </P> <P>Don Shalvey:  Maybe California is different.  I guess the way I would put this is that my belief is that most school district superintendents who are decision-makers in their organizations over time believe that the approach we take is something they can get next to.  Their constituencies may battle that, but I think most superintendents look at school choice, and the options that are there, and if you can find the win/win with them, we don t get denied.  Actually, and I think we don t get denied because we try to say to a superintendent, How do you want to frame us?  Do you want to frame us as a friend?  Do you want to frame us as a wolf at the door?  Because we won t get denied, and because we re willing to find a win/win for them, that we think that the cooperative venture works better for us, and we re operating in 16 different school districts.  But, it could be just one old guy to another old guy that makes this work.  </P> <P>Frederick M. Hess:  Okay, actually, and with that, unfortunately, Bill, you ve got something quick here?  </P> <P>Bill:  Yes, I just, I wanted to elaborate that you are more successful at this cooperative approach than some other charter groups in California.  I think it s fair to say, since we re both Californians and we both work together, that you are unusually successful in making this work, and other people have not been as successful as you.  </P> <P>Don Shalvey:  I m going to agree with Bill.  We have been fortunate, and part of the reason I think we have been fortunate is, when I was a superintendent, I didn t get up every day and say, How can I screw kids lives?  No school district superintendent or chief academic office or anyone else really thinks that way, but, yet, when you are, and I would just say it, when you re approached by a, I don t know, 29-year old, Stanford MBA who thinks that they actually, really know how to run schools, and just come in and stonewall you, that kind of approach doesn t seem to work in California.  I m not sure it works anywhere else.  So, I couldn t play that card because I don t have an MBA and I m not 27.  </P> <P>Frederick M. Hess:  All right, wrapping up to make that the last word.  I d like to thank the panel.  [Applause].  We re going to reconvene at 3:45 for the final panel.  </P> <P>[END OF PANEL IV] </P> <P>PANEL V:  Making Supply-Side Reform Work</P> <P>Frederick M. Hess:  Please grab your seats, we re going ahead and get started.  Having read these papers, I m confident that we want to make sure to have the maximum amount of time. And we ve got a couple of discussants up here that are worth the price of admission themselves.  So, let s not dally.  </P> <P>First, I do want to mention, on February 27-28, here in DC, the Education Industry Association will be having its meeting.  It ll touch on a bunch of the issues that we have hit today.  If you re interested, you can find them on the web, that s EIA, the Education Industry Association.  I think it ll be of interest to many in this room.  </P> <P>This is the fifth panel.  We ve talked today about questions of human capital and talent development, we ve talked about the role of financial capital and venture support, we ve talked about barriers to entry and the political dimension of that, but one of the reasonable concerns anybody might have about all of this, is, these are kids we re talking about and there are variables that we haven t thought about.  How do we make sure we re doing this in ways that are going to do more good than harm, and that we re being careful about unanticipated consequences?  This is the panel that s going to think about some of those issues.  </P> <P>The author speaking first will be Tony Bryk.  Tony holds the Spencer Chair in Organizational Studies in the School of Education and the Graduate School of Business at Stanford University.  Previously he served as Professor of Urban Education and Sociology at the University of Chicago, where he founded the Center for Urban School Improvement.  Like almost everyone else on this panel, he has authored at least one volume, in Tony s case, numerous volumes, including Charting Chicago s School Reform, Trust in Schools, and Catholic Schools and the Common Good.  </P> <P>Speaking second will be Matt Candler.  Matt is CEO of New Schools for New Orleans.  Formerly he served as Vice President of School Development at the KIPP Foundation.  In addition to that, he has served as the founding COO of the New York City Center for Charter School Excellence, which provides support to charter schools in New York.  </P> <P>Speaking third will be the prolific Checker Finn, President of the Thomas B. Fordham Foundation and Senior Fellow at the Hoover Institution.  Checker is author or editor of well over one dozen books, including the must read, No Remedy Left Behind, and the forthcoming memoir, Troublemaker.  Checker, of course, in his time, has served as Assistant Secretary of Education for Research and Improvement.  </P> <P>Two discussants with us today; speaking first will be Wendy Kopp.  Wendy is CEO and founder of Teach For America.  She is also author of, One Day All Children: The Unlikely Triumph of Teach For America and What I Learned Along the Way.  </P> <P>Finally, we also have with us, Chris Whittle, founder and chairman of Edison Schools, previously founder and chairman of Whittle Communications, one of America s largest student publishers, and author of, Crash Course: Imaging a Better Future for Public Education.  </P> <P>With that, Tony, would you please get us started?  </P> <P>Anthony Bryk:  I think I am the token academic on this set of panelists.  And, as an academic, we have to frame things before we do things, which means I ve got to do a little opening pitch before I actually get to the substance of this, which I guess in the spirit of the world sphere, means I m probably a better starter than a closer, but I m still part of the closing.  At any rate, let s go forward.  </P> <P>When I think about building an R&D infrastructure for education, you got to put this in some sort of context of what you think the big problems are that we re confronting.  This slide basically is saying we re confronting an extraordinary time in American history.  The school system that we all went through in one form or another, grew up into the turn of the 20th century when we were confronting extraordinary problems of urbanization, immigration, industrialization.  We re in the midst of another one of those historical moments now, where, again, we re in periods of mass immigration, we re in periods of profound economic change, and we have this whale of technology that has transformed every workplace except schools, and that has to come as well.  </P> <P>That all sets the stage for much more ambitious academic attainment for all, which, again, no one anywhere has ever achieved.  And, so, we re really venturing out into new territory.  This is not marginal change on an existing system, but, basically, in my view, the reinventing of education in America.  </P> <P>When you set the problem in that way, it s inconceivable that we could get to where we want with much better schools on a mass scale, without a serious renewal of the ways in which we go about developing school professional people, and the tools, materials, and ideas evidenced with which they work.  That s an R&D infrastructure for school improvement.  However, this R&D infrastructure for school improvement in the United States currently is extraordinarily weak.  Of the institutional arrangements among public education, we would normally think of taking on this task of developing people and the tools, materials, and ideas they work with.  All of these for different reasons are not especially strong in engaging these problems.  And the connections among these entities, more to the point, are extraordinarily weak.  </P> <P>I think you ve seen this already.  Our investment in educational research in the United States is a pittance.  If we look at other fields (medicine, engineering), R&D might represent 5 to 15 percent of the overall expenditures, depending upon who you read, and I suspect Chris may talk more about this, sharing some of his insights from Crash Course.  We spend less than a quarter of 1 percent of our overall education budgets on R&D.  </P> <P>Most educational research is conducted in universities.  We place this priority on individual contributions to new knowledge and the interesting angle on a problem.  Participation and collaborative, larger, more problem-centered R&D activities are not especially valued.  Moreover, the culture and incentives in universities are not conducive to bringing teams together to work for sustained periods of time on engineering things that work, the kind of work that Larry Berger, among others, talked about earlier.</P> <P>The institutional mechanisms for collaborating between researchers and practitioners are weak.  These are very hard arrangements to get in place.  They are not considered to be part of the core work of schools.  You have to spend a lot of time building relationships for this.  You can get these broad sides from policy, when you think you ve got something in place and suddenly the state does something and your whole R&D effort can go down the drain.  These are not good arrangements for doing this kind of R&D.  </P> <P>And, finally, the commercial sector, for reasons we ve heard earlier this morning, quite naturally is quite conservative in its orientation toward R&D because of the kind of cacophony and chaos that exists in this system.  Marketing decisions, not surprisingly, are based more on trying to figure out how to get something through a State Board approval, than around really developing new tools and services.  </P> <P>There have been a number of reports and accounts, including Crash Course, that have begun to start to recognize these problems, and begun to start to talk about what a new vision of research and development for practice improvement in the U.S. would have to look like.  It s got to be an agenda organized around the core problems of practice.  What is it that it really takes to improve teaching and learning at scale in American schools?  That s going to require our researchers working in much closer proximity with practitioners in this kind of iterative design cycle, in engineering orientation, because it s not only got to work in principle or in theory, but it s got to be something that can work over a wide range of context with different kinds of individuals coming to these tools and services and with different kinds of contextual constraints.  We need to think about ways of bringing the commercial sector into this earlier on.  For academics, we develop it, and we give it to them, and they screw it up.  And they look at us and say, well, you don t know how to build things at scale.  And both of those perspectives are true.  </P> <P>So, capture those ideas in this kind of new visioning of strengthening a capacity for educational R&D.  I think about this as a three-legged stool where we have to figure out how to bring stronger academic expertise, more sustained, long-term working relationships with clinical practice, and bring the social entrepreneurs into this activity and sustaining it for a period of time.  That s a new infrastructure that has to be built.  We need more money, but we re not going to get there by putting more money into the existing operations.  You ve got to build infrastructure.  </P> <P>Having said that about the kind of organizational design of this activity, the question is, what ought such activity focus on?  And here there are obviously going to be lots of different views about how to frame the R&D agenda.  This is an opportunity for me to share mine with you.  </P> <P>Some organizing principles for how I think about this.  Education is a human resource intensive enterprise.  Schools are only as good as the quality of the people that are in them and their capacity to work together.  If we look at K-12 schooling in the U.S., it s quite clear that schooling, as a sector of the economy, does not get its fair share of our human capital.  We spend a lot of money on public education in the United States, but the question is not how much we spend, but what it buys.  And, in this case, it doesn t buy the fair share of our human resources.  </P> <P>The implications would seem clear that we ve got to make teaching a more attractive profession.  In any other industry, if you ve got a talent problem, what do you do?  You work on your salaries and you work on your work conditions, all of which seems very sensible, but, when you go down that line of thinking, that seems to require massive infusions of new dollars into public education.  And then you start to think about the competition for those dollars, and it seems unlikely, in my mind, that we re going to see massive infusions of money into public education, as important as I think that is.  </P> <P>That, in turn, leads to a perspective that we have to make schooling more efficient while simultaneously pressing toward achieving more ambitious academic gains for all kids.  So this is a two-edged problem.  We ve got to do better, and we ve got to do it more efficiently, and we ve got to be able to solve both of these at the same time.  </P> <P>That view, in turn, leads to the second conclusion, that this is a problem of social betterment at scale, and social betterment at scale comes to managed organizations.  So we have all the rhetoric today about leadership, and that s absolutely right, but when the day is done, leaders have to manage.  I mean management at the classroom level of instruction, management at the school level, creating environments where adults can work, management at the intermediate level of districts, or whatever is above them to support that kind of work in schools as well.  </P> <P>A few emerging R&D priorities that come out of that perspective.  If we are going to make the work of teachers more attractive in schools, one of the big problems we have to solve is the egg-crate structure of schooling.  If you accept that schools have to be organized as a teacher and 25 kids, you don t have enough degrees of freedom to solve this problem.  You ve got to start to think about teams, if we re going to differentiate the work at the upper-end, which a lot of the policy reports talk about, we ve got to figure out how to differentiate it at the lower-end and use expertise where expertise is most productive, rather than what the most senior teacher in a system does is precisely the same thing as a first-year novice.  That problem has to be solved.  And that is a very tough design, engineering, and development problem because we re talking about fundamentally changing work on the job floor of schools.  This is no small problem.  </P> <P>Second, thinking about this idea of schooling as a fundamentally human resource intensive enterprise, can we make the systems that support the development of teachers, teacher learning, more efficient and effective?  And, in fact, most of what we work off of here is expert, professional judgment, which, often times, is very good, but if you really want to strengthen this activity, you need evidence.  So, we have the design of professional education programs.  We ve got to get much more explicit about what is it we want people to know and be able to do and how do we know whether our professional education programs accomplish it?  Assuming they ve learned those things, does that actually translate into changes in classroom practice that we think are valued?  So we re going to have to have ways of measuring that.  And then we have to go to the next stage in this causal cascade, and, does it in fact link to actual improvements in student learning?  If we measure the student learning piece back here, and we have no evidence in the chain along the way, we have no way to actually manage the improvement of what is essentially a human resource intensive enterprise.  </P> <P>The third one, utilizing technology well.  Is this the core new resource for a more efficient and ambitious educational system?  In the not too very distant future, we will be in a situation where all children, hopefully all children, live in a 24/7 ubiquitous digital environment.  How can we transform learning once this exists as a basic infrastructure?  How do we use the other 85 percent of time when kids are not in school to advance their learning?  In this technology there s actually the seeds of what has been the long-standing progressivist dream, democratizing access to knowledge, expanding the base of those who educate, individualizing each child s program around their interests and what we know about their development.  These are the things that progressives for a century have tried to advance, and you see it in individual classrooms, sometimes you see it in schools, but the weak underbelly is, we don t know how to do this at scale, and part of that has been the lack of the technology to support it.  The same thing is true about thinking about assessment.  Once you start to think about capturing the day-to-day work of students in a digital form, can that become the basic resource for much more ambitious assessments going forward?  </P> <P>Other topics addressed in the paper, this will be the last slide I ll talk about, as you move down this path, and I think we ve heard this already today, education innovation is not just a technical act, but it invariably will be caught up in the kind of social and political activity around schooling.  As we try to move in this direction, we clearly have to secure resources to carry out R&D, and that obviously means funding, but it means more than that.  There s a legal infrastructure that conducts school-based R&D that has to be worked on.  Part of it is around having a set of schools where you can actually conduct this research and development on a sustained basis.  It was the reason why, in Chicago, we actually started our own charter school, because we wanted to have a context.  We were hiring people into that school who understood that research and development is part of what we do here, rather than something that just sort of happens on the side.  </P> <P>As we think about more complex innovations, they don t get carried only by the tools and materials, but they are carried by people who ve worked with them, who ve become expert in them, and they get carried out by social systems of such people.  That s all part of the R&D problem, building that expertise base, and building the social systems in which those individuals work.  </P> <P>And then, finally, I ll stop on this, we need more supportive policies to stabilize and incent demand.  We ve heard about this before.  Schools don t generally have resources, or the pot of resources that schools have to buy innovation is very modest, and the use of those resources is subject to very radical change every time a federal policy changes, or a state changes.  This is not a stable marketplace.  If the marketplace isn t stable, people can build things, but no one might buy them, no matter how good they might be.  </P> <P>Finally, if you think about where we are and where we need to go, there s the question of how this development needs to occur.  What s the catalyst, what s the shepherd kind of prudential leadership to move this forward?  And then, not the least of which, who is going to pay for it?  The sugar daddy.  Thank you.  </P> <P>Frederick M. Hess:  Thank you, Tony.  Matt?  </P> <P>Matt Candler:  While we re setting up, just quickly, I am the only guy up here who has never written anything.  I was a math major.  I picked that primarily because you didn t have to write a lot of essays.  So, I struggle with this, and the first thing I asked Rick was, how many graphics can I put in my paper?  He only let me have one.  This clipart is just to make you laugh.  I m not going to use anymore, I promise.  I ve come at this as a practitioner, spending ten years in the school starting business.  Three of those years I was on my own helping what some folks have termed mom and pops, mostly along the eastern seaboard, open up, go from folks with an idea, to folks with a charter in hand, to a school operating with kids in it.  That translated into three years of work at the KIPP Foundation, where I led the School Development Team.  </P> <P>I spent a lot of my time on planes, obsessed about a word that you ll hear Checker talk a lot about, which is quality, but didn t talk at all, and never really used the word proximity, which is a word that Tony has used.  So the last two gigs I ve had have really focused on that second word, proximity.  In New York, when we started the Center for Charter School Excellence, it was designed to really create the conditions, in partnership with Joel Klein s leadership in the district, and outside in the philanthropy community, to create a strong message to operators, this is the place you need to be.  In the same way, we pretty much poached all those ideas, brought them to New Orleans, and started New Schools for New Orleans.  We ve added human capital to the mix because it s such a key piece of success in New Orleans.  </P> <P>With that, let me jump right in.  Stig talked about this, 200 of the 5,000 charters we ve started are actual gap closers.  Let me show you some visuals of this.  Let s talk about Connecticut, New Haven.  Connecticut and New Haven achievement gap--Amistad Academy, closed the gap and went past it.  These are 8th graders after four years on the Connecticut Mastery Test.  Let s try it again in Newark.  This is the Stanford 10, a national norm test.  The nation is at 50 percent, that s how you do norm tests. Newark kids coming into 5th grade, this is a KIPP school in Newark, they scored 21.  At the end of 8th grade, the gaps closed, there s another gap on the other end.  They ve passed this national average.  That s in four years in reading.  Let s look at math at Team.  Same, 50 percent norm, kids come in at 5th grade, and 22.  But let s not look at four years, let s just look at how these guys do in one year of math.  It s up here.  These guys killed it, one year, that s what the Team academy math department did.  They are closing the gap, and, again, to Stig s point, only about 200 schools in the country are doing this.  </P> <P>I will tell a little story, again, first time writing I struggled with using a particular word in my presentation.  But then I read a piece about Sioux City, Iowa getting stuck with the FAA term SUX for their airport designation.  I took it as a sign that I had to use the word SUX in this presentation.  So, here it comes.  I m sorry, if you re in the back, I sat in the back for a while, there s a little yellow dot near the bottom of the gap, and it s barely creeping up.  Most districts are barely, barely creeping, and they re not even close to closing this gap.  Much of the research now on charters suggests they re closing it a little faster, but still not even close.  My perspective, as a teacher, is that that SUX.  I ve been in the charter movement for ten years, this SUX less, but this still SUX.  I m getting really tired, in ten years of the work, about being a guy defined as, yes, I suck less than that guy.  [Laughter].  So, what I m trying to do in the paper is tell a few stories about how you get things like Amistad, which don t suck at all.</P> <P>We are closing the gap in 200 of these schools.  I spend most of the paper talking about my trials and tribulations in trying to open gap-closing schools.  So I m going to walk through a few of those, just tips on how to do this.  </P> <P>So, how do you get more gap-closers?  Blue dots, you all can see the blue dots?  In your district, while avoiding the SUX less supply side strategy of the past, and I m done with it.  The next decade in my career, I m not doing SUX less strategies.  It just wears me out.  So, I m going to tell you a little bit of the tips on just having done this on the supply side.  When leadership--and I actually go into a little bit about what I think leadership is, and how critical alignment within a particular locale is--when leaders make the call from there, to the best schools, they are one of two things.  </P> <P>One of the stories I tell is my first day on the job at KIPP.  We go to Thomasville, Georgia, who had called the Foundation and said, we want a KIPP school.  We said, why?  They said, because, Governor Barnes said we should have one.  We said, okay.  So we went down to the school board, met with the superintendent, and he said, you might have a little trouble.  We went to the school board meeting, but we had five hours to burn.  So, first day on the job with my new team, instead of having a speech about how good of a leader I was going to be and how awesome our team was going to be, I said, let s go to the movies.  So, the only movie in town was Legally Blonde, so I m going to steal a few visuals from Legally Blonde, if you don t mind.  So, they re either really happy you called, or, they re not really sure that you get it.  If you want to get the first answer, I m going to give you a little tip.  They need three things, they need funding, facilities, and freedom.  I go into it a little more detail in the paper about what those things are.  Without question, the most important F is freedom.  Operators who care, and who can close the gap for kids will run like the wind if they don t think they re getting freedom in your particular town.  And we ll talk a little bit about how to get that.  </P> <P>Once you make that connection, you ve got to realize that you still have to manage it.  That s a great picture of Reese and Luke Wilson getting hitched.  But, here s the issue, a lot of folks just stop there, and they say, all right, great, we have reform now, let s go on to something else.  The problem is, you ve got to actively manage that pipeline.  A couple things you ve got to do, you ve got to replicate the very best, create the conditions legally, politically, from a financial perspective, again, the three Fs.  To let those guys replicate you got to run these guys off.  Sometimes the authorizer can do it, but, usually, you need somebody who is independent to do it.  In the Charter Center, we did it in New York, and we do it at New Schools for New Orleans down south.  We actively run off people who aren t ready, not in a strict, nasty way, in a, why don t you come back next year, and here s a grant to help you do that way.  We also really work on the demand side.  The thing that s going to crack New Orleans open, in my opinion, is that our pipeline is going to make a real connection with the communities that are still in need of better schools.  When we crack that demand side, and match it up with our supply pipeline, I think we re going to make huge, huge gains.  </P> <P>So, once you get a SUX less supply side effort going, you still have to manage it.  Right?  Because, honestly, some will excel, some will do okay, and some will bomb.  That s what the bottom of the slide says.  So, even if you manage this pipeline, you re still going to have some SUX less schools.  You ve got to do some proactive things with them.  Replicate the best, and study your policies, change leadership in the middle, and I ll tell you what not to do in the next slide, and close the bottom.  We ve all talked about that today.  But don t get stuck on the trying new stuff in the middle.  I spend no time in New Orleans in the middle of the scatter plot.  My life is defined by replicating the right side of the scatter plot where schools are doing great, and trying to close or put pressure on the less side of the scatter plot.  If you can focus your reform thinking there, it clarifies things and keeps you moving forward.  Don t do school intervention.  Close them.  But when you do, be smart about it, and, again, help parents and teachers understand the process of closing their school, and have a new one ready for them.  The pipeline actively managing can help you solve this huge political dilemma of closing schools.  </P> <P>So, again, the gap, if we re going to make a new one with amazing gap closing schools on the other end of the kids that are actually not dealing with the achievement gap we re trying to solve, you got to do two things, you ve got to avoid the SUX less, you ve got to be proactive about it, and you ve got to create conditions that great schools are looking for to excel.  </P> <P>Frederick M. Hess:  Thank you, Matt.  Checker?</P> <P>Checker Finn, Jr.:  So, Rick used to be my friend, and then he said, you ll go tenth, out of ten papers, on a long day, in a hot room.  Thank you very much, Rick.  Then they made me engage in what for me is an unnatural act, which is to create PowerPoint slides, which I am completely unable to manipulate.  And then to embarrass me further, they sat me next to Matt Candler, who went to business school with my daughter.  [Laughter].  </P> <P>We re here to talk about quality control in a dynamic sector.  Next slide please.  [Laughter].  </P> <P>There s going to be a lot of lists in the next 12 minutes.</P> <P>The old bureaucratic model of public schooling came with its own form of quality control of the old bureaucratic sort built for a system elect, good data on student performance and academic outcomes that presuppose that educators are public employees, governed by regulated state oligopoly, and that paid most of its attention to compliance and not much to student achievement.  And because it was invented in a pre-Coleman era, it incorrectly assumed a fairly linear relationship between education inputs and outcomes.  In short, our old-fashioned QC arrangements were part of the one best system that characterized American public education during most of the 20th century.  </P> <P>Today, we possess new tools, a flood of outcomes data, and a clearer understanding of the shaky relationship between school inputs and academic results.  Moreover, we re not very happy with those results.  For at least the past 20 years in the U.S., as you all know, we ve been attempting to revitalize K-12 education.  Prominent among those forms of revitalization today is entrepreneurship, the entry into this world of new providers, new participants, new models for education.  The U.S. is more open than it ever was before to alternative sources of schooling, school designs, curricula, instructional materials, technology, governance arrangements, financing, now even personnel.  Some of these entrepreneurial entries are profit-seekers, some are non-profit, some are actually governmental.  In this blooming, buzzing world of competitors, innovators, snake-oil peddlers, and well-meaning naives, how do we think about quality control?  </P> <P>Next slide please.  One could simply trust the marketplace, but for three compelling reasons, we don t dare.  First, kids are involved, and society is obligated to look after their welfare.  Second, for the most part, public dollars are involved, and sound fiscal practice calls for steps to insure that these are not wasted, much less stolen.  Third, because the backdrop to all of this innovation and enterprise is dissatisfaction with the performance of old-style public education, the new models are of value, and the hassles and tussles and risks associated with them are worth enduring, primarily to the extent that they yield better performance, which needs to be determined by some sort of suitable metric or comparison.  </P> <P>New style quality control needs to address today s demand for stronger academic performance and narrower gaps.  It needs to address the entry of new providers and our awareness that the path from intentions and resources to results is far twistier than we previously knew.  It also has to be more versatile because its users have different QC needs.  For example, a district considering whether to outsource its HR operation to the New Teacher Project, or outsource some of its schools to Chris Whittle, will be interested in very different performance metrics than will parents comparing schools for their kids, or monitoring the quality of teachers within a given school.  The new system likely calls for multiple mechanisms for different users, and it calls for different data, maybe even for reinventing our education statistics arrangements, which were devised for the current, the old delivery system.  </P> <P>There s something to be learned from our experience with charter schools, and it s not entirely happy.  They are subject to both old style and new style quality control, both to market forces to results-based accountability and to compliance with many of the regulations that still bare on district schools too.  In theory, their quality should be brilliantly controlled, look how many quality control mechanisms are at work, yet we all know that it isn t.  The market doesn t work nearly as well as it should, consumers aren t nearly as fussy as we would like them to be, and they don t have access to enough of the right kinds of information about school performance.  The data system isn t what it needs to be either, and the top-down regulatory regimen is capricious, insensitive, and often hostile.  The system of academic performance indicators that we tend to use, NCLB style, over-relies on assessments of student proficiency keyed to fix standards, the results of which may be useful for state accountability purposes, but they don t tell consumers much about whether a given school is more effective with its kids, with its pupils.  Even when we know that a charter school delivers dreadful results, rarely is anything done to change it.  One can blame the authorizers, who are more apt to police their school s regulatory compliance, than their academic effectiveness, and who are reluctant and often incompetent when it comes to putting low-performing schools on probation or shutting them down.  I speak from experience, the Fordham Foundation is an authorizer of charter schools in Ohio.  This ain t bean bags.  </P> <P>Charter schools are only part of today s education entrepreneurialism picture.  I think a useful typology, very quickly, there s five major categories of entrepreneurship in education today.  First, providers of specific goods and services, these may be non-instructional, like transportation and technology and data management and food service.  They may be professional services, like school psychology, healthcare, attendance services, professional development.  The second category, providers of instructional materials, pedagogies, assessments, and information about schools, publishers, media firms, testing companies, vendors of curriculum, some of these specialize in school report cards, like GreatSchools.net, or JustForTheKids, and lots of SES providers are there tutoring kids.  A third category, people providers, such as Wendy s Teach For America program, New Leaders, which we ve talked about, The New Teacher Project, which we ve talked about.  The fourth category, firms that serve as expert advisors and turnaround specialists and management consultants and things like that, ranging from classic, all-purpose firms like Mackenzie, to non-profit outfits like Bridgespan, to more specialized school doctors, like the Center for Performance Assessment, or AIR s School Consulting Practice.  And, lastly on that list, of course, EMOs and CMOs, large and small, local, regional and national, that run whole schools.  </P> <P>Seeking models of quality control for this enormously diverse and ever-changing world of education entrepreneurialism, we find that quality control in the United States of America, looking across all fields, typically takes four forms.  First, Adam Smith s invisible hand, that is, the marketplace.  This doesn t have to be purely a popularity contest or a price competition, it can include RFPs to help procurements, sometimes very prescriptive and detailed ones, even too much so to the extent of stifling market entry.  Another risk in education is that some entrepreneurs are so enchanted with markets and marketing that they don t pay much attention to product quality or academic performance, only to whether someone will buy what they have to offer.  Others engage in misleading advertising, or they offer popular ancillary services, like after school programs, without paying due attention to the effectiveness of their core school program.  Keep in mind, too, that there are all sorts of shoppers in this marketplace, not just families.  School districts are customers too, for technology, for services, but they re not always smart purchasers either.  Many procurements simply follow the pattern of previous years, or they go to the lowest bidder under procurement laws, or they hinge on the right salesmen treating the superintendent to a gratifying game of golf.  </P> <P>A second form of QC in America, continuing government regulation, this is, perhaps, the most familiar kind.  The Agriculture Department inspecting meat packers, the FDA requiring evidence of safety and efficacy for medical devices, the FCC insisting on gobs of information from public companies, all of this kind of thing may, again, reward large operators, with, for example, those with sufficient capital to underwrite field trials of their new products.  It may not regulate key elements, and it can be vulnerable to political manipulation and corruption.  </P> <P>Third large form of quality control, self-policing.  Consider the movie rating system, consider school and college accreditation, consider peer review and research.  With self-policing, however, comes the risk of restraint of trade and discouragement of innovation, but there can also be stimulus and quality boost afforded when, for example, a school joins the Core Knowledge Network or the Coalition of Essential Schools.  In corporate America we find lots of internal QC, Wal-Mart, Burger King, The Gap, they inspect their own stores, they monitor their own products, they fare it out, probably because they can t afford not to.  Hotel chains send anonymous inspectors around to check on cleanliness and service.  </P> <P>The fourth large form of quality control, independent reviews.  Think of AAA and Mobile Star System for hotels.  Think of The New Yorker s film and theatre reviews, Walter Mossberg s appraisals of the latest technology in The Wall Street Journal, Consumer Report s comparisons of toasters.  Some of these qualify as expert reviews, others simply as user opinions.  Some rely on lab tests and data and formal comparisons, others purely on taste and preferences.  Yet, we do turn to them for help with decisions, especially where objective data are missing.  There s almost no such thing as objective data to be had when it comes to picking movies or plays or concerts, for example.  And sometimes we turn to them because we want to be guided by another person or outfit whose judgment we have come to trust.  </P> <P>Besides the big four, and I m going to just touch on, just name these, really, there s at least six more QC models in operation worth being aware of.  Expert judgment, think of the What Works Clearinghouse, audits and evaluations, think of the GAO or Mathematica.  Inspectors, ala the British School Inspection System that s begun to migrate to U.S. shores.  Voting, not just through the ballot box and opinion polls, but also through a whole variety of Wiki methods.  Instant web surveys, Zagat restaurant reviews, tripadvisor.com evaluations of hotels where inexpert consumers provide feedback on the quality of their experience.  </P> <P>Fifth artificial intelligence, the Google-type system where something I don t understand decides what works best for your particular needs, if you re looking for something in particular.  And, finally, data aggregations, often based on expert judgments, followed by data collection such as the U.S. News ratings of colleges, for example, or Newsweek s ratings of high schools.  </P> <P>Given so many different QC options, how do we decide which one to deploy where?  Let me suggest five generic criteria.  First, does the provider of the given service or intervention or program do what it claims to?  Does it actually provide the service it promises for the price that it states?  </P> <P>Second, cost effectiveness, this may matter less for parents who are spending the taxpayers money when they pick a public school or charter school, but it s certainly a question for districts that must stay within budget when procuring goods or services.  </P> <P>Third, is there reliable evidence, preferably from third parties, that it accomplishes what it claims?  Often, that means enhanced student achievement, but, in a whole variety of fields, other metrics might be more appropriate, if you re a provider of food services, for example.  </P> <P>Fourth, how reliable, consistent and replicable is this from one place to the next, or, does it s performance hinge on iffy and variable implementation?  </P> <P>And, last, what are its strengths and weaknesses compared with other providers of the same or similar services?  </P> <P>This oversimplified little chart, Rick only let Matt do one, he made me do one.  This, which you probably can t see anyway, it s in the paper, suggests a way of thinking about QC choices and why they don t always lead to the same selection.  The columns represent two different kinds of uses of information, one is the basis for informed private choices, such as parents picking schools, the other is the basis for districts procuring services, or judging providers.  The two rows distinguish between characteristics that are relatively easy to quantify, such as school accreditation or AYP, and those that are much harder to gauge objectively, such as teacher effectiveness, or the likelihood that a would-be charter operator will do a good job if you give them a charter.  </P> <P>And, last, what do I conclude, looking ahead, quality control for an entrepreneurial education world I think needs to attend to these six considerations, a little boring, but I think important to keep in mind.  First, we ve got to have some tolerance for gray here.  There is no one best QC system here, no one right answer, and we re not likely to find one.  Second, we need a judicious balance of brand name large operators and of start-ups that look at least at the beginning like mom and pop operators.  Third, a dynamic market needs to be opened a new entrance, but not so accepting and tolerant that it doesn t purge itself of failed operators.  Fourth, as entrepreneurial activity evolves, QC must evolve.  It would be a huge mistake to try to devise a single QC regiment in 2007, and insist that it be applied to innovators of products or services in 2027.  Fifth, there is a really tricky balance here between homogeneity, which government regulators love, and diversity, which is what entrepreneurialism is all about.  And, last, we ve got to do some experimenting here.  We actually need to be ready to innovate on this front, the QC front, just was we are innovating on the entrepreneurialism front itself because this is going to take some ingenuity, and it s going to take some trial and error, it s going to take some false starts, it s going to take some openness to new approaches.  And, overall, it would be a terrible mistake to put the entrepreneurial models that we ve been talking about all day today under the old-fashioned QC regimen of the one best system.  Thank you very much.  </P> <P>Frederick M. Hess:  Thank you, Checker.  Wendy, it s yours.  </P> <P>Wendy Kopp:  I m still trying to get my head around how best to approach this, having not had the context of everything that s already been said today, and also being sure that in such a like-minded group such as this, probably virtually everything has been said.  But, let me throw out a couple of observations that lead me to one main question about a couple of the papers.  And maybe the two observations are more just questions to consider.  </P> <P>The first is whether the topic of this particular panel is the most critical question to consider, and, therefore, whether we should be investing massive amounts of our time and energy thinking about it.  So the topic being, as you put it, Rick, we must give sufficient attention to doing things in ways that do more good than harm.  And, of course, we could accept that at some level, but I consider the context in which we are working, and I wonder how much more harm we could possibly be doing.  In all seriousness, just considering where we are today, you think about the 13 million kids growing up below the poverty line, half of them will graduate from high school, knowing that those who do will be at the 8th grade level compared to kids in high-income communities.  We re just squandering kids lives, at least if we look at this from the vantage point of what s going on in our urban and rural areas.  </P> <P>That s one observation.  The more fundamental question and the question that should be driving 99 percent of our energy should be, how do we effect change that is transformational for kids, not how do we effect incremental change for kids.  How do we solve what is a truly, tragic, tragic problem?  </P> <P>The second set of thoughts that I m coming at this with, is I think my fundamental frame on what is really the answer to the broader, big problem?  I feel like every single thing I ve ever seen leads me to believe that this is fundamentally a challenge of institution-building, meaning, it s all the basics, that we just have to do much, much better.  It starts from my spending a lot of time, and Teach For America spending a lot of time trying to understand really what it is at the classroom level that differentiates teachers who effect transformational change for kids.  What is it that they re doing?  And you realize pretty quickly that it s actually nothing elusive, and it s nothing particularly complicated, it s fundamentally leadership.  They are incredible leaders and they go in and they see that their kids are three or four grade levels behind and they set a big vision of where they re going to be at the end of the year and they invest at least half their time in getting the kids and their influencers to work harder than they ve ever worked to realize that vision as any great leader would.  And, in the process, they re building a powerful culture within their room, a culture of excellence, and then they re being very goal-oriented about getting to that vision, and just absolutely relentless, doing whatever it takes.  </P> <P>So, I see that at the classroom level, and then you start walking around the 200 schools that are truly effecting transformational change, and ask any one of those 200 principals, what is it here, what is the magic sauce?  And they look at you like you re crazy, because there is no magic to it, it s just all about a lot of hard work, and it s about great leadership that can attract great talent that can build powerful cultures in their buildings that hold themselves accountable for results and just continuously, continuously improve and do whatever it takes to get where they re trying to go.  </P> <P>And, so, the remaining question which we have yet to solve is, how do we create not 200 schools but thousands and thousands of schools, whole systems of schools, whether it s within our school districts or through other kind of governance models?  </P> <P>And, so, the fundamental thing is not so much to make sure that we don t do harm, but really to figure out how do we support institution-building, and, thus, transformational change?  My question that emerges from that is whether spending a lot of time on, centrally, figuring out quality control indicators, other than the basic overarching accountability framework that hopefully we re trying to improve over time, makes sense, versus making the overall accountability framework better and better over time, and leaving lots of the input decisions to the local leadership who are trying to meet these more rigorous accountability standards.  And, similarly, do we need a central R&D infrastructure, or do we need to figure out how to build within our systems of schools the kinds of systems for continuous improvement that exist in any other very high-performing institution in any other sector.  </P> <P>So, I do think we should be focusing a lot on things that, no doubt, have already been talked about a great deal today.  This is all about talent and leadership at the end of the day, working from within our school districts, working within anything that is trying to effect change from outside the system, our biggest constraint is talent and leadership, so the focus on that makes lots of sense.  The focus on making the overall accountability framework stronger and stronger, incenting new innovations so that we can then see if the market buys them, enabling technology investments.  </P> <P>You think about the very well run institutions out there, the GE s, the General Electric s that we all hear about, and think about the difference between where General Electric is and where anything, whether it s the most high-performing charter school management organizations or anything in this sector of ours: what s harder, what GE is doing, or what we re all endeavoring to do?  We are no where in terms of where we need to be, and I just think everything we do needs to be about asking the question of, how do we build truly high-performing systems, which is all about where are we going to get the people and how are we going to develop them over time and what are the technology systems that are going to enable continuous improvement. </P> <P>Frederick M. Hess:  Great, thanks, Wendy.  Chris?  </P> <P>Chris Whittle:  Checker, you complained about being nearly last, I am last, and you complained about being seated next to Matt, I m seated next to Wendy, and, you complained about having to write your PowerPoint, I had to read your paper.  [Laughter].  And, if that weren t enough, I think I kind of represent the SUX less past.  [Laughter].  I really appreciate it, Rick.  [Laughter].  And, on top of it, this was cogent last night, but I ve been making a lot of notes and I have no idea what s on this paper, but I m going to try.  </P> <P>I had four comments, three about the papers, and one that was more related to the general conference.  First, on Anthony s papers, which really discusses, in a very intelligent way, the role of R&D, or the lack thereof, in education today.  I want to salute his thinking on that, and that he s thinking about it structurally, which needs to be done.  And I also want to just mention why it is so important, this thing of R&D.  As you listened to Matt talk, we clearly have not figured out a better mousetrap.  The fact that we have 200 out of 5,000, and that s really 200 out of 100,000, because that s the kind of supply we re supposed to be bringing in to this world.  One of the reasons that we haven t figured it out as well as we would like, is, none of the organizations that we represent have the kind of research and development capacities that they really need to have, and figuring out what the new infrastructure is and how it is supported and how it is funded in a very real way is an important topic, and I m glad that the conference is doing that.  </P> <P>Towards the end of your document, you raise a question that I wanted to comment on, which is, what should the focus of research and development be?  You put it into two buckets, which should it be on improving schools as they currently are, or, on reinventing them.  I know you know that we don t have to absolutely pick.  </P> <P>I want to particularly come down on the reinvention one, and I want to mention why.  I think it s the only way we can truly change schools.  I think schooling in the United States and around the world, I think of it often as a black hole in that it absorbs light, meaning, and trying to tackle it with a kind of glancing blow is very difficult and that you have to grab it in its entirety to really change it, and you ve got to be able to control all the resources so that you can rearrange those resources to the best possible way.  And, so, that reinvention thing, I think, is very important.  </P> <P>Another thing I wanted to say, is, you made a comment of focusing on the D part of R&D.  I think we need to be thinking about it as R&D and D, and it s research, development, and distribution, which is basically getting it out into the world.  Your point about how this has to be connected to practitioners, that s where the distribution occurs, and figuring out that right linkage is very important.  </P> <P>Checker, when I picked up your paper, late one night, I said, this is going to be fun reading, and you did not disappoint, as is so always the case.  There s one line that I just wanted to read out of it, because it then ties to something I d like to say about Matt s paper.  And, that line, which I m going to butcher in the reading, because it s actually is a paragraph, but: QC and education, as in most fields, will not come from the entrepreneurs themselves.  School operators are more apt to wow parents with nifty technologies, snazzy buildings, and smiling teachers, than by carefully displaying their value-added test scores. </P> <P>I sense that this is slowly changing in the charter school space after years of being hammered by adverse studies, mediocre results, and political opposition.  </P> <P>I believe that s absolutely true, that it is beginning to change, which leads me to my third comment, in Matt s document. I was most impressed with your accounting of how the New York Center for Charter School Excellence is really trying to police charter schools.  What was particularly courageous I found in that is naming names.  One of the things that s very tough in a world where we re working together and we re friends, naming names is hard, and I found it interesting that you even did it in the document, and it has to happen, and I think it s going to lead towards an overall better picture, and I m glad to see that happening.  </P> <P>My final comment is really more on supply side in general.  I was able to sit in the afternoon sessions, and if this was covered earlier, I apologize for some redundancy, but, as I think about building supply, I think it s instructive to think back about, and to remember, how many of us in this room got here, and what made that possible.  And what made that possible was a change, it was a change in laws, and it goes back to that first, what day was it, 1991, I always look to the historian in the room, the first charter law in 1991, it was a change in law that began to alter how supply could come about.  And if it hadn t been for that, many of us wouldn t be in the room today, and, although we re not all in charters here, many of us are, and many of us are related to them in a variety of ways.  </P> <P>I believe that charter laws and accountability laws, over the last two decades, have probably been the two things driving reform.  But, I think if we re going to see supply go up in a significant way, R&D is going to drive the quality of that supply in many respects, but laws are going to drive the supply side of that, and it s important that we not only not take them for granted, but not take them in any way that they re as good as they could be.  They re not close to as good as they could be, and we, as an entire movement, have got to circle back to all of those laws.  And, Matt, in your comments, you kept mentioning F, F, and F, that s what those laws are about.  Those laws are about the freedom to be able to do things differently, and many of those laws give very little freedom.  They re about the facilities to do things, and most of those laws do not provide as they should for the facility to do them.  And they re about the funds to do them, and most of those laws are not adequate in terms, or even fair, in terms of that.  And going back and seeing that we get facilities, funding, God forbid, even direct issuance of charters to providers that want another, those are going to make big differences in supplies in the future.  And, thank you for holding this conference.  </P> <P>Frederick M. Hess:  Okay, let s go ahead and open it up.</P> <P>Jim Kohlmoos:  My name is Jim Kohlmoos from Knowledge Alliance.  I was really happy to see Chris comments and Tony s comments focus on R&D and the infrastructure and how it could and should be changed.  I m just wondering if you ve given thought to how the Federal Government plays into the R&D structure, and should it be in, should it be out, should this be a philanthropic enterprise, how to grow it in the way that you re thinking about?  </P> <P>Anthony Bryk:  One of the problems in thinking about building this infrastructure is, if you re really going to do this, particularly if you re going to focus on reinvention, most of the things you re going to support are going to fail, because that s the nature of real innovation.  And if you read into the social organization of real research and development enterprises, they need a particular kind of context for them to work.  There s got to be a lot of freedom, a lot of flexibility, a lot of potential things to fail, because the things that succeed are the things that are really going to move the system forward.  In education, I worry that the Federal Government, especially, is not particularly well positioned to develop this system.  There s a question of what you need in the early stages to develop it, and what you need in the later and subsequent stages to operate it.  The subsequent stages, I don t see how this works without the support of the Federal Government.  States aren t going to do this, you ve got free rider problems, this is not going to happen in small charter management organizations, it takes too much resources.  The entrepreneurs like Larry Berger, as much as they want to do it, they can t garner enough capital to do it.  So, as you move down this path, it seems inevitable that the Federal Government has to be part of this, but I worry they can t build it.  And that s where I think, this is one of the classic places where private philanthropy can really act in the public good.  </P> <P>Frederick M. Hess:  Chris, did you want to add to that?  </P> <P>Chris Whittle:  I think I agree with everything you just said, including that the Feds long-term have to be in this.  The amount of funding that really should be going toward this I don t think we can find anywhere else, but, philanthropy could jumpstart it.  Big philanthropy could jumpstart it.  The good news is, is there s a good bit of big philanthropy floating around out there.  So, it could happen.  </P> <P>Terry Bronson:  Hi, Terry Bronson, Anthony s school in Milwaukee.  In some of this discussion on R&D, it s compared to medicine or engineering.  In medicine, if a new heart procedure come out, and surgeons don t follow that new procedure, they get sued and go to jail, lose their practice.  In engineering, a bridge falls down, if the engineer didn t follow the set of protocols for building the bridge, jail, out of a job.  The problem in education is, you still have people using leeches to treat heart disease, and nobody gets sued or goes to jail.  So, the question is, I don t want to get yelled at, so what s the incentive to do all this R&D in finding evidence-based programs if no one is ever required to implement them?  </P> <P>Anthony Bryk:  One of the things I do elude to in my paper, is, this is a supply problem in sort of how we do the R&D, but it s also a demand problem, which is part of the issue.  It s not as if public school leaders are deliberately using leeches when they know they don t work.  Part of it is, deep in the structure of the way resource allocation decisions are made in districts.  Larry Berger referred to that earlier, that, first off, there s very little money to buy innovations.  There are certain categories of things you buy.  You can buy textbooks.  So, an innovation in that space could conceivably be bought.  It s not accidental that Wireless Generation is kind of one of the successes in social entrepreneurs, because it s about assessments and districts have historically bought assessments, and the Federal Government helped a whole lot with Reading First, saying, you need to have things like this.  </P> <P>So there isn t much money in there, and, when it is there, it s contested with other issues about buying more people, because that s what districts normally do, you give them more money, they buy more people, or they wind up going into collective bargaining agreements.  So the money through innovation, at the demand side, in some sense, has to be protected.  One of the interesting cases, I had a conversation with David Vitale, who was the Chief Financial Officer for the Chicago Public Schools for a long period of time, and actually led a very substantial improvement in technology infrastructure in Chicago.  I asked David how he did it because this is one of those things that most districts try to do it with one-time money, or they get grants, or whatever, and he said, I did it as a capital item.  So it didn t come out of the budget, it came out of my capital budget.  And, of course, some of it is capital, the cabling.  But, he said, then we put all the hardware on leasing arrangements, it s treated in capital.  Well, you ve got to have human resource infrastructure, we treated that as a capital item.  And, so, that innovation came out of a protected pot of money that couldn t be used in other ways, and, in some form, the demand problem for innovation and public districts has got to be solved as well, and that starts as a funding problem and a kind of legal apparatus problem.  </P> <P>Frederick M. Hess:  Checker?  </P> <P>Checker Finn, Jr.:  It would be un-American to not be in favor of more research, and I talked a little bit about that myself.  Tony Bryk is always right about almost everything.  But, let s keep this in perspective.  Chris talked about the laws, Matt talked about not lingering very much in the mid part of the distribution of the dots, or whatever the hell you called that, and Stig talked this morning, very persuasively, I thought, about how we always end up researching the 20 percent or so of the education world that we actually think we might be able to change, and we ignore the 80 percent that needs the change the worst.  The large problems we re grappling with here are not lack of research, the large problems we re grappling with here have to do with laws and rules and power and courage.  Those aren t research topics nearly as much as they are political topics.  We could do all the research in the world, but if we don t deal with the laws and the rules and the power and courage we re not going to have a successful entrepreneurial sector.  </P> <P>Frederick M. Hess:  Wendy?  </P> <P>Wendy Kopp:  Just to reflect off of the last two questions, I do still truly question whether we will get transformational change by actually going down the path of asking these particular questions.  So, this question is, what are we going to do about the people who are doing a really bad job out there?  It s 90+ percent of what s going on.  Right?  Because we re trying to effect transformational change, so the question is, where do we find more Joel Klines, where do we find more Michelle Rhees, where do find the people are deeply committed, because they know that kids can achieve if they re given the opportunities they deserve?  </P> <P>Of course, we need more central R&D as well, but, the bigger problem is that we have local institutions, school districts, charter school management organizations, that, themselves, have virtually non-existent systems for continuous improvement and for research and development.  So to take one small example about teacher qualifications, we have school systems across the country with massive databases, knowing what achievement results their teachers achieve.  They can look back at what they knew about those teachers when they hired them.  They could run incredible studies to actually tell us, what are the personal characteristics that differentiate teachers who affect gains in student achievement?  How many districts are doing that?  Are there any?  And, honestly, who is best positioned to do that?  And who will do it, central R&D infrastructure, or a driven leader like a Michelle Rhee who says, I ve got to get my school district better, so I m going to start running this data so that we can start selecting our teachers differently.  I just think we have to think very locally.  </P> <P>All this stuff is incredibly important, but, to me, the fundamental question is, where are we going to get the deeply driven leadership?  How are we going to invest, how are we going to help them develop the systems that enable continuous improvement in R&D on their end?  So, I just want to make sure we re approaching it from the ground up, because we ve seen in the last five or six years, NCLB seemed like it had a ton of promise, but, has it affected transformational change?  It s trying to micro-regulate districts to success, and what we see is that doesn t work, it s all about local leadership and initiatives.  So how do we find more of it, how do we invest in their capacity to ultimately do great things?  </P> <P>Chris Whittle:  I want to differ with you here.  Your question was, how do we find more Joel Klines?  That is a research and development question.  The answer is, we haven t figured out how to do that.  We have 15,000 superintendents.  </P> <P>Checker Finn:  We can clone sheep.  </P> <P>Chris Whittle:  Yes, and there was substantial research and development projects behind that.  [Laughter].  But, that is an R&D question, and it s not so much an R question, it s a D question, meaning, it is not look at your neighbor, it s, figure out, through a lot of work, how you actually would have 15,000 Joel Kline types, because I know you re not wanting to clone.  And, or, how you would have 100,000 incredible school leaders.  The point is, we haven t figured that out.  </P> <P>Wendy Kopp:  I m all for investing some small tiny fraction in that.  Honestly, I think there are lots of people with theories out there, not just theories, but who are demonstrating results who can show you 90 percent of the path to that right now.  That s where 90 percent of our resources and energy needs to go.  </P> <P>Chris Whittle:  I agree, they can, how many times have you heard a superintendent say, we do all of that?  I agree that we have examples of great schools.  We do not know how to replicate them and bring them to scale. </P> <P>Wendy Kopp:  That s because ultimately this is all about execution and management and leadership and, unfortunately, more research isn t going to get us more leadership and management.  </P> <P>Frederick M. Hess:  Let me let Tony in here.  </P> <P>Anthony Bryk:  I ve got to really take issue with you, Wendy, because, there s beliefs, and then there s evidence.  I believe in Teach For America.  I believe in New Leaders for New Schools.  I started a charter school.  I ve advocated for charter management organizations, so, I believe in those things.  But then there s evidence, and, you know, we heard Jon Schnur this morning saying a lot of our New Leaders for New Schools aren t doing much better than the people whom they re replacing.  I heard Matt say, well, they SUX a little less.  Then I look at the research on Teach For America.  There are terrific people coming into Teach For America, but when I look at their productivity in the classroom, they don t look all that different from the productivity of other people.  </P> <P>So the issue, is, there are spectacular people in all of these organizations, but it goes back to Chris issue, we don t know how to do this at scale.  I go back to the generalization, now, it s possible schools are different, but in virtually any other sector, when you want to see improvement at scale, this is a problem of managed organizations, and it s a problem of design, engineering, and development.  When Kennedy said, we re going to the moon, he didn t say, I believe we can get there.  It was a huge investment in a research and development infrastructure that allowed that to happen.  </P> <P>Wendy Kopp:  I m coming from a vantage point where I have come to deeply believe, and I wouldn t argue with anything you said about Teach For America or New Leaders or anything else, but, so much of this is about strong leadership and strong management and strong execution at the local level.  Why isn t Teach For America better?  Because we haven t fully gotten where we need to be in terms of execution.  Why isn t every KIPP school great?  When you think what GE, going back to that example, has invested in becoming a truly well-managed, well-led at every level enterprise.  It s a massive, massive undertaking, and I want to be sure we re not oversimplifying this to think that we re going to get there through a lot of research, because what will actually get us there fundamentally is this is about that, and it s incredibly, incredibly challenging.  Everyone who is a practitioner knows it.  It s just incredibly challenging to do it well.  I think as long as we re not obsessing with that question we will never, ever effect transformational change.  </P> <P>Anthony Bryk:  Just, one other clarification, too, when I wrote in the paper about building an infrastructure, I never used the word central, and, in fact, that s also part of my reticence about putting it in the Federal Government.  This is, again, I think it picks up on Chris idea that freedom and flexibility and innovation is much better done out in decentralized areas, but you need mechanisms and infrastructure to support that.  </P> <P>Checker Finn:  For example, if, and this is a real question, if the Federal Government, a new infrastructure, perhaps, funded by the Federal Government, came to you and said, Wendy, we think the best organization in the world to figure out how to take quality teaching to scale is yours, and we want, over the next decade, you to be the head of research and development and distribution on that issue, and here s $500M to help.  </P> <P>Wendy Kopp:  I would say, no way, I don t believe that that s going to get us where we need to go.  I would.  It would take us another hour to really get into this, but, I wouldn t do that, because I don t think one person can.  I think that the answer is for, on that particular question, every school system needs to do what any very high-performing institution in any sector does, which is, just, go out and recruit people aggressively who have the characteristics that we know differentiate people who really succeed and need to invest in their development, not just before they start, but ongoing, and into their leadership development.  </P> <P>We need to develop really robust people pipelines and leadership pipelines, and that s actually the perfect classic example, because I know we can t solve the teacher problem centrally.  The only way we re going to do it is if we finally realize this is about institution-building, and, having a system where schools of that are expected to deal with teacher quality, while school systems deal with student achievement, is nuts.  Right?  We ve got to build the capacity in our school systems to develop their leadership.  </P> <P>Frederick M. Hess:  It sounds like we re talking past each other a little bit, because what you just described, Tony, seems similar, but I think we re just talking about it in different words.  </P> <P>Anthony Bryk:  It s very much in the spirit of it s rooted in the real problems on the job floor, that s where the agenda has to come from.  And, as I said in my presentation, it was second, it was developing people.  We don t know how to do that at school.  Schools of education clearly are not leading the way, and, it s one thing to build it for a small group, it s another thing to build it to work at scale.  </P> <P>Matt Candler:  You asked, that question, the only way to translate the medicine to education is like saying, we ve got to get some procedures so that everybody who ever thought about going to med school or ever applied to med school can effectively execute the procedure.  And that s basically leeches.  Right?  You re forgetting that medicine doesn t let everybody do the job.  This is slightly to back-up Wendy a little bit, we don t even think about developing talent, and medicine is not doing it with people at scale, they are weeding out the people who can t do it and doing it at the extreme with people who are capable and want to do it and bring a lot to the table.  So, I just want to acknowledge that there are two different things.  </P> <P>Frederick M. Hess:  We ll get something else up here.  </P> <P>Quinton Messer:  Hi, good afternoon, Quinton Messer, Edison Schools, and, I just have to say, I made a career transformation due to Checker Finn, so I want to thank him.  </P> <P>Checker Finn:  I m old enough to be his father too.  [Laughter].  </P> <P>Quinton Messer:  And, my mentor is Matt, and I followed Wendy at Princeton, and I wanted to go to Stanford, so there we have it.  Anyway, now the question.  We talked a lot through the day, and it was a tremendous day, about being a very politicized context.  We talked a lot, ironically, in AEI, about the Federal Government s role.  Given that we have an election on the horizon, given that the people who have traditionally been the fosters of supply, Republicans are now increasingly going back to sort of a state model.  What does that portend for any sort of large-scale R&D and D, Chris, if any, and then, the flipside of that, the undercurrent of all of this has been, we are in a politicized context, and Jim Shelton and others talked about it, the parent side.  Let s just be honest, when we re talking the parent side, we talk about rates, and we talk about the fact that despite schools.net being there, people are still making decisions that would not support data, for example.  So what do we do, one, if we go the other way, and then, two, can you research or create something to get people to be more intelligent? </P> <P>Frederick M. Hess:  That s a big question, and, it s about 5:10, so why don t we give you all each a final shot to make some final thoughts, and there s a lot in that question, feel free to kind of pick and choose, otherwise we ll be here until about 6:30.  Tony, do you want to?  </P> <P>Anthony Bryk:  I ve said plenty.  </P> <P>Frederick M. Hess:  Okay.  Matt?  </P> <P>Matt Candler:  Yes, I ll jump in.  Quinton, it s an amazing question, and I think that it s silly to talk about supply side without talking about demand side.  This is the Parent s Guide to Public Schools in New Orleans.  We ran 15,000 of these in the spring.  We ran another 5,000.  This is our acknowledgement that you have to do this work with the demand side in mind, which is why I m just convinced more and more that we need to do the R&D and D, and the talent development, and the politics within a locale, not nationally.  When you re just focusing on New Orleans, for example, you cannot get up in the morning without thinking about how you re going to get parents on board and on your side.  And, I ll confess, I used to be in the business, when I was on planes with KIPP I didn t care as much about that, I took it for granted.  I think it s really important that as you move us forward, Rick, and as others, who write better than I do and faster than I do, push us to talk next about the demand side, because I think it s insufficient to just say that we ll throw a bunch of supply and back the truck up and the solution will fall on the ground and everyone will grab it.  I think we ve got to understand how to connect the supply side to the demand side at the parent level, primarily.  </P> <P>Checker Finn, Jr.:  Well, it wouldn t be a Washington event if it didn t circle back to the election.  There are two risks there, one is that the Republicans will blindly trust the states, and the other is, the Democrats will blindly trust the unions.  I m not sure which is the worst fate, actually.  One of the good things about NCLB, and there are plenty of things that aren t so good about it, but one of the good things about it was, it did require a bi-partisan consensus in order for it to happen.  And, I predict that its reauthorization, if and when that day comes, is, again, going to require a bi-partisan consensus of some kind, which will tend to ameliorate the worst tendencies of each party, and I hope that s the case.  Nevertheless, we still do have to keep in mind that 93 percent of the money, and about 85 percent of the rules and regulations in education do come from states.  It would be folly, no matter how large an R&D apparatus we might install in Washington, it would be folly to expect decisions made in Washington to swamp the enormous, or important decisions that are made at the state level.  </P> <P>Frederick M. Hess:  Wendy, Chris, Tony, any final thoughts?  </P> <P>Anthony Bryk:  Just one final thought, this is really a global enterprise.  We have a way of thinking about this in very local terms, in very domestic terms.  But, as we talk about a flat-Earth economy, we re talking about developing people, we re talking about developing ideas, and the nation s that figure this out are the ones that are going to prosper in the 21st century, and the improvement of our educational systems are right at the core of the solution of this problem.  We have an enormous problem, starting with issues of governance, that makes us, a governance system, which was designed to protect local action, is now a governance system that s working against the kind of very rapid change we need.  It took us 15 years to get a definition, I had to count dropouts, in that same period of time a nation like China can dramatically expand its higher education system.  </P> <P>You ve got to think about this down at the micro-level where the work occurs.  But the fact that this exists in a global enterprise, and others are moving much faster than we are, and, for the first time, in this sphere, where we used to think about the international premise, we took American technology and we sent it abroad, there are now things happening faster abroad than are happening here, and we have to learn from them.   </P> <P>Chris Whittle:  I learned an important thing in the last 20 minutes, which was, as we were debating this topic of R&D, two poles seem to be developing.  And one was this sense of R&D means central and mandating a one-best system, one-best new system into the world of education, versus the other pole, which was a highly distributed local autonomy phenomenon.  I think that may be a false dichotomy, that we should all think about how to better communicate, particularly those of us that are advocating the research and development agenda, and I m walking away with that as my next assignment from you.  </P> <P>Frederick M. Hess:  Wendy, final thought?  </P> <P>Wendy Kopp:  Just reflecting on the question, I think about the parent piece because I think the question, how do we create the demand is so central to driving the betterance of the supply.  And, just think about, as one example, the power of having the technology systems, because I don t know how else you would do it, that would put real data in the hands of not only teachers and principals and states, but, parents and kids.  Whenever we find our transformational teachers, they are telling the parents of their kids, flat out, your kid is in the 6th grade, they re at the 2nd grade level, if you work with me they can be at the 5th or 6th grade level at the end of the year.  I think the only way we ll get where we re trying to go, even executionally, is to do that, but, at the same time, doing that is going to generate the demand.  But, again, it leads me back to the idea that if we were going to insure that our local systems are working to serve kids, approach that in a sophisticated way, as a GE approaches its work, what would it lead us to?  I think we need to spend massive resources figuring out, how do we create the local capacity to understand what s going on, and to continuously improve.  That s really all of my ranting, I think we need a totally different level in terms of the investment at the local level to enable the continuous improvement and the creation of transformation and excellence.  </P> <P>Frederick M. Hess:  We re going to make that the last word.  First, I d like to thank the Ewing Marion Kauffman Foundation, for making possible the scholarship and the gathering today.  Second, I would like to remind you all of that the papers, I think copies are still available and they re on CD, and you can also find these on the web at <A target=_blank href="http://www.aei.org/event1522" target=_blank>www.aei.org/event1522</A>.  I would particularly encourage you to check out all the papers today.  Unfortunately, time constraints mean that only a portion of the thinking that goes into them can be communicated.  We didn t spend a lot talking about what Checker flagged in the quality control issues, or what Matt flagged in how you do this stuff on the ground.  I would commend your attention as well to Tony s, just because these are issues that we can have really interesting conversations about, but we just don t spend a lot of time thinking or talking through.  </P> <P>I m going to invite all of you who care to join us in the next room for a glass of wine, but, before I do that, I just want to say thank you to Thomas Gift for the job of pulling this together.  And I want to thank the panelists for a phenomenally interesting session at the end of a long day.  So, thank you all very much.  [Applause].  </P> <P>[END OF PANEL V] </P></body></html>