GUEST BLOG: Poverty, Inequality and Opportunity

New national research reveals that America is still a land of opportunity, but many Indiana communities rank poorly in fostering upward economic mobility for children and youth.

According to Harvard University’s Equality of Opportunity Project, despite a growing income gap between wealthy Americans and the rest of the country, the prospects of moving up the economic ladder are at least the same and even a little better today compared with 1971.

After examining changes in income over time for 40 million children and their parents, the Harvard researchers concluded, “Contrary to the popular perception, measures of (economic) mobility have remained extremely stable. If anything mobility may have increased slightly. The rungs of the ladder have grown further apart, but children’s chances of climbing from lower to higher rungs have not changed.”

However, economic advancement is not equal in all places. The Harvard study divides the United States into 741 regions and ranks those regions on the likelihood of a child moving from the bottom fifth of income into the top fifth. Of the 17 regions in Indiana, only five – including cities such as Vincennes, Greensburg, Madison, Wabash and Lafayette – are above the national median.

More concerning, four Hoosier regions – including cities such as South Bend, Muncie, Richmond and Indianapolis – rank in the bottom fourth in the country. In fact, among the nation’s 50 largest metropolitan areas, children raised in the Indianapolis region have the fifth worst likelihood of improving economically.

Yet, people move to Central Indiana for jobs in life sciences, technology, health care, higher education, advanced manufacturing and logistics. So how can the region that includes the state’s capital city fare so poorly in comparisons of economic mobility?

“There’s an important distinction between kids who grow up in an area and kids who move to an area to find a job,” explained Sarah Abraham, a senior researcher in the Harvard study. “When we’re talking about (the Indianapolis region) being a place of low mobility, we’re talking about the kids who are born and raised in those school systems and in that environment.”

Quality K-12 education is essential, as is additional education after high school. Without discounting the importance of the other factors, Raj Chetty who leads the Harvard project and his colleagues place priority on raising educational outcomes to improve economic results – starting at the earliest grades.

“There’s an incredibly powerful relationship between kindergarten test scores and earnings 20 to 25 years later,” Chetty told the World Bank. “If we can figure out (how to help more of our youngest students succeed academically), we can potentially have really big effects on children’s success.”

Bill Stanczykiewicz is President & CEO of the Indiana Youth Institute. He can be reached at [email protected]

Not a Fan of Romney or Obama? Third Party Candidates Offer Views in Debate

It’s been a while since a third party candidate has really made a splash in the presidential election. Ross Perot garnered 19% of the popular vote back in 1992, and many left-leaners fault Ralph Nader’s Green Party bid in 2000 for serving as the reason Al Gore lost the election — although the onus should probably fall on the Supreme Court for that. (Additionally, this year’s Green Party nominee, Harvard educated physician Jill Stein, was arrested for trying to get into the first presidential debate.) But frankly, my favorite third party candidate in American history would have to be former-President Theodore Roosevelt, when he ran for a second term with the progressive Bull Moose Party.

Unless Libertarian and former New Mexico Governor Gary Johnson gets a surprising chunk of the vote and potentially hinders Romney’s chances (although many libertarians scoff at the notion that those votes would otherwise go to a Republican), it’s doubtful third parties will make an impact this year. However, Larry King moderated a debate between them on Tuesday, and it’s worth noting.

The New York Times blog The Caucus reports:

The call by the liberals, Jill Stein of the Green Party and Rocky Anderson of the Justice Party, for an end to the war on drugs was amplified by Gary Johnson, the Libertarian candidate. Mr. Johnson offered bona fides on the question: “I have drank alcohol, I have smoked marijuana” — though not anymore, he said. Even Virgil Goode of the conservative Constitution Party, who opposes legalization, said he would cut financing for federal drug enforcement in the name of closing the deficit.

But their passion and refusal to compromise on the principles that reflect their ideas of American democracy marked each person on stage. In an illustration of the circular nature of the political spectrum, the staunch liberals and small-government conservatives all firmly opposed the practice of indefinite detention without trial and said that the Pentagon’s budget should be cut as the United States takes a less aggressive posture.

“We cannot be the policemen of the world,” Mr. Goode said, followed shortly by Ms. Stein’s similar sentiment: “A foreign policy based on militarism and brute military force is making us less secure, not more secure.”

The particular set questions, submitted by social media and the event’s organizers, disproportionately addressed issues where the candidates’ views are alike. It took a question about the cost of college to reveal strong differences. Ms. Stein, a physician, and Mr. Anderson, a former Democrat and mayor of Salt Lake City, both said the government should provide free higher education. The right-leaning candidates both said they would cut Pell grants, Mr. Johnson reasoning that guaranteed government loans make universities “immune from pricing.”

And even Mr. Johnson and Mr. Goode had differences. The latter said he would cut off immigration until the unemployment rate dropped to 5 percent, while Mr. Johnson, a former New Mexico governor who unsuccessfully ran in the G.O.P. primary, wants to make it easier for immigrants to get work visas.

Both men have been seen as possible spoilers for Mitt Romney, and Mr. Goode seemed to particularly relish that potential. A former Virginia congressman, he overcame Republicans’ efforts to keep him off the ballot in that state, and he frequently contrasted his plans to cut the budget with the slower approach of the Republican ticket.

Workers Wasting Time Web Surfing? Study Suggests It May Not be the Worst Thing

Studies show American workers waste over an hour per day surfing online. Not ideal, right? But Harvard Business School researcher Marco Piovesan conducted a study concluding that those who are forbidden from Internet use may be even less productive. Read why (and check out the entire article):

To test the hypothesis, the researchers used a variation of the "Marshmallow Task," a classic psychological experiment in which children were shown one marshmallow, and told they would be rewarded with two marshmallows if they could resist the temptation to eat the first treat until the instructor returned to the room. Only 30 percent of the kids could hold out.

But instead of measuring wait time, the team measured the ability of children to complete actual work tasks—folding paper per instructions—at an Italian summer camp in 2008. Children facing temptation got less work done, even given the promise of eventual reward of candy and soda: They not only completed fewer tasks, but also made more mistakes, which downgraded their performance.

"We’d expect to find that being more flexible in monitoring Internet use could increase productivity."(The effect was particularly pronounced for children below age 9, who were found to be on average 21 percent less productive than the children in the control group—while for children over age 9, there was shown to be no significant difference, a finding consistent with previous research showing that children begin developing willpower between the ages of 8 and 10. For more, see their article "Temptation and Productivity: A Field Experiment with Children," forthcoming in the Journal of Economic Behavior & Organization.)

Despite the fact that the study was done with children, Piovesan saw clear implications for adults—hypothesizing that the effects would change not only with age, but also with the degree of temptation. "If we used the same temptation of candies in an office, probably we wouldn’t find anything, but using a different temptation that is stronger for older subjects, the effect would be stronger."

In a recent set of experiments detailed in "Temptation at Work," Piovesan and his colleagues tested exactly that using 20- to 25-year-old college students in an office environment. Instead of paper-folding, the test subjects were given a simple task of counting the number of times people passed a ball back and forth in a video. Between tasks, however, half of the subjects were allowed to watch a video of the British comedy TV show Mr. Bean. The other half were confronted with a flashing red button at the bottom of their screens warning them not to play the video. Upping the temptation, the latter group was able to overhear the video playing nearby and laughter of the students.

As with the summer camp kids, the researchers found that the students facing temptation were more apt to make mistakes and were less productive overall than the control students, underscoring that no matter how much willpower we adults think we have, we are still susceptible to tempting distractions.

Venturing Along the Capital Trail

That headline is a cute way of saying "who are the recipients of venture capital?" CB Insights, a New York-based services firm for the financial industry, tried to answer that question in a recent study. You can sign up for free to get the full report, but I found this analysis from the State Science & Technology Institute provided a good overview.

 A CB Insights’ report on the "human capital" of venture-backed Internet companies finds that vast majority of company founders are white. They also tend to be between 35 and 44 years old, male and have MBAs.

When venture capitalists are asked the most important factor in choosing a company for a deal, they often say that the founder or team weighs heaviest in their decisions. CB Insights drills down into this human element by providing data on the founders of Internet companies that received venture capital in the first half of 2010. The study includes data on race, age and experience, the number of founders per company, gender and the educational background/pedigree of the founders. It also provides specific data on deals in California, Massachusetts and New York.

Within the 165 deals tracked in the study, 87 percent of early stage, venture-backed Internet startup founders were white, with 83 percent of entire founding teams being all white. Only 77 percent of the general U.S. population is white. Asian founders represented 12 percent of founders, while making up 4 percent of the U.S. population. The percentage of Asian founders was larger in California, and their companies tended to receive larger investments. Black founders accounted for only 1 percent of company founders, while Native Americans and "other" represented less than one percent.

The founders in the study were overwhelmingly male. Across the country, 92 percent of founders were male and 86 percent of teams were all male. Massachusetts had the highest percentage of female founders with 27 percent. All-male and all-female teams received similar levels of funding, but mixed teams received substantially more.

Almost half of the founding teams had average ages between 35 and 44. Teams in the 26-34 age range, however, tended to receive more capital. Massachusetts favored somewhat older teams, New York favored younger teams, and California teams fell in the middle. Nationally, 51 percent of founders hold a Master’s or PhD, but two-thirds of all teams had at least one person with an advanced degree. In New York, founders with only an undergraduate degree actually tended to raise more capital. Cornell, Stanford and Harvard produced the most founders with undergraduate degrees. Harvard, Stanford and MIT’s graduate programs generated the most founders with advanced degrees. About 37 percent of companies had one founder, 40 percent had two, 19 percent had three, and 4 percent had four partners.

While providing an interesting snapshot of the founders who received funding in the first half of 2010, there are limits on the conclusions that can be drawn from the CB Insights report. It focuses exclusively on venture-backed Internet companies, and, since it is the first in a series of reports, no trend data is yet available. Also, without data on who is seeking for venture funding, the report does not reveal much about the preferences of venture firms. It is clear, however, that the population of venture-backed founders included in the study does not reflect the diversity of the U.S. population.

In the Cards: Ball State Thrives with Smartphone Technology

Indiana is truly blessed to have the many esteemed public institutions of higher learning that it does. Thanks to efforts from Indiana schools, men have walked on the moon, more people now survive cancer (ask Lance Armstrong) and our food is grown incredibly efficiently. But lest we not forget, the fine folks in Muncie are considered a national leader in the world of technology. Here is just one example:

Under the direction of computer science professor Paul Gestwicki students spent an entire semester developing several dozens applications for Google Android. The new smart phone operating system was launched in 2009 and quickly is proving popular with consumers as potential rival to the BlackBerry and the iPhone.

When they were done in fall 2009, 18 students with no computer programming experience had created a bird-watching program, several games, an English-to-Spanish tutoring system, math flashcards, and a Dungeons and Dragons character generator with Web-based database storage capability.

"This was an incredible experience because it opened new doors and new ways of thinking for all of us," says Travis Cawthorn, ’12, of Frankton, Indiana, majoring in accounting. "I created a game that should be fun to play with for hours. Let’s be honest, many students my age use smart phones for entertainment."

The class was part of an experimental partnership between Google and several technology-centered universities including Ball State, Harvard, Massachusetts Institute of Technology (MIT), University of Colorado, and University of Michigan.

Google provided the class with 20 G1 developer phones loaded with Google’s Android operating system and gave them access to the new App Inventor for Android, which makes it possible for users with no programming experience to create mobile applications.

And stay tuned for our September/October edition of BizVoice for my article on Ball State’s WiMAX test bed. The school’s work is helping America’s top companies perfect their wireless broadband technologies and rendering Ball State an archetype in the field.

The Morning People Shall Inherit the Earth

An intriguing article by biologist Christoph Randler from the Harvard Business Review contends that morning people are actually most successful in the business world, due to their proclivity to be more proactive. Honestly, it makes a lot of sense.

And if you’re not a morning person (I’m not either), just please don’t be like that guy in a recent McDonald’s commercial who refused to speak to anyone – regardless of the critical nature of their inquiry – until he had his coffee. Oh, you’re so precious and delicate that no mere mortal is allowed to speak to you until you’ve had some caffeine? Wish somebody in that ad would’ve just said, "Great, here’s some scalding Folgers in your face. You awake now, tough guy?"

Anyway, here’s an excerpt:

If I wanted to train myself to be a morning person, how would I do it?

The fascinating thing about our findings is that duration of sleep has nothing to do with the increased proactivity and morning alertness that we see among morning people. But while the number of hours of sleep doesn’t matter, the timing of sleep does. So you could try shifting your daily cycle by going to bed earlier. Another thing you could do is go outside into the daylight early in the morning. The daylight resets your circadian clock and helps shift you toward morningness. If you go outside only in the evening, you tend to shift toward eveningness.

If I taught myself to be a morning person, would I become more proactive?

I don’t know. One theory is that morning people are more proactive because getting up early gives them more time to prepare for the day. If that’s true, then increasing your morningness might improve your proactivity. But there’s evidence that something inherent may determine proactivity. Studies show that conscientiousness is also associated with morningness. Perhaps proactivity grows out of conscientiousness.

Brokaw Among Those Whose College Rejection had Positive Outcome

Building upon higher education week on our blog last week is an interesting article from the Wall Street Journal illustrating how getting rejected from their first college choices served to motivate some who became icons in their fields. Case in point is Tom Brokaw, broadcast journalist and keynote speaker at our 21st Annual Awards Dinner in November:

And broadcast journalist Tom Brokaw, also rejected as a teenager by Harvard, says it was one of a series of setbacks that eventually led him to settle down, stop partying and commit to finishing college and working in broadcast journalism. “The initial stumble was critical in getting me launched,” he says.

Future MLB Hall of Famer Throws Efforts Toward Business Start-Up

A little interesting story from the BusinessWeek blog. Outspoken pitching great Curt Schilling recently joined a Harvard business class to help him cultivate a plan for his new gaming company. Thus far, there are no plans for the company to sell bloody socks (though it may be an underrated niche):

My favorite line for the day was when, during the Q&A session at the end, Schilling started off by confessing, "After one year at a junior college and a 23 year in professional baseball, it cost me nearly $30 million to get to Harvard." The comment was in reference to the fact that Schilling has been funding 38 Studios almost entirely out of his own pocket. Many VCs turned him down when he first launched the company in 2006 and 2007 (including me, which is the subject of a funny story, where a VC buddy of mine and I ended up having dinner with Schilling alongside our then 7 year old sons in Fort Meyers, FL in 2007 while he was in the midst of Spring Training, but that’s another story for another day).

Putting aside celebrity and baseball, the case has two pedagogical lessons:

Entrepreneurs who have been successful in one field and have developed a "blueprint" for what it takes to be successful, can sometimes struggle to translate that blueprint into a new field. Therefore, they should be thoughtful about what skills and habits they should adapt to develop a new blueprint that suits the new field. I have been through this myself personally when, after being an enterprise software entrepreneur at early e-commerce leader Open Market in the 1990s, I embarked on becoming a consumer Internet entrepreneur at Upromise and had to learn a whole new blueprint (never mind learn the VC blueprint I find myself still adapting to since I made that conversion seven years ago!).

Harnessing and containing strong, visionary founders is a tricky endeavor, but there are some useful techniques that can be applied to improve the chances of success. Some of the students had worked with Jeff Bezos, Michael Dell, and other larger-than-life founders, and shared their related challenges and lessons learned in those environments. In many situations, the founder is a creative force of nature rather than an experienced operating manager, and skillfully managing the tension between those two essential ingredients can make or break a start-up.
 

Economist/Presidential Advisor Bearish on Recovery at Economic Club Lunch

Martin Feldstein – one of the most respected economists of our time – spoke a cautionary message at the Economic Club of Indiana luncheon in Indianapolis Tuesday.

“Reports of the economic recovery have been greatly exaggerated,” Feldstein said.

As a long-time Harvard professor of economics, Feldstein has educated many of today’s economic leaders. He has also served in top advisory roles for three of the past five U.S. Presidents. While acknowledging the consensus among professional forecasters that we are in an economic recovery, Feldstein remains skeptical about the sustainability of current growth.

“Many of the recent positive (economic) numbers are from temporary policy changes such as the stimulus package and first time home buyer tax credit,” Feldstein explains.

Feldstein supports the idea of using fiscal policy to end the recession but feels the Obama administration’s programs were poorly designed and ultimately failed. His long range concerns are based on the housing market – in which one-third of homebuyers owe more money on their loan than the home is currently worth – and the growth in national debt. 

In total, Feldstein feels that the economic outlook is a mixed picture – with the decrease in value of the dollar versus other world currencies making American goods more affordable and reducing trade deficits. He believes the prospects for a recovery are based largely on the household savings rate in 2010. An increased savings rate – while typically seen as beneficial for individual families – would delay the overall economic recovery by slowing consumption. The current national savings rate of 4-5% is double what it was immediately prior to the recession.

Goldsmith: Electronic Records Transformative, Though Challenges Exist

Former Indianapolis Mayor Stephen Goldsmith touts the innovation of the push toward electronic health (and other types of) records. Although, there are challenges in building the connecting networks, he contends. Read his column on the matter in Governing:

Whether one is discussing health care, education, housing, or any of the other myriad and complex public challenges, the path to transformative breakthroughs starts with electronic records. Unfortunately even the process of creating electronic records presents enormously difficult issues. In my work as a prosecutor and mayor, I found that every entity can see how easier access to data from other organizations will facilitate better decision-making — but inevitably, each entity questions whether the other organizations can be trusted with its information.

To move toward an integrated network of digital information requires that participants agree on terms, governance, protocols and a process to mediate conflicts. Designing these data networks is complicated because you’re actually creating a network of networks, all of which have their own issues. A hospital will manage a network of providers and interested parties — including, for example, its clinics and its doctors. Yet this network will also be part of the statewide electronic network. To the governor’s health secretary, he or she is at the network’s center, but to the hospital president, or medical group administrator, or community health center, they are the center, and their efforts and interests take precedence. Harmonizing these interests requires careful mapping and understanding of the consequences.

That is the easy stuff. The electronic record is a step towards better outcomes, not an end in itself. Who, for instance, gets to define the outcomes, especially when an outcome that is central to one party is not so central to others? Huge amounts of accessible data can now be managed to provide insights that will dramatically improve public interventions, but that management requires careful consideration about how it happens, who supports it and how the data gets to the field worker. Too often these systems serve the person at the top but not the person really doing the work. We have seen this in, for instance, large federally supported child welfare systems that view the job of the caseworker as less important than supporting oversight in Washington.