Thread by @ReformedTrader

1/ Common Sense: The Investor's Guide to Equality, Opportunity, and Growth (Joel Greenblatt)

"How can we use the strengths of our government, the dynamism of our private sector, and the power of incentives to achieve more opportunity for everyone?" (p.6)

amazon.com/Common-Sense-I…

2/ "Thinking like a long-term investor rather than an accountant at the Congressional Budget Office could come in handy as we try to help our workforce navigate new disruptions." (p. 2)

Greenblatt discusses this book in a March 2021 interview:

https://twitter.com/ReformedTrader/status/1369797842454208513

3/ "Bill Gates has called education reform more difficult than eradicating polio, malaria, or tuberculosis. Much of what I write is disturbing, but we can work around the current system to create real opportunity for students and adults of all backgrounds." (p. 2)

4/ "Kids in lower-income neighborhoods are assigned to locally zoned district schools. Most families can’t afford to move to a neighborhood with a better school. If an individual school were to significantly improve, rents would rise, and poorer families would have to move.

5/ "One potential fix would be to break the relationship between zip code and the schools children attend.

"In theory, public school 'vouchers' [such as Senator Warren's proposal] would make sense and encourage competition between schools.

6/ ""New York City has a Public School Choice program. But kids in good district schools aren’t forced to leave, so there aren’t many spots available.

"Part of the answer may lie in solving some of the other problems (poverty, crime, drugs, health and family issues) first.

7/ "It’s not clear that government interventions work. Started toward the end of the G.W. Bush administration and significantly expanded under Obama, the School Improvement Grants (SIG) program spent a total of $7 billion in an attempt to improve underperforming schools.

8/ "This included replacing principals/teachers, instructional reforms, new governance, increased learning time, more flexibility, and restarting entire schools. In an unusually blunt government version of “we spent a lot of money and didn’t help anyone,” the 2017 report stated:

9/ "We found no effect of SIG-funded models on student outcomes… When we examined the impacts of SIG-funded models on math and reading test scores, high school graduation, and college enrollment… we found no significant impacts within student and school subgroups." (p. 11)

10/ "The most recent $773 million intervention in NYC to fix failing schools has been equally unsuccessful.

"A school where 7% of students were reading at grade level only had to improve to 8%—two years later—to meet the standard for improvement, but the program largely failed.

11/ "Union leader Ernest Logan of the Council of School Supervisors and Administrators asserted, “If I told you that we spent $14,000-plus a kid and you know what you only got is a 1% improvement, you’d run me out of the country.” " (p. 14)

12/ "Over the past fifty years, as per-pupil spending in the United States has doubled in real terms, average reading and math scores on the National Assessment of Educational Progress (NAEP) exam haven’t improved at all." (p. 16)

13/ "In contrast, the schools in the Success Academy Charter Network are performing quite well. Most of the schools are located in the poorest areas of New York City, with 87% children of color and 75% from economically disadvantaged backgrounds.

14/ "In 2019, >90% of Success students passed state math and English tests, while <40% of similar students in the city’s district schools passed the same tests. This made Success #1 for achievement in all of New York, outperforming every wealthy suburban district in the state.

15/ "Success students with disabilities outperformed district school students without disabilities. English Language Learners at Success (formerly known as ESL) outperformed district students whose first language was English on the English exam.

16/ "Test scores were not affected by race or ethnicity. Black, brown, and white kids performed equally well on both English and math tests, completely eliminating any achievement gap." (p. 16)

17/ "In the 1970s, Soviet trains arrived too early or too late. In the centrally controlled system, with no input from customers and no checks from the marketplace, misguided incentives and goals weren’t corrected. The train was literally leaving the station with no one on it.

18/ "Similarly, quality is ignored when determining which public schools (district/charter) have access to public-school space.

"Money follows the student. If she gets into a charter school, the government funding for that student goes to the charter, not to the district school.

19/ "Most district school employees in New York are unionized; most charter school principals and teachers are not. Every new charter student removes money, power, and control from districts, unions, and local government.

20/ "The 200-page union contract has limiting work and supervision rules and virtually no effective provision to remove underperforming teachers.

"The United Federation of Teachers tried to show that its work contract was not an impediment by opening its own charter in 2005.

21/ "After several conditional extensions, the UFT school was finally closed by the state a decade later as one of the lowest performing in New York. In 2014, just 1.2% of seventh graders passed the state reading test and 2% of eighth graders passed the state math test." (p. 22)

22/ "Researchers from MIT compared students who had won the lottery to enter a charter school with students who had lost.

"Four years of charter high school enrollment in Massachusetts were enough to completely close the black-white achievement gap in both reading and math.

23/ "Wealthy and middle-class suburban neighborhoods voted overwhelmingly against charters. Those who had the resources to move where they were happy with district schools voted that parents trapped in communities with underperforming schools shouldn't have access to charters.

24/ "When a district school loses a student to a charter school, the district school still receives 100% of the funding for the student in the first year after she leaves. For the next five years, the district school still receives 25% of the state funds for the departed student.

25/ "They are also reimbursed for facilities costs and receive additional local funding: funding per pupil goes up for district students. In the five years after 2011, the Boston Public School budget for district schools increased 23.4% while district school enrollment decreased.

26/ "So growth in charter schools doesn’t hurt district school funding. During those five years, district school math and English scores improved significantly, both in Boston and in the next ten Massachusetts districts with the highest concentration of charter schools." (p. 27)

27/ "In 2016, 150 new students entered Success Academy after attending third grade at another New York school the prior year. After less than one year at Success, these new students went from 39% passing the state math exam at their old school (below the city average) to 92%.

28/ "In English, scores jumped over 40% to 85% passing, more than double the city rate. The great results couldn’t be due to Success getting better students or more engaged parents: these were the same students and the same parents.

29/ "At Success, poor, low-income, and homeless children outperform children in the wealthiest suburban school districts; students accepted by lottery outperform students who have tested in to Gifted and Talented schools.

30/ "A study of NYC schools performed showed that “students in district schools do better when charters open nearby: students in these schools earn higher scores on reading and math tests and are less likely to repeat a grade. The closer the schools, the larger the effect.”

31/ "The study also found that the more charters there are in a neighborhood, the better the district schools in that neighborhood do on state tests. It concluded that charter school entry produces no significant demographic changes in district schools...

32/ "including no changes for district schools in the percentage of underrepresented minority groups, special education students, or students that require individualized education programs." (p. 30)

33/ "The goal of our current system is to complete 2-4 years of college. Yet only half of those graduates end up in careers that require a college diploma.

"Between tuition, living expenses, and foregone income, college is expensive, particularly for families with limited means.

34/ "Most student debt isn’t dismissible—even in bankruptcy—delaying the opportunity to build a family, buy a home, or start a new business.

"Job candidates could show accomplishment without a traditional diploma if we implement a system of alternative certification." (p. 46)

35/ "Alternative certification would be a credential that employers could consider instead of, or in addition to, a traditional degree. Companies would consider job applicants who have passed courses or done well on a series of tests for skills that employers find valuable.

36/ "Top-tier companies would need to develop standards apart from a traditional diploma that correlate well with future job performance.

"Arum and Roksa found that students in the U.S. barely improve critical thinking, complex reasoning, and writing skills while in college.

37/ "Bryan Caplan argues that employers value a high school or college degree mostly as a signaling device. It signals “intelligence, conscientiousness, and conformity.”

"He figures the split is 80% signaling and 20% acquisition of human capital (skills, knowledge, experience).

38/ "Dropping out of school, even one credit shy of completion, costs you a ton in the job market, but very little in the learning department. Employers value finishing senior year far more highly than completing freshman, sophomore, and junior year combined." (p. 49)

39/ "Without government involvement, the costs of the alternative certification system would be much lower. Tutoring services and classes (both for-profit and non-profit), as well as individual tutors, would not have to be accredited, thereby opening up supply." (p. 54)

40/ "Starting with a Supreme Court ruling in Griggs v. Duke Power Co., employers cannot use employment practices that have a disparate impact on one group of people (classified by race, religion, sex, national origin) versus another.

41/ "If an employer administers an employment test in which one race/sex does better than another, the results would be considered discrimination whether or not the test appears discriminatory on its face or whether there was any intentional discrimination by the employer.

42/ "There are two ways out of this bind. Under the law, one can show a “business necessity” in which the test has a direct relationship to the requirements of a job. The other would be for employers not to administer the tests themselves and not to make the tests a requirement.

43/ "Technically, under the disparate-impact standard, requiring a college degree for most job openings should qualify as employment discrimination—but 'a long habit of not thinking a thing wrong gives it a superficial appearance of being right (Thomas Paine).' " (p. 58)

44/ "Apple, IBM, JPMorgan, and other top companies are already making a push to hire candidates that don’t have four-year degrees. Several of these leading companies support vocational programs and partner with community colleges and philanthropies to train students.

45/ "IBM has a small but growing apprenticeship program for non-college graduates and also provides online training materials in a number of technical areas that can result in “badges” and certificates of accomplishment. These can be used for potential jobs at IBM or elsewhere.

46/ "Other companies are in the early stages of similar efforts as well. JPMorgan CEO, Jamie Dimon, has it right: “The new world of work is about skills, not necessarily degrees.” " (p. 62)

47/ "With alternative certification, students would no longer be as disadvantaged by poor schools, immaturity, slower development, lack of support at home, age, or initial ability.

"The prize of a good job would be on the table regardless of the means to get there." (p. 64)

48/ On the minimum wage: "What if your skill set doesn't justify $15/hour? Foreign competition in lower-wage countries may make your employer's services non-competitive. Employers will be even more incentivized to replace higher-priced people with cheaper machines." (p. 71)

49/ "For every 100 skilled foreign-born workers allowed to work in the U.S., 183 additional jobs are created for American workers. Bill Gates: “Microsoft has found that for every H-1B hire we make, we add, on average, 4 additional employees to support them in various capacities.”

50/ "We are so restrictive that only 7% of green cards are issued based on employment qualifications; the vast majority are granted based on family relationships. Our other option to encourage skilled immigration, H-1B visas, is a limited, inefficient, expensive ($10,00+) mess.

51/ "If a business finds a foreign national it would like to hire in July, it must wait until April to apply for an H-1B visa and hopefully get approval 3-6 months after that. It’s tough to wait a year or more to hire talent. H-1Bs are good for only 3 years without an extension.

52/ "The United States should be a “brain magnet,” with the ability to “import” talented immigrants as a natural resource. And we need them. As our citizens age and birthrates decline, fewer workers are available to support our current and future retirees." (p. 87)

53/ "In contrast, each immigrant without a high school diploma costs us $117,000 (the current net cost in today’s dollars of government services that will be received less taxes that will be collected from these immigrants and their descendants).

54/ "Complicating matters, most taxes paid by immigrants go to the federal government, while most of the costs of schooling, health care, police, and infrastructure fall on state and local governments.

55/ "If our goal is to help as many refugees as possible, according to the Center for Immigration Studies, it is twelve times more expensive to resettle a refugee in the U.S. than to feed, house, and find work for that same refugee in the safest neighboring country." (p. 91)

56/ "Extra regulation has come at a price: less access to credit for smaller and new businesses. Not only are small business loans considered riskier, requiring more bank capital, but more regulation has made it tougher for the small banks who make many of these loans to compete.

57/ "Larger banks can better handle the regulatory costs. Small banks can’t afford the extra staff and expense.

"Dodd-Frank and other regulations have made it so difficult for small banks that the number of new bank charters issued each year has fallen by 90% vs. pre-2008.

58/ "Since 2010, commercial and industrial loans of less than $1 million have plunged. At the same time, bank loans for larger businesses that borrow over $1 million have almost doubled.

"Net small business formation has dropped off >75% since the crisis began.

59/ "An alternative would be to restructure the incentives within the banking system from the beginning, aligning things so that the risks of failure and the benefits of success fall where they should. And what that really means is that banks need more equity capital." (p. 104)

60/ "Australians have already collectively saved the equivalent of $2 trillion U.S. If we adjust for the relative size of the U.S., that would be like Americans saving $30 trillion for retirement in superannuation accounts—the combined value of every publicly traded U.S. company.

61/ "Employers in Australia contribute 9.5% of wages to a fund chosen by the employee. The contributions are tax-deductible for employer and non-taxable for employee.

"An Age Pension supplements savings for retirees that don't have enough to make it through retirement." (p. 114)

62/ "At the current rate of contributions/payouts, our Social Security trust fund will be gone in 15 years. As the population ages, the math starts to work against us.

"The people who need 401(k)s and IRAs the most don't have them.

"How about just copying Australia?" (p. 117)

63/ "Let's divert Social Security taxes to personal retirement accounts. Compounding early [at more than the Treasury rate] is the key.

"We could lift the contribution limit but 'tax' the additional contributions, redirecting that 15-20% to accounts of those with lower incomes.

64/ "The tax benefits for high earners would theoretically make up for this 15-20% up-front tax. As opposed to compulsory taxes, these additional contributions would be voluntary.

"For this to work, everyone would need to set up a retirement account (a good thing)." (p. 125)

65/ "We all want more opportunity and to grow the economic pie for the benefit of everyone. The more ideas we share, the more discussion we have and the less fighting we engage in, the faster we'll reach our mutual goals."

66/ Thread:

"At bulk pricing (assuming $85/device), the U.S. per capita public library expenditure is enough to buy one Kindle per 2.36 people in the country and subsequently supply each device with $85 of reading material per year."

https://twitter.com/ReformedTrader/status/1307388049861390336

67/ Counterpoint:

https://twitter.com/BillAdelberger/status/1373390023064743940