Price Point: Raise student loan interest rates.

Summary:  The easy access to cheap federal financing has created a tuition bubble.  The cost of tuition is not tied to it's true value or the real costs of educating students, but to the massive demand for education which has been inflated by federal programs.

I've railed several times against the cost of education, especially graduate education.  I'm convinced that tuition and state funding are tied to manipulated supply and demand curves rather than the actual cost of service.  Unfortunately, since schools are mini government bureaucracies, the expenses tend to rise to or above the revenue.
There has been a recent hub-bub about subsidized student loan rates going up (the reductions are expiring).  Allowing these rates to return to 6.4% is seen as an assault on students and the poor/middle class families many of them come from.  I recognize that the immediate effects of a rate hike can be nasty, especially on those students who pay their interest payments during school.  However, I would like to focus on students entering school in 2014.

Let's assume that President Obama or Romney decide to extend these lower rates into 2016.  Also assume that President Obama takes other measures to ensure access to government loans and more affordable education through grants and other financial instruments.

The direct effect of rate reductions is to make leveraging your future wages more affordable.  The interest costs of $50,000 in student loans are $266.67 per month at 6.4% and $141.67 per month at 3.4%.  That $125 a month in savings would pay your electric bill or your car insurance.

The indirect of rate reductions, however, is to increase the demand for education at expensive institutions.  (The rate changes won't affect demand at cheap colleges as much because the savings will not be as significant).  Furthermore, the effect of easy access to financing in addition to a rate reduction is to explode the demand for education.

For example, there is no way I could have personally financed my legal education, and private loans seemed insane to me.  The easy access to federal loans and great consolidation programs provided just enough security for me to invest so heavily in education.   I added up all the loans I would need and figured out what the payments would be in the future.  Then I decided whether my probable income as a lawyer would be sufficient to cover the lifestyle I wanted, retirement (ha!) and the loan payments.  Because of the semi-affordable (yet soul crushing) interest rates, I decided that it was a worthwhile investment.

But what if the rates were high, or if the schools required a massive down payment?  Or what if every student loan required four co-signers?  Demand for education would drop.  Universities would be left with a few options: 1) Raise tuition on those who can pay (not likely to work for lower ranked universities); 2) cut costs and drop tuition; 3) Beg the state for more money; or 4) cut costs, keep tuition the same, and have less students.

If option 1 happened, you'd inevitably see more low-end competitors dropping prices.  Better students would opt for lower ranked institutions, and more employers would hire from lower ranked institutions, and those institutions would suddenly rise in the rankings.  Alternatively, employers would be forced to hire workers who were not as educated or finance the education of their employees.  Professional and technical schools would quickly begin to take a greater share of the market.  Additionally, you'd see degrees that do not generate significant income either vanish or become much cheaper. (Why in the world does an english degree cost the same amount as a organic chemistry or computer science degree?)  Liberal arts education might suffer, but much of this education could now be done online.

If option 2 happened, then the more expensive financing options would be offset by lower tuition costs.  Anyone who has ever gone to a major university knows that money is wasted like crazy.  Tuition, donations, and state funding are all hogged up with ravenous hunger, and trust funds continue to grow regardless of waste and luxury.   If the numerous "non-profit" schools could somehow tie tuition to actual cost of education, you'd see the market work much more effectively.

Option 3 is a no-go at this point, but some states might do it.  I think it would be insane.

Option 4 would probably be fine as well.  Education is wonderful, but it's not as restricted as it used to be. You can access free Harvard and MIT lectures on a number of websites.  Obviously the information is valuable, but institutions charge for the degree, not the information.  A fancy school degree is great primarily because employers hire students with fancy degrees.  The quality of education at cheaper institutions is often very high (depending on the quality of the student). If a prospective employer wanted you to take 6 credits of math, science, and foreign language, they could require all applicants to possess it.   If society benefited greatly from a well-rounded education, then charities, states, and donors could supplement the "less practical" fields.

So while I understand that there are drawbacks to options 1-4, I think they are necessary to make the cost of formal education more closely resemble it's true value.  You'll hear thousands of people whining about student loan interest rates and an "unfair deal", but I doubt they've really thought through the ramifications of federal interference in the education market.

Consider an additional example in the legal field.   There are several Tier 4 law schools (presumed to be ranked below 130 in the nation) with tuition levels every bit as high as the top 14 law schools.  There is a high demand for these low end schools because there are plenty of students with average LSAT scores and GPAs who cannot gain admission to Harvard or Yale.  In most areas, the lower quality products are cheaper because everyone has access to the higher quality stuff and the price point determines whether they will buy a particular good. (Demand on goods is rarely lower than supply, but there are exceptions like nintendo wiis and iphones.)
Harvard and Yale's high rankings are primarily due to prestige, which attracts the best teachers and students. (I'll write about how rankings are driven by student quality (aka employer demand) later).  As a result of the high student quality and high ranking, most ivy educated law students get good jobs, and the investment pays off.  However, a high percentage of tier 4 law students end up wasting a ton of time and money because there are more students than jobs.

So why do so many people risk so much to go to crappy schools and face a 50/50 shot of never being a lawyer?   Human Nature.   Humans are far more eager to risk future gains than sacrifice current money.  If you required a $50,000 down payment in cash to go to a T4 school, almost nobody would go.  But when you spread out the 100,000-150,000 in loans over 25 years, many students figure they are the exception, and the "investment" is worth the risk.

Now read through that again and see if you agree with me on how ludicrous it is.   In what industry can you obtain the same level of financing regardless of product quality or reasonable rate of return?   If you can prove you can pay the payment, you can probably get 500k in financing for a 550k home.  But you can't get 500k in financing for a 250k home.   The truth is, most private lenders would never invest money in a tier 4 law student unless they could come up with a true business plan for how they were going to make money.  Only the government would apply funds so recklessly... they can get current voters by offering great "education" reforms, and then they'll be long out of office before the taxpayers get nailed with the billions (or trillions) in defaulted loans.

Reducing the rates is a grant... and the grant is applied evenly regardless of merit.  Why subsidize all programs the same?  And why subsidize all students the same?  If you want to give a grant because a student is poor, then do that.  If you want to give a grant because the student is exceptional, then do that.  But don't pretend that lower student loan rates are good for anyone in this insane economy.

Romneycare vs. Obama Care (Short)

I'd love to spend all day writing about this topic, but I can't. I do want to say that those arguing that what Mitt Romney did is the same as what Pelosi and President Obama did are crazy.

Two main principles:

Limited Powers and the Tenth Amendment

Police Power

The founders knew that they would never get a constitution on the books unless they made concessions with the states. The end solution was for a powerful, but very limited federal government. "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people."

There are many reasons why the 10th amendment was a good idea. Among them are First, it's the reason the country survived; second, the states became laboratories for experimentation; third, freedom increased wildly because people could move to other states freely if they were looking for different laws or environments.

There are many cases which have expanded (or just interpreted) federal congressional power. The necessary and proper clause and the commerce clause are two of the main provisions that congress uses to justify it's actions. "Obamacare," at a minimum, stretches the commerce power. Many argue that the Raich court case provides a precedent to uphold the individual mandate. I think Raich was wrong, and I think this case is distinct from Raich.

By contrast, Massachussets has broader powers including a police power. Romneycare could possibly be unconstitutional under the Massachusetts constitution, and it could be argued that it violates the first, fourth, fifth, and sixth amendments to the federal bill of rights. However, Romneycare is not analyzed under the federal commerce power. The analysis would be wildly different. Furthermore, anyone who wishes not to be involved in Romneycare can move to another state, which is much easier that moving to another country.

I am moderately federalist, (meaning, I believe most decisions should be made at the lowest (local) political level possible. I want states to have more freedom because I want to have options in the future. I hope that some states can remain as havens for freedom. I hope those states offer few entitlements and require great personal responsibility. And I hope those states can prove that through freedom and responsibility, citizens may gain prosperity. Unfortunately, federal involvement in almost anything is making it nearly impossible for any states to engage in the psuedo-libertarian model.

I support what Governor Romney did even though I don't completely agree with the bill, but that doesn't mean that he would do, or be allowed to do, the same thing at the federal level.

The Individual Health Insurance Mandate

My two-year-old post on the individual health insurance mandate.

If the average patient does not know or care about the cost of her healthcare, it will never be "affordable."

But before we get to that, I need to address the core issue:

Is health care a fundamental right? I believe it is to a certain extent. We can debate that all you want, but it won't be that effective. Instead, let's talk about fundamental rights for a moment.

The Right to Privacy from unreasonable searches and seizures

You have a fundamental right to privacy under the bill of rights. Privacy from your neighbors?? Nope. Sure, you can sue someone for trespassing (probably not going to get much money) and a person can be arrested for trespassing (if a state has that law).

Your neighbor simply cannot violate your constitutional right to privacy, because the Fourth Amendment applies to intrusions from the government. The government can't search your stuff or take control of your stuff unless certain conditions are met (Ask me about this if you really want to know all the criteria).

Does the government mess with your stuff and violate the 4th Amendment sometimes? Yeah, it happens all the time. "The Constitution says they can't do that! Why didn't the cops stop them from doing that?"Because the government doesn't have to stand outside your house and make sure cops don't bust in without a warrant.

You don't have a fundamental right to a security system that will help protect your 4th amendment rights. You have the right to sue the government if they violate your rights. Additionally, the Government probably can't use the evidence they find against you if they Violated your rights.

Nobody has the job to stop the government from violating your rights, you just get a chance to use the judicial sledgehammer and smash them. Hopefully the fear of punishment will stop them from doing the same thing in the future, but there is no preemptive strike provision in the bill of rights. The government doesn't have to build a wall around your house, they don't have to give you locks for your luggage, and they don't have to make sure you have a private place.

Health Care compared to Privacy

The health care debate is very similar. The Constitution simply cannot be interpreted to guarantee that the government will proactively provide healthcare. Also, the Constitution can't possibly be interpreted to mean that the government is responsible to make sure the quality of health care is acceptable. Maybe people should be able to sue if they are not allowed to offer emergency or clinical services, but that doesn't mean they shouldn't have to pay for it later.

So then any "fundamental right" to health care must be some sort of moral human right. Some Governments have the authority to codify human rights. The U.S. Congress specifically has authority to regulate interstate commerce, and that's a big ol' umbrella that covers almost everything. (This is another complicated legal subject that requires more explanation that I don't have time for here) So this issue is a bit tricky, but lets just assume that congress has the authority under the Constitution to fine people if they don't get insurance.

Heck, let's assume congress could just create a new health care amendment like:

"No Citizen of the United States shall be denied access to care in hospitals operated by the several states"

Such an Amendment would suggest that there is some type of fundamental right to health care, or at least access to health care. I don't see how an Amendment could do much more than this.

What are you going to say? "Everyone shall get free healthcare." Well it simply can't be free. Someone has to pay for it. So basically that's the same as saying "All people who don't pay taxes shall get free health care"

Or maybe you could say "The government shall establish hospitals funded by the treasury"

Well how many hospitals? Does each city and small town need one? How far should someone have to drive for health care? "I have a fundamental right to health care within a 20 minute drive!!!"

What if the government set up a big-A hospital in washington DC, and everyone could just go there for free. Wouldn't that give everyone in the country access to health care? "But John, that hospital would be overrun. That just doesn't make sense."

So what would you have the constitution say? "The Government Shall Establish Hospitals which are solely funded by the treasury, and such hospitals shall be established within 37 'as the tire rolls' miles from every city, town, or association with a population of more than 632 citizens."

Can you see what I'm getting at here? No matter what you do, someone would be screwed. So you can't really guarantee that everyone has equal access to health care. What standard of quality would you use? Would the government have to make sure that doctors passed a federal certification to be qualified under the constitution? It would be nearly impossible to regulate.

So what does that mean.

This leads us back to where we are today. Congress realizes they can't actually guarantee any standard of quality, so they are pretty much just saying that everyone gets reimbursed for whatever health care they can find. So either the government will provide insurance, or they will just require everyone to have insurance. Sure, there will be some level of quality required before a clinic or hospital can be eligible for reimbursement. But what if a little doctor's office doesn't want to take the government insurance? (A lot of Doctor's won't take Medicaid/care)

Doesn't that mean the rich would have access to health care that the poor don't get?

Under the bill, the government will fine an individual for refusing to get eligible insurance. Even if you've self insured over the last 20 years, and you've got a "health fund" set up. Can the government fine a business for not accepting insurance? That's kind of like the government fining a private business for not taking food stamps. It's probably in their best interest because they get reimbursed for the food, but it should be up to the company.

The Power of the Consumer

Do you want the best health care in the world for free, with no lines, and close to your house?

That's impossible. Can we at least accept that?

I almost never had to pay health care bills when I had insurance at my old job. Seriously, when I wrecked my motorcycle at 75 mph, I saw amazing doctors and went to great facilities. The care was immediate and effective. (Even before they knew I had insurance)

Do you think everyone should have access to the same insurance? I don't. Why? Because that insurance sucks.

I paid about 200 bucks a month for my health coverage. The coverage was awesome; it had a super low deductible, low out-of-pocket, and great access to doctors. So I thought that was a pretty good deal. Except my company was spending $600 a month on my plan as well. $800 dollars a month? Yeah, that's $9,600 dollars that I didn't get paid, because the company was giving me the "benefit" of coverage. Don't get me wrong: I'm extremely grateful that I had insurance when I got hurt. But that accident was hopefully just a freak occurrence. And that's what I believe insurance is for.

Health Savings Plans

You just say those three words and some people stop listening. "That just won't work for the general population."

I simply don't understand why not. Maybe you can educate me.

Let's crunch the numbers.

A "deductible" in insurance is a dollar amount that you have to pay toward your healthcare every year before the insurance company starts paying. My old insurance had a deductible of $250. (That's amazing) So I had to pay the first $250, and then the insurance company paid 85% of everything after that.

A $10,000 Deductible health plan costs almost nothing. If you spread that out over a medium company, say 100 employees, the average monthly premium would be something like $65 bucks a month. Why so cheap? Because the insurance company doesn't have to pay for the first 10,000 bucks. That means most traditional procedures, pregnancies, prescriptions, and general emergency room visits wouldn't be covered by the insurance company.

Well who has 10 grand sitting around to cover that? Almost nobody.

Well my insurance cost me and the company $9,600 a year.

The new insurance would cost me and the company $780 a year. Which would leave $8,820 in savings.

What would the company do with that 8800? If I were running it you would have two options.

Option 1: A debit card loaded with $5,000 that can only be used for medical purposes, and a $3,800 raise.

Option 2: A debit card loaded with $8,800 dollars that can only be used for medical purposes.

So you would have the responsibility of covering the first $10,000 of your medical expenseseach year, but 8,800 would be covered. So if you did have a disaster, then you'd have to come up with $1,200 bucks, and that shouldn't bankrupt you (especially since you could spread it out over 24 months or whatever).

If you wanted to gamble a bit, you could choose option one. Then you might have to come up with 5,000 bucks for a disaster, but you'd have more money coming into your paycheck, and hopefully you could invest in your own health fund. Maybe you'd even be able to make some money with it.

Oh, and one more thing. THE MONEY WOULD ROLL OVER.

Under option 2, if you are healthy for 10 years, you'd have 86,000 buckaroos in your health savings account, and you'd still have insurance. In my company, as soon as you built up an amount twice the size of your deductible (or $20,000) then the rest of the contributions would go into your retirement account.

And this wouldn't cost me any more that the expensive insurance you were already getting.

The opposing argument would suggest that this strategy wouldn't work for the whole population. Some employers don't provide benefits at all, and the drop in contributions to health insurance would make insurance rates go up for everyone.

First, everyone can afford disaster insurance or get on medicaid. You can find a way.

Second, nobody can predict the exact effect on premiums, but you can bet your bottom dollar that health care costs would go down.

why? Because in the current system you don't know how much stuff costs.

The food insurance metaphor is a bit silly. "What if you had food insurance. Someone else is paying, so you'd just buy steak every time you went to the grocery store!"

Well take that and add on the fact that you have no idea how much you'll be charged until AFTER you get the care. Some people do know the price, some of the time. But most people go to the same doctor for everything. That's insane. I don't even buy all of my dairy products at the same store.

If you had a health savings account that would eventually turn into your retirement, you'd start shopping around.

Need to get a funny spot on your neck checked out? Don't just run to your regular dermatologist, call around to every dermatologist in town.

Doctors would start to run specials, they would start to compete. If quality went down, the business would disappear.

You'd find prices listed on the wall in Doctor's offices. "Strep throat test: $42.50"

"Oh, well I can go to the walgreens clinic and get that procedure for $29, bye"

"MRI that you probably only have a 1.7% chance of actually needing: $1,700"

"Need surgery, choose an anesthesiologist:

A: 2 years of experience, Utah Medical School: $1,200

B: 29 years of experience, John's Hopkins: $4,400"

Prices would start to go down because:

1: Doctor's couldn't get away with as much

2: Unnecessary procedures would be eliminated

3: Doctor's would get paid in cash and collection costs would go down, so they would have an incentive to market to these people.

4: People would be encouraged to live healthier lives in order to save money.

A big argument against me is that people would get scammed, some people would choose not to have procedures they ended up needing, and lives would inevitably be lost.

First: Is that worse than the current system? Not really.

Second: That argument works on two faulty assumptions (1) that people can't take care of themselves and (2) that people who make bad decisions shouldn't be responsible for the consequences.

I just don't think it would be that much of a problem. You'd be able to get more informed and get more involved in the process, and you'd still be able to sue people who scam you or who harm you out of negligence.

Could someone tell me where I'm wrong?

Should bank tellers be rich? How everyone misunderstands potential.

The going rate for a new bank teller is in the range of $9.00-$11.00 per hour. That's ridiculous. Bank teller's should make $20 per hour. This article is about poor management (which is interesting) even though it seems like an article about bank tellers (who are boring).

I returned home from a two-year church mission in the spring of 2003 at the age of 21. I was ambitious, big-picture wise, but I wasn't in a hurry to do anything. My parents prodded me to get a job, so I attended an interview at a local credit union (My father set the interview up). I had no resume, and no relevant skills, but my father is kind of a genius, so the bank manager thought I might have good genes. After several interviews, the manager decided that none of the candidates were good, so she went with the best of the terrible options: me. Her decision to hire me as a teller, and my decision to take the job impacted my life in significant ways. Were it not for that first teller job, I would be in a completely different career and probably in a different state right now.

Throughout my five-year mini-career in consumer banking, I was employed in seven different positions. Although these positions were in the same industry, the skill-sets each required were all over the map. I quickly picked up on tellering and became an excellent cash handler and customer service agent (in my own mind, at least). Six months in, I was pushing hard for a promotion and a raise from my meager $7.25 per hour. The powers that be recognized that I was a talented teller, so they made accommodations to give me a part-time consumer loan officer job to mesh with my busy school schedule.

I was an A or A+ teller, and I was a B or B- auto loan officer. I quickly learned the loan policies and procedures, but there were a few areas of the job that I was not cut out for. Nevertheless, my good performance earned me another promotion and I moved on. My third position was challenging and rewarding and I excelled again, back up to the A- range. My pay increased along with my responsibility. At that point I managed to impress a manager at another bank and he offered me a job so I went. The new position required a completely different skill set and was insanely boring. My performance dropped down to a C+. Luckily, my old boss at the credit union hired me back as assistant manager where I managed to do a fine job, possibly a B rating. I was eventually promoted to a seventh position and the company had high hopes. They still viewed me as that A+ teller, and they expected nothing less. Unfortunately, I struggled until I left for law school. I hate to say it, but I was probably a C- or D+ quality in that last position.

At some point, my company paid good money to have me tested. The test consisted of personality profiling and IQ testing. The results showed that I was a 90% match for one particular position with a lot of responsibility, and I was an 88% match for a job as a teller. The testing computer felt that I would not be a good fit for many other positions. Not surprisingly, the company didn't listen to the results. They evaluated me as a $20+ per hour employee, and a teller was a "less-than-$10" type of job, so they stuck me in an available job that I wasn't cut out for, and I eventually quit.

I managed one teller who somehow got every male customer to fall in love with her. (There are at least four of my former co-workers that will think I'm talking about them) People would add accounts and services just so they could see her more often. Sometimes, business owners would wait in-line strategically to use her as their teller. These men never dated her (she was in a relationship) and she dressed modestly, but for some reason these men loved to interact with our star teller.

The company wanted to promote her to something else, but luckily her schedule wouldn't allow it. She would have been a terrible loan officer. Fortunately, she continued to excel as a teller, but eventually her schedule cleared up and she had to leave to do something else for more money. My manager desperately wanted her to stay, but the big-wigs would never pay $20/hr for a teller... ever... and no other positions were open. "Teller positions are not worth that much. The market doesn't pay tellers that much."

The first problem with this type of job evaluation is that managers and owners suck at evaluating jobs. The second problem is that most companies see front line employees and staff as a cost rather than an investment.

The market evaluates the worth of a teller position at a low wage because companies apparently don't see the value in a teller. "Wells Fargo doesn't pay more, so I won't!" I can tell you from first hand experience that managers often see tellers as a necessary evil. (They won't admit this though) The question then is what data or what criteria do managers use to determine that a loan officer or assistant manager position is any more important or profitable than a teller position? Our star teller made something like $9 per hour, but I guarantee she made or saved the credit union ten times that. We got new accounts and loans all the time because of her skill set (She was fast and accurate, in addition to her ability to charm).

Our Star was replaced by an atrocious teller that stuck around for quite a long time. She made something in the neighborhood of $10 bucks an hour and she probably lost us accounts every single day. She made mistakes, but they were never fireable offenses.

The difference in wages between what we wanted to pay Star, and what we paid her replacement was $20,000 per year. That's the kind of money that makes the big-wigs drool or cry. "What kind of idiot would pay a teller $20,000 more per year than he had to??" Unfortunately, management didn't realize that a substandard teller actually cut away from profits. She single handedly destroyed two large business accounts. I can't remember the exact numbers, but I'm sure that her terribleness easily cost the company over $20,000 per year. Star teller, on the other hand, would convince upset business owners to stay at the credit union, she'd bring in her friends, her friends friends, and her friend's fathers. Every time a customer came in to the branch, he was exposed to our brochures, our posters, and all of the advertising material we could throw at him. That teller projected an image onto customers which made them think that our entire credit union was as high-quality as she was. She independently increased the value of our entire brand because people saw her every day.

Most managers and big-wigs would promote a teller like Star. They wouldn't think about how the skill set required for a teller is drastically different than the skill set required for a loan processor or manager. They wouldn't consider that the value of an employee who enjoys her job is exponentially better than the value of an employee who hates her job. Unfortunately, most established bankers are too stubborn to even consider paying a teller enough to keep them around. As a reaction to this stubbornness, one company actually started to value applicants who were boring, ambitionless, and shy. The theory was that these people would stick around for a longer period of time, so the training costs per employee would go down.

On a side note (I wish I could use footnotes): Aside from stubbornness, many companies are afraid of risk. They feel, as explained above, that tellers or other front-liners are a necessary evil and they assume that a $20/hr employee is just as likely to fail as a $10/hr employee. This indicates that their interviewing and training methods are inadequate.

So what does it say about your company when your front line is just a fill-in employee. What does it say when the person who interacts with the most clients and customers is the least qualified employee in the entire company? What does it say when your company is unwilling to pay a front-line employee for dominating the position, but your company is willing to promote the employee they could be terrible at?

I believe my argument also holds up in different industries as well. Consider a receptionist at a law firm where the attorneys charge incredibly high rates or a billing clerk at a dental office where the dentist charges even higher rates. One client is probably worth between $5,000 and $10,000 to the company. If four clients quit coming back because they are put off by your front line, your company gets nailed for $20,000 to $40,000 per year. If your clients feel welcome, informed, and comfortable, they will refer their friends. I don't have time to do a study or full analysis, but I would be willing to bet that a front line employee is credited with 10-20% of a customer's feel for the company. That 20% could quickly turn off your customers.

My point in all this is that managers should evaluate employees in isolation. How much does X employee make or save my company? How much more will I have to pay X employee to stay? What negative impact would replacing X employee with Y employee have? If the negative impact of removing X is greater that the extra you will have to pay them, you've made a poor decision. I don't think this is that novel of an idea, but I'm convinced that most managers just look at what everyone else pays for that position, and refuse to pay much more. Preconceived notions that do not stand up to logic cause slowness, dullness, and stagnation. Hopefully future managers can avoid that trap.

Elections and Job Interviews: more alike than not.

My little slice of the world is full of happiness... We'll call that micro-world. But macro-world (the collection of all the micro-worlds out there and how they react) is pretty screwed up right now.

This post aims to explain how job interviews and elections are very much alike. Surprisingly (or maybe not), people apply fundamentally different rule sets to political races than they do to job interviews. This troubles me. I'm troubled.

When you are interviewing a candidate for a position, you stick your neck out a little bit. You will be providing them with at least some financial commitment. Salary, benefits, and the huge opportunity cost of screwing up can be daunting (opportunity cost is the cost of not doing something other than what you chose to do). This high risk turns into high anxiety when interviewers are tasked to hire an employee based on 3-7 pages of information and a 15-30 minute interview. Unsurprisingly, interviewers screw it up all the time and cost the company money. However, one productive employee hired can compensate for a few unproductive hires if the company is healthy enough.

So how do you combat this problem? Several companies have concluded that the solution is to do intense research into which questions illicit truthful or telling responses. Others, like most busy entrepreneurs and managers without huge HR departments, decide to use basic filters that separate the wheat from the tares. For example, one employer told me that since interviews were not effective for him, he generally used an arbitrary GPA cutoff to reduce the number of resumes he was required to analyze.

Of course, those applicants on the outside looking in are eagerly awaiting the opportunity to prove themselves in an interview. "Who cares if I'm not in the top 25% of my class, I'll wow them with my sales pitch." These candidates believe that the arbitrary line causes companies to overlook qualified applicants (this might be true), but I believe that the causality is skewed. Look at it from the employer's perspective: if you interview people, many of them are going to sound better than they actually are. They will answer questions based on what they think you want. They will say they can take on more pressure than they can. They will commit to working more hours than they wish. Lies, lies, lies, lies, lies. The fact that applicants are so eager to please is the reason why interviewers use arbitrary lines, and arbitrary lines are at least indicative of a long-term performance (or short-term high stress performance). I'm sure companies would interview more job-seekers if they knew they could get an honest and accurate picture of who that person really was.

As an interviewer in a former life, I realized quickly that when there was conflict between an interview performance and what was on the page of a resume, the smart money went to the resume. I admit that a clever questioner, or perhaps tester, can break through the fake and find the real, but that's beyond the scope of my point.

This applies to politics because voters are idiots.

I'm not going to analyze Michele Bachmann because I don't know that much about her. She may be the most qualified candidate for president, but its not very likely. It is however, insanely troubling to me that voters are showing signs of voting for who tells them exactly what they want to hear, as if they actually believe the politician is telling them the truth. Nobody believes everything along party lines all the time, and its ridiculous to assume they do. The faulty assumption is bad, but whats worse is they fault other candidates for taking positions that they (the voter) does not agree with. In this particular race, the positions generally deal with civil unions, climate change, health care, or taxes.

Can anyone honestly look at Michelle Bachman's resume and compare it to Jon Huntsman and tell me that Ms. Bachman is the more qualified candidate? "She sticks to her guns. She fights Washington. She stands for what I believe in." Those tag-lines may be true, but are they accurate predictions of her future success in office? I'm not insane enough to assume that past behavior is always a predictor of future success, but its much more accurate than a politicians promise. Mr. Huntsman is just an example, but he's been a successful government by most any rational measurement, he has experience with small and large businesses, and he was an ambassador, twice. On the precipice of an economic war with China (and hopefully not any other kind of war) wouldn't that be more attractive than Ms. Bachmann's background? The fact that he admitted he disagrees with his party on civil unions and perhaps global warming makes him less credible? But she speaks with a honey coated tongue and you eat it right up?

If a manager employs these tactics when hiring a new employee they should be deemed too incompetent to continue. Some might say that its important to see how a person presents himself, to get a picture of how he'll be viewed by customers. This is a great argument in a relevant position, but this logic still passes by most primary voters. "how he'll look to the other voters" is apparently unimportant to many of those currently polled by the media.

I suggest a new measurement to use when dealing with politicians. It's one adopted from nearly every legal rule: reasonableness. If a politician is reasonable (almost a dirty word these days) many people will refuse to vote for them. People want to play in the land of ideals, but forget that the other sides ideals are just as ideal, because they aren't real.

A liberal may say that they want to feed the sick and educate everyone to become great contributors to society. This requires government programs and initiatives to build people up and make the country great.

A conservative might say he wants to get out of the way of the free market that will provide plenty of jobs for everyone if we all just work hard and work together. If people are charitable those sick and needy people will have plenty of money. Freedom (plus hard work and honesty) leads to prosperity.

Both of those things are fantastic, but completely unrealistic. If we continue to elect politicians based on those ideals, we'll have lip service and empty wallets. Either extreme will bankrupt the country unless we have perfect leaders and perfect citizens. Anyone honestly think that's going to happen in the near future?

My hope is that people use their heads to analyze a politicians record. Try to determine if that person was successful in the past and if you liked her results. Try to determine if they have any potential to make any useful change (whether expansive or contractive) in Washington. Don't just assume that any job candidate who speaks well and tells you what you want to hear is qualified for the job. I'm afraid if you build on the sandy foundation of promises you'll end up drowning in idealistic regret.

What if we all said no to college?

(Disclaimer: Despite my comments below, I am pro-education. I have gone to school for 20 years, and I believe college education is important for many different reasons, but that's not what this post is about)

There has been a lot of buzz lately about a study claiming 45% of college students sampled showed no significant improvement in knowledge between high school graduation and completing their sophomore year of college.

This leads me a key question that has haunts me: Does education help you get a job and make you more money in life simply because employers are looking for educated employees? Or do college graduates actually possess more skills?

The next logical question is what would happen if a large group of smart college bound kids just decided not to go?

College is inefficient, but it has to be. One-on-one instruction would be much more effective, but that option cannot be available to every student. I think it's very possible that a bright young student could learn more on their own in four years than they could in the classroom, but it's preposterous to believe they actually would. The university setting provides structure and motivation that most young adults are not capable of generating on their own.

Nevertheless, it's still interesting to think about what a bright young man or woman could accomplish in four years if they weren't busy studying (drinking) and finding themselves (sleeping) in college.

A decent college is probably going to charge something like 40,000 in tuition for a college degree. If the student does not work they are giving up somewhere around 100,000 in income that they could have otherwise made in an entry-level job over the course of 4 years.

So my non-student will start with $140,000 more than your student will have. If he invests all of that money when he is 25 years old and averages a 6% return, he will have $1,534,000 when he reaches 65. (If he averages 8% that retirement pops up to more than 3 million)

Or, if working for money isn't his thing, he could just enter into internships. In four years he could intern with 8 banks or with 8 different types of employers. He could work in different cities and states, or even different countries. He could expand his professional network. He might even know what he wants to do with his life. (assuming the parents/loans would still fund his activities like they do in college)

Or he could work hard for 4 years and save up $140,000 and start a business before he's 25. Imagine the innovation we would see if hundreds of thousands of bright young people had $140,000 to invest in business ideas, especially after these kids had four years of work experience and business relationships.

Or, if college were reserved for those with more experience, he could work for ten years or build a business for ten years, and then go to college after he has learned where he wants to go in life. Those first two years of school could be spent on subjects that will benefit him in his career.

He could join the military, travel, or write a novel. He could play a sport, learn three foreign languages, or work for a charity.

These are all opportunity costs of going to college, and they are real. Now I'm not stupid enough to suggest that all 18 year-olds are prepared to take on this type of responsibility, but are our schools really the best place to put our young adults while they "get it out of their system?" What if there was a bright young person who determined that school wasn't for them. What if he watched all of the free MIT classes on academicearth.org. What if he received advanced specialized training in several different fields, and worked hundreds of hours to amass $100,000+ in savings? Would the lack of degree stop you from hiring him?

Most people would say that this just doesn't happen, but I propose that it would happen much more often if the extremely dedicated young people who excel in schools decided not to go. If those people with motivation and drive to dominate in the classroom decided to instead point their ship toward the workforce and self educate, there's no telling what they could accomplish.

I'm not trying to be nasty to educators. My education has been a brilliant addition to my life, and I am so glad that I have pursued it. But isn't it possible, maybe just a little bit, that some times, for some people, the answer might be less education rather than more?

Even if you agree with my proposition, it does not mean anything unless we live in a world where employers have the capability and insight to see beyond the lack of a college degree. College performance is measurable, college graduates are often quite dependable, and employers need a way to separate applicants. The problem with this blog post is that I pose a lot of questions that simply will not ever be answered because our system won't allow them to be.

So as we move forward to win the future, it is highly likely that our best and brightest minds will be prevented from entering the workforce for four, six, or 8 years as they attack the classroom. Are the benefits worth it? I argue that we can never know for sure.

I'd recommend that you students and graduates look back on your life and wonder what you could have accomplished with those prime years... you might surprise yourself.

Apple Computers: "We know you better than you"

Apple, inc. basically has this philosophy:

We know better than you, okay? You are stupid unless you use our products, and you are a slave to corporate hacks... and even though you'll think you're smart when you start using our products, we will still treat you like you are stupid. We can't help it.

You have to be careful with this topic, because there are Apple loyalists everywhere who might cry if you criticize the gospel of Apple spoken by Jobs the beloved.

I don't want to criticize the Apple business model. It just plain works. They are so well marketed and their products work oh so well.

Honestly, look at the iPhone. Reasonable minds may differ on this (maybe), but the iPhone is far and away the best (and most popular) smart phone out today.

I have an iPhone, and it blows my mind on a daily basis.

But the iPhone is limited. Not by mechanical or technological limitations, but by intentional limitations that Apple decided to place on it.

For Example:

1: You can't use Flash (e.g., hulu.com) on the iPhone, even if you are surfing the web on a wireless network.

2: You can't really multi-task with third party apps, even if you are plugged into a wall outlet. So I can't listen to Pandora and check my email at the same time. I can't chat with my wife and check a calendar at the same time. To be fair, I can listen to my ipod and surf the web at the same time, and I can call my wife and check my calendar at the same time.

These two examples are irritating, but I've gotten used to them. Apple says they use these limitations in order to increase battery life, maintain system stability, and to avoid outdated technology (Apple believes HTML 5 is better than Flash, and they are right.)

And Apple is pretty powerful. I'll change my name to Hamlet Berger if Hulu and other sites like it don't create compatible apps for the iPad and iPhone by next year.

I imagine Apple is using this strategy to dominate the marketplace. They want to continue selling millions of their products while maintaining ridiculously high quality. They want to force software makers to build programs that work well with Apple hardware (rather than building hardware to work well with all software).

But doesn't this make your spine tingle just a little bit? You CAN'T use flash and you CAN'T multi-task, even if you want to. Apple could just say, "Hey STUPID, if you do this stuff it will screw your iPhone/iPad up... so if you do it, don't come back complaining to me!"

But instead, they just say, "We know better than you sweetie, now shut up and eat your Apple."

And for some reason, people just continue to consume apple products (Guilty...as...charged). Supposedly Apple sold 300,000 iPads in one day over the weekend. And people did that with the knowledge that a better version will be released in the next few months.

So I'm starting to see what Apple really is. A beautiful, elegant, nearly perfect, yet PURELY EVIL company... The masters of deception.

Who will rise up to fight them? Who can stop this socialistic dictatorship from consuming the whole world market?

I have one made-up word for you:

GOOGLE.

The Google boys are not perfect, but they believe in openness and freedom to choose. Apple wants to bind us, and force us to be clean and bubbly, but Google wants to teach us correct principles and let us govern ourselves.

Can Google's Nexus One Smartphone overcome the Darth Vader esque iPhone? Not today... but some day.

Can Google Chrome (the operating system) and it's rowdy bunch of netbooks stand in the iPad's way? (what a stupid name: iPad) Not today... but maybe some day.

Maybe Google doesn't give us a way to escape, but it gives us hope... And through our hope we gain our power back. NO APPLE, YOU DO WHAT WE PAY YOU TO DO, which is whatever the crap we want!