Danny Crichton

I have now added a new theme for mobile. If you are using an iPhone or Android phone, you should be automatically converted to a far more pleasing single-column layout. If there are any issues, please send me an email.

In the last few years, there has been a growing criticism of the high cost and low impact of contemporary higher education. On the micro-level, individuals like Peter Thiel have devoted significant resources to creating alternative pathways to traditional higher education institutions, while on the macro-level, there is stronger oversight by Congress and politicians regarding the value of education today.

On a holistic level, the idea that "everyone should go to college" doesn't make sense. This simplistic refrain fails to consider the individual needs of a diverse population, as well as the actual economic needs of the marketplace. While education most certainly should not be reserved for elites, the logical opposite is not necessarily better.

All this debate about costs though has raised the question: how should you think about investing in further education? Some emphasize elements like quality of living/career, happiness or personal interest as reasons to continue being educated, but economists take a much more utilitarian approach to the question. Instead of focusing on soft qualities, economists (using the Human Capital model) remove the distinction between a financial investment and further education. In other words, the same thought process that guides our decisions with regards to stocks or bonds, for instance, should also be applied to higher education. In summary, we should use the present value of all future gains on income and compare this to the total economic cost of further education.

This process though has some peculiarities, and is the subject of this post.

The Model

What is the cost of further education? This simple question is actually quite complex to answer, so let's start simply and go from there.

The basic human capital model for education is as follows. The cost of education is the price of tuition

Last year, I was working at Google on Google+, and the outlook was grim. There were scores of editorials and blog posts discussing the imminent downfall of the search giant. The issue revolved around "social" -- and the anti-social nature of Google's technology. Google was going to fall to other search engines and Facebook or Quora as people started asking their friends for searches. Furthermore, without social data, Google's search engine wouldn't provide the personalized recommendations that consumers would soon demand, making Google's vaunted search algorithms useless.

Fast-forward to today. The doom is now directed toward Facebook over the issue of monetization. This week, Facebook and particularly Zynga were hammered for failing to meet market expectations, begetting a whole new debate over the actual utility of social.

These ebbs and flows in news coverage, particularly in tech journalism, are commonplace. But, in this case, careful PR management of Google was just as much to blame as the vanities of the press.

The high water mark for the coming Google apocalypse came on March 22, 2012 in a lengthy Gizmodo piece by Matt Honan called "The Case Against Google." In it, he takes the company to task for the kerfuffles related to privacy, and also zeroed in on Google's social problem. This piece generated a lot of attention, and the mainstream press began writing similar pieces as well. The coming death of Google seemed almost imminent.

Yet, less than two weeks later, the narrative would suddenly change on April 4 with the public unveiling of Google's Project Glass, their take on the classic imagined design of the augmented reality glasses. The announcement created a press storm and excitement like nothing that Google had really done in some time, capturing the

Policymakers across the world desperately desire to increase the levels of entrepreneurship within their borders. Whether it is the United States increasing funds for STEM education in the Educate to Innovate program, the extensive programs for new business formation in South Korea, or building one of the most well-endowed science and technology universities in Saudi Arabia (KAUST), governments are putting new venture formation, entrepreneurs, and science and technology on an ever greater pedestal. They are the panacea to all of our economic problems.

Despite the grand visions of politicians, few policymakers have successfully guided their economies to reach this entrepreneurial target. Saudi Arabia is hardly a paragon of innovation today, despite KAUST's existence for the past few years. The Research Triangle in North Carolina, while not a failure, has never reached its full potential to become a major innovation hub. Today, the only region that looks promising is New York City, where a start-up ecosystem has grown in the ashes of the Wall Street financial collapse and the city government is devoting significant resources to grow and sustain a technical workforce.

Why is it so difficult to build these kinds of regions? I can think of a couple of answers:

• Policymakers aren't entrepreneurs.
  This not only means that it is difficult to build good policies, but it also means that the implementation of the policies can be extraordinarily hard as well.
• Policy often lacks focus.
  I don't believe that building an entrepreneurial region is hard, but what is your price? It's not just about money here, but also attention and time. Are you willing to change every policy (labor law, patents, taxes, etc.) to support such an environment, or do such changes get mired in politics?
• Policy often lacks geographic focus.
  Most entrepreneurship happens

I have just finished my research grant in South Korea and returned to the United States. Hopefully, my blog will be updated more extensively in the weeks to come as I begin my professional life again here.

There are a couple of things to look forward to in the next few weeks here:

1. I am currently drafting a (relatively) comprehensive report on the state of Korea's innovation policy. This report, rather than taking the feel of a OECD Country Report, will instead look at people's impressions and feelings based on my interviews in South Korea. Numbers can only take you so far in understanding why people start companies and build innovative enterprises. Psychology, arguably, is more important, and this report will have much to say about the current environment for Korean entrepreneurialism.
2. I will be posting my undergraduate thesis online about the history of Stanford's Computer Science department and the rise of Silicon Valley. I am currently converting the thesis from LaTeX into HTML (retaining all footnotes) and adding in an introduction and executive summary.

Thanks for reading this blog. If you have ideas for stories I should write about, you can always get in touch with me at danny.crichton@gmail.com.

BusinessWeek just wrote a short piece on the rise of state capitalism, and how governments are not completely naive when it comes to generating innovative industries. The article gives several examples of countries that have successfully developed companies, including Brazil with Embraer and Singapore with several of its research companies. What's exciting about this story is that the free-market capitalism press is beginning to write about state capitalism without the vitriol seen in the past few decades.

Honestly, we are starting to see the small cracks in the so-called "Washington Consensus" that has dominated development approaches for the past three decades. That Consensus entails privatization of state-owned properties, deregulation, and policy reforms like taxes to spur investment and create a stronger free-market environment for growth. The problem with the Washington Consensus, of course, is that it has been an unmitigated failure in pretty much any country in which it has been applied to.

State capitalism, development states, and other names all refer to one approach to development: namely, the use of government as a coordinating force in the economy. Poor countries that wish to grow are stymied by the "all-or-nothing" problem (my term for it) -- how do you build multiple companies and sectors of the economy in synchronicity without strong private investment (since no money exists to invest)? The free market is great at coordination in relatively developed markets today, where innovation and creative destruction build new industries to replace old ones. It is less useful in countries that have few industries and need long-term development on the order of decades. There is little private capital that will support that investment horizon.

State capitalism is the theoretical approach that the Asian tigers and Japan embraced to develop throughout

Microsoft's acquisition of Yammer last week was simultaneously praised for potentially adding social features to Microsoft's enterprise software while panned for its perceived value for the company. It is always difficult to debate the sale value (currently quoted at $1.2 billion), but the acqusition seems to make sense for Microsoft, which wishes to add a social dimension to many of its products like SharePoint.

Less discussed has been the question on my mind: where was Google?

Development started on Yammer in 2008, and the enterprise social network was already well on its way to success by the end of 2010. At the same time, Google was re-conceiving its social network strategy in the wake of the failed Google Wave and Google Buzz products. What emerged from those discussions was the model for the current Google+ Circles concept, which was originally developed by Paul Adams.

The goal of Google+ is, and remains, simple: add a social dimension to all of Google's products, while protecting Google's market share in search against competitors. In the past decade, the patina of the open web has been slowly chipped away by the growing use of "walled garden" websites. Websites and their content were once freely open to all, but today, web start-ups are increasingly roping off content to control its distribution and acquire information about users. For Google, this pattern not only degrades the experience for its users, it also makes search much less useful. A social layer like Facebook is critical for Google's long-term success, but since Facebook doesn't make its data public, Google had to acquire the data ab initio.

When I arrived to work at Google last summer, I witnessed the final hectic weeks of the launch of Google+. What

One definition of engineering is solving a problem using tools and processes within constraints. These constraints are numerous: they can include expenses, people, laws, physical laws, knowledge, and the list goes on. As a general rule, constraints are good, since they help to hone the mind on what is necessary rather than what is desirable. One of the largest take-aways from my research on the history of Stanford's Computer Science department was that its limited resources compared to MIT and CMU forced it be much more adaptive and innovative.

This is one of the reasons why start-up companies can topple mega-corporations with such limited resources. When you have 2-3 people and no money, you just can't put time on things that really don't matter. The focus is on the low-hanging fruit that takes the least time to develop with the least number of resources for the biggest gain in the user experience. By focusing on the essence, start-ups are able to build the kernel correctly -- and with some luck, all else follows.

This partially explains the success of Eric Ries' Lean Start-up model, which focuses on releasing early, iterating fast, and making sure a company is highly adaptable. This model is at the heart of YCombinator and almost all of the start-up advice that one receives in Silicon Valley in today's environment.

However, its dominance has become pernicious, because it hides a very important dilemma that faces all start-ups: there is a spectrum between anarchy and planning in building a business. What do I mean by this? Each point on this spectrum offers a range of businesses to start. On the anarchy side for instance, you have social networks and other web applications that emphasize the user