First, I want to thank Dom and Jake for putting the time in to work with VentureF0rth on these upcoming events that were mentioned in the previous post. The motivations behind these events are obviously close to the collective BDQ heart and I hope that we can capitalize on this great opportunity. I look forward to seeing ya’ll there.

I was reading an article today from Steve Blank about his lean startup class at Stanford. Looking over the presentations that were posted, its awesome to see this kind of entrepreneurial teaching getting traction in curriculums. If you read through to the bottom of the article, you’ll notice that Steve talks about the volume of interest in the class and how going forward, getting into the class will essentially be an application process. Day to day we are well accustomed to the logic of meritocracy. To steal from a TED talker (who at this point I can’t remember), there is a strong argument to be made that the most talented should be given the best stuff. Society as a whole arguably benefits more from the best violinist getting the best violin, rather than a random or an equal distribution scheme. Meritocracy in theory is great, but it is also subject to abuse.

A few posts ago Dom posted about a fascinating article concerning the higher education bubble which I wanted to play off of. The so-called higher education bubble, to me, is a perfect example of the perils of bastardizing meritocracy. Too many students go to school believing that the education system is transparent: if you crush that entrance exam, you go to the highest ranked school you can, and you are justly rewarded upon graduation. I believe that is at issue here, is a question of incentives. We as students are led to believe that educational programs are incentivized to maximize our future societal potential. You work hard, you get your due. Period. Educational programs, however, also have interests in accepting the largest applicant pools that they can. Problems always surface when a certain class of actors is either unaware or misled about the incentives of another actor class. Ex. Student debtors believe that those issuing the loans would not issue them if the loaner knew that the student couldn’t pay them back.

The business lesson of my diatribe is this: incentive analysis is crucial. Given the bottom line focused business world that Dom mentioned, not understanding the motivations of those we do business with is a potential disaster for both parties. You never have the benefit of costlessly gathering data, but making efforts to understand the incentives of parties is important whether you’re making an HR plan, doing a VC deal, or making an app. So go out, be a skeptic and don’t let the man get you down.

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