Friday, December 05, 2008

How to Fix America's Schools

MARCH 19, 2001

How to Fix America's Schools

If you take it for more than a political slogan, President Bush's motto for education reform--"no child left behind"--is a wildly ambitious goal. It is every bit as audacious as Lyndon B. Johnson's War on Poverty or John F. Kennedy's race to the moon. Since the U.S. first embraced universal public education decades ago, there has been a largely unspoken assumption that some children will never earn a high school degree. Now, says National Urban League President Hugh B. Price, Bush is "asking our schools to do something that no society has ever done, to educate all children well, regardless of their circumstances." In effect, Bush is declaring that in the Information Age, a solid education is a fundamental civil right. The President's pronouncement is the culmination of nearly twenty years of mounting efforts to fix America's schools. The educational crusade began in earnest with A Nation at Risk, a 1983 report commissioned by the Reagan Administration warning that "a rising tide of mediocrity [in our schools] threatens our very future as a nation." In 1989, then-President George Bush and the nation's governors held the first-ever national education summit, where they set sweeping goals--from eliminating illiteracy to vaulting U.S. students to No. 1 in the world in math and science.

There has been scant progress toward meeting those goals (tables). Less than half of America's schoolchildren read proficiently at their grade level. U.S. 12th-graders still score well below teenagers in almost every other developed country on mathematics and science tests. The 74% of students who have completed high school by the age of 18 rank the U.S. No. 17 in graduation rates after decades of leading the world, according to the Education Trust, a research group in Washington. "While we've certainly made some improvements, they're not nearly enough to keep up," says Milt Goldberg, who headed the commission that produced A Nation at Risk.

NOT SO GLOOMY. Low-income and minority students fare the worst. Only 29% of all fourth-graders read proficiently at their grade level, but among low-income kids, the figure is 13%. By the end of high school, black and Hispanic children perform only at the level whites do in eighth grade. "This achievement gap is the most important issue of social justice in our society," says Tom Vander Ark, executive director for education at the Bill & Melinda Gates Foundation, which doles out $100 million a year for education reform. The problem is an economic issue, too, since white kids will fill fewer than half of U.S. school seats by 2040, down from 65% today and 85% in 1950.

Still, the prospects are not quite so hopeless as the gloomy report card suggests. Many schools in prosperous, upper-middle-class suburbs have always done a good job, as have certain schools in solid middle-class districts. The real challenge lies with the continuing mediocrity that plagues too many of America's schools--and the disastrous state of education for kids at the bottom. The good news: The past two decades have seen an explosion of local reform efforts aimed at even the most intransigent problems. "We now have abundant evidence that there are strategies that can make a significant difference," says the Urban League's Price.

As discussion begins on Bush's education plan, to be debated in the Senate the week of Mar. 12, BusinessWeek set out to identify the best of these strategies. We posed a simple question: What would it take to achieve the President's goal of "no child left behind"? A broad range of experts and educators helped us draw up seven strategies that, pursued together, would go a long way toward fixing America's schools. The list isn't exhaustive. We left aside such pedagogical questions as how best to teach math or reading. Instead, we focused on changes in the system that would create an environment in which schools could succeed with far more regularity.

In evaluating solutions, we had one basic test: There must be compelling evidence that they work. The ideas that follow have all been battle-tested. In seeking them out, we went to schools, districts, and states that have beaten the odds, often in some of America's toughest neighborhoods. Among them: Humanities Preparatory Academy in New York's Chelsea neighborhood, a high school that often takes students who floundered elsewhere yet sends 91% of its graduates to college, including Harvard University and Northwestern University. At KIPP Academy, which runs middle schools in Houston and New York's South Bronx, more than 90% of students are Latino or African American, and virtually all are poor. Last year, 98% of KIPP's students in Houston passed the Texas Assessment of Academic Skills (TAAS) test, ranking it among the state's best.

Even more impressive are the states that have made large-scale improvements. In the 1980s, Kentucky ranked dead last in the country in its share of adults with a high school or college degree. But 11 years after the courts forced the state to redesign its entire system, 78% of adults now have a high school diploma, up from 53% in 1980. The share holding college degrees has doubled. And the Bluegrass State has leapfrogged other states into the middle ranks of academic performance. Similarly, sweeping reforms have helped North Carolina and Texas make strides, outpacing the gains of all other states on the National Assessment of Educational Progress (NAEP), the primary test used to measure students nationally.

One clear lesson of all the reform efforts is that no single idea can solve the many ills of America's schools. "Schools are complicated institutions, which means you need a comprehensive approach that deals with everything at once," says former Yale University President Benno C. Schmidt Jr., now chairman of Edison Schools (EDSN ), the nation's largest operator of for-profit schools. That's why President Bush's program is just a downpayment on all that's needed.

True, he wants to tackle several areas at once, including technology, school choice, and mandatory testing. But because Washington plays a relatively minor role in education, Bush's proposal doesn't come close to providing the radical action required. Most reforms, from tougher accountability to pay-for-performance for teachers, face stiff opposition that can only be overcome by the states, the highest level of government with leverage over the country's 90,000 schools.

HEFTY OUTLAYS. At the same time, however, the U.S. must also pony up more money for serious reform. Bush wants a $2 billion, or 10%, boost in federal K-12 spending. But that's pennies out of the $360 billion total the U.S. shells out annually on public education. No one has tried to figure out what it would take to provide every child with an adequate education. Wyoming took a shot at it and came up with $7,400 per student a year, or 18% more than what it had been spending. The cost would certainly be higher in many states with big cities and many poor families.

Still, as a starting point, a national increase like Wyoming's would run an extra $60 billion a year. Even half that, if used wisely, could make a dent. But real change will require everyone--Washington, the states, and school districts--to dig deep into their pockets. For that, the political environment has never been more conducive. "Almost every governor has an agenda to improve the schools," notes Ted Sanders, president of the Education Commission of the States. The question now is whether it's enough to give every American child a real education.


Few factors affect students' performances more than the quality of their teachers. A Tennessee study in 1996--to cite just one of many making the same point--found that fifth-graders who had three years of effective teaching improved their math scores by 83%, vs. a 29% gain for students with ineffective teachers. Yet many teachers are unqualified. One-third of secondary school math teachers and roughly half of physical science teachers didn't major or minor in the subjects they teach. Often, "the most senior teachers opt for the nicest schools, while we put our weakest teachers in the hardest locations," says Robert T. Jones, president of the National Alliance of Business (NAB), which backs training and education initiatives.

The appalling shortage of quality teachers stems in part from chronically low pay. Any college grad who wants to teach must be willing to endure a lifetime of subpar wages (chart). Now schools face the near-impossible mission of filling the 2.2 million teaching vacancies expected over the next decade.

Aggravating the problem is an outdated salary structure unrelated to what teachers do in the classroom. Most teachers are still paid under the so-called single-salary system developed in Des Moines 80 years ago. Everyone with the same seniority and degree is paid the same. That approach marked a step forward in 1921, when it corrected the practice of paying male teachers more than female ones. But the system has become a straitjacket that's stifling schools, which can't reward the best teachers or pay more to lure math and science graduates. "It doesn't offer teachers any real opportunity for professional advancement," argues Lowell Milken, chairman of the Milken Family Foundation.

The solution: Pay teachers more, and scrap single salaries for a system that rewards teachers for what they contribute to student learning. On Jan. 30, four leading business groups--the NAB, the U.S. Chamber of Commerce, the Business Roundtable, and the National Association of Manufacturers--endorsed a plan along these lines. These groups would, in return for higher teachers' pay, raise the bar for new teachers. Educators would be paid according to how well they perform in class and mentor other teachers, with the chance to reach a max of $100,000. Meanwhile, professional development would be expanded.

Connecticut has shown that such reforms can work. Starting in 1986, it raised teacher salaries by nearly one-third. Today, they're still among the nation's highest, averaging around $53,000 and peaking at more than $80,000. Simultaneously, the state hiked requirements for new teachers, including passing an exam in their subject area. New teachers work with a mentor to improve their technique. Then they are evaluated. The review covers lesson plans and teaching techniques and "evaluates their ability to foster learning," says Raymond Pecheone, who oversees teacher evaluation for the state. Those who don't cut it by their third year are out.

UP THE LADDER. The payoff has been great. It has avoided the teacher shortages of other states. "We turn away three [applicants] for every one we let into our teaching program, and the grade-point average of those accepted is 3.4," brags Richard L. Schwab, dean of the Neag School of Education at the University of Connecticut. Teacher attrition is down, and Connecticut has made huge gains in student achievement, especially in reading, where it ranks first in the nation.

Now reformers elsewhere are adding more rungs to a career ladder teachers can climb. Last fall, Cincinnati negotiated a new system with the local union in which teachers may ascend five rungs in their career--from apprentice to accomplished. Advances are based on a sophisticated measure of performance. Educators will undergo periodic evaluations, "and if you don't measure up, you can drop a rung and actually lose pay," says Kathleen Ware, the city's associate superintendent. Iowa is close to adopting a similar statewide career ladder.

Teachers themselves are one of the most difficult obstacles to such schemes. The country's two teachers unions, the National Education Assn. (NEA) and the American Federation of Teachers (AFT), support higher pay to attract more qualified talent to teaching. And "we support different ways of providing compensation to teachers," says AFT President Sandy Feldman, who notes that her union backed the Cincinnati plan. But the unions are skeptical about some aspects of reform. NEA President Robert F. Chase, for example, opposes paying more to attract math and science teachers. "Is their work really more important than teaching kindergarten or first grade?" he asks. Such thinking ignores the marketplace reality that those trained in math and science have many other opportunities.

Teachers at the Vaughn Next Century Learning Center in Los Angeles even had to withdraw from the union to keep working there after the school adopted a pay-for-performance ladder. In 1990, 70% of Vaughn teachers had less than three years experience. The school serves 1,300 Hispanic elementary kids in one of the city's poorest neighborhoods. Turnover was high, and Vaughn ranked among L.A.'s worst schools.

Three years later, Principal Yvonne Chan converted Vaughn into a charter school (which means it receives public funds but is otherwise largely autonomous). In 1998, she set up a system that bases pay on a teacher's ability to help kids meet California's standards and gives bonuses to high achievers. Top performers can earn $68,000 a year, 20% more than in other L.A. schools. But the local union insisted that Vaughn teachers return to a regular public school. Some did, but after an ugly debate, most left the union and endorsed the plan.

Today, most of Vaughn's 69 teachers seem to enjoy the challenge. "When I was in the union, I didn't feel teachers were being asked to work up to their full potential," says Jose Salas, who quit the union to teach at Vaughn. Now, "there's a feeling of controlling one's destiny." Test scores are soaring, and the state ranks Vaughn in roughly the top 10% of schools serving similar inner-city students.

Improving teacher effectiveness also requires professional development. Today, the average U.S. teacher receives just eight hours of training a year, less than 10% of what teachers get in Japan, for example. But look what happened in New York's District 2, which serves 23,000 students in Manhattan. In the mid-1980s, it began devoting 8% of its budget to teacher instruction, compared with less than 3% spent at the typical U.S. school. At P.S. 130, in Chinatown, Principal Lily D. Woo began holding breakfast meetings, Saturday workshops, and summer sessions to train her staff in more effective methods for teaching literacy. Today, District 2 ranks second among 32 districts in test scores, up from 17th in 1985.

More pay and training cost big bucks. Still, warns the January report by the NAB and the three other business groups, "without high-quality teachers, our efforts to improve student achievement are destined to fail." It's a question of paying now or paying later.


Two years ago, Yrcania Castillo was kicked out of Hunter College High School in New York. Although the school is highly regarded, Yrcania found it too competitive and impersonal. "My attendance and grades were terrible," she admits. Then she discovered Humanities Prep, a small school in Manhattan that specializes in giving kids a second chance. Yrcania blossomed in the intimate environment of the 175-student school, where she's now a senior. "At Hunter, they didn't care, but here they're really concerned," says Yrcania, 17, who has applied to college. Without Humanities, "I would likely have ended up on welfare," she says.

For decades, U.S. education has operated under the assumption that bigger is better, especially in high schools. After former Harvard President James B. Conant advocated eliminating smaller schools in favor of large, comprehensive ones in the 1950s, most urban high school students began attending factory-like schools with 1,000 students or more. Today, many have become cauldrons of violence, pitiful achievement, and high dropout rates.

It's time for a 180-degree turn. New construction should favor "small neighborhood schools, with 200 to 500 students," says Jack Clegg, CEO of Nobel Learning Communities Inc. (NLCI ), a for-profit school operator. It's too costly to dismantle large dysfunctional schools, but they can be turned into several schools-within-schools, allowing kids and teachers to form closer bonds.

Several cities are already downsizing schools. New Visions for Public Schools, a reform group, has helped to create some 40 small schools in New York, including Humanities Prep. Chicago has 150 small schools after a decade of effort by the Small Schools Workshop at the University of Illinois at Chicago. "None is bigger than 350 kids, and all are run more like communities than factory schools," says Workshop Director Michael Klonsky.

REBORN. The movement is proving that the intimacy long offered by elite prep schools can work minor miracles in disadvantaged districts. Student attendance climbs, and dropout rates fall, according to a new study of Chicago's small schools by the Bank Street College of Education in New York. The schools in the study are located in Chicago's poorest neighborhoods. "It's like a village, where all of the teachers know the students," says Alice Perry, whose daughter, Mary, is a student at Best Practice High, a new Chicago small school.

The school-within-a-school concept makes smallness work even in cavernous buildings. Look at the Julia Richman Education Complex on New York's Upper East Side, or the Cregier Multiplex, a block from Chicago's United Center. As large schools, both had epitomized all that was wrong with urban education. Then they were reborn. Each now houses several specialized small schools, such as Julia Richman's Urban Academy, whose intensive liberal arts program is regarded as among the best in the nation.

There's a similar movement to slash class size. While there has been some controversy about the value and cost of smaller classes, a landmark 1980s study in Tennessee called Project star found that they're especially helpful for young children who often need extra individual attention. Students in kindergarten through third grade were randomly assigned to classes of 12 to 17 pupils, of 22 to 26 pupils, and to large classes with an aide helping the teacher. The result: Those in the small classes did better. The gains persisted even after students left third grade. The star project has fueled efforts to reduce class sizes in the early grades. But overcrowding remains a problem.


Lucy McVey took over as principal of Blanton Elementary in Austin, Tex., in 1996 with one mission: to remove it from the state's list of low-performing schools. Blanton earned the stigma after its mostly Hispanic immigrant students scored poorly on the TAAS. To shake things up, McVey required teachers to attend staff development sessions that ran till 8 p.m. She enticed 600 working-class parents to attend a baked-potato social, where she exhorted them to get more involved. "It was a tremendous struggle," McVey says. Some teachers even quit. But after just one year, math scores jumped by 33%, reading scores by 25%--and Blanton got off the list. Further improvements have landed it on the state's list of blue-ribbon schools.

Blanton is a textbook example of what President Bush believes accountability can do for schools nationwide. His plan calls for annual assessments of students in math and reading from grades three to eight, which would require a huge increase in standardized testing. Today, only 15 states--including Texas--administer such tests in each of these years. His plan would give assistance to low-income schools that fail to make sufficient progress. If a school didn't shape up in three years, its students would get federal funds to attend a better public or private school.

HORNET'S NEST. Critics warn that annual testing would create test mania and divert kids from broader learning. But there's ample evidence that performance can rise with well-designed accountability systems that use tests in addition to other measures. In North Carolina's ABC program, each school gets a target for how much they should improve on the state's test each year. Schools that meet the standard receive a bonus of up to $1,500 per teacher. The neediest schools are assigned a team of top-rated teachers, plus an administrator, that spends a year helping to "conduct staff development and forming action plans for borderline teachers," says Elsie C. Leak, who oversees the program. So far, 85% of schools receiving aid have earned their way off the laggard list. North Carolina, with Texas, has outpaced all other states in gains on the NAEP tests.

Or look at how Texas helped to improve the three districts around El Paso, one of the poorest areas in the U.S. The schools had been dreadful for so long that people assumed nothing could be done, says Susana Navarro, head of the El Paso Collaborative for Academic Excellence, a community group formed in 1991. Then the group set high standards, worked to improve teacher quality, and relied on the TAAS exams to measure progress. Now, 70% of El Paso's children pass the exams, up from about 50% in 1994. "Accountability [has been] the most valuable contribution," says Navarro.

Testing often stirs up a hornet's nest among parents and critics. While there's little opposition in Texas, a backlash is building in states that conduct more difficult tests. In Massachusetts, 45% of high school students have been flunking the test that will be required for graduation starting in 2003. This has parents worried that their kids won't graduate on time--or at all.

Similar tests have driven up the dropout rate in Cincinnati, where kids must pass five Ohio tests to graduate. Last June, 92% of 12th-graders but only 35% of freshmen passed all five, says Kathleen Ware, associate Cincinnati superintendent. Some kids learn enough to bring up their score, which is the goal of the tests. But a bigger reason for the discrepancy is that some 40% of incoming students leave before graduation. "This is a long, tough road," warns Ware. It may be that in states with tough tests, students will need more time to meet the standards.

Another worry: that "schooling tends to get reduced to test prep, giving kids a watered-down curriculum," says Monty Neill, head of the National Center for Fair & Open Testing, a group critical of standardized tests. The best educators resist that impulse. At Blanton, McVey reinstated dance and piano when the school got off the troubled list.

The best way to counter the problem is to develop tests worth teaching to. Unfortunately, quality varies widely. California and others states assess English using dumbed-down, fill-in-the-bubble tests. But tests in Massachusetts and New York require kids to read complex material and write extended analyses. The U.S. needs higher and more uniform standards. There are also more comprehensive ways to assess students. At the Urban Academy, a Manhattan public high school, seniors prepare final projects and present them to outside experts to qualify for graduation.

The entire accountability system remains a work in progress. But it would be wrong to give up on testing, warns Boston Superintendent Thomas W. Payzant. True, 56% of his 10th-graders flunked the state English exam last year and 66% failed math. "But we have to be very clear about what we want our students to learn," says Payzant, who warns that if the tests were abolished, pressure to turn around Boston's long-failing schools would evaporate. Even critics like Neill agree that "kids and their parents have a right to know if school is preparing them for something other than dead-end jobs and prisons." Without greater accountability, schools can continue to fail with impunity.


Most people associate school choice with vouchers, which allow parents to use public funds for private schools. But while vouchers remain stymied in a political and legal quagmire, there has been an explosion of choice in public school systems. Charter schools have multiplied from 100 in 1994 to 2,000 today. They serve a half-million of America's 53 million K-12 students, estimates Jeanne Allen, president of the Center for Education Reform in Washington. Another 1 million or so kids have a choice of schools within the traditional public-school system, she estimates. By contrast, only about 20,000 students in a handful of cities attend private schools using publicly funded vouchers. Indeed, giving students a choice of public schools, where 90% of kids go, is a more realistic alternative than vouchers. It's also a far easier political sell, since the teachers unions support charters.

The rationale for choice lies in the competitive jolt it can give existing schools. "Choice and competition breed innovation and better performance," just as they do in business, argues Edison's Schmidt. Equally important is that "one size does not fit all in education," says John L. Anderson, vice-chairman of New American Schools, a nonprofit that helps schools implement comprehensive reform models.

One example is Perspectives Charter School in the heart of Chicago. It has just 150 students, mostly African American and Hispanic, in grades 6 to 12. All must observe the school's 20-point behavior code known as "The Disciplined Life." The code helps to create a safe environment, in part by training students how to resolve conflicts peacefully. Expectations are skyscraper-high. All students must apply to five colleges and can't graduate "unless they're accepted at a college, trade school, the military, or have a job," says Co-Director Diana Shulla-Cose. It's tough. But since the school opened in 1997, reading scores have doubled, math scores have tripled, and 19 of last year's class of 21 graduated and went to college.

NEW MODELS. To ensure that students have access to educational approaches that best fit their needs, school boards should be overhauled and given the primary responsibility for creating choice in their districts. In effect, boards should help every school become a charter school, with the ability to set its own approach within broad guidelines. Boards would set the guidelines and oversee the results to ensure that schools meet performance standards.

To encourage more variety, educators and some companies are coming up with what amount to national brands for educational methods. Already, more than 3,000 schools in all 50 states have adopted one of New American Schools' models. They range from Success for All, which targets improving literacy, to Co-Nect, which creates high-tech schools. Meanwhile, Edison now runs 113 schools, up from 79 last year, using an approach involving lots of technology and more time in school. KIPP, which stresses rigorous teaching of the basics, is about to roll out its model nationally.

More public districts are moving toward a multiple-choice model, as well. In New York, students can choose among dozens of differing middle and high schools, although there's no guarantee of acceptance at their first choice. Chicago has 15 charters, 12 citywide magnet schools, and 15 international baccalaureate programs and expects to bring in Edison and KIPP to manage some public schools.

One danger in the proliferation of options is that educators may chase fads or fruitless experiments that lead nowhere or even set students back. "We need far more research" on which models work best, cautions AFT President Sandra Feldman. Boards will have to hold schools to high standards and close them if they fail to deliver.


In January, a New York court issued a stinging indictment of the state's funding of New York City's 1.1 million-student school system. A staggering 31% of the city's teachers flunked the basic exam required of new educators on their first try, vs. 4.7% of those in the rest of the state. Hundreds of city school buildings have structural deficiencies. Overall, the state's poorest districts, mostly in the city, spend $2,800 per child less than the richest, mostly located in suburbs and upstate. That works out to some $60,000 less per class.

The result: Just 60% of city students who entered the ninth grade in 1996 have graduated. At every turn, city schools lack the resources to provide the "sound basic education" required by the state constitution, wrote New York Supreme Court Judge Leland DeGrasse, who ordered major funding reforms.

This decision, which the state is appealing, is the latest in a three-decade string of rulings striking down school-funding systems on constitutional grounds. Wyoming and Kentucky have made progress in reducing the disparities between the wealthiest and poorest districts. But there are still gaps in 42 states, according to the Education Trust. "We get killed," complains Chicago Schools CEO Paul G. Vallas, who says some suburbs spend twice as much as Chicago, even though it has half the state's special-ed students.

For years, the solution has been to try to equalize funding, which is most commonly based on property taxes, thus perpetuating the discrepancies between rich and poor districts. But any schemes that include blocking wealthy districts from lavishing extras on their schools breed resentment. Now, some reformers are embracing a more practical approach: adequate, rather than equal, funding. After a court struck down its funding system in 1995, the state of Wyoming took such a tack. It embarked on an extensive study of what makes up an adequate education and calculated that it costs $7,400 per student.

Of course, more money is no guarantee of success: Schools in Washington, D.C., are dreadful, despite annual outlays of $8,000 per kid. And while billions have been dumped into the federal Title I program, which helps the most impoverished schools, many recipient schools remain abysmal.

Still, extra dollars can work wonders. After a court struck down Kentucky's system, the state boosted spending on its schools by 20% in 1990. It targeted the money to backwoods schools such as Roundstone Elementary School in Mt. Vernon, Ky., which serves 270 mostly poor students. Its library was outdated, classes were large, and the building was crumbling. A 150% budget increase let Roundstone remodel the library, cut class sizes, and sharply expand professional development for teachers. The payoff? "We're now considered one of the best schools in the state," says Principal David Pensol. His fourth-graders ranked first in state science scores last year.

Uncle Sam may have to help resolve disparities between states. In 1998, for example, Connecticut and New Jersey spent $9,000 per student, twice as much as Mississippi or Utah. Indeed, the 10 bottom-ranked states spent less than the national average. As courts have made clear, it's unfair to consign kids to inferior schools because of where they live.


The amount of time kids spend in class has remained largely unchanged since the 19th century, when schools adopted the six-hour day and the nine-month calendar to accommodate farm life. The summer break is especially harmful to minority and poor kids. They enter the first grade half a year behind upper-income children but fall 2.5 years behind by the end of fifth grade, according to a Baltimore study by Johns Hopkins University sociologists Doris R. Entwisle and Karl Alexander. "Almost all of this gap can be traced to the summer vacations, when lower-income kids were treading water and upper-income kids were forging ahead," says Alexander. The reason, he concluded, is that upper-income families do so much better at keeping their kids stimulated during the summer.

"NO SHORTCUTS." The solution--requiring more time in school for kids who need it--is simple to say but difficult to achieve. "Schools have to be in session year-round," argues Chicago's Vallas. One problem, of course, is cost. There's also resistance from teachers, parents, and students, who all like the summer break. In addition, more time isn't as necessary for many affluent kids, giving the concept a penalize-the-poor tinge.

Still, evidence abounds that more hours in class can lift student performance (as well as alleviate child-care problems). It's one reason for the success of the KIPP Academy, which runs its two schools from 7:30 a.m. to 5 p.m., Monday to Friday, plus four hours on Saturday and an extra month in the summer. Arduous? Yes. But all 550 of its pupils in Houston and the South Bronx meet state standards, and many win scholarships to top prep schools. "There are no shortcuts to success," argues founder Mike Feinberg.

Similarly, in Chicago, 250,000 students, more than half of the total, now attend summer school or extended-day programs. They're a key reason why student test scores, though still low, have risen five years in a row.


Schools have embraced new technology with fervor in recent years. Some 95% of public schools are wired to the Internet, up from less than 35% in 1994. There has also been an explosion in the digital resources available to schools, from virtual courses and field trips to access to some of the world's great libraries.

Yet so far, technology has done little to improve the national report card. The problem: Most educators don't know how to use it to improve student learning, teacher cooperation, or even school administration. That needs to change, since no other tool offers more potential to transform our schools.

Just look at schools that have begun to tap the potential. Adlai E. Stevenson High School in Lincolnshire, Ill., a suburb north of Chicago, offers students access to the Net from every classroom, office, library, and student common area. German teacher Margaret R. Plank uses e-mail to link her classes with students in Hamburg. The teens from both countries learn each other's language by discussing everything from mad cow disease to Germans' feelings about their country's role in World War II. "This gives the students a reason to improve," says Plank.

GONE FISHING. Similarly, Washington State has created a statewide fiber-optic intranet called K-20 that links every college and school district in the state. Now "we're offering all kinds of virtual courses," says state superintendent Terry Bergeson. Seven districts, from Forks, a fishing town on the Olympic Peninsula, to North Franklin on the Columbia River, have teamed up on a project to help protect salmon. Kids monitor water quality, discuss their findings with each other through teleconferences, and report to their local communities.

A new generation of software is proving far more effective than traditional programs, which are often little more than rote learning dressed up for the Digital Age. Take the Cognitive Tutor, developed by Carnegie Learning in Pittsburgh to teach algebra and geometry. The program uses artificial intelligence to determine what students understand and what they need to tackle next. Rather than drill kids on equations, it requires them to use algebra to solve real problems. Kids using Cognitive Tutor score higher on math tests than students in traditional algebra classes and are more than twice as likely to complete geometry and higher algebra.

Dot-coms may have soured the business world on the Internet's commercial potential, but schools are still experimenting with abandon. Teachers use the Net to collaborate on lesson plans. In some schools, e-mail is being harnessed to expand communication between teachers and parents. The Gates Foundation is helping pilot a new online system for testing kids more frequently and effectively. The goal is to turn today's cumbersome standardized tests into a just-in-time diagnostic tool that would yield results instantly so teachers could address problems quickly. "In five years, we hope several states will have moved their entire testing system online," says the Foundation's Vander Ark.

Technology alone, like more choice or smaller schools, is no panacea for the ills of America's classrooms. But if deployed with the other reforms, it holds the promise of helping to close the yawning gap between schools in rich and poor communities. As with the other measures, it will take tremendous effort to adapt technology effectively. Doing so will require "a national mobilization...similar in scope...to bringing electricity and phone service to all corners of the nation," concluded the Congressional Web-based Education Commission last December. Those are good analogies for what it will take to implement all seven reforms outlined here. If the goal of "no child left behind" is a serious one, nothing less will suffice.

By William C. Symonds
With Ann Therese Palmer in Chicago, Hilary Hylton in Austin, Tex., and bureau reports

Saturday, June 07, 2008

Takahashi: Three who had the right idea at the right time

Takahashi: Three who had the right idea at the right time
By Dean Takahashi
Mercury News
Article Launched: 01/02/2008 01:54:35 AM PST

This column is about people you hate. They're overnight successes in the Internet business and they make the rest of us look dumb and unlucky. Guy Kawasaki, a veteran of many start-ups and Apple's former evangelist, interviewed them at the recent AlwaysOn Venture Capital Summit for a panel titled "Why Take Venture Capital At All?"

Inside the swanky Ritz-Carlton Half Moon Bay resort, Kawasaki talked to entrepreneurs who had the right idea at the right time. Their businesses took off and they barely needed funding at all.

Drew Curtis, the founder of the humor Web site Fark.com, said he has managed to get 52 million page views a month from 4 million unique visitors. I enjoy Fark, which basically is news of the weird that makes you laugh. People submit ideas for funny stories, and he and his crew put the best ones on the site. Curtis lives in Kentucky, drinks beer and plays a lot of soccer to counter the effects of the beer.

He got the idea for Fark.com as a "complete accident" back in 1999. "I did it because I was annoying the people I was sending the stories to," he said. By the time it gathered momentum, the bottom had fallen out of the dot-com market so Curtis didn't raise any money.

"Still, it was basically my own personal Web site," he said. "It's almost on auto pilot."

They get about 2,000 stories a day and then sort through them. He notes that every late-night talk
show and comedy show uses stuff from Fark.com but they don't credit it. He reads through them from 7 a.m. until 5 p.m., when his soccer game starts. He says he is usually so drunk at night that he signs off early.

"I'm having trouble feeling sorry for you, hanging out in Kentucky," Kawasaki said.

Curtis said that four friends help him do the sorting because they have the same kind of sense of humor that he has. Sometimes he disappears and no one notices.

Markus Frind of Vancouver, British Columbia, runs a free online dating site, Plenty of Fish, out of his apartment. He gets 1.2 billion page views a month from 50 million unique visitors. Frind said he started the company because he needed to learn a new software program dubbed ASP.net.

"I needed to learn so that I could get another job," he said. "I built it in two weeks and it started to get traffic. It never occurred to me to raise money."

He and his girlfriend worked on it and he said, "My girlfriend didn't really want to do anything so I hired an actual employee." Kawasaki asked him, "What is the biggest single check you've ever gotten from Google AdSense?" Frind answered, "$900,000. That was for two months."

Frind said he beats out eHarmony and others thanks to "lots of automation." He said one person goes through the site and "forwards me the police requests." Kawasaki asked how many police requests come in. Frind said about two a week.

The traffic is taking more and more servers. He now has 12 servers in a vault, storing 50 terabytes a month. About 300 million files a day are sent out.

Blake Commagere, co-founder of San Francisco-based Mogad, said he had a "string of unsuccessful companies, none of which you've heard of." But in his last project he created something that is spreading like wildfire on the Facebook social-networking site: the Zombies and Vampires social game. In five months, there have been 20 million users. But there are about 5 million unique visitors who are active and the monthly page views are just shy of 500 million.

"How much?" Kawasaki asked in disbelief. "Half a billion," Commagere replied. That means the players of the game are committed and they're generating hundreds of page views each.

All Commagere was trying to do was annoy and amuse his friends. They were annoyed with him when they found out he disappeared for two weeks to create a dumb game. "It was created as a joke, just to make me laugh," he said. "As it took off, I said, 'Oh god, I have to get resources into this.' "

Commagere said it's a very simple game that is designed to spread from person to person. The reward system gets users hooked so they can get to the next level and see new pictures of zombies. He figured he shouldn't even try to ask for venture capital because he would get laughed out of the room.

"People would probably be terrified if I told them about how off-the-cuff everything was," he said.

Contact Dean Takahashi at dtakahashi@mercurynews.com or (408) 920-5739.

Monday, June 02, 2008



In midsummer of 1834 a bankrupt hardware merchant from Philadelphia, Charles Goodyear, walked into the New York retail store of the Roxbury India Rubber Co., America's first rubber manufacturer. He showed the store manager a new valve he had devised for rubber life preservers. The manager shook his head sadly. The company wasn't in the market for valves now; it would be lucky to stay in business at all.

He showed Goodyear why: rack on rack of rubber goods which had been melted to malodorous glue by the torrid weather. In the company's factory at Roxbury, Mass., he confided, thousands of melted rubber articles were being returned by outraged customers. The directors had met in the dead of night to bury $20,000 worth of stinking rejects in a pit.

The "rubber fever" of the early 1830s had ended as suddenly as it had begun. At first everybody had wanted things made of the new waterproof gum from Brazil, and factories had sprung up to meet the demand. Then abruptly the public had become fed up with the messy stuff which froze bone-hard in winter and turned glue-like in summer. Not one of the young rubber companies survived as long as five years. Investors lost millions. Rubber, everyone agreed, was through in America.

Goodyear disappointedly pocketed the valve and took his first good look at rubber. He had played with bits of it as a child, but now, at 34, he experienced a sudden curiosity and wonder about this mysterious "gum elastic." "There is probably no other inert substance," he said later, "which so excites the mind."

Returning to Philadelphia, Goodyear was clapped into jail for debt. It was not his first sojourn there, nor his last. He asked his wife to bring him a batch of raw rubber and her rolling pin. Here, in his cell, Goodyear made his first rubber experiments, kneading and working the gum hour after hour.

If rubber was naturally adhesive, he reasoned, why couldn't a dry powder be mixed in to absorb its stickiness -- perhaps the talc-like magnesia powder sold in drugstores? Out of jail again, he tried, with promising results.

He talked a boyhood friend into backing a modest venture. Charles, his wife and small daughters made up several hundred pairs of magnesia-dried rubber overshoes in their kitchen. But before he could market them summer came, and he watched his footwear sag into shapeless paste.

Neighbors complained about Goodyear's smelly gum, so he moved his experiments to New York. There a friend gave him a fourth-floor tenement bedroom for his "laboratory." A brother-in-law came to his squalid quarters, lectured him about his hungry children, advised him that rubber was dead. "I am the man to bring it back," said Goodyear.

He was adding two drying agents to his rubber now, magnesia and quicklime, then boiling the mixture and getting a better product all the time. Impressed, a New York trade show awarded him a medal.

Goodyear lavished all the arts of decoration on his dingy samples, painted them, gilded them, embossed them. Running short of material one morning, he decided to re-use an old decorated sample and applied nitric acid to remove its bronze paint. The piece turned black, and Goodyear threw it away.

A few days later he remembered that somehow the blackened scrap had felt different. He retrieved it from his trash can and found he was right. The nitric acid had done something to the rubber, made it almost as smooth and dry as cloth. This was better rubber than anyone had ever made before.

A New York businessman advanced several thousand dollars to begin production. But the financial panic of 1837 promptly wiped out both the backer and the business. Destitute, Charles and his family camped in the abandoned rubber factory on Staten Island, living on fish he caught in the harbor.

In time, Goodyear got new backing in Boston and again seesawed to momentary prosperity. His partners wangled a government contract for 150 mailbags, to be manufactured by the nitric-acid process. After making the bags Goodyear was so sure of himself that he stored them in a warm room and took the family away for a month's vacation. When he returned, the mailbags were melted. Underneath their "dry-as-cloth" surface lay the same old sticky gum.

After five futile years, Goodyear was near rock bottom. Farmers around Woburn, Mass. where he now lived, gave his children milk and let them dig half-grown potatoes for food.

The great discovery came in the winter of 1839. Goodyear was using sulphur in his experiments now. Although Goodyear himself has left the details in doubt, the most persistent story is that one February day he wandered into Woburn's general store to show off his latest gum-and-sulphur formula. Snickers rose from the cracker-barrel forum, and the usually mild-mannered little inventor got excited, waved his sticky fistful of gum in the air. It flew from his fingers and landed on the sizzling-hot potbellied stove.

When he bent to scrape it off, he found that instead of melting like molasses, it had charred like leather. And around the charred area was a dry, springy brown rim -- "gum elastic" still, but so remarkably altered that it was virtually a new substance. He had made weatherproof rubber.

This discovery is often cited as one of history's most celebrated "accidents." Goodyear stoutly denied that. Like Newton's falling apple, he maintained, the hot stove incident held meaning only for the man "whose mind was prepared to draw an inference." That meant, he added simply, the one who had "applied himself most perseveringly to the subject."

The winter after Goodyear's discovery was the blackest of his life. Dyspeptic and gout-racked, his health broken, he hobbled about his experiments on crutches. He knew now that heat and sulphur miraculously changed rubber. But how much heat, for how long? With endless patience he roasted bits of rubber in hot sand, toasted them like marshmallows, steamed them over the teakettle, pressed them between hot irons. When his long-suffering wife took her bread from the oven he thrust in chunks of evil-smelling gum.

At night he lay awake, afraid that he would die and the secret die with him. He pawned his watch and the household furniture.

When even the dinnerware was gone, he made rubber dishes to eat from. Then the food was gone too.

That spring he went to Boston to look up friends, found none, was jailed for nonpayment of a $5 hotel bill, and came home to find his infant son dead. Unable to pay for a funeral, Goodyear hauled the little coffin to the graveyard in a borrowed wagon. Of the 12 Goodyear children, six died in infancy.

At last he found that steam under pressure, applied for four to six hours at around 270 degrees Fahrenheit, gave him the most uniform results. He wrote his wealthy New York brother-in-law -- who had once lectured him about his parental obligations -- of his discovery. This time the brother-in-law, a textile manufacturer, was interested, for Charles told him that interwoven rubber threads would produce the fashionable puckered effect then much favored in men's shirts. Two "shirred goods" factories were rushed into production and, on the ruffled shirtfronts of dandies, rubber rode to worldwide success.

As soon as he could, Goodyear disposed of the manufacturing interests which might have made him a millionaire and went back to his experiments. He wanted to make everything of rubber: banknotes, musical instruments, flags, jewelry, ship sails, even ships themselves. He had his portrait painted on rubber, his calling cards engraved on it, his autobiography printed on and bound in it. He wore rubber hats, vests, ties.

Goodyear saw rubber as what we know it is today: the first and most versatile of the modern "plastics." He perceived in it a "vegetable leather" that defied the elements, an "elastic metal," a wood substitute that could be shaped in molds.

Some of his ideas still turn up as "new" uses for rubber. Many food packagers, for example, now wrap their products in Pliofilm, a rubber-derived plastic; Goodyear suggested the same application in 1850. Rubber paint, car springs, ferryboat bumpers, wheelbarrow tires, inflatable life rafts, and "frogmen" suits are other recent innovations he described a century ago.

Goodyear's business deals, licensing manufacture under his scores of patents, were ridiculously bad. Shirred-goods rights, for instance, went for royalty of three cents a yard; the licensees made $3 a yard.

Against "patent pirates" Goodyear was forced to prosecute 32 infringement cases all the way to the U.S. Supreme Court. In one famous 1852 case, his advocate was no less a personage than Secretary of State Daniel Webster. Goodyear paid Webster $15,000 for temporarily doffing the robes of Cabinet office -- the largest fee ever paid an American lawyer to that time. In a two-day speech Webster won a permanent injunction against further patent infringements. It made headlines, but it didn't stop the piracy.

Goodyear was slow in filing foreign patent applications. But he had sent samples of his heat-and-sulphur-treated gum to British rubber companies without revealing details. One sample was seen by famed English rubber pioneer Thomas Hancock, who had been trying for 20 years to make weatherproof rubber. Hancock noticed a yellowish sulphur "bloom" on the Goodyear sample's surface. With that clue, he reinvented vulcanized rubber in 1843, four years after Goodyear. By the time Goodyear applied for an English patent he found that Hancock had filed a few weeks earlier.

Offered a half-share of the Hancock patent to drop his suit, Goodyear foolishly declined -- and lost. A friend of Hancock named the contested process "vulcanization," after Vulcan, the Roman god of fire.

At the London and Paris world's fairs of the 1850s Goodyear installed great pavilions built entirely of rubber, floor to roof. When his French patent was canceled on a technicality and his French royalties stopped before he could pay his bills, he was seized by gendarmes and hustled off to a 16-day stay at his familiar "hotel" (as he called it) -- debtors' prison. There he received the Cross of the Legion of Honor, bestowed by Emperor Napoleon III.

When he died, in 1860, he was $200,000 in debt. Eventually, however, accumulated royalties made his family comfortable. His son Charles Jr., inherited something more precious -- inventive talent -- and later built a small fortune on shoemaking machinery.

Neither Goodyear nor his family was ever connected with the company named in his honor, today's billion-dollar Goodyear Tire & Rubber Co., the world's largest rubber business. Goodyear's only direct descendant among modern companies is United States Rubber, which years ago absorbed a small company he once served as director.

Today there is a cultivated rubber tree for every two human beings on earth. Three million tree "milkers" harvest the crop. The United States alone imports almost half of it, and synthesizes as much or more from petroleum. Nearly 300,000 Americans earn their livelihoods in rubber manufacturing, this year will produce $6 billion worth of products.

The whole huge apparatus owes its existence to the invincible little fanatic who might have died a bitter man, but didn't.

"Life," he wrote, "should not be estimated exclusively by the standard of dollars and cents. I am not disposed to complain that I have planted and others have gathered the fruits. A man has cause for regret only when he sows and no one reaps."


Thursday, March 06, 2008

Branson's Next Big Bet

Having an idea is one thing. Having a successful business is another. With more than 200 startups under your belt, what advice would you give entrepreneurs on making an idea stick?

I made and learned from lots of mistakes. In the end, the key is willpower. It's just really hard work to make sure you can keep paying the bills. But I do think one can have too much respect for bank managers.

When we entered the airline business, the very first plane Boeing (Charts) sent over to us ran into a bunch of birds and lost an engine. Because it hadn't been delivered yet, the insurance didn't cover that, so we were $1.5 million down before we flew our first flight, which took the whole Virgin Group beyond its overdraft facility.

Two days later, as I returned from the inaugural flight, our bank manager was sitting on my doorstep and telling me that he's going to foreclose on the whole business if we don't get the money in by Monday - and that was a Friday.

So I had to scurry around like mad over the weekend to try to get enough money to cover what I owed, which I just managed to do. For most people, bank managers are a bit like doctors - they never leave them because they have too much respect for them.

By daring to be disrespectful, we went from having a $5 million overdraft facility to having a $40 million overdraft facility with a different bank by the end of that week. Where one bank was willing to ruin us based on the assets we had, another bank was willing to give us more credit.

There is a very, very thin dividing line between survival and failure. You've just got to fight and fight and fight and fight to survive.

What was the first business idea you came up with?

I set up this magazine called Student when I was 16, and I didn't do it to make money - I did it because I wanted to edit a magazine. There wasn't a national magazine run by students, for students. I didn't like the way I was being taught at school. I didn't like what was going on in the world, and I wanted to put it right.

Of course, a lot of businesses want to reach students, so I funded the magazine by selling advertising. I sold something like $8,000 worth of advertising for the first edition, and that was in 1966. I printed up 50,000 copies, and I didn't even have to charge for them on the newsstand because my costs were already covered.

So I became a publisher by mistake - well, not quite by mistake, because I wanted to be an editor but I had to make sure the magazine would survive. The point is this: Most businesses fail, so if you're going to succeed, it has to be about more than making money.

Are you saying entrepreneurs should go into business without the bottom line in mind?

Ideally, since 80 percent of your life is spent working, you should start your business around something that is a passion of yours. If you're into kite-surfing and you want to become an entrepreneur, do it with kite-surfing.

Look, if you can indulge in your passion, life will be far more interesting than if you're just working. You'll work harder at it, and you'll know more about it. But first you must go out and educate yourself on whatever it is that you've decided to do - know more about kite-surfing than anyone else. That's where the work comes in. But if you're doing things you're passionate about, that will come naturally.

Monday, July 16, 2007

Business paradigm shifts and free tequila shots

Yelp has two ambitions: Have fun and seize as much of the $100 billion local ad market as possible. Fortune's Jeffrey O'Brien reports on a hot Web startup.

By Jeffrey M. O'Brien, Fortune senior editor
July 10 2007: 3:30 PM EDT
(Fortune Magazine) -- "I'm making a ton of money from Yelp, and it's freaking me out." Woe is Christopher Hall, the 34-year-old owner of Splitends, a hair salon in Orange County, Calif. Its chic décor is more architectural firm than beauty parlor. He has appeared on a reality show, in the L.A. Times, and on TV news segments. He's photogenic and has a quick wit. He serves beer to customers. So business, unsurprisingly, was decent as soon as he opened the place last December. Until March 6. That's when things got crazy.

Now he's literally in pain from all the coiffing. "I've been doing hair for 16 years, and I'm busier than I've ever been," he says. "Saturday I came in at 6:30 a.m., left at 8 p.m., and did 22 people. I woke up Sunday and my hands were all swollen. I had to put them in an ice bucket."

What happened March 6? That was the day Anita Lau wrote about Splitends at Yelp.com, an online platform for user reviews of everything from dive bars to funeral parlors. Lau has posted 2,036 reviews and 1,340 photos, has collected 790 compliments on her work from fellow Yelpers, and along the way has amassed the power to put bodies into barbershop chairs. She gave Splitends the maximum five stars, praising Hall and saying, "I absolutely love my haircut."

The review started a logroll of new clients for the stylist and a couple dozen subsequent five-star critiques. "I've taken out ten ads in OC Weekly this year and have gotten maybe one call," says Hall. "I get anywhere from five to 15 calls a day from Yelpers. They come in and then write reviews. Then other people see the reviews, think it must be great, and call. It's its own little biosphere. It feeds itself."

For those outside California, let's back up a bit. Yelp is part social network, part localized review site - think Facebook meets Zagat - and it's fast becoming the web's gift to small business. A platform for ratings of anything with a postal address, Yelp offers the service industry new insight into what the chattering masses are saying. The name "Yelp" comes from a friend of the founders who simply liked the word. But it also serves as a nifty contraction of "yellow pages," which reveals the company's ambitions: a land grab on the $100 billion that's spent every year on local advertising.

"There's an information shortage when it comes to local businesses," says co-founder and CEO Jeremy Stoppelman. "If you look at the yellow pages, what are you seeing? You're seeing how much money a business spent to buy a big ad. We're a place for a conversation between the prospective customer and the business owner."

Many well-funded companies have tried to tackle local search over the years, using a mix of strategies. There's the directory model, which involves a massive sales force upselling business owners to ever bigger, flashier ads. There's the Citysearch tactic of creating proprietary content and selling ads against it. And then there's the search-engine route of crawling everyone else's content and automating the ad sales. Yelp is taking a different road: crowd-sourcing. For years Zagat has been compiling anonymous user reviews, but Yelpers get to fully express their feelings and make names for themselves.

Employing the same user-generated content model that powers YouTube or Craigslist, Yelp can reach into a city's every nook to reveal hidden car washes, dentists, plumbers - the sorts of unsexy but necessary services that make up our daily lives. When we discover something wonderful (or horrible), we love to tell our friends about it. We also turn to people we trust when we need a good recommendation. Yelp is enabling those conversations to happen on a massive scale.

There's any number of reasons the site could fail. But so far the enthusiasm Yelp has generated indicates otherwise - usage is up nearly 400% to 1.8 million users a month, according to Nielsen/NetRatings. In San Francisco the dining and nightlife scene has been all but completely trolled, analyzed, and pontificated upon (or "Yelped," for short), and the site has recently caught fire in Chicago, New York, and L.A. In those cities it has begun changing the way local businesses do their marketing.

The word most often used to describe Yelp - other than some variation on the ever-flexible brand itself, which can be intoned positively, as in "I Yelped that awesome crepe wagon," or negatively, "That bitchy waiter totally got Yelped!" - is "addictive." Anita Lau drives around Southern California in an SUV with a vanity plate that reads I [heart] YELP. The plate is unique. The sentiment isn't.


A charismatic 29-year-old with a boyish smile and a self-deprecating streak, Stoppelman started the company in 2004 with longtime friend and CTO Russel Simmons, 28. (No, not the hip-hop impresario. This Russel has only one "L.") After their last employer, PayPal, was sold to eBay (Charts, Fortune 500), the co-founders cashed out and began kicking around startup ideas with a former colleague, PayPal co-founder Max Levchin. One day Stoppelman was looking for a doctor but had no clue how to find a good one. That gave him and Simmons an idea for a convoluted automated system in which people could e-mail friends asking for recommendations on, say, local doctors, and the answers would be logged at a communal site for everyone to see. Levchin floated the duo $1 million to build out the plan. It went nowhere. But the co-founders noticed an interesting tendency among the early users. People were writing unsolicited reviews of their favorite businesses just for fun. So Yelp switched tack. "I remember the moment that Russ said, 'There should be a way for you to write your own reviews without asking questions,'" Stoppelman recalls.

Actually, Stoppelman and Simmons weren't just looking for a new doctor. A pair of unrepentant party boys - they did tequila shots during the Fortune photo shoot - they were in a perpetual search for the greatest restaurants and clubs in San Francisco. To get Yelp off the ground, they decided to mix business and pleasure, and started hosting Yelp parties at local establishments. The parties got people talking. (Flickr is littered with raucous snapshots from Yelp events featuring bar dancing and an endless train of women hanging all over the co-founders.) More important, the revelry got people writing reviews, building up the site's content.

Today Yelpers seem to live on the site, messaging one another about their social lives, reacting to reviews, and planning get-togethers. That's the social-networking part. As is the case on most social networks, Yelp is rife with self-conscious patter. But there's a point to all the yammering: finding cool stuff that's not too far away. It's a mission everyone seems to take seriously.

"One of the first surprises was the length of reviews and the attention to detail," says Simmons. "People think they have to write reviews of a certain quality or there's no point. A lot of them are funny. Some are poetry. I saw one review in the form of an IM conversation with Skeletor" (the latter, of course, being the superevil, skull-faced archnemesis of He-Man, Master of the Universe).

In 2005, Stoppelman and Simmons raised $5 million from Bessemer Ventures, the VC firm behind Verisign and Skype, among others, and then last November another $10 million from Benchmark Capital, whose hits include eBay and Red Hat (Charts). The company's strategy is to build a rabid following in any given market. Once an establishment has a good number of reviews, a Yelp salesperson calls to make sure the establishment's owner is aware of all the chatter going on, offers a Yelp window sticker, and, of course, tries to sell an ad. Ads and sponsorship packages range from $200 to $2,000 a month.

Stoppelman is coy about how well Yelp is doing on the business side. The company is generating revenue, though he won't say how much. He does acknowledge that profits are a ways off. "Someday we'll make money," he says, smiling, adding only that Yelp has all the funding it needs.

The obvious question: If the content costs nothing and the marketing is word-of-mouth, where is Yelp spending its $16 million? Well, salespeople are expensive. The company is always adding servers to handle growth and is in a desperate search for more engineers in San Francisco. Given the reputations of Stoppelman and Simmons, it'd be easy to accuse the co-founders of spending their funding on bar tabs. Except that lately an awful lot of their drinks seem to be on the house.

Thursday, May 31, 2007

Steve Jobs and Bill Gates at D5

They take questions from audience:

Tuesday, May 29, 2007

HP strolls down shopping aisle of the future

By Erica Ogg

PALO ALTO, Calif.--Despite the digitization of nearly everything in our daily lives, the Sunday circular ad for beef and bags of baby carrots has remained. Hewlett-Packard is developing a technology to bring even the banal task of grocery shopping into the Digital Age. At HP Labs here, researchers are developing an in-store kiosk solution called Retail Store Assistant (RSA) that will make shopping for food, clothes and electronics easier for buyers and make selling things easier for retailers.

This is the same lab that invented inkjet printing technology and pocket-size scientific calculators, and it wouldn't seem in-store kiosks are at the forefront of technology, which HP admits. But it's the combination of several areas of HP's core businesses that's new.

"The technology is available," said Mohamed Dekhil, manager of imaging and printing retail applications at HP Labs. "It's a question of how you connect all this together."

HP's Retail Store Assistant
The idea is this: Imagine walking into a grocery store, and instead of bringing your shopping list along, simply swiping a club card or entering a phone number. Any information you've entered online from home (milk, eggs, pretzels, ground beef, apples) will show up on your profile. There will also be special offers tailored to your shopping habits--your club card already keeps track of the fact that you prefer Diet Pepsi to Coke, and that you buy a carton of eggs every other week. The kiosk simply matches your information with retailers' offers to generate the appropriate coupons.

The RSA kiosk will then create a printed list of special discounts and shopping items. On the back will be a map of the store and the location of all items, eliminating the need to comb every aisle of a store. And instead of fumbling for coupon clippings, a single bar code on the printout will track the customized offers and remove items from the shopping list that were purchased.

If a printed piece of paper is too cumbersome, HP says the list and information could also be transferred via Bluetooth technology to a mobile device, like a phone.

While HP stressed that the intent of the technology is about making shopping "a delight" for customers, it's also a way for the company to sell more of what it's best at. The kiosk service combines HP database technology, servers, mobile products, printers and imaging technology.

The RSA kiosk could also be a boon for retailers and marketers. The kiosks can know by the time a shopper has left the store which discounts a buyer took advantage of. That information is gold for marketers looking for demographic data and ways to sell more accurately to individual buyers.

Though privacy advocates may balk at the idea of a retailer monitoring each shopper's purchases--indeed some already do decry the club card concept--HP says its customers will need to have privacy policies available to shoppers so they know what they're getting themselves into. Eventually the kiosks will let shoppers manage what personal data is kept, said Dekhil. For instance, shoppers can indicate that none of their alcohol or medicine purchases be tracked.

The technology isn't available yet, and likely won't be for some time, but HP says it is talking to major retailers, like supermarkets, electronics stores and discount chains about using the technology to make shopping an experience, one that eliminates the frustration of not being able to find a product or a helpful salesperson, and then build customer loyalty to that store. HP says it is currently "in talks" with major retailers to start pilot programs soon.

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