LISTEN — Class Disrupted S4 E12: It’s Time We Talked Money
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Class Disrupted is a bi-weekly podcast focusing on education. It features author Michael Horn and Diane Tavenner from Summit Public Schools engaging in conversations with educators, school leaders, students, and other members of school communities. Together, they explore the challenges faced by the education system during the ongoing pandemic and discuss potential paths moving forward. You can access every episode by bookmarking our Class Disrupted page or subscribing on Apple Podcasts, Google Play, or Stitcher. New episodes are released every other Tuesday.
Quite often, money is a topic that is considered taboo in schools. There is not enough discussion about the need for more funding in education. In this episode, Diane Tavenner and Michael Horn delve into how this lack of financial resources hinders innovation for the benefit of students. They also contemplate how the culture and actions of schools could change in relation to this subject.
Listen to the episode below. A complete transcript follows.
- Class Disrupted S4 E12: It’s Time We Talked Money
Tavenner: Hello, Michael.
Horn: Hi, Diane.
Tavenner: Michael, it feels like I’m living in a movie or a psychological experiment, maybe even both.
Horn: I completely understand. To give our listeners some context, we are recording this episode on Monday morning, after the recent events involving the run and subsequent closure of Silicon Valley Bank. It is quite an unprecedented time.
Tavenner: Indeed, it is. The government has stepped in as of Sunday, so perhaps the situation won’t be as dire. However, I must admit that before this weekend, my knowledge of a bank run was mostly informed by the movie "It’s A Wonderful Life." Unlike in that movie, there was no George Bailey in the lobby of Silicon Valley Bank on Friday, using his honeymoon fund to prevent customers from withdrawing all their money and causing the bank to shut down. Instead, we witnessed a classic prisoner’s dilemma scenario unfolding, where some individuals panicked and withdrew all their funds, triggering a rush on the bank until it ran out of money and had to close. According to the theory, if everyone had stayed united and refrained from withdrawing, the bank may have been able to survive.
Horn: Yes, I hadn’t considered the prisoner’s dilemma aspect of this situation. It’s remarkable, Diane, how history seems to be repeating itself in recent years with events from the past that I never expected to encounter in my lifetime. It truly feels like March Madness in more ways than one.
Tavenner: Indeed, it is March Madness on multiple levels. Michael, I don’t want to add to the frenzy or overreact, but we started this podcast at the beginning of the COVID pandemic because we believed it would have a profound impact with predominantly negative consequences. Our hope was that if anything positive could arise from this situation, it would be a reimagining of our schools to better serve the needs of current students and society as a whole. Then came the racial reckoning sparked by the murder of George Floyd, which added another significant event to the mix. Now, in our fourth season, it seems that we may be facing yet another event related to our financial systems. I don’t want to sound alarmist, but there are some undeniable patterns emerging, and I sincerely hope that I’m mistaken. Interestingly enough, the topic I wanted to discuss with you today, and I swear I chose it before these recent events unfolded, is money.
Horn: That is quite uncanny, I must say. You wanted to talk about money, and that was before all the challenges in the banking sector arose. However, I feel like we should have an expert on the financial system if we want to delve into this topic further.
Horn: Well, Diane, I must admit that I am intrigued by your thoughts. It’s definitely a relief to focus on something other than bank crises. I’m curious to hear what’s on your mind because we had Margarite Rosa, the leading expert on money in schools, on the show in 2021. We asked her a lot of questions back then. So, what questions do you have now?
Tavenner: Let’s begin with something that puzzles me, Michael. As a general rule, we tend to avoid discussing money in schools. Actually, let me correct myself. Money is constantly talked about in schools and education, but the focus is mainly on the lack of it and the need for more. If we delve deeper, it typically revolves around insufficient teacher salaries and the lack of funding for art and music programs. That seems to be the ongoing conversation.
Moreover, schools function very differently from businesses when it comes to managing finances. I don’t mean to criticize school administrators, but it’s an observation of the overall system. Budgets within schools or districts have limited control over various items. They also lack control over revenues and other traditional levers of organization management. They simply don’t have the power to make significant changes.
This stands in stark contrast to the principles advocated by the Lean Startup or discovery-driven planning methodologies, which are often used as models for innovation. It made me wonder whether we can truly embrace innovation in schools without fundamentally reevaluating our relationship with money.
Horn: Diane, what you’ve just shared is incredibly thought-provoking. It has always nagged at me, the dynamic you described. However, before I respond further, could you provide a couple of examples to make this more concrete? Can you describe how this plays out in a school?
Tavenner: Michael, there’s one example that comes to mind that perfectly illustrates the complexity of the conversation we’re about to have. I must warn you, though, that when I mention it, many people tend to feel uncomfortable. It’s a topic that often gets dismissed as inappropriate, but that won’t stop me from bringing it up. In fact, that’s precisely why I believe this conversation is crucial. I hope our audience can stay with us and appreciate the nuance because it’s essential.
Here’s my example. In my opinion, a crucial aspect of what I’m discussing is the fact that federal law grants students the right to an individualized learning plan, commonly known as an IEP (Individualized Education Plan). This plan is typically provided to students who have a diagnosed learning disability, leading to a significant difference between their academic performance and perceived ability. These plans offer tailored accommodations and additional support services beyond what is available to all students.
Now, when determining these accommodations and services, an IEP team convenes to discuss and make decisions. The team generally consists of the student’s parents or caregivers, teachers, education specialists, and perhaps the principal. However, here’s the catch, Michael: it is against the law to consider financial factors when deciding on these accommodations and services.
Horn: Diane, this is a fascinating example, and I hope that people stay engaged throughout the entire explanation. However, it does shed light on why there hasn’t been as much innovation in special education as we would have expected. One reason could be that we have restrictions on how education leaders can allocate resources to support these children. As a result, they are unable to fully utilize their expertise and think holistically about personalized learning.
In a business context, it would be ludicrous to mandate a profit margin for a division leader without giving them any control over the available resources. Yet, in education, we seem to follow a similar approach.
Addressing your question about discovery-driven planning and Lean Startup principles, it is interesting to consider that historically, our education system may have unintentionally followed some of these ideas when it was first created. However, it is important to note that our education system was never designed to optimize individual student learning or help every child reach their full potential. Despite this, it was successful for many years by equipping students with enough knowledge to secure good jobs and middle-class wages in an industrial economy. However, this arrangement began to break down in the late 1970s with the rise of technology and globalization. Suddenly, a college degree became essential for accessing middle-class opportunities.
Unfortunately, we started sending more students to college without adequately preparing them with necessary foundational skills, as our education system was not designed to optimize their learning. Now we find ourselves needing a different approach.
Let’s consider the concept of discovery-driven growth. With this approach, we would establish a clear definition of success from the beginning and then identify the assumptions that need to be true for the innovation to be successful. For example, a goal could be to ensure that 100% of third graders can read by the end of the year. We could then design a blended learning model using the three queuing method of reading instruction, although I acknowledge that this may not be met with enthusiasm.
Next, we would test these assumptions in the most cost-effective way possible. If they prove to be true, we would gradually increase investment in the new system. However, if they do not hold true, we would stop the experiment. In the case of the three queuing method, research readily shows that it is unlikely to achieve a 100% success rate in reading proficiency by third grade. Therefore, it would not be wise to continue investing in this approach.
Tavenner: Absolutely, Michael. In my opinion, there are two key areas where money isn’t playing the necessary role in fostering innovation. Firstly, we need to establish a cost-effective criteria for decision-making and driving innovation. Currently, we don’t emphasize its importance or consider it during the innovation cycle. As you pointed out, we often see funds being poured into methods that have been disproven.
Alright. One of the major challenges, Michael, is that a significant portion of school budgets are locked in and not under the control of those managing the school. Unless you experience this firsthand, it’s hard to realize. Many educators may not have exposure to other sectors, so they’re unaware that there could be an alternative approach. Perhaps that’s the issue at hand. A major distinction between schools and businesses is that a successful business generates more revenue and resources through growth. However, this is not the case in schools. School funding doesn’t work that way. Revenue in schools primarily comes from enrollment and attendance.
Usually, the more students a school has and the better the attendance, the more funding it receives. However, these factors have their constraints and nuances, and it’s important to note that the situation varies in different states. So, I’m left wondering if innovation is feasible under these circumstances. There must be a way, even though we can’t completely overturn the existing system overnight, despite our desire to do so. Can we draw lessons from large companies that innovate? Some companies succeed in this aspect, while others don’t. Is there something we can learn from their experiences in tackling this challenge?
Horn: Absolutely. Just imagine if schools were funded based on the outcomes and actual learning growth of children rather than just enrollment and attendance. But, I agree with your broader point that our current system doesn’t lend itself to innovation. Sadly, that seems to be the reality. Now, when I talk about innovation, I don’t mean throwing random ideas out there without regard for their effectiveness. I define it as new approaches or continuous improvements that truly help people make progress.
Taking your point further, it would be ideal to see a diverse range of schools and models within the existing system. We need a portfolio of options that offer great potential for achieving positive outcomes for every child. There’s another theory that Clay Christensen, a well-known theorist, embraced, called "Good Money, Bad Money." He and his co-author, Michael Rainer, explored the best type of funding for new ventures in their book "The Innovator’s Solution." They questioned the traditional categorization schemes of venture capital, corporate growth capital, and loans, realizing that these frameworks were flawed. Their conclusion was that new ventures should secure patient capital for growth, focusing on developing a viable and successful model before seeking dramatic scaling. This perspective goes against the prevailing mindset in Silicon Valley, Diane, so its reception may be mixed.
Horn: I completely agree with your point. And let me add that I have experience in designing a school that caters to a diverse group of students in terms of income and race. So I’m not referring to segregation based on those factors. Instead, I’m talking about finding the best fit for students based on their cognitive abilities, needs, and interests. However, I must mention that while the theory I’m about to discuss may have some limitations in terms of its predictive capabilities, there are anomalies like Facebook that indicate the theory requires more nuance.
Nevertheless, I believe that this theory, known as Good Money, Bad Money, is particularly beneficial in large and established organizations. Michael Rainer and Clay Christensen have pointed out that if the new investments you’re making for future growth or success are not profitable at the beginning, the moment the main enterprise faces difficulties, it will cut back on those investments and focus solely on its core activities in order to protect what it has always done.
However, there are cases where if the new venture is profitable and self-sustaining, it can be protected and continued, becoming the promising wave of growth in the future. In the context of schools, this pertains to ensuring student success in the future.
Tavenner: This is really intriguing, Michael. I’d like to bring the conversation back to practicality, if I may, because that’s how I understand these theories better. Throughout this season, we have emphasized the importance of pilots and closely examining our pilot program on school leadership. We have analyzed its various elements and nuances, and have come to the conclusion that pilots are crucial. As I listen to you and reflect on our work, I realize that the driving force behind this pilot is our belief that it is a more cost-effective model. This is the essence of our discussions on the pilot.
However, I’ve noticed that I haven’t mentioned cost savings or efficacy when discussing our measures of success. I can’t help but wonder why I haven’t done so. This is a moment where it seems so obvious, and I’m frustrated with myself for not considering it earlier. I need to reflect on this question. I suppose I’m reluctant to prioritize cost and money as significant factors in decision-making within schools, as I believe it may not be well received by most people. I understand that this may sound like an excuse, but I’m basing it on meaningful and real experiences.
Horn: Diane, I understand where you’re coming from, and there’s no need to be hard on yourself because this is how the system has been designed. However, let’s think about how we can introduce these factors into school settings in a way that respects the school culture and feels authentic. Let me provide you with more insights on what the theory suggests in order to prevent the cutting of innovations and things that will contribute to future success the moment budgets become tight, which, by the way, is about to happen. Our schools are going to face this challenge, yet we both want to ensure that innovation and improvement continue. So let me outline the three-step process and let’s brainstorm ideas on how to implement them without facing backlash.
Tavenner: Interesting, Michael. Let me share my thoughts. Many states are currently implementing policies to encourage innovation through waivers and opportunities for exposure. I have personally participated in professional development programs at the state level where they offer exposure to innovative ideas and even financial incentives for being innovative. However, I haven’t come across any efforts that explicitly require cost effectiveness or fiscal sustainability as criteria for success. It would be beneficial if these factors were considered, as it could change mindsets in a positive way. For example, if my pilot project had been incentivized and required to consider cost effectiveness, it would have signaled to me the importance of this aspect. We need to incorporate this mindset shift into our education system.
Another thought that comes to mind is the need to address the removal of old methods and practices when scaling successful pilot projects. It is crucial to clear out outdated practices and allocate budget accordingly to sustain the new initiatives. Surprisingly, this aspect is rarely discussed or emphasized when guiding and evaluating innovative ideas. To ensure sustainability, we must clear out the old to make room for the new.
Lastly, I believe it is essential to shift the conversation in education from constantly seeking more money to considering what is a reasonable amount to have and how to prioritize resources. This simple yet often overlooked question can significantly impact our decision-making. Currently, the focus is on always needing more money, but we need to reframe it and determine what we have and what we can prioritize within our means. Although these points may not be directly related, they are important aspects to consider in creating space for innovation.
Horn: Diane, I completely agree with your points. From a practical perspective, I’ve observed that urban districts across the country often receive substantial funding per student, yet it doesn’t trickle down to the schools or classrooms. I wonder how behavior would change if school leaders were held accountable for successful outcomes while having more autonomy in resource allocation and budgeting. This shift would allow for more innovation and allocation of resources towards other critical aspects of student preparation for the complex world they will enter. It’s unfortunate that this reallocation rarely happens. Hopefully, by providing our listeners with an optimistic perspective, we can inspire action. Before we conclude, I’m curious to know what you’re currently interested in outside of the school conversation, such as books or TV shows.
Tavenner: Well, Michael, I often contemplate big ideas like these, so I’m excitedly waiting for the release of season three of Ted Lasso. The show has brought me joy and positivity in the past, and I hope it continues to do so. That’s what I’m looking forward to. How about you?
Horn: We’re also eagerly anticipating the release of Ted Lasso season three. In the meantime, we’ve been engrossed in Shrinking on Apple TV. It’s been a great watch, but we’re using it as a temporary distraction until the weekly Lasso releases start. By the time our listeners hear this episode, it might already be out, so I recommend checking it out.
Tavenner: Without a doubt, I wholeheartedly agree. I adore that book. It…
Horn: Have you actually read it?
Tavenner: Yes, it’s absolutely incredible.
Horn: It makes me even happier to know that you may have also faced challenges at first, but eventually grew to love it. And with that, we will bid farewell to all of you and express our gratitude for joining us on another episode of Class Disrupted.
Michael B. Horn is dedicated to fostering a world where every individual can pursue their passions and reach their full potential. He achieves this through his writing, speaking engagements, and collaboration with various educational organizations. He has authored multiple books, including the acclaimed Disrupting Class: How Disruptive Innovation Will Change the Way the World Learns, as well as the recently published From Reopen to Reinvent: (Re)creating School for Every Child. Additionally, he co-founded the Clayton Christensen Institute, a nonprofit think tank.
Diane Tavenner serves as the CEO of Summit Public Schools and is a co-founder of the Summit Learning Program. With a lifelong dedication to education and innovation, she is also the author of Prepared: What Kids Need for a Fulfilled Life.
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