Business and policy lessons from The Years that Matter the Most by Paul Tough
I did not expect to think about predictive analytics and blue ocean markets when reading Paul Tough’s latest book, but it triggered a lot of entrepreneurial connections. I also was deeply impressed by his mix of policy, anecdotal evidence, and critical thinking. This post focuses on one of many examples that tie together a lot of business, public policy, and income equality issues.
During Larry Summers's tenure as President of Harvard University, he announced that any student with family income below $40,000 would be able to attend the university for free.
A year after the announcement, low-income student enrollment went up by just…. fifteen students. A trivial rounding error improvement even after Harvard was offering a degree at no cost.
What went wrong?
Paul Tough, in his groundbreaking book- The Years That Matter the Most, writes how there was supposed to be a significant increase in students who met this financial aid criterion, but the admissions office felt otherwise.
We are finding all the students who meet our academic standards and qualify for financial aid, they claimed. In some ways, they were right.
From their perspective, there was a limited amount of applicants who met the financial and academic standards to qualify, and most of those eligible students were also applying to top Ivy League Schools. In the admissions department mind, the elite schools were all competing for the same group of students.
If that was true, was there really no way to address income inequality at elite universities?
Caroline Hoxby, an academic, decided to dig into the data, and what she found turns into an important policy and business lesson about blue ocean markets. In her research paper that Tough quotes from, she writes — ” The problem is that most high-achieving, low-income students do not apply to any selective college so they are invisible to admissions staff. They are unlikely to come to the attention of admissions staff through traditional recruiting channels.”
Blue Ocean Strategy, by W. Chan Kim & Renée Mauborgne, looks at how “demand is created, rather than fought over.”
How does Harvard expand their pool of applicants versus competing over a limited supply?
At first, Hoxby’s research team had to wrangle the data better. What questions were they missing, and how should they focus their questions to lead to better analysis of the data?
Historically, admissions officers visited no more than 100 schools to find students, established decades-old relationships with guidance counselors at feeder schools, and mailed general information to high performing standardized test scores. These are the red ocean markets as Kim and Mauborgne write, “the known market space.”
There was a consumer education, scale, and geographic problem so Hoxby’s team focused on finding answers to these questions and adding more layers to datasets that expanded the pool. This included IRS and Census data, in addition to geographic and ACT score data.
In conclusion, she writes —
“We believe that this phenomenon occurs because many colleges are “searching under the lamp-post.” That is, many colleges look for low-income students where the college is instead of looking for low-income students where the students are.”
Harvard admissions were missing more than 30,000 applicants that met their criteria — each year.
The top schools were only looking for their target customer underneath their noses, instead of finding better ways to find the customer who did not even know it was possible for them to apply, get in, and afford school.
Summers had announced a new product basically without creating a blue ocean strategy to reach his intended audience. In another analogy, he posted the product and ran Google ads, but so few people searched for the product that it was not expanding the audience. He needed the Facebook and Instagram newsfeed to find the right customers based on audience behavior to get introduced to his product. These are the kind of customers who fit the criteria but do not even know the product exists.
Each school year tens of thousands of students scored in the top ten percent on their ACT or SAT, but did not apply to top 10 schools that they were eligible for because of an “information deficit.” The students were not told that if they applied to Harvard not only was there a good chance that they would get in, but that they would not have to pay. Their guidance counselors did not tell them, nor did their family and friend network, and the Ivy’s did not know they existed because the high school was in the middle of nowhere. They were a classic blue ocean market.
In the academic world, they called their solution an intervention, in the business world, coming up with a solution based on a problem is called a….business. Hoxby teamed up with Sarah Turner, a professor at UVA who specialized in economics in higher education to use data from the College Board to identify high achieving students and mail them a simple information packet.
The “product” was a mailer with more info about financial aid to top schools, and information about application fee waivers.
This $6 dollar solution increased enrollment and garnered a lot of media and big donor attention. It seemed like such a no-brainer fix — the way to solve for income equality was just sending more information to people who scored well and would benefit from more information about financial aid and elite schools.
But here is where Tough’s book deviates from the tidy policy changes of his previous books. A simple intervention with more attention actually does not solve the larger problems of poverty. Family lives are messy. Tough digs deeper than a news article that wants a flashy headline, and shows how making real economic equality changes is full of setbacks and hard decisions. Public policy is gray.
There are business lessons to take away from this book, but I also came away with how it is unwise to paint these complicated issues with broad strokes. The academics in this story applied innovative tactics to wrangle the data and come up with solutions, but poverty and income inequality do not get solved with one intervention. And if we are talking about system-wide change at scale, we often fall short.
Tough concludes his chapter with an important, and timely quote from Nicole Hurd who has worked for years to try to get more low-income students to apply to top schools.
“If we are trying to protect our democracy and create a robust economy, we need to help more than 75,000 kids a year. We need to think about where those other kids are going too. And are they graduating? And if they’re not, what does that mean for our country?”
