American Universities Are Better

Here’s a very interesting section from one of Paul Graham’s essays.

What really stands out to me:

• Fear of elitism causes lost opportunities. If all universities are roughly equal in quality, then none are especially good. The best professors are spread out, making them less productive. And no one university will be good enough to attract talent from abroad.
• The Germans invented the modern university, but now they suck because in the 1930s they excluded Jews. Hopefully nothing like that will cause the downfall of our universities. We love Jews and people of all races… right?
• Competition is key. It’s a good thing many of the best universities in the US are private. Government-controlled institutions just don’t work.

Without further ado, here’s the excerpt:

You need a great university to seed a silicon valley, and so far there are few outside the US. I asked a handful of American computer science professors which universities in Europe were most admired, and they all basically said “Cambridge” followed by a long pause while they tried to think of others. There don’t seem to be many universities elsewhere that compare with the best in America, at least in technology.

In some countries this is the result of a deliberate policy. The German and Dutch governments, perhaps from fear of elitism, try to ensure that all universities are roughly equal in quality. The downside is that none are especially good. The best professors are spread out, instead of being concentrated as they are in the US. This probably makes them less productive, because they don’t have good colleagues to inspire them. It also means no one university will be good enough to act as a mecca, attracting talent from abroad and causing startups to form around it.

The case of Germany is a strange one. The Germans invented the modern university, and up till the 1930s theirs were the best in the world. Now they have none that stand out. As I was mulling this over, I found myself thinking: “I can understand why German universities declined in the 1930s, after they excluded Jews. But surely they should have bounced back by now.” Then I realized: maybe not. There are few Jews left in Germany and most Jews I know would not want to move there. And if you took any great American university and removed the Jews, you’d have some pretty big gaps. So maybe it would be a lost cause trying to create a silicon valley in Germany, because you couldn’t establish the level of university you’d need as a seed.

It’s natural for US universities to compete with one another because so many are private. To reproduce the quality of American universities you probably also have to reproduce this. If universities are controlled by the central government, log-rolling will pull them all toward the mean: the new Institute of X will end up at the university in the district of a powerful politician, instead of where it should be.

His essay on Why Startups Condense in America.

Do you agree with my perspective?

Here’s another interesting excerpt:

Those worried about America’s “competitiveness” often suggest spending more on public schools. But perhaps America’s lousy public schools have a hidden advantage. Because they’re so bad, the kids adopt an attitude of waiting for college. I did; I knew I was learning so little that I wasn’t even learning what the choices were, let alone which to choose. This is demoralizing, but it does at least make you keep an open mind.

Certainly if I had to choose between bad high schools and good universities, like the US, and good high schools and bad universities, like most other industrialized countries, I’d take the US system. Better to make everyone feel like a late bloomer than a failed child prodigy.

I have to agree with Paul. Education spending sounds good, but the more I think about it, the worse it turns out to be. You need to reward the good schools and punish the bad, because if you give bad schools more money, you’ll get more of them.

He even dives into the issue of taxes…

Capital Gains

There are also a couple things you could do to beat America at the national level. One would be to have lower capital gains taxes. It doesn’t seem critical to have the lowest income taxes, because to take advantage of those, people have to move. [7] But if capital gains rates vary, you move assets, not yourself, so changes are reflected at market speeds. The lower the rate, the cheaper it is to buy stock in growing companies as opposed to real estate, or bonds, or stocks bought for the dividends they pay.

So if you want to encourage startups you should have a low rate on capital gains. Politicians are caught between a rock and a hard place here, however: make the capital gains rate low and be accused of creating “tax breaks for the rich,” or make it high and starve growing companies of investment capital.

Tax breaks for the rich. LOL. Whatever you do, give us lower taxes. Unfortunately this is why, no matter how much I’m coming to hate the War in Iraq, I can’t vote for a Democrat. It’s quite obvious that lower taxes and lower government spending is the best thing the government can do for the economy. And looking at politicians’ voting records is a very objective way of measuring that.

Lower taxes and less government spending has a great side benefit: a smaller and less powerful central government. The folks who wrote the US Constitution were brilliant. A successful country has a small central government and better local (or state) governments to pick up the slack. In the footnotes, Paul Graham notes that China missed out on the Industrial Revolution that happened in Europe because it had a government powerful enough to squash it:

This has already happened once in China, during the Ming Dynasty, when the country turned its back on industrialization at the command of the court. One of Europe’s advantages was that it had no government powerful enough to do that.

I suspect these kinds of dumb government decisions are a lot more common than one might think. A lot of things that are in the government’s best interest are not in the people’s.

Here’s a snippet he writes on immigration.

US immigration policy is particularly ill-suited to startups, because it reflects a model of work from the 1970s. It assumes good technical people have college degrees, and that work means working for a big company.

If you don’t have a college degree you can’t get an H1B visa, the type usually issued to programmers. But a test that excludes Steve Jobs, Bill Gates, and Michael Dell can’t be a good one. Plus you can’t get a visa for working on your own company, only for working as an employee of someone else’s. And if you want to apply for citizenship you daren’t work for a startup at all, because if your sponsor goes out of business, you have to start over.

American immigration policy keeps out most smart people, and channels the rest into unproductive jobs. It would be easy to do better. Imagine if, instead, you treated immigration like recruiting– if you made a conscious effort to seek out the smartest people and get them to come to your country.

A country that got immigration right would have a huge advantage. At this point you could become a mecca for smart people simply by having an immigration system that let them in.

“…a test that excludes Steve Jobs, Bill Gates, and Michael Dell can’t be a good one.” So true. So what country gets this right? Does any country get it right yet?

And I love his conclusion.

I can imagine a future in which the default choice of ambitious young people is to start their own company rather than work for someone else’s. I’m not sure that will happen, but it’s where the trend points now. And if that is the future, places that don’t have startups will be a whole step behind, like those that missed the Industrial Revolution.

So, how about the Startup Revolution?