Freakonomics Radio: A government official in venture capitalist's clothing?

High school students sit in a classroom.

TEXT OF INTERVIEW

Kai Ryssdal: We're going to take a couple minutes now to do some Freakonomics Radio with Stephen Dubner, co-author of the book and host of the podcast of the same name.

Dubner, how are ya?

Stephen Dubner: Hey Kai. So I want to try something different today, a bit of a quiz. You up for that?

RYSSDAL: Well you know, not without some reservations, but all right.

DUBNER: Let's just try this. I'm going to play you some voices on tape, talking about different ways to experiment and innovate, and I want you to try to guess who's talking.

RYSSDAL: Nobody told me there was going to be a test.

DUBNER: I'm telling you right now. Don't worry, you're going to do fine.

RYSSDAL: You remember that dream you had when you were a kid about winding up in school in your underwear?

DUBNER: Actually, I wound up actually fully naked, so I didn't even have the underwear.

RYSSDAL: That's an entirely different show. But anyway, go ahead.

DUBNER: Let's get back on topic. Here's your first voice, Kai. I'm going to tell you this man's first name -- it's Peter -- but you have to tell me what kind of business do you think that Peter is involved in.

Peter: You know, if I was a betting man, I may not have bet on the winner and I may have lost all my money. But by backing a prize, you in fact support an entire ecosystem and industry, all these approaches being tried, and the best one or best ones bubbled to the top.

RYSSDAL: Horse racing. Definitely horse racing.

DUBNER: Excellent guess, but very wrong. It's actually Peter Diamandis, who runs the X Prize Foundation, which tries to solve all kinds of problems: curing AIDs, predicting earthquakes, getting commercial space flight going. It runs intense competitions with multi-million dollar prizes for the winners. So for instance, the X Prize Foundation just recently rewarded $10 million to three teams who each invented a car that can travel 100 miles on a gallon of gas or the equivalent of a non-gas fuel.

Here's the next voice, O.K.? This voice belongs to an engineer, a guy named Craig Nevill-Manning, and I'm going to tell you where he works -- he works for Google. Now my question for you, Kai, is this: what kind of Google experiment do you think Craig is talking about right here?

Craig Nevill-Manning: It's really a way for our engineers to come up with a creative idea and then put that idea into practice. I feel like lots of ideas people have, most of them are bad, and you never find that out until you actually try to put them into practice.

RYSSDAL: Oh I have no earthly idea. Google, I mean, literally, it could be anything.

DUBNER: It could be anything. And what he's describing is what they call "20 percent time." Which means that Google allows or actually encourages its engineers to take 20 percent of their worktime or the equivalent of one day a week to work on their own pet projects. Now how would you do if you had a full free day a week?

RYSSDAL: I'd be at home, because I would take a free day.

DUBNER: Exactly. At Google, though, it's not just loafing around, I can assure you. So 20 percent time bares real and profitable fruit -- GMail and Google News for instance.

Now let me play you one more. This is someone who's sort of combining what we just heard from Google and what we know about the X Prize. Now I want you to tell me who this is, Kai, and what you think this guy does.

Voice: Well we're fundamentally trying to change the business we're in and we're trying to drive innovation rather than being in this compliance-driven bureaucracy. And the idea of crowdsourcing that you're seeing in other industries, we think is absolutely applicable here. The only way you challenge the status quo is to give people rewards for success.

RYSSDAL: So that was what, like a gimmie? That's Arne Duncan, he's the Secretary of Education.

DUBNER: Nicely done. And the reason I'm playing you this tape is because Duncan, in the Obama Administration, has launched this program called Race to the Top, which is trying to give states a lot of money for their education departments if they can come up with experimental ways to innovate. Now here's what I really like--

RYSSDAL: Oh wait! Wait, wait, wait. I have the quiz answer, it goes like this: this is, if you roll Google and the X Prize and Arne Duncan and government all into one, it's all about government not being like government, right? Government being like business?

DUBNER: Gold star for Kai Ryssdal. That's exactly right. So we're getting a lot of experimentation in the means of competition. And this fall we're already seeing some payoff; schools in winning states are gathering new data to help them track each student's progress from year to year. Delaware, one of the Race to the Top winners, has set up an experimental office to measure teacher skill, with the goal of figuring out what makes a great teacher and then learning how to recruit more of them. So the government is acting a bit like a venture capital firm, right? Placing bets on a lot of different ideas, many of which are bound to fail. But that's kind of the point: fail hard, fail fast, and let the winning ideas rise to the top.

So Kai, remember this: the reason Charles Lindbergh flew across the Atlantic Ocean was to win a cash prize -- $25,000. When I asked Peter Diamandis of the X Prize Foundation what all of us got for that prize money, he had a very simple answer: the aviation industry.

RYSSDAL: Stephen Dubner and Freakonomics Radio. He's back in a couple of weeks with more. In the meanwhile, check his website for the blog and the podcast and all that good stuff that he's doing. It's freakonomicsradio.com. Dubner, we'll see ya.

DUBNER: Thanks a billion, Kai.

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