Wednesday, May 21, 2008

Q & A with Patrick M. Byrne

Patrick Byrne was in Sioux Falls on Thursday talking to Civic and Business Leaders about Initiated Measure 9 – South Dakota Small Investors Protection Act (I will post on this later) and I had the opportunity to speak with him. Byrne is a dynamic individual, very engaging and is a big thinker. One thought that impressed me is that that most of America’s problems can be solved by reforming our Education System and the Capital Markets. His ideas embrace competition and are in the Spirit of America – they worth considering.

Patrick M. Byrne is Chairman of the Board of Directors of the Internet retailer In 2002 he was named to Business Week’s list of the 25 most influential people in e-business. In the public policy arena he has campaigned against the practice of naked short selling of securities and is a strong advocate of Education Reform. Byrne is a graduate of Dartmouth College, Cambridge University, and holds a Ph.D. in philosophy from Stanford University. Byrne serves as the Chairman of First Class Education, an organization that advocates that 65% of all education monies be spent in the Classroom.

Q. Why do you believe the 65% Solution is the most important reform of Public education?

A. I actually believe that vouchers or school choice is the most important issue. Society has to have a deep conversation about how to deal with the public education system. While that is going on we have to keep things from getting any worse. The 65% Solution is a tourniquet to keep things from getting worse. In many states and many cities the share of the funding that is going to the educrats is getting bigger and bigger and the share that is going to the kids in the classroom is getting smaller and smaller. It (money to the classroom) is basically shrinking every year. That basically is the nature of bureaucracies. They expand. Jefferson said liberty contracts and as I would say now education contracts. We have got to stop that while we have an adult conversation about the way education is organized. I think the right solution at that point is to do some sort of school choice, whether it charter schools, vouchers, tax credits, scholarship grants, etc.

Q. Many educators believe that our culture and lack of parental involvement is the prime cause of the decline of education excellence in America, do you agree?

A. Well there is some statistics and data that supports the view that parental involvement is important. But that really is a way for people who are selling an inferior product for a higher price, mainly our public school system to blame the parents. They don’t want to have to reason how they are doing things so they are just blaming the parents.

Q. Is testing alone the key to educational accountability?

A. My answer to that is I don’t know, and I respectfully say you don’t know and none of your readers know, nobody really knows what is going to fix it. The only thing that is in my view to find out what is going to fix it is to have a system where there can be innovation. Where you can have one hundred flowers bloom, where you can have competition and people testing out different theories. Maybe it’s more mandatory parental involvement, maybe it’s more focus on math, maybe it’s more focus on whole language learning, maybe it’s more focus on cultural studies. I don’t pretend to know the answer. You need a school system that permits there to be a wide variety of experimentation and not a one size fits all. And then the better solutions will float to the top.

Q. Higher education costs have skyrocketed. What can be done to get them under control?

A. I actually think that we are getting good value for our money. The U. S. higher education system is the envy of the world. It is our K-12 that is a disaster. We actually do pretty well up through the 4th grade. By the time kids are sixteen years old, we are at the bottom of the heap as a nation. We are at 25th out of 30 industrial countries. Our primary and secondary is at the bottom of the heap. Our higher education is the envy of the world. Now the reason for that is that the higher education system allows competition. The G I Bill, Pell Grants, etc. – people get to choose their school. So the providers have to be responsive. Higher education is getting more expensive and it is getting more expensive at a higher rate but I think it is still probably and underpriced good. The K-12 system is a terribly overpriced system and an over priced good, probably overpriced by a factor of two or three times. The higher education system is still a good value for the money.

Q. In South Dakota we have our 4% state sales tax that generates about $700 million annually. Our elected officials and politicians estimate that we lose as much as $75 to $100 million annually to Internet Sales along with hundreds of Main Street jobs. Why should Internet Sales of goods not be taxed?

A. Internet sales do not put the same load on local infrastructure as say having a local Walmart does. To shop at Walmart you have people driving on the roads to get there, you’ve got kids going to schools, you’ve got power plants and water utilities infrastructure that has to be paid for. That isn’t the case when you order through the Internet that is showing up through the Post Office.

Q. You have been a reformer in the economic arena working to reform the practice of Naked Short Selling of securities. As a former CEO for a Berkshire Hathaway company, do you agree in principle that corporate compensation is excessive and the Boardrooms need reforming?

A. Yes. I think Buffet right on there. That young fellow is going to go places.

Q. What do you think are the best and worst things about living in America?

A. I am sort of a Jeffersonian Libertarian and old school. I am as about blue blood patriotic as you can get. I do feel at the risk of sound a little old that we are nearing the end of a 230 year old experiment. I feel very badly about it and I have been doing everything I could to try to do something about it. But I am feeling bad especially since the financial meltdown that has started that I think is going to continue and the sad part is we are fast on our way to becoming Britain 1961. It is not going to be like the recession of 79-82. This is going to be a generational thing. It is going to take us half a generation to get out of this and get back.

Originally posted on April 24, 2008

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