Volume VII, #19
Last weekend I went on a long bike ride by the beach with my 11-year-old son Leo. As I was struggling to keep up, I passed a man lying in the grass next to the bike path pointing with both hands to his very yellow socks: "I graduated UCLA,” he exclaimed to no one in particular. “Look, they gave me socks."
As I continued biking, I had a few thoughts. First, maybe the man did graduate from UCLA. Although he was talking to himself and looked homeless, there are undoubtedly homeless UCLA grads, as well as a larger number who enjoy relaxing at the beach.
Second, assuming he didn't go to UCLA, there are thousands of people each year who falsely identify themselves as graduates of brand-name universities, and - in most cases - employers are none the wiser. University brands signify a certain level of competence. But when homeless people are tempted to claim an association solely by dint of yellow socks, the university brand signifier may have jumped the shark.
That night I began watching the new HBO series ”The Defiant Ones,” the story behind Dr. Dre and Jimmy Iovine’s music empire. In the first episode, Iovine describes how music industry legend Roy Cicala taught him to be a recording engineer:
“He’d sit you at the console and he’d say: give me a compressor on the vocal, 2DB at 10,000 cycles. No, try 3. No, 2 sounds better. And as you’re turning the knob, you’re hearing the vocal get brighter. Or you put the echo on the tape delay and you actually hear it. He goes, ‘no that’s too much. Alright, slow the tape machine up a little bit. OK, you hear why that’s working.’ And you get a feel for how to make a record. Because I didn’t have any skills.”
Despite the fact that UCLA offers few programs and courses that rely on learning-by-doing to a comparable extent (perhaps explaining why Iovine endowed an academy at crosstown rival USC), it’s not because faculty are resistant. Most faculty aspire to learning-by-doing (or hands-on learning, or experiential education). The trick is to figure out how to incorporate it into the subject matter and learning objectives.
Nearly 20 years ago, the answer seemed to be technology. A company called UNext – founded by disgraced junk bond king Michael Milken – spent $180M to build million-dollar simulation-based business courses with universities like Columbia, Stanford and Chicago. Sadly, UNext disappeared within a few years and simulations fell out of the spotlight. Why invest in expensive online courses when students will pay for cheap online courses translated from traditional onground college courses in a robotic manner: read material, participate in discussion, submit weekly assignment?
The answer is that while students may not be great judges of educational modalities and learning outcomes, employers are better situated. While the dominant model in higher education remains tuition-pay, requiring Title IV and isomorphizing accreditation, the emergence of new education-to-employment models – particularly employer-pay staffing and placement models – will bring back simulations in a big way. And when we reach Sim City, we’ll have fewer signifier problems; simulations – not UCLA degrees or yellow socks – will help employers determine whether candidates are qualified for good jobs.
Stock trading is a good job (although perhaps not according to the Platonic definition of good) and one that, even more than recording engineer, is easily measurable: determined by the value of the trader’s portfolio. Two years ago, a young Canadian entrepreneur named Justin Ling with a few years’ experience in asset management created EquitySim, a simulation platform for trading stocks, bonds, currencies and other securities. His intended target: colleges and universities.
Unlike simulation platforms of old, where the audience was the faculty member (without much skin-in-the-game in terms of student success), EquitySim’s audience is employers seeking talent; its model is employer-pay. EquitySim functions as a recruitment company for entry-level trading positions, identifying and funneling top-performing candidates to asset management firms around the world. EquitySim gets paid a percentage of first-year compensation by investment banks and hedge funds for every student placed.
As a result, EquitySim isn’t only focused on keeping track of how students do with their $50M in play cash. EquitySim’s simulation platform records the “why” behind investment and trading decisions e.g., risk management capability, market research. It captures over 100,000 behavioral data points per student (e.g., order of steps followed, duration of time spent, etc.) in order to target candidates for each specific employer based on competencies that are uniquely predictive of success and retention. So while it’s ultimately about performance, performance can only result from critical thinking, problem solving, and other core cognitive skills.
To date, the platform has been adopted by faculty at over 250 universities, producing over 60,000 student users. Like staffing and placement businesses, Employers are excited about EquitySim because it helps them identify top talent at schools where they don’t recruit. 48% of hired students are female – remarkable given that three-quarters of newly hired financial analysts are men – and 68% come from schools where employers are not actively recruiting.
Ling named his company EquitySim not because of equity trading, but because he strongly believes that simulations can create a more equitable playing field for students regardless of background. “While EquitySim is starting with trading,” says Ling, “there are a large number of professions where entry-level work can be simulated and assessed in a way that will give employers broader access to talent while opening up exciting new employment pathways for students.”
It’s hard to think of entry-level jobs that couldn’t be simulated à la EquitySim. It’s equally hard to think of traditional degree programs broadly incorporating such simulations – a product of the chasm between academia and the labor market (stock trading simulations for finance courses are a clear exception). So while some forward-thinking colleges and universities will seek to adopt simulation-based competency-based hiring platforms, I expect them to really take off outside traditional higher education as a central component of many faster + cheaper alternatives: bootcamps, income share programs, and staffing models.
Simulations are coming back: not because they’re useful in determining academic performance or grades, but because there’s no better predictor of on-the-job performance. And unlike UNext, we won’t be asking students to pay. They won’t need to because employers will. Why will online simulations work now when they didn’t work 20 years ago? To paraphrase James Carville from President Clinton’s successful 1992 election: “It’s the job, stupid.”
Next week many of us will convene in Chicago at Innovate+Educate’s annual Close It conference: the competency-based hiring event of the year. I hope to see many of you there. The shift to competency-based hiring has massive potential to unlock economic opportunity but requires unprecedented cooperation among educators and employers. While few employers in attendance at Close It are developing comprehensive simulations for entry-level jobs, intermediaries like EquitySim are doing exactly this, and – according to a recent EquitySim hire at a major investment bank, “in HR, it’s the talk of the town.” And that’s a damn sight better than hiring someone based on a degree or yellow socks.