Pissed because people are selling education out of one side of their month and doing everything short of stealing money out of the other side of it. I’ve spent a lot of time over the last year studying the inner workings of education and it’s amazing how shady many of the companies who operate in it appear to be. Sure, most people know about diploma mills. But that’s just the tip of the iceberg. From artificially raising tuition to the student loan cap to schools doing whatever they can to scoop up stimulus/taxpayer dollars, it’s some pretty gnarly stuff. So I think it’s time we did something about it.

When it comes to education, it’s time to start taking the power back.

Too many of us have been sold a bill of goods that just doesn’t cut it. We’ve paid too much for degrees that aren’t worth enough. We’ve taken on an insane amount of debt that we’ll spend years (decades?) paying back. And the thing is…it doesn’t need to be this way. There *are* alternatives. And I’m not talking about crappy, “get what you pay for” alternatives. I’m talking about ways to gain a world-class education for a fraction of the cost that marketing-driven educational machines are trying to shove down our throats.

The guy who really got me thinking about is Josh Kaufman over at PersonalMBA.com. Josh is brilliant and part of his brilliance has been to promote the scandalous notion (I joke, but only partially) that a world class education doesn’t have to cost an insane amount of money. He’s been doing so for years at PMBA and more recently wrote a must-read article “Hacking Higher Education, Part 1: How to Obtain an Accredited Undergraduate Degree in 1 Year for $4,000” (follow-up articles here and here, all must-reads). While I’m not convinced that Josh’s recipe for getting a degree in 1 year is the right thing for most people I think what it speaks to is the larger opportunity to save significant money while pursuing your degree. And more importantly, to take the power back.

Hey Mr. University, want to raise my tuition 32 percent this year?! That’s fine. See this whole CLEP thingie over here?? I’m just going to do that and you can keep your little ol’ tuition hikes!

Students (and parents of students!) sick of paying insane prices for tuition need to start demanding alternatives. And we’re not talking ultra-low-quality alternatives. We’re talking about the opportunity to get a high quality education at a lower prices. Every year your mobile phone gets better and the price gets cheaper. Why shouldn’t your education? Instead, it’s quite the opposite. Every year it gets about 8% more expensive and at least according to many, every year it gets a bit worse (check out Kent Pitman who makes this case way better than I could).

We started offering online CLEP courses at eduFire to give people an opportunity to take the power back. Learn from some of the most engaging and brightest instructors but save 80-90% of the cost of taking the same number of credits at The University of Phoenix. And we’re not the only ones helping people to take the power back. Look at people like Chegg, BookRenter and Flat World Knowledge who are helping students take the power back when it comes to textbooks. Check out sites like AcademicEarth, Peer2Peer University and University of the People are helping people who simply want to learn without money standing in the way to take the power back.

I’m all for education period. But I’m more for education when the number one goal is helping the student succeed. Optimizing profits at the expense of students? Not cool. Playing tricks on students to force them into unnecessarily buying new editions of textbooks? Lame-o. As Umair Haque would say, these are classic cases of thin value creation.

The era of playing games with our education is over. Pink Floyd woke up a generation of kids and young adults with their rallying cry “Teacher, leave them kids alone.”

Our generation needs a new rallying cry around education.

Perhaps that one should be “Take the Power Back“.

(I’ll be back with Part 2 of this in a little bit. Excited to hear your thoughts in the comments.)

So two experiences this week plus this Fred Wilson blog post got me thinking that content publishers are looking in the entirely wrong place for their business model. They are looking at the content.

But what if that’s the wrong approach entirely?

What if the thing you can charge for is the filter?

Let me relay my two experiences this week and then I’ll circle back to wrap things up.

Experience #1: Hacker News. IMHO, Hacker News is one of the best, if not the best, news/article filter out there. OK, maybe not for everyone but if you remove the coding and start-up articles (the focus of the community) what remains is a super-interesting collection of smart writing and interesting thinking. Kind of like what I thought Digg would ultimately become but hasn’t really (cute pictures and funny videos have largely overrun the homepage).

However, here’s my beef with Hacker News. I want to do more with it. I want to be able to see the most popular Hacker News articles of all time (the “Best” link which is buried two links in off of “Lists” in the footer is sort of this but only for the last 2 weeks). I want to see the most popular stories of all time. I also want to be able to see articles filtered in different ways (e.g., only startup, everything except “news” sites like TechCrunch, CNN, etc.). I want to be able to search in ways that I can’t unless I do some sophisticated stuff in Google.

I get it. HN isn’t set up for this. That’s fine. It’s an amazing resource the way it is. But would I pay $5/month or $50/year for a “power user” version of Hacker News. You bet.

Experience #2: Delicious. I’m learning to do more and more with Delicious these days but I’ll admit it, it’s not a user-friendly process. For instance, let’s say I want to be able to find all articles that are tagged “subscription” and “revenue” sorted by most bookmarked. Here’s the best process I was able to find this week:

Step #1: Install Greasemonkey and then install the Sort Visible Links Greasemonkey script in Firefox.

Step #2: Search by multiple tags in Delicious. This isn’t super difficult (Here’s the query: http://delicious.com/tag/subscription+revenue).

Step #3: Sort the results based off of the number of bookmarks using Sort Visible Links.

However, what happens when I have, say, 2,500 results? Well then I have to set Delicious to show 100 links per page (the max) and then I have to page through 25 pages of results and do a sort on every page. That = Royal. Pain. In. The. Ass. Did this for one query this week and it probably took me two hours to go through what I should have been able to do in about 10 minutes. That sucks.

Would I pay delicious a bit of money to make this stuff easier? I would. Absolutely.

So the big question is whether I am just a strange edge case? I realize that I probably am. But guess what…so were the people trying to upload video to the Web and show it to everybody in 2003 before YouTube came along. Once YouTube made it easy for people to upload and share video that space exploded.

What we have right now, to steal Clay Shirky’s words is not information overload. It’s filter failure. We have an increasing amount of info, links, etc. being thrown at us through stuff like Facebook, Twitter, Digg, etc. and fairly crappy ways to get to what’s most important. And here’s where the publishers have an amazing opportunity to help us.

Build robust filters.

They have ridiculous amounts of data on what peoples’ preferences are. They have internal metrics out of the whazoo. They have the potential to help us get to the best and most relevant content. And what have they done? Largely outsourced the process of building content filters to Digg, Reddit, delicious, Hacker News and other folks.

I love those guys. But the problem is that delicious knows a heck of a lot less a specific piece of content than the content owner does. New York Times could do an insanely good job of giving me personalization and robust filtering. And I’d be willing to pay for that. Instead, they do an inane job of this. And therefore I don’t pay them. And I filter their ads. At least 5% of Internet users (FF users) do the same thing and I wouldn’t be surprised if 50% or more of Internet users do that within 3 years. (Camino is my half-time browser and it sports a freaking checkbox that blocks all web ads.)

So here’s the deal. Very few people will pay for your content (and increasingly fewer). And while more people will view your ads that number will fall over time as will CPMs likely. So how do you make money? By creating services that people will pay for (like next-gen filtering and personalization) and that don’t subtract value in any way (unlike pay walls which subtract huge amounts of value). These services will produce revenue that drops completely to the bottom line which is dramatically different from advertising sales which often have gross margins of less than 50% once the cost of selling the ads is factored in *and* detracts from the user experience.

OK, bonus round. Don’t even build the filters in-house. Do the Netflix Prize thing and outsource the building of the filters and recommendations to smart, hungry (and often young) hackers. Turn over your data to them (anonymously of course) and let them build the engines that can help you reinvent your industry.

Sound risky? Damn right. But what do you really have to lose? Doing this adds money directly to your bottom line if people pay money for premium services and at a minimum makes your service a better user experience if they don’t pay. It allows you to understand better why people read and watch what they do and as we become an increasingly information-saturated society it allows you to skate to where the puck is going vs. skating to the where the puck is.

Humor us content producers. Start the revolution this time rather than being a victim of it.

Umair uses the example of the food industry and I think it’s an appropriate one. The food industry (let’s say fast food for the purposes of this analogy) certainly does provide some benefits to society. Calories. Enjoyment of eating meals with friends/family. Convenience and time savings associated with not having to cook. However, the modern fast food industry also imposes a slew of costs on society. Huge environmental costs. Significant contributions to our obesity epidemic (this video will blow your mind).

But here’s the interesting part, the vast majority of those external costs are not borne out by the fast food companies making money off selling their food to consumers. McDonald’s doesn’t pick up the cost of the heart attacks its food helps to cause. Burger King doesn’t have to pay anywhere near the true costs of those flame-broiled Whoppers. So they are able to artificially create value by charging a lower price and making higher profits than they would if they had to pay the true costs that their products are imposing on society.

Fast food is hardly the only example of this. Other forms of inauthentic value creation can be seen in every nook and cranny of society. Anywhere there is an option to take true costs of a product and externalize them you get inauthentic value creation. Anytime you see government subsidies increasing a company’s profits, whether this be a corn farmer in Iowa or an investment banker in Manhattan, you get inauthentic value creation.

So lest I end this blog post on a depressing note, let me talk about an area where we are, recession and all, seeing a tremendous amount of authentic value creation: Tech entrepreneurship. Now as a tech entrepreneur I’m admittedly biased but let me offer up a few data points here:

#1 – Watched this excellent TED Talk by Juan Enriquez (embedded below) a couple of days ago and he quoted an amazing statistic:

“Venture-backed start-up companies are 0.02% of US GDP investment and are about 17% of output.”

Wow. That’s a mind-blowing statistic. We’re spending such a small amount of money on funding new technology and yet receiving enormous payback (think Google, Apple, YouTube, Amazon, eBay, etc.).

#2 – Look at the example of YCombinator, a program that I think is, on a pound-for-pound basis, the most innovative thing going on the planet. In the last few years, with a relatively small amount of money, YCombinator has produced a host of high-value services like Dropbox, Loopt, Scribd and Xobni. Check out this recent Motley Fool article “Ignore YCombinator at Your Own Risk” for some more on just how much they’ve done with so little.

#3 – The other side of the authentic value equation of course is cost and here’s where tech really shines. Unlike industries like energy (at least traditional energy), food and health care, it’s difficult to see in tech where significant costs to society get externalized. This isn’t to say it doesn’t happen but rather than the costs are so small relative to the benefits that technology is affording us that it’s hard not to argue that when costs are factored into the equation, technological innovation doesn’t represent, by far, the most significant authentic value creation on the planet.

The thing about authentic value creation is that it doesn’t get recognized immediately. Which is why YCombinator doesn’t have many multi-millionaire alumni rounding around despite the fact that Wall Street ignoramuses continue to pull down fat paychecks and bonuses. But I’m an optimist and I believe that eventually what you do catches up to you. It’s starting to happen. The playing field is starting to level and tech is playing a big role in making that happen faster than most people realize. Let’s hope it continues and intensifies as the meme of authentic value creation spreads to more people. I’ll let Umair take it from here…

Umair Haque Q & A from BRITE ‘09 conference from BRITE Conference on Vimeo.

The Pirate Bay guys were criminally prosecuted for….violating (largely obsolete) copyright. Almost no one in finance has been held even civilly liable for vastly more economically damaging actions.

I followed up with a comment along the lines of the fact that the content owner industry (i.e. the MPAA and RIAA) is throwing tons of money trying to solve a problem that fundamentally can’t be solved (witness Kazaa and Napster and how effective shutting down those services was at stemming file sharing). However, at least in the case of music (and soon in the case of TV and movies) the power is shifting away from the record labels and towards bands and fans.

So my question is, when will that happen in finance?

For years the power has been cloistered in the hands of a few small number of organizations at the top (e.g., Goldman Sachs, J.P. Morgan, etc.). The recent financial crisis didn’t knock those organizations out of power. In fact, it did the opposite. It strengthened their power base. Witness this:

The loss of competitors including Lehman Brothers Holdings Inc. and Bear Stearns Cos. meant Goldman Sachs attracted more trading business, said Huntington’s Sorrentino.

“A lot has to do with the fact that they really narrowed the playing field,” he said. “All that business has to be flowing through to someone.”

So perhaps we’re doomed to live in the world where a few banks at the top reap insane profits while everyone else suffers. But I don’t think that necessarily needs to be the case. I think it’s possibly for some sharp entrepreneurs to come in and do something radically disruptive Napster/Kazaa/Pirate Bay-style. In other words, help shift the power from a small number of people (record labels in the music example, banks in the finance example) to a large number of people (fans and bands in the music example, individual investors and small businesses in the financial example).

Prosper was one company that I believed was taking a shot at this. Until the SEC in their infinite wisdom decided to shut them down (by the way, it’s good to know that while Madoff and Stanford were off doing their things the SEC was spending a ton of time shutting down one of the only truly innovative companies in the finance space). Hopefully there will be others. The opportunities are immense. But of course so are the challenges. I’m really excited to see what courageous entrepreneurs will step up to start the companies that will be the Last.fm’s, Pandoras and Hype Machines of the finance space and what courageous investors will back them. This is something the world desperately needs.

A month or so ago I lost the hard drive on my old MacBook Pro. Most of my data was backed up but I wasn’t 100% current and I lost a small amount of data. One of the things that I lost was my download of Feed The Animals. Girl Talk has chosen to go the “pay what you want” route and back when I downloaded I think I paid $5 or $10 for the album.

Today I wanted to listen to the album. Had Feed The Animals been a typical DRM-infested, iTunes download I would have had to ante up again for it. What I probably would have done is just moved along and listened to something else instead. After, who wants to pay for the same album twice?

But because “pay as you want” existed I downloaded it again off the Girl Talk website. And now I am happily listening to Play Your Part (free stream on Lala here). And I’m blogging about Girl Talk. And I’ll Twitter the blog post. And the odds that I’ll go see Girl Talk next time they’re in town just went up.

Why am I telling you this? Because it’s a perfect example of evidence for The Grand Unified Theory On The Economics Of Free (one of the best blog posts in the last five years). Make it easy for people to consume your abundant goods (digital downloads) and what you’ll find is that people will consume more of your scarce goods (concert tickets). What’s it worth to Girl Talk that I blog about them or Twitter about them? Probably not a ton but in the aggregate a lot of people talking about them adds up. And had they not made it easy for me to re-download their album there’s a blog and Twitter endorsement from me they weren’t likely to get today.

So give some thought to your abundant goods today and how you can make them more accessible. For everyone that’s different and a “pay what you want” model isn’t for everyone. It’s just one example of a lot of strategies that can be used to make it easier for people to consume and share stuff in a way that doesn’t set you back anything at an individual level.

And for goodness sake, go download Feed the Animals already!

Rob goes on to say more on the subject in this video.

This line crystallizes something I’ve been pondering for a long time and that’s this movement towards the edge that Umair has talked about for years. I’m probably mangling Umair’s definition a bit but I think there’s a strong common thread between what Umair has been blogging about all this time and what Rob is talking about in the videos above.

Let’s look at some examples:

eBay – By most accounts, at least one million people make their living (full-time or part-time) on eBay. That’s one million entrepreneurial opportunities that didn’t exist prior to eBay (although I’m sure there’s a bit of a substitution effect from offline craft sellers, etc.).

Etsy – Etsy is approaching $100 million in gross sales and what I love about Etsy is that essentially all the money on Etsy is made by individual entrepreneurs. As Kalin points out, Etsy is all about moving power from a small number of large producers to a large number of small producers. In some ways Etsy isn’t doing anything that eBay didn’t but in others it’s radically more subversive because of it’s rejection of corporate sellers.

craigslist – Few companies have done more to empower entrepreneurs than craigslist. It gives the power for people to buy and sell a whole host of things (some of it admittedly unsavory…check on this interesting article on cl drug lingo) without having to pay listing fee or transaction fees (in most cases).

Google – AdSense represents a huge movement to the edge. It empowered bloggers to make a full-time or part-time living from their writing. It allowed a one-man gang from Vancouver to make millions of dollars a year running a free dating service. Deeply, deeply disruptive.

And now a whole host of others are enabling this movement to the edge. A few of my favorites include Foodzie (artisan foods), Mahalo (with the PTG program and with Mahalo Answers) and what we’re doing with eduFire (disclosure: I’m the founder of eduFire).

The thought running through my head right now is maybe the economic crisis is not really due to sub-prime or to a whole host of other reasons that the news wonks are throwing at us. Maybe instead it’s about a fundamental restructuring of this little thing we call capitalism. Maybe it’s about the power shifting from the hands of a number of large Fortune 500 companies towards a vast sea of independent, ambitious and ready to rock entrepreneurs.

Outside of eBay there weren’t a lot of early stories of the Web empowering entrepreneurs with the obvious exceptions of the people who created the Yahoos, Amazons, Googles, etc. of the world. But lately we’ve had a ton of them. What Derek Sivers did with CDBaby. The crazy cult community at DeviantArt. The Facebook App platforms allowing developers to makes tens of thousands of dollars a day.

So that sucking sound you hear when you turn on CNBC tomorrow (or the next day or whatever) and hear the Dow at a new multi-year low…there’s a really good chance that could be the oxygen that’s being squeezed out of big monolithic companies. The ones that turned our landscapes in wastelands of strip malls and fast food joints. Maybe the tide has finally turned. And even though nobody can really figure out what the heck is going on right now (witness multi-year low Dow) maybe it’s just because something really big is actually going on and we haven’t figured out how to adjust to it yet.

The Edge, that movement from concentrated power in the hands of a relative few # of organizations to distributed power in the hands of many people, represents the biggest shift we may see in our lifetime. I think it’s time to get on the right side of the wave. To start companies that leverage The Edge. To invest in companies that get what it means to be at The Edge (Hi Twitter! What’s going on Thesixtyone?!) To leave your “safe job” and go work for an pioneering Edge company.

It’s not too late. In fact, it’s the perfect time.