Tuesday, February 23, 2010

Hold Outs and Free Riders.

When I was in law school, my real property professor was an economist as well as a lawyer, and he often analyzed legal issues in economic terms. I remember during one class he discussed a classic problem from economics: the free rider and holdout problems. I believe that this was discussed in a session about eminent domain, and the valuation of properties taken by the government. In any event, with admissions, tuition assistance, and other economic issues on my mind during these recent days, I thought it important to review these concepts and indicate how they can wreak havoc at Kadima.

Back to law school. The professor discussed how whenever there is a group of people purchasing something, or being sold something, and there is a deadline, there is always an economic incentive for some of them to become "free riders" or "hold outs."

A free rider situation occurs when a group of people need to purchase something and not everyone wants to pay. Suppose a group of people need to pay for a bus, to get home from the beach. Assume that everyone needs to get home. The bus costs $500, and there are ten people. If everyone pays $50 then everyone can get home. However, one of the people might say, "well, the other nine people really want to get home, so I don't need to pay anything, since others will step up and pay and I know that they won't leave me here." What happens in this situation? One person really wants to get home, so he pays the extra $10 for the person who becomes the a "free rider." The free rider says, "look, they're not going to leave me here--that would be against community values--so maybe I won't pay anything, or I will pay less and have everyone else make up the difference." My professor said that the economic incentives make being a free rider very attractive, so one could argue that you need rules and regulations to overcome the market incentive.

A holdout situation occurs when a party tries to "hold out" to get a better price from someone else at the expense of others similarly situated. Suppose there are ten property lots and a developer wants to build a new hospital that the town desperately needs, but he needs to buy all 10 lots or he can't build the hospital. He offers the great price for each lot, which is $100,000. Nine of the people agree to sell their properties, but the tenth becomes a "holdout." He knows that if he doesn't sell, the buyer can't develop the hospital. So he demands $500,000 for his lot. Because this is not economical for the buyer, the project collapses, and the buyer sells the other lots. The hospital is never built, and the community is worse off, and property values for everyone decline. Again, if the government can come in and take the property (compensating the owner), the hold out problem is eliminated.

What does any of this have to do with Kadima or private school? Lots. We often face similar issues with regard to tuition, deadlines, and financial aid. Some people choose not to submit their contracts or aid applications in the hopes that they will become "hold outs". They hope that Kadima will be so desperate for the student that they can cut a deal in August that would be better than the price they'd get in March. Their belief is that Kadima would rather take $10,000 instead of full price, because $10,000 is better than nothing, and by waiting until August, they can put more pressure on the school.

Others become "freeriders" in that they don't make a meaningful gift to the school (and "meaningful" means whatever is truly meaningful to the family, based upon the family's financial situation) because they assume everyone else will. Even though we constantly point out that our tuition does not pay all of the costs of the education, many people don't participate in fundraising because, well, someone else will pay the extra costs. Or so they believe.

Holdouts and freeriders are inherent in any economic situation. However, we are working hard at Kadima to ameliorate their negative effect. Not only do these situations hurt us economically, but they tear apart the social fabric of the community. Those that are good citizens and who are not holdouts or freeriders resent those that are, and then they decide either to leave the institution or try to become holdouts and freeriders themselves, and then, well, there's chaos. Moreover, the example it sets for our students--cut every corner, don't follow the rules--are contrary to the Jewish values we hold dear and promote at our school.

So what to do?

We can't change laws of economics, but we can "institute rules and regulations" that try to use them to our advantage. And we are doing just that. We are setting and sticking to our deadlines, even if, in the short term, it means additional pain for the school. If people know that they will pay a price for being a freerider or a holdout, and that there is no benefit to doing so, they are less likely to try.

We can, and have, created transparency in our processes and procedures so everyone knows how we do business. We can manage our affairs competently, judiciously, and wisely, all in tuned with a Mission to promote Jewish education. Ultimately, we can provide an educational product that is so spectacular that everyone wants it for their children.

None of this is easy. But we are working on it. It requires time, hard work, and the commitment to change.

We will succeed at it. And while some may lament the loss of a "special deal", the institution and the community will be the better for it.

Monday, February 22, 2010

Early Birds.

This Friday, February 26, 2010, is the deadline for returning families to submit their application deposits for next year and receive a several hundred dollar early bird discount. I strongly urge families are planning to come back--and if you're not, please let us know why so we can change your mind--next year to get your deposits in by Friday.

We will not be extending this deadline.

So please: turn in your forms by Friday and take advantage of the discount.

Tuesday, February 16, 2010

A Community Comes Together.

As noted below, over the weekend, the local community suffered a shock with the tragic death of 17 year old Adir Vered in an automobile accident. The accident occurred on Friday evening, and by Saturday morning, word was spreading throughout the local community.

Within hours, there was Facebook page, and a variety of communications among the community. The funeral was on Sunday at 3:00 p.m. Even on extremely short notice, there were probably more than a 1000 people there. It was a remarkable scene. The chapel at Eden was full, and many of us, including me, stood outside to listen to the proceedings inside. After the service, the crowd slowly walked up the steep hill to the graveside, where the community helped the Vereds lay their son to his final resting place.

The community continues to be at David and Esther's side, as hundreds visit their home during shiva. Shiva information was sent out to our community members and is available from the school office.

Meanwhile, Kadima's administration has set a variety of meetings for today--for faculty, students and parents--as we all seek ways to assist the three Vered children as they return to school at Kadima.

Monday, February 15, 2010

A tragedy.

Last Friday, Adir Vered, a Kadima alumnus, and a junior at New Community Jewish High School, died in an automobile accident.

Our entire community hopes that the Vereds find comfort and strength among the mourners of Zion and Jerusalem.

Kadima will be working to provide assistance to the Vereds and their three children who presently attend Kadima.

Baruch dayan haEmet.

Friday, February 12, 2010

Lamed Vav.

There is a Jewish legend, dating from the Talmud, that the fate of the world rests on 36 righteous people. The 36 people are so righteous, that they don't know who they are; their righteousness exists because of their actions. If one of them started believing that they were one of the 36, then the hubris associated with such a belief would automatically disqualify the person from being one of the 36. And yet, the legend continues, the world needs the 36, because without them, the world would devolve into chaos.

We have our own Lamed Vav Society at Kadima. These are people who have donated an annual gift of $1,800 or more to the school. They are people who are deeply committed to Kadima and to Jewish private school education and demonstrate their commitment by making a meaningful financial gift to the school. And without them, Kadima couldn't exist.

And so, next month, we'll be having a great event for the Lamed Vav. We'll be having a private showing of Valentine's Day at the theater at Panavision, and also likely having a discussion with the film's producer and one of its stars. It should be a great evening.

If you are interested in joining the Lamed Vav Society (we don't actually have 36 members yet, but we won't stop accepting members if we exceed this number), please contact our Development Director, Franci Levine-Grater at 818.346.0849

Monday, February 8, 2010

Board Meetings.

Despite my best efforts, there still seems to be some confusion about attendance at Board meetings, or what the Board does. I thought that some of this problem would be dispelled by the musings on this blog, but apparently, not everyone reads this blog. I've tried on the blog to let everyone know what the Board does, and to encourage people to come to our meetings, but I guess I need to try harder.

Our next Board meeting is February 17 at 7:00 p.m. I urge everyone to attend. While we might go into Executive Session to discuss sensitive matters (i.e., certain financial matters that we cannot spread around to the world), I'd anticipate that most of our business will be open.

As I've been saying for some time, the Board's focus is fundraising, evangelizing the merits of a Kadima education, general business and fiduciary matters and ensuring that the school is meeting its Mission. What we don't do is discuss the specifics of what is happening in the Second Grade, or what a teacher is doing a particular class. The Board has one employee--the Head of School--and works through the HOS to achieve its goals.

People often want to go to a Board meeting so they will "know what is going on." If people to do attend a meeting, they often leave disappointed, having discovered that what is "going on" is far less salacious or interested than they expected. The Board generally talks about how we are going to raise more money, how we are governing ourselves, and what the Board can do to assist the HOS in fulfilling the school's mission. It is interesting stuff; we have great discussions about what we want the school to be and how we can help the community reach these goals. Yet, it is not a gossip fest; nor is it a peek into the underside of the school.

Nonetheless, I still hope that we can get the community to come to our meetings and help us. That's how I got involved in the school; I started coming to meetings. And look what happened to me...

Thursday, February 4, 2010

Luxury?

Recently a parent expressed the opinion that going to a private school was a "luxury." The implication of this was that not everyone would be able to afford the "luxury" of a private school education.

It got me thinking.

If Jewish Day School education is perceived as a "luxury"--as an independent school education might be--then it is not, by definition, essential. If it is not essential--but something only for those with the money and priorities to afford it--then the community need not make it a focus of its philanthropic efforts. Without community support, however, Jewish private schools will struggle. I question, for example, whether there are enough people to purchase a $20,000 per year luxury good every year when it means that they can't use those resources for something else.

Our job, therefore, is to make a Jewish private school education something more than a luxury; it must be something that our community believes is essential for our children.

Shabbat Shalom.

Tuesday, February 2, 2010

11 million peripheral blood stem cells.

After days of receiving Neupogen to stimulate white blood cell growth, and two days hooked up to a blood washing machine (one arm is out going, the other incoming), I've donated more than 10 million peripheral stem cells to a patient somewhere in need. Or they're on their way to him.

I'm exhausted. The staff at the City of Hope was unbelievably kind, and my family and friends incredibly supportive. This was not an easy process, but much easier than what the recipient is going through.

With God's help, the cells will work, and the recipient will have a chance at new life.

I'll get back to Kadima next week.

In the meantime, please join the marrow registry.