Herbert’s hypothesis is yet significant to understand the need of strategic information in the decision making process.  In the past five years, the data analytics and data scientists profession have bloomed and demand for these professionals across different industries are skyrocketed.  However, the speed of companies’ adoption on this new exciting development differs.  Rapid adjustments found in the industries characterized by ultra-competition, such as manufacturing, or retail.  However, others such as education satisfies with best-practices and data visualization approaches, instead of deploying data analytics.

Needless to say that bounded rationality (BR) has prevented any industry, or any company to max-out their opportunities, investments or resources for some may apply less-than-optimal strategies.  Making this honest mistake is natural because of BR.  It prevents any organization to make optimal choice because human beings are constrained to apply their rationality fully because lack of wisdom (LW) or add (gut) feeling, rumors and owned biases in the process.  Therefore, whatever the decisions that have been made in the past suffered from this natural constraint.  The example has been discussed by Ricardo’s–the Law of Diminishing Return.  The current example can be learned from Facebook $120 billion in 24 hours loss in market capitalization because the combination of LW and BR.

Supposed the optimal output/revenue/sales/enrollment or ROI is Π, an organization will never be able to reach Π, but (Π-ε), because of LW & BR.  The gap measured by ε can be reduced by the application of data analytics where strategic decisions are made and based upon.  One can call ε as the waste of resources, or the loss of chances or opportunities because the institutions fail to make important decision based on processed data.  Some decision makers realize this constraint, and welcome the application of data analytics.  However, many may still stick with the Neo-classical theory of profit maximization or simple rule dictated by the Wall Street.

Higher learning organizations are more comfortable with the concept of best-practices. Needless to say that these best practices are unwritten consensus among the institutions in the industry which are communicated to members through different seminars and Associations.  Should it be time to think about these best practices mindset?  The reason is simple for the best practices paradigm fails to recognize special or unique characteristic or core competence of an individual organization.  For example, if one strategy works for Harvard, it does not automatically work for Universities in North Carolina.  Or if it works for 4-year institution then it will work for 2-year colleges.  Or if it works for state-owned institutions, then it will automatically work for non-profit private entities.

Having discussed the role of process data and BR, one may conclude:

1. Strategic decisions need to made based on data analytics and not data visualization alone.
2. Companies or higher learning organizations that have relied more heavily on data analytics will perform better in the long-run and will be able to outsmart their competitors.
3. Demand for data scientists will keep increasing in the future.  Please check out the following current open position.  If interested, please click this link to apply.
4. Decision makers will rely more on information processed by data analytics.
5. Applying data visualization instead of data analytics will not produce the optimal results.
6. Return or profit cannot be maxed out indefinitely.  Therefore, a new paradigm need to be explored, adopted and applied in order to survive in the world of ultra competition.  This new paradigm will be discussed in the up-coming BLOG article.

Following our discussions on moral virtues, it is pretty obvious that any decision made without wisdom will not produce optimal results.  As shown below quoted from Encyclopedia Britannica on Aristotle’s hypothesis about moral virtue and wisdom.

“Wisdom, the intellectual virtue that is proper to practical reason, is inseparably linked with the moral virtues of the affective part of the soul. Only if an agent possesses moral virtue will he endorse an appropriate recipe for a good life. Only if he is gifted with intelligence will he make an accurate assessment of the circumstances in which his decision is to be made. It is impossible, Aristotle says, to be really good without wisdom or to be really wise without moral virtue. Only when correct reasoning and right desire come together does truly virtuous action result”

That having said, we are now understand more about Ricardo’s theory of diminishing return to scale in that no entity will ever experience positive revenue or sales growth forever.  Recent example from FEDEX shows the proof.  Even though, the Wall Street thinks otherwise.  There are all non-linear, and only positively slope in certain range.  The question is why many institutions trying to push higher?  Maybe, some of the companies are living in hallucination?

One can see the parallel with Ricardo’s hypothesis.  The land in the classical Ricardo example is parallel as the business environment at time t. The innovator, enter the market (fertile land) as the market leader (Apple in smart phone industry), then other players such as Samsung and Huawei came at time (t+i) and make the business environment more crowded or saturated (less fertile land).  These laggards, however, entered the market with better technology.  Therefore, their products perceived by the customers have higher value.  It can be observed that success will create more demand for leisure.  Since time is finite, i.e., there are only 24 hours available a day, the effect of increasing demand for leisure on the market leader is obvious.

The same thing occurs in higher ed.  Harvard as the innovator enters the market decades ago, then followed by others.  Now, that in the higher ed industry, the business environments are way too saturated with all kind of noises, especially when the administrators let all kind of for-profit organizations to join the crowd.  For those who already in the market, they are trying to expand their programs, instead of finding their “sweet spot”.  This strategy finally leads to disastrous outcomes. There are two reasons why this happens. (1). The industry has reached it steady-state, i.e., after the first and second order conditions for maximum were met and (2) Because of bounded rationality as it has been explained by Herbert’s.  Certainly, the captain of those institutions may not have the wisdom and perhaps they are leaving in the state of hallucination that makes them to be unwise and irrational in making choices.   In order to compensate their failures or to prove that they have made the rational decision, then they start to cheat or to cover-up?  In other words, any lack of wisdom leads institutions to make disastrous decisions, policy choice or strategies.  It surely will negatively affect the stake holders and the society as a whole.

The answer is yes, because outcomes produced based on rationality has the upper bound (say X), while results produced based on moral virtues equal to upper bound plus., i.e., X+ε. In other words human beings will never be able to use their rationality fully in the decision making process, but partially.  Herbert A. Simon (1947) called this phenomenon as bounded rationality.  If this is the case, then any entity managed based on Neo-classical or Rational Expectation will no longer possible to advance further after it hits the upper bound.  This is not a new concept, but has been discussed by Ricardo with his famous diminishing return to scale hypothesis.  Let us take an example of the Apple company.  It starts as a market leader in the smart phone industry until Samsung, and now potentially Huawei entered the market.  The classical example can also be taken from automobile industry.  The US companies dominated supply of cars in the world, until the Japanese car manufactures took over as the global players.  Market leaders discussed above may have applied the Neo-classical profit-maximizing mindset as the center of their operations.  But newer competitors focusing more toward customers satisfaction and customer perceived value as their competitive weapons.  Therefore, profit is seen as the results, and not the choice variable as seen by the Neo-classical concept adopters.

In the higher education industry, students and employees level of satisfaction are the choice variables.  Therefore, higher ed entities should focus on maximizing their utility function, instead of someone’s else.  This hypothesis has huge implications, and may require significant paradigm shift in the process to manage a higher ed institution.  The transformation in attitude and conduct from different players in the system are required, and this is not an easy task.

The exemplar evidences of practicing moral virtues need to come first from the upper level management.  Sadly, like in any others, education industry has been known to its strong buddy-buddy and a close-knit system.  In such a system, each element will protect each other’s interest.  This reality may cause biases which push the main focus further away to the buddy-buddy group’s interests.  Under such a condition, maximizing group’s interest (example: increase group members’  pay check) will be the focus, instead of students’ utility function. But students’ focus will be used as a rhetoric jargon to camouflage the hidden agenda.  Others, outside the group will be used as the working bees to support the group’s interests.  The pay gap from these two groups is going to be wider. If the institutional budget is finite, and because of the big chucks of it go to the select group, then only a small amount remained to pay the outsiders.  However, their workload go to the other way around.  In contrast to the group members’, the peons will do most of the laundry lists.  Those who go against the group’s interest will be wiped out and this will create further fear in the work place.  This kind of system will only produce yes-man employees while creativity and innovation will be (near) null.  This is the reason why a system operates based on moral virtue produces fruits far more superior than those of bounded rationality.

The paranoid behavior phenomenon is found at higher ed organization and pratically in any industry, big or small are consistent with Herbert’s bounded rationality hypothesis. The close-knit paranoid group behaviors occur because of they in-capabilities to formulate and solve complex problems.  Therefore, the only way they can protect their individual objective is by sticking together.  They are also fear of retaliation or dismay of losing their position and money associated with it, once their lose their power grips.  Sadly on the expense of everyone else in the system, students’ and outsiders’.

Are there any obvious relationships between data scientists’ (DS) work and moral virtues?  Definitely.  Moral virtues are the guidance for all type of professions or works–from politicians to the garbage collectors.  It does not matter what the profession is–without moral virtues used as a guidance consciously in the work place will only produce garbage.  It is particularly important in the DS professions for their work, or research results and recommendations will be used by the policy makers.  Therefore, if one works with tainted data, then the results are obvious.  The jargon of data integrity is often used in the DS profession.

Make thing extremely important in the DS profession is that the amount of data or observations that one usually works with is often gigantic.  It is not abnormal if a DS works with million observations to just come out with one estimated regression equation.  Therefore, there is a chance that users will understand the whole research process.  For example, if data integrity has been compromised by omitting or data altering to produce a (more) favorable result?  This is particularly critical in the pharmaceutical company–in the clinical trials for new drugs or drug improvement efforts.  That is the reasons why the FDA’s approval on new drugs can take years, expensive, involved meticulous steps and documentation of evidences in the process of the trials.  Unfavorable results will bring the share of the company down to the sink, but the reverse is true for a success trial.

Note that any clinical trials for the new drugs are heavily regulated by the FDA.  What about in other industry, say education?  How often data were manipulated or change so that favorable results can be reported?  This is a critical issue when federal or state awards any funding based on “performance” metrics such as retention or graduation rate for under-represented students’ group?  Unlike in the pharmaceutical area, the education industry may have been regulated in reporting, but it certainly less rigorous than those in the pharma industry.  The question is this?  Who is going to check in detail if certain minority group enrollment has or has not been compromised?  Here is the question that related to moral virtues.  As a DS or IRI expert will you take the risk to alter the data sets or observations, because someone else wants you to?  Your (level of) consciousness of moral virtues will guide you on such a situation.  Hint: There are 4 levels related to moral virtues.

The Association has written two articles in its Blog about cheating and many more on systematic errors.  On June 6, 2016, an article was shared on cheating related to higher ed, followed by an article shared to the public on December 7, 2018.  Recent college admissions scandals may complete the long list of systematic errors phenomena found in the US higher ed industry.  In the past 6 years, one can see the types of cheating in the US higher learning institutions.  Basically, they can be grouped based on the players’ side either as the suppliers and consumers in the so-called higher education game.  What do these phenomena tell the American public and what do they have in common?  Well, it won’t take Albert Einstein’s brain to recognize or to find the communalities among those who have such a behavior–which is lack of moral and integrity.

If moral is not in the equation when decisions are made, then one should expect the outcomes are tainted.  It is independent of who the decision makers are.  When moral is compromised, then it is just a matter of time before the stinks are spread.  Lack of moral led to all kind of unfortunate behaviors such as selfishness, corruptions, laziness, lack-of-fighting attitude, lack-of innovation or creativity, greed, crimes and others.  The list can go-on and-on.

The results of such unfortunate attitudes are griefs, failures, frustrations, defeats, pains, sorrows, miseries, sadness, anguish, distress, agony, torments, afflictions, sufferings, heartaches, heartbreak, broken-heartedness, heaviness of heart, woes, desolations, despondency, dejection, despair, angsts, mortification, mourning, mournfulness, bereavement, lamentation, ament, remorse, regret, pining, lost of jobs.  The effects of recent college admissions bribery tell them all.

No one will win when moral is set aside in the decision making process.  Unfortunately, it was only Adam Smith who considers the importance of moral virtues (Aristotle) which will ensure the existence of market equilibrium.  Its negative effects are universal, and independent of what kind of decisions are made.  In addition, to what the public has learned about college admissions cheating scandals, Uncle Sam is still trying to cope with student loan debt.  As the election is around the corner, each candidate is trying to throw their mantra to dupe the voters.  This is not about campaign promises, rather it is about moral choice.  When moral as one of the important virtues that affect human’s life is left out from the equation, all affected parties will suffer regardless of their economic status.  One may escape in the short-run, but may not in the (near) future.  As moral virtue is fading away, one will expect more pains occur in the society.

The American public may not notice the big shift seems to occur how to handle the $1.5 trillion student loan debt.  It started with a person who led the DOE threw her ideas of passing the government role to private companies.  This recent movement may have been based on the idea of the free-market forces are able to allocate resources more efficiently–but forgot the conditions needed for that to happen.  The condition is certainly missing not only in the practical sense, but also under the Neoclassical economic theory.  This missing constraint has been discussed by Adam Smith.  He called it moral sentiment.  Adam Smith is correct–a market cannot operate efficiently, if it is not Pareto efficient.

In addition to DOE, Congress has its own ideas as well as the state how to deal with the student loan debts.  Recent article found a very interesting, yet sketchy ideas how DOE has handled the loan servicing companies.  Reading all these articles show only one thing which is chaos.  There is no single public policy meant to management student debt crises.  As the Association has pointed out in many articles no one has the real interest to find ways to minimize the chaos—for it does not have negative direct impacts, but to benefit them.  Worse yet, every so often that more systematic errors were infused into the system to make it less possible to be managed.  Even a superman will refuse, if he were assigned to straight things out.  Pretty sad!

The Association’s hypotheses on the going-concern of private colleges in the US have again been proved.  The state of Massachusetts is conducting a stress test for private colleges in that state.  Well, the following studies that AAEA has done many years ago can help the decision makers in any state in the US to know the financial condition of many colleges, not just the private one.  Please click the following link, and on the drop-down menu, select the name of the state.

Pretty amazing how close or accurate the Association’s forecast of what will happen to US Colleges in the future.  The same thing has been forecasted on the national student loan debt.  There won’t be any easy solutions due to systematic errors.  These errors are infused to the system to benefit certain organizations, but not the American public.  Make thing sad, more of these systematics errors are added to the system, such that solving the issue getting less and less possible.  As we have mentioned, once, the Wall Street get involved–things will get murkier.  One day, the American public will here the Uncle Sam will bail-out all the loans, providing that it has the resources to do so.  Just wait and see.

When someone with this kind of background says something about solving student loans, one needs to really use their critical thinking and always alert themselves with the following phrase “there is no free lunch”.  The article says that he has a solution–the fact is that he makes thing worse through this recycled-nonsense proposal.

By the way, we first heard this worst idea from Sen. Lamar Alexander, chair of the Senate Health, Education, Labor and Pensions (HELP) Committee.  We are convinced this is not his original idea, but the whisperers’, i.e., the lobbyists of special interest groups.  At the hearing, a college administrator gave a disastrous presentation in the Senate floor on January 25, 2018.  Perhaps, the author of this article needs to do more research, and knowing the history of the issues. Those who are invited to do presentation, majority, if not all, are representing higher ed institutions. It will be difficult to admit that they do not have any institutional bias, and do not commit any systematic errors?  It will be hard to say that they are free from either personal’s, institutional or Higher Ed Association’s interest, in such conflicting interest settings.  So next time, the lawmakers need to bring both sides on the equations before drafting any regulation.  Unless, they are also part of the systematic errors contributing actors.  Remember about the NDEA.

Income sharing is the worse scenario to solve the student loans for it does not address the real issue and the root of the problems.  Make things even worse is that young generation in America treated as working bees~~enslaved by who has the money and power to control others.  Giving up their future income, even before their earn it, the same idea of payday loans business.  This predatory practice is nothing, but equivalent to the scenario of modern slavery which the Association has discussed on March 11, 2018.  Unless the majority of American public okay with the resurrection of the slavery era.  This income sharing predatory idea has more damaging and devastating impacts because it affects every single citizen in the country, regardless of their race or  ethnicity.

If Purdue University starts doing it, it does not means that everyone else has to follow the same policy.  This is the thing, the University can charge what its want and receive 100 % from what it charges for—-but its students have to suffer from this type of  irresponsible institutional policy.  Indirectly force the young Americans to transfer their future income to support the high overhead and inefficiency.  What a great idea for the institution, but students and their family got rigged very badly.  Though one of its student (yes, only one among thousands), quoted in the article as Andrew Hoyer–a 22-year old airline pilot said he does not mind that his loan increased from $16,000.00 to $40,000.00. However, Mr. Hoyer is not Mr. A or Mr. Z who are mind to pay $24,000.00 extra for, maybe the interest. Therefore, it does not represent the American public and general population interest–a typical fallacy of generalization example.

This billionaire can say that because his family members never feel the pitch and miserable life because of the student loans scam and the systematic errors made by the actors other than the students and their family.  Through research, the Association found that those who have business ties to Wall Street are one of the worse contributing actors in the US student loans crises.  The Association has addressed this recycled story about a year ago, on January 24 and 25, 2018 to be exact.  One of presenters tries to support his idea asking more Fed money when testifies at the US Senate floor–but make terrible mistakes in his presentation even using a simple table using Excel.  If one cannot even know to work on a simple math addition for a presentation at an important event, such as this one, how then the American public has to trust other college administrators?  You tell me.