Eugene A. Stead Jr. A life of chasing what I did not understand
My Story
The End of a Chapter
Postscripts from Stead's World
My Photos
Mostly My Thoughts
Thoughts from housestaff and friends
Thoughts from Others
For the Curious
A Christmas Letter for 2003

Gene Stead and Frank Starmer

For several years my colleague Frank Starmer and I have urged our medical schools to use the internet for memory storage and the brain to manipulate the stored material by a process called thinking. For the first time, the combination of the internet-using doctor and the patient using the internet could reduce the transaction cost (the cost of the patient-doctor encounter) to near zero. Surgical manipulation would remain expensive but even here the steady improvements of machines would erode the need for the trained surgeons hands and eventually reduce the cost. The cost of medical education will decline when we lick the forgetting curve by using the internet for memory storage and the brain for manipulation of the stored material.

My interest in changing education is reenergized simply because the Internet and Google bring new tools to the table that even I could not imagine 10 years ago. With help from Frank, I have slowly learned how to use Google to locate resources. At the same time, I have noted a shift in the political scene. Howard Dean has done something that no prior politician has been able to do - that of harvesting enough supporters to become a serious change agent on the political scene. He has managed this with a very small organization. Dean has discovered that he can engage individuals without a costly staff by using the Internet as the mode of two way communication. All other politicians have been unable to engage individuals, even with a large and costly staff, and therefore have turned their attention to the leadership of large and influential special interest groups. The leadership of labor unions, the AARP, and the motion picture industry (RIAA) comprise only a small group of people who promise to encourage their followings to follow the leader. These multi-level organizations isolate the general public from active participation in serious issues of government.

The Internet, providing low cost access to computers from every corner of the world, brings a new player to the political table: the individual. When the USSR was closed, very few Americans were aware of the life of an ordinary Soviet citizen. Penetrating Moscow with the internet made it impossible for the Soviet regime to keep a secret, and thus, the coup of 1991 failed, in large part because not only were ordinary Soviet citizens able to follow and participate in events, the whole world was able to follow the blow by blow accounts, published by a small group of Internet-savvy individuals in Moscow.

As I was staring my career at Harvard, exploring the structure of human behavior, Ronald Coase was starting his career in London, exploring the structure of industrial organizations. He was puzzled why many felt Lenin was wrong in thinking that the Soviet Union could not be run like a large factory, while Ford Motor Company was being quite successful as a large factory. The answer that Coase found was that firms exist to meet needs associated with producing items with a significant cost of a business transaction. If the cost of a transaction was zero, the the individual would not patronize a firm, but rather, would manage his/her affairs without external help. Lenin's factory was not a response of individuals able to make a choice whereas Ford's factory was the result of individuals making a choice that created the market for Ford's machines. Lenin's factory eventually collapsed from a structure that was not a reflection of the marketplace. Coase identified "marketing costs" or "transaction costs" as central to our choices and that different structures resulted from demands associated with different costs of a business transaction. His paper, The Nature of the Firm was published in 1937 (Economica 4:386-405, 1937). His ideas revolutionized the field of economics and he was awarded the Nobel Prize in Economics in 1991. His revolutionary ideas required 60 years from initial publication to his Nobel prize. I have only been preaching for 50 years. Perhaps another 10 will be required for others to understand my message.

At Harvard, and later at Emory and Duke, I was interested in education and unaware of the concept of transaction cost. I pursued my career along paths that seemed right from my experiences. I understood the power of the forgetting process and over time changed the medical school curriculum in a way to compressed two years of basic science into a single year of basic science. However I was aware that something was not quite right. The medical school faculty and administration, I felt, sometimes managed the curriculum to suit their needs, not the needs of the student.

Now I am faced with a new opportunity. Dean has demonstrated that Internet communication can drive the cost of a transaction between his election committee and ordinary citizens almost to zero. Many of you have already enjoyed this experience via ordering books from or purchasing something from eBay - all without middle management, a business structure of the past that increases the complexity of organizations and increases the price of products.

I now realize that the Internet and Google have driven the price of information to zero. Everyone has access to everything at virtually no cost. I know from Frank, that remote villages in India have access to Internet and children, once bound by village education, now have the possibility to explore a new source of educational material. I realize now that perhaps I am a step closer to my dream of building an educational system that focuses on learning by doing and problem solving instead of memorizing and remembering and passing written examinations.

Christmas time is a wonderful time. Each year, it provides me a chunk of unencumbered time large enough to think about something. This year, I am thinking about a new kind of learning, about Coase's observations about industrial organization (which educational organizations tend to copy), about the Internet and Google. Some of my essays have been collected and published as "A Way of Thinking" and "A Way of Working". Now I would like to build a set of essays addressing "A Way of Learning". Who would like to join me in this venture?

Best wishes for a happy holiday season and a wonderful 2004.

Gene and Frank

Back to my thoughts