Random Walk

So I’m about half-way through my new book, “A Random Walk down Wall Street,” by Burton Malkiel. I’m loving it. It is part investing history, part argument for index-funds as a means of investing. Having read all of Mr. Money Mustache, I already lean towards index investing as a way to safely reach good, respectable returns. It is awful nice, though, to read up on some of the background for why indexing works so that I can better understand the whole strategy. I, while seeing “Random Walk” as a very cheap way to get ahead in life, realizing it isn’t the complete solution, noticing that not enough people are seriously considering their economic situations,┬ádefinitely recommend this book.

Assessing Stocks and Strategies

One concept that Malkiel brings up frequently throughout this book is that there is a major issue with assessing stocks: basically nobody is ever consistently good at recognizing good stocks from bad. Many people claim to be able to “figure out” which stocks are primed to do well and which are on the downward slope, but these people, as study after study points out, are rarely (maybe even NEVER) right for a consistent time.

Malkiel argues that, rather than trying to assess stocks and determine which will rise or fall, the better strategy is to invest in the market at large, sort of at random. To do this, you can buy into index funds. Index funds are simply large swaths of stocks all put together, swaths that follow the overall trend of the market, which over-time moves upward. So, if you are in for the long-haul, and can outlast yearly fluctuations in stock prices, then index fund investing might be for you, especially because you’ll never correctly guess individual stocks for long enough to make solid returns.

Where have I heard about Assessments before?

Oh, yeah! Literally everybody having anything to do with education is obsessed with assessments. Let me list some of the types for you now, in case you somehow (and luckily) forgot about them:

  • Formative
  • Summative
  • Informal
  • Auditory
  • Written
  • Verbal
  • Standards-based

The list goes on. The educational world is obsessed with assessing students, teachers, principals, schools, even districts as a whole. We have been tricked into thinking that the problem with education is simply that we don’t know EXACTLY how students are doing, whether they are primed for growth, whether we expect good returns from them, or whether we expect them to fall onto the downward slope.

The Problem with Assessments

This is a red herring! Assessments aren’t the solution to our problem, same as they aren’t the magic bullet in finding stocks that will surely grow in the future. I would argue, as with stocks, it is fairly impossible to determine what a student will do a day from now, a month from now, a year from now, let alone when they get out of school. It is also fairly impossible to measure exactly how promising a student is at this given moment.

Sure, we can measure how well the student knows a specific set of words, or how well they can write about a specific prompt, or how fast they can read, or how well they can answer specific, trivial multiple choice questions about a given text, but all of these assessments give us little holistic, actionable data about the student.

This isn’t to say that all assessment is bad. On the contrary, it is indeed important to try to understand your students, just as it is indeed important to understand where you put your money (even in index funds.) But like index investing, it may be more important to invest in a class at large than to worry about determining which of your 150 students is at exactly which stage or state of development at a given time.

MY Answer to the Problem

We need to take a more holistic, “random walk” approach to our curriculum and assessments. It may be a very good thing to understand at large how your class is managing with certain subjects. It may be a good thing to pay attention to any obvious outliers as well. However, we run the risk of heading down a rabbit hole by trying to identify precisely the exact abilities of each and every student.

If we work to teach a broad-based lesson, with diversification (or “differentiating” in education jargon) included to reach the most growth in the most students, then we needn’t worry ourselves over particular successes or failures. It may be that in any given sampling of students, from any given teacher, school, state, there will always be success stories and failure notices. This is equally true in stocks: there will always be those who go up and those who go down.

We must not, therefore, get lost in determining exactly which ones do what, but rather focus on investing in the quantity at large.

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Let me know what you think. Are assessments over-valued right now? Do they ever really do much for improving your outcomes?