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Pay for an A?

Judah Guber writes about his new company:

What we have done with Ultrinsic is created a system of incentives for students to allow them to invest in their ability to achieve a certain grade and when they achieve that grade we reward them with a cash incentive on top of receiving their original investment. This helps remove one of the large barriers students have to studying and staying motivated over the course of long semesters of college by giving them rewards on a much more immediate basis.

We have been doing a pilot program in 2 schools, NYU and Penn, for the past year or so, and are currently in the process of a major roll out of our services to 37 schools all across the country. This is due to our popularity and inquiries from students in tons of schools all around the country regarding getting Ultrinsic’s services in their school. In the Fall 2010 semester, Ultrinsic will be revolutionizing student motivation on a grand scale . This is the dream of many economists: to change the cost benefit analysis of people to cause them to improve themselves and to even allow them to put them in control of this change.

Our system is forever sustainable because we earn a profit on motivating students to improve their performance, there will always be a motivation to sustain this program. Another very important aspect to our market, the college student, is that it’s one thing that’s never going to go out of style.

Guber asked if I wanted to interview him, which I did by email. Here are my questions and his responses:

AG: How will your system make money?

Judah Guber: Ultrinsic makes money by the discrepancy of the contributions and payouts between the students who achieve their target grade and those who don’t. However, another very important aspect to our business model is our offering of our many ancillary services to students once we reach critical mass from the college market, which should not be too far off based on our current roll-out schedule.

AG: Are you worried about anyone gaming the system, for example an instructor could give all A’s and then collect some of the $? (As you are probably aware, we give a lot of A’s in college classes as it is.) Or, to take a more mild example, students going on to your site for the courses that they particularly expect to do well in?

Judah Guber: To answer your question honestly, we have some concerns, as anyone who creates a product this innovative probably does, when they are ready to launch it on any kind of large scale into the marketplace. We plan to limit the size of the incentives a student can acquire at least initially so, that no student can game us out of too much money while we are adjusting our system into the college market. If it does happen, that someone games the system one semester, we could easily course correct and customize those odds for that eventuality. We will also increase the cap of money that could be won based on the level of the user’s involvement, like how long they have been an UItrinsic user. Lastly, by analyzing the students performance in other classes that they have already taken we can predict how the student will do in a current class. We have algorithms that take into account a number of different statistics like academic history, how well they do in certain subjects, as well as others as we gather more and more information.So, as someone like you probably knows better than most, the more data that’s collected the more accurate these odds will become.

AG: You write that your system is “the dream of many economists: to change the cost benefit analysis of people to cause them to improve themselves and to even allow them to put them in control of this change.” I assume that the ultimately benefit for a student to get good grades is far larger, on average, than the amount that they would win from going on your site. Thus, perhaps it would be more accurate to say that you’re trying to change students’ immediate cost-benefit calculations by taking a long-term benefit and moving it closer into view?

Judah Guber: Yes, you are absolutely right that the program changes students’ immediate cost-benefit calculations by causing them to take a long-term benefit and moving the benefit closer into view. However, the student is the one who is in control of this change because they can decide what kind of incentives they want and how much they want. Ultrinsic is just the provider of this program. We do have a very strong belief in education so, ideally we would want to give someone as much motivation as possible to do as well as possible on their grades. Since schools and education first came into our society many things have changed in our daily lives, save for a lot of aspects of education and the grading systems we have. Much of our lives are adaptations to our new needs, like the Internet allowed us to further our love for immediacy when it comes to having all information at our fingertips at the drop of a dime. We see Ultrinsic as the service that helps the education system evolve much like everything has.


  1. Anonymous says:

    If we look beyond the obvious negatives, the additional pressure on professors to pass out A's, pressure on students to recover their 'investment', it's still not clear that this won't backfire.

    If I were a careless and clever student, wanting to make a quick buck, why not intentionally perform poorly in some courses to drive up the odds against my success, place my bet on a class I could ace, then deliver the A-punch. All at the expense of my long-term success.

    Also, as a student, I would be very upset if a university simply handed over my academic records to an exploitative scheme like this.

  2. Bill Harper says:

    This is a very interesting service that is offering. When I was a student I was totally into making money and I definitely would have used it for my classes. I would not however, have thrown any of my classes in order to get better incentives because I realize that the value of doing well far outweighs the cash value of the incentive.
    Furthermore, I totally would have studied harder in classes where I didn’t like the professor because making money is a better reason to study then to get the approval of some of my dumber professors.

  3. Anonymous says:

    This comment is noticeably similar to the advertisement rhetoric on the Ultrinsic website…

    If the business plan (stated above) of this company is successful, then the student's expected gain would be negative. This is the same trick used in Las Vegas and the race tracks! You've described the mentality of a naive student. Unfortunately, it seems Ultrinsic is out to exploit this, betting on students to fail.

    Students: Just put your money in a savings account, then you'll have a little more at the end of the semester whether you achieve your goal or not!

  4. Sam says:

    So … as a result of the overjustification effect, won't this make learning even less enjoyable for its own sake? Or is the intrinsic pleasure of learning already ruined by the grade incentive?


  5. Michael King says:

    This incentive program scares me to some degree because it causes me to think about how messed up the current culture is that they need this program. It really demonstrates that students lack motivation in school.
    Although I sometimes pine for earlier times when the family was stronger, I do believe that the argument that students should learn for the sake of learning is a bit of a nostalgic argument that doesn't take into account how students really learn. Nowadays, schools have a grading system that grades everything that the students do and puts a number on them to measure how good of a person they are based on their scholastic achievement. I do believe that this program at least dispenses with the idea of measuring the self worth of the kids based on their grades and only gives them the incentives to do well in school.
    This program is the first viable program that I have seen that is honest in its judgement about the education system and puts forth solutions to our problems. I am deeply impressed.

  6. Michael Mizrachi says:

    how retarded do you have to be to sign up for this, when all your hard work and money is at the whim of a professor's opinion of what grade you deserve. every other betting system in existence, from track racing to poker to dice, offers stricter variables and safer bets for those who are informed about their game of choice. i'd sooner put my cash down at a Vegas table or online poker then to bet money on trusting my professor to give me the grade i think i deserve.

  7. Anonymous says:

    This is clearly prone to adverse selection, another dream of economists. Only students who expect to make money would join for a given odds of winning. If people know their abilities and are rational then this scheme should unravel. This cannot be sustainable unless students are willing to pay upfront for the commitment device. Or maybe stupid parents are – but why not pay your kid directly?

    This is like voluntary health insurance where only those sick people join. Their expected costs is higher than the premium (accounting for some risk aversion). You won't get the young and healthy to make the scheme sustainable, so the company goes broke — hence Obama's mandate. And yes, this does happen in practice.

    David M. Cutler & Sarah J. Reber, 1998. "Paying For Health Insurance: The Trade-Off Between Competition And Adverse Selection," The Quarterly Journal of Economics, MIT Press, vol. 113(2), pages 433-466, May,

  8. Anonymous says:

    I do not understand this response. If you have issues with it being against the altruistic system of education. I can sort of see where one might be going but, while things like Black Jack and sports betting might have more defined objectives. They are also completely out of your control while, your subject to their absolute randomness. This seems to be a system that while it depends on the attitude and ultimate decision making of another person, it also has a significant other aspect, unlike those other betting methods, that are within your control. You have a big part on what results you end up getting unlike putting money on a game.

    If you want to enjoy this kind of reward process while, also having some control of the outcome, this seems a lot more safe and more of a game than a gamble. If the other option is going to Vegas or Atlantic City and your still in school this seems like the a much better option.

  9. nvtsky says:

    Isn't it pretty obvious that this is a company that is a marketing company. They just want you to sign up, make a few dollars on your "bet" and then their profit comes from direct marketing to you or by selling your information.

    The "gambling" on grades is just an advertisement cost to them.