Tuesday, December 18, 2012

My Class Economy Part 5: The Christmas Firings

On December 25th, I'll send my class a mass email outlining how they were each an invaluable resource during the first semester economy, but I no longer need their services. In short, they're fired from their classroom jobs. They'll receive a small severance package upon their return to the classroom in January. Good luck and Godspeed.
Trust me.
This is not as nearly as cruel as it sounds.
Or cold. Or hairy.

In fact this might not even warrant its own post. But the Christmas firings of all classroom employees marks a fundamental shift in how I run my fourth grade class economy, and I thought it was important to highlight not only it, but the shift in thinking that occurs in my students.
During the first semester all students are my employees. I call them government employees, and I represent the government. They all get more or less the same salary, which varies slightly according to their work. The bankers work the hardest, so they get paid a little more than the rest, but it's not a huge difference. That changes second semester, because the security blanket of a steady paycheck evaporates. 
My Objective Was Never To Recreate Joe Versus The Volcano

The sole goal for the first semester though is to prepare my students to be entrepreneurs. That means to teach the kids how to deposit and withdraw money, but also give them the tools and lessons to help them succeed on their own.
By the time we have our last class-economy-class in December, most everyone is begging to be fired. Not because they don't enjoy their jobs. But because they're ready (or they think they're ready) to venture out on their own. To help with the transition, I provide business grants for startup businesses in January and a couple other opportunities for grant money.

My Christmas Email To My Class

Despite how I prepare them, here are some lessons that can't be taught, but must be learned with experience:

1) Don't Partner With Anyone.
No matter how many warnings I give or cold hard numbers I throw at them, my students want to partner with each other to open their own business. This is because partnering with someone does two things that will hurt a small business in our small microcosm economy. 
- It takes away a potential customer, since that customer is now your partner, and
- It forces that business to make double the amount of money to make rent.
Partners 'Til The End

The second point is the key. Instead of the business having to make 700 moneys for rent, it now has to make 1400 moneys in a month. This is a crazy amount of moneys, because no one knows how to price anything in the beginning. Up until January, no matter what a child did, they would get a paycheck at the end of the month. To go from that to the harsh reality that you now have to make your own money is something that has to be experienced to fully understand. 
Partners do expedite my discussion of welfare and taxes however. As soon as someone doesn't make rent, I introduce a tax on rent. The students that can afford to pay rent have to pay a little more to cover the students that can't. The alternative is that the entire economy collapses. The more students that can't pay, the higher the tax is.

2) Spending Money Is The Best Way To Make Money
I artificially encourage buying when we do start selling to each other. If I didn't, no one would dare buy anything, and I'd be stuck with a buch of hoarders on welfare. So I have the following mechanism built in for our second semester class economy:
For every product that you sell, the government will buy something from you of equal value.

Shut Up And Take My Money!

Collectively if this rule was fully realized, everyone would make a ton of money and probably create a class of millionaires. It's never fully realized though, and the rule does what it is supposed to do: encourage students to spend and make deals with each other to scramble enough to make rent. 

3) You're First Entrepreneurial Idea Won't Sustain You
Customers are a finicky lot, and there are only so many bookmarks you can sell to one person. If your customer base is only between 11 and 20 people, you'll need to diversify your product.
Gaze Upon My Colorful Wares

In order to succeed during the second semester, a student entrepreneur will go through several reincarnations of their business. Those that get stuck into selling only one product are usually the ones that suffer in March.

4) You'll Never Make Bank If You Price Your Bookmarks/Stickers/Pictures/Comic Books So Cheap
In the beginning, students have no idea how to price anything. Many will start by pricing their products between 10 and 20 Moneys. This means to make rent, they'll have to sell between 35 and 70 products each month. There are two problems with this: 
- They don't have 35 - 70 products to sell.
- They don't have a customer base that will buy that much. 
The biggest class I have had the past three years is this year's class of 21 children. My previous years I've had 11 and 12, respectively (I know, that's crazy). But figuring out the right price model- what people will pay and how much they will buy- is an important lesson that can't just be taught. It must be experienced. 

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