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One IPO please, and super-size it

Tue, 2015-05-05 01:00
260 percent

This is how much Shake Shack has grown since the burger chain went public in January, according to Reuters. About half a dozen fast-casual restaurant chains have had big IPOs last year. These companies cater to an emerging generation of younger diners who are looking for alternatives to McDonald's.

$2,780

A poor child growing up in Los Angeles County – where Marketplace is based – can expect to earn that much less by age 26 than the national average. Even the children of one-percenters in LA see a drop, $4,460  less than the national average. What does that mean? Compared to the rest of the country, LA County has very poor economic mobility. A new study out of Harvard finds these drop-offs are not limited to Southern California. The Upshot's report on the study will customize to report on your county, or any county you choose.

30,000

That's about how many people Carly Fiorina reportedly laid off while she was head of Hewlett-Packard. Someone registered carlyfiorina.org to remind people of that as Fiorina announced her White House bid Monday. Former CEOs who run for office have a few things going for them – knowledge of the economy, proven experience as a leader and often a conservative record that could attract voters. But being head of a large company also means your record as a job creator – or a job cutter – is out in the open.

20,588

That's how many complaints of age discrimination were filed last year, according to the Equal Employment Opportunity Commission. Fortune notes this number has been increasing since the dot-com boom, and some of that growth may be tied to employers looking to hire so-called "digital natives." The phrase is correlated with age, though some hiring managers defend its use as a quick way of describing strong digital skills.

A ban on fracking bans (no, you didn't misread that)

Mon, 2015-05-04 13:59

Denton, Texas, a small town in the middle of oil and gas country, banned fracking back in November. Today, the Texas legislature essentially overturned that vote with a ban on fracking bans.

Marketplace’s Scott Tong reported on the fracking ban in Denton last year. He several states are considering similar bills to stop municipal fracking bans.

One of these, in Oklahoma, passed one chamber. The sponsor of that bill said he wants to "get ahead of what we're seeing in other states."

Hear the full conversation using the audio player above.

McDonald's first turnaround steps aren't about food

Mon, 2015-05-04 13:00

McDonald’s new CEO was pretty blunt on Monday.

“We are not on our game,” Steve Easterbrook told investors and customers while unveiling a turnaround plan for the company amid sagging sales. Easterbrook’s plan involves a major restructuring he hopes will make McDonald’s more nimble in responding to consumers' changing tastes. The company will also franchise more of its restaurants and buy back more shares.

Some investors wanted more details about menu and store changes, but there were no sweeping announcements on that. McDonald’s is experimenting with more customized orders and online ordering at a few locations, among other changes.

Tim Calkins, a marketing professor at Northwestern’s Kellogg School of Management, says the company’s immense size makes any fundamental changes across the board challenging.

“Repositioning a brand is hard and it takes time to do those things," he says. "It means there’s not a quick fix here.”

 

The downside to being a 'CEO candidate'

Mon, 2015-05-04 13:00

Carly Fiorina, former CEO of Hewlett-Packard, officially announced on Monday her candidacy for the presidential nomination. She told "Good Morning America" that she understands "how the economy actually works." But being a CEO isn't always an advantage for a political candidate. 

Look, for instance, to CarlyFiorina.org. It's a simple site, reading: "Carly Fiorina failed to register this domain. So I'm using it to tell you how many people she laid off at Hewlett Packard." And then: 30,000 frowny emoticons.

George Anders, author of "Perfect Enough: Carly Fiorina and the Reinvention of Hewlett Packard," says layoffs were in the tens of thousands under Fiorina — in large part thanks to a merger with Compaq she pushed through.

This question of how many jobs a CEO created or destroyed is a key one for business executives who become political candidates. Just look at Mitt Romney's campaign for the presidency, and his record at private equity firm Bain Capital.

"Whether Bain Capital created more jobs than it took away was one of the great debating issues," says Mike Useem, professor of management at the Wharton School. "And that obviously is going to be debated in the case of Carly Fiorina. Net-net, was she a job creator?"

One thing Nick Carnes, professor of public policy at Duke University, says we do know about CEOs is their general political tendency: across all levels of government, he says they tend to favor more conservative economic policy choices.

Why social media investing looks like a rollercoaster

Mon, 2015-05-04 13:00

The share price of social media companies – LinkedIn, Twitter, and Yelp, to name a few – have gone on some bumpy rides lately.  When LinkedIn told investors the year ahead wasn’t looking as rosy as previously thought, its stock dropped 20 percent in a morning. Twitter saw a similar plunge when it surprised the markets with weak earnings.

If social media stocks seem a bit volatile, “our belief is they should be,” says Rick Summer, an equity strategist at Morningstar.

That’s not because they’re social media companies; it’s that they’re growing fast and their business models are still uncertain.

“Many of these companies are forming new advertising products,” says Summer. “We don’t have a great deal of history in understanding how you and I as users will interact with those advertising products and how advertisers will value that degree of advertising.”

Therefore, the stock price of many social media companies isn’t based on how much they make today, but what investors believe they one day will, says Shyam Patil, a senior vice president with Wedbush Securities.

If suddenly a company’s not growing as fast as expected, investors will reevaluate.

“It’s kind of like compounding, right?” says Patil. “If you’re trying to figure out what $1,000 today is going to be worth in 30 years, a two percentage change in the growth rate is going to have a significant impact."

That’s not unique to social media companies, nor does it mean they’re falling out of favor.

“When you look at the value of these stocks, they’re significant before and significant after,” says Brian Wieser, an analyst with Pivotal Research. “We can argue about whether the market overreacts – absolutely.”

Wieser says a volatile stock price doesn’t change the inherent value of these companies – just want Wall Street thinks that value is.

His reaction to Twitter’s recent drop? “Cheap now, time to buy.”

Breaking down 'The Avengers' by screen time

Mon, 2015-05-04 13:00

The good people over at the pop culture website Vulture counted up how much screen time each of the Avengers got in the new movie.

Captain America and Iron Man came in at one and two. Black Widow, that's Scarlett Johansson to those not familiar, was third.

The Hulk was 5th — that's the screen time of Bruce Banner and The Hulk combined, by the way.

And I'd just like to say, speaking for Norwegians everywhere, that Thor totally got the short straw: a lousy 14 minutes of screen time.

Dan Hill/Marketplace

The Avengers' best superpower might be merchandising

Mon, 2015-05-04 12:41

Sales of "Avengers" merchandise lept from $325 million in 2013 to over $1 billion in 2014. Marketing licensed products to adults is responsible for a big chunk of that.

There's everything from Gamma-ray-blasted Greek yogurt from Chobani to the Hulk's cologne that smells like sandalwood, dry musk, and warm cedar. And there are collaborations with brands like Under Armour and Forever 21.

Four Five released a collection incorporating subtle elements inspired by Iron Man, Captain America, and Thor. Think of it as "geek couture." For women, there's the "Her Universe" collection with the Thor sailor dress, the Captain America halter dress, and the Black Widow belted jacket.

But why has the the "Avengers" brand been so successful in making the jump to mainstream culture?

"What a brand has to do is, they have to strike a chord in the brain of the buyers they're targeting," explains explains Ira Kalb, assistant professor of clinical marketing at the Marshall School of Business at USC. "Marvel characters already have that."

And the push is worldwide. "Avengers: Age of Ultron" is the most-marketed movie ever in India. If you're in a Subway in Mumbai, you can stop in for the Double Aloo Melt, one of the signature "Avengers" sandwiches currently available.

Along with kids and parents, there are now teens, 20-somethings, and working professionals from Beijing to Berlin buying "Avengers" products. With the Avengers franchise bringing together the characters of Marvel's other hit movies, the sun never sets on the empire.

The next two sequels are already scheduled for release in 2018 and 2019. Disney and Marvel are betting big on the continued global demand for all things Avengers, like pint glasses, ice cube trays, coffee mugs, water bottles, combat boots, canvas slip-ons, Gillette razors, Peavey guitar straps, waffle makers, iPhone covers and so much more.

The rise, fall, and rise again of the Twinkie

Mon, 2015-05-04 06:53

Saving Hostess Brands was not an easy task, but billionaire C. Dean Metropoulos and Apollo Global’s Andy Jhawar may have successfully revived the company.

The business deal was closed in April 2013 — Metropoulos and Jhawar bought Hostess Brands for $410 million. The bakery company has a history of more than 150 years, but in late 2012, Twinkies, Ding-Dongs and Snowballs became extinct on store shelves.  

"The funny thing with Hostess and Twinkies was that the snack cake business, even when it was in bankruptcy, was still a billion dollar business a year," says Steven Bertoni, senior editor at Forbes.

Still, the money-making industry was not enough to prevent Hostess from experiencing two bankruptcies, five CEOs, and millions of dollars of debt.

Bertoni says, Hostess was very old-fashioned. While competitors modernized factories and switched to warehouse-based shipping, Hostess stuck to its old machines and delivery practices.

"They had an old direct-to-store route, which means basically they had 5,000 delivery trucks dropping goods off a couple of times a week, which is extremely inefficient," says Bertoni. "Delivery costs were about 36 percent of all revenue."

However, switching to the warehouse model meant food might have to sit in storage for weeks — something Hostess was not prepared to do.

"The old Twinkie only lasted 30 days and that wasn’t long enough for a distribution model with warehouses," says Bertoni.

The death of Hostess was short-lived. Under its new ownership, Hostess found a way to extend the longevity of the Twinkie to 65 days to allow warehouse-based shipping.

"Now, delivery costs are about 16 percent of total revenue," he says.

The entrepreneurial team behind the new Hostess is expected to make $2 billion in since their undertaking on Twinkies alone. It looks like Twinkies are here to stay.

PODCAST: Obama announces a new non-profit

Mon, 2015-05-04 03:00

Airing on Monday, May 4, 2015: Back in March, just 126-thousand jobs were added to payrolls. But what about April? For that we consult Drew Matus, senior US economist at UBS Securities. Next, President Obama is scheduled to announce not a new government agency but a new non-profit today. It's an extension of the "My Brother's Keeper Initiative" the President started last year to help minority young people stay in school, do well, and graduate readt for college. And the new organization might be a sign of what the president has planned for his future. The price of crude oil is up from its lows of the last year, but at $59 a barrel this morning, that still about half what it was 11 months ago. This is great for consumers of oil, drivers, businesses and beyond.  But it's a challenge for many who work in the oil industry, including what are called "landmen," people paid by oil companies to get rights to drill. We check in with one land person in Eddy County, New Mexico. 

 

Meet the woman leading the EU's case against Google

Mon, 2015-05-04 02:00

Google has its hands full in Europe, where antitrust regulators have accused it of abusing its power to, among other things, favor its business partners in search results.

Google denies wrongdoing.

The European Union Commissioner for Competition  Margrethe Vestager is leading the charge against the company. We talked with her about the case, another high-profile investigation and more. The conversation has been lightly edited for clarity.

This EU complaint against Google comes after a five-year investigation, give me a sense of what you're concerned about.

It is pretty simple. The concern is that Google, which is a huge, successful company in Europe, is using its very dominant position in general search to favor its own services in related markets. You can't do that, due to European competition law.

So when I look up something on Google in Europe, it might turn up whatever the search finds, but it might sometimes favor some of the people it has business relationships with, and that would violate your rules?

Yes, because as a consumer you would expect to get the best answer to your query. And if, systematically, you get the Google service as the answer to your query, that may not be the best thing. Then other companies may wonder, "Should we invest in new and innovative products if we can never be found by Google?" And therefore the risk is, as a consumer, you get less choice and fewer innovative products to look at.

In an internal memo to Google's own employees, the company claimed it's competing on its merits, in Europe and elsewhere, offers good search service, and that competition to Google is really just a click away and that it hasn't actually harmed its competition. I know, Commissioner, that you use Google, and you think its a good service. Are you just trying to penalize a company for being very good at what it does?

Oh, no. On the contrary, I and others should congratulate any successful company, because this is great for jobs creation and for growth. But ... you need to compete on your merits. To a large extent, Google can just go and do their business and innovate and find new things, but when it comes to being very dominant — in many European countries almost 90 percent of all search is Google search — that requires you to not misuse this position.

Moving on from Google, you're also leading the effort to investigate the Russi's state-owned energy firm, Gazprom, for overcharging, especially in Eastern Europe. Are you worried that investigation is going to disrupt international relations at a tense time?

Well, it's strictly a law-enforcement effort. I'm being very careful, because we have no grudge or anything like that with the Russian state or with Gazprom as a company. Again, it's a certain conduct. What we see in our preliminary findings, is that Gazprom has enabled themselves to charge maybe 40 percent more for gas in five countries. For the consumer that makes the cost of heating the home, or cooking or any other use of electricity much more expensive than it maybe ought to be.

I have one last question that's a bit off-point but before we go: there is a Danish television series a bit like the show we know here as "The West Wing". It's called "Borgen." I keep seeing articles suggesting you are the inspiration for the main character, the party leader who becomes Prime Minister. When you watch "Borgen," do you see yourself in any way?

Of course, it's always hard to tell when it's fiction. But you know, she has more or less the same family relations (as me), her husband is also a teacher. The party is very much like the party I belong to, the Social Liberal Party. So there's a lot of things that look alike. And anyway, I'd recommend it if someone wants to see how Nordic politics work.

A conversation with Microsoft CEO Satya Nadella

Mon, 2015-05-04 02:00

Microsoft is having an interesting moment.

People are getting more excited about its hardware, and some recent moves by CEO Satya Nadella and others seem to be helping to grow its cloud computing business. Nadella joins us to talk about what the company is trying to do with businesses and information technology workers around the world, including employees of the city of Chicago.

“We worked with the city of Chicago to create this hub where they are not only bringing employees who work for the city to the cloud with Office 365, but they are also figuring out how to connect everything that makes up city of Chicago — every traffic light and piece of equipment they have in the city — and tackle some of the bigger challenges, like energy consumption.” Nadella says. 

When we ask him where Microsoft is now, he says "to me, Microsoft is about empowerment...we are the original democratizing force, putting a PC in every home and every desk." The core of the company remains "user software." But that doesn't exclude the company from having a success, "like the Xbox," he adds. 

Click on the multimedia player above to hear more and tune in tomorrow for our second installment of our conversation. 


Obama's plan to keep up with My Brother's Keeper

Mon, 2015-05-04 02:00

President Obama is scheduled to speak Monday at the launch of a new nonprofit organization — the My Brother's Keeper Alliance. 

If that sounds familiar, it's because it's a spinoff of the My Brother's Keeper Initiative launched by the President in 2014 as a White House program aimed at helping minority boys and young men stay in school and graduate prepared for college. 

Michael Casserly, executive director of the Council of the Great City Schools and one of the Initiative's first partners, says, "The fact that he is setting this up now is important in signaling what a major priority this is for him personally."

Perhaps the President will continue to be involved after he leaves office in January 2017. Last week, he told a group of school children that he will "go back to doing the kinds of work I was doing before," leading some to speculate he may return to community organizing.

A conversation with the CEO of Microsoft

Mon, 2015-05-04 02:00

Last week we got some Microsoft news about new products from the company's BUILD conference for developers. This week in Chicago the company's Ignite conference gets under way. Microsoft is having an interesting moment. People are getting more excited about its hardware, and some recent moves by CEO Satya Nadella and others seem to be helping to grow its cloud computing business. Nadella joins us to talk about what the company is trying to do with businesses and information technology workers around the world, including employees of the city of Chicago.

“We worked with the city of Chicago to create this hub where they are not only bringing employees who work for the city to the cloud with Office 365, but they are also figuring out how to connect everything that makes up city of Chicago - every traffic light and piece of equipment they have in the city - and tackle some of the bigger challenges, like energy consumption.” Mr. Nadella says. 

When we asked him where Micrsoft is now, he said "to me, Microsoft is about empowerment...we are the original democratizing force, putting a PC in every home and every desk." The core the company, Mr. Nadella reiterated, remains "user software." But that doesn't exclude the company from having a success, "like the X Box," he adds. 

Click on the multimedia player above to hear more and tune in tomorrow for our second installment of our conversation. 


Goldman downsizes its commodities operations

Mon, 2015-05-04 02:00

Goldman Sachs is reportedly in talks to sell a pair of coal mines in Columbia, as it downsizes its commodities operations and possibly exits this type of business. The Wall Street Journal cites people familiar with Goldman’s negotiations, saying Goldman would is trying to sell the mines, after environmental problems and labor strife have beset the open-pit coal-mining operations in Colombia.

Goldman bought its first Colombian coal mine in 2010. It then bought another mine and a railroad, for a total outlay of more than $550 million. Since then, coal prices have fallen. According to the Journal, Goldman is now trying to sell off its Colombian coal holdings at a loss. Goldman has also exited the aluminum-warehousing business and sold several power plants. Other investment banks—JP Morgan Chase and Morgan Stanley—have been getting out of commodities, too, selling off metals-warehousing, oil-shipping and pipeline businesses.

Last November, the Senate Permanent Subcommittee on Investigations held hearings on investment banks’ role in commodities production and trading. Democratic Senator Carl Levin said the banks’ positions as commodity producers and warehousers could enable them to manipulate commodity supplies and prices. Republican Senator John McCain said these operations carry “dangers of toxic spills, deadly explosions and other disasters” which are not typically associated with banks. The Federal Reserve, meanwhile, is reviewing whether the biggest investment banks (deemed "systemically important") have set aside enough capital, and carry enough insurance, to cover catastrophic losses from events such as mine collapses, pollution or oil spills. 

 “Banks are the nexus of the financial system and the lifeblood of the economy,” says Cornelius Hurley, director of the Center for Finance, Law and Policy at Boston University. “We have a stake in them being safe and sound. And quite frankly, Lloyd Blankfein doesn’t know the coal business. Moreover, bank regulators don’t know the coal business. We don’t look to our banks to be volatile—we like our banks to be boring. And this is a highly volatile business.”

 Goldman Sachs has said its commodities businesses are adequately insulated from other parts of its banking business, and that it has too small a position in the overall global commodities market to influence supplies or prices.

Obama's plan to keep up with My Brother's Keeper

Mon, 2015-05-04 02:00

President Obama is scheduled to speak Monday at the launch of a new nonprofit organization — the My Brother's Keeper Alliance. 

If that sounds familiar, it's because it's a spinoff of the My Brother's Keeper Initiative launched by the President in 2014 as a White House program aimed at helping minority boys and young men stay in school and graduate prepared for college. 

Michael Casserly, executive director of the Council of the Great City Schools and one of the Initiative's first partners, says "The fact that he is setting this up now is important in signaling what a major priority this is for him personally."

And perhaps the President will continue to be involved after he leaves office in January 2017. Last week, he told a group of school children that he will "go back to doing the kinds of work I was doing before," leading some to speculate he may return to community organizing.

Why "landmen" don't benefit from low gas prices

Mon, 2015-05-04 02:00

The price of crude oil is up from its lows of the last year, but at $59 a barrel this morning, that still about half what it was 11 months ago. This is great for consumers of oil, drivers, businesses and beyond. But it's a challenge for many who work in the oil industry, including what are called "landmen," people paid by oil companies to get rights to drill. We visit one land person, in Eddy County, New Mexico.

Click on the multimedia player above to hear more. 

McDonald's wants to serve up a giant turnaround

Mon, 2015-05-04 02:00

McDonald's is sharing details of a major turnaround plan. The company recently said it plans to reassert itself as a "modern, progressive burger company." This at a time the fast-food giant's global sales were down 2.3 percent in the first quarter.

But can a fast-food chain with 36,000 restaurants worldwide adapt to changing consumer tastes without confusing people? McDonald's wants to be a place you can get a double cheeseburger for a dollar, or an artisanal antibiotic-free chicken sandwich. And for a company that big, it's not an easy switch.

"It's a little bit like the difference between trying to redirect a huge freighter with a barge or whatever, and a sailboat," University of Oregon marketing professor T. Bettina Cornwell says. "It's a large brand with a long history."

Because McDonald's is such a household name, she says it feels more pressure to offer healthier items.

Meantime, "you get company's like Shake Shack or Smashburger or Five Guys come along, and they just focus on those hamburgers and fries, Maverick Consulting founder John Knight says. He says healthier items also take longer to make. And with as much traffic as McDonald's has, every extra second costs money.

Obama's plan to keep up with My Brother's Keeper

Mon, 2015-05-04 02:00

President Obama is scheduled to speak Monday at the launch of a new nonprofit organization — the My Brother's Keeper Alliance. 

If that sounds familiar, it's because it's a spinoff of the My Brother's Keeper Initiative, launched by the President in 2014, as a White House program aimed at helping minority boys and young men stay in school and graduate prepared for college. 

Michael Casserly, executive director of the Council of the Great City Schools and one of the Initiative's first partners, says "The fact that he is setting this up now is important in signalling what a major priority this is for him personally."

And perhaps the President will continue to be involved after he leaves office in January 2017. Last week, he told a group of school children that he will "go back to doing the kinds of work I was doing before," leading some to speculate he may return to community organizing.

Meeting with the EU Commissioner for Competition

Mon, 2015-05-04 02:00

The European Union Commissioner for Competition against Google,  Margrethe Vestager, joins us from her home country of Denmark. The high-profile official has taken on some high-profile companies since stepping in her role last year. The internet search and advertising giant Google has its hands full in Europe, where antitrust regulators have accused it of abusing its power to, among other things, favor its business partners in Google results. Google denies wrongdoing. Gazprom, the largest energy provider for eastern Europe, is also under investigation for overcharging in the regional market. 

Click the multimedia player above to hear more on Commissioner Vestager's take on Google, Gazprom, and her television portrayal.

 

The changing role of Advanced Placement classes

Mon, 2015-05-04 01:36
Luis Romero has taken so many Advanced Placement courses, he can barely remember them all. AP Computer Science, Human Geography, U.S. Government, World History...

He may sound like a “typical” teenager in a “typical” high-achieving high school, but not that long ago, Romero would have stood out at North County High School in Glen Burnie, Maryland — a diverse school in a working-class suburb of Baltimore.

If annual growth rates hold true, during the next two weeks, more than two million high school students across the country are expected to take AP exams during the next few weeks. A passing score could mean earning college credit while still in high school. Research shows that students who take rigorous courses in high school are more likely to get into, and succeed, in college.

For a lot of students though, especially low-income and minority students, AP courses haven’t always been an option. North County principal Julie Cares says five years ago, only 10 percent of the school's 2,000 students took any Advanced Placement classes. Less than one-fourth of seniors planned to attend a four-year college.

“When I first came, there was a sense of, just low expectations,” she says. “A lot of kids not only didn’t believe it was possible, but it didn’t even occur to them that was something they might do."

Should all students be accepted into AP classes?

To build a college-going culture, the school added more AP courses, eliminated all of the requirements to get in and pushed every student to take at least one. In five years, the number of AP students has tripled, from about 200 to 600.

“We decided to open the gates, basically,” Cares says. “Then it just became something that we do here: when you come to North County, you take an AP class.”

There are more students in classes like AP English Language and Composition, where a class of juniors recently wrestled with concepts like “polysyndeton” and “metonomy.” In an assignment designed to help prepare them for the upcoming exam, students are asked to identify the rhetorical strategy in a passage from literature or popular music.

Student Tyler Beynard says he might not have considered taking a class this challenging before the shift.

“I didn't even know what AP was,” he says. “The middle school I went to, I feel like it didn’t really prepare me for high school, so AP classes was kind of a shock.”

The transition was sort of a shock for North County, too.

“The original intent was like, we’re going to help more kids, this is going to be awesome, bring us more kids,” says Jennifer Mermod, another AP English teacher. “And it did. But, then there were those kids that we thought, ‘Wow, this may not have been the best push for them.’”

Source: The College Board (Dan Hill for LearningCurve)

So, some gatekeeping has returned. Mermod says students who might do better in an honors-level class, typically used as the prerequisite for some AP courses, are encouraged to stay there and get a higher grade.

“I want them to get into college — that’s the point of the program, so I really don’t want a kid that’s going to come into the class and not at least get a C,” she says.

The high school also added more tutoring, and expanded a college prep program called AVID, which provides support for students taking AP courses. Students like Luis Romero, who will be the first in his family to attend college, also take a separate class where they learn note-taking and study skills.

“It gives me a time period where I can just focus on whatever I need to do, as well as give me a couple of tips that will help me do better in my classes and get to college,” he says. Romero has passed all but one of the many AP exams he’s taken.

North County High School senior Luis Romero gets support for college applications and AP classes from teacher Brian Whitley, through a program called AVID. (Mary Wiltenburg/Marketplace)

Teachers also have had to make adjustments. They no longer get just the brightest or most-motivated students. To keep classes challenging for those students, Mermod says she breaks her class into small groups. Sometimes the better-prepared students serve as leaders.

“Other times you cohort them up, so they can have their little, ‘You came prepared, you deserve to be rewarded with a better discussion,’” Mermod says.

But, as more high schools push less-prepared kids into AP, there is the risk the whole class might suffer, says Denise Pope, co-founder of Challenge Success, a project at Stanford University.

“You may have to water it down so much that it’s not going to be considered a college-level course,” she says.

The original purpose of AP courses was to give talented students a chance to earn college credit — aka advanced placement — by taking college-level work while still in high school.

Today, many school leaders see AP as, “the solution to having kids prepared for college,” says Kristin Klopfenstein, director of the University of Northern Colorado’s Education Innovation Institute.

Adding AP classes can boost a school’s standing, Klopfenstein says. She questions the value of putting students into those classes if they aren’t likely to pass the official — though most times optional — AP exams at the end of the year.

“The research is pretty clear that that confers no advantage to them in terms of their postsecondary enrollment and outcomes,” she says.

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At North County High, more than two-thirds of students generally do not pass the exams, meaning no college credit. Principal Cares says they’re working to improve that rate. Even without the college credit, she says students develop skills like writing and critical thinking that will serve them in college.

“They’re still learning those skills that are pushing them forward,” Cares says.

Junior Nevay Archuleta didn’t pass her first AP test last year in Government. But, she says taking the class still changed how she thinks about herself and her future. She’s taking two more AP classes this year.

“Before AP, I thought I was definitely like too average for college,” she says. “But I think now that they see that I’ve challenged myself, they’re going to be more impressed.”

AP by the numbers

$91 Total fee per AP exam

$53 Cost per exam for students with financial need*

13 Number of states where some students can take exams for free

$795,817,602 Total College Board — which distributes the AP — revenue 2012-13

$28,483,000 Amount of grants awarded by the Department of Education to states in August 2014, to defray the costs of taking Advanced Placement tests for low-income students

*The College Board provides a $29 fee reduction per exam for students with financial need. For each AP exam taken with a fee reduction, the school forgoes its $9 rebate, resulting in a cost of $53 per exam for the student. Many states use federal and state funding to further reduce the exam fee for these students.

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