Treat the golden ticket syndrome first

Kim Dong-won
The author is a former visiting professor at Korea University.

“In the next decade, we’ll experience more progress than in the past 100 years combined, as technology reshapes health and materials sciences, energy, transportation and a wide range of other industries and domains,” prophesized McKinsey & Company in its 2021 executive summary titled “The top trends in tech.” Just as the prediction implied, the ongoing AI revolution accelerates an extensive rebuilding of the existing industrial structure to go far beyond the digital revolution in the late 20th century and bring humanity to uncharted frontiers in another dimension.

The AI revolution is being orchestrated by Magnificent Seven (M7) — Miscosoft, Apple, Nvidia, Alphabet, Meta, Amazon and Tesla — plus Open AI. The combined market cap of the behemoth — $13.8 trillion as of June 14 — accounts for a quarter of the market cap of all listed companies in the New York Stock Exchange. The seven companies’ market cap is even bigger than the size of the Chinese stock market and those of the German, Japanese, U.K. and French stock markets combined.

Some experts are skeptical about the sustainability of the AI revolution, citing low profitability compared to the immense cost of building massive language models to launch novel services. Nevertheless, the AI revolution spearheaded by the M7 is expected to gain traction with the advent of the era of humanoid robots.

Physicist Safi Bahcall’s 2019 book “Loonshot” drew much attention by showing readers how “crazy ideas” shunned by the mainstream changed the world. As “loon” — a Scottish dialect word meaning “a person who is crazy, silly or strange” — suggests, "loonshots" imply revolutionary innovations spiked by such people.

Interestingly, five out of the eight founders of M7 launched their businesses when they were in their 20s. Three of them dropped out of college; one earned a bachelor’s degree; two received a master’s degree; and two quit their PhD programs. Open AI CEO Sam Altman founded Loopt — a location-based social networking app — in 2005 at age 19 when he was a high school senior, co-founded startup incubator Y Combinator in 2011 and became CEO in 2014, and launched Open AI at age 30 in the following year to emerge as the darling of the AI revolution with the introduction of ChatGPT in November 2022. Altman is known to invest at least $2.8 billion in more than 400 startups through his own venture capital firm.

Altman, Apple founder Steve Jobs and Microsoft founder Bill Gates are typical loons. They are the geniuses who wanted to change the world with their unfettered visions, creative ideas and explosive passions. The question is why such a visionary tribe only appeared in America.

As of the end of 2023, 3,417 venture capital firms are investing a whopping $1.2 trillion in a constellation of startups in the United States. A common thread running through their minds is “finding startups with the highest probability of hitting a jackpot.” If retail investors had owned Nvidia stocks — valued at $12 per share at the time of its IPO in 1999 — until last May, they would have reaped nearly 4,000 times their original value. If they had done the same with Apple stocks, their gross return would have increased by almost 500 times.

The United States’ national innovation system is firmly rooted in ensuring an open science and technology habitat, protecting intellectual property rights and bolstering a fair and efficient venture capital market for startups. Such multi-layered — and effective — support systems help startups advance to higher levels. Thanks to the frontier spirit, U.S. venture capital firms cherish challenges and show generous attitudes toward failures. They strive to find startups bent on developing core technologies that can change the world, and aggressively invest in such enterprises regardless of high risks.

In contrast, venture capital firms in Europe and Japan take a relatively conservative approach to startup risks due to the separation of their science and technology communities from their capital markets. Their banking institution-based development of finance compound the problem. Of course, governments in Europe and Japan are actively pushing for the development of their startups, but promising startups are increasingly leaving their country for the United States because of deep-seated limitations from school or regional connections and a culture intolerant of failures.

The M7-led digital economy — which showed an annualized growth of 7.1 percent between 2017 and 2022 — helped the U.S. GDP grow 2.3 percent during the period. Thanks to the convergence of capital and companies in the United States, the U.S. share in global GDP rose to 26.1 percent in 2022 from 21.1 percent in 2011. During the same period, the share of the combined GDP of the European Union and the United Kingdom fell to 20.7 percent from 25 percent. For Japan, the share plunged to 4 percent from 8.4 percent. In other words, the loons-led digital revolution spurred an impressive comeback for the U.S. economy.

What would have happened if the founders of the M7 and OpenAI had been born in Korea? Their parents would have sent them to private academies to help them get admitted to medical schools or law schools. The OECD’s Korea Economic Survey 2022 called this the “golden ticket syndrome.” “Golden tickets” refer to Korea’s unique “rites of passage” to enter good universities to get well-paying jobs at large companies or in the public sector. To do so, students must sacrifice their talents for a fierce competition for entering college.

The golden ticket syndrome is caused by a huge bottleneck in the education system, which methodically blocks a swift response to the fast changes in the labor market from the technological paradigm shift. Under this system, entering top colleges is a shortcut to success. This syndrome has “several negative effects, including low youth employment, a lot of time and money spent on private tutoring at hagwons [cram schools], skill and qualification mismatches, high pressure on students and low life satisfaction,” the OECD report pointed out.

The Bank of Korea recently warned that the economy will suffer negative growth in the 2040s without a groundbreaking change in birthrate and productivity. In other words, the golden ticket syndrome poses a deadly challenge to the country, as it critically undermines people’s happiness now and in the future by not only precluding the possibility of such loons emerging in our society, but also deepening social polarization, avoidance of marriage, a low birthrate and slow growth.

Korea’s venture ecosystem has considerably improved, and yet there is still a slim chance of such loons appearing after overcoming the golden ticket syndrome. As the AI revolution progresses, national losses from their disappearance will snowball. According to the Ministry of Education, 78.5 percent of parents sent their children to private academies last year by spending 27 trillion won ($19.5 billion), the equivalent of 41 percent of the ministry’s budget for early childhood, elementary, middle and high school education. Most cram schools focus on so-called “prior learning.” But in the AI era, learning to find the hidden answers to run-of-the-mill questions is all but futile, because AI can find convincing answers in a minute. The AI revolution will spike arguably the greatest intellectual rebellion since the Printing Revolution in the 15th century. Each country’s future competiveness will surely be determined by its ability to accommodate the AI revolution.

Last December, the Education Ministry announced a plan to revamp the 2028 college entrance system. Under the new College Scholastic Ability Test (CSAT) guidelines, students must take the same questions from the same subjects regardless of whether they chose natural sciences or liberal arts for their curriculum track at school. The ministry also plans to reintroduce the absolute evaluation system for academic performances at high schools. If so, could the private education system disappear? In a recent JoongAng Ilbo column, former Seoul National University President Oh Se-jung expressed deep concerns about our college education environment, where 21st century students are being taught by 20th century professors in a 19th century way. Can our college education change? Regrettably, a technical improvement of the college admissions system will not likely resolve the golden ticket syndrome.

It may be difficult to radically change our education system to help stimulate the appearance of loons who can change the world. But we must escape from the trap of the syndrome — urgently. To do so, the government must embark on a colossal education reform to effectively deal with the challenges from the AI revolution before it’s too late.

Translation by the Korea JoongAng Daily staff.