This is Wall Street Week.

I'm David Weston bringing you stories of capitalism.

The world of futures contracts tied to specific events is exploding, whether it's predicting the outcome of the New York mayoral election or the ending of a government shutdown.

What did they tell us?

And do they need regulation like any other futures markets?

Plus, President Trump has moved against the big Chinese clothing exporters avoiding tariffs under the so called deminimous rule.

But what other businesses is he catching in his net?

And last week it was healthcare.

This week we take another look at an area where artificial intelligence is already being used to transform a critical sector, this time education.

But we start with a story about putting a price on the priceless freedom.

What happens when society concludes that some of us must lose.

That precious freedom?

And how do we handle the difficult business of detaining people and what we hope is a safe and a humane way.

It's something we've dealt with for thousands of years, but is now front and center amid new efforts to detain and deport those who are not in the United States legally.

It's a story that's in the news every week.

I have said Congress a detailed funding request laying out exactly how we will eliminate these threats to protect our homeland and complete the largest deportation operation in American history.

President Trump was elected in twenty twenty four in part because of his strong stance on immigration, keeping out those who try to enter the country illegally and deporting those who have already come in outside the rules.

Whether one agrees with his deportation policy or not, it is happening on an historic scale, which raises the question of how best to do it.

There's a lot of money involved.

Oh, this is big money at a high.

Rate of return.

Most of the money is going to private companies who run the detention facilities.

What DHS does is it contracts with other entities, sometimes counties, and most often private companies, and those companies run the facilities instead.

There is nothing new about private detention.

The first modern federal contract dates to the mid nineteen eighties under President Ronald Reagan.

Corrections Corporation of America today core Civic, helped pioneer the model.

Damon Heininger, a former correctional officer, now leads Corcivic one of the largest private prison and detention operators in America.

Our very first contract was with then I and ASK now Immigration custom Enforcement.

But the value proposition is to bring private sector innovation, being very nimble, being very flexible, provide high quality solutions and outcomes that are a very low cost to government.

Along with the ramp up in immigration enforcement has come more demand for core civic services.

Not even a year into its second term, the Trump administration says it has deported more than four hundred thousand people, which comes at a big cost for the government.

Earlier this year, Congress passed the One Big, Beautiful Bill, authorizing roughly one hundred and seventy billion dollars for immigration and border operations, with forty five billion dollars designated just for detention capacity expansion.

We need detention facilities, We need beds to put them in place so that they can have their due process before they return home.

Some sixty thousand people are currently detained, with nearly ninety percent of them in private facilities owned or operated by companies like cour Civic or Geogroup, its main competitor, and that's helped drive profits.

According to Corcific's second quarter earnings figures.

ICE contracts account for a majority of its revenue.

We don't get involved in policy, but obviously there has been a lot of discussion, you know, lead up to the campaign and the election last year and this year about you know, getting a stronger enforcement on the southwest border and also doing a fair amount of interior enforcement with DHS and turn our customer ICE.

We obviously didn't know what the outcome was going to be in the election, and I've always stressed this as CEO, to plan well in advance before there was, you know, an outcome on our national election, especially like the one we had last year.

Investors moved quickly after the twenty twenty four election.

Corcific stock jumped before President Trump was even sworn in, as Wall Street priced in tighter immigration enforcement and more detention spending.

The explosion in ICE detentions may have been good for the business of companies like Corcivic, but it's come with a fair amount of scrutiny and criticism.

Margot Schleiner, a University of Michigan law professor, previously served in the Department of Homeland Security in the Obama administration, overseeing civil rights and liberties of detainees.

There is a range of conditions.

Some of the detention facilities are better than others, and some of them are more stressed than others and are less good at dealing with the stress of high populations or particularly needy populations.

Why is it that the federal government essentially delegates this or contracts it out to private companies.

Congress made a decision a while back that it didn't want to set up the Department of Homeland Security to run a large system of detention and run it itself.

So the federal gearau of Prisons has correctional officers who run facilities.

ICE does not.

ICE does not have the kinds of people who just day in, day out run the facilities.

So that's been its general approach since the founding of the department in two thousand and three.

Course Civics says that there are checks and balances in place to try to ensure the detainees are being treated humanly.

Really, since day one, we wanted to meet all national standards within our facilities.

So American Correction Association, which has been around since eighteen seventy, they set national standards on our facilities are designed, how big our day rooms how big our cells, how big are the food service area, medical maintenance, et cetera.

Do those apply to ongoing treatment while people are in your custody.

They do, yeah, So they'll have general standards come in.

They'll calibrate the review based on our population.

So again if they're coming, you know, if we've got auditors coming in from the ACA to do a review at a facility for an ICE and those standards have again kind of evolved over time, not just the standards from ACA, but also from our partners.

But this is important.

I'm not sure everyone knows about this.

There are independent orders from ACA that come in and monitor what you're doing, apart from DHS or ICE or anyone else in the government.

Virtually all of our facilities have full time on site auditors and monitors.

And so these are government employees where we are acquired by contract to give them space in the facility where they get set up offices and have space to where they can do their kind of day to day review of the operations.

But they got unfettered access to facility twenty four hours a day, seven days a week.

We've all seen reports in the press about the mistreatment of detainees knowing what you know, how do you respond to that?

Is it number one, the reports are wrong, or number two, it's just not courcific.

You know, the vast majority, I'd say ninety nine percent of the stuff that we see in newspapers or speculated in online or on socials is incorrect or false or maybe not incomplete relative to information we got in our facilities, like one thousand government employees that have unfedered access to our operations.

Now, having said that, and I often say this to investors, Yeah, fourteen thousand employees.

Not every single employee is going to make the right decision every single day, and so and that's the case offer with any large organization.

There's also the question of where all these detention facilities will be located and whether they help or hurt their home communities.

One of the largest for profit sites in the nation is Geogroup's Folkston Ice Processing Center in Georgia.

In June, the County Commission approved an expansion from just over eleven hundred beds to nearly three thousand.

County Administrator Glenn Hull helped shepherd the deal.

The process to expand the GEO facility and the contract with Ice took about four months.

Overall, the relationship is good not only from an operating standpoint, but from a revenue standpoint.

The geogroup in the facility contribute about six hundred and fifty five thousand dollars to our tax collections, which makes about twelve percent of our overall income.

Is significant because as we have an outmigration of jobs and industries, we need to fill the gap in rural America.

This is where the rubber meets the road.

For Folkston, a city with a population of less than five thousand people and few job openings, the expansion provides both tax revenues and hiring opportunities.

The job count from the GEO facility is six hundred and thirty two, about five hundred and fifty one of those are in Georgia, in Folkston specifically one hundred and ninety eight jobs.

There's been a longstanding debate over whether jails and prisons and the expansion of jails and prisons, and that's what these are.

These are basically facilities that are like jails and prisons.

Whether those expansions actually help communities.

I think the best evidence is that long term it does not, but there's definitely some short term influx of money.

Charlton County has been through many iterations.

Back when US One was a vibrant corridor through here before the Interstates in the early seventies.

We had a mill here in Folkston.

Some time ago, that mill closed and all of those jobs went away.

When you have an economy that's based on kind of blue collar work and those jobs go away, so do the people, so does the tax revenue.

I think it's important to understand that these servatives lifelines on ground zero.

Without a detention facility, we wouldn't be surviving as a county.

It's not a lot to offer here when it comes to jobs per se, and if there are there on a low scale.

Despite the possible economic benefits of hosting a detention center, not everyone there is happy about having one in town.

Local pastor Antoine Nixon was born and raised in Folkston and opposed the expansion.

My mindset was we failed again.

I think it has been a growing concern here for the citizens, especially as blade with some of the things that our commissioners have been okay with.

I'm not proud to say we have a prison here.

There's no kids who are going to graduate, who are going to say I want to graduate and go work at the prison.

I think we ought to start providing better outcomes and start looking at what's better for our children's future.

When you look at our community, why is it here?

Why did they choose folks?

And you're not going to go in those maybe educated areas, people who are really standing up against things like that, You're not going to bring it into those areas.

I think Folks insists as a prime example and a prime place, as many other places do, where you can go in and you can dangle the golden apple in front of people, and you can just make them these promises that ultimately end up being nothing, and then once they suck you dry, they move on and find other places.

It's like leeches, you know, once they have all they have, we don't want to get from you, then you're left to offend for yourselves.

So I'm not happy about that.

Detention and deportation of those who have entered the United States unlawfully remains as controversial as ever, if not more so.

And although there are those who, like Reverend Nixon, think it simply can't be justified no matter what the benefit, there are also those who believe this new business of detention can be a lifeline for their community.

What I would say is, let's have real conversations with people that live in rural America as opposed to having academic arguments about what tension facility is and what it is not.

It's one thing to have a human rights conversation, it's a completely another one to have an economic development conversation.

And then there are those who are running a legal and profitable business and trying to do it the best way they can.

I think the general review is from a policy perspective, We've done a good job.

We're very important part of the solution for these jurisdictions.

And I think from a vested perspective, I think the risk that may be assigned for our business in the past maybe is not as great.

In the end, there is no simple answer to the question of how the markets can price the freedom of individuals, or whether they can.

But until a better solution comes along, all we can do is our best coming up prognosticators putting their money where their mouth is, the brave new world of futures in events, contracts, and whether they can tell us who the next Mayor of New York will be This is a story about telling the future, or at least discounting it by paying attention to a whole lot of other people telling the future.

The business of making a market in futures contracts tied to events is exploding.

Be fun.

They may make some people some money, but do they tell us anything about what is around the corner.

I think our goal with forrediction markets is really to allow every person that has an opinion on something to find the market and that big event that they care about to be able to trade on.

Luana Lopez Lara is the co founder and COO of Calshi, the first events contract exchange regulated by the Commodity Futures and Trading Commission.

The company is currently raising funds at evaluation five billion dollars, even as the Intercontinental Exchange seeks to buy Calshi's rival Polymarket for closer to ten billion dollars.

While we went to MIT, but one thing we realize is that most trading happens when you have an opinion about what's going to happen in the future and you find a way to put that in the market.

So you think this country is going to go into a recession, or you think this person is going to win an election or Brexit's going to happen, and you find a way to express that view in the market to hedge some risks that you have, or also to get exposure to something.

And what we realized was there should be a better way to do it for us.

Why is there no direct exchange that you can just trade directly on what you think is going to happen.

Former Treasury Secretary Larry Summers sees real value in prediction markets like the ones Calci and polymarket have created not only for the people betting on events, but also for those hoping to learn about the outcomes.

Poly Markets is probably the largest of the various prediction markets that are out there.

There are a number of them.

I think these are a very useful tool because what markets do markets where people can place a bet, take a position, is they enable you to get access to a kind of consensus opinion where people aren't just talking, but they have to put their money where their mouths are and they're taking a stake in something.

So let me give you an exac I don't live in New York.

It's not my primary interest, but I do follow the New York City mayoralty election, there was a development Mayor Adams Withdrew.

How much did that change the likely prospects of the election?

One could have formed a judgment by trying to think about it.

One could have formed a judgment by reading a lot of political analysts.

In fact, you could just look at the prediction markets.

That I think is the value.

It helps us all be more informed, more informed about even when there isn't much information available about what's likely to happen in politics, what's likely to happen in foreign policy?

What are the prospects of an agreement between Russia and Ukraine.

I don't think anybody sensible would pretend that these estimates are exactly right.

These estimates are estimates that can be completely relied on.

But I think there's a great deal of evidence from elections, from sports, judgments, from other efforts at forecasting, that looking at these prediction markets provides, what's a better and more reliable sense of which way things are going to go than talking to a single favorite expert.

Do prediction markets like polymarkets potentially replace polls?

I mean, polls will come under some siege.

It's gotten harder and harder to do them, and by the way, are they more susceptible of being gamed?

David, I don't think they replace poles anymore than the stock market replaces earnings forecasts.

The stock market reflects earnings forecasts and helps people process what a company is worth given divergent discussions.

But it wouldn't be able to function if there weren't data, and there weren't analyzes and projections of future earnings.

So no, I don't think that prediction markets are a substitute for polls.

They are a way of processing the information in polls if you're not yourself a polster in a much better in a much better way.

Scott Rasmussen is a traditional polster and editor at large of ballot Pedia, and as challenging as the business of polling has been in recent years, it's far from clear that prediction markets can replace it.

The definition of a good poll for most people is one that confirms what they want to see, and a lot of the criticism about polling is because of perceived inaccuracies or perceived biases, and a lot of that has to do with the difference between conducting a poll and interpreting the poll, between the polling and the analysis twenty sixteen is a year that I constantly hear people say the polling was wrong.

Well, actually, the national polls in twenty sixteen showed that Hillary Clinton would win the popular vote by three points.

She won by two.

On the state by state polls, there were forty seven states where there were no surprises whatsoever.

There were three states that were a shock, the big Blue Wall States.

My point to all.

Of this is that the analysis, the way you look at the polls and the way you read them, has as much to do with the polling is or with the interpretation of the polls as anything else.

Scott, how has technology changed your business?

Maybe made it harder, particularly in getting representative samples in the things like cell phones.

As was a landlines.

We do almost all of our work now online through different panels and text to pro coaches and other things.

Every one of those, every polling methodology you use, and this has been true forever, has certain biases that you have to correct for.

When we were.

Doing phone polling exclusively, if you had to call into an urban area, you didn't get as many people answering the phones because they were out doing other things.

So we would have to consciously work to place more calls into those areas.

Today, I believe that pollsters can get a pretty good sample if you're careful with your methodology, if you're talking about a survey of registered voters or a survey of all adults.

Because we have census data, we have good models for what that should look like.

Where pollsters have struggled in recent years and will continue to struggle is in the question of likely voters, who's actually going to show up on election day, and as we all know, in close races, that's decisive.

And now there's a new technology in town called artificial intelligence.

How is that changing polling?

Is it making it better?

The thing that first made polling better, by the way, was having a lot more competition and a lot more polsters because we actually had to improve our game.

Right now, artificial intelligence is reshaping all kinds of industries in ways that we can't imagine.

I'm working on a project with Jigsaw, which is a techt incubator inside of Google.

We're going to have a national conversation with five people from every congressional district.

The difference in this poll this is not to determine who's going to win the mid terms or the twenty twenty eight presidential election, We're focused on what does it mean to be an American in the twenty first century.

This gets to one of the core problems in polling, and this is where AI can help.

We don't all speak the.

Same language anymore, so what we're doing with this project we're asking questions, but we're letting respondents answer in their own words.

We also are seeing a rapid uptake in so called prediction markets, or these futures markets and tied to specific events.

Contract how do those fit into the world of polling?

If at all, they don't fit into the world of polling.

But I will tell you that on election night when I'm doing whether I'm doing analysis or if I'm sitting at home, I watch the prediction markets because you've got a whole crowd sourced army of people out there who are looking for the latest news.

And if I see a candidate going from a seventy percent bet to a forty percent bet, quickly I say, oh, something has gone on here.

I need to investigate and find out what it was leading up to election night.

Though prediction markets are heavily dependent on polling, if you don't have polling, the prediction markets wouldn't be nearly as good as they are right now.

What prediction markets have done is there, in effect another analyst.

They're looking at all of the data.

They're looking at the poles, They're also looking maybe at who's voting early.

They may be looking at some other factors going on in the campaign, and they assemble that in a way that an analyst can't.

No individual analysts could combine all of that information.

So I like the crowdsourcing aspect of it, but again it's not really a replacement for polling.

There's all kinds of data that's out there today that we can look at and analyze and think about, and prediction markets are another important tool.

Up next, President Trump triggers the law of unintended consequences, aiming for big Chinese apparel companies and hitting a small watercolor artist in Devonshire with sweeping tariff changes.

This is a story.

About painting with a very broad brush.

In late July of this year, President Trump declared an end to a tariff exemption for small shipments.

It may have been meant to hit some large Chinese companies, but it's also hitting small businesses on the other side of the world.

To Menormis.

It's very it's a big deal.

It's a big scam going on against our country gets really small businesses, and we've ended we put an end to it.

Three thousand miles away from Washington across the Atlantic, Harriet Dewinton has built a business painting with the smallest of brushes.

It began with wedding stationery, beautiful hand painted illustrated designs, and that quickly transformed into a much broader range of things.

From a cottage in the quiet countryside of Devon, England, de Winton paints, post videos and well's the supply she uses to customers around the world.

I taught I write watercolor books, which we sell around the world, and also art supplies because a lot of people see me painting on YouTube and you can have fun really turning this piece into something rather sophisticated.

So the business still involves painting commissions and doing some really fun illustration work for companies and brands.

We're getting now to about a four hundred thousand pound turnover a year, so we're you know, it's keeping us really busy and really happy.

Dewinton was used to the challenges of running a small business, but none compared to the day she learned that the rule she relied on to ship goods abroad was going away.

I was on Instagram and I was I noticed a post from a fellow small business owner who runs a creative business talking about this, and I it was the first I'd heard, and I thought, that's that sounds very strng.

The rule exempting tariffs on small shipments dates back to the nineteen thirties and was designed for administrative efficiency.

It started with packages worth less than a dollar, and eventually it grew to five dollars, to ten dollars, to two hundred dollars, eventually reaching eight hundred dollars in twenty sixteen.

The Dimennamus tariff rule at the moment was that if you brought in less than eight hundred dollars worth of imports, you were exempted.

From all tariffs.

And it was dates to the nineteen thirties, back to the Smooth Holly era, and it was meant to exempt people from all the paperwork and compliance costs and sorting through the tariff schedules for small transactions.

Douglas holtz Eken is president of the American Action Forum and a former director of the Congressional Budget.

Office, compliance costs are reel.

Administrative costs serreel, and you don't want to spend those dollars on tiny transactions that don't amount to much in the economy.

So that was a sensible thing to happen.

The whole.

Seekin says that over the years, the use of the Dominimus rule has exploded, with US Customs and Border Protection reporting nearly one point four billion packages in twenty twenty four, averaging about three point seven million a day.

There are two rationales given for taking it away.

Rationale number one is fentanyl and the shipment of packages from China and to the United States containing fentanyl and not being inspected because they are declared to be under the eight hundred dollars dominionist rule.

So as part of fighting the fentanyl trafficking, the administration thought, we'll get rid of the Dominius rule.

We'll look at every package.

And the second is the competition from the online retailers in China, and if you're a US retailer and you're paying local sales taxes, the Chinese retailers sending it to the US without any terriff for tax What developed was large online Chinese retailers who automated the process of breaking up large shipments into small under eight hundred dollars bundles, dodging all the tariffs entire and that's what caught the attention of the administration.

Seventy percent of the value of things brought in under the Dominianist rule or from China.

These are low cost retailers, and Americans liked the prices.

Today, I am doing another huge team hall.

This one is massive.

Two leggings for like nine dollars.

Let's see, we can make it right three two.

What President Trump may have taken away a strategic advantage for Shian and Timu, but small business owners like Harriet Dewinton say they're also paying the price, a price that began simply with confusion about how it would all work and what it would mean.

What is that done to your business?

It's had a really sizable impact on the business, starting with the beginning of hearing about the news and in all honesty being in disbelief that it was about to happen.

About sixty percent of Dewinton's online sales came from the US.

After a transition period when the US imposes of flat duty on all shipments.

Ultimately, everything she ships to the United States apart from books, will be subject to tariffs calculated as a percentage of the item's declared value, depending on what it is and where it's from.

Confused, so is Harriet.

It felt quite uncertain and unclear as to what the actual facts of the exemption ending were going to be, so we very quickly started just trying to research as much as possible.

That's the best thing you can do, isn't it.

When change, change comes.

We used to change and we act nimbly on our feet, but this one was just a little bit difficult to get a true sense of what it was going to mean for us.

We realized that we needed to shut our shop entirely towards the end of August just so we could see what it actually meant.

Rathnascharade built her company flavor Cloud to help businesses like Dewinton's navigate this shifting trade andronment.

So really, most consumer purchases are under the eight hundred dollars, so it didn't need to have formal customs declarations, didn't need to have additional data around you know what exactly is coming into the country, so typically trade requires harmonized commodity codes.

It basically allows for the customs official at the border to say, you know, what are you bringing into the country, what is the value of those goods where was it made.

What that allows the customs official to do is then assess duties, taxes and fees.

Typically that also includes tariffs in this case, and that's being assessed now on goods of any value.

So regardless of where you source and bring the goods from, you are seeing a massive implication with deminimus.

For small businesses like Dewinton's.

The end of Deminimus came as a surprise, but insiders say it was a long time coming, with the US standing out for years with one of the world's most generous thresholds at eight hundred dollars, far higher than in Europe, Canada or Japan.

Ultimately, all governments want a piece of the tax revenue.

So as global e commerce has grown, cross border e commerce has grown, and it is a continuously growing pie.

You know, everyone wants a piece of that pie.

So we've seen that happen around the world.

But economists warn the real shift will be felt in the pocketbooks of American consumers.

This is the hard truth that the administration really doesn't like to face.

Tariffs are taxes on imports, and they're paid by Americans.

I've been to either businesses or consumers.

It is their hope that foreign producers will cut their prices so that the net cost to the consumer doesn't go up.

There's no evidence that that's going to be the case on a large scale.

And so if you've put the tariffs place, and we have a lot of tariffs in place now, about three hundred and eighty billion dollars a year, that's a three hundred and eighty billion dollar year tax increase on Americans.

This is a highly distortionary tax.

It's going to force all these small businesses to change the way they run their operations and impose a lot of costs in them.

You look at whether it's a fair tax.

These are regressive taxes paid more by small businesses and low income individuals, and it's an incredibly complicated, expensive thing to comply with and to administer.

It isn't the way you want to.

Raise a lot of revenue head to etsy to get both of these we are selling to the USA again.

Hallelujah.

We've been looking at all the options and my main focus is to remove the hassle for the US customer because they're so important to us.

So we've decided to pay at the source with Royal Mail for the time being, and they do a service where we cover the cost of the tariff and then it's down to me as a shop owner to decide where I make that difference up.

So we've looked at just increasing our shipping costs a little bit, and in one or two examples we've just slightly raised the price of the product itself to be able to stay in business.

If you haven't already had this land on your doormat today, they're no worries because I'm going to show you how to do this tutorial.

Viewed through the broad brush of the economy, it's all pretty simple.

Costs have gone up and so to must the price.

But for Harriet Dewinton, who has now reopened her online shop back in Devon, it's not that easy.

Do you have a sense of the long term effect on your business?

Well?

I do think just returning to people's consciousness as the seller they want to buy from is going to take a bit of time and my hope is that we sell a number of products that are unique to my business, and I'm a trusted voice on the Internet when it comes to art supplies and watercolor in particular.

The American or adients have been a really, really important part of de Winton Paper Coat, taking it from just working down in Devon and I love your little cottage and reaching out to the world.

I've just found that the culture of watercolor painting in particular has just been embraced so much by the American audience as well as the rest of the world.

For her, it all goes back to the passion and people who have turned her art into a global community and a global business.

She hopes that both will endure no matter the costs.

Coming up AI is coming to a schoolroom near you, if it isn't already there.

This is the second story in our series on artificial intelligence being applied here and now where it matters most.

Last week we brought you the story of the AI used by your doctor.

This week it's about your teacher, the one you depend on to educate your children, the one we all depend on to prepare the next generation of workers, the one that we all remember from our own childhood.

Whenever I talk to people about their experiences in education, they always named this one teacher who was so influential and they got into this discipline because this teacher was amazing and they inspired them where students said.

What Professor Shamya Kurumbaya now teaches those teachers.

As a professor at the University of Wisconsin.

She lives at the intersection of education and tech, focusing on the application of artificial intelligence in America's classrooms.

Why we know that teacher in the front of the classroom and students in front of their laptops is not a model that works.

It's broken.

Last couple of years especially has been very exciting, and I would say the big change is the ability for teachers to customize what's happening with AIS.

So what else to look for on your Kira dashboard.

Lance Key is one of those classroom teachers adapting and adapting AI as he teaches computer science in the Putnam County School System just east of Nashville, Tennessee.

Computer science curriculum.

They've really gamified it and they made it colorful and engaging and exciting for the students.

And also you know, inside of there, if they try to do things that they can't it again will redirect them.

It'll give them, oh, there's an error here, and then then go to the chatbot and try to work through what the error is, and then it'll redirect them to where they need to go.

I think the big opportunity that stems from MEI in the classroom is the ability to personalize instruction to individual students.

Andrea Passinetti is co founder and CEO of the company Kira.

It provides the education software platform to Lance Key's classroom, as well as to many of the largest school districts across the United States.

If AI, a teacher has an unlimited number of teaching assistants to support that process, and the teacher can provide guidance, guardrails, and guidelines on how to provide that support to students.

That looks like students working on a terminal and having an AI tutor that they can query either in written text by typing on a keyboard or in spoken word by speaking directly to the terminal and the computer.

Yeah chet bot.

That personalization is something that Key is experiencing every day in his Tennessee classroom.

It allows me to have a more personalized relationship with my students in the classroom.

Before there was one of me and for every question that came up, I was like bouncing around the room just answering questions all the time.

But now we've got you a tutor that can help them along the way, and I can build personalized tutors for them too, So if it's on a specific content area, I can say, okay, today we're working on solving two step equations.

Here's a two step tutor that.

My students can work with alone and ask it questions, so then I can walk around and then one on one.

Check with students.

I've also got a dashboard on the backside that will alert me if there's a student that's having problems, so then I know real time that I need to go check on Johnny or Susie.

Over and above that personalization, AI can also provide teachers like Lance Key with some much needed relief.

My wife previously was an English teacher, and I recall grading essays being very daunting for her because she would have to score one hundred and fifty essays every time if they wrote an essay in the classroom.

So using a Rubert, being able to upload our district rubricks into Kira and being able to use one, they're.

Greater off of that rubric.

But also their AI detection, their plagiarism detection, and their feedback writer has been amazing.

So we can load all the papers up into that.

It will score it off for us, It will give us all the feedback and the teachers can then just review it.

And I think that's the big thing that we can focus on with A is the time that it gives teachers back in the day.

By twenty thirty, we're going to need to hire thirty million teachers because we've got teachers retiring and people not going into the field, so we're gonna have a teacher shortage that's.

Coming along with a high burnout.

Right, So I think AI can help us with some of the repetitive processes that we do over and over and over again.

For all its promise today, it turns out that the use of AI for education isn't all that new.

While large language models are only just making their debut in schools, other forms of AI have a long history.

How long has either artificial intelligence or maybe we should call it machine learning going back?

How long has it been used in the classroom.

You'd be surprised how AI and education.

Users of it in education have a lot of common sort of origins, and so I come from an academic background where my advisor's advisors advisor back in nineteen eighties was creating what we now call it cognitive tutors that were being u in Pittsburgh classrooms, and people have studied.

There's work done in the nineteen nineties on ethnography basically of how teachers are using AI in the classroom.

What does introduction of AI in the classroom change in the social structures student student interaction or student AI student teacher interaction.

It's only in the last few years that AI has developed to the point where companies like Kira can put it to use in the classroom.

According to surveys by RAND, as of the twenty twenty three to twenty four school year, a quarter of all US teachers were already using AI to teach students and Passinetti says, the key is the conversation.

We use AI as a catch all term for a lot of different technologies.

In reality, what's happened with the most recent wave of AI, with LLLMS in particular, is a more discursive medium.

So AI now, unlike even three four years ago, is able to have real conversations with students.

It's able to engage with student on a level that feels more human in some respects.

We founded Kira four years ago before AI was popular.

AI wasn't cool, it seemed premature, and in many cases it was entirely verbotan.

There are a lot of districts that said, we can't really be talking about AI with parents because it gives them a lot of anxiety, or there's a lack of understanding about what a I can do, and so the whole conversation would die at the very beginning.

So I would say there's been a radical shift where that anxiety and resistance has given way to curiosity.

And some of that curiosity has turned into plain necessity.

As school districts across the country struggled to deal with teaching students in a multitude of languages.

It's important to bring students home language into their classrooms.

A very promising benefited opportunity for AI here is to bridge the gap between the language that the teacher speaks and different languages that the students in the classroom speak.

Thirty two states in the United States reported that their students speak over two hundred languages, and these thirty two states have a deficit of bilingual resource teachers.

So there are all these opportunities out there in terms of what's already working in the classroom, but there is limited human resources.

The number of districts that can now teach languages like Mandarin or Arabic or you know, French and Spanish, where historically would have required teaching a native or hiring a native speaker of that language and as a result been much more, much more difficult to achieve for a district.

The ability to do that now is immediate.

Districts can leverage AI tools to teach a new foreign subject or a foreign language as a subject in a way that they couldn't have in the past.

For all its advantages, the widespread use of AI in the classroom is not without its risks, risks we've all heard about with other applications of AI, things like hallucinations and bias, but also risks that are unique to education.

Pew study from last year showed that a quarter of teachers think AI tools do more harm than good in the classroom.

Only six percent say AI is beneficial.

Any piece of AI that is generating text anywhere where it is student facing.

You have to be careful about the implications hallucinations have in this specific context of education.

The goal in the classroom is for us to help students learn.

Hallucination is absolutely detrimental to students learning any sort of misinformation it could.

I would also talk about potential biases, potential toxic content, the kinds of any kind of text that the AI is generating that is harmful for students learning and well being.

But perhaps a greater risk with AI applied to classroom is the risk of expecting too much of it.

AI is a tool like anything else.

It has very very real limitations.

The fact that it's discursive and it resembles an interaction with a human in some isolated cases makes it feel a lot more advanced than technologies we've interacted with in the past, But as of today, AI's boundaries are still limited and it's very easy to overstate.

There's a lot of hype.

It's very easy to feed into a narrative of fear, but the reality is AI is still answering fairly discreete questions being asked by students and supporting teachers with the answering of those questions.

I think students interacting with computers one on one is definitely something that schools, district, teachers, parents, students themselves need to be careful of.

It can take students out of interpersonal relationships, It can all students abilities to interact with their peers.

So AI is by no means a panacea.

Over ninety percent of innovation in AI for education fails.

I believe that it is because there is a They don't do not consider what's the kind of practices that's happening in the classroom, and it's built in this black box.

Second is also often in computer science.

I am I have a background in computer science.

Often we make oversimplifying assumptions about real world context.

So we are sort of assuming that these factors do not play a role, and we build a system for this ideal context.

But classroom, real world classrooms are far from ideal.

Students have very different needs.

There is a lot of learner variability.

They come in with a lot of preconceptions that often is hard for us to catch right away.

So with all the hype and a fair amount of failure, how can an investor short out which AI education applications have the most promise.

The AI hype certainly has led to a lot of funding for what I would call as systems that are generated.

To put a lipstick on the pig, is that the phrase if you haven't thought about fundamentally, how are you going to improve education?

And you're only coming from the point of view, we have this AI tool and we're going to find something to apply to It's not going to work.

It's yet another fancy tool, but the underlying things that has been broken in education continues to be.

Broken, whether it's investing or teaching or learning.

Everyone agrees that in the end, it all comes back to the teachers themselves.

I think that's the real promise of AI.

It allows teachers to do what they do best.

When you think of your favorite teacher, you don't think of, you know, the teacher who taught derivatives the best.

Do you think of the teacher who encouraged you, who made you feel smart, who made you feel capable, who made you feel like you could learn anything and accomplish anything.

And I think that's where teachers really shine.

That's where is really a democratizing power.

I would say in education.

There is something about that human intent.

There is something about a human being caring about a child, about a student, which I don't think AI is able to do that.

My dad just a few.

Years ago, he changed a headlight in the car and I'm like, why don't you take it this moere.

To get it done?

He said, I'll watch the YouTube video and it taught me how to do it.

So I think that we have some dispensations that are happening in education right now where some shifts are happening.

Teachers are not being minimized, but our roles are changing a little bit to where we're guiding students to learning and we're able to personalize the learning more because we have the time to be able to do that.

That does it for us Here at Wall Street Week, I'm David Weston.

See you next week for more stories of capitalism.