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I had to go recheck the Stanford course numbering system - looks like a 200-level is "advanced undergraduate/beginning graduate". So we're both right.
I agree that people might interpret the grades in the way you say, and that it could be a PR issue for Stanford, but I don't think it would actually be indicative of deep flaws in Stanford admissions (and here I mean undergrad admissions - my understanding is that admissions to the professional masters program mostly consist of "can you breathe, and does your employer have an enormous wad of cash for us?"). The objective function that Stanford is optimizing contains a lot of terms that are not reflected in someone's CS221 performance, so you'd only expect them to be somewhat correlated. Could all of the outside high-scorers also do well in a Stanford English class, do they have anything to contribute to the college community artistically, athletically, or in terms of their background (whether poor black kid from the south or non-native speaker from Japan, most elite schools put a lot of admissions resources into making their campus a mini-melting-pot on the theory that it's good for society and good for their students), and were they taking a bunch of other tough classes at the same time while playing in the orchestra and being involved in a bunch of student groups? (of course many outsiders would have real-world jobs; it would depend on the job and the Stanford student who actually had the tougher time) And of course some of the successful outsiders could be 40yo engineers who went to MIT or wherever back in the day, so it's not as if they're "excluded" from the elite education system.
Basically, I agree that it's possible this could expose that the Stanford admissions filter does not perfectly select for raw CS talent. But I don't think they ever claimed to do that, and I don't think there are many good arguments that they should.
You're right that most game AI doesn't use very sophisticated techniques, but just for the record it's not true that the Berkeley Overmind team found building a "true AI" (whatever that means) for Starcraft to be "beyond infeasible". They focused on mutas because they're easier to do micro with, but the higher-level strategic code is AFAIK pretty much race-agnostic. There's a build-order planner which can work with any set of building constraints you feed it, there's strategy selection which leverages results of scouting and just needs to know the basic details of units and buildings (e.g. if you observe the enemy building a Stargate, then as long as the AI has been told that Stargates produce air units and that Goliaths (say) can attack air units, then it will shift production towards Goliaths), there's a fair amount of prediction of when/where enemies will expand or attack that has to work for enemies of all races, and so on. The Overmind is certainly not a perfect rational agent (or even a perfect bounded-rational agent, which would be a more realistic goal), but it's much more sophisticated than a bunch of hacks around a mutalisk-micro script.
Source: I'm a Berkeley CS grad student, and I know a bunch of the Overmind authors and have been to a few of their meetings, though I didn't personally contribute code.
Stanford undergrad tuition is essentially free if your family makes less than $100k/yr. Need-based financial aid policies mean that the $55k number is an upper bound, typically paid in full only by families making $200k and above (with various exceptions, of course, but that's the general pattern). In any case, this is a grad course, so the price of undergrad tuition is not really relevant to the discussion.
Stanford CS PhD students generally have their tuition, as well as an additional stipend for living expenses, fully funded by research grant money, so they don't pay a cent. The only students taking this class who would actually be charged full tuition are likely those in the professional master's degree program, which is basically Stanford's way of siphoning money from Silicon Valley tech companies: the companies send their employees for training and pay Stanford to do it.
This is all to say that I don't think Stanford's trying to rip anyone off here (quite the contrary, since they're providing the course for free). But it's also a rare course which can be taught in this way. It's easy to write an autograder that runs programs submitted to it and checks to see if they produce the correct output; it's much harder to automatically provide feedback on an English paper or a mathematical proof. Similarly, it's easy to record your lectures and put them up on Youtube; it's much harder to replicate a classroom discussion facilitated by a true expert. So, a few large-lecture CS classes aside, the vast majority of classroom experiences (at Stanford or anywhere else) are going to be very difficult to replicate at a web scale, now and for the foreseeable future.
Where does that money go? At Williams it mostly goes towards people: a 7:1 student-faculty ratio and something like a 2.5:1 staff-student ratio. Williams employs 800 staff for 2000 students, which sounds ridiculous and probably is pretty ridiculous, but that includes everything from chefs and dining employees, to secretaries and departmental administrative assistants, to IT support, to mechanics and janitors and groundskeepers, to doctors and nurses and psych counselors and chaplains, to athletic coaches, to campus life coordinators and deans. I'm now in grad school at a much larger and less-well-funded state school (UC Berkeley), and it's amazing to see the contrast between the two institutions. A lot of kids get decent educations at Berkeley, and some do really well. But where at Williams I was taking classes with 20, 10, or even 2 students in them, Berkeley undergrad class sizes are in the hundreds. At Williams I was working on a research project with a prof by the end of my freshman year; at Berkeley most undergrads don't ever get a chance to get involved with research. And so on. You just don't get the same level of personal attention at a large state school (and Berkeley is one of the best large state schools!) as you do at a small private school. That level of attention is expensive to provide.
I've seen the studies about educational outcomes at elite schools before, and I believe them to a certain extent, but you have to be at least a bit careful interpreting their conclusions. I'm pretty sure I would have ended up "successful" by most metrics if I'd gone to a large state school like Berkeley, in the sense that I would have gotten decent grades and graduated and found a decent-paying job somewhere that I would have been happy with. But I probably wouldn't have gotten involved in research and ended up at a top grad school. I probably wouldn't have met nearly as diverse a group of friends from all around the country and around the world. I probably wouldn't have gotten to meet and have lengthy conversations with people like Dan Dennett and Steve Strogatz, and I probably wouldn't have had a whole bunch of other experiences that have made my life richer in ways that are not going to be measured by a few survey questions as to my "success".
You can certainly get a great education at a lot of schools (heck, if you're the right sort of student you can get a great education sitting at home with a textbook), though I dispute that your average "Springfield State School" has anywhere near the same level of amazing people and opportunities as a top-tier university (case in point: I was going to check out the course offerings of the SUNY Cortland computer science department to see how they compared to CS programs I'm familiar with, but it looks like they don't actually have a computer science department, just a minor in "computer applications"). But if you're lucky enough to be able to get into one of the elite schools, there are experiences you'll be able to get there that you just won't have at your average state school. I don't know if supporting elite schools is the best use of my money as a potential alumni donor, because obviously there are a lot of other worthy causes in the world. But I do think that the world is a better place for having institutions whose mission is to bring together some of the best students from all around the world and give them the best educations money can buy, so I certainly respect people who choose to support that mission financially.
People don't understand that in the top tier of American education, it's not about money. Harvard is swimming in so much money they've actually seriously debated whether they should eliminate tuition entirely and just become free for all applicants; the only reason they haven't done this is that they're already free or very cheap for basically any middle-class family, so the only people who would benefit from such a change are the people who are rich enough to not need it. MIT is not quite that rich, but they're rich enough to offer very generous aid to any international student they admit. And that's exactly what they do, because their reputation as one of the best schools in the world is very much dependent on their having the best students in the world, and that means making sure people can come regardless of their ability to pay.
Basically, the argument that schools like MIT make to their alumni is that when you donate to MIT, you're not giving your money to a large faceless entity with a $8 billion endowment staffed with administrators who light their cigars with $100 bills. You're giving it to a poor kid from the slums of Bangalore who is able to come to MIT and fulfill his/her potential because of generous alumni like you, who have allowed MIT to provide a $300k education for free to anyone who can qualify. Obviously you can believe this sort of thing to varying degrees, but apparently Bose's experiences working at MIT for several decades came to convince him that it is, as an institution, overall a force for good in the world.