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This Just In: Profit Making and Public Education are a Mismatch

Education “reformer” Andrew Rotherham’s recent USNews and World Report article, “Public Goals, Private Ownership” reaches a conclusion he finds sad and perplexing: the need to reward shareholders conflicts with the overarching goals of public education. I’ve extracted some quotes from the article that illustrate why this is the case. The first one describes how Amplify’s decision to acquire a successfully operating privately owned related technology business, Wireless, was a factor in its demise:

Education is an inherently difficult business, the Wireless business model was not the same one Amplify pursued, the company grew too fast, and some of the tools and products Amplify offered were just too far in front of the schools market right now.

Wireless also had ideas and products that were out in front, but had successful core businesses to create space for the company to innovate elsewhere. What Wireless didn’t have was the constant pressure of stock prices, earning expectations and the short-term thinking plaguing public companies right now.

The nub of the problem is described in the last sentence. Profit making and providing services to schools are not necessarily incompatible. It can work when a company is introducing new technology on a small scale to school districts who are seeking that technology. The problem comes when investors who require short-term profits and ever-higher earning expectations become part of the equation. The only way that can be accomplished is to grow and the faster one grows the more impressive its gains will be…. and the sooner it will be necessary to move into districts that lack the technological and professional infra-structure needed to make an innovative product work for students. This leads to the description of Edison’s crash. After a promising beginning, Edison schools entered the urban schools market and failed, though Rotherham misses the real reason in his analysis:

To get the Philadelphia deal and fit with the teachers union contract there the company compromised on key elements of its model, including around teacher quality and extended learning time. This along with the political crossfire the company found itself in basically destroyed Edison.

Pressure to hit revenue and growth expectations drives companies to attract customers who are a poor fit.

The more such students the company signed up, the more its academic results suffered.

Rotherham assumes that the problem was NOT Edison’s model… it was the teachers union contract and politics. The problem with Edison’s model, like that of all “reformers”, is that it skims the districts with the highest level of technological infrastructure and the students whose parents have the highest degree of engagement. In doing so, it exacerbates the digital and economic divides that public policy should be helping public education close.  Despite this inherent flaw with profit making and public education, Rotherham stands by his assertion that market driven reforms are good for schools:

From the public interest standpoint, there are upsides to publicly traded companies. In particular, they face a level of accountability that is rare in the education sector. When K12’s leadership made contested statements about performance that would be completely unremarkable coming from public officials seeking to put the best gloss on mediocre results, it instead triggered a Securities and Exchange Commission investigation. That sort of accountability would turn the education world upside down – in a good way.

Sorry, Mr. Rotherham, but K12’s claims of success were akin to the Atlanta cheating scandal. According to a December 2014 ValueWalk post,

K12 was accused of making materially false statements or omissions about the effectiveness of its program going back as far as January 2011.

Materially false” statements are not “…contested statements about performance that would be completely unremarkable coming from public officials“… They are the kind of claims that lead to Principals and Superintendents finding new jobs and school boards getting put out of office. After blaming teachers unions for the failings of Edison, he uses regulations and politics as the ultimate roadblock to private sector success:

In the special interest-laden education sector, politics drives regulatory and policy decisions even more than is the norm in American life. Performance indicators and signals are heavily politicized and unreliable, too.

I do agree that performance indicators are heavily politicized… and Mr. Rotherham must know this as well since the politics behind the institution of standardized testing is driven by the very people he lionizes in this article. If tests did not exist, schools wouldn’t be “failing” and for-profit corporations would have no means of taking over the schools on behalf of the politicians who don’t want to address the underlying problems of public education: poverty and inequality of opportunity, Rotherham concludes his “analysis” with this:

Many analysts agree. “Unless you are huge and a publisher, or education is a smaller part of your business, like Apple, Microsoft or a big construction firm, it makes no sense to be public” says one longtime industry observer and investor.

Here is an area where “reformers” and REAL reformers might find common ground. Corporations who provide products to help educate students have long been for-profit and in that capacity have viewed teachers and administrators as customers who deserve respect and whose needs should be met. When corporations take over the operations of schools, they inevitably find they must serve students who are a “bad fit” for their “model” and either leave those students behind or perceive the requirement to deal with these students as burdensome regulations.

Here’s the bottom line: For-profit thinking is a bad fit for public education.

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