Why For-Profit Education Fails | Hacker News Reader

Why For-Profit Education Fails

theatlantic.com

51 pointsjseliger46 comments

In a world where prestigious private schools are amassing huge endowments, I think the "for profit" versus "private" distinction is a thin one. For profit schools fail not because of their corporate structure, but because their lack of prestige and reputation limits them to catering mainly to a student body that is marginal to begin with.

If Harvard, Stanford, etc., converted to corporations and started paying dividends out of its giant endowment, I doubt the best students would suddenly start turning down their offers.

There is a huge distinction -- endowments provide stability to non-profit universities and ensure that they will be able to benefit future generations, not to provide value to shareholders.

Endowments also usually come from alumni donations. So their business model is essentially to recoup money from students long after they've graduated and become successful.

That incentive, at least, is correctly aligned. They can't bring in large alumni donations if they don't turn out well-educated successful students.

I fail to see how comparing a top 5 university in the world with regular education.

This is talking about ALL ages. "Knowledge Universe businesses included early-childhood learning centers, for-profit K–12 schools, online M.B.A. programs, IT-training services for working professionals, and more."

With investment being made with these ideas a $500 Billion dollar industry, "In 2012, the media mogul Rupert Murdoch and the former New York City schools chancellor Joel Klein established the Amplify division within News Corp. At the time of his initial investment, Murdoch described K–12 education as “a $500 billion sector in the U.S. alone that is waiting desperately to be transformed.” " They sold after losing a billion dollars to Steve Job's widow.

If private schools converted to corporations they would not have multi-billion dollar endowments available to fund all of the things they do that make them so prestigious. That money would have to be returned to shareholders as profit.

Why? Private corporations can do whatever they want...

Harvard Corporation's charter[0] contains some restrictions, but yes, it can attempt pretty much whatever it wants.

[0] http://library.harvard.edu/university-archives/using-the-col...

Isn't Harvard a nonprofit?

Parenthetical remark: Harvard is already a corporation, in fact, America's first. "The net result of that research is the conclusion that the Corporation of Harvard College is indeed America’s first corporation". See https://www.buybooksontheweb.com/peek.aspx?id=4221

No its because the quality of education is complete shit and for-profit education is focused on churning out as many diplomas as possible.

The endowments were created by the cumulative donations of alumni, largely with the intention of keeping monetary influence out of the university. If you remove that connection, you'll eventually kill the goose that laid the golden eggs, as a for-profit institution inevitably embraces the values of the agora rather than the acadame.

In other words, people gave money because they felt these universities can educate more freely when money isn't a factor. When they no longer feel that way, there will be no more donations.

> 'If Harvard, Stanford, etc., converted to corporations'...

let's acknowledge that this is a completely absurd notion.

but for fun, let's say it did happen: this would be the end of harvard's good reputation, i guarantee it.

- faculty protests

- widespread shut-the-campus-down student protests, no doubt

- alumni uproar like no other

- kiss donations goodbye -- nobody ever donated a million dollars to Univ of Phoenix or General Assembly...

- research funding elibility in limbo at the very least

- research coming out of the institution would no longer be taken seriously (i sure wouldn't)

- etc

i would never send my children to a for-profit institute that, by definition, did not have interests aligned with my family's or society's, and i'm sure many others wouldn't either. it is not about reputation. i would rather they go to the tiniest po-dunk state college than attend a for-profit of any kind.

I do wonder if a decent for-profit university is possible.

I think it's possible to provide an excellent education and make a profit while doing so. (After all, is that not what a tutor does?) But it would need to be done very carefully - the education arm would have to be separate from the corporate in order to ensure integrity. You'd also need a board that was committed to profiting from selling a quality education, rather than maximizing profits. Unfortunately, I think that's where this idea falls apart.

Right away? No. But eventually, that profit motive would destroy those schools.

Converted? Dividends are already paid from endowments in the form of grants to studying students.

That would still be a conversion because Harvard is not currently owned by its students.

Maybe you should read the Harvard Corporation's charter?

http://library.harvard.edu/university-archives/using-the-col...

Their idea was to overturn the way children were taught in public schools by integrating technology into the classroom. Although inspirational, the idea entailed competing with a series of multibillion-dollar global leaders in educational hardware, software, and curriculum development.

They've been peddling technology in the classroom as a panacea for as long as I can remember without much impact. What did they really think billions of dollars of technology was going to change?

And their strategies have been very shallow: many upper middle class school districts went and purchased tablets and iPads for every student - but no software for them to use. Often the "technology" taught is more of a lesson to the teachers than the students - who have been playing with parents phones since birth... I consulted with a few of these education startups over the years, and not a single one I encountered felt like anything other than an investor scam.

Thinking back, too, it was always the software that had an impact. Logo, Word, MATLAB, CAD tools, OneNote... most of that was running on clunky, antique machines, yet it brought more to my education than any glitzy IOT device.

By all means give kids a taste of how computers actually work, but breaking down problems into small parts, that kind of critical thinking, is useful not just in programming, but as a foundational life skill.

Bringing tablets into the classroom is one of the dumbest things I'd ever heard. Those are products. You don't learn technology, at all, by using products. You learn about a thing by deconstructing and constructing.

I especially appreciate your second paragraph's point - the mechanism of learning. Sure, having a spell-check assist when typing is wonderful, but the user still is designed to bring the language use mechanics. Forming language communications (sentences, paragraphs, etc) is not conveyed by a product or tool, I think, but uses those as conduits from learning the deconstruction and construction parts.

"Advocates of for-profit education often understandably emphasize the role that market forces play in improving quality and efficiency."

Is there any significant evidence that for-profit educational institutions have improved either quality or efficiency (whatever that means in the case)?

"But the most constructive role the for-profit segment may play is in providing a unique level of stability to the educational ecosystem when (and only when) it establishes sustainable business models."

Considering that the rest of the article ia about the instability of the for-profit segment, this seems to be wishful thinking.

It fails (in K-12) because it misidentifies the problems. A school filled with iPads cannot solve:

- poor nutrition

- a home or neighborhood situation wracked with neglect, abuse, or addiction and the associated stress and anxiety that goes along with them

- impoverished relatives that are forced to move frequently for new, low-paying jobs

- general situational instability and lack of access to money

The school's money could fix the underpaid teacher/poor facilities problem (but that only helps in cases where students can afford the schools in the first place, obviously.) In our system, we use phrases like "problems with K-12 education" as a laughable shorthand for "enormous societal problems we're not even trying to tackle in a serious way because they would require lots of work, taxation, redistribution, and government 'intrusion'." The people starting these schools would never have done so if they'd realized this; there is no silver bullet for the problem. It requires major systemic changes (and many of these things apply just as much to higher ed as well.)

There is a big difference between a for-profit school, like the University of Phoenix, and for-profit companies in the education space which work with all types of schools as vendors or sell directly to students.

LeapFrog in the first paragraph is a for-profit company in the education sector not a school - Leapfrog makes things like software that teaches young kids to read and tablets that have education-related games on them.

This is a ridiculous article, especially coming from the "co-director of the media-and-technology program" at Columbia Business School.

It does not really answer "Why?" nor is it clear the author knows what "for-profit education" means.

Further, for-profit education of any definition doesn't appear to have some huge failure rate above other types of startup businesses or a specific reason why failure occurs when it does. And the article completely brushes over success stories. I used Kaplan recently; it is for profit, worth billions and is an 80 year old company, and I had a positive experience as a customer.

For-profit schools, like for-profit health care, like for profit military work, is a debate worth having. But this article, which basically says "in education don't try to do big things - a few rich guys have failed trying that", is not helping anyone.

Build an education-related business however you want, big or small. Education is full of problems needing fixing and there is no reason the solutions can't come from more for-profit companies that just don't suck at it.

The role of a school is to produce good students, who 20 years down the road would be happy about their education.

The role of a company is to satisfy clients enough to see them returning. Here the clients are parents, and the target is that they return next year.

Free-market can work in the direction of human progress but a lot of people miss the fact that incentives have to be designed for this to happen, they don't just magically appear.

That's Michael Milkin, the ex-con who invented junk bonds and went to jail for violating securities laws. Looks like he went into junk education.

Well it's hard to compete with nonprofits that don't pay taxes. Non profits compete with government. In fact non profit education outfits do pretty well against public schools.

I think the biggest problem with attempts to "revolutionize" US education is that nobody has identified an actual problem it has. US public schools actually get pretty damn good results by worldwide standards.

> US public schools actually get pretty damn good results by worldwide standards.

This is in spite of the system, instead of because of it. Some people were going to do well regardless - because they were well-nourished as children, grew up in stable homes, etc. Most the rest are good worker-bees, or good candidates for filling the prisons (a make-work program).

> I think the biggest problem with attempts to "revolutionize" US education is that nobody has identified an actual problem it has.

I think John Gatto [1] pointed out that "Nothing of value to the individual happens by force" - maybe the quote is in one of his books. Gatto's essay on retiring, "I Quit, I Think" [2], precisely describes professional teachers' dilemma.

[1] http://www.johntaylorgatto.com/

[2] https://web.archive.org/web/20100309061700/http://www.johnta...

One interesting thing I saw recently was that it might be the case that students in "better" education systems might also be doing well because they were going to do well regardless.

From a semi-recent slatestar link thread[0] (Tyler Cowen is Marginal Revolution):

"Tyler Cowen makes the case that Denmark’s institutions aren’t that great because Danes in the US do better than Danes in Denmark, suggesting Denmark is a successful country mostly because of Danish culture (Cowen didn’t mention genes, but should have)."

[0]:https://www.bloomberg.com/view/articles/2016-08-16/denmark-s...

The point is that we could do it better. We could have a better environment for both students and teachers.

Technology has helped in the past, after all. Computers for test-grading, for example, from scan-trons back in the 1980's to software that can give a math test and automatically score them. Overhead projectors, smartboards, and so on. None of these are absolutely necessary, but helpful.

Problems? It is pretty easy to spot problems: The scores inside the us are vastly different in different areas, for example. Stress levels both for students and teachers. Funding is poor in places.

Then there is this kid speaking about it: https://www.youtube.com/watch?v=fnsejGj4JSg

I find it interesting that the US produces world class universities (Caltech, MIT, Stanford), and the proof is that (good) international students are dying to get in, while elementary schools average around 25th in the world

Those institutions have money. Elementary schools may or may not have money, depending on whether they're in a rich neighborhood or not.

25th in the world is in the top 12%, which is fine with me. Sure, we could make improvements (particularly by ending the idiocy of funding schools at the local level), but this notion that the system is somehow broken is just absurd.

I assume there are a large number of private schools in the US that are for-profit and doing well. The key is scale and the desire to change the education system. I don't fault the startups for aligning with top colleges. The big names bring credibility. I imagine it's difficult to compete in the primary education market with a product that's free (Government Schools).

Most private schools are not for profit.

They don't have investor and the endowments are not used to pay dividends.

Private doesn't mean for profit, and non for profit doesn't mean they can't make money it's what the money is used for that defines them.

The issue is rarely the schools themselves (hell, nearly all charters are non-profits, for that matter) but the Education Management Companies they hire to do the actual operations. The school is simply a conduit to get public money to that company.

For Profit and Non-Profit means nothing but when the money is spent. a non-profit just makes their books zero by paying their "CEO" and "Board members" the profits each year and can't carry over for investments.

ALL CHARTER SCHOOLS ARE PUBLIC SCHOOLS. Most people totally forget this point.

> a non-profit just makes their books zero by paying their "CEO" and "Board members" the profits each year and can't carry over for investments.

This claim is false.

> Although NPOs are permitted to generate surplus revenues, they must be retained by the organization for its self-preservation, expansion, or plans. [0]

Non-profits are perfectly capable of carrying money over each year, but the purpose of those "profits" are not for the financial gain of board members or CEOs, in fact doing what you suggest could be illegal in some jurisdictions, but rather to further develop or sustain the non-profit and its goals.

Spending on things like CEO bonuses would make the money taxable (if they're honest or, more likely, caught in an audit).

[0] https://en.wikipedia.org/wiki/Nonprofit_organization

> This claim is false.

Why would you say that and not check?

"One of Chicago’s leading charter networks, the nationally recognized Noble Network of Charter Schools, paid its CEO and founder Michael Milkie a salary of $209,520 and a bonus of $20,000."

https://themerrowreport.com/2016/02/25/whos-raking-in-the-bi...

I have worked in non-profits since 1989 and I can state that zero balance is the vast majority 90% + of all their system. The reason is designated funds. I work in a educational institution and we have around 50 million in our operating budget. We have millions but for miscellaneous expensiveness we need to get outside money and donations. My job is paid for by these donations. My company when we have extra money from unfulfilled positions that becomes out bonuses because they can't use those funds for anything else like maintenance or capital expenditures.

SOME non-profits just have HUGE CEO pay and then if they don't have the "profit" for their salary they don't take their whole salary that year. They also can give consulting fees to board members. There is a TON that happens in Non-Profits that just makes me sad. Fortuitously I have never worked in one and currently work in the best run non-profit I have ever worked in. There are plenty of examples of HUGE CEO pay in non-profits.

> Spending on things like CEO bonuses would make the money taxable (if they're honest or, more likely, caught in an audit).

That's not factual

"In 2010, one-third of nonprofits surveyed provided bonuses to their well-paid executives, and the median bonus was over $50,000."

https://www.philanthropy.com/article/Executive-Pay-Increased...

Please refute my "facts" and not just don't down vote. I replied to a person saying I was in error and I replied back with the actual numbers.

I think baldfat's point might be that "non-profit" doesn't necessarily imply that those organizations are not designed to allow profits to be paid out as compensation. Excessive compensation to non-profit leadership can often be paid based on the same metrics as a corporation (basically, increasing revenue). It's certainly not the norm, but there are more than just a few exceptions where CEOs of non-profits (including universities) are earning in excess of $1 million per year.

In the primary and secondary education markets in the US, most for-profits are fully or partially funded by the local government as replacements for government-owned schools.

Often this is done with some flavor of a voucher system, where students within the school district can attend any school in the district (public or private). In other cases, the district will hire a for-profit school to run a magnet school. The whole system is often corrupt, with the for-profit school being audited by a company that shares common investors.

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