Online K-12 education as a cash cow for ‘Wall Street’

21 Nov

There should be a variety of options and approaches in education. Still, School choice does not mean education on the cheap! K-12 education should not be the next sub-prime mortgage or derivative gambit for large for-profit companies. Lee Fang has written the alarming Nation article, How Online Learning Companies Bought America’s Schools.

While most education reform advocates cloak their goals in the rhetoric of “putting children first,” the conceit was less evident at a conference in Scottsdale, Arizona, earlier this year.

Standing at the lectern of Arizona State University’s SkySong conference center in April, investment banker Michael Moe exuded confidence as he kicked off his second annual confab of education startup companies and venture capitalists. A press packet cited reports that rapid changes in education could unlock “immense potential for entrepreneurs.” “This education issue,” Moe declared, “there’s not a bigger problem or bigger opportunity in my estimation.”

Moe has worked for almost fifteen years at converting the K-12 education system into a cash cow for Wall Street. A veteran of Lehman Brothers and Merrill Lynch, he now leads an investment group that specializes in raising money for businesses looking to tap into more than $1 trillion in taxpayer money spent annually on primary education. His consortium of wealth management and consulting firms, called Global Silicon Valley Partners, helped K12 Inc. go public and has advised a number of other education companies in finding capital.

Moe’s conference marked a watershed moment in school privatization. His first “Education Innovation Summit,” held last year, attracted about 370 people and fifty-five presenting companies. This year, his conference hosted more than 560 people and 100 companies, and featured luminaries like former DC Mayor Adrian Fenty and former New York City schools chancellor Joel Klein, now an education executive at News Corporation, a recent high-powered entrant into the for-profit education field. Klein is just one of many former school officials to cash out. Fenty now consults for Rosetta Stone, a language company seeking to expand into the growing K-12 market.

As Moe ticked through the various reasons education is the next big “undercapitalized” sector of the economy, like healthcare in the 1990s, he also read through a list of notable venture investment firms that recently completed deals relating to the education-technology sector, including Sequoia and Benchmark Capital. Kleiner Perkins, a major venture capital firm and one of the first to back Amazon.com and Google, is now investing in education technology, Moe noted.

http://www.thenation.com/article/164651/how-online-learning-companies-bought-americas-schools

Henry M. Levin of Columbia University had some cautionary notes about for-profit K-12 education in 2001.

In the 2001 paper, Thoughts on For-profit Schools, Levin wrote:

The fact is that we know little about how for-profit schools will operate and how they will affect students and other schools. At least three major questions have yet to be answered satisfyingly:

If schools are a potentially profitable endeavor, then why did entrepreneurs wait so long to enter the market? Is there something unique about schooling that makes it difficult to earn a profit?

Now that we do have for-profit schools, how will they achieve cost savings? Will they bring fundamentally different approaches to education through curricular and technological innovations that will “break the mold”?

Even if they are more effective or less costly, or both, will they earn profits that are comparable to the returns on other investments?

http://www.ncspe.org/publications_files/7_OP14.pdf

Levin mused about some of the other issues that for-profit operators of K-12:

In short, even the most expensive private schools with the most elite clientele fail to cover their costs with tuition. This goes far in explaining why entrepreneurs have shied away from the K–12 market. This is not to say that an individual, for-profit, family-owned school can’t survive. I know of a few for-profit schools at the K–12 level and more at the preschool level that appear to be marginally profitable. But much of what appears as profit is due to the family members’ hard work for little pay. The salaries they draw on the school understate the value of their time, leaving the impression that the enterprise is profitable.

Whether this can be replicated on a large scale by corporate entities is doubtful. Historically, economic studies have not identified substantial economies of scale in education at school sites or in multi-school endeavors. Perhaps this is for the reason suggested by John Chubb and Terry Moe in Politics, Markets, and America’s Schools (1990): that the best results are obtained when schools are given great autonomy.2 A corporate competitor in schooling must establish brand and product identity, which necessitates relatively uniform operations and services from site-to-site. This puts the need for quality control and similarity from site to site in direct competition with the need to be responsive to differences among particular clients and settings.

http://www.ncspe.org/publications_files/7_OP14.pdf

One business plan about how the big corporations plan to turn a buck in K-12 education is the move toward online education. Laura Herrerra’s New York Times article, In Florida, Virtual Classrooms Without Teachers describes what may actually happen in practice.

 MIAMI — On the first day of her senior year at North Miami Beach Senior High School, Naomi Baptiste expected to be greeted by a teacher when she walked into her precalculus class.

All there were were computers in the class,” said Naomi, who walked into a room of confused students. “We found out that over the summer they signed us up for these courses.”

Naomi is one of over 7,000 students in Miami-Dade County Public Schools enrolled in a program in which core subjects are taken using computers in a classroom with no teacher. A “facilitator” is in the room to make sure students progress. That person also deals with any technical problems.

These virtual classrooms, called e-learning labs, were put in place last August as a result of Florida’s Class Size Reduction Amendment, passed in 2002. The amendment limits the number of students allowed in classrooms, but not in virtual labs….

Under the state’s class-reduction amendment, high school classrooms cannot surpass a 25-student limit in core subjects, like English or math. Fourth- through eighth-grade classrooms can have no more than 22 students, and prekindergarten through third grade can have no more than 18.

Alix Braun, 15, a sophomore at Miami Beach High, takes Advanced Placement macroeconomics in an e-learning lab with 35 to 40 other students. There are 445 students enrolled in the online courses at her school, and while Alix chose to be placed in the lab, she said most of her lab mates did not.

None of them want to be there,” Alix said, “and for virtual education you have to be really self-motivated. This was not something they chose to do, and it’s a really bad situation to be put in because it is not your choice…”

Some teachers are skeptical of how well the program can help students learn.

The Illinois Online Network has a good synopsis of the pros and cons of online education at Strengths and Weaknesses of Online Learning Technology can be a useful tool and education aid, BUT it is not a cheap way to move the masses through the education system without the guidance and mentoring that a quality human and humane teacher can provide.

Many critics put the emphasis on “for-profit” and will adamantly argue that any entity which is for-profit is inherently bad for education. Moi would put the emphasis on neighborhood choice and argue that entities without strong ties to the neighborhood they intend to operate in, do not have the loyalty to succeeding in that particular neighborhood and will probably not be successful. Let’s be honest, corporations intend to generate a profit from their education activities as their primary goal. The secondary goal is probably the education of children. Moi is skeptical that a for-profit entity really has the commitment to a neighborhood and thus to a neighborhood’s schools. Still, moi is not like some so called “anti-reform” types who foam at the mouth at the words charter and for-profit. There is no magic bullet or “Holy Grail” in education. There is only what works to produce academic achievement in each population of children. That is why school choice is so important.

Children are not the new sub-prime mortgage business or the new derivative gambit. People must be afraid, very afraid of the vultures who are now hovering around the education sector. If folks don’t watch them, the results will not be pretty.

Dr. Wilda says this about that ©

4 Responses to “Online K-12 education as a cash cow for ‘Wall Street’”

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  1. Is online higher ed a threat to bricks and mortar colleges? « drwilda - September 17, 2012

    […] Online K-12 education as a cash cow for ‘Wall Street’ https://drwilda.com/2011/11/21/online-k-12-education-as-a-cash-cow-for-wall-street/ […]

  2. For-profit colleges: It’s all about the $$$ « drwilda - October 16, 2012

    […] In the 2001 paper, Thoughts on For-profit Schools, Levin wrote: The fact is that we know little about how for-profit schools will operate and how they will affect students and other schools. At least three major questions have yet to be answered satisfyingly: • If schools are a potentially profitable endeavor, then why did entrepreneurs wait so long to enter the market? Is there something unique about schooling that makes it difficult to earn a profit? • Now that we do have for-profit schools, how will they achieve cost savings? Will they bring fundamentally different approaches to education through curricular and technological innovations that will “break the mold”? • Even if they are more effective or less costly, or both, will they earn profits that are comparable to the returns on other investments? http://www.ncspe.org/publications_files/7_OP14.pdfhttps://drwilda.com/2011/11/21/online-k-12-education-as-a-cash-cow-for-wall-street/ […]

  3. Do online badges give a more realistic appraisal than grades? « drwilda - October 21, 2012

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  4. Sudy of Washington community college students: Online college courses could widen achievement gap | drwilda - February 27, 2013

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