
Why For-Profit Education Fails - jseliger
http://www.theatlantic.com/magazine/archive/2016/11/why-for-profit-education-fails/501140/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Best-Of-The-Atlantic+%28The+Atlantic+-+Best+Of%29&amp;single_page=true
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rayiner
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.

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rusty122
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.

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baron816
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.

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sliverstorm
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.

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zelos
_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?

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bsenftner
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.

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sliverstorm
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.

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mcguire
" _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.

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Futurebot
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.)

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qwrusz
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.

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Iv
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.

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Animats
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.

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naveen99
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.

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bandrami
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.

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nixos
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

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st3v3r
Those institutions have money. Elementary schools may or may not have money,
depending on whether they're in a rich neighborhood or not.

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mgamache
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).

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dogma1138
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.

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baldfat
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.

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Jtsummers
> 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](https://en.wikipedia.org/wiki/Nonprofit_organization)

~~~
baldfat
> 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...](https://themerrowreport.com/2016/02/25/whos-raking-in-the-big-bucks-in-
charterworld/)

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...](https://www.philanthropy.com/article/Executive-Pay-Increased-
by/156075)

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baldfat
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.

