Education also really is several separate industries rather than a monolithic one. K-12 has a very different dynamic than higher education and those industries have a much different dynamic than corporate training. Consumer education, which I would consider to be stuff like Kaplan Test Prep, Lynda.com, LiveMocha, etc. is essentially another industry albeit with some overlap with the others. And consumer ed is probably the toughest one to make money in, at least in the U.S.
One of the biggest challenges with education companies in the United States is that I feel we've almost been conditioned not to pay for education. Public K-12 education (which is the vast majority of consumption) is paid for by the state. Higher education is heavily subsidized by the government and when it is paid for by the consumer it typically comes in the form of student loans. And then we you become an adult your employer steps in and pays for the majority of your education/training.
So while people will spend lots of money for clothing, entertainment, food, etc. it's tough to get people to pay out of pocket for education. The industry that is most similar in this respect is health care and end the dynamics in these two industries are much the same. I'd highly recommend that anyone wanting to understand these industries more deeply read Disrupting Class and The Innovator's Prescription, both by Clayton Christensen.
This is a great point, and something pundits and the author of this article don't explain in sufficient detail. Comparing a company that offers online courses to end consumers and a company selling software a a service to districts and universities is nonsensical. Is it safe to say that the education market on whole is a challenging environment? Sure. But beyond that, without specifying a narrow segment, generalizations are useless.
I suspect if you could beat state/community colleges on quality and at least match them on cost I think you could be successful. I just have no idea how a company actually beat them on quality.
"Why Companies That Deliver Incremental Improvement To Educational Services Already Provided Free To Most Rich-World Citizens Do Not Generate Sufficient Returns At Scale To Justify VC Investment."
Quick summary: Union politics can rear its head in unexpected ways. :(
There's probably good money to be made in this space. Goodness knows there's plenty of low-hanging fruit. But you may run-up against some terribly well-entrenched opposition.
Then how are obesity rates at all times highs?
Actually, I really want to go one step further, and suggest giving up their degrees in order to be really educated!
I do think that this American anti-intellectualism is a relatively new (and hopefully temporary) thing. I mean, if you can earn a good living working at a factory, you do what you are told, right? you don't go changing the system 'cause you think it's better. But really, I think this is largely a post-great-war thing, and hopefully it will fade.
Really, as far as I can tell, schooling, if anything, makes this problem worse. You ever hire someone out of college? Most of them seem to think they should do what you tell them to do, no more and no less. And they expect fairly explicit instructions.
The self-taught seem to be much more open to "hey, I need task X done. Go figure it out"
Most of the people I see shouting about anti-intellectualism have degrees, sure, but most of them are degrees in art history or other fields that are not applicable to creating or fixing anything, so maybe I /am/ the American anti-intellectualism that they speak of, because I value knowledge based on what it can be used to achieve, rather than knowledge that indicates belonging in a certain class, and because I don't have a lot of respect for degrees. I mean, I have a lot of respect for people who learned useful things and got a degree along the way... but I don't see the degree as primary; I see the learning as primary. I see a degree in art history a little bit like buying a lexus; It shows that you are a person of leisure.
- 'jocks' are celebrated while 'nerds' are persecuted at the high school level, and to a lesser extent at the college/university level.
- Someone that's smart is looked down on because they 'ruined the curve' for everyone else by acing a test.
- College/University are culturally seen as one large drunken orgy.
It's a huge problem. My understanding is that the definition of "Ivy league college" actually refers to what colleges play sports against what other colleges. An absolutely insane way to rank schools. Hell, we subsidize sports stadiums as adults; stadiums that cause significant traffic problems, and if you ask me, attract an undesirable element.
This is actually one of the things I really like about silicon valley; I don't know anyone who doesn't work a service job who is really into sports.
>- College/University are culturally seen as one large drunken orgy.
Wait, you mean it's not a large drunken orgy? I mean, I'm half joking, but outside of the math and engineering majors, I'm under the impression that a lot of partying happens.
But this goes back to my own prejudice against liberal arts majors. Does that prejudice make me an anti-intellectual?
> My understanding is that the definition of "Ivy league
> college" actually refers to what colleges play sports
> against what other colleges.
The use of the phrase is no longer limited to athletics,
and now represents an educational philosophy inherent to
the nation's oldest schools.
> I don't know anyone who doesn't work a service job
> who is really into sports.
> But this goes back to my own prejudice against
> liberal arts majors.
I don't think passion has as much to do with it as you seem to think. I mean, sure, to be great, passion is required. But passion alone is not sufficient. You also need great skill to be great.
The problem with going into entertainment (and I'd class both art and sports as entertainment.) is that the way the economy currently works, sure, a great artist produces a lot of value. But a mediocre artist? A mediocre artist produces coffee.
Engineering, on the other hand? or accounting? or, really, most other professions? Sure, the mediocre are worlds away from the great, but they still produce a reasonable amount of positive value.
My point is just that if you spend four (or six or eight) years of your life training to do something outside of entertainment, you have a pretty good chance of being able to produce a reasonable, if not great amount of value when you finish. More value than you could produce before you began the training, at any rate. If you study entertainment, on the other hand? you have an extremely small chance of producing a huge amount of value, but most likely you will not be capable of producing more value after you leave school than when you entered school.
So yeah, that's why I'm saying a degree in the arts implies a life of leisure; it implies that you have the resources to spend years training for a job that will not be able to support you when you finish.
I mean, as far as luxury goods go, it's pretty cool; I certainly find someone who spent a few years studying history to be quite a bit more interesting than someone who, say, has a really expensive car. But, for those of us without rich parents? in the end, we need to work for a living. School loans can't be discharged by bankruptcy.
I think compensation for Engineers is the opposite of compensation for artists; Really great Engineers, unless they also act as businesspeople, don't earn a very large multiplier on what a mediocre Engineer earns. I mean, we're talking maybe 3x, when you account for location disparity. I personally think this is a market inefficiency; I believe a really great engineer produces hundreds, if not thousands of times as much value as a mediocre Engineer. That disparity of pay between the average and the great, though, actually exists in the entertainment world. The great artists make huge sums, while the average artist gets paid unskilled labor rates.
It's interesting, 'cause this might actually explain the Engineering market inefficiency.
The thing is, when you start your training, you don't actually know if you can become great, and I don't think you'd have many people going through the training to be Engineers if the average Engineer made day labor rates, even if the pay for the top people was so high as to make the total expected return similar to what it is today. Looking at it from that perspective, it's not a market failure, it's Engineering students trading off upside for a improved average case.
Slight disagreement on the quality/cost problem. The big challenge isn't having a market. One of the reasons there is so much competition is that people will look at the leading players and think, "if they can sell that for $500 then I can make a lot of money with a better and cheaper product." This encourages a flood of really low quality education products that saturate the market and create a barrier to entry for new startups.
The thing most founders don't realize is that most of the revenues from high-priced products are used to fund advertising and customer acquisition strategies, so competing on price is very difficult because - ironically - it hurts your ability to scale in the short-term. This makes bootstrapping tough because if you charge the prices necessary to get users you have to compete at the same level of quality as the established players, while if you charge less you will have trouble getting users. Meanwhile, the extreme competition makes SEO near impossible (our organic search figures are dismal - our growth is ALL word of mouth).
This is why there is so much snakeoil in the industry: distribution trumps quality. The companies that survive tend to be the ones that take a shotgun approach to maximizing visibility rather than actually focusing on how to provide a better education. I personally believe focusing on quality at low cost IS a winning approach because once you achieve dominance you undermine the pay-to-advertise business model, but you have to figure out how to cover your costs and grow into that position organically. And this is simply not possible for startups that have expense structures that require them to get funding.
I've been told by public listed companies not to enter our market because they were going to own it in X years by giving away both the cow and the milk. I've seen competitor after competitor flame out because they thought getting users would be easy, produced crap and discovered that no-one came. But if you can produce something that people use and care enough about to help spread word, you can do it.
You're selling to the parents, to the school district, who have different motivations than the user.
they offer dance lessons, after school at elementary schools, or during the day at preschools. depending on the school, they charge the parents of the children, or they charge the school directly. the money they earn is more than enough to higher dance instructors to teach for them and to pay their overhead.
i'm talking to her about hiring programmers to come in once a week and teach the kids algorithmic thinking - i can imagine a ton of parents who'd be willing to pay $10 a week to help their kids learn to program. if you teach a one hour class five days a week, and each class has 30 kids, that's $1,500 a week.
most of the thinking in this space - especially on getting more people into programming - is way too focused on people in high school and early college. at that point, their impression of programming is mostly set. if you want to really change the world, you've got to start with they're still excited about learning and too young to worry about being cool.
Put together he is claiming that middle class people are not, on average, well educated. There is also an implication that lower class people are not well educated either.
We are left, by inference, with the claim that it is only the upper class who is well educated. Perhaps we should define what it means to be well educated before proceeding or accepting any further claims in the article.
Educated is Univ KS BSCS I got for $600/semester
Well Educated is MIT Masters of CS which costs what $10's of thousands
For me being well-educated is about expanding one's scope of knowledge beyond a myopic mastery of a particular niche to an understanding of the power and potential of their craft, in the context of current society as well as history.
How can I use what I know to improve things, and what have others tried before? What knowledge can I borrow from other fields to be more effective?
Also, your comment Can't say the same for Yale graduates I've met, most who contribute little to society and are for the most part ignorant seems unnecessarily harsh.
The point is I only know a limited number of people from any particular university, as does anyone. From what I have read of Mr. Spolsky, a Yale graduate, he is well educated, but I haven't met him so can't speak too much to that.
It seems it is of intrinsically questionable validity to make sweeping generalizations about whether graduates, attendees, and those merely accepted by any given university are well educated.
Again we end up asking what it means to be educated in the first place. Different people may have different opinions of this as well. Clearly there will be some who believe it has to do with whether one has been to the same class of university as themselves, regardless of what they gained from it. This seems like specious reasoning though.
First of all, what's being referred to here as "education" is really dozens of different categories of products -- it's very challenging to generalize about all of them.
Secondly, the author asserts that building a meaningful education business will take 20 years. It's interesting that he makes that assertion since he didn't spend 20 years on his own education business. But consider that every meaningful innovation always seems like it's 20 years away. (Indoor plumbing probably seemed at least 20 years away the day before it was invented.) But then, as soon as something is invented, it immediately seems obvious and commonplace. That's how innovation works; that's why it fascinates us.
The big problem with education is that most investors work on pattern recognition, which is to say they want to see some variant of something they've seen before. So they fund shitty businesses that really act more like media companies or software companies because they think that's how they'll achieve scale. And it's unsurprising that students are indifferent, because students want to be actually educated and your highly scalable education business essentially rickrolled them.
The author has mentioned very few education companies outside of the standardized tests/textbooks/tutoring model. Companies like Wireless Generation, Khan Academy, P2PU are the ones that are really disrupting how education is delivered. Another education company called Zinch which was purchased by Chegg turned the admissions process on its head. These are the type of innovations that education industry will have. It will be sad if we all sit around with our arms crossed thinking that it can't be done for the next 20 years because the technology is ripe and so is adoption...
To compare, look at what's happening in the music or book industries right now. It's hard to find a retailer that sells CDs today because that business has been disrupted.
It's far from clear to me that KA is actually having that "disruptive" effect, or that they will be able to do that in the future.
Wireless Generation - They have been around for 10 years and were not profitable at the time of sale. http://finance.fortune.cnn.com/2010/11/23/news-corp-deal-for...
Zinch - didn't really get off the ground. I know the founder and others on the team. Really great folks doing some great work. Part of the reason they sold is that getting any serious traction and turning it into a large business is going to take many many more years.
Put it another way. In the same amount of time that Wireless Generation was founded the rest of the Internet got: Facebook, iOS, YouTube, Wikipedia, DropBox, and much more.
There is a big difference between an industry being nascent (as the PC industry was in the 70s) and the fundamental dynamics in the industry creating certain types of companies (as is the case with education and some other industries).
People tend to forget today that color TV was bleeding edge tech in the 60s and what CTW did back then was amazing. I also think that anybody who wants to be a CEO should study what Joan Ganz Cooney did at CTW, and more importantly what she didn't do: She found the best creative talent out there and made it a point to not get in the way. She also made it a point to not base her organization in Hollywood, and because of many of her choices kids today are still watching and learning from Sesame Street.
What I would like a startup to offer me is this: Buy my product/service, invest your time and energy as well as you can learning the subject, and in return we will make you as employable as humanly possible.
Maybe work backwards from that. Just my 2 cents.
Let's talk data. How many students spend money on educational services? 15% of students take SAT or ACT prep outside of school. By the time a student is 16 and has some discretionary spend and has some influence of a parent's spend. If students took their spending power/influence and prioritized educational spend you would have a lot more than 15% of students getting test prep outside of the school.
Consumer spending is huge. Consumer spending on education is large. Consumer spending on education where the primary driver is quality is much smaller.
There seems to be a reasonable amount of interest in what used to be called a liberal arts education.
"The Great Courses was founded as The Teaching Company in 1990 by Thomas M. Rollins, former Chief Counsel of the United States Senate Committee on Labor and Human Resources."
On the basis of The Teaching Company bringing in less revenue than one school district in a single state, more than twenty years after it was founded, I would have to say that the submitted article's main point is correct, that there isn't a lot of big money for private enterprise in education in the United States.
Note on background knowledge: I have bought a few sets of videos from The Teaching Company, as has my local homeschooling support group. Our local public library system also buys them. But the local school district spends more money in a year than the full revenue of the company even at that.
On esimply can't compare legally-mandated, tax-derived expenditures to cash freely given to a private enterprise (which is their revenue). Not only that, the proper measure in both cases is outcomes per dollar spent, not total expenditures. For the business, this is return on equity. For a school district, it's educational outcomes vs. dollar inputs.
This is not to say that every company in the education sector is a great business; there are lots of so-so and outright horrible businesses in many sectors of the economy. But comparing a private enterprise to a tax-supported government entity doesn't make that point clearer.
Thanks for posting!