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Why Education Companies Do Not Succeed (avichal.com)
230 points by avichal on Oct 7, 2011 | hide | past | web | favorite | 62 comments



I think article is essentially right on. It's very difficult to succeed in the education space and, at a minimum, it typically takes a long time to succeed. If you have the patience you can definitely make money in the space (witness Wireless Generation as an example) but there are very few quick wins.

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.


> Education also really is several separate industries rather than a monolithic one.

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.


Hi JByers -- blog author here. I don't think the comparison is non-sensical because the common thread tying all of these different segments together is the end buyer's perception of value. If you as the builder or service provider or technologist think that the value you're offering is higher quality you will have a slow road. If you think it is saving cost/time to get to the same level of quality you will scale quickly. This holds across segments as the examples in the post illustrate -- Chegg, University of Phoenix, TutorVista, etc.


I would say the distinction is most important for considering what the competition will be. There are already plenty of people who consider higher education an investment, but also factor cost and risk for more significantly than the sort of entrepreneur you describe. Many middle-class people value quality but moderate their exposure to risk by choosing State and Community Colleges. They perhaps sacrifice some quality in return for "good enough" and a $20,000 loan instead of a $60,000 loan.

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.


There have been tough barriers to entry set up by pricing for a long time in "education." If some providers have exclusive subsidies from taxpayers, it is difficult for other providers to compete. "In modern times [as contrasted with ancient times] the diligence of public teachers is more or less corrupted by the circumstances which render them more or less independent of their success and reputation in their particular professions. Their salaries, too, put the private teacher, who would pretend to come into competition with them, in the same state with a merchant who attempts to trade without a bounty in competition with those who trade with a considerable one. . . . The privileges of graduation, besides, are in many countries . . . obtained only by attending the lectures of the public teachers. . . . The endowment of schools and colleges have, in this manner, not only corrupted the diligence of public teachers, but have rendered it almost impossible to have any good private ones." -- Adam Smith, The Wealth of Nations, Book V, Part 3, Article II (1776)


FTFY:

"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."


Every time I think about the education space, I think back to a couple of Steve Krenzel's posts about his startup's experience.

http://news.ycombinator.com/item?id=1343380

http://news.ycombinator.com/item?id=1343564

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.


This article basically centers it's argument around the fact that people in small town america don't need an education to survive. With increased automation and robots, that is quickly changing. I bet in 30 years we'll see a complete shift in American culture where education is absolutely necessary just to survive.


The reality will change in America long before the culture will. The Asian obsession with education is ingrained from literally over a thousand years of systemized, central testing. I have my doubts that The American middle class (or, those who were once the middle class) will go from borderline anti-intellectual to embracing the need for education, in a mere 30 years.


That happened with exercise. Suddenly, in the 1960s and 1970s fitness became a massive priority for millions of Americans. The paradigm shift happened almost immediately. 50 years ago you would only work out if you were an athlete or a soldier. A value was placed on wellness much like a value will eventually be placed on education. Also watching parents sit in unemployment lines because the factory closed is serving as a wakeup call to many people. Don't overestimate the Asians either -- their concept of education is quantitative (i.e how high we're your scores or how many vocabulary words did you learn) while Americans tend to be more qualitative. There's a reason innovation in places like China depends on copying everyone else. What major startups in China have been built based on an original idea? Very very few. There are more successful startups based on new ideas in the Bay Area than in the entirety of China. The successful Chinese companies are almost always rehashed versions of American products. Education isn't the driving force behind success in China -- at least not Chinese education.


50 years ago the average person did more working out as a matter of just living his life than the average person today does doing half assed cardio on an elliptical machine.


> A value was placed on wellness much like a value will eventually be placed on education.

Then how are obesity rates at all times highs?


The diet changed, and more then compensated for the exercise change.


Is this exclusive of China? USA seems to be the exception (in the other direction), not China. Most Internet startups are from the USA, why? It's probably because of several causes: the cultural factors that you mention, of course, but also because it's easier to create a company than in other countries, because there are VCs supporting this kind of company, and I'd say because there is a very important internal market willing to buy the products.


Voice from a educator from China! You are right, but we are trying hard to change this. First thing I want my students to do is to forget about their scores.

Actually, I really want to go one step further, and suggest giving up their degrees in order to be really educated!


"Never let your schooling interfere with your education" - there is a big difference between educating yourself for the real world and educating yourself for a test; this difference, I think, can possibly give the Americans an advantage.

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"


I think you may be conflating anti-intellectualism and need for structure. The need for structure is probably newer, as people grow up in an increasingly structured society. On the other hand, I think there is an American strain of anti-intellectualism that goes much deeper, to our national myth of "taming the frontier". We don't need no diplomas out here on the frontier!


Maybe. I dono. I don't automatically equate diplomas to learning. I mean, sure, lots of people learn things at school... but lots of people get degrees without learning anything useful, too, and I'm not sure why, say, an art history degree should be respected any more than four years spent backpacking around the world.

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.


Some examples of anti-intellectualism in-grained into American culture:

- '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.


You've obviously never been to a Korean university. The orgy part is less prevalent but certainly not the drunkenness and laxidasical attitudes. I went to both a US university and a Korean one and the work ethic of American university students is much more sturdy than Korean university students. The difference between Asia and the US (one of them) is that Asian students bust their backsides to get into school while the Americans busy their asses once in school. I'm generalizing of course, but at least in Korea, getting into a top school is more important than what you do once you're there. There's a reason that so many Asians want to go to US schools -- and it isn't for the basketball teams-- the quality is much much higher in the States (and UK) than Asia.


I know that people do study and learn things at university in the US, but culturally we tend to elevate going to a 'party school' above going to a school that is known to deliver a good education.


That may be the anecdotal truth, however nearly any student in the States would prefer to go to MIT or U of Chicago over San Jose State, though San Jose is far more of 'party school' than the aforementioned. Students do care about quality but a party school doesn't necessarily equate to a less serious school. The issue isn't party vs. academics it's about work-life balance. Medical students party very profoundly, however there's no doubt that they value their academics highly. As a current high school teacher, I have nearly daily conversations about college choices and the party aspect is way down on the list. Given a choice between a party school and a top-flight academic institution, nearly all of my admittedly small sample would pick the better academics. Of course, I admit to some selection bias because I'm an AP teacher and my students are far more driven than the 'typical' student.


>- 'jocks' are celebrated while 'nerds' are persecuted at the high school level, and to a lesser extent at the college/university level.

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.
According to Wikipedia:

  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.
There are downsides to the polar opposite though. Personally, I think the balance is to love playing sports (or possibly going to friends' sporting events to cheer them on), rather than to just love watching them.

  > But this goes back to my own prejudice against
  > liberal arts majors.
I think you're missing the distinction between someone that pursues are major because they want to coast through university vs someone that pursues a major because they have a passion of the subject.


>I think you're missing the distinction between someone that pursues are major because they want to coast through university vs someone that pursues a major because they have a passion of the subject.

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,[1] 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.

[1]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.


No, the article says that even if in 30 years we'll see a world where education will be absolutely necessary to survive, small town america isn't aware of this fact, or ignores this fact for more short-term matters.


My view is a bit different: education companies don't succeed because they don't have a market. People who are motivated enough to actually engage in online education can do it for free (MIT courseware, as one example). People who aren't, won't sign up. Or if they do they won't stick with it. So the only way to make money in online education is to appeal to people who won't ever really benefit, and take their money.


I run an education company in the consumer space.

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.


That may apply to end-user education. That is rarely the individual buying the education.

You're selling to the parents, to the school district, who have different motivations than the user.


a friend of mine has an education startup that's doing quite well, considering she spends maybe a few hours a month it.

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.


Note that the article is talking about VC-scale (think 10s/100s of million in revenue).


He makes the claim: "Well educated people think about education as an investment." He later says: "The average, middle class person thinks about education as an expenditure, not an investment."

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.


When you're talking about the size of markets you make generalizations. Inferring that the lower and middle classes of America are not well educated is not to say that none are. However, if you're willing to accept that "smart" and "well educated" are two different things, it would be pretty hard to argue that the poor or middle classes of America are well educated, in general.


You dropped "well". Well Educated and Educated are not equivalent.

Educated is Univ KS BSCS I got for $600/semester

Well Educated is MIT Masters of CS which costs what $10's of thousands


I would argue that being well educated is not about the name of the institution, but the breadth and depth of knowledge. A master's degree in CS from a top school does not make you well educated without the insight of how to apply it. That insight comes from more broad study in humanities and the arts.


No, in my experience it's mostly about the competence of your peers and the expectations of your professors. Decent schools teach you about operating systems. Great schools make you write an operating system and don't care when you bitch that it's "too hard" and takes 20 hours a week for that one class.


Mastery through rigor is one interpretation.

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?


Thanks for the feedback. The post wasn't intended to make a subtle distinction with or without the "well" qualifier. To make sure there is no confusion, I edited the post, prepending the well qualifier to each instance of educated. I made no other edits. This way we can consider the points as they are without concern for whether the qualifier is present.


What would a few terms at Reed College be?


Interesting question. I know quite a few Reed graduates, they all fit my personal definition of extremely well educated. I'd say the same for graduates of St. John's Colleges as well. In both cases though it seems the well educated part happened before they even arrived at either school. It's more their temperament and their depth and breadth of true knowledge not just trivia, and their interest in developing themselves and assisting those around them. Can't say the same for Yale graduates I've met, most who contribute little to society and are for the most part ignorant. Again we are left with addressing what does it mean to be educated. I might argue that ignorant people are not educated. But what does it mean to be ignorant? There's a lot to such a question and sometimes it's easier to say I know it when I see it.


I think davidw was referring to Steve Jobs, who was registered for just one semester at Reed in the 70s and then hung around for a few more semesters sitting in on whatever classes interested him (including a course on typefaces, which came back into his life when he was working on the Macintosh). He talks about it in the Stanford 2005 graduation address:

http://www.youtube.com/watch?v=UF8uR6Z6KLc

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.


I'll presume that Mr. Jobs is well educated.

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.


Just a couple of notes on K-12 public education spending, for additional context: (1) The vast majority of the public funds go to teacher salaries and benefits. In most districts, as little as 5% of funds are available for new technology, pilot programs, or anything innovative. That said, small percentages can go a long way. New York City, for example, has an annual budget of ~$24 billion. (2) Per student funding is a complex mix of federal, state, and local dollars. Federal dollars are designed to even the playing field, while local dollars exacerbate socioeconomic differences. The lack of transparency around these formulas is a significant barrier to disruption--many families don't have an accurate picture of how their school's resources compare to the resources of schools in the town nextdoor, which would be a first step toward starting to think about what your money should really be getting you. Part of the reason the school choice movement has been so powerful is that it sheds light on per student funding. With the increasing number of blended/ hybrid learning options, I'm curious to see whether there's a push to give families even greater control over the per student dollars allocated to their children. If you can take your child's ~$10-13K and go to a charter school, why can't you decide to dedicate half the funds to online courses and half to live instruction?


Anytime anyone advises you that something can never work, you should run screaming. "Never" is an extremely long time.

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.


I couldn't agree with you more. What you just said reminded me of how IBM first reacted to personal computers. The crux of innovation is disrupting the existing model. Thats what Apple did with its iPod and iTunes product.

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...


It's not at all clear to me that Khan Academy is really "disrupting education". They may be awesome and all, but when an industry is disrupted something more fundamental is at work -- other businesses are displaced and shut down, people lose their jobs, and billion-dollar market segments get turned into million-dollar market segments (or eliminated completely).

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.


Khan Academy - I point out the demographics in my post. It supports my point. Also note that it's free and a nonprofit, not a VC backed company.

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).


The reason most geeks fail at this is because they think the answer can be found in technology, but what they always seem to forget is that at the end of the education is about people. By the way if anyone is interested in role model I'd suggest reading the book "Street Gang: the Complete History of Sesame Street" by Michael Davis: http://www.streetgangbook.com

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.

http://en.wikipedia.org/wiki/Joan_Ganz_Cooney


We're sesame street creators the first to use content testing(borrowed from direct mail ads) in a systematic way for children TV ? wasn't this the source of they're success ?


Thank you for this essay - I spent a lot of time researching (higher) education and had similar conclusions - although certainly not as substantiated by experience and well put.


It seems that they are serving the wrong customers. Most edu startups try to sell to parents, teachers, or administrators. Sell directly to the student. Thats one reason I think Khan Academy is having such success.

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.


Unfortunately students have the same mentality and have no buying power on their own. Khan Academy has built a great brand but is free. The demographic analysis in the article supports the thesis -- in my unbiased opinion ;-)


This is an easy excuse but it's dead simple wrong. Students represent a huge amount in spending power, with a huge percentage of that being discretionary spending on non-essential items. Students spend money. Lots of money. Parents spend even more. A lack of a market isn't the reason ed-tech startups fail. It's lack of value.


That's the point of the post. There's lots of money out there. But it gets spent in ways that are different from what the typical entrepreneur and VC expect it to be spent on. The dynamics of how purchasing decisions are made are around cost, not quality.

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.


Counter example: The Great Courses nee The Teaching Company.

There seems to be a reasonable amount of interest in what used to be called a liberal arts education.


I do wish them the best but I don't think it's a counter example. They've been around for 20 years, so if they are huge (I have no idea how big they really are) then it because they stuck it out for the long term.

"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."


According to Forbes, the Teaching Company's sales exceeded $100M/yr as of 2010.

http://www.forbes.com/forbes/2011/0117/entrepreneurs-brandon...

[Edit:typo]


Thank you for mentioning the specific number for The Teaching Company, which allows me to relate it to my local public school district. I was just at a public meeting last week where I learned that my local school district, one of a few dozen school districts in the suburban Twin Cities (and by no means the largest), has an annual budget of $137 million. Other HN participants may want to check what the budget is of their own local school district. (As an update, a Web search I just did turned up my school district's budget documents online.)

http://www.minnetonka.k12.mn.us/administration/Budget/Docume...

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.


I'm sorry, but I don't find that to be an instructive comparison. The money the school district spends isn't revenue from the open marketplace, it's tax dollars, which the law compels residents of the school district to give them. Your school district could be the absolute worst or the absolute best in the world, but the money they spend would be derived from the law, not from free choice of a similar caliber (it's much easier to stop doing business with the Teaching Company than to sell my house and leave the district).

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.


Great article! I have a rabid passion about this space and have been thinking and researching it for last 2 years. The five minutes I spent reading this has taught me more about the space than the last 2 years. I also think this resonates with me because it just shows how hard it will be to be disruptive and how jacked up it really is in the US.

Thanks for posting!


The most important thing that I got from this article was the realization that for most people to live an average life where they are not "screwed" they don't need a very high quality education; an average education which provides good value for money will do just fine.


The key isn't making education 'great' (whatever that means,) but making it easier. Edu-products need to be simple. Try getting a class of 9th graders to login to Basecamp and you'll see what the problem is..




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