Saturday, August 05, 2006

A New Breed of Higher Education Entrepreneur

By Richard Vedder

With the rapid growth in for-profit higher education, there is a new breed of successful entrepreneurs. Of course the most successful of these ventures has been the University of Phoenix (Apollo Corporation), whose founder, John Sperling is a certified billionaire. To be sure Apollo has had a series of problems in the past year, such as declining enrollment growth, management changes, and investigations into stock options, but the company still has nearly an $8 billion capitalization and makes tons of money.

Watch out, however, for the new kid on the block, Randy Best. Texas-based Mr. Best has made and lost many fortunes over a lifetime in a wide variety of businesses. He is the only person I know who ever made really big money in K-12 education. Most big efforts (e.g., Edison Schools) find in nearly impossible to compete with public schools that, for whatever their defects, are "free" to the consumer. Mr. Best focused on a reading program, not trying to run an entire school system, and he and his partners made several hundred million dollars when he sold out a year or so ago.

Mr. Best is back at it again, in higher education. His most promising venture, perhaps, is Early College, an Internet-based program designed to get high school kids to take college courses while in high school, condensing the 8 year (which often turns out to be 9 or 10 year) high school/college experience, saving students money, preparing them for traditional university study, and making better use of their time. He has made severalf shrewd moves. Mr. Best hired such education powerhouses as Rod Paige (former Secretary of Education), Mike Moses (who ran Texas's schools), and Reid Lyons (a much admired researcher and senior staff person at the Department of Education). He bought a struggling Catholic liberal arts college, some claim in order to get accreditation (paying several million dollars, maybe a sort of an initiation fee into the higher education fraternity). And, knowing consumers would worry about the quality of his product, he brought in a respected external examiner, the ACT, to test kids to see if they have learned college-quality material in an acceptable manner. His program is getting started now, but I expect it may be a real winner. Charlie Reed, head of the California State University system, characterized the senior year in high school as a waste of time in recent testimony before the Higher Education Commission, and Randy Best is trying to make that "dead time" far more productive. As a father of a kid who got an "A-" in a college English course while still in eighth grade, I suspect Randy Best is on to something. Some in the HEE (Higher Education Establishment) are critical of his efforts, but I think higher education needs more efforts like this, not fewer.

Randy is also aware of the dismal state of America's colleges of education, and the huge market out there for graduate degrees in education by existing or wannabe teachers. So he has started also the American College of Education on-line. Beyond that, he dreams of offering college degrees globally at a very low cost (less than two thousand dollars a year), using modern Internet technology and research-backed approaches to teaching.

I became familar with Randy and many of his able lieutenants when he asked me to do some major consulting work for him a year or so ago. In the interest of full disclosure, I even invested a nominal amount of my own money in this new venture. So I guess I am biased. But I think it is entrepreneurs like Randy Best who increasingly will force the existing traditional educational institutions to become more innovative, more cost-effective, more willing to demonstrate that their students are learning (e.g., by having some sort of external evaluation of their progress). The for-profit sector hopefully will use its profit-based incentive system to innovate, to be more productive, and to drag, perhaps kicking and screaming, traditional higher education into 21st century.


Wyld said...

I thought I remembered that part about the small Catholic university. In the interest of full disclosure, of course, here's the article from the the Chronicle. I was led here by Marginal Revolution, and now I guess I'm a little disappointed.

Lady Justice said...

People need to be very careful about some of the for-profit schools, though. A handful have faced fines for violating federal financial aid rules, and if you've followed what has gone on with Career Education Corporation out of Hoffman Estates, Illinois, you'll understand the word of warning.

As innovative as they sound, no one really knows if Just Grab Your Mouse And Click U is going to be in business or totally shut down 10 or 20 years down the road.

I mean, think about it. I'd rather go to a real class in a real bricks-and-mortar university than play roulette with the value of a degree that I spent thousands for.

I'm not saying that no one should attend an online style, for-profit school, but there's still a bit of a cheese factor attached to some of them, especially in the wake of the Career Education Corporation fiasco.

Just be careful.

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