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Money & Finance Opinion

1996: Entrepreneurship Reaches a Critical Mass in Public Education (I)

February 14, 2008 5 min read

This is the fourth in a series addressing the questions implied by Alexander Russo’s statement:

“Social entrepreneurship is everywhere these days…. And of course it’s a big buzzword in certain education circles as well. I still don’t know what it means.”

Two trends in state legislation made entrepreneurship possible in public education. A top-down standards and accountability movement led to laws setting benchmarks for what students should know and be able to do, requiring tests to show that students meet the standards, and establishing consequences for schools where average student performance falls below some level. A bottom-up charter school movement induced the passage of laws establishing an alternative public school system based on private initiative. One can argue about the teeth in state accountability legislation and the amount of space charter laws created for the private sector. Regardless, the first put some premium on products, services and programs that could improve student performance; the second permitted a modicum of competition in the supply of public schools.I would peg 1996 as the critical confluence of the two movements and the moment of critical mass for entrepreneurship in public education. That’s when governors and “big business” leaders formed the standards champion organization Achieve, and when the states most favorably inclined to the charter school had passed their legislation. It’s also the year New American Schools and its Design Teams – joined by several other comprehensive school reform projects, embarked on their transition to a dissemination strategy based on fees, and Memoranda of Understanding with a total of twelve states, groups of schools districts, and individual school districts to create school-level markets for the new providers. And it’s roughly the time the first sites managed by Edison Schools opened as charter and contract schools. Finally, by this time Teach For America – recruiting top graduates from the Ivies, had given several thousand alumni a formative experience in the nation’s worst schools, creating a pool of potential leaders with strong interest in getting back into that game.

Before the 1990’s, there was no equivalent to a commercial entrepreneur within public school systems or the publishing houses and, for all practical purposes, no entrepreneurial class serving public education. The 1990s saw the expansion of commercial entrepreneurship into the public school space created by law. Opportunities opened up to create charter schools, manage charter and district schools, sell schools and districts means of reinventing whole schools, and replace textbooks with teaching and learning programs integrating professional development, materials and technology. On the for-profit side, this is the roughly birth period of today’s EMOs Mosaica (1997), National Heritage (1995); and the bright young things everyone investing in k-12 watches – Scientific Learning (1997), Carnegie Learning (1994), and Learning.com ( ). This was a period of relatively rapid growth but, remember, the base was near zero.

There’s no doubt that those who formed the for-profits were commercial entrepreneurs. In each case the founders brought some combination of intellectual property, cash and sweat to the enterprise, reflected in an ownership stake. For a long time, most founders had the power to close the operation down on their own, although they’d have a lot of creditors to satisfy. Even today, after raising additional capital, many founders have what corporate law and Wall Street would consider a controlling interest in their firms.

But this series of postings is about “social” entrepreneurship in public education, not commercial entrepreneurship. Bottom Line: If you formed a for-profit enterprise to satisfy an unmet need in public education, and control it – you are a commercial entrepreneur. If you had control but sold it or lost it to your investors, you were a commercial entrepreneur. Maybe you could have made more money doing something else, maybe felt good about doing well financially by doing social good, but your obligation to your investors was to do well, and that’s the scorecard your creditors employed whether or not you shared ownership with others. That gig is old-fashioned commercial entrepreneurship.

This is not to deny that a lot of people who attracted venture capital were commercial entrepreneurs in name more than intent. I recall quite vividly the conversation in Boston with a member of EMO Advantage Schools’ founding management team not too long after their initial funding. Remarkably, he was the chief financial officer and arguably the guy who clearly wasn’t a “policy wonk.” He told me that the organization could not maintain school quality at the growth rate expected by – and promised to, the investors. He lamented that if they slowed the growth rate the founders would lose equity.

This fellow was gone in a year or so. His personal social commitment outweighed his commercial entrepreneurial obligations. Since I started watching the emerging school improvement industry from RAND in the early 1990’s, he illuminated what I’ve since called “the tyranny of the business plan.” He is hardly the only disillusioned socially-conscious participant I have met with experience in a for-profit enterprise serving public education.

Nevertheless, a definition of “social entrepreneur” encompassing the proposition that traditional entrepreneurs involved in commercial enterprise serving public education is just so much spin. These are only “social” entrepreneurs to the extent that Henry Ford and Charles Lindberg were “transportation” entrepreneurs. The adjective describes the field they work in, but alters nothing about their traditional functions, status, or activities.

Next: The people called “social entrepreneurs” found education nonprofits circa 1996, How are this bunch and their social enterprises materially different from the founders and the nonprofits they formed before entrepreneurship came to public education?

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