The education industry “is significantly undercapitalized and poised for significant growth”

by David Safier

It's essential to understand the link between the current "education reform" movement and the profit motive, generally referred to as the corporatization of education. The fact is, hedge fund managers and other investment giants are learning, if they play their cards right, there's gold in them thar schools.

Case in point: The Education Innovation Network, a cooperative venture between major players in the education investment network and ASU. The website of the Education Innovation Summit is part of the asu.edu network. The co-chairs are Michael Crow, ASU President, and Michael Moe, a hedge fund guy "called one of the best stock pickers in the country by BusinessWeek magazine" who is going heavy into the education market.

Listen to the language on the website explaining the concept behind EIN:

By assembling the best talent with actionable ideas and applying business expertise to accelerate change, we can radically improve outcomes for our children.

[snip]

[Education entrepreneurs] face challenges in identifying and evaluating investment opportunities.

[snip]

Education is a $3.8 trillion industry globally, representing 6.3% of global domestic product, but only 0.1% of global market capitalization. This gap suggests that the industry is significantly undercapitalized and poised for significant growth. Education innovation, as a subset of the overall education industry, has enjoyed rapid growth in the US, particularly in the past four years. Since 2007, more than $1.1 billion of merger and acquisition (M&A) activity in education innovation has taken place, compared to a total of $218 million in the preceding four years (2003–2006).

The velocity of the investment in the education industry is rapidly increasing. From April to November 2010, high-profile venture capital firms completed 19 deals with a total value of more than $225 million in education innovation companies. [boldface added]

In another post, I'll write about a recent revelatory article about ways for-profit online learning companies have used the political system to further their interests and their bottom line.To understand the "education reform" movement, it's essential to understand the involvement of big money in the project. This isn't a blanket condemnation of everything they propose. Obviously, business can make contributions to education innovation. But it's a caveat emptor. We are being sold "education reform" as a commodity. To be careful consumers, we have to understand the profit motive and read between the lines.