Earlier this
year, LeapFrog Enterprises, the educational-entertainment business, sold itself
for $1 a share. The deal came several months after LeapFrog received a warning
from the New York Stock Exchange that it would be delisted if the value of its
stock did not improve, a disappointing end to the public life of a company that
had the best-performing IPO of 2002.
LeapFrog was
one of the very last remaining of the dozens of investments made by Michael
Milken through his ambitiously named Knowledge Universe. Founded in 1996 by
Milken and his brother, Lowell, with the software giant Oracle’s CEO, Larry
Ellison, as a silent partner, Knowledge Universe aspired to transform
education. Its founders intended it to become, in Milken’s phrase, “the
pre-eminent for-profit education and training company,” serving the world’s
needs “from cradle to grave.”
Investors
aiming to start an education revolution have, with regularity, lost their
shirts.
Knowledge
Universe businesses included early-childhood learning centers, for-profit K–12
schools, online M.B.A. programs, IT-training services for working
professionals, and more. Milken’s penchant for secrecy makes a comprehensive
assessment impossible—most of the businesses were privately held and some were
sold to private buyers for undisclosed sums. But of the companies about which
there is public information, most, like LeapFrog, ended badly. Education
remains untransformed.
Milken was far
from alone in the belief that education could be revolutionized through radical
new business models. In 2012, the media mogul Rupert Murdoch and the former New
York City schools chancellor Joel Klein established the Amplify division within
News Corp. At the time of his initial investment, Murdoch described K–12
education as “a $500 billion sector in the U.S. alone that is waiting
desperately to be transformed.” Their idea was to overturn the way children
were taught in public schools by integrating technology into the classroom.
Although inspirational, the idea entailed competing with a series of
multibillion-dollar global leaders in educational hardware, software, and
curriculum development. After several years and more than $1 billion, with no
serious prospect of ever turning a profit, Murdoch and Klein sold their venture
for scrap value to Laurene Powell Jobs, Steve Jobs’s widow, last year.
Read more
on... Why For-Profit Education Fails
Author: JONATHAN
A. KNEE
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