Acknowledgments
1. Alasdair MacIntyre, After Virtue: A Study in Moral Theory (Notre Dame, IN: University of Notre Dame Press, 1981).
2. Jerome Karabel, The Chosen: The Hidden History of Admission and Exclusion at Harvard, Yale, and Princeton (New York: Houghton Mifflin, 2005).
3. Nicholas Lemann, The Big Test: The Secret History of the American Meritocracy (New York: Farrar, Straus and Giroux, 1999).
Introduction
1. Although this quote is widely attributed to Dewey, like much conventional wisdom in education, there is scant evidence for its truth. According to the Center for Dewey Studies, the closest sentiment for which written attribution can be found is “Cease conceiving of education as mere preparation for later life, and make it the full meaning of the present life.” http://deweycenter.siu.edu/faq.html, retrieved May 17, 2016. The actual quote may be from a 1912 book by a professor of education at the State University of Iowa. See Irving King, Social Aspects of Education: A Book of Sources and Original Discussions with Annotated Bibliographies (New York: MacMillan, 1912), 274.
2. Edward Wyatt, “Investors See Room for Profit in the Demand for Education,” New York Times, November 4, 1999, 1A.
3. Chris Whittle, interview in “Privatizing Public Education,” 60 Minutes, CBS, November 14, 1999.
4. Joseph Kahn, “Wall Street’s Banks Kept to Hierarchy During 1998,” New York Times, January 1, 1999.
5. Terzah Ewing and Suzanne McGee, “Deals and Dealmakers: Venture Capitalist Allen Gains from as Many as 3 IPOs in a Week,” Wall Street Journal, November 15, 1999, C27.
6. DLJ held shares through the Sprout group, its venture arm.
7. The National Commission on Excellence in Education, A Nation at Risk: The Imperative for Educational Reform (Washington, D.C. U.S. Government Publishing Office, 1983).
8. Alexis de Toqueville, Democracy in America (1835; New York: Library of America, 2004), 46.
9. The field of education has spawned multiple genres of literature, spanning both academic and popular formats. Within academia, serious research has moved well beyond traditional areas of study within “soft sciences,” such as education, law, and sociology, to encompass highly specialized realms, such as advanced economics and neuroscience. See Joseph Stiglitz and Bruce Greenwald, Creating a Learning Society: A New Approach to Growth Development and Social Progress (New York: Columbia University Press, 2014). Popular formats include memoirs from the front lines; policy tracts from long-time sector scholars; and chronicles of scandal, history, political combat, and even scientific research across the full landscape of educational activity from thoughtful journalists. See Benedict Carey, How We Learn: The Surprising Truth About When, Where, and Why It Happens (New York: Random House, 2014); Elizabeth Green, Building a Better Teacher: How Teaching Works (and How to Teach It to Everyone) (New York: Norton, 2014); Dana Goldstein, The Teacher Wars: A History of America’s Most Embattled Profession (New York: Doubleday, 2014); Amanda Ripley, The Smartest Kids in the World and How They Got That Way (New York: Simon & Schuster, 2013); Paul Tough, How Children Succeed: Grit, Curiosity, and the Hidden Power of Character (New York: Houghton Mifflin Harcourt, 2013); and Jeffrey Selingo, College Unbound: The Future of Higher Education and What It Means for Students (New Harvest, 2013).
11. George Joseph, “9 Billionaires Are About to Remake New York’s Public Schools—Here’s Their Story,” The Nation, March 19, 2015.
12. Walter Isaacson, Steve Jobs (New York: Simon & Schuster, 2011), chapter 18.
14. James Surowiecki, “Better All the Time,” New Yorker, November 10, 2014.
15. Early childhood learning represents only 5 percent of overall K–12 spending, or $37.6 billion. Unlike the rest of K–12 education, however, most of the providers are private, not public, so that it represents just over half of for-profit K–12 revenues. This category encompasses activities both in and out of school, from infancy until the early grades.
1. The Wizard of Ed
1. Michael Cannell, “Bicoastal Romance,” Architectural Digest 69, 8 (August 2012): 68–75. The firm also designed Karan’s majestic retail stores.
2. See Deborah Sontag, “Yale President Quitting to Lead National Private School Venture,” New York Times, May 26, 1992, A1.
3. Fourth Annual Avenues New Year Letter, January 7, 2014.
4. All subheading quotes are from The Wonderful Wizard of Oz. Frank Lyman Baum, William Wallace Denslow, and Michael Patrick Hearn, The Annotated Wizard of Oz: The Wonderful Wizard of Oz (New York: Norton, 2000).
5. Unless otherwise specified, the details on Whittle’s early years are from Vance H. Trimble, An Empire Undone: The Wild Ride and Hard Fall of Chris Whittle (New York: Birch Lane, 1995) and James Stewart, “Grand Illusion,” New Yorker, October 21, 1994.
6. In a 1990 Vanity Fair profile, Lynn Hirschberg describes the rupture with Whittle’s one-time mentor as the culmination of five years of “Oedipal combat.” Lynn Hirschberg, “Is Chris Whittle the Devil?,” Vanity Fair, March 1990, 233.
7. Hirschberg, “Is Chris Whittle the Devil?”, 198.
8. Stewart, “Grand Illusion,” 71.
9. Trimble, Empire Undone, 288.
11. Whittle initially sought as much as $30 million; the amount he ultimately settled for has been reported as between $7.5 and $11.25 million. Compare Stewart, “Grand Illusion,” 79 ($7.5 million) to Trimble, Empire Undone, 327 (claiming that Whittle received three $1.25 million annual payments on top of the $7.5 million).
12. Stewart, “Grand Illusion,” 64.
13. Trimble, Empire Undone, 327.
16. The seminal modern case is United States v. Jewell, 532 F.2d 697 (CA9 1976). The Supreme Court recently extended the doctrine to civil as well as criminal cases, in Global-Tech Appliances v. SEB, 563 U.S. 754 (2011). See also Edwards, “The Criminal Degrees of Knowledge,” Modern Law Review 17, 4 (July 1954): 294.
17. Stewart and I teach together at Columbia Journalism School, and he generously shared some of his background notes collected in preparing the 1994 article.
18. Stewart, “Grand Illusion,” 80.
19. Whittle wrote a regular column for Tennessee Illustrated. Trimble, Empire Undone, 262.
20. Yale Alumni Magazine, October 1992.
21. Sontag, “Yale President Quitting.”
22. Jordan later said, “I wasted three years with Whittle Communications. They were the most unproductive years of my life.” Stewart, “Grand Illusion,” 74.
23. Commenting on the stream of “million dollar men” pouring into Knoxville at Whittle Communications by the early 1990s one observer said, “They look to me like ‘trophies.’ I don’t know how he can use all of them.” Trimble, Empire Undone, 234.
24. Richard Bernstein, “The Yale Schmidt Leaves Behind,” New York Times, June 14, 1992.
25. See Benno Schmidt, Wall Street Journal, June 5, 1992 (“The problem, I think, is the system itself…The system virtually cries out for radical change.”).
26. Interview with former K-III executive.
27. Interview with Peter Haje.
28. Stewart, “Grand Illusion,” 74.
29. Trimble, Empire Undone, 350–51.
31. Diane Brady, “Commentary: Chris Whittle’s New IPO Deserves a D-,” Businessweek, September 5, 1999.
32. Trimble, Empire Undone, 343.
34. Morley Safer, “Privatizing Public Education,” 60 Minutes, November 14, 1999.
35. Edison Schools Inc., IPO Prospectus, November 10, 1999, 41.
36. Stewart, “Grand Illusion,” 76.
37. See Prospectus. Years later, in 2005, Hawaii would finally hire the company for selected turnaround services.
38. Many of the technology IPOs of the same era faced analogous valuation challenges. See Jonathan A. Knee, The Accidental Investment Banker: Inside the Decade That Transformed Wall Street (Oxford: Oxford University Press, 2006), 123–126.
39. The precise calculation of the WACC is E × Re + D × Rd × (1–corporate tax rate). E and D are the proportion of the company’s total value reflected in its equity and debt, respectively. Re and Rd are the respective rates of return required to attract that equity and debt—usually referred to as the cost of equity and the cost of debt. Although the cost of debt can usually be calculated with reasonable precision based on rates at which companies with comparable credit profiles have borrowed money, the cost of equity is always subject to disagreement among bankers and economists. The cost of equity is a function of the size of the risk premium investors would require to invest in a particular company. This in turn is a function of two always controversial variables: the risk premium embedded in the stock market as a whole, and the extent to which the particular company’s returns are correlated with the market as a whole (the latter is known as Beta, the coefficient of market risk for a particular security or portfolio).
40. From 2000 to 2002, more schools (27) dropped Edison than decided to renew their contracts. Heidi Steffens and Peter W. Cookson, Jr., “Limitations of the Market Model,” Education Week, August 7, 2002.
41. Terry Webster, “Protesters Complain About Edison at School Board,” Las Vegas Sun, August 24, 2001.
42. Mark Walsh, “Still in the Red, Edison Now Hit with Case of ‘Enronitis’,” Education Week, February 20, 2002.
43. Diana Henriques and Jacques Steinberg, “Operator of Public Schools in Settlement with SEC,” New York Times, May 15, 2002. Although many stocks fared poorly after 9/11, Edison shares actually experienced a brief renaissance, breaking $20/share in January 2002.
44. “Edison Schools Announces Additions to the Management Team, PRNewswire, August. 7, 2002.
45. “Edison Announces Four New Nominees for Board of Directors,” PRNewswire, November 19, 2002. The fourth independent was necessitated by Delaney’s appointment as a company officer. One of these independents was replaced several months later. “Edison Schools Welcomes Edward S. Harris to Board of Directors.,“ PRNewswire, April 30, 2003.
46. Dorothy’s response to the observation that she had “some queer friends.” I was part of the team at Evercore Partners that advised the Special Committee of the Board that considered the Edison go-private transaction. All of the key dates and facts described here are as detailed in the shareholder communication of October 10, 2003. Additional color is provided from interviews with participants in preparation for this book.
47. Michael Gross, “Whittling Away Debt,” New York Daily News, November 10, 2002. Although not included in the agreed terms, some suspected an informal understanding that a new buyer would forgive these company loans. See Nelson Schwartz, “The Nine Lives of Chris Whittle,” Fortune, October 27, 2003.
48. Although he ended up with less than he had hoped, Whittle did just fine. “Chris Whittle came out of the deal with about $21 million dollars [sic], a 42 percent raise, a loan of $1.68 million, and eligibility for a bonus of 245 percent of his base salary.” Kenneth Saltman, The Edison Schools: Corporate Schooling and the Assault on Public Education (New York: Routledge, 2005), 64.
49. Diana B. Henriques, “A Learning Curve for Whittle Venture,” New York Times, May 25, 2002.
50. Trace Urban et al., “Thoughts on the Deal: Adding Insult to Injury,” ThinkEquity Partners, July 17, 2003.
51. Trace Urban et al., “Arbs Likely to Make Money Here,” ThinkEquity Partners, September 15, 2003.
52. Carmen McCollum, “Edison Learning Official Takes New Job,” Times of Northwest Indiana, December 31, 2013.
53. Kris Hudley, “State Pays $180 Million in Fees, Gets Little from Long-Term Investment,” Tampa Bay Times, October 17, 2010.
54. Kate Nelson, “Florida Teachers Say They Want No Part of Edison Buyout,” The Notebook, November 1, 2003. The union had leaked a copy of the “scathing critique” of Liberty Partners by the outside consultant just days before the shareholder vote on the deal. Vineeta Anand, “Scathing critique: Consultant gives failing grade to Florida’s private equity manager,” Pensions & Investments, November 10, 2003.
55. A sinister interpretation of events and a broader critique of Edison performance can be found in Kenneth Saltman, The Edison Schools, 57–64.
56. Kris Hudley, “State Pays $180 Million in Fees.”
57. “Edison Schools Partners with Essex County to Develop and Launch New School Design in the United Kingdom,” PR Newswire, June 13, 2003.
58. From the Nations Academy website, quoted in Dana Rubenstein, “School’s Out Forever as Durst, Whittle Part Ways on Private 57th Street Academy,” New York Observer, September 9, 2008.
59. Thomas Toch, “Super-Special Ed,” New York Magazine, July 20, 2008.
60. The capital contribution and corresponding ownership of Nations Academy is included as Exhibit A in the fraud complaint filed by Lynn Tilton.
61. Steve Hendrix, “Buyers of Montgomery Estate Plan a ‘Global’ Private School,” Washington Post, December 8, 2007. Whittle was typically vague on the price and terms: “Let’s just say that we have an agreement and that some money has changed hands.”
62. Eliot Brown, “Durst to Build Private School on 11th Avenue,” New York Observer, February 19, 2008.
63. Jon Boone, “Global Network of Schools Planned,” Financial Times, June 23, 2007.
64. Jenna Goudreau, “Lynn Tilton: Is She the Richest Self-Made Woman in America?” Forbes, April 6, 2011. Tilton herself has become the subject of SEC fraud charges. See Sheelah Kolhatkar, “How Lynn Tilton Went from Company Savior to SEC Target,” BloombergBusiness, July 16, 2015.
65. Emet v. Nations Academy et al., SDNY, August 23, 2010. A settlement in which Varkey agreed to pay Tilton her $5 million back was reached before the end of the year.
66. Steve Hendrix, “New York Firm Ends Bid to Build School,” Washington Post, September 25, 2008. Although the development plan had drawn some local criticism, one of the opponents conceded that their efforts had not been dispositive: “It just might not be the best time to build a 1,600-student private school in an area that already has plenty of private schools.”
67. Dana Rubenstein, “Durst Files Plans for Off-Again, On-Again Esquire Private School,” New York Observer, September 18, 2009.
68. Shelly Banjo, “Whittle Starts a City School,” Wall Street Journal, January 31, 2011. Although not publicly revealed, a portion of Liberty’s share was off-loaded to a group of wealthy individuals.
69. Although originally planned as a division of Edison, the new funding partners necessitated the creation of a new investment vehicle, Edison School Holdings.
70. David Kaplan, “Chris Whittle’s Plan to Make a World-Class Private School,” Fortune, April 6, 2011.
71. Jenny Anderson, “The Best School $75 Million Can Buy,” New York Times, July 8, 2011.
72. Aaron Gell, “Has Avenues Mastermind Chris Whittle Learned His Lesson?” New York Observer, June 13, 2012.
73. Richard Bradley, “The New School,” Worth (August/September 2011).
74. See Kaplan, “Chris Whittle’s plan.” Teachers were said to make over $100,000 on average. See also Carl Swanson, “How Do You Say ‘Early Admission’ in Mandarin?,” New York Magazine, September 9, 2012.
75. Sophia Hollander, “Private School Goes All In with Tech,” Wall Street Journal, November 18, 2012.
76. Amanda M. Fairbanks, “Whittle Is Seeking a Global Audience for His New Ed Venture,” Education Week, September 26, 2012.
77. In 2011 and 2012, Whittle asserted the availability of, alternatively, $4 million in scholarship money (see “Move Over, Dalton,” Economist, September 1, 2012), but this was reduced to $3 million by 2013 (Jenny Andersen, “Is This the Best Education Money Can Buy?” New York Times, May 2, 2013). This corresponded to the equivalent of less than 70 full scholarships, or under 5 percent of reported full capacity of 1635 students. A typical New York City private school gives 12–18 percent in scholarships.
78. See Gell, “Has Whittle Learned His Lesson?”
79. Celia Walden, “World Class: a superschool for the global age,” Daily Telegraph, February 4, 2013.
80. Sometimes, but not always, the claim of one additional round of financing is couched with the caveat this would cover the first two of the schools. See Anderson, “Best School $75 Million Can Buy.”
81. According to Whittle, the schools will be on average as large or larger than the New York one, with an anticipated 30,000 to 40,000 students. See Dan Wolfman and Chris Beier, “How I Did It: How Education Entrepreneur Chris Whittle Disproved Skeptics,” Inc.com, November 12, 2012.
82. Anderson, “Best School $75 Million Can Buy.”
83. The teaching of the French national curriculum by these schools is overseen by the Agency for French Teaching Abroad, which is part of the Ministry of Foreign Affairs.
84. Lycée aside, there has been an explosion of international chains of profit-driven private schools with which Avenues will be competing (discussed in chapter 5). See Ian Wylie, “Education goes global,” Financial Times, December 12, 2012.
85. Fairbanks, “Whittle Is Seeking a Global Audience.”
86. Sophia Hollander, “Education Entrepreneur Chris Whittle Resigns From Avenues School,” Wall Street Journal, March 5, 2015.
87. See Carl Swanson, “How Do You Say ‘Early Admission’.”
88. Nelson Schwartz, “Nine Lives of Chris Whittle.”
89. Hollander, “Education Entrepreneur Chris Whittle Resigns.”
90. “NJ Acting Schools Chief Faces Questions About Transparency, Imperiling His Confirmation,” Star-Ledger, March 13, 2011.
91. Maura Waltz, “Chris Cerf returns to the education private sector—but in Brazil,” Chalkbeat, March 10, 2010.
92. Arianna Prothero, “John E. Chubb, Education Researcher and National Private School Leader, Dies,” Education Week Blog, November 13, 2015.
93. See “GSV Capital Corp. Reports First Quarter 2013 Results of Operations,” Global Newswire, May 8 2013. Current holdings at http://gsvcap.com/charts/.
94. Consistent research results since the 1970s confirm that people arrive at desired but erroneous conclusions by emphasizing consistent evidence at the expense of any inconsistent evidence. See C. G. Lord, L. Ross, and M. R. Lepper (1979). “Biased Assimilation and Attitude Polarization: The Effects of Prior Theories on Subsequently Considered Evidence,” Journal of Personality and Social Psychology, 37 (1979): 2098–2109; or, more recently, P. H. Ditto and D. F. Lopez, “Motivated Skepticism: Use of Differential Decision Criteria for Preferred and Nonpreferred Conclusions,” Journal of Personality and Social Psychology, 63 (1992): 568–84.
2. Rupert and the Chancellor: A Tragic Love Story
1. See Matt Richtel, “In Classroom of Future, Stagnant Scores,” New York Times, September 3, 2011.
2. See Trip Gabriel and Matt Richtel, “Inflating the Software Report Card,” New York Times, October 8, 2011.
3. Lee Wilson, “Apple’s iPad Textbooks Cost 5X More Than Print,” The Education Business Blog (February 23, 2012).
4. Phil Wahba, “Archipelago Learning IPO Prices Within Range,” Reuters, November 19, 2009.
5. Clayton M. Christensen, The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail (Cambridge, MA: Harvard Business Review, 1997).
6. Jill Lepore, “The Disruption Machine,” New Yorker, June 23, 2014.
7. James Liebman and Jonah Rockoff, “Moving Mountains in New York City: Joel Klein’s Legacy by the Numbers,” Education Week, November 30, 2010.
8. “IAC Announces Intent to Pursue IPO of Match Group,” PRNewswire, June 25, 2015. This will be the eighth independent company to emerge from this strategy.
9. Jim Edwards, “Why News Corp. Invested $30 Million in Cow and Chicken Farms,” Business Insider, December 6, 2012.
10. Almost $15 billion of these diverse write-downs had occurred just since 2009, suggesting an acceleration in the pace of bad decisions.
11. Amy Chozick and Michael J. de la Merced, “At News Corp., a Plan to Sever Publishing Arm,” New York Times, June 26, 2012.
12. Robert MacMillan, “Dow Jones Cost News Corp $2.8 Bln in Writedown,” Reuters, February 6, 2009.
13. The profit metric used is called EBITDA—earnings before interest, tax depreciation, and amortization—and is discussed in detail in chapter 3.
14. Kenneth Gilpin, “Pearson to Buy a Publisher from News Corp.,” New York Times, February 10, 1996.
15. News Corp. 8-K, November 24, 2004, 95.
16. “News Corporation to Acquire Technology Company Wireless Generation,” Business Wire, November 22, 2010.
17. News Corp. spokespeople pointed to the fact that the deal “had been in the works for months” as evidence of Klein’s complete lack of involvement. Fernanda Santos, “News Corp., After Hiring Klein, Buys Technology Partner in a City Schools Project,” New York Times, November 23, 2010.
18. Brian Stetler and Tim Arango, “News Corp. Reels in a Top Educator,” New York Times, November 9, 2010.
19. Katherine Ward, “Who’s the Most Important Living New Yorker?” New York Magazine, September 26, 2010.
20. Julie Petersen, “For Educational Entrepreneurs, Innovation Yields High Returns,” Education Next, Spring 2014.
21. Valerie Strauss, “DIBELS Test: A Question of Validity,” Washington Post, March 26, 2007; Alan Dessoff, “DIBELS Draws Doers & Doubters,” District Administration, August 2007.
22. The Children First initiative, from which the Accountability Initiative grew, was funded in part with outside contributions from the Broad and Robertson Foundations. “Klein Announces Children First: A New Agenda for Public Education in New York,” NYC Department of Education Press Release, October 3, 2002.
23. Carl Campanile, “Schools Striking Up the Bandwidth,” New York Post, October 24, 2003.
24. Precedent examples are detailed in “ARIS on the Side of Caution: A Survey of New York City Principals on the City’s Accountability Computer System,” a report by Public Advocate Betsy Gotbaum, August 2009, 12–16.
25. Anastasia Gornick, “Law Professor Accepts Post at DOE,” Columbia Spectator, February 6, 2006. Professor Liebman had also written a handful of law review articles on educational policy topics.
26. “Schools Chancellor Joel I. Klein Announces Selection of IBM to Develop Achievement Reporting System for Educators and Parents” (press release), NYC Department of Education, March 3, 2007. Between CIOs Kroot and Brodheim, an internal staff person served in an acting capacity. McKinsey consulting was also hired to assist the department in assessing the competing proposals.
27. “ARIS on the Side of Caution: A Survey of New York City Principals on the City’s Accountability Computer System,” a report by public advocate Betsy Gotbaum, August 2009, 6.
28. IBM had also earlier donated a million dollars worth of computers to the public schools. Elisa Gootman, “Equipment Donated to Convention is Passed to Schools,” New York Times, September 3, 2004. Liebman denied that IBM played any role in designing the specifications.
29. At around $5 million, Wireless Generation’s contribution represented less than 10 percent of the overall contract value.
30. Elissa Gootman, “As Schools Face Cuts, Delays on Data System Bring More Frustration,” New York Times, October 24, 2008.
31. Javier Hernandez, “Chief Accountability Officer for City Schools Resigns,” New York Times, July 8, 2009.
32. Interview with Professor James Liebman.
33. Race to the Top Program Executive Summary, U.S. Department of Education, November 2009.
34. This is how an Amplify spokesperson characterized it role. Ben Chapman, “City Schools Dumping $95 Million Computer System for Tracking Student Data,” New York Daily News, November 16, 2014.
35. Anna Phillips, “Murdoch Buys Education Tech Company Wireless Generation,” Chalkbeat NY, November 22, 2010.
36. Even after early mixed results, former Teacher’s College President Arthur Levine, who subsequently became president of the Woodrow Wilson Foundation, continued to champion the program. Arthur Levine, “Teachers + Tech = Better Learning,” New York Daily News, September 12, 2012.
37. Georgina Prodham, “Private Equity to Buy Pearson’s IDC for $3.4 Billion,” Reuters, May 4, 2010.
38. Roi Carthy, “Israel’s Time to Know Aims to Revolutionize the Classroom,” TechCrunch, February 2, 2010.
39. Rafael Corrales, “News Corp. Deal for Wireless Generation Is Great, but It Doesn’t Make Sense,” Fortune, November 23, 2010.
40. Through a friend whose brother, a former editor-in-chief of the Harvard Law Review, was a partner, I got my first summer law school internship at the firm, Onek, Klein & Farr. It was immediately clear that I was totally out of my league.
41. Javier Hernandez, “Klein’s Waiver and the City’s Chief Street Monitor,” New York Times City Room Blog, November 12, 2010.
42. Steven Brill, Class Warfare: Inside the Fight to Fix America’s Schools (New York: Simon & Schuster, 2011).
44. Edmund Andrews, “Bertelsmann Chief Turns Voting Control Over to a New Board,” New York Times, July 2, 1999.
45. “Joel Klein to Join Bertelsmann AG as Chairman and CEO of US-Based Bertelsmann, Inc.,” PRNewswire, January 31, 2001.
46. Matthew Rose and Martin Peers, “Bertelsmann’s New Executive May Curb Its Online Presence,” Wall Street Journal, July 30, 2002.
47. Sharon Otterman and Jennifer Medina, “New York Schools Chancellor Ends 8-Year Run,” New York Times, November 9, 2010. Kristen Kane, the previous COO, had already departed.
48. Gabriel Sherman, “Elisabeth of the Murdochs,” New York Magazine, November 4, 2011.
49. John Wilke, “News Corp.’s Plan to Buy Heritage May Be Challenged,” Wall Street Journal, July 29, 1997.
50. Tim Arango, “An Adviser to Murdoch Is Leaving News Corp.,” New York Times, November 16, 2009.
51. Barbara Martinez and Michael Saul, “New York City Chancellor Moves On,” Wall Street Journal, November 11, 2010.
52. Stetler and Arango, “News Corp Reels in a Top Educator.”
53. Brett Bulley, “News Corp.’s Education Unit Hires Two Public-School Managers,” Bloomberg, June 8, 2011.
54. Ben Fenton, “Pearson Buys Schoolnet for $230 Million,” Financial Times, April 26, 2011.
55. Rachel Monahan, “Dept. of Ed. Awards $27M Contract to News Corp. Company,” New York Daily News, June 9, 2011.
56. Sharon Otterman, “Subsidiary of News Corp. Loses Deal with State,” New York Times, August 29, 2011.
57. Ben Chapman, “City Schools Dumping $95 Million Computer System,” New York Daily News, November 16, 2014.
58. Amy Chozick, “Steering Murdoch in Scandal, Klein Put School Goals Aside,” New York Times, May 7, 2012.
59. Natasha Singer, “InBloom Student Data Repository to Close,” New York Times, April 21, 2014.
60. See Fiona Hollands, “Using Cost-effectiveness Analysis to Evaluate School-of-One,” paper presented at the 2012 annual meeting of the American Educational Research Association, Vancouver, British Columbia, AERA Online Paper Repository.
61. “News Corporation Unveils Amplify to Bring Digital Innovation to K–12 Education,” Business Wire, July 23, 2012.
63. “UBS to Host 40th Annual Global Media and Communications Conference December 3–5 in New York,” Business Wire, November 13, 2012.
64. Factset callstreet transcript, UBS Global Media and Communications Conference, December 4, 2012.
65. John Hechinger, “K12 Backed by Milken Suffers Low Scores as States Resist,” Bloomberg, November 14, 2014.
66. See Stephanie Saul, “Profits and Questions at Online Charter Schools,” New York Times, December 12, 2011; Morgan Smith, “Cyberschools Grow, Fueling New Concerns,” New York Times, August 24, 2013.
67. Joel Klein, The new News Corp. Investor Day Presentation, New York City, New York, May 28, 2013.
68. Matt Chesler, News Corp. Initiation of Coverage, “From Deep Dive to Deep Value—Initiating with a Buy,” Deutsche Bank, July 2, 2013.
69. Alexia Quadrani, News Corp. Initiation of Coverage, “A Murky Transition into the New News—Initiating with Neutral,” JP Morgan, July 1, 2013.
70. Andrew Mcleod, et al., “What if Amplify Was Closed? Sizing the Potential Uplift To Shares,” Morgan Stanley, September 30, 2013.
71. Laura Colby, “News Corp.’s $1 Billion Plan to Overhaul Education Is Riddled with Failures”, BloombergBusiness, April 7, 2015.
72. Tony Wan, “One Amplify: Joel Klein’s Plan to Unify News Corp.’s Education Business,” EdSurge, April 29, 2015.
74. Colby, “News Corp.’s $1 Billion Plan.”
76. Molly Hensley-Clancy, “Amplify Education Tries to Build an Identity Outside of News Corp.’s Shadow,” Buzzfeed, April 14, 2014.
77. Laura Colby, “News Corp. Is Winding Down School Tablet Sales,” BloombergBusiness, June 26, 2015.
78. Liana Baker, “Laurene Powell Jobs Back Amplify Education Company Bought from News Corp.,” Reuters, November 20, 2015.
79. Tony Wan, “It’s Official: News Corporation Is Looking to Sell Amplify,” EdSurge, August 12, 2015.
80. All quotes from interview with Joel Klein.
81. Peter Lattman and Clare Cain Miller, “Steve Job’s Widow Steps Onto Philanthropic Stage,” New York Times, May 17, 2013.
82. Sean Cavanaugh, “Amplify Sold Off to Group of Its Executives, Including Joel Klein,” Education Week, October 2, 2015.
3. Curious George Schools: John Paulson
1. Suzanne E. Stein and Denny Galindo, “Curious George Gets a Tablet; Initiate at Overweight,” Morgan Stanley Research, December 24, 2013.
2. Ellen B. Ballou, The Building of the House: Houghton Mifflin’s Formative Years (Boston: Houghton Mifflin, 1970), 35–36.
5. The change from partnership to corporate form was driven by concern over the potential need to satisfy multiple capital calls from partners seeking to withdraw money simultaneously. The business was incorporated with George Mifflin as president. Ibid., 493–494.
6. Houghton Mifflin Company 1967 Annual Report, 1.
7. Its cultural conservatism may also have played a role in the successful 1975 suit by the Massachusetts attorney general for discrimination against women in hiring and promotion. Houghton would ultimately pay more than $1 million to settle the claims. Wendy Smith, “Houghton Reaches Accord in Sex Bias Suit,” Publishers Weekly, January 16, 1981.
8. Herbert Mitgang, “Authors Protest Conglomerate Deal,” New York Times, April 20, 1978.
9. “Houghton in Pact,” New York Times, July 8, 1978.
10. Laura Jereski, “Making Book,” Forbes, March 7, 1988.
12. “The Media Business: Publishing; A Growing Acceptance of Goliaths,” New York Times, February 13, 1989.
13. Robert La Franco, “Passionate Textbook Salesman,” Forbes, January 11, 1999.
14. Edwin McDowell, “The Media Business: Foreign Flavor for Publishing Leadership,” New York Times, November 5, 1990.
15. Steve Sherman, “Houghton Mifflin’s CEO Hopes to Globalize His Company’s Outlook,” Publishers Weekly, July 12, 1991.
16. John Robinson, “Partying with Pavarotti,” Boston Globe, November 16, 1993.
17. Steve Sherman, “HM’s Chief Urges Futurist Outlook,” Publishers Weekly, October 31, 1994.
18. Julia Lawlor, “Meditation ‘Takes the Edge Off’ at Work,” USA Today, June 18, 1993.
19. Jim Milliot, “Houghton Mifflin Sets Sales Goal of $1 Billion,” Publishers Weekly, April 25, 1995.
20. Aimee Seles, “eBT Decides to Liquidate After Rejecting Plan to Rebuild,” Providence Business News, May 28, 2001. By then, the company had changed its name first to INSO and then to eBT International.
21. Tom Nutile, “Houghton to Buy D. C. Heath,” Boston Herald, September 26, 1995.
22. Steve Bailey and Steven Syre, “One for the Books: While Software Firm Info Corp. Flies, Parent Houghton Mifflin Struggles,” Boston Globe, February 11, 1996.
23. Barbara Carton, “Houghton Mifflin Is Seeking Ways to Make the Grade—Bad Marks Include Missed Profit Estimates, Lackluster Stock Ratings Cut,” Wall Street Journal, June 24, 1996.
24. Harold T. Miller, Publishing: A Leap from Mind to Mind (Golden, CO: Fulcrum, 2003), 48. For a former textbook editor’s perspective on the adoption process, see Tamim Ansary, “A Textbook Example of What’s Wrong with Education,” Edutopia, November 10, 2004.
25. Nikhil Deogun and William Bulkeley, “Reed Elsevier, Thomson Agree to Buy Harcourt for $4.45 Billion Plus Debt,” Wall Street Journal, October 27, 2000.
26. Peter Appert and Peter Salkowsky, “Snatching Defeat from the Jaws of Victory,” Deutsche Bank Equity Research, October 10, 2000.
27. See “Houghton Mifflin Could Be Takeover Target,” M2 Best Books, November 6, 2000; Carole Gould, “Investing with Michael A. Prober,” New York Times, February 18, 2001.
28. Nikhil Deogun and John Carreyou, “Vivendi Talks to Houghton About Purchase,” Wall Street Journal, May 22, 2001.
29. David Kirkpatrick and Seth Schiesel, “Vivendi Said to Be in Talks About Acquiring Houghton,” New York Times, May 23, 2001.
30. See Bruce Wasserstein, Big Deal: Mergers and Acquisitions in the Digital Age (New York: Warner, 2000), 262–290.
31. Geraldine Fabrikant, “Simon & Schuster in Sale to British,” New York Times, May 18, 1998.
32. Jean-Marie Messier, “Group Overview and Strategy,” Analysts’ Presentation, November 11, 2000.
33. The title is a reference to Messier’s nickname from a French comedy show. Jean-Marie Messier, J6M.com: Faut-il avoir peur de la nouvelle economie? (Paris: Hachette Litteratures, 2000). The book was followed up with an unapologetic defense of his vision and an angry attack on those who facilitated his ultimate downfall. Jean-Marie Messier and Yves Messarovitch, Mon Vrai Journal (Paris: Editions Ballard, 2002).
34. Messier is used as the prototype for bad mogul behavior in Jonathan A. Knee, Bruce C. Greenwald, and Ava Seave, The Curse of the Mogul: What’s Wrong with the World’s Leading Media Companies (New York: Portfolio, 2009).
35. Ibid., 13–14. Exhibits to an instructive Harvard case on Messier provide a partial list of the acquisitions and divestitures. Rakesh Khurana, Vincent Dessain, and Daniela Beyersdorfer, Messier’s Reign at Vivendi Universal (Harvard Business School Case 9-405-063, exhibits 2 and 4, Cambridge, MA, July 21, 2005).
36. Mathilde Richter, “Vivendi’s Messier Enlists Monkey in Convergence Campaign,” Dow Jones International News, September 24, 2001. See Knee, Greenwald, and Seave, Curse of the Mogul, 16.
37. Mark Walsh, “Houghton Mifflin Acquisition Extends Industry Trend,” Education Week, June 13, 2001.
39. Kirkpatrick, “Vivendi Said to Be in Talks About Acquiring Houghton.”
40. Sallie Hofmesiter, “Vivendi to Buy U.S. Publisher,” Los Angeles Times, June 2, 2001.
41. Miller, Publishing, 299.
43. John Carreyrou and Martin Peers, “How Messier Kept Cash Crisis at Vivendi Hidden for Months,” Wall Street Journal, October 31, 2002.
44. Seth Schiesel, “Shake-up at Vivendi: The Ex-chairman a Citizen of the World With Few Allies,” New York Times, July 2, 2002.
45. Blackstone contributed 20 percent of the equity for the deal.
46. “Houghton Mifflin CEO Retires, Gieskes Named,” Boston Business Journal, June 13, 2002.
47. Robert Weissman, “Houghton Mifflin to Name CEO Today: Appointment Caps 2 Years of Turmoil for Hub Publisher,” Boston Globe, August 5, 2003. Shortly after the sale of Houghton was announced, Reed had selected Pat Tierney to lead the educational business it bought from Harcourt in 2001. “Reed Elsevier Appoints Chief Executive for Its Global Educational Business,” PRNewswire, December 5, 2002.
48. Robert Weisman, “Reinvigorated Houghton Mifflin Presses Forward: New CEO Makes an Investment in Growth,” Boston Globe, June 1, 2004.
52. Nicole Bullock, “Houghton Mifflin Increases Junk Bond Deal to $1 Billion,” Dow Jones Business News, January 24, 2003.
53. Houghton Mifflin 2002 EBITDA and plate were $253 million and $95 million, respectively. With debt of $1.096 billion, the respective leverage multiples, depending on whether one looked at EBITDA or EBITDA less plate, were 4.3× and 6.9×.
54. See Jeremy Adams, “Houghton Mifflin Faces Downgrade,” Financial News, October 5, 2003.
55. “Moody’s Downgrades Ratings of Houghton Mifflin and Assigns SLG-3 Liquidity Rating,” Moody’s Investor Service, December 23, 2004.
56. Interviews with corporate executives involved with discussions.
57. Thomas Malloy, “Has O’Callaghan Got What It Takes to Top the Terminator?” Irish Independent, January 14, 2010.
58. “A Chief Executive at the Age of 30,” Irish Examiner, January 14, 2010.
59. CBT Group would change its name to SmartForce in 1999 and merge with SkillSoft in 2002.
60. Brian Carey, “Master of the Textbook Takeover; Interview Barry O’Callaghan; Business Person of 2006,” The Sunday Times, December 31, 2006.
61. “Riverdeep Group plc Raising IPO Price Range,” PR Newswire, March 7, 2000; Harry Keaney, “Riverdeep IPO Soars on Nasdaq,” Irish Echo, March 10, 2000.
62. Aine Coffey and Marion McKone, “Fear of the Rocker Feller,” Sunday Tribune, November 17, 2002.
63. Conor Brophy, “Riverdeep Mulled Ousting O’Callaghan,” Sunday Tribune, January 26, 2003.
64. Janine Brewis, “CSFB Takes Riverdeep Private Three Years After Leading IPO,” eFinancial News, January 20, 2003.
65. Adam Levy, “CSFB’s Perks: Casual Dress, Easy Money,” Bloomberg Markets, August 2001.
66. Mark Paul and Brian Carey, “I’ll Be Back: While Investors in EMPG Face an Equity Wipeout, Boss Barry O’Callaghan Is Determined to Emerge from the Group’s Latest Crisis as Strong as Ever,” The Sunday Times, January 17, 2010.
67. See Emmet Oliver, “Quiet Exit for One-Time, High-Flying Publishing Magnate,” Irish Independent, March 17, 2011: “How Mr. O’Callaghan funded his original stake has never been revealed and which Irish bank was involved is the subject of some conjecture.”
68. Nick Web, “Debt-Laden Publisher Is Now a Wage Slave,” Irish Independent, January 17, 2010.
69. Ciaran Hancock, “Will the Clever Cat Get the Cream?” The Sunday Times, October 29, 2006.
70. “Ambition Grows as Riverdeep Deal Moves Forward,” Irish Times, October 27, 2006.
71. Arthur Beasley, “Merged Riverdeep Group May Float in Two Years,” Irish Times, October 25, 2006.
72. Riverdeep Houghton Mifflin, Confidential Information Memorandum, J & E Davy, November 17, 2006, p. 8.
73. Christian Berthelsen, “High-Flying Financier on Way Down/Fraud Investigation of Palo Alto Banker,” San Francisco Chronicle, February 9, 2003.
74. See, “Ambition Grows as Riverdeep Deal Moves Forward.” (“So will it work? At one level, O’Callaghan has already convinced the people who really count, investment banking institutions as eminent as Goldman Sachs.”).
75. See Alexandra Dawe, “Reed Shares Drop on Lower Education Growth Forecast,” BusinessWeek, November 17, 2005. See also Robert Lea, “Reed’s ‘Mr. 10 percent’ to Miss Target,” London Evening Standard, February 19, 2004.
76. Tom McEnaney, “Ernst Quits at Riverdeep,” Irish Independent, February 15 2007.
77. Michael J. de la Merced, “Houghton Mifflin to Buy Harcourt Units,” New York Times, July 17, 2007.
78. Education Media & Publishing Group, Confidential Information Memorandum, Credit Suisse, Lehman Brothers and Citigroup, October 2007, p. 77.
79. Joe Brennan, “Dealmaker O’Callaghan Rides Out Choppy Credit Markets,” Irish Independent, July 3, 2008.
82. Moody’s Investor Service, December 22, 2008; S&P, February 11, 2009.
83. Andrew Edgecliff-Johnson, “Houghton Mifflin Harcourt disputes Moody’s Ratings Downgrade,” Financial Times, January 7, 2009.
84. Jeffrey A. Trachtenberg, “Writer’s Block: Houghton Won’t Acquire New Books,” Wall Street Journal, November 28, 2008; Motoko Rich, “Houghton Mifflin Publisher Resigns,” New York Times, December 3, 2008.
85. Motoko Rich, “Houghton Mifflin Harcourt Abandons Sale of Trade Division,” New York Times, March 12, 2009.
86. Andrew Johnson and Kate Laughlin, “Education Media Receives Covenant Relief,” Debtwire, March 17, 2009.
87. “Dubai Royals Back O’Callaghan’s EMPG,” Business and Finance Daily News Service, August 17, 2009.
88. “Houghton Mifflin Riverdeep Group Announces Senior Appointment,” PRNewswire, April 4, 2007.
89. Jeffrey Trachtenberg, “As Houghton Mifflin CEO Retires, O’Callaghan Will Try to Right the Ship,” Wall Street Journal, April 3, 2009.
90. See Gregory Zuckerman, The Greatest Trade Ever: The Behind the Scenes Story of How John Paulson Defied Wall Street and Made Financial History (New York: Crown, 2010).
91. Andrew Edgecliffe-Johnson, “EMPG Pushes for Financial Shake-up,” Financial Times, January 14, 2010.
92. Paul and Carey, “I’ll Be Back.”
93. Paulson had not been publicly involved in the sector from either an investing or policy perspective. There is reason to believe, however, that he viewed the investment as an opportunity to make money while making a contribution to education. A product of Queens public schools, Paulson obviously has strong feelings on the subject of education, having recently donated $8.5 million to the Success Academy charter school network. Carl Campanille, “Hedge-Fund Billionaire Donates $8.5M for New Charter Schools,” New York Post, July 30, 2015.
94. Milken’s involvement does not appear to have been reported in the United States. The UK press, however, had identified Guggenheim as “representing the interests of Michael Milken.” See Paul and Carey, “I’ll Be Back.”
95. In the ultimate settlement reached by Guggenheim with the Securities and Exchange Commission, neither Milken nor Boehly was named. But Charles Gasparino reported that one of the key transactions at issue related to an undisclosed personal loan from Milken to Boehly. Charles Gasparino, “Guggenheim to Pay SEC $20 Million,” FOXBusiness, August 10, 2015.
96. Edgecliffe-Johnson, “EMPG Pushes for Financial Shake-up.”
97. “Aspen Institute to Host ‘Education Innovation Forum and Expo,’” Investment Weekly News, January 22, 2011.
98. “Riverdeep Auditors Point to Debt Challenge at Publisher,” Irish Independent, February 12, 2011.
99. Key terms of the arrangement are detailed in the May 9, 2011, Preliminary Offering Memorandum for the Senior Secured Notes Due 2019.
100. For an entire decade prior to joining Houghton as CFO in 2007, interim CEO Michael Muldowney had “served at various times as President, COO, CFO” and a board member for a disastrous Milken-controlled company called Nextera, which is discussed in chapter 4.
101. “Moody’s Says Houghton Mifflin’s Ratings Not Affected by Revised Refinancing Terms,” Moody’s Investor Service, May 13, 2011.
102. Pricing Term Sheet dated May 13, 2011 to Preliminary Offering Memorandum dated May 9 2011, Houghton Mifflin Harcourt, 10.5% Senior Secured Notes due 2019.
103. “Riverdeep Founder Set for 100M Euro Payday,” Sunday Business Post, June 19, 2011.
104. John Berke, “Houghton Mifflin Harcourt Reports 67 Percent EBITDA Drop in 2Q11,” Debtwire, August 18, 2011.
105. Linda K. Zecher, “The Path to Publishing,” New York Times, January 12, 2013.
106. Andrew Edgecliff-Johnson, “Houghton Mifflin to Cut 10 Percent of Staff,” Financial Times, November 12, 2011.
107. Jim Milliot, “The Shrinking of Houghton Mifflin Harcourt,” Publishers Weekly, May 12, 2012.
108. Pearson’s stock price actually grew by almost 60 percent from the end of 2005 until the end of 2011 (159.3%) while the overall S&P index remained essentially flat during this period (100.7%).
109. Houghton Mifflin Harcourt Disclosure Statement, Case 12-15610, Doc. 14, filed May 21, 2012.
110. In addition to being unable to calculate the precise amount of Paulson’s investment, he is likely to have received some dividends in addition to the proceeds from the share sales. This does not change the conclusion that he cerainly lost hundreds of millions of dollars.
111. Gavin Daly, “Dubai Pulls Out of Deal with EMPGI,” The Sunday Times, May 12, 2013.
112. “About Us,” RISE website, retrieved February 15, 2015.
113. DC Denison, “Bankruptcy Over, Boston’s Houghton Mifflin Looks Ahead,” Boston Globe, June 24, 2012. (“There’s a huge market out there for parents.…We can now go after that market more aggressively.”).
114. Jon Chesto, “Houghton Mifflin Harcourt Embraces the Digital Age,” Boston Business Journal, July 5, 2013. (Zecher promised to “essentially double the percentage of the company’s…revenue that come from digital sales” in under two years.) See also Gavin Daly, “I’d Like to Teach the World to Read: The Business Interview,” The Sunday Times, July 22, 2012.
115. Denison, “Bankruptcy Over.”
116. Chris Reidy, “Publisher Buys School News Channel,” Boston Globe, May 13, 2014.
117. Jeffrey Trachtenberg, “A Reborn Houghton Goes Digital to the Core,” Wall Street Journal, November 25, 2014.
118. Jeffrey Trachtenberg, “Houghton Mifflin Buys Scholastic’s Ed Tech Business for $575 Million,” Wall Street Journal, April 24, 2014.
119. “Houghton Mifflin Announces Third Quarter 2015 Results,” Business Wire, November 5, 2015.
120. “Moody’s Downgrades Houghton Mifflin Harcourt’s CFR to B2,” Moody’s Investor Service, February 5, 2016.
121. Denny Galindo and Toni Kaplan, “Déjà Vu? Guidance Seems Aggressive,” Morgan Stanley Equity Research, February 26, 2016.
4. Michael Milken: Master of the Knowledge Universe
1. See Mark Walsh, “Education Firm Charts Growth of Its Universe,” Education Week, August 4, 1999.
2. Milken had previously purchased and, following a brief period, sold an international arm for the early childhood education business.
3. Cale Ottens, “Milkens Sell U.S. Education Business,” Los Angeles Business Journal, July 9, 2015.
4. Cora Daniels, “The Man Who Changed Medicine,” Fortune, November 29, 2004.
5. Milken paid a $47 million fine for violating the ban in 1998 in connection with advice he gave on deals involving friends Rupert Murdoch and Ronald Perelman, among others. Michael Schroeder, “Milken Agrees to Pay Fine of $47 Million in SEC Case,” Wall Street Journal, February 27, 1998. More recently, his relationship with Guggenheim Partners has come under Securities and Exchange Commission scrutiny.
6. Riva D. Atlas, “Milken Sees the Classroom as Profit Center,” New York Times, December 18, 2004.
8. “S&P Cuts Knowledge Universe Rating to CCC,” Reuters, July 27, 2012.
9. In 2007, Bloomberg reported that Milken had hired Goldman Sachs and First Boston to raise $1 billion to support Knowledge Universe’s further growth. At the time, a Milken spokesperson claimed to have already received commitments for more than half of this amount. Miles Weiss, “Milken Plans to Sell $1 Billion Stake in Knowledge Universe,” Bloomberg, March 20, 2007. As no other public comment—beyond this one related to the apparent $2.25 billion valuation—was ever made regarding this placement, it seems unlikely that much more than the $220 million noted in a public filing at the time was ever raised. See Ottens, “Milkens Sell U.S. Education Business.”
10. The international child-care assets Milken had bought out of bankruptcy from ABC Learning and flipped to a Canadian pension fund did yield a gain, but these were relatively small and did not close the massive value gap. Sean Farrell, “Busy Bees Nursery Firm Buys Its First Overseas Childcare Centres,” Guardian, February 2, 2015.
11. Deborah Vrana, “Education’s Pied Piper with a Dark Past,” Los Angeles Times, September 7, 1998.
13. Kathleen Morris, “The Reincarnation of Mike Milken,” BusinessWeek, May 10, 1999.
14. Amy Feldman, “Milken’s New Empire Amasses Education Companies Worth $1B,” New York Daily News, March 23, 1998.
16. Justin Martin, “Lifelong Learning Spells Earnings,” Fortune, July 6, 1998.
18. Preqin, Private Equity Online.
19. “News Corp. Role in Bidding Seen,” New York Times, May 15, 1998.
20. “Milken, KinderCare Reunited,” CNN/Money, November 6, 2004.
21. Marvin Harris, “KinderCare Files for Bankruptcy Protection,” Associated Press, November 10, 1992.
22. “Tax Troubles for Kinder-Care Founder,” Associated Press, August 3, 1991.
23. Atlas, “Milken Sees the Classroom as Profit Center.”
24. Linda Sandler, “Milken Builds New Empire in the Education Industry,” Wall Street Journal, May 15, 1998.
25. Joseph Nocera “ Michael Milken: The Midas of the Eighties Tells Us Where Tomorrow’s Wealth Lies,” Fortune, September 30, 1998.
26. Kathleen Morris and Lisa Sanders, “Professor Milken’s Lesson Plan,” BusinessWeek, August 3, 1997.
28. “CRT Group PLC Annual Trading Statement,” PRNewswire, June 8, 1998.
29. Julia Flynn, “Spring Group Sets Plans to Shift Focus to Information-Technology Professionals,” Wall Street Journal, May 9, 2000.
30. Ed Bowsher, “Sales Put Bounce in Spring,” Citywire Money, December 29, 2000.
31. Ruth Sullivan, “Top Management Reshuffle at Spring,” Financial Times, August 4, 2006.
32. Algernon Hall, “Spring Loses More Bounce,” Citywire Money, July 29, 2005.
33. “Spring Group PLC Interim Results for the Six Months to 30 June 1999,” August 11, 1999.
34. Goran Mijuk, “Adecco Buys MPS for $1.3 Billion,” Wall Street Journal, October 21, 2009.
35. Josh McHugh, “LeapFrog’s Wild Ride,” Wired, November 2005.
36. Steve Gelsi, “LeapFrog, Hewitt Led ’02 IPO Crop,” Marketwatch, January 3, 2003.
37. Morris, “The Reincarnation of Mike Milken.”
38. Hasbro and Mattel generate operating margins in the teens in good years.
39. Matthew Witheiler, “Here’s Why It’s Tough to Get Investors Excited About Your Toy Startup,” VentureBeat, October 20, 2013.
40. Kate Kelly, “Milken to Go Ahead with LeapFrog IPO,” Wall Street Journal, July 25, 2002.
41. Lisa DiCarlo, “LeapFrog Execs Get the Dunce Cap,” Forbes.com, March 11, 2004, “Technology Briefs,” Wall Street Journal, November 2, 1999.
42. “Leapfrog Founder Wood Resigns Posts,” Los Angeles Times, September 2, 2004.
43. “LeapFrog Receives Continued Listing Standard Notice from NYSE,” PRNewswire, September 4, 2015.
44. “LeapFrog Reports Knowledge Universe Distributes 73 percent of Its LeapFrog Holdings,” PRNewswire, May 1, 2003; “Leapfrog Reports Knowledge Universe Distribution of LF Shares,” PRNewswire, April 7, 2004.
45. KU Learning, 13-D filing for Nobel Education Dynamics Inc., January 23, 1988.
46. “Milken, Ellison Invest in Private-Schools Firm,” Los Angeles Times, January 27, 1998.
47. Public companies with equity value between $300 million and $2 billion are “small cap,” $2 billion to $10 billion are “mid cap,” and above $10 billion are “large cap.”
48. Sandler, “Milken Builds New Empire in the Education Industry.”
49. “Nobel Learning Communities, Inc. Clarifies Its Growth Intentions,” PRNewswire, March 5, 1999.
50. “Management Offers to Buy Nobel Learning for $110 Million,” Associated Press, August 6, 2002.
51. Reid Kanaley, “Nobel Learning’s Shares Drop by One-Third on Buyout Woes,” Philadelphia Inquirer, November 16, 2002.
52. “Nobel Learning Communities, Inc. Announces Termination of Merger Agreement,” PRNewswire, February 3, 2003.
53. “Nobel Learning Communities, Inc. and Knowledge Universe Join Forces to Augment NLCI’s Future Growth Potential,” PRNewswire, March 13, 2003.
54. “Related Party Transactions,” NLCI 10-K, September 19, 2005.
55. “Nobel Learning Communities, Inc. Announces Hiring of Chief Executive Officer,” PRNewswire, July 25, 2003.
56. “Proxy Statement,” NLCI 14-A, December 1, 2003.
57. “Michael and Lowell Milken Increase Stake in Nobel Learning Communities to 19.4 Percent,” Associated Press, March 27, 2007.
58. “Nobel Learning Communities, Inc., Announces Changes to Its Board of Directors,” PRNewswire, August 11, 2006.
59. Kaja Whitehouse, “Poison Pill Revival Stars Michael Milken,” New York Post, July 21, 2008.
60. “Nobel Learning Communities, Inc. Adopts Shareholder Rights Plan,” PRNewswire, July 21, 2008.
61. “Knowledge Learning Corporation Proposes Strategic Acquisition of Nobel Learning Communities, Inc. for $17.00 per Share,” Business Wire, March 11, 2009.
62. “Nobel Learning Communities Conducting Process to Determine Possible Sale of the Company,” Associated Press, November 7, 2008.
63. “Knowledge Learning Corporation Proposes Strategic Acquisition of Nobel Learning Communities, Inc. for $13.50 per Share,” Business Wire, March 11, 2009.
64. “Nobel Learning Communities, Inc. Responds to Proposal,” PRNewswire, March 11, 2009; “Nobel Learning Communities, Inc. Board Unanimously Rejects Proposal from Knowledge Learning Corporation,” PRNewswire, March 19, 2009.
65. Milken presumably did better on the distressed loans he made to the company.
66. The price was $405 million plus unspecified indebtedness. “Leeds Equity to Sell Nobel Learning,” Private Equity Professional Digest, March 30, 2015. In addition, a Swiss private equity group that co-invested with Leeds issued a press release on the sale, touting the 4X return on investment (“Partners Group to Exit Investment in Nobel Learning,” AWP Original Press Release, March 30, 2015). Interestingly, this group was lead investor in the purchase of Knowledge Universe for $1.465 billion. Given the leverage and nature of the remaining business, it is hard to see them doing this well again.
67. Terzah Ewing, “Milken’s Nextera Enterprises Begins Trading with a Dud,” Wall Street Journal, May 19, 1999.
68. Merton Miller is the Nobel winner most publicly associated with the firm but others include Gary Becker and James Heckman (See “Nextera Leads Prominent Dialogue on Human Capital Management (HCM) During Milken Institute 2001 Global Conference,” PRNewswire, March 21, 2001) and, much earlier in its history, George Stigler and Kenneth Arrow (See Benjamin Stein, “Don’t Blame Us—The New Defense in Shareholder Suits“ Barron’s, June 6, 1988).
69. David Margolick, “The Law: At the Bar,” New York Times, June 17, 1988.
70. Joseph Cahill, “Milken’s Nextera Acquires Consultant for $60 million,” Wall Street Journal, February 17, 1999.
71. Melody Petersen, “Law Firm to Pay Longtime Foe $50 Million,” New York Times, April 14, 1999.
72. “Technology Briefs,” Wall Street Journal, November 2, 1999.
73. Fink was also a long-time associate of Ellison’s and was often viewed as Ellison’s appointee on the Knowledge Universe company boards on which he sat. He was also Vice Chairman and Treasurer of Knowledge Universe itself and had served as Chair of all the other public companies profiled here—Spring, Leapfrog, and Nobel.
74. Seth Lubove, “Friends and Neighbors,” Forbes, February 21, 2000.
75. “PricewaterhouseCoopers’ David M. Schneider Joins Nextera as President and CEO,” PRNewswire, October 26, 2000.
76. “Nextera Enterprises Sells Sibson Consulting Unit,” Business Wire, January 31, 2002.
77. Graef Crystal, “Milken Brothers and Ellison Taken to the Cleaners,” Bloomberg, November 26, 2003.
78. “Nextera Announces Third Quarter Results,” Business Wire, October 30, 2003.
79. Nextera proxy statement, October 24, 2003.
80. “Nextera Enterprises Enters Into an Agreement to Sell Lexecon Assets for $130 Million,” PRNewswire, September 25, 2003. The company had already received its first delisting notice from NASDAQ on May 15, 2003.
81. Patrick McGeehan, “Market Place: Tied to Milken, the Ride Can Still Be Bumpy,” New York Times, November 12, 2003.
82. Nocera, “Michael Milken.”
84. Morris, “The Reincarnation of Mike Milken.”
86. Cyrus Afzali, “Costello Leaves Cadence,” CNNMoney.com, October 21, 1997.
87. Russ Baker, “The Education of Michael Milken,” The Nation, May 3, 1999.
88. Peter Lattman, “Perelman Sues Old Friend Milken (Not to Worry. It Isn’t Personal),” New York Times, July 8, 2013.
89. Patrick Danner, “Harland Clarke Loses Court Fight with Milken,” San Antonio Express News, March 4, 2015.
90. Morris and Sanders, “Professor Milken’s Lesson Plan.”
91. “Manhattan U.S. Attorney Announces $4 Million Fraud Settlement with New York Institute of Technology and Cardean Learning Group, LLC” [press release], Southern District of New York, December 27, 2012.
92. Steven Strahler, “One Good Turn May Deserve Another for U of C Trustee,” Crain’s Chicago Business, May 10, 1999.
93. Patrick McGeehan, “Business School Does Its IPO Homework, Links Up with Internet Education Firm,” Wall Street Journal, April 2, 1999.
94. Goldie Blumenstyk, “A Company Pays Top Universities to Use Their Names and Their Professors,” Chronicle of Higher Education, June 18, 1999.
95. Columbia may have gotten a slightly better deal than others for being first. Later reports suggest the $20 million due to other universities could be paid over as long as eight years.
96. Jeffrey Pfeffer and Christina T. Fong, “The End of Business Schools? Less Success Than Meets the Eye,” Academy of Management Learning & Education, September 2002.
97. UNext website, quoted in Harvey Blustain and Phil Goldstein, “Report on UNext and Cardean University,” The E-University Compendium, October 2001.
98. Stephen P. Pizzo, “Barbarians at the University Gate,” Forbes ASAP, September 10, 1991.
99. “Corporate Training Goes to the Head of the Class,” Red Herring, February 25, 2001.
100. Jennifer Renwick, “Private Virtual Universities Challenge Many Assumptions Long Held by Educators: Their Own Challenge: Survival,” Wall Street Journal, March 12, 2001.
101. Sarah Carr, “Rich in Cash and Prestige, UNext Struggles in Its Search for Sales,” Chronicle of Higher Education, May 4, 2001.
102. Steven Strahler, “Investors Back Online School Like No Other: Nobel Lineup, Star-Studded Financiers,” Crain’s Chicago Business, March 29, 1999.
103. Keating returned to the nonprofit sector a couple years later. “Keating Is Choice as New Executive Vice President” [press release], Boston of College, July 26, 2001.
104. Sarah Carr, “Amid High Expectations, UNext.com Tests Its First Online Courses,” Chronicle of Higher Education, April 27, 2000.
105. Abby Ellin, “The Battle in Cyberspace,” New York Times, August 6, 2000.
106. Renwick, “Private Virtual Universities Challenge Many Assumptions Long Held by Educators.”
107. Lisa Bransten, “Something Ventured: Where the Big Money Investors Are Placing Their Bets,” Wall Street Journal, March 12, 2001.
108. “UNext Forms Strategic Partnership with the Thomson Corporation,” PRNewswire, March 1, 2001.
109. “UNext Prepares for More Job Cuts,” Crain’s Chicago Business, September 10, 2001.
110. Barbara Rose, “UNext Wants to Alter Deals with Universities,” Chicago Tribune, August 9, 2001.
111. “A Modern Class Struggle: Distance Learning Is Still a Long Way Off,” Red Herring, October 1, 2000.
112. Kathryn McCabe, “Online Schools Target Busy Execs: Net Transforming Distance Learning,” Crain’s Chicago Business, November 27, 2000. Rosenfield specifically predicted 200,000 students in India and 300,000 in China. Della Bradshaw, “Why Most Students ‘Default to Quality’,” Financial Times, March 24, 2003.
113. Barbara Rose, “Tech Watch,” Crain’s Chicago Business, February 27, 2000.
114. Steven Strahler, “Chicago Will Get Another Gleacher Center,” Crain’s Chicago Business, December 2, 2002.
115. Julie Johnsson, “Online University Lowering Its Brow: UNext Pushes Corporate Training,” Crain’s Chicago Business, November 5, 2001.
116. Barbara Rose, “UNext to Launch Online MBAs,” Chicago Tribune, August 6, 2002.
117. “NYIT and UNext Launch Online College for Working Adults,” PRNewswire, September 16, 2003.
119. Apparently the University of Chicago continued to receive royalties from Cardean as late as 2008 for reasons that are unclear. Goldie Blumenstyk, “New Nonprofit Online University Has Unusual Corporate Beginnings,” Chronicle of Higher Education, August 22, 2008.
120. Interview with former Thomson executive.
121. “UNext Names Cathleen Raffaeli CEO,” PRNewswire, March 4, 2004.
122. Jack Stripling, “Breaking Up Is Hard to Do,” Inside Higher Ed, December 9, 2008.
123. K12 Inc., “Form 10-K,” October 7, 2011.
124. Jacques Steinberg and Edward Wyatt, “Boola, Boola, E-commerce Comes to the Quad,” New York Times, February 13, 2000.
125. Steve Kolowich, “Glimpse Into the Future,” Inside Higher Ed, May 25, 2011.
126. Jason Lewis, “NYIT and Cardean Learning Ordered to Pay $4 Million for Swindling Students,” Village Voice, December 27, 2012.
127. “Higher Ed, Inc,” Economist, September 8, 2005.
128. Laura Pappano, “The Year of the MOOC,” New York Times, November 2, 2012.
129. A recent study by Columbia University’s Teachers College found that although MOOCs developed by universities and nonprofit institutions cost far less than the $1 million UNext spent on its full courses, they can still run into the hundreds of thousands of dollars. Fiona Hollands and Devayani Tirthali, “MOOCs: Expectations and Reality,” Center for Benefit-Cost Studies of Education, May 2014.
130. Liz Gannes, “Education Start-Up Udacity Raises Funds from Andreesen Horowitz,” AllthingsD, October 25, 2012; Rip Empson, “Online education startup Coursera lands 16M from Kleiner & NEA, adds John Doerr to its board,” TechCrunch, April 18, 2012.
131. Melissa Korn, “Yale Gives Former Leader $8.5 Million Payout,” Wall Street Journal, May 19, 2015.
132. Radhika Rukmangadhan, “Google X Cofounder’s Udacity Valued at $1 Billion in Latest Funding,” Reuters, November 11, 2015.
133. Lizetter Chapman, “E-Learning Startup Udacity Raises $35M to Launch ‘Nanodegrees,’” WSJ.D, September 24, 2014.
134. Claire Zillman, “Coursera teams up with Instagram, Google: The search for a business model continues,” Fortune, February 11, 2015.
5. What Makes a Good Education Business?
1. Jonathan Knee, Bruce Greenwald, and Ava Seave, The Curse of the Mogul: What’s Wrong with the World’s Leading Media Companies (New York: Portfolio, 2009).
2. Bruce Greenwald and Judd Kahn, Competition Demystified: A Radically Simplified Approach to Business Strategy (New York: Portfolio, 2005).
3. Knee, Greenwald, and Seave, Curse of the Mogul, 17.
4. Gary Becker, Human Capital: A Theoretical and Empirical Analysis (Cambridge, MA: National Bureau of Economic Research, 1964).
5. Ian Wylie, “Education Goes Global,” Financial Times, December 13, 2012.
6. Matthew Martin, “Blackstone Makes Bet in Dubai Expat School-Place Lottery,” BloombergBusiness, December 9, 2014.
7. Karla Shores, “Private School President Plans Exchange Network,” Sun Sentinel, March 17, 2005.
8. “Nord Anglia Education Completes Acquisition of Six Schools from Meritas,” PRNewswire, June 25, 2015.
9. “GENCO Partners with McGraw-Hill Education to Manage Ohio Distribution Centers,” PRNewswire, September 22, 2014.
10. Just to make the name game more complex, in early 2016, Apollo Global announced that it had separately reached an agreement to buy Apollo Education as well. Gillian Tan, “Why Apollo Has Eyes for Apollo,” Bloomberg, January 12, 2016.
11. Chelsea Dulaney, “McGraw-Hill Education Files to Go Public,” Wall Street Journal, September 4, 2015.
12. “Cengage Learning Files for Bankruptcy,” New York Times DealBook, July 2, 2013.
13. Network effects are sometimes described as demand-side scale, while fixed cost-based scale is a supply-side phenomenon.
14. These are called “indirect” network effects because the value to buyers comes from the addition of new sellers and vice versa. Direct network effects are present where, for instance, there is a social network aspect to the business. Teachers Pay Teachers, discussed later in this chapter, has both a marketplace and social network dimension and thus displays both direct and indirect network effects.
15. The company was originally called iParadigms, but its core plagiarism detection product was always called Turnitin.
16. “Pearson Agrees to Acquire eCollege for $477 Million,” PRNewswire, May 14, 2007.
17. Interview with Oakleigh Thorne.
18. Carl Straumsheim, “Pearson to Leave Learning Management System Market by 2018,” Inside Higher Ed, February 3, 2016.
19. Steve Kolowich, “Outsourcing Plus,” Inside Higher Ed, October 12, 2010.
20. Carl Straumsheim, “Online Program Management Providers, Now a Billion Dollar Industry, Look Ahead,” Inside Higher Ed, September 11, 2015.
21. Robert Budden, “Pearson Acquires Embanet Compass for $650m,” Financial Times, October 16, 2012. The company, which had a troubled early period, was owned by Knowledge Universe.
22. Lora Kolodny, “Education Investors, Startups Hopeful Following Solid IPO by 2U,” Wall Street Journal, April 3, 2014.
23. Ben Fox Rubin, “Wiley to Buy On-line Education Firm Deltak,” Wall Street Journal, October 2, 2012.
24. “America’s Children: Key National Indicators of Well-Being, 2015,” Indicator Fam3.A, Childstats.gov.
25. Peter Lattman, “How Bright Horizons Took Care of Bain Capital Over the Years,” New York Times, January 25, 2013.
26. Peter Martin, Joseph Sims, and Brian Neigut., “Advantage Learning Systems: Leveraging the Learning Triad,” Jeffries & Company Equity Research, March 22, 2000. Advantage Learning Systems changed its name to Renaissance Learning in 2001.
27. Trip Gabriel and Matt Richtel, “Inflating the Software Report Card,” New York Times, October 8, 2011.
29. Eric Bettinger and Rachel Baker, “The Effects of Student Coaching in College: An Evaluation of a Randomized Experiment in Student Advising,” Educational Evaluation and Policy Analysis 36, no. 1 (2014): 3–19.
30. 2012 GSV Advisors Survey.
31. Kellie Woodhouse, “Impact of Pell Surge,” Inside Higher Ed, June 12, 2015.
32. Richard Ruch, Higher Ed, Inc.: The Rise of the For-Profit University (Baltimore, MD: John Hopkins University Press, 2001), 53.
33. In modern times, for-profits only broke 1 percent of enrollments at degree-granting institutions in 1980. National Center for Education Statistics, Digest of Educational Statistics, Table 303.70.
35. Tamar Lewin, “Facing Cuts in Federal Aid, For-Profit Colleges Are in a Fight,” New York Times, June 5, 2010.
37. Ronald Hansen, “Apollo Sees Its Reach Narrowing, More Enrollment Losses,” Arizona Republic, July 4, 2015.
38. Carly Stockwell, “Same as It Ever Was: Top 10 Most Popular College Majors,” USA Today, October 26, 2014.
41. Paul Fain, “Low Bar, High Failure,” Inside Higher Ed, May 7, 2013.
42. Neal McClusky, “Even For-Profit Universities Are Better Than America’s Terrible Community Colleges,” Washington Post, January 13, 2015.
43. Paul Fain, “Gainful Employment Arrives,” Inside Higher Ed, October 30, 2014.
44. Kate Taylor, “At a Success Academy Charter School, Singling Out Pupils Who Have ‘Got to Go,’” New York Times, October 29, 2015.
45. Ann Belser, “EDMC to Close 15 Art Institute Locations,” Pittsburgh Post Gazette, May 6, 2015.
46. Eric Toll, “IRS Filing Inches Grand Canyon University Closer to Possible Nonprofit Move,” Phoenix Business Journal, July 31, 2015; Paul Fain, “Dropping Profit,” Inside Higher Ed, July 17, 2014. Accreditors ultimately blocked Grand Canyon’s attempt to convert to a nonprofit. Ronald J. Hansen and Anne Ryman, “Grand Canyon University: Accreditor Blocks Conversion to Non-Profit,” Arizona Republic, March 4, 2016.
47. Bob Kerrey and Jeffrey Leeds, “A Federal Anti-Education Plan,” Wall Street Journal, November 19, 2013.
48. Fall enrollment in two year public degree granting institutions fell from 7.22 million in 2010 to 6.4 million in 2014. National Center for Education Statistics, Digest of Educational Statistics, Table 303.70. Although the NCES projected a recovery to 6.76 million in 2015, the National Student Clearinghouse estimates that enrollments actually continued to fall substantially. https://nscresearchcenter.org/currenttermenrollmentestimate-fall2015/.
49. National Center for Education Statistics, Digest of Educational Statistics, Table 3.
50. Emma Brown, “College Enrollment Rates Are Dropping, Especially Among Low Income Students,” Washington Post, November 24, 2015.
51. Aline van Duyn, “Thomson Sells Education Unit for $7.75bn,” Financial Times, May 11, 2007.
52. David Schick and Mary Beth Marklein, “College Students Say No to Costly Textbooks,” USA Today, August 20, 2013.
53. Rip Empson, “Blackboard: With Both Co-founders Now Gone, It’s The End of an Era for the Education Software Giant,” TechCrunch, October 18, 2012.
54. Scott Jaschik, “Blackboard Buys Angel,” Inside Higher Ed, May 7, 2009.
55. Michael J. De La Merced, “Providence to Buy Blackboard for $1.64 Billion,” New York Times, July 1, 2011.
56. Christopher Dawson, “Blackboard Founder and CEO Resigns—What It Means for the LMS Industry,” ZDNet Education, October 17, 2012.
57. Jacob Bogage, “Blackboard Loses High-profile Clients as Its Rivals School It in Innovation,” Washington Post, August 22, 2015.
6. Lessons from Clown School
1. The phrase is attributed to Benjamin Franklin.
2. “Houghton Mifflin Harcourt Secures New $650 Million Cash Investment and Recapitalizes Balance Sheet in Historic Restructuring,” Business Wire, February 22, 2010.
3. Joshua Margolis and Hillary Elfenbein, “Doing Well by Doing Good? Don’t Count on It,” Harvard Business Review, January 2008.
4. A wide variety of surveys seek to rank universities domestically and globally. What these mostly have in common is how persistent the names at the top of the lists are. One recent study concluded that moving into the top 20 institutions ranked by the much-cited U.S. News & World Report survey would be wildly expensive and nearly impossible. Shari Gnolek, Vincenzo Falciano, and Ralph Kuncl, “Modeling Change and Variation in U.S. News & World Report College Ranking: What Would It Really Take to Be in the Top 20?,” Research in Higher Education 55, no. 8: 761–79, December 2014.
5. Although the company lost money in 2015 and is projected to do so in 2016, it believes that it will achieve positive EBITDA in 2016. As discussed in chapter 2, EBITDA has a very tenuous connection to operating cash flow. In the case of 2U, the company had originally stated that cash flow breakeven would trail EBITDA by one year. In a recent earnings call, the CFO both rescinded that previous estimate and refused to establish a new one. “We’re not ready to put a stake in the sand as to how much longer” it will take to generate cash flow, she said. Comments of Cathy Graham, Edited Transcript, TWOU—Q1 2016 2U, Inc Earnings Call, Thomson Reuters Streetevents, May 5, 2016. Research analysts at Credit Suisse, which rates 2U as an “outperform,” project that the company will finally generate operating cash flow in 2019. Michael Nemeroff, Kyle Chen, Alexander Hu, and Christopher Rochester, “2U, Inc: 1Q16 Results/Guidance Above; A Front Row View of Profitability,” Credit Suisse Equity Research, May 5, 2016.
6. Jess Hempel, “A Different Kind of Tall Tale,” Fortune, February 11, 2013.
7. Christina Passariello, “Startup University’s Disruption Plan: An Old-School Master’s Degree,” Wall Street Journal, December 9, 2015.
8. Graeme Wood, “The Future of College?” The Atlantic, September 2014.
10. Jo Johnson, “Return of the Prodigal Son,” Financial Times, February 7, 2009.
11. Carol Loomis, “The Wit and Wisdom of Warren Buffett,” Fortune, November 19, 2012.
12. Devin Banerjee and David Carey, “Permira Quadruples Its Money Selling Renaissance Learning,” Bloomberg, March 13, 2014.
13. To manage the sale process, McGraw appointed as CEO a seasoned, long-time IBM operating executive, Buzz Waterhouse, who had previously managed the sale process of Harcourt for Reed.
15. Interview with senior Amplify executive.
16. Molly Hensley-Clancy, “How Rupert Murdoch Suffered a Rare Defeat in American Classrooms,” Buzzfeed, August 24, 2015.
17. Brooks Barnes and Amy Chozick, “Media Companies, Seeing Profit Slip, Push into Education,” New York Times, August 19, 2012.
19. Jonathan A. Knee, “The Melting of Mark Zuckerberg’s Donation to Newark Schools,” New York Times DealBook, August 25, 2015 (review of Dale Russakoff, The Prize: Who’s in Charge of America’s School (New York: Houghton Mifflin Harcourt, 2015)).
20. Neera Tanden and Paul Reville, “Taking a Page from the Bay State’s Education Playbook,” US News & World Report, December 4, 2013.
21. Kenneth Chang, “Expecting the Best Yields Results in Massachusetts,” New York Times, September 2, 2013.
22. Cambridge Associates, Private Equity Index and Benchmark Statistics, December 31, 2015.
23. Betty Corcoran, “Can Investors Make Money and Do Good in Education’” Edsurge, November 5, 2014.
24. The classic discussion of the importance of local barriers is Bruce Greenwald and Judd Kahn, “All Strategy Is Local,” Harvard Business Review, September 2005.
25. Deepa Seetharaman, “LinkedIn Slashes Guidance; Shares Plunge,” Wall Street Journal, May 1, 2015.
26. Saul Hansell, “Once an Acquirer, TMP Worldwide Decides to Divide,” New York Times, February 18, 2003. On a smaller scale, another precedent in the same sector is the acquisition in 2000 by Dice.com, the leading job site for tech professionals, of MeasureUp and CCPrep, online services to help people prepare for tech-certification programs. Dice.com ultimately abandoned both businesses.
27. Jay Greene, “Microsoft to Acquire LinkedIn for $26.2 Billion,” Wall Street Journal, June4. 2016.
28. Zara Kessler, “Education looms big in shared dreams if LinkedIn Microsoft,” Seattle Times, July 2, 2016.
29. Henry Mance, “Pearson to Sell School Software Provider Powerschool for $350m,”Financial Times, June 17, 2015.
30. Caroline O’Connor and Perry Klebahn, “The Strategic Pivot: Rules for Entrepreneurs and Other Innovators,” Harvard Business Review, February 28, 2011.