Why the Business Model Doesn’t Work for Education

It’s simple, really. In our adoration for free enterprise that has been built into cult-like status over the past generation, we have forgotten the prime rule of business: failure is the norm.

Let me say it again: failure, in business, is far more common than success. When we opened Shakespeare’s Sister in 1994, the cliche was that 90% of new businesses close within the first two years. By the time I closed the store for good in 2008, I had seen enough businesses come and go to know that the cliche is not far from the truth. Yes, many businesses are created for a limited time only, but most start-ups do fail.

We cannot afford that with schools. When they don’t work, closing them isn’t an effective option–as New York City is learning right now. Closing a business affects only the owners and employees. The business failed (generally speaking) because it did not meet demands, whatever they have been, so the impact of its closing on customers is negligible. Closing a school disrupts its community and sidetracks education. Its impact on students is huge. Furthermore, it fails not because it does not meet demands, but because it did not reach benchmarks. As any entrepreneur will tell you, benchmarks do not make or break a business–they are only tools created to aid the entrepreneur. In education, however, they are used to destroy, not to improve. It is meet them–or else. That is artificial. It has nothing to do with concepts of free enterprise, the marketplace, or business in any way. And it is destructive, hurting students and communities, not to mention.

Trying again, for an entrepreneur, is difficult and emotionally draining, but it is the individual’s choice to keep trying to find something that will work in the particular marketplace around the endeavor. It doesn’t even have to be done. If there is real demand, another business will step in: that’s the nature of supply-and-demand.

The same isn’t true for education. It doesn’t work on an entrepreneurial basis and never has. A community can’t just wait for an educational entrepreneur to step in and found a new school on his or her own. For another thing, for the sake of the students one really should not displace them from school to school the way one can move from store to store. Ask any of us who attended multiple schools growing up: it’s not a good experience–and, for most students, it impedes the flow of education rather than enhancing it. Closing and opening schools buffets students about but does not improve their learning–as we are seeing today in the wake of the current school-closing mania.

The fact that allowing a school to fail is not the same as allowing a business to fail should be obvious. It is, to anyone who has been a real entrepreneur, who has tried to build a business from scratch and who has experienced (or seen) the frequency with which businesses fail. Business is risk, but the risk is taken by the entrepreneur–it is not passed off onto the customer. It should not be passed on to the student, who many now mistakenly view as a customer. For, in the putative business model of education, the real risk is put on the student, something one should never do to a ‘customer’; the ‘entrepreneur’ loses nothing when the enterprise fails. That is exactly the opposite of what happens in the real business world.

All of those people who tout the business model for education? For the most part, they are either government types or corporate types (neither has much experience with start-ups or with education). They don’t know what they are talking about, not when the subject is education, but they do know how to pass money from government to corporations. School closing (and the charter-school movement in general) is a great way for doing that.

Even though it leaves students–and communities–in the lurch.

4 thoughts on “Why the Business Model Doesn’t Work for Education

  1. Well put. Almost as good as your essay in the 25th issue anniversary issue of the popular serconzine PKD Otaku. It turned out well. And Nick did a creative job with the graphics. What are you going to do for the next issue?


  2. And congrats are in order for your new gig as Faculty Editor, Academe over at AAUP. I think a great follow up for your PKD Otaku essay would be some of the literary allusions found in PKD's short story, “Faith of Our Fathers.”


  3. Yes, when I'm serving (formerly, teaching) my customers (formerly, students), I just remember that the competition (formerly, drugs, video games, and television, currently, for-profit schools) can come in lure my customers away with a better product or service. Now instead of worrying about my customers' needs, I'm focused on the more relevant marketing of my brand, because in a world of limited resources, the brand that has the best lobbyists gets the access to relevant subsidies. If my brand makes a profit, as measured by what its shares are trading at, then I must be serving my customers, and therefore I'll be eligible for the best contracts and tax laws. It's not who you know, it's what they're doing for you that counts.


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