Expensive Education Problems
“You could design a better traffic calming plan for the high school.”
That was how the morning started the other day as my son and I sat waiting to turn left into the world’s most chaotic parking lot after we had been talking about activities he might undertake that he would (1) like and (2) be good at that would also be (3) interesting and (4) ballast on a future college application.
“I don’t think so,” he said.
“What kind of attitude is that? If you see a problem, solve it,” I said. Like Vanilla Ice,” I added.
“Who?”
“Vanilla Ice…the rapper…from the 1990s…‘Ice Ice Baby’...‘if there was a problem, yo, I’ll solve it…’”
There was vague comprehension.
Anyhow, the impetus for this (half-serious?) discussion was an article that appeared in The Wall Street Journal about the guru who can get your 11-year-old into Harvard. A profile of Jamie Beaton who founded a company called Crimson Education to coach wealthy children on how to get accepted into expensive private universities, the piece recommends strategically choosing areas where a student can excel and if you aren’t going to be a top performer in an activity “drop[ping] it and mov[ing] on to something else.” Beaton himself apparently quit piano and tennis to pursue debate and engineering.
I’ll reserve comment on the merit of this or any other advice for getting a good education (though Aristotle may have some thoughts and, oh, fine, work hard have fun), but say that the article is worth a read if you have a child with higher education in his or her future. I’ll also say that we have seen investment opportunities in a number of competitors to Crimson come across our desks and learned enough to understand their valuation expectations and that the word to describe what’s happening here is this: Bubble.
The article itself tells you why. There are now 10,000 college consultants in the US (up from less than 100 in 1990) working in an industry where there “are few regulations or barriers to entry,” observable fraud has been perpetrated (shoutout Varsity Blues/Rick Singer), and where customers are paying top dollar for a product whose benefit is almost impossible to measure (the article posits that many of Crimson’s customers benefit from selection bias and a halo effect).
Alex Robertson of Tiger Management, a high profile hedge fund that invested in Crimson disagrees, saying that what’s happening here makes sense because of supply and demand. “You’re talking about massive interest in demand and not that many more seats” is his quote.
And while it’s probably true that there are more people that want (and would pay for) a Harvard degree than can get one, that begs the question “What is the point of education?” (and again I’ll defer to Aristotle). But clearly it should not be a luxury good. A diploma isn’t a Birkin bag. It’s not something you only qualify to overpay for after cozying up to a related party and spending an unconscionable amount of money on ancillary products and services (though Hermes has every right to make someone do that for a leather accessory).
The world has seen this before. Any space where costs are rising faster than outcomes are improving is ripe for disintermediation and that’s where I think education broadly finds itself today. I’m not sure exactly what that looks like, but it certainly looks like there’s a problem and someone (or someones), heeding the words of Vanilla Ice (because wisdom can come from anywhere), will solve it.
– Tim