Jonathan A. Knee

Start BIG, finish bankrupt

First off, Class Clowns is not an Education book. It does not evaluate strategies, technologies, or theories in Education. It is a finance book, almost lovingly detailing the stupidity, willful blindness and hubris of financial titans. They don’t follow their own advice. They don’t do their homework; they can’t be bothered with business plans. They know what they want, and they make their company buy it. If someone had brought them the idea, they would have refused to fund it. The book is technical in financial terms. It’s mostly about capital structure.

Secondly, it is an excellently researched and written history of four financial titans’ dismal failure in Education. Education is a magic kingdom that continuously draws people with too much money. They see how big the pot is (well over a trillion dollars – mostly taxpayer), see that there is absolutely no barrier to entry, and they plunge in to take it away like candy from a baby.

Incredibly, they go at it without even a basic understanding of the field, or of the industries serving it. They hire famous names with no Education chops and no Enterprise chops, because the chosen are celebrities or they know them personally, or both. Instead of focusing on a niche or a tight geographic space, they set sights on the nation or the world. It is a recipe for disaster.

The four case studies are Whittle, Murdoch, Paulson and Milken. Between them they lost billions and destroyed untold value.

In no case was failure a result of poor product or adverse economic conditions. In every case, failure was the result of bad management, greedy management, and blind management. Their firms all seemed to lack any kind of core competency (except for Houghton Mifflin which had been big in textbooks for a century). And without any barriers to entry, anyone could play.

Knee was there. As a banker, he sat through the roadshow presentations, analyzed the proposals and balance sheets, and was justifiably amazed and skeptical of it all – especially that otherwise reputable firms would fund them. In some cases, repeatedly. Now as a Columbia professor, he lectures us on how they wrong they all were, and how to do it right.

Class Clowns if frightening for two reasons. The clowns attacking Education are diverting attention and funds for their own greater glory – and failing at it, damaging everything in their wake. And investors should shudder at the reality of reputable, all-star teams trying to take over whole segments of economic sectors by power alone. Their ideas are unfocused, their figures irrational, and their staffing inappropriate. And we buy into it because of their names and record. There is simply no one to trust.

David Wineberg… (más)