American Enterprise Institute

September 5, 2006

[Edited transcript from audio tapes]

3:45 p.m.	Registration
4:00	Presenter:	Frederick M. Hess, AEI
	Discussants:	Michael Feinberg, Knowledge Is Power Program (KIPP)
		Michelle Rhee, The New Teacher Project
		Chris Whittle, Edison Schools
5:30	Wine and Cheese Reception
6:30	Adjournment

Proceedings:

Rick Hess:  I welcome all of you here today through the rain.  First Tuesday after Labor Day, folks come back and they’re swamped, so I appreciate you guys joining us today.  Last time we did the entrepreneurship conference, last fall, Morgan reminds me, it was raining buckets too.  I think we’ve got a theme going here, which is the state of educational entrepreneurship is rainy.

I’m Rick Hess, director of the education policy studies at the American Enterprise Institute.  I’d like to welcome you to AEI today for a conversation of “Educational Entrepreneurship: Realities, Challenges and Possibilities.”  Today’s conversation is prompted by the publication of a new book, in stately brown and blue, Educational Entrepreneurship, a volume published by Harvard Education Press, just released a few days ago, that I edited.  Its chapters are the revised versions of papers first presented at an AEI conference last fall.  You will find the volume available outside in the foyer at the end of the event, if you were so moved by the conversation that you must rush home with a copy.  If not, you can find it at bookstores and Amazon.com and such places.

The thing for me that’s interesting about this conversation is that we have it so rarely.  Sitting to my right, are three of probably the most interesting educational reformers in the business today.  To my immediate right is Mike Feinberg, then Michelle Rhee and Chris Whittle.  Each of these has probably in their own way wrought more substantive change over a slice of the education pie than a lot of folks that we put up at National Governors Association meetings and ASCD meetings and whatnot.  And yet conversations like this, talking about entrepreneurship – how it works, what it means – are unusual.  They’re rare.  This stuff is at the margins of our discussions of how we reform education. 

I find that particularly troubling because entrepreneurship is the pivotal but rarely considered element of both major strands of 21st century school reform – both accountability-driven reform and choice-driven reform. 

Accountability, after all, is not just about testing – at least in theory – but it’s about a grand bargain in which we adopt outcome accountability in return for new operational flexibility.  Effective, imaginative solutions that harness the freedom, that flexibility, are the crux of entrepreneurship.  That’s what entrepreneurship is.  The fact that we see so little entrepreneurship probably is one explanation for why there is so much discomfort and resistance with accountability in the conventional world of public education.

For school choice, whether we’re talking charters or public choice or vouchers, these are about putting market principles to work on behalf of kids.  Consumer choice is fine.  Parental choice is a neat thing.  But it only works the way it’s supposed to when folks have quality choices before them.  If they’re making choices among the same old/same old, it’s unlikely that choice-driven reform is going to make a big difference.  In the end, choice-based reform is about opening a door, letting new folks in. 

Entrepreneurship is about the operators, the providers that operate within those opportunities.  Yet just as the accountability conversation is rarely about these things, if you go to national meetings on charter schooling or sessions on voucher schooling, you rarely hear thinking about how we create a dynamic infrastructure for the sector.  You hear a lot about legislation and funding formulas.  Those are important too; this stuff is essential.

What exactly is educational entrepreneurship?  What’s this book about?  What are these folks talking about?  What do I mean by the term?  With apologies to Peter Drucker, or with credit to Peter Drucker, in the book I describe it as “a process of purposeful innovation directed towards improving educational productivity, efficiency and quality.”  You notice this says nothing about whether you’re for-profit or nonprofit.  It says nothing about whether you’re operating inside or outside conventional school districts.  What it’s about is harnessing the kind of creative energy and the cycles of creation and renewal – and destruction – that characterize the most vibrant sectors of American life. 

What this requires is a fundamental rethinking of how we talk about innovation and how we talk about failure in education.  The fact is, we fail a lot of kids today.  We fail millions.  We have tens of thousands of schools that by any reasonable definition are failing to do their work effectively.  Talking about 100 percent proficiency and scientifically valid approaches doesn’t solve that dilemma.  The fact is, we have a lot of schools which we would like to see be more effective.  But how do we actually get there?

If we think about how we’ve generally been successful in whatever areas of national life we’ve had great success, it’s rarely because we knew what we were doing ahead of time.  The examples abound.  If you remember Fred Smith, founder of FedEx, one of the famous stories – he wrote up the business plan for FedEx in the mid-1960s.  Got a C on it.  Was told it would have had a higher grade if it was feasible. 

The Wright brothers in 1902 were asked how long it would be before somebody actually learned how to fly.  They said at least twenty years.  In 1903 the Wright brothers were the first to succeed.  UNIVAC in 1950 predicted how many computers would be sold worldwide by the end of the 20th century.  It predicted a thousand.  Edsel was the most highly engineered car of the 20th century – massive flaw.  What everybody forgets, of course, is that in sorting through the wreckage of the Edsel, Ford stumbled upon one of the most successful cars of the 20th century – the Mustang. 

Not only are we not good at predicting what’s going to work, what’s going to be effective, how things are going to operate – even when we know there will be winners, we have trouble figuring out who they’re going to be on the front end, because how they’re going to get there is not yet clear.  In 1910 there were 200 automotive firms in this country.  By 1960 there were four.  We say, oh, now if we go back, it’s pretty easy. 

The fact is, you could go to the folks who knew the tech sector inside-out in 1998 and not many of them would have predicted that Amazon and EBay and Google were going to be the giants and hundreds were going to wind up wrecked on the shores.  Even two years ago, not a whole lot of smart folks would have told you that YouTube and MySpace would be the breakout websites of the last couple years.  We’re not good at seeing these things ahead of time, which is why we have to let smart people get their hands on capital, take advantage of opportunities, and see what they can discover, what they can invent.

Anyway, in this book a collection of leading scholars and thinkers joined me in thinking about these dynamics.  What we usually see are heroic profiles or puff pieces – or hatchet attacks, some of them launched at some of the folks up on this podium here.  What we don’t usually see is real reasoned conversation about what entrepreneurship is, what it needs to succeed.  That’s what this book talks about – what does entrepreneurship require?  How does it actually work in practice?  What’s happened thus far and what does it mean?  What does an entrepreneurial environment look like? 

For instance, in the U.S. today, in 2005, three-quarters of the top twenty-five firms were not on the same list of the top twenty-five firms in 1965.  In France, same comparison – of the firms that were France’s twenty-five biggest firms in 2005, every single one had been one of the nation’s biggest firms in 1965.  Very little invention – a lot of stability.  One of the consequences is you see relatively low rates of R&D and breakthrough advances.

Today we have three of the nation’s most successful educational entrepreneurs with us to talk about what they’ve seen, the lessons they’ve learned, and what all of this means for 21st century school reform.  They’re going to speak in the order you see them seated. 

First up will be Michael Feinberg, co-founder of the Knowledge Is Power Program and superintendent of KIPP-Houston.  Next to Mike is Michelle Rhee, chief executive officer and president of The New Teacher Project.  Finally is Chris Whittle, founder and chief executive officer of Edison Schools.  Each of our guests is going to speak for about fifteen minutes.  We will then open it up for conversation among them and for questions from the audience.  At 5:30 we are going to adjourn and we’ll have refreshments out in the foyer if you care to join us. 

With that, Mike, why don’t you take it away.

Michael Feinberg:  It’s great to see everybody.  All the KIPP schools are defined by our five pillars: more time on task, the choice of commitment, the high expectations, the focus on great results – but the fifth pillar, which I think is the main critical path for us, is the power to lead.  The fact that there is a grade school leader in place who has control over their staff and budget and their curriculum and they run the school the way they see fit, which has caused – which has been one of the challenges for us has been that in the last six years we’ve had over 2,500 applicants to start KIPP schools and we’ve selected about 70. 

Today we have 52 schools because while we found some very competent school leaders, we haven’t found what we’re looking for, which is school entrepreneurs who are really going to dive in and start this from scratch and make it work.  It’s been an interesting challenge. 

When we started in 2000, Governor Roy Barnes in Georgia called Dave Levin and myself up and said, “Please come to Atlanta now and talk to me.”  We said, yes, sir.  We go into his office and he says, “I’m going to make sure you get charters.  I’m going to make sure you have all the money you need.  I’m going to make sure you have facilities.  So you’re going to start schools for me, right?”  We both didn’t know what to say other than, “Yes, sir.”  So we say “Yes, sir” and then we leave his office and say, what are we going to do now? 

That’s how we started the KIPP Foundation, was we went out and got the help of – well, we need to help start these schools, how are we going to make it happen?  Scott Hamilton, the Pisces Foundation, everyone worked with us on this.  Of course we couldn’t find anyone so then Dave and I had to play basketball to figure out who’s going to go back and tell Governor Barnes we couldn’t find anyone, despite the funding, despite all the freedom, despite all the facilities. 

So school leader really is a critical path item for us.  Of course the challenge is, 52 schools later, while we’re very proud of the results, of course be careful what you wish for – it’s great to have these entrepreneurs out there running their schools.  Now you try to organize 52 entrepreneurs to all be rowing in the same direction at the same time – that can be a little bit of a challenge.  So for us, how you make this more than just excellent dots on the map, but somehow be able to leverage all the success combined to really put something forward, has been a challenge.

When I think about what educational entrepreneurship is, I think it’s just that.  I think it’s basically just overcoming the challenges.  In public education, the river runs downstream unfortunately.  If you do exactly what the system is set up to do and just kind of go with the flow, it doesn’t yield to great results.  Great results are happening all over the place but they’re always the exception to the rule.  There are no systems out there where a vast majority of the kids are excelling in K-12, a vast majority are going to and through college and given an opportunity to do what they want in this world.  It’s happening in pockets but it’s not system-wide.

So for us, it’s kind of addressing that challenge at the beginning when we were 1992 TFA Corps members, I think – we weren’t really thinking of ourselves as entrepreneurs at the time, but to me, just like these guys up here and other people in the country who are doing this, you’re presented with some major challenges and obstacles towards helping your kids achieve – your kids in the classroom, your kids in your school, your kids in your school system, however you look at it.  Your kids in this country.  What are you doing to try to address those challenges and obstacles and get around them? 

For us it was putting together the proposal back in 1993 to start the Knowledge Is Power Program.  At first we didn’t have any long-range plans, it was just going to be a fifth-grade program.  It was successful in fifth grade but we realized it wasn’t enough, we had to turn it into a school.  One school wasn’t enough because we had long wait lists.  We had to start more schools, and it kind of snowballed like that.  It certainly wasn’t necessarily intentional.  The only thing that was intentional from the beginning was what we’re going to do to truly set our kids up to not just survive but thrive, all throughout their elementary years, middle school years, high school years and college years.

It’s certainly been very frustrating along the way too.  When we first wrote that proposal back in 1993, that was the story where we heard Rafe Esquith speak, who was the 1992 Teacher of the Year.  He got us inspired.  We realized that we were part of the problem, not part of the solution, so we went back and stayed up all night, put on U2’s “Achtung Baby” on repeat play.  Wrote the Knowledge Is Power Program. 

The next day we started going into the school district to try to get support for this.  We would meet with the assistant superintendent of left-brain instruction, or one of those titles, and they would ask us – because we wanted official school district support for what we were trying to do.  They would say, well, this KIPP thing you’re trying to do, is this ed reform?  We would answer, sure, it’s ed reform.  They would say, so what’s the new curriculum?  Well, there’s no new curriculum.  We figured lots of very smart people here in the district and the state have written good curriculum.  We’re trying to make sure the kids learn it. 

That confused them.  They asked, well, if there’s no new curriculum, how is this ed reform?  We said, the kids will come to school at 7:30 in the morning.  Okay, now we know what you’re doing; we’re going to check the box right here, it’s a before-school program.  No, no, they’re going to stay until 5:00 in the afternoon. Oh, wrong box – after-school program.  After she said that, she walked away to go to another office and Dave and I are sitting in this office looking at each other and going, why don’t they get it?  We’re just lengthening the school day – more time for reading, more time for math. 

I guess it’s one of the more immature things we’ve ever done – we were so frustrated we couldn’t get past her that when she left the office, she had her computer on the desk and we just kind of unhooked the keyboard wire from the back of her monitor.  Which twelve years later I bet she still hasn’t figured out how to make her computer work.  Maybe entrepreneurs are also very mischievous creatures, I guess.

In terms of what I see our role in public policy, I’ve always said it goes back to the other pillar of “focus on results.”  What our goal is and our hope is, is that we can produce some great results which in turn can be used by various people and policy leaders in public policy to take the results and then figure out what do you do with these for the rest of the system and what are the lessons learned that others can work on as well.  You can’t be everything to everyone. 

I think it’s important also, everyone should be keeping their focus and focus on their strengths.  Our strengths are not in the public policy world.  Our strengths are in the classroom with the kids.  At the same time, as much as that’s our strength, we want to make sure we link up with a lot of people in this room so that if we do get great results, they go to the people in this room to be leveraged for lessons learned and to help all kids learn.  Being Teach For America Corps members, we believe that one day all children in this nation will attain excellent education.  That’s what we’re trying to make happen.

There was the one question about do policymakers understand our efforts.  That’s kind of a funny question too.  That’s definitely depends on the day, time and place.  If the place is Texas, where I’m from, it especially depends on the place.  I remember there was one – right when we first became a state charter in 1999, we had a legislator (who will remain anonymous) come unannounced to the school and say, I’m here to see one of these new charter schools.  I took her around and she saw the school.  She was very quiet, nodding as I was showing her the different classrooms and explaining how we operated KIPP. 

When we got to the end of the tour she said, “Mike, this is one of the best schools I’ve seen.  This is exactly why I don’t support charter schools.”  I said, well, thank you, Representative, I understand the first part but I’m confused on the second part.  She said, well, this is one of the best schools I’ve seen – because it’s a charter school, you have the freedom to do all the things that the other traditional schools are not able to do.  I said, ma’am, you’re in the legislature, why don’t you change the law so all the schools can do this too?  She hesitated for a minute and said, “I never thought of it that way before.” 

So one, that demonstrates we really do have to work on critical thinking skills in Texas.  But it also demonstrates just the power of this idea of what can happen when you finally show people the results, but it also shows how people always talk about – the word “change” is such a funny word. 

People always say we want to change, want to make things better, but it’s one of those – if you read between the lines, it’s that we want to change and we’re psyched to do it as long as everything will stay the same.  It’s just that kind of paradox in there too that hopefully educational entrepreneurs can kind of light a trail and show people it’s okay to do things a little bit differently.  As it says a lot in this book, it doesn’t mean it’s going to work every time.  There will always be lots of lessons learned from mistakes as well as from successes.  But hopefully that can inform people.

What’s on the horizon for entrepreneurs and for KIPP specifically?  As we move forward, we are trying to herd the cats around the country, instead of having these fifty random dots all over the country.  As we look to start another, in the next decade, hopefully up to another hundred schools – ten a year is our goal, ten to fifteen a year.  Instead of just adding another hundred dots so we look like the Southwest Airlines route map, we’re trying to take the existing dots on the map and make them larger and larger. 

What was talked about in the book in the beginning is the FedEx analogy, which to really chase the analogy, does it apply in education?  It worked beautifully in the mail industry.  The Post Office government monopoly really did get better because of FedEx and then after that because of UPS and DHL. 

Today they all make each other better and none of us today have to spend five or six dollars just to mail a letter because they’re all constantly putting pressure on each other and innovating from each other.  Does that work and does that apply in public education?  That’s a good question.  We need people to really push it. 

People will look and say it doesn’t because look here in the District itself.  There’s 25 percent of the kids are now in charter schools, started by a lot of entrepreneurial people.  The District is still having lots of trouble so no, it doesn’t work.  I would argue back that that’s not a really good analogy because we didn’t control for all the variables.  The variable of quality wasn’t controlled for.  If FedEx lost half of the packages early on, I bet the Post Office never would have tipped.

So again, if we can control for quality, if you do get up to 8, 10, 12, 15 percent of kids in a system served really well outside the traditional public school system, will that have a positive effect on the traditional public school system?  I like to think yes.  It’s all speculative until someone really chases it.  That’s what we’re going to try to do in Houston and then from there we’re also trying to do it in some of the other cities around the country where we hope we can find more of these entrepreneurs to keep growing it.  Of course as we start these schools, not just think about how to start them but how to make them sustainable as well.

So I look forward to having a dialogue after we hear from our other panelists.  Thanks.

Michelle Rhee:  Good afternoon.  I’ll give you a little bit of background first.  The New Teacher Project is a national nonprofit organization.  We work with school districts and state departments of education across the country on the recruitment and retention of new teachers.  We work with most of the largest urban school districts in the country, helping them bring in teachers. 

I started this organization about ten years ago during the height of the teacher shortage crisis, when the U.S. Department of Education came out and said that we were going to need 2 million teachers over the next ten years.  That was sort of – back then, teacher recruitment was all the rage.  So people were saying we can’t find enough people who want to teach in urban school districts across the country.  We’ve got to focus on putting more resources toward recruiting these folks.

So we thought we would come in and add the greatest value by trying to broaden the pool of people from whom school districts were choosing their teachers.  So we started what we call high-quality alternate routes into education, where we started to recruit mid-career professionals into education.  We had a tremendous amount of success with that.

We are unique as entrepreneurs in that we are a revenue-generating nonprofit organization.  We sign contracts with school districts and we say we’re going to operate pretty much like a business.  So we have to go out and sell contracts.  We have to make sure that our contract revenue meets our expenses.  We do very little fundraising and that keeps us lean and keeps us innovative. 

I think that one of the things that early on really sort of sparked the entrepreneurialism within the organization was the fact that we were having a hard time early on trying to get districts to sign contracts with us.  I remember one of the earliest clients that we had was Randy Ward when he was in Compton, California.  He looked at me and said, “Why would I ever believe that you could bring these teachers?  Nobody wants to teach in these schools in Compton.  They’re out of control, they lack resources.  What you say is interesting but I don’t really think you’re going to be successful in getting these people here.”  I started trying to talk him into why I thought it was going to happen and he said, “All right, let’s just cut to the chase.  What happens if you don’t bring in the people you say you’re going to?”  I said, “Then you don’t pay us.”  He said, “Okay, deal.”

So we set up our first performance-based contract and we run all of our contracts on this basis now, where we say we will bring you a certain number of teachers.  Here’s what the makeup of those teachers is going to look like.  If we fall short in any realm we will pro-rate our fee down.  So it’s a proposition that is very difficult for people – or should be very difficult, rather – for people to turn down, because the way that HR departments operate in school districts is the district will throw millions of dollars into the HR department, saying go recruit us 1,100 teachers. 

If they open the school year with 400 vacancies, who are you going to look at?  The money is out the door.  The people who are there who are supposed to be doing this work, they stay there.  They’ve been there for twenty years.  You’re left in a situation where there are children with no teachers in front of their classrooms and the money is out the door and there’s not really a lot that’s done about it.  So we try to break that cycle by saying if for whatever reason we don’t bring in the number of teachers we promise you, you don’t pay us.

So you’d think that would be an enticing proposition but one of the questions that Rick asked us was, what’s been one of the most frustrating things you’ve had to deal with?  So I’ll point to an example from Mike’s home state of Texas, in an unnamed district that starts with D.  This will just show you about his comment about the lack of critical thinking skills in said city.

We were brought into that city by a group of funders who wanted us to come in and start working with the district.  They were hiring thousands of teachers a year.  So we went in and they said, “We don’t want your alternate route candidates.  We have a large alternative certification program here.  What we want and need is certified candidates.”  They were trying to figure out how they could maneuver not having to work with us, so they’re throwing up all the obstacles.  They said traditionally certified candidates.  We’d never done that before but we said, okay, we can do that.  They said, in the high-need subject areas.  We said okay.  Then they said, to teach in the lowest performing schools in the district.  We said okay.

So we sent our staff member down, one staff member.  She had a half-time college intern.  We looked at their data and it turned out their recruitment staff of twenty people the prior year had brought in just over a hundred, 105 teachers, who met this profile.  They said, what do you think you’re going to be able to do for us?  We said we’ll be able to match that.  They looked at us like we were crazy.  We said, give us a shot.  They said, fine.

So our folks, our one and a third person, ended up recruiting probably about 140 of these high-need subject area people who were certified to teach in these low-performing schools.  The foundation community could not have been more thrilled.  They saw this and they said we’ve got to ramp this up.  Next year we want you to bring in 600 of these people and we will, as a foundation, give the money to the district to pay for this.  So the package that the funding community basically put together a deal for the district where they only had to pay $254 per person, per certified candidate.  So we put this package together, went and had a meeting. 

The district looked at us and said, “I think we’re going to take a pass.”  We said, “It’s only going to cost you $254 a person to bring in these high-need subject area people, certified.”  They said, “We feel like we watched you over the past year and we’ve learned a lot and we know how to do this ourselves now, so thank you very much.”  The superintendent who had to listen to those people said, well, that’s what they say, so that’s what we’re going to do.

So that’s just a little glimpse into the challenges we face in dealing with school districts, even when we have what we believe is a superior product at a lower price and with much better efficiency.

In terms of what I think entrepreneurs can bring to this field, I think one of the most important things is – I’m trying to figure out how not to say this in a lewd way, even though this is Rick Hess’ thing and he’s not averse.  So from a female entrepreneur, I will say bring some ovaries to the table.  Just a willingness to mix it up a little bit and do things a little bit differently.  One of the things that I think is our greatest advantage as we’re working with school districts, we are in a position where we are constantly looking to innovate to solve their problems. 

One example is we work in New York City, obviously the largest school district in the country.  When we started working there on our program to recruit mid-career professionals, there were all of these regulations in place that said here’s who you can hire as a nontraditional candidate, here’s who you can’t.  Here’s all the hoops they need to jump through.  We were looking at a situation where the district had to hire about 400-500 math teachers a year.  The traditional education schools were producing across the state about 150 math-certified teachers a year.  So even if for some godforsaken reason New York City was successful in recruiting all 150 of those people, they would still be woefully short of what they needed.

So we looked at trying to bring in math teachers through our program and we found that the state regulations said you could only recruit people who had a math major.  Through that route we were able to bring in maybe fifty a year.  Finally we looked up and said, this is insane.  We have to be able to find a way to bring people who have content knowledge into the classroom.  So we struck a deal between the DOE and the state department of ed to say let us recruit a different kind of math teacher. 

We were able to strike a bargain where we looked at people’s transcripts and looked for people who had a proclivity in math because of their previous jobs or they might have had a minor or something like that.  We ensured that they could pass the test, the content test.  We put them through sort of a math immersion program.  Through that we have been able to basically grow sevenfold in the number of math teachers we’re bringing in a year.  We’re bringing in between 300 and 350 math teachers a year now into New York City and we’re closing that gap of what the education schools are not producing. 

We also bring in mid-year cohorts.  This is a problem that all school districts have across the country, is bringing in people mid-year.  Once these vacancies are on the books they’re hard to take off the books.  So we bring in four cohorts a year.  We bring in a cohort in September, October, November and again in January, so there’s always a new crop of highly qualified teachers ready to go into classrooms.

The last point that I’ll touch on is what role do entrepreneurs play in policy.  I think like Mike we had no intention when we went into this of touching policy.  We’ve sort of fallen into it by necessity. 

When we started our work we realized that what was going on in these public school districts in terms of hiring new teachers was crazy.  We saw that there were inefficient HR departments.  We saw that there were policies that were stopping the best teachers from being hired by these districts.  So because of what we were seeing and the data we were able to gather, we actually started putting out reports.  So we put out two reports to date. 

The first one was called “Missed Opportunities,” where we basically showed that it was not a recruitment problem – that there are plenty of people who are interested in teaching in urban districts if you have an aggressive and strategic recruitment effort.  That it was really the bureaucracies and the timeline that stopped the best people from coming into the districts. 

Our second report just came out in November, called “Unintended Consequences,” looked specifically at one of the policy barriers that we identified, which was the union collective bargaining agreements in the large urban districts that we worked in.  How there are provisions within those contracts that really stop districts from being able to hire the best teachers.

I would say what’s been most interesting for us has been the fact that we’re a very small staff, we have not spent a lot of money at all on these particular reports – I’d say between the two of them, less than $300,000 – but the policy impacts that they’ve had have been huge.  Both in New York City, which I think people would argue has one of the toughest unions in the country, and then on the other side of the country in California, we have been able to see substantive changes in the collective bargaining agreements because of the data we’ve gathered.  In New York we were able to change the collective bargaining agreement so that principals had right of refusal over teachers who wanted to transfer into their schools, which was huge.  We ensured that novice teachers could not be bumped out of their positions because a more senior teacher wanted that position.  So those are the two things we were able to do in New York. 

Then in California we just had state legislation passed that says that for the lowest performing schools in the state, those that are in deciles 1-3, that those schools will have a right of refusal over voluntary transfer candidates.

So I think our lesson learned here is that data is incredibly important.  If you can take the arguments out of the anecdotal and actually show with numbers that these policy barriers exist, then you can actually have a tremendous amount of impact on education policy.

Chris Whittle:  I’m here to represent the old entrepreneurs.  I’m going to do something that any good entrepreneur would not do, which is I’m going to loosely follow instructions.  Rick sent me over the weekend five questions he wanted me to answer so here we go.

The first one was, what exactly is educational entrepreneurship and what role can it play in improving American education?  I don’t see a lot – other than it’s in a much more important sector than a lot of other sectors, I don’t see a big difference between entrepreneurialism in this sector and any other sector.  So in a way the real question is, what is entrepreneurship? 

I think you actually captured it pretty well in the book but there were a few things in there that I wanted to highlight.  It’s the introduction of change, via organizations or companies.  The point that the book made about it’s the questioning of all givens that may exist in the current paradigm, I thought was very good.  In Kim Smith’s chapter, I think I read it wrong the first time and then got it, but the concept of “learned optimism” is a very good – at first I thought it said LEARN-ed optimism, which I liked that one even better. 

But LEARNED optimism is truly an entrepreneurial trait.  If you haven’t seen the impossible work, you don’t believe that it can.  A lot of entrepreneurs, particularly ones who have been entrepreneurs for a while, have seen that you can actually take your hands off one trapeze bar and get to the other one when a lot of people wouldn’t believe that you could.

I think there are some aspects of educational entrepreneurs that are different than entrepreneurs you see in other fields.  Most of the ones I’ve met in this field are at heart social revolutionaries.  Many of them would have been in politics if this opportunity didn’t create itself and may one day be.  I think of them as a lot of people from the 1960s with ties on, is often the way I view them.  They’re kind of capitalists that care and don’t see any conflict between that construct – at least those of us on the dark side of this, the aspiring for-profits.  I know that “capitalists who care” sounds suspiciously like compassionate conservatives but it was not intended to be that.

In terms of how entrepreneurs can help American education, I think we’re in a two-phase process.  The first one is the one we’re in now, that introduces new thinking, new approaches at all sorts of levels.  That directly influences today a relatively small group of children, when you add them all up, compared to the 55 million or so children that are in public schools today.  I think there will be a period where it will scale up and the number of children directly affected will be dramatic.  There’s a recent Blair government white paper that I think captured what the future might look like. 

Here’s the way they said it.  They said, “LEAs [school districts] will become commissioners of education, not providers of it.”  That’s a very revolutionary statement and it encompasses something that’s hard for a lot of people in public education to accept or comprehend, which is that the funding of schools is separate and apart from the provision of schools.  You can be the funder of schools, which makes it public, but that doesn’t mean the public is the provider of it.  I think entrepreneurs over the next few decades are going to make that a reality.

The second question, what are a few of your most frustrating or daunting challenges, or things you’ve encountered in your efforts?  All entrepreneurial efforts are stressful, but I think being in the public K-12 space is at the high end of the entrepreneurial stress scale.  Primarily because it adds an element to the mix that most entrepreneurs don’t cope with and that is you have to throw politics and media into your already stressed environment.  I’ve often said K-12 entrepreneurs live at a very busy intersection of education, finance and politics and media.  That politics and media piece makes it hard. 

Just to give you an example of a typical day in our world, and I won’t name cities, but here’s an example of how all those things have collided and do collide in the past.  You open a charter school in a particular city – and what I’m about to tell you actually happened – they pay you only roughly 80 percent of the funds that the school down the street gets, but they say they pay you more.  So you actually get 80 percent but then you get slammed because you’re getting more – at least they’re saying you’re getting more.  As soon as your school opens, or actually several months before it does, neighboring schools counsel out all of their most challenged children and they actually have a systematic program of principals and teachers saying to parents, there’s a new school opening near you – it’s terrific for your child – which happens to be the most challenged child in the school – and you really should go there. 

Then we get hammered for creaming, which is that we’re only selecting the best children in town.  So you wind up with, if you will, the toughest study body in some respects, with 80 percent of the resources.  Then guess what, your test scores come out in the first year and gee whiz, they’re lower than the school down the street – having nothing to do with what their progress was, just their absolute scores.  You get lambasted in the media because the scores are actually lower.  If that weren’t enough then comes phase two, which is after you’ve spent a year finding, developing all these great teachers to deal with this pretty stacked deck that you’ve been given, the same schools that counseled out the toughest kids raid your teachers by saying, our school’s much more easier to teach in because we sent all our tough kids over there.  That’s kind of a day in the life of a lot of charter schools, not just ones that we’re involved with.

The third question was what role should entrepreneurs play in public policy.  I think we should be involved at about the same level as the teachers unions are involved in.  That would be a lot, as participants in policy discussions and as contributors to politics.  We are absolutely decades away from being able to play there.  If you combine all of the kind of contributions of, if you will, this fledgling movement, you would probably be talking millions of dollars as opposed to hundreds of millions of dollars.  So it’s a long ways away but I see no reason why we shouldn’t be dramatically involved.  In most ways, most organizations are somewhat involved.  Many of them got there late and didn’t plan it in the early days but realized – and we were the same way – realized you had to if you were going to survive and prosper.

The next to last question was, have policymakers, education officials and journalists generally understood the challenges and nature of your efforts?  Some have, some haven’t, but I’ll address two issues. 

The first is on media coverage of educational entrepreneurship.  It has basically been a he-said/she-said type of media coverage.  I want to give you examples.  The question that is now almost annually or three or four times a year debated is, are charter schools – and charter schools are not the only form of entrepreneurialism, as the book says, but they’re one strain – are charter schools any better than regular or traditional public schools?  Most journalists find so many conflicting studies on this particular question that what they do is default to a very safe place.  The safe place is to report anecdotally. 

By the way, if you report anecdotally, what do you do?  You go find a good charter school and you find a bad charter school and you put both those in your article.  Then you put a headline on it that calls it “mixed results.”  By the way, on the basis of those anecdotes it makes sense.  On the basis of these warring studies you see, it holds water.

What I find particularly frustrating is the inability so far to establish that mixed results can in fact be better.  To put it in another world, Tiger Woods has lost 75 percent of the tournaments he has entered since he turned professional.  He’s lost 75 percent of every tournament he entered.  The average professional golfer has lost 99 percent of all the tournaments they enter, but everyone would say Tiger Woods is better than the average.  In reality they both have very mixed results.  All mixed results are not created equal.  That’s been very challenging to establish in the media coverage of what we do.

A second issue, particularly with politicians and journalists, is this story is way too long to fit into their agendas.  Journalists have a deadline to meet and very limited space.  Politicians have got to get it all on a bumper sticker for the mid-term elections.  The reality of the work we do does not fit into those kinds of high-speed constructs.  I’ve been doing this fifteen years, I hope I do it another fifteen years.  The work will just be getting to a particular level at that point.  That’s a frustrating part of this, education is very faddish.  What’s the cure of the month?  This thing takes a long time and therefore, is it good, is it bad?

The last question you had is, what opportunities do you see on the horizon and how could policy changes assist some of those?  When I speak on college campuses – you remember that old line from “The Graduate” of what you would go into, and the guy says plastics – if anybody asks me what’s the field to go into, I say education.  They’re somewhat stunned by that but it’s going to be an exploding, high-growth, highly interesting category for the century ahead. 

You might say, how is that so?  Two things that I would point out.  We have not seen – and you mentioned this in the book – we have not seen the second generation of schools coming out of educational entrepreneurship.  That’s coming soon. 

Everybody that’s in this arena has learned a great deal from both good results and bad results over the last ten or fifteen years.  They’re going to synthesize all of those.  Put another way, use your Edsel example – they’re going to work through their Edsels and they’re going to come out with a whole different generation of schools that are going to work and be much more effective for students and teachers.  That’s what I’m spending the great bulk of my time on right now.  We’ve been at Edison working mostly on the original design we created fifteen years ago.  We’re working on the next one, which we’re pretty excited about.  I think you’ll see that happening in different ways from every entity in the space.

The second one is, this is going to be a global category.  This whole educational entrepreneurship thing is happening all over the world.  Just coming down here today I looked back at my calendar – in the last ninety days I have met with delegations from China, Japan, the Mideast and Germany, saying we’d like you to come set up shop here.  It’s happening in every particular arena of what we’re doing in every country across the globe.  So I think you’re going to see a lot of activity in that way.

On the policy front, the one thing I think policymakers – the two things I would suggest they do is first get rid of what I call educational protectionism.  There are two aspects of that.  We’ve got to have parity of funding.  You cannot go, here’s 70 or 80 percent of the money to a school and then say we expect better results.  That’s not what the premise should be.  Charter laws all over the country play around with funding in a variety of ways.  It doesn’t establish real markets. 

By the way, it was never intended to establish real markets.  People get their hands on this legislation.  It was intended to do exactly what you think, which is make it much harder.  It’s the equivalent of the American government saying we’re going to pay a 30 percent tax on every Japanese car that arrives.  That is not making it easier for import cars to function.  And we are the imports, have no doubt about that.

A second way that there’s educational protectionism is structural protectionism.  If you look at lots of charter laws across the U.S., they have little things like “a charter can only have one campus.”  Most states do that.  So if you have a great school, you can’t replicate it?  Exactly what’s the social policy thinking behind that?  There’s only one thing behind that, which is stop them now or they’ll get bigger.  So it is protectionism and fighting that will help everyone in this movement.

The second thing happens to be one of my pet peeves – much greater research and development support, particularly from the feds.  America is spending a hundred times as much at the federal level on health care research as it is on education research.  It’s spending 250 times as much at the federal level on defense research and development as it is in education.  If we can bump up those levels of expenditures and create a collaboration between the public and private sectors, it’s going to help. 

 Rick Hess:  Thank you, Chris.  Michelle, one point Chris touched on is when we talk about – to the extent we talk about entrepreneurship in education, it’s about charter schooling.  They’ve become more than a little synonymous.  When Chris is talking about these obstacles in terms of protectionism, you alluded to them.  Can you talk a bit about – so often talking about opening up education gets to opening up school entrée.  But you hear the same concerns from folks who are providing technology, from folks who are in the sub-services market.  You’re kind of the one person up here today who’s not a charter operator.  Could you talk a bit about how these things play out and how could policymakers change the playing field if they wanted to?

Michelle Rhee:  It’s been interesting for us to be in this realm as entrepreneurs but also being on the nonprofit side of things, because they can’t use the excuse they probably use with you, which is you’re trying to make money off the backs of kids.  They can’t use that with us.  But it’s been interesting to us just to see the level of defensiveness, I guess, that there is to innovative people coming into the fold.

Just an example.  We work hand in hand with HR departments.  I’d like to say that a lot of what we bring is very different.  But there’s sort of a different level, which is much more foundational, it’s just nuts and bolts.  So somebody applies to our program, they can apply online.  Two weeks after they apply they will hear whether or not they got an interview.  Two weeks after they interview they’ll know whether or not they got a job.  They can check their status online at any time.  If they ever have a question they can call our office, they will speak to a live person or they’ll get their question usually answered within four hours. 

Basic stuff that you would think anybody would want and be able to do.  But the level to which people say to us, “That is amazing that you can do that – how do you do that?”  I just sort of explain to them, lay it out, this is what happens in every other sector in America.  Sort of basic customer service seems to be just a complete anomaly in this field.  I’d say most of the problem is the fact that there’s a lack of accountability.

So we look at the way HR departments are operating right next to our folks and it’s amazing, but those people, many of them have been working in those HR departments for thirty years.  They’ve done things the same way forever.  They have no incentive to change.  The bottom line is they look across the hall at what our folks are doing and they’re saying they’re working hard, way harder than we are, they’re making a whole lot less money – why would we ever want to move to that way of doing things?

I think it’s also amazing how at the very top of these districts there’s not more movement toward trying to push people in this direction.  I think the one heartening thing is that what we’re beginning to see in a lot of these districts is that at the principal, at the school level, people are starting to see a difference.  So the way we set our programs up, we operate as if we’re a district program.  Our staff sit in the district offices.  Most people don’t know that those people sit on my payroll as opposed to the district payroll.  But the principals have started saying – they’ll say to the director of HR, “I don’t get it.  When I’m hiring a teaching fellow I can view the candidates’ resumes online, I can schedule the interviews online, they have these placement fairs, they’re faxing me resumes – but when I’m trying to hire these traditional candidates, none of that exists.  What’s going on?”  They don’t understand. 

So I think that slowly maybe some of that pressure will start to bubble up from the schools in terms of getting us to the place where there’s more pressure on this.  But for right now I’d say there’s just a tremendous amount of protection over the status quo that to me is just unbelievable.

Rick Hess:  Mike, before I open it up to the audience, let me ask you one thing that Chris touched upon.  In Chris’ Crash Course book, for instance, he talked about – something you’ve said a lot, Chris, that Edison in your mind is still kind of the Model T of what you’d like to see accomplished.  I’ve kind of said the same thing about KIPP, I don’t know if you’d agree with this or not.  One of the things we do is there’s so few kind of name brands in education that folks are truly excited about – the governors and mayors and even folks at the national level – everybody uses KIPP as shorthand for “I want more schools like that.” 

One of my concerns sometimes is that rather than saying we want more KIPP schools but we also want more brands to come through that process, is they say let’s stop fiddling with this and let’s make all our schools look like KIPP schools and the problem is solved.  I don’t know if this is something you encounter much.  What do you make of all this?

Michael Feinberg:  The last thing we wanted to do is wake up one day and realize that we’ve become what we’ve been trying to challenge the last decade.  Which is one of the challenges of the whole entrepreneurial spirit as well – you don’t want to throw the baby out with the bathwater.  I absolutely agree with what Chris said, R&D is huge and you have to keep looking very carefully at where you are succeeding and why, where you’re coming up short and why, keep tinkering with it and making it better. 

But that’s the means to the end.  It’s not just tinkering for the sake of always trying to do new things, because then you’re going to wind up – it’s the old adage of the truth came knocking at the door and I said go away, I’m too busy looking for the truth.  You want to make sure you remain focused on where is it working, where is it not, and how you’re getting results.

What’s interesting is that while with KIPP we’ve built a really neat brand, if you go from KIPP school to KIPP school you definitely see the commonalities and you can tell they’re cousins to each other but they’re certainly not twins.  They’re related by those five pillars.  Is that enough for this to be long-term sustainable?  Probably not.  They probably have to start looking more like, as we evolve, more like brothers and sisters.  But again, not twins.  But where KIPP in Baltimore is just knocking it out of the park with their math scores – not just in Baltimore but the entire state of Maryland – what should Houston and San Diego be learning from that so we are adopting it too?  So over time they should start to look more similar than more different except for those five pillars.

Rick Hess:  I think in two ways.  One is I think that needs to be the kind of research that we’re doing about this.  It’s not like we haven’t realized by the early 1990s or something that we were frustrated with some of the results of school districts.  But so much of the discussion of how do you actually reform things like organizations and culture came down to what’s the right governance strategy or whether or not markets will make the stuff go away.  The answer, of course, is nothing ever makes it go away.  There are better and worse strategies for building effective organizations. 

One of the things that organizations like KIPP or Edison or the New Teacher Project provide is they provide fundamentally different organizational models which give you certain strengths, may have certain weaknesses of their own.  But rather than trying to think about them with the same models that we’ve tried to use relatively ineffectively to understand districts, I think the research community really needs to say, all right, what are the advantages of having organizations which are not spatially grounded, having organizations which are taking over one set of competencies in districts rather than trying to run whole schools?  Or having schools with different kinds of cultural and organizational models?  Say the difference we see in some ways between KIPP and Edison, as different approaches.  We haven’t really asked any of these questions.  They’re not on the agenda.  So I think it will be really useful going forward if we can keep that on the table.

The second thing is I think what this gives rise to is there’s a bunch of questions we should ask and need to ask.  Where do we get the capital to allow these folks to grow and others like them?  Mike alluded to the human capital problem that we face.  How do we get enough good people to really help these organizations grow?  These are the kinds of questions – Chris mentioned the charter debate and the way it gets played in the newspaper front pages.  But not only is that stuff intellectually frustrating because of the way it’s researched, but it actually misses a lot of the interesting questions we’ve touched upon today.

My hope would be that the book and these kinds of conversations can start to redirect some of the energy that’s been going into the back and forth over whether charter schools work, to asking the really interesting questions like what do you need to do to support and nurture service providers, or charters, or single-service kind of contractors, or what have you.  Anyway, that would be the hope for the book.

I’d like to thank the panelists for joining us today.

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