Billionaires Gone Wild:
The Futile Infatuation with School Choice
This paper attempts to explain a puzzle that has drawn scant attention: why do so many super rich obviously smart businessmen (e.g., Lee Ainslie of Maverick Capital, Jamie Dimon of JP Morgan Chase plus multiple foundations) rush to invest in school choice to uplift struggling blacks despite scant evidence that this panacea works? Put another way, if an educator pushed a multi-million dollar profit-making school choice venture targeting under-achieving blacks under the door, some assistant would read it and fire back a memo saying that billions in government funding, for almost every conceivable reform has failed so why should yet one more magic bullet work?. Why throw yet more good money after bad?
Yet, the millions rolls in and billionaire hedge fund operators yearly compete with each other at lavish banquets in funding school choice schemes. What gives?
Lacking any personal contact with these benefactors I can only speculate on their motives. Nevertheless, let me offer three plausible explanations and then conclude briefly regarding the political consequences of this colossal waste.
Confused Thinking and an Inappropriate Analogy
Champions of school choice are extraordinarily smart but this acumen does not mean that their considerable intelligence is uniformly applied. Many, for example, make ill-advised choices in their personal life and, as they will admit, not every investment pays-off. So, pouring millions into a doomed school choice program may just illustrate the old adage that even great minds sometimes get it wrong and as in periodic economic bubbles, even the smartest of the smart get caught up in collective stupidity.
But, that said, how does our foolish millionaire arrive at this foolishness when it comes to school choice? John Maynard Keynes once said that today’s hard-headed businessman is often a slave to the airhead ideas long defunct economist and in the case of school choice advocates, the seductive thinker is Milton Friedman. It is not that Friedman is a flawed economist—he is certainly is not. Nor is he wrong about school choice—again, he is not.
Rather, when these affluent school choice advocates glibly invoke Friedman so as to put an intellectual gloss on their wastefulness, they get it all wrong. Friedman never claimed that free markets would improve academic performance. He championed school choice as a general principle since freedom per se was inherently good. Choice brought multiple benefits, only one of which, and only for a small group of consumers, might bring academic proficiency. He is absolutely explicit and says that if parents want a school teaching social dancing (his illustration) that’s fine. The one example of markets promoting academic improvement was a brief aside about a Negro boy unable to find a decent neighborhood school who, thanks to choice, could find one elsewhere.
Moreover, given what we know about consumer educational preferences, the world envisioned by Friedman would offer minimal academic excellence. With ample choice, schools stressing athletics, country club-like amenities, easy self-esteem boosting curriculums, music and art, even extensive traveling would proliferate. Perhaps no more than 15% of the school population (probably less) has the intellectual talent and motivation to benefit from an academically demanding school. The plain-to-see parallel are American colleges. Of perhaps 4000 US colleges and universities I’d guess that no more than two dozen stress academics above all else.
But, in an economic system where those selling Edsels go broke, how can these benefactors so badly misread market demand? The answer is simple: they tacitly assume that since black parents “demand” the results of a good education (i.e., a good job, high income, high status) their children are willing to make the arduous effort to achieve the goals, i.e., work hard, pay attention in class, respect teacher authority, etc. This is a serious error. If a market research firm equated this desire for a valuable outcome with a willingness to work for it, the firm would be fired.
Muddled thinking in place, wealthy benefactors supply what they perceive as necessary this “demand”—well-credentialed teachers, cutting-edge technology, individual tutoring and all else that will clear the path to Harvard. But, what the benefactor ignores is that you can take a horse to water but you cannot make him drink, particular when these resources collide with an anti-intellectual culture. Absent cognitive ability and motivation, well-crafted lesson from dedicated teachers fall on deaf ears and computers are used to play games. Imagine if these savvy businessmen were asked to invest in a chain of expensive gyms since “every American wants to be fit and trim.” Their response would be, “Of course that what they say, but fantasies aside, will they actually enroll and stay enrolled? Probably not.”
A closer analysis will also show that these benefactor-supplied options are not school choice despite the label. Parents can only pick from a benefactor-provided menu heavy on academics. A more apt label is “choices offered by those who pay the bills.” If black and Hispanic parents were truly able to dictate their own menu, nearly all would prefer schools with lavish facilities and dumbed-down feel good courses plus sports. Why else have all the state-imposed academic standards? Again, these capitalists are seriously misinterpreting what constitutes “school choice” and what customers actually want.
Admittedly, benefactors can trot out studies demonstrating that choice works or pick apart failed ventures but don’t be fooled. Nearly all of this confirming evidence comes from researchers who have taken the King’s Shilling and few of them will bite the hand that feeds them (this is, of course, equally true among enemies of choice). It is not especially difficult to rig the study design or cherry pick findings in today’s political climate desperate for upbeat news about minority academic achievement (and the technically unsophisticated audience seldom can discern the good from the bad). Who wants to spoil the parade by asking awkward questions about excluding difficult-to-teach students, rigged tests, hiring only teachers skilled at cooking the numbers, or the long-term consequences of relatively brief interventions?
Though champions of school choice speak as if they have discovered a cure and have the evidence to prove it, education is light years from FDA-like scrutiny and, of the upmost importance, there are no outsider auditors who evaluate the venture according to generally accepted accounting practices. Nor is there any reason to confront major failures, e. g., the 21 year old Milwaukee “guaranteed to succeed” choice experiment that has unambiguously failed. School choice is a world far removed from real life where Betamaxes and Polaroid cameras go extinct.
Finally, benefactors delude themselves with seductive but wholly misleading analogies: the power of monetary incentives, the value of competition and other homilies infusing business culture. Consumer electronics analogies are a favorite and usually go something like, “TVs were once tiny and expensive but today, thank to cutthroat competition, they are huge, with great pictures and cost a pittance. So, it “follows” that a schools freely compete for customers, market survival will mean that somebody (perhaps in some garage) will figure out a way to educate laggards who currently refuse (or are unable) to learn.” In a nutshell, capitalist greed will now deliver what millions of educators on the state payroll have failed to accomplish.
This is delusional. The marketplace overflows with market failure—when do we get 100% safe 100 mpg SUVs though this market is gigantic? Awarding cash incentives to educators for miracles almost always fail and claimed successes often reflect outright cheating or other slight- of- hand tricks. Perhaps the greatest flaw in this business analogy is that by law you cannot close down failing schools—you can only ship students elsewhere. Education is unlike business where chronic failures are put into the scrap heap to preserve overall profitability. Unlike the parade of failed McDonald entrees, dumb students are forever.
Ego Gratification on Steroids
When school choice benefactors dispense millions they are not exactly taking a financial hit akin to seeing a real investment wiped out. The US tax code strongly encourages this generosity since it would just go to the IRS if not given away “free.” Nor does the IRS care if the donation works as promised. So, the real question for the benefactor is where to give, not whether to donate anything to charity.
The list of donation seekers is almost endless and most of us accept the reality that our contribution will only be a drop in the bucket—a $100 to the American Cancer Society gets only an impersonal “thank you” note and a tax deduction. It’s a different story when millions are given away and here the competition for notoriety is intense. A million dollars to the Metropolitan Opera brings social prestige and other benefits, but this traditional gift-giving is too conventional to draw celebrity-like attention in today’s crowed philanthropic world. Something more from the million is needed.
Let me suggest that in today’s crowded gift-giving world donating million to help academically struggling black students is the perfect cutting edge fad, and as such will yield far greater favorable ego-inflating publicity than, say, donating an MRI machine to the local hospital. The MRI machine will save a few lives but this is small beer compared with, it will be claimed, turning around dozens of lives while helping to alleviate what many claim is the number one social justice issue of modern America—closing that racial gap in academic achievement.
Especially for liberals keen on demonstrating “deep commitment,” this donation is totally risk free. Trying to solve what appears to be an intractable problem also allows the benefactor to showcase his entrepreneurial skills, a benefit often far more alluring than donating expensive medical devices. In an instant the billionaire is painlessly putting their money where their mouth is and thereby reaping all the rewards of “doing something big and costly about a serious problem.” But keep in mind that they are not sending their own children to sub-standard schools nor are they hiring graduates from these schools or in any other way risking anything of personal value. Funding choice schools far, far away must be the safest “risky” venture imaginable.
What newspaper could resist printing a glowing story complete with a picture of the benefactor surrounded by neatly dressed bright-eyed kids and smiling appreciative administrators? No doubt, the story will recount how the billionaire himself rose to the top thanks to his education and that he is now using his fortune to “give back” to others in similar dire straits. And, rest assured, everyone, from parents and their children to the newly hired well-paid administrators will be genuinely thankful. Who could possibly doubt the school’s future success? After all, our benefactor earned millions in a far more challenging business world, so getting kids to read at 11th grade level should be a snap.
I also suspect that in today’s world where gigantic risk-takers are heroes, ego gratification has become positively related to the hopelessness of a cause. Few celebrate plutocrats donating millions to cancer research--far too conventional. Better to pursue Utopian fantasy-like projects such as ending world hunger or pushing low-IQ students into college.
Cynical But Unaware Conservatives
Though these well-heeled champions of school choice are nominally endorsing “a conservative” (capitalist) solution to academic insufficiency they are seldom judged ideological conservatives. Actually, they should be classified as liberals insofar as they are attempting to level inequalities while insisting on human malleability if only the right environment were supplied.
There is, however, a different take on “being conservative.” If we define “conservative” as upholding the status quo or at least attempting to impede disorder, these benefactors are bona fide conservatives. From this perspective, all their millions are less about getting blood from uncooperative turnips than pushing out millions to potential rabble rousers so as to keep the peace. The historical parallels are the anti-poverty programs of the 1960s whose implicit aim was to cool the violence by putting malcontents on the public payroll. This devious generosity would also include paying experts to uncover iffy nuggets of truth, even funding entire think tanks that embrace free-market solutions.
Put it this way: in the quest for sustaining the social order, would a million dollars for cancer research be as useful as a million for some inner-city Taj Mahal school? Stripped of all the education reform rhetoric, this is but old-fashioned bribery.
This private philanthropy is often superior to publicly funded “keep-the-peace” strategies. For one, benefactors enjoy more freedom in spending their money compared to what public officials face. If those sponsoring a charter school want to hire teachers and administrators who cannot satisfy state-imposed professional requirements, they can just do it. This is no small advantage since many blacks and Hispanics struggle to satisfy state requirements. Nor must benefactors, unlike electorally accountable officials, fret over the ideological baggage of those hired so they are free to hire community activists and ideologues. And while the local media might be outraged over hiring rabble rousers, they are powerless to stop it since private money is private money.
Indeed, a privately-funded school is the inner-city job creation machine par excellence. One can only be reminded of the old urban bosses who could put anybody on the public payroll. Consider, for example, the mania for small schools (versus alienating “factories”) so as to personalize education. These are perfect for generating bureaucratic insfrasture. For example, the Gates Foundation pumped over $2 billion into these, 100 in New York City alone, before giving up. Ample private finances also provide job title flexibility—if the principal decides that the school requires a liaison with neighborhood community organizers, no problem. Imagine the fallout if the salary was publicly paid. It is no wonder that foundations get a reputation for radicalism—they are just hiring the malcontents to keep the peace.
Lastly, and least obvious, privately financed school choice, including the hired-gun research, (plus tolerated cheating) helps maintain our Noble Lies. Who wants to hear that the race-related gap in academic achievement cannot be closed? Do poor blacks and Hispanics want to feel neglected by “the system”? When it comes to matters touching on race, America needs good news—even lies--and the school choice movement helps provide it. Thanks to rich benefactors, “there is still hope.”
A cold, clear-eyed financial analysis of this apparent money-down-the-drain educational enterprise might show that it is a brilliant financial investment. At least until recently, these academically futile ventures have kept the peace and, domestic tranquility brings prosperity. A dollar spent on some “Academy for Academic Excellence” may ultimately bring $5 dollars worth of income to the rich. Skeptics should recall New York City in the 60s and 70s when race-related unrest almost killed the local economy. This was a period of falling real estate and thereby lower tax revenue plus “combat pay” to lure executives to the Big Apple. Today, by contrast, the city’s economy is doing reasonably well and, we argue, that some of the prosperity is traceable to the millions seemingly squandered on school choice. Yes, the students themselves may still be struggling, but billionaire hedge fund operators have learned to calm civic unrest while covering themselves in ego-gratifying glory.
Let me conclude with what I consider the greatest liability of all these millionaires and billionaires investing in school choice: the generosity crowds out more realistic, superior solutions. Opportunity costs in economic terms. In general, today’s education reform battle has two sides, improving public schools versus school choice. Panacea details aside, both assume that genuine progress is possible and should be pursued almost regardless of costs. That each side enjoys ample financial resources and armies of champions means that pessimists who reject both positions lack a soapbox.
Specifically, those inclined to biologically imposed limits on educational progress are marginalized, a process further exacerbated by this biologically driven pessimism being “too controversial” in today’s intellectual climate. Doubters should attend a “conservative” think tank forum on educational reform and express this heresy during the Q and A. Awkward silence but hushed “I’m glad you said that” support after the meeting. Or, for stalwarts, personally confront a school choice sponsor (or his expert on the payroll) and patiently explain why his generosity will fail in providing a decent education to those intellectually incapable of moving beyond 8th grade. Lots of luck—they will probably just talk about their new smart phone and why the technological innovation mentality should be applied to inner city schools.