An ambitious and controversial entrepreneur, Chris Whittle took the educational establishment by storm in 1992 when he founded Edison Schools Inc. (originally the Edison Project), a for-profit company specializing in public school management. He believes that America needs to spend "serious money" on research and development of its educational system, and that one way to get that money is by running schools that generate a profit, which can be channeled back into improving the system. Critics say his money-making model will always put the bottom line ahead of the children. He was interviewed by FRONTLINE in October and December 2002.
... How would you describe yourself?
... I grew up assuming that I would be in public service. I never planned to be in business. I planned to be in politics from my earliest days and went, "I'll temporarily be in business." Then there was the time where I went, "I wanted to actually combine, effectively, public service and business." The crux of the Edison idea, if you look at it, is: Can you combine these two things? ...
[How did you come up with the idea for Edison schools?]
... I was round about 40 years old. I'd been in the media business for 20 years. It had been good to me. But I was saying, "What do I want to do next?" One very distinct possibility was politics at that point. I was looking at that very closely. Then just a serendipitous event occurred. I was asked to make a speech to the Business Roundtable. The assignment I was given was: What would you do to improve America's schools? I was given about six months to think about it. ... So for several months, I thought about it on and off. What would I do if I were actually given this mission?
It was 1988 or 1989. I gave this speech, and it had two broad themes. One was that if we didn't figure out a way to bring research and development into the design of our schools, we weren't going to change our schools, and that you get what you pay for. If you don't pay for change, you're not going to get change.
I had really done a lot of research as part of the speech. We didn't do, at that particular time in America -- not much now -- any serious research and development on schools. Now, a lot of people say, "We do a lot of research on schools." That's not what I'm talking [about]. I'm talking about the deep part, which is: Do we actually spend serious money to figure out how to improve an elementary school? As a society, we do not.
We spend serious money to run the ones we have. We don't spend serious money to take them to another level. I said, "If we don't start doing that, our schools are going to remain" -- and you know the saying as well as I do -- "one of the only institutions that somebody would recognize if they came back from the 15th century."
I then theorized that the only way it was really going to work was if somebody came up with a national system of schools that could plow back dollars into research and development in the same way that other major economic entities do. We couldn't expect [states and school districts] to [make] serious R&D efforts, because they didn't have the scale to do that.
It had to be national?
I wasn't advocating a nationalization of our schools, I was saying that some national system, one or three or five national systems could do that. In this speech, I had no intention of doing this, just zero. I was just going, "This is something I think should be considered in America." I actually advocated that it ought to be done by the Department of Ed[ucation] ...
In the audience that day was Lamar Alexander. Several weeks later, he was appointed secretary of education. Lamar called and said, "Chris, could you send me those notes from your speech? Also, would you brief the department here? I'd just like them to hear what your thoughts are on that." I said, "Sure." So I went to a briefing... and out of that grew New American Schools. ...
A whole bunch of different models.
Exactly, and research and development, federally organized, but privately funded. I was watching all that. I wasn't directly involved. I [thought it was] good, but I [didn't] think it was going to work in the way that I was originally thinking. ... I said, "So why don't I do that?" And it flowed into my search for what was going to be the next period of my life.
You made a speech. You said this country needs to be serious about research and development, needs to think about spending money to get better. When did you say to yourself, "Gee, someone could do this and make money doing it?"
... I said to myself, "I don't know. I don't see the government's going to be able to do this. This is going to have to be done as a private sector thing." That was inherent. It never crossed my mind to set it up in any other mode than as a private company.
At some point, did you say to yourself, "Boy, there's a lot of money in education, and boy, a lot of it's badly spent or wasted?"
Let's say this in a slightly different way. Did we believe, particularly then, that American education was the most efficient sector in American life? I don't think so, and I don't think anyone else did, either. We read the newspapers, and particularly in urban settings, we knew that there were ... significant amounts of dollars going out in ways that you might want to reconsider. I think we had a general belief that there may be a way to organize it in a more efficient method.
Before Edison Schools, you developed Channel One, a news program broadcast in classrooms across the nation. Tell me about that.
Channel One was first envisioned on a Vermont farm in 1987 or 1988. We at Whittle Communications had been in the magazine publishing business for many years. We were theorizing, should we move from the magazine business to the television business as a way to diversify and grow our business? Someone said, "What if we had a news program that went to teenagers, that was just news designed for teenagers?" Then the question was, "How would we get it to them?" Everybody began to discuss.
There really was no way to get a television signal to a school. Then we went, "What if we provided them the television sets and what [if] we put in the satellite dishes?" We sketched out on a piece of paper, "That would be 12,000 satellite dishes and 300,000 television sets and 5,000 miles of cable." We said, "Well, that could work." We ran a lot of different scenarios over two or three months and decided, yes, it could work. We could not only build the news program, but we could build the distribution system. ...
Originally it was envisioned as a one-hour program on a weekly basis. I'm not sure of this. But I think this is correct. We then went, "We'll never be able to find an hour in a day." Then we went, "What if we split it into five parts and did 12 minutes a day? Would that work? That might work." It would actually become part of homeroom, kind of "Start your day, here's what's going on in the world," energize lessons [that] would occur later. We went, "Yes. That could work."...
Where did the idea of bringing in commercials come from? Was that in your original plan?
Sure. We thought about, "Could we actually sell it on a subscription basis to schools?" When we ran the numbers -- and it's been over a decade -- but I think it would be a cost of $50 or $60 or $70 a year per student, something like that. We didn't think that was realistic, so we said, "The only way we're really going to do it is with commercial sponsorship."
Did you anticipate the reaction?
I don't think we anticipated the degree of the reaction. We anticipated the reaction. It's interesting that, almost 15 years later, there's still reaction. But what's interesting to note is what the acceptance was as well, and that's often forgotten. Something on the order of 40 percent of all middle and high schools in the United States said, "We think this is a good idea," and said that over a short period of time, meaning over 36 or 48 months. Even a decade later, when I'm not involved, [they] continue to say that. So it resonated as a concept, and has had staying power as well. ...
[What about the claims that you were profiteering at the expense of children?] Did you have any qualms about that?
Absolutely not. First of all, [for] that program to find its way to a classroom had to go through a school board. There were on the order of 4,000 positive school board votes. There were debates right in front of those school boards: "Is this good? Is this bad? Do we think this is good for our children?" They weighed in that it was good. That says a very large percentage of people out there agree. ...
But there's no ethical issue about selling to kids?
Here was the way I said it at the time, and the way I would say it now. If you could have a news program without commercials, it would be better. But is a news program with commercials better than no news program at all? My view was, I'll take the one with commercials versus no news program at all. ...
DESIGNING EDISON SCHOOLS
How did the design team [for Edison] come together?
It was a very eclectic and interesting team.. ... I went, "The best way to do this is to bring a lot of people from a lot of different places that care about the topic, and give them resources and time to see what they come up with." They were divided into, as I recall, three or four different competitive teams. They were given a two- to three- year period, and the plan was come up with a design. They each presented their own designs. By the way, I was the fifth team. I presented my design as well. Then we merged elements of the design into the final design.
... I was not involved as much as I would like at that time. I was going through a very difficult stretch in Whittle Communications, in which we had just overextended ourselves. We were doing too many big ideas, of which Edison was one. As I was having to fight various fires, I was not as involved in Edison during that stretch as I would like, other than making sure it had the fuel that it needed. My real engagement in that 100 percent way started shortly after the design test.
That was a pretty tough time for you. Whittle Communications was basically going down the tubes.
Yes. ... We were definitely in a Sophie's Choice situation -- what are we going to keep, what are we going to sell, and what are we going to close? Basically the two educational ideas survived, and the two large ideas on health care did not. We closed down Medical News Network and Special Report. We sold Channel One and kept Edison.
Was that important to you to keep Edison?
Absolutely. That was a conscious choice.
Why? Why keep that?
Because I thought, of all of them, it was the most important, and the one that I wanted to spend the next stretch of time doing. ...
Tell me why America needs Edison.
I think the country needs what Edison stands for. Whether it comes from us or from somebody else I don't think is important. I would never position us as the be-all, end-all. In a sentence, it's saying there's got to be a better way than what we are currently doing. We, as a society, have got to try lots of solutions, and we're one of those.
What's wrong with the way we do it now?
I'm going to use an example I often use. If you walked up to an airline counter, and they said, "Sir, 20 percent of our flights don't make it. Would you like a window or an aisle?" You'd go, "I'm not getting on this plane," because you would say those odds are unacceptable.
We have schools in America, that if they were asking the question, they would say, "Your child has an 80 percent probability of failure at this school. Which class would you like to be in?" Some people will get upset that I'm making that statement. That's a reality. We have large systems where 50 percent, 60 percent, 70 percent of all the children are well below what the states are saying are proficiency levels. We can't say that's acceptable. ...
How much have you personally invested in Edison? How much has it been part of your personal fortune, your personal wealth? What's at stake for you?
I'll start onto that [with] what have I have invested. I've basically invested my career. I'm 55, and when I started this, I was 45 and man, they are prime times in business careers when I made the decision I was making. So I did that consciously, and do it consciously yet. Financially ... at one time or another, I risked something on the order of $30 million. That was either in cash that I actually put in, or things I signed my name to...
Money that you borrowed to invest?
[Either] money I borrowed or money I guaranteed in one way or another. If everything had come to ruin, that's what the price tag would've been.
How much of your personal fortune was back-accessed?
Roughly, all of it.
Why would you spend all of your personal fortune?
For one, because I believe it'll work out. ... Two, because that was what was required, and that I see as very important. There are times when you don't have options. You are either doing what has to be done for the entity or you're not doing your job. ... You step up. I mean, to be clear, I didn't necessarily want to. But that's what you do. ...
If it all works out, where will you stand? What will success for Edison mean for Chris Whittle?
Pick your time frame. Over the next three to four years, nothing, if you were to balance risk versus return. If you think over the 10-year to 15-year frame, potentially a great deal. There have been days when my stock was worth $100 million, and there have been days when it's worth $500,000. Who knows? Is there a chance of a serious reward? Yes. ...
CAN EDISON MAKE MONEY?
If you were to ask most people in business today, "Do Edison schools turn a profit?" they would say no. If you actually looked at our schools, the great majority of our schools are profitable. Meaning, if you look at the revenues coming into the school versus the expenditures at the school, is there something left over? The answer is yes, on average, about 15 percent or 16 percent today.
Then, out of that, we have to cover three things. We have to cover the capital that we put in. We have to cover our headquarters cost. What's left is our profit. Right now, we don't have enough to cover all three of those. Right now, we have enough to cover two. We recover our capital and our headquarters, but we don't have enough to cover any profit there.
But you why are you so certain that at some point there will be? Why were you when Edison was conceived as a management company?
For a very simple reason: the average school system in America has six schools. That's the average school system. Our theory was that a system of 500 schools -- or pick your number, 300 schools -- had to have a more efficient approach than one to six. You ask why did we think that then and why do we know it today? For two reasons. The first, because it was totally logical, almost transparently logical, for example, that a superintendent spread across six schools is one thing; a superintendent spread across 40 is another, and that that's more an efficient organization. So from a strict logical point of view, it made sense to us.
Second, it is true in virtually every other walk of American life, any other business sector, you have seen a movement towards regional or national organization.
Take The New York Times; originally, a local paper, but not so anymore, a global paper today. You can take every media: radio now -- regionally and nationally organized. Television -- regionally and nationally organized. Take any retail phenomena. The only sector that's significant that has not moved in that direction was education. ... That's what we believed 10 years ago. Now we've proved it.
Every year of our existence -- and it's an eighth year of running schools -- our cost of the administration has fallen as a percent of our total expenditures. Every year. And not by [an insignificant amount]; every year, it drops materially. ...
There are some instances, though, where the economies of scale, as economists call it, don't apply. For example, one sector would be running a ballet company. It's hard to get more performances out of a dancer than one at a time, and hard to get more people in the audience than can fit in that theatre. If you want to replicate that experience, you'll have to have more dancers and more theatres.
So what makes you so certain that running Edison schools is more like The New York Times, where once you have the printing plants and the staff, you can print 100,000 papers or you can print a million papers, and everything after the overhead is paid is profit? Why is this not a ballet company and instead a newspaper plant?
OK. Let's take your ballet company. Let's say there are 200 ballet companies in the United States. If each of them individually said, "We want to put together a particular training program for our ballerinas that focuses on one particular move or event or a technique," and they each went off and did that, is that the most efficient way to do that? Or is it better for them to band together and say, "Hey, let's do that as a group, and then we'll have whatever this is come around to each of our ballet companies to help it?" The answer is clearly the second.
You're going, "The teacher is the ballerina," and in this case, that you can't apply scale to what goes on within the confines of those four walls. I agree with you. That's obvious, too. But what goes on outside those four walls -- which is a huge part of education, a huge part -- you can apply scale to.
The economies of scale, the decline in your overhead as a percentage of your revenue, has been helped enormously by this extraordinary growth in revenue. The percentage had fallen sharply, and then kind of got stubbornly a little bit smaller year over year. What makes you so certain that you haven't just reached the limit of what can be done, and instead, that in fact you're heading down a road towards that profit?
This goes all the way back to an earlier question you asked about, how do you know that risk is going to pay off? One of the things you learn from taking risks -- and I've been taking risks for 35 years now -- is that you get to understand it. You can't actually imagine all that's going to happen in front of you. If you invest yourself and your organization towards something, things happen to it that you that you don't plan. Example: We didn't know that there were charter schools before we started. Guess what? They happened. We never heard of contract schools when we started. They happened. No Child Left Behind wasn't even on our radar screen. ... And the fall in price of technology is hugely relevant to what we're doing. All of those things feed into the constant movement of something. ...
We've spent $40 million to $50 million on [our school] design -- that is a pittance of what real R&D looks like in America. It really is. America still hasn't invested anything in school design. ... But we will come back and we will revisit that design, and we'll go, "Does it have to be done this way? Can we change this and that?"
Every decade, you will see differences in that. Two or three decades from now, you'll see a fundamentally different school that doesn't bear a resemblance to the school you now know. ...
If you could achieve that without ever making money personally, would you do it?
I would do it, but I would've failed. [Earlier you asked me], "Would you rather make money and not have a good school?" ... The answer to that one is easy. I'd rather have a good school and not make money. But if that happens, I've failed.
Because one of the points of this is that so long as education in America requires a vow of poverty, we are not going to see education in America go to where it needs to be. That is too much to ask of the people in education. ... Why do we have an immense teacher turnover in America? One of the reasons is a lot of people do this for a short period of time because they feel it's important to be into it and they want to do it. Then they've got to move on for their own personal reasons. Others stick it out for unbelievably long times. But we've got to change that formula. We've got to make sure that education is rewarding. Part of what's going on here is to do that. ...
We don't need to raise teacher pay 10 percent. That's not going to make any difference. You've got to make teacher pay competitive with other professional pay, and that means you've got to double it. Now, how are we going to do that as a society? There's only one way we're going to do it. We're not going to double education spending. That's too costly. That's $400 billion out of the American economy. That's not happening. We ought to find a different site design that increases teacher pay. That also means something else. We may have less teachers. You have to figure out, well, how do you make all that work? That's called design and R&D. ...
How do you make all that work?
I've sketched that out. How do you double teacher pay? You have children? And you know some teenagers? Are they better on computers than you are? A lot better? The school they go to doesn't recognize that, because the school they go, a good school, will have a tech there. ... Reorganizing schools so that students play a huge role in the running of them is a critical part of this working.
It also solves another problem of our schools, which is the alienation of our children in those schools, particularly at the middle-school and high-school levels. The school and the students are, in many respects, alienated from one another. If the students owned the school more than they do, you'd get both economic and educational benefits.
The bible in American education [says] that every child must have adult supervision at all times. That is vital, and it drives the entire economics in American education. Think about it; it has to. But it dictates the economy of education. Does that have to be? I don't think so. If you attack that from the mental belief, you're attacking the entire economy of the school. I happen to believe you'll get a better educational result at the same time, because I think children fundamentally resent and act out against it. In fact, one of the big problems in American education is being resisted by our children -- that they're not paddling with us, in a large part. ...
You said that education has to become more rewarding or it can't get better, it can't work. What do you mean, "more rewarding?" It has to be profitable, or it can't get better?
No. The one thing I want to make very clear is -- and I've said this 100 times -- I do not believe in one way to do education in America. I believe that diversity is critical, and that competition between many different ways is critical. I think that, in fact, one of the big problems of American education is that we have had one way. ... I do not believe that the only way out of this is for America to be a for-profit education only. I think that's one way through this thicket, and there may be many others. It's the only one I know about, and it's what I do. It's not my saying that's the only way it's going to work.
How much money does Montebello make for Edison?
One thing we don't do -- and we're pretty consistent on this -- we don't release individual school budgets. I'm perfectly happy to talk about averages. If you look at our model, one day the company hopes to make, after tax, about 5 percent. Now, we don't make that today, and those records are public. The company in its first decade has made no money. But most people that look at us don't understand one thing. The great bulk of all of our schools are profitable, and they are generating cash, some of which comes back here. We just don't have enough of them yet. ... When we get to a certain size, we'll make about 5 percent.
OBSTACLES AND CRITICS
You haven't been profitable, Chris.
How are you going to persuade the private sector that this is a place to push into and try to make those things happen without profitability?
First of all, I think we have done --looked at in a 10-year frame --a very good job of that. We've recruited $600 million of capital to the enterprise. At this very moment in time, they don't believe; that's clear from our stock price. I would say two things on that. Partly we're to blame for that, but they also overreacted. They really did.
The other thing you have to know is that our stock price is different than so many because it has a political element in it. It's politically affected in a way that so many aren't. There have been days when it's higher than it should have been, and there are days when it's lower than it should have been. ...
How much of that is that Chris Whittle effect? You've been a lightning rod for educational opposition for years.
I'm a factor, but I'm not the primary factor.
If you go to Philadelphia, 45 schools are being given private providers. America has only heard of one of them, and only one of them has been resisted. The others are basically a free ride. There's an old saying, in certain wars, "take the leadership out." If you remove leadership, you can run battles. We are the leader in this world, and there are some who are trying to take us out, because if you take us out, you take out this general phenomenon.
The biggest thing that happens is misinformation; truly, propaganda. They'll say that we don't have any special ed at Edison. They say that. Now, anyone that would do any research would know that we have 10,000-plus special ed students in our schools. Others go around and say we asked children of poverty to leave our schools. We have twice the rate of poverty in Edison schools [as the rate] inside the public schools. We have twice the children of color that you see in standard public schools. That's blatant propaganda. ...
How did the demonization get started?
I think it clearly started with Channel One. There is a legitimate other side of the argument on Channel One. I don't want commercials in a classroom. That's a legitimate position. My response: Well, would you like to know where Beijing is? Introducing the world into America's schools is a good thing, and if the price is a commercial, go with that. Reasonable minds can differ on that. They really can. I respect the point of view. I disagree with it, but I respect it.
If you want to vilify, you got material to work with there. So I think that's where it began. It really is not applicable to Edison schools; it just isn't. I think it's a convenient carryover for some. ... ...
Does it bother you that other for-profit companies are making money, and not getting anywhere near the heat that you get on a regular basis?
If I allowed myself to get bothered, I couldn't work. We take a lot of heat, and a lot of undeserved heat. What we're doing is threatening, and that's what goes with our territory.
I don't think everybody's threatened. Some welcome us. Some view this as almost a turf war. They go, "You're just not welcome here, because we've got this figured out, and we don't want to be disturbed by this." I think they fear it in ways that they shouldn't. ...
So there's a hostility that goes back to Chris Whittle, or making money off our kids?
I actually think the making money is a smokescreen. It's not a real criticism. Seriously. If it were, why aren't they throwing everyone else out of a school that makes money? The textbook manufacturers, the computer manufacturers, the milk makers, the uniform makers, on and on and on and on. Why are they just picking on us? I think the reason is that we're not on that edge of the school. We're about the school, and that causes people to be threatened.
You also come in and say, "You guys aren't going a very good job."
We work hard not to approach it that way. We're not trying stick a thumb in anybody's eye. If you look at our literature, we're cautious in our commentary of what the current results are. There are days we've actually considered, have we been too cautious on that? Because, candidly, in many places, they're scandalous, and they should be spotlighted for how terrible they are. But we haven't done that. I mean, I'm doing a little bit right here, but we haven't done it normally. ...
[Who are your most vocal opponents?]
An easy one is to say some unions are against us. I could name multiple cities where the American Federation of Teachers has been helpful in our securing contracts within those cities. The same with the NEA. I can also name cities that are the reverse. I can name cities where liberal democratic institutions have been extremely helpful to us, and other cities where they've fought us immensely.
So there isn't a monolithic situation. But is there a group of people that get up every morning and go, "We would not like them to succeed even if they run good schools?" Yes. ... Are there are there efforts to sabotage or undermine what we do, or to get rid of us? Absolutely. We are going into situations and saying, "We want to make changes." Those changes, sometimes -- and more often than not -- rattle kind of adult interests within schools, and alter the balance between adult interests and children's interests more to children's. Some people don't like that, and they express that in multiple ways. ...
Who is their leadership?
I don't actually know, meaning I don't think there's one person that is resisting the private sector's involvement in public schools. But if you go to any city where we may have resistance, you'll see a list of 30 organizations that pile on. ...
It's too simple to say that unions are opposition. Sometimes they are, sometimes they're not. ... I would say, periodically, [our opponants are] people who, either out of fear -- and I call it irrational fear -- are worried that their world is going to be upset if we succeed -- or even if we enter, forget whether we succeed or not. I would say that's the biggest bulk of it. ...
Who are your friends?
I think reformers in general are our friends.
They come from both sides. I think most people think they come from the right, but they don't. ...We reach out, and do have friends on both sides.
Ted Sizer, certainly a leading reformer, says that your model is inherently wrong; investors will always come first.
I don't think so. If that's true, then there's no math book out there that works. There's no computer that works. There's no school bus. All of those were brought by for-profit entities that are balancing the services that they're providing and the service in the interest of their shareholders. We're no different. Education is filled with successful examples of companies providing services that educators like.
So when Sizer says, "Chris Whittle, when push comes to shove, is going to put investors first ahead of kids," [what do] you say?
I would disagree with that. I would say that that we can balance those interests. And by the way ... there is a tension between multiple interests that exist in American public education. It's not that we are the first time there's a tension that exists. The question is: Can we possibly do it in a way that actually winds up making it work better? The academic data would indicate that we are, and I think that's the point.
So when someone says Edison is inherently immoral, [what do] you say?
I'm saying, if faced with this decision, which would that person choose? I'd rather have a better school that is managed by a for-profit company, or I'd rather have a worse school that's not. If they'd rather have a worse school that's not, that is the worst of being an ideologue. ...
INSIDE AN EDISON SCHOOL
Can you talk about the cooperative learning that's an integral part of an Edison school?
You see it in almost any home where you have siblings -- that's cooperative learning. Sometimes it's not particularly cooperative. But other times, you'll see an older sibling, a younger sibling, working very well together. You'll see one teaching and one learning, and then they flip roles. Cooperative learning is just one mechanism that we believe in for good instruction. Where you see it, I think, most, in Edison schools, is in our reading programs. You'll see children reading to one another, where they'll listen and correct, and respond. But we use it in math; it's throughout the school. ...
The idea that children should be praised is a concept we use everywhere. One of the things you see a lot in Edison schools is good conduct awards being handed out -- literally, in the hallways -- every day. Teachers will see children walking quietly, as opposed to roaring down the halls, screaming or whatever, and they'll go, "That's great. Thank you for doing that." You'll see that in many different ways. Essentially, they're rewarding and supporting a behavior that creates a learning environment. If you have hallways that are completely out of control, they bleed into classrooms. They mean that the next class is harder to get started, because you got to get everybody calmed down before you can start doing what you're doing.
A lot of public schools, it seems to me, run away from overtly teaching values. But Edison has core values.
I think you're correct, that a lot of schools steer away from it. One of the reasons is it's very easy to run into highly controversial waters in the value area. What we try to do is pick a character-building program that has a set of values that, 99.99 percent of Americans would go, "I endorse that." Lying is not a good thing. If you look at [the core values], I think you'd have trouble finding someone that would say, "I don't agree with those." We think they're important concepts to teach that affect the overall environment of the school. Learning can't happen until you have a particular calmness, in many respects, in a school, and we do work to get that. The character building is part of that.
You said right out front, "Yes, we do teach values. These are the values, and, by golly, they'll go all the way across the curriculum."
Yes. They're just a part of the school day. Embedded in the reading program are a series of books that actually bring out these values. We don't necessarily just teach them explicitly as a value course. They're scattered throughout the curriculum.
That core curriculum -- that comes from here, the Edison headquarters?
Yes. Well, to be fair, it comes from many places. We were the integrator of it. For example, our math program comes from the University of Chicago. Our science program, I think, from the University of Colorado. Our reading, from Johns Hopkins. That value program you were talking about, from someone in Pennsylvania. We took those different elements and put them together. We studied them, we researched them. We compared them to others. We challenged them as to whether they're the best at what they do, but we didn't actually come up with each of them.
If you have all this good stuff that you took some from here, some from there, what's to prevent a regular public school district from saying, "Hey, let's just take the Edison plan, and let's do it ourselves. We don't need Chris Whittle?"
Nothing. On the face of it, you could go, "Let's just assemble these parts, and then, voila, we have an Edison school." You could do that. What you would not have is all of the system supports over those parts. An example: You wouldn't have the ability of 150 principals to meet in Colorado Springs last week to review different aspects of that design, and exactly how they were executing it, and the problems they were having. You wouldn't have lots of the electronic backbones that tie these various things together.
If you really look at the true value-add of Edison, in early days, it was the design, because nobody had thought of that particular design. Over time, it has become the support systems around that design, and it will ebb and flow. One of the other things we were doing at this particular conference is we were beginning the discussion of what should our next generation of design be? There will be elements of it that are the same, but we will take it to another level. It's all of that area of work that you're getting as part of being part of the system. ...
What would the next level look like?
I can give you quick headlines of things that I would personally like to see. We're just beginning that process. Our hope is that fall 2004 or fall 2005 we will introduce into our schools the next serious design change. ...
Key things I'd like to see -- I'd like for us to re-examine particular aspects of our curriculum. The one I would like to see most is, I think schools today are missing huge parts of things that are important to children, particularly in middle and high programs. I don't think we prepare kids sufficiently for that real world out there. [They don't have a] real understanding of what careers are available to them. I think many of them graduate, and they have no real idea what all those options are. I think we should expose them to that. I think there's a whole set of life skills areas that I would look at us introducing.
Many of these you get balled up into something called "Health." Marriage is given a chapter, OK. Marriage, relationships, etc., maybe we want to give that a little more time than you typically see in schools. Health, in terms of how that's actually approached, if you take a typical physical education class, many of them aren't really approaching it from the standpoint of helping you develop your health regimen. A whole series of what I would call life skills -- that I think we ought to be pioneers in.
In Edison schools now, there's a teachers' meeting every day. How important is that?
It's a critical part of the design, and it's harder than it looks. If I were to tell you, for example, what that design element actually cost, it would shock you, because in order for that to happen, the students have to be somewhere. If they are somewhere, that means there has to be staff -- at least, in current design -- with them. ...
You've heard for years about team teaching in American education. If there's no time for teams to form, if there's no time for teams to meet to think about how they're going to work as a team, there are no teams. If you leave that to after school or before school, it's generally not going to happen.
Edison has worked very hard on that particularly element of the design. We believe hugely in the team and the team leader. It's a critical part of what we do. ...
Art, music, phys ed and Spanish. Those "non-essential" subjects are essential as part of an Edison school.
The four topics that you just talked about -- art, music, P.E. and Spanish -- are four untested subjects in America, to my knowledge, on any state or national exams. We think they're very important in terms of children's education, and in terms of children getting a broad liberal arts education, which is, basically what Edison's approach is. We call those aspects of our curriculum "the specials."
You have to make tough choices. You've got to decide, would you like art, music, P.E. and Spanish? And if to do those, you got a slightly higher class size, which one do you want to do? We've generally opted for, we'd rather have those specials in the curriculum. If that means a slightly higher class size, we'll do it. But those are the hard calls you got to make. ...
At the Montebello School, the kids wear uniforms. Is that common to all Edison schools?
At most Edison schools, uniforms are a parent choice item. We recommend it. We think it's a good thing, but it's generally left to site decisions. I think the great bulk of Edison schools do have uniforms. ...
Can you explain how the schools are organized into "houses?"
More than anything else, at least to me, it's a management concept. If you take typical U.S. public school, what it looks like is principal, and maybe assistant principal, and then 25 or 30 teachers, all of which have to report to them. If you've ever had 25 or 30 direct reports, it does not work. The true result of that is there really isn't much connection between leadership and what's actually going on in the classroom, because there's too many teachers for a principal really to know and properly work with.
Our house structure is to lay in a group of what we call lead teachers, each of which lead a house of three to six teachers. They're there to work closely as a team and often they're the more senior members of the staff, that lead the houses, which may have more junior teachers in them as well.
There are other values to the house, but that's one I find particularly [important. It also] creates a smaller unit, and in big schools, that's valuable. Children feel as if they're in smaller schools because of houses, and that's a secondary value. Then the third value is ... this team teaching concept. ...
Parents' Night at Montebello was jammed.
Right. It's [another] critical part of the design. We believe, as many people do, that what goes on at home has a big impact on what goes on at school. We have multiple devices that we try to deploy to engage parents. One of the critical ones is what we call the quarterly learning contract, which is a quarterly parent-teacher-child conference. We work very hard on attendance at those conferences. You'll often see 90 percent, 95 percent of parent-teacher conference attendance rates. In some other schools, you might see 30 percent.
You've got to really work to see that it happens. We do all sorts of things, from very different scheduling of when those occur, to closing schools so that teachers can devote a lot of time to them, to you-name-it. ...
How much of what happens in an Edison school is scheduled by Edison's central office?
How common is the experience from school to school? .... I would say 70 percent to 80 percent of what you're experiencing in a school, we helped craft with the school. Then every school has deltas around that.
Could you say, let's say, "It's Jan. 17; it's 10:30, therefore, everybody's doing math?"
No, that you wouldn't see. What you would see -- and I think you can see this almost to a school -- is that the first 90 minutes of a day is reading. The way they are approaching reading will be very, very similar, because we use one reading program throughout.
We saw test scores posted in the halls. Is there some educational reason for putting those numbers up there?
I'll take it to a different level. At the school I just recently visited ... in Las Vegas, students had taken their test data and pasted it to their desk. Each student had their monthly results and were graphing their own results. They were saying, "Today, I'm at 40 percent accuracy, and I want to get to 80 percent accuracy by June." I think that's tremendously valuable, because it gets students involved in setting their own objectives, in monitoring how they're doing against those objectives. That, in and of itself, is a learning tool for them. But it's also a motivation thing. I think it's a great concept, and you see it in many, many different ways. A classroom will post it outside their door, inside the classroom; all sorts of things.
Do you worry that you're overdoing this test score stuff?
I think it can be overdone. I don't think we are. I think first, to ignore it is to ignore it at your peril. To just go, "We're not going to pay any attention to tests," is not an option that we have in America today. I think one of the things implicit in your question is are we teaching to the test? We have a very interesting answer to that: We have one curriculum in Edison, but we have 22 different testing systems out there. We don't get to adapt our curriculum to each different testing system. We're using a curriculum we believe, and then that's being monitored by all sorts of testing systems. So we're not teaching to the test, in that respect.
Is Montebello profitable? Does it make money? ...
Yes. This will surprise you, but something we've learned is that the better a school is academically, it tends to be better financially. It's counterintuitive. But the reason is, if you have good leadership in a school, they tend to be good in multiple ways, meaning, they're good recruiters of talent, they're good in terms of raising student achievement, and they're good managers of budgets. ... So generally, we see our best schools are good in multiple ways. ...
CASE STUDY: PHILADELPHIA, PA
There were risks; you no doubt saw those going in. But what were the potential rewards that you saw that made going after that Philadelphia assignment worth it?
Multiple things. First of all, in its original incarnation -- and it went through multiple ones -- we saw the chance to make a huge difference in one of the top 10 systems of schools in the United States, and that was very exciting. That's what we do here and that's what we're about. We saw the possibility of doing that on a scale and with the freedom that was pretty unusual.
What did you think that would do for Edison?
It would do what's obviously important to us, which is it would take us to another scale. As we have said many times, scale is important part of us achieving profitability. Secondly, we realized that it was going to be a highly visible assignment, and assuming we succeeded, it would lead to other similar assignments.
When you approached the school reform commission there, what did you tell them that Edison could deliver? What specific vision did you annunciate for them if Edison got that assignment?
Again, this went through many aspects. In the early days, we laid out our basic school design, as we do almost anywhere. We said, "This is what we'd like to do." That was one element. The second element was we also proposed that we have a role in consulting with the remainder of the district beyond the schools that we managed.
As things turned out, both of those were altered very significantly. One was completely rejected, meaning we don't have a consulting role within the district -- or a better way to say it, the role that was offered didn't make much sense. Then secondly, we wound up with less schools than we originally intended, and the design within those schools is substantially modified from what we typically do. The amount of freedom we have in the schools, control over the budgets, is different. The amount of money that we actually get is different.
We had two choices -- either not to do it or to make significant modifications -- and there's a whole long list of modifications that we made.
So you must have felt that, even with the modifications, it was worth doing. Why did you feel that way?
Because we think that, even with the modifications, we can move student achievement forward in that district and be a positive force within the district. It's going to be harder than what we initially set out to do, because the constraints are different. But we still think that we could do it, or we wouldn't have done it.
Let's look at that day [the decision was made that Edison would get, not 45 schools to manage, but 20].
We were severely disappointed. It surprised us. But we don't get to make those decisions. Our clients get to make those decisions, and that's what they decided. We said, "OK. This is the hand we're dealt." ...
What did Philly's action that day symbolize?
If you look at it -- and leave us out for a moment, and forget our expectations -- I think they did something very important. They said, "We're going to take 20 percent of our schools, and we're going to ask seven different players to assist us significantly in those." No other American city has done that. Even though it wasn't what we originally conceived, or what we originally hoped for, it was a very, very important step. Time will tell whether it was the right one. ...
Some of the critics in Philadelphia say that Edison's too experimental, too risky to play around with kids' lives.
I can't imagine how they would take that position. Here's why: We're eight school years into this. We have over 80,000 children that are enrolled, and we have a very substantial body of results. What has happened at those school, as you well know, that may be subject to debate. But what's not subject to debate is, generally, those students are doing well. If that's experimental, I don't know how they would arrive at that.
Even more important -- Edison is new, but the component parts of Edison are not new. Success For All reading program pre-existed us. All the different components are not experimental; it's how we put them together, how we manage them, etc.
The critics say, "They'll get in, they'll cut corners, they'll bend the contract rules to make profitability, or they'll demand contract changes to make profitability." No? Yes?
You should judge on the basis of our behavior. To date, we haven't received a penny from Philadelphia. We've been doing nothing but investing for well over a year. There's no reward yet. Our behavior wouldn't indicate that that's the approach we're taking. If this were a get-rich-quick scheme, why have we lost money for 10 years? We've taken a very long-term view and invested accordingly. ...
Between April 17 and May 7, Edison's stock price fell from about $12 a share to about $3 a share, all apparently in response to the decisions that were made in Philadelphia and the expectations that had been there. Were you surprised by the severity of that reaction?
I was surprised at the severity of it. The reality is we just won more schools than we had ever won in our history. Even though it wasn't what we had thought, it was still substantial in every sense. And by the way, it has turned out that the year that we're in is going to be the best financial year in the company's history. I felt then -- and I feel today -- it was an overreaction.
I would say Philadelphia was the precipitating event, but it wasn't the only one. Market conditions weren't very good to start with. Lots and lots of stocks have been taking substantial hits, and it was no secret we had a pretty substantial short position in our stock. Then the final thing is, it wasn't just the decision, but the controversy surrounding this decision I think was frightening to some investors, and they went, "Are we going to have to go through that again?" ...
It must have been pretty dark days. In the litany of dark days that Edison has experienced, how would you rank that springtime stock meltdown after Philadelphia?
"Dark" has different features. In one respect, it was as dark as we've known. In terms of fear, it wasn't that dark, meaning, fear of, "Are we going to make it?" I knew the reality of the situation, and we've been through worse. In terms of disappointment, it was probably the darkest, because a decade of work kind of went up in smoke, at least that aspect of it. That was severely disappointing to lots of people.
And pretty damaging to your own personal net worth?
Absolutely. Devastating. ...
How much of Edison's future, do you think, is still riding on what happens in Philadelphia?
Philadelphia is important. This is tough question, because, if I go, "Well, it's not that important, [they'll go] "Oh, you don't care?" We clearly care. It is important. Is it absolutely pivotal to our company's success? No. One of the reasons is it's depending on which way you look at it. If you look at enrollment or whatever, it's 7 percent to 12 percent of the company. That alone won't determine our future. Symbolically, it's important; reputationally, it's important. We understand that. ...
CASE STUDY: CHESTER, PENN.
When you got the Chester, [Penns.], job, many of your rival for-profit companies had looked and walked away. Why did you stay at the table? What appealed to you about Chester? Why did you think you could do it, when they took a look and said, "Not us?"
Most, if not all, of the other companies in our general space are experts at running charter schools that are independent of districts. As you know, we do both. We're the largest charter school company, but we also manage schools for school districts. ... I think they opted out -- and just to let you know, that may have been wise on their part. [Chester is] not necessarily a place you want to start to learn.
The chairman at the control board, Thom Persing, says he repeatedly warned you that not even Edison was going to be able to make money in Chester. What made you so sure he was wrong?
We did in Chester as we do in every situation. We did a lot of due diligence on Chester. If I were to take you back and show you all our original models, they worked. They weren't perfect, but they worked. What occurred was certain assumptions we were going on didn't turn out to be true. There were less students than we thought in the district, and the amount of funding that we actually received wasn't what we thought, either. ...
In retrospect, were you misled?
I don't think so.
Did they lie to you?
I don't think so. It's possible they didn't know. ... They did the best they could. We did the best we could. It didn't turn out.
Some critics have said that you knew you wouldn't make money there, you were just buying business with that Chester contract. You were going for market share, instead of for the specific site performance.
That's harsh on their part. "Not true," is actually what I should say. We knew we were taking risks in Chester. There were reasons we were prepared to do it that we felt were strategically sound. It represented a new line of business for us, which was essentially a state takeover of an entire district. We said, "We got to learn about those, and the only was you really learn is to go do one." We learned at an enormous amount from Chester, and by the way, you won't see us make the same kind of mistakes again.
Given how it's turned out for the kids, for the teachers, for their parents, do you feel apologies are in order, either on your part or on anyone else's?
I think it's way too early to make a decision, either way. But certainly, I would make no apologies in terms of intent. Ultimately, the results are what count, not intent. We're one year in. It'll be a better question to ask a year from now, because in two years, you should see a difference.
You demand now $2 million more under that contract. Is that, you think, going to raise problems for you in negotiations elsewhere, from the standpoint of being a credible and reliable contract partner? Are you going to find that your critics are going to add to their long roster of complaints that Edison plays bait and switch, that you get people into a contract, and then said, "Oh, gee, we've taken a closer look; it doesn't work. You need to change the contract."
Exactly the reverse. We have been impeccable partners. We have lost our shirt in Chester in every sense of the word, and we continue to go forward. ... I think that demonstrates that we understand our commitments; we stick with them. Do we ask for a little help from the other side? Yes. But if you compared what we're doing, I think you'd walk away and go, "We've been very good partners."
You signed the contract that a lot of your rivals walked away from. Why shouldn't Chester just hold you to that contract? If it's so unworkable that Edison says it needs to changed now, why did you sign it in the first place?
As I said, we signed it on the basis of what we knew, and they signed it on the basis of what they knew. We both know more today. A contract is a living thing. They should look at it and go, "What do we think of this?" We look at it and go, "What do we think of it? What makes sense for the district? What makes sense for the kids?" ...
In term of per pupil expenditures, how many Chesters are there in Edison's portfolio?
None. Nothing even close. We suffered very, very severe losses in Chester. If we had other things like that in our portfolio, we couldn't possibly show the progress that we're showing.
It's the worst?
By order of magnitude. ...
You have this model. Then here you are in Chester, where you can't do it all. It's "Edison Lite." Why did you compromise your model? You spent years and millions developing a model which called for a longer day, a longer year, and right away from the get go with Chester, you compromised.
Because there are going to be situations where you have these two choices that you can't do anything, or that you can do something somewhat different than what you've been doing. ... We said we're going to do here something that's different than what we've typically done. ...
Do you regret it?
No. And one of the reasons is part of what we do is learning, meaning we've got to try things to see how they actually work. ...
Has there been union obstructionism in Chester?
In the early days of Chester, no. In fact, the union was quite supportive. I think one of the reasons they were is that there was a chance that Chester was going to be completely disband or be chartered or whatever. In the latter part, I think there have been difficulties. Candidly, I'm not close enough to make intelligent comment on what those have been. ...
Why are you staying in Chester?
Because this is part of what we do. Just because it was tough, you don't leave. There's a point where you go "That's crazy," but we have a great deal of tolerance for that. ...
Do you think you can make money in Chester?
I think we can keep our nose above water in Chester, and try to do what we set out to do in terms of the educational side.
So you don't necessarily say, "Yes, we will someday make money in Chester?"
I'm not sure we will. There's a difference between hemorrhaging and struggling by. I think struggling by is likely where we will be. ...
CASE STUDY: WICHITA, KAN.
Wichita was unique in when it set out, it signed a contract, but it also said, "Well, let's do some Edison without Edison."
I don't know that it's unique. I think that some other schools have said or some other systems have tried things close to this. But I think it was the first, for sure. The superintendent who brought us to Wichita believed in competition, and said, "Let's set up a competition." I think one of the reasons they did that is, they said, "Let's not just have the benefits of this be confined to Edison schools. Let's see if there are ways that, by Edison being here, we can actually move other schools forward." I think that's what they tried, and I think it worked.
What what's your reaction to someone saying, "Well, let's just do Edison, but let's not pay Edison?"
First of all, I don't think it's nearly as easy as it looks. They can do parts of Edison without doing Edison. Example, you can extend your day without having us. You could do SFA--
"Successful For All."
--without doing us. But I'll give you an example of what you wouldn't get. We do SFA in 150 different schools. We've now done it for eight years. We have an enormous amount of built-in expertise of actually how to do it. ... If you say we just want to try this in a copycat way, I think you can do that, and I think you can improve the school by doing it. Do I think, over time, the results are going to be the same? No, I don't, and the reason is the support systems do ultimately play a big role. ...
What's your reaction to the Wichita school board voting to cancel the contract?
Quick question: Is the superintendent that brought us in the same as exists there now? No. If you do an analysis and you said, "Let's look at all the situations," there aren't many where Edison has been asked to leave. Let's look at how many of them were actually people that brought them to town; there aren't many. Regimes changes. Superintendents leave. Someone new comes in, someone new's got a different point of view. It's part of what we struggle with, and it's the politics of that we have to live with every day. ...
Were you making money in Wichita?
A little ... if you looked at it on what we call a return basis now.
How do you explain this to perspective customers? "We were successful in Wichita, but they asked us to leave." Is that what you say?
Here's the way I explain it. If educational decisions were made in a pure way, on the basis of what was in the best interest of the kids, I could describe utter tragedies that have occurred with us. I mean, where I'm going, "How could they possibly do that? To fire us when we've done what we've done?"
That's not how educational decisions are made in America. Part of what we're about is to try to alter that somewhat so that decisions are actually made, factoring in what's happening in the schools. Unfortunately, lots and lots of decisions have nothing to do what that, they have to do with the politics du jour in the cities that we're in. Do we get fired for political reasons? You bet. Do we get hired for political reasons? Yes. Politics are a fact in our life. ...
[The Wichita] superintendent says [he fired you for financial reasons.] He says, "We can save $00,000 a year more by just doing it ourselves." Do you believe that?
No, I think it was politics. ...
Was Wichita, on balance, a success for Edison?
I think educationally, yes. I think we served students year in and year out very, very well there. ...
I keep thinking about the irony of all this. We began with a question, you know, "Does Chris Whittle have a better idea?" What if it turns out that, yes, you do have a better idea, and so therefore the schools will say, "Well, let's just do it without Whittle, without Edison?" Can you be a success and a failure at the same time?
No. There's just not something in-between. We'll be a failure or we'll be a success. If what you had posited is the following: that Edison is a design on paper that has complete portability, I don't believe that. [I] believe that school design is very important, and then there is a connection to a support system, and that that's not portable. If that can't over time be conclusively demonstrated, we will fail.
So you're saying to any of those people who might think they can do Edison without Edison, "You cannot?"
I don't think you can, for all the reasons that that I've said. There's $70 million of support systems that we have built here to support that site design. To say that you can do it without us is to basically say all of that was for naught, and I don't think so. ...
MOVING AHEAD, LOOKING BACK
What were the top three lessons you learned from the low point for Edison in the summer of 2002?
I think that a lot of what we went through over the last year was a media event more than a business event. That doesn't mean that it's something we don't have to contend with. But what we did was, we said, "All right, since we're going through this, let's use this period to find out things that we think need to be fixed," whether the media knew that or not.
Also, when you go through a stretch like this, it actually enables you to make tough decisions that you may have been reluctant to make in prior times. When your stock price is at a buck you go, "All right." When it was at $20, we may not have wanted to cause a lot of controversy over a particular decision. So we went through lots of things that, frankly, the media probably had no interest in. But we were going, "Let's address this at this particular time."
Some of these have been reported on. We're approaching our growth much differently, and the lesson there is that this is a very, very complex business. Each situation requires a degree of nurturing and attention that, if you have too many situations, it's hard to give it. I'm talking about more of the relationships than I am the schools. The schools, we could actually grow faster. The relationships I think are more complex, in some respects, than the schools. ...
One of the things when you go through a situation like we've been through is you find out who your real friends are. You find out who your real clients are, as well. We've had some clients that tried to take advantage of us being down, and you learn from that. Is that the kind of business we want as we go forward?
So are you firing clients?
I don't know if I'd apply that word. But we are exiting relationships that we don't think make sense. ...
You're saying, in effect, that you're thinking smaller. You're thinking quality of clients, as opposed to emphasis on quantity of clients. Some folks have said that, to survive, Edison has to become adept at thinking smaller. Do you agree with that? If so, can you manage a consolidating business without a major change in your own management style, which has been very much the builder over the years?
I don't think we're thinking smaller if you look at a time frame. We're not really altering the long-term vision of the company. We may be saying this is a time to consolidate to find out what are our best situations, and what are not. So for a moment in time, we may be thinking smaller and we may be regulating our growth, even coming out of that. So looked at over two or three or four years, you might say smaller. Looked at over a decade, I don't think we're really changing our view of what this can be. But certainly at this very particular moment, I think we are doing that.
Am I suited to do that? It's not my strongest [suit], meaning that consolidation is not what I typically wake up in the morning and think about. But I can adjust.
Tell us about the role that Chip Delaney has played, and is playing. He's shifted from being a director to a key investor, at a time when you needed financing quite desperately, to now top management. How did you find him? How are you using him? How are the two of you sharing the levers of power and control here at Edison?
He'd been on our board for two or three years, so we obviously knew one another. He actually approached us on this idea. He was leaving his old firm, and said he would be interested in helping out. ... He's very aggressive. He's very skilled at some of the things that we need right now. ... He joined us in the summer. A lot of people think he represents the tough guy. He definitely does that, but that's not it entirely. He's made us re-think lots of different parts of what we do. He's very good at kind of getting in your face and going, "Now, does this really make sense?"
How has he changed Edison?
If you really look at the strengths of this company over the last decade, they were first and foremost educational, meaning it was a very strong set of players on the education front. Secondly, it was a good operating system, particularly in the ability to start up schools, I think it was as good as it gets, and it was a pretty good marketing culture. I don't think that was our strongest suit, and I think that would surprise some folks.
But financially, it wasn't as strong as it should've been. I think what he's done has brought a balance to those, and that now, in any given decision, education, operations and finance are kind of all represented with about the same strength. That's a balance that's a good thing.
What have you learned from what he's brought to the company and what the company's been doing? What impact is that going to have on your kind of core approach to entrepreneuring going forward?
A couple of things. One, I think we will drive tougher deals, as a general point. Let's say that a school in the past cost $13 million to launch. I would've said, "OK, we'll put in $6 million of that," and somebody else will put in $7 million. I'm just using this as an example. In the future, we might say, "We'll put in $4 million," and somebody else puts in $9 million. Though that doesn't sound like a huge delta, when you're launching the number of schools that we launch, it adds up, and each of those decisions is a is a better-quality decision. We've also seen that we can do that. We [haven't] necessarily exercised our ability to do that in the past, but we can do it. ...
Do you regret going public?
There are days. As I look back on it, I think it was the right thing to do at the time. At the time that we went public, markets liked the kind of things that we did, which were growth companies with big visions. In terms of a source of capital for trying to realize our mission, I think it was the correct thing to do. ... I think from a political standpoint, it made our job somewhat harder, because enemies of what we do could use our public status against us -- and did.
I'll give you an example. I can't tell you how many times [this] has happened. I'll stand up in front of a school board meeting, and someone will read me the risk factors out of our prospectus. You know why risk factors exist. They exist because they want to indicate to investors what hypothetically could happen. I've had those read to me 30 times, not as hypotheticals, but as, "Oh, you actually think this is going to happen." That's an example of the kind of things we've gone through. Then when our stock price declined, people used it as a way of [showing], "Oh, there's viability issues here," etc., etc. So in those respects, it's been difficult. But I think it [going public] was the right thing. ...
What did it mean in terms of how you had to manage this company when you have all of these public constituencies to be addressed?
... The complexity is that you have educational constituents ... and you have financial constituents. Each of those you have to communicate, too, and they don't necessarily speak the same languages. An EBITDA means one thing to a financial investor; it doesn't necessarily mean anything to an educational player.
That's an acronym for Earnings Before Interest Taxes and Depreciation and Amortization, and it probably doesn't mean a lot to anybody. But what I hear you saying is it's sometimes a conflicting language you need to speak -- what you need to say to one constituency actually confuses or antagonizes another constituency.
I'll give an example. In the decision of should we exit a relationship, from a financial standpoint, some of those are almost obvious decisions. Why are we spending years and years and years when somebody's not even paying us? ... The financial community would applaud that decision [to exit that relationship, but then] a critic can go, "Here's an example of a company not being committed to children," or whatever.
So it's a tough balance. That exists to some degree whether we're public or private. It's just an increased situation when we're public. ...
When you look back on Edison Schools, do you say, "Boy, were we naive?"
In some ways, yes, and not just in the beginning. We discover new pools of naivete every day. In a funny way, you have to be naive to do this. You wouldn't take it on if you truly knew what you were in for.
Knowing now what you know, would you do it?
I would. People have asked me, "What would you do if Edison failed?" I would do it again.
If you ask a bunch of educators, "If your legacy could be starting dozens of schools like Montebello," ... they'd say, "I would have had a great career." But, for you, it's starting good schools and making money. One without the other is not sufficient?
Definitely, one with out the other is not sufficient. I would add a third ingredient in there: leaving behind a system that continues and grows and gets better and better and better. It's not just about the individual schools. It's about that entire institution that is being constructed. If that doesn't remain and go far beyond what I may have originally had in mind, then there is no legacy, in my view.
So it's a system of good schools that continues? ...
Yes. That are good academically, and good financially.
And make money?
Yes. That would be success.
If you fail, does that take down the entire for-profit education industry?
I think it would set it back, maybe decades. ...
How close are you to being successful?
You mean in a time sense? In one respect, which is just turning a financial corner, pretty close. In another sense, which is realizing what we originally set out to do, years away.
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published july 3, 2003
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