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Innovation in Education Gave Birth to a Rough-and-Tumble Industry

Joel Klein's decision to go work for Rupert Murdoch last week set off a round of wild speculation that News Corp. (NWS) is planning a technologically disruptive attack on the education establishment.

The surprise is not that many have seen the potential for a huge business in combining software and learning. The edutainment business -- as learning software was known in the 1990s -- has been around for almost as long as the personal computer.

Nor is it that a rich man with a controversial reputation is getting into a business that inspires a great deal of sanctimony. Michael Milken and Larry Ellison founded Knowledge Universe in 1996 and have made significant bets on operating schools as well as the potential for technology to transform early learning with their Leapfrog devices.

New York Magazine's John Heilemann used his access to Klein to get a better sense of what News might have in mind:

In fact, the likelihood that Murdoch's education strategy will involve either charter schools or online college-diploma mills is very close to zero. Instead, it is all but certain to revolve around one of the most fertile areas of innovation today: the application of digital technology to learning. In the next few years, "what you're going to see in educational software and new solutions and online learning is going to be game-changing," says Klein, in terms of "the ability of new technology to both improve instruction and the quality of it through new learning platforms."

Klein is no expert in this area, but in his time as chancellor, he became convinced of the need to move away from what he calls "this sort of twentieth-century model of one teacher trying to master all the content and information and deliver it to 25 children, who are performing at different levels."

What education will move toward isn't entirely clear. It doesn't take much imagination to see the potential for technology to transform education at all levels -- especially among high school and college students.

We've seen recently that budget cuts at state schools are pushing lectures online. From there, it's not a big leap to imagine that students will be able to self-test and progress at their own educational rate. Indeed, online education begins to disrupt the whole idea of a university. Why should a professor continually perform lectures when he or she can record a semester once? Why be limited to the second- and third-best professor on subject when the recorded lectures of the leading light in the field are easily accessible through a tablet?

All of this suggests a very different structure to secondary and college-level education in the future. The only problem is that for-profit education at that level has been taking serious beating these last few months as the Federal government cracks down on on what it sees as abuses among online educators.
Here's the New York Times on the subject:

Lawmakers and Department of Education officials have become increasingly concerned that too much of the $26.5 billion in federal student aid that went to for-profit colleges last year enriched shareholders and company executives, rather than helping students.
Such schools enroll about 11 percent of the nation's college students, and get a quarter of all federal student aid. But their students account for 43 percent of those defaulting on student loans.
The Times says these schools get more than 90% of their revenue from the government. Worse than that, the whole business seems to have a Glengarry Glen Ross feel it. Instead of buying swampland in Florida, these guys are selling dreams of unrealistic careers based upon the fantasy of an easy education.
With prominent short-sellers like Michael Lewis's subprime hero Steve Eisman making a bear case against the whole industry at prominent investment conferences, the stocks of for-profit education firms have been getting hammered across the board.

CNBC's favorite short-seeker, Herb Greenberg, was all over the collapse of University of Phoenix parent Apollo Group in October when it withdrew guidance in the face of the government's shake-up of the field.

All of this suggests that disrupting education is likely to be something more like perestroika was in Russia -- a move that may benefit a few but will likely expose many to losses and fraud -- than Silicon Valley was in the US.

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