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The Letter From: Staying In With the Outs


("The Letter From" is on hiatus through December. This is an "encore presentation" from April 19, 2004 - before edbizbuzz came on the scene. Consider it an opportunity to judge my predictive capacity and to revisit the school improvement industry trade groups' Washington strategies. For those of you who were expecting something on venture capital, I apologize for the change of mind.)

Always stay in with the outs.
David Halberstam

Inside Washington and out, the school improvement industry is associated more with Republicans than Democrats and more with conservatives than liberals.

Some examples: Edison drew intellectual strength from Republicans like Checker Finn and voucher advocates like John Chubb. Jeanne Allen, of the pro-voucher Center for Education Reform, has long been a featured speaker at education industry investor conferences and is tied to the EMO’s trade association. Bill Bennett chairs K12, Inc. The Education Leaders Council, which advances systemic reforms essential to our industry, is predominately Republican.

None of these relationships are wrong. The industry owes a great deal to the investments these people made in the school improvement industry’s early days. Nevertheless, we can no longer be a “Republican,” “conservative” industry.

Industry access to Washington policy is predominately through Republican and conservative doors. Until that changes, we are subject to “material” political risk – and all that means for access to capital. Our trade groups need to attract Democrats, while maintaining ties to Republicans. The industry must create a political base pegged on the vital center.

For example, we must consider the prospect of Sen. John Kerry becoming President, and develop a strategy that will allow the industry to thrive in that environment. If the “outs” capture the White House, we will regret not having established an “in“ with them earlier.

Political alliances are based on shared interests. Our industry and centrist Democrats share several:

1) Full funding of NCLB. Full funding means a bigger market for the industry. Unlike Sen. Kerry, the Democrats most important to education, Sen. Kennedy and Rep. Miller, are holding firm on accountability while demanding full funding. But moderates will eventually fold on accountability – greatly damaging our industry - unless they can deliver the money they feel Pres. Bush promised. SII Weekly has argued that $8-10 billion is not the difference between the success and failure of school reform, when taxpayers spend $500 billion. But it is crucial to NCLB politics.

2) Opposition to vouchers. The charter school experience demonstrates that an atomized “system” of independent schools lacks the infrastructure required to take advantage of the scale solutions the industry has developed. It is not a great business when compared to selling to school districts. More important, our industry is based the principle of accountability for performance. This drives the purchases of the goods and services we offer. Schools receiving vouchers are exempt from this key NCLB provision. Moderate Democrats object to this on principle too; we should join them.

3) Teacher empowerment. While it is preferable to sell to one school district versus a hundred individual schools, our industry does not prefer “assembly line” teachers. To “leave no child behind” requires the average teacher truly be “highly qualified.” The training, support, tools and materials such a teacher needs are sophisticated and require constant upgrades. This is an attractive market. This is also the teaching force to which moderate Democrats aspire. And, the approach offers them a reasonable way to appeal to teachers over the heads of a union leadership resisting real reform.

4) Social entrepreneurship. The “baby boom” centrist Democrats in office used politics for social good. While our better known companies may have a Wall Street Republican patina, the bulk of this industry are small companies run by idealists using the marketplace for social good. Moreover, a growing number of nonprofit leaders choose to pursue their education mission in the market. Most of these leaders seem to be Democrats.

These industry interests are shared with many Republicans as well as most moderate Democrats. No doubt, moving towards the center will disappoint the ideological right, but it will vote with the industry on vital matters. Similarly, the traditional left will never support us. Our goal is to create the bi-partisan support for the industry required to protect us when the federal government changes hands. Our goal is taking political risk off our list of worries - and off the lists of those who manage investment capital.

Listen to this as a podcast here.

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