My friend Nik recently sent me a PandoDaily article written by Francisco Dao entitled Looterism: The Cancerous Ethos That Is Gutting America.
He defines looterism as the “deification of pure greed” and says:
The danger of looterism, of focusing only on maximizing self interest above the importance of creating value, is that it incentivizes the extraction of wealth without regard to the creation or replenishment of the value building mechanism.
I like the term, I think I’ll use it. And it made me think of this recent Bloomberg article about private equity and hedge funds getting into the public schools space. From the article:
Indeed, investors of all stripes are beginning to sense big profit potential in public education.
The K-12 market is tantalizingly huge: The U.S. spends more than $500 billion a year to educate kids from ages five through 18. The entire education sector, including college and mid-career training, represents nearly 9 percent of U.S. gross domestic product, more than the energy or technology sectors.
Traditionally, public education has been a tough market for private firms to break into — fraught with politics, tangled in bureaucracy and fragmented into tens of thousands of individual schools and school districts from coast to coast.
Now investors are signaling optimism that a golden moment has arrived. They’re pouring private equity and venture capital into scores of companies that aim to profit by taking over broad swaths of public education.
The conference last week at the University Club, billed as a how-to on “private equity investing in for-profit education companies,” drew a full house of about 100.
[I think I know why that golden moment arrived, by the way. The obsession with test scores, a direct result of No Child Left Behind, is both pseudo-quantitative (by which I mean it is quantitative but is only measuring certain critical things and entirely misses other critical things) and has broken the backs of unions. Hedge funds and PE firms love quantitative things, and they don’t really care if they numbers are meaningful if they can meaningfully profit.]
Their immediate goal is out-sourcing: they want to create the Blackwater (now Academi) of education, but with cute names like Schoology and DreamBox.
Lest you worry that their focus will be on the wrong things, they point out that if you make kids drill math through DreamBox “heavily” for 16 weeks, they score 2.3 points higher in a standardized test, although they didn’t say if that was out of 800 or 20. Never mind that “heavily” also isn’t defined, but it seems safe to say from context that it’s at least 2 hours a day. So if you do that for 16 weeks, those 2.3 points better be pretty meaningful.
So either the private equity guys and hedge funders have the whole child in mind here, or it’s maybe looterism. I’m thinking looterism.