The answer is found in the word "ephemeral." To become a billionaire, I need to provide a lot for many, for very little. I need to find an area of business that today is fat, bloated, and inefficient, an area where people are dissatisfied with the current system and whose products need improving. The industry I have the most opportunity in is the biggest industry of all: education. If you take a moment and think about all the money that is spent on education and training, the dollar amount will stagger you. This goes beyond counting the money for public schools, colleges, etc. When you look at the amount of education that goes on in business, the military, homes, and professional seminars, the dollar amount is the biggest of all. Yet, education is the one industry that has remained the most mired in the past. Education as we know it is obsolete, expensive, and ready for change.
Earlier this year, a friend of mine, Dan Osborne, an international foreign exchange trader, sent me an article from The Economists' website. The following are excerpts from that article:
Michael Milken, the junk-bond king who once earned $500 million in a single year, is now building one of the world's biggest education companies, Knowledge Universe. Kohlberg, Kravis and Roberts, a buyout firm that strikes fear into managers the world over, also owns an education company called Kindercare. In Wall Street firms, analysts have taken to issuing breathless reports making such assertions as the education industry is undergoing a paradigm shift toward privatization and rationalization.
Why is everyone suddenly so excited? Because of the parallels they see between education and healthcare. Twenty-five years ago, healthcare was mostly stuck in the public and voluntary sectors. Today it is a multi-billion-dollar, largely private industry. A lot of rich people, not just Mr. Milken and Henry Kravis, but also Warren Buffett, Paul Allen, John Doerr, and Sam Zell, are all betting that education is moving in the same direction. Companies from a range of conventional industries are investing in the business, including Sun, Micros oft, Oracle, Apple, Sony, Harcourt General, and the Washington Post Group.
The U.S. government says that the country spends a total of $635 billion a year on education, more than it devotes to pensions or defense, and predicts that spending per pupil will rise by 40% over the next decade. Private companies currently have only 13% of the market, mostly in the area of training, and most of them are mom-and-pop companies, ripe for consolidation. International Data Corporation, a trends consultancy, reckons that this share will expand to 25% over the next two decades.
The article continues by saying:
America's public schools are increasingly frustrating parents and falling behind international standards. America spends more of its GDP on education than most countries, yet it gets mediocre results. Children in Asia and Europe often trounce their American counterparts in standardized scholastic tests. More than 40% of American ten-year-olds cannot pass a basic reading test; as many as 42 million adults are functionally illiterate. Part of the reason for this dismal performance is that close to half of the $6,500 spent on each child is eaten up by non-instructional services, mostly administration.
Now the barriers between public and private sectors are eroding, allowing entrepreneurs into the state system. The 1,128 (and growing) charter schools are free to experiment with private management without losing public money.
The article also points out:
Not surprisingly, there is plenty of opposition to creeping privatization. The teachers' unions have an impressive record of crushing the challenges to their power...
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