The "Big Enchilada"

"Trying to make a killing in the charter school business"?! Yeah, that's right, the charter school business is so profitable that I'm telling all my friends in the hedge fund business that they're in the wrong business. My message: "If you really want to make a lot of money, start a charter school!" LOL! -- Whitney Tilson

LOL! indeed. In 2007, hedgefunder and charter school maven, Whitney Tilson chided me for implying that there was a profit to be made in the charter school market and that he and his group DFER were pursuing exactly that course, under the banner of school reform. It was Tilson himself, a couple of years later however, who let the cat out of the bag in a New York Times article by Joe Nocera:

Charter schools, explained Whitney Tilson, the founder of T2 Partners and one of their most ardent supporters, are the perfect philanthropy for results-oriented business executives. For one thing, they can change lives permanently, not just help people get by from day to day. For another, he said, “hedge funds are always looking for ways to turn a small amount of capital into a large amount of capital.”

A wealthy hedge fund manager can spend more than $1 million financing a charter school start-up. But once it is up and running, it qualifies for state funding, just like a public school. 

The profitability of school reform, was also pointed to by Jonathan Kozol back in 2007, when he cited a NationsBanc Montgomery Securities prospectus in his column published byHarpers, writing:

“The education industry represents, in our opinion, the final frontier of a number of sectors once under public control that have either voluntarily opened” or “been forced” to open up to private enterprise.

The education industry, the bank concludes, represents the largest market opportunity since health care services were privatized during the 1970s. While college education can offer “attractive investment returns, the larger developing opportunity is in the K-12 EMO [Education Management Organization] market,” it observed. “The K-12 market is the Big Enchilada.”

Tilson would later refer to the ed reform business as a diamond in the rough, a business the market has left for dead, "but a savvy investor could turn for a profit." A big inner-city school system, said Tilson, "is kind of like that — the General Motors of the education world. "