The New Education Century

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By Kosmo Kalliarekos

Published: June 8th, 2004



June of 1944

This week we are celebrating the 60th anniversary of perhaps the seminal event of the 20th century, the invasion of the beaches of Normandy leading to the eventual defeat of fascism. Many consider it our nation's finest hour and a testament to America's supreme sacrifice in defense of freedom.

On June 22nd we will also celebrate the 60th anniversary of the passage of the GI Bill, one of the most important pieces of legislation in U.S. history. The GI Bill was in place from 1944 through 1960. Approximately 2.2 million veterans (one-third of all veterans returning from WWII) entered the thousands of U.S. colleges and universities in the 16 years following the war.

The result was broadened access to higher education services and a change in the structure of the higher education system. After the GI Bill was introduced, the mean number of colleges established every year rose consistently year after year, as did enrollment.

The synchronicity of these events is rather impressive. Almost simultaneously, "guns and butter" were put to work. From then on, our nation, indeed the world, experienced an unprecedented time of growth and innovation, powered by millions of highly educated Americans, eager to attain the American dream.

Productivity, that ultimate source of economic growth, has a source itself: the education of our human capital. The best investment advice one can give young Americans is to invest in their education. Over the second half of the 20th century, as our economy became hungrier for higher-level skills, the high school diploma became less and less of an entry ticket into our economic playground. Currently, high school graduates will earn 60% of the median income of graduates holding a bachelor's degree and only one-third of the income of holders of professional degrees. In a knowledge-based society, those who don't attain knowledge also don't attain a decent standard of living.

The linkage of education and economic development is not just a U.S. phenomenon, but a global one. Thirty-year trend studies by the World Bank on the differences in economic growth of countries that began as roughly similar in economic size point to almost two-thirds of that difference being driven by knowledge attainment (e.g., Ghana and South Korea). This should become one of the cardinal rules of economic growth: the relative speed of knowledge attainment will drive two-thirds of the relative speed of economic growth. That is how important it is.

The Largest Investment on Earth

Education is the second-largest industry in the U.S. (healthcare being number one), and given its nature, the largest investment. The same can be said globally.

U.S. educational expenditures for primary through tertiary education amount to over 3/4 of a trillion (!) dollars annually, with the world as a whole spending a little over $2 trillion. In that comparison alone, we can see how much more the U.S. is spending on education than is any other country. On an annual basis, our educational spending exceeds the entire GNP of any country save five: Japan, Germany, France, Italy and the U.K..

However, for all of this money, the U.S. education system has been at best stagnant, if not in relative decline.

When U.S. math and science achievements are compared with those of 41 other countries at the 4th, 8th and 10th grade levels, results show superior initial rankings rapidly giving way to parity and eventually to sub-par performance. Test results show the U.S. performing well in 4th grade achievement, holding a 95% ranking out of 41 countries taking TIMMS tests for science, and an 80% ranking for math. Tests for 8th grade achievement drop U.S. rankings to 55% in science and 45% in math. By 10th grade, the U.S. scores dip to a stunning 10% ranking in both science and math!

Furthermore, the Organization of Economic Cooperation and Development has reported that over the last 10 years, the U.S. has lost its leading position in terms of college-attendance rates. Since 1994, the U.S. has slipped from first in college attainment (graduation rates of those age 25-34) to second, behind Norway. More important, every country in the study made progress in increasing college attainment rates for the current generation versus the last... except the United States, which made none.

It is hard to escape the fact that the largest investment on earth - indeed, the largest investment in the history of investing - is beginning to look like the largest non-performing investment in the history of investing....

Before we discuss potential solutions, it is important to consider that while the international comparisons are sobering, the intra-U.S. trends are perhaps even more alarming.

An increasing body of evidence shows a rapidly stratifying American society defining itself along very distinct lines of educational attainment. In short, the multiplying effects of educational attainment are dramatic when applied to income groups. Consider that 76% of 8th graders with family incomes of greater than $75,000 will attain a higher education degree, while only 43% percent of those 8th graders with family incomes of $25,000 to $74,000 share the same educational characteristic. Depressingly, only 19% of 8th graders with family incomes of less than $25,000 will attain any form of higher education.

This "attainment gap," which is also becoming manifest along racial and ethnic lines, has been steadily increasing over the past 20 years. In an economy that is driven by knowledge attainment, we are witnessing the creation of two Americas: a well-educated America which increasingly holds the tickets to economic prosperity, and a second America for which prosperity is inaccessible. Indeed, increasingly, in modern knowledge-based societies the rate of social friction and the resultant costs will be directly driven by the rate of the growth of the educational attainment gap. A recent U.N. study on the stagnation of Arab societies identified educational attainment, along with lack of political expression, as one of the top causes, proving the global application of such a trend.

Recently, the comparative decline of American educational performance has received a somewhat nationalistic - one might say even militaristic - flavor, as illustrated by these comments from Christopher Cross, former President of the Council for Basic Education and former Assistant Secretary for Educational Research and Improvement:

"... China graduates 40 million people a year from college. In India the figures are similar. The United States graduates about 2.2 million.

India and China are clearly intent on using education as a "soft" weapon against the United States. We will never see an explosion, we will never be able to trace fissionable materials, we will never discover germ factories. The "secret factories" are out in the open and called schools, technical colleges and universities.

Their goal is to produce legions of people with degrees, who can encircle our meager forces in another few decades, consigning the U.S. economy to the second tier, and with it, the standard of living of our children and grandchildren.

Our only effective defense is to greatly improve the quality and productivity of our own education system."

We must resist the temptation of merging the Department of Education with the Pentagon, particularly during these current troubling times, when the U.S. education system is less accessible to foreign students.

It is in America's interest to promote a more educated world. Educated democracies are our best hope for a peaceful world. And, as Mr. Cross correctly points out, educational quality and productivity will be the new benchmark for relative economic growth.

Entering the Tunnel

Sadly, these trends have been in existence for some time. Indeed, it has been more than a decade since the Commission on Excellence in Education published its famous "A Nation at Risk" report, sounding the first broad alarm. Before we examine the way out (indeed, there is one!), let's consider the architecture of the problem.

First, although it is the attainment of higher education that drives income, the failure to achieve it starts squarely at the K-12 level. The U.S. has the most accessible higher education system in the world, largely supported by billions of dollars of student aid. Failure to access it or navigate through it to completion of a degree largely rests on the performance of our K-12 educational pipeline. Those of us who have spent a considerable time working with our K-12 system often joke that it takes five times as long and five times more money to get things done in education compared with any other industry. The "speed of molasses" phenomenon can be traced to the following:

Lack of Scale - The U.S. education system consists of a sea of decision makers: 16,000 school districts, 110,000 schools, 3 million teachers and tens of thousands of school board members (most viewing school boards as a first step to a political career) - think of the factorial! - often not staying long enough to make things happen. It is not surprising that the average tenure of a school principal is not much more than 2 years.

The "Problem of One" - K-12 education is offered as a basic right of every U.S. citizen. Our nation has a strong ethos in providing every single child access to it. With 50 million kids all coming from different socioeconomic backgrounds and starting points, the challenge is enormous. Every child in a classroom has to have the same access to the same pedagogical tools and processes. A teacher cannot assign a writing assignment if 99 students out of 100 have a pencil and one does not.

Zero-Sum Budgets - Long-term educational expenditures don't grow much more than 4% to 5% a year. 80% of the cost is labor (teacher salaries). Most of the growth is provided by special initiatives from the federal government or the states, while teacher salaries try to keep up with inflation. For programs not covered by specially allocated funds, any shift in spending has to come from another pocket in the system. Usually this means reducing jobs or pay for teachers, delaying building programs, or paring or eliminating libraries. I wouldn't want to be a school board member trying a new initiative on the backs of these constituencies.

Lack of Accountability - In some respects, lack of accountability is a direct result of the lack of scale. While management's half life is less than two years (boards, principals, superintendents), labor representation tends to be permanent. It is not surprising that labor representation has sought and gained strong (some argue too strong) job protections for its membership in a world where "management" is constantly changing and where the academic and political debates of what constitutes effective pedagogy are without end.

Rules of the Road

Given this system architecture, consider the following as rules of engagement, or guideposts of a successful solution:

  1. Any successful solution must cover everyone.
  2. Any successful solution will require sustained systemic investment.
  3. Any successful solution will require incremental investment in the short term in
    order to avoid the zero-sum game dynamics.
  4. No local or even single state solution will change the system, no matter how successful it is.

It is fair to say that the above rules apply on the assumption that one cannot change the basic architecture of our education system. Although that would be theoretically possible (e.g., national curriculum, etc.), it is practically unattainable. We have to work within the current box if we want to get results.

The Efforts to Date

It is also fair to say that our nation's government has made efforts to meet the challenge. After all, politicians must respond: education is consistently one of the top three concerns of voters for as many years as we have been able to track voter expectations. The Clinton and Bush administrations have each initiated and enacted educational legislation whose scope has not been seen for 30 years. During the '90s, E-Rate legislation (further described below) amounted to almost $40 billion of investment in wiring our nation's schools, while No Child Left Behind (NCLB) is currently profoundly addressing educational accountability.

America hasn't seen this kind of universal educational legislation since the GI Bill. Even major legislations such as Title I or the Individuals Disabilities Education Act (IDEA) - providing funds for low-income and disabled kids, respectively - affected only parts of the educational population, not the entire population.

Both E-Rate and NCLB have been partly successful, but sadly, they have yet to change our performance trajectory. Both are systemic in nature, as they are federal programs and hence applied throughout the nation (Rule #4). Applying the rest of the model rules we can see why they have stumbled:


This legislation strikes at the heart of the accountability challenge. To be accountable requires a means of measurement.. That observation has led to a massive effort to test every child in America, several times. Once a school is deemed to be failing, it can ultimately be closed. This ultimate "death penalty" has applied significant pressure to the system and has focused the mind of all decision makers. That is good.

The legislation is also focused on every child (Rule #1), and hence has the necessary systemic scope to make a difference.

However, sustained investment appears to be lagging. The initial decision was far-reaching and noble, but once the legislation was passed ("the day after," so to speak), the states faced a chaotic set of requirements, all of which have led to the gradual emergence of significant costs. Although the government has provided funds for teacher training, state testing and tutoring (Rule #2), the funding is either too complex to reach the schools or is simply not adequate. In a world of zero-sum budget, the absence of incremental funds (Rule #3) ignites every constituency's defensive posture, and it just becomes political quicksand.


The Clinton administration's massive investment in wiring our schools has largely met its specific goals. Currently, almost all schools and increasingly all classrooms have been wired for broadband access to the Internet. It is gratifying to witness the success of a program once our government focuses on it. This has all happened within the past seven years, and it has transformed the technology infrastructure of the school system. The federal government largely provided all the funds (and as such, incremental to existing budgets), and the schools have responded (Rule #3).

E-Rate's promise was a simple one: technology has transformed and has largely improved every other aspect of our economy. Furthermore, the Internet is by definition a knowledge-attaining, collaborative medium. Tim DiScipio's recent SNS Special Letter on collaborative technologies in schools proved this point aptly.

However, E-Rate's ultimate promise has yet to be fulfilled. Bottom line: performance did not increase. Following the fanfare (and the federal dollars), school districts still have to maintain access to the Web without any tangible systemic evidence that it is worth much.

E-Rate provided funds for wiring and network build-up but not enough for teacher training, maintenance and pedagogy (Rule #2). What good is a network if there is a dearth of good proven content, or when five kids have to huddle over a single computer in the back of the class to access it? E-Rate was a 5,000-foot solution. It did not reach every kid. It is a network effectively without nodes. It violated Rule #1.

Exiting the Tunnel

We don't need to re-invent everything all the time. Actually, both NCLB and E-Rate represent powerful electrical shocks to the body of the U.S. education system. And given the massiveness of the edifice, it is always tempting to abandon what we started and chase another "transforming" idea. Education will be changed by building upon hard-earned progress and the billions already invested. We are in the midst of crossing the chasm.

While NCLB is in the midst of its rollout, and while the political debate is raging around its level of funding (which is a step forward, as most continue to support its central accountability tenets), the great technological leap forward is in danger of stalling and fizzling. Technology companies are rushing to provide technological infrastructures to manage data and deliver tests (both worthwhile activities and markets), but such an effort is relegating technology to a supporting and derivative status, displacing it from the core of the pedagogical process.

The debate about the lack of results given the investment in establishing universal school and classroom broadband access is centered around the lack of content, insufficient teacher training, lack of maintenance funds and a general lack of innovation when it comes to technology-enhanced pedagogy, particularly the reluctance of educators to use technology. But these are all somewhat superficial and secondary arguments, when one considers that:

  1. There is a plethora of ideas on how to solve specific educational challenges, from privacy issues to security, training, communications, data management, etc. Several billions of venture dollars have already been invested in innovative education technology companies.
  2. Although somewhat slow to adopt, most teachers are either comfortable with their usage of technology or are open to training. Continued training is necessary, and the foundation has already been created.
  3. The great success of higher education distance learning demonstrates that technology can indeed be used to deliver a better high-quality educational experience.
  4. Content publishers spend over $1 billion annually on developing content for school textbooks and ancillaries. Most major education textbook companies are themselves divisions of integrated professional content conglomerates that have made the transition to electronic content successfully in several other divisions. There is no doubt that the movement to electronic content represents a major opportunity for textbook publishers to increase their growth and profitability. But in order to make the transition, they need to be convinced that the book platform is a relic of the past. They are not quite convinced of that as of yet.
  5. Kids, as Marc Prensky has pointed out to us in SNS and at FiRe, are already digital natives, comfortable with and attracted to technology.

E-Rate built the equivalent of the "interstate highway system," linking our education system to the Web. We certainly have plenty of ready "drivers," as increasingly teachers and kids are prepared to enter the information highway, while the content companies certainly have the wherewithal to provide all with the "fuel" of content. We have all of the elements in place except the "cars." Currently the U.S. ratio of computers to kids stands at 1:5, and such ratio is considered one of the best in the world. But imagine a 1:5 ratio of textbooks to kids. At that ratio I am not sure that the textbook would have been much of an effective educational tool either.


So much of the technology revolution has been fueled by collaboration, connectivity and network effects. White-collar productivity gains didn't hit the power curve until penetration in the workspace (indeed, even at home) reached, and in some cases exceeded, 1:1 ratios of white-collar professionals to computers. As computing power has become more and more portable, the computer has become a permanent, conjoint feature of work. It is hard to believe that we could actually accomplish much anymore without access to a PC or equivalent device.

In education, the first beachhead of 1:1 computing has been the higher education system. The first manifestation of 1:1 results has been a massive increase in distance learning, as working adults are finding that freed from the restrictions of time and space they can pursue higher learning tailored to their lifestyles. Initial fears of potentially lower-quality learning are being allayed as more and more universities (including some of the most prestigious ones) are incorporating distance or blended learning as part of their core pedagogical offerings. New forms of pedagogical tools (such as sophisticated simulations) are actually improving classroom teaching (think of flight simulators).

In the K-12 space, 1:1 pilots in specific school districts, such as Lemon Grove in San Diego County, and even in states (e.g., Angus King's initiative in Maine), are demonstrating measurable and meaningful increases in pedagogical outcomes as every child in a certain grade, school, or school district has access to a wireless computer environment, often both at the classroom and at home.

These pilots are also providing all of us with knowledge about the overall ecology of 1:1 computing in schools, including requirements for support, training and content applications. They also demonstrate the intense commitment by educators, students and parents to 1:1 computing once the fruits of its success are tasted. Nothing inspires change more than success.

We are starting to accumulate powerful insights about outcomes and implementation guidelines. Most important, we are learning that we must not fall into the trap of thinking we must design the perfect system in order to begin. There are several outstanding questions around specific pedagogical content, teacher training and change management processes - but none of that has a chance of success unless every child has equal access to a computer on a 1:1 basis. They first need cars in order to learn how to drive.

The Design Points

Our successes and failures to date point to the following broad design points of a 1:1 educational world.

Cadillac, not Chevy

There is always a temptation to cut corners in order to cut costs. But we must not make the mistake of cutting the functionality of the device to the point that it does not deliver a successful or needs-appropriate experience. Small black-and-white screens, insufficient battery power, unwieldy and unfamiliar keyboards, poor support and superficial training are just a few of the compromises we have made in the misguided effort to have our cake and eat it too. I submit that lowering functionality and broadly defined system reliability serve only to increase rather than decrease overall costs, as insufficient products are ultimately discarded.

Network access all the time, everywhere

Pupils don't leave their textbooks in the classroom. Kids don't study just in the school. Experiences with 1:1 computing are starting to show (despite earlier fears) that once kids acquire a sense of personal ownership of their laptops, they actually take better care of them than even the most optimistic forecasts projected. If we think that allowing students to take their laptops home makes the machines more vulnerable to damage, figures from Maine offer convincing evidence to the contrary. It is an empowering relationship, and it is personal. It is theirs.

Network access at home also requires the extension of E-Rate connectivity to the household, which can present perhaps the single biggest challenge to 1:1 computing. However, innovative schemes are being implemented (including the participation of cable and telephone companies, in San Diego), accelerating the rollout of broadband to all student households and diminishing costs to the states and federal government. Education is a killer app for broadband connectivity.

Familiarity of devices

Two decades of knowledge show how consumers and kids are using computing devices and what types of devices they are comfortable with. We live in a world that has already distilled several user behaviors into common denominator form factors, that do not require most users (teachers and kids alike) to learn brand-new tricks.

SNS Project Inkwell, for example, founded by Mark Anderson (disclosure: I am an advisor), is engaged in an ambitious effort to aggregate and summarize the basic standards around 1:1 computing so that the technology industry can design products that appropriately and equitably fulfill the needs of the school environment.

E-Rate II (The Sequel)

Sooner or later it all comes down to money.

We are talking about the kind of money that only exists within the power of a national government. Even though 93 cents out of every educational dollar is spent by local and state authorities, every single large-scale U.S. educational initiative has required federal and presidential leadership. Consistent with the rules of engagement described above, only the federal government can be the catalyst that turns the proverbial dial.

Currently, the U.S. is spending a rather meager $40 (approximately) per kid per year on computing. Even if such devices were to last four to five years, the average amount spent right now per device is no more than $200. It is our estimate that the kind of computing capability that is required is in the range of about $1,000 per pupil.

Simple algebra determines the level of funding required:

  1. 29-30 million kids (grades 5-12)
  2. Current amount spent on computing for grades 5-12 is roughly $1 billion
  3. Ballpark current cost per kid for an appropriate networked product: about $1,000
  4. Assuming that the devices last at least three years (and there is good evidence that this is highly possible), cost will be about $10 billion per year
  5. Adding roughly 20% of training and incentive systems puts us at about $12 billion per year for 1:1 computing

The gap is in the range of $11 billion per year. That is only about 3% of our current overall educational expenditures. It would still leave IT spent for education as a percent of total costs, less than in many other industries, particularly those that are knowledge-based.

Is $11 billion affordable? Is our ability to begin to have a high-performing education system a large economic opportunity? My answer to both questions is a resounding yes. There are few areas that we can invest in that will as directly ensure the long-term growth of our nation.

In the end, $11 billion is of course a substantial figure; and frankly, it represents the outer bound. In order for action to take place, the IT industry as a whole will have to decrease the total cost while maintaining and even increasing functionality by using the economies of scale that such new demand creates.

IT Industry Leadership Required

The approach of the IT industry to K-12 education has been rather disappointing and has lacked a coherent vision. In general, the major companies have failed to see education as much more than another sales channel, potentially a difficult and less profitable one, given the complexity of the sales cycle and the inevitable price discounts. Despite the business challenges, and the lackluster demand to date, most are comforted by the belief that even if the profits are not all that exciting, at least the kids' experience with their products will lead to potential future adult users. Most have also set up nonprofit initiatives to provide access to their products and services, largely out of a sincere desire to help. But all of these good intentions are not enough to change the system.

Technology leaders must recognize, if not the potential for a wider societal impact of improved education via technology, then certainly the tremendous business opportunity that technology holds. However, unlike markets in which competitors respond to market demand, the technology industry must work to help create and shape this demand. The potential creation of billions of dollars in demand for new systems in the U.S. and eventually abroad (e.g., last year's German education ministry's multibillion-dollar order) represents one of the few new large-scale markets for the global PC hardware and software industries.

If indeed a new E-Rate II program is to take shape, leading IT CEOs must play a direct and even a personal role. The industry must take steps toward creating educationally focused products and managing costs at scale. How much can we drive the cost of a $1,000 computer while maintaining appropriate functionality? What are the economies of scale? Can there be agreement on some common minimum standards?

Having done our share of the bargain, we can then work with the federal government (and it must be the federal government) to support the grand roll-out. A grand bargain indeed.

The New Education Century

Sixty years after Normandy and the GI Bill, we are again faced with a very similar circumstance: a global war and demands to prepare our workforce for a new kind of economy. Our nation once again requires our leaders' imagination, commitment and determination.

American voters have consistently voiced their desire to improve the performance of their educational investment and arrest the slow but persistent decline of our most fundamental productivity engine. Technology has yet to make a meaningful difference, but it is tantalizingly close to doing so. Let's not delay further. Let us remember the start of this new century not just in terms of a war on terror, but also as the time of reinvesting in our future - just as we did in June of 1944.

Copyright 2004 by Kosmo Kalliarekos.

About Kosmo Kalliarekos

Kosmo Kalliarekos is a founding member and senior partner with The Parthenon Group, a strategic advisory boutique consisting of 150 members located in Boston, London, and San Francisco. At Parthenon, Kosmo heads the firm's Education Industry Center of Excellence. For over 15 years, Kosmo has advised clients on issues related to operational excellence, extensive corporate strategy development, and new venture creation. Parthenon's client relationships span several industries, including consumer products, financial services, information publishing, and educational publishing, technology, and services. Kosmo's clients include a wide range of organizations, from startups to Fortune 100 companies. Kosmo has been a featured speaker on issues relating to the education industry at several forums, including the Congressional Joint Committee on Education, the World Bank, and the American Association of Publishers, among others. Kosmo graduated from the Wharton School of Business at the University of Pennsylvania and received an MBA with High Distinction, from Harvard Business School. He is also on the steering committee for Project Inkwell, developing the business model and economics of 1-to-1 computing in grades K-12.

Originally published by: Strategic News Service

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