Living within Limits: The Harsh Reality of Our Business Model

As we know from Baumol's cost disease formulation, education--particularly private, independent education--has essentially ignored the business imperative to use technology to leverage productivity and thereby raise wages without increasing prices at rates beyond inflation. In board retreat after board retreat on nearly every inhabited continent, I find members frustrated with management (read: head of school) for not finding a way to attenuate inflation+ prices increases. Yet, what this frustration ignores (or, more accurately, is ignorant of) is the fact that few board members would actually want administrators to do what it would take to manage the problem.Ask board members what they value most about their school and one invariably hears the same factors: intimacy, teachers who know every student, small class sizes, no cracks for anyone to fall through, and so on. For the most part, these rich adult-to-student ratios are what drives the cost disease in the first place. Making serious headway on attenuating tuition increases means (1) more students for the same number of teachers, or (2) fewer teachers for the same number of students. I have yet to find a single board member, let alone a plurality of members, who would welcome this shift.We wouldn't be out of the woods even if higher ratios were marketable, because adjusting ratios may only be a short-term solution. Looking down the road, even if productivity improved by, say, 20-25% or more, it is unlikely that similar gains in productivity can be realized in perpetuity. This means that at some point in the not too distant future, we will again be trapped in the cost disease conundrum, at least until a way is found to stream both the content and experiences of education directly into children's brains.We may not like the notion, but to a very large degree those leading and governing independent schools are actually in the retail business. Learning to live with the implications of this fact will serve us well and will be the subject of several future posts.