The “Profit Motive” delusion and open education #edstartup #opencontent #edchat


Note: This is an expanded version of a comment on this post on EdSurge. Other people have also commented here, here and here.

Note 2: When I first started thinking about this post, I had this title in my head but decided it wasn’t quite appropriate “You’d have to be an absolute idiot to think that the profit motive is a guarantee of quality or anything”. The reason I rejected it is that I don’t actually think that people who believe this are idiots even if I think the notion is silly (see below).

The EdStartup debate: profit motive and technological innovation

Segal Kitties

Segal Kitties (Photo credit: h-e-a-p)

It seems that previous encounters with ed entrepreneurs have left enough of a bad taste in the mounths of educators that they are now suspicious of the motives of many well-meaning ed technology startups. Tom Segal, who works for ed startup VC firm Rethink Education, went on the offensive (in more ways than one) to defend the profit motive by way of repeating some free market cliches. Let’s have a look at how they stack up.

Segal preemptively called people who disagree with him “haters”, so let me start by saying that I don’t hate the idea of a sustainable business, making a profit to maintain its existence and provide comfortable lives for its workers and owners, and providing a useful service to its customers. But the justifications of profit as some sort of panacea or being the primary means of achieving quality, those I do hate. And Tom Segal’s post is full of them.

Marketplace analogies are built on a dream

“In an effective marketplace, every good company that lasts provides a product that satisfies the consumer”

This ignores the fact that there is no such thing as an effective marketplace (just like there is no ideal gas). In reality there are plenty of good companies that don’t survive and plenty of bad ones that do. This could be due to chance or manipulation. And also, the surviving good companies, often turn bad when they can. They may not even be intentionally bad, they just put profit ahead of other priorities. What is a company could make 20 million, but only makes 10 because of some public good (and no PR stunts do not count)? Why is that not part of the equation?

Segal acknowledges that “a truly transparent market filled with a multitude of options” does not “yet” exist in education but he ignores the fact that it does not exist almost anywhere. There are some high profile exceptions (basic consumer products) but most of the time, as Bill Fitgerald pointed out “the ‘transparency’ gets buried under marketing copy and, in some cases, patents”.

The cliche of entreprise as driver of all innovation

“They [computers, phones] were developed by fiercely competitive, ROI-oriented companies”.

This is a favorite free-market cliche but it’s complete nonsense. Computers and the internet would not exist without government grants, university research (a point so obvious that it was made by all the commenters I mentioned above). And while their consumer incarnation is a result of commercial competition led by profit motive, without massive public subsidies for R&D and infrastructure like electricity, there would have been no opportunity for the profit motive to come into play. Because a pure profit motive is mostly shortsighted and needs a counterbalance to thrive.

That is not to say that a competitive marketplace cannot spur innovation. But as often as not it is innovation in accounting practices, worker efficiency, advertising, streamlined production, resource exploitation, etc. These all sound fairly businessy and neutral, but they are not such a positive when we pair them with their counterparts that inevitably seem to pop up in both fiercely competitive environments and monopolistic environments: tax avoidance, exploitation/firing, lies, low quality products, environmental disasters, etc. These alone are not an arguments against competition (we have plenty of examples of what monopolistic telephone companies get up to and its even worse then their duo,trio,quadropolies), but they put us back in the real world.

But statements like these are simply delusional and I can’t believe anybody with half a brain cell would ever make them. (But plenty of people with loads of brain cells do, illustrating my thesis that incredibly smart people can believe incredibly silly things.)

“That is the beauty of a free market: once a company has been exposed as a fraud or a problem-child, there goes their business.”

Segal’s obviously never heard of phone companies. This is simply almost never the case for companies of any appreciable size unless some special conditions obtain. Microsoft is the butt of many jokes and many people downright hate Windows but they still keep buying them because they have no choice. So telling schools “don’t buy those products” is living in a fool’s paradise, a mirror image to the worst distortions of Marxism Leninism. Consumers never have the freedom of choice and quality of product is only a small part of the equation when it comes to purchase-making decision. The cost of switching a product, the social cost of using something different than others, the institutional pressures of trying something new, the personal risks of “not buying IBM”.

The Manufactured Crisis?

Everytime I hear a TED talk or read a TED-syndrome blog post exhorting us to save education (in the US or anywhere else). I remind myself of the Berliner and Biddle book Manufactured Crisis which shows clearly that there’s nothing all that wrong with US schools (or schools in much of the developed world). But there is plenty wrong with many of the communities in which those schools are located. Splitting the international comparisons (useless as they are) by income levels clearly showed that. So I don’t agree with the premise of…

“Our schools need all the help they can get right now. Our children need all the help they can get.”

But there are lots of schools around the US and the world that need all the help. But what they need is less money leeched away by fads of the moment like CD-ROMs/iBooks or interactive smartboards (and here I speak as an early adopter and promoter of technology) and more money given to supporting the basic needs of students and the communities they live in (food, shelter, health care, security, economic opportunities). No amount of technology in the classroom is going to change those fundamentals, although technology can play a role in delivering them.

Technology and innovation can also help solve some of the problems around access to resources. But what is needed there are open content, open platforms and open interfaces to avoid lock in and make the “marketplace” of services around the content, platforms and services at least a bit more of an equal playing field.

The passion of the edtech entrepreneur

I absolutely agree with Segal that most of the edtech entrepreneurs are passionate people who want to make a difference. But there have always been people like that (see

And I would even say that profit probably isn’t the first motive of many education entrepreneurs. Profit is just a means to an end. I fully understand that. I have lots of ideas that I would like to exist and sometimes profit is the means of making that happen. But at other times, it is not. There is no reason for private enterprise to “lead” the technological innovation. There are plenty of Open Source models that can sustain innovation and innovators. And charging money for services is a part of that equation. But not the sole and exclusive driver.

Quality, Open Education, and Freedom

Perhaps the greatest howler perpetrated by Segal is this:

“You can’t have high-quality digital tools without the profit motive”

First, there is no one necessary precondition of quality of anything. Ever. There can perhaps be a gurantee of provenance which can form the foundation of trust. But that’s about it. Nothing on its own guarantees quality. Not peer review process. Not the editorial board of an encyclopedia. Not a Quality Assurance process. Not a stable of fact checkers. And certainly not the profit motive.

Part of the reason is that quality is both subjective and ever changing. But an even bigger reason is that all the would be guarantees of quality are easily subverted and corrupted in the same way that the business processes I described above can be and often are..

The only guarantee we can ever have is the guarantee of freedom to take the content and remix it. To own our data in a meangful way, ie download it all in a format that can be easily parsed. This should be the first ideal of any education technology startup. I’m not interested in spending any of my time or effort in a system that doesn’t let me take my data with me or that “sells” me something I can’t share with a friend. In effect, this means Creative Commons licensed content in a reasonably open format (and here I would include Word), platforms running on open source software or at least have fully open APIs.

This is an ideal that is clearly achievable but not straightforward or easily defined. Brazil has gone perhaps the longest way towards it and there are pockets of success around the world.

But obviously, the people creating content, software and other things, have to support themselves and their families. Maybe they even want to have nice things. And we should look for funding models that will allow that. Here’s an innovation that is happening (if not enough). But it is the sort of innovation that the “profit motive” will never spur in its pure form.

Content business or Relationship business

But this ideal is not incompatible with people making money. It’s a matter of perspective And here I would borrow a slogan from Jeff Jarvis aimed at the media industry but just as applicable to the education industry: “You are not in the content business, you are in the relationship business.” Some examples of this, artists making more money from T-Shirts and Concerts than music sales, newspapers running conferences and exhibitions, open source software companies selling support packages, etc.

Which means open education companies will have to innovate in building portfolios of revenue sources. And a part of that portfolio can be charging for the delivery of the content (by print, special ebook format, etc.). All of that is possible even if the content itself is licensed in a way that allows sharing and remixing.

But a bigger part will be personal (human) services like tutoring, consultancy, support, etc. Many of these do not scale quite as well as making widgets but as so many would be private school entrepreneurs have discovered, you can only ever make marginal savings from economies of scale in education. Buying chalk in bulk or installing VLEs does not make for savings if the bulk of your cost is staff with a more or less fixed ratio to the number of students. Technology can make the life of the staff easier (in the long run). For instance, it can let them focus more on interacting with student than paperwork or access peer support and training at lower cost and expense of time. But that doesn’t reduce the staff cost. Education is not like selling widgets and although people make pots of money by selling widgets to schools and students. The bulk of education is about relationships between the learners and the teachers, the learners and other learners and the learners and the content. And true educational innovation will come from facilitating these relationships in an open way.

But I see that the companies Segal’s fund invests in mostly do not innovate in any of these areas. They offer freemium services but it’s mostly build around proprietary lock in in shiny interfaces. That’s not to say that they do not provide useful services, but their thinking about profits (with some exceptions) is to have schools or individuals spend money on things that they could also get for free. (I think Engrade and Smarter are going in the general right direction.)

Open Together: Remix this idea

I don’t have money to invest but I’m hoping someone who does, will invest it in companies innovating around open education. The Open Source world has paved the way here. For instance, I have an idea for a startup called Open Together that would help schools identify common needs and direct a part of their resources to further development of open content and open software, to bring it up to the quality they expect. Sort of a “collective purchasing” facilitator using the Summer of Code model of development. I think it could be a very sustainable business. So if somebody wants to take that idea and remix it, please do.


I feel like I’m missing companies and business models around Open Education. If I do, please school me in the comments.


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