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Hedge Funds and Charter Schools



This is an excellent report on how hedge fund managers have been behind the charter school movement since the very beginning. Now they are buying school board seats by overwhelming cities with campaign donations that competitors who oppose charter schools can’t begin to match. From the very beginning, the hedge fund managers have seen Barack Obama has an ally. He has definitely confirmed their faith in him.

The hedge fund industry and the charter movement are almost inextricably entangled. Executives see charter-school expansion as vital to the future of public education, relying on a model of competition. They see testing as essential to accountability. And they often look at teacher unions with unvarnished distaste. Several hedge fund managers have launched their own charter-school chains. You’d be hard-pressed to find a hedge fund guy who doesn’t sit on a charter-school board.

Consider Whitney Tilson. Straight out of Harvard, Tilson deferred a consulting job in Boston to become one of Teach For America’s first employees in 1989. Ten years later, he started his own hedge fund in New York. Soon after that, Teach For America founder Wendy Kopp took him on a visit to a charter school in the South Bronx. It was an electrifying experience for him. “It was so clearly different and so impactful,” Tilson says. “Such a place of joy, but also rigor.”

The school was one of two original Knowledge Is Power Program schools—better known as KIPP—which has since grown into a prominent charter network with nearly 200 schools in 20 states plus the District of Columbia, serving almost 70,000 students, predominately low-income and of color.

But back then, charter schools were still a rather unfamiliar novelty to most people. Tilson, however, was convinced that they were the future of education. He started dragging all his friends, most of whom were hedge fund investors, from Wall Street up to the South Bronx to see the KIPP school. “KIPP was used as a converter for hedge fund guys,” Tilson says. “It went viral.”

Many critics of the corporate education-reform movement are quick to accuse proponents of seeking to cash in on the privatization of one of the United States’ last public goods. And while there certainly are those in ed-reform circles who stand to benefit from a windfall of new education technology, testing, and curriculum services, hedge funders by and large do not fit that stereotype. Theirs is more of an ideological and philanthropic crusade, rather than a crude profit-seeking venture.

As Tilson explains it, hedge fund managers almost exclusively come from well-off backgrounds and got the best educations in the world. “I personally never knew what the situation was like for families forced to attend their local school in the South Bronx, or Brooklyn,” Tilson says. “I didn’t know of anyone who dropped out of high school or college—much less that there were high schools where half the students dropped off.”

And of course rather than blame poverty, he blamed unions, which the charter school movement has declared war upon.

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  • Let’s be honest: this is about money, end of story. Anything else that comes out of their mouths is bullshit, plain and simple.

    • DrS

      Yeah. Seems like, even if they claim to have loftier values, they think that making money off of it is the true signal of virtue. Meritocracy rules.

    • LosGatosCA

      Anything else that comes out of their mouths is bullshit, elevator pitchy aimed at accelerating the IPO plain and simple.

      Also, too, the Hypocrits oath: First, break everything you don’t already own.

    • Brett

      Rich people can have their ideological delusions and pet causes as well, especially when it comes to education and “self-reliance”. Erik just had a post on Carnegie – I don’t think Carnegie was building libraries to make money.

    • Manny Kant

      Eh. These guys are making enormous quantities of money as it is. If they’re making anything from charter schools, it’s peanuts compared to their main sources of income. I think these people are largely true believers.

      • LosGatosCA


        Sure the absolute dollar amount to be made may not be what they are normally focused on.

        But there’s no reason they shouldn’t aim to make a 4000% return on their investment even if the original motivation is to ‘help.’

        And being the extreme big foot competitors they are, they can’t control the collateral damage that seems inconsequential to them, but are actually negatively impacting other people’s whole lives. This is ‘educational tourism’ on a strip mining level.

  • wengler

    I’m surprised that the private prison industry hasn’t gotten more involved in charter schools. In the end they are in the same grift- charging the government for warm bodies.

    I also imagine charter schools would benefit from private prisons’ innovation in supervising a large population with as few people as possible.

    • I also imagine charter schools would benefit from private prisons’ innovation in supervising a large population with as few people as possible.

      They could merge, and charter school dropouts could go directly to charter prison, where they could be farmed out as cheap labor.

      • wengler

        Creating a domestic labor pool that is competitive with the global poor these same capitalists are ‘uplifting’ overseas.

      • LosGatosCA

        There was a kids for prison cash prototype in PA

  • The Dark God of Time

    Now you’re on the record being opposed to hedge funds and parents having an alternative to public schools. What kind of monster are you?

    • nixnutz

      Not to mention taking good jobs away from Bangladeshi children.

  • MdeVoltaire

    The impetus behind charter schools has always been about funneling public dollars into private hands and destroying teacher unions. Many charter proponents hate all things public except for the public dollars they gladly and greedily pocket.

    Moreover, research shows that most charter and public schools don’t perform significantly better or worse than each other. There are outliers, to be sure, but charters with stellar records on paper tend to get rid of underperforming kids to inflate their scores and give the appearance of excellence. One example I know of from firsthand experience is BASIS, which is all the rage in Arizona and a couple other states and does exactly this.

  • By the end, Cosby had raked in a total of nearly $80,000. Two other reform candidates were elected with more than $60,000 in support, including $10,000 checks from former New York City Mayor Michael Bloomberg.

    Before she was even sworn in to her seat on the board, it became apparent that Cosby’s idea of reform was different than DFER’s. She and the other new board members were invited to what she describes as a secret meeting at Eli Lilly, an Indiana pharmaceutical company with major philanthropic initiatives. The meeting featured a presentation pitching a plan to expand and fully integrate charter schools into the Indianapolis Public Schools system.

    “It hit me fully in the face that the expectation of my role was to support a much larger, clandestine agenda in the city,” Cosby says.
    “It hit me fully in the face that the expectation of my role was to support a much larger, clandestine agenda in the city,” Cosby says. “That’s when I realized that this role I was stepping into was going to be filled with problems.”

    This is a good example of why the problems of money in politics go beyond quid-pro-quo bribery, or even the personal honesty/corruption of recipients.

  • Manny Kant

    I’m always fascinated by these people who had the “best educations” and somehow think that the best way to educate those lest fortunate than themselves is through a model of education that bears absolutely no resemblance to their own educations.

    • koolhand21

      Who can claim to have the best education in the world and use the (not word) impactful? Makes my teeth hurt to read that quote.

      One other charter school issue is the rate of “special Ed” students for which the daily payment is about 25% higher. Same classes, same teachers, same staff, more profit. WIN!!!!

  • Perazzi-man

    kill the teachers unions , help the rethugs. Simple. Just like their attempts to kill off the trial lawyers.

    • That definitely explains some of the support. On the other hand, I doubt that’s what Barack Obama or Corey Booker were thinking.

      You have people who hate unions qua unions. You have people who hate unions qua Democratic supporters. You have people with an ideological hostility towards public education. You have people with legitimate complaints about the public schools who get their energy directed at teachers unions. You have people who cling to the original idea of charter schools – alternative schools run by some local parents who want to try some different educational strategies. And you have scammers who see the opportunity for profit.

      • humanoid.panda

        I’d add another category here, to account for people like Obama and Booker: people who came of age, politically, in the 1980s and 1990s, travelled in elite liberal circles, and genuninely buy the neoliberal line on competition and innovation being the panacea to all evils.

        • humanoid.panda

          Also, this is purely anecdotal, but the biggest supporter of charter schools I know in real life is an attorney who works for Google- a Black nationalist, Bernie style socialist, who is nevertheless convinced that public school unions are part of the white power structure that wants to keep Black students from competing with their suburban peers.

          • efc

            Kind of a Shanker-Brownsville thing maybe. But don’t charters usually end up firing all the African-American teachers and hiring 23 year old TFA grads?

          • shah8

            I don’t know about racist unions, but boy oh boy, do public schools have some really racist teachers.

            Been something of a movement to homeschool black kids these days.

            I feel that guy’s pain.

          • Roberta

            Agreed. This context is where I think “neoliberal” actually has a substantive meaning, and it’s what you’re describing.

      • dp

        Yep. I’m sorry I was ever a fan of Phoenix Suns now.

  • snarkout

    Tilson isn’t even a particularly successful hedge fund guy; he’s got $90 million in assets under management, which is certainly more than I have kicking around, but I think it’s mostly family money where big hedge fund guys like Paul Tudor Jones or Daniel Loeb are managing billions. I guess this sort of thing just floats around in the atmosphere if you want to manage other people’s money.

    I’ve talked about this with friends before, and I think that largely these guys are genuinely well-intentioned, just operating from a poisonous set of presuppositions. Like, I think that they do in fact want to make it easier for inner-city students to succeed academically and they’re not generally positioning themselves to make money off the bust-out a bunch of charter schools are running on the public school systems of America, but they’re strongly positioned to view “disrupt” as a prima facie good, unions as inherently problematic, and to assume that a bunch of rich guys with no domain expertise are well-equipped to solve intractable problems that largely boil down to “poverty” and “schools are funded by property taxes”. Same with the Gates Foundation, if not the Waltons.

    • snarkout

      And thinking about it, it’s very similar to the constant claim from the sorts of people who get to write op-eds that Michael Bloomberg/school reform backer Mark Zuckerberg* is the man on a horse that the American people have been asking for. There’s just this unquestioned set of assumptions in the chattering classes that’s fundamentally immune to correction from people who understand how education policy or American politics actually work.

      * Zuckerberg and, particularly, his wife seem entirely genuine about their interest in fixing Newark’s public schools, but based on results he’d have been better off buying the children of Newark $100 million worth of backpacks and textbooks. To his credit, Zuckerberg seems to have realized his donation did very little good except enriching a bunch of education reform consultants, and seems to have changed his approach slightly; would that the Gates Foundation would do the same.

    • AMK

      I think this is mostly correct….particularly when you consider that many of these guys actually lose more money than they stand to gain (at least in the short term) when the multibillion-dollar teachers’ pension funds divest from their hedge funds over their support for charter schools and related anti-union activism, as has happened to Loeb and others.

      On the other hand, you could use the same set of facts as evidence of these guys’ irredeemable sociopathy. I know if I was a billionaire already making hundreds of millions off of public schools and teachers unions, I wouldn’t go out of my way to spend lots of money slandering said schools and unions or really rocking the boat in any way. In fact, I would probably do the opposite and give generously to public school teachers’ pet causes in the hopes they would give me even more of their money to manage.

      • humanoid.panda

        Right- but sociopathy doesn’t account for why guys like Zuckerberg or Gates, who don’t make any money from schools, and don’t seem to intend to, spend hundreds of millions of their own money to fund education reform.

        • efc

          I think it’s part of the meritocracy myth. They believe they are where they are because of their merit. But then they see that merit isn’t the only thing it makes them question whether merit is in fact what got them where they are. By (in their eyes) pulling down one obstacle to meritocracy for all it makes them feel better about their own position because now if everyone can go to a “good school” no one can complain about structural, systemic inequality. It is just convenient that this particular structural impediment to meritocracy doesn’t actually require any changes that will affect them, their kids, or their pocketbook (beyond one time donations).

  • DAS

    I didn’t know of anyone who dropped out of high school or college—much less that there were high schools where half the students dropped off.

    I call b.s. No way he never met anyone who dropped out of college at least.

    • Bill Murray

      can you ever really know the help. or the occasional captain of industry or professional athlete

  • JG

    I’m honestly terrified about the prospect of Ruben “Charter School Diaz” being mayor of NYC. I honestly might vote for the Republican in that case if it’s someone like Lhota who at least gets transit (correct me if I’m wrong about that but I figure the former head of the MTA would be a decent mayor on transit even if Cuomo calls the shots).

    • DAS

      I know a kid who is somewhat of a savant about transit issues. If the MTA is smart (which they are not), they will hire this kid ASAP to run their organization. Anyway, maybe if I remember and get a chance when I see him in synagogue next Shabbos, I’ll ask him about how well Lhota really did as MTA head.

  • ColBatGuano

    Isn’t Whitney Tilson a character in a Tom Wolfe novel? Or a frat buddy of HA Goodman and Brogan Morris?

    • DAS

      Does it really have to be either/or?

  • pianomover

    Impactful, say that word and I want to punch you in the teeth.

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