Why For-Profit Education Fails

Moguls’ good intentions too often betray them.

- Jonathan A. Knee

Earlier this year, LeapFrog Enterprises, the educational-entertainment business, sold itself for $1 a share. The deal came several months after LeapFrog received a warning from the New York Stock Exchange that it would be delisted if the value of its stock did not improve, a disappointing end to the public life of a company that had the best-performing IPO of 2002.

LeapFrog was one of the very last remaining of the dozens of investments made by Michael Milken through his ambitiously named Knowledge Universe. Founded in 1996 by Milken and his brother, Lowell, with the software giant Oracle’s CEO, Larry Ellison, as a silent partner, Knowledge Universe aspired to transform education. Its founders intended it to become, in Milken’s phrase, “the pre-eminent for-profit education and training company,” serving the world’s needs “from cradle to grave.”

Knowledge Universe businesses included early-childhood learning centers, for-profit K–12 schools, online M.B.A. programs, IT-training services for working professionals, and more. Milken’s penchant for secrecy makes a comprehensive assessment impossible—most of the businesses were privately held and some were sold to private buyers for undisclosed sums. But of the companies about which there is public information, most, like LeapFrog, ended badly. Education remains untransformed.