Diane Ravitch, now an indefatigable opponent of the weirdly popular idea that the proper formative model for The Children, Who Are the Future is a combination of factory feedlot and highway weigh station, finds the Washington Post lambasting the State of Texas–yes, that Texas–for “reduc[ing] the number of end-of-course exams required for a diploma and loosen[ing] the required courses for graduation.” Needless to say, the Chinese (“increased international competition”) make an appearance, as does the, uh, the, uh, the spurious notion that “an auto technician or sheet-metal worker” needs something called Algebra II. The fact that the Post editorial board uses the term “auto technician” suggests a gang of 24-month BMW leaseholders who haven’t exactly been frequenting the local Meineke for the $29.99 fluids brakes & rotation special, but, you know, whatever. Look, we all know that these people are assholes, but Ravitch is wrong to suppose that they also don’t know what they’re talking about. She’s kinder than I am. Unfortunately Diane, they’re just assholes.
Now I am an agèd 32, an icy planetoid careening through the scattered disk of the Millennial Generation, far, far from the warm, YOLO star at its core, and I can’t remember whether I ever took Algebra II, or if it had anything to do with getting a job. I do, on the other hand, know a thing or two about financial accounting and corporate finance. Also, I have an internet connection, and therefore access to the Washington Post Company’s Investor Relations Page and Annual Report. So lemme first lay something graphical down upon ye:
That is to say that 55% of their gross receipts come from boondoggling students. But the Post is a business, and you don’t measure a business by revenues alone. You gotta look at income, and the nice folks at Investor Relations are kind enough to provide revenue and income by operating segment, and right now, the picture of the Education segment resembles a particularly terrifying Bosch. In 2010, the segment booked $360 million in operational income. In 2011, it dropped to $96 million.
In 2012, it booked a $105 million loss.
Damn, girlfriend, don’t take my word for it. What’s management got to say?
Education Division. Education division revenue in 2012 totaled $2,196.5 million, a 9% decline from $2,404.5 million in 2011. Excluding revenue from acquired businesses, education division revenue declined 10% in 2012. Kaplan reported an operating loss of $105.4 million for 2012, compared to operating income of $96.3 million in 2011. Kaplan’s 2012 operating results were adversely impacted by a significant decline in KHE results; a $111.6 million noncash goodwill and other long-lived assets impairment charge related to KTP; and $45.2 million in restructuring costs. These were offset by improved results at KTP and Kaplan International.
In response to student demand levels, Kaplan has formulated and implemented restructuring plans at its various businesses that have resulted in significant costs in 2012 and 2011, with the objective of establishing lower cost levels in future periods. Across all businesses, restructuring costs totaled $45.2 million in 2012 and $28.9 million in 2011. Kaplan currently expects to incur approximately $25 million in additional restructuring costs in 2013 at KHE and Kaplan International in conjunction with completing these restructuring plans. Kaplan may also incur additional restructuring charges in 2013 as the Company continues to evaluate its cost structure.
When a company starts to “incur additional restructuring charges” as it “continues to evaluate its cost structure,” you can be reasonably sure that, in the poetical language of MBAs everywhere, their Revenue Model Is Fucked. Pace WalMart and its giant un-staffed aisles of rotting meat, you cannot make profit on cost cutting and labor arbitrage alone. At some point, you have to sell shit that people want to buy at a price somewhat greater than the expense of actually putting it on the shelves. But this is the sort of fundamental logic of the marketplace that the parishoners understand even as the high priests of late capitalism keep yammering about miracles from their corner pulpits. Every braid shop in DC gets this basic equation, with or without Algebra II. Meanwhile, the WaPo group is booking $100 million dollar goodwill impairment expenses for one subdivision of its Education segment. Oh, I guess that means they have been completely misrepresenting their asset base too, huh. You mean to tell me that KTP (Kaplan Test Prep) doesn’t actually have hundreds of millions in goodwill? Like I said, not idiots. Just assholes.
Well, we’ve wandered far enough afield. The Washington Post, the newspaper, is a loss leader for the Washington Post, the company; damn, they ought to just reorganize it as a marketing division, eliminate sales and ad revenue altogether, and deduct the whole thing as a business expense. And so, anytime you see the Post editorializing about something that directly affects the core businesses (roughly speaking, training scams and cable TV), you should ask, cui bono? Which roughly translates as, NO, FUCK YOU!
You see, when even Texas recognizes that even these United States are still filled with “auto technicians” and welders and waitrons and janitors and a hundred million other mooks just trying to work a job and pay the rent and afford a beer and the WaPo’s cable box at the end of the day, well, that’s a lot less need for test prep; it’s a lot fewer kids getting shoveled into pointless 2-year Kaplan Higher Ed (KHE)
pogroms programs in dental veterinary respiratory therapeutic office support. The thing about “rigorous” curricula and expensive testing is that it provides a busted gas cap through which rent-seeking corporations can siphon more money out of the unsuspecting public.
I mean, when you think about it, schooling is actually a pretty low-rent activity, right? Considered at its most fundamental level. You build a center-courtyard building with a bunch of identical rooms. You buy some books. You divide everyone up by age and you hire 1 staff person per 15-20 kids to talk all day. Whatever your opinions on the particular merits of universal education, this is a remarkably efficient delivery of an effectively universal service. You hire some janitors and some cafeteria ladies and maybe a coach, and then the only annual service contract you’ve got to worry about are the nice guys who fix the boilers. YO, HOW’S A DIVERSIFIED EDUCATION AND MEDIA COMPANY SUPPOSED TO GET ITS NUT UP IN THAT?
Well, what you do is you get everyone all hepped up about the devilish Chinese eating our kids’ lunch, and you add a little taste of cryptoracism about achievement gaps and such, and you get politicians and schoolboards and affiliated business roundtables and chambers of commerce to insist that without seventeen different kinds of tests, all of them proprietary, all of them supported by teacher training (fee for service) and software packages (licensing, fees, service, updates) and, for the rich kids, more test prep (fee for service) outside of school, ad inf., well, like we said, CHINA! Look out!
So basically, the guys at the Washington Post, well, they don’t know enough higher order math to go make money at their own investment firms. You gotta know, like, calculus. But they do know that selling Algebra II is one small step toward making back that $100 million loss.