Entrepreneur pursues dream of building educational empire; After run of successes in other fields, he sees bright future in for-profit schools

By Joshua Benton
Staff Writer

Page 1A

Second of three parts

Dallas entrepreneur Randy Best has owned more than 100 companies in his career.

Bakeries and defense contractors. Greeting-card makers and health-care companies. Companies that sell telecom equipment and companies that sell cheerleading equipment.

But now, at 63, his focus is fully on education. Mr. Best is launching a network of for-profit education companies that he says could revolutionize the way students are taught, both in the U.S. and around the world.

“We want to help train the next generation of educators,” said Mr. Best, who has raised $50 million for the project, with much more to come.

If he is successful, his private companies will move into roles traditionally held by public educators or nonprofit colleges. He wants American high schools to buy his curriculum. He wants them to pay his companies to train their teachers. And he wants to sell college education from Bogotá to Beijing.

He says his companies can make the world a better place – and do it at costs low enough to turn a profit, even with bargain-basement tuition.

He’s gone after some big names. Rod Paige, a former secretary of education, sits on his companies’ boards and serves as a senior adviser. Mike Moses, a former Dallas Independent School District superintendent and state education commissioner, is a key executive.

There are three major Best-funded education businesses:

*Early College, a still nebulous plan to offer students the chance to earn college credit while they finish high school;

*The Whitney International University System, a global chain of for-profit universities;

*The American College of Education, an attempt to build the first national college of education.

It’s difficult, at this early stage, to tell whether these ventures will produce a high-quality education. But some analysts believe they have a good shot at making money.

“They’re on to some ideas that could be very successful,” said Trace Urden, an analyst who covers the for-profit education market for the financial services firm Baird. “They’re spending Randy’s money, and I wouldn’t count them out in a head-to-head competition with anybody.”

Entrepreneurial career

Mr. Best first took interest in education in the early 1990s. He had enjoyed a long career as an entrepreneur, beginning with the class-ring business he founded in college – and later sold, at age 25, for $10 million. He went on to found or acquire dozens of businesses through his company Best Associates and an earlier incarnation, Mason Best.

In 1994, he founded Voyager Expanded Learning, a company that initially provided after-school programs in public schools. Later, Voyager shifted its focus to selling a prepackaged, phonics-based reading curriculum to schools.

Despite losing money for its first eight years, Voyager became a business success. More than 1,000 school districts have purchased its curriculum products. Company officials point to studies that have shown Voyager improves student test scores, although some of those studies were funded by Voyager. Some prominent reading specialists, such as Yale neuroscientist Sally Shaywitz, have expressed support for Voyager’s products.

But Voyager has sparked controversy in some education circles. Some don’t like the approach of its curriculum, which is more scripted than some other reading methods. But much of the criticism comes from perceptions that Voyager sells its curriculum to school districts through connections rather than quality.

In Voyager’s early days, Mr. Best attracted a number of top local education officials to his payroll, including DISD Superintendent Chad Woolery and Richardson ISD Superintendent Vernon Johnson. Both men had agreed to allow Voyager to offer its programs in their schools in the months before leaving their positions.

Voyager later hired Jim Nelson, the Texas education commissioner at the time.

Voyager also was known for its political connections. During President Bush’s 2000 presidential campaign, Mr. Best volunteered to be a “Pioneer,” meaning he pledged to raise $100,000 for the campaign from friends and family. (Records indicate he did not reach the goal.)

Voyager officials strongly dispute the criticisms.

“Voyager’s success is very much founded in results,” said Voyager spokesman Chris Cook, pointing out that 95 percent of the districts that buy Voyager products become repeat customers.

Knowing the system

Mr. Best defends his hiring of top public officials – a pattern he has repeated with ACE. “We really know K-12 and how to navigate that system,” he said. “I’ve hired a lot of people from that system. And the main reason I did that was so my initiatives would be taken seriously. They know Randy Best doesn’t know anything about education. But I try to hire people who are respected.”

Mr. Best sold Voyager to Michigan-based ProQuest in January 2005 for $361 million. By then, Mr. Best was already moving on to new ventures.

One was the American College of Education, a new national teacher-training college.

Mr. Best says his interest in the education business was inspired in part by his mother, a schoolteacher. “She taught about 6,000 students over 50 years, but looking back, what she taught was not scientific,” he said. “We want predictability, consistent outcomes.”

Top researcher

Perhaps the most important part of that effort is a researcher named Reid Lyon.

In November 2002, Dr. Lyon sat in front of a Washington crowd of policy wonks and said the words that would come to define his public image. “You know, if there was any piece of legislation that I could pass, it would be to blow up colleges of education,” he said. “Those are some of the most resistant, recalcitrant places you will ever get to.”

Dr. Lyon was then a top boss at the National Institute of Child Health and Human Development, after an academic career that included stops at Northwestern University and the University of Vermont. He was also a key adviser to the Bush administration on education issues, an architect of its Reading First program.

One move to Dallas later, Dr. Lyon is ACE’s senior adviser in charge of research. Dr. Lyon believes most education schools are too wrapped up in ideological battles and not rigorous enough in teaching techniques that actually improve student achievement. He said ACE would filter through competing claims and determine reality, using sound research and brain science.

“There is a knowable truth, and we can find it,” he said.

Some people in traditional colleges of education say that Dr. Lyon’s criticisms can be extreme but that they are not without merit. “I got quoted once saying we prepared plumbers in this country better than we prepared teachers,” said Barbara Radner, director of the Center for Urban Education at DePaul University, which is a part-owner of ACE.

Dr. Radner said ACE’s standardization is an interesting alternative to traditional academic freedom. “At a university, it’s idiosyncratic – the professor is powerful,” she said. “This is Reid Lyon’s big annoyance. A professor can say, ‘I’m going to teach this,’ and he can do it no matter what the evidence says.”

Beyond Dr. Lyon, ACE has attracted many people from other for-profit education companies and the Dallas school district – and not just Dr. Moses.

Carmyn Neely is a senior vice president of ACE’s parent company, Higher Ed Holdings. Before that, she was DISD’s associate superintendent for curriculum and instruction. Her husband, Joe Neely – a special assistant to the superintendent during Dr. Moses’ time in DISD and a former Rockwall superintendent – is also a senior vice president.

Mr. Best also hired another prominent Dallasite: Rena Pederson, who spent 31 years at The Dallas Morning News, most of it as editor of the paper’s editorial page. She is now spokeswoman for Mr. Best’s new companies.

The test for the American College of Education will be Chicago.

ACE opened for business there in October, and it has received a contract with Chicago Public Schools to run a master’s degree program. The 25 students in ACE’s first class are teachers and other district employees who Chicago officials believe might someday make good principals.

Most colleges of education get their students the traditional way: Students hear about their programs and decide to enroll. ACE plans to get most of its business by contracting directly with school districts, which would supply the students and pay a portion of their tuition.

Wave of retirements

Arne Duncan, Chicago’s superintendent, said the coming wave of baby-boomer retirements would require the district to train dozens of new principals. “Obviously we’re early on, but I’m hopeful it will work out well,” he said of the district’s deal with ACE. “The feedback I’ve gotten from our aspiring principals has been very positive so far.”

Mr. Duncan said he was introduced to ACE by Dr. Paige. “We talked once or twice” after he left office, Mr. Duncan said, “then he started to put this team together. He was getting something going very interesting.”

About half of the program’s course content is taught in spare Chicago school classrooms, after the regular school day. The other half is delivered online, through documents and discussions that students access at home.

Danusia Gerlach is a math specialist in Chicago schools and one of the students in ACE’s inaugural class. She said she was initially hesitant about taking education classes from a company based in Texas, known in some circles for a test-heavy approach to education. “I don’t have a real positive view of Texas,” she said.

But she said she has been happy with her experiences. “I really enjoy the classes, actually,” she said. “The instructors share their experiences and really tie things into practice. It’s very well-presented.” The online component has been good for collaboration and getting feedback from classmates and instructors, she said.

Ruby Everage, a math and science specialist, said she liked the convenience ACE’s classes offered. The first course in the master’s program, taught by former Woodrow Wilson High School principal Judy Zimny, was outstanding, she said – but a more recent course was lackluster.

“It’s a great bargain,” she said. “I do plan to continue, and I am satisfied.”

Since ACE has only been in operation since October – and on a very small scale – it’s too early to judge its quality. There’s not enough data, Dr. Lyon said, and “we’re all about analyzing data.”

ACE is only one player in a competitive teacher-education market in Chicago, with several established universities offering similar master’s degree programs. But ACE’s tuition, at $1,000 a course, is slightly below most in the market, and the idea of a new approach to training educators appeals to many districts.

“Like most districts across the country, we are aware that the master’s degree programs for administrators need to be revised,” said Nancy Laho, who leads Chicago’s principal-training programs. “There has to be some connection made between the theory and what it looks like when you’re standing there in that role.”

Making money

ACE believes it can do that, and at a profit – even though it plans to offer cut-rate tuition.

Teacher training programs are traditionally moneymakers for colleges. At the same conference where he made his famous comments about colleges of education, Dr. Lyon noted their profitability. “We talk to deans and presidents all the time, and of course they have a business situation with colleges of education,” he said.

“Those colleges of education generate a heck of a lot of credit-hour production, tuition dollars. Those tuition dollars pay the physics professors where you don’t have a lot of money going in there, studentwise.”

Master’s degree programs, in particular, are known as cash generators for colleges of education. That’s because school districts generally pay their teachers more if they have a master’s. (In DISD, the annual pay bump ranges from $1,000 to around $6,000, depending on a teacher’s experience.) Some districts even require teachers to pursue a master’s.

ACE’s own budget projections, filed with Illinois regulators, reflect the company’s optimism. It expects to be generating $4.6 million in revenues annually by 2009. And it expects a profit margin of around 21 percent.

But Mr. Best said that even the relatively low tuition ACE currently charges in Chicago would be cut severely when the company expands. Because ACE will use public-school classrooms instead of a traditional campus – and because it plans to rely heavily on online learning – he expects tuition to be around 20 percent to 25 percent of what other colleges charge. ACE plans to make up the difference in volume.

“Our dream is to be truly the first national college of education,” Mr. Best said. ACE officials expect to have operations in Texas this fall and are in talks with districts in at least three other states.

When ACE officials met with Texas regulators last fall, they produced a document titled “The Big ‘To Do’ List.” It outlines the company’s plans to expand, including offering a full bachelor’s degree program.

Then comes an expansion “in all 50 states” and a broadening of ACE into other subjects, from engineering to law. The final step on “The Big ‘To Do’ List,” the only item in bold print: “Expand everything internationally.”

In addition, ACE has hired two lobbyists from the Dallas law firm Locke Liddell & Sapp to work on its behalf in Washington, particularly on the Higher Education Reauthorization Act. The version of that bill passed by the House in March includes $300 million in federal grants for teacher training programs – many of which ACE could be eligible for in partnership with states and school districts.

Lessons learned

Dr. Moses acknowledged that the company has had to learn some lessons in its early days. ACE initially planned to teach more students in its current Chicago program and to charge them more in tuition, but both numbers have been scaled back.

Plans originally called for a Dallas operation to launch this fall, but Mr. Best said the company’s immediate Texas plans have shifted to rural districts. ACE has not yet officially sought state approval to open a Texas campus, a process that takes several months. Spokesmen for both the Dallas and Houston school districts said there have not yet been any talks with any of the Best companies about a business relationship.

“Right now, our main thrust is getting our courses developed,” Dr. Moses said. “Getting our degree programs in place, getting those properly authorized, and we’ll see how that expands out.”

But he said he has high hopes for how the American College of Education can outperform the status quo – even with the added pressure of having to turn a profit.

“My dad was head of the school of education at Stephen F. Austin for 20 years,” he said of the state university in Nacogdoches. “We’re not diminishing anything that anybody else is doing. But I’ll hold up what we’re doing. We have assembled a pretty talented group of people, and I think we’re going to produce something good.”