Our North Star

The profit motive is good, I suppose, for some things, like televisions. If the demand for TVs goes up, then the big manufacturers can make more by doing business things like expanding capacity or becoming more productive through creating efficiencies. If demand falls, they can protect their profits by cutting back or lowering prices. The bottom line is that at the end of the day no one really needs a TV and there is still enough competition in the consumer electronics market that the promise of capitalism's supply-and-demand dynamics actually serves consumers who are always, at least theoretically, looking for the "best quality" at the "lowest price."

Some of you may have heard about the collapse of the Guidepost Montessori chain of preschools. The founder had raised $335 million from venture capitalists and private equity firms with the promise of doing "what ride-sharing apps or Airbnb have achieved." At its peak, Guidepost had opened 150 preschools serving tens of thousands of families, only to have the whole thing come tumbling down after accumulating $440 million in losses. But only after degrading their "product" (i.e., caring for young children) to the point that they were, from the sound of it, essentially warehousing kids under the care of unqualified teachers working for, you guessed it, low wages. It's been called a "Ponzi scheme" by some former employees.

Some things, and early childhood education is one of them, cannot practically or ethically, be provided as the kind of fast-growth, high-profit "product" that most investors are looking for. I know something about this because I've watched, from the inside, as smart, well-funded people tried to thread that needle.

Several years ago, I got involved with an effort to do something similar to what Guidepost Montessori was trying to do. We even compared ourselves to Uber. I was recruited, the CEO told me, to protect the company's "North Star," which was to provide affordable, high-quality preschool in every neighborhood in the US, and, we dared to dream, ultimately the world. We had seed money from a well-regarded venture capital firm and I was well-compensated, but it didn't take long for me to realize that they really didn't want my input. I was there to provide credibility. The company had other problems, but it quickly became clear to me that the kind of business approach favored by Silicon Valley would never work for our sector. The Guidepost collapse just further confirms my decision to run like the wind.

On the surface our model sounded ingenious. Instead of building expensive centers, we would unlock the underused capacity of educators' homes, the way Uber does with their drivers' own cars, to create a network of in-home care. Instead of employing all teachers at a central location, we would create a platform to connect families directly with educators in their neighborhoods. We would create efficiency by centralizing marketing and admin, while letting individual educators provide the actual service. 

But there's a fundamental difference: Uber can scale without producing more drivers. It recruits people who already possess cars and driving skills, and each additional driver expands capacity. A preschool platform, however, has to somehow produce and sustain high-quality educators, and that quality resides overwhelmingly in those human beings and their relationships with children. That's a much bigger challenge than simply providing a relatively clean vehicle with a full gas tank.

I would say it's an impossible challenge.

I'm not saying that business is bad for childcare. Indeed, our profession is full of scrappy, creative entrepreneurs, people who are providing outstanding education and care that is both affordable and at least modestly profitable. These people aren't likely to get rich. They might open a second, third, or even fourth location, but at some point they stop themselves because they know that anything more would mean losing sight of their North Star: the high-quality that made them successful in the first place.

No, the conflict isn't between business and education, but rather between the economics of high-quality care and an investment model that requires rapid, scalable growth and attractive financial returns. You can't have both.

From the perspective of economics, our profession is a mess, which is why so many business people are trying to fix it. Families are stretching themselves thin to afford child care and preschool. Early childhood education is among the lowest paid professions with many of us leaving because of it. Yet, as we discovered during the pandemic, the service we provide is an essential aspect of the overall economy. In the world that capitalism envisions, this should mean that we all get a substantial pay raise, but that ain't in the offing. The economics of what we do is broken.

At the same time, I've long said that I would love to see us make more money, but not so much more that we start attracting people only for the money. Money is important, but it's an inadequate organizing principle when it comes to caring for children.

Money is what motivates a television manufacturer to respond to growing demand through productivity improvements: automation, cheaper components, improved manufacturing, larger factories, global supply chains. Each worker can, as a result, effectively produce vastly more TVs to satisfy demand.

An early childhood educator can't become vastly more "productive" in that sense without degrading the "product" itself. If one excellent teacher caring for eight children becomes one excellent teacher caring for 16, we haven't discovered an efficiency -- we've simply changed (degraded) what we're "selling." 

This is an aspect of what economists call Baumol's Cost Disease. Labor-intensive activities like education, childcare, and live performance can't achieve the same productivity gains as manufacturing, but their workers still exist in an economy where wages and costs are influenced by sectors that can. That's one reason these services become increasingly expensive relative to manufactured goods.

Capitalism knows what to do when we want more televisions. Why doesn't it know what to do when we want more preschool teachers? Maybe it's because the "productivity" of an early childhood educator isn't measured in the number of children she can process. The relationship is the product. And that's why so many of us know that we are rich even when our paychecks are modest.

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Books have a way of transforming us unlike any other media out there. Be it fiction or non-fiction, a books has the power to fully immerse us into a world in ways that makes us come out the other side a changed -- and better -- person. I've put together this list of 16 books that have done that for me. They are intentionally not early childhood books, although each one has, in one way or another, profoundly transformed my work with young children. Maybe you'll find a few new ones here that will do the same for you. To download the list, click here.

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