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University of Phoenix and for-profit education

May 25th, 2009 · No Comments

I just finished reading the fascinating REBEL WITH A CAUSE by John Sperling. In case you never heard about John Sperling, he founded University of Phoenix and grew it into a multi-billion dollars, publically traded company.

A few interesting things I learned about John Sperling and his founding of University of Phoenix from the book:

  • he didn’t find his calling until his late 30’s
  • he founded University of Phoenix when he was 53 years old. That’s pretty late for an entrepreneur
  • he was born into a poor, dysfunctional sharecropper family. In fact, he said in the book that the day his abusive father died was one of the happiest day in his life
  • John Sperling had to fight one regulatory battle after another to keep his company alive. It was absolutely brutal.
  • University of Phoenix survived and prospered despite the regulatory battles because there was a strong demand for its programs.
  • feisty, aggressive, outspoken, controversial – John Sperling is a tough guy and quite a character.
  • Until very recently, recruiters at University of Phoenix got paid more than senior managers.

Over past decade, several for-profit education companies have been very successful – Apollo Group (parent company of University of Phoenix – NASDAQ: APOL), Career Education Corporation (NASDAQ: CECO), Corinthian Colleges (NASDAQ: COCO), New Oriental Education (NASDAQ: EDU), Grand Canyon University (NASDAQ: LOPE) – these are all publically traded companies. Most of their stocks have been holding pretty well – education is a relatively recession-proof business.

I’m very passionate about education.  But, I have always been quite skeptical about for-profit colleges – aren’t they degree mills? Who would spend money to earn those useless degrees?

I have to say that I think differently now after reading the book and doing some research on my own.

I, and most of my friends have been through the “traditional/conventional education path” – high school to college to graduate school. However, there are a lot of people who left out of the conventional system:

  • high school graduates who start working after graduation. They later realize that they need more education, but family/job obligation preclude them from attending a conventional college program
  • teenage mothers who dropped out of high school or college
  • military personnel who want to get a degree while they’re enlisted
  • stay-home moms who want to learn a new skills and enter the workforce when their kids get older
  • mid-career professionals who want to change careers or acquire new skills. But, they have family and kids. Traditional college program isn’t an option.
  • etc.

For-profit universities fill the void. There are a lot of controversies about for-profit schools, but given its explosive growth, clearly there is a market demand.

Given layoffs and a down economy, I predict that for-profit education sector will continue to grow, and start to gain main-stream acceptance.

Tags: Company Analysis · Learning and Growing

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