Can school be different? Yes. Can it be very different from the status quo? Perhaps not.

Whoever wishes to innovate in the schooling side of education must decide whether they are playing a niche strategy or seeking to disrupt the ecosystem. Disruption is by far the harder road, and innovators in education need to understand the currents which work in their favor, and which do not. To think clearly about disruption, it is essential to think clearly about the status quo. This will make clear why for most innovators niche strategies will be the better, if less ambitious option.

The modal secondary school is a five day per week program starting at 7:30 am lasting until 2:30 or 3:00 pm with extracurriculars after school, some clubs, and some elective classes. Private schools usually have the same framework differentiated by added branding, ideology, curricular specialization, amenities, or access to a particular social class. Government sanctioned charter schools are public schools with a few more degrees of freedom, which while an improvement to pure geography-based schooling is not radically different in framework, though they perform modestly better than pure public schools. I will call all such programs traditional schools. Whether they be Zoroastrian Classical Schools, AP-Test-injection machines taught by Stanford graduate students, project-based transhumanist art pod, or the public school down the street, if they fit the modal description above, they are traditional schools.

This is a fine framework for the meat and potatoes of education to stew in, you can put all sorts of different ingredients in it to get different flavors, but it goes wrong so often and so often fails to teach students to learn at their capacity, let alone love to learn, that many people seek to create alternative frameworks: homeschool, hybrid school, semi-online school, travel school. There is some demand for something different. But how far can we stray from traditional schools? 

The Creation of a Bundle

One way to think about secondary school is to look at colleges. Colleges have received a lot more attention in broader cultural discourse than secondary schools, but believe their dynamics shed light on the secondary school situation. While the purchases made by both secondary schools and colleges are different, I think the educational incentives facing both are similar enough that the college situation, which more people are aware of, applies to the more arcane world of secondary education.

Why is college so expensive? Is it costly signaling, the government subsidies, increased quantity of small specialized courses, administrative bloat, or the Baumol effect? 

These are all interesting theories, some with more merit than others. But let’s talk about the theoretical development of a college program. As a program becomes more successful, where does it look to reinvest its money? “To attract more/better students” is a common answer. If we started with a successful yet inflexible program, we add options or amenities which unlock the marginal student cohort. Because at each moment in time the cost of an additional student to the institution is very low, the institution’s managers will make decisions to attract that additional student. It is a low cost move with a decent ROI. Every so often the institution’s ability to accommodate more students reaches some ceiling: of professors, of space, of competitive equilibrium with similar institutions, and then it must decide to either make that big capital investment or sit tight. Managers will always be tempted to make the investment, to raise the funds, to do something bigger. And because education is not one thing which you purchase but an enormous basket of something like eighteen different goods, the administration will find a reason to invest more in one of the eighteen different reasons the marginal student came to this college anyway.The absolute cheapest college program I have seen was a short-lived experiment to have four teachers and one administrator teach a specialized three-year curriculum. The specialization did not receive enough support and so it died from lack of student demand. But we can imagine one with more demand. As it grew it would add courses. And community services. And events. And extracurriculars. While unique in many interesting ways, it would still be recognizably a college of some type, requiring similar support staff and offering mutatis mutandis the same mode of programming as other places, even if the content is very different.

Students’ desires are mixed. The reasons college students get up in the morning, if they do, are many. The girl they like, the sport they compete in, the classes they enjoy, the fulfillment of long-term goals, the desire to learn, the friends who are expecting them, the clubs they participate in or lead, breakfast, lunch. Consider the student situation carefully. Students require more than academics while they are in school. They desire the full suite of things that make for a comfortable, happy life. If you accept that a purely academic existence is unattractive to most students, then students will also be looking for certain social, emotional, and recreational goods. These are hard and costly to acquire, but in a college setting they are easier to supply because a whole cohort of people is at hand. Why be lonely for a time and pay for rental gear, gym memberships, and club sports when one could get that stuff as part of the schooling package? When students choose institutions, they are choosing along these social dimensions at least as much as academic ones, provided the academic program they basically want, or suspect they want, is there.

Likewise, the institution is going to set up all sorts of sub-institutions to fulfill these social, academic, and emotional wishes: counselors, librarians, study abroad officers, post-graduation success coordinators, writing center tutors, seventeen different sports and their coaches, thirty-seven majors and their professors, arts studios, and a legion of almost-funded clubs. The university will also play host to various academic institutes and research centers for the faculty, the donors, and the prestige interested. 

You might think this all sounds expensive, and it is, but the key thing to understand is that it is cheaper to do it this way. You could have the college run academics and a different institution nearby run sports clubs, but the transaction costs are higher. It is easier for the university to provide sports than to make sure that there is an allied institution nearby providing them, and then to coordinate signing up students and payments of a separate fee. Unbundling creates more economic friction. That friction might cost a student, might cost additional man-hours of coordination, and doesn’t directly show up on the college’s balance sheet. Furthermore, the college doesn’t get the knock-on benefits of a successful sports program for recruiting and PR. It’s like this for every program that a school runs. Outsourcing is, or at least appears, expensive to the school. When outsourcing, the school pays part of the transaction costs of being a middleman without reaping the full benefit of offering it themselves.

The social world has high transaction costs. But it is relatively inexpensive for schools to cover these costs. Since the marginal cost of adding some social amenity is less than marginal revenue, schools continue to add the marginal amenity.

Mission Drift

This constant small-step growth of schools leads to what seems to be mission drift.

I have so far argued that the system of marginal amenity growth as we see it is cost efficient. However, if the explicit goal of the institution is supposed to apply to all the students, then it is values-inefficient.

Whatever core demographic of hard-core fans were the founders and initial cohorts of the school, the true believers, find over time that their percentage of the base is shrinking. While this might pose political problems within the institution, in the big picture the original mission as it was enacted to serve the initial cohorts becomes only part, perhaps a noble and prominent part, of a larger suite of services and programs offered by the institution. Students within the institution then sort themselves based upon what parts of the bundle they are most keen to participate in and support.

The upshot is that from the parent/student consumer point of view the question they often ask themselves is not whether this institution is custom built to their purposes, but whether it contains a niche which fosters their current interests and optionality for future interests.

Thus, a larger institution is less likely to be exactly optimized for them, but it is more likely to reach the acceptability threshold of the next new student.

The Difficulty of Unbundling

Now we start to turn away from analysis and towards advice.

So, you are still interested in unbundling, how can we do this? In that long list of school bundles – curriculum, sports, clubs, fine arts, support services, facilities, testing, age-based friendship, childcare, community socialization – you need a ready answer for how what you provide either complements or substitutes for these preferences. If you provide a substitute for only part of the picture, you need to also explain how people will secure all the other complementary goods as well. That can be very difficult.

But many people are willing to make tradeoffs, especially in the current educational environment which lacks a ton of choice. You are providing that choice, and your high value proposition in one area can compensate for a weaker offering in another. You don’t necessarily have to satisfy in all areas all at once.

If you want to really unbundle and come to an equilibrium that resists the trend described above, you need hard limits put in place that alter the evolution trajectory of your institution. In such a case, you are selling not only a school (or school related item), but a lifestyle change.

Homeschools, Pod schools, and hybrid schools which meet a few days in person are a lifestyle platform as well as a school. There may be a ceiling on growth, but there is also insurance against mission drift and unalignment, because the barriers to mission creep are stronger. These are great substitutes to the traditional education system and are worth exploring.

If you are successful, which many of you will be, then you might be able to grow, and that growth comes with temptations to change the product rather than to find the proper student/family fit.

If you want your institution to preserve a particular character that is based on a particular vision of an education platform, then create a system whose underlying structure reflects that vision.

In Conclusion

The incentives of educational institutions tend towards “bloat”, and makes the institution unoptimized for any particular thing. Any alternative that prioritizes growth will converge on something similar to the status quo. In other words, there is a bit of tension between doing something new and effective and doing something that scales to replace meaningful parts of legacy institutions. While a common thought is to unbundle this basket and create a network of services, such a strategy commonly runs up against transaction costs and still has to manage to outcompete the institutions which gain value, status, scope etc, from their less optimized but broader offering. 

This is not a doom on alternatives scenario. If you can find anything that reduces transaction costs and makes it easier to rebundle things, then on the margin you can have a thriving alternative and carve out a niche. With thousands of people doing this, ultimately, we all get a society with a thriving ecosystem of educational options that are truly different species.