Speaker 1: Hello, and welcome to another episode of the Oddlots Podcast.
Speaker 2: I'm Joe Wisenthal and I'm Tracy Alloway.
Speaker 1: Tracy, the economics of care work one of these topics
Speaker 1: that I think we're both interested in, but like news
Speaker 1: developments keep derailing our pursuit of.
Speaker 2: This area, right, things keep happening. Yeah, really, And so
Speaker 2: we can't talk about the economics of preschool.
Speaker 1: And I guess the one other time we sort of
Speaker 1: talked about it, like so much of the conversation about
Speaker 1: like infrastructure or making this economy like more productive, like
Speaker 1: so much emphasis on like the built economy.
Speaker 2: The good side of the the good.
Speaker 1: Side factories and can the factories make good batteries and
Speaker 1: stuff like that. But I do think that like when
Speaker 1: you look at like long term challenges for the US,
Speaker 1: so many things related to like childcare, elder care is
Speaker 1: a really big one, and the sort of like the
Speaker 1: economics of these industries that like aren't going to have
Speaker 1: like some huge productivity breakthrough tomorrow or like it takes
Speaker 1: a lot of labor, and they seem to keep getting
Speaker 1: more challenging for pure.
Speaker 2: Right, in many respects, they seem more troublesome than some
Speaker 2: of the good sides. I think we talked about this before,
Speaker 2: but certainly if you look at inflation numbers and if
Speaker 2: you divide them up by you know, consumer goods versus services,
Speaker 2: the really long term price pressures are mostly on the
Speaker 2: services side, so again things like healthcare and education. And
Speaker 2: then secondly, to your point, in some respects, it feels like, Okay,
Speaker 2: if there's a bottleneck of a particular good, well we
Speaker 2: can build a new factory or increased capacity at the ports. Yeah,
Speaker 2: you know, I'm sort of simplifying it. But when it
Speaker 2: comes to care work, there's this massive labor issue which
Speaker 2: you can't just build fifty new preschools in a particular
Speaker 2: city because you would still need to man them, and
Speaker 2: even and then even if you could get the labor
Speaker 2: to keep them going, there is a fundamental issue with
Speaker 2: the business model.
Speaker 1: Itself totally, you know, And you mentioned the porch and
Speaker 1: you said you're oversimplified, but I don't think so. I mean, like,
Speaker 1: you know, that is sort of what a lot of
Speaker 1: this conversation is about. You can expand them, you could
Speaker 1: get you know, repeal the dreadg Act and allow more
Speaker 1: boats into the Port of Los Angeles, and then theory.
Speaker 1: You know, some ports are automated so that one person
Speaker 1: can do what ten people did in terms of unloading
Speaker 1: containers and things like that. I mean, maybe at some
Speaker 1: point we'll have robots take care of like all old
Speaker 1: people and children and someone, but that does not seem imminent.
Speaker 3: Uh.
Speaker 2: It seems rather a dystopian though not imminent, but very dystopian.
Speaker 2: But okay, So we have done an episode on this
Speaker 2: with Nancy Folbright where we talk sort of generally about
Speaker 2: the issues at play with preschool education. But I think
Speaker 2: we need to delve in a little bit more on
Speaker 2: some of the practical difficulties of running this type of business.
Speaker 1: Right, this one of those things. It's not like a
Speaker 1: post pandemic. I mean, it's worsened in this sort of
Speaker 1: current post March twenty twenty era, like the stress that
Speaker 1: families feel about childcare, but like in least in New
Speaker 1: York City, people were stressed about it in twenty nineteen
Speaker 1: and twenty eighteen and probably long, you know, for years
Speaker 1: and years. So there's like something that deeply structural going on.
Speaker 1: And you has a really good question in the interview
Speaker 1: with Nancy full Brad It's like, where does the money
Speaker 1: where they w there is the money? Like, what is
Speaker 1: the cost?
Speaker 2: I think I'm just going to be asking this question
Speaker 2: over and over again on this episode, but I do
Speaker 2: not understand how people can pay two thousand dollars a
Speaker 2: month for childcare and yet the childcare workers themselves seem
Speaker 2: to be not paid very well. So where is the
Speaker 2: money going?
Speaker 1: And I think there are many people listening who'ld be like, wait,
Speaker 1: Tracy knows of a place where you can get childcare
Speaker 1: for two thousand dollars?
Speaker 2: Oh really?
Speaker 1: Sorry? No, no, no, I know, like that's that cheap.
Speaker 2: I was trying to think of something reasonable.
Speaker 1: I think that there are many people who pay I
Speaker 1: don't know. I actually don't know, but okay, let's find out.
Speaker 1: It is an expensive cost for any family, particularly in cities.
Speaker 1: And also it seems to be the case that the
Speaker 1: workers generally are not paid all that well in many
Speaker 1: locations at least. So your question of like where's the
Speaker 1: money going, what's the cost? Et cetera, like we just
Speaker 1: need to dive more into that.
Speaker 2: Yeah, let's do it.
Speaker 1: Well. I'm very excited to say we do have the
Speaker 1: perfect guest because he is in this business specifically, we're
Speaker 1: going to be speaking with Matt Bateman. He's a member
Speaker 1: of the founding team at Higher Ground Education, which is
Speaker 1: a startup that has a chain over one hundred and
Speaker 1: twenty Montassori schools around the country, mostly under the guide
Speaker 1: Post Montessori brand. He is currently technically the VP of
Speaker 1: Pedagogy at Higher Ground Education, and he knows a lot
Speaker 1: about the actual business of childcare, where the cost go,
Speaker 1: et cetera. And so Matt, thank you so much for
Speaker 1: coming out on the podcast.
Speaker 3: Well thanks for having Matt.
Speaker 1: Just to establish why we're talking. What is Higher Ground Education?
Speaker 1: Why was it founded? I guess in twenty sixteen, like
Speaker 1: sort of like what is this this business that you
Speaker 1: helped launch.
Speaker 3: It's a missionary company. So we're out there trying to
Speaker 3: create more monassory schools, create more monesssory education. And the
Speaker 3: fundamental mission of the company is educational or pedagogical, which
Speaker 3: means kind of related to teaching methods. It's that the
Speaker 3: kind of support that children get in early childhood centers
Speaker 3: or even from their parents can be greatly greatly improved.
Speaker 3: This is the monasory thesis by approaching education very differently,
Speaker 3: and so that's the premise and I mean there are
Speaker 3: a lot of monastery schools. There are thousands of Monessori
Speaker 3: schools in the US, tens of thousands across the world.
Speaker 3: But we wanted to do something big in the space,
Speaker 3: to grow bigger, to create something like I don't know,
Speaker 3: like the whole foods of Monessuri create create a new
Speaker 3: a new kind of branding impact and a new reach
Speaker 3: for Monesssory Education understood it.
Speaker 1: Tracy. By the way, I don't think this actually cauds
Speaker 1: a disclimer. I went to a Montessori school for a
Speaker 1: few years. I'm a big fan. I really, It's not like, well,
Speaker 1: there's things.
Speaker 2: The reason that doesn't surprise me.
Speaker 1: But uh yeah, when I from like eight grade one
Speaker 1: through three for few years, and I have, I had
Speaker 1: very positive memories of it.
Speaker 2: I think I went to technically like government preschool. It
Speaker 2: was provided by the US embassy.
Speaker 1: Oh which country were in Japan? Oh wow?
Speaker 2: Yeah? Okay, Well, Matt, can I just ask the obvious question,
Speaker 2: So a parent or a pair of parents, they're paying
Speaker 2: hundreds of dollars a month for childcare. Where is that
Speaker 2: money going?
Speaker 3: I'm going to answer the question as I understand it.
Speaker 3: I mean, the unit economics of an early childhood center
Speaker 3: are pretty simple. It's tuition minus labor minus rent. So
Speaker 3: is your question just the numbers don't add up. If
Speaker 3: you've got one hundred people in a center times the
Speaker 3: amount of tuition that's the list price, it seems like
Speaker 3: it should either be making like ninety percent margins or
Speaker 3: the teacher would be getting paid more. Is that the question?
Speaker 2: I think it's more. It feels like the teachers should
Speaker 2: be getting paid more, and so labor shouldn't be as
Speaker 2: much of an issue as it seems to be currently.
Speaker 3: I mean a few caveats. A lot of people don't
Speaker 3: pay list tuition, so I mean that is I mean
Speaker 3: even at very elite schools, at chain schools, there's a
Speaker 3: kind of list price, and then there's graded discounting down
Speaker 3: to fifty percent or even lower, and so the average
Speaker 3: list price can can be a lot lower than the
Speaker 3: list price. The kind of average gross tuition can be
Speaker 3: a lot lower than the gross tuition that you would
Speaker 3: get just by multiplying the tuition numbers. The second thing
Speaker 3: is there, I mean there is overhead in this business.
Speaker 3: I think the overhead actually hits one off centers kind
Speaker 3: of mom and pop centers, which are most centers harder
Speaker 3: than it hits the chains because of there's regulatory overhead
Speaker 3: with licensing, there's kind of operational overhead. This is not
Speaker 3: an industry where there's like a billing system in a
Speaker 3: box than any preschool center can use and it's really easy.
Speaker 3: It's it's actually pretty difficult to get it set up
Speaker 3: and chasing payments and chasing parents. Usually the people that
Speaker 3: set up centers are like entrepreneurial moms that decided to
Speaker 3: start a preschool twenty years ago and they've learned the
Speaker 3: business side as they go. It's a very small business
Speaker 3: kind of vibe. And in that setting operational complexity and
Speaker 3: regulatory complexity, which I mean it varies, but I mean
Speaker 3: in New York City there's a ton of regulatory complexity
Speaker 3: eats up costs. And then the last bit, which is
Speaker 3: a kind of like intersection of regulatory and labor complexity,
Speaker 3: is there are ratio requirements, and there are there are
Speaker 3: ratio requirements, and there are also just requirements on who
Speaker 3: can work in a preschool at all. And I mean
Speaker 3: you see this a lot in places like New York,
Speaker 3: Like it's not that easy to find guides that are
Speaker 3: qualified to work in preschools. You need a certain kind
Speaker 3: of bachelors or masters are credential. I can't remember exactly
Speaker 3: what the details are in New York City, but it's
Speaker 3: not just like you can tap into a wide hiring pool,
Speaker 3: a wide labor market, and so all these things kind
Speaker 3: of in being like you need to have a certain ratio,
Speaker 3: You've got some overhead. There's a lot of operational complexities,
Speaker 3: so maybe you should add another person to your staff.
Speaker 3: And if you add another person to your staff, which
Speaker 3: is the easiest way to solve a lot of these problems,
Speaker 3: is you just kind of over staff, you end up
Speaker 3: paying everybody less. I mean, that is the endemic problem
Speaker 3: in the early childhood market. So that's a kind of
Speaker 3: shotgun blast overview. I mean I think that. I mean,
Speaker 3: the reality is is most centers don't make much money.
Speaker 3: I mean a lot of them lose money, a lot
Speaker 3: of them close, a lot of them have razor thin margins.
Speaker 3: And even the big centers, I haven't seen kindercres numbers
Speaker 3: post pandemic or the Warning Care Group. But if you
Speaker 3: look at I mean, Bright Horizons is public and so
Speaker 3: you can look at their numbers their early childhood care business.
Speaker 3: I mean, if it weren't for ARPA money, it would
Speaker 3: be cashlow negative.
Speaker 2: Can I just ask? That was a great overview, And
Speaker 2: I think we're going to drill into like a bunch
Speaker 2: of the things that you just said. But what is
Speaker 2: insurance like for preschool because I can imagine that that
Speaker 2: must be you know, you talk about sort of regulation.
Speaker 2: I imagine that must be one big risk factor and
Speaker 2: potentially quite a large expense.
Speaker 3: We have viability insurance. I don't think it's that significant.
Speaker 3: I would have to ask somebody else on my team,
Speaker 3: but I don't. I don't think it's really that significant.
Speaker 1: Go on, you know, and talk about like scaling, et cetera.
Speaker 1: And so you say that there's this endemic problem of
Speaker 1: over hiring, et cetera, and that this creates talk to
Speaker 1: us like about this phenomenon of like the choices that
Speaker 1: a school makes, how it sort of like solves the
Speaker 1: hiring problem and then pushes wages down for everyone.
Speaker 3: I mean, that's one aspect of it. And I wouldn't
Speaker 3: say it's like the main or the primary problem, but
Speaker 3: it's like one of the ways that the problem manifests.
Speaker 3: So let's say you've got a small center with five classrooms, sure,
Speaker 3: and you need to have two teachers in each classroom.
Speaker 3: Let's just make it simple. Some of the classrooms are toddler,
Speaker 3: some of the costumes are preschool, but you need to
Speaker 3: give those teachers breaks. Or you're in a labor crunch
Speaker 3: and you're losing teachers more frequently, or teachers aren't showing up,
Speaker 3: like a teacher calls in sick, and that's happening more
Speaker 3: and more often. This is the kind of post pandemic
Speaker 3: reality is. Call outs are just like every industry call outs,
Speaker 3: it's getting more common. Well, you need something that we
Speaker 3: call in this industry a floater or a kind of
Speaker 3: standing substitute teacher to be able to kind of go
Speaker 3: and fill in. And then, unless you're thinking very creatively
Speaker 3: about that role, the kind of standard way to think
Speaker 3: about that role is you just have another person who's available.
Speaker 3: It starts to get expensive pretty quickly because you're looking at, okay,
Speaker 3: like we had ten people on staff who are teaching,
Speaker 3: and now we have twelve people on staff because we
Speaker 3: have two floaters, and then we have two admins and
Speaker 3: fourteen people on staff is very small, Actually, for a
Speaker 3: school of the size, most schools would have three or
Speaker 3: four admins, and then you have to think about turnover
Speaker 3: and the teachers that you're training, and so it just
Speaker 3: it's it's I mean, it's a labor intensive industry. Everybody
Speaker 3: knows that, but it's just like it's even more labor intensive.
Speaker 3: I think then people realize it is, at least on
Speaker 3: the standard models of it.
Speaker 1: I want to go back to something you said that
Speaker 1: a lot of sort of the chain companies that own
Speaker 1: childcare centers would be cash flow negative without what money?
Speaker 1: Did you say, ARPA money? And what is that money?
Speaker 3: I mean that's right Horizons in particular. Yeah, money is
Speaker 3: it's some sort of COVID grant system. Oh, I can't
Speaker 3: remember what it stands for, but it's I mean, Bright
Speaker 3: Haresins does make money. They make money with backup care
Speaker 3: and and in other ways. But if you just kind
Speaker 3: of look at the unit economics of their centers, of
Speaker 3: their preschool centers, it's not great. It's it's just a
Speaker 3: kind of low margin business. I mean, this is something
Speaker 3: that we we struggle with as well. In good cases,
Speaker 3: we can push the margins up, but when you're starting
Speaker 3: at school, when you've got a new center, when you're
Speaker 3: looking at like, you know, somewhere between one and three
Speaker 3: years of cash flow burn no matter what, as you're
Speaker 3: kind of ramping up. I think that sometimes people have
Speaker 3: this impression because private equity is so interested.
Speaker 2: This was going to be my next question, like, if
Speaker 2: the margins are so thin, why is private equity so
Speaker 2: interested in this business?
Speaker 3: Apparently I think that they're interested in it because it's
Speaker 3: it's kind of sticky and has regulatory modes. And I mean,
Speaker 3: what private equity does in this industry is they it's
Speaker 3: a roll up strategy. Basically, they come in and they
Speaker 3: buy centers from small businesses that are looking to sell,
Speaker 3: like schools that started in the sixty seventies eighties, or
Speaker 3: small businesses that are now owned by other holding companies,
Speaker 3: by other private equity companies, and they combine them and
Speaker 3: they try to get as many operational and administrative efficiencies
Speaker 3: as they can, and they close the ones that aren't profitable,
Speaker 3: and they try to get to fifteen percent margins or whatever,
Speaker 3: and then they either repacket it and sell or they
Speaker 3: go public, depending on the modelism. There's been a lot
Speaker 3: of passing back and forth of clusters of schools and
Speaker 3: private equity.
Speaker 2: How do you scaling efficiencies work in preschools, Because on
Speaker 2: the face of it, it wouldn't appear to me that
Speaker 2: like running ten schools versus running one school would be
Speaker 2: vastly more efficient.
Speaker 3: It's not vastly more efficient. But if you're dealing with
Speaker 3: baseline thin margins, eliminating an admin person at a school
Speaker 3: because you can centralize that functional or coming up with
Speaker 3: a standardized operational or onboarding system or a system for
Speaker 3: vetting hires hiring is a pain in education just I mean,
Speaker 3: this is some of this is preschool in early childhood,
Speaker 3: but some of us, just like private schools or just
Speaker 3: the schooling system in general, some of these issues just
Speaker 3: kind of get inherited from the general complexity of education.
Speaker 3: But yeah, I mean, if you kind of can go
Speaker 3: down from four admins to two, or you can have
Speaker 3: a scheduling system that lets you eliminate one float or
Speaker 3: something like that, that's where the private equity kinds of
Speaker 3: efficiencies come in. How we think about it as a
Speaker 3: little bit different. I mean, the big question is are
Speaker 3: there innovations that can help are thesises there are, and
Speaker 3: that these kinds of standard models that take these like
Speaker 3: half academic, half progressive, play based preschools and just try
Speaker 3: to scale them out. Like the thing that's actually needed
Speaker 3: is programmatic innovation, including innovation on the staffing side in
Speaker 3: terms of how teachers are hired and trained and how
Speaker 3: the funnel works, and can you do something like you know,
Speaker 3: Montossuri ran incredible schools in Rome where there were one
Speaker 3: hundred fifty students and five lead teachers and five assistant
Speaker 3: teachers for three to six years old. That's that's like
Speaker 3: much better ratios. And those programs were amazing. They were
Speaker 3: kind of world changingly.
Speaker 1: Goes, you're talking about the actual Montessori. Yeah when you
Speaker 1: say that.
Speaker 3: Okay, yeah, I'm talking about Montesssuri in like you know,
Speaker 3: nineteen thirteen or whatever. And I mean, this is what
Speaker 3: she's famous for. She's famous for taking children who were
Speaker 3: living in slums the likes of which the US has
Speaker 3: never ever seen, the kind of poress of the poor,
Speaker 3: the least privileged possible, and you know, she had them
Speaker 3: kind of like happy and reading and academically advanced by
Speaker 3: the time they were three and four. And nobody understood
Speaker 3: how she did it because this was a time when
Speaker 3: nobody was teaching children how to read at three or four,
Speaker 3: even even wealthy children were learning how to read. And
Speaker 3: so and she did it with relatively low ratios and
Speaker 3: or high ratios, I guess.
Speaker 1: Depending on who's the denominator and what is the numer.
Speaker 3: Yeah, exactly. And once you get up to the three
Speaker 3: year old range, and you have a program that's really
Speaker 3: based on setting up an environment in a certain way
Speaker 3: and giving children a lot of independence and setting a
Speaker 3: certain kind of culture in the school, you don't need
Speaker 3: to kind of staff for supervision or staff for tutoring
Speaker 3: in the same way. That's part of our hypothesis is that, yeah,
Speaker 3: like in infant care and toddler Carroll, like you're you're
Speaker 3: always going to need you know, it's always going to
Speaker 3: be labor intensive in the sense of being a lot
Speaker 3: of teachers per student or a low amount of students
Speaker 3: per teacher. But that gets I think people think of like, oh,
Speaker 3: in elementary school, you can have like a higher ratio
Speaker 3: and it can still be good. And I think that
Speaker 3: that's all so true in preschool and there are other
Speaker 3: things like that.
Speaker 2: So actually that leads me to something that else that
Speaker 2: I wanted to ask, which is how much do the
Speaker 2: sort of economic aspects of running a preschool change along
Speaker 2: with the education style.
Speaker 3: They do change a bit, So I think that they're
Speaker 3: fairly different for us once you get to three years
Speaker 3: old because of how we do preschool classrooms, because we
Speaker 3: have a one to twelve ratio there. They're also different
Speaker 3: for us, and that we consider the job of an
Speaker 3: early childhood educator to be a certain kind of expertise
Speaker 3: that we train on and pay for, and so the
Speaker 3: economics of paying teachers is just a little bit different
Speaker 3: for us, paying and hiring teachers and supporting teachers. But
Speaker 3: in general, I don't think that it changes that much
Speaker 3: across most centers. Even the changes that I think are
Speaker 3: there for us, which are real and meaningful, they're not
Speaker 3: like order of magnitude changes. They're small differences that do
Speaker 3: make a difference.
Speaker 1: Can you talk about I mean you talk about I
Speaker 1: mean every industry, especially these days, has had problem with
Speaker 1: labor retention. Probably it's worse for education and service sector
Speaker 1: childcare stuff. I know that the daycare center that my
Speaker 1: kids both went to that we get an email like
Speaker 1: every few weeks or maybe every few months about on
Speaker 1: this teacher is leaving and then so on else and
Speaker 1: so I'm pretty like aware of that. Can you talk
Speaker 1: about like your strategy It sort of sounds like you're
Speaker 1: saying it, But are there things that companies can do
Speaker 1: or operators can do that would sort of like training
Speaker 1: and investment in the teachers to reduce churn.
Speaker 3: So just the state of the problem is the total
Speaker 3: labor and early childhood is still less than it was
Speaker 3: in twenty nineteen. Wow, I can't remember how much less.
Speaker 3: I think it's like five percent less, but it's you know,
Speaker 3: there was a slowly studying increased curve, as there often
Speaker 3: is any kind of labor market that's healthy, and then
Speaker 3: there was a huge drop and it hasn't quite recovered yet.
Speaker 3: It's been going steadily up since them, but it hasn't
Speaker 3: quite recovered. Pay has gone up twenty twenty five percent,
Speaker 3: I think in the last two or three years, and
Speaker 3: that's one of the main things that companies are doing
Speaker 3: is they're trying to pay teachers more. We're certainly paying
Speaker 3: teachers more, I think more. I can't remember exactly how
Speaker 3: much more than twenty five percent, but more than that
Speaker 3: is the amount that our wages have gone up. I
Speaker 3: don't know how much of it is just a wage issue.
Speaker 3: So I mean, wages aren't going to double, like they're
Speaker 3: going to keep going up, but they're not going to
Speaker 3: go dramatically up just because of the unit economics of it.
Speaker 3: I think that a lot of it has to do
Speaker 3: with kind of seeing the job as a meaningful career,
Speaker 3: as something with dignity. Early childhood work is also relatively
Speaker 3: low status, and then the things that employers can do
Speaker 3: or the things that centers can do, is like, how
Speaker 3: do you kind of actually manifest that both in terms
Speaker 3: of meaningful opportunities and in terms of the kind of
Speaker 3: dignity of the work itself. I mean, I've worked in
Speaker 3: preschools that aren't Montessori as well as Montessori preschools. You
Speaker 3: feel like a babysitter, Like you feel like you're watching
Speaker 3: a bunch of kids and you're running out the clock.
Speaker 3: And that's just it. I mean, even if you love children,
Speaker 3: and I love children and I've done this kind of work,
Speaker 3: it's like doesn't feel like a kind of sustainable, long
Speaker 3: term thing. It feels like something you do for a
Speaker 3: while or is gig work. And seeing it as like
Speaker 3: this is a kind of expertise and a kind of wisdom,
Speaker 3: and there's curriculum here, and there are things that you
Speaker 3: can do and master, and there are growth paths. I
Speaker 3: think that that's the biggest thing. And there aren't that
Speaker 3: many early childhood approaches. I mean, Montosauri is one. There
Speaker 3: are others that kind of take it that seriously.
Speaker 2: Have there been, you know, throughout your career, any shifts
Speaker 2: in the demographics of people who work at preschools, Like
Speaker 2: did it used to be an older cohort and now
Speaker 2: maybe it's younger or vice versa.
Speaker 3: That's a really good question. Anecdotally, I feel like it's
Speaker 3: gotten younger. But I also I mean, I've been in
Speaker 3: this industry for about ten years, so not that long.
Speaker 3: But even though I feel that way, like when I'm
Speaker 3: thinking about the teachers that we're training and the teachers
Speaker 3: in our schools, like it still really is the full range.
Speaker 3: So you did see a lot of retirements right around
Speaker 3: when COVID hit right, and that kind of knocks the
Speaker 3: older end of the distribution off. I don't know whether
Speaker 3: that's just going to heal over time naturally, or whether
Speaker 3: that's here to stay. Yeah, that's a good question.
Speaker 1: I want to go back to ra shows, and of
Speaker 1: course you talked about that, you know, the in theory,
Speaker 1: as you know Maria Montessori showed one hundred and ten
Speaker 1: years ago. Maybe you don't need as many teachers and
Speaker 1: once you get to the age of three or whatever.
Speaker 1: RA shows generally though regulated, and probably for most schools,
Speaker 1: the regulations are there for a pretty good reason, and
Speaker 1: especially if you're going to have babies, et cetera, like
Speaker 1: you want, you know, a lot of eyes on them
Speaker 1: for pretty obvious reasons. But as a company with schools
Speaker 1: in multiple states, can you talk about like you have schools.
Speaker 1: I don't know if for sure this is true, but
Speaker 1: in my mind I imagine that Texas laws are much
Speaker 1: more liberal about this stuff than New York City laws.
Speaker 1: Can you talk about what you see the differences you
Speaker 1: see from state to state.
Speaker 3: I mean, some of them are in ratios, but some
Speaker 3: of it is just like I mean, I lived in
Speaker 3: New York for years with a small child and grand
Speaker 3: schools for small children. It is essentially illegal to open
Speaker 3: an infant program in New York City for children under
Speaker 3: eighteen months. I mean, you need it needs to be
Speaker 3: on the ground floor and you need to have too egress.
Speaker 3: I mean, just the space requirements are so onerous, and
Speaker 3: then the kind of licensing review process is so onerous
Speaker 3: that it's really really hard. We have infant programs in
Speaker 3: New York.
Speaker 1: I'm pretty sure, because I'm pretty sure my I think
Speaker 1: at least one of my kids was in that program.
Speaker 3: Before I'm overstating.
Speaker 1: It's no, I know, it's.
Speaker 3: It's legal. It's just hard, especially if you're kind of
Speaker 3: looking at kind of entrepreneurial when off hop operator. It's
Speaker 3: really really hard and that and that's not true in Texas,
Speaker 3: but I mean it's it's not that easy in Texas either.
Speaker 3: There's still a licensing process, so there are big differences.
Speaker 3: There are some differences in ratio requirements in Chicago and
Speaker 3: New York. The racio requirements are a little bit stricter.
Speaker 3: It tends to be the licensing process, the space requirements
Speaker 3: we have. I mean, this is another thing that you
Speaker 3: can get with economies of scale. If you're opening new centers,
Speaker 3: which we do. We don't just do acquisitions, so you
Speaker 3: open a lot of new centers. Is there's a construction
Speaker 3: process that has to happen with almost any space and
Speaker 3: that means that you need certificates of EUCK agency and licensing,
Speaker 3: and there's this whole process. And in some places we've
Speaker 3: got it down to a few weeks where we can
Speaker 3: do that, like you know, like a couple of months
Speaker 3: for construction and the licensing process and everything. And another
Speaker 3: place is like New York or San Francisco, you're looking
Speaker 3: at like a year, two years even and you're carrying
Speaker 3: the costs of the space when possibly staff, depending on
Speaker 3: what you're doing with it for that time with no enrollment.
Speaker 2: How competitive are preschools on cost? And what I mean
Speaker 2: by that is how big a concern is it? Because
Speaker 2: on the one hand, I imagine that, you know, it
Speaker 2: is a sizeable chunk of money for parents who are
Speaker 2: spending hundreds or possibly thousands of dollars a month on
Speaker 2: this expense. But at the same time, I also imagine
Speaker 2: that if you're a parent of a young child, you
Speaker 2: might be nervous about taking the cheapest option right, and
Speaker 2: you might have a tendency or a willingness to take
Speaker 2: something that's more expensive. So do you find that you're
Speaker 2: competing on costs quite a lot, or is there like
Speaker 2: a little bit of insulation there we.
Speaker 3: Compete on costs, for sure. I think at the at
Speaker 3: the ultra elite level like West Side Montessori or the
Speaker 3: kind of storied New York preschools where people are like
Speaker 3: this is a you know, they think of it as
Speaker 3: like part of a path to Harvard or whatever, and
Speaker 3: they're charging fifty thousand dollars a year. There is some
Speaker 3: price insulation there, but even there it's not I mean,
Speaker 3: it's not totally anelastic We raise prices and then we
Speaker 3: find that it's too much and we have the backtrack
Speaker 3: like we face, we face price competition.
Speaker 2: Oh so if you raise prices too much, you do
Speaker 2: see attrition of oh.
Speaker 3: Yeah, yeah, definitely. I find it interesting that you find
Speaker 3: that surprising where you kind of under the impression that
Speaker 3: that was.
Speaker 2: Well, I thought it was. You use the word sticky before,
Speaker 2: and I kind of assumed like once kids were in
Speaker 2: a school that the parents liked more or less, barring
Speaker 2: some massive financial disaster like if they lose their job
Speaker 2: or something like that, that they would be very motivated
Speaker 2: to stay in that school.
Speaker 3: Let's say that you're doing infant through preschool, and a
Speaker 3: typical case so we do for one age is zero
Speaker 3: through six. But say you're doing like two to five,
Speaker 3: which is a more typical case, SOS child is there
Speaker 3: for three or four years, you're losing a quarter of
Speaker 3: your class a year. So if you raise prices, I mean,
Speaker 3: let's just say that you don't even none of your
Speaker 3: existing families disenroll, which which isn't going to be the
Speaker 3: case necessarily. But if you raise prices and like you're
Speaker 3: the twenty five percent of your new families are new families,
Speaker 3: and you have to compete for those families on the
Speaker 3: kind of new rates. We actually do this thing where
Speaker 3: we signal what our rate increases are going to be
Speaker 3: when you sign up, so there's no surprise rate increases,
Speaker 3: and you do have rate increases, but we say, like
Speaker 3: we have a rate sheet and you sign up for
Speaker 3: it and you know transparently what they're going to be,
Speaker 3: so you walk in those rates. If you lose half
Speaker 3: of those families, like your business is sunk. Like that.
Speaker 3: That's that's part of what it means to be in
Speaker 3: a business where like you make money on the last
Speaker 3: four families that are enrolled.
Speaker 1: I hadn't thought about that dynamic that just by definition,
Speaker 1: any like school basically is going to lose a lot
Speaker 1: of customers every single year automatically just because people graduate
Speaker 1: or a trick. I don't know, do you graduate.
Speaker 3: Yeah, And if you're if your kind of mental model
Speaker 3: is K twelve, you might think, oh, you're like losing
Speaker 3: five percent or eight percent or whatever, but like, really
Speaker 3: you're losing like a fifth, a quarter or a third
Speaker 3: of your students every year. And that's if you've got
Speaker 3: a really healthy pipeline coming through like that, that's kind
Speaker 3: of what you're shooting for. That's the success cases that
Speaker 3: you're graduating students.
Speaker 1: So I know, like every American considers themselves to have
Speaker 1: been raised middle class, but I was so and I
Speaker 1: definitely include myself in that category. And the years that
Speaker 1: I went to Montessori school, I was living in Juliet, Illinois.
Speaker 1: I had a lot of friends there whose families were
Speaker 1: unambiguously middle class. These days, when I think about like
Speaker 1: monosory schools, I do not think that. Like I think like, oh,
Speaker 1: you're like, oh, you have to be rich to go
Speaker 1: to a Montessori school or some sort of like anything
Speaker 1: that sort of has the vibe of like progressive education.
Speaker 1: I just assume is sort of this luxury consumption good
Speaker 1: and be like, why is that the case? And has
Speaker 1: it gotten worse? Because I don't know. The people that
Speaker 1: I went to school with strike me as I don't
Speaker 1: know if in the year twenty twenty three they could
Speaker 1: have sent their kids to a Montessori school.
Speaker 3: So cost of childcare has gone up because of education
Speaker 3: in general has gone up faster than in other areas.
Speaker 3: I can't remember what all the different buckets are. You
Speaker 3: guys would know better than I would. But whenever I
Speaker 3: look at the inflation curves and it's like education, healthcare,
Speaker 3: and then like you know, food is flat, and then
Speaker 3: something like electronxes, like you know, yeah, so yeah, I
Speaker 3: mean it's it's gotten more expensive. I think in general
Speaker 3: it keeps pace with or slightly outpaces wage growth. So
Speaker 3: given that most of the costs in education is labor,
Speaker 3: I mean I think that that's part of what you're
Speaker 3: looking at there. I don't know if I have the
Speaker 3: full story as to I think it has gotten a
Speaker 3: little bit worse. I don't think it's as bad as
Speaker 3: it seems for a lot of different reasons. So there
Speaker 3: is Hey, there's more public funding now than there's ever
Speaker 3: been at the early childhood age. B it's just very
Speaker 3: so much by location, Like I mean, if you're kind
Speaker 3: of pegging on New York City.
Speaker 1: Yeah, I admit that, like the economics of school, a
Speaker 1: monassory school in New York City where everyone is a
Speaker 1: crazy status obsessed in thinking that they need to get
Speaker 1: their kids in the right school so that they can
Speaker 1: one day go to Harvard and then one day go
Speaker 1: to a law firm. It's probably different than it was
Speaker 1: in Juliet, Illinois in the early nineteen eighties.
Speaker 3: Yeah, I mean New York is very bimodal and New
Speaker 3: York it's like head start programs or like you know,
Speaker 3: twenty five hundred dollars a month would be cheap, well,
Speaker 3: you know for the kind of other end of the
Speaker 3: of the range, but in like Dallas, like you can
Speaker 3: get good daycare for twelve hundred dollars a month, one
Speaker 3: thousand dollars a month, and maybe some of that would
Speaker 3: be a little bit subsidized, And then you're looking eight
Speaker 3: hundred dollars a month, and then all of a sudden
Speaker 3: it starts to look a lot cheaper than like an
Speaker 3: any and like totally worth it to get a job.
Speaker 3: Even a kind of middling pay job and send your
Speaker 3: kids to school if that's what enables you to do. So,
Speaker 3: I think that the range is probably bigger than your thinking.
Speaker 3: But has it gotten worse. I think it's probably gotten
Speaker 3: a little bit worse. Yeah.
Speaker 2: Wait, so setting New York aside, which is crazy, crazy
Speaker 2: for a bunch of different markets. This was a wider
Speaker 2: point brought up by our previous guest on this topic,
Speaker 2: Nancy Folbright, who argued that one of the reasons why
Speaker 2: childcare costs are going up is like, yes, okay, labor
Speaker 2: costs happened going up, But there's also this selection bias
Speaker 2: at play, which is, if you cannot afford childcare, you
Speaker 2: opt out of the market entirely. Maybe you find a
Speaker 2: family member who can look after your kid, or maybe
Speaker 2: you know you don't work anymore and just leave the
Speaker 2: labor market all together. And so there's selection bias at
Speaker 2: play in that the people who can afford preschool are
Speaker 2: the ones paying for preschool, and there's a whole segment
Speaker 2: of society who are just not included in that data.
Speaker 2: Is that a valid criticism from your perspective.
Speaker 3: If I understand the point correctly, that there's a kind
Speaker 3: of step function where it's like you're either there's a
Speaker 3: threshold below what you're not considering paying for childcare. Yeah,
Speaker 3: and there's a threshold and that threshold has probably gone up, right. Yeah,
Speaker 3: I think that that's true. They're kind of interesting little
Speaker 3: sub markets of the early childhood space, like at home
Speaker 3: care or in home care, or like a teacher runs
Speaker 3: a program out of their home and they might take
Speaker 3: like three students or five students or something like that.
Speaker 3: I think that if you wanted to kind of lower
Speaker 3: that threshold of the kind of cost threshold, I think
Speaker 3: you would have to think about, how do we see
Speaker 3: a lot more of that kind of model where you've
Speaker 3: got a neighborhood, like where a lot of neighborhoods have schools,
Speaker 3: where like a mom whose kids have gone to college
Speaker 3: like walks after three or four toddlers, and kind of
Speaker 3: what are the economics of that that is? I mean,
Speaker 3: that is not usually either illegal or not or kind
Speaker 3: of highly regulated, and it's just it's also we just
Speaker 3: don't have a culture of that kind of thing. But yeah,
Speaker 3: I mean in terms of the question is there a
Speaker 3: step function, is there a threshold effect? Does that drive
Speaker 3: up pricing? Yeah? I think almost certainly.
Speaker 1: Does you know, it feels like there's this whole range.
Speaker 1: There's the heavily subsidized schools. There are the sort of
Speaker 1: mom and pop schools that were like, you know, maybe
Speaker 1: in the nineteen sixties or nineteen seventies and someone set
Speaker 1: up a school that's sort of like out of their house,
Speaker 1: and I think my sister went to them when I
Speaker 1: when I was growing up, like it was literally like
Speaker 1: in our neighborhood. It looked just like a house. And
Speaker 1: then there's all these like private equity ones, like do
Speaker 1: you hit like this sort of like broader what does
Speaker 1: the whole like market look like? How much has it
Speaker 1: gone corporate versus said twenty years ago.
Speaker 3: It's mostly mom and pop still, Yeah, I think the
Speaker 3: official numbers are that it's like a seventy billion dollar
Speaker 3: year market, but it's higher than that. I think that
Speaker 3: that's an underestimate for various reasons. So if you say
Speaker 3: it's like one hundred billion dollar to addressable market early
Speaker 3: childhood centers in the US, and you could broad on
Speaker 3: that to be like two hundred billion if you included
Speaker 3: just nannies and other kinds of ChIL childcare expenses, KinderCare
Speaker 3: is like a seven billion revenue and it's the biggest
Speaker 3: by far, and then you have Learning Care Group and
Speaker 3: Right Horizons that's another seven billion spring. So probably like
Speaker 3: ten maybe fifteen percent of it is pe or other
Speaker 3: kinds of big companies, and the rest is really mom
Speaker 3: and pops. I don't know exactly what percentage is subsidized
Speaker 3: because the way that the subsidies work is so varied,
Speaker 3: and often subsidies go to private centers. It's often it's
Speaker 3: unusual for there to be like a public preschool in
Speaker 3: the sense that there's a public school, but most I
Speaker 3: mean the kind of chains like I mean, you know,
Speaker 3: we're dropping the bucket and you know, higher ground school.
Speaker 3: It's it's a huge market and it's very very fragmented.
Speaker 3: The biggest players are like, you know, the biggest company
Speaker 3: takes up like less than five percent of the market.
Speaker 1: Probably you said something earlier that many daycare jobs or
Speaker 1: childcare jobs, as a society, we don't they're not seen
Speaker 1: as high status jobs, high dignity jobs, and perhaps in
Speaker 1: some cases the person in the position feels like, as
Speaker 1: you say, like they're sort of a babysitter waiting out
Speaker 1: the clock. And waiting for the parents to pick them
Speaker 1: up and then the day's over. Can you like talk
Speaker 1: a little bit more about the structural challenges that pose
Speaker 1: because at the end of the day, like there just
Speaker 1: seems to be like this mismatch, like and who is
Speaker 1: going into you know, the supply of future teachers, Like
Speaker 1: who is going in to this career? And like are
Speaker 1: there policy levers that you think could be done to
Speaker 1: sort of increase the number of people that want to
Speaker 1: make this a career in some way?
Speaker 3: So the people that go into the early childhood education
Speaker 3: are people that love children by and large, I mean
Speaker 3: not always. You occasionally find somebody working in early childhood
Speaker 3: education who actually hates children, and that's tragic and awful.
Speaker 3: It seems like a bad but it's a bad combo. Yeah, yeah,
Speaker 3: I mean one side this is a little bit of
Speaker 3: an aside, but one side of this being a very
Speaker 3: labor intensive industry and a very human industry, where I
Speaker 3: mean I agree that it would be I don't think
Speaker 3: robots watching our children are in the cards any time. Ever.
Speaker 3: One half of that is it's a management intensive industry
Speaker 3: kind of like the culture of a school and the
Speaker 3: kind of happiness of your staff, and it matters a
Speaker 3: lot and kind of interfacing with all these you know,
Speaker 3: you've got ten twenty personalities in a small center, all
Speaker 3: literally stepping on each other's toes. Like keeping that a
Speaker 3: really positive place which is really important for the children
Speaker 3: is really hard. That's an aside. You can divide it
Speaker 3: into three issues that are all interrelated. One is the
Speaker 3: money problem, like what about people that want to make
Speaker 3: more money? I think that there are possibly solutions to
Speaker 3: that where you tie early childhood education into other career paths.
Speaker 3: The other is the kind of status problem that's in
Speaker 3: some ways the hardest problem, just like how do you
Speaker 3: get people to see working with small children as important?
Speaker 3: I mean, this is the problem that mothers I mean
Speaker 3: tied into all sorts of other social issues, on gender
Speaker 3: issues and so on. And then the third problem is,
Speaker 3: and this is kind of why higher Ground exists, and
Speaker 3: we haven't talked about it much, but it's how do
Speaker 3: you actually make early childhood education good? Like how do
Speaker 3: you make it.
Speaker 1: So that I laugh there, not because like it's funny,
Speaker 1: but it is funny in the sense that is the
Speaker 1: education good. Often it feels like is the secondary or
Speaker 1: churchary question? Even though we are talking about schools here and.
Speaker 3: I think, I mean, most education isn't good, is my view.
Speaker 3: Certainly most early childhood education isn't good. It's and it's
Speaker 3: very far from great. Even if it's like passable, you know,
Speaker 3: it's not great. And what everybody wants, I mean, people
Speaker 3: want money, and people want status, but what everybody wants
Speaker 3: most out of their job is they want to do
Speaker 3: good work. And the thing that's going to change early
Speaker 3: childhood education is changing how we approach it at the
Speaker 3: level of the classroom, in the programming. And this is why,
Speaker 3: this is why I'm such a such an evangelist about
Speaker 3: Montessori and developmentally informed education and kind of like thinking
Speaker 3: about alternative education and differences to the system. Is education
Speaker 3: needs to change and that that will change the teaching profession.
Speaker 3: I mean that change would, I mean, it goes a lot.
Speaker 3: And this is why part of what we do we
Speaker 3: run a training center. We train a thousand teachers a
Speaker 3: year in our Moneessory Training Center, are kind of accredited
Speaker 3: training center, and that is essential, like that you can
Speaker 3: kind of take somebody in then say there's a totally
Speaker 3: different way of thinking about it. We're going to kind
Speaker 3: of deprogram you from your traditional thinking about education and
Speaker 3: open your eyes to a new way of thinking about children,
Speaker 3: about learning, about curriculum, about development, about growth. Certain people
Speaker 3: love that. I mean, that's a calling for a certain
Speaker 3: kind of person.
Speaker 2: So just on that note, you know, Joe and I
Speaker 2: started this conversation talking about how, to some extent, expanding
Speaker 2: capacity in durable goods is simpler than expanding capacity in
Speaker 2: something like daycare or preschool education. And you talked a
Speaker 2: little bit about what it would take to get more
Speaker 2: people entering this profession. But are there other ways that
Speaker 2: you could expand capacity? Would it be, for instance, you know,
Speaker 2: maybe tweaking the type of education, making it more for
Speaker 2: lack of a better word, efficient, that sounds terrible, efficient education,
Speaker 2: or government support of some of some form or another funding.
Speaker 2: What would it take to actually expand this sector significantly?
Speaker 3: Okay, here's the standard narrative. I don't know how much
Speaker 3: I believe the standard narrative, but it's out there and
Speaker 3: there's probably something to it. There's been a kind of
Speaker 3: collapse that the pandemic accelerated. Families that put down roots
Speaker 3: and they know one another, and they get to know
Speaker 3: their neighborhood and they might have extended family in the area,
Speaker 3: and this is how they kind of raise children. The
Speaker 3: kind of critical narrative is like we've can become more
Speaker 3: adamized as a society, so like we don't know our neighbors,
Speaker 3: and like if you're got to working families and you
Speaker 3: need help with child care, you've got to hire someone.
Speaker 3: And that didn't used to be the onli or even
Speaker 3: the main solution to early childhood education or childcare. To
Speaker 3: the extent that that's true, I think that's probably a
Speaker 3: half truth. I'm kind of skeptical of kind of adomization narratives,
Speaker 3: and I'm generally skeptical of like there was a golden
Speaker 3: age where childcare was great, right neighbor Yeah, But to
Speaker 3: the extent that that's true, I do think that there
Speaker 3: need to be kind of different operating modes for early
Speaker 3: childhood where I mean, we were doing things like we
Speaker 3: are running preschools in neighborhood houses. We'll like rent a house,
Speaker 3: like a five bedroom house, We'll move a preschool teacher
Speaker 3: into that house, and we'll say we'll pay your rent
Speaker 3: and like you know, in three on the first floor,
Speaker 3: like you run an early childhood neighborhood center, and like
Speaker 3: that kind of thing is the kind of thing that
Speaker 3: we're experimenting with. I mean, if that was more common,
Speaker 3: more standardized, more culturally accepted, and we got better at it,
Speaker 3: not just we as on higher ground, but just as
Speaker 3: a as a culture, that was a kind of problem
Speaker 3: that we really were invested in solving. I think that
Speaker 3: that kind of shift would be good. The early childhood
Speaker 3: center model, it's i mean the school model in general,
Speaker 3: even just like you go to school for eight hours
Speaker 3: a day until you're eighteen, Like it's getting disrupted, and
Speaker 3: that goes all the way down to child childcare and
Speaker 3: early childcare. And there's a question as to what it
Speaker 3: looks like, what do micro schools look like, what do
Speaker 3: home schools look like? What are the whole range of
Speaker 3: homeschool options? How do you get expertise in this area?
Speaker 3: It's it requires thought and innovation, and it's it's an
Speaker 3: exciting time. If you kind of look, if you squint
Speaker 3: and you look at the industry as like this is
Speaker 3: where it's at right now, it looks very dark. I
Speaker 3: mean it's like there's a labor crunch. Education is very bimodal.
Speaker 3: It's hard to expand capacity. But if you kind of
Speaker 3: step back and you say parents are really skeptical of
Speaker 3: existing institutions and people are hungry for something different, I
Speaker 3: think you can be a lot more optimistic, and I
Speaker 3: think we will see changes in the next time twenty
Speaker 3: thirty years in this space.
Speaker 1: So I just have like one sort of last question,
Speaker 1: and maybe it sort of very ties into this what
Speaker 1: you were just talking about. But like, you know, people
Speaker 1: have this idea, and I think, for like good reason
Speaker 1: that we should have publicly funded childcare from day one.
Speaker 1: We hate we have this sort of strange system where
Speaker 1: the public schools are as everyone knows in large part
Speaker 1: places where people are A big reason they exist is
Speaker 1: for working parents to drop off their kids hopefully it's
Speaker 1: a good education. But also a big part is just
Speaker 1: this sort of public this free childcare, but only once
Speaker 1: the kid turns like five or six or whatever the
Speaker 1: exact age is. So let's say like we wanted as
Speaker 1: a country. You're like, this doesn't make any sense, Like
Speaker 1: why do we only start this at age five? We
Speaker 1: want to start it from like day one or you know,
Speaker 1: month free or whatever it is. What would be the
Speaker 1: biggest constraint to being able to happen.
Speaker 3: So I'm very skeptical of that solution, both like philosophically
Speaker 3: and politically, but also operationally, I would say, and I
Speaker 3: should also say there are people, especially people in the
Speaker 3: Montessori world, who think that is the solution. That is
Speaker 3: obviously the solution is to kind of integrate monesssory with
Speaker 3: the public space in multiple ways. There's a debate about that.
Speaker 3: I think what you would find really quickly is that
Speaker 3: making early childhood education good, like really good in a
Speaker 3: way that actually meets children's developmental needs, is harder than
Speaker 3: getting elementary school right. That's harder. It sounds crazy to say,
Speaker 3: you're just like, wait, aren't you just watching the kids?
Speaker 3: Elementary school kids are actually as critical as I am
Speaker 3: of most school trust structures and traditional school structures. Six
Speaker 3: year olds are kind of ready for school. They're eager
Speaker 3: to learn, they're curious, they're thinking conceptually. They don't need
Speaker 3: a specifically, they don't need to think about learning in
Speaker 3: terms of like a job or some vocation. This is
Speaker 3: just what that age is. The kind of six to
Speaker 3: twelve age especially is is the school agent. Always has
Speaker 3: been in history, always there's a reason why if you
Speaker 3: go back twenty six hundred years, school starts at six
Speaker 3: or seven, and then there's this question as to what
Speaker 3: to do when children get to like middle school, high
Speaker 3: school age historically, but this kind of like six to
Speaker 3: twelve age is when schooling happens, and there are developmental
Speaker 3: reasons for that. If you want to push it down
Speaker 3: to three much less two or one, and you want
Speaker 3: to think about making that a healthy environment where children
Speaker 3: are getting what they developmentally need, I think you have
Speaker 3: to do something like Montossori, if not exactly Montissori, and
Speaker 3: most preschools are really far from being that good. They're
Speaker 3: really really far from being that good. And so I
Speaker 3: think what you would see is that the kind of
Speaker 3: the public preschools, it's just it will be a developmental disaster.
Speaker 3: That's that's my that's my thesis.
Speaker 1: Well, MATD. Bateman really appreciate your perspective. Obviously sort of
Speaker 1: like extraordinary complicated question just in terms of some of
Speaker 1: the dimensions that you brought up there, but even some
Speaker 1: of the sort of simpler regulatory questions about like well
Speaker 1: ratios and multiple points of egress in one state for another.
Speaker 1: Really appreciate you coming on the podcast and talking about
Speaker 1: the business.
Speaker 3: Thank you're having a nice thanks really.
Speaker 1: Yeah, thanks Matt Tracy. I thought that was really interesting.
Speaker 1: I mean I think like simple, like you know, the
Speaker 1: the economics as he described it, are like, yeah, you pay,
Speaker 1: and then it's like wages and rent, et cetera. But
Speaker 1: then like when you think about like management costs and
Speaker 1: I you know, floaters and I've certainly seen this in
Speaker 1: substitutes and churn, et cetera, you could see how it's
Speaker 1: just like they get incredibly like inefficient, complicated business.
Speaker 2: Yes, which is why I'm still kind of surprised that
Speaker 2: there seems to be so much private equity interest and
Speaker 2: like a belief in scaling it up. Although I do
Speaker 2: take the point about like sure you can have a
Speaker 2: sort of centralized administrator and things like that. I did
Speaker 2: think it was really interesting his point about competing on
Speaker 2: costs and the idea that like, well naturally just by attrition,
Speaker 2: you're sort of losing students every year. That's something I
Speaker 2: hadn't considered before.
Speaker 1: Yeah, the fact that like so right, like as you said,
Speaker 1: k through twelve hardly and you graduate in a year.
Speaker 1: But if it's like a two or three or four
Speaker 1: year program, like you're always losing students and always having
Speaker 1: to pull at new ones.
Speaker 2: Also, you guys are so down on robots watching kids,
Speaker 2: But I have distinct memories of my parents leaving me
Speaker 2: alone with like a Teddy Ruckspin doll in nineteen eighty
Speaker 2: five for hours to entertain me. So it's already happened.
Speaker 2: The robots are already here.
Speaker 1: It's funny.
Speaker 2: It's called the iPads.
Speaker 1: I love yes, Oh my god, can I just say
Speaker 1: as a parent, I love screens, I love iPads, I
Speaker 1: love kindles, I love TV, I love Amazon Fire, I
Speaker 1: love all of these things. They make life so much easier.
Speaker 1: But actually it is funny you say that because he's like, oh,
Speaker 1: there's never really a golden age, but maybe the golden
Speaker 1: age is when like people are just more chill about
Speaker 1: this stuff. Okay, No, seriously, if you were so, you know,
Speaker 1: all the parents are like so neurotic.
Speaker 2: No, it's like the child has to be learning something
Speaker 2: all like every minute of the day in preparation for
Speaker 2: you know, their future success. Whereas you could just sit
Speaker 2: them down, like I don't know, a light bright or something,
Speaker 2: I'm giving away my my nineteen eighties I'm sorry, childhood.
Speaker 1: It's crazy that like if you have a two year
Speaker 1: old you're like thinking about it on the Harvard track.
Speaker 1: There's crazy. No, that is that's crazy.
Speaker 2: No, I agree completely. Shall we leave it there?
Speaker 1: Let's leave it there.
Speaker 2: This has been another episode of the Odd Lots podcast.
Speaker 2: I'm Tracy Alloway. You can follow me on Twitter at
Speaker 2: Tracy Alloway.
Speaker 1: And I'm Jill Wisenthal. You can follow me on Twitter
Speaker 1: at the Stalwart. You can follow our guest Matt Bateman.
Speaker 1: He's at m Bateman. Follow our producers Carmen Rodriguez at
Speaker 1: Carmen Arman and dash Ol Bennett at dashbot. And check
Speaker 1: out all of our podcasts under the handle at podcasts.
Speaker 1: And for more Odd Loots content, go to bloomberg dot
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