THE SATURDAY ESSAY

Updated August 3, 2013, 4:46 a.m. ET

The $4 Million Teacher

South Korea's students rank among the best in the world, and its top teachers can make a fortune. Can the U.S. learn from this academic superpower?

By AMANDA RIPLEY

 
 
Kim Ki-hoon earns $4 million a year in South Korea, where he is known as a rock-star teacher—a combination of words not typically heard in the rest of the world. Mr. Kim has been teaching for over 20 years, all of them in the country's private, after-school tutoring academies, known as hagwons. Unlike most teachers across the globe, he is paid according to the demand for his skills—and he is in high demand.

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SeongJoon Cho for The Wall Street Journal
 Kim Ki-Hoon, who teaches in a private after-school academy, earns most of his money from students who watch his lectures online. 'The harder I work, the more I make,' he says. 'I like that.'
 
Mr. Kim works about 60 hours a week teaching English, although he spends only three of those hours giving lectures. His classes are recorded on video, and the Internet has turned them into commodities, available for purchase online at the rate of $4 an hour. He spends most of his week responding to students' online requests for help, developing lesson plans and writing accompanying textbooks and workbooks (some 200 to date).

I traveled to South Korea to see what a free market for teaching talent looks likeone stop in a global tour to discover what the U.S. can learn from the world's other education superpowers. Thanks in part to such tutoring services, South Korea has dramatically improved its education system over the past several decades and now routinely outperforms the U.S. Sixty years ago, most South Koreans were illiterate; today, South Korean 15-year-olds rank No. 2 in the world in reading, behind Shanghai. The country now has a 93% high-school graduation rate, compared with 77% in the U.S.

Tutoring services are growing all over the globe, from Ireland to Hong Kong and even in suburban strip malls in California and New Jersey. Sometimes called shadow education systems, they mirror the mainstream system, offering after-hours classes in every subject—for a fee. But nowhere have they achieved the market penetration and sophistication of hagwons in South Korea, where private tutors now outnumber schoolteachers.

Viewed up close, this shadow system is both exciting and troubling. It promotes striving and innovation among students and teachers alike, and it has helped South Korea become an academic superpower. But it also creates a bidding war for education, delivering the best services to the richest families, to say nothing of its psychological toll on students. Under this system, students essentially go to school twiceonce during the day and then again at night at the tutoring academies. It is a relentless grind.

The bulk of Mr. Kim's earnings come from the 150,000 kids who watch his lectures online each year. (Most are high-school students looking to boost their scores on South Korea's version of the SAT.) He is a brand name, with all the overhead that such prominence in the market entails. He employs 30 people to help him manage his teaching empire and runs a publishing company to produce his books.

In South Korea, 47% of eighth graders are ranked 'advanced.' In the U.S.: 7%
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To call this mere tutoring is to understate its scale and sophistication. Megastudy, the online hagwon that Mr. Kim works for, is listed on the South Korean stock exchange. (A Megastudy official confirmed Mr. Kim's annual earnings.) Nearly three of every four South Korean kids participate in the private market.

In 2012, their parents spent more than $17 billion on these services. That is more than the $15 billion spent by Americans on videogames that year, according to the NPD Group, a research firm. The South Korean education market is so profitable that it attracts investments from firms like Goldman Sachs, the Carlyle Group and A.I.G.

It was thrilling to meet Mr. Kim—a teacher who earns the kind of money that professional athletes make in the U.S. An American with his ambition and abilities might have to become a banker or a lawyer, but in South Korea, he had become a teacher, and he was rich anyway.

The idea is seductive: Teaching well is hard, so why not make it lucrative? Even if American schools will never make teachers millionaires, there are lessons to be learned from this booming educational bazaar, lessons about how to motivate teachers, how to captivate parents and students and how to adapt to a changing world.
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Agence France-Presse/Getty Images
South Korean students prepare to take the standardized exam for college admissions on Nov. 10, 2011. The country has a 93% high-school graduation rate.

 

To find rock-star teachers like Mr. Kim, hagwon directors scour the Internet, reading parents' reviews and watching teachers' lectures. Competing hagwons routinely try to poach one another's celebrity tutors. "The really good teachers are hard to retain—and hard to manage. You need to protect their egos," says Lee Chae-yun, who owns a chain of five hagwons in Seoul called Myungin Academy.

The most radical difference between traditional schools and hagwons is that students sign up for specific teachers, so the most respected teachers get the most students. Mr. Kim has about 120 live, in-person students per lecture, but a typical teacher's hagwon classes are much smaller. The Korean private market has reduced education to the one in-school variable that matters most: the teacher.

It is about as close to a pure meritocracy as it can be, and just as ruthless. In hagwons, teachers are free agents. They don't need to be certified. They don't have benefits or even a guaranteed base salary; their pay is based on their performance, and most of them work long hours and earn less than public school teachers.

Performance evaluations are typically based on how many students sign up for their classes, their students' test-score growth and satisfaction surveys given to students and parents. "How passionate is the teacher?" asks one hagwon's student survey—the results of which determine 60% of the instructor's evaluation. "How well-prepared is the teacher?" (In 2010, researchers funded by the Bill & Melinda Gates Foundation found classroom-level surveys like this to be surprisingly reliable and predictive of effective teaching in the U.S., yet the vast majority of our schools still don't use them.)

"Students are the customers," Ms. Lee says. To recruit students, hagwons advertise their results aggressively. They post their graduates' test scores and university acceptance figures online and outside their entrances on giant posters. It was startling to see such openness; in the U.S., despite our fetish for standardized testing, the results remain confusing and hard to interpret for parents.

Once students enroll, the hagwon embeds itself in families' lives. Parents get text messages when their children arrive at the academies each afternoon; then they get another message relaying students' progress. Two to three times a month, teachers call home with feedback. Every few months, the head of the hagwon telephones, too. In South Korea, if parents aren't engaged, that is considered a failure of the educators, not the family.

If tutors get low survey marks or attract too few students, they generally get placed on probation. Each year, Ms. Lee fires about 10% of her instructors. (By comparison, U.S. schools dismiss about 2% of public school teachers annually for poor performance.)

All of this pressure creates real incentives for teachers, at least according to the kids. In a 2010 survey of 6,600 students at 116 high schools conducted by the Korean Educational Development Institute, Korean teenagers gave their hagwon teachers higher scores across the board than their regular schoolteachers: Hagwon teachers were better prepared, more devoted to teaching and more respectful of students' opinions, the teenagers said. Interestingly, the hagwon teachers rated best of all when it came to treating all students fairly, regardless of the students' academic performance.

Private tutors are also more likely to experiment with new technology and nontraditional forms of teaching. In a 2009 book on the subject, University of Hong Kong professor Mark Bray urged officials to pay attention to the strengths of the shadow markets, in addition to the perils. "Policy makers and planners should…ask why parents are willing to invest considerable sums of money to supplement the schooling received from the mainstream," he writes. "At least in some cultures, the private tutors are more adventurous and client-oriented."

But are students actually learning more in hagwons? That is a surprisingly hard question to answer. World-wide, the research is mixed, suggesting that the quality of after-school lessons matters more than the quantity.

And price is at least loosely related to quality, which is precisely the problem. The most affluent kids can afford one-on-one tutoring with the most popular instructors, while others attend inferior hagwons with huge class sizes and less reliable instruction—or after-hours sessions offered free by their public schools. Eight out of 10 South Korean parents say they feel financial pressure from hagwon tuition costs. Still, most keep paying the fees, convinced that the more they pay, the more their children will learn.

For decades, the South Korean government has been trying to tame the country's private-education market. Politicians have imposed curfews and all manner of regulations on hagwons, even going so far as to ban them altogether during the 1980s, when the country was under military rule. Each time the hagwons have come back stronger.

"The only solution is to improve public education," says Mr. Kim, the millionaire teacher, echoing what the country's education minister and dozens of other Korean educators told me. If parents trusted the system, the theory goes, they wouldn't resort to paying high fees for extra tutoring.

To create such trust, Mr. Kim suggests paying public-school teachers significantly more money according to their performance—as hagwons do. Then the profession could attract the most skilled, accomplished candidates, and parents would know that the best teachers were the ones in their children's schoolsnot in the strip mall down the street.

Schools can also build trust by aggressively communicating with parents and students, the way businesses already do to great effect in the U.S. They could routinely survey students about their teachersin ways designed to help teachers improve and not simply to demoralize them.

Principals could make their results far more transparent, as hagwons do, and demand more rigorous work from students and parents at home in Exchange. And teacher-training programs could become far more selective and serious, as they are in every high-performing education system in the worldinjecting trust and prestige into the profession before a teacher even enters the classroom.

No country has all the answers. But in an information-driven global economy, a few truths are becoming universal: Children need to know how to think critically in math, reading and science; they must be driven; and they must learn how to adapt, since they will be doing it all their lives. These demands require that schools change, tooor the free market may do it for them.


—Ms. Ripley is an Emerson Fellow at the New America Foundation. This essay is adapted from her forthcoming book, "The Smartest Kids in the World—and How They Got That Way," to be published Aug. 13 by Simon & Schuster. Copyright © 2013 by Amanda Ripley.
 
 
Copyright 2012 Dow Jones & Company, Inc. All Rights Reserved


THE WEEKEND INTERVIEW

Updated August 9, 2013, 7:10 p.m. ET

Ben Nelson: The Man Who Would Overthrow Harvard

Can the Minerva Project do to Ivy League universities what Amazon did to Borders?

By MATTHEW KAMINSKI
San Francisco

 
 

'If you think as we do," says Ben Nelson, "Harvard's the world's most valuable brand." He doesn't mean only in higher education.

"Our goal is to displace Harvard. We're perfectly happy for Harvard to be the world's second most valuable brand."
 
Listening to Mr. Nelson at his spare offices in San Francisco's Mid-Market, a couple of adjectives come to mind. Generous (to Harvard) isn't one. Nor immodest. Here's a big talker with bold ideas. Crazy, too, in that Silicon Valley take-a-flier way. 

Mr. Nelson founded and runs the Minerva Project. The school touts itself as the first elitemake that "e-lite"—American university to open in 100 years. Or it will be when the first class enters in 2015. Mr. Nelson, who previously led the online photo-sharing company Snapfish, wants to topple and transcend the American academy's economic and educational model. 

And why not? Higher education's product-delivery system—a professor droning to a limited number of students in a roomdates back a thousand years. The industry's physical plant (dorms, classrooms, gyms) often a century or more. Its most expensive employees, tenured faculty, can't be fired. The price of its product (tuition) and operating costs have outpaced inflation by multiples. 

In similar circumstances, Wal-Mart took out America's small retail chains. Amazon crushed Borders. And Harvard will have to make way for . . . Minerva? "There is no better case to do something that I can think of in the history of the world," says Mr. Nelson.
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Ken Fallin

 
Some people regarded as serious folks have bought the pitch, superlatives and all. Larry Summers, the former Harvard president, agreed to be the chairman of Minerva's advisory board. Former Sen. Bob Kerrey, who led the New School in New York from 2001-10, heads the fundraising arm.
 
Stephen Kosslyn, previously dean of social sciences at Harvard, is Minerva's founding academic dean. Benchmark, a venture-capital firm that financed eBay and Twitter, last year made its largest-ever seed investment, $25 million, in Minerva. 

Mr. Nelson calls Minerva a "reimagined university." Sure, there will be majors and semesters. Admission requirements will be "extraordinarily high," he says, as at the Ivies. Students will live together and attend classes. And one day, an alumni network will grease job and social opportunities.

But Minerva will have no hallowed halls, manicured lawns or campus. No fraternities or sports teams. Students will spend their first year in San Francisco, living together in a residence hall. If they need to borrow books, says Mr. Nelson, the city has a great public library. Who needs a student center with all of the coffee shops around? 

Each of the next six semesters students will move, in cohorts of about 150, from one city to another. Residences and high-tech classrooms will be set up in the likes of São Paulo, London or Singaporedetails to come. Professors get flexible, short-term contracts, but no tenure. Minerva is for-profit.  

The business buzzword here is the "unbundling" of higher education, or disaggregation. Since the founding of Oxford in the 12th century, universities, as the word implies, have tried to offer everything in one package and one place. In the world of the Web and Google, physical barriers are disappearing 

Mr. Nelson wants to bring this technological disruption to the top end of the educational food chain, and at first look Minerva's sticker price stands out. Freed of the costs of athletics, the band and other pricey campus amenities, a degree will cost less than half the average top-end private education, which is now over $50,000 a year with room and board. 

His larger conceit, inspired or outlandish, is to junk centuries of tradition and press the reset button on the university experience. Mr. Nelson offers a fully-formed educational philosophy with a practiced salesman's confidence. At Minerva, introductory courses are out. For Econ or Psych 101, buy some books or sign up for one of the MOOCs—as in massive open online course—on the Web.  

"Too much of undergrad education is the dissemination of basic information that at that level of student you should expect them to know," he says. "We just feel we don't have any moral standing to charge you thousands of dollars for learning what you can learn for free." Legacy universities move students to their degrees through packed, required lecture classes, which Mr. Nelson calls their "profit pools." And yes, he adds, all schools are about raking in money, even if most don't pay taxes by claiming "not-for-profit" status. 

In the Nelson dream curriculum, all incoming students take the same four yearlong courses. His common core won't make students read the Great Books. "We want to teach you how to think," Mr. Nelson says. A course on "multimodal communications" works on practical writing and debating skills. A "formal systems class" goes over "everything from logic to advanced stats, Big Data, to formal reasoning, to behavioral econ." 

Over the next three years, Minervaites take small, discussion-heavy seminars via video from their various locations. Classes will be taped and used to critique not only how students handle the subjects, but also how they apply the reasoning and communication skills taught freshman year.

The idea for Minerva grew out of Mr. Nelson's undergraduate experience. As a freshman at Penn's Wharton School, he took a course on the history of the university. "I realized that what the universities are supposed to be is not what they are," he says. "That the concept of universities taking great raw material and teaching how it can have positive impact in the world is gone."  

Undergraduates come in, take some random classes, settle on a major and "oh yeah, you're going to pick up critical thinking in the process by accident." By his senior year, Mr. Nelson was pushing for curriculum changes as chairman of a student committee on undergraduate education. As a 21-year-old, he designed Penn's still popular program of preceptorials, which are small, short-term and noncredit seminars offered "for the sake of learning."

A Wharton bachelor's degree in economics took him to consulting at Dean & Company in Washington, D.C. "My first six months, what did the consulting firm teach me? They didn't teach me the basics of how they do business. They taught me how to think. I didn't know how to check my work. I didn't think about order of magnitude. I didn't have habits of mind that a liberal arts education was supposed to have given me. And not only did I not have it, none of my other colleagues had itpeople who had graduated from Princeton and Harvard and Yale."

After joining Snapfish in 1999 and leaving as CEO a little over a decade later, Mr. Nelson, who is 38 and married with a daughter, wrote and shopped around his business plan for Minerva. He says he considered partnering with existing institutions, but decided to build a 21st-century school from scratch to offer the "ideal education." 

Ideas like his are not in short supply. The catch? No one has found a way to make a steady profit on an ed-tech startup. 

Going back to the Internet bubble of the late 1990s, many have tried. With $120 million from Michael Milken and Larry Ellison and a board of big names, UNext launched in 1997 as a Web-based graduate university. It failed. Fathom, a for-profit online-learning venture founded by Columbia University in 2000, closed three years and several million in losses later. 

In the current surge of investment in new educational companies, Minerva has no direct competitor but plenty of company. Udacity and Coursera, two prominent startups, are looking to monetize the proliferation of MOOCs. UniversityNow offers cheap, practical courses online and at brick-and-mortar locations in the Bay Area. And so on. 

Education accounts for 8.7% of the U.S. economy, but less than 1% of all venture capital transactions in 1995-2011 and only 0.3% of total public market capitalization, as of 2011, according to Global Silicon Valley Advisors. The group predicts the market for postsecondary "eLearning" and for-profit universities will grow by double digits annually over the next five years.  

Mr. Nelson's vision will be beside the point if Minerva fails to attract paying students. He makes a straightforward business case. Harvard and other top schools take only a small share of qualified applicants, and for 30 years have refused to meet growing demand. A new global middle classsome 1.5 billion peopledesperately wants an elite American education. "The existing model doesn't work," he says. "The market was begging for a solution." 

Audacious ideas are easy to pick apart, and Mr. Nelson's are no exception. He repeats "elite" to describe a startup without a single student. Reputations are usually earned over time. Many prospective students dream of Harvard for the brand. Even at around $20,000 a yearno bargain for middle-class Chinese 18-year-oldsMinerva won't soon have the Harvard cachet.

Any education startup must also brave a regulatory swamp. By opting out of government-backed student-loan programs, Minerva won't have to abide by many of the federal rules for so-called Title IV (of the relevant 1965 law) schools. Americans won't have an edge in admissions and Minerva expects most students will come from abroad. 

But Mr. Nelson wants to be part of the club whose price of entry is accreditation. A cartel sanctioned by Congress places a high barrier to entry for newcomers, stifling educational innovation. Startups face a long slog to get accredited. So last month Minerva chose to partner with the Keck Graduate Institute, or KGI, a small school founded in 1997 that is part of the Claremont consortium of colleges near Los Angeles. Minerva degrees will now have, pending the regulatory OK, an accreditor's seal of approval.
 
With this move, Mr. Nelson eased one headache and raised some questions. KGI offers only graduate degrees in life sciences, an unusual fit for an undergraduate startup. KGI isn't a recognizable international name for Minerva to market. Yet Mr. Nelson says the schools are "completely complementary" and the deal represents "zero change in our mission."  

Among the other marketing challenges: Won't Minerva undergrads miss out on lifelong bonding built in classrooms, dorms and next to the keg? Traveling across the world, Mr. Nelson says, will bring people even closer together. Campus activities? Imagine a college newspaper with 25 foreign bureaus, he shoots back, or the cultural attractions of the world's great cities. "If you want to be an intercollegiate fencer, do not come to Minerva. Bad idea," he says. "There are a lot of traditional experiences that a traditional university will provide you that we will not." 

Effusive on every other topic, Mr. Nelson turns vague when I bring up Minerva's finances. Skeptical investors have seen this movie before. Mr. Nelson doesn't even hint at projected profit or a growth timetable. He says the school has to become roughly the size of an Ivy League university, enrolling around 10,000 students, to break even. "Making your profit, your substantial revenue, based on 18-year-olds is not the mover," he says. "It's what you do with them. It's how you build the brand."  

If the bulk of revenues won't come from undergrads, then where? "We'll see," he says. Perhaps executive education, or licensing classroom content or technology, or putting on conferences. "Our enterprise value will not be derived nearly as much from our 'E' as much as P/E," he says, as in the price/earnings ratio. "It isn't about maximizing profits.

It's all about how the brand unlocks the future potential earnings." Harvard, a multibillion-dollar operation, is a business more than an academic model.
 
Whether or not Mr. Nelson and Minerva shake up American higher education, someone will.
 
 
Mr. Kaminski is a member of the Journal's editorial board.
 
Copyright 2012 Dow Jones & Company, Inc. All Rights Reserved