Annals of New York private schools, Avenues edition

By Felix Salmon
September 13, 2012
Carl Swanson has a perfectly-pitched profile of Avenues, the new for-profit private school in Manhattan where, as he puts it, affluent parents steeped in "that inspirational-advertising way banks and oil companies have come to perfect" are "hoping the school will provide a secure future in the Davosphere for their children".

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Carl Swanson has a perfectly-pitched profile of Avenues, the new for-profit private school in Manhattan where, as he puts it, affluent parents steeped in “that inspirational-advertising way banks and oil companies have come to perfect” are “hoping the school will provide a secure future in the Davosphere for their children”.

The school has raised $75 million from investors, and sprawls over 215,000 square feet of very expensively fitted-out prime New York real estate; it even has a robotics lab. The idea is to educate tomorrow’s global elite, in a world where the cost difference between the very best and the merely excellent has never been greater. Given the parents and the kids that Avenues is designed to appeal to, it’s easy to see how the price tag for a year’s education could reach astonishing levels.

Think about it this way: if you live in a nearby apartment with a couple of kids, and you enjoy the same kind of light and space that can be found at Avenues it’s entirely possible that you have a $5 million mortgage — which, if it’s a 30-year loan at 4% interest, will cost you some $286,000 a year in mortgage payments. People with those kind of cashflows aren’t looking to save money on their school tuition bills: they’re just looking for the best school they can find. As ever, there’s no one quite as price-insensitive as a parent looking for a private school — and the richer the parent, the more price-insensitive they become.

At most high-end private schools, as described by Scott Asen, tuition rates in the $40,000 range “often cover only 70 to 80 percent of costs”. Which means that the actual cost of educating these kids is somewhere north of $50,000.

Avenues is being run on a for-profit basis, and has surely spent much more than most schools on real estate; if you include its rent or mortgage payments, and then add in a little something for profit margin, it’s easy to see how the school might charge somewhere in the $60,000 to $70,000 range per child per year. That would be weirdly handy as a signaling tool, too: often, at these levels, price is used as an indicator of quality and desirability.

And yet, for all the six-figure salaries paid to the staff at Avenues, tuition is a mere $39,750, plus mandatory fees of $2,000 to cover “lunch, snacks, athletic uniforms and annual investments in educational technology”. Avenues is glossy, but it’s also being run on the cheap:

Whittle has planned Avenues with a McKinsey-like focus on making the curriculum as lean and efficient as possible… his book is largely for the type of person who thinks principals should have M.B.A.’s and teachers should get commission, their bonuses dependent on improvements in test scores. Understandably, teachers unions weren’t happy about that idea, or his other big one, which is to free up money for raises by having fewer teachers…

Each kid gets a dedicated cubicle, since Whittle thinks they should spend half the day out of the classroom working independently (a pedagogic notion he pursued in Crash Course as a way to save money).

It’s easy to be able to afford an iPad for every student if the amount of time they actually spend interacting with well-paid teachers is cut in half. And I’m sure that the investors in Avenues aren’t expecting profits from day one, especially given that the school is starting out only at 50% of its capacity.

But the fact is that all schools are local, and for all that Avenues has lofty aspirations of being the world’s first genuinely international school, the realities of the private-education business are still steeped in extracting high fees from local parents who don’t make seven-figure salaries at Goldman Sachs. Swanson talked to actual parents at Avenues, rather than the hypothetical financial jet-setters that the school aspires to appeal to, and reports that “while tuition is typical for a private school, several parents pointed out to me that since the school is for-profit, they won’t be hounded for donations, too”.

It seems to me that Avenues has a pretty subtle two-level sales pitch. Ostensibly it’s all about being part of the global elite, hanging out with the Davos set, immersion in Mandarin, becoming the best of the best, and so forth. But underlying that is something much more mundane but just as effective when you’re dealing with New York’s harried parents: we’ll charge the same as everybody else, we won’t harry you for donations, and — crucially — we’re easier to get in to, just because we’re not as established as those other guys. Did you just move to New York in a hurry to get away from a controlling husband, and need a new school on short notice without being able to apply years in advance? Well, we’re perfect!

The world of education moves slowly, and is hard to disrupt. Avenues is a little bit further outside the mainstream than most schools, and it’s easy to get caught up in the ways that it’s different from the others. In reality, however, it’s just another private school in Manhattan, one which has the same kind of middle-class* parents as the others, and one with rather less in the way of student-teacher interactions than you find at most of its peers. The students will all be fine: they all come from supportive, affluent, well-educated households, and those students always do fine. But let’s not kid ourselves that they’ll be disproportionately represented at Davos 2040, or that any school, anywhere, could deliver such a class.

*Update: The irony in my use of “middle-class” wasn’t coming through, so I striked it out. The parents at Avenue and other NYC private schools are rich; they’re not middle class. But, at the same time, they’re highly ambitious and aspirational, and they are a long, long way from the global plutocracy which Avenues claims to be serving.

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