Investing in education

It’s the future! It provides the greatest hope for humanity! So, here is my mission for today: to consider the merits of investing in education.

Article updated: 22 March 2019 12:00pm Author: Michael Baxter

Education is just about the most important of all industries. Yet, I worry about it. When schools were first provided for ordinary folks, as opposed to the elite, factory owners and those introducing compulsory education made a pact. Factories were set to lose an important source of cheap labour, namely child workers, and so they agreed a deal. Providing schools churn out factory workers — workers for the future, they could accept it. And that is why schools are like they are: rows of desks, teacher at the front, discipline an important part of education — or so Seth Godin has suggested.

And I am sorry to say this, but for the most part, the education sector, and especially policy makers in government, are asleep. They don’t have the slightest idea of how the education needs of people have changed. And frankly, I am not even sure that parents really understand how the education needs of their kids have changed. And few of us adults understand our own needs for education.

And it has changed thanks to tech. The well paid jobs of the future will involve working with AI — data scientist is one new role that has been created and has an enormous appetite for talent.

But technology is changing so fast — we all carry with us a device for accessing the greatest library that has ever existed, in seconds.

By the time kids who are entering education in 2019, at reception level, leave school, technology will be entirely different. We will probably have access to the internet, not from devices we hold in our hands, but from glasses, contact lenses, earphones, and even chips embedded in our bodies. Screens won’t be physical things — we will call up a screen that exists virtually, we could type into it, our fingers gliding over thin air and invisible ether, or speak into it, even think into it — yes, some companies are working on interfaces we can operate by thought. Facebook, for example, was working on technology that can type from instructions dictated by thought. It claimed that the technology would be able to type at 50 words a minute.

And what will be the point of learning so many of the things we learn today? Will we need to learn a foreign language when a real-time translation device that sits on the cloud and communicates with us via earplugs, can translate every language known to man in real-time? Voice recognition has been improving super-fast in recent years, it’s only a matter of time before it can understand us as accurately as we understand each other. Will we need to learn our times tables if we are never more than a few nanoseconds from giving instructions to a sophisticated calculator? Will we need to remember things — remember dates in history, for example, cram our minds with facts, when we can look up any fact in a fraction of a second? As Einstein supposedly said: “Never memorise something that you can look up.”

Now I know there are flaws in the above. What will happen to our brains if we don’t do the above things. Will our brains become as useful as putty?

But that will be one of the most important challenges of education — ensuring our brains are not turned into something useless by technology, instead teaching us how to let technology augment us, improve us, challenge us, exercise our brains, remember for us without making us lazy?

Talking of brains made of putty. We are all putty in the hands of crowd pressure — we think the thoughts and ideas that our environment and groupthink tells us to think. Bold individuals that we consider original thinkers are still slaves of the framework we learned to accept as kids. We might rebel at some of our teachings — but our rebellion is always limited.

As we dive into our smart phones, and talk to one another via social media, might we forget how to communicate? Might we lose the skill of interacting with others face-to-face? Might the metaphorical muscle that gives us empathy grow weak?

What we need is education that helps us grapple with these challenges — creates skills set for the AI revolution, teaches us how to make optimal use of technology, frees us from the chains of convention and groupthink, exercising our empathy.

Instead we get schools that have barely changed in a century, politicians talking about returning to education basics, learning our tables, yearly exams, 19th century thinking that Dickens would have hated, in an age when technology is changing the world at a pace that has no precedent.

So what can investors do?

A superficial analysis reveals a sorry tale — a lack of opportunities, but there are a few.

There are companies that operate in education services — companies such as Wey Education, listed on AIM that provides online education.

The education services sector also has a busy place on the NASDAQ, many of the players, such as Hailiang Education Group, or Tal Education, and OneSmart International Education Group, are Chinese based; there is also a smattering of companies that operate education institutions in the US such as Adtalem Global Education and Universal Technical Institute.

In the UK, universities often borrow money by issuing bonds. Banks used to be big investors in universities because the debt was considered relatively safe. But Basel III rules has dented their ability to do this, hence universities such as Oxford, University of Bristol and Lancaster University have taken to the bond market.

Adult and tech

There is another point about education. Just as the needs of kids starting school today are different from kids of a few decades ago, students leaving school or higher education have very different needs. They may need to re-train over and over again, maybe have outright career changes several times during the course of their working lives.

This is creating the need for adult education and training — set to become a rapidly growing sector.

But it is education technology — Edtech — where I see the biggest opportunities — companies like VR Education, a UK listed company which specialises in virtual and augmented reality education software, or in the US, K12 Inc.


But just as there are opportunities there are examples of over hype. Last year US Edtech companies collectively raised $1.45 billion, equalling the record.

Is this opportunity? Of course. But, as they used to say to us when we were at school, do your homework.

Comment below if you uncover some interesting opportunities. Or, see me after class.

These views are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees

Michael Baxter portrait photo
Michael Baxter

Economics Commentator

Michael is an economics, investment and technology writer, known for his entertaining style. He has previously been a full-time investor, founder of a technology company which was floated on the NASDAQ, and a director of a PR company specialising in IT.

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