Letter #211: Bill Oberndorf (2010)
Founder of Oberndorf Enterprises | Education and American Competitiveness
Hi there! Welcome to A Letter a Day. If you want to know more about this newsletter, see "The Archive.” At a high level, you can expect to receive a memo/essay or speech/presentation transcript from an investor, founder, or entrepreneur (IFO) each edition. More here. If you find yourself interested in any of these IFOs and wanting to learn more, shoot me a DM or email and I’m happy to point you to more or similar resources.
If you like this piece, please consider tapping the ❤️ above or subscribing below! It helps me understand which types of letters you like best and helps me choose which ones to share in the future. Thank you!
Today’s letter is the transcript of a panel Bill Oberndorf spoke on in 2010. In it, he discusses his early education, the quality of students entering the workforce, competing with India and China, technology in the classroom, implications of dropouts on America and its economy, leadership, teachers unions, and outsourcing education.
Bill Oberndorf is the Founder of Oberndorf Enterprises. Bill started his career with the Bass Brothers, joining Texas Partners, which was founded by Sid Bass, Richard Rainwater, and John Scully, after graduate school. Texas Partners became Main Street Partners when Sid’s brother Robert joined. Bill then left the Bass Brothers to join John Scully at San Francisco Partners, which was renamed SPO to reflect the addition of two new partners — (Bill) Patterson and (Bill) Oberndorf.
Notably, Bill was also a student of Jack McDonald. Under Jack’s purview, Bill and classmate Tim Bliss (who joined John Scully’s classmate Reece Duca at IGSB after graduation) did a study of the great investors, interviewing people like Phil Fisher and studying Warren Buffett and his evolution.
I hope you enjoy this panel as much as I did! Bill does not speak publicly often, so getting a peak into how he thinks is fascinating.
(Transcript and any errors are mine.)
Related Resources
Jack McDonald
Bass Brothers
IGSB
Berkshire Hathaway
Education Founders
Transcript
On his early education
How many of you somewhere in your education went to public school? Show of hands? Everyone… Would you talk a little bit about something from your public education background that changed your life?
I started off going to a public school. Then I went to a Catholic school. Then it went back to public school that I went to another public school. That was K-6. And then I went to the same private school from 7-12. And it was at that school that I really found my home. And that's why I am such a big believer in choice.
On the quality of students entering the workforce
What is the greatest challenge that you are all finding that is facing American business when it comes to assembling a high quality workforce? … What's your candid assessment of the average American high school student or college student that you see coming out?
I would say my experience has been the case of the haves and the have nots. At our firm, which is about 30 people, we are able to hire the best and the brightest in the country. Extraordinary talent, extraordinary educations. And then I look at some of the companies that we've been involved in. Our timber company, which was the largest private landowner in the country -- we had people in our plants in Louisiana who could not read beyond third grade level. Third grade level. Poor minority. We sent them back to school. And they had been there a long time. But as the business was becoming more sophisticated, they were not even gonna be able to keep those jobs that they had, unless we educated them. And that's pathetic.
On competing with India and China
We all know that India and China are incredibly focused in [STEM]. How do you think American students can be competitive in these areas?
I think we can be competitive again. But we aren't going to be competitive unless we allow there to be competition in education. And we heard about this from Superintendent Pasternak this morning. It's what so many of us have worked in this room for for so long. And the state's -- our laboratories, as Jeb Bush talked about it -- let me give you one specific example. The State of Wisconsin, where there is a long standing voucher plan in Milwaukee. It's capped at 20,000 students. Today -- when it started, there were no charter schools. Out of the 100,000 K-12 kids in that state, in that city, 20,000 are in vouchers. It is fully subscribed. 30,000 are in charters. And 50,000 are in traditional public schools. The graduation rates have improved for the traditional public schools from about 40% to 50%. The charters are around 70%. And the voucher schools are at 65%. And going up every year. We happen to have -- we have family income limits. The average family income is $16,000 for the kids in the voucher schools. That's the average family income. And we are funded at 7,000. The charters are funded at 8,500. And the public schools are funded at about 12,000. If you go to Racine, 2 charter schools. Racine, Wisconsin. Madison, 3 charter schools. No voucher schools. No real choice. So when you have choice, it raises all boats. And that's what we need to see happen more all across the country. Then we're going to have better outcomes. Because there's nothing wrong with the kids. And there's nothing wrong with most of the parents, because most of the parents really do care about those kids, or they have some advocate in their lives who do. And then we're gonna see better outcomes.
On technology in the classroom
Let's talk about innovation a minute. As business leaders, you know how important it is… Would you talk a little bit about technology? A lot of these classrooms still look like the classrooms that you grew up in. What kinds of innovations that you're seeing in the business world do you think can be brought into the classroom?
I think technology has the potential to be the great disrupter here. With the greatest potential of perhaps anything that is out there. Gisele Huff is doing a tremendous amount of work on this. And it price points of between $5,500-6,000 a student. Dramatically lower than what we are spending today in every state. So if you take -- you have to have early adopters, though, to any of these things. And the public schools will dig in on this, in my opinion. But I think where there's the greatest potential of this is in the Catholic schools today, where we have 1.2mn empty Catholic school seats in the urban cities in the United States. We have erected a Berlin Wall in our own society. And they have to operate at that $5,000-6,000 price point. And they serve the poorest kids in the country, and technology can make it happen for them.
On the implications of dropouts on America and its economy
What are the immediate and the longer term implications that you see for American business and our country as a whole if we're unable to turn around the dropout crisis right now?
Thomas Jefferson said, You must have an educated populace to have a democracy. When people feel that they cannot participate because they don't have the skills to, in the life of the country, they are going to become frustration. That frustration will spill over, and we will have anarchy. That's what's at stake here. And it's in process. This isn't out in the future, it is what is going to happen now. We're seeing the beginnings of it. And if we don't do these stem this tide very quickly, we aren't going to have a country.
On Leadership
Successful leaders have to take chances. And sometimes you win, and sometimes you lose. If you could, leave our audience today with one piece of advice about leadership that you think might help them in going forward with this.
I would define leadership as how you get other people to follow who may not be inclined to do so. And a lot of that comes from working with people willing to be able to reach across the aisle, as Jeb was talking about this morning. How do you get people to coalesce around this issue? Well, you get them to do so because this is about kids. And you talk about the children. And that's who this really is all about. And it can't be about adults. And it can't be about job preservation. So you have to define it that way. And then I think the other aspect of this, which has been echoed by the other panelists so far, but it's something George Shultz taught me, who's been involved with this issue for decades now. He said, You never get anything done politically, unless there's a real or perceived crisis. And I think there is a sense today, and a lot of it's because this has been the year of documentaries, we have a crisis. And when you have those rare moments, you better seize them, because they don't come along very often. And you better act boldly.
On teachers unions
Nobody's talked about teachers unions. How would you deal with teachers unions? Are they friend or foe?
I think the teachers unions are an enormous problem. And it's not a problem with the teachers. It's a problem with vested interest. And I think you have to create alternative paradigms in order to get the unions to be be responsive. I'll go back to Milwaukee as a case in point. Once there was a bill passed, which was vehemently fought against by the unions, they then did things like began -- there is no longer seniority placement in Milwaukee. They realized they couldn't lump -- put all the bad teachers in the same schools. They made these changes themselves. They began to offer tutoring programs, because they realized they had to get the reading levels and math comprehension levels up in the public schools. Those things wouldn't have occurred if they hadn't been forced to make those changes. So I think you have to have forces from the outside to get the unions to change and modify their behavior. When they do so, then all things can improve. But left to their own devices, it won't happen.
On outsourcing education
As CEOs, many of your corporations have outsourced jobs overseas to get better quality, better results. Why as you as CEOs have not spoken out about outsourcing education more, as in private schools, school vouchers, tax credits, charter schools, to get better quality in education today?
Well, the people who I've found who have been CEOs of companies who've been willing to speak out on this issue, have by and large been entrepreneurs, who started their own businesses, who are not beholden to unions. You have many people who are CEOs of large companies where they've got a lot of union issues and this will make their business lives complicated to step out on this. And the unions control an awful lot of money that goes into politics. So this comes back to politics. And again, it goes back to how can you work to change that paradigm. Somebody who's done a magnificent job of this is John Kirtley, in Florida, where five years ago, six years ago, 30 members of the Black Caucus, almost all Democrats, only one out of 30 voted for school choice. This year, 23 out of 30. Almost every member of the Hispanic Caucus voted for school choice. Because once you start it, their constituents begin to experience it, and they won't go back. But we've got to get CEOs to step out on this, and take some risks. And they need to be more vocal. And they need to be more visible.
If you got this far and you liked this piece, please consider tapping the ❤️ above or sharing this letter! It helps me understand which types of letters you like best and helps me choose which ones to share in the future. Thank you!
Wrap-up
If you’ve got any thoughts, questions, or feedback, please drop me a line - I would love to chat! You can find me on twitter at @kevg1412 or my email at kevin@12mv2.com.
If you're a fan of business or technology in general, please check out some of my other projects!
Speedwell Research — Comprehensive research on great public companies including Constellation Software, Floor & Decor, Meta, RH, interesting new frameworks like the Consumer’s Hierarchy of Preferences (Part 1, Part 2, Part 3), and much more.
Cloud Valley — Easy to read, in-depth biographies that explore the defining moments, investments, and life decisions of investing, business, and tech legends like Dan Loeb, Bob Iger, Steve Jurvetson, and Cyan Banister.
DJY Research — Comprehensive research on publicly-traded Asian companies like Alibaba, Tencent, Nintendo, Sea Limited (FREE SAMPLE), Coupang (FREE SAMPLE), and more.
Compilations — “A national treasure — for every country.”
Memos — A selection of some of my favorite investor memos.
Bookshelves — Your favorite investors’/operators’ favorite books.