EIEIO...DOE DOA?
On the Department of Education
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EIEIO…Fast Facts
Entrepreneurship: 112 – The number of startups founded by SpaceX alumni (Alumni Founders by Live Data Technologies)
Innovation: $3 billion – The amount of venture funding invested into defense tech start-ups in 2024, compared to $0.3 billion in 2019 (Crunchbase)
Education: 42% – The percentage of U.S. public school teachers who say that the stress and disappointment of their jobs are “worth it”, compared to 72% in 2018 (RAND)
Impact: 39,000,000 – The minimum number of deaths that antibiotic resistance is projected to cause globally by 2050 (Harper’s)
Opportunity: 88% – the percentage of Salvadorans who say that it is safe to walk alone at night in their neighborhood, compared to 72% of Americans (Gallup)
“I would abolish the Department of Education very quickly. People don’t realize that the Federal Department of Education gives each state 11 cents out of every dollar that every state spends. But it comes with 15 cents worth of strings attached.” – Former New Mexico Governor Gary Johnson
“The function of education is to teach one to think intensively and think critically. Intelligence plus character…that is the goal of education.” – Martin Luther King Jr.
“Education is the most powerful weapon which you can use to change the World.” – Nelson Mandela
“Educational excellence is critical to the societal contract supporting our democracy and is inextricably tied to the success or failure of our nation.” –Condoleezza Rice
“It is the mark of an educated mind to be able to entertain a thought without accepting it.” – Aristotle
DOGE-ball has become the most popular sport in Washington DC.
The newly created Department of Government Efficiency a.k.a. DOGE, co-founded by Elon Musk and Vivek Ramaswamy, has lit up the entrepreneurial community in a positive way I’ve never seen before. Talent is coming out of the woodwork to contribute and make a difference for the country.
The mission of DOGE is to streamline government operations and reduce wasteful spending which with 2.2 million federal workers and a $6.7 trillion budget is a target-rich environment. The stated goal is to make USA Inc. a leaner, meaner fighting machine and then close down DOGE on America’s 250th birthday July 4th, 2026.
Perhaps no area of the Federal Government has more critics than the Department of Education. After all, despite it spending $228 billion a year, or 4% of the overall budget, few people are happy with the overall performance of our education system. (As a side note, the United States Government pays $658 billion a year in interest expense.)
Conventional wisdom is that Jimmy Carter was the creator of the Department of Education in 1979, which was promptly greeted by Ronald Reagan wanting to abolish the DOE with his election in 1980. The actual facts are a bit more complicated and extensive.
The history of the department dates back to over 100 years earlier, when Congressman Justin Morrill introduced a bill for the creation of public land grants for state colleges. His bill went largely ignored for several years, until President Lincoln’s administration took it under consideration. Though first they wanted to collect information on the schools already in existence and already being built.
Lincoln’s successor, Andrew Johnson, then created the Department of Education on March 2, 1867, largely at the urging of Zalmon Richard. However, the department only retained its independent status for two years before it was changed to the United States Office of Education within the Department of the Interior. Over the next century it would be transferred to the Federal Security Agency and later the US Department of Health, Education, and Welfare.
In 1979, President Jimmy Carter proposed reinstating a cabinet-level Department of Education in order to “establish policy for, administer, and coordinate most federal assistance to education, collect data on US schools, and to enforce federal educational laws regarding privacy and civil rights.” Carter signed the Department of Education Organization Act into law on October 17, 1979, with operations officially beginning on May 4, 1980.
The stated mission of the Department of Education is pretty undeniable and shouldn’t be controversial. Notably, the DOE is to “promote student achievement and preparation for global competitiveness, education excellence and ensuring equal access.”
As a country for pure self-interest, ensuring that all students have access to high-quality education and resources is a given. Former Secretary of State Condoleezza Rice stated in a report recently created by the Education Futures Council that educational excellence is inextricably tied to the success or failure of our country. Secretary Rice also said our country’s education failure has gone from an “urgency” to an “emergency”.
The advocates for abolishing the Department of Education cite a number of issues that they pound on. Project 2025 out of the Heritage Foundation rails on the DOE having lost the plot of what they should be doing and being a “bastion of progressivism.” Also, Heritage makes the argument that issues such as civil rights enforcement are better enforced out of the Department of Justice and block grants to the states are a better way to get money to low-income students and children with special needs.
What Does the Education Department Do? A Look at the Agency Trump Wants to Cut | U.S. News
Other disputes with the DOE include items such as the Department of Education wasn’t in the Constitution (neither was the space program or the Department of Homeland Security), not having enough support of local control and parent input, and federal overreach.
Arguably, the most compelling reason for shutting down the DOE is that as a country, despite spending trillions of dollars on education, we haven’t moved the needle in terms of extensive excellence. Most problematic, with our most disadvantaged students, we’ve failed them. As legendary football coach Bill Parcells said, “You are what your record says you are.”
As a nation, our education system is the New York Jets.
Despite spending $857 billion on K-12 public education, or $17,280 per child…more than any country than Luxembourg, yet our education standing vis a vis our international counterparts is mediocre at best.
10 Countries with Highest PISA Scores:
Singapore - 560
Macau - 535
Taiwan - 533
Japan - 533
South Korea - 523
Hong Kong - 520
Estonia - 516
Canada - 506
Ireland - 504
Switzerland - 498
….
18. United States
The National Assessment of Educational Progress (NAEP) has actually gotten worse over the past five years. Only 31% of 8th graders are proficient in reading and just 27% of 8th graders are proficient in math. In Chicago, there are 55 schools where there isn’t one student who is proficient in math or reading.
In higher education, students have accumulated $1.7 trillion of debt with an increasingly challenged product/market fit. Just 41% of college students graduate in four years and when they do, they are entering a job market that is changing faster than the skills they have.
My view is that rather than abolish the Department of Education, we need to reimagine how we align its activities with national objectives…and elevate it.
To have a citizenship that can thrive in a dynamic knowledge-based future, we need to have the Department of Education set the bar for a target of national and global excellence that every school, teacher, and parent understands.
The Department of Education can be a leader in how we attract, develop, and retain the best teachers in the World and give them the stature that highly effective professionals deserve. In China, teachers are equivalent to doctors, in America, they are equivalent to a librarian.
The Department of Education can play a vital role in innovation and making sure our education system is at the forefront of new technologies that can help advance how people learn and acquire knowledge. The Defense Department has the Office of Strategic Capital and the Defense Advance Research Project Agency (DARPA)…the Department of Education needs the equivalent.
Lastly, the Department of Education should be the catalyst of interaction between other key departments of government and the states. Education is critical for Defense, Commerce, Health and Human Services, and even Agriculture…just to name a few. Overarching the 50 states, which can be innovation laboratories, and creating both synergy and accountability is crucial.
The nomination of Linda McMahon to be the new Secretary of Education was met with disdain by many of the establishment who thought her appointment showed how little President Trump thought about the Department of Education. After all, she had little background in the Education Industry, with most of her management experience being the CEO of World Wrestling Entertainment.
My optimistic view is that Secretary McMahon would bring her formidable entrepreneurial skills to the DOE, with her tenure as the Head of the Small Business Administration during President Trump’s first term, notable for her success, especially in supporting women entrepreneurs, rural businesses, and veterans. Moreover, as Chairman of the American First Policy Institute, she promoted school choice, increased parental involvement, and, focus on developing technical skills and more accountability.
Coach Lou Holtz Praises Linda McMahon’s Leadership
To Make America Great…which is what we all want….we have to have the greatest education system in the World. To do that, we need the best, smartest and most forward looking Department of Education on the planet.
Market Performance
Market Commentary
The beat goes on.
As has become habit, stocks moved up nicely last week led by the Dow advancing 2.0%. The S&P 500 and NASDAQ each were up 1.7% as the “animal spirits” have awakened post-election.
In addition to Wall Street having a smile on its face, consumer sentiment as measured by the University of Michigan reached a seven-month high at 71.8. Also, crypto has come back with a vengeance with Bitcoin nearly reaching $100, 000 last week.
Artificial Intelligence continues to be the Megatrend with Menlo Ventures research saying businesses spending on Generative AI up 500% from $2.3 billion to $13.8 billion in a year. Elon’s LLM xAI raised $5 billion at a $50 billion market valuation. The poster child of the AI Revolution, NVIDIA, reported mega results last week with revenues up 100% beating analyst expectations by 6%…alas, with NVIDIA’s world-leading $3.6 trillion market cap, and NVIDIA guidance of “only” 70% fourth growth, shares stalled.
In other news, Comcast has media properties such as MSNBC, CNBC, USA, and Oxygen for sale. Just because he has nothing else to do, Elon also articulated interest in buying MSNBC and doing a “Twitter” to it.
While valuations of the S&P 500 are stretched by traditional measures at selling at 21.8X forward estimates, if you “normalize” the index by company instead of market weight, the P/E is more like 16X. Moreover, the broadening of participation by stocks bodes well for growth investors. We expect to see a robust IPO Calendar in 2025 which also is positive for growth hunters. We remain BULLISH.
Need to Know
READ: Weekly Dose of Optimism #121 | Not Boring
READ: What abolishing Education Department could mean for higher ed | Inside Higher Ed
WATCH: Milton Friedman casually giving the blueprint for DOGE in 1999 | Students for Liberty
LISTEN: Morgan Housel: The Cost of Ego | Glue Guys, EP.13
ICYMI: 🎙️ Ep 30 · Arne Duncan: Former U.S. Secretary of Education | Ed on the Edge | Dash Media
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Connecting the Dots & EIEIO…
Old MacDonald had a farm, EIEIO. New MacDonald has a Startup….EIEIO: Entrepreneurship, Innovation, Education, Impact and Opportunity. Accordingly, we focus on these key areas of the future.
One of the core goals of GSV is to connect the dots around EIEIO and provide perspective on where things are going and why. If you like this, please forward to your friends. Onward!
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