Free Market Education: Teacher Refuses $11 Million Offer

FT reports:

Modern Education published an open letter in local newspapers last week offering Lam Yat-yan, one of Hong Kong’s most popular tutors, an annual income of HK$85m ($11m) if he jumps ship from rival Beacon Group and lures 25,000 student enrolments. 

Modern Education, whose parent company listed on the Hong Kong stock exchange in 2011, made its move for Mr Lam, a 28-year-old Chinese language tutor, just after Beacon filed for its own initial public offering.

Mr Lam, who looks more like a boy-band singer than a teacher with his fashionably coiffed hair and fitted clothes, enjoys a strong following. “I have friends who worship him like a god,” said Coby Lam, one of his former students. “A friend of mine got better grades after going to his class and that’s why I signed up for it.”

Tiffany Lai, another former student, said she joined the bandwagon along with most of her classmates because she was afraid she would miss out.

“I think he’s a good talker, that’s his biggest selling point,” she said. “I saw people crying even in some of his video classes, all because of the motivational things he said.”
With testimonials such as these, it is no wonder these colleges have to worry about “key person risk” even more than founder-led companies such as Facebook or Tesla Motors.
Star tutors have to sign non-compete clauses and several poaching attempts have escalated into messy legal disputes.

Beacon revealed in its listing prospectus that its top tutor was responsible for generating 40 per cent of its revenue of HK$328m in the past financial year..

Tutors are typically paid commission per student and the use of video technology has allowed them to expand their reach. When Mr Lam gives a live class, Beacon records it and rebroadcasts it as many as 18 times, with students who watch the video getting just a HK$20 discount on the HK$590 fee for four sessions.

When you mix free markets and the distribution abilities of the internet, talented teachers can make a fortune. And students get top quality teaching!

-RW