CHAPTER ONE WOOING THE PRESIDENT OF YALE Benno Schmidt Jr., the president of Yale University, kept lifting his eyebrows and shooting wry looks at Peter Jennings, the ABC television network anchor who sat across the candlelit black marble table set for twelve. In considerable amazement, he listened at a Long Island beach house dinner party in the summer of 1990 to a bizarre scheme being vigorously espoused by one guest he had only met this night. Calmly and persuasively, Chris Whittle was suggesting that America's bankrupt public school system should be turned upside down - "reinvented" - and that he was ready to tackle the job himself while making a profit doing so. Not surprisingly, the powerful and sophisticated president of Yale and Jennings, a knowledgeable education buff, fired challenging questions. Between bites of grilled tuna the other guests, sophisticates all, leaped in and fueled a stimulating debate that rattled on for three or four hours. At times it was heated. The hosts were Ed Victor, an international literary agent in London, and his lawyer wife Carol Ryan. Both Americans, they regularly came home to spend summers at Two Barns on Long Island's Little Noyac Pass in Bridgehampton. Their beach house, romantic, historic, and aptly named, was constructed from two seventeenth-century English barns they had dismantled and numbered board by board in 1981 and then shipped across the Atlantic to be reassembled and joined as their vacation home. This dinner highlighted the weekend Benno Schmidt and his wife, Helen Cutting Whitney, a documentary filmmaker, were spending as the Victors' guests at Two Barns, as they did every year, Mort Janklow, a New York literary agent, was another one of Victor and Ryan's dinner guests that evening. He recalls thinking that Chris Whittle - "a really smart guy" - was sending up trial balloons and "noodling" an idea he hadn't yet thought out. "I don't think there is anything that Chris Whittle has not thought out," rejoins Victor. "In a sense it was a trial balloon. I think it was one of the first public outings of the Edison Project, but I remember the dinner table was, to make a terrible pun of the Edison Project, `lit up' by this conversation. "It really did dominate the evening. I know that very heated words were exchanged between Chris and Peter [Jennings]. They really went at it. Peter is an expert on education. It's a regular part of his American Agenda on the nightly news. They crossed swords a lot, as did Harry Evans and Chris." Ed Victor was referring to another guest, Harold Evans, former editor of the London Times, who had become head of Random House's trade book division. He was present with his wife, Tina Brown, then editor of Vanity Fair and soon to be named editor of the New Yorker. The other three at the table were Peter Jennings's wife, the author Kati Ilona Marton; Mort Janklow's wife, Linda, who headed New York City's ghetto school cultural program; and Chris Whittle's fiancee, Priscilla Rattazzi. Daughter of an Italian count and niece of billionaire Gianni Agnelli, Italy's richest man and chairman of the Fiat automobile empire, she occupied her family's summer house nearby in East Hampton. She knew the Victors because her five-year-old son Maximilian played in the Long Island "brat pack" with the Victors' small boy, Gary. Priscilla Rattazzi currently was awaiting a divorce from Maxi's father, her second husband, Claus Moehlmann, a German investment banker. Despite Machiavellian overtones that could be suspected later, the dinner party was not a deliberate ploy for letting Chris Whittle try out wacky ideas on Benno Schmidt or, for that matter, on any guest. "Benno and Chris are both pals of mine," says Ed Victor, "and I thought they should get to know each other." Schmidt later said of the dinner party, "I've often wondered whether my old friend Ed had any thought that an oak tree might grow out of that acorn." Throughout the evening, Chris Whittle was definitely on the defensive, countering sharp blows from every side. Ed Victor watched and marveled at his poise and argumentive skills. Though Whittle had bought and was remodeling his own house in East Hampton across a pond from Priscilla Rattazzi's, Victor had first met him in 1989 in London. A mutual friend in Hollywood had asked the agent to introduce Chris to the London literati, which included going to Ken Follett's Christmas party and a photo exhibit by Koo Stark, the actress who dated Prince Andrew in the mid-eighties. However, no one at the table knew more about him than Tina Brown, who had just published in her March 1990 issue of Vanity Fair (whose cover displayed near-nude actress Kathleen Turner) a thorny profile: "Is Chris Whittle the Devil?" The introductory deck read: Chris Whittle, the marketing whiz from Tennessee, has seen the future and it is "enlightened commercialism" - ads everywhere, even in doctors' waiting rooms and between the pages of books. With the launch this month of Channel One, a news program for classrooms with commercials and expected revenues of $100 million, Whittle has raised an uproar. Is he a visionary? Or is he asking us "to sell access to our kids' minds"? At this dinner party, no one rehashed Chris Whittle's image as a maverick of controversy in American media for the past two decades. The talk centered on his private-public school brainstorm and his impending challenge of America's elementary education with a multi-billion-dollar scheme that had not yet been publicly announced. "We were talking about education," says Janklow, "lamenting the failure of the American public school system. Linda is chairman of Arts Connection, which is the largest inner-city school cultural program in the United States. They give 2,600 cultural performances in the ghetto schools every year. She was talking about the schools she visits in the ghetto where the educational system is failing. I recalled the time in the forties when I was in public school and we still had the first-generation children of immigrant parents for whom teaching was a big deal. And how we had such wonderful public education in New York and how that was now failing. "Chris began to talk, asking, wouldn't it be wonderful if there could be a way to really take the kinds of things that are possible in private schools and do them in a broad-based educational structure. It seems this was something he was noodling with. But it was clear to me that he was convinced then there was a way to improve the education system that might not be possible in the public context which has been traditional in this country. "Some of us argued we weren't getting the right kind of teaching and the ghettos had become uncivilized. That it became dangerous and impossible to teach in those environments. And the illegitimacy of children ... That kind of thing. Really far-ranging discussions.... And Chris was the only one who had obviously focused on trying to find a solution to this problem." Peter Jennings objected to the "reinventing" idea. He feared 200 to 250 alternative Edison schools scattered across the United States would "take away" from the state educational system. Ed Victor recalls Jennings arguing that the country's energy and resources should go to improve the existing system, not create an untried alternative. Chris Whittle countered that millions spent by Edison on research and development would inspire states to emulate its anticipated revolutionary methods. Benno Schmidt has a vivid recollection of the dinner-table debate. "Chris Whittle said he had in mind creating a new nationwide system of schools that would be rethought from the ground up. He thought we needed a revolution in education, that the existing schools were so fragmented, so constrained by politics and by the sort of inherited model and approaches they had. Hence they were not capable of the kind of revolutionary change he thought education needed. That the way to do it was to create a new nationwide system of schools, get investors to finance it, because it couldn't be financed any other way. And that was about it. "Jennings jumped in. Said he had been around to a lot of schools. Thought there was a lot of innovation going on, and a lot of new thinking. And that the problem really wasn't so much with the schools but with the problems of family and kids that they bring to the schools. So there was a lot of discussion about what current schools are doing. And some skepticism, I guess, about whether it would be possible to create a whole new system." When the last guest had departed and the Schmidts relaxed for a nightcap with the Victors, the president of Yale was of the opinion that he had experienced a stimulating dinner-table joust over the future of American education with an intense, articulate, and serious young man with notable powers of persuasion. And that was all. But he did not know Chris Whittle. It was not to be their last encounter on that subject. When Chris phoned him at Yale weeks later it took Schmidt a moment to remember who he was. "I didn't think anything more about him or the idea after that dinner, just an interesting dinner. I wasn't expecting to hear from him." Chris Whittle asked if he could come to New Haven and see the Yale president. "I assumed," says Schmidt, "he wanted to come up and just get some general advice and counsel from me on how to go about thinking through the strategy for this project. And to talk more generally about my sense of education and what the problems were in the country, and what the opportunities were." When Chris arrived, Schmidt was in the midst of a busy "sort of dentist-style day," rushing from one meeting to another. Schmidt took his visitor to the celebrated Mory's for lunch. At the table, Chris got right to it. "I know you are going to think I'm crazy," he said, "but I want to persuade you to leave Yale and to join this new project, because nothing like it has ever been done before." Benno Schmidt was taken totally off guard. The offer came in what he remembers as "a most friendly, engaging way." His eyebrows shot up, and his mouth fell open. "Yes, you are! You are crazy!" The Yale president smiled, dismissing the offer about as casually as he would a five-dollar bet on tomorrow's weather. "I said, 'I think your project sounds very intriguing, but there is no way I could think about leaving Yale.' "And then he said, 'I expected that would be your response, but let's talk about it anyway a little bit.' So he laid it out a little bit at lunch. I said, 'Look, I really think you mustn't waste your time thinking this is something that I could possibly do. I've got things at Yale that I'm in the middle of that just have to be carried out. This seems a worthwhile project. I'd be happy to give you advice. It's interesting and fun - but there's no way.'" Chris said, "Well, okay. I understand. But I'd like to talk with you some more about it." "Okay, okay," said Schmidt. "Just give me a call whenever you're up in this neck of the woods and we can sit down again." They had no further contact for weeks. But right after New Year's 1991 Chris returned to New Haven. "I heard," Schmidt recalls, "more of his conception of how the project would be organized and conceived from the beginning, what his strategy was for thinking that it could be accomplished, what his public purposes were in doing it. This was really intended by him as an effort to kind of open up a system of education that he felt was closed and increasingly moribund and failing. And his view that opening it up to innovation and competition and choice was probably the best way to bring about change that was crucial." Chris Whittle conceded he would have to raise an enormous amount of venture capital - $2.5 billion! The first step, at a cost of $60 million, would be to create a think tank of experts to thrash out the model for the new schools. Once that was done, his basic scheme called for a network of two hundred profit-making schools that would open their doors in 1996 for children as young as one year old through the sixth grade. Grades up to twelve would be phased in one year at a time. This would require $2.5 billion from large investors to acquire land and build facilities equipped with computers and audio-visual aids. By the year 2010 there would be one thousand Whittle schools. As he told Schmidt, on the same $5,500 that American taxpayers currently spend per student annually, the schools should turn a profit of 12 to 15 percent. Later the Whittle enterprise would make money by selling the educational software and other services it would have developed to public schools. "We can reduce costs in many ways," Chris told Schmidt. "Elimination of bureaucracy, introduction of technology . . . We see parents and students doing many things that would lower tuition. Not just cafeteria and janito [NO CONTINUATION FOR PAGE 9 FROM THE ORIGINAL DOCUMENT NEXT DATA IS FOR PAGE 10] Schmidt's life was so frantic he returned phone calls from his car while driving to Manhattan on weekends. Now, about eight months after the Two Barns dinner party, Benno Schmidt had acquired a much better picture of Chris Whittle's background and meteoric rise to become a multimillionaire entrepreneur in publishing, only to switch career lanes to barge into education with his controversial Channel One broadcasts. Given his extremely modest background, Chris Whittle seemed cast in an unlikely role. Born in 1947, son of a small-town physician, Chris became a campus politician at the University of Tennessee at Knoxville. There he met and bonded with another student leader, Phillip Moffitt. In 1969, in an offhand way, they published a free campus guide for freshmen called Knoxville in a Nutshell and loaded it with advertising. Chris and Moffitt discovered this was a paying business; with two partners they created Nutshells for a hundred other colleges. The entrepreneurs moved quickly - and amateurishly - and promptly fell $1 million in debt. In the process, however, they created a million-dollar idea - a formula that permitted advertisers to directly target college and high school consumers. Their idea paid off gradually but enormously when they chanced to hit on the idea of "print specials," where one advertiser dominated an entire issue of one of the many youth-oriented magazines they developed under the banner of The 13-30 Corporation, named for the age group they addressed. Within ten years, 13-30 publications, issued from Knoxville, were grossing $10 million a year. Whittle and Moffitt, brash, young, and unseasoned, kept expanding their scope on campus, adding to their profits by signing up health and beauty aids manufacturers to distribute samples of their wares to freshman dorms at two hundred colleges. Their remarkable success attracted the interest of the Swedish publishing conglomerate Bonnier first and then of Lord Rothermere's Associated Newspaper Holdings of London. When both companies invested, Whittle and Moffitt purchased the ailing Esquire magazine in 1979, made a heroic struggle to beat the odds, and turned it profitable. In 1986 they had a falling out and parted, Moffitt keeping Esquire and Whittle taking Knoxville's 13-30 Corporation, which he promptly renamed Whittle Communications L. P. Schmidt was impressed that in 1988 Time Warner had bought half interest in Whittle Communications for $185 million, $40 million of which Chris personally pocketed. He was also well aware of the Channel One controversy. Whittle Communications had proposed providing $50,000 in cable equipment, VCRs, and television sets free to all high schools willing to let students see a daily twelve-minute news and features broadcast that contained two minutes of advertising. While this innovation was welcomed by hard-up school boards in many states, it triggered a general roar of protest from the national educational establishment. Bill Honig, California's superintendent of public instruction, banned Channel One. "They want us to sell access to our kids' minds and we have no right, morally or ethically, to do that," Honig said. Other states and cities blocked the Whittle newscast, chiefly because it included commercials. Protested one parent, "We'd create Kentucky Fried Children." But Channel One was an idea whose time had come. In little more than twelve months it was being beamed into 8,700 schools in forty-seven states, and generating $100 million in advertising revenue for Whittle Communications L.P. The Yale president could clearly see he was not dealing with a dullard who lacked ambition and guts. Even while he said no, Benno Schmidt left the door open a crack. Chris took advantage of the fact that they both spent their weekends in New York. Chris resided in the Dakota, an historic luxury apartment building on the edge of Central Park, with his rooms adorned by $10 million in paintings. The Yale president lived within walking distance, across Central Park on East 95th street. Helen Whitney, fiercely independent, retained her own name after their 1980 marriage, (Schmidt's third) and refused to live on the Yale campus in New Haven. The Yale president and the Tennessee entrepreneur talked a lot in the spring of 1991, one time at Chris's place, the next at Schmidt's. "I was very impressed with the positive potential of the project for America," says Schmidt. "And in talking with him in our meetings, I had really been increasingly impressed with his vision and his creativity. And the more we talked, the more I liked him. I thought, 'Gee! This would be a great guy to work with. This is a really interesting, creative guy, with genuinely constructive and civic-minded purposes.' "So I told him again that I had taken it seriously and that I had thought it through enough to say to him that I really did hope he had success with it because I thought it was very promising. But I was just in the middle of things that had to be carried through at Yale, so I just couldn't do it. I told him, 'I'm not at all sure that there is anything that would persuade me to give up Yale at this point, short of some major public job in government, like getting appointed to the Supreme Court.'" (In one of our interviews I suggested Schmidt wanted that. "No, no. But everybody assumes that I do. That's just kind of an assumption that was around.") Chris accepted the latest turn down philosophically. "Well, I'm sorry," he told Schmidt. "I understand. I've got a lot out of our discussions. You've helped my thinking a lot about it. Would you mind if I sought your counsel from time to time about other people I might consider to take on the leadership of this, or other questions about how to proceed?" "Oh, no," said Schmidt. "Be great. I'd love to be of any help I can because I really think it's a great project." Once again the Yale president put the Edison Project out of his mind and turned his full attention to his duties in New Haven. However, Chris Whittle did not intend to surrender his quest. He was certain the boyish but tough Benno Schmidt had precisely the right qualifications, connections, and stature, to give credibility to the new school network. Graduating from Yale law school in 1966 at twenty-two, Schmidt clerked one year for Earl Warren, chief justice of the Supreme Court. He then spent two years as an assistant United States attorney general and began making a name as a constitutional scholar. In 1969, at twenty-seven, he became professor of constitutional law at Columbia University law school. Highly regarded, Schmidt was appointed dean of the law school in 1984 at the age of forty-two. He promptly showed skill as a fund-raiser by bringing in $9 million in a single year, a university record. In the second year of Schmidt's deanship, Yale lost its president. A. Bartlett Giamatti had held the office since 1978 but then succumbed to a lifelong yen to get into major league baseball. In late 1986 Giamatti accepted the presidency of the National League, becoming baseball commissioner in 1989, only to die unexpectedly at fifty-one, five months later. Yale's search committee, headed by alumnus Cyrus Vance, the noted lawyer and former secretary of state, tapped Schmidt. At forty-three he became president of his alma mater. Even without a leader or any of his one hundred brain-trusters in place, Chris Whittle surged forward relentlessly. On May 16, 1991 he presided over a press conference in Washington D.C. to announce the Edison Project. Though he still had his heart set on Benno Schmidt, Chris did not mention this pursuit publicly. The Yale president had to be persuaded to head up the Edison schools. During the summer of 1991 Chris kept in touch with Schmidt. Several times he went to New Haven specifically seeking counsel on people suitable for the core team of Edison s research and development. Schmidt, for some reason not as buoyant as before, seemed tense and depressed. He felt he was "beginning to see daylight" in conquering his Yale problems. He had found five new deans, brought in $300 million, and made concessions that staved off walkouts by graduate students and university unionized employees. He had calmed the faculty by cancelling or delaying certain staff cuts. Even so, he remained the target of animosity and some ridicule. The university's social leaders grumbled that the president's wife was never on his arm at official functions; Helen Whitney, busy in Manhattan with her own career as a filmmaker, showed utter disdain for their resentment. Students took derisive note of Schmidt's frequent absences from campus; T-shirts appeared saying SCHMIDT HAPPENS. Faculty gossip surged around the president's somber moods and seeming distraction. Critics privately speculated that he might be on his way out. Schmidt concedes that period of his presidency gave him some feeling of burnout. In one of our interviews he said, "One of the very frustrating things is you spend an awful lot of time going to endless receptions, listening to endless complaints because university presidents are sort of a complaint bureau ... A lot of it is just ceremonial and not really very creative and quit frustrating, because universities are very fractious places about things that aren't very important . . . and a lot of people are just hell-bent to fight because controversy is very energizing for them." In the fall of 1991, Chris, aware of the wobbly tightrope Schmidt seemed to be walking at Yale, once more undertook a hard sell. He wrote Schmidt a heartfelt seven-page letter. Neither would release the text for this book. Schmidt says, "Chris just reiterated the arguments he had made to me, in a very powerful way." Chris agrees the letter was primarily a reiteration of points of view the Yale chief had already shared with him. "More than anything," Chris says, "I stressed the importance of Edison, noting that its success had to be more important than that of a single university in three respects: One, an immense problem existed in our country that needed solving: the difficulties within our K-12 schools. Two, Edison would set an example for thousands of schools across the United States and lead the way for Edison `lookalikes' to follow. Three, Edison could, over a ten- or fifteen-year period, have several hundred thousand students enrolled, so even within its own walls it would touch many children. "There was nothing `magic' in the letter. It simply stated the importance of the Edison mission and compared that to his then-current post." Undeniably, reading the seven typed pages prompted Schmidt to seriously reevaluate Yale vis-a-vis Edison. During the winter months, Schmidt began bouncing this latest Edison offer off close associates, including his friend and lawyer Floyd Abrams, while he continued frequent weekend meetings with Chris. "Floyd thought it was extremely interesting but that people in the New York-New England establishment would find it odd that anyone would give up being president of Yale to take on something new and unprecedented and something that was bound to be controversial." Nonetheless, Abrams sent one of his partners, an expert in corporate take-overs, to Knoxville to check Whittle's books. Schmidt says, "I just wanted to make sure it was a company with a good reputation and a strong financial base. It was. And fast growing! It had a 30 percent annual growth rate for twenty years. It's amazing!" Schmidt also went for advice to his Texas-born father, the prominent New York lawyer and financier who coined the phrase "venture capital" and handled investments for the scion of one of America's most distinguished wealthy families, John Hay "Jock" Whitney. A financier, diplomat, and philanthropist, Whitney (1904-1982) is remembered as publisher of the New York Herald-Tribune and owner of a Hollywood movie studio. Benno Schmidt also took it up with one of his father's partners, Mike Brooks. "My father's main reservation was that this is a risky venture in terms of getting it financed. He had very little doubt that we could come up with a new design for schools that would be a radical improvement, and very little doubt about the depth of the public need." The president of Yale gradually grew enthusiastic about Edison possibilities. In 1992 Chris convinced him that corporate investors to provide the financing would be forthcoming. "I felt," says Schmidt, "that we would have the necessary resources to do a very thorough research and design effort. I concluded that with those resources in hand we would be able to demonstrate that there is an enormous need for revolutionary change in schools and an enormous demand for a better model. Current schools are so out-of-date and so anachronistic. The time is so right for change in new technology of just designing schools in terms of schedules, daily and yearly, as far as parents are concerned. All the things that one could do if we got there first with a revolutionary new model ... We could be a catalyst for change, with the whole politics of education and school choice just taking off." He conferred in confidence at Yale with Dr. Henry Broude, a long-time faculty member who had been adviser to several Yale presidents, including Giamatti. "I remember when I showed Chris's seven-page letter to Henry Broude and Floyd Abrams, they both said, `Wow! this guy is really persuasive. But it's basically the power of the idea. This is an idea whose time has come. Yes, it's visionary. It's risky. It's large. A very powerful idea.'" In March 1992, still waffling, Schmidt went to an education conference in Hawaii with Helen Whitney and their eleven-year-old daughter, Christina. "Helen and I told each other really had to decide this thing. We took off for about a week and went to Lanai and really talked it through." The parents and daughter took long, pleasant. It was good to escape "the frenetic Yale environment." He recalls, "Things got into perspective. Yale is not the only thing in the world, the way it sometimes seems when you are in New Haven.... But I was still uncertain when I got back in April." Schmidt went to Floyd Abrams and said, "I think I'm serious enough about this - although I'm not completely sure.... Let's see if we can get the contracts in shape, and dot the i's and cross the t's." Chris Whittle had placed a lucrative offer on the table. Published reports later indicated it gave Schmidt annual compensation of $800,000 to $1 million, plus an interest in the new schools. The money was attractive; his Yale salary was reported to be $187,000 a year. In April 1992 Schmidt flew to Knoxville and spent a Sunday talking to Chris Whittle, looked over his facilities, and met one of his executives, Hamilton Jordan, the former chief of staff to President Jimmy Carter. Chris Whittle drove Schmidt to the airport for his evening flight back to New York. "Do we have a deal?" he asked. "Want to shake hands on it?" The president of Yale screwed up his moon-shaped face, rubbed his jaw, and looked thoughtful. "Well, Chris, before I give an answer, I believe I'd better go back to New York and sleep on it." Copyright © 1995 Vance H. Trimble. All rights reserved.