Fast Company

The Hard Life and Restless Mind of America's Education Billionaire

John Sperling was born dirt-poor, fell in with Communists, and became a union organizer who led a strike that ended in disaster. Today, he runs the world's largest for-profit university -- and a company whose shares are defying gravity on Wall Street. So why do so many smart people say such terrible things about him? And why does he relish their attacks?

At first glance, he doesn't look like a street fighter. John Sperling, an 82-year-old former history professor, is an elf-sized fellow with gold-rimmed aviator glasses and a halo of gray hair. Twice divorced, he lives alone in an Italian-style estate near the sere hills of north Phoenix, where he is surrounded by citrus and pecan trees and paintings by Andy Warhol. As we meet in his poolside office on a sun-splashed winter day, he is retiring, almost shy.

But make no mistake: John Sperling, the man who put the profit into for-profit higher education, hasn't amassed a billion-dollar fortune by letting himself get pushed around. The longer we talk, the more his hard-charging attitude emerges. He drives a Jaguar. He favors a black leather biker jacket and a Greek sailor cap. He is direct, profane. And he enjoys nothing more than sticking it to the powers that be -- whether it's smug academic princes in the ivory tower or zealous antidrug warriors in the Bush administration.

Sperling is chairman of the Apollo Group Inc., a Nasdaq-traded holding company with a market cap of $7.5 billion, and founder of the University of Phoenix, the least by-the-book university imaginable. The Apollo Group owns the university, which makes it a school that you can attend and invest in at the same time. Comprised entirely of working adults (the minimum age is 23), the University of Phoenix is the largest private university system in the United States, with more than 140,000 students attending classes at 41 campuses. Factor in its distance-learning operation, and the University of Phoenix's reach extends across the world.

Sperling's Apollo Group is a rare success story in this down economy. Since going public in 1994, Apollo has racked up an annual growth rate of roughly 25%. Last year, it had $1 billion in revenue -- a 31% increase over 2001. Its distance-learning division claims nearly 60,000 students and an enrollment that's increasing at a rate of about 60% a year. Its stock has split twice and nearly tripled in price since its IPO in 2000, making it one of the few Internet companies to have prospered.

For those reasons and more, Sperling is beloved on Wall Street. For those reasons and more, he is loathed in many academic quarters. His critics accuse him of commodifying education, turning a social good into a market product. They dismiss the University of Phoenix as a "McUniversity" that delivers mass-produced fare at bland locations.

"John Sperling's vision of education is entirely mercenary. It is merely one more opportunity to turn a buck," says Scott Rice, a San Jose State University English professor who is writing a book on the effort to monetize higher education. "When education becomes one more product, we obey the unspoken rule of business: to give consumers as little as they will accept in exchange for as much as they will pay. Sperling is a terrible influence on American education." Sperling is used to such biting commentary. In fact, he seems to welcome it. "Why do people say such things about us?" he asks. "Fear! Fear! Fear! They're scared to death of us."

Even Sperling's harshest critics must concede that he is a visionary. He foresaw a growing demand for adult learning -- which now accounts for more than half of all college students -- and built a fortune by getting there first. Then, years before Marc Andreessen unveiled the Mosaic browser and supercharged the Web, Sperling saw that he could reach tens of thousands of additional students by putting the University of Phoenix's curriculum online.

By his own description, Sperling is an "unintentional" entrepreneur, an ex - trade unionist who is now on the Forbes 400 list of America's wealthiest people. He is also a provocateur: He enraged animal-rights activists when he underwrote a successful attempt to clone a cat named CC, the first-ever genetically engineered pet. He still unnerves conservatives by helping bankroll 17 drug-reform ballot initiatives -- and winning every one. "Popular causes find money everywhere. What's the point of backing them?" he grouses.

Sperling is a battler -- a man who views the business world as a "nasty, brutish" place and likes nothing more than to wage a good fight -- against complacency, against convention, and against those who would crush him. "When you're in the middle of a brawl, your animal instincts are at their peak," he exclaims. "When you face death -- that is, the death of your company -- that's when you're most effective. You're most in focus. You're most alive."

Rough Start: The Makings of an Accidental CEO

Sperling's rags-to-riches life is the stuff of an American fable. He was born in the Missouri Ozarks in a cabin that already housed a family of six. His mother was overbearing. His father habitually beat him. In his autobiography, Rebel With a Cause (Wiley, 2000), he recalls that when his father died, "I could hardly contain my joy." Sperling got pneumonia at the age of seven, and doctors used just a local anesthetic when they sawed out a piece of a rib and drained pus from an infected lung. He spent the next six months in bed. The experience left him with a lifelong aversion to boredom. "I learned nothing from my childhood," he muses. "Except that it's a mean world out there, and you've got to bite and scratch to get by."

Years later, Sperling discovered that he was dyslexic. He prints everything -- except for his signature, which he inks in a wobbly cursive script. When he graduated from high school, he could barely read. His real education began when he joined the merchant marine and took a job in a freighter's engine room. Once at sea, he met several older, well-educated crewmen who shared their personal libraries. Sailing between Japan and Shanghai, Panama and New York, he devoured such classics as Notes from Underground and The Great Gatsby. Many of the ship's crew members were socialists -- some were Trotskyites and Stalinists -- and they introduced him to a leftist ideological culture. He remains an unabashed liberal who delights in challenging the status quo.

After two years at sea, he left the merchant marine and paid his tuition at Portland, Oregon's Reed College by working the swing shift in a Columbia River shipyard. Lacking family connections or any notion of how to make his way in the business world, he fell into academe. "It was the path of least resistance," he says. He earned a PhD from Cambridge University and became a tenured humanities professor at San Jose State University. Professor Scott Rice describes Sperling's time at the school in less-than-charitable terms. "Teaching was all right, but I'm an activist," Sperling concedes. The passive life just didn't appeal to me."

It was at San Jose State that he discovered his first true calling: union organizing. He joined the local chapter of the American Federation of Teachers (AFT) and rose to state and national positions of leadership during the next 10 years. But then he overplayed his hand. In 1968, he persuaded the leaders of the AFT at San Jose State to mount a sympathy strike with professors at San Francisco State University. After 31 days of picketing, 100 professors narrowly averted a mass firing, and the strike unraveled. As for Sperling, he lost his credibility as a leader and became the most reviled man on campus. Still, the humiliating defeat delivered an invaluable lesson.

"The strike was one of the most liberating experiences of my life," he says. He found that "it didn't make a goddamn bit of difference what people thought of me. Without that psychological immunity, it would have been impossible to create and protect the University of Phoenix from hostility, legal assaults, and attempts to legislate us out of existence." He does not recommend this behavior to others. ("You don't get anywhere in an organization if you're utterly indifferent to how people feel about you," he says.) But for him, it worked. The experience steeled him for the life of an entrepreneur.

No Retreat: Defiling the Ivory Tower

Sperling dislikes the goal-oriented mind-set that drives many businesspeople. "If you have a goal, you're constrained by that goal," he says. "You should never delude yourself into thinking that you know exactly where you're going." By the early 1970s, Sperling's academic career was going nowhere. But while he didn't know it at the time, he was about to embark on a life-changing journey into the world of business.

In 1972, he was chosen to run a series of workshops at San Jose State that would prepare police officers and teachers to work with juvenile delinquents. He built the program around some of the same pedagogical tools that he would later employ at the University of Phoenix: He brought in teachers who were experts in their fields, divided the class into small groups, and challenged each group to complete a project. He was surprised when the enthusiastic students lobbied him to create degree programs. Which is exactly what he did.

Sperling sketched out a curriculum for working adults and pitched it to the academic vice president at San Jose State, who promptly slapped it down. "My university said they didn't need no more stinkin' students, that they had all they could handle," Sperling acidly recalls. "They told me to go back and behave -- be a professor." Naturally, he ignored that advice. Even though he held business in contempt -- as would any right-thinking, left-leaning humanities professor -- the marketplace intrigued him. And he sensed an enormous market for degree-based programs targeted at working adults who were anxious to take the road to higher education.

Gambling that he could take the adult-education curriculum that San Jose State had rejected and make it succeed elsewhere, Sperling set about putting his ideas to work. He sought out the vice president of development at Stanford University, a man named Frank Newman, who threw a dash of reality onto his ambitions. Newman warned that educational bureaucracies innovate only out of fiscal desperation. In a letter, he advised Sperling to "find a school in financial trouble and convince the people running it that your program will generate a profit." Sperling found the University of San Francisco, a cash-strapped, Jesuit-run institution that became his first client.

Newman's advice was appealing. For starters, Sperling was itching to test his vision in the marketplace. "Either we'd grow or we'd die," he says. "The market is a jungle, and I love it." But there was an equally compelling motivator for making his enterprise a for-profit effort. After losing control of the United Professors of California, the union that he had built almost single-handedly, he vowed that he would never again lead a nonprofit, "which some board could yank away from me." By launching a corporation -- the forerunner of his Apollo Group -- he would control his own destiny. At age 53, Sperling became the thing that he had cursed for so many years: a businessman.

His program at USF proved to be an "immediate financial success." His biggest challenge was handling the growth. But soon, a larger problem loomed. As he signed up other schools, word spread among California's regulators that Sperling had committed the ultimate blasphemy: He had dragged the profit motive into the ivory tower. His assault on academic orthodoxy, recalls Sperling, "was met with hostility bordering on rage. If they could have killed me, they would have."

Smart Money: The Un-University Arrives

Sperling had sparked a culture war that pitted his notion of a radically different learning system against California's higher-education establishment. In many academic circles, his vision of a stripped down, utilitarian curriculum that provided working adults with real-world tools and information was viewed as a naked attempt to dethrone the professorate.

Although he was a tenured professor at San Jose State, Sperling forbade tenure in his own programs. (Even now, the faculty consists primarily of 8,000 professionals who teach at night what they do for work by day.) He banned lectures and developed standardized courses. The University of Phoenix's curriculum is built around peer-based learning groups where the instructor isn't exactly viewed as a fount of knowledge. "The faculty member is an equal in the classroom," says Sperling. "His job isn't to expound wisdom, it's to serve a learning group."

Bureaucrats and politicians branded Sperling's operation a diploma mill, and after a futile five-year battle to win accreditation, he abandoned California and decamped to Phoenix, where he thought regulators would be more receptive. But his struggles in Arizona proved to be just as vicious as they were in California. It wasn't until 1979 -- after an all-out campaign waged in the media, the Arizona state legislature, and the conference rooms of higher-education regulators -- that Sperling's newly named University of Phoenix was finally accredited. Still, the fights continue. Today, the Apollo Group retains an army of 30 political lobbyists to help Sperling further his dream of building a for-profit, global university.

The University of Phoenix's main campus sits on a side road just off of Interstate 10. Three red-brick buildings, which house classrooms and administrative offices, cluster around a courtyard that's ringed with conifers. And that's it. There's no student center, no fine-arts buildings, no athletic center. In a school that offers undergraduate and graduate-degree programs in business, information technology, accounting, management, marketing, and the like, ivy-covered quads are deemed superfluous. At least, that's one explanation. But in a larger sense, this spartan campus is simply the physical manifestation of Sperling's assault on the traditional college experience. It is the embodiment of his notion of how a university for working adults should look, feel, and function.

In mid-afternoon, when many colleges are bustling with students, the university's courtyard is deserted. All of that changes as night falls and students begin to arrive from their day jobs. As the classrooms fill with thirtysomething and fortysomething professionals dressed for work, the place takes on its true character: that of a corporate campus. The average student is 34 years old and earns between $50,000 and $60,000 a year. About 60% of students receive some tuition reimbursement from their employers, which include such blue-chip behemoths as AT&T, Boeing, IBM, Intel, Lockheed Martin, and Motorola -- not to mention the U.S. military.

Sperling's critics, of course, question whether the Intels and Motorolas of the world are getting their money's worth from the University of Phoenix. "Many CEOs and hiring partners report that these newly minted business majors aren't as literate and as broadly educated as they need to be," says Carole Fungaroli Sargent, an English professor at Georgetown University and author of Traditional Degrees for Nontraditional Students: How to Earn a Top Diploma From America's Great Colleges at Any Age (Farrar, Straus, and Giroux, 2000). "When places like the University of Phoenix strip the arts and humanities out of a degree because those studies are deemed unnecessary, they don't serve the business world, and they certainly don't serve the student."

Sperling dismisses such talk, countering that if the school were failing to educate, it wouldn't be attracting students by the tens of thousands. Then he scribbles two numbers onto a piece of paper: "160,000" and "30%." I ask what he means. "We have a student enrollment of 160,000, which is growing at 30% per annum. At that rate, in five years we will have nearly 600,000 students. That would make us the largest higher-education system in the world."

Still the First Mover

Sperling is a restless soul. He likes to say that his whole life has been a flight from boredom. Twice he nearly bankrupted the Apollo Group when he pushed the company into new markets before it was ready. But when the Internet arrived in the mid-1990s and dotcoms rushed to launch virtual universities, they soon found that Sperling had gotten there first.

In 1989, he purchased a defunct distance-learning company and assigned a team of techies a task that no one had ever accomplished: Create a viable and profitable electronic education system. It took five years to translate a classroom education experience into bits and bytes. But in 2000, just as the Internet wave was cresting, the university's online enrollment jumped 81%. Phoenix Online now generates $327 million in revenue. Analysts at William Blair & Co. call it one of the best-performing tracking stocks of all time.

These days, Sperling can barely contain his excitement over a new high-tech experiment that could turn out to be as revolutionary as the university's distance-learning effort. Eighteen months ago, at a dinner party for San Francisco venture capitalists, Sperling saw his first demo of an electronic textbook: "I was fascinated by it, although I didn't know what the hell to do with it." He brought the e-book idea to Adam Honea, the university's dean of information systems and technology, and used it to issue a challenge: Brainstorm a way to eliminate all of the system's textbooks and replace them with customized learning materials that exist entirely in digital form.

"At first, it doesn't seem that revolutionary. But think about it: We become publishing's version of a general contractor," says Honea. "We contract authors and experts to create course materials exactly to our specs. That lets us bypass textbook publishers. It eliminates the fixed costs of moving 140,000 books every five to six weeks. John Sperling reinvented the traditional model of the student, the instructor, and the classroom. And now he's reinventing the textbook."

Even if he fails in this latest adventure, you can't help but marvel at the man's audacity -- and energy. Sperling may be an octogenarian, but he still gets up at 5:30 every morning to work out, he still puts in a 12-hour day, and he still lives by that 1999 mantra: Change or die. "We'll put the textbook publishers out of business if they don't adapt," he exclaims. Then his eyebrows rise in mock wonder: "Isn't this what you guys call a 'disruptive technology'? "

Sidebar: Lessons From the School of Hard Knocks

John Sperling, the billionaire entrepreneur who pioneered for-profit higher education, has one piece of advice when it comes to lessons on business: Ignore them. Sperling, who holds a PhD from Cambridge University, says that he has learned far more about how to conduct his business affairs from such novels as Tom Jones and The Great Gatsby than he has from business books. More to the point, he believes that the strategies that worked for him probably won't work for others. With that caveat, here are four lessons from Sperling's school of hard knocks. He urges you to strenuously avoid them.

Ignore your detractors. "It doesn't make a goddamn bit of difference what people think of me," says Sperling. "If I weren't immune to criticism, it would have been impossible to create and protect the University of Phoenix from hostility and legal assaults. But that's a unique characteristic that was positive for me. If someone in an organization is indifferent to the feelings of others, he won't function well."

Take bet-the-farm risks. "I drove my company to near bankruptcy on a couple of occasions. That kind of bet-the-farm risk taking helped build the Apollo Group. But I had nowhere to go but up. I had nothing to lose."

Challenge authority. "If you challenge authority, but you're not tough enough or shrewd enough to carry it off, you'll be ill served by this advice. The same can be said for a number of characteristics that have served me best: opportunism, joy in conflict, a thrill from taking risks. None of them is a safe ride."

Never set a goal. "An English historian once observed, 'He goes farthest who knows not whence he goes.' There's much truth in this. If you have a goal, you're constrained by the goal. Organizations must have a coherent philosophy, a clear direction, and the strategies to make the journey successful."

Bill Breen (bbreen@fastcompany.com) is a Fast Company senior editor. Learn more about the Apollo Group (www.apollogrp.edu) on the Web.

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