Does the DCF model apply to great teachers--in valuation or elsewhere?

By Rick Warner, ASA, AVA; Sr. Contributing Editor, BVWire

I began thinking about this article when all the brouhaha started about entrepreneurs and who was really responsible for building wealth in the country, the government or private enterprise.  And while I don’t want to get dragged into a discussion about the relative merits of that argument, I couldn’t help but thinking about some of the help that I had along the way.

A very long time ago I was growing up in Akron Ohio and was attending what we referred to as junior high (now we call them middle schools).  I think I was in the eighth grade at the time, which would have made me 13 years old.  The school I attended was Thornton Jr. High School, and was a typical inner city school.  Now we would say that the student population was “diverse”.  What that meant in the 60s was that white kids were a minority.  And the interesting part of that in my mind is that we never thought about it.  We weren’t black kids, or white kids – we were kids. None of us had two nickels to rub together.  I remember being on the soccer team at the time and I can still remember the kid who played goalie for the team – Henry Burke.  I can remember playing on the basketball team too, with Larry Taylor.  Later on when I went to a private Jesuit high school (through a series of events that I still can’t believe to this day) I ended up playing against Larry in a high school game.  Akron South beat us that day, but not by much.  Both Henry and Larry were black, and while we weren’t the type of friends that played with each other on the weekends, at least during the school week, and especially at sports, we were, well, we were friends.

Henry and I happened to have a couple of classes together.  A biology class was taught by a teacher; let’s just call her Miriam O.  Now Miriam at the time weighted about 300 pounds, and as I found out later was divorced.  We thought she was old.  She was probably 35-40 years old at the time.  She had two sons of her own.  One was in high school and the other was a contemporary of mine.

Besides being a very effective classroom teacher, whose duties included breaking up fights between 13 and 14 year olds, Miriam O. took her job as teacher a whole lot further.  Miriam O. kept her eye on students who she thought deserved a little more attention.  And what Miriam O. did was something that could never happen in today’s society.

Every Friday night, Miriam O. would drive around Akron and pick up a half-dozen of her students that she had identified as, well, special.  She would take these kids over to her house, they would drink Pepsi (not Coca-Cola, only Pepsi), play chess, and afterwards she would drive these kids over to the Big Boy Drive-in and order however many hamburgers and orders of French fries that she needed to feed a car load of junior high boys.  Afterwards, she would drive everyone home and they would all be home by 11:00 PM.

I wasn’t part of this group for a long time.  In fact I didn’t even know it existed for a while.  Eventually Miriam O. saw something in me (probably hunger) and I got invited to join this group.  I still remember being asked if I wanted to come over to her house one Friday.  Even in the 60s this type of an invitation required a whole lot of thinking, before accepting.

Somehow, I did get to her house.  Some nights I ended up walking, other nights she gave me (and others) a ride.  What did we do at her house during these Friday night sessions?  We talked.  We played chess.  We had the television on, but I don’t remember watching it.  Probably what was more important was what we didn’t do.  We didn’t run around the streets of Akron; we didn’t get into fights; we didn’t smoke or drink (well some of us didn’t); and we weren’t out chasing 15 year old girls (well, not every weekend, anyway).

But what was the most important thing that happened during those Friday night sessions?  Miriam O. introduced us to the word “college”.

For a bunch of kids whose parents were blue-collar, lower middle class, graduates of WWII, college was something that wasn’t really on the radar until Miriam O. planted that seed in our little noggins.

Miriam O. did something else for her little group.  She not only let us know that something like college existed; she also made sure that we knew that she thought we had the ability to get through college.  Was this something that our parents should have done?  I just don’t think that this was something that our parents ever thought of.  I know that’s hard to believe now, but in the 60s in Akron, OH, it was the way the world was.

So what did Miriam O.’s investment yield?  Well, for me anyway she at least pointed out the possibilities that college offered.  For my four children, all with master’s degrees and for their children, other possibilities remain.

To bring this full-circle, what about Henry Burke and Larry Taylor?  Did they have the benefit of a Miriam O.?  They did in the classroom to be sure, but they didn’t have the benefit of Miriam O.’s Friday night sessions.  For all the good that she could do, even Miriam O. couldn’t have black kids over to her house on a Friday night in Akron, OH in the 1960s.  And that is something that I know she would have liked to have changed.

So what’s the value of a good teacher?  I’m not sure I can figure that out, but it’s more than simply the present value of the discounted cash flows produced by her investment in me.  It’s way more than that.