“In a dysfunctional society or organization, people acquire wealth via corruption, rent-seeking, and theft. Perhaps they steal it at the point of a sword. Perhaps they acquire wealth through outright corruption. Perhaps they acquire wealth through holding a position in a completely dysfunctional management structure that requires internal politicking rather than actual performance.”

That last sentence offers a perfect portrait of TBI’s Head Office. As we showed yesterday, Ning Anhar extracts grotesquely large management fees (sometimes up to $10,000 a month) from TBI, despite the fact that she does zero management work at all. I spoke to a former manager of TBI Kuningan, formerly TBI’s most profitable school, and he reported that never once did she hold a meeting with him, phone him or email him in several years of working for the company. Her one visit to the school ended in angry rebukes and scoldings when she realized that a glass vase that her daughter had made had been moved from its pride of place in a showcase. She also threw a violent temper tantrum that people on the front desk did not recognize her. (How could she be surprised, people wondered, when Ibu Ning only turned up once every several years to even the biggest TBI school?)

Her contribution to the school was precisely nothing, yet she extracted enormous rents from the school. It was a classic rent-seeking relationship. Political connections on the board of USG were all that really mattered. People were not compensated based on performance, productivity or value added. All that mattered was the strangehold on power at USG. This dysfunctional set-up was highly attractive to the venal and mediocre, because they could be well compensated for doing nothing if they just held the right position. However, it was also a set-up which put TBI at a huge competitive disadvantage versus its competitors, especially those who were run along more meritocratic or performance-based lines. The roots of its rapidly declining prestige and economic performance are to be found in the rent-seeking arrangement whereby the well-connected can plunder its profits for personal gain.

Parts of TBI were once quite productive. (We have heard that only that only 2 group schools are now turning a profit, but the situation was once considerably better). Schools such as TBI Jalan Jawa and TBI Kuningan used to make tidy profits in the past, even considering the tens of thousands of dollars in ‘management fees’ extracted by rent-seekers who rarely or never set foot inside a TBI school. Yet, true to the rent-seeking model, money was never re-invested into the productive parts of the business. The rent-seekers at USG diverted as much of the money as possible into their own pockets and the productive assets were left to wither and rot.

For example, there were dozens of complaints a week about the snail-like speed of the computers in the lab at TBI Kuningan. In truth, computers from the year 2000 are still being used at TBI Kuningan today. To try and fool the students that TBI had bought new computers, new cases were bought at one point to give them a shinier appearance! This is the mentality of the rent-seeker. They see capital investments in productive assets as being taken from their own pockets.

One especially shocking example of nepotism was the case of the UIC Design School, which was set up by Ning’s own daughter. TBI profits were channeled to UIC Design Centre, which opened with a sum total of 17 students when TBI Kuningan had 600 enrollments. Whereas TBI students had old, no-name computers from 2000, UIC had new widescreen Apple Macs. Once again rent-seekers were raiding a productive business to prop up an inefficient, unpopular, nonviable enterprise. It was a highly distorted system which punished the part of the business which were efficient and well-run at the expense of hare-brained vanity projects.

However, any thoughtful person could see where it is all going to end. By starving the productive parts of the business of resources, the USG rent-seekers were handicapping TBI against other school chains. As a result, their market share has shrunk and shrunk, with new competitors popping up every week and TBI unable to expand. At the same time, student numbers have declined even at established schools. One of the problems of a rent-seeking culture is that it does not have a plan for growth. All energies at directed towards getting as big a share of the existing pie as possible, always at the expense of others. Greed and self-interest will eventually cause the whole situation to collapse.