Joseph D. Duffey walked into the DC Coast, a popular restaurant in Washington where a constant stock ticker beamed the latest from Bloomberg and CNN. This was 3 1/2 years ago, when everyone at the bar glanced at the ticker every minute or two because the stock prices jumped one way - up.
Duffey was there to meet Douglas L. Becker, who wanted to recruit Duffey for his company in Baltimore, Sylvan Learning Systems Inc.
Duffey qualified as a capital insider. He was head of the U.S. Information Agency and a former president of American University. Duffey had known Bill Clinton for 30 years, dating back to protests at Yale University against U.S. military involvement in Vietnam. Bill and Hillary Rodham Clinton had done volunteer work for Duffey's unsuccessful campaign for a U.S. Senate seat in Connecticut.
Clinton had told Duffey a little about Becker and Sylvan. The president knew of the company because its relocation to downtown Baltimore from the suburbs was a coup for his "empowerment zone" tax-credit program to aid cities.
"Young company run by a bunch of kids" was how Clinton described it, Duffey recalled.
Upon meeting Becker, then 32, Duffey silently concurred with that description. But as he listened to Sylvan's fresh-faced chief executive describe his plan to amass colleges overseas, he was impressed by the depth and maturity of the vision - not the first person so struck by Becker.
Becker emphasized that his was not an attempt to export American higher education or to create little American universities around the world. He described how developing nations were under pressure to provide college opportunities to a growing middle class and how they were turning to for-profit providers to help.
Duffey had spent most of his adult life in higher education. He was chancellor and president at the University of Massachusetts before running American University. He had watched other respected universities - Maryland, Michigan, Temple - establish overseas programs or partnerships, with mixed success.
He saw vast potential in Becker's idea, and not only through his experiences in academia.
His father was a West Virginia coal miner who had lost a leg on the job and despaired before he died that he had no property to leave his five children. Duffey envisioned parents in Mexico and Spain and China with similar hopes that education would offer more prosperity for their children.
"The Sylvan plan intrigued me," said Duffey, who became an executive for Sylvan's international universities a few months later. "I was trying to understand this new generation, this new economy. It struck me as a good business venture, but more than that, it was based on some insights that I was sympathetic to. I saw it as an idea that nobody had put forth before."
After-school project
Becker, with business partner R. Christopher Hoehn-Saric, had surpassed expectations before.
They bought Sylvan in their 20s after making millions in an after-school computer project. They quickly built it into the largest tutoring company in the world. And they moved its base from the suburbs to downtown, the first new corporate headquarters in Baltimore in a generation.
But their latest maneuver might be the most astonishing to date: transforming Sylvan from a tutor for children to a global network of universities.
Becker "is a great example of a 21st-century leader in the knowledge business," said Freeman A. Hrabowski III, president of the University of Maryland, Baltimore County. "No one is better at asking the right question at the right time than Doug."
Sylvan's two principals are considered innovators in for-profit education - perhaps a result of their having spent relatively little time in education and never having worked professionally in a school setting. With an early start in business, Hoehn-Saric didn't finish college, and Becker never started.
Becker was 17 and a junior at the Gilman School in Baltimore when he met Hoehn-Saric, then a 20-year-old junior at the Johns Hopkins University, in 1983. Hoehn-Saric was friendly with Eric Becker but hadn't met his younger brother until they began working at a computer store in Lutherville.
The two didn't know a great deal about computers, but most people understood even less because personal computers were fairly new to the market.
Becker spent a lot of time at home pecking at a computer keyboard, to his mother's dismay. She finally suggested that he go outside and get some exercise rather than waste a sunny afternoon in a dark room.
"If I were sitting in front of a Steinway, would you say the same thing?" Becker pointedly asked his mother, a symphony narrator. Rheda Becker never questioned him on the subject again, she recalled.
Couple of standouts
"They were definitely people who, when we first met them, particularly Doug, really stood out from the crowd," said Bob Roswell, then co-owner of the Computerland store where they worked.
"It's just not every day that a 17-year-old walks into a professional business and says, 'I can be a teacher.' We gave him a chance and found out the customer satisfaction was the best we ever had."
Becker and Hoehn-Saric devised an early form of voice mail and persuaded Computerland to delve into a new technology at the time called CD-ROMs. "They were always looking for the next big thing," Roswell said.
The owner of an oil-change shop asked whether they could help him develop a customer card to record maintenance records for automobiles. The idea never progressed, but it sparked greater things.
Hoehn-Saric and Becker, who planned to enroll in medical school, discussed with a surgeon acquaintance, Dr. Frederik Hansen, an idea for a plastic "swipe card" that would electronically contain hundreds of pages of personal medical data.
The three, with Eric Becker and another friend, Steven Taslitz, eventually became partners in the project with Blue Cross and Blue Shield of Maryland. The insurer later bought them out for an undisclosed sum believed to be in the millions.
Some Blues executives were stunned when news reports of the sale revealed that Becker, the boyish-looking young man with whom they'd been negotiating, was attending high school classes in the morning before working with them on the LifeCard project in the afternoon.
Becker and Hoehn-Saric next did as boys might - or men for that matter - with the windfall: They went straight to a Washington-area car dealer and each bought a Porsche.
"My parents were happy. They were proud," Becker recalled. "They weren't crazy about the Porsche."
The money wasn't all blown on fancy cars. The pair also bought into a computer consulting business in Columbia called KEE Inc. in 1987.
Four years later, they purchased a tutoring business named Sylvan from child-care operator KinderCare Learning Centers Inc. of Alabama. KinderCare executives thought Sylvan had potential, but they were struggling with their main business and had nothing to put into it.
Better use of space
Tutoring wasn't foremost in the plans of the two young entrepreneurs from Baltimore either. They saw the learning centers as terribly inefficient because they went unused until late afternoon after children got out of school.
Their grander plan was to expand into computerized testing. While at KEE, they had done work for Educational Testing Service, the Princeton, N.J., company that operates the SAT used for college admission. Sylvan began administering tests for professional licenses so its centers and equipment could be used by adults before the daily tutoring sessions began.
By 1993, Becker and Hoehn-Saric mounted a "road show" to convince financiers of their intent to sell public stock in their company. They were met with similar disbelief.
"I'm sitting there with these snotty-nosed bankers and 10 minutes in, they'd ask Chris and Doug, 'You're 25? You never went to college?'" recalled B. Lee McGee, an executive who moved from KinderCare to join Sylvan's new owners. "But at the end of 30 minutes they were mesmerized. Chris and Doug were mature beyond their years from a business perspective."
Becker also won over hundreds of the company's original franchisees after he bought the company and again three years ago when Sylvan's plan to launch an online tutoring service threatened to cannibalize their investments.
"We're extending the hand of partnership, and I'm asking you to grasp it," Becker, a former high school thespian, theatrically told a Florida ballroom full of anxious franchisees, with his right hand outstretched.
The stakes were huge. Sylvan's franchisees pay as much as they would if opening a McDonald's: about $45,000 for the right to use the corporate name, annual royalties of 8 percent or 9 percent of revenue and about $140,000 for start-up capital, construction and equipment. They were afraid that investment would be at risk if families in need gravitated instead to Sylvan tutoring on the Internet.
A profit-sharing plan eventually appeased most of them, said Barry Miller, an engineer who owns a center in Ohio, with his wife, a teacher. The couple had been similarly won over by Becker when they first met him in 1991.
"'How can somebody with that little experience actually know what to do?' we thought," Miller said. "But he surprised us all."
Avoiding conflict
Many say that Sylvan has also avoided fights with the public education establishment - in an era when tuition vouchers and school reform are political hot potatoes.
"They might have left their formal higher education earlier than they normally would have, but they are both students of whatever area they're into," Richard W. Riley, a former U.S. education secretary under Clinton, said of Becker, now 36, and Hoehn-Saric, 40.
"They have creative ideas but they're grounded. It's unusual to have people have that combination," said Riley, who joined Sylvan's board of directors a year ago at Duffey's request.
Becker and Hoehn-Saric both come from accomplished families, in business and medicine. They have deep admiration for each other. "He's like a brother," Becker said. In personality, they are yin and yang, fire and ice.
Hoehn-Saric is reserved, avoids publicity and has taken a back seat in Sylvan's structure. He and Becker began as co-CEOs, but Becker is now chief executive officer. The photograph that begins each year's annual report, which formerly included both of them, shows just Becker now. Hoehn-Saric now leads Sylvan Ventures LLC, the subsidiary that invests in education businesses.
He is the son of a prominent Johns Hopkins psychiatrist, Dr. Rudolf Hoehn-Saric. His mother and a brother are also physicians, and another brother is a Washington attorney.
The outgoing one
Becker, by contrast, is much more demonstrative.
Friends describe him as a Type A who was calmed only by the birth of a daughter last year. On his wedding day two years ago in London, to his new bride's chagrin, he arranged to interview a job candidate after he realized he had a few hours to kill before the ceremony.
He has no reservations about telling a reporter that he fears a negative headline about his company might upset his mother in Pikesville - forget Wall Street.
Even their offices parallel the partners - steely and emotive. Hoehn-Saric's is highlighted by a 6-foot wooden Chinese warrior he bought at a bazaar in Asia; Becker's by a simple sketch of a mouse-like character beneath a falling rock. You never know what's coming next, he explained.
He and Hoehn-Saric could easily buy the whole Porsche dealership now. Becker's Sylvan stock holdings alone are worth $30 million and Hoehn-Saric's $21 million. Each made $700,000 in salary and bonuses last year and each holds options for an additional 2 million shares. They also are partners in a venture fund, Sterling Partners LP, with Eric Becker and Steven Taslitz - most of the original LifeCard team.
A few years ago, the foursome also bought a shopping mall decoration business begun by the Beckers' father, Gordon.
A well-known arts patron in Baltimore, Gordon Becker used to take his young sons on sales calls to give them a taste for free enterprise. (The brothers' only business partnership that ended badly was when Eric made Doug's hamster disappear in a neighborhood magic show; Doug believed the pet never acted quite the same afterward.)
"Gordon talked a lot about his sons. I was prepared to meet a boy wonder," recalled former Baltimore Mayor Kurt L. Schmoke.
The mayor eventually came to rely on the young man he'd encountered on his campaign for City Hall for some of the biggest successes of his three terms: the move of Sylvan's headquarters downtown and the opening of Port Discovery, a $32 million children's attraction near the Inner Harbor. Becker led the project at Schmoke's request.
"He had the responsibility of being a peacemaker and bringing all these groups together to help develop a vision for it that everyone could rally around and finally to be chief fund-raiser. It was quite a daunting task, but that's his style - to bring people together," Schmoke said. "I was impressed not only with his business sense, but his real commitment to the broader community."
"There are few businesspeople who care about the city, unlike 30 or 40 years ago. He's one of the bright spots in the future of the city," Robert C. Embry Jr., president of the city-based charity, the Abell Foundation Inc., said of Becker. He called Sylvan "one of the biggest start-up success stories in the city."
Hoehn-Saric and Becker could retire quite comfortably now, getting out of business as prematurely as they got in. They express no such desire.
"This is the opportunity of a lifetime. I think this is so cool," said Becker, who sees his work in a nascent industry as akin to John Malone's maneuvers in cable TV or Bill Gates' in computers.
"When else can you find yourself at ground zero at the birth of an industry?"