Jonathan Knee is one of the most versatile people on Wall Street. An M&A banker at Evercore Partners Inc., he also helps run the media program at Columbia Business School, where he has taught since 2001. In his spare time he writes books, most recently Class Clowns: How the Smartest Investors Lost Billions in Education, set to be released in November by Columbia Business School Publishing. "Education" often means some form of technology designed for use in the classroom or by administrators, so Knee's book is as much about bone-headed bets on tech as it is about the challenges investors have in navigating America's educational system .

The possibility of transforming that system and the massive amount of money poured into it - $1.3 trillion last year, about a tenth of that in the for-profit segment - have lured some very gifted businesspeople to invest in what have often turned out to be spectacular failures. Knee offers four case studies illustrating the theme. He starts with Chris Whittle, a visionary who's lost large amounts of other people's money in a series of ill-conceived ventures since the early 1990s.

In "Rupert and the Chancellor: A Tragic Love Story," Knee explains how Rupert Murdoch's decision to put former New York CIty public school chancellor Joel Klein in charge of Murdoch's education businesses went awry. Houghton Mifflin was an old-line Boston publishing house with a particular strength in education that has been weakened by a series of transactions beginning with its sale to Vivendi in 2001. Like Murdoch, Michael Milken was motivated to invest in for-profit education in part out of an altruism that turned out to be both costly and ineffectual.

As a quartet, Knee's case studies show the dangers of financial engineering in businesses that often have very high fixed costs and the failure to realize the limited ability of new technology to change a highly regulated, intensely local sector of the economy. Along the way, he debunks the concepts of first-mover advantage and transformational technology. First movers, he writes, are usually providing free market research and developing a market for later, more focussed entrepreneurs rather than building businesses that will dominate a new field. In education as in other realms, investors are often seduced by a piece of technology that promises to reshape an industry, but businesses that try to solve a specific problem are far more likely to succeed. Knee cites Turnitin, which began developing its plagiarism detection software in the late 1990s and is now the dominant player in the field.

"As frustrating as it may be to an education visionary," Knee concludes, "both investors and the public will be better off if innovative ideas are applied to a narrow product or geographic space in which scale, customer captivity and learning can be practically achieved."