We live in a wondrous time. Knowledge has never been more accessible to everyone than it is today. The times they are a-changin’. Especially when you think about the higher education industry.
Robert Heinlein, one of science fiction’s iconic writers, published his first short story in 1939. Called “Life-Line”, it’s the story of a man that invents a means of measuring the length of someone’s life — and thereby tell that person the exact moment of their future death. This advancement disrupts the life insurance industry and the practical businessmen impacted take action. It’s a great read and, like many of Heinlein’s stories, is prophetic of things to come.
In the story, insurance executives try to block the inventor’s application under the guise of protecting their own business interests from economic harm. Heinlein brilliantly skewers this protectionist-style argument in a manner that is relevant to our lives today. He points out that those who benefit from the status quo have no inherent right to block other advancement and innovation — even if this renders their own product or business obsolete. He draws the comparison to how the electric light bulb was the beginning of the end for the coal-oil-lamp era. Those oil-lamp manufacturers were not entitled to suppress a revolutionary technology simply because it was bad for their business. Similarly, I think the higher education industry is on the cusp of a changing era.
This website provides some slightly outdated facts about the total endowments of U.S. institutions of higher education. As of June 2011, total endowment was valued at $416 billion (with a “B”). That is, these institutions control (and earn investment income from) assets worth $416 billion. Of these Harvard is the granddaddy of endowed institutions with their endowment valued (as of June 2013) at more than $32B. Their return on endowment was 11.3%. Nice return which generated around $3.6B. At the risk of referencing a third time period, this article from Forbes in February 2014 set student loan debt at more than $1 trillion (with a “T”).
The Forbes article discusses the impact on this staggering debt on our economy. I won’t repeat other than to emphasize the idea that this student loan debt will act as a damper on future growth. As Consumer Financial Protection Bureau Director Richard Cordray is quoted in Forbes, “The burden of student debt is jeopardizing the ability of young Americans to buy homes, start small businesses, and save for the future.”
This post is not about wealth redistribution. I believe in capitalism and a free market. I am not demonizing the higher education industry. I don’t believe anyone is ambushed, drugged, and awakens in a seedy motel in a bathtub of ice
missing their kidneys saddled with student loan debt. I do think that many college students fail to understand the implications of taking on an average of $27,000 of debt (again, from the Forbes article). Isn’t there a better way?
Maybe. Remember the analogy about coal-oil-lamps at the beginning of the electric light bulb era? I think higher education is about to have its business model similarly disrupted.
The Massachusetts Institute of Technology made news in 2002 when it began offering 32 courses free to the public online (source). Today, with less than 30 seconds of work on Google, you can find countless free college classes or similar material. Kind of makes the decision to go into $27k of student loan debt (plus whatever is paid by parents, tapping savings, etc.) a harder sell, no?
To be fair, a college degree is not just about the information learned in the courses. That’s only part of the value of a college education. In fact, merely disseminating the information takes human resources. Most people are dependent upon, or at least benefit from, effective teachers. The feedback loop — testing one’s understanding and application of new learnings via external feedback and evaluation — is a critical piece. The resources necessary for that teaching and feedback aren’t free.
But again, the times they are a-changin’.
The marketplace transaction between a college graduate — looking to sell his or her work — and a prospective employer — looking to purchase human resources — is defined in part by the perceived value of the college degree. Again — the value of the college degree is based on what a prospective employer thinks it is worth. I’m not talking about the knowledge obtained in one’s education. I happen to believe knowledge has its own intrinsic value. But I can’t pay my mortgage or buy groceries with knowledge’s intrinsic value. You want someone to pay you for your work? Well, you have to offer them something that they’ll pay money for. My MBA is worth what an employer will pay me because I possess it.
(I’m oversimplifying this intentionally to illustrate a point. In the real world, I’ve never hired someone simply on the basis of a college degree. A college degree is just one factor that is considered in assessing the worth of a potential employee. But the idea here is sound.)
Let’s think about that marketplace transaction between a college graduate and a prospective employer. Are all college degrees the same? Nope. Look at the additional perceived value of a degree from Harvard Law, the Wharton School, or any other marquee name. Conversely, ask your boss if they would accept a college degree from a non-accredited institution. Probably not. Again, the value of that degree is based on what a prospective employer thinks its worth.
We use the conferring of a college degree as a proxy for evidence of the specific knowledge, skills, and demonstration of work effort necessary to complete the degree. It’s not the piece of paper — it’s what that piece of paper represents. That is the real, commonly agreed upon value of a college degree.
Which brings me to that industry about to experience a sea change. Higher education is going to change. It’s just a question of what will be the tipping point. Is the $1 trillion in student loan debt enough to get us thinking differently about higher education? Maybe. Or maybe it will be $1.5T.
What if I created a new business model for higher education? The knowledge — the coursework — is available for free. Most sponsors of these free courses have an option to purchase a certification of completion or something comparable. That is merely the institution’s licensing of its perceived value to a student and employer. What if XYZ Company, Inc. valued my endorsement of a student’s work? Suppose this fictional prospective employer said that they required a 4-year degree for its entry level positions — but they would also accept a certification of completion from TMPinSYR? Granted, I’d have to justify why my endorsement of a learner was comparable to a traditional 4-year degree program but that is all an accrediting body is. A group that assesses and certifies the value of a school’s degree program. A trusted accrediting body? Your degree is good. A shady accreditation? Well, you may find that degree to be less useful.
This series of certifications is the heart of the college degree. We value a bachelors degree because the school says its worth something. We value the school’s certification because the accrediting body says the school can be trusted. What if my certification was deemed to carry the same legitimacy? What if I charged people $5000 to be assessed and measured against my standards? If an employer trusted my endorsement of one’s accomplishments, would you pay for that certification? Let’s think about this.
I could create a 1-, 2-, or 3-day test of your mastery of the material associated with a 4-year business degree. I charge you $5000 to take my test — which employers place a value on successfully completing because they know that I’ve designed my test in such a way that you could only pass it by possessing knowledge comparable to a bachelors degree in business and employers know this. Now would you pay me $5000 to take this test? Maybe. Sound like anything familiar? Ever heard of the bar exam? I’d make the argument that the law degree isn’t very useful by itself. Its traditional perceived value is obtained only by pairing it with the successful completion of the bar exam.
The legal industry has a long tradition of acceptance into an occupation based only on demonstrated expertise — the test of that demonstrated expertise being the bar exam. It’s a broadly known fact that Abraham Lincoln did not go to law school. Guess what? There are a number of states that do not require that law degree to become a lawyer. (Google it.) Taking the bar exam and demonstrating sufficient knowledge to be licensed to practice law? Yup. But 3 years of law school before that in order to get a Juris Doctor? Not the only path to sit for that bar exam.
We know that, for all practical purposes, all of the knowledge for a typical college degree is available online, for free. You can even take a class — incorporating that curated learning experience and feedback loop — for free. (The idea for today’s post came from my own experience about to take my first free online course via FutureLearn. I’m not getting anything for linking to them — I think sharing information is its own reward.) Rather than go $27k in debt (plus everything else that people pay as they go for college), couldn’t someone simply pick from the almost limitless options available for free online, complete course after course, and come to me when they were ready for the test? Even if you paid a tutor on an as-needed basis, when you compare that to the roughly $100k total cost for a bachelors degree, my new business model starts to look pretty good, doesn’t it? Ready to take the plunge and follow this new path?
Not today. But maybe tomorrow. I think that all it takes is one forward-thinking iconoclast to push us into a new culture of thinking about “higher learning”.
Have I skipped a bunch of things in this exploration? Of course. I’d think that a doctor needs the hands-on learning associated with the process of earning a medical degree. But is it so unrealistic to think that in the near or semi-near future we won’t be able to develop virtual reality-based learning that mimics dissecting a cadaver or any of the other nuances of medical school? I wouldn’t bet against the development of that technology.
Do you think institutions of higher learning have a monopoly on learning? Do you think that their interests in the status quo (after all, that $1T in student loan debt flowed to those institutions) will allow them to prevent this transformation of the industry of higher learning?
Just ask those coal-oil-lamp manufacturers how business is today.