UV Letters

The Stack Fallacy In Higher Education

Volume VI, #3

I grew up in Toronto in the oldest house on my block. In the 19th century it had been the farm house, well beyond the overly polite Canadian hustle and bustle. One day in fifth grade I was home after school eating a snack in the kitchen when I heard what sounded like my violin playing upstairs. This was weird because I thought I was alone, home before my siblings or nanny. I raced upstairs to my room in the attic and flipped on the light in the creepy closet which was the venue of most of my nightmares. My violin was out of its case on the floor, the bow leaning improbably against the strings. I ran downstairs and confirmed that no one else was home. Or at least, no other human.

A few months ago I took my 7-year-old son Hal to walk our dog around the neighborhood. It was nearing dinner and he was complaining of being hungry. So I thought I’d distract him with this scary story. I told it with as much frightening detail as I could muster. But when I concluded, Hal just had one question: “Dad, what were you eating for snack?”

When you’re hungry, it’s hard to focus on scary stories.

***

Colleges and universities are hearing plenty of scary stories of unemployed and underemployed recent graduates with tens (and sometimes hundreds) of thousands of dollars or student loan debt. Not surprisingly, connecting graduates to jobs and the critical importance of the first job to future earnings has never had a higher profile at cabinet and trustee levels. We’re even starting to see some universities follow the example of coding bootcamps with job guarantees.

In their hunger to connect students to jobs, however, I’m afraid most colleges and universities will follow Hal’s example and disregard another scary story currently making the rounds in Silicon Valley: “Why Big Companies Keep Failing,” a TechCrunch article from Anshu Sharma, a partner at Storm Ventures.

Sharma writes about the “stack fallacy” – “the mistaken belief that it is trivial to build the layer above yours.” Sharma cites Oracle and Apple as examples of companies that have been successful in building “down the stack” but that have often failed in going “up the stack” i.e., towards the consumer. Oracle, a database company, spent hundreds of millions of dollars trying to develop ERP software, which founder Larry Ellison perceived to be nothing more than workflows atop Oracle databases, but failed and had to spend billions acquiring PeopleSoft and Siebel to enter the market.

Sharma explains the relative ease of innovating down the stack as a product of the fact that companies are themselves customers of lower layers: “Apple knew what it wanted from an ideal future microprocessor.” Conversely, the difficulty of innovating up the stack is a lack of understanding of customer needs: Apple had a heck of a time building Apple Maps.

***

Last year I wrote about the higher education “stack,” at the very top of which sits the job. One of the core competencies of emerging “full-stack” higher education providers would be to “connect students with employers during and following the educational experience and make sure they get the job.”

For colleges and universities, innovating “up the stack” means making these scary stories of unemployed and underemployed recent graduates disappear by moving a much higher percentage into good jobs on the first rungs of ladders leading to reasonably remunerative careers. And if they were hungry to innovate up the stack before, now they’re being force-fed by Governors challenging “all state universities to better align their degrees with a student’s opportunity to get a job when they graduate.” Specifically, last month the Governor of Florida demanded that all state universities ensure that their two most popular majors (often psychology and political science) have 100% employment rates.

My hope is that Governors and universities alike can do better than a hungry 7-year-old in paying attention to a scary story. Because disregarding the stack fallacy could send hundreds of institutions screaming in the wrong direction.

Just as database companies found it easy to believe they could build ERP apps – “After all, we know tables and workflows” – Sharma points out that a little knowledge can be dangerous: “it’s human nature – we (over) value what we know.” So it is with universities. As I noted last month, when it comes to connecting students with employers, colleges and universities have a proud history of establishing a small number of direct connections with local companies, such as the recent partnership between Southern Connecticut State, Gateway Community College and the New Haven Regional Water Authority. As a result, most colleges and universities feel they have a good sense of what employers are seeking and make decisions based on analogies rather than data.

Not surprisingly, many colleges are encouraging the exodus from the liberal arts by expanding pre-professional bachelor’s degree programs. Does this address the needs of employers (the end “customers” of higher education)? Surveys demonstrate employers value critical thinking, problem solving and core executive function skills where liberal arts programs likely do a better job than programs like accounting, healthcare or education (although this compliment may be viewed as akin to calling someone a taller midget). Other colleges are responding by “rebundling” their academic programs (which is odd, because rebundling should probably follow unbundling which is not yet upon us).

Colleges and universities are about as well positioned to understand employer needs as database engineers are to understand the needs of supply chain software customers – which is to say, not well at all.

A better approach would be to take advantage of the emerging army of intermediaries seeking to partner with colleges and universities to provide structured, low-risk pathways to careers in fast-growing sectors. Companies like eIntern keep their fingers on the pulse of changing employer needs and have direct relationships with hundreds of employers. So it may be that these intermediaries are not only useful for “last mile” training and placement, but also for providing intelligence on employer needs to colleges and universities seeking to innovate up the stack and better align programs to employer needs.

One can envision how such partnerships could lead to a multitude of pathways that don’t merely diverge in the last mile, but which are truly distinct and differentiated from run-of-the-mill bachelor’s degree programs (let alone Florida’s dreaded B.A.s in psychology and political science). Such programs would do a better job of preparing graduates for their first job and successful careers, and would directly address the pernicious isomorphism that continues to be higher education’s public enemy #1. And that would be a happy conclusion to a scary story.

University Ventures (UV) is the premier investment firm focused exclusively on the global higher education sector. UV pursues a differentiated strategy of 'innovation from within'. By partnering with top-tier universities and colleges, and then strategically directing private capital to develop programs of exceptional quality that address major economic and social needs, UV is setting new standards for student outcomes and advancing the development of the next generation of colleges and universities on a global scale.

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Three articles that tell us where the puck is going in higher education

1. Evolve Our Business Model Huffington Post column on the challenges and opportunities facing higher education, by André Dua, Director at McKinsey & Co. For starters, schools could offer "built to order" curricula designed to train students for specific jobs. These programs would be designed with input from promising employers Read more 2. Easier Said Than Done Chronicle of Higher Education commentary on the need for higher education to move from transferring knowledge to training creativity, by Joseph Aoun, President of Northeastern University. Given a world in which machines will perform much of what we view as knowledge work, colleges will have to reduce their emphasis on knowledge transfer, and pivot to building students’ capacity for coming up with original ideas. Read more 3. Amazon Eats Higher Education Vox imaginary letter to Amazon shareholders from CEO Jeff Bezos in 2030 on how current Amazon initiatives (AWS certification, badging by Zappos) evolved into internal competency-based education system and ultimately “Amazon University.” Over time, we also learned that other Silicon Valley businesses were using our badge system as a proxy for hiring… [so we began offering] our educational services at cost and introduced many as free to Prime members. Read more