UV Letters

Jul 26, 2013 BACK

You Won

Volume III, #15

By Daniel Pianko

Besides screaming kids and standard drama, family reunions at my house frequently involve a debate about the future of higher education. Like me, my brother has made his career in higher education. With a doctorate from an Ivy League institution, he’s now a tenured professor at a prestigious public university.

After nearly 40 years of sibling rivalry, including a memorable period during 8th grade when he would return home from wrestling elective to practice new moves on me, our current discussions focus on what the future of higher education will bring. What role will technology play? How will America’s leading higher education institutions survive and grow in a period of rapid change?

But over the July 4 holiday weekend, the argument took a surprising direction. His university announced it would join EdX and strongly encouraged its faculty to experiment with online and hybrid courses. At the conclusion of a discussion which was fascinating to us (but which, to other family members, was about as much fun as seeing how high you can count), he jokingly said: “you won.”

The nomenclature is important. “You won” indicates a zero sum game. To be fair to my brother, there are lots of examples of technological change yielding zero sum games. For example, new e-hailing services like Uber and Lyft provide direct competition to taxis, which have responded by pressuring regulators to issue cease-and-desist letters on innovative grounds such as “our roadways are a scarce resource.” (Although the services are permitted in San Francisco, San Francisco airport police ticket Uber drivers. So while you can take an Uber car to the airport, you have to pretend to be related to the driver.)

Another area where there’s been quite a bit of zero-sum thinking is retail. Amazon has scooped up market share from onground retailers in every market and segment. But increasingly retailers are using technology to fight back. Consumers who download a retailer’s app are already known the moment they enter the store so retailers can make Amazon-like recommendations. Those who aren’t known may find that the store is using wi-fi to track the movements of their mobile phone. Once they’ve spent 20 minutes in the shoe section, a coupon for a pair of Manolo Blahniks may pop up. There are even service providers offering cameras with facial analysis software for retailers to deploy at checkout in order to offer coupons for additional purchases. In a recent New York Times article, the head of marketing of one such Russian company suggested: “If you are an angry man of 30, and it is Friday evening, it may offer you a bottle of whiskey.” (Which begs two important questions: (1) In Russia, wouldn’t this be an appropriate offer every evening, or really at any time of day?; and (2) Wouldn’t that angry man already have a bottle?)

As colleges and universities face off against new technology, how does this game compare with the one retailers and taxi drivers have been playing?

It’s true that three million American students – nearly 1 in 6 enrolled at colleges and universities – are earning degrees entirely online, without setting foot on campus. But they are doing so at accredited universities (nearly all regionally accredited). Students haven’t fled the system for an Uber- or Amazon-alternative. Overall enrollment is up 18% over the past 5 years. And new private sector universities (i.e., publicly traded companies like Apollo Group, parent of University of Phoenix), which had seemed on a path to market domination, have experienced enrollment declines.

At the same time, my brother sees clouds on the horizon. As Ben Nelson, the founder of the Minerva Project, explained to me, about 100,000 students at the University of California and California State University systems take Psychology 101 each year. Psychology 101 is a first year lecture class with, on average, over 200 students in each class. That’s 100,000 students, at an average of $1,500 of revenue per student per class. So Psych 101 generates $150M in revenue at a cost of delivery that can’t possibly exceed $50M. As a result, the California systems generate $100,000,000 of gross margin (i.e., profit) on Psych 101 – a contribution that is used to support other activities in the systems. What happens, my brother rightly and fairly asks, when new entrants like StraighterLine and UniversityNow push the price UC and CSU can charge for Psych 101 to the actual cost of delivery? What will UC and CSU have to cut?

His second major concern involves the pedagogical model. Sure, the lecture might be dated, but what about the relationship between professor and student? Is online learning reductive of the higher learning aspects of higher education? What about critical thinking? What happens to the humanities? Keeping with the California theme, is the technology-enabled version of higher education destined to be a poor facsimile of our own experience – something like the bad Beach Boys?

With regard to quality, I argue that technology will pull back the curtain and we’ll see what’s there. Some institutions, programs and courses offer finely tuned sedans, while at many other institutions the shiny Cadillac is really a beat up old jalopy that should be replaced by a Tesla (or an avatar). The fact that there aren’t many jalopies at my brother’s state institution doesn’t mean the jalopies aren’t out there. If you travel around many of our nation’s 4,000+ colleges and universities, you will hear them. You don’t even need to listen carefully. Lord knows the students aren’t. Just ask the 96% of students who fail to complete at the Chicago Community Colleges.

As for the cuts that result from the elimination of the Psych 101 profit center, they will be hard. But like retailers, over the coming decade colleges and universities also will be able to take advantage of new technology to become much focused on their core mission: producing measurable student outcomes. This focus will ensure that the cuts aren’t impacting their core mission, but rather ancillary activities like Division I sports, or – equally entertaining – keeping for-profit universities from participating in Division I sports.

As for faculty, most will perceive technology to be win-win as opposed to win-lose. For one, across colleges and universities, 75% of instruction is delivered by graduate students, part-time faculty, or full-time non-tenure track faculty. These are faculty who are typically happy to pick up another course. And although technology may reduce the number of Psych 101 sections delivered by one institution, overall it will increase demand for their expertise – in the U.S. and globally.

And for full-time tenure track faculty like my brother, I consider it my personal mission to convince him and his colleagues that “you won” is really “we win.” My advice to my brother: Be the first to put your courses online. Join every faculty committee discussing innovative models. Influence the debate. Create the “rockstar” MOOC up for your discipline. Remove the phrase “that can’t work” from your vocabulary and replace it with “let’s figure out how to make a Tesla – or perhaps a driverless car?”

If that fails, I’ll try my own wrestling moves on him. Or better, I’ll tell him that if he loses his job, I’ll let him give me an Uber ride to the San Francisco airport. After all, we are related.

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 expects to set new standards for student outcomes and advance the development of the next generation of colleges and universities on a global scale.

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