Features

September/October 2012 The Siege of Academe

For years, Silicon Valley has failed to breach the walls of higher education with disruptive technology. But the tide of battle is changing. A report from the front lines.

By Kevin Carey

So the VC guys and the start-ups look at K-12 and higher education, which between them cost over $1 trillion per year in America, and much more around the world. They see businesses that are organized around communication between people and the exchange of information, two things that are increasingly happening over the Internet. Right now, nearly all of that communication and exchange happens on physical platforms—schools and colleges—that were built a long time ago. A huge amount of money is tied up in labor and business arrangements that depend on things staying that way. How likely are they to stay that way, in the long term? Sure, there are a ton of regulatory protections and political complications tied up in the fact that most education is funded by the taxpayer. As always, the timing would be difficult, and there is as much risk in being too early as too late.

Still, $1 trillion, just sitting there. And how much does it cost for a firm like Learn Capital to invest in a few people sitting around a table with their MacBook Airs? That’s a cheap lottery ticket with a huge potential jackpot waiting for whomever backs the winning education platform.

After chatting with Nathaniel for a while, I eventually yield the floor to a young guy named Parker, an aspiring entrepreneur who graduated from Amherst last May, who’s come to pitch an idea for a start-up in hopes of scoring seed money. In November he had an idea for a new company he calls eHighLighter, which sells a smartphone app that lets you take a picture of a book page and convert it to a document on which you can then highlight text, categorize it, save it, and otherwise organize it in useful ways. He put some bootstrapping money together and used it to hire six computer programmers in Bangalore to design the “user interface” and “user experience” (UI and UX) for the company.

He gives a short, practiced explanation of what the app does, then pulls out his white iPhone—everyone here has not only an iPhone 4S but a white iPhone 4S— and shows Nathaniel some screen captures of the product. The pitch takes about five minutes. Nathaniel nods, listens, and says, nicely but decisively, “I’m not sure I buy it.” He sees eHighLighter as an intermediate technology, a bridge to the eventual transition from paper to electronic books. What then? Parker is ready for this and cites statistics about the slow rate at which libraries are scanning in physical books, and they have a friendly back-and-forth about this, with Nathaniel offering useful advice about going after specific market segments—PhD candidates who live in archives, for example. But his initial judgment remains unchanged.

Parker doesn’t seem particularly crestfallen. It’s his first pitch; there will probably be more, and the prospect of hitting a home run never seems that far off around here. Less than a year out of Amherst with nothing but a few iPhone screen captures and Parker can walk into a room full of money and get the money’s attention. Youcan’t ask for more than that.

As we’re wrapping up the meeting, suddenly everyone starts fiddling with their white iPhones at once. “Facebook just bought Instagram for $1 billion,” Michael says. This is, in many ways, local news. Lots of people here know the Instagram guys, have run into them at parties, or have otherwise overlapped circles in the small valley world. So it’s slightly vertiginous to wake up the next morning and see the story of how the creators of an iPhone photo-sharing app struck it rich above the fold on the free copy of USA Today the hotel leaves in front of my door. Instagram comes up in nearly every meeting I attend for the next three days.

Back in San Francisco, we meet Ben Nelson, founder and president of the richly funded but still entirely theoretical Minerva Project. Michael and I meet him at an Asian restaurant in the hip SoMa (South of Market Street) district of San Francisco. Nelson is wearing another black fleece zip-up jacket. He’s half a generation older than most of the start-up people I talk to—meaning late thirties—and spent more than five years as the CEO of the photosharing company Snapfish. Minerva made news in the valley the week before by getting $25 million in start-up funding from Benchmark Capital, the single biggest seed investment the firm, whose past investments include eBay, Twitter, and Instagram, had ever made. Since nobody gives away all or even most of their equity in exchange for initial seed funding, $25 million implies a substantially larger total valuation. Since these negotiations are essentially speculative and tend to involve round numbers (see: Instagram, $1 billion), $100 million is not a bad guess.

Minerva sprang from Nelson’s observation that higher education was increasingly a realm of mismatched supply and demand. Recent decades have been generally peaceful and prosperous on planet Earth. There are a lot more people with the desire and ability to pay for higher education than there used to be. Elite American schools are the unchallenged market leaders, which is why applications to Harvard have increased by double digits annually for years, with growing demand from China and other fast-developing economies.

In response to this surge in demand for its product, Harvard has done the following: absolutely nothing. It hasn’t expanded the size of its freshman class by a single student in the last twenty years. With a few exceptions, this is true for all elite American schools. They don’t have to get bigger, they don’t want to get bigger, and, anchored as they are to immovable physical places, they can’t get bigger in any meaningful or not absurdly expensive way. Yale, one of the exceptions, is currently in the process of expanding its undergraduate enrollment by 15 percent, or about 800 students. This involves building two new “colleges,” the rectangular gothic buildings in which Yale undergraduates live and study, at a cost of more than $600 million—or twenty-four times what Minerva got in seed money, an amount that was repeatedly described to me as shockingly large.

Minerva is designed to soak up this growing excess demand. Nelson plans to signal elite status through a combination of rigorous admissions standards and a nail-tough academic curriculum. While the courses will be conducted primarily online, students will live together in shared housing units in cities around the world. They’ll start in their home country and then rotate to different cities in later years, finishing with a capstone project in their chosen major. Nelson figures this can be done for less than half of what Ivies charge students, and that if Minerva ends up with a student body of 10,000 undergraduates it will be a financial success.

Kevin Carey is the director of the Education Policy program at the New America Foundation.

Comments

  • Adrian Meli on August 28, 2012 6:35 PM:

    What a wonderful article-it put a huge smile on my face reading it. Lots of great ideas and wonderful innovation happening it in a space that needs it. I hope you do a follow-up in a year on it.

  • Atul Kumthekar on August 28, 2012 10:52 PM:

    I think for a true pursuer of knowledge, all the western education seems meaningless at a point. Albeit it may be giving good platform to connect. It may be good to look also at how Indian Classical Music is taught (traditionally) in India. Even in science we see a good bond between a student and a teacher which is most critical. This may not be possible in online education. One can even go back to Archimedes days and see how he used to teach walking around - he must be doing his own thinking while teaching ! All n all - it is the freedom, no fear or survival, is the key to good education. Online education definitely provides some goals like education for all, free and whenever student wants. I am doing some online courses on coursera.org and quite satisfied except for the typical exam pattern they implement - probably out of some framework bindings.

  • Bethany Schwecker on August 29, 2012 12:55 AM:

    Thanks for this reporting Kevin.

    Like many who have earned their expensive degree from an intellectually respected institution and find that the value of the credential in the real-world of remuneration is far less than the cost it took to acquire it, I'm very glad that future generations have a fighting chance to get out from under these dark clouds--though I am naturally envious that I will not be able to participate in their joy.

    I, like Adrian, very much would like to know how forward progress is being made in this arena. Please do a follow-up in a year.

  • Atul Kumthekar on August 29, 2012 2:51 AM:

    Phew... read the entire article and thought may add few more points:

    1. Thiels of the world can focus on wankel engine type substitute to IC engines rather than rockets and fuel. That will be more useful to mankind and will go in line with the scale, money, ambition mix !

    2. The rail road example and getting obsolete of it may not be really related to open market capitalism but more related to car lobby! If this was not so, possibly we may not have faced global warn(read -m)ing :)

    3. There sure exist a world beyond scale, economy and ambition. May be US need to become 1000 year old culture for that! But to think of it, would any venture capitalist have funded Right Brothers? The new things will even today and tomorrow NOT come from out of venture capital world. I like the 18th century Europe scenario in this respect. So many innovations came in math, physics, chemistry not by venture capital mechanism but by sheer desire and efforts in honest way. No fancy American colleges were really required for all that. I think it is about creating the cult and hype of this type. That is what we need. As aptly put by great Indian leader Gandhi - 'there is enough for everyone's need but not enough for greed' :) So one needs to think over as to which world are we talking about when we think about change. Does the trickle down effect really work?

  • Jeff on August 29, 2012 9:50 AM:

    Can I please have a wallpaper-size copy of the article's leading illustration? Right now?

  • LaFollette Progressive on August 29, 2012 11:07 AM:

    It's easy to imagine some very positive changes to the status quo emerging from this new technology -- eliminating the de facto requirement that everyone who wants a halfway decent white collar job must go into debt to earn a traditional four year degree from a name-brand institution, and allowing anyone in the world to take high-quality individually-tailored coursework for career development, while preserving the long-term health of institutions that still provide a traditional four-year liberal arts education to those who actually want one.

    It's also easy to imagine this going in a dystopian direction, in which slower-adapting public universities have to be closed or bailed out and reorganized by their states, many smaller private schools disappear off the map, the most prestigious schools start profiteering off of student loan dollars like the worst online schools of the present, the best research faculty stop teaching, and even the most prestigious schools become little more than a series of powerpoint presentations delivered by adjuncts who earn virtually nothing.

    Frankly, the latter version seems much more likely, given the current direction of our society.

  • mbk114 on August 29, 2012 12:08 PM:

    A very interesting article, but I'm surprised that never once did I see the names John Sperling, Apollo Group, or University of Phoenix brought up. It's unfortunate, because they offer a glimpse of what this new world of education is likely to look like - a system where most people participating are just simply going through the motions because of the ever-growing need to get that little piece of paper society values so much.

    Mr. Carey only partially addresses the key factor here, which is that of the credibility of the degree -- or what he refers to in market-ese as "colleges with strong brand names." On the surface it's easier to get a degree than ever, with UoP and its clones offering technology-assisted education in ways that accommodates the needs of their users, just like many of the people interviewed here are hoping to do (albeit at a lower cost). Yet these institutions suffer from a growing perception that their degrees do not reflect the same degree of intellectual development as those from more traditional institutions of higher learning. Rather, it becomes something like a variation of that old slogan about socialism: the teachers pretend to teach and the students pretend to learn.

    This isn't to say that technology, for better and for worse, won't play a growing role in education (and I say worse because technology is a factor driving up the cost of higher ed that nobody is talking about). But that tipping point that Mr. Carey describes at the end of his article is a lot farther off than he thinks unless the smart people of Silicon Valley devote some time to figuring out how to improve the validity of the degrees they would be granting. There already is a way to do this -- it's called accreditation, but it's the type of expensive process that would cancel out many of the cost benefits these people are trying to achieve. Until they figure THIS out, though, they're going to just be creating an e-version of the UoP model, with most of the students they produce ultimately having wasted their time pursuing a chimera sold by some sharp people whose enthusiasm outpaced reality.

  • Robert Arvanitis on August 29, 2012 6:36 PM:

    The essence of teaching is when the one who knows, knows so well he can anticipate where the one who seeks does not understand.

    In other words, the teacher must know the most complex subject so well, that they can make it seem simple.

    The real leap will occur when predictive analytics are sufficiently sophisticated to replicate that.

  • frank on August 29, 2012 6:51 PM:

    My daughter is 12-this gives me hope...

  • TTT on August 29, 2012 7:26 PM:

    The missing piece is for large tech employers like Google, Apple, Microsoft, etc. to unite and say they will hire, for entry level positions, people who have completed the following 3-course certificate in MITx in the suitable field (computer science, etc.).

    When these high-profile employers say that a Bachelor's degree is not needed for entry-level positions, then the last pillar holding up the sordid old edifice, is gone.

    So the education that can make you eligible for an entry-level job at Google costs very little, vs...

    A degree in 'Women's Studies' that neither opens up jobs nor is cheap.

    An easy choice.

  • Paul Schantz on August 29, 2012 11:50 PM:

    Fantastic article, Kevin! It captures a lot of the internal passion and excitement in the Internet industry that many in higher ed have never been exposed to. It's infectious and perhaps a little frightening for some. Thank you for writing this.

  • Louise Yarnall on August 30, 2012 3:32 AM:

    I agree with the person fearing the dystopian vision, and the person worried that hiring managers will pick the candidates from brand name colleges and personal recommendations rather than on evidence of competence. Disruptive change needs to offer real opportunity to be meaningful. The most interesting aspects of teaching and learning have to do with lesson and assessment design. It would be nice to see more focus on how these new entrepreneurial models teach and how students learn from them. Making that part of the equation more transparent would make a strong contribution toward solving many of the education problems we have: inequity, branding and creaming, impersonalization, poor teacher preparation. One size never fits all, and really, one of the biggest problems today in education is the lack of tools for students and their families to customize learning based on the inherent talents and passions that all young people display. The more we learn about learning, the closer we will get to transforming opportunity for all.

  • Alan Contreras on August 30, 2012 12:07 PM:

    Kevin, you have done a great job with this subject. As someone whose career has been based on evaluating colleges and determining the validity of degrees, I look at the future and see a great deal of complication.

    One key factor in moving knowledge from one person to another is the need to rely on the qualifications of the provider. I am concerned that as we move away from a system rooted in the concept of the "faculty," we move into something of a qualitative wilderness in which anyone can slap a label on a training packet and call it knowledge. Some of the for-profits do this already.

    This is to some extent self-correcting over time, as the turkeys are seen to bear feathers, but by then a significant amount of harm may be done. It is true that the gatekeeping functions of governments and accreditors are rusty and the processes slow and expensive. However, unless we adopt a purely libertarian view of credentials, under which any employer must conduct significant research into the nature of the providers whose "graduates" are at the door, there needs to be some kind of screening or certifying function for credentials.

    I do not think that these new models will have much effect on the bulk of traditional-age undergraduates. They will continue to want to go to physical colleges because that is where they find mates and make friends. The issue is whether they will be able to afford it.

    The era of subsidized public colleges is clearly over and won't be seen again, so the question is how to support student attendance at physical campuses. The only plausible answer is that colleges that succeed in generating private support will survive and many others will not.

    I'm sorry to see that so many wealthy entrepreneurs do not see more value in reducing the cost of traditional education rather than replacing it with something else. The new models will work well for some students, but not for many.

    Alan Contreras
    Oregon

  • William Senft on August 31, 2012 12:15 PM:

    When you boil it all down, isn't the core problem/opportunity TESTING?

    If there are assessments that truly measure knowledge and ability, administered with security and integrity, then those who demonstrate their mastery will deserve to gain access to capital and employment opportunities. The industry winners are those that can provide quality curriculum and assessment and testing security and integrity.

    The rest is up to the students - truly a merit based system for advancement that does not depend on playing the admissions game for a brand name university. The revenue model in this new system will involve payment for access to courses and for testing.

    Traditional schools will have to focus on providing the experiences that REQUIRE people to be together in the same physical location. The 4 year, 9 months a year, brick and mortar classroom based model for achieving high school and college degrees will not provide the right cost/benefit balance as opposed to some hybrid that will leverage technology to make the educational experience much more flexible and efficient. There are many complexities, like the simple fact that much of secondary school education essentially is daycare for older children that is needed by working parents, but one thing is for sure, the cost of education should trend inexorably downward going forward. That's a good thing.

    Thanks for this thought provoking article.

  • Virginia on September 01, 2012 6:34 PM:

    Great article, enough to frighten a lot of universities. But oddly enough perhaps not professors, who I would think are in a weak position.

    I would second the comment about trying to reform traditional universities instead of disrupting them.They aren't making big bucks, as the article implies, at least not the public universities. I wish some venture capital would go towards streamlining the existing system to make it more efficient.

    I think the real challenge to colleges is the globalization of education, not just its online nature. And it will be people in other countries who make the most of it. American college students still resist online learning, don't like eTextbooks, and are skeptical about classroom tech.

    Is anyone figuring out the advising part of this? Most students don't know which courses they should take, which ones go together, what to specialize in, how to make a program that makes sense. And they also don't necessarily know how to learn. Universities put a lot of effort into advising.

    Finally, I would be sad to see higher education become so narrowly focused on jobs and not intellectual development. Yes, that's easy to say when you have a job. But many people remember college as a time of intellectual experimentation and growth, not just learning technical skills. The new forms of education could also provide this--but I don't see anyone talking that way, at least not in this article.

    Thanks for a thought provoking article.

  • Lukas W on September 04, 2012 9:32 PM:

    Just wanted to say I love the article. Lots of food for thought. About credentials, power structures, education, technology, and the "thing" that is start-ups.

    Thanks so much.

  • Kevin F. Adler on September 05, 2012 12:23 PM:

    The basic philosophical divide that Nick proposes is compelling, but I find it dubious in practice. Relationships form the bedrock of Silicon Valley, and dictate the flow of money. Is the entrepreneur a known entity? Are other investor friends investing? Broad category plays can only be so broad. Talent, while scarce, is still incredibly rich and distributed across startups concentrated in the Valley. While some philosophical underpinnings guide general investment flow, ties from college, prior employment, and friend networks dictate where the money goes.

    Even Instagram, a startup that seemed to take off overnight, offers a good case in point: http://kevinfadler.com/post/21086254592/instagram-not-instant-success

  • Kevin F. Adler on September 05, 2012 12:24 PM:

    The basic philosophical divide that Nick proposes is compelling, but I find it dubious in practice. Relationships form the bedrock of Silicon Valley, and dictate the money.

    Is the entrepreneur a known entity? Are other investor friends investing? Broad category plays can only be so broad. Talent, while scarce, is still incredibly rich and distributed across startups concentrated in the Valley. While some philosophical underpinnings guide general investment flow, ties from college, prior employment, and friend networks dictate where the money goes.

    Even Instagram, a startup that seemed to take off overnight, offers a good case in point: http://kevinfadler.com/post/21086254592/instagram-not-instant-success

  • Bro'Donnell on September 06, 2012 2:46 AM:

    Fascinating article! Really enjoyed it and I'm excited for some upcoming disruption!

  • John Beck on September 07, 2012 11:11 AM:

    Based on some of the other comments, this article seems to inspire hope in a lot of the people who read it. I'm not sure why, and I'm sort of scratching my head about the "golly gee" tone of the article and some of its premises. Has Carey suddenly transformed into Dr. Pangloss? For starters, he writes glowingly of Wal-Mart; Wal-Mart has indeed brought us cheap prices for clothes and other products, its great "gift." The downside? Many of these products are produced by people working at what reasonably could be called slave labor wages in impoverished countries. Then there's the 1000s of small stores across the country run out of business by Wal-Mart and Wal-Mart's other great "gift" to the American people: the expansion of the low wage, no benefit employment sector. To "Wal-Martize" higher education even further than it has been through technology (the process has been well under way for decades with the growing use of adjuncts) will do in yet another employment sector that pays reasonably well. Don't expect these tech start-ups to create new kinds of jobs en mass to replace the jobs lost in higher ed; Carey (and research supports this) makes clear these companies aren't going to be major employers.

    Mr. Carey is implicitly making the case that these entrepreneurs will solve the problem of rising tuitions and limited access to higher education. It's a curious argument for him to make because it's so narrowly focused. In this article, the education world seems to consist solely of expensive elite universities jealously keeping their enrollments small and thus closing out a multitude of top students across the country (and world) who apparently can't get a decent education elsewhere. The community college sector (ironically, Carey's specialty)is totally invisible in this article not to mention the hundreds and hundreds of public universities that provide a solid education--even an excellent education to those who seek it--at tuition levels that still generally don't leave graduates with tens of thousands of dollars of debts.

    The entrepreneurs Carey is describing are primarily interested in doing what interests them and in making money. They don't care if they devastate an industry whether it's the recording industry, publishing or higher education. We may not care either, but if the digitalization of publishing reduces the already minuscule compensation authors earn even more, that may very well result in less quality published work, not more, and maybe that's a problem. As for the implicit message in this article that colleges and universities are slow to take advantage of the new technology, maybe so, but most have been moving online for more than a decade now. What these entrepreneurs hope to do is cut the colleges and universities out of this market and make some money. Educators--at least the principled ones--hold values that limit how far they are willing to go in changing higher education. These entrepreneurs apparently don't adhere to these values; for them, instruction is a commodity, nothing more, nothing less. Why have 1000s of teachers giving a lecture about the Declaration of Independence when one good lecture by a professor at an "elite" university will do? Hire paper graders and discussion facilitators (low paid of course) to do the grunt work and work on software to replace them eventually. Heck, why even have a course that brings up the Declaration of Independence? How does that pay off for someone? And who's going to get this type of education in the brave new world? People who aren't brilliant and people who aren't rich, which is to say, most of us. People who are brilliant and people who are affluent will continue to get the real deal. And what will people do with their online degrees as entrepreneurs work tirelessly to bring "progress" to industry after industry? Wal-Mart beckons.

  • doug k on September 07, 2012 4:50 PM:

    John Beck said most of what I was going to say. Kevin Adler makes the excellent point that college is more about the relationships established, than the education as such.

    Also this quote was illuminating:
    "one of its executives asks me how much money the United States spends per year to educate a single student in K-12 education. About $15,000, I say. Thatís more than what it costs us per month to host the entire site, serving millions, the executive responds. "

    Serving millions, yes, but with what ? flash cards are not an education nor yet a teacher. The glib Panglossians of online education mistake a twig of the tree for an entire woods.

    I took one of the Coursera courses. Certainly it's an excellent option for those who have no other access to the material, but it did not appear in any way to be teaching. With thousands of students, the lecturers might as well be reading out chapters of the textbook. Any learning that happened occurred at random in the online forums and chatrooms around the course, not the lecture videos. Online courses are a fine resource for autodidacts but no replacement for teachers.

  • Jerry on September 19, 2012 1:15 PM:

    While I think higher education is ripe for disruption, there is something that the Yales and Stanfords of the world do well, and that is research. Their education delivery is demonstrably poor, but as a society, we need research, and I haven't seen anyone put forth how research gets done without universities. Do you kill research that moves humanity forward if you kill universities?

  • Mark Goldes on September 29, 2012 1:56 AM:

    Back in the 1960's I initiated the Free University movement. According to Time Magazine, 600 experiments materialized worldwide in the following year or two.

    What I really meant was that the planet was becoming a university as a result of modern communication. Anyone seriously interested could learn anything with the support of a few friends.

    Carey provides an excellent survey of a revolution taking place in education. it may transform our civilization faster than might be imagined.

    I plug the article in my bio on the Aesop Institute website. And will expand the mention now that the entire article ia on the web.

  • Mark Goldes on September 29, 2012 2:00 AM:

    Jerry,

    While some academic research is magnificent, much of it leaves a great deal to be desired.

    Cold Fusion is a wonderful example.

    See Cheap Green on the Aesop Institute website to see a little about a monumental energy breakthrough that has been delayed for more than two decades by the failure of academic research.

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