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.
In many ways the plausibility of Minerva comes down to a pure numbers game. The world is very big, and the number of students served by elite American schools is very small. They turn down nine out of ten potential customers now, and the number of global aspirants is only starting to grow. Nelson expects that 90 percent of Minerva students won’t be American. Even with the inevitable discount applied to newness and online-ness, even with a high bar to get admitted and a second high bar to graduate, at some point the sheer weight of numbers solves everything. Ten thousand is a small amount in a world of seven billion people.
Indeed, scale is the oxygen feeding the combustible mix of money, ambition, and technology-driven transformation in the valley. Low margins, uncertain business models, limited marketing budgets—all of these limitations and more can be overcome by scale. And the rapid growth of mobile telecommunications technology means that the number of people in the world who are potential customers is quickly moving toward the number of people in the world.
Minerva isn’t the only project in this city—or in this neighborhood, even—playing this numbers game. One company I visited had start-up costs so low that it never even had the need for venture funding; in valley parlance, it was “100 percent bootstrapped.” Quizlet, as the company is called, was started in 2007 by a Bay Area high school student named Andrew Sutherland. The first product was flash cards. If you were learning the names of animals in French, for example (the sophomore-year high school assignment that motivated Sutherland to create Quizlet), you’d create a digital flash card by entering “penguin” on one side and “manchot” on the other. By the time Sutherland was a college junior, the site had three million monthly users. Now the company is a typical San Francisco start-up with black chairs and MacBook Airs. It makes enough money to rent space and pay salaries by running small ads on the site and by selling a premium version for $15. The ads and subscriptions aren’t expensive, but they don’t have to be when you’ve got millions of users and host everything in the Cloud.
To drive home the point of just how cheap it is to be Quizlet, 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. That’s more than what it costs us per month to host the entire site, serving millions, the executive responds. Quizlet has no sales force, a very small marketing department, and more than seven million monthly unique visitors. (There are about fifty million public school students in the United States.) Quizlet, in its busiest months, during the school year, is among the top 500 most visited sites on the entire Internet. Now they’ve expanded beyond flash cards. You can create study groups, convert your content into multiplayer games, and search for cards and games that other people have created. We think we can get to 40 million users, then 100 million, says the executive. The question that drives the company, he says, is this: How can we create amazing learning tools for one billion people? This is the way most of the people in the valley talk.
Other companies are starting by exploiting inefficiencies in the existing higher education system and using the money to bankroll more disruptive ideas. After visiting the Quizlet headquarters in San Francisco, Michael and I hopped onto Highway 101 and drove south toward Palo Alto. We stopped at the well-appointed headquarters of Chegg, which is basically the Netflix of textbooks; students rent their textbooks online and then mail them back when they’re done. Chegg has tens of thousands of student-customers and lots of cash, but it knows that sending textbooks back and forth in the mail is not the business of the future. So it has begun expanding into other services, like, for instance, one that creates a marketplace for students to share their class notes with each other. Another company that I visited that afternoon, called Course Hero, conducts a similar business.
Both companies have been on the receiving end of cease-and-desist letters from colleges and universities claiming that student notes of a lecture remain the intellectual property of the lecturer and thus can’t be resold for money. But this just highlights the radical changes in power over information wrought by information technology. When colleges were originally built, there were only two ways to get scholarly information: read a book or talk to a smart person. So it made sense to concentrate the books and smart people in distinct places, and colleges benefited enormously from the combination of a growing demand for expert information and the high barriers to entry for building libraries and assembling learned faculty. The college business model depends on holding that position, so they don’t take kindly to upstart companies facilitating new ways of sharing their once-scarce information.
And the one thing that sticks with me more than anything else is that the onslaught is shaping up to be relentless.
Perhaps the biggest sign that this assault on the university is of an unprecedented scale is that some of the biggest incumbents have finally started making moves to defend themselves. In Palo Alto one evening, Michael and I walk to a bar and meet a woman who is helping Stanford build out its online higher education infrastructure. For the previous five months, Stanford had been on one end of a fascinating game of higher education technology one-upsmanship. Throughout the fall 2011 semester, a group of well-known Stanford professors had been running an unorthodox experiment by letting over 100,000 students around the world take their courses, online, for free. Those who did well got a certificate from the professor saying so. Then, in December, MIT announced the creation of MITx, a new nonprofit organization, branded by the university, which would also offer so-called “massively open online courses,” or MOOCs, and would also give certificates to those who earned them—a new kind of academic currency.
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