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Picking Daisies for American Universities

November 22, 2010
Institutions, Policy
10 Comments

 

One of the commercials broadcast during the NBC Monday Night  Movie on the evening of September 7, 1964 was a one-minute campaign ad for President Lyndon Johnson.  It began innocently enough with a child picking daisies and ended in the horrifying nuclear catastrophe that would be the inevitable result of electing Johnson’s Republican opponent, Barry Goldwater.  Johnson’s voice intoned: “These are the stakes!”

The Daisy Ad was broadcast only once, but it was in the view of many historians the decisive factor in Johnson’s landslide victory. Goldwater was at the time a sitting two-term United State senator and the rock-solid leader of American conservatives.  He was a fierce opponent of Roosevelt-era programs,which he considered financially irresponsible, but he was by all accounts anything but excitable.  Nevertheless, the Daisy Ad defined Barry Goldwater as the man who would recklessly plunge the nation into nuclear war. It was a dramatic illustration of the ruination awaiting public figures who allow their opponents to define them.

The number of “These are the stakes!” portents of disaster for American Universities is on the rise. Everything from tenure to the economic benefits of a university degree seems to be under assault.  Richard Vetter, Director of the Center for College Affordability and Productivity (CCAP),says that an economic nuclear wasteland is the price of ignoring the recklessness of American higher education:

The pell-mell investment in sheepskins is beginning to look an awful lot like something our economy has seen in real estate: a debt-fueled asset bubble. It might end just as badly.

How do American universities respond? Meekly. As reported in the Chronicle of Higher Education, university leadership has been slow to recognize the direction and force of prevailing winds.  A common mistake in business and politics is to focus on the feel-good stuff that is ultimately valueless, and universities are making the same mistake.  The Chronicle reports that former MIT vice president John Curry told a gathering of heads of public universities to stop clinging to “worn out myths about campus strengths.” Curry told the group, “We like our stories more than the truth.” That leaves a vacuum for others to tell their versions of the truth.  It was devastating to Goldwater and it will be devastating to higher education.

The CCAP has in recent months published a series of highly critical studies of cost and value in American higher education.  I have mentioned some of them here. CCAP themes have gone viral in communities that are to all appearances unfriendly to the overall goals of higher education, among them the conservative think tank The Heritage Foundation.

It is no secret that conservative groups are increasingly cool to the idea of an academic meritocracy, preferring to view the inevitable hub-and-spoke network of influencers within the academic community as unfair to arguments and causes that would draw relatively few advocates on their own merits–a “liberal tilt” they call it. Now CCAP’s Matthew Denhart has published a study for the Heritage Foundation that argues for less federal involvement in higher education.

You see where this is going. Taking themes that are deeply troubling to the future of universities, like the overreaching of accreditation agencies, and constructing a “Picking Daisies” story about the politicization of higher education, the silence of university leadership becomes the Goldwater response to the doomsday ad. Here’s an example of the disconnect. On my campus, as on many others, there is still serious debate about the use of online education.  We cling to the worn out myths about the value of classroom attendance when overall enrollments are growing at a paltry 2%. The most recent Sloan Survey of Online Education reports that during that same period online enrollments surged by 21%.  I did not drop a decimate point. That’s a factor of ten difference. It sounds to me a little like debating the desirability of damp weather as a tsunami is approaching.

Among the Sloan findings: class differences caused by increasing selectivity and rising costs in traditional public universities are driving a new generation of students toward online learning in unprecedented numbers. The unresponsiveness of public institutions to obvious trends like these clears the way for anyone who wants to define higher ed. What are traditional universities doing in the meanwhile?  We argue about the effectiveness of increasingly baroque systems of ranking our own hubris-driven reputations, we fight tooth-and-nail against a level playing field for traditional and for-profit universities, we are able to argue with a straight face that college costs that have rise at twice the rate of health care costs are not really out of control.

The general public does not care about any of this.  It’s no wonder that they have tuned out pleas for more funding and are willing to turn their backs on a great engine of wealth creation in favor of just about any story that makes sense to them. Richard Vetter’s story is that traditional higher education is the Goldwater who threatens the innocent daisy-picking American public.  It doesn’t make much sense, but it’s better than the story that we tell.

Damaged Pipelines and the Future of Innovation

September 6, 2010
Institutions, Policy
2 Comments

One of the strongest arguments for shoring up the nation’s public universities, increasing graduate offerings, and expanding the role of expansive research plans in determining institutional priorities is the effect that investments like these have on America’s ability to innovate. It’s an argument that rings true, but as facts accumulate, it is beginning to look like public universities are not doing much to secure the future of innovation in the United States.

The nation’s supply of scientists and engineers is fed by a pipeline that extends from the undergraduate programs of colleges and universities to the graduate programs that educate the next generation of PhDs.  The massive investment in research at public universities should have had some impact on the health of this pipeline, but it has not.

A couple of weeks ago, I cited a depressing  CCAP ranking of universities that placed many of the country’s most highly respected research universities near the bottom of value-oriented rankings.  Now there is a new survey from UCLA’s Higher Education Research Institute that adds more details to this portrait of failed priorities.

On a per capita basis the schools whose undergraduate programs are responsible for the most PhDs in the STEM (Science, Technology, Engineering, Math) disciplines are the ones that are also highly regarded by students and alumni for the value they deliver.  There are only three public institutions in the top fifty: UC Berkeley (39), William and Mary (45), and a surprisingly strong 15th place showing for tiny New Mexico Tech.  Who is at the top? Caltech is number 1.  Private research universities like MIT, Princeton, and Chicago are also in the top ten. But so are schools with virtually no research funding.  Harvey Mudd is ranked number 2.  Reed, Swarthmore, and Carleton — all liberal arts colleges — are among the top ten as well. Many in the top fifty are small, but there are a couple of  large institutions like Berkeley (35,000) and Cornell (21,000).  About half enroll between 10,000 and 15,000 students.  All are highly selective, but so are the most of the public universities that are members of the AAU.

In a recent post, I asked “Why universities do research?”  This data makes the question even more pointed. The largest consumers of federal research dollars should be directing their energies to insuring the health of the STEM research pipeline.  All of the schools in the top fifty manage to do it — some with little or no help from the federal government.  So it makes perfect sense to ask what is going on at the other institutions.  I have my own ideas — and I talk about them in my book — but I am also interested in hearing your thoughts.  Is this another indication of a damaged pipeline?

Holding the Middle by Nibbling the Edges

August 27, 2010
Institutions
1 Comment

One of the consequences of the e-pill scenario that I painted in my Ephemeralization post is the increased threat to colleges and universities in the “middle.”

Most American colleges and universities lie in the middle between the seventy or so top institutions that are wealthy enough to set their own agendas — even in tough financial times — and the proprietary, for-profit universities whose growth seems to be unperturbed by the financial meltdown of the last couple of years.

For many universities in the middle, online instruction threatens to hollow out their value. This is especially true for those institutions whose courses have been charted to follow the elites. When I raised the possibility of new kinds of technology enabled courses, the reactions were predicable:  lots of reasons that the online experience was vastly inferior to in-person instruction.  If that’s the value that the middle is holding on to, then the rapid embrace of online courses by top institutions is a real threat as larger numbers of the best students enroll in elite online courses and  price-sensitive students continue to choose the customer-friendly, jobs-oriented online programs at proprietary colleges.

Now in today’s The Choice blog at the New York Times, Rachel Gross asks:

“What if you could graduate from an elite university without ever stepping foot on campus — if instead, you had merely to open your laptop?”

The implications are staggering:  no more artificial size limits for entering freshman classes; elite curricula repackaged; focus on market share. Can an elite institution enroll fifty thousand students?  In 2000, executives at Hewlett-Packard asked whether HP could profitably produce and sell a forty-nine dollar printer.  They are really the same question.

In both cases, the answer is yes, but only if you can figure out a way to grab and hold increased market share with increased quality and service. As HP found out, you cannot turn your value proposition upside down by nibbling around the edges.  You have to be prepared to dramatically change your business model.

If Rachel Gross is right, then top-ranked institutions are already making this leap.  No more arguing over the drawbacks of online instruction or snarky comments about the low-brow nature of the  for-profits.  That means some at the top have already figured out new business models. If so, they are not talking about it. Whether it is a razor-and-razor blade platform, a cost-cutting approach to commoditized courseware, or a hybridized delivery model, every advance at the top threatens the stability in the middle.  I don’t think many will survive by nibbling around the edges.

Ephemeralization of American Universities

July 18, 2010
Institutions, Resources
4 Comments

Let’s imagine a pill. I’ll call it e-pill. It’s available to every young adult who wants it — probably a benefit of some program to link health care and education.  E-pill has one effect: it permanently rewires brains to store, understand and effectively use knowledge equivalent to the general education requirements at a good American university. You know what courses I am talking about: science, math, history, philosophy, art, social science, writing, and literature. No side effects.  It does not make you any smarter, but if you’ve taken e-pill, you have a lock on credit for English 101 and Intro to American History.  No downside to the pill at all except for this:  you have to forgo the classroom experience.

Thinking about e-pill  clarifies something that has been on my mind a lot these days: ephemeralization of American colleges and universities.  Ephemeralization is a term that Buckminster Fuller  used to capture the economic concept of dematerialization.  In effect, ephemeralization means doing more with less.

The National Conference of  of State Legislatures just issued a report that makes it clear the extent to which public universities will have to do more with less over the next several years. According to State Higher Education Executive Officers:

Appropriations per student remained lower in FY 2009 (in constant dollars) than in most years
since FY 1980.

Tuition increases — which now average 37% of revenues — have made up for some of the shortfall, but as Delta Project data makes clear, although increased tuition may cover lost revenue, it does not necessarily find its way into instructional budgets.  Public institutions have been using stimulus funds provided by the 2009 Federal American Recovery and Reinvestment Act (ARRA) to keep the wheels on.  ARRA funds will disappear soon. All the while, students are pouring into dozens of campuses like the University of Central Florida where access is paramount.

The lead article in today’s Chronicle of Higher Education, was a jaw-dropping summary of the budget shortfalls awaiting the State University System of New York and other systems where state finances are so broken that higher education funding will be disastrously inadequate for years. Maybe decades. Short of rolling over and shedding both students and programs, dematerialization is the order of the day for most of us in public universities.

As I pointed out in last week’s post, there are swirling financial misconceptions that — if acted upon — could actually make matters worse.  This is not the time, for example, for an aspiring public institution to undertake a large research commitment in the blind hope that research revenue would help the budget.

What does this have to do with e-pill?  This is a time to take a serious look at the value proposition for American universities.  If there is a way to get the unnecessary cost out of the general education requirements, it would have an enormous impact on the economics of running a public institution.  Universities — particularly research universities — are under-reimbursed for the cost of offering courses that do not need to be taught in the traditional , expensive, bricks-and-mortar way.  I mentioned the University of Central Florida above, because as the third largest university in the country, they have already shifted a substantial portion of their introductory load to online delivery — not exactly an e-pill, but the marginal cost per student in an online course is a tiny fraction of the cost for campus-based delivery.

If the marginal cost were actually zero (the e-pill scenario), then what would be the rationale for charging anything for the first two years of a university education?  The argument that was made shortly after the American Civil War was that the social experience of attending a university was worth the price of admission.  It was not a winning argument, and the structure of higher education in the U.S. was forever changed as a result.

The experiment should be easy enough to run.  Let’s set two prices.  The first price, a nominal fee, reflects the true cost of the general ed requirements when they are offered efficiently using modern technology — costs that are unburdened by subsidies to research, athletics, and bureaucratic offices that add little value to a student’s education.  The second price — the deluxe treatment — reflects the true cost of the on-campus experience. Virtually all of the value for the high price on campus experience is from activity outside the classroom, and  because there has been an effective dematerialization for English 101, the income from families who have the wherewithal  to pay for first-class tickets can be applied to other institutional priorities.  Maybe even the upper division courses where smaller class sizes and dedicated instructional budgets might have a beneficial impact on a student’s education.

Vendors of proprietary Unix™ servers had to face this same problem a decade ago.  Why would a customer pay the high-margin premium prices for HP-UX™, Solaris™, or AIX™, when there was a “free” alternative?  The answer, it turned out, was that customers paid for value. The smart companies figured out that the high-margin, high-expense proprietary Unix business was different from the low-margin open source business. Smart companies figured out how to make both businesses work.

This is the opportunity for ephemeralization.  Since doing more with less is inevitable, why not turn our attention to it?  We will never get an e-pill, but we might be able to squeeze half the cost out of the rapidly commoditizing general education requirements.

The question for public universities is what to do when the crossover point is reached —  when the value to students exceeds the cost of delivery.  I asked Arizona State president Michael Crow exactly this question, and,  without skipping a beat, he told me he would like to do: “Let’s figure out what we are the best at, and make that available to as many students as possible. If ephemeralization is inevitable, what other value propositions change what universities will look like when we reach the crossover point?

Why Universities Do Research?

July 5, 2010
Comment and Review, Institutions, Resources
16 Comments

The title of this post is a question.

My colleague Mark Guzdial recently asked whether it makes sense for colleges and universities to do research:

I’m wondering now why universities do research — how does it make economic sense? Is it because it’s their raison d’etre? I don’t buy that, because that wouldn’t explain why so many smaller colleges and universities are increasing their research portfolio. Is it because a “hit” cancels out all the losses? One good piece of IP makes up for all the research that didn’t bear fruit? Or is it because a research portfolio is necessary for reputation surveys?

It’s a question that I try to answer in my new book.  Here are some of the facts.

  1. University research seldom pays for itself. Institutional data is hard to come by because accounting practices vary wildly from place to place, and there is wholesale mixing of revenue sources.  According to the Center for College Affordability and Productivity, for example, the historical trend at AAU institutions has been toward reduced teaching loads for faculty actively engaged in research. But that is a trend that flies in the face of increased enrollments. Additional instructors are needed for the classes that would otherwise be taught by faculty members engaged in sponsored research.  Costs like these are not recoverable, so research sponsors get an effective discount because faculty salaries do not reflect teaching productivity. Who makes up the difference? Most institutions tap a general fund to cover these costs — the same fund that is used for instructional budgets.  Reduced teaching loads are a tax on the cost of instruction, and it is just one of dozens of ways that cross-subsidies fund the research enterprise. I recently asked the vice president for research at a top fifty land grand college about their discount rate. He told me, “We spend $2.50 for every research dollar we bring in.“
  2. Institutional envy drives both behavior and investment. Presidents of public masters universities are motivated to define their institutional profiles to conform to a  “higher” Carnegie classification.  It is a phenomenon that Arizona State president Michael Crow calls institutional envy, and it drives the behavior of hundreds of colleges and universities. Sometimes institutional envy is simply the way that institutions climb the reputational pyramid.  Other times, it is the only way to make scarce resources stretch to fit expanding missions, because non-state, non-tuition revenues flow disproportionately to the universities at the top of the hierarchy. Public support for public masters universities declined by 15% from 2001 to 2006,  In that same period, tuition rose only 10%.  Gifts, endowments, grants, and research contracts are the only means available for closing the gap, but private giving has been in decline since 2001.  In fact, public university endowment income on a per-student basis is less than $600, which is essentially its pre-1987 level. That means federal and state research contracts have to generate enough income to keep fragile programs afloat. Since the 2008 market collapse, tuition increases have been used to try to stave off disaster, but,  according the Delta Project on Postsecondary Costs, Productivity, and Analysis, few of those dollars have benefited instruction.  In fact, once you remove discretionary spending,  instruction is dead last among the beneficiaries of increased tuition.
  3. You do not need a research program to prosper and innovate. The examples that come readily to mind are Williams College and Harvey Mudd College. Williams in particular eschewed the tug of becoming a research university in the wake of Daniel Coit Gilman’s 1876 launch of Johns Hopkins as a research institution in the mold of the great German research universities.  Harvey Mudd is a continuing experiment in how to keep a mission focused on students.   The University of Mary Washington in Virginia innovates around technology that keeps students and alumni closely bound to the university.
  4. Commercializing and licensing IP is a pipe dream for most institutions. Every tech transfer office knows the examples: Wisconsin’s vitamin D patent, Stanford’s rDNA patents.  But according to NSF’s John Hurt: “Of 3,200 universities, perhaps six have made significant amounts of money from their intellectual property rights.” John Preston, former head of MIT’s technology commercialization office is even more blunt: “Royalty income is such a horrible means of measuring success. Schools should instead focus on wealth and job creation, economic development, and corporate goodwill.”
  5. Research universities have conflicting incentives. They are in many ways inconsistent institutions. The legendary University of California president Clark Kerr used the term multiversity to describe the modern research university — it is a wonderfully clarifying word. What it means is that what we think of as monolithic institutions are actually loosely federated enterprises that all live together under the same brand.  A modern research university  consists of several undergraduate colleges,  one or more professional schools, many graduate schools, several intercollegiate athletic programs, hospitals, hotels, performing arts centers, technology commercialization offices, and distance education centers. Each component has its own network of stakeholders who demand success, even if it comes at the expense of another part of the university.

Viewed through this lens, Guzdial’s questions are even more interesting.  It frequently makes little economic sense for a university to conduct research. It may be part of the mission of a multiversity, but it is not the only mission — and there are plenty of examples to guide other choices.  If the dream of IP commercialization success drives  institutions to build their research programs, what about the data that predicts little chance of success? And if a university is concerned about reputational hierarchies, does building a research portfolio actually help?  Among the many components of a modern multiversity, few could survive without the instructional programs.  Academic programs, on the other hand, might do quite well without hospitals, theaters, or fancy football arenas. So, why should a university do research?

Let’s hear your thoughts.