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Awhile ago, I mentioned India’s plan to create 27,000 new colleges and universities over the next decade.  Well, guess what?  I was wrong.  The number is now 35,600. Here’s what I said a year ago about Education Minister Sibal’s plan to expand India’s capacity in higher education:

What does this have to do with American colleges and universities? Just as low-cost, high value service industries have migrated to India, the higher education market in the US will also start to buy more educational services there as well.

So I was immediately drawn to yesterday’s Business Week article about California’s intention to make a quick lunch of its seed corn by cutting university spending $1.4B and the likely effect that snack will have on job growth and tax revenue.

Particularly striking to me was VC Robert Ackerman’s reaction to the massive and rapid expansion of higher education in Asia:

Right now, if I were the Chinese university system, I’d be running ads showing up on UC websites, recruiting students to universities in Beijing and Shanghai.

Now I am not a big fan of the proposition that value in higher education can be measured in dollars spent–if American institutions made better use of their budgets, then the resulting efficiencies would actually increase capacity–but there is little doubt that wholesale dismantling of universities across the country is a very bad idea.

We are shrinking university capacity at a time when India, China, Singapore and many other countries are  increasing theirs. India  alone will create 600 new research universities. China is increasing its capacity in research universities while the  U.S. has created one new research university this century: UC Merced.  Since Merced is part of the California system, its prospects are dimmer by the moment. Only a handful of new universities of any kind have been created in the U.S. since 1960, a period in which college enrollments have quadrupled.

Why is falling capacity so important? Because the worldwide market is growing, and we are systematically reducing our share of that market when economic competitors are  moving in the opposite direction. I leave it as  a homework exercise to determine what happens when an enterprise loses market share in a growing market.

Buon appetito!

There has been a lot of discussion surrounding my post about Ephemeralization of American Universities.  One of the solutions I advocate is concentrating resources where they matter most — and for most universities that is not in the first two years when increasingly commoditized, high quality content is available to replace ineffective bricks and mortar in-person classroom experiences. Many of my colleagues have argued that the classroom experience is not only pedagogically superior, it is what students value. That was an argument that always rang hollow to me.  It did not match my experience and many of colleagues agreed.

But my anecdotal reporting of experiences has limitations.  A new book by Richard Arum and Josipa Roksa puts some weight behind the proposition that during the first two years of college students learn little.  That does not mean the first two years has no value, but as the Ephemeralization pill experiment suggests, the value is much more likely to be social than academic.

Here’s how Jacques Steinberg describes it in his New York Times blog:

This is going to be a topic that generates a lot of heat.  Behind it all is the question: why are we spending such a large part of the higher ed dollar on that part of the college experience that returns the least value?

It’s one of my favorites. Tom Wolfe’s  June 8, 1970 New York Magazine article “Radical Chic: The Party at Lenny’s” is a dazzling piece of writing that never fails to alternatively enrage and inspire as layer by painful layer the dangers of “integrating new politics with tried and true social motifs…” are laid bare.  More than an essay, it’s a universal metaphor.

Everyone from the Black Panther anarchists who were guests in the Bernstein house (but apparently thought that his was the BERN-STEEN residence)  to Peter Duchin’s wife Charay (who bubbled “I’ve never met a Panther before–this is a first for me!”) comes away excoriated and diminished. Including Tom Wolfe.

My favorite passage is the brief exchange between Leonard Bernstein and Panther field marshal Don Cox:

“You can’t blueprint the future,” says Cox. “You mean you’re just going to wing it?” says Lenny.

It’s that way with every revolution, I suspect.  Events are set in motion. If they are dangerous enough, they attract attention and sometimes even smug support from fashionistas who cannot quite believe that outcomes are uncertain. Edupunk is like that. It’s an idea that sounds dangerous but somehow containable.  Flying close to that flame might actually be fun.

At least that’s what University of Virginia president Teresa Sullivan probably had in mind when

In a bow to the “Edupunks,” Sullivan explained that Virginia is incorporating student habits into its pedagogy.

“Radical Chic” came immediately to mind when she explained that a bow can be as cheap and impersonal as a $500 check at Lenny’s dinner party.   It’s  not exactly the  Jeffersonian embrace that you might expect from an institution like Virginia:

“flash seminars” alert students to an edgy topic — no examples of how edgy — that will be discussed in a professor’s living room. To raise the hype level, only the first 25 students who show up are allowed to participate in this non-credit-bearing activity.

A colleague of mine put an even finer point on the comparison:

“bow”,”hype level”, professor’s “living rooms”, “edgy topics”– the academy domesticates  the “bizarre acts” of flash behavior, clueless to its naffness.

It should come as no surprise to those of you who saw last week’s announcement or have been following the plans that Richard Barke, Bill Rouse and I have for an open seminar on “Transforming Academia” at Georgia Tech’s Tennenbaum Institute that that I am winding up the year thinking about big ideas in higher education.

In fact, right after Georgia Tech announced the creation of a Center for 21st Century Universities (C21U), I started getting phone calls and email. “What’s the point?” one writer said. “Won’t universities change over the next 40 years or so?”  “What’s your vision for the 21st Century?” asked one reporter. “Here’s an idea that you have to look at,” said a colleague.  “It will change everything.”  The whole point of C21U is that over a hundred years, everything will change, and–from our vantage point at the start of the century–we have no way of knowing which ideas matter.

There is one thing that history teaches us: the ideas we think are important and radical  and chic today have almost nothing to do with how things turn out. I thought it was fascinating that the first questions I got about C21U were the ones that Arthur Miller and Barbara Walters were asking at the Lenny’s the night that Cox, Miller, and the other “funky, natural, scraggly, wild…” representatives of a new order stepped into polite society.

Would a turn-of-the-last-century gathering of influencers actually recognize the ideas that would shape higher education over the next hundred years? The New Year is an occasion for lists, so here’s one: What are the three ideas that shaped higher education–for better or worse– in the 20th Century?

Why only three? After all, higher education went through massive changes from 1901 to 2000.  But I would argue that these changes were consequences of three big ideas.

  1. The University as a Factory: The first massive increase in funding for higher education came from John D. Rockefeller and Andrew Carnegie. They transformed American universities, but the great philanthropists were also industrialists.  They demanded that the chaos and debris of 19th century experimentation be swept away and replaced by fiscal and administrative discipline. The chaos was tamed, but the price was the creation of an institution that took in raw materials of a measurable grade and under the watchful eyes of managers and boards of directors produced graduates of a certain intellectual size and shape. Everything from standardized admissions testing, an obsession with measuring inputs, and a focus on classroom efficiencies to the layers of bureaucracy for administering an unwieldy system of accreditation stems from the demand of  philanthropic foundations that universities operate with factory-like discipline.
  2. The National Science Foundation: Before Vannevar Bush convinced Roosevelt and Truman to create a  taxpayer-supported, national version of the Carnegie Foundation, sponsored research played essentially no role in university operations. Over the next sixty years, the rate of  federal spending on university research rose nearly three times faster than the economy as a whole. NSF led the first explosion in federal funding, and it cause a shift in values at the nation’s universities that forever coupled scholarship with sponsored research.  The very idea of a research university was transformed in the process, and it soon engulfed the social sciences and the humanities in a new  multi-billion dollar industry that–in addition to the elite research universities–now reaches into the thousands of regional and community colleges whose missions have expanded to include research.
  3. The Multiversity: It was legendary University of California president Clark Kerr who observed in his 1963 lectures at Harvard that universities were no longer single communities, but had become the sometimes inconsistent homes to stakeholders who did not always share the same goals but needed to be supported and nurtured if the university in the 2oth century was to play the same national role that railroads did in the 19th century. Graduate and undergraduate education had to survive and prosper with medical and other professional schools, athletics, the arts and others. The idea of a multiversity coincided with the second great influx of money into higher education. Some say it was instrumental in the decline of the great public universities and the creeping missions of all institutions. At least in was the cause for abandoning forever the idea that money spent in the nation’s colleges and universities should end up in the classroom.

Nobody would have recognized these as the great ideas of the coming decades.  There would have been no Edupunk thrill in rubbing elbows with the bureaucrats who defined the “Carnegie unit ” or a future MIT dean who believed that scientific talent was a national treasure. The great institutions were as likely to be state universities–which were still small and wealthy–as private colleges.  Not one of the public universities on Raymond Hugh’s 1925 list of top 20 research universities is at the top of the  current U.S. News and World Report ranking of graduate programs. They were displaced by universities that did not even exist in 1901.

Before pulling out their checkbooks to support the new politics of higher education,  radical chic party guests would have wanted to know what the plan was. Clark Kerr would have told Lenny, “You can’t blueprint the future.”

Lenny would have been incredulous: “You mean you’re just going to wing it?”

The latest economic parable explaining why tuition at American colleges and universities has risen twice as fast as health care costs is aimed at supporting an insupportable value proposition: a university education is cheap at twice the price.  In my last post I talked about the danger to higher education in “clinging to myths”, as MIT’s John Curry put it.  Justifying the high cost of a college education rests on one of those myths.

Here is the basis of the economic argument: since college costs are driven by labor intensive processes that require high degrees of skill and are resistant to technological efficiencies, we should look to the value received in other specialized service markets like health care and banking where quality demands 1-1 contact with a highly trained service provider. The conclusion is that higher ed prices have fared no worse than prices in those other markets. Some of the comments to my last post also repeated this argument.

The problem with this line of thought is that virtually none of the assumptions underlying it are true.  Never mind that wholesale “mission creep” has systematically siphoned off value that should be delivered to students in the classroom in favor of dozens of other priorities. The basic underpinnings of the things-aren’t-so-bad argument are simply fabricated.

Running a university is like running a business.  There are denyers who dispute that claim, but the fact of the matter is that in higher education income has to balance expenses.  If expenses rise, then a university president has to search for new sources of income.  State subsidies are drying up. Endowment income has been shrinking. Research income does not help, and licensing income is, well, let’s just say it’s an unlikely source. The only source of new income is tuition, and the parable concludes by saying,  “Labor costs are high, so let’s get students to subsidize the increase.”

There are not that many different ways to bring costs down in any business: (1) you can deskill your workforce, (2) you can find a more efficient physical plant, or (3) you can use materials better.  There is no reason that a higher quality university education cannot be delivered to more people by applying one or more of these principles.

Let’s take on the we-must-use-high-cost-labor assumption. Even if you are not a believer in online education, only a stunningly short-sighted point of view  fails to recognize that ed tech is on a different innovation curve than classroom instruction. Compare the improvement in the educational blogging experience over the last six months with the rate of change in the classroom, where it can be argued that the last real technological innovation–one that became ubiquitous because of its obvious value–was the introduction of the chalk board in 1801.

I understand the thesis: university teaching cannot be deskilled because it is by definition undeskillable.  Higher education is artisinal by its very nature.  It has to be delivered by professors to individual students–or, at least, to small groups of individuals–in person. I agree with that:  given the premise of an artisinal workforce, deskilling makes little sense.  If we do nothing at all to change what and how we teach then what we have today is probably pretty close to the best that we can expect from the system.  But I reject the premise out of hand. Which brings me to a very different way of looking at the economics of higher education: the parable of  tip and ring.

Tip and ring is the technology that telephone operators used to manually switch telephone connections a hundred years ago. The tip and the ring of the plugs that operators used kept the twisted pair of copper wires in a telephone cable separated so that they could be inserted into the large patch panels of a central exchange switch.

Early studies of telephone operator efficiency by Western Electric indicated that a skilled worker at peak performance could switch up to 250 calls at one time. Everyone did the math.  Given projected population growth and even the most conservative estimates for network growth, the current method of switching was going to be very expensive.  Underlying labor costs would limit the extent to which Americans would have direct access to telephone communications. An investment banker in 1887, summarized the various Bell System technical memos on the subject very succinctly:

The possibilities of a private home telephone system throughout the country is out of the question. Almost the entire working population of the United States would be needed to switch cable.

Network engineers were aware of the current economic curve and a few brave souls piped up: “Well, what if we do things differently? What if we replace the human telephone operators with automated workings? Wouldn’t we be able to multiply the number of switching operations per minute by many fold?”  By 1918, rumors of the promise of deskilling in voice telephony reached the office of Theodore N. Vail, president of American Telephone & Telegraph:

Automated working is not adapted to our needs, any more than radiography will will ever supplant telegraphy by wires.

Human operators were eventually helped out by some technology, but it wasn’t until the first crossbar switch was installed in Brooklyn, New York, in 1938 that automation began in earnest.  It took a hundred years for the U.S. telephone systems to reach 700 million installed lines. In the next ten years, the number of lines doubled, while technology put voice call quality on its current growth curve. By 1986, fiber optic technology enabled Sprint to revolutionize the long distance telephone business with its “So clear you can hear a pin drop” marketing campaign. None of this would have happened if Theodore Vail had  his way and the telephone business had remained dependent on a highly skilled manual workforce to switch voice calls.

So, yes: if higher education remains dependent on the tip and ring process of using an unnecessarily labor intensive system, costs will continue to rise. There are many–perhaps a majority–in higher ed circles who would repeat Vail’s dictum: “Automated working is not adapted to our needs.” To be more precise, they say, “Higher Education remains essentially an artisinal industry.” There are others, however, who believe that fundamental change will not only bring costs down, it will bring the 1986 promise of pin drop quality to the 21st century university. And don’t get me started about how wrong Vail was about mobile telephony.

 

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.

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?

In Where’s the money….? I described for you the Department of Education’s assessment of the financial health of the nation’s private universities:

The U.S. Department of Education issues a regular report on the financial health of  degree-granting colleges and universities.  It is a sort of test of financial strength.  When I started tracking the course of these institutions for my book, there were about a hundred non-profit colleges  that failed the test.  By 2008, that number had risen to 127.  The Chronicle of Higher Education has just reported that 150 non-profits now fail the Education Department’s test.

Now we have picture of the toll that the financial meltdown and runaway expenses are exacting on America’s public institutions as well. Moody’s Investor Services has just issued its report on the liquidity of public universities: “U.S. Public University Medians for Fiscal Year 2009 Show Tuition Pricing Power Amidst Rising Challenges.”  The report is available only to Moody subscribers, but Goldie Blumenstyk, writing in today’s Chronicle of Higher Education, summarizes the key findings as follows:

The median level of debt for 200-plus public institutions rated by Moody’s—$176.9-million as of the end of the 2009 fiscal year—has grown by 31 percent over four years. That’s notably greater than the rate of revenue growth (25 percent), total financial resource growth (15 percent), and enrollment growth (13 percent) during that same period…For the first time, colleges’ debt per student ($13,665) exceeded their financial resources per student ($12,893).

As a consequence, operating margins are at or near all-time lows for public institutions and are negative for many.

Tuition is rising at many public universities, but the cost to students is not being converted to increased educational value.  In many cases, tuition increases simply service expanding debt obligations. While the liquidity of top-ranked public research universities is worse than their private top-ranked counterparts, the public medians have the ability to convert a larger share of their assets to cash in the near term.  What Moody’s doesn’t say is where the liquid cash comes from.

The lack of transparency in public funding of higher education matters.  A public university has a public budget, and we all know that in most states funds slosh back and forth between spending categories without regard to the rules of arithmetic that most of us have to live under.

One large eastern state delayed paying university employees until the start of the next fiscal year.  Another one routinely delays most raises until the start of the next calendar year.  Still another allows cash to flow freely between major athletic programs and major academic obligations in the hope that a great athletic season might generate enough private donation to repay internal mortgages. Cost-sharing contributions are shifted, research cost recovery is murky, and personnel obligations are sometimes backloaded for months and years.

Even in good times, generating cash for operations in a public university is an exercise in juggling future payments.  With zero operating margins, administrators are the unlucky Monopoly™ player who has just landed on Park Place and realizes that the only way to pay the rent on the three hotels is to mortgage all of his properties. He spends the rest of the game hoping that he can keep his meager wages. Hope is not a strategy.

That is why the ability to raise tuition is so powerful.  But, as Moody’s new report makes clear, tuition increases are like passing GO.  New tuition dollars fill budget gaps. They do not change a university’s finances. It is only a matter of time before students figure that out and go for the e-pill.