The Disruption Is Here

A recent essay here by Robert Archibald and David Feldman challenged the idea of a "higher education bubble." They argued that a degree, even an expensive degree, is still worth it. They correctly pointed out that a degree is not an asset that responds to supply and demand like other markets. Their point that "on average most of us are average, and the data show that college is a very good investment for the average person," is true enough. But their real message was: there’s no need to panic, the status quo is still working. I disagree.

Said essay is part of a broader continuing discussion, this round set off by Peter Thiel's statements surrounding his 20 Under 20 Program encouraging students to "stop out" of college – with the idea that they are more likely to achieve entrepreneurial breakthroughs on their own than with more formal education.

Thiel is a managing partner at one of the venture investors, Founders Fund, in my company, Inigral. Ironically, Inigral serves educational institutions with our Schools App, and most of our clients are traditional colleges and universities. (Schools App is a community platform inside Facebook and on mobile devices that helps to welcome the incoming class during the admissions, orientation, and first-year experience, making sure students find their “fit” and get off on the right foot.) So my company helps keep students in college while Thiel is going around talking about the potential value of "stopping out."

Given this irony, people often ask me what I think about Thiel’s comments suggesting that higher education is in a bubble. Here's what I think: He is mostly right, but the future prospects for education are more optimistic than Thiel suggests for two primary reasons: 1) Though it looks like an economic bubble, it's unlikely that there will be a precise moment in which the market crashes. Instead, there will be a slow market shift towards amorphous market entrants that can deliver relevant, quality education conveniently and affordably. 2) There's a path forward if folks in higher education understand the processes of both disruption and change management.

Thiel's critique of higher education isn’t that degrees have no value. It’s about whether the industry is ripe for disruption, which I have defined in the context of education here. Thiel correctly observes that higher education is a market with unsustainable price increases based on irrational confidence. It’s true. Tuition has grown at rates that astound and outrage since the early '90s, and these prices seem unable to turn course. Our system incentivizes institutions to pursue selectivity, gargantuan research, and increased spending per student (small class sizes, student services, physical plant).

As of yet, there's no market mechanism to reward high levels of student success for the least possible cost. This is irrational. Thiel’s critique is based on an unstated assumption: market forces are starting to unleash on institutions that have not had to learn to thrive in a post-Internet, mobile device-oriented, and competitive marketplace. Indeed, few are currently asking themselves the important questions and embarking upon the dramatic transformations that will allow them to thrive.

This bubble is not going to suddenly crash; degrees are not normal assets that can be bought and sold on the open market. Even more importantly, the irrational confidence in education is founded on some fundamental truths: education produces opportunities for individuals, an educated population can both compete globally and provide a great foundation for democracy, and I would add that an education is an end in itself -- a transformative process that provides a near-priceless value. To boot, almost all of our nation's postsecondary institutions are filled with smart people who can not only survive, but also thrive if given the right road map, tools and opportunity.

Higher education should be transforming as quickly as it can. Whether or not there's a "bubble" that will be dramatically "popped" does not change the bold reality of an oncoming future, what I propose to call the Great Disruption.

Here's a suggested survival guide:

First, regard any continuing education programs, night school, certifications, or alternative models of education as start-ups within your organization. If you don't have one already, start a fully online program. Allow these groups to act as independent entities that can explore different models of how to educate and serve students. Hire the best, smartest, and most courageous people to run them. Allow them to innovate, and have your main operation learn from their innovation actively. Do not assume that their models cannot inform your traditions, because the speed at which traditional institutions learn to adopt these new models will determine how healthy they can stay when the full market forces of disruption start to occur.

Second, embrace "blended learning" and competency-based assessment. Move away from seat-time-based models in an attempt to bring rapid cost efficiency, especially to our more generic courses. We're already trying to teach our "Econ 101" courses to 500 students at a time. Why not go at them with even more scalable models to the point where one course can serve nearly unlimited numbers of students? It’s already possible through lecture capture, video content, blended learning, different technology supported models of coursework, participation, grading, and assessment. What needs to exist but doesn’t yet will come rapidly once the market starts to demand it.

Third, actively seek vendors as partners that can provide technology to "scale" any of your existing processes out of the classroom -- marketing and communication, financial aid, student services, community building, and student success. Over the past 30 years or so, technology has been used within the existing educational model and within the operating framework of our institutions. Institutions need to look at technology differently -- they need to see it as an opportunity to transform what they do and help them adapt.

The reality is that in higher education, there is a lot of spending focused on improving student success, but not all the efforts scale and their outcomes are often difficult to measure. Too often, success is measured anecdotally because there's no scalable way to gather real-time information, but this changes with schoolwide software. A small handful of schools, in particular Purdue University, seem capable of building this technology internally, with projects such as Mixable and Hotseat. But most colleges and universities will find that they are not very good software developers. Even if they can build something they will have trouble building upon it and maintaining it. So colleges should seek this kind of software from others.

Fourth, actively seek to take advantage of the Internet as services arise that are of interest to your students, your faculty and staff, and more importantly -- your market. Put lectures on iTunes U and Youtube, get your professors on Academia.edu and Notehall. Send your students to StudentMentor and StudentAdvisor. See what happens. Something will pop up that will remarkably improve or change what you do. One thing is for sure: we're quickly going to move to a model where "all-star" faculty members who have amazing reputations as both thinkers and teachers will probably be your best foot forward on the Internet.

Fifth, just adopt good management practices from business. Decide who you are and what you are good at, and start cutting the rest. Hold people accountable. Who is responsible for persistence and completion? Give people incentives. Who gets a bonus if the persistence and completion rates go up? Constantly improve institutional efficiency and effectiveness: who’s responsible for identifying opportunities to improve and taking the necessary steps?

On a personal note, my biggest fear is that our institutions in higher education are not structurally capable of making efficient and courageous decisions that will allow them to innovate and thrive through the coming Great Disruption. As a result, probably the biggest element of focus needs to be on change management and reorganization that will provide true accountability for student success, as well as create incentive systems that reward risk taking in pursuit of excellence and efficiency. Having said that, the worst thing to do would be to spend all your focus as an administrator going through a painful and time-consuming reorganization that delays pursuing the five tips listed above.

The cost-cutting race is on. And the Great Disruption is just beginning.