The Achilles Heel of Higher Education

Today, anyone can acquire certified knowledge for virtually any subject. But, is certified knowledge actually worth anything?

It’s been nearly 20 years since education moved online. This new era of online classes was supposed to disrupt higher education. It hasn’t. No parent would brag about their kid staying at home to study for a Nanodegree at Udacity. However, every parent would brag if their kid packed their bags to go to Harvard. People continue to think that certified knowledge is the primary product offered by higher education. It isn’t. And now that certified knowledge has been completely separated from the higher education product bundle, we can prove it.

Unbundling Knowledge

Higher education is characterized by the high fixed costs of classrooms, tenured professors, and campuses. In my recent article on higher education’s competitive moat, I explored why higher education has been so resistant to the massive technological changes that have disrupted other industries. After all, technology theoretically enables us to shift to a lower cost education model that uses online instruction by anyone, available anytime, and from anywhere.

To help explain why this cost shift hasn’t happened yet, I argued that the higher education product bundle (shown below) is the competitive moat keeping change at bay:

bundle3This bundle tells employers not only about the knowledge, skills, and tools that you possess (which is obvious), but about your implied level of intelligence from the rank of your school (less obvious). In order to shift from a high cost to a low cost model, we need to unbundle higher education into its separate parts, a process I call the “Great Unbundling”.

The good news is that the “Great Unbundling” is already underway…

The first part of the higher education product bundle to be separated is knowledge. This is the result of efforts almost 20 years ago to provide access to university courses over the internet. M.I.T. proposed the “OpenCourseWare Initiative” to publish its entire course catalog online in 2001. Yale and Carnegie Mellon University began similar initiatives soon thereafter. The ability for humans to acquire certified knowledge from educational institutions as a stand-alone product had begun. (I’m not talking about uncertified knowledge, from you know, reading books, which had been around since the dawn of mass publishing and the the steam printing press in the early 1800’s)

Following the early experiments in online educational content distribution, the next iteration of knowledge unbundling began in the late 2000’s: performing classes, online, to students across the internet. Online classes were eventually given the horrible acronym “MOOCs” for “Massive Open Online Courses”, when in 2011, Sebastian Thrun and Peter Norvig taught a class online at Stanford that drew 160,000 online registrants. Afterwards, companies such as Udacity and Coursera were founded to commercialize MOOCs, fueled by venture capital and the naive perspective that unbundling knowledge was sufficient to disrupt the higher education model.

At the same time that academics at Stanford were experimenting with online courses, entrepreneurs were similarly focused on commercializing professional knowledge: this was the dawn of the “how to” videos. The most successful of these early ventures is arguably Lynda.com, which was acquired by LinkedIn for $1.5 billion in 2015. Lynda.com began offering online courses in 2002, with decidedly non-academic topics such as web design. Another venture, Pluralsight, began offering online training, primarily in technology related subjects in 2007. Udemy, another “how to” website was founded in 2009. All three continue to focus heavily on work related skills, such as “Formatting PowerPoint Presentations”, rather than academic subjects, such as “Introduction to Philosophy”.

The Value of Knowledge

Due to the efforts of academics and entrepreneurs (see below), certified knowledge has been completely unbundled as a stand alone product and is widely available to anyone with an internet connection and a computer.

knowlegeunbundled.png

This was supposed to be a huge disruptive event in higher education. To understand why is wasn’t, we have to ask the question: what is the value of certified knowledge as a stand-alone product for students? In other words, if you can prove to an employer that you know something, is that worth anything when you enter the job market?

Unfortunately, the evidence would suggest that the answer is “No.”

ZipRecruiter, one of the largest mobile job search apps, explored whether employers take MOOCs seriously. The answer: “No – not yet”, in part because employers preferred hiring for skills over knowledge. The Financial Times couldn’t find data from hiring managers in the U.K. on the role of MOOCs in recruitment: it simply wasn’t a factor in the hiring decision of most firms. One of the few research papers I could find on the subject was written by a PhD candidate who surveyed hiring manager’s views of MOOCs in the United States. The author, after finding little interest in MOOCs from hiring managers, concluded:

While MOOCs may be able to effectively advance learners’ human capital, organizations might only truly consider them as an accompaniment to traditional degrees or as a cost-saving option for training individuals currently within the business’s employ.

In other words, without a context for the intelligence, skills, and tools also possessed by the student, it’s difficult for employers to put a value on knowledge in and of itself.

The Missing Piece

For the last 20 years everyone has mistaken certified knowledge as “the thing” that universities do. After all, when you graduate from college, you receive a transcript, which is a list of classes (i.e. knowledge) and grades (your level of knowledge). We therefore thought that certified knowledge was “the point” of higher education. As it turns out, employers don’t agree, because they so far have shown little interest in hiring people holding completion certificates for classes they’ve taken online, even when those classes are from the leading Universities. Online knowledge certification is missing something employers want.

The missing piece is the other major deliverable you receive when you graduate: a diploma. A diploma has a prominent design element that employers are also looking for. Here’s a hint:

ivys.png

The watermarks on your diploma are signals that your were intelligent enough to attend one of these elite Universities. Universities started as places to convey certified knowledge to students. However, over time, they have evolved into mega-brands that allow their graduates to signal “intelligence” the way that wearing a Rolex signals “wealth”. And, just like Rolex, Harvard produces only a few thousand graduates every year in order avoid diluting the elite brand. This is despite the fact that Harvard could easily build more buildings to accommodate more students.

The Achilles Heel of Higher Education

The distinction between knowledge certification (your transcript) vs. intelligence certification (your school’s brand) is important because, like any bundled product, the cost to produce each element is very different.

The cost of knowledge certification is effectively the entire cost structure of higher education that was put in place more than 100 years ago: the classrooms, professors, textbooks that enable you to have “Economics 101, Grade B+” printed on your transcript. On the other hand, the cost of transmitting knowledge in the age of the internet is virtually zero, with thousands of college lectures available to watch for free online.

The cost of intelligence certification is composed of two parts: First, the marginal cost of having a few college administrators at Harvard sit in a conference room and review your SAT scores, high school transcripts, letters of recommendation, and application essays to determine whether you should be admitted. Second, the brand value of Harvard or Stanford that has accrued from the virtuous cycle of attracting the best and the brightest to attend. We know that we can replicate knowledge certification at a much lower cost than traditional colleges and universities. The next battle is to replicate intelligence certification.

Alternatives to branded intelligence certification are the Achilles heel of higher education. I’ve listed several of them below:

  • Employers are starting to incorporate cognitive ability tests into their interviewing process rather than relying on the name-brand college degrees as a proxy for intelligence
  • Employees are getting companies to “think past the sale” of whether or which college they attended, by providing them with portfolios of their own work
  • Startups like Toptal, are evaluating candidates regardless of educational pedigree, and certifying them as being in the “top 3%” based on their individual work products.

In the future, you may still not be able to get into one of the (artificially) limited spaces at Harvard. However, if you’re smart enough to do the work, other options will soon be there to help you against the branded competition. And once this happens, we’ll be living in a new world where certified knowledge can be bundled with work-based intelligence certification, to create a truly, low-cost alternative to higher education.

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Micah

Micah is the author of Rethink the MBA. He works and lives in Silicon Valley.

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