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The Coming 20+ Year Disruption In Higher Education

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Higher Education

This is a post on the problems & solutions in higher education from someone clearly not qualified to make those observations. The only information I have is the 79 pitches from entrepreneurs large and small who are all trying to disrupt Higher Education from around the world. Besides that over 500+ articles, blog posts & discussions with several professors at the top colleges in the world.

The Higher Education market is largely a US dominated one. With over 4500 private, public and semi-public colleges and universities, this market is over $475 Billion. Over 9% of US GDP and close to $1.3 Trillion (pdf) is spent on education overall. While there is more spent on K-12 education, the higher ed market has more spend per student.

Most of the money spent by students in on tuition. Over 57% of the higher ed spend is on tuition. This goes towards educators, libraries, textbooks, facilities, etc.

The average 4 year college cost is reaching $30K+ per year for private colleges. Given that over 70% of US students end up with over $30K in debt after college, this clearly unsustainable.

With the advent of MOOC (Massive Online Open Courses) I personally believe it is only a matter of time before many of the 4500 colleges shut down. I personally think 50% of colleges in the US will close down in 10+ years. Similar for Indian colleges – over 50% of colleges in India will shut down in 20 years.

Most private colleges make money from endowments, grants, and then from tuition – in that order. Most of the moneyed institutions have “rich” students who then become alumni and donate to the college, many of the smaller colleges dont.

The average private college takes 2000+ students and charges about $30K per student. Lets say that is $60 Million per year.

Now imagine that the private college wants to take 20,000 students (online) instead. [They could also take 100,000 students, since nothing is going to stop them from doing that]. All things being equal and factoring in inflation, and the cost to run the university being largely the same, they would be able to charge $3K per student per year and still do well.

It is not a dream. It is going to happen. In 10-20 years, or likely sooner, but it is going to happen.

Would you rather get a degree from MIT and be taught by the top professor at MIT or a local college professor who may not have the level of depth and knowledge about the subject as the MIT professor?

You can do this from Saudi Arabia, Australia and India. That’s because even the folks in Newton, Mass, who live <100 Miles from MIT will be doing the same.

Most learning is going online. In a massive way. Higher education is as well.

Now, I understand the concerns.

A) The Internet do not replace the interaction you get in a face-to-face setting.

B) How can you build relationships with your students and network with them – which is the biggest value of a college 10 years hence? and

C) Online learning is still largely unproven.

All that will get itself sorted out with other offerings to supplement the MOOC.

In the future you will have interactions (office hours) remotely managed by professors.

In the future you will learn from your peers together as much as you will from the professor – which will build the relationships.

In the future you will have more teaching aids and tools to help you sort, identify and collate your learning better than textbooks.

That future is less than 10 years away.

I am going to shift gears and now try to talk to future parents.

What should you do? What are the things you can do to make sure your kids are going to be successful? This is primarily if your kids are between 0-10 years old.

First and (I cannot understate this) let your kids find their way.

If you can make the investment, buy them a tablet and let them learn stuff using the machine.

If you can get them to follow structure courses online (for older kids), I’d recommend Khan academy and other sites like those.

We dont have Television at home, but I am not convinced that’s the right approach for everyone. If you can get rid of the television, do it. I’d highly recommend it.

Kids will play more games than use the tablet for useful stuff initially but that novelty wears off in a few years. The % of core gamers and those that are addicted to gaming is still small. I am not saying ignore it, but be less worried about that than no exposure to games at all.

I dont think most parents will give up the school environment all together, since they need the kids to be “someplace” other than home when they head to work, but I would focus a lot less on grades at school.

In fact, grades will become irrelevant in 15 years, increasingly replaced by “show me what you did” instead of “how did you learn”. Why?

If you are MIT or Stanford and you want 20K students to take your course, you are likely to get less picky a decade from now. 

[Side note: Similar to startups these days, when being evaluated by investors, the focus is on product & traction, not on idea, grades tell me how you studied, not what you learnt].

The goal of these colleges will go away from “exclusivity for some” to “knowledge for all” very soon. That’s the direction they are all heading. Will MIT as an institution or the lecture halls go away? – not likely. They will be the purview of the few rich kids who can spend $100K per year to be housed in 5 star luxury comforts. For the rest of us, a computer and an internet connection will suffice.

This next paragraph is going to unsettle a few folks, but hear my argument.

Focus on spending money *now* to help your kids, than saving money for the future. Most parents I know end up trying to save for education – by putting money in 529 plans, education savings plans and the like. I would use as much money you plan to save for the future into their education right now. Give them any edge they can get now and you will end up spending 1/3rd of what you originally planned for later.

That’s because the cost of higher education is going to drop dramatically for most students.

So who will hurt from these disruptions?

1. University deans, college presidents and the endowment chairs, who make over $1 Million per year.

2. Smaller unknown colleges who will see their enrollments drop dramatically and will likely have to shut down.

3. 529 plan administrators.

For the rest of us, quality higher education is going to be highly accessible.

Also Read: 5 Steps To A Good Market Analysis For Your Startup

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Creating Artificial Constraints as a Means to Innovation

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Artificial Constraints

Many of the entrepreneurs I know have created new innovative startups thanks to real constraints they had. For example, I was hearing AirBnB’s Brian Chesky, on the Corner Office podcast and he mentioned that when he and his cofounder were trying to get some money to get started and the only way to keep afloat was to “rent” their air bed they had in their room. That, then led to Air Bed and Breakfast, which is now AirBnB.

This was a real constraint they had – no money to “eat” so they had to make it happen somehow.

I have heard of many stories of innovation where in the protagonists had real constraints of either financial, technology, supply, demand, economic, social or any number of other characteristics.

The interesting story that I have also recently heard of how Facebook has “pivoted” from being a desktop offering to getting a significant part of their revenue from mobile is how they were given the arbitrary constraint of only accessing Facebook via the mobile phone.

So there are ways that you can create “artificial” constraints to force innovation to happen.

Most larger companies and some smaller ones as well, have to constantly find ways to create artificial constraints – to find a way to innovate and be more be a pioneer.

While some constraints are good – lack of funds at the early stage for example and lack of resources, there are entrepreneurs that are stymied by these constraints and those that will find  a way to seek a path to go forward.

I think this is a great way for you to think about innovating in a new space. If you have constraints, find a way to use it to your advantage.

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The Great Mobile App Migration of March 2020

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Mobile App Migration

Over the last few weeks as many in the world have been in lockdown, there has been a temporary “mobile app migration” happening. There are new apps downloaded and they replaced existing apps on the “home screen”.

While some of these apps are likely temporary use, for e.g. I have 6 “conferencing apps” – Zoom, Uber Conference, Webex, Google Hangouts, Blue Jeans and Goto Meeting. That is because of the many people I have conference calls with – each company seems to have chosen a different web conference solution.

Other apps seem like they will have staying power – Houseparty, for e.g. which has games, networking and video conferencing all built into one app to keep in touch with friends and relatives.

Houseparty

The apps that have moved away from my “home” screen, which I expect will come back once the crisis will be behind us include – Uber, Lyft and all the airline apps from Delta, Alaska and United.

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Perseverance with the Ability to Pivot on Data: 21 Traits We Look for in Entrepreneurs

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Perseverance with the Ability to Pivot

There are 5 key inflection points I have noticed which makes founders question their startup, to either make a call to continue working on their startup, pivot to a new problem or quit their startup altogether.

It is at these points that you really get to know the startup founder and their hunger and drive to be successful. I don’t think I can characterize those that choose to quit as “losers” or “quitters” because of many extraneous circumstances, but there is a lot of value that most investors see in entrepreneurs who face an uphill part of their journey to come out on the other side more confident and stronger.

These five inflection points are:

  1. When you have to get the first customers to use and pay for the product you have built after you have “shipped” an alpha / beta / first version. Entrepreneurs quit because they have not found the product-market-fit – because the customer don’t care about the product, there is no market need, or the product is really poorly built, or a host of other reasons.
  2. When you have to start to raise the first external round of financing from people you are not familiar with at all. Entrepreneurs quit because while it is hard to get customers and hire people, it is much more harder to get a smaller set of investors to part with their money, if you do not have “traction”, or “the right management team” or a “killer product”.
  3. When you have to push to break even (financially) and sustain the company to path of being self sufficient. Entrepreneurs quit at this stage because they have now the ability to do multiple things at the same time – grow revenues and manage costs, and many of them like to do one but realize it is hard to do that without affecting the other. So, rather than feel stuck they decide to quit.
  4. When you have to scale and grow faster that the competition – which might mean to hire faster, to get more customers, to drive more sales, or to completely rethink their problem statement and devise new ways to grow faster. Entrepreneurs quit at this point because they are consumed by the magnitude of the problem. They overassess the impact the competition will have on their company, give them too much credit or focus way too much on the competitors, thereby driving their company to the ground.
  5. At any point in the journey, when the founders lose the passion, vision or the drive to succeed. Entrepreneurs quit a these points because they have challenges with their co founder, they don’t agree with the direction they have to take, or encounter the “grass is greener on the other side” syndrome.

While I have observed many entrepreneurs at these stages at  discrete points in time, I have also had the opportunity to observe some entrepreneurs in the continuum, and I am going to give you my observations on 3 of the many folks I have known, who, have quit.

Perseverance separates great entrepreneurs from good ones
Perseverance separates great entrepreneurs from good ones

One went back to college to finish his MBA after getting a running business to a point of near breakeven, another found the business much harder than he originally thought he would and got a job at a larger company and the third was just unable to have the drive to go past 11 “no’s”‘ from angel investors.

Over the last 8 years, if I look at my deeper interactions with over 90 entrepreneurs, who I would have spent at least 100+ hours each, I would say that of the 24 people that are not longer in their startup, the one thing that stands out among the ones that persevere is that it is not “passion” or “vision” at all.

It is the inherent belief that they are solving a problem that they believe is their “calling”. They also don’t believe that there is any other problem that’s worth solving as much, even though there may be easier ways to make money.

So most of my questions of entrepreneurs to test whether they will pivot or quit are around why they want to solve this problem (which I am looking to see if they know enough about in the first place) versus any other one.

The answer to that question is the best indicator I have found to be the difference between the pivots, the leavers and the rest.

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