Sunday, April 29, 2012

The Coming Collapse of the University System

In 1636, the Massachusetts Bay Colony established New College – the first institute of higher education in the Western Hemisphere. A Boston minister named John Harvard donated 320 books and £800 to the new institution, which was promptly renamed Harvard College in his honor, thus beginning the modern university system in the United States. For most of the time since then, universities were the province of the elite. Since most Americans were farmers prior to the 20th century, they had little use for even a high school diploma, much less a bachelor's degree. Following World War II, the paradigm shifted dramatically. As the need for college-educated labor dramatically increased, universities became much more commonplace. The university system has grown to immense scales that John Harvard could scarcely have imagined – there are now over 2,600 universities in the United States, and more than half of all Americans have completed at least some college education.

For the past 60 or so years, the university system has served a dual role: Professors both conduct academic research and instruct students. High tuition price tags are, in large part, used to subsidize academic research rather than pay for student education. Although this arrangement worked reasonably well for several decades, it began to show cracks in the early 2000s and is now near the breaking point. This paradigm for higher education is no longer sustainable.

The most obvious reason is the soaring cost of tuition. The average college graduate has accumulated $26,000 in student debt when he or she graduates. In 2010, student loans became the largest source of unsecured debt in the United States, surpassing credit card debt for the first time. This wouldn't necessarily be a problem if accumulating so much debt was a worthwhile long-term investment, but recently many people have started to question this longstanding assumption. They are right to be worried. Student debt is an albatross around the necks of many recent graduates which hinders social mobility. One definition of an economic bubble is the trade in a product or service at a price that far exceeds its intrinsic value; another definition is a widespread public consensus of the high value of the product or service, that is at odds with a realistic examination of the facts. By these definitions, university tuition prices are most definitely in a bubble, and it's only a matter of time until the bubble pops.

But the tuition bubble masks another looming problem that most universities barely acknowledge today, but poses an even greater threat to them: The prominence and quality of free online education is poised to improve dramatically in the next few years. Today, most online universities are for-profit institutions with horrible brand images, but that will soon change. MIT and Stanford now offer many of their courses online for free, to anyone who wants them. Additionally, a slew of free websites have popped up in the last couple years to teach specific skills such as computer programming, mathematics, history, biology, foreign languages, and business.

As the course offerings proliferate and quality improves, more and more students will begin to question why they are paying tens of thousands of dollars to attend a university, when they can learn the same material online for free (or at least very cheaply). This will, in turn, encourage employers to accept “alternative” certifications to a traditional bachelor's degree, such as educational websites vouching for the student's knowledge. This will badly damage the credibility of universities and undermine their role as the gatekeepers to white-collar careers. With the exception of certain professions for which formal credentials are absolutely required for employment (e.g. law and medicine), the necessity of acquiring a formal degree will fall by the wayside as more alternatives present themselves, causing a mass exodus from universities.

As this happens, universities will need to sharply reduce their tuitions in order to stay competitive with their free counterparts...and eventually, even the sharpest reductions will be insufficient. As the cost of a good education drops to nearly zero, universities will need to completely rethink their business model.

This will cause major funding problems for scholarly research, if nothing is done. The dual responsibilities of universities, instruction and research, will separate from one another. As universities earn less money from tuition – and have fewer alumni to provide large donations – academia could suffer unless steps are taken to find another stream of revenue. The research that professors conduct benefits society as a whole, but is usually not profitable. As tuition money dries up, I suspect that universities – both public and private – will rely more on government largesse to support their research.

Ultimately there is another role that universities might serve. Although the tuition model is doomed in the long term, many students crave the “college experience” that only being on a campus can provide. Universities might still serve as places for young people to come together and live, join clubs, and play sports and music together...despite getting their actual education online from many different sources. In this way, perhaps universities can earn a bit of money from their “students” and retain some loyalty from their “alumni,” although they will never again be centers of education.

The coming crash in tuition prices will be bad for universities and potentially bad for academic research if nothing changes...but it will be great for students. In a certain sense, the ability to acquire a college education for free or nearly free will be a throwback to the “old days” in which young people started out their careers without any debt. Many of the most dynamic companies are started by young people, but student debt provides a significant drag on this economic engine. Eliminating this problem for future generations could potentially create a large economic boom, as more dynamic companies are born to solve the world's challenges.

By 2021 – The average cost of tuition at the 100 top-ranked brick-and-mortar universities is lower than it was in 2011, after adjusting for inflation.

Saturday, April 21, 2012

Book review - "Abundance" by Peter Diamandis

Peter Diamandis, the founder of the X Prize Foundation and the co-founder of Singularity University, is one of the foremost futurists today. He is well known for both popularizing emerging technologies and driving their development. His new book, Abundance, chronicles the ways in which technology is rapidly transforming life for people all around the world, and will soon usher in a “post-scarcity economy.”

Diamandis starts out by identifying the sources of humanity's biggest needs today – water, food, energy, education, information, communication, transportation, health care, and freedom/democracy – before going on to explain how technology can solve or is already solving these problems. Many of these same topics have already been covered in this blog.

Technologies like Dean Kamen's Slingshot will soon transform the way water is distributed and solve humanity's single greatest problem. Bioengineered crops, in vitro meat production, and vertical farming will soon enable us to grow food in places where it was not previously possible, under conditions that are much safer, more environmentally friendly, and less volatile. New online education technologies will soon enable far more people to have access to high-quality K-12 education, at a greatly reduced price, and Moore's Law is reducing the price of computing to the point where nearly anyone in the world can afford it (case in point: the proliferation of cell phones throughout even the poorest parts of Africa and India.) Solar energy will become cost-competitive with fossil fuels by the 2020s, thus offering a virtually unlimited source of environmentally-friendly energy.

But the part of the book that I found the most intriguing wasn't simply the range of technological solutions to humanity's greatest challenges; although Diamandis writes about these emerging technologies with an insider's knowledge, they have all been discussed elsewhere for years. The most intriguing part was Diamandis' idea of billions of new minds “coming online.” Sadly, people grinding out an existence in poverty are usually not able to contribute their ideas and talents to the world, and we are all worse off for it. But as we solve the problems of poverty and move toward a post-scarcity economy, billions of people will be freed from the task of eking out a subsistence lifestyle and will be able to contribute more to humanity's wellbeing themselves.

In my opinion, this reserve of squandered brainpower is the biggest overlooked resource of exponential growth that humanity has. Even the futurist most known for the concept of exponential growth, Ray Kurzweil, rarely talks about this untapped human potential. I find Diamandis' idea of exponential growth due to human intelligence far more plausible than Kurzweil's idea of exponential growth due to artificial least for the next few decades.

For most of human history, progress crawled along at an incredibly slow pace, because nearly everyone was dirt poor, focused on staying alive rather than making the world a better place. Progress accelerated dramatically in the 19th and 20th century, as more and more people gained access to the basic necessities of life and were able to build careers in areas in which they were talented and interested. But even today, at most a small fraction of humanity is currently driving the vast majority of the technological, social, political, and economic change around the world. This small fraction is disproportionately comprised of those who have already benefited from abundance. Far too many people still do not have access to the basics of life, which are a prerequisite to leaving a lasting mark on humanity.

As more and more people gain access to these things and we enter a post-scarcity economy, the world will begin to “wake up.” What happens when 8 billion people, rather than 1-2 billion, have everything they need to pursue their dreams? What will they do? How much more rapidly will our world progress when we have so many more people working for the betterment of the world? What kind of ideas, dreams, and talents already exist in the world today, lying dormant and waiting to be unlocked by the technological drivers of abundance?

Book rating: 5/5 stars