College isn’t working.
At least it isn’t working for an ever-increasing amount of young adults in America.
I wouldn’t blame maliciousness, lack of talent from the professors, or lack of desire to set up young people for success from the administrators. It’s due to a Higher Education system that was created in the 1920s by Charles Elliot from Harvard that keeps reinforcing itself.
It comes down to old frameworks, approaches, and incentives that keep building on each other with no end in sight. The issue with college is a systemic one, not downstream of any individual or a single school.The purpose of this piece is to lay out the current structure of our Higher Education system and argue that the roughly 4,000 accredited Title IV will have large challenges changing from within, and positive innovation will most likely from outside of it via the free market.
The Four Core Issues with Higher Education
#1 – Splintered Focus On Several Services
Ryan Craig, in his book College Disrupted, argues that colleges, in their current iterations, are attempting to fill all of these functions:
- Admissions
- Research
- Facilities Management
- Housing
- Student Healthcare
- Credentialing
- Foodservice
- Athletic facilities
- And more
Hence the quality of their other services (like education & knowledge retention) will have fewer resources, innovation, and attention devoted to them.
Put in another way, a Mexican restaurant attempts to:
- File taxes
- Sell construction material
- Make a SaaS product
- Provide massages
Can’t have the best burritos. Organizations that focus on specialization typically have better products and services.
#2 – Heavy Fixed Costs That Keep Building
The fixed costs of most Universities keep climbing, such as:
- Physical infrastructures like dormitories and classrooms
- Lazy rivers & rock climbing walls to entice better social experiences
- Tenured Professors
- Ever-expanding administrative departments like D.I.E. & Leadership Teams
College prices will continue to rise as these costs continue to pile up, further detracting from their ability to provide ROI-positive education.
#3 – Misaligned Financial Incentives
Incentives run everything. Human beings don’t respond to moral norms or laws, they respond to the incentives of those forces.
There is a disconnect between providing a return on investment in the form of landing a job that pays back the cost of your education. Yes, some majors accomplish this like the STEM fields, but many majors and areas of studies do not.
Colleges already secure the bag once you sign on the dotted line via guaranteed government-backed loans. Yes, they get secondary funding via donations from wealthier alumni, but that’s like the tipping mechanism of restaurants. If a diner can’t sustain itself on general revenue alone, it can’t survive. But in its current iteration, colleges get revenue from Freddie Mac & Sallie Mae so they don’t need the alumni donations to carry on.
Another approach would be to fund higher education via Income Share Agreements, or ISAs for short. ISAs are financial agreements where you pay back your tuition from the income you receive as a direct result of your education. I personally used an ISA when attending the software engineering Bootcamp with Bloomtech.
The best part? I didn’t have to start paying back tuition until I landed a job in tech that paid more than $50,000 or more annually.
#4 – Ossified Admissions Process
Currently, all, if not most, of the accredited Universities qualify students and accept them based on GPA, ACTs/SATs, and extracurricular activities. Is this really the best option though?
Rebecca Kantar, CEO & Founder of Imbellus (acquired by Roblox) argues that other methods like pattern recognition tests would be more fair, equitable, and more effective.
The challenge of pivoting is that change would require hundreds if not thousands of competing institutions to all agree to make a major shift, together. The Game Theory behind this situation makes it impossible for the existing players to play a different game.
When Blockbuster had revenue in the billions, thousands of employees and a universal brand did their executives ever had to question whether they needed fundamental changes, or else they would go bankrupt?
Sometimes, if not most of the time, the incumbents in an industry are the least likely to see their own blindspots and aren’t aware of how the needs of the market are shifting.
Higher Education is no different.
Radical innovation in this space is most likely to happen from outside the current system, not from within it. Hence why I’m trying to build a second path with Unbundl.ed. More on that in my next article…
