http://www.washingtonmonthly.com/magazi ... php?page=1
Some thoughts....Last August, Marc Andreessen, the man whose Netscape Web browser ignited the original dot-com boom and who is now one of Silicon Valley’s most influential venture capitalists, wrote a much-discussed op-ed in the Wall Street Journal. His argument was that “software is eating the world.” At a time of low start-up costs and broadly distributed Internet access that allows for massive economies of scale, software has reached a tipping point that will allow it to disrupt industry after industry, in a dynamic epitomized by the recent collapse of Borders under the giant foot of Amazon. And the next industries up for wholesale transformation by software, Andreessen wrote, are health care and education. That, at least, is where he’s aiming his venture money. And where Andreessen goes, others follow. According to the National Venture Capital Association, investment in education technology companies increased from less than $100 million in 2007 to nearly $400 million last year. For the huge generator of innovation, technology, and wealth that is Silicon Valley, higher education is a particularly fat target right now.
This hype has happened before, of course. Back in the 1990s, when Andreessen made his first millions, many people confidently predicted that the Internet would render brick-and-mortar universities obsolete. It hasn’t happened yet, in part because colleges are a lot more complicated than retail bookstores. Higher education is a publicly subsidized, heavily regulated, culturally entrenched sector that has stubbornly resisted digital rationalization. But the defenders of the ivy-covered walls have never been more nervous about the Internet threat. In June, a panicked board of directors at the University of Virginia fired (and, after widespread outcry, rehired) their president, in part because they worried she was too slow to move Thomas Jefferson’s university into the digital world.
The ongoing carnage in the newspaper industry provides an object lesson of what can happen when a long-established, information-focused industry’s business model is challenged by low-price competitors online. The disruptive power of information technology may be our best hope for curing the chronic college cost disease that is driving a growing number of students into ruinous debt or out of higher education altogether. It may also be an existential threat to institutions that have long played a crucial role in American life.......................
I ask Nathaniel about how Learn Capital sees the world. Is the real money to be made, per Marc Andreessen, in eating the existing education industry? Or will it be in providing service to the industry, helping them do what they do better? In terms popularized by Harvard business professor Clayton Christensen, this is the difference between “disruptive” and “sustaining” innovation.
Nathaniel says that’s an “ideological” question. Learn Capital looks for two things, he says: “highly relevant niche plays,” which sound like a sustaining innovation, and winner-takes-all “platforms,” which sound like university eaters to me. In fact, if one word defines the dialogue of my trip to the valley, it is “platform.” Investors want to put their money in platforms, and start-ups want to build platforms, because right now, and for the foreseeable future, platforms rule the world..........................................
Minerva sprang from Nelson’s observation that higher education was increasingly a realm of mismatched supply and demand. Recent decades have been generally peaceful and prosperous on planet Earth. There are a lot more people with the desire and ability to pay for higher education than there used to be. Elite American schools are the unchallenged market leaders, which is why applications to Harvard have increased by double digits annually for years, with growing demand from China and other fast-developing economies.
In response to this surge in demand for its product, Harvard has done the following: absolutely nothing. It hasn’t expanded the size of its freshman class by a single student in the last twenty years. With a few exceptions, this is true for all elite American schools. They don’t have to get bigger, they don’t want to get bigger, and, anchored as they are to immovable physical places, they can’t get bigger in any meaningful or not absurdly expensive way. Yale, one of the exceptions, is currently in the process of expanding its undergraduate enrollment by 15 percent, or about 800 students. This involves building two new “colleges,” the rectangular gothic buildings in which Yale undergraduates live and study, at a cost of more than $600 million—or twenty-four times what Minerva got in seed money, an amount that was repeatedly described to me as shockingly large.
Minerva is designed to soak up this growing excess demand. Nelson plans to signal elite status through a combination of rigorous admissions standards and a nail-tough academic curriculum. While the courses will be conducted primarily online, students will live together in shared housing units in cities around the world. They’ll start in their home country and then rotate to different cities in later years, finishing with a capstone project in their chosen major. Nelson figures this can be done for less than half of what Ivies charge students, and that if Minerva ends up with a student body of 10,000 undergraduates it will be a financial success.................................
In many ways the plausibility of Minerva comes down to a pure numbers game. The world is very big, and the number of students served by elite American schools is very small. They turn down nine out of ten potential customers now, and the number of global aspirants is only starting to grow. Nelson expects that 90 percent of Minerva students won’t be American. Even with the inevitable discount applied to newness and online-ness, even with a high bar to get admitted and a second high bar to graduate, at some point the sheer weight of numbers solves everything. Ten thousand is a small amount in a world of seven billion people.
Indeed, scale is the oxygen feeding the combustible mix of money, ambition, and technology-driven transformation in the valley. Low margins, uncertain business models, limited marketing budgets—all of these limitations and more can be overcome by scale. And the rapid growth of mobile telecommunications technology means that the number of people in the world who are potential customers is quickly moving toward the number of people in the world.
Minerva isn’t the only project in this city—or in this neighborhood, even—playing this numbers game. One company I visited had start-up costs so low that it never even had the need for venture funding; in valley parlance, it was “100 percent bootstrapped.” Quizlet, as the company is called, was started in 2007 by a Bay Area high school student named Andrew Sutherland. The first product was flash cards. If you were learning the names of animals in French, for example (the sophomore-year high school assignment that motivated Sutherland to create Quizlet), you’d create a digital flash card by entering “penguin” on one side and “manchot” on the other. By the time Sutherland was a college junior, the site had three million monthly users. Now the company is a typical San Francisco start-up with black chairs and MacBook Airs. It makes enough money to rent space and pay salaries by running small ads on the site and by selling a premium version for $15. The ads and subscriptions aren’t expensive, but they don’t have to be when you’ve got millions of users and host everything in the Cloud.
To drive home the point of just how cheap it is to be Quizlet, one of its executives asks me how much money the United States spends per year to educate a single student in K-12 education. About $15,000, I say. That’s more than what it costs us per month to host the entire site, serving millions, the executive responds. Quizlet has no sales force, a very small marketing department, and more than seven million monthly unique visitors. (There are about fifty million public school students in the United States.) Quizlet, in its busiest months, during the school year, is among the top 500 most visited sites on the entire Internet. Now they’ve expanded beyond flash cards. You can create study groups, convert your content into multiplayer games, and search for cards and games that other people have created. We think we can get to 40 million users, then 100 million, says the executive. The question that drives the company, he says, is this: How can we create amazing learning tools for one billion people? This is the way most of the people in the valley talk.........................
Most of the weight is fuel.
That stays with me, even after we finally leave Founders Fund, dodging the sprinklers again, and I catch a taxi a few blocks from the gates of the Presidio and head back to SoMa and my hotel. Because when most of the weight is fuel, Scott explains, a reduction in the amount of fuel you need to create thrust increases the payload weight you can move from Earth into orbit along a logarithmic scale. It’s not a linear, one-to-one thing. The less fuel you need, the less fuel you need. It’s exponential.
This, I realize, is pretty much what’s happening to the basic math undergirding the Silicon Valley economy and, with it, the likelihood of higher education encountering some kind of dramatic disruption at the hands of a Musk-like figure. As access to the Internet grows and the cost of everything technological moves toward zero, the amount of money needed to start a company that can grow to scale and just possibly change the world—that can go from 0 to 1—drops along the same kind of exponential scale. When does that cost become functionally indistinguishable from nothing? In the admittedly much less complicated business of photo sharing, it got there nine hours before I arrived at Founders Fund. That’s Instagram, the billion-dollar company that consisted of nothing more than a handful of ramen eaters (on the day it was purchased, Instagram had fewer than twenty employees) armed with ergonomic black chairs, wi-fi, and MacBook Airs.
During a meeting on Sand Hill Road, the fabled home of Silicon Valley venture capitalism, one investor told me that the basic model of firms like his making huge startup bets was ripe for disruption. A new breed of venture firms has taken to investing small amounts in start-ups, in the range of $25,000 to $50,000. These firms recognize that the cost of starting a new company is far less than it used to be, which means that investors can spread their money around to more entrepreneurs and ideas. And the entrepreneurs themselves can “fail faster,” a crucial idea in an ecosystem driven by experimentation and groping around for the new new thing.
Instead of shooting for the moon by building a beautiful, expensive product and hoping like hell that the whole world comes to your door, the idea now is to build the “minimal viable product,” get it to the market quickly, watch what happens, and iterate like crazy. Because the Cloud is so cheap, it doesn’t take much in the way of money to do this. Because the scale of the entire world is so large, the potential to get big is vast. If that doesn’t work, everyone can move on to the next thing with relatively little time and money wasted.
In the future, anyone with an idea will be able to build a rocket, aim it at the gigantic trillion-dollar market of education, and light the fuse.............................
At a certain point, probably before this decade is out, that parallel universe will reach a point of sophistication and credibility where the degrees—or whatever new word is invented to mean “evidence of your skills and knowledge”—it grants are taken seriously by employers. The online learning environments will be good enough, and access to broadband Internet wide enough, that you won’t need to be a math prodigy like Eren Bali to learn, get a credential, and attract the attention of global employers. Companies like OpenStudy, Kno, Quizlet, Chegg, Inigral, and Degreed will provide all manner of supportive services—study groups, e-books, flash cards, course notes, college-focused social networking, and many other fabulous, as-yet-un-invented things. Bali isn’t just the model of the new ed tech entrepreneur—he’s the new global student, too, finally able to transcend the happenstance of where he was born.
That’s when American colleges and universities will really start to feel the pain. Political pressure will continue to grow for credits earned in low-cost MOOCs to be transferable to traditional colleges, cutting into the profit margins that colleges have traditionally enjoyed in providing large, lecture-based college courses. At the same time, people with huge student loan burdens from overpriced institutions will be undercut in the labor market by foreign-born workers willing to work for less because they incurred no debt in getting valuable credentials in the parallel higher education universe. Colleges with strong brand names and other sources of revenue (e.g., government-sponsored research or acculturating the children of the ruling class) will emerge stronger than ever. Everyone else will scramble to survive as vestigial players.
At least, that’s what people are dreaming of in the valley. If history is any guide, some of them are going to be right..
One of the lenses that should be explored more is not only the potential of MOOCs to bring disparate communities of the world together, but also they might, or indeed will, function as a new fulcrum and training ground of the next class of globalized elites. In that same vein, if the MOOCs prove to be as powerful as they claim to be in democratizing and expanding education worldwide, and thus "uplifting" the skillsets of millions more 3rd world denizens, expect further downward pressure onto 1st world wages and upward pressure on hiring qualifications, as those "uplifted" workers gain invaluable skillsets while still being stuck on a much lower payscale than even a 1st world worker would dare to dream of. Globalization will be turbocharged into its next explosive and chaotic phase that will continue erode the status of 1st world workers even more than during the 00's.
There are alot of things MOOCs can accomplish, but helping to "ameliorate" the unemployment situation by providing ostensible training for various industry shifts, and hence lowering the unemployment rate by proxy, is not among them. By common sense this should be obvious but apparently many confuse it otherwise.
in the same vein, if the MOOCs prove to be as astronomically successful as those entrepeneurs (aka profiters) desire, expect a rapid and merciless consolidation of higher education that will benefit only the Ivy Leagues, Stanford, MassCaltech, and a smattering of sub-Ivies(Duke, Rice, etc.) and public flagships(Berkeley, UofMich, UoV, UTAustin). Those that will be disproportionately culled out are the for profit colleges(UofPhoenix, Corinthian, which is good), middling to bottom ranked private U's(perhaps for the better as well), most liberal arts colleges (Ok maybe there's a problem), and perhaps most state U's as well ( definitely a problem now). The end result is paradoxically in reduction of institutional and perhaps instructional diversity, as the participating colleges only number a few dozen or so and the faculty recruited will barely exceed a couple hundred, while the students served will potentially number in the tens of millions. Needless to say the resulting decrease in the variety and diversity of those pedagogies and modules that would have existed will not be an unqualified positive.
And by the way, I think we can agree that this new paradigm disruption is not a job creating one, but quite the opposite, though it (may) be for the better. Maybe, or not.
