Stormfront Part 2 - The Demise of Higher Education

The Demise of the current Higher Education model


 "the whole bloated, expensive, lecture-based higher education system will face the first challenge to its very existence: open-source, online higher education that costs a fraction of four years at Harvard—but is good enough for employers who want a college graduate" - Scott McNealy -  former CEO of Sun Microsystems (read the whole article here)


As I explained in my previous Stormfront post, I believe the current model of Education (primarily K-12) came into being on a set of conditions.  Let me formally spell them out here.

1. Businesses needed a large quantity of assembly line workers.
2. These workers needed a limited range of skills such as Reading, Writing and Arithmatic..
3. These skills needed to be of a uniform quality. (thus allowing workers to be interchangeable)
4. Life expectancy was shorter so it was expected that a person would stay in their job for their entire career.
5. The job would not change much over that career.

I believe it is now clear that all of these conditions no longer exist.  Therefore the raison d' être for the formal education system has disappeared.  In the past formal Education has adapted to changes, such as the advent of computers, and has survived but there is a new problem it has to deal with that I believe is insurmountable without totally rethinking the system.  Let me set this up with a basic lesson in economics.

Econ 101.

Scarcity = value.

If I am a producer of a product, I can sell this product to people who want it, but who cannot get it through someone else.  If I am the only producer, (a monopoly) then I can charge very high prices.  If I have competitors, I have to moderate my prices, but as long as all the competitors have similar costs, the prices will be in the same range.  This system will sustain itself as long as the product is in demand and the supply is limited.  However, if demand decreases, or supply increases the price will change.

Distribution

Distribution does affect things quite a bit.  Production does not equal supply by itself.  You still need to get your product to the consumers.  If you have a farm in California, you can sell your produce to consumers in Maine, but you have to truck it there first.  Even if you can produce a huge amount of crops, you still have to transport it.  This will constrain the supply even if production is not limited. The cost of that transportation will also increase your product price.  This is ok as long as your competitors have to pay similar costs.

Information

Consider information.  Information is a product that is produced in infinite combinations with infinite diversity.  In other words, the production is unlimited.  Anyone can produce information.  This can take many forms.  Facts, figures, conversations, music, film, stories, really any form of media is information.  Over the last 20 years computers have almost completely transformed our ability to create things.  This transformation has been seen in almost every part of society and was not forseen.  If you look at a what people in the 1950s thought the year 2000 would be like, it was all about flying cars, moon bases and personal robots.  None of that has happened.  Why?  The part that was missing from their vision was computers. (robots were kind of like that, but few thought about computers without bodies). Computers were the last big StormFront.  The Internet is the next.

The computer allowed those in the information production business (newspapers, book sellers, movies studios, record labels) to experience a drastic reduction in production costs, this triggering a golden age of business. (1982-1998)

When personal computers became widespread in the early 1990s, they were not a threat to the major information producers.  In our farm analogy, it is like everyone can now farm, but only the original producers have the trucks to get the produce to Maine.  The distribution costs were too high for just anyone to enter a market. Thus, for a while the status quo was preserved. Then came the internet and this changed everything.

The Internet

The Internet is not a producer of information; it is a distributor of information.  Right now it costs almost nothing to distribute information to the rest of the world.  It is a way for producers to directly connect to their customers with essentially zero distribution costs.  Movie studios, record companies, news organizations, and schools exist primarily as distribution systems.  The cost of actual production has been dropping steadily over time especially with computer technology.  So a record company has a great deal of costs involved in producing, marketing, and shipping a CD to a record store.  A CD costs about 50 cents to make but cost $15.  Why?  Because there is a huge distribution system behind it.  Now with the advent of distribution systems like iTunes, the distribution costs are very low, thus the prices are very low.  More importantly, what they are selling is digital.  This changes everything.

Digital = no scarcity.

Digital information can be copied infinitely with no loss of quality.  Therefore there is no scarcity to it.  If there is no free means to distribute copies, then producers are ok, but now that has changed too.  If a product is free to make and free to distribute, then it is not scarce.  No scarcity = no value.  This means death to the distributors.  Their services are no longer required.

How this applies to formal Education

So finally we get to Education.  (thanks for hanging in there)  The whole Education system was set up as a distribution system for information.  They did produce some of it themselves in the form of research, but generally the information they sold was accumulated from elsewhere.  It was too difficult and time consuming for a regular person to accumulate this information themselves so they paid a University to do it for them and then attended classes to receive it.  The quality of the information did vary from school to school, so people had a choice on price.  (not everyone drives around in a BMW) The big problem is, people can now get their own information.  Thus to the list of Education conditions we can add a 6th condition.

6. Information is scarce.

This last one was the one keeping formal Education afloat.  Now it is gone too, and I think will force a drastic change in how Education is pursued in the next decade.  "The economics of traditional schooling are so out of whack that there is an opening for new players," says Fred Fransen, executive director of the Center for Excellence in Higher Education in an article on Businessweek.com.  The author of that article said the following:

"The Harvards of the world won't go away. They will continue to be the high-fidelity players in the fidelity/convenience trade-off. But a large swath of the population might decide that going deeply into debt before even starting work is too high a price to pay for a high-fidelity education when a more convenient version will do. They will pull out of mid-level universities. Just as surely as many consumers gave up music CDs for Internet downloads, many students will soon decide to put aside a four-year stint at a traditional university for a cheap, easy, and good-enough degree delivered through laptop screens and smart phones. Schools in the middle of the pack—neither high-fidelity nor high-convenience—will have to adapt or suffer." - Kevin Maney

Part of the answer to the Education system's quandary is found in my assertion that Knowledge and Information is not the same thing but I will get to that in a later post.

So how will this change happen and why so soon?  The answer lies in a folk story about the Chinese Emperor.