The (Needed) Revolution Emerging in Higher Education

Tyler Durden's picture

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Higher education is just the latest in a long line of labor-intensive industries with enormous fixed costs that now faces competition from new technologies and new far more efficient systemic processes.

There is a revolution underway in education being driven by digital technology.  Like all technologically fueled upheavals, this revolution requires creative destruction of the current industry, which is resisting the revolution even as it attempts to embrace the parts that might preserve the status quo.

This is an old story:  Huge labor-intensive industries with enormous fixed costs face competition from new technologies and new systemic processes.  Those earning a living within the old industries resist the destruction of the institutions and cost structures that have supported them, but resistance is futile, for the new technologies and processes are faster, better, and cheaper, often by an order of magnitude.

Though the entire spectrum of education from preschool to doctoral studies is being revolutionized, I will focus on higher education, which is already being creatively disrupted by digital technologies.  All that is needed to fulfill the revolution is a parallel advance in systemic processes.

The Old System: Systemic Scarcity of Media and Knowledge

To understand the revolution, we need to start with the historical roots of the current system, which arose from a profound scarcity of knowledge and instruction.  In the ancient world, storing information was extremely expensive.  Even after Gutenberg’s printing press made mass-produced books available, books remained expensive.  Only a wealthy household could afford to buy more than a few books.

Informed instruction was similarly limited.  Instruction in universities was often one person reading a text aloud to a classroom of students; this is the source of Cambridge University’s longstanding academic rank of “Reader.”

The scarcity and high cost of written media led to the primacy of the oral lecture, as the only way to share knowledge was to concentrate students in one small geographic area to hear these lectures.

Despite the ubiquity of relatively inexpensive books, higher education in the 20th century remained essentially unchanged from the medieval model of students gathering to hear lectures drawn from large libraries. This high-cost structure kept universities elite institutions, offering finishing schools for the upper-class and a narrow channel of meritocracy for the best and brightest of the lower classes.

World War II and the Advent of the Factory Model

The advent of global war required a rapid expansion of industry and managerial skills on an unprecedented scale.  Unlike previous wars, oil, technology, industrial production, advanced research, and management of these complex systems became paramount in World War II.  In response, the U.S. Federal Government ramped up the nation’s small elitist institution of higher education into a vast factory of universities and colleges producing millions of educated workers to serve the emerging knowledge economy.

This Factory Model was based on the principles of mass production.  College students attended the same lectures as hundreds of others and studied the same textbooks as thousands of others.  The system of accrediting each college created an illusion of parity between institutions.  While an Ivy League diploma was recognized as being worth more than a standard-issue diploma, any bachelor’s degree was deemed adequate proof of academic achievement.

This Factory Model yielded a three-part system: the traditional elite of academia, research, and the professional schools (i.e. graduate and doctoral programs), mass-produced four-year bachelor’s degrees, and a two-year community college system that served two roles: as preparation for a bachelor’s degree and as a vocational school.

The need for white-collar managerial workers exceeded the output of college graduates in the 1950s and 1960s, so supply and demand favored college graduates, who found good-paying jobs relatively quickly and opportunities for advancement relatively expansive.

Colleges expanded quickly, using federal and state funds to construct campus buildings. Costs were held down by modest salaries for non-tenured instructors and flat management structures.

In effect, a hodge-podge system tossed together in a national crisis became institutionalized. This is best revealed by this question: If we could start from scratch now, how would we design an effective, responsive, accountable, low-cost higher education?

Answers vary, but it certainly wouldn’t resemble today’s failing, costly, obsolete system.

Expensive, Obsolete, Failing

Though it pains its advocates to hear, the reality is that America’s system of higher education is expensive, obsolete, and failing. Though proponents finger reduced state-level spending as the cause of higher tuition and fees, this claim ignores the many structural causes of higher costs, including bloated layers of management, soaring salaries and benefits, costly building projects, and so on.

Consider this chart of one University of California campus's employment of professors and administration. If we extrapolate the lines, there will be more highly-compensated administrators than there will be professors teaching in the classrooms.

Federally backed student loans are skyrocketing by hundreds of billions of dollars.  U.S. government-issued student loans ($560 billion) now exceed the entire gross domestic product of entire nations; for example, Sweden ($538 billion).  Non-Federal student loans total another $500 billion, bringing the total to over $1 trillion.

While the cost of higher education has skyrocketed (tuition is up 1,100% since 1980), the value of college education and diploma has declined. One national study, Academically Adrift, found that over one third of college students “did not demonstrate any significant improvements in learning” critical thinking and other skills central to success in the new economy.  From this dismal record, we can extrapolate that another third gained marginal utility from their investment of tens of thousands of dollars and four years of study.

Google is widely viewed as a bellwether of the new economy.  It is noteworthy, then, that Google has found that academic success has little correlation with being productive in the workplace.  Lazlo Bock, Senior Vice President of People Operations at Google, made the following comments in an interview published by the New York Times in June 2013:

One of the things we’ve seen from all our data crunching is that G.P.A.’s (grade point averages) are worthless as a criteria for hiring, and test scores are worthless. Google famously used to ask everyone for a transcript and G.P.A.’s and test scores, but we don’t anymore…. We found that they don’t predict anything.
What’s interesting is the proportion of people without any college education at Google has increased over time as well. So we have teams where you have 14 percent of the team made up of people who’ve never gone to college.

Doing well in college—earning high test scores and grades—has no measurable correlation with being an effective worker or manager.  This is incontrovertible evidence that the entire higher education system is detached from the real economy: Excelling in higher education has no discernible correlation to real-world skills or performance.


The Consequences of Cartel

What is striking about these runaway costs and failure to prepare students to thrive in the new economy is the stunning lack of accountability.  The higher education system continues to maintain it is cost-effective and successful even as evidence piles up that it is unaffordable, failing, and obsolete.

This lack of accountability and runaway pricing are hallmarks of cartel capitalism, a variation of monopoly that offers an illusory veneer of competition.  In the present system, colleges maintain a state-granted monopoly on accreditation.  If you want a college degree, you have to pay the cartel its price, regardless of the education’s quality.  There is no accountability for the poor product because students have nowhere else to go for a diploma but the cartel.

What Has Changed

The U.S. economy has changed in fundamental ways since the heyday of the Factory Model of Higher Education in the 1950s and 1960s.  In that era, the U.S. maintained a near-monopoly on capital and industry, as war-ravaged Europe and Japan were still rebuilding their shattered economies.  The rapid expansion of the consumer economy demanded an equally rapid expansion in the white-collar workforce of managers and marketers, and those with college diplomas were a scarce commodity who could command a premium on the labor market.  Health care was cheap and economic growth robust; overhead costs were low; and it behooved companies to offer stable employment, low-cost benefits, and pension plans.

The 1970s upended many aspects of this high-growth era.  Energy crises bled the economy of efficiency and purchasing power, and the era of high wages for low-skill factory work gave way to the first wave of automation, computerization, and robotics.

This structural shift from industrial to post-industrial employment fueled a systemic need for workers with advanced knowledge of computers, software, and related technical skills, as well as a secondary pool of workers able to deploy these new technologies in every sector of the economy: defense, design, communications, marketing, human resources, government, finance, engineering, etc.

The Factory Model could adjust to this new need by expanding curricula in these new fields while keeping the traditional departments and schools on a continued expansionary track.

Demographics played a role as well; the 60+ million Baby Boom that had begun entering college in the mid-1960s reached its college-age apogee in the 1970s.

The economy of the 2010s is undergoing a change just as dramatic and wrenching as the transition from industrial to post-industrial.  The economy—and competition for capital, skills, goods, and services—is global.  Overhead costs such as healthcare have soared, making hiring workers an expensive proposition.  With roughly 40% of the workforce holding a college diploma, the scarcity of college-educated workers has been replaced by a surplus of workers with university degrees. (Only 5% of adults had a college degree in 1940.)

Granting more advanced degrees does not magically create positions for those holding freshly issued diplomas.  Instead, it seems degree inflation is at work: what once required a high school diploma now requires a bachelor's degree, what once required a bachelor's degree now requires a master's degree, and so on.

In effect, a four-year college degree is becoming the entry-level minimum, replacing the high-school diploma. Further up the food chain, master's degrees are also in surplus, pushing many ambitious youth into PhD programs in the hope that a PhD will guarantee a high-paying job.

Alas, there is a growing surplus of people with PhDs in a number of fields. Some claim the unemployment rate for PhDs is very low, but these surveys do not measure under-employment; i.e., Did the PhD take a position that only required a lesser degree? (seeThe PhD Bust: America's Awful Market for Young Scientists—in 7 Charts)

New Paradigms Arising

The Higher Education cartel is perfectly happy to encourage degree inflation (at enormous expense, of course), but this zeal for issuing student-loan-funded diplomas fails to address two structural disparities: the one between the skills needed to prosper in the emerging economy and the skills colleges are providing students, and the widening income/wealth/education gap between the wealthy and the non-wealthy.

As higher education costs soar, the gap between wealthy and poor families widens as non-wealthy students are forced to become debt-serfs to pay for college.  A system that forces poor households to shoulder student loans for decades in return for marginal-utility college degrees is not just immoral, it is recklessly predatory.  Yet this is the system Higher Education supports and defends.

There is a profound disconnect between the Higher Education cartel and the economy and what higher education should cost in a world where information, instruction, and knowledge have fallen to the cost of bandwidth; i.e., near zero.  What was once costly and scarce (knowledge and instruction) is now nearly free and abundant, readily available on any digital device anywhere in the world with a connection to the Web.  There is no need to concentrate students in a campus with a library; every web-connected digital device is a library and university combined.

In Part II: The New Education Models Offering New Hope we explore the emerging rise of radically cheaper, more effective, and more accountable systems despite the institutional resistance of the Higher Education cartel. We discuss this new Nearly Free University model and how families and households can make use of these innovations as they become mainstream.

Click here to access Part II of this report (free executive summary; enrollment required for full access).

This essay was first published on Needless to say, it is based on my book The Nearly Free University and The Emerging Economy: The Revolution in Higher Education (Kindle edition)

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
QQQBall's picture

Nice chart on growth of Faculty vs Administrators

Ruffcut's picture

At least you have college football to live by.

THough for professions, and most other classes, students are lazy and have to be sppon fed to obtain the multiplier effect of learning.

All kinda of kids are on data feed phones, laptops etc and they are dumber than dogshit.

This way the kids will piss away their parents money at college and have a good time.

Ying-Yang's picture

But... but Charles, how can we keep up the prestige of our hallowed halls, our campuses entrenched in traditions and our grants. My God, our GRANTS, we must maintain our grants!

Otherwise Chas we don't need traditional colleges or universities. Outsource them all.

We could still have sorority and frat houses to host wild toga parties.

Skateboarder's picture

'Professors' in bed with bigTextbook continually updating the same tired material with 'new insights' and horsebollocks. Milk the editions, move on to the next book. Always require the latest edition for homework, make the lil fuckers buy $200 books every year. Of course, some professors keep it real and write their own free textbooks (was fortunate to have one of those).

Knowledge scarcity is king monopoly, and college as an everyman's rite of passage fortifies the scarcity. Every textbook educates but enslaves also. Global free open source online resources are the only way to break out of this nasty garbage we call education. The species is goddamned bass ackwards sometimes...

I've heard a few times the notion that college is the best standard of living people have these days (or something like that). That's some sick, funny shit.

Lost My Shorts's picture

On the other hand, you can't blame professors for being cynical and greedy.  If they try to actually teach anything, the students just give them bad reviews.  Students want easy classes with no hassle.  Probably most professors have been through the cycle of trying to actually turn the airheads in their class into something, and been burned at review time, and said screw them all then.

Bobbyrib's picture

If you have tenure, you can do almost anything you want. I had professors tell me stories that had nothing to do with the course I was taking. None were fired.

RafterManFMJ's picture

So you been to school for a year or two
And you know you've seen it all
In daddy's car thinkin' you'll go far
Back east your type don't crawl
Play ethnicky jazz to parade your snazz
On your five grand stereo
Braggin that you know how the niggers feel cold
And the slums got so much soul

It's time to taste what you most fear
Right Guard will not help you here
Brace yourself, my dear

RafterManFMJ's picture

Luckstily I gratuaded before the economy cratered with dual degrees in Forestry and Women's studies! I only owes 97,000 in student loan!

I come your house rid of carpenter ants , carve you phallus of Black Oak, same day!

As always thanks you very much Univercity of Pheoneix!

Lost My Shorts's picture

I agree.  The critics of college always forget the difference between doing the minimum to get the degree (while spending most of your time hooking up and drinking beer) vs. working your ass off and actually taking advantage of the resources of the college.  Both cost about the same.  The former is worthless, the latter priceless.

The current generation is the unfortunate product of the self esteem movement -- the belief that high self esteem spurs achievement rather than vice versa.  Real education starts when someone kicks your ass and says you don't know anything.  Students today don't get that service.  (Except on ZH !!)

Bobbyrib's picture

For most majors the cirriculum is horseshit.

ebworthen's picture

Legions of PhD's who are drug by the nose through 7 years of being worked like slaves with the promise of tenure dangled in front of them - only to be cut loose in the 7th year.

The few that make it are the ass-kissing mandarin's who sell their soul, tow the line, and are inculcated completely into the lies of the dream factories (Colleges and Universities).

vegas's picture

I just asked a teenager at the airport what he thought of the situation in the Middle East; he said he didn't know there was any trouble in Ohio. WTF.

Joe Davola's picture

There's been a "situation in the Middle East" since I was a teenager, the teenager you spoke to is better off tuning it out.

Bobbyrib's picture

If he would have said "Fuck the Middle East," he would have been my hero.

CaptainSpaulding's picture

Cue the Doc Severinsen punchine rimshot

OwnSilverPlayMusic's picture
Nick Saban Alabama SEC $5,316,667 $160,071 $5,476,738 $700,000 Mack Brown Texas Big 12 $5,292,500 $61,250 $5,353,750 $850,000 Bob Stoops Oklahoma Big 12 $4,550,000 $0 $4,550,000 $819,500 Urban Meyer Ohio State Big Ten $4,250,000 $50,000 $4,300,000 $450,000 Kirk Ferentz Iowa Big Ten $3,835,000 $0 $3,835,000 $1,750,000 Les Miles LSU SEC $3,751,000 $105,417 $3,856,417 $700,000 Steve Spurrier South Carolina SEC $3,550,000 $35,000 $3,585,000 $1,550,000 Gene Chizik Auburn SEC $3,500,000 $77,500 $3,577,500 $1,200,000 Chip Kelly Oregon PAC-12 $3,500,000 N/A $3,500,000 $900,000
koaj's picture

Those football coaches generate tons of revenue for the universities. major networks dont pay hundreds of millions of dollars to televise chemistry experiments. right or wrong thats how it is. in fact i would gather many academic luxuries at these schools are there because of BCS and TV money

OwnSilverPlayMusic's picture

Yeah I'm well aware.  Nothing better than making 5 mil to coach amateur 'student athletes.  See South Park 'Crack Baby Basketball' for further info.

Father Lucifer's picture

More like semi-pro or minor league. The kids should get paid. Occupy the NCAA.

McMolotov's picture

Not necessarily true.

"Looking at data from 2011-2012, athletic departments at 99 major schools lost an average of $5 million once you take out revenue generated from 'student fees' and 'university subsidies.'"

ebworthen's picture

In other words, the educational institutions have whored themselves out to put on gladiatorial spectacles using boys from the plantation who are now getting their heads knocked or knees ruined instead of picking cotton.  At least they get to lay the white girls and don't get hung from a tree and have a slim shot at a professional slot in the more advanced gladiatorial bread and circuses.

OwnSilverPlayMusic's picture

dang my formatting got screwed, but the numbers are 'school pay' 'other pay' 'total pay' and 'max bonus'

halfawake's picture

ah, ok, got it. disregard my first sentence, then.

halfawake's picture

most coachs' salaries are paid by boosters, not the school. still fake money from boosters who probably work WS or some other type of skimming op that allows such riches. and that doesn't speak for the presidents and high-level admins.

HarryHaller's picture

One of the few things you can say CA is doing right  - all state employees' salaries are a matter of public record.

3 of the top 5 salaries for 2012 are all head coaches (although all three have been canned in the last year, their replacements probably aren't that much lower).  All top five salaries are employees at UC.  Average of top 5 salaries is more than 10 times what the CA governor makes.

Joe Davola's picture

Considering CA's governor, they're probably worth more than 10x.

Number 156's picture

The Higher Education Cartel is pricing themselves out of the market.

Dinosaurs died because they were too big. Let nature take its course.

RebelDevil's picture

Slowly, but surely, people are waking up through pain by itself.
You go to college, thinking "I need that degree so that I can show employers I'm qualified and compentent."
You graduate with a decent GPA, but then you can't get a job. You become a server at a resturant for miminum wage in order to pay the bills, and your dream of ever getting that great job is smashed!
Well, if you did that, you shot your dream to pieces, because:
1. The difference between (internet-based) autodidactism and university study is slim, as professors teach worse than HS teachers!
2. The university classes are ALWAYS about the tests, and never about creating competence, appreciation of the subject at hand, and "forward momentum" (going beyond the text, applying what you learned, and/or making new progress in the field.) This shows that the system is indoctrinating, and not educating! 
3. There's more graduates than employers want to employ, and thus a shortage of entreprenuers! This creates a game of "musical chairs" with fierce competition over only a few positions.

The "American-Dream" as the masses know it is shot dead. The alternative and only current "American Dream" for the common person is this:
1. Educate YOURSELF (Autodidactism) using the free only resources today, combined with the growing supply of cheaper and older editions of textbooks.
2. Generate capital! (Trade the markets, invest, budget, conserve, and be (a least temporarily) loyal worker)
3. Contemplate on the world, and solve a problem that the people want solved.
4. Connect with others, especially those who have studied the same subjects as you have.
5. Become an Entreprenuer! (Capitalize and implement that solution you found in step 3.)

So few (with the exception of the elite) are achiving this dream though, because society itself will fight you "tooth and nail" every step of the way in the name of greed, apathy, and ignorance.

Rainman's picture

IBM's Watson will do all the thinking from here on out. You will have one for a laptop. Higher ed campuses will easily be converted to mental health rehab facilities for the synthetic opiate addicted masses. 

world_debt_slave's picture

yeah, this so called "capitalistic" system we have is run my industries that milk the system with fraud and lies until it is milked dry, but by then most have disappeared, somenone is going to get caught holding the bag, but don't let it be them.

kralizec's picture

Like the "faculty" is something to crow about...99% left-wing moonbat jackasses who couldn't hack it in the private sector...

Higher Ed...Higher Fleecing more like it!

kralizec's picture

Yeah.  Been barking at that for...what year is it?  Going on 4 decades!  Gahhhh!!!

q99x2's picture

I listened to this podcast on Peak Prosperity a few weeks ago. I didn't quite get where Charles says that apprenticeship/internship is not being implemented in the US educational system and the conclusions drawn. Other than that it was an ok article.

The cost should be way down but the truth is that US education system like the prison system is a business and under the guidance of Washington D.C. traitors and criminal influences. So long live the freakin revolution and up my FASFA Bernanke Mutha Fucka.

I get 66 dollars a day for studying Astronomy, Mythology and Modernity during the Age of Enlightenment. I can hardly afford to buy an ounce of silver. Two of these classes are prerequisites to transfer to UCLA. I like the classes better than online classes because of all the young women.

eric89074's picture

If the government stopped backing student loans the price of education would plummet. People could actually afford to go to college for the sake of education if they felt like it and not be saddled with tons of debt.

halfawake's picture

charts like this make me think we'll see deflation before inflation. those billions upon billions will never be paid back.

Alpha Monkey's picture

Pretty sure that is inflation.  Money created, then not destroyed through repayment.

halfawake's picture

yeah, i guess technically it is. but wouldn't deflationary effects kick in once the multiplier of so many non-payments start occuring, especially given all the derivatives all the way back to the fed? as if the money never ever really existed, right? just spitballin.

Maverick Ninefingers's picture

I believe defaulting on a traditional loan is deflationary, but these student loans do not disappear when in default or bankruptcy.  That leads me to believe Alpha Monkey is right.

halfawake's picture

Hmm... you're right. I forgot that the loans are on the banks' sheets for good, regardless of payment or not. But at some point, if the banks can't collect anything on these NPLs, especially en masse, wouldn't that indirectly impact their ability to pay salaries, buy stuff, etc? I mean, who are we kidding, once too many of these become non-performing, the taxpayers will foot the private bill anyway. Just a waste of my brain power, what little I have left.

climber's picture

I'm taking a 300 level history of aviation course currently. At the beginning of the course my professor stressed the importance of critical thinking in our papers. Apparently critical thinking in her view is summarizing and regurgitating the information in the readings due to the C I got on my first paper. I wrote papers like that in 7th grade. I have no idea how people can be history majors and think that they learned anything.

seek's picture

If they raise the bar to a higher standard, students fail, and the college loses money.

This reinforcement mechanism tells you all you need to know about academic standards and the value of a degree.

This is also probably why STEM degrees seem to be the only ones that have a net positive value -- you don't have subjective answers in math and physics so you can't dumb down the classes, and those that can't pass are weeded out early, leaving people who would likely be successful at anything even without the STEM degree as graduates.

climber's picture

Yeah thats why I'm glad I'm majoring in Mechanical Engineering

MachoMan's picture

Just take your lumps (bad grades) and put out the best work product possible.  If you can challenge yourself to improve, then you're going to be successful; you don't need anyone else to shit on you to become successful (although it can be a driving force in some instances).  Just accept the school for what it is (useless middle man), take your lumps when they come, and get your little sheet of paper that tells everyone you're free to start learning a trade.  Hopefully you don't have to go into debt for the pleasure.

MetalFillBoy's picture

When ever I talk to friends that have kids heading for college, I always mention STEM (Science, Technology, Engineering and Math).  And here is why:  Almost all of the top 10 starting salaries for college graduates is a STEM degree.  I am sure you can find lower unemployment among STEM workers.  

But after preaching about STEM degrees, I understand that not everyone can get a degree in engineering.  Drop out rates can be pretty high for engineering degree programs.  Not everyone is cut out to be an engineer . . .

Computer Engineering


Chemical Engineering


Computer Science


Aerospace/Aeronautical/Astronautical Engineering


Mechanical Engineering


Electrical/Electronics and Communications Engineering


Civil Engineering




Construction Science/Management


Information Sciences and Systems


bankonzhongguo's picture

All of this is a function of when big companies start accepting non-bachelor degrees (online degrees) for employment.

Sure this is a little easier with coding, but think about the legions of liberal arts degree people that effectively have no skills greater than what a high-schooler has.

The whole massive online system is forming now, but it will take employers to pull the trigger to make the meaning and cost of a bachelors questionable.

It is a dangerous slope though. You need places to do basic research, labs, experimentation, discourse, etc.  The "solution" is somewhere in the middle.  First off, let's get the public ed system working again in actually producing intelligence inquisitive young people.

I deal with UC college people all the time.  It is truly frightening how many are absorbed by addled Japanese cartoons, my little pony, call of duty and porn.  These guys have so much arrested development they can't even score and smoke pot, never-mind actually contemplating getting a job or fighting the next war.

It takes 3 generations to build a family business and a few years of the last to destroy it all.

Son of Loki's picture

bankon, I read somewhere the bigges tusers of Viagra are teens b/c they are so grooked out and limp from drugs they can't get it up, so they need help of a second line of drugs.

If it's true, it's a real sign of deeper problems then we can even fathom.

Totentänzerlied's picture

Simple cost-benefit analysis: if your reward is worth less than what it will take to get it, it's not a good idea to pursue it. People intuitively understand this - wasting energy is maladaptive because humans need energy to get more energy. Minimum wage jobs to nowhere, for example, are a piss poor reward for the debt and energy required to get the requisite bullshit degree you don't really need just to qualify for the job (keeping labor abundant and cheap by erecting barriers to entry into the labor market).

Not too complicated, really.