Brave New World: The Next Wave of Higher Education

Is higher education due for a makeover? With the pandemic only accelerating the trends disrupting the traditional model of higher ed, it’s an opportune time to look ahead and discuss what’s coming next, from closing the gap that has opened between elite schools and the rest to the waning of standardized admissions tests to the rise of online and hybrid learning from the fringe to the center. And of course, to answer the ever-acute question of what it is all supposed to be for.

Sylvia M. Burwell, president of American University, Michael Crow, president of Arizona State University, and Scott Galloway, the founder of Section4, a content platform for accessible business education, joined us for a conversation about the future of higher ed on April 7, 2021. Watch the video in full or read an extract from the conversation below. It has been lightly edited for brevity and clarity.

Zachary Karabell: Scott, you’ve been vocally critical of the traditional framework of higher education. You started Section4 to create a less traditional one. What’s your take?

Scott Galloway (SG): I think higher ed has moved from being the greatest upward lubricant in the middle class to being the enforcer of a caste system, and those trends are accelerating. If you look at when innovation or digital technology comes into any sector, the effect is a flight to quality, or a concentration of power. Amazon, for instance, brought technology to retail, and they’ve added more market capitalization in the last 10 years than all of European retail is worth. 

We’re seeing the same dramatic flight to quality happen here—applications to Berkeley are up 24% in one year. The most frightening thing about it is that those “quality,” elite institutions no longer see themselves as public servants. They see themselves as luxury brands. Every year the dean stands up and brags that we didn’t turn away 90% of our applicants, we turned away 94%, which in my view is tantamount to the head of a homeless shelter bragging that they turned away 94% of the people who showed up last night. What that will do is feed into the tier-two colleges, and give them more pricing power to sell a Hyundai for a Mercedes-like price. And the wheel spins. We’ll continue to affect a transfer of 1.5 becoming 1.6 becoming 1.8 trillion dollars, preying on the hopes and dreams of the middle class.

The good news is there might be some disruptors; both Sylvia and Michael could be described as such. They’re people who haven’t lost the script, who see education’s role as an upward lubricant for the middle class as where we should be. But the net effect here could be disastrous.

On that, Sylvia, do you spend any time being concerned about what the top 50 universities think, in terms of competitiveness, or is your eye elsewhere? 

Sylvia M. Burwell (SB): Scott has articulated a real potential problem. Although I think we would all agree that higher ed is not actually about exclusion. It’s about excellence. I think the market will become more differentiated. We do have to have a world where the consumer, in order to prevent what Scott just described, is the dominant force of the next 10 years in terms of higher ed. We’re going to have to focus on how we think about higher ed, really and truly, from the trifecta of access, affordability, and quality.

To do that, we have to see beyond the traditional approaches of four-year degrees. Two-thirds of the nation does not have undergraduate degrees. In the next 10 years we want that number to change. We have to think about what people need: what they want, when they want it, how they want it. That’s the concept of lifelong learning, of post-secondary education, being something that people do in different ways at different times. We are going to have to serve those needs.

I think Scott’s point is fair—there is a top tier that is not a part of this thrust to increase access. Another thing to mention is that we know community college applications numbers are down. Numbers of applications from some underrepresented minorities are down. Not as many financial aid forms are being filled out, which indicates that folks from a certain socioeconomic milieu aren’t coming. And so we all have to focus. You asked what I focus on, and of course my focus is on American University (AU). My Chief Online Officer started the day we put everyone online due to the pandemic. Because I believe that while we are going to be excellent at the traditional, four-year, face-to-face residential college, we have create greater access through other means and mechanisms so that we can try and push against the forces that Scott described.

Michael Crow (MC): I agree with Scott’s characterization of the system being seriously messed up, but let me augment how seriously messed up it is. We have an entire higher ed system where the coin of the realm is scarcity, where status is derivative of exclusion. Well, that might be fine for small honors colleges in private universities, or institutions that are just going to have a few undergraduates and some professional schools, who are going to manage it with their own resources and bring in only the upper couple of percent of high school students. But the rest of us have got to take on the task of democracy building, and democracy building only works if the educational attainment of the population continues to rise, particularly as the more modern knowledge-driven economy moves forward.

The old British model of elitism has regained its strength in the United States, a granting of social status not through what family you’re born into, but through what school you go to.

Michael Crow

What we have now is a situation where the “top” universities are those that only admit high school students with A averages. That’s how you get to be a top university. What we’ve decided to do at Arizona State University (ASU) is to prove that that’s not the case, that we could break out of the stranglehold. The old British model of elitism has regained its strength in the United States, a granting of social status not through what family you’re born into, but through what school you go to. That has to be seriously attacked. That’s the reason that not only have we gone, since I’ve been in office, from 40,000 ASU students to 150,000, but also from 6,000 students in engineering to 25,000. And we’ve become one of the top-five research universities in the country that doesn’t have a medical school.

We have to be manufacturing all of these different pathways to success in the future. We’ve got to start holding public universities and some private universities that take large amounts of public resources accountable for their outcomes. And we’ve got to drive innovation and technology forward, or we’re going to revert back to, “Oh, I see you went to Kings or Queens College, Cambridge. You’re set.” For, you know, all 300 of you that got to go to the University of Cambridge. We can’t work that way across the scale of the US.

This does raise the question of what the actual point of a college degree is. Is it credentialing? Is it some sort of entree ticket? Is it supposed to carry with it a set of skills? 

SG: At least at New York University (NYU), I think we’re in the business not of educating or socializing, but of credentialing, full stop. What has effectively happened is that that corporate America has said, “we’ll pay a graduate of the business school $140,000. It’s probably worth $100,000, but your HR department posing as an admissions department does a lot more diligence on these individuals and makes them jump through so many hoops that you are a fine filter, and your exclusion combined with our fetishization on hiring only people from elite universities creates this caste system that we’re all benefiting from.” 

The insidious Antichrist here is the US News and World Report, which rewards status and compensation largely driven on exclusivity and rejection rates. The rankings have been so terrible for society, because they have created one metric: we’re going to push you up in the rankings if you reject more and more people. 

This is personal for me; I make no money in this sector. I actually lose it with my half-baked research. When I applied to University of California at Los Angeles (UCLA), there was a 60% admittance rate. I was unremarkable. My mother was a secretary. I had a 3.2 GPA and 1100 SATs. They called me—they already had 60% men in the class, sorry. They only let me in after I appealed. They said, “you’re not qualified, but you’re a native son of California, so we’re going to let you in.” I rewarded the vision of the regents of UC and the California taxpayers with a 2.27 GPA from UCLA. And then I went on to apply to Berkeley. The admissions director called me and said, “you don’t deserve to be here, but we think you have a great future, so we’re going to let you in.” And that created an upward spiral for me. I’m going to pay $11 million in federal income taxes this year. So I would argue it was not only philanthropic. It was a great investment in America. 

Slowly but surely higher ed has come to represent America. We’ve decided our collective goal as a country is to take the 1% and turn them into billionaires, whereas it should be to take the bottom 90% and give them a shot at being the top 10%. This year the UCLA admissions rate isn’t going to be 60%. It’s going to be 9%. The greatest platforms for financial security in the history of mankind, US corporations, have to fall out of love with Chanel and Hermes posing as Stanford and Harvard. Universities are just following where the money goes, and that’s the US corporations who only recruit now at elite universities. We need to totally reverse rankings and say, are you adding any value to society that might be a component of the rankings? And then two, we need to figure out a way to get corporations to commit to hiring more people that don’t have a college degree.

I think this has become a huge societal problem. When Harvard’s total admitted freshmen class is 1400 people, and they have an endowment that is the GDP of El Salvador, they’re not a nonprofit, they’re a hedge fund educating the children of their investors. Where’s the morality? Stanford’s endowment has gone from 1 billion to 30 billion in the last 30 years. Their applications have tripled. They haven’t increased their freshman class one seat. There are universities like Cal State who are doing God’s work and expanding their enrollments, but mostly we have totally lost the script in higher ed. 

When Harvard’s total admitted freshmen class is 1400 people, and they have an endowment that is the GDP of El Salvador, they’re not a nonprofit, they’re a hedge fund educating the children of their investors.

Scott Galloway

If there’s a thesis of “all’s well” in higher ed, and Scott is the antithesis—the whole system is corrupt and sclerotic—it seems to me that you, Michael, and Sylvia, are offering a synthesis. What is it?

MC: I like Scott’s story because he was a UCLA undergrad. On my office desk is a UCLA catalog from August 10, 1950. I use it as my inspiration. At that time the admission standards were, did you have at least a B average? Did you take some of the courses they wanted you to take? If you got in, the cost was zero—there was no tuition. We are doing everything we possibly can at ASU to build the modern version of that. And we have made huge progress. 

What has been difficult for us is, with every step we take, there’s a mindset that if you’re big, then you can’t be any good. If you change your academic departments to become more reflective of transdisciplinary learning, then somehow you’re producing transdisciplinary mental midgets. This is measurably false, but there is so much momentum around the notion of status, both for the faculty and for the students, that every time we have tried to break away from that, it has been extremely difficult. 

That’s one of the reasons that we decided to be what we are now: a world-class research university with 20,000 undergraduates who come from families on public support, who have incomes below $25,000 a year. Since we’re not supported very much by the government, the financial question is, how do we pay for kids to be able to come to the university to cover the actual cost, while constraining the costs as much as we can? It goes back to what a public university was designed to do. It was designed to provide access to students from every family background to be able to move forward unencumbered and do almost anything.

We have also thought about how unfair it is for so many people who went to college and didn’t finish. That’s why we did the Starbucks program [in which Starbucks employees can receive a tuition-free bachelor’s degree]. We’ve got 18,000 students in that program now and 6,000 graduates out of it, no cost, no debt. But even that wasn’t enough. Now we built a thing called the Pathway program. We don’t care if you didn’t graduate from high school, we don’t care what your situation is. We have ways for you to earn your way into college if college is where you’d like to go, and we have ways for you to earn your way into certain careers, if those are the directions that you would like to go.

Our faculty, who are research-grade faculty of world-class stature, want to do all of that. They have become super-faculty. The main thing for us has been changing the faculty-centric model to a student-centric model, and empowering our faculty to be able to educate at scale and with speed, and to be innovative.

You need certain things to, say, be a social worker, that may not require a four-year degree. If those things are offered in an online format, which is inherently at a lower cost, taken with a perhaps wider reach, does the financial structure allow for that? Can you offer a $200 course, or does the system implode if it moves out of the realm where the price tag reinforces the purpose of not educating everybody as a way to maintain scarcity?

SB: We’ve been doing those kinds of programs and that kind of work at AU for a number of years. It’s an important part of how one thinks about the progress. I think what you have articulated in the question gets to one of the fundamentals, which is that the economics of higher ed has to change. The example that I have given at AU is if you take the rate of inflation over the last 20 years in higher ed, and you extend that out for the next 20 years, a child born today would end up paying hundreds of thousands of dollars at a private institution. So it just doesn’t work. 

We have to consider what has to change to get to the world that we’re discussing, where there can be the kind of access where you provide what is needed. Technology is a helpful part of it. With universities, first there’s the question of affordability, and then the question of who pays. We try and reverse those questions. We are always focused on the extremely important issue of student debt. But solving that problem at a point in time is not enough without solving the long-term issue that your question raises, which is how we think about the future of economics of higher ed. That has to do with the consideration of the value proposition. What do you get, and what do you pay for it? And how do you evaluate how those two things come together? What do you do to evaluate that which you get?

MC: If you listen to a very powerful—not all-powerful, but very powerful—force called the market, what you see is that there is a market for biology majors out there. We have 6,000 biology majors, and we’re going to grow it to 10,000 biology majors. We have 2,000 biology majors online. One of our online biology majors was just admitted to the Mayo Medical School, one of the most selective medical schools. We have a top-10 research unit in electrical engineering with 2,500 electrical engineering majors on campus and 2,000 online taking Star Trek-level electrical engineering at unbelievably low costs, with the most advanced technologies that people have to carry out learning. But I have to stop listening to people that come and say, “you can’t have people studying stuff online. There’s nothing very good about that.” 

Recently we had a video done by 40 of our online biochemistry majors who got a letter from an elite university medical school saying they’d never admit anyone with an online degree because they don’t know anything about leadership or teams or society. One of the students in the video was a flight medic who was already a college graduate working on helicopter rescues out of Colorado. One was an electrician’s mate at the bottom of the ocean in a nuclear-powered submarine, working on their biochemistry courses. Half of them were nurses, trying to learn more chemistry and more science so they could move forward in their field. 

The point of saying this to you is that there’s all kinds of ways to change the cost model. We’ve changed the cost model dramatically by generating up our revenue. We’ve increased our tuition revenue from $125 million a year to $2.2 billion a year. And with that revenue we’ve been investing in new technologies and methods. We decelerated our rate of cost increase. Scott, you’ll be happy to know that the average net tuition for our 45,000 undergraduates from Arizona is under $4,000 a year. For half of them, it’s zero.

So we’re excited about the fact that you can gain financial control by realizing that you’re existing in a marketplace for your graduates, your technologies, your tools, and everything else. It just required us to move away from being dependent on the government and move toward a public enterprise model. That changes all aspects of how we’re able to operate financially.

Scott, is it “build it and they will come” insofar as creating a robust set of online multidisciplinary tools, and eventually you gain status and credibility, or is the absolute challenge here, meaning that you could deliver the content, but you can’t change the status issue easily?

SG: I think AU and ASU are always going to have a certain brand halo that they deserve due to great research, their atmosphere of learning, the investments they make in technology, and their location. But I think this is what’s going to happen: The internet slowly but surely went in and picked apart every part of the newspaper piece by piece. First they went for the classifieds. Then they went for the car ads. Then the movie listings. In the same way, I think we’re going to see a great unbundling of universities.

Take the elite MBA. I think it’s the scarcest product in the world. What I mean by scarce is global recognition and transformative value relative to its total market: presidents, 220 Fortune 500 CEOs, and so on. The total universe of full-time MBAs among the top 20 schools is about 8,000 people a year. So there’s massive excess demand. How do you offer pieces of that elite MBA to someone who is never going to be able to go to Wharton? Maybe I’m a single mother managing five Tiffany stores in Dallas. I make $110,000 a year. I don’t even get invited to the big offsite at headquarters in New York. And I’m just never going to get an MBA. It’s out of my reach. Maybe I got three years through college, but I didn’t graduate, although I’m great at what I do. I want the American dream. Are there supply chain courses from instructors at elite business schools that I can take? Are there courses I can take where I can get some sort of micro-certification? 

I think we’re about to see what happens with the internet when it comes into a sector, that unbundling. The key will be one, companies falling out of love with elite universities being the only on-ramp into their organizations, this ridiculous, drunken intoxication with luxury. The most important thing that has happened in higher ed in the last month was Tesla announcing that they’re going to start hiring more people without college degrees. And two, we’re going to need class traitors. Michael is a class traitor. My faculty would hate his guts. He’s saying, “all right, I want to educate a ton of people. I am about expanding admissions. And if ASU doesn’t resemble Hermes, that’s okay with me.” That’s what’s called public service.

The other thing we have to wrestle with is that state funding has been flat for the last 30 or 40 years, because, and I say this as a proud progressive, we’re seen as graduating wokesters, not warriors. Generally speaking, across our 50 states, 50% of the people who decide the budgets for state-funded schools are Republicans. And it’s difficult for them to decide to increase the funding for what I’ll call the woke machine. When one and a half percent of the faculty of elite universities identify as conservatives, we’re running up against a notion that universities are not a place for provocative thought. The people who fund these institutions don’t want to continue to fund an ideology or a dogma that they think is contrary to what they believe in. 

I think we’re going to see the great unbundling; the mother of all chins has fists of stones coming forward. If you think about disruption, it is essentially a function of whether you have raised prices faster than inflation with no underlying increase in productivity or outcomes. That literally defines American higher ed and tier-two schools. I thought COVID would be that first fist of stone. I’ve been wrong so far—it has only served to strengthen these problematic circumstances. But I’m hopeful about innovators like Sylvia and Michael as well as the unbundling.