The Journey Continues: New Name, New People, and Pricing

Big News!

The CBL Exam is undergoing a make-over, and I'm super excited to share the news with you:

1) GF Education Group, Inc. is changing it's name to HigherNext, Inc. Why? As we get traction, hire new staff and develop new tools for different markets, we realize that we need a new corporate name to reflect our values and what we are all about. No matter who you are, where you study, and your background: our goal and mission is to offer you a "Higher Next."

2) We welcome John Brady to the fold as our new COO. John brings some amazing experience to the group and drastically improves our team - we went from a group of ambitious, but inexperienced education entrepreneurs with no standardized testing experience to having someone who has managed the largest and most influential exams in the world: the AP and SAT for the College Board. I'm super excited to have him aboard and he has already improved our operations, marketing and company.

3) A new website: As we progress, we realized that our website did not reflect our values or culture. We are here for our candidates and employers, but they live in different worlds and have very different needs. Phase one of this journey is the newly improved candidate website and portal: TheBusinessTest.com. Phase Two is for the employers of our candidates, stay tuned!

4) New Pricing: Over the past 12 months, we've worked our tails off to improve our technology and test administration to get to a point that was very affordable for all. Starting in February, a candidate can take our exam for $49 and get their knowledge and skills in front of any employer in the world. Compared to almost any other educational opportunity, we feel the ROI our product is pretty awesome.

5) A formal press release is forthcoming, but we've signed a major business development deal with a global employer branding firm - one that will catapult our consumer marketing, employer buy-in and overall reputation in the marketplace to new levels...stay tuned.

The firm is "all-In" on becoming the next standardized exam and continuing the journey towards a more meritocratic society and giving new opportunities for those currently locked out of the current system.

Upward and onward,
Guy

Some Thoughts on the ROI of College

Typically in news articles about going to college, many writers quote the long term income differential between high school and college graduates. These stats clearly indicate that going to college and graduating leads to higher average incomes over one's working life.

Here is the "normal" picture:
High School graduate average lifetime earnings: $30,627
College Graduate average lifetime earnings: $56,625

But this ignores some really big red flags in deciding whether to attend college, which is that 56% of those who enroll in a four year college will not graduate within 6 years.

Here are the stats from the census on "drop-outs" vs. College Grads, lifetime average earnings:
Drop Out Average Earnings (56% of college entrants): $32,296
College Graduate Average Earnings (44% of college entrants): $56,625
Weighted Average: $43,017

But don't forget, the college graduate just spent $40-80K and owes $25K in student loans on average.

There's more: Of the 44% who do graduated in the last 4-5 years:  "74.4 percent of college graduates under age 25 had jobs. Of this same demographic group, 45.9 percent had jobs that actually required a college degree. " (Source)


So a high school graduate that enrolls in college can expect:
Drop Out: 56% chance
College Graduate with No Job: 11% Chance
College Graduate with a "Non-college": 13% Chance
College Graduate with Legit Job: 20% Chance

You can run the numbers and throw in estimations for the 24% who don't get good jobs right out of graduating college, but in the end you have 80% of not making a "college salary", and you'l probably be closer to the $40K range + an initial 4-5 year time period where you burn around $80K.

Other factors to consider:
- These numbers take into account the past college graduates, not the future influx of graduates flooding the market today (the college enrollment rate is up to 70% of high school graduates now). So the $56K number skews higher, taking into account graduates from 70's and 80's.
- No one knows the long term effect on wages of these factors, but the long term effects of graduating in a recession supposedly lower lifetime earnings by 17.5% (Lisa Kahn, Yale)

New Grade Inflation Report

Lots of good data on grade inflation in this report (Where A Is Ordinary: The Evolution of American College and University Grading, 1940–2009 by Stuart Rojstaczer & Christopher Healy)

In 1940, 15% of grades given in college were A's and the majority of the grades given were C's, now the number tops 40%. 

How far are we from a "grade inflation adjusted average"

Roland Fryer: Culture over Resources in K-12 Education

Roland Fryer (MacArthur genius grant recipient and education scholar) recently crunched the numbers at 35 charter schools and came up with the following results:


Things that don't make a difference to math and reading results: class size, per-pupil spending, and the number of teachers with certifications or advanced degrees 


Things that do make a difference to math and reading results: teacher development, data-driven instruction, creating a culture focused on student achievement, and setting high academic expectations 


It seems like we are tracking and rating teaching, results and ranking schools on things that we can track easily and is scalable, but that does not always translate into the best data. Hopefully, someone can create an index or something to put his model to good use.

Higher Education's Next Big Move: No More Bachelor's Degrees

A lot has been written about the state of higher education - the ROI, costs, quality and over all allocation of resources in the typical four year university leaves a lot of room for improvement. I could link to a bunch of articles, but really there has been so much it's tough to par down a representative sample.

A lot of the people who really dig deep into the system come to the same conclusion: the top 5/10% of Universities will be able to maintain their supremacy/high prices, while the other 1,000's of colleges will be consolidated/merged/out of business and move mostly online.

At the same time, people have finally begun to notice that higher education institutions primarily focus their resources and talent in higher level courses: ie Calculus 101 at Harvard is probably taught by a TA, as at Western Louisiana State, with the student experience being pretty much the same. When you hit the "Good Will Hunting" level courses, that's when you get some Nobel laureate teaching the course.

All these trends lead to a similar conclusion: The branded "Higher Education" shouldn't really be about the basics, for anyone.  The basics fundamentals should be the "Associate Degree". Everyone who graduates college goes into this program with the intent on learning the general education requirements, as well as the basics of their own major/chosen field of study. At the end of your chosen path (online, community college, etc...), everyone should take SAT II Subject Tests/AP type tests to get into the next level of college, or join the workforce. 90% of colleges would offer these types of degrees and focus on costs and ROI on learning (ie higher test scores).

The next level of higher education should be a Master's degree. This is where you go to the big dog Universities and research, learn the advanced stuff and specialize. Since you aren't taking other courses (just the one's in your new major), I figure 2 to 2.5 years of intensive study should get you to a current "master's level" knowledge we now know (no summers off or only practical internships for credit as breaks). This includes law, business, etc... So we have a bunch old 22-24 year olds with real, hard skills and the same network as they had in the old our year college system. 2 years should be enough of a fun "residential college experience" to make up for the first few years.


A few firms innovating in the space:

Western Governors University is building out a competency based online university - meaning all the courses are geared towards existing certification exams.

Straighterline has build up a menu of cheap (around $99) courses that automatically transfer to higher education institutions - so you can get a bunch of credits out of the way and save a ton of cash in the process.

Altius is focused on a similar business model (cheap online community college, transfer credits to a four year school).

Good Post on Why Education Startups Do Not Succeed

Avichal Gang, founder of PrepMe, drops some knowledge in a post about Education and Start-ups. I found the post articulated a lot of lessons I have learned over the past year researching and running an education start-up.

When you look at the education tech space, a lot of chatter is about cool features, how awesome the software is and why it improves learning outcomes/solves problems. You rarely see a start-up in the space that claims, "this is the same thing, but we do it cheaper," because the eventual buyers are schools, colleges - not consumers.

The sales process does not jive with the "normal" seed stage value prop/advise of get traction, then start charging. It's a weird nebulous market, you get people (students or teachers) using the product, maybe even charge a few, then spend years trying to sell it to 1,000's of massive segmented bureaucratic entities (schools, districts and colleges) with unmotivated buyers. In the places where people do pay out of pocket (textbooks, test prep, tutoring) - you do see that value proposition, but those are actually pretty segmented and hard to crack markets.

But here's the problem, according to Avichal:

Most entrepreneurs in education build the wrong type of business, because entrepreneurs think of education as a quality problem. The average person thinks of it as a cost problem.

The VC view: Almost always what they are really saying is “consumer, Internet, online education in the Western world is ready for disruption. Everyone is online now and everyone gets an education, so clearly there are massive businesses to be built.” They probably aren’t talking about education in Asia because the companies in that space are started on the ground in Asia. They most likely aren’t selling to schools, districts, the government, or universities. VCs usually don’t like to invest in businesses that sell to the government until those businesses are big (at which point it’s really a private equity deal, not a venture capital deal).

He really digs deep, but that top sentence says it all. Only 15% of students will buy a prep course for the SATs - even though everyone knows it really matters what college you go to for better job opportunities (in actual, real life, not "theoretical college does not matter" terms).

For every new feature, cool piece of software and educational product - you better be ready to answer the question: "how do I sell this and am I ready for that process to take years while I give it away for free and all the competition catches up - for both K-12 and Higher Education." If you have a consumer product you actually want to sell direct, be realistic about your market size and value prop, it's not everyone in the world.

Great Commentary on STEM vs. Liberal Arts

There's a ton written about the movement to increase STEM majors and graduates in the country - but not much takes into account the incentives that college kids actually face.

Since the ROI of being a rock star engineer is pretty high (right out of college and otherwise), general economics suggest that there would be a rush on these majors - but there still is not. Smart kids are still taking liberal arts type majors like history, English, etc...

Kenneth Anderson at the Volokh Conspiracy has probably the best explanation I've read:

...if you are a smart but not brilliant student in STEM, you might tell yourself until you are blue in the face that you must study STEM to be employable and have real skills. But the reality is that you will flunk out or come close to it, or be lucky to get by with Cs. Moreover, at that level of performance, it is not clear that you are actually acquiring STEM skills, just at a C level compared to an A level. Pedagogically, it doesn’t work that way. The bottom end students wind up not really learning anything, because the class moves at a pace and in a way that they can’t keep up with, even to get a lesser grounding in it.

From the standpoint of a student who says, I don’t want to be an engineer or research chemist or computer scientist — I want to get a strong grounding in those fields, in a genuinely technical way — but I want to be a manager or someone with a non-technical job that requires interaction with the technical fields — how do I do that? At the top range of universities, the STEM departments simply don’t have a place for you.

The top universities have many reasons for grade inflation in liberal arts, but this fact counts among them. Undergraduates who realize that they cannot compete with global specialists in STEM, particularly at the top universities, opt for liberal arts subjects. They and the universities realize that GPA is all that matters, and unsurprisingly, GPAs rise.

So in other words - if I'm of average intelligence and better in verbal or math grade-wise, the ROI of me dipping my toe in organic chemistry just for kicks is really low - it would create problems when I apply to law or business school. I'm better off taking "History of Plants" for my science credit and getting an A vs. learning some hard science and getting a C-.

GPA, Majors and Recruiting

It's well established GPAs have been creeping up across all different types of schools.

But what about within majors at a specific school. Let's say you got 2 resumes from Cornell: one was 3.75 majoring in Human Ecology from Cornell and one was 3.75 majoring in Philosophy. To the untrained eye, they both seem like "Liberal Artsy" majors that should be about equatable in GPA terms.

Assuming you didn't care about the subject matter and just wanted to know how well they performed relative to their peers, who would you know how to hire?

Some revealing data has been published that might shed some light on the subject.

The percentage of classes in Human Ecology with a median grade of A- or better: 100%

The percentage of classes in Philosophy with a median grade of A- or better: 35.7%

So academically, the Human Ecology major could have ranked right in the median of their classes and the Philosophy major conceivably could be ranked in the top 10%, yet how would you know from looking at their resume?

The need for some standardization here is huge. Either do away with grades, reformulate via rankings or grade on a strict curve. There really should be standardized exit exams for every subject for every graduating college student in the nation, in addition to GPAs.

UNC's Online MBA

The WSJ recently chronicled the launch of UNC's online MBA - the first full-time all online MBA from a top 20 school.

Some things that stood out from the article:

• UNC officials say that admissions standards for the new program are just as high as for an on-campus M.B.A.
• On paper, the online M.B.A. will be indistinct from the brick-and-mortar degree earned by students
• 2tor invested more than $10 million in the program. The start-up will receive a share of the tuition UNC receives from students for the 10-year life of the UNC contract.

So with a more stringent admissions policy, the "signalling" of this program will be tested in the recruiting of its graduates. It's hard to believe the alumni network will adjust to interacting with online-only students, it seems like the online community will create its own network and build from there. I wonder what the percentage royalty 2tor got for building the program?

TheLadders Guarantee

Recently, TheLadders.com made waves with a new promotion: if you sign up for their expensive premium job searching service, and you don't find a job, they will refund you your money. We did something similar last year, offering a full refund if someone did not have a job after six months of taking the exam.

Of course, there are strings attached to the Ladders deal (you have to go through the program and complete all the tasks). We at the CBL think this is great and should be extended to career services offices all over the US.

Imagine if traditional college tuition was broken down into academic training and professional training.

Academic training is typical college: classes, dorms, labs, etc...

Professional training is career services: resume review, career advice, interview tips, etc...

Let's say the split is probably 95% academic, 5% career. So for a typical $30,000 a year program, you would allocate $1,500 allocated to career services. At the end of four years, if a student has gone to all the training seminars and advisory groups, and are not employed three months after graduation, they get a check for $6,000.

Seems like a good, market based solution to me.

New Start-Ups Tackle "Signaling"

In previous posts, we spoke about the emerging category of higher education & start-ups, and also recruiting & start-ups.

Sitting in between these two are an emerging group: signaling start-ups.

What's the thesis? Two big aspects of college are about:

• Learning
• Signalling how smart you are/how much you've learned.

As we have discussed previously, the "learning part" is being attacked in every which way: through cheap online schools, awesome adaptive learning technologies and other tools and software to mimic (or improve) the college learning experience.

So what about signalling? This is a much harder and bigger beast, given the higher education system is embedded in our psyches on how we rank and rate candidates.

Some start-ups in the news lately that are trying to tackle this through reputation based systems:

1) Smarterer.com just raised $1.25 million to "prove what you know in 60 seconds"

2) One of the Thiel Fellows named Dale Stephans is starting RadMatter to "Help people develop and demonstrate talent."

3) Jon Bischke is starting RG Labs, whose tagline is: "RG Labs was started with a simple premise: The most important decisions we make are decisions about people. And the Web is revolutionizing how we're making those decisions. We're building products that will change how people hire, form teams and start companies."

Obviously, we include ourselves in this category - but through a different approach - a standardized exam vs. an awesome reputation-based system where everyone is ranking each other on different criteria. Should be really interesting to see what emerges from this group and how it plays out in the recruiting world.

NYT: "A Decade Makes All the Difference"

The Economix blog in the NYT recently covered one of the overlooked metrics out there: the “under-employment rate” – the percentage of job-holders that get a job that do not require a college degree. In 2000, 81% of graduating seniors had jobs lined up, and 60% of those jobs required a college degree. Today (October 2010-March 2011), only 74.4% of college graduates have jobs and 45.9% have jobs that require a college degree.

On the wages front, the few who have gained “college labor” employment (28%) have had their pay increase, while “not college labor” pay has decreased – increasing the gap between the haves and the have nots dramatically, and consequently making “catching up” more difficult.

Stats are great, but what’s the lesson here?

We need to start re-evaluating schools in terms of how well they teach and place graduates via hard data – not surveys, brand or general experience of the degree. It is not fair to ask an 18 year old student to take on an inextinguishable debt load and not give him the data he needs to back up the investment.

Many have argued that there is an unquantifiable experience to going to college and experiencing the four years with your peers. No intelligent person would argue against that, but at the same time, we treat the product with kid gloves. We need to have hard data on what matters to our society and graduates.

In other words, as any economist will tell you – information is key to a functioning market. When someone buys a $200,000 Ferrari, it’s not just to get from point a to point b, they are paying for the lifestyle, experience, etc…BUT we give them all the data on the car and they can tell it’s not 10X better at its core function (driving from point A to point B) than a Dodge Neon. Why can’t we do the same for higher education?

College Graduates - 85% Moving Back Home

In the HuffintonPost - Amanda Fairbanks outlines some desolate news for the new class of entry-level job candidates.

Here are some interesting stats:

- 85 percent will return home because they can’t secure jobs that might give them more choices and more control over their lives.

- According to Andrew Sum, an economist at Northeastern University, about half, or 3.2 million, are “underutilized” -- meaning they’re unemployed, working part-time, or working a job outside of the college labor market, such as bar-tending or waiting tables.

- There's gonna be over a trillion dollars worth of student debt floating around relatively soon.

- Half a century ago, 77 percent of women and 65 percent of men had attained traditional markers of maturity by their 30th birthday: They had left home, finished school, gotten a job, married, and started a family. According to the U.S. Census Bureau, by 2000, less than half of 30-year-old women and just one-third of 30-year-old men had attained similar markers of adulthood.

- Graduates of 2009 were hit especially hard. A study conducted by the John J. Heldrich Center for Workforce Development at Rutgers indicates that 50 percent of 2009 graduates are either unemployed or working in jobs that don’t require a college degree.

Beyond the stats - and maybe more troubling - is the effect on the psyches of an entire generation of job seekers. The general optimism about life, careers, etc...is waning as the recession continues. Not having a job, getting laid off or transitioning is tough - but NOT EVER having a job is 10 times worse.

Of course, standing out to me was not the stats, but what happens after graduates return home: "Recently, after sending out dozens of resumes and cover letters, all of which went unanswered, Malik’s spirits plummeted. Even rejection feels better than no response at all, she thought to herself." It's not just the fact that no jobs are out there - it's that the system is not designed for the mis-match in supply and demand.

Economics 101: You Get What You Pay For

As many micro-economics 101 students have learned (probably on day 1 of class) economic policy is all about one core concept: "people respond to incentives." Combine this with the macro-economic philosophy of "we have scarce resources, let's allocate them efficiently" and you have as simple framework for analyzing how effective a policy is: are the goals of the policy in line with the effects of the policy.

As many are aware - for profit higher education is being attacked by the government (mainly Senator Harkin) for mis-leading their students, creating degree mills and extremely low retention, graduation and placement rates. Meanwhile, the government continues to push degree attainment as its measure of "success." (See Obama's goals of for 60% degree attainment by 2020). I think these two facts are kind of at odds with each other. Online and for profit education scale up, expanding the pool, then get dinged for not delivering high quality. basically, if you ask for degrees, you'll get degrees.

The combination of the stated goals for higher education and the student loan structure creates mis-aligned incentives for the sellers and the buyers of higher education. We have screwed up the incentive structure to make it a short term, transactional gain for the sellers, creating a system for the buyers to take out debt they will have trouble paying back. The house of cards falls down when the inherent gains from the asset (a degree or home) go down instead of up continually.

So what's the remedy? What if we re-defined higher education from a "degree" to a "learning outcome"? Meaning instead of saying 60% of our population get's degrees, we say 60% can do X. Then create a standardized test for X.

Tie loans, accreditation, etc.. to this number, at least a high portion. That way, a student can figure out on their own what is the best environment - Harvard, community college, online, etc...Higher education is not only about one aspect of learning, but it should be a major piece of how we measure our attainment vs solely the degree.

How do we know this will work? Because the only place that has something similar is the standardized testing prep industry. Investment dollars are being poured into awesome adaptive learning engines (Knewton), studying tools (Grockit) and a million other start-ups. Even though it is a smaller market than general K-12 or higher ed, it is quantifiable - if I invent a better way to learn GRE words, the scores of my candidates will increase and I will make more money and build better tools. There is no way to really measure how fast, effectively and well we learn in higher education.

Some Early Standardized Exams

The history of testing is quite interesting - PBS has a nice timeline of the rise of the SAT in prominence to becoming the standard that it is today here.

The College Board's first college entrance examinations consisted of essay examinations in English, French, German, Latin, Greek, history, mathematics, chemistry, and physics.

Here is Harvard's entrance exam from 1899. Subjects include: Latin, Greek, History and Geography, Arithmetic, Algebra and Plane Geometry. 

NYT: The Default Major: Skating Through B-School

The New York Times recently ran a piece called: The Default Major: Skating Through B-School. basically, it's calling out all the default business majors and their general apathy, laziness and lack of knowledge relative to years past.

Specifically, this is what they are calling out:

Intelligence: And when business students take the GMAT, the entry examination for M.B.A. programs, they score lower than students in every other major.

Group Projects: While some group projects are genuinely challenging, the consensus among students and professors is that they are one of the elements of business that make it easy to skate through college.

The ease of classes: One senior accounting major at Radford, who asked not to be named so as not to damage his job prospects, says he goes to class only to take tests or give presentations.

The weakness of management and marketing: In contrast to finance, she says, the marketing final she took earlier in the week consisted mostly of multiple-choice questions that had already appeared on previous tests this quarter. For the management final, students could bring a cheat sheet. Ms. Berry’s sheet, in tiny multicolored script, is a thing of beauty: the five-factor model of personality. Bounded rationality. Anchoring bias. Distributive versus procedural theories of fairness.

Interesting critiques, but with any article summarizing a study you don't have the underlying data, you want to question the results. First, the GMAT scores - are these controlled by school (meaning a history major at school X outscored a business major at school Y)? If not, what about SAT score? Are schools that don't have business majors are usually harder to get into, ie biased towards students with higher GMAT scores? 

Clayton Christenson and "Disrupting College"

MBA students around the US are almost universally exposed to 2 professors.

(1) Michael Porter’s 5 Forces (2) Clayton Christenson “Disruptive Model of Innovation”

Christenson and co-author Michael Horn recently released a report entitled “Disrupting College.”

Here’s a key piece:

“What the theory of disruptive innovation suggests is that the business model of many traditional colleges and universities is broken. Their collapse is so fundamental that it cannot be stanched by improving the financial performance of endowment investments, tapping wealthy alumni donors more effectively, or collecting more tax dollars from the public. There needs to be a new model. The only question is whether traditional universities will undertake this replacement themselves, or whether community colleges, for-profit universities, and other entrant organizations aggressively using online learning will do it instead—and ultimately grow to replace many of today’s traditional institutions.

He states: “The problem is that we are now asking them to do something for which they were not built. Traditional universities were not designed to address a metric of quality around effectively serving all students around their distinct needs and desired jobs outside of the academy, no matter their incoming academic achievement. Asking universities to do this represents a seismic shift in how society, broadly speaking, has judged high quality—moving away from a focus on research and knowledge creation and instead moving toward a focus on learning and knowledge proliferation.”

In a nutshell, Christenson’s model of disruption states the following: incumbents cannot innovate on their business model because the uncertainty of the adoption of a new innovation is on an “S-Curve”. When a disruptor is one the flat part of the “S”, incumbents are unconcerned. Then innovation hits the steep part of the “S” and it’s too late, the incumbent gets left in the dust by the nimble start-up or whatever.

Christensen outlines what many have been saying on the fringes for a while: the current model of higher education is broken. It focuses on the wrong things: research over teaching, degrees over learning outcomes, resources of the university while paying no attention to the job outcomes of its graduates. The only thing that was uncertain is where online learning (which he equates to learning outcomes vs. degree outcomes) education was fitting into the "substitution curve" and how fast it was going to disrupt the system.

Up until now, it was tough to see where on the “S-Curve” online education was – we knew it was growing, but was it really fundamentally disrupting higher education (and conversely, their ability to charge 10% more every year in tuition?). Graphing out online education adoption (a limited sample, but you catch the drift), one can see that we are on our way:

The first brick through the window of the ivory tower of higher education was the online schools that were laser focused on one message: “getting you a job” and targeting older students by offering convenient class times – basically ignoring the socialization aspect of college. This has allowed them to “re-design the factory” – a streamlined approach vs. the jumble of a traditional university that has 3 competing business models – “research, organized as a solution shop model; teaching, which is a value-adding process activity; and facilitated networks, within which students work to help each other succeed and have fun.”

Interesting stuff.

Big News Targets Education - But in Different Ways

It's no secret that "big news" needs to diversify out of their core product: print - everyone knows the subscription base + ad sales have declined over the years for the traditional giants of print media. Not diversifying leads to fire sales (see Businessweek and Newsweek for recent examples) or outright bankruptcies (see 100's of magazines in the last year).

In my opinion, the options for a big branded print publication:

1) Adapt traditional news product to new media world

2) Leverage media brand and installed base and diversify offering

3) Take your cash or leverage your business and buy some other business that makes money

#1 - The economics don't really make sense - even for the very successful NYT.com (pre pay-wall), digital subscription revenue was only 28% of print ad revenue, and circulation revenue totaled 43% of total revenue. Social media strategies are tough to build a case around as well.

#3 - What's a recent example of a Big News firm buying up a dynamic growing company successfully?

#2 - Among other things, some of these old line media firms have decided to dip their toe in online education - which is smart as they see an industry in the midst of disruption, making money, and can leverage their brand in the right way.

NY Times:http://www.nytimesknownow.com/index.php/fdu-nytimes/

Strategy: Partner with mid-tier colleges and co-brand their course within the "NYT Knowledge Network." Really a lead gen network and advertising play in my opinion.

The Economist Education: http://www.economisteducation.com/

Strategy: Build out proprietary content and target managers who are looking to add both knowledge and credentials to their resume.

NBC: http://www.nbclearn.com/portal/site/learn

Strategy: Take their own videos and sell them on a subscription basis as a supplement to other learning (K-12, higher education, integrates with Blackboard)
Bloomberg: https://www.bloomberginstitute.com/bat/start/

Strategy: Build an standardized high finance exam to filter candidates in the investment banking/financial services world.

Obviously, we at the CBL Exam like the Bloomberg business model best, but it will be interesting to see if any of these companies can execute - or if they choose to go another route, an outright acquisition of for-profit education firm.

It worked out pretty well for Washington Post:

Edit: Conde Nast just opened up a fashion college

Peter Thiel: Higher Education

The "higher education" bubble proponents have a new voice, and it is a big one: Peter Thiel

Techcrunch released an synopsis from an interview by Peter Thiel and his views on higher education:

But Thiel’s issues with education run even deeper. He thinks it’s fundamentally wrong for a society to pin people’s best hope for a better life on something that is by definition exclusionary. “If Harvard were really the best education, if it makes that much of a difference, why not franchise it so more people can attend? Why not create 100 Harvard affiliates?” he says. “It’s something about the scarcity and the status. In education your value depends on other people failing. Whenever Darwinism is invoked it’s usually a justification for doing something mean. It’s a way to ignore that people are falling through the cracks, because you pretend that if they could just go to Harvard, they’d be fine. Maybe that’s not true.”

Peter is building a program that pays college students $100K to drop out of school and start companies. While awesome in some respects - it's not a truly scalable solution, but is doing something no one has whispered in years - creating an alternative option to an expensive degree.

Prediction: Ideas like this will be popping up more and more (see some evidence already). Mark it down, higher education is being attacked from all sides, and now the movement has a powerful new face.

Bubbles and Investing

Peter Thiel recently made headlines with his prognosis and interview about higher education being in a bubble and that it was ripe for disruption (here is the original article, a rebuttal and my two cents). So it seems like we are always in a bubble of some sort - even with all the information tools in the world, there always seems to be someone claiming that prices are misaligned with proper valuations. But I think a more interesting question is: what does that mean for me?

The two most glaring recent examples of bubbles are:

The Tech Bubble (1999-2000), here's the NASDAQ:

And the Real Estate Bubble (2008) - [Case-Shiller]

How do you know you are in a bubble? I think a good recipe is as follows:

1) Your graph is spiking upwards and to the right

2) Information about the present or future is unclear (there's no fundamental reason for the spike)

But, how does an individual investor make money off a bubble? It's pretty tough. In the tech bubble case, it was easier - short the high flying tech IPOs that came out during the boom times. Even then, most retail investors don't like shorting and have trouble with the concept of market timing (and withstanding huge upswings before crashes). In real estate, you could short the home-builders, but the real money was made in underwriting credit default swaps - which seems like 10 people in the US figured out and could actually fund the proposition.

But how do you "short" higher education? You can't really hedge a downfall in traditional higher education by investing in the for-profit sector because of the regulatory stuff going on (see Eisman from the "Big Short" presentation on the subject here) , and can't really "bet" on a University losing it's stature, although I guess you could bet someone privately that tuition will go down in real terms or something like that.

I'm betting on the trend by creating a tool to disaggregate "learning outcomes" from "college degrees." A degree represents socialization, maturity and yes, learning - but we rank the "learning outcomes" by measuring the resources, research and selectivity of the college one attends - vs. actually what and how much they learned and absorbed. (see my commentary on rankings: here).

CBL Prep Books Now Free

One of the biggest gripes from the college student population is the expense of textbooks. The story is relatively simple: textbook publishers tweak old versions of their textbooks every year and keep prices really high. Bookstores (i.e. Universities) profit from the sales of these books, and thus have an incentive to keep prices high - even in the face of increased protest from student groups. Students get miffed and feel they are being exploited, considering they have paid tuition and don't want to spend an extra $1,000+ on books per semester.

Without going too far into it - the internet is the obvious forum for this process to be disaggregated and attacked. Kno, Inkling and Coursesmart are all addressing this issue by delivering cool content through tablet computers and making it cheaper because they avoid the printing+delivery+inventory costs. Chegg and Bookrenter are also players here, renting textbooks (which is really a fast way to avoid the "buy and return" game).

When we launched the CBL Exam, many students kept asking us, "Are there prep books available?" We scoured the net, talked to publishers and found that we would be in the same category - offering expensive books while there were free options online elsewhere to learn our competencies.

To address this growing need - we are offering all of our study materials for free. Now a student has multiple places to learn: in school, via online resources, and via our own prep books. Anyone can go to our website and download our books free of charge. In the next few months, we will have enhanced offerings with video lectures and quizzes to help you study.

To access our free study materials, click here.

Metrics are the Problem - Not "Hiring Philosophy"

The blogosphere is buzzing with the debate between liberal arts vs. technical majors, and which type of candidate is the best to hire. What's also cool is that has kind of become a debate between Bill Gates (Engineers) and Steve Jobs (Liberal Arts).

Here is the NYT "Room for Debate" Commentary on the Series.

Here is an HBR article outlining the case for liberal arts majors.

One side of the debate: liberal arts folks are the "creative innovators", not robot automotons that can only do rote, monkey-like tasks.

Other side: That's great - while the rest of the world pumps out engineers by the millions who can actually build things, we are building a nation of poets versed in Chaucer, but can't build a wooden table.

So who is right?

As with most debatable/interesting questions, both ideas are "right". Creativity and innovation can be produced by both liberal arts majors and pure engineers, and liberal arts majors can usually be taught the skills that are necessary to do the tasks that technical majors can achieve.

One issue that is being ignored is the operational link (meaning the actual sourcing and recruitment) between these two candidate types and recruiting. The HBR article talks about the "big consulting firms" hiring top liberal arts majors. The problem is, this strategy only works at the very high end of the spectrum - Harvard/Ivy League can afford to churn out liberal arts majors who are just assumed to be "smart," but this breaks down when you get to schools outside the elite realm: not because the students are less capable, but because firms cannot assume this without expensive screening. So at this level of recruiting emphasizes vocational and technical skills (not completely, just relative to the elite schools).

Many business owners will tell you they don't care about majors, schools, backgrounds as long a candidate has a "good head on their shoulders." This is really not true - the initial HR resume/criteria screen is based on those metrics - so they actually do matter. It's not that that companies want to hire based on "academics" vs. "well roundedness" - but this is the data they are presented before they can travel to campuses to interview candidates. In other words, companies would love to really inspect a candidate's well-rounded workplace personality, but it gets really expensive. Until there is a scalable way to measure both the hard skills and soft skills companies care about - the system will remain the same.

So what's the solution? Everyone seems to have vested interest in "assuming away" book-smarts and keying in on "creativity," disassociating learning outcomes from inconsistent schools, majors and GPAs is a start.

Breaking Down Start-Ups and the World of Higher Ed

As we have blogged about before, the higher education market is one that is ripe for disruption.

Higher Education 1.0 has lasted for about 200 years and has been an awesome business. In what other industry has the pool of customers expanded almost every year, and, as volume increased, prices have vastly outpaced inflation for so long?

NUMBER OF BACHELORS DEGREES CONFERRED IN US:

So where's the disruption?

One of the first businesses to really monetize on the internet's vast global reach was online (many times with offline campuses), for-profit schools that built a system for adult learners and part-time students. As recently revealed to general public through a ton of bad press, much of this growth was driven by government grants & subsidies - but they still rocked it for about ten years.

Here is some data on the expansion of online learning:

Now we are experiencing an influx of companies attacking the space - through different means. I like the way Yury Lifshits on Mashable breaks it down into these categories:

New Institutions
Learning Management companies
Online Content
Networks and Marketplaces
Live Training and Tutoring
Learner Tools
Collaborative Learning
Funding and Payments
Hardware for Education

All of these categories have good, funded start-ups focusing on the space, but in different ways.

Basically, someone can attack the market in one of three ways:

•Cost (Delivering same product more cheaply)

•Efficiency (Building software to make education process more efficient)

•Product (Building a better product than the current offerings)

Just for kicks, here's a matrix of three categories and examples of companies we feel fall into those categories.

None of these really address one fundamental problem - what to do after you have delivered this awesome new content/taught the student better/cheaper, etc...? For the most part, they exist within the framework of higher ed 1.0.; augmenting the old business of delivering education in better and more efficient ways to the expanding student pool, which is great, but does not address one aspect of the business - how to measure the better learning outcomes derived from these new companies.

Of course - one "learning outcomes" focused industry is test-prep, so you see very successful companies and start-ups attacking that space (and advertised metrics for their performance), which translates to massive investment dollars, innovation and resources to attack that specific space.

Where does the CBL Exam fit into this group? Allowing students to demonstrate their learning outcomes to top employers around the globe in way that is consistent across all these different delivery mechanisms. That way - all these start-ups can have that metric to guide their outcomes. If we create the standardized test to a typical, broad college curriculum, it opens up a whole new world for ranking, and critiquing not only students - but the education they receive.

Breaking Down Start-Ups and the World of Recruiting

It seems that 2011 will see a lot of start-ups in the recruiting field pop-up, attacking each step of of the recruiting eco-system. I think a lot of start-ups are trying to solve each step of a traditionally inefficient process, while duplicating what happens offline anyway (referrals, info gathering, etc...)

I did a quick scan of Quora.com (check it out if you have not yet), and came across this question: What are the most interesting startups in the recruiting and hiring space?

From the companies mentioned there, I would break the market down like this:

Problem Trying to Solve: Company

Information: Glassdoor

Networking: Brazencareerist

Matching: Roundpeg

Screening: CBL Exam =-)

Interviewing: Sayhired

Referrals: MatchFWD

Employer branding: KODA.us

Hiring/applicant tracking: Jobvite

It's cool to see an inefficient market be attacked on so many levels - as the distribution of job postings was disaggregated from the newspaper business by Monster, Hotjobs and Careerbuilder (and 100's of other awesome niche websites) in the past - the actual communication of a job's listing and someone indicating interest in that job is basically saturated. These new firms are a kind of job searching 2.0.

As new channels open up (Facebook, LinkedIn, Twitter) there is definite "data exhaust" problem - a job opportunity must be curated, managed and optimized to get the best solution (on both sides). In my opinion there is a challenge here: start-ups that depend on volume of candidates (and postings) to serve corporations must grow in a way that controls for quality with volume- or risk being muddled by players on both sides.

Unemployment and Entry Level Hiring

Since the recession has began, various publications have written stories about how entry level recruits are handling the recession and how they have had to adjust their plans by taking part-time internships, unpaid work, or volunteering until the economy picks up and employers begin hiring again.

Even as the economy starts to turn the corner in its long recovery, data unfortunately suggests even the recent gains in employment are focused on more experienced recruits.

Here are some tidbits from various reports released by research firms around the country over the past few years.

From Michigan State:

This is from Brookings:

And finally, here is the unemployment rate for recent college graduates from the BLS:

So what is the bottom line? Basically, as the economy heats up and the economy turns - jobs will start to come - but will start to increase first at the experienced hire level. This makes getting that finding that first job all the more important - and increase your earning potential in the later years of your career (as there are so few entry level hires right now - the 2/3 year experienced hires at full time jobs will also be valued).

Forbes Magazine: Universities On The Brink

Forbes magazine just posted the latest article on the "education bubble":

Here are some tidbits:

"But over the past two decades the costs of university education--tuition, room, board and fees--have increased at a rate six times greater than the increase in the average earnings of college graduates. And in the past decade college graduates' earnings have actually fallen. The value proposition is on a downward trajectory."

"Where is all the tuition money going? Universities would reasonably argue that they are spending their funds to increase their attractiveness to students. If you've visited college campuses recently, you'll have noticed new dormitories, food courts, athletic centers, high-tech classroom buildings or laboratories. The ranking of universities over the past 25 years has created a facilities arms race. And those physical amenities do affect students' enrollment decisions. Another phenomenon affecting rising costs is the perceived need to attract star scholars with attractive salaries, research support (including laboratory space), and light teaching loads--all because star scholars also affect rankings favorably."

Some Facts from the article:

- Over the past 14 years the average debt for a graduating college student has doubled.

- The number of graduates in debt increased by 27% over just the past five years. And, not surprisingly, the default rate has grown each year.

- In June of last year student loan debt reached $830 billion, surpassing credit card debt in America.

Louis Lataif should know a thing or two about higher education, as he was a dean at BU and worked at Ford. However, his solutions are stop-gaps: small measure like cutting down summer breaks does nothing to fundamentally shift the core system that has developed -> universities spend more money on research, facilities and professors, and less on learning and teaching of undergraduate students. The only way to shift this to a lower cost model is to disaggregate "hard knowledge" from the "college experience" and independently value (and price) both.

An Open Message to Rick Perry (Governor of Texas)

"Today, I’m challenging our institutions of higher education to develop bachelor’s degrees that cost no more than $10,000, including textbooks."

Rick Perry's remark at his "State of the State" has sparked an online debate from educators world-wide: Check out some of the conversation at the Times Higher Education.

A representative response from the article:

"If so, Texas’ higher-education institutions will have to come up with something nobody else has tried, says Jane Wellman, executive director of the Delta Project, which focuses on costs and productivity in higher education. Even the most efficient online colleges – for-profit companies, which have the advantage of highly centralised governance structures – cannot match that $10,000 end-to-end sticker price, she says."

Jane Wellman is right - the traditional delivery model of education will have trouble matching that price (even online). Let's say they can hit that number via ultra-cheap online options: a new problem emerges in terms of quality control and how to handle an influx of new graduates and their transition to the working world.

Here is my "slightly-biased" solution: Texas should sponsor the CBL exam (and other credentialing programs) for the students who want to get into the professional world. The model for the credentialing programs are a much more scalable way to address the Governor's problem: It's cheaper (we charge $250) and addresses directly the quality problem: a student can study and learn by any means necessary (from a school or online with free resources), and still be judged on the information absorbed vs. classes attended.

Trying to take a product that costs $40K-250K currently and challenging it to be $10K is like asking the car companies to build a $2,000 car. Instead of taking on a vast embedded system, go outside the system and come up with a whole new idea.

What's Missing from Rankings

A lot has been written about the way undergraduate institutions are ranked. Although there is a prevailing view that "rankings" don't matter, that's not really realistic. Students, parents (especially) and employers all reference rankings, especially for schools outside their immediate knowledge.

Here is how the current ranking system breaks down by UsNews (the big player here):

Undergraduate academic reputation (weighting: 22.5% for National Universities and National Liberal Arts Colleges; 25% for Regional Universities and Regional Colleges)

Graduation and Freshman retention (20% for the National Universities and National Liberal Arts Colleges and 25% for Regional Universities and Regional Colleges)

Faculty resources (20%)

Student selectivity (15%)

Financial resources (10%)

Graduation rate performance (7.5%)

Alumni giving rate (5%)

Here's a summary of what students care about from the NACE (national association of college employers):

Top reasons noted as very important in selecting college attended

Graduates get good jobs (56.5%)

The cost of attending (41.6%)

A visit to the campus (41.4%)

Wanted to go to a school about the size of this college (39.8%)

Graduates gain admission to top graduate/professional schools (34.6%)

Of course, one cannot generalize objective measures such as "school size" in a ranking, so let's just focus on the points that can be ranked:

Graduates get good jobs: This statistic is not present in the UsNews rankings. I suspect because most of the info is self reported, it is tougher to track this piece. Recently, law schools were called out for gaming their stats with this piece of info.

The cost of attending: I addressed this in an earlier post - but there should be some ROI measure related to salaries earned over time

What both lists ignore: Learning

Why is it assumed everyone who goes to every college has attained the same knowledge? I know the coursework is relatively consistent across schools - and teaching is better at some than others. But the rankings above focus on research (faculty resources) over teaching (embedded in "Undergraduate academic reputation"). With high schools, there are AP exams, SAT II's and other measures to see how well a certain teacher has taught over time and how much is absorbed. It's time we implement some national standards here and truly try and measure how much a graduate learns. The real question is - would colleges be willing to embrace this concept?