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.