Recession hitting colleges - time to challenge some assumptions

The recession is hitting starting to hit colleges and universities hard. The NY Times profiles Reed College, in Oregon, which had to deny admission to some students because the college couldn't offer them enough financial aid. Officials there are hoping that this is a temporary setback:

Reed has put off drastic measures like spending more of its endowment, closing some departments or selling some real estate near campus. Instead, college officials are counting on the economy to turn around quickly

I think that is wishful thinking at best. Delusion seems to be the order of the day here. The problem is not that the economy is in a downturn. The problem is that the business model for elite liberals arts colleges is broken. It simply is no longer sustainable to charge people $50K a year for an education, and expect to be able to continue charging ever more. It's time to challenge some assumptions.

Consider some other industries with broken business models: American car companies, and newspapers. For years, the UAW demanded, and got, job security in its contracts with the Big Three. The "jobs bank" was part of that - workers were paid to sit around factories, instead of being fired. Sound familiar? Guaranteed job security is also what tenure is about. GM, Ford, and Chrysler have had trouble adapting to new economic realities because they did not have the flexibiilty to make the changes that they needed to. And they were forced to put the interests of workers ahead of the interests of customers. Is it in the best interest of customers of American car companies for auto workers to be able to retire after 30 years? No, it's not. Running a corporation always involves balancing the interests of employees and customers, but these kinds of demands made it impossible for the Big Three to try to fine-tune that balance. Same thing with their dealers. Instead of managing change gradually, the Big Three were forced to change very drastically and very suddenly, with disastrous results for thousands of employees who had demanded job security.

Colleges are going to face the same problem with tenure. There are conflicts between the interests of students and professors. But giving professors tenure makes balancing those interests very difficult, if not impossible, for colleges and universities. That has not mattered for a very long time, in part because a college education was so valuable that it we, as a society, could afford to cut colleges some slack. For many students, it didn't really matter what they studied - a college degree was a ticket to at least a solid, middle class existence. This was particularly true for many decades, even centuries, in this country, because having a college degree was rare enough that just having it gave a person a huge advantage in the marketplace. So many people could learn something esoteric and obscure, graduate from college with a useless degree, and still get a good job. That is becoming less and less possible.

Part of the reason is that it's now no longer rare or even unusual for Americans to go to college. It's now fairly common. That means that the advantages conferred on college graduates are not as great. Supply is now more equal to demand, so the value is not what it once was. Which means that we are going to have to think much more carefully about the value of a college education.

The other industry going through wrenching changes is the newspaper industry. The parallels between higher education and newspapers are obviously much closer than between car companies and the liberal arts. The products of both are primarily in the form of the written word. There are, of course, differences. Newspapers publish quickly and almost disposably, while college professors take a long time to write essays that are supposed to last. Colleges have small, captive audiences who pay huge amounts; newspapers have diverse, widespread audiences who pay very little or, in the case of their Websites, nothing.

But creation and dissemination of intellectual property is at core of each's value proposition. The processes by which intellectual property is created, stored, and distributed are, of course, undergoing radical change. Newspapers have not adapted well, and it shows. Colleges are different in large part because of the different timelines that defines each. Students stay in college for several years, but are then alumni for the rest of their lives. The feedback loop for newspapers is virtually instantaneous; the feedback loop for colleges lasts decades.

The challenge for newspapers is blindingly obvious; news is very easy to find and distribute, which makes it very cheap. The challenge for colleges and newspapers is much more obscure; it's not clear exactly how to replicate Harvard, which has been around for centuries. That's a fairly large barrier to entry for competitors.

The competition that colleges like Reed should be most worried about, however, is not going to come from other colleges. It is going to come from completely different sources. The NY Times used to compete with the Wall Street Journal and the Washington Post; now it competes with Talking Points Memo and other blogs. Reed's value proposition derives in large part from its reputation as a place where great ideas are discussed. Such a description, however, no longer applies in any kind of a unique or interesting way strictly to colleges and universities. Great ideas are being discussed in lots of places. Reed's competitors are not other colleges. Its competitors are Google, McKinsey, the NY Times, and Time Warner. As well as a million other companies delivering intellectual content.

The first step in solving a problem is acknowledging that it exists. Liberal arts colleges are far from taking even that basic step.

But no college president wants to be first to make major changes in the college experience; Reed, for example, is not abandoning plans for a new performing arts center. “If we’re going to change our ways, we’re really going to need to be pushed,” Mr. Diver said, referring to colleges generally. “It’s not going to well up from within.”

That's for damn sure. This is, in a sense, the silver lining of this deep recession; it is going to force colleges to start facing some unpleasant realities. For example, that their students are basically customers. This attitude, from Reed's president, is indicative of how much work needs to be done, how much old attitudes are in the way:

“The catering to consumer tastes — I keep trying to say, we are in the education business,” Mr. Diver said, describing the pressure to keep up with wealthier colleges and expressing a frustration rarely voiced publicly by college presidents. “The whole principle behind higher education is, we know something that you don’t. Therefore, we shouldn’t cater to them.”

I find that absurd. Yes, you know something that students don't. But they are paying you. Moreover, many of them are going into debt to pay you, which means that they are going to be paying you for years. Question for Mr. Diver: do you want your students to make donations when they are alumni? Then you should try to make sure that they are happy when they are students. Which means that you need to cater to them.

Time to challenge some assumptions.