Creative Destruction Coming to Higher Ed

Remember the movie Jaws? I’m thinking especially of the scene where you know that the shark is about to take a gigantic bite out of the helpless swimmer.

We may have a similar scene about to play not in theatres, but in real life. Corresponding to the helpless swimmer are the many colleges and universities that have neither strong reputations nor large endowments. And the shark? Online education.

It’s true that online education has been around for years without doing any noticeable damage to traditional bricks and mortar schools. There is reason to believe, however, that things are about to change.

Most students (and their families, and taxpayers) now spend $20,000 to $50,000 per year for college. In return, they get instruction by professors, lecturers, and grad students that is often indifferent. What if they could instead get better instruction for $1,200 per year?

Yes, you read that right—$1,200.

A new firm, StraighterLine ( ), offers courses students can take for only $99 per month: For that price, a student can take as many of StraighterLine’s courses as he wants and can progress through them as quickly as it suits him.

Maybe that sounds like one of those infamous diploma mill scams, but it’s genuine. In a recent article in Washington Monthly, Kevin Carey (policy director of Education Sector, a think tank in D.C.) wrote about the experience of one woman who wanted an affordable way of boosting her resume and improving her employability. Her name is Solvig and Carey interviewed her to find out what StraighterLine’s courses were like.

Carey writes,

Every morning she would sit down at her kitchen table and log on to a Web site where she could access course materials, read text, watch videos, listen to podcasts, work through problem sets, and take exams. Online study groups were available where she could collaborate with other students via listserv and instant messaging. StraighterLine courses were designed and overseen by professors with PhDs, and she was assigned a course adviser who was available by e-mail. And if Solvig got stuck and needed help, real live tutors were available at any time, day or night, just a mouse click away.

And, adding an exclamation point to her experience, her daughter was taking a math class at her community college that used exactly the same course materials Solvig had used in a StraighterLine. Of course, there were several marked differences. First, the community college class cost a lot more; second, her daughter had to adjust her schedule to fit class meeting times; third, the community college “just stands there” while students try to work through problems on their own.

Better quality, lower cost, greater convenience: sounds as though StraighterLine has invented the proverbial better mousetrap.

Inexpensive calculators did in the slide rule and email has put a huge dent in the volume of written letters. Is high-quality online instruction such as StraighterLine offers going to similarly revolutionize the market for higher education? Is traditional classroom teaching going to go the way of the Pony Express now that people can get high quality courses at a small fraction of the cost?

No, but there will almost certainly be a big shakeup in the higher education industry once this new competition catches on. Our top colleges and universities aren’t going away; a substantial number of our mid- to lower-tier schools probably will. The factor that will determine how widespread the “creative destruction” will be is this: how will employers react to educational work done online?

Professor Robert Martin argued in his recent Pope Center paper on higher ed costs, that college and university officials are primarily interested in improving the perceived prestige and reputation of their schools. Prestige and reputation help schools in various ways, among them that it helps their graduates land better jobs. Employers use school reputation of applicants as a proxy for hard-to-determine personal qualities like reliability and trainability. She got into Harvard and graduated, so she must be pretty good.

The reputation factor is a big hurdle for the growth of companies like StraighterLine. Their products may be excellent and affordable, but if the business world doesn’t recognize that, students will be spending their time and money for naught. Solvig didn’t take that math course just for the satisfaction of a better understanding of math. She took it because she hopes that some employer who is looking for people who are competent in math (and many can’t even handle very simple mathematical problems, as this report shows) will hire her because she is competent.

The question is whether they will recognize her StraighterLine credits as a good indicator of competence in math and other fields. StraighterLine has no reputation to speak of. What will it take for employers to start thinking, She passed StraighterLine’s statistics course, so she must be pretty good?

I don’t know exactly, but there are two forces that will push in that direction. First, StraighterLine and other online education firms have a very strong incentive to see that people in the business world find out about the quality of their programs. This is essentially the same problem that any new business faces—getting people to think well enough of it to try it.

Second, I suspect that it has become evident to many in the business world that the mere possession of a college degree doesn’t convey much reliable information about a person’s capabilities. Fifty years ago, it did, but no longer. With so many college graduates unable to read well, write well, and do basic math, business people are probably interested in better information sources. So business has an incentive, too—finding dependable ways of identifying people who won’t need additional training before they can become valuable workers.

If and when those connections are made, the result will be an exodus of students from many schools that are selling degrees but only paying lip service to education. A little bit of truly useful learning may be much more valuable than taking a lot of effortless classes.

Competition: let ‘er rip.