Deconstructing Education

Muslim School for Girls - Istanbul

Muslim School for Girls – Istanbul

DSI Global View White Paper

Richard L. Wottrich, CEO & Senior Consultant

Atlanta USA

“I cannot teach anybody anything. I can only make them think” ― Socrates 

As a graduate of Dartmouth College I remember well a certain professor who inspired me to think about ideas. Years later in Istanbul I took the picture above at the entrance to a Muslim school for girls. One marvels at the gulf between the two institutions – and the similarities. 

Roughly one in four adults worldwide worked full-time for an employer in 2013 – 26% of the estimated global workforce of 3.4 billion workers (Gallup’s Payroll to Population [P2P] rate). This figure has remained virtually unchanged for five years, while our global population grew by 300 million. Meanwhile over one billion people toil in subsistence agriculture, while according to the politically correct United Nations World Food Programme over 800 million people “do not have enough food to lead a healthy active life” – sometimes referred to as starving to death.

Nearly three billion people have access to the Internet for the information flow and market access it provides. In 2015 perhaps 2 billion humans will own a smart phone. These factoids epitomize unprecedented trends in humankind’s technological progress today, while highlighting the trinity of Education, Innovation and Productivity. Of these Education must ultimately be the predominant engine of 21st century growth and prosperity.

Nevertheless with over fifty percent of humanity under age 30, only 150 million students are enrolled globally in institutions of higher learning. Half of these students are in China and India and nearly all student enrollment growth occurs in these two countries. Something is out of whack.

Paradoxically, higher education today is still modeled after a centuries-old monastic tradition of exclusionary practices that myopically shower enormous benefits on an exceptionally privileged few. The top ten higher learning institutions in the U.S. possess one-third of all endowments and the top 40 institutions control two-thirds of endowments.

From the Sublime – Harvard Tax-free Hedge Fund

The world’s largest endowment fund at Harvard University is valued at $36.4 billion. Harvard earned a 15.4% return on the fund in 2014. Harvard’s endowment earnings alone would rank it among the top university endowments globally. In 2014 Harvard sent admission notifications to just 2,023 students, 5.9 percent of its applicant pool of 34,295. This is an infinitesimal sliver of humanity’s 7.2 billion souls.

Harvard reports that it spent roughly $166 million last year providing needs-based tuition assistance to its 6,400 undergraduates. Its 1,214 full faculty members earned $274,000 on average last year, or approximately $332 million.  Undergraduate costs run $60,659 for tuition, room, board. In fact Harvard spent just $1.5 billion of its endowment fund last year – representing four percent of the total fund and only a bit over one fourth of its 2014 endowment earnings. This has led some observers to quip that Harvard is, in essence, “a tax-free hedge fund.”

To the Ridiculous – Chicago Public School System 

In stark contrast, public school systems across the country are awash in debt and deficit spending. For the 2013-14 school year, the Chicago Public Schools (CPS) – the third largest school system in the nation – said its five-year graduation rate for students was just 65 percent, which they consider to be a good trend.  According to the Prairie State Achievement Examination for 11th-graders, only about 25 percent of last year’s CPS class was considered “college-ready.” The CPS student count in the system has been declining each year to 374,000, but the teacher population of 22,519 and the CPS support and administrative staff of 12,573 has failed to shrink proportionally, while CPS healthcare and pension obligations grow ever larger.

Average CPS salaries for 2012-2014 were $74,839 for teachers and $120,659 for administrators. This is in contrast to the city’s median household income (which includes all household earners) of $46,877, and to Chicago’s median per capita income of $27,148. The teachers’ pension deficit is pushing $1 billion and in 2012 CPS reported a budget of $5.11 billion, while facing a $1.1 billion budget deficit. There is no private business model on earth that would suffer these poor results. CPS is a just a heartbeat away from bankruptcy.

Traditional Education’s Failure 

Available data suggests that roughly 150 million students worldwide attend traditional colleges and universities – two percent of humanity. But half the developing world’s population is under age 30, and over 133 million babies are born every year. The vast majority of them are in developing countries with the highest population growth rates, where good jobs are scarce.  Doing the math, there are roughly 1.5 billion humans aged 18-30 who desperately want a good education, while the traditional higher education model reaches barely ten percent of them.

Distributed Learning 

To counter perceptions of elitism and criticism of tenure, champions of higher education have suggested that the Internet will transform learning, producing digital campuses creating “Distributed Learning.”  The high priests in these temples should exercise great care in their prognostications: implicitly they are assuming that they – entrenched administrations and tenured professors – will drive and control the digital transformation they envision.

Not so fast, says an Internet community that holds no special brief for endowed chairs but which instead drives innovations that break down all closed business models. Think Kodak, the Post Office, taxis, the music business and newspapers, for starters. Higher education is just another candidate for Internet disruption, deconstruction and transformation.

This transformation has already commenced, with twenty-five colleges closing over the last decade, and another 40 acquired by larger schools or merged. The latest college to go down is Sweet Briar College in Virginia. Sweet Briar is/was a 114-year-old, all-female liberal arts school with a beautiful 3,000-acre campus near the Blue Ridge Mountains. Tuition at Sweet Briar is $45,405 serving just 560 undergraduates.

“The deconstruction of higher education is well underway.” – Richard Wottrich, 2010


The Alfred P. Sloan Foundation 2012 Survey of Online Learning, projects that 6.7 million students will participate in online learning (e-learning) at US higher education institutions in 2016. Meanwhile, Florida Virtual School, which is technically a Florida school district, enrolls over 200,000 students across Florida and the world. The vast majority are part time, taking an average of just one course. But another 200,000 K-12 students are studying online full-time, most at the high school level, in at least 33 states – out of roughly 55 million U.S. K-12 students (including 5 million home schooled students).

In general, private companies – such as K12, Inc. (NYSE:LRN) – rather than the nation’s universities – are leading the Internet’s transformation of the higher education market.  The New York Times Company’s Epsilen, LLC, is another such company.  This online education firm provides services to the Texas Virtual School Network.

SSI Investments II Limited – parent company of SkillSoft Limited and subsidiaries SkillSoft Corporation and SkillSoft Ireland Limited – is another leader in online education. SkillSoft is a leading Software as a Service (SaaS) provider of on-demand training and e-learning solutions for global enterprises, government and education agencies, and small to medium-sized businesses.

The worldwide market for e-learning has grown from $35.6 billion in 2011, according to Docebo in a March 2014 report, to $56.2 billion in 2014, and it’s going to double in 2015. Inflows are estimated at $6 billion from private equity groups over the past five years – driving the education deconstruction business model, funding start-up dot-com entrepreneurs, for-profit spin-off ventures, and university e-learning ventures.

Where the Rubber Meets the Road

Entrenched academic establishment opposition suggests that e-learning is a solution in search of a problem. They might visit with Michael Levy, CEO of ARPAC, a packaging machinery manufacturer located near Chicago’s O’Hare Airport. ARPAC is well-known globally for high quality machines that shrink-wrap products for shipping  – from bottled water to storm doors. Levy employs scores of top-level engineers, most of whom hail from Russia and Eastern Europe. ARPAC has immediate openings for a dozen engineers at salaries of $70,000 plus benefits. It cannot find them, let alone hire them.

In a speech I delivered on April 15, at the United States – Mexico Chamber of Commerce  conference in Chicago USA, the exploding manufacturing base in Mexico was examined. Mexico is poised to become the number one exporter of autos into the U.S. in 2016, supplanting Japan and Canada. Direct foreign investment in Mexico has risen from $42 billion (641 billion pesos) in 2011-2012 to $66 billion (1 trillion pesos) in 2013-2014, an increase of 36 percent. But in workshop sessions during the conference the number one concern voiced by virtually every participating executive was the lack of skilled workers. The problem is pronounced not just in Mexico, but also in the U.S. where public school systems are not addressing skilled labor programs.

Caterpillar CEO Doug Oberhelman, based in Peoria, IL, bluntly summarized the issue for Crain’s Chicago Business a few years ago: “We cannot find qualified hourly people, and, for that matter, many technical, engineering services technicians, and even welders, and it is hurting our manufacturing base in the United States. The education system in the United States basically has failed them, and we have to retrain every person we hire.” Oberhelman and Levy are being failed by the entrenched “bricks and mortar” educational system.

When Caterpillar – and virtually every other major and middle market US corporation – cannot find educated, knowledgeable workers, they move these jobs elsewhere.  Yet, our most highly-respected educational institutions’ relative non-response to this critical issue – in their continuing determination to ration the infinite wealth of education to the most highly-selective nano-slivers of our global population – risks their eventual and possibly irreversible obsolescence when confronted by the Internet’s 24/7 avowed dissemination of the gathered knowledge of all human history to 3 billion wired world citizens.

If an engineer can properly integrate GPS positioning functionalities in a Caterpillar 450E Backhoe Loader so that a gas line is laid exactly as surveyed, CEO Oberhelman will care very little what campus – or series of websites – that student engineer attended in achieving the education required to perform.

Some universities are developing distributed learning platforms. M.I.T. has achieved some success via OpenCourseWare lecture videos (2,000+ courses complete with lecture notes, videos, exams and solutions that have been posted on M.I.T.’s website and via Apple’s iTunes U). These are referred to as Massive Open Online Courses (MOOCs) and they appeal to tenured professors in direct proportion to their own personal involvement in “staring” in MOOCs and profiting from that role. Yet the free, and freely-available, OpenCourseWare platform begs the question: Can a system that demands in-person matriculation at M.I.T. at a $56,000-a-year tuition, room and board, after-taxes, compete with an online education M.I.T. is making available to all at no charge?

Nor is distributed learning the exclusive domain of centers of higher education. KhanAcademy, a website endorsed by Bill Gates, features more than 2,400 10-20 minute videos, each with a blackboard-like background, explaining key concepts in such academic disciplines as mathematics, physics, finance and history. More interestingly, teachers have begun using these videos in the classroom to complement or even substitute for established curricula.  Have such teachers brought a proverbial Trojan Horse into their hallowed halls?  Quite possibly.  Is e-learning blurring the meaning and delivery of education and the Socratic Method?  Most definitely.

Such sites as Wolfram Alpha deliver knowledge that is essentially devoid of human interaction.  Wolfram Alpha’s powerful algorithm search portal enables visitors to compare and contrast strings of concepts and algorithms in a unique fashion. A visitor who types in, “China Military versus US Military,” for example, immediately would receive sufficient requisite information to write a critical essay. What would Socrates say?  Perhaps more to the point, what would John Harvard and Elihu Yale say?  Or do?

Higher learning doesn’t require tax-free campuses. For example, more than 30,000 employees live and work at the giant Godrej Consumer Products Limited (BSE:532424) corporate campus in Mumbai, India, manufacturing everything from refrigerators to satellite electronics. Chairman Jamshyd Godrej explained to me that his company provides a simple test to new engineers applying for work. Shown a basic drawing of a fulcrum and lever, they are asked to write down the corresponding mathematical equation. More than 50% of engineer applicants fail the test. As a result, Godrej created a comprehensive engineering school on its corporate campus that teaches its engineers online and throughout India what they must know to compete globally.

Increasingly, campuses and e-learning venues will compete directly, or learn how to cooperate. Past New York City Mayor Bloomberg launched a competition inviting major universities to open a branch campus in Applied Sciences and receive New York state and municipality subsidies. Stanford and Cornell were the leading candidates to “win” this bricks and mortar competition.

But Stanford also is competing with itself. German-born Sebastian Thrum, a brilliant Stanford professor and largely self-taught robotics expert, gained fame by leading the team that built Google’s self-driving car. Thrum is offering his Stanford MOOC, “Introduction to Artificial Intelligence, at no cost. E-learning students have access to the exact same course for which on-campus students pay $55,000 a year – including the same tests and the same assignments. In lieu of receiving diplomas, e-learning students will earn, “statements of achievement.”

When The New York Times ran a story on Thrum’s MOOC course, its e-learning enrollment surged to 130,000 or nearly 20 times Stanford’s own undergraduate population of 7,000. It is precisely this conundrum that challenges tuition-based higher education business models – charge precious few students fortunate enough to gain entrance to a college or university a very high tuition, or reach thousands of e-learning students at a much lower cost per student? This is the same model that iTunes used to blow up the music industry.

E-learning quality control most certainly is an issue, but then higher education institutions have always dealt with mediocre C students, cheating, drop outs and failing students. This is nothing new.  This writer predicts that an automated Internet-based intelligent accreditation business model soon will emerge to aggregate and track all the e-learning courses that a particular student completes regardless of source. This system would verify student results, score course values, and accredit the “major” of their choice bench-marked against universal standards.

It is just a matter of time before such methodologies are accepted by the global marketplace for talent. The Chinese government’s goal for example is to have their entire K-12 population of over 200 million students online by 2020. This single goal exceeds all students enrolled in higher learning institutions worldwide.

There are many nuances that collectively define the on-campus higher education experience. There will always be a place for the few who can afford that experience, or for fields such as medicine requiring extensive hands-on instruction. But do not for a moment underestimate the enormously disruptive influence of technologies that can educate hundreds of millions of people across the globe – people who otherwise would have no access to the higher education they desperately want and now can obtain on a smart phone app.

Richard Wottrich, Blog Author –