The Last Great Middle Man

Rory Eakin -

Americans are losing trust in universities. In 2015, 57% of Americans reported a 'great deal' or 'quite a lot' confidence in higher education institutions. Last year, that number fell by a third, to 36%.

One way to think about the changing pressures and dynamics is to view the university as a classic middleman in the process of being disrupted by the internet. A primary function of universities is to stand between employers and secondary education, providing training and credentialing to help the matchmaking process when students enter the workforce. With knowledge and networks moving online, do we still need modern universities to play that role in society?

That idea comes from a thoughtful conversation from Marc Andreessen and Ben Horowitz, founders of A16Z, called "Crisis in Higher Ed" (found online here). Universities contribute to our society in many other ways, and the university system is an important and powerful advantage for the US. Yet, the trajectory of support is worrying.

Andreessen and Horowitz provide a helpful frame to disentangle the many roles Universities play. Andreessen argues Universities are a bundled product, constituting a dozen key functions:

  • Credentialing agency
  • Courses (knowledge transfer)
  • Research bureau (create new knowledge)
  • Policy think tank
  • Moral instructor
  • Social reformer
  • Immigration agency (role of foreign students)
  • Sports league
  • Hedge fund
  • Young adult day care
  • Dating site
  • Lobbying firm

The podcast walks through each of these. While many headlines are focused today on the hedge fund business (e.g. the size and impact of the endowments for a few select Universities), it seems to me that the overwhelming role of the 2,500+ four year universities in the country is in the first three functions - credentialing, sharing knowledge, and conducting research.

That role is threatened by the internet, and exacerbated the constantly rising cost of tuition. There are many reasons why Universities are not be able to quickly respond to a fundamental change in their environment like the internet. But the podcast has me thinking, even if they could change, what would the appropriate response be?

The internet classically disrupts middlemen. Why should a student pay thousands to sit in a lecture hall listening to economics professor when she can read every paper written by the greatest economists of all time and ask their AI personas all questions directly for free (you can already do this - check it out here)?

I'm skeptical about the role of knowledge transfer for most Universities, most of the time. I suspect most coursework doesn't relate directly to future employment, and even when it does it becomes dated quickly. There is an argument around teaching students 'how to think.' I'm not sure how to evaluate that claim.

I do believe universities serve an important credentialing role today, but that doesn't seem sustainable, especially at the cost of $100k+. The podcast makes the good point about separating credentialing for intelligence (admission) and conscientiousness (completion), but both of those could be seemingly done with a much lower cost, open access process. At the end, the hosts directly call for more startups to take on this challenge.

I don't know enough about the value and process of the knowledge creation role of Universities. I suspect that where there is a significant contribution it is from a small subset of elite research institutions, not from the vast majority of 2,500 different universities.

As you go down the list above beyond the top three, there may be a stronger case for Universities to play an important role in each of these areas than I currently understand, but seems hard to put any one of those as the reason for a school to exist.

All to say, how should Universities respond to the world they are operating in today? It's easier to think of the problem from the outside in, all the reasons to be frustrated/disappointed with the current state. It's harder to think through what you would do to change, even if the power existed to change a complex organization like a modern University?

Higher education is critical to the US, and the world. The US has the best university system in the world - our great universities continue to attract bright students from all over the world, and are the envy of every country. Yet, they are also in a troubled state, as measured by the data above.

I recommend a listen to this discussion as a way to start thinking more deeply about these important US institutions.