Creative Destruction

On UVA from Walter Russel Mead via Glenn Reynolds

As the NYT article points out, universities all over the country are facing a world of rapid change. This is going to be hard to face. Universities are structured to adapt slowly—if at all. Typically, university presidents have only limited controls, while faculties have a lot of power to resist. Management is usually decentralized, with different schools and departments governed under different rules and accountable to different constituencies. The fiscal arrangements of most universities are both byzantine and opaque; it can be very hard for administrators to understand or properly and fairly value the true cost and contributions of different parts of the institution.

The structural problem our universities face is this: confronted with the need for sweeping, rapid changes, administrators and boards have two options — and they are both bad. One option is to press ahead to make rapid changes. This risks — and in many (perhaps most) cases will cause — enormous upheavals; star professors will flounce off. Alumni will be offended. Waves of horrible publicity will besmirch the university’s name.

Option two: you can try to make your reforms consensual — watering down, delaying, carefully respecting existing interests and pecking orders. If you do this, you will have a peaceful, happy campus . . . until the money runs out.

This kind of organizational change issue is NOT unique to public institutions.  I think if one were a fly on the wall at Sears, or RIM/Blackberry, or AOL, one could describe exactly the same dynamic: insider constituencies were and are successful under the old model, so consensus processes involving these same constituencies seldom lead to change since these changes are inherently threatening to these same constituencies.  A simpler way of saying this is that it is really hard to obsolete oneself.  Just go ask Blockbuster Video.

But there is one difference in the world of public institutions.  In the private world, new success models in the worlds of Sears and AOL and Blackberry are already out there and growing really fast, run by outsiders who have absolutely no stake in the success of the old model (in fact by folks who have a strong economic stake in killing the old models).  But there is no parallel to capital markets and entrepreneurship in the public space.  There is no venue for new-model proponents to get capital and support outside of the old-model institutions.  In fact, if anything, public institutions will rally their political clout, up to and including sponsoring new legislation, to make sure new models are strangled in the crib.

If I were in the VA legislature and really cared about education innovation in the future, I would give up on UVA driving it and instead take 20% of its funding and hand it off to a brand new parallel entity, say UVA 2.0, run by an entirely new team.



    I think the university system will follow the bust cycle of the tech sector, how AltaVista and Yahoo got trampled by Google, which is now getting trampled by Facebook, which is also about to get trampled.

    Flexible and innovate universities like Western Governors are growing amazingly fast, while the expensive and entrenched ivory towers are stagnating.

    And it looks like the student loan industry is about to implode, which will cause quite bit of change.

  2. Chris:

    Or, better yet, take 20% of their funding and give it back to tax payers and let them invest and spend money on whatever UVA 2.0 is privately.

  3. LarryG:

    I don't think UVA is going anywhere nor Va Tech or William & Mary or George Mason. Change is in the winds but education will always be in demand and "brand name" Universities while having a need to adapt and change or much less vulnerable than the smaller outfits.

    Note also that the high-dollar, high-faluten non-public schools are selling "something" beyond what your typical fly-by-night "online" outfits are selling - and probably only in business to start with because of govt-subsidized loans.

    Education is a "racket" but there are a lot of different flavors of it and UVA, MIT, etc, et al have not near as much to fear as the 100% online outfits do.

  4. Anonymous Mike:

    I've worked a bit in higher education and I will say that in general it's an unreformable mess.

    It's best to look at a large university like UVA or even ASU not as a single entity but really a collection of separate entities operating under a single banner with little to no central control. The president of ASU isn't going to pick up the phone and bring his College of Business or Engineering in line to meet the coming tsunami and the deans of those colleges aren't going to do that as well in relation to their faculties. Keep in mind that the nominal head of those universities, the president, is really no more than a fundraiser.

    Real power at those universities grow out of the faculties; in fact Rule #1 for presidents, provosts and deans is not so better serving the students as not getting on the wrong side of their faculties. Governing boards, like AZ Board of Regents, are a joke in that no matter how fired up the new members are they tend to be co-opted into being cheeerleaders of the system. There have been numerous efforts over the past 15 years to try and create other public higher ed alternatives in Arizona and they die every time - mostly because the revenue from undergrads underwrites a big chunk of those Research I behemoths.

    Reform is a fool's game - these institutions are a Gordian Knot - so take the money states pay universities on a per-student basis and turn it into a voucher and make that voucher valid for all providers (don't get me started on the incestuousness of accreditation)

    To take this step would be a full frontal attack on the educational establishment but it can be done if you can convince people that a system of public education doesn't have to mean a system of public education institutions. The system can be reformed but not the institutions, most of them will have to perish - so let's think of educational reform not so much as providers reforming themselves but as cohort replacement in that the existing forest has to be cleared so new life can take hold.

    If you want to read a very prophetic book on all of this, written 20 years before higher ed bubbles and all of that, read Lewis Perelman's School's Out. We tried doing this 15 years ago and it bombed because no one wanted to change because they didn't have to

  5. George O'Har:

    I agree with all previous comments. The university system of today has run out of gas. It is deeply subsidized by government, big and small, in ways too numerous to list. It delivers a product, at great expense, whose value is now questionable, and, as if that weren't enough of a problem, said product can now via the internet be delivered at a fraction of the cost (in most cases). The business model of our university system is dead.

    But there are powerful "vested interests" who will fight to the death to keep it alive. Could or should the current system be saved? Maybe--if the costs could be cut in half. Otherwise, time for 'creative destruction.' For decades colleges have been showering professors with cash, for less and less teaching. They have hired, each of them, glaciers of bureaucrats, highly paid, who do next to nothing. And, of course, colleges have ventured into areas and disciplines that while they may have sounded well and fine to the leftists who came up with them, are now helping to diminish the product.

    Education is a serious and important business. But the fact is, we don't need an instructor in front of a room to teach most of it. Think how liberating the internet could be: instead of 10,000 colleges scattered all over America, teaching the same expensive courses, we could have only a handful doing so from a few areas (I'll ignore the Orwellian risk, and the fact that this would shift considerable responsibility to students).

    I understand the pitfalls here. We need to keep alive some semblance of our university system, which, after all, is one of America's greatest accomplishments. But like so many institutions today, colleges have squandered trust and sense, embraced fads, and spent money like there was no tomorrow, at the same time they were watering down the essential product.

    Time to look for alternatives--where they might fit.

  6. mark2:

    One problem is there is a lot of inertia in the Business world too. University of Phoenix has been offering reasonable degrees, esp in Business for years online. However, they don't have the same accedidation as the big names, and so some companies reject them out of hand (not accepting the degree) and for those managers that still thumb through their own resumes. a UOP will not merit the same respect as the local mid-low range state college.

    Attitude adjustments are needed all around.

  7. ParatrooperJJ:

    One thing to keep in mind is that the client of Universities is not the student, it's the faculty.

  8. John Sterling:

    I don't think that UVa is truly in the education business for the Commonwealth of Virginia, at least not in a public good sense. This is not K-12 primary education that we're talking about here. This is a fancy, status enhancing club good for the children of upper middle-class Virginians. Like a lot of state funded Universities it's more of a regressive wealth transfer than a public benefit. UVa will provide a lot of stats on the economic impact to the state of its research, but those figures use the same logic as federal stimulus spending. (i.e. showing the benefit but not adjusting for what the same funds could have done in private hands) However UVa probably is a net asset for growing the "gross state product" of Virginia, but it's more "export" oriented. Something like 25% of the students are from out-of-state and they pay the full market cost, approx. $37k per year. In economic terms UVa is probably more like an oil reservoir that represents accumulated economic rents.

  9. Lawrence:

    I think the thrust for reform at UVa is going to come from the same BoV that initially fired and then reinstated the president. The BoV has the backing of the governor of Virginia, Bob McDonnell, regarding the "unacceptable" rate of tuition increases at UVa which are simiar to those experienced at most public four year schools: i.e., about 7%/yr.

    Earlier this week, McDonnell must have said ten times on a local radio program in the Wash D.C. that the "doubling of tuition over the past decade is unacceptable". So, I'm thinking that the BoV is going to come out with a program that ratches down tuition increases to the rate of CPI within a few years.

    Cutting the rate of tuition increases would force a lot more reform on UVa than any attempts by the BoV to get voluntary cuts from the president and faculty.

  10. sch:

    About 5 yrs ago I was checking up on a friend who had a named professorship in the Dept of Mathematics at UVA and while mousing around stumbled
    on a list of salaries. Interesting that his salary (about age 64, ~30 yrs or so at UVA) was $125k/yr. Assistant Vice Provost was ~$150k/yr
    and the administrative salaries went up from there. The faculties may wag the dog, (eg Larry Summers getting the boot) but the administrators
    know how to feather their nests and expand in number.

  11. IGotBupkis, Legally Defined Cyberbully in All 57 States:

    >>>> Just go ask Blockbuster Video.

    Actually, Blockbuster is probably a poor example of this. They saw the convergence of create-on-demand disks like two decades ago. They wanted to create the now-common "movie kiosks" in the early 1990s. Hollywood wouldn't let them, fearing that they'd miss out on their cut somehow on a percentage of rentals... It took Netflix throwing the whole model on its head to shake the wax out of their ears long enough for them to smell what the rock was cookin', and realize that kiosk vending machines were the future.